Exhibit 10.3

 

BEHRINGER HARVARD 1325 G STREET, LLC,

a Delaware limited liability company, as grantor
(Borrower)

to

LAWYERS TITLE REALTY SERVICES, INC., a Virginia corporation, as trustee
(Trustee)

to

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
a Delaware corporation, as nominee of Lender, as beneficiary
(Lender)

 

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AMENDED AND RESTATED DEED OF TRUST AND SECURITY AGREEMENT

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Dated:  As of October 18, 2006

Property Location:  1325 G Street NW, Washington, DC

MERS MIN: 8000101-0000004159-9

DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:

Kelley Drye & Warren LLP
101 Park Avenue
New York, New York 10178
Attention:  Paul A. Keenan, Esq.

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THIS AMENDED AND RESTATED DEED OF TRUST AND SECURITY AGREEMENT (this “Security
Instrument”) is made as of this 18th day of October, 2006, by BEHRINGER HARVARD
1325 G STREET, LLC, a Delaware limited liability company, having its principal
place of business c/o Behringer Harvard Funds, 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, as grantor (“Borrower”) to LAWYERS TITLE REALTY SERVICES,
INC., a Virginia corporation, having an address at 1015 15th Street, N.W., Suite
300, Washington, DC  20005, as trustee (“Trustee”) for the benefit of MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS, INC., a Delaware corporation, having an address
at 1595 Spring Hill Road, Suite 310, Vienna, Virginia 22182 (“MERS”), as nominee
of BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York corporation, having an
address at 383 Madison Avenue, New York, New York 10179, as grantee (“Lender”).

R E C I T A L S:

WHEREAS, Borrower, by the terms of that certain Amended and Restated Loan
Agreement, dated as of the date hereof, between Borrower and Lender (as the same
may hereafter be amended, restated, replaced, supplemented, renewed, extended or
otherwise modified from time to time, the “Loan Agreement”) and evidenced by
that certain Amended and Restated Promissory Note executed on the same date as
this Security Instrument (the “Note”) and in connection with the loan (the
“Loan”) from Lender to Borrower, is indebted to Lender in the principal sum of
ONE HUNDRED MILLION AND NO/100 U.S. DOLLARS ($100,000,000.00).

WHEREAS, Borrower desires to secure the payment of the Debt (as defined in the
Loan Agreement) and the performance of all of its obligations under the Note and
certain Other Obligations (as defined in Section 2.2).

WHEREAS, Lender has required, as a condition to making the Loan to Borrower,
that Borrower execute and deliver this Security Instrument, which amends and
restates the Original Deed of Trust (as hereinafter defined) in its entirety,
and Borrower, in order to obtain the Loan, is willing to execute and deliver
this Security Instrument.

WHEREAS, this Security Instrument is an amendment and restatement of that
certain Purchase Money Deed of Trust, Assignment of Leases and Rents, and
Security Agreement and Fixture Filing from Behringer Harvard 1325 G Street, LLC,
as Grantor to Roger N. Simon, as Trustee, dated November 15, 2005 and recorded
on November 17, 2005 among the Land Records of the District of Columbia as
Instrument No.: 2005166119, securing Behringer Harvard Operating Partnership I
LP (the “Original Deed of Trust”), and is intended to amend and restate the
Original Deed of Trust in its entirety (and if there is a conflict between the
terms of the Original Deed of Trust and this Security Instrument, the terms of
this Security Instrument shall prevail) and Lender is the current holder of the
Note secured by the Original Deed of Trust.  This Security Instrument is given
to secure payment of the Debt and the performance of the Other Obligations and
to reaffirm and clarify the rights and obligations of the parties under the Loan
Documents.  This Security Instrument (i) shall in no way waive Lender’s rights,
powers or remedies under the Loan Documents, (ii) shall in no way limit, impair
or prejudice Lender from exercising any past, present or future right, power or
remedy from and after the date hereof under

 

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the Loan Documents, and (iii) shall not constitute or be deemed to be a novation
of the Debt and Other Obligations.

NOW, THEREFORE, in consideration of the agreements hereinafter set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower, Trustee and Lender hereby agree as follows:

ARTICLE I - - GRANTS OF SECURITY

Section 1.1            Property Mortgaged.  Borrower does hereby irrevocably
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Trustee, for the benefit of MERS, as nominee of Lender and its successors and
assigns, all of Borrower’s right, title and interest in, to and under the
following property, rights, interests and estates now owned, or hereafter
acquired by Borrower (collectively, the “Property”):

(a)           Land.  The real property described in Exhibit A attached hereto
and made a part hereof (the “Land”);

(b)           Additional Land.  All additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the Land and
the development of the Land and all additional lands and estates therein which
may, from time to time, by supplemental mortgage or otherwise be expressly made
subject to the lien of this Security Instrument;

(c)           Improvements.  The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (collectively, the
“Improvements”);

(d)           Easements.  All easements, rights-of-way or use, rights, strips
and gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversions and remainders, and all land lying in the bed of
any street, road or avenue, opened or proposed, in front of or adjoining the
Land, to the center line thereof and all the estates, rights, titles, interests,
rights of dower, rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Borrower of, in and to the Land and
the Improvements and every part and parcel thereof, with the appurtenances
thereto;

(e)           Equipment.  All “equipment,” as such term is defined in Article 9
of the Uniform Commercial Code (as hereinafter defined), now owned or hereafter
acquired by Borrower, which is used at or in connection with the Improvements or
the Land or is located thereon or therein (including, but not limited to, all
machinery, equipment, furnishings, and electronic data-processing and other
office equipment now owned or hereafter acquired by Borrower and used at the
Improvements or the Land and any and all additions, substitutions and
replacements of any of the foregoing), together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto (collectively, the “Equipment”).

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Notwithstanding the foregoing, Equipment shall not include any property
belonging to tenants under leases except to the extent that Borrower shall have
any right or interest therein;

(f)            Fixtures.  All Equipment now owned, or the ownership of which is
hereafter acquired, by Borrower which is so related to the Land and Improvements
forming part of the Property that it is deemed fixtures or real property under
the law of the particular state in which the Land is located, including, without
limitation, all building or construction materials intended for construction,
reconstruction, alteration or repair of or installation on the Property,
construction equipment, appliances, machinery, plant equipment, fittings,
apparatuses, fixtures and other items now or hereafter attached to, installed in
or used in connection with (temporarily or permanently) any of the Improvements
or the Land, including, but not limited to, engines, devices for the operation
of pumps, pipes, plumbing, call and sprinkler systems, fire extinguishing
apparatuses and equipment, heating, ventilating, incinerating, electrical, air
conditioning and air cooling equipment and systems, gas and electric machinery,
appurtenances and equipment, pollution control equipment, security systems,
disposals, dishwashers, refrigerators and ranges, recreational equipment and
facilities of all kinds, and water, gas, electrical, storm and sanitary sewer
facilities, utility lines and equipment (whether owned individually or jointly
with others, and, if owned jointly, to the extent of Borrower’s interest
therein) and all other utilities whether or not situated in easements, all water
tanks, water supply, water power sites, fuel stations, fuel tanks, fuel supply,
and all other structures, together with all accessions, appurtenances,
additions, replacements, betterments and substitutions for any of the foregoing
and the proceeds thereof (collectively, the “Fixtures”).  Notwithstanding the
foregoing, “Fixtures” shall not include any property which tenants are entitled
to remove pursuant to leases except to the extent that Borrower shall have any
right or interest therein;

(g)           Personal Property.  All furniture, furnishings, objects of art,
machinery, goods, tools, supplies, appliances, general intangibles, contract
rights, accounts, accounts receivable, franchises, licenses, certificates and
permits, and all other personal property of any kind or character whatsoever as
defined in and subject to the provisions of the Uniform Commercial Code, whether
tangible or intangible, other than Fixtures, which are now or hereafter owned by
Borrower and which are located within or about the Land and the Improvements,
together with all accessories, replacements and substitutions thereto or
therefor and the proceeds thereof (collectively, the “Personal Property”), and
the right, title and interest of Borrower in and to any of the Personal Property
which may be subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the state or states where any of the
Property is located (the “Uniform Commercial Code”), superior in lien to the
lien of this Security Instrument and all proceeds and products of the above;

(h)           Leases and Rents.  All leases, subleases or subsubleases,
lettings, licenses, concessions or other agreements (whether written or oral)
pursuant to which any Person is granted a possessory interest in, or right to
use or occupy all or any portion of the Land and the Improvements, and every
modification, amendment or other agreement relating to such leases, subleases,
subsubleases, or other agreements entered into in connection with such leases,
subleases, subsubleases, or other agreements and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto, heretofore or hereafter
entered into (collectively, the “Leases”), whether before or after the filing by
or against Borrower of any petition for relief under the Bankruptcy

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Code and all right, title and interest of Borrower, its successors and assigns
therein and thereunder, including, without limitation, cash or securities
deposited thereunder to secure the performance by the lessees of their
obligations thereunder and all rents, additional rents, revenues, issues and
profits (including all oil and gas or other mineral royalties and bonuses) from
the Land and the Improvements whether paid or accruing before or after the
filing by or against Borrower of any petition for relief under the Bankruptcy
Code (collectively, the “Rents”) and all proceeds from the sale or other
disposition of the Leases and the right to receive and apply the Rents to the
payment of the Debt;

(i)            Condemnation Awards.  All Awards, including interest thereon,
which may heretofore and hereafter be made with respect to the Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of the right),
or for a change of grade, or for any other injury to or decrease in the value of
the Property;

(j)            Insurance Proceeds.  All Insurance Proceeds in respect of the
Property under any Policies covering the Property, including, without
limitation, the right to receive and apply the proceeds of any Policies,
judgments, or settlements made in lieu thereof, in connection with a Casualty to
the Property;

(k)           Tax Certiorari.  All refunds, rebates or credits in connection
with reduction in Taxes of Other Charges charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction;

(l)            Conversion.  All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, Insurance
Proceeds and Awards, into cash or liquidation claims;

(m)          Rights.  The right, in the name and on behalf of Borrower, to
appear in and defend any action or proceeding brought with respect to the
Property and to commence any action or proceeding to protect the interest of
Lender in the Property;

(n)           Agreements.  All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or any business or activity
conducted on the Land and any part thereof and all right, title and interest of
Borrower therein and thereunder, including, without limitation, the right, upon
the happening of any default hereunder, to receive and collect any sums payable
to Borrower thereunder;

(o)           Trademarks.  All tradenames, trademarks, servicemarks, logos,
copyrights, goodwill, books and records and all other general intangibles
relating to or used in connection with the operation of the Property;

(p)           Accounts.  All reserves, escrows and deposit accounts maintained
by Borrower with respect to the Property, including, without limitation (i) all
accounts established pursuant to the Cash Management Agreement and (ii) all
accounts established

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pursuant to the Lockbox Agreement; together with all deposits or wire transfers
made to the Lockbox Account or Cash Management Account and all cash, checks,
drafts, certificates, securities, investment property, financial assets,
instruments and other property held therein from time to time and all proceeds,
products, distributions or dividends or substitutions thereon and thereof; and

(q)           Other Rights.  Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (p) above.

AND without limiting any of the other provisions of this Security Instrument, to
the extent permitted by applicable law, Borrower expressly grants to MERS, as
nominee of Lender, as secured party, a security interest in the portion of the
Property which is or may be subject to the provisions of the Uniform Commercial
Code which are applicable to secured transactions; it being understood and
agreed that the Improvements and Fixtures are part and parcel of the Land (the
Land, the Improvements and the Fixtures collectively referred to as the “Real
Property”) appropriated to the use thereof and, whether affixed or annexed to
the Real Property or not, shall for the purposes of this Security Instrument be
deemed conclusively to be real estate and subject to this Security Instrument.

Section 1.2            Assignment of Rents.  Borrower hereby absolutely and
unconditionally assigns to MERS, as nominee of Lender all of Borrower’s right,
title and interest in and to all current and future Leases and Rents; it being
intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only.  Nevertheless,
subject to the terms of the Assignment of Leases, the Cash Management Agreement
and Section 7.1(h) of this Security Instrument, Lender grants to Borrower a
revocable license to collect, receive, use and enjoy the Rents and Borrower
shall hold the Rents, or a portion thereof sufficient to discharge all current
sums due on the Debt, for use in the payment of such sums.

Section 1.3            Security Agreement.  This Security Instrument is both a
real property mortgage and a “security agreement” within the meaning of the
Uniform Commercial Code.  The Property includes both real and personal property
and all other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property.  By executing and delivering this Security Instrument,
Borrower hereby grants to MERS, as nominee of Lender, as security for the
Obligations (hereinafter defined), a security interest in the Fixtures, the
Equipment and the Personal Property to the full extent that the Fixtures, the
Equipment and the Personal Property may be subject to the Uniform Commercial
Code (said portion of the Property so subject to the Uniform Commercial Code
being called the “Collateral”).  If an Event of Default shall occur and be
continuing, Lender, in addition to any other rights and remedies which it may
have, shall have and may exercise immediately and without demand, any and all
rights and remedies granted to a secured party upon default under the Uniform
Commercial Code, including, without limiting the generality of the foregoing,
the right to take possession of the Collateral or any part thereof, and to take
such other measures as Lender may deem necessary for the care, protection and
preservation of the Collateral.  Upon request or demand of Lender after the
occurrence and during the continuance of an Event of Default, Borrower shall, at
its expense, assemble the Collateral and make it available to Lender at a
convenient place (at the Land if tangible property) reasonably acceptable to
Lender.  Borrower shall pay to Lender on demand any and all expenses,

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including reasonable legal expenses and attorneys’ fees, incurred or paid by
Lender in protecting its interest in the Collateral and in enforcing its rights
hereunder with respect to the Collateral after the occurrence and during the
continuance of an Event of Default.  Any notice of sale, disposition or other
intended action by Lender with respect to the Collateral sent to Borrower in
accordance with the provisions hereof at least ten (10) Business Days prior to
such action, shall, except as otherwise provided by applicable law, constitute
reasonable notice to Borrower.  The proceeds of any disposition of the
Collateral, or any part thereof, may, except as otherwise required by applicable
law, be applied by Lender to the payment of the Debt in such priority and
proportions as Lender in its discretion shall deem proper.  Borrower’s
(debtor’s) principal place of business is as set forth on page one hereof and
the address of Lender (secured party) is as set forth on page one hereof. 
Borrower’s organizational ID no. is 4058123.

Section 1.4            Fixture Filing.  Certain of the Property is or will
become “fixtures” (as that term is defined in the Uniform Commercial Code) on
the Land, and this Security Instrument, upon being filed for record in the real
estate records of the city or county wherein such fixtures are situated, shall
operate also as a financing statement filed as a fixture filing in accordance
with the applicable provisions of said Uniform Commercial Code upon such of the
Property that is or may become fixtures.

Section 1.5            Pledges of Monies Held.  Borrower hereby pledges to
Lender any and all monies now or hereafter held by Lender or on behalf of
Lender, including, without limitation, any sums deposited in the Lockbox
Account, the Cash Management Account, the Reserve Funds and Net Proceeds, as
additional security for the Obligations until expended or applied as provided in
this Security Instrument or other Loan Documents.

Section 1.6            Grants to MERS.  This Security Instrument and the benefit
of grants, assignments and transfers made to MERS in this Article 1 shall inure
to MERS solely in its capacity as Lender’s nominee.

CONDITIONS TO GRANT

TO HAVE AND TO HOLD the above granted and described Property unto Trustee for
and on behalf of MERS, as nominee of Lender and to the use and benefit of MERS
as nominee of Lender and Trustee for their successors and assigns, forever;

IN TRUST, WITH POWER OF SALE, to secure payment to Lender of the Debt at the
time and in the manner provided for its payment in the Loan Agreement, the Note
and in this Security Instrument.

PROVIDED, HOWEVER, these presents are upon the express condition that, if
Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note, the Loan Agreement and this Security Instrument,
shall well and truly perform the Other Obligations as set forth in this Security
Instrument and shall well and truly abide by and comply with each and every
covenant and condition set forth herein and in the Note, the Loan Agreement and
the other Loan Documents, those presents and the estates hereby granted shall
cease, terminate and be void; provided, however, that Borrower’s obligation to
indemnify and

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hold harmless Lender pursuant to the provisions hereof shall survive any such
payment or release.

Upon payment in full of the Debt in accordance with the Loan Agreement, Lender
will execute and deliver a release of the lien of this Security Instrument in
customary form.

ARTICLE II - - DEBT AND OBLIGATIONS SECURED

Section 2.1            Debt.  This Security Instrument and the grants,
assignments and transfers made in Article I are given for the purpose of
securing the Debt.

Section 2.2            Other Obligations.  This Security Instrument and the
grants, assignments and transfers made in Article I are also given for the
purpose of securing the following (the “Other Obligations”):

(a)           the performance of all other obligations of Borrower contained
herein;

(b)           the performance of each obligation of Borrower contained in the
Loan Agreement and any other Loan Document; and

(c)           the performance of each obligation of Borrower contained in any
renewal, extension, amendment, modification, consolidation, change of, or
substitution or replacement for, all or any part of the Note, the Loan Agreement
or any other Loan Document.

Section 2.3            Debt and Other Obligations.  Borrower’s obligations for
the payment of the Debt and the performance of the Other Obligations shall be
referred to collectively herein as the “Obligations.”

ARTICLE III - - BORROWER COVENANTS

Borrower covenants and agrees that:

Section 3.1            Payment of Debt.  Borrower will pay the Debt at the time
and in the manner provided in the Loan Agreement, the Note and this Security
Instrument.

Section 3.2            Incorporation by Reference.  All the covenants,
conditions and agreements contained in (a) the Loan Agreement, (b) the Note and
(c) all and any of the other Loan Documents, are hereby made a part of this
Security Instrument to the same extent and with the same force as if fully set
forth herein.

Section 3.3            Insurance.  Borrower shall obtain and maintain, or cause
to be maintained, in full force and effect at all times insurance with respect
to Borrower and the Property as required pursuant to the Loan Agreement.

Section 3.4            Maintenance of Property.  Borrower shall cause the
Property to be maintained in a good and safe condition and repair.  The
Improvements, the Fixtures, the Equipment and the Personal Property shall not be
removed, demolished or materially altered

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(except for normal replacement of the Fixtures, the Equipment or the Personal
Property, tenant finish and refurbishment of the Improvements and for the
disposal of Fixtures, Equipment or Personal Property not material to the use or
value of the Property as an office building) without the consent of Lender. 
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any Casualty or become damaged, worn or dilapidated or
which may be affected by any Condemnation, and shall complete and pay for any
structure at any time in the process of construction or repair on the Land.

Section 3.5            Waste.  Borrower shall not commit or suffer any waste of
the Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or allow the
cancellation of any Policy, or do or permit to be done thereon anything that may
in any way materially impair the value of the Property or the security of this
Security Instrument.  Borrower will not, without the prior written consent of
Lender, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or extraction thereof.

Section 3.6            Payment for Labor and Materials.

(a)           Subject to Section 3.6(b), Borrower will promptly pay when due all
bills and costs for labor, materials, and specifically fabricated materials
(“Labor and Material Costs”) incurred in connection with the Property and never
permit to exist beyond the due date thereof in respect of the Property or any
part thereof any lien or security interest, even though inferior to the liens
and the security interests hereof, and in any event never permit to be created
or exist in respect of the Property or any part thereof any other or additional
lien or security interest other than the liens or security interests hereof
except for the Permitted Encumbrances and other Liens permitted pursuant to the
Loan Documents.

(b)           After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Labor and Material Costs, provided
that (i) no Event of Default has occurred and is continuing under the Loan
Agreement, the Note, this Security Instrument or any of the other Loan
Documents, (ii) Borrower is permitted to do so under the provisions of any other
mortgage, deed of trust or deed to secure debt affecting the Property,
(iii) such proceeding shall suspend the collection of the Labor and Material
Costs from Borrower and from the Property or Borrower shall have paid all of the
Labor and Material Costs (or such portion thereof as to which collection is not
suspended) under protest, (iv) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder, (v) neither
the Property nor any part thereof or interest therein will be in immediate
danger of being sold, forfeited, terminated, canceled or lost, and (vi) Borrower
shall have furnished the security as may be required in the proceeding, or as
may be reasonably requested by Lender to insure the payment of any contested
Labor and Material Costs, together with all interest and penalties thereon.

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Section 3.7            Performance of Other Agreements.  Borrower shall observe
and perform each and every term, covenant and provision to be observed or
performed by Borrower pursuant to the Loan Agreement, any other Loan Document
and any other agreement or recorded instrument affecting or pertaining to the
Property and any amendments, modifications or changes thereto.

Section 3.8            Change of Name, Identity or Structure.  Borrower shall
not change Borrower’s name, identity (including its trade name or names) or, if
not an individual, Borrower’s corporate, partnership or other structure without
notifying Lender of such change in writing at least thirty (30) days prior to
the effective date of such change and, in the case of a change in Borrower’s
structure, without first obtaining the prior written consent of Lender. 
Borrower shall execute and deliver to Lender, prior to or contemporaneously with
the effective date of any such change, any financing statement or financing
statement change required by Lender to establish or maintain the validity,
perfection and priority of the security interest granted herein.  At the request
of Lender, Borrower shall execute a certificate in form satisfactory to Lender
listing the trade names under which Borrower intends to operate the Property,
and representing and warranting that Borrower does business under no other trade
name with respect to the Property.

Section 3.9            Title.  Borrower has good, marketable and insurable fee
simple title to the real property comprising part of the Property and good title
to the balance of such Property, free and clear of all Liens (as defined in the
Loan Agreement) whatsoever except the Permitted Encumbrances (as defined in the
Loan Agreement), such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents.  The Permitted
Encumbrances in the aggregate do not materially and adversely affect the value,
operation or use of the Property or Borrower’s ability to repay the Loan.  This
Security Instrument, when properly recorded in the appropriate records, together
with any Uniform Commercial Code financing statements required to be filed in
connection therewith, will create (a) a valid, perfected first priority lien on
that portion of the Property constituting interests in real estate, subject only
to Permitted Encumbrances and the Liens created by the Loan Documents and (b) to
the extent that a security interest therein may be perfected by the filing of
financing statements under the Uniform Commercial Code, perfected security
interests in and to, and perfected collateral assignments of, all personalty
(including, to the extent that they constitute personalty subject to the Uniform
Commercial Code, the Leases), all in accordance with the terms thereof, in each
case subject only to any applicable Permitted Encumbrances, such other Liens as
are permitted pursuant to the Loan Documents and the Liens created by the Loan
Documents.  There are no claims for payment for work, labor or materials
affecting the Property which are past due and are or may become a lien prior to,
or of equal priority with, the Liens created by the Loan Documents unless such
claims for payments are being contested in accordance with the terms and
conditions of this Security Instrument.

Section 3.10         Partition.  Notwithstanding anything to the contrary
contained herein, for so long as the Loan is outstanding Borrower shall not
bring an action for partition with respect to such Borrower’s ownership interest
in the Property or to compel any sale thereof and each Borrower hereby expressly
waives any and all rights to partition the Property.

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ARTICLE IV - - OBLIGATIONS AND RELIANCES

Section 4.1            Relationship of Borrower and Lender.  The relationship
between Borrower and Lender is solely that of debtor and creditor, and Lender
has no fiduciary or other special relationship with Borrower, and no term or
condition of the Loan Agreement, the Note, this Security Instrument and the
other Loan Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.

Section 4.2            No Reliance on Lender.  The general partners, members,
principals and (if Borrower is a trust) beneficial owners of Borrower are
experienced in the ownership and operation of properties similar to the
Property, and Borrower and Lender are relying solely upon such expertise and
business plan in connection with the ownership and operation of the Property. 
Borrower is not relying on Lender’s expertise, business acumen or advice in
connection with the Property.

Section 4.3            No Lender Obligations.

(a)           Notwithstanding the provisions of Subsections 1.1(h) and (n) or
Section 1.2, Lender is not undertaking the performance of (i) any obligations
under the Leases; or (ii) any obligations with respect to such agreements,
contracts, certificates, instruments, franchises, permits, trademarks, licenses
and other documents.

(b)           By accepting or approving anything required to be observed,
performed or fulfilled or to be given to Lender pursuant to this Security
Instrument, the Loan Agreement, the Note or the other Loan Documents, including,
without limitation, any Officer’s Certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal, or Policy,
Lender shall not be deemed to have warranted, consented to, or affirmed the
sufficiency, the legality or effectiveness of same, and such acceptance or
approval thereof shall not constitute any warranty or affirmation with respect
thereto by Lender.

Section 4.4            Reliance.  Borrower recognizes and acknowledges that in
accepting the Loan Agreement, the Note, this Security Instrument and the other
Loan Documents, Lender is expressly and primarily relying on the truth and
accuracy of the warranties and representations set forth in Section 4.1 of the
Loan Agreement without any obligation to investigate the Property and
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof, that the warranties and
representations are a material inducement to Lender in making the Loan; and that
Lender would not be willing to make the Loan and accept this Security Instrument
in the absence of the warranties and representations as set forth in Section 4.1
of the Loan Agreement.

ARTICLE V - - FURTHER ASSURANCES

Section 5.1            Recording of Security Instrument, etc.  Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time upon Lender’s request, will cause this Security
Instrument and any of the other Loan Documents creating a lien or security
interest or evidencing the lien hereof upon the Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to

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protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property.  Borrower will pay all taxes, filing, registration
or recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, this Security Instrument, the other
Loan Documents, any note, deed of trust or mortgage supplemental hereto, any
security instrument with respect to the Property and any instrument of further
assurance, and any modification or amendment of the foregoing documents, and all
federal, state, county and municipal taxes, duties, imposts, assessments and
charges arising out of or in connection with the execution and delivery of this
Security Instrument, any deed of trust or mortgage supplemental hereto, any
security instrument with respect to the Property or any instrument of further
assurance, and any modification or amendment of the foregoing documents, except
where prohibited by law so to do.

Section 5.2            Further Acts, etc.  Borrower will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every further acts, deeds, conveyances, deeds of trust, mortgages,
assignments, notices of assignments, transfers and assurances as Lender shall,
from time to time, reasonably require, for the better assuring, conveying,
assigning, transferring, and confirming unto Lender the property and rights
hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so to
be, or which Borrower may be or may hereafter become bound to convey or assign
to Lender, or for carrying out the intention or facilitating the performance of
the terms of this Security Instrument or for filing, registering or recording
this Security Instrument, or for complying with all Legal Requirements. 
Borrower, on demand, will execute and deliver, and in the event it shall fail to
so execute and deliver, hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements to evidence more effectively the
security interest of Lender in the Property.  Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Lender at
law and in equity, including without limitation, such rights and remedies
available to Lender pursuant to this Section 5.2.

Section 5.3            Changes in Tax, Debt, Credit and Documentary Stamp Laws.

(a)           If any law is enacted or adopted or amended after the date of this
Security Instrument which deducts the Debt from the value of the Property for
the purpose of taxation or which imposes a tax, either directly or indirectly,
on the Debt or Lender’s interest in the Property (other than the inclusion of
such amounts as income for income tax purposes or taxes on Lender’s capital),
Borrower will pay the tax, with interest and penalties thereon, if any.  If
Lender is advised by counsel chosen by it that the payment of tax by Borrower
would be unlawful or taxable to Lender or unenforceable or provide the basis for
a defense of usury then Lender shall have the option by written notice of not
less than one hundred twenty (120) days to declare the Debt immediately due and
payable.  If so accelerated, Borrower shall repay the Loan without premium or
penalty.

(b)           Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this

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Security Instrument or the Debt.  If such claim, credit or deduction shall be
required by law, Lender shall have the option, by written notice of not less
than one hundred twenty (120) days, to declare the Debt immediately due and
payable.  If so accelerated, Borrower shall repay the Loan without premium or
penalty.

(c)           If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the other Loan
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.

Section 5.4            Severing of Security Instrument.  This Security
Instrument and the Note shall, at any time until the same shall be fully paid
and satisfied, at the sole election of Lender, be severed into two or more notes
and two or more security instruments in such denominations as Lender shall
determine in its sole discretion, each of which shall cover all or a portion of
the Property to be more particularly described therein.  To that end, Borrower,
upon written request of Lender, shall execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered by the then owner of the Property, to
Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount of this Security Instrument, and containing terms, provisions
and clauses similar to, and no more onerous to Borrower than, those contained
herein and in the Note, and such other documents and instruments as may be
required by Lender; provided that Borrower’s obligations are not materially
increased thereby.

Section 5.5            Replacement Documents.  Upon receipt of an affidavit of
an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any other Loan Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or other
Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other
Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note
or other Loan Document in the same principal amount thereof and otherwise of
like tenor.

ARTICLE VI - - DUE ON SALE/ENCUMBRANCE

Section 6.1            Lender Reliance.  Borrower acknowledges that Lender has
examined and relied on the experience of Borrower and its general partners,
members, principals and (if Borrower is a trust) beneficial owners in owning and
operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Borrower’s ownership of the Property as a means of
maintaining the value of the Property as security for repayment of the Debt and
the performance of the Other Obligations.  Borrower acknowledges that Lender has
a valid interest in maintaining the value of the Property so as to ensure that,
should Borrower default in the repayment of the Debt or the performance of the
Other Obligations, Lender can recover the Debt by a sale of the Property.

Section 6.2            No Sale/Encumbrance.  Neither Borrower nor any Restricted
Party shall Transfer the Property or any part thereof or any interest therein or
permit or suffer the Property or any part thereof or any interest therein to be
Transferred other than as expressly permitted pursuant to the terms of the Loan
Agreement.

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ARTICLE VII - - RIGHTS AND REMEDIES UPON DEFAULT

Section 7.1            Remedies.  Upon the occurrence and during the continuance
of any Event of Default, Borrower agrees that Lender may take such action,
without notice or demand, as it deems advisable to protect and enforce its
rights against Borrower and in and to the Property, including, but not limited
to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Lender may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Lender:

(a)           declare the entire unpaid Debt to be immediately due and payable;

(b)           institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law,
in which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;

(c)           with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;

(d)           intentionally omitted;

(e)           institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein, in the
Note, the Loan Agreement or in the other Loan Documents;

(f)            recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Security Instrument or the other Loan
Documents;

(g)           apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnifying Person with respect to the Loan or of any Person
liable for the payment of the Debt;

(h)           the license granted to Borrower under Section 1.2 hereof shall
automatically be revoked and Lender may enter into or upon the Property, either
personally or by its agents, nominees or attorneys and dispossess Borrower and
its agents and servants therefrom, without liability for trespass, damages or
otherwise and exclude Borrower and its agents or servants wholly therefrom, and
take possession of all books, records and accounts relating thereto and Borrower
agrees to surrender possession of the Property and of such books, records and
accounts to Lender upon demand, and thereupon Lender may (i) use, operate,
manage, control, insure, maintain, repair, restore and otherwise deal with all
and every part of the Property and conduct the business thereat; (ii) complete
any construction on the Property in such manner and form as Lender deems
advisable; (iii) make alterations, additions, renewals, replacements and
improvements to or on the Property; (iv) exercise all rights and powers of
Borrower with respect to the Property, whether in the name of Borrower or
otherwise, including,

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without limitation, the right to make, cancel, enforce or modify Leases, obtain
and evict tenants, and demand, sue for, collect and receive all Rents of the
Property and every part thereof; (v) require Borrower to pay monthly in advance
to Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Property
as may be occupied by Borrower; (vi) require Borrower to vacate and surrender
possession of the Property to Lender or to such receiver and, in default
thereof, Borrower may be evicted by summary proceedings or otherwise; and
(vii) apply the receipts from the Property to the payment of the Debt, in such
order, priority and proportions as Lender shall deem appropriate in its sole
discretion after deducting therefrom all expenses (including reasonable
attorneys’ fees) incurred in connection with the aforesaid operations and all
amounts necessary to pay the Taxes, Other Charges, Insurance Premiums and other
expenses in connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and employees;

(i)            exercise any and all rights and remedies granted to a secured
party upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing:  (i) the right to take possession of
the Fixtures, the Equipment, the Personal Property or any part thereof, and to
take such other measures as Lender may deem necessary for the care, protection
and preservation of the Fixtures, the Equipment, the Personal Property, and
(ii) request Borrower at its expense to assemble the Fixtures, the Equipment,
the Personal Property and make it available to Lender at a convenient place
acceptable to Lender.  Any notice of sale, disposition or other intended action
by Lender with respect to the Fixtures, the Equipment, the Personal Property
sent to Borrower in accordance with the provisions hereof at least ten (10) days
prior to such action, shall constitute commercially reasonable notice to
Borrower;

(j)            apply any sums then deposited or held in escrow or otherwise by
or on behalf of Lender in accordance with the terms of the Loan Agreement, this
Security Instrument or any other Loan Document to the payment of the following
items in any order in its uncontrolled discretion:

(i)       Taxes and Other Charges;

(ii)      Insurance Premiums;

(iii)     Interest on the unpaid principal balance of the Note;

(iv)    Amortization of the unpaid principal balance of the Note;

(v)     All other sums payable pursuant to the Note, the Loan Agreement, this
Security Instrument and the other Loan Documents, including without limitation
advances made by Lender pursuant to the terms of this Security Instrument;

(k)           pursue such other remedies as Lender may have under applicable
law; or

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(l)            apply the undisbursed balance of any Net Proceeds Deficiency
deposit, together with interest thereon, to the payment of the Debt in such
order, priority and proportions as Lender shall deem to be appropriate in its
discretion.

In the event of a sale, by foreclosure, power of sale or otherwise, of less than
all of Property, this Security Instrument shall continue as a lien and security
interest on the remaining portion of the Property unimpaired and without loss of
priority.

Section 7.2            Application of Proceeds.  The purchase money, proceeds
and avails of any disposition of the Property, and or any part thereof, or any
other sums collected by Lender pursuant to the Note, this Security Instrument or
the other Loan Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.

Section 7.3            Right to Cure Defaults.  Upon the occurrence and during
the continuance of any Event of Default, Lender may, but without any obligation
to do so and without notice to or demand on Borrower and without releasing
Borrower from any obligation hereunder, make any payment or do any act required
of Borrower hereunder in such manner and to such extent as Lender may deem
necessary to protect the security hereof.  Lender is authorized to enter upon
the Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
reasonable attorneys’ fees to the extent permitted by law), with interest as
provided in this Section 7.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand.  All such costs and expenses incurred
by Lender in remedying such Event of Default or such failed payment or act or in
appearing in, defending, or bringing any such action or proceeding shall bear
interest at the Default Rate, for the period after notice from Lender that such
cost or expense was incurred to the date of payment to Lender.  All such costs
and expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.

Section 7.4            Actions and Proceedings.  Lender has the right to appear
in and defend any action or proceeding brought with respect to the Property and
to bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.

Section 7.5            Recovery of Sums Required To Be Paid.  Lender shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.

Section 7.6            Examination of Books and Records.  At reasonable times
and upon reasonable notice, Lender, its agents, accountants and attorneys shall
have the right to examine the records, books, management and other papers of
Borrower which reflect upon the financial

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condition of the Property or of any Borrower owning a 20% or greater undivided
interest therein, at the Property or at any office regularly maintained by
Borrower where the books and records are located.  Lender and its agents shall
have the right to make copies and extracts from the foregoing records and other
papers.  In addition, at reasonable times and upon reasonable notice, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower pertaining to the income, expenses and
operation of the Property during reasonable business hours at any office of
Borrower where the books and records are located.  This Section 7.6 shall apply
throughout the term of the Note and without regard to whether an Event of
Default has occurred or is continuing.

Section 7.7            Other Rights, etc.  (a)  The failure of Lender to insist
upon strict performance of any term hereof shall not be deemed to be a waiver of
any term of this Security Instrument.  Borrower shall not be relieved of
Borrower’s obligations hereunder by reason of (i) the failure of Lender to
comply with any request of Borrower or any Guarantor or Indemnifying Person with
respect to the Loan to take any action to foreclose this Security Instrument or
otherwise enforce any of the provisions hereof or of the Note or the other Loan
Documents, (ii) the release, regardless of consideration, of the whole or any
part of the Property, or of any person liable for the Debt or any portion
thereof, or (iii) any agreement or stipulation by Lender extending the time of
payment or otherwise modifying or supplementing the terms of the Note, this
Security Instrument or the other Loan Documents.

(a)           It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured. 
Possession by Lender shall not be deemed an election of judicial relief if any
such possession is requested or obtained with respect to any Property or
collateral not in Lender’s possession.

(b)           Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect.  Lender may take action to recover the Debt, or any portion thereof,
or to enforce any covenant hereof without prejudice to the right of Lender
thereafter to foreclose this Security Instrument.  The rights of Lender under
this Security Instrument shall be separate, distinct and cumulative and none
shall be given effect to the exclusion of the others.  No act of Lender shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision.  Lender shall not be limited exclusively to
the rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.

Section 7.8            Right to Release Any Portion of the Property.  Lender may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. 
This Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.

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Section 7.9            Violation of Laws.  If the Property is not in material
compliance with Legal Requirements, Lender may impose additional requirements
upon Borrower in connection herewith including, without limitation, monetary
reserves or financial equivalents.

Section 7.10         Recourse and Choice of Remedies.  The provisions of
Section 9.4 of the Loan Agreement are hereby incorporated by reference into this
Security Instrument to the same extent and with the same force as if fully set
forth herein.

Section 7.11         Right of Entry.  Upon reasonable notice to Borrower, Lender
and its agents shall have the right to enter and inspect the Property at all
reasonable times.

Section 7.12         References to Lender.  Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, all references
herein to “Lender” shall be deemed to collectively or individually (as the
context requires) refer to Lender or to MERS, acting on behalf of and at the
sole direction of Lender in its capacity as Lender’s nominee, as each of their
interests may appear; provided, that, unless Lender, in its sole discretion,
shall determine otherwise, only Lender (and not MERS) shall be deemed to be
“Lender” with respect to (a) any consent or similar approval right granted to
Lender hereunder or under any of the other Loan Documents (including, without
limitation, any consent or similar approval right that is deemed granted if not
approved or denied within a specified time period), (b) any items, documents or
other information required to be delivered to Lender hereunder or under any of
the other Loan Documents (other than notices expressly required to be sent to
MERS) or (c) any future funding or other obligations of Lender to Borrower or
any affiliate of Borrower hereunder or under any of the other Loan Documents, if
any.

Section 7.13         Failure to Act.  Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, the failure of MERS to
take any action hereunder or under any of the other Loan Documents, other than
such acts as it may be required to take under applicable law by virtue of its
capacity as lienholder or secured party of record, shall not (a) be deemed to be
a waiver of any term or condition of this Security Instrument or any of the
other Loan Documents, or (b) adversely affect any rights of Lender hereunder or
under any of the other Loan Documents.

ARTICLE VIII - - ENVIRONMENTAL HAZARDS

Section 8.1            Environmental Representations and Warranties.  Except as
otherwise disclosed by that certain Phase I environmental report (or Phase II
environmental report, if required) delivered to Lender by Borrower in connection
with the origination of the Loan (such report is referred to below as the
“Environmental Report”), to Borrower’s Knowledge (a) there are no Hazardous
Substances (defined below) or underground storage tanks in, on, or under the
Property, except those that are (i) in compliance with Environmental Laws
(defined below) and with permits issued pursuant thereto (to the extent such
permits are required under Environmental Law), (ii) de-minimis amounts necessary
to operate the Property for the purposes set forth in the Loan Agreement which
will not result in an environmental condition in, on or under the Property and
which are otherwise permitted under and used in compliance with Environmental
Law and (iii) fully disclosed to Lender in writing pursuant the Environmental
Report; (b) there are no past, present or threatened Releases (defined below) of
Hazardous

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Substances in, on, under or from the Property which has not been fully
remediated in accordance with Environmental Law; (c) there is no threat of any
Release of Hazardous Substances migrating to the Property; (d) there is no past
or present non-compliance with Environmental Laws, or with permits issued
pursuant thereto, in connection with the Property which has not been fully
remediated in accordance with Environmental Law; (e) Borrower does not know of,
and has not received, any written or oral notice or other communication from any
Person (including but not limited to a Governmental Authority) relating to
Hazardous Substances or Remediation (defined below) thereof, of possible
liability of any Person pursuant to any Environmental Law, other environmental
conditions in connection with the Property, or any actual or potential
administrative or judicial proceedings in connection with any of the foregoing;
and (f) Borrower has truthfully and fully disclosed to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and has provided to Lender all
information that is contained in Borrower’s files and records, including, but
not limited to, any reports relating to Hazardous Substances in, on, under or
from the Property and/or to the environmental condition of the Property.

“Environmental Law” means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations and the like, as well as common law,
relating to protection of human health or the environment, relating to Hazardous
Substances, relating to liability for or costs of Remediation or prevention of
Releases of Hazardous Substances or relating to liability for or costs of other
actual or threatened danger to human health or the environment.  Environmental
Law includes, but is not limited to, the following statutes, as amended, any
successor thereto, and any regulations promulgated pursuant thereto, and any
state or local statutes, ordinances, rules, regulations and the like addressing
similar issues:  the Comprehensive Environmental Response, Compensation and
Liability Act; the Emergency Planning and Community Right-to-Know Act; the
Hazardous Substances Transportation Act; the Resource Conservation and Recovery
Act (including but not limited to Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act. 
Environmental Law also includes, but is not limited to, any present and future
federal, state and local laws, statutes, ordinances, rules, regulations and the
like, as well as common law:  conditioning transfer of property upon a negative
declaration or other approval of a governmental authority of the environmental
condition of the Property; requiring notification or disclosure of Releases of
Hazardous Substances or other environmental condition of the Property to any
governmental authority or other Person, whether or not in connection with
transfer of title to or interest in property; imposing conditions or
requirements relating to Hazardous Substances in connection with permits or
other authorization for lawful activity; relating to nuisance, trespass or other
causes of action in respect of Hazardous Substances related to the Property; or,
to the extent arising out of the presence of Hazardous Substances, relating to
wrongful death, personal injury, or property or other damage in connection with
any physical condition or use of the Property.

“Hazardous Substances” include but are not limited to any and all substances
(whether solid, liquid or gas) defined, listed, or otherwise classified as
pollutants, hazardous wastes, hazardous substances, hazardous materials,
extremely hazardous wastes, or words of

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similar meaning or regulatory effect under any present or future Environmental
Laws or that may have a negative impact on human health or the environment,
including but not limited to petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated biphenyls, lead, radon,
radioactive materials, flammables and explosives, but excluding substances of
kinds and in amounts ordinarily and customarily used or stored in similar
properties for the purpose of cleaning or other maintenance or operations and
otherwise in compliance with all Environmental Laws.

“Release” of any Hazardous Substance includes but is not limited to any release,
deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting,
pumping, pouring, emptying, escaping, dumping, disposing or other movement of
Hazardous Substances.

“Remediation” includes but is not limited to any response, remedial, removal, or
corrective action, any activity to clean-up, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance, any actions to prevent, cure or
mitigate any Release of any Hazardous Substance, any action to comply with any
Environmental Laws or with any permits issued pursuant thereto, any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous Substances
or to anything referred to in Article 8.

Section 8.2            Environmental Covenants.  Borrower covenants and agrees
that:  (a) Borrower shall use commercially reasonable efforts to ensure that all
uses and operations on or of the Property shall be in compliance with all
Environmental Laws and permits issued pursuant thereto; (b) Borrower shall use
commercially reasonable efforts to prevent any Releases of Hazardous Substances
in, on, under or from the Property; (c) Borrower shall not permit any Hazardous
Substances in, on, or under the Property, except those that are (i) in
compliance with all Environmental Laws and with permits issued pursuant thereto
(to the extent such permits are required by Environmental Law), (ii) de-minimis
amounts necessary to operate the Property for the purposes set forth in the Loan
Agreement which will not result in an environmental condition in, on or under
the Property and which are otherwise permitted under and used in compliance with
Environmental Law and (iii) fully disclosed to Lender in writing; (d) Borrower
shall keep the Property free and clear of all liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act or omission of
Borrower or any other Person (the “Environmental Liens”); (e) Borrower shall, at
its sole cost and expense, fully and expeditiously cooperate in all activities
pursuant to Section 8.3 below, including but not limited to providing all
relevant information and making knowledgeable persons available for interviews;
(f) Borrower shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection with
the Property, pursuant to any reasonable written request of Lender made in the
event that Lender has reason to believe that an environmental hazard exists on
the Property (including but not limited to sampling, testing and analysis of
soil, water, air, building materials and other materials and substances whether
solid, liquid or gas), and share with Lender the reports and other results
thereof, and Lender and other Indemnified Parties shall be entitled to rely on
such reports and other results thereof; (g) Borrower shall, at its sole cost and
expense, comply with all reasonable written requests of Lender made in the event
that Lender has reason to believe that an environmental hazard exists on the
Property to (i) reasonably effectuate Remediation of any condition (including
but not limited to a Release of a Hazardous Substance) in, on, under or from the
Property; (ii) comply

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with any Environmental Law; (iii) comply with any directive from any
Governmental Authority; and (iv) take any other reasonable action necessary or
appropriate for protection of human health or the environment; (h) Borrower
shall not do or allow any tenant or other user of the Property to do any act
with respect to Hazardous Substances that materially increases the dangers to
human health or the environment, poses an unreasonable risk of harm to any
Person (whether on or off the Property), impairs or may impair the value of the
Property, is contrary to any requirement of any insurer, constitutes a public or
private nuisance, constitutes waste, or violates any covenant, condition,
agreement or easement applicable to the Property; and (i) Borrower shall
immediately notify Lender in writing of (A) any presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or migrating
towards the Property; (B) any non-compliance with any Environmental Laws related
in any way to the Property; (C) any actual or potential Environmental Lien;
(D) any required or proposed Remediation of environmental conditions relating to
the Property; and (E) any written notice or other written communication of which
Borrower becomes aware from any source whatsoever (including but not limited to
a governmental entity) relating in any way to Hazardous Substances or
Remediation thereof, possible liability of any Person pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or potential administrative or judicial proceedings in
connection with anything referred to in this Article 8.

Section 8.3            Lender’s Rights.  In the event that Lender has reason to
believe that an environmental hazard exists on the Property that does not, in
Lender’s sole discretion, endanger any tenants or other occupants of the
Property or their guests or the general public or materially and adversely
affect the value of the Property, upon reasonable notice from Lender, Borrower
shall, at Borrower’s expense, promptly cause an engineer or consultant
satisfactory to Lender to conduct an environmental assessment or audit (the
scope of which shall be determined in Lender’s sole and absolute discretion) and
take any samples of soil, groundwater or other water, air, or building materials
or any other invasive testing requested by Lender and promptly deliver the
results of any such assessment, audit, sampling or other testing; provided,
however, if such results are not delivered to Lender within a reasonable period
or if Lender has reason to believe that an environmental hazard exists on the
Property that, in Lender’s sole judgment, endangers any tenant or other occupant
of the Property or their guests or the general public or may materially and
adversely affect the value of the Property, upon reasonable notice to Borrower,
Lender and any other Person designated by Lender, including but not limited to
any receiver, any representative of a governmental entity, and any environmental
consultant, shall have the right, but not the obligation, to enter upon the
Property at all reasonable times to assess any and all aspects of the
environmental condition of the Property and its use, including but not limited
to conducting any environmental assessment or audit (the scope of which shall be
determined in Lender’s sole and absolute discretion) and taking samples of soil,
groundwater or other water, air, or building materials, and reasonably
conducting other invasive testing.  Borrower shall cooperate with and provide
Lender and any such Person designated by Lender with access to the Property.

ARTICLE IX - - INDEMNIFICATION

Section 9.1            General Indemnification.  Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions,

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proceedings, obligations, debts, damages, losses, costs, expenses, diminutions
in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts
paid in settlement, punitive damages, foreseeable and unforeseeable
consequential damages, of whatever kind or nature (including but not limited to
reasonable attorneys’ fees and other costs of defense) (collectively, the
“Losses”) imposed upon or incurred by or asserted against any Indemnified
Parties and directly or indirectly arising out of or in any way relating to any
one or more of the following, except, in each case, to the extent arising out of
any Indemnified Party’s gross negligence or willful misconduct:  (a) ownership
of this Security Instrument, the Property or any interest therein or receipt of
any Rents; (b) any amendment to, or restructuring of, the Debt, the Note, the
Loan Agreement, this Security Instrument, or any other Loan Documents; (c) any
and all lawful action that may be taken by Lender in connection with the
enforcement of the provisions of this Security Instrument, the Loan Agreement,
the Note or any of the other Loan Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnifying Person and/or any partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument, the Note, the Loan Agreement or any of the other Loan
Documents; (g) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property or any part thereof;
(h) the failure of any person to file timely with the Internal Revenue Service
an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate,
Broker and Barter Exchange Transactions, which may be required in connection
with this Security Instrument, or to supply a copy thereof in a timely fashion
to the recipient of the proceeds of the transaction in connection with which
this Security Instrument is made; (i) any failure of the Property to be in
compliance with any Legal Requirements; (j) the enforcement by any Indemnified
Party of the provisions of this Article 9; (k) any and all claims and demands
whatsoever which may be asserted against Lender 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 Lease; (l) the payment of any
commission, charge or brokerage fee to anyone claiming through Borrower which
may be payable in connection with the funding of the Loan; or (m) any
misrepresentation made by Borrower in this Security Instrument or any other Loan
Document.  Any amounts payable to Lender by reason of the application of this
Section 9.1 shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Lender until
paid.  For purposes of this Article 9, the term “Indemnified Parties” means
Lender and any Person who is or will have been involved in the origination of
the Loan, any Person who is or will have been involved in the servicing of the
Loan secured hereby, any Person in whose name the encumbrance created by this
Security Instrument is or will have been recorded, any Person who may hold or
acquire or will have held a full or partial interest in the Loan secured hereby
(including, but not limited to, investors or prospective investors in the
Securities, as well as custodians, trustees and other fiduciaries who hold or
have held a full or partial interest in the Loan secured hereby for the benefit
of third parties) as well as the respective directors, officers, shareholders,
partners, employees, agents, servants, representatives, contractors,
subcontractors,

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affiliates, subsidiaries, participants, successors and assigns of any and all of
the foregoing (including, but not limited to, any other Person who holds or
acquires or will have held a participation or other full or partial interest in
the Loan, whether during the term of the Loan or as a part of or following a
foreclosure of the Loan and any successors by merger, consolidation or
acquisition of all or a substantial portion of Lender’s assets and business).

Section 9.2            Security Instrument and/or Intangible Tax.  Borrower
shall, at its sole cost and expense, protect, defend, indemnify, release and
hold harmless the Indemnified Parties from and against any and all Losses
imposed upon or incurred by or asserted against any Indemnified Parties and
directly or indirectly arising out of or in any way relating to any tax on the
making and/or recording of this Security Instrument, the Note or any of the
other Loan Documents, but excluding any income, franchise or other similar
taxes.

Section 9.3            ERISA Indemnification.  Borrower shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, reasonable attorneys’ fees and costs incurred in the investigation,
defense, and settlement of Losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual
prohibited transaction exemption under ERISA that may be required, in Lender’s
sole discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 4.1.9 or 5.2.12 of the Loan Agreement.

Section 9.4            Environmental Indemnification.  Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), engineers’ fees, environmental
consultants’ fees, and costs of investigation (including but not limited to
sampling, testing, and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas) imposed upon or
incurred by or asserted against any Indemnified Parties, and arising out of or
in any way relating to any one or more of the following:  (a) any presence of
any Hazardous Substances in, on, above, or under the Property; (b) any past,
present or threatened Release of Hazardous Substances in, on, above, under or
from the Property; (c) any activity by Borrower, any Person affiliated with
Borrower or any tenant or other user of the Property in connection with any
actual, proposed or threatened use, treatment, storage, holding, existence,
disposition or other Release, generation, production, manufacturing, processing,
refining, control, management, abatement, removal, handling, transfer or
transportation to or from the Property of any Hazardous Substances at any time
located in, under, on or above the Property; (d) any activity by Borrower, any
Person affiliated with Borrower or any tenant or other user of the Property in
connection with any actual or proposed Remediation of any Hazardous Substances
at any time located in, under, on or above the Property, whether or not such
Remediation is voluntary or pursuant to court or administrative order, including
but not limited to any removal, remedial or corrective action; (e) any past or
present non-compliance or violations of any Environmental Laws (or permits
issued pursuant to any Environmental Law) in connection with the Property or
operations thereon, including but not limited to any failure by Borrower, any
Affiliate of Borrower or any tenant or other user of the Property to comply with
any order of any Governmental Authority in connection with any Environmental
Laws; (f) the imposition, recording or filing of any Environmental Lien
encumbering the Property; (g) any administrative processes or proceedings or
judicial

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proceedings in any way connected with any matter addressed in Article 8 and this
Section 9.4; (h) any past, present or threatened injury to, destruction of or
loss of natural resources in any way connected with the Property, including but
not limited to costs to investigate and assess such injury, destruction or loss;
(i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another Person and containing such or any similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substance for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage arising under any statutory or common law or
tort law theory, including but not limited to damages assessed for the
maintenance of a private or public nuisance or for the conducting of an
abnormally dangerous activity on or near the Property (in each case, to the
extent arising out of the presence of Hazardous Substances); and (l) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 8.  This indemnity shall survive any termination, satisfaction or
foreclosure of this Security Instrument, subject to the provisions of
Section 10.5.  Notwithstanding the foregoing, Borrower shall have no liability
for any Losses imposed upon or incurred by or asserted against any Indemnified
Parties and described in this Section 9.4 to the extent that such Losses arose
solely by actions, conditions or events relating to the Hazardous Substances
placed in, on, above or under the Property after the date that Lender or any
Affiliate or nominee of Lender (or any purchaser at a foreclosure sale) actually
acquired title to the Property and were not caused by the direct or indirect
actions of Borrower or any officer or director of Borrower or any employee,
agent, contractor or Affiliate of Borrower.

Section 9.5            Duty to Defend; Attorneys’ Fees and Other Fees and
Expenses.  Upon written request by any Indemnified Party, Borrower shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties.  Notwithstanding the foregoing, if the defendants in any
such claim or proceeding include both Borrower and any Indemnified Party and
Borrower and such Indemnified Party shall have reasonably concluded that there
are any legal defenses available to it and/or other Indemnified Parties that are
different from or additional to those available to Borrower, such Indemnified
Party shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such Indemnified Party, provided that no compromise or settlement shall be
entered without Borrower’s consent, which consent shall not be unreasonably
withheld.  Upon demand, Borrower shall pay or, in the sole and absolute
discretion of the Indemnified Parties, reimburse, the Indemnified Parties for
the payment of reasonable fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection
therewith.

ARTICLE X - - WAIVERS

Section 10.1         Waiver of Counterclaim.  To the extent permitted by
applicable law, Borrower hereby waives the right to assert a counterclaim, other
than a mandatory or compulsory

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counterclaim, in any action or proceeding brought against it by Lender arising
out of or in any way connected with this Security Instrument, the Loan
Agreement, the Note, any of the other Loan Documents, or the Obligations.

Section 10.2         Marshalling and Other Matters.  To the extent permitted by
applicable law, Borrower hereby waives the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein.  Further, Borrower hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Security Instrument on behalf of Borrower, and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by applicable law.

Section 10.3         Waiver of Notice.  To the extent permitted by applicable
law, Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument or any
other Loan Document specifically and expressly provides for the giving of notice
by Lender to Borrower and except with respect to matters for which Lender is
required by applicable law to give notice, and Borrower hereby expressly waives
the right to receive any notice from Lender with respect to any matter for which
this Security Instrument does not specifically and expressly provide for the
giving of notice by Lender to Borrower.

Section 10.4         Waiver of Statute of Limitations.  To the extent permitted
by applicable law, Borrower hereby expressly waives and releases to the fullest
extent permitted by law, the pleading of any statute of limitations as a defense
to payment of the Debt or performance of its Other Obligations.

Section 10.5         Survival.  The indemnifications made pursuant to
Sections 9.3 and 9.4 herein and the representations and warranties, covenants,
and other obligations arising under Article 8, shall continue indefinitely in
full force and effect and shall survive and shall in no way be impaired by any
of the following:  any satisfaction or other termination of this Security
Instrument, any assignment or other transfer of all or any portion of this
Security Instrument or Lender’s interest in the Property (but, in such case,
shall benefit both Indemnified Parties and any assignee or transferee), any
exercise of Lender’s rights and remedies pursuant hereto including, but not
limited to, foreclosure or acceptance of a deed in lieu of foreclosure, any
exercise of any rights and remedies pursuant to the Loan Agreement, the Note or
any of the other Loan Documents, any transfer of all or any portion of the
Property (whether by Borrower or by Lender following foreclosure or acceptance
of a deed in lieu of foreclosure or at any other time), any amendment to this
Security Instrument, the Loan Agreement, the Note or the other Loan Documents,
and any act or omission that might otherwise be construed as a release or
discharge of Borrower from the obligations pursuant hereto.

ARTICLE XI - - EXCULPATION

The provisions of Section 9.4 of the Loan Agreement are hereby incorporated by
reference into this Security Instrument to the same extent and with the same
force as if fully set forth herein.

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ARTICLE XII -  - NOTICES

All notices or other written communications hereunder shall be delivered in
accordance with Section 10.6 of the Loan Agreement.

Notices to Lender hereunder and under any of the other Loan Documents shall
include a copy thereof to Lender (to be addressed and delivered in accordance
with Section 10.6 of the Loan Agreement) and shall be sent as follows:

Lender:

 

MERS Commercial

 

 

 

P.O. Box 2300

 

 

 

Flint, Michigan 48501-2300

 

ARTICLE XIII -  - APPLICABLE LAW

Section 13.1         Governing Law.  This Security Instrument shall be governed
in accordance with the terms and provisions of Section 10.3 of the Loan
Agreement.

Section 13.2         Usury Laws.  Notwithstanding anything to the contrary,
(a) all agreements and communications between Borrower and Lender are hereby and
shall automatically be limited so that, after taking into account all amounts
deemed interest, the interest contracted for, charged or received by Lender
shall never exceed the Maximum Legal Rate or amount, (b) in calculating whether
any interest exceeds the Maximum Legal Rate, all such interest shall be
amortized, prorated, allocated and spread over the full amount and term of all
principal indebtedness of Borrower to Lender, and (c) if through any contingency
or event, Lender receives or is deemed to receive interest in excess of the
Maximum Legal Rate, any such excess shall be deemed to have been applied toward
payment of the principal of any and all then outstanding indebtedness of
Borrower to Lender, or if there is no such indebtedness, shall immediately be
returned to Borrower.

Section 13.3         Provisions Subject to Applicable Law.  All rights, powers
and remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any applicable law.  If
any term of this Security Instrument or any application thereof shall be invalid
or unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.

ARTICLE XIV -  - DEFINITIONS

All capitalized terms not defined herein shall have the respective meanings set
forth in the Loan Agreement.  Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Security Instrument may be used interchangeably in singular or plural form and
the word “Borrower” shall mean “each Borrower and any subsequent owner or owners
of a fee interest in the Property or any part thereof,” the word “Lender” shall
mean “Lender and any subsequent holder of the Note,” the word “Note” shall mean
“the Note and any other evidence of indebtedness secured by this Security

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Instrument,” the word “Property” shall include any portion of the Property and
any interest therein, and the phrases “attorneys’ fees”, “legal fees” and
“counsel fees” shall include any and all reasonable attorneys’, paralegal and
law clerk fees and disbursements, including, but not limited to, fees and
disbursements at the pre-trial, trial and appellate levels actually incurred or
paid by Lender in protecting its interest in the Property, the Leases and the
Rents and enforcing its rights hereunder.

ARTICLE XV -  - MISCELLANEOUS PROVISIONS

Section 15.1         No Oral Change.  This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

Section 15.2         Successors and Assigns.  This Security Instrument shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns forever.

Section 15.3         Inapplicable Provisions.  If any term, covenant or
condition of the Loan Agreement, the Note or this Security Instrument is held to
be invalid, illegal or unenforceable in any respect, the Loan Agreement, the
Note and this Security Instrument shall be construed without such provision.

Section 15.4         Headings, etc.  The headings and captions of various
Sections of this Security Instrument are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof.

Section 15.5         Number and Gender.  Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.

Section 15.6         Subrogation.  If any or all of the proceeds of the Note
have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Property, then, to the extent of the funds so used, Lender
shall be subrogated to all of the rights, claims, liens, titles, and interests
existing against the Property heretofore held by, or in favor of, the holder of
such indebtedness and such former rights, claims, liens, titles, and interests,
if any, are not waived but rather are continued in full force and effect in
favor of Lender and are merged with the lien and security interest created
herein as cumulative security for the repayment of the Debt, the performance and
discharge of Borrower’s obligations hereunder, under the Loan Agreement, the
Note and the other Loan Documents and the performance and discharge of the Other
Obligations.

Section 15.7         Entire Agreement.  The Note, the Loan Agreement, this
Security Instrument and the other Loan Documents constitute the entire
understanding and agreement between Borrower and Lender with respect to the
transactions arising in connection with the Debt and supersede all prior written
or oral understandings and agreements between Borrower and Lender with respect
thereto.  Borrower hereby acknowledges that, except as incorporated in

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writing in the Note, the Loan Agreement, this Security Instrument and the other
Loan Documents, there are not, and were not, and no persons are or were
authorized by Lender to make, any representations, understandings, stipulations,
agreements or promises, oral or written, with respect to the transaction which
is the subject of the Note, the Loan Agreement, this Security Instrument and the
other Loan Documents.

Section 15.8         Limitation on Lender’s Responsibility.  No provision of
this Security Instrument shall operate to place any obligation or liability for
the control, care, management or repair of the Property upon Lender, nor shall
it operate to make Lender responsible or liable for any waste committed on the
Property by the tenants or any other Person, or for any dangerous or defective
condition of the Property, or for any negligence in the management, upkeep,
repair or control of the Property resulting in loss or injury or death to any
tenant, licensee, employee or stranger.  Nothing herein contained shall be
construed as constituting Lender a “mortgagee in possession.”

ARTICLE XVI - DEED OF TRUST PROVISIONS

Section 16.1         CONCERNING THE TRUSTEE.  Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee’s reasonable satisfaction.  Trustee, by acceptance of this Security
Instrument, covenants to perform and fulfill the trusts herein created, being
liable, however, only for gross negligence or willful misconduct, and hereby
waives any statutory fee and agrees to accept reasonable compensation, in lieu
thereof, for any services rendered by Trustee in accordance with the terms
hereof.  Trustee may resign at any time upon giving thirty (30) days’ notice to
Borrower and to Lender.  Lender may remove Trustee at any time or from time to
time and select a successor trustee.  In the event of the death, removal,
resignation, refusal to act, or inability to act of Trustee, or in its sole
discretion for any reason whatsoever Lender may, without notice and without
specifying any reason therefor and without applying to any court, select and
appoint a successor trustee, by an instrument recorded wherever this Security
Instrument is recorded and all powers, rights, duties and authority of Trustee,
as aforesaid, shall thereupon become vested in such successor.  Such substitute
trustee shall not be required to give bond for the faithful performance of the
duties of Trustee hereunder unless required by Lender.  The procedure provided
for in this Section 16.1 for substitution of Trustee shall be in addition to and
not in exclusion of any other provisions for substitution, by law or otherwise.

Section 16.2         TRUSTEE’S FEES.  Borrower shall pay all reasonable costs,
fees and expenses incurred by Trustee and Trustee’s agents and counsel in
connection with the performance by Trustee of Trustee’s duties hereunder and all
such costs, fees and expenses shall be secured by this Security Instrument.

Section 16.3         CERTAIN RIGHTS.  With the approval of Lender, 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
Lender) upon any matters arising hereunder, including the preparation,
execution, and interpretation of the Note, this Security Instrument or the other
Loan Documents, and shall be fully protected in relying as to legal matters on
the

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advice of counsel, (ii) to execute any of the trusts and powers hereof and to
perform any duty hereunder either directly or through his/her agents or
attorneys, (iii) to select and employ, in and about the execution of his/her
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 willful misconduct, and (iv) any and all other lawful action as
Lender may instruct Trustee to take to protect or enforce Lender’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
Property for debts contracted for or liability or damages incurred in the
management or operation of the Property.  Trustee shall have the right to rely
on any instrument, document, or signature authorizing or supporting an 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 actual
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.

Section 16.4         RETENTION OF MONEY.  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.

Section 16.5         PERFECTION OF APPOINTMENT.  Should any deed, conveyance, or
instrument of any nature be required from Borrower 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 Borrower.

Section 16.6         SUCCESSION INSTRUMENTS.  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/her predecessor in the rights hereunder with like
effect as if originally named as Trustee herein; but nevertheless, upon the
written request of Lender 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.

ARTICLE XVII - LOCAL LAW PROVISIONS

Section 17.1         Inconsistencies.  In the event of any inconsistencies
between the terms and conditions of this Article 17 and the other provisions of
this Security Instrument, the terms and conditions of this Article 17 shall
control and be binding.

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Section 17.2         Supplemental District of Columbia Remedies.  Upon the
occurrence of any Event of Default, Borrower agrees that Lender, and when
requested to do so by Lender, Trustee, may take such action, without notice or
demand except as otherwise required by law, as Lender deems advisable to protect
and enforce the rights of Lender and Trustee against Borrower and in and to the
Property, including, but not limited to the following actions, each of which may
be pursued concurrently or otherwise, at such time and in such order as Lender
may determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Lender or Trustee:

(a)           Assent to the entry of a decree for interest in the Property by
any court of equity having jurisdiction over the sale of the Property.

(b)           Upon the occurrence of an Event of Default and the election of
Lender to affect a trustee’s sale of the Property under power of sale in lieu of
a judicial foreclosure, then Lender may instruct Trustee to commence such sale
and consummate such sale in the following manner:

(i)            Foreclose pursuant to the power of sale granted herein in any
manner allowed by applicable law, including without limitation Sections 42-815
and 42-818 of D.C. Code Ann. (2001) as amended, or in accordance with customs
and practices for foreclosure sales in the District of Columbia; or sell or
offer for to sell, at any time or different times, at one place or at different
places, the Property in such portions, order and parcels, and on such terms and
conditions, cash or credit, as Lender may determine, with or without having
first taken possession of same, to the highest bidder for cash at public
auction, with any postponement or rescheduling of any such sale as Trustee may
deem appropriate.  Such sale shall be made in any manner allowed or permitted by
any applicable law, including without limitation Sections 42-815 and 42-818 of
D.C. Code Ann. (2001) as amended, or by custom or practice in the District of
Columbia or by Chapter 9 of the UCC relating to the sale of collateral after
default by a debtor (as such laws now exist or may be hereafter amended or
succeeded), or by any other present or subsequent articles or enactments
relating to same.  With respect to any notices required or permitted under the
UCC, Borrower agrees that five (5) days' prior written notice shall be deemed
commercially reasonable.  At any such sale, whether made under the power herein
contained, the UCC, any other legal requirement or by virtue of any judicial
proceedings or any other legal right, remedy or recourse, it shall not be
necessary for Trustee to be physically present at or to have constructive
possession of the Property (Borrower shall deliver to Trustee any portion of the
Property not actually or constructively possessed by Trustee immediately upon
demand by Trustee), and the title to and right of possession of any such
property shall pass to the purchaser thereof as completely as if Trustee had
been actually present and delivered to purchaser at such sale, each instrument
of conveyance executed by Trustee shall contain a general warranty of title,
binding upon Borrower, each recital contained in any instrument of conveyance
made by Trustee shall conclusively establish the truth and accuracy of the
matters recited therein, including, without limitation, nonpayment of the Debt,
advertisement and conduct of such sale in the manner provided herein

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and otherwise by law, and appointment of any successor Trustee hereunder, any
prerequisites to the validity of such sale shall be conclusively presumed to
have been performed, the receipt of Trustee or other party making the sale shall
be a sufficient discharge to the purchaser or purchasers for his or their
purchase money and no such purchaser or purchasers, or his or their assigns or
personal representatives, shall thereafter be obligated to see to the
application of such purchase money or be in any way answerable for any loss,
misapplication or nonapplication thereof, and  to the fullest extent permitted
by law, Borrower shall be completely and irrevocably divested of all of its
right, title, interest, claim, equity, equity of redemption, and demand
whatsoever, either at law or in equity, in and to the property sold and such
sale shall be a perpetual bar both at law and in equity against Borrower, and
against all other persons claiming or to claim the property sold or any part
thereof, by, through or under Borrower.  Lender may be a bidder at such sale or
a purchaser at such sale and if Lender is the highest bidder, and Lender may
credit the portion of the purchase price that would be distributed to Lender
against the Indebtedness in lieu of paying cash.

(ii)           Trustee may sell the Property at public auction for cash, after
first giving such notice and advertising such sale in such manner as provided
below or, to the extent not provided below, as may be otherwise allowed by law,
and, upon compliance with the then law relating to foreclosure proceedings under
power of sale, convey title to the purchaser as hereinafter set forth; and
Trustee shall deliver to the purchaser at the settlement of such Trustee’s sale
its deed, with special warranty, which shall convey to the purchaser the
interest in the Property which Borrower has or has the power to convey at the
time of execution of this Security Instrument, and such as it may have acquired
thereafter. 

(iii)          Trustee may sell all or any portion of the Property, real,
personal and mixed, together or in lots or parcels.  The sale or sales by
Trustee of less than the whole of the Property shall not exhaust the power of
sale herein granted, and Trustee is specifically empowered to make successive
sale or sales under such power until the whole of the Property shall be sold;
and, if the proceeds of such sale or sales of less than the whole of the
Property shall be less than the aggregate of the Debt, including any expenses
relating thereto, this Security Instrument and the lien, security interest, and
assignment hereof shall remain in full force and effect as to the unsold portion
of the Property just as though no sale or sales had been made; provided,
however, that Borrower shall never have any right to require the sale or sales
of less than the whole of the Property, but Lender shall have the right, at its
sole election, to request Trustee to sell less than the whole of the Property. 
If an Event of Default occurs hereunder, Lender also shall have the option to
proceed with foreclosure either through judicial proceedings or by directing
Trustee to proceed under the power of sale granted herein, conducting, to the
extent permitted by applicable law, the sale as herein provided without
declaring the entire Debt due, and if sale is made because of an Event of
Default caused by failure to pay an installment, or a part of an installment,
such sale may, to the extent permitted by applicable law, be made subject to the
unmatured part of the Debt.  Such sale, if so made, shall not in any manner
affect the unmatured

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part of the Debt, but as to such unmatured part this Security Instrument shall
remain in full force and effect as though no sale had been made under the
provisions of this subsection.  Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of any Debt.

(c)           At any foreclosure sale hereunder, (A) Borrower hereby agrees, in
Borrower’s behalf and in behalf of Borrower’s successors and assigns, that any
and all recitals made in any deed of conveyance given by Trustee with respect to
the identity of Lender, the occurrence or existence of any default or Event of
Default, the acceleration of the maturity of any of the Debt, the request to
sell, the notice of sale, the giving of notice to all parties legally entitled
thereto, the time, place, terms, and manner of sale, and receipt, distribution,
and application of the money realized therefrom, or 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 Lender or by Trustee
hereunder, shall be taken by all courts of law and equity as prima facie
evidence that the statements or recitals state facts and are without further
question to be so accepted, and (B) the purchaser may disaffirm any easement
granted, or rental, lease, or other contract made in violation of any provision
of this Security Instrument or the Loan Documents, and may take immediate
possession of the Property free from, and despite the terms of, such grant of
easement and rental, lease or other contract.

(d)           Borrower hereby ratifies and confirms any and all acts which
Trustee, or his successor or substitute in this trust, shall do lawfully by
virtue hereof.

Section 17.3         Trustee’s Commission.  Immediately upon the first insertion
of any advertisement or notice of any such sale, even if the Debt thereafter is
paid, there shall become due and owing by Borrower all reasonable expenses
incident to such advertisement or notice, all other costs and all expenses
(including without limitation Lender’s and Trustee’s reasonable attorney’s fees)
incident to any foreclosure proceedings brought under this Security Instrument
or otherwise in connection with such sale, and a Trustee’s commission on the
then outstanding principal balance of the Note not in excess of one percent (1%)
of the then outstanding principal balance of the Note.  No party shall be
required to receive only the aggregate Debt then secured hereby with interest
thereon to the date of payment unless it is accompanied by a tender of payment
of such expenses, costs and commissions.

Section 17.4         Supplemental District of Columbia Remedies Cumulative and
Concurrent.

(a)           The District of Columbia supplemental remedies and rights granted
to Lender and Trustee under this Article 17 to this Security Instrument are
intended to be and are cumulative and concurrent with the remedies and rights
set forth in the body of the Deed of Trust and are not in lieu of, but are in
addition to, and shall not be affected by any exercise of, any other remedy or
right available to Lender or Trustee whether now or hereafter existing either at
law, or in equity, or under this Security Instrument or any other Loan Document.

(b)           No recovery of any judgment by Lender and no levy of an execution
under any judgment upon the Property or upon any other property of Borrower
shall affect in any manner or to any extent the lien of this Security Instrument
upon the Property or any part thereof,

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or any liens, rights, powers or remedies of Lender hereunder, but such liens,
rights, powers and remedies of Lender shall continue unimpaired as before.

Section 17.5         Fixtures; Personal Property.  Notwithstanding the filing of
a financing statement covering any of the Property or any of the Collateral in
the records normally pertaining to personal property, all of the Property, for
all purposes and in all proceedings, legal or equitable, shall be regarded, at
Lender’s option (to the extent permitted by law), as part of the Property
whether or not any such item is physically attached to the Property or serial
numbers are used for the better identification of certain items.  The mention in
any such financing statement of any of the Property shall never be construed in
any way as derogating from or impairing this declaration.  Such mention in the
financing statement is hereby declared to be for the protection of Lender in the
event any court shall at any time hold that notice of the priority of this
Security Instrument, to be effective against any third party, including the
Federal government or any authority or agency thereof, must be filed in the
Uniform Commercial Code records.  Pursuant to the provisions of the Uniform
Commercial Code, Borrower hereby authorizes Trustee and Lender, without the
signature of Borrower, to execute and file financing and continuation statements
if Lender shall determine, in its sole and absolute discretion, that such
financing or continuation statements are necessary or advisable in order to
preserve or perfect its security interest in the fixtures encumbered by this
Security Instrument, and Borrower shall pay to Lender, on demand, any expenses
incurred by Trustee and Lender in connection with the preparation, execution and
filing of such statements that may be filed by Trustee or Lender.

Section 17.6         Discontinuance of Proceedings.  If Lender shall have
proceeded to invoke any right, remedy or recourse permitted under the Loan
Documents and shall thereafter elect to discontinue or abandon it for any
reason, Lender shall have the unqualified right to do so and, in such an event,
Borrower and Lender shall be restored to their former positions with respect to
the Indebtedness, the Obligations, the Loan Documents, the Property and
otherwise, and the rights, remedies, recourses and powers of Lender shall
continue as if the right, remedy or recourse had never been invoked, but no such
discontinuance or abandonment shall waive any Event of Default which may then
exist or the right of Lender thereafter to exercise any right, remedy or
recourse under the Loan Documents for such Event of Default.

Section 17.7         Application of Proceeds.  The proceeds of any sale of, and
the rents and other amounts generated by the holding, leasing, management,
operation or other use of the Property, shall be applied by Lender or Trustee
(or the receiver, if one is appointed) in the following order unless otherwise
required by applicable law:

(a)           to the payment of the costs and expenses of taking possession of
the Property and of holding, using, leasing, repairing, improving and selling
the same, including, without limitation  trustee's and receiver's fees and
expenses, court costs,  attorneys' and accountants' fees and expenses, costs of
advertisement, and  the payment of all ground rent, real estate taxes and
assessments, except any taxes, assessments, or other charges subject to which
the Property shall have been sold;

(b)           to the payment of all amounts (including interest), other than the
unpaid principal balance of the Note and accrued but unpaid interest, which may
be due to Lender under the Loan Documents;

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(c)           to the payment of the Indebtedness and performance of the
Obligations in such manner and order of preference as Lender in its sole
discretion may determine; and

(d)           the balance, if any, to the payment of the persons legally
entitled thereto.

Section 17.8         Occupancy After Foreclosure.  The purchaser at any
foreclosure sale shall pursuant to the terms hereof become the legal owner of
the Property.  All occupants of the Property shall, at the option of such
purchaser, become tenants of the purchaser at the foreclosure sale and shall
deliver possession thereof immediately to the purchaser upon demand.  It shall
not be necessary for the purchaser at said sale to bring any action for
possession of the Property other than the statutory action of forcible detainer
in any justice court having jurisdiction over the Property.

Section 17.9         Additional Advances and Disbursements; Costs of
Enforcement.  If any Event of Default exists, Lender shall have the right, but
not the obligation, to cure such Event of Default in the name and on behalf of
Borrower.  All sums advanced and expenses incurred at any time by Lender under
this Section, or otherwise under this Security Instrument or any of the other
Loan Documents or applicable law, shall bear interest from the date that such
sum is advanced or expense incurred, to and including the date of reimbursement,
computed at the Default Rate (as defined in the Loan Agreement), and all such
sums, together with interest thereon, shall be secured by this Security
Instrument.

Section 17.10       No Mortgagee in Possession.  Neither the enforcement of any
of the remedies under this Security Instrument nor any other remedies afforded
to Lender under the Loan Documents, at law or in equity shall cause Lender or
Trustee to be deemed or construed to be a mortgagee in possession of the
Property, to obligate Lender or Trustee to lease the Property or attempt to do
so, or to take any action, incur any expense, or perform or discharge any
obligation, duty or liability whatsoever under any of the Leases or otherwise.

[NO FURTHER TEXT ON THIS PAGE]

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IN WITNESS WHEREOF, Behringer Harvard 1325 G Street, LLC, has caused these
presents to be executed by Gerald J. Reihsen, III and Gary S. Bresky, the
Secretary and Chief Financial Officer, and does hereby constitute
                            and                         as its true and lawful
attorneys-in-fact to acknowledge these presents as the act and deed of Behringer
Harvard 1325 G Street, LLC, effective as of the date first hereinabove written.

 

 

In the presence of:

BEHRINGER HARVARD 1325 G STREET,

 

LLC, a Delaware limited liability company

 

 

 

 

 

 

 

 

By:

 

  [SEAL]

 

 

Name: Gerald J. Reihsen, III

 

 

Title: Secretary

 

 

 

 

 

 

By:

 

  [SEAL]

 

 

Name: Gary S. Bresky

 

 

Title: Chief Financial Officer

 

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

 

ACKNOWLEDGMENTS

STATE OF

)

 

ss:

COUNTY OF

)

 

I,                         , a notary public in and for
                                       , do hereby certify that Gerald J.
Reihsen, III and Gary S. Bresky, of Behringer Harvard 1325 G Street, LLC, a
Delaware limited liability company, are named as attorneys-in-fact for such
company, the trustor in the foregoing and attached Security Instrument bearing
the date of                           , 2006, personally appeared before me in
                                                and, being personally well known
to me as the persons named as attorneys-in-fact in said Security Instrument,
acknowledged that the foregoing instrument is the act and deed of such company,
and that they delivered the same as managers of such company.

Given under my hand and seal this              day of                        ,
2006.

 

 

 

 

Notary Public

 

My Commission Expires:

 

(Notarial Seal)

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SIGNATURE PAGE TO AMENDED AND RESTATED DEED OF TRUST AND SECURITY AGREEMENT

 

 

LENDER:

 

BEAR STEARNS COMMERCIAL
MORTGAGE, INC., a New York corporation

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

Managing Director

 

3

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ACKNOWLEDGEMENTS

STATE OF NEW YORK

)

 

:   SS.:

COUNTY OF NEW YORK

)

 

 

On the               day of October, 2006, before me, the undersigned, a Notary
Public in and for said State, personally appeared
                                                                                             ,
known to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is/are subscribed to the within instrument and acknowledged that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

 

 

 

 

Notary Public

 

4

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EXHIBIT A
Legal description

All that certain piece or parcel of land, together with the improvements thereon
and appurtenances thereunto belonging, lying, situate and being in the District
of Columbia, being described as follows:

Lot Numbered Seventy-Nine (79) in Square Numbered Two Hundred Fifty-Two (252),
being a subdivision made by 1325 G Street Associates, a Limited Partnership, as
per plat thereof recorded in Liber 151 at Folio 16 in the Office of the Surveyor
for the District of Columbia.

EXH. A-1

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