Document:

EXHIBIT 10.4

AMENDED AND RESTATED FIRST AMENDMENT 

TO PURCHASE AND SALE AGREEMENT

This
AMENDED AND RESTATED FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “First
Amendment”) is made to be effective as of May 23, 2006, by and among DESTA
ONE PARTNERSHIP, LTD., a Texas limited partnership, DESTA TWO PARTNERSHIP,
LTD., a Texas limited partnership, and DESTA FIVE PARTNERSHIP, LTD., a Texas
limited partnership (collectively, “Seller”) and HARVARD PROPERTY TRUST, LLC, a
Delaware limited partnership (“Buyer”).

RECITALS:

WHEREAS,
Seller and Buyer entered into that certain Purchase and Sale Agreement with an
effective date of May 12, 2006 (the “Contract”), for the purchase and sale
of the Property commonly known as The Terrace and located in Austin, Texas;

WHEREAS, Buyer and Seller have previously entered into
a First Amendment to Purchase and Sale Agreement (the “Prior Agreement”) to
amend the Contract to adjust the Purchase Price and to include the Management
Agreement, the Promissory Note, the Deed of Trust and the Development Agreement
as Exhibits; and

WHEREAS, Buyer and Seller  now desire to amend and restate the Prior
Agreement in its entirety to include the final agreed forms of the Management
Agreement, the Promissory Note, the Deed of Trust and the Development Agreement
as Exhibits; and

WHEREAS,
all capitalized terms used and not defined herein shall have the meanings
ascribed to such terms in the Contract.

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Buyer agree that the Contract shall
be amended as follows:

1.                                       Purchase
Price. The reference to “One Hundred Sixty Seven Million Dollars
($167,000,000)” in the definition of Purchase Price is deleted and “One Hundred
Sixty Six Million, Three Hundred Thousand Dollars ($166,300,000)” is
substituted in lieu thereof.

2.                                       Exhibit N-
Management Agreement. Exhibit N of the Contract is hereby deleted and
the document labeled “Exhibit N” attached hereto and incorporated herein
shall be substituted in lieu thereof.

3.                                       Exhibit O-
Development Agreement. Exhibit O of the Contract is hereby deleted and
the document labeled “Exhibit O” attached hereto and incorporated herein
shall be substituted in lieu thereof.

 __________________________________________________________________________________________
 AMENDED AND RESTATED FIRST AMENDMENT 
 TO PURCHASE AND SALE AGREEMENT                                                                                                   Page 1
  
 

 

 

4.                                       Exhibit P-
Promissory Note. Exhibit P of the Contract is hereby deleted and the
document labeled “Exhibit P” attached hereto and incorporated herein shall
be substituted in lieu thereof.

5.                                       Exhibit Q-
Deed of Trust. Exhibit Q of the Contract is hereby deleted and the
document labeled “Exhibit Q” attached hereto and incorporated herein shall
be substituted in lieu thereof.

6.                                       Counterparts.
Buyer and Seller may execute this First Amendment in one or more identical
counterparts, all of which when taken together will constitute one and the same
instrument. Copied or telecopied signatures may be attached hereto and shall
have the same binding and legal effect as original signatures.

7.                                       Miscellaneous.
Except as amended by this First Amendment, the Contract remains unchanged and
is in full force and effect and the parties ratify same.

EXECUTED to be effective as of the date first written
above.

	
  

  	
   

  	
  SELLER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DESTA ONE PARTNERSHIP, LTD., a Texas limited
  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: Desta One Development Corp., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ L. Paul Latham                                                               

  
	
   

  	
   

  	
   

  	
   

  	
  Name: L. Paul Latham

  
	
   

  	
   

  	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DESTA TWO PARTNERSHIP, LTD., a Texas limited
  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: Desta Two Management Corp., its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ L. Paul Latham                                                               

  
	
   

  	
   

  	
   

  	
   

  	
  Name: L. Paul Latham

  
	
   

  	
   

  	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 __________________________________________________________________________________________
 AMENDED AND RESTATED FIRST AMENDMENT 
 TO PURCHASE AND SALE AGREEMENT                                                                                                   Page 2
  
 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DESTA FIVE PARTNERSHIP, LTD., a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: Desta Five Development Corp., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ L. Paul Latham                                                               

  
	
   

  	
   

  	
   

  	
   

  	
  Name: L. Paul Latham

  
	
   

  	
   

  	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 __________________________________________________________________________________________
 AMENDED AND RESTATED FIRST AMENDMENT 
 TO PURCHASE AND SALE AGREEMENT                                                                                                   Page 3
  
 

 

 

	
  

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HARVARD PROPERTY TRUST, LLC, a Delaware limited
  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ Gerald J. Reihsen, III                                                      

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Gerald J. Reihsen, III

  
	
   

  	
   

  	
   

  	
   

  	
  Title: Secretary

  

 

 

 __________________________________________________________________________________________
 AMENDED AND RESTATED FIRST AMENDMENT 
 TO PURCHASE AND SALE AGREEMENT                                                                                                   Page 4
  

 

EXHIBIT N

MANAGEMENT AGREEMENT

PROPERTY
MANAGEMENT AND LEASING SUBCONTRACT

This PROPERTY MANAGEMENT AND
LEASING SUBCONTRACT (this “Agreement”)
is made and entered into as of the 21st day of June,
2006, by and between HPT MANAGEMENT SERVICES LP, a Texas limited partnership
(the “Manager”), and CLAYDESTA, L.P., a
Texas limited partnership (the “Subcontractor”).

RECITALS

A.            Behringer
Harvard Terrace LP, LLC, a Delaware limited liability company (“Owner”) has acquired the land
described on Exhibit A attached hereto, together with the office
building and related facilities located thereon commonly known as the Terrace
I, located at 2600 Via Fortuna Drive, Austin, Texas, Terrace II, located at
2700 Via Fortuna Drive, Austin, Texas, Terrace V, located at 2901 Via Fortuna
Drive, Austin, Texas, and Terrace VII, located at 2801 Via Fortuna Drive,
Austin, Texas (the “Property”);

B.            Behringer Harvard REIT I, Inc.,
a Maryland corporation (“BH REIT”),
Behringer Harvard Operating Partnership I LP, a Texas limited partnership (“BH OP”), and Manager have entered
into that certain Third Amended and Restated Property Management and Leasing
Agreement dated as of March 20, 2006 (the “Master
Agreement”), pursuant to which BH REIT and BH OP retained
Manager to manage and coordinate the leasing of certain properties acquired by
BH REIT, BH OP or their Affiliates. All rights, benefits, titles and interests
of BH REIT and BH OP under the Master Agreement, as they relate to or arise
from the Property, have been assigned to Owner;

C.            Owner is an affiliate of BH REIT and
BH OP and has retained Manager to manage and coordinate the leasing of the
Property in accordance with the terms of the Master Agreement; and

D.            Manager wishes to subcontract
certain of its duties under the Master Agreement with respect to the management
and operation of the Property, and Subcontractor wishes to perform such duties
and receive the fees and other consideration provided for herein.

NOW, THEREFORE, in consideration of the
premises and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree, as follows:

ARTICLE I

DEFINITIONS

Except
as otherwise specified or as the context may otherwise require, the following
terms have the respective meanings set forth below for all purposes of this
Agreement, and the definitions of such terms are equally applicable both to the
singular and plural forms thereof:

 

 

1.1      “Affiliate”
means, with respect to any Person: (i) any Person directly or indirectly
owning, controlling or holding, with the power to vote, ten percent (10%) or
more of the outstanding voting securities of such other Person; (ii) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with the power to vote, by
such other Person; (iii) any Person directly or indirectly controlling,
controlled by or under common control with such other Person; (iv) any
executive officer, director, trustee or general partner of such other Person;
and (v) any legal entity for which such Person acts as an executive
officer, director, trustee or general partner.

1.2      “Deemed Management Fees”
means the product of (a) the amount of Management Fees earned by
Subcontractor in the calendar month preceding the termination of this Agreement
pursuant to Section 7.2(b) multiplied by (b) the number of
months in the period beginning upon the date of termination of this Agreement
pursuant to Section 7.3(b), and ending on the third (3rd)
anniversary of the date of this Agreement, or if this Agreement is extended
pursuant to Section 7.1, until the end of such extended term.

1.3      “Gross
Revenues” means all amounts actually collected as rents or other
charges for the use and occupancy of the Property, but shall exclude parking
fees, lease termination fees, interest and other investment income of Owner as
well as proceeds received by Owner for a sale, exchange, condemnation, eminent
domain taking, casualty or other disposition of the Property.

1.4      “Improvements”
means buildings, structures, and equipment from time to time located on the
Property and all parking and common areas located on the Property.

1.5      “Lease”
means, unless the context otherwise requires, any lease or sublease of the
Property made by Owner as landlord or by its predecessor, covering any portion
of the Property.

1.6      “Management Fee”
has the meaning set forth in Section 5.1 hereof.

1.7      “Person”
means an individual, corporation, association, business trust, estate, trust,
partnership, limited liability company or other legal entity.

1.8      “Termination Fee”
shall mean a fee payable by Manager to Subcontractor if (and only if) this
Agreement is terminated under Section 7.2(b) hereof and shall be
equal to the present value of the Deemed Management Fees at the time of such
termination, such present value to be determined by discounting on a monthly
basis at the rate of seven percent (7%) per annum.

 

 

1.9      “Wachovia Clearing Account”
shall mean the following Wachovia Bank, National Association account:

	
  Name:

  	
   

  	
  Behringer Harvard Terrace LP

  
	
  Account No.:

  	
   

  	
  5000000140389

  
	
  ABA No.:

  	
   

  	
  053-000-219

  
	
  Address:

  	
   

  	
  Behringer Harvard Terrace LP P.O. Box 60353,

  
	
   

  	
   

  	
  Charlotte, NC 28260-0353

  

 

ARTICLE
II

APPOINTMENT
OF MANAGER; SERVICES TO BE PERFORMED

2.1      Appointment of Subcontractor. Manager
hereby engages and retains Subcontractor as the manager and leasing agent of
the Property, and Subcontractor hereby accepts such appointment on the terms
and conditions hereinafter set forth.

2.2      General Duties. Subcontractor shall
devote its best efforts to performing its duties hereunder to manage, operate,
maintain, and lease the Property in a diligent, careful and vigilant manner. The
services of Subcontractor are to be of scope and quality not less than those
generally performed by professional property managers of other similar
properties in the area. Subcontractor shall make available to Manager and Owner
the full benefit of the judgment, experience and advice of the members of
Subcontractor’s organization and staff with respect to the policies to be
pursued by Owner relating to the operation of the Property.

2.3      Specific Duties. Subcontractor’s
duties include the following:

(a)           Lease Obligations. Subcontractor
shall perform all duties of the landlord under all Leases insofar as such
duties relate to operation, maintenance, and day-to-day management. Subcontractor
shall also provide or cause to be provided, at Owner’s expense, all services
normally provided to tenants of like premises, including where applicable and
without limitation, gas, electricity or other utilities required to be
furnished to tenants under Leases, normal repairs and maintenance, and cleaning
and janitorial service. Subcontractor shall arrange for and supervise the
performance of all installations and improvements in space leased to any tenant
that are either expressly required under the terms of the Lease of such space
or that are customarily provided to tenants.

(b)           Maintenance. Subcontractor
shall cause the Property to be maintained in the same manner as similar
properties in the area. Subcontractor’s duties and supervision in this respect
shall include, without limitation, cleaning of the interior and the exterior of
the Improvements and the public common areas on the Property and the making and
supervision of the repair, alteration, and decoration of the Improvements,
subject to and in strict compliance with this Agreement, the Master Agreement,
and the Leases. Construction activities undertaken by Subcontractor, if any,
will be limited to activities related to the management, operation,
maintenance, and leasing of the Property (e.g., repairs, renovations, and
leasehold improvements).

 

 

(c)           Leasing Functions. Subcontractor
shall coordinate the leasing of the Property and shall negotiate and use its
best efforts to secure executed Leases from qualified tenants, and to execute
same on behalf of Owner, if requested, for available space in the Property,
such Leases to be in form and on terms approved by Owner and Manager, and to
bring about complete leasing of the Property. Manager shall be responsible for
the hiring of all leasing agents, as necessary for the leasing of the Property,
and to otherwise oversee and manage the leasing process on behalf of Owner.

(d)           Notice of Violations. Subcontractor
shall forward to Manager and Owner promptly upon receipt all notices of
violation or other notices from any governmental authority, board of fire
underwriters or any insurance company, and shall make such recommendations
regarding compliance with such notice as shall be appropriate.

(e)           Personnel. Any personnel hired
by Subcontractor to maintain, operate, and lease the Property shall be the
employees or independent contractors of Subcontractor and not of Manager or
Owner. Subcontractor shall use due care in the selection and supervision of
such employees or independent contractors. Subcontractor shall be responsible
for the preparation of and shall timely file all payroll tax reports and timely
make payments of all withholding and other payroll taxes with respect to each
of Subcontractor’s employees.

(f)            Utilities and Supplies. Subcontractor
shall enter into or renew contracts for electricity, gas, steam, landscaping,
fuel, oil, maintenance and other services with respect to the Property as are
customarily furnished or rendered in connection with the operation of similar
rental property in the area.

(g)           Expenses. Subcontractor shall
analyze all bills received for services, work and supplies in connection with
maintaining and operating the Property, pay all such bills when due, and, if
requested by Manager or Owner, pay, when due, utility and water charges, sewer
rent and assessments, and any other amount payable with respect to the Property.
All bills shall be paid by Subcontractor within the time required to obtain
discounts, if any. Manager or Owner may from time to time request that
Subcontractor forward certain bills to Manager or Owner promptly after receipt,
and Subcontractor shall comply with any such request. Subcontractor shall pay
all bills, assessments, real property taxes, insurance premiums and any other
amount payable with respect to the Property out of the Account (as hereinafter
defined). All expenses shall be billed at net cost (i.e., less all rebates,
commissions, discounts and allowances, however designated).

(h)           Monies Collected. Subcontractor
shall timely collect all rent and other monies, in the form of a check or money
order, from tenants and any sums otherwise due Owner with respect to the
Property in the ordinary course of business. Upon the request of Owner or
Manager, Subcontractor shall request, demand, collect and provide receipt for
all such rent and other monies and institute legal proceedings in the name of
Owner for the collection thereof and for the dispossession of any tenant in
default under its Lease.

(i)            Banking Accommodations. Owner
shall establish and maintain a separate checking account (the “Account”) for funds relating to the
Property. All monies deposited from time to time in the Account shall be deemed
to be trust funds and shall be and remain the property of Owner. During such
periods in which Subcontractor is performing the accounting

 

 

functions for the
Property, monies deposited in the Account shall be withdrawn and disbursed by
Subcontractor for the account of Owner only as expressly permitted by this
Agreement for the purposes of performing the obligations of Subcontractor
hereunder. No monies collected by Subcontractor on Owner’s behalf shall be commingled
with funds of Subcontractor. The Account shall be maintained, and monies shall
be deposited therein and withdrawn therefrom, in accordance with the following:

(i)                        All sums
received from rents and other income from the Property shall be promptly deposited
by Subcontractor in the Wachovia Clearing Account. The Account will be funded
primarily through disbursements from the Wachovia Clearing Account. During such
periods in which Subcontractor is performing the accounting functions for the
Property, Subcontractor shall have the right to designate two or more persons
who shall be authorized to draw against the Account, but only for purposes
authorized by this Agreement.

(ii)                     All sums due
to Subcontractor hereunder, whether for compensation, reimbursement for
expenditures, or otherwise, as herein provided, shall be a charge against the
operating revenues of the Property and shall be paid from the Account prior to
the making of any other disbursements therefrom.

(j)            Ownership Agreements. If
Subcontractor is provided with copies of Articles of any Incorporation,
Agreements of Limited Partnership, Joint Venture Partnership Agreements and
Operating Agreements in respect of Owner, as applicable (the “Ownership Agreements”),
Subcontractor shall use reasonable care to avoid any act or omission that, in
the performance of its duties hereunder, shall in any way conflict with the
terms of the Ownership Agreements.

(k)           Signs. Subcontractor shall
place and remove, or cause to be placed and removed, such signs upon the Property
as Subcontractor deems appropriate, subject, however, to the terms and
conditions of the Leases and to any applicable ordinances and regulations.

2.4      Approval of Leases, Contracts, Etc.
In fulfilling its duties to Manager and Owner, Subcontractor may and hereby is
authorized to enter into any leases, contracts or agreements on behalf of Owner
in accordance with Section 3.1.

2.5      Accounting, Records and Reports.

(a)           Records. Subcontractor shall
maintain all office records and books of account and shall record therein, and
keep copies of, each invoice received from services, work and supplies ordered
in connection with the maintenance and operation of the Property. Such records
shall be maintained in accordance with generally accepted accounting principles.
Manager, Owner and persons designated by Manager or Owner shall at all
reasonable times have access to and the right to audit and make independent
examinations of such records, books and accounts and all vouchers, files and
all other material pertaining to the Property and this Agreement, all of which
Subcontractor agrees to keep safe, available and separate from any records not
pertaining to the Property, at a place recommended by Subcontractor and
approved by Manager and Owner.

 

 

(b)           Monthly Reports. On or before
the tenth (10th)
day after the end of each month and during the term of this Agreement,
Subcontractor shall prepare and timely deliver to Manager and Owner a monthly
performance report (the “Monthly Performance Report”),
in the form approved by Owner.

(c)           Budgets and Leasing Plans. Not
later than October 1 of each calendar year, Subcontractor shall prepare
and submit to Manager and Owner for approval an operating budget and a
marketing and leasing plan with respect to the Property for the calendar year
immediately following such submission. The budget and marketing and leasing
plan shall be in the form of the budget and plan approved by Owner prior to the
date thereof. As often as reasonably necessary during the period covered by any
such budget, Subcontractor may submit to Manager and Owner for approval an
updated budget or plan incorporating such changes as shall be necessary to
reflect cost over-runs and the like during such period. If Manager or Owner
fails to disapprove any such budget within thirty  (30) days after receipt thereof by Manager
and Owner, such budget shall be deemed approved. If Manager or Owner shall
disapprove any such budget or plan, it shall so notify Subcontractor within
said thirty  (30) day period and explain
the reasons therefor. If Manager or Owner disapproves of any budget or plan,
Subcontractor shall submit a revised budget or plan within ten (10) days
after receipt of the notice of disapproval, and Manager and Owner shall have
ten (10) days to provide notice to Subcontractor if it disapproves of any
such revised budget or plan. Subcontractor will not incur any costs other than
those estimated in any budget or plan except for:

(i)                        tenant
improvements and real estate commissions required under a Lease;

(ii)                     maintenance or
repair costs under Ten Thousand Dollars and No/100 ($10,000.00);

(iii)                  costs incurred
in emergency situations in which action is immediately necessary for the
preservation or safety of the Property, or for the safety of occupants or other
persons (or to avoid the suspension of any necessary service of the Property);

(iv)                 expenditures for
real estate taxes and assessment in respect of the Property; and

(v)                    maintenance
supplies calling for an aggregate purchase price less than Five Thousand
Dollars and No/100 ($5,000.00) per annum for the Property.

Budgets prepared by Subcontractor shall be for
planning and informational purposes only, and Subcontractor shall have no
liability to Manager or Owner for any failure to meet any such budget except as
provided in Article VII of this Agreement. However, Subcontractor will use
its best efforts to operate within the approved budget.

 

 

(d)           Performance of Accounting Function.
Unless otherwise instructed in writing by Owner, all accounting performed by
Subcontractor in respect of the Property shall be conducted on the computer
system of Manager by means of remote access software (which is MRI as of the
date of this Agreement) and in accordance with Manager’s policies and
procedures for managing agents, as amended from time to time. Subcontractor
acknowledges that an owner of direct or indirect interests in Owner is a
publicly registered entity and that it is of utmost importance that
Subcontractor perform its accounting functions in respect of the Property in an
accurate and timely manner. Notwithstanding anything contained herein to the
contrary, in the event that more than two (2) times in any period of
twelve (12) consecutive months Subcontractor either (i) causes a material
inaccuracy to be present in any financial report prepared by Subcontractor in
respect of the Property, or (ii) fails to prepare and deliver to Owner any
report required by this Agreement in a timely manner, then Owner or Manager
shall have the right at any time thereafter, by written notice to Subcontractor,
to relieve Subcontractor of its accounting and reporting duties under this
Agreement. In such event, the Management Fee defined in Section 5.1 shall
be reduced by 1.5% of Gross Revenues.

(e)           Initial Accounting Period. Manager
and Subcontractor acknowledge that during the period from the effective date of
this Agreement until December 31, 2006, Subcontractor will use all
reasonable efforts to develop its processes to provide the accounting functions
described in subparagraphs (a) — (d) and will use reasonable efforts
during the fourth (4th)
quarter of 2006 to run in tandem with Manager’s accounting services to verify
that Subcontractor’s system will meet Owner’s standards for such services. Manager
agrees to use best efforts to assist Subcontractor (at Subcontractor’s expense)
in meeting Owner’s requirements for the accounting services in order to allow
Subcontractor to take control of accounting services effective January 1,
2007. If on January 1, 2007, Owner is, in good faith, of the reasonable
opinion, based on verifiable evidence provided to Subcontractor by the end of
each month beginning not later than September 30, 2006, that Subcontractor
is unable to meet Owner’s standards for the Accounting Functions, then Owner
may elect to allow Manager to retain the Accounting Functions and Subcontractor’s
Management Fee shall remain at 1.5% of Gross Revenues until such time as
Subcontractor assumes the Accounting Functions. In such event, during 2007
Subcontractor shall continue to run the Accounting Functions in tandem with
Manager, and Manager and Subcontractor (at Subcontractor’s expense) will use
all reasonable efforts in good faith to reach Owner’s standards for
Subcontractor to assume the Accounting Functions by the end of the second (2nd) quarter of 2007.

(f)            Legal Requirements. Subcontractor
shall execute and file when due all forms, reports, and returns required by law
relating to the employment of its personnel. Subcontractor shall be responsible
for notifying Manager and Owner in the event it receives notice that any
Improvement on the Property or any equipment therein does not comply with the
requirements of any statute, ordinance, law or regulation of any governmental
body or of any public authority or official thereof having or claiming to have jurisdiction
thereover. Subcontractor shall promptly forward to Manager and Owner any
complaints, warnings, notices or summonses received by it relating to such
matters. Subcontractor is authorized to disclose the ownership of the Property
by Owner to any such officials. Owner is obligated to indemnify, protect,
defend, save and hold Subcontractor and its stockholders, officers, directors,
employees, managers, successors and assigns (collectively, the “Indemnified Parties”) harmless of
and from any and all Losses (as

 

 

defined in Section 3.5(a) hereof) that may
be imposed on them or any or all of them by reason of the failure of Owner to
correct any present or future violation or alleged violation of any and all
present or future laws, ordinances, statutes, or regulations of any public
authority or official thereof, having or claiming to have jurisdiction
thereover, of which it has actual notice; provided, however, that the foregoing
indemnity shall not be applicable to any violation of law caused by Subcontractor
or any Affiliate of Subcontractor known by Subcontractor or any Affiliate of
Subcontractor prior to Owner’s acquisition of the Property.

2.6      Subcontractor shall maintain an office
at the Property. Owner shall provide Suite 525 of Terrace VII to Subcontractor.
1500 square feet of Suite 525 shall be at no cost to Subcontractor during
the term of this Agreement. Owner will charge Subcontractor a market rental for
the excess of 1,186 square feet (initially to be $17 psf-net). Subcontractor
shall have the option to renew its Lease at market rate for a period of three (3) years.

ARTICLE
III

AUTHORITY
GRANTED TO SUBCONTRACTOR AND CERTAIN OWNER OBLIGATIONS

3.1      Authority As To Tenants, Etc. Manager
hereby delegates to Subcontractor the following authority and powers (all of
which shall be exercised either in the name of Subcontractor, as manager of the
Property, or in the name of Owner entered into by Subcontractor as Owner’s
authorized agent, and Owner shall assume all expenses in connection with such
matters):

(a)           to advertise the Property or any part
thereof and to display signs thereon, as permitted by law;

(b)           to lease the Property to tenants
(subject to Owner’s approval);

(c)           to pay all expenses of leasing the
Property, including but not limited to, newspaper and other advertising,
signage, banners, brochures, referral commissions, leasing commissions, finder’s
fees, fees of attorneys approved by Manager, and salaries, bonuses and other
compensation of leasing personnel responsible for the leasing of the Property;

(d)           to cause references of prospective
tenants to be investigated, it being understood and agreed by the parties
hereto that Subcontractor does not guarantee the creditworthiness or
collectibility of accounts receivable from tenants, users or lessees; and to
negotiate new Leases and renewals and cancellations of existing Leases, all of
which shall be subject to Manager’s and Owner’s approval;

(e)           to charge tenants all or any of the
following, subject to the approval of Owner and Manager and in accordance with
the terms of the applicable Lease: a late rent administrative charge, a
non-negotiable check charge, credit report fee, a subleasing administrative
charge and/or broker’s commission; and Subcontractor shall account for such
charges and/or commission to Manager;

 

 

(f)            to terminate tenancies at the
Property and to sign and serve in the name of Owner such notices as are deemed
necessary by Subcontractor;

(g)           to institute and prosecute actions to
evict tenants and to recover possession of the Property or portions thereof;
and

(h)           with Owner’s and Manager’s
authorization, to sue for and in the name of Owner and recover rent and other
sums due; and to settle, compromise, and release such actions or suits, or
reinstate such tenancies. All expenses of litigation including, but not limited
to, attorneys’ fees, filing fees, and court costs that Subcontractor shall
incur in connection with the collecting of rent and other sums, or to recover
possession of the Property or any portion thereof, shall be deemed to be an
operational expense of the Property. Subcontractor, Manager, and Owner shall
concur on the selection of the attorneys to handle such litigation.

3.2      Operational Authority. Manager
hereby delegates to Subcontractor the following authority and powers (all of
which shall be exercised either in the name of Subcontractor, as manager of the
Property, or in the name of Owner entered into by Subcontractor as Owner’s
authorized agent, and Owner shall assume all expenses in connection with such
matters):

(a)           to hire, supervise, discharge, and
pay all labor required for the operation and maintenance of the Property
including but not limited to on-site personnel, managers, assistant managers,
leasing consultants, engineers, janitors, maintenance supervisors and other
employees required for the operation and maintenance of the Property, including
personnel spending a portion of their working hours (to be charged on a pro
rata basis) at the Property. All expenses of such employment shall be deemed
operational expenses of the Property to the extent set forth in an approved
budget or otherwise authorized by this Agreement;

(b)           to make or cause to be made all
ordinary repairs and replacements necessary to preserve the Property in its
present condition and for the operating efficiency thereof and all alterations
required to comply with lease requirements, and to decorate the Property as
requested from time to time by the Manager;

(c)           to negotiate and enter into contracts
for all items on budgets that have been approved by Owner and Manager, any
emergency services or repairs for items not exceeding Fifteen Thousand Dollars
and No/100 ($15,000.00), appropriate service agreements and labor agreements
for normal operation of the Property, which have terms not to exceed twelve (12)
months, and agreements for all budgeted maintenance, minor alterations, and
utility services, including, but not limited to, electricity, gas, fuel, water,
telephone, window washing, scavenger service, landscaping, snow removal, pest
exterminating, decorating and legal services in connection with the Leases and
service agreements relating to the Property, and other services or such of them
as Subcontractor may consider appropriate; and

(d)           to purchase supplies and pay all
bills.

Subcontractor
shall use its best efforts to obtain the foregoing services and utilities for
the Property under terms that are as cost-effective and otherwise favorable to
Subcontractor as possible for the quality of services and utilities required. Subcontractor
is authorized to execute, as agent for Owner, all such contracts. In addition,
Owner agrees to specifically assume in

 

 

writing all
obligations under all such contracts so entered into by Subcontractor, on
behalf of Owner, upon the termination of this Agreement, and Owner shall
indemnify, protect, save, defend and hold Subcontractor and the other
Indemnified Parties harmless from and against any and all Losses resulting
from, arising out of or in any way related to such contracts and that relate to
or concern matters occurring after termination of this Agreement, but excluding
matters arising out of Subcontractor’s negligence or misconduct. Subcontractor
shall secure the approval of Manager and Owner, and execution of appropriate
contracts by Owner, for any non-budgeted and non-emergency/contingency capital
items, alterations or other expenditures in excess of Five Thousand Dollars and
No/100 ($5,000.00) for any one item, securing for each item at least three (3) written
bids, if practicable, or providing evidence satisfactory to Manager and Owner
that the contract amount is lower than industry standard pricing, from
responsible contractors. Subcontractor shall not contract with or make
purchases from Affiliates of Subcontractor without the prior written approval
of Owner. Subcontractor may at any time and from time to time request and
receive the prior written authorization of Owner of the Property of any one or
more purchases or other expenditures, notwithstanding that Subcontractor may
otherwise be authorized hereunder to make such purchases or expenditures.

3.3      Rent and Other Collections. Manager
hereby delegates to Subcontractor the following authority and powers (all of
which shall be exercised either in the name of Subcontractor, as manager of the
Property, or in the name of Owner entered into by Subcontractor as Owner’s
authorized agent, and Owner shall assume all expenses in connection with such
matters):  to collect rents and/or
assessments and other items, including but not limited to tenant payments for
real estate taxes, property liability and other insurance, damages and repairs,
common area maintenance, tax reduction fees and all other tenant
reimbursements, administrative charges, proceeds of rental interruption
insurance, parking fees, income from coin operated machines and other
miscellaneous income, due or to become due and give receipts therefore and to
deposit all such Gross Revenue collected hereunder in the Account. Subcontractor
may endorse any and all checks received in connection with the operation of any
Property and drawn to the order of Owner, and Owner shall, upon request,
furnish Subcontractor’s depository with an appropriate authorization for
Subcontractor to make such endorsement. Subcontractor shall also have the
authority to collect and handle tenants’ security deposits, including the right
to apply such security deposits to unpaid rent, and to comply, on behalf of
Owner, with applicable state or local laws concerning security deposits and
interest thereon, if any. Subcontractor shall not be required to advance any
monies for the care or management of the Property. Owner agrees to advance all
monies necessary therefor. If Subcontractor shall elect to advance any money in
connection with the Property, Owner agrees to reimburse Subcontractor forthwith
and hereby authorizes Subcontractor to deduct such advances from any monies due
Owner. In connection with any insured losses or damages relating to the
Property, Subcontractor shall have the authority to handle all steps necessary
regarding any such claim; provided that Subcontractor will not make any
adjustments or settlements in excess of Ten Thousand Dollars and No/100
($10,000.00) without the prior written consent of Manager and Owner.

3.4      Payment of Expenses. If directed by
Manager in writing, Subcontractor shall pay all expenses of the Property from
the Gross Revenue collected in accordance with Section 3.3 above and
deposited in the Account, but only if the funds in the Account are sufficient
for such

 

 

payments. If
directed by Manager in writing, Subcontractor shall forward to Manager invoices
and such other information with respect to expenses of the Property as
requested by Manager in order to allow Manager to make payment of such expenses.
In the event of an emergency which requires the emergency expenditure of funds,
Subcontractor will contact Manager with an explanation of the emergency. If
Manager determines to make expenditures to address the emergency, Manager shall
wire sufficient funds into the Account within one (1) business day to
allow Subcontractor to address the emergency.

3.5      Certain Owner Indemnification
Obligations.

(a)           On Termination. In the event
this Agreement is terminated for any reason prior to the expiration of its
original term or any renewal term, Owner shall indemnify, protect, defend, save
and hold Subcontractor and all of the other Indemnified Parties harmless from
and against any and all claims, causes of action, demands, suits, proceedings,
loss, judgments, damage, awards, liens, fines, costs, attorney’s fees and
expenses, of every kind and nature whatsoever (collectively, “Losses”), which may be imposed on
or incurred by Subcontractor by reason of the willful misconduct, gross
negligence, and/or unlawful acts (such unlawfulness having been adjudicated by
a court of proper jurisdiction) of Owner.

(b)           Property Damage, Etc. Owner
agrees to indemnify, defend, protect, save and hold Subcontractor and all of
the other Indemnified Parties harmless from any and all Losses in connection
with or in any way related to the Property and from liability for damage to the
Property and injuries to or death of any person whomsoever, and damage to
property; provided, however, that such indemnification shall not extend to any
such Losses arising out of the negligence or willful misconduct of Subcontractor
or any of the other Indemnified Parties. Subcontractor shall not be liable for
any error of judgment or for any mistake of fact or law, or for any thing that
it may do or refrain from doing, except in cases of negligence or willful
misconduct.

3.6      Environmental Matters. Owner hereby
warrants and represents to Subcontractor that, to the best of Owner’s
knowledge, the Property will not be used to treat, deposit, store, dispose of
or place any hazardous substance that may subject Subcontractor to liability or
claims under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C.A. Section 9607) or any constitutional
provision, statute, ordinance, law, or regulation of any governmental body or
of any order or ruling of any public authority or official thereof, having or
claiming to have jurisdiction thereover. Furthermore, Owner agrees to
indemnify, protect, defend, save and hold harmless Subcontractor and all of the
other Indemnified Parties from any and all Losses involving, concerning or in
any way related to any future (but not current or past) treatment, depositing,
storage, disposal or placement by any party other than Subcontractor of
hazardous substances on the Property.

3.7      Legal Status of Properties. Owner authorizes
Subcontractor to disclose the identity of the Owner of the Property to any
governmental officials and agrees to indemnify, protect, defend, save and hold
Subcontractor and the other Indemnified Parties harmless of and from any and
all Losses that may be imposed on them or any of them by reason of the failure
of Owner to correct any present or future violation or alleged violation of any
and all present or future laws, ordinances, statutes, or regulations of any
public authority or official thereof, having

 

 

or claiming to
have jurisdiction thereover, of which it has actual notice; provided,
however, that the foregoing indemnity shall not be applicable to any violation
of law caused by Subcontractor or any Affiliate of Subcontractor known by
Subcontractor or any Affiliate of Subcontractor prior to acquisition of the
Property by Owner. In the event it is alleged or charged
that any Improvement or any equipment on the Property or any act or failure to
act by Owner with respect to the Property or the sale, rental, or other
disposition thereof fails to comply with, or is in violation of, any of the
requirements of any constitutional provision, statute, ordinance, law, or
regulation of any governmental body or any order or ruling of any public
authority or official thereof having or claiming to have jurisdiction
thereover, and Subcontractor, in its sole and absolute discretion, considers
that the action or position of Owner, with respect thereto may result in damage
or liability to Subcontractor, Subcontractor shall have the right to cancel
this Agreement at any time by written notice to Owner of its election so to do,
which cancellation shall be effective upon the service of such notice. Such
cancellation shall not release the indemnities of Owner set forth in this
Agreement and shall not terminate any liability or obligation of Manager or
Owner to Subcontractor for any payment, reimbursement, or other sum of money
then due and payable to Subcontractor hereunder.

ARTICLE
IV

EXPENSES

4.1      Owner’s Expenses. Except as
otherwise specifically provided in this Agreement, all costs and expenses
incurred hereunder by Subcontractor in fulfilling its duties to Owner shall be
for the account of and on behalf of Owner. Such costs and expenses shall
include the wages and salaries and other employee-related expenses of all
on-site and off-site employees of Subcontractor who are engaged in the
operation, management, maintenance and leasing or access control of the
Property, including taxes, insurance and benefits relating to such employees,
and legal, travel and other out-of-pocket expenses that are directly related to
the management of the Property, to the extent set forth in a budget approved by
Owner and Manager. All costs and expenses for which Owner is responsible under
this Agreement shall be paid by Subcontractor out of the Account. In the event
the Account does not contain sufficient funds to pay all said expenses, Owner
shall fund all sums necessary to meet such additional costs and expenses.

4.2      Subcontractor’s Expenses. Subcontractor
shall, out of its own funds, pay all of its general overhead and administrative
expenses.

ARTICLE V

MANAGER’S
COMPENSATION

5.1      Management Fee. Commencing on the
date hereof, Owner shall pay Subcontractor a property management fee (the “Management Fee”) of 1.5% of Gross
Revenues until such time as Owner allows Subcontractor to provide the
accounting functions describe in subparagraphs (a)-(d) of Section 2.5,
at which time the Management Fee shall increase to 3.0% of Gross Revenues. The
Management Fee payable hereunder shall be paid on a monthly basis

 

 

from the rental
income comprising Gross Revenues received from the Property over the term of
this Agreement.

5.2      Leasing Fees. In addition to the
compensation paid to Subcontractor under Section 5.1 above, Subcontractor
shall be entitled to receive a separate fee for the Leases of new tenants and
renewals of Leases with existing tenants in an amount not to exceed the fee
customarily charged in arm’s length transactions by others rendering similar
services in the same geographic area for similar properties as determined by a
survey of brokers and agents in such area. The compensation to be paid to
Subcontractor with respect to Leases is set forth on Exhibit B
attached hereto and made a part hereof. Any sub-leasing agreement between
Subcontractor and a third-party broker must be (i) approved by Manager or
Owner and (ii) must be terminable by Owner on thirty (30) days notice. Manager
and Owner acknowledge that they have approved the Exclusive Leasing Agency
Agreement between Subcontractor and Colliers of Texas Real Estate Services, LLC
dated as of May 12, 2006.

5.3      Audit Adjustment. If any audit of
the records, books or accounts relating to the Property discloses an
overpayment or underpayment of Management Fees, Manager or Subcontractor shall
promptly pay to the other party the amount of such overpayment or underpayment,
as the case may be. If such audit discloses an overpayment of Management Fees
for any fiscal year of more than one hundred five percent (105%) of the correct
Management Fees for such fiscal year, Subcontractor shall bear the reasonable
out-of-pocket cost of such audit.

5.4      Construction Management. In the
event Subcontractor assists with planning and coordinating the construction of
any tenant-paid finish-out or improvements, Subcontractor shall be entitled to
receive from any such tenant (but not from Owner) an amount equal to not
greater than five percent (5.0%) of the cost of such tenant improvements.

5.5      Limitation on Compensation. Notwithstanding
anything contained herein to the contrary, in no event shall Manager (or Owner)
be obligated to pay Subcontractor compensation under this Article V in
excess of the compensation that Manager is entitled to receive under Article V
of the Master Agreement. So long as this Agreement remains in effect, Manager
and Owner shall not enter into any amendment of the Master
Agreement that would result in a reduction in the compensation
payable to Manager in respect of the Property, unless either (a) Subcontractor’s
written consent to such amendment is obtained, or (b) Manager delivers to
Subcontractor a written agreement whereby Manager agrees to pay to
Subcontractor any loss of compensation incurred by Subcontractor that results
from such amendment.

ARTICLE
VI

INSURANCE
AND INDEMNIFICATION

6.1      Property Insurance. Owner shall
cause to be placed and kept in force at Owner’s expense, causes of loss-Special
form commercial property insurance for the Property that contains coverages and
is issued by companies that are acceptable to Owner, in Owner’s sole

 

 

discretion. Such policy(ies) shall name Owner as the
named insured and any mortgagee(s) as loss payee. Policy terms an
conditions shall comply with the requirements of the applicable mortgage(s) and
leases affecting the Property.

6.2      Personal Property of Subcontractor.
Neither Owner nor Manager shall be liable to Subcontractor, its employees,
agents, customers or invitees for loss or damage to their personal property and
business records located at the Property. Subcontractor shall obtain and keep
in full force and effect during the term of this Agreement extended coverage
property insurance covering one hundred percent (100%) of the replacement cost
of Subcontractor’s personal property. Subcontractor shall procure from its
insurers waivers of subrogation with respect to claims against Owner and/or
Manager under policies in which Owner and/or Manager is not named an additional
insured.

6.3      Liability Insurance. Owner or
Manager shall at all times during the term of this Agreement carry Commercial
General Liability (“CGL”)
insurance with respect to each Property in an amount of not less than Two
Million Dollars and No/100 ($2,000,000.00). Subcontractor shall at all times
during the term of this Agreement carry CGL insurance covering the actions
taken by Subcontractor in performing its obligations under this Agreement with
minimum limits of at least Two Million Dollars and No/100 ($2,000,000.00)
issued by an insurance company acceptable to Owner. Owner, Manager and
Subcontractor shall be named as an additional insured, respectively in such
policy of each other.

6.4      Workers’ Compensation and Employer’s
Liability Insurance. Owner and/or Manager shall carry Worker’s Compensation
insurance in statutory amounts. In addition, Owner and/or Manager shall carry
Employer’s Liability Insurance in not less than the following amounts:

(a)           $1,000,000 bodily injury by accident,
each accident;

(b)           $1,000,000 bodily injury by disease,
each employee; and

(c)           $1,000,000 bodily injury by disease,
policy limit.

6.5      Property Losses. Subcontractor
shall promptly investigate and report to Owner, Manager, and/or either’s
insurance carrier all claims for damage to the Property. Subcontractor is
authorized to settle claims for damage to Owner’s Property up to a maximum of
Ten Thousand Dollars and No/100 ($10,000.00). Property claims in excess of Ten
Thousand Dollars and No/100 ($10,000.00) shall, at Owner’s option, be settled
by Owner or Manager.

6.6      Cooperation with Insurers. Subcontractor
shall cooperate with and provide reasonable access to the Property to
representatives of insurance companies and insurance brokers or agents with
respect to insurance that is in effect or for which application has been made. Subcontractor
shall use its best efforts to comply with all requirements of insurers.

6.7      Accidents and Claims. Subcontractor
shall promptly investigate and shall report in detail to Owner and Manager,
promptly after Subcontractor obtains knowledge thereof, all accidents, claims
for damage relating to ownership, operation or maintenance of the Property, and
any damage or destruction to the Property and the estimated costs of repair
thereof, and shall prepare for approval by Manager and Owner all reports
required by an insurance company in

 

 

connection with
any such accident, claim, damage, or destruction. Such reports shall be given
to Manager and Owner within forty-eight (48) hours of any such accident, claim,
damage, or destruction, and shall also be noted in the monthly operating
statement delivered to Manager and Owner pursuant to Section 2.5(b).
Subcontractor shall assist Owner and Manager with Owner’s settlement of any
claim against an insurance company arising out of any policy, in executing
proofs of loss and adjustments of loss, and in collecting and receiving loss
proceeds.

6.8      Certificates of Insurance. Subcontractor
shall collect from all tenants of the Property certificates of insurance
evidencing the existence of all insurance required by each tenant’s lease. Subcontractor
shall use its best efforts to obtain a new certificate of insurance from each
tenant at least twenty (20) days prior to the date on which an insurance policy
described in a certificate of insurance previously delivered by the tenant
would expire. Subcontractor shall promptly forward to Owner and Manager copies
of all certificates of insurance collected, and Subcontractor shall retain the
original of each certificate for its tenant file.

6.9      Contractors and Vendors. Subcontractor
shall require that all parties performing work on or with respect to the
Property (except for parties performing work for a tenant whose lease includes
a lesser insured amount), including, without limitation, contractors,
subcontractors, materialmen and service vendors, maintain insurance coverage at
such party’s expense, in the following minimum amounts:

	
  

  	
   

  	
  (a)

  	
   

  	
  Worker’s Compensation:

  	
   

  	
  Statutory Amount

  
	
   

  	
   

  	
  (b)

  	
   

  	
  Employer’s Liability:

  	
   

  	
  $1,000,000 bodily injury by accident, each accident;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $1,000,000 bodily injury by disease, each employee;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $1,000,000 bodily injury by disease, policy limit

  
	
   

  	
   

  	
  (c)

  	
   

  	
  Comprehensive General

  	
   

  	
  $1,000,000 each occurrence;

  
	
   

  	
   

  	
   

  	
   

  	
  Liability, including Broad Form Endorsement:

  	
   

  	
  $2,000,000 general aggregate

  
	
   

  	
   

  	
  (d)

  	
   

  	
  Umbrella Liability: 

  	
   

  	
  $1,000,000

  

 

Subcontractor
must obtain Owner’s and Manager’s written permission prior to waiving any of
the above insurance requirements. Upon prior notice to Subcontractor, Owner
and/or Manager shall have the right to increase the amounts of insurance
described above and to require additional insurance. Subcontractor shall obtain
and keep on file a certificate of insurance evidencing the existence of the
coverages described above prior to permitting any contractor, subcontractor, materialman
or vendor to work on the Property.

6.10    Indemnification.

(a)           Subcontractor hereby agrees to
indemnify, hold harmless and defend Owner, Manager and all Affiliates of Owner
and Manager from and against any and all claims, losses, damages, demands, liabilities,
obligations, rights of action and expenses (including, but not limited to,
attorneys’ fees) that may arise, directly or indirectly, from or in connection
with

 

 

Subcontractor’s
negligence, willful misconduct, or any actual or alleged misrepresentations
made by Subcontractor or its employees or agents to tenants, prospective
tenants, other real estate brokers or other third parties; Subcontractor’s
violation of any law or regulation applicable to real estate brokers or sales
persons generally; or Subcontractor’s failure to pay any commission it has
agreed to pay to a cooperating broker. This indemnity shall survive the
termination of this Agreement.

(b)           Owner shall indemnify and hold
Subcontractor harmless from and against all claims, damages and costs
(including, but not limited to, reasonable attorneys’ fees) arising out of or
in connection with the management of the Property and the operation thereof,
except for acts of Subcontractor not authorized by this Agreement, acts of
discrimination as defined by Title VII of the Civil Rights Act of 1964, acts of
negligence or willful misconduct of Subcontractor, its employees and agents
(collectively, “Unauthorized Acts”).
Subcontractor shall indemnify and hold Owner harmless from and against all
claims, damages and costs (including, but not limited to, attorneys’ fees)
determined to have arisen out of or in connection with Unauthorized Acts. The
indemnities contained herein shall survive the termination of this Agreement.

ARTICLE
VII

TERM AND
TERMINATION

7.1      Term. This Agreement shall commence
on the date first above written and shall continue until the last day of the
thirty-sixth (36th)
full calendar month after the date of this Agreement, subject to the provisions
of Sections 7.2, 7.3 and 7.4 below. Unless terminated by either party on thirty
(30) days notice prior to the end of such term, the Agreement shall
automatically renew on an annual basis thereafter.

7.2      Events of Termination. Notwithstanding
anything contained herein to the contrary, this Agreement shall terminate upon (a) the
sale of the Property to a party which is not an Affiliate of Owner; (b) termination
or expiration of the Master Agreement or (c) termination of this Agreement
as provided in Section 7.3 or Section 7.4 hereof. In
event that this Agreement is terminated prior to the third (3rd)
anniversary of the date first written above (or if this Agreement is extended
pursuant to Section 7.1, prior to the end of such extended term) by reason
of the termination or expiration of the Master Agreement, then Owner, at its
option, shall enter into a direct management agreement with the Subcontractor
under the same terms and conditions, or shall pay Subcontractor the Termination
Fee within thirty (30) days after the effective date of such termination.

7.3      Termination by Manager. Manager
shall have the right to terminate this Agreement upon written notice to
Subcontractor upon the occurrence of any of the following events:

(a)           Subcontractor fails in any respect to
perform a material obligation under this Agreement and such failure is not
cured (i) within five (5) days after
notice of such failure from

 

 

Owner if the failure involves the payment of money, or (ii) within thirty (30) days after notice of such
failure from Owner if the failure involves action other than the payment of
money.

(b)           Subcontractor files a petition or
case seeking relief under the liquidation provisions of any bankruptcy or other
debtor relief laws of the United States or any state or other competent
jurisdiction.

(c)           The occurrence
of an event whereby (i) a petition or case is filed against Subcontractor
seeking relief under the bankruptcy, arrangement, reorganization or other
debtor relief laws of the United States or any state or other competent
jurisdiction, or (ii) a court of competent jurisdiction enters an order,
judgment or decree appointing a receiver or a trustee for Subcontractor, or for
all or any part of the property of Subcontractor, and such petition, order,
judgment or decree is not discharged within one hundred eighty (180) days after
the entry thereof.

(d)           Subcontractor fails to provide to
Manager within fifteen (15) days after request by Manager customary, reasonable
and truthful certifications as Manager may reasonably request to enable Manager
or Owner to meet its financial certification obligations under the
Sarbanes-Oxley Act of 2002 as such statute relates to financial reporting in
respect of the Property. Any such certification may be given by Subcontractor
to its actual knowledge without any duty of investigation.

(e)           Subcontractor experiences a “Change
of Control.” “Change of Control” shall mean an event or a series of related
events wherein the Subcontractor ceases to be directly or indirectly controlled
by Clayton W. Williams, Modesta S. Williams or a child of Clayton W. Williams, Jr.

(f)            If in any two consecutive calendar
quarters the Property fails to achieve the gross revenues set forth in the approved
budget in respect of such quarter in which shall be based upon reasonable
absorption rates for vacant space mutually agreed to by Subcontractor and
Manager, and Subcontractor fails to achieve such gross revenues within one
calendar quarter after written notice of such failure given by Manager or Owner
to Subcontractor, it being understood and agreed that Manager and Subcontractor
shall, in good faith, update and amend the approved budget annually in
connection with the annual budget approval process in respect of the Property.

(g)           If in any three consecutive monthly
periods, tenant delinquencies exceed 3% of the gross revenues set forth in the
approved budget attached hereto, and Subcontractor fails to reduce such
delinquencies within one calendar quarter after written notice of such failure
given by Manager or Owner to Subcontractor, it being understood and agreed that
Manager and Subcontractor shall, in good faith, update and amend the approved
budget annually in connection with the annual budget approval process in
respect of the Property. For purposes of the calculation used in this section,
Manager and Owner shall exclude tenants in default under their lease
obligations for more than 30 days if such default was not caused by the
Subcontractor. Owner and Manager shall not be required to give notice to cure
this default more than two times in any twelve month period.

 

 

(h)            If in any two consecutive calendar
quarters the Project fails to achieve the levels of those operating expenses (“Controllable
Expenses”) listed on the approved budget which are subject to Subcontractor’s
reasonable control (which shall not include taxes, insurance rate increases,
utility rate increases, increases due to requirements of law, or system
failures or breakdowns) and Subcontractor fails to achieve such levels of
operating expenses within one calendar quarter after written notice of such
failure given by Manager to Subcontractor, it being understood and agreed that
Manager and Subcontractor shall, in good faith, update and amend the approved
budget annually in connection with the annual budget approval process in
respect of the Property.

(i)            If, in Owner’s reasonable
discretion, the Property is no longer being managed in a manner consistent with
the management standards for Class A office space in the Austin, Texas,
and such failure is not cured within thirty (30) days after notice of such
failure from Owner; provided, however, that if such failure is not reasonably
susceptible of cure within such thirty (30) day period, and if Subcontractor
promptly commences cure of such failure and diligently pursues such cure, then
the cure period for such failure shall be extended for such period of time as
is reasonably necessary to cure such failure, up to a maximum of ninety (90)
days after notice of such failure.

7.4      Termination by Subcontractor. Subcontractor
shall have the right to terminate this Agreement upon written notice to Manager
and Owner upon the occurrence of any of the following events:

(a)           Manager or Owner fails in any respect
to perform a material obligation under this Agreement (i) within
five (5) days after notice of such failure from Subcontractor if the
failure involves the payment of money, or (ii) within
thirty (30) days after notice of such failure from Subcontractor if the failure
involves action other than the payment of money.

(b)           Manager or Owner files a petition or
case seeking relief under the liquidation provisions of any bankruptcy or other
debtor relief laws of the United States or any state or other competent
jurisdiction.

(c)           The
occurrence of an event whereby (i) a petition or case is filed against
Manager or Owner seeking relief under the bankruptcy, arrangement,
reorganization or other debtor relief laws of the United States or any state or
other competent jurisdiction, or (ii) a court of competent jurisdiction
enters an order, judgment or decree appointing, without the consent of Manager
or Owner, a receiver or a trustee for Manager or Owner, as the case may be, or
for all or any part of their respective property, and such petition, order,
judgment or decree is not discharged within one hundred eighty (180) days after
the entry thereof.

(d)           Ninety (90) days written notice of
termination.

7.5      Subcontractor’s Obligations Upon
Termination. Upon the termination of this Agreement, Subcontractor shall
have the following duties:

 

 

(a)           Subcontractor shall deliver to
Manager or its designee, all books and records with respect to the Property.

(b)           Subcontractor shall transfer and
assign to Manager, or its designee, all service contracts and personal property
relating to or used in the operation and maintenance of the Property, except
personal property paid for and owned by Subcontractor. Subcontractor shall
also, for a period of sixty (60) days immediately following the date of such
termination, make itself available to consult with and advise Manager, or its
designee, regarding the operation, maintenance and leasing of the Property.

(c)           Subcontractor shall render to Manager
an accounting of all funds of Owner in its possession and shall deliver to
Manager a statement of all Management Fees claimed to be due to Subcontractor
and shall cause funds of Owner held by Subcontractor relating to the Property
to be paid to Manager or its designee.

7.6      Manager’s Obligations Upon Termination.
Manager shall pay or reimburse Subcontractor for any sums of money due it under
this Agreement for services and expenses prior to termination of this Agreement.
All provisions of this Agreement that require Owner or Manager to have insured,
or to protect, defend, save, hold and indemnify or to reimburse Subcontractor
shall survive any expiration or termination of this Agreement and, if
Subcontractor is or becomes involved in any claim, proceeding or litigation by
reason of having been Subcontractor hereunder, such provisions shall apply as
if this Agreement were still in effect.

ARTICLE VIII

MISCELLANEOUS

8.1      Subject to Master Agreement. This
Agreement is subject and subordinate in all respects to the Master Agreement. Subcontractor
has received a copy of the Master Agreement and is familiar with the terms
thereof. Subcontractor shall perform its duties under this Agreement in
accordance with the Master Agreement and will not, by its act or omission to
act, cause a default under the Master Agreement. Notwithstanding the above,
Owner and Manager agree that the Master Agreement shall not amend the rights of
the Subcontractor in Section 2.3 (i)(iii), 2.5(c)(ii) and 3.2(c) of
this Agreement.

8.2      Notices. All
notices, approvals, consents and other communications hereunder shall be in
writing, and, except when receipt is required to start the running of a period
of time, shall be deemed given when delivered in person or on the fifth day
after its mailing by either party by registered or certified United States
mail, postage prepaid and return receipt requested, to the other party, at the
addresses set forth after their respect name below or at such different
addresses as either party shall have theretofore advised the other party in
writing in accordance with this Section 8.2.

	
  Manager:

  	
   

  	
  HPT MANAGEMENT SERVICES LP

  15601 Dallas Parkway, Suite 600

  Addison, Texas 75001

  Attention: Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
  Owner:

  	
   

  	
  Behringer Harvard Terrace LP

  c/o Behringer Harvard REIT I, Inc.

  15601 Dallas Parkway, Suite 600

  Addison, Texas 75001

  Attention: Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
  Subcontractor:

  	
   

  	
  ClayDesta, L.P.

  6 Desta Drive, Suite 6500

  Midland, Texas 79705

  Attention: L. Paul Latham

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  w/copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Robert V. Rendall, Jr.

  Stubbeman, McRae, Sealy, Laughlin & Browder, Inc.

  550 W. Texas Avenue, Suite 800

  Midland, Texas 79701

  

 

8.3      Governing Law; Venue. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, and any action brought to enforce the agreements made hereunder
or any action which arises out of the relationship created hereunder shall be
brought exclusively in Dallas County, Texas.

8.4      Assignment. Subcontractor may not
assign or delegate its duties and rights under this Agreement without the prior
written consent of Manager and Owner. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.

8.5      No Waiver. The failure of Manager,
Subcontractor or Owner to seek redress for violation or to insist upon the
strict performance of any covenant or condition of this Agreement shall not
constitute a waiver thereof for the future.

8.6      Amendments. This Agreement may be
amended only by an instrument in writing signed by the party against whom
enforcement of the amendment is sought.

8.7      Headings. The headings of the
various subdivisions of this Agreement are for reference only and shall not
define or limit any of the terms or provisions hereof.

 

 

8.8      Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart.

8.9      Entire Agreement. This Agreement
contains the entire understanding and all agreements between Manager and
Subcontractor respecting the management of the Property. There are no
representations, agreements, arrangements or understandings, oral or written,
between Manager and Subcontractor relating to the management of the Property
that are not fully expressed herein.

8.10    Disputes. If there shall be a dispute
between or among Manager, Subcontractor or Owner relating to this Agreement
resulting in litigation, the prevailing party in such litigation shall be
entitled to recover from the other party to such litigation such amount as the court
shall fix as reasonable attorneys’ fees.

8.11    Activities of Subcontractor. Subcontractor
shall not engage in other activities or business ventures that are in
competition with the business of Owner at the Property.

8.12    Independent Contractor. Subcontractor
shall not be construed as a joint venturer or partner of either Manager or
Owner pursuant to this Agreement, and none of such parties shall have the power
to bind or obligate the other party except as set forth herein. It is the
intent of the parties that: (a) the status of Manager to Owner under the
Master Agreement is that of an independent contractor; (b) the status of
Subcontractor to Manager under this Agreement is that of an independent
contractor; and (c) the status of Subcontractor to Owner is that of an
independent subcontractor.

8.13    No Third-Party Rights. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy
or claim under or with respect to this Agreement or any provision of this
Agreement, except such rights as shall inure to a successor or permitted
assignee pursuant to Section 8.4.

8.14    Documents Required by Lender. In the
event that a mortgagee of the Property (a “Mortgagee”)
requests that Subcontractor execute a document in connection with a loan to
Owner, Subcontractor will respond to such request promptly and will not
unreasonably withhold its consent to such document. Without limiting the
generality of the preceding sentence, Subcontractor agrees that it will execute
and deliver the following documents within five (5) days after request
therefor: (a) an agreement that a Mortgagee may terminate this Agreement
if a default occurs in respect of the loan secured by the Property; (b) an
estoppel certificate certifying that this Agreement is in full force and effect
and containing such other certifications as may be reasonably requested; (c) an
agreement subordinating this Agreement to any mortgage or deed or trust held by
a Mortgagee; and (d) a waiver by Subcontractor of any right to assert a
lien against the Property. Subcontractor shall use reasonable care to avoid any
act or omission that, in the performance of its duties hereunder, shall in any
way conflict with the terms of any mortgage documents in respect of the
Property, provided that Subcontractor has been furnished with copies of such
mortgage documents.

 

 

8.16    Compliance Amendments.
Notwithstanding anything contained herein to the contrary, in the event that
legal counsel for Owner reasonably determines that an amendment to this
Agreement is necessary or advisable in order for this Agreement to comply with
applicable securities laws, the offering documents pertaining to Behringer
Harvard REIT I, Inc., a Maryland corporation, or the Statement of
Policy Regarding Real Estate Programs of the North American Securities
Administrators Association, Inc., effective September 29, 1993, as
amended, then Manager and Subcontractor shall, within ten (10) days
after request from Owner, execute such an amendment; provided, however, that no
such amendment may decrease the compensation to which Subcontractor is entitled
hereunder or materially increase Subcontractor’s liabilities or
obligations under this Agreement without Subcontractor’s written consent.

[THE REMAINDER OF THIS PAGE HAS BEEN
INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties have executed this
Property Management and Leasing Subcontract as of the date first above written.

 

	
  

  	
   

  	
  MANAGER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HPT MANAGEMENT SERVICES LP,

  
	
   

  	
   

  	
  a Texas limited
  partnership

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III, Secretary

  

 

 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SUBCONTRACTOR:

  
	
   

  	
   

  	
  CLAYDESTA, L.P., a Texas limited
  partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Claydesta Operating, LLC, 

  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:
                                                                                            

  
	
   

  	
   

  	
   

  	
   

  	
        L.
  Paul Latham, President

  

 

 

 

CONSENT OF OWNER

By its execution
below, Owner consents to the terms of the foregoing Agreement and agrees to be
bound by the representations, warranties and covenants of Owner contained in
such Agreement.

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BEHRINGER HARVARD
  TERRACE LP,

  
	
   

  	
   

  	
  a Delaware limited
  partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Behringer
  Harvard Terrace GP, LLC,

  a Delaware limited liability company, its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:
                                                                                            

  
	
   

  	
   

  	
   

  	
   

  	
        Gerald J.
  Reihsen, III, Secretary

  

 

 

 

 

Exhibit A

Legal Description

TRACT 1: Lot(s) 1
(Terrace II Office Building) and 2 (Terrace I Office Building), Block “C” THE
TERRACE, SECTION FOUR, a subdivision in Travis County, Texas, according to
the map or plat thereof, recorded in Volume 97, Page(s) 115-116 of
the Plat Records of Travis County, Texas.

TRACT 2 (Terrace VII
Office Building): Lot 1, Block “E” THE TERRACE SECTION SIX, a subdivision
in Travis County, Texas, according to the map or plat thereof, recorded under
Document No. 200000362 of the Official Public Records of Travis County,
Texas; TOGETHER WITH a non-exclusive easement for vehicular and pedestrian
traffic, created in that certain Declaration of Easements and Restrictions
dated December 4, 2000, recorded in Document No. 2000193470 of the
Official Public Records of Travis County, Texas, being over and across a 0.3109
acre parcel of land, more or less, as described in Exhibit “A-2”
therein, the same being a portion of Lot 3, Block “B” THE TERRACE SECTION SEVEN,
a subdivision in Travis County, Texas, according to the map or plat thereof,
recorded under Document No. 200109072 of the Official Public Records of
Travis County, Texas.

TRACT 3 (Terrace V Office Building): Lot 3, Block
“B” of THE TERRACE SECTION SEVEN, a subdivision in Travis County, Texas,
according to the map or plat thereof, recorded under Document No. 200100072
of the Official Public Records of Travis County, Texas; TOGETHER WITH (i) a
non-exclusive easement for vehicular and pedestrian traffic, created in that
certain Declaration of Easements and Restrictions dated December 4, 2000,
recorded in Document No. 2000193470 of the Official Public Records of
Travis County, Texas, being over and across a 0.1695 acre parcel of land, more
or less, as described in Exhibit “A-1” therein, the same being a
portion of Lot 1, Block “E” THE TERRACE SECTION SIX, a subdivision in
Travis County, Texas, according to the map or plat thereof, recorded under
Document No. 200000362 of the Official Public Records of Travis County,
Texas, and (ii) non-exclusive easement for vehicular and pedestrian
traffic, created in that certain Declaration of Easements and Restrictions
dated May 22, 2002, recorded under Document No. 2002101061 of the
Official Public Records of Travis County, Texas, being over and across a
portion of Lot 2, Block “B” THE TERRACE SECTION SEVEN, a subdivision in
Travis County, Texas, according to the map or plat thereof, recorded under
Document No. 200100072 of the Official Public Records of Travis County,
Texas, as more particularly described in Exhibit “B” therein.

 

 

Exhibit B

Leasing Commissions

New Leases with outside Broker — 6%
of aggregate rent payable over the term of the Lease

New Lease without outside Broker—4%
of aggregate rent payable over the term of the Lease

Renewal Leases — 4% of aggregate
rent payable over the term of the Lease extension

 

 

EXHIBIT O

DEVELOPMENT AGREEMENT

DEVELOPMENT
OPTION AGREEMENT

This
is an agreement made effective as of June 21, 2006, between W&G
Partnership, Ltd., Desta Three Partnership, Ltd., and Desta Six Partnership,
Ltd. (herein together referred to as “Owner”), and BEHRINGER HARVARD HOLDINGS,
LLC, a Delaware limited liability company 
(“Harvard”).

ARTICLE I

RECITALS

a.                                       As
of the date of this Agreement, pursuant to that Purchase and Sale Agreement between
Desta One Partnership, Ltd., Desta Two Partnership, Ltd, and Desta Five
Partnership, Ltd, as Seller, and Behringer Harvard Terrace LP (“Harvard Terrace”),
as Buyer (the “Purchase Agreement”), Harvard Terrace has acquired from certain
affiliates of Owner those certain office buildings known as The Terrace I, II,
V and VII Buildings (the “Terrace Property”). In addition, Owner is the owner
of the development tracts described on Attachment #1 attached hereto (the “Development
Land”).

b.                                      The
Development Property is subject to certain restrictions and development
parameters described in the Declarations of Covenants, Conditions and
Restrictions for The Terrace Planned Unit Development recorded in Volume 12740,
Page 260, of the Real Property Records of Travis County, Texas, and in the
Restrictive Covenants, Terrace P.U.D., City of Austin Zoning File No. C814-86-009
as recorded in Volume 10252, Page 135, of the Real Property Records of
Travis County, Texas (together referred to as the “Restrictive Covenants”).

c.                                       Owner
has agreed to grant Harvard a right of first offer relating to the acquisition
and development of the Development Property. In consideration for funds paid
pursuant to the Purchase Agreement, and in consideration of Ten and 00/100
($10.00) cash and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Harvard and Owner agree as
follows:

ARTICLE II

DEVELOPMENT OF DEVELOPMENT PROPERTY

a.                                       Owner
and Harvard agree that, subject to the terms of this Agreement, Harvard shall
have an exclusive right of first offer to participate in the future development
of each parcel of the Development Land. Development of the Development Land
shall be governed by a Development Agreement to be entered into by the New
Development 

 

 

Entity (as herein defined) and ClayDesta, L.P. (“Developer”)
which will include the terms outlined in Attachment
#2 and 2A.

b.                                      At
such time as Owner determines to develop any parcel of the Development Land,
Owner shall advise Harvard of its proposed project by presenting a proposal
including a detailed proforma of Owner’s proposal (the “Offer Notice”). Said
Offer Notice shall include a development plan, a development budget, pro forma
income and expense estimates for the cost of development, including project
interest costs. Harvard shall advise Owner in writing within fifteen (15)
business days following receipt of the Offer Notice if Harvard desires to
participate in development of the parcel of Development land under the terms
proposed by Owner. Should Harvard elect not to participate in the development
of a parcel of Development Land or should Harvard fail to give Owner written
notice of its intent to participate in such development within fifteen (15)
business days of receipt of the Offer Notice, Owner shall be free to develop
the parcel of Development Land in the manner described in the Offer Notice
without the participation of Harvard. If, after Harvard’s election not to
participate in the development of a parcel of Development Land, Owner desires
to pursue development of such parcel of Development Land in a manner materially
different than presented to Harvard in the Offer Notice, then Owner shall first
present a revised Offer Notice for Harvard’s review in accordance with this
Agreement. As used herein the term “materially different” shall mean a proposal
(i) with a reduction of hard costs for the development of the parcel of
Development Property which is 10% or greater than set forth in the Offer Notice
or (ii) with a projected change in cash returns to Owner and Harvard of
more than 10% greater than set forth in the Offer Notice.

c.                                       Should
Harvard give notice of its intent to participate in the development of said
parcel of Development Land, Owner and Harvard shall promptly form an entity in
which to develop such parcel of Development Land (“New Development Entity”). Owner
and Harvard shall mutually agree on the fair market value of the parcel of
Development Land which Owner shall contribute to the New Development Entity. Should
Owner and Harvard be unable to agree upon the fair market value of the parcel
of Development Land, then Owner and Harvard shall submit the issue to
arbitration using the following procedure. Within ten (10) days after
Owner has advised Harvard of its election to proceed with arbitration, Owner
and Harvard shall each at their own expense, select an appraiser, each who
shall be a qualified and impartial person licensed in the State of Texas as an
MAI appraiser with not less than five (5) years experience in appraising
undeveloped commercial property in Travis County, Texas. Within thirty (30)
days of appointment, each appraiser shall render a written opinion as to the
value of the parcel. If the appraisals are within 10% of each other, the value
of the parcel shall be the average of the two appraisals. If the appraisals
differ by more than 10%, then the appraisers shall jointly appoint a third
appraiser who shall render an appraisal (“Third Appraisal”) within thirty (30)
days of appointment. Whichever of the first two appraisals the Third Appraisal
is closest to shall be the fair market value of the parcel. Harvard and Owner
agree the arbitration process shall not delay Owner from proceeding with the
development process for the 

 

 

parcel of Development Land. Harvard and Owner will
amend the formation documents for the New Development Entity at the conclusion
of the arbitration process, if such amendments are required.

d.                                      Harvard’s
equity contribution shall be used to fund architectural fees, engineering fees,
other professional fees, the cost of application for appropriate permits from
governmental entities as well as any of the costs associated with development
of such parcel.

e.                                       The
New Development Entity will be owned in percentage to be determined by Owner
and Harvard, provided Harvard shall own not less than 50% of the New
Development Entity and Owner, by means of the contribution of the parcel of
Development Land and cash, shall, at Owner’s sole option, own up to 50% of the
New Development Entity. The governing document of the New Development Entity
shall provide:

(i)                                     the
distributions from the New Development Entity will be in the same percentage as
ownership of the New Development Entity until Harvard receives a 25% IRR on its
contributed equity and thereafter distributions will be 25% to Harvard and 75%
to Owner;

(ii)                                  a
four (4) to six (6) year hold strategy;

(iii)                               a
buy-sell arrangement at fair market value if either party desires to sell a
completed building after four (4) years;

(iv)                              any
project must be 50% preleased prior to commencement of construction;

(v)                                 neither
party shall propose development of a parcel unless the proforma reflects not
less than a return of eleven percent (11%) on the total estimated cost for
development of such parcel, assuming a five percent (5%) tenant vacancy rate;
and

(vi)                              Owner
may assign all or part of its ownership interest to entities owned and/or
controlled by Clayton W. Williams, Jr., Modesta S. Williams and/or the
children of Clayton W. Williams, Jr., without the consent of Harvard.

f.                                         In
the event Harvard determines it desires to develop any parcel of the
Development Land, Harvard shall advise Owner of its proposed project by
presenting a proposal including a detailed proforma of Harvard’s proposal (“Harvard’s
Offer Notice”). The Harvard Offer Notice shall include a development plan, a
development budget, proforma income and expense estimates for the cost of
development, including project interest costs. Owner shall advise Harvard in
writing within fifteen (15) business days if Owner desires to participate in
development of the parcel of 

 

 

Development Land under the terms proposed by Harvard. Should
Owner elect not to participate in the development of a parcel of Development
Land or should Owner fail to give Harvard written notice of its intent to
participate in such development within fifteen (15) business days of receipt
of, Owner shall convey said parcel of Development Land to Harvard at the fair
market value of said parcel plus 80% of all actual costs previously paid to
third parties for engineering and architectural plans associated with
development of Terrace III or Terrace VI at such time as those parcels are
developed. If Harvard and Owner cannot agree upon the fair market value of the
parcel, Harvard and Owner shall utilize the procedure described in paragraph c
above to determine the fair market value of the parcel. Should Owner give
notice to Harvard of its intent to participate in the development of said
parcel of Development Land in accordance with the Harvard Offer Notice, Owner
and Harvard shall proceed under the provisions of paragraphs c, d and e of this
Article II and ClayDesta, L.P., shall be the Developer under the terms of
a Development Agreement.

ARTICLE III

TERMINATION OF RIGHT OF FIRST OFFER

a.                           Owner
and Harvard agree that should Harvard decline to participate in the development
of parcels of Development Land, Owner shall have the right to terminate this
Agreement as to the remainder of the undeveloped Development Land upon the
second proposal relating to the second separate parcel which Harvard declines
to be a participant.

b.                          Owner and
Harvard agree that, should a Development Agreement not be executed relating to
at least one of the parcels of Development Land on or before August 1, 2011, this Agreement may be terminated by Owner by giving written notice to
Harvard.

c.                           Owner
and Harvard agree that should the Management Agreement with ClayDesta, L.P.,
executed pursuant to the Purchase Agreement be terminated by Harvard Terrace
without cause, this Agreement may be terminated by Owner by giving written
notice to Harvard. In this event, Owner agrees that for a period of 60 months
following termination of the Management Agreement, Owner (including its agents,
affiliates and property managers) will not solicit for relocation any tenant of
any portion of the Terrace Property or any portion of the Development Land
owned by Harvard or an affiliate of Harvard. In the event that ClayDesta, L.P.
terminates the Management Agreement, this agreement shall continue.

ARTICLE IV

GENERAL PROVISIONS

a.    Governing Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Texas.

 

 

b.    Captions Not Binding; Exhibits. The
captions in this Agreement are inserted for reference only and in no way
define, describe or limit the scope or intent of this Agreement or of any of
the provisions hereof. All Exhibits attached hereto shall be incorporated by
reference as if set out herein in full.

c.    Binding Effect. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

d.    Severability. If any term or provision
of this Agreement or the application thereof to any persons or circumstances
shall, to any extent, be invalid or unenforceable, the remainder of this
Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby, and each term and provision of this Agreement shall
be valid and enforced to the fullest extent permitted by Law.

e.    Notices. Any notice, request,
demand, consent, approval and other communications under this Agreement shall
be in writing, and shall be deemed duly given or made at the time and on the
date when received by facsimile (provided that the sender of such communication
shall orally confirm receipt thereof by the appropriate parties and send a copy
of such communication to the appropriate parties within one (1) Business
Day of such facsimile) or when personally delivered as shown on a receipt
therefore (which shall include delivery by a nationally recognized delivery
service such as Federal Express, UPS Next Day Air, Purolator Courier, U.S. Mail
or Airborne Express) or sent via e-mail, to the address for each party set
forth below. Any party, by written notice to the other in the manner herein
provided, may designate an address different from that set forth below.

 

	
  If to Harvard:

  	
   

  	
  BEHRINGER HARVARD HOLDINGS, LLC,

  15601 Dallas Parkway, Suite 600

  Addison, Texas 75001-6026

  Attention: James D. Fant

  Telephone No.: (214) 655-1600 

  Telecopy No.: (214) 655-1610

  E-mail: jfant@behringerharvard.com

  
	
   

  	
   

  	
   

  
	
  with a
  copy to:

  	
   

  	
  Powell & Coleman

  15601 Dallas Parkway, Suite 1380

  Addison, Texas 75001-6026

  Attention: Randy Osborne

  Telephone No.: (214) 890-7116

  Telecopy No.: (214) 373-8768

  E-mail: rosborne@psclaw.com

  

 

 

 

	
  If to Owner:

  	
   

  	
  W&G Partnership, Ltd.

  6 Desta Drive, Suite 6500

  Midland, Texas 79705

  Attention: L. Paul Latham

  Telephone No.: (432) 688-3212

  Telecopy No.: (432) 688-3247

  E-mail: platham@claytonwilliams.com

  
	
   

  	
   

  	
   

  
	
  with a
  copy to:

  	
   

  	
  Stubbeman McRae Sealy Laughlin &
  Browder, Inc.

  550 W. Texas Ave, Ste. 800

  Midland, Texas 79701

  Attn: Robert V. Rendall, Jr.

  Telephone No.: (432) 688-0246

  Telecopy No.: (432) 682-4884

  E-mail: rrendall@stubbemanlawfirm.com

  

 

f.     Assignability. This
Agreement may not be assigned in whole or in part by either party hereto
without the prior written consent of the other, provided Owner shall have the
right to assign all or any part of this Agreement to an Affiliate of Owner AND
Harvard shall have the right to assign all or any part of this Agreement of an
Affiliate of Harvard. As used herein “Affiliate of Owner” shall mean any entity
owned or controlled by Clayton W. Williams, Jr., Modesta S. Williams or
the children of Clayton W. Williams, Jr.

g.    Counterparts. This
Agreement may be executed in counterparts, each of which shall be an original
and all of which counterparts taken together shall constitute one and the same
agreement.

h.    No Recordation. Harvard and Owner each
agrees that neither this Agreement nor any memorandum or notice hereof (except
as otherwise specifically authorized herein) shall be recorded.

 

 

Executed effective June 21, 2006.

 

	
  OWNER:

  
	
   

  
	
  W & G Partnership, Ltd.

  
	
   

  
	
  By:

  	
   

  	
  ClayDesta L.P.

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  ClayDesta Operating L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Desta Three Partnership, Ltd.

  
	
   

  
	
  By:

  	
   

  	
  Desta Three Development Corp.

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
  Desta Six Partnership, Ltd.

  
	
  By:

  	
   

  	
  Desta Six Development Corp.

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
  

  
	
  HARVARD:

  
	
   

  
	
  BEHRINGER HARVARD
  HOLDINGS, LLC

  
	
   

  
	
   

  
	
   

  
	
  By:                                                                 

  
	
   

  
	
  Name:                                                            

  
	
   

  
	
  Title:                                                              

  

 

 

 

ATTACHMENT
#1

DEVELOPMENT
PROPERTY

TRACT #1 — (Terrace VI Office Building): Lot(s) 2, Block
“B” THE TERRACE, SECTION SEVEN, a subdivision in Travis County, Texas,
according to the map or plat thereof, recorded under Document No. 200100072
of the Official Public Records of Travis County, Texas.

TRACT #2 — (Terrace III Office Building): Lot(s) 2,
Block “A” THE TERRACE, SECTION FIVE, a subdivision in Travis County,
Texas, according to the map or plat thereof, recorded under Document No. 200000361
of the Official Public Records of Travis County, Texas.

TRACT
#3 — (Hotel Site): Lot(s) 1, Block “A” THE TERRACE, SECTION FIVE, a
subdivision in Travis County, Texas, according to the map or plat thereof,
recorded under Document No. 200000361 of the Official Public Records of
Travis County, Texas.

TRACT
#4 — (Terrace IV Office Building): Lot(s) 1, Block “B” THE TERRACE, SECTION SEVEN,
a subdivision in Travis County, Texas, according to the map or plat thereof,
recorded under Document No. 200100072 of the Official Public Records of
Travis County, Texas.

TRACT
#5 — (Retail Site): Lot 2, Block “E” of THE TERRACE SECTION SIX, a
subdivision in Travis County, Texas, according to the map or plat thereof,
recorded under Document No. 200000362 of the Official Public Records of
Travis County, Texas.

 

 

ATTACHMENT
#2

TERMS
OF DEVELOPMENT AGREEMENT

Any Development
Agreement executed in connection with this Agreement shall contain the
following key terms:

1.             The Developer shall have the
authority to sign documents on behalf of the Owner provided the identified
documents are consistent with the intended construction and use of the Project
as set forth in the final development budget. [As used in this Attachment #2,
the term “Owner” shall mean the New Development Entity].

2.             Within 30 days following execution
of the Development Agreement, Developer shall provide an updated development
plan and development budget adequate for presentation to a third party lender
(the “Development Budget”).

3.             During the term of the Development
Agreement, Developer will be required to provide Owner with a monthly progress
report at the beginning of each month detailing the amount of work on the
Project which has been completed in the previous period in relation to the
schedule for the Project. This report shall also include (i) a detailed
summary of costs and payments, (ii) a marketing status report, and (iii) an
updated construction schedule, each in a format to be supplied prior to
commencement of construction

4.             The terms of the Development Fee and
related issues are included in Attachment 2A.

5.             Owner shall have the right to
terminate the Development Agreement in if one or more of the following events
shall occur:

(a)           the filing by Developer of a
voluntary petition in bankruptcy, the filing by a creditor of an involuntary petition
in bankruptcy which is not dismissed within ninety (90) days, the adjudication
of Developer as bankrupt or insolvent, the filing by Developer of any petition
or answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, assignment for the benefit of creditors, or similar
relief for debtors;

(b)           a failure by Developer to pay any
amounts or monetary obligations due and owing to Owner which is not cured
within ten (10) days following receipt of written notice by Owner
specifying such default;

(c)           failure
by Developer to achieve Substantial Completion of the Project within
one-hundred twenty (120) days after the scheduled date of Completion set forth
in the Project Schedule (as may be adjusted pursuant to a Development
Agreement). As used herein the term “Substantial Completion” shall mean the
issuance of a Certificate of Occupancy for the building shell by the City of
Austin, Texas;

(d)           a good faith determination by Owner prior
to commencement of construction that
completion of the Project is not economically feasible;

 

 

(e)           Total
Project Costs exceed the amount scheduled in the Development Budget in excess
of ten percent (10%) excluding (i) interest costs, (ii) items to be
paid by tenants of the building, (iii) design changes required by law, (iv) increase
resulting from Force Majeure Events, (v) delays caused by the General
Contractor or any subcontractor, (vi) change orders requiring written
consent of the Owner, or (vii) change orders which are funded through contingency
items in the Development Budget (Items (i) through (vii) herein
referred to as “Budget Adjustments”); or

(f)            a
material default by Developer under this Agreement that is not cured within
thirty (30) days following receipt of written notice from Owner specifying the
default; provided, however, that if such default cannot be cured within such
thirty (30) day period through the use of diligent efforts, such period shall
be extended for an additional thirty (30) days; provided, further, that if Developer
promptly commences such cure and thereafter diligently prosecutes such cure but
is unable to complete such cure within the aforesaid two thirty (30) day
periods, Developer shall be afforded an additional sixty (60) days to complete
such cure.

6.             For purposes of the Development
Agreement, “Force Majeure Events” shall consist of abnormal weather
patterns that affect critical path construction, acts (or the failure to act)
by the other party to this Agreement, uncontrollable delay in issuance of
permits, changes in governmental laws, enemy or hostile governmental action,
civil commotion, and fire or other casualty. The party seeking to excuse delay
in performance by reason of a Force Majeure Event must, no later than the tenth
(10th) day of the calendar month immediately following the calendar month in
which such Force Majeure Event occurs, notify the other party thereof in
writing, and of the cause or causes thereof.

7.             So long as the Management Agreement
has not been terminated, prior to substantial completion of the Project the New
Development Entity will enter into a Property Management and Leasing
Subcontract on the same terms found in the current Property Management and
Leasing Subcontract between HPT Management Services, LP and ClayDesta, L.P.

 

 

ATTACHMENT
#2A

Development
Fee Provisions

COMPENSATION

1.             Development Fee. For all services
rendered in connection with the development of the project pursuant to the
terms of the Development Agreement to be executed by Owner and Developer,
Developer shall be paid a fee (the “Development Fee”) equal to 4% of the
actual Controllable Construction Costs for the project. The Development Fee
shall be subject to possible reduction as set forth in Paragraph 3 below. For
purposes hereof, the term “Controllable Construction Costs” shall have the
meaning set forth below. During construction of the project, until the date of
Completion for the project, the Development Fee shall be paid monthly, on the
tenth (10th) day
of each calendar month, based on the budgeted Controllable Construction Costs
and beginning on the first day of the month following the date of commencement
of construction of the project in accordance with the following formula:

3% of
Controllable Construction Costs

(less amounts advanced prior to commencement)

_______________________________________________
(Divided by)

Number of months in the projected construction
schedule.

Any portion of the Development Fee remaining unpaid as
of the date of Completion shall be paid to Developer within thirty (30) days
after the date of Completion. The Development Fee shall be Developer’s full and
complete compensation for the performance of duties, services, efforts and/or
activities in connection with the development of the project. The term “Completion”
shall mean the issuance of a Certificate of Occupancy for the building shell by
the City of Austin, Texas;

2.             Advances on Development Fee. Notwithstanding
the provisions of paragraph 1 above, Developer shall receive an advance against
the Development Fee prior to the commencement of construction of the project
pursuant to the provisions of this Paragraph 2. The amount of such advance
shall be $25,000 per month beginning on the date that the New Development
Entity formed (as described in the Development Option Agreement) acquires title
to the Development Land upon which the project is to be constructed and ending
on the earlier of (a) the Development Agreement is terminated, or (b) the
date construction of the project commences. Not more than twenty percent (20%)
of the Development Fee shall be paid to Developer prior to commencement of
construction. The advance payable with respect to any partial calendar month
during such period shall be prorated on a per diem basis. The amount of all
advances paid to Developer shall be deducted from the Development Fee payable
to Developer under paragraph 1. At such time as the Terrace III and Terrace VI
Buildings are developed, W&G Partnership, Ltd., shall be reimbursed for 80%
of the actual costs previously paid to third parties for engineering and
architectural plans for each such building.

 

 

3.             Adjustment to Development Fee. Prior to
the final payment described in paragraph 1, a determination shall be made as to
whether the Development Fee should be reduced, as follows:

(a)           If the Controllable Construction
Costs actually incurred to complete the project exceed the Controllable
Construction Costs set forth in the final Development Budget for the project
plus the Budget Adjustments, then the Development Fee shall be reduced by the
lesser of (i) the amount by which incurred Controllable Construction Costs
exceed the Controllable Construction Costs set forth in the Development Budget,
or (ii) one percent (1%) of the incurred Controllable Construction Costs;
and

(b)           If
the date of Completion is more than sixty (60) days after the date of
Completion projected in the Project Schedule (as adjusted for Force Majeure)
and delays resulting from Tenant delay, then the Development Fee shall be
reduced in the following manner:  (A) if
the date of Completion occurs more than thirty (30) days after the projected
date of Completion but not later than forty five (45) days after the projected
Date of Completion, then the Development Fee shall be reduced by .125% of
Controllable Construction Costs; (B) if the date of Completion occurs more
than forty five (45) days after the projected date of Completion but not later
than sixty (60) days after the projected Date of Completion, then the
Development Fee shall be reduced by .25% of Controllable Construction Costs; (C) if
the date of Completion occurs more than sixty (60) days after the projected
date of Completion but not later than seventy five (75) days after the
projected Date of Completion, then the Development Fee shall be reduced by
..375% of Controllable Construction Costs; and (D) if the date of
Completion occurs more than seventy five (75) days after the projected Date of
Completion, then the Development Fee shall be reduced by .5% of Controllable
Construction Costs.

(c)           Notwithstanding
the foregoing provisions of this paragraph 3, in no event shall the aggregate
decrease in the Development Fee pursuant to subparagraph 3(a) and (b) above
exceed one percent (1%) of Controllable Construction Costs.

4.             No Other Compensation. Other than the
Development Fee and construction management fees for tenant build-out, if any,
Developer shall be entitled to no compensation under this Agreement, nor will
Developer be entitled to any reimbursement of expenses except as expressly set
forth in this Agreement. Without limiting the generality of the preceding
sentence, it is specifically agreed that Developer will not be entitled to
reimbursement for (a) the salary and wages, payroll taxes, insurance,
workers’ compensation and other benefits of any employees of Developer; (b) the
cost of forms, papers, ledgers and other supplies and equipment used in the
Developer’s office; (c) the cost of electronic data processing or computer
services that Developer may elect to incur in the performance its duties under
this Agreement; (d) the cost of office equipment acquired by Developer to
enable it to perform its duties hereunder; or (e) the cost of advances
made to employees of Developer. However, the cost of travel and lodging by
Developer’s employees and agents shall be reimbursable in accordance with the
Development Budget approved by Owner.

As used in this Agreement, the term “Controllable
Construction Costs” means the amounts actually expended in connection with
the development of the Project (to be allocated among the Phases as set forth herein
and in the Development Budget), consisting of the

 

 

following items: 
civil and structural engineering costs; costs of site development; costs
of labor and materials; the fees of the Architect and Consultants; the cost of
the General Contractor for the base building shells, parking garage and other
improvements included in the project; the cost of acquiring and installing base
building, common area and lobby fixtures and any other items covered by the
base building construction contract; landscaping costs; and testing costs; but
specifically excluding, without limitation, Land acquisition costs, ad valorem
and other taxes, the costs of insurance premiums, and debt service.

 

 

EXHIBIT P

PROMISSORY NOTE

 

PROMISSORY NOTE

 

June 21, 2006

1.             Key Terms

	
  Borrower:

  	
  W&G Partnership, Ltd.

  
	
   

  	
   

  
	
  Borrower’s Mailing
  Address: 

  	
  6 Desta Drive, Suite 6500

  Midland, Texas 79701

  
	
   

  	
   

  
	
  Lender:

  	
  Behringer Harvard Operating Partnership I LP,

  a Texas limited partnership

  
	
   

  	
   

  
	
  Place for Payment: 

  	
  c/o Behringer
  Harvard REIT I, Inc.
15601 Dallas Parkway, Suite 600

  Addison, Texas 75001-6026

  Attention:  Treasurer

  
	
   

  	
   

  
	
  Principal Amount:

  	
  $3,000,000.00

  
	
   

  	
   

  
	
  Annual Interest Rate:

  	
  7.75% per annum

  
	
   

  	
   

  
	
  Maturity Date:

  	
  June 21, 2013

  
	
   

  	
   

  
	
  Default Rate:

  	
  12% per annum

  
	
   

  	
   

  

2.             Terms of Payment
(principal and interest):

Interest only, calculated at the annual rate of 6.50%,
shall be due and payable monthly as it accrues on the 15th day of each month,
beginning July 15, 2006, and continuing through the Maturity Date. The
difference between the Annual Interest Rate and 6.50% shall be accrued and
added to the Principal Amount annually on the anniversary date of this Note. On the Maturity Date, the unpaid Principal Amount
balance and accrued, unpaid interest will be payable in full. Payments will be
applied first to accrued interest and the remainder to reduction of the
Principal Amount.

Borrower shall have the right to prepay all or any
part of the Principal Amount at any time. Partial releases of the Development
Land shall be accomplished under the terms of the Deed of Trust described
below.

3.                                       Security for Payment: This Note is secured by a deed of
trust of even date herewith from W&G Partnership, Ltd. to Randall S.
Osborne, Trustee, for the benefit of Lender (“Deed of Trust”), which covers the
real property described on Exhibit “A” of the Deed of Trust (referred to
as the “Development Land”)

 

 

4.                                       Promise to Pay/Default Interest. Borrower promises to pay to
the order of Lender the Principal Amount plus interest at the Annual Interest
Rate. This Note is payable at the Place for Payment and according to the Terms
of Payment. All unpaid amounts are due by the Maturity Date. After maturity or
so long as any other Event of Default has occurred and is continuing, then
notwithstanding anything in this Note to the contrary, interest under this Note
shall accrue on the unpaid principal balance at the Default Rate.

5.                                       Acceleration. If Borrower defaults in the payment of this
Note or in the performance of any obligation in any instrument securing or collateral
to this Note, Lender may declare the unpaid principal balance, earned interest,
and any other amounts owed on the Note immediately due after ten (10) days
written notice to Borrower.

6.                                       Loan Charges. Interest on the debt evidenced by this Note
will not exceed the maximum rate or amount of nonusurious interest that may be
contracted for, taken, reserved, charged, or received under law. Any interest
in excess of that maximum amount will be credited on the Principal Amount or,
if the Principal Amount has been paid, refunded. On any acceleration or
required or permitted prepayment, any excess interest will be canceled
automatically as of the acceleration or prepayment or, if the excess interest
has already been paid, credited on the Principal Amount or, if the Principal
Amount has been paid, refunded. This provision overrides any conflicting
provisions in this Note and all other instruments concerning the debt.

7.                                       Late
Charge. If any monthly installment of interest or principal and interest or
other amount payable under this Note or under the Deed of Trust or any other
Loan Document is not received in full by Lender within ten (10) days after
the installment or other amount is due, counting from and including the date
such installment or other amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to five percent
(5%) of such installment or other amount due (unless applicable law requires a
lesser amount be charged, in which event such lesser amount shall be
substituted).

8.                                       Exculpation. Except as otherwise provided in this Section 9,
Borrower shall have no personal liability under this Note, the Security
Instrument or any other Loan Document for the repayment of the Indebtedness or
for the performance of any other obligations of Borrower under the Loan
Documents and Lender’s only recourse for the satisfaction of the Indebtedness
and the performance of such obligations shall be Lender’s exercise of its
rights and remedies with respect to the Mortgaged Property and to any other
collateral held by Lender as security for the Indebtedness. Borrower shall be
personally liable to Lender for the performance of all of Borrower’s
obligations under Section 8.2 of the Deed of Trust (relating to
environmental matters).

9.                                       When
the context requires, singular nouns and pronouns include the plural. Capitalized
terms used herein shall have the meaning given in the Deed of Trust unless
otherwise defined.

 

 

	
  

  	
   

  	
  W&G PARTNERSHIP, LTD.,

  
	
   

  	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  ClayDesta, L.P., its managing general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
  ClayDesta Operating L.L.C.,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  

 

 

EXHIBIT Q

DEED OF TRUST

Prepared by, and after recording

return to:

Randall
S. Osborne

Powell & Coleman, L.L.P.

8080 North Central Expressway, Suite 1380

Dallas, Texas 75206

DEED OF TRUST

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

 Deed of Trust - Page 1
 

 

 

DEED OF TRUST

This Deed
of Trust (herein referred to as the “Deed of Trust”), is entered into as
of June 21, 2006 by W&G
Partnership, Ltd., a Texas limited partnership, Desta Three Partnership, Ltd.,
a Texas limited partnership, and Desta Six Partnership, Ltd., a Texas limited
partnership, whose mailing address for notice hereunder is 6 Desta Drive, Suite 6500,
Midland, Texas 79705, to Randall S. Osborne, Trustee, whose address is c/o
Powell & Coleman, 8080 N. Central Expressway, Suite 1380, Dallas,
Texas  75206, for the benefit of the
hereinafter described Beneficiary.

W I T N E S S E T H:

DEFINITIONS

Definitions. As used herein, the following terms have the
following meanings:

Beneficiary:  Behringer
Harvard Operating Partnership I LP, a Texas limited partnership  whose address for notice hereunder is 15601
Dallas Parkway, Suite 600, Addison, Texas 75001-6026, and the
subsequent holder or holders, from time to time, of the Note.

Charges:  All fees,
charges and/or other things of value, if any, contracted for, charged,
received, taken or reserved by Beneficiary in connection with the transactions
relating to the Note and the other Loan Documents, which are treated as
interest under applicable law.

Constituent Party:  Any
signatory to this Deed of Trust that signs on Grantor’s behalf that is a
corporation, general partnership, limited partnership, limited liability
company, joint venture, trust, or other type of business organization.

Contracts:  All of the
right, title, and interest of Grantor, including equitable rights, in, to, and
under any and all (i) contracts and agreements for the sale of all or any
portion of the Mortgaged Property, whether such contracts or agreements are now
or at any time hereafter existing, including any and all earnest money or other
deposits escrowed or to be escrowed or letters of credit provided or to be
provided by the purchasers under the contracts, including all amendments and
supplements to and renewals and extensions of the contracts at any time made,
and together with all payments, earnings, income, and profits arising from the
sale of all or any portion of the Mortgaged Property or from the contracts and
all other sums due or to become due under and pursuant thereto; (ii) contracts,
licenses, permits, and rights relating to living unit equivalents or other
entitlements for water, wastewater, and other utility services whether
executed, granted, or issued by a private person or entity or a Governmental
Authority or quasi-governmental agency, which are directly or indirectly
related to, or connected with, the development, ownership, maintenance or
operation of the Mortgaged Property, now or at any time thereafter existing; (iii) arrangements
relating to the financing or purchase of all or any portion of the Mortgaged
Property by future purchasers; and (iv) all other contracts which in any
way relate to the use, enjoyment, occupancy, operation, maintenance, repair,
management or ownership of the Mortgaged Property, including maintenance and
service contracts and management agreements.

Debtor Relief Laws:  Title 11 of
the United States Code and any other applicable law, domestic or foreign,
relating to bankruptcy, insolvency, liquidation, receivership, reorganization,
arrangement or composition, extension or adjustment of debts, or similar laws
affecting the rights of creditors.

 Deed of Trust - Page 2
 

 

 

Default Rate:  The rate of
interest specified in the Note as the “Default Rate.”

Disposition:  Any sale,
lease, exchange, assignment, conveyance, transfer, trade, or other disposition
of all or any portion of the Mortgaged Property (or any interest therein) or
all or any part of the legal and beneficial ownership interest in Grantor,
except as may be expressly permitted by this Deed of Trust or the other Loan
Documents.

Environmental Law:  Any federal,
state, or local law, statute, ordinance, or regulation, whether now or
hereafter in effect, pertaining to health, industrial hygiene, or the
environmental conditions on, under, or about the Land, including the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”),
42 U.S.C. § 9601 et seq.; Resource, Conservation and Recovery Act (“RCRA”),
42 U.S.C. § 6901 et seq. as amended by the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”), Pub. L. 99-499, 100 Stat.
1613; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.;
Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C. § 1101 et
seq.; Clean Water Act (“CWA”), 33 U.S.C. § 1251 et seq.;
Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq.; Federal Water
Pollution Control Act (“FWPCA”), 33 U.S.C. § 1251 et seq.; and any
corresponding state laws or ordinances including the Texas Water Code (“TWC”)
§ 26.001 et seq.; Texas Health & Safety Code (“THSC”) §
361.001 et seq.; Texas Solid Waste Disposal Act, Tex. Rev. Civ. Stat.
Ann. art. 4477-7; and regulations, rules, guidelines, or standards
promulgated pursuant to such laws, statutes and regulations.

ERISA:  The Employee
Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et  seq.

Event of Default:  Any
happening or occurrence described in Article VI hereof.

Governmental Authority:  The United States, each state, each county,
each city, and each other political subdivision in which all or any portion of
the Mortgaged Property is located, and each other political subdivision,
agency, or instrumentality exercising jurisdiction over Beneficiary, Grantor or
any Mortgaged Property.

Grantor:  The party or
parties, whether one or more, who execute this Deed of Trust and who are
identified as such in the initial paragraph of this Deed of Trust, as well as
the successors, assigns, heirs and legal representatives of such party or
parties.

Hazardous Substance:  Any
substance, product, waste, or other material which is or becomes listed,
regulated, or addressed as being a toxic, hazardous, polluting, or similarly
harmful substance under any Environmental Law, including:  (i) any substance included within the
definition of (A) “hazardous waste” pursuant to Section 1004 of RCRA,
(B) “hazardous substance” pursuant to Section 101 of CERCLA, (C) “regulated
substance” pursuant to Section 26.342(11) of TWC, (D) “hazardous
substance” pursuant to Section 361.003(11) of THSC, (E) “waste”
pursuant to Section 30.003(b) of TWC , or (F) “pollutant”
pursuant to Section 26.001(13) of TWC; (ii) asbestos or asbestos-containing
materials in any form that is or could become friable; (iii) polychlorinated
biphenyls; (iv) petroleum products; (v) underground or above-ground
storage tanks, whether empty, filled or partially filled with any substance; (vi) any
radioactive materials, urea formaldehyde foam insulation or radon; and (vii) any
other chemical, material or substance now or in the future defined as a “hazardous
substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic
pollutant,” “contaminant,” or “pollutant” within the meaning of any
Environmental Law.

Impositions:  (i) All
real estate and personal property taxes, charges, assessments, standby fees,
excises, and levies and any interest, costs, or penalties with respect thereto,
general and special, ordinary and extraordinary, foreseen and unforeseen, of
any kind and nature whatsoever which at any time prior to or after the
execution hereof may be assessed, levied, or imposed upon the Mortgaged
Property or the ownership, use, occupancy, or enjoyment thereof, or any portion
thereof, or the sidewalks, streets, or alleyways adjacent thereto; (ii) any
charges, fees, license payments, or other sums payable for or under 

 Deed of Trust - Page 3
 

 

any easement, license, or agreement
maintained for the benefit of the Mortgaged Property; (iii) water, gas,
sewer, electricity, and other utility charges and fees relating to the
Mortgaged Property; and (iv) assessments and charges arising under any
subdivision, condominium, planned unit development, or other declarations,
restrictions, regimes, or agreements affecting the Mortgaged Property.

Indebtedness:  (i) The
principal of, interest on, or other sums evidenced by the Notes or the Loan
Documents; (ii) any other amounts, payments, or premiums payable under the
Loan Documents; (iii) such additional or future sums (whether or not
obligatory), with interest thereon, as may hereafter be borrowed or advanced
from Beneficiary by or to the then record owner of the Mortgaged Property, when
evidenced by a promissory note which, by its terms, is secured hereby (it being
contemplated by Grantor and Beneficiary that such future indebtedness may be
incurred); (iv) any and all other indebtedness, obligations, and
liabilities of any kind or character of Grantor to Beneficiary, now or
hereafter existing, absolute or contingent, due or not due, arising by
operation of law or otherwise, or direct or indirect, primary or secondary,
joint, several, joint and several, fixed or contingent, secured or unsecured by
additional or different security or securities, voluntarily or involuntarily
incurred, known or unknown, or originally payable to Beneficiary or to a third
party and subsequently acquired by Beneficiary.

Land:  All that certain
real property or interest therein more particularly described in Exhibit “A”,
which is attached hereto and incorporated herein by this reference, together
with all right, title, interest, and privileges of Grantor in and to (i) all
streets, ways, roads, alleys, easements, rights-of-way, licenses,
rights of ingress and egress, vehicle parking rights and public places, existing
or proposed, abutting, adjacent, used in connection with or pertaining to such
real property or the improvements thereon; (ii) any strips or gores of
real property between such real property and abutting or adjacent properties; (iii) all
water and water rights, timber and crops pertaining to such real estate; and (iv) all
appurtenances and all reversions and remainders in or to such real property.

Legal Requirements:  (i) Any
and all present and future judicial decisions, statutes (including Architectural
Barrier Laws and Environmental Laws), rulings, rules, regulations, permits,
certificates, or ordinances of any Governmental Authority in any way applicable
to Grantor, any Constituent Party or the Mortgaged Property, including the
ownership, use, occupancy, possession, operation, maintenance, alteration,
repair, or reconstruction thereof, (ii) any and all covenants, conditions,
and restrictions contained in any deeds, other forms of conveyance, or in any
other instruments of any nature that relate in any way or are applicable to the
Mortgaged Property or the ownership, use, or occupancy thereof, (iii) Grantor’s
presently or subsequently effective bylaws and articles of incorporation,
operating agreement and articles of organization or partnership, limited
partnership, joint venture, trust, or other form of business association
agreement, (iv) any and all Contracts, and (v) any and all leases
other than those described in (iv) above and other contracts (written or
oral) other than those described in (vi) above of any nature that relate
in any way to the Mortgaged Property and to which Grantor may be bound,
including any lease or other contract pursuant to which Grantor is granted a
possessory interest in and to the Land.

Loan Documents:  The Note
and  this Deed of Trust and all other
instruments, documents or other writings now or hereafter evidencing,
governing, securing, guaranteeing or otherwise relating to or executed pursuant
to or in connection with any of the Indebtedness or any Loan Document, whether
executed and delivered prior to, concurrently with or subsequent to this Deed
of Trust, as such documents may have been or may hereafter be amended from time
to time.

Maximum Lawful Rate:  The maximum
lawful rate of interest which may be contracted for, charged, taken, received
or reserved by Beneficiary in accordance with the applicable laws of the State
of Texas (or applicable United States federal law to the extent that it permits
Beneficiary to contract for, charge, take, receive or reserve a greater amount
of interest than under Texas law), taking into account all Charges (as herein
defined) made in connection with the transaction evidenced by the Note and the
other Loan Documents. To the extent that Beneficiary is relying on Chapter 303
of the Texas Finance Code to

 Deed of Trust - Page 4
 

 

 

determine the Maximum Lawful Rate
payable on the Note and/or any other portion of the Indebtedness, Beneficiary
will utilize the weekly ceiling from time to time in effect as provided in such
Chapter 303. To the extent United States federal law permits Beneficiary to
contract for, charge, take, receive or reserve a greater amount of interest
than under Texas law, Beneficiary will rely on United States federal law
instead of such Chapter 303 for the purpose of determining the Maximum Lawful
Rate. Additionally, to the extent permitted by applicable law now or hereafter
in effect, Beneficiary may, at its option and from time to time, utilize any
other method of establishing the Maximum Lawful Rate under such Chapter 303 or
under other applicable law by giving notice, if required, to Grantor as
provided by applicable law.

Minerals:  All
substances in, on, under, or above the Land which are now, or may become in the
future, intrinsically valuable (that is, valuable in themselves) and which now
or in the future may be enjoyed through extraction or removal from the Land,
including without limitation, oil, gas, and all other hydrocarbons, coal,
lignite, carbon dioxide and all other nonhydrocarbon gases, uranium and all
other radioactive substances, and gold, silver, copper, iron and all other
metallic substances or ores.

Mortgaged Property:  The Land,
Minerals, Contracts, and any interest of Grantor now owned or hereafter
acquired in and to the Land, Minerals, Contracts, together with any and all other
security and collateral of any nature whatsoever, now or hereafter given for
the repayment of the Indebtedness or the performance and discharge of the
Obligations. The term “Mortgaged Property” is expressly defined as
meaning all or, where the context permits or requires, any portion of the
foregoing items in this definition and all or, where the context permits or
requires, any interest therein.

Note (individually and/or collectively, as the context may
require):  That certain Promissory Note of
even date herewith, incorporated herein by this reference, executed by W&G
Partnership, Ltd. and payable to the order of Beneficiary in the stated
principal amount of $3,000,000.00, and any and all renewals, modifications, amendments,
rearrangements, consolidations, reinstatements, enlargements, increases or
extensions of such promissory note or notes given in renewal, substitution or
replacement therefor. The Note shall mature on June __,
2013 unless renewed or extended in accordance with the express terms of
the Loan Documents or unless the maturity shall be accelerated for any reason.

Obligations:  Any and all
of the covenants, conditions, warranties, representations, and other
obligations (other than to repay the Indebtedness) made or undertaken by
Grantor or any other person or party to the Loan Documents to Beneficiary,
Trustee, or others as set forth in the Loan Documents, and in any deed, lease,
sublease, or other form of conveyance, or any other agreement pursuant to which
Grantor is granted a possessory interest in the Land.

Permitted Exceptions:  All matters shown on Schedule B of the
Mortgagee Policy of Title Insurance issued in Beneficiary’s name insuring the
lien of this Deed of Trust

Release:  The terms “release,”
“removal,” “environment,” and “disposal” shall have the meanings given such
terms in CERCLA, and the term “disposal” shall also have the meaning given it
in RCRA; provided that in the event either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment, and provided further
that to the extent the laws of the State of Texas establish a meaning for “release,”
“removal,” “environment,” or “disposal,” which is broader than that specified
in either CERCLA and RCRA, such broader meaning shall apply.

Remedial Work:  Any
investigation, site monitoring, containment, cleanup, removal, restoration, or
other work of any kind or nature reasonably necessary in the sole opinion of
Beneficiary under any applicable Environmental Law or desirable in connection
with the current or future presence, suspected presence, release, or suspected
release of a Hazardous Substance in or into the air, soil, ground water,
surface water, or soil vapor at, on, about, under, or within the Mortgaged
Property, or any part thereof. The parties contemplate that any Remedial Work
will result in decontamination of the Mortgaged 

 Deed of Trust - Page 5
 

 

 

Property to permit any future use of
the Property, including as residential property, and shall not comprise any
restrictions or conditions in connection with future development of the
Mortgaged Property.

Subordinate Mortgage:  Any mortgage, deed of trust, pledge, lien
(statutory, constitutional, or contractual), security interest, encumbrance or
charge, or conditional sale or other title retention agreement, covering all or
any portion of the Mortgaged Property, the lien of which is subordinate and
inferior to the lien of this Deed of Trust.

Tax Code:  The U.S.
Internal Revenue Code of 1986, as amended, any and all U.S. Department of
Treasury Regulations issued pursuant thereto in temporary or final form, and
any and all federal, state, county, municipal and city rules and rulings,
notices, requirements, statutes, regulations or laws governing or relating to
taxes and/or taxation, and any and all successor statutes thereof.

Trustee:  The
individual described as Trustee in the initial paragraph of this Deed of Trust.

Additional
Definitions and General Usage. Unless the context clearly indicates a contrary intent or unless
otherwise specifically provided for in this Deed of Trust, the following shall
govern:

“Hereof,” “hereby,” “hereto,” “hereunder,”
“herewith,” and similar terms mean of, by, to, under and with respect to, this
Deed of Trust or to the other documents or matters being referenced.

“Heretofore” means before, “hereafter”
means after, and “herewith” means concurrently with, the date of this Deed of
Trust.

“Including” means including, without
limitation.

“Person” includes a natural person,
corporation, limited liability company, partnership, trust, unincorporated
association, government, Governmental Authority and any other entity.

The phrase “attorneys fees” and “legal
fees” include any and all counsel, attorney, paralegal and law clerk fees and
disbursements, including at the pre-trial, trial and appellate levels
incurred or paid by Beneficiary or Trustee in protecting Beneficiary’s interest
in the Mortgaged Property or enforcing its rights hereunder, whether with
respect to retained firms, the reimbursement for the expenses of in-house
staff or otherwise.

All pronouns, whether in masculine,
feminine or neuter form, shall be deemed to refer to the object of such pronoun
whether same is masculine, feminine or neuter in gender, as the context may suggest
or require.

All terms used herein, whether or
not defined in Section 1.1 hereof, and whether used in singular or
plural form, shall be deemed to refer to the object of such term whether such
is singular or plural in nature, as the context may suggest or require.

References to “Legal Requirements,” “Environmental
Laws,” “Debtor Release Laws,” “applicable law,” any other specifically named
law and any other similar terms also refer to such laws and items as now or
hereafter amended or modified.

GRANT

Grant. To secure the full and
timely payment of the Indebtedness and the full and timely performance and
discharge of the Obligations, Grantor has GRANTED, BARGAINED, SOLD and
CONVEYED, and 

 Deed of Trust - Page 6
 

 

 

by these
presents does GRANT, BARGAIN, SELL and CONVEY, unto Trustee, in trust, the
Mortgaged Property, subject, however, to the Permitted Exceptions, TO HAVE AND
TO HOLD the Mortgaged Property unto Trustee, forever, and Grantor does hereby
bind itself, its successors, and assigns to WARRANT AND FOREVER DEFEND the title
to the Mortgaged Property unto Trustee against every person whomsoever lawfully
claiming or to claim the same or any part thereof. If Grantor shall pay (or
cause to be paid) the Indebtedness as and when the same shall become due and
payable and shall fully perform and discharge (or cause to be fully performed
and discharged) the Obligations on or before the date the same are to be
performed and discharged, then the liens, security interests, estates, and
rights granted by the Loan Documents shall terminate, in accordance with the
provisions hereof, otherwise the same shall remain in full force and effect. A
certificate or other written statement executed on behalf of Trustee or
Beneficiary confirming that the Indebtedness has not been fully paid or the Obligations
have not been fully performed or discharged shall be sufficient evidence
thereof for the purpose of reliance by third parties on such fact.

Future
Indebtedness. It is specifically contemplated by Grantor and Beneficiary
that the Indebtedness secured hereby may be increased and rearranged by
subsequent amendments, restatements, supplements and other modifications and
additions to the Loan Documents and that additional promissory notes and loan
agreements may be issued and entered into in connection therewith. Grantor and
each person who, at any time, may claim an interest in or lien or encumbrance
against all or any portion of the Mortgaged Property agree that all
Indebtedness shall be secured by this Deed of Trust with the same priority as
if all had been advanced, had arisen or had become owing or performable on the
date of this Deed of Trust. This Deed of Trust shall remain in full force and
effect as to all future Indebtedness and to all subsequent advances or
subsequently arising portions of the Indebtedness without loss of priority
until (a) the Indebtedness is fully and finally paid, performed and
satisfied, and (b) all agreements and obligations, if any, of Beneficiary
for further advances or for the extension of additional credit have been terminated
(including, without limitation, any loans made by Beneficiary to Grantor even
if advances or loans thereunder shall be optional or non-obligatory), and
(c) this Deed of Trust has been released of record by Beneficiary.

 

WARRANTIES
AND REPRESENTATIONS

Grantor
hereby unconditionally warrants and represents to Beneficiary, as of the date
hereof and at all times during the term of this Deed of Trust, as follows:

Organization and Power. Grantor and each Constituent Party that is not a
natural person (a) is duly incorporated or duly organized with a legal
status separate from its affiliates, validly existing and in good standing
under the laws of the state of its formation or existence, and has complied
with all conditions prerequisite to its doing business in the state in which
the Land is located, and (b) has all requisite power and all governmental
certificates of authority, licenses, permits, qualifications, and documentation
to own, lease, and operate its properties and to carry on its business as now
being, and as proposed to be, conducted.

Validity
of Loan Documents. The execution, delivery, and performance by Grantor, and
by each Constituent Party on behalf of Grantor, of and under the Loan Documents
(a) are within Grantor’s and each Constituent Party’s powers and have been
duly authorized by Grantor’s and each Constituent Party’s board of directors,
shareholders, partners, members, managers, venturers, trustees, or other
necessary parties, as the case may be, and all other requisite action for such authorization
has been taken, (b) have 

 Deed of Trust - Page 7
 

 

 

received
any and all requisite prior approvals of Governmental Authorities in order to
be legally binding and enforceable in accordance with the terms thereof, and (c) will
not violate, be in conflict with, result in a breach of, or constitute (with
due notice or lapse of time, or both) a default under or violation of any Legal
Requirement or result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of Grantor’s property or assets,
except as contemplated by the provisions of the Loan Documents. The Loan
Documents constitute the legal, valid, and binding obligations of Grantor
enforceable in accordance with their respective terms.

Title and
Lien. Grantor has good and indefeasible title to the Land, except the Permitted
Exceptions. This Deed of Trust constitutes a valid, subsisting first lien on
the Land; a valid, subsisting first priority security interest in and to the
Contracts; all in accordance with the terms hereof, and all subject to the
Permitted Exceptions.

Business
Purposes. The loan evidenced by the Note is solely for the purpose of carrying on
or acquiring a business of Grantor, and is not for personal, family, household,
or agricultural purposes. The Mortgaged Property forms no part of any property
owned, used or claimed by Grantor as a residence or business homestead and is
not exempt from forced sale under the laws of the State in which the Mortgaged
Property is located. Grantor hereby disclaims and renounces each and every
claim to all or any portion of the Mortgaged Property as a homestead.

Taxes. Grantor
and each Constituent Party have filed all federal, state, county, municipal,
and city income and other tax returns required to have been filed by them (including,
those required under the Tax Code) and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Grantor nor any Constituent Party knows
of any basis for any additional assessment in respect of any such taxes and
related liabilities. Grantor and each Constituent Party believe that their
respective tax returns properly reflect the income and taxes of Grantor and
each Constituent Party for the periods covered thereby, subject only to
reasonable adjustments required by the Internal Revenue Service or other
applicable tax authority upon audit.

Mailing
Address. Grantor’s mailing address, as set forth in the opening paragraph hereof
or as changed pursuant to the provisions hereof, is true and correct.

Relationship
of Grantor and Beneficiary. Notwithstanding any prior business or personal
relationship between Grantor and Beneficiary, or any officer, director or
employee of Beneficiary, the relationship between Grantor and Beneficiary is
solely that of debtor and creditor, Beneficiary has no fiduciary or other
special relationship with Grantor, Grantor and Beneficiary are not partners or
joint venturers, and no term or condition of any of the Loan Documents shall be
construed so as to deem the relationship between Grantor and Beneficiary to be
other than that of debtor and creditor.

No
Reliance on Beneficiary. Grantor is experienced in the ownership and operation of
properties similar to the Mortgaged Property, and Grantor and Beneficiary have
and are relying solely upon Grantor’s expertise and business plan in connection
with the ownership and operation of the Mortgaged Property. Grantor is not
relying on Beneficiary’s expertise or business acumen in connection with the Mortgaged
Property.

Environmental
and Hazardous Substances. The following representations and warranties of Grantor
are made without regard to whether Beneficiary has, or hereafter obtains, any
knowledge or report of the 

 Deed of Trust - Page 8
 

 

 

environmental
condition of the Mortgaged Property. To the best knowledge, information and
belief of Grantor:

The
Mortgaged Property and the operations conducted thereon do not violate any
applicable law, statute, ordinance, rule, regulation, order, or determination
of any Governmental Authority or any restrictive covenant or deed restriction
(recorded or otherwise), including without limitation all applicable zoning
ordinances and building codes, flood disaster laws and Environmental Laws.

Without
limitation of subsection (a) immediately preceding, the Mortgaged
Property and operations conducted thereon by the current owner or operator of
such Mortgaged Property, are not in violation of or subject to any existing,
pending, or threatened action, suit, investigation, inquiry, or proceeding by any
governmental or nongovernmental entity or person or to any remedial obligations
under any Environmental Law.

All
notices, permits, licenses, or similar authorizations, if any, required to be
obtained or filed in connection with the ownership, operation, or use of the
Mortgaged Property, including, the past or present generation, treatment,
storage, disposal, or release of a Hazardous Substance into the environment,
have been duly obtained or filed.

The
Mortgaged Property does not contain any Hazardous Substance.

Grantor
has taken all steps necessary to determine and has determined that no Hazardous
Substances have been generated, treated, placed, held, located, or otherwise
released on, under, from, or about the Mortgaged Property.

Grantor
has not undertaken, permitted, authorized, or suffered and will not undertake,
permit, authorize, or suffer the presence, use, manufacture, handling,
generation, transportation, storage, treatment, discharge, release, burial, or
disposal on, in, under, from or about the Mortgaged Property of any Hazardous
Substance or the transportation to or from the Mortgaged Property of any
Hazardous Substance.

There is
no pending or threatened litigation, proceedings, or investigations before or
by any administrative agency in which any person or entity alleges or is
investigating any alleged presence, release, threat of release, placement on,
in, under, from or about the Mortgaged Property, or the manufacture, handling,
generation, transportation, storage, treatment, discharge, burial, or disposal
on, under, from or about the Mortgaged Property, or the transportation to or
from the Mortgaged Property, of any Hazardous Substance.

Grantor
has not received any notice, and has no actual or constructive knowledge, that
any Governmental Authority or any employee or agent thereof has determined, or
threatens to determine, or is investigating any allegation that there is a
presence, release, threat of release, placement on, in, under, from or about
the Mortgaged Property, or the use, manufacture, handling, generation,
transportation, storage, treatment, discharge, burial, or disposal on, in,
under, from or about the Mortgaged Property, or the transportation to or from
the Mortgaged Property, of any Hazardous Substance.

There have
been no communications or agreements with any Governmental Authority or any
private entity, including, but not limited to, any prior owners or operators of
the Mortgaged Property, relating in any way to the presence, release, threat of
release, placement on, under or about the Mortgaged Property, or the use,
manufacture, handling, generation, transportation, storage, treatment,
discharge, burial, or 

 Deed of Trust - Page 9
 

 

 

disposal
on, in, under or about the Mortgaged Property, or the transportation to or from
the Mortgaged Property, of any Hazardous Substance.

Neither
Grantor nor, to the best knowledge, information and belief of Grantor, any
other person, including, but not limited to, any predecessor owner, tenant,
licensee, occupant, user, or operator of all or any portion of the Mortgaged
Property, has ever caused, permitted, authorized or suffered, and Grantor will
not cause, permit, authorize, or suffer, any Hazardous Substance to be placed,
held, located, or disposed of, on, in, under or about any other real property,
all or any portion of which is legally or beneficially owned (or any interest
or estate therein which is owned) by Grantor in any jurisdiction now or
hereafter having in effect a so-called “superlien” law or ordinance or
any part thereof, the effect of which law or ordinance would be to create a
lien on the Mortgaged Property to secure any obligation in connection with the “superlien”
law of such other jurisdiction.

Grantor has been issued all required federal, state, and local
licenses, certificates, or permits relating to, and Grantor and its facilities,
business assets, property, leaseholds, and equipment are in compliance in all
respects with all applicable federal, state, and local laws, rules, and
regulations relating to, air emissions, water discharge, noise emissions, solid
or liquid waste disposal, hazardous waste or materials, or other environmental,
health, or safety matters.

No
Litigation. Except as disclosed in writing to Beneficiary, there are no (i) judicial,
administrative, mediation or arbitration actions, suits, or proceedings, at law
or in equity, before any Governmental Authority or arbitrator pending or
threatened against or affecting Grantor or any Constituent Party or involving
the Mortgaged Property, (ii) outstanding or unpaid judgments against
Grantor, any Constituent Party, or the Mortgaged Property, or (iii) defaults
by Grantor with respect to any order, writ, injunction, decree, or demand of
any Governmental Authority or arbitrator.

ERISA. Grantor is not an “employee
benefit plan,” as defined in Section 3(3) of ERISA, which is subject
to Title I of ERISA and the assets of Grantor do not constitute “plan assets”
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101
(1998).

No
Bankruptcy. No bankruptcy or insolvency proceedings are pending or contemplated by
Grantor or, to the best knowledge, information and belief of Grantor, against
Grantor or by or against any endorser, cosigner or guarantor of the Note.

Compliance
with Legal Requirements. To the best knowledge, information and belief of Grantor,
the Land and the intended use thereof by Grantor comply with all Legal
Requirements, including, all applicable restrictive covenants, zoning
ordinances, subdivision and building codes, flood disaster laws, applicable
health and environmental laws and regulations and all other ordinances, orders
or requirements issued by any state, federal or municipal authorities having or
claiming jurisdiction over the Mortgaged Property.

Separate
Tax Parcel; Legal Lot. The Land, are taxed separately without regard to any other
real property and the Land constitutes a legally subdivided lot under all
applicable Legal Requirements (or, if not subdivided, no subdivision or
platting of the Land is required under applicable Legal Requirements), and for
all purposes may be mortgaged, conveyed or otherwise dealt with as an
independent parcel.

 Deed of Trust - Page 10
 

 

 

AFFIRMATIVE
COVENANTS

Grantor
hereby unconditionally covenants and agrees with Beneficiary, until the entire
Indebtedness shall have been paid in full and all of the Obligations shall have
been fully performed and discharged as follows:

Payment
and Performance. Grantor will pay the Indebtedness as and when specified in
the Loan Documents, and will perform and discharge all of the Obligations, in
full and on or before the dates the same are to be performed.

Existence. Grantor will and will
cause each Constituent Party to preserve and keep in full force and effect its
existence (separate and apart from its affiliates), good standing, rights,
franchises, trade names, trademarks and other associated goodwill whether
existing at common law or as a federal or state registration.

Compliance
with Legal Requirements. Grantor will promptly and faithfully comply with, conform
to, and obey all Legal Requirements, whether the same shall necessitate
structural changes in, improvements to, or interfere with the use or enjoyment
of, the Mortgaged Property.

First Lien
Status. Grantor will protect and preserve the first lien and security interest
status of this Deed of Trust and the other Loan Documents and will not permit
to be created or to exist in respect of the Mortgaged Property or any part
thereof any lien or security interest on a parity with, superior to, or
inferior to any of the liens or security interests hereof, except for the Permitted
Exceptions.

Payment of
Impositions. Subject to the applicable sections of this Deed of Trust, Grantor will
duly pay and discharge, or cause to be paid and discharged, the Impositions not
later than the earlier to occur of (i) the due date thereof, (ii) the
date any fine, penalty, interest, or cost may be added thereto or imposed, or (iii) the
date prior to any date any lien may be filed for the nonpayment thereof (if
such date is used to determine the due date of the respective item), and
Grantor shall deliver to Beneficiary a written receipt evidencing the payment
of the respective Imposition.

Insurance. Grantor
will, at Grantor’s own expense, obtain and maintain and keep in full force and
effect insurance upon and relating to the Mortgaged Property in such amounts
and covering such risks as shall be requested by and satisfactory to
Beneficiary, from time to time.

Payment
for Labor and Materials. Subject to the applicable provisions of this Deed of
Trust, Grantor will promptly pay all bills for labor, materials, and
specifically fabricated materials incurred in connection with the Mortgaged
Property and never permit to exist in respect of the Mortgaged Property or any
part thereof any lien or security interest, even though inferior to the liens
and security interests hereof, for any such bill, and in any event never permit
to be created or exist in respect of the Mortgaged Property or any part thereof
any other or additional lien or security interest on a parity with, superior,
or inferior to any of the liens or security interests hereof, except for the
Permitted Exceptions.

Further
Assurances and Corrections. From time to time, at the request of Beneficiary,
Grantor will (i) promptly correct any defect, error, or omission which may
be discovered in the contents of this Deed of Trust or in any other Loan
Document or in the execution or acknowledgment thereof; (ii) execute,
acknowledge, deliver, record and/or file such further instruments (including,
further deeds of trust, 

 Deed of Trust - Page 11
 

 

security
agreements, financing statements, continuation statements and assignments of
rents) and perform such further acts and provide such further assurances as may
be necessary, desirable, or proper, in Beneficiary’s opinion, to carry out more
effectively the purposes of this Deed of Trust and the Loan Documents and to
subject to the absolute assignments, liens and security interests hereof and
thereof any property intended by the terms hereof or thereof to be covered
hereby or thereby, including without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Mortgaged Property; (iii) execute,
acknowledge, deliver, procure, file, and/or record any document or instrument
(including without limitation, any financing statement) deemed advisable by
Beneficiary in Beneficiary’s sole discretion to protect the liens and the
security interests herein granted against the rights or interests of third
persons; and (iv) pay all costs connected with any of the foregoing.

Statement
of Unpaid Balance. At any time and from time to time, Grantor will furnish
promptly, upon the request of Beneficiary, a written statement or affidavit, in
form satisfactory to Beneficiary, stating the unpaid balance of the
Indebtedness and that there are no offsets or defenses against full payment of
the Indebtedness and the terms hereof, or if there are any such offsets or
defenses, specifying them.

Expenses. Grantor will pay on
demand all reasonable and bona fide out-of-pocket costs, fees, and
expenses and other expenditures, including, but not limited to, reasonable
attorneys’ fees and expenses, paid or incurred by Beneficiary or Trustee to
third parties incident to this Deed of Trust or any other Loan Document
(including without limitation, reasonable attorneys’ fees and expenses in
connection with the negotiation, preparation, and execution hereof and of any
other Loan Document and any amendment hereto or thereto, any release hereof,
any consent, approval or waiver hereunder or under any other Loan Document, the
making of any advance under the Note, and any suit to which Beneficiary or
Trustee is a party involving this Deed of Trust or the Mortgaged Property) or
incident to the enforcement of the Indebtedness or the Obligations or the
exercise of any right or remedy of Beneficiary under any Loan Document.

Address. Grantor shall give
written notice to Beneficiary and Trustee of any change of address of Grantor
at least five (5) business days prior to the effective date of such change
of address. Absent such official written notice of a change in address for
Grantor, Beneficiary and Trustee shall be entitled for all purposes under the
Loan Documents to rely upon Grantor’s address as set forth in the initial
paragraph of this Deed of Trust, as same may have been theretofore changed in
accordance with the provisions hereof.

ERISA. If and to the extent that
Grantor is obligated under any plan governed by or subject to ERISA, Grantor
shall fully discharge and satisfy all of its obligations and funding
requirements under such plan, ERISA and the Tax Code. Furthermore, Grantor
shall comply in all material respects with any and all applicable provisions of
ERISA and the Tax Code and will not incur or permit to exist any unfunded
liabilities to the Pension Benefit Guaranty Corporation (“PBGC”) or to
such plan under ERISA or the Tax Code. As soon as possible but in any event not
later than 30 days after Grantor knows that any event which would constitute a
reportable event under § 4043(b) of Title IV of ERISA with respect to any “employee
plan” subject to ERISA has occurred, or that the PBGC has instituted or will
institute proceedings under ERISA to terminate that plan, Grantor will deliver
to Beneficiary a certificate of a responsible officer of Grantor setting forth
details as to such reportable event and the action which Grantor or an
affiliate of Grantor (as defined under ERISA), as the case may be, proposes to
take with respect to same, together with a copy of any notice of such
reportable event that may be required to be filed with the PBGC, or any notice
delivered by the PBGC evidencing its intent to institute those proceedings or
any notice to the PBGC that the plan is to be terminated, as the case may be. For
all purposes of this Section 4.12, Grantor is deemed to have all
knowledge of all facts attributable to the plan administrator under ERISA.

 Deed of Trust - Page 12
 

 

 

Delivery
of Contracts. Grantor will deliver to Beneficiary a true, correct and
complete copy of each Contract promptly after the execution of same by all
parties thereto. Within twenty (20) days after a request by Beneficiary,
Grantor shall prepare and deliver to Beneficiary a complete listing of all
Contracts, showing date, term, parties, subject matter, concessions, whether
any defaults exist, and other information specified by Beneficiary, of or with
respect to each of such Contracts, together with a true, correct and complete
copy thereof (if so requested by Beneficiary).

Environmental and Hazardous Substances. Grantor will:

not use,
generate, manufacture, produce, store, release, discharge, treat, or dispose of
on, in, under, from or about the Mortgaged Property or transport to or from the
Mortgaged Property any Hazardous Substance or allow any other person or entity
to do so;

keep and
maintain the Mortgaged Property in compliance with, and shall not cause or
permit the Mortgaged Property to be in violation of, any Environmental Law;

establish
and maintain, at Grantor’s sole expense, a system to assure and monitor
continued compliance with Environmental Laws and the exclusion of Hazardous
Substances from the Mortgaged Property, by any and all owners or operators of
the Mortgaged Property, which system shall include annual reviews of such
compliance by employees or agents of Grantor who are familiar with the
requirements of the Environmental Laws and, at the request of Beneficiary no
more than once each year, a detailed review of such compliance of the
environmental condition of the Mortgaged Property (the “Environmental Report”)
in scope satisfactory to Beneficiary by an environmental consulting firm
approved in advance by Beneficiary; provided, however, that if any
Environmental Report indicates any violation of any Environmental Law or a need
for Remedial Work, such system shall include at the request of Beneficiary a
detailed review of the status of such violation (a “Supplemental Report”)
by such environmental consultant. Grantor shall furnish an Environmental Report
or such Supplemental Report to Beneficiary within sixty (60) days after
Beneficiary so requests, together with such additional information as
Beneficiary may reasonably request;

give
prompt written notices to Beneficiary of: 
(i) any proceeding or inquiry by any governmental or
nongovernmental entity or person with respect to the presence of any Hazardous
Substance on, in, under, from or about the Mortgaged Property, the migration
thereof from or to other property, the disposal, storage, or treatment of any
Hazardous Substance generated or used on, under or about the Mortgaged
Property, (ii) all claims made or threatened by any third party against
Grantor or the Mortgaged Property or any other owner or operator of the
Mortgaged Property relating to any loss or injury resulting from any Hazardous
Substance, and (iii) Grantor’s discovery of any occurrence or condition on
any real property adjoining or in the vicinity of the Mortgaged Property that
could cause the Mortgaged Property or any part thereof to be subject to any
investigation or cleanup of the Mortgaged Property pursuant to any
Environmental Law;

permit
Beneficiary to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated with respect to the Mortgaged Property in
connection with any Environmental Law or Hazardous Substance, and Grantor shall
pay all attorneys’ fees incurred by Beneficiary in connection therewith;

if any
Remedial Work is reasonably necessary or desirable in the opinion of
Beneficiary, Grantor shall commence and thereafter diligently prosecute to
completion all such Remedial Work within thirty (30) days after written demand
by Beneficiary for performance thereof (or such shorter period of time as may
be required under any Legal Requirement). All Remedial Work shall be performed
by contractors 

 Deed of Trust - Page 13
 

 

 

approved
in advance by Beneficiary, and under the supervision of a consulting engineer
approved by Beneficiary. All costs and expenses of such Remedial Work shall be
paid by Grantor including, Beneficiary’s reasonable attorneys’ fees and costs
incurred in connection with monitoring or review of such Remedial Work. If
Grantor shall fail to timely commence, or cause to be commenced, or fail to
diligently prosecute to completion, such Remedial Work, Beneficiary may, but
shall not be required to, cause such Remedial Work to be performed, and all
costs and expenses thereof, or incurred in connection therewith, shall become
part of the Indebtedness. THE COVENANT CONTAINED IN THIS SECTION SHALL SURVIVE THE RELEASE
OF THE LIEN OF THIS DEED OF TRUST, OR THE EXTINGUISHMENT OF THE LIEN BY
FORECLOSURE OR ACTION IN LIEU THEREOF.

NEGATIVE
COVENANTS

Grantor
hereby unconditionally covenants and agrees with Beneficiary until the entire
Indebtedness shall have been paid in full and all of the Obligations shall have
been fully performed and discharged as follows:

Use
Violations. Grantor will not use, maintain, operate, or occupy, or allow the use,
maintenance, operation, or occupancy of, the Mortgaged Property in any manner
which (i) violates any Legal Requirement, (ii) may be dangerous,
unless safeguarded as required by law and/or appropriate insurance, (iii) constitutes
a public or private nuisance, or (iv) makes void, voidable, or
cancellable, or increases the premium of, any insurance then in force with
respect thereto.

Change in
Zoning. Grantor will not (i) seek or acquiesce in a zoning reclassification,
zoning variance or special exception to zoning of all or any portion of the
Mortgaged Property, (ii) grant or consent to any easement, dedication,
plat, or restriction (or allow any easement to become enforceable by
prescription), (iii) seek or acquiesce to any imposition of any addition
of a Legal Requirement or any amendment or modification thereof, covering all
or any portion of the Mortgaged Property, without Beneficiary’s prior written
consent.

No
Drilling. Grantor will not, without the prior written consent of Beneficiary,
permit any drilling or exploration for or extraction, removal, or production
of, any Minerals from the surface or subsurface of the Land regardless of the
depth thereof or the method of mining or extraction thereof.

No
Disposition. Grantor will not make a Disposition without obtaining Beneficiary’s prior
written consent to the Disposition. Notwithstanding the above, nothing in this
Deed of Trust shall prevent the transfer of a legal and beneficial ownership
interest in the Grantor, so long as Grantor is directly or indirectly
controlled by Clayton W. Williams, Modesta S. Williams or a child of Clayton W.
Williams, Jr.

No
Subordinate Mortgages. Grantor will not create, place, or permit to be created or
placed, or through any act or failure to act, acquiesce in the placing of, or
allow to remain any Subordinate Mortgage regardless of whether such Subordinate
Mortgage is expressly subordinate to the liens or security interests of the
Loan Documents with respect to the Mortgaged Property, other than the Permitted
Exceptions.

Additional
Obligations. Grantor shall not guarantee, endorse or otherwise become contingently
liable in connection with any obligations of any other person or entity, and
shall not create or incur any additional 

 Deed of Trust - Page 14
 

 

 

liability,
whether contingent or non-contingent, with respect to either Grantor or
the Mortgaged Property, except as specifically allowed or contemplated pursuant
to the Loan Documents.

Business
Change. Grantor shall not make or permit to occur or exist a material change in
the character of its business activities as such existed on the date hereof,
without Beneficiary’s prior written consent.

 

EVENTS OF
DEFAULT

The term “Event
of Default,” as used herein and in the Loan Documents, shall mean the
occurrence or happening, at any time and from time to time, of any one or more
of the following:

Payment of
Indebtedness. Grantor shall fail, refuse, or neglect to pay, in full,
any installment or portion of the Indebtedness as and when the same shall
become due and payable, whether at the due date thereof stipulated in the Loan
Documents, upon acceleration or otherwise, and such failure continues for a
period of ten (10) days after the date the same is due; provided, however,
that if such installment or portion of the Indebtedness becomes due and payable
as a result of Beneficiary’s accelerating the maturity of the Indebtedness in
accordance with the Loan Documents, the ten (10) day period for payment
set forth in this Section shall not apply to the accelerated due date.

Performance
of Obligations. Grantor shall fail, refuse or neglect or cause the
failure, refusal, or neglect to comply with, perform and discharge fully and
timely as and when required any of the Obligations other than a failure, breach
or default referred to in Sections 6.1, 6.3, 6.5, 6.6, 6.8 and 6.9,
(inclusive) and such failure, breach or default shall either not be curable or,
if curable, shall remain uncured for a period of thirty (30) days after the
earlier to occur of (i) the date Beneficiary (or Trustee) gives written
notice thereof to Grantor or (ii) the date upon which Grantor had actual
knowledge of the term to be performed; provided, however, that if such failure,
breach or default is curable but requires work to be performed, acts to be done
or conditions to be remedied which, by their nature, cannot be performed, done
or remedied, as the case may be, within such thirty (30) day period, no Event
of Default shall be deemed to have occurred if Grantor commences same within
such thirty (30) day period and thereafter diligently and continuously
prosecutes the same to completion within sixty (60) days after such notice or
date of actual knowledge.

False Representation. Any representation, warranty, or statement made by Grantor or others
under or pursuant to the Loan Documents or any affidavit or other instrument
executed or delivered with respect to the Loan Documents or the Indebtedness is
determined by Beneficiary to be false or misleading in any material respect as
of the date hereof or when made.

Default
Under Other Lien Document. Grantor shall default or commit an event of default
under and pursuant to any other mortgage or security agreement which covers or
affects any part of the Mortgaged Property.

Insolvency;
Bankruptcy. Grantor (i) shall execute an assignment for the benefit of creditors
or an admission in writing by Grantor of Grantor’s inability to pay, or Grantor’s
failure to pay, debts generally as the debts become due; or (ii) shall
allow the levy against the Mortgaged Property or any part thereof, of any
execution, attachment, sequestration or other writ which is not vacated within
sixty (60) days after the levy; or (iii) shall allow the appointment of a
receiver, Trustee or custodian of Grantor or of the Mortgaged Property or any
part thereof, which receiver, Trustee or custodian is not discharged within 

 Deed of Trust - Page 15
 

 

 

sixty days
after the appointment; or (iv) files as a debtor a petition, case,
proceeding or other action pursuant to, or voluntarily seeks the benefit or
benefits of any Debtor Relief Law, or takes any action in furtherance thereof;
or (v) files either a petition, complaint, answer or other instrument
which seeks to effect a suspension of, or which has the effect of suspending
any of the rights or powers of Beneficiary or Trustee granted in the Note,
herein or in any Loan Document; or (vi) allows the filing of a petition,
case, proceeding or other action against Grantor as a debtor under any Debtor
Relief Law or seeks appointment of a receiver, Trustee, custodian or liquidator
of Grantor or of the Mortgaged Property, or any part thereof, or of any
significant portion of Grantor’s other property; and (a) Grantor admits,
acquiesces in or fails to contest diligently the material allegations thereof,
or (b) the petition, case, proceeding or other action results in the entry
of an order for relief or order granting the relief sought against Grantor, or (c) the
petition, case, proceeding or other action is not permanently dismissed or
discharged on or before the earlier of trial thereon or thirty (30) days next
following the date of filing.

Dissolution;
Disability. Grantor or any Constituent Party, shall die, dissolve, terminate or
liquidate, or merge with or be consolidated into any other entity, or become
permanently disabled.

No Further
Encumbrances. Grantor creates, places, or permits to be created or
placed, or through any act or failure to act, acquiesces in the placing of, or
allows to remain, any Subordinate Mortgage, regardless of whether such
Subordinate Mortgage is expressly subordinate to the liens or security
interests of the Loan Documents, with respect to the Mortgaged Property, other
than the Permitted Exceptions.

Disposition
of Mortgaged Property and Beneficial Interest in Grantor. Grantor makes a
Disposition, without the prior written consent of Beneficiary. Notwithstanding
the foregoing, no Event of Default shall be deemed to have occurred upon the
transfer of interests in Grantor, any general partner of Grantor or any
managing member of Grantor by devise or descent or by operation of law upon the
death of a person.

Condemnation. Any condemnation
proceeding is instituted or threatened which would, in Beneficiary’s sole
judgment, materially impair the use and enjoyment of the Mortgaged Property for
its intended purposes.

Event of
Default in Loan Documents. An Event of Default as defined in any of the Loan
Documents.

REMEDIES

Beneficiary’s
Remedies Upon Default. Upon the occurrence of an Event of Default or any event or
circumstance which, with the lapse of time, or the giving of notice, or both, would
constitute an Event of Default, Beneficiary may, at Beneficiary’s option, and
by or through Trustee, by Beneficiary itself or otherwise, do any one or more
of the following:

Right to
Perform Grantor’s Covenants. If Grantor has failed to keep or perform any
covenant whatsoever contained in this Deed of Trust or the other Loan
Documents, Beneficiary 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 shall
be and become a part of the Indebtedness, and Grantor promises, upon demand, to
pay to Beneficiary, at the place where the Note is payable, all sums so
advanced or paid by Beneficiary, with interest from the date when paid or
incurred by Beneficiary at the Default Rate. No such payment by Beneficiary
shall constitute a waiver of any 

 Deed of Trust - Page 16
 

 

 

Event of
Default. In addition to the liens and security interests hereof, Beneficiary
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 Beneficiary may make an advance, or which Beneficiary may pay.

Right to
Accelerate. Beneficiary 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 Grantor and all other parties obligated in
any manner whatsoever on the Indebtedness, declare the entire unpaid balance of
the Indebtedness immediately due and payable, and upon such declaration, the
entire unpaid balance of the Indebtedness shall be immediately due and payable.
The failure to exercise any remedy available to Beneficiary shall not be deemed
to be a waiver of any rights or remedies of Beneficiary under the Loan
Documents, at law or in equity.

Foreclosure-Power
of Sale. Beneficiary 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:

Public
Sale. Trustee is hereby authorized and empowered, and it shall be Trustee’s
special duty, upon such request of Beneficiary, to sell the Mortgaged Property,
or any part thereof, at public auction to the highest bidder for cash, with or
without having taken possession of same. Any such sale (including notice
thereof) shall comply with the applicable requirements, at the time of the sale,
of Section 51.002 of the Texas Property Code 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.

Right to
Require Proof of Financial Ability and/or Cash Bid. At any time during the
bidding, the Trustee may require a bidding party (A) to disclose its full
name, state and city of residence, occupation, and specific business office
location, and the name and address of the principal the bidding party is
representing (if applicable), and (B) to demonstrate reasonable evidence
of the bidding party’s financial ability (or, if applicable, the financial
ability of the principal of such bidding party), as a condition to the bidding
party submitting bids at the foreclosure sale. If any such bidding party (the “Questioned
Bidder”) declines to comply with the Trustee’s requirement in this regard,
or if such Questioned Bidder does respond but the Trustee, in Trustee’s sole
and absolute discretion, deems the information or the evidence of the financial
ability of the Questioned Bidder (or, if applicable, the principal of such
bidding party) to be inadequate, then the Trustee may continue the bidding with
reservation; and in such event (1) the Trustee shall be authorized to
caution the Questioned Bidder concerning the legal obligations to be incurred
in submitting bids, and (2) if the Questioned Bidder is not the highest
bidder at the sale, or if having been the highest bidder the Questioned Bidder
fails to deliver the cash purchase price payment promptly to the Trustee, all
bids by the Questioned Bidder shall be null and void. The Trustee may, in
Trustee’s sole and absolute discretion, determine that a credit bid may be in
the best interest of Grantor and Beneficiary, and elect to sell the Mortgaged
Property for credit or for a combination of cash and credit; provided, however,
that the Trustee shall have no obligation to accept any bid except an all cash
bid. In the event the Trustee requires a cash bid and cash is not delivered
within a reasonable time after conclusion of the bidding process, as specified
by the Trustee, but in no event later than 3:45 p.m. local time on the day
of sale, then said contingent sale shall be null and void, the bidding process
may be recommenced, and any subsequent bids or sale shall be made as if no
prior bids were made or accepted.

 Deed of Trust - Page 17
 

 

 

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

Partial Foreclosure. Sale of a part of the Mortgaged Property shall not exhaust the power of
sale, but sales may be made from time to time until the Indebtedness is paid
and the Obligations are performed and discharged in full.

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 Grantor, conveying the Mortgaged Property
or any part thereof so sold to the purchaser or purchasers with general
warranty of title by Grantor. It is agreed that in any deeds, assignments or
other conveyances given by Trustee, any and all statements of fact or other
recitals therein made as to the identity of Beneficiary, the occurrence or
existence of any Event of Default, the notice of intention to accelerate, or
acceleration of, the maturity of the Indebtedness, the request to sell, notice
of sale, time, place, terms and manner of sale, and receipt, distribution, and
application of the money realized therefrom, the due and proper appointment of
a substitute Trustee, and any other act or thing having been duly done by or on
behalf of Beneficiary 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 Grantor does hereby ratify and confirm
any and all acts that Trustee may lawfully do in the premises by virtue hereof.

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

Beneficiary’s
Right to Appointment of Receiver. Beneficiary, as a matter of right and without
regard to the sufficiency of the security for repayment of the Indebtedness and
performance and discharge of the Obligations, without notice to Grantor 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, shall be entitled to
the appointment of a receiver or receivers of the Mortgaged Property or any
part thereof, and Grantor 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.

 Deed of Trust - Page 18
 

 

 

Other
Rights. Beneficiary may (i) apply the reserve for Impositions and insurance
premiums, if any, required by the provisions of this Deed of Trust, toward
payment of the Indebtedness, and (ii) exercise any and all other rights
and remedies which Beneficiary may have at law or in equity, or by virtue of
any Loan Document or under the Code, or otherwise.

Beneficiary
as Purchaser. Beneficiary may be the purchaser of the Mortgaged Property
or any part thereof, at any sale thereof, whether such sale be under the power
of sale herein vested in Trustee or upon any other foreclosure of the liens and
security interests hereof, or otherwise, and Beneficiary shall, upon any such
purchase, acquire good title to the Mortgaged Property so purchased, free of
the liens and security interests hereof, unless the sale was made subject to an
unmatured portion of the Indebtedness. Beneficiary, as purchaser, shall be
treated in the same manner as any third party purchaser and the proceeds of
Beneficiary’s purchase shall be applied in accordance with Section 7.4
of this Deed of Trust.

Other
Rights of Beneficiary. Should any part of the Mortgaged Property come into the
possession of Beneficiary, whether before or after an Event of Default,
Beneficiary may (for itself or by or through other persons, firms, or entities)
hold, lease, manage, use, or operate the Mortgaged Property for such time and
upon such terms as Beneficiary may deem prudent under the circumstances (making
such repairs, alterations, additions, and improvements thereto and taking such
other action as Beneficiary may from time to time deem necessary or desirable)
for the purpose of preserving the Mortgaged Property or its value, pursuant to
the order of a court of appropriate jurisdiction or in accordance with any
other rights held by Beneficiary in respect of the Mortgaged Property. Grantor
covenants to promptly reimburse and pay to Beneficiary on demand, at the place
where the Note is payable, the amount of all reasonable expenses (including
without limitation the cost of any insurance, Impositions, or other charges)
incurred by Beneficiary in connection with Beneficiary’s custody, preservation,
use, or operation of the Mortgaged Property, together with interest thereon
from the date incurred by Beneficiary at the Default Rate, and all such
expenses, costs, taxes, interest, and other charges shall be and become a part
of the Indebtedness. It is agreed, however, that the risk of loss or damage to
the Mortgaged Property is on Grantor, and Beneficiary shall have no liability
whatsoever for decline in value of the Mortgaged Property, for failure to
obtain or maintain insurance, or for failure to determine whether insurance in
force is adequate as to amount or as to the risks insured. Possession by
Beneficiary shall not be deemed an election of judicial relief, if any such
possession is requested or obtained, with respect to any Mortgaged Property or
collateral not in Beneficiary’s possession.

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

Abandonment
of Sale. At any time before a sale at foreclosure under power of sale is commenced
by Trustee in accordance with this Deed of Trust, Trustee may abandon the sale,
and Beneficiary may then 

 Deed of Trust - Page 19
 

 

 

institute
suit for the collection of the Indebtedness and for the foreclosure of the
liens and security interests hereof and of the Loan Documents. If Beneficiary
should institute a suit for the collection of the Indebtedness and for a
foreclosure of the liens and security interests, Beneficiary 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.

Payment of
Fees. If the Note or any other part of the Indebtedness shall be collected or
if any of the Obligations shall be enforced by legal proceedings, whether
through a probate or bankruptcy court or otherwise, or shall be placed in the
hands of an attorney for collection after maturity, whether matured by the
expiration of time or by an option given to Beneficiary to mature same, or if
Beneficiary becomes a party to any suit in which this Deed of Trust or the
Mortgaged Property or any part thereof is involved, Grantor agrees to pay
Beneficiary’s attorneys’ fees and expenses incurred, and such fees shall be and
become a part of the Indebtedness and shall bear interest from the date such
costs are incurred at the Default Rate.

Miscellaneous.

Discontinuance
of Remedies. In case Beneficiary 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, Beneficiary shall have the
unqualified right to do so and, in such event, Grantor and Beneficiary shall be
restored to their former positions with respect to the Indebtedness, the Loan
Documents, the Mortgaged Property or otherwise, and the rights, remedies,
recourses and powers of Beneficiary shall continue as if same had never been
invoked.

Other
Remedies. In addition to the remedies set forth in this Article, upon the
occurrence of an Event of Default, Beneficiary and Trustee shall, in addition,
have all other remedies available to them at law or in equity.

Remedies
Cumulative; Non-Exclusive; Etc. All rights, remedies, and recourses of Beneficiary
granted in the Note, this Deed of Trust, 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 Grantor, the Mortgaged Property, or any one or more of
them, at the sole discretion of Beneficiary; (iii) may be exercised as
often as occasion therefor shall arise, it being agreed by Grantor 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 Beneficiary exercising
or pursuing any remedy in relation to the Mortgaged Property prior to
Beneficiary bringing suit to recover the Indebtedness or suit on the
Obligations; and (vi) in the event Beneficiary elects to bring suit on the
Indebtedness and/or the Obligations and obtains a judgment against Grantor
prior to exercising any remedies in relation to the Mortgaged Property, all
liens and security interests, including the lien of this Deed of Trust, shall
remain in full force and effect and may be exercised at Beneficiary’s option.

Partial Release; Etc. Beneficiary may release, regardless of consideration, any part of the
Mortgaged Property without, as to the remainder, in any way impairing,
affecting, subordinating, or releasing the lien or security interests evidenced
by this Deed of Trust or the other Loan Documents or affecting the obligations
of Grantor or any other party to pay the Indebtedness or perform and discharge
the Obligations. For payment of the Indebtedness, Beneficiary may resort to any
of the collateral therefor in such order and manner as Beneficiary may elect. No
collateral heretofore, herewith, or hereafter taken by Beneficiary shall in any
manner impair or affect the 

 Deed of Trust - Page 20
 

 

 

collateral given pursuant to the Loan Documents, and all collateral
shall be taken, considered, and held as cumulative.

Waiver and
Release by Grantor. Grantor hereby irrevocably and unconditionally waives and
releases (i) all benefits that might accrue to Grantor by virtue of any
present or future law exempting the Mortgaged Property from attachment, levy or
sale on execution or providing for any appraisement, valuation, stay of
execution, exemption from civil process, redemption, or extension of time for
payment; (ii) all notices of any Event of Default or of Trustee’s exercise
of any right, remedy, or recourse provided for under the Loan Documents; and (iii) any
right to a marshaling of assets or a sale in inverse order of alienation.

No Implied
Covenants. Grantor and Beneficiary mutually agree that there are no, nor shall there
be any, implied covenants of good faith and fair dealing or other similar
covenants or agreements in this Deed of Trust and the other Loan Documents. All
agreed contractual duties are set forth in this Deed of Trust, the Note, and
the other Loan Documents.

 

SPECIAL
PROVISIONS

Condemnation
Proceeds. Beneficiary shall be entitled to receive any and all sums which may be
awarded and become payable to Grantor for 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. All such sums are hereby assigned to
Beneficiary, and Grantor shall, upon request of Beneficiary, make, execute,
acknowledge, and deliver any and all additional assignments and documents as
may be necessary from time to time to enable Beneficiary to collect and receipt
for any such sums. Beneficiary shall not be, under any circumstances, liable or
responsible for failure to collect, or exercise diligence in the collection of,
any of such sums.

INDEMNITY. GRANTOR SHALL
INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS BENEFICIARY AND TRUSTEE, THEIR
RESPECTIVE PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES,
REPRESENTATIVES, AGENTS, SUCCESSORS, AND ASSIGNS FROM AND AGAINST ANY AND ALL
LIABILITY, DAMAGE, LOSS, COST, OR EXPENSE (INCLUDING, ATTORNEYS’ FEES AND
EXPENSES), ACTION, PROCEEDING, CLAIM OR DISPUTE INCURRED OR SUFFERED BY THE
FOREGOING PARTIES SO INDEMNIFIED WHETHER OR NOT AS THE RESULT OF
THE NEGLIGENCE OF ANY PARTY SO INDEMNIFIED, WHETHER
VOLUNTARILY OR INVOLUNTARILY INCURRED OR SUFFERED, IN RESPECT OF THE FOLLOWING:

ANY AND
ALL LOSS, DAMAGE, COSTS, EXPENSE, ACTION, CAUSES OF ACTION, OR LIABILITY
(INCLUDING ATTORNEYS’ FEES AND COSTS) DIRECTLY OR INDIRECTLY ARISING FROM OR
ATTRIBUTABLE TO THE USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE,
THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE OF A HAZARDOUS SUBSTANCE
ON, IN, UNDER OR ABOUT THE MORTGAGED PROPERTY, WHETHER KNOWN OR UNKNOWN AT THE
TIME OF THE EXECUTION HEREOF, INCLUDING WITHOUT LIMITATION (A) ALL
FORESEEABLE CONSEQUENTIAL DAMAGES OF ANY SUCH USE, GENERATION, MANUFACTURE,

 Deed of Trust - Page 21
 

 

 

PRODUCTION,
STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE, AND (B) THE
COSTS OF ANY REQUIRED OR NECESSARY ENVIRONMENTAL INVESTIGATION OR MONITORING,
ANY REPAIR, CLEANUP, OR DETOXIFICATION OF THE MORTGAGED PROPERTY, AND THE
PREPARATION AND IMPLEMENTATION OF ANY CLOSURE, REMEDIAL, OR OTHER REQUIRED
PLANS.

BENEFICIARY AND/OR TRUSTEE MAY EMPLOY
AN ATTORNEY OR ATTORNEYS TO PROTEST OR ENFORCE ITS RIGHTS, REMEDIES AND
RECOURSES UNDER THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS, AND TO ADVISE
AND DEFEND BENEFICIARY AND/OR TRUSTEE WITH RESPECT TO ANY SUCH ACTIONS AND
OTHER MATTERS. GRANTOR SHALL REIMBURSE BENEFICIARY AND/OR TRUSTEE FOR THEIR
RESPECTIVE ATTORNEYS’ FEES AND EXPENSES (INCLUDING EXPENSES AND COSTS FOR
EXPERTS) IMMEDIATELY UPON RECEIPT OF A WRITTEN DEMAND THEREFOR, WHETHER ON A
MONTHLY OR OTHER TIME INTERVAL, AND WHETHER OR NOT AN ACTION IS ACTUALLY
COMMENCED OR CONCLUDED. ALL OTHER REIMBURSEMENT AND INDEMNITY OBLIGATIONS
HEREUNDER SHALL BECOME DUE AND PAYABLE WHEN ACTUALLY INCURRED BY BENEFICIARY
AND/OR TRUSTEE.

Waiver of
Subrogation. Grantor hereby waives any and all right to claim, recover, or subrogation
that arises or may arise in its favor and against Beneficiary or its officers,
directors, employees, agents, attorneys, or representatives hereto for any and
all loss of, or damage to, Grantor, the Mortgaged Property, Grantor’s property,
or the property of others under Grantor’s control from any cause insured
against or required to be insured against by the provisions of the Loan
Documents. Said waiver shall be in addition to, and not in limitation or
derogation of, any other waiver or release contained in this Deed of Trust with
respect to any loss or damage to property of the parties hereto. Inasmuch as
the above waivers preclude the assignment of any aforesaid claim by way of
subrogation (or otherwise) to an insurance company (or any other person),
Grantor hereby agrees to immediately give to each insurance company which has
issued to it any such insurance policy whether or not it is required to be
insured against by the provisions of the Loan Documents written notice of the
terms of said waivers, and to have said insurance policies properly endorsed,
if necessary, to prevent the invalidation of said insurance coverage by reason
of said waiver.

Waiver of
Setoff. The Indebtedness, or any part thereof, shall be paid by Grantor without
notice, demand, counterclaim, setoff, deduction, or defense and without
abatement, suspension, deferment, diminution, or reduction by reason of:  (i) any damage to, destruction of, or
any condemnation or similar taking of the Mortgaged Property; (ii) any
restriction or prevention of or interference with any use of the Mortgaged
Property; (iii) any title defect or encumbrance or any eviction from the
Mortgaged Property by superior title or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation, or other
like proceeding relating to Trustee, Beneficiary, or Grantor, or any action
taken with respect to this Deed of Trust by any Trustee or receiver of
Beneficiary or Grantor, or by any court, in any such proceeding; (v) any
claim which Grantor has or might have against Trustee or Beneficiary; (vi) any
default or failure on the part of Beneficiary to perform or comply with any of
the terms hereof or of any other agreement with Grantor; or (vii) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Grantor shall have notice or knowledge of any of the foregoing. Except
as expressly provided herein, Grantor waives all rights now or hereafter
conferred by statute or otherwise to any abatement, suspension, deferment,
diminution, or reduction of the Indebtedness.

 Deed of Trust - Page 22
 

 

 

Setoff. Beneficiary shall be
entitled to exercise both the rights of setoff and banker’s lien, if
applicable, against the interest of Grantor in and to each and every account
and other property of Grantor which are in the possession of Beneficiary to the
full extent of the outstanding balance of the Indebtedness.

Consent to
Disposition. It is expressly agreed that Beneficiary may predicate Beneficiary’s
decision to grant or withhold consent to a Disposition on such terms and
conditions as Beneficiary may require, in Beneficiary’s sole discretion,
including without limitation (i) consideration of the creditworthiness of
the party to whom such Disposition will be made and its management ability with
respect to the Mortgaged Property, (ii) consideration of whether the
security for repayment of the Indebtedness and the performance and discharge of
the Obligations, or Beneficiary’s ability to enforce its rights, remedies, and
recourses with respect to such security, will be impaired in any way by the
proposed Disposition, (iii) an increase in the rate of interest payable
under the Note or any other change in the terms and provisions of the Note and
other Loan Documents, (iv) reimbursement of Beneficiary for all costs and
expenses incurred by Beneficiary in investigating the creditworthiness and
management or consulting ability of the party to whom such Disposition will be
made and in determining whether Beneficiary’s security will be impaired by the
proposed Disposition, (v) payment to Beneficiary of a transfer fee to
cover the cost of documenting the Disposition in its records, (vi) payment
of Beneficiary’s reasonable attorneys’ fees in connection with such
Disposition, (vii) the express assumption of payment of the Indebtedness
and performance and discharge of the Obligations by the party to whom such
Disposition will be made (with or without the release of Grantor from liability
for such Indebtedness and Obligations), (viii) the execution of assumption
agreements, modification agreements, supplemental loan documents, and financing
statements, satisfactory in form and substance to Beneficiary, (ix) endorsements
(to the extent available under applicable law) to any existing mortgagee title
insurance policies insuring Beneficiary’s liens and security interests covering
the Mortgaged Property, and (x) requiring additional security for the
payment of the Indebtedness and performance and discharge of the Obligations.

Payment After Acceleration. If, following the occurrence of an Event of
Default, and an acceleration of the Indebtedness or any part thereof but prior
to a foreclosure sale of the Mortgaged Property, Grantor shall tender to
Beneficiary the payment of an amount sufficient to satisfy the entire
Indebtedness or the part thereof which has been accelerated, such tender shall
be deemed a voluntary prepayment pursuant to the Indebtedness and, accordingly,
Grantor, to the extent permitted by applicable law, shall also pay to
Beneficiary the premium, if any, then required under the Indebtedness or the
Loan Documents in order to exercise the prepayment privilege contained therein.

Contest of
Certain Claims. Grantor shall not be in default for failure to pay or
discharge any Imposition or mechanic’s or materialman’s lien asserted against
the Mortgaged Property if, and so long as, (a) Grantor shall have notified
Beneficiary of same within five (5) days of obtaining knowledge thereof; (b) Grantor
shall diligently and in good faith contest the same by appropriate legal
proceedings which shall operate to prevent the enforcement or collection of the
same and the sale of the Mortgaged Property or any part thereof, to satisfy the
same; (c) Grantor shall have furnished to Beneficiary a cash deposit, or
an indemnity bond satisfactory to Beneficiary with a surety satisfactory to
Beneficiary, in the amount of the Imposition or mechanic’s or materialman’s
lien claim, plus a reasonable additional sum to pay all costs, interest and
penalties that may be imposed or incurred in connection therewith, to assure
payment of the matters under contest and to prevent any sale or forfeiture of
the Mortgaged Property or any part thereof; (d) Grantor shall promptly
upon final determination thereof pay the amount of any such Imposition or claim
so determined, together with all costs, interest and penalties which may be
payable in connection therewith; (e) the failure to pay the Imposition or
mechanic’s or materialman’s lien claim does not 

 Deed of Trust - Page 23
 

 

 

constitute
a default under any other deed of trust, mortgage or security interest covering
or affecting any part of the Mortgaged Property; and (f) notwithstanding
the foregoing, Grantor shall immediately upon request of Beneficiary pay (and
if Grantor shall fail so to do, Beneficiary may, but shall not be required to,
pay or cause to be discharged or bonded against) any such Imposition or claim
notwithstanding such contest, if in the reasonable opinion of Beneficiary the
Mortgaged Property shall be in jeopardy or in danger of being forfeited or
foreclosed. Beneficiary may pay over any such cash deposit or part thereof to
the claimant entitled thereto at any time when, in the judgment of Beneficiary,
the entitlement of such claimant is established.

 

partial
releases.

 

Grantor shall be entitled to partial releases of the
lien of the Deed of Trust on the following terms and conditions:

9.1      Releases
will be granted for each tract of the Land described in Exhibit “A”. At
such time as Grantor determines to develop any tract of the Land, Grantor shall
notify Beneficiary and to obtain a release of each such tract and tender
Beneficiary an amount equal to the outstanding principal of the Note multiplied
by the ratio of the buildable square feet of the parcel to be released to the
total buildable square feet of the total Land (authorized at the time of the
Release) which remains as security under this Deed of Trust (the “Release Price”).

9.2      To
obtain a partial release of any tract of the Property from this Deed of Trust,
the Release Price shall be paid in cash by Grantor. All payments for partial
releases shall be applied as a prepayment on the Note.

9.3      All
expenses incident to the granting of partial releases shall be born by Grantor.

 

 

Intentionally
Deleted

 

 

Trustee

No
Required Action. Trustee shall not be required to take any action toward
the execution and enforcement of the trust hereby created or to institute,
appear in, or defend any action, suit, or other proceeding in connection
therewith where, in Trustee’s opinion, such action would be likely to involve
Trustee in expense or liability, unless requested so to do by a written
instrument signed by Beneficiary

 Deed of Trust - Page 24
 

 

 

and, if
Trustee so requests, unless Trustee is tendered security and indemnity
satisfactory to Trustee against any and all cost, expense, and liability
arising therefrom. Trustee shall not be responsible for the execution,
acknowledgment, or validity of the Loan Documents, or for the proper
authorization thereof, or for the sufficiency of the lien and security interest
purported to be created hereby, and Trustee makes no representation in respect
thereof or in respect of the rights, remedies, and recourses of Beneficiary.

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

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

Successor
Trustees. Trustee may resign by the giving of notice of such resignation in writing
or orally to Beneficiary. If Trustee shall die, resign, or become disqualified
from acting in the execution of this trust, or if, for any reason, Beneficiary
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, Beneficiary shall have full power to
appoint a substitute Trustee (or, if preferred, multiple substitute Trustees)
in succession who shall succeed (and if multiple substitute Trustees are
appointed, each of such multiple substitute Trustees shall succeed) to all the
estates, rights, powers, and duties of the aforenamed Trustee. Such appointment
may be executed by any authorized agent of Beneficiary, and if such Beneficiary
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. Grantor
hereby ratifies and confirms any and all acts which the aforenamed Trustee, or
Trustee’s 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 

 Deed of Trust - Page 25
 

 

 

empowered
and authorized to act alone without the necessity of the joinder of the other
multiple substitute Trustees, whenever any action or undertaking of such
substitute Trustees is requested or required under or pursuant to this Deed of
Trust or applicable law.

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

Succession
Instruments. Any substitute Trustee appointed pursuant to any of the provisions hereof
shall, without any further act, deed, or conveyance, become vested with all the
estates, properties, rights, powers, and trusts of its or his predecessor in
the rights hereunder with like effect as if originally named as Trustee herein;
but nevertheless, upon the written request of Beneficiary 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
Representation by Trustee or Beneficiary. By accepting or approving
anything required to be observed, performed, or fulfilled or to be given to
Trustee or Beneficiary pursuant to the Loan Documents, including without
limitation, any officer’s certificate, balance sheet, statement of profit and
loss or other financial statement, survey, appraisal, or insurance policy,
neither Trustee nor Beneficiary shall be deemed to have warranted, consented
to, or affirmed the sufficiency, legality, effectiveness, or legal effect of
the same, or of any term, provision, or condition thereof, and such acceptance
or approval thereof shall not be or constitute any warranty or affirmation with
respect thereto by Trustee or Beneficiary.

 

MISCELLANEOUS

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

Performance
at Grantor’s Expense. Grantor shall (i) pay all legal fees incurred by
Beneficiary in connection with the preparation of the Loan Documents (including
any amendments thereto or consents, releases, or waivers granted thereunder); (ii) reimburse
Beneficiary, promptly upon demand, for all amounts expended, advanced, or
incurred by Beneficiary to satisfy any obligation of Grantor under the Loan
Documents, which amounts shall include (without limitation) all court costs,
attorneys’ fees (including, for trial, appeal, or other proceedings), fees of
auditors and accountants and other investigation expenses reasonably incurred
by Beneficiary in connection with any such matters; and (iii) any and all
other costs and expenses of performing or complying with any and all of the
Obligations. Except to the extent that costs and expenses are included within
the definition of “Indebtedness,” the payment of such 

 Deed of Trust - Page 26
 

 

 

costs and
expenses shall not be credited, in any way and to any extent, against any
installment on or portion of the Indebtedness.

Survival of Obligations. Each and all of the Obligations shall survive the execution and delivery
of the Loan Documents and the consummation of the loan called for therein and
shall continue in full force and effect until the Indebtedness shall have been
paid in full; provided, however, that nothing contained in this Section shall
limit the obligations of Grantor as otherwise set forth herein.

Recording
and Filing. Grantor will cause the Loan Documents requested by Beneficiary and all
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded, and refiled in such manner and in such places as
Trustee or Beneficiary shall reasonably request, and will pay all such
recording, filing, re-recording and refiling taxes, documentary stamp
taxes, fees, and other charges.

Notices. All notices and other
communications provided for in this Deed of Trust or contemplated hereby, given
hereunder or required by law to be given, shall be in writing (unless expressly
provided to the contrary). If personally delivered, such notices shall be
effective when delivered, and in the case of mailing or delivery by overnight
courier, such notices shall be effective when placed in an envelope and
deposited at a post office or official depository under the exclusive care and
custody of the United States Postal Service or delivered to an overnight
courier, postage prepaid, in each case addressed to the parties as set forth in
this Deed of Trust, or to such other address as a party shall have designated
to the other in writing in accordance with this Section. In the case of
mailing, the mailing shall be by certified or first class mail. The giving of
at least five (5) days’ notice before Beneficiary shall take any action
described in any notice shall conclusively be deemed reasonable for all
purposes; provided, that this shall not be deemed to require Beneficiary to
give such five (5) days’ notice, or any notice, if not specifically required
to do so in this Deed of Trust. For purposes of this Section, the address of
Grantor and the Beneficiary shall be that address set forth on Page 1
hereof.

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

Successors and Assigns. All of the terms of the Loan Documents shall apply to, be binding upon,
and inure to the benefit of the parties thereto, their successors, assigns,
heirs, and legal representatives, and all other persons claiming by, through,
or under them.

No Waiver;
Severability. Any failure by Trustee or Beneficiary to insist, or any
election by Trustee or Beneficiary not to insist, upon strict performance by
Grantor or others of any of the terms, provisions, or conditions of the Loan
Documents shall not be deemed to be a waiver of same or of any other terms,
provisions, or conditions thereof, and Trustee or Beneficiary shall have the
right at any time or times thereafter to insist upon strict performance by
Grantor or others of any and all of such terms, provisions, and conditions. The
Loan Documents are intended to be performed in accordance with, and only to the
extent permitted by, all applicable Legal Requirements. If any provision of any
of the Loan Documents or the application thereof to any person or circumstance
shall, for any reason and to any extent, be invalid or unenforceable, then
neither the remainder of the instrument in which such provision is contained
nor the application of such provision to other persons or circumstances nor the
other instruments referred to herein shall be affected thereby, but rather
shall be enforced to the greatest extent permitted by law.

 Deed of Trust - Page 27
 

 

 

Counterparts. To facilitate execution,
this Deed of Trust may be executed in as many counterparts as may be convenient
or required. It shall not be necessary that the signature and acknowledgment
of, or on behalf of, each party, or that the signature and acknowledgment of
all persons required to bind any party, appear on each counterpart. All
counterparts shall collectively constitute a single instrument. It shall not be
necessary in making proof of this Deed of Trust to produce or account for more
than a single counterpart containing the respective signatures and
acknowledgment of, or on behalf of, each of the parties hereto. Any signature
and acknowledgment page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures and
acknowledgments thereon and thereafter attached to another counterpart
identical thereto except having attached to it additional signature and
acknowledgment pages.

Governing
Law. This Deed of Trust is executed and delivered as an incident to a lending
transaction negotiated and consummated in Dallas County, Texas, and shall be
governed by and construed in accordance with the laws of the State of Texas.

Controlling
Agreement. In the event of any conflict between the provisions of this Deed of Trust
and any of the other Loan Documents, it is the intent of the parties hereto
that the provisions of this Deed of Trust shall control. The parties hereto
acknowledge that they were represented by competent counsel in connection with
the negotiation, drafting and execution of the Loan Documents and that such
Loan Documents shall not be subject to the principle of construing their
meaning against the party which drafted same.

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

Rights
Cumulative. Beneficiary shall have all rights, remedies, and recourses granted in the
Loan Documents and available at law or in equity (including, those granted by
the Code and applicable to the Mortgaged Property or any portion thereof), and
the same (i) shall be cumulative and concurrent, (ii) may be pursued
separately, successively, or concurrently against Grantor or others obligated
for the Indebtedness or any part thereof, or against any one or more of them,
or against the Mortgaged Property, at the sole discretion of Beneficiary, (iii) may
be exercised as often as occasion therefor shall arise, it being agreed by
Grantor that the exercise, discontinuance of the exercise of or failure to
exercise any of the same shall in no event be construed as a waiver or release
thereof or of any other right, remedy, or recourse, and (iv) are intended
to be, and shall be, nonexclusive. All rights and remedies of Beneficiary
hereunder and under the other Loan Documents shall extend to any period after
the initiation of foreclosure proceedings, judicial or otherwise, with respect
to the Mortgaged Property.

Payments. Remittances in payment of
any part of the Indebtedness other than in the required amount in funds
immediately available at the place where the Note is payable shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by Beneficiary in funds immediately
available at the place where the Note is payable (or such other place as
Beneficiary, in Beneficiary’s sole discretion, may have established by delivery
of written notice thereof to Grantor) and shall be made and accepted subject to
the condition that any check or draft may be handled for collection 

 Deed of Trust - Page 28
 

 

 

in
accordance with the practice of the collecting bank or banks. Acceptance by
Beneficiary 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 be and continue to be an Event of Default.

Change of Security. Any part of the Mortgaged Property may be released, regardless of
consideration, by Beneficiary from time to time without impairing,
subordinating, or affecting in any way the lien, security interest, and other
rights hereof against the remainder. The lien, security interest, and other
rights granted hereby shall not be affected by any other security taken for the
Indebtedness or Obligations, or any part thereof. The taking of additional
collateral, or the amendment, extension, renewal, or rearrangement of the
Indebtedness or Obligations, or any part thereof, shall not release or impair
the lien, security interest, and other rights granted hereby, or affect the
liability of any endorser or guarantor or improve the right of any junior
lienholder; and this Deed of Trust, as well as any instrument given to secure
any amendment, extension, renewal, or rearrangement of the Indebtedness or
Obligations, or any part thereof, shall be and remain a first and prior lien,
except as otherwise provided herein, on all of the Mortgaged Property not
expressly released until the Indebtedness is fully paid and the Obligations are
fully performed and discharged.

Headings. The
Article, Section, and Subsection entitlements hereof are inserted for
convenience of reference only and shall in no way alter, modify, or define, or
be used in construing the text of such Articles, Sections, or Subsections.

Entire
Agreement; Amendment. THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS EMBODY THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO. The provisions hereof and the other Loan
Documents may be amended or waived only by an instrument in writing signed by
Grantor and Beneficiary.

Waiver of
Right to Trial by Jury. GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT
RELATES TO OR ARISES OUT OF ANY OF THE LOAN DOCUMENTS OR THE ACTS OR FAILURE TO
ACT OF OR BY BENEFICIARY IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS
OF THIS DEED OF TRUST OR THE OTHER LOAN DOCUMENTS.

Counting of Days. The term “days” when used herein shall mean calendar days. If any
time period ends on a Saturday, Sunday or holiday officially recognized by the
state within which the Land is located (whether legal or religious in nature),
the period shall be deemed to end on the next succeeding business day. The term
“business day” or “Business Day” when used herein shall mean a
weekday, Monday through Friday, except a legal holiday or a day on which
banking institutions in Dallas, Texas are authorized by law to be closed.

 Deed of Trust - Page 29
 

 

 

Beneficiary’s
Discretion. Whenever pursuant to this Deed of Trust, Beneficiary exercises any right
given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Beneficiary, the decision of Beneficiary to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Beneficiary and shall be final and conclusive.

No Merger
of Estates. So long as any part of the Indebtedness and the Obligations secured
hereby remain unpaid and unperformed or undischarged, the fee and leasehold
estates to the Mortgaged Property shall not merge but rather shall remain
separate and distinct, notwithstanding the union of such estates either in
Grantor, Beneficiary, any lessee, or any third party purchaser or otherwise.

[Balance of this Page Left
Intentionally Blank]

 

 Deed of Trust - Page 30

 

 

EXECUTED
as of the date first above written.

NOTICE OF INDEMNIFICATION:

GRANTOR HEREBY ACKNOWLEDGES

AND AGREES THAT THIS DEED OF TRUST

CONTAINS CERTAIN INDEMNIFICATION

PROVISIONS WHICH, IN CERTAIN

CIRCUMSTANCES, COULD INCLUDE AN

INDEMNIFICATION BY GRANTOR OF

BENEFICIARY FROM CLAIMS OR LOSSES

ARISING AS A RESULT OF

BENEFICIARY’S OWN NEGLIGENCE.

 

	
  

  	
   

  	
  GRANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  W&G PARTNERSHIP, LTD.,

  a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  ClayDesta, L.P., its managing general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
  ClayDesta Operating L.L.C.,

  its general partner

  	
   

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
   

  	
  DESTA THREE PARTNERSHIP, LTD.,

  a Texas limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Desta Three Development Corp.,

  its general partner

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  

  	
   

  	
  DESTA SIX PARTNERSHIP, LTD.,

  a Texas limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Desta Six Development Corp.,

  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
										

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  L. Paul Latham

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
  [SEAL]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE STATE OF TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF MIDLAND

  	
  ‘

  	
   

  
	
   

  	
   

  	
   

  

 

This instrument was acknowledged before me on the _____ day of June,
2006 by L. Paul Latham, President of ClayDesta Operating, L.L.C., a Texas
limited liability company, general partner of ClayDesta, L.P., managing general
partner of W&G Partnership, Ltd., on behalf of said company and
partnerships.

	
  [SEAL]

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE STATE OF TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF MIDLAND

  	
  ‘

  	
   

  
	
   

  	
   

  	
   

  

 

This instrument was acknowledged before me on the _____ day of June,
2006 by L. Paul Latham, President of Desta Three Development Corp., general
partner of Desta Three Partnership, Ltd., a Texas limited liability company, on
behalf of said company and partnership.

	
  [SEAL]

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE STATE OF TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF MIDLAND

  	
  ‘

  	
   

  
	
   

  	
   

  	
   

  

 

This instrument was acknowledged before me on the _____ day of June,
2006 by L. Paul Latham, President of Desta Six Development Corp., general
partner of Desta Six Partnership, Ltd., a Texas limited liability company, on
behalf of said company and partnership.

 

	
  [SEAL]

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public Signature

  
	
   

  	
   

  	
   

  

 

 

EXHIBIT “A”

Land
Description

TRACT
#1 — (Terrace VI Office Building): Lot(s) 2, Block “B” THE TERRACE, SECTION SEVEN,
a subdivision in Travis County, Texas, according to the map or plat thereof,
recorded under Document No. 200100072 of the Official Public Records of
Travis County, Texas.

TRACT
#2 — (Terrace III Office Building): Lot(s) 2, Block “A” THE TERRACE, SECTION FIVE,
a subdivision in Travis County, Texas, according to the map or plat thereof,
recorded under Document No. 200000361 of the Official Public Records of
Travis County, Texas.

TRACT #3 — (Hotel Site): Lot(s) 1,
Block “A” THE TERRACE, SECTION FIVE, a subdivision in Travis County,
Texas, according to the map or plat thereof, recorded under Document No. 200000361
of the Official Public Records of Travis County, Texas.

TRACT #4 — (Terrace IV Office Building):
Lot(s) 1, Block “B” THE TERRACE, SECTION SEVEN, a subdivision in
Travis County, Texas, according to the map or plat thereof, recorded under
Document No. 200100072 of the Official Public Records of Travis County,
Texas.

TRACT #5 — (Retail Site): Lot 2, Block “E” of
THE TERRACE SECTION SIX, a subdivision in Travis County, Texas, according
to the map or plat thereof, recorded under Document No. 200000362 of the
Official Public Records of Travis County, Texas.

 

 

Exhibit “B”

Permitted Exceptions

All
restrictions, covenants, easements, encumbrances, and rights of way of record
in the Official Public Records of Travis County on the date hereof._______________________________________________________________

LOAN AGREEMENT

Dated as of June 21, 2006

Between

BEHRINGER HARVARD TERRACE LP

as Borrower

And

LEHMAN BROTHERS BANK, FSB 

as Lender

_________________________________________________________________

 

 

 

 

 

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page No.

  
	
  1.

  	
   

  	
  DEFINITIONS; PRINCIPLES
  OF CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.1

  	
   

  	
  Specific Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
  1.2

  	
   

  	
  Index of Other Definitions

  	
   

  	
  11

  
	
   

  	
   

  	
  1.3

  	
   

  	
  Principles of Construction

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  GENERAL LOAN TERMS

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1

  	
   

  	
  The Loan

  	
   

  	
  14

  
	
   

  	
   

  	
  2.2

  	
   

  	
  Interest; Monthly Payments.

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
  2.2.1

  	
   

  	
  Generally

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
  2.2.2

  	
   

  	
  Default Rate

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
  2.2.3

  	
   

  	
  Taxes

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
  2.2.4

  	
   

  	
  New Payment Date

  	
   

  	
  15

  
	
   

  	
   

  	
  2.3

  	
   

  	
  Loan Repayment.

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
  2.3.1

  	
   

  	
  Repayment

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
  2.3.2

  	
   

  	
  Mandatory Prepayments

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
  2.3.3

  	
   

  	
  Defeasance.

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
  2.3.4

  	
   

  	
  Optional Prepayments

  	
   

  	
  18

  
	
   

  	
   

  	
  2.4

  	
   

  	
  Release of Property.

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
  2.4.1

  	
   

  	
  Release on Defeasance

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
  2.4.2

  	
   

  	
  Release on Payment in Full

  	
   

  	
  19

  
	
   

  	
   

  	
  2.5

  	
   

  	
  Payments and Computations.

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
  2.5.1

  	
   

  	
  Making of Payments

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
  2.5.2

  	
   

  	
  Computations

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
  2.5.3

  	
   

  	
  Late Payment Charge

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  CASH MANAGEMENT AND
  RESERVES

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Cash Management Arrangements

  	
   

  	
  20

  
	
   

  	
   

  	
  3.2

  	
   

  	
  Intentionally Deleted.

  	
   

  	
  20

  
	
   

  	
   

  	
  3.3

  	
   

  	
  Tax and Insurance Reserve.

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
  3.3.1

  	
   

  	
  Reserve Deposits

  	
   

  	
  20

  
	
   

  	
   

  	
  3.4

  	
   

  	
  Capital Expense Reserves.

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
  3.4.1

  	
   

  	
  Reserve Deposits

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
  3.4.2

  	
   

  	
  Guaranty in Lieu of Reserve.

  	
   

  	
  22

  
	
   

  	
   

  	
  3.5

  	
   

  	
  Rollover Reserves.

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
  3.5.1

  	
   

  	
  Reserve Deposits

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
  3.5.2

  	
   

  	
  Guaranty in Lieu of Reserve

  	
   

  	
  23

  
	
   

  	
   

  	
  3.6

  	
   

  	
  Operating Expense Subaccount

  	
   

  	
  24

  
	
   

  	
   

  	
  3.7

  	
   

  	
  Casualty/Condemnation Subaccount

  	
   

  	
  25

  
	
   

  	
   

  	
  3.8

  	
   

  	
  Security Deposits

  	
   

  	
  25

  
	
   

  	
   

  	
  3.9

  	
   

  	
  Cash Collateral Subaccount

  	
   

  	
  25

  

 i
 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.10

  	
   

  	
  Grant of Security Interest; Application of Funds

  	
   

  	
  25

  
	
   

  	
   

  	
  3.11

  	
   

  	
  Property Cash Flow Allocation.

  	
   

  	
  26

  
	
   

  	
   

  	
  3.12

  	
   

  	
  Intentionally Omitted.

  	
   

  	
  27

  
	
   

  	
   

  	
  3.13

  	
   

  	
  Intentionally Omitted.

  	
   

  	
  27

  
	
   

  	
   

  	
  3.14

  	
   

  	
  Initial Deposits into Reserves

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.1

  	
   

  	
  Organization; Special Purpose

  	
   

  	
  27

  
	
   

  	
   

  	
  4.2

  	
   

  	
  Proceedings; Enforceability

  	
   

  	
  27

  
	
   

  	
   

  	
  4.3

  	
   

  	
  No Conflicts

  	
   

  	
  28

  
	
   

  	
   

  	
  4.4

  	
   

  	
  Litigation

  	
   

  	
  28

  
	
   

  	
   

  	
  4.5

  	
   

  	
  Agreements

  	
   

  	
  28

  
	
   

  	
   

  	
  4.6

  	
   

  	
  Title

  	
   

  	
  28

  
	
   

  	
   

  	
  4.7

  	
   

  	
  No Bankruptcy Filing

  	
   

  	
  29

  
	
   

  	
   

  	
  4.8

  	
   

  	
  Full and Accurate Disclosure

  	
   

  	
  29

  
	
   

  	
   

  	
  4.9

  	
   

  	
  Tax Filings

  	
   

  	
  30

  
	
   

  	
   

  	
  4.10

  	
   

  	
  ERISA; No Plan Assets

  	
   

  	
  30

  
	
   

  	
   

  	
  4.11

  	
   

  	
  Compliance

  	
   

  	
  30

  
	
   

  	
   

  	
  4.12

  	
   

  	
  Contracts

  	
   

  	
  31

  
	
   

  	
   

  	
  4.13

  	
   

  	
  Federal Reserve Regulations; Investment Company Act

  	
   

  	
  31

  
	
   

  	
   

  	
  4.14

  	
   

  	
  Easements; Utilities and Public Access

  	
   

  	
  31

  
	
   

  	
   

  	
  4.15

  	
   

  	
  Physical Condition

  	
   

  	
  31

  
	
   

  	
   

  	
  4.16

  	
   

  	
  Leases

  	
   

  	
  32

  
	
   

  	
   

  	
  4.17

  	
   

  	
  Fraudulent Transfer

  	
   

  	
  32

  
	
   

  	
   

  	
  4.18

  	
   

  	
  Ownership of Borrower

  	
   

  	
  33

  
	
   

  	
   

  	
  4.19

  	
   

  	
  Purchase Options

  	
   

  	
  33

  
	
   

  	
   

  	
  4.20

  	
   

  	
  Management Agreement

  	
   

  	
  33

  
	
   

  	
   

  	
  4.21

  	
   

  	
  Hazardous Substances

  	
   

  	
  33

  
	
   

  	
   

  	
  4.22

  	
   

  	
  Name; Principal Place of Business

  	
   

  	
  34

  
	
   

  	
   

  	
  4.23

  	
   

  	
  Other Debt

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  COVENANTS

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.1

  	
   

  	
  Existence

  	
   

  	
  34

  
	
   

  	
   

  	
  5.2

  	
   

  	
  Taxes and Other Charges

  	
   

  	
  34

  
	
   

  	
   

  	
  5.3

  	
   

  	
  Access to Property

  	
   

  	
  35

  
	
   

  	
   

  	
  5.4

  	
   

  	
  Repairs; Maintenance and Compliance; Alterations.

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
  5.4.1

  	
   

  	
  Repairs; Maintenance and Compliance

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
  5.4.2

  	
   

  	
  Alterations

  	
   

  	
  35

  
	
   

  	
   

  	
  5.5

  	
   

  	
  Performance of Other Agreements

  	
   

  	
  36

  
	
   

  	
   

  	
  5.6

  	
   

  	
  Cooperate in Legal Proceedings

  	
   

  	
  36

  
	
   

  	
   

  	
  5.7

  	
   

  	
  Further Assurances

  	
   

  	
  36

  
	
   

  	
   

  	
  5.8

  	
   

  	
  Environmental Matters.

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
  5.8.1

  	
   

  	
  Hazardous Substances

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
  5.8.2

  	
   

  	
  Environmental Monitoring.

  	
   

  	
  37

  
	
   

  	
   

  	
  5.9

  	
   

  	
  Title to the Property

  	
   

  	
  38

  

 ii
 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.10

  	
   

  	
  Leases.

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
  5.10.1

  	
   

  	
  Generally

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
  5.10.2

  	
   

  	
  Material Leases

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
  5.10.3

  	
   

  	
  Minor Leases

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
  5.10.4

  	
   

  	
  Additional Covenants with respect to Leases

  	
   

  	
  40

  
	
   

  	
   

  	
  5.11

  	
   

  	
  Estoppel Statement

  	
   

  	
  40

  
	
   

  	
   

  	
  5.12

  	
   

  	
  Property Management.

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
  5.12.1

  	
   

  	
  Management Agreement

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
  5.12.2

  	
   

  	
  Termination of Manager

  	
   

  	
  41

  
	
   

  	
   

  	
  5.13

  	
   

  	
  Special Purpose Bankruptcy Remote Entity

  	
   

  	
  43

  
	
   

  	
   

  	
  5.14

  	
   

  	
  Assumption in Non-Consolidation Opinion

  	
   

  	
  43

  
	
   

  	
   

  	
  5.15

  	
   

  	
  Change in Business or Operation of Property

  	
   

  	
  43

  
	
   

  	
   

  	
  5.16

  	
   

  	
  Debt Cancellation

  	
   

  	
  43

  
	
   

  	
   

  	
  5.17

  	
   

  	
  Affiliate Transactions

  	
   

  	
  43

  
	
   

  	
   

  	
  5.18

  	
   

  	
  Zoning

  	
   

  	
  43

  
	
   

  	
   

  	
  5.19

  	
   

  	
  No Joint Assessment

  	
   

  	
  43

  
	
   

  	
   

  	
  5.20

  	
   

  	
  Principal Place of Business

  	
   

  	
  44

  
	
   

  	
   

  	
  5.21

  	
   

  	
  Change of Name, Identity or Structure

  	
   

  	
  44

  
	
   

  	
   

  	
  5.22

  	
   

  	
  Indebtedness

  	
   

  	
  44

  
	
   

  	
   

  	
  5.23

  	
   

  	
  Licenses

  	
   

  	
  44

  
	
   

  	
   

  	
  5.24

  	
   

  	
  Compliance with Restrictive Covenants, Etc

  	
   

  	
  44

  
	
   

  	
   

  	
  5.25

  	
   

  	
  ERISA.

  	
   

  	
  45

  
	
   

  	
   

  	
  5.26

  	
   

  	
  Transfers.

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
  5.26.1

  	
   

  	
  Generally

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
  5.26.2

  	
   

  	
  Transfer and Assumption.

  	
   

  	
  46

  
	
   

  	
   

  	
  5.27

  	
   

  	
  Liens

  	
   

  	
  48

  
	
   

  	
   

  	
  5.28

  	
   

  	
  Dissolution

  	
   

  	
  48

  
	
   

  	
   

  	
  5.29

  	
   

  	
  Expenses

  	
   

  	
  48

  
	
   

  	
   

  	
  5.30

  	
   

  	
  Indemnity

  	
   

  	
  49

  
	
   

  	
   

  	
  5.31

  	
   

  	
  Patriot Act Compliance.

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  NOTICES AND REPORTING

  	
   

  	
  51

  
	
   

  	
   

  	
  6.1

  	
   

  	
  Notices

  	
   

  	
  51

  
	
   

  	
   

  	
  6.2

  	
   

  	
  Borrower Notices and Deliveries

  	
   

  	
  51

  
	
   

  	
   

  	
  6.3

  	
   

  	
  Financial Reporting.

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
  6.3.1

  	
   

  	
  Bookkeeping

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
  6.3.2

  	
   

  	
  Annual Reports

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
  6.3.3

  	
   

  	
  Monthly/Quarterly Reports

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
  6.3.4

  	
   

  	
  Other Reports

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
  6.3.5

  	
   

  	
  Annual Budget

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  INSURANCE; CASUALTY; AND
  CONDEMNATION

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.1

  	
   

  	
  Insurance.

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
  7.1.1

  	
   

  	
  Coverage

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
  7.1.2

  	
   

  	
  Policies

  	
   

  	
  56

  

 iii
 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.2

  	
   

  	
  Casualty.

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
  7.2.1

  	
   

  	
  Notice; Restoration

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
  7.2.2

  	
   

  	
  Settlement of Proceeds

  	
   

  	
  57

  
	
   

  	
   

  	
  7.3

  	
   

  	
  Condemnation.

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
  7.3.1

  	
   

  	
  Notice; Restoration

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
  7.3.2

  	
   

  	
  Collection of Award

  	
   

  	
  58

  
	
   

  	
   

  	
  7.4

  	
   

  	
  Application of Proceeds or Award.

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
  7.4.1

  	
   

  	
  Application to Restoration

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
  7.4.2

  	
   

  	
  Application to Debt

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
  7.4.3

  	
   

  	
  Procedure for Application to Restoration

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  DEFAULTS

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.1

  	
   

  	
  Events of Default

  	
   

  	
  61

  
	
   

  	
   

  	
  8.2

  	
   

  	
  Remedies.

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
  8.2.1

  	
   

  	
  Acceleration

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
  8.2.2

  	
   

  	
  Remedies Cumulative

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
  8.2.3

  	
   

  	
  Severance

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
  8.2.4

  	
   

  	
  Delay

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
  8.2.5

  	
   

  	
  Lender’s Right to Perform

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  SPECIAL PROVISIONS

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9.1

  	
   

  	
  Sale of Note and Secondary Market Transaction.

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.1

  	
   

  	
  General; Borrower Cooperation

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.2

  	
   

  	
  Use of Information

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.3

  	
   

  	
  Borrower Obligations Regarding Disclosure Documents

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.4

  	
   

  	
  Borrower Indemnity Regarding Filings

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.5

  	
   

  	
  Indemnification Procedure

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.6

  	
   

  	
  Contribution

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.7

  	
   

  	
  Severance of Loan

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
  9.1.8

  	
   

  	
  Audited Statements

  	
   

  	
  69

  
	
   

  	
   

  	
  9.2

  	
   

  	
  Costs and Expenses

  	
   

  	
  69

  
	
   

  	
   

  	
  9.3

  	
   

  	
  Mezzanine Loan

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10.1

  	
   

  	
  Exculpation

  	
   

  	
  70

  
	
   

  	
   

  	
  10.2

  	
   

  	
  Brokers and Financial Advisors

  	
   

  	
  72

  
	
   

  	
   

  	
  10.3

  	
   

  	
  Retention of Servicer

  	
   

  	
  72

  
	
   

  	
   

  	
  10.4

  	
   

  	
  Survival

  	
   

  	
  73

  
	
   

  	
   

  	
  10.5

  	
   

  	
  Lender’s Discretion

  	
   

  	
  73

  
	
   

  	
   

  	
  10.6

  	
   

  	
  Governing Law.

  	
   

  	
  73

  
	
   

  	
   

  	
  10.7

  	
   

  	
  Modification, Waiver in Writing

  	
   

  	
  74

  
	
   

  	
   

  	
  10.8

  	
   

  	
  Trial by Jury

  	
   

  	
  75

  
	
   

  	
   

  	
  10.9

  	
   

  	
  Headings/Exhibits

  	
   

  	
  75

  
	
   

  	
   

  	
  10.10

  	
   

  	
  Severability

  	
   

  	
  75

  

 iv
 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10.11

  	
   

  	
  Preferences

  	
   

  	
  75

  
	
   

  	
   

  	
  10.12

  	
   

  	
  Waiver of Notice

  	
   

  	
  75

  
	
   

  	
   

  	
  10.13

  	
   

  	
  Remedies of Borrower

  	
   

  	
  75

  
	
   

  	
   

  	
  10.14

  	
   

  	
  Prior Agreements

  	
   

  	
  76

  
	
   

  	
   

  	
  10.15

  	
   

  	
  Offsets, Counterclaims and Defenses

  	
   

  	
  76

  
	
   

  	
   

  	
  10.16

  	
   

  	
  Publicity

  	
   

  	
  76

  
	
   

  	
   

  	
  10.17

  	
   

  	
  No Usury

  	
   

  	
  76

  
	
   

  	
   

  	
  10.18

  	
   

  	
  Conflict; Construction of Documents

  	
   

  	
  77

  
	
   

  	
   

  	
  10.19

  	
   

  	
  No Third Party Beneficiaries

  	
   

  	
  77

  
	
   

  	
   

  	
  10.20

  	
   

  	
  Assignment

  	
   

  	
  77

  
	
   

  	
   

  	
  10.21

  	
   

  	
  Set-Off

  	
   

  	
  77

  
	
   

  	
   

  	
  10.22

  	
   

  	
  Certain Additional Rights of Lender

  	
   

  	
  78

  
	
   

  	
   

  	
  10.23

  	
   

  	
  Counterparts

  	
   

  	
  79

  
	
   

  	
   

  	
  10.24

  	
   

  	
  Yield Maintenance Premium

  	
   

  	
  79

  

 

Schedule 1             Form of Tenant Direction
Letter

Schedule 2             Exceptions to
Representations and Warranties

Schedule 3             Rent Roll

Schedule 4             Organization of
Borrower

Schedule 5             Definition of
Special Purpose Bankruptcy Remote Entity

Schedule 6             Intentionally
Omitted

Schedule 7             Intentionally
Omitted

Schedule 8             Intentionally
Omitted

 

 v

LOAN
AGREEMENT

LOAN AGREEMENT
dated as of June 21, 2006 (as the same may be modified, supplemented,
amended or otherwise changed, this “Agreement”)
between BEHRINGER HARVARD TERRACE LP, a Delaware limited partnership, having an
office at 15601 Dallas Parkway, Suite 600, Addison, Texas 75001 (together
with its permitted successors and assigns, “Borrower”), and LEHMAN BROTHERS BANK, FSB, a federal
stock savings bank, a Delaware corporation (together with its successors and
assigns, “Lender”).

1.                                       DEFINITIONS; PRINCIPLES OF
CONSTRUCTION

1.1          Specific Definitions. The following
terms have the meanings set forth below:

Acceptable
Mezzanine Lender:  (i) any
Person satisfying the definition of “Qualified Transferee” (or any successor
term) under clause (ii) (or such corresponding subsection of any successor
term) of the definition of “Qualified Transferee” set forth in the form
Intercreditor Agreement attached as Appendix VI to the Standard & Poor’s
U.S. CMBS Legal and Structural Finance Criteria published May 1, 2003, as
the same may have been amended or modified prior to the date of the Mezzanine
Loan, based on the default values for minimum total assets and
capital/statutory surplus or shareholders’ equity included in the definition of
“Eligibility Requirements” in such publication (or any successor term) or (ii) any
other Person that has been approved by Lender acting reasonably, and provided,
however, in the case of each of the foregoing clauses (i) and (ii), that
if the Mezzanine Loan is made after the occurrence of a Secondary Market
Transaction, such Person (1) was identified to the applicable Rating
Agencies as the proposed lender in connection with the request for a Rating
Comfort Letter referred to in Section 9.3(c), or (2) has otherwise
been approved in writing by the applicable Rating Agencies.

Appraisal: shall mean an
appraisal prepared in accordance with the requirements of FIRREA, prepared by
an independent third party appraiser holding an MAI designation, who is State
licensed or State certified if required under the laws of the State where the
Property is located, who meets the requirements of FIRREA and who is otherwise
satisfactory to Lender.

Affiliate:  as to any Person, any other Person that,
directly or indirectly, is in Control of, is Controlled by or is under common
Control with such Person or is a director or officer of such Person or of an
Affiliate of such Person.

Amortization Commencement Date:  August 11, 2011, as such date may be
changed in accordance with Section 2.2.4.

Approved Capital Expenses:  Capital Expenses incurred by Borrower,
provided that during a Cash Trap Period, such Capital Expenses shall either be (i) included
in the total Approved Capital Budget or (ii) approved by Lender.

Approved Leasing Expenses:  actual out-of-pocket expenses incurred by
Borrower in leasing space at the Property pursuant to Leases entered into in
accordance with the Loan Documents, including brokerage commissions (including
those paid pursuant to the Management Agreement) and tenant improvements, which
expenses (i) are (A) specifically

 

approved by Lender in
connection with approving the applicable Lease, (B) incurred in the
ordinary course of business and on market terms and conditions in connection
with Leases which do not require Lender’s approval under the Loan Documents, or
(C) otherwise approved by Lender, which approval shall not be unreasonably
withheld or delayed, and (ii) are substantiated by executed Lease
documents and brokerage agreements.

Approved Operating Expenses:  during a Cash Trap Period, operating expenses
incurred by Borrower which (i) are within one hundred five percent (105%)
of the total amounts included in the Approved Operating Budget for the current
calendar month (or for unpaid operating expenses included in the Approved
Operating Budget for prior calendar months); provided that, for purposes
hereof, operating expenses in such Approved Operating Budget shall be deemed to
be increased from the amounts in the applicable Approved Operating Budget to
the extent that such increased amounts are at least equal to an increase in
operating revenues from the amounts in such Approved Operating Budget or
directly relate to variances in occupancy levels or emergencies or unforeseen
circumstances, (ii) are for real estate taxes, insurance premiums,
electric, gas, oil, water, sewer or other utility service to the Property, (iii) are
for property management fees payable to Manager under the Management Agreement,
such amounts not to exceed three percent (3%) of the monthly Rents (excluding
however any asset management fees payable by Borrower to Manager pursuant to
the Management Agreement; provided, however, the foregoing three percent (3%)
limitation shall not be deemed to preclude Borrower from paying any such asset
management fees pursuant to the terms of the Management Agreement from its own
funds) or (iv) have been approved by Lender, acting in a commercially
reasonably manner. Notwithstanding the foregoing, nothing herein shall be
deemed to preclude Borrower from paying any asset management fee (over and
above the amount set forth above) pursuant to the terms of the Management
Agreement from its own funds.

Available Cash:  as of each Payment Date during the
continuance of a Cash Trap Period, the amount of Rents, if any, remaining in
the Deposit Account after the application of all of the payments required under
clauses (i) through (v) of Section 3.11(a) hereof.

Behringer:  Behringer Harvard Holdings, LLC, a Delaware
limited liability company.

Business Day:  any day other than a Saturday, Sunday or any
day on which commercial banks in New York, New York are authorized or required
to close.

Calculation Date:  the last day of each calendar quarter during
the Term.

Capital Expenses:  expenses that are capital in nature or
required under GAAP to be capitalized.

Cash Trap Period:  shall commence, if, (i) an Event of
Default has occurred and is continuing, and shall end if such Event of Default
has been cured and no other Event of Default has occurred and is continuing or (ii) as
of any Calculation Date, the Debt Service Coverage Ratio is less than 1.01:1,
and shall end upon Lender’s determination that the Property has achieved a Debt
Service Coverage Ratio of at least 1.01:1 for two (2) consecutive
Calculation Dates.

 2
 

 

Code:  the Internal Revenue Code of 1986, as amended
and as it may be further amended from time to time, any successor statutes
thereto, and applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.

Control:  with respect to any Person, either (i) ownership
directly or indirectly of forty nine percent (49%) or more of all equity
interests in such Person or (ii) the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, through the ownership of voting securities, by contract or
otherwise.

Debt:  the unpaid Principal, all interest accrued
and unpaid thereon, any Yield Maintenance Premium and all other sums due to
Lender in respect of the Loan or under any Loan Document.

Debt Service:  with respect to any particular period, the
scheduled Principal and interest payments due under the Note in such period.

Debt Service Coverage Ratio:  as of any date, the ratio calculated by
Lender of (i) the Net Operating Income for the twelve (12)-month
period ending with the most recently completed calendar month to (ii) the
Debt Service with respect to such period.

Default:  the occurrence of any event under any Loan
Document which, with the giving of notice or passage of time, or both, would be
an Event of Default.

Default Rate:  a rate per annum equal to the lesser of (i) the
maximum rate permitted by applicable law, or (ii) five percent (5%) above
the Interest Rate (as applicable prior to the occurrence of an Event of
Default), compounded monthly.

Defeasance Collateral:  U.S. Obligations, which provide payments (i) on
or prior to, but as close as possible to, all Payment Dates and other scheduled
payment dates, if any, under the Note after the Defeasance Date and up to and
including the Defeasance Maturity Date, and (ii) in amounts equal to or
greater than the Scheduled Defeasance Payments.

Defeasance Maturity Date:  means the Permitted Prepayment Date.

Deposit Bank:  Wachovia Bank, National Association, or such
other bank or depository selected by Lender in its discretion.

Eligible Account:  a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account
or accounts (A) maintained with a federal or state-chartered depository
institution or trust company which complies with the definition of Eligible
Institution or (B) as to which Lender has received a Rating Comfort Letter
from each of the applicable Rating Agencies with respect to holding funds in
such account, or (ii) a segregated trust account or accounts maintained
with the corporate trust department of a federal depository institution or
state chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations §9.10(b), having in either case corporate trust powers, acting in
its fiduciary capacity, and a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal and state
authorities.

 3
 

 

An Eligible Account will
not be evidenced by a certificate of deposit, passbook or other instrument.

Eligible Institution:
a depository institution insured by the Federal Deposit Insurance Corporation
the short term unsecured debt obligations or commercial paper of which are
rated at least A-1 by S&P, P-1 by Moody’s and F-1+ by
Fitch, in the case of accounts in which funds are held for thirty (30) days or
less or, in the case of Letters of Credit or accounts in which funds are held
for more than thirty (30) days, the long term unsecured debt obligations of
which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s.

ERISA:  the Employment Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regulations
promulgated thereunder.

ERISA Affiliate:  all members of a controlled group of
corporations and all trades and business (whether or not incorporated) under
common control and all other entities which, together with Borrower, are
treated as a single employer under any or all of Section 414(b), (c), (m) or
(o) of the Code.

FIRREA:
means the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
as the same may be amended from time to time.

GAAP:  generally accepted accounting principles in
the United States of America as of the date of the applicable financial report.

Governmental Authority:  any court, board, agency, commission, office
or authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) now or hereafter in
existence.

Guarantor:  Behringer Harvard REIT I, Inc., a
Maryland corporation.

Guaranty Limit Amount:
as of any date of determination thereof, the sum, as of such date after giving
effect to any adjustments thereto pursuant to this Agreement and the Guaranty,
of (i) the Rollover Reserve Offset Amount plus (ii) the Capital
Reserve Offset Amount.

Harvard Fund I:  individually or collectively, Behringer
Harvard Short-Term Opportunity Funds I, L.P., a Texas limited partnership
and/or Behringer Harvard Mid-Term Value Enhancement Fund I, L.P. a Texas
limited partnership and/or Behringer Harvard Strategic Opportunity Fund LLP, a
Texas limited partnership and/or any other fund for which Behringer Harvard
Holdings, LLC, or an Affiliate of it under its Control, serves as general
partner, manager or advisor.

Harvard REIT:  individually or collectively, the Behringer
Harvard Operating Partnership I LP, a Texas limited partnership (the “Harvard REIT Operating Partnership”)
and/or Behringer Harvard REIT I, Inc., a Maryland corporation (“Behringer Harvard REIT”) and/or
Behringer Harvard Opportunity REIT I, Inc., a Maryland corporation (“Behringer

 4
 

 

Harvard
Opportunity REIT”) and/or any other fund for which
Behringer Harvard Holdings, LLC, or an Affiliate of it under its Control, serves
as general partner, manager or advisor.

Interest Period:  (i) the period from the date hereof
through the first (1st) day thereafter that is the tenth (10th) day of a
calendar month and (ii) each period thereafter from the eleventh (11th)
day of each calendar month through the tenth (10th) day of the following
calendar month; except that the Interest Period, if any, that would otherwise
commence before and end after the Maturity Date shall end on the Maturity Date.
Notwithstanding the foregoing, if Lender exercises its right to change the
Payment Date to a New Payment Date in accordance with Section 2.2.4
hereof, then from and after such election, each Interest Period shall be the
period from the New Payment Date in each calendar month through the day in the
next succeeding calendar month immediately preceding the New Payment Date in
such calendar month.

Interest Rate:  a rate of interest equal to (i) for the
period from and including the date hereof through and including the last day of
the Interest Period ending in the calendar month of July, 2008, 5.75% per
annum, and (ii) for all periods thereafter, 6.22302% per annum (or, in
either such case, when applicable pursuant to this Agreement or any other Loan
Document, the Default Rate).

Leases:  all leases and other agreements or
arrangements heretofore or hereafter entered into providing for the use,
enjoyment or occupancy of, or the conduct of any activity upon or in, the
Property or the Improvements, including any guarantees, extensions, renewals,
modifications or amendments thereof and all additional remainders, reversions
and other rights and estates appurtenant thereunder.

Lease Termination Payments:  (i) all fees, penalties, commissions or
other payments made to Borrower in connection with or relating to the
rejection, buy-out, termination, surrender or cancellation of any Lease
(including in connection with any Bankruptcy Proceeding), (ii) any
security deposits, or proceeds of letters of credit held by Borrower in lieu of
cash security deposits, which Borrower is permitted to retain pursuant to the
applicable provisions of any Lease and (iii) any payments made to Borrower
relating to unamortized tenant improvements and leasing commissions under any
Lease.

Legal Requirements:
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions of Governmental Authorities affecting Borrower, any Loan Document
or all or part of the Property or the construction, ownership, use, alteration
or operation thereof, whether now or hereafter enacted and in force, and all
permits, licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instrument, either of record or known to Borrower, at any time in force affecting
all or part of the Property.

Lien: any
mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation,
easement, restrictive covenant, preference, assignment (intended as security),
security interest or any other encumbrance, charge or transfer (intended as
security) of, or any agreement to enter into or create any of the foregoing, on
or affecting all or any part of the Property or any interest therein, or any
direct or indirect interest in Borrower, including any

 5
 

 

conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, the filing of any financing statement,
and mechanic’s, materialmen’s and other similar liens and encumbrances.

Loan Documents:  this Agreement and all other documents,
agreements and instruments now or hereafter evidencing or securing the Loan, or
pursuant to which any Person incurs, has incurred or assumes any obligation to
or for the benefit of Lender, or makes any certification, representation or
warranty to Lender in connection with the Loan, including, without limitation,
the following, each of which is dated as of the date hereof:  (i) the Promissory Note or Promissory
Notes made by Borrower to Lender in the aggregate principal amount equal to the
Loan (the “Note”), (ii) the Deed of
Trust and Security Agreement made by Borrower in favor of Lender which covers
the Property (the “Security Instrument”), (iii) Assignment
of Leases and Rents from Borrower to Lender (the “Assignment
of Leases”), (iv) Assignment of Agreements, Licenses,
Permits and Contracts from Borrower to Lender, (v) the Clearing Account
Agreement (the “Clearing Account Agreement”)
among Borrower, Lender, Manager and Clearing Bank, (vi) the Deposit
Account Agreement (the “Deposit Account Agreement”)
among Borrower, Lender, Manager and the Deposit Bank and (vii) the
Guaranty made by Guarantor (the “Guaranty”);
as each of the foregoing may be (and each of the foregoing defined terms shall
refer to such documents as they may be) amended, restated, replaced, severed,
split, supplemented or otherwise modified from time to time (including pursuant
to Section 9.1.7 hereof).

Management Agreement:  the management agreement between Borrower and
Manager, pursuant to which Manager is to manage the Property, as same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time in accordance with Section 5.12 hereof.

Manager:  HPT Management Services LP, a Texas limited
partnership, or any successor, assignee or replacement manager appointed by
Borrower in accordance with Section 5.12 hereof.

Material Alteration:
any alteration affecting structural elements of the Property the cost of which
exceeds $250,000; provided, however, that in no event shall (i) any tenant
improvement work performed pursuant to any Lease existing on the date hereof or
entered into hereafter in accordance with the provisions of this Agreement, or (ii) alterations
performed as part of a Restoration, constitute a Material Alteration.

Material Lease:  all Leases which individually or in the
aggregate with respect to the same tenant and its Affiliates (i) cover
more than 35,000 square feet of the Improvements or (ii)  have a gross
annual rent of more than five percent (5%) of the total annual Rents or (iii) demise
at least one (1) full floor of the Improvements.

Maturity Date:  the Stated Maturity Date or any earlier date
on which the final payment of principal of the Note (or any replacement
promissory note issued in connection with a Defeasance Event, if applicable)
shall become due and payable as provided herein or in any other Loan Documents,
whether by declaration of acceleration, or otherwise.

 6
 

 

Minor Lease:
any Lease that is not a Material Lease.

Net Operating Income:  for any period, the underwritten net cash
flow of the Property determined by Lender in its sole discretion exercised in
good faith (uniformly and consistently applied in the same manner as Lender
exercises similar discretion in other loans of this type and nature for
comparable properties) in accordance with Lender’s then current underwriting
standards for loans of this type and the then current underwriting standards of
the Rating Agencies (including adjustments for a management fee equal to the
greater of the combined management fees and asset management fees paid under
the Management Agreement during such period or three percent (3%) of gross
revenues, market vacancy, bankrupt tenants which are not in full occupancy of
their respective leased premises or which have rejected their respective leases
or which are not paying rent on a current basis, leasing costs (i.e, tenant improvements and leasing
commissions) and capital items). For
the purposes of calculating Net Operating Income, leasing costs shall be deemed
to be $.75 per square foot of the Improvements per annum, and capital items
shall be deemed to be $.15 per square foot of the Improvements per annum.

Officer’s Certificate:  a certificate delivered to Lender by
Borrower, which is signed by the manager or a senior executive officer of
Borrower.

Other Charges:  all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges
and license fees for the use of vaults, chutes and similar areas adjoining the
Property, now or hereafter levied or assessed or imposed against the Property
or any part thereof.

Payment Date:  the eleventh (11th) day of each calendar
month or, upon Lender’s exercise of its right to change the Payment Date in
accordance with Section 2.2.4 hereof, the New Payment Date (in
either case, if such day is not a Business Day, the Payment Date shall be the
first Business Day thereafter). The first Payment Date hereunder shall be August 11,
2006.

Permitted Encumbrances:
(i) the Liens created by the Loan Documents, (ii) all Liens and other
matters disclosed in the Title Insurance Policy, (iii) Liens, if any, for
Taxes or Other Charges not yet due and payable and not delinquent, (iv) any
workers’, mechanics’ or other similar Liens on the Property provided that any
such Lien is bonded or discharged within thirty (30) days after Borrower first
receives notice of such Lien, (v) such other title and survey exceptions
as Lender approves in writing in Lender’s discretion, and (vi) Liens
securing a Mezzanine Loan in accordance with Section 9.3.

Permitted Transfers:

(i)            a Lease entered into in accordance
with the Loan Documents;

(ii)           a Permitted Encumbrance;

(iii)          a Transfer and Assumption pursuant to Section 5.26.2;

 7
 

 

(iv)          provided that no Event of Default
shall then exist, a Transfer of a direct or indirect interest in Borrower to
any Person (including the Transfer or issuance of publicly traded shares or of
operating partnership units in the Behringer Harvard REIT, Behringer Harvard
Opportunity REIT, Harvard Fund I or the Harvard REIT Operating Partnership,
which shall be permitted whether or not an Event of Default shall exist)
provided that (A) the Harvard REIT Operating Partnership shall at all
times continue to own, directly or indirectly, not less than fifty-one percent
(51%) of Borrower, (B) such Transfer shall not (x) cause the
transferee (other than Behringer Harvard REIT), together with its Affiliates,
to acquire Control of Borrower or to increase its direct or indirect interest
in Borrower to an amount which equals or exceeds forty nine percent (49%) or (y) result
in Borrower no longer being Controlled by Behringer Harvard REIT, (C) Borrower
shall give Lender notice of such Transfer together with copies of all
instruments effecting such Transfer not less than 10 days prior to the date of
such Transfer (other than with respect to Transfers or issuances of shares or “unit
interests” in Harvard Fund I or the Harvard REIT), and (D) the legal and
financial structure of Borrower and its members and the single purpose nature
and bankruptcy remoteness of Borrower and its members after such Transfer,
shall satisfy Lender’s then current applicable underwriting criteria and
requirements;

(v)           provided that no Event of Default
shall then exist, a Transfer of a direct or indirect interest in Borrower
related to or in connection with the estate planning of such transferor to (1) the
spouse, children or grandchildren of such transferor (and/or any spouse of a
child or grandchild), or any other immediate family member of such transferor,
or (2) a trust established for the benefit of any such parties, provided
that (A) such Transfer shall not cause a change in the Control of
Borrower, (B) such Transfer shall not result in a change of the day to day
management and operations of the Property, (C) Borrower shall give Lender
notice of such Transfer together with copies of all instruments effecting such
Transfer not less than 10 days after the date of such Transfer and (D) the
legal and financial structure of Borrower, and the single purpose nature and
bankruptcy remoteness of Borrower after such Transfer, shall satisfy Lender’s
then current applicable underwriting criteria and requirements; or

(vi)          a Transfer of a direct or indirect
interest in Borrower that occurs by devise or bequest or by operation of law
upon the death of a natural person that was the holder of such interest to a
member of the immediate family of such interest holder or a trust established
for the benefit of such immediate family member, provided that (A) no such
Transfer shall result in a change of the day to day operations of the Property,
(B) Borrower shall give Lender notice of such Transfer together with
copies of all instruments effecting such Transfer not less than 30 days after
the date of such Transfer, (C) Borrower shall continue to be a Special
Purpose Bankruptcy Remote Entity, (D) if any such Transfer would result in
a change of Control of Borrower and occurs prior to the occurrence of a
Secondary Market Transaction, such Transfer is approved by Lender in writing
within 30 days after any such Transfer, and (E) if any such Transfer would
result in a change of Control of Borrower and occurs after the occurrence of a
Secondary Market Transaction, Borrower, at Borrower’s sole cost and expense,
shall, within 30 days after any such Transfer, (a) deliver (or cause to be
delivered) (x) a Rating Comfort Letter to Lender, and (y) a
substantive non-consolidation opinion to Lender and the Rating Agencies with
respect to Borrower and such transferee in form and substance satisfactory to
Lender and the Rating Agencies, (b) obtain the prior written consent of
Lender which shall not be unreasonably

 8
 

 

withheld and (c) reimburse
Lender for all reasonable expenses incurred by Lender in connection with such
Transfer.

Person: 
any individual, corporation, partnership, limited liability company,
joint venture, estate, trust, unincorporated association, any other person or
entity, and any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.

Plan:  (i) an
employee benefit or other plan established or maintained by Borrower or any
ERISA Affiliate or to which Borrower or any ERISA Affiliate makes or is
obligated to make contributions and (ii) which is covered by Title IV of
ERISA or Section 302 of ERISA or Section 412 of the Code.

Property: the parcel of real property and
Improvements thereon owned by Borrower and encumbered by the Security
Instrument; together with all rights pertaining to such real property and
Improvements, and all other collateral for the Loan as more particularly
described in the granting clauses of the Security Instrument and referred to
therein as the Property. The Property is located at 2600, 2700, 2801 and 2901
Via Fortuna Drive, Austin, Texas.

Rating Agency: 
each of Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc. (“S&P”),
Moody’s Investors Service, Inc. (“Moody’s”),
and Fitch, Inc., a division of Fitch Ratings Ltd. (“Fitch”)
or any other nationally-recognized statistical rating organization to the
extent any of the foregoing have been engaged by Lender or its designee in
connection with or in anticipation of any Secondary Market Transaction.

Rating Comfort Letter:  a letter issued by each of the applicable
Rating Agencies which confirms that the taking of the action referenced to
therein will not result in any qualification, withdrawal or downgrading of any
existing ratings of Securities created in a Secondary Market Transaction.

Release Date: the earlier to occur of (i) the
thirty-sixth (36th) Payment Date of the Term and (ii) the date that is two
(2) years from the “startup day” (within the meaning of Section 860G(a)(9) of
the Code) of the REMIC Trust established in connection with the final Secondary
Market Transaction involving this Loan.

REMIC Trust: a “real estate mortgage investment
conduit” within the meaning of Section 860D of the Code that holds the
Note.

Rents:  all
rents, rent equivalents, moneys payable as damages (including payments by
reason of the rejection of a Lease in a Bankruptcy Proceeding) or in lieu of
rent or rent equivalents, royalties (including all oil and gas or other mineral
royalties and bonuses), income, fees, receivables, receipts, revenues, deposits
(including security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other payment and consideration of
whatever form or nature received by or paid to or for the account of or benefit
of Borrower, Manager or any of their agents or employees (other than fees paid
under the Management Agreements and salaries paid to employees) from any and
all sources arising from

 9
 

 

or attributable to
the Property and the Improvements, including all receivables, customer
obligations, installment payment obligations and other obligations now existing
or hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of the Property
or rendering of services by Borrower, Manager or any of their agents or
employees and proceeds, if any, from business interruption or other loss of
income insurance.

Scheduled Defeasance Payments:  the Monthly Debt Service Payment Amount
and/or Monthly Interest Payment Amount (as applicable) required under the Note
for all Payment Dates occurring after the Defeasance Date but prior to the
Defeasance Maturity Date and the outstanding Principal balance on the Note as
of the Defeasance Maturity Date and all accrued and unpaid interest as of such
date.

Security Agreement: a security agreement in form
and substance that would be satisfactory to Lender (in Lender’s sole but good
faith discretion) pursuant to which Borrower grants Lender a perfected, first
priority security interest in the Defeasance Collateral Account and the
Defeasance Collateral.

Servicer: 
a servicer selected by Lender to service the Loan, including any “master
servicer” or “special servicer” appointed under the terms of any pooling and
servicing agreement or similar agreement entered into as a result of a
Secondary Market Transaction.

State:  the
state in which the Property is located.

Stated Maturity Date:  July 11, 2016, as such date may be
changed in accordance with Section 2.2.4 hereof.

Taxes:  all
real estate and personal property taxes, assessments, water rates or sewer
rents, maintenance charges, impositions, vault charges and license fees, now or
hereafter levied or assessed or imposed against all or part of the Property.

Term:  the
entire term of this Agreement, which shall expire upon repayment in full of the
Debt and full performance of each and every obligation to be performed by
Borrower pursuant to the Loan Documents (other than surviving indemnity
obligations with respect to matters as to which no claim for indemnification is
then pending).

Title Insurance Policy:  the ALTA mortgagee title insurance policy in
the form acceptable to Lender issued with respect to the Property and insuring
the Lien of the Security Instrument.

Transfer: 
any sale, conveyance, transfer, lease or assignment, or the entry into
any agreement to sell, convey, transfer, lease or assign, whether by law or
otherwise, of, on, in or affecting (i) all or part of the Property
(including any legal or beneficial direct or indirect interest therein), or (ii) any
direct or indirect interest in Borrower (including any profit interest).

 10

 

UCC or Uniform Commercial Code:  the Uniform Commercial Code as in
effect in the State or the state in which any of the Cash Management Accounts
are located, as the case may be.

U.S. Obligations: 
obligations that are “government securities” within the meaning of Section 2(a)(16)
of the Investment Company Act of 1940, as amended, and, to the extent
acceptable to the applicable Rating Agencies, other non-callable government
securities satisfying the REMIC Provisions (hereinafter defined), in each case
to the extent such obligations are not subject to prepayment, call or early
redemption. As used herein, “REMIC Provisions”
mean provisions of the federal income tax law relating to real estate mortgage
investment conduits, which appear at Sections 860A through 860G of Subchapter M
of Chapter 1 of Subtitle A of the Code, and related provisions, and temporary
and final regulations and, to the extent not inconsistent with such temporary
and final regulations, proposed regulations, and published rulings, notices and
announcements promulgated thereunder, as the foregoing may be in effect from
time to time.

Welfare Plan: 
an employee welfare benefit plan, as defined in Section 3(1) of
ERISA.

Yield Maintenance Premium:  an amount which, when added to the
outstanding Principal, would be sufficient to purchase U.S. Obligations which
provide payments (a) on or prior to, but as close as possible to, all
successive scheduled payment dates under this Agreement through the Stated
Maturity Date and (b) in amounts equal to the Monthly Debt Service Payment
Amount and/or Monthly Interest Payment Amount, as the case may be, required
under this Agreement through the Stated Maturity Date together with the
outstanding principal balance of the Note as of the Stated Maturity Date
assuming all payments of the Monthly Debt Service Payment Amount and/or Monthly
Interest Payment Amount, as the case may be, are made (including any servicing
costs associated therewith). In no event shall the Yield Maintenance Premium be
less than zero.

1.2          Index of Other Definitions. The
following terms are defined in the sections or Loan Documents indicated below:

“Aggregate Approved Capital Costs” — 3.4.2

“Approved Annual Budget “
— 6.3.5

“Annual Budget “ — 6.3.5

“Approved Capital Budget”
— 6.3.5

“Approved Operating Budget” — 6.3.5

“Applicable
Taxes” — 2.2.3

“Assignment
of Leases” — 1.1 (Definition of Loan Documents)

“Award”
— 7.3.2

“Bankruptcy Proceeding” — 4.7

“Borrower GP” — 4.18

“Borrower’s
Recourse Liabilities” — 10.1

“Base Capital Amount” — 3.4.2

“Calendar Quarter” — 3.4.2

 11
 

 

“Capital Reserve Offset Amount” — 3.4.2 

“Capital Reserve Subaccount” — 3.4

“Cash
Collateral Subaccount” — 3.9

“Cash
Management Accounts” — 3.10

“Casualty”
— 7.2.1

“Casualty/Condemnation
Prepayment” — 2.3.2

“Casualty/Condemnation
Subaccount” — 3.7

“Clearing Account” — 3.1

“Clearing
Account Agreement” — 1.1 (Definition of Loan Documents)

“Clearing
Bank” — 3.1

“Condemnation” — 7.3.1

“Defeasance Collateral Account” — 2.3.3

“Defeasance Event” — 2.3.3

“Defeasance
Date” — 2.3.3

“Deposit Account” — 3.1

“Deposit
Account Agreement” — 1.1 (Definition of Loan Documents)

“Disclosure
Document” — 9.1.2

“DSCR Earnout
Reserve Subaccount” — 3.16 

“Easements” —
4.14

“Endorsement”
— 5.26

“Environmental
Laws” — 4.21

“Equipment” — Security Instrument

“Event of Default”
— 8.1

“Exchange Act” — 9.1.2

“Fitch” — 1.1 (Definition of Rating
Agency) 

“Government Lists” — 5.31

“Guaranty” — 1.1 (Definition of Loan
Documents)

“Harvard REIT Operating Partnership” — 1.1 (Definition of Harvard REIT)

“Hazardous
Substances” — 4.21

“Improvements”
— Security Instrument

“Incumbent Board”
— 5.26.1

“Indemnified
Liabilities” — 5.30

“Indemnified
Party(ies)” — 5.30

“Independent
Director” — Schedule 5

“Insurance
Premiums” — 7.1.2

“Insured
Casualty” — 7.2.2

“Issuer”
— 9.1.3

“Intercreditor
Agreement” — 9.3

“Late Payment
Charge” — 2.5.3

“LC Security Deposit Cooperation Agreement”
— 1.1 (Definition of Loan Documents)

“Lehman  Group” —
9.1.3

“Lender’s
Consultant” — 5.8.1

“Lender’s
Losses” — 10.1

“Letter(s) of
Credit” — 9.4

“Liabilities” — 9.1.3

“Licenses”
— 4.11

 12
 

 

“Loan” — 2.1

“Mezzanine Borrower” — 9.3 

“Mezzanine Lender” — 9.3

“Mezzanine Loan” — 9.3

“Monthly Capital Reserve Deposit Amount” — 3.4.1

“Monthly Debt Service Payment Amount” —
2.2.1

“Monthly Interest Payment Amount” — 2.2.1

“Monthly Tax and Insurance Deposit” —
3.3.2

“Moody’s” — 1.1 (Definition of Rating
Agency)

“Security Instrument” —
1.1 (Definition of Loan Documents)

“New Payment Date” — 2.2.4

“Note”
— 1.1 (Definition of Loan Documents)

“Notice” — 6.1

“OFAC” — 5.31

“Operating Expense Subaccount” — 3.6

“Patriot Act”
— 5.31

“Patriot Act
Offense” — 5.31

“Permitted
Indebtedness” — 5.22

“Permitted
Investments” — Deposit Account Agreement

“Permitted Prepayment Date” — 2.3.4

“Policies”
— 7.1.2

“Principal”
— 2.1

“Proceeds” — 7.2.2

“Proposed Material
Lease” — 5.10.2

“Protective
Advance” — 8.2.5

“Provided
Information” — 9.1.1

“Qualified
Carrier” — 7.1.1

“Registration
Statement” — 9.1.3

“Remedial
Work” — 5.8.2

“REMIC Provisions”
— 1.1 (Definition of U.S. Obligations)

“Rent Roll”
— 4.16

“Restoration”
— 7.4.1

“Borrower Holding” — 4.18

“Rollover Reserve Offset Amount” — 3.5

“Rollover Reserve Subaccount” — 3.5

“S&P”
— 1.1 (Definition of Rating Agency)

“Secondary
Market Transaction” — 9.1.1

“Securities”
— 9.1.1

“Securities
Act” — 9.1.2

“Security Deposit Subaccount” — 3.8

“Significant
Casualty” — 7.2.2

“Special
Purpose Bankruptcy Remote Entity” — 5.13

“Springing
Recourse Event” — 10.1

“Subaccounts” — 3.1

“Successor
Borrower” — 2.3.3

“Tax and Insurance Reserve Offset Amount” — 3.3.2 

 13
 

 

“Tax and Insurance Subaccount” — 3.3

“Third Party Report” — 9.1.3 

“TI/LC Holdback Reserve Subaccount” — 3.13

“TI/LC Holdback Leases” — 3.13

“TI/LC Holdback Tenants” — 3.13 

“Toxic Mold” — 4.21

“Transfer and Assumption” — 5.26

“Transferee
Borrower” — 5.26

“Underwriter Group” — 9.1.3

“Underwriters” — 9.1.3

 

1.3          Principles of Construction. Unless
otherwise specified, (i) all references to sections and schedules are to
those in this Agreement, (ii) the words “hereof,” “herein” and “hereunder”
and words of similar import refer to this Agreement as a whole and not to any
particular provision, (iii) all definitions are equally applicable to the
singular and plural forms of the terms defined, (iv) the words “include”
and “including” mean “including but not limited to,” and (v) accounting
terms not specifically defined herein shall be construed in accordance with
GAAP.

2.                                      GENERAL LOAN TERMS

2.1          The Loan. Lender is making a loan
(the “Loan”)
to Borrower on the date hereof, in the original principal amount (the “Principal”)
of $131,000,000, which shall mature on the Stated Maturity Date or, if a
Defeasance Event has occurred in accordance with Section 2.3.3
hereof, on the Defeasance Maturity Date. Borrower acknowledges receipt of the
Loan, the proceeds of which are being and shall be used to (i) acquire the
Property, (ii) fund certain of the Subaccounts, and (iii) pay
transaction costs. Any excess proceeds may be used for any lawful purpose. No
amount repaid in respect of the Loan may be reborrowed.

2.2          Interest; Monthly Payments.

2.2.1       Generally.
From and after the date hereof, interest on the unpaid Principal shall accrue
at the Interest Rate and be payable as hereinafter provided. On the date
hereof, Borrower shall pay interest on the unpaid Principal from the date
hereof through and including July 10, 2006. On August 11, 2006 and
each Payment Date thereafter through and including the Payment Date immediately
preceding the Amortization Commencement Date, Borrower shall pay interest only
on the unpaid Principal accrued at the Interest Rate during the Interest Period
immediately preceding such Payment Date (the “Monthly Interest Payment Amount”). On the Amortization
Commencement Date and each Payment Date thereafter through and including June 11,
2016 (as such date may be changed in accordance with Section 2.2.4),
the Principal and interest thereon at the Interest Rate shall be payable in
equal monthly installments of $804,291.90 
(the “Monthly Debt Service Payment
Amount”); which is based on the Interest Rate and a 360-month
amortization schedule. The Monthly Debt Service Payment Amount due on any
Payment Date shall first be applied to the payment of interest accrued during
the preceding Interest Period (calculated in accordance with Section 2.5.2)
and the remainder of such Monthly Debt Service Payment Amount shall be applied
to the reduction of the unpaid

 14
 

 

Principal. All accrued and unpaid interest shall be due and payable on
the Maturity Date. If the Loan is repaid on any date other than on a Payment
Date (whether prior to or after the Stated Maturity Date), Borrower shall also
pay interest that would have accrued on such repaid Principal to but not
including the next Payment Date.

2.2.2       Default Rate. After the occurrence
and during the continuance of an Event of Default, the entire unpaid Debt shall
bear interest at the Default Rate, and shall be payable upon demand from time
to time, to the extent permitted by applicable law.

2.2.3       Taxes.
Any and all payments by Borrower hereunder and under the other Loan Documents
shall be made free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on Lender’s income,
and franchise taxes imposed on Lender by the law or regulation of any
Governmental Authority (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
in this Section 2.2.3 as “Applicable Taxes”). If Borrower
shall be required by law to deduct any Applicable Taxes from or in respect of
any sum payable hereunder to Lender, the following shall apply:  (i) the sum payable shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.2.3),
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law. Payments pursuant to this Section 2.2.3
shall be made within ten (10) days after the date Lender makes written
demand therefor. If the amounts payable hereunder relate to Applicable Taxes
which are not of general application to lending institutions making secured
mortgage loans at such time, Borrower shall have the option to prepay the Loan
in full without any Yield Maintenance Premium unless Lender, at its option,
elects not to require Borrower to pay such Applicable Taxes pursuant to this Section 2.2.3.
Notwithstanding the foregoing, if the Loan is transferred to a transferee which
is organized under the laws of any jurisdiction other than the United States of
America or any state thereof, the transferor shall cause such transferee,
concurrently with the effectiveness of such transfer, to furnish to the
transferor and Borrower either a United States Internal Revenue Service Form 4224
or United States Internal Revenue Service Form 1001 (wherein such
transferee claims entitlement to complete exemption from United States federal
withholding tax on all interest payments hereunder); provided, however, that in
the event that the transferor fails to cause the transferee to furnish either
such Form, Borrower shall deduct any Applicable Taxes to the extent required by
law and payments shall be made net of any Applicable Taxes without regard to
the provisions of clause (i) of the second sentence of this Section 2.2.3.

2.2.4       New Payment Date. Lender shall have the right, to be exercised not
more than once during the term of the Loan, to change the Payment Date to a
date other than the sixth day of each month (a “New Payment Date”), on thirty (30) days’ written notice
to Borrower; provided, however, that any such change in the Payment Date: (i) shall
not modify the amount of regularly scheduled monthly principal and interest
payments, except that the first payment of principal and interest payable on
the New Payment Date shall be accompanied by interest at the interest rate
herein provided for the period from the Payment Date in the month in which the

 15
 

 

New Payment Date first occurs to the New
Payment Date, (ii) shall extend the Amortization Commencement Date to the
New Payment Date occurring in the month set forth in the definition of
Amortization Commencement Date, and (iii) shall extend the Stated Maturity
Date to the New Payment Date occurring in the month set forth in the definition
of Stated Maturity Date.

2.3          Loan Repayment.

2.3.1       Repayment.
Borrower shall repay the entire outstanding principal balance of the Note in
full on the Maturity Date, together with interest thereon to (but excluding)
the date of repayment and any other amounts due and owing under the Loan
Documents. Borrower shall have no right to prepay or defease all or any portion
of the Principal except in accordance with Section 2.2.3 above, Section 2.3.2
below, Section 2.3.3 below, Section 2.3.4 below, Section 2.4
below and Section 7.4.2 below. Except during the continuance of an
Event of Default, all proceeds of any repayment, including any prepayments of
the Loan, shall be applied by Lender as follows in the following order of
priority:  First, accrued and unpaid interest at the Interest Rate; Second, to Principal; and Third, to and any other amounts then due
and owing under the Loan Documents. If prior to the Stated Maturity Date the
Debt is accelerated by reason of an Event of Default, then Lender shall be
entitled to receive, in addition to the unpaid Principal and accrued interest
and other sums due under the Loan Documents, an amount equal to the Yield
Maintenance Premium applicable to such Principal so accelerated. During the
continuance of an Event of Default, all proceeds of repayment, including any
payment or recovery on the Property (whether through foreclosure, deed-in-lieu
of foreclosure, or otherwise) shall, unless otherwise provided in the Loan
Documents, be applied in such order and in such manner as Lender shall elect in
Lender’s discretion.

2.3.2       Mandatory
Prepayments. The Loan is subject to mandatory
prepayment in certain instances of Insured Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”),
in the manner and to the extent set forth in Section 7.4.2 hereof. Each
Casualty/Condemnation Prepayment, after deducting Lender’s costs and expenses
(including reasonable attorneys’ fees and expenses) in connection with the
settlement or collection of the Proceeds or Award, shall be applied in the same
manner as repayments under Section 2.3.1 above, and if such
Casualty/Condemnation Payment is made on any date other than a Payment Date,
then such Casualty/Condemnation Payment shall include interest that would have
accrued on the Principal prepaid to but not including the next Payment Date. Provided
that no Event of Default is continuing, any such mandatory prepayment under
this Section 2.3.2 shall be without the payment of the Yield
Maintenance Premium. Notwithstanding anything to the contrary contained herein,
each Casualty/Condemnation Prepayment shall be applied in inverse order of
maturity and shall not extend or postpone the due dates of the monthly
installments due under the Note or this Agreement, or change the amounts of
such installments. In addition, and notwithstanding anything to the contrary
contained herein or in any other Loan Document, provided no Event of Default is
continuing, no Yield Maintenance Premium shall be payable in connection with
any prepayment of the Debt required by Lender under Sections 5 and 6
of the Security Instrument.

 16

 

2.3.3       Defeasance.

(a)           Conditions to Defeasance. Provided no
Event of Default shall be continuing, Borrower shall have the right on any
Payment Date after the Release Date and prior to the Permitted Prepayment Date
to voluntarily defease the entire amount of the Principal and obtain a release
of the Lien of the Security Instrument by providing Lender with the Defeasance
Collateral (a “Defeasance Event”),
subject to the satisfaction of the following conditions precedent:

(i)            Borrower
shall give Lender not less than thirty (30) days prior written notice
specifying a Payment Date (the “Defeasance Date”) on which the Defeasance Event is to
occur.

(ii)           Borrower
shall pay to Lender (A) all payments of Principal and interest due on the
Loan to and including the Defeasance Date and (B) all other sums, then due
under the Note, this Agreement and the other Loan Documents;

(iii)          Borrower
shall deposit the Defeasance Collateral into the Defeasance Collateral Account
and otherwise comply with the provisions of subsections (b) and (c) of
this Section 2.3.3;

(iv)          Borrower
shall execute and deliver to Lender a Security Agreement in respect of the
Defeasance Collateral Account and the Defeasance Collateral;

(v)           Borrower
shall deliver to Lender an opinion of counsel for Borrower that is standard in
commercial lending transactions and subject only to customary qualifications,
assumptions and exceptions opining, among other things, that (i) Lender
has a legal and valid perfected first priority security interest in the
Defeasance Collateral Account and the Defeasance Collateral, (ii) if a
securitization has occurred, the REMIC Trust formed pursuant to such
securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a
result of a Defeasance Event pursuant to this Section 2.3.3, (iii) the
Defeasance Event will not result in a significant modification and will not be
an exchange of the Note for purposes of Section 1001 of the Code and the
Treasury Regulations thereunder, (iv) delivery of the Defeasance
Collateral and the grant of a security interest therein to Lender will not
constitute an avoidable preference under Section 547 of the Bankruptcy
Code or applicable state law and (v) a non-consolidation opinion with
respect to the Successor Borrower;

(vi)          Borrower
shall deliver to Lender a Rating Comfort Letter as to the Defeasance Event;

(vii)         Borrower
shall deliver an Officer’s Certificate certifying that the requirements set
forth in this Section 2.3.3 have been satisfied;

(viii)        Borrower
shall deliver a certificate of a “big four” or other nationally recognized
public accounting firm acceptable to Lender certifying that (i) the
Defeasance Collateral will generate monthly amounts equal to or greater than
the Scheduled

 17
 

 

Defeasance Payments, and (ii) the securities that comprise the
Defeasance Collateral are not subject to prepayment, call or early redemption;

(ix)           Borrower
shall deliver such other certificates, opinions, documents and instruments as
Lender may reasonably request; and

(x)            Borrower
shall pay all costs and expenses of Lender incurred in connection with the
Defeasance Event, including Lender’s reasonable attorneys’ fees and expenses
and Rating Agency fees and expenses.

(b)           Defeasance Collateral Account. On or
before the date on which Borrower delivers the Defeasance Collateral, Borrower
shall open at any Eligible Institution the defeasance collateral account (the “Defeasance Collateral Account”)
which shall at all times be an Eligible Account. The Defeasance Collateral
Account shall contain only (i) Defeasance Collateral, and (ii) cash
from interest and principal paid on the Defeasance Collateral. All cash from
interest and principal payments paid on the Defeasance Collateral shall be paid
over to Lender on each Payment Date and applied first to accrued and unpaid
interest and then to Principal. Any cash from interest and principal paid on
the Defeasance Collateral not needed to pay accrued and unpaid interest or
Principal shall be retained in the Defeasance Collateral Account as additional
collateral for the Loan. Borrower shall cause the Eligible Institution at which
the Defeasance Collateral is deposited to enter an agreement with Borrower and
Lender, satisfactory to Lender in its sole discretion, pursuant to which such
Eligible Institution shall agree to hold and distribute the Defeasance
Collateral in accordance with this Agreement. The Successor Borrower shall be
the owner of the Defeasance Collateral Account and shall report all income accrued
on Defeasance Collateral for federal, state and local income tax purposes in
its income tax return. Borrower shall prepay all cost and expenses associated
with opening and maintaining the Defeasance Collateral Account. Lender shall
not in any way be liable by reason of any insufficiency in the Defeasance
Collateral Account.

(c)           Successor Borrower. In connection with
a Defeasance Event under this Section 2.3.3, Borrower shall, if
required by the Rating Agencies or if Borrower elects to do so, establish or
designate a successor entity (the “Successor
Borrower”) which shall be a Single Purpose Bankruptcy Remote
Entity and which shall be approved by the Rating Agencies. Any such Successor
Borrower may, at Borrower’s option, be an Affiliate of Borrower unless the
Rating Agencies shall require otherwise. Borrower shall transfer and assign all
obligations, rights and duties under and to the Defeased Note, together with
the Defeasance Collateral to such Successor Borrower. Such Successor Borrower
shall assume the obligations under the Note and the Security Agreement and
Borrower shall be relieved of its obligations under such documents. Borrower
shall pay a minimum of $1,000 to any such Successor Borrower as consideration
for assuming the obligations under the Note and the Security Agreement. Borrower
shall pay all costs and expenses incurred by Lender, including Lender’s
attorney’s fees and expenses, incurred in connection therewith.

2.3.4       Optional
Prepayments. On and after the third Payment Date
prior to the Stated Maturity Date (the “Permitted
Prepayment Date”), Borrower shall have the right to prepay
the Loan in whole (but not in part), provided that Borrower gives Lender at
least fifteen

 18
 

 

(15) days’ prior written notice thereof. If any such prepayment is not
made on a Payment Date, Borrower shall also pay interest that would have
accrued on such prepaid Principal to, but not including, the next Payment Date.
Any such prepayment shall be made without payment of the Yield Maintenance
Premium.

2.4          Release of Property.

2.4.1       Release on Defeasance. If Borrower
has elected to defease the Note and the requirements of Section 2.3.3
above and this Section 2.4 have been satisfied, the Property shall
be released from the Lien of the Security Instrument and the Defeasance Collateral
pledged pursuant to the Security Agreement shall be the sole source of
collateral securing the Note. In connection with the release of the Lien,
Borrower shall submit to Lender, not less than thirty (30) days prior to the
Defeasance Date (or such shorter time as is acceptable to Lender in its sole
discretion), a release of Lien (and related Loan Documents) for execution by
Lender. Such release shall be in a form appropriate in the jurisdiction in
which the Property is located and contain standard provisions protecting the
rights of the releasing lender. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release, together with an Officer’s Certificate certifying
that such documentation (i) is in compliance with all Legal Requirements,
and (ii) will effect such release in accordance with the terms of this
Agreement. Borrower shall pay all costs, taxes and expenses associated with the
release of the Lien of the Security Instrument, including Lender’s reasonable
attorneys’ fees.

2.4.2       Release
on Payment in Full. Lender shall, upon the written
request and at the expense of Borrower, upon payment in full of the Debt in
accordance herewith, release or, if requested by Borrower, assign to Borrower’s
designee (without any representation or warranty by and without any recourse
against Lender whatsoever), the Lien of the Loan Documents if not theretofore
released.

2.5          Payments
and Computations.

2.5.1       Making
of Payments. Each payment by Borrower shall be
made in funds settled through the New York Clearing House Interbank Payments
System or other funds immediately available to Lender by 11:00 a.m., New
York City time, on the date such payment is due, to Lender by deposit to such account
as Lender may designate by written notice to Borrower. Whenever any such
payment shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the first Business Day thereafter. All such payments
shall be made irrespective of, and without any deduction, set-off or
counterclaim whatsoever and are payable without relief from valuation and
appraisement laws and with all costs and charges incurred in the collection or
enforcement thereof, including attorneys’ fees and court costs.

2.5.2       Computations.
Interest payable under the Loan Documents shall be computed on the basis of the
actual number of days elapsed over a 360-day year.

2.5.3       Late
Payment Charge. If any regularly scheduled payment
of Principal, interest or other monthly payment or reserve or escrow deposit
due under any Loan Document is not paid by Borrower on the date on which it is
due (other than the balloon payment of Principal

 19
 

 

due on the Maturity Date or acceleration of the Loan), Borrower shall
pay to Lender upon demand an amount equal to the lesser of five percent (5%) of
such unpaid sum or the maximum amount permitted by applicable law (the “Late Payment Charge”), in
order to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Such amount shall be secured by the Loan Documents.

3.                                      CASH MANAGEMENT AND RESERVES

3.1          Cash Management Arrangements. Concurrently
with the execution of this Agreement with respect to all existing lessees of
the Property, and concurrently with the execution and delivery of each new
Lease of the Property, Borrower shall deliver a notice in the form of attached
hereto on Schedule 1 to each lessee of the Property directing them to
pay their rent directly to the Clearing Bank. Borrower shall cause all Rents to
be transmitted directly by tenants of the Property into an Eligible Account
(the “Clearing Account”)
maintained by Borrower at a local bank selected by Borrower, which shall at all
times be an Eligible Institution (the “Clearing Bank”) as more fully described in
the Clearing Account Agreement. Without in any way limiting the foregoing, all
Rents received by Borrower or Manager shall be deposited into the Clearing
Account within two Business Days of receipt. Funds deposited into the Clearing
Account shall be swept by the Clearing Bank on a daily basis into an Eligible
Account at the Deposit Bank controlled by Lender (the “Deposit Account”) and
applied and disbursed in accordance with this Agreement. Funds in the Deposit
Account shall be invested at Lender’s discretion only in Permitted Investments.
Lender will also establish subaccounts of the Deposit Account which shall at
all times be Eligible Accounts (and may be ledger or book entry accounts and
not actual accounts) (such subaccounts are collectively referred to herein as “Subaccounts”). The
Deposit Account and any Subaccount will be under the sole control and dominion
of Lender, and Borrower shall not have any right of withdrawal therefrom. Borrower
shall pay for all expenses of opening and maintaining all of the above accounts.
In the event that the Clearing Bank and the Deposit Bank are the same, then the
Clearing Account and the Deposit Account may be the same account.

3.2          Intentionally Deleted.

3.3          Tax and Insurance Reserve.

3.3.1       Reserve Deposits. Borrower shall pay to
Lender on each Payment Date an amount equal to the sum of (i) one-twelfth
(1/12th) of the Taxes that Lender estimates will be payable during the next
twelve (12) months in order to accumulate with Lender sufficient funds to pay
all such Taxes at least thirty (30) days prior to their respective delinquency
dates (i.e., the last date upon which such Taxes may be paid without penalty or
loss of available discount) and (ii) one-twelfth (1/12th) of the Insurance
Premiums that Lender estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof in order to accumulate
with Lender sufficient funds to pay all such Insurance Premiums at least thirty
(30) days prior to the expiration of the Policies (such monthly required
deposit amount, as adjusted by Lender from time to time in the event of
increases or decreases in annual estimated Taxes and Insurance Premiums, the “Monthly Tax and Insurance Deposit”).
Such amounts will be

 20
 

 

transferred by Lender to a Subaccount (the “Tax and Insurance Subaccount”). If
Lender determines that the amount in the Tax and Insurance Subaccounts,
together with the monthly deposits to be made by Borrower pursuant to (i) and
(ii) above, will not be sufficient to pay the items set forth in (i) and
(ii), then Borrower shall promptly pay to Lender, upon demand, an amount which
Lender shall estimate as sufficient to make up the deficiency. Notwithstanding
the foregoing, if insurance coverage required pursuant to Section 7.1
hereof is provided through a blanket insurance Policy, Borrower shall not be
obligated to make monthly escrow payments on account of the applicable
Insurance Premiums so long as Borrower maintains the insurance coverage
required by Section 7.1 in full force and effect and Borrower maintains on
deposit in the Tax and Insurance Subaccount, in addition to the amounts
escrowed for Taxes, an amount equal to one-quarter of the annual Insurance
Premium estimated by Lender to be payable for a replacement Policy providing
the coverage required by Section 7.1 hereof with respect to the Property. Provided
that no monetary Event of Default or material non-monetary Event of Default has
occurred and is continuing, Lender will (a) apply funds in the Tax and
Insurance Subaccount to payments of Taxes and (unless the Property is insured
under a blanket insurance policy) Insurance Premiums required to be made by
Borrower pursuant to Section 5.2 hereof and Section 7.1 hereof,
provided that Borrower has promptly supplied Lender with notices of all Taxes
and Insurance Premiums due and paid any deficiency between the amounts held in
the Tax and Insurance Subaccount and the amounts due with respect to such Taxes
and Insurance Premiums, or (b) reimburse Borrower for such amounts upon
presentation of evidence of payment; subject, however, to Borrower’s right to
contest Taxes in accordance with Section 5.2 hereof. In making any payment
relating to Taxes and Insurance Premiums, Lender may do so according to any
bill, statement or estimate procured from the appropriate public office (with
respect to Taxes) or insurer or agent (with respect to Insurance Premiums),
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or
claim thereof.

3.4          Capital Expense Reserves.

3.4.1       Reserve Deposits. Borrower shall pay to
Lender $7,602.33 (the “Monthly Capital Reserve
Deposit Amount”) on each Payment Date (such deposits, the “Monthly Capital Reserve Deposits”). Lender
will transfer such amounts into a Subaccount (the “Capital
Reserve Subaccount”). Additionally, upon thirty (30) days’ prior
notice to Borrower, Lender may reassess the amount of the monthly payment
required under this Section 3.4 from time to time in its reasonable
discretion (based upon its then current underwriting standards). Provided that
no Event of Default has occurred and is continuing, Lender shall disburse funds
held in the Capital Reserve Subaccount to Borrower, within fifteen (15) days
after the delivery by Borrower to Lender of a request therefor (but not more
often than once per month), in minimum amounts of at least $5,000 provided that
(i) such disbursement is for an Approved Capital Expense; (ii) Lender
shall have (if it desires) verified (by an inspection conducted at Borrower’s
expense (with respect to any disbursement in excess of $50,000)) performance of
the work associated with such Approved Capital Expense; and (iii) the
request for disbursement is accompanied by (A) an Officer’s Certificate
certifying (1) that such funds will be used to pay or reimburse Borrower
for Approved Capital Expenses and a description thereof, (2) that all
outstanding trade payables (other than those not yet due and payable or those
to be paid from the requested disbursement or those constituting Permitted
Indebtedness) have been paid in full, (3)

 21
 

 

that the same has not been the subject of a previous disbursement, and (4) that
all previous disbursements have been used to pay the previously identified
Approved Capital Expenses, and (B) lien waivers or other evidence of
payment satisfactory to Lender, (C) with respect to any disbursement that
exceeds $50,000, at Lender’s option, a title search for the Property indicating
that the Property is free from all Liens, claims and other encumbrances not
previously approved by Lender and (D) such other evidence as Lender shall
reasonably request that the Approved Capital Expenses at the Property to be
funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to Borrower. Any such disbursement of more
than $10,000 to pay (rather than reimburse) Approved Capital Expenses may, at
Lender’s option, be made by joint check payable to Borrower and the payee on
such Approved Capital Expenses.

3.4.2       Guaranty
in Lieu of Reserve.

(A)          In lieu of a
requirement for monthly deposits by Borrower into the Capital Reserve
Subaccount, Guarantor, pursuant to the Guaranty, has (among other obligations
thereunder) guaranteed payment and performance in full of all Capital Expenses
and work relating thereto and agreed to pay to Lender, upon Lender’s demand
following the occurrence and during the continuance of an Event of Default, an
amount equal to the Guaranty Limit Amount, determined as the sum of various
amounts, including an amount equal to the Capital Reserve Offset Amount (as
hereafter defined). As used herein, “Capital
Reserve Offset Amount” shall mean, on any date of determination,
an amount equal to the greater of (I) the zero and (II) the
following:

(1)           the product of $91,228 (the “Base Capital Amount”), multiplied by
a fraction, the numerator of which is the number of Calendar Quarters which
have ended (and for which the reports required under Section 6.3.3
hereof have been delivered or were required to have been delivered) as of the
date of determination (a “Calendar
Quarter” shall be the three calendar month period ending on September 30,
2006 and each three calendar month period ending on each December 31, March 31,
June 30 and September 30, thereafter), and the denominator of which
is four (4); for example, a calculation made October 10, 2007 would be for
the 5 Calendar Quarters ending September 30, 2006, December 31, 2006,
March 31, 2007, June 30, 2007 and September 30, 2007, and thus $
$91,228 X [5/4] = $114,035); minus

(2)           the Aggregate Approved Capital Costs
(as hereafter defined) for such Calendar Quarters.

As used herein,
the term  “Aggregate
Approved Capital Costs” shall mean amounts hereafter paid by
Borrower for reasonable Approved Capital Expenses (other than those related to
leasing of space at the Property or for which a credit has been provided
against the purchase price under the purchase agreement pursuant to which the
Borrower acquired the Property as of the date hereof), as demonstrated by
Borrower to Lender’s reasonable satisfaction within 120 days of the Calendar
Quarter in which such costs were incurred.

(B)           Upon the occurrence
of an Event of Default (and without limiting any rights or remedies available
to Lender in connection therewith), Borrower shall on each Payment Date
thereafter deposit with Lender the Monthly Capital Reserve Deposit Amount. If
Lender receives

 22
 

 

the Capital Reserve Offset Amount from Guarantor under the Guaranty,
Lender shall transfer the same to the Capital Reserve Subaccount to be applied
as provided in Section 3.4.1 above, subject to Lender’s right to
apply the same otherwise as set forth in Section 3.10 below.

3.5          Rollover
Reserves.

3.5.1       Reserve Deposits. Borrower shall
pay to Lender $33,333.33 (the
“Monthly Rollover Reserve Deposit Amount”)
on each Payment Date (such deposits, the “Monthly Rollover Reserve
Deposits”). Lender will transfer such amount into a Subaccount
(the “Rollover Reserve Subaccount”).
Notwithstanding the foregoing, no Monthly Rollover Reserve deposits shall be
required to be made into the Rollover Reserve Subaccount during periods that
the balance in the Rollover Reserve Subaccount exceeds $1,200,000 (exclusive of
the proceeds of Lease Termination Payments). Borrower shall also pay to Lender
for transfer into the Rollover Reserve Subaccount all Lease Termination
Payments received by Borrower. Provided that no Event of Default has occurred
and is continuing, Lender shall disburse funds held in the Rollover Reserve
Subaccount to Borrower, within ten (10) days after the delivery by
Borrower to Lender of a request therefor (but not more often than once per
month), in minimum amounts of at least $5,000, provided (i) such
disbursement is for Approved Leasing Expenses with respect to Leases hereafter
executed (it being acknowledged that leasing costs with respect to Leases
existing as of the date hereof shall not qualify for disbursements from the
Rollover Reserve Subaccount); (ii) Lender shall have (if it desires)
verified (by an inspection conducted at Borrower’s expense) performance of any
construction work associated with such Approved Leasing Expenses; (iii) the
request for disbursement is accompanied by (A) an Officer’s Certificate
certifying (1) that such funds will be used only to pay (or reimburse
Borrower for) Approved Leasing Expenses and a description thereof, (2) that
all outstanding trade payables (other than those not yet due and payable or those
to be paid from the requested disbursement or those constituting Permitted
Indebtedness) have been paid in full, (3) that the same has not been the
subject of a previous disbursement, and (4) that all previous
disbursements have been used only to pay (or reimburse Borrower for) the
previously identified Approved Leasing Expenses and (B) reasonably
detailed supporting documentation as to the amount, necessity and purpose
therefor; and (iv) any such disbursement of more than $10,000 to pay
(rather than reimburse) Approved Leasing Expenses may, at Lender’s option, be
made by joint check payable to Borrower and the payee of such Approved Leasing
Expenses. If Lender receives the Rollover Reserve Offset Amount from Guarantor
under the Guaranty, Lender shall transfer the same to the Rollover Reserve
Subaccount to be applied as provided in this Section 3.5, subject
to Lender’s right to apply the same otherwise as set forth in Section 3.10
below. All disbursements from the Rollover Reserve Subaccount shall be deemed
to have been made first from the proceeds of any Lease Terminations Payments
deposited into the Rollover Reserve Subaccount, until all such Lease
Termination Payments have been disbursed, and then from the proceeds of Monthly
Rollover Reserve Deposits.

3.5.2       Guaranty in Lieu of Reserve. In
lieu of a requirement hereunder for Monthly Rollover Reserve Deposits to be
deposited into the Rollover Reserve Subaccount, Guarantor, pursuant to the
Guaranty, has (among other obligations thereunder) guaranteed payment and
performance in full of all Approved Leasing
Expenses with respect to Leases hereafter executed and all work relating
thereto and agreed to pay to Lender , upon Lender’s

 23
 

 

demand following the occurrence and during the continuance of an Event
of Default, an amount equal to the Guaranty Limit Amount, determined as the sum
of various amounts, including an amount equal to the Rollover Reserve Offset
Amount. As used herein, “Rollover
Reserve Offset Amount” shall mean, on any date of determination,
an amount equal to the lesser of (A) $1,200,000 and (B) the greater
of (I) zero and (II) the following:

(1)           the product of $400,000 (the “Base Rollover Amount”), multiplied
by a fraction, the numerator of which is the number of Calendar Quarters which
have ended (and for which the reports required under Section 6.3.3
hereof have been delivered or were required to have been delivered) as of the
date of determination, and the denominator of which is four (4); minus

(2)           the Aggregate Approved Leasing Costs
(as hereafter defined) for such Calendar Quarters.

As used herein,
the term  “Aggregate
Approved Leasing Costs” shall mean amounts hereafter paid by
Borrower for reasonable Approved Leasing Expenses (other than those for which a
credit has been provided against the purchase price under the purchase
agreement pursuant to which the of Borrower acquired the Property as of the
date hereof), as demonstrated by Borrower to Lender’s reasonable satisfaction
within 120 days of the Calendar Quarter in which such costs were incurred.

3.6          Operating
Expense Subaccount. On each Payment Date during
the continuance of a Cash Trap Period, a portion of the Rents that have been
deposited into the Deposit Account during the immediately preceding Interest
Period in an amount equal to the monthly amount set forth in the Approved
Operating Budget for the following month (plus any other amounts requested by
Borrower for such month for payment of items constituting Approved Operating
Expenses, which are not included in the Approved Operating Budget), shall be
transferred into a Subaccount for the purpose of payment of Approved Operating
Expenses for the month in which such Payment Date occurs (the “Operating Expense Subaccount”).
Provided no Event of Default has occurred and is continuing, Lender shall
disburse funds held in the Operating Expense Subaccount to Borrower (or at
Borrower’s direction, to the Manager), within five (5) Business Days after
delivery by Borrower to Lender of a request therefor (but not more often than
weekly), in minimum amounts of at least $1,000, provided (i) such
disbursement is for an Approved Operating Expense; and (ii) such
disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that
such funds will be used to pay Approved Operating Expenses and a description
thereof, (2) that all outstanding trade payables (other than those not yet
due and payable or those to be paid from the requested disbursement or those
constituting Permitted Indebtedness) have been paid in full, (3) that the
same has not been the subject of a previous disbursement, and (4) that all
previous disbursements have been or will be used to pay the previously
identified Approved Operating Expenses, and (B) reasonably detailed
documentation satisfactory to Lender as to the amount, necessity and purpose
therefor. Notwithstanding anything to the contrary contained herein, to the
extent that (i) Borrower has requested a disbursement of funds from the
Operating Expense Subaccount in accordance with the foregoing provisions and (ii) at
the time of such request, the funds that have been collected in the Operating
Expense Subaccount are insufficient to cover the same, then Lender shall
nonetheless disburse

 24
 

 

additional funds that are thereafter deposited into the Operating
Expense Subaccount to Borrower (without any requirement for Borrower to submit
an additional request therefor); provided that sufficient funds have been
collected in the Deposit Account to make the payments required under clauses (i) -
(v) of Section 3.11(a) on the next succeeding Payment Date.

3.7          Casualty/Condemnation
Subaccount. Borrower shall pay, or cause to be
paid, to Lender all Proceeds or Awards due to any Casualty or Condemnation to
be transferred to a Subaccount (the “Casualty/Condemnation Subaccount”) in
accordance with the provisions of Article 7 hereof. All amounts in
the Casualty/Condemnation Subaccount shall disbursed in accordance with the
provisions of Article 7 hereof.

3.8          Security
Deposits. Borrower shall keep all security
deposits under Leases in accordance with applicable Legal Requirements. After
the occurrence and during the continuance of an Event of Default, Borrower
shall, upon Lender’s request, if permitted by applicable Legal Requirements,
turn over to Lender the security deposits (and any interest theretofore earned
thereon) under Leases, to be held by Lender in a Subaccount (the “Security Deposit Subaccount”)
subject to the terms of the Leases. Security deposits held in the Security
Deposit Subaccount will be released by Lender upon notice from Borrower
together with such evidence as Lender may reasonably request that such security
deposit is required to be returned to a tenant pursuant to the terms of a Lease
or may be applied as Rent pursuant to the rights of Borrower under the
applicable Lease. Any letter of credit or other instrument that Borrower
receives in lieu of a cash security deposit under any Lease shall (i) be
maintained in full force and effect in the full amount unless replaced by a
cash deposit as hereinabove described and (ii) if permitted pursuant to
any Legal Requirements, name Lender as payee or mortgagee thereunder (or at
Lender’s option, be fully assignable to Lender).

3.9          Cash
Collateral Subaccount. If a Cash Trap Period shall
have commenced then on the immediately succeeding Payment Date and on each
Payment Date thereafter during the continuance of such Cash Trap Period, all
Available Cash shall be paid to Lender, which amounts shall be transferred by
Lender into a Subaccount (the “Cash Collateral Subaccount”) as
cash collateral for the Debt. Any funds in the Cash Collateral Subaccount and
not previously disbursed or applied shall be disbursed to Borrower upon the
termination of such Cash Trap Period. Lender shall have the right, but not the
obligation, at any time during the continuance of a monetary Event of Default
or material non-monetary Event of Default, in its sole and absolute discretion
to apply all sums then on deposit in the Cash Collateral Subaccount to the
Debt, in such order and in such manner as Lender shall elect in its sole and
absolute discretion, including (if the Loan has been accelerated) to make a
prepayment of Principal (together with the applicable Yield Maintenance Premium
applicable thereto). Notwithstanding anything to the contrary contained above,
Lender shall have the right, but not the obligation, in its sole and absolute
discretion from time to time, to disburse funds deposited into the Cash
Collateral Subaccount to Borrower for application to Approved Leasing Expenses
or capital expenditures approved by Lender, subject to such terms and
conditions as Lender may require.

3.10        Grant
of Security Interest; Application of Funds. As
security for payment of the Debt and the performance by Borrower of all other
terms, conditions and provisions of the Loan Documents, Borrower hereby pledges
and assigns to Lender, and grants to Lender a

 25
 

 

security interest in, all Borrower’s right, title and interest in and
to all Rents and in and to all payments to or monies held in the Clearing
Account, the Deposit Account, all Subaccounts created pursuant to this
Agreement (collectively, the “Cash Management Accounts”). Borrower hereby grants to
Lender a continuing security interest in, and agrees to hold in trust for the
benefit of Lender, all Rents in its possession prior to the (i) payment of
such Rents to Lender or (ii) deposit of such Rents into the Deposit
Account. Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in any Cash
Management Account, or permit any Lien to attach thereto, or any levy to be
made thereon, or any UCC Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto. This Agreement is, among
other things, intended by the parties to be a security agreement for purposes
of the UCC. Upon the occurrence and during the continuance of an Event of
Default, Lender may apply any sums in any Cash Management Account in any order
and in any manner as Lender shall elect in Lender’s discretion without seeking
the appointment of a receiver and without adversely affecting the rights of
Lender to foreclose the Lien of the Security Instrument or exercise its other
rights under the Loan Documents, provided that Lender will not apply any such
sums to prepayment of Principal unless it has accelerated the Loan. Cash
Management Accounts shall not constitute trust funds and may be commingled with
other monies held by Lender. All interest which accrues on the funds in any
Cash Management Account (other than the Tax and Insurance Subaccount) shall
accrue for the benefit of Borrower and shall be taxable to Borrower and shall
be added to and disbursed in the same manner and under the same conditions as
the principal sum on which said interest accrued. Upon repayment in full of the
Debt, all remaining funds in the Subaccounts, if any, shall be promptly
disbursed to Borrower.

3.11        Property Cash Flow Allocation.

(a)           All Rents deposited
into the Deposit Account during the immediately preceding Interest Period shall
be applied on each Payment Date as follows in the following order of priority:

(i)            First,
to make payments into the Tax and Insurance Subaccount if and as required (and
only if and as required) under Section 3.3 hereof;

(ii)           Second,
to pay the monthly portion of the fees charged by the Deposit Bank in
accordance with the Deposit Account Agreement;

(iii)          Third,
to Lender to pay the Monthly Debt Service Payment Amount or the Monthly
Interest Payment Amount, as the case may be, due on such Payment Date (plus, if
applicable, interest at the Default Rate and all other amounts, other than
those described under other clauses of this Section 3.11(a), then
due to Lender under the Loan Documents);

(iv)          Fourth,
to make payments into the Capital Reserve Subaccount if and as required (and
only if and as required) under Section 3.4 hereof;

(v)           Fifth,
during the continuance of a Cash Trap Period, to make payments for Approved
Operating Expenses as required under Section 3.6 hereof;

 26

 

(vi)          Sixth,
during the continuance of a Cash Trap Period, to make payments in an amount
equal to all remaining Available Cash on such Payment Date into the Cash
Collateral Subaccount in accordance with Section 3.9 hereof; and

(vii)         Lastly,
provided that no Cash Trap Period is then continuing, payments to Borrower of
any remaining amounts.

Notwithstanding the foregoing, except during the continuance of a Cash
Trap Period, provided that in any given Interest Period, all amounts referred
to in the foregoing clauses (i) - (iv) have been paid, then at
Borrower’s request, the payments to Borrower under the foregoing clause (vii) shall
be made on a weekly basis.

(b)           The failure of
Borrower to make all of the payments required under clauses (i) through (vi) of
Section 3.11(a) above in full on each Payment Date shall
constitute an Event of Default under this Agreement; provided, however, if
adequate funds are available in the Deposit Account for such payments, the
failure by the Deposit Bank to allocate such funds into the appropriate
Subaccounts shall not constitute an Event of Default.

(c)           Notwithstanding
anything to the contrary contained in this Section 3.11, after the
occurrence of an Event of Default, Lender may apply all Rents deposited into
the Deposit Account and other proceeds of repayment in such order and in such
manner as Lender shall elect.

3.12        Intentionally
Omitted.

3.13        Intentionally Omitted.

3.14        Initial Deposits into Reserves. The initial deposits required to be made on
the date hereof into the reserve accounts established under this Article 3
are funded from the proceeds of the Loan disbursed at closing.

4.                                       REPRESENTATIONS AND WARRANTIES

Borrower
represents and warrants to Lender as of the date hereof that, except to the
extent (if any) disclosed on Schedule 2 hereto with reference to a
specific Section of this Article 4:

4.1          Organization;
Special Purpose. Borrower has been duly organized
and is validly existing and in good standing under the laws of the state of its
formation, with requisite power and authority, and all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to own its
properties and to transact the business in which it is now engaged. Borrower is
duly qualified to do business and is in good standing in each jurisdiction
where it is required to be so qualified in connection with its properties,
business and operations. Borrower is a Special Purpose Bankruptcy Remote
Entity.

4.2          Proceedings;
Enforceability. Borrower has taken all necessary
action to authorize the execution, delivery and performance of the Loan
Documents. The Loan Documents to which Borrower is a party have been duly
executed and delivered by Borrower

 27
 

 

and constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms, subject
to applicable bankruptcy, insolvency and similar laws affecting rights of
creditors generally, and general principles of equity. The Loan Documents to
which Borrower’s Guarantor and/or Affiliates are a party have been duly
executed and delivered by such Guarantor and/or Affiliates that are parties
thereto, and constitute legal, valid and binding obligations of such Guarantor
and/or Affiliates that are parties thereto, enforceable against such Guarantor
and/or Affiliates that are parties thereto in accordance with their respective
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
rights of creditors generally, and general principles of equity. The Loan
Documents are not subject to, and Borrower has not asserted, any right of
rescission, set-off, counterclaim or defense, including the defense of usury. No
exercise of any of the terms of the Loan Documents, or any right thereunder,
will render any Loan Document unenforceable.

4.3          No
Conflicts. The execution, delivery and performance
of the Loan Documents by Borrower and the transactions contemplated hereby will
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition of any
Lien (other than pursuant to the Loan Documents) upon any of the property of
Borrower pursuant to the terms of, any agreement or instrument to which
Borrower is a party or by which its property is subject, nor will such action result
in any violation of the provisions of any statute or any order, rule or
regulation of any Governmental Authority having jurisdiction over Borrower or
the Property. Borrower’s rights under the Licenses and the Management Agreement
will not be adversely affected by the execution and delivery of the Loan
Documents, Borrower’s performance thereunder, or the recordation of the
Security Instrument. Any consent, approval, authorization, order, registration
or qualification of or with any Governmental Authority required for the
execution, delivery and performance by Borrower of the Loan Documents has been
obtained and is in full force and effect.

4.4          Litigation.
There are no actions, suits or other proceedings at law or in equity by or
before any Governmental Authority now pending or threatened against or
affecting Borrower, the Manager or the Property, which, if adversely
determined, might materially adversely affect the condition (financial or
otherwise) or business of Borrower, Manager or the condition or ownership of
the Property.

4.5          Agreements.
Borrower is not a party to any agreement or instrument or subject to any
restriction which might adversely affect Borrower or the Property, or Borrower’s
business, properties, operations or condition, financial or otherwise. Borrower
is not in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Permitted Encumbrance or any other agreement or instrument to which Borrower is
a party or by which Borrower or the Property is bound.

4.6          Title.
Borrower has good and indefeasible title in fee to the real property and good
title to the balance of the Property, free and clear of all Liens except the
Permitted Encumbrances. All transfer taxes, deed stamps, intangible taxes or
other amounts in the nature of transfer taxes required to be paid by any Person
under applicable Legal Requirements in connection with the transfer of the
Property to Borrower have been paid. The Security Instrument when properly
recorded in the appropriate records, together with any UCC financing

 28
 

 

statements required to be filed in connection therewith and the other
Loan Documents, will create (i) a valid, perfected first priority lien on
Borrower’s interest in that portion of the Property, the Leases (to the extent
not subject to the Uniform Commercial Code) and the Rents constituting
interests in real estate or real property interests (including fixtures) and (ii) to
the extent that a security interest therein may be created under the Uniform
Commercial Code, a valid security interest in that portion of the Property, the
Leases  (to the extent subject to the
Uniform Commercial Code) and Rents and other collateral for the Loan
constituting personal property, which security interest constitutes a perfected
first priority security interest (a) to the extent that a security
interest therein may be perfected by the filing of a UCC financing statement
and (b) with respect to the Cash Management Accounts, by virtue of Lender’s
control of such Cash Management Accounts, all in accordance with the terms of
such Loan Documents, in each case subject only to any applicable Permitted
Encumbrances. All mortgage, recording, stamp, intangible or other similar taxes
required to be paid by any Person under applicable Legal Requirements in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents have been (or will,
contemporaneously with such recordation or filing, be) paid by Borrower. The
Permitted Encumbrances do not materially adversely affect the value, operation
or use of the Property, or Borrower’s ability to repay the Loan. No
Condemnation or other proceeding has been commenced or, to Borrower’s best
knowledge, is contemplated with respect to all or part of the Property or for
the relocation of roadways providing access to the Property. There are no
claims for payment for work, labor or materials affecting the Property which
are or may become a Lien prior to, or of equal priority with, the Liens created
by the Loan Documents. There are no outstanding options to purchase or rights
of first refusal affecting all or any portion of the Property. The survey for
the Property delivered to Lender does not fail to reflect any material matter
affecting the Property or the title thereto. Except as shown on the survey, all
of the Improvements included in determining the appraised value of the Property
lie wholly within the boundaries and building restriction lines of the Property,
and no improvement on an adjoining property encroaches upon the Property, and
no easement or other encumbrance upon the Property encroaches upon any of the
Improvements, except those insured against by the Title Insurance Policy. Each
parcel comprising the Property is a separate tax lot and is not a portion of
any other tax lot that is not a part of the Property. To the best of Borrower’s
knowledge, there are no pending or proposed special or other assessments for
public improvements or otherwise affecting the Property, or any contemplated
improvements to the Property that may result in such special or other
assessments.

4.7          No
Bankruptcy Filing. Borrower is not contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency law or the liquidation of all or a major portion of its property (a “Bankruptcy Proceeding”),
and Borrower has no knowledge of any Person contemplating the filing of any
such petition against Borrower. In addition, neither Borrower nor any principal
or Affiliate of Borrower has been a party to, or the subject of a Bankruptcy
Proceeding for the past ten (10) years.

4.8          Full
and Accurate Disclosure. No statement of fact made
by Borrower in any of the Loan Documents contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein not misleading. There is no material fact presently known to
Borrower that has not been disclosed to Lender which adversely affects, or, as
far as Borrower can foresee, might adversely affect, the Property or the
business,

 29
 

 

operations or condition (financial or otherwise) of Borrower. All
financial data, including the statements of cash flow and income and operating
expense, that have been +delivered to Lender in respect of Borrower and, to
Borrower’s knowledge, the Property (i) are true, complete and correct in
all material respects, (ii) accurately represent the financial condition
of  Borrower and the Property as of the
date of such reports, and (iii) to the extent prepared by an independent
certified public accounting firm, have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as disclosed
therein. Borrower does not have any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments, unrealized or anticipated
losses from any unfavorable commitments or any liabilities or obligations not
expressly permitted by this Agreement. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower or the Property from that set
forth in said financial statements.

4.9          Tax
Filings.
To the extent required, Borrower has filed (or has obtained effective
extensions for filing) all federal, state and local tax returns required to be
filed and have paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments payable by Borrower. Borrower
believes that its tax returns (if any) properly reflect the income and taxes of
Borrower for the periods covered thereby, subject only to reasonable
adjustments required by the Internal Revenue Service or other applicable tax
authority upon audit.

4.10        ERISA;
No Plan Assets. As of the date hereof and throughout the Term (i) Borrower
is not and will not be an “employee benefit plan,” as defined in Section 3(3) of
ERISA, subject to Title I of ERISA, (ii) none of the assets of Borrower
constitutes or will constitute “plan assets” of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3-101, (iii) Borrower is
not and will not be a “governmental plan” within the meaning of Section 3(32)
of ERISA, and (iv) transactions by or with Borrower are not and will not
be subject to state statutes regulating investment of, and fiduciary
obligations with respect to, governmental plans. As of the date hereof, neither
Borrower, nor any member of a “controlled group of corporations” (within the
meaning of Section 414 of the Code) maintains, sponsors or contributes to
a “defined benefit plan” (within the meaning of Section 3(35) of ERISA) or
a “multiemployer pension plan” (within the meaning of Section 3(37)(A) of
ERISA).

4.11        Compliance.
Borrower and, to Borrower’s best knowledge, the Property and the use thereof
comply in all material respects with all applicable Legal Requirements (including with respect to parking and
applicable zoning and land use laws, regulations and ordinances). Borrower
is not in default or violation of any order, writ, injunction, decree or demand
of any Governmental Authority, the violation of which might materially
adversely affect the condition (financial or otherwise) or business of Borrower.
The Property is used exclusively as an office building property and other
appurtenant and related uses. In the
event that all or any part of the Improvements are destroyed or damaged, said
Improvements can be legally reconstructed to their condition prior to such
damage or destruction, and thereafter exist for the same use without violating
any zoning or other ordinances applicable thereto and without the necessity of
obtaining any variances or special permits. No legal proceedings are pending
or, to the knowledge of Borrower, threatened with respect to the zoning of the
Property. Neither the zoning nor any other right to construct, use or operate
the Property is in any way dependent upon

 30
 

 

or
related to any property other than the Property. All certifications,
permits, licenses and approvals, including certificates of completion and
occupancy permits required for the legal use, occupancy and operation of the
Property (collectively, the “Licenses”), have been obtained and are in full force and
effect. The use being made of the Property is in conformity with the
certificate of occupancy issued for the Property and all other restrictions,
covenants and conditions affecting the Property.

4.12        Contracts.
There are no service, maintenance or repair contracts affecting the Property
that are not terminable on one (1) month’s notice or less without cause
and without penalty or premium. All service, maintenance or repair contracts
affecting the Property have been entered into at arms-length in the ordinary
course of Borrower’s business (or that of its predecessor in interest) and
provide for the payment of fees in amounts and upon terms comparable to
existing market rates.

4.13        Federal
Reserve Regulations; Investment Company Act. No
part of the proceeds of the Loan will be used for the purpose of purchasing or
acquiring any “margin stock” within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or for any other purpose that would be
inconsistent with such Regulation U or any other regulation of such Board of
Governors, or for any purpose prohibited by Legal Requirements or any Loan
Document. Borrower is not (i) an “investment company” or a company “controlled”
by an “investment company,” within the meaning of the Investment Company Act of
1940, as amended; (ii) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended; or (iii) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.

4.14        Easements;
Utilities and Public Access. To Borrower’s best
knowledge, all easements, cross easements, licenses, air rights and
rights-of-way or other similar property interests (collectively, “Easements”), if
any, necessary for the full utilization of the Improvements for their intended
purposes have been obtained, are described in the Title Insurance Policy and
are in full force and effect without default thereunder. To Borrower’s best
knowledge, the Property has rights of access to public ways and is served by
water, sewer, sanitary sewer and storm drain facilities adequate to service it
for its intended uses. To Borrower’s best knowledge, all public utilities
necessary or convenient to the full use and enjoyment of the Property are
located in the public right-of-way abutting the Property, and all such
utilities are connected so as to serve the Property without passing over other
property absent a valid easement. To Borrower’s best knowledge, all roads
necessary for the use of the Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities.

4.15        Physical
Condition. To Borrower’s best knowledge, the
Property, including all Improvements, parking facilities, systems, Equipment
and landscaping, are in good condition, order and repair in all material
respects; to Borrower’s knowledge, there exists no structural or other material
defect or damages to the Property, whether latent or otherwise. Borrower has
not received notice from any insurance company or bonding company of any defect
or inadequacy in the Property, or any part thereof, which would adversely
affect its insurability or cause the

 31
 

 

imposition of extraordinary premiums or charges thereon or any
termination of any policy of insurance or bond. No portion of the Property is
located in an area as identified by the Federal Emergency Management Agency as
an area having special flood hazards. To Borrower’s best knowledge, the
Improvements have suffered no material casualty or damage which has not been
fully repaired and the cost thereof fully paid.

4.16        Leases.
To Borrower’s best knowledge, the rent roll attached hereto as Schedule 3
(the “Rent Roll”)
is true, complete and correct and the Property is not subject to any Leases
other than the Leases described in the Rent Roll. To Borrower’s best knowledge,
except as set forth on the Rent Roll or tenant estoppel certificates delivered
to Lender prior to the date hereof: (i) each Lease is in full force and
effect; (ii) the tenants under the Leases have accepted possession of and
are in occupancy of all of their respective demised premises, have commenced
the payment of rent under the Leases, and there are no offsets, claims or
defenses to the enforcement thereof; (iii) all rents due and payable under
the Leases have been paid and no portion thereof has been paid for any period
more than thirty (30) days in advance; (iv) the rent payable under each
Lease is the amount of fixed rent set forth in the Rent Roll, and there is no
claim or basis for a claim by the tenant thereunder for an adjustment to the
rent; (v) no tenant has made any claim against the landlord under any
Lease which remains outstanding, there are no defaults on the part of the
landlord under any Lease, and no event has occurred which, with the giving of
notice or passage of time, or both, would constitute such a default; (vi) there
is no present material default by the tenant under any Lease; (vii) all
security deposits under Leases are as set forth on the Rent Roll and are held
consistent with Section 3.8 hereof; (viii) Borrower is the
sole owner of the entire lessor’s interest in each Lease; (ix) each Lease
is the valid, binding and enforceable obligation of the Borrower and the applicable
tenant thereunder; (x) no Person has any possessory interest in, or right
to occupy, the Property except under the terms of the Lease; and (xi) each
Lease is subordinate to the Loan Documents, either pursuant to its terms or
pursuant to a subordination and attornment agreement. None of the Leases
contains any option to purchase or right of first refusal to purchase the
Property or any part thereof. Neither the Leases nor the Rents have been
assigned or pledged except to Lender, and no other Person has any interest
therein except the tenants thereunder.

4.17        Fraudulent
Transfer. Borrower has not entered into the Loan
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor, and Borrower has received reasonably equivalent value in exchange for
its obligations under the Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair saleable value of Borrower’s
assets exceeds and will, immediately following the execution and delivery of
the Loan Documents, exceed Borrower’s total probable liabilities, including
subordinated, unliquidated, disputed or contingent liabilities, including the
maximum amount of its contingent liabilities or its debts as such debts become
absolute and matured. Borrower’s assets do not and, immediately following the
execution and delivery of the Loan Documents will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Borrower does not intend to, and does not believe that it will,
incur debts and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).

 32

 

4.18        Ownership
of Borrower. The sole general partner of Borrower
is Behringer Harvard Terrace GP, LLC, a Delaware limited liability company (“Borrower GP”). The
sole member of Borrower GP, and the sole limited partner of Borrower, is
Behringer Harvard Operating Partnership I LP (“Borrower Holding”). The sole owner of
100% of the equity interests in Borrower Holding is the Harvard REIT Operating
Partnership. The only partners of the Harvard REIT Operating Partnership are (i) the
Behringer Harvard REIT (0.1% general partner), (ii) BHR Partners, LLC, a
Delaware limited liability company (in excess of 99% limited partner), which is
100% owned by the Behringer Harvard REIT, and (iii) certain other
individual holders of equity interests (less than 1% limited partners in the
aggregate). The foregoing partnership and membership interests in Borrower and
Borrower GP, respectively the equity interests in Borrower Holding, the general
partnership interests in Harvard REIT Operating Partnership, and the limited
partnership interests of BHR Partners, LLC in Harvard REIT Operating
Partnership, are all owned free and clear of all Liens, warrants, options and
rights to purchase. Borrower has no obligation to any Person to purchase,
repurchase or issue any ownership interest in it. The organizational chart
attached hereto as Schedule 4 is complete and accurate and illustrates
all Persons who have a direct or indirect ownership interest in Borrower.

4.19        Purchase
Options.
Neither the Property nor any part thereof is subject to any purchase
options or other similar rights in favor of third parties.

4.20        Management
Agreement. The Management Agreement is in full
force and effect. There is no default, breach or violation existing thereunder,
and no event has occurred (other than payments due but not yet delinquent)
that, with the passage of time or the giving of notice, or both, would
constitute a default, breach or violation thereunder, by either party thereto.
Pursuant to the Management Agreement, Borrower has appointed the Manager as its
agent for (i) hiring, terminating (subject to the provisions thereof),
overseeing and otherwise dealing with any sub-property manager for the
Property, (ii) otherwise overseeing the operation and management of the
Property, and (iii) making decisions and otherwise interacting and dealing
with Lender with respect to the Loan, this Agreement, the other Loan Documents
and the Property. Additionally, subject to the provisions of Section 3.1
hereof, the Clearing Account Agreement and the Deposit Account Agreement, the
Manager has control of all operating and other bank accounts with respect to
the Property.

4.21        Hazardous
Substances. Except as disclosed in the
environmental assessment report delivered to Lender in connection with the
Loan, (i) to the best of Borrower’s knowledge, after due inquiry, the
Property is not in violation of any Legal Requirement pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water Act,
the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water
Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes (including with respect to Toxic Mold), any
local law requiring related permits and licenses and all amendments to and
regulations in respect of the foregoing laws (collectively, “Environmental Laws”);
(ii) to the best of Borrower’s knowledge, after due inquiry, the Property
is not subject to any private or governmental Lien or judicial or

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administrative
notice or action or inquiry, investigation or claim relating to hazardous,
toxic and/or dangerous substances, toxic mold or fungus of a type that may pose
a risk to human health or the environment or would negatively impact the value
of the Property (“Toxic Mold”) or any other substances or
materials which are included under or regulated by Environmental Laws
(collectively, “Hazardous
Substances”); (iii) to the best of Borrower’s knowledge,
after due inquiry, no Hazardous Substances are or have been (including the
period prior to Borrower’s acquisition of the Property), discharged, generated,
treated, disposed of or stored on, incorporated in, or removed or transported
from the Property other than in compliance with all Environmental Laws; (iv) to
the best of Borrower’s knowledge, after due inquiry, no Hazardous Substances
are present in, on or under any nearby real property which could migrate to or
otherwise affect the Property; (v) to the best of Borrower’s knowledge,
after due inquiry, no Toxic Mold is on or about the Property which requires
remediation; and (vi) to the best of Borrower’s knowledge, after due
inquiry, no underground storage tanks exist on the Property and the Property
has never been used as a landfill. To the best of Borrower’s knowledge, after
due inquiry, there have been no environmental investigations, studies, audits,
reviews or other analyses conducted by or on behalf of Borrower which have not
been provided to Lender.

4.22        Name;
Principal Place of Business. Borrower has not
used, does not use and will not use any trade name, nor has Borrower done, or
will in the future do, business under any name, other than its actual name set
forth herein and the trade name of the Property. The principal place of
business of Borrower is its primary address for notices as set forth in Section 6.1
hereof, and Borrower has no other place of business.

4.23        Other
Debt. There is no indebtedness with respect to the
Property or any excess cash flow or any residual interest therein, whether
secured or unsecured, other than Permitted Encumbrances and Permitted
Indebtedness.

5.                                      COVENANTS

Until the end
of the Term, Borrower hereby covenants and agrees with Lender that:

5.1          Existence.
Borrower shall (i) do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence, rights, and
franchises, (ii) continue to engage in the business presently conducted by
it, (iii) obtain and maintain all Licenses, and (iv) qualify to do
business and remain in good standing under the laws of each jurisdiction, in
each case as and to the extent required for the ownership, maintenance,
management and operation of the Property.

5.2          Taxes
and Other Charges. Borrower shall pay all Taxes
and Other Charges prior to delinquency, and deliver to Lender receipts for
payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid prior to delinquency (provided, however, that
Borrower need not pay such Taxes nor furnish such receipts for payment of Taxes
paid by Lender pursuant to Section 3.3 hereof). Borrower shall not
suffer and shall promptly cause to be paid and discharged any Lien against the
Property, and shall promptly pay for all utility services provided to the
Property. After prior 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 of any
Taxes or Other

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Charges,
provided that (i) no Event of Default has occurred and is continuing, (ii) such
proceeding shall suspend the collection of the Taxes or such Other Charges, (iii) 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, (iv) no part of or interest in the
Property will be in imminent danger of being sold, forfeited, terminated,
canceled or lost, (v) Borrower shall have furnished such security as may be
required in the proceeding, or as may be requested by Lender, to insure the
payment of any such Taxes or Other Charges, together with all interest and
penalties thereon, which shall not be less than one hundred twenty five percent
(125%) of the Taxes and Other Charges being contested (less amounts then being
retained in the Taxes and Insurance Subaccount to pay such Taxes so contested),
and (vi) Borrower shall promptly upon final determination thereof pay the
amount of such Taxes or Other Charges, together with all costs, interest and
penalties. Lender may, with the prior approval of Borrower (not to be
unreasonably withheld), pay over any such security or part thereof held by
Lender to the claimant entitled thereto at any time when, in the judgment of Lender,
the entitlement of such claimant is established.

5.3          Access
to Property.
Borrower shall permit agents, representatives, consultants and employees
of Lender to inspect the Property or any part thereof at reasonable hours upon
reasonable advance notice, subject to the rights of tenants of the Property
under their respective Leases.

5.4          Repairs; Maintenance and Compliance; Alterations.

5.4.1       Repairs;
Maintenance and Compliance. Borrower shall at all
times maintain, preserve and protect all franchises and trade names, and
Borrower shall cause the Property to be maintained in a good and safe condition
and repair and shall not remove, demolish or alter the Improvements or
Equipment (except for alterations performed in accordance with Section 5.4.2
below and normal replacement of Equipment with Equipment of equivalent value
and functionality or removal of Equipment that is not material to the operation
or value of the Property as an office building). Borrower shall promptly comply
with all Legal Requirements and immediately cure properly any violation of a
Legal Requirement. Borrower shall notify Lender in writing within three (3) Business
Days after Borrower first receives notice of any such non-compliance. Borrower
shall promptly repair, replace or rebuild any part of the Property that becomes
damaged, worn or dilapidated and shall complete and pay for any Improvements at
any time in the process of construction or repair.

5.4.2       Alterations.
Borrower may, without Lender’s consent, perform alterations to the Improvements
and Equipment which (i) do not constitute a Material Alteration, (ii) do
not adversely affect Borrower’s financial condition or the value or Net
Operating Income of the Property and (iii) are in the ordinary course of
Borrower’s business. Borrower shall not perform any Material Alteration without
Lender’s prior written consent, which consent shall not be unreasonably
withheld or delayed. Lender may, as a condition to giving its consent to a
Material Alteration, require that Borrower deliver to Lender security for
payment of the cost of such Material Alteration in an amount equal to one
hundred twenty five percent (125%) of the cost of the Material Alteration as
estimated by Lender. Upon substantial completion of the Material Alteration,
Borrower shall provide evidence satisfactory to Lender that (i) the
Material

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Alteration was constructed in accordance with applicable Legal
Requirements and substantially in accordance with plans and specifications
approved by Lender (which approval shall not be unreasonably withheld or
delayed), (ii) all contractors, subcontractors, materialmen and
professionals who provided work, materials or services in connection with the
Material Alteration have been paid in full and have delivered unconditional
releases of lien and (iii) all material Licenses necessary for the use,
operation and occupancy of the Material Alteration (other than those which
depend on the performance of tenant improvement work) have been issued. Borrower
shall reimburse Lender upon demand for all out-of-pocket costs and expenses
(including the reasonable fees of any architect, engineer or other professional
engaged by Lender) incurred by Lender in reviewing plans and specifications or
in making any determinations necessary to implement the provisions of this Section 5.4.2.

5.5          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 instrument affecting or pertaining to the
Property, including the Loan Documents.

5.6          Cooperate
in Legal Proceedings. Borrower shall cooperate
fully with Lender with respect to, and permit Lender, at its option, to
participate in, any proceedings before any Governmental Authority which may in
any way affect the rights of Lender under any Loan Document.

5.7          Further
Assurances. Borrower shall, at Borrower’s sole
cost and expense, (i) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the
collateral at any time securing or intended to secure the Debt and/or for the
better and more effective carrying out of the intents and purposes of the Loan
Documents, as Lender may reasonably require from time to time; and (ii) upon
Lender’s request therefor given from time to time after the occurrence of any
Default or Event of Default pay for (a) reports of UCC, federal tax lien,
state tax lien, judgment and pending litigation searches with respect to
Borrower and Guarantor and (b) searches of title to the Property, each
such search to be conducted by search firms reasonably designated by Lender in
each of the locations reasonably designated by Lender.

5.8          Environmental Matters.

5.8.1       Hazardous
Substances. So long as Borrower owns or is in
possession of the Property, Borrower shall (i) keep the Property free from
Hazardous Substances and in compliance with all Environmental Laws, (ii) promptly
notify Lender if Borrower shall become aware that (A) any Hazardous
Substance is on or near the Property, (B) the Property is in violation of
any Environmental Laws or (C) any condition on or near the Property shall
pose a threat to the health, safety or welfare of humans and (iii) remove
such Hazardous Substances and/or cure such violations and/or remove such
threats, as applicable, as required by law (or as shall be required by Lender
in the case of removal which is not required by law, but in response to the
opinion of a licensed hydrogeologist, licensed environmental engineer or other
qualified environmental consulting firm engaged by Lender (“Lender’s Consultant”)),
promptly after Borrower becomes aware of same, at Borrower’s sole expense. Nothing
herein shall prevent

 36
 

 

Borrower from recovering such expenses from any other party that may be
liable for such removal or cure.

5.8.2       Environmental Monitoring.

(a)           Borrower shall give
prompt written notice to Lender of (i) any proceeding or inquiry by any
party (including any Governmental Authority) with respect to the presence of
any Hazardous Substance on, under, from or about the Property, (ii) all
claims made or threatened by any third party (including any Governmental
Authority) against Borrower or the Property or any party occupying the Property relating to any loss or
injury resulting from any Hazardous Substance, and (iii) Borrower’s
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of the Property that could cause the Property to be subject to any
investigation or cleanup pursuant to any Environmental Law. Upon becoming aware
of the presence of mold or fungus at the Property, Borrower shall (i) undertake
an investigation to identify the source(s) of such mold or fungus and
shall develop and implement an appropriate remediation plan to eliminate the
presence of any Toxic Mold, (ii) perform or cause to be performed all acts
reasonably necessary for the remediation of any Toxic Mold (including taking
any action necessary to clean and disinfect any portions of the Property affected
by Toxic Mold, including providing any necessary moisture control systems at
the Property), and (iii) provide evidence reasonably satisfactory to
Lender of the foregoing. Borrower shall permit Lender to join and participate
in, as a party if it so elects, any legal or administrative proceedings or
other actions initiated with respect to the Property in connection with any
Environmental Law or Hazardous Substance, and Borrower shall pay all reasonable
attorneys’ fees and disbursements incurred by Lender in connection therewith.

(b)           Upon Lender’s
request, at any time and from time to time, Borrower shall provide an
inspection or audit of the Property prepared by a licensed hydrogeologist,
licensed environmental engineer or qualified environmental consulting firm
approved by Lender assessing the presence or absence of Hazardous Substances
on, in or near the Property, and if Lender in its good faith judgment
determines that reasonable cause exists for the performance of such
environmental inspection or audit, then the cost and expense of such audit or
inspection shall be paid by Borrower. Such inspections and audit may include
soil borings and ground water monitoring. If Borrower fails to provide any such
inspection or audit within thirty (30) days after such request, Lender may
order same, and Borrower hereby grants to Lender and its employees and agents
access to the Property and a license to undertake such inspection or audit.

(c)           If any environmental
site assessment report prepared in connection with such inspection or audit
recommends that an operations and maintenance plan be implemented for any
Hazardous Substance, whether such Hazardous Substance existed prior to the
ownership of the Property by Borrower, or presently exists or is reasonably
suspected of existing, Borrower shall cause such operations and maintenance
plan to be prepared and implemented at its expense upon request of Lender, and
with respect to any Toxic Mold, Borrower shall take all action necessary to
clean and disinfect any portions of the Improvements affected by Toxic Mold in
or about the Improvements, including providing any necessary moisture control
systems at the Property. If any investigation, site monitoring, containment,
cleanup, removal, restoration or other work of any kind is reasonably necessary
under an applicable Environmental Law

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(“Remedial Work”), Borrower
shall commence all such Remedial Work within thirty (30) days after written
demand by Lender and thereafter diligently prosecute to completion all such
Remedial Work within such period of time as may be required under applicable
law. All Remedial Work shall be performed by licensed contractors approved in
advance by Lender and under the supervision of a consulting engineer approved
by Lender. All costs of such Remedial Work shall be paid by Borrower, including
Lender’s reasonable attorneys’ fees and disbursements incurred in connection
with the monitoring or review of such Remedial Work. If Borrower does not
timely commence and diligently prosecute to completion the Remedial Work,
Lender may (but shall not be obligated to) cause such Remedial Work to be
performed at Borrower’s expense. Notwithstanding the foregoing, Borrower shall
not be required to commence such Remedial Work within the above specified time
period: (x) if prevented from doing so by any Governmental Authority, (y) if
commencing such Remedial Work within such time period would result in Borrower
or such Remedial Work violating any Environmental Law, or (z) if Borrower,
at its expense and after prior written notice to Lender, is contesting by
appropriate legal, administrative or other proceedings, conducted in good faith
and with due diligence, the need to perform Remedial Work. Borrower shall have
the right to contest the need to perform such Remedial Work, provided that, (1) Borrower
is permitted by the applicable Environmental Laws to delay performance of the
Remedial Work pending such proceedings, (2) neither the Property nor any
part thereof or interest therein will be sold, forfeited or lost if Borrower
fails to promptly perform the Remedial Work being contested, and if Borrower
fails to prevail in contest, Borrower would thereafter have the opportunity to
perform such Remedial Work, (3) Lender would not, by virtue of such
permitted contest, be exposed to any risk of any civil liability for which
Borrower has not furnished additional security as provided in clause (4) below,
or to any risk of criminal liability, and neither the Property nor any interest
therein would be subject to the imposition of any Lien for which Borrower has
not furnished additional security as provided in clause (4) below, as a
result of the failure to perform such Remedial Work and (4) Borrower shall
have furnished to Lender additional security in respect of the Remedial Work
being contested and the loss or damage that may result from Borrower’s failure
to prevail in such contest in such amount as may be reasonably requested by
Lender but in no event less than one hundred twenty five percent (125%) of the
cost of such Remedial Work as estimated by Lender or Lender’s Consultant and
any loss or damage that may result from Borrower’s failure to prevail in such
contest, which amount shall periodically be disbursed to Borrower during the
course of such Remedial Work in accordance with those procedures and
requirements that Lender may determine are reasonably necessary in connection
therewith. Upon completion of the Remedial Work, any unused portion of any
security deposited with Lender pursuant to this Section 5.8.2 shall
promptly be released to Borrower.

(d)           Borrower shall not
install or permit to be installed on the Property any underground storage tank.

5.9          Title
to the Property. Borrower will warrant and defend
the title to the Property, and the validity and priority of all Liens granted
or otherwise given to Lender under the Loan Documents, subject only to
Permitted Encumbrances, against the claims of all Persons.

5.10        Leases.

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5.10.1     Generally.
Upon request, Borrower shall furnish Lender with executed copies of all Leases
then in effect (other than Leases that have previously been furnished to
Lender). All renewals of Leases and all proposed leases shall provide for
rental rates and terms comparable to existing local market rates and shall be
arm’s length transactions with bona fide, independent third-party tenants.

5.10.2     Material
Leases. Borrower shall not enter into a proposed
Lease or a proposed renewal, extension (other than a renewal or extension that
is being unilaterally exercised by a tenant pursuant to the terms of an existing
Lease, with respect to which Lender shall not have any consent rights) or
modification of an existing Lease without the prior written consent of Lender,
which consent shall not, so long as no Event of Default is continuing, be  unreasonably withheld or delayed. Prior to
seeking Lender’s consent to any Material Lease, Borrower shall deliver to
Lender a copy of such proposed lease (a “Proposed
Material Lease”) and, if such Proposed Material Lease is based
on the standard form of Lease approved by Lender, blacklined to show changes
from the standard form of Lease approved by Lender and then being used by
Borrower. Lender shall approve or disapprove each Proposed Material Lease or
proposed renewal, extension or modification of an existing Material Lease for
which Lender’s approval is required under this Agreement within fifteen (15)
Business Days of the submission by Borrower to Lender of a written request for
such approval, accompanied by a final copy of the Proposed Material Lease or
proposed renewal, extension or modification of an existing Material Lease. If
requested by Borrower, Lender will grant conditional approvals of Proposed
Material Leases or proposed renewals, extensions or modifications of existing
Material Leases at any stage of the leasing process, from initial “term sheet”
through negotiated lease drafts, provided that Lender shall retain the right to
disapprove any such Proposed Material Lease or proposed renewal, extension or
modification of an existing Material Lease, if subsequent to any preliminary
approval material changes are made to the terms previously approved by Lender,
or additional material terms are added that had not previously been considered
and approved by Lender in connection with such Proposed Material Lease or
proposed renewal, extension or modification of an existing Material Lease.
Provided that no Event of Default is continuing, if Borrower provides Lender
with a written request for approval (which written request shall specifically
refer to this Section 5.10.2 and shall explicitly state that
failure by Lender to approve or disapprove within fifteen (15) Business Days
will constitute a deemed approval) and Lender fails to reject the request in
writing delivered to Borrower within fifteen (15) Business Days after receipt
by Lender of the request, the Proposed Material Lease or proposed renewal,
extension or modification of an existing Material Lease shall be deemed
approved by Lender, and Borrower shall be entitled to enter into such Proposed
Material Lease or proposed renewal, extension or modification of an existing
Material Lease. Notwithstanding anything to the contrary in this Section 5.10,
unless expressly agreed to in writing by Lender, any approval or deemed
approval by Lender of a proposed Lease or proposed renewal, extension or
modification of an existing Lease pursuant to this Section 5.10 shall not
be deemed to constitute (in and of itself) an approval or deemed approval by
Lender of any Approved Leasing Expenses in connection therewith.

5.10.3     Minor
Leases. Notwithstanding the provisions of Section 5.10.2
above, provided that no Event of Default is continuing, renewals, amendments
and modifications of existing Leases and proposed Leases, shall not be subject
to the prior approval of Lender

 39
 

 

provided (i) the proposed Lease would be a Minor Lease or the
existing Lease as amended or modified or the renewal Lease is a Minor Lease, (ii) the
proposed Lease shall be written substantially in accordance with the standard
form of Lease which shall have been approved by Lender, (iii) the Lease as
amended or modified or the renewal Lease or series of Leases or proposed Lease
or series of Leases: (a) shall provide for net effective rental rates
comparable to existing local market rates for similarly situated properties, (b) with
respect to any new Lease with a new tenant (other than kiosks and vending
machines), shall have an initial term (together with all renewal options) of
not less than three (3) years or greater than ten (10) years, (c) shall
provide for automatic self-operative subordination to the Security Instrument
and, at Lender’s option, (x) attornment to Lender and (y) the
unilateral right by Lender, at the option of Lender, to subordinate the Lien of
the Security Instrument to the Lease, and (d) shall not contain any option
to purchase, any right of first refusal to purchase, any right to terminate
(except in the event of the destruction or condemnation of substantially all of
the Property), any requirement for a non-disturbance or recognition agreement,
or any other provision which might adversely affect the rights of Lender under
the Loan Documents in any material respect. Borrower shall deliver to Lender
copies of all Leases which are entered into pursuant to the preceding sentence
together with Borrower’s certification that it has satisfied all of the
conditions of the preceding sentence within ten (10) days after the
execution of the Lease. Notwithstanding anything in this Section 5.10 to
the contrary, at Borrower’s request and at Borrower’s sole cost and expense,
Lender shall enter into a subordination, non-disturbance and attornment
agreement on Lender’s then current form with any tenant under a Lease of at
least 2,500 rentable square feet.

5.10.4     Additional
Covenants with respect to Leases. Borrower (i) shall
observe and perform the material obligations imposed upon the lessor under the
Leases and shall not do or permit anything to impair the value of the Leases as
security for the Debt;  (ii) shall
promptly send copies to Lender of all notices of default that Borrower shall
send or receive under any Lease; (iii) shall enforce, in accordance with
commercially reasonable practices for properties similar to the Property, the
terms, covenants and conditions in the Leases to be observed or performed by
the lessees, short of termination thereof; (iv)  shall not collect any of
the Rents more than one (1) month in advance (other than security
deposits); (v) shall not execute any other assignment of lessor’s interest
in the Leases or the Rents (except as contemplated by the Loan Documents); (vi) shall
not modify any Lease in a manner inconsistent with the Loan Documents; (vii) shall
not convey or transfer or suffer or permit a conveyance or transfer of the
Property so as to effect a merger of the estates and rights of, or a termination
or diminution of the obligations of, lessees under Leases; (viii) shall
not consent to any assignment of or subletting under any Material Lease unless
required in accordance with its terms without the prior written consent of
Lender, which, with respect to a subletting, may not, so long as no Event of
Default is continuing,  be unreasonably
withheld or delayed; and  (ix) shall
not cancel or terminate any Lease or accept a surrender thereof (except in the
exercise of Borrower’s commercially reasonable judgment in connection with a
tenant default under a Minor Lease or as expressly permitted under the terms of
such Lease in accordance with Section 5.10.3(d)) without the prior written
consent of Lender, which consent shall not, so long as no Event of Default is
continuing, be unreasonably withheld or delayed.

5.11        Estoppel
Statement. After request by Lender, Borrower shall
within ten (10) days furnish Lender with a statement addressed to Lender,
its successors and assigns, duly

 40
 

 

acknowledged
and certified, setting forth (i) the unpaid Principal, (ii) the
Interest Rate, (iii) the date installments of interest and/or Principal
were last paid, (iv) any offsets or defenses to the payment of the Debt,
and (v) that the Loan Documents are valid, legal and binding obligations
and have not been modified or if modified, giving particulars of such
modification.

5.12        Property Management.

5.12.1     Management
Agreement. Borrower shall (i) cause the
Property to be managed pursuant to the Management Agreement; (ii) promptly
perform and observe all of the covenants required to be performed and observed
by it under the Management Agreement and do all things necessary to preserve
and to keep unimpaired its rights thereunder; (iii) promptly notify Lender
of any default under the Management Agreement of which it is aware; (iv) promptly
deliver to Lender a copy of each financial statement, business plan, capital
expenditure plan, and property improvement plan and any other notice, report
and estimate received by Borrower under the Management Agreement; and (v) promptly
enforce the performance and observance of all of the covenants required to be
performed and observed by Manager under the Management Agreement. Without
Lender’s prior written consent, Borrower shall not (a) surrender, terminate,
cancel, extend or renew the Management Agreement (other than extensions or
renewals pursuant to the express renewal/extension provisions set forth in the
Management Agreement on the same terms and conditions set forth therein (as in
effect on the date hereof, or as hereafter amended or modified in accordance
with the terms and conditions set forth in this Agreement)) or otherwise
replace the Manager or enter into any other management agreement (except
pursuant to Section 5.12.2 below); (b) reduce or consent to
the reduction of the term of the Management Agreement; (c) increase or
consent to the increase of the amount of any charges under the Management
Agreement; (d) otherwise modify, change, supplement, alter or amend in any
material respect, or waive or release any of its rights and remedies under, the
Management Agreement; (e) suffer or permit the occurrence and continuance
of a default beyond any applicable cure period under the Management Agreement
(or any successor Management Agreement) if such default permits the Manager to
terminate the Management Agreement (or such successor Management Agreement); (f) suffer
or permit the ownership, management or control of the Manager to be transferred
to a Person other than an Affiliate of Behringer; or (g) engage (or permit
any Manager to engage) any submanaging agent or enter into (or permit any
Manager to enter into) any submanagement agreement (other than the Subcontract
for Management Services dated as of the date hereof between the current Manager
and Claydesta, L.P., or as otherwise permitted under Section 5.12.2
below), it being acknowledged that any new submanaging agent must be acceptable
to Lender (in Lender’s reasonable discretion) and the terms and conditions of
any new submanagement agreement must be reasonably satisfactory to Lender and
may, if required by Lender, be conditioned on Borrower delivering a Rating
Comfort Letter as to such new submanaging agent and new submanagement agreement
and a subordination and consent executed by the submanaging agent in the form
of that delivered by the current submanaging agent on or about the date hereof
or such other form as shall be reasonably acceptable to Lender.

5.12.2     Termination
of Manager. If (i) an Event of Default shall
be continuing, or (ii) Manager is in default under the Management
Agreement, or (iii) upon the gross negligence, malfeasance or willful
misconduct of the Manager, Borrower shall, at the request of Lender, terminate
the Management Agreement and replace Manager with a replacement

 41
 

 

Manager acceptable to Lender (in Lender’s discretion), on terms and
conditions satisfactory to Lender, which acceptance may, if required by Lender,
be conditioned upon Borrower delivering a Rating Comfort Letter as to such
successor Manager and the successor Management Agreement. Additionally, and
without limitation of any of the foregoing, if, as of any two (2) consecutive
Calculation Dates, Borrower fails to maintain a Debt Service Coverage Ratio of
at least 1.01:1.00, then Borrower shall, if requested by Lender, terminate (or
cause the termination of) any submanagement agreement and, in such event, shall
either (A) cause the Property to be managed directly by the then-existing
prime Manager under the then-existing prime Management Agreement then in place
between such Manager and Borrower in accordance with this Agreement (without
any replacement submanaging agent being utilized to manage the Property), or (B) replace
(or cause the replacement of) the submanaging agent thereunder with a
replacement submanaging agent acceptable to Lender (in Lender’s reasonable
discretion), on terms and conditions satisfactory to Lender, which acceptance
may, if required by Lender, be conditioned upon Borrower delivering a Rating
Comfort Letter as to such successor submanaging agent and the successor
submanagement agreement (it being acknowledged that in such event Borrower
shall be required to take one of the actions described in the foregoing clauses
(A) or (B) but that it shall be Borrower’s option which of such
actions Borrower shall take). If, at any time, Borrower elects, pursuant to
clause (A) of the immediately preceding sentence, to cause the Property to
be managed directly by the then-existing prime Manager without any replacement
submanaging agent, then, if Borrower continues to fail to maintain a Debt
Service Coverage Ratio of at least 1.01:1.00 as of the next Calculation Date
(or if Borrower does achieve a Debt Service Coverage Ratio of at least
1.01:1.00 as of the next Calculation Date but thereafter, as of any two (2) consecutive
Calculation Dates, Borrower fails to maintain a Debt Service Coverage Ratio of
at least 1.01:1.00), then Borrower shall, if requested by Lender, take one of
the following two actions: (I) terminate the Management Agreement and
replace Manager with a replacement Manager acceptable to Lender (in Lender’s
discretion), on terms and conditions satisfactory to Lender, which acceptance
may, if required by Lender, be conditioned upon Borrower delivering a Rating
Comfort Letter as to such successor Manager and the successor Management
Agreement, or (II) engage (or cause the engagement of) a new submanaging
agent acceptable to Lender (in Lender’s reasonable discretion), on terms and
conditions satisfactory to Lender, which acceptance may, if required by Lender,
be conditioned upon Borrower delivering a Rating Comfort Letter as to such new
submanaging agent and the new submanagement agreement (it being acknowledged
that in such event Borrower shall be required to take one of the actions
described in the foregoing clauses (I) or (II) but that it shall be
Borrower’s option which of such actions Borrower shall take). All calculations
of the Debt Service Coverage Ratio for purposes of this Section 5.12.2
shall (a) be subject to verification by Lender, and (b) use, as the
adjustment for management fees made in calculating Net Operating Income in
connection therewith, the greater of actual combined management fees and asset
management fees paid under the Management Agreement (including any
submanagement agreement) or two percent (2%) of gross revenues (instead of
three percent (3%) as otherwise provided in the definition of Net Operating
Income hereunder). In any such event described in this Section 5.12.2,
Borrower’s failure to appoint an acceptable replacement Manager (or, as the
case may be, submanaging agent) within thirty (30) days after Lender’s request
of Borrower to terminate the Management Agreement (or, as the case may be,
submanagement agreement) shall constitute an immediate Event of Default. Borrower
may from time to time appoint a successor Manager to manage the Property,
provided that such successor Manager and corresponding

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replacement Management Agreement shall be approved in writing by Lender
(in Lender’s discretion), which approval may, if required by Lender, be
conditioned upon Borrower delivering a Rating Comfort Letter as to such
successor manager and Management Agreement.

5.13        Special
Purpose Bankruptcy Remote Entity. Borrower shall
at all times be a Special Purpose Bankruptcy Remote Entity. Borrower shall not
directly or indirectly make any change, amendment or modification to its
organizational documents, or otherwise take any action which could result in
Borrower not being a Special Purpose Bankruptcy Remote Entity. A “Special Purpose Bankruptcy Remote
Entity” shall have the meaning set forth on Schedule 5
hereto.

5.14        Assumption
in Non-Consolidation Opinion. Borrower shall
conduct its business so that the assumptions (with respect to each Person) made
in that certain substantive non-consolidation opinion letter dated the date
hereof delivered by Borrower’s counsel in connection with the Loan, shall be
true and correct in all respects.

5.15        Change
in Business or Operation of Property. Borrower
shall not purchase or own any real property other than the Property and shall
not enter into any line of business other than the ownership and operation of
the Property, or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in activities
other than the continuance of its present business or otherwise cease to
operate the Property as an office building property or terminate such business
for any reason whatsoever (other than temporary cessation in connection with
renovations to the Property).

5.16        Debt
Cancellation. Borrower shall not cancel or otherwise forgive or release any
claim or debt (other than termination of Leases in accordance herewith) owed to
Borrower by any Person, except for adequate consideration and in the ordinary course
of Borrower’s business.

5.17        Affiliate
Transactions. Other than the Management Agreement, Borrower shall not enter
into, or be a party to, any transaction with an Affiliate of Borrower or any of
the members of Borrower except in the ordinary course of business and on terms
which are fully disclosed to Lender in advance and are no less favorable to
Borrower or such Affiliate than would be obtained in a comparable arm’s-length
transaction with an unrelated third party. With respect to the foregoing, Lender
hereby acknowledges that it has approved the Management Agreement in the form
delivered to Lender by Borrower on or before the date hereof.

5.18        Zoning. Borrower shall not initiate or
consent to any zoning reclassification of any portion of the Property or seek
any variance under any existing zoning ordinance or use or permit the use of
any portion of the Property in any manner that could result in such use
becoming a non-conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation, without the prior consent of
Lender.

5.19        No
Joint Assessment. Borrower shall not suffer, permit or initiate the joint
assessment of the Property (i) with any other real property constituting a
tax lot separate from the Property, and (ii) with any portion of the
Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Property.

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5.20        Principal
Place of Business. Borrower shall not change its principal place of business or
chief executive office without first giving Lender thirty (30) days’ prior
notice.

5.21        Change
of Name, Identity or Structure. Borrower shall not change its name,
identity (including its trade name or names) or Borrower’s corporate,
partnership or other structure without notifying Lender of such change in
writing at least thirty (30) days prior to the effective date of such change
and, in the case of a change in Borrower’s structure, without first obtaining
the prior written consent of Lender. Borrower shall execute and deliver to
Lender, prior to or contemporaneously with the effective date of any such
change, any financing statement or financing statement change required by
Lender to establish or maintain the validity, perfection and priority of the
security interest granted herein. At the request of Lender, Borrower shall
execute a certificate in form satisfactory to Lender listing the trade names
under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect
to the Property.

5.22        Indebtedness. Borrower shall not directly or
indirectly create, incur or assume any indebtedness other than the Debt and
unsecured trade payables incurred in the ordinary course of business relating
to the ownership and operation of the Property which do not exceed, at any
time, a maximum amount of two percent (2%) of the original amount of the Principal
and are paid within sixty (60) days of the date incurred or invoiced
(collectively, “Permitted
Indebtedness”); provided, however, such two percent (2%)
limitation shall not apply to (i) any asset management or property
management fee payable pursuant to the terms of the Management Agreement or (ii) any
amounts that are payable out of the Capital Reserve Subaccount, the Rollover
Reserve Subaccount or any other reserves established under this Agreement. Notwithstanding
the foregoing, with respect to the 60-day period set forth above,
Borrower may, after prior notice to Lender, at its own expense, contest by
appropriate legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity of any such Permitted Indebtedness
(during which time such 60-day period shall be tolled), provided that if
Borrower desires to withhold payment of such Permitted Indebtedness during the
pendency of the contest, (i) no Event of Default has occurred and is
continuing, (ii) no part of or interest in the Property will be in danger
of being sold, forfeited, terminated, canceled or lost, (iii) Borrower
shall have furnished such security as may be required in the proceeding, or as
may be reasonably requested by Lender, to insure the payment of any such
Permitted Indebtedness, together with all interest and penalties thereon, which
security shall not be less than one hundred twenty five percent (125%) of the
Permitted Indebtedness being contested, and (iv) Borrower shall promptly
upon final determination thereof pay the amount of such Permitted Indebtedness,
together with all costs, interest and penalties and Borrower shall be permitted
to use such security to make such payment.

5.23        Licenses. Borrower shall not Transfer any
License required for the operation of the Property (other than in connection
with a Lender-approved Transfer and Assumption pursuant to Section 5.26.2
below).

5.24        Compliance
with Restrictive Covenants, Etc. Borrower will not enter into,
modify, waive in any material respect or release any Easements, restrictive
covenants or other

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Permitted
Encumbrances, or suffer, consent to or permit the foregoing, without Lender’s
prior written consent, which consent may be granted or denied in Lender’s sole
discretion.

5.25        ERISA.

5.25.1      Borrower
shall not engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Lender of any of its rights
under the Note, this Agreement or the other Loan Documents) to be a non-exempt
(under a statutory or administrative class exemption) prohibited transaction
under ERISA.

5.25.2      Borrower
shall not maintain, sponsor, contribute to or become obligated to contribute
to, or suffer or permit any ERISA Affiliate of Borrower to, maintain, sponsor,
contribute to or become obligated to contribute to, any Plan or any Welfare
Plan or permit the assets of Borrower to become “plan assets,” whether by
operation of law or under regulations promulgated under ERISA.

5.25.3      Borrower
shall deliver to Lender such certifications or other evidence from time to time
throughout the Term, as requested by Lender in its sole discretion, that (A) Borrower
is not and does not maintain 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(3) of ERISA; (B) Borrower is not
subject to state statutes regulating investments and fiduciary obligations with
respect to governmental plans; and (C) one or more of the following circumstances
is true:

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

(2)           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

(3)           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).

5.26        Transfers.

5.26.1     Generally. Borrower shall not
directly or indirectly make, suffer or permit the occurrence of (a) any
Transfer other than a Permitted Transfer, or (b) any event, or series of
events, that results in the individuals who, as of the date of this Agreement,
are members of the Board of Directors of the Behringer Harvard REIT (the “Incumbent
Board”) ceasing
for any reason to constitute at least a majority of such Board of Directors,
provided, however, that if the election, or nomination for election by the
Behringer Harvard REIT’s shareholders, of any new director was approved by a
vote of at least a majority of the Incumbent Board, such new director shall,
for purposes of this Agreement, be considered as a member of the Incumbent
Board; provided further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened “Election Contest” (as described in Rule 14a-11
promulgated under the

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Securities Exchange Act of 1934) or other actual
or threatened solicitation of proxies or consents by or on behalf of a person
other than the Board (a “Proxy Contest”) including by reason of any agreement
intended to avoid or settle any Election Contect or Proxy Contest.

5.26.2     Transfer and Assumption.

(a)           Subject to obtaining
Lender’s prior written consent, which may be withheld in Lender’s reasonable
and absolute discretion, and subject to the terms and satisfaction of all of
the conditions precedent set forth in this Section 5.26.2, Borrower
shall have the right to Transfer the Property to another party (the “Transferee Borrower”) and
have the Transferee Borrower assume all of Borrower’s obligations under the
Loan Documents, and have replacement guarantors and indemnitors assume all of
the obligations of the indemnitors and guarantors of the Loan Documents
(collectively, a “Transfer
and Assumption”). Borrower may make a written application to
Lender for Lender’s consent to the Transfer and Assumption, subject to the
conditions set forth in paragraphs (b) and (c) of this Section 5.26.2.
Together with such written application, Borrower will pay to Lender the
reasonable review fee then required by Lender. Borrower also shall pay on
demand all of the reasonable costs and expenses incurred by Lender, including
reasonable attorneys’ fees and expenses, and including the fees and expenses of
Rating Agencies and other outside entities, in connection with considering any
proposed Transfer and Assumption, whether or not the same is permitted or
occurs.

(b)           Lender’s consent,
which may be withheld in Lender’s reasonable discretion, to a Transfer and
Assumption shall be subject to the following conditions:

(1)           No Event of Default has occurred and
is continuing;

(2)           Borrower has submitted to Lender
true, correct and complete copies of any and all information and documents of
any kind requested by Lender concerning the Property, Transferee Borrower,
replacement guarantors and indemnitors and Borrower;

(3)           Evidence satisfactory to Lender has
been provided showing that the Transferee Borrower and such of its Affiliates
as shall be designated by Lender comply and will comply with Section 5.13
hereof, as those provisions may be modified by Lender taking into account the
ownership structure of Transferee Borrower and its Affiliates;

(4)           If the Loan, by itself or together
with other loans, has been the subject of a Secondary Market Transaction, then
Lender shall have received a Rating Comfort Letter from the applicable Rating
Agencies;

(5)           If the Loan has not been the subject of
a Secondary Market Transaction, then Lender shall have determined that no
rating for any securities that would be issued in connection with such
securitization will be diminished, qualified, or withheld by reason of the
Transfer and Assumption;

(6)           Borrower shall have paid all of
Lender’s reasonable costs and expenses in connection with considering the
Transfer and Assumption, and shall have paid the amount

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requested by
Lender as a deposit against Lender’s costs and expenses in connection with the
effecting the Transfer and Assumption;

(7)           Borrower, the Transferee Borrower,
and the replacement guarantors and indemnitors shall have indicated in writing
in form and substance reasonably satisfactory to Lender their readiness and
ability to satisfy the conditions set forth in subsection (c) below;

(8)           The identity, experience, and
financial condition of the Transferee Borrower and the replacement guarantors
and indemnitors shall be satisfactory to Lender; and

(9)           The proposed property manager and
proposed Management Agreement shall be satisfactory to Lender and the
applicable Rating Agencies.

(c)           If Lender consents
to the Transfer and Assumption, the Transferee Borrower and/or Borrower as the
case may be, shall immediately deliver the following to Lender:

(1)           Borrower shall deliver to Lender an
assumption fee in the amount of either (i) in the case of the first such
Transfer and Assumption, one quarter of one percent (0.25%) of the then unpaid
Principal, or (ii) in the case of any subsequent Transfer and Assumption,
one half of one percent (0.50%) of the then unpaid Principal;

(2)           Borrower, Transferee Borrower and the
original and replacement guarantors and indemnitors shall execute and deliver
to Lender any and all documents required by Lender, in form and substance
required by Lender, in Lender’s sole discretion;

(3)           Counsel to the Transferee Borrower
and replacement guarantors and indemnitors shall deliver to Lender opinions in
form and substance satisfactory to Lender as to such matters as Lender shall
require, which may include opinions as to substantially the same matters and
were required in connection with the origination of the Loan (including a new
substantive non-consolidation opinion with respect to the Transferee Borrower);

(4)           Borrower shall cause to be delivered
to Lender, an endorsement (relating to the change in the identity of the vestee
and execution and delivery of the Transfer and Assumption documents) to the
Title Insurance Policy in form and substance acceptable to Lender, in Lender’s
reasonable discretion (the “Endorsement”); and

(5)           Borrower shall deliver to Lender a
payment in the amount of all remaining unpaid costs incurred by Lender in
connection with the Transfer and Assumption, including but not limited to,
Lender’s reasonable attorneys fees and expenses, all recording fees, and all
fees payable to the title company for the delivery to Lender of the
Endorsement.

(d)           Upon
the closing of a Transfer and Assumption, Lender shall release Borrower and
Guarantor from all obligations under the Loan Documents arising prior to and
after the date of the Transfer and Assumption (but only to the extent that such
obligations of Borrower and Guarantor are expressly assumed by the Transferee
Borrower or replacement guarantor, as the case may be, in connection with the
Transfer and Assumption).

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5.27        Liens. Without Lender’s prior written
consent, Borrower shall not create, incur, assume, permit or suffer to exist
any Lien on all or any portion of the Property or any direct or indirect legal
or beneficial ownership interest in Borrower, except Liens in favor of Lender
and Permitted Encumbrances, unless such Lien is bonded or discharged within
thirty (30) days after Borrower first receives notice of such Lien (or such
longer period as is permitted under this Agreement in the event and to the
extent the Lien is of a nature which may be contested by Borrower under the
provisions of this Agreement and Borrower is in fact contesting such Lien in
accordance with the express provisions and conditions set forth in this
Agreement). Notwithstanding the foregoing, pledges of any non-controlling
direct or indirect legal or beneficial ownership interest in Harvard REIT
Operating Partnership shall not constitute Liens prohibited hereunder if the
foreclosure thereon would constitute a “Permitted Transfer” (subject to any
applicable notice and other requirements set forth in the defined term “Permitted
Transfer” (if applicable)).

5.28        Dissolution. Borrower shall not (i) engage
in any dissolution, liquidation or consolidation or merger with or into any
other business entity, (ii) engage in any business activity not related to
the ownership and operation of the Property or (iii) transfer, lease or
sell, in one transaction or any combination of transactions, all or
substantially all of the property or assets of Borrower except to the extent
expressly permitted by the Loan Documents.

5.29        Expenses.
Borrower shall reimburse Lender upon receipt of notice for all reasonable
out-of-pocket costs and expenses (including reasonable attorneys’ fees and
disbursements) incurred by Lender or Servicer in connection with the Loan,
including (i) the preparation, negotiation, execution and delivery of the
Loan Documents and the consummation of the transactions contemplated thereby
and all the costs of furnishing all opinions by counsel for Borrower; (ii) Borrower’s
and Lender’s ongoing performance under and compliance with the Loan Documents,
including confirming compliance with environmental and insurance requirements; (iii) the
negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications of or under any Loan
Document and any other documents or matters requested by Lender; (iv) filing
and recording of any Loan Documents; (v) title insurance, surveys,
inspections and appraisals; (vi) the creation, perfection or protection of
Lender’s Liens in the Property and the Cash Management Accounts (including fees
and expenses for title and lien searches, intangibles taxes, personal property
taxes, mortgage recording taxes, due diligence expenses, travel expenses,
accounting firm fees, costs of appraisals, environmental reports and Lender’s
Consultant, surveys and engineering reports); (vii) enforcing or
preserving any rights in response to third party claims or the prosecuting or
defending of any action or proceeding or other litigation, in each case
against, under or affecting Borrower, the Loan Documents, the Property, or any
other security given for the Loan; (viii) fees charged by Rating Agencies
in connection with any modification of the Loan requested by Borrower and (ix) enforcing
any obligations of or collecting any payments due from Borrower under any Loan
Document or with respect to the Property or in connection with any refinancing
or restructuring of the Loan in the nature of a “work-out”, or any insolvency
or bankruptcy proceedings. Any costs and expenses due and payable by Borrower
hereunder which are not paid by Borrower within ten (10) days after demand
may be paid from any amounts in the Deposit Account, with notice thereof to
Borrower. The obligations and liabilities of Borrower under this Section 5.29
shall survive the Term and the exercise by Lender of any of its rights or

 48
 

 

remedies under
the Loan Documents, including the acquisition of the Property by foreclosure or
a conveyance in lieu of foreclosure.

5.30        Indemnity.
Borrower shall defend, indemnify and hold harmless Lender and each of its
Affiliates and their respective successors and assigns, including the
directors, officers, partners, members, shareholders, participants, employees,
professionals and agents of any of the foregoing (including any Servicer) and
each other Person, if any, who Controls Lender, its Affiliates or any of the
foregoing (each, an “Indemnified
Party”), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for an Indemnified Party in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto, court
costs and costs of appeal at all appellate levels, investigation and laboratory
fees, consultant fees and litigation expenses), that may be imposed on,
incurred by, or asserted against any Indemnified Party (collectively, the “Indemnified Liabilities”)
in any manner, relating to or arising out of or by reason of the Loan,
including: (i) any breach by Borrower of its obligations under, or any
misrepresentation by Borrower contained in, any Loan Document; (ii) the
use or intended use of the proceeds of the Loan; (iii) any information
provided by Borrower; (iv) ownership of the Security Instrument, the
Property or any interest therein, or receipt of any Rents; (v) any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (vi) any
use, nonuse or condition in, on or about the Property or on adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(vii) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property; (viii) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance on, from or affecting
the Property; (ix) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to such Hazardous
Substance; (x) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substance; (xi) any violation of
the Environmental Laws which is based upon or in any way related to such
Hazardous Substance, including the costs and expenses of any Remedial Work;
(xii) any failure of the Property to comply with any Legal Requirement; (xiii)
any claim by brokers, finders or similar persons claiming to be entitled to a
commission in connection with any Lease or other transaction involving the
Property or any part thereof, or any liability asserted against Lender with
respect thereto; and (xiv) the claims of any lessee of any portion of the
Property or any Person acting through or under any lessee or otherwise arising
under or as a consequence of any Lease; provided, however, that Borrower shall
not have any obligation to any Indemnified Party hereunder to the extent that
it is finally judicially determined that such Indemnified Liabilities arise
from the gross negligence, illegal acts, fraud or willful misconduct of such
Indemnified Party. Any amounts payable to any Indemnified Party by reason of
the application of this paragraph shall be payable within 10 days after demand
and shall bear interest at the Default Rate from the date due until paid. The
obligations and liabilities of Borrower under this Section 5.30
shall survive the Term (with respect to any matter occurring or in existence
prior to the end of the Term, and thereafter with respect to third party
claims, suits and actions) and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.

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5.31        Patriot Act Compliance.

(a)           Borrower will use
its good faith and commercially reasonable efforts to comply with the Patriot
Act (as defined below) and all applicable requirements of governmental
authorities having jurisdiction over Borrower and the Property, including those
relating to money laundering and terrorism. Lender shall have the right to
audit Borrower’s compliance with the Patriot Act and all applicable
requirements of governmental authorities having jurisdiction over Borrower and
the Property, including those relating to money laundering and terrorism. In
the event that Borrower fails to comply with the Patriot Act or any such
requirements of governmental authorities, then Lender may, at its option, cause
Borrower to comply therewith and any and all reasonable costs and expenses
incurred by Lender in connection therewith shall be secured by the Security
Instrument and the other Loan Documents and shall be immediately due and payable.
For purposes hereof, the term “Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended
from time to time, and corresponding provisions of future laws.

(b)           Neither Borrower nor
any member of Borrower nor any partner of any such member nor any owner of a
direct or indirect interest in Borrower (i) is listed on any Government
Lists (as defined below), (ii) is a person who has been determined by
competent authority to be subject to the prohibitions contained in Presidential
Executive Order No. 13224 (Sept. 23, 2001) or any other similar
prohibitions contained in the rules and regulations of OFAC (as defined
below) or in any enabling legislation or other Presidential Executive Orders in
respect thereof, (iii) has been previously indicted for or convicted of
any felony involving a crime or crimes of moral turpitude or for any Patriot
Act Offense (as defined below), or (iv) is currently under investigation
by any governmental authority for alleged criminal activity. For purposes
hereof, the term “Patriot Act Offense” means any violation of
the criminal laws of the United States of America or of any of the several
states, or that would be a criminal violation if committed within the
jurisdiction of the United States of America or any of the several states,
relating to terrorism or the laundering of monetary instruments, including any
offense under (1) the criminal laws against terrorism; (2) the
criminal laws against money laundering, (3) the Bank Secrecy Act, as
amended, (4) the Money Laundering Control Act of 1986, as amended, or the (5) Patriot
Act. “Patriot Act Offense”
also includes the crimes of conspiracy to commit, or aiding and abetting
another to commit, a Patriot Act Offense. For purposes hereof, the term “Government Lists” means (I) the
Specially Designated Nationals and Blocked Persons Lists maintained by Office
of Foreign Assets Control (“OFAC”), (II) any
other list of terrorists, terrorist organizations or narcotics traffickers
maintained pursuant to any of the Rules and Regulations of OFAC that
Lender notified Borrower in writing is now included in “Governmental Lists”, or
(III) any similar lists maintained by the United States Department of
State, the United States Department of Commerce or any other government
authority or pursuant to any Executive Order of the President of the United
States of America that Lender notified Borrower in writing is now included in “Governmental
Lists”.

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6.                                      NOTICES AND REPORTING

6.1          Notices.
All notices, consents, approvals and requests required or permitted hereunder
or under any other Loan Document (a “Notice”) shall be given in writing and shall
be effective for all purposes if either hand delivered with receipt
acknowledged, or by a nationally recognized overnight delivery service (such as
Federal Express), or by certified or registered United States mail, return
receipt requested, postage prepaid, in each case addressed as follows (or to
such other address or Person as a party shall designate from time to time by
notice to the other party):  If to
Lender:  Lehman Brothers Bank, FSB, 399
Park Avenue, 8th Floor, New York, New York 10022,
Attention:  John Herman, with a copy to:
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New
York  10038, Attention:  William Campbell, Esq.; if to Borrower:
c/o HPT Management Services LP, 15601 Dallas Parkway, Suite 600, Addison,
Texas 75001, Attention: Chief Financial Officer. A notice shall be deemed to
have been given:  in the case of hand
delivery, at the time of delivery; or in the case of registered or certified
mail, when delivered or the first attempted delivery on a Business Day; or in
the case of overnight delivery, upon the first attempted delivery on a Business
Day; or in the case of facsimile, upon the confirmation of such facsimile
transmission.

6.2          Borrower
Notices and Deliveries. Borrower shall (a) give
prompt written notice to Lender of: (i) any litigation, governmental
proceedings or claims or investigations pending or threatened against Borrower
or the Property which might materially adversely affect Borrower’s or the
Property’s condition (financial or otherwise) or business; (ii) any
material adverse change in Borrower’s or the Property’s condition, financial or
otherwise, or of the occurrence of any Default or Event of Default of which
Borrower has knowledge; and (b) furnish and provide to Lender all
instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other insurance
reports and agreements, reasonably requested, from time to time, by Lender
within the possession or reasonable control of Borrower. In addition, after
request by Lender (but no more frequently than twice in any year), (x) Borrower
shall furnish to Lender within ten days, a certificate addressed to Lender, its
successors and assigns reaffirming (to the best of its knowledge) all
representations and warranties of Borrower set forth in the Loan Documents as
of the date requested by Lender or, to the extent of any changes to any such
representations and warranties, so stating such changes, and (y) Borrower
shall use commercially reasonable efforts to furnish to Lender within 30 days,
tenant estoppel certificates addressed to Lender, its successors and assigns
from each tenant at each Property in form and substance reasonably satisfactory
to Lender.

6.3          Financial Reporting.

6.3.1       Bookkeeping.
Borrower shall keep on a calendar year basis, in accordance with GAAP (or
federal income tax basis of accounting, consistently applied), proper and
accurate books, records and accounts reflecting all of the financial affairs of
Borrower and all items of income and expense and any services, Equipment or
furnishings provided in connection with the operation of the Property, whether
such income or expense is realized by Borrower, Manager or any Affiliate of
Borrower. Lender shall have the right from time to time during normal business
hours upon reasonable notice to examine such books, records and accounts
relating to the Property at the office of Manager or other Person maintaining
them, and

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to make such copies or extracts thereof as Lender shall desire. After
an Event of Default, Borrower shall pay any costs incurred by Lender to examine
such books, records and accounts, as Lender shall determine to be necessary or
appropriate in the protection of Lender’s interest.

6.3.2       Annual
Reports. Borrower shall furnish to Lender
annually, within 120 days after each calendar year, a complete copy of Borrower’s
annual financial statements prepared in accordance with GAAP (or federal income
tax basis of accounting, consistently applied) and containing balance sheets
and statements of profit and loss for Borrower and the Property in such detail
as Lender may request. Each of such financial statements (x) shall be in
form and substance satisfactory to Lender, (y) shall set forth the
financial condition and the income and expenses for the Property for the
immediately preceding calendar year, including statements of annual Net
Operating Income as well as (1) a list of tenants, if any, occupying more
than ten percent (10%) of the rentable space of the Property, (2) a
breakdown showing (a) the year in which each Lease then in effect expires,
(b) the percentage of rentable space covered by such Lease, (c) the
percentage of base rent with respect to which Leases shall expire in each such
year, expressed both on a per year and a cumulative basis and (z) shall be
accompanied by an Officer’s Certificate certifying (1) that such statement
is true, correct, complete and accurate and presents fairly the financial
condition of the Property and has been prepared in accordance with GAAP (or
federal income tax basis of accounting, consistently applied) and (2) whether
there exists a Default or Event of Default, and if so, the nature thereof, the
period of time it has existed and the action then being taken to remedy it.

6.3.3       Monthly/Quarterly
Reports. Borrower shall furnish to Lender, within
thirty (30) days after the end of each calendar month during the period prior
to a securitization of the Loan and thereafter within thirty (30) days after
the end of each calendar quarter, the following items: (i) monthly or
quarterly (as applicable) and year-to-date operating statements, noting Net
Operating Income and other information necessary and sufficient under GAAP (or
federal income tax basis of accounting, consistently applied) to fairly
represent the financial position and results of operation of the Property during
such calendar month or calendar quarter (as applicable), all in form
satisfactory to Lender; (ii) a balance sheet for such calendar month or
calendar quarter (as applicable); (iii) a comparison of the budgeted
income and expenses and the actual income and expenses for each month or
quarter (as applicable) and year-to-date for the Property, together with a
detailed explanation of any variances of ten percent (10%) or more between
budgeted and actual amounts for such period and year-to-date; (iv) a
statement of the actual Capital Expenses made by Borrower during each calendar
quarter as of the last day of such calendar quarter; (v) intentionally
omitted; (vi) an aged receivables report and (vii) rent rolls
identifying the leased premises, names of all tenants, units leased, monthly
rental and all other charges payable under each Lease, date to which paid, term
of Lease, date of occupancy, date of expiration, material special provisions,
concessions or inducements granted to tenants, and a year-by-year schedule
showing by percentage the rentable area of the Improvements and the total base
rent attributable to Leases expiring each year) and a delinquency report for
the Property. Each such statement shall be accompanied by an Officer’s
Certificate certifying that to the best of such officer’s knowledge, (1) that
such items are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of Borrower and the Property
in accordance with GAAP (or federal income tax basis of accounting,
consistently applied) (subject to normal year-end adjustments) and (2) whether
there exists a Default or Event

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of Default, and if so, the nature thereof, the period of time it has
existed and the action then being taken to remedy it.

6.3.4       Other
Reports. Borrower shall furnish to Lender, within
ten (10) Business Days after request, such further detailed information
with respect to the operation of the Property and the financial affairs of
Borrower or Manager as may be reasonably requested by Lender or any applicable
Rating Agency.

6.3.5       Annual
Budget. Borrower shall prepare and submit (or
shall cause Manager to prepare and submit) to Lender within thirty (30) days
after a Cash Trap Period commences and by December 15th of each year thereafter
during the Term until such Cash Trap Period has ended, for approval by Lender,
which approval shall not be unreasonably withheld or delayed, a proposed pro
forma budget for the Property for the succeeding calendar year (the “Annual Budget”, and each Annual
Budget approved by Lender is referred to herein as the “Approved Annual Budget”)), and, promptly after preparation
thereof, any revisions to such Annual Budget. The Annual Budget shall consist
of (i) an operating expense budget showing, on a month-by-month basis, in
reasonable detail, each line item of the Borrower’s anticipated operating
income and operating expenses (on a cash and accrual basis), including amounts
required to establish, maintain and/or increase any monthly payments required
hereunder (and once such Annual Budget has been approved by Lender, such
operating expense budget shall be referred to herein as the “Approved Operating Budget”), and (ii) a
Capital Expense budget showing, on a month-by-month basis, in reasonable
detail, each line item of anticipated Capital Expenses (and once such Annual
Budget has been approved by Lender, such Capital Expense budget shall be
referred to herein as the “Approved
Capital Budget”). Until such time that any Annual Budget has
been approved by Lender, the prior Approved Annual Budget shall apply for all
purposes hereunder (with such adjustments as reasonably determined by Lender
(including increases for any non-discretionary expenses)).

7.                                      INSURANCE; CASUALTY; AND CONDEMNATION

7.1          Insurance.

7.1.1       Coverage.
Borrower, at its sole cost, for the mutual benefit of Borrower and Lender,
shall obtain and maintain during the Term the following policies of insurance:

(a)           Property insurance
insuring against loss or damage customarily included under so called “all risk”
or “special form” policies including fire, lightning, vandalism, and malicious
mischief, boiler and machinery and, if required by Lender in accordance with
subsections (b) or (i) below, flood and/or earthquake coverage, and
subject to subsection (j) below, coverage for damage or destruction caused
by the acts of “Terrorists” (or such policies shall have no exclusion from
coverage with respect thereto) and such other insurable hazards as, under good
insurance practices, from time to time are insured against for other property
and buildings similar to the premises in nature, use, location, height, and
type of construction. Such insurance policy shall also insure for ordinance of
law coverage, costs of demolition and increased cost of construction in amounts
satisfactory to Lender. Each such insurance policy shall (i) be in an
amount equal to one hundred percent (100%) of the then replacement cost of the
Improvements without deduction for physical depreciation and in any event not
less than such

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amount as is
necessary so that the insurer would not deem Borrower a co-insurer under such
policies, (ii) have deductibles no greater than $200,000 per occurrence, (iii) be
paid annually in advance and (iv) be on a replacement cost basis and
contain either no coinsurance or, if coinsurance, an agreed amount endorsement,
and shall cover, without limitation, all tenant improvements and betterments
that Borrower is required to insure on a replacement cost basis. If the
insurance required under this subparagraph is not obtained by blanket insurance
policies, the insurance policy shall be endorsed to also provide guaranteed
building replacement cost to the Improvements and such tenant improvements in
an amount to be subject to the consent of Lender, which consent shall not be
unreasonably withheld. Lender shall be named Mortgagee and Loss Payee on a
Standard Mortgagee Endorsement.

(b)           Flood insurance if
any part of the Improvements are located in an area now or hereafter designated
by the Federal Emergency Management Agency as a Zone “A” & “V” Special
Hazard Area, or such other Special Hazard Area if Lender so requires in its
sole discretion. Such policy shall (i) be in an amount equal to (A) one
hundred percent (100%) of the full replacement cost of the Improvements on the
Property (without any deduction for depreciation) or (B) such other amount
as is agreed to by Lender in writing, and (ii) have a maximum permissible
deductible of $3,000.

(c)           Public liability
insurance, including (i) “Commercial General Liability Insurance”, (ii) “Owned”,
“Hired” and “Non Owned Auto Liability”; and (iii) umbrella liability
coverage for personal injury, bodily injury, death, accident and property
damage, such insurance providing in combination no less than containing minimum
limits per occurrence of $1,000,000 and $2,000,000 in the aggregate for any
policy year with no deductible or self insured retention; together with at
least $25,000,000 excess and/or umbrella liability insurance for any and all
claims with no deductible. The policies described in this subsection shall also
include coverage for elevators, escalators, independent contractors, “Contractual
Liability” (covering, to the maximum extent permitted by law, Borrower’s
obligation to indemnify Lender as required under this Agreement and the other
Loan Documents), “Products” and “Completed Operations Liability” coverage.

(d)           Rental loss and/or
business interruption insurance (i) with Lender being named as “Lender
Loss Payee”, (ii) in an amount equal to 100% of the projected Rents from the
Property during the period of restoration; and (iii) containing an
extended period of indemnity endorsement which provides that after the physical
loss to the 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 eighteen (18) months from the date that the
Property is repaired or replaced and operations are resumed, whichever first
occurs, and notwithstanding that the policy may expire prior to the end of such
period. The amount of such insurance shall be increased from time to time
during the Term as and when the estimated or actual Rents increase.

(e)           Comprehensive boiler
and machinery insurance covering all mechanical and electrical equipment
against physical damage, rent loss and improvements loss and covering, without
limitation, all tenant improvements and betterments that Borrower is required
to insure pursuant to the Leases on a replacement cost basis and in an amount
equal to the greater of (i)

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$2,000,000 and
(ii) one hundred percent (100%) of the full replacement cost of the
Improvements on the Property (without any deduction for depreciation).

(f)            Worker’s
compensation and disability insurance with respect to any employees of Borrower,
as required by any Legal Requirement.

(g)           During any period of
repair or restoration, builder’s “all-risk” insurance on the so called
completed value basis in an amount equal to not less than the full insurable
value of the Property, against such risks (including fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may request, in
form and substance acceptable to Lender.

(h)           Coverage to
compensate for ordinance of law, the cost of demolition and the increased cost
of construction in an amount satisfactory to Lender.

(i)            Such other
insurance (including environmental liability insurance, earthquake (but only if
a future seismic study indicates a PML in excess of twenty percent (20%))
insurance, mine subsidence insurance and windstorm insurance) as may from time
to time be reasonably required by Lender in order to protect its interests.

(j)            Notwithstanding
anything in subsection (a) above to the contrary, Borrower shall be
required to obtain and maintain coverage in its property insurance Policy (or
by a separate Policy) against loss or damage by terrorist acts in an amount
equal to one hundred percent (100%) of the “Full Replacement Cost” of the
Property; provided that such coverage is available. In the event that such
coverage with respect to terrorist acts is not included as part of the “all
risk” property policy required by subsection (a) above, Borrower shall,
nevertheless be required to obtain coverage for terrorism (as stand alone
coverage) in an amount equal to one hundred percent (100%) of the “Full
Replacement Cost” of the Property; provided that such coverage is available. Notwithstanding
the foregoing, with respect to any such stand-alone policy covering terrorist
acts, Borrower shall not be required to pay any Insurance Premiums solely with
respect to such terrorism coverage in excess of the Terrorism Premium Cap
(hereinafter defined); provided that if the Insurance Premiums payable with
respect to such terrorism coverage exceeds the Terrorism Premium Cap, Lender
may, at its option (1) purchase such stand-alone terrorism Policy, with
Borrower paying such portion of the Insurance Premiums with respect thereto
equal to the Terrorism Premium Cap and the Lender paying such portion of the
Insurance Premiums in excess of the Terrorism Premium Cap or (2) modify
the deductible amounts, policy limits and other required policy terms to reduce
the Insurance Premiums payable with respect to such stand-alone terrorism
Policy to the Terrorism Premium Cap. As used herein, (i) “Terrorism
Premium Cap” means an amount equal to one hundred percent (100%) of the
aggregate Insurance Premiums payable with respect to all the insurance coverage
under Section 7.1.1(a) above for the last policy year in which
coverage for terrorism was included as part of the “all risk” property policy
required by subsection (a) above, adjusted annually by a percentage equal
to the increase in the Consumer Price Index (hereinafter defined) and (ii) “Consumer Price Index” means
the Consumer Price Index for All Urban Consumers published by the Bureau of
Labor Statistics of the United States Department of Labor, New York
Metropolitan Statistical Area, All Items (1982-84 = 100), or any
successor index thereto,

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approximately
adjusted, and in the event that the Consumer Price Index is converted to a
different standard reference base or otherwise revised, the determination of
adjustments provided for herein shall be made with the use of such conversion
factor, formula or table for converting the Consumer Price Index as may be
published by the Bureau of Labor Statistics or, if said Bureau shall not
publish the same, then with the use of such conversion factor, formula or table
as may be published by Prentice-Hall, Inc., or any other nationally
recognized publisher of similar statistical information; and if the Consumer
Price Index ceases to be published, and there is no successor thereto (i) such
other index as Lender and Borrower shall agree upon in writing or (ii) if
Lender and Borrower cannot agree on a substitute index, such other index, as
reasonably selected by Lender. Borrower shall obtain the coverage required
under this subsection (j) from a carrier which otherwise satisfies the
rating criteria specified in Section 7.1.2 below (a “Qualified Carrier”) or in
the event that such coverage is not available from a Qualified Carrier,
Borrower shall obtain such coverage from the highest rated insurance company
providing such coverage.

7.1.2       Policies.
All policies of insurance (the “Policies”) required pursuant to Section 7.1.1
above shall: (i) be issued by companies approved by Lender and licensed to
do business in the State, with a claims paying ability rating of “A” or better
by S&P (and the equivalent by any other Rating Agency), and a rating of “A:VIII” or better
in the current Best’s Insurance Reports, provided, however, that for
multi-layered Policies, (A) if there are 4 or fewer insurers providing
such Policies, then at least 75% of the entire amount of the applicable
insurance coverage provided under such Policies shall be issued by insurers
having minimum claims paying ability ratings of “A” or better by S&P (and
the equivalent by any other Rating Agency) and no insurer providing any portion
of such coverage shall have a minimum claims paying ability rating lower than “BBB”
by S&P (or lower than the equivalent by any other Rating Agency), and (B) if
there are 5 or more insurers providing such Policies, then at least 60% of the
entire amount of the applicable insurance coverage provided under such Policies
shall be issued by insurers having minimum claims paying ability ratings of “A”
or better by S&P (and the equivalent by any other Rating Agency) and no
insurer providing any portion of such coverage shall have a minimum claims
paying ability rating lower than “BBB” by S&P (or lower than the equivalent
by any other Rating Agency); (ii) name Lender and its successors and/or
assigns as their interest may appear as the mortgagee (in the case of property
insurance), loss payee (in the case of business interruption/loss of rents
coverage) and an additional insured (in the case of liability insurance); (iii) contain
(in the case of property insurance) a Non-Contributory Standard Mortgagee
Clause and a Lender’s Loss Payable Endorsement, or their equivalents, naming
Lender as the person to which all payments made by such insurance company shall
be paid; (iv) contain a waiver of subrogation against Lender; (v) be
assigned and the originals thereof delivered to Lender; or, in lieu of
delivering originals of the Policies, Borrower may, on an annual basis, deliver
Acord evidences of coverages, or the equivalent, as adequate proof of coverage;
provided, however, if at, any time, Lender requests carrier certification of
Policies, Borrower shall deliver such certification within ten (10) days
of Lender’s request therefor; (vi) contain such provisions as Lender deems
reasonably necessary or desirable to protect its interest, including (A) endorsements
providing that neither Borrower, Lender nor any other party shall be a
co-insurer under the Policies, (B) that Lender shall receive at least
thirty (30) days’ prior written notice of any modification, reduction or
cancellation of any of the Policies, (C) an agreement whereby the insurer
waives any right to claim any premiums and commissions against Lender, provided
that the policy need not waive the requirement that

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the premium be paid in order for a claim to be paid to the insured and (D) providing
that Lender is permitted to make payments to effect the continuation of such
policy upon notice of cancellation due to non-payment of premiums; (vii) in
the event any insurance policy (except for general public and other liability
and workers compensation insurance) shall contain breach of warranty
provisions, such policy shall provide that with respect to the interest of
Lender, such insurance policy shall not be invalidated by and shall insure
Lender regardless of (A) any act, failure to act or negligence of or
violation of warranties, declarations or conditions contained in such policy by
any named insured, (B) the occupancy or use of the premises for purposes
more hazardous than permitted by the terms thereof, or (C) any foreclosure
or other action or proceeding taken by Lender pursuant to any provision of the
Loan Documents; and (viii) be satisfactory in form and substance to Lender
and approved by Lender as to amounts, form, risk coverage, deductibles, loss
payees and insureds. Borrower shall pay the premiums for such Policies (the “Insurance Premiums”)
as the same become due and payable and furnish to Lender evidence of the
renewal of each of the Policies together with (unless such Insurance Premiums
have been paid by Lender pursuant to Section 3.3 hereof) receipts
for or other evidence of the payment of the Insurance Premiums reasonably satisfactory
to Lender. If Borrower does not furnish such evidence and receipts at least
thirty (30) days prior to the expiration of any expiring Policy, then Lender
may, but shall not be obligated to, procure such insurance and pay the
Insurance Premiums therefor, and Borrower shall reimburse Lender for the cost
of such Insurance Premiums promptly on demand, with interest accruing at the
Default Rate. Borrower shall deliver to Lender a certified copy of each Policy
within thirty (30) days after its effective date. Within thirty (30) days after
request by Lender, Borrower shall obtain such increases in the amounts of
coverage required hereunder as may be reasonably requested by Lender, taking
into consideration changes in the value of money over time, changes in
liability laws, changes in prudent customs and practices, and the like.

7.2          Casualty.

7.2.1       Notice;
Restoration. If the Property is damaged or
destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall
give prompt notice thereof to Lender. Following the occurrence of a Casualty,
Borrower, regardless of whether insurance proceeds are available (unless Lender
has breached its obligation (if any) to make such insurance proceeds available
pursuant to Section 7.4.1), shall promptly proceed to restore, repair,
replace or rebuild the Property in accordance with Legal Requirements to be of
at least equal value and of substantially the same character as prior to such
damage or destruction.

7.2.2       Settlement
of Proceeds. If a Casualty covered by any of the
Policies (an “Insured Casualty”)
occurs where the loss does not exceed $2,000,000, provided no Event of Default
has occurred and is continuing, Borrower may settle and adjust any claim
without the prior consent of Lender; provided such adjustment is carried out in
a competent and timely manner, and Borrower is hereby authorized to collect and
receipt for the insurance proceeds (the “Proceeds”).
In the event of an Insured Casualty where the loss exceeds $2,000,000 (a “Significant Casualty”),
Borrower may settle and adjust any claim with the prior written consent of
Lender (which consent shall not be unreasonably withheld or delayed) unless
either (i) an Event of Default has occurred and is continuing or (ii) the
loss equals or exceeds $5,000,000, in which either such case Lender may, in its
sole discretion, settle and adjust any claim without the

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consent of Borrower and agree with the insurer(s) on the amount to
be paid on the loss, and the Proceeds shall be due and payable solely to Lender
and held by Lender in the Casualty/Condemnation Subaccount and disbursed in
accordance herewith. If Borrower or any party other than Lender is a payee on
any check representing Proceeds with respect to a Significant Casualty,
Borrower shall immediately endorse, and cause all such third parties to
endorse, such check payable to the order of Lender. Borrower hereby irrevocably
appoints Lender as its attorney-in-fact, coupled with an interest, to endorse
such check payable to the order of Lender.  The expenses incurred by Lender in the
settlement, adjustment and collection of the Proceeds shall become part of the
Debt and shall be reimbursed by Borrower to Lender upon demand. Notwithstanding
anything to the contrary contained herein, if in connection with a Casualty any
insurance carrier makes a payment under a property insurance Policy that
Borrower proposes be treated as business or rental interruption insurance,
then, notwithstanding any designation (or lack of designation) by the insurance
carrier as to the purpose of such payment, as between Lender and Borrower, such
payment shall not be treated as business or rental interruption insurance
proceeds unless Borrower has demonstrated to Lender’s satisfaction that the
remaining net Proceeds that will be received from the property insurance
carriers are sufficient to pay one hundred percent (100%) of the cost of fully
restoring the Improvements or, if such net Proceeds are to be applied to repay
the Debt in accordance with the terms hereof, that such remaining net Proceeds
will be sufficient to pay the Debt in full. All business or rental interruption
proceeds paid to Lender shall be held by Lender and applied to the payment of
debt service and reserves from time to time due and payable with respect to the
Loan and, to the extent Lender determines that the cash flow from the Property
or (if applicable) amounts in the Operating Expense Subaccount are not
sufficient for such purpose, payment of operating expenses approved by Lender.

7.3          Condemnation.

7.3.1       Notice;
Restoration. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding affecting the Property (a “Condemnation”) and shall deliver to Lender copies of any
and all papers served in connection with such Condemnation. Following the
occurrence of a Condemnation, Borrower, regardless of whether an Award is
available (unless Lender has breached its obligation (if any) to make such
Award available pursuant to Section 7.4.1), shall promptly proceed to
restore, repair, replace or rebuild the Property in accordance with Legal
Requirements to the extent practicable to be of at least equal value and of
substantially the same character (and to have the same utility) as prior to
such Condemnation.

7.3.2       Collection
of Award. If a Condemnation occurs where the award
or payment in respect thereof (an “Award”) does not exceed $2,000,000 or which
results in the taking of five percent (5%) or less of the Property, provided no
Event of Default has occurred and is continuing, Borrower may make any
compromise, adjustment or settlement in connection with such Condemnation with
the prior written consent of Lender, not to be unreasonably withheld, provided
such adjustment is carried out in a competent and timely manner, and Borrower
is hereby authorized to collect and receipt for the Award. In the event of a
Condemnation where the Award is in excess of $2,000,000 or which results in the
taking of more than five percent (5%) of the Property, Lender is hereby irrevocably
appointed as Borrower’s

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attorney-in-fact, coupled with an interest, with exclusive power to
collect, receive and retain such Award and to make any compromise, adjustment
or settlement in connection with such Condemnation with the prior consent of Borrower
(unless an Event of Default is continuing, in which case, Borrower’s prior
consent shall not be required), not to be unreasonably withheld (which shall be
deemed consented to if Borrower fails to respond to any request for consent
therefor within 10 days’ of request). Notwithstanding any Condemnation (or any
transfer made in lieu of or in anticipation of such Condemnation), Borrower
shall continue to pay the Debt at the time and in the manner provided for in
the Loan Documents, and the Debt shall not be reduced unless and until any
Award shall have been actually received and applied by Lender to expenses of
collecting the Award and to 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 in
the Note. If the Property is sold, through foreclosure or otherwise, prior to
the receipt by Lender of such Award, Lender shall have the right, whether or
not a deficiency judgment on the Note shall be recoverable or shall have been
sought, recovered or denied, to receive all or a portion of the Award
sufficient to pay the Debt. Borrower shall cause any Award that is payable to
Borrower to be paid directly to Lender. Lender shall hold such Award in the
Casualty/Condemnation Subaccount and disburse such Award in accordance with the
terms hereof.

7.4          Application of Proceeds or Award.

7.4.1       Application
to Restoration. If an Insured Casualty or
Condemnation occurs where (i) the loss is in an aggregate amount less than
twenty five percent (25%) of the unpaid Principal; (ii) in the reasonable
judgment of Lender, the Property can be restored within twelve (12) months
after all applicable restoration permits have been obtained, and prior to six (6) months
before the Stated Maturity Date and prior to the expiration of the rental or
business interruption insurance with respect thereto, to the Property’s
pre-existing condition and utility as existed immediately prior to such Insured
Casualty or Condemnation and to an economic unit not less valuable and not less
useful than the same was immediately prior to the Insured Casualty or
Condemnation, and after such restoration will adequately secure the Debt; (iii) less
than (x) thirty percent (30%), in the case of an Insured Casualty or (y) fifteen
percent (15%), in the case of a Condemnation, of the rentable area of the
Improvements has been damaged, destroyed or rendered unusable as a result of
such Insured Casualty or Condemnation; (iv) Leases demising in the
aggregate at least sixty-five percent (65%) of the total rentable space in the
Property and in effect as of the date of the occurrence of such Insured
Casualty or Condemnation remain in full force and effect during and after the
completion of the Restoration (hereinafter defined); (v) Lender shall
determine that the Debt Service Coverage Ratio for the remaining Term following
completion of Restoration shall be at least 1.10:1.00; and (vi) no Event
of Default shall have occurred and be then continuing, then the Proceeds or the
Award, as the case may be (after reimbursement of any expenses incurred by
Lender), shall be applied to pay for or reimburse Borrower for the cost of
restoring, repairing, replacing or rebuilding the Property (the “Restoration”), in the manner
set forth herein. Borrower shall commence and diligently prosecute such
Restoration. Notwithstanding the foregoing, in no event shall Lender be
obligated to apply the Proceeds or Award to reimburse Borrower for the cost of
Restoration unless, in addition to satisfaction of the foregoing conditions,
both (x) Borrower shall pay (and if required by Lender, Borrower shall
deposit with Lender in advance) all costs of such Restoration

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in excess of the net amount of the Proceeds or the Award made available
pursuant to the terms hereof; and (y) Lender shall have received evidence
reasonably satisfactory to it that during the period of the Restoration, the
Rents will be at least equal to the sum of the operating expenses and Debt
Service, as reasonably determined by Lender.

7.4.2       Application
to Debt. Except as provided in Section 7.4.1
above, any Proceeds and/or Award may, at the option of Lender in its
discretion, be applied to the payment of (i) accrued but unpaid interest
on the Note, (ii) the unpaid Principal and (iii) other charges due
under the Note and/or any of the other Loan Documents, or applied to reimburse
Borrower for the cost of any Restoration, in the manner set forth in Section 7.4.3
below. Any such prepayment of the Loan shall be without any Yield Maintenance
Premium, unless an Event of Default has occurred and is continuing at the time
the Proceeds are received from the insurance company or the Award is received
from the condemning authority, as the case may be, in which event Borrower
shall pay to Lender an additional amount equal to the Yield Maintenance
Premium, if any, that may be required with respect to the amount of the
Proceeds or Award applied to the unpaid Principal. Notwithstanding anything to
the contrary contained herein, if any Proceeds or Award are not required to be
made available for a Restoration (other than surplus proceeds of an Award
applied pursuant to Section 7.4.3), are retained and applied by
Lender toward the payment of the Debt and the amount so applied shall exceed
$20,000,000, Borrower may prepay the entire outstanding Principal without
payment of any Yield Maintenance Premium provided that (x) such prepayment
is made within 90 days after Lender applies such Proceeds or Award to the Debt
and (y) together with such prepayment, Borrower shall pay to Lender all
accrued and unpaid interest and all other sums payable under the Loan Documents
and (z) if such prepayment does not occur on a Payment Date, Borrower
shall pay all interest that would have accrued during the balance of the
related Interest Period.

7.4.3       Procedure
for Application to Restoration. If Borrower is
entitled to reimbursement out of the Proceeds or an Award held by Lender, such
Proceeds or Award shall be disbursed from time to time from the
Casualty/Condemnation Subaccount upon Lender being furnished with (i) evidence
satisfactory to Lender of the estimated cost of completion of the Restoration, (ii) a
fixed price or guaranteed maximum cost construction contract for Restoration
satisfactory to Lender, (iii) prior to the commencement of Restoration,
all immediately available funds in addition to the Proceeds or Award that in
Lender’s judgment are required to complete the proposed Restoration (or such
additional funds are irrevocably committed to the satisfaction of Lender by or
on behalf of Borrower for that purpose), (iv) such architect’s
certificates, waivers of lien, contractor’s sworn statements, title insurance
endorsements, bonds, plats of survey, permits, approvals, licenses and such other
documents and items as Lender may reasonably require and approve in Lender’s
discretion, and (v) all plans and specifications for such Restoration,
such plans and specifications to be approved by Lender in writing prior to
commencement of any work. Lender may, at Borrower’s expense, retain a
consultant to review and approve all requests for disbursements, which approval
shall also be a condition precedent to any disbursement. No payment made prior
to the final completion of the Restoration shall exceed ninety percent (90%) of
the value of the work performed from time to time; funds other than the
Proceeds or Award shall be disbursed prior to disbursement of such Proceeds or
Award; and at all times, the undisbursed balance of such Proceeds or Award remaining
in the hands of Lender, together with funds deposited for that purpose or
irrevocably committed to the

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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, free and clear of all Liens or claims
for Lien. Provided no Default or Event of Default then exists, any surplus that
remains out of the Proceeds held by Lender after payment of such costs of
Restoration shall be paid to Borrower. Any surplus that remains out of the
Award received by Lender after payment of such costs of Restoration shall, in
the discretion of Lender, be retained by Lender and applied to payment of the
Debt or returned to Borrower.

8.                                      DEFAULTS

8.1          Events
of Default. An “Event of Default” shall exist with
respect to the Loan if any of the following shall occur:

(a)           any portion of the
Debt is not paid when due or any other amount under Section 3.11(a)(i) through
(viii) hereof is not paid in full on each Payment Date (provided,
however, if adequate funds are available in the Deposit Account for such
payments, the failure by the Deposit Bank to allocate such funds into the
appropriate Subaccounts shall not constitute an Event of Default);

(b)           any of the Taxes are
not paid when due (unless Lender is paying such Taxes pursuant to Section 3.3
hereof), subject to Borrower’s right to contest Taxes in accordance with Section 5.2
hereof;

(c)           the Policies are not
kept in full force and effect, or are not delivered to Lender pursuant to Section 7.1.2(v) within
ten (10) days after request;

(d)           (i) a Transfer
other than a Permitted Transfer occurs, or (ii) any event, or series of
events, occurs that results in the individuals who, as of the date of this
Agreement, are members of the Incumbent Board of the Behringer Harvard REIT
ceasing for any reason to constitute at least a majority of such Board of
Directors, provided, however, that if the election, or nomination for election
by the Behringer Harvard REIT’s shareholders, of any new director was approved
by a vote of at least a majority of the Incumbent Board, such new director
shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened “Election Contest” (as
described in Rule 14a-11 promulgated under the Securities Exchange
Act of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a person other than the Board (a “Proxy Contest”) including
by reason of any agreement intended to avoid or settle any Election Contect or
Proxy Contest;

(e)           any representation
or warranty made by Borrower or Guarantor or in any Loan Document, or in any
report, certificate, financial statement or other instrument, agreement or
document furnished by Borrower or Guarantor in connection with any Loan
Document, shall be false or misleading in any material respect as of the date
the representation or warranty was made;

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(f)            Borrower or
Guarantor shall (i) make an assignment for the benefit of creditors, or (ii) generally
not be paying its debts as they become due;

(g)           a receiver,
liquidator or trustee shall be appointed for Borrower or Guarantor; or Borrower
or Guarantor shall be adjudicated a bankrupt or insolvent; or any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law,
or any similar federal or state law, shall be filed by or against, consented
to, or acquiesced in by, Borrower or Guarantor, as the case may be; or any
proceeding for the dissolution or liquidation of Borrower or Guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower or Guarantor, as
the case may be, only upon the same not being discharged, stayed or dismissed
within sixty (60) days;

(h)           Borrower breaches
any covenant contained in Sections 5.12.1 (a) - (f), 5.13, 5.15,
5.25, 5.27 or 5.28 hereof;

(i)            except as expressly
permitted hereunder, the alteration, improvement, demolition or removal of all
or any portion of the Improvements without the prior written consent of Lender
(if such consent is required pursuant to the terms of this Agreement);

(j)            an Event of Default
as defined or described elsewhere in this Agreement or in any other Loan
Document occurs;

(k)           a default occurs
under any term, covenant or provision set forth herein or in any other Loan
Document which specifically contains a notice requirement or grace period and
such notice has been given and such grace period has expired;

(l)            any of the
assumptions contained in any substantive non-consolidation opinion, delivered
to Lender by Borrower’s counsel in connection with the Loan or otherwise
hereunder, were not true and correct as of the date of such opinion or
thereafter became untrue or incorrect;

(m)          Borrower directly or
indirectly creates, incurs or assumes any indebtedness other than (i) the
Debt and (ii) unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Property which do not
exceed, at any time, a maximum amount of two percent (2%) of the original
amount of the Principal; provided, however, such two percent (2%) limitation
shall not apply to (i) any asset management or property management fee
payable pursuant to the terms of the Management Agreement or (ii) any
amounts that are payable out of the Capital Reserve Subaccount, the Rollover
Reserve Subaccount or any other reserves established under this Agreement; or

(n)           a default shall be
continuing under any of the other terms, covenants or conditions of this
Agreement or any other Loan Document not otherwise specified in this Section 8.1,
for ten (10) days after notice to Borrower (and Guarantor, if applicable)
from Lender, in the case of any default which can be cured by the payment of a
sum of money, or for thirty (30) days after notice from Lender in the case of
any other default; provided, however, that if such non-monetary default is
susceptible of cure but cannot reasonably be cured within such thirty (30)-day
period, and Borrower (or Guarantor, if applicable) shall have commenced to cure
such default within such thirty (30)-day period and thereafter diligently and
expeditiously proceeds to cure the same, such thirty (30)-day period shall be
extended for an additional period of time as is reasonably necessary for
Borrower (or Guarantor, if applicable) in the exercise of due diligence to cure
such

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default, such
additional period not to exceed sixty (60) days; it being further acknowledged
that: (A) a default under Section 6(c) of the Guaranty
may be cured by delivery to Lender of cash in an amount equal to the Guaranty
Limit Amount; (B) any cash delivered pursuant to the foregoing clause (A) (if
an Event of Default has occurred) shall be allocated to the Debt, in such order
and in such manner as Lender shall elect in its sole and absolute discretion,
including (if the Loan has been accelerated) to make a prepayment of Principal
(together with the applicable Yield Maintenance Premium applicable thereto);
and (C) any cash delivered pursuant to the foregoing clause (A) (if
no Event of Default has occurred) shall be deposited by Lender into the Capital
Reserve Subaccount and the Rollover Reserve Subaccount, in the respective
amounts contemplated under Section 3, and shall be governed by the
provisions of Sections, 3.4 and 3.5, as applicable, as
well as the other terms and conditions of this Agreement and the other Loan
Documents.

8.2          Remedies.

8.2.1       Acceleration.
Upon the occurrence and during the continuance of an Event of Default (other
than an Event of Default described in paragraph (f) or (g) of Section 8.1
above) and at any time and from time to time thereafter during the continuance
of such Event of Default, in addition to any other rights or remedies available
to it pursuant to the Loan Documents or at law or in equity, Lender may take
such action, without notice or demand, that Lender deems advisable to protect
and enforce its rights against Borrower and in and to the Property; including
declaring the Debt to be immediately due and payable (including unpaid
interest), Default Rate interest, Late Payment Charges, Yield Maintenance
Premium and any other amounts owing by Borrower), without notice or demand; and
upon any Event of Default described in paragraph (f) or (g) of Section 8.1
above, the Debt (including unpaid interest, Default Rate interest, Late Payment
Charges, Yield Maintenance Premium and any other amounts owing by Borrower)
shall immediately and automatically become due and payable, without notice or
demand, and Borrower hereby expressly waives any such notice or demand,
anything contained in any Loan Document to the contrary notwithstanding.

8.2.2       Remedies
Cumulative. Upon the occurrence and during the
continuance of an Event of Default, all or any one or more of the rights,
powers, privileges and other remedies available to Lender against Borrower
under the Loan Documents or at law or in equity may be exercised by Lender at
any time and from time to time, whether or not all or any of the Debt shall be
declared, or be automatically, due and payable, and whether or not Lender shall
have commenced any foreclosure proceeding or other action for the enforcement
of its rights and remedies under any of the Loan Documents. Any such actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth in the
Loan Documents. Without limiting the generality of the foregoing, Borrower
agrees that if an Event of Default is continuing, (i) to the extent
permitted by applicable law, Lender is not subject to any “one

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action” or “election of remedies” law or rule, and (ii) all Liens
and other rights, remedies or privileges provided to Lender shall remain in
full force and effect until Lender has exhausted all of its remedies against
the Property, the Security Instrument has been foreclosed, the Property has
been sold and/or otherwise realized upon in satisfaction of the Debt or the
Debt has been paid in full. To the extent permitted by applicable law, nothing
contained in any Loan Document shall be construed as requiring Lender to resort
to any particular Property or any portion of the Property for the satisfaction
of any of the Debt in preference or priority to any other portion, and Lender
may seek satisfaction out of the entire Property or any part thereof, in its
discretion.

8.2.3       Severance.
During the continuance of an Event of Default, Lender shall have the right from
time to time to sever the Note and the other Loan Documents into one or more
separate notes, mortgages and other security documents in such denominations
and priorities of payment and liens as Lender shall determine in its discretion
for purposes of evidencing and enforcing its rights and remedies. Borrower
shall execute and deliver to Lender from time to time, promptly after the
request of Lender, a severance agreement and such other documents as Lender
shall request in order to effect the severance described in the preceding sentence,
all in form and substance reasonably satisfactory to Lender. Borrower hereby
absolutely and irrevocably appoints Lender as its true and lawful attorney,
coupled with an interest, in its name and stead to make and execute all
documents necessary or desirable to effect such severance, Borrower ratifying
all that such attorney shall do by virtue thereof.

8.2.4       Delay.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default, or the granting of any indulgence or compromise by Lender
shall impair any such remedy, right or power hereunder or be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of one Default or
Event of Default shall not be construed to be a waiver of any subsequent
Default or Event of Default or to impair any remedy, right or power consequent
thereon. Notwithstanding any other provision of this Agreement, Lender reserves
the right to seek a deficiency judgment or preserve a deficiency claim in
connection with the foreclosure of the Security Instrument to the extent
necessary to foreclose on all or any portion of the Property, the Rents, the
Cash Management Accounts or any other collateral.

8.2.5       Lender’s
Right to Perform. If Borrower fails to perform any
covenant or obligation contained herein and such failure shall continue for a
period of five (5) Business Days after Borrower’s receipt of written
notice thereof from Lender, without in any way limiting Lender’s right to
exercise any of its rights, powers or remedies as provided hereunder, or under
any of the other Loan Documents, Lender may, but shall have no obligation to,
perform, or cause performance of, such covenant or obligation, and all costs,
expenses, liabilities, penalties and fines of Lender incurred or paid in
connection therewith shall be payable by Borrower to Lender upon demand and if
not paid shall be added to the Debt (and to the extent permitted under
applicable laws, secured by the Security Instrument and other Loan Documents)
and shall bear interest thereafter at the Default Rate. Notwithstanding the
foregoing, Lender shall have no obligation to send notice to Borrower of any
such failure. Additionally, during the continuance of an Event of Default,
Lender shall have the right, but not the obligation, to make any Protective
Advance (hereinafter defined) (provided, however, that Lender will only make
such Protective Advance from its own funds if there are insufficient funds in
the Cash Management Accounts),

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and the same shall be added to the Debt (and to the extent permitted
under applicable laws, secured by the Security Instrument and other Loan
Documents) and shall bear interest thereafter at the Default Rate. As used
herein, “Protective
Advance” means all sums advanced for the purpose of payment of real
estate taxes (including special payments in lieu of real estate taxes),
maintenance costs, insurance premiums, operating expenses, trade payables or
other items with respect to the Property (including capital items) reasonably
necessary to protect the Property or any other security given for the Loan or
to preserve any of Lender’s rights or remedies under the Loan Documents.

9.                                      SPECIAL PROVISIONS

9.1          Sale of Note and Secondary Market Transaction.

9.1.1       General;
Borrower Cooperation. Lender shall have the right
at any time and from time to time (i) to sell or otherwise transfer the
Loan or any portion thereof or the Loan Documents or any interest therein to
one or more investors, (ii) to sell participation interests in the Loan to
one or more investors or (iii) to securitize the Loan or any portion
thereof in a single asset securitization or a pooled loan securitization of
rated single or multi-class securities (the “Securities”) secured by or evidencing
ownership interests in the Note and the Security Instrument (each such sale,
assignment, participation and/or securitization is referred to herein as a “Secondary Market Transaction”).
In connection with any Secondary Market Transaction, Borrower shall use all
reasonable efforts and cooperate fully and in good faith with Lender and
otherwise assist Lender in satisfying the market standards to which Lender
customarily adheres or which may be reasonably required in the marketplace or
by the Rating Agencies in connection with any such Secondary Market
Transactions, including: (a) to (i) to provide such financial and
other information with respect to the Property, Borrower and its Affiliates,
Manager and any tenants of the Property, (ii)  provide business plans and
budgets relating to the Property and (iii)  perform or permit or cause to
be performed or permitted such site inspection, appraisals, surveys, market
studies, environmental reviews and reports, engineering reports and other due
diligence investigations of the Property, as may be reasonably requested from
time to time by Lender or the Rating Agencies or as may be necessary or
appropriate in connection with a Secondary Market Transaction or Exchange Act
requirements (the items provided to Lender pursuant to clauses (i) and (ii) of
this paragraph (a) being called the “Provided Information”), together, if customary, with
appropriate verification of and/or consents to the Provided Information through
letters of auditors or opinions of counsel of independent attorneys acceptable
to Lender and the Rating Agencies; (b) at Borrower’s expense, cause
counsel to render opinions as to non-consolidation (which may be an update of
an existing non-consolidation opinion) and any other opinion customary in securitization
transactions with respect to the Property, Borrower and its Affiliates, which
counsel and opinions shall be reasonably satisfactory to Lender and the Rating
Agencies; (c) make such representations and warranties as of the closing
date of any Secondary Market Transaction with respect to the Property, Borrower
and the Loan Documents as are customarily provided in such transactions and as
may be reasonably requested by Lender or the Rating Agencies and consistent
with the facts covered by such representations and warranties as they exist on
the date thereof, including the representations and warranties made in the Loan
Documents; (d) provide current certificates of good standing and
qualification with respect to Borrower and Guarantor from appropriate
Governmental Authorities; and (e) execute such

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amendments to the Loan Documents and Borrower’s organizational
documents, as may be requested by Lender or the Rating Agencies or otherwise to
effect a Secondary Market Transaction, provided that nothing contained in this
subsection (e) shall result in changes to Loan terms adverse to Borrower
or require Borrower to incur any additional liabilities. Borrower’s cooperation
obligations set forth herein shall continue until the Loan has been paid in
full.

9.1.2       Use
of Information. Borrower understands that all or
any portion of the Provided Information and any other information and/or
materials delivered by or on behalf of Borrower, Guarantor or any of their
respective Affiliates may be included in disclosure documents in connection
with a Secondary Market Transaction, including a prospectus or private
placement memorandum (each, a “Disclosure Document”) and may also be included in
filings with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange
Act of 1934, as amended (the “Exchange Act”), or provided or made available to
investors or prospective investors in the Securities, the Rating Agencies, and
service providers or other parties relating to the Secondary Market Transaction.
If the Disclosure Document is required to be revised, Borrower shall cooperate
with Lender in updating the Provided Information or such other information
and/or materials for inclusion or summary in the Disclosure Document or for
other use reasonably required in connection with a Secondary Market Transaction
by providing all current information pertaining to Borrower, Manager and the
Property necessary to keep the Disclosure Document accurate and complete in all
material respects with respect to such matters.

9.1.3       Borrower
Obligations Regarding Disclosure Documents. In
connection with a Disclosure Document, Borrower shall: (a) if requested by
Lender, certify in writing that Borrower has carefully examined those portions
of such Disclosure Document, pertaining to Borrower, the Property, Manager and
the Loan, and that such portions do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading; and (b) indemnify (in a separate instrument of indemnity,
if so requested by Lender) (i) any underwriter, syndicate member or
placement agent (collectively, the “Underwriters”)
retained by Lender or its issuing company affiliate (the “Issuer”) in connection with a
Secondary Market Transaction, (ii) Lender and (iii) the Issuer that
is named in the Disclosure Document or registration statement relating to a
Secondary Market Transaction (the “Registration
Statement”), and each of the Issuer’s directors, each of its
officers who have signed the Registration Statement and each person or entity
who controls the Issuer or the Lender within the meaning of Section 15 of
the Securities Act or Section 30 of the Exchange Act (collectively within
(iii), the “Lehman Group”), and each of
its directors and each person who controls each of the Underwriters, within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act (collectively, the “Underwriter
Group”) for any losses, claims, damages or liabilities (the “Liabilities”) to which
Lender, the Lehman Group or the Underwriter Group may become subject (including
reimbursing all of them for any legal or other expenses actually incurred in
connection with investigating or defending the Liabilities) insofar as the
Liabilities arise out of or are based upon any untrue statement of any material
fact contained in any of the Provided Information or in any of the applicable
portions of such sections of the Disclosure Document applicable to Borrower,
Manager, the Property or the Loan, or arise out of or are based upon the
omission to state therein a material fact required to be stated in the
applicable

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portions of such sections or necessary in order to make the statements
in the applicable portions of such sections in light of the circumstances under
which they were made, not misleading; provided, however, that Borrower shall
not be required to indemnify Lender for any Liabilities relating to untrue
statements or omissions which Borrower identified to Lender in writing at the
time of Borrower’s examination of such Disclosure Document or which Borrower
identified to Lender in writing at least three (3) Business Days prior to
Lender’s delivery of such Disclosure Document to any third party in connection
with any Secondary Market Transaction, or (ii) any information or document
not provided to or certified by Borrower. Notwithstanding anything to the
contrary contained in this Section 9.1.3, nothing contained herein shall
impose liability upon Borrower for any losses, claims, damages or liability
arising out of or based upon an untrue statement of any material fact contained
in any statement, report or document provided to Lender on behalf of Borrower
by a party who is not an Affiliate of Borrower (a “Third Party Report”), unless Borrower had actual
knowledge at the time Borrower provided such statement, report or document to
Lender that such Third Party Report contains such untrue statement.

9.1.4       Borrower
Indemnity Regarding Filings. In connection with
filings under the Exchange Act, Borrower shall (i) indemnify Lender, the
Lehman Group and the Underwriter Group for any Liabilities to which Lender, the
Lehman Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon the omission to state in the
Provided Information a material fact required to be stated in the Provided
Information in order to make the statements in the Provided Information, in
light of the circumstances under which they were made not misleading and (ii) reimburse
Lender, the Lehman Group or the Underwriter Group for any legal or other
expenses actually incurred by Lender, Lehman Group or the Underwriter Group in
connection with defending or investigating the Liabilities. Notwithstanding
anything to the contrary contained in this Section 9.1.4, nothing
contained herein shall impose liability upon Borrower for any Liabilities
arising out of or based upon an untrue statement of any material fact contained
in any Third Party Report, unless Borrower had actual knowledge at the time
Borrower provided such statement, report or document to Lender that such Third
Party Report contains such untrue statement.

9.1.5       Indemnification
Procedure. Promptly after receipt by an
indemnified party under Section 9.1.3 above or Section 9.1.4
above of notice of the commencement of any action for which a claim for
indemnification is to be made against Borrower, such indemnified party shall
notify Borrower in writing of such commencement, but the omission to so notify
Borrower will not relieve Borrower from any liability that it may have to any
indemnified party hereunder except to the extent that failure to notify causes
prejudice to Borrower. If any action is brought against any indemnified party,
and it notifies Borrower of the commencement thereof, Borrower will be
entitled, jointly with any other indemnifying party, to participate therein
and, to the extent that it (or they) may elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice of
commencement, to assume the defense thereof with counsel satisfactory to such
indemnified party in its discretion. After notice from Borrower to such
indemnified party under this Section 9.1.5, Borrower shall not be
responsible for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both Borrower and an indemnified party, and any indemnified party shall
have reasonably concluded that there are any legal defenses available to it
and/or other

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indemnified parties that are different from or additional to those
available to Borrower, then the indemnified party or parties shall have the
right to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Borrower shall not be liable for the expenses of more than one
separate counsel unless there are legal defenses available to it that are
different from or additional to those available to another indemnified party.

9.1.6       Contribution.
In order to provide for just and equitable contribution in circumstances in
which the indemnity agreement provided for in Section 9.1.3 above
or Section 9.1.4 above is for any reason held to be unenforceable
by an indemnified party in respect of any Liabilities (or action in respect
thereof) referred to therein which would otherwise be indemnifiable under Section 9.1.3
above or Section 9.1.4 above, Borrower shall contribute to the
amount paid or payable by the indemnified party as a result of such Liabilities
(or action in respect thereof); provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person not
guilty of such fraudulent misrepresentation.  In determining the amount of contribution to
which the respective parties are entitled, the following factors shall be
considered:  (i) the Lehman Group’s
and Borrower’s relative knowledge and access to information concerning the
matter with respect to which the claim was asserted; (ii) the opportunity
to correct and prevent any statement or omission; and (iii) any other
equitable considerations appropriate in the circumstances. Lender and Borrower
hereby agree that it may not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation.

9.1.7       Severance
of Loan. Lender shall have the right, at any time
(whether prior to, in connection with, or after any Secondary Market
Transaction), with respect to all or any portion of the Loan, to modify, split
and/or sever all or any portion of the Loan as hereinafter provided. Without
limiting the foregoing, Lender may (i) cause the Note and the Security
Instrument to be split into a first and second mortgage loan, (ii) create
one more senior and subordinate notes (i.e.,
an A/B or A/B/C structure), (iii) create multiple components of the Note
or Notes (and allocate or reallocate the principal balance of the Loan among
such components) or (iv) otherwise sever the Loan into two (2) or
more loans secured by mortgages and by a pledge of partnership or membership
interests (directly or indirectly) in Borrower (i.e., a senior loan/mezzanine loan structure), in each such
case, in whatever proportion and whatever priority Lender determines; provided,
however, in each such instance the outstanding principal balance of all the
Notes evidencing the Loan (or components of such Notes) immediately after the
effective date of such modification equals the outstanding principal balance of
the Loan immediately prior to such modification and the weighted average of the
interest rates for all such Notes (or components of such Notes) immediately
after the effective date of such modification equals the interest rate of the
original Note immediately prior to such modification and no such modification
shall have a significant adverse economic effect on Borrower. If requested by
Lender, Borrower (and Borrower’s constituent members, if applicable, and
Guarantor) shall execute within seven (7) Business Days after such
request, such documentation as Lender may reasonably request to evidence and/or
effectuate any such modification or severance.

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9.1.8       Audited Statements. Without
limitation to the other provisions of this Section 9.1, if
requested by Lender in connection with a Secondary Market Transaction, Borrower
shall cause all annual financial statements to be delivered during the Term
pursuant to Section 6.3.2 to be audited statements prepared by a “big
four” accounting firm or another reputable independent certified public
accounting firm and be accompanied by an unqualified opinion from such firm.

9.2          Costs
and Expenses. Notwithstanding anything to the contrary contained in this Article 9,
Borrower shall not be required to incur out-of-pocket expenses in the
performance of its obligations under Sections 9.1.1 (other than with
respect to the delivery or update of non-consolidation opinions), 9.1.2
and 9.1.7.

9.3          Mezzanine Loan. Lender agrees to
permit owner(s) of direct or indirect equity interests in Borrower (the “Mezzanine Borrower”,
provided however that in no event shall any entity required hereunder to be a
Special Purpose Bankruptcy Remote Entity be a Mezzanine Borrower) to obtain a
mezzanine loan (the “Mezzanine Loan”) the
proceeds of which may be used solely to make a capital contribution to Borrower
and in turn used by Borrower to pay Approved Leasing Expenses incurred with
respect to Leases entered into after the date hereof, subject to satisfaction
of the following conditions (provided that no more than one Mezzanine Loan
shall be permitted during the term of the Loan):

(a)           no Event of Default
shall exist;

(b)           the Mezzanine Loan
may be secured by a pledge by Mezzanine Borrower of such Mezzanine Borrower’s
direct or indirect equity interest in Borrower, but not by the Property or any
assets of Borrower or of any other entity required hereunder to be a Single
Purpose Bankruptcy Remote Entity, and neither Borrower nor any other entity
required hereunder to be a Special Purpose Bankruptcy Remote Entity shall in
any way be obligated in connection with the Mezzanine Loan (except for
non-monetary obligations reasonably acceptable to Lender that are customary in
connection with mezzanine loans involving securitized senior loans);

(c)           if a Secondary
Market Transaction has occurred, Borrower shall have obtained (and delivered to
Lender) a Rating Comfort Letter with respect to the proposed Mezzanine Loan;

(d)           the Mezzanine Loan
lender (the “Mezzanine Lender”)
shall be an Acceptable Mezzanine Lender;

(e)           the  Mezzanine Lender shall, upon Lender’s
request, execute a subordination and standstill intercreditor agreement (the “Intercreditor Agreement”)
in form approved by Lender, which approval shall not be unreasonably withheld,
conditioned or delayed so long as the Intercreditor Agreement is otherwise in
conformance with Rating Agency approved forms for intercreditor agreements;

(f)            the Net Operating
Income of the Property, as reasonably determined by Lender for the 12 month
period then most recently ended, is sufficient to satisfy an aggregate

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projected Debt
Service Coverage Ratio (based on the aggregate of the Debt Service on the Loan
and the Mezzanine Loan) of at least 1.15:1.00;

(g)           Lender shall have
approved (such approval not to be unreasonably withheld, conditioned or
delayed) the loan documents evidencing and securing the Mezzanine Loan;

(h)           the maturity of the
Mezzanine Loan shall be no earlier than the Maturity Date;

(i)            the Property value,
as determined by Lender based on an Appraisal dated not more than six (6) months
prior to the date of the Mezzanine Loan and otherwise reasonably acceptable to
Lender, prepared, at Borrower’s expense, on behalf of Lender by an appraiser
reasonably approved by Lender which is a member of the Appraisal Institute with
substantial experience in appraising properties similar to the Property, is
sufficient to satisfy an aggregate loan-to-value ratio (based on the aggregate
balances of the Loan and the Mezzanine Loan) not in excess of 85%;

(j)            Mezzanine Loan
payments shall be made solely from excess Property cash flow distributed by the
Borrower to its owners after payment of all debt service and reserve payments
under the Loan and operating expenses for the Property or from other funds of
Mezzanine Borrower; and

(k)           Borrower shall enter
into such amendments or supplements to the Loan Documents as Lender may require
in order to establish a hard lock box and cash management arrangement whereby
(or modify the existing arrangement so that) Property cash flow is deposited
and applied, through Lender-controlled accounts, first to debt service and
reserves required under the Loan, then to fund operating expenses, prior to any
distributions of excess Property cash flow to the Borrower’s owners for
payments upon the Mezzanine Loan.

Borrower shall pay or reimburse to Lender all Rating Agency fees and
all reasonable costs and expenses incurred by Lender, including fees and
expenses of Lender’s counsel, in connection with the review and documentation
concerning the Mezzanine Loan regardless of whether such Mezzanine Loan is
closed.

10.                                 MISCELLANEOUS

10.1        Exculpation. (a) Subject to
the qualifications below, Lender shall not enforce the liability and obligation
of Borrower to perform and observe the obligations contained in the Loan
Documents by any action or proceeding wherein a money judgment shall be sought
against Borrower, except that Lender may bring a foreclosure action, an action
for specific performance or any other appropriate action or proceeding to
enable Lender to enforce and realize upon its interest and rights under the
Loan Documents, or in the Property, the Rents or any other collateral given to
Lender pursuant to the Loan Documents; provided, however, that, except as
specifically provided herein, any judgment in any such action or proceeding
shall be enforceable against Borrower only to the extent of Borrower’s interest
in the Property, in the Rents and in any other collateral given to Lender, and
Lender shall not sue for, seek or demand any deficiency

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judgment
against Borrower in any such action or proceeding under or by reason of or
under or in connection with any Loan Document. The provisions of this Section 10.1
shall not, however, (i) constitute a waiver, release or impairment of any
obligation evidenced or secured by any Loan Document; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under the Security Instrument; (iii) affect the
validity or enforceability of any of the Loan Documents or any guaranty made in
connection with the Loan or any of the rights and remedies of Lender
thereunder; (iv) impair the right of Lender to obtain the appointment of a
receiver; (v) impair the enforcement of the Assignment of Leases; (vi) constitute
a prohibition against Lender to commence any other appropriate action or
proceeding in order for Lender to fully realize the security granted by the
Security Instrument or to exercise its remedies against the Property; or (vii) constitute
a waiver of the right of Lender to enforce the liability and obligation of
Borrower, by money judgment or otherwise, to the extent of any loss, damage,
cost, expense, liability, claim or other obligation incurred by Lender
(including attorneys’ fees and costs reasonably incurred) (collectively, “Lender’s Losses”)
arising out of or in connection with the following (all such liability and
obligation of Borrower for any or all of the following being referred to herein
as “Borrower’s Recourse
Liabilities”): (1) fraud or intentional misrepresentation
by Borrower, or Guarantor in connection with obtaining the Loan; (2) physical
waste of the Property or any portion thereof (other than acts committed by a
third party non-affiliated property manager), or after an Event of Default the
removal or disposal of any portion of the Property (other than acts committed
by a third party non-affiliated property manager); (3) any Proceeds paid
by reason of any Insured Casualty or any Award received in connection with a
Condemnation or other sums or payments attributable to the Property not applied
in accordance with the provisions of the Loan Documents (other than acts
committed by a third party non-affiliated property manager) (except to the
extent that Borrower did not have the legal right, because of a bankruptcy,
receivership or similar judicial proceeding, to direct disbursement of such
sums or payments); (4) all Rents of the Property received or collected by or
on behalf of Borrower after an Event of Default and not applied to payment of
Principal and interest due under the Note, and to the payment of actual and
reasonable operating expenses of the Property, as they become due or payable
(other than acts committed by a third party non-affiliated property manager)
(except to the extent that such application of such funds is prevented by
bankruptcy,  receivership, or similar
judicial proceeding in which Borrower is legally prevented from directing the
disbursement of such sums); (5) misappropriation (including failure to
turn over to Lender on demand following an Event of Default) of tenant security
deposits and Rents collected in advance, or of funds held by Borrower for the
benefit of another party (other than acts committed by a third party
non-affiliated property manager); (6) the failure to pay Taxes, provided
that Borrower shall not be liable (A) to the extent funds to pay such
amounts are available in the Tax and Insurance Subaccount and Lender failed to
pay same or has elected not to pay the same pursuant to Section 3.3
or (B) Rents are insufficient to yield sufficient funds to pay such
amounts; (7) the breach of any representation, warranty, covenant or
indemnification in any Loan Document concerning Environmental Laws or Hazardous
Substances, including, without limitation, Sections 4.21 and 5.8,
and clauses (viii) through (xi) of Section 5.30; (8) the
breach of the covenants set forth in Section 5.13 (other than a
breach of any of the covenants described in clauses (x) and (xxi) (with
respect to unsecured trade payables) set forth in the definition of “Special
Purpose Bankruptcy Remote Entity” on Schedule 5, if the same occurs as a
result of the economic performance of the Property); and/or (9) Borrower
or Guarantor or any of their direct or indirect Affiliates taking any action or
making any omission intended or

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reasonably
likely to hinder, delay, impair or prevent Lender in or from enforcing any and
all of its rights and remedies under or pursuant to the Loan Documents or at
law or in equity (unless the same is brought in good faith and is determined in
favor of Borrower or Guarantor pursuant to a final, non-appealable judgment of
a court of competent jurisdiction).

(b)           Notwithstanding
anything to the contrary in this Agreement or any of the Loan Documents, (A) Lender
shall not be deemed to have waived any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to
file a claim for the full amount of the Debt or to require that all collateral
shall continue to secure all of the Debt in accordance with the Loan Documents,
and (B) Lender’s agreement not to pursue personal liability of Borrower as
set forth above SHALL BECOME NULL AND VOID and shall be of no further force and
effect, and the Debt shall be fully recourse to the Borrower in an amount equal
to the greater of (x) Lender’s Losses arising out of or in connection with
the following matters or (y) an amount equal to the unpaid balance of the
Debt, in the event that one or more of the following occurs (each, a “Springing Recourse Event”): (i) an
Event of Default described in Section 8.1(d) shall have occurred; (ii) the
occurrence of any condition or event described in either Section 8.1(f)(i) (with
respect to Borrower only) or Section 8.1(g) (with respect to Borrower
only) (each, an “Insolvency
Action”) and, with respect to such Insolvency Action described in Section 8.1(g),
either Borrower, Guarantor or any Person owning an interest (directly or indirectly)
in Borrower or Guarantor initiates, aids, solicits, supports, or otherwise
cooperates or colludes to cause such Insolvency Action or, except to the extent
that any such party may not contest same under applicable law, fails to contest
an involuntary Insolvency Action, (iii) any involuntary bankruptcy
proceeding is brought by Borrower or Guarantor or any of their respective
Affiliates against any of them; or (iv) if subsequent to the commencement
of any voluntary bankruptcy proceeding with respect to Borrower, any
involuntary bankruptcy proceeding is brought by Lender against Borrower and
Borrower or Guarantor files any motion contesting the same.

10.2        Brokers
and Financial Advisors. Borrower hereby represents
that it has dealt with no financial advisors, brokers, underwriters, placement
agents, agents or finders in connection with the Loan other than NorthMarq
Capital, Inc. (“Broker”),
whose fee shall be paid by Borrower. Borrower shall indemnify and hold Lender
harmless from and against any and all claims, liabilities, costs and expenses
(including attorneys’ fees, whether incurred in connection with enforcing this
indemnity or defending claims of third parties) of any kind in any way relating
to or arising from a claim by any Person (including Broker) that such Person
acted on behalf of Borrower in connection with the transactions contemplated
herein. The provisions of this Section 10.2 shall survive the
expiration and termination of this Agreement and the repayment of the Debt.

10.3        Retention
of Servicer. Lender reserves the right to retain
the Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, any pooling and servicing agreement or similar agreement entered
into as a result of a Secondary Market Transaction, the Deposit Account
Agreement or otherwise, together with such other powers as are reasonably
incidental thereto. Borrower shall pay any reasonable fees and expenses of the
Servicer in connection with a release of the Property, assumption or
modification of the Loan, enforcement of the Loan Documents or

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any other
action taken by Servicer hereunder on behalf of Lender, to the extent such
actions are permitted to be taken pursuant to the terms of the Loan Documents,
but only to the extent that Borrower is expressly required to pay such expenses
pursuant to the terms of this Agreement. Notwithstanding anything to the
contrary contained herein, to the extent any matter described in this Agreement
requires the consent or approval of the special servicer under the pooling and
servicing agreement (or other similar agreement) entered into in connection
with a Securitization, such special servicer shall be afforded a consent period
for such matter equal to the greater of (i) the period of time given to
Lender hereunder within which to consent or approve such matter, or (ii) 15
Business Days (to the extent such 15 Business Day period is required under the
terms of such pooling and servicing agreement).

10.4        Survival.
This Agreement and all covenants, agreements, representations and warranties
made herein and in the certificates delivered pursuant hereto shall survive the
making by Lender of the Loan and the execution and delivery to Lender of the Note,
and shall continue in full force and effect so long as any of the Debt is
unpaid or such longer period if expressly set forth in this Agreement. All
Borrower’s covenants and agreements in this Agreement shall inure to the
benefit of the respective legal representatives, successors and assigns of
Lender.

10.5        Lender’s
Discretion. Whenever pursuant to this Agreement or
any other Loan Document, Lender exercises any right given to it to approve or
disapprove, or consent or withhold consent, or any arrangement or term is to be
satisfactory to Lender or is to be in Lender’s discretion, the decision of
Lender to approve or disapprove, to consent or withhold consent, or to decide
whether arrangements or terms are satisfactory or not satisfactory, or
acceptable or unacceptable or in Lender’s discretion shall (except as is
otherwise specifically herein provided) be in the sole discretion of Lender and
shall be final and conclusive.

10.6        Governing Law.

(a)           THIS AGREEMENT WAS
NEGOTIATED IN THE STATE OF NEW YORK AND THE PROCEEDS OF THE NOTE DELIVERED
PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT
AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF
THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED,
IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH
STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE DEBT. TO THE FULLEST EXTENT PERMITTED
BY LAW, BORROWER HEREBY UNCONDITIONALLY AND

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IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
§ 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

(b)           ANY LEGAL SUIT,
ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO
THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK
COUNTY, NEW YORK  AND BORROWER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES
HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEM, 111 EIGHTH AVENUE, NEW
YORK, NEW YORK 10011 AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK,
AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN
NOTICE OF SAID SERVICE OF BORROWER MAILED OR DELIVERED TO BORROWER IN THE
MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON BORROWER (UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF SERVICE), IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (i) SHALL
GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (ii) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE
SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (iii) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

10.7        Modification, Waiver in Writing. No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the
same shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to or demand on Borrower shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances. Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or
agreement, or exercising any right, power, remedy or privilege hereunder, or
under any other Loan Document, shall operate as or constitute a waiver thereof,
nor shall a single or partial exercise thereof preclude any other future
exercise, or the exercise of any other right, power, remedy or privilege. In
particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under any Loan Document, Lender shall not be deemed
to have waived any right either

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to require
prompt payment when due of all other amounts due under the Loan Documents, or
to declare an Event of Default for failure to effect prompt payment of any such
other amount.

10.8        Trial
by Jury. BORROWER AND LENDER HEREBY AGREE NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM
OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL
BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY THE OTHER.

10.9        Headings/Exhibits.
The Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose. The Exhibits attached hereto, are hereby incorporated  by reference as a part of the Agreement with
the same force and effect as if set forth in the body hereof.

10.10      Severability.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

10.11      Preferences.
Upon the occurrence and continuance of an Event of Default, Lender shall have
the continuing and exclusive right to apply any and all payments by Borrower to
any portion of the Debt. To the extent Borrower makes a payment to Lender, or
Lender receives proceeds of any collateral, which is in whole or part
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Debt or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by Lender. This provision
shall survive the expiration or termination of this Agreement and the repayment
of the Debt.

10.12      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 Agreement or any other Loan Document specifically and expressly
requires the giving of notice by Lender to Borrower and except with respect to
matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which no
Loan Document specifically and expressly requires the giving of notice by
Lender to Borrower.

10.13      Remedies
of Borrower. If a claim or adjudication is made
that Lender or any of its agents, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case

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where by law
or under any Loan Document, Lender or any such agent, as the case may be, has
an obligation to act reasonably or promptly, Borrower agrees that neither
Lender nor its agents, including Servicer, shall be liable for any monetary
damages, and Borrower’s sole remedy shall be to commence an action seeking
injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment. Borrower specifically waives any claim against
Lender and its agents, including Servicer, with respect to actions taken by
Lender or its agents on Borrower’s behalf.

10.14      Prior
Agreements. This Agreement and the other Loan
Documents contain the entire agreement of the parties hereto and thereto in
respect of the transactions contemplated hereby and thereby, and all prior
agreements, understandings and negotiations among or between such parties,
whether oral or written, are superseded by the terms of this Agreement and the
other Loan Documents.

10.15      Offsets,
Counterclaims and Defenses. Borrower hereby waives
the right to assert a counterclaim, other than a compulsory counterclaim, in
any action or proceeding brought against Borrower by Lender or its agents,
including Servicer, or otherwise offset any obligations to make payments
required under the Loan Documents. Any assignee of Lender’s interest in and to
the Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which Borrower may otherwise have against any
assignor of such documents, and no such offset, counterclaim or defense shall
be interposed or asserted by Borrower in any action or proceeding brought by
any such assignee upon such documents, and any such right to interpose or
assert any such offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrower.

10.16      Publicity.
All news releases, publicity or advertising by Borrower or its Affiliates
through any media intended to reach the general public, which refers to the
Loan Documents, the Loan, Lender or any member of the Lehman Group, a Loan
purchaser, the Servicer or the trustee in a Secondary Market Transaction, shall
be subject to the prior written approval of Lender; provided however, that
Lender’s consent shall not be required by Borrower, Borrower’s Affiliates, or
any broker dealer or investor representative related to the marketing or sale
of any investment fund or investment trust managed by Borrower’s Affiliates
which disclosure is required under the Securities Act of 1933 or 1934 or to any
potential purchaser of an interest in the Property. Lender shall have the right
to issue any of the foregoing without Borrower’s approval.

10.17      No
Usury. Borrower and Lender intend at all times to
comply with applicable state law or applicable United States federal law (to
the extent that it permits Lender to contract for, charge, take, reserve or
receive a greater amount of interest than under state law) and that this Section 10.17
shall control every other agreement in the Loan Documents. If the applicable
law (state or federal) is ever judicially interpreted so as to render usurious
any amount called for under the Note or any other Loan Document, or contracted
for, charged, taken, reserved or received with respect to the Debt, or if Lender’s
exercise of the option to accelerate the maturity of the Loan or any prepayment
by Borrower results in Borrower having paid any interest in excess of that
permitted by applicable law, then it is Borrower’s and Lender’s express intent
that

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all excess amounts
theretofore collected by Lender shall be credited against the unpaid Principal
and all other Debt (or, if the Debt has been or would thereby be paid in full,
refunded to Borrower), and the provisions of the Loan Documents immediately be
deemed reformed and the amounts thereafter collectible thereunder reduced,
without the necessity of the execution of any new document, so as to comply
with applicable law, but so as to permit the recovery of the fullest amount
otherwise called for thereunder. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the Loan shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that the
rate or amount of interest on account of the Debt does not exceed the maximum
lawful rate from time to time in effect and applicable to the Debt for so long
as the Debt is outstanding. Notwithstanding anything to the contrary contained
in any Loan Document, it is not the intention of Lender to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.

10.18      Conflict;
Construction of Documents. In the event of any
conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that each is represented by separate counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents
shall not be subject to the principle of construing their meaning against the
party that drafted them.

10.19      No
Third Party Beneficiaries. The Loan Documents are
solely for the benefit of Lender and Borrower and nothing contained in any Loan
Document shall be deemed to confer upon anyone other than the Lender and
Borrower any right to insist upon or to enforce the performance or observance
of any of the obligations contained therein.

10.20      Assignment.
The Loan, the Note, the Loan Documents and/or Lender’s rights, title,
obligations and interests therein may be assigned by Lender and any of its
successors and assigns to any Person at any time in its discretion, in whole or
in part, whether by operation of law (pursuant to a merger or other successor
in interest) or otherwise. Upon such assignment, all references to Lender in
this Loan Agreement and in any Loan Document shall be deemed to refer to such
assignee or successor in interest and such assignee or successor in interest
shall thereafter stand in the place of Lender. Borrower may not assign its
rights, title, interests or obligations under this Loan Agreement or under any
of the Loan Documents.

10.21      Set-Off.
In addition to any rights and remedies of Lender
provided by this Loan Agreement and by law, Lender shall have the right,
without prior notice to Borrower, any such notice being expressly waived by
Borrower to the extent permitted by applicable law, upon any amount becoming
due and payable by Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by Lender or any Affiliate
thereof to or for the credit or the account of Borrower. Lender agrees promptly
to notify Borrower after any such set-off and

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application
made by Lender; provided that the failure to give such notice shall not
affect the validity of such set-off and application.

10.22      Certain
Additional Rights of Lender. Notwithstanding
anything to the contrary which may be contained in this Agreement, Lender shall
have:

(i)            the right to
routinely consult with Borrower’s management regarding the significant business
activities and business and financial developments of Borrower, provided,
however, that such consultations shall not include discussions of environmental
compliance programs or disposal of hazardous substances. Consultation meetings
(which may be held by teleconference) should occur on a regular basis (no less
frequently than quarterly) with Lender having the right to call special
meetings at any reasonable times upon reasonable notice;

(ii)           the right, in
accordance with the terms of this Agreement, to examine the books and records
of Borrower at any time upon reasonable notice;

(iii)          the right, in
accordance with the terms of this Agreement, to receive monthly, quarterly and
year-end financial reports, including balance sheets, statements of income,
shareholder’s equity and cash flow, a management report and schedules of outstanding
indebtedness;

(iv)          the right, without
restricting any other rights of Lender under this Agreement (including any
similar right), to restrict financing to be obtained with respect to the
Property so long as any portion of the Debt remains outstanding;

(v)           the right, without
restricting any other right of Lender under this Agreement or the other Loan
Documents (including any similar right), to restrict, upon the occurrence of an
Event of Default, Borrower’s payments of management, consulting, director or
similar fees to Affiliates of Borrower from the Rents;

(vi)          the right, without
restricting any other rights of Lender under this Agreement (including any
similar right), to approve any operating budget and/or capital budget of
Borrower;

(vii)         the right, without
restricting any other rights of Lender under this Agreement (including any
similar right), to approve any acquisition by Borrower of any other significant
property (other than personal property required for the day to day operation of
the Property); and

(viii)        the right, without
restricting any other rights of Lender under this Agreement (including any
similar right), to restrict the transfer of interests in Borrower held by its
members, and the right to restrict the transfer of interests in such member,
except for any transfer that is a Permitted Transfer.

The rights described above may be exercised directly or indirectly by
any Person that owns substantially all of the ownership interests in Lender.

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10.23      Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument.

10.24      Yield
Maintenance Premium. Borrower acknowledges that (a) Lender
is making the Loan in consideration of the receipt by Lender of all interest
and other benefits intended to be conferred by the Loan Documents and (b) if
payments of Principal are made to Lender prior to the Stated Maturity Date, for
any reason whatsoever, whether voluntary, as a result of Lender’s acceleration
of the Loan after an Event of Default, by operation of law or otherwise, Lender
will not receive all such interest and other benefits and may, in addition,
incur costs. For these reasons, and to induce Lender to make the Loan, Borrower
agrees that, except as expressly provided in Section 2.2.3,  Section 2.3.2, Section 2.3.4
and Section 7.4.2 hereof, all prepayments, if any, whether
voluntary or involuntary, will be accompanied by the Yield Maintenance Premium.
Such Yield Maintenance Premium shall be required whether payment is made by
Borrower, by a Person on behalf of Borrower, or by the purchaser at any
foreclosure sale, and may be included in any bid by Lender at such sale. Borrower
further acknowledges that (A) it is a knowledgeable real estate developer
and/or investor; (B) it fully understands the effect of the provisions of
this Section 10.24, as well as the other provisions of the Loan
Documents; (C) the making of the Loan by Lender at the Interest Rate and
other terms set forth in the Loan Documents are sufficient consideration for
Borrower’s obligation to pay a Yield Maintenance Premium (if required); and (D) Lender
would not make the Loan on the terms set forth herein without the inclusion of
such provisions. Borrower also acknowledges that the provisions of this
Agreement limiting the right of prepayment and providing for the payment of the
Yield Maintenance Premium and other charges specified herein were independently
negotiated and bargained for, and constitute a specific material part of the
consideration given by Borrower to Lender for the making of the Loan except as
expressly permitted hereunder. BY EXECUTING THIS AGREEMENT, BORROWER HEREBY
EXPRESSLY ACKNOWLEDGES AND UNDERSTANDS THAT, PURSUANT TO THE TERMS OF THIS
AGREEMENT, BORROWER HAS AGREED THAT IT DOES NOT HAVE THE RIGHT TO PREPAY THE
LOAN IN WHOLE OR IN PART WITHOUT PREMIUM EXCEPT AS OTHERWISE PROVIDED
HEREIN, AND THAT BORROWER SHALL BE LIABLE FOR THE PAYMENT OF THE YIELD
MAINTENANCE PREMIUM TO THE EXTENT PROVIDED HEREIN IF BORROWER PREPAYS THE LOAN
FOLLOWING THE OCCURRENCE OF AN ACCELERATION OF THE LOAN. BORROWER HEREBY
FURTHER EXPRESSLY ACKNOWLEDGES AND UNDERSTANDS THAT LENDER HAS MADE THE LOAN
EVIDENCED HEREBY IN RELIANCE ON THE FOREGOING AGREEMENTS AND WAIVERS OF
BORROWER, THAT LENDER WOULD NOT HAVE MADE THIS LOAN WITHOUT SUCH AGREEMENTS AND
WAIVERS OF BORROWER, AND THAT THE MAKING OF THE LOAN AT THE INTEREST RATE AND
FOR THE TERMS SET FORTH HEREIN CONSTITUTES ADEQUATE CONSIDERATION, GIVEN WEIGHT
BY THE UNDERSIGNED, FOR SUCH AGREEMENTS AND WAIVER.

[Remainder of page intentionally
left blank. Signature

counterparts follow on next page(s).]

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IN WITNESS WHEREOF,
the parties hereto have caused this Loan Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above
written.

	
  

  	
   

  	
  BEHRINGER HARVARD TERRACE LP,

  
	
   

  	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Behringer Harvard Terrace GP, LLC, a Delaware

  limited liability company, its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III, Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEHMAN
  BROTHERS BANK, FSB, a
  federal stock

  savings bank

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

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