exv10w16



 



EXHIBIT
10.16

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.



NOTICE: THIS INSTRUMENT SECURES, INTER ALIA, OBLIGATIONS WHICH PROVIDE FOR A VARIABLE RATE OF
INTEREST AND OBLIGATORY FUTURE CREDIT ADVANCES. ALL SUCH OBLIGATORY FUTURE CREDIT ADVANCES SHALL
HAVE THE SAME LIEN PRIORITY AS IF MADE ON THE DATE HEREOF. [SEE THE FOLLOWING DEED OF TRUST FOR
PARTICULARS.]



THIS DEED OF TRUST SHALL BE EFFECTIVE AS AND SHALL CONSTITUTE A FIXTURE FILING FROM THE DATE OF ITS
FILING FOR RECORD IN THE REAL PROPERTY RECORDS OF THE COUNTY IN WHICH THE LAND (AS DEFINED HEREIN)
IS LOCATED.




******************************************************************************




SECOND DEED OF TRUST,



SECURITY AGREEMENT AND FIXTURE FILING




     THIS SECOND DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (hereinafter referred to as
this “Deed of Trust”) is made and entered into as of the 31st day of October, 2006, by
APARTMENT REIT WARKER RANCH, LP, a Txas limited partnership (“Grantor”), Grantor having as a business address
1606 Santa Rosa Road, Suite 109, Richmond, Virginia 23229, Attn: S.Jay Olander, to JOHN M. NOLAN,
whose address is Winstead Sechrest & Minick, P.C., 1201 Elm Street, Dallas, Texas 75270,
as Trustee (including any successors or substitutes appointed as herein provided from
time to time, hereinafter referred to as “Trustee”) for the benefit of WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association (hereinafter referred to as “Wachovia”), having as a
business address at 171 17TH Street, N.W., GA 4506, Atlanta, Georgia 30363, Attn: Cathy
Casey, as Agent for itself and the other lenders from time to time party to the Mezzanine Credit
Agreement (as hereinafter defined) (Wachovia, in its capacity as Agent, hereinafter referred to as
the “Lender”).



W I T N E S S E T H:




     WHEREAS, NNN Apartment REIT Holdings, L.P., a Virginia limited partnership (“Borrower”),
Lender and certain other financial institutions parties thereto from time to time (the Lender,
together with such other financial institutions, the “Banks”) entered into that certain Credit
Agreement dated October 31, 2006 (the “Senior Credit Agreement” and the loans made thereunder
the “Senior Loans”); and



     WHEREAS, the Senior Loans are evidenced by (i) those certain Revolving Credit Note(s) made by
Borrower in the aggregate principal amount of up to $200,000,000.00, each of



 









 







which has been issued pursuant to the Senior Credit Agreement and (ii) each other note as may
be issued under the Senior Credit Agreement, each as originally executed, or if varied, extended,
supplemented, consolidated, amended, replaced, renewed, modified or restated from time to time as
so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated
(collectively, the “Senior Note”); and



     WHEREAS, the obligations under the Senior Credit Agreement and the Senior Note are (i)
guaranteed by, among other things, that certain Guaranty executed and delivered by, among others,
the Grantor, dated October 31, 2006 and (ii) secured by, among other things, that certain Deed
of Trust, Security Agreement and Fixture Filing dated as of October 31, 2006 given by Grantor
(the “Senior Deed of Trust”), for the use and benefit of Wachovia, as agent under the Senior Credit
Agreement; and



     WHEREAS, the Senior Loan is further secured by the following documents: (i) an Assignment of
Leases and Rents, dated as of October 31, 2006 (the “Senior Assignment of Leases”), (ii) an
Agreement Regarding Environmental Activity, dated as of October 31, 2006, (iii) a Collateral
Assignment of Property Management Agreement, dated as of October 31, 2006, (iv) a Management
Company’s Consent to Assignment and (ii) various other security documents and financing statements
on form UCC-1.



     WHEREAS, Borrower, Lender and Banks are party to a Mezzanine Credit Agreement, dated as of
October 31, 2006 (hereinafter together with any and all renewals, modifications,
consolidations and extensions thereof, referred to as the “Mezzanine Credit Agreement”; terms used
but not defined herein shall have the meanings contained in the Mezzanine Credit Agreement),
pursuant to which the Banks may make a loan to Borrower up to the original principal amount of
FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) (the “Loan”); and



     WHEREAS, it is a condition precedent to the Banks’ obligations under the Mezzanine Credit
Agreement that Grantor execute and deliver this Deed of Trust;



     NOW, THEREFORE, FOR AND IN CONSIDERATION OF TEN AND NO/100 DOLLARS ($10.00) AND OTHER GOOD AND
VALUABLE CONSIDERATIONS, the receipt and sufficiency whereof are hereby acknowledged by Grantor,
and in order to secure the Secured Obligations (as hereinafter defined), Grantor, with general
warranty, does hereby grant, bargain, sell, convey, transfer, assign, pledge, set over, confirm and
deliver in trust unto Trustee, and his substitutes, successors and assigns, with power of sale, all
of Grantor’s estate, right, title and interest in, to and under all and singular, the following
described property (hereinafter collectively referred to as the “Property”):



          (a) All that certain tract or parcel of land located in the County of Bexar, State of Texas,
more particularly described in Exhibit A attached hereto and by this reference made a part
hereof, together with all right, title and interest of Grantor, including any after-acquired title
or reversion, in and to the rights-of-ways, streets and alleys adjacent thereto, and all easements,
rights-of-way, licenses, operating agreements, strips and gores of land, vaults, streets, ways,
alleys, passages, sewers, sewer rights, waters, water courses, water rights and powers, oil, gas
and other minerals, flowers, shrubs, crops, trees, timber and other emblements now or hereafter

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located on the land or under or above same, and all estates, rights, titles, interests,
privileges, liberties, tenements, hereditaments and appurtenances whatsoever, in any way belonging,
relating to or appertaining to said tract or parcel of land or any part thereof, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired
by Grantor and the reversion and reversions, remainder and remainders, and all the estate, right,
title, interest, property, possession, claim and demand whatsoever at law, as well as in equity, of
Grantor of, in and to the same (hereinafter referred to as the “Land”); and




          (b) All buildings, structures, parking areas, landscaping, and other improvements of every
nature now or hereafter situated, erected or placed on the Land (hereinafter referred to as the
“Improvements”), and all materials intended for construction, reconstruction, alteration and
repairs of the Improvements now or hereafter erected, all of which materials shall be deemed to be
included within the Improvements immediately upon the delivery thereof to the Land; and




          (c) All fixtures, machinery, equipment, furniture, inventory, building supplies, appliances
and other articles of personal property (hereinafter collectively referred to as the “Personal
Property”), including, but not limited to, all engines, radiators, heaters, furnaces, boilers,
stokers, pumps, tanks, dynamos, motors, generators, switchboards, electrical equipment, heating,
plumbing, lifting and ventilating apparatus, air-cooling and air-conditioning apparatus, gas and
electric fixtures, elevators and motors, escalators, ranges, ovens, bathtubs, sinks, commodes,
basins, pipes, faucets and other plumbing, mirrors, refrigerating plant, refrigerators, iceboxes,
dishwashers, carpeting, floor coverings, furniture, light fixtures, signs, lawn equipment, water
heaters, cooking apparatus and appurtenances, fittings, machinery, furniture, furnishings, and all
other equipment of every kind and description, used or procured for use in the operation of any
building, structure or other improvement now or hereafter standing on the Property, and all other
fixtures and equipment now or hereafter owned by Grantor and located in, on or about, or used or
intended to be used with or in connection with the use, operation, or enjoyment of the Land or the
Improvements, whether installed in such a way as to become a part thereof or not, including all
extensions, additions, improvements, betterments, renewals and replacements of any of the foregoing
and all the right, title and interest of Grantor in and to any of the foregoing now owned or
hereafter acquired by Grantor, all of which are hereby declared and shall be deemed to be fixtures
and accessions to the freehold and a part of the Improvements as between the parties hereto and all
persons claiming by, through or under them; and




          (d) All right, title and interest of Grantor in and to all policies of insurance, causes of
action, licenses, franchises, permits, service contracts, maintenance contracts, property
management agreements, equipment leases, trade names, trademarks, service marks, logos, goodwill,
accounts, chattel paper and general intangibles as defined in the Uniform Commercial Code as
enacted in the State of Texas which in any way now or hereafter belong, relate or appertain to the
Land, the Improvements or the Personal Property or any part thereof now owned or hereafter acquired
by Grantor, including, without limitation, all property management agreements, franchise
agreements, so called “patronage” agreements, agreements relating to the collection of receivables
or use of customer lists, all bookings and reservations for space or facilities within the Property
or other information, sales contracts, purchase options, option agreements, rights of first
refusal, contract deposits, earnest money deposits, prepaid items and

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payments due and to become due thereunder, condemnation payments, insurance proceeds and
escrow funds (hereinafter referred to as the “Intangible Property”); and




          (e) All present and future leases, tenancies, occupancies and licenses, whether written or
oral (“Leases”), of the Land, the Improvements, the Personal Property and the Intangible Property,
or any combination or part thereof, and all income, rents, issues, royalties, profits, revenues,
security deposits, and other benefits of the Land, the Improvements, the Personal Property and the
Intangible Property, from time to time accruing, all payments under Leases, and all payments on
account of oil and gas and other mineral Leases, working interests, production payments, royalties,
overriding royalties, rents, delay rents, operating interests, participating interests and other
such entitlements, and all the estate, right, title, interest, property, possession, claim and
demand whatsoever at law, as well as in equity, of Grantor of, in and to the same (hereinafter
collectively referred to as the “Revenues”);




          (f) All the right, title and interest of Grantor in and to all construction contracts,
subcontracts, architectural agreements, labor, deposits, bonds, assurances, material and payment
bonds, guaranties and warranties, and plans and specifications relating to the construction of the
Improvements on the Land, whether now or hereafter existing, including, without limitation (i) any
architectural or engineering agreement entered into with respect to the design of said Improvements
and other architectural or engineering services, (ii) the plans and specifications for the
construction of said Improvements prepared by the architect, and (iii) any contractor’s agreement
entered into with respect to the construction of the Improvements on the Land (hereinafter
collectively referred to as the “Contracts”);




          (g) All present and future funds, deposit accounts, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including without limitation,
payment intangibles, all names by which the Land or the Improvements may be operated or known, all
rights to carry on business under such names, all telephone numbers or listings), all rights,
interest and privileges which Grantor has or may have as developer or declarant under any
easements, covenants, restrictions or declarations now or hereafter relating to the Land or the
Improvements, all goods (including, without limitation, inventory, property, possession, equipment,
fixtures and accessions), investment property, commercial tort claims, money, supporting
obligations, as-extracted collateral, timber to be cut, and all notes or chattel paper (whether
tangible or electronic) now or hereafter arising from or by virtue of any transactions related to
the Land or the Improvements and all customer lists, other lists, and business information relating
in any way to the Land, the Improvements or the use thereof, whether now owned or hereafter
acquired;




          (h) All proceeds, products, substitutions and accessions of the foregoing of every type.




     TO HAVE AND TO HOLD the Property and all parts, rights, members and appurtenances thereof, to
the use, benefit and behalf of Trustee and the substitutes, successors and assigns of Trustee
forever. Grantor covenants and represents that Grantor is lawfully seized and possessed of the
Property and has good right to convey and pledge the same, and that the same is unencumbered except
for those matters (hereinafter referred to as the “Permitted Encumbrances”) expressly set forth in
Exhibit B attached hereto and by this reference made a



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part hereof and the Senior Deed of Trust. Except for the Permitted Encumbrances and the
Senior Deed of Trust, Grantor does warrant and will forever defend the title to the Property unto
Trustee, his successors or substitutes in trust and his or their assigns, against the claims of all
persons whomsoever.



     This Deed of Trust is given to secure the payment and performance of the following described
indebtednesses and obligations (hereinafter collectively referred to as the “Secured Obligations”):



          (a) The debt evidenced by (i) those certain Notes made or to be made by Borrower in the
aggregate principal amount of up to Fifteen Million and No/100 Dollars ($15,000,000.00), each of
which has been or will be issued pursuant to the Mezzanine Credit Agreement and each of which is
due and payable in full on or before                      2009; and (ii) each other note as may be
issued under the Mezzanine Credit Agreement, each as originally executed, or if varied, extended,
supplemented, consolidated, amended, replaced, renewed, modified or restated from time to time as
so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated
(collectively, the “Note”);




          (b) The payment, performance and discharge of each and every obligation, covenant and
agreement of Grantor contained herein or of Grantor and the other Guarantors in the Guaranty, of
Borrower contained in the Mezzanine Credit Agreement, and of Grantor and Borrower in the other Loan
Documents;




          (c) The full and prompt payment and performance of all of the provisions, agreements,
covenants and obligations contained in the Mezzanine Credit Agreement;




          (d) The full and prompt payment and performance of all of the provisions, agreements,
covenants and obligations of Borrower herein contained and contained in any other agreements,
documents or instruments now or hereafter evidencing, securing or otherwise relating to the
indebtedness evidenced by the Note (the Note, this Deed of Trust, the Mezzanine Credit Agreement
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 therein covenanted to be paid;




          (e) Any and all additional advances made by Lender to protect or preserve the Property or the
lien and security interest created hereby on the Property, or for taxes, assessments or insurance
premiums as hereinafter provided or for performance of any of Grantor’s obligations hereunder or
under the other Loan Documents or Borrower’s obligations under the Mezzanine Credit Agreement or
under the other Loan Documents or for any other purpose provided herein or in the other Loan
Documents (whether or not the original Grantor remains the owner of the Property at the time of
such advances); and




          (f) Any and all future advances under any of the Loan Documents, whether such advances are
obligatory or are to be made at the option of Lender or otherwise, as are made within twenty (20)
years from the date of this Deed of Trust, to the same extent as if such future advances were made
on the date of the execution of this Deed of Trust.




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     PROVIDED, ALWAYS, and it is the true intent and meaning of the parties to these presents, that
when Borrower and Grantor, their respective successors or assigns, shall pay or cause to be paid to
Lender, its successors or assigns, the Secured Obligations according to the conditions and
agreements of the Note and of this Deed of Trust, and shall perform all of the obligations
according to the true intent and meaning of the Note and of this Deed of Trust and the conditions
thereunder and hereunder, then this conveyance of the Property shall become of no further force and
effect, and the lien and security interest hereof shall be released of record at Grantor’s request
and at Grantor’s cost and expense.



     Grantor hereby further covenants and agrees with Lender as follows:



     1. Payment and Performance of Secured Obligations. Grantor shall promptly pay or
cause to be paid the Secured Obligations when due, and fully and promptly perform or cause to be
performed all of the provisions, agreements, covenants and obligations of the Secured Obligations.



     2. Funds for Impositions. After the occurrence and during the continuance of an Event
of Default, Grantor shall pay to Lender, subject to Lender’s option under Paragraph 3 hereof, on
the days that monthly installments of interest are payable under the Note, until the Note is paid
in full, a sum (hereinafter referred to as the “Funds”) reasonably estimated by Agent to provide an
amount necessary for payment of the following items in full thirty (30) days prior to when such
items become due (hereinafter collectively referred to as the “Impositions”): (a) the yearly real
estate taxes, ad valorem taxes, personal property taxes, assessments and betterments, and (b) the
yearly premium installments for the insurance covering the Property and required by Lender pursuant
to Paragraph 4 hereof. The Impositions shall be reasonably estimated initially and from time to
time by Lender on the basis of assessments and bills and estimates thereof. The Funds shall be
held by Lender in a separate account free of any liens or claims on the part of creditors of
Grantor and as part of the security for the Secured Obligations. Grantor shall pay all Impositions
prior to delinquency as required by Paragraph 3 hereof. Provided no Event of Default has occurred
and is continuing, within ten (10) days after Grantor furnishes Lender with reasonably satisfactory
evidence that Grantor has paid one or more of the items comprising the Impositions, Lender shall
reimburse Grantor therefor to the extent of the Funds (plus accrued interest) then held by Lender.
Alternatively, Lender shall apply the Funds to pay the Impositions with respect to which the Funds
were paid to the extent of the Funds then held by Lender and provided Grantor has delivered to
Lender the assessments or bills therefor. Grantor shall be permitted to pay any Imposition early
in order to take advantage of any available discounts. Lender shall make no charge for so holding
and applying the Funds or for verifying and compiling said assessments and bills. The Funds are
pledged as additional security for the Secured Obligations, and may be applied, at Lender’s option
and without notice to Grantor, to the payment of the Secured Obligations upon the occurrence of any
Event of Default and acceleration of the Note hereunder. If at any time the amount of the Funds
held by Lender shall be less than the amount reasonably deemed necessary by Lender to pay
Impositions as such become due, Grantor shall pay to Lender any amount necessary to make up the
deficiency within fifteen (15) Business Days after notice from Lender to Grantor requesting payment
thereof. Upon payment in full of the Secured Obligations, Lender shall promptly refund to Grantor
any Funds held by Lender.



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     3. Impositions, Liens and Charges. Grantor shall pay all Impositions and other
charges, if any, attributable to the Property prior to delinquency, and at Lender’s option, shall
pay in the manner provided under Paragraph 2 hereof. Grantor shall furnish to Lender all bills and
notices of amounts due under this Paragraph 3 as soon as received, and in the event Grantor shall
make payment directly, Grantor shall, as and when available, furnish to Lender receipts evidencing
such payments prior to the dates on which such payments are delinquent, subject to Grantor’s right
to contest taxes, assessments and other governmental charges as provided in the Mezzanine Credit
Agreement. Grantor shall promptly discharge (by bonding, payment or otherwise) any lien filed
against the Property or Grantor (including federal tax liens) and will keep and maintain the
Property free from the claims of all persons supplying labor or materials to the Property, subject
to Grantor’s right to contest the same as provided in the Mezzanine Credit Agreement. Grantor
shall not claim or be entitled to any credit against the taxable value of the Property by reason of
this Deed of Trust, or any deduction in or credit on the Secured Obligations by reason of
Impositions paid.



     4. Property and Other Insurance. Grantor shall, at its expense, procure and maintain
or caused to be procured or maintained, for the benefit of Grantor and Lender, insurance policies
issued by such insurance companies, in such amounts, in such form and substance, and with such
coverages, endorsements, deductibles, and expiration dates, providing the types of insurance set
forth in the Mezzanine Credit Agreement, as may be required by the Mezzanine Credit Agreement.



     5. Preservation and Maintenance. Grantor (a) shall not permit or commit waste,
impairment, or deterioration of the Property or abandon or discontinue operations on the Property,
(b) shall restore or repair promptly (following adjustment of any claims for an insured casualty
loss, if applicable) and in a good and workmanlike manner all or any part of the Property in the
event of any damage, injury or loss thereto, to the substantial equivalent of its condition prior
to such damage, injury or loss, or such other condition as Lender may approve in writing, provided
that Lender shall release net insurance proceeds, to the extent actually received by Lender, to
Grantor (provided, however, the insufficiency of such proceeds shall not relieve Grantor of its
obligations to restore hereunder), (c) shall keep the Property, including the Improvements and the
Personal Property, in first class order, repair and tenantable condition and shall replace
fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in
first class order, repair, and tenantable condition, (d) subject to Grantor’s right to contest the
same as provided in this Deed of Trust, shall comply with all laws, ordinances, regulations and
requirements of any governmental body applicable to the Property, and (e) shall keep all
franchises, trademarks, trade names, service marks and licenses and permits necessary for the use
and occupancy of the Property in good standing and in full force and effect. Grantor covenants and
agrees to give Lender prompt notice of any non-compliance with such laws, ordinances, regulations
or requirements and of any notice of non-compliance therewith which it receives or any threatened
or pending proceedings in respect thereto or with respect to the Property (including, without
limitation, changes in zoning). Notwithstanding the provisions of this Paragraph 5, Grantor at its
own expense after written notice to Lender may contest the applicability or enforcement of such
laws, ordinances, regulations or requirements by an appropriate proceeding conducted in good faith
and with due diligence, provided that such non-compliance will not result in any lien, charge, fine
or other liability against the Property or Grantor and such non-compliance will not place the
Property or any part thereof in any danger of



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being forfeited, lost or closed. Neither Grantor nor any tenant or other person shall remove,
demolish or alter any Improvements now existing or hereafter erected on the Property or any
Personal Property in or on the Property except when incident to the replacement of Personal
Property with items of like kind and value or customary tenant improvements pursuant to Leases
approved or deemed approved pursuant to the Mezzanine Credit Agreement.



     6. Transfers. Except as may be expressly provided in the Mezzanine Credit Agreement,
(a) if Grantor shall, directly, indirectly or by operation of law, without the prior written
consent of Lender in each instance, (i) sell, convey, assign, transfer, lease, option, mortgage,
pledge, hypothecate or dispose of the Property, or any part thereof or interest therein, except as
expressly permitted by the terms of this Deed of Trust or the Mezzanine Credit Agreement, or (ii)
create or suffer to be created or to exist any lien, encumbrance, security interest, mortgage,
pledge, restriction, attachment or other charge of any kind upon the Property, or any part thereof
or interest therein, except for Permitted Encumbrances and the Senior Deed of Trust (subject to
Grantor’s right to contest certain liens to the extent provided in the Mezzanine Credit Agreement),
or (b) if there shall occur, directly, indirectly or by operation of law, without the prior written
consent of Lender in each instance, any sale, assignment, transfer, conveyance, disposition,
option, mortgage, hypothecation, pledge or other encumbrance of any direct or indirect interest in
Grantor, then, in either (a) or (b), an Event of Default shall exist under this Deed of Trust.



     7. Hazardous Materials.



          (a) Environmental Indemnity. Grantor covenants and agrees, at its sole cost and
expense, to indemnify, defend (at trial and appellate levels and with attorneys, consultants and
experts acceptable to Lender) and hold each Lender, each of the Banks and each of their respective
parents, subsidiaries, affiliates, shareholders, directors, officers, employees and agents, and the
successors and assigns of any of them (collectively, the “Indemnified Parties” and individually an
“Indemnified Party”) harmless against and from any and all liens, damages, losses, liabilities,
obligations, settlement payments, penalties, 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 incurred in investigating, defending against,
settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon,
incurred by or asserted or awarded against such Indemnified Party or the Property and arising
directly or indirectly from or out of: (A) the Release or threatened Release of any Hazardous
Materials on, in, under or affecting all or any portion of the Property or migrating from the
Property to any surrounding areas, regardless of whether or not caused by or within the control of
Grantor or any other Obligor; (B) the existence of any Mold Condition on, in, under or affecting
all or any portion of the Property, regardless of whether or not caused by or within the control of
Grantor or any other Obligor; (C) the violation by Grantor of any Environmental Laws relating to or
affecting the Property of Grantor, whether or not caused by or within the control of Grantor or any
other Obligor; (D) the failure of Grantor to comply fully with the terms and conditions of this
Paragraph 7 or Sections 6.1(p) and 7.9 of the Mezzanine Credit Agreement; (E) the violation of any
Environmental Laws which gives or may give rise to any rights whatsoever in any party with respect
to the Property by virtue of any Environmental Laws; (F) the breach of any representation or
warranty contained in Section 6.1(p) of the Mezzanine

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Credit Agreement; or (G) the enforcement of this Paragraph 7, including, without limitation,
(i) the reasonable costs of assessment, containment and/or removal of any and all Hazardous
Materials from all or any portion of the Property or any surrounding areas to which Hazardous
Materials have migrated from the Property, (ii) the costs of assessment, containment, abatement,
remediation and/or removal of any Mold Condition from all or any portion of the Property so that
such Mold Condition no longer exists, (iii) the reasonable costs of any actions taken in response
to a Release or threatened Release of any Hazardous Materials on, in, under or affecting all or any
portion of the Property or any surrounding areas to which Hazardous Materials have migrated from
the Property to prevent or minimize such Release or threatened Release so that it does not migrate
or otherwise cause or threaten danger to present or future public health, safety, welfare or the
environment, (iv) the costs of any actions taken in response to any Mold Condition on, in, under or
affecting all or any portion of the Property to prevent or minimize such Mold Condition so that it
does not migrate or otherwise cause or threaten danger to present or future public health, safety,
welfare or the environment, and (v) reasonable costs incurred to comply with the Environmental Laws
in connection with all or any portion of the Property or any surrounding areas to which Hazardous
Materials have migrated from the Property; provided, however, nothing contained in this Paragraph 7
shall require Grantor to indemnify any Indemnified Party from any matter, cost or expense to the
extent such matter, cost or expense arises or results solely from such Indemnified Party’s own
gross negligence or willful misconduct. GRANTOR AGREES THAT THE INDEMNIFICATION OF ANY INDEMNIFIED
PARTY BY GRANTOR SET FORTH IN THIS PARAGRAPH 7 INCLUDES INDEMNIFICATION IN THE EVENT OF ORDINARY
NEGLIGENCE OR STRICT LIABILITY ON THE PART OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY BUT DOES
NOT INCLUDE INDEMNIFICATION OF SUCH INDEMNIFIED PARTY FOR SUCH INDEMNIFIED PARTY’S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. Grantor’s obligations hereunder are separate and distinct from Grantor’s
obligations under the other Loan Documents, and Lender’s and the other Indemnified Parties’ rights
under this Agreement shall be in addition to all rights of Lender under the Note, the Mezzanine
Credit Agreement, the Guaranty and under any other documents or instruments evidencing, securing or
relating to the Secured Obligations, and payments by Grantor under this Paragraph 7 shall not
reduce Grantor’s obligations and liabilities, if any, under any of the other Loan Documents.
Nothing herein shall require Grantor to indemnify any Indemnified Party from any matter, cost or
expense relating to a Release or Threat of Release of Hazardous Substances or violation of any
Environmental Law caused by an Indemnified Party or first occurring after the Lender or its nominee
acquires title to the applicable Property by the exercise of its foreclosure remedies or by deed in
lieu of foreclosure or after repayment of the Loan (unless all or any portion of the Loan is
reinstated because such repayment is rescinded or otherwise required to be returned).




          (b) Survival, Assignability and Transferability.




               (i) Except as expressly provided in Paragraph 7(a) above, the indemnity set forth above in
subparagraph (a) of this Paragraph 7 and any representations or warranties set forth in Section
6.1(p) of the Mezzanine Credit Agreement and incorporated herein by reference shall survive the
payment and performance of the Secured Obligations and any exercise by Lender of any remedies under
this Deed of Trust, including without limitation,



9









 







the power of sale, or any other remedy in the nature of foreclosure, and shall not merge with
any deed given by Grantor to Lender in lieu of foreclosure or any deed under a power of sale.



               (ii) It is agreed and intended by Grantor and Lender that the indemnity set forth above in
subparagraph (a) of this Paragraph 7 and any representations or warranties set forth in Section
6.1(p) of the Mezzanine Credit Agreement and incorporated herein by reference may be assigned or
otherwise transferred by Lender to its successors and assigns in connection with an assignment of
this Deed of Trust and to any subsequent purchasers of all or any portion of the Property by,
through or under Lender, without notice to Grantor and without any further consent of Grantor. To
the extent consent to any such assignment or transfer is required by law, advance consent to any
such assignment or transfer is hereby given by Grantor in order to maximize the extent and effect
of the warranties, representations and indemnity given hereby.



     8. Protection of Lender’s Security. If Grantor fails to perform the covenants and
agreements contained in this Deed of Trust or (to the extent applicable to Grantor) the Mezzanine
Credit Agreement, or if any action or proceeding is commenced which affects the Property or title
thereto or the interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement or arrangements or proceedings involving a bankrupt or decedent, then
Lender at Lender’s option, but without any duty or obligation of any sort to do so and without in
any way waiving or relieving any Default or Event of Default, may make such appearances, disburse
such sums and take such action as Lender reasonably deems necessary to protect Lender’s interest or
cure such Default or Event of Default, including, but not limited to, disbursement of reasonable
attorneys’ fees, payment, contest or compromise of any lien or security interest which is prior to
the lien or security interest of this Deed of Trust, including the Senior Deed of Trust, payment of
insurance premiums, taxes, charges and assessments and entry upon the Property to make repairs.
Any reasonable amounts disbursed by Lender pursuant to this Paragraph 8, with interest thereon,
shall become a portion of the Secured Obligations. Unless Grantor and Lender agree to other terms
of payment, such amounts shall be payable upon notice from Lender to Grantor requesting payment
thereof and shall bear interest from the date of disbursement at the Post-Default Rate stated in
the Mezzanine Credit Agreement unless collection from Grantor of interest at such rate would be
contrary to applicable law, in which event such amounts shall bear interest at the highest rate
which may be collected from Grantor under applicable law. Grantor shall have the right to prepay
such amounts in whole or in part at any time. Nothing contained in this Paragraph 8 shall require
Lender to incur any expense or do any act.



     9. Inspection. Lender may, at Grantor’s expense, during normal business hours make
or cause to be made reasonable entries upon and inspections of the Property as permitted in the
Mezzanine Credit Agreement, or at any other time when necessary or appropriate, in the sole
reasonable discretion of Lender, to protect or preserve the Property.



     10. Grantor and Security Title Not Released. From time to time, without affecting any
obligation of Grantor or Grantor’s successors or assigns to pay the Secured Obligations and to
observe the covenants of Grantor contained in this Deed of Trust and the other Loan Documents, and
without affecting the guaranty of any person, corporation, partnership or other entity for payment
or performance of the Secured Obligations, and without affecting the lien or security interest or
priority of lien or security interest of this Deed of Trust on the Property,



10









 







Lender may, at Lender’s option, without giving notice to or obtaining the consent of Grantor
or Grantor’s successors or assigns or of any guarantor, and without liability on Lender’s part,
grant extensions or postponements of the time for payment of the Secured Obligations or any part
thereof, release anyone liable on any of the Secured Obligations, accept a renewal note or notes
therefor, release from this Deed of Trust any part of the Property, take or release other or
additional security, reconvey any part of the Property, consent to any map or plat or subdivision
of the Property, consent to the granting of any easement, join in any extension or subordination
agreement and agree in writing with Borrower to modify the rate of interest or terms and time of
payment or period of amortization of the Note or change the amount of the monthly installments
payable thereunder. Grantor shall pay Lender a reasonable service charge, together with such title
insurance premiums and reasonable attorneys’ fees as may be incurred, at Lender’s option, for any
such action if taken at Grantor’s request.



     11. Forbearance Not Waiver. Any forbearance by Lender in exercising any right or
remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of any right or remedy hereunder. The procurement of insurance or the payment of taxes or
other liens or charges by Lender shall not be a waiver of Lender’s right to accelerate the maturity
of the Secured Obligations. Lender’s receipt of any awards, proceeds or damages under Paragraphs 4
and 9 hereof shall not operate to cure or waive any default in payment of the Secured Obligations
by any Obligor.



     12. Estoppel Certificates. Grantor shall within ten (10) Business Days of a written
request from Lender, but no more often than quarterly, furnish Lender with a written statement,
duly acknowledged, setting forth the amount of the Secured Obligations and any right of set-off,
counterclaim or other defense which may exist or be claimed by Grantor against the Secured
Obligations and the obligations of Grantor under this Deed of Trust.



     13. Security Agreement.



          (a) Insofar as any item of property included in the Property which is or might be deemed to be
“personal property” is concerned, this Deed of Trust is hereby made and declared to be, among other
things, a security agreement, granting a security interest to Lender in and to each and every item
of such property included in the Property (hereinafter collectively referred to as the
“Collateral”), in compliance with the provisions of the Uniform Commercial Code as enacted in the
State of Texas. A financing statement or statements (whether or not reciting this Deed of Trust to
be a security agreement), covering all of the Collateral, shall be authorized by Grantor and
appropriately filed. The remedies for any violation of the covenants, terms and conditions of the
security agreement herein contained shall be (i) as prescribed herein, or (ii) as prescribed by
general law, or (iii) as prescribed by the specific statutory consequences now or hereafter enacted
and specified in said Uniform Commercial Code, all at Lender’s sole election. Upon the occurrence
and continuance of an Event of Default, Lender may require Grantor, at its expense, to assemble all
personal property which is a part of the Property, and with respect to which such request or demand
is made, and make the same available to Lender at a convenient place upon the Land (or within
Improvements upon the Land, as may be appropriate for the protection of such personal property)
acceptable to Lender. Any notice of sale, disposition or other action by Lender with respect to
personal property which is a part of the Property sent to Grantor in accordance with the provisions
hereof relating to communications at

11









 







least ten (10) days prior to such action shall constitute adequate and reasonable notice to
Grantor of such action. Grantor and Lender agree that the filing of such financing statement(s) in
the records normally having to do with personal property shall never be construed as in any way
derogating from or impairing this declaration and hereby stated intention of Grantor and Lender
that everything used in connection with the production of income from the Property and/or adapted
for use therein and/or which is described or reflected in this Deed of Trust, is, and at all times
and for all purposes and in all proceedings, both legal or equitable, shall be, regarded as part of
the real estate irrespective of whether (i) any such item is physically attached to the Land or the
Improvements, (ii) serial numbers are used for the better identification of certain items capable
of being thus identified in a recital contained herein, or (iii) any such item is referred to or
reflected in any such financing statement(s) so filed at any time. Similarly, the mention in any
such financing statement(s) of the rights in and to the proceeds of any hazard insurance policy, or
any award in eminent domain proceedings for a taking or for loss of value, or Grantor’s interest as
lessor in any present or future lease or rights to income growing out of the use and/or occupancy
of the Property, whether pursuant to lease or otherwise, shall never be construed as in any way
altering any of the rights of Lender as determined by this instrument or impugning the priority of
Lender’s lien granted hereby or by any other recorded document, but such mention in such financing
statement(s) is declared to be for the protection of Lender in the event any court shall at any
time hold, with respect to any such matter, that notice of Lender’s priority of interest, to be
effective against a particular class of persons, must be filed in the Uniform Commercial Code
records. Grantor warrants that (i) Grantor’s (that is, “Debtor’s”) name, identity or
organizational structure and residence or principal place of business are as set forth in
Exhibit C attached hereto and by this reference made a part hereof; (ii) Grantor (that is,
“Debtor”) has been using or operating under said name, identity or organizational structure without
change for the time period set forth in Exhibit C attached hereto and by this reference
made a part hereof; and (iii) the location of all collateral constituting fixtures is upon the
Land. Grantor covenants and agrees that Grantor will furnish Lender with notice of any change in
name, identity, organizational structure, residence or principal place of business within thirty
(30) days of the effective date of any such change and Grantor will promptly upon request by Lender
execute any financing statements or other instruments deemed necessary by Lender to prevent any
filed financing statement from becoming misleading or losing its perfected status. The information
contained in this Paragraph 13 is provided in order that this Deed of Trust shall comply with the
requirements of the Uniform Commercial Code, as enacted in the State of Texas, for instruments to
be filed as financing statements. This Deed of Trust shall be effective as and shall constitute a
fixture filing from the date of its filing for record in the Real Property Records of the county in
which the Land is located.




          (b) Lender may, at its election, at any time after delivery of this Deed of Trust, sign one or
more copies hereof in order that such copies may be used as a financing statement under said
Uniform Commercial Code. The signature of Lender may be placed between the last sentence of this
Deed of Trust and Grantor’s acknowledgment or may follow Grantor’s acknowledgment. Lender’s
signature need not be acknowledged and is not necessary to the effectiveness hereof as a deed of
trust, mortgage, assignment, pledge, security agreement or (unless otherwise required by applicable
law) as a financing statement. Lender is authorized to file in any jurisdiction where Lender deems
it necessary this Deed of Trust, a financing statement or statements and one or more continuation
statements, pursuant to said Uniform Commercial Code, in form satisfactory to Lender, and will pay
the cost of filing or recording any


12









 








such instrument, in all public offices at any time and from time to time whenever filing or
recording of any financing statement, continuation statement or this Deed of Trust is deemed by
Lender to be necessary or desirable. Certain of the Property is or will become “fixtures” (as that
term is defined in said Uniform Commercial Code) on the Property of which Grantor is record owner
(unless otherwise stated herein) and upon filing of this Deed of Trust for record in the real
estate records of the county wherein such fixtures are situated, it shall operate also as a
financing statement upon such of the Property which is or may become fixtures.




          (c) The information contained in Exhibit C is provided in order that this Deed of
Trust shall comply with the requirements of the Uniform Commercial Code for instruments to be filed
as financing statements. The names of “Debtor” and the “Secured Party”, the identity or
organizational structure, jurisdiction of organization, organizational number, federal tax
identification number and residence or chief executive office of “Debtor,” and the time period for
which “Debtor” has been using or operating under said name and identity or organizational structure
without change are as set forth in Part 1 of Exhibit C attached hereto and by this
reference made a part hereof; the mailing address of the “Secured Party” from which information
concerning the security interest may be obtained, and the mailing address of “Debtor,” are as set
forth in Part 1 and Part 2 of Exhibit C attached hereto. Exhibit C correctly sets
forth all names and tradenames that Grantor has used within the last five years and also correctly
sets forth the locations of all of the chief executive offices of Grantor over the last five years.




          (d) Grantor shall, at any time and from time to time, take such steps as Lender may reasonably
request for Lender (i) to obtain an acknowledgment, in form and substance reasonably satisfactory
to Lender, of any bailee having possession of any of the Collateral, stating that the bailee holds
possession of such Collateral on behalf of Lender, (ii) to obtain “control” of any investment
property, deposit accounts, letter-of-credit rights, or electronic chattel paper (as such terms are
defined by the Uniform Commercial Code with corresponding provisions thereof defining what
constitutes “control” for such items of collateral), with any agreements establishing control to be
in form and substance reasonably satisfactory to Lender, and (iii) otherwise to insure the
continued perfection and priority of the Lender’s security interest in any of the Collateral and of
the preservation of its rights therein, subject to the prior lien of the Senior Deed of Trust,
whether in anticipation of or following the effectiveness of the Uniform Commercial Code. If
Grantor shall at any time acquire a “commercial tort claim” (as such term is defined in the Uniform
Commercial Code) with respect to the Collateral or any portion thereof, Grantor shall promptly
notify Lender thereof in writing, providing a reasonable description and summary thereof, and shall
execute a supplement to this Deed of Trust in form and substance acceptable to Lender granting a
security interest in such commercial tort claim to Lender.




          (e) Grantor hereby authorizes Lender, its counsel or its representative, at any time and from
time to time, to file financing statements, amendments and continuations that describe or relate to
the Collateral or any portion thereof in such jurisdictions as Lender may deem necessary or
desirable in order to perfect the security interests granted by Grantor under this Deed of Trust or
any other Loan Document, subject to the prior lien of the Senior Deed of Trust, and such financing
statements may contain, among other items as Lender may deem advisable to include therein, the
federal tax identification number of Grantor. Lender shall upon request provide Grantor with
copies of any and all such filings made by Lender.




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          (f) Upon the occurrence of an Event of Default, Lender may require Grantor to assemble the
Collateral and make it available to Lender, at Grantor’s sole risk and expense, at a place or
places to be designated by Lender which are reasonably convenient to both Lender and Grantor.




     14. Leases and Revenues.



          (a) As part of the consideration for the Secured Obligations, Grantor has absolutely and
unconditionally assigned and transferred to Lender all of Grantor’s right, title and interest in
and to the Leases and the Revenues, including those now due, past due or to become due by virtue of
any of the Leases for the occupancy or use of all or any part of the Property. Grantor hereby
authorizes Lender or Lender’s agents to collect the Revenues and hereby directs such tenants,
lessees and licensees of the Property to pay the Revenues to Lender or Lender’s agents; provided,
however, that prior to written notice given by Lender to Grantor of any Event of Default, Grantor
shall have a license (revocable upon the occurrence of an Event of Default) to collect and receive
the Revenues as trustee for the benefit of Lender, and apply the Revenues so collected to the
Secured Obligations, to the extent then due and payable, then to the payment of normal and
customary operating expenses for the Property which are then due and payable, with the balance, so
long as no Event of Default has occurred, to the account of Grantor. Grantor agrees that each and
every tenant, lessee and licensee of the Property shall pay, and hereby irrevocably authorizes and
directs each and every tenant, lessee and licensee of the Property to pay, the Revenues to Lender
or Lender’s agents on Lender’s written demand therefor (which demand may be made by Lender at any
time after the occurrence of an Event of Default) without any obligation on the part of said
tenant, lessee or licensee to inquire as to the existence of an Event of Default and
notwithstanding any notice or claim of Grantor to the contrary, and Grantor agrees that Grantor
shall have no right or claim against said tenant, lessee or licensee for or by reason of any
Revenues paid to Lender following receipt of such written demand.




          (b) Grantor hereby covenants that Grantor has not executed any prior assignment of the Leases
or the Revenues, other than the prior lien of the Senior Deed of Trust and the Senior Assignment of
Leases, that Grantor has not performed, and will not perform, any acts and has not executed, and
will not execute, any instruments which would prevent Lender from exercising the rights of holder
under this Deed of Trust, other than the prior lien of the Senior Deed of Trust and the Senior
Assignment of Leases, and that at the time of execution of this Deed of Trust there has been no
anticipation or prepayment of any of the Revenues for more than one (1) month prior to the due
dates of such Revenues. Grantor further covenants that Grantor will not hereafter collect or
accept payment of any Revenues more than one (1) month prior to the due dates of such Revenues.




          (c) Grantor agrees that neither the foregoing assignment of Leases and Revenues nor the
exercise of any of Lender’s rights and remedies under Paragraph 19 of this Deed of Trust shall be
deemed to make Lender a mortgagee-in-possession or otherwise responsible or liable in any manner
with respect to the Leases, the Property or the use, occupancy, enjoyment or operation of all or
any portion thereof, unless and until Lender, in person or by agent, assumes actual possession
thereof. Grantor further agrees that the appointment of any receiver for the Property by any court
at the request of Lender or by agreement with Grantor, or the entering into possession of any part
of the Property by such

14









 








receiver, shall not be deemed to make Lender a mortgagee-in-possession or otherwise
responsible or liable in any manner with respect to the Leases, the Property or the use, occupancy,
enjoyment or operation of all or any portion thereof.




          (d) If Lender or a court-appointed receiver enters upon, takes possession of and maintains
control of the Property pursuant to Paragraph 19 of this Deed of Trust, all Revenues thereafter
collected shall be applied, subject to the prior lien of the Senior Deed of Trust, in such order as
Lender may elect in its discretion against the reasonable costs of taking control of and managing
the Property and collecting the Revenues, including, but not limited to, reasonable attorneys’ fees
actually incurred, receiver’s fees, premiums on receiver’s bonds, costs of repairs to the Property,
premiums on insurance policies, Impositions and other charges on the Property, and the costs of
discharging any obligation or liability of Grantor as landlord, lessor or licensor of the Property,
or to the Secured Obligations. Lender or the receiver shall have access to the books and records
used in the operation and maintenance of the Property and shall be liable to account only for those
Revenues actually received. Lender shall not be liable to Grantor, anyone claiming under or
through Grantor or anyone having an interest in the Property by reason of anything done or left
undone by Lender pursuant to Paragraph 19 of this Deed of Trust, except in the event of Lender’s
gross negligence or willful misconduct. If the Revenues are not sufficient to meet the costs of
taking control of and managing the Property and collecting the Revenues, any monies reasonably
expended by Lender for such purposes shall become a portion of the Secured Obligations. Unless
Lender and Grantor agree in writing to other terms of payment, such amounts shall be payable upon
notice from Lender to Grantor requesting payment thereof and shall bear interest from the date of
disbursement at the Post-Default Rate stated in the Mezzanine Credit Agreement unless payment of
interest at such rate would be contrary to applicable law, in which event such amounts shall bear
interest at the highest rate which may be collected from Grantor under applicable law. The
entering upon and taking possession of and maintaining of control of the Property by Lender or the
receiver pursuant to Paragraph 19 of this Deed of Trust and the application of Revenues as provided
herein shall not cure or waive any Event of Default or invalidate any other right or remedy of
Lender hereunder.




          (e) It is the intention of Lender and Grantor that the assignment effectuated by this Deed of
Trust with respect to the Revenues shall be a direct and currently effective assignment and shall
not constitute merely the granting of a lien, security interest or pledge for the purpose of
securing the Secured Obligations. In the event that a court of competent jurisdiction determines
that, notwithstanding such expressed intent of the parties, Lender’s interest in the Revenues
constitutes a lien on or security interest in or pledge of the Revenues, it is agreed and
understood that the forwarding of a notice to Grantor after the occurrence of an Event of Default
advising Grantor of the revocation of Grantor’s license to collect such Revenues, shall be
sufficient action by Lender to (i) perfect such lien on or security interest in or pledge of the
Revenues, (ii) take possession thereof and (iii) entitle Lender to immediate and direct payment of
the Revenues, for application as provided in this Deed of Trust, subject to the prior lien of the
Senior Deed of Trust, all without the necessity of any further action by Lender, including, without
limitation, any action to obtain possession of the Land, Improvements or any other portion of the
Property.




     15. Leases of the Property.



15









 





          (a) Except as permitted in the Mezzanine Credit Agreement, Grantor will not enter into any
Lease of all or any portion of the Property or amend, supplement or otherwise modify, or terminate
or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant any
concessions to or waive the performance of any obligations of any tenant, lessee or licensee under,
any now existing or future Lease of the Property, without the prior written consent of Lender.
Grantor, at Lender’s request, shall furnish Lender with executed copies of all Leases hereafter
made of all or any part of the Property as required by the Mezzanine Credit Agreement. Upon
Lender’s request, Grantor shall make a separate and distinct assignment to Lender, as additional
security, subject to the prior lien of the Senior Deed of Trust and the Senior Assignment of
Leases, of all Leases hereafter made of all or any part of the Property.




          (b) There shall be no merger of the leasehold estates created by the Leases with the fee
estate of the Property without the prior written consent of Lender. Lender may at any time and
from time to time by specific written instrument intended for the purpose, unilaterally subordinate
the lien of this Deed of Trust to any Lease, without joinder or consent of, or notice to, Grantor,
any tenant or any other Person, and notice is hereby given to each tenant under a Lease of such
right to subordinate. No such subordination shall constitute a subordination to any lien or other
encumbrance, whenever arising, or improve the right of any junior lienholder. Nothing herein shall
be construed as subordinating this Deed of Trust to any Lease.




          (c) Grantor hereby appoints Lender its attorney-in-fact, coupled with an interest, empowering
Lender to subordinate any Leases to this Deed of Trust.




     16. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and
cumulative to any other right or remedy under this Deed of Trust or under the other Loan Documents
or afforded by law or equity, and may be exercised concurrently, independently or successively.



     17. Taxation of Deed of Trusts. In the event of the enactment of any law deducting
from the value of the Property any deed of trust lien thereon, or imposing upon Lender the payment
of all or part of the taxes, charges or assessments previously paid by Grantor pursuant to this
Deed of Trust, or changing the law relating to the taxation of deeds of trust or debts secured by
deeds of trust or Lender’s interest in the Property so as to impose new incidents of tax on Lender,
then Grantor shall pay such taxes or assessments or shall reimburse Lender therefor; provided,
however, that if in the opinion of counsel to Lender, such payment cannot lawfully be made by
Grantor, then Lender may, at Lender’s option, declare the Secured Obligations to be immediately due
and payable and invoke any remedies permitted by Paragraph 19 of this Deed of Trust.



     18. Events of Default and Acceleration. The term “Event of Default”, wherever used in
this Deed of Trust, shall mean any one or more of the following conditions or events:



          (a) Failure by Grantor to pay as and when due and payable any sums to be paid by Grantor under
this Deed of Trust (including, but not limited to any payment of Funds) and continuance of such
failure for a period of five (5) days after notice thereof from Lender




16









 







(provided that no such cure period is provided with respect to any payments for which no cure
or grace period is provided under the Mezzanine Credit Agreement); or




          (b) Failure by Grantor to duly observe or perform any term, covenant, condition or agreement
contained in Paragraph 3 or 4 of this Deed of Trust where such failure continues for ten (10)
Business Days; or




          (c) Failure by Grantor to duly observe or perform any other term, covenant, condition or
agreement contained in this Deed of Trust and continuance of such failure for a period of thirty
(30) days after notice thereof from Lender, provided, that any such cure period shall not apply to
any default excluded from any provision of grace or cure of defaults contained in this Deed of
Trust or in any other of the Loan Documents; or




          (d) Any representation or warranty of Grantor contained in this Deed of Trust shall prove to
have been false or incorrect in any material respect upon the date when made; or




          (e) The occurrence of any “Event of Default” as defined in any of the other Loan Documents.




     If an Event of Default shall have occurred, Lender may, at Lender’s option, by notice to
Grantor declare the entire Secured Obligations to be immediately due and payable, whereupon the
same shall become immediately due and payable, and without presentment, protest, demand, notice of
intent to accelerate, or other notice of any kind, all of which are hereby expressly waived by
Grantor. No omission on the part of Lender to exercise such option when entitled to do so shall be
construed as a waiver of such right.



     19. Rights and Remedies. If an Event of Default shall have occurred, then the entire
Secured Obligations shall, at the option of Lender, immediately become due and payable without
presentment, protest, demand, notice of intent to accelerate, notice of acceleration or other
notice of any kind, all of which are hereby expressly WAIVED by Grantor, time being of the essence,
and Lender, at its option, may do any one or more of the following (and, if more than one, either
concurrently or independently, and in such order as Lender may determine in its discretion), all
without regard to the adequacy or value of the security for the Secured Obligations:



          (a) Enter upon and take possession of the Property without the appointment of a receiver, or
an application therefor; at its option, operate the Property; at its option, exclude Grantor and
its agents and employees wholly therefrom; at its option, employ a managing agent of the Property;
and at its option, exercise any one or more of the rights and powers of Grantor to the same extent
as Grantor could, either in its own name, or in the name of Grantor; and receive the rents,
incomes, issues and profits of the Property. Lender shall have no obligation to discharge any
duties of a landlord to any tenant or to incur any liability as a result of any exercise by Lender
of any rights hereunder; and Lender shall not be liable for any failure to collect rents, issues,
profits or revenues, nor liable to account for any rents, issues, profits or revenues unless
actually received by Lender.




          (b) Apply, as a matter of strict right, without notice and without regard to the solvency,
fraud or mismanagement of any party bound for its payment, for the appointment of a receiver to
take possession of and to operate the Property and to collect and apply the incomes,

17









 








rents, issues, profits and revenues thereof, and Grantor does hereby irrevocably consent to
such appointment. Any such receiver shall have all the usual powers and duties of receivers in
similar cases, including the full power to rent, maintain and otherwise operate the Property upon
such terms as may be approved by the court, and shall apply such rents in accordance with the
provisions of this Deed of Trust.




          (c) Pay, perform or observe any term, covenant or condition of this Deed of Trust and any of
the other Loan Documents 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
Grantor to Lender with interest thereon at the lesser of the Post-Default Rate or the maximum rate
of interest permitted by applicable law. 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 Grantor
or any person in possession holding under Grantor. Grantor hereby acknowledges and agrees that the
remedies set forth in this Paragraph 19(c) 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 Grantor with interest thereon at the lesser of the
Post-Default Rate or the maximum rate of interest permitted by applicable law, notwithstanding the
fact that such remedies were exercised and such payments made and costs incurred by Lender after
the filing by Grantor of a voluntary case or the filing against Grantor of an involuntary case
pursuant to or within the meaning of the Bankruptcy Code, 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 Grantor, Lender, any guarantor, the Secured Obligations or any of the Loan Documents.




          (d) Trustee, upon the request of Lender, shall be authorized and empowered and it shall be his
special duty to sell the Property or any part thereof at public auction to the highest bidder for
cash, with or without having taken possession of same. The sale shall be made in the county in
which the Property is situated. If the Property is situated in more than one county, then notices
as hereinafter provided shall be given in both or all of such counties, the Property may be sold in
either county, and such notices shall designate the county where the Property will be sold. Notice
of such sale shall be given by posting written notice of the sale at the courthouse door or other
place designated for the filing of such notices in the county where the Property is situated, and
by filing a copy of the notice in the county clerk’s office, in the county in which the sale is to
be made, at least twenty-one (21) days preceding the date of the sale. If the Property is in more
than one county, one notice shall be posted at the courthouse door of each county in which the
Property is situated and one notice shall be filed with the county clerk of each county in which
the Property is situated. In addition, one of the holders of the Secured Obligations (or any part
thereof) shall at least twenty-one (21) days preceding the date of such sale serve written notice
of the proposed sale by certified mail on each debtor obligated to pay the Secured Obligations (or
any part thereof) according to the records of such holder. Service of such notice upon each debtor
shall be completed upon deposit of the notice, enclosed in a postpaid wrapper, properly addressed
to such debtor at his, her or its most recent address as shown by the records of such holder of the
Secured Obligations (or any part thereof) in a post office or official depository under the care
and custody of the United States Postal

18









 








Service. The affidavit of any person having knowledge of the facts to the effect that such
service was completed shall be prima facie evidence of the fact of service. After such written
notice shall have been posted or filed, as aforesaid, and such notice shall have been served upon
such debtor or debtors, as aforesaid, Trustee shall perform his duty to enforce the trusts created
herein by selling the Property, either as an entirety or in parcels as the Lender may direct (all
rights to a marshaling of assets or sale in inverse order of alienation being waived and Grantor
shall not have any right to require the Trustee to sell less than all of the Property) at public
venue, in the place designated by the commissioner’s court in the county designated in such notice
on the first Tuesday in any month between the hours of 10:00 A.M. and 4:00 P.M. (and within three
(3) hours after a specific time designated in such notice), to the highest bidder or bidders for
cash, and make due conveyance of the Property to the purchaser or purchasers, with general warranty
subject to the Permitted Encumbrances and subject to the prior lien of the Senior Deed of Trust and
any other leases or matters affecting title approved by Lender hereunder or pursuant to the
Mezzanine Credit Agreement. Grantor binds itself, its heirs, legal representatives, successors and
assigns, to warrant and forever defend the title to such purchaser or purchasers, when so made by
Trustee acting against the claims and demands of every person whomsoever lawfully claiming or to
claim the same or any part thereof subject to the Permitted Encumbrances and subject to the prior
lien of the Senior Deed of Trust and any other leases or matters affecting title approved by Lender
hereunder or pursuant to the Mezzanine Credit Agreement. Payment of the purchase price to Trustee
shall satisfy the obligation of the purchaser at such sale therefor, and such purchaser shall not
be responsible for the application thereof. The sale or sales by Trustee of less than the whole of
the Property shall not exhaust the power of sale herein granted, and Trustee is specifically
empowered to make successive sale or sales under such power until the whole of the Property shall
be sold; and if the proceeds of such sale or sales of less than the whole of the Property shall be
less than the aggregate of the Secured Obligations and the expenses thereof, this Deed of Trust and
the lien, security interest and assignment hereof shall remain in full force and effect as to the
unsold portion of the Property just as though no sale or sales had been made; provided, however,
that Grantor shall never have any right to require the sale or sales of less than the whole of the
Property, but Lender shall have the right, at its sole election, to request Trustee to sell less
than the whole of the Property. If an Event of Default occurs, the holder of the Secured
Obligations or any part thereof on which the payment is delinquent shall have the option to proceed
with foreclosure in satisfaction of such item either through judicial proceedings or by directing
Trustee to proceed as if under a full foreclosure, conducting the sale as herein provided without
declaring the entire Secured Obligations due, and if sale is made because of default of an
installment, or a part of an installment, such sale may be made subject to the unmatured part of
the Secured Obligations; and it is agreed that such sale, if so made, shall not in any manner
affect the unmatured part of the Secured Obligations, but as to such unmatured part, this Deed of
Trust shall remain in full force and effect as though no sale had been made under the provisions of
this paragraph. Several sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Secured Obligations. To the extent permitted by applicable law, any sale may
be adjourned by announcement at the time and place appointed for such sale without further notice

except as may be required by law. Trustee may, after any request or direction by Lender, sell not
only the real property but also the Collateral and other interests which are a part of the
Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of
the Property separately from the remainder of the Property. It shall not be necessary for Trustee
to have taken possession of any part of the


19









 






 Property or to have present or to exhibit at any sale any of the Collateral. The Trustee or
his successor or substitute 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 Trustee, including the posting of notices and
the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. If
Trustee or his successor or substitute shall have given notice of sale hereunder, any successor or
substitute Trustee thereafter appointed may complete the sale and the conveyance of the property
pursuant thereto as if such notice had been given by the successor or substitute Trustee conducting
the sale. At any such sale (1) Grantor hereby agrees, on its behalf and on behalf of its heirs,
executors, administrators, successors, personal representatives and assigns, that any and all
recitals made in any deed of conveyance given by Trustee with respect to the identity of Lender,
the occurrence or existence of any default, the acceleration of the maturity of any of the Secured
Obligations, the request to sell, the notice of sale, the giving of notice to all debtors legally
entitled thereto, the time, place, terms, and manner of sale, and receipt, distribution and
application of the money realized therefrom, or the due and proper appointment of a substitute
Trustee, and, without being limited by the foregoing, with respect to any other act or thing having
been duly done by Lender or by Trustee hereunder, shall be taken by all courts of law and equity as
prima facie evidence that the statements or recitals state facts and are without further question
to be so accepted, and Grantor hereby ratifies and confirms every act that Trustee or any
substitute Trustee hereunder may lawfully do in the premises by virtue hereof, and (2) the
purchaser may disaffirm any easement granted, or rental, lease or other contract made in violation
of any provision of this Deed of Trust, and may take immediate possession of the Property free
from, and despite the terms of, such grant of easement and rental or lease contract. Lender may
bid and become the purchaser of all or any part of the Property at any trustee’s or foreclosure
sale hereunder, and the amount of Lender’s successful bid may be credited on the Secured
Obligations. Lender may, at its option, direct the Trustee to sell the Property subject to the
rights of any tenants of the Property, and the failure to make any such tenants parties to any
foreclosure proceedings and to foreclose their rights will not be asserted by Grantor to be a
defense to any proceedings instituted by Lender to collect the Secured Obligations. The provisions
hereof with respect to posting and giving notices of sale are intended to comply with the
provisions of the Texas Property Code, including without limitation Section 51.002, and other
applicable laws, and in the event the requirement for any notice under the Texas Property Code or
such other applicable law shall be eliminated or the prescribed manner of giving same modified by
future amendment to, or adoption of any statute superseding the Texas Property Code or such other
applicable law, the requirement for such particular notice shall be deemed stricken from or
modified in this Deed of Trust in conformity with such amendment or superseding statute, effective
as of the effective date of same. The manner herein prescribed for serving or giving any notice,
other than that to be posted or caused to be posted by Trustee, shall not be deemed exclusive but
such notice or notices may be given in any other manner which may be permitted by applicable law.
Said sale shall forever be a bar against Grantor, its heirs, legal representatives, successors and
assigns, and all other persons claiming under it. It is expressly agreed that the recitals in each
conveyance to the purchaser shall be full evidence of the truth of the matters therein stated, and
all lawful prerequisites to said sale shall be conclusively presumed to have been performed.




          (e) Enforce any legal or equitable remedy against Grantor, including without limitation suing
for any sums, whether interest, principal or any installment of either or both, taxes, penalties or
any other sums required to be paid under the terms of this Deed of Trust, as


20









 







the same become due, without regard to whether or not all of the Secured Obligations shall
then be due, and without prejudice to the right of Lender thereafter to enforce any other remedy,
including without limitation an action of foreclosure, whether or not such other remedy be based
upon an Event of Default which existed at the time of commencement of an earlier or pending action,
and whether or not such other remedy be based upon the same Event of Default upon which an earlier
or pending action is based.




          (f) UCC Remedies. In addition to any other remedies set forth herein, with respect to
any Collateral subject to the security interest created by this Deed of Trust as security
instrument, or any financing statement filed in connection with such security interest under the
Uniform Commercial Code, Lender may exercise any and all rights and remedies of a secured party
under the Uniform Commercial Code. Expenses of retaking, holding, preparing for sale, selling or
the like (including, without limitation, reasonable attorneys’ fees and legal expenses), together
with interest thereon at the Post-Default Rate, from the date incurred by Lender until actually
paid by Grantor, shall be paid by Grantor 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 Obligations. If notice is
required by law, Lender shall give Grantor at least ten (10) days’ prior written notice of the time
and place of any public sale of such property 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 Grantor, 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 Grantor. 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 Paragraph 19(f) shall be deemed to have
been a public sale conducted in a commercially reasonable manner if held contemporaneously with the
foreclosure sale as provided in Paragraph 19(d) of this Deed of Trust upon giving the same notice
with respect to the sale of the Property hereunder as is required under said Paragraph 19(d).




          (g) The proceeds of any sale of, and any rents and other amounts generated by the holding,
leasing, operation or other use of the Property shall be applied by the Trustee (or the receiver,
if one is appointed) to the extent that funds are so available therefrom, in the following order of
priority:




               (i) Costs of Trustee’s Sale. First, to the payment of all reasonable costs of the
sale by the Trustee or other costs mandated by law (including a reasonable trustee’s commission);



               (ii) Other Costs. Second, to the payment of the reasonable costs and expenses of
taking possession of the Property and of holding, using, leasing, repairing and selling the same,
including, without limitation, (A) reasonable attorneys’ and accountants’ fees, and (B) the payment
of any and all Impositions, liens, security interests or other rights, titles or interest superior
to the lien and security interest of this Deed of Trust;



               (iii) Secured Obligations Other than the Note. Third, to the payment of all amounts
of the Secured Obligations, excluding the principal balance and accrued but unpaid interest on the
Note, which may be due to the holder of the Note or any of the other Loan Documents, together with
interest thereon as provided therein;



21









 





               (iv) Note. Fourth, to the payment of the indebtedness evidenced by the Note, the
application to the different portions of the Note to be made in such manner, order and priority as
Lender in its sole discretion may elect; and



               (v) Balance. Fifth, to Grantor, its heirs, legal representatives, successors and
assigns, or to whomsoever may be lawfully entitled to receive the same.



          (h) Trustee may require minimum bids at any foreclosure sale and may cancel and abandon the
sale if no bid is received equal to or greater than any such minimum bid. If foreclosure should be
commenced by Trustee, Lender may at any time before the sale direct Trustee to abandon the sale for
any reason, and may at any time or times thereafter direct Trustee to again commence foreclosure.
Irrespective of whether foreclosure is commenced by Trustee, Lender may at any time after the
occurrence of an Event of Default institute suit for collection of the Secured Obligations or
foreclosure of the lien of this Deed of Trust. If Lender should institute suit for collection of
the Secured Obligations or foreclosure of the lien of this Deed of Trust, Lender or such other
holder may at any time before the entry of final judgment dismiss the same, and require Trustee to
sell the Property in accordance with the provisions of this Deed of Trust.




          (i) No single sale or series of sales by Trustee or by any substitute or successor Trustee
under this Deed of Trust, and no judicial foreclosure or incomplete or defective sale shall
extinguish the lien or security interest, or exhaust the power of sale under this Deed of Trust
except with respect to the items of property sold, but such lien or security interest and power
shall exist for so long as, and may be exercised in any manner by law or in this Deed of Trust
provided as often as, the circumstances require to give Lender full relief hereunder.




          (j) Lender shall have the right to become the purchaser at any sale made hereunder, being the
highest bidder, and credit upon all or any part of the Secured Obligations shall be deemed cash
paid for the purposes of this Article.




          (k) Grantor hereby waives any right or remedy which Grantor may have or be able to assert
pursuant to Chapter 34 of the Texas Business and Commerce Code, or any other provision of Texas
law, pertaining to the rights and remedies of sureties.




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




22









 








          (m) The remedies in this Paragraph 19 shall be available under and governed by the real
property laws of Texas and shall not be governed by the personal property laws of Texas, including,
but not limited to, the power to dispose of personal property in a commercially reasonable manner
under Section 9.610 of the Texas Uniform Commercial Code, unless Lender elects to proceed as to the
Collateral together with the other Property under and pursuant to the real property remedies of
this Paragraph 19.




          (n) THE TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD
FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (EXPRESSLY
INCLUDING FOR TRUSTEE’S NEGLIGENCE), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
THE 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 HIM/HER HEREUNDER, BELIEVED BY HIM/HER IN
GOOD FAITH TO BE GENUINE. ALL MONIES RECEIVED BY TRUSTEE SHALL, UNTIL USED OR APPLIED AS HEREIN
PROVIDED, BE HELD IN TRUST FOR THE PURPOSES FOR WHICH THEY WERE RECEIVED, BUT NEED NOT BE
SEGREGATED IN ANY MANNER FROM ANY OTHER MONIES (EXCEPT TO THE EXTENT REQUIRED BY LAW), AND TRUSTEE
SHALL BE UNDER NO LIABILITY FOR INTEREST ON ANY MONIES RECEIVED BY HIM/HER HEREUNDER. GRANTOR
HEREBY RATIFIES AND CONFIRMS ANY AND ALL ACTS WHICH THE HEREIN NAMED TRUSTEE OR HIS/HER SUCCESSOR
OR SUCCESSORS, SUBSTITUTE OR SUBSTITUTES, IN THIS TRUST, SHALL DO LAWFULLY BY VIRTUE HEREOF.
GRANTOR WILL REIMBURSE TRUSTEE FOR, AND SAVE HIM/HER HARMLESS AGAINST, ANY AND ALL LIABILITY AND
EXPENSES WHICH MAY BE INCURRED BY HIM/HER IN THE PERFORMANCE OF HIS/HER DUTIES. THE FOREGOING
INDEMNITY SHALL NOT TERMINATE UPON DISCHARGE OF THE SECURED OBLIGATIONS OR FORECLOSURE, OR RELEASE
OR OTHER TERMINATION, OF THIS DEED OF TRUST.




     20. Waiver of Deficiency Statute.



          (a) Waiver. In the event an interest in any of the Property is foreclosed upon
pursuant to a judicial or nonjudicial foreclosure sale, Grantor agrees as follows: notwithstanding
the provisions of Sections 51.003, 51.004, and 51.005 of the Texas Property Code (as the same may
be amended from time to time), and to the extent permitted by law, Grantor agrees that Lender shall
be entitled to seek a deficiency judgment from Grantor and any other party obligated on the Note
equal to the difference between the amount owing on the Note and the amount for which the Property
was sold pursuant to judicial or nonjudicial foreclosure sale. Grantor expressly recognizes that
this Paragraph 20 constitutes a waiver of the above-cited provisions of the Texas Property Code
which would otherwise permit Grantor, Borrower and other persons against whom recovery of
deficiencies is sought or any Guarantor independently (even absent the initiation of deficiency
proceedings against them) to present competent evidence of the fair market value of the 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. Grantor further
recognizes and agrees that this waiver creates an irrebuttable presumption that the foreclosure
sale price is equal to the fair market value of the Property for

23









 








purposes of calculating deficiencies owed by any Grantor, Borrower, and others against whom
recovery of a deficiency is sought.




          (b) Alternative to Waiver. Alternatively, in the event the waiver provided for in
subparagraph (a) above is determined by a court of competent jurisdiction to be unenforceable, the
following shall be the basis for the finder of fact’s determination of the fair market value of the
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, reasonable attorneys’ fees, and marketing costs; (iv) the
gross fair market value of the Property shall be further discounted to account for any estimated
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.




     21. Substitute Trustee. In case of absence, death, inability, refusal or failure of
Trustee herein named to act, or in case he should resign (and he is hereby authorized to resign
without notice to Grantor), or if Lender shall desire, with or without cause, to replace Trustee
herein named, a successor and substitute Trustee may be named, constituted and appointed by Lender
or other holder of the Secured Obligations, without other formality than an appointment and
designation in writing. This conveyance shall vest in such successor or substitute Trustee, as
Trustee, the estate in and title to all of the Property, and such successor or substitute Trustee
so appointed and designated shall thereupon hold, possess and exercise all the title, rights,
powers and duties herein conferred on Trustee named herein and any previous successor or substitute
Trustee, and his/her conveyance to the purchaser at any such sale shall be equally valid and
effective as if made by Trustee named herein, and such right to appoint a successor or substitute
Trustee shall exist and may be exercised as often and whenever from any of said causes, or without
cause, as aforesaid.



     22. Notices. Except as otherwise specified in this Deed of Trust, any and all
notices, demands, elections or requests provided for or permitted to be given pursuant to this Deed
of Trust (hereinafter in this Paragraph 22 referred to as “Notice”) shall be in writing and shall
be deemed to have been properly given or served by personal delivery or by sending same by
overnight courier or by depositing same in the United States Mail, postpaid and registered or
certified, return receipt requested, and addressed to the addresses set forth on page one hereof.
A duplicate copy of each Notice to Lender shall be sent to Wachovia Bank, National Association,



24









 




171 17th Street, N.W., GA 4506, Atlanta, Georgia 30303, Attn: Cathy Casey. A
duplicate copy of each Notice to Grantor shall be sent to William F. Timmons, Esq., McKenna Long &
Aldridge LLP, 303 Peachtree Street, N.E., Suite 5300, Atlanta, Georgia, 30308. Each Notice shall
be effective upon being personally delivered or upon being sent by overnight courier or upon being
deposited in the United States Mail as aforesaid. However, the time period in which a response to
such Notice must be given or any action taken with respect thereto, if any, shall commence to run
from the date of receipt if personally delivered or sent by overnight courier, or, if so deposited
in the United States Mail, on the date of receipt as disclosed on the return receipt. Rejection or
other refusal to accept or the inability to deliver because of changed address for which no Notice
was given shall be deemed to be receipt of the Notice sent. By giving at least five (5) Business
Days prior Notice thereof, Grantor or Lender shall have the right from time to time and at any time
during the term of this Deed of Trust 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.




     23. Successors and Assigns Bound; Captions. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to, the respective successors and
assigns of Lender and Grantor, subject to the provisions of Paragraph 6 hereof. The captions and
headings of the paragraphs of this Deed of Trust are for convenience only and are not to be used to
interpret or define the provisions hereof.



     24. GOVERNING LAW; SEVERABILITY. THIS DEED OF TRUST AND THE OBLIGATIONS OF GRANTOR
HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, AND THE LAWS OF THE UNITED STATES OF AMERICA. SHOULD ANY OBLIGATION OR REMEDY
UNDER THIS INSTRUMENT BE INVALID OR UNENFORCEABLE PURSUANT TO THE LAWS PROVIDED HEREIN TO GOVERN,
THE LAWS OF ANY OTHER STATE REFERRED TO HEREIN OR OF ANOTHER STATE WHOSE LAWS CAN VALIDATE AND
APPLY THERETO SHALL GOVERN. In the event that any provision or clause of this Deed of Trust, the
Note or the other Loan Documents is invalid or unenforceable or conflicts with applicable law, such
invalidity, unenforceability or conflict shall not affect other provisions of this Deed of Trust,
the Note or the other Loan Documents which can be given effect without the invalid, unenforceable
or conflicting provision, and to this end, the provisions of this Deed of Trust, the Note and the
other Loan Documents are declared to be severable. In the event that any applicable law limiting
the amount of interest or other charges permitted to be collected from Grantor is interpreted so
that any charge for which provision is made in this Deed of Trust, the Note or the other Loan
Documents, whether considered separately or together with other charges permitted to be collected
from Grantor as a part of the transaction represented by this Deed of Trust, the Note and the other
Loan Documents, violates such law, and Grantor is entitled to the benefit of such law, such charge
is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any,
previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as
reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the
Note.



     25. WAIVERS. GRANTOR AGREES TO THE FULL EXTENT PERMITTED BY LAW, THAT IN CASE OF AN
EVENT OF DEFAULT HEREUNDER, NEITHER



25









 







GRANTOR NOR ANYONE CLAIMING THROUGH OR UNDER GRANTOR SHALL OR WILL SET UP, CLAIM OR SEEK TO
TAKE ADVANTAGE OF ANY MORATORIUM, REINSTATEMENT, FORBEARANCE, APPRAISEMENT, VALUATION, STAY,
EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS NOW OR HEREAFTER IN FORCE, IN ORDER TO PREVENT
OR HINDER THE ENFORCEMENT OR FORECLOSURE OF THIS DEED OF TRUST, OR THE ABSOLUTE SALE OF THE
PROPERTY, OR THE FINAL AND ABSOLUTE PUTTING INTO POSSESSION THEREOF, IMMEDIATELY AFTER SUCH SALE,
OF THE PURCHASERS THEREAT, AND GRANTOR, FOR GRANTOR AND ALL WHO MAY AT ANY TIME CLAIM THROUGH OR
UNDER GRANTOR, HEREBY WAIVES TO THE FULLEST EXTENT THAT GRANTOR MAY LAWFULLY SO DO, THE BENEFIT OF
ALL SUCH LAWS, AND ANY AND ALL RIGHT TO HAVE THE ASSETS COMPRISED IN THE SECURITY INTENDED TO BE
CREATED HEREBY MARSHALED UPON ANY TRUSTEE’S SALE OR JUDICIAL FORECLOSURE OF THE LIEN HEREOF. NO
DELAY OR OMISSION OF LENDER OR OF ANY HOLDER OF THE NOTE TO EXERCISE ANY RIGHT, POWER OR REMEDY
ACCRUING UPON ANY EVENT OF DEFAULT SHALL EXHAUST OR IMPAIR ANY SUCH RIGHT, POWER OR REMEDY OR SHALL
BE CONSTRUED TO BE A WAIVER OF ANY SUCH DEFAULT, OR ACQUIESCENCE THEREIN; AND EVERY RIGHT, POWER
AND REMEDY GIVEN BY THIS DEED OF TRUST TO LENDER MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS
MAY BE DEEMED EXPEDIENT BY LENDER. NO CONSENT OR WAIVER, EXPRESSED OR IMPLIED, BY LENDER TO OR OF
ANY EVENT OF DEFAULT SHALL BE DEEMED OR CONSTRUED TO BE A CONSENT OR WAIVER TO OR OF ANY OTHER
EVENT OF DEFAULT. FAILURE ON THE PART OF LENDER TO COMPLAIN OF ANY ACT OR FAILURE TO ACT WHICH
CONSTITUTES AN EVENT OF DEFAULT, IRRESPECTIVE OF HOW LONG SUCH FAILURE CONTINUES, SHALL NOT
CONSTITUTE A WAIVER BY LENDER OF LENDER’S RIGHTS HEREUNDER OR IMPAIR ANY RIGHTS, POWERS OR REMEDIES
CONSEQUENT ON ANY EVENT OF DEFAULT. NO ACT OR OMISSION OF LENDER AS DESCRIBED IN PARAGRAPH 10
ABOVE SHALL PRECLUDE LENDER FROM EXERCISING ANY RIGHT, POWER OR PRIVILEGE HEREIN GRANTED OR
INTENDED TO BE GRANTED IN THE EVENT OF ANY EVENT OF DEFAULT THEN MADE OR OF ANY SUBSEQUENT EVENT OF
DEFAULT; NOR, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN AN INSTRUMENT OR INSTRUMENTS EXECUTED BY
LENDER, SHALL THE LIEN OF THIS DEED OF TRUST BE ALTERED THEREBY. IN THE EVENT OF THE SALE OR
TRANSFER BY OPERATION OF LAW OR OTHERWISE OF ALL OR ANY PART OF THE PROPERTY, LENDER, WITHOUT
NOTICE, IS HEREBY AUTHORIZED AND EMPOWERED TO DEAL WITH ANY SUCH VENDEE OR TRANSFEREE WITH
REFERENCE TO THE PROPERTY OR THE SECURED OBLIGATIONS OR WITH REFERENCE TO ANY OF THE TERMS,
COVENANTS, CONDITIONS OR AGREEMENTS HEREOF, AS FULLY AND TO THE SAME EXTENT AS IT MIGHT DEAL WITH
THE ORIGINAL PARTIES HERETO AND WITHOUT IN ANY WAY RELEASING OR DISCHARGING ANY LIABILITIES,
OBLIGATIONS OR UNDERTAKINGS (INCLUDING, WITHOUT LIMITATION, THE RESTRICTIONS UPON TRANSFER
CONTAINED IN PARAGRAPH 6 OF THIS DEED



26









 







OF TRUST). GRANTOR COVENANTS AND AGREES THAT, UPON THE COMMENCEMENT OF A VOLUNTARY OR
INVOLUNTARY BANKRUPTCY PROCEEDING BY OR AGAINST BORROWER OR ANY OTHER GUARANTOR, GRANTOR SHALL NOT
SEEK A SUPPLEMENTAL STAY OR OTHER RELIEF, WHETHER INJUNCTIVE OR OTHERWISE, 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 BORROWER OR ANY
OTHER GUARANTOR OF OR ANY OTHER PERSON OR PARTY LIABLE WITH RESPECT TO THE SECURED OBLIGATIONS.



     26. Further Assurances. At any time and from time to time, upon request by Lender,
Grantor will make, execute and deliver, or cause to be made, executed and delivered, to Lender and,
where appropriate, cause to be recorded and/or filed and from time to time thereafter to be
re-recorded and/or refiled at such time and in such offices and places as shall be deemed desirable
by Lender, any and all such other and further assignments, deeds of trust, security agreements,
financing statements, continuation statements, instruments of further assurance, certificates and
other documents as may, in the opinion of Lender, be necessary or desirable in order to effectuate,
complete, or perfect, or to continue and preserve, subject to the prior lien of the Senior Deed of
Trust, (a) the obligations of Grantor under this Deed of Trust, and (b) the lien and security
interest created by this Deed of Trust upon the Property. Upon any failure by Grantor so to do,
Lender may make, execute, record, file, re-record and/or refile any and all such assignments, deeds
of trust, security agreements, financing statements, continuation statements, instruments,
certificates, and documents for and in the name of Grantor, and Grantor hereby irrevocably appoints
Lender the agent and attorney in fact of Grantor so to do.



     27. Subrogation. Lender shall be subrogated to all right, title, lien or equity of
all persons to whom Lender may have paid any monies or that may have been paid with proceeds of the
Loan in settlement of liens, charges or assessments, or in acquisition of title or for its benefit
hereunder, or for the benefit or account of Grantor upon execution of the Note or subsequently paid
under any provisions hereof.



     28. Time of the Essence. Time is of the essence with respect to each and every
covenant, agreement and obligation of Grantor under this Deed of Trust, the Note and any and all
other Loan Documents.



27









 





     29. INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET AND JURY TRIAL.



          (a) GRANTOR SHALL INDEMNIFY, DEFEND AND HOLD EACH INDEMNIFIED PARTY HARMLESS AGAINST: (I) ANY
AND ALL CLAIMS FOR BROKERAGE, LEASING, FINDERS OR SIMILAR FEES WHICH MAY BE MADE RELATING TO THE
PROPERTY OR THE SECURED OBLIGATIONS, AND (II) ANY AND ALL LIABILITY, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, SUITS, COSTS AND EXPENSES (INCLUDING SUCH INDEMNIFIED PARTY’S
REASONABLE ATTORNEYS’ FEES, TOGETHER WITH REASONABLE APPELLATE COUNSEL FEES, IF ANY) OF WHATEVER
KIND OR NATURE WHICH MAY BE ASSERTED AGAINST, IMPOSED ON OR INCURRED BY SUCH INDEMNIFIED PARTY
(EXPRESSLY INCLUDING ANY AND ALL LIABILITY, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS,
ACTIONS, SUITS, COSTS AND EXPENSES DUE TO ANY NEGLIGENT ACTIONS OR OMISSIONS OF SUCH INDEMNIFIED
PARTY) IN CONNECTION WITH THE SECURED OBLIGATIONS, THIS DEED OF TRUST, THE PROPERTY, OR ANY PART
THEREOF, OR THE EXERCISE BY ANY INDEMNIFIED PARTY OF ANY RIGHTS OR REMEDIES GRANTED TO IT UNDER
THIS DEED OF TRUST; PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE GRANTOR
TO INDEMNIFY, DEFEND AND HOLD HARMLESS ANY INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS, COSTS AND EXPENSES
ENACTED AGAINST, IMPOSED ON OR INCURRED BY SUCH INDEMNIFIED PARTY BY REASON OF SUCH INDEMNIFIED
PARTY’S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE IF A JUDGMENT IS ENTERED AGAINST SUCH INDEMNIFIED
PARTY BY A COURT OF COMPETENT JURISDICTION AFTER THE EXHAUSTION OF ALL APPLICABLE APPEAL PERIODS.
GRANTOR AGREES THAT THE INDEMNIFICATION OF THE INDEMNIFIED PARTIES BY GRANTOR SET FORTH IN THIS
SECTION 29 INCLUDES INDEMNIFICATION IN THE EVENT OF ORDINARY NEGLIGENCE ON THE PART OF THE
INDEMNIFIED PARTIES BUT DOES NOT INCLUDE INDEMNIFICATION OF ANY INDEMNIFIED PARTY FOR SUCH
INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.




          (b) IF ANY INDEMNIFIED PARTY IS MADE A PARTY DEFENDANT TO ANY LITIGATION OR ANY CLAIM IS
THREATENED OR BROUGHT AGAINST SUCH INDEMNIFIED PARTY CONCERNING THE SECURED OBLIGATIONS, 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 GRANTOR SHALL INDEMNIFY, DEFEND AND HOLD
SUCH INDEMNIFIED PARTY HARMLESS FROM AND AGAINST ALL LIABILITY BY REASON OF SAID LITIGATION OR
CLAIMS, INCLUDING REASONABLE ATTORNEYS’ FEES (TOGETHER WITH REASONABLE APPELLATE COUNSEL FEES, IF
ANY) AND REASONABLE EXPENSES INCURRED BY SUCH INDEMNIFIED PARTY IN ANY SUCH LITIGATION OR CLAIM,
WHETHER OR NOT ANY SUCH LITIGATION OR CLAIM IS PROSECUTED TO JUDGMENT; PROVIDED, HOWEVER, THAT
NOTHING IN THIS PARAGRAPH 29 SHALL BE CONSTRUED TO OBLIGATE GRANTOR TO





28









 




INDEMNIFY, DEFEND AND HOLD HARMLESS ANY INDEMNIFIED PARTY BY REASON OF SUCH INDEMNIFIED
PARTY’S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OR WITH RESPECT TO MATTERS RELATING TO THE PROPERTY
FIRST OCCURRING AFTER ANY SUCH INDEMNIFIED PARTY OR ITS NOMINEE ACQUIRES TITLE TO THE PROPERTY BY
THE EXERCISE OF ITS FORECLOSURE REMEDIES OR BY DEED IN LIEU OF FORECLOSURE, BUT SHALL APPLY WITH
RESPECT TO MATTERS THAT IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY INDEMNIFIED PARTY’S
NEGLIGENCE. IF ANY INDEMNIFIED PARTY COMMENCES AN ACTION AGAINST GRANTOR TO ENFORCE ANY OF THE
TERMS HEREOF OR TO PROSECUTE ANY EVENT OF DEFAULT BY GRANTOR HEREOF OR TO RECOVER ANY SUM SECURED
HEREBY, GRANTOR SHALL PAY TO SUCH INDEMNIFIED PARTY ITS REASONABLE ATTORNEYS’ FEES (TOGETHER WITH
REASONABLE APPELLATE COUNSEL FEES, IF ANY) AND REASONABLE EXPENSES. THE RIGHT TO SUCH ATTORNEYS’
FEES (TOGETHER WITH REASONABLE APPELLATE COUNSEL FEES, IF ANY) AND REASONABLE 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 AN EVENT OF DEFAULT OCCURS UNDER THIS DEED OF TRUST, ANY
INDEMNIFIED PARTY 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 GRANTOR, GRANTOR SHALL PAY
SUCH INDEMNIFIED PARTY REASONABLE ATTORNEYS’ FEES (TOGETHER WITH REASONABLE APPELLATE COUNSEL FEES,
IF ANY) AND REASONABLE EXPENSES INCURRED BY SUCH INDEMNIFIED PARTY, WHETHER OR NOT AN ACTION IS
ACTUALLY COMMENCED AGAINST GRANTOR BY REASON OF SUCH BREACH. ALL REFERENCES TO “ATTORNEYS” IN THIS
SUBPARAGRAPH AND ELSEWHERE IN THIS DEED OF TRUST SHALL INCLUDE WITHOUT LIMITATION ANY REASONABLE
ATTORNEY OR LAW FIRM ENGAGED BY ANY INDEMNIFIED PARTY AND SUCH INDEMNIFIED PARTY’S IN-HOUSE
COUNSEL, AND ALL REFERENCES TO “FEES AND EXPENSES” IN THIS SUBPARAGRAPH AND ELSEWHERE IN THIS DEED
OF TRUST SHALL INCLUDE WITHOUT LIMITATION ANY REASONABLE FEES OF SUCH ATTORNEY OR LAW FIRM AND ANY
ALLOCATION CHARGES AND ALLOCATION COSTS OF ANY SUCH INDEMNIFIED PARTY’S IN-HOUSE COUNSEL.




               (c) A waiver of subrogation shall be obtained by Grantor from its insurance carrier and,
consequently, Grantor waives any and all right to claim or recover against any Indemnified Party,
for loss of or damage to Grantor, the Property, Grantor’s property or the property of others under
Grantor’s control from any cause insured against or required to be insured against by the
provisions of this Deed of Trust.



               (d) ALL SUMS PAYABLE BY GRANTOR HEREUNDER SHALL BE PAID WITHOUT NOTICE (EXCEPT AS MAY
OTHERWISE BE PROVIDED HEREIN), DEMAND, COUNTERCLAIM, SETOFF, DEDUCTION OR DEFENSE AND WITHOUT
ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION OR REDUCTION, AND THE OBLIGATIONS AND LIABILITIES OF
GRANTOR HEREUNDER SHALL IN NO WAY BE RELEASED, DISCHARGED OR OTHERWISE AFFECTED BY REASON OF: (I)
ANY



29









 







DAMAGE TO OR DESTRUCTION OF OR ANY CONDEMNATION OR SIMILAR TAKING OF THE PROPERTY OR ANY PART
THEREOF; (II) ANY RESTRICTION OR PREVENTION OF OR INTERFERENCE WITH ANY USE OF THE PROPERTY OR ANY
PART THEREOF; (III) ANY TITLE DEFECT OR ENCUMBRANCE OR ANY EVICTION FROM THE LAND OR THE
IMPROVEMENTS ON THE LAND OR ANY PART THEREOF BY TITLE PARAMOUNT OR OTHERWISE; (IV) ANY BANKRUPTCY,
INSOLVENCY, REORGANIZATION, COMPOSITION, ADJUSTMENT, DISSOLUTION, LIQUIDATION, OR OTHER LIKE
PROCEEDING RELATING TO ANY INDEMNIFIED PARTY, OR ANY ACTION TAKEN WITH RESPECT TO THIS DEED OF
TRUST BY ANY TRUSTEE OR RECEIVER OF ANY SUCH INDEMNIFIED PARTY, OR BY ANY COURT, IN SUCH
PROCEEDING; (V) ANY CLAIM WHICH GRANTOR HAS, OR MIGHT HAVE, AGAINST ANY INDEMNIFIED PARTY; (VI) ANY
DEFAULT OR FAILURE ON THE PART OF ANY INDEMNIFIED PARTY TO PERFORM OR COMPLY WITH ANY OF THE TERMS
HEREOF OR OF ANY OTHER AGREEMENT WITH GRANTOR; OR (VII) ANY OTHER OCCURRENCE WHATSOEVER, WHETHER
SIMILAR OR DISSIMILAR TO THE FOREGOING, WHETHER OR NOT GRANTOR SHALL HAVE NOTICE OR KNOWLEDGE OF
ANY OF THE FOREGOING. GRANTOR WAIVES ALL RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE
TO ANY ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION, OR REDUCTION OF ANY SUM SECURED HEREBY AND
PAYABLE BY GRANTOR.



               (e) GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL PERSONAL RIGHTS UNDER
THE LAWS OF ANY STATE TO THE RIGHT, IF ANY, TO TRIAL BY JURY.



     30. Revolving Credit/Future Advance. This Deed of Trust secures Secured Obligations
which may provide for a variable rate of interest as well as revolving credit advances and other
future advances, whether such advances are obligatory or otherwise. Advances under the Note are
subject to the terms and provisions of the Mezzanine Credit Agreement and the other Security
Documents. Grantor acknowledges that the Secured Obligations may increase or decrease from time to
time and that if the outstanding balance of the Secured Obligations is ever repaid to zero the
security title and security interest created by this Deed of Trust shall not be deemed released or
extinguished by operation of law or implied intent of the parties. This Deed of Trust shall remain
in full force and effect as to any further advances under the Mezzanine Credit Agreement made after
any such zero balance until the Secured Obligations are paid in full, all agreements to make
further advances or issue letters of credit have been terminated and this Deed of Trust has been
canceled of record. Grantor waives the operation of any applicable statutes, case law or
regulation having a contrary effect.



     31. Prior Security Deed. This Deed of Trust is subject and subordinate to the Senior
Deed of Trust. Grantor hereby expressly agrees that any Event of Default under the Senior Deed of
Trust shall constitute and be deemed to be an Event of Default under this Deed of Trust. Lender
shall have the right, but not the obligation, to pay any sums or to take any action which Lender
deems necessary or advisable to cure any alleged default under the Senior Deed of Trust, and such
payment or such action is hereby authorized by Grantor, and any sum so paid and any expense
incurred by Lender in taking any such action shall be secured hereby and shall be immediately due
and payable by Grantor to



30









 







Lender. Grantor hereby transfers and assigns to Lender any excess proceeds arising from any
foreclosure or sale under power pursuant to the Senior Deed of Trust or any instrument evidencing
the indebtedness secured thereby, and Grantor hereby authorizes and directs the holder or holders
of the Senior Deed of Trust to pay such excess proceeds directly to Lender.



     32. Mezzanine Credit Agreement. Notwithstanding anything contained herein to the
contrary, Grantor agrees to be bound to all of the terms and conditions of the Mezzanine Credit
Agreement that (i) apply to the Property or Grantor, including without limitation, Section 7.5 of
the Mezzanine Credit Agreement relating to insurance, casualty and condemnation, and (ii) relate to
grace or notice and cure periods, notices of default and acceleration of the Secured Obligations,
including without limitation, Section 10.1 of the Mezzanine Credit Agreement. Additionally,
Grantor does hereby make and reaffirm each and every warranty and representation set forth in the
Mezzanine Credit Agreement concerning the Property, subject to the prior lien of the Senior Deed of
Trust, as if the Property were Eligible Real Estate under the Mezzanine Credit Agreement.



     33. WAIVER OF CONSUMER RIGHTS. GRANTOR WAIVES ALL OF ITS RIGHTS, REMEDIES, CLAIMS
DEMANDS AND CAUSES OF ACTION UNDER, BASED UPON OR RELATED TO THE TEXAS DECEPTIVE TRADE PRACTICES
CONSUMER PROTECTIONS ACT AS DESCRIBED IN SECTION 17.41 ET SEQ. (OTHER THAN SECTION
17.555) OF THE TEXAS BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS, AS THE SAME PERTAINS OR MAY PERTAIN TO THE NOTE, THE SECURED OBLIGATIONS AND ANY OF
THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, TO THE MAXIMUM EXTENT
THAT SUCH RIGHTS, REMEDIES, CLAIMS, DEMANDS, AND CAUSES OF ACTION MAY LAWFULLY AND EFFECTIVELY BE
WAIVED. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, GRANTOR VOLUNTARILY CONSENTS TO
THIS WAIVER. IN FURTHERANCE OF THIS WAIVER, GRANTOR HEREBY REPRESENTS AND WARRANTS TO LENDER THAT
(A) GRANTOR IS REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE NEGOTIATION, EXECUTION AND
DELIVERY OF THIS DEED OF TRUST, (B) GRANTOR HAS A CHOICE OTHER THAN TO ENTER INTO THIS WAIVER IN
THAT IT CAN OBTAIN THE LOAN EVIDENCED BY THE NOTE FROM ANOTHER INSTITUTION, AND (C) GRANTOR DOES
NOT CONSIDER ITSELF TO BE IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER WITH
RESPECT TO THE NOTE AND THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




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




	 	 	 	 	 	 	 	 	 	 	 
	 	 	GRANTOR:
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	APARTMENT REIT WALKER RANCH, LP, a Texas limited partnership
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	APARTMENT REIT WALKER RANCH 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/
Stanley J. Olander Jr.
 	 
	 	 	Name:  	Stanley J. Olander, Jr. 	 
	 	 	Title:  	CEO




[CORPORATE SEAL]	 
	 



[Signature
Page to Mezzanine Deed of Trust — Wachovia/NNN October 2006]





32









 






NOTICE PURSUANT TO TEXAS BUS. & COMM. CODE § 26.02



THIS WRITTEN DEED OF TRUST AND ALL OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
PRIOR TO OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF, TOGETHER CONSTITUTE A
WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.




	 	 	 	 	 	 	 
	 	 	GRANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	APARTMENT REIT
WALKER RANCH, LP, a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	APARTMENT REIT WALKER RANCH 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/ STANLEY J. OLANDER, 	 	 
	 

	 	Name:
	 	 

STANLEY J. OLANDER, JR.
	 	 
	 

	 	Title:
	 	CEO	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	[CORPORATE SEAL]	 	 






	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL

 ASSOCIATION, as Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 







[Signature Page to Mezzanine Deed of Trust —
Wachovia/NNN October 2006]



 









 






NOTICE PURSUANT TO TEXAS BUS. & COMM. CODE § 26.02



THIS WRITTEN DEED OF TRUST AND ALL OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
PRIOR TO OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF, TOGETHER CONSTITUTE A
WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.




	 	 	 	 	 	 	 
	 	 	GRANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	APARTMENT REIT
WALKER RANCH, LP, a
Texas limited 
partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	APARTMENT REIT WALKER RANCH 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:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	[CORPORATE SEAL]	 	 






	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL 

ASSOCIATION, as Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ CATHY A. CASEY	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: CATHY A. CASEY	 	 
	 

	 	 	 	Title: MANAGING DIRECTOR	 	 






[Signature Page to Mezzanine Deed of Trust - Wachovia/NNN October 2006]

 









 





STATE OF VIRGINIA




COUNTY OF [ILLEGIBLE]




     This instrument was acknowledged before me on October 27, 2006, by S J OLANDER, the CEO of
NNN Apartment REIT, Inc., a Maryland corporation, on behalf of said corporation as the General
Partner of NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, on behalf of such
limited partnership as the Manager of Apartment REIT Walker Ranch GP,
LLC, a Delaware limited
liability company as the General Partner of APARTMENT REIT WALKER RANCH, LP, a Texas limited
partnership.



	 	 	 	 	 
	 

	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 

Notary Public, in and for
	 	 
	 
	 	 	 	 
	(SEAL)

	 	THE STATE OF VIRGINIA	 	 
	 
	 	 	 	 
	 

	 	My Commission Expires: 6/30/10	 	 






[Notary
Page to Mezzanine Deed of Trust — Wachovia/NNN October 2006]




 









 








STATE OF GEORGIA




COUNTY OF FULTON




     This instrument was acknowledged before me on October 30, 2006 by Cathy A. Casey, a Managing
Director of Wachovia Bank, National Association, a national banking association, on behalf of said
association.



	 	 	 	 	 
	
	 	 	 	 
	 

	 	/s/ Valretha V. Bailey	 	 
	 

	 	 

Notary Public, in and for
	 	 
	 
	 	 	 	 
	 

	 	THE STATE OF Georgia	 	 
	 
	 	 	 	 
	 

	 	My Commission Expires: 4-14-2007	 	 






[Notary
Page to Mezzanine Deed of Trust — Wachovia/NNN
October 2006]





 









 





EXHIBIT A




Legal Description




37









 





EXHIBIT B




Permitted Encumbrances




     Permitted Encumbrances are such matters as are shown on Schedule B to that certain
Commitment for Title Insurance (No.                     ) issued by                      with an
effective date of                     .



38









 





EXHIBIT C




Schedule 1




DESCRIPTION OF DEBTOR AND SECURED PARTY




Part 1 – Description of Debtor




A.                     , a                     . Such Debtor has been using or operating under
said name and identity or corporate structure without change since                     .



Names and Tradenames used within the last five years:



Location of all chief executive offices over last five years:



                                        




                                        




                                        




Mailing address:




                                        




                                        




                                        

Attn:                               




Organizational Identification Number:                     




Federal Tax Identification Number:                     




Part 2 – Description of Secured Party




Wachovia Bank, National Association, a national banking association, as Agent

171 17th Street, N.W.

GA 4506

Atlanta, Georgia 30363

Attn: Cathy Casey




***********************************************************





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