exv10w10



 




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




 









 





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	 






i









 






	 	 	 	 	 	 	 
	 	 	 	 	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	 






ii









 






	 	 	 	 	 	 	 
	 	 	 	 	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	 






iii









 





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;



 









 





     (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









 





     (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



3









 







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









 







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









 







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



6









 







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



7









 







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




8









 




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



9









 







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




10









 




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




11









 




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



12









 







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.



13









 





     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



14









 






          (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




15









 




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



16









 







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




17









 




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




18









 




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.




19









 








          (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,



20









 







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;



21









 






          (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.



22









 





     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



23









 







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




24









 




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



25









 







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



26









 







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



27









 







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



28









 







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



29









 







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



30









 







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



31









 







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




32









 




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




33









 




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




34









 




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)




35









 




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




36









 




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




37









 




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




38









 




“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



39









 







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.



40









 





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




41









 




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



42









 







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,



43









 







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




46









 




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



47









 







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.




48









 








          (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,



49









 




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.



50









 





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



51









 







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



52









 







“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



53









 







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



54









 







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.




55









 








          (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



56









 







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



57









 







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]




58









 





     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
	 
	 	 	 	 	 	 	 	 	 	 	 	 





 









 





	 	 	 	 	 
	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







 









 





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


 









 






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.