Document:

Deed of Trust  (W1536342.DOCX;1)

NOTICE OF CONFIDENTIALITY RIGHTS:  IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS:  YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

DEED OF TRUST, SECURITY AGREEMENT AND

ASSIGNMENT OF RENTS

THE STATE OF TEXAS

§

§

KNOW ALL MEN BY THESE PRESENTS:

COUNTY OF DALLAS

§

THAT HARTMAN RICHARDSON TECH CENTER, LLC, a Texas limited liability company (hereinafter referred to as “Grantor”), whose mailing address is 2909 Hillcroft, Suite 420, Houston, Texas 77057, in consideration of the sum of Ten ($10.00) Dollars to Grantor in hand paid, the receipt and sufficiency of which is hereby acknowledged, and in further consideration of the uses, purposes and trusts herein set forth and declared, have Granted, Bargained and Sold, and by these presents do hereby Grant, Bargain, Sell and Convey unto James L. Hedrick, Trustee (hereinafter referred to as “Trustee”), in trust, whose mailing address is Potter Minton, Attn: James L. Hedrick, Plaza Tower, Suite 500, 110 N. College, Tyler, Texas 75702, all of the property described in paragraphs A, B and C, immediately following, to-wit:

A.

Fee simple title to all of the real property described on Exhibit “A” attached hereto and made a part hereof located in the City of Richardson, Dallas County, Texas (the “Land”); the easements and other rights and benefits appurtenant to the Land, including, without limitation, prescriptive easements; all buildings and other improvements now or hereafter situated on the Land (the “Improvements”); all of Grantor’s right, title and interest in and to all other rights, privileges and benefits appurtenant to the Land or the Improvements, whether now existing or hereafter arising. 

B. 

All of Grantor’s right, title and interest in and to all goods, fixtures, equipment, inventory, supplies and other tangible personal property of any kind in which Grantor now has, or at any time hereafter acquires, an ownership interest, including without limitation, those that are now, or at any time hereafter, situated in, on or about the Land or Improvements (or used in connection with the Land or Improvements), including, but not limited to, all heating, lighting, refrigeration, mechanical, plumbing, ventilating, incinerating, water-heating, cooking, communication, fire suppression, electrical, and air-conditioning fixtures and equipment, and all appliances, furniture, furnishings, artwork, engines, machinery, elevators, pumps, motors, compressors, boilers, condensing units, cooling towers, doors, windows, window screens, window treatments, wall coverings, sprinklers, hoses, tools, supplies, speakers, electrical wiring, floor coverings, signs and all replacements and substitutions thereof and all additions thereto.   All of the property described or referred to in this paragraph B being hereinafter sometimes called “Accessories”. 

C. 

All of Grantor’s right, title and interest in and to all other assets of every kind and character of Grantor (whether now owned or hereafter acquired, and whether tangible or intangible) (i) that are used in connection with the Land, the Improvements and/or the Accessories, including, without limitation all licenses, permits, warranties, contracts, leases, management agreements and other 

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agreements, and all other rights and benefits of any kind associated with the Land, the Improvements or the Accessories, including, without limitation, all contract rights, privileges and benefits of Grantor under parking leases, licenses and agreements, and (ii) including, without limitation, all other goods, inventory, equipment, investment property, instruments, chattel paper, documents and letter of credit rights, accounts, deposit accounts, fixtures and supporting obligations (each as defined in Title 1, Chapter 9 of the Texas Business and Commerce Code), and (iii) including, without limitation, all tangible and intangible assets purchased by Grantor and described in one or more deeds, bills of sale and other instruments of assignment and transfer from Richardson Business Center, Ltd. in favor of Grantor and dated on or about the same date as this Deed of Trust, Security Agreement and Assignment of Rents (the “Purchased Assets”).    

All property and interests described or referred to in paragraphs A, B, and C preceding is sometimes hereinafter referred to collectively as the “Mortgaged Property.”  The liens and security interests granted herein are purchase money liens and security interests with respect to the Purchased Assets.

TO HAVE AND TO HOLD the Mortgaged Property, together with all and singular the rights, hereditaments and appurtenances in anywise appertaining or belonging thereto, unto Trustee, and his successors or substitutes in this trust, and his and their assigns, in trust, and for the uses and purposes hereinafter set further, forever.

Grantor, for Grantor and Grantor’s successors, hereby agrees to warrant and forever defend, all and singular, the Mortgaged Property unto Trustee, and his successors or substitutes in this trust, and to his and their assigns, forever, against every person whomsoever lawfully claiming or to claim the same or any part thereof, subject only to the Permitted Encumbrances. As used herein, the term “Grantor’s successors” means each and all of the successors, assigns, executors, heirs, administrators and legal representatives of Grantor.  As used herein, the term “Permitted Encumbrances” means (a) the easements and other matters listed on Exhibit “B” attached hereto and made a part hereof, (b) the liens and security interests in favor of Mortgagee created by the Loan Documents, (c) any other exceptions to title permitted under the Loan Documents (hereinafter defined), and (d) any other matters that are expressly approved in writing by Mortgagee.

Grantor hereby grants to the Mortgagee hereinafter named, and to the successors and assigns of Mortgagee, a first and superior lien and security interest in the Mortgaged Property, and each and every part thereof, subject to the Permitted Encumbrances, and in all proceeds from the sale, lease or other disposition thereof and in all sums, proceeds, funds and reserves described or referred to in Sections 5.7, 5.8 and 5.9 hereof; provided, however, that the grant of a security interest in proceeds shall not be deemed to authorize any action otherwise prohibited herein.  Mortgagee’s mailing address is P. O. Box 1079, Tyler, Texas 75710.

ARTICLE I

The Obligation

Section 1.1 

This Deed of Trust (as used herein, the expression “this Deed of Trust” shall mean this Deed of Trust, Security Agreement and Assignment of Rents), and all rights, titles, interests, liens, security interests, powers and privileges created hereby or arising by virtue hereof, are given to secure payment and performance of the following indebtedness, obligations and liabilities: 

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2

Deed of Trust

(a) the indebtedness evidenced by a Promissory Note executed by Grantor, as Maker, payable to the order of Southside Bank (hereinbefore and hereinafter referred to as “Mortgagee”) in Tyler, Smith County, Texas, dated March 14, 2018, in the principal face amount of $3,570,000.00, maturing on March 14, 2021, bearing interest as therein specified, containing an attorney’s fee clause, interest, and principal being payable as therein specified (the “Note”), including, without limitation, any and all future advances under the Note; 

(b) (Intentionally Omitted);

(c) all other indebtedness, obligations and liabilities of Grantor to Mortgagee arising pursuant to the provisions of this Deed of Trust, the other Loan Documents or otherwise;

(d) (Intentionally Omitted); and

(e) any and all renewals, extensions, modifications or restatements of all or any part of the indebtedness, obligations and liabilities described or referred to in Subsections 1.1(a), 1.1(b), 1.1(c) and 1.1(d) preceding. 

The word “Obligation”, as used herein, shall mean all of the indebtedness, obligations and liabilities described or referred to in the foregoing Subsections 1.1(a), 1.1(b), 1.1(c), 1.1(d) and 1.1(e). 

The word “Holder”, as used herein, shall mean the holder or holders of the Obligation at the time in question.  

The words “Loan Agreement” means the Loan Agreement of even date herewith by and between Grantor and Southside Bank, as same may hereafter be modified, amended or restated. 

The words “Loan Documents” means all documents evidencing or securing payment of the Obligation, or any part thereof, as same may be executed, modified, amended or restated from time to time.

ARTICLE II

Certain Representations, Warranties and Covenants of Grantor

Section 2.1 

Grantor represents and warrants that: (a) Grantor has the power and authority to execute and deliver this Deed of Trust and to perform its obligation hereunder; and (b) the statements contained in this Deed of Trust concerning Grantor’s mailing address are true and correct.

Section 2.2 

Grantor, for Grantor and Grantor’s successors, covenants and agrees to: (a) subject to Grantor’s right to contest the same as provided in the Loan Agreement, pay or cause to be paid, before delinquent, all taxes and assessments of every character in respect of the Mortgaged Property, or any part thereof, and from time to time, upon request of Holder, to furnish to Holder evidence satisfactory to Holder of the timely payment of such taxes and assessments; (b) maintain insurance with respect to the Mortgaged Property as provided in the Loan Agreement; (c) cause all property insurance so carried to name Holder as mortgagee (and cause all such insurance proceeds to be payable to Holder), to stipulate that same can be cancelled after no less than fifteen (15) days written notice to Holder, and to deliver copies the policies of insurance or certificates thereof to Holder; (d) pay, or cause to be paid, all premiums for such insurance when due, and furnish to Holder satisfactory proof of the timely making of such payments and to deliver all renewal policies to Holder at least fifteen (15) days before the expiration date of each expiring policy; (e) comply, in all material respects, with all valid governmental laws, ordinances and regulations applicable to the Mortgaged Property and its ownership, use and operation, including without limitation, all laws now or hereafter in effect pertaining to health, hygiene, the environment or environmental conditions on, under, or about the Land, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC §9601, et seq, the Resource Conservation and Recovery Act, 42 USC §6901, et seq, the Clean Water Act, 33 USC § 1251, et seq, the Clean Air Act, 42 USC §7401, et seq, the Federal Water Pollution Control Act, 33 USC §1251, et seq, and any similar state laws or ordinances, including without limitation, the Texas Water Code §26.001, et seq, the Texas Solid Waste Disposal Act, Texas Health and Safety Code §361.001, et seq, and Regulations, Rules, Guidelines and Standards promulgated pursuant to such laws, statutes and regulations, as amended from time to time, and to comply, in all material respects, with all, and not violate in any material respect, any easements, restrictions, agreements, covenants, and conditions with respect to or affecting the Mortgaged Property, or any part thereof; (f) at all times maintain, preserve and keep the Mortgaged Property in the condition required in the Loan Agreement; (g) promptly pay all bills for labor and materials incurred in connection with the Mortgaged Property as provided in the Loan Agreement (subject to the contest rights set forth in the Loan Agreement); (h) at any time and from time to time, upon reasonable written request by Holder, forthwith, execute and deliver to Holder any and all reasonable additional instruments and further assurances, and do all other acts and things as may be necessary or proper, in the exercise of Holder’s reasonable opinion, to effect the intent of these presents, more fully evidence and perfect the rights, titles, liens and security interests herein created or intended to be created and protect the rights, remedies, powers and privileges of Holder hereunder (provided, however, any documents, instruments or assurances provided or performed by Grantor  pursuant to this Section 2.2(h) shall not expand or alter Grantor’s obligations or liabilities or limit or reduce Grantor’s right or benefits under the Loan Documents); (i) to the extent of Grantor’s authority, not to authorize any termination or any material amendment or modification of any easements appurtenant to the Land, without Holder’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; (j) continuously maintain Grantor’s existence and its right to do business in Texas; (k) not, without the prior written consent of Holder (which consent may be withheld with or without cause), sell, trade, transfer, assign, exchange or otherwise dispose of any material interest in the Mortgaged Property, or any material part thereof, except for disposition of items of the tangible Accessories which have become obsolete or worn beyond practical use or which are replaced by an article of equal or better suitability and value (notwithstanding the foregoing, Grantor shall be permitted, without Mortgagee’s prior written consent, to remove any obsolete Accessories that do not constitute a material portion of the Collateral without replacing the same); (l) pay and perform all of the Obligations in accordance with the terms thereof, or when the maturity thereof may be accelerated in accordance with the terms thereof; (m) (Intentionally Omitted); (n) (Intentionally Omitted); (o) at any time any law shall be enacted imposing or authorizing the imposition of any tax upon this Deed of Trust, or upon any rights, titles, liens or security interests created hereby, or upon the Obligation, or any part thereof, promptly pay all such taxes; (p) at any time and from time to time (but not more than once in any 12-month period unless a Default then exists), furnish promptly, upon written request, a written statement or affidavit, in such form as shall be reasonably satisfactory to Holder, stating the unpaid balance of the Obligation and that to Grantor’s knowledge there are not offsets or defenses against full payment of the Obligation and the terms hereof, or, if there are any such offsets and defenses, specifying them; (q) (Intentionally Omitted); (r) punctually and properly perform all of Grantor’s covenants, duties and liabilities under any other security agreement, mortgage, deed of trust, collateral, pledge agreement, loan agreement or assignment of any kind now or hereafter existing as security for or in connection with payment of the Obligation, or any part thereof (each such being herein called “other security instrument”); and (s) allow Holder, upon reasonable prior notice and during normal business hours and subject to the rights of Tenants under Leases, to inspect the Mortgaged Property and all records relating thereto or to the Obligation, and to make and take away copies of such records.

Section 2.3

TEXAS FINANCE CODE SECTION 307.052 COLLATERAL PROTECTION NOTICE: (A) GRANTOR IS REQUIRED TO: (i) KEEP THE LAND INSURED AGAINST DAMAGE IN THE AMOUNT HOLDER SPECIFIES; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (iii) NAME HOLDER AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS; (B) GRANTOR MUST, IF REQUIRED BY HOLDER, DELIVER TO HOLDER A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS, AND (C) IF GRANTOR FAILS TO MEET ANY REQUIREMENT LISTED IN PARAGRAPH (A) OR (B), HOLDER MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF GRANTOR AT GRANTOR’S EXPENSE.

ARTICLE III

Respecting Defaults and Remedies of Holder

Section 3.1 

The term “Default”, as used herein, shall mean a Default as defined in the Loan Agreement.

Section 3.2 

Upon the occurrence and during the continuation of a Default, Holder may, at its option, do any one or more of the following:

(a) 

If the Default is based on Grantor’s failure to keep or perform any covenant whatsoever contained in this Deed of Trust, Holder 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 covenants shall be a part of the Obligation, and Grantor promises upon written demand, to pay to Holder, at the place where the Note is payable, or at such other place as Holder may direct by written notice, all sums so advanced or paid by Holder, with interest at the rate equal to the lesser of (i) the Maximum Rate (as defined in the Note), and (ii) ten (10%) percent per annum from the date when paid or incurred by Holder.  No such payment by Holder shall constitute a waiver of any Default. In addition to the liens and security interest hereof, Holder shall be subrogated to all rights, titles, liens and security interests securing the payment of any debt, claim, tax or assessment for the payment of which Holder may make an advance, or which Holder may pay.

(b) 

Holder may, without notice, demand or presentment, all of which are hereby waived by Grantor and all other parties obligated in any manner whatsoever on the Obligation, declare the entire unpaid balance of the Obligation immediately due and payable, and upon such declaration the entire unpaid balance of the Obligation shall be immediately due and payable.

(c) 

Holder may request Trustee to proceed with foreclosure, and in such event Trustee is hereby authorized and empowered, and it shall be his special duty, upon such request of the Holder, to sell the Mortgaged Property, or any part thereof, in accordance with the applicable provisions of Section 51.002, et. seq. of the Texas Property Code. Any sale of any part of the Mortgaged Property located in the State of Texas shall be made in the county in which such Mortgaged Property is situated. Where any part of the Mortgaged Property located in the State of Texas is situated in more than one county, then notice as herein provided shall be given in both or all of such counties, and such notice shall designate the county where the Mortgaged Property will be sold. Notice of such proposed sale shall be given as required by the applicable provisions of the Texas Property Code as then in effect.  The Affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service.  Sale of the Mortgaged Property shall be “AS IS” with a special warranty of title binding Grantor, and without representation or warranty, express or implied, by Trustee.  Sale of a part of the Mortgaged Property shall not exhaust the power of sale, but sales may be made from time to time until the Obligation is paid and performed in full. It shall not be necessary to have present or to exhibit at any such sale any of the Accessories. In addition to the rights and powers of the sale granted under the preceding provisions of this Subsection 3.2(c), if Default is made in the payment of any installment of the Obligation, Holder, at its option, at once or at any time thereafter while any matured installment remains unpaid, without declaring the entire Obligation to be due and payable, may orally or in writing direct Trustee to enforce this Trust and to sell the Mortgaged Property subject to such un-matured indebtedness and the liens and security interests securing its payment, in the same manner, on the same terms, at the same place and time and after having given notice in the same manner, all as provided in the preceding provisions of this Subsection 3.2(c). After such sale, Trustee shall make due conveyance to the purchaser or purchasers. Sales made without maturing the Obligation may be made hereunder whenever there is a default in the payment of any installment of the Obligation without exhausting the power of sale granted hereby, and without affecting in any way the power of sale granted under this Section 3.2(c), the un-matured balance of the Obligation (except as to any proceeds of any sale which Holder may apply as prepayment of the Obligation) or the liens and security interest securing payment of the Obligation. It is intended by each of the foregoing provisions of this Subsection 3.2(c) that Trustee may, after any request or direction by Holder, sell, not only the Land but also, the Accessories and other interests constituting a part of the Mortgaged Property, or any part thereof, along with the Land, or any part thereof, all as a unit and a part of a single sale, of may sell any part of the Mortgaged Property separately from the remainder of the Mortgaged Property. It is agreed that, in any deed or deeds given by Trustee, any and all statements of fact or other recitals therein made as to the identity of the Holder, or as to the occurrence or existence of any Default, or as to the acceleration of the maturity of the Obligation, or as to the request to sell, notice of sale, time, place, terms and manner of sale, and receipt, distribution and application of the money realized therefrom, or as to the due and proper appointment of a substitute trustee, and, without being limited by the foregoing, as to any other act or thing having been duly done by Holder or by Trustee, shall be taken by all courts of law and equity as prima facie evidence that the said statements or recitals of fact are without further question to be so accepted, and Grantor does hereby ratify and confirm any and all acts that Trustee may lawfully do by virtue hereof.  In the event of the resignation or death of Trustee, or his removal from his county of residence or inability, for any reason, to make any such sale or to perform any of the trusts herein declared, or at the option of Holder, without cause, then Holder may appoint, in writing, a substitute trustee, who shall thereupon succeed to all the estates, titles, rights, powers and trusts herein granted to and vested in Trustee. If Holder is an entity, such appointment may be made on behalf of such Holder by any person who is then an authorized officer of agent of Holder. In the event of the resignation or death of any such substitute trustee, or his failure, refusal or inability to make any such sale or perform such trusts, or at the option of Holder, without cause, successive substitute trustees may thereafter, from time to time, be appointed in the same manner. Wherever herein the word “Trustee” is used, the same shall mean the person who is the duly appointed trustee or substitute trustee hereunder at the time in question.

(d) 

Holder may, or Trustee may upon written request of Holder, proceed by suit or suits, at law or in equity, to enforce the payment and performance of the Obligation in accordance with the terms hereof and of the Note (subject to any provisions of the Note limiting the liability of the maker of the Note) or other instruments evidencing it, to foreclose the liens, security interests and this Deed of Trust as against all or any part of the Mortgaged Property, and to have all or any part of the Mortgaged Property sold under the judgment or decree of a court of competent jurisdiction.

(e) 

Holder, as a matter of right and without regard to the sufficiency of the security, and without any showing of insolvency, fraud or mismanagement on the part of Grantor, and without the necessity of filing any judicial or other proceeding, other than the proceeding for appointment of a receiver or receivers of the Mortgaged Property, or any part thereof, shall take control of all receipts of the Mortgaged Property, and of the income, rents, issues and profits thereof.

(f) 

Holder may enter upon the Land, take possession of the Mortgaged Property and remove the Accessories, or any part thereof, with or without judicial process, and, in connection therewith, without any responsibility or liability on the part of Holder, take possession of any property located on or in the Mortgaged Property which is not a part of the Mortgaged Property and hold or store such property at Grantor’s expense.

(g) 

Holder may require Grantor to assemble the tangible Accessories, or any part thereof, and make them available to Holder at a place to be designated by Holder which is reasonably convenient to Grantor and Holder.

(h) 

After notification, if any, hereafter provided in this Subsection 3.2(h), Holder may sell, lease or otherwise dispose of, at the office of Holder, or on the Land, or elsewhere, as chosen by Holder, all or any part of the Accessories or other personal property, in their then condition, and each Sale (as used herein, the term “Sale” means any such sale, lease or other disposition made pursuant to this Subsection 3.2(h)) may be as a unit or in parcels, by public or private proceedings, and by way of one or more contracts, and, at any Sale, it shall not be necessary to exhibit the property sold, or part thereof. The Sale of any part of the Accessories or other personal property shall not exhaust Holder’s power of sale, but Sales may be made from time to time until the Obligation is paid and performed in full. Reasonable notification of the time and place of any public Sale pursuant to this Subsection 3.2(h) or reasonable notification of the time of any private Sale made pursuant to this Subsection 3.2(h), shall be sent to Grantor and to any other person entitled under the Uniform Commercial Code of the State of Texas (“Code”) to notice; provided that if the Accessories or other personal property, or part thereof, being sold are perishable, or threaten to decline speedily in value, or are of a type customarily sold on a recognized market, Holder may sell, lease or otherwise dispose of such items, or part thereof, being sold, leased or otherwise disposed of without notification, advertisement or other notice of any kind. It is agreed that notice sent or given not less than twenty (20) days prior to the taking of the action to which the notice relates, is reasonable notification and notice for the purposes of this Subsection 3.2(h).  Notwithstanding the foregoing, the Accessories and other personal property included in the Mortgaged Property may be sold with the Land pursuant to the applicable provisions of Section 51.002, et. seq. of the Texas Property Code and Section 9.604 of the Texas Business and Commerce Code.   

(i) 

Holder may surrender the insurance policies maintained pursuant to Section 2.2(b) hereof, or any part thereof, and receive and apply the unearned premiums as a credit on the Obligation, and, in connection therewith, Grantor hereby appoints Holder as the agent and attorney-in-fact for Grantor to collect such premiums.

(j) 

Holder may retain the Accessories and/or other personal property included in the Mortgaged Property in satisfaction of the Obligation whenever the circumstances are such that Holder is entitled to do so under the Code.

(k) 

Holder may buy the Mortgaged Property, or any part thereof, at public Sale or judicial sale.

(l) 

Holder may buy the Accessories or other personal property, or any part thereof, at any private Sale if they are a type customarily sold in a recognized market or are a type which is the subject of widely distributed standard price quotations.

(m) 

Holder shall have and may exercise any and all other rights and remedies which Holder may have at law or in equity, or by virtue of any other security instrument, or under the Code, or under the other Loan Documents, or otherwise.

(n) 

Holder may apply the reserves, if any, required by Section 5.9 hereof, toward payment of the Obligation.

Section 3.3 

If Holder is the purchaser of the Mortgaged Property, or any part thereof, at any Sale thereof, whether such Sale be under the power of sale hereinabove vested in Trustee, or upon any other foreclosure of the liens and security interests hereof, or otherwise, Holder shall, upon any such purchase, acquire good title (subject only to the Permitted Encumbrances) to the Mortgaged Property so purchased, free of the liens and security interests.

Section 3.4 

Should any part of the Mortgaged Property come into the possession of Holder during a Default, Holder may use or operate the Mortgaged Property for the purpose of preserving it or its value, pursuant to the order of a court of appropriate jurisdiction, or in accordance with any other rights held by Holder in respect of the Mortgaged Property. Grantor covenants to promptly reimburse and pay to Holder, at the place where the Note is payable, or at such other place as may be designated by Holder in writing, the amount of all reasonable expenses (including the cost of any insurance, taxes or other charges) incurred by Holder during a Default in connection with its custody, preservation, use or operation of the Mortgaged Property, together with interest thereon from the date incurred by Holder at the rate equal to the lesser of (i) the Maximum Rate (as defined in the Note), and (ii) ten (10%) percent per annum, and all such expenses, cost, taxes, interest and other charges shall be a part of the Obligation. It is agreed, however, that the risk of accidental loss or damage to the Mortgaged Property is on Grantor, and Holder shall have no liability whatsoever for decline in value of the Mortgaged Property, or for failure to determine whether any insurance ever in force is adequate as to amount or as to the risks insured.

Section 3.5 

In case the liens or security interests hereof shall be foreclosed by Trustee’s sale, or by other judicial or non-judicial action, the purchaser at any such Sale shall receive, as an incident to his ownership, immediate possession of the property purchased, and if Grantor or Grantor’s successors shall hold possession of said property, or any part thereof, subsequent to foreclosure, Grantor and Grantor’s successors shall be considered as tenants at sufferance of the purchaser at foreclosure sale, and anyone occupying the property (excluding those occupying the property pursuant to a lease, license or other occupancy agreement that is permitted by the Loan Documents), after demand made for possession thereof shall be guilty of forcible detainer and shall be subject to eviction and removal, forcible or otherwise, with or without process of law, and all damages by reason thereof are hereby expressly waived.

Section 3.6 

The proceeds from any Sale, lease of other disposition made pursuant to this Article III, or the proceeds from surrendering any insurance policies pursuant to Subsection 3.2(i) hereof, or any Rental collected by Holder pursuant to Article IV hereof, or the reserves required by Section 5.9 hereof, or sums received pursuant to Section 5.7 hereof, or proceeds from insurance which Holder elects to apply to the Obligation pursuant to Section 5.8 hereof, shall be applied by Trustee, or by Holder, as the case may be, as follows: First, to the payment of all expenses of advertising, selling and conveying the Mortgaged Property, or part thereof, including reasonable attorneys’ fees; second, to interest on the Obligation; third, to principal on the matured portion of the Obligation; fourth, to prepayment of the un-matured portion, if any, of the Obligation (applied to installments of principal in inverse order of maturity); and fifth, the balance, if any, remaining after the full and final payment and performance of the Obligation, to Grantor.

Section 3.7 

In the event a foreclosure hereunder should be commenced by Trustee in accordance with Subsection 3.2(c) hereof, Holder may at any time before the Sale direct Trustee to abandon the Sale, and may then institute suit for the collection of the Note (subject to any provisions of the Note limiting the liability of the maker of the Note), and for the foreclosure of the liens and security interest hereof. If Holder should institute a suit for the collection of the Note, and for a foreclosure of the liens and security interests hereof, it may at any time before the entry of a final judgment in said suit dismiss the same, and require Trustee to sell the Mortgaged Property, or any part thereof, in accordance with the provisions of this Deed of Trust.

Section 3.8

TRUSTEE WILL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING THE TRUSTEE’S NEGLIGENCE AND/OR STRICT LIABILITY), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  Trustee will have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by it hereunder, believed by it in good faith to be genuine.  All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by law), and Trustee will be under no liability for interest on any moneys received by it hereunder.  GRANTOR SHALL REIMBURSE TRUSTEE FOR, AND INDEMNIFY AND SAVE IT HARMLESS AGAINST, ANY AND ALL LIABILITY AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) WHICH MAY BE INCURRED BY IT IN THE PERFORMANCE OF ITS DUTIES HEREUNDER (INCLUDING ANY LIABILITY AND EXPENSES RESULTING FROM TRUSTEE’S OWN NEGLIGENCE AND/OR STRICT LIABILITY), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE AND/OR WILLFUL MISCONDUCT.  The foregoing indemnity will not terminate upon release, foreclosure or other termination of this Deed of Trust.

ARTICLE IV

Leases and Rental

Section 4.1 

As used in this Deed of Trust: (a) “Lease” means any lease, sublease or other agreement under the terms of which any person other than Grantor has or acquires any right to occupy or use the Land or Improvements, or any part thereof, or interest therein; (b) “Lessee” means the lessee, sublessee, tenant or other person having the right to occupy or use a part of the Land or Improvements under a Lease; and (c) “Rental” means the rents, additional rents, royalties and other consideration payable by the Lessee under the terms of a Lease, and any other revenues generated from the Land or Improvements.

Section 4.2 

Grantor covenants and agrees to: (a) if a Default occurs and continues beyond any applicable cured period, upon written demand by Holder, assign to Holder, by separate instrument in form and substance reasonably satisfactory to Holder and Grantor, any or all Leases, or the Rental payable thereunder, including but not limited to, any Lease which is now in existence or which may be executed after the date hereof; (b) pay to Holder, as a prepayment of principal on the Note, all Rental paid by any Lessee for more than three months in advance; (c) comply with the terms and provisions of each Lease; (d) except as otherwise provided in the Loan Agreement, not amend, modify, extend or renew any Lease on other than market terms; (e) not assign, transfer or mortgage any Lease other than to Holder; (f) not assign, transfer, pledge or mortgage any Rental other than to Holder; (g) not waive, excuse, release or condone any nonperformance of any covenants of any Lessee, except in the ordinary course of business and consistent with prudent business practices; (h) promptly give to Holder duplicate notice of each written notice of default by each Lessee provided to Grantor; and (i) use commercially reasonably efforts to promptly furnish to Holder such estoppel certificates and/or attornment agreements (signed by Lessees) as Holder may reasonably request from time to time (but not more than once in any 12-month period unless a Default then exists).

Section 4.3 

Notwithstanding anything to the contrary contained herein, Holder is entitled to all of the rights and remedies of an assignee set forth in Chapter 64 of the Texas Property Code, the Texas Assignment of Rents Act (“TARA”).  This Deed of Trust shall constitute and serve as a security instrument under TARA.  Holder shall have the ability to exercise its rights related to the Leases and Rental, in Holder’s sole discretion and without prejudice to any other remedy available, as provided in this Deed of Trust and/or as otherwise allowed by applicable law, including, without litigation, TARA.  

ARTICLE V

Miscellaneous

Section 5.1 

If the Note (including any renewals, modifications and restatements thereof) and all other amounts due and payable by Grantor under the Loan Documents is paid in full; if there exists no Default; and if Holder has no obligation to make any future loan advances or extend any additional credit under any of the Loan Documents, then this conveyance shall become null and void and be released at Grantor’s request and expense.  Otherwise, this Deed of Trust shall remain in full force and effect, and no release hereof shall impair Grantor’s covenants, warranties and indemnities contained herein with respect to matters first arising or occurring prior to such release, all of which shall survive any release of this Deed of Trust.

Section 5.2 

As used in this Article V, “Rights” means rights, remedies, powers and privileges, and “Liens” means titles, interests, liens and security interests. All Rights and Liens herein, or by law or in equity provided, or provided in any other security instrument and shall not be deemed to deprive Holder or Trustee of any such other legal or equitable Rights and Liens by judicial proceedings, or otherwise, appropriate to enforce the conditions, covenants and terms of this Deed of Trust, the Note and other security instruments, and the employment of any Rights hereunder, or otherwise, shall not prevent the concurrent or subsequent employment of any other appropriate Rights.

Section 5.3 

Any and all covenants in this Deed of Trust may from time to time, by instrument in writing signed by Holder and delivered to Grantor, be waived to such extent and in such manner as Holder may desire, but no such waiver shall ever affect or impair Holder’s Rights or Liens hereunder, except to the extent so specifically stated in such written instrument. Impossibility, impracticability or force majeure shall not excuse the performance of any covenant of Grantor.

Section 5.4 

Any provision herein, or in any Note or any other document executed in connection herewith, to the contrary notwithstanding, no Holder shall in any event be entitled to receive or collect, nor shall or may the amounts received hereunder be credited, so that Holder shall be paid, as interest, a sum greater than the maximum amount permitted by the laws of the State of Texas to be charged to the person, firm or corporation primarily obligated to pay the Obligation at the time in question. If any construction of this Deed of Trust or the Note, or any and all other papers, indicates a different right given to Holder to ask for, demand or receive any larger sum, as interest, such is a mistake in calculation or wording, which this clause shall override and control, and proper adjustment shall automatically be made accordingly.

Section 5.5 

In the event Grantor or any of Grantor’s successors conveys its interest in the Mortgaged Property, or any part thereof, to any other party, Holder may, without notice to Grantor or Grantor’s successors, deal with any owner of any part of the Mortgaged Property with reference to this Deed of Trust and the Obligation, either by way of foreclosure on the part of Holder, or extension of time of payment of the Obligation, or release of all or any part of the Mortgaged Property, or any other property securing payment of the Obligation, without in any way modifying or affecting Holder’s Rights and Liens hereunder or the liability of Grantor or any other party liable for payment of the Obligation, in whole or in part.

Section 5.6 

Grantor hereby waives all rights of marshaling in event of any foreclosure of the liens and security interests hereby created.  Grantor also waives all rights, claims and defenses under Sections 51.003 and 51.004 of the Texas Property Code.

Section 5.7 

Holder shall be entitled to receive any and all sums that may be awarded or become payable to Grantor for the condemnation of the Mortgaged Property, or any part thereof, for public or quasi- public use, or by virtue of private sale in lieu thereof, and any sums which may be awarded or become payable to Grantor for damages caused by public works or construction on or near the Mortgaged Property, and Holder shall apply such proceeds in the order and in the manner as set forth in Section 3.6 hereof.  Provided, however, in the event that proceeds from any condemnation equal $250,000 or less and provided there exists no continuing Default then, notwithstanding any provision contained herein to the contrary, such proceeds shall be deposited in a construction account with Holder to be used by Grantor for restoration of the Mortgaged Property.  All such sums are hereby assigned to Holder, and Grantor shall, upon request of Holder, make, execute, acknowledge and deliver any and all additional assignments and documents as may be necessary from time to time to enable Holder to collect and receipt for any such sums. Holder shall not be, under any circumstances, liable or responsible for failure to collect, or exercise diligence in the collection of, any of such sums.  Provided, however, notwithstanding anything to the contrary herein, if there shall occur any condemnation of a part of the Mortgaged Property in excess of $250,000, but not exceeding $500,000, and (i) if Holder is reasonably satisfied that after restoration has been completed (and a reasonable re-leasing period, not to exceed 180 days, has occurred), the net cash flow of the Mortgaged Property will be sufficient to cover all costs and operating expenses of the Mortgaged Property, including payments due and any reserves required under the Loan Documents, and (ii) if no Default exists, the Holder shall make available to Grantor for such restoration of the Mortgaged Property, the proceeds of condemnation, if any, collected by Holder and not restricted by any adverse claim thereto; said proceeds to be disbursed by Holder in accordance with Holder’s customary terms, conditions and procedures for the advancement of funds for construction, including, without limitation, such lien waivers, inspections, receipts and other documentation as Holder may reasonably require. 

Section 5.8 

Holder may collect the proceeds of any and all insurance that may become payable with respect to the Mortgaged Property and shall apply such proceeds in the order and in the manner as set forth in Section 3.6 hereof, provided that Holder may deduct therefrom any reasonably third-party expenses incurred in connection with the collection or handling of such proceeds, it being understood that Holder shall not be, under any circumstances, liable or responsible for failure to collect, or exercise diligence in the collection of, any of such proceeds.  Provided, however, in the event proceeds from any casualty equal $250,000 or less and provided there exists no continuing Default, then, notwithstanding any provision contained herein to the contrary, such proceeds shall be deposited in a construction account with Holder to be used by Grantor for restoration.  Provided, however, notwithstanding anything to the contrary herein, if there shall occur any insured damage to the Mortgaged Property or any part thereof in excess of $250,000, but not exceeding $500,000, and (i) if Holder is reasonably satisfied that after restoration has been completed (and a reasonable re-leasing period, not to exceed 180 days, has occurred), the net cash flow of the Mortgaged Property will be sufficient to cover all costs and operating expenses of the Mortgaged Property, including payments due and any reserves required under the Loan Documents, and (ii) if no Default exists, then Holder shall make available to Grantor for restoration of the Mortgaged Property, the proceeds of insurance, if any, collected by Holder because of such loss and not restricted by any adverse claim thereto; said proceeds to be disbursed by Holder in accordance with Holder’s customary terms, conditions and procedures for the advancement of funds for construction, including, without limitation, such lien waivers, inspections, receipts and other documentation as Holder may reasonably require.

Section 5.9 

Upon the occurrence and during the continuation of a Default, at the request of Holder, Grantor shall create a fund or reserve for the payment of all insurance premiums, taxes and assessments against the Mortgaged Property by paying to Holder contemporaneously with each installment of principal and/or interest on the Note a sum equal to the premiums that will next become due and payable on the hazard insurance policies covering the Mortgaged Property, or any part thereof, plus taxes and assessments next due on the Mortgaged Property, or any part thereof, as estimated by Holder, less all sums paid previously to Holder therefor, divided by the number of months to elapse before one month prior to the date when such premiums, taxes and assessments will become delinquent, with such sums to be held by Holder without interest, for the purposes of paying such premiums, taxes and assessments. Transfer of legal title to the Mortgaged Property shall automatically transfer title in all sums deposited under the provisions of this Section 5.9.

Section 5.10 

It is understood and agreed that the proceeds of any Note, to the extent the same are utilized to renew or extend any indebtedness or take up any outstanding Liens against the Mortgaged Property, or any portion thereof, have been advanced by Holder at Grantor’s request and upon Grantor’s representation that such amounts are due and payable. Holder shall be subrogated to any and all Rights and Liens owned or claimed by any owner or holder of said outstanding Rights and Liens, however remote, regardless of whether said Rights and Liens are acquired by assignment or are released by the Holder thereof upon payment.

Section 5.11 

Any notice required or permitted to be given under this Deed of Trust or under the other Loan Documents shall be in writing and either shall be mailed by certified mail, postage prepaid, return receipt requested, or sent by overnight courier service.  All such communications shall be mailed, sent or delivered, addressed to the party for whom it is intended at its address set forth in this Deed of Trust.  Any communication so addressed and mailed shall be deemed to be given on the date when actually delivered to the address of the intended addressee (whether or not delivery is accepted).  Any party may designate a change of address by written notice to the other by giving at least ten (10) days prior written notice of such change of address.

Section 5.12 

If the Rights and Liens created by this Deed of Trust shall be invalid or unenforceable as to any part of the Obligation, the unsecured portion of the Obligation shall be completely paid prior to the payment of the remaining and secured portion of the Obligation, and all payments made on the Obligation shall be considered to have been paid on and applied first to the complete payment of the unsecured portion of the Obligation.

Section 5.13 

This Deed of Trust is binding upon Grantor and Grantor’s successors, and shall inure to the benefit of Holder, and its successors and assigns, and the provisions hereof shall likewise be covenants running with the Land. The duties, covenants, conditions, obligations and warranties of Grantor in this Deed of Trust shall be joint and several obligations of Grantor and Grantor’s successors.

Section 5.14 

This Deed of Trust is also a security agreement and financing statement.  

Section 5.15

To the extent that this Deed of Trust secures all contemporaneous and future advances made under the Note, and to the extent that money is advanced to make improvements to the Land or any part thereof, this Deed of Trust is a construction mortgage within the meaning of Section 9.334 of the Texas Business and Commerce Code.  

Section 5.16

Grantor expressly acknowledges a vendor’s lien on the Mortgaged Property as security for that portion of the Obligation that represents money advanced by Mortgagee to pay the purchase price of the Mortgaged Property.  This Deed of Trust does not waive the vendor’s lien, and the vendor’s lien and the lien created by the Deed of Trust shall be cumulative.  Holder may elect to enforce either of the liens without waiving the other, or Holder may enforce both liens.

Section 5.17

NOTICE - THE DEBT SECURED HEREBY IS SUBJECT TO ACCELERATION OF MATURITY IN THE EVENT OF SALE OR CONVEYANCE OF THE LAND OR ANY PART THEREOF. 

(End of Page---Signature and Acknowledgement of Grantor Follow on Next Page)

{A17/04114/0107/W1536342.1 }

3

Deed of Trust

(Deed of Trust – Signature Page)

EXECUTED AND DELIVERED to be effective as of the 14th day of March, 2018.

GRANTOR:

HARTMAN RICHARDSON TECH CENTER, LLC, 

a Texas limited liability company

By:

Hartman Income REIT Management, Inc.,

a Texas corporation, its Manager

By:

Name:

Allen R. Hartman

Its:

President

STATE OF TEXAS

§

§

COUNTY OF _____________

§ 

This instrument was acknowledged before me on March ____, 2018, by Allen R. Hartman, in the capacity stated. 

Notary Public, State of Texas

AFTER RECORDING RETURN TO:

Southside Bank

Attn: Julie Brown

P. O. Box 1079

Tyler, Texas 75710

{A17/04114/0107/W1536342.1 }

EXHIBIT “A”

(Legal Description)

EXHIBIT “B”

(Permitted Encumbrances)

Building setback lines shown on Plat recorded in Volume 84170, Page 1835 of the Map Records of Dallas County, Texas. 

{A17/04114/0107/W1536342.1 }REAL PROPERTY, PARTNERSHIP AND COMPANY

REAL PROPERTY MANAGEMENT AGREEMENT

              THIS REAL PROPERTY MANAGEMENT AGREEMENT (“Agreement”) is effective as of the 29th day of January, 2018, by and between Hartman Richardson Tech Center, LLC, a Texas limited liability company (“Company”), and Hartman Income REIT Management, Inc., a Texas corporation (“Manager”).

ARTICLE 

AGENCY; TERM

.

Appointment/Acceptance.  Company hereby appoints Manager, and Manager hereby accepts appointment, on the terms and conditions hereinafter provided, as exclusive managing and leasing agent for all properties acquired by Company.  All properties acquired by Company which from time to time are subject to this Agreement are hereinafter referred to collectively as the “Properties” and individually as the “Property.”

.

Term.  Subject to Article IV below, the term of this Agreement (the "Term") shall be a period of one (1) year from the date first set forth above and thereafter shall be automatically extended on an annual basis unless terminated in writing by either Company or Manager at least thirty (30) days prior to the expiration of the Term or extension thereof.

ARTICLE 

MANAGER’S DUTIES

.

  Power and Authority.  Manager shall have, and is hereby granted, full power and authority to exercise all functions and perform all duties in connection with the operation and management of the Properties, subject to the right retained by Company to supervise the activities of Manager pursuant to this Agreement.  The power and authority of Manager shall include but not be limited to:

1.

Investigating, hiring, paying, supervising and discharging all personnel necessary or desirable, in Manager’s good faith judgment, to be employed in connection with the maintenance and operation of the Properties.  Compensation for the service of all such employees and the cost of worker’s compensation insurance and any benefits with respect to such employees shall be an operating expense of the Properties.  Manager, on behalf of Company, may employ affiliated persons or entities of Manager or Company (hereinafter “Affiliates”) as long as such employment is at rates that do not exceed commercially reasonable rates that would be paid to an unaffiliated person or entity for similar services, supplies, materials or other such dealings.  Manager is authorized to engage, on behalf of and at the expense of Company, professional persons (such as lawyers and accountants) and consultants (such as tax and energy consultants) to render services for the Properties.

2.

Maintaining business-like relations with tenants.

3.

Using good faith efforts to lease vacant space in the Properties and renew existing leases with tenants in accordance with the current rental schedule from time to time submitted by Manager and approved by Company (or in the absence of such current rental schedule approved by Company, at rents reasonably determined by Manager taking into consideration market factors then prevailing) and on such other terms and conditions as Manager in its sole discretion shall determine.  Manager shall execute leases and rental agreements with tenants and agreements with concessionaires in Manager’s name as agent for Company on such terms and conditions as Manager, in its sole discretion, shall determine.  Manager shall have the right to reduce the rental rate by an amount up to ten percent (10%) of the rental rate stipulated on the then current rental schedule approved by Company (if any) if, in Manager’s sole discretion, such reduction is necessary to expedite rental of such space under the competitive rental and economic conditions then prevailing.

4.

Collecting all monthly rentals and other charges due from tenants, all rents and other charges due from concessionaires, users of parking spaces and from users or lessees of other facilities in the Properties.  Company hereby authorizes and directs Manager to request, demand, collect, receive and receipt for any and all charges or rents which may at any time be or become due to Company, and to take such legal action as necessary to evict tenants delinquent in payment of monthly rent and to take such legal action as necessary to collect any rentals owing from tenants.

5.

Causing the buildings, appurtenances and grounds on the Properties to be maintained according to customary industry standards including, but not limited to, landscaping, interior and exterior cleaning, painting and decorating, plumbing, steam fitting, carpentry and other normal maintenance and repair work or any extraordinary maintenance and repair work deemed necessary or desirable by Manager, in Manager’s good faith judgment.

6.

Making contracts for water, electricity, gas, fuel, oil, telephone, pest control, trash removal, insurance and other necessary services as Manager shall deem necessary or desirable, in Manager’s good faith judgment.  Additionally, Manager shall place purchase orders for such equipment, tools, appliances, materials and supplies as are necessary or desirable, in Manager’s good faith judgment, to properly maintain the Properties.  All such contracts and orders may at Manager’s choice be made in either the name of Manager or in the name of Company and shall be on such terms and conditions as Manager deems advisable.  Manager shall use good faith efforts to have such contracts provide that Manager (or Company, as applicable) can terminate on thirty (30) days’ notice.

7.

Taking such action as may be necessary or desirable, in Manager’s good faith judgment, to comply with any orders or requirements affecting the Properties issued by federal, state, county or municipal authority having jurisdiction over the Properties.  Manager shall promptly notify Company of the receipt and contents of any such governmental orders or requirements.

8.

Causing to be disbursed or paid, from the monies collected from the operation of the Properties and such other monies as may or shall be advanced by Company to Manager:  (1) salaries and any other compensation or fees due and payable to Manager and employees of the Properties in connection with the management of the Properties and the cost of workers’ compensation insurance with respect to such employees; (2) payments required to be made to the holders of any mortgages affecting the Properties; (3) current amounts due for premium charges under contracts of insurance for fire and other hazard insurance premiums and amounts due for ad valorem taxes or other assessments on the Properties; (4) sums otherwise due and payable in connection with the operation and management of the Properties, including but not limited to, utility bills, service bills, supply bills license fees and payroll taxes; (5) repair expenses, capital improvement costs and other sums retained for such reserves as Manager deems necessary or desirable, in Manager’s good faith judgment,  for the prudent management and operation of the Properties; and (6) the balance of funds, if any, shall be paid monthly to Company.  Unless otherwise agreed to in writing by Manager and Company, such payments and disbursements shall be made by Manager in any order it may determine.

9.

Verifying appraisals and bills for real estate and personal property taxes, improvement assessments and other like charges which are or may become liens against the Properties.  Manager may pay the bills or take such legal action as necessary to appeal such tax appraisals as Manager may decide, in its reasonable judgment, to be prudent.   

B.

Manager’s Right to Subcontract.  Manager reserves the right, in its sole discretion, to subcontract some or all of the property management and leasing functions described herein to property managers, leasing agents and certain other third parties.  However, except as expressly provided herein, the fees to be paid to Manager under this Agreement are inclusive of fees payable to such third parties and Manager will pay the third parties with whom it subcontracts for these services a portion of its property management or leasing fees.

C.

Company’s Right to Supervise.  Company at all times shall have the right to supervise Manager in its performance of any or all of these activities.  Company shall have the right, if it so elects, to direct Manager in the conduct of any of these activities.  Absent any such direction from Company, Manager shall be entitled to perform its duties hereunder in accordance with its own good faith judgment.

D.

Agency; Payments.  Except for the employment, supervision and discharge of personnel in connection with the maintenance and operation of the Properties, who shall be employees of Manager and not of Company (although all costs with respect to such employees shall, to the extent allocable to the Properties, be deemed costs of the Properties), all action taken by Manager pursuant to the provisions of this Agreement shall be done as agent of Company and obligations or expenses incurred thereunder shall be for the account, on behalf and at the expense of Company, but any such actions may be taken or made either in Company’s name or Manager’s name.  Any payments to be made by Manager hereunder shall be made out of such funds as are available from rentals and 

2

other collections from the Properties and such other monies as may be provided by Company.  In the event anticipated disbursements for Properties expenses and Company management shall in any month be in excess of the anticipated revenues, Company agrees to advance sufficient funds to meet the obligations (including all costs with respect to the employees of the Properties described in Article II(A)(1) hereof, including Affiliates, the Management Fee, reimbursement of expenses described in Article III(A) hereof,) within fifteen (15) days after Manager’s request.  Manager shall not be obligated to make any advance to or for the account of Company or to pay any sum contemplated by this Agreement except out of funds held by Manager on behalf of Company or out of funds provided by Company to Manager, nor shall Manager be obligated to incur any liability of or for the account of Company without assurance or proof from Company that the necessary funds for the discharge thereof will be provided promptly.

E.

Bank Account.  Manager shall establish and maintain, in a manner to indicate the custodial nature thereof, with a bank, whose deposits are insured by the Federal Deposit Insurance Corporation, a separate bank account as agent of Company for the deposit of rentals and collections from the Properties, which shall not be commingled by Manager with funds from other projects or other funds of Manager or its Affiliates.  Manager has authority to draw thereon (a) for any payments to be made by Manager pursuant to the terms of this Agreement, (b) to discharge any liabilities or obligations incurred pursuant to this Agreement, and (c) for the payment of the Management Fee described in Article III(A) hereof and the various expense reimbursements due Manager hereunder. 

F.

Operating Budget.  On or before December 1 of each year, Manager shall prepare and submit to Company for its consent an operating budget with respect to the Properties for the next ensuing calendar year (the “Budget”).  If Company does not consent to the Budget submitted by Manager then, pending such consent or the submission to Manager by Company of an alternative Budget, Manager shall be authorized to rely on the Budget for the prior year, but with a four percent (4%) increase in each line item.

G.

Discretion.  Manager shall have and is hereby granted sole and complete discretion to exercise the powers and functions granted herein and Manager shall not be required to consult with Company or obtain Company’s approval before taking any action permitted hereunder; provided, however, except in cases of emergency, Manager shall not incur any obligation in excess of $10,000.00 without the consent of Company.  The approval by Company of a Budget shall be deemed the consent of Company to the expenses indicated on such Budget.  For these purposes, an “emergency” shall be deemed to exist if in the good faith judgment of Manager, prompt maintenance or repairs are needed in order to prevent death, bodily injury or material property damage.

H.

Records.  Manager shall maintain, or cause to be maintained, books of account of all receipts and disbursements from the management of the Properties.  Manager shall provide monthly statements to Company containing occupancy information and collection and disbursement reports.  Manager shall allow Company’s accountant or other representatives to review the books and records of the Properties during reasonable business hours.  Manager also shall provide Company with an annual report for the Properties containing information about occupancy and receipts and disbursements for the immediately preceding calendar year.

ARTICLE 

COMPENSATION OF MANAGER

.

Property Management.

1.

Management Fee.  Company shall pay to Manager, as base compensation for Manager’s duties and obligations under this Agreement, a property management fee (the “Management Fee”) equal to three percent (3%) of the Effective Gross Revenues (as hereinafter defined) for the management of the Property or Properties managed by Manager hereunder.  Company shall pay the Management Fee to the Manager within ten (10) days after the end of each calendar month, based upon the Effective Gross Revenues during said calendar month.  For purposes of this Agreement, “Effective Gross Revenues” shall mean all payments actually collected from tenants and occupants of the Properties, exclusive of (a) security and deposits (unless and until such deposits have been applied to the payment of current or past due rent) and (b) payments received from tenants in reimbursement of expenses of repairing damage caused by tenants.

2.

Leasing Fee.  If Manager provides leasing services with respect to a Property, Company shall pay to Manager a leasing fee (the “Leasing Fee”) in an amount equal to the leasing fees charged by unaffiliated 

3

persons rendering comparable services in the same geographic location of the applicable property. The Leasing Fee shall be payable upon execution of each lease.

3.

Construction Management Fee.  In the event that Manager supervises the construction or installation of tenant improvements to the Properties, Company shall pay Manager a construction management fee equal to 5% of the costs of the construction or installation of the tenant improvements.

4.

Oversight Fee.  In the event that Company contracts directly with a third-party property manager with respect to a Property, Company shall pay Manager an oversight fee equal to 1% of the Effective Gross Revenues of the Property managed.  In no event will the Company pay both a property management fee and an oversight fee to Manager with respect to any particular property. The foregoing fee shall be payable only from net cash flow from the Property after payment of all sums then due to the holder of the mortgage on the Property.   

5.

Disposition Fee.  If Manager provides a substantial amount of services, as determined by Company’s managers, in connection with the sale of one or more assets, Manager will receive a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset. 

6.

Reimbursement of Expenses.  Company, within fifteen (15) days of a request by Manager, shall reimburse Manager for all reasonable and necessary expenses incurred or monies advanced by Manager in connection with the management and operation of the Properties.  However, Manager shall not be reimbursed for its overhead, including the salaries and expenses of employees relating to the management of the Properties except as expressly provided in Article II(A)(1) hereof.  Manager shall have no obligation to advance any of its own funds for the management of the Properties.

B.

Miscellaneous.  The fees and reimbursements set forth in the Article III are cumulative; and the obligations of Company pursuant to Article III shall survive the termination of this Agreement.

ARTICLE 

TERMINATION

.

Termination.  Notwithstanding anything herein to the contrary, but subject to Article IV(B) below, Manager and Company shall each have the right, upon sixty (60) days prior written notice to the other party to terminate this Agreement in its entirety or as to a specific Property or Properties.

.

Default.  Notwithstanding anything herein to the contrary, either party shall have the right (without limitation of its other rights and remedies) to terminate this Agreement in the event of a default by the other party if such default is not cured within thirty (30) days after written notice is given to the other party (provided that if such default cannot reasonably be cured within such thirty (30) day period, the cure period shall be extended as may reasonably be required provided that the party obligated to cure such default endeavors with diligence to do so).  Additionally, Company shall have the right (without limitation of its other rights and remedies) to immediately terminate this Agreement at any time upon written notice to Manager in the event of Manager’s fraud, gross malfeasance, gross negligence or willful misconduct.

.

Termination Payments.  Upon termination in whole or as to any Properties, Company and Manager shall immediately account to each other with respect to all matters outstanding and all sums owing each other as of the effective date of termination.  Manager shall be entitled to retain copies of such books and records pertaining to such Properties as Manager deems appropriate, provided Manager shall bear the cost of such photocopying.

ARTICLE 

INSURANCE; INDEMNIFICATION OF MANAGER

.

Insurance.  Except as otherwise agreed in writing between the parties hereto, Manager shall maintain (subject to reimbursement as an expense of the Properties) all risk casualty insurance, and public liability insurance for the Properties with a broad form comprehensive general liability endorsement, in such amounts as Manager may deem appropriate.  Any and all other insurance maintained for the Properties shall be the sole responsibility of Company.  Each party shall provide the other with copies of all insurance policies maintained by such party with respect to the Properties.

.

Indemnification.  Manager shall have no liability to Company for any loss suffered by Company which arises out of any action or inaction of Manager if Manager, in good faith, determined that such course of conduct was in the best interest of Company and such course of conduct did not constitute gross negligence or willful misconduct of Manager.  Company shall indemnify Manager against all claims, actions, damages, losses, judgments, liabilities, costs and expenses (including attorneys’ fees) and amounts paid in settlement of any claims sustained by Manager in connection with the management of the Properties and the management services provided pursuant to this Agreement, provided that the same were not the result of fraud, gross negligence or willful misconduct on the part of Manager (collectively, “Unauthorized Acts”).  Manager shall indemnify Company against all claims, actions, damages, losses, judgments, liabilities, costs and expenses (including attorneys’ fees) and amounts paid in settlement of any claims sustained by Company arising out of or in connection with Unauthorized Acts.  Indemnities herein contained shall not apply to any claim with respect to which the indemnified party is covered by insurance, provided that the foregoing exclusion does not invalidate the indemnified party’s insurance coverage.  The indemnification provisions set forth herein shall survive termination of this Agreement.

.

Waiver.  Notwithstanding anything herein to the contrary, each party hereby expressly waives any claim against the other to the extent recoverable by insurance carried or required to be carried by the claimant hereunder.

ARTICLE 

MISCELLANEOUS

.

Binding Obligation; Assignment.  This Agreement shall inure to the benefit of and constitute a binding obligation upon the parties hereto and their respective successors and assigns.  Subject to Article VI(G), no party may assign its rights or delegate its duties hereunder without the prior written consent of the other party, such consent not to be unreasonably withheld.

.

Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the matters set forth herein, and shall not be changed, modified or amended, except by an instrument in writing after this date signed by both of the parties hereto with the same formalities as the execution of this Agreement.

.

Relief.  Company and Manager each shall be entitled to injunctive and other equitable relief to enforce the provisions of this Agreement.

.

Competitive Activities.  Manager (and any Affiliate) may acquire, own, promote, develop, operate and manage real property (or any one or more of the foregoing) on its own behalf or on behalf of any other person or entity.  Manager (and any Affiliate), notwithstanding the existence of this Agreement, may engage in any activity it so chooses, whether such activity is competitive with the Properties or Company or otherwise, without having or incurring any obligation to offer any interest in such activities to Company.  Neither this Agreement nor any activity undertaken pursuant hereto shall prevent Manager (and any Affiliate) from engaging in such activities or require Manager (and any Affiliate) to permit Company to participate in such activities, and, as a material part of the consideration for Manager’s execution hereof, Company hereby waives, relinquishes and reserves any such right or claim of participation.

.

Time Obligation.  Manager shall not be required to spend all of its time in the performance of its duties hereunder, but, rather, shall spend such time as it deems reasonably necessary for the business-like management of the Properties.

.

Notices.  Notices or other communications required or permitted to be given hereunder shall be deemed duly made or given, as the case may be, if in writing, signed by or on behalf of the person making or giving the same, and shall be deemed completed upon the first to occur of receipt or two (2) days after deposit in the United States mail, first class, postage prepaid, addressed to the person or persons to whom such offer, acceptance, election, approval, consent, certification, request, waiver, or notice is to be made or given, at their respective addresses:

If to Company:

Hartman Richardson Tech Center, LLC

2909 Hillcroft

Suite 420

Houston, Texas 77057

Attention:  Office of General Counsel

If to Manager:

Hartman Income REIT Management, Inc.

2909 Hillcroft

Suite 420

Houston, Texas 77057

Attention:  Allen R. Hartman

or, in any case, at such other address as shall have been set forth in a notice sent pursuant to the provisions of this paragraph.

.

Consents; Approval.  Wherever in this Agreement the consent or approval of a party is required, such consent or approval shall not be withheld unreasonably (except as expressly set forth herein to the contrary) and shall be deemed to have been given if the party whose consent or approval is requested does not notify in writing the party requesting such consent or approval otherwise within ten (10) days after receipt of a written request for such consent or approval.

.

Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute one instrument.

.

Situs.  This Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws provisions thereof.

.

Headings.  Article and section titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and shall not be construed in any way to define, limit, extend or describe the scope of any of the provisions hereof.

.

Definitions.  The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.  The singular shall include the plural, and the masculine gender shall include the feminine and neuter, and vice versa, unless the context otherwise requires.

.

Severability; Invalidity.  Each provision of this Agreement shall be considered separable and if for any reason any provision or provisions herein are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement which are valid.

.

Additional Instruments, Acts.  Each of the parties hereto shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intent and purpose of this Agreement and as are not inconsistent with the provisions hereof.

.

Time.  Time is of the essence with respect to the dates set forth in this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written pursuant to due authority.

COMPANY:

HARTMAN RICHARDSON TECH CENTER, LLC,

a Texas limited liability company

By: 

___________________________________

Louis T. Fox, III, Vice President

MANAGER:

HARTMAN INCOME REIT MANAGEMENT, INC.,

a Texas corporation

By:

________________________________________

Allen R. Hartman, President

4

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