exv10w2



 





Exhibit 10.2




AZLIFE Loan No. 10074




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.




	 	 	 	 	 
	 

	 	 	 	 
	THE STATE OF TEXAS

	 	§	 	 
	 

	 	§	 	 
	COUNTY OF DALLAS

	 	§	 	 






DEED OF TRUST, MORTGAGE AND SECURITY AGREEMENT




     This
Deed of Trust, Mortgage and Security Agreement (“Deed of
Trust”) is made to be
effective as of the 14th day of November, 2007, by CM REAL ESTATE, LLC, a Texas limited
liability company, having an office and usual place of business at 650 S. Royal Lane, Coppell,
Texas 75019 (the “Borrower”), to Patrick M. Arnold,
as Trustee (the “Trustee”),
whose address is 8080 North Central Expressway, Suite 1380, Dallas, Texas 75206, for the benefit
of Allianz Life Insurance Company of North America, whose address is c/o Allianz of America, Inc.,
Attention: Real Estate Department, 55 Greens Farms Road, P.O. Box 5160, Westport, Connecticut
06881-5160 (the “Lender”).



     FOR THE PURPOSE of securing (a) the repayment of the indebtedness evidenced by the Borrowers
promissory note of even date herewith, payable to the order of the Lender in the original principal
amount of Eleven Million and No/100 Dollars ($11,000,000.00), said principal sum, with interest
thereon at the rate therein provided being finally due and payable on December 10, 2017, and all
renewals, extensions and modifications thereof and any note issued in substitution therefor (the
“Note”); (b) the payment of all other sums with interest thereon as may be advanced by the
Lender in accordance with this Deed of Trust, the Assignment of Rents and Leases of even date
herewith from the Borrower to the Lender (the “Assignment”), the Environmental Indemnity of
even date herewith from the Borrower and Craftmade International, Inc., a Delaware corporation
(sometimes called the “Guarantor” and sometimes
called the “Principal of Borrower,”
whether one or more) to the Lender (the “Indemnity”), and any other instruments securing
payment of the Note (the Note, the Deed of Trust, the Assignment, the Indemnity, that certain
Guaranty Agreement of even date herewith executed by Principal of Borrower, and any other
instruments securing payment of the Note being herein together referred to as the “Loan
Documents” and the indebtedness evidenced by the Note and all such other sums being hereinafter
collectively referred to as the “Indebtedness”); and (c) the performance of all the
covenants and agreements of the Borrower contained in the Loan Documents, the Borrower does hereby
mortgage, grant, bargain, sell, assign, transfer and convey unto the Trustee, for the benefit and
security of the Lender, all the tracts or
parcels of land (hereinafter called the “Land’’), located in Dallas County, Texas, and
described in Exhibit A attached hereto and made a part hereof, together with (i) all of the
buildings, structures and other improvements now standing or at any time hereafter constructed or
placed upon the Land; (ii) all lighting, heating, ventilating, air conditioning, sprinkling and
plumbing fixtures, water and power systems, engines and machinery, boilers, furnaces, oil burners,
elevators and motors, communication systems,



Deed
of Trust, Mortgage and Security Agreement — Page 1




 









 




dynamos, transformers, electrical equipment and all other fixtures of every
description located in or on, or used, or intended to be used in connection
with the Land or any building now or hereafter located thereon; (iii) all
hereditaments, easements, appurtenances, riparian rights, rents, issues,
profits, insurance proceeds, condemnation awards, mineral rights, water
rights, utility rights, and development rights, now or hereafter belonging or
in any way pertaining to the Land or to any building now or hereafter located
thereon and all the estates, rights and interests of the Borrower in the Land;
(iv) all building materials, furniture, furnishings, maintenance equipment,
books, records, plans, specifications, and all other personal property now or
hereafter located in, or on, or used, or intended to be used in connection
with the Land or any building now or hereafter located thereon and all
replacements and additions thereto (excluding personal property owned by
tenants occupying space in any building now or hereafter located on the Land);
(v) all right, title and interest of the Borrower in, to and under any
contracts, licenses and permits relating to the development or operation of
the Land, including specifically, without limitation, any rights of the
Borrower arising from membership in any owners’ association relating to the
Land or arising from any restrictive covenants or other covenants running with
the Land; and (vi) all additions, accessions, increases, parts, fittings,
accessories, replacements, substitutions, betterments, repairs and proceeds to
any and all of the foregoing (all of the foregoing, together with the Land,
being hereinafter referred to as the “Mortgaged Property”). With respect to
any portion of the Mortgaged Property which constitutes personal property,
fixtures or other property governed by the Texas Uniform Commercial Code, this
Deed of Trust shall constitute a security agreement between the Borrower as
the debtor and the Lender as the secured party, and the Borrower hereby grants
the Lender a security interest in such portion of the Mortgaged Property.




     TO HAVE AND TO HOLD the Mortgaged Property unto Trustee, forever, and the
Borrower does hereby bind itself, its successors, and assigns to WARRANT AND
FOREVER DEFEND the title to the Mortgaged Property unto Trustee against every
person whomsoever lawfully claiming or to claim the same or any part thereof,
subject only to the matters set forth in the mortgagee policy of title
insurance in favor of Lender insuring the lien of this Deed of Trust
(collectively, the “Permitted Encumbrances”); provided, however, that if the
Borrower shall pay (or cause to be paid) the Indebtedness as and when the same
shall become due and payable and shall fully perform and discharge (or cause
to be fully performed and discharged) all of its obligations set forth in the
Loan Documents on or before the date same are to be performed and discharged,
then the liens, security interests, estates, and rights granted by the Loan
Documents shall terminate, in accordance with the provisions hereof, otherwise
same shall remain in full force and effect. A certificate or other written
statement executed on behalf of the Trustee or the Lender confirming that the
Indebtedness has not been fully paid or the obligations of the Borrower set
forth in the Loan Documents have not been fully performed or discharged shall
be sufficient evidence thereof for the purpose of reliance by third parties on
such fact.



     The Borrower represents, warrants and covenants to and with the Lender that it
is lawfully seized of the Land in fee simple, subject to the Permitted
Encumbrances, and has good right and full power and authority under all
applicable provisions of law and under its organizational documents to execute
this Deed of Trust and the Loan Documents and to mortgage the Mortgaged
Property; that the Mortgaged Property is free from all liens, security
interests and encumbrances except for the Permitted Encumbrances; that
Borrower will warrant and defend the title to the Mortgaged Property and the
lien and priority of this Deed of Trust against all claims and demands of all
persons whomsoever, whether now existing or hereafter


Deed
of Trust, Mortgage and Security Agreement — Page 2






 









 




arising, not included in the Permitted Encumbrances; and that all buildings and improvements now
or hereafter located on the Land are located entirely within the
boundaries of the Land. The
covenants and warranties of this paragraph shall survive foreclosure of this Deed of Trust and
shall run with the Land.




     The Borrower further covenants and agrees as follows:



     1. Payment
of the Note. The Borrower will duly and punctually pay the principal of
and interest on the Note in accordance with the terms of the Note, and all other Indebtedness,
when and as due and payable. The provisions of the Note are hereby incorporated by reference
into this Deed of Trust as fully as if set forth at length herein. Time is of the essence
hereof.



     2. Fund for Taxes and Assessments.



          (a) The Borrower shall pay to the Lender on the day monthly installments of
interest or principal and interest are payable under the Note, until the Note is paid in full,
a sum
equal to one-twelfth of the yearly taxes and assessments levied against the Mortgaged Property
and one-twelfth of the yearly insurance premiums applicable to the Mortgaged Property as
estimated initially and from time to time by the Lender, to be applied by the Lender to pay
said
taxes, assessments and insurance premiums (such amounts being hereafter referred to as the
“Funds”). The Lender shall apply the Funds to pay said taxes, assessments and insurance
premiums prior to the date that penalty attaches for nonpayment (or insurance lapses, as the
case
may be) so long as the amount of Funds held by the Lender is sufficient at that time to make
such
payments. No earnings or interest shall be payable to the Borrower on the Funds. Such Funds
shall not be, nor be deemed to be, trust funds, and the Lender shall have the right to hold
the
Funds in any manner the Lender elects and may commingle the Funds with other moneys held by
the Lender.



          (b) If the amount of the Funds held by the Lender shall exceed at any time the
amount deemed necessary by the Lender to provide for the payment of taxes, assessments and/or
insurance premiums, such excess shall, at the option of the Lender, either be promptly repaid
to
the Borrower or be credited to the Borrower on the next monthly installment of Funds due. If
at
any time the amount of the Funds held by the Lender shall be less than the amount deemed
necessary by the Lender to pay taxes, assessments and/or insurance premiums as they fall due,
the Borrower shall pay to the Lender any amount necessary to make up the deficiency within ten
(10) days after notice from the Lender to the Borrower requesting payment thereof. The Funds
are pledged as additional security for the Indebtedness.



          (c) Upon the occurrence of any Event of Default (as defined in paragraph 18
hereof), the Lender may apply, in any order as the Lender shall determine in its sole
discretion,
any Funds held by the Lender at the time of application to pay taxes, assessments and/or
insurance premiums which are then or will thereafter become due or as a credit against the
Indebtedness. Upon payment in full of all Indebtedness, the Lender shall promptly refund to
the
Borrower any Funds held by the Lender.


Deed
of Trust, Mortgage and Security Agreement — Page 3






 









 






     3. Application
of Payments. All payments received by the Lender from the
Borrower under the Note or the Loan Documents shall be applied by the Lender in the manner
set forth in the Note.



     4. Payment
of Taxes, Assessments and Other Charges. Subject to payments in the
manner provided under paragraph 2 hereof and to paragraph 9 relating to contests, the
Borrower
shall pay before a penalty might attach for nonpayment thereof, all taxes and assessments and
all
other charges whatsoever levied upon or assessed or placed against the Mortgaged Property,
except that assessments may be paid in installments so long as no fine or penalty is added to
any
installment for the nonpayment thereof. The Borrower shall likewise pay any and all
governmental levies or assessments such as maintenance charges, owner association dues or
charges or fees, levies or charges resulting from covenants, conditions and restrictions
affecting
the Mortgaged Property, which are assessed or imposed upon the Mortgaged Property or any part
thereof or become due and payable, and which create, may create or appear to create a lien
upon
the Mortgaged Property, or any part thereof. The Borrower shall likewise pay all taxes,
assessments and other charges, levied upon or assessed, placed or made against, or measured
by,
this Deed of Trust, or the recordation hereof, or the Indebtedness secured hereby. In the
event of
any legislative action or judicial decision after the date of this Deed of Trust, imposing
upon the
Lender the obligation to pay any such taxes, assessments or other charges, or deducting the
amount secured by this Deed of Trust from the value of the Mortgaged Property for the purpose
of taxation, or changing in any way the laws now in force for the taxation of mortgages, deeds
of
trust or debts secured thereby, or the manner of the operation of any such taxes so as to
affect the
interests of the Lender, then, and in such event, the Borrower shall bear and pay the full
amount
of such taxes, assessments or other charges. Notwithstanding the foregoing provisions of
this
paragraph 4, if for any reason payment by the Borrower of any such taxes, assessments or other
charges would be unlawful, or if the payment thereof would render the indebtedness evidenced
by the Note usurious, the Lender may declare the whole sum secured by this Deed of Trust, with
interest thereon, to be immediately due and payable. The Borrower shall promptly furnish to
the
Lender all notices received by the Borrower of amounts due under this paragraph and in the
event the Borrower shall make payment directly, the Borrower shall promptly furnish to the
Lender receipts evidencing such payments.



     5. Payment of Utility Charges. Subject to paragraph 9 relating to contests, the
Borrower shall pay all charges made by utility companies, whether public or private, for
electricity, gas, heat, water, or sewer, furnished or used in connection with the Mortgaged
Property or any part thereof, and will, upon written request of the Lender, furnish proper
receipts
evidencing such payment.



     6. Liens. Subject to paragraph 9 hereof relating to contests, the Borrower shall not
create, incur or suffer to exist any lien, encumbrance or charge on the Mortgaged Property or
any
part thereof, other than the lien of this Deed of Trust and any lien included in the Permitted
Encumbrances. The Borrower shall pay, when due, the claims of all persons supplying labor or
materials to or in connection with the Mortgaged Property.



     7. Compliance with Laws. Subject to paragraph 9 relating to contests, the Borrower
shall comply with all present and future statutes, laws, rules, orders, regulations and
ordinances
affecting the Mortgaged Property, any part thereof or the use thereof.



Deed
of Trust, Mortgage and Security Agreement — Page 4





 









 





     8. Hazardous Substances.



          (a) Definitions. As used in this Deed of Trust, the following terms shall have
the following meanings:



       
        
(i) “Environmental Law” means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sec. 9601 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Sec. 690] et seq., the Hazardous Materials Transportation Act. 49 U.S.C.
Sec. 1802 et seq., the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et seq.,
the Federal Water Pollution Control Act, 33 U.S.C. Sec. 1251 et seq., the Clean Water Act, 33
U.S.C. Sec. 1321 et seq., the Clean Air Act 42 U.S.C. Sec.
7401 et seq., the Texas
Water Code, the Texas Solid Waste Disposal Act, the Texas Health & Safety Code Sec. 361.001 et
seq., and any other applicable federal, state, county, municipal, local or other statute, law,
ordinance or regulation which may relate to or deal with human health or the environment, all as
may be from time to time amended.



               (ii) “Hazardous Substances” means asbestos ureaformaldehyde, polychlorinated
biphenyls (“PCBs”), nuclear fuel or material, chemical waste, radioactive material,
explosives, known carcinogens, petroleum products and by-products and other dangerous, toxic or
hazardous pollutants, contaminants, chemicals, materials or substances listed or identified in, or
regulated by, any Environmental Law.



          (b) Representations and Warranties. The Borrower represents and warrants to
the Lender that:



               (i) Neither Borrower nor Principal of Borrower has in its possession or under its control an
environmental report or study in respect of the Mortgaged Property that is more current than the
Environmental Report described in subparagraph (d).



               (ii) Except as disclosed by the Environmental Report described in subparagraph (d), there are
not present in, on or under the Mortgaged Property any Hazardous Substances.



               (iii) The Mortgaged Property is not presently being used and to the best of the Borrower’s
knowledge after due inquiry, has not in the past been used in violation of Environmental Laws
governing the handling, storage, transportation, manufacture, release or disposal of any Hazardous
Substances.



               (iv) There are no present and to the best of the Borrower’s knowledge after due inquiry, have
not been any past claims, investigations, administrative proceedings, litigation, regulatory
hearings or requests or demands for remedial or response actions or for compensation, which may be
proposed, threatened or pending with respect to the Mortgaged Property, alleging noncompliance with
or violation of any Environmental Law, seeking relief
under any Environmental Law or relating to any required environmental permits, licenses or
authorizations.



               (v) To the best of Borrower’s knowledge after due inquiry, all reports and notices required
by any Environmental Law have been duly made with respect to the



Deed
of Trust, Mortgage and Security Agreement — Page 5





 









 




Mortgaged Property, and all permits, licenses and authorizations required by any Environmental Law
have been obtained and are in full force and effect with respect to the Mortgaged Property.




               (vi) Except as disclosed by the Environmental Report described in subparagraph (d), there is
not now present nor, to the best of the Borrower’s knowledge after due inquiry, has there ever
been present, in, on or under the Mortgaged Property any above-ground or underground storage tanks
used for the storage of petroleum, petroleum by-products or any other Hazardous Substances.



               (vii) The Mortgaged Property is not and never has been listed on the United States
Environmental Protection Agency’s National Priorities List of Hazardous Waste Sites or on any
other list, schedule, log, inventory or record of hazardous waste sites maintained by any federal,
state, or local agency.



               (viii) The Borrower has disclosed and delivered to the Lender all environmental reports and
investigations which the Borrower has obtained or ordered with
respect to the Mortgaged Property.



          (c) Prohibited Uses. The Borrower shall not use, or permit the use of, the
Mortgaged Property in violation of Environmental Laws governing the handling, storage,
transportation, manufacture, release or disposal of any Hazardous Substances. In addition,
the
Borrower shall not install or maintain, or permit the installation or maintenance of, any
above-ground or underground storage tanks for the storage of petroleum, petroleum by-products
or other Hazardous Substances in, about or under the Mortgaged Property unless (i) the
Borrower has obtained the prior written consent of the Lender for such installation and
maintenance, and (ii) the Borrower installs and maintains such above-ground or underground
storage tanks in compliance with all applicable Environmental Laws. Notwithstanding the
foregoing, the Borrower or any tenant of the Borrower may use or store immaterial amounts of
commonly known and used materials which may be deemed Hazardous Substances hereunder,
provided that any such use or storage (A) does not constitute a remunerative activity of the
Borrower or any tenant, or (B) is incidental to the Borrower’s or such tenant’s primary use of
the
Mortgaged Property and does not constitute a primary use thereof, and (C) in any case complies
at all times with all applicable Environmental Laws.



          (d) Environmental Reports. The Lender acknowledges receipt from the
Principal of Borrower of an Environmental Site Assessment dated December 19, 1995 (the
“Environmental Report”) prepared by Professional Services Industries, Inc.
Upon the
occurrence of an Event of Default hereunder or if the Lender receives information which leads
the Lender, in its sole discretion, to believe that except as permitted in paragraph 8(c)
above, any
Hazardous Substance is present on or is being handled, stored, transported, manufactured,
released or disposed of in, on or under the Mortgaged Property, the Lender may obtain, at the
Borrower’s expense, further environmental reports from a reputable environmental consultant of
the Lender’s choice, if any such environmental report indicates any presence, handling,
storage,
transportation, manufacture, release or disposal of Hazardous Substances in, on or under the
Mortgaged Property, the Lender may require the Borrower, at the Borrower’s expense, to remedy
any such presence, handling, storage, transportation, manufacture, release, or disposal to the
satisfaction of the Lender.


Deed
of Trust, Mortgage and Security Agreement — Page 6






 









 





          (e) Legal Proceedings and Remedial Actions. The Borrower shall immediately notify the
Lender in writing of any claim, investigation, administrative proceeding, litigation, regulatory
hearing or request or demand for remedial or response action or for compensation which may be
proposed, threatened or pending, alleging the presence, handling, storage, transportation,
manufacture, release or disposal of Hazardous Substances in, on or under the Mortgaged Property.
The Lender shall have the right, but not the obligation, to join and participate in any such
investigation, administrative proceeding, litigation, regulatory hearing or other action and to
have its attorneys’ fees and expenses in connection therewith paid by the Borrower. Without the
Lender’s prior written consent, the Borrower shall not take any remedial or response action or
enter into any settlement or other compromise with respect to any claim, investigation,
administrative proceeding, litigation, regulatory hearing or request or demand for remedial or
response action or for compensation which, in the Lender’s reasonable judgment, may impair the
value of the Lender’s security under this Deed of Trust.



     9. Permitted
Contests. The Borrower shall not be required to (a) pay any
tax,
assessment or other charge referred to in paragraph 4 hereof, (b) pay any charge referred to
in
paragraph 5 hereof, (c) discharge or remove any lien, encumbrance or charge referred to in
paragraph 6 hereof, or (d) comply with any statute, law, rule, regulation or ordinance
referred to
in paragraph 7 hereof, so long as the Borrower shall (i) contest, in good faith, the
existence,
amount or the validity thereof, the amount of damages caused thereby or the extent of its
liability
therefor, by appropriate proceedings which shall operate during the pendency thereof to
prevent
(A) the collection of, or other realization upon the tax, assessment, charge or lien,
encumbrance
or charge so contested, (B) the sale, forfeiture or loss of the Mortgaged Property or any part
thereof, and (C) any interference with the use or occupancy of the Mortgaged Property or any
part thereof, and (ii) shall give such security to the Lender as may be demanded by the Lender
to
ensure compliance with the foregoing provisions of this paragraph 9. The Borrower shall give
prompt written notice to the Lender of the commencement of any contest referred to in this
paragraph 9.



     10. Insurance.



          (a) Risks to be Insured. Subject to the terms and provisions of paragraph 2 above, the
Borrower, at its sole cost and expense, will maintain insurance of the following character:



               (i) Insurance on the buildings and other improvements now existing or hereafter erected on the
Land and on the fixtures and personal property included in the Mortgaged Property against loss by
fire, and other hazards covered by the so-called “special” form of policy without a co-insurance
clause in an amount equal to the full replacement cost thereof (with a deductible of not more than
$25,000) without deduction for physical depreciation, which insurance shall in no event be less
than the unpaid principal balance of the Note at any given time. While any building or other
improvement is in the course of being constructed or rebuilt on the Land, the Borrower shall
provide the aforesaid hazard insurance in builder’s risk completed value form including coverage
available on the so-called “special” non-reporting form of policy for an amount equal to 100% of
the insurable replacement cost of such building or other improvement.


Deed
of Trust, Mortgage and Security Agreement — Page 7






 









 





               (ii) If the Mortgaged Property includes steam boilers or other equipment for the generation
or transmission of steam, insurance against loss or damage by explosion, rupture or bursting of
steam boilers, pipes, turbines, engines and other pressure vessels and equipment, in an amount
satisfactory to the Lender, without a co-insurance clause.



               (iii) If the Land or any part thereof is located in a designated official flood-hazardous
area, flood insurance insuring the buildings and improvements now existing or hereafter erected on
the Land in an amount equal to the lesser of the principal balance of the Note or the maximum
limit of coverage made available with respect to such buildings and improvements under the Federal
Flood Disaster Protection Act of 1973, as amended, and the regulations issued thereunder.



               (iv) Comprehensive general liability insurance in an amount not less than $5,000,000
protecting against claims arising from any accident or occurrence in or upon the Mortgaged
Property in the form and amount acceptable to the Lender.



               (v) While any building or improvement is in the course of being constructed, renovated or
rebuilt on the Land, such worker’s compensation insurance as is required by statute.



               (vi) Insurance against interruption of business in respect of the Mortgaged Property in an
amount sufficient to pay one (1) year’s debt service on the Note, including principal and interest
thereof, tax and assessment payments described in paragraph 2, insurance premiums for the
coverages required in this paragraph 10, and other operating expenses of the Mortgaged Property.



               (vii) Insurance against (or insurance which does not exclude from coverage) acts of terrorism
if available at a commercially reasonable premium, at the discretion of Lender.



          (b) Policy
Provisions. All insurance policies and renewals thereof maintained
by the Borrower pursuant to subparagraphs (a)(i) through (a)(iii) and (a)(vi) through (a)(vii)
above shall be written by an insurance carrier satisfactory to the Lender, contain a standard
mortgagee clause in favor of and in form acceptable to the Lender, contain an agreement of the
insurer that it will not cancel or modify the policy except after thirty (30) days prior
written
notice to the Lender, and be reasonably satisfactory to the Lender in all other respects.
The
insurance maintained pursuant to subparagraph (a)(iv) and (a)(v) shall also be written by an
insurance carrier acceptable to the Lender and shall name the Lender as an additional insured.
In
all events, the insurance companies issuing the insurance policies required by this Mortgage
must have a
general policy rating of A or better and a financial class of X or better by A.M. Best
Company, Inc.



          (c) Delivery
of Policy. The Borrower will deliver to the Lender copies of
policies satisfactory to the Lender evidencing the insurance which is
required under
subparagraphs (a)(i) through (a)(iii) and (a)(vi) through (a)(vii), certificates evidencing
the
insurance which is required under subparagraphs (a)(iv) and (a)(v), and the Borrower shall
promptly furnish to the Lender copies of all renewal notices and all receipts of paid premiums
received by it. At least fifteen (15) days prior to the expiration date of a required
policy, the
Borrower shall deliver to the Lender a copy of a renewal policy in form satisfactory to the


Deed
of Trust, Mortgage and Security Agreement — Page 8





 









 




Lender. If the Borrower has a blanket insurance policy In force providing coverage for several
properties of the Borrower, including the Mortgaged Property, the Lender will accept a certificate
of such insurance together with a copy of such blanket insurance
policy; provided the certificate
sets forth the amounts of insurance and coverage, and such amounts are at least equal to the
amounts required herein above, the original policy of insurance is written by a carrier or carriers
acceptable to the Lender, insures against the risks set forth hereinabove, cannot be amended,
modified or canceled without thirty (30) days’ prior written notice to any mortgagee of the
Borrower, is in an amount not less than the unpaid principal balance secured by this Deed of Trust,
and has a full replacement cost endorsement meeting the requirements
of paragraph 10(a)(i).




          (d) Assignment of Policy. If the Mortgaged Property is sold at a foreclosure
sale or if the Lender shall acquire title to the Mortgaged Property, the Lender shall have all
of the
right, title and interest of the Borrower in and to any insurance policies required under
subparagraphs 10(a)(i) through (a)(iii) and (a)(vi) through (a)(vii) hereof and the unearned
premiums thereon and in and to the proceeds resulting from any damage to the Mortgaged
Property prior to such sale or acquisition.



          (e) Notice
of Damage or Destruction; Adjusting Loss. If the Mortgaged
Property or any part thereof shall be damaged or destroyed by fire or other casualty, the
Borrower will promptly give written notice thereof to the insurance carrier and the Lender,
and
will not adjust any damage or loss unless the Lender shall have joined in such adjustment; but
if
there has been no adjustment of any such damage or loss within four months from the date of
occurrence thereof and if an Event of Default shall exist at the end of such four-month period
or
at any time thereafter, the Lender may alone, make proof of loss, adjust and compromise any
claim under the policies and appear in and prosecute any action arising from such policies.
In
connection therewith, the Borrower does hereby irrevocably authorize, empower and appoint the
Lender as attorney-in-fact for the Borrower (which appointment is coupled with an interest and
is
irrevocable) to do any and all of the foregoing in the name and on behalf of the Borrower.



          (f) Application of Insurance Proceeds. All sums paid under any insurance
policy required in subparagraphs 10(a)(i) through (a)(iii) and (a)(vi) through (a)(vii), shall
be
paid to the Lender. Lender agrees to allow the use of sums paid under the insurance policy
required under subparagraph (a) above for repair and reconstruction of the Mortgaged Property
provided that, Borrower demonstrates to Lender (in Lender’s judgment), (i) restoration or
repair
of the Mortgaged Property is economically feasible, (ii) the value of the Lender’s security is
not
reduced, (iii) if any leases of the Mortgaged Property were in effect at the time of loss or
damage, no such lease has terminated as a result of the loss or damage and all such leases
remain
enforceable under their terms without modification, (iv) the loss does not occur in the six
(6)
month period preceding the stated maturity date of the Note and Lender’s independent
consultant
certifies that the restoration of the Mortgaged Property can be completed at least ninety (90)
days
prior to the maturity date of the Note, (v) there exists no Event of Default or other event
which
with the passing of time or the giving of notice or both would constitute an Event of Default
under the Note or this Deed of Trust, (vi) insurance proceeds and additional funds deposited
by
the Borrower with the Lender prior to the commencement of any repair or reconstruction are
adequate to complete repair and reconstruction of the Mortgaged Property pursuant to plans and
specifications approved by Lender, (vii) disbursement procedures acceptable to Lender are in


Deed
of Trust, Mortgage and Security Agreement — Page 9





 









 




place, which procedures shall include provisions for the deposit of construction shortfalls,
collection of lien waivers, issuance of title policies by a title insurance company, payment of
Lender’s fees and expenses in disbursing, and coordination of work, and Borrower shall have
reimbursed Lender for all of its out-of-pocket expenses in connection with such reconstruction and
disbursement, including, without limitation, title insurance fees, inspection fees, attorneys’
fees, and architect’s fees, and (viii) Lender shall have received such consents and assurances from
municipal authorities, tenants in the Mortgaged Property, if any, and others as Lender may request.
Lender may establish other conditions it deems necessary to assure the work is fully completed in a
good and workmanlike manner free of all liens or claims by reason thereof, and in compliance with
all applicable laws, rules and regulations. If the above conditions are not satisfied as to
application of insurance proceeds, and in any event as to condemnation awards, Lender shall apply
the same (after first deducting therefrom Lender’s expenses incurred in collecting the same,
including but not limited to attorneys’ fees) to the reduction of the outstanding principal balance
of the loan evidenced by the Note (the “Loan”) without a prepayment premium or to payment of the
restoration, repair, replacement or rebuilding of the property that is damaged or destroyed in such
manner as Lender may determine; provided, however, if Lender offers to make the insurance proceeds
available for repairs or reconstruction and Borrower refuses same, the application of insurance
proceeds shall be deemed a voluntary prepayment subject to the prepayment premium. Any application
of insurance proceeds or eminent domain proceeds shall not extend or postpone the due dates of the
monthly installments payable under the Note or change the amount of such installments.




          (g) Reimbursement of the Lender’s Expenses. The Borrower shall promptly reimburse the
Lender upon demand for all of the Lender’s expenses incurred in connection with the collection of
the insurance proceeds, including but not limited to attorneys’ fees, and all such expenses,
together with interest from the date of disbursement at the rate stated in the Note (unless
collection of interest from the Borrower 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 the
Borrower under applicable law) shall be additional amounts secured by this Deed of Trust.



     11. Preservation and Maintenance of the Mortgaged Property. The Borrower (a) shall
keep the buildings and other improvements now or hereafter erected on the Land in safe and
good repair and condition, ordinary depreciation excepted; (b) shall, upon damage to or
destruction of the Mortgaged Property or any part thereof by fire or other casualty, restore,
repair, replace or rebuild the Mortgaged Property that is damaged or destroyed to the
condition it
was in immediately prior to such damage or destruction, whether or not any insurance proceeds
are available or sufficient for such purpose, unless the Lender shall have elected to apply
such
proceeds to reduction of the Indebtedness; (c) shall constantly maintain the parking and
landscaped areas of the Mortgaged Property; (d) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property; (c) shall not remove from the Land any of the
fixtures
and personal property included in the Mortgaged Property unless the same is immediately
replaced with property of at least equal value and utility, and this Deed of Trust becomes a
valid
first lien on such property.



     12. Inspection. The Lender, or its agents, shall have the right at all reasonable
times,
and only after reasonable prior notice to Borrower except in the case of emergency, to enter
upon


Deed
of Trust, Mortgage and Security Agreement — Page 10





 









 




the Mortgaged Property for the purposes of inspecting the Mortgaged Property or any part thereof.
The Lender shall, however, have no duty to make such inspection.




     13. Protection of the Lender’s Security. Subject to the rights of the Borrower under
paragraph 9 hereof, if the Borrower fails to perform any of the covenants and agreements
contained in the Loan Documents or if any action or proceeding is commenced which affects the
Mortgaged Property or the interest of the Lender therein, or the title thereto, then the
Lender, at
Lender’s option, may perform such covenants and agreements, defend against and/or investigate
such action or proceeding, and take such other action as the Lender deems necessary to protect
the Lender’s interest. The Lender shall be the sole judge of the legality, validity and
priority of
any claim, lien, encumbrance, tax, assessment, charge and premium paid by it and of the amount
necessary to be paid in satisfaction thereof. The Lender is hereby given the irrevocable power
of
attorney (which power is coupled with an interest and is irrevocable) to enter upon the
Mortgaged Property as the Borrower’s agent in the Borrower’s name to perform any and all
covenants and agreements to be performed by the Borrower as herein provided. Any amounts or
expenses disbursed or incurred by the Lender pursuant to this paragraph 13, with interest
thereon, shall become additional Indebtedness of the Borrower secured by this Deed of Trust.
Unless the Borrower and the Lender agree in writing to other terms of repayment, such amounts
shall be immediately due and payable, and shall bear interest from the date of disbursement at
the interest rate stated in the Note, unless collection from the Borrower 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 the Borrower under applicable law. The Lender shall,
at its option, be subrogated to the lien of any mortgage or other lien discharged in whole or
in
part by the Indebtedness or by the Lender under the provisions hereof, and any such
subrogation
rights shall be additional and cumulative security for this Deed of Trust. Nothing contained
in
this paragraph 13 shall require the Lender to incur any expense or do any act hereunder, and
the
Lender shall not be liable to the Borrower for any damages or claims arising out of action
taken
by the Lender pursuant to this paragraph 13.



     14. Condemnation. The Borrower hereby irrevocably assigns to the Lender any
award or payment which becomes payable by reason of any taking of the Mortgaged Property, or
any part thereof, whether directly or indirectly or temporarily or permanently, in
or by
condemnation or other eminent domain proceedings or sale under threat of condemnation
(hereinafter called “Taking”). Forthwith upon receipt by the Borrower of notice of the
institution
of any proceeding or negotiations for a Taking, the Borrower shall give notice thereof to the
Lender. The Lender may appear in any such proceedings and participate in any such
negotiations and may be represented by counsel. The Borrower, notwithstanding that the Lender
may not be a party to any such proceeding, will promptly give to the Lender copies of all
notices,
pleadings, judgments, determinations and other papers received by the Borrower therein. The
Borrower will not enter into any agreement permitting or consenting to the taking of the
Mortgaged Property, or any part thereof, or providing for the conveyance thereof in lieu of
condemnation, with anyone authorized to acquire the same in condemnation or by eminent
domain unless the Lender shall first have consented thereto in writing. All Taking awards
shall
be adjusted jointly by the Borrower and the Lender. All awards payable as a result of a
Taking
shall be paid to the Lender, which may, at its option, apply them, after first deducting the
Lender’s expenses incurred in the collection thereof, to the payment of the Indebtedness
(without
prepayment premium), whether or not due and in such order of application as the Lender may


Deed
of Trust, Mortgage and Security Agreement — Page 11





 









 




determine, or to the repair or restoration of the Mortgaged Property, in the manner as provided in
paragraph 10(f) relating to the application of insurance proceeds or in such manner as the Lender
may determine. Any application of Taking awards to principal of the Note shall not extend or
postpone the due dates of the monthly installments payable under the Note or change the amount of
such installments.




     If the Taking involves a taking of any building or other improvement now or hereafter located
on the Land, the Borrower shall proceed, with reasonable diligence, to demolish and remove any
ruins and complete repair or restoration of the Mortgaged Property as nearly as possible to its
respective size, type and character immediately prior to the Taking, whether or not the
condemnation awards are available or adequate to complete such repair or restoration unless the
Lender has applied the entire condemnation award to payment of the Indebtedness (without
prepayment premium). The Borrower shall promptly reimburse the Lender upon demand for all of the
Lender’s expenses (including attorneys’ fees) incurred in the collection of awards and their
disbursement in accordance with this paragraph, and all such expenses, together with interest from
the date of disbursement at the rate stated in the Note (unless collection of interest from the
Borrower 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 the Borrower under applicable law) shall
be additional amounts secured by this Deed of Trust.



     15. Financial
Covenants, Statements and Other Information; Books and Records.



          (a) Status
of Borrower. Borrower is and, unless changed as provided below,
will continue to be a limited liability company duly organized and validly existing under the
laws
of the State of Texas and in good standing in the State of Texas. Borrower may not change its
form of organization or state of organization without the prior written consent of Lender,
which
consent will not be withheld unless the proposed change will have a material adverse effect on
the rights of Lender under the Loan Documents. Principal of Borrower owns one hundred
percent (100%) of the ownership interests in Borrower and will continue to own one hundred
percent (100%) of the ownership interests in Borrower until the Indebtedness is paid in full.



          (b) Financial Reports as to Borrower and Principal of Borrower. Borrower
and Principal of Borrower will deliver to Lender within ninety (90) days after the end of each
of
their respective fiscal years financial statements that cover their last fiscal year,
certified by
Borrower and the Principal of Borrower, as the case may be (and audited if delivered after an
Event of Default has occurred), and prepared in accordance with generally accepted accounting
principles. If an Event of Default occurs, Borrower will deliver to Lender, within thirty
(30)
days after the occurrence of an Event of Default, year-to-date financial statements of
Borrower
and Principal of Borrower prepared by independent certified public accountants of recognized
national standing in accordance with generally accepted accounting
principles.



          (c) Financial Reports as to the Mortgaged Property. Borrower will prepare or
cause to be prepared at its expense and deliver to the Lender for the Mortgaged Property (in
such
number as may reasonably be requested):



               (i) As soon as practicable after the end of each calendar year, and in no event later
than ninety (90) days thereafter, a separate unaudited statement (except that such


Deed
of Trust, Mortgage and Security Agreement — Page 12





 









 




statements shall be audited after an Event of Default) of the income from and expenses incurred
with respect to the Mortgaged Property for such year, including a balance sheet, an
operating/financial statement and a current tenant summary, setting forth in comparative form the
figures for the previous calendar year, all in reasonable detail, certified to the current actual
knowledge of the Borrower to be true and correct in all material aspects by the Borrower, and
prepared in accordance with generally accepted accounting principles. The tenant summary shall
include tenants’ names, square footage, lease commencement and expiration dates, base rent and
other charges, security deposits, options and other lease concessions, delinquencies, unleased
space, vacant space and, with respect to leases that have expired within the year or will expire
in the next year, if any, the new or proposed lease terms for such leases that have been renewed
(a “Leasing Summary”).




               (ii) As soon as practicable after the occurrence of an Event of Default, and in no event
later than thirty (30) days thereafter, and monthly thereafter until such time as there is not in
existence an uncured Event of Default, a Leasing Summary and an audited statement of the income
from and expenses incurred with respect to the Mortgaged Property for each month and the year to
date, setting forth in comparative form the figures for the previous calendar year, all in
reasonable detail and prepared and certified to the current actual knowledge of the Borrower to be
true and correct in all material aspects by Borrower.



               (iii) Immediately upon becoming aware of the existence of any condition or event which
constitutes, or which after notice or lapse of time or both would constitute, an Event of Default,
written notice specifying the nature and period of existence thereof and what action the Borrower
has taken, is taking or proposes to take with respect thereto.



          (d) Books and Records. Borrower shall keep and maintain at all times at the
Borrower’s address stated below or at such other place as the Lender may approve in writing,
complete and accurate books of accounts and records in sufficient detail to reflect correctly the
results of the operation of the Mortgaged Property and copies of all written contracts, leases and
other instruments which affect the Mortgaged Property. Such books, records, contracts, leases and
other instruments shall be subject to examination and inspection by the Lender or its
representative during ordinary business hours. If the Borrower fails to provide the operating
statements specified in subparagraph (c) above, the Lender shall have the right to audit the
Borrower’s books and records at the Borrower’s expense.



     16. No Secondary Financing. The Borrower shall not create or permit to be created or
to remain any subordinate lien on the Mortgaged Property or any part thereof.



     17. Security Interest. This Deed of Trust shall constitute a security agreement with
respect to (and the Borrower hereby grants the Lender a security interest in) all personal
property
and fixtures included in the Mortgaged Property as more specifically described in paragraphs
(ii),
(iv) and (v) of the granting clause above. The Borrower will from time to time, at the request
of
the Lender, execute any and all financing statements covering such personal property and
fixtures (in a form satisfactory to the Lender) which the Lender may reasonably consider
necessary or appropriate to perfect its security interest.


Deed
of Trust, Mortgage and Security Agreement — Page 13




 









 





     18. Events of Default; Acceleration. Each of the following occurrences
shall constitute an event of default hereunder (herein called an “Event of Default”):



          (a) The Borrower shall fail to duly and punctually pay any installment of
interest or principal and interest payable under the Note.



          (b) The Borrower shall default in the performance of or breach its agreement
contained in paragraph 16 hereof.



          (c) The Borrower shall fail to duly and punctually pay when and as due any
payment for taxes and assessments required by paragraph 2 to be paid or shall fail to provide
the
insurance coverage required by paragraph 10.



          (d) The Borrower or Principal of Borrower shall fail to duly perform or
observe any of the covenants or agreements contained in the Loan Documents (other than a
covenant or agreement which is elsewhere in this paragraph 18 specifically dealt with) and
such
failure shall not be cured within thirty (30) days after written notice to Borrower or
Principal of
Borrower, as the case may be; provided, however, that if such default is susceptible of cure
but
cannot reasonably be cured within such thirty (30) day period, and if Borrower (or Principal
of
Borrower, if applicable) shall have commenced to cure such default within such thirty (30) day
period and thereafter diligently and expeditiously proceeded to cure the same, such thirty
(30)
day period shall be extended for an additional period of time as is reasonably necessary for
Borrower (or Principal of Borrower, if applicable) in the exercise of due diligence to cure
such
default, such additional period not to exceed ninety (90) days.



          (e) The Borrower or Principal of Borrower shall make an assignment for the
benefit of its creditors, or the Borrower or Principal of Borrower shall generally not be
paying its
debts as they become due, or a petition shall be filed by or against the Borrower or Principal
of
Borrower under the United States Bankruptcy Code, or the Borrower or Principal of Borrower
shall seek or consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of a
material part of its properties or of the Mortgaged Property or any part thereof or shall not,
within sixty (60) days after the appointment (without its consent or acquiescence) of a
trustee,
receiver or liquidator of any material part of its properties or of the Mortgaged Property,
have
such appointment vacated.



          (f) A judgment, writ or warrant of attachment or execution, or similar process
shall be entered and become a lien on, issued or levied against, the Mortgaged Property or any
part thereof and shall not be released, vacated or fully bonded within thirty (30) days after
its
entry, issue or levy.



          (g) The Mortgaged Property, or any part thereof, without the prior written
consent of Lender, shall be sold, conveyed, transferred, encumbered or full possessory rights
therein transferred, or an ownership interest in the Borrower or any general partner or
managing
member in the Borrower shall be sold, conveyed, transferred or encumbered,
whether
voluntarily, involuntarily or by operation of law; and this provision shall apply to each and
every
sale, transfer, conveyance or encumbrance regardless of whether or not the Lender has
consented


Deed
of Trust, Mortgage and Security Agreement — Page 14






 












 




or waived its rights, whether by action or omission, in connection with any previous sale,
transfer, conveyance or encumbrance.




          (h) Any representation or warranty made by Borrower or Principal of Borrower to Lender in
connection with the loan secured hereby proves to be untrue in any material respect.




     Upon the occurrence of any Event of Default, Lender may, at its option, without notice,
declare the principal of and the accrued interest on the Note, and all sums advanced hereunder,
with interest thereon, to be forthwith due and payable, and there-upon the Note and all other
Indebtedness secured hereby, including both principal and all unpaid interest accrued thereon,
including all applicable late payment charges and prepayment premium, and including all sums
advanced hereunder and interest thereon, shall be and become immediately due and payable without
presentment, demand or notice of any kind. Time is of the essence hereof.



     19. Remedies. Upon the occurrence of any Event of Default, then and in every such
case the Lender may, at the Lender’s option, and by or through Trustee, by the Lender itself or
otherwise, do any one or more of the following, in addition to any other remedies available to the
Lender:



          (a) the Lender may, prior or subsequent to the institution of any foreclosure proceedings,
enter upon the Mortgaged Property, or any part thereof, and take exclusive possession of the
Mortgaged Property and of all books, records, and accounts relating thereto and exercise without
interference from the Borrower any and all rights which the Borrower has with respect to the
management, possession, operation, protection, or preservation of the Mortgaged Property, including
without limitation, the right to rent the same for the account of the Borrower and to deduct from
such Rents all costs, expenses, and liabilities of every character incurred by the Lender in
collecting such Rents and in managing, operating, maintaining, protecting, or preserving the
Mortgaged Property and to apply the remainder of such Rents on the Indebtedness in such manner as
the Lender may elect. All such costs, expenses, and liabilities incurred by the Lender in
collecting such Rents and in managing, operating, maintaining, protecting, or preserving the
Mortgaged Property, if not paid out of Rents as hereinabove provided, shall constitute a demand
obligation owing by the Borrower and shall bear interest from the date of expenditure until paid at
the Default Rate, all of which shall constitute a portion of the Indebtedness. If necessary to
obtain the possession provided for above, the Lender may invoke any and all legal remedies to
dispossess the Borrower, including specifically one or more actions for forcible entry and detainer,
trespass to try title, and restitution. In connection with any action taken by the Lender pursuant
to this subsection, the Lender shall not be liable for any loss sustained by the Borrower resulting
from any failure to let the Mortgaged Property, or any part thereof, or from any other act or
omission of the Lender in managing the Mortgaged Property unless such loss is caused by the willful
misconduct of the Lender, nor shall the Lender be obligated to perform or discharge any obligation,
duty, or liability under any lease or under or by reason hereof or the exercise of rights or
remedies hereunder. THE BORROWER SHALL AND DOES HEREBY AGREE TO INDEMNIFY THE LENDER FOR, AND TO
HOLD THE LENDER HARMLESS FROM, ANY AND ALL LIABILITY, LOSS, OR DAMAGE (INCLUDING, WITHOUT
LIMITATION, ANY LIABILITY, LOSS OR DAMAGE ARISING FROM, OR ALLEGED TO HAVE ARISEN FROM, THE SOLE OR
CONCURRENT





Deed of Trust, Mortgage and Security Agreement — Page 15




 









 




NEGLIGENCE OF LENDER) WHICH MAY OR MIGHT BE INCURRED BY THE LENDER UNDER ANY SUCH LEASE OR UNDER
OR BY REASON HEREOF OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER, AND FROM ANY AND ALL CLAIMS
AND DEMANDS WHATSOEVER (INCLUDING, WITHOUT LIMITATION, CLAIMS AND DEMANDS ARISING FROM, OR ALLEGED
TO HAVE ARISEN FROM, THE SOLE OR CONCURRENT NEGLIGENCE OF LENDER) WHICH MAY BE ASSERTED AGAINST
THE LENDER BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR
DISCHARGE ANY OF THE TERMS, COVENANTS, OR AGREEMENTS CONTAINED IN ANY SUCH LEASE; PROVIDED,
HOWEVER, THAT IT IS AGREED THAT THE FOREGOING INDEMNITY SHALL NOT BE CONSTRUED TO INDEMNIFY LENDER
AGAINST THE CONSEQUENCES OF ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Should the Lender
incur any such liability, the amount thereof, including without limitation, costs, expenses, and
attorneys’ fees, together with interest thereon from the date of expenditure until paid at the
Default Rate, shall be secured hereby, and the Borrower shall reimburse the Lender therefor
immediately upon demand. Nothing in this subsection shall impose any duty, obligation, or
responsibility upon the Lender for the control, care, management, leasing, or repair of the
Mortgaged Property, nor for the carrying out of any of the terms and conditions of any such Lease;
nor shall it operate to make the Lender responsible or liable for any waste committed on the
Mortgaged Property by the tenants or by any other parties, or for any Hazardous Substance on or
under the Mortgaged Property, or for any dangerous or defective condition of the Mortgaged
Property or for any negligence in the management, leasing, upkeep, repair, or control of the
Mortgaged Property resulting in loss or injury or death to any tenant, licensee, employee, or
stranger. The Borrower hereby assents to, ratifies, and confirms any and all actions of the Lender
with respect to the Mortgaged Property taken under this subsection.




          (b) The Lender may request the Trustee to proceed with foreclosure under the power of sale
which is hereby conferred, such foreclosure to be accomplished in accordance with the following
provisions:




               (i) The Trustee is hereby authorized and empowered, and it shall be the Trustee’s special
duty, upon such request of Lender, to sell the Mortgaged Property, or any part thereof, at public
auction to the highest bidder for cash, with or without having taken possession of same. Any such
sale (including notice thereof) shall comply with the applicable requirements, at the time of the
sale, of Section 51.002 of the Texas Property Code, as amended, or, if and to the extent such
statute is not then in force, with the applicable requirements, at the time of the sale, of the
successor statute or statutes, if any, governing sales of Texas real property under powers of sale
conferred by deeds of trust. If there is no statute in force at the time of the sale governing
sales of Texas real property under powers of sale conferred by deeds of trust, such sale shall
comply with applicable law at the time of the sale.



               (ii) At any time during the bidding, the Trustee may require a bidding party (A) to disclose
its full name, state and city of residence, occupation, and specific business office location, and
the name and address of the principal the bidding party is representing (if applicable), and (B) to
demonstrate reasonable evidence of the bidding party’s financial ability (or, if applicable, the
financial ability of the principal of such bidding party), as a condition to the bidding party
submitting bids at the foreclosure sale. If any such bidding party (the “Questioned




Deed of Trust, Mortgage and Security Agreement — Page 16




 









 




Bidder”) declines to comply with the Trustee’s requirement in this regard, or if such Questioned
Bidder does respond but the Trustee, in Trustee’s sole and absolute discretion, deems the
information or the evidence of the financial ability of the Questioned Bidder (or, if applicable,
the principal of such bidding party) to be inadequate, then the Trustee may continue the bidding
with reservation; and in such event (I) the Trustee shall be authorized to caution the Questioned
Bidder concerning the legal obligations to be incurred in submitting bids, and (2) if the
Questioned Bidder is not the highest bidder at the sale, or if having been the highest bidder the
Questioned Bidder fails to deliver the cash purchase price payment promptly to the Trustee, all
bids by the Questioned Bidder shall be null and void. The Trustee may, in Trustee’s sole and
absolute discretion, determine that a credit bid may be in the best interest of the Borrower and
the Lender, and elect to sell the Mortgaged Property for credit or for a combination of cash and
credit; provided, however, that the Trustee shall have no obligation to accept any bid except an
all cash bid. In the event the Trustee requires a cash bid and cash is not delivered within a
reasonable time after conclusion of the bidding process, as specified by the Trustee, but in no
event later than 3:45 p.m. local time on the day of sale, then said contingent sale shall be null
and void, the bidding process may be recommenced, and any subsequent bids or sale shall be made as
if no prior bids were made or accepted.




               (iii) In addition to the rights and powers of sale granted under the preceding provisions of
this subsection, if default is made in the payment of any installment of the Indebtedness, Lender
may, at Lender’s option, at once or at any time thereafter while any matured installment remains
unpaid, without declaring the entire Indebtedness to be due and payable, orally or in writing
direct the Trustee to enforce this trust and to sell the Mortgaged Property subject to such
unmatured Indebtedness and to the rights, powers, liens, security interests, and assignments
securing or providing recourse for payment of such unmatured Indebtedness, in the same manner, all
as provided in the preceding provisions of this subsection. Sales made without maturing the
Indebtedness may be made hereunder whenever there is a default in the payment of any installment
of the Indebtedness, without exhausting the power of sale granted hereby, and without affecting in
any way the power of sale granted under this subsection, the unmatured balance of the Indebtedness
or the rights, powers, liens, security interests, and assignments securing or providing recourse
for payment of the Indebtedness.



               (iv) Sale of a part of the Mortgaged Property shall not exhaust the power of sale, but sales
may be made from time to time until the Indebtedness is paid and the obligations of Borrower set
forth in the Loan Documents are performed and discharged in full. It is intended by each of the
foregoing provisions of this subsection that the Trustee may, after any request or direction by
Lender, sell the Mortgaged Property as a unit or sell at any time or from time to time any part or
parts of the Mortgaged Property separately from the remainder of the Mortgaged Property. It shall
not be necessary to have present or to exhibit at any sale any of the Mortgaged Property.



               (v) After any sale under this subsection, the Trustee shall make good and sufficient deeds,
assignments, and other conveyances to the purchaser or purchasers thereunder in the name of the
Borrower, conveying the Mortgaged Property or any part thereof so sold to the purchaser or
purchasers with general warranty of title by the Borrower. It is agreed that in any deeds,
assignments or other conveyances given by the Trustee, any and all statements of fact or other
recitals therein made as to the identity of Lender, the occurrence or existence of




Deed of Trust, Mortgage and Security Agreement — Page 17




 









 




any Event of Default, the notice of intention to accelerate, or acceleration of, the maturity of
the Indebtedness, the request to sell, notice of sale, time, place, terms and manner of sale, and
receipt, distribution, and application of the money realized therefrom, the due and proper
appointment of a substitute trustee, and without being limited by the foregoing, any other act or
thing having been duly done by or on behalf of Lender or by or on behalf of Trustee, shall be taken
by all courts of law and equity as prima facie evidence that such statements or recitals
state true, correct, and complete facts and are without further question to be so accepted, and the
Borrower does hereby ratify and confirm any and all acts that Trustee may lawfully do in the
premises by virtue hereof.




          (c) The Lender, or the Trustee, upon written request of the Lender, may proceed by suit or
suits, at law or in equity, to enforce the payment of the Indebtedness and the performance and
discharge of the obligations of Borrower set forth in the Loan Documents in accordance with the
terms hereof, of the Note, and the other Loan Documents, to foreclose the liens and security
interests of this Deed of Trust as against all or any part of the Mortgaged Property, and to have
all or any part of the Mortgaged Property sold under the judgment or decree of a court of competent
jurisdiction. This remedy shall be cumulative of any other nonjudicial remedies available to the
Lender with respect to the Loan Documents. Proceeding with a request or receiving a judgment for
legal relief shall not be or be deemed to be an election of remedies or bar any available
nonjudicial remedy of the Lender.




          (d) The Lender may be the purchaser of the Mortgaged Property or any part thereof, at any sale
thereof, whether such sale be under the power of sale herein vested in the Trustee or upon any
other foreclosure of the liens and security interests hereof, or otherwise, and the Lender shall,
upon any such purchase, acquire good title to the Mortgaged Property so purchased, free of the
liens and security interests hereof, unless the sale was made subject to an unmatured portion of
the Indebtedness. The Lender, as purchaser, shall be treated in the same manner as any third party
purchaser and the proceeds of the Lender’s purchase shall be applied in accordance with subparagraph
(h) below.




          (e) Should any part of the Mortgaged Property come into the possession of the Lender, whether
before or after default, the Lender may (for itself or by or through other persons, firms, or
entities) hold, lease, manage, use, or operate the Mortgaged Property for such time and upon such
terms as the Lender may deem prudent under the circumstances (making such repairs, alterations,
additions, and improvements thereto and taking such other action as the Lender may from time to
time deem necessary or desirable) for the purpose of preserving the Mortgaged Property or its
value, pursuant to the order of a court of appropriate jurisdiction or in accordance with any other
rights held by the Lender in respect of the Mortgaged Property. The Borrower covenants to
promptly reimburse and pay to the Lender on demand, at the place where the Note is payable, the
amount of all expenses (including without limitation the cost of any insurance, taxes, or other
charges) incurred by the Lender in connection with the Lender’s custody, preservation, use, or
operation of the Mortgaged Property, together with interest thereon from the date incurred by the
Lender at the Default Rate; and all such expenses, costs, taxes, interest, and other charges shall
be and become a part of the Indebtedness. It is agreed, however, that the risk of loss or damage
to the Mortgaged Property is on the Borrower, and the Lender shall have no liability whatsoever for
decline in value of the Mortgaged Property, for failure to obtain or maintain insurance, or for
failure to determine whether insurance in force is adequate as to





Deed of Trust, Mortgage and Security Agreement — Page 18




 









 




amount or as to the risks insured. Possession by the Lender shall not be deemed an election of
judicial relief, if any such possession is requested or obtained, with respect to any Mortgaged
Property or collateral not in the Lender’s possession.




          (f) If the liens or security 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 the
Borrower or the Borrower’s successors shall hold possession of said property or any part thereof
subsequent to foreclosure, the Borrower and the Borrower’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 Mortgaged Property so occupied and sold to such purchaser), and anyone occupying
such portion of the Mortgaged 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 of such eviction and removal are hereby
expressly waived.




          (g) The proceeds from any foreclosure sale of the Mortgaged Property shall be applied by the
Trustee to the Indebtedness in the following order and priority: (i) to the payment of all
expenses of advertising, selling, and conveying the Mortgaged Property or part thereof, and/or
prosecuting or otherwise collecting Rents, proceeds, premiums, or other sums including, without
limitation, attorneys’ fees; (ii) to the Indebtedness and other obligations of the Borrower set
forth in the Loan Documents, in such order as Lender may determine in its sole discretion; and
(iii) the balance, if any, and to the extent applicable, remaining after the full and final payment
of the Indebtedness and full performance and discharge of the obligations of the Borrower set forth
in the Loan Documents, to the holder or beneficiary of any inferior liens covering the Mortgaged
Property, if any, in order of the priority of such inferior liens (Trustee and the Lender shall
hereby be entitled to rely exclusively upon a commitment for title insurance issued to determine
such priority); and (iv) the cash balance, if any, to the Borrower. The balance of the
Indebtedness remaining unpaid, if any, shall remain fully due and owing in accordance with the
terms of the Note or the other Loan Documents.




          (h) In the event a foreclosure hereunder is commenced by the Trustee in accordance with the
terms of this Deed of Trust, at any time before the sale, Trustee may abandon the sale, and the
Lender may then institute suit for the collection of the Indebtedness and for the foreclosure of
the liens and security interests hereof and of the Loan Documents. If the Lender should institute
a suit for the collection of the Indebtedness and for a foreclosure of the liens and security
interests, the Lender may, at any time before the entry of a final judgment in said suit, dismiss
the same and require the Trustee to sell the Mortgaged Property or any part thereof in accordance
with the provisions of this Deed of Trust.




          (i) To the fullest extent permitted by applicable law, Lender, as a matter of right and
without regard to the sufficiency of the security for repayment of the Indebtedness and
performance and discharge of the obligations of Borrower set forth in the Loan Documents, without
notice to the Borrower and without any showing of insolvency, fraud, or mismanagement on the part
of the Borrower, and without the necessity of filing any judicial or other proceeding other than
the proceeding for appointment of a receiver, shall be entitled to the





Deed of Trust, Mortgage and Security Agreement — Page 19




 









 




appointment of a receiver or receivers of the Mortgaged Property or any part thereof, and of the
rents from the Mortgaged Property, and the Borrower hereby irrevocably consents to the appointment
of a receiver or receivers. Any receiver appointed pursuant to the provisions of this subsection
shall have the usual powers and duties of receivers in such matters.




          (j) In addition to any other remedies set forth herein, Lender shall have all of the rights
and remedies provided by the Texas Uniform Commercial Code, including the right to proceed under
the Texas Uniform Commercial Code provisions governing default as to any fixtures, equipment,
instruments, general intangibles, accounts, contract rights, claims or personal property which may
be included in or related to the Mortgaged Property and as to any deposits, policies, unearned
premiums, proceeds, awards, payments or consideration assigned to Lender as further security
hereunder, separately from the real estate included in the Mortgaged Property, or to proceed as to
any or all of such property in accordance with its rights and remedies in respect of said real
estate. If the Lender should elect to proceed separately as to any such property, the Borrower
agrees to make such property available to the Lender at a place or places reasonably acceptable to
Lender, and, if any notification of intended disposition of any of such property is required by
law, such notification shall be deemed commercially reasonable and reasonably and properly given if
mailed at least ten (10) days before such disposition in the manner below provided.




          (k) In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement,
readjustment, composition, dissolution, liquidation, termination or other judicial proceedings
affecting Borrower, its creditors or its property, Lender, to the extent permitted by law, shall
be entitled to file such proofs of claim and other documents as may be necessary, or advisable in
order to have its claims allowed in such proceedings for the entire amount due and payable under
the Note, this Deed of Trust and any other instrument securing or referring to the Note, at the
date of institution of such proceedings, and for any additional amounts which may become due and
payable hereunder and thereunder after such date, including but not limited to Lender’s costs,
expenses and attorneys’ fees incurred in connection therewith.




     20. Anti-Terrorism and Anti-Money Laundering Compliance.



          (a) Borrower represents and warrants to Lender that it is not, and, after making due inquiry,
that no person who owns an interest in Borrower is (i) listed on the Specially Designated
Nationals and Blocked Persons List (the “SDN List”) maintained by the Office of Foreign
Assets Control (“OFAC”), Department of the Treasury, and/or on any other similar list
(“Other Lists” and, collectively with the SDN List, the “Lists”) maintained by the
OFAC pursuant to any authorizing statute. Executive Order or regulation (collectively. “OFAC
Laws and Regulations”); or (ii) a person (a “Designated Person”) either (A) included
within the term “designated national” as defined in the Cuban Assets Control Regulations, 31
C.F.R. Part 515, or (B) designated under Sections 1(a), l(b), l(c) or l(d) of
Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 25, 2001) or similarly
designated under any related enabling legislation or any other similar Executive Orders
(collectively, the “Executive Orders”). The OFAC Laws and Regulations and the Executive
Orders are collectively referred to in this Amendment as the “Anti-Terrorism Laws”.
Borrower represents and warrants that it requires, and has taken reasonable measures to ensure
compliance with the requirement that no person who owns an interest in Borrower is or shall be
listed on any of the Lists or is or shall be a





Deed of Trust, Mortgage and Security Agreement — Page 20




 









 




Designated Person. This paragraph 20 shall not apply to any person to the extent that such
person’s interest in the Borrower is through a U.S. Publicly-Traded Entity. As used in this
Agreement, “U.S. Publicly-Traded Entity” means a business entity whose securities are
listed on a national securities exchange, or quoted on an automated quotation system, in the
United States, or a wholly-owned subsidiary of such an entity.




          (b) Borrower represents and warrants that it has taken reasonable measures appropriate to the
circumstances (and in any event as required by law), with respect to each holder of an interest in
Borrower, to assure that funds invested by such holders in Borrowers are derived from legal sources
(“Anti-Money Laundering Measures”). The Anti-Money Laundering Measures have been undertaken
in accordance with the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq. (“BSA”), and all applicable
laws, regulations and government guidance on BSA compliance and on the prevention and detection of
money laundering violations under 18 U.S.C. §§ 1956 and 1957 (collectively with the BSA,
“Anti-Money Laundering Laws”). Borrower represents and warrants to Lender that, to Borrower’s
knowledge, neither Borrower nor any holder of an interest in Borrower (i) is under investigation by
any governmental authority for, or has been charged with, or convicted of, money laundering under
18 U.S.C. §§ 1956 and 1957, drug trafficking, terrorist-related activities or other money
laundering predicate crimes, or any violation of the BSA, (ii) has been assessed civil penalties
under any Anti-Money Laundering Laws, or (iii) has had any of its funds seized or forfeited in an
action under any Anti-Money Laundering Laws.




          (c) Borrower represents and warrants to Lender it has taken reasonable measures appropriate
to the circumstances (in any event as required by law), to ensure that Borrower is in compliance
with all current and future Anti-Money Laundering Laws and laws, regulations and government
guidance for the prevention of terrorism, terrorist financing and drug trafficking.




     21. Estoppel Certificate. The Borrower agrees at any time and from time to time,
upon not less than fifteen (15) days prior notice by the Lender, to execute, acknowledge and
deliver, without charge, to the Lender or to any person designated by the Lender, a statement in
writing certifying that this Deed of Trust is unmodified (or if there have been modifications,
identifying the same by the date thereof and specifying the nature thereof), the principal amount
then secured hereby and the unpaid balance of the Note, that the Borrower has not received any
notice of default or notice of acceleration or foreclosure of this Deed of Trust (or if the
Borrower has received such a notice, that it has been revoked, if such be the case), that to the
knowledge of the Borrower no Event of Default exists hereunder (or if any such Event of Default
does exist specifying the same and stating that the same has been cured, if such be the case), that
the Borrower to its knowledge has no claims or offsets against the Lender (or if the Borrower has
any such claims, specifying the same), and the dates to which the interest and the other sums and
charges payable by the Borrower pursuant to the Note have been paid. Upon reasonable advance
written request, the Lender shall provide the Borrower a statement in writing respecting the unpaid
balance of the Note and whether, to the knowledge of the Lender, any Event of Default exists.



     22. Forbearance Not a Waiver; Rights and Remedies Cumulative. No delay by the Lender
in exercising any right or remedy provided herein or otherwise afforded by law or equity shall be
deemed a waiver of or preclude the exercise of such right or remedy, and no waiver by




Deed of Trust, Mortgage and Security Agreement — Page 21




 









 




the Lender of any particular provision of this Deed of Trust shall be deemed effective unless in
writing signed by the Lender. All such rights and remedies provided for herein or which the Lender
or the holder of the Note may have otherwise, at law or in equity, shall be distinct, separate and
cumulative and may be exercised concurrently, independently or successively in any order
whatsoever, and as often as the occasion therefor arises. The Lender’s taking action pursuant to
paragraph 13 or receiving proceeds, awards or damages pursuant to paragraphs 10 or 14 shall not
impair any right or remedy available to the Lender under paragraph 19 hereof. Acceleration of
maturity of the Note, once claimed hereunder by the Lender, may, at the option of the Lender, be
rescinded by written acknowledgment to that effect by the Lender, but the tender and acceptance of
partial payments alone shall not in any way affect or rescind such acceleration of maturity of the
Note.




     23. Successors and Assigns Bound; Number; Gender; Agents; Captions;
Amendments. The covenants and agreements herein contained shall bind, and the rights
hereunder shall inure to, the respective heirs, legal representatives, successors and assigns of
the Lender and the Borrower; provided, however, that this paragraph 23 shall not limit the effect
of paragraph 18(g). Wherever used, the singular number shall include the plural, and the plural
the singular, and the use of any gender shall apply to all genders. 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. No amendment of this Deed of Trust shall be effective unless in a
writing executed by the Borrower and the Lender.



     24. Notice. Any notice, consent, or approval that Lender or Borrower may desire or be
required to give to the other shall be in writing and shall be mailed or delivered to the intended
recipient thereof at its address set forth below or at such other address as such intended
recipient may, from time to time, by notice in writing, designate to the sender pursuant hereto.
Any such notice, consent, or approval shall be deemed effective (a) if given by nationally
recognized overnight courier for next day delivery, one (1) business day after delivery to such
courier, or (b) if given by United States mail (registered or certified), three (3) business days
after such communication is deposited in the mails (unless given in respect of a foreclosure of the
Mortgaged Property, in which case it shall be deemed given on the date of deposit), or (c) if given
in person, upon delivery. Except as otherwise specifically required herein, notice of the exercise
of any right or option granted to Lender by this Deed of Trust is not required to be given. The
failure of Lender to provide a courtesy copy of any notice to Borrower’s counsel shall not
invalidate any such notice otherwise properly given to Borrower. Any notices delivered hereunder
shall be addressed as follows unless otherwise notified in accordance herewith:



          Borrower:



CM Real Estate, LLC 

Attention: Mr.
Marcus Scrudder 
650 S. Royal Lane

Coppell, Texas 75019





Deed of Trust, Mortgage and Security Agreement — Page 22



 









 





          Lender:



Allianz Life Insurance Company of North America

c/o Allianz of America, Inc.

Attention: Real Estate Department

55 Greens Farms Road

P.O. Box 5160

Westport, CT 06881-5160




     25. Governing Law; Severability. This Deed of Trust shall be governed by the
substantive laws of the State of Texas. In the event that any provision or clause of this Deed of
Trust conflicts with applicable law, such conflict shall not affect other provisions of this Deed
of Trust which can be given effect without the conflict provisions and to this end the provisions
of the Deed of Trust are declared to be severable.



     26. Counterparts. This Deed of Trust may be executed in any number
of counterparts, each of which shall be an original, but all of which together shall constitute one
instrument.



     27. Production of Documents. The Borrower shall, while this Deed of Trust is in full
force and effect, furnish the Lender with such documents, instruments and papers as the Lender may
reasonably request from time to time in order for the Lender to effectuate a sale or a
participation in the loan evidenced by the Note and this Deed of Trust.



     28. Waiver of Marshalling; Failure to Consent. The Borrower, any party who consents
to this Deed of Trust and any party who now or hereafter acquires a lien on the Mortgaged Property
and who has actual or constructive notice of this Deed of Trust hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the remedies permitted
by applicable law or provided herein. In the event that Lender fails to grant any consent or
approval under this Deed of Trust or any other Loan Document that Borrower believes Lender is
legally required to grant to Borrower, the sole and exclusive remedy for any claim against Lender
that Lender has wrongfully withheld or delayed such consent or approval shall be an action for
injunctive or declaratory relief, and in no event shall Borrower be entitled to recover damages
from Lender by reason of such claim.



     29. Fixture Filing. From the date of its recording, this Deed of Trust shall be
effective as a financing statement filed as a fixture filing with respect to all goods constituting
part of the Mortgaged Property (as more particularly described in item (ii) of the granting clause
of this Deed of Trust) which are or are to become fixtures related to the real estate described
herein. For this purpose, the following information is set forth:



          (a)  Name and Address of Debtor:



CM Real Estate, LLC 

650
S. Royal Lane 
Coppell,
Texas 75019

(Tax Identification No.                                        )





Deed of Trust, Mortgage and Security Agreement — Page 23


 









 





         (b) Name and Address of Secured Party:



Allianz Life Insurance Company of North America

c/o Allianz of America, Inc.

Attention: Real Estate Department

55 Greens Farms Road

P.O. Box 5160

Westport, CT 06881-5160

(Tax Identification No. 41-1366075)




          (c) This document covers goods which are or are to become fixtures.




          (d) The name of the record owner of the Land is the Debtor described above.




     30. Concerning the Trustee.



          (a) The Trustee shall not be required to take any action toward the execution and enforcement
of the trust hereby created or to institute, appear in, or defend any action, suit, or other
proceeding in connection therewith where, in his opinion, such action would be likely to involve
him in expense or liability, unless requested so to do by a written instrument signed by Lender
and, if Trustee so requests, unless the Trustee is tendered security and indemnity satisfactory to
the Trustee against any and all cost, expense, and liability arising therefrom. Trustee shall not
be responsible for the execution, acknowledgment, or validity of the Loan Documents, or for the
proper authorization thereof, or for the sufficiency of the lien and security interest purported to
be created hereby, and Trustee makes no representation in respect thereof or in respect of the
rights, remedies, and recourses of Lender.




          (b) With the approval of the Lender, the Trustee shall have the right to take any and all of
the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be,
counsel for the Lender) upon any matters arising hereunder, including the preparation, execution,
and interpretation of the Loan Documents, and shall be fully protected in relying as to legal
matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to
perform any duty hereunder either directly or through his agents or attorneys, (iii) to select and
employ, in and about the execution of his duties hereunder, suitable accountants, engineers and
other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the
employ of Trustee, and Trustee shall not be answerable for any act, default, negligence, or
misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact,
if selected with reasonable care, or for any error of judgment or act done by Trustee in good
faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for
Trustee’s gross negligence or bad faith, and (iv) any and all other lawful action as the Lender may
instruct Trustee to take to protect or enforce the Lender’s rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering by virtue of the powers herein
granted to Trustee, upon the Mortgaged Property for debts contracted for or liability or damages
incurred in the management or operation of the Mortgaged Property. Trustee shall have the right
to rely on any instrument, document, or signature authorizing or supporting any action taken or
proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine.
Trustee shall be entitled to reimbursement for





Deed of Trust, Mortgage and Security Agreement — Page 24




 









 




expenses incurred by Trustee in the performance of Trustee’s duties hereunder and to reasonable
compensation for such of Trustee’s services hereunder as shall be rendered. The Borrower will,
from time to time, pay the compensation due to Trustee hereunder and reimburse Trustee for, and
save Trustee harmless against, any and all liability and expenses which may be incurred by Trustee
in the performance of Trustee’s duties.




          (c) All moneys received by Trustee shall, until used or applied as herein provided, be held in
trust for the purposes for which they were received, but need not be segregated in any manner from
any other moneys (except to the extent required by applicable law) and Trustee shall be under no
liability for interest on any moneys received by Trustee hereunder.




          (d) The Trustee may resign by the giving of notice of such resignation in writing or verbally
to Lender. If the Trustee shall die, resign, or become disqualified from acting in the execution of
this trust, or if, for any reason, the Lender shall prefer to appoint a substitute trustee or
multiple substitute trustees, or successive substitute trustees or successive multiple substitute
trustees, to act instead of the aforenamed Trustee, the Lender shall have full power to appoint a
substitute trustee (or, if preferred, multiple substitute trustees) in succession who shall succeed
(and if multiple substitute trustees are appointed, each of such multiple substitute trustees shall
succeed) to all the estates, rights, powers, and duties of the aforenamed Trustee. Such appointment
may be executed by any authorized agent of the Lender, and if such Lender be a corporation and such
appointment be executed in its behalf by any officer of such corporation, such appointment shall be
conclusively presumed to be executed with authority and shall be valid and sufficient without proof
of any action by the board of directors or any superior officer of the corporation. Borrower hereby
ratifies and confirms any and all acts which the aforenamed Trustee, or his successor or successors
in this trust, shall do lawfully by virtue hereof. If multiple substitute Trustees are appointed,
each of such multiple substitute Trustees shall be empowered and authorized to act alone without
the necessity of the joinder of the other multiple substitute trustees, whenever any action or
undertaking of such substitute trustees is requested or required under or pursuant to this Deed of
Trust or applicable law.




          (e) Should any deed, conveyance, or instrument of any nature be required from the Borrower by
any Trustee or substitute Trustee to more fully and certainly vest in and confirm to the Trustee or
substitute Trustee such estates, rights, powers, and duties, then, upon request by the Trustee or
substitute Trustee, any and all such deeds, conveyances and instruments shall be made, executed,
acknowledged, and delivered and shall be caused to be recorded and/or filed by Borrower.




          (f) Any substitute Trustee appointed pursuant to any of the provisions hereof shall, without
any further act, deed, or conveyance, become vested with all the estates, properties, rights,
powers, and trusts of its or his predecessor in the rights hereunder with like effect as if
originally named as Trustee herein; but nevertheless, upon the written request of the Lender or of
the substitute Trustee, the Trustee ceasing to act shall execute and deliver any instrument
transferring to such substitute Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the property and moneys held by such Trustee to the substitute Trustee
so appointed in the Trustee’s place.




Deed of Trust, Mortgage and Security Agreement — Page 25




 









 





          (g) By accepting or approving anything required to be observed, performed, or fulfilled or to
be given to the Trustee or the Lender pursuant to the Loan Documents, including without limitation,
any officer’s certificate, balance sheet, statement of profit and loss or other financial
statement, survey, appraisal, or insurance policy, neither the Trustee nor the Lender shall be
deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness, or
legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or
approval thereof shall not be or constitute any warranty or affirmation with respect thereto by
Trustee or the Lender.




     31. INDEMNITIES.
THE BORROWER SHALL PROTECT, DEFEND, INDEMNIFY AND
SAVE HARMLESS THE LENDER AND THE TRUSTEE FROM AND AGAINST ALL LIABILITIES, OBLIGATIONS,
CLAIMS, DEMANDS, DAMAGES, PENALTIES, CAUSES OF ACTION, LOSSES, FINES, COSTS AND
EXPENSES (INCLUDING ATTORNEYS’ FEES AND DISBURSEMENTS), IMPOSED UPON OR INCURRED BY
OR ASSERTED AGAINST THE LENDER AND/OR THE TRUSTEE BY REASON OF: (A) OWNERSHIP OF THIS DEED OF TRUST
OR ANY INTEREST IN THE MORTGAGED PROPERTY OR RECEIPT OF ANY RENTS AND PROFITS; (B) ANY ACCIDENT,
INJURY TO OR DEATH OF PERSONS OR LOSS OF OR DAMAGE TO PROPERTY OCCURRING IN, ON OR ABOUT THE
MORTGAGED PROPERTY, OR ANY PART THEREOF, OR ON THE ADJOINING SIDEWALKS, CURBS,
ADJACENT PROPERTY OR ADJACENT PARKING AREAS, STREETS OR WAYS; (C) ANY FAILURE ON THE PART OF THE
BORROWER TO PERFORM OR COMPLY WITH ANY OF THE TERMS OF THIS DEED OF TRUST; (D) ANY FRAUD OR MATERIAL MISREPRESENTATION COMMITTED BY THE BORROWER IN CONNECTION WITH THE
INDEBTEDNESS SECURED BY THIS DEED OF TRUST; (E) ANY WASTE OF THE MORTGAGED PROPERTY ARISING FROM
THE ACTS OF THE BORROWER; (F) THE FAILURE OF THE BORROWER TO PAY TAXES, INSURANCE PREMIUMS. UTILITY
CHARGES AND OTHER EXPENSES OF OPERATING THE MORTGAGED PROPERTY; (G) THE DISPOSITION OF
INSURANCE OR CONDEMNATION PROCEEDS IN A MANNER NOT AUTHORIZED BY THE PROVISIONS OF THIS
DEED OF TRUST: (H) THE MISAPPLICATION OF SECURITY DEPOSITS OR PREPAID RENTS BY THE
BORROWER; AND (I) ANY FAILURE OF THE MORTGAGED PROPERTY TO COMPLY WITH ANY APPLICABLE LAWS. THE
FOREGOING INDEMNITY FOR THE BENEFIT OF LENDER AND TRUSTEE IS INTENDED TO BE APPLICABLE AND BINDING
UPON THE BORROWER NOTWITHSTANDING THAT A LIABILITY, OBLIGATION, CLAIM, DEMAND, DAMAGE, PENALTY,
CAUSE OF ACTION, LOSS, FINE, COST OR EXPENSE DESCRIBED IN THE PRECEDING PROVISIONS OF THIS
PARAGRAPH 30 ARISES OR IS ALLEGED TO HAVE ARISEN FROM THE SOLE OR CONCURRENT NEGLIGENCE OF LENDER
OR TRUSTEE; HOWEVER, SAID INDEMNITY IS NOT INTENDED TO INCLUDE ANY LIABILITIES, OBLIGATIONS,
CLAIMS, DEMANDS, DAMAGES, PENALTIES, CAUSES OF ACTION, LOSSES, FINES, COSTS OR EXPENSES
ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER OR TRUSTEE.



     32. Further Documentation. At any time and from time to time until payment in full of
the Indebtedness, the Borrower will, at the request of the Lender, promptly execute and deliver to
the Lender such additional instruments as may be reasonably required further to




Deed of Trust, Mortgage and Security Agreement — Page 26




 









 




evidence the lien of this Deed of Trust and further to protect the security interest of the Lender
with respect to the Mortgaged Property, including, without limitation, additional security
agreements, financing statements and continuation statements. Any expenses incurred by the Lender
in connection with the preparation and recordation of any such instruments, including, but not
limited to attorneys’ fees, shall become additional Indebtedness of the Borrower secured by this
Deed of Trust. Unless the Borrower and the Lender agree in writing to other terms of repayment,
such amounts shall be immediately due and payable, and shall bear interest from the date of
disbursement at the interest rate stated in the Note, unless collecting from the Borrower 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 the Borrower under applicable law.




     33. Release. If the Indebtedness is paid in full in accordance with the terms of
this Deed of Trust, the Note, and the other Loan Documents, and if the Borrower shall well and
truly perform each and every one of the obligations to be performed and discharged in accordance
with the terms of this Deed of Trust, the Note and the other Loan Documents, then this conveyance
shall become null and void and be released by the Lender at Borrower’s request and expense, and the
Lender shall have no further obligation to make advances under and pursuant to the provisions
hereof or in the other Loan Documents.



     34. Performance at the Borrower’s Expense. The Borrower shall (a) pay all legal fees
incurred by the Lender in connection with the preparation of the Loan Documents (including any
amendments thereto or consents, releases, or waivers granted thereunder); (b) reimburse the Lender,
promptly upon demand, for all amounts expended, advanced, or incurred by the Lender to satisfy any
obligation of the Borrower under the Loan Documents, which amounts shall include ail court costs,
attorneys’ fees (including, without limitation, for trial, appeal, or other proceedings), fees of
auditors and accountants and other investigation expenses reasonably incurred by the Lender in
connection with any such matters; and (c) any and all other costs and expenses of performing or
complying with any and all of the obligations of the Borrower set forth in the Loan Documents.
Except to the extent that costs and expenses are included within the definition of “Indebtedness.”
the payment of such costs and expenses shall not be credited, in any way and to any extent, against
any installment on or portion of the Indebtedness.



     35. Special Purpose Entity Provisions. Borrower represents, warrants and covenants
to Lender as follows:



          (a) Borrower shall not engage in any business or activity other than the ownership,
operation, leasing and maintenance of the Mortgaged Property, and activities incidental
thereto;




          (b) Borrower shall not acquire or own any material assets other than (i) the Mortgaged
Property, and (ii) such incidental personal property as may be necessary for the operation of the
Mortgaged Property;




          (c) Borrower shall not merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially
all of its assets or change its legal structure, without in each case Lender’s consent;





Deed of Trust, Mortgage and Security Agreement — Page 27




 









 





          (d) Borrower shall not fail to observe its organizational formalities or preserve its
existence as an entity duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization or formation, and qualification to do business in the state where
the Mortgaged Property is located, or without the prior written consent of Lender, materially
amend, modify, terminate or fail to comply with the provisions of Borrower’s limited partnership
agreement, articles of organization, operating agreement or similar organizational documents, as
the case may be;




          (e) Borrower shall not own any subsidiary or make any investment in any person or entity
without the consent of Lender;




          (f) Borrower shall not commingle its assets with the assets of any of its members, affiliates,
or principals, or of any person or entity or consistently fail to use its own separate stationary;




          (g) Borrower shall not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the indebtedness secured by the Loan Documents,
except for trade payables in the ordinary course of its business of owning and operating the
Mortgaged Property, provided that such debt is not evidenced by a note and is paid when due;




          (h) Borrower shall not become insolvent and/or fail to pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its assets as the same
shall become due;




          (i) Borrower shall not fail to maintain its records, books of account and bank accounts
separate and apart from those of the members, principals and affiliates of Borrower, the
affiliates of members or principals of Borrower, and any other person or entity;




          (j) Borrower shall not enter into any contract or agreement with any member, principal or
affiliate of Borrower, except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis with third parties
other than any member, principal or affiliate of Borrower;




          (k) Borrower shall not seek the dissolution or winding up, in whole or in part, of Borrower;




          (1) Borrower shall not fail to correct any known misunderstandings regarding the separate
identity of Borrower;




          (m) Borrower shall not guarantee or become obligated for the debts of any other entity or
person or hold itself out to be responsible for the debts of another entity or person;




          (n) Borrower shall not make any loans or advances to any third party, including any member,
principal or affiliate of Borrower, or any member, principal or affiliate thereof, and shall not
acquire obligations or securities of any member, principal or affiliate of Borrower, or any
member, general partner, or affiliate thereof;





Deed of Trust, Mortgage and Security Agreement — Page 28




 









 





          (o) Borrower shall not fail to file its own tax returns, nor file a consolidated federal
income tax return with any other entity;




          (p) Borrower shall not fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business solely in its own
name in order not to (i) mislead others as to the identity with which such other party is
transacting business, or (ii) suggest that Borrower is responsible for the debts of any third
party (including any member, principal or affiliate of Borrower, or any member, principal or
affiliate thereof);




          (q) Borrower shall not fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of its contemplated
business operations;




          (r) Borrower shall not file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors;




          (s) Borrower shall not fail to maintain separate financial statements, showing its assets and
liabilities separate and apart from those of any other person or entity;




          (t) Borrower shall not have its assets listed on the financial statement of any other entity;
provided, however, that Borrower’s assets may be included in a consolidated financial statement of
the Principal of Borrower if (i) appropriate notations are made on such consolidated financial
statements to indicate the separateness of the Borrower and the Principal of Borrower and to
indicate that Borrower’s assets and credit are not available to satisfy the debts and other
obligations of the Principal of Borrower or any other Person, and (ii) such assets shall be listed
on Borrower’s own separate balance sheet;




          (u) Borrower shall not fail to pay the salaries of its own employees (if any) from its own
funds;




          (v) Borrower shall not fail to allocate fairly and reasonably any overhead expenses that are
shared with an affiliate, including paying for office space and services performed by any employee
of an affiliate; and




          (w) Borrower shall not pledge its assets for the benefit of any other person or entity, other
than with respect to the loan evidenced by the Note.




     36. Property Manager. The exclusive manager of the Mortgaged Property shall be
Borrower or such other manager as may be first approved in writing by Lender, which approval shall
not be unreasonably withheld or delayed. The exclusive leasing agent of the Property, if other than
the foregoing parties, shall be first approved in writing by Lender, which approval shall not be
unreasonably withheld or delayed. The management and leasing contracts and all tenant leases shall
be satisfactory to and subject to the written approval of Lender, which approval shall not be
unreasonably withheld or delayed, throughout the term of the Indebtedness, and shall be subordinate
to this Deed of Trust. Upon default in any of these requirements, not cured within the applicable
cure period, if any, then the whole of the Indebtedness shall, at the




Deed of Trust, Mortgage and Security Agreement — Page 29




 









 




election of Lender, become immediately due and payable, and Lender shall be entitled to exercise
any or all remedies provided for or referenced in this Deed of Trust.




     37. Usury Savings Clause. The provisions of this Deed of Trust and of all agreements
between Borrower and Lender, whether now existing or hereafter arising and whether written or oral,
including, but not limited to, the Loan Documents, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of the
Note or otherwise, shall the amount contracted for, charged, taken, reserved, paid, or agreed to be
paid to Lender for the use, forbearance, retention or detention of the money loaned under the Note
and related indebtedness exceed the maximum amount permissible under applicable law. The provisions
of paragraph III.G. of the Note are hereby incorporated herein.



     38. Covenants Running with the Land. All obligations contained in this Deed of Trust
and the other Loan Documents are intended by the Borrower, the Lender, and the Trustee to be, and
shall be construed as, covenants running with the Mortgaged Property until the lien of this Deed of
Trust has been fully released by the Lender.



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



     40. Use of Terms. For all state law, statutory and other purposes hereunder, (a) the term
“Borrower” as used herein shall be deemed to mean a grantor of the Mortgaged Property as described
herein the same as if the term “grantor” were used in lieu of the term “Borrower” throughout this
Deed of Trust, and (b) the term “Lender” as used herein shall be deemed to mean a beneficiary of
this Deed of Trust with respect to the Mortgaged Property with all of the rights conferred hereby
the same as if the term “beneficiary” were used in lieu of the term “Lender” throughout this Deed
of Trust.



     41. SPECIFIC NOTICE REGARDING INDEMNITIES. IT IS EXPRESSLY AGREED AND UNDERSTOOD
THAT THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS INCLUDE INDEMNIFICATION, RELEASE, EXCULPATION
AND/OR WAIVER PROVISIONS WHICH, IN CERTAIN CIRCUMSTANCES, COULD MAKE BORROWER LIABLE AND
RESPONSIBLE FOR THE CONSEQUENCES OF THE NEGLIGENCE OF LENDER OR TRUSTEE, EXCLUDING LENDER’S
OR TRUSTEE’S GROSS NEGLIGENCE. BORROWER ACKNOWLEDGES ITS ACTUAL NOTICE OF SUCH INDEMNITY,
RELEASE, EXCULPATION AND/OR WAIVER PROVISIONS AND THAT CERTAIN RISKS AND LIABILITIES OF LENDER AND
TRUSTEE HAVE BEEN SHIFTED TO BORROWER WHERE, BUT FOR THE PROVISIONS OF THIS DEED OF
TRUST, SUCH RISKS AND LIABILITIES MIGHT HAVE REMAINED THE RESPONSIBILITY OF LENDER OR TRUSTEE.




Deed of Trust, Mortgage and Security Agreement — Page 30




 









 





[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





Deed of Trust, Mortgage and Security Agreement — Page 31




 









 





     IN WITNESS WHEREOF, the Borrower has caused this Deed of Trust to be executed effective as of
the day and year first written above.



	 	 	 	 	 	 	 
	 	 	CM REAL ESTATE, LLC,

a Texas limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James R. Ridings
	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	James R. Ridings	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 











	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF DALLAS

	 	§






     This instrument was acknowledged before me on the 13th day of November, 2007, by
James Ridings,                                                           of CM Real
Estate, LLC, a Texas limited liability company, on behalf of said limited liability company.



	 	 	 	 	 
	 

	 	/s/ Susan B Peresh
	 	 
	 

	 	 	 	 
	 

	 	Notary Public in and for

the State of Texas	 	 
	 
	 	 	 	 
	 

	 	Printed Name of Notary	 	 
	 
	 	 	 	 
	 

	 	Susan B Peresh	 	 
	 

	 	 	 	 
	 

	 	My Commission Expires: 3/20/2009	 	 







Deed of Trust, Mortgage and Security Agreement — Page 32




 









 






AZLIFE Loan No. 10074




EXHIBIT A




Legal Description



BEING a tract or parcel of land situated in the WILLIAM K. PAYNE SURVEY, ABSTRACT NO. 1140, the
T.J. THWEATT SURVEY, ABSTRACT NO. 1753 and the S.A. & M.G.R.R. SURVEY, ABSTRACT NO. 1439, City of
Coppell, DALLAS County, Texas, same being all of Lot 3R out of a replat of Freeport North, recorded
in Volume 95245, Page 2050, DALLAS County Plat Records. Same also being a portion of that certain
31.9602 acre tract conveyed to MEPC Quorum Properties II, Inc. by instrument of record in Volume
95098, Page 968, DALLAS County Deed Records. Said tract being more particularly described by metes
and bounds as follows:



BEGINNING at a 1/2" iron rod set for the Northeasterly corner of said 31.9602 acre tract from
which a found fence corner post bears North 89 degrees 40 minutes 00 seconds East, 2028.84 feet.
Said iron rod also being the Northwesterly corner of that certain 100.00 acre tract of land
conveyed to Coppell Industrial N.V. by instrument of record in Volume 82071, Page 1061, DALLAS
County Deed Records. Same also being in the Southerly line of that certain 214.09 acre tract of
land conveyed to Angeles Esteve by instrument of record in Volume 88246. Page 4209, DALLAS County
Deed Records;



THENCE along the common line of said 100.00 acre tract and said 31,9602 acre tract, South 00
degrees 11 minutes 33 seconds East, 1115.00 feet to a 1/2" iron rod set for comer;



THENCE departing said common line, South 89 degrees 48 minutes 27 seconds West, 450.00 feet to a
1/2" iron rod set for corner;



THENCE South 44 degrees 48 minutes 27 seconds West, 45.00 feet to a 1/2" iron rod set for comer;



THENCE South 34 degrees 16 minutes 20 seconds West, 33.17 feet to a 1/2" iron rod set for corner
in the Easterly right-of-way line of Royal Lane, 100 feet wide;



THENCE along said Easterly line the following three (3) courses:





(1) 239.13 feet along the arc of a non-tangent curve to the left having a radius of 1050.00
feet, a central angle of 13 degrees 02 minutes 56 seconds and a chord bearing and distance
of North 62 degrees 15 minutes 08 seconds West, 238.62 feet to a 1/2" iron rod found for a
point of tangency;




(2) North 68 degrees 46 minutes 36 seconds West, 150.00 feet to a 1/2" iron rod found for a
point of curvature;




(3) 275.29 feet along the arc of a tangent curve to the right having a radius of 950.00
feet, a central angle of 16 degrees 36 minutes 11 seconds and a chord bearing and distance
of



EXHIBIT A - 1




 









 







North 60 degrees 28 minutes 30 seconds West, 274.33 feet to a 1/2" iron rod set for
corner;


THENCE departing said Easterly line, North 89 degrees 41 minutes 59 seconds East, 460.92 feet to a
1/2" iron rod set for corner;



THENCE North 00 degrees 18 minutes 01 seconds West, 869.55 feet to a 1/2" iron rod set for corner
in the Southerly line of said 214.09 acre Esteve Tract;



THENCE along the common line of said Esteve Tract and said 31.9602 acre tract, North 89 degrees 41
minutes 59 seconds East, 630.00 feet to the POINT OF BEGINNING and containing 17.5201 acres,
763,174 square feet, more or less.




EXHIBIT A - 2