Exhibit 10.10
this instrument prepared by
and when recorded return to:
Kilpatrick Stockton LLP
Hearst Tower, Suite 2500
214 North Tryon Street
Charlotte, North Carolina 28202
Attn: James M. Tucker, Esq.
(SPACE ABOVE THIS LINE FOR RECORDER’S USE)

      Loan No.: 50-2859027   Hidden Lakes Apartments

APARTMENT REIT HIDDEN LAKES, LP,
as Borrower
to
WILLIAM M. WOODALL, as Trustee
For the benefit of
WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender
DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
Dated as of: December 28, 2006
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR
STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED
FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S
LICENSE NUMBER

 

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TABLE OF CONTENTS

                      Page   ARTICLE I. REPRESENTATIONS AND WARRANTIES OF
BORROWER     4  
1.1
  Organization; Special Purpose     4  
1.2
  Title     4  
1.3
  No Bankruptcy Filing     5  
1.4
  Full and Accurate Disclosure     5  
1.5
  Proceedings; Enforceability     5  
1.6
  No Conflicts     5  
1.7
  Federal Reserve Regulations; Investment Company Act     6  
1.8
  Taxes     6  
1.9
  ERISA     6  
1.10
  Property Compliance     6  
1.11
  Utilities     7  
1.12
  Public Access     7  
1.13
  Litigation; Agreements     7  
1.14
  Physical Condition     7  
1.15
  Contracts     7  
1.16
  Leases     8  
1.17
  Foreign Person     8  
1.18
  Management Agreement     8  
1.19
  Fraudulent Transfer     8  
1.20
  Foreign Assets Control     8  
 
            ARTICLE II. COVENANTS OF BORROWER     9  
2.1
  Defense of Title     9  
2.2
  Performance of Obligations     10  
2.3
  Insurance     10  
2.4
  Payment of Taxes     13  
2.5
  Casualty and Condemnation     14  
2.6
  Construction Liens     16  
2.7
  Rents and Profits     16  
2.8
  Leases     17  
2.9
  Alienation and Further Encumbrances     19  
2.10
  Payment of Utilities, Assessments, Charges, Etc.     22  
2.11
  Access Privileges and Inspections     23  
2.12
  Waste; Alteration of Improvements     23  
2.13
  Zoning     23  
2.14
  Financial Statements and Books and Records     23  
2.15
  Further Assurances     25  
2.16
  Payment of Costs; Reimbursement to Lender     25  
2.17
  Security Interest     26  
2.18
  Security Agreement     27  
2.19
  Easements and Rights-of-Way     28  
2.20
  Compliance with Laws     28  
2.21
  Additional Taxes     29  
2.22
  Secured Indebtedness     29  
2.23
  Borrower’s Waivers     29  

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                      Page  
2.24
  SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL     31  
2.25
  Attorney-in-Fact Provisions     31  
2.26
  Management     31  
2.27
  Hazardous Waste and Other Substances     32  
2.28
  Indemnification; Subrogation     36  
2.29
  Covenants with Respect to Existence, Indebtedness, Operations, Fundamental
Changes of Borrower     37  
2.30
  Embargoed Person     39  
2.31
  Anti-Money Laundering     40  
2.32
  ERISA     40  
2.33
  Intentionally Deleted     40  
 
            ARTICLE III. RESERVES AND CASH MANAGEMENT     41  
3.1
  Reserves Generally     41  
3.2
  Payment Reserve     42  
3.3
  Impound Account     42  
3.4
  Intentionally Deleted     43  
3.5
  Replacement Reserve     43  
 
            ARTICLE IV. EVENTS OF DEFAULT     44  
4.1
  Events of Default     44  
 
            ARTICLE V. REMEDIES     46  
5.1
  Remedies Available     46  
5.2
  Application of Proceeds     48  
5.3
  Right and Authority of Receiver or Lender in the Event of Default; Power of
Attorney     49  
5.4
  Occupancy After Foreclosure     50  
5.5
  Notice to Account Debtors     50  
5.6
  Cumulative Remedies     50  
5.7
  Payment of Expenses     50  
 
            ARTICLE VI. MISCELLANEOUS TERMS AND CONDITIONS     51  
6.1
  Time of Essence     51  
6.2
  Release of Deed of Trust     51  
6.3
  Certain Rights of Lender     51  
6.4
  Waiver of Certain Defenses     51  
6.5
  Notices     51  
6.6
  Successors and Assigns; Joint and Several Liability     51  
6.7
  Severability     52  
6.8
  Gender     52  
6.9
  Waiver; Discontinuance of Proceedings     52  
6.10
  Section Headings     52  
6.11
  GOVERNING LAW     52  
6.12
  Counting of Days     52  
6.13
  Relationship of the Parties     53  
6.14
  Application of the Proceeds of the Note     53  
6.15
  Unsecured Portion of Indebtedness     53  
6.16
  Cross Default     53  
6.17
  Interest After Sale     53  
6.18
  Inconsistency with Other Loan Documents     53  
6.19
  Construction of this Document     53  
6.20
  No Merger     53  
6.21
  Rights With Respect to Junior Encumbrances     53  

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                      Page  
6.22
  Lender May File Proofs of Claim     54  
6.23
  Fixture Filing     54  
6.24
  After-Acquired Property     54  
6.25
  No Representation     54  
6.26
  Counterparts     54  
6.27
  Personal Liability     54  
6.28
  Recording and Filing     54  
6.29
  Intentionally Deleted     55  
6.30
  Maximum Interest     55  
6.31
  Secondary Market     56  
6.32
  Dissemination of Information     56  
6.33
  Intentionally Deleted     56  
6.34
  REMIC Opinions     56  
 
            ARTICLE VII. CONCERNING THE TRUSTEE     57  
7.1
  Certain Rights     57  
7.2
  Retention of Money     57  
7.3
  Successor Trustees     57  
7.4
  Perfection of Appointment     58  
7.5
  Succession Instruments     58  
7.6
  No Representation by Trustee or Lender     58  
7.7
  Entire Agreement and Modifications     59  

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DEED OF TRUST, SECURITY AGREEMENT
AND FIXTURE FILING
     THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (as the same may
from time to time be amended, consolidated, renewed or replaced, this “Deed of
Trust”) is made as of December 28, 2006 by APARTMENT REIT HIDDEN LAKES, LP, a
Texas limited partnership (“Borrower”), having an address at c/o Triple Net
Properties, LLC, 1551 North Tustin Avenue, Suite 300, Santa Ana, California
92705, to WILLIAM M. WOODALL, an individual and resident of Texas, as Trustee
(“Trustee”), having an address at 8201 Preston Road, Suite 280, Dallas, Texas
75225, for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association, as beneficiary (together with its successors and assigns,
“Lender”), whose address is Commercial Real Estate Services, 8739 Research Drive
URP — 4, NC 1075, Charlotte, North Carolina 28262.
W I T N E S S E T H:
     THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH
ARE HEREBY ACKNOWLEDGED, BORROWER HEREBY IRREVOCABLY GRANTS, BARGAINS, SELLS AND
CONVEYS to Trustee in trust, for the benefit of Lender, with power of sale, all
of Borrower’s estate, right, title and interest in, to and under any and all of
the following described property, whether now owned or hereafter acquired by
Borrower (collectively, the “Property”):
     (A) All that certain real property situated in the County of Bexar, State
of Texas, more particularly described on Exhibit “A” attached hereto and
incorporated herein by this reference (the “Premises”), together with all of the
easements, rights, privileges, franchises, tenements, hereditaments and
appurtenances now or hereafter thereunto belonging or in any way appertaining
thereto, and all of the estate, right, title, interest, claim and demand
whatsoever of Borrower therein or thereto, either at law or in equity, in
possession or in expectancy, now or hereafter acquired;
     (B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Premises (the
“Improvements”);
     (C) All furniture, furnishings, fixtures, goods, equipment, inventory or
personal property owned by Borrower and now or hereafter located on, attached to
or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Borrower as are now or hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all building materials
and equipment hereafter situated on or about the Premises or Improvements, and
all warranties and guaranties relating thereto, and all additions thereto and
substitutions and replacements therefor (exclusive of any of the foregoing owned
or leased by tenants of space in the Improvements);
     (D) All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Premises or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Property or any part thereof, or
which hereafter shall in any way belong, relate or be appurtenant thereto,
whether now owned or hereafter acquired by Borrower;

 

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     (E) All water, ditches, wells, reservoirs and drains and all water, ditch,
well, reservoir and drainage rights which are appurtenant to, located on, under
or above or used in connection with the Premises or the Improvements, or any
part thereof, whether now existing or hereafter created or acquired;
     (F) All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Premises;
     (G) All cash funds, deposit accounts and other rights and evidence of
rights to cash, now or hereafter created or held by Lender pursuant to this Deed
of Trust or any other of the Loan Documents (as hereinafter defined), including,
without limitation, all funds now or hereafter on deposit in the Reserves (as
hereinafter defined);
     (H) All leases (including, without limitation, oil, gas and mineral
leases), licenses, concessions and occupancy agreements of all or any part of
the Premises or the Improvements (each, a “Lease” and collectively, “Leases”),
whether written or oral, now or hereafter entered into and all rents, royalties,
issues, profits, bonus money, revenue, income, rights and other benefits
(collectively, the “Rents and Profits”) of the Premises or the Improvements, now
or hereafter arising from the use or enjoyment of all or any portion thereof or
from any present or future Lease or other agreement pertaining thereto or
arising from any of the Leases or any of the General Intangibles (as hereinafter
defined) and all cash or securities deposited to secure performance by the
tenants, lessees or licensees (each, a “Tenant” and collectively, “Tenants”), as
applicable, of their obligations under any such Leases, whether said cash or
securities are to be held until the expiration of the terms of said Leases or
applied to one or more of the installments of rent coming due prior to the
expiration of said terms, subject, however, to the provisions contained in
Section 2.7 hereinbelow;
     (I) All contracts and agreements now or hereafter entered into covering any
part of the Premises or the Improvements (collectively, the “Contracts”) and all
revenue, income and other benefits thereof, including, without limitation,
management agreements, service contracts, maintenance contracts, equipment
leases, personal property leases and any contracts or documents relating to
construction on any part of the Premises or the Improvements (including plans,
drawings, surveys, tests, reports, bonds and governmental approvals) or to the
management or operation of any part of the Premises or the Improvements;
     (J) All present and future monetary deposits given to any public or private
utility with respect to utility services furnished to any part of the Premises
or the Improvements;
     (K) All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including,
without limitation, trademarks, trade names, service marks and symbols now or
hereafter used in connection with any part of the Premises or the Improvements,
all names by which the Premises or the Improvements may be operated or known,
all rights to carry on business under such names, and all rights, interest and
privileges which Borrower has or may have as developer or declarant under any
covenants, restrictions or declarations now or hereafter relating to the
Premises or the Improvements) and all notes or chattel paper now or hereafter
arising from or by virtue of any transactions related to the Premises or the
Improvements (collectively, the “General Intangibles”);
     (L) All water taps, sewer taps, certificates of occupancy, permits,
licenses, franchises, certificates, consents, approvals and other rights and
privileges now or hereafter obtained in connection with the Premises or the
Improvements and all present and future warranties and guaranties relating to
the Improvements or to any equipment, fixtures, furniture, furnishings, personal
property or components of any of the foregoing now or hereafter located or
installed on the Premises or the Improvements;

2

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     (M) All building materials, supplies and equipment now or hereafter placed
on the Premises or in the Improvements and all architectural renderings, models,
drawings, plans, specifications, studies and data now or hereafter relating to
the Premises or the Improvements;
     (N) All right, title and interest of Borrower in any insurance policies or
binders now or hereafter relating to the Property, including any unearned
premiums thereon;
     (O) All proceeds, products, substitutions and accessions (including claims
and demands therefor) of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards; and
     (P) All other or greater rights and interests of every nature in the
Premises or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Borrower.
     FOR THE PURPOSE OF SECURING:
     (1) The loan (the “Loan”) evidenced by that certain Promissory Note (such
Promissory Note, together with any and all renewals, amendments, modifications,
consolidations and extensions thereof, is hereinafter referred to as the “Note”)
of even date with this Deed of Trust, made by Borrower payable to the order of
Lender in the principal face amount of Nineteen Million Two Hundred Eighteen
Thousand and No/100 Dollars ($19,218,000.00), together with interest as therein
provided; and having a maturity date of January 11, 2017;
     (2) The full and prompt payment and performance of all of the provisions,
agreements, covenants and obligations herein contained and contained in any
other agreements, documents or instruments now or hereafter evidencing, securing
or otherwise relating to the Debt (as hereinafter defined) including the
Environmental Indemnity Agreement (as hereinafter defined) and the Indemnity and
Guaranty Agreement (as hereinafter defined) (the Note, this Deed of Trust, and
such other agreements, documents and instruments, together with any and all
renewals, amendments, extensions and modifications thereof, are hereinafter
collectively referred to as the “Loan Documents”) and the payment of all other
sums herein or therein covenanted to be paid;
     (3) Any and all additional advances made by Lender to protect or preserve
the Property or the lien or security interest created hereby on the Property, or
for taxes, assessments or insurance premiums as hereinafter provided or for
performance of any of Borrower’s obligations hereunder or under the other Loan
Documents or for any other purpose provided herein or in the other Loan
Documents (whether or not the original Borrower remains the owner of the
Property at the time of such advances); and
     (4) Any and all other indebtedness now owing or which may hereafter be
owing by Borrower to Lender, including, without limitation, all prepayment fees,
however and whenever incurred or evidenced, whether express or implied, direct
or indirect, absolute or contingent, or due or to become due, and all renewals,
modifications, consolidations, replacements and extensions thereof, it being
contemplated by Borrower and Lender that Borrower may hereafter become so
indebted to Lender.
(All of the sums referred to in Paragraphs (1) through (4) above are herein
referred to as the “Debt”).
     TO HAVE AND TO HOLD the Property unto Trustee, its successors, substitutes
or assigns, in trust, and Borrower does hereby bind itself, its successors and
assigns, to WARRANT AND FOREVER

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DEFEND the title to the Property, subject to the Permitted Encumbrances (as
hereinafter defined), unto Trustee against every person whomsoever lawfully
claiming or to claim the same or any part thereof;
     PROVIDED, HOWEVER, that if the principal and interest and all other sums
due or to become due under the Note or under the other Loan Documents,
including, without limitation, any prepayment fees required pursuant to the
terms of the Note, shall have been paid at the time and in the manner stipulated
therein and the Debt shall have been paid and all other covenants contained in
the Loan Documents shall have been performed, then, in such case, the liens,
security interests, estates and rights granted by this Deed of Trust shall be
satisfied and the estate, right, title and interest of Lender in the Property
shall cease, and upon payment to Lender of all costs and expenses incurred for
the preparation of the release hereinafter referenced and all recording costs if
allowed by law, Lender shall promptly satisfy and release this Deed of Trust of
record and the lien hereof by proper instrument.
ARTICLE I.
REPRESENTATIONS AND WARRANTIES OF BORROWER
     Borrower, for itself and its successors and assigns, does hereby represent,
warrant and covenant to and with Lender, its successors and assigns, that:
     1.1 Organization; Special Purpose. Borrower has been duly organized and is
validly existing and in good standing under the laws of the state of its
formation, with requisite power and authority, and all rights, licenses, permits
and authorizations, governmental or otherwise, necessary to own its properties
and to transact the business in which it is now engaged. Borrower is duly
qualified to do business and is in good standing in each jurisdiction where it
is required to be so qualified in connection with its properties, business and
operations. Borrower possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits necessary for the conduct of its business
substantially as now conducted. Borrower is a Single-Purpose Entity in
compliance with the provisions of Section 2.29 hereof.
     1.2 Title. Borrower has good, marketable and indefeasible fee simple title
to the Property, subject only to those matters expressly set forth as exceptions
to or subordinate matters in the title insurance policy insuring the lien of
this Deed of Trust delivered as of the date hereof which Lender has agreed to
accept, excepting therefrom all preprinted and/or standard exceptions (such
items being the “Permitted Encumbrances”), and has full power and lawful
authority to grant, bargain, sell, convey, assign, transfer, encumber and
mortgage its interest in the Property in the manner and form hereby done or
intended. Borrower will preserve its interest in and title to the Property and
will forever warrant and defend the same to Lender against any and all claims
whatsoever and will forever warrant and defend the validity and priority of the
lien and security interest created herein against the claims of all persons and
parties whomsoever, subject to the Permitted Encumbrances. Upon proper
recordation and indexing, this Deed of Trust creates (i) a valid, perfected lien
on the Premises, subject only to Permitted Encumbrances and the liens created by
the Loan Documents and (ii) perfected security interests in and to, and
perfected collateral assignments of, all personalty, all in accordance with the
terms thereof, in each case subject only to any applicable Permitted
Encumbrances, such other liens as are permitted pursuant to the Loan Documents
and the liens created by the Loan Documents. There are no security agreements or
financing statements affecting all or any portion of the Property other than
(i) as disclosed in writing by Borrower to Lender prior to the date hereof and
(ii) the security agreements and financing statements created in favor of
Lender. There are no claims for payment for work, labor or materials affecting
the Premises which are or may become a lien prior to, or of equal priority with,
the liens created by the Loan Documents. None of the Permitted Encumbrances,
individually or in the aggregate, materially interfere with the benefits of the
security intended to be provided by this Deed of Trust, materially and adversely
affect the value of the Premises, impair the use or operations of the Premises
or impair Borrower’s ability to pay its obligations

4

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in a timely manner. The foregoing warranty of title shall survive the
foreclosure of this Deed of Trust and shall inure to the benefit of and be
enforceable by Lender in the event Lender acquires title to the Property
pursuant to any foreclosure.
     1.3 No Bankruptcy Filing. No bankruptcy, insolvency proceedings or
liquidation of all or a substantial portion of the Property is pending or
contemplated by Borrower or, to the best knowledge of Borrower, against Borrower
or by or against any endorser or cosigner of the Note or of any portion of the
Debt, or any guarantor or indemnitor under any guaranty or indemnity agreement,
including, without limitation, that certain Indemnity and Guaranty Agreement,
dated the date hereof, executed in favor of Lender (the “Indemnity and Guaranty
Agreement”) executed in connection with the Note or the loan evidenced thereby
and secured hereby (an “Indemnitor”). No petition in bankruptcy has been filed
against Borrower or any general partner, manager, sole member, managing member
or majority shareholder of Borrower, as applicable (collectively, the “Borrower
Parties”, each a “Borrower Party”), and neither Borrower Party or any principal
of a Borrower Party has ever made an assignment for the benefit of creditors or
taken advantage of any insolvency act for the benefit of debtors.
     1.4 Full and Accurate Disclosure. No statement of fact made by Borrower in
any Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained therein not
misleading. There is no material fact presently known to Borrower that has not
been disclosed to Lender which adversely affects, or, as far as Borrower can
foresee, might adversely affect, the Property or the business, operations or
condition (financial or otherwise) of Borrower. All financial data, including
the statements of cash flow and income and operating expense, that have been
delivered to Lender with respect to Borrower and the Property (i) are true,
complete and correct in all material respects, (ii) accurately represent the
financial condition of Borrower and the Property as of the date of such reports,
and (iii) to the extent prepared by an independent certified public accounting
firm, have been prepared in accordance with sound accounting practices relating
to the real estate industry, on a Cash/Tax basis, consistently applied
throughout the periods covered, except as disclosed therein. Borrower has no
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments, unrealized or anticipated losses from any unfavorable commitments
or any liabilities or obligations not expressly permitted by this Deed of Trust.
Since the date of such financial statements, there has been no materially
adverse change in the financial condition, operations or business of Borrower or
the Property from that set forth in said financial statements.
     1.5 Proceedings; Enforceability. The execution, delivery and performance of
this Deed of Trust, the Note and all of the other Loan Documents have been duly
authorized by all necessary action to be, and are, binding and enforceable
against Borrower in accordance with the respective terms thereof and do not
contravene, result in a breach of or constitute a default (nor upon the giving
of notice or the passage of time or both will constitute a default) under the
partnership agreement, articles of incorporation, operating agreement or other
organizational documents of Borrower or any contract or agreement of any nature
to which Borrower is a party or by which Borrower or any of its property may be
bound and do not violate or contravene any law, order, decree, rule or
regulation to which Borrower is subject. The Loan Documents are not subject to,
and Borrower has not asserted, any right of rescission, set-off, counterclaim or
defense, including the defense of usury.
     1.6 No Conflicts. Borrower is not required to obtain any consent, approval
or authorization from or to file any declaration or statement with, any
governmental authority or agency in connection with or as a condition to the
execution, delivery or performance of this Deed of Trust, the Note or the other
Loan Documents which has not been so obtained or filed. Borrower has obtained or
made all necessary (i) consents, approvals and authorizations and registrations
and filings of or with all governmental authorities or agencies and
(ii) consents, approvals, waivers and notifications of partners, stockholders,
members, creditors, lessors and other non-governmental persons and/or entities,
in each

5

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case, which are required to be obtained or made by Borrower in connection with
the execution and delivery of, and the performance by Borrower of its
obligations under, the Loan Documents.
     1.7 Federal Reserve Regulations; Investment Company Act. No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring any
“margin stock” within the meaning of Regulation T, U or X of the Board of
Governors of the Federal Reserve System or for any other purpose that would be
inconsistent with such Regulation T, U or X or any other regulation of such
Board of Governors, or for any purpose prohibited by law or any Loan Document.
Borrower is not (i) an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended; (ii) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended; or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.
     1.8 Taxes. Borrower and any general partner or managing member of Borrower,
if any, has filed all federal, state and local tax returns required to be filed
as of the date hereof and has paid or made adequate provision for the payment of
all federal, state and local taxes, charges and assessments payable by Borrower
and any general partner or managing member, if any, as of the date hereof.
Borrower and any general partner or managing member, if any, believe that their
respective tax returns properly reflect the income and taxes of Borrower and
said general partner or managing member, if any, for the periods covered
thereby, subject only to reasonable adjustments required by the Internal Revenue
Service or other applicable tax authority upon audit. Borrower and the Property
are free from any past due obligations for sales and payroll taxes.
     1.9 ERISA. Borrower (i) has no knowledge of any material liability that has
been incurred or is expected to be incurred by Borrower that is or remains
unsatisfied for any taxes or penalties with respect to any “employee benefit
plan”, as defined in section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), or any “plan” within the meaning of
Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)
or any other benefit plan (other than a multi-employer plan) maintained,
contributed to, or required to be contributed to by Borrower or by any entity
that is under the common control with Borrower within the meaning of ERISA
Section 4001(a)(14) (collectively, a “Plan”) or any plan that would be a Plan
but for the fact that it is a multi-employer plan within the meaning of ERISA
Section 3(37) and (ii) has made and shall continue to make when due all required
contributions to all such Plans, if any. Each such Plan, if any, has been and
will be administered in compliance with its terms and the applicable provisions
of ERISA, the Code and any other applicable Federal or state law and no action
shall be taken or fail to be taken that would result in the disqualification or
loss of the tax-exempt status of any such Plan, if any, intended to be qualified
or tax-exempt. The assets of Borrower do not constitute “plan assets” of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101.
     1.10 Property Compliance. The Premises and the Improvements and the current
intended use thereof by Borrower comply in all material respects with all
applicable restrictive covenants, zoning ordinances, subdivision and building
codes, flood disaster laws, health and environmental laws and regulations and
all other ordinances, orders or requirements issued by any state, federal or
municipal authorities having or claiming jurisdiction over the Property. In the
event that all or any part of the Improvements are destroyed or damaged, said
Improvements can be legally reconstructed to their condition prior to such
damage or destruction, and thereafter exist for the same use without violating
any zoning or other ordinances applicable thereto and without the necessity of
obtaining any variances or special permits. No legal proceedings are pending or,
to the knowledge of Borrower, threatened with respect to the zoning of the
Premises. Neither the zoning nor any other right to construct, use or operate
the Premises is in any way dependent upon or related to any property other than
the Premises. All

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certifications, permits, licenses and approvals, including certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Premises have been obtained and are in full force and effect.
The Premises and Improvements constitute one or more separate tax parcels for
purposes of ad valorem taxation. The Premises and Improvements do not require
any rights over, or restrictions against, other property in order to comply with
any of the aforesaid governmental ordinances, orders or requirements.
     1.11 Utilities. All utility services necessary and sufficient for the full
use, occupancy, operation and disposition of the Premises and the Improvements
for their intended purposes are available to the Property, including water,
storm sewer, sanitary sewer, gas, electric, cable and telephone facilities,
through public rights-of-way or perpetual private easements approved by Lender.
The Property is free from delinquent water charges, sewer rents, taxes and
assessments.
     1.12 Public Access. All streets, roads, highways, bridges and waterways
necessary for access to and full use, occupancy, operation and disposition of
the Premises and the Improvements have been completed, have been dedicated to
and accepted by the appropriate municipal authority and are open and available
to the Premises and the Improvements without further condition or cost to
Borrower. All curb cuts, driveways and traffic signals shown on the survey
delivered to Lender prior to the execution and delivery of this Deed of Trust
are existing and have been fully approved by the appropriate governmental
authority.
     1.13 Litigation; Agreements. There are no judicial, administrative,
mediation or arbitration actions, suits or proceedings pending or threatened
against or affecting Borrower (or, if Borrower is a partnership or a limited
liability company, any of its general partners or members) or the Property
which, if adversely determined, would materially impair either the Property or
Borrower’s ability to perform the covenants or obligations required to be
performed under the Loan Documents. Borrower is not a party to any agreement or
instrument or subject to any restriction which might adversely affect Borrower
or the Property, or Borrower’s business, properties, operations or condition,
financial or otherwise. Borrower is not in default in any material respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any Permitted Encumbrance or any other agreement or
instrument to which it is a party or by which it or the Property is bound.
     1.14 Physical Condition. As of the date of this Deed of Trust, (i) the
Property is free from unrepaired damage caused by fire, flood, accident or other
casualty, (ii) no part of the Premises or the Improvements has been taken in
condemnation, eminent domain or like proceeding nor is any such proceeding
pending or, to Borrower’s knowledge and belief, threatened or contemplated,
(iii) except as may otherwise be disclosed in that certain property condition
assessment (the “Property Condition Report”), dated December 20, 2006 and
prepared by IVI Due Diligence Services, Inc., the Improvements are structurally
sound, in good repair and free of defects in materials and workmanship and have
been constructed and installed in substantial compliance with the plans and
specifications relating thereto, and (iv) all major building systems located
within the Improvements, including, without limitation, the heating and air
conditioning systems and the electrical and plumbing systems, are in good
working order and condition.
     1.15 Contracts. Borrower has delivered to Lender true, correct and complete
copies of all Contracts and all amendments thereto or modifications thereof.
Each Contract constitutes the legal, valid and binding obligation of Borrower
and, to the best of Borrower’s knowledge and belief, is enforceable against any
other party thereto. No default exists, or with the passing of time or the
giving of notice or both would exist, under any Contract which would, in the
aggregate, have a material adverse effect on Borrower or the Property. No
Contract provides any party with the right to obtain a lien or encumbrance upon
the Property superior to the lien of this Deed of Trust. All Contracts affecting
the Property have

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been entered into at arms-length in the ordinary course of Borrower’s business
and provide for the payment of fees in amounts and upon terms comparable to
existing market rates.
     1.16 Leases. Borrower has delivered (i) a true, correct and complete
schedule (the “Rent Roll”) of all Leases affecting the Property as of the date
hereof, which accurately and completely sets forth in all material respects for
each such Lease, the following: the name of the Tenant, the Lease expiration
date, extension and renewal provisions, the base rent payable, the security
deposit held thereunder and any other material provisions of such Lease and
(ii) true, correct and complete copies of all Leases described in the Rent Roll.
Each Lease constitutes the legal, valid and binding obligation of Borrower and,
to the best of Borrower’s knowledge and belief, is enforceable against the
Tenant thereof. No default exists, or with the passing of time or the giving of
notice or both would exist, under any Lease which would, in the aggregate, have
a material adverse effect on Borrower or the Property. No Tenant under any Lease
has, as of the date hereof, paid rent more than thirty (30) days in advance, and
the rents under such Leases have not been waived, released, or otherwise
discharged or compromised. All security deposits required under such Leases have
been fully funded and are held by Borrower in a separate segregated account or
as otherwise required by applicable law. No Lease provides any party with the
right to obtain a lien or encumbrance upon the Property superior to the lien of
this Deed of Trust. The Property forms no part of any property owned, used or
claimed by Borrower as a residence or business homestead and is not exempt from
forced sale under the laws of the state in which the Premises is located.
Borrower hereby disclaims and renounces each and every claim to all or any
portion of the Property as a homestead.
     1.17 Foreign Person. Borrower is not a “foreign person” within the meaning
of §1445(f)(3) of the Code, and the related Treasury Department regulations,
including temporary regulations.
     1.18 Management Agreement. The property management agreement relating to
the Premises (the “Management Agreement”) is in full force and effect and to the
best of Borrower’s knowledge, there is no default, breach or violation existing
thereunder by any party thereto beyond the expiration of applicable notice and
grace periods thereunder and no event has occurred (other than payments due but
not yet delinquent) that, with the passage of time or the giving of notice, or
both, would constitute a default, breach or violation by any party thereunder.
The fee due under the Management Agreement, and the terms and provisions of the
Management Agreement, are subordinate to this Deed of Trust.
     1.19 Fraudulent Transfer. Borrower has not entered into the Loan or any
Loan Document with the actual intent to hinder, delay, or defraud any creditor,
and Borrower has received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair saleable value of Borrower’s assets
exceeds and will, immediately following the execution and delivery of the Loan
Documents, exceed Borrower’s total liabilities, including subordinated,
unliquidated, disputed or contingent liabilities, including the maximum amount
of its contingent liabilities or its debts as such debts become absolute and
matured. Borrower’s assets do not and, immediately following the execution and
delivery of the Loan Documents will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debts and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of Borrower).
     1.20 Foreign Assets Control.
          (a) None of the Borrower, any subsidiary of the Borrower or any
Affiliate of the Borrower or any Indemnitor (i) is a Sanctioned Person (defined
below), (ii) has more than 15% of its

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assets in Sanctioned Countries (defined below), or (iii) derives more than 15%
of its operating income from investments in, or transactions with Sanctioned
Persons or Sanctioned Countries. The loan proceeds to be advanced by Lender will
not be used and have not been used to fund any operations in, finance any
investments or activities in or make any payments to, a Sanctioned Person or a
Sanctioned Country. For purposes of the foregoing, a “Sanctioned Person” shall
mean (i) a person named on the list of “specially designated nationals” or
“blocked persons” maintained by the U.S. Office of Foreign Assets Control
(“OFAC”) at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as
otherwise published from time to time, or (ii) (A) an agency of the government
of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country,
or (C) a person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC. A “Sanctioned Country” shall mean a
country subject to a sanctions program identified on the list maintained by OFAC
and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html,
or as otherwise published from time to time.
          (b) Lender may reject or refuse to accept any Collateral for credit
toward payment of the obligations hereunder or under any of the Loan Documents
that is an account, instrument, chattel paper, lease, or other obligation or
property of any kind due from, owed by, or belonging to, a Sanctioned Person.
          (c) Notwithstanding any grant of a security interest in the Collateral
by virtue of other provisions of this Deed of Trust or under any of the Loan
Documents, (i) no account, instrument, chattel paper or other obligation or
property of any kind due from, owed by, or belonging to, a Sanctioned Person or
(ii) any lease in which the lessee is a Sanctioned Person shall be Collateral.
          (d) Borrower shall pay any civil penalty or fine assessed by the U. S.
Department of the Treasury’s Office of Foreign Assets Control against, and all
reasonable costs and expenses (including counsel fees and disbursements)
incurred in connection with defense thereof by Lender as a result of the funding
of the loan proceeds by Lender hereunder or the acceptance of payments hereunder
or under the Note and other Loan Documents or of Collateral due under any of the
Loan Documents.
All of the representations and warranties in this Article I and elsewhere in the
Loan Documents (i) shall survive for so long as any portion of the Debt remains
owing to Lender and (ii) shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.
ARTICLE II.
COVENANTS OF BORROWER
     For the purposes of further securing the Debt and for the protection of the
security of this Deed of Trust, for so long as the Debt or any part thereof
remains unpaid, Borrower covenants and agrees as follows:
     2.1 Defense of Title. If, while this Deed of Trust is in force, the title
to the Property or the interest of Lender therein shall be the subject, directly
or indirectly, of any action at law or in equity, or be attached directly or
indirectly, or endangered, clouded or adversely affected in any manner,
Borrower, at Borrower’s expense, shall take all necessary and proper steps for
the defense of said title or interest, including the employment of counsel
approved by Lender, the prosecution or defense of litigation, and the compromise
or discharge of claims made against said title or interest. Notwithstanding the
foregoing, in the event that Lender determines that Borrower is not adequately
performing its obligations under this Section, Lender may, without limiting or
waiving any other rights or remedies of Lender hereunder, take such steps with
respect thereto as Lender shall deem necessary or proper and any and all costs
and expenses incurred by Lender in connection therewith, together with interest
thereon at the Default Interest

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Rate (as defined in the Note) from the date incurred by Lender until actually
paid by Borrower, shall be immediately paid by Borrower on demand and shall be
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the indebtedness evidenced by the Note.
     2.2 Performance of Obligations. Borrower shall pay when due the principal
of and the interest on the Debt in accordance with the terms of the Note.
Borrower shall also pay all charges, fees and other sums required to be paid by
Borrower as provided in the Loan Documents, in accordance with the terms of the
Loan Documents, and shall observe, perform and discharge all obligations,
covenants and agreements to be observed, performed or discharged by Borrower set
forth in the Loan Documents in accordance with their terms. Further, Borrower
shall promptly and strictly perform and comply with all covenants, conditions,
obligations and prohibitions required of Borrower in connection with any other
document or instrument affecting title to the Property, or any part thereof,
regardless of whether such document or instrument is superior or subordinate to
this Deed of Trust.
     2.3 Insurance. Borrower shall at Borrower’s expense, maintain in force and
effect on the Property at all times while this Deed of Trust continues in effect
the following insurance:
          (a) Insurance against loss or damage to the Property by fire,
lightning, windstorm, tornado, hail, terrorism, riot and civil commotion,
vandalism, malicious mischief, burglary and theft and against loss and damage by
such other, further and additional risks as may be now or hereafter embraced by
a “special causes of loss” type of insurance policy. The amount of such
insurance shall be not less than one hundred percent (100%) of the full
replacement cost (insurable value) of the Improvements (as established by a
Member of the Appraisal Institute appraisal), without reduction for
depreciation. The determination of the replacement cost amount shall be adjusted
annually to comply with the requirements of the insurer issuing such coverage
or, at Lender’s election, by reference to such indices, appraisals or
information as Lender determines in its reasonable discretion in order to
reflect increased value due to inflation. Absent such annual adjustment, each
policy shall contain inflation guard coverage insuring that the policy limit
will be increased over time to reflect the effect of inflation. “Full
replacement cost,” as used herein and elsewhere in this Section 2.3, means, with
respect to the Improvements, the cost of replacing the Improvements without
regard to deduction for depreciation, exclusive of the cost of excavations,
foundations and footings below the lowest basement floor. Borrower shall also
maintain insurance against loss or damage to furniture, furnishings, fixtures,
equipment and other items (whether personalty or fixtures) included in the
Property and owned by Borrower from time to time to the extent applicable. Each
policy shall contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or a waiver
of any co-insurance provisions, all subject to Lender’s approval. The maximum
deductible shall be $25,000.00.
          (b) If the “special causes of loss” policy required in subsection
(a) above excludes coverage for wind damage, Borrower shall maintain separate
coverage for such risk. Furthermore, if the Property is located in the State of
Florida, or within twenty five (25) miles of the ocean coast of the states of
Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina, Hawaii or South
Carolina, windstorm insurance must be maintained in an amount equal to the
lesser of (i) the full replacement cost of the Property or (ii) the maximum
limit of coverage available with respect to the Improvements and Equipment. If
available, a minimum of eighteen (18) months general business income coverage
specifically relating to wind damage shall be required. The maximum deductible
shall be $25,000.00.
          (c) Ordinance and law insurance is required if the Property is
“non-conforming” with respect to any zoning requirements. Borrower shall
maintain “Coverage A” against loss on value to the undamaged portion of the
Improvements for the full replacement cost of the Improvements. Borrower shall
also maintain “Coverage B” against the cost of demolition in an amount equal to
ten percent (10%) of the total value of the Improvements and “Coverage C”
against increased cost of reconstruction in an

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amount equal to twenty percent (20%) of the total value of the Improvements. The
maximum deductible shall be $25,000.00.
          (d) Commercial General Liability Insurance against claims for personal
injury, bodily injury, death and property damage occurring on, in or about the
Premises or the Improvements in amounts not less than $1,000,000.00 per
occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an
amount not less than $25,000,000. Lender hereby retains the right to
periodically review the amount of said liability insurance being maintained by
Borrower and to require an increase in the amount of said liability insurance
should Lender deem an increase to be reasonably prudent under then existing
circumstances. The maximum deductible shall be $10,000.00.
          (e) Equipment breakdown (also known as boiler and machinery insurance)
is required if steam boilers or other pressure-fired vessels are in operation at
the Premises. Minimum liability coverage per accident must equal the greater of
the replacement cost (insurable value) of the Improvements housing such boiler
or pressure-fired machinery or $2,000,000.00. If one or more large HVAC units is
in operation at the Premises, “Systems Breakdowns” coverage shall be required,
as determined by Lender. Minimum liability coverage per accident must equal the
value of such unit(s). If available, a minimum of eighteen (18) months general
business income coverage specifically relating to boiler and machinery damage
shall be required. The maximum deductible shall be $10,000.00. Co-insurance is
prohibited.
          (f) If the Improvements or any part thereof is situated in an area
designated by the Federal Emergency Management Agency (“FEMA”) as a special
flood hazard area (Zone A or Zone V), flood insurance in an amount equal to the
lesser of: (i) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the Debt if replacement cost coverage is not available for the type of
building insured), or (ii) the maximum insurance available under the appropriate
National Flood Insurance Administration program. If available, a minimum of
eighteen (18) months general business income coverage specifically relating to
flood damage shall be required. The maximum deductible shall be $3,000.00 per
building or a higher minimum amount as required by FEMA or other applicable law.
          (g) If the Property is situated in an area designated by FEMA as a
high probability earthquake area (Zone 2b or greater), Lender may require a
Probable Maximum Loss (“PML”) study to be conducted at the Property. If the PML
study reveals a PML equal to or exceeding twenty percent (20%) of the full
replacement cost of the Improvements, Borrower shall be required to maintain
earthquake insurance in an amount equal to the PML percentage of full
replacement cost of the Improvements. If available, a minimum of eighteen
(18) months general business Income coverage specifically relating to earthquake
damage shall be required. The maximum deductible shall be no more than five
percent (5%) of the value at risk or the lowest deductible available in the
State in which the Property is located.
          (h) During the period of any construction, renovation or alteration of
the existing Improvements which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Lender’s request, a completed value, “All
Risk” Builder’s Risk form or “Course of Construction” insurance policy in
non-reporting form, in an amount approved by Lender, may be required. During the
period of any construction of any addition to the existing Improvements, a
completed value, “All Risk” Builder’s Risk form or “Course of Construction”
insurance policy in non-reporting form, in an amount approved by Lender, shall
be required. The maximum deductible shall be $25,000.00.
          (i) When required by applicable law, ordinance or other regulation,
Worker’s Compensation and Employer’s Liability Insurance covering all persons
subject to the worker’s

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compensation laws of the state in which the Property is located. Additionally,
if Borrower has direct employees, Hired and Non-Owned Auto Insurance is required
in an amount equal to $1,000,000 per occurrence. The maximum deductible shall be
$25,000.00.
          (j) In addition to the specific risk coverage required herein, general
business income (loss of rents) insurance in amounts sufficient to compensate
Borrower for all Rents and Profits or income during a period of not less than
twelve (12) months. The “actual loss” amount of coverage shall be adjusted
annually to reflect the greater of (i) estimated Rents and Profits or income
payable during the succeeding twelve (12) month period or (ii) the projected
operating expenses, capital expenses and debt service for the Property as
approved by Lender in its sole discretion. Additionally, Lender, in its sole
discretion, may require an “Extended Period of Indemnity” endorsement for an
additional six (6) months to allow for re-leasing of the Property. The maximum
deductible shall be $10,000.00.
          (k) Such other insurance on the Property or on any replacements or
substitutions thereof or additions thereto as may from time to time be required
by Lender against other insurable hazards or casualties which at the time are
commonly insured against in the case of property similarly situated including,
without limitation, Sinkhole, Mine Subsidence and Environmental insurance, due
regard being given to the height and type of buildings, their construction,
location, use and occupancy.
     All such insurance shall (i) be with insurers fully licensed and authorized
to do business in the state within which the Premises is located and who have
and maintain a rating of at least (A) A- or higher from Standard & Poors and
(B) AV or higher from A.M. Best, (ii) contain the complete address of the
Premises (or a complete legal description), (iii) be for terms of at least one
year, with premium prepaid, and (iv) be subject to the approval of Lender as to
insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates, and (v) include a standard,
non-contributory, mortgagee clause naming EXACTLY:
Wachovia Bank, National Association,
its Successors and Assigns ATIMA
c/o Wachovia Bank, National Association, as Servicer
P.O. Box 563956
Charlotte, North Carolina 28256-3956
(A) as an additional insured under all liability insurance policies, (B) as the
first mortgagee on all property insurance policies and (C) as the loss payee on
all loss of rents or loss of business income insurance policies.
     Borrower shall, as of the date hereof, deliver to Lender evidence that said
insurance policies have been prepaid as required above and certified copies of
such insurance policies and original certificates of insurance signed by an
authorized agent of the applicable insurance companies evidencing such insurance
satisfactory to Lender. Borrower shall renew all such insurance and deliver to
Lender an Accord 28 certificate for proof of commercial property insurance and
an Accord 25 certificate for proof of liability insurance, together with such
other certificates reasonably requested by Lender and policies evidencing such
renewals at least thirty (30) days before any such insurance shall expire.
Borrower further agrees that each such insurance policy: (i) shall provide for
at least thirty (30) days’ prior written notice to Lender prior to any policy
reduction or cancellation for any reason other than non-payment of premium and
at least ten (10) days’ prior written notice to Lender prior to any cancellation
due to non-payment of premium; (ii) shall contain an endorsement or agreement by
the insurer that any loss shall be payable to Lender in accordance with the
terms of such policy notwithstanding any act or negligence of Borrower which
might otherwise result in forfeiture of such insurance; (iii) shall waive all
rights of subrogation against Lender; and (iv) may be in the form of a blanket
policy provided that, in the event that any such

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coverage is provided in the form of a blanket policy, Borrower hereby
acknowledges and agrees that failure to pay any portion of the premium therefor
which is not allocable to the Property or by any other action not relating to
the Property which would otherwise permit the issuer thereof to cancel the
coverage thereof, would require the Property to be insured by a separate,
single-property policy. The blanket policy must properly identify and fully
protect the Property as if a separate policy were issued for 100% of Replacement
Cost at the time of loss and otherwise meet all of Lender’s applicable insurance
requirements set forth in this Section 2.3. The delivery to Lender of the
insurance policies or the certificates of insurance as provided above shall
constitute an assignment of all proceeds payable under such insurance policies
relating to the Property by Borrower to Lender as further security for the Debt.
In the event of foreclosure of this Deed of Trust, or other transfer of title to
the Property in extinguishment in whole or in part of the Debt, all right, title
and interest of Borrower in and to all proceeds payable under such policies then
in force concerning the Property shall thereupon vest in the purchaser at such
foreclosure, or in Lender or other transferee in the event of such other
transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance. In the event Borrower fails to provide, maintain, keep in force or
deliver and furnish to Lender the policies of insurance required by this Deed of
Trust or evidence of their renewal as required herein, Lender may, but shall not
be obligated to, procure such insurance and Borrower shall pay all amounts
advanced by Lender therefor, together with interest thereon at the Default
Interest Rate from and after the date advanced by Lender until actually repaid
by Borrower, promptly upon demand by Lender. Any amounts so advanced by Lender,
together with interest thereon, shall be secured by this Deed of Trust and by
all of the other Loan Documents securing all or any part of the Debt. Lender
shall not be responsible for nor incur any liability for the insolvency of the
insurer or other failure of the insurer to perform, even though Lender has
caused the insurance to be placed with the insurer after failure of Borrower to
furnish such insurance. Borrower shall not obtain insurance for the Property in
addition to that required by Lender without the prior written consent of Lender,
which consent will not be unreasonably withheld provided that (i) Lender is a
named insured on such insurance, (ii) Lender receives complete copies of all
policies evidencing such insurance, and (iii) such insurance complies with all
of the applicable requirements set forth herein.
     2.4 Payment of Taxes. Borrower shall pay or cause to be paid, except to the
extent provision is actually made therefor pursuant to Section 3.3 of this Deed
of Trust, all taxes and assessments which are or may become a lien on the
Property or which are assessed against or imposed upon the Property. Borrower
shall furnish Lender with receipts (or if receipts are not immediately
available, with copies of canceled checks evidencing payment with receipts to
follow promptly after they become available) showing payment of such taxes and
assessments at least fifteen (15) days prior to the applicable delinquency date
therefor. Notwithstanding the foregoing, Borrower may, in good faith, by
appropriate proceedings and upon notice to Lender, contest the validity,
applicability or amount of any asserted tax or assessment so long as (a) such
contest is diligently pursued, (b) Lender determines, in its subjective opinion,
that such contest suspends the obligation to pay the tax and that nonpayment of
such tax or assessment will not result in the sale, loss, forfeiture or
diminution of the Property or any part thereof or any interest of Lender
therein, and (c) prior to the earlier of the commencement of such contest or the
delinquency date of the asserted tax or assessment, Borrower deposits in the
Impound Account (as hereinafter defined) an amount determined by Lender, to be
adequate to cover the payment of such tax or assessment and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that Borrower shall promptly cause to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final; and provided
further that in any event each such contest shall be concluded and the taxes,
assessments, interest, costs and penalties shall be paid prior to the date any
writ or order is issued under which the Property may be sold, lost or forfeited.

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     2.5 Casualty and Condemnation. Borrower shall give Lender prompt written
notice of (i) the occurrence of any casualty affecting the Property or any
portion thereof, (ii) the institution of any proceedings for eminent domain or
for the condemnation of the Property or any portion thereof or (iii) any written
notification threatening the institution of any proceedings for eminent domain
or for the condemnation of the Property or any portion thereof or any written
request to execute a deed in lieu of condemnation affecting the Property or any
portion thereof. All insurance proceeds on the Property, and all causes of
action, claims, compensation, awards and recoveries for any damage, condemnation
or taking, or any deed in lieu of condemnation, affecting all or any part of the
Property or for any damage or injury to it for any loss or diminution in value
of the Property, are hereby assigned to and shall be paid to Lender. Lender may
participate in any suits or proceedings relating to any such proceeds, causes of
action, claims, compensation, awards or recoveries, and Lender is hereby
authorized, in its own name or in Borrower’s name, to adjust any loss covered by
insurance or any condemnation claim or cause of action, and to settle or
compromise any claim or cause of action in connection therewith, and Borrower
shall from time to time deliver to Lender any instruments required to permit
such participation; provided, however, that, so long as no Event of Default has
occurred, and no event has occurred or failed to occur which with the passage of
time, the giving of notice, or both would constitute an Event of Default (a
“Default”), Lender shall not have the right to participate in the adjustment of
any loss which is not in excess of the lesser of (i) five percent (5%) of the
then outstanding principal balance of the Note and (ii) $100,000. Lender shall
apply any sums received by it under this Section first to the payment of all of
its costs and expenses (including, but not limited to, reasonable legal fees and
disbursements) incurred in obtaining those sums, and then, as follows:
          (a) In the event that (x) less than fifteen percent (15%), in the case
of condemnation, or thirty percent (30%), in the case of casualty, of the fair
market value or net rentable square footage of the Improvements located on the
Premises have been taken or destroyed and (y) Leases covering in the aggregate
at least sixty-five percent (65%) of the total rentable space in the Property
which has been demised under executed and delivered Leases in effect as of the
date of the occurrence of such casualty or condemnation, whichever the case may
be, and each Major Lease (as hereinafter defined) in effect as of such date
shall remain in full force and effect during and after the completion of the
restoration without abatement of rent beyond the time required for restoration,
then if and so long as:
          (1) no Default or Event of Default has occurred hereunder or under any
of the other Loan Documents, and
          (2) the Property can, in Lender’s judgment, with diligent restoration
or repair, be returned to a condition at least equal to the condition thereof
that existed prior to the casualty or partial taking causing the loss or damage
within the earlier to occur of (A) six (6) months after the initial receipt of
any insurance proceeds or condemnation awards by either Borrower or Lender but
in any event prior to the expiration or lapse of rent loss or general business
income necessary to satisfy current obligations of the Loan, and (B) six
(6) months prior to the stated maturity date of the Note, and
          (3) all necessary governmental approvals can be obtained to allow the
rebuilding and reoccupancy of the Property as described in Section (a)(2) above,
and
          (4) there are sufficient sums available (through insurance proceeds or
condemnation awards and contributions by Borrower, the full amount of which
shall, at Lender’s option, have been deposited with Lender) for such restoration
or repair (including, without limitation, for any costs and expenses of Lender
to be incurred in administering said restoration or repair) and for payment of
principal and interest to become due and payable under the Note during such
restoration or repair, and

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          (5) the economic feasibility of the Improvements after such
restoration or repair will be such that income from their operation is
reasonably anticipated to be sufficient to pay operating expenses of the
Property and debt service on the Debt in full with the same coverage ratio
considered by Lender in its determination to make the loan secured hereby, and
          (6) in the event that the insurance proceeds or condemnation awards
received as a result of such casualty or partial taking exceed the lesser of
(i) five percent (5%) of the then outstanding principal balance of the Note and
(ii) $150,000, Borrower shall have delivered to Lender, at Borrower’s sole cost
and expense, an appraisal report in form and substance satisfactory to Lender
appraising the value of the Property as proposed to be restored or repaired to
be not less than the appraised value of the Property considered by Lender in its
determination to make the loan secured hereby, and
          (7) Borrower so elects by written notice delivered to Lender within
five (5) days after settlement of the aforesaid insurance or condemnation claim.
          Lender shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Borrower therefor, to Borrower
in the manner and upon such terms and conditions as would be required by a
prudent interim construction lender, including, but not limited to, the prior
approval by Lender of plans and specifications, contractors and form of
construction contracts and the furnishing to Lender of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors,
in form and substance satisfactory to Lender in its discretion, with any
remainder being applied by Lender for payment of the Debt in whatever order
Lender directs in its absolute sole discretion, or at the discretion of Lender,
the same may be paid, either in whole or in part, to, or for the benefit of,
Borrower for such purposes as Lender shall designate in its discretion.
          (b) In all other cases, namely, in the event that (x) more than
fifteen percent (15%), in the case of condemnation, or thirty percent (30%), in
the case of casualty, of the fair market value or net rentable square footage of
the Improvements located on the Premises have been taken or destroyed (y) Leases
covering in the aggregate at least sixty-five percent (65%) of the total
rentable space in the Property which has been demised under executed and
delivered Leases in effect as of the date of the occurrence of such casualty or
condemnation, whichever the case may be, and each Major Lease (as hereinafter
defined) in effect as of such date will not remain in full force and effect
during and after the completion of the restoration without abatement of rent
beyond the time required for restoration, or (z) Borrower does not elect to
restore or repair the Property pursuant to clause (a) above or otherwise fails
to meet the requirements of clause (a) above, then, in any of such events,
Lender shall elect, in Lender’s absolute discretion and without regard to the
adequacy of Lender’s security to do either of the following: (1) accelerate the
maturity date of the Note and declare any and all of the Debt to be immediately
due and payable and apply the remainder of such sums received pursuant to this
Section to the payment of the Debt in whatever order Lender directs in its
absolute discretion, with any remainder being paid to Borrower, or
(2) notwithstanding that Borrower may have elected not to restore or repair the
Property pursuant to the provisions of Section 2.5(a)(7) above, so long as the
proceeds of any such award with respect to any casualty or condemnation are made
available to the Borrower for restoration, require Borrower to restore or repair
the Property in the manner and upon such terms and conditions as would be
required by a prudent interim construction lender, including, but not limited
to, the deposit by Borrower with Lender, within thirty (30) days after demand
therefor, of any deficiency reasonably determined by Lender to be necessary in
order to assure the availability of sufficient funds to pay for such restoration
or repair, including Lender’s costs and expenses to be incurred in connection
therewith, the prior approval

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by Lender of plans and specifications, contractors and form of construction
contracts and the furnishing to Lender of permits, bonds, lien waivers,
invoices, receipts and affidavits from contractors and subcontractors, in form
and substance satisfactory to Lender in its discretion, and apply the remainder
of such sums toward such restoration and repair, with any balance thereafter
remaining being applied by Lender for payment of the Debt in whatever order
Lender directs in its absolute sole discretion, or at the discretion of Lender,
the same may be paid, either in whole or in part, to, or for the benefit of,
Borrower for such purposes as Lender shall designate in its discretion.
Any reduction in the Debt resulting from Lender’s application of any sums
received by it hereunder shall take effect only when Lender actually receives
such sums and elects to apply such sums to the Debt and, in any event, the
unpaid portion of the Debt shall remain in full force and effect and Borrower
shall not be excused in the payment thereof. Partial payments received by
Lender, as described in the preceding sentence, shall be applied first to the
final payment due under the Note and thereafter to installments due under the
Note in the inverse order of their due date. If Borrower elects or Lender
directs Borrower to restore or repair the Property after the occurrence of a
casualty or partial taking of the Property as provided above, Borrower shall
promptly and diligently, at Borrower’s sole cost and expense and regardless of
whether the insurance proceeds or condemnation award, as appropriate, shall be
sufficient for the purpose, restore, repair, replace and rebuild the Property as
nearly as possible to its value, condition and character immediately prior to
such casualty or partial taking in accordance with the foregoing provisions and
Borrower shall pay to Lender all costs and expenses of Lender incurred in
administering said rebuilding, restoration or repair, provided that Lender makes
such proceeds or award available for such purpose. Borrower agrees to execute
and deliver from time to time such further instruments as may be requested by
Lender to confirm the foregoing assignment to Lender of any award, damage,
insurance proceeds, payment or other compensation. Lender is hereby irrevocably
constituted and appointed the attorney-in-fact of Borrower (which power of
attorney shall be irrevocable so long as any portion of the Debt is outstanding,
shall be deemed coupled with an interest, shall survive the voluntary or
involuntary dissolution of Borrower and shall not be affected by any disability
or incapacity suffered by Borrower subsequent to the date hereof), with full
power of substitution, subject to the terms of this Section, to settle for,
collect and receive any such awards, damages, insurance proceeds, payments or
other compensation from the parties or authorities making the same, to appear in
and prosecute any proceedings therefor and to give receipts and acquittances
therefor.
     2.6 Construction Liens. Borrower shall pay when due all claims and demands
of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Premises or the Improvements; provided, however,
that, Borrower shall have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to Lender and provided that neither the Property nor any interest
therein would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest. In the event Borrower shall contest any such claim or
demand, Borrower shall promptly notify Lender of such contest and thereafter
shall, upon Lender’s request, promptly provide a bond, cash deposit or other
security satisfactory to Lender to protect Lender’s interest and security should
the contest be unsuccessful. If Borrower shall fail to immediately discharge or
provide security against any such claim or demand as aforesaid, Lender may do so
and any and all expenses incurred by Lender, together with interest thereon at
the Default Interest Rate from the date incurred by Lender until actually paid
by Borrower, shall be immediately paid by Borrower on demand and shall be
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the Debt.
     2.7 Rents and Profits. As additional and collateral security for the
payment of the Debt and cumulative of any and all rights and remedies herein
provided for, Borrower hereby absolutely and presently assigns to Lender all
existing and future Rents and Profits. Borrower hereby grants to Lender the
sole, exclusive and immediate right, without taking possession of the Property,
to demand, collect (by

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suit or otherwise), receive and give valid and sufficient receipts for any and
all of said Rents and Profits, for which purpose Borrower does hereby
irrevocably make, constitute and appoint Lender its attorney-in-fact with full
power to appoint substitutes or a trustee to accomplish such purpose (which
power of attorney shall be irrevocable so long as any portion of the Debt is
outstanding, shall be deemed to be coupled with an interest, shall survive the
voluntary or involuntary dissolution of Borrower and shall not be affected by
any disability or incapacity suffered by Borrower subsequent to the date
hereof). Lender shall be without liability for any loss which may arise from a
failure or inability to collect Rents and Profits, proceeds or other payments.
However, until the occurrence of an Event of Default under this Deed of Trust or
under any other of the Loan Documents, Borrower shall have a license to collect,
receive, use and enjoy the Rents and Profits when due and prepayments thereof
for not more than one (1) month prior to due date thereof. Upon the occurrence
of an Event of Default, Borrower’s license shall automatically terminate without
notice to Borrower and Lender may thereafter, without taking possession of the
Property, collect the Rents and Profits itself or by an agent or receiver. From
and after the termination of such license, Borrower shall be the agent of Lender
in collection of the Rents and Profits, and all of the Rents and Profits so
collected by Borrower shall be held in trust by Borrower for the sole and
exclusive benefit of Lender, and Borrower shall, within one (1) business day
after receipt of any Rents and Profits, pay the same to Lender to be applied by
Lender as hereinafter set forth. Neither the demand for or collection of Rents
and Profits by Lender shall constitute any assumption by Lender of any
obligations under any agreement relating thereto. Lender is obligated to account
only for such Rents and Profits as are actually collected or received by Lender.
Borrower irrevocably agrees and consents that the respective payors of the Rents
and Profits shall, upon demand and notice from Lender of an Event of Default,
pay said Rents and Profits to Lender without liability to determine the actual
existence of any Event of Default claimed by Lender. Borrower hereby waives any
right, claim or demand which Borrower may now or hereafter have against any such
payor by reason of such payment of Rents and Profits to Lender, and any such
payment shall discharge such payor’s obligation to make such payment to
Borrower. All Rents collected or received by Lender may be applied against all
expenses of collection, including, without limitation, reasonable attorneys’
fees, against costs of operation and management of the Property and against the
Debt, in whatever order or priority as to any of the items so mentioned as
Lender directs in its sole subjective discretion and without regard to the
adequacy of its security. Neither the exercise by Lender of any rights under
this Section nor the application of any Rents to the Debt shall cure or be
deemed a waiver of any Event of Default. The assignment of Rents and Profits
hereinabove granted shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Property. Borrower has executed an
Assignment of Leases and Rents dated of even date herewith (the “Lease
Assignment”) in favor of Lender covering all of the right, title and interest of
Borrower, as landlord, lessor or licensor, in and to any Leases. All rights and
remedies granted to Lender under the Lease Assignment shall be in addition to
and cumulative of all rights and remedies granted to Lender hereunder.
     2.8 Leases.
          (a) Prior to execution of any Leases of space in the Improvements
after the date hereof, Borrower shall submit to Lender, for Lender’s prior
approval, which approval shall not be unreasonably withheld, a copy of the form
Lease Borrower plans to use in leasing space in the Improvements or at the
Property. All such Leases of space in the Improvements or at the Property shall
be on terms consistent with the terms for similar leases in the market area of
the Premises, shall provide for free rent only if the same is consistent with
prevailing market conditions and shall provide for market rents then prevailing
in the market area of the Premises. Such Leases shall also provide for security
deposits in reasonable amounts consistent with prevailing market conditions.
Borrower shall also submit to Lender for Lender’s approval, which approval shall
not be unreasonably withheld, prior to the execution thereof, any proposed Lease
of the Improvements or any portion thereof that differs materially and adversely
from the aforementioned form Lease. Borrower shall not execute any Lease for all
or a

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substantial portion of the Property, except for an actual occupancy by the
Tenant, lessee or licensee thereunder, and shall at all times promptly and
faithfully perform, or cause to be performed, all of the covenants, conditions
and agreements contained in all Leases with respect to the Property, now or
hereafter existing, on the part of the landlord, lessor or licensor thereunder
to be kept and performed. Borrower shall furnish to Lender, within sixty
(60) days after a request by Lender to do so, but in any event by January 1 of
each year, a current Rent Roll, certified by Borrower as being true and correct,
containing the names of all Tenants with respect to the Property, the terms of
their respective Leases, the spaces occupied and the rentals or fees payable
thereunder and the amount of each Tenant’s security deposit. Upon the request of
Lender, Borrower shall deliver to Lender a copy of each such Lease. Borrower
shall not do or suffer to be done any act, or omit to take any action, that
might result in a default by the landlord, lessor or licensor under any such
Lease or allow the Tenant thereunder to withhold payment of rent or cancel or
terminate same and shall not further assign any such Lease or any such Rents and
Profits. Borrower, at no cost or expense to Lender, shall enforce, short of
termination, the performance and observance of each and every condition and
covenant of each of the parties under such Leases and Borrower shall not
anticipate, discount, release, waive, compromise or otherwise discharge any rent
payable under any of the Leases. Notwithstanding the foregoing, at any time and
from time to time, Lender shall be entitled to, and Borrower hereby grants to
Lender the right to, undertake any and all action as may be required (in the
sole discretion of Lender) to cure any default, or event which with the passage
of time following any notice and cure period shall constitute a default by
Borrower, under such Leases. Borrower shall not, without the prior written
consent of Lender, modify any of the Leases, terminate or accept the surrender
of any Leases, waive or release any other party from the performance or
observance of any obligation or condition under such Leases except, with respect
only to Leases affecting less than the lesser of (x) five percent (5%) of the
gross leaseable area of the Improvements and (y) 2,500 square feet and having a
term of three (3) years or less, in the normal course of business in a manner
which is consistent with sound and customary leasing and management practices
for similar properties in the community in which the Property is located.
Borrower shall not permit the prepayment of any rents under any of the Leases
for more than one (1) month prior to the due date thereof.
          (b) Each Lease executed after the date hereof affecting any of the
Premises or the Improvements must provide, in a manner approved by Lender, that
the Tenant will recognize as its landlord, lessor or licensor, as applicable,
and attorn to any person succeeding to the interest of Borrower upon any
foreclosure of this Deed of Trust or deed in lieu of foreclosure. Each such
Lease shall also provide that, upon request of said successor-in-interest, the
Tenant shall execute and deliver an instrument or instruments confirming its
attornment as provided for in this Section; provided, however, that neither
Lender nor any successor-in-interest shall be bound by any payment of rent for
more than one (1) month in advance, or any amendment or modification of said
Lease made without the express written consent of Lender or said
successor-in-interest.
          (c) Upon the occurrence of an Event of Default under this Deed of
Trust, whether before or after the whole principal sum secured hereby is
declared to be immediately due or whether before or after the institution of
legal proceedings to foreclose this Deed of Trust, forthwith, upon demand of
Lender, Borrower shall surrender to Lender, and Lender shall be entitled to take
actual possession of, the Property or any part thereof personally, or by its
agent or attorneys. In such event, Lender shall have, and Borrower hereby gives
and grants to Lender, the right, power and authority to make and enter into
Leases with respect to the Property or portions thereof for such rents and for
such periods of occupancy and upon conditions and provisions as Lender may deem
desirable in its sole discretion, and Borrower expressly acknowledges and agrees
that the term of any such Lease may extend beyond the date of any foreclosure
sale of the Property, it being the intention of Borrower that in such event
Lender shall be deemed to be and shall be the attorney-in-fact of Borrower for
the purpose of making and entering into Leases of parts or portions of the
Property for the rents and upon the terms, conditions and provisions deemed
desirable to Lender in its sole discretion and with like effect as if such
Leases had been made by

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Borrower as the owner in fee simple of the Property free and clear of any
conditions or limitations established by this Deed of Trust. The power and
authority hereby given and granted by Borrower to Lender shall be deemed to be
coupled with an interest, shall not be revocable by Borrower so long as any
portion of the Debt is outstanding, shall survive the voluntary or involuntary
dissolution of Borrower and shall not be affected by any disability or
incapacity suffered by Borrower subsequent to the date hereof. In connection
with any action taken by Lender pursuant to this Section, Lender shall not be
liable for any loss sustained by Borrower resulting from any failure to let the
Property, or any part thereof, or from any other act or omission of Lender in
managing the Property, nor shall Lender be obligated to perform or discharge any
obligation, duty or liability under any Lease covering the Property or any part
thereof or under or by reason of this instrument or the exercise of rights or
remedies hereunder. Borrower shall, and does hereby, indemnify Lender for, and
hold Lender harmless from, any and all claims, actions, demands, liabilities,
loss or damage which may or might be incurred by Lender under any such Lease or
under this Deed of Trust or by the exercise of rights or remedies hereunder and
from any and all claims and demands whatsoever which may be asserted against
Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants or agreements contained in any
such Lease other than those finally determined by a court of competent
jurisdiction to have resulted solely from the gross negligence or willful
misconduct of Lender. Should Lender incur any such liability, the amount
thereof, including, without limitation, costs, expenses and reasonable
attorneys’ fees, together with interest thereon at the Default Interest Rate
from the date incurred by Lender until actually paid by Borrower, shall be
immediately due and payable to Lender by Borrower on demand and shall be secured
hereby and by all of the other Loan Documents securing all or any part of the
Debt. Nothing in this Section shall impose on Lender any duty, obligation or
responsibility for the control, care, management or repair of the Property, or
for the carrying out of any of the terms and conditions of any such Lease, nor
shall it operate to make Lender responsible or liable for any waste committed on
the Property by the Tenants or by any other parties or for any dangerous or
defective condition of the Property, or for any negligence in the management,
upkeep, repair or control of the Property. Borrower hereby assents to, ratifies
and confirms any and all actions of Lender with respect to the Property taken
under this Section.
     2.9 Alienation and Further Encumbrances.
          (a) Borrower acknowledges that Lender has relied upon the principals
of Borrower and their experience in owning and operating the Property and
properties similar to the Property in connection with the closing of the loan
evidenced by the Note. Accordingly, except as specifically allowed hereinbelow
in this Section and notwithstanding anything to the contrary contained in
Section 6.6 hereof, in the event that the Property or any part thereof or direct
or indirect interest therein or direct or indirect interest in Borrower shall be
sold, conveyed, disposed of, alienated, hypothecated, leased (except to Tenants
of space in the Improvements in accordance with the provisions of Section 2.8
hereof), assigned, pledged, mortgaged, further encumbered or otherwise
transferred or Borrower shall be divested of its title to the Property or any
direct or indirect interest therein, in any manner or way, whether voluntarily
or involuntarily (each, a “Transfer”), without the prior written consent of
Lender being first obtained, which consent may be withheld in Lender’s sole
discretion, then the same shall constitute an Event of Default and Lender shall
have the right, at its option, to declare any or all of the Debt, irrespective
of the maturity date specified in the Note, immediately due and payable and to
otherwise exercise any of its other rights and remedies contained in Article V
hereof. A Transfer within the meaning of this Section 2.9 shall be deemed to
include, among other things: (i) an installment sales agreement wherein Borrower
agrees to sell the Property or any part thereof for a price to be paid in
installments; and (ii) an agreement by Borrower leasing all or a substantial
part of the Property for other than actual occupancy by a space tenant
thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower’s right, title and interest in and to any Leases
or any Rents and Profits.

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          (b) Notwithstanding the foregoing, the following Transfers shall be
permitted under this Section 2.9 without the prior consent of Lender: (i) a
Transfer of corporate stock, limited partnership interests and/or non-managing
member interests in Borrower, or in any partner or member of Borrower, or any
direct or indirect legal or beneficial owner of Borrower, so long as following
such Transfer (whether in one or a series of transactions) or, with respect to
any creation or issuance of new limited partnership interests or membership
interests, not more than 49% of the beneficial economic interest in Borrower
(whether directly or indirectly) has been transferred in the aggregate, there is
no Change of Control and the persons responsible for the day to day management
of the Property and Borrower remain unchanged following such Transfer, (ii) any
involuntary Transfer caused by the death of Borrower, or any partner,
shareholder, joint venturer, member or beneficial owner of a trust, or any
direct or indirect legal or beneficial owner of Borrower, so long as Borrower is
promptly reconstituted, if required, following such death and so long as there
is no Change of Control and those persons responsible for the day to day
management of the Property and Borrower remain unchanged as a result of such
death or any replacement management or controlling parties are approved by
Lender, and (iii) a Transfer comprised of gifts for estate planning purposes of
any individual’s interests in Borrower, or in any of Borrower’s partners,
members, shareholders, beneficial owners of a trust or joint venturers, or any
direct or indirect legal or beneficial owner of Borrower, to the spouse or any
lineal descendant of such individual, or to a trust for the benefit of any one
or more of such individual, spouse or lineal descendant, so long as Borrower is
reconstituted promptly, if required, following such gift and so long as there is
no Change of Control and those persons responsible for the day to day management
of the Property and Borrower remain unchanged following such gift.
Notwithstanding any provision of this Deed of Trust to the contrary, no person
or entity may become an owner of a direct or indirect interest in Borrower,
which interest exceeds forty-nine (49%) percent, without Lender’s prior written
consent unless Borrower has complied with the provisions set forth in Section
2.9(c) below. For purposes of this Section 2.9(b), “Change of Control” shall
mean a change in the identity of the individual or entities or group of
individuals or entities who have the right, by virtue of any partnership
agreement, articles of incorporation, by-laws, articles of organization,
operating agreement or any other agreement, with or without taking any formative
action, to cause Borrower to take some action or to prevent, restrict or impede
Borrower from taking some action which, in either case, Borrower could take or
could refrain from taking were it not for the rights of such individuals.
          (c) Notwithstanding the foregoing provisions of this Section, Lender
shall consent to (x) one or more Transfers of the Property in its entirety, or
(y) one or more Transfers of direct or indirect interests in the Borrower for
which consent is required under this Section 2.9 (any such hereinafter, a
“Sale”) to any person or entity provided that, for each Sale, each of the
following terms and conditions are satisfied:
          (1) No Default and no Event of Default is then continuing hereunder or
under any of the other Loan Documents;
          (2) Borrower gives Lender written notice of the terms of such
prospective Sale not less than sixty (60) days before the date on which such
Sale is scheduled to close and, concurrently therewith, gives Lender all such
information concerning the proposed transferee of the Property or the proposed
owner of the direct or indirect interest in the Borrower for which consent is
required under this Section 2.9, as applicable (hereinafter, “Buyer”) as Lender
would require in evaluating an initial extension of credit to a borrower and
pays to Lender a non-refundable application fee in the amount of $5,000. Lender
shall have the right to approve or disapprove the proposed Buyer. In determining
whether to give or withhold its approval of the proposed Buyer, Lender shall
consider the Buyer’s experience and track record in owning and operating
facilities similar to the Property, the Buyer’s financial strength, the Buyer’s
general business standing and the Buyer’s relationships and experience with
contractors, vendors, tenants,

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lenders and other business entities; provided, however, that, notwithstanding
Lender’s agreement to consider the foregoing factors in determining whether to
give or withhold such approval, such approval shall be given or withheld based
on what Lender determines to be commercially reasonable in Lender’s sole
discretion and, if given, may be given subject to such conditions as Lender may
deem appropriate;
          (3) Borrower pays Lender, concurrently with the closing of such Sale,
a non-refundable assumption fee in an amount equal to all out-of-pocket costs
and expenses, including, without limitation, reasonable attorneys’ fees and
Rating Agency fees, incurred by Lender in connection with the Sale, plus an
amount equal to one percent (1.0%) of the then outstanding principal balance of
the Note;
          (4) In the event that such Sale is a Transfer of the Property in its
entirety, the Buyer assumes and agrees to pay the Debt subject to the provisions
of Section 6.27 hereof and, in all cases (whether such Sale is a Transfer of the
Property in its entirety or a Transfer of direct or indirect interests in the
Borrower for which consent is required under this Section 2.9), prior to or
concurrently with the closing of such Sale, the Buyer executes, without any cost
or expense to Lender, such documents and agreements as Lender shall reasonably
require to evidence and effectuate said assumption and delivers such legal
opinions (including, without limitation, a REMIC opinion) as Lender may require;
          (5) A party associated with the Buyer approved by Lender in its sole
discretion assumes the obligations of the current Indemnitor under its guaranty
or indemnity agreement and environmental indemnity agreement and such party
associated with the Buyer executes, without any cost or expense to Lender, a
substitution agreement or a new guaranty or indemnity agreement or environmental
indemnity agreement in form and substance satisfactory to Lender and delivers
such legal opinions as Lender may require;
          (6) Borrower and the Buyer execute, without any cost or expense to
Lender, new financing statements or financing statement amendments (and new
financing statements as may be necessary) and any additional documents
reasonably requested by Lender;
          (7) Borrower delivers to Lender, without any cost or expense to
Lender, such replacement policy or endorsements to Lender’s title insurance
policy, hazard insurance policy endorsements or certificates and other similar
materials as Lender may deem necessary at the time of the Sale, all in form and
substance satisfactory to Lender, including, without limitation, a replacement
policy or an endorsement or endorsements to Lender’s title insurance policy
insuring the lien of this Deed of Trust, extending the effective date of such
policy to the date of execution and delivery (or, if later, of recording) of the
assumption agreement referenced above in subparagraph (4) of this Section, with
no additional exceptions added to such policy, and, in the event that such Sale
is a Transfer of the Property in its entirety, insuring that fee simple title to
the Property is vested in the Buyer;
          (8) Borrower and any current Indemnitor execute and deliver to Lender,
without any cost or expense to Lender, a release of Lender, its officers,
directors, employees and agents, from all claims and liability relating to the
transactions evidenced by the Loan Documents, through and including the date of
the closing of the Sale, which agreement shall be in form and substance
satisfactory to Lender and shall be binding upon the Buyer and any new
Indemnitor;

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          (9) Subject to the provisions of Section 6.27 hereof, such Sale is not
construed so as to relieve Borrower of any personal liability under the Note or
any of the other Loan Documents for any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale, whether or not
same is discovered prior or subsequent to the closing of such Sale, and Borrower
executes, without any cost or expense to Lender, such documents and agreements
as Lender shall reasonably require to evidence and effectuate the ratification
of said personal liability. In the event that such Transfer is a Sale of the
Property in its entirety, Borrower shall be released from and relieved of any
personal liability under the Note or any of the other Loan Documents for any
acts or events occurring or obligations arising after the closing of such Sale
which are not caused by or arising out of any acts or events occurring or
obligations arising prior to or simultaneously with the closing of such Sale;
          (10) Such Sale is not construed so as to relieve any current
Indemnitor of its obligations under any guaranty or indemnity agreement for any
acts or events occurring or obligations arising prior to or simultaneously with
the closing of such Sale, and each such current Indemnitor executes, without any
cost or expense to Lender, such documents and agreements as Lender shall
reasonably require to evidence and effectuate the ratification of each such
guaranty and indemnity agreement. In the event that such Transfer is a Sale of
the Property in its entirety, each such current Indemnitor shall be released
from and relieved of any of its obligations under any guaranty or indemnity
agreement executed in connection with the loan secured hereby for any acts or
events occurring or obligations arising after the closing of such Sale which are
not caused by or arising out of any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale;
          (11) The Buyer shall furnish, if the Buyer is a corporation,
partnership or other entity, all appropriate papers evidencing the Buyer’s
capacity and good standing, and the qualification of the signers to execute the
assumption of the Debt, which papers shall include certified copies of all
documents relating to the organization and formation of the Buyer and of the
entities, if any, which are partners of the Buyer. In the event that such Sale
is a Transfer of the Property in its entirety, the Buyer shall be a Single
Purpose Entity whose formation documents shall be approved by counsel to Lender,
and who shall comply with the requirements set forth in Section 2.29 hereof;
          (12) Borrower delivers to Lender confirmation in writing (a
“No-Downgrade Confirmation”) from each Rating Agency that such Sale will not
result in a qualification, downgrade or withdrawal of any ratings issued in
connection with any Secondary Market Transaction (as hereinafter defined) or, in
the event the Secondary Market Transaction has not yet occurred, Lender shall,
in its sole discretion, have approved the Sale; and
          (13) The applicable transfer will not result in an increase in the
real property taxes for the Premises and Improvements that would cause the debt
service coverage ratio of the Debt with respect to the immediately succeeding
twelve (12) month period to be less than the debt service coverage ratio of the
Debt for the twelve (12) month period immediately preceding such transfer, in
each case as determined by Lender.
     2.10 Payment of Utilities, Assessments, Charges, Etc. Borrower shall pay
when due all utility charges which are incurred by Borrower or which may become
a charge or lien against any portion of the Property for gas, electricity, water
and sewer services furnished to the Premises and/or the Improvements and all
other assessments or charges of a similar nature, or assessments payable
pursuant to any restrictive covenants, whether public or private, affecting the
Premises and/or the Improvements or any portion thereof, whether or not such
assessments or charges are or may become liens thereon.

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     2.11 Access Privileges and Inspections. Lender and the agents,
representatives and employees of Lender shall, subject to the rights of Tenants,
have full and free access to the Premises and the Improvements and any other
location where books and records concerning the Property are kept at all
reasonable times and, except in the event of an emergency, upon not less than 24
hours prior notice (which notice may be telephonic) for the purposes of
inspecting the Property and of examining, copying and making extracts from the
books and records of Borrower relating to the Property. Borrower shall lend
assistance to all such agents, representatives and employees of Lender.
     2.12 Waste; Alteration of Improvements. Borrower shall not commit, suffer
or permit any waste on the Property nor take any actions that might invalidate
any insurance carried on the Property. Borrower shall maintain the Property in
good condition and repair. No part of the Improvements may be removed,
demolished or materially altered, without the prior written consent of Lender
other than in connection with non-structural day to day maintenance and except
for tenant improvements under Leases. Without the prior written consent of
Lender, Borrower shall not commence construction of any improvements on the
Premises other than improvements required for the maintenance or repair of the
Property. Lender reserves the right to condition its consent to any material
alteration, removal, demolition or new construction on the following: (i) such
conditions as would be required by a prudent interim construction lender,
including, but not limited to, the prior approval by Lender of plans and
specifications, construction budgets, contractors and form of construction
contracts and the furnishing to Lender of evidence regarding funds, permits,
approvals, bonds, insurance, lien waivers, title endorsements, appraisals,
surveys, certificates of occupancy, certificates regarding completion, invoices,
receipts and affidavits from contractors and subcontractors, in form and
substance satisfactory to Lender in its discretion, (ii) the delivery of an
opinion from counsel satisfactory to Lender in its discretion and in form and
substance satisfactory to Lender in its discretion opining as to such matters as
Lender may reasonably require, including, without limitation, an opinion that
such alteration, removal, demolition or new construction will not have an
adverse effect on the status of any trust formed in connection with a Secondary
Market Transaction a “real estate mortgage investment conduit” within the
meaning of Section 860D of the Code (“REMIC”), and (iii) Borrower’s agreement to
pay all fees, costs and expenses incurred by Lender in granting such consent,
including, without limitation, reasonable attorneys’ fees and expenses.
     2.13 Zoning. Without the prior written consent of Lender, Borrower shall
not seek, make, suffer, consent to or acquiesce in any change in the zoning or
conditions of use of the Premises or the Improvements. Borrower shall comply
with and make all payments required under the provisions of any covenants,
conditions or restrictions affecting the Premises or the Improvements. Borrower
shall comply with all existing and future requirements of all governmental
authorities having jurisdiction over the Property. Borrower shall keep all
licenses, permits, franchises and other approvals necessary for the operation of
the Property in full force and effect. Borrower shall operate the Property as an
apartment complex for so long as the Debt is outstanding. If, under applicable
zoning provisions, the use of all or any part of the Premises or the
Improvements is or becomes a nonconforming use, Borrower shall not cause or
permit such use to be discontinued or abandoned without the prior written
consent of Lender. Further, without Lender’s prior written consent, Borrower
shall not file or subject any part of the Premises or the Improvements to any
declaration of condominium or co-operative or convert any part of the Premises
or the Improvements to a condominium, co-operative or other form of multiple
ownership and governance.
     2.14 Financial Statements and Books and Records. Borrower shall keep
accurate books and records of account of the Property and its own financial
affairs sufficient to permit the preparation of financial statements therefrom
in accordance with sound accounting practices relating to the real estate
industry, on a Cash/Tax basis, consistently applied. Lender and its duly
authorized representatives shall

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have the right to examine, copy and audit Borrower’s records and books of
account at all reasonable times. So long as this Deed of Trust continues in
effect, Borrower shall provide to Lender, in addition to any other financial
statements required hereunder or under any of the other Loan Documents, the
following financial statements and information, all of which must be certified
to Lender as being true and correct by Borrower or the person or entity to which
they pertain, as applicable, and be prepared in accordance with sound accounting
practices relating to the real estate industry, on a Cash/Tax basis,
consistently applied, and be in form and substance acceptable to Lender:
          (a) copies of all tax returns filed by Borrower, within thirty
(30) days after the date of filing;
          (b) monthly operating statements for the Property and a Rent Roll,
within sixty (60) days after the end of each calendar month commencing with the
first full month after the date hereof and continuing until the earlier of
(X) twelve (12) calendar months following the date hereof or (Y) the date of a
Secondary Market Transaction;
          (c) quarterly balance sheets, operating statements for the Property
and a Rent Roll, within sixty (60) days after the end of each March, June,
September and December commencing with the calendar quarter during which the
Borrower is permitted to cease submitting monthly operating statements under
subsection (b) above;
          (d) annual balance sheets for the Property and annual financial
statements for Borrower, and each Indemnitor, within one hundred twenty
(120) days after the end of each calendar year;
          (e) such other information with respect to the Property, Borrower, the
principals or general partners in Borrower and each Indemnitor, which may be
reasonably requested from time to time by Lender, within a reasonable time after
the applicable request; and
          (f) if, at the time one or more Disclosure Documents are being
prepared for a securitization, Lender expects that Borrower alone or Borrower
and one or more affiliates of Borrower collectively, or the Property alone or
the Property and any other parcel(s) of real property, together with
improvements thereon and personal property related thereto, that is “related”,
within the meaning of the definition of Significant Obligor, to the Property (a
“Related Property”) collectively, will be a Significant Obligor, Borrower shall
furnish to Lender upon request (i) the selected financial data or, if
applicable, net operating income, required under Item 1112(b)(1) of
Regulation AB and meeting the requirements thereof, if Lender expects that the
principal amount of the Loan, together with any loans made to an affiliate of
Borrower or secured by a Related Property that is included in a securitization
with the Loan (a “Related Loan”), as of the cut-off date for such securitization
may, or if the principal amount of the Loan together with any Related Loans as
of the cut-off date for such securitization and at any time during which the
Loan and any Related Loans are included in a securitization does, equal or
exceed ten percent (10%) (but less than twenty percent (20%)) of the aggregate
principal amount of all mortgage loans included or expected to be included, as
applicable, in the securitization or (ii) the financial statements required
under Item 1112(b)(2) of Regulation AB and meeting the requirements thereof, if
Lender expects that the principal amount of the Loan together with any Related
Loans as of the cut-off date for such securitization may, or if the principal
amount of the Loan together with any Related Loans as of the cut-off date for
such securitization and at any time during which the Loan and any Related Loans
are included in a securitization does, equal or exceed twenty percent (20%) of
the aggregate principal amount of all mortgage loans included or expected to be
included, as applicable, in the securitization. Such financial data or financial
statements shall be furnished to Lender (A) within ten (10) Business Days after
notice from Lender in connection with the preparation of Disclosure Documents
for the securitization, (B) not

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later than thirty (30) days after the end of each fiscal quarter of Borrower and
(C) not later than seventy-five (75) days after the end of each fiscal year of
Borrower; provided, however, that Borrower shall not be obligated to furnish
financial data or financial statements pursuant to clauses (B) or (C) of this
sentence with respect to any period for which a filing pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) in connection
with or relating to the securitization (an “Exchange Act Filing”) is not
required. As used herein, “Regulation AB” shall mean Regulation AB under the
Securities Act of 1933, as amended and the Exchange Act. As used herein,
“Disclosure Document” shall mean a prospectus, prospectus supplement, private
placement memorandum, or similar offering memorandum or offering circular, in
each case in preliminary or final form, used to offer securities in connection
with a securitization. As used herein, “Significant Obligor” shall have the
meaning set forth in Item 1101(k) of Regulation AB.
If any of the aforementioned materials are not furnished to Lender within the
applicable time periods, are not prepared in accordance with the foregoing
requirements or Lender is dissatisfied with the form of any of the foregoing and
has notified Borrower of its dissatisfaction, in addition to any other rights
and remedies of Lender contained herein and provided Lender has given Borrower
at least thirty (30) days notice of such failure and opportunity to cure,
(i) Borrower shall pay to Lender upon demand, at Lender’s option and in its sole
discretion, an amount equal to $2,500 per reporting period, and (ii) Lender
shall have the right, but not the obligation, to obtain the same by means of an
audit by an independent certified public accountant selected by Lender, in which
event Borrower agrees to pay, or to reimburse Lender for, any expense of such
audit and further agrees to provide all necessary information to said accountant
and to otherwise cooperate in the making of such audit.
     2.15 Further Assurances. Borrower shall, on the request of Lender and at
the expense of Borrower: (a) promptly correct any defect, error or omission
which may be discovered in the contents of this Deed of Trust or in the contents
of any of the other Loan Documents; (b) promptly execute, acknowledge, deliver
and record or file such further instruments (including, without limitation,
further mortgages, deeds of trust, security deeds, security agreements,
financing statements, continuation statements and assignments of rents or
leases) and promptly do such further acts as may be necessary, desirable or
proper to carry out more effectively the purposes of this Deed of Trust and the
other Loan Documents and to subject to the liens and security interests hereof
and thereof any property intended by the terms hereof and thereof to be covered
hereby and thereby, including specifically, but without limitation, any
renewals, additions, substitutions, replacements or appurtenances to the
Property; (c) promptly execute, acknowledge, deliver, procure and record or file
any document or instrument (including specifically, without limitation, any
financing statement) deemed advisable by Lender to protect, continue or perfect
the liens or the security interests hereunder against the rights or interests of
third persons; and (d) promptly furnish to Lender, upon Lender’s request, a duly
acknowledged written statement and estoppel certificate addressed to such party
or parties as directed by Lender and in form and substance supplied by Lender,
setting forth all amounts due under the Note, stating whether any Default or
Event of Default has occurred hereunder, stating whether any offsets or defenses
exist against the Debt and containing such other matters as Lender may
reasonably require.
     2.16 Payment of Costs; Reimbursement to Lender. Borrower shall pay all
costs and expenses of every character reasonably incurred in connection with the
closing of the loan evidenced by the Note and secured hereby, attributable or
chargeable to Borrower as the owner of the Property or otherwise attributable to
any consent requested of Lender or any Rating Agency under the terms hereof or
any other Loan Document, including, without limitation, appraisal fees,
recording fees, documentary, stamp, mortgage or intangible taxes, brokerage fees
and commissions, title policy premiums and title search fees, uniform commercial
code/tax lien/litigation search fees, escrow fees, consultants’ fees,
No-Downgrade Confirmations and reasonable attorneys’ fees. If Borrower defaults
in any such payment, which default is not cured within any applicable grace or
cure period, Lender may pay the same and Borrower shall

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reimburse Lender on demand for all such costs and expenses incurred or paid by
Lender, together with such interest thereon at the Default Interest Rate from
and after the date of Lender’s making such payment until reimbursement thereof
by Borrower. Any such sums disbursed by Lender, together with such interest
thereon, shall be additional indebtedness of Borrower secured by this Deed of
Trust and by all of the other Loan Documents securing all or any part of the
Debt. Further, Borrower shall promptly notify Lender in writing of any
litigation or threatened litigation affecting the Property, or any other demand
or claim which, if enforced, could impair or threaten to impair Lender’s
security hereunder. Without limiting or waiving any other rights and remedies of
Lender hereunder, if Borrower fails to perform any of its covenants or
agreements contained in this Deed of Trust or in any of the other Loan Documents
and such failure is not cured within any applicable grace or cure period, or if
any action or proceeding of any kind (including, but not limited to, any
bankruptcy, insolvency, arrangement, reorganization or other debtor relief
proceeding) is commenced which might affect Lender’s interest in the Property or
Lender’s right to enforce its security, then Lender may, at its option, with or
without notice to Borrower, make any appearances, disburse any sums and take any
actions as may be necessary or desirable to protect or enforce the security of
this Deed of Trust or to remedy the failure of Borrower to perform its covenants
and agreements (without, however, waiving any default of Borrower). Borrower
agrees to pay on demand all expenses of Lender or Trustee incurred with respect
to the foregoing (including, but not limited to, reasonable fees and
disbursements of counsel), together with interest thereon at the Default
Interest Rate from and after the date on which Lender or Trustee incurs such
expenses until reimbursement thereof by Borrower. Any such expenses so incurred
by Lender, together with interest thereon as provided above, shall be additional
indebtedness of Borrower secured by this Deed of Trust and by all of the other
Loan Documents securing all or any part of the Debt. The necessity for any such
actions and of the amounts to be paid shall be determined by Lender in its
discretion. Lender is hereby empowered to enter and to authorize others to enter
upon the Property or any part thereof for the purpose of performing or observing
any such defaulted term, covenant or condition without thereby becoming liable
to Borrower or any person in possession holding under Borrower. Borrower hereby
acknowledges and agrees that the remedies set forth in this Section 2.16 shall
be exercisable by Lender, and any and all payments made or costs or expenses
incurred by Lender in connection therewith shall be secured hereby and shall be,
without demand, immediately repaid by Borrower with interest thereon at the
Default Interest Rate, notwithstanding the fact that such remedies were
exercised and such payments made and costs incurred by Lender after the filing
by Borrower of a voluntary case or the filing against Borrower of an involuntary
case pursuant to or within the meaning of the Bankruptcy Reform Act of 1978, as
amended, Title 11 U.S.C., or after any similar action pursuant to any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable to Borrower, Lender, any Indemnitor, the Debt or any of the Loan
Documents. Borrower hereby indemnifies and holds Lender harmless from and
against all loss, cost and expenses with respect to any Event of Default hereof,
any liens (i.e., judgments, mechanics’ and materialmen’s liens, or otherwise),
charges and encumbrances filed against the Property, and from any claims and
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Premises or the Improvements or any nuisance made
or suffered thereon, except those that are due to Lender’s gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction,
including, without limitation, in any case, reasonable attorneys’ fees, costs
and expenses as aforesaid, whether at pretrial, trial or appellate level, and
such indemnity shall survive payment in full of the Debt. This Section shall not
be construed to require Lender to incur any expenses, make any appearances or
take any actions.
     2.17 Security Interest. This Deed of Trust is also intended to encumber and
create a security interest in, and Borrower has GRANTED, BARGAINED, CONVEYED,
ASSIGNED, TRANSFERRED, and SET OVER and by these presents does GRANT, BARGAIN,
CONVEY, ASSIGN, TRANSFER and SET OVER, unto Trustee and Lender, a first and
prior security interest in, all of Borrower’s right, title and

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interest in, to, under and with respect to all sums on deposit with Lender
pursuant to the provisions of Article III hereof or any other Section hereof or
of any other Loan Document and all fixtures, chattels, accounts, equipment,
inventory, contract rights, general intangibles and other personal property
included within the Property, all renewals, replacements of any of the
aforementioned items, or articles in substitution therefor or in addition
thereto or the proceeds thereof (said property is hereinafter referred to
collectively as the “Collateral”), whether or not the same shall be attached to
the Premises or the Improvements in any manner. It is hereby agreed that to the
extent permitted by law, all of the foregoing property is to be deemed and held
to be a part of and affixed to the Premises and the Improvements. The foregoing
security interest shall also cover Borrower’s fee simple interest in any of the
foregoing property which is leased by Borrower. Notwithstanding the foregoing,
all of the foregoing property shall be owned by Borrower and no leasing or
installment sales or other financing or title retention agreement in connection
therewith shall be permitted without the prior written approval of Lender.
Borrower shall, from time to time upon the request of Lender, supply Lender with
a current inventory of all of the property in which Lender is granted a security
interest hereunder, in such detail as Lender may reasonably require. Borrower
shall promptly replace all of the Collateral subject to the lien or security
interest of this Deed of Trust when worn or obsolete with Collateral comparable
to the worn out or obsolete Collateral when new and will not, without the prior
written consent of Lender, remove from the Premises or the Improvements any of
the Collateral subject to the lien or security interest of this Deed of Trust
except such as is replaced by an article of equal suitability and value as above
provided, owned by Borrower free and clear of any lien or security interest
except that created by this Deed of Trust and the other Loan Documents. All of
the Collateral shall be kept at the location of the Premises except as otherwise
required by the terms of the Loan Documents. Borrower shall not use any of the
Collateral in violation of any applicable statute, ordinance or insurance
policy.
     2.18 Security Agreement. This Deed of Trust constitutes a security
agreement between Borrower and Lender with respect to the Collateral in which
Lender is granted a security interest hereunder, and, cumulative of all other
rights and remedies of Lender hereunder, Lender shall have all of the rights and
remedies of a secured party under any applicable Uniform Commercial Code.
Borrower hereby agrees to execute and deliver on demand and hereby irrevocably
constitutes and appoints Lender the attorney-in-fact of Borrower to execute and
deliver and, if appropriate, to file with the appropriate filing officer or
office, such security agreements, financing statements, continuation statements
or other instruments as Lender may request or require in order to impose,
perfect or continue the perfection of the lien or security interest created
hereby. To the extent specifically provided herein, Lender shall have the right
of possession of all cash, securities, instruments, negotiable instruments,
documents, certificates and any other evidences of cash or other property or
evidences of rights to cash rather than property, which are now or hereafter a
part of the Property, and Borrower shall promptly deliver the same to Lender,
endorsed to Lender, without further notice from Lender. Borrower agrees to
furnish Lender with notice of any change in the name, identity, organizational
structure, residence, or principal place of business or mailing address of
Borrower within ten (10) days of the effective date of any such change. Upon the
occurrence of any Event of Default, Lender shall have the rights and remedies as
prescribed in this Deed of Trust, or as prescribed by general law, or as
prescribed by any applicable Uniform Commercial Code, all at Lender’s election.
Any disposition of the Collateral may be conducted by an employee or agent of
Lender. Any person, including both Borrower and Lender, shall be eligible to
purchase any part or all of the Collateral at any such disposition. Expenses of
retaking, holding, preparing for sale, selling or the like (including, without
limitation, Lender’s reasonable attorneys’ fees and legal expenses), together
with interest thereon at the Default Interest Rate from the date incurred by
Lender until actually paid by Borrower, shall be paid by Borrower on demand and
shall be secured by this Deed of Trust and by all of the other Loan Documents
securing all or any part of the Debt. Lender shall have the right to enter upon
the Premises and the Improvements or any real property where any of the property
which is the subject of the security interest granted herein is located to take
possession of, assemble and collect the same or to render it unusable, or
Borrower, upon demand of Lender, shall assemble such property and make it

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available to Lender at the Premises, or at a place which is mutually agreed upon
or, if no such place is agreed upon, at a place reasonably designated by Lender
to be reasonably convenient to Lender and Borrower. If notice is required by
law, Lender shall give Borrower at least ten (10) days’ prior written notice of
the time and place of any public sale of such property, or adjournments thereof,
or of the time of or after which any private sale or any other intended
disposition thereof is to be made, and if such notice is sent to Borrower, as
the same is provided for the mailing of notices herein, it is hereby deemed that
such notice shall be and is reasonable notice to Borrower. No such notice is
necessary for any such property which is perishable, threatens to decline
speedily in value or is of a type customarily sold on a recognized market. Any
sale made pursuant to the provisions of this Section shall be deemed to have
been a public sale conducted in a commercially reasonable manner if held
contemporaneously with a foreclosure sale as provided in Section 5.1(e) hereof
upon giving the same notice with respect to the sale of the Property hereunder
as is required under said Section 5.1(e). Furthermore, to the extent permitted
by law, in conjunction with, in addition to or in substitution for the rights
and remedies available to Lender pursuant to any applicable Uniform Commercial
Code:
          (a) In the event of a foreclosure sale, the Property may, at the
option of Lender, be sold as a whole; and
          (b) It shall not be necessary that Lender take possession of the
aforementioned Collateral, or any part thereof, prior to the time that any sale
pursuant to the provisions of this Section is conducted and it shall not be
necessary that said Collateral, or any part thereof, be present at the location
of such sale; and
          (c) Lender may appoint or delegate any one or more persons as agent to
perform any act or acts necessary or incident to any sale held by Lender,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Lender. The name and address of Borrower (as Debtor under any
applicable Uniform Commercial Code) are as set forth on the first page hereof.
The name and address of Lender (as Secured Party under any applicable Uniform
Commercial Code) are as set forth on the first page hereof.
     2.19 Easements and Rights-of-Way. Borrower shall not grant any easement or
right-of-way with respect to all or any portion of the Premises or the
Improvements without the prior written consent of Lender. Borrower shall comply
with all easements affecting the Property. The purchaser at any foreclosure sale
hereunder may, at its discretion, disaffirm any easement or right-of-way granted
in violation of any of the provisions of this Deed of Trust and may take
immediate possession of the Property free from, and despite the terms of, such
grant of easement or right-of-way. If Lender consents to the grant of an
easement or right-of-way, Lender agrees to grant such consent without charge to
Borrower other than expenses, including, without limitation, reasonable
attorneys’ fees, incurred by Lender in the review of Borrower’s request and in
the preparation of documents effecting the subordination.
     2.20 Compliance with Laws. Borrower shall at all times comply with all
statutes, ordinances, regulations and other governmental or quasi-governmental
requirements and private covenants now or hereafter relating to the ownership,
construction, use or operation of the Property, including, but not limited to,
those concerning employment and compensation of persons engaged in operation and
maintenance of the Property and any environmental or ecological requirements,
even if such compliance shall require structural changes to the Property;
provided, however, that, Borrower may, upon providing Lender with security
satisfactory to Lender, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, regulation or
requirement so long as during such contest the Property shall not be subject to
any lien, charge, fine or other liability and shall not be in danger of being
forfeited, lost or closed. Borrower shall not use or occupy, or allow the use or
occupancy of, the Property

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in any manner which violates any Lease of or any other agreement applicable to
the Property or any applicable law, rule, regulation or order or which
constitutes a public or private nuisance or which makes void, voidable or
cancelable, or increases the premium of, any insurance then in force with
respect thereto.
     2.21 Additional Taxes. In the event of the enactment after the date hereof
of any law of the state in which the Property is located or of any other
governmental entity deducting from the value of the Property for the purpose of
taxing any lien or security interest thereon, or imposing upon Lender the
payment of the whole or any part of the taxes or assessments or charges or liens
herein required to be paid by Borrower, or changing in any way the laws relating
to the taxation of deeds of trust, mortgages or security agreements or debts
secured by deeds of trust, mortgages or security agreements or the interest of
the beneficiary, mortgagee or secured party in the property covered thereby, or
the manner of collection of such taxes, so as to adversely affect this Deed of
Trust or the Debt or Lender, then, and in any such event, Borrower, upon demand
by Lender, shall pay such taxes, assessments, charges or liens, or reimburse
Lender therefor; provided, however, that if in the opinion of counsel for Lender
(a) it might be unlawful to require Borrower to make such payment, or (b) the
making of such payment might result in the imposition of interest beyond the
maximum amount permitted by law, then and in either such event, Lender may
elect, by notice in writing given to Borrower, to declare all of the Debt to be
and become due and payable in full thirty (30) days from the giving of such
notice, and, in connection with the payment of such Debt, no prepayment premium
or fee shall be due unless, at the time of such payment, an Event of Default or
a Default shall have occurred, which Default or Event of Default is unrelated to
the provisions of this Section 2.21, in which event any applicable prepayment
premium or fee in accordance with the terms of the Note shall be due and
payable.
     2.22 Secured Indebtedness. It is understood and agreed that this Deed of
Trust shall secure payment of not only the indebtedness evidenced by the Note
but also any and all substitutions, replacements, renewals and extensions of the
Note, any and all indebtedness and obligations arising pursuant to the terms
hereof and any and all indebtedness and obligations arising pursuant to the
terms of any of the other Loan Documents, all of which indebtedness is equally
secured with and has the same priority as any amounts advanced as of the date
hereof. It is agreed that any future advances made by Lender to or for the
benefit of Borrower from time to time under this Deed of Trust or the other Loan
Documents and whether or not such advances are obligatory or are made at the
option of Lender, or otherwise, made for any purpose, and all interest accruing
thereon, shall be equally secured by this Deed of Trust and shall have the same
priority as all amounts, if any, advanced as of the date hereof and shall be
subject to all of the terms and provisions of this Deed of Trust.
     2.23 Borrower’s Waivers. To the full extent permitted by law, Borrower
agrees that Borrower shall not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the Debt prior to any sale
of the Property to be made pursuant to any provisions contained herein or prior
to the entering of any decree, judgment or order of any court of competent
jurisdiction, or any right under any statute to redeem all or any part of the
Property so sold. Borrower, for Borrower and Borrower’s successors and assigns,
and for any and all persons ever claiming any interest in the Property, to the
full extent permitted by law, hereby knowingly, intentionally and voluntarily,
with and upon the advice of competent counsel: (a) waives, releases,
relinquishes and forever forgoes all rights of valuation, appraisement, stay of
execution, reinstatement and notice of election or intention to mature or
declare due the Debt (except such notices as are specifically provided for
herein); (b) waives, releases, relinquishes and forever forgoes all right to a
marshaling of the assets of Borrower, including the Property, to a sale in the
inverse order of alienation, or to direct the order in which any of the Property
shall be sold in the event of foreclosure of the liens and security interests
hereby created and agrees that any court having jurisdiction to foreclose such
liens and security

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interests may order the Property sold as an entirety; and (c) waives, releases,
relinquishes and forever forgoes all rights and periods of redemption provided
under applicable law. To the full extent permitted by law, Borrower shall not
have or assert any right under any statute or rule of law pertaining to the
exemption of homestead or other exemption under any federal, state or local law
now or hereafter in effect, the administration of estates of decedents or other
matters whatever to defeat, reduce or affect the right of Lender under the terms
of this Deed of Trust to a sale of the Property, for the collection of the Debt
without any prior or different resort for collection, or the right of Lender
under the terms of this Deed of Trust to the payment of the Debt out of the
proceeds of sale of the Property in preference to every other claimant whatever.
Furthermore, Borrower hereby knowingly, intentionally and voluntarily, with and
upon the advice of competent counsel, waives, releases, relinquishes and forever
forgoes all present and future statutes of limitations as a defense to any
action to enforce the provisions of this Deed of Trust or to collect any of the
Debt to the fullest extent permitted by law. Borrower covenants and agrees that
upon the commencement of a voluntary or involuntary bankruptcy proceeding by or
against Borrower, Borrower shall not seek a supplemental stay or otherwise shall
not seek pursuant to 11 U.S.C. §105 or any other provision of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor relief law (whether
statutory, common law, case law, or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, to stay,
interdict, condition, reduce or inhibit the ability of Lender to enforce any
rights of Lender against any guarantor or indemnitor of the secured obligations
or any other party liable with respect thereto by virtue of any indemnity,
guaranty or otherwise.
     In the event an interest in any of the Property is foreclosed upon pursuant
to a judicial or nonjudicial foreclosure sale, Borrower agrees as follows:
notwithstanding the provisions of Sections 51.003, 51.004, and 51.005 of the
Texas Property Code (as the same may be amended from time to time), and only to
the extent permitted by law and to the extent set forth in the Note, Borrower
agrees that Lender shall be entitled to seek a deficiency judgment from Borrower
and any other party obligated on the indebtedness secured hereby equal to the
difference between the amount owing on the indebtedness Debt and the amount for
which the Property was sold pursuant to judicial or nonjudicial foreclosure
sale, subject, however, in all respects to the limitations in Section 2.6 of the
Note and Costs (as defined in the Indemnity and Guaranty Agreement and the
Environmental Indemnity Agreement). Borrower expressly recognizes that this
section constitutes a waiver of the above-cited provisions of the Texas Property
Code which would otherwise permit Borrower and other persons against whom
recovery of deficiencies is sought or Indemnitor independently (even absent the
initiation of deficiency proceedings against them) to present competent evidence
of the fair market value of the Property as of the date of the foreclosure sale
and offset against any deficiency the amount by which the foreclosure sale price
is determined to be less than such fair market value. Borrower further
recognizes and agrees that this waiver creates an irrebuttable presumption that
the foreclosure sale price is equal to the fair market value of the Property for
purposes of calculating deficiencies owed by Borrower, Indemnitor, and others
against whom recovery of a deficiency is sought.
     Alternatively, in the event the waiver provided for above is determined by
a court of competent jurisdiction to be unenforceable, the following shall be
the basis for the finder of fact’s determination of the fair market value of the
Property as of the date of the foreclosure sale in proceedings governed by
Sections 51.003, 51.004 and 51.005 of the Texas Property Code (as amended from
time to time): (i) the Property shall be valued in an “as is” condition as of
the date of the foreclosure sale, without any assumption or expectation that the
Property will be repaired or improved in any manner before a resale of the
Property after foreclosure; (ii) the valuation shall be based upon an assumption
that the foreclosure purchaser desires a resale of the Property for cash
promptly (but no later than twelve (12) months) following the foreclosure sale;
(iii) all reasonable closing costs customarily borne by the seller in commercial
real estate transactions should be deducted from the gross fair market value of
the Property, including, without limitation, brokerage commissions, title
insurance, a survey of the Property, tax prorations, attorneys’ fees, and
marketing costs; (iv) the gross fair market value of the Property shall be

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further discounted to account for any actual holding costs associated with
maintaining the Property pending sale, including, without limitation, utilities
expenses, property management fees, taxes and assessments (to the extent not
accounted for in (iii) above), and other maintenance, operational and ownership
expenses; and (v) any expert opinion testimony given or considered in connection
with a determination of the fair market value of the Property must be given by
persons having at least five (5) years experience in appraising property similar
to the Property and who have conducted and prepared a complete written appraisal
of the Property taking into consideration the factors set forth above.
     2.24 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
          (a) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PREMISES IS
LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THE NOTE, THIS DEED OF TRUST OR ANY OTHER OF THE LOAN DOCUMENTS,
(ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY IN WHICH THE
PREMISES IS LOCATED, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND
(iv) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT
THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).
          (b) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE
DEBT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN EACH OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
     2.25 Attorney-in-Fact Provisions. With respect to any provision of this
Deed of Trust or any other Loan Document whereby Borrower grants to Lender a
power-of-attorney, provided no Default or Event of Default has occurred under
this Deed of Trust, Lender shall first give Borrower written notice at least
three (3) days prior to acting under such power, which notice shall demand that
Borrower first take the proposed action within such period and advising Borrower
that if it fails to do so, Lender will so act under the power; provided,
however, that, in the event that a Default or an Event of Default has occurred,
or if necessary to prevent imminent death, serious injury, damage, loss,
forfeiture or diminution in value to the Property or any surrounding property or
to prevent any adverse affect on Lender’s interest in the Property, Lender may
act immediately and without first giving such notice. In such event, Lender will
give Borrower notice of such action as soon thereafter as reasonably practical.
     2.26 Management. The management of the Property shall be by either:
(a) Borrower or an entity affiliated with Borrower approved by Lender for so
long as Borrower or said affiliated entity is managing the Property in a first
class manner; or (b) a professional property management company approved by
Lender. Such management by an affiliated entity or a professional property
management company shall be pursuant to a written agreement approved by Lender.
In no event shall any manager be

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removed or replaced or the terms of any management agreement modified or amended
without the prior written consent of Lender which approval may be conditioned
upon, among other things, receipt by Lender of a No-Downgrade Confirmation from
each Rating Agency. After an Event of Default or a default under any management
contract then in effect, which default is not cured within any applicable grace
or cure period or if at any time during the term of the Loan the Debt Service
Coverage Ratio (as hereinafter defined) of the Property is ever less than
1.15:1, as determined by Lender, Lender shall have the right to terminate, or to
direct Borrower to terminate, such management contract upon thirty (30) days’
notice and to retain, or to direct Borrower to retain, a new management agent
approved by Lender which approval may be conditioned upon, among other things,
receipt by Lender of a No-Downgrade Confirmation from each Rating Agency. All
Rents and Profits generated by or derived from the Property shall first be
utilized solely for current expenses directly attributable to the ownership and
operation of the Property, including, without limitation, current expenses
relating to Borrower’s liabilities and obligations with respect to this Deed of
Trust and the other Loan Documents, and none of the Rents and Profits generated
by or derived from the Property shall be diverted by Borrower and utilized for
any other purposes unless all such current expenses attributable to the
ownership and operation of the Property have been fully paid and satisfied.
     2.27 Hazardous Waste and Other Substances.
          (a) Except as otherwise may be disclosed in that certain Phase I
Environmental Site Assessment of the Property, dated December 19, 2006 and
prepared by IVI Due Diligence Services, Inc. (the “Phase I”), Borrower hereby
represents and warrants to Lender that, as of the date hereof: (i) to the best
of Borrower’s knowledge, information and belief, none of Borrower nor the
Property nor any Tenant at the Premises nor the operations conducted thereon is
in direct or indirect violation of or otherwise exposed to any liability under
any local, state or federal law, rule or regulation or common law duty
pertaining to human health, natural resources or the environment, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. §9601 et seq.) (“CERCLA”), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. §1251 et seq.), the Clean Air Act (42
U.S.C. §7401 et seq.), the Emergency Planning and Community-Right-to-Know Act
(42 U.S.C. §11001 et seq.), the Endangered Species Act (16 U.S.C. §1531 et
seq.), the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the
Occupational Safety and Health Act (29 U.S.C. §651 et seq.) and the Hazardous
Materials Transportation Act (49 U.S.C. §1801 et seq.), the Texas Solid Waste
Disposals Act (V.T.C.A. Health and Safety Code §361 et seq.) and the Texas Water
Code/Water Quality Control (V.T.C.A. Water Code §26.001 et seq.), regulations
promulgated pursuant to said laws, all as amended from time to time
(collectively, “Environmental Laws”) or otherwise exposed to any liability under
any Environmental Law relating to or affecting the Property, whether or not used
by or within the control of Borrower; (ii) no hazardous, toxic or harmful
substances, wastes, materials, pollutants or contaminants (including, without
limitation, asbestos or asbestos-containing materials, lead based paint, Toxic
Mold (as hereinafter defined) polychlorinated biphenyls, petroleum or petroleum
products or byproducts, flammable explosives, radioactive materials, infectious
substances or raw materials which include hazardous constituents) or any other
substances or materials which are included under or regulated by Environmental
Laws (collectively, “Hazardous Substances”) are located on, in or under or have
been handled, generated, stored, processed or disposed of on or released or
discharged from the Property (including underground contamination), except for
those substances used by Borrower or any Tenant in the ordinary course of their
respective businesses and in compliance with all Environmental Laws and where
such Hazardous Substances could not reasonably be expected to give rise to
liability under Environmental Laws; (iii) radon is not present at the Property
in excess or in violation of any applicable thresholds or standards or in
amounts that require disclosure under applicable law to any tenant or occupant
of or invitee to the Property or to any governmental agency or the general
public; (iv) the Property is not subject to any private or governmental lien or
judicial or administrative notice or action

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arising under Environmental Laws; (v) there is no pending, nor, to Borrower’s
knowledge, information or belief, threatened litigation arising under
Environmental Laws affecting Borrower or the Property; (vi) there are no and
have been no existing or closed underground storage tanks or other underground
storage receptacles for Hazardous Substances or landfills or dumps on the
Property; (vii) Borrower has received no notice of, and to the best of
Borrower’s knowledge and belief, there exists no investigation, action,
proceeding or claim by any agency, authority or unit of government or by any
third party which could result in any liability, penalty, sanction or judgment
under any Environmental Laws with respect to any condition, use or operation of
the Property, nor does Borrower know of any basis for such an investigation,
action, proceeding or claim; and (viii) Borrower has received no notice of and,
to the best of Borrower’s knowledge and belief, there has been no claim by any
party that any use, operation or condition of the Property has caused any
nuisance or any other liability or adverse condition on any other property, nor
does Borrower know of any basis for such an investigation, action, proceeding or
claim. For the purposes hereof, “Toxic Mold” shall mean any mold or fungus at
the Property which is of a type (i) that might pose a significant risk to human
health or the environment or (ii) that would negatively impact the value of the
Property.
          (b) Borrower has not received nor to the best of Borrower’s knowledge,
information and belief has there been issued, any notice, notification, demand,
request for information, citation, summons, or order in any way relating to any
actual, alleged or potential violation or liability arising under Environmental
Laws.
          (c) Neither the Property, nor to the best of Borrower’s knowledge,
information and belief, any property to which Borrower has, in connection with
the maintenance or operation of the Property, directly or indirectly transported
or arranged for the transportation of any Hazardous Substances is listed or, to
the best of Borrower’s knowledge, information and belief, proposed for listing
on the National Priorities List promulgated pursuant to CERCLA or CERCLIS (as
defined in CERCLA) or on any similar federal or state list of sites requiring
environmental investigation or clean-up.
          (d) Borrower shall comply with all applicable Environmental Laws.
Except as to those items disclosed by the Phase I, if any (unless further action
is required under applicable Environmental Laws), Borrower shall keep the
Property or cause the Property to be kept free from Hazardous Substances (except
those substances used by Borrower or any Tenant in the ordinary course of their
respective businesses and except in compliance with all Environmental Laws and
where such Hazardous Substances could not reasonably be expected to give rise to
liability under Environmental Laws) and in compliance with all Environmental
Laws, Borrower shall not install or use any underground storage tanks, shall
expressly prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all Tenants in quantities or
conditions that would violate or give rise to any obligation to take remedial or
other action under any applicable Environmental Laws. Without limiting the
generality of the foregoing, during the term of this Deed of Trust, Borrower
shall not install in the Improvements or permit to be installed in the
Improvements any asbestos or asbestos-containing materials.
          (e) Borrower shall promptly notify Lender if Borrower shall become
aware of (i) the actual or potential existence of any Hazardous Substances on
the Property other than those occurring in the ordinary course of Borrower’s
business and which do not violate, or would not otherwise give rise to liability
under Environmental Laws, (ii) any direct or indirect violation of, or other
exposure to liability under, any Environmental Laws, (iii) any lien, action or
notice affecting the Property or Borrower resulting from any violation or
alleged violation of or liability or alleged liability under any Environmental
Laws, (iv) the institution of any investigation, inquiry or proceeding
concerning Borrower or the Property pursuant to any Environmental Laws or
otherwise relating to Hazardous Substances, or (v) the discovery of any
occurrence, condition or state of facts which would render any representation or

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warranty contained in this Deed of Trust incorrect in any respect if made at the
time of such discovery. Immediately upon receipt of same, Borrower, shall
deliver to Lender copies of any and all requests for information, complaints,
citations, summonses, orders, notices, reports or other communications,
documents or instruments in any way relating to any actual, alleged or potential
violation or liability of any nature whatsoever arising under Environmental Laws
and relating to the Property or to Borrower. Borrower shall remedy or cause to
be remedied in a timely manner (and in any event within the time period
permitted by applicable Environmental Laws) any violation of Environmental Laws
or any condition that could give rise to liability under Environmental Laws.
Without limiting the foregoing, Borrower shall, promptly and regardless of the
source of the contamination or threat to the environment or human health, at its
own expense, take all actions as shall be necessary or prudent, for the clean-up
of any and all portions of the Property or other affected property, including,
without limitation, all investigative, monitoring, removal, containment and
remedial actions in accordance with all applicable Environmental Laws (and in
all events in a manner satisfactory to Lender) and shall further pay or cause to
be paid, at no expense to Lender, all clean-up, administrative and enforcement
costs of applicable governmental agencies which may be asserted against the
Property. In the event Borrower fails to do so, Lender may, but shall not be
obligated to, cause the Property or other affected property to be freed from any
Hazardous Substances or otherwise brought into conformance with Environmental
Laws and any and all costs and expenses incurred by Lender in connection
therewith, together with interest thereon at the Default Interest Rate from the
date incurred by Lender until actually paid by Borrower, shall be immediately
paid by Borrower on demand and shall be secured by this Deed of Trust and by all
of the other Loan Documents securing all or any part of the Debt. Borrower
hereby grants to Lender and its agents and employees access to the Property and
a license to remove any items deemed by Lender to be Hazardous Substances and to
do all things Lender shall deem necessary to bring the Property into conformance
with Environmental Laws.
          (f) Borrower covenants and agrees, at Borrower’s sole cost and
expense, to indemnify, defend (at trial and appellate levels, and with
attorneys, consultants and experts acceptable to Lender), and hold Lender
harmless from and against any and all liens, damages (including without
limitation, punitive or exemplary damages), losses, liabilities (including,
without limitation, strict liability), obligations, settlement payments,
penalties, fines, assessments, citations, directives, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or of any nature whatsoever (including, without limitation,
reasonable attorneys’, consultants’ and experts’ fees and disbursements actually
incurred in investigating, defending, settling or prosecuting any claim,
litigation or proceeding) which may at any time be imposed upon, incurred by or
asserted or awarded against Lender or the Property, and arising directly or
indirectly from or out of: (i) any violation or alleged violation of, or
liability or alleged liability under, any Environmental Law; (ii) the presence,
release or threat of release of or exposure to any Hazardous Substances or radon
on, in, under or affecting all or any portion of the Property or any surrounding
areas, regardless of whether or not caused by or within the control of Borrower;
(iii) any transport, treatment, recycling, storage, disposal or arrangement
therefor of Hazardous Substances whether on the Property, originating from the
Property, or otherwise associated with Borrower or any operations conducted on
the Property at any time; (iv) the failure by Borrower to comply fully with the
terms and conditions of this Section 2.27; (v) the breach of any representation
or warranty contained in this Section 2.27; or (vi) the enforcement of this
Section 2.27, including, without limitation, the cost of assessment,
investigation, containment, removal and/or remediation of any and all Hazardous
Substances from all or any portion of the Property or any surrounding areas, the
cost of any actions taken in response to the presence, release or threat of
release of any Hazardous Substances on, in, under or affecting any portion of
the Property or any surrounding areas to prevent or minimize such release or
threat of release so that it does not migrate or otherwise cause or threaten
danger to present or future public health, safety, welfare or the environment,
and costs incurred to comply with Environmental Laws in connection with all or
any portion of the Property or any surrounding areas. The indemnity set forth in
this Section 2.27 shall also include any diminution in the

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value of the security afforded by the Property or any future reduction in the
sales price of the Property by reason of any matter set forth in this
Section 2.27. The foregoing indemnity shall specifically not include any such
costs relating to Hazardous Substances which are initially placed on, in or
under the Property after foreclosure or other taking of title to the Property by
Lender or its successor or assigns. Lender’s rights under this Section shall
survive payment in full of the Debt and shall be in addition to all other rights
of Lender under this Deed of Trust, the Note and the other Loan Documents.
          (g) Upon Lender’s request, at any time after the occurrence of an
Event of Default or at such other time as Lender has reasonable grounds to
believe that Hazardous Substances are or have been released, stored or disposed
of on the Property, or on property contiguous with the Property, or that the
Property may be in violation of the Environmental Laws, Borrower shall perform
or cause to be performed, at Borrower’s sole cost and expense and in scope, form
and substance satisfactory to Lender, an inspection or audit of the Property
prepared by a hydrogeologist or environmental engineer or other appropriate
consultant approved by Lender indicating the presence or absence of Hazardous
Substances on the Property, the compliance or non-compliance status of the
Property and the operations conducted thereon with applicable Environmental
Laws, or an inspection or audit of the Property prepared by an engineering or
consulting firm approved by Lender indicating the presence or absence of friable
asbestos or substances containing asbestos or lead or substances containing lead
or lead based paint (“Lead Based Paint”) on the Property. If Borrower fails to
provide reports of such inspection or audit within thirty (30) days after such
request, Lender may order the same, and Borrower hereby grants to Lender and its
employees and agents access to the Property and an irrevocable license to
undertake such inspection or audit. The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from the date
incurred by Lender until actually paid by Borrower, shall be immediately paid by
Borrower on demand and shall be secured by this Deed of Trust and by all of the
other Loan Documents securing all or any part of the Debt.
          (h) Reference is made to that certain Environmental Indemnity
Agreement of even date herewith by Triple Net Properties, LLC, a Virginia
limited liability company in favor of Lender (the “Environmental Indemnity
Agreement”). The provisions of this Deed of Trust and the Environmental
Indemnity Agreement shall be read together to maximize the coverage with respect
to the subject matter thereof, as determined by Lender.
          (i) If prior to the date hereof, it was determined that the Property
contains asbestos-containing materials (“ACM’s”), Borrower covenants and agrees
to institute, within thirty (30) days after the date hereof, an operations and
maintenance program (the “Maintenance Program”) designed by an environmental
consultant, satisfactory to Lender, with respect to ACM’s, consistent with
“Guidelines for Controlling Asbestos-Containing Materials in Buildings” (USEPA,
1985) and other relevant guidelines, and such Maintenance Program will hereafter
continuously remain in effect until the Debt secured hereby is repaid in full.
In furtherance of the foregoing, Borrower shall inspect and maintain all ACM’s
on a regular basis and ensure that all ACM’s shall be maintained in a condition
that prevents exposure of residents to ACM’s at all times. Without limiting the
generality of the preceding sentence, Lender may require (i) periodic notices or
reports to Lender in form, substance and at such intervals as Lender may
specify, (ii) an amendment to such operations and maintenance program to address
changing circumstances, laws or other matters, (iii) at Borrower’s sole expense,
supplemental examination of the Property by consultants specified by Lender, and
(iv) variation of the operations and maintenance program in response to the
reports provided by any such consultants.
          (j) If, prior to the date hereof, it was determined that the Property
contains Lead Based Paint, Borrower had prepared an assessment report describing
the location and condition of the Lead Based Paint (a “Lead Based Paint
Report”). If, at any time hereafter, Lead Based Paint is suspected of being
present on the Property, Borrower agrees, at its sole cost and expense and
within twenty (20)

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days thereafter, to cause to be prepared a Lead Based Paint Report prepared by
an expert, and in form, scope and substance, acceptable to Lender. Borrower
agrees that if it has been, or if at any time hereafter it is, determined that
the Property contains Lead Based Paint, on or before thirty (30) days following
(i) the date hereof, if such determination was made prior to the date hereof or
(ii) such determination, if such determination is hereafter made, as applicable,
Borrower shall, at its sole cost and expenses, develop and implement, and
thereafter diligently and continuously carry out (or cause to be developed and
implemented and thereafter diligently and continually to be carried out), an
operations, abatement and maintenance plan for the Lead Based Paint on the
Property, which plan shall be prepared by an expert, and be in form, scope and
substance, acceptable to Lender (together with any Lead Based Paint Report, the
“O&M Plan”). If an O&M Plan has been prepared prior to the date hereof, Borrower
agrees to diligently and continually carry out (or cause to be carried out) the
provisions thereof. Compliance with the O&M Plan shall require or be deemed to
require, without limitation, the proper preparation and maintenance of all
records, papers and forms required under the Environmental Laws.
     2.28 Indemnification; Subrogation.
          (a) Borrower shall indemnify, defend and hold Lender harmless against:
(i) any and all claims for brokerage, leasing, finders or similar fees which may
be made relating to the Property or the Debt, and (ii) any and all liability,
obligations, losses, damages, penalties, claims, actions, suits, costs and
expenses (including Lender’s reasonable attorneys’ fees) of whatever kind or
nature which may be asserted against, imposed on or incurred by Lender in
connection with the Debt, this Deed of Trust, the Property, or any part thereof,
or the exercise by Lender of any rights or remedies granted to it under this
Deed of Trust or arise from the information provided in accordance with the
terms hereof; provided, however, that nothing herein shall be construed to
obligate Borrower to indemnify, defend and hold harmless Lender from and against
any and all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs and expenses enacted against, imposed on or incurred by
Lender by reason of Lender’s willful misconduct or gross negligence.
          (b) If Lender is made a party defendant to any litigation or any claim
is threatened or brought against Lender concerning the Debt, this Deed of Trust,
the Property, or any part thereof, or any interest therein, or the construction,
maintenance, operation or occupancy or use thereof, then Borrower shall
indemnify, defend and hold Lender harmless from and against all liability by
reason of said litigation or claims, including reasonable attorneys’ fees and
expenses incurred by Lender in any such litigation or claim, whether or not any
such litigation or claim is prosecuted to judgment. If Lender commences an
action against Borrower to enforce any of the terms hereof or to prosecute any
breach by Borrower of any of the terms hereof or to recover any sum secured
hereby, Borrower shall pay to Lender its reasonable attorneys’ fees and
expenses. The right to such attorneys’ fees and expenses shall be deemed to have
accrued on the commencement of such action, and shall be enforceable whether or
not such action is prosecuted to judgment. If Borrower breaches any term of this
Deed of Trust, Lender may engage the services of an attorney or attorneys to
protect its rights hereunder, and in the event of such engagement following any
breach by Borrower, Borrower shall pay Lender reasonable attorneys’ fees and
expenses incurred by Lender, whether or not an action is actually commenced
against Borrower by reason of such breach. All references to “attorneys” in this
Subsection and elsewhere in this Deed of Trust shall include, without
limitation, any attorney or law firm engaged by Lender and Lender’s in-house
counsel, and all references to “fees and expenses” in this Subsection and
elsewhere in this Deed of Trust shall include, without limitation, any fees of
such attorney or law firm, any appellate counsel fees, if applicable, and any
allocation charges and allocation costs of Lender’s in-house counsel.
          (c) A waiver of subrogation shall be obtained by Borrower from its
insurance carrier and, consequently, Borrower waives any and all right to claim
or recover against Lender, its officers, employees, agents and representatives,
for loss of or damage to Borrower, the Property, Borrower’s

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property or the property of others under Borrower’s control from any cause
insured against or required to be insured against by the provisions of this Deed
of Trust.
     2.29 Covenants with Respect to Existence, Indebtedness, Operations,
Fundamental Changes of Borrower. (a) Borrower has, since the date of its
formation, and shall do or cause to be done all things necessary to
(i) preserve, renew and keep in full force and effect its existence, rights, and
franchises, (ii) continue to engage in the business presently conducted by it,
(iii) obtain and maintain all licenses, and (iv) qualify to do business and
remain in good standing under the laws of each jurisdiction, in each case as and
to the extent required for the ownership, maintenance, management and operation
of the Property. Borrower hereby represents, warrants and covenants as of the
date hereof and until such time as the Debt is paid in full, that Borrower has
been, since the date of its formation, is, and shall remain a Single-Purpose
Entity (as hereinafter defined). A “Single-Purpose Entity” or “SPE” means a
corporation, limited partnership or limited liability company that:
          (1) was and will be organized solely for the purpose of (i) owning an
interest in the Property, (ii) acting as a general partner of a limited
partnership that owns an interest in the Property, or (iii) acting as the
managing member of a limited liability company that owns an interest in the
Property;
          (2) will not, nor will any partner, limited or general, member or
shareholder thereof, as applicable, amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of incorporation,
by-laws, operating agreement, articles of organization, or other formation
agreement or document, as applicable, in any material term or manner, or in a
manner which adversely affects Borrower’s existence as a Single Purpose Entity;
          (3) will not liquidate or dissolve (or suffer any liquidation or
dissolution), or enter into any transaction of merger or consolidation, or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any stock or other evidence of beneficial ownership of any entity;
          (4) will not, nor will any partner, limited or general, member or
shareholder thereof, as applicable, violate the terms of its partnership
certificate, partnership agreement, articles of incorporation, by-laws,
operating agreement, articles of organization, or other formation agreement or
document, as applicable;
          (5) has not and will not guarantee, pledge its assets for the benefit
of, or otherwise become liable on or in connection with, any obligation of any
other person or entity;
          (6) does not own and will not own any asset other than (i) the
Property, and (ii) incidental personal property necessary for the operation of
the Property;
          (7) is not engaged and will not engage, either directly or indirectly,
in any business other than the ownership, management and operation of the
Property;
          (8) will not enter into any contract or agreement with any general
partner, principal, affiliate or member of Borrower, as applicable, or any
affiliate of any general partner, principal or member of Borrower, except upon
terms and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties other
than an affiliate;
          (9) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the Debt, and (ii) trade payables or accrued expenses incurred in the
ordinary course of business of operating the Property customarily satisfied
within thirty (30) days not evidenced by a note and in an aggregate amount not
to exceed two

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percent (2.0%) of the existing principal balance of the Note, and no other debt
will be secured (senior, subordinate or pari passu) by the Property;
          (10) has not made and will not make any loans or advances to any third
party (including any affiliate);
          (11) is and will be solvent and pay its debts from its assets as the
same shall become due;
          (12) has done or caused to be done and will do all things necessary to
preserve its existence, and will observe all formalities applicable to it;
          (13) will conduct and operate its business in its own name and as
presently conducted and operated;
          (14) will maintain financial statements, books and records and bank
accounts separate from those of its affiliates, including, without limitation,
its general partners or members, as applicable;
          (15) will be, and at all times will hold itself out to the public as,
a legal entity separate and distinct from any other entity (including, without
limitation, any affiliate, general partner, or member, as applicable, or any
affiliate of any general partner or member of Borrower, as applicable) and will
correct any known misunderstanding concerning its separate identity;
          (16) will file its own tax returns;
          (17) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
          (18) will establish and maintain an office through which its business
will be conducted separate and apart from those of its affiliates or shall
allocate fairly and reasonably any overhead and expense for shared office space;
          (19) will not commingle the funds and other assets of Borrower with
those of any general partner, member, affiliate, principal or any other person;
          (20) has and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other person;
          (21) does not and will not hold itself out to be responsible for the
debts or obligations of any other person;
          (22) will pay the salaries of its own employees (if any) from its own
funds and maintain a sufficient number of employees (if any) in light of its
contemplated business operations;
          (23) will pay any liabilities out of its own funds, including salaries
of its employees, not funds of any affiliate; and
          (24) will use stationery, invoices, and checks separate from its
affiliates.
          (b) In addition to the foregoing, for any Borrower that is a single
member Delaware limited liability company (a “SMLLC”), the limited liability
company agreement of the SMLLC (the

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“LLC Agreement”) shall provide that (i) upon the occurrence of any event that
causes the sole member of the SMLLC (“Member”) to cease to be the member of the
SMLLC (other than (A) upon an assignment by Member of all of its limited
liability company interest in the SMLLC and the admission of the transferee, or
(B) the resignation of Member and the admission of an additional member in
either case in accordance with the terms of the Loan Documents and the LLC
Agreement), any person acting as a springing or special member of the SMLLC
shall without any action of any other Person and simultaneously with the Member
ceasing to be the member of the SMLLC, automatically be admitted to the SMLLC
(“Special Member”) and shall continue the SMLLC without dissolution and
(ii) Special Member may not resign from the SMLLC or transfer its rights as
Special Member unless a successor Special Member has been admitted to the SMLLC
as Special Member in accordance with requirements of Delaware law. The LLC
Agreement shall further provide that (i) Special Member shall automatically
cease to be a member of the SMLLC upon the admission to the SMLLC of a
substitute Member, (ii) Special Member shall be a member of the SMLLC that has
no interest in the profits, losses and capital of the SMLLC and has no right to
receive any distributions of the SMLLC’s assets, (iii) pursuant to
Section 18-301 of the Delaware Limited Liability Company Act (the “Act”),
Special Member shall not be required to make any capital contributions to the
SMLLC and shall not receive a limited liability company interest in the SMLLC,
(iv) Special Member, in its capacity as Special Member, may not bind the SMLLC,
and (v) except as required by any mandatory provision of the Act, Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the SMLLC,
including, without limitation, the merger, consolidation or conversion of the
SMLLC. In order to implement the admission to the SMLLC of Special Member,
Special Member shall execute a counterpart to the LLC Agreement. Prior to its
admission to the SMLLC as Special Member, Special Member shall not be a member
of the SMLLC.
          (c) Upon the occurrence of any event that causes the Member to cease
to be a member of the SMLLC, to the fullest extent permitted by law, the
personal representative of Member shall, within ninety (90) days after the
occurrence of the event that terminated the continued membership of Member in
the SMLLC, agree in writing (i) to continue the SMLLC and (ii) to the admission
of the personal representative or its nominee or designee, as the case may be,
as a substitute member of the SMLLC, effective as of the occurrence of the event
that terminated the continued membership of Member of the SMLLC in the SMLLC.
Any action initiated by or brought against Member or Special Member under any
creditors rights laws shall not cause Member or Special Member to cease to be a
member of the SMLLC and upon the occurrence of such an event, the business of
the SMLLC shall continue without dissolution. The LLC Agreement shall provide
that each of Member and Special Member waives any right it might have to agree
in writing to dissolve the SMLLC upon the occurrence of any action initiated by
or brought against Member or Special Member under any creditors rights laws, or
the occurrence of an event that causes Member or Special Member to cease to be a
member of the SMLLC.
     2.30 Embargoed Person. At all times throughout the term of the Loan,
including after giving effect to any Sale hereunder, (a) none of the funds or
assets of Indemnitor that are used to repay the Loan or of Borrower shall
constitute property of, or shall be beneficially owned directly or, to
Borrower’s best knowledge, indirectly, by any person subject to sanctions or
trade restrictions under United States law (“Embargoed Person” or “Embargoed
Persons”) that are identified on (1) the “List of Specially Designated Nationals
and Blocked Persons” maintained by the Office of Foreign Assets Control (OFAC),
U.S. Department of the Treasury, and/or to Borrower’s best knowledge, as of the
date thereof, based upon reasonable inquiry by Borrower, on any other similar
list maintained by OFAC pursuant to any authorizing statute including, but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701
et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any
Executive Order or regulation promulgated thereunder, with the result that the
investment in Borrower or any Indemnitor, as applicable (whether directly or
indirectly), is prohibited by law, or the Loan made by Lender would be in
violation of law, or (2) Executive Order 13224 (September 23, 2001) issued by
the

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President of the United States (“Executive Order Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism”), any related enabling legislation or any other similar Executive
Orders, and (b) no Embargoed Person shall have any direct interest, and to
Borrower’s best knowledge, as of the date hereof, based upon reasonable inquiry
by Borrower, indirect interest, of any nature whatsoever in Borrower or any
Indemnitor, as applicable, with the result that the investment in Borrower or
any Indemnitor, as applicable (whether directly or indirectly), is prohibited by
law or the Loan is in violation of law.
     2.31 Anti-Money Laundering. At all times throughout the term of the Loan,
including after giving effect to any Transfer permitted pursuant to the Loan
Documents, none of the funds of Borrower or any Indemnitor, as applicable, that
are used to repay the Loan shall be derived from any unlawful activity, with the
result that the investment in Borrower or any Indemnitor, as applicable (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law.
     2.32 ERISA.
          (a) Borrower shall not engage in any transaction which would cause any
obligation, or action taken or to be taken, hereunder (or the exercise by Lender
of any of its rights under the Note, this Deed of Trust or any of the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA.
          (b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Deed of Trust, as requested by Lender in its sole discretion, that (i) Borrower
is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a “governmental plan” within the meaning of
Section 3(32) of ERISA; (ii) Borrower is not subject to Federal or state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
     (1) Equity interests in Borrower are publicly offered securities within the
meaning of 29 C.F.R. Section 2510.3-101(b)(2);
     (2) Less than 25 percent of each outstanding class of equity interests in
Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R.
Section 2510.3-101(f)(2); or
     (3) Borrower qualifies as an “operating company” within the meaning of 29
C.F.R. Section 2510.3-101 or an investment company registered under the
Investment Company Act of 1940.
          (c) Borrower shall indemnify Lender and defend and hold Lender
harmless from and against all civil penalties, excise taxes, or other loss, cost
damage and expense (including, without limitation, reasonable attorneys’ fees
and disbursements and costs incurred in the investigation, defense and
settlement of claims and losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual
prohibited transaction exemption under ERISA that may be required, in Lender’s
sole discretion) that Lender may incur, directly or indirectly, as a result of a
default under this Section. This indemnity shall survive any termination,
satisfaction or foreclosure of this Deed of Trust.
     2.33 Intentionally Deleted.

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ARTICLE III.
RESERVES AND CASH MANAGEMENT
     3.1 Reserves Generally.
          (a) As additional security for the payment and performance by Borrower
of all duties, responsibilities and obligations under the Note and the other
Loan Documents, Borrower hereby unconditionally and irrevocably assigns,
conveys, pledges, mortgages, transfers, delivers, deposits, sets over and
confirms unto Lender, and hereby grants to Lender a security interest in,
(i) the Payment Reserve, the Impound Account, the Replacement Reserve, as
applicable (each as hereinafter defined) and any other reserve or escrow account
established pursuant to the terms hereof or of any other Loan Document
(collectively, the “Reserves”), (ii) the accounts into which the Reserves have
been deposited, (iii) all insurance on said accounts, (iv) all accounts,
contract rights and general intangibles or other rights and interests pertaining
thereto, (v) all sums now or hereafter held therein or represented thereby,
(vi) all replacements, substitutions or proceeds thereof, (vii) all instruments
and documents now or hereafter evidencing the Reserves or such accounts,
(viii) all powers, options, rights, privileges and immunities pertaining to the
Reserves (including the right to make withdrawals therefrom), and (ix) all
proceeds of the foregoing. Borrower hereby authorizes and consents to the
account into which the Reserves have been deposited being held in Lender’s name
or the name of any entity servicing the Note for Lender and hereby acknowledges
and agrees that Lender, or at Lender’s election, such servicing agent, shall
have exclusive control over said account. Notice of the assignment and security
interest granted to Lender herein may be delivered by Lender at any time to the
financial institution wherein the Reserves have been established, and Lender, or
such servicing entity, shall have possession of all passbooks or other evidences
of such accounts. Borrower hereby assumes all risk of loss with respect to
amounts on deposit in the Reserves. Funds on deposit in the Replacement Reserve
(collectively, if more than one, the “Interest Bearing Reserves”) shall bear
interest at a rate equal to the then prevailing commercial money market rate.
All amounts deemed earned on funds contributed to the Interest Bearing Reserves
at the rate referenced in the immediately preceding sentence shall be retained
by Lender and accumulated for the benefit of Borrower and added to the balances
in the Interest Bearing Reserves and shall be disbursed for payment of the items
for which other funds in the Interest Bearing Reserves are to be disbursed.
Borrower shall not be entitled to earn any interest with respect to funds on
deposit in the Payment Reserve and the Impound Account. Borrower hereby
knowingly, voluntarily and intentionally stipulates, acknowledges and agrees
that the advancement of the funds from the Reserves as set forth herein is at
Borrower’s direction and is not the exercise by Lender of any right of set-off
or other remedy upon a Default or an Event of Default. Borrower hereby waives
all right to withdraw funds from the Reserves except as provided for in this
Deed of Trust. If an Event of Default shall occur hereunder or under any other
of the Loan Documents Lender may, without notice or demand on Borrower, at its
option: (A) withdraw any or all of the funds (including, without limitation,
interest) then remaining in the Reserves and apply the same, after deducting all
costs and expenses of safekeeping, collection and delivery (including, but not
limited to, reasonable attorneys’ fees, costs and expenses) to the Debt or any
other obligations of Borrower under the other Loan Documents in such manner as
Lender shall deem appropriate in its sole discretion, and the excess, if any,
shall be paid to Borrower, (B) exercise any and all rights and remedies of a
secured party under any applicable Uniform Commercial Code, or (C) exercise any
other remedies available at law or in equity. No such use or application of the
funds contained in the Reserves shall be deemed to cure any Default or Event of
Default.
          (b) The Reserves shall not, unless otherwise explicitly required by
applicable law, be or be deemed to be escrow or trust funds, but, at Lender’s
option and in Lender’s discretion, may either be held in a separate account or
be commingled by Lender with the general funds of Lender. The Reserves are
solely for the protection of Lender and entail no responsibility on Lender’s
part beyond the payment of the respective items for which they are held
following receipt of bills, invoices or statements therefor in

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accordance with the terms hereof and beyond the allowing of due credit for the
sums actually received. Upon assignment of this Deed of Trust by Lender, any
funds in the Reserves shall be turned over to the assignee and any
responsibility of Lender, as assignor, with respect thereto shall terminate. If
the funds in the applicable Reserve shall exceed the amount of payments actually
applied by Lender for the purposes and items for which the applicable Reserve is
held, such excess may be credited by Lender on subsequent payments to be made
hereunder or, at the option of Lender, refunded to Borrower. If, however, the
applicable Reserve shall not contain sufficient funds to pay the sums required
by the dates on which such sums are required to be on deposit in such account,
Borrower shall, within ten (10) days after receipt of written notice thereof,
deposit with Lender the full amount of any such deficiency. If Borrower shall
fail to deposit with Lender the full amount of such deficiency as provided
above, Lender shall have the option, but not the obligation, to make such
deposit, and all amounts so deposited by Lender, together with interest thereon
at the Default Interest Rate from the date so deposited by Lender until actually
paid by Borrower, shall be immediately paid by Borrower on demand and shall be
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the Debt. If there is an Event of Default under this Deed of
Trust, Lender may, but shall not be obligated to, apply at any time the balance
then remaining in any or all of the Reserves against the Debt in whatever order
Lender shall subjectively determine. No such application of any or all of the
Reserves shall be deemed to cure any Event of Default. Upon full payment of the
Debt in accordance with its terms or at such earlier time as Lender may elect,
the balance of any or all of the Reserves then in Lender’s possession shall be
paid over to Borrower and no other party shall have any right or claim thereto.
     3.2 Payment Reserve.
          (a) Contemporaneously with the execution hereof, Borrower has
established with Lender a reserve in the amount of the first (1st) payment of
principal, interest and deposits for any applicable reserves or escrow accounts
required under the terms of this Deed of Trust or the other Loan Documents as
calculated by Lender (the “Payment Reserve”). Borrower understands and agrees
that, notwithstanding the establishment of the Payment Reserve as herein
required, all of the proceeds of the Note have been, and shall be considered,
fully disbursed and shall bear interest and be payable on the terms provided
therein.
          (b) For so long as no Event of Default has occurred hereunder or under
any of the other Loan Documents, Lender shall, on the First Payment Date (as
defined in the Note) under the Note, advance from the Payment Reserve to itself
the amount of the monthly installment due and payable by Borrower under the Note
on the First Payment Date and shall also advance from the Payment Reserve into
the Impound Account the amount of any deposit for taxes and insurance premiums
and into the Replacement Reserve (as hereinafter defined) the amount of any
deposit for Repairs (as hereinafter defined) and into any other reserve account
the amount of any deposit in accordance with the terms of any other Loan
Document required to be paid by Borrower concurrently with such monthly
installment pursuant to the terms hereof and thereof. Provided no Default or
Event of Default has occurred, after the scheduled disbursement from the Payment
Reserve, any amounts then remaining in the Payment Reserve shall be paid to
Borrower. Nothing contained herein, including, without limitation, the existence
of the Payment Reserve, shall release Borrower of any obligation to make
payments under the Note, this Deed of Trust or the other Loan Documents strictly
in accordance with the terms hereof or thereof and, in this regard, without
limiting the generality of the foregoing, should the amounts contained in the
Payment Reserve not be sufficient to pay in full the monthly installments and
the Impound Account, Replacement Reserve and any other applicable reserve
account deposits referenced above in this subparagraph, Borrower shall be
responsible for paying such deficiency on the First Payment Date.
     3.3 Impound Account. Borrower shall establish and maintain at all times
while this Deed of Trust continues in effect an impound account (the “Impound
Account”) with Lender for payment of real

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estate taxes and assessments and insurance on the Property and as additional
security for the Debt. Simultaneously with the execution hereof, Borrower shall
deposit in the Impound Account an amount determined by Lender to be necessary to
ensure that there will be on deposit with Lender an amount which, when added to
the monthly payments subsequently required to be deposited with Lender hereunder
on account of real estate taxes, assessments and insurance premiums, will result
in there being on deposit with Lender in the Impound Account an amount
sufficient to pay the next due installment of real estate taxes and assessments
on the Property at least one (1) month prior to the earlier of (a) the due date
thereof or (b) any such date by which Borrower or Lender is required by law to
pay same and the next due annual insurance premiums with respect to the Property
at least one (1) month prior to the due date thereof. Commencing on the first
monthly payment date under the Note and continuing thereafter on each monthly
payment date under the Note, Borrower shall pay to Lender, concurrently with and
in addition to the monthly payment due under the Note and until the Debt is
fully paid and performed, deposits in an amount equal to one-twelfth (1/12) of
the amount of the annual real estate taxes and assessments that will next become
due and payable on the Property, plus one-twelfth (1/12) of the amount of the
annual premiums that will next become due and payable on insurance policies
which Borrower is required to maintain hereunder, each as estimated and
determined by Lender. So long as no Default or Event of Default has occurred,
and no event has occurred or failed to occur which with the passage of time, the
giving of notice, or both would constitute an Event of Default (a “Default”),
all sums in the Impound Account shall be held by Lender in the Impound Account
to pay said taxes, assessments and insurance premiums before the same become
delinquent. Borrower shall be responsible for ensuring the receipt by Lender, at
least thirty (30) days prior to the respective due date for payment thereof, of
all bills, invoices and statements for all taxes, assessments and insurance
premiums to be paid from the Impound Account, and so long as no Event of Default
has occurred, Lender shall pay the governmental authority or other party
entitled thereto directly to the extent funds are available for such purpose in
the Impound Account. In making any payment from the Impound Account, Lender
shall be entitled to rely on any bill, statement or estimate procured from the
appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability or contestability of any tax, assessment,
valuation, sale, forfeiture, tax lien or title or claim thereof.
     3.4 Intentionally Deleted.
     3.5 Replacement Reserve. As additional security for the Debt, Borrower
shall establish and maintain at all times while this Deed of Trust continues in
effect a repair reserve (the “Replacement Reserve”) with Lender for payment of
costs and expenses incurred by Borrower in connection with the performance of
work to the roofs, chimneys, gutters, downspouts, paving, curbs, ramps,
driveways, balconies, porches, patios, exterior walls, exterior doors and
doorways, windows, elevators and mechanical and HVAC equipment (collectively,
the “Repairs”). Commencing on the first monthly Payment Date under the Note and
continuing thereafter on each monthly Payment Date under the Note, Borrower
shall pay to Lender, concurrently with and in addition to the monthly payment
due under the Note and until the Debt is fully paid and performed, a deposit to
the Replacement Reserve in an amount equal to $7,125 per month. So long as no
Event of Default has occurred, all sums in the Replacement Reserve shall be held
by Lender in the Replacement Reserve to pay the costs and expenses of Repairs.
So long as no Default or Event of Default has occurred, Lender shall, to the
extent funds are available for such purpose in the Replacement Reserve, disburse
to Borrower the amount paid or incurred by Borrower in performing such Repairs
within ten (10) days following: (a) the receipt by Lender of a written request
from Borrower for disbursement from the Replacement Reserve and a certification
by Borrower in a form approved in writing by Lender that the applicable item of
Repair has been completed; (b) the delivery to Lender of invoices, receipts or
other evidence satisfactory to Lender, verifying the cost of performing the
Repairs; (c) for disbursement requests in excess of $25,000.00, the delivery to
Lender of affidavits, lien waivers or other evidence reasonably satisfactory to
Lender showing that all materialmen, laborers,

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subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished material or labor to the
Property have been paid all amounts due for labor and materials furnished to the
Property; (d) for disbursement requests in excess of $25,000.00, delivery to
Lender of a certification from an inspecting architect or other third party
acceptable to Lender describing the completed Repairs and verifying the
completion of the Repairs and the value of the completed Repairs; and (e) for
disbursement requests in excess of $25,000.00, delivery to Lender of a new
certificate of occupancy for the portion of the Improvements covered by such
Repairs, if said new certificate of occupancy is required by law, or a
certification by Borrower that no new certificate of occupancy is required.
Lender shall not be required to make advances from the Replacement Reserve more
frequently than once in any thirty (30) day period. In making any payment from
the Replacement Reserve, Lender shall be entitled to rely on such request from
Borrower without any inquiry into the accuracy, validity or contestability of
any such amount. Lender may, at Borrower’s expense, make or cause to be made
during the term of this Deed of Trust an annual inspection of the Property to
determine the need, as determined by Lender in its reasonable judgment, for
further Repairs of the Property. In the event that such inspection reveals that
further Repairs of the Property are required, Lender shall provide Borrower with
a written description of the required Repairs and Borrower shall complete such
Repairs to the reasonable satisfaction of Lender within ninety (90) days after
the receipt of such description from Lender, or such later date as may be
approved by Lender in its sole discretion.
ARTICLE IV.
EVENTS OF DEFAULT
     4.1 Events of Default. The occurrence of any of the following events shall
be an Event of Default hereunder:
          (a) Borrower (x) fails to pay any payments due under the Note or to
the Reserves on the date when the same is due and payable, or (y) fails to pay
any money to Lender required hereunder at the time or within any applicable
grace period set forth herein, or if no grace period is set forth herein, then
within seven (7) days of the date such payment is due (except those regarding
payments to be made under the Note or to the Reserves, which failure is not
subject to any grace or cure period).
          (b) Borrower fails to provide insurance as required by Section 2.3
hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in Section 2.27 or Section 2.29 hereof.
          (c) Borrower fails to perform any other covenant, agreement,
obligation, term or condition set forth herein, other than those otherwise
described in this Section 4.1, and, to the extent such failure or default is
susceptible of being cured, the continuance of such failure or default for
thirty (30) days after written notice thereof from Lender to Borrower; provided,
however, that if such default is susceptible of cure but such cure cannot be
accomplished with reasonable diligence within said period of time, and if
Borrower commences to cure such default promptly after receipt of notice thereof
from Lender, and thereafter prosecutes the curing of such default with
reasonable diligence, such period of time shall be extended for such period of
time as may be necessary to cure such default with reasonable diligence, but not
to exceed an additional sixty (60) days.
          (d) Any representation or warranty made herein, in or in connection
with any application or commitment relating to the Loan evidenced by the Note,
or in any of the other Loan Documents to Lender by Borrower, by any principal,
general partner, manager or member in Borrower, or by any Indemnitor is
determined by Lender to have been false or misleading in any material respect at
the time made.

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          (e) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a security
interest in or other transfer or further encumbrancing of the Property, Borrower
or its general partners or managing members, or any portion thereof or any
interest therein, in violation of Section 2.9 hereof.
          (f) A default occurs under any of the other Loan Documents which has
not been cured within any applicable grace or cure period therein provided.
          (g) Borrower, general partner or managing member in Borrower or any
Indemnitor becomes insolvent, or makes a transfer in fraud of creditors, or
makes an assignment for the benefit of creditors, or files a petition in
bankruptcy, or is voluntarily adjudicated insolvent or bankrupt or admits in
writing the inability to pay its debts as they mature, or petitions or applies
to any tribunal for or consents to or fails to contest the appointment of a
receiver, trustee, custodian or similar officer for Borrower, for any such
general partner or managing member of Borrower or for any Indemnitor or for a
substantial part of the assets of Borrower, of any such general partner or
managing member of Borrower or of any Indemnitor, or commences any case,
proceeding or other action under any bankruptcy, reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect.
          (h) A petition is filed or any case, proceeding or other action is
commenced against Borrower, against any general partner or managing member of
Borrower or against any Indemnitor seeking to have an order for relief entered
against it as debtor or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or other relief under
any law relating to bankruptcy, insolvency, arrangement, reorganization,
receivership or other debtor relief under any law or statute of any
jurisdiction, whether now or hereafter in effect, or a court of competent
jurisdiction enters an order for relief against Borrower, against any general
partner or managing member of Borrower or against any Indemnitor, as debtor, or
an order, judgment or decree is entered appointing, with or without the consent
of Borrower, of any such general partner or managing member of Borrower or of
any Indemnitor, a receiver, trustee, custodian or similar officer for Borrower,
for any such general partner or managing member of Borrower or for any
Indemnitor, or for any substantial part of any of the properties of Borrower, of
any such general partner or managing member of Borrower or of any Indemnitor,
and if any such event shall occur, such petition, case, proceeding, action,
order, judgment or decree is not dismissed within sixty (60) days after being
commenced.
          (i) The Property or any part thereof is taken on execution or other
process of law in any action against Borrower.
          (j) Borrower abandons all or a portion of the Property.
          (k) The holder of any lien or security interest on the Property
(without implying the consent of Lender to the existence or creation of any such
lien or security interest), whether superior or subordinate to this Deed of
Trust or any of the other Loan Documents, declares a default and such default is
not cured within any applicable grace or cure period set forth in the applicable
document or such holder institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder.
          (l) The Property, or any part thereof, is subjected to waste or to
removal, demolition or material alteration so that the value of the Property is
materially diminished thereby and Lender determines that it is not adequately
protected from any loss, damage or risk associated therewith.
          (m) Any dissolution, termination, partial or complete liquidation,
merger or consolidation of Borrower, any general partner or any managing member,
or any Indemnitor.

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ARTICLE V.
REMEDIES
     5.1 Remedies Available. If there shall occur an Event of Default under this
Deed of Trust, then this Deed of Trust is subject to foreclosure as provided by
law and Lender may, at its option and by or through a trustee, nominee, assignee
or otherwise (including, without limitation, the Trustee), to the fullest extent
permitted by law, exercise any or all of the following rights, remedies and
recourses, either successively or concurrently:
          (a) Acceleration. Accelerate the maturity date of the Note and declare
any or all of the Debt to be immediately due and payable without any
presentment, demand, protest, notice or action of any kind whatever (each of
which is hereby expressly waived by Borrower), whereupon the same shall become
immediately due and payable. Upon any such acceleration, payment of such
accelerated amount shall constitute a prepayment of the principal balance of the
Note and any applicable prepayment fee provided for in the Note shall then be
immediately due and payable.
          (b) Entry on the Property. Either in person or by agent, with or
without bringing any action or proceeding, or by a receiver appointed by a court
and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, without force or with such
force as is permitted by law and without notice or process or with such notice
or process as is required by law, unless such notice and process is waivable, in
which case Borrower hereby waives such notice and process, and do any and all
acts and perform any and all work which may be desirable or necessary in
Lender’s judgment to complete any unfinished construction on the Premises, to
preserve the value, marketability or rentability of the Property, to increase
the income therefrom, to manage and operate the Property or to protect the
security hereof, and all sums expended by Lender therefor, together with
interest thereon at the Default Interest Rate, shall be immediately due and
payable to Lender by Borrower on demand and shall be secured hereby and by all
of the other Loan Documents securing all or any part of the Debt.
          (c) Collect Rents and Profits. With or without taking possession of
the Property, sue or otherwise collect the Rents and Profits, including those
past due and unpaid.
          (d) Appointment of Receiver. Upon, or at any time prior or after,
initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, to the
extent permitted by law, make application to a court of competent jurisdiction
for appointment of a receiver for all or any part of the Property, as a matter
of strict right and without notice to Borrower and without regard to the
adequacy of the Property for the repayment of the Debt or the solvency of
Borrower or any person or persons liable for the payment of the Debt, and
Borrower does hereby irrevocably consent to such appointment, waive any and all
notices of and defenses to such appointment and agree not to oppose any
application therefor by Lender, but nothing herein is to be construed to deprive
Lender of any other right, remedy or privilege Lender may now have under the law
to have a receiver appointed, provided, however, that the appointment of such
receiver, trustee or other appointee by virtue of any court order, statute or
regulation shall not impair or in any manner prejudice the rights of Lender to
receive payment of the Rents and Profits pursuant to other terms and provisions
hereof. Any such receiver shall have all of the usual powers and duties of
receivers in similar cases, including, without limitation, the full power to
hold, develop, rent, lease, manage, maintain, operate and otherwise use or
permit the use of the Property upon such terms and conditions as said receiver
may deem to be prudent and reasonable under the circumstances as more fully set
forth in Section 5.3 below. Such receivership shall, at the option of

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Lender, continue until full payment of all of the Debt or until title to the
Property shall have passed by foreclosure sale under this Deed of Trust or deed
in lieu of foreclosure.
          (e) Foreclosure. Immediately commence an action to foreclose this Deed
of Trust or to specifically enforce its provisions with respect to any of the
Debt, pursuant to the statutes in such case made and provided, and sell the
Property or cause the Property to be sold in accordance with the requirements
and procedures provided by said statutes in a single parcel or, to the extent
permitted by law, in several parcels at the option of Lender. In the event
foreclosure proceedings are instituted by Lender, all expenses incident to such
proceedings, including, but not limited to, reasonable attorneys’ fees and
costs, shall be paid by Borrower and secured by this Deed of Trust and by all of
the other Loan Documents securing all or any part of the Debt. The Debt and all
other obligations secured by this Deed of Trust, including, without limitation,
interest at the Default Interest Rate any prepayment charge, fee or premium
required to be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), reasonable attorneys’ fees and any other amounts
due and unpaid to Lender under the Loan Documents, may be bid by Lender in the
event of a foreclosure sale hereunder. In the event of a judicial sale pursuant
to a foreclosure decree, it is understood and agreed that Lender or its assigns
may become the purchaser of the Property or any part thereof.
          (f) Judicial Remedies. Proceed by suit or suits, at law or in equity,
instituted by or on behalf of Lender, to enforce the payment of the Debt or the
other obligations of Borrower hereunder or pursuant to the Loan Documents, to
foreclose the liens and security interests of this Deed of Trust as against all
or any part of the Property, and to have all or any part of the Property sold
under the judgment or decree of a court of competent jurisdiction. This remedy
shall be cumulative of any other non-judicial remedies available to Lender with
respect to the Loan Documents. Proceeding with the request or receiving a
judgment for legal relief shall not be or be deemed to be an election of
remedies or bar any available non-judicial remedy of Lender.
          (g) Sale of Property. (i) Trustee, at the request of Lender, shall
have the power to sell the Property or any part thereof at public auction to the
highest bidder for cash, in such manner, at such time, and place, upon such
terms and notice to Borrower as provided in Section 51.002 of the Texas Property
Code, as amended, or if and to the extent such statute is not then in force,
with the applicable requirements at the time of sale of the successor statute or
statutes, if any governing sales of Texas real property under power of sale
conferred by deeds of trust. If there is no statute in force at the time of sale
governing sales of Texas real property under powers of sale conferred by deeds
of trust, such sale shall comply with applicable law at the time of sale. The
Property shall be conveyed in fee simple by trustee’s deed with special warranty
of title to and at the cost of the purchaser, who shall not be liable to see to
the application of the purchase money. The proceeds or avails of any sale made
under or by virtue of this paragraph, together with any other sums which then
may be held by Lender under this Deed of Trust, whether under the provisions of
this paragraph or otherwise, shall be applied as provided in Section 5.2 hereof.
Lender, Trustee and any receiver or custodian of the Property or any part
thereof shall be liable to account for only those rents, issues, proceeds and
profits actually received by it.
          (ii) Lender and Trustee, as applicable, may adjourn from time to time
any sale by it to be made under or by virtue of this Deed of Trust by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales and, except as otherwise provided by any applicable law, Lender or
Trustee, without further notice or publication, may make such sale at the time
and place to which the same shall be so adjourned.
          (iii) Upon the completion of any sale or sales ordered by Lender and
made by Trustee under or by virtue of this paragraph, Lender or Trustee, or any
officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument, or good and

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sufficient instruments, granting, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold.
Trustee is hereby irrevocably appointed the true and lawful attorney-in-fact for
Borrower (coupled with an interest), in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the property and
rights so sold and for that purpose Trustee may execute all necessary
instruments of conveyance, assignment, transfer and delivery, and may substitute
one or more persons with like power, Borrower hereby ratifying and confirming
all that its said attorney-in-fact or such substitute or substitutes shall
lawfully do by virtue hereof. Nevertheless, Borrower, if so requested by Trustee
or Lender, shall ratify and confirm any such sale or sales by executing and
delivering to Lender, or to such purchaser or purchasers all such instruments as
may be advisable, in the sole judgment of Lender, for such purpose, and as may
be designated in such request. Any such sale or sales made under or by virtue of
this paragraph, whether made under the power of sale herein granted or under or
by virtue of judicial proceedings or a judgment or decree of foreclosure and
sale, shall operate to divest all the estate, right, title, interest, claim and
demand whatsoever, whether at law or in equity, of Borrower in and to the
property and rights so sold, and shall, to the fullest extent permitted under
law, be a perpetual bar both at law and in equity against Borrower and against
any and all persons claiming or who may claim the same, or any part thereof,
from, through or under Borrower.
          (iv) In the event of any sale made under or by virtue of this Deed of
Trust (whether made under the power of sale herein granted or under or by virtue
of judicial proceedings or a judgment or decree of foreclosure and sale), the
entire Debt relative to the Property, immediately thereupon shall, anything in
the Note, this Deed of Trust or any other of the Loan Documents to the contrary
notwithstanding, become due and payable.
          (v) Upon any sale under or by virtue of this Deed of Trust (whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or a judgment or decree of foreclosure and sale), Lender may bid for
and acquire the Property or any part thereof and in lieu of paying cash therefor
may make settlement for the purchase price by crediting the Debt to and against
the net sales price after deducting therefrom the expenses of the sale and the
costs of the action.
          (vi) No recovery of any judgment by Lender and no levy of an execution
under any judgment upon the Property or any part thereof or upon any other
property of Borrower shall release the lien of this Deed of Trust upon the
Property or any part thereof, or any liens, rights, powers or remedies of Lender
hereunder, but such liens, rights, powers and remedies of Lender shall continue
unimpaired until the entire Debt is paid in full.
          (h) Other. Exercise any other right or remedy available hereunder,
under any of the other Loan Documents or at law or in equity.
     5.2 Application of Proceeds. To the fullest extent permitted by law, the
proceeds of any sale under this Deed of Trust shall be applied, to the extent
funds are so available, to the following items in such order as Lender in its
discretion may determine:
          (a) To payment of the reasonable costs, expenses and fees of taking
possession of the Property, and of holding, operating, maintaining, using,
leasing, repairing, improving, marketing and selling the same and of otherwise
enforcing Lender’s rights and remedies hereunder and under the other Loan
Documents, including, but not limited to, receivers’ fees, court costs,
attorneys’, accountants’, appraisers’, managers’ and other professional fees,
title charges and transfer taxes.

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          (b) To payment of all sums expended by Lender under the terms of any
of the Loan Documents and not yet repaid, together with interest on such sums at
the Default Interest Rate.
          (c) To payment of the Debt and all other obligations secured by this
Deed of Trust, including, without limitation, interest at the Default Interest
Rate and, to the extent permitted by applicable law, any prepayment fee, charge
or premium required to be paid under the Note in order to prepay principal, in
any order that Lender chooses in its sole discretion.
          (d) The remainder, if any, of such funds shall be disbursed to
Borrower or to the person or persons legally entitled thereto.
     5.3 Right and Authority of Receiver or Lender in the Event of Default;
Power of Attorney. Upon the occurrence of an Event of Default, and entry upon
the Property pursuant to Section 5.1(b) hereof or appointment of a receiver
pursuant to Section 5.1(d) hereof, and under such terms and conditions as may be
prudent and reasonable under the circumstances in Lender’s or the receiver’s
sole discretion, all at Borrower’s expense, Lender or said receiver, or such
other persons or entities as they shall hire, direct or engage, as the case may
be, may do or permit one or more of the following, successively or concurrently:
(a) enter upon and take possession and control of any and all of the Property;
(b) take and maintain possession of all documents, books, records, papers and
accounts relating to the Property; (c) exclude Borrower and its agents, servants
and employees wholly from the Property; (d) manage and operate the Property;
(e) preserve and maintain the Property; (f) make repairs and alterations to the
Property; (g) complete any construction or repair of the Improvements, with such
changes, additions or modifications of the plans and specifications or intended
disposition and use of the Improvements as Lender may in its sole discretion
deem appropriate or desirable to place the Property in such condition as will,
in Lender’s sole discretion, make it or any part thereof readily marketable or
rentable; (h) conduct a marketing or leasing program with respect to the
Property, or employ a marketing or leasing agent or agents to do so, directed to
the leasing or sale of the Property under such terms and conditions as Lender
may in its sole discretion deem appropriate or desirable; (i) employ such
contractors, subcontractors, materialmen, architects, engineers, consultants,
managers, brokers, marketing agents, or other employees, agents, independent
contractors or professionals, as Lender may in its sole discretion deem
appropriate or desirable to implement and effectuate the rights and powers
herein granted; (j) execute and deliver, in the name of Lender as
attorney-in-fact and agent of Borrower or in its own name as Lender, such
documents and instruments as are necessary or appropriate to consummate
authorized transactions; (k) enter such leases, whether of real or personal
property, or tenancy agreements, under such terms and conditions as Lender may
in its sole discretion deem appropriate or desirable; (1) collect and receive
the Rents and Profits from the Property; (m) eject tenants or repossess personal
property, as provided by law, for breaches of the conditions of their leases or
other agreements; (n) initiate a cause of action for unpaid Rents and Profits,
payments, income or proceeds in the name of Borrower or Lender; (o) maintain
actions in forcible entry and detainer, ejectment for possession and actions in
distress for rent; (p) compromise or give acquittance for Rents and Profits,
payments, income or proceeds that may become due; (q) delegate or assign any and
all rights and powers given to Lender by this Deed of Trust; and (r) do any acts
which Lender in its sole discretion deems appropriate or desirable to protect
the security hereof and use such measures, legal or equitable, as Lender may in
its sole discretion deem appropriate or desirable to implement and effectuate
the provisions of this Deed of Trust. This Deed of Trust shall constitute a
direction to and full authority to any lessee, or other third party who has
heretofore dealt or contracted or may hereafter deal or contract with Borrower
or Lender, at the request of Lender, to pay all amounts owing under any Lease,
contract, concession, license or other agreement to Lender without proof of the
Event of Default relied upon. Any such lessee or third party is hereby
irrevocably authorized to rely upon and comply with (and shall be fully
protected by Borrower in so doing) any request, notice or demand by Lender for
the payment to Lender of any Rents and Profits or other sums which may be or
thereafter become due under its Lease, contract, concession, license or other
agreement,

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or for the performance of any undertakings under any such Lease, contract,
concession, license or other agreement, and shall have no right or duty to
inquire whether any Event of Default under this Deed of Trust or under any of
the other Loan Documents has actually occurred or is then existing. Borrower
hereby constitutes and appoints Lender, its assignees, successors, transferees
and nominees, as Borrower’s true and lawful attorney-in-fact and agent, with
full power of substitution in the Property, in Borrower’s name, place and stead,
to do or permit any one or more of the foregoing described rights, remedies,
powers and authorities, successively or concurrently, and said power of attorney
shall be deemed a power coupled with an interest and irrevocable so long as any
portion of the Debt is outstanding. Any money advanced by Lender in connection
with any action taken under this Section 5.3, together with interest thereon at
the Default Interest Rate from the date of making such advancement by Lender
until actually paid by Borrower, shall be a demand obligation owing by Borrower
to Lender and shall be secured by this Deed of Trust and by every other
instrument securing all or any portion of the Debt.
     5.4 Occupancy After Foreclosure. In the event there is a foreclosure sale
hereunder and at the time of such sale, Borrower or Borrower’s representatives,
successors or assigns, or any other persons claiming any interest in the
Property by, through or under Borrower (except tenants of space in the
Improvements subject to leases entered into prior to the date hereof), are
occupying or using the Property, or any part thereof, then, to the extent not
prohibited by applicable law, each and all shall, at the option of Lender or the
purchaser at such sale, as the case may be, immediately become the tenant of the
purchaser at such sale, which tenancy shall be a tenancy from day-to-day,
terminable at the will of either landlord or tenant, at a reasonable rental per
day based upon the value of the Property occupied or used, such rental to be due
daily to the purchaser. Further, to the extent permitted by applicable law, in
the event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Premises is located.
     5.5 Notice to Account Debtors. Lender may, at any time after an Event of
Default, notify the account debtors and obligors of any accounts, chattel paper,
negotiable instruments or other evidences of indebtedness to Borrower included
in the Property to pay Lender directly. Borrower shall at any time or from time
to time upon the request of Lender provide to Lender a current list of all such
account debtors and obligors and their addresses.
     5.6 Cumulative Remedies. All remedies contained in this Deed of Trust are
cumulative and Lender shall also have all other remedies provided at law and in
equity or in any other Loan Documents. Such remedies may be pursued separately,
successively or concurrently at the sole subjective direction of Lender and may
be exercised in any order and as often as occasion therefor shall arise. No act
of Lender shall be construed as an election to proceed under any particular
provisions of this Deed of Trust to the exclusion of any other provision of this
Deed of Trust or as an election of remedies to the exclusion of any other remedy
which may then or thereafter be available to Lender. No delay or failure by
Lender to exercise any right or remedy under this Deed of Trust shall be
construed to be a waiver of that right or remedy or of any Event of Default.
Lender may exercise any one or more of its rights and remedies at its option
without regard to the adequacy of its security.
     5.7 Payment of Expenses. Borrower shall pay on demand all of Lender’s
expenses incurred in any efforts to enforce any terms of this Deed of Trust,
whether or not any lawsuit is filed and whether or not foreclosure is commenced
but not completed, including, but not limited to, reasonable legal fees and
disbursements, fees of any Rating Agency, fees related to any No-Downgrade
Confirmation, foreclosure costs and title charges, together with interest
thereon from and after the date incurred by Lender until actually paid by
Borrower at the Default Interest Rate, and the same shall be secured by this
Deed of Trust and by all of the other Loan Documents securing all or any part of
the Debt.

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ARTICLE VI.
MISCELLANEOUS TERMS AND CONDITIONS
     6.1 Time of Essence. Time is of the essence with respect to all provisions
of this Deed of Trust.
     6.2 Release of Deed of Trust. If all of the Debt shall be paid, then and in
that event only, all rights under this Deed of Trust, except for those
provisions hereof which by their terms survive, shall terminate and the Property
shall become wholly clear of the liens, security interests, conveyances and
assignments evidenced hereby, which shall be promptly released of record by
Lender in due form at Borrower’s cost. No release of this Deed of Trust or the
lien hereof shall be valid unless executed by Lender.
     6.3 Certain Rights of Lender. Without affecting Borrower’s liability for
the payment of any of the Debt, Lender may from time to time and without notice
to Borrower: (a) release any person liable for the payment of the Debt;
(b) extend or modify the terms of payment of the Debt; (c) accept additional
real or personal property of any kind as security or alter, substitute or
release any property securing the Debt; (d) recover any part of the Property;
(e) consent in writing to the making of any subdivision map or plat thereof;
(f) join in granting any easement therein; or (g) join in any extension
agreement of this Deed of Trust or any agreement subordinating the lien hereof.
     6.4 Waiver of Certain Defenses. No action for the enforcement of the lien
hereof or of any provision hereof shall be subject to any defense which would
not be good and available to the party interposing the same in an action at law
upon the Note or any of the other Loan Documents.
     6.5 Notices. All notices, demands, requests or other communications to be
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next business day
delivery, or by depositing the same in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, in any event addressed
to the intended addressee at its address set forth on the first page of this
Deed of Trust or at such other address as may be designated by such party as
herein provided. All notices, demands and requests shall be effective upon such
personal delivery, or one (1) business day after being deposited with the
private courier service, or two (2) business days after being deposited in the
United States mail as required above. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. By giving to the other party hereto at least fifteen (15) days’
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
     6.6 Successors and Assigns; Joint and Several Liability. The terms,
provisions, indemnities, covenants and conditions hereof shall be binding upon
Borrower and the successors and assigns of Borrower, including all successors in
interest of Borrower in and to all or any part of the Property, and shall inure
to the benefit of Lender, its directors, officers, shareholders, employees and
agents and their respective successors and assigns and shall constitute
covenants running with the land. All references in this Deed of Trust to
Borrower or Lender shall be deemed to include all such parties’ successors and
assigns, and the term “Lender” as used herein shall also mean and refer to any
lawful holder or owner, including pledgees and participants, of any of the Debt.
If Borrower consists of more than one person or

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entity, each is jointly and severally liable to perform the obligations of
Borrower hereunder and all representations, warranties, covenants and agreements
made by Borrower hereunder are joint and several.
     6.7 Severability. A determination that any provision of this Deed of Trust
is unenforceable or invalid shall not affect the enforceability or validity of
any other provision, and any determination that the application of any provision
of this Deed of Trust to any person or circumstance is illegal or unenforceable
shall not affect the enforceability or validity of such provision as it may
apply to any other persons or circumstances.
     6.8 Gender. Within this Deed of Trust, words of any gender shall be held
and construed to include any other gender, and words in the singular shall be
held and construed to include the plural, and vice versa, unless the context
otherwise requires.
     6.9 Waiver; Discontinuance of Proceedings. Lender may waive any single
Event of Default by Borrower hereunder without waiving any other prior or
subsequent Event of Default. Lender may remedy any Event of Default by Borrower
hereunder without waiving the Event of Default remedied. Neither the failure by
Lender to exercise, nor the delay by Lender in exercising, any right, power or
remedy upon any Event of Default by Borrower hereunder shall be construed as a
waiver of such Event of Default or as a waiver of the right to exercise any such
right, power or remedy at a later date. No single or partial exercise by Lender
of any right, power or remedy hereunder shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification or
waiver of any provision hereof nor consent to any departure by Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by Lender, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose given. No notice to nor
demand on Borrower in any case shall of itself entitle Borrower to any other or
further notice or demand in similar or other circumstances. Acceptance by Lender
of any payment in an amount less than the amount then due on any of the Debt
shall be deemed an acceptance on account only and shall not in any way affect
the existence of an Event of Default. In case Lender shall have proceeded to
invoke any right, remedy or recourse permitted hereunder or under the other Loan
Documents and shall thereafter elect to discontinue or abandon the same for any
reason, Lender shall have the unqualified right to do so and, in such an event,
Borrower and Lender shall be restored to their former positions with respect to
the Debt, the Loan Documents, the Property and otherwise, and the rights,
remedies, recourses and powers of Lender shall continue as if the same had never
been invoked.
     6.10 Section Headings. The headings of the sections and paragraphs of this
Deed of Trust are for convenience of reference only, are not to be considered a
part hereof and shall not limit or otherwise affect any of the terms hereof.
     6.11 GOVERNING LAW. THIS DEED OF TRUST WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED, PROVIDED
THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY
FEDERAL LAW, SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING, AND PROVIDED
FURTHER THAT THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED SHALL GOVERN
AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF LIENS AND SECURITY INTERESTS IN
THE PROPERTY LOCATED IN SUCH STATE.
     6.12 Counting of Days. The term “days” when used herein shall mean calendar
days. If any time period ends on a Saturday, Sunday or holiday officially
recognized by the state within which the Premises is located, the period shall
be deemed to end on the next succeeding business day. The term

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“business day” when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in New York, New
York are authorized by law to be closed.
     6.13 Relationship of the Parties. The relationship between Borrower and
Lender is that of a borrower and a lender only and neither of those parties is,
nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.
     6.14 Application of the Proceeds of the Note. To the extent that proceeds
of the Note are used to pay indebtedness secured by any outstanding lien,
security interest, charge or prior encumbrance against the Property, such
proceeds have been advanced by Lender at Borrower’s request and Lender shall be
subrogated to any and all rights, security interests and liens owned by any
owner or holder of such outstanding liens, security interests, charges or
encumbrances, irrespective of whether said liens, security interests, charges or
encumbrances are released.
     6.15 Unsecured Portion of Indebtedness. If any part of the Debt cannot be
lawfully secured by this Deed of Trust or if any part of the Property cannot be
lawfully subject to the lien and security interest hereof to the full extent of
such indebtedness, then all payments made shall be applied on said indebtedness
first in discharge of that portion thereof which is unsecured by this Deed of
Trust.
     6.16 Cross Default. An Event of Default hereunder which has not been cured
within any applicable grace or cure period shall be a default under each of the
other Loan Documents.
     6.17 Interest After Sale. In the event the Property or any part thereof
shall be sold upon foreclosure as provided hereunder, to the extent permitted by
law, the sum for which the same shall have been sold shall, for purposes of
redemption (pursuant to the laws of the state in which the Premises is located),
bear interest at the Default Interest Rate.
     6.18 Inconsistency with Other Loan Documents. In the event of any
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions of the Note shall
control over the provisions of this Deed of Trust, and that the provisions of
this Deed of Trust shall control over the provisions of the Lease Assignment,
the Indemnity and Guaranty Agreement, the Environmental Indemnity Agreement, and
the other Loan Documents.
     6.19 Construction of this Document. This document may be construed as a
mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.
     6.20 No Merger. It is the desire and intention of the parties hereto that
this Deed of Trust and the lien hereof do not merge in fee simple title to the
Property. It is hereby understood and agreed that should Lender acquire any
additional or other interests in or to the Property or the ownership thereof,
then, unless a contrary intent is manifested by Lender as evidenced by an
appropriate document duly recorded, this Deed of Trust and the lien hereof shall
not merge in such other or additional interests in or to the Property, toward
the end that this Deed of Trust may be foreclosed as if owned by a stranger to
said other or additional interests.
     6.21 Rights With Respect to Junior Encumbrances. Any person or entity
purporting to have or to take a junior mortgage or other lien upon the Property
or any interest therein shall be subject to the rights of Lender to amend,
modify, increase, vary, alter or supplement this Deed of Trust, the Note or any
of the other Loan Documents, and to extend the maturity date of the Debt, and to
increase the amount of the Debt, and to waive or forebear the exercise of any of
its rights and remedies hereunder or under any of

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the other Loan Documents and to release any collateral or security for the Debt,
in each and every case without obtaining the consent of the holder of such
junior lien and without the lien or security interest of this Deed of Trust
losing its priority over the rights of any such junior lien.
     6.22 Lender May File Proofs of Claim. In the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Borrower or the principals, general partners or
managing members in Borrower, or their respective creditors or property, Lender,
to the extent permitted by law, shall be entitled to file such proofs of claim
and other documents as may be necessary or advisable in order to have the claims
of Lender allowed in such proceedings for the entire Debt at the date of the
institution of such proceedings and for any additional amount which may become
due and payable by Borrower hereunder after such date.
     6.23 Fixture Filing. This Deed of Trust shall be effective from the date of
its recording as a financing statement filed as a fixture filing with respect to
all goods constituting part of the Property which are or are to become fixtures.
This Deed of Trust shall also be effective as a financing statement covering
as-extracted collateral as defined in Section 9.102(a)(6) of the Texas Business
and Commerce Code, as amended, and is to be filed for record in the real estate
records of the county where the Premises is situated. The mailing address of
Borrower and the address of Lender from which information concerning the
security interests may be obtained are set forth in first page hereof.
     6.24 After-Acquired Property. All property acquired by Borrower after the
date of this Deed of Trust which by the terms of this Deed of Trust shall be
subject to the lien and the security interest created hereby, shall immediately
upon the acquisition thereof by Borrower and without further mortgage,
conveyance or assignment become subject to the lien and security interest
created by this Deed of Trust. Nevertheless, Borrower shall execute,
acknowledge, deliver and record or file, as appropriate, all and every such
further mortgages, security agreements, financing statements, assignments and
assurances as Lender shall require for accomplishing the purposes of this Deed
of Trust.
     6.25 No Representation. By accepting delivery of any item required to be
observed, performed or fulfilled or to be given to Lender pursuant to the Loan
Documents, including, but not limited to, any officer’s certificate, balance
sheet, statement of profit and loss or other financial statement, survey,
appraisal or insurance policy, Lender shall not be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance of delivery thereof shall not be or constitute any warranty, consent
or affirmation with respect thereto by Lender.
     6.26 Counterparts. This Deed of Trust may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Deed of Trust may be detached
from any counterpart of this Deed of Trust without impairing the legal effect of
any signatures thereon and may be attached to another counterpart of this Deed
of Trust identical in form hereto but having attached to it one or more
additional signature pages.
     6.27 Personal Liability. Notwithstanding anything to the contrary contained
in this Deed of Trust, the liability of Borrower and its officers, directors,
general partners, managers, members and principals for the Debt and for the
performance of the other agreements, covenants and obligations contained herein
and in the Loan Documents shall be limited as set forth in the Note.
     6.28 Recording and Filing. Borrower will cause the Loan Documents and all
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded and re-filed in such

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

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          (b) Definitions. As used herein, the term “Maximum Lawful Rate” shall
mean the maximum lawful rate of interest which may be contracted for, charged,
taken, received or reserved by Lender in accordance with the applicable laws of
the State of Texas (or applicable United States federal law to the extent that
it permits Lender to contract for, charge, take, receive or reserve a greater
amount of interest than under Texas law), taking into account all Charges (as
herein defined) made in connection with the transaction evidenced by the Note
and the other Loan Documents. As used herein, the term “Charges” shall mean all
fees, charges and/or any other things of value, if any, contracted for, charged,
received, taken or reserved by Lender in connection with the transactions
relating to the Note and the other Loan Documents, which are treated as interest
under applicable law. As used herein, the term “Related Indebtedness” shall mean
any and all debt paid or payable by Borrower to Lender pursuant to the Loan
Documents or any other communication or writing by or between Borrower and
Lender related to the transaction or transactions that are the subject matter of
the Loan Documents, except such debt which has been paid or is payable by
Borrower to Lender under the Note.
          (c) Ceiling Election. To the extent that Lender is relying on
Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate
payable on the Note and/or the Related Indebtedness, Lender will utilize the
weekly ceiling from time to time in effect as provided in such Chapter 303, as
amended. To the extent United States federal law permits Lender to contract for,
charge, take, receive or reserve a greater amount of interest than under Texas
law, Lender will rely on United States federal law instead of such Chapter 303
for the purpose of determining the Maximum Lawful Rate. Additionally, to the
extent permitted by applicable law now or hereafter in effect, Lender may, at
its option and from time to time, utilize any other method of establishing the
Maximum Lawful Rate under such Chapter 303 or under other applicable law by
giving notice, if required, to Borrower as provided by applicable law now or
hereafter in effect.
     6.31 Secondary Market. Lender may sell, transfer and deliver the Note and
the Loan Documents to one or more investors in the secondary mortgage market (a
“Secondary Market Transaction”). In connection with such sale, Lender may retain
or assign responsibility for servicing the loan evidenced by the Note or may
delegate some or all of such responsibility and/or obligations to a servicer,
including, but not limited to, any subservicer or master servicer, on behalf of
the Investors (as hereinafter defined). All references to Lender herein shall
refer to and include, without limitation, any such servicer, to the extent
applicable.
     6.32 Dissemination of Information. If Lender determines at any time to
sell, transfer or assign the Note, this Deed of Trust and the other Loan
Documents, and any or all servicing rights with respect thereto, or to grant
participations therein (the “Participations”) or issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (the “Securities”), Lender may
forward to each purchaser, transferee, assignee, servicer, participant,
investor, or their respective successors in such Participations and/or
Securities (collectively, the “Investors”) or any rating agency rating such
Securities (each a “Rating Agency”), each prospective Investor and each of the
foregoing’s respective counsel, all documents and information which Lender now
has or may hereafter acquire relating to the Debt, to Borrower, any guarantor,
any indemnitor, and the Property, which shall have been furnished by Borrower
and any Indemnitor, as Lender determines necessary or desirable.
     6.33 Intentionally Deleted.
     6.34 REMIC Opinions. In the event Borrower requests Lender’s consent with
respect to any proposed action or Borrower proposes to take any action not
otherwise requiring Lender’s specific consent under the Loan Documents, which
Lender determines, in its discretion, may affect (i) the “REMIC” status of
Lender, its successors or assigns, or (ii) the status of this Deed of Trust as a
“qualified

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mortgage” as defined in Section 860G of the Internal Revenue Code of 1986 (or
any succeeding provision of such law), Lender reserves the right to require
Borrower, at Borrower’s sole expense, to obtain, from counsel satisfactory to
Lender in its discretion, an opinion, in form and substance satisfactory to
Lender in its discretion, that no adverse tax consequences will arise as a
result of the proposed course of action.
ARTICLE VII.
CONCERNING THE TRUSTEE
     7.1 Certain Rights. With the approval of Lender, Trustee shall have the
right to take any and all of the following actions: (i) to select, employ and
consult with counsel (who may be, but need not be, counsel for Lender) upon any
matters arising hereunder, including the preparation, execution and
interpretation of the Loan Documents, and shall be fully protected in relying as
to legal matters on the advice of counsel, (ii) to execute any of the trusts and
powers hereof and to perform any duty hereunder either directly or through his
or her agents or attorneys, (iii) to select and employ, in and about the
execution of his or her duties hereunder, suitable accountants, engineers and
other experts, agents and attorneys-in-fact, either corporate or individual, not
regularly in the employ of Trustee (and Trustee shall not be answerable for any
act, default, negligence, or misconduct of any such accountant, engineer or
other expert, agent or attorney-in-fact, if selected with reasonable care, or
for any error of judgment or act done by Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for
Trustee’s gross negligence or bad faith), and (iv) any and all other lawful
action that Lender may instruct Trustee to take to protect or enforce Lender’s
rights hereunder. Trustee shall not be personally liable in case of entry by
Trustee, or anyone entering by virtue of the powers herein granted to Trustee,
upon the Property for debts contracted for or liability or damages incurred in
the management or operation of the Property. Trustee shall have the right to
rely on any instrument, document, or signature authorizing or supporting any
action taken or proposed to be taken by Trustee hereunder, believed by Trustee
in good faith to be genuine. Trustee shall be entitled to reimbursement for
expenses incurred by Trustee in the performance of Trustee’s duties hereunder
and to reasonable compensation for such of Trustee’s services hereunder as shall
be rendered. Borrower will, from time to time, pay the compensation due to
Trustee hereunder and reimburse Trustee for, and save and hold Trustee harmless
against, any and all liability and expenses which may be incurred by Trustee in
the performance of Trustee’s duties.
     7.2 Retention of Money. All moneys received by Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, and shall be segregated from any other moneys of Trustee.
     7.3 Successor Trustees. Trustee may resign by the giving of notice of such
resignation in writing to Lender. If Trustee shall die, resign or become
disqualified from acting in the execution of this trust, or if, for any reason,
Lender, in Lender’s sole discretion and with or without cause, shall prefer to
appoint a substitute trustee or multiple substitute trustees, or successive
substitute trustees or successive multiple substitute trustees, to act instead
of the aforenamed Trustee, Lender shall have full power to appoint a substitute
trustee (or, if preferred, multiple substitute trustees) in succession who shall
succeed (and if multiple substitute trustees are appointed, each of such
multiple substitute trustees shall succeed) to all the estates, rights, powers
and duties of the aforenamed Trustee. Such appointment may be executed by any
authorized agent of Lender, and if such Lender be a corporation and such
appointment be executed on its behalf by any officer of such corporation, such
appointment shall be conclusively presumed to be executed with authority and
shall be valid and sufficient without proof of any action by the board of
directors or any superior officer of the corporation. Borrower hereby ratifies
and confirms any and all acts which the aforenamed Trustee, or his or her
successor or successors in this trust, shall do lawfully by virtue hereof. If
multiple substitute trustees are appointed, each of such multiple substitute
trustees shall be empowered and authorized to act alone without the necessity of
the joinder of the other

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multiple substitute trustees, whenever any action or undertaking of such
substitute trustees is requested or required under or pursuant to this Deed of
Trust or applicable law. Any prior election to act jointly or severally shall
not prevent either or both of such multiple substitute Trustees from
subsequently executing, jointly or severally, any or all of the provisions
hereof.
     7.4 Perfection of Appointment. Should any deed, conveyance, or instrument
of any nature be required from Borrower by any Trustee or substitute Trustee to
more fully and certainly vest in and confirm to Trustee or substitute Trustee
such estates, rights, powers, and duties, then, upon request by Trustee or
substitute trustee, any and all such deeds, conveyances and instruments shall be
made, executed, acknowledged, and delivered and shall be caused to be recorded
and/or filed by Borrower.
     7.5 Succession Instruments. Any substitute trustee appointed pursuant to
any of the provisions hereof shall, without any further act, deed or conveyance,
become vested with all the estates, properties, rights, powers, and trusts of
its, his or her predecessor in the rights hereunder with like effect as if
originally named as Trustee herein; but nevertheless, upon the written request
of Lender or of the substitute trustee, the Trustee ceasing to act shall execute
and deliver any instrument transferring to such substitute trustee, upon the
trusts herein expressed, all the estates, properties, rights, powers, and trusts
of the Trustee so ceasing to act, and shall duly assign, transfer and deliver
any of the property and moneys held by such Trustee to the substitute trustee so
appointed in such Trustee’s place.
     7.6 No Representation by Trustee or Lender. By accepting or approving
anything required to be observed, performed, or fulfilled or to be given to
Trustee or Lender pursuant to the Loan Documents, including, without limitation,
any officer’s certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal or insurance policy, neither Trustee nor
Lender shall be deemed to have warranted, consented to, or affirmed the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision, or condition thereof, and such acceptance or approval thereof
shall not be or constitute any warranty or affirmation with respect thereto by
Trustee or Lender.
[The Remainder of the Page is Intentionally Blank]

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     7.7 Entire Agreement and Modifications. THIS DEED OF TRUST AND THE OTHER
LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. This Deed of
Trust and the other Loan Documents may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against which enforcement of the amendment,
revision, waiver, discharge, release or termination is asserted. Any alleged
amendment, revision, waiver, discharge, release or termination which is not so
documented shall not be effective as to any party.
     IN WITNESS WHEREOF, Borrower has executed this Deed of Trust on the day and
year first written above.
BORROWER:

                      NOTICE OF INDEMNIFICATION:
BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT THIS DEED OF TRUST CONTAINS
INDEMNIFICATION PROVISIONS PURSUANT TO SECTIONS 2.8, 2.16, 2.27(f), 2.28,
2.32(c) AND ARTICLE V HEREOF.   APARTMENT REIT HIDDEN LAKES, LP,
a Texas limited partnership
 
 
By:  
 
Apartment REIT Hidden Lakes GP, LLC,
a Delaware limited liability company,
its General Partner                             By:   NNN Apartment REIT
Holdings, L.P.,
a Virginia limited partnership,
its Manager
 
                                By:   NNN Apartment REIT, Inc.,
a Maryland corporation,
its General Partner
 
                   
 
              By:   /s/ Andrea R. Biller
 
                 
 
   
 
              Name:   Andrea R. Biller
 
                 
 
   
 
              Title:   Secretary
 
                       

 

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STATE OF
  California    
 
 
 
   

         
COUNTY OF
  Orange    
 
 
 
   

     Before me, J. Hu, Notary Public, on this day personally appeared Andrea
Biller, known to me to be the person whose name is subscribed to the foregoing
instrument as Secretary of NNN Apartment REIT, Inc., a Maryland corporation, the
General Partner of NNN Apartment REIT Holdings, L.P., a Virginia limited
partnership, the Manager of Apartment REIT Hidden Lakes GP, LLC, a Delaware
limited liability company, the General Partner of APARTMENT REID HIDDEN LAKES,
LP, a Texas limited partnership, and acknowledged to me that she executed the
same on behalf of said limited liability company, for the purposes and
consideration therein expressed, as the act and deed of said limited
partnership.
     Given under my hand and seal of office this 27thday of December, 2006.

              /s/ J. Hu      
 
  Printed Name:   J. Hu
 
 
 
 
  Notary Public for the State of   California
 
       
 
       
 
  My Commission Expires:   Sept. 30, 2009
 
       

[SEAL]
J. Hu
Commission # 1610142
Notary Public — California
Orange County
My Comm. Expires Sep. 30, 2009

 

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EXHIBIT “A”
Legal Description
TRACT I
A 48.80 acre, or 2,125,701 square feet, tract of land, out of a 69.40 acre tract
recorded in Volume 6447, Pages 1192-1195 of the Official Public Records of Real
Property of Bexar County, Texas, a portion of the called 48.97 acre tract of
land (“Tract I”) recorded in Volume 10288, Pages 623-627 of the Official Public
Records of Real Property of Bexar County, Texas, and being all of Lot 30, Block
8 of the Replat and Subdivision Plat Establishing Bandera Springs as recorded in
Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas,
also being out of the Perry Davis Survey Number 267, Abstract Number 189, County
Block 4528, now all in New City Block (N.C.B.) 14614, In the City of San
Antonio, Bexar County, Texas, said 48.88 acre being more particularly described
by metes and bounds as follows, with the basis of bearings being the said
Bandera Springs Subdivision:
BEGINNING at a found Texas Department of Transportation monument with brass
plate, a point on the southeast right-of-way line of F.M. 1604, the northwest
corner of the above referenced 69.40 acre tract, the northeast corner of a
13.923 acre tract recorded in Volume 10593, Pages 769-772 of the Official Public
Records of Real Property of Bexar County, Texas, the northwest corner of the
herein described tract, from which a found 1/2 inch iron rod bears S 45° 39’ 57”
W, a distance of 126.85 feet; thence N 45° 30’ 49” E, along and with the
southeast right-of-way of said F.M. 1604, a distance of 196.51 feet to a set “x”
in concrete; thence : N 44° 34’ 21” E, along and with the southeast right-of-way
of said F.M. 1604, a distance of 40.71 feet to a set “x” in concrete, the west
corner of a 47.04 acre tract recorded in Volume 7321, Page 1004-1007 of the
Official Public Records of Real Property of Bexar County, Texas, the north
corner of the herein described tract; thence departing the southeast
right-of-way line of said F.M. 1604, along and with the southwest line of said
47.04 acre tract, the northeast line of herein described tract the following
calls and distances: S 44° 27’ 48” E, a distance of 68.58 feet to the center of
a sanitary sewer manhole lid; S 30° 13’ 45” E, a distance of 397.94 feet to a
set “x” on a sanitary sewer manhole lid; S 60° 22’ 03” E. a distance of 698.23
feet to the center of a sanitary sewer manhole lid; S 22° 51’ 53” E. a distance
of 251.38 feet to a set “x” on a sanitary sewer manhole lid; S 78° 38’ 40” E. a
distance of 491.06 feet, to a found 1/2 inch iron rod with a yellow cap marked
“Pape-Dawson”, the southeast corner of said 47.04 acre tract, the northeast
corner of this tract, a point on the west right-of-way line of South Hausman
Road (a variable width right-of-way); thence S 00° 03’ 57” W, along and with the
west right-of-way of said South Hausman Road, a distance of 245.33 feet to a set
1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 84° 21’ 08” W,
departing the west right-of-way of said South Hausman Road, a distance of 10.05
feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” being a
northeast corner of said Lot 30; thence S 00°03’57” W, along and with the west
right-of-way of said South Hausman Road, the west line of a 10-dedication for
future street widening recorded fn Volume 9559, Pages 114-116 of the Deed and
Plat Records of Bexar County, Texas, the east line of said Lot 30, a distance of
351.58 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”;
thence N 17° 06’ 38” E, departing the west right-of-way of said South Hausman
Road, Along the south line of a said 10-dedication for future street widening,
the east line of said Lot 30, a distance of 34.12 to a set 1/2 inch iron rod
with yellow cap marked “Pape-Dawson” in the west right-of-way line of said South
Hausman Road; thence S 00° 03’ 57” W, along and with the west right-of-way of
said South Hausman Road, a distance of 551.48 feet to a set 1/2 inch iron rod
with yellow cap marked “Pape-Dawson”; thence S 80° 07’ 33’’ W, departing the
west right-of-way line of said South Hausman Road, at a distance of 5.08 feet
passing the northeast corner of Oakridge Pointe Unit-4 Subdivision, as recorded
in Volume 9534, Page 117, Deed and Plat Records of Bexar County, Texas,
continuing along the north line of said Oakridge Pointe, Unit-4 at a distance of
181.40 passing the southwest corner of said Lot 30, Block 8, in all a total
distance of 298.93 feet to a set 1/2 inch iron rod with yellow cap marked
“Pape-Dawson”; thence S 46° 06’ 14” W, with the northwest line of Oakridge
Pointe Unit-4, a distance of 50.04 feet to a set 1/2 inch iron rod with yellow
cap marked “Pape-Dawson”’, the northwest corner of said subdivision the
northeast corner of Lot 20, Block 8, N.C.B. 14614, South Hausman Road
Elementary, as recorded in Volume 9535, Pages 34-35, Deed and Plat Records of
Bexar County, Texas, being the southeast corner of the remaining

 

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portion of that 16.12 acre tract conveyed to Northside Independent School
District in Volume 6761, Pages 1256-1274 of the Official Public Records of Real
Property of Bexar County, Texas, a point on curve of a non-tangent curve to the
left; thence Northwesterly, along and with the east tine of said remaining
portion of that 16.12 acre tract and along the arc of said curve to the left,
said curve having a radial bearing of S 43° 51’ 41” W, a radius of 375.00 feet,
a central angle of 101° 1’ 53”, a chord bearing and distance of N 46° 44’ 15” W,
7.84 feet, an arc length of 7.84 feet to a set 1/2 inch iron rod with yellow cap
marked “Pape-Dawson”; thence N 47° 20’ 12” W, a distance of 20.00 feet to a set
1/2 inch iron rod with yellow cap marked “Pape-Dawson” at the north corner of
said remaining portion of that 16.12 acre tract; thence S 58° 56’ 36” W, along
and with the west line of said remaining portion of that 16.12 acre tract, the
south line of said 48.80 acre tract and said Lot 30, a distance of 62.28 feet to
a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, at the southwest
corner of said remaining portion of that 16.12 acre tract, and angle point in
the north line of said Lot 20, Block 8 of South Hausman Road Elementary, the
beginning of a curve to the right; thence Southwesterly, along and with the
northwest and north line of said South Hausman Road Elementary, the south line
of said Lot 30 and said 48.80 acre tract and arc of said curve to the right,
said curve having a radius of 300.00 feet, a central angle of 36° 02’ 40”, a
chord bearing and distance of S 76° 57’ 56” W, 185.63 feet, an arc length of
188.73 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”;
thence N 85° 00’ 44” W, along and with the north line of said South Hausman Road
Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance
of 115.39 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”;
thence Northwesterly, along and with the north and northeast line of said South
Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract
and the arc of said curve to the right, said curve having a radius of 350.00
feet, a central angle of 44° 59’ 40”, a chord bearing and distance of N 62° 31’
12” W. 267.79 feet, an arc length of 274.79 feet to a set 1/2 inch iron rod with
yellow cap marked “Pape-Dawson”; thence N 40° 01’ 40” W, along and with the
northeast line of said South Hausman Road Elementary, the south line of said Lot
30 and said 48.80 acre tract, a distance of 245.43 feet to a set 1/2 inch iron
rod with yellow cap marked “Pape-Dawson”, the beginning of a curve to the left;
thence Northwesterly, along and with the northeast line of said South Hausman
Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the
arc of said curve to the left, said curve having a radius of 250.00 feet, a
central angle of 49° 57’ 50”, a chord bearing and distance of N 65° 00’ 35” W,
211.17 feet, an arc length of 218.01 feet to a set 1/2 inch iron rod with yellow
cap marked “Pape-Dawson”; thence N 89° 59’ 30” W, along and with the north line
of said South Hausman Road Elementary, the south line of said Lot 30 and said
48.80 acre tract, a distance of 52.06 feet to a set 1/2 inch iron rod with
yellow cap marked “Pape-Dawson”, a point on the west line of a 3 8.966 acre
tract recorded in Volume 2569, Page 1217, Official Public Records of Real
Property of Bexar County, Texas, the southwest corner of said Lot 30 and the
southwest corner of the herein described tract; thence N 00° 00’ 12” E, along
and with the east line of said 38.966 acre tract, a distance of 706.02 feet to a
set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at a common corner
between said 38.966 acre tract and said 13.923 acre tract; thence N 14°12’ 23”
W. along and with the east line of said 13.923 acre tract, the west line of said
Lot 30 and said 48.80 acre tract, a distance of 1071.43 feet to the POINT OF
BEGINNING and containing 48.80 acres of land in the City of San Antonio, Bexar
County, Texas.
TRACT II:
Drainage easement as provided by document recorded in Volume 7032, Page 1269,
Real Property Records of Bexar County, Texas.
TRACT III:
Landscape buffer, lighting and access easement agreement as prodded by document
recorded in Volume 41880, Page 1700, Real Property Records of Bexar County,
Texas.