Exhibit 10.40

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO:

WELLS FARGO BANK, NATIONAL ASSOCIATION

Real Estate Group (AU #02955)

2030 Main Street, Suite 800

Irvine, CA 92614

Attn: Jeri Gehrer

Loan No. 1002835

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR
STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED
FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVERS
LICENSE NUMBER.

 

 

 

DEED OF TRUST

WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING (“Deed of Trust”), made as of February 25,
2011, are KBSII TWO WESTLAKE PARK, LLC, a Delaware limited liability company
(“Grantor”), PETER S. GRAF (“Trustee”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as administrative agent for itself and certain additional lenders
(“Beneficiary”).

ARTICLE 1. GRANT IN TRUST

 

  1.1

GRANT. For the purposes of and upon the terms and conditions in this Deed of
Trust and to secure the full and timely payment, performance and discharge of
the Secured Obligations (as herein defined), Grantor irrevocably GRANTS,
CONVEYS, ASSIGNS, BARGAINS and SELLS and has by these presents GRANTED,
CONVEYED, ASSIGNED, BARGAINED and SOLD to Trustee, in trust for the benefit of
Beneficiary, with power of sale and right of entry and possession, all of that
real property located in the County of Harris, State of Texas, described on
Exhibit A attached hereto, together with all right, title, interest, and
privileges of Grantor in and to all streets, ways, roads, and alleys used in
connection with or pertaining to such real property and any improvements
thereon, all development rights or credits, air rights, water, water rights and
water stock related to the real property, all timber, and all minerals, oil and
gas, and other hydrocarbon substances in, on or under the real property, and all
licenses, appurtenances, reversions, remainders, easements, rights and rights of
way appurtenant or related thereto; any and all rights of Grantor, as a
declarant, under any covenants, conditions, and restrictions now or hereafter
pertaining to the real property described on Exhibit A, hereto, provided,
however, that Beneficiary shall have no liability under such covenants,
conditions, and restrictions unless and until Beneficiary forecloses on the real
property; all buildings, other improvements and fixtures now or hereafter
located on the real property, including, but not limited to, all apparatus,
equipment, and appliances used in the operation or occupancy of the real
property, it being intended by the parties that all such items shall be
conclusively considered to be a part of the real property, whether or not
attached or affixed to the real property (the “Improvements”); all interest or
estate which Grantor may hereafter acquire in the property described above, and
all additions and accretions thereto, and the proceeds of any of the foregoing;
(all of the foregoing being collectively referred to as the “Subject Property”).
The listing of specific rights or property shall not be interpreted as a limit
of general terms; TO HAVE AND TO HOLD the Subject Property unto Trustee,
forever, and Grantor does hereby bind itself, its successors and assigns, to
WARRANT AND FOREVER DEFEND the title to the Subject Property unto Trustee
against every person whomsoever lawfully claiming or to claim the same or any
part thereof;

 

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provided, however, that if Grantor shall pay (or cause to be paid) and shall
perform and discharge (or cause to be performed and discharged) the Secured
Obligations on or before the date same are to be paid, performed and discharged,
then the liens, security interests, estates, rights and titles granted by this
Deed of Trust shall terminate in accordance with the provisions hereof,
otherwise same shall remain in full force and effect. A certificate or other
written statement executed on behalf of Trustee or Beneficiary confirming that
the Secured Obligations have not been fully and finally paid, performed or
discharged shall be sufficient evidence thereof for the purpose of reliance by
third parties on such fact.

 

  1.2

ADDRESS. The address of the subject property is 580 Westlake Park Blvd.,
Houston, Texas. However, neither the failure to designate an address nor any
inaccuracy in the address designated shall affect the validity or priority of
the lien of this Deed of Trust on the Subject Property as described on
Exhibit A.

ARTICLE 2. OBLIGATIONS SECURED

 

  2.1

OBLIGATIONS SECURED. Grantor makes this Deed of Trust for the purpose of
securing the following obligations (“Secured Obligations”):

 

  (a)

Payment to Lenders (as defined in the Loan Agreement (as defined below)) of all
sums at any time owing under one or more secured promissory notes (initially
dated January 27, 2011, and maturing on January 27, 2016 (subject to extension
in accordance with the Loan Agreement referenced below)) made in the aggregate
principal amount of Three Hundred and Sixty Million Dollars ($360,000,000) (the
“Loan”) executed by Grantor and certain other parties, as borrowers
(“Borrowers”), from time to time in connection with the Loan Agreement, and
payable to the order of one or more Lenders, including, without limitation
(i) any replacement Note executed pursuant to Section 2.15 of the Loan Agreement
in connection with an increase of the Loan to a maximum principal amount of
Three Hundred and Seventy-Two Million Dollars ($372,000,000) and (ii) any
replacement Note executed pursuant to Section 3.4 of the Loan Agreement in
connection with the joinder of additional Borrowers to the Loan Agreement
including, without limitation, that certain Third Amended and Restated and
Consolidated Secured Promissory note of even date herewith (collectively, as the
same may be amended, restated or replaced from time to time, the “Note”); and

 

  (b)

Payment and performance of all covenants and obligations of Grantor under this
Deed of Trust; and

 

  (c)

Payment and performance of all covenants and obligations on the part of
Borrowers under that certain Amended and Restated and Consolidated Loan
Agreement (as the same may be amended, restated or replaced from time to time,
“Loan Agreement”), dated January 27, 2011, by and among Borrowers, Beneficiary,
and Lenders (as defined in the Loan Agreement), the Hazardous Materials
Indemnity Agreement (as defined in the Loan Agreement), and all other “Loan
Documents” as defined in the Loan Agreement; and

 

  (d)

Payment and performance of all covenants and obligations, if any, of any rider
attached as an Exhibit to this Deed of Trust; and

 

  (e)

Payment and performance of all future advances and other obligations that the
then record owner of all or part of the Subject Property may agree to pay and/or
perform (whether as principal, surety or guarantor) for the benefit of
Beneficiary, when such future advance or obligation is evidenced by a writing
which recites that it is secured by this Deed of Trust; and

 

  (f)

Payment and performance of all covenants and obligations of Borrowers (or any of
them) under (i) the Existing Swap and (ii) any other Swap Agreement (as such
terms are defined in the Loan Agreement), which agreement is evidenced by a
writing that recites it is secured by this Deed of Trust; and

 

  (g)

All modifications, extensions and renewals of any of the obligations secured
hereby, however evidenced, including, without limitation: (i) modifications of
the required principal payment dates or

 

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Loan No. 1002835

 

 

interest payment dates or both, as the case may be, deferring or accelerating
payment dates wholly or partly; or (ii) modifications, extensions or renewals at
a different rate of interest whether or not in the case of a note, the
modification, extension or renewal is evidenced by a new or additional
promissory note or notes.

 

  2.2

OBLIGATIONS. The term “obligations” is used herein in its broadest and most
comprehensive sense and shall be deemed to include, without limitation, all
interest and charges, prepayment charges (if any), late charges and loan fees at
any time accruing or assessed on any of the Secured Obligations.

 

  2.3

INCORPORATION. All capitalized terms not defined herein shall have the meanings
given to them in the Loan Agreement. All terms of the Secured Obligations and
the documents evidencing such obligations are incorporated herein by this
reference. All persons who may have or acquire an interest in the Subject
Property shall be deemed to have notice of the terms of the Secured Obligations
and to have notice, if provided therein, that: (a) the Note or the Loan
Agreement may permit borrowing, repayment and re-borrowing so that repayments
shall not reduce the amounts of the Secured Obligations; and (b) the rate of
interest on one or more Secured Obligations may vary from time to time.

ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS

 

  3.1

ASSIGNMENT. Grantor hereby irrevocably assigns to Beneficiary all of Grantor’s
right, title and interest in, to and under: (a) all leases of the Subject
Property or any portion thereof, and all other agreements of any kind relating
to the use or occupancy of the Subject Property or any portion thereof, whether
now existing or entered into after the date hereof (“Leases”); and (b) the
rents, revenue, income, issues, deposits and profits of the Subject Property,
including, without limitation, all parking income and all amounts payable and
all rights and benefits accruing to Grantor under the Leases (“Payments”). The
term “Leases” shall also include all guarantees of and security for the lessees’
performance thereunder, and all amendments, extensions, renewals or
modifications thereto which are permitted hereunder. This is a present and
absolute assignment, not an assignment for security purposes only, and
Beneficiary’s right to the Leases and Payments is not contingent upon, and may
be exercised without possession of, the Subject Property.

 

  3.2

GRANT OF LICENSE. Beneficiary confers upon Grantor a license (“License”) to
collect and retain the Payments as they become due and payable, until the
occurrence of a Default (as hereinafter defined). Upon a Default, the License
shall be automatically revoked and Beneficiary may collect and apply the
Payments pursuant to Section 6.4 without notice and without taking possession of
the Subject Property. Grantor hereby irrevocably authorizes and directs the
lessees under the Leases to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums which may
at any time become due under the Leases, or for the performance of any of the
lessees’ undertakings under the Leases, and the lessees shall have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing hereunder. Grantor hereby relieves the lessees from any liability to
Grantor by reason of relying upon and complying with any such notice or demand
by Beneficiary.

 

  3.3

EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause
Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for
the control, care, management or repair of the Subject Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; or
(c) responsible or liable for any waste committed on the Subject Property by the
lessees under any of the Leases or any other parties; for any dangerous or
defective condition of the Subject Property; or for any negligence in the
management, upkeep, repair or control of the Subject Property resulting in loss
or injury or death to any lessee, licensee, employee, invitee or other person.
Beneficiary and Trustee shall not directly or indirectly be liable to Grantor or
any other person as a consequence of: (i) the exercise or failure to exercise by
Beneficiary or Trustee, or any of their respective employees, agents,
contractors or subcontractors, any of the rights, remedies or powers granted to
Beneficiary or Trustee hereunder; or (ii) the failure or refusal of Beneficiary
to perform or discharge any obligation, duty or liability of Grantor arising
under the Leases.

 

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Loan No. 1002835

 

  3.4

REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that, to the
best of Grantor’s knowledge: (a) Grantor has delivered to Beneficiary a rent
roll that, as of the date hereof, contains a true, accurate and complete list of
all Leases; (b) all existing Leases are in full force and effect and are
enforceable in accordance with their respective terms, and no breach or default,
or event which would constitute a breach or default after notice or the passage
of time, or both, exists under any existing Leases on the part of any party;
(c) no rent or other payment under any existing Lease has been paid by any
lessee for more than one (1) month in advance; and (d) none of the lessor’s
interests under any of the Leases has been transferred or assigned.

 

  3.5

COVENANTS. Grantor covenants and agrees at Grantor’s sole cost and expense to:
(a) perform the obligations of lessor contained in the Leases and enforce by all
appropriate remedies performance by the lessees of the obligations of the
lessees contained in the Leases; (b) give Beneficiary prompt written notice of
any material default which occurs with respect to any of the Leases, whether the
default be that of the lessee or of the lessor; (c) exercise Grantor’s best
efforts to keep all portions of the Subject Property that are capable of being
leased leased at rental rates pursuant to the terms of the Loan Agreement;
(d) deliver to Beneficiary fully executed, copies of each and every Lease that
it is required to deliver in accordance with the Loan Agreement; and (e) execute
and record such additional assignments of any Lease or, if required by the terms
of the Loan Agreement, use commercially reasonable efforts to obtain specific
subordinations (or subordination, attornment and non-disturbance agreements
executed by the lessor and lessee) of any Lease to the Deed of Trust, in form
and substance acceptable to Beneficiary, as Beneficiary may request. Grantor
shall not, without Beneficiary’s prior written consent or as otherwise permitted
by any provision of the Loan Agreement: (i) to the extent prohibited by the
terms of the Loan Agreement, enter into any Leases after the date hereof;
(ii) execute any other assignment relating to any of the Leases; (iii) to the
extent prohibited by the terms of the Loan Agreement, discount any rent or other
sums due under the Leases or collect the same in advance, other than to collect
rentals one (1) month in advance of the time when it becomes due; (iv) to the
extent prohibited by the terms of the Loan Agreement, terminate, modify or amend
any of the terms of the Leases or in any manner release or discharge the lessees
from any obligations thereunder; (v) to the extent prohibited by the terms of
the Loan Agreement, consent to any assignment or subletting by any lessee; or
(vi) subordinate or agree to subordinate any of the Leases to any other deed of
trust or encumbrance. Any such attempted action in violation of the provisions
of this Section 3.5 shall be null and void. Without in any way limiting the
requirement of Beneficiary’s consent hereunder, any sums received by Grantor in
consideration of any termination (or the release or discharge of any lessee)
modification or amendment of any Lease shall be applied as set forth in the Loan
Agreement.

 

  3.6

ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by
Beneficiary, Grantor shall deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Grantor, and use its best efforts
to obtain such estoppel certificates executed by each of the lessees, in each
case in recordable form, certifying (if such be the case): (a) that the
foregoing assignment and the Leases are in full force and effect; (b) the date
of each lessee’s most recent payment of rent; (c) that there are no defenses or
offsets outstanding, or stating those claimed by Grantor or lessees under the
foregoing assignment or the Leases, as the case may be; and (d) any other
information reasonably requested by Beneficiary.

ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

 

  4.1

SECURITY INTEREST. Grantor hereby grants and assigns to Beneficiary as of the
date hereof a security interest, to secure payment and performance of all of the
Secured Obligations, in all of the following described personal property in
which Grantor now or at any time hereafter has any interest (collectively, the
“Collateral”):

All goods, building and other materials, supplies, work in process, equipment,
machinery, fixtures, furniture, furnishings, signs and other personal property
and embedded software included therein, wherever situated, which are or are to
be incorporated into, used in connection with, or appropriated for use on
(i) the real property described on Exhibit A attached hereto and incorporated by
reference herein (to the extent the same are not effectively made a part of the
real property pursuant to Section 1.1 above) or (ii) the Improvements (which
real property and Improvements are collectively referred to

 

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Loan No. 1002835

 

herein as the Subject Property); together with all rents (to the extent, if any,
they are not subject to Article 3); all inventory, accounts, cash receipts,
deposit accounts, accounts receivable, contract rights, licenses, agreements,
(including, without limitation, all acquisition agreements with respect to the
Subject Property); all of Grantor’s rights under any Swap Agreement, including,
without limitation, the Existing Swap; all Contracts referenced in Section 5.18
below (including property management and leasing agreements), architects’
agreements, and/or construction agreements with respect to the completion of any
improvements on the Subject Property), general intangibles, chattel paper
(whether electronic or tangible), instruments, documents, promissory notes,
drafts, letters of credit, letter of credit rights, supporting obligations,
insurance policies, insurance and condemnation awards and proceeds, any other
rights to the payment of money, trade names, trademarks and service marks
arising from or related to the ownership, management, leasing or operation of
the Subject Property or any business now or hereafter conducted thereon by
Grantor; all permits, consents, approvals, licenses, authorizations and other
rights granted by, given by or obtained from, any governmental entity with
respect to the Subject Property; all deposits or other security now or hereafter
made with or given to utility companies by Grantor with respect to the Subject
Property; all advance payments of insurance premiums made by Grantor with
respect to the Subject Property; all plans, drawings and specifications relating
to the Subject Property; all loan funds held by Beneficiary, whether or not
disbursed; all funds deposited with Beneficiary pursuant to any loan agreement;
all reserves, deferred payments, deposits, accounts, refunds, cost savings and
payments of any kind related to the Subject Property or any portion thereof;
together with all replacements and proceeds of, and additions and accessions to,
any of the foregoing; together with all books, records and files to the extent
relating to any of the foregoing.

As to all of the above described personal property which is or which hereafter
becomes a “fixture” under applicable law, this Deed of Trust constitutes a
fixture filing under Article 9 of the Texas Business and Commerce Code, as
amended or recodified from time to time (“UCC”), and is acknowledged and agreed
to be a “construction mortgage” under the UCC.

The filing of a financing statement covering the Collateral shall not be
construed to derogate from or impair the lien or provisions of this Deed of
Trust with respect to any property described herein which is real property or
which the parties have agreed to treat as real property. Similarly, nothing in
such financing statement shall be construed to alter any of the rights of
Beneficiary under this Deed of Trust or the priority of the Beneficiary’s lien
created hereby, and such financing statement is declared to be for the
protection of Beneficiary in the event any court shall at any time hold that
notice of Beneficiary’s priority of interest in any property or interests
described in this Deed of Trust must, in order to be effective against a
particular class of persons, including but not limited to the federal government
and any subdivision, agency or entity of the federal government, be filed in the
Uniform Commercial Code records.

 

  4.2

REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants that:
(a) Grantor has, as of the date of recordation of this Deed of Trust, and will
have, good title to the Collateral; (b) Grantor has not previously assigned or
encumbered the Collateral, and no financing statement covering any of the
Collateral has been delivered to any other person or entity; (c) Grantor’s
principal place of business is located at the address shown in Section 7.11; and
(d) Grantor’s legal name is exactly as set forth on the first page of this Deed
of Trust and all of Grantor’s organizational documents or agreements delivered
to Beneficiary are complete and accurate in every respect.

 

  4.3

COVENANTS. Grantor agrees: (a) to execute and deliver such documents as
Beneficiary deems necessary to create, perfect and continue the security
interests contemplated hereby; (b) not to change its name, and as applicable,
its chief executive office, its principal residence or the jurisdiction in which
it is organized and/or registered without giving Beneficiary prior written
notice thereof; (c) to cooperate with Beneficiary in perfecting all security
interests granted herein and in obtaining such agreements from third parties as
Beneficiary deems necessary, proper or convenient in connection with the
preservation, perfection or enforcement of any of its rights hereunder; and
(d) that Beneficiary is authorized to file financing statements in the name of
Grantor to perfect Beneficiary’s security interest in Collateral.

 

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  4.4

RIGHTS OF BENEFICIARY. In addition to Beneficiary’s rights as a “Secured Party”
under the UCC, Beneficiary may, but shall not be obligated to, at any time
without notice and at the expense of Grantor: (a) give notice to any person of
Beneficiary’s rights hereunder and enforce such rights at law or in equity;
(b) insure, protect, defend and preserve the Collateral or any rights or
interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse,
collect and receive any right to payment of money owing to Grantor under or from
the Collateral. Notwithstanding the above, in no event shall Beneficiary be
deemed to have accepted any property other than cash in satisfaction of any
obligation of Grantor to Beneficiary unless Beneficiary shall make an express
written proposal thereof under UCC §9.621, or other applicable law, and the
provisions of UCC §9.620 have been satisfied.

 

  4.5

RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence of a Default (hereinafter
defined) under this Deed of Trust, then in addition to all of Beneficiary’s
rights as a “Secured Party” under the UCC or otherwise at law:

 

  (a)

Beneficiary may (i) upon written notice, require Grantor to assemble any or all
of the Collateral and make it available to Beneficiary at a place designated by
Beneficiary; (ii) without prior notice, enter upon the Subject Property or other
place where any of the Collateral may be located and take possession of,
collect, sell, lease, license and dispose of any or all of the Collateral, and
store the same at locations acceptable to Beneficiary at Grantor’s expense;
(iii) sell, assign and deliver at any place or in any lawful manner all or any
part of the Collateral and bid and become the purchaser at any such sales;

 

  (b)

Beneficiary may, for the account of Grantor and at Grantor’s expense:
(i) operate, use, consume, sell, lease, license or dispose of the Collateral as
Beneficiary deems appropriate for the purpose of performing any or all of the
Secured Obligations; (ii) enter into any agreement, compromise, or settlement,
including insurance claims, which Beneficiary may deem desirable or proper with
respect to any of the Collateral; and (iii) endorse and deliver evidences of
title for, and receive, enforce and collect by legal action or otherwise, all
indebtedness and obligations now or hereafter owing to Grantor in connection
with or on account of any or all of the Collateral; and

 

  (c)

In disposing of Collateral hereunder, Beneficiary may disclaim all warranties of
title, possession, quiet enjoyment and the like. Any proceeds of any disposition
of any Collateral may be applied by Beneficiary to the payment of expenses
incurred by Beneficiary in connection with the foregoing, including reasonable
attorneys’ fees, and the balance of such proceeds may be applied by Beneficiary
toward the payment of the Secured Obligations in such order of application as
Beneficiary may from time to time elect.

Notwithstanding any other provision hereof, Beneficiary shall not be deemed to
have accepted any property other than cash in satisfaction of any obligation of
Grantor to Beneficiary unless Beneficiary shall make an express written proposal
thereof under UCC §9.621, or other applicable law, and the provisions of UCC
§9.620 have been satisfied. Grantor agrees that Beneficiary shall have no
obligation to process or prepare any Collateral for sale or other disposition.

 

  4.6

POWER OF ATTORNEY. Grantor hereby irrevocably appoints Beneficiary as Grantor’s
attorney-in-fact (such agency being coupled with an interest), and as such
attorney-in-fact Beneficiary may, without the obligation to do so, in
Beneficiary’s name, or in the name of Grantor, prepare, execute and file or
record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve any of
Beneficiary’s security interests and rights in or to any of the Collateral, and,
upon a Default hereunder, take any other action required of Grantor; provided,
however, that Beneficiary as such attorney-in-fact shall be accountable only for
such funds as are actually received by Beneficiary.

 

  4.7

POSSESSION AND USE OF COLLATERAL. Except as otherwise provided in this Section
or the other Loan Documents (as defined in the Loan Agreement), so long as no
Default exists under this Deed of Trust or any of the Loan Documents, Grantor
may possess, use, move, transfer or dispose of any of the Collateral in the
ordinary course of Grantor’s business and in accordance with the Loan Agreement.

 

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ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES

 

  5.1

TITLE. Grantor represents and warrants that, except as disclosed to Beneficiary
in a writing which refers to this warranty, Grantor lawfully holds and possesses
fee simple title to the Subject Property without limitation on the right to
encumber, and that this Deed of Trust is a first and prior lien on the Subject
Property. Grantor hereby represents and warrants that all of the Subject
Property is a single tax parcel, and there are no properties included in such
tax parcel other than the Subject Property. Grantor further covenants and agrees
that it shall not cause all or any portion of the Subject Property to be
replatted or for any lots or boundary lines to be adjusted, changed or altered
for either ad valorem tax purposes or otherwise, and shall not consent to the
assessment of the Subject Property in more than one tax parcel or in conjunction
with any property other than the Subject Property.

 

  5.2

TAXES AND ASSESSMENTS.

 

  (a)

Subject to Grantor’s rights to contest in good faith payment of taxes as
provided in Section 5.2(b) below, Grantor shall pay prior to delinquency all
taxes, assessments, levies and charges imposed by any public or quasi-public
authority or utility company which are or which may become a lien upon or cause
a loss in value of the Subject Property or any interest therein. Grantor shall
also pay prior to delinquency all taxes, assessments, levies and charges imposed
by any public authority upon Beneficiary by reason of its interest in any
Secured Obligation or in the Subject Property, or by reason of any payment made
to Beneficiary pursuant to any Secured Obligation; provided, however, Grantor
shall have no obligation to pay taxes which may be imposed from time to time
upon Beneficiary and which are measured by and imposed upon Beneficiary’s net
income.

 

  (b)

Grantor may contest in good faith any taxes or assessments if: (i) Grantor
pursues the contest diligently and in compliance with applicable laws, in a
manner which Beneficiary determines is not prejudicial to Beneficiary, and does
not impair the rights of Beneficiary under any of the Loan Documents; and
(b) Grantor deposits with Beneficiary any funds or other forms of assurance
which Beneficiary in good faith determines from time to time appropriate to
protect Beneficiary from the consequences of the contest being unsuccessful.
Grantor’s compliance with this Section shall operate to prevent such claim,
demand, levy or assessment from becoming a Default.

 

  5.3

TAX AND INSURANCE IMPOUNDS. At any time following the occurrence of a Default
and in accordance with the other Loan Documents, at Beneficiary’s option and
upon its demand, Grantor shall, until all Secured Obligations have been paid in
full, pay to Beneficiary monthly, annually or as otherwise directed by
Beneficiary an amount estimated by Beneficiary to be equal to: (a) all taxes,
assessments, levies and charges imposed by any public or quasi-public authority
or utility company which are or may become a lien upon the Subject Property or
Collateral and will become due for the tax year during which such payment is so
directed; and (b) premiums for fire, hazard and insurance required or requested
pursuant to the Loan Documents when same are next due. If Beneficiary determines
that any amounts paid by Grantor are insufficient for the payment in full of
such taxes, assessments, levies, charges and/or insurance premiums, Beneficiary
shall notify Grantor of the increased amounts required to pay all amounts when
due, whereupon Grantor shall pay to Beneficiary within thirty (30) days
thereafter the additional amount as stated in Beneficiary’s notice. All sums so
paid shall not bear interest, except to the extent and in any minimum amount
required by law; and Beneficiary shall, unless Grantor is otherwise in Default
hereunder or under any Loan Document, apply said funds to the payment of, or at
the sole option of Beneficiary release said funds to Grantor for the application
to and payment of, such sums, taxes, assessments, levies, charges, and insurance
premiums. Upon Default by Grantor hereunder or under any Loan Document,
Beneficiary may apply all or any part of said sums to any Secured Obligation
and/or to cure such Default, in which event Grantor shall be required to restore
all amounts so applied, as well as to cure any other events or conditions of
Default not cured by such application. Upon assignment of this Deed of Trust,
Beneficiary shall have the right to assign in writing all amounts collected and
in its possession to its assignee whereupon Beneficiary and the Trustee shall be
released from all liability with respect thereto. Within ninety-five (95) days
following full repayment of the Secured Obligations (other than full repayment
of the Secured Obligations as a consequence of a foreclosure or conveyance in
lieu of foreclosure of the liens and security interests securing

 

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the Secured Obligations) or at such earlier time as Beneficiary may elect, the
balance of all amounts collected and in Beneficiary’s possession shall be paid
to Grantor and no other party shall have any right or claim thereto.

 

  5.4

PERFORMANCE OF SECURED OBLIGATIONS. Grantor shall promptly pay and perform each
Secured Obligation for which it is responsible hereunder or under the Loan
Agreement when due.

 

  5.5

LIENS, ENCUMBRANCES AND CHARGES. Grantor shall immediately discharge any lien
not approved by Beneficiary in writing that has or may attain priority over this
Deed of Trust. Subject to the following sentence, Grantor shall pay when due all
obligations secured by or which may become liens and encumbrances which shall
now or hereafter encumber or appear to encumber all or any part of the Subject
Property or Collateral, or any interest therein, whether senior or subordinate
hereto. If a claim of lien is recorded which affects the Subject Property,
Grantor shall, within twenty (20) calendar days of such recording or within five
(5) calendar days of Beneficiary’s demand, whichever occurs first: (a) pay and
discharge the claim of lien; (b) effect the release thereof by recording; or
(c) provide Beneficiary with other assurances which Beneficiary deems, in its
sole discretion, to be satisfactory for the payment of such claim of lien and
for the full and continuous protection of Beneficiary from the effect of such
lien.

 

  5.6

DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS.

 

  (a)

The following (whether now existing or hereafter arising) are all absolutely and
irrevocably assigned by Grantor to Beneficiary and, at the request of
Beneficiary, shall be paid directly to Beneficiary: (i) all awards of damages
and all other compensation payable directly or indirectly by reason of a
condemnation or proposed condemnation for public or private use affecting all or
any part of, or any interest in, the Subject Property or Collateral; (ii) all
other claims and awards for damages to, or decrease in value of, all or any part
of, or any interest in, the Subject Property or Collateral; (iii) all proceeds
of any insurance policies payable by reason of loss sustained to all or any part
of the Subject Property or Collateral; and (iv) all interest which may accrue on
any of the foregoing. Subject to applicable law and Section 5.6(b) below, and
without regard to any requirement contained in Section 5.7(d), Beneficiary may
at its discretion apply all or any of the proceeds it receives to its expenses
in settling, prosecuting or defending any claim and may apply the balance to the
Secured Obligations in any such order acceptable to Beneficiary, and/or
Beneficiary may release all or any part of the proceeds to Grantor upon any
conditions Beneficiary may impose. Beneficiary may commence, appear in, defend
or prosecute any assigned claim or action and may adjust, compromise, settle and
collect all claims and awards assigned to Beneficiary; provided, however, in no
event shall Beneficiary be responsible for any failure to collect any claim or
award, regardless of the cause of the failure, including, without limitation,
any malfeasance or nonfeasance by Beneficiary or its employees or agents.

 

  (b)

Beneficiary shall permit insurance or condemnation proceeds held by Beneficiary
to be used for repair or restoration but may condition such application upon
reasonable conditions, including, without limitation: (i) the deposit with
Beneficiary of such additional funds which Beneficiary determines are needed to
pay all costs of the repair or restoration, (including, without limitation,
taxes, financing charges, insurance and rent during the repair period); (ii) the
establishment of an arrangement for lien releases and disbursement of funds
acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and
specifications for the work, a contract for the work signed by a contractor
acceptable to Beneficiary, a cost breakdown for the work and a payment and
performance bond for the work, all of which shall be acceptable to Beneficiary;
and (iv) the delivery to Beneficiary of evidence acceptable to Beneficiary
(aa) that after completion of the work the income from the Subject Property will
be sufficient to pay all expenses and debt service for the Subject Property;
(bb) of the continuation of Leases acceptable to and required by Beneficiary;
(cc) that upon completion of the work, the size, capacity and total value of the
Subject Property will be at least as great as it was before the damage or
condemnation occurred; (dd) that there has been no material adverse change in
the financial condition or credit of Grantor since the date of this Deed of
Trust; (ee) no Default shall have occurred, and (ff) of the satisfaction of any
additional conditions that Beneficiary may reasonably establish to protect its
security. Grantor hereby acknowledges that the conditions described above

 

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are reasonable, and, if such conditions have not been satisfied within sixty
(60) days of receipt by Beneficiary of such insurance or condemnation proceeds,
then Beneficiary may apply such insurance or condemnation proceeds to pay the
Secured Obligations in such order and amounts as Beneficiary in its sole
discretion may choose.

 

  (c)

Notwithstanding the foregoing provisions of this Section 5.6, if the insurance
or condemnation proceeds equal $1,000,000 or less, Beneficiary shall release
such proceeds to Grantor for repair or restoration of the Subject Property
without any additional requirements or conditions.

 

  (d)

TEXAS FINANCE CODE SECTION 307.052 COLLATERAL PROTECTION INSURANCE NOTICE:
(A) GRANTOR IS REQUIRED TO: (i) KEEP THE SUBJECT PROPERTY INSURED AGAINST DAMAGE
IN THE AMOUNT BENEFICIARY SPECIFIES; (ii) PURCHASE THE INSURANCE FROM AN INSURER
THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS
LINES INSURER; AND (III) NAME BENEFICIARY AS THE PERSON TO BE PAID UNDER THE
POLICY IN THE EVENT OF A LOSS; (B) GRANTOR MUST, IF REQUIRED BY BENEFICIARY,
DELIVER TO BENEFICIARY A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF
PREMIUMS; AND (C) IF GRANTOR FAILS TO MEET ANY REQUIREMENT LISTED IN PARAGRAPH
(A) OR (B), BENEFICIARY MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF
GRANTOR AT GRANTOR’S EXPENSE.

 

  5.7

MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to the provisions
of the Loan Agreement, Grantor covenants: (a) to insure the Subject Property and
Collateral against such risks as Beneficiary may require pursuant to the Loan
Agreement and, at Beneficiary’s request (but not more than fifteen (15) days
prior to the termination date of any existing coverage), to provide evidence of
such insurance to Beneficiary, and to comply with the requirements of any
insurance companies providing such insurance; (b) to keep the Subject Property
and Collateral in good condition and repair; (c) not to remove or demolish the
Subject Property or Collateral or any part thereof, not to alter, restore or add
to the Subject Property or Collateral and not to initiate or acquiesce in any
change in any zoning or other land classification which affects the Subject
Property without Beneficiary’s prior written consent or as provided in the Loan
Agreement; (d) to complete or restore promptly and in good and workmanlike
manner the Subject Property and Collateral, or any part thereof which may be
damaged or destroyed, without regard to whether Beneficiary elects to require
that insurance proceeds be used to reduce the Secured Obligations as provided in
Section 5.6; (e) to comply with all laws, ordinances, regulations and standards,
and all covenants, conditions, restrictions and equitable servitudes, whether
public or private, of every kind and character which affect the Subject Property
or Collateral and pertain to acts committed or conditions existing thereon,
including, without limitation, any work, alteration, improvement or demolition
mandated by such laws, covenants or requirements; (f) not to commit or permit
waste of the Subject Property or Collateral; and (g) to do all other acts which
from the character or use of the Subject Property or Collateral may be
reasonably necessary to maintain and preserve its value.

 

  5.8

DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Grantor’s sole expense,
Grantor shall protect, preserve and defend the Subject Property and Collateral
and title to and right of possession of the Subject Property and Collateral, the
security hereof and the rights and powers of Beneficiary and Trustee hereunder
against all adverse claims. Grantor shall give Beneficiary and Trustee prompt
notice in writing of the assertion of any claim, of the filing of any action or
proceeding, of the occurrence of any damage to the Subject Property or
Collateral and of any condemnation offer or action.

 

  5.9

POWERS OF BENEFICIARY. Beneficiary may, without affecting the personal liability
of any person for payment of any indebtedness or performance of any obligations
secured hereby and without liability therefor and without notice: (a) release
all or any part of the Subject Property; (b) consent to the making of any map or
plat thereof; and (c) join in any grant of easement thereon, any declaration of
covenants and restrictions, or any extension agreement or any agreement
subordinating the lien or charge of this Deed of Trust.

 

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  5.10

ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE.

 

  (a)

Trustee accepts this trust when this Deed of Trust is delivered by Grantor to
Beneficiary. Except as may be required by applicable law, Trustee or Beneficiary
may from time to time apply to any court of competent jurisdiction for aid and
direction in the execution of the trust hereunder and the enforcement of the
rights and remedies available hereunder, and may obtain orders or decrees
directing or confirming or approving acts in the execution of said trust and the
enforcement of said remedies.

 

  (b)

Trustee shall not be required to take any action toward the execution and
enforcement of the trust hereby created or to institute, appear in, or defend
any action, suit, or other proceeding in connection therewith where, in his
opinion, such action would be likely to involve him in expense or liability,
unless requested so to do by a written instrument signed by Beneficiary and, if
Trustee so requests, unless Trustee is tendered security and indemnity
satisfactory to Trustee against any and all cost, expense, and liability arising
therefrom. Trustee shall not be responsible for the execution, acknowledgment,
or validity of the Loan Documents, or for the proper authorization thereof, or
for the sufficiency of the lien and security interest purported to be created
hereby, and Trustee makes no representation in respect thereof or in respect of
the rights, remedies, and recourses of Beneficiary.

 

  (c)

With the approval of Beneficiary, Trustee shall have the right to take any and
all of the following actions: (i) to select, employ, and advise with counsel
(who may be, but need not be, counsel for Beneficiary) upon any matters arising
hereunder, including the preparation, execution, and interpretation of the Loan
Documents, and shall be fully protected in relying as to legal matters on the
advice of counsel, (ii) to execute any of the trusts and powers hereof and to
perform any duty hereunder either directly or through his agents or attorneys,
(iii) to select and employ, in and about the execution of his duties hereunder,
suitable accountants, engineers and other experts, agents and attorneys-in-fact,
either corporate or individual, not regularly in the employ of Trustee, and
Trustee shall not be answerable for any act, default, negligence, or misconduct
of any such accountant, engineer or other expert, agent or attorney-in-fact, if
selected with reasonable care, or for any error of judgment or act done by
Trustee in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever, except for Trustee’s gross negligence or bad faith,
and (iv) any and all other lawful action as Beneficiary may instruct Trustee to
take to protect or enforce Beneficiary’s rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering by virtue of
the powers herein granted to Trustee, upon the Subject Property for debts
contracted for or liability or damages incurred in the management or operation
of the Subject Property. Trustee shall have the right to rely on any instrument,
document, or signature authorizing or supporting any action taken or proposed to
be taken by Trustee hereunder, believed by Trustee in good faith to be genuine.
Trustee shall be entitled to reimbursement for expenses incurred by Trustee in
the performance of Trustee’s duties hereunder and to reasonable compensation for
such of Trustee’s services hereunder as shall be rendered. GRANTOR WILL, FROM
TIME TO TIME, PAY THE COMPENSATION DUE TO TRUSTEE HEREUNDER AND REIMBURSE
TRUSTEE FOR, AND INDEMNIFY AND HOLD HARMLESS TRUSTEE AGAINST, ANY AND ALL
LIABILITY AND EXPENSES WHICH MAY BE INCURRED BY TRUSTEE IN THE PERFORMANCE OF
TRUSTEE’S DUTIES.

 

  (d)

All moneys received by Trustee shall, until used or applied as herein provided,
be held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required by
applicable law) and Trustee shall be under no liability for interest on any
moneys received by Trustee hereunder.

 

  (e)

Should any deed, conveyance, or instrument of any nature be required from
Grantor by any Trustee or substitute Trustee to more fully and certainly vest in
and confirm to the Trustee or substitute Trustee such estates, rights, powers,
and duties, then, upon request by the Trustee or substitute Trustee, any and all
such deeds, conveyances and instruments shall be made, executed, acknowledged,
and delivered and shall be caused to be recorded and/or filed by Grantor.

 

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  (f)

By accepting or approving anything required to be observed, performed, or
fulfilled or to be given to Trustee pursuant to the Loan Documents, including
without limitation, any deed, conveyance, instrument, officer’s certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal, or insurance policy, Trustee shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness,
or legal effect of the same, or of any term, provision, or condition thereof,
and such acceptance or approval thereof shall not be or constitute any warranty
or affirmation with respect thereto by Trustee.

 

  5.11

COMPENSATION; EXCULPATION; INDEMNIFICATION.

 

  (a)

Grantor shall pay Trustee’s fees and reimburse Trustee for expenses in the
administration of this trust, including attorneys’ fees. Grantor shall pay to
Beneficiary reasonable compensation for services rendered concerning this Deed
of Trust, including without limit any statement of amounts owing under any
Secured Obligation. Beneficiary shall not directly or indirectly be liable to
Grantor or any other person as a consequence of (i) the exercise of the rights,
remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the
failure or refusal of Beneficiary to perform or discharge any obligation or
liability of Grantor under any agreement related to the Subject Property or
Collateral or under this Deed of Trust; or (iii) any loss sustained by Grantor
or any third party resulting from Beneficiary’s failure (whether by malfeasance,
nonfeasance or refusal to act) to lease the Subject Property after a Default
(hereinafter defined) or from any other act or omission (regardless of whether
same constitutes negligence) of Beneficiary in managing the Subject Property
after a Default unless the loss is caused by the gross negligence or willful
misconduct of Beneficiary and no such liability shall be asserted against or
imposed upon Beneficiary, and all such liability is hereby expressly waived and
released by Grantor.

 

  (b)

GRANTOR INDEMNIFIES TRUSTEE AND BENEFICIARY AGAINST, AND HOLDS TRUSTEE AND
BENEFICIARY HARMLESS FROM, ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, CAUSES OF
ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS’ FEES AND OTHER LEGAL EXPENSES, COST
OF EVIDENCE OF TITLE, COST OF EVIDENCE OF VALUE, AND OTHER EXPENSES WHICH EITHER
MAY SUFFER OR INCUR: (i) BY REASON OF THIS DEED OF TRUST; (ii) BY REASON OF THE
EXECUTION OF THIS DEED OF TRUST OR IN PERFORMANCE OF ANY ACT REQUIRED OR
PERMITTED HEREUNDER OR BY LAW; (iii) AS A RESULT OF ANY FAILURE OF GRANTOR TO
PERFORM GRANTOR’S OBLIGATIONS; OR (iv) BY REASON OF ANY ALLEGED OBLIGATION OR
UNDERTAKING ON BENEFICIARY’S PART TO PERFORM OR DISCHARGE ANY OF THE
REPRESENTATIONS, WARRANTIES, CONDITIONS, COVENANTS OR OTHER OBLIGATIONS
CONTAINED IN ANY OTHER DOCUMENT RELATED TO THE SUBJECT PROPERTY AND COLLATERAL.
THE ABOVE OBLIGATION OF GRANTOR TO INDEMNIFY AND HOLD HARMLESS TRUSTEE AND
BENEFICIARY SHALL SURVIVE THE RELEASE AND CANCELLATION OF THE SECURED
OBLIGATIONS AND THE RELEASE OR PARTIAL RELEASE OF THE LIEN OF THIS DEED OF
TRUST.

 

  (c)

Grantor shall pay all amounts and indebtedness arising under this Section 5.11
immediately upon demand by Trustee or Beneficiary together with interest thereon
from the date the indebtedness arises at the rate of interest then applicable to
the principal balance of the Note as specified therein.

 

  5.12

SUBSTITUTION OF TRUSTEES. Trustee may resign by the giving of notice of such
resignation in writing or verbally to Beneficiary. If Trustee shall die, resign,
or become disqualified from acting in the execution of this trust, or if, for
any reason, Beneficiary shall prefer to appoint a substitute trustee or multiple
substitute trustees, or successive substitute trustees or successive multiple
substitute trustees, to act instead of the aforenamed Trustee, Beneficiary shall
have full power to appoint a substitute trustee (or, if preferred, multiple
substitute trustees) in succession who shall succeed (and if multiple substitute
trustees are appointed, each of such multiple substitute trustees shall succeed)
to all the estates, rights, powers, and duties of the aforenamed Trustee. Such
appointment may be executed by any authorized agent of Beneficiary, and if such
Beneficiary be a corporation and such appointment be executed in its behalf by
any officer of such corporation, such appointment shall be conclusively presumed
to be executed with authority and shall be valid and sufficient

 

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without proof of any action by the board of directors or any superior officer of
the corporation. Grantor hereby ratifies and confirms any and all acts which the
aforenamed Trustee, or his successor or successors in this trust, shall do
lawfully by virtue hereof. If multiple substitute Trustees are appointed, each
of such multiple substitute Trustees shall be empowered and authorized to act
alone without the necessity of the joinder of the other multiple substitute
trustees, whenever any action or undertaking of such substitute trustees is
requested or required under or pursuant to this Deed of Trust or applicable law.
Any substitute Trustee appointed pursuant to any of the provisions hereof shall,
without any further act, deed, or conveyance, become vested with all the
estates, properties, rights, powers, and trusts of its or his predecessor in the
rights hereunder with like effect as if originally named as Trustee herein; but
nevertheless, upon the written request of Beneficiary or of the substitute
Trustee, the Trustee ceasing to act shall execute and deliver any instrument
transferring to such substitute Trustee, upon the trusts herein expressed, all
the estates, properties, rights, powers, and trusts of the Trustee so ceasing to
act, and shall duly assign, transfer and deliver any of the property and moneys
held by such Trustee to the substitute Trustee so appointed in the Trustee’s
place.

 

  5.13

DUE ON SALE OR ENCUMBRANCE. The terms “Loan” and “Loan Documents” have the
meaning given them in the Loan Agreement described in Section 2.1. Grantor
represents, agrees and acknowledges that:

 

  (a)

Improvement and operation of real property is a highly complex activity which
requires substantial knowledge of law and business conditions and practices, and
an ability to control, coordinate and schedule the many factors affecting such
improvement and operation. Experience, financial stability, managerial ability
and a good reputation in the business community enhance an owner’s and
operator’s ability to obtain market rents and to induce cooperation in
scheduling and are taken into account by Beneficiary in approving loan
applications.

 

  (b)

Grantor has represented to Beneficiary, not only in the representations and
warranties contained in the Loan Documents, but also in its initial loan
application and in all of the negotiations connected with Beneficiary making the
Loan, certain facts concerning Grantor’s financial stability, managerial and
operational ability, reputation, skill, and creditworthiness. Beneficiary has
relied upon these representations and warranties as a substantial and material
consideration in its decision to make the Loan.

 

  (c)

The conditions and terms provided in the Loan Agreement were induced by these
representations and warranties and would not have been made available by
Beneficiary in the absence of these representations and warranties.

 

  (d)

Beneficiary would not have made this Loan if Beneficiary did not have the right
to sell, transfer, assign, or grant participations in the Loan and in the Loan
Documents, and that such participations are dependent upon the potential
participants’ reliance on such representations and warranties.

 

  (e)

Grantor’s financial stability and managerial and operational ability and that of
those persons or entities having a direct or beneficial interest in Grantor are
a substantial and material consideration to any third parties who have entered
or will enter into agreements with Grantor.

 

  (f)

Beneficiary has relied upon the skills and services offered by such third
parties and the provision of such skills and services is jeopardized if Grantor
breaches its covenants contained below regarding Transfers.

 

  (g)

A transfer of possession of or title to the Subject Property, or a change in the
person or entity operating, developing, constructing or managing the Subject
Property, would substantially increase the risk of Default under the Loan
Documents and significantly and materially impair and reduce Beneficiary’s
security for the Note.

 

  (h)

As used herein, the term “Transfer” shall mean each of the following actions or
events: the sale, transfer, assignment, lease as a whole, encumbrance,
hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily,
involuntarily or by operation of law of: (i) the Subject Property or Collateral
or any interest therein; (ii) title to any other security more specifically
described

 

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in any Loan Document; (iii) Grantor’s right, title and/or interest in the Loan
Documents and any subsequent documents executed by Grantor in connection
therewith; (iv) legal or beneficial ownership of any partnership interest in
Grantor if Grantor is a partnership; (v) legal or beneficial ownership of any
membership interest in Grantor if Grantor is a limited liability company;
(vi) legal or beneficial ownership of any partnership interest in any general
partner, venturer or member of Grantor; or (vii) legal or beneficial ownership
of any of the stock in Grantor if Grantor is a corporation or in any general
partner, venturer or member in Grantor that is a corporation.

 

  (i)

Grantor shall not make or commit to make any Transfer without Beneficiary’s
prior written consent, which it may grant or withhold at its sole discretion
(except with respect to those Transfers reasonably approved by Beneficiary or
otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan
Agreement). It is expressly agreed that Beneficiary may predicate Beneficiary’s
decision to grant consent to a Transfer on such terms and conditions as
Beneficiary may require, in Beneficiary’s sole discretion, including without
limitation (i) consideration of the creditworthiness of the party to whom such
Transfer will be made and its development and management ability with respect to
the Subject Property, (ii) consideration of whether the security for repayment,
performance and discharge of the Secured Obligations, or Beneficiary’s ability
to enforce its rights, remedies, and recourses with respect to such security,
will be impaired in any way by the proposed Transfer, (iii) an increase in the
rate of interest payable under the Note or any other change in the terms and
provisions of the Note and other Loan Documents, (iv) reimbursement of
Beneficiary for all costs and expenses incurred by Beneficiary in investigating
the creditworthiness and management ability of the party to whom such Transfer
will be made and in determining whether Beneficiary’s security will be impaired
by the proposed Transfer, (v) payment to Beneficiary of a transfer fee to cover
the cost of documenting the Transfer in its records, (vi) payment of
Beneficiary’s reasonable attorneys’ fees in connection with such Transfer,
(vii) endorsements (to the extent available under applicable law) to any
existing mortgagee title insurance policies or construction binders insuring
Beneficiary’s liens and security interests covering the Subject Property, and
(viii) require additional security for the payment, performance and discharge of
the Secured Obligations. If Beneficiary’s consent should be given, any Transfer
shall be subject to the Loan Documents and any transferee of Grantor’s interest
shall: (i) assume all of Grantor’s obligations thereunder; and (ii) agree to be
bound by all provisions and perform all obligations contained therein; provided,
however, that such assumption shall not release Grantor or any maker or any
guarantor of the Note from any liability thereunder or under any other Loan
Documents without the prior written consent of Beneficiary. In the event of any
Transfer without the prior written consent of Beneficiary, whether or not
Beneficiary elects to enforce its right to accelerate the Loan pursuant to
Sections 6.1 and 6.2, all sums owing under the Note, as well as all other
charges, expenses and costs owing under the Loan Documents, shall at the option
of Beneficiary, automatically bear interest at five percent (5%) above the rate
provided in the Note, but not in excess of the Maximum Lawful Rate (as defined
below), from the date (or any date thereafter) of such unconsented to Transfer.
Grantor acknowledges that the automatic shift(s) to this alternate rate is
reasonable since the representations that Beneficiary relied upon in making the
Loan may no longer be relied upon. A consent by Beneficiary to one or more
Transfers shall not be construed as a consent to further Transfers or as a
waiver of Beneficiary’s consent with respect to future Transfers.

 

  5.14

RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to
or the consent, approval or agreement of any persons or entities having any
interest at any time in the Subject Property and Collateral or in any manner
obligated under the Secured Obligations (“Interested Parties”), Beneficiary may,
from time to time, release any person or entity from liability for the payment
or performance of any Secured Obligation, take any action or make any agreement
extending the maturity or otherwise altering the terms or increasing the amount
of any Secured Obligation, or accept additional security or release all or a
portion of the Subject Property and Collateral and other security for the
Secured Obligations. None of the foregoing actions shall release or reduce the
personal liability of any of said Interested Parties, or release or impair the
priority of the lien of and security interests created by this Deed of Trust
upon the Subject Property and Collateral.

 

  5.15

RELEASES. If the Secured Obligations are paid, performed and discharged in full
in accordance with the terms of this Deed of Trust, the Note, and the other Loan
Documents, then this conveyance shall become

 

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null and void and be released by Beneficiary at Grantor’s request and expense,
and Beneficiary shall have no further obligation to make advances under and
pursuant to the provisions hereof or in the other Loan Documents.
Notwithstanding anything contained herein to the contrary, Beneficiary hereby
agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to
release this Deed of Trust notwithstanding the fact that all of the Secured
Obligations have not been satisfied.

 

  5.16

SUBROGATION. Beneficiary shall be subrogated to the lien of all encumbrances,
whether released of record or not, paid in whole or in part by Beneficiary
pursuant to the Loan Documents or by the proceeds of any loan secured by this
Deed of Trust.

 

  5.17

RIGHT OF INSPECTION. Beneficiary, its agents and employees, may enter the
Subject Property at any reasonable time for the purpose of inspecting the
Subject Property and Collateral and ascertaining Grantor’s compliance with the
terms hereof.

 

  5.18

CONTRACTS. Grantor will deliver to Beneficiary a copy of each Contract promptly
after the execution of same by all parties thereto and subject to any approval
of Beneficiary required by any of the Loan Documents. Within twenty (20) days
after a request by Beneficiary, Grantor shall prepare and deliver to Beneficiary
a complete listing of all Contracts, showing date, term, parties, subject
matter, concessions, whether any defaults exist, and other information specified
by Beneficiary, of or with respect to each of such Contracts, together with a
copy thereof (if so requested by Beneficiary). Grantor represents and warrants
that none of the Contracts encumber or create a lien on the Subject Property or
Collateral, but are personal with Grantor. As used herein, the term “Contract”
shall mean any management agreement, leasing and brokerage agreement, and
operating or service contract with respect to the Subject Property or
Collateral.

ARTICLE 6. DEFAULT PROVISIONS

 

  6.1

DEFAULT. For all purposes hereof, the term “Default” shall mean (a) the
existence of any Event of Default as defined in the Loan Agreement; (b) at
Beneficiary’s option, the failure of Grantor to make any payment of principal or
interest on the Note or to pay any other amount due hereunder or under the Note
when the same is due and payable, whether at maturity, by acceleration or
otherwise; (c) the failure of Grantor to perform any non-monetary obligation
hereunder, or the failure to be true of any representation or warranty of
Grantor contained herein and the continuance of such failure for ten (10) days
after notice, or within any longer grace period, if any, allowed in the Loan
Agreement for such failure, or (d) if Grantor or any other Person shall make a
Transfer without the prior written consent of Beneficiary (which consent may be
withheld in Beneficiary’s sole discretion (except for those Transfers reasonably
approved by Beneficiary or otherwise expressly permitted under Sections 9.17,
9.18 and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.13
above).

 

  6.2

RIGHTS AND REMEDIES. At any time after Default, Beneficiary and Trustee shall
each have all the following rights and remedies:

 

  (a)

Right to Accelerate. Beneficiary may, without notice, demand, presentment,
notice of nonpayment or nonperformance, protest, notice of protest, notice of
intent to accelerate, notice of acceleration, or any other notice or any other
action, all of which are hereby waived by Grantor and all other parties
obligated in any manner whatsoever on the Secured Obligations, declare the
entire unpaid balance of the Secured Obligations immediately due and payable,
and upon such declaration, the entire unpaid balance of the Secured Obligations
shall be immediately due and payable. The failure to exercise any remedy
available to the Beneficiary shall not be deemed to be a waiver of any rights or
remedies of the Beneficiary under the Loan Documents, at law or in equity.

 

  (b)

Right to Perform Grantor’s Covenants. If Grantor has failed to keep or perform
any covenant whatsoever contained in this Deed of Trust or the other Loan
Documents, Beneficiary may, but shall not be obligated to any person to do so,
perform or attempt to perform said covenant, and any payment made or expense
incurred in the performance or attempted performance of any such covenant shall
be and become a part of the Secured Obligations, and Grantor promises, upon

 

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demand, to pay to Beneficiary, at the place where the Note is payable, all sums
so advanced or paid by Beneficiary, with interest from the date when paid or
incurred by Beneficiary at the rate of interest then applicable on the
outstanding principal balance of the Note. No such payment by Beneficiary shall
constitute a waiver of any Default. In addition to the liens and security
interests hereof, Beneficiary shall be subrogated to all rights, titles, liens,
and security interests securing the payment of any debt, claim, tax, or
assessment for the payment of which Beneficiary may make an advance, or which
Beneficiary may pay.

 

  (c)

Right of Entry. Beneficiary may, prior or subsequent to the institution of any
foreclosure proceedings, enter upon the Subject Property, or any part thereof,
and take exclusive possession of the Subject Property and Collateral and of all
books, records, and accounts relating thereto and to exercise without
interference from Grantor any and all rights which Grantor has with respect to
the management, possession, operation, protection, or preservation of the
Subject Property and Collateral, including without limitation the right to rent
the same for the account of Grantor and to deduct from such Payments all costs,
expenses, and liabilities of every character incurred by the Beneficiary in
collecting such Payments and in managing, operating, maintaining, protecting, or
preserving the Subject Property and Collateral and to apply the remainder of
such Payments on the Secured Obligations in such manner as Beneficiary may
elect. All such costs, expenses, and liabilities incurred by the Beneficiary in
collecting such Payments and in managing, operating, maintaining, protecting, or
preserving the Subject Property and Collateral, if not paid out of Payments as
hereinabove provided, shall constitute a demand obligation owing by Grantor and
shall bear interest from the date of expenditure until paid at the rate of
interest then applicable on the outstanding principal balance of the Note, all
of which shall constitute a portion of the Secured Obligations. If necessary to
obtain the possession provided for above, the Beneficiary may invoke any and all
legal remedies to dispossess Grantor, including specifically one or more actions
for forcible entry and detainer, trespass to try title, and restitution. In
connection with any action taken by the Beneficiary pursuant to this subsection,
the Beneficiary shall not be liable for any loss sustained by Grantor resulting
from any failure to let the Subject Property or Collateral, or any part thereof,
or from any other act or omission of the Beneficiary in managing the Subject
Property and Collateral unless such loss is caused by the willful misconduct of
the Beneficiary, nor shall the Beneficiary be obligated to perform or discharge
any obligation, duty, or liability under any Lease or under or by reason hereof
or the exercise of rights or remedies hereunder. GRANTOR SHALL AND DOES HEREBY
AGREE TO INDEMNIFY BENEFICIARY FOR, AND TO HOLD HARMLESS BENEFICIARY FROM, ANY
AND ALL LIABILITY, LOSS, OR DAMAGE, WHICH MAY OR MIGHT BE INCURRED BY
BENEFICIARY UNDER ANY SUCH LEASE OR UNDER OR BY REASON HEREOF OR THE EXERCISE OF
RIGHTS OR REMEDIES HEREUNDER, AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER
WHICH MAY BE ASSERTED AGAINST BENEFICIARY BY REASON OF ANY ALLEGED OBLIGATIONS
OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS,
OR AGREEMENTS CONTAINED IN ANY SUCH LEASE. Should Beneficiary incur any such
liability, the amount thereof, including without limitation costs, expenses, and
reasonable attorneys’ fees, together with interest thereon from the date of
expenditure until paid at the rate of interest then applicable on the
outstanding principal balance of the Note, shall be secured hereby, and Grantor
shall reimburse the Beneficiary therefor immediately upon demand. Nothing in
this subsection shall impose any duty, obligation, or responsibility upon
Beneficiary for the control, care, management, leasing, or repair of the Subject
Property and Collateral, nor for the carrying out of any of the terms and
conditions of any such Lease; nor shall it operate to make Beneficiary
responsible or liable for any waste committed on the Subject Property and
Collateral by the tenants or by any other parties, or for any Hazardous
Materials on or under the Subject Property or Collateral, or for any dangerous
or defective condition of the Subject Property or Collateral or for any
negligence in the management, leasing, upkeep, repair, or control of the Subject
Property or Collateral resulting in loss or injury or death to any tenant,
licensee, employee, or stranger. Grantor hereby assents to, ratifies, and
confirms any and all actions of Beneficiary with respect to the Subject Property
and Collateral taken under this subsection.

The remedies in this subsection are in addition to other remedies available to
the Beneficiary and the exercise of the remedies in this subsection shall not be
deemed to be an election of nonjudicial or

 

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judicial remedies otherwise available to the Beneficiary. The remedies in this
Section 6.2 are available under and governed by the real property laws of Texas
and are not governed by the personal property laws of Texas, including but not
limited to, the power to dispose of personal property in a commercially
reasonable manner under Section 9.610 of the UCC. No action by Beneficiary,
taken pursuant to this subsection, shall be deemed to be an election to dispose
of personal property under Section 9.621 of the UCC. Any receipt of
consideration received by Beneficiary pursuant to this subsection shall be
immediately credited against the Secured Obligations (in the inverse order of
maturity) and the value of said consideration shall be treated like any other
payment against the Secured Obligations.

 

  (d)

Foreclosure-Power of Sale. 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 Subject
Property and Collateral, 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.

 

  (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 and Beneficiary, and elect to sell the Mortgaged 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 Indebtedness. In addition to the rights and powers of
sale granted under the preceding provisions of this subsection, if default is
made in the payment of any portion of the Secured Obligations, Beneficiary may,
at Beneficiary’s option, at once or at any time thereafter while any matured
portion remains unpaid, without declaring the entire Secured Obligations to be
due and payable, orally or in writing direct Trustee to enforce this trust and
to sell the Subject Property and Collateral subject to such unmatured Secured

 

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Obligations and to the rights, powers, liens, security interests, and
assignments securing or providing recourse for payment of such unmatured Secured
Obligations, in the same manner, all as provided in the preceding provisions of
this subsection. Sales made without maturing the Secured Obligations may be made
hereunder whenever there is a default in the payment of any portion of the
Secured Obligations, 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 Secured Obligations or the rights, powers, liens,
security interests, and assignments securing or providing recourse for payment
of the Secured Obligations.

 

  (iv)

Partial Foreclosure. Sale of a part of the Subject Property or Collateral shall
not exhaust the power of sale, but sales may be made from time to time until the
Secured Obligations is paid, performed and discharged 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 Subject Property, but
also the Collateral and other interests constituting security for the Loan under
the Loan Documents, or any part thereof, along with the Subject Property and
Collateral 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 Subject Property
and Collateral separately from the remainder of the Subject Property and
Collateral. It shall not be necessary to have present or to exhibit at any sale
any of the Subject Property and Collateral.

 

  (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 Subject Property and
Collateral 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 Default, the notice of intention to accelerate,
or acceleration of, the maturity of the Secured Obligations, 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 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.

 

  (e)

Beneficiary’s Judicial Remedies. Beneficiary, or Trustee, upon written request
of Beneficiary, may proceed by suit or suits, at law or in equity, to enforce
the payment, performance and discharge of the Secured Obligations in accordance
with the terms hereof, of the Note, and the other Loan Documents, to foreclose
the liens and security interests of this Deed of Trust as against all or any
part of the Subject Property and Collateral, and to have all or any part of the
Subject Property and Collateral sold under the judgment or decree of a court of
competent jurisdiction. This remedy shall be cumulative of any other nonjudicial
remedies available to the Beneficiary with respect to the Loan Documents.
Proceeding with a request or receiving a judgment for legal relief shall not be
or be deemed to be an election of remedies or bar any available nonjudicial
remedy of the Beneficiary.

 

  (f)

Beneficiary’s Right to Appointment of Receiver. Beneficiary, as a matter of
right and without regard to the sufficiency of the security for payment,
performance and discharge of the Secured Obligations, 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 Subject Property and
Collateral or any part thereof, and of the Payments, 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.

 

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  (g)

Beneficiary’s UCC Remedies. The Beneficiary may exercise its rights of
enforcement with respect to the Collateral under the UCC, and in conjunction
with, in addition to or in substitution for the rights and remedies under the
UCC the Beneficiary may, and Grantor agrees, as follows: (i) without demand or
notice to Grantor, enter upon the Subject Property to take possession of,
assemble, receive, and collect the Collateral, or any part thereof, or to render
it unusable; (ii) require Grantor to assemble the Collateral and make it
available at a place Beneficiary designates which is mutually convenient to
allow Beneficiary to take possession or dispose of the Collateral; (iii) written
notice mailed to Grantor as provided herein at least ten (10) days prior to the
date of public sale of the Collateral or prior to the date after which private
sale of the Collateral will be made shall constitute reasonable notice; (iv) any
sale made pursuant to the provisions of this subsection shall be deemed to have
been a public sale conducted in a commercially reasonable manner if held
contemporaneously with the sale of the Subject Property under power of sale as
provided herein upon giving the same notice with respect to the sale of the
Collateral hereunder as is required for such sale of the Subject Property under
power of sale, and such sale shall be deemed to be pursuant to a security
agreement covering both real and personal property under Section 9.604 of the
UCC; (v) in the event of a foreclosure sale, whether made by the Trustee under
the terms hereof, or under judgment of a court, the Collateral and the Subject
Property may, at the option of the Beneficiary, be sold as a whole; (vi) it
shall not be necessary that the Beneficiary take possession of the Collateral,
or any part thereof, prior to the time that any sale pursuant to the provisions
of this subsection is conducted, and it shall not be necessary that the
Collateral or any part thereof be present at the location of such sale;
(vii) prior to application of proceeds of disposition of the Collateral to the
Secured Obligations, such proceeds shall be applied to the reasonable expenses
of retaking, holding, preparing for sale or lease, selling, leasing and the
like, and the reasonable attorneys’ fees and legal expenses incurred by the
Beneficiary; (viii) after notification, if any, hereafter provided in this
subsection, Beneficiary may sell, lease, or otherwise dispose of the Collateral,
or any part thereof, in one or more parcels at public or private sale or sales,
at Beneficiary’s offices or elsewhere, for cash, on credit, or for future
delivery. Upon the request of Beneficiary, Grantor shall assemble the Collateral
and make it available to Beneficiary at any place designated by Beneficiary that
is reasonably convenient to Grantor and Beneficiary. Grantor agrees that
Beneficiary shall not be obligated to give more than ten (10) days’ written
notice of the time and place of any public sale or of the time after which any
private sale may take place and that such notice shall constitute reasonable
notice of such matters. Grantor shall be liable for all expenses of retaking,
holding, preparing for sale, or the like, and all attorneys’ fees, legal
expenses, and all other costs and expenses incurred by Beneficiary in connection
with the collection of the Secured Obligations and the enforcement of
Beneficiary’s rights under the Loan Documents. Beneficiary shall apply the
proceeds of the sale of the Collateral against the Secured Obligations in
accordance with the requirements of this Deed of Trust. Grantor shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay, perform and discharge the Secured
Obligations in full. Grantor waives all rights of marshalling in respect of the
Personalty; (ix) any and all statements of fact or other recitals made in any
bill of sale or assignment or other instrument evidencing any foreclosure sale
hereunder, the nonpayment of the Secured Obligations, the occurrence of any
Default, the Beneficiary having declared all or a portion of such Secured
Obligations to be due and payable, the notice of time, place, and terms of sale
and of the properties to be sold having been duly given, or any other act or
thing having been duly done by Beneficiary, shall be taken as prima facie
evidence of the truth of the facts so stated and recited; and (x) Beneficiary
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 Beneficiary, including the
sending of notices and the conduct of the sale, but in the name and on behalf of
Beneficiary.

 

  (h)

Rights Relating to Leases and Rents. Grantor has, pursuant to Article 3 of this
Deed of Trust, assigned to Beneficiary all Payments under each of the Leases
covering all or any portion of the Subject Property. Beneficiary, or Trustee on
Beneficiary’s behalf, may at any time, and without notice, either in person, by
agent, or by receiver to be appointed by a court, enter and take possession of
the Subject Property or any part thereof, and in its own name, sue for or
otherwise collect the Payments. All Payments collected by Beneficiary, or
Trustee acting on Beneficiary’s behalf, shall be applied as provided for in this
Deed of Trust; provided, however, that if the costs,

 

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expenses, and attorneys’ fees shall exceed the amount of Payments collected, the
excess shall be added to the Secured Obligations, shall bear interest at the
rate of interest then applicable on the outstanding principal balance of the
Note, and shall be immediately due and payable. The entering upon and taking
possession of the Subject Property, the collection of Payments, and the
application thereof as aforesaid shall not cure or waive any Default or notice
of default, if any, hereunder nor invalidate any act done pursuant to such
notice, except to the extent any such Default is fully cured. Failure or
discontinuance by Beneficiary, or Trustee on Beneficiary’s behalf, at any time
or from time to time, to collect said Payments shall not in any manner impair
the subsequent enforcement by Beneficiary, or Trustee on Beneficiary’s behalf,
of the right, power and authority herein conferred upon it. Nothing contained
herein, nor the exercise of any right, power, or authority herein granted to
Beneficiary, or Trustee on Beneficiary’s behalf, shall be, or shall be construed
to be, an affirmation by it of any tenancy, lease, or option, nor an assumption
of liability under, nor the subordination of, the lien of this Deed of Trust, to
any such tenancy, lease, or option, nor an election of judicial relief, if any
such relief is requested or obtained as to Leases or Payments, with respect to
the Subject Property or any other collateral given by Grantor to Beneficiary. In
addition, from time to time Beneficiary may elect, and notice hereby is given to
each lessee under any Lease, to subordinate the lien of this Deed of Trust to
any Lease by unilaterally executing and recording an instrument of
subordination, and upon such election the lien of this Deed of Trust shall be
subordinate to the Lease identified in such instrument of subordination;
provided, however, in each instance such subordination will not affect or be
applicable to, and expressly excludes any lien, charge, encumbrance, security
interest, claim, easement, restriction, option, covenant and other rights,
titles, interests or estates of any nature whatsoever with respect to all or any
portion of the Subject Property and Collateral to the extent that the same may
have arisen or intervened during the period between the recordation of this Deed
of Trust and the execution of the Lease identified in such instrument of
subordination.

 

  (i)

Other Rights. Beneficiary (i) may surrender the insurance policies maintained
pursuant hereto or the other Loan Documents or any part thereof, and upon
receipt shall apply the unearned premiums as a credit on the Secured
Obligations, in accordance herewith, and, in connection therewith, Grantor
hereby appoints Beneficiary as agent and attorney-in-fact (which is coupled with
an interest and is therefore irrevocable) for Grantor to collect such premiums;
and (ii) apply the reserve for impositions, if any, required by the provisions
of this Deed of Trust, toward payment of the Secured Obligations; and
(iii) shall have and may exercise any and all other rights and remedies which
Beneficiary may have at law or in equity, or by virtue of any Loan Document or
under the UCC, or otherwise.

 

  (j)

Beneficiary as Purchaser. Beneficiary may be the purchaser of the Subject
Property and Collateral or any part thereof, at any sale thereof, whether such
sale be under the power of sale herein vested in Trustee or upon any other
foreclosure of the liens and security interests hereof, or otherwise, and
Beneficiary shall, upon any such purchase, acquire good title to the Subject
Property and Collateral so purchased, free of the liens and security interests
hereof, unless the sale was made subject to an unmatured portion of the Secured
Obligations. The Beneficiary, as purchaser, shall be treated in the same manner
as any third party purchaser and the proceeds of the Beneficiary’s purchase
shall be applied in accordance with the requirements of this Deed of Trust.

 

  (k)

Possession After Foreclosure. If the liens or security interests hereof shall be
foreclosed by power of sale granted herein, by judicial action, or otherwise,
the purchaser at any such sale shall receive, as an incident to purchaser’s
ownership, immediate possession of the property purchased, and if Grantor or
Grantor’s successors shall hold possession of said property or any part thereof
subsequent to foreclosure, Grantor and Grantor’s successors shall be considered
as tenants at sufferance of the purchaser at foreclosure sale (without
limitation of other rights or remedies, at a reasonable rental per day, due and
payable daily, based upon the value of the portion of the Subject Property and
Collateral so occupied or possessed and sold to such purchaser), and anyone
occupying or possessing such portion of the Subject Property and Collateral,
after demand is made for possession thereof, shall be guilty of forcible
detainer and shall be subject to eviction and removal, forcible or otherwise,
with or without process of law, and all damages by reason thereof are hereby
expressly waived.

 

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  (l)

Abandonment of Sale. In the event a foreclosure hereunder is commenced by
Trustee in accordance with subsection (d) hereof, at any time before the sale,
Trustee may abandon the sale, and Beneficiary may then institute suit for the
collection of the Secured Obligations and for the foreclosure of the liens and
security interests hereof and of the Loan Documents. If Beneficiary should
institute a suit for the collection of the Secured Obligations and for a
foreclosure of the liens and security interests hereof, Beneficiary may, at any
time before the entry of a final judgment in said suit, dismiss the same and
require Trustee to sell the Subject Property and Collateral or any part thereof
in accordance with the provisions of this Deed of Trust.

 

  6.3

APPLICATION OF FORECLOSURE SALE PROCEEDS. The proceeds from any sale, lease, or
other disposition made pursuant to Section 6.2, or the proceeds from the
surrender of any insurance policies pursuant hereto, or any Payments collected
by Beneficiary from the Subject Property and Collateral, or the reserve for
impositions, if any, required by the provisions of this Deed of Trust or sums
received pursuant to a condemnation or proceeds from insurance which Beneficiary
elects to apply to the Secured Obligations, shall be applied by Trustee, or by
Beneficiary, as the case may be, to the Secured Obligations in the following
order and priority: (i) to the payment of all expenses of advertising, selling,
disposing and conveying the Subject Property and Collateral or part thereof,
and/or prosecuting or otherwise collecting Payments, proceeds, premiums, or
other sums including reasonable attorneys’ fees and a reasonable fee or
commission to Trustee; (ii) to the remainder of the Secured Obligations;
(iii) the balance, if any and to the extent applicable, remaining after the full
and final payment, performance and discharge of the Secured Obligations to the
holder or beneficiary of any inferior liens or security interests covering the
Subject Property and Collateral, if any, in order of the priority of such
inferior liens or security interests (Trustee and Beneficiary shall hereby be
entitled to rely exclusively upon a commitment for title insurance or search of
applicable uniform commercial code filing office records issued to determine
such priority); and (iv) the cash balance, if any, to the Grantor. The
application of proceeds of sale or other proceeds as otherwise provided herein
shall be deemed to be a payment of the Secured Obligations like any other
payment. The balance of the Secured Obligations remaining unpaid, if any, shall
remain fully due and owing in accordance with the terms of the Note or the other
Loan Documents.

 

  6.4

APPLICATION OF OTHER SUMS. All sums received by Beneficiary under Section 6.2 or
Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver
under Section 6.2 or Section 3.2, including, without limitation, attorneys’
fees, shall be applied in payment of the Secured Obligations in such order as
Beneficiary shall determine in its sole discretion; provided, however,
Beneficiary shall have no liability for funds not actually received by
Beneficiary.

 

  6.5

NO CURE OR WAIVER. Neither Beneficiary’s nor Trustee’s nor any receiver’s entry
upon and taking possession of all or any part of the Subject Property and
Collateral, nor any collection of rents, issues, profits, insurance proceeds,
condemnation proceeds or damages, other security or proceeds of other security,
or other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise or failure to exercise of any other right or remedy
by Beneficiary or Trustee or any receiver shall cure or waive any breach,
Default or notice of default under this Deed of Trust, or nullify the effect of
any notice of default or sale (unless all Secured Obligations then due have been
paid and performed and Grantor has cured all other defaults), or impair the
status of the security, or prejudice Beneficiary or Trustee in the exercise of
any right or remedy, or be construed as an affirmation by Beneficiary of any
tenancy, lease or option or a subordination of the lien of or security interests
created by this Deed of Trust.

 

  6.6

PAYMENT OF COSTS, EXPENSES AND ATTORNEYS’ FEES. Grantor agrees to pay to
Beneficiary immediately and without demand all costs and expenses incurred by
Trustee and Beneficiary pursuant to Section 6.2 (including, without limitation,
court costs and attorneys’ fees, whether incurred in litigation or not) with
interest from the date of expenditure until said sums have been paid at the rate
of interest then applicable to the principal balance of the Note as specified
therein. In addition, Grantor shall pay to Trustee all Trustee’s fees hereunder
and shall reimburse Trustee for all expenses incurred in the administration of
this trust, including, without limitation, any attorneys’ fees.

 

  6.7

POWER TO FILE NOTICES AND CURE DEFAULTS. Grantor hereby irrevocably appoints
Beneficiary and its successors and assigns, as its attorney-in-fact, which
agency is coupled with an interest, (a) to execute and/or record any notices of
completion, cessation of labor, or any other notices that Beneficiary deems

 

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appropriate to protect Beneficiary’s interest, (b) upon the issuance of a deed
pursuant to the foreclosure of the lien of this Deed of Trust or the delivery of
a deed in lieu of foreclosure, to execute all instruments of assignment or
further assurance with respect to the Subject Property and Collateral, Leases
and Payments in favor of the grantee of any such deed, as may be necessary or
desirable for such purpose, (c) to prepare, execute and file or record financing
statements, continuation statements, applications for registration and like
papers necessary to create, perfect or preserve Beneficiary’s security interests
and rights in or to any of the Subject Property and Collateral, and (d) upon the
occurrence of an event, act or omission which, with notice or passage of time or
both, would constitute a Default, Beneficiary may perform any obligation of
Grantor hereunder; provided, however, that: (i) Beneficiary as such
attorney-in-fact shall only be accountable for such funds as are actually
received by Beneficiary; and (ii) Beneficiary shall not be liable to Grantor or
any other person or entity for any failure to act (whether such failure
constitutes negligence) by Beneficiary under this Section.

ARTICLE 7. MISCELLANEOUS PROVISIONS

 

  7.1

ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference
the entire agreement of the parties with respect to matters contemplated herein
and supersede all prior negotiations. The Loan Documents grant further rights to
Beneficiary and contain further agreements and affirmative and negative
covenants by Grantor which apply to this Deed of Trust and to the Subject
Property and Collateral and such further rights and agreements are incorporated
herein by this reference.

 

  7.2

MERGER. No merger shall occur as a result of Beneficiary’s acquiring any other
estate in, or any other lien on, the Subject Property unless Beneficiary
consents to a merger in writing.

 

  7.3

OBLIGATIONS OF GRANTOR, JOINT AND SEVERAL. If more than one person has executed
this Deed of Trust as “Grantor”, the obligations of all such persons hereunder
shall be joint and several.

 

  7.4

RECOURSE TO SEPARATE PROPERTY. Any married person who executes this Deed of
Trust as a Grantor agrees that any money judgment which Beneficiary or Trustee
obtains pursuant to the terms of this Deed of Trust or any other obligation of
that married person secured by this Deed of Trust may be collected by execution
upon that person’s separate property, and any community property of which that
person is a manager.

 

  7.5

WAIVER OF MARSHALLING RIGHTS. Grantor, for itself and for all parties claiming
through or under Grantor, and for all parties who may acquire a lien on or
interest in the Subject Property and Collateral, hereby waives all rights to
have the Subject Property and Collateral and/or any other property, which is now
or later may be security for any Secured Obligation (“Other Property”)
marshalled upon any foreclosure of the lien of this Deed of Trust or on a
foreclosure of any other lien or security interest against any security for any
of the Secured Obligations. Beneficiary shall have the right to sell, and any
court in which foreclosure proceedings may be brought shall have the right to
order a sale of, the Subject Property and any or all of the Collateral or Other
Property as a whole or in separate parcels, in any order that Beneficiary may
designate.

 

  7.6

RULES OF CONSTRUCTION. When the identity of the parties or other circumstances
make it appropriate the masculine gender includes the feminine and/or neuter,
and the singular number includes the plural. The term “Subject Property” and
“Collateral” means all and any part of the Subject Property and Collateral,
respectively, and any interest in the Subject Property and Collateral,
respectively.

 

  7.7

SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained
shall be binding upon and inure to the benefit of the heirs, successors and
assigns of the parties hereto; provided, however, that this Section 7.7 does not
waive or modify the provisions of Section 6.1.

 

  7.8

EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be
executed in as many counterparts as may be convenient or required. It shall not
be necessary that the signature or acknowledgment of, or on behalf of, each
party, or that the signature of all persons required to bind any party, or the
acknowledgment of such party, appear on each counterpart. All counterparts shall
collectively

 

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Loan No. 1002835

 

 

constitute a single document. It shall not be necessary in making proof of this
document to produce or account for more than a single counterpart containing the
respective signatures of, or on behalf of, and the respective acknowledgments
of, each of the parties hereto. Any signature or acknowledgment page to any
counterpart may be detached from such counterpart without impairing the legal
effect of the signatures or acknowledgments thereon and thereafter attached to
another counterpart identical thereto except having attached to it additional
signature or acknowledgment pages.

 

  7.9

TEXAS LAW. This Deed of Trust shall be construed in accordance with the laws of
the State of Texas, except to the extent that federal laws preempt the laws of
the State of Texas.

 

  7.10

INCORPORATION. Exhibit A and Exhibit B, as attached, are incorporated into this
Deed of Trust by this reference.

 

  7.11

NOTICES. All notices, demands or other communications required or permitted to
be given pursuant to the provisions of this Deed of Trust shall be in writing
and shall be considered as properly given if delivered personally or sent by
certified United States mail, return receipt requested, or by Overnight Express
Mail or by overnight commercial courier service, charges prepaid. Notices so
sent shall be effective upon receipt at the address set forth below; provided,
however, that non-receipt of any communication as the result of any change of
address of which the sending party was not notified or as the result of a
refusal to accept delivery shall be deemed receipt of such communication. For
purposes of notice, the address of the parties shall be:

 

Grantor:

 

KBSII Two Westlake Park, LLC

c/o KBS Capital Advisors LLC

620 Newport Center Drive, Suite 1300

Newport Beach, CA 92660

Attention: Rodney Richerson, Regional Vice President, Asset Management

Telephone: (949) 417-6515

Telecopier: (949) 417-6518

Trustee:

 

Peter S. Graf

2626 Howell Street, 10th Floor

Dallas, Texas 75204

(w/ reference to Loan #1002835 and Beneficiary AU #02955)

Beneficiary:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

Real Estate Group (AU #02955)

2030 Main Street, Suite 800

Irvine, CA 92614

Attn: Bryan Stevens, Senior Vice President

Tel: (949) 251-4125

Fax: (949) 851-9728

Loan #1002835

With a copy to:

 

Wells Fargo Bank, National Association

Disbursement and Operations Center

2120 East Park Place, Suite 100

El Segundo, CA 90245

Attention: Eva Lopez

Any party shall have the right to change its address for notice hereunder to any
other location within the continental United States by the giving of thirty
(30) days notice to the other party in the manner set forth hereinabove. Grantor
shall forward to Beneficiary, without delay, any notices, letters or other
communications delivered to the Subject Property or to Grantor naming
Beneficiary, “Lender” or the “Construction Lender” or any similar designation as
addressee, or which could reasonably be deemed to affect the construction of the
Improvements or the ability of Grantor to perform its obligations to Beneficiary
under the Note or the Loan Agreement.

 

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Loan No. 1002835

 

  7.12

LIMITATIONS ON RECOURSE. The limitations on personal liability of directors,
officers, partners and members of Grantor contained in Section 13.27 of the Loan
Agreement shall apply to this Deed of Trust.

 

  7.13

INTEREST PROVISIONS.

 

  (a)

Savings Clause. It is expressly stipulated and agreed to be the intent of
Grantor and Beneficiary at all times to comply strictly with the applicable
Texas law governing the maximum rate or amount of interest payable on the Note
or the Related Indebtedness (or applicable United States federal law to the
extent that it permits Beneficiary to contract for, charge, take, reserve or
receive a greater amount of interest than under Texas law). If the applicable
law is ever judicially interpreted so as to render usurious any amount
(i) contracted for, charged, taken, reserved or received pursuant to the Note,
any of the other Loan Documents or any other communication or writing by or
between Grantor and Beneficiary related to the transaction or transactions that
are the subject matter of the Loan Documents, (ii) contracted for, charged or
received by reason of Beneficiary’s exercise of the option to accelerate the
maturity of the Note and/or the Related Indebtedness, or (iii) Grantor will have
paid or Beneficiary will have received by reason of any voluntary prepayment by
Grantor of the Note and/or the Related Indebtedness, then it is Grantor’s and
Beneficiary’s express intent that all amounts charged in excess of the Maximum
Lawful Rate shall be automatically cancelled, ab initio, and all amounts in
excess of the Maximum Lawful Rate theretofore collected by Beneficiary shall be
credited on the principal balance of the Note and/or the Related Indebtedness
(or, if the Note and all Related Indebtedness have been or would thereby be paid
in full, refunded to Grantor), and the provisions of the Note and the other Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder;
provided, however, if the Note has been paid in full before the end of the
stated term of the Note, then Grantor and Beneficiary agree that Beneficiary
shall, with reasonable promptness after Beneficiary discovers or is advised by
Grantor that interest was received in an amount in excess of the Maximum Lawful
Rate, either refund such excess interest to Grantor and/or credit such excess
interest against the Note and/or any Related Indebtedness then owing by Grantor
to Beneficiary. Grantor hereby agrees that as a condition precedent to any claim
seeking usury penalties against Beneficiary, Grantor will provide written notice
to Beneficiary, advising Beneficiary in reasonable detail of the nature and
amount of the violation, and Beneficiary shall have sixty (60) days after
receipt of such notice in which to correct such usury violation, if any, by
either refunding such excess interest to Grantor or crediting such excess
interest against the Note and/or the Related Indebtedness then owing by Grantor
to Beneficiary. All sums contracted for, charged or received by Beneficiary for
the use, forbearance or detention of any debt evidenced by the Note and/or the
Related Indebtedness shall, to the extent permitted by applicable law, be
amortized or spread, using the actuarial method, throughout the stated term of
the Note and/or the Related Indebtedness (including any and all renewal and
extension periods) until payment in full so that the rate or amount of interest
on account of the Note and/or the Related Indebtedness does not exceed the
Maximum Lawful Rate from time to time in effect and applicable to the Note
and/or the Related Indebtedness for so long as debt is outstanding. In no event
shall the provisions of Chapter 346 of the Texas Finance Code (which regulates
certain revolving credit loan accounts and revolving triparty accounts) apply to
the Note and/or the Related Indebtedness. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Beneficiary to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.

 

  (b)

Definitions. As used herein, the term “Maximum Lawful Rate” shall mean the
maximum lawful rate of interest which may be contracted for, charged, taken,
received or reserved by Beneficiary in accordance with the applicable laws of
the State of Texas (or applicable United States federal law to the extent that
it permits Beneficiary to contract for, charge, take, receive or reserve a
greater amount of interest than under Texas law), taking into account all
Charges (as herein defined) made in connection with the transaction evidenced by
the Note and the other Loan Documents. As used herein, the term “Charges” shall
mean all fees, charges and/or any other things of value, if any, contracted for,
charged, received, taken or reserved by Beneficiary in connection with the

 

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Loan No. 1002835

 

 

transactions relating to the Note and the other Loan Documents, which are
treated as interest under applicable law. As used herein, the term “Related
Indebtedness” shall mean any and all debt paid or payable by Grantor to
Beneficiary pursuant to the Loan Documents or any other communication or writing
by or between Grantor and Beneficiary related to the transaction or transactions
that are the subject matter of the Loan Documents, except such debt which has
been paid or is payable by Grantor to Beneficiary under the Note.

 

  (c)

Ceiling Election. To the extent that Beneficiary is relying on Chapter 303 of
the Texas Finance Code to determine the Maximum Lawful Rate payable on the Note
and/or the Related Indebtedness, Beneficiary will utilize the weekly ceiling
from time to time in effect as provided in such Chapter 303, as amended. To the
extent United States federal law permits Beneficiary to contract for, charge,
take, receive or reserve a greater amount of interest than under Texas law,
Beneficiary will rely on United States federal law instead of such Chapter 303
for the purpose of determining the Maximum Lawful Rate. Additionally, to the
extent permitted by applicable law now or hereafter in effect, Beneficiary may,
at its option and from time to time, utilize any other method of establishing
the Maximum Lawful Rate under such Chapter 303 or under other applicable law by
giving notice, if required, to Grantor as provided by applicable law now or
hereafter in effect.

 

  7.14

DEFICIENCY.

 

  (a)

In the event an interest in any of the Subject Property and Collateral is
foreclosed upon pursuant to a judicial or nonjudicial foreclosure sale, Grantor
agrees as follows. Notwithstanding the provisions of Sections 51.003, 51.004,
and 51.005 of the Texas Property Code (as the same may be amended from time to
time), and to the extent permitted by law, Grantor agrees that Beneficiary shall
be entitled to seek a deficiency judgment from Grantor and any other party
obligated on the Note equal to the difference between the amount owing on the
Note and the amount for which the Subject Property and Collateral was sold
pursuant to judicial or nonjudicial foreclosure sale. Grantor expressly
recognizes that this section constitutes a waiver of the above-cited provisions
of the Texas Property Code which would otherwise permit Grantor and other
persons against whom recovery of deficiencies is sought or any guarantor
independently (even absent the initiation of deficiency proceedings against
them) to present competent evidence of the fair market value of the Subject
Property and Collateral as of the date of the foreclosure sale and offset
against any deficiency the amount by which the foreclosure sale price is
determined to be less than such fair market value. Grantor further recognizes
and agrees that this waiver creates an irrebuttable presumption that the
foreclosure sale price is equal to the fair market value of the Subject Property
and Collateral for purposes of calculating deficiencies owed by Grantor, any
guarantor, and others against whom recovery of a deficiency is sought.

 

  (b)

Alternatively, in the event the waiver provided for in subsection (a) above is
determined by a court of competent jurisdiction to be unenforceable, the
following shall be the basis for the finder of fact’s determination of the fair
market value of the Subject Property and Collateral as of the date of the
foreclosure sale in proceedings governed by Sections 51.003, 51.004 and 51.005
of the Texas Property Code (as amended from time to time): (i) the Subject
Property and Collateral shall be valued in an “as is” condition as of the date
of the foreclosure sale, without any assumption or expectation that the Subject
Property and Collateral will be repaired or improved in any manner before a
resale of the Subject Property and Collateral after foreclosure; (ii) the
valuation shall be based upon an assumption that the foreclosure purchaser
desires a resale of the Subject Property and Collateral for cash promptly (but
no later than twelve (12) months) following the foreclosure sale; (iii) all
reasonable closing costs customarily borne by the seller in commercial real
estate transactions should be deducted from the gross fair market value of the
Subject Property and Collateral, including, without limitation, brokerage
commissions, title insurance, a survey of the Subject Property, tax prorations,
attorneys’ fees, and marketing costs; (iv) the gross fair market value of the
Subject Property and Collateral shall be further discounted to account for any
estimated holding costs associated with maintaining the Subject Property and
Collateral pending sale, including, without limitation, utilities expenses,
property management fees, taxes and assessments (to the extent not accounted for
in (iii) above), and other maintenance, operational and ownership expenses; and
(v)

 

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Loan No. 1002835

 

 

any expert opinion testimony given or considered in connection with a
determination of the fair market value of the Subject Property and Collateral
must be given by persons having at least five (5) years experience in appraising
property similar to the Subject Property and Collateral and who have conducted
and prepared a complete written appraisal of the Subject Property and Collateral
taking into consideration the factors set forth above.

 

  7.15

ENTIRE AGREEMENT; AMENDMENT. 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 UNDERSTANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND
MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Deed of Trust
and the Loan Documents may be amended or waived only by an instrument in writing
signed by the Grantor and Beneficiary.

 

Page 25

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Loan No. 1002835

 

IN WITNESS WHEREOF, Grantor has executed this Deed of Trust as of the day and
year set forth above.

 

“GRANTOR”

KBSII TWO WESTLAKE PARK, LLC,

a Delaware limited liability company

By:

  

KBSII REIT ACQUISITION XXII, LLC,

a Delaware limited liability company,

its sole member

  

By:

  

KBS REIT PROPERTIES II, LLC,

a Delaware limited liability company,

its sole member

     

By:

  

KBS LIMITED PARTNERSHIP II,

a Delaware limited partnership,

its sole member

        

By:

  

KBS REAL ESTATE INVESTMENT TRUST II, INC.,

a Maryland corporation,

general partner

           

By:

  

/s/ Charles J. Schreiber, Jr.

              

Charles J. Schreiber, Jr.

Chief Executive Officer

 

(ALL SIGNATURES MUST BE ACKNOWLEDGED)

 

Page 26

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EXHIBIT A

Loan No. 1002835

EXHIBIT “A”

DESCRIPTION OF SUBJECT PROPERTY

Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents,
Security Agreement and Fixture Filing executed by KBSII TWO WESTLAKE PARK, LLC,
a Delaware limited liability company, as Grantor, to PETER S. GRAF, as Trustee,
for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative
agent for itself and the Lenders, as Beneficiary, dated as of February 25, 2011.

TRACT ONE (FEE SIMPLE):

All that certain 5.3681 acres of land out of Restricted Reserve “A”, Westlake
Park Subdivision, Section One according to the plat thereof filed at Volume 316,
Page 101 Harris County Map Records and being more particularly described by
metes and bounds as follows:

BEGINNING at a found angle iron in the south right-of-way line of Grisby Road
(80 feet wide) at its intersection with the east line of Barker’s Landing,
Section One according to the plat thereof filed at Volume 251, Page 103 Harris
County Map Records;

THENCE S 88 degrees 49 minutes 29 seconds E - 616.03 feet, with said south
right-of-way line to a set 5/8 inch iron rod with cap for corner;

THENCE S 01 degrees 10 minutes 31 seconds W - 100.00 feet to a found 5/8 inch
iron rod for angle point;

THENCE S 46 degrees 44 minutes 49 seconds W - 213.69 feet to a found 5/8 inch
iron rod for angle point;

THENCE S 01 degrees 44 minutes 49 seconds W - 201.81 feet to a found 5/8 inch
iron rod for corner;

THENCE N 88 degrees 49 minutes 29 seconds W - 234.92 feet to a found “X” in
concrete for corner;

THENCE N 01 degrees 09 minutes 09 seconds E - 10.07 feet to a found “X” in
concrete for corner;

THENCE N 88 degrees 50 minutes 51 seconds W - 178.33 feet to a found 5/8 inch
iron rod with cap for corner;

THENCE S 01 degrees 09 minutes 09 seconds W - 10.00 feet to a found 5/8 inch
iron rod with cap for corner;

THENCE N 88 degrees 49 minutes 29 seconds W - 48.00 feet to a found 5/8 inch
iron rod for corner;

THENCE N 01 degrees 09 minutes 09 seconds E - 450.38 feet, with the
aforementioned east line of Barker’s Landing, Section One to a found 5/8 inch
iron rod for angle point;

THENCE N 01 degrees 44 minutes 49 seconds E - 1.00 feet, continuing with said
east line to the POINT OF BEGINNING, containing 5.3681 acres (233,833 square
feet) of land more or less.

COMMON AREA TRACT (NON-EXCLUSIVE EASEMENT):

All easements and rights appurtenant to Tract One as set forth and described in
Declaration of Protective Covenants filed for record under County Clerk’s File
No. G687785, as amended under G933718, H707652, re-recorded in H707653, H755367,
K565423, K819292, re-recorded in K922237, P755375 and S913626 of the Official
Public Records of Real Property of Harris County, Texas.

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

EXHIBIT A

Loan No. 1002835

 

TRACT TWO (NON-EXCLUSIVE EASEMENT):

Non-exclusive easement for vehicular and pedestrian access and for parking as
set out in Garage Agreement dated October 20, 1982, filed for record on
November 24, 1982, filed for record under County Clerk’s File No(s). H710574 of
the Official Public Records of Real Property of Harris County, Texas, by and
between Two Westlake Park and Westlake Three Limited, and more particularly
described by metes and bounds as follows:

All that certain 4.537 acres of land out of the Joel Wheaton Survey, A-80 and
being more particularly described by metes and bounds as follows:

Commencing at the north property corner of that certain property described in
the certain Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas
limited partnership, and Exxon Corporation, a New Jersey corporation, as
recorded in No. G-376617 of the Clerk’s File of Harris County, Texas; said north
corner also being in the south line of Interstate Highway 10; Thence N 88
degrees 15 minutes 11 seconds W along the south line of Interstate Highway 10,
1,423.03 feet to a point for corner; Thence S 01 degrees 44 minutes 49 seconds
W, 782.58 feet to a point for corner; Thence S 01 degrees 09 minutes 09 seconds
W, 450.38 feet to a point for corner and the Place of Beginning of the tract
herein described;

Thence S 88 degrees 49 minutes 29 seconds E, 48.00 feet to a point for corner;

Thence N 01 degrees 09 minutes 09 seconds E, 10.00 feet to a point for corner;

Thence S 88 degrees 50 minutes 51 seconds E, 178.33 feet to a point for corner;

Thence S 01 degrees 09 minutes 09 seconds W, 10.07 feet to a point for corner;

Thence S 88 degrees 49 minutes 29 seconds E, 329.31 feet to a point for corner;

Thence S 01 degrees 09 minutes 09 seconds W, 352.47 feet to a point for corner;

Thence N 88 degrees 49 minutes 29 seconds W, 555.65 feet to a point for corner;

Thence N 01 degrees 09 minutes 09 seconds E, 352.47 feet to a point for corner
and the Place of Beginning containing 4.537 acres of land, more or less.

TRACT THREE (NON-EXCLUSIVE EASEMENT):

Non-exclusive right-of-way and easement for vehicular and pedestrian access as
set out in Roadway Agreement dated October 7, 1982, filed for record on
November 22, 1982 filed for record under County Clerk’s File No. H707658 of the
Official Public Records of Real Property of Harris County, Texas, by and between
Westlake Two Limited, Westlake Three Limited and Owedeco Ltd., upon the four
parcels of land out of the Joel Wheaton Survey, Abstract No. 80, in Harris
County, Texas and designated as Parcels One, Two, Three and Four and containing
0.815 acres, 0.086 acres, 0.313 acres and 0.189 acres, and more particularly
described by metes and bounds as follows:

Parcel One:

Being a tract of land containing 0.815 acres out of the Joel Wheaton Survey,
Abstract 80 in Harris County, Texas, and being more particularly described by
metes and bounds as follows:

Commencing at the North property corner of that certain property described in
the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited
partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in
Harris County Clerk’s File No. G-376617, same being on the South right-way line
of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W, along
said South right-of-way line 1428.03 feet to a point for corner; Thence S 01
degrees 44 minutes 49 seconds W, 782.58 feet to a point for corner; Thence S 01
degrees 09 minutes 09 seconds W, 450.38 feet to a 5/8-inch iron rod for corner,
and being the Place of Beginning for the tract herein described;

Thence S 88 degrees 49 minutes 29 seconds E, 35.00 feet to a point for corner;

 

2

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EXHIBIT A

Loan No. 1002835

 

Thence S 01 degrees 09 minutes 09 seconds W, 323.47 feet to a point for corner;

Thence S 43 degrees 50 minutes 10 seconds E, 9.90 feet to a point for corner;

Thence S 88 degrees 49 minutes 29 seconds E, 190.90 feet to a point for corner;

Thence N 46 degrees 09 minutes 50 seconds E, 14.14 feet to a point for corner;

Thence N 01 degrees 09 minutes 09 seconds E, 214.55 feet to a point for corner
at the beginning of a curve to the right;

Thence along the arc of a curve to the right, having a chord of N 05 degrees 26
minutes 24 seconds E, 45.74 feet, a radius of 305.89 feet, a central angle of 08
degrees 34 minutes 30 seconds, a distance of 45.78 feet to a point for corner at
the beginning of a curve to the left;

Thence along the arc of a curve to the left, having a chord of N 05 degrees 26
minutes 24 seconds E, 40.50 feet, a radius of 270.89 feet, a central angle of 08
degrees 34 minutes 30 seconds, a distance of 40.54 feet to a point for corner;

Thence N 01 degrees 09 minutes 09 seconds E, 19.92 feet to a point for corner;

Thence S 88 degrees 49 minutes 29 seconds E, 35.00 feet to a point for corner;

Thence S 01 degrees 09 minutes 09 seconds W, 19.91 feet to a point for corner at
the beginning of a curve to the right;

Thence along the arc of a curve to the right, having a chord of S 05 degrees 26
minutes 24 seconds W, 45.74 feet, a radius of 305.89 feet, a central angle of 08
degrees 34 minutes 30 seconds, a distance of 45.78 feet to a point for corner at
the beginning of a curve to the left;

Thence along the arc of a curve to the left, having a chord of S 05 degrees 26
minutes 24 seconds W, 40.50 feet, a radius of 270.89 feet, a central angle of 08
degrees 34 minutes 30 seconds, a distance of 40.54 feet to a point for corner;

Thence S 01 degrees 09 minutes 09 seconds W, 214.56 feet to a point for corner;

Thence S 43 degrees 50 minutes 10 seconds E, 14.14 feet to a point for corner;

Thence S 88 degrees 49 minutes 29 seconds E, 249.12 feet to a point for corner
at the beginning of a curve to the left;

Thence along the arc of a curve to the left, having a chord of N 88 degrees 10
minutes 17 seconds E, 18.66 feet, a radius of 178.00 feet, a central angle of 06
degrees 00 minutes 28 seconds, a distance of 18.66 feet to a point for corner;

Thence S 01 degrees 09 minutes 09 seconds W, 22.98 feet to a point for corner;

Thence N 88 degrees 49 minutes 29 seconds W, 555.65 feet to a 5/8 inch iron rod
for corner;

Thence N 01 degrees 09 minutes 09 seconds E, 352.47 feet to the Place of
Beginning; containing 0.815 acres of land, more or less.

Parcel Two:

Being a tract of land containing 0.086 acres out of the Joel Wheaton Survey,
Abstract 80 in Harris County, Texas, and being more particularly described by
metes and bounds as follows:

Commencing at the North property corner of that certain property described in
the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited
partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in
Harris County Clerk’s File No. G-376617, same being on the South right-of-way
line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W,
along said South right-of-way line 1,428.03 feet to a point for corner;

 

3

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EXHIBIT A

Loan No. 1002835

 

Thence South 01 degrees 44 minutes 49 seconds W, 782.58 feet to a 5/8-inch iron
rod for corner; Thence S 01 degrees 09 minutes 09 seconds W, 802.85 feet to a
5/8-inch iron rod for corner; Thence S 88 degrees 49 minutes 29 seconds E,
651.85 feet to a point for corner; Thence N 31 degrees 26 minutes 44 seconds E,
18.49 feet to a point for corner, and being the Place of Beginning for the tract
herein described;

Thence N 31 degrees 26 minutes 44 seconds E, 171.54 feet to a point for corner;

Thence S 58 degrees 33 minutes 16 seconds E, 22.00 feet to a point for corner;

Thence S 31 degrees 26 minutes 44 seconds W, 75.18 feet to a point for corner at
the beginning of a curve to the right;

Thence along the arc of a curve to the right, having a chord of S 44 degrees 18
minutes 26 seconds W, 98.83 feet, a radius of 222.00 feet, a central angle of 25
degrees 43 minutes 24 seconds, a distance of 99.67 feet to the Place of
Beginning; containing 0.086 acres of land, more or less.

Parcel Three:

Being a tract of land containing 0.313 acres out of the Joel Wheaton Survey,
Abstract 80 in Harris County, Texas, and being more particularly described by
metes and bounds as follows:

Commencing at the North property corner of that certain property described in
the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited
partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in
Harris County Clerk’s File No. G-376617, same being on the South right-of-way
line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W,
along said South right-of-way line 1428.03 feet to a point for corner; Thence S
01 degrees 44 minutes 49 seconds W, 782.58 feet to a 5/8-inch iron rod for
corner; Thence S 01 degrees 09 minutes 09 seconds W, 802.85 feet to a 5/8-inch
iron rod for corner and being the Place of Beginning for the tract herein
described;

Thence S 88 degrees 49 minutes 29 seconds E, 633.36 feet to a point for corner
on the arc of a curve to the right;

Thence along the arc of a curve to the right, having a chord of S 78 degrees 18
minutes 49 seconds W, 98.83 feet, a radius of 222.00 feet, a central angle of 25
degrees 43 minutes 24 seconds, a distance of 99.67 feet to a point for corner;

Thence N 88 degrees 49 minutes 29 seconds W, 495.02 feet to a point for corner;

Thence S 36 degrees 03 minutes 48 seconds W, 12.20 feet to a point for corner;

Thence N 88 degrees 50 minutes 51 seconds W, 35.00 feet to a point for corner;

Thence N 01 degrees 09 minutes 09 seconds E, 32.02 feet to the Place of
Beginning; containing 0.313 acres of land, more or less.

Parcel Four:

Being a tract of land containing 0.189 acres out of the Joel Wheaton Survey,
Abstract 80 in Harris County, Texas, and being more particularly described by
metes and bounds as follows:

Commencing at the North property corner of that certain property described in
the Exchange Deeds and Boundary Agreement between Owedeco, Ltd., a Texas limited
partnership, and Exxon Corporation, a New Jersey Corporation, as recorded in
Harris County Clerk’s File No.G-376617, same being on the South right-of-way
line of Interstate Highway 10; Thence N 88 degrees 15 minutes 11 seconds W,
along said South right-of-way line 1,428.03 feet to a point for corner; Thence S
01 degrees 44 minutes 49 seconds W, 782.58 feet to a 5/8-inch iron rod for
corner; Thence S 01 degrees 09 minutes 09 seconds W, 802.85 feet to a 5/8-inch
iron rod for corner; Thence S 88 degrees 49 minutes 29 seconds E, 555.65 feet to
a point for corner and being the Place of Beginning for the tract herein
described;

 

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EXHIBIT A

Loan No. 1002835

 

Thence N 01 degrees 09 minutes 09 seconds E, 22.98 feet to a point for corner on
the arc of a curve to the left;

Thence along the arc of a curve to the left, having a chord of N 58 degrees 18
minutes 23 seconds E, 160.85 feet, a radius of 178.00 feet, a central angle of
53 degrees 43 minutes 19 seconds, a distance of 166.90 feet to a point for
corner;

Thence N 31 degrees 26 minutes 44 seconds E, 106.21 feet to a point for corner;

Thence S 55 degrees 52 minutes 49 seconds E, 44.01 feet to a point for corner;

Thence S 31 degrees 26 minutes 44 seconds W, 30.00 feet to a point for corner;

Thence N 58 degrees 33 minutes 16 seconds W, 22.00 feet to a point for corner;

Thence S 31 degrees 26 minutes 44 seconds W, 171.54 feet to a point for corner
on the arc of a curve to the right;

Thence along the arc of a curve to the right, having a chord of S 61 degrees 18
minutes 37 seconds W, 32.07 feet, a radius of 222.00 feet, a central angle of 08
degrees 17 minutes 00 seconds, a distance of 32.09 feet to a point for corner;

Thence N 88 degrees 49 minutes 29 seconds W, 77.71 feet to the Place of
Beginning; containing 0.189 acres of land, more or less.

Note: The Company is prohibited from insuring the area or quantity of the land
described herein. Any statement in the above legal description of the area or
quantity of land is not a representation that such area or quantity is correct,
but is made only for informational and/or identification purposes and does not
override Item 2 of Schedule B hereof.

 

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EXHIBIT B

Loan No. 1002835

EXHIBIT “B”

NON-BORROWER GRANTOR RIDER

Exhibit B to Deed of Trust with Absolute Assignment of Leases and Rents,
Security Agreement and Fixture Filing executed by KBSII TWO WESTLAKE PARK, LLC,
a Delaware limited liability company, as Grantor, to PETER S. GRAF, as Trustee,
for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative
agent for itself and the Lenders, as Beneficiary, dated as of February 25, 2011.

To the extent the Deed of Trust secures a promissory note and other loan
documents (“Loan Documents”) made by a party or parties (“Borrower”) not
identical to the party or parties constituting Grantor, the party or parties
constituting Grantor agree as follows:

 

1.

CONDITIONS TO EXERCISE OF RIGHTS. Grantor hereby waives any right it may now or
hereafter have to require Beneficiary, as a condition to the exercise of any
remedy or other right against Grantor hereunder or under any other document
executed by Grantor in connection with any Secured Obligations: (a) to proceed
against any Borrower or other person, or against any other collateral assigned
to Beneficiary by Grantor or any Borrower or other person; (b) to pursue any
other right or remedy in Beneficiary’s power; (c) to give notice of the time,
place or terms of any public or private sale of real or personal property
collateral assigned to Beneficiary by any Borrower or other person (other than
Grantor), or otherwise to comply with the UCC (as modified or recodified from
time to time) with respect to any such personal property collateral; or (d) to
make or give (except as otherwise expressly provided in the Loan Documents) any
presentment, demand, protest, notice of dishonor, notice of protest or other
demand or notice of any kind in connection with any Secured Obligations or any
collateral (other than the Subject Property) for any Secured Obligations.

 

2.

DEFENSES. Grantor hereby waives any defense it may now or hereafter have that
relates to: (a) any disability or other defense of any Borrower or other person;
(b) the cessation, from any cause other than full performance, of the
obligations of Borrower or any other person; (c) the application of the proceeds
of any Secured Obligations, by any Borrower or other person, for purposes other
than the purposes represented to Grantor by any Borrower or otherwise intended
or understood by Grantor or any Borrower; (d) any act or omission by Beneficiary
which directly or indirectly results in or contributes to the release of any
Borrower or other person or any collateral for any Secured Obligations; (e) the
unenforceability or invalidity of any collateral assignment (other than this
Deed of Trust) or guaranty with respect to any Secured Obligations, or the lack
of perfection or continuing perfection or lack of priority of any lien (other
than the lien hereof) which secures any Secured Obligations; (f) any failure of
Beneficiary to marshal assets in favor of Grantor or any other person; (g) any
modification of any Secured Obligations, including any renewal, extension,
acceleration or increase in interest rate; (h) any and all rights and defenses
arising out of an election of remedies by Beneficiary; (i) any law which
provides that the obligation of a surety or guarantor must neither be larger in
amount nor in other respects more burdensome than that of the principal or which
reduces a surety’s or guarantor’s obligation in proportion to the principal
obligation; (j) any failure of Beneficiary to file or enforce a claim in any
bankruptcy or other proceeding with respect to any person; (k) the election by
Beneficiary, in any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the United States Bankruptcy Code;
(l) any extension of credit or the grant of any lien under Section 364 of the
United States Bankruptcy Code; (m) any use of cash collateral under Section 363
of the United States Bankruptcy Code; or (n) any agreement or stipulation with
respect to the provision of adequate protection in any bankruptcy proceeding of
any person. Grantor further waives any and all rights and defenses that Grantor
may have because Borrower’s debt is secured by real property; this means, among
other things, that: (1) Beneficiary may collect from Grantor without first
foreclosing on any real or personal property collateral pledged by Borrower;
(2) if Beneficiary forecloses on any real property collateral pledged by
Borrower, then (A) the amount of the debt may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price, and (B) Beneficiary may collect

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EXHIBIT B

Loan No. 1002835

 

 

from Grantor even if Beneficiary, by foreclosing on the real property
collateral, has destroyed any right Grantor may have to collect from Borrower.
The foregoing sentence is an unconditional and irrevocable waiver of any rights
and defenses Grantor may have because Borrower’s debt is secured by real
property. Without limiting the generality of the foregoing or any other
provision hereof, Grantor further expressly waives to the extent permitted by
law any and all rights and defenses, including without limitation any rights of
subrogation, reimbursement, indemnification and contribution, which might
otherwise be available to Grantor. Without limiting any other provision hereof,
the rights and defenses being waived by Grantor include any rights or defenses
under and pursuant to (x) Rule 31 of the Texas Rules of Civil Procedure,
Section 17.001 of the Texas Civil Practice and Remedies Code, and Chapter 34 of
the Texas Business and Commerce Code, as such are amended or succeeded from time
to time; and (y) under Sections 51.003, 51.004 and 51.005 of the Texas Property
Code, as such are amended or succeeded from time to time. Grantor hereby
expressly waives any claim of fraudulent inducement to execute this Deed of
Trust and further disclaims any reliance on statements or representations of
Beneficiary in waiving such a claim.

 

3.

SUBROGATION. Grantor hereby waives, until such time as all Secured Obligations
are fully performed: (a) any right of subrogation against any Borrower that
relates to any Secured Obligations; (b) any right to enforce any remedy Grantor
may now or hereafter have against any Borrower that relates to any Secured
Obligations; and (c) any right to participate in any collateral now or hereafter
assigned to Beneficiary with respect to any Secured Obligations.

 

4.

BORROWER INFORMATION. Grantor warrants and agrees: (a) that Beneficiary would
not make the Loan but for this Deed of Trust; (b) that Grantor has not relied,
and will not rely, on any representations or warranties by Beneficiary to
Grantor with respect to the credit worthiness of any Borrower or the prospects
of repayment of any Secured Obligations from sources other than the Subject
Property; (c) that Grantor has established and/or will establish adequate means
of obtaining from each Borrower on a continuing basis financial and other
information pertaining to the business operations, if any, and financial
condition of each Borrower; (d) that Grantor assumes full responsibility for
keeping informed with respect to each Borrower’s business operations, if any,
and financial condition; (e) that Beneficiary shall have no duty to disclose or
report to Grantor any information now or hereafter known to Beneficiary with
respect to any Borrower, including, without limitation, any information relating
to any of Borrower’s business operations or financial condition; and (f) that
Grantor is familiar with the terms and conditions of the Loan Documents and
consents to all provisions thereof.

 

5.

REINSTATEMENT OF LIEN. Beneficiary’s rights hereunder shall be reinstated and
revived, and the enforceability of this Deed of Trust shall continue, with
respect to any amount at any time paid on account of any Secured Obligations
which Beneficiary is thereafter required to restore or return in connection with
a bankruptcy, insolvency, reorganization or similar proceeding with respect to
any Borrower.

 

6.

SUBORDINATION. Until all of the Secured Obligations have been fully paid and
performed: (a) Grantor hereby agrees that all existing and future indebtedness
and other obligations of each Borrower to Grantor (collectively, the
“Subordinated Debt”) shall be and are hereby subordinated to all Secured
Obligations which constitute obligations of the applicable Borrower, and the
payment thereof is hereby deferred in right of payment to the prior payment and
performance of all such Secured Obligations; (b) Grantor shall not collect or
receive any cash or non-cash payments on any Subordinated Debt or transfer all
or any portion of the Subordinated Debt; and (c) in the event that,
notwithstanding the foregoing, any payment by, or distribution of assets of, any
Borrower with respect to any Subordinated Debt is received by Grantor, such
payment or distribution shall be held in trust and immediately paid over to
Beneficiary, is hereby assigned to Beneficiary as security for the Secured
Obligations, and shall be held by Beneficiary in an interest bearing account
until all Secured Obligations have been fully paid and performed.

 

7.

LAWFULNESS AND REASONABLENESS. Grantor warrants that all of the waivers in this
Deed of Trust are made with full knowledge of their significance, and of the
fact that events giving rise to any defense or other benefit waived by Grantor
may destroy or impair rights which Grantor would otherwise have against
Beneficiary, Borrower and other persons, or against collateral. Grantor agrees
that all such waivers are reasonable under the circumstances and further agrees
that, if any such waiver is determined (by a court of

 

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EXHIBIT B

Loan No. 1002835

 

 

competent jurisdiction) to be contrary to any law or public policy, the other
waivers herein shall nonetheless remain in full force and effect.

 

8.

ENFORCEABILITY. Grantor hereby acknowledges that: (a) the obligations undertaken
by Grantor in this Deed of Trust are complex in nature, and (b) numerous
possible defenses to the enforceability of these obligations may presently exist
and/or may arise hereafter, and (c) as part of Beneficiary’s consideration for
entering into this transaction, Beneficiary has specifically bargained for the
waiver and relinquishment by Grantor of all such defenses, and (d) Grantor has
had the opportunity to seek and receive legal advice from skilled legal counsel
in the area of financial transactions of the type contemplated herein. Given all
of the above, Grantor does hereby represent and confirm to Beneficiary that
Grantor is fully informed regarding, and that Grantor does thoroughly
understand: (i) the nature of all such possible defenses, and (ii) the
circumstances under which such defenses may arise, and (iii) the benefits which
such defenses might confer upon Grantor, and (iv) the legal consequences to
Grantor of waiving such defenses. Grantor acknowledges that Grantor makes this
Deed of Trust with the intent that this Deed of Trust and all of the informed
waivers herein shall each and all be fully enforceable by Beneficiary, and that
Beneficiary is induced to enter into this transaction in material reliance upon
the presumed full enforceability thereof.

 

9.

DISCLOSURE OF INFORMATION; PARTICIPATIONS. Grantor understands and agrees that
Beneficiary may elect, at any time, to sell, assign, or participate all or any
part of Beneficiary’s interest in the Loan, and that any such sale, assignment
or participation may be to one or more financial institutions, private
investors, and/or other entities, at Beneficiary’s sole discretion. Grantor
further agrees that Beneficiary may disseminate to any such potential
purchaser(s), assignee(s) or participant(s) all documents and information
(including, without limitation, all financial information) which has been or is
hereafter provided to or known to Beneficiary with respect to: (a) the Subject
Property and Collateral and its operation; (b) any party connected with the Loan
(including, without limitation, the Grantor, the Borrower, any partner of
Borrower and any guarantor); and/or (c) any lending relationship other than the
Loan which Beneficiary may have with any party connected with the Loan.

 

10.

INTEGRATION; INTERPRETATION. This Deed of Trust and the other Loan Documents
contain or expressly incorporate by reference the entire agreement of the
parties with respect to the matters contemplated therein and supersede all prior
negotiations or agreements, written or oral. This Deed of Trust and the other
Loan Documents shall not be modified except by written instrument executed by
all parties. Any reference to the Loan Documents includes any amendments,
renewals or extensions now or hereafter approved by Beneficiary in writing.

 

3

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STATE OF CALIFORNIA

COUNTY OF     Orange         SS.

On February 22, 2011 before me, K. Godin, Notary Public, personally appeared
Charles J. Schreiber, Jr., who proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument. I certify under PENALTY OF
PERJURY under the laws of the State of California that the foregoing paragraph
is true and correct.

WITNESS my hand and official seal

Signature /s/ K. Godin

My commission expires June 5, 2013.