Exhibit
10.70


 


	
  AFTER RECORDING

  	
   

  	
   

  
	
           HOLD
  FOR

  	
   

  	
   

  
	
  AMERICAN TITLE COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GF# 557938-T

  	
   

  	
   

  
	
  CLOSER: KS/TO (HO)

  	
   

  	
   

  



 




 





Loan No. V_ 46692


 


A-S 46 HWY 290-SPRING
CYPRESS, L.P., as grantor

(Borrower)


 


to

KIM SOBIESKI, as trustee

(Trustee)


 


for the benefit of


 


JPMORGAN CHASE BANK,
N.A., as beneficiary

(Lender)


 






 


DEED OF
TRUST AND

SECURITY AGREEMENT


 






 


Dated: November 23, 2004




 





 


NOTE TO CLERK/RECORDER:


THIS INSTRUMENT IS ALSO A FIXTURE
FINANCING STATEMENT.


 


[SEAL]


 

















 


TABLE
OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  GRANTS OF SECURITY

  	
  1

  
	
   

  	
  Section 1.1.

  	
  PROPERTY CONVEYED

  	
  1

  
	
   

  	
  Section 1.2.

  	
  ASSIGNMENT OF RENTS

  	
  4

  
	
   

  	
  Section 1.3.

  	
  DEFINITION OF PERSONAL PROPERTY

  	
  4

  
	
   

  	
  Section 1.4.

  	
  PLEDGE OF MONIES HELD

  	
  4

  
	
  ARTICLE 2

  	
  DEBT AND OBLIGATIONS SECURED

  	
  4

  
	
   

  	
  Section 2.1.

  	
  DEBT

  	
  4

  
	
   

  	
  Section 2.2.

  	
  OTHER OBLIGATIONS

  	
  5

  
	
   

  	
  Section 2.3.

  	
  DEBT AND OTHER OBLIGATIONS

  	
  5

  
	
   

  	
  Section 2.4.

  	
  PAYMENTS

  	
  5

  
	
  ARTICLE 3

  	
  BORROWER COVENANTS

  	
  6

  
	
   

  	
  Section 3.1.

  	
  INCORPORATION BY REFERENCE

  	
  6

  
	
   

  	
  Section 3.2.

  	
  INSURANCE

  	
  6

  
	
   

  	
  Section 3.3.

  	
  PAYMENT OF TAXES, ETC

  	
  13

  
	
   

  	
  Section 3.4.

  	
  CONDEMNATION

  	
  14

  
	
   

  	
  Section 3.5.

  	
  USE AND MAINTENANCE OF PROPERTY

  	
  15

  
	
   

  	
  Section 3.6.

  	
  WASTE

  	
  15

  
	
   

  	
  Section 3.7.

  	
  COMPLIANCE WITH LAWS; ALTERATIONS

  	
  15

  
	
   

  	
  Section 3.8.

  	
  BOOKS AND RECORDS

  	
  16

  
	
   

  	
  Section 3.9.

  	
  PAYMENT FOR LABOR AND MATERIALS

  	
  17

  
	
   

  	
  Section 3.10.

  	
  PERFORMANCE OF OTHER AGREEMENTS

  	
  18

  
	
  ARTICLE 4

  	
  SPECIAL COVENANTS

  	
  18

  
	
   

  	
  Section 4.1.

  	
  PROPERTY USE

  	
  18

  
	
   

  	
  Section 4.2.

  	
  ERISA

  	
  18

  
	
   

  	
  Section 4.3.

  	
  SINGLE PURPOSE ENTITY

  	
  19

  
	
  ARTICLE 5

  	
  -REPRESENTATIONS AND WARRANTIES

  	
  21

  
	
   

  	
  Section 5.1.

  	
  BORROWER’S REPRESENTATIONS

  	
  21

  
	
   

  	
  Section 5.2.

  	
  WARRANTY OF TITLE

  	
  21

  
	
   

  	
  Section 5.3.

  	
  STATUS OF PROPERTY

  	
  22

  
	
   

  	
  Section 5.4.

  	
  NO FOREIGN PERSON

  	
  23

  
	
   

  	
  Section 5.5.

  	
  SEPARATE TAX LOT

  	
  23

  
	
  ARTICLE 6

  	
  OBLIGATIONS AND RELIANCES

  	
  23

  



 


i

















 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.1.

  	
  RELATIONSHIP OF BORROWER AND LENDER

  	
  23

  
	
   

  	
  Section 6.2.

  	
  NO RELIANCE ON LENDER

  	
  23

  
	
   

  	
  Section 6.3.

  	
  NO LENDER OBLIGATIONS

  	
  23

  
	
   

  	
  Section 6.4.

  	
  RELIANCE

  	
  24

  
	
  ARTICLE 7

  	
  FURTHER ASSURANCES

  	
  24

  
	
   

  	
  Section 7.1.

  	
  RECORDING FEES

  	
  24

  
	
   

  	
  Section 7.2.

  	
  FURTHER ACTS

  	
  24

  
	
   

  	
  Section 7.3.

  	
  CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP
  LAWS

  	
  24

  
	
   

  	
  Section 7.4.

  	
  CONFIRMATION STATEMENT

  	
  25

  
	
   

  	
  Section 7.5.

  	
  SPLITTING OF SECURITY INSTRUMENT

  	
  26

  
	
   

  	
  Section 7.6.

  	
  REPLACEMENT DOCUMENTS

  	
  26

  
	
  ARTICLE 8

  	
  DUE ON SALE/ENCUMBRANCE

  	
  26

  
	
   

  	
  Section 8.1.

  	
  LENDER RELIANCE

  	
  26

  
	
   

  	
  Section 8.2.

  	
  NO SALE/ENCUMBRANCE

  	
  26

  
	
   

  	
  Section 8.3.

  	
  EXCLUDED AND PERMITTED TRANSFERS

  	
  27

  
	
   

  	
  Section 8.4.

  	
  NO IMPLIED FUTURE CONSENT

  	
  29

  
	
   

  	
  Section 8.5.

  	
  COSTS OF CONSENT

  	
  29

  
	
   

  	
  Section 8.6.

  	
  CONTINUING SEPARATENESS REQUIREMENTS

  	
  29

  
	
  ARTICLE 9

  	
  DEFAULT

  	
  29

  
	
   

  	
  Section 9.1.

  	
  EVENTS OF DEFAULT

  	
  29

  
	
   

  	
  Section 9.2.

  	
  DEFAULT INTEREST

  	
  32

  
	
  ARTICLE 10

  	
  RIGHTS AND REMEDIES

  	
  32

  
	
   

  	
  Section 10.1.

  	
  REMEDIES

  	
  32

  
	
   

  	
  Section 10.2.

  	
  RIGHT OF ENTRY

  	
  37

  
	
  ARTICLE 11

  	
  INDEMNIFICATION; SUBROGATION

  	
  38

  
	
   

  	
  Section 11.1.

  	
  GENERAL INDEMNIFICATION

  	
  38

  
	
   

  	
  Section 11.2.

  	
  ENVIRONMENTAL INDEMNIFICATION

  	
  39

  
	
   

  	
  Section 11.3.

  	
  DUTY TO DEFEND AND ATTORNEYS AND OTHER FEES AND
  EXPENSES

  	
  41

  
	
   

  	
  Section 11.4.

  	
  SURVIVAL OF INDEMNITIES

  	
  41

  
	
  ARTICLE 12

  	
  SECURITY AGREEMENT

  	
  42

  



 


ii

















 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.1.

  	
  SECURITY AGREEMENT

  	
  42

  
	
  ARTICLE 13

  	
  WAIVERS

  	
  43

  
	
   

  	
  Section 13.2.

  	
  WAIVER OF NOTICE

  	
  43

  
	
   

  	
  Section 13.3.

  	
  SOLE DISCRETION OF LENDER

  	
  43

  
	
   

  	
  Section 13.4.

  	
  SURVIVAL

  	
  43

  
	
   

  	
  Section 13.5.

  	
  WAIVER OF TRIAL BY JURY

  	
  43

  
	
   

  	
  Section 13.6.

  	
  WAIVER OF AUTOMATIC OR SUPPLEMENTAL STAY

  	
  44

  
	
  ARTICLE 14

  	
  NOTICES

  	
  44

  
	
   

  	
  Section 14.1.

  	
  NOTICES

  	
  44

  
	
  ARTICLE 15

  	
  APPLICABLE LAW

  	
  45

  
	
   

  	
  Section 15.1.

  	
  GOVERNING LAW; JURISDICTION

  	
  45

  
	
   

  	
  Section 15.2.

  	
  USURY LAWS

  	
  46

  
	
   

  	
  Section 15.3.

  	
  PROVISIONS SUBJECT TO APPLICABLE LAW

  	
  46

  
	
  ARTICLE 16

  	
  SECONDARY MARKET

  	
  46

  
	
   

  	
  Section 16.1.

  	
  TRANSFER OF LOAN

  	
  46

  
	
  ARTICLE 17

  	
  COSTS

  	
  46

  
	
   

  	
  Section 17.2.

  	
  ATTORNEY’S FEES FOR ENFORCEMENT

  	
  47

  
	
  ARTICLE 18

  	
  DEFINITIONS

  	
  47

  
	
   

  	
  Section 18.1.

  	
  GENERAL DEFINITIONS

  	
  47

  
	
  ARTICLE 19

  	
  MISCELLANEOUS PROVISIONS

  	
  47

  
	
   

  	
  Section 19.1.

  	
  NO ORAL CHANGE

  	
  47

  
	
   

  	
  Section 19.2.

  	
  LIABILITY

  	
  47

  
	
   

  	
  Section 19.3.

  	
  INAPPLICABLE PROVISIONS

  	
  48

  
	
   

  	
  Section 19.4.

  	
  HEADINGS, ETC

  	
  48

  
	
   

  	
  Section 19.5.

  	
  DUPLICATE ORIGINALS; COUNTERPARTS

  	
  48

  
	
   

  	
  Section 19.7.

  	
  SUBROGATION

  	
  48

  
	
   

  	
  Section 19.8.

  	
  ENTIRE AGREEMENT

  	
  48

  
	
  ARTICLE 20

  	
  TRUSTEE

  	
  48

  
	
  ARTICLE 21

  	
  SPECIAL STATE OF TEXAS PROVISIONS

  	
  49

  
	
   

  	
  Section 21.1.

  	
  Principles Of Construction

  	
  49

  
	
   

  	
  Section 21.2.

  	
  Assignment Of Leases And Rents Amended

  	
  49

  
	
   

  	
  Section 21.3.

  	
  Remedies Continued

  	
  50

  



 


iii

















 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 21.4.

  	
  Inapplicability of Credit Code

  	
  53

  
	
   

  	
  Section 21.5.

  	
  Entire Agreement

  	
  53

  
	
   

  	
  Section 21.6.

  	
  Notice of Indemnification

  	
  53

  
	
   

  	
  Section 21.7.

  	
  Receipt of Security Instrument

  	
  53

  
	
   

  	
  Section 21.8.

  	
  Duties of Trustee

  	
  53

  
	
   

  	
  Section 21.9.

  	
  Substitution of Trustee

  	
  54

  



 


iv

















 


Index of Defined
Terms


 


	
  ADA

  	
  16

  
	
  ALR

  	
  4

  
	
  Applicable Laws

  	
  16

  
	
  attorneys

  	
  38

  
	
  attorneys’ fees

  	
  47

  
	
  Bankruptcy Code

  	
  2

  
	
  Borrower

  	
  1, 47

  
	
  Business Day

  	
  45

  
	
  Collateral

  	
  42

  
	
  counsel fees

  	
  47

  
	
  Debt

  	
  4

  
	
  Environmental Indemnity

  	
  6

  
	
  Environmental Law

  	
  39, 40

  
	
  Environmental Lien

  	
  40

  
	
  ERISA

  	
  18

  
	
  Escrow Agreement

  	
  3

  
	
  Event

  	
  46

  
	
  Event of Default

  	
  29

  
	
  Exculpated Portion

  	
  37

  
	
  fees and expenses

  	
  38

  
	
  Guarantor

  	
  20

  
	
  Hazardous Substances

  	
  40

  
	
  Improvements

  	
  1

  
	
  Indemnified Parties

  	
  40

  
	
  Insurance Premiums

  	
  9

  
	
  Insured Casualty

  	
  10

  
	
  Intangibles

  	
  3

  
	
  Investor

  	
  46

  
	
  Land

  	
  1

  
	
  Lease

  	
  2

  
	
  Leases

  	
  2

  
	
  legal fees

  	
  47

  
	
  Lender

  	
  1, 47

  
	
  Loan

  	
  28

  
	
  Loan Documents

  	
  6

  
	
  Losses

  	
  41

  
	
  Note

  	
  1, 47

  
	
  Obligations

  	
  5

  
	
  Original Principals

  	
  27

  
	
  Other Charges

  	
  13

  
	
  Other Loan Documents

  	
  6

  
	
  Other Obligations

  	
  5

  
	
  Permitted Exceptions

  	
  21

  



 


1

















 


	
  person

  	
  47

  
	
  Personal Property

  	
  4

  
	
  Policies

  	
  8

  
	
  Policy

  	
  8

  
	
  Property

  	
  1, 47

  
	
  Qualified Insurer

  	
  8

  
	
  Rating Agency

  	
  46

  
	
  Release

  	
  41

  
	
  Remediation

  	
  41

  
	
  Rents

  	
  2

  
	
  Securities

  	
  46

  
	
  Security Instrument

  	
  1

  
	
  Taxes

  	
  13

  
	
  Trustee

  	
  1

  
	
  Uniform Commercial Code

  	
  2

  



 


2

















 


THIS DEED OF TRUST AND
SECURITY AGREEMENT (this “Security Instrument”) is made as of
the 23rd day of November, 2004, by A-S 46 HWY 290-SPRING CYPRESS,
L.P., a Texas limited partnership, having its principal place of business c/o
NewQuest Properties, 8807 W. Sam Houston Parkway N., Suite 200, Houston, Texas
77040 (“Borrower”), to KIM SOBIESKI, an individual, having an
address at American Title Company of Houston, 4400 Post Oak Parkway, Suite
1900, Houston, Texas 77027 (“Trustee”), for the benefit of JPMORGAN CHASE BANK, N.A., a banking
association chartered under the laws of the United States of America, having
its principal place of business at 270 Park Avenue, New York, New York 10017,
as beneficiary (“Lender”).


 


RECITALS:


 


Borrower
by its Fixed Rate Note of even date herewith given to Lender is indebted to
Lender in the principal sum of $6,125,000.00 in lawful money of the United
States of America (such Fixed Rate Note, together with all extensions,
renewals, modifications, substitutions and amendments thereof, shall
collectively be referred to as the “Note”), with interest from the date thereof at the rates set forth in
the Note, principal and interest to be payable in accordance with the terms and
conditions provided in the Note, and with a final maturity date of December 1,
2014.


 


Borrower
desires to secure the payment of the Debt (as defined in Article 2) and the performance of all of its
obligations under the Note and the Other Obligations (as defined in Article
2).


 


ARTICLE 1 - GRANTS
OF SECURITY


 


Section 1.1.        PROPERTY
CONVEYED. Borrower does hereby irrevocably, unconditionally and absolutely,
grant, bargain, sell, pledge, enfeoff, assign, warrant, transfer and convey to
Trustee (with power of sale) in trust for the purposes herein set forth, the
following property, rights, interests and estates now owned, or hereafter
acquired by Borrower (collectively, the “Property”):


 


(a)        Land.
The real property described in Exhibit A attached hereto and made a part
hereof (collectively, the “Land”), together with additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the
development, ownership or occupancy of such real property, and all additional
lands and estates therein which may, from time to time, by supplemental deed of
trust or otherwise be expressly made subject to the lien of this Security
Instrument;


 


(b)       Improvements.
The buildings, structures, fixtures, additions, accessions, enlargements,
extensions, modifications, repairs, replacements and improvements now or
hereafter erected or located on the Land (the “Improvements”);


 


(c)        Easements.
All easements, rights-of-way or use, rights, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, and all estates, rights, titles,
interests, privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any


 

















 


nature whatsoever, in any
way now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders, and
all land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;


 


(d)       Fixtures
and Personal Property. All machinery, equipment, goods, inventory, consumer
goods, fixtures (including, but not limited to, all heating, air conditioning,
plumbing, lighting, communications and elevator fixtures) and other property of
every kind and nature whatsoever owned by Borrower, or in which Borrower has or
shall have an interest, now or hereafter located upon the Land and the
Improvements, or appurtenant thereto, and usable in connection with the present
or future use, maintenance, enjoyment, operation and occupancy of the Land and
the Improvements and all building equipment, materials and supplies of any
nature whatsoever owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon the Land and the Improvements, or
appurtenant thereto, or usable in connection with the present or future
operation and occupancy of the Land and the Improvements, and the right, title
and interest of Borrower in and to any of the Personal Property (as hereinafter
defined) which may be subject to any security interests, as defined in the
Uniform Commercial Code, as adopted and enacted by the state or states where
any of the Property is located (the “Uniform Commercial Code”), superior
in lien to the lien of this Security Instrument and all proceeds and products
of the above;


 


(e)        Leases
and Rents. All leases and other agreements affecting the use, enjoyment or
occupancy of the Land and the Improvements heretofore or hereafter entered
into, whether before or after the filing by or against Borrower of any petition
for relief under 11 U.S.C. § 101 et  seq., as the same may be
amended from time to time (the “Bankruptcy Code”) (individually, a “Lease”;
collectively, the “Leases”) and all right, title and
interest of Borrower, its successors and assigns therein and thereunder,
including, without limitation, cash or securities deposited thereunder to
secure the performance by the lessees of their obligations thereunder and all
rents (including all tenant security and other deposits), additional rents,
revenues, issues and profits (including all oil and gas or other mineral
royalties and bonuses) from the Land and the Improvements whether paid or
accruing before or after the filing by or against Borrower of any petition for
relief under the Bankruptcy Code (collectively the “Rents”) and all
proceeds from the sale or other disposition of the Leases and the right to
receive and apply the Rents to the payment of the Debt;


 


(f)        Condemnation
Awards. All awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Property, whether from the
exercise of the right of eminent domain (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of the right), or
for a change of grade, or for any other injury to or decrease in the value of
the Property;


 


2

















 


(g)       Insurance
Proceeds. All proceeds of and any unearned premiums on any insurance
policies covering the Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements made
in lieu thereof, for damage to the Property;


 


(h)       Tax
Certiorari. All refunds, rebates or credits in connection with a reduction
in real estate taxes and assessments charged against the Property as a result
of tax certiorari or any applications or proceedings for reduction;


 


(i)         Conversion.
All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing including, without limitation, proceeds of insurance and condemnation
awards, into cash or liquidation claims;


 


(j)         Rights.
The right, in the name and on behalf of Borrower, to appear in and defend any
action or proceeding brought with respect to the Property and to commence any
action or proceeding to protect the interest of Trustee and/or Lender in the
Property;


 


(k)        Agreements.
All agreements, contracts (including purchase, sale, option, right of first
refusal and other contracts pertaining to the Property), certificates,
instruments, franchises, permits, licenses, approvals, consents, plans,
specifications and other documents, now or hereafter entered into, and all
rights therein and thereto, respecting or pertaining to the use, occupation,
construction, management or operation of the Property (including any
Improvements or respecting any business or activity conducted on the Land and
any part thereof) and all right, title and interest of Borrower therein and
thereunder, including, without limitation, the right, upon the happening of any
default hereunder, to receive and collect any sums payable to Borrower
thereunder;


 


(l)         Trademarks.
All tradenames (except that of NewQuest Properties), trademarks, servicemarks,
logos, copyrights, goodwill, books and records and all other general
intangibles relating to or used in connection with the operation of the
Property;


 


(m)       Accounts.
All accounts, accounts receivable, escrows (including, without limitation, all
escrows, deposits, reserves and impounds established pursuant to that certain
Escrow Agreement for Reserves and Impounds of even date herewith between
Borrower and Lender; hereinafter, the “Escrow Agreement”), documents,
instruments, chattel paper, deposit accounts, investment property, claims,
reserves (including deposits) representations, warranties and general
intangibles, as one or more of the foregoing terms may be defined in the
Uniform Commercial Code, and all contract rights, franchises, books, records,
plans, specifications, permits, licenses (to the extent assignable), approvals,
actions, choses, commercial tort claims, suits, proofs of claim in bankruptcy
and causes of action which now or hereafter relate to, are derived from or are
used in connection with the Property, or the use, operation, maintenance,
occupancy or enjoyment thereof or the conduct of any business or activities
thereon (hereinafter collectively called the “Intangibles”); and


 


(n)       Other
Rights. Any and all other rights of Borrower in and to the Property and any
accessions, renewals, replacements and substitutions of all or any portion of
the


 


3

















 


Property and all proceeds
derived from the sale, transfer, assignment or financing of the Property or any
portion thereof.


 


Section 1.2.        ASSIGNMENT
OF RENTS. Borrower hereby absolutely and unconditionally assigns to Lender
Borrower’s right, title and interest in and to all current and future Leases
and Rents; it being intended by Borrower that this assignment constitutes a
present, absolute and unconditional assignment and not an assignment for
additional security only. Nevertheless, subject to the terms of this Section
1.2 and the terms and conditions of that certain Assignment of Leases and
Rents of even date herewith from Borrower to Lender (the “ALR”),
Lender grants to Borrower a revocable license to collect and receive the Rents.
Borrower shall hold the Rents, or a portion thereof sufficient to discharge all
current sums due on the Debt, for use in the payment of such sums.


 


Section 1.3.        DEFINITION
OF PERSONAL PROPERTY. For purposes of this Security Instrument, the
Property identified in Subsections 1.1(d) through 1.1(n), inclusive,
shall be collectively referred to herein as the “Personal Property.”


 


Section 1.4.        PLEDGE
OF MONIES HELD. Borrower hereby pledges to Lender any and all monies now or
hereafter held by Lender, including, without limitation, all insurance proceeds
described in Section 3.2 and condemnation awards or payments described
in Section 3.4. as additional security for the Obligations until
expended or applied as provided in this Security Instrument.


 


CONDITIONS TO GRANT


 


TO HAVE AND TO HOLD the
above granted and described Property unto and to the use and benefit of
Trustee, and the successors and assigns of Trustee, forever, by, through and
under Borrower, but not otherwise;


 


PROVIDED,
HOWEVER, these presents are upon the express condition that, if Borrower shall
well and truly pay to Lender the Debt at the time and in the manner provided in
the Note and this Security Instrument, shall well and truly perform the Other
Obligations as set forth in this Security Instrument and shall well and truly
abide by and comply with each and every covenant and condition set forth herein
and in the Note, these presents and the estate hereby granted shall cease,
terminate and be void; provided  however, that Borrower’s
obligation to indemnify and hold harmless Lender pursuant to the provisions
hereof with respect to matters relating to any period of time during which this
Security Instrument was in effect shall survive any such payment or release.


 


ARTICLE 2 - DEBT AND
OBLIGATIONS SECURED


 


Section 2.1.        DEBT.
This Security Instrument and the grants, assignments and transfers made in Article
1 are given for the purpose of securing the following, in such order of
priority as Lender may determine in its sole discretion (the “Debt”):


 


(a)        the
payment of the indebtedness evidenced by the Note in lawful money of the United
States of America;


 


4

















 


(b)       the
payment of interest, default interest, late charges and other sums, as provided
in the Note, this Security Instrument or the Other Loan Documents (as
hereinafter defined);


 


(c)        the
payment of all other moneys agreed or provided to be paid by Borrower in the
Note, this Security Instrument or the Other Loan Documents;


 


(d)       the
payment of all sums advanced pursuant to this Security Instrument to protect
and preserve the Property and the lien and the security interest created
hereby; and


 


(e)        the
payment of all sums advanced, costs and expenses incurred, and processing fees
charged, by Lender in connection with the Debt or any part thereof, any
renewal, extension, or change of or substitution for the Debt or any part
thereof, or the acquisition or perfection of the security therefor, whether
made or incurred at the request of Borrower or Lender.


 


Section 2.2.        OTHER
OBLIGATIONS. This Security Instrument and the grants, assignments and
transfers made in Article 1 are also given for the purpose of securing
the following (the “Other Obligations”):


 


(a)        the
performance of all other obligations of Borrower contained herein;


 


(b)        the
performance of each obligation of Borrower contained in any other agreement
given by Borrower to Lender which is for the purpose of further securing the
obligations secured hereby, and any amendments, modifications and changes
thereto; and


 


(c)        the
performance of each obligation of Borrower contained in any renewal, extension,
amendment, modification, consolidation, change of, or substitution or
replacement for, all or any part of the Note, this Security Instrument or the
Other Loan Documents.


 


Section 2.3.        DEBT
AND OTHER OBLIGATIONS. Borrower’s obligations for the payment of the Debt
and the performance of the Other Obligations shall be referred to collectively
herein as the “Obligations.”


 


Section 2.4.        PAYMENTS.
Unless payments are made in the required amount in immediately available funds
at the place where the Note is payable, remittances in payment of all or any
part of the Debt shall not, regardless of any receipt or credit issued
therefor, constitute payment until the required amount is actually received by
Lender in funds immediately available at the place where the Note is payable
(or any other place as Lender, in Lender’s sole discretion, may have
established by delivery of written notice thereof to Borrower) and shall be
made and accepted subject to the condition that any check or draft may be
handled for collection in accordance with the practice of the collecting bank
or banks. Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and the failure to pay
the entire amount then due shall (subject to any right to notice and
opportunity to cure provided herein) be and continue to be an Event of Default
(as hereinafter defined).


 


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ARTICLE 3 - BORROWER
COVENANTS


 


Borrower covenants and
agrees that:


 


Section 3.1.        INCORPORATION
BY REFERENCE. All the covenants, conditions and agreements contained in (a)
the Note, and (b) all and any of the documents other than the Note or this
Security Instrument now or hereafter executed by Borrower and/or others and by
or in favor of Lender in connection with the creation of the Obligations, the
payment of any other sums owed by Borrower to Lender or the performance of any
Obligations (collectively the “Other Loan Documents”), are hereby made a part of this Security
Instrument to the same extent and with the same force as if fully set forth
herein. The term “Loan Documents” as used herein shall individually and collectively
refer to the Note, this Security Instrument and the Other Loan Documents; provided,
however, that notwithstanding any provision of this Security Instrument
to the contrary, the Obligations of the Borrower under that certain
Environmental Indemnity Agreement of even date herewith executed by Borrower in
favor of Lender (the “Environmental Indemnity”) shall not
be deemed or construed to be secured by this Security Instrument or otherwise
restricted or affected by the foreclosure of the lien hereof or any other
exercise by Lender of its remedies hereunder or under any other Loan Document,
such Environmental Indemnity being intended by the signatories thereto to be
its (or their) unsecured obligation.


 


Section 3.2.        INSURANCE.


 


(a)        Borrower
shall obtain and maintain (or cause to be obtained and maintained, and for the
purposes of this Section 3.2, satisfaction of any of the requirements
herein by a tenant under any Lease shall be deemed to be satisfaction by
Borrower hereunder), and shall pay (or cause to be paid) all premiums in
accordance with Subsection 3.2(b) below for, insurance for Borrower and
the Property providing at least the following coverages:


 


(i)            all
risk insurance (including, without limitation, riot and civil commotion,
vandalism, malicious mischief, water, fire, burglary and theft and without any
exclusion for terrorism) on the Improvements and the Personal Property and in
each case (A) in an amount equal to 100% of the “Full Replacement Cost,” which
for purposes of this Security Instrument shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities and
footings) with a waiver of depreciation; (B) containing an agreed amount
endorsement with respect to the Improvements and Personal Property waiving all
co-insurance provisions; (C) providing for no deductible in excess of
$100,000.00; and (D) containing Demolition Costs, Increased Cost of
Construction and “Ordinance or Law Coverage” or “Enforcement” endorsements in
amounts satisfactory to Lender if any of the Improvements or the use of the
Property shall at any time constitute legal non-conforming structures or uses
or the ability to rebuild the Improvements is restricted or prohibited. The
Full Replacement Cost may be redetermined from time to time by an appraiser or
contractor designated and paid by Lender or by an engineer or appraiser in the
regular employ of the insurer. No omission on the part of Lender to request any


 


6

















 


such appraisals shall
relieve Borrower of any of its obligations under this Subsection;


 


(ii)           commercial
general liability insurance against claims for personal injury, bodily injury,
death or property damage occurring upon, in or about the Property, such
insurance (A) to be on the so-called “occurrence” form with a combined single limit
of not less than $1,000,000.00 and not less than $3,000,000.00 if the Property
has one or more elevators, as well as liquor liability insurance in a minimum
amount of $2,000,000.00 if any part of the Property is covered by a liquor
license and an aggregate coverage limit acceptable to Lender; (B) to continue
at not less than the aforesaid limit until required to be changed by Lender in
writing by reason of changed economic conditions making such protection
inadequate; (C) to cover at least the following hazards: (1) premises and
operations; (2) products and completed operations on an “if any” basis; (3)
independent contractors; (4) blanket contractual liability for all written and
oral contracts; (5) contractual liability covering the indemnities contained in
Section 11.1 hereof to the extent the same is available; and (D) to be
without deductible;


 


(iii)          business
income insurance (A) with loss payable to Lender; (B) covering losses of income
and Rents derived from the Property; (C) containing an extended period of
indemnity endorsement which provides that after the physical loss to the
Improvements and Personal Property has been repaired, the continued loss of
income will be insured until such income either returns to the same level it
was at prior to the loss, or the expiration of twelve (12) months from the date
of the loss, whichever first occurs, and notwithstanding that the policy may
expire prior to the end of such period; and (D) in an amount equal to 100% of
the projected gross income from the Property (on an actual loss sustained
basis) for a period continuing until the restoration of the Property is
completed. The amount of such business income insurance shall be determined by
Lender prior to the date hereof and at least once each year thereafter based on
Borrower’s reasonable estimate of the gross income from the Property for the
succeeding twelve (12) month period. All insurance proceeds payable to Lender
pursuant to this Subsection 3.2(a) shall be held by Lender and shall be
applied first to the obligations secured hereunder from time to time due and
payable hereunder and under the Note; provided,  however, that
nothing herein contained shall be deemed to relieve Borrower of its obligations
to pay the obligations secured hereunder on the respective dates of payment
provided for in the Note except to the extent such amounts are actually paid
out of the proceeds of such business income insurance;


 


(iv)          at
all times during which structural construction, repairs or alterations are
being made with respect to the Improvements: (A) owners will be named as
additional insureds on tenant’s or contractor’s liability policies; and (B) the
insurance provided for in Subsection 3.2(a)(i) written in a so-called builder’s risk completed value form
(1) on a non-reporting basis, (2) against all risks insured against pursuant to
Subsection 3.2(a)(i), (3)
including permission to


 


7

















 


occupy the Property, and
(4) with an agreed amount endorsement waiving coinsurance provisions;


 


(v)           workers’
compensation, subject to the statutory limits of the state in which the
Property is located, and employer’s liability insurance with a limit of at
least $2,000,000.00 per accident and per disease per employee, and
$2,000,000.00 for disease aggregate in respect of any work or operations on or
about the Property, or in connection with the Property or its operation (if
applicable);


 


(vi)          comprehensive
boiler and machinery insurance (without exclusion for explosion), if
applicable, in amounts as shall be reasonably required by Lender and covering
all boilers or other pressure vessels, machinery and equipment located at or
about the Property (including, without limitation, electrical equipment,
sprinkler systems, heating and air conditioning equipment, refrigeration
equipment and piping);


 


(vii)         if
any portion of the Improvements is currently or at any time in the future
located in a federally designated “special flood hazard area,” flood hazard
insurance in an amount equal to the lesser of (A) the Full Replacement Cost or
(B) the maximum amount of such insurance available under the National Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the
National Flood Insurance Reform Act of 1994, as each may be amended; and


 


(viii)        such
other insurance and in such amounts as Lender from time to time may reasonably
request against such other insurable hazards which at the time are commonly
insured against for property similar to the Property located in or around the
region in which the Property is located, including, without limitation,
earthquake insurance (in the event the Property is located in an area with a
high degree of seismic activity), sinkhole insurance, mine subsidence insurance
and environmental insurance.


 


(b)        All
insurance provided for in Subsection 3.2(a) hereof shall be obtained
under valid and enforceable policies (the “Policies” or in the singular, the “Policy”), in such forms and, from time to time after
the date hereof, in such amounts as may from time to time be reasonably
satisfactory to Lender, issued by financially sound and responsible insurance
companies authorized to do business in the state in which the Property is
located as admitted or unadmitted carriers which, in either case, have been
approved by Lender (with such approval not to be unreasonably withheld) and
which have a claims paying ability rating of A or better issued by Standard
& Poor’s Ratings Group or with a claims paying ability rating otherwise
acceptable to Lender (each such insurer shall be referred to below as a “Qualified
Insurer”). Such
Policies shall not be subject to invalidation due to the use or occupancy of
the Property for purposes more hazardous than the use of the Property at the
time such Policies were issued. No Policy required under Sections 3.2(a)(i)
and (iii) hereof shall contain an exclusion from coverage under such Policy
for loss or damage incurred as a result of an act of terrorism or similar acts
of sabotage. Not less than thirty (30) days prior to the expiration dates of the


 


8

















 


Policies theretofore
furnished to Lender pursuant to Subsection 3.2(a), certified copies of
the Policies marked “premium paid” or accompanied by evidence satisfactory to
Lender of payment of the premiums due thereunder (the “Insurance Premiums”), shall be delivered by Borrower to Lender;
provided, however, that in the case of renewal Policies, Borrower may furnish
Lender with binders therefor to be followed by the original Policies when
issued.


 


(c)        Borrower
shall not obtain (i) separate insurance concurrent in form or contributing in
the event of loss with that required in Subsection 3.2(a) to be
furnished by, or which may be reasonably required to be furnished by, Borrower,
or (ii) any umbrella or blanket liability or casualty Policy unless, in each
case, Lender’s interest is included therein as provided in this Security
Instrument and such Policy is issued by a Qualified Insurer. If Borrower
obtains separate insurance or an umbrella or a blanket Policy, Borrower shall
notify Lender of the same and shall cause certified copies of each Policy to be
delivered as required in Subsection 3.2(a). Any blanket insurance Policy
shall specifically allocate to the Property the amount of coverage from time to
time required hereunder and shall otherwise provide the same protection as
would a separate Policy insuring only the Property in compliance with the
provisions of Subsection 3.2(a).


 


(d)        All
Policies of insurance provided for or contemplated by Subsection 3.2(a) shall name Lender, its successors and
assigns, including any servicers, trustees or other designees of Lender, and
Borrower as the insured or additional insured, as their respective interests
may appear, and in the case of property damage, boiler and machinery, and flood
insurance, shall contain a so-called New York standard non-contributing Lender
clause in favor of Lender providing that the loss thereunder shall be payable
to Lender.


 


(e)        All
Policies of insurance provided for in Subsection 3.2(a) shall contain
clauses or endorsements to the effect that:


 


(i)            no
act or negligence of Borrower, or anyone acting for Borrower, or of any tenant
under any Lease or other occupant, or failure to comply with the provisions of
any Policy which might otherwise result in a forfeiture of the insurance or any
part thereof, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;


 


(ii)           the
Policy shall not be canceled without at least thirty (30) days’ prior written
notice to Lender;


 


(iii)          each
Policy shall provide that the issuers thereof shall give written notice to
Lender if the Policy has not been renewed thirty (30) days prior to its
expiration; and


 


(iv)          Lender
shall not be liable for any Insurance Premiums thereon or subject to any
assessments thereunder.


 


(f)         Borrower
shall furnish to Lender within ten (10) calendar days after Lender’s request
therefor (but not more than once per calendar year), a statement certified


 


9

















 


by Borrower or a duly
authorized officer of Borrower of the amounts of insurance maintained in
compliance herewith, of the risks covered by such insurance and of the
insurance company or companies which carry such insurance.


 


(g)        If
at any time Lender is not in receipt of written evidence that all insurance
required hereunder is in full force and effect, Lender shall have the right but
not the obligation, without notice to Borrower, to take such action as Lender
deems reasonably necessary to protect its interest in the Property, including,
without limitation, the obtaining of such insurance coverage in the form and
amounts required hereunder, and all expenses incurred by Lender in connection
with such action or in obtaining such insurance and keeping it in effect shall
be paid by Borrower to Lender upon demand and until paid shall be secured by
this Security Instrument and shall bear interest at the Default Rate (as
defined in the Note). Lender shall endeavor to provide Borrower with 24 hours
notice prior to taking the action contemplated in this subsection provided,
that, the failure of Lender to provide such notice shall not, in any way,
prejudice Lender’s right to take any such action.


 


(h)        If
the Property shall be damaged or destroyed, in whole or in part, by fire or
other casualty, Borrower shall give prompt notice thereof to Lender.


 


(i)            In
case of loss covered by Policies, Lender may either (1) settle and adjust any
claim without the consent of Borrower, or (2) allow Borrower to agree with the
insurance company or companies on the amount to be paid upon the loss; provided
that, if no Event of Default shall have occurred and be continuing (A) Borrower
may adjust losses aggregating not in excess of $100,000.00 if such adjustment
is carried out in a competent and timely manner and (B) Lender shall not settle
or adjust any such claim without the consent of Borrower, which consent shall
not be unreasonably withheld or delayed. In any case Lender shall and is hereby
authorized to collect and receive any such insurance proceeds; and the expenses
incurred by Lender in the adjustment and collection of insurance proceeds shall
become part of the Debt and be secured hereby and shall be reimbursed by
Borrower to Lender upon demand (unless deducted by and reimbursed to Lender
from such proceeds).


 


(ii)           In
the event of any insured damage to or destruction of the Property or any part
thereof (herein called an “Insured Casualty”),
if (A) less than 30% of the total floor area of the Improvements has been
damaged, destroyed or rendered unusable as a result of such Insured Casualty
and in the reasonable judgment of Lender, the Property can be restored within
six (6) months after insurance proceeds are made available and at least six (6)
months prior to the Maturity Date (as defined in the Note) to an economic unit
not less valuable (including an assessment by Lender of the impact of the
termination of any Leases due to such Insured Casualty) and not less useful
than the same was prior to the Insured Casualty, and after such restoration
will adequately secure the outstanding balance of the Debt; (B) Leases demising
in the aggregate a percentage amount equal to or greater than seventy-five
percent (75%) of the total rentable space in the Property which has been
demised under executed and


 


10

















 


delivered Leases in
effect as of the date of the occurrence of such fire or other casualty shall
remain in full force and effect during and after the completion of the
restoration, notwithstanding the occurrence of any such Insured Casualty and
Borrower furnishes to Lender evidence satisfactory to Lender that all tenants
under Material Leases (as defined in the ALR) shall continue to operate their
respective space at the Property after the completion of the Restoration; and
(C) no Event of Default (hereinafter defined) shall have occurred and be
continuing (except a non-monetary Event of Default resulting solely from such
casualty), then the proceeds of insurance shall be applied to reimburse Borrower
for the cost of restoring, repairing, replacing or rebuilding the Property or
part thereof subject to Insured Casualty, as provided below. Additionally, in
the event of any insured damage to or destruction to any portion of the
Property which Borrower is required to restore pursuant to any Lease, provided
no Event of Default shall have occurred and be then continuing, then the
proceeds of insurance shall be applied to reimburse Borrower for the cost of
restoring, repairing, replacing or rebuilding the Property or part thereof
subject to Insured Casualty, as provided below. In any such case, Borrower
hereby covenants and agrees forthwith to commence and diligently to prosecute
such restoring, repairing, replacing or rebuilding; provided, however,
in any event Borrower shall pay all costs (and if required by Lender, Borrower
shall deposit the total thereof with Lender in advance) of such restoring,
repairing, replacing or rebuilding in excess of the net proceeds of insurance
made available pursuant to the terms hereof.


 


(iii)          Except
as provided above, the proceeds of insurance collected upon any Insured
Casualty shall, at the option of Lender in its sole reasonable discretion, be
applied to the payment of the Debt or applied to reimburse Borrower for the cost
of restoring, repairing, replacing or rebuilding the Property or part thereof
subject to the Insured Casualty, in the manner set forth below. Any such
application to the Debt shall not be considered a voluntary prepayment
requiring payment of the prepayment consideration provided in the Note, and
shall not reduce or postpone any payments otherwise required pursuant to the
Note, other than the final payment on the Note.


 


(iv)          Regardless
of whether proceeds of insurance, if any, are made available to Borrower for
the restoring, repairing, replacing or rebuilding of the Property, Borrower
hereby covenants to restore, repair, replace or rebuild the same to be of at
least equal value and of substantially the same character as prior to such
damage or destruction, all to be effected in accordance with applicable law and
plans and specifications approved in advance by Lender, which approval shall
not be unreasonably withheld, conditioned or delayed. Notwithstanding the
foregoing, Lender shall not compel Borrower to rebuild portions of the
Improvements damaged in connection with an Insured Casualty for which no Lease
is then in effect (other than to remove debris and to restore the affected area
to a good and safe condition in keeping with the condition of the balance of
the Property), in which case any related insurance proceeds shall, unless
Lender is otherwise entitled to apply such proceeds to the payment of the Debt
in


 


11

















 


accordance with the
provisions hereof, be held by Lender in an interest bearing account and
disbursed for the costs of rebuilding such Improvements in the manner provided
herein upon the execution of a Lease for such space.


 


(v)           If
Borrower is entitled to reimbursement out of insurance proceeds held by Lender,
such proceeds shall be disbursed from time to time upon Lender being furnished
with (1) evidence reasonably satisfactory to it (which evidence may include
inspections of the work performed) that such portion of the restoration,
repair, replacement and rebuilding covered by the disbursement has been
completed in accordance with plans and specifications approved by Lender, (2)
evidence reasonably satisfactory to it of the estimated cost of completion of
the restoration, repair, replacement and rebuilding, (3) funds, or, at Lender’s
option, assurances reasonably satisfactory to Lender that such funds are
available, sufficient in addition to the proceeds of insurance to complete the
proposed restoration, repair, replacement and rebuilding, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance endorsements, bonds, plats of survey and such other evidences of
cost, payment and performance as Lender may reasonably require and approve; and
Lender may, in any event, require that all plans and specifications for such
restoration, repair, replacement and rebuilding be submitted to and approved by
Lender (which approval shall not be unreasonably withheld, conditioned or
delayed) prior to commencement of work. With respect to disbursements to be
made by Lender: (A) no payment made prior to the final completion of the
restoration, repair, replacement and rebuilding shall exceed ninety percent
(90%) of the value of the work performed from time to time; (B) funds other
than proceeds of insurance shall be disbursed prior to disbursement of such
proceeds; and (C) at all times, the undisbursed balance of such proceeds
remaining in the hands of Lender, together with funds deposited for that
purpose or irrevocably committed to the satisfaction of Lender by or on behalf
of Borrower for that purpose, shall be at least sufficient in the reasonable
judgment of Lender to pay for the cost of completion of the restoration,
repair, replacement or rebuilding, free and clear of all liens or claims for
lien and the costs described in Subsection 3.2(h)(vi) below. Any surplus
which may remain out of insurance proceeds held by Lender after payment of such
costs of restoration, repair, replacement or rebuilding shall be paid to any
party entitled thereto. In no event shall Lender assume any duty or obligation
for the adequacy, form or content of any such plans and specifications, nor for
the performance, quality or workmanship of any restoration, repair, replacement
and rebuilding. Notwithstanding the foregoing provisions of this Subsection
3.20(h)(v), if the insurance proceeds shall be less than $100,000.00 and
the costs of completing the restoration shall be less than $100,000.00, the
insurance proceeds will be disbursed by Lender to Borrower upon receipt,
provided that the conditions set forth in Subsection 3.2(h)(ii) hereof are met and Borrower delivers to
Lender a written undertaking to expeditiously commence and to satisfactorily
complete with due diligence the restoration in accordance with the terms of
this Security Instrument.


 


12

















 


(vi)          Notwithstanding
anything to the contrary contained herein, the proceeds of insurance reimbursed
to Borrower in accordance with the terms and provisions of this Security
Instrument shall be reduced by the reasonable costs (if any) incurred by Lender
in the adjustment and collection thereof and in the reasonable costs incurred
by Lender of paying out such proceeds (including, without limitation, reasonable
attorneys’ fees and costs paid to third parties for inspecting the restoration,
repair, replacement and rebuilding and reviewing the plans and specifications
therefor).


 


Section 3.3.        PAYMENT
OF TAXES, ETC.


 


(a)     Borrower
shall pay (or cause to be paid) all taxes, assessments, water rates, sewer
rents, governmental impositions, and other charges, including without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Land, now or hereafter levied or assessed or
imposed against the Property or any part thereof (the “Taxes”), all ground
rents, maintenance charges and similar charges, now or hereafter levied or
assessed or imposed against the Property or any part thereof (the “Other
Charges”), and all charges for utility services provided to
the Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender’s request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges which Borrower is obligated to pay
have been so paid or are not then delinquent. Borrower shall not allow and
shall promptly cause to be paid and discharged all Taxes and Other Charges
which may be or become a lien or charge against the Property. Except to the
extent sums sufficient to pay all Taxes and Other Charges have been deposited
with Lender in accordance with the terms of this Security Instrument, Borrower
shall furnish to Lender paid receipts for the payment of the Taxes prior to the
date the same shall become delinquent.


 


(b)     After
prior written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application in whole or in
part of any of the Taxes, Other Charges, utility service charges, and any lien
or charge whatsoever (each, a “Contested Obligation”), provided
that (i) no Event of Default has occurred and is continuing under the Note,
this Security Instrument or any of the Other Loan Documents, (ii) Borrower is
permitted to do so under the provisions of any other mortgage, deed of trust or
deed to secure debt affecting the Property, (iii) such proceeding shall suspend
the collection of such Contested Obligation from Borrower and from the Property
or Borrower shall have paid all of the Contested Obligation under protest, (iv)
such proceeding shall be permitted under and be conducted in accordance with
the provisions of any other instrument to which Borrower is subject and shall
not constitute a default thereunder, (v) neither the Property nor any part
thereof or interest therein will be in danger of being sold, forfeited,
terminated, canceled or lost, (vi) without duplication of amounts deposited
pursuant to subclause (vii) hereof, Borrower shall have set aside and deposited
with Lender adequate reserves for the payment of the Contested Obligation,
together with all interest and penalties thereon, unless Borrower has paid all
of the Contested Obligation under protest, and (vii) Borrower shall have
furnished the


 


13

















 


security as may be
required in the proceeding to insure the payment of any Contested Obligation,
together with all interest and penalties thereon.


 


Section 3.4.        CONDEMNATION.
Borrower shall promptly give Lender notice of the actual or threatened
commencement of any condemnation or eminent domain proceeding and shall deliver
to Lender copies of any and all papers served in connection with such
proceedings. Lender is hereby irrevocably appointed as Borrower’s
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any award or payment for said condemnation or eminent domain
and to make any compromise or settlement in connection with such proceeding,
subject to the provisions of this Security Instrument. Notwithstanding any
taking by any public or quasi-public authority through eminent domain or
otherwise (including but not limited to any transfer made in lieu of or in
anticipation of the exercise of such taking), Borrower shall continue to pay
the Debt at the time and in the manner provided for its payment in the Note and
in this Security Instrument and the Debt shall not be reduced until any award
or payment therefor shall have been actually received and applied by Lender,
after the deduction of expenses of collection, to the reduction or discharge of
the Debt. Lender shall not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the award interest
at the rate or rates provided herein or in the Note. Borrower shall cause the
award or payment made in any condemnation or eminent domain proceeding, which
is payable to Borrower, to be paid directly to Lender. Provided less than ten
percent (10%) of the Land constituting the Property is taken, and such Land is
located along the perimeter or periphery of the Property or along a public
street, and no portion of the Improvements is the subject of such proceeding,
Lender shall allow Borrower to use the proceeds of such condemnation toward the
repair and restoration of the Property subject to and in accordance with terms
and conditions similar to those set forth in Section 3.2(h) hereof, including,
without limitation, the satisfaction of the conditions set forth in Section
3.2(h)(ii). Lender may apply any award or payment to the reduction or discharge
of the Debt whether or not then due and payable (such application to be free
from any prepayment consideration provided in the Note, except that if an Event
of Default, or an event which with notice and/or the passage of time, or both,
would constitute an Event of Default, has occurred, then such application shall
be subject to the full prepayment consideration computed in accordance with the
Note). If the Property is sold, through foreclosure or otherwise, prior to the
receipt by Lender of the award or payment, Lender shall have the right, whether
or not a deficiency judgment on the Note shall have been sought, recovered or
denied, to receive the award or payment, or a portion thereof sufficient to pay
the Debt. Regardless of whether any award or payment is made available to
Borrower for the restoring, repairing, replacing or rebuilding of the Property,
Borrower hereby covenants to restore, repair, replace or rebuild the same to be
of at least equal value and of substantially the same character as prior to
such condemnation or eminent domain proceeding, all to be effected in
accordance with applicable law and plans and specifications approved in advance
by Lender, which approval shall not be unreasonably withheld, conditioned or
delayed. Notwithstanding the foregoing, Lender shall not compel Borrower to
rebuild portions of the Improvements affected by a taking by any public or
quasi-public authority through eminent domain or otherwise for which no Lease
is then in effect (other than to remove debris and to restore the affected area
to a good and safe condition in keeping with the condition of the balance of
the Property), in which case any condemnation proceeds shall, unless Lender is
otherwise entitled to apply such proceeds to the payment of the Debt in
accordance with the provisions hereof, be held by Lender in an interest bearing
account


 


14

















 


and disbursed for the
costs of rebuilding such Improvements in the manner provided herein upon the
execution of a Lease for such space.


 


Section 3.5.        USE
AND MAINTENANCE OF PROPERTY. Borrower shall cause the Property to be
maintained and operated in a good and safe condition and repair and in keeping
with the condition and repair of properties of a similar use, value, age,
nature and construction. Borrower shall not use, maintain or operate the
Property in any manner which constitutes a public or private nuisance or which
makes void, voidable, or cancelable, or increases the premium of, any insurance
then in force with respect thereto. The Improvements and the Personal Property
shall not be removed, demolished (except in connection with a casualty) or
materially altered (except for normal replacement of the Personal Property with
items of the same utility and of equal or greater value, and except as
permitted by any existing Leases) without the prior written consent of Lender,
which approval shall nor be unreasonably withheld, conditioned or delayed.
Except as otherwise expressly permitted herein, Borrower shall promptly repair,
replace or rebuild any part of the Property which may be destroyed by any
casualty, or becomes damaged, worn or dilapidated or which may be affected by any
proceeding of the character referred to in Section 3.4 hereof and shall
complete and pay for any structure at any time in the process of construction
or repair on the Land. Borrower shall not initiate, without Lender’s prior
written consent, which consent shall not be unreasonably withheld, delayed or
conditioned, join in, acquiesce in, or consent to any change in any private
restrictive covenant (other than use restrictions under the Leases), zoning law
or other public or private restriction, limiting or defining the uses which may
be made of the Property or any part thereof. If under applicable zoning
provisions the use of all or any portion of the Property is or shall become a
nonconforming use, Borrower will not cause or permit the nonconforming use to
be discontinued or abandoned without the express written consent of Lender.
Borrower shall not take any steps whatsoever to convert the Property, or any
portion thereof, to a condominium or cooperative form of management. In
connection with any proposed new easement or restrictive covenant or
modification of any existing easement or restrictive covenant, Lender shall use
good faith efforts to respond within twenty (20) days after Lender’s receipt of
both Borrower’s written request for approval or consent and all relevant
information regarding such request. If Lender fails to respond to such request
within such twenty (20) day period, and such request contained a legend clearly
marked in not less than fourteen (14) point bold face type, underlined, in all
capital letters “REQUEST DEEMED APPROVED IF NO RESPONSE WITHIN 20 DAYS”, Lender
shall be deemed to have approved or consented to such matter.


 


Section 3.6.        WASTE.
Borrower shall not commit or suffer any waste of the Property or, without first
obtaining such additional insurance as may be necessary to cover a proposed
change in use of the Property, make any change in the use of the Property which
will in any way materially increase the risk of fire or other hazard arising
out of the operation of the Property, or take any action that might invalidate
or give cause for cancellation of any Policy, or do or permit to be done
thereon anything that may in any way impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of the Land, regardless of the depth thereof or the method of mining
or extraction thereof.


 


15

















 


Section 3.7.        COMPLIANCE
WITH LAWS; ALTERATIONS.


 


(a)     Borrower
shall promptly comply (or cause to be complied) with all existing and future
federal, state and local laws, orders, ordinances, governmental rules and
regulations or court orders affecting or which may be interpreted to affect the
Property, or the use thereof, including, but not limited to, the Americans with
Disabilities Act (the “ADA”) (collectively “Applicable Laws”).


 


(b)     Notwithstanding
any provisions set forth herein or in any document regarding Lender’s approval
of alterations of the Property, Borrower shall not alter the Property in any
manner which would increase Borrower’s responsibilities for compliance with
Applicable Laws without the prior written approval of Lender. Lender’s approval
of the plans, specifications, or working drawings for alterations of the
Property shall create no responsibility or liability on behalf of Lender for
their completeness, design, sufficiency or their compliance with Applicable
Laws. The foregoing shall apply to tenant improvements constructed by Borrower
or by any of its tenants. Lender may condition any such approval upon receipt
of a certificate of compliance with Applicable Laws from an independent architect,
engineer, or other person acceptable to Lender.


 


(c)     Borrower
shall give prompt notice to Lender of the receipt by Borrower of any notice
related to a violation of any Applicable Laws and of the commencement of any
proceedings or investigations which relate to compliance with Applicable Laws.


 


(d)     Borrower
shall take appropriate measures to prevent and will not engage in or knowingly
permit any illegal activities at the Property.


 


Section 3.8.        BOOKS
AND RECORDS.


 


(a)     Borrower
shall keep accurate books and records of account in accordance with sound
accounting principles in which full, true and correct entries shall be promptly
made with respect to Borrower, the Property and the operation thereof, and will
permit all such books and records (including without limitation all contracts,
statements, invoices, bills and claims for labor, materials and services
supplied for the construction, repair or operation to Borrower of the
Improvements) to be inspected or audited and copies made by Lender and its representatives
during normal business hours and at any other reasonable times. Borrower
represents that its chief executive office is as set forth in the introductory
paragraph of this Security Instrument and that all books and records pertaining
to the Property are maintained at the Property or such other location as may be
expressly disclosed to Lender in writing. Borrower will furnish, or cause to be
furnished, to Lender on or before forty-five (45) calendar days after the end
of each calendar quarter the following items, each certified by Borrower as
being true and correct in all material respects, in such format and in such
detail as Lender or its servicer may reasonably request:


 


(i)            a written statement
(rent roll) dated as of the last day of each such calendar quarter identifying
each of the Leases by the term, space occupied, rental required to be paid
(including percentage rents and tenant sales), security deposit paid, any
rental concessions, all rent escalations, any rents paid more than one (1)


 


16

















 


month in advance, any
special provisions or inducements granted to tenants, any taxes, maintenance
and other common charges paid by tenants, all vacancies and identifying any
defaults or payment delinquencies thereunder; and


 


(ii)           quarterly
and year-to-date operating statements prepared for each calendar quarter during
each such reporting period detailing the total revenues received, total
expenses incurred, total cost of all capital improvements, total debt service
and total cash flow.


 


(b)     Within
one hundred twenty (120) calendar days following the end of each calendar year,
Borrower shall furnish a statement of the financial affairs and condition of
the Borrower and the Property including a statement of profit and loss for the
Property in such format and in such detail as Lender or its servicer may
reasonably request, and setting forth the financial condition and the income
and expenses for the Property for the immediately preceding calendar year
prepared and certified by Borrower as being true and correct in all material
respects. Borrower shall deliver to Lender copies of all income tax returns,
requests for extension and other similar items within fifteen (15) days of
delivery of same to the Internal Revenue Service.


 


(c)     Borrower
will permit representatives appointed by Lender, including independent
accountants, agents, attorneys, appraisers and any other persons, to visit and
inspect, subject to the rights of tenants and other occupants of the Property, during
its normal business hours and at any other reasonable times any of the Property
and to make photographs thereof, and to write down and record any information
such representatives obtain, and shall permit Lender or its representatives to
investigate and verify the accuracy of the information furnished to Lender
under or in connection with this Security Instrument or any of the Other Loan
Documents and to discuss all such matters with its officers, employees and
representatives. Borrower will furnish to Lender at Borrower’s expense all
evidence which Lender may from time to time reasonably request as to the
accuracy and validity of or compliance with all representations and warranties
made by Borrower in the Loan Documents and satisfaction of all conditions
contained therein. Any inspection or audit of the Property or the books and
records of Borrower, or the procuring of documents and financial and other
information, by or on behalf of Lender, shall be at Borrower’s expense (not to
exceed $1,000.00 per year unless an Event of Default then exists) and shall be
for Lender’s protection only, and shall not constitute any assumption of
responsibility or liability by Lender to Borrower or anyone else with regard to
the condition, construction, maintenance or operation of the Property, nor
Lender’s approval of any certification given to Lender nor relieve Borrower of
any of Borrower’s obligations.


 


(d)     Prior
to the transfer of the Loan by Lender pursuant to Section 16.1 hereof,
Borrower shall deliver to Lender the reports required by Section 3.8(a)
on a monthly basis. Such reports shall be delivered within twenty (20) calendar
days after the end of each calendar month.


 


Section 3.9.        PAYMENT
FOR LABOR AND MATERIALS. Borrower will promptly pay (or cause to be paid)
when due all bills and costs for labor, materials, and specifically


 


17

















 


fabricated materials incurred in connection with the
Property and, except for liens being contested in accordance with Section
3.3(b) above, never permit to exist beyond the due date thereof in respect of
the Property or any part thereof any lien or security interest, even though
inferior to the liens and the security interests hereof, and in any event never
permit to be created or exist in respect of the Property or any part thereof
any other or additional lien or security interest other than the liens or
security interests hereof, except for the Permitted Exceptions (as hereinafter
defined).


 


Section 3.10.      PERFORMANCE
OF OTHER AGREEMENTS. Borrower shall observe and perform each and every term
to be observed or performed by Borrower pursuant to the terms of any agreement
or recorded instrument affecting or pertaining to the Property, or given by
Borrower to Lender for the purpose of further securing an obligation secured
hereby and any amendments, modifications or changes thereto.


 


ARTICLE 4 - SPECIAL
COVENANTS


 


Borrower covenants and
agrees that:


 


Section 4.1.        PROPERTY
USE. The Property shall be used only for a retail shopping center, retail
office and business office uses and related ancillary commercial uses that are
consistent with similar first-class retail shopping centers, and for no other
use without the prior written consent of Lender, which consent may be withheld
in Lender’s sole and absolute discretion.


 


Section 4.2.        ERISA.


 


(a)     It
shall not engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Lender of any of its rights
under the Note, this Security Instrument and the Other Loan Documents) to be a
non-exempt (under a statutory or administrative class exemption) prohibited
transaction under the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”).


 


(b)    It
shall deliver to Lender such certifications or other evidence from time to time
throughout the term of the Security Instrument, as requested by Lender in its
sole discretion, that (i) Borrower is not an “employee benefit plan” as defined
in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a
“governmental plan” within the meaning of Section 3(32) of ERISA; (ii)
Borrower is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; and (iii) one or more of the
following circumstances is true:


 


(i)            Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. §2510.3-101(b)(2);


 


(ii)           Less
than twenty-five percent (25%) of each outstanding class of equity interests in
Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R.
§2510.3-101(f)(2); or


 


18

















 


(iii)          Borrower
qualifies as an “operating company” or a “real estate operating company” within
the meaning of 29 C.F.R. §2510.3-101(c) or (e) or an investment company
registered under The Investment Company Act of 1940.


 


Section 4.3. SINGLE
PURPOSE ENTITY. Borrower covenants and agrees that it shall not:


 


(a)     engage
in any business or activity other than the acquisition, ownership, operation
and maintenance of the Property, and activities incidental thereto; or


 


(b)     acquire
or own any material asset other than (i) the Property, and (ii) such incidental
Personal Property as may be necessary for the operation of the Property.


 


(c)     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;


 


(d)     fail
to preserve its existence as an entity duly organized, validly existing and in
good standing (if applicable) under the laws of the jurisdiction of its
organization or formation, or without the prior written consent of Lender,
amend, modify, terminate or fail to comply with the provisions of Borrower’s
Partnership Agreement, Articles or Certificate of Incorporation, Articles of
Organization, Operating Agreement or similar organizational documents, as the
case may be;


 


(e)     own
any subsidiary or make any investment in or acquire the obligations or
securities of any other person or entity without the consent of Lender;


 


(f)      commingle
its assets with the assets of any of its partner(s), members, shareholders,
affiliates, or of any other person or entity or transfer any assets to any such
person or entity other than distributions on account of equity interests in the
Borrower permitted hereunder and properly accounted for;


 


(g)     incur
any debt, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than the Debt, except trade payables incurred in the
ordinary course of its business of owning and operating the Property, provided
that such debt is (i) not evidenced by a note, (ii) is paid within sixty (60)
days of the date incurred, (iii) does not exceed, in the aggregate, four
percent (4%) of the outstanding principal balance of the Note and (iv) is
payable to trade creditors and in amounts as are normal and reasonable under
the circumstances;


 


(h)     allow
any person or entity to pay its debts and liabilities (except a Guarantor or
Indemnitor) or fail to pay its debts and liabilities solely from its own
assets;


 


(i)      fail
to maintain its records, books of account and bank accounts separate and apart
from those of the shareholders, partners, members, principals and affiliates of
Borrower, the affiliates of a shareholder, partner or member of Borrower, and
any other person or entity or fail to prepare and maintain its own financial
statements in accordance with sound accounting practices and susceptible to
audit, or if such financial statements


 


19

















 


are consolidated fail to
cause such financial statements to contain footnotes disclosing that the
Property is actually owned by the Borrower;


 


(j)      enter
into any contract or agreement with any shareholder, partner, member, principal
or affiliate of Borrower, any guarantor of all or a portion of the Debt (a “Guarantor”) or any shareholder, partner, member, principal or affiliate
thereof, 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 shareholder, partner, member, principal or
affiliate of Borrower or Guarantor, or any shareholder, partner, member,
principal or affiliate thereof;


 


(k)     seek
dissolution or winding up in whole, or in part;


 


(1)     fail
to correct any known misunderstandings regarding the separate identity of
Borrower;


 


(m)    guarantee
or become obligated for the debts of any other entity or person or hold itself
out to be responsible or pledge its assets or credit worthiness for the debts
of another person or entity or allow any person or entity to hold itself out to
be responsible or pledge its assets or credit worthiness for the debts of the
Borrower (except for a Guarantor or Indemnitor);


 


(n)     make
any loans or advances to any third party, including any shareholder, partner,
member, principal or affiliate of Borrower, or any shareholder, partner,
member, principal or affiliate thereof;


 


(o)     fail
to file its own tax returns or to use separate contracts, purchase orders,
stationery, invoices and checks;


 


(p)     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 (i) to mislead others as to the entity with which such other
party is transacting business, or (ii) to suggest that Borrower is responsible
for the debts of any third party (including any shareholder, partner, member,
principal or affiliate of Borrower, or any shareholder, partner, member,
principal or affiliate thereof);


 


(q)     fail
to allocate fairly and reasonably among Borrower and any third party
(including, without limitation, any Guarantor) any overhead for common
employees, shared office space or other overhead and administrative expenses;


 


(r)      allow
any person or entity to pay the salaries of its own employees or fail to
maintain a sufficient number of employees for its contemplated business
operations;


 


(s)     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;


 


20

















 


(t)      file
a voluntary petition or otherwise initiate proceedings to have the Borrower or
any general partner or managing member adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against the
Borrower or any general partner or managing member, or file a petition seeking
or consenting to reorganization or relief of the Borrower or any general
partner or managing member as debtor under any applicable federal or state law
relating to bankruptcy, insolvency, or other relief for debtors with respect to
the Borrower or any general partner or managing member; or seek or consent to
the appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, liquidator (or other similar official) of the Borrower or any
general partner or managing member or of all or any substantial part of the
properties and assets of the Borrower or any general partner or managing
member, or make any general assignment for the benefit of creditors of the
Borrower or any general partner or managing member, or admit in writing the
inability of the Borrower or any general partner or managing member to pay its
debts generally as they become due or declare or effect a moratorium on the
Borrower or any general partner or managing member debt or take any action in
furtherance of any such action;


 


(u)     share
any common logo with or hold itself out as or be considered as a department or
division of (i) any shareholder, partner, principal, member or affiliate of
Borrower, (ii) any affiliate of a shareholder, partner, principal, member or
affiliate of Borrower, or (iii) any other person or entity or allow any person
or entity to identify the Borrower as a department or division of that person
or entity; or


 


(v)     conceal
assets from any creditor, or enter into any transaction with the intent to
hinder, delay or defraud creditors of the Borrower or the creditors of any
other person or entity.


 


ARTICLE 5 -
REPRESENTATIONS AND WARRANTIES


 


Section 5.1.        BORROWER’S
REPRESENTATIONS. Borrower represents and warrants to Lender that each of
the representations and warranties set forth in that certain Closing
Certificate of even date herewith executed by Borrower in favor of Lender are
true and correct as of the date hereof and are hereby incorporated and restated
in this Security Instrument by this reference.


 


Section 5.2.        WARRANTY
OF TITLE. Borrower represents and warrants that it has good and
indefeasible title to the Property and has the right to grant, bargain, sell,
pledge, assign, warrant, transfer and convey the same and that Borrower
possesses an unencumbered fee simple absolute estate in the Land and the
Improvements and that it owns the Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of this Security Instrument (the “Permitted Exceptions”). Borrower represents
and warrants that none of the Permitted Exceptions will materially and
adversely affect the ability of the Borrower to pay in full the Loan, the use
of the Property for the use currently being made thereof, the operation of the
Property or the value of the Property. Borrower shall, at its sole cost and
expense, forever warrant, defend and preserve the title and the validity and
priority of the lien of this Security Instrument and shall, at its sole cost
and expense,


 


21

















 


forever warrant and defend the same to Trustee and
Lender against the claims of all persons whomsoever, by, through or under
Borrower, but not otherwise.


 


Section 5.3.        STATUS
OF PROPERTY.


 


(a)     No
portion of the Improvements is located in an area identified by the Secretary
of Housing and Urban Development or any successor thereto as an area having
special flood hazards pursuant to the National Flood Insurance Act of 1968 or
the Flood Disaster Protection Act of 1973, as amended, or any successor law,
or, if located within any such area, Borrower has obtained and will maintain
the insurance prescribed in Section 3.2 hereof.


 


(b)     To
Borrower’s actual knowledge, Borrower has obtained all necessary certificates,
permits, licenses and other approvals, governmental and otherwise, necessary
for the use, occupancy and operation of the Property and the conduct of its
business (including, without limitation, certificates of completion and
certificates of occupancy) and all required zoning, building code, land use,
environmental and other similar permits or approvals, all of which are in full
force and effect as of the date hereof and not subject to revocation,
suspension, forfeiture or modification.


 


(c)     The
Property and the present and contemplated use and occupancy thereof are to the
actual knowledge of Borrower in fall compliance with all Applicable Laws,
including, without limitation, zoning ordinances, building codes, land use and
environmental laws, laws relating to the disabled (including, but not limited
to, the ADA) and other similar laws.


 


(d)     The
Property is served by all utilities required for the current or contemplated
use thereof. All utility service is provided by public utilities and the
Property has accepted or is equipped to accept such utility service.


 


(e)     All
public roads and streets necessary for service of and access to the Property
for the current or contemplated use thereof have been completed, are
serviceable and are physically and legally open for use by the public.


 


(f)      The
Property is served by public water and sewer systems.


 


(g)     The
Property is free from damage caused by fire or other casualty. There is no
pending or, to the actual knowledge of Borrower, threatened condemnation
proceedings affecting the Property or any portion thereof.


 


(h)    All
costs and expenses of any and all labor, materials, supplies and equipment used
in the construction of the Improvements have been (or will be) paid in full and
no notice of any mechanics’ or materialmen’s liens or of any claims of right to
any such liens have been received.


 


(i)      Borrower
has (or will have) paid in full for, and is the owner of, all furnishings,
fixtures and equipment (other than tenants’ property) used in connection with


 


22

















 


the operation of the
Property, free and clear of any and all security interests, liens or
encumbrances, except the lien and security interest created hereby.


 


(j)      All
liquid and solid waste disposal, septic and sewer systems located on the
Property are to the actual knowledge of Borrower in a good and safe condition
and repair and in compliance with all Applicable Laws.


 


(k)     All
Improvements lie within the boundary of the Land.


 


Section 5.4.        NO
FOREIGN PERSON. Borrower is not a “foreign person” within the meaning of
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended, and the
related Treasury Department regulations, including temporary regulations.


 


Section5.5.         SEPARATE
TAX LOT. The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot or lots, separate from any adjoining land or
improvements not constituting a part of such lot or lots, and no other land or
improvements is assessed and taxed together with the Property or any portion
thereof.


 


ARTICLE 6 - OBLIGATIONS
AND RELIANCES


 


Section 6.1.        RELATIONSHIP
OF BORROWER AND LENDER. The relationship between Borrower and Lender is
solely that of debtor and creditor, and Lender has no fiduciary or other
special relationship with Borrower, and no term or condition of any of the
Note, this Security Instrument and the other Loan Documents shall be construed
so as to deem the relationship between Borrower and Lender to be other than
that of debtor and creditor.


 


Section 6.2.        NO
RELIANCE ON LENDER. The partners, members, principals and (if Borrower is a
trust) beneficial owners of Borrower are experienced in the ownership and
operation of properties similar to the Property, and Borrower and Lender are
relying solely upon such expertise and business plan in connection with the
ownership and operation of the Property. Borrower is not relying on Lender’s
expertise, business acumen or advice in connection with the Property.


 


Section 6.3.        NO
LENDER OBLIGATIONS.


 


(a)     Notwithstanding
the provisions of Subsections 1.1(e) and 1.1(1) or Section 1.2,
Lender is not undertaking (i) any obligations under the Leases; or (ii) any
obligations with respect to such agreements, contracts, certificates,
instruments, franchises, permits, trademarks, licenses and other documents.


 


(b)     By
accepting or approving anything required to be observed, performed or fulfilled
or to be given to Lender pursuant to this Security Instrument, the Note or the
Other 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, Lender shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality or effectiveness
of same, and such acceptance or approval thereof shall not constitute any
warranty or affirmation with respect thereto by Lender.


 


23

















 


Section 6.4.        RELIANCE.
Borrower recognizes and acknowledges that in accepting the Note, this Security
Instrument and the Other Loan Documents, Lender is expressly and primarily
relying on the truth and accuracy of the warranties and representations set forth
in Article 5 and that certain Closing Certificate of even date herewith
executed by Borrower, without any obligation to investigate the Property and
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof; that such warranties
and representations are a material inducement to Lender in accepting the Note,
this Security Instrument and the Other Loan Documents; and that Lender would
not be willing to make the Loan (as hereinafter defined) and accept this
Security Instrument in the absence of the warranties and representations as set
forth in Article 5 and such Closing Certificate.


 


ARTICLE 7 -
FURTHER ASSURANCES


 


Section 7.1.        RECORDING
FEES. Borrower will pay all taxes, filing, registration or recording fees,
and all expenses incident to the preparation, execution, acknowledgment and/or
recording of the Note, this Security Instrument, the Other Loan Documents, any
note or deed of trust supplemental hereto, any security instrument with respect
to the Property and any instrument of further assurance, and any modification
or amendment of the foregoing documents, and all federal, state, county and
municipal taxes, duties, imposts, assessments and charges arising out of or in
connection with the execution and delivery of this Security Instrument, any
deed of trust supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.


 


Section 7.2.        FURTHER
ACTS. Borrower will, at the cost of Borrower, and without expense to
Lender, do, execute, acknowledge and deliver all and every such further acts,
deeds, conveyances, deeds of trust, assignments, notices of assignments,
transfers and assurances as Lender shall, from time to time, reasonably
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Lender the property and rights hereby granted, bargained, sold,
conveyed, confirmed, pledged, assigned, warranted and transferred or intended
now or hereafter so to be, or which Borrower may be or may hereafter become
bound to convey or assign to Lender, or for carrying out the intention or
facilitating the performance of the terms of this Security Instrument or for
filing, registering or recording this Security Instrument, or for complying
with all Applicable Laws. Borrower, on demand, will execute and deliver and
hereby authorizes Lender to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Lender in the Property. Borrower grants to
Lender an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available
to Lender at law and in equity, including without limitation such rights and
remedies available to Lender pursuant to this Section 7.2.


 


Section 7.3.        CHANGES
IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS.


 


(a)     If
any law is enacted or adopted or amended after the date of this Security
Instrument which imposes a tax, either directly or indirectly, on the Debt or Lender’s


 


24

















 


interest in the Property,
requires revenue or other stamps to be affixed to the Note, this Security
Instrument, or the Other Loan Documents, or imposes any other tax or charge on
the same, Borrower will pay the same, with interest and penalties thereon, if
any. If Lender is advised by counsel chosen by it that the payment of tax by
Borrower would be unlawful or taxable to Lender or unenforceable or provide the
basis for a defense of usury, then Lender shall have the option, by written
notice of not less than one hundred eighty (180) calendar days, to declare the
Debt immediately due and payable, in which event no prepayment penalty will be
due.


 


(b)    Borrower
will not claim or demand or be entitled to any credit or credits on account of
the Debt for any part of the Taxes or Other Charges assessed against the
Property, or any part thereof, and no deduction shall otherwise be made or
claimed from the assessed value of the Property, or any part thereof, for real
estate tax purposes by reason of this Security Instrument or the Debt. If such
claim, credit or deduction shall be required by law, Lender shall have the
option, by written notice of not less than one hundred eighty (180) calendar
days, to declare the Debt immediately due and payable, in which event no
prepayment penalty will be due.


 


Section 7.4.  CONFIRMATION
STATEMENT.


 


(a)     After
written request by Lender, Borrower, within ten (10) days following such
request, shall furnish Lender or any proposed assignee with a statement, duly
acknowledged and certified, confirming to Lender (or its designee) (i) the
amount of the original principal amount of the Note, (ii) the unpaid principal
amount of the Note, (iii) the rate of interest of the Note, (iv) the terms of
payment and maturity date of the Note, (v) the date installments of interest
and/or principal were last paid, and (vi) that, except as provided in such
statement, there are no defaults or events which with the passage of time or
the giving of notice or both, would constitute an event of default under the
Note or this Security Instrument; provided, however, Lender shall not be
entitled hereunder to receive more than one (1) such statement in each calendar
year.


 


(b)     Subject
to the provisions of the Leases, Borrower shall deliver to Lender, promptly
upon request (but not more frequently than once annually so long no Event of
Default is continuing hereunder), duly executed estoppel certificates from any
one or more lessees as required by Lender attesting to such facts regarding the
Lease as Lender may require, including but not limited to attestations that
each Lease covered thereby is in full force and effect with no defaults
thereunder on the part of any party, that none of the Rents have been paid more
than one month in advance, and that the lessee claims no defense or offset
against the full and timely performance of its obligations under the Lease.


 


(c)     Upon
any transfer or proposed transfer contemplated by Section 16.1 hereof,
at Lender’s request, Borrower, any Guarantors and any Indemnitors shall provide
an estoppel certificate to the Investor (defined in Section 16.1) or any
prospective Investor in such form, substance and detail as Lender, such
Investor or prospective Investor may reasonably require.


 


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Section 7.5.        SPLITTING
OF SECURITY INSTRUMENT. This Security Instrument and the Note shall, at any
time until the same shall be fully paid and satisfied, at the sole election of
Lender and at no expense to Borrower unless an Event of Default then exists, be
split or divided into two or more notes and two or more security instruments,
each of which shall cover all or a portion of the Property to be more
particularly described therein. To that end, Borrower, upon written request of
Lender, shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered by the then owner of the Property, to Lender and/or
its designee or designees substitute notes and security instruments in such
principal amounts, aggregating not more than the then unpaid principal amount
of Debt, and containing terms, provisions and clauses similar to those
contained herein and in the Note, and such other documents and instruments as
may be required by Lender. If Note and/or this Security Instrument is split
into two or more notes or security instruments, all approvals or consents
required from Lender hereunder shall nonetheless be obtained from a single lead
lender (or its servicer or special servicer, as applicable).


 


Section 7.6.        REPLACEMENT
DOCUMENTS. Upon receipt of an affidavit of an officer of Lender as to the
loss, theft, destruction or mutilation of the Note or any Other Loan Document
which is not of public record, and, in the case of any such mutilation, upon
surrender and cancellation of such Note or Other Loan Document, Borrower, at
its expense, will issue, in lieu thereof, a replacement Note or Other Loan
Document, dated the date of such lost, stolen, destroyed or mutilated Note or
Other Loan Document in the same principal amount thereof and otherwise of like
tenor.


 


ARTICLE 8 - DUE ON
SALE/ENCUMBRANCE


 


Section 8.1.        LENDER
RELIANCE. Borrower acknowledges that Lender has examined and relied on the
creditworthiness of Borrower and experience of Borrower and its partners,
members, principals and (if Borrower is a trust) beneficial owners in owning
and operating properties such as the Property in agreeing to make the Loan, and
will continue to rely on Borrower’s ownership of the Property as a means of
maintaining the value of the Property as security for repayment of the Debt and
the performance of the Other Obligations. Borrower acknowledges that Lender has
a valid interest in maintaining the value of the Property so as to ensure that,
should Borrower default in the repayment of the Debt or the performance of the
Other Obligations, Lender can recover the Debt by a sale of the Property.


 


Section 8.2.        NO
SALE/ENCUMBRANCE.


 


(a)     Borrower
agrees that Borrower shall not, without the prior written consent of Lender,
Transfer the Property or any part thereof or permit the Property or any part
thereof to be Transferred. Lender shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon Borrower’s Transfer
of the Property without Lender’s consent.


 


(b)    As
used in Section 8.2(a), “Transfer” shall mean any voluntary or involuntary
sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer of all or any part of the Property or Borrower or any direct or
indirect interest


 


26

















 


therein including, but
not limited to: (i) an installment sales agreement wherein Borrower agrees to
sell the Property or any part thereof for a price to be paid in installments;
(ii) an agreement by Borrower leasing all or a substantial part of the Property
for other than actual occupancy by a space tenant thereunder; (iii) a sale,
assignment or other transfer of, or the grant of a security interest in,
Borrower’s right, title and interest in and to any Leases or any Rents; (iv) if
Borrower, Guarantor, or any managing member or general partner of Borrower or
Guarantor is a corporation, any Transfer of such corporation’s stock (or the
stock of any corporation directly or indirectly controlling such Borrower,
Guarantor, managing member or general partner by operation of law or otherwise)
or the creation or issuance of new stock in one or a series of transactions by
which an aggregate of forty-nine percent (49%) or more of such corporation’s
stock shall directly or indirectly be vested in or pledged to a party or
parties who are not now stockholders (provided, however, in no
event shall this subpart [iv] apply to any Guarantor whose stock or shares are
traded on a nationally recognized stock exchange); (v) if Borrower, Guarantor,
or any managing member or general partner of Borrower or Guarantor is a limited
liability company or partnership, the Transfer by which an aggregate of
forty-nine percent (49%) or more of the ownership interest in such limited
liability company or forty-nine percent (49%) or more of the partnership
interests in such partnership shall directly or indirectly be vested in or
pledged to parties not having an ownership interest as of the date of this
Security Instrument; (vi) if Borrower, any Guarantor or any managing member or
general partner of Borrower or any Guarantor is a partnership, limited
liability company or joint venture, the change, removal or resignation of a
general partner, managing member or joint venturer or the Transfer directly or
indirectly of all or any portion of the partnership or ownership interest of
any general partner, managing member or joint venturer; and (vii) except as
expressly permitted by Section 8.3, any Transfer by an Original
Principal, directly or indirectly, of its ownership interest in the Borrower.


 


Section 8.3.        EXCLUDED
AND PERMITTED TRANSFERS.


 


(a)     A
Transfer within the meaning of this Article 8 shall not include (i)
transfers of ownership interests in the Borrower, any general partner or
managing member or any Guarantor made by devise or descent or by operation of
law upon the death of a joint tenant, partner, member or shareholder, subject,
however, to all the following requirements: (A) written notice of any transfer
under this Section 8.3, whether by will, trust or other written
instrument, operation of law or otherwise, is provided to Lender or its
servicer, together with copies of such documents relating to the transfer as
Lender or its servicer may reasonably request, (B) control over the management
and operation of the Property is retained by one or more of Steven D. Alvis and
Jay K. Sears (the “Original Principals”, whether one or more) at all times prior to
the death or legal incapacity of all the Original Principals and is thereafter
assumed by persons who are acceptable in all respects to Lender in its sole and
absolute discretion, (C) no such transfer by devise or descent by any of the
Original Principals will release the respective estate from any liability as a
Guarantor, and (D) no such transfer, death or other event has any material
adverse effect on the status of Borrower as a continuing legal entity liable
for the payment of the Debt and the performance of all other


 


27

















 


obligations secured
hereby, (ii) transfers otherwise by operation of law in the event of a
bankruptcy, or (iii) a Lease of a portion of the Property.


 


(b)    The
prohibitions in Subsection 8.2(a) shall not apply to an inter vivos or
testamentary transfer of all or any portion of ownership interests in the
Borrower, any general partner or managing member or any Guarantor to one or
more family members of Original Principals or a trust in which all of the
beneficial interest is held by one or more family members of Original
Principals or a partnership or limited liability company in which a majority of
the capital and profits interests are held by one or more family members of Original
Principals, provided, that any inter vivos transfer of all or any
portion of the ownership interests in the Borrower, such general partner or
managing member or such Guarantor is made in connection with Original
Principals’ bona fide, good faith estate planning and that the person(s) with
voting control of Borrower or the management of the Property are (i) the same
person(s) who had such voting control and management rights immediately prior
to the transfer in question, or (ii) reasonably acceptable to Lender. Lender
acknowledges that Original Principals and/or an Original Principal’s spouse are
acceptable to exercise voting control of Borrower and the management of the
Property. As used herein, “family members” shall include the spouse, children
and grandchildren and any lineal descendants.


 


(c)     Notwithstanding
the provisions of Section 8.2 above, Lender will give its consent to
three separate sales or transfers of the Property or ownership interests in the
Borrower, a general partner or managing member of the Borrower, or any
Guarantor, if (but only if) no Event of Default under the Loan Documents has
occurred and is continuing, and if each of the following conditions precedent
have been fully satisfied (as determined in Lender’s sole and absolute discretion):
(i) the grantee’s or transferee’s integrity, reputation, financial condition,
character and management ability are satisfactory to Lender in its sole
discretion, and all information relating thereto requested by Lender is
delivered to Lender at least 30 days prior to the proposed transfer, (ii) the
grantee’s or transferee’s (and its sole general partner’s or managing member’s)
single purpose character are satisfactory to Lender in its sole discretion, and
all information relating thereto requested by Lender is delivered to Lender at
least 30 days prior to the proposed transfer, (iii) Lender has obtained such
estoppels from any guarantors of the Note or replacement guarantors and such
other legal opinions regarding substantive consolidation issues, enforceability
of the assumption documents, no adverse impact on the Securities or any REMIC
holding the Note and similar matters as Lender may require, (iv) all of
Lender’s costs and expenses associated with the sale or transfer (including
reasonable attorneys’ fees) are paid by Borrower or the grantee or transferee
(provided that Lender will advise Borrower if such legal fees are estimated to
exceed $5,000.00 prior to incurring such expense), (v) the payment of a
transfer fee not to exceed 1% of the then unpaid principal balance of the loan
evidenced by the Note and secured hereby (the “Loan”), (vi) the execution and delivery to Lender of a written
assumption agreement and/or substitute guaranty (in its sole reasonable
discretion) and such modifications to the Loan Documents executed by such
parties and containing such terms and conditions as Lender may require in its
sole reasonable discretion prior to such sale or transfer (provided that in the
event the Loan is included in a REMIC and is a performing Loan, no modification
to the terms and conditions shall be made or permitted mat would cause (A)


 


28

















 


any adverse tax
consequences to the REMIC or any holders of any Mortgage-Backed Pass-Through
Securities, (B) the Security Instrument to fail to be a Qualifying Security
Instrument under applicable federal law relating to REMIC’s, or (C) result in a
taxation of the income from the Loan to the REMIC or cause a loss of REMIC
status), (vii) if applicable, the delivery to Lender of an endorsement (at
Borrower’s sole cost and expense) to Lender’s policy of title insurance then
insuring the lien created by this Security Instrument in form and substance
acceptable to Lender in its sole judgment and (viii) written confirmation from
the Rating Agencies that such transfer will not result in a qualification,
downgrade or withdrawal of the then-current rating of the Securities


 


(d)     Without
limiting the foregoing, if Lender shall consent to a transfer of the Property,
the written assumption agreement described in Subsection 8.3(c)(vi)
above shall provide for the release of Borrower and each Guarantor and
Indemnitor of personal liability under the Note and Other Loan Documents, but
only as to acts or events occurring, or obligations arising, after the closing
of such transfer; provided, however, that the environmental indemnities shall
be subject to termination as provided in Article 8 of the Environmental
Indemnity.


 


Section 8.4.        NO
IMPLIED FUTURE CONSENT. Lender’s consent to one sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Property shall not
be deemed to be a waiver of Lender’s right to require such consent (in
accordance with the terms and provisions hereof) to any future occurrence of
same. Any sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property made in contravention of this Article 8 shall
be null and void and of no force and effect.


 


Section 8.5.        COSTS
OF CONSENT. Borrower agrees to bear and shall pay or reimburse Lender on
demand for all reasonable expenses (including, without limitation, all
recording costs, reasonable attorneys’ fees and disbursements and title search
costs) incurred by Lender in connection with the review, approval and
documentation of any such sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer.


 


Section 8.6.        CONTINUING
SEPARATENESS REQUIREMENTS. In no event shall any of the terms and
provisions of this Article 8 amend or modify the terms and provisions
contained in Section 4.3 herein.


 


ARTICLE 9 -
DEFAULT


 


Section 9.1.        EVENTS
OF DEFAULT. The occurrence of any one or more of the following events shall
constitute an “Event of Default”:


 


(a)     if
any portion of the Debt is not paid on or before the seventh (7th)
calendar day after the same is due or if the entire Debt is not paid on or
before the maturity date, along with applicable prepayment premiums, if any;


 


(b)     if
Borrower, or its general partner or managing member, if applicable, violates or
does not comply with any of the provisions of Section 4.3 or Article
8;


 


29

















 


(c)     if
any representation or warranty of Borrower or of its members, general partners,
or principals or of any Guarantor made herein or in the Environmental Indemnity
or in any other Loan Document, in any guaranty, or in any certificate, report,
financial statement or other instrument or document furnished to Lender shall
have been false or misleading in any material respect when made;


 


(d)     if
Borrower or any Guarantor shall make an assignment for the benefit of creditors
or if Borrower or any Guarantor shall admit in writing its inability to pay, or
Borrowers or any Guarantor’s failure to pay its debts as they become due;


 


(e)     if
(i) Borrower or any subsidiary or general partner or managing member of
Borrower, or any Guarantor shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, conservatorship or relief
of debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or Borrower or any subsidiary or
general partner or managing member of Borrower, or any Guarantor shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against Borrower or any subsidiary or general partner or managing
member of Borrower, or any Guarantor any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of sixty (60) calendar days;
or (iii) there shall be commenced against Borrower or any subsidiary or general
partner or managing member of Borrower or any Guarantor any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets which
results in the entry of any order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within sixty (60)
calendar days from the entry thereof; or (iv) Borrower or any subsidiary or
general partner or managing member of Borrower, or any Guarantor shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above;
or (v) Borrower or any subsidiary or general partner or managing member of
Borrower, or any Guarantor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due;


 


(f)      subject
to Borrower’s right to contest certain liens as provided in this Security
Instrument, if the Property becomes subject to any mechanic’s, materialman’s or
other lien other than a lien for local real estate taxes and assessments not
then due and payable and the lien shall remain undischarged of record (by
payment, bonding or otherwise) for a period of sixty (60) calendar days after
Borrower becomes aware of such lien;


 


30

















 


(g)    if
any federal tax lien is filed against Borrower, any general partner or managing
member of Borrower, any Guarantor or the Property and same is not discharged of
record within sixty (60) calendar days after same is filed;


 


(h)    except
as permitted in this Security Instrument, and except as required by the Leases,
the actual or threatened alteration, improvement, demolition or removal of any
of the Improvements without the prior consent of Lender;


 


(i)      damage
to the Property in any manner which is not covered by insurance, which lack of
coverage arises solely as a result of Borrower’s failure to maintain the
insurance required under this Security Instrument;


 


(j)      without
Lender’s prior consent, (i) any managing agent for the Property resigns or is
removed, (ii) the ownership, management or control of such managing agent is
transferred to a person or entity other than one or more of the Original
Principals, or (iii) there is any material change in the property management
agreement of the Property;


 


(k)     this
Security Instrument shall cease to constitute a first-priority lien on the
Property (other than in accordance with its terms), except with respect to
mechanic’s or materialman’s claims that have been bonded over and/or are being
contested in accordance with the provisions hereof;


 


(1)     seizure
or forfeiture of the Property, or any portion thereof, or Borrower’s interest
therein, resulting from criminal wrongdoing or other unlawful action of
Borrower or its affiliates under any federal, state or local law;


 


(m)    if
Borrower consummates a transaction which would cause this Security Instrument
or Lender’s exercise of its rights under this Security Instrument, the Note or
the Other Loan Documents to constitute a nonexempt prohibited transaction under
ERISA or result in a violation of a state statute regulating governmental
plans, subjecting Lender to liability for a violation of ERISA or a state
statute;


 


(n)    if
any default occurs under any guaranty or indemnity including the Environmental
Indemnity executed in connection herewith and such default continues after the
expiration of applicable grace periods, or such guaranty or indemnity shall
cease to be in full force and effect, or any guarantor or indemnitor shall deny
or disaffirm its obligation thereunder; and


 


(o)    if
Borrower or any Guarantor, as the case may be, shall continue to be in default
under any other term, covenant or condition of this Security Instrument or any
Other Loan Documents for thirty (30) calendar days after notice from Lender; provided
that if such default cannot reasonably be cured within such thirty (30)
calendar day period and Borrower (or such Guarantor as the case may be) shall
have commenced to cure such default within such thirty (30) calendar day period
and thereafter diligently and expeditiously proceeds to cure the same, such
thirty (30) calendar day period shall be extended for so long as it shall
require Borrower (or such Guarantor as the case may be) in the exercise of due
diligence to cure such default, it being agreed that no such


 


31

















 


extension shall be for a
period in excess of ninety (90) calendar days after the notice from Lender
referred to above.


 


Section 9.2.        DEFAULT
INTEREST. Borrower will pay, from the date of an Event of Default through
the earlier of the date upon which the Event of Default is cured or the date
upon which the Debt is paid in full, interest on the unpaid principal balance
of the Note at the Default Rate.


 


ARTICLE 10 -
RIGHTS AND REMEDIES


 


Section 10.1.      REMEDIES.
Upon the occurrence of any Event of Default, Borrower agrees that Lender may
take such action, by or through Trustee, by Lender itself or otherwise, without
notice or demand, as it deems advisable to protect and enforce its rights
against Borrower and in and to the Property, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Lender:


 


(a)           Right to Perform
Borrower’s Covenants. If Borrower has failed to keep or perform any
covenant whatsoever contained in this Security Instrument or the Other Loan
Documents, Lender may, but shall not be obligated to any person to do so,
perform or attempt to perform said covenant and any payment made or expense
incurred in the performance or attempted performance of any such covenant,
together with any sum expended by Lender that is chargeable to Borrower or
subject to reimbursement by Borrower under the Loan Documents, shall be and
become a part of the “Debt”, and Borrower promises, upon demand, to pay to
Lender, at the place where the Note is payable, all sums so incurred, paid or
expended by Lender, with interest from the date when paid, incurred or expended
by Lender at the Default Rate.


 


(b)          Right of Entry.
Lender may, prior or subsequent to the institution of any foreclosure
proceedings, enter upon the Property, or any part thereof, and take exclusive
possession of the Property and of all books, records, and accounts relating
thereto and to exercise without interference from Borrower any and all rights
which Borrower has with respect to the management, possession, operation,
protection, or preservation of the Property, including without limitation the
right to rent the same for the account of Borrower and to deduct from such
Rents all costs, expenses, and liabilities of every character incurred by
Lender in collecting such Rents and in managing, operating, maintaining,
protecting, or preserving the Property and to apply the remainder of such Rents
on the Debt in such manner as Lender may elect. All such costs, expenses, and
liabilities incurred by Lender in collecting such Rents and in managing,
operating, maintaining, protecting, or preserving the Property, if not paid out
of Rents as hereinabove provided, shall constitute a demand obligation owing by
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 Debt. If necessary
to obtain the possession provided for above, Lender may invoke any and all
legal remedies to dispossess 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 Lender pursuant to this


 


32

















 


Subsection 10.1(b),
Lender shall not be liable for any loss sustained by Borrower resulting from
any failure to let the Property, or any part thereof, or from any other act or
omission of Lender in managing the Property unless such loss is caused by the
willful misconduct of Lender, nor shall 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. Borrower shall
and does hereby agree to indemnify Lender for, and to hold Lender harmless
from, any and all liability, loss, or damage, which may or might be incurred by
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 which may be asserted against Lender by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the terms,
covenants, or agreements contained in any such Lease. Should Lender incur any
such liability, the amount thereof, including without limitation costs,
expenses, and reasonable attorneys’ fees, together with interest thereon from
the date of expenditure until paid at the Default Rate, shall be secured
hereby, and Borrower shall reimburse Lender therefor immediately upon demand.
Nothing in this Subsection 10.1(b) shall impose any duty, obligation, or
responsibility upon Lender for the control, care, management, leasing, or
repair of the Property, nor for the carrying out of any of the terms and
conditions of any such Lease; nor shall it operate to make Lender responsible
or liable for any waste committed on the Property by the tenants or by any
other parties, or for any hazardous substances or environmental conditions on
or under the Property, or for any dangerous or defective condition of the
Property or for any negligence in the management, leasing, upkeep, repair, or
control of the Property resulting in loss or injury or death to any tenant,
licensee, employee, or stranger. Borrower hereby assents to, ratifies, and
confirms any and all actions of Lender with respect to the Property taken under
this subsection.


 


(c)          Acceleration.
Upon the occurrence of an Event of Default (other than an Event of Default
described in Section 9.1 (d) or (e) above) and at any time
thereafter Lender may, without notice, demand, presentment, notice of
nonpayment or nonperformance, protest, notice of protest, notice of intent to
accelerate, notice of acceleration, or any other notice or any other action,
all of which are hereby waived by Borrower and all other parties obligated in
any manner whatsoever on the Debt, declare the entire unpaid balance of the
Debt immediately due and payable, and upon such declaration, the entire unpaid
balance of the Debt shall be immediately due and payable. Upon the occurrence
of an Event of Default described in Section 9.1(d) or (e) above,
the entire unpaid balance of the Debt shall immediately and automatically
become due and payable, without notice or demand.


 


(d)          Foreclosure-Power of
Sale. Lender may institute a proceeding or proceedings, judicial, or
nonjudicial, by advertisement or otherwise, for the complete or partial
foreclosure of this Security Instrument or the complete or partial sale of the
Property under power of sale or under any applicable provision of law. Lender
may, through the Trustee, sell the Property, and all estate, right, title,
interest, claim and demand of Borrower therein, and all rights of redemption
thereof, at one or more sales, as an entirety or in parcels, with such elements
of real and/or personal property, and at such time and place and upon such
terms as it may deem expedient, or as may be required by applicable law, and in
the event of a sale, by foreclosure or otherwise, of less than all of


 


33

















 


the Property, this
Security Instrument shall continue as a lien and security interest on the
remaining portion of the Property.


 


(e)     Rights
Pertaining to Sales. Subject to the requirements of applicable law and
except as otherwise provided herein, the following provisions shall apply to
any sale or sales of all or any portion of the Property under or by virtue of Subsection
10.1(d) above, whether made under the power of sale herein granted or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale:


 


(i)            Trustee
or Lender may conduct any number of sales from time to time. The power of sale
set forth above shall not be exhausted by any one or more such sales as to any
part of the Property which shall not have been sold, nor by any sale which is
not completed or is defective in Lender’s opinion, until the Debt shall have
been paid in full.


 


(ii)           Any
sale may be postponed or adjourned by public announcement at the time and place
appointed for such sale or for such postponed or adjourned sale without further
notice.


 


(iii)          After
each sale, Lender, Trustee or an officer of any court empowered to do so shall
execute and deliver to the purchaser or purchasers at such sale a good and
sufficient instrument or instruments granting, conveying, assigning and
transferring all right, title and interest of Borrower in and to the property
and rights sold and shall receive the proceeds of said sale or sales and apply
the same as specified in the Note. Each of Trustee and Lender is hereby
appointed the true and lawful attorney-in-fact of Borrower, which appointment
is irrevocable and shall be deemed to be coupled with an interest, in
Borrower’s name and stead, to make all necessary conveyances, assignments,
transfers and deliveries of the property and rights so sold, Borrower hereby
ratifying and confirming all that said attorney or such substitute or
substitutes shall lawfully do by virtue thereof. Nevertheless, Borrower, if
requested by Trustee or Lender, shall ratify and confirm any such sale or sales
by executing and delivering to Trustee, Lender or such purchaser or purchasers
all such instruments as may be advisable, in Trustee’s or Lender’s judgment,
for the purposes as may be designated in such request.


 


(iv)          Any
and all statements of fact or other recitals made in any of the instruments
referred to in Subsection 10.1(e)(iii) given by Trustee or Lender shall
be taken as conclusive and binding against all persons as to evidence of the
truth of the facts so stated and recited.


 


(v)           Any
such sale or sales shall operate to divest all of the estate, right, title,
interest, claim and demand whatsoever, whether at law or in equity, of Borrower
in and to the properties and rights so sold, and shall be a perpetual bar both
at law and in equity against Borrower and any and all persons claiming or who
may claim the same, or any part thereof or any interest therein, by, through or
under Borrower to the fullest extent permitted by applicable law.


 


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(vi)          Upon
any such sale or sales, Lender may bid for and acquire the Property and, in
lieu of paying cash therefor, may make settlement for the purchase price by
crediting against the Debt the amount of the bid made therefor, after deducting
therefrom the expenses of the sale, the cost of any enforcement proceeding
hereunder, and any other sums which Trustee or Lender is authorized to deduct under
the terms hereof, to the extent necessary to satisfy such bid.


 


(vii)         Upon
any such sale, it shall not be necessary for Trustee, Lender or any public
officer acting under execution or order of court to have present or
constructively in its possession any of the Property.


 


(f)      Lender’s
Judicial Remedies. Lender, or Trustee upon written request of Lender, may
proceed by suit or suits, at law or in equity, to enforce the payment of the
Debt to foreclose the liens and security interests of this Security Instrument
as against all or any part of the Property, and to have all or any part of the
Property sold under the judgment or decree of a court of competent
jurisdiction. This remedy shall be cumulative of any other nonjudicial remedies
available to Lender under this Security Instrument, the Note or the Other 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 Lender.


 


(g)     Lender’s
Right to Appointment of Receiver. Lender, as a matter of right and (i)
without regard to the sufficiency of the security for repayment of the Debt and
without notice to Borrower, (ii) without any showing of insolvency, fraud, or
mismanagement on the part of Borrower, (iii) without the necessity of filing
any judicial or other proceeding other than the proceeding for appointment of a
receiver, and (iv) without regard to the then value of the Property, shall be
entitled to the appointment of a receiver or receivers for the protection,
possession, control, management and operation of the Property, including
(without limitation), the power to collect the Rents, enforce this Security
Instrument and, in case of a sale and deficiency, during the full statutory period
of redemption (if any), whether there be a redemption or not, as well as during
any further times when Borrower, except for the intervention of such receiver,
would be entitled to collection of such Rents. 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.


 


(h)     Commercial
Code Remedies. Lender may exercise any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing: (i) the right to take
possession of the Personal Property or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and preservation
of the Personal Property, and (ii) request Borrower at its expense to assemble
the Personal Property and make it available to Lender at a convenient place
acceptable to Lender. Any notice of sale, disposition or other intended action
by Lender with respect to the Personal Property sent to Borrower in accordance
with the provisions hereof at least five (5) days prior to such action, shall
constitute commercially reasonable notice to Borrower.


 


35

















 


(i)      Apply
Escrow Funds. Lender may apply any Funds (as defined in the Escrow
Agreement) and any other sums held in escrow or otherwise by Lender in
accordance with the terms of this Security Instrument or any Other Loan
Document to the payment of the following items in any order in its uncontrolled
discretion:


 


(i)            Taxes
and Other Charges;


 


(ii)           Insurance
Premiums;


 


(iii)          Interest
on the unpaid principal balance of the Note;


 


(iv)          Amortization
of the unpaid principal balance of the Note; and


 


(v)           All
other sums payable pursuant to the Note, this Security Instrument and the Other
Loan Documents, including without limitation advances made by Lender pursuant
to the terms of this Security Instrument.


 


(j)      Other
Rights. Lender (i) may apply any funds held by Lender toward payment of the
Debt; and (ii) shall have and may exercise any and all other rights and
remedies which Lender may have at law or in equity, or by virtue of any of the
Loan Documents, or otherwise.


 


(k)     Discontinuance
of Remedies. In case Lender shall have proceeded to invoke any right,
remedy, or recourse permitted under the Loan Documents and shall thereafter
elect to discontinue or abandon same for any reason, Lender shall have the
unqualified right so to do and, in such event, Borrower and Lender shall be
restored to their former positions with respect to the Debt, the Loan
Documents, the Property or otherwise, and the rights, remedies, recourses and
powers of Lender shall continue as if same had never been invoked.


 


(l)      Remedies
Cumulative. All rights, remedies, and recourses of Lender granted in the
Note, this Security Instrument and the Other Loan Documents, any other pledge
of collateral, or otherwise available at law or equity: (i) shall be cumulative
and concurrent; (ii) may be pursued separately, successively, or concurrently
against Borrower, the Property, or any one or more of them, at the sole
discretion of Lender; (iii) may be exercised as often as occasion therefor
shall arise, it being agreed by Borrower that the exercise or failure to
exercise any of same shall in no event be construed as a waiver or release
thereof or of any other right, remedy, or recourse; (iv) shall be nonexclusive;
(v) shall not be conditioned upon Lender exercising or pursuing any remedy in
relation to the Property prior to Lender bringing suit to recover the Debt; and
(vi) in the event Lender elects to bring suit on the Debt and obtains a
judgment against Borrower prior to exercising any remedies in relation to the
Property, all liens and security interests, including the lien of this Security
Instrument, shall remain in full force and effect and may be exercised
thereafter at Lender’s option.


 


(m)    Bankruptcy
Acknowledgment. In the event the Property or any portion thereof or any
interest therein becomes property of any bankruptcy estate or subject to any
state or federal insolvency proceeding (other than pursuant to a bankruptcy by
or


 


36

















 


against a tenant under a
Lease), then Lender shall immediately become entitled, in addition to all other
relief to which Leader may be entitled under this Security Instrument, to
obtain (i) an order from the Bankruptcy Court or other appropriate court
granting immediate relief from the automatic stay pursuant to § 362 of
the Bankruptcy Code so to permit Lender to pursue its rights and remedies
against Borrower as provided under this Security Instrument and all other
rights and remedies of Lender at law and in equity under applicable state law,
and (ii) an order from the Bankruptcy Court prohibiting Borrower’s use of all
“cash collateral” as defined under § 363 of the Bankruptcy Code. In
connection with such Bankruptcy Court orders, Borrower shall not contend or
allege in any pleading or petition filed in any court proceeding that Lender
does not have sufficient grounds for relief from the automatic stay. Any
bankruptcy petition or other action taken by the Borrower to stay, condition,
or inhibit Lender from exercising its remedies are hereby admitted by Borrower
to be in bad faith and Borrower further admits that Lender would have just
cause for relief from the automatic stay in order to take such actions
authorized under state law.


 


(n)     Application
of Proceeds. The proceeds from any sale, lease, or other disposition made
pursuant to this Security Instrument, or any Rents collected by Lender from the
Property, if any, or proceeds from insurance which Lender elects to apply to
the Debt pursuant to Article 3 hereof, shall be applied by Trustee, or
by Lender, as the case may be, to the Debt in the following order and priority:
(1) to the payment of all expenses of advertising, selling, and conveying the
Property or part thereof, and/or prosecuting or otherwise collecting Rents,
proceeds, premiums or other sums including reasonable attorneys’ fees and a
reasonable fee or commission to Trustee, not to exceed five percent of the
proceeds thereof or sums so received; (2) to that portion, if any, of the Debt
with respect to which no person or entity has personal or entity liability for
payment (the “Exculpated Portion”), and with respect to the Exculpated Portion
as follows: first, to accrued but unpaid interest, second, to matured
principal, and third, to unmatured principal in inverse order of maturity; (3)
to the remainder of the Debt as follows: first, to the remaining accrued but
unpaid interest, second, to the matured portion of principal of the Debt, and
third, to prepayment of the unmatured portion, if any, of principal of the Debt
applied to installments of principal in inverse order of maturity; (4) the
balance, if any or to the extent applicable, remaining after the full and final
payment of the Debt to the holder or beneficiary of any inferior liens covering
the Property, if any, in order of the priority of such inferior liens (Trustee
and Lender shall hereby be entitled to rely exclusively on a commitment for
title insurance issued to determine such priority); and (5) the cash balance,
if any, to the Borrower. The application of proceeds of sale or other proceeds
as otherwise provided herein shall be deemed to be a payment of the Debt like
any other payment. The balance of the Debt remaining unpaid, if any, shall
remain fully due and owing in accordance with the terms of the Note and the other
Loan Documents.


 


Section 10.2.      RIGHT
OF ENTRY. Lender and its agents shall have the right to enter and inspect
the Property at all reasonable times, subject, however, to the rights of
tenants and other occupants of the Property.


 


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ARTICLE 11 -
INDEMNIFICATION; SUBROGATION


 


Section 11.1.      GENERAL
INDEMNIFICATION.


 


(a)     Borrower
shall indemnify, defend and hold Lender and Trustee harmless against: (i) any
and all claims, by, through or under Borrower, for brokerage, leasing, finder’s
or similar fees which may be made relating to the Property or the Debt, and
(ii) any and all liability, obligations, losses, damages, penalties, claims,
actions, suits, costs and expenses (including Lender’s reasonable attorneys’
fees, together with reasonable appellate counsel fees, if any) of whatever kind
or nature which may be asserted against, imposed on or incurred by Lender or
Trustee in connection with the Debt, this Security Instrument, the Property, or
any part thereof, or the exercise by Lender or Trustee of any rights or
remedies granted to it under this Security Instrument; provided,  however,
that nothing herein shall be construed to obligate Borrower to indemnify,
defend and hold harmless Lender from and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs and
expenses enacted against, imposed on or incurred by Lender by reason of
Lender’s willful misconduct or gross negligence.


 


(b)     If
Lender is made a party defendant to any litigation or any claim is threatened
or brought against Lender concerning the secured indebtedness, this Security
Instrument, the Property, or any part thereof, or any interest therein, or the
construction, maintenance, operation or occupancy or use thereof, then Lender
shall notify Borrower of such litigation or claim and Borrower shall indemnify,
defend and hold Lender harmless from and against all liability by reason of
said litigation or claims, including reasonable attorneys’ fees (together with
reasonable appellate counsel fees, if any). The right to such attorneys’ fees
(together with reasonable appellate counsel fees, if any) and expenses incurred
by Lender in any such litigation or claim of the type described in this Subsection
11.1(b), whether or not any such litigation or claim is prosecuted to
judgment, shall be deemed to have accrued on the commencement of such claim or
action and shall be enforceable whether or not such claim or action is
prosecuted to judgment. If Lender commences an action against Borrower to
enforce any of the terms hereof or to prosecute any breach by Borrower of any
of the terms hereof or to recover any sum secured hereby, Borrower shall pay to
Lender its reasonable attorneys’ fees (together with reasonable appellate
counsel fees, if any) and expenses. If Borrower breaches any term of this
Security Instrument, Lender may engage the services of an attorney or attorneys
to protect its rights hereunder, and in the event of such engagement following
any breach by Borrower, Borrower shall pay Lender reasonable attorneys’ fees
(together with reasonable appellate counsel fees, if any) and expenses incurred
by Lender, whether or not an action is actually commenced against Borrower by
reason of such breach. All references to “attorneys”
in this Subsection 11.1(b) and elsewhere in this Security Instrument
shall include without limitation any attorney or law firm engaged by Lender and
Lender’s in-house counsel, and all references to “fees and expenses” in this Subsection 11.1(b) and elsewhere in this Security Instrument
shall include without limitation any fees of such attorney or law firm and any
allocation charges and allocation costs of Lender’s in-house counsel.


 


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(c)     A
waiver of subrogation shall be obtained by Borrower from its insurance carrier
and, consequently, Borrower waives any and all right to claim or recover
against Lender, its officers, employees, agents and representatives, for loss
of or damage to Borrower, the Property, Borrower’s property or the property of
others under Borrower’s control from any cause insured against or required to
be insured against by the provisions of this Security Instrument.


 


Section 11.2.      ENVIRONMENTAL
INDEMNIFICATION. Borrower shall, at its sole cost and expense, protect,
defend, indemnify, release and hold harmless the Indemnified Parties from and
against any and all Losses (as hereinafter defined) imposed upon or incurred by
or asserted against any Indemnified Parties (other than those arising solely
from a state of facts that first came into existence after Lender (or any other
party) acquired title to the Property through foreclosure or a deed in lieu
thereof), and directly or indirectly arising out of or in any way relating to
any one or more of the following: (a) any presence of any Hazardous Substances
(as hereinafter defined) in, on, above, or under the Property; (b) any past,
present or future Release (as hereinafter defined) of Hazardous Substances in,
on, above, under or from the Property; (c) any activity by Borrower, any person
or entity affiliated with Borrower, and any tenant or other user of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management,
abatement, removal, handling, transfer or transportation to or from the
Property of any Hazardous Substances at any time located in, under, on or above
the Property; (d) any activity by Borrower, any person or entity affiliated
with Borrower, and any tenant or other user of the Property in connection with
any actual or proposed Remediation (as hereinafter defined) of any Hazardous
Substances at any time located in, under, on or above the Property, whether or
not such Remediation is voluntary or pursuant to court or administrative order,
including but not limited to any removal, remedial or corrective action; (e)
any past, present or threatened non-compliance or violations of any
Environmental Law (as hereinafter defined) (or permits issued pursuant to any
Environmental Law) in connection with the Property or operations thereon,
including but not limited to any failure by Borrower, any person or entity
affiliated with Borrower, and any tenant or other user of the Property to
comply with any order of any governmental authority in connection with any
Environmental Laws; (f) the imposition, recording or filing or the future
imposition, recording or filing of any Environmental Lien (as hereinafter
defined) encumbering the Property; (g) any administrative processes or
proceedings or judicial proceedings in any way connected with any matter
addressed in this Section 11.2; (h) any material misrepresentation or
inaccuracy in any representation or warranty or material breach or failure to
perform any covenants or other obligations under the Environmental Indemnity of
even date executed by Borrower and Indemnitor; and (i) any diminution in value
of the Property in any way connected with any occurrence or other matter
referred to in this Section 11.2.


 


The term “Environmental Law” means any present and future federal,
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or costs of
Remediation or prevention of Releases of Hazardous Substances or relating to
liability for or costs of other actual or threatened danger to human health or
the environment. The term “Environmental Law” includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto,


 


39

















 


and any state or local statutes, ordinances, rules,
regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including but not limited to
Subtitle I relating to underground storage tanks); the Solid Waste Disposal
Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act;
the Safe Drinking Water Act; the Occupational Safety and Health Act; the
Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and
Rodenticide Act; the Endangered Species Act; the National Environmental Policy
Act; and the River and Harbors Appropriation Act. The term “Environmental Law” also includes, but is not limited to, any
present and future federal, state and local laws, statutes, ordinances, rules,
regulations and the like, as well as common law: conditioning transfer of
property upon a negative declaration or other approval of a governmental
authority of the environmental condition of the Property; requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of the Property to any governmental authority or other
person or entity, whether or not in connection with transfer of title to or
interest in property; imposing conditions or requirements in connection with
permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to the Property; and relating to
wrongful death, personal injury, or property or other damage in connection with
any physical condition or use of the Property.


 


The term “Environmental Lien” includes but is not limited to any lien or
other encumbrance imposed pursuant to Environmental Law, whether due to any act
or omission of Borrower or any other person or entity.


 


The term “Hazardous Substances” includes but is not limited to any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or
regulatory effect under any present or future Environmental Laws, including but
not limited to petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated biphenyls, lead, lead-based
paints, radon, radioactive materials, flammables, explosives and, to the extent
subject to regulation by any Environmental Law, any toxic fungus, including
mold, mildew and any mycotoxins, spores, scents or byproducts produced by
fungi.


 


The term “Indemnified Parties” includes but is not limited to Lender, any
person or entity who is or will have been involved in originating the Loan
evidenced by the Note, any person or entity who is or will have been involved
in servicing the Loan, any person or entity in whose name the encumbrance
created by this Security Instrument is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest
in the Loan (including but not limited to those who may acquire any interest in
Securities, as well as custodians, trustees and other fiduciaries who hold or
have held a full or partial interest in the Loan for the benefit of third
parties), as well as the respective directors, officers, shareholders,
partners, employees, agents, servants, representatives, contractors,
subcontractors, affiliates, subsidiaries, participants, successors and assign
of any and all of the foregoing (including but not limited to any other person
or entity who holds or acquires or will have held a participation or other full
or partial interest in the Loan or the Property, whether during the term of the
Loan or as part of or following foreclosure pursuant to the Loan) and including
but not limited to any


 


40

















 


successors by merger, consolidation or acquisition of
all or a substantial part of Lender’s assets and business.


 


The term “Losses” includes but is not limited to any
claims, suits, liabilities (including but not limited to strict liabilities),
administrative or judicial actions or proceedings, obligations, debts, damages,
losses, costs, expenses, diminutions in value, fines, penalties, charges, fees,
expenses, costs of Remediation (whether or not performed voluntarily),
judgments, award, amounts paid in settlement, litigation costs, attorneys’
fees, engineer’s fees, environmental consultants’ fees and investigation costs
(including but not limited to costs for sampling, testing and analysis of soil,
water, air, building materials, and other materials and substances whether
solid, liquid or gas), of whatever kind or nature, and whether or not incurred
in connection with any judicial or administrative proceedings.


 


The term “Release” with
respect to any Hazardous Substance includes but is not limited to any release,
deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Substances.


 


The term “Remediation” includes but is not limited to any response, remedial,
removal, or corrective action; any activity to cleanup, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Substance; any
actions to prevent, cure or mitigate any Release of any Hazardous Substance;
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto; any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances or to anything referred to in this Article
11.


 


Section 11.3.      DUTY
TO DEFEND AND ATTORNEYS AND OTHER FEES AND EXPENSES. Upon written request
by any Indemnified Party, Borrower shall defend such Indemnified Party (if
requested by any Indemnified Party, in the name of the Indemnified Party) by
attorneys and other professionals approved by the Indemnified Parties. Notwithstanding
the foregoing, any Indemnified Parties may, in their sole and absolute
discretion, engage their own attorneys and other professionals to defend or
assist them, and, at the option of Indemnified Parties, their attorneys shall
control the resolution of claim or proceeding. Upon demand, Borrower shall pay
or, in the sole and absolute discretion of the Indemnified Parties, reimburse,
the Indemnified Parties for the payment of reasonable fees and disbursements of
attorneys, engineers, environmental consultants, laboratories and other
professionals in connection therewith.


 


Section 11.4.      SURVIVAL
OF INDEMNITIES. Notwithstanding any provision of this Security Instrument
or any other Loan Document to the contrary, the provisions of Section 11.1
and Section 11.2, and Borrower’s obligations thereunder, shall survive
(a) the repayment of the Note, (b) the foreclosure of this Security Instrument,
and (c) the release (or reconveyance, as applicable) of the lien of this
Security Instrument; provided, however, that the indemnities set forth in Section
11.2 shall be subject to termination as provided in Article 8 of the
Environmental Indemnity.


 


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ARTICLE 12 -
SECURITY AGREEMENT


 


Section 12.1.      SECURITY
AGREEMENT. This Security Instrument is both a real property mortgage and a
“security agreement” within the meaning of the Uniform Commercial Code. The
Property includes both real and personal property and all other rights and
interests, whether tangible or intangible in nature, of Borrower in the
Property. Borrower by executing and delivering this Security Instrument has
granted and hereby grants to Lender, as security for the Obligations, a
security interest in the Property to the full extent that the Property may be
subject to the Uniform Commercial Code (said portion of the Property so subject
to the Uniform Commercial Code being called in this paragraph the “Collateral”). Borrower hereby agrees with
Lender to execute and deliver to Lender, in form and substance satisfactory to
Lender, such financing statements, continuation statements, other uniform
commercial code forms and shall pay all expenses and fees in connection with
the filing and recording thereof, and such further assurances as Lender may
from time to time, reasonably consider necessary to create, perfect, and
preserve Lender’s security interest herein granted. This Security Instrument
shall also constitute a “fixture filing” for the purposes of the Uniform
Commercial Code. All or part of the Property are or are to become fixtures.
Information concerning the security interest herein granted may be obtained
from the parties at the addresses of the parties set forth in the first
paragraph of this Security Instrument. If an Event of Default shall occur,
Lender, in addition to any other rights and remedies which they may have, shall
have and may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the Uniform Commercial
Code, including, without limiting the generality of the foregoing, the right to
take possession of the Collateral or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and preservation
of the Collateral. Upon request or demand of Lender, Borrower shall at its
expense assemble the Collateral and make it available to Lender at a convenient
place acceptable to Lender. Borrower shall pay to Lender on demand any and all
expenses, including legal expenses and attorneys’ fees, incurred or paid by
Lender in protecting the interest in the Collateral and in enforcing the rights
hereunder with respect to the Collateral. Any notice of sale, disposition or
other intended action by Lender with respect to the Collateral sent to Borrower
in accordance with the provisions hereof at least five (5) days prior to such
action, shall constitute commercially reasonable notice to Borrower. The
proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Lender to the payment of the Obligations in such priority and
proportions as Lender in its discretion shall deem proper. In the event of any
change in name, identity or structure of any Borrower, such Borrower shall
notify Lender thereof, and promptly after request shall execute, file and record
such Uniform Commercial Code forms as are necessary to maintain the priority of
Lender’s lien upon and security interest in the Collateral, and shall pay all
expenses and fees in connection with the filing and recording thereof. If
Lender shall require the filing or recording of additional Uniform Commercial
Code forms or continuation statements, Borrower shall, promptly after request,
execute, file and record such Uniform Commercial Code forms or continuation
statements as Lender shall deem necessary, and shall pay all expenses and fees
in connection with the filing and recording thereof it being understood and
agreed, however, that no such additional documents shall increase Borrower’s
obligations under the Note, this Security Instrument and the Other Loan
Documents. Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, to file with the appropriate public office on its
behalf any financing or other statements signed only by Lender, as Borrower’s
attorney-in-fact, in connection with the Collateral covered by this Security
Instrument. Notwithstanding the


 


42

















 


foregoing, Borrower shall appear and defend in any
action or proceeding which affects or purports to affect the Property and any
interest or right therein, whether such proceeding effects title or any other
rights in the Property (and in conjunction therewith, Borrower shall fully
cooperate with Lender in the event Lender is a party to such action or
proceeding).


 


ARTICLE 13 -
WAIVERS


 


Section 13.1.      MARSHALLING
AND OTHER MATTERS. Borrower hereby waives, to the extent permitted by law,
the benefit of all appraisement, valuation, stay, extension, reinstatement and
redemption laws now or hereafter in force and all rights of marshalling in the
event of any sale hereunder of the Property or any part thereof or any interest
therein. Further, Borrower hereby expressly waives any and all rights of
redemption from sale under any order or decree of foreclosure of this Security
Instrument on behalf of Borrower, and on behalf of each and every person
acquiring any interest in or title to the Property subsequent to the date of
this Security Instrument and on behalf of all persons to the extent permitted
by applicable law.


 


Section 13.2.      WAIVER
OF NOTICE. Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Security
Instrument specifically and expressly provides for the giving of notice by
Lender to Borrower and except with respect to matters for which Lender is
required by applicable law to give notice, and Borrower hereby expressly waives
the right to receive any notice from Lender with respect to any matter for
which this Security Instrument does not specifically and expressly provide for
the giving of notice by Lender to Borrower.


 


Section 13.3.      SOLE
DISCRETION OF LENDER. Wherever pursuant to this Security Instrument Lender
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Lender, the decision of Lender to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory shall be in the sole discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.


 


Section 13.4.      SURVIVAL.
Except as otherwise set forth herein and in the Environmental Indemnity, the
indemnifications made pursuant to Article 11, shall continue
indefinitely in full force and effect and shall survive and shall in no way be
impaired by: any satisfaction or other termination of this Security Instrument,
any assignment or other transfer of all or any portion of this Security
Instrument or Lender’s interest in the Property (but, in such case, shall
benefit both Indemnified Parties and any assignee or transferee), any exercise
of Lender’s rights and remedies pursuant hereto including but not limited to
foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any
rights and remedies pursuant to the Note or any of the Other Loan Documents,
any transfer of all or any portion of the Property (whether by Borrower or by
Lender following foreclosure or acceptance of a deed in lieu of foreclosure or
at any other time), any amendment to this Security Instrument, the Note or the
Other Loan Documents, and any act or omission that might otherwise be construed
as a release or discharge of Borrower from the obligations pursuant hereto.


 


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Section 13.5.      WAIVER OF TRIAL BY JURY.


 


BORROWER
HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS SECURITY INSTRUMENT, THE
NOTE OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION
ARISING IN CONNECTION THEREWITH INCLUDING, BUT NOT LIMITED TO THOSE RELATING TO
(A) ALLEGATIONS THAT A PARTNERSHIP EXISTS BETWEEN LENDER AND BORROWER; (B)
USURY OR PENALTIES OR DAMAGES THEREFOR; (C) ALLEGATIONS OF UNCONSCIONABLE ACTS,
DECEPTIVE TRADE PRACTICE, LACK OF GOOD FAITH OR FAIR DEALING, LACK OF
COMMERCIAL REASONABLENESS, OR SPECIAL RELATIONSHIPS (SUCH AS FIDUCIARY, TRUST
OR CONFIDENTIAL RELATIONSHIP); (D) ALLEGATIONS OF DOMINION, CONTROL, ALTER EGO,
INSTRUMENTALITY, FRAUD, REAL ESTATE FRAUD, MISREPRESENTATION, DURESS, COERCION,
UNDUE INFLUENCE, INTERFERENCE OR NEGLIGENCE; (E) ALLEGATIONS OF TORTIOUS
INTERFERENCE WITH PRESENT OR PROSPECTIVE BUSINESS RELATIONSHIPS OR OF
ANTITRUST; OR (F) SLANDER, LIBEL OR DAMAGE TO REPUTATION. THIS WAIVER OF RIGHT
TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO
FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY BORROWER.


 


Section 13.6.      WAIVER
OF AUTOMATIC OR SUPPLEMENTAL STAY. In the event of the filing of any
voluntary or involuntary petition under the Bankruptcy Code by or against
Borrower (other than an involuntary petition filed by or joined in by Lender),
the Borrower shall not assert, or request any other party to assert, that the
automatic stay under § 362 of the Bankruptcy Code shall operate or be
interpreted to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any rights it has by virtue of this Security Instrument, or
any other rights that Lender has, whether now or hereafter acquired, against
any guarantor of the Debt. Further, Borrower shall not seek a supplemental stay
or any other relief, whether injunctive or otherwise, pursuant to § 105
of the Bankruptcy Code or any other provision therein to stay, interdict,
condition, reduce or inhibit the ability of Lender to enforce any rights it has
by virtue of this Security Instrument against any guarantor of the Debt. The
waivers contained in this paragraph are a material inducement to Lender’s
willingness to enter into this Security Instrument and Borrower acknowledges
and agrees that no grounds exist for equitable relief which would bar, delay or
impede the exercise by Lender of Lender’s rights and remedies against Borrower
or any guarantor of the Debt.


 


ARTICLE 14 - NOTICES


 


Section 14.1.      NOTICES.
All notices or other written communications hereunder shall be deemed to have
been properly given (i) upon delivery, if delivered in person or by facsimile
transmission with receipt acknowledged, (ii) one (1) Business Day after having
been deposited for overnight delivery with any reputable overnight courier
service, or (iii) three (3) Business


 


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Days after having been
deposited in any post office or mail depository regularly maintained by the
U.S. Postal Service and sent by registered or certified mail, postage prepaid,
addressed as follows:


 


	
  If to Borrower:

  	
   

  	
  A-S 46 HWY 290-SPRING CYPRESS, L.P.

  
	
   

  	
   

  	
  c/o NewQuest Properties

  
	
   

  	
   

  	
  8807 W. Sam Houston Parkway N., Suite 200

  
	
   

  	
   

  	
  Houston, Texas 77040

  
	
   

  	
   

  	
  Attention: Steven D. Alvis

  
	
   

  	
   

  	
  Facsimile No.: (281) 477-4399

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Nathan Sommers Jacobs + Gorman

  
	
   

  	
   

  	
  2800 Post Oak Boulevard, 61st Floor

  
	
   

  	
   

  	
  Houston, Texas 77056

  
	
   

  	
   

  	
  Attn: Louis B. Sullivan III, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (713) 892-4840

  
	
   

  	
   

  	
   

  
	
  If to Lender:

  	
   

  	
  ARCap Servicing, Inc.

  
	
   

  	
   

  	
  5605 N. MacArthur Blvd., Suite 950

  
	
   

  	
   

  	
  Irving, Texas 75038

  
	
   

  	
   

  	
  Attention:

  	
  Clyde Greenhouse

  Director of Administration

  
	
   

  	
   

  	
  Facsimile No.: (972) 580-3888

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Kelley Drye & Warren LLP

  
	
   

  	
   

  	
  200 Kimball Drive

  
	
   

  	
   

  	
  Parsippany, New Jersey 07054

  
	
   

  	
   

  	
  Attention: Paul A. Keenan, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (973) 503-5950

  



 


or addressed as such party may from time to time designate by written
notice to the other parties. For purposes of this subsection, the term “Business Day” shall mean a day on which
commercial banks are not authorized or required by law to close in New York,
New York.


 


Any party by notice to
the other parties may designate additional or different addresses for
subsequent notices or communications.


 


ARTICLE 15 – APPLICABLE
LAW


 


Section 15.1.      GOVERNING
LAW; JURISDICTION. This Security Instrument shall be governed by and
construed in accordance with appliciable federal law and the laws of the state
where the Property is located, without reference or giving effect to any choice
of law doctrine. Borrower hereby irrevocably submits to the jurisdiction of any
court of competent jurisdiction located in the state in which the Property is
located in connection with any proceeding arising out of or relating to this
Security Instrument.


 


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Section 15.2.      USURY
LAWS. This Security Instrument and the Note are subject to the express
condition that at no time shall Borrower be obligated or required to pay
interest on the Debt at a rate which could subject the holder of the Note to
either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is permitted by applicable law to contract
or agree to pay. If by the terms of this Security Instrument or the Note,
Borrower is at any time required or obligated to pay interest on the Debt at a
rate in excess of such maximum rate, the rate of interest under the Security
Instrument and the Note shall be deemed to be immediately reduced to such
maximum rate and the interest payable shall be computed at such maximum rate
and all prior interest payments in excess of such maximum rate shall be applied
and shall be deemed to have been payments in reduction of the principal balance
of the Note. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount
of interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.


 


Section 15.3.      PROVISIONS
SUBJECT TO APPLICABLE LAW. All rights, powers and remedies provided in this
Security Instrument may be exercised only to the extent that the exercise
thereof does not violate any applicable provisions of law and are intended to
be limited to the extent necessary so that they will not render this Security
Instrument invalid, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any applicable law. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.


 


ARTICLE 16 -
SECONDARY MARKET


 


Section 16.1.      TRANSFER
OF LOAN. Lender may, at any time, sell, transfer or assign the Note, this
Security Instrument and the Other Loan Documents, and any or all servicing
rights with respect thereto, or grant participations therein or issue mortgage
pass-through certificates or other securities evidencing a beneficial interest
in a rated or unrated public offering or private placement (the “Securities”). Lender may forward to each purchaser, transferee, assignee,
servicer, participant, investor in such Securities or any Rating Agency rating
such Securities (collectively, the “Investor”) and each prospective Investor, all
documents and information which Lender now has or may hereafter acquire
relating to the Debt and to Borrower, any Guarantor, any Indemnitor and the
Property, whether furnished by Borrower, any Guarantor, any Indemnitor or
otherwise, as Lender determines necessary or desirable. The term “Rating Agency” shall mean each statistical rating agency that has assigned a
rating to the Securities.


 


ARTICLE 17 - COSTS


 


Section 17.1.      PERFORMANCE
AT BORROWER’S EXPENSE. Borrower acknowledges and confirms that Lender shall
impose certain administrative processing and/or commitment fees in connection
with (a) the extension, renewal, modification, amendment and termination
(excluding the scheduled maturity of the Note) of its loans, (b) the release or
substitution of collateral therefor, or (c) obtaining certain consents, waivers
and approvals with respect to the Property (the occurrence of any of the above
shall be called an “Event”).


 


46

















 


Borrower hereby acknowledges
and agrees to pay, immediately, upon demand, all such fees (as the same may be
increased or decreased from time to time), and any additional fees of a similar
type or nature which may be imposed by Lender from time to time, upon the
occurrence of any Event.


 


Section 17.2.      ATTORNEY’S
FEES FOR ENFORCEMENT. (a) Borrower shall pay all reasonable legal fees
incurred by Lender in connection with (i) the preparation of the Note, this
Security Instrument and the Other Loan Documents and (ii) the items set forth
in Section 17.1 above, and (b) Borrower shall pay to Lender on demand
any and all expenses, including reasonable legal expenses and attorneys’ fees,
incurred or paid by Lender in protecting its interest in the Property or
Personal Property and/or collecting any amount payable or in enforcing its
rights hereunder with respect to the Property or Personal Property, whether or
not any legal proceeding is commenced hereunder or thereunder and whether or
not any default or Event of Default shall have occurred and is continuing,
together with interest thereon at the Default Rate from the date of payment or
incurring by Lender until paid by Borrower.


 


ARTICLE 18 -
DEFINITIONS


 


Section 18.1.      GENERAL
DEFINITIONS. Unless the context clearly indicates a contrary intent or
unless otherwise specifically provided herein, words used in this Security
Instrument may be used interchangeably in singular or plural form and the word
“Borrower” shall mean “each Borrower and any
subsequent owner or owners of the Property or any part thereof or any interest
therein,” the word “Lender” shall
mean “Lender and any subsequent holder of the Note,” the word “Note” shall mean “the Note and any other
evidence of indebtedness secured by this Security Instrument,” the word “person” shall
include an individual, corporation, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word
“Property” shall include any
portion of the Property and any interest therein, and the phrases “attorneys’  fees,” “legal fees”
and “counsel fees” shall include
any and all attorneys’, paralegal and law clerk fees and disbursements,
including, but not limited to, fees and disbursements at the pre-trial, trial
and appellate levels incurred or paid by Lender in protecting its interest in
the Property, the Leases and the Rents and enforcing its rights hereunder.


 


ARTICLE 19 -
MISCELLANEOUS PROVISIONS


 


Section 19.1.      NO
ORAL CHANGE. This Security Instrument, the Note, and the Other Loan
Documents and any provisions hereof or thereof, may not be modified, amended,
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Borrower or Lender, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.


 


Section 19.2.      LIABILITY.
If Borrower consists of more than one person, the obligations and liabilities
of each such person hereunder shall be joint and several. This Security
Instrument shall be binding upon and inure to the benefit of Borrower and
Lender and their respective successors and assigns forever.


 


47

















 


Section 19.3.      INAPPLICABLE
PROVISIONS. If any term, covenant or condition of the Note or this Security
Instrument is held to be invalid, illegal or unenforceable in any respect, the
Note and this Security Instrument shall be construed without such provision.


 


Section 19.4.      HEADINGS,
ETC. The headings and captions of various Sections of this Security
Instrument are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.


 


Section 19.5.      DUPLICATE
ORIGINALS; COUNTERPARTS. This Security Instrument may be executed in any
number of duplicate originals and each duplicate original shall be deemed to be
an original. This Security Instrument may be executed in several counterparts,
each of which counterparts shall be deemed an original instrument and all of
which together shall constitute a single Security Instrument. The failure of
any party hereto to execute this Security Instrument, or any counterpart
hereof, shall not relieve the other signatories from their obligations hereunder.


 


Section 19.6.      NUMBER
AND GENDER. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.


 


Section 19.7.      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 Property, then, to
the extent of the funds so used, Lender shall be subrogated to all of the
rights, claims, liens, titles, and interests existing against the 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 Lender and are merged
with the lien and security interest created herein as cumulative security for
the repayment of the Debt, the performance and discharge of Borrower’s
obligations hereunder, under the Note and the Other Loan Documents and the
performance and discharge of the Other Obligations.


 


Section 19.8.      ENTIRE
AGREEMENT. The Note, this Security Instrument and the Other Loan Documents
constitute the entire understanding and agreement between Borrower and Lender
with respect to the transactions arising in connection with the Debt and
supersede all prior written or oral understandings and agreements between
Borrower and Lender with respect thereto. Borrower hereby acknowledges that,
except as incorporated in writing in the Note, this Security Instrument and the
Other Loan Documents, there are not, and were not, and no persons are or were
authorized by Lender to make, any representations, understandings,
stipulations, agreements or promises, oral or written, with respect to the
transaction which is the subject of the Note, this Security Instrument and the
Other Loan Documents.


 


ARTICLE 20 -
TRUSTEE


 


Trustee may resign by the
giving of notice of such resignation in writing or verbally to Lender. If
Trustee shall die, resign, or become disqualified from acting in the execution
of this trust, or if, for any reason, 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, Lender shall have full power to appoint a substitute
trustee


 


48

















 


(or, if preferred, multiple substitute trustees) in
succession who shall succeed (and if multiple substitute trustees are
appointed, each of such multiple substitute trustees shall succeed) to all the
estates, rights, powers, and duties of the aforenamed Trustee. Such appointment
may be executed by any authorized agent of Lender, and if such Lender be a
corporation and such appointment be executed 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 Security Instrument or applicable law. 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 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. No fees or expenses shall be payable to Trustee, except in
connection with a foreclosure of the Property or any part thereof or in
connection with the release of the Property following payment in full of the
Debt.


 


ARTICLE 21 -
SPECIAL STATE OF TEXAS PROVISIONS


 


Section 21.1.      Principles
Of Construction. In the event of any inconsistencies between the terms and
provisions of this Article 21 and the rest of this Security Instrument,
the terms and provisions of this Article 21 shall govern and control.


 


Section 21.2.      Assignment
Of Leases And Rents Amended. The following shall be inserted at the end of Section
1.2:


 


“The assignments set forth in this Section 1.2
are not intended to constitute payment to Lender or Trustee unless Borrower’s
license to collect Rents is terminated, and then only to the extent that the
Rents are actually received by Lender (as opposed to constituting a portion of
the voluntary payments of principal and interest on the Note) and are not used
for the operation or maintenance of the Property or for the payment of costs
and expenses in connection therewith, taxes, assessments, water charges, sewer
rents, and other charges levied, assessed or imposed against the Property,
insurance premiums, costs and expenses with respect to any litigation affecting
the Property, the leases, the concessions, and the rent, any wages and salaries
of employees, commissions of agents and reasonable attorneys’ fees, all in accordance
with the terms of the Loan Documents. It is further the intent of Borrower and
Lender that the Rents hereby absolutely assigned are no longer, during the term
of this Security Instrument, property of Borrower or property of any estate of
Borrower as defined in 11 U.S.C. § 541 and shall not constitute


 


49

















 


collateral, cash or
otherwise, of Borrower. The term “Rents” as used herein shall mean the gross
rents without deduction or offsets of any kind.”


 


Section 21.3.      Remedies
Continued. The following Sections are hereby added to the end of Article
10:


 


“Section 10.3 Delivery
upon Sale. Upon the completion of any sale or sales pursuant hereto,
Trustee shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold by special warranty of title. Trustee is hereby
irrevocably appointed the true and lawful attorney of Borrower, in its name and
stead, to make all necessary conveyances, assignments, transfers and deliveries
of the Property and rights so sold and for that purpose Trustee may execute all
necessary instruments of conveyance, assignment and transfer, and may
substitute one or more persons with like power, Borrower hereby ratifying and
confirming all that its said attorney or such substitute or substitutes shall
lawfully do by virtue hereof. Any sale or sales made under or by virtue of this
Section, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, shall operate to divest all the estate, right, title, interest, claim and
demand whatsoever, whether at law or in equity, of Borrower in and to the
properties and rights so sold, and shall be a perpetual bar both at law and in
equity against Borrower and against any and all persons claiming or who may
claim the same, or any part thereof from, through or under Borrower.


 


Section 10.4        Option
to Bid. Upon any sale made under or by virtue of this Article 10, whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Lender may bid
for and acquire the Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the Debt
the net sales price after deducting therefrom the reasonable out-of-pocket
expenses of the sale and costs of the action and any other sums which Lender is
authorized to deduct under this Security Instrument.


 


Section 10.5       Remaining Liens. No
recovery of any judgment by Lender and no levy of an execution under any
judgment upon the Property or upon any other property of Borrower shall affect
in any manner or to any extent the lien of this Security Instrument upon the
Property or any part thereof, or any liens, rights, powers or remedies of
Lender hereunder, but such liens, rights, powers and remedies of Lender shall
continue unimpaired as before.


 


Section 10.6       No Waiver of Remedies.
Lender may resort to any remedies and the security given by the Note, this
Security Instrument or the Loan Documents in whole or in part, and in such
portions and in such order as determined by Lender’s sole discretion. No such
action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by the Note, this Security Instrument or any of
the other Loan Documents. The failure of Lender to exercise any right, remedy
or option


 


50

















 


provided in the Note,
this Security Instrument or any of the other Loan Documents shall not be deemed
a waiver of such right, remedy or option or of any covenant or obligation
secured by the Note, this Security Instrument or the other Loan Documents. No
acceptance by Lender of any payment after the occurrence of any Event of
Default and no payment by Lender of any obligation for which Borrower is liable
hereunder shall be deemed to waive or cure any Event of Default with respect to
Borrower, or Borrower’s liability to pay such obligation, unless simultaneously
with such acceptance or payment by Lender, Lender waives in writing the Event of
Default cured thereby. No sale of all or any portion of the Property, no
forbearance on the part of Lender, and no extension of time for the payment of
the whole or any portion of the Debt or any other indulgence given by Lender to
Borrower, shall operate to release or in any manner affect the interest of
Lender in the remaining Property or the liability of Borrower to pay the Debt.
No waiver by Lender shall be effective unless it is in writing and then only to
the extent specifically stated. All reasonable out-of-pocket costs and expenses
of Lender in exercising its rights and remedies under this Article (including
reasonable attorneys’ fees and disbursements to the extent permitted by law),
shall be paid by Borrower within five (5) business days after notice from
Lender, and such costs and expenses shall constitute a portion of the Debt and
shall be secured by this Security Instrument.


 


Section 10.7       No
Waiver Continued. The interests and rights of Lender under the Note, this
Security Instrument or in any of the other Loan Documents shall not be impaired
by any indulgence, including (i) any renewal, extension or modification which
Lender may grant with respect to any of the Debt, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which Lender
may grant with respect to the Property or any portion thereof; or (iii) any
release or indulgence granted to any maker, endorser, guarantor or surety of
any of the Debt.


 


Section 10.8       Foreclosure.
Upon the occurrence and during the continuance of any Event of Default, Lender
may request 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:


 


(a)          Public
Sale. Trustee is hereby authorized and empowered, and it shall be Trustee’s
special duty, upon such request of Lender, to sell the Property, or any part
thereof, at public auction to the highest bidder for cash, with or without
having taken possession of same. 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 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, governing sales of Texas real property
under powers of sale conferred by deeds of trust. Trustee or his successor or
substitute may appoint or delegate any one or more persons as agent to perform
any act or acts necessary or incident to any sale held by Trustee, including
the posting of notices, and the conduct of sale, but in the name and on behalf
of Trustee, his successor or substitute.


 


51

















 


(b)         Intentionally
Deleted.


 


(c)          Sale
Subject to Unmatured Debt. 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 Debt and is not cured within
applicable cure periods, Lender may, at Lender’s option, at once or at any time
thereafter while any matured installment remains unpaid, without declaring the
entire Debt to be due and payable, orally or in writing direct Trustee to
enforce this Security Instrument and to sell the Property subject to such
unmatured Debt and to the rights, powers, liens, security interests, and
assignments securing or providing recourse for payment of such unmatured Debt,
in the same manner, all as provided in the preceding provisions of this
subsection. Sales made without maturing the Debt may be made hereunder whenever
there is a default in the payment of any installment of the Debt, 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
Debt or the rights, powers, liens, security interests, and assignments securing
or providing recourse for payment of the Debt.


 


(d)         Partial
Foreclosure. Sale of a part of the Property shall not exhaust the power of
sale, but sales may be made from time to time until the Debt is paid in full.
It is intended by each of the foregoing provisions of this subsection that
Trustee may, after any request or direction by Lender, sell not only the Land
and the Improvements, but also the equipment and other interests constituting a
part of the Property or any part thereof, along with the Land and the
Improvements or any part thereof, as a unit and as a part of a single sale, or
may sell at any time or from time to time any part or parts of the Property
separately from the remainder of the Property. It shall not be necessary to
have present or to exhibit at any sale any of the Property. Any sale of
personal property made hereunder shall be deemed to have been a public sale
conducted in a commercially reasonable manner if held contemporaneously with,
or as part of, and upon the same notice as required for the sale of real
property under the power of sale granted herein.


 


(e)          Trustee’s
Deeds. After any sale under this subsection, Trustee shall make good and
sufficient deeds, assignments, and other conveyances to the purchaser or
purchasers thereunder in the name of Borrower, conveying the Property or any
part thereof so sold to the purchaser or purchasers with special warranty of
title by Borrower. It is agreed that in any deeds, assignments or other
conveyances given by Trustee, absent fraud, willful misconduct or gross
negligence, any and all statements of fact or other recitals therein made as to
the identity of Lender, the occurrence or existence of any Event of Default,
the notice of intention to accelerate, or acceleration of, the maturity of the
Debt, 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 Borrower does hereby ratify and confirm any and
all acts that Trustee may lawfully do in the premises by virtue hereof.”


 


52

















 


Section 21.4.     Inapplicability of Credit
Code. In no event shall the provisions of Chapter 346 of the Texas Finance
Code (which regulates certain revolving credit loan accounts and revolving
tri-party accounts) apply to the loan evidenced by the Loan Documents and/or
secured hereby.


 


Section 21.5.     Entire Agreement. THIS
SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF.


 


Section 21.6.     Notice of Indemnification.
BORROWER ACKNOWLEDGES THAT THIS SECURITY INSTRUMENT PROVIDES FOR
INDEMNIFICATION OF LENDER AND TRUSTEE BY BORROWER PURSUANT TO ARTICLE 11.
SUBJECT TO THE TERMS THEREOF, IT IS SPECIFICALLY INTENDED BY BORROWER, LENDER,
AND TRUSTEE THAT ALL INDEMNITY OBLIGATIONS AND LIABILITIES ASSUMED BY BORROWER
HEREUNDER BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF
(INCLUDING PREEXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY
PARTY OR PARTIES (INCLUDING LENDER AND TRUSTEE) WHETHER SUCH NEGLIGENCE BE
SOLE, JOINT OR CONCURRENT, OR PASSIVE. THE PARTIES SPECIFICALLY INTEND THAT
LENDER AND TRUSTEE ARE TO BE INDEMNIFIED AGAINST THEIR OWN NEGLIGENCE;
PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE BORROWER
TO INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER OR TRUSTEE FROM AND AGAINST ANY
OR ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
SUITS, COSTS AND EXPENSES ENACTED AGAINST, IMPOSED ON OR INCURRED BY LENDER OR
TRUSTEE BY THEIR OWN WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.


 


Section 21.7.      Receipt of Security
Instrument. THE BORROWER HEREBY DECLARES AND ACKNOWLEDGES THAT THE BORROWER
HAS RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS SECURITY INSTRUMENT.


 


Section 21.8.      Duties
of Trustee. It shall be no part of the duty of the Trustee to see to any
recording, filing or registration of this Security Instrument or any other
instrument in addition or supplemental thereto, or to give any notice thereof,
or to see to the payment of or be under any duty in respect of any tax or
assessment or other governmental charge which may be levied or assessed on the
Property, or any part thereof, or against the Borrower, or to see to the
performance or observance by the Borrower of any of the covenants and
agreements contained herein. The Trustee shall not be responsible for the
execution, acknowledgment or validity of this Security Instrument or of any
instrument in addition or supplemental hereto or for the sufficiency of the
security purported to be created hereby, and makes no representation in respect


 


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thereof or in respect of the rights of the Lender. The
Trustee shall have the right to advise with counsel upon any matters arising
hereunder and shall be fully protected in relying as to legal matters on the
advice of counsel. The Trustee shall not incur any personal liability hereunder
except for his own gross negligence or willful misconduct; and the Trustee shall
have the right to rely on any instrument, document or signature authorizing or
supporting any action taken or proposed to be taken by him hereunder, believed
by him in good faith to be genuine.


 


Section 21.9.      Substitution
of Trustee. In case of the death, inability, refusal or incapacity of the
Trustee to act, or at the option of the Lender at any time and without cause or
notice, a successor or substitute trustee may be named, constituted and
appointed. Successor or substitute trustees may be named, constituted and
appointed without procuring the resignation of the former trustee and without
other formality than the execution and acknowledgment by Lender of a written
instrument (which instrument, if Lender is a corporation, shall be executed by
the President or any Vice President and attested by the Secretary or any
Assistant Secretary and without the necessity of any action by the Board of
Directors authorizing such appointment) appointing and designating such
successor or substitute trustee, whereupon such successor or substitute trustee
shall become vested with and succeed to all of the rights, titles, privileges,
powers and duties of the Trustee named herein. Such right of appointment of a
substitute or successor trustee shall exist as often and whenever for any of
said causes the original or successor or substitute trustee cannot or will not
act or has been removed as herein provided.


 


[SIGNATURES APPEAR
ON FOLLOWING PAGE]


 


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IN WITNESS WHEREOF, THIS
SECURITY INSTRUMENT has been executed by Borrower the day and year first above
written.


 


	
   

  	
   

  	
  BORROWER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A-S 46 HWY 290-SPRING CYPRESS, L.P., a Texas

  limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  A-S 46, L.C., a Texas limited liability company, its

  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Steven D. Alvis

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Steven D. Alvis

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Member-Manager