EXHIBIT 10.7

Recording Requested by

and when recorded return to:

Goodwin Procter LLP

601 South Figueroa Street, 41st Floor

Los Angeles, California 90017

Attention: Dean C. Pappas, Esq.

 

 

DEED OF TRUST

and

ABSOLUTE ASSIGNMENT OF RENTS

AND LEASES

and

SECURITY AGREEMENT

(AND FIXTURE FILING)

This DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (AND FIXTURE FILING) (“Deed of Trust”), dated as of December 19, 2008
is executed by FPA GOVERNOR PARK ASSOCIATES, LLC, a Delaware limited liability
company (“Trustor”), with a mailing address at c/o Fowler Property Acquisitions,
100 Bush Street, Suite 510, San Francisco, California, to Chicago Title Company,
a California corporation (“Trustee”), with a mailing address at 388 Market
Street, Suite 1300, San Francisco, CA 94111, Attn: Susan Trowbridge, for the
benefit of MIREF GOVERNOR FINANCE, LLC (“Beneficiary”), with a mailing address
at c/o McMorgan Institutional Real Estate Fund I, LLC, 425 Market Street, Suite
1600, San Francisco, California 94105.

R E C I T A L S

 

A. Trustor proposes to borrow from Beneficiary, and Beneficiary proposes to lend
to Trustor the maximum principal amount of ELEVEN MILLION FOUR HUNDRED FORTY AND
NO/100THS DOLLARS ($11,440,000) (“Loan”). The Loan is evidenced by a promissory
note (“Note”) executed by Trustor, dated the date of this Deed of Trust, payable
to the order of Beneficiary in the maximum principal amount of the Loan. The
maturity date of the Loan is December 19, 2010, subject to the extension options
set forth in the Note. Capitalized terms not otherwise defined herein shall have
the meanings given to them in the Note.

 

B. The loan documents include this Deed of Trust, the Note and the other
documents described in the Note as Loan Documents (“Loan Documents”).

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ARTICLE 1. DEED OF TRUST

 

1.1. GRANT. For the purposes of and upon the terms and conditions of this Deed
of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in trust,
for the benefit of Beneficiary, with power of sale and right of entry and
possession, all estate, right, title and interest which Trustor now has or may
hereafter acquire in, to, under or derived from any or all of the following:

 

  a. That certain real property commonly known as Two Governor Park, located at
6310 Greenwich Drive, San Diego, County of San Diego, State of California, and
more particularly described on Exhibit A-1 attached hereto (the “Two Governor
Property”) and that certain real property commonly known as Five Governor Park,
located at 5060 Shoreham Place, San Diego, County of San Diego, State of
California, and more particularly described on Exhibit A-2 attached hereto (the
“Five Governor Property”, together with the Two Governor Property, the “Land”);

 

  b. All appurtenances, easements, rights of way, water and water rights, pumps,
pipes, flumes and ditches and ditch rights, water stock, ditch and/or reservoir
stock or interests, royalties, development rights and credits, air rights,
minerals, oil rights, and gas rights, now or later used or useful in connection
with, appurtenant to or related to the Land;

 

  c. All buildings, structures, facilities, other improvements and fixtures now
or hereafter located on the Land, including, without limitation, the buildings
commonly known as Two Governor Park and Five Governor Park as well as any other
buildings or structures located on the Land (collectively, the “Improvements”);

 

  d. All apparatus, equipment, machinery and appliances and all accessions
thereto and renewals and replacements thereof and substitutions therefor used in
the operation or occupancy of the Land, it being intended by the parties that
all such items shall be conclusively considered to be a part of the Land,
whether or not attached or affixed to the Land and all on-site parking;

 

  e. All land lying in the right-of-way of any street, road, avenue, alley or
right-of-way opened, proposed or vacated, and all sidewalks, strips and gores of
land adjacent to or used in connection with the Land;

 

  f. All additions and accretions to the property described above;

 

  g. All licenses, authorizations, certificates, variances, consents, approvals
and other permits now or hereafter pertaining to the Land and all estate, right,
title and interest of Trustor in, to, under or derived from all tradenames or
business names relating to the Land or the present or future development,
construction, operation or use of the Land, plan, specifications and drawings,
rights of landlord under any leases or occupancy agreements, all property
records (excluding historical accounting records), substantive correspondence
and other documents related to any right occupy any of the Improvements; and

 

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  h. All proceeds of any of the foregoing.

All of the property described above is hereinafter collectively defined as the
“Property”. The listing of specific rights or property shall not be interpreted
as a limitation of general terms.

ARTICLE 2. OBLIGATIONS SECURED

 

2.1. OBLIGATIONS SECURED. Trustor makes the foregoing grant and assignment for
the purpose of securing the following obligations (“Secured Obligations”):

 

  a. Full and punctual payment to Beneficiary of all sums at any time owing
under the Note;

 

  b. Payment and performance of all covenants and obligations of Trustor under
this Deed of Trust including, without limitation, indemnification obligations
and advances made to protect the Property;

 

  c. Payment and performance of all additional covenants and obligations of
Trustor under the Loan Documents;

 

  d. Payment and performance of all covenants and obligations, if any, which any
rider attached as an exhibit to this Deed of Trust recites are secured hereby;

 

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

 

  f. All interest and charges on all obligations secured hereby including,
without limitation, prepayment charges, late charges and loan fees;

 

  g. All modifications, extensions and renewals of any of the obligations
secured hereby, however evidenced, including, without limitation:
(i) modifications of the required principal payment dates or interest payment
dates or both, as the case may be, deferring or accelerating payment dates
wholly or partly; and (ii) modifications, extensions or renewals at a different
rate of interest whether or not any such modification, extension or renewal is
evidenced by a new or additional promissory note or notes; and

 

  h. Payment and performance of any other obligations which are defined as
“Secured Obligations” in the Note.

 

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

 

2.3. INCORPORATION. All terms and conditions of the documents which evidence any
of the Secured Obligations are incorporated herein by this reference. All
persons who may have or acquire an interest in the Property shall be deemed to
have notice of the terms of the Secured Obligations and to have notice that the
rate of interest on one or more Secured Obligation may vary from time to time.

ARTICLE 3. ABSOLUTE ASSIGNMENT OF RENTS AND LEASES

 

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

 

3.2. GRANT OF LICENSE. Beneficiary confers upon Trustor a revocable license
(“License”) to collect and retain the Payments as they become due and payable,
until the occurrence of a Default (as hereinafter defined). Upon the occurrence
of a Default, the License shall be automatically revoked and Beneficiary may
collect and apply the Payments pursuant to the terms hereof without notice and
without taking possession of the Property. All Payments thereafter collected by
Trustor shall be held by Trustor as trustee under a constructive trust for the
benefit of Beneficiary. Trustor hereby irrevocably authorizes and directs the
tenants under the Leases to rely upon and comply with any notice or demand by
Beneficiary for the payment to Beneficiary of any rental or other sums which may
at any time become due under the Leases, or for the performance of any of the
tenants’ undertakings under the Leases, and the tenants shall have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing. Trustor hereby relieves the tenants from any liability to Trustor by
reason of relying upon and complying with any such notice or demand by
Beneficiary. Beneficiary may apply, in its sole discretion, any Payments so
collected by Beneficiary against any Secured Obligation or any other obligation
of Trustor or any other person or entity, under any document or instrument
related to or executed in connection with the Loan Documents, whether existing
on the date hereof or hereafter arising. Collection of any Payments by
Beneficiary shall not cure or waive any Default or notice of Default or
invalidate any acts done pursuant to such notice.

 

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3.3. EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause
Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for
the control, care, management or repair of the Property or for performing any of
the terms, agreements, undertakings, obligations, representations, warranties,
covenants and conditions of the Leases; (c) responsible or liable for any waste
committed on the Property by the tenants under any of the Leases or by any other
parties; 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, invitee
or other person; or (d) responsible for or impose upon Beneficiary any duty to
produce rents or profits. Beneficiary shall not directly or indirectly be liable
to Trustor or any other person as a consequence of: (e) the exercise or failure
to exercise any of the rights, remedies or powers granted to Beneficiary
hereunder; or (f) the failure or refusal of Beneficiary to perform or discharge
any obligation, duty or liability of Trustor arising under the Leases.

 

3.4. COVENANTS-SHORT TERM LEASES. Trustor shall at Trustor’s sole cost and
expense:

 

  a. perform the obligations of landlord contained in the Leases and use
reasonable efforts to enforce performance by the tenants of the obligations of
the tenants contained in the Leases;

 

  b. use commercially reasonable efforts to keep the Property leased at all
times to tenants which Trustor reasonably and in good faith believes are
creditworthy at rents not less than the fair market rental value (including, but
not limited to, free or discounted rents to the extent the market so requires);

 

  c. Give Beneficiary prompt written notice of any default which occurs with
respect to any of the Leases, whether the default be that of the lessee or of
the lessor, which would allow either party to terminate the Lease or would allow
the lessee to offset any amount against its payment of rent; and

 

  d. promptly upon Beneficiary’s request, execute and record any additional
assignments to Beneficiary of landlord’s interest in any Lease or specific
subordinations (or subordination, attornment and non-disturbance agreements
executed by the lessor and lessee) of any Lease in form and substance
satisfactory to Beneficiary.

Unless consented to in writing by Beneficiary or otherwise permitted by any
provision of the Loan Documents, Trustor shall not:

 

  e. enter into any Leases after the date hereof;

 

  f. terminate, modify or amend any of the terms of the Leases or in any manner
release or discharge the lessees from any obligations thereunder;

 

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  g. Subordinate or agree to subordinate any of the Leases to any other security
deed or encumbrance;

 

  h. grant any tenant under any Lease any option, right of first refusal or
other right to purchase all or any portion of the Property under any
circumstances; or

 

  i. execute any other assignment of landlord’s interest in any of the Leases.

Any such attempted action in violation of the provisions of this Section shall
be null and void.

 

3.5. RIGHT OF SUBORDINATION. To the extent permitted by applicable law,
Beneficiary may at any time and from time to time by specific written instrument
intended for the purpose unilaterally subordinate the lien of this Deed of Trust
to any Lease, without joinder or consent of, or notice to, Trustor, any tenant
or any other person. Notice is hereby given to each tenant under a Lease of such
right to subordinate. No subordination referred to in this Section shall
constitute a subordination to any lien or other encumbrance, whenever arising,
or improve the right of any junior lienholder. Nothing herein shall be construed
as subordinating this Deed of Trust to any Lease.

ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

 

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

All goods, building and other materials, supplies, work in process, equipment,
machinery, fixtures, furniture, furnishings, signs and other personal property,
wherever situated, which are or are to be incorporated into, used in connection
with or appropriated for use on the Property; all rents, issues, deposits and
profits of the Property (to the extent, if any, they are not subject to the
Absolute Assignment of Rents and Leases); all inventory, accounts, cash
receipts, deposit accounts, impounds, accounts receivable, contract rights,
general intangibles, software, chattel paper, instruments, documents, promissory
notes, drafts, letters of credit, letter of credit rights, supporting
obligations, insurance policies, insurance and condemnation awards and proceeds,
any other rights to the payment of money, trade names, trademarks and service
marks arising from or related to the Property or any business now or hereafter
conducted thereon by Trustor; all permits, consents, approvals, licenses,
authorizations and other rights granted by, given by or obtained from, any
governmental entity with respect to the Property; all deposits or other security
now or hereafter made with or given to utility companies by Trustor with respect
to the Property; all advance payments of insurance premiums made by Trustor with
respect to the Property; all plans, drawings and specifications relating to the
Property; all loan funds held by Beneficiary, whether or not disbursed; all
funds deposited with Beneficiary pursuant to any Loan Document, all reserves,
impounds, deferred payments, deposits, accounts, refunds, cost savings and
payments of any

 

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kind related to the Property or any portion thereof; together with all
replacements and proceeds of, and additions and accessions to, any of the
foregoing, and all books, records and files relating to any of the foregoing.

As to all of the above-described personal property which is or which hereafter
becomes a “fixture” under applicable law, this Deed of Trust constitutes a
fixture filing under the California Uniform Commercial Code, as amended or
recodified from time to time (“UCC”).

 

4.2. COVENANTS. Trustor agrees: (a) to execute and deliver such documents as
Beneficiary deems necessary to create, perfect and continue the security
interests contemplated hereby; (b) not to change its name, and, as applicable,
its chief executive offices, its principal residence or the jurisdiction in
which it is organized without giving Beneficiary at least 30 days’ prior written
notice thereof; and (c) to cooperate with Beneficiary in perfecting all security
interests granted herein and in obtaining such agreements from third parties as
Beneficiary deems necessary, proper or convenient in connection with the
preservation, perfection or enforcement of any of Beneficiary’s rights
hereunder.

 

4.3. RIGHTS OF BENEFICIARY. In addition to Beneficiary’s rights as a “Secured
Party” under the UCC, Beneficiary may, but shall not be obligated to, at any
time without notice and at the expense of Trustor: (a) give notice to any person
of Beneficiary’s rights hereunder and enforce such rights at law or in equity;
(b) insure, protect, defend and preserve the Collateral or any rights or
interests of Beneficiary therein; and (c) subject to the rights of tenants under
any Leases, inspect the Collateral. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary
shall make an express written election of said remedy under the UCC or other
applicable law.

 

4.4. RIGHTS OF BENEFICIARY UPON DEFAULT. Upon the occurrence of a Default, then
in addition to all of Beneficiary’s rights as a “Secured Party” under the UCC or
otherwise at law:

 

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

 

  b.

Other Rights. Beneficiary may, for the account of Trustor and at Trustor’s
expense: (i) operate, use, consume, sell, lease, license or otherwise dispose of
the Collateral as Beneficiary deems appropriate for the purpose of performing
any or all of the Secured Obligations; (ii) enter into any agreement, compromise
or settlement including insurance claims,

 

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which Beneficiary may deem desirable or proper with respect to any of the
Collateral; and (iii) endorse and deliver evidences of title for, and receive,
enforce and collect by legal action or otherwise, all indebtedness and
obligations now or hereafter owing to Trustor in connection with or on account
of any or all of the Collateral.

Trustor acknowledges and agrees that a disposition of the Collateral in
accordance with Beneficiary’s rights and remedies as heretofore provided is a
disposition thereof in a commercially reasonable manner and that 5 days’ prior
notice of such disposition is commercially reasonable notice. Beneficiary shall
have no obligation to process or prepare the Collateral for sale or other
disposition. In disposing of the Collateral, Beneficiary may disclaim all
warranties of title, possession, quiet enjoyment and the like. Any proceeds of
any sale or other disposition of the Collateral may be applied by Beneficiary
first to the reasonable expenses incurred by Beneficiary in connection
therewith, including, without limitations, reasonable attorneys’ fees and
disbursements, and then to the payment of the Secured Obligations, in such order
of application as Beneficiary may from time to time elect.

 

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

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

 

5.1. REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
Beneficiary that, to Trustor’s current actual knowledge after reasonable
investigation and inquiry, the following statements are true and correct as of
the date hereof:

 

  a. Legal Status. Trustor is duly organized and existing and in good standing
under the laws of the state(s) in which Trustor is organized. Trustor is
qualified or licensed to do business in all jurisdictions in which such
qualification or licensing is required.

 

  b. Permits. Trustor possess all permits, franchises and licenses and all
rights to all trademarks, trade names, patents and fictitious names, if any,
necessary to enable Trustor to conduct the business(es) in which Trustor is now
engaged in compliance with applicable law.

 

  c.

Authorization and Validity. The execution and delivery of the Loan Documents
have been duly authorized and the Loan Documents constitute valid and binding
obligations of Trustor or the party which executed the same, enforceable

 

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in accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors’ rights, or by the application of rules of equity.

 

  d. Violations. The execution, delivery and performance by Trustor of each of
the Loan Documents does not violate any provision of any law or regulation, or
result in any breach or default under any contract, obligation, indenture or
other instrument to which Trustor is a party or by which Trustor is bound.

 

  e. Litigation. There are no pending or threatened actions, claims,
investigations, suits or proceedings before any governmental authority, court or
administrative agency which may adversely affect the financial condition or
operations of Trustor other than those previously disclosed in writing by
Trustor to Beneficiary.

 

  f. Financial Statements. The financial statements of Trustor, of each general
partner (if Trustor is a partnership), of the managing member (if Trustor is a
limited liability company) and of Limited Guarantor previously delivered by
Trustor to Beneficiary: (i) are true, complete and correct; (ii) present fairly
the financial condition of such party; and (iii) have been prepared in
accordance with the same accounting standard used by Trustor to prepare the
financial statements delivered to and approved by Beneficiary in connection with
the making of the Loan, or other accounting standards approved by Beneficiary.
Since the date of such financial statements, there has been no material adverse
change in the financial condition of Trustor or Limited Guarantor.

 

  g. Reports. All reports, documents, instruments and information delivered to
Beneficiary in connection with the Loan: (i) are correct and sufficiently
complete to give Beneficiary accurate knowledge of their subject matter; and
(ii) do not contain any misrepresentation of a material fact or omission of a
material fact which omission makes the provided information misleading.

 

  h. Income Taxes. There are no pending assessments or adjustments of Trustor’s
income tax payable with respect to any year.

 

  i. Subordination. There is no agreement or instrument to which Trustor is a
party or by which Trustor is bound that would require the subordination in right
of payment of any of Trustor’s obligations under the Note to an obligation owed
to another party.

 

  j. Title. Trustor lawfully holds and possesses fee simple title to the
Property, without limitation on the right to encumber same. This Deed of Trust
is a first lien on the Property prior and superior to all other liens and
encumbrances on the Property except: (i) liens for real estate taxes and
assessments not yet due and payable; (ii) senior exceptions previously approved
by Beneficiary and shown in the title insurance policy insuring the lien of this
Deed of Trust; and (iii) other matters, if any, approved by Beneficiary in a
writing (collectively, the “Permitted Exceptions”).

 

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  k. Collateral. Trustor has good title to the existing Collateral, free and
clear of all liens and encumbrances except those, if any, previously approved by
Beneficiary in writing. Trustor’s chief executive office (or principal
residence, if applicable) is located at the address shown on page one of this
Deed of Trust. Trustor is an organization organized solely under the laws of the
State of Delaware. All organizational documents of Trustor delivered to
Beneficiary are complete and accurate in every respect. Trustor’s legal name is
exactly as shown on page one of this Deed of Trust.

 

  l. Homestead. There is no homestead or other exemption available to Trustor
which would materially interfere with the right to sell the Property at a
trustee’s sale or the right to foreclose this Deed of Trust.

 

  m. Solvency. None of the transactions contemplated by the Loan will be or have
been made with an actual intent to hinder, delay or defraud any present or
future creditors of Trustor, and Trustor, on the Effective Date (as defined in
the Note), will have received fair and reasonably equivalent value in good faith
for the grant of the liens or security interests effected by the Loan Documents.
On the Effective Date, Trustor will be solvent and will not be rendered
insolvent by the transactions contemplated by the Loan Documents. Trustor is
able to pay its debts as they become due.

 

  n. Mechanics’ Liens. There are no mechanics’ or similar liens or claims which
have been filed for work, labor or material (and no rights are outstanding that
under law could give rise to any such liens) affecting the Property which are or
may be prior to or equal to the lien of this Deed of Trust.

 

  o. Encroachments. Except as shown in the survey, if any, previously delivered
to Beneficiary, none of the buildings or other improvements which were included
for the purpose of determining the appraised value of the Property lies outside
of the boundaries or building restriction lines of the Property and no buildings
or other improvements located on adjoining properties encroach upon the
Property.

 

  p. Leases. Except as disclosed in any rent roll provided to Beneficiary or
otherwise disclosed to Beneficiary in writing (i) all existing Leases are in
full force and effect and are enforceable in accordance with their respective
terms, (ii) no material breach or default by any party, or event which would
constitute a material breach or default by any party after notice or the passage
of time, or both, exists under any existing Lease and (iii) none of the
landlord’s interests under any of the Leases, including, but not limited to,
rents, additional rents, charges, issues or profits, has been transferred or
assigned.

 

  q. Condition of Property. Except as shown in the property condition survey or
other engineering reports, if any, previously delivered to or obtained by
Beneficiary, the Property is in good condition and repair and is free from any
damage that would materially and adversely affect the value of the Property as
security for the Loan or the intended use of the Property.

 

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  r. Hazardous Materials. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by Beneficiary, and
except for de minimus amounts of Hazardous Materials (defined herein) used in
connection with the normal operations and maintenance of the Property and used,
stored and disposed of in accordance with all Hazardous Materials Laws (defined
herein), the Property is not and has not been a site for the use, generation,
manufacture, storage, treatment, release, threatened release, discharge,
disposal, transportation or presence of Hazardous Materials (as hereinafter
defined) except as otherwise previously disclosed in writing by Trustor to
Beneficiary.

 

  s. Hazardous Materials Laws. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by Beneficiary, the
Property complies with all Hazardous Materials Laws (as hereinafter defined).

 

  t. Hazardous Materials Claims. Except as shown in the environmental assessment
report(s), if any, previously delivered to or obtained by Beneficiary, are no
pending or threatened Hazardous Materials Claims (as hereinafter defined).

 

  u. Compliance With Laws. Except as shown on the Property condition report or
any other engineering reports delivered to or obtained by Beneficiary, all
federal, state and local laws, rules and regulations applicable to the Property,
including, without limitation, all zoning and building requirements and all
requirements of the Americans With Disabilities Act of 1990, as amended from
time to time (42 U. S. C. Section 12101 et seq.) have been satisfied or complied
with. Trustor is in possession of all certificates of occupancy and all other
licenses, permits and other authorizations required by applicable law for the
existing use of the Property. All such certificates of occupancy and other
licenses, permits and authorizations are valid and in full force and effect.

 

  v. Property Taxes and Other Liabilities. Except for those items being
contested in good faith and in accordance with applicable laws and Section 8.4
hereof) all taxes, governmental assessments, insurance premiums, water, sewer
and municipal charges, and ground rents, if any, which previously became due and
owing in respect of the Property have been paid.

 

5.2. Beneficiary’s Knowledge. Beneficiary (or an affiliate thereof) had an
interest in the Property prior to the Effective Date. In recognition thereof, to
the extent that Beneficiary had actual knowledge as of the Effective Date that
any of the representations set forth in Section 5.1.n through 5.1.v is not true
and correct as of the Effective Date, then such representation shall be deemed
modified by such actual knowledge of Beneficiary. For purposes of the foregoing,
the “actual knowledge” of Beneficiary shall be deemed to be the actual, current
knowledge of Thomas P. O’Hanlon as of the Effective Date, without the duty of
investigation.

 

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5.3. REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING STATUS.

Trustor hereby represents, warrants and covenants to Beneficiary as follows:

 

  a. such entity was organized solely for the purpose of owning and operating
the Property;

 

  b. such entity has not and will not engage in any business unrelated to the
ownership and operation of the Property;

 

  c. such entity has not and will not have any assets other than the Property
(and personal property incidental to the ownership and operation of the
Property);

 

  d. such entity has not and will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger, asset sale, or
amendment of its articles of incorporation, articles of organization,
certificate of formation, operating agreement or partnership agreement, as
applicable;

 

  e. such entity, without the unanimous consent of all of its directors
(including all Independent Directors (as defined herein), general partners or
members, as applicable, shall not file or consent to the filing of any
bankruptcy or insolvency petition or otherwise institute insolvency proceedings;

 

  f. such entity has no indebtedness (and will have no indebtedness) other than
(i) the Loan; and (ii) unsecured trade debt, which is not evidenced by a note
and is incurred in the ordinary course of its business in connection with
owning, operating and maintaining the Property and is paid within sixty
(60) days from the date incurred;

 

  g. such entity does not have and will not fail to correct any known
misunderstanding regarding the separate identity of such entity;

 

  h. such entity has maintained and will maintain its accounts, books and
records separate from any other person or entity;

 

  i. such entity has maintained and will maintain its books, records,
resolutions and agreements as official records;

 

  j. such entity (i) has not and will not commingle its funds or assets with
those of any other entity; and (ii) has held and will hold its assets in its own
name;

 

  k. such entity has conducted and will conduct its business in its own name;

 

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  l. such entity has maintained and will maintain its accounting records and
other entity documents separate from any other person or entity;

 

  m. such entity has prepared and will prepare separate tax returns and
financial statements, or if part of a consolidated group, is shown as a separate
member of such group;

 

  n. such entity has paid and will pay its own liabilities and expenses out of
its own funds and assets;

 

  o. such entity has held and will hold regular meetings, as appropriate, to
conducts its business and has observed and will observe all corporate,
partnership or limited liability company formalities and record keeping, as
applicable;

 

  p. such entity has not and will not assume or guarantee or become obligated
for the debts of any other entity or hold out its credit as being available to
satisfy the obligations of any other entity;

 

  q. such entity has not and will not acquire obligations or securities of its
shareholders, partners or members, as applicable;

 

  r. such entity has allocated and will allocate fairly and reasonably the costs
associated with common employees and any overhead for shared office space and
such entity has used and will use separate stationery, invoices and checks;

 

  s. such entity has not and will not pledge its assets for the benefit of any
other person or entity;

 

  t. such entity has held and identified itself and will hold itself out and
identify itself as a separate and distinct entity under its own name and not as
a division or part of any other person or entity;

 

  u. such entity has not made and will not make loans to any person or entity;

 

  v. such entity has not and will not identify its shareholders, partners or
members, as applicable, or any affiliates of any of the foregoing, as a division
or part of it;

 

  w. such entity has not entered into and will not enter into or be a party to,
any transaction with its shareholders, partners or members, as applicable, or
any affiliates of any of the foregoing, except in the ordinary course of its
business pursuant to written agreements and on terms which are intrinsically
fair and are no less favorable to it than would be obtained in a comparable
arm’s-length transaction with an unrelated third party;

 

  x. if any such entity is a corporation, the directors of such entity shall
consider the interests of the creditors of such entity in connection with all
corporate action;

 

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  y. such entity has paid and will pay the salaries of its own employees and has
maintained and will maintain a sufficient number of employees in light of its
contemplated business operations;

 

  z. such entity has maintained and will maintain adequate capital in light of
its contemplated business operations;

 

  aa. [Intentionally Omitted].

 

  bb. if any such entity is a partnership with more than one general partner,
its partnership agreement requires the remaining partners to continue the
partnership as long as one solvent general partner exists; and

 

  cc. if any such entity is a limited liability company, its operating
agreement, if any such entity is a partnership, its partnership agreement and if
any such entity is a corporation, to the fullest extent permitted by applicable
law, its articles of incorporation, contain the provisions set forth in this
Section 5.2 and such entity shall conduct its business and operations in strict
compliance with the terms contained therein.

ARTICLE 6. RIGHTS AND DUTIES OF THE PARTIES

 

6.1.

MAINTENANCE AND PRESERVATION OF THE PROPERTY. Subject to the rights of tenants
under any Leases, Trustor shall: (a) keep the Property and Collateral in good
condition and repair; (b) complete or restore promptly and in good and
workmanlike manner the Property and Collateral or any part thereof which may be
damaged or destroyed (unless, if and to the extent permitted under Section 6.11,
Beneficiary elects to require that insurance proceeds be used to reduce the
Secured Obligations); (c) comply and cause the Property to comply with (i) all
laws, ordinances, regulations and standards, (ii) all covenants, conditions,
restrictions and equitable servitudes, whether public or private, of every kind
and character and (iii) all requirements of insurance companies and any bureau
or agency which establishes standards of insurability, which laws, covenants or
requirements affect the Property and pertain to acts committed or conditions
existing thereon, including, without limitation, any work of alteration,
improvement or demolition as such laws, covenants or requirements mandate;
(d) operate and manage the Property at all times in a professional manner and do
all other acts which from the character or use of the Property may be reasonably
necessary to maintain and preserve its value; (e) engage a property manager of
the Property and enter into a property management agreement concerning the
Property, each approved by Beneficiary in advance and in writing, including with
respect to all amendments thereto and waivers thereof; and (f) execute and
acknowledge all further documents, instruments and other papers as Beneficiary
or Trustee deems necessary or appropriate to preserve, continue, perfect and
enjoy the benefits of this Deed of Trust and perform Trustor’s obligations,
including, without limitation, statements of the amount secured hereby then
owing and statements of no offset. Subject to the rights of tenants under any
Leases, Trustor shall not: (g) remove or demolish all or any part of the
Property (other than demolition of interior space with respect to tenant
improvements as set forth in the then-current Business Plan approved in writing
by Beneficiary); (h) alter either (i) the exterior

 

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of the Property in a manner which materially and adversely affects the value of
the Property or (ii) the roof or other structural elements of the Property;
(i) initiate or acquiesce in any change in any zoning or other land
classification which affects the Property; (j) materially alter the type of
occupancy or use of all or any part of the Property; or (k) commit or permit
physical waste of the Property.

Additionally, the failure of Trustor to pay any taxes or assessments assessed
against the Property, or any installment thereof, or any premiums payable with
respect to any insurance policy covering the Property, shall constitute waste.
Trustor hereby consents to the appointment of a receiver should Beneficiary
elect to seek such relief.

 

6.2. HAZARDOUS MATERIALS. Without limiting any other provision of this Deed of
Trust, Trustor agrees as follows:

 

  a. Trustor shall not cause or permit the Property to be used as a site for the
use, generation, manufacture, storage, treatment, release, discharge, disposal,
transportation or presence of any oil or other petroleum products, flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
hazardous wastes, toxic or contaminated substances or similar materials,
including, without limitation, any substances which are “hazardous substances,”
“hazardous wastes,” “hazardous materials” or “toxic substances” under the
Hazardous Materials Laws (defined below) and/or other applicable environmental
laws, ordinances or regulations (“Hazardous Materials”).

The foregoing to the contrary notwithstanding, (i) Trustor may store, maintain
and use on the Property janitorial and maintenance supplies, paint and other
Hazardous Materials of a type and in a quantity readily available for purchase
by the general public and normally stored, maintained and used by owners and
managers of properties of a type similar to the Property; and (ii) tenants of
the Property may store, maintain and use on the Property household and consumer
cleaning supplies and other Hazardous Materials of a type and in a quantity
readily available for purchase by the general public and normally stored,
maintained and used by tenants of properties similar to the Property.

 

  b. Trustor shall comply and cause the Property to comply with all federal,
state and local laws, ordinances and regulations relating to Hazardous Materials
(“Hazardous Materials Laws”), including, without limitation: the Clean Air Act,
as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (including the Superfund Amendments and Reauthorization Act of 1986,
“CERCLA”), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act,
as amended, 29 U.S.C. Section 651; the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and
Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state and local
laws, laws of other jurisdictions or orders and regulations.

 

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  c. Trustor shall promptly notify Beneficiary in writing of: (i) the discovery
of any Hazardous Materials on, under or about the Property (other than Hazardous
Materials permitted under Section 6.2(a)); (ii) any knowledge by Trustor that
the Property does not comply with any Hazardous Materials Laws; (iii) any claims
or actions (“Hazardous Materials Claims”) pending or threatened against Trustor
or the Property by any governmental entity or agency or any other person or
entity relating to Hazardous Materials or pursuant to the Hazardous Materials
Laws; and (iv) the discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that could cause the Property or
any part thereof to become contaminated by or with Hazardous Materials.

 

  d. In response to the presence of any Hazardous Materials on, under or about
the Property, Trustor shall immediately take, at Trustor’s sole expense, all
remedial action required by any Hazardous Materials Laws or any judgment,
consent decree, settlement or compromise in respect to any Hazardous Materials
Claims.

 

  e. Upon reasonable prior notice to Trustor and subject to the rights of
tenants under any Leases, Beneficiary, its employees and agents, may from time
to time (whether before or after the commencement of a nonjudicial or judicial
foreclosure proceeding), enter and inspect the Property for the purpose of
determining the existence, location, nature and magnitude of any past or present
release or threatened release of any Hazardous Materials into, onto, beneath or
from the Property. If Beneficiary has reason to believe, in its good faith
discretion, that an audit may disclose the presence or release of Hazardous
Materials, or if an environmental audit deems further testing is necessary,
Beneficiary has the right to obtain, at Beneficiary’s expense, such
environmental audit and/or further testing.

 

  f. Trustor and Beneficiary agree that: (i) this Hazardous Materials Section is
intended as Beneficiary’s written request for information (and Trustor’s
response) concerning the environmental condition of the real property security
as required by California Code of Civil Procedure Section 726.5; and (ii) each
representation and warranty and covenant in this Section (together with any
indemnity applicable to a breach of any such representation and warranty) with
respect to the environmental condition of the Property is intended by
Beneficiary and Trustor to be an “environmental provision” for purposes of
California Code of Civil Procedure Section 736.

 

6.3.

COMPLIANCE WITH LAWS. Trustor shall use commercially reasonable efforts to
comply, or cause its tenants under any Leases to comply, with all federal, state
and local laws, rules and regulations applicable to the Property, including,
without limitation, all zoning and building requirements and all requirements of
the Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.),
as amended from time to time. Trustor shall possess and maintain in full force
and effect at all

 

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times (a) all certificates of occupancy and other licenses, permits and
authorizations required by applicable law for the existing use and operation of
the Property and (b) all permits, franchises and licenses and all rights to all
trademarks, trade names, patents and fictitious names, if any, required by
applicable law for Trustor to conduct the business(es) in which Trustor is now
engaged and necessary or reasonably considered by Beneficiary to be desirable
for the contemplated use, operation and maintenance of the Property unless the
failure to so comply or maintain is not reasonably expected to have a material
adverse effect.

 

6.4. LITIGATION. Trustor shall promptly notify Beneficiary in writing of any
litigation pending or threatened against Trustor or any guarantor claiming
damages in excess of $100,000 and of all pending or threatened litigation
against Trustor or Limited Guarantor if the aggregate damage claims against
Trustor or any guarantor exceed $300,000.

 

6.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Trustor shall not: (a) merge or
consolidate with any other entity; (b) make any substantial change in the nature
of Trustor’s business or structure; (c) acquire all or substantially all of the
assets of any other entity; or (d) sell, lease, assign, transfer or otherwise
dispose of a material part of Trustor’s assets except in the ordinary course of
Trustor’s business.

 

6.6. ACCOUNTING RECORDS. Trustor shall maintain adequate books and records for
the Property and/or Trustor in accordance with the same accounting standard used
by Trustor to prepare the financial statements delivered to and approved by
Beneficiary in connection with the making of the Loan or other accounting
standards approved by Beneficiary. Trustor shall permit any representative of
Beneficiary, at any reasonable time and from time to time upon reasonable prior
notice, to inspect, audit and examine such books and records and make copies of
same.

 

6.7.

COSTS, EXPENSES AND ATTORNEYS’ FEES. Trustor shall pay to Beneficiary from time
to time the full amount of all costs and expenses, including, without
limitation, reasonable attorneys’ fees and expenses of Beneficiary’s in-house or
outside counsel, incurred by Beneficiary in connection with: (a) appraisals and
inspections of the Property or Collateral required by Beneficiary as a result of
(i) a Transfer or proposed Transfer (as defined below), or (ii) a Default;
(b) appraisals and inspections of the Property or Collateral required by
applicable law, including, without limitation, federal or state regulatory
reporting requirements; and (c) any acts performed by Beneficiary at Trustor’s
request or wholly or partially for the benefit of Trustor (including, without
limitation, the preparation or review of amendments, assumptions, waivers,
releases, reconveyances, estoppel certificates or statements of amounts owing
under any Secured Obligation). In connection with appraisals and inspections,
Trustor specifically (but not by way of limitation) acknowledges that: (aa) a
formal written appraisal of the Property by a state certified or licensed
appraiser may be required by Beneficiary’s internal procedures and/or federal
regulatory reporting requirements on not more than an annual or more frequent
basis; and (bb) Beneficiary may require inspection of the Property by an
independent supervising architect, a cost engineering specialist, or both in
association with a Default or in connection with a draw request. Trustor shall
pay all indebtedness arising under this Section within five (5) Business Days of
demand by Beneficiary together with interest thereon following notice of such
indebtedness at the rate of

 

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interest then applicable to the principal balance of the Note as specified
therein. As used herein, “Business Days” shall mean Monday through Friday of
each calendar week, exclusive of federal holidays

 

6.8. LIENS, ENCUMBRANCES AND CHARGES. Subject to Trustor’s right to contest the
same in accordance with Section 8.4 herein, Trustor shall immediately discharge
by bonding or otherwise any lien, charge or other encumbrance which attaches to
the Property in violation of Section 6.15. Subject to Trustor’s right to contest
such matters under this Deed of Trust or as expressly permitted in the Loan
Documents, Trustor shall pay when due all obligations secured by or reducible to
liens and encumbrances which shall now or hereafter encumber or appear to
encumber all or any part of the Property or any interest therein, whether senior
or subordinate hereto, including, without limitation, all claims for work or
labor performed, or materials or supplies furnished, in connection with any work
of demolition, alteration, repair, improvement or construction of or upon the
Property, except such as Trustor may in good faith contest or as to which a bona
fide dispute may arise (provided provision is made to the satisfaction of
Beneficiary for eventual payment thereof in the event that Trustor is obligated
to make such payment and that any recorded claim of lien, charge or other
encumbrance against the Property is immediately discharged by bonding or
otherwise).

 

6.9. TAXES AND OTHER LIABILITIES. Subject to Trustor’s right to contest the same
in accordance with Section 8.4 herein, Trustor shall pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real and
personal and including federal and state income taxes and state and local
property taxes and assessments. Trustor shall promptly provide to Beneficiary
copies of all tax and assessment notices pertaining to the Property.

 

6.10.

INSURANCE COVERAGE. Trustor shall obtain, and so long as any of the Secured
Obligations remain outstanding maintain, the following insurance coverage:
(a) “All Risk” or “Special Form” property insurance, including coverages for
real and personal property, earthquake, acts of terrorism, boiler and machinery,
wind storm, extra expense and rent loss or business interruption (covering at
least twelve (12) months), insuring 100% of the insurable replacement value of
the Property and Collateral, with no coinsurance or similar penalty;
(b) Commercial General Liability insurance (including contractual liability) in
an amount not less than $1,000,000 per occurrence and $5,000,000 in the
aggregate, with a “Per Location” aggregate endorsement if multiple properties
are insured under the same policy; and (c) umbrella or excess liability
insurance in the amount of at least $20,000,000. All insurance required
hereunder must have deductibles in an amount of $10,000 or less (other than
those applicable to earthquake and terrorism insurance, which must be
satisfactory to Beneficiary in Beneficiary’s sole, good faith discretion).
Beneficiary may from time to time also require that Trustor maintain insurance
for flood, builder’s risk, commercial auto, workers compensation, environmental
and such other insurance as Beneficiary may require. Each insurance company
providing coverage must have an A. M. Best rating of no less than A-IX. Trustor
shall from time to time, at Beneficiary’s request, promptly deliver to
Beneficiary the following evidence of insurance: (i) an insurance binder or
other

 

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evidence of property insurance provided by an authorized insurance agent or
broker; and (ii) a certificate of insurance, provided by an authorized insurance
agent, confirming coverages are maintained for liability insurance as required
to be carried by the Trustor, each of which: (A) with respect to the property
insurance, must include a mortgagee clause and a loss payee clause satisfactory
to Beneficiary, and with respect to the Certificate of Liability Insurance, must
name Beneficiary as an Additional Insured and (B) must otherwise be satisfactory
to Beneficiary.

 

6.11. CONDEMNATION AND INSURANCE PROCEEDS.

 

  a. Assignment of Claims. Trustor absolutely and irrevocably assigns to
Beneficiary all of the following rights, claims and amounts (collectively,
“Claims”), all of which shall be paid to Beneficiary: (i) all awards of damages
and all other compensation payable directly or indirectly by reason of a
condemnation or proposed condemnation for public or private use affecting all or
any part of, or any interest in, the Property or Collateral; (ii) all other
claims and awards for damages to or decrease in value of all or any part of, or
any interest in, the Property or Collateral; (iii) all proceeds of any insurance
policies payable by reason of loss sustained to all or any part of the Property
or Collateral; and (iv) all interest which may accrue on any of the foregoing.
Trustor shall give Beneficiary prompt written notice of the occurrence of any
casualty affecting, or the institution of any proceedings for eminent domain or
for the condemnation of, the Property or any portion thereof. Beneficiary may
commence, appear in, defend or prosecute any Claim, and may adjust, compromise
and settle all Claims, but shall not be responsible for any failure to commence,
appear in, defend, prosecute or collect any such Claim regardless of the cause
of the failure. All awards, proceeds and other sums described herein shall be
payable to Beneficiary.

 

  b. Application of Proceeds; No Default. So long as no Default has occurred and
is continuing at the time of Beneficiary’s receipt of the proceeds of the Claims
(“Proceeds”) and no Default occurs thereafter, the following provisions shall
apply:

 

  (i) Condemnation. If the Proceeds are the result of Claims described in
clauses 6.11.a (i) or (ii) above, or interest accrued thereon, Beneficiary shall
apply the Proceeds in the following order of priority: First, to Beneficiary’s
expenses in settling, prosecuting or defending the Claims; and Second, to the
Secured Obligations (including to payment of the Exit Fee (as defined in and
calculated in accordance with the Note) payable in respect of such Proceeds in
any order without suspending, extending or reducing any obligation of Trustor to
make installment payments, provided, however, Beneficiary may, in its sole and
absolute discretion, elect to disburse such Proceeds to Trustor to be applied to
the repair or restoration of the Property.

 

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  (ii) Insurance. If the Proceeds are the result of Claims described in clause
6.11.a (iii) above or interest accrued thereon, Beneficiary shall apply the
Proceeds in the following order of priority: (A) if the amount of the Proceeds
is less than $250,000, First, to Beneficiary’s expenses in settling, prosecuting
or defending the Claims; and Second, to the Trustor to be applied to the repair
or restoration of the Property; (B) if the amount of the Proceeds is between
$250,000 and $1,000,000, First, to Beneficiary’s expenses in settling,
prosecuting or defending the Claims; and Second, to the Trustor to be applied to
the repair or restoration of the Property subject to the satisfaction of the
conditions set forth in Section 6.11.b (iii); and (C) if the amount of the
Proceeds is greater than $1,000,000, First, to Beneficiary’s expenses in
settling, prosecuting or defending the Claims; and Second, to the Secured
Obligations (including to payment of the Exit Fee [as defined in and calculated
in accordance with the Note] payable in respect of such Proceeds) in any order
without suspending, extending or reducing any obligation of Trustor to make
installment payments; provided, however, Beneficiary may, in its sole and
absolute discretion, elect to disburse such Proceeds to Beneficiary or Trustor
to be applied to the repair or restoration of the Property.

 

  (iii)

Restoration. Notwithstanding the foregoing Sections 6.11.b (i) and (ii) (except
as set forth in Section 6.11.b (ii) (A)), Beneficiary shall have no obligation
to make any Proceeds available for the repair or restoration of all or any
portion of the Property unless and until all the following conditions have been
satisfied: (aa) delivery to Beneficiary of the Proceeds plus any additional
amount which is needed to pay all costs of the repair or restoration (including,
without limitation, taxes, financing charges, insurance and rent during the
repair period); (bb) establishment of an arrangement for lien releases and
disbursement of funds reasonably acceptable to Beneficiary; (cc) delivery to
Beneficiary in form and content acceptable to Beneficiary of all of the
following: (1) plans and specifications for the work; (2) a contract for the
work, signed by a contractor reasonably acceptable to Beneficiary; (3) a cost
breakdown for the work; (4) if required by Beneficiary, a payment and
performance bond for the work; (5) evidence of the continuation of all Leases
unless consented to in writing by Beneficiary or evidence that rent loss
insurance proceeds are sufficient to cover the tenancies that have been
terminated on account of the casualty during the period of repair; (6) evidence
that, upon completion of the work, the size, capacity, value, and income
coverage ratios for the Property will be at least as great as those which
existed immediately before the damage or condemnation occurred; (7) evidence
that the work can reasonably be completed on or before that date which is 6
months prior to the Maturity Date; (8) evidence that

 

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there has been no material adverse change in the financial condition or credit
of Trustor or Limited Guarantor since the date of this Deed of Trust; and
(9) evidence of the satisfaction of any additional conditions that Beneficiary
may reasonably establish to protect Beneficiary’s security. Trustor acknowledges
that the specific conditions described above are reasonable. and (ii) that
Beneficiary may impose additional conditions in its sole and absolute discretion
with respect to the distribution of Proceeds to Trustor pursuant to
Section 6.11.b (i) and 6.11.b (ii) (C).

 

  c. Application of Proceeds; Default. If a Default has occurred and is
continuing at the time of Beneficiary’s receipt of the Proceeds or if a Default
occurs at any time thereafter, Beneficiary may, at Beneficiary’s absolute
discretion and regardless of any impairment of security or lack of impairment of
security, but subject to applicable law governing use of the Proceeds, if any,
apply all or any of the Proceeds to Beneficiary’s expenses in settling,
prosecuting or defending the Claims and then apply the balance to the Secured
Obligations in any order without suspending, extending or reducing any
obligation of Trustor to make installment payments, and may release all or any
part of the Proceeds to Trustor upon any conditions Beneficiary chooses.

 

6.12.

TAX AND INSURANCE IMPOUNDS. If a Default has occurred and is existing, then, at
Beneficiary’s option and upon its demand, Trustor, shall, until all Secured
Obligations have been paid in full, pay to Beneficiary in equal monthly
installments, or as otherwise reasonably directed by Beneficiary, an amount
estimated by Beneficiary to be equal to: (a) all taxes, assessments, levies and
charges imposed by any public or quasi-public authority or utility company which
are or may become a lien upon the Property or Collateral and will become due for
the tax year during which such payment is so directed; and (b) premiums for
fire, hazard and insurance required or requested pursuant to the Loan Documents
when the same are next due. If Beneficiary determines that any amounts paid by
Trustor are insufficient for the payment in full of such taxes, assessments,
levies, charges and/or insurance premiums, Beneficiary shall notify Trustor of
the increased amounts required to pay all amounts when due, whereupon Trustor
shall pay to Beneficiary within thirty (30) days thereafter the additional
amount as stated in Beneficiary’s notice. If Beneficiary is required to
segregate such sums paid, Trustor shall (i) execute such documents as
Beneficiary, in its sole discretion, deems necessary to perfect its security
interest in such account and (ii) pay the costs of setting up and maintaining
such account. All sums so paid shall not bear interest, except to the extent and
in any minimum amount required by law; and Beneficiary shall, unless Trustor is
otherwise in Default hereunder or under any Loan Document, apply said funds to
the payment of, or at the sole option of Beneficiary release said funds to
Trustor for the application to and payment of, such sums, taxes, assessments,
levies, charges, and insurance premiums. Upon Default by Trustor hereunder or
under any Secured Obligation, Beneficiary may apply all or any part of said sums
to any Secured Obligation and/or to cure such Default, in which event Trustor
shall be required to restore all amounts so applied, as well as to cure any
other events or conditions of Default not cured by such application. Upon
assignment of this Deed of Trust, Beneficiary shall have the right to

 

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assign all amounts collected and in its possession to its assignee whereupon
Beneficiary shall be released from all liability with respect thereto. Within
sixty (60) days following full repayment of the Secured Obligations (other than
full repayment of the Secured Obligations as a consequence of a foreclosure or
conveyance in lieu of foreclosure of the liens, security titles and security
interests securing the Secured Obligations) or at such earlier time as
Beneficiary may elect, the balance of all amounts collected and in Beneficiary’s
possession shall be paid to Trustor and no other party shall have any right or
claim thereto.

 

6.13. DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. Trustor shall protect,
preserve and defend the Property and title to and right of possession of the
Property, the security of this Deed of Trust and the rights and powers of
Beneficiary and Trustee hereunder at Trustor’s sole expense against all adverse
claims, other than Permitted Exceptions, whether the claim: (a) is against a
possessory or non-possessory interest; (b) arose prior or subsequent to the
Effective Date; or (c) is senior or junior to Trustor’s or Beneficiary’s rights.
Trustor shall give Beneficiary and Trustee prompt notice in writing of the
assertion of any claim, of the filing of any action or proceeding, of the
occurrence of any damage to the Property and of any condemnation offer or
action.

 

6.14. RIGHT OF INSPECTION. Subject to the rights of tenants under any Leases,
Beneficiary and its independent contractors, agents and employees may enter the
Property from time to time at any reasonable time upon forty-eight hours prior
written notice to Trustor for the purpose of inspecting the Property and
ascertaining Trustor’s compliance with the terms of this Deed of Trust.
Beneficiary shall use reasonable efforts to assure that Beneficiary’s entry upon
and inspection of the Property shall not materially and unreasonably interfere
with the business or operations of Trustor or Trustor’s tenants on the Property.

 

6.15. DUE ON SALE/ENCUMBRANCE.

 

  a.

Trustor acknowledges that Beneficiary has relied upon the principals of Trustor
and their experience in owning and operating properties similar to the Property
in connection with the closing of the Loan. Accordingly, except with the prior
written consent of Beneficiary or as otherwise expressly permitted in this Deed
of Trust or the Note, Trustor shall not cause or permit any sale, exchange,
mortgage, pledge, hypothecation, assignment, encumbrance or other transfer,
conveyance or disposition, whether voluntarily, involuntarily or by operation of
law (“Transfer”) of all or any part of the Property or the Collateral, except
for equipment and inventory in the ordinary course of its business, or a
Transfer of any direct or indirect, legal or beneficial, interest in any
Restricted Party (defined herein) (in each case, a “Prohibited Transfer”). If
any Transfer not expressly permitted in the Note or this Deed of Trust is made
without the prior written consent of Beneficiary, Beneficiary shall have the
absolute right at its option, without prior demand or notice, to declare all of
the Secured Obligations immediately due and payable, except to the extent
prohibited by law, and pursue its rights and remedies under Section 7.3 herein.
Trustor agrees to pay the Exit Fee (as defined in and calculated in accordance

 

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with the Note) in the event the Secured Obligations are accelerated pursuant to
the terms of this Section. Consent to one such Transfer shall not be deemed to
be a waiver of the right to require the consent to future or successive
Transfers. Beneficiary’s consent to any Transfer may be withheld, conditioned or
delayed in Beneficiary’s sole and absolute discretion.

“Restricted Party” shall mean Trustor or any shareholder, partner, member or
non-member manager, or any direct or indirect, legal or beneficial, owner of
Trustor.

 

  b. Notwithstanding anything herein to the contrary, the following Transfers
shall not be deemed to be a Prohibited Transfer:

 

  (i) Transfer of certain minority interests in Trustor, or in entities having a
direct or indirect ownership interest in Trustor so long as each of the
conditions set forth below has been satisfied:

 

  (1) no Default exists under this Deed of Trust or under any of the other Loan
Documents;

 

  (2) the original Trustor continues to hold title to the Property and
Collateral;

 

  (3) Beneficiary has received at least thirty (30) days prior written notice of
such Transfer;

 

  (4) after giving effect to each and every such Transfer, Gregory A. Fowler
manages and controls, directly or indirectly, the day-to-day affairs of the
Trustor;

 

  (5) after giving effect to each and every such Transfer, Gregory A. Fowler
and/or the Gregory A. Fowler Living Trust, collectively, directly or indirectly
own at least thirty percent (30%) of the aggregate equity in Trustor; and

 

  (6) Trustor pays any and all of Beneficiary’s out-of-pocket costs in
connection with the review of any such Transfer and any and all taxes, fees,
costs or other expenses incurred in connection with such transaction; or

 

  (ii) the removal of FPA Governor Park Investors, LLC, a Delaware limited
liability company (the “Operating Member”) as operating member of FPA/PRIP
Governor Park, LLC, a Delaware limited liability company (the “Member”), the
sole member of Trustor, and replacement of such operating member with PRIP
Governor Park, LLC, a Delaware limited liability company (“PRIP”), so long as
each of the conditions set forth below has been satisfied:

 

  (1) Beneficiary has received at least forty-five (45) days prior written
notice of such replacement, which notice must include the executed documents
described in clause (7) immediately below;

 

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  (2) no Default exists under this Deed of Trust or under any of the other Loan
Documents;

 

  (3) the original Trustor continues to hold title to the Property and
Collateral;

 

  (4) the Property continues to be managed by a property manager approved by
Beneficiary pursuant to this Deed of Trust;

 

  (5) PRIP shall be controlled, directly or indirectly, by Paladin Realty
Partners, LLC, a Delaware limited liability company (“Paladin”);

 

  (6) after giving effect to such Transfer, Paladin and/or funds managed by
Paladin, directly or indirectly own at least thirty percent (30%) of the
aggregate equity in Trustor;

 

  (7) without releasing, modifying or otherwise impacting the Limited Guaranty
and Hazardous Materials Indemnity Agreement, PRIP has delivered to Beneficiary
an executed limited guaranty and hazardous materials indemnity agreement (each
in the form executed by Gregory A. Fowler on the Effective Date or in a form
which is otherwise acceptable to Beneficiary in its reasonable discretion) from
an affiliate of PRIP that has a net worth (as reflected on such affiliate’s
financial statements) of at least $50,000,000;

 

  (8) the LTV Ratio shall be equal to or less than fifty percent (50%) or shall
be reduced to fifty percent (50%) prior to the effective date of such
replacement of the operating member. As used in this Section 6.15(b)(ii)(8),
“LTV Ratio” means the outstanding balance on the Loan divided by the fair market
value of the Property as determined by Beneficiary, such determination to be
made in consideration of a new appraisal (at Trustor’s expense) by an MAI
appraiser selected by Beneficiary or as reflected on the most recent appraisal
by an MAI appraiser obtained by Beneficiary provided that such appraisal is
dated not more than ninety (90) days prior to the effective date of the
Transfer;

 

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  (9) from and after the date that PRIP becomes the operating member of the
Member, Trustor may not thereafter obtain a partial release of either the Two
Governor Property or the Five Governor Property pursuant to Section 6.21(b)
hereof and such Section 6.21(b) hereof will be of no further force or effect;
and

 

  (10) Trustor pays any and all of Beneficiary’s out-of-pocket costs in
connection with the review of any such Transfer and any and all taxes, fees,
costs or other expenses incurred in connection with such transaction.

 

  c. In no event shall title to the Property or the Collateral, or any portion
thereof or any interest therein, be held as a tenancy in common.

 

6.16. ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts this
trust when this Deed of Trust is recorded. From time to time upon written
request of Beneficiary and presentation of this Deed of Trust, or a certified
copy thereof, for endorsement, and without affecting the personal liability of
any person for payment of any indebtedness or performance of any Secured
Obligation, Trustee may, without liability therefor and without notice:
(a) reconvey all or any part of the Property; (b) consent to the making of any
map or plat of the Property; (c) join in granting any easement on the Property;
(d) join in any declaration of covenants and restrictions; or (e) join in any
extension agreement or any agreement subordinating the lien or charge of this
Deed of Trust. Nothing contained in the immediately preceding sentence shall be
construed to limit, impair or otherwise affect the rights of Trustor in any
respect. Except as may otherwise be required by applicable law, Trustee or
Beneficiary may from time to time apply to any court of competent jurisdiction
for aid and direction in the execution of the trusts hereunder and the
enforcement of the rights and remedies available hereunder, and Trustee or
Beneficiary may obtain orders or decrees directing or confirming or approving
acts in the execution of said trusts and the enforcement of said remedies.
Trustee has no obligation to notify any party of any pending sale or any action
or proceeding (including, without limitation, actions in which Trustor,
Beneficiary or Trustee shall be a party) unless held or commenced and maintained
by Trustee under this Deed of Trust. Trustee shall not be obligated to perform
any act required of it hereunder unless the performance of the act is requested
in writing and Trustee is reasonably indemnified and held harmless against loss,
cost, liability and expense.

 

6.17. COMPENSATION OF TRUSTEE. Trustor shall pay to Trustee reasonable
compensation and reimbursement for services and expenses in the administration
of this trust, including, without limitation, reasonable attorneys’ fees.
Trustor shall pay all indebtedness arising under this Section immediately upon
demand by Trustee or Beneficiary together with interest thereon from the date
the indebtedness arises at the rate of interest then applicable to the principal
balance of the Note as specified therein.

 

6.18.

EXCULPATION. Beneficiary shall not directly or indirectly be liable to Trustor
or any other person as a consequence of: (a) the exercise of the rights,
remedies or powers granted to Beneficiary in this Deed of Trust; (b) the failure
or refusal of

 

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Beneficiary to perform or discharge any obligation or liability of Trustor under
any agreement related to the Property or under this Deed of Trust; or (c) any
loss sustained by Trustor or any third party resulting from Beneficiary’s
failure to lease the Property after a Default (hereafter defined) or from any
other act or omission of Beneficiary in managing the Property after a Default
unless the loss is caused by the willful misconduct and bad faith of Beneficiary
and no such liability shall be asserted or enforced against Beneficiary, all
such liability being expressly waived and released by Trustor.

 

6.19.

INDEMNITY. Without in any way limiting any other indemnity contained in this
Deed of Trust, Trustor agrees to defend, indemnify and hold harmless Trustee and
the Beneficiary Group from and against any claim, loss, damage, cost, expense or
liability directly or indirectly arising out of: (a) the making of the Loan,
except for violations of banking laws or regulations by the Beneficiary Group;
(b) this Deed of Trust; (c) the execution of this trust or the performance of
any act required or permitted hereunder or by law; (d) any failure of Trustor to
perform Trustor’s obligations under this Deed of Trust or the other Loan
Documents; (e) any alleged obligation or undertaking on the Beneficiary Group’s
part to perform or discharge any of the representations, warranties, conditions,
covenants or other obligations contained in any other document related to the
Property; (f) any act or omission by Trustor or any contractor, agent, employee
or representative of Trustor with respect to the Property; or (g) any claim,
loss, damage, cost, expense or liability directly or indirectly arising out of:
(i) the use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous
Materials which are found in, on, under or about the Property (including,
without limitation, underground contamination); or (ii) the breach of any
covenant of Trustor under Section 6.2 above. The foregoing to the contrary
notwithstanding, this indemnity shall not include any claim, loss, damage, cost,
expense or liability directly or indirectly arising out of the gross negligence
or willful misconduct of any member of the Beneficiary Group or Trustee, or any
claim, loss, damage, cost, expense or liability incurred by the Beneficiary
Group or Trustee arising from any act or incident on the Property occurring
after the full reconveyance and release of the lien of this Deed of Trust on the
Property, or with respect to the matters set forth in clause (g) above, any
claim, loss, damage, cost, expense or liability incurred by the Beneficiary
Group resulting from the introduction and initial release of Hazardous Materials
on the Property occurring after the transfer of title to the Property at a
foreclosure sale under this Deed of Trust, either pursuant to judicial decree or
the power of sale, or by deed in lieu of such foreclosure. This indemnity shall
include, without limitation: (aa) all direct and indirect consequential damages
(including, without limitation, any third party tort claims or governmental
claims, fines or penalties against Trustee or the Beneficiary Group); (bb) all
court costs and attorneys’ fees (including, without limitation, expert witness
fees) paid or incurred by Trustee or the Beneficiary Group; and (cc) the costs,
whether foreseeable or unforeseeable, of any investigation, repair, cleanup or
detoxification of the Property which is required by any governmental entity or
is otherwise necessary to render the Property in compliance with all laws and
regulations pertaining to Hazardous Materials. “Beneficiary Group”, as used
herein, shall mean (1) Beneficiary (including, without limitation, any
participant in the Loan), (2) any entity controlling, controlled by or under
common control with Beneficiary, (3) the directors, officers, employees and
agents of Beneficiary and such other entities, and

 

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(4) the successors, heirs and assigns of the entities and persons described in
foregoing clauses (1) through (3). Trustor shall pay immediately upon Trustee’s
or Beneficiary’s demand any amounts owing under this indemnity together with
interest from the date the indebtedness arises until paid at the rate of
interest applicable to the principal balance of the Note as specified therein.
Trustor agrees to use legal counsel reasonably acceptable to Trustee and the
Beneficiary Group in any action or proceeding arising under this indemnity. THE
PROVISIONS OF THIS SECTION SHALL SURVIVE THE TERMINATION AND RECONVEYANCE OF
THIS DEED OF TRUST, BUT TRUSTOR’S LIABILITY UNDER THIS INDEMNITY SHALL BE
SUBJECT TO THE PROVISIONS OF THE SECTION IN THE NOTE ENTITLED “BORROWER’S
LIABILITY.”

 

6.20. SUBSTITUTION OF TRUSTEE. From time to time, by a writing signed and
acknowledged by Beneficiary and recorded in the Office of the Recorder of the
County in which the Property is situated, Beneficiary may appoint another
trustee to act in the place and stead of Trustee or any successor. Such writing
shall set forth any information required by law. The recordation of such
instrument of substitution shall discharge Trustee herein named and shall
appoint the new trustee as the trustee here-under with the same effect as if
originally named trustee herein. A writing recorded pursuant to the provisions
of this Section shall be conclusive proof of the proper substitution of such new
trustee.

 

6.21. RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.

 

  a. Without notice to or the consent, approval or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Secured Obligations (“Interested Parties”), Beneficiary may,
from time to time: (a) fully or partially release any person or entity from
liability for the payment or performance of any Secured Obligation; (b) extend
the maturity of any Secured Obligation; (c) make any agreement with Trustor
increasing the amount or otherwise altering the terms of any Secured Obligation;
(d) accept additional security for any Secured Obligation; or (e) release all or
any portion of the Property, Collateral and other security for any Secured
Obligation. None of the foregoing actions shall release or reduce the personal
liability of any of said Interested Parties, or release or impair the priority
of the lien of this Deed of Trust upon the Property.

 

  b. Notwithstanding anything to the contrary stated herein and provided that no
Transfer has occurred pursuant to Section 6.15(b)(ii) hereof, Trustor may obtain
a partial release of either the Two Governor Property or the Five Governor
Property (the parcel being released at such time, the “Release Parcel”) from the
lien and security interest created by this Deed of Trust and the other Loan
Documents upon satisfaction in full of all of the following conditions:

 

  (i)

Beneficiary shall have received, in immediately available funds, prior to or
concurrently with such release, an amount equal to the greater of:
(i) eighty-four percent (84%) of the sales proceeds from the sale of such parcel

 

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(less reasonable and customary transaction expenses approved by Beneficiary in
its reasonable discretion), and (ii) $4,500,000 in the case of the release of
the Two Governor Property, and $9,500,000 in the case of the release of the Five
Governor Property;

 

  (ii) Trustor must have provided written notice to Beneficiary of its intent to
release the Release Parcel at least forty-five (45) days before such release;

 

  (iii) The underwritten Debt Service Coverage Ratio (as defined in the Note) as
determined by Beneficiary for the portion of the Property not being released at
such time shall be no less than 1.20;

 

  (iv) Beneficiary shall have approved in writing a modified Cap-Ex, Leasing
Costs and Interest Reserve Budget (as defined in the Note) reflecting that the
costs identified thereon will not be incurred with respect to the Release Parcel
following the release thereof;

 

  (v) No Default under this Deed of Trust or under any of the other Loan
Documents, and no conditions exist which but for the running of a cure period
would give rise to a Default, shall exist at the time of such release;

 

  (vi) Release and modification agreements (and any other required documents)
reasonably acceptable to Beneficiary in connection with the release of the
Release Parcel shall have been executed and recorded, as applicable;

 

  (vii) Limited Guarantor shall have reaffirmed in writing, in form acceptable
to Beneficiary, its obligations under any environmental indemnity agreement and
under any guaranty of non-recourse exceptions delivered to Beneficiary in
connection with the Loan;

 

  (viii) An endorsement to Beneficiary’s title insurance policy insuring the
validity and priority of the lien of this Deed of Trust, as modified by such
release, subject to no exceptions and reflecting no subordinate liens or other
encumbrances encumbering the Property, except those set forth in Beneficiary’s
existing Loan title policy, approved in writing by Beneficiary or expressly
permitted by the Loan Documents without Beneficiary’s consent;

 

  (ix) All out of pocket costs and expenses incurred by Beneficiary (including
legal fees) in connection with the release shall have been paid by Trustor,
regardless of whether the release closes;

 

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  (x) There shall have been no material adverse change to the financial
condition of Limited Guarantor;

 

  (xi) Beneficiary shall have received payment of the Exit Fee;

 

  (xii) The LTV Ratio for the portion of the Property not being released at such
time shall be equal to or less than seventy percent (70%). As used in this
Section 6.21(b)(xii), “LTV Ratio” means the outstanding balance on the Loan
divided by the fair market value of the Property not being released as
determined by Beneficiary, such determination to be made in consideration of a
new appraisal (at Trustor’s expense) by an MAI appraiser selected by Beneficiary
or as reflected on the most recent appraisal by an MAI appraiser obtained by
Beneficiary provided that such appraisal is dated not more than ninety (90) days
prior to the effective date of such release; and

 

  (xiii) Such other conditions as Beneficiary may reasonably require shall have
been satisfied.

 

6.22.

SALE OR PARTICIPATION OF LOAN. Beneficiary may at any time sell, assign,
participate or securitize all or any portion of Beneficiary’s rights and
obligations under the Loan Documents, and that any such sale, assignment,
participation or securitization may be to one or more financial institutions or
other entities, to private investors, or into the public securities market, in
Beneficiary’s sole discretion. Trustor further agrees that Beneficiary may
disseminate to any such actual or potential purchaser(s), assignee(s) or
participant(s) (and to any investment banking firms, rating agencies, accounting
firms, law firms and other third party advisory firms and investors involved
with the Loan and the Loan Documents or the applicable sale, assignment,
participation or securitization) all documents and financial and other
information heretofore or hereafter provided to or known to Beneficiary with
respect to: (a) the Property and its operation; (b) any party connected with the
Loan (including, without limitation, Trustor, any partner or member of Trustor,
any constituent partner or member of Trustor, any guarantor and any nonborrower
trustor). In the event of any such sale, assignment, participation or
securitization, Beneficiary and the other parties to the same shall share in the
rights and obligations of Beneficiary set forth in the Loan Documents as and to
the extent they shall agree among themselves. In connection with any such sale,
assignment, participation or securitization, Trustor further agrees that the
Loan Documents shall be sufficient evidence of the obligations of Trustor to
each purchaser, assignee or participant, and Trustor shall, within fifteen
(15) days after request by Beneficiary; (c) deliver to Beneficiary such
information and documents relating to Trustor, the Property and its operation
and any party connected with the Loan as Beneficiary or any rating agency may
request; (d) deliver to Beneficiary an estoppel certificate for the benefit of
Beneficiary and any other party designated by Beneficiary verifying the status
and terms of the Loan, in form and content satisfactory to Beneficiary;
(e) enter into such amendments to the Loan Documents as may be requested in
order to facilitate any such sale, assignment, participation or securitization
without impairing Trustor’s rights or increasing Trustor’s obligations; (f) if,
as a condition to the

 

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closing of the Loan, Trustor was required to be a special-purpose
bankruptcy-remote entity, enter into such amendments to the organizational
documents of Trustor as any rating agency may request to preserve or enhance
Trustor’s special-purpose bankruptcy-remote status; and (g) if, as a condition
to the closing of the Loan, Trustor was required to provide Beneficiary with any
nonconsolidation opinions, provide Beneficiary with such amendments and
restatements of such opinions as any rating agency may request. The indemnity
obligations of Trustor under the Loan Documents shall also apply with respect to
any purchaser, assignee or participant.

 

6.23. RECONVEYANCE. Upon Beneficiary’s written request, and upon surrender of
this Deed of Trust or certified copy thereof and any note, instrument or
instruments setting forth all obligations secured hereby to Trustee for
cancellation, Trustee shall reconvey, without warranty, the Property or that
portion thereof then held hereunder. The recitals of any matters or facts in any
reconveyance executed hereunder shall be conclusive proof of the truthfulness
thereof. To the extent permitted by law, the reconveyance may describe the
grantee as “the person or persons legally entitled thereto”. Neither Beneficiary
nor Trustee shall have any duty to determine the rights of persons claiming to
be rightful grantees of any reconveyance. When the Property has been fully
reconveyed, the last such reconveyance shall operate as a reassignment of all
future rents, issues and profits of the Property to the person or persons
legally entitled thereto.

 

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

 

6.25. APPROVAL OF LEASES. Beneficiary must approve of in advance and in writing
all new Leases and all Lease amendments, modifications, terminations,
assignments, extensions and renewals executed or entered into subsequent to the
Effective Date (collectively, the “Lease Documents”), provided, however, if
Beneficiary fails to respond to Trustor within three (3) Business Days of
receipt of any Lease Document submitted by Trustor to Beneficiary for approval,
such Lease Document shall be deemed approved. Notwithstanding the foregoing,
Trustor shall be permitted to enter into any new Lease or Lease amendment
without Beneficiary’s prior written approval provided that: (i) the terms of
such agreement are in compliance with the minimum rental rates and all other
applicable terms set forth on the annual Business Plan (as defined in the Note)
approved in writing by Beneficiary, (ii) the form of such agreement is
substantially similar to the form of lease submitted to Beneficiary by Trustor
and approved in writing by Beneficiary and (iii) such agreement reflects an
arms-length transaction with a third-party tenant that is not an affiliate of
Trustor.

 

6.26.

MANAGEMENT OF PROPERTY. So long as any of the Secured Obligations remain
outstanding, Beneficiary must approve (such approval not to be unreasonably
withheld or delayed) each property manager of the Property in advance and in
writing, pursuant to a written management agreement approved by Beneficiary in
advance and in writing. If at any time, the Trustor is in material default under
the Loan Documents and the management of the Property and the Collateral is not
satisfactory to Beneficiary, Trustor shall have a reasonable period of time not
exceeding ninety (90) days to engage a property manager

 

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approved by Beneficiary (such approval by Beneficiary not to be unreasonably
withheld or delayed). If management satisfactory to Beneficiary is not in place
within said ninety (90) day period, then at Beneficiary’s option, the Secured
Obligations (including the Exit Fee) shall be immediately due and payable. Any
leasing commissions agreement and management agreement affecting the Property
and the Collateral must be satisfactory to Beneficiary and must be subordinate
to the lien of this Deed of Trust. Notwithstanding the foregoing, Trinity
Property Consultants, LLC is hereby approved as the property manager of the
Property.

 

6.27. SUBORDINATE, MEZZANINE AND OTHER FINANCING. Trustor shall not permit any
subordinate liens (voluntary or involuntary) secured by any portion of the
Property or Collateral, or any beneficial interest in the Property, or any
mezzanine or any other financing, whether unsecured or secured by any direct or
indirect ownership interest in Trustor, to exist (provided that, the foregoing
prohibitions are not intended to prevent Trustor’s indirect principals who are
individuals from obtaining personal loans unrelated to the Property and are also
not intended to prevent Trustor from incurring reasonable and customary trade
payables that will be satisfied within sixty (60) days of incurrence).

 

6.28. PATRIOT ACT AND RELATED MATTERS.

 

  a. Trustor shall promptly comply with all existing and future federal, state
and local laws, orders, ordinances, governmental rules and regulations or court
orders affecting Trustor, the Property, or the use thereof, including, without
limitation, Prescribed Laws. The term “Prescribed Laws” shall mean,
collectively, (a) the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, and relating to Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism, (c) the International Emergency Economic Power Act, 50 U.S.C. §1701
et. seq. and (d) all other legal requirements relating to money laundering or
terrorism. Beneficiary shall have the right to audit Trustor’s compliance with
the Prescribed Laws. Trustor shall from time to time, upon Beneficiary’s
request, provide Beneficiary with evidence reasonably satisfactory to
Beneficiary that each of Trustor and the Property complies with all Prescribed
Laws or is exempt from compliance with Prescribed Laws.

 

  b.

None of Trustor, any member of the Trustor, Limited Guarantor or any member or
partner of such member, nor any owner of a direct or indirect interest in
Trustor: (i) is listed on any Government Lists (as defined below), (ii) is a
person who has been determined by competent authority to be subject to the
prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23,
2001) or any other similar prohibitions contained in the rules and regulations
of OFAC (as defined below) or in any enabling legislation or other Presidential
Executive Orders in respect thereof, (iii) has been previously indicted for or
convicted of any felony involving a crime or crimes of moral turpitude or for
any Patriot Act Offense (as defined below), or (iv) is not currently under
investigation by any governmental authority for alleged

 

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criminal activity. For purposes hereof, the term “Patriot Act Offense” means any
violation of the criminal laws of the United States of America or of any of the
several states, or that would be a criminal violation if committed within the
jurisdiction of the United States of America or any of the several states,
relating to terrorism or the laundering of monetary instruments, including any
offense under (a) the criminal laws against terrorism; (b) the criminal laws
against money laundering, (c) the Bank Secrecy Act, as amended, (d) the Money
Laundering Control Act of 1986, as amended, or (e) the Patriot Act. “Patriot Act
Offense” also includes the crimes of conspiracy to commit, or aiding and
abetting another to commit, a Patriot Act Offense. For purposes hereof, the term
“Government Lists” means (x) the Specially Designated Nationals and Blocked
Persons Lists maintained by Office of Foreign Assets Control (“OFAC”), (y) any
other list of terrorists, terrorist organizations or narcotics traffickers
maintained pursuant to any of the Rules and Regulations of OFAC that Beneficiary
notified Trustor in writing is now included in “Governmental Lists”, or (z) any
similar lists maintained by the United States Department of State, the United
States Department of Commerce or any other government authority or pursuant to
any Executive Order of the President of the United States of America that
Beneficiary notified Trustor in writing is now included in “Governmental Lists”.

ARTICLE 7. DEFAULT

 

7.1. DEFAULT. The occurrence of any one or more of the following shall
constitute an event of default (a “Default”) hereunder and the other Loan
Documents:

 

  a. Monetary. Trustor shall fail to (i) pay when due any sums which by their
express terms require immediate payment without any grace period, sums which are
payable on the Maturity Date or any regular monthly payment due under the Note,
or (bb) pay within ten (10) days after written notice thereof shall have been
given to Trustor by Beneficiary of any other sums payable under this Deed of
Trust or any of the other Loan Documents.

 

  b. Failure to Perform. Trustor shall fail to observe, perform or discharge any
of Trustor’s obligations, covenants, conditions or agreements, other than
Trustor’s payment obligations, under the Note, this Deed of Trust or any of the
other Loan Documents, and (aa) such failure shall remain uncured for thirty
(30) days after written notice thereof shall have been given to Trustor by
Beneficiary if such default is capable of being cured within thirty (30) days;
provided however, if such default is not capable of being cured within thirty
(30) days and such default occurred through no fault of Trustor, the cure period
shall be extended so long as Trustor commences its cure efforts and diligently
pursues such cure following notice from Beneficiary.

 

  c.

Representations and Warranties. Any representation, warranty, certificate or
other statement (financial or otherwise) made or furnished by or on behalf of
Trustor, or Limited Guarantor, to Beneficiary or in connection with any of the

 

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Loan Documents, or as an inducement to Beneficiary to make the Loan, shall be
knowingly false, incorrect, incomplete or misleading in any material respect
when made or furnished.

 

  d. Condemnation; Attachment. The condemnation, seizure or appropriation of any
material portion (as reasonably determined by Beneficiary) of the Property; or
the sequestration or attachment of, or levy or execution upon any of the
Property, the Collateral or any other collateral provided by Trustor under any
of the Loan Documents, or any material portion of the other assets of Trustor,
which sequestration, attachment, levy or execution is not released or dismissed
within forty-five (45) days after its occurrence; or the sale of any assets
affected by any of the foregoing.

 

  e. Uninsured Casualty. The occurrence of an uninsured casualty with respect to
any material portion (as reasonably determined by Beneficiary) of the Property
unless: (aa) no other Default has occurred and is continuing at the time of such
casualty or occurs thereafter; (bb) Trustor promptly notifies Beneficiary of the
occurrence of such casualty; and (cc) not more than forty-five (45) days after
the occurrence of such casualty, Trustor delivers to Beneficiary immediately
available funds in an amount sufficient, in Beneficiary’s reasonable opinion, to
pay all costs of the repair or restoration (including, without limitation,
taxes, financing charges, insurance and rent during the repair period). So long
as no Default has occurred and is continuing at the time of Beneficiary’s
receipt of such funds and no Default occurs thereafter, Beneficiary shall make
such funds available for the repair or restoration of the Property.
Notwithstanding the foregoing, Beneficiary shall have no obligation to make any
funds available for repair or restoration of the Property unless and until all
conditions imposed by Beneficiary in its sole and absolute discretion have been
satisfied.

 

  f. Limited Guarantor. Limited Guarantor shall fail to comply with the Minimum
Net Worth Requirement (as defined in the Limited Guaranty).

 

  g. Voluntary Bankruptcy, Insolvency, Dissolution. (aa) Trustor’s filing a
petition for relief under the Bankruptcy Reform Act of 1978, as amended or
recodified (“Bankruptcy Code”), or under any other present or future state or
federal law regarding bankruptcy, reorganization or other relief to debtors
(collectively, “Debtor Relief Law”); or (bb) Trustor’s filing any pleading in
any involuntary proceeding under the Bankruptcy Code or other Debtor Relief Law
which admits the jurisdiction of a court to regulate Trustor or the Property or
the petition’s material allegations regarding Trustor’s insolvency; or (cc)
Trustor’s making a general assignment for the benefit of creditors; or (dd)
Trustor’s applying for, or the appointment of, a receiver, trustee, custodian or
liquidator of Trustor or any of its property; or (ee) the filing by or against
Trustor of a petition seeking the liquidation or dissolution of Trustor or the
commencement of any other procedure to liquidate or dissolve Trustor.

 

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  (i) Involuntary Bankruptcy. Trustor’s failure to effect a full dismissal of
any involuntary petition under the Bankruptcy Code or other Debtor Relief Law
that is filed against Trustor or in any way restrains or limits Trustor or
Beneficiary regarding the Loan or the Property, prior to the earlier of the
entry of any order granting relief sought in the involuntary petition or 90 days
after the date of filing of the petition.

 

  (ii) Partners, Guarantors. The occurrence of an event specified in Sections
(i) or (ii) as to any general partner or managing member of Trustor or any
guarantor or other person or entity in any manner obligated to Beneficiary under
the Loan Documents.

 

7.2. ACCELERATION. Upon the occurrence of a Default, all sums owing to
Beneficiary under the Note and the other Loan Documents shall, at Beneficiary’s
option, become immediately due and payable.

 

7.3. RIGHTS AND REMEDIES. In addition to the rights and remedies in Section 7.2
above, at any time during the continuance of a Default, Beneficiary shall have
all of the following rights and remedies:

 

  a. Entry on Property. With or without notice, and without releasing Trustor
from any Secured Obligation, and without becoming a mortgagee in possession, to
enter upon the Property from time to time and to do such acts and things as
Beneficiary or Trustee deem necessary or desirable in order to inspect,
investigate, assess and protect the security hereof or to cure any Default,
including, without limitation: (i) to take and possess all documents, books,
records, papers and accounts of Trustor or the then owner of the Property which
relate to the Property; (ii) to make, terminate, enforce or modify leases of the
Property upon such terms and conditions as Beneficiary deems proper; (iii) to
make repairs, alterations and improvements to the Property necessary, in
Trustee’s or Beneficiary’s sole judgment, to protect or enhance the security
hereof; (iv) to appear in and defend any action or proceeding purporting to
affect the security hereof or the rights or powers of Beneficiary or Trustee
hereunder; (v) to pay, purchase, contest or compromise any encumbrance, charge,
lien or claim of lien, other than the Permitted Exceptions, which, in the sole
judgment of either Beneficiary or Trustee, is or may be senior in priority
hereto, the judgment of Beneficiary or Trustee being conclusive as between the
parties hereto; (vi) to obtain insurance to the extent required to be maintained
hereunder or under any other Loan Document; (vii) to pay any premiums or charges
with respect to insurance required to be carried hereunder or under any other
Loan Document; (viii) to obtain a court order to enforce Beneficiary’s right to
enter and inspect the Property for Hazardous Materials, in which regard the
decision of Beneficiary as to whether there exists a release or threatened
release of Hazardous Materials onto the Property shall be deemed reasonable and
conclusive as between the parties hereto; (ix) to have a receiver appointed
pursuant to applicable law to enforce Beneficiary’s rights to enter and inspect
the Property for Hazardous Materials; and/or (x) to employ legal counsel,
accountants, engineers, consultants, contractors and other appropriate persons
to assist them;

 

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  b. Appointment of Receiver. With or without notice or hearing to apply to a
court of competent jurisdiction for and obtain appointment of a receiver,
trustee, liquidator or conservator of the Property, for any purpose, including,
without limitation, to enforce Beneficiary’s rights to collect Payments and to
enter on and inspect the Property for Hazardous Materials, as a matter of strict
right and without regard to: (i) the adequacy of the security for the repayment
of the Secured Obligations; (ii) the existence of a declaration that the Secured
Obligations are immediately due and payable; (iii) the filing of a notice of
default; or (iv) the solvency of Trustor or any guarantor or other person or
entity in any manner obligated to Beneficiary under the Loan Documents.

 

  c. Judicial Foreclosure; Injunction. To commence and maintain an action or
actions in any court of competent jurisdiction to foreclose this instrument as a
mortgage or to obtain specific enforcement of the covenants of Trustor
hereunder, and Trustor agrees that such covenants shall be specifically
enforceable by injunction or any other appropriate equitable remedy and that for
the purposes of any suit brought under this subparagraph, Trustor waives the
defense of laches and any applicable statute of limitations;

 

  d. Nonjudicial Foreclosure. To execute a written notice of such Default and of
the election to cause the Property to be sold to satisfy the Secured
Obligations. Trustee shall give and record such notice as the law then requires
as a condition precedent to a trustee’s sale. When the minimum period of time
required by law after such notice has elapsed, Trustee, without notice to or
demand upon Trustor except as required by law, shall sell the Property at the
time and place of sale fixed by it in the notice of sale, at one or several
sales, either as a whole or in separate parcels and in such manner and order,
all as Beneficiary in its sole discretion may determine, at public auction to
the highest bidder for cash, in lawful money of the United States, payable at
time of sale. Neither Trustor nor any other person or entity other than
Beneficiary shall have the right to direct the order in which the Property is
sold. Subject to requirements and limits imposed by law, Trustee may, from time
to time postpone sale of all or any portion of the Property by public
announcement at such time and place of sale, and from time to time may post-pone
the sale by public announcement at the time and place fixed by the preceding
postponement. A sale of less than the whole of the Property or any defective or
irregular sale made hereunder shall not exhaust the power of sale provided for
herein. Trustee shall deliver to the purchaser at such sale a deed conveying the
Property or portion thereof so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Trustee,
Trustor or Beneficiary may purchase at the sale;

Upon sale of the Property at any judicial or nonjudicial foreclosure,
Beneficiary may credit bid (as determined by Beneficiary in its sole and
absolute discretion) all or any portion of the Secured Obligations. In
determining such credit

 

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bid, Beneficiary may, but is not obligated to, take into account all or any of
the following: (i) appraisals of the Property as such appraisals may be
discounted or adjusted by Beneficiary in its sole and absolute underwriting
discretion; (ii) expenses and costs incurred by Beneficiary with respect to the
Property prior to foreclosure; (iii) expenses and costs which Beneficiary
anticipates will be incurred with respect to the Property after foreclosure, but
prior to resale, including, without limitation, costs of structural reports and
other due diligence, costs to carry the Property prior to resale, costs of
resale (e.g. commissions, attorneys’ fees, and taxes), costs of any Hazardous
Materials clean-up and monitoring, costs of deferred maintenance, repair,
refurbishment and retrofit, costs of defending or settling litigation affecting
the Property, and lost opportunity costs (if any), including the time value of
money during any anticipated holding period by Beneficiary; (iv) declining
trends in real property values generally and with respect to properties similar
to the Property; (v) anticipated discounts upon resale of the Property as a
distressed or foreclosed property; (vi) the fact of additional collateral (if
any), for the Secured Obligations; and (vii) such other factors or matters that
Beneficiary (in its sole and absolute discretion) deems appropriate. In regard
to the above, Trustor acknowledges and agrees that: (viii) Beneficiary is not
required to use any or all of the foregoing factors to determine the amount of
its credit bid; (ix) this paragraph does not impose upon Beneficiary any
additional obligations that are not imposed by law at the time the credit bid is
made; (x) the amount of Beneficiary’s credit bid need not have any relation to
any loan-to-value ratios specified in the Loan Documents or previously discussed
between Trustor and Beneficiary; and (xi) Beneficiary’s credit bid may be (at
Beneficiary’s sole and absolute discretion) higher or lower than any appraised
value of the Property;

 

  e. Multiple Foreclosures. To resort to and realize upon the security hereunder
and any other security now or later held by Beneficiary concurrently or
successively and in one or several consolidated or independent judicial actions
or lawfully taken nonjudicial proceedings, or both, and to apply the proceeds
received upon the Secured Obligations all in such order and manner as Trustee
and Beneficiary or either of them determine in their sole discretion;

 

  f. Rights to Collateral. To exercise all rights Trustee or Beneficiary may
have with respect to the Collateral under this Deed of Trust, the UCC or
otherwise at law; and

 

  g. Other Rights. To exercise such other rights as Trustee or Beneficiary may
have at law or in equity or pursuant to the terms and conditions of this Deed of
Trust or any of the other Loan Documents.

In connection with any sale or sales hereunder, Beneficiary may elect to treat
any of the Property which consists of a right in action or which is property
that can be severed from the Property (including, without limitation, any
improvements forming a part thereof) without causing structural damage thereto
as if the same were personal property or a fixture, as the case may be,

 

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and dispose of the same in accordance with applicable law, separate and apart
from the sale of the Property. Any sale of Collateral hereunder shall be
conducted in any manner permitted by the UCC.

 

7.4. APPLICATION OF FORECLOSURE SALE PROCEEDS. If any foreclosure sale is
effected, Trustee shall apply the proceeds of such sale in the following order
of priority: First, to the costs, fees and expenses of exercising the power of
sale and of sale, including, without limitation, the payment of the Trustee’s
fees and attorneys’ fees permitted pursuant to subdivision (b) of California
Civil Code Section 2924d and subdivision (b) of Section 2924k; Second, to the
payment of the Secured Obligations which are secured by this Deed of Trust, in
such order as Beneficiary shall determine in its sole discretion; Third, to
satisfy the outstanding balance of obligations secured by any junior liens or
encumbrances in the order of their priority; and Fourth, to the Trustor or the
Trustor’s successor in interest, or in the event the Property has been sold or
transferred to another, to the vested owner of record at the time of the
Trustee’s sale.

 

7.5. WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Property, hereby waives all rights to have the Property
and/or any other property, including, without limitation, the Collateral, which
is now or later may be security for any Secured Obligation, marshaled upon any
foreclosure of this Deed of Trust or on a foreclosure of any other security for
any of the Secured Obligations.

 

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

 

7.7. PAYMENT OF COSTS, EXPENSES AND ATTORNEYS’ FEES. Trustor agrees to pay to
Beneficiary immediately and upon demand all costs and expenses incurred by
Trustee and Beneficiary in the enforcement of the terms and conditions of this
Deed of Trust (including, without limitation, statutory trustee’s fees, court
costs and attorneys’ fees, whether incurred in litigation or not) with interest
from the date of expenditure until said sums have been paid at the rate of
interest applicable to the principal balance of the Note as specified therein.

 

7.8.

POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably appoints
Beneficiary and its successors and assigns, as its attorney-in-fact, which
agency is coupled with an interest, to perform any obligation of Trustor
hereunder upon the occurrence of an event, act or omission which, with notice or
passage of time or both, would constitute a Default,

 

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provided, however, that: (a) Beneficiary as such attorney-in-fact shall only be
accountable for such funds as are actually received by Beneficiary;
(b) Beneficiary shall not be liable to Trustor or any other person or entity for
any failure to act under this Section; and (c) Beneficiary shall not exercise
such right until after the expiration of any applicable notice and cure periods.

 

7.9. REMEDIES CUMULATIVE. All rights and remedies of Beneficiary and Trustee
under this Deed of Trust and the other Loan Documents are cumulative and are in
addition to all rights and remedies provided by applicable law (including
specifically that of foreclosure of this Deed of Trust as though it were a
mortgage). Beneficiary may enforce any one or more remedies or rights under the
Loan Documents either successively or concurrently.

ARTICLE 8. MISCELLANEOUS PROVISIONS

 

8.1. ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan Documents
grant further rights to Beneficiary and contain further agreements and
affirmative and negative covenants by Trustor which apply to this Deed of Trust
and to the Property and such further rights and agreements are incorporated
herein by this reference. THE OBLIGATIONS AND LIABILITIES OF TRUSTOR UNDER THIS
DEED OF TRUST AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO THE PROVISIONS OF THE
SECTION IN THE NOTE ENTITLED “BORROWER’S LIABILITY.”

 

8.2. NON-WAIVER. By accepting payment of any amount secured hereby after its due
date or late performance of any other Secured Obligation, Beneficiary shall not
waive its right against any person obligated directly or indirectly hereunder or
on any Secured Obligation, either to require prompt payment or performance when
due of all other sums and obligations so secured or to declare default for
failure to make such prompt payment or performance. No exercise of any right or
remedy by Beneficiary or Trustee hereunder shall constitute a waiver of any
other right or remedy herein contained or provided by law. No failure by
Beneficiary or Trustee to exercise any right or remedy hereunder arising upon
any Default shall be construed to prejudice Beneficiary’s or Trustee’s rights or
remedies upon the occurrence of any other or subsequent Default. No delay by
Beneficiary or Trustee in exercising any such right or remedy shall be construed
to preclude Beneficiary or Trustee from the exercise thereof at any time while
that Default is continuing. No notice to nor demand on Trustor shall of itself
entitle Trustor to any other or further notice or demand in similar or other
circumstances.

 

8.3. [Intentionally Omitted].

 

8.4.

PERMITTED CONTESTS. After prior written notice to Beneficiary, Trustor may
contest, by appropriate legal or other proceedings conducted in good faith and
with due diligence, the amount, validity or application, in whole or in part, of
any lien, levy, tax or assessment, or any lien of any laborer, mechanic,
materialman, supplier or vendor, or the application to

 

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Trustor or the Property of any law or the validity thereof, the assertion or
imposition of which, or the failure to pay when due, would constitute a Default;
provided that (a) Trustor pursues the contest diligently, in a manner which
Beneficiary determines is not prejudicial to Beneficiary, and does not impair
the lien of this Deed of Trust; (b) the Property, or any part hereof or estate
or interest therein, shall not be in any danger of being sold, forfeited or lost
by reason of such proceedings; (c) in the case of the contest of any law or
other legal requirement, Beneficiary shall not be in any danger of any civil or
criminal liability; and (d) if required by Beneficiary, Trustor deposits with
Beneficiary any funds or other forms of assurance (including a bond or letter of
credit) satisfactory to Beneficiary to protect Beneficiary from the consequences
of the contest being unsuccessful. Trustor’s right to contest pursuant to the
terms of this provision shall in no way relieve Trustor of its obligations under
the Loan or to make payments to Beneficiary as and when due.

 

8.5. FURTHER ASSURANCES. Trustor shall, upon demand by Beneficiary or Trustee,
execute, acknowledge (if appropriate) and deliver any and all documents and
instruments and do or cause to be done all further acts reasonably necessary or
appropriate to effectuate the purposes of the Loan Documents and to perfect any
assignments contained therein.

 

8.6. ATTORNEYS’ FEES. If any legal action, suit or proceeding is commenced
between Trustor and Beneficiary regarding their respective rights and
obligations under this Deed of Trust or any of the other Loan Documents, the
prevailing party shall be entitled to recover, in addition to damages or other
relief, costs and expenses, reasonable attorneys’ fees and court costs
(including, without limitation, expert witness fees). As used herein the term
“prevailing party” shall mean the party which obtains the principal relief it
has sought, whether by compromise settlement or judgment. If the party which
commenced or instituted the action, suit or proceeding shall dismiss or
discontinue it without the concurrence of the other party, such other party
shall be deemed the prevailing party.

 

8.7. TRUSTOR AND BENEFICIARY DEFINED. The term “Trustor” includes both the
original Trustor and any subsequent owner or owners of any of the Property, and
the term “Beneficiary” includes the original Beneficiary and any future owner or
holder, including assignees, pledges and participants, of the Note or any
interest therein.

 

8.8. DISCLAIMERS.

 

  a.

Relationship. The relationship of Trustor and Beneficiary under this Deed of
Trust and the other Loan Documents is, and shall at all times remain, solely
that of borrower and lender; and Beneficiary neither undertakes nor assumes any
responsibility or duty to Trustor or to any third party with respect to the
Property. Notwithstanding any other provisions of this Deed of Trust and the
other Loan Documents: (i) Beneficiary is not, and shall not be construed to be,
a partner, joint venturer, member, alter ego, manager, controlling person or
other business associate or participant of any kind of Trustor, and Beneficiary
does not intend to ever assume such status; (ii) Beneficiary’s activities in
connection with this Deed of Trust and the other Loan Documents shall not be
“outside the scope of activities of a lender of money” within

 

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the meaning of California Civil Code Section 3434, as amended or recodified from
time to time, and Beneficiary does not intend to ever assume any responsibility
to any person for the quality, suitability, safety or condition of the Property;
and (iii) Beneficiary shall not be deemed responsible for or a participant in
any acts, omissions or decisions of Trustor.

 

  b. No Liability. Beneficiary shall not be directly or indirectly liable or
responsible for any loss, claim, cause of action, liability, indebtedness,
damage or injury of any kind or character to any person or property arising from
any construction on, or occupancy or use of, the Property, whether caused by or
arising from: (i) any defect in any building, structure, grading, fill,
landscaping or other improvements thereon or in any on-site or off-site
improvement or other facility therein or thereon; (ii) any act or omission of
Trustor or any of Trustor’s agents, employees, independent contractors,
licensees or invitees; (iii) any accident in or on the Property or any fire,
flood or other casualty or hazard thereon; (iv) the failure of Trustor or any of
Trustor’s licensees, employees, invitees, agents, independent contractors or
other representatives to maintain the Property in a safe condition; or (v) any
nuisance made or suffered on any part of the Property.

 

8.9. SEVERABILITY. If any term of this Deed of Trust or any other Loan Document,
or the application thereof to any person or circumstances, shall, to any extent,
be invalid or unenforceable, the remainder of this Deed of Trust or such other
Loan Document, or the application of such term to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term of this Deed of Trust or such other Loan Document shall
be valid and enforceable to the fullest extent permitted by law.

 

8.10. RELATIONSHIP OF ARTICLES. The rights, remedies and interests of
Beneficiary under the deed of trust established by Article 1 and the security
agreement established by Article 4 are independent and cumulative, and there
shall be no merger of any lien created by the deed of trust with any security
interest created by the security agreement. Beneficiary may elect to exercise or
enforce any of its rights, remedies or interests under either or both the deed
of trust or the security agreement as Beneficiary may from time to time deem
appropriate. The absolute assignment of rents and leases established by Article
3 is similarly independent of and separate from the deed of trust and the
security agreement.

 

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

 

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

 

8.13.

SEPARATE AND COMMUNITY PROPERTY. Any married person who executes this Deed of
Trust as a “Trustor” agrees that any money judgment which Beneficiary or Trustee
obtains pursuant to the terms of this Deed of Trust or any other

 

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obligation of that married person secured by this Deed of Trust may be collected
by execution upon any separate property or community property of that person.

 

8.14. INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect to the
matters contemplated therein and supersede all prior negotiations or agreements,
written or oral. The Loan Documents shall not be modified except by written
instrument executed by all parties. Any reference in any of the Loan Documents
to the Property or Collateral shall include all or any part of the Property or
Collateral. Any reference to the Loan Documents includes any amendments,
renewals or extensions now or hereafter approved by Beneficiary in writing. When
the identity of the parties or other circumstances make it appropriate, the
masculine gender includes the feminine and/or neuter, and the singular number
includes the plural.

 

8.15. CAPITALIZED TERMS. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Note.

 

8.16. SUCCESSORS IN INTEREST. The terms, covenants, and conditions contained
herein and in the other Loan Documents shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties. The foregoing
sentence shall not be construed to permit Trustor to assign the Loan except as
otherwise permitted under the Note or the other Loan Documents.

 

8.17. GOVERNING LAW. This Deed of Trust was accepted by Beneficiary in the state
of California and the proceeds of the Note secured hereby were disbursed from
the state of California, which state the parties agree has a substantial
relationship to the parties and to the underlying transaction embodied hereby.
Accordingly, in all respects, including, without limiting the generality of the
foregoing, matters of construction, validity, enforceability and performance,
this Deed of Trust, the Note and the other Loan Documents and the obligations
arising hereunder and thereunder shall be governed by, and construed in
accordance with, the laws of the state of California applicable to contracts
made and performed in such state and any applicable law of the United States of
America, except that at all times the provisions for enforcement of
Beneficiary’s STATUTORY POWER OF SALE and all other remedies granted hereunder
and the creation, perfection and enforcement of the security interests created
pursuant hereto and pursuant to the other Loan Documents in any Collateral which
is located in the state where the Property is located shall be governed by and
construed according to the law of the state where the Property is located.
Except as provided in the immediately preceding sentence, Trustor hereby
unconditionally and irrevocably waives, to the fullest extent permitted by law,
any claim to assert that the law of any jurisdiction other than California
governs this Deed of Trust, the Note and other Loan Documents.

 

8.18.

CONSENT TO JURISDICTION. Trustor irrevocably submits to the jurisdiction of:
(a) any state or federal court sitting in the state of California over any suit,
action, or proceeding, brought by Trustor against Beneficiary, arising out of or
relating to this Deed of Trust, the Note or the Loan; (b) any state or federal
court sitting in the state where the Property is located or the

 

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state in which Trustor’s principal place of business is located over any suit,
action or proceeding, brought by Beneficiary against Trustor, arising out of or
relating to this Deed of Trust, the Note or the Loan; and (c) any state court
sitting in the county of the state where the Property is located over any suit,
action, or proceeding, brought by Beneficiary to exercise its STATUTORY POWER OF
SALE under this Deed of Trust or any action brought by Beneficiary to enforce
its rights with respect to the Collateral. Trustor irrevocably waives, to the
fullest extent permitted by law, any objection that Trustor may now or hereafter
have to the laying of venue of any such suit, action, or proceeding brought in
any such court and any claim that any such suit, action, or proceeding brought
in any such court has been brought in an inconvenient forum.

 

8.19. EXHIBITS. Exhibit A is incorporated into this Deed of Trust by this
reference.

 

8.20. ADDRESSES; REQUEST FOR NOTICE. All notices, demands, or other
communications under this Deed of Trust and the other Loan Documents shall be in
writing and shall be delivered to the appropriate party at the address set forth
below (subject to change as set forth below). Except when otherwise required by
law, any notice which a party is required or may desire to give the other shall
be in writing and may be sent by personal delivery or by mail (either [i] by
United States registered or certified mail, return receipt requested, postage
prepaid, or [ii] by Federal Express or similar generally recognized overnight
carrier regularly providing proof of delivery), or by facsimile transmittal (in
which case, such notice if immediately followed by Federal Express or similar
generally recognized overnight carrier regularly providing proof of delivery
shall be deemed given upon receipt of a transmittal confirmation statement ).
Any notice so given by mail shall be deemed to have been given as of the date of
delivery established by U.S. Post Office return receipt or the overnight
carrier’s proof of delivery, as the case may be. Any such notice not so given
shall be deemed given upon receipt of the same by the party to whom the same is
to be given; provided, however, that non-receipt of any communication as the
result of any change of address of which the sending party was not notified or
as the result of a refusal to accept delivery shall be deemed receipt of such
communication

Addresses for Notices:

 

If to Beneficiary:   MIREF Governor Finance, LLC      425 Market Street, Suite
1600      San Francisco, CA 94105      Attention:    Thomas P. O’Hanlon     
Telephone:    415-616-9354      Facsimile:    415-616-9399      Email:   
tohanlon@mcmorgan.com    With a copy to:   Goodwin|Procter LLP      601 South
Figueroa Street, 41st Floor      Los Angeles, CA 90017      Attention:    Dean
Pappas   

 

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  Telephone:    213-426-2525      Facsimile:    213-623-1673      Email:   
dpappas@goodwinprocter.com    If to Trustor:   FPA Governor Park Associates, LLC
     c/o Fowler Property Acquisitions      100 Bush Street, Suite 510      San
Francisco, CA 94104      Attention:    Hannah Moriarty      Telephone:   
415-249-6199      Facsimile:    415-925-3440      Email:   
hmoriarty@fpacquisitions.com    With a copy to:   Fowler Property Acquisitions
     100 Bush Street, Suite 510      San Francisco, CA 94104      Attention:   
Hannah Moriarty      Telephone:    415-249-6192      Facsimile:    415-925-3440
     Email:    sgrant@fpacquisitions.com    And to:   Nancy Mauriello, Esq.     
4665 MacArthur Court, Suite 210      Newport Beach, CA 92660      Telephone:   
949-399-2525      Facsimile:    949-399-2528      Email:    nancy@nmapc.com   

Trustor’s principal place of business is at the address set forth above and
hereby requests that a copy of notice of default and notice of sale be delivered
to it at that address. Failure to insert an address shall constitute a
designation of Trustor’s last known address as the address for such notice. Any
party shall have the right to change its address for notice hereunder to any
other location within the continental United States by giving thirty (30) days
written notice to the other parties in the manner set forth above.

 

8.21. COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed an
original and all of which taken together, will be deemed to be one and the same
instrument.

 

- 43 -

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

 

TRUSTOR:

FPA GOVERNOR PARK ASSOCIATES, LLC,

a Delaware limited liability company

By:   GF Governor Park, LLC,   a Delaware limited liability company Its:  
Manager By:  

/s/ Michael B. Earl

Name:   Title  

ACKNOWLEDGMENT

State of California

County of ORANGE

 

                      N. Wickham    

On Dec. 16, 2008 before me, (here insert name and title of the officer),
personally Appeared Michael B. Earl, who proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

 

Signature  

/s/ N. Wickham

  (Seal)

Signature Page to Deed of Trust

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EXHIBIT A-1

Description of Land

Exhibit A-1 to DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT (AND FIXTURE FILING) (“Deed of Trust”) among FOWLER PROPERTY
ACQUISITIONS, LLC, as “Trustor”, Chicago Title Company, as “Trustee”, and MIREF
GOVERNOR FINANCE, LLC, as “Beneficiary”.

Description of Land.

All that certain real property located in the City and County of San Diego,
State of California, described as follows:

Parcel 2 in the City of San Diego, County of San Diego, State of California, as
shown at Page 12834 of Parcel Maps filed in the Office of the County Recorder of
San Diego, California July 29, 1983.

 

EXHIBIT A-1

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EXHIBIT A-2

Description of Land

Exhibit A-2 to DEED OF TRUST AND ABSOLUTE ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT (AND FIXTURE FILING) (“Deed of Trust”) among FOWLER PROPERTY
ACQUISITIONS, LLC, as “Trustor”, Chicago Title Company, as “Trustee”, and MIREF
GOVERNOR FINANCE, LLC, as “Beneficiary”.

Description of Land.

All that certain real property located in the City and County of San Diego,
State of California, described as follows:

Lot 5 of Governor Drive Business Park Unit No. 1, in the City of San Diego,
County of San Diego, State of California, according to the map thereof
No. 10134, filed in the Office of the County Recorder of San Diego County, on
June 30, 1981.

 

EXHIBIT A-2