Document:

Exhibit 10.123

 

This
instrument prepared by

and when
recorded, return to:

Kilpatrick
Stockton LLP

1100 Peachtree
Street, Suite 2800

Atlanta,
Georgia 30309

Attn: Mark A.
Palmer, Esq.

 

ABOVE SPACE FOR RECORDER’S USE

 

ASSUMPTION AND RELEASE AGREEMENT

 

THIS ASSUMPTION
AND RELEASE AGREEMENT (this “Agreement”) is made effective as of August 17, 2006, by
and among A-S 60 HWY 75-LOY LAKE, L.P.,
a Texas limited partnership (“Original Borrower”), STEVEN
D. ALVIS, JAY K. SEARS, H. DEAN
LANE, JR. and KYLE D. LIPPMAN (collectively, “Original Borrower Principal”),
MB  SHERMAN TOWN CENTER LIMITED PARTNERSHIP, an Illinois limited
partnership (“Assumptor”),
MINTO BUILDERS (FLORIDA), INC., a
Florida corporation (“New
Borrower Principal”),
and WELLS FARGO BANK, N.A., as Trustee for the Registered Holders of
J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through
Certificates, Series 2004-CIBC10 (“Noteholder”).

 

RECITALS:

 

A.            Original
Borrower executed and delivered to the order of JPMorgan Chase Bank, a New York
banking corporation (“Lender”),
a certain Fixed Rate Note dated June 15, 2004 (together with all addenda,
modifications, amendments, riders, exhibits and supplements thereto, the “Note”), in the stated
principal amount of $39,650,000.00, which Note evidences a loan (the “Loan”) made by Lender
to Original Borrower. To secure the repayment of the Note, Original Borrower,
among other things, executed and delivered a Deed of Trust and Security
Agreement executed by Original Borrower to Reno Hartfiel, as trustee, for the
benefit of Lender, as beneficiary, dated as of June 15, 2004, recorded in the
Real Property Records of Grayson

 

1

 

County, Texas,
in Volume 3680, Page 231 (together with all addenda, modifications, amendments,
riders, exhibits and supplements thereto, the “Security Instrument”), that grants a lien
on certain property described on Exhibit A attached hereto and
incorporated herein by reference and more particularly described in the Security
Instrument (the “Property”).
Original Borrower is liable for the payment and performance of all of Original
Borrower’s obligations under the Note, the Security Instrument and all those
other documents listed on Exhibit B attached hereto together with all addenda,
riders, exhibits and supplements thereto all of which are incorporated herein
by reference as though fully set forth herein (the Note, the Security Instrument
and such other documents and instruments are hereinafter referred to as the “Loan  Documents”).

 

B.            Each
of the Loan Documents has been duly assigned or endorsed to Noteholder.

 

C.            Noteholder,
as the holder of the Note and beneficiary under the Security Instrument, has
been asked to consent to the transfer of the Property to Assumptor (the “Transfer”) and the
assumption by Assumptor and New Borrower Principal of the obligations of Original
Borrower and Original Borrower Principal, respectively, under the Loan
Documents (the “Assumption”).

 

D.            Noteholder
has agreed to consent to the Transfer and the Assumption subject to the terms
and conditions stated below.

 

E.             Section
3.08 of that certain Pooling and Servicing Agreement dated as of November 23,
2004 (the “PSA”)
authorizes Midland Loan Services, Inc., a Delaware corporation (“Master Servicer”), as
Master Servicer under the PSA, on behalf of Noteholder, under certain terms and
conditions to waive the due on sale clause and facilitate the Transfer and the Assumption,
and Master Servicer has elected to do so on the terms and conditions set forth
in this Agreement. Master Servicer’s execution and delivery of this Agreement
is binding upon Noteholder pursuant to the PSA.

 

AGREEMENT:

 

In
consideration of the foregoing and the mutual covenants and promises set forth
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Noteholder, Original Borrower,
Original Borrower Principal, Assumptor and New Borrower Principal agree as
follows:

 

1.             Incorporation
of Recitals. The foregoing recitals are incorporated herein as a substantive,
contractual part of this Agreement.

 

2.             Assumption
of Obligation. Assumptor agrees to and does hereby assume as of the origination
date of the Loan, all of the payment and performance obligations of Original Borrower
set forth in the Note, the Security Instrument and the other Loan Documents in accordance
with their respective terms and conditions, as the same may be modified by this
Agreement including, without limitation, payment of all sums due and payable under
the Note. Assumptor further agrees to abide by and be bound by all of the terms
of the Loan Documents, all as though each of the Loan Documents had been made,
executed and delivered by Assumptor. The provisions of the Loan Documents are
incorporated herein by reference as if fully set forth

 

2

 

herein.
Assumptor acknowledges and agrees that any reference to Original Borrower in
the Loan Documents shall be deemed to refer to Assumptor. Assumptor hereby adopts,
ratifies and confirms as of the date hereof all of the representations,
warranties and covenants of Original Borrower contained in the Loan Documents
in connection with the Loan (including, but not limited to, the warranty of
title set forth in, and the other terms and provisions of, Section 5.2 of the
Security Instrument) as if Assumptor was Original Borrower named in the Loan
Documents, and, without limitation of the foregoing, Assumptor hereby
represents, warrants, and covenants that Assumptor has good, indefeasible, and
insurable fee simple title to the real property comprising part of the Property
and good and indefeasible title to the balance of the Property, free and clear
of all liens whatsoever except the Permitted Exceptions (as defined in the Security
Instrument), such other liens as are permitted pursuant to the Loan Documents
and the liens created by the Loan Documents.

 

3.             Original
Borrower’s Acknowledgments, Representations and Warranties. Original Borrower
acknowledges, represents and warrants to Noteholder as of the date of this
Agreement that:

 

(a)           The
Note has an unpaid principal balance as of the date of this Agreement, of $38,448,939.41
and prior to default bears interest at the rate of 4.95% per annum, subject to adjustment
as, and to the extent, set forth in the Note. There are presently the following
balances in the indicated reserve accounts (each of the following terms for the
individual reserve accounts are defined in the Escrow Agreement, as defined on Exhibit
B) maintained by Noteholder in connection with the Loan: (i) $809,915.67 in
the Tax and Insurance Funds reserve account, (ii) $116,846.24 in the TI &
LC Funds reserve account, (iii) $58,640.64 in the On-going Replacement Reserve,
(iv) $3,856.72 in the Tenancy Reserve Funds reserve account, and (v) $0.00 in
the Construction Reserve Funds reserve account. Contemporaneously herewith, Original
Borrower has transferred and assigned to Assumptor all right, title and
interest of Original Borrower in and to such reserve accounts.

 

(b)           The
Note requires that monthly payments of principal and interest in the amount of
$211,639.80 be made on or before the first day of each month continuing to July
1, 2014, whereupon the entire outstanding balance of the Loan shall be
immediately due and payable, if not sooner accelerated or paid.

 

(c)           The
Security Instrument is a valid first lien on the Property for the full unpaid
principal amount of the Loan and all other amounts as stated in the Loan
Documents.

 

(d)           There
are no defenses, offsets or counterclaims by Original Borrower to the Note, the
Security Instrument or the other Loan Documents.

 

(e)           There
are no defaults by Original Borrower under the provisions of the Note, the
Security Instrument or the other Loan Documents, nor, to the best of Original Borrower’s
knowledge, are there any conditions which with the giving of notice or the
passage of time or both may constitute a default by Original Borrower under the
provisions of the Note, the Security Instrument or the other Loan Documents.

 

3

 

(f)            To
the best of Original Borrower’s knowledge, all provisions of the Note, the
Security Instrument and the other Loan Documents are valid, in full force and
effect, and enforceable in accordance with their terms.

 

(g)           There
are no subordinate liens of any kind covering or relating to the Property, nor
are there any mechanics’ liens or liens for unpaid taxes or assessments encumbering
the Property, nor has notice of a lien or notice of intent to file a lien been
received by Original Borrower.

 

Original
Borrower understands and intends that Noteholder and Assumptor will rely upon
the acknowledgments, representations and warranties contained herein in
entering into this Agreement.

 

4.             Assumptor’s
and New Borrower Principal’s Representations and Warranties. Assumptor and
New Borrower Principal jointly and severally represent and warrant to Noteholder
as of the date of this Agreement that neither Assumptor nor New Borrower
Principal has any knowledge that any of the representations made by Original
Borrower in Section 3 above are not true and correct. Assumptor and New
Borrower Principal understand and intend that Noteholder will rely on the
representations and warranties contained herein.

 

5.             Consent
to Transfer and Assumption. Noteholder hereby consents to the Transfer and
to the Assumption, subject to the terms and conditions set forth in this
Agreement. Noteholder’s consent to the Transfer of the Property to Assumptor
and Noteholder’s consent to the Assumption are not intended to be and shall not
be construed as a consent to any subsequent transfer or assumption which
requires Noteholder’s consent pursuant to the terms of the Loan Documents.

 

6.             Assumption
by New Borrower Principal of Liability for the Exceptions to Non- Recourse.
New Borrower Principal hereby adopts, ratifies and confirms all of the representations,
warranties and covenants of Original Borrower Principal under the Loan Documents
as if New Borrower Principal were the Original Borrower Principal named
therein, and jointly and severally assumes all liability of Original Borrower
Principal under the Loan Documents as of the origination date of the Loan,
including, without limitation, the Environmental Indemnity Agreement, the
Guaranty, and Article 10 of the Note. Reference in any Loan Document to
Original Borrower Principal henceforth shall be deemed to refer to New Borrower
Principal.

 

7.             Release
of Original Borrower and Original Borrower Principal. In reliance on Original
Borrower’s and Assumptor’s acknowledgments, representations and warranties in
this Agreement and in consideration for the releases contained in Section 12 of
this Agreement, Noteholder releases Original Borrower and Original Borrower
Principal from their respective obligations under the Loan Documents, provided that neither Original Borrower
nor Original Borrower Principal is released from any liability pursuant to this
Agreement or any of the Loan Documents, including, without limitation, Section
11 of the Security Instrument, for any liability that relates to the period
prior to the date hereof regardless of when any environmental hazard or other
condition giving rise to any such liability thereunder is discovered. Nothing
contained herein shall be deemed to impair the right of Noteholder to name
Original Borrower, for

 

4

 

purposes of
extinguishing Original Borrower’s interest in the Property, as a party
defendant in any action or suit for judicial foreclosure and sale under the
Security Instrument or for purposes of appointment of a receiver for the
Property, or for purposes of enforcement of the assignment of leases and rents
set forth in the Security Instrument.

 

8.             No
Impairment of Lien. Nothing set forth herein shall affect the priority or
extent of the lien of the Security Instrument or any of the other Loan
Documents, nor, except as expressly set forth herein, release or change the
liability of any party who may now be or after the date of this Agreement may
become liable, primarily or secondarily, under the Loan Documents. Except as
expressly modified hereby, the Note, the Security Instrument and the other Loan
Documents remain unchanged, are hereby ratified and reaffirmed in all respects
and shall remain in full force and effect, and this Agreement shall have no
effect on the priority or validity of the liens, operation and effect of the
Security Instrument and the other Loan Documents, all of which are incorporated
herein by reference. Nothing herein shall be construed to constitute a novation
of the Loan or of any of the Loan Documents.

 

9.             Costs.
Original Borrower agrees to pay all fees and costs (including reasonable attorneys’
fees) incurred by Noteholder in connection with Noteholder’s consent to and
approval of the Transfer of the Property and the assumption fee equal to 1.0%
of the outstanding principal balance of the Loan which is required to be paid
by Original Borrower to Noteholder in consideration of the consent to the
Transfer and to the Assumption.

 

10.           Financial
Information. Assumptor and New Borrower Principal represent and warrant to
Noteholder that all financial information and information regarding the
management capability of Assumptor and New Borrower Principal provided to
Noteholder was true and correct as of the date provided to Noteholder and
remains materially true and correct as of the date of this Agreement.

 

11.           Addresses.
From and after the date hereof, the addresses for notice for Assumptor, New
Borrower Principal and Noteholder hereunder and under the Loan Documents are as
follows:

 

Assumptor:

 

MB Sherman
Town Center Limited Partnership

2901
Butterfield Road

Oak Brook,
Illinois 60523

Attn:                                      

 

New Borrower
Principal:

 

Minto Builders
(Florida), Inc.

                                            

                                            

Attn: 

 

5

 

Noteholder:

 

Wells Fargo
Bank, N.A., as Trustee for the Registered

Holders of
J.P. Morgan Chase Commercial Mortgage

Securities
Corp., Commercial Mortgage Pass-Through

Certificates,
Series 2004-CIBC10

c/o NorthMarq
Capital, Inc.

1 Riverway,
Suite 2400

Houston, Texas
77056

 

Attn: Loan
Number 210404

 

12.           Complete
Release. Assumptor, Original Borrower, Original Borrower Principal and New
Borrower Principal hereby jointly and severally, unconditionally and
irrevocably release and forever discharge Lender, Noteholder and Master
Servicer and their respective successors, assigns, agents, directors, officers,
employees and attorneys, and each current or substitute trustee, if any, under
the Security Instrument (collectively, “Indemnitees”) from all Claims (as defined
below). Further, each of Original Borrower and Original Borrower Principal hereby
covenants and agrees that it will not take or assert, and will not request or
cause any other person or entity to take or assert, any action, claim or
allegation in contradiction of, or inconsistent with, the following statement:
all provisions of the Note, the Security Instrument and the other Loan Documents
are valid, in full force and effect, and enforceable in accordance with their
terms. Original Borrower and Original Borrower Principal jointly and severally
agree to indemnify Indemnitees and defend and hold them harmless from any and
all claims, losses, causes of action, costs and expenses of every kind or
character incurred by or asserted against Indemnitees in connection with (A)
any Claims, the Transfer, or the breach by Original Borrower or Original
Borrower Principal of the Loan Documents, as amended herein, but only to the
extent that such claims, losses, causes of action, costs and expenses arise out
of or are in any way connected with or result from the acts, actions or
omissions of Original Borrower or Original Borrower Principal, or (B) any actions
or conduct taken or caused to be taken by Original Borrower, Original Borrower
Principal, or any person or entity claiming by, through, under, or on behalf of
Original Borrower or Original Borrower Principal which are in contradiction of,
inconsistent with, or in breach of the terms and provisions of this Section 12
(including, without limitation, the release and discharge set forth in this
Section 12). Assumptor and New Borrower Principal jointly and severally agree
to indemnify Indemnitees, and defend and hold them harmless from any and all
claims, losses, causes of action, costs and expenses of every kind or character
incurred by or asserted against Indemnitees in connection with Claims, the
Transfer or the breach by Assumptor or New Borrower Principal of the Loan
Documents, as amended herein, but only to the extent that such claims, losses,
causes of action, costs and expenses arise out of or are in any way connected
with or result from the acts, actions or omissions of Assumptor or New Borrower
Principal.

 

As used in
this Agreement, the term “Claims”
shall mean any and all possible claims, demands, actions, fees, costs, expenses
and liabilities whatsoever, known or unknown, at law or in equity, originating
in whole or in part, on or before the date of this Agreement, which Original Borrower,
Original Borrower Principal, or any of their respective partners, limited
partners, members, officers, directors, shareholders, agents or employees may
now or hereafter have

 

6

 

against
Indemnitees, and irrespective of whether any such Claims arise out of contract,
tort, violation of laws, regulations or otherwise, arising out of or relating
to the Loan or any of the Loan Documents including, without limitation, any
contracting for, charging, taking, reserving, collecting or receiving interest
in excess of the highest lawful rate applicable thereto and any loss, cost or
damage of any kind or character arising out of or in any way connected with or
in any way resulting from the acts, actions or omissions of Indemnitees,
including any requirement that the Loan Documents be modified as a condition to
the transactions contemplated by this Agreement, any charging, collecting or
contracting for prepayment premiums, transfer fees or assumption fees, any
breach of fiduciary commitment, undue influence, duress, economic coercion,
violation of any federal or state securities or Blue Sky laws or regulations,
conflict of interest, bad faith, malpractice, violations of the Racketeer
Influenced and Corrupt Organizations Act, intentional or negligent infliction
of mental or emotional distress, tortious interference with contractual
relations, tortious interference with corporate governance or prospective
business advance, breach of contract, deceptive trade practices, libel,
slander, conspiracy or any claim for wrongfully accelerating the Note or
wrongfully attempting to foreclose on any collateral relating to the Note, but
in each case only to the extent permitted by applicable law. Original Borrower,
Assumptor, Original Borrower Principal and New Borrower Principal agree that
Noteholder has no fiduciary or similar obligations to any of such parties and
that their relationship is strictly that of creditor and debtor. This release
is accepted by Noteholder pursuant to this Agreement and shall not be construed
as an admission of liability on the part of any party hereto. Original Borrower,
Original Borrower Principal, Assumptor and New Borrower Principal hereby represent
and warrant that they are the current legal and beneficial owners of all
Claims, if any, released hereby and have not assigned, pledged or contracted to
assign or pledge any such Claims to any other person.

 

13.           Usury.
It is expressly stipulated and agreed to be the intent of all of the parties hereto
at all times to comply with the applicable law governing the maximum rate or
amount of interest payable on or in connection with the Note and the Loan (or
applicable United States federal law to the extent that it permits Noteholder
to contract for, charge, take, reserve or receive a greater amount of interest
payable on or in connection with the Note and the Loan than under applicable
law). If the applicable law is ever judicially interpreted so as to render
usurious any amount called for under the Note or under the Security Instrument,
this Agreement or any other Loan Document, or contracted for, charged, taken,
reserved or received with respect to the Loan, or if Original Borrower or
Assumptor have paid any interest in excess of that permitted by law, then it is
the express intent of all of the parties that all excess amounts theretofore
collected by Noteholder or Lender be credited to the then outstanding principal
balance of the Note (or, if the Note has been or would thereby be paid in full,
any surplus refunded to Original Borrower or Assumptor), and the provisions of
the Note, this Agreement, the Security Instrument and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with such applicable law but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of the Note does not include the right to
accelerate any interest, which has not otherwise accrued on the date of such
acceleration, and Noteholder does not intend to collect any unearned interest
in the event of acceleration. All sums paid or agreed to be paid to Lender or
Noteholder for the use, forbearance or detention of the indebtedness evidenced
by the Note or other Loan Documents shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread

 

7

 

through the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the applicable
usury ceiling. Notwithstanding any provision contained in the Note, the
Security Instrument, this Agreement or in any of the other Loan Documents, as
amended herein, that permits the compounding of interest including, without
limitation, any provision by which any of the accrued interest is added to the
principal amount of the Note, the total amount of interest that Original
Borrower or Assumptor is obligated to pay and Noteholder is entitled to receive
with respect to the Loan shall not exceed the amount calculated on a simple
(i.e., non-compounded) interest basis at the maximum rate allowed by applicable
law on principal amounts actually advanced to or for the account of Original
Borrower or Assumptor, including all current and prior advances and any advances
made pursuant to the Security Instrument, this Agreement or the other Loan Documents,
as amended herein (including, but not limited to, the payment of taxes,
insurance premiums and the like). The provisions of the Note and the other Loan
Documents limiting the amount of interest which may be contracted for, charged
or received on the indebtedness evidenced thereby and dealing with the rights
and duties of the parties with respect to the charging or receiving of interest
in excess of the maximum rate, are hereby incorporated in this Agreement by
reference as though fully set forth herein. To the extent permitted by law,
Original Borrower, Assumptor, Original Borrower Principal and New Borrower
Principal hereby waive and release all claims and defenses based upon usury in
connection with the execution and delivery of the Note and the other Loan
Documents and the borrowing of the funds represented by the Loan.

 

14.           Further
Assurances. Original Borrower, Original Borrower Principal, Assumptor and
New Borrower Principal agree to perform such other and further acts, and to
execute such additional documents, agreements, notices or financing statements,
as Noteholder deems reasonably necessary or desirable from time to time to
create, preserve, continue, perfect, validate or carry out any of Noteholder’s
rights under this Agreement and/or the other Loan Documents.

 

15.           Miscellaneous.

 

(a)           This
Agreement shall be construed according to and governed by the laws of the
jurisdiction(s), which are specified by the Security Instrument. In the event
the Security Instrument does not specifically state what jurisdiction’s laws
govern, this Agreement shall be construed according to and governed by the laws
in which the Property are located without regard to its conflicts of law
principles.

 

(b)           If
any provision of this Agreement is adjudicated to be invalid, illegal or unenforceable,
in whole or in part, it will be deemed omitted to that extent and all other provisions
of this Agreement will remain in full force and effect.

 

(c)           No
change or modification of this Agreement shall be valid unless the same is in
writing and signed by all parties hereto.

 

(d)           The
captions contained in this Agreement are for convenience of reference only and
in no event define, describe or limit the scope or intent of this Agreement or
any of the provisions or terms hereof.

 

8

 

(e)           This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, legal representatives, successors and permitted
assigns.

 

(f)            This
Agreement may be executed in any number of counterparts with the same effect as
if all parties hereto had signed the same document. All such counterparts shall
be construed together and shall constitute one instrument, but in making proof
hereof it shall only be necessary to produce one such counterpart.

 

(g)           THIS
WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED, REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

 

(h)           THIS
AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS AS SET FORTH IN SECTION 12
HEREOF.

 

16.           Reservation
of Rights. Nothing contained in this Agreement shall prevent or in any way
diminish or interfere with any rights or remedies including, without
limitation, the right to contribution, which Noteholder may have against
Original Borrower, Original Borrower Principal, Assumptor, New Borrower
Principal or any other party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (codified at Title 42, U.S.C. Section
9601, et. seq.), as it may be amended from time to time, any successor
statute thereto or any other applicable federal, state or local laws, all such
rights being hereby expressly reserved.

 

17.           Compliance
with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws.
Assumptor shall comply with all Requirements of Law relating to money laundering,
anti-terrorism, trade embargos and economic sanctions now or hereafter in
effect. Upon Noteholder’s request from time to time during the term of the
Loan, Assumptor shall certify in writing to Noteholder that Assumptor’s
representations, warranties and obligations under this Section 17 remain true
and correct and have not been breached. Assumptor shall immediately notify
Noteholder in writing if any of such representations, warranties or covenants are
no longer true or have been breached or if Assumptor has reasonable basis to
believe that they may no longer be true or have been breached. In connection
with such an event, Assumptor shall comply with all Requirements of Law and
directives of Governmental Authorities and, at Noteholder’s request, provide to
Noteholder copies of all notices, reports and other communications exchanged
with or received from Governmental Authorities relating to such an event.
Assumptor shall also reimburse Noteholder any expense incurred by Noteholder in
evaluating the effect of such an event on the Loan and Noteholder’s interest in
the collateral for the Loan, in obtaining any necessary license from
Governmental Authorities as may be necessary for Noteholder to enforce its
rights under the Loan Documents, and in complying with all Requirements of Law
applicable to Noteholder as the result of the existence of such an event and for
any penalties or fines imposed upon Noteholder as a result thereof. Further,
Assumptor shall immediately notify Noteholder in writing if any future tenant
of the Property (i) is identified on the OFAC List, or (ii) is a Person with
whom a citizen of the United States is prohibited to engage in transactions by
any trade embargo, economic sanction or other prohibition of United

 

9

 

States law,
regulation or Executive Order of the President of the United States. For
purposes of this Agreement, the following definitions shall apply:

 

“Governmental Authority”
means any nation or government, any state or other political subdivision
thereof, and any Person exercising executive, legislative, judicial or
administrative functions of or pertaining to such government.

 

“OFAC List” means the
list of specially designated nationals and blocked Persons subject to financial
sanctions that is maintained by the U.S. Treasury Department, Office of Foreign
Assets Control and any other similar list maintained by the U.S. Treasury
Department, Office of Foreign Assets Control pursuant to any Requirements of
Law including, without limitation, trade embargo, economic sanctions or other
prohibitions imposed by Executive Order of the President of the United States.
The OFAC List currently is accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

 

“Requirements of Law”
means (a) the organizational documents of an entity, and (b) any law, regulation,
ordinance, code, decree, treaty, ruling or determination of an arbitrator,
court or other Governmental Authority or any Executive Order issued by the
President of the United States, in each case applicable to or binding upon such
Person or to which such Person any of its property or the conduct of its
business is subject including, without limitation, laws, ordinances and regulations
pertaining to the zoning, occupancy and subdivision of real property.

 

“Person” means an
individual, partnership, limited partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.

 

18.           Additional
Permitted Transfers. Notwithstanding any terms or provisions of the Loan
Documents to the contrary (including, without limitation, Article 8 of the
Security Instrument), so long as MB Sherman Town Center Limited Partnership, an
Illinois limited partnership, is the sole Borrower, the following Transfers
(each, a “Permitted
Transfer” and, collectively, the “Permitted Transfers”) will be permitted
without Noteholder’s consent, subject to the terms and conditions set forth in
this Section 18:

 

(a)           MB
REIT Transfers. Subject to the terms and conditions of subparagraphs (1), (2),
and (3), below, the following series of transactions (each, an “MB REIT Transfer”) to
be consummated between the date of this Agreement and December 31, 2006, that
will lead to the full capitalization of Minto Builders (Florida), Inc., a
Florida corporation and a REIT (“MB  REIT”):

 

(i)            To the extent not
completed prior to the date of this Agreement, issuance to individuals of 125
shares of non-voting Series B Preferred Stock in MB REIT to satisfy certain REIT
regulations requiring MB REIT to have at least 100 shareholders; such Series B
Preferred Stock will be issued at a price of $1,000 per share with a 12.5%
preferred return and shall have no voting rights;

 

(ii)           Issuance to Inland
Western Real Estate Trust, Inc., a Maryland corporation and a public REIT (“Inland Western”), of
up to $60,000,000.00 in additional Class C Preferred Stock in MB REIT and the
subsequent redemption thereof by MB

 

10

 

REIT; such
Class C Preferred Stock will earn a preferred return of 7% and shall have no
voting rights; and

 

(iii)          Issuance to Inland
American Real Estate Trust, Inc., a Maryland corporation and a public REIT (“Inland American”), of
up to $1,128,000,000.00 in additional Special Voting Stock in MB REIT and the
subsequent conversion thereof to Common Stock so that after such issuance and
conversion Inland American will own 80% of the value of the stock of MB REIT
and approximately 97.5% of the Common Stock of MB REIT, with Minto (Delaware),
LLC, a Delaware limited liability company, owning the remaining approximately
2.5% of the Common Stock. Such Special Voting Stock shall be convertible to
Common Stock and entitled to 0.99 votes per share and a liquidation preference
of $0.01 per share. The Common Stock in MB REIT shall be entitled to one vote
per share.

 

provided,
that, with respect to any of the transactions described in this Section
18(a):

 

(1)           With respect to any MB
REIT Transfer resulting in Inland American becoming the owner of greater than
forty-nine percent (49%) of the direct or indirect ownership interests in
Borrower or MB REIT, Borrower shall deliver to Noteholder and Noteholder’s
counsel: (A) written notice of such MB REIT Transfer at least fifteen (15)
business days prior to the consummation thereof; which notice requirement may
be satisfied by Borrower giving written notice to Noteholder, at least fifteen
(15) business days prior to the commencement of such period, of the thirty (30)
day period in which Borrower anticipates such MB REIT Transfer will occur
(e.g., if Borrower anticipates that such transaction will occur during the
period from July 1 to July 30, 2006, Borrower shall give written notice thereof
to Noteholder on or before June 12, 2006), and, if such MB REIT Transfer does
not occur during the thirty-day period identified in any such notice, then Borrower
shall give a subsequent written notice to Noteholder at least fifteen (15) business
days prior to the commencement of a later thirty-day period in which Borrower
then anticipates such MB REIT Transfer will occur; in all events, Borrower
shall give written notice to Noteholder of such MB REIT Transfer within ten
(10) business days after the consummation thereof; and (B) at least ten (10)
business days prior to such MB REIT Transfer, a non-consolidation opinion in
form and substance, and issued by a law firm, satisfactory to Noteholder and
its counsel in their sole discretion, it being acknowledged that such
nonconsolidation opinion may be delivered to Noteholder and its counsel at any
time during the ninety (90) day period prior to such MB REIT Transfer and
Borrower shall promptly after the consummation of such MB REIT Transfer cause
to be delivered to Noteholder a re-dated original of such non-consolidation
opinion, dated as of the date of such consummation.

 

(2)           Within ten (10)
business days after the end of each calendar quarter (commencing with the
calendar quarter ending June 30, 2006), Borrower shall give Noteholder written
notice of any MB REIT Transfer(s) that has occurred during said calendar quarter,
including the MB REIT Transfer described in subparagraph (1), above; and

 

11

 

(3)           Except as contemplated
in subparagraph (1), above, no MB REIT Transfer shall be a “Permitted Transfer”
under this Section 18 if it results in either (A) any Person who does not now,
as of the date of this Agreement, own greater than forty-nine percent (49%) of
the ownership interests in Borrower or MB REIT becoming the owner (by itself or
together with its Affiliates) of greater than fortynine percent (49%) of the
ownership interests in Borrower or MB REIT, or (B) any Person who does not now,
as of the date of this Agreement, Control Borrower or MB REIT, obtaining
Control (by itself or together with its Affiliates) of Borrower or MB REIT (as
such term “Control” is hereinafter defined). Any transaction described in this
subparagraph (3) shall be subject to the applicable terms and conditions of the
Loan Documents, including, without limitation, Article 8 of the Security
Instrument, and, without limitation, unless earlier notice is required under
any such terms and conditions, Borrower shall give Noteholder at least fifteen
(15) business days advance written notice of any transaction described in this
subparagraph (3). “Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or other agreement or otherwise; “Controlling” has a
correlative meaning.

 

(b)           Inland
American Transfers. The following Transfers of stock in Inland American:

 

(i)            Transfer of stock in
Inland American to Inland Western, Inland Retail Real Estate Trust, Inc., a
Maryland corporation, Inland Real Estate Corporation, a Maryland corporation,
or Inland Real Estate Investment Corporation, a Delaware corporation, in
connection with a concurrent merger of Inland American with or into such
entity, so long as the applicable entity is a REIT that is a publicly traded corporation
and related to Inland American, it being acknowledged that the term “publicly
traded” (as used in this subparagraph (i)) shall not be deemed to require that
the corporation’s stock be traded on a public stock exchange; and

 

(ii)           Transfers of stock in
Inland American so long as all such Transfers, in the aggregate, do not result
in (i) any Person who does not now, as of the date of this Agreement, own,
directly or indirectly, greater than forty-nine percent (49%) of the stock in
Inland American, becoming the owner (by itself or together with its Affiliates),
directly or indirectly, of greater than forty-nine percent (49%) of the stock
in Inland American, or (ii) any Person who does not now, as of the date of this
Agreement, Control Inland American, obtaining Control (by itself or together with
its Affiliates) of Inland American.

 

Notwithstanding
anything to the contrary contained in this Agreement or in the Loan Documents,
(i) this Agreement shall not modify or amend, or constitute a waiver of, the
terms and conditions of Section 8.7 of the Security Instrument, and (ii) no
Transfer shall be permitted without Noteholder’s prior written consent, subject
to satisfaction of the requirements and conditions of Section 8.3(c) of the
Security Instrument, that would cause or result in Inland American, or its
successor following a permitted merger pursuant to subparagraph (b)(i), above,

 

12

 

(i) not owning
at least fifty-one percent (51%) of the Common Stock in MB REIT, or (ii) not Controlling
Borrower and MB REIT.

 

It is
acknowledged and agreed that permitting the Permitted Transfers (as defined in
this Section 18) without Noteholder’s consent as set forth in this Section 18
is a limited and conditional waiver of certain restrictions on Transfers set
forth in the Loan Documents that may otherwise require such consent, and such
waiver shall be effective only so long as: (i) the conditions set forth in this
Section 18 with respect to each such Transfer are performed and satisfied; (ii)
neither an Event of Default nor any event that with the giving of notice or the
passage of time would become an Event of Default has occurred and subsists; and
(iii) without limitation of any other condition, MB Sherman Town Center Limited
Partnership, an Illinois limited partnership, is the sole Borrower. Without
limitation, it is acknowledged and agreed that (a) upon the failure of the
condition described in clause (iii) of the preceding sentence, the waiver set
forth in this Section 18 shall automatically terminate and become null and
void, and any Transfers occurring thereafter shall be subject to the terms and
conditions of the Loan Documents without regard to this Section 18, and (b) upon
the failure of any other condition set forth in this Section 18, and during the
subsistence of any such failure, the waiver set forth in this Section 18 shall
not be effective, and any Transfers occurring while any such failure subsists shall
be subject to the terms and conditions of the Loan Documents without regard to
this Section 18. In no event shall this Section 18 be deemed or construed to
modify or amend the Security Agreement or any of the other Loan Documents.

 

19.           Amendments
to Loan Documents. Section 8.3(a) of the Security Instrument is hereby
amended by: (i) deleting the phrase “Steven D. Alvis, Jay K. Sears, H. Dean
Lane, Jr., and Kyle D. Lippman” in clause (B) of said Section and substituting
the phrase “Minto Builders (Florida), Inc., a Florida corporation” in its
place; (ii) deleting the phrase “prior to the death or legal incapacity of all
the Original Principals and is thereafter assumed by persons who are acceptable
to Lender in its sole and absolute discretion” at the end of said clause (B);
and (iii) deleting clause (C) of said Section in its entirety and substituting
the phrase “(C) intentionally omitted,” in its place.

 

20.           Noteholder
Confirmation. Noteholder hereby confirms to Assumptor that the representations
and warranties of Original Borrower made in Sections 3(a) and 3(b) of this Agreement
are true and correct. Further, Noteholder hereby confirms to Assumptor that
there are no uncured defaults under the Loan Documents with respect to the
payment of principal and interest. Further, Noteholder represents and warrants
to Assumptor that to its actual knowledge, no other Event of Default (as
defined in the Security Instrument) exists under the Loan. However, Noteholder
is not waiving and does not hereby waive any existing defaults if any in fact
exist and nothing herein is intended to be nor shall it be construed to be a
waiver of any existing defaults, material or immaterial, which may in fact
exist. As used in this paragraph, “actual knowledge” means the actual state of
mind of the person or persons directly responsible for the processing of
Original Borrower’s request for consent to the Transfer and Assumption and does
not include any implied, constructive or imputed knowledge.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

13

 

IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first above
written, with the intent that this shall be deemed an instrument under seal.

 

 

	
   

  	
   

  	
  ASSUMPTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MB SHERMAN TOWN CENTER LIMITED

  
	
   

  	
   

  	
  PARTNERSHIP, an Illinois limited partnership

  
	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
  By:

  	
  MB Sherman
  Town Center GP, L.L.C., a

  
	
   

  	
   

  	
   

  	
  Delaware
  limited liability company, its general

  
	
   

  	
   

  	
   

  	
  partner

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Minto
  Builders (Florida), Inc., its sole

  
	
   

  	
   

  	
   

  	
   

  	
  member

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NEW BORROWER PRINCIPAL:

  
	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
  MINTO BUILDERS (FLORIDA), INC., a

  
	
   

  	
   

  	
  Florida
  corporation

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
														

 

[SIGNATURES CONTINUE ON THE NEXT PAGE]

 

 

[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]

 

	
   

  	
   

  	
  ORIGINAL BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A-S 60 HWY 75-LOY LAKE, L.P., a Texas

  
	
   

  	
   

  	
  limited
  partnership

  
	
  Witnesses:

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Sherman GP,
  LLC, a Delaware limited

  
	
   

  	
   

  	
   

  	
   

  	
  liability
  company, its General Partner

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
  Steven D.
  Alvis

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
    Manager

  	
   

  
										

 

 

	
   

  	
   

  	
   

  	
  ORIGINAL BORROWER PRINCIPAL:

  	
   

  
	
  Witnesses:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  STEVEN D. ALVIS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  JAY K. SEARS

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  H. DEAN LANE, JR.

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  KYLE D. LIPPMAN

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
								

 

[SIGNATURES CONTINUE ON THE NEXT PAGE]

 

 

[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]

 

	
   

  	
   

  	
  NOTEHOLDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WELLS FARGO BANK, N.A., as Trustee under

  that certain Pooling and Servicing Agreement dated

  as of November 23, 2004 (the “PSA”), for the

  Registered Holders of J.P. Morgan Chase

  Commercial Mortgage Securities Corp.,

  Commercial Mortgage Pass-Through Certificates,

  Series 2004-CIBC10

  
	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
  By:

  	
  NorthMarq
  Capital, Inc., as Sub-Servicer for

  the Master Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
								

 

 

STATE OF               

 

COUNTY OF           

 

The foregoing
instrument was acknowledged before me this       
day of           , 2006, by
                  ,
the                           
of Minto Builders (Florida), Inc., the sole member of MB Sherman Town Center
GP, L.L.C., the general partner of MB Sherman
Town  Center Limited Partnership,
an Illinois limited partnership. He is personally known to me or has produced                                 
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

 

STATE OF                    

 

COUNTY OF            

 

The foregoing
instrument was acknowledged before me this        
day of             ,
2006, by
                         ,
the                       
of Minto Builders (Florida), Inc.,
a Florida corporation. He is personally known to me or has produced
                          
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

 

STATE OF                    

 

COUNTY OF                  

 

The foregoing
instrument was acknowledged before me this       day
of           , 2006, by Steven
D. Alvis as Manager of Sherman GP, LLC, a Delaware limited liability company,
the General Partner of A-S 60 HWY 75-Loy
Lake, L.P., a Texas limited partnership. He is personally known to
me or has produced                             
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

STATE OF                     

 

COUNTY OF                 

 

The foregoing
instrument was acknowledged before me this        
day of                ,
2006, by Steven D. Alvis. He is personally
known to me or has produced
                                    
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

STATE OF                     

 

COUNTY OF                 

 

The foregoing
instrument was acknowledged before me this       day
of                    ,
2006, by Jay K. Sears. He is
personally known to me or has produced                          
as identification. Notary Public

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

 

STATE OF                    

 

COUNTY OF                    

 

The foregoing
instrument was acknowledged before me this       day
of             ,
2006, by H. Dean Lane, Jr. He is
personally known to me or has produced                    
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

 

STATE OF                       

 

COUNTY OF                         

 

The foregoing
instrument was acknowledged before me this      day of               ,
2006, by Kyle D. Lippman. He is
personally known to me or has produced                  
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

 

STATE OF                       

 

COUNTY OF                    

 

The foregoing
instrument was acknowledged before me this       day
of              ,
2006, by
             ,
the                                
of NorthMarq Capital, Inc., as Sub-Servicer for Master Servicer for Wells Fargo Bank, N.A., as Trustee under
that certain Pooling and Servicing Agreement dated as of November 23, 2004, for
the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-CIBC10. He is
personally known to me or has produced                        
as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  
	
   

  	
   

  
	
   

  	
  (SEAL)

  

 

 

EXHIBIT A

 

LEGAL DESCRIPTION OF THE PROPERTY

 

A-1

 

EXHIBIT B

 

LOAN DOCUMENTS

 

1.             Fixed Rate Note dated
June 15, 2004, made by Original Borrower and payable to Lender in the stated
principal amount of $39,650,000.00 (together with all addenda, riders, exhibits
and supplements thereto, the “Note”).

 

2.             Deed of Trust and
Security Agreement dated as of June 15, 2004, made by Original Borrower to Reno
Hartfiel, as trustee, for the benefit of Lender, recorded in the Real Property
Records of Grayson County, Texas, in Volume 3680, Page 231 (together with all
addenda, riders, exhibits and supplements thereto, the “Security Instrument”).

 

3.             Assignment of Leases
and Rents dated as of June 15, 2004, made by Original Borrower to Lender,
recorded in the Real Property Records of Grayson County, Texas, in Volume 3680,
Page 297 (together with all addenda, riders, exhibits and supplements thereto,
the “Assignment of
Leases and Rents”).

 

4.             Environmental
Indemnity Agreement dated as of June 15, 2004, made by Original Borrower and
Original Borrower Principal in favor of Lender (together with all addenda, riders,
exhibits and supplements thereto, the “Environmental Indemnity Agreement”).

 

5.             Guaranty dated as of
June 15, 2004, made by Original Borrower Principal in favor of Lender (together
with all addenda, riders, exhibits and supplements thereto, the “Guaranty”).

 

6.             Escrow Agreement for
Reserves and Impounds dated as of June 15, 2004, made by Original Borrower for
the benefit of Lender (together with all addenda, riders, exhibits and
supplements thereto, the “Escrow
Agreement”).

 

B-1Exhibit 10.124

 

 

Loan Number V    44053

 

A-S 60 HWY 75-LOY LAKE, L.P., as
grantor

(Borrower)

 

to

RENO
HARTFIEL, as trustee 

(Trustee)

 

for
the benefit of

 

JPMORGAN
CHASE BANK, as beneficiary

(Lender)

 

 

DEED OF TRUST AND

SECURITY AGREEMENT

 

 

Dated:
June 15, 2004

 

 

NOTE TO CLERK/RECORDER:

THIS INSTRUMENT IS ALSO A
FIXTURE FINANCING STATEMENT.

 

	
   

  	
   

  	
  RETURN
  TO:

  
	
   

  	
   

  	
  2711000069-LB

  
	
   

  	
   

  	
  PARTNERS
  TITLE COMPANY

  
	
   

  	
   

  	
  712
  Main St., Suite 2000E

  
	
   

  	
   

  	
  Houston,
  TX 77002-3218

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE 1 - GRANTS OF SECURITY

  	
  1

  
	
  Section 1.1.

  	
  PROPERTY CONVEYED

  	
  1

  
	
  Section 1.2.

  	
  ASSIGNMENT OF RENTS

  	
  4

  
	
  Section 1.3.

  	
  DEFINITION OF PERSONAL PROPERTY

  	
  4

  
	
  Section 1.4.

  	
  PLEDGE OF MONIES HELD

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 - DEBT AND OBLIGATIONS SECURED

  	
  4

  
	
  Section 2.1.

  	
  DEBT

  	
  4

  
	
  Section 2.2.

  	
  OTHER OBLIGATIONS

  	
  5

  
	
  Section 2.3.

  	
  DEBT AND OTHER OBLIGATIONS

  	
  5

  
	
  Section 2.4.

  	
  PAYMENTS

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 - BORROWER COVENANTS

  	
  6

  
	
  Section 3.1.

  	
  INCORPORATION BY REFERENCE

  	
  6

  
	
  Section 3.2.

  	
  INSURANCE

  	
  6

  
	
  Section 3.3.

  	
  PAYMENT OF TAXES, ETC.

  	
  12

  
	
  Section 3.4.

  	
  CONDEMNATION

  	
  13

  
	
  Section 3.5.

  	
  USE AND MAINTENANCE OF PROPERTY

  	
  13

  
	
  Section 3.6.

  	
  WASTE

  	
  14

  
	
  Section 3.7.

  	
  COMPLIANCE WITH LAWS; ALTERATIONS

  	
  14

  
	
  Section 3.8.

  	
  BOOKS AND RECORDS

  	
  14

  
	
  Section 3.9.

  	
  PAYMENT FOR LABOR AND MATERIALS

  	
  16

  
	
  Section 3.10.

  	
  PERFORMANCE OF OTHER AGREEMENTS

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 - SPECIAL COVENANTS

  	
  16

  
	
  Section 4.1.

  	
  PROPERTY USE

  	
  16

  
	
  Section 4.2.

  	
  ERISA

  	
  16

  
	
  Section 4.3.

  	
  SINGLE PURPOSE ENTITY

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 - REPRESENTATIONS AND WARRANTIES

  	
  20

  
	
  Section 5.1.

  	
  BORROWER’S REPRESENTATIONS

  	
  20

  
	
  Section 5.2.

  	
  WARRANTY OF TITLE

  	
  20

  
	
  Section 5.3.

  	
  STATUS OF PROPERTY

  	
  21

  
	
  Section 5.4.

  	
  NO FOREIGN PERSON

  	
  22

  
	
  Section 5.5.

  	
  SEPARATE TAX LOT

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 - OBLIGATIONS AND RELIANCES

  	
  22

  
	
  Section 6.1.

  	
  RELATIONSHIP OF BORROWER AND LENDER

  	
  22

  
	
  Section 6.2.

  	
  NO RELIANCE ON LENDER

  	
  22

  
	
  Section 6.3.

  	
  NO LENDER OBLIGATIONS

  	
  22

  
	
  Section 6.4.

  	
  RELIANCE

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 - FURTHER ASSURANCES

  	
  23

  

 

i

 

	
  Section 7.1.

  	
  RECORDING FEES

  	
  23

  
	
  Section 7.2.

  	
  FURTHER ACTS

  	
  23

  
	
  Section 7.3.

  	
  CHANGES IN TAX, DEBT CREDIT
  AND DOCUMENTARY STAMP LAWS

  	
  23

  
	
  Section 7.4.

  	
  CONFIRMATION STATEMENT

  	
  24

  
	
  Section 7.5.

  	
  SPLITTING OF SECURITY
  INSTRUMENT

  	
  24

  
	
  Section 7.6.

  	
  REPLACEMENT DOCUMENTS

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 - DUE ON
  SALE/ENCUMBRANCE

  	
  25

  
	
  Section 8.1.

  	
  LENDER RELIANCE

  	
  25

  
	
  Section 8.2.

  	
  NO SALE/ENCUMBRANCE

  	
  25

  
	
  Section 8.3.

  	
  EXCLUDED AND PERMITTED
  TRANSFERS

  	
  26

  
	
  Section 8.4.

  	
  NO IMPLIED FUTURE CONSENT

  	
  28

  
	
  Section 8.5.

  	
  COSTS OF CONSENT

  	
  28

  
	
  Section 8.6.

  	
  CONTINUING SEPARATENESS
  REQUIREMENTS

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 - DEFAULT

  	
  28

  
	
  Section 9.1.

  	
  EVENTS OF DEFAULT

  	
  28

  
	
  Section 9.2.

  	
  DEFAULT INTEREST

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 - RIGHTS AND
  REMEDIES

  	
  31

  
	
  Section 10.1.

  	
  REMEDIES

  	
  31

  
	
  Section 10.2.

  	
  RIGHT OF ENTRY

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 -
  INDEMNIFICATION; SUBROGATION

  	
  36

  
	
  Section 11.1.

  	
  GENERAL INDEMNIFICATION

  	
  36

  
	
  Section 11.2.

  	
  ENVIRONMENTAL
  INDEMNIFICATION

  	
  38

  
	
  Section 11.3.

  	
  DUTY TO DEFEND AND
  ATTORNEYS AND OTHER FEES AND EXPENSES

  	
  40

  
	
  Section 11.4.

  	
  SURVIVAL OF INDEMNITIES

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12 - SECURITY
  AGREEMENT

  	
  40

  
	
  Section 12.1.

  	
  SECURITY AGREEMENT

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13 - WAIVERS

  	
  41

  
	
  Section 13.1.

  	
  MARSHALLING AND OTHER
  MATTERS

  	
  41

  
	
  Section 13.2.

  	
  WAIVER OF NOTICE

  	
  42

  
	
  Section 13.3.

  	
  SOLE DISCRETION OF LENDER

  	
  42

  
	
  Section 13.4.

  	
  SURVIVAL

  	
  42

  
	
  Section 13.5.

  	
  WAIVER OF TRIAL BY JURY

  	
  42

  
	
  Section 13.6.

  	
  WAIVER OF AUTOMATIC OR
  SUPPLEMENTAL STAY

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14 - NOTICES

  	
  43

  
	
  Section 14.1.

  	
  NOTICES

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15 - APPLICABLE
  LAW

  	
  44

  
	
  Section 15.1.

  	
  GOVERNING LAW;
  JURISDICTION

  	
  44

  
	
  Section 15.2.

  	
  USURY LAWS

  	
  44

  

 

ii

 

	
  Section 15.3.

  	
  PROVISIONS SUBJECT TO APPLICABLE LAW

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16 - SECONDARY MARKET

  	
  45

  
	
  Section 16.1.

  	
  TRANSFER OF LOAN

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE 17 - COSTS

  	
  45

  
	
  Section 17.1.

  	
  PERFORMANCE AT BORROWER’S EXPENSE

  	
  45

  
	
  Section 17.2.

  	
  ATTORNEY’S FEES FOR ENFORCEMENT

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18 - DEFINITIONS

  	
  46

  
	
  Section 18.1.

  	
  GENERAL DEFINITIONS

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE 19 - MISCELLANEOUS PROVISIONS

  	
  46

  
	
  Section 19.1.

  	
  NO ORAL CHANGE

  	
  46

  
	
  Section 19.2.

  	
  LIABILITY

  	
  46

  
	
  Section 19.3.

  	
  INAPPLICABLE PROVISIONS

  	
  46

  
	
  Section 19.4.

  	
  HEADINGS, ETC

  	
  46

  
	
  Section 19.5.

  	
  DUPLICATE ORIGINALS; COUNTERPARTS

  	
  46

  
	
  Section 19.6.

  	
  NUMBER AND GENDER

  	
  47

  
	
  Section 19.7.

  	
  SUBROGATION

  	
  47

  
	
  Section 19.8.

  	
  ENTIRE AGREEMENT

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE 20 - TRUSTEE

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE 21 - SPECIAL STATE OF TEXAS PROVISIONS

  	
  48

  

 

iii

 

Index of
Defined Terms

 

	
  “SPE Principal”

  	
   

  	
  22

  
	
  ADA

  	
   

  	
  16

  
	
  ALR

  	
   

  	
  4

  
	
  Applicable Laws

  	
   

  	
  16

  
	
  attorneys

  	
   

  	
  40

  
	
  attorneys’ fees

  	
   

  	
  49

  
	
  Bankruptcy Code

  	
   

  	
  2

  
	
  Borrower

  	
   

  	
  1, 48

  
	
  Business Day

  	
   

  	
  47

  
	
  Collateral

  	
   

  	
  43

  
	
  counsel fees

  	
   

  	
  49

  
	
  Debt

  	
   

  	
  4

  
	
  Environmental Indemnity

  	
   

  	
  6

  
	
  Environmental Law

  	
   

  	
  41

  
	
  Environmental Lien

  	
   

  	
  41

  
	
  ERISA

  	
   

  	
  18

  
	
  Escrow Agreement

  	
   

  	
  3

  
	
  Event

  	
   

  	
  48

  
	
  Event of Default

  	
   

  	
  31

  
	
  Exculpated Portion

  	
   

  	
  39

  
	
  fees and expenses

  	
   

  	
  40

  
	
  Guarantor

  	
   

  	
  20

  
	
  Hazardous Substances

  	
   

  	
  41

  
	
  Improvements

  	
   

  	
  1

  
	
  Indemnified Parties

  	
   

  	
  42

  
	
  Insurance Premiums

  	
   

  	
  9

  
	
  Insured Casualty

  	
   

  	
  10

  
	
  Intangibles

  	
   

  	
  3

  
	
  Investor

  	
   

  	
  48

  
	
  Land

  	
   

  	
  1

  
	
  Lease

  	
   

  	
  2

  
	
  Leases

  	
   

  	
  2

  
	
  legal fees

  	
   

  	
  49

  
	
  Lender

  	
   

  	
  1, 48

  
	
  Loan

  	
   

  	
  30

  
	
  Loan Documents

  	
   

  	
  6

  
	
  Losses

  	
   

  	
  42

  
	
  Note

  	
   

  	
  1, 48

  
	
  Obligations

  	
   

  	
  5

  
	
  Original Principals

  	
   

  	
  29

  
	
  Other Charges

  	
   

  	
  13

  
	
  Other Loan Documents

  	
   

  	
  6

  

 

Index - 1

 

	
  Other Obligations

  	
   

  	
  5

  
	
  Permitted Exceptions

  	
   

  	
  22

  
	
  person

  	
   

  	
  48

  
	
  Personal Property

  	
   

  	
  4

  
	
  Policies

  	
   

  	
  8

  
	
  Policy

  	
   

  	
  8

  
	
  Property

  	
   

  	
  1, 49

  
	
  Qualified Insurer

  	
   

  	
  8

  
	
  Rating Agency

  	
   

  	
  48

  
	
  Release

  	
   

  	
  42

  
	
  Remediation

  	
   

  	
  42

  
	
  Rents

  	
   

  	
  2

  
	
  Securities

  	
   

  	
  48

  
	
  Security Instrument

  	
   

  	
  1

  
	
  Taxes

  	
   

  	
  13

  
	
  Trustee

  	
   

  	
  1

  
	
  Uniform Commercial Code

  	
   

  	
  2

  

 

Index - 2

 

THIS DEED OF TRUST AND
SECURITY AGREEMENT (this “Security Instrument”)
is made as of the 15th day of June, 2004, by A-S 60 HWY 75-LOY LAKE,
L.P., a Texas limited partnership, having its principal place of business at
c/o NewQuest Properties, 8807 W. Sam Houston Parkway N., Suite 200, Houston,
Texas 77040 (“Borrower”), to RENO
HARTFIEL, an individual, having an address at 712 Main Street, Suite 2000E,
Houston, Texas 77002 (“Trustee”),
for the benefit of JPMORGAN CHASE BANK, a New York banking corporation, having
its principal place of business at 270 Park Avenue, New York, New York 10017,
as beneficiary (“Lender”).

 

RECITALS:

 

Borrower by its
Fixed Rate Note of even date herewith given to Lender is indebted to Lender in
the principal sum of $39,650,000 in lawful money of the United States of
America (such Fixed Rate Note, together with all extensions, renewals, modifications,
substitutions and amendments thereof, shall collectively be referred to as the “Note”), with interest from the date thereof
at the rates set forth in the Note, principal and interest to be payable in
accordance with the terms and conditions provided in the Note, and with a final
maturity date of July 1, 2014.

 

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

 

ARTICLE 1
- GRANTS OF SECURITY

 

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

 

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

 

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

 

(c)         Easements.
All easements, rights-of-way or use, rights, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, and all estates, rights, titles,
interests, privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way now or hereafter belonging, relating
or pertaining to the Land and the Improvements and the reversion and
reversions, remainder and remainders,

 

 

and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center Line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Borrower
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto;

 

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

 

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

 

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

 

(g)         Insurance
Proceeds. All proceeds of and any unearned premiums on any insurance
policies covering the Property, including, without limitation, the right to

 

2

 

receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu thereof, for
damage to the Property;

 

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

 

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

 

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

 

(k)         Agreements.
All agreements, contracts (including (A) that certain Performance Bond and
Payment Bond with National Fire Insurance Company of Hartford and EMJ
Corporation (“Contractor”) dated
as of September 22, 2003, and (B) that certain Standard Form of Agreement
Between Borrower (as “Owner”) and Contractor dated September 8, 2003 and (C)
any other purchase, sale, option, right of first refusal and other contracts
pertaining to the Property), certificates, instruments, franchises, permits,
licenses, approvals, consents, plans, specifications and other documents, now
or hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Property (including any Improvements or respecting any business or activity
conducted on the Land and any part thereof) and all right, title and interest
of Debtor, therein and thereunder, including, without limitation, the right,
upon the happening of any default hereunder, to receive and collect any sums
payable to Debtor thereunder;

 

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

 

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

 

3

 

(n)         Other
Rights. Any and all other rights of Borrower in and to the Property and any
accessions, renewals, replacements and substitutions of all or any portion of
the Property and all proceeds derived from the sale, transfer, assignment or
financing of the Property or any portion thereof.

 

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

 

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

 

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

 

CONDITIONS TO GRANT

 

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

 

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

 

ARTICLE 2 - DEBT AND OBLIGATIONS SECURED

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

only, and the failure to
pay the entire amount then due shall (subject to any right to notice and
opportunity to cure provided herein) be and continue to be an Event of Default
(as hereinafter defined).

 

ARTICLE 3 - BORROWER COVENANTS

 

Borrower covenants
and agrees that:

 

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

 

Section 3.2.     INSURANCE.

 

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

 

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

 

6

 

Replacement
Cost may be redetermined from time to time by an appraiser or contractor
designated and paid by Lender or by an engineer or appraiser in the regular
employ of the insurer. No omission on the part of Lender to request any such
appraisals shall relieve Borrower of any of its obligations under this
Subsection;

 

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

 

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

 

(iv)    at all times
during which structural construction, repairs or alterations are being made
with respect to the Improvements: (A) owners will be named as additional
insureds on tenant’s or contractor’s liability policies; and (B) the insurance
provided for in Subsection 3.2(a)(i) written in a so-called builder’s

 

7

 

risk
completed value form (1) on a non-reporting basis, (2) against all risks
insured against pursuant to Subsection 3.2(a)(i), (3) including
permission to occupy the Property, and (4) with an agreed amount endorsement waiving
co-insurance provisions;

 

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

 

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

 

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

 

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

 

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

 

8

 

under such Policy
for loss or damage incurred as a result of an act of terrorism or similar acts
of sabotage. Not less than thirty (30) days prior to the expiration dates of
the Policies theretofore furnished to Lender pursuant to Subsection 3.2(a),
certified copies of the Policies marked “premium paid” or accompanied by
evidence satisfactory to Lender of payment of the premiums due thereunder (the “Insurance Premiums”), shall be delivered by
Borrower to Lender; provided, however, that in the case of renewal Policies,
Borrower may furnish Lender with binders therefor to be followed by the
original Policies when issued.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

(f)          Borrower
shall furnish to Lender within ten (10) calendar days after Lender’s request
therefor (but not more than once per calendar year), a statement certified by
Borrower or a duly authorized officer of Borrower of the amounts of insurance
maintained in compliance herewith, of the risks covered by such insurance and
of the insurance company or companies which carry such insurance.

 

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

 

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

 

(i)      In case of loss
covered by Policies, Lender may either (1) settle and adjust any claim without
the consent of Borrower, or (2) allow Borrower to agree with the insurance
company or companies on the amount to be paid upon the loss; provided that, if
no Event of Default shall have occurred and be continuing (A) Borrower may
adjust losses aggregating not in excess of $250,000.00 if such adjustment is
carried out in a competent and timely manner and (B) Lender shall not settle or
adjust any such claim without the consent of Borrower, which consent shall not
be unreasonably withheld or delayed. In any case Lender shall and is hereby
authorized to collect and receive any such insurance proceeds; and the expenses
incurred by Lender in the adjustment and collection of insurance proceeds shall
become part of the Debt and be secured hereby and shall be reimbursed by
Borrower to Lender upon demand (unless deducted by and reimbursed to Lender
from such proceeds).

 

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

 

10

 

percentage amount
equal to or greater than seventy-five percent (75%) of the total rentable space
in the Property which has been demised under executed and delivered Leases in
effect as of the date of the occurrence of such fire or other casualty shall
remain in full force and effect during and after the completion of the
restoration, notwithstanding the occurrence of any such Insured Casualty and
Borrower furnishes to Lender evidence satisfactory to Lender that all tenants
under Material Leases (as defined in the ALR) shall continue to operate their
respective space at the Property after the completion of the Restoration; and
(C) no Event of Default (hereinafter defined) shall have occurred and be
continuing (except a non-monetary Event of Default resulting solely from such
casualty), then the proceeds of insurance shall be applied to reimburse
Borrower for the cost of restoring, repairing, replacing or rebuilding the
Property or part thereof subject to Insured Casualty, as provided below.
Additionally, in the event or any insured damage to or destruction to any
portion of the Property which Borrower is required
to restore pursuant to any Lease, provided no Event of Default shall have
occurred and be then continuing, then the proceeds of insurance shall be
applied to reimburse Borrower for the cost of restoring, repairing, replacing
or rebuilding the Property or part thereof subject to Insured Casualty, as
provided below. In any such case, Borrower hereby covenants and agrees
forthwith to commence and diligently to prosecute such restoring, repairing,
replacing or rebuilding; provided, however, in any event Borrower
shall pay all costs (and if required by Lender, Borrower shall deposit the
total thereof with Lender in advance) of such restoring, repairing, replacing
or rebuilding in excess of the net proceeds of insurance made available
pursuant to the terms hereof.

 

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

 

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

 

11

 

Property), in
which case any related insurance proceeds shall, unless Lender is otherwise
entitled to apply such proceeds to the payment of the Debt in accordance with
the provisions hereof, be held by Lender in an interest bearing account and
disbursed for the costs of rebuilding such Improvements in the manner provided
herein upon the execution of a Lease for such space.

 

(v)     If Borrower is
entitled to reimbursement out of insurance proceeds held by Lender, such
proceeds shall be disbursed from time to time upon Lender being furnished with
(1) evidence reasonably satisfactory to it (which evidence may include
inspections of the work performed) that such portion of the restoration,
repair, replacement and rebuilding covered by the disbursement has been
completed in accordance with plans and specifications approved by Lender, (2)
evidence reasonably satisfactory to it of the estimated cost of completion of
the restoration, repair, replacement and rebuilding, (3) funds, or, at Lender’s
option, assurances reasonably satisfactory to Lender that such funds are
available, sufficient in addition to the proceeds of insurance to complete the
proposed restoration, repair, replacement and rebuilding, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance endorsements, bonds, plats of survey and such other evidences of
cost, payment and performance as Lender may reasonably require and approve; and
Lender may, in any event, require that all plans and specifications for such
restoration, repair, replacement and rebuilding be submitted to and approved by
Lender (which approval shall not be unreasonably withheld, conditioned or
delayed) prior to commencement of work. With respect to disbursements to be
made by Lender: (A) no payment made prior to the final completion of the
restoration, repair, replacement and rebuilding shall exceed ninety percent
(90%) of the value of the work performed from time to time; (B) funds other
than proceeds of insurance shall be disbursed prior to disbursement of such
proceeds; and (C) at all times, the undisbursed balance of such proceeds
remaining in the hands of Lender, together with funds deposited for that purpose
or irrevocably committed to the satisfaction of Leader by or on behalf of
Borrower for that purpose, shall be at least sufficient in the reasonable
judgment of Lender to pay for the cost of completion of the restoration,
repair, replacement or rebuilding, free and clear of all liens or claims for
lien and the costs described in Subsection 3.2(h)(vi) below. Any surplus
which may remain out of insurance proceeds held by Lender after payment of such
costs of restoration, repair, replacement or rebuilding shall be paid to any
party entitled thereto. In no event shall Lender assume any duty or obligation
for the adequacy, form or content of any such plans and specifications, nor for
the performance, quality or workmanship of any restoration, repair, replacement
and rebuilding. Notwithstanding the foregoing provisions of this Subsection
3.2(h)(v), if the insurance proceeds shall be less than $250,000 and the
costs of completing the restoration shall be less than $250,000, the insurance
proceeds will be disbursed by Lender to Borrower upon receipt, provided that
the conditions set forth in Subsection 3.2(h)(ii) hereof are met and
Borrower delivers to Lender a written undertaking to expeditiously commence and
to satisfactorily complete with due diligence the restoration in accordance
with the terms of this Security Instrument.

 

12

 

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

 

Section 3.3.     PAYMENT OF TAXES, ETC.

 

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

 

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

 

13

 

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

 

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

 

14

 

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

 

Section 3.5.     USE AND MAINTENANCE OF
PROPERTY. Borrower shall cause the Property to be maintained and operated
in a good and safe condition and repair and in keeping with the condition and
repair of properties of a similar use, value, age, nature and construction.
Borrower shall not use, maintain or operate the Property in any manner which
constitutes a public or private nuisance or which makes void, voidable, or
cancelable, or increases the premium of, any insurance then in force with
respect thereto. The Improvements and the Personal Property shall not be
removed, demolished (except in connection with a casualty) or materially
altered (except for normal replacement of the Personal Property with items of
the same utility and of equal or greater value, and except as permitted by any
existing Leases) without the prior written consent of Lender, which approval
shall not be unreasonably withheld, conditioned or delayed. Except as otherwise
expressly permitted herein, Borrower shall promptly repair, replace or rebuild
any part of the Property which may be destroyed by any casualty, or becomes
damaged, worn or dilapidated or which may be affected by any proceeding of the
character referred to in Section 3.4 hereof and shall complete and pay
for any structure at any time in the process of construction or repair on the
Land. Borrower shall not initiate, without Lender’s prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned, join
in, acquiesce in, or consent to any change in any private restrictive covenant
(other than use restrictions under the Leases), zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Property or any part thereof. If under applicable zoning provisions the use of
all or any portion of the Property is or shall become a nonconforming use,
Borrower will not cause or permit the nonconforming use to be discontinued or
abandoned without the express written consent of Lender. Borrower shall not
take any steps whatsoever to convert the Property, or any portion thereof, to a
condominium or cooperative form of management. In connection with any proposed
new easement or restrictive covenant or modification of any existing easement
or restrictive covenant, Lender shall use good faith efforts to respond within
twenty (20) days after Lender’s receipt of both Borrower’s written request for
approval or consent and all relevant information regarding such request. If
Lender fails to respond to such request within such twenty (20) day period, and
such request contained a legend clearly marked in not less than fourteen (14)
point bold face type, underlined, in all capital letters “REQUEST DEEMED
APPROVED IF NO RESPONSE WITHIN 20 DAYS”, Lender shall be deemed to have
approved or consented to such matter.

 

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

 

15

 

Section 3.7.     COMPLIANCE WITH LAWS;
ALTERATIONS.

 

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

 

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

 

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

 

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

 

(e)         From and
after the completion of the initial Improvements to be constructed at the
Property, Borrower shall not enter into any contract or contracts for
construction outstanding at any one time which individually or in the aggregate
provide for payments by Borrower in excess of five percent (5%) of the
outstanding principal balance of the Note (the “Threshold Amount”) unless (i) Lender shall have approved of
such contract(s), such approval not to be unreasonably withheld or delayed and
(ii) if the total unpaid amounts due by Borrower and payable under such
contract(s) shall at any time exceed the Threshold Amount, as security for
Borrower’s obligations under such contract(s), Borrower shall cause an
affiliate or principal of Borrower or the related tenant or contractor (but not
Borrower) to deliver to Lender, cash, a completion and performance bond or an
irrevocable letter of credit (payable on sight draft only) issued by a
financial institution having a rating by S&P of not less than “A-1+” in the
amount by which the amounts payable by Borrower under such contract(s) exceed
the Threshold Amount.

 

Section 3.8.     BOOKS AND RECORDS.

 

(a)         Borrower
shall keep accurate books and records of account in accordance with sound
accounting principles in which full, true and correct entries shall be promptly
made with respect to Borrower, the Property and the operation thereof, and will
permit all such books and records (including without limitation all contracts,
statements, invoices, bills and claims for labor, materials and services
supplied for the construction, repair or operation to Borrower of the
Improvements) to be inspected or audited and copies made

 

16

 

by Lender and its
representatives during normal business hours and at any other reasonable times.
Borrower represents that its chief executive office is as set forth in the
introductory paragraph of this Security Instrument and that all books and
records pertaining to the Property are maintained at the Property or such other
location as may be expressly disclosed to Lender in writing. Borrower will
furnish, or cause to be furnished, to Lender on or before forty-five (45)
calendar days after the end of each calendar quarter the following items, each
certified by Borrower as being true and correct in all material respects, in
such format and in such detail as Lender or its servicer may reasonably
request:

 

(i)      a written
statement (rent roll) dated as of the last day of each such calendar quarter
identifying each of the Leases by the term, space occupied, rental required to
be paid (including percentage rents and tenant sales), security deposit paid,
any rental concessions, all rent escalations, any rents paid more than one (1)
month in advance, any special provisions or inducements granted to tenants, any
taxes, maintenance and other common charges paid by tenants, all vacancies and
identifying any defaults or payment delinquencies thereunder; and

 

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

 

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

 

(c)         Borrower
will permit representatives appointed by Lender, including independent
accountants, agents, attorneys, appraisers and any other persons, to visit and
inspect, subject to the rights of tenants and other occupants of the Property,
during its normal business hours and at any other reasonable times any of the
Property and to make photographs thereof, and to write down and record any
information such representatives obtain, and shall permit Lender or its
representatives to investigate and verify the accuracy of the information
furnished to Lender under or in connection with this Security Instrument or any
of the Other Loan Documents and to discuss all such matters with its officers,
employees and representatives. Borrower will furnish to Lender at Borrower’s
expense all evidence which Lender may from time to time reasonably request as
to the accuracy and validity of or compliance with all representations and
warranties made by Borrower in the Loan Documents and satisfaction of all
conditions contained therein. Any inspection or audit of the Property or the
books and records of Borrower, or the procuring of documents and financial and
other information, by or on behalf of Lender,

 

17

 

shall be at
Borrower’s expense (not to exceed $1,000 per year unless an Event of Default
then exists) and shall be for Lender’s protection only, and shall not
constitute any assumption of responsibility or liability by Lender to Borrower
or anyone else with regard to the condition, construction, maintenance or
operation of the Property, nor Lender’s approval of any certification given to
Lender nor relieve Borrower of any of Borrower’s obligations.

 

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

 

Section 3.9.     PAYMENT FOR LABOR AND
MATERIALS. Borrower will promptly pay (or cause to be paid) when due all
bills and costs for labor, materials, and specifically fabricated materials
incurred in connection with the Property and, except for liens being contested
in accordance with Section 3.3(b) above, never permit to exist beyond the due
date thereof in respect of the Property or any part thereof any lien or
security interest, even though inferior to the liens and the security interests
hereof, and in any event never permit to be created or exist in respect of the
Property or any part thereof any other or additional lien or security interest
other than the liens or security interests hereof, except for the Permitted
Exceptions (as hereinafter defined).

 

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

 

ARTICLE 4 - SPECIAL COVENANTS

 

Borrower covenants and agrees that:

 

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

 

Section 4.2.     ERISA.

 

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

 

(b)         It shall
deliver to Lender such certifications or other evidence from time to time
throughout the term of the Security Instrument, as requested by Lender in its
sole

 

18

 

discretion, that
(i) Borrower is not an “employee benefit plan” as defined in Section 3(3)
of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within
the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to
state statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:

 

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

 

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

 

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

 

Section 4.3.     SINGLE PURPOSE ENTITY.
(1) Borrower covenants and agrees that it has not and shall not:

 

(a)         engage in
any business or activity other than the acquisition, ownership, operation and
maintenance of the Property, and activities incidental thereto, except with
respect to Borrower’s previous ownership of those portions of the shopping
center of which the Property is a part in which title was held by Borrower but
were conveyed by Borrower on or before the date hereof (the “Released
Outparcels”);

 

(b)         acquire or
own any material asset other than (i) the Property and (ii) such incidental
Personal Property as may be necessary for the operation of the Property, except
that Borrower previously owned the Released Outparcels;

 

(c)         merge into
or consolidate with any person or entity or dissolve, terminate or liquidate in
whole or in part, transfer or otherwise dispose of all or substantially all of
its assets or change its legal structure, without in each case Lender’s
consent;

 

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

 

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

 

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

 

19

 

(g)         incur any
debt, secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than (x) the Debt, (y) construction obligations for which
any applicable security has been provided in accordance with Section 2.11 of
the Escrow Agreement and Section 3.7(e) hereof, and (z) trade payables incurred
in the ordinary course of its business of owning and operating the Property,
provided that such debt is (i) not evidenced by a note, (ii) is paid within
sixty (60) days of the date incurred, (iii) does not exceed, in the aggregate,
four percent (4%) of the outstanding principal balance of the Note and (iv) is
payable to trade creditors and in amounts as are normal and reasonable under
the circumstances;

 

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

 

(i)          fail to
maintain its records, books of account and bank accounts separate and apart
from those of the shareholders, partners, members, principals and affiliates of
Borrower, the affiliates of a shareholder, partner or member of Borrower, and
any other person or entity or fail to prepare and maintain its own financial
statements in accordance with sound accounting practices and susceptible to
audit, or if such financial statements are consolidated fail to cause such
financial statements to contain footnotes disclosing that the Property is
actually owned by the Borrower;

 

(j)          enter into
any contract or agreement with any shareholder, partner, member, principal or
affiliate of Borrower, any guarantor of all or a portion of the Debt (a “Guarantor”)
or any shareholder, partner, member, principal or affiliate thereof, except
upon terms and conditions that are intrinsically fair and substantially similar
to those that would be available on an arms-length basis with third parties
other than any shareholder, partner, member, principal or affiliate of Borrower
or Guarantor, or any shareholder, partner, member, principal or affiliate
thereof;

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

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

 

(s)         fail to
maintain adequate capital for the normal obligations reasonably foreseeable in
a business of its size and character and in light of its contemplated business
operations;

 

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

 

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

 

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

 

21

 

(w)        fail to
conduct its business so that the assumptions made with respect to the Borrower
and SPE Principal in any “substantive non-consolidation” opinion letter
delivered in connection with the Loan shall be true and correct in all
respects.

 

(2)         If Borrower
is a limited partnership or a limited liability company (other than a Single
Member LLC (as defined below)), its sole general partner or managing member
(the “SPE Principal”) of Borrower,
as applicable, is and shall be at all times a corporation or Single Member LLC
whose sole asset is its interest in Borrower and such SPE Principal will at all
times comply, and will cause Borrower to comply, with each of the covenants,
terms and provisions contained in Section 4.3(1) as if such representation,
warranty or covenant was made directly by such SPE Principal. As used herein,
the term “Single Member LLC” means a limited liability company that (i) is
either a single member limited liability company or a multiple member limited
liability company that does not have an SPE Principal, (ii) is organized under
the laws of the State of Delaware, (iii) provides in its organizational
documents that it will at all times have either (x) a member which owns no
economic interest in such Single Member LLC or (y) a “springing member” which
will automatically become a member of such Single Member LLC immediately prior
to the dissolution of the last remaining member and (iv) otherwise satisfies
the requirements of any Rating Agency (as hereinafter defined) relating
thereto.

 

(3)         Borrower
represents that (i) the Released
Outparcels consisted entirely of vacant land while owned by Borrower and (ii)
Borrower has no remaining liabilities, contingent or otherwise, with respect to
the Released Outparcels (other than customary warranties of title contained in
the deeds conveying the Released Outparcels) and shall not incur any additional
liabilities with respect thereto.

 

ARTICLE 5 - REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

22

 

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

 

Section 5.3.     STATUS
OF PROPERTY.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23

 

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

 

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

 

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

 

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

 

Section 5.5.     SEPARATE TAX LOT. The
Property is assessed for real estate tax purposes as one or more wholly
independent tax lot or lots, separate from any adjoining land or improvements
not constituting a part of such lot or lots, and so other land or improvements
is assessed and taxed together with the Property or any portion thereof.
Notwithstanding the foregoing, Lender acknowledges that certain of the Released
Outparcels have not yet been excluded from the tax lot of which the Property is
a part. Borrower covenants to take all necessary steps to cause the Property to
be taxed independently from all Released Outparcels no later than the 2005 tax
year. Until such time as the Property is an independent tax lot or lots, Lender
shall reserve for the payment of taxes for the entire tax lot or lots of which
the Property is a part pursuant to the Escrow Agreement.

 

ARTICLE 6 - OBLIGATIONS AND RELIANCES

 

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

 

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

 

Section 6.3.     NO LENDER OBLIGATIONS.

 

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

 

(b)         By accepting
or approving anything required to be observed, performed or fulfilled or to be
given to Lender pursuant to this Security Instrument, the Note or the

 

24

 

Other Loan
Documents, including without limitation, any officer’s certificate, balance
sheet, statement of profit and loss or other financial statement, survey,
appraisal, or insurance policy, Lender shall not be deemed to have warranted,
consented to, or affirmed the sufficiency, legality or effectiveness of same,
and such acceptance or approval thereof shall not constitute any warranty or
affirmation with respect thereto by Lender.

 

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

 

ARTICLE 7 - FURTHER ASSURANCES

 

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

 

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

 

25

 

and in equity,
including without limitation such rights and remedies available to Lender
pursuant to this Section 7.2.

 

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

 

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

 

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

 

Section 7.4.     CONFIRMATION STATEMENT.

 

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

 

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

 

26

 

defense or offset
against the full and timely performance of its obligations under the Lease.

 

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

 

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

 

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

 

ARTICLE 8 - DUE ON SALE/ENCUMBRANCE

 

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

 

27

 

Section 8.2.     NO SALE/ENCUMBRANCE.

 

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

 

(b)         As used in
Section 8.2(a), “Transfer” shall mean any voluntary or involuntary sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer of all or any part of the Property or Borrower or any direct or
indirect interest therein including, but not limited to: (i) an installment
sales agreement wherein Borrower agrees to sell the Property or any part
thereof for a price to be paid in installments; (ii) an agreement by Borrower
leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder; (iii) a sale, assignment or other
transfer of, or the grant of a security interest in, Borrower’s right, title
and interest in and to any Leases or any Rents; (iv) if Borrower, Guarantor, or
any managing member or general partner of Borrower or Guarantor is a
corporation, any Transfer of such corporation’s stock (or the stock of any
corporation directly or indirectly controlling such Borrower, Guarantor,
managing member or general partner by operation of law or otherwise) or the
creation or issuance of new stock in one or a series of transactions by which
an aggregate of forty-nine percent (49%) or more of such corporation’s stock
shall directly or indirectly be vested in or pledged to a party or parties who
are not now stockholders (provided, however, in no event shall
this subpart [iv] apply to any Guarantor whose stock or shares are traded on a
nationally recognized stock exchange); (v) if Borrower, Guarantor, or any
managing member or general partner of Borrower or Guarantor is a limited
liability company or partnership, the Transfer by which an aggregate of
forty-nine percent (49%) or more of the ownership interest in such limited
liability company or forty-nine percent (49%) or more of the partnership
interests in such partnership shall directly or indirectly be vested in or
pledged to parties not having an ownership interest as of the date of this
Security Instrument; (vi) if Borrower, any Guarantor or any managing member or
general partner of Borrower or any Guarantor is a partnership, limited liability
company or joint venture, the change, removal or resignation of a general
partner, managing member or joint venturer or the Transfer directly or
indirectly of all or any portion of the partnership or ownership interest of
any general partner, managing member or joint venturer; and (vii) except as
expressly permitted by Section 8.3, any Transfer by an Original
Principal, directly or indirectly, of its ownership interest in the Borrower.

 

Section 8.3.     EXCLUDED AND PERMITTED
TRANSFERS.

 

(a)         A Transfer
within the meaning of this Article 8 shall not include (i) transfers of
ownership interests in the Borrower, any general partner or managing member or
any Guarantor made by devise or descent or by operation of law upon the death
of a joint tenant, partner, member or shareholder, subject, however, to all the
following requirements: (A) written notice of any transfer under this Section
8.3, whether by will, trust or other written instrument, operation of law
or otherwise, is provided to Lender or its servicer, together with copies of
such documents relating to the

 

28

 

transfer as Lender
or its servicer may reasonably request, (B) control over the management and
operation of the Property is retained by one or more of Steven D. Alvis, Jay K.
Sears, H. Dean Lane, Jr. and Kyle D. Lippman (the “Original Principals”, whether one or more) at all times prior
to the death or legal incapacity of all the Original Principals and is
thereafter assumed by persons who are acceptable in all respects to Lender in
its sole and absolute discretion, (C) no such transfer by devise or descent by
any of the Original Principals will release the respective estate from any
liability as a Guarantor, and (D) no such transfer, death or other event has
any material adverse effect either on the bankruptcy-remote status of Borrower
under the requirements of any Rating Agency or on the status of Borrower as a
continuing legal entity liable for the payment of the Debt and the performance
of all other obligations secured hereby, (ii) transfers otherwise by operation
of law in the event of a bankruptcy, or (iii) a Lease of a portion of the
Property.

 

(b)         The
prohibitions in Subsection 8.2(a) shall not apply to an inter vivos or
testamentary transfer of all or any portion of ownership interests in the
Borrower, any general partner or managing member or any Guarantor to one or
more family members of Original Principals or a trust in which all of the
beneficial interest is held by one or more family members of Original
Principals or a partnership or limited liability company in which a majority of
the capital and profits interests are held by one or more family members of
Original Principals, provided, that any inter vivos transfer of all or
any portion of the ownership interests in the Borrower, such general partner or
managing member or such Guarantor is made in connection with Original
Principals’ bona fide, good faith estate planning and that the persons(s) with
voting control of Borrower or the management of the Property are (i) the same
person(s) who had such voting control and management rights immediately prior
to the transfer in question, or (ii) reasonably acceptable to Lender and provided
further that no such transfer shall have any adverse effect on the
bankruptcy remote status of Borrower under the requirements of any Rating
Agency. Lender acknowledges that Original Principals and/or an Original
Principal’s spouse are acceptable to exercise voting control of Borrower and
the management of the Property. As used herein, “family members” shall include
the spouse, children and grandchildren and any lineal descendants.

 

(c)         Notwithstanding
the provisions of Section 8.2 above, Lender will give its consent to
three separate sales or transfers of the Property or ownership interests in the
Borrower, a general partner or managing member of the Borrower, or any
Guarantor, if (but only if) no Event of Default under the Loan Documents has
occurred and is continuing, and if each of the following conditions precedent
have been fully satisfied (as determined in Lender’s sole and absolute
discretion): (i) the grantee’s or transferee’s integrity, reputation, financial
condition, character and management ability are satisfactory to Lender; in its
sole discretion, and all information relating thereto requested by Lender is
delivered to Lender at least 30 days prior to the proposed transfer, (ii) the
grantee’s or transferee’s (and its sole general partner’s or managing member’s)
single purpose and bankruptcy remote character are satisfactory to Lender in
its sole discretion, and all information relating thereto requested by Lender
is delivered to Lender at least 30 days prior to the proposed transfer, (iii)
Lender has obtained such estoppels from any guarantors of the Note or
replacement guarantors and such other legal opinions regarding

 

29

 

substantive
consolidation issues, enforceability of the assumption documents, no adverse
impact on the Securities or any REMIC holding the Note and similar matters as
Lender may require, (iv) all of Lender’s costs and expenses associated with the
sale or transfer (including reasonable attorneys’ fees) are paid by Borrower or
the grantee or transferee (provided that Lender will advise Borrower if such
legal fees are estimated to exceed $ 10,000 prior to incurring such expense),
(v) the payment of a transfer fee not to exceed 1% of the then unpaid principal
balance of the loan evidenced by the Note and secured hereby (the “Loan”), (vi) the execution and delivery to
Lender of a written assumption agreement and/or substitute guaranty (in its
sole reasonable discretion) and such modifications to the Loan Documents
executed by such parties and containing such terms and conditions as Lender may
require in its sole reasonable discretion prior to such sale or transfer
(provided that in the event the Loan is included in a REMIC and is a performing
Loan, no modification to the terms and conditions shall be made or permitted
that would cause (A) any adverse tax consequences to the REMIC or any holders
of any Mortgage-Backed Pass-Through Securities, (B) the Security Instrument to
fail to be a Qualifying Security Instrument under applicable federal law
relating to REMIC’s, or (C) result in a taxation of the income from the Loan to
the REMIC or cause a loss of REMIC status), (vii) if applicable, the delivery
to Lender of an endorsement (at Borrower’s sole cost and expense) to Lender’s
policy of title insurance then insuring the lien created by this Security
Instrument in form and substance acceptable to Lender, in its sole judgment and
(viii) written confirmation from the Rating Agencies that such transfer will
not result in a qualification, downgrade or withdrawal of the then-current
rating of the Securities.

 

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

 

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

 

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

 

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

 

30

 

Section 8.7.     NON-CONSOLIDATION OPINION
If either (a) as a result of any direct or indirect transfers of interests in
Borrower (including any excluded and permitted transfers) more than forty-nine
percent (49%) in the aggregate of direct or indirect interests in Borrower is
owned by any person or entity that owned less than a forty-nine percent (49%)
direct or indirect interest in Borrower as of the date hereof or (b) a new
property manager that is affiliated with Borrower is hereafter appointed to
manage the Property, Lender shall, as a condition to such transfer or
appointment, as applicable, receive a non-consolidation opinion acceptable to
it and the Rating Agencies.

 

ARTICLE 9 - DEFAULT

 

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

 

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

 

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

 

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

 

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

 

(e)         if (i)
Borrower or any subsidiary or general partner or managing member of Borrower,
or any Guarantor shall commence any case, proceeding or other, action (A) under
any existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization, conservatorship or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or Borrower or any subsidiary or
general partner or managing member of Borrower, or any Guarantor shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against Borrower or any subsidiary or general partner or managing
member of Borrower, or any Guarantor any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of sixty (60) calendar days;
or (iii) there shall be commenced against Borrower or any subsidiary

 

31

 

or general partner
or managing member of Borrower or any Guarantor any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of any order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within sixty (60)
calendar days from the entry thereof; or (iv) Borrower or any subsidiary or
general partner or managing member of Borrower, or any Guarantor shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above;
or (v) Borrower or any subsidiary or general partner or managing member of
Borrower, or any Guarantor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(m)        if Borrower
consummates a transaction which would cause this Security Instrument or
Lender’s exercise of its rights under this Security Instrument, the Note or the
Other Loan Documents to constitute a nonexempt prohibited transaction under

 

32

 

ERISA or result in
a violation of a state statute regulating governmental plans, subjecting Lender
to liability for a violation of ERISA or a state statute;

 

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

 

(o)         if Borrower
or any Guarantor, as the case may be, shall continue to be in default under any
other term, covenant or condition of this Security Instrument or any Other Loan
Documents for thirty (30) calendar days after notice from Lender, provided
that if such default cannot reasonably be cured within such thirty (30)
calendar day period and Borrower (or such Guarantor as the case may be) shall
have commenced to cure such default within such thirty (30) calendar day period
and thereafter, diligently and expeditiously proceeds to cure the same, such
thirty (30) calendar day period shall be extended for so long as it shall
require Borrower (or such Guarantor as the case may be) in the exercise of due
diligence to cure such default, it being agreed that no such extension shall be
for a period in excess of ninety (90) calendar days after the notice from
Lender referred to above.

 

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

 

ARTICLE 10 - RIGHTS AND REMEDIES

 

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

 

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

 

33

 

(b)         Right of
Entry. Lender may, prior or subsequent to the institution of any
foreclosure proceedings, enter upon the Property, or any part thereof, and take
exclusive possession of the Property and of all books, records, and accounts
relating thereto and to exercise without interference from Borrower any and all
rights which Borrower has with respect to the management, possession,
operation, protection, or preservation of the Property, including without
limitation the right to rent the same for the account of Borrower and to deduct
from such Rents all costs, expenses, and liabilities of every character
incurred by Lender in collecting such Rents and in managing, operating,
maintaining, protecting, or preserving the Property and to apply the remainder
of such Rents on the Debt in such manner as Lender may elect. All such costs,
expenses, and liabilities incurred by Lender in collecting such Rents and in managing,
operating, maintaining, protecting, or preserving the Property, if not paid out
of Rents as hereinabove provided, shall constitute a demand obligation owing by
Borrower and shall bear interest from the date of expenditure until paid at the
Default Rate, all of which shall constitute a portion of the Debt. If necessary
to obtain the possession provided for above, Lender may invoke any and all
legal remedies to dispossess Borrower, including specifically one or more
actions for forcible entry and detainer, trespass to try title, and
restitution. In connection with any action taken by Lender pursuant to this Subsection
10.1(b). Lender shall not be liable for any loss sustained by Borrower
resulting from any failure to let the Property, or any part thereof, or from
any other act or omission of Lender in managing the Property unless such loss
is caused by the willful misconduct of Lender, nor shall Lender be obligated to
perform or discharge any obligation, duty, or liability under any Lease or
under or by reason hereof or the exercise of rights or remedies hereunder.
Borrower shall and does hereby agree to indemnify Lender for, and to hold
Lender harmless from, any and all liability, loss, or damage, which may or
might be incurred by Lender under any such Lease or under or by reason hereof
or the exercise of rights or remedies hereunder, and from any and all claims
and demands whatsoever which may be asserted against Lender by reason of any
alleged obligations or undertakings on its part to perform or discharge any of
the terms, covenants, or agreements contained in any such Lease. Should Lender
incur any such liability, the amount thereof, including without limitation
costs, expenses, and reasonable attorneys’ fees, together with interest thereon
from the date of expenditure until paid at the Default Rate, shall be secured
hereby, and Borrower shall reimburse Lender therefor immediately upon demand.
Nothing in this Subsection 10.1(b) shall impose any duty, obligation, or
responsibility upon Lender for the control, care, management, leasing, or
repair of the Property, nor for the carrying out of any of the terms and
conditions of any such Lease; nor shall it operate to make Lender responsible
or liable for any waste committed on the Property by the tenants or by any
other parties, or for any hazardous substances or environmental conditions on
or under the Property, or for any dangerous or defective condition of the
Property or for any negligence in the management, leasing, upkeep, repair, or
control of the Property resulting in loss or injury or death to any tenant,
licensee, employee, or stranger. Borrower hereby assents to, ratifies, and
confirms any and all actions of Lender with respect to the Property taken under
this subsection.

 

(c)         Acceleration.
Upon the occurrence of an Event of Default (other than an Event of Default
described in Section 9.1 (d) or (e) above) and at any time
thereafter Lender may, without notice, demand, presentment, notice of
nonpayment or

 

34

 

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

 

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

 

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

 

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

 

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

 

(iii)      After
each sale, Lender, Trustee or an officer of any court empowered to do so shall
execute and deliver to the purchaser or purchasers at such sale a good and
sufficient instrument or instruments granting, conveying, assigning and
transferring all right, title and interest of Borrower in and to the property
and rights sold and shall receive the proceeds of said sale or sales and apply
the same as specified in the Note. Each of Trustee and Lender is hereby
appointed the true and lawful attorney-in-fact of Borrower, which appointment
is irrevocable and shall be deemed to be coupled with an interest, in
Borrower’s name and stead, to make an necessary conveyances, assignments,
transfers and deliveries of the property and rights so sold, Borrower hereby
ratifying and

 

35

 

confirming all
that said attorney or such substitute or substitutes shall lawfully do by
virtue thereof. Nevertheless, Borrower, if requested by Trustee or Lender,
shall ratify and confirm any such sale or sales by executing and delivering to
Trustee, Lender or such purchaser or purchasers all such instruments as may be
advisable, in Trustee’s or Lender’s judgment, for the purposes as may be
designated in such request.

 

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

 

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

 

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

 

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

 

(f)          Lender’s
Judicial Remedies. Lender, or Trustee upon written request of Lender, may
proceed by suit or suits, at law or in equity, to enforce the payment of the
Debt to foreclose the liens and security interests of this Security Instrument
as against all or any part of the Property, and to have all or any part of the
Property sold under the judgment or decree of a court of competent
jurisdiction. This remedy shall be cumulative of any other nonjudicial remedies
available to Lender under this Security Instrument, the Note or the Other Loan
Documents. Proceeding with a request or receiving a judgment for legal relief
shall not be or be deemed to be an election of remedies or bar any available
nonjudicial remedy of Lender.

 

(g)         Lender’s
Right to Appointment of Receiver. Lender, as a matter of right and (i)
without regard to the sufficiency of the security for repayment of the Debt and
without notice to Borrower, (ii) without any showing of insolvency, fraud, or
mismanagement on the part of Borrower, (iii) without the necessity of filing
any judicial or other proceeding other than the proceeding for appointment of a
receiver, and (iv) without regard to the then value of the Property, shall be
entitled to the appointment of a receiver or receivers for the protection,
possession, control, management and operation of

 

36

 

the Property,
including (without limitation), the power to collect the Rents, enforce this
Security Instrument and, in case of a sale and deficiency, during the full
statutory period of redemption (if any), whether there be a redemption or not,
as well as during any further times when Borrower, except for the intervention
of such receiver, would be entitled to collection of such Rents. Borrower
hereby irrevocably consents to the appointment of a receiver or receivers. Any
receiver appointed pursuant to the provisions of this subsection shall have the
usual powers and duties of receivers in such matters.

 

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

 

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

 

(i)        Taxes and
Other Charges;

 

(ii)       Insurance
Premiums;

 

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

 

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

 

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

 

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

 

(k)         Discontinuance
of Remedies. In case Lender shall have proceeded to invoke any right,
remedy, or recourse permitted under the Loan Documents and shall thereafter
elect to discontinue or abandon same for any reason, Lender shall have the
unqualified right so to do and, in such event, Borrower and Lender shall be
restored to their former positions with respect to the Debt, the Loan
Documents, the Property or

 

37

 

otherwise, and the
rights, remedies, recourses and powers of Lender shall continue as if same had
never been invoked.

 

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

 

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

 

(n)         Application
of Proceeds. The proceeds from any sale, lease, or other disposition made
pursuant to this Security Instrument, or any Rents collected by Lender from the
Property, or the Tax and Insurance Escrow Fund or the Replacement Escrow Fund
(as defined in the Escrow Agreement), if any, or proceeds from insurance which
Lender elects to apply to the Debt pursuant to Article 3 hereof, shall
be applied by Trustee, or by Lender, as the case may be, to the Debt in the
following order and priority: (1) to the payment of all expenses of
advertising, selling, and conveying the Property or part thereof, and/or
prosecuting or otherwise collecting Rents, proceeds, premiums or other sums
including reasonable attorneys’ fees and a reasonable fee or commission to
Trustee, not to exceed five percent of the proceeds thereof or sums so
received; (2) to that

 

38

 

portion, if any,
of the Debt with respect to which no person or entity has personal or entity
liability for payment (the “Exculpated
Portion”), and with respect to the Exculpated Portion as follows:
first, to accrued but unpaid interest, second, to matured principal, and third,
to unmatured principal in inverse order of maturity; (3) to the remainder of
the Debt as follows: first, to the remaining accrued but unpaid interest,
second, to the matured portion of principal of the Debt, and third, to
prepayment of the unmatured portion, if any, of principal of the Debt applied
to installments of principal in inverse order of maturity; (4) the balance, if
any or to the extent applicable, remaining after the full and final payment of
the Debt to the holder or beneficiary of any inferior liens covering the
Property, if any, in order of the priority of such inferior liens (Trustee and
Lender shall hereby be entitled to rely exclusively on a commitment for title
insurance issued to determine such priority); and (5) the cash balance, if any,
to the Borrower. The application of proceeds of sale or other proceeds as
otherwise provided herein shall be deemed to be a payment of the Debt like any
other payment. The balance of the Debt remaining unpaid, if any, shall remain
fully due and owing in accordance with the terms of the Note and the other Loan
Documents.

 

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

 

ARTICLE 11 - INDEMNIFICATION; SUBROGATION

 

Section 11.l.    GENERAL INDEMNIFICATION.

 

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

 

(b)         If Lender is
made a party defendant to any litigation or any claim is threatened or brought
against Lender concerning the secured indebtedness, this Security Instrument,
the Property, or any part thereof, or any interest therein, or the
construction, maintenance, operation or occupancy or use thereof, then Lender
shall notify Borrower of such litigation or claim and Borrower shall indemnify,
defend and hold Lender harmless from and against all liability by reason of
said litigation or claims, including reasonable attorneys’ fees (together with
reasonable appellate counsel fees, if any). The right to such attorneys’ fees
(together with reasonable appellate counsel fees, if any) and expenses

 

39

 

incurred by Lender
in any such litigation or claim of the type described in this Subsection
11.1(b), whether or not any such litigation or claim is prosecuted to
judgment, shall be deemed to have accrued on the commencement of such claim or
action and shall be enforceable whether or not such claim or action is
prosecuted to judgment. If Lender commences an action against Borrower to
enforce any of the terms hereof or to prosecute any breach by Borrower of any
of the terms hereof or to recover any sum secured hereby, Borrower shall pay to
Lender its reasonable attorneys’ fees (together with reasonable appellate
counsel fees, if any) and expenses. If Borrower breaches any term of this
Security Instrument, Lender may engage the services of an attorney or attorneys
to protect its rights hereunder, and in the event of such engagement following
any breach by Borrower, Borrower shall pay Lender reasonable attorneys’ fees
(together with reasonable appellate counsel fees, if any) and expenses incurred
by Lender, whether or not an action is actually commenced against Borrower by
reason of such breach. All references to “attorneys”
in this Subsection 11.1(b) and elsewhere in this Security Instrument
shall include without limitation any attorney or law firm engaged by Lender and
Lender’s in-house counsel, and all references to “fees and expenses” in this Subsection 11.1(b) and
elsewhere in this Security Instrument shall include without limitation any fees
of such attorney or law firm and any allocation charges and allocation costs of
Lender’s in-house counsel.

 

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

 

Section 11.2.   ENVIRONMENTAL
INDEMNIFICATION. Borrower shall, at its sole cost and expense, protect,
defend, indemnify, release and hold harmless the Indemnified Parties from and
against any and all Losses (as hereinafter defined) imposed upon or incurred by
or asserted against any Indemnified Parties (other than those arising solely
from a state of facts that first came into existence after Lender (or any other
party) acquired title to the Property through foreclosure or a deed in lieu
thereof), and directly or indirectly arising out of or in any way relating to
any one or more of the following: (a) any presence of any Hazardous Substances
(as hereinafter defined) in, on, above, or under the Property; (b) any past,
present or future Release (as hereinafter defined) of Hazardous Substances in,
on, above, under or from the Property; (c) any activity by Borrower, any person
or entity affiliated with Borrower, and any tenant or other user of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management,
abatement, removal, handling, transfer or transportation to or from the
Property of any Hazardous Substances at any time located in, under, on or above
the Property; (d) any activity by Borrower, any person or entity affiliated
with Borrower, and any tenant or other user of the Property in connection with
any actual or proposed Remediation (as hereinafter defined) of any Hazardous Substances
at any time located in, under, on or above the Property, whether or not such
Remediation is voluntary or pursuant to court or administrative order,
including but not limited to any removal, remedial or corrective action; (e)
any past, present or threatened non-compliance or violations of any
Environmental Law (as

 

40

 

hereinafter
defined) (or permits issued pursuant to any Environmental Law) in connection
with the Property or operations thereon, including but not limited to any
failure by Borrower, any person or entity affiliated with Borrower, and any
tenant or other user of the Property to comply with any order of any
governmental authority in connection with any Environmental Laws; (f) the
imposition, recording or filing or the future imposition, recording or filing
of any Environmental Lien (as hereinafter defined) encumbering the Property;
(g) any administrative processes or proceedings or judicial proceedings in any
way connected with any matter addressed in this Section 11.2; (h) any
material misrepresentation or inaccuracy in any representation or warranty or
material breach or failure to perform any covenants or other obligations under
the Environmental Indemnity of even date executed by Borrower and Indemnitor;
and (i) any diminution in value of the Property in any way connected with any
occurrence or other matter referred to in this Section 11.2.

 

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

 

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

 

The term “Hazardous Substances”
includes but is not limited to any and all substances (whether solid, liquid or
gas) defined, listed, or otherwise classified as pollutants, hazardous wastes,
hazardous substances, hazardous materials, extremely hazardous wastes, or words
of

 

41

 

similar meaning or
regulatory effect under any present or future Environmental Laws, including but
not limited to petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated biphenyls, lead, lead-based
paints, radon, radioactive materials, flammables, explosives and, to the extent
subject to regulation by any Environmental Law, any toxic fungus, including
mold, mildew and any mycotoxins, spores, scents or byproducts produced by
fungi.

 

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

 

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

 

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

 

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

 

Section 11.3.   DUTY TO DEFEND AND ATTORNEYS
AND OTHER FEES AND EXPENSES. Upon written request by any Indemnified Party,
Borrower shall defend such

 

42

 

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

 

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

 

ARTICLE 12 - SECURITY AGREEMENT

 

Section 12.1.   SECURITY AGREEMENT. This
Security Instrument is both a real property mortgage and a “security agreement”
within the meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all other rights and interests, whether tangible
or intangible in nature, of Borrower in the Property. Borrower by executing and
delivering this Security Instrument has granted and hereby grants to Lender, as
security for the Obligations, a security interest in the Property to the full
extent that the Property may be subject to the Uniform Commercial Code (said
portion of the Property so subject to the Uniform Commercial Code being called
in this paragraph the “Collateral”).
Borrower hereby agrees with Lender to execute and deliver to Lender, in form
and substance satisfactory to Lender, such financing statements, continuation
statements, other uniform commercial code forms and shall pay all expenses and
fees in connection with the filing and recording thereof, and such further
assurances as Lender may from time to time, reasonably consider necessary to
create, perfect, and preserve Lender’s security interest herein granted. This
Security Instrument shall also constitute a “fixture filing” for the purposes
of the Uniform Commercial Code. All or part of the Property are or are to
become fixtures. Information concerning the security interest herein granted
may be obtained from the parties at the addresses of the parties set forth in
the first paragraph of this Security Instrument. If an Event of Default shall
occur, Lender, in addition to any other rights and remedies which they may
have, shall have and may exercise immediately and without demand, any and all
rights and remedies granted to a secured party upon default under the Uniform
Commercial Code, including, without limiting the generality of the foregoing,
the right to take possession of the Collateral or any part thereof, and to take
such other measures as Lender may deem necessary for the care, protection and
preservation of the Collateral. Upon request or demand of Lender, Borrower
shall at its expense assemble the Collateral and make it available to Lender at
a convenient place acceptable to Lender. Borrower shall pay to Lender on demand
any and all expenses, including legal expenses and attorneys’ fees, incurred or
paid by Lender in protecting the interest in the Collateral and in enforcing
the rights hereunder with respect to the Collateral. Any notice of sale,
disposition or other intended action by Lender with

 

43

 

respect to the
Collateral sent to Borrower in accordance with the provisions hereof at least
five (5) days prior to such action, shall constitute commercially reasonable
notice to Borrower. The proceeds of any disposition of the Collateral, or any
part thereof, may be applied by Lender to the payment of the Obligations in
such priority and proportions as Lender in its discretion shall deem proper. In
the event of any change in name, identity or structure of any Borrower, such
Borrower shall notify Lender thereof, and promptly after request shall execute,
file and record such Uniform Commercial Code forms as are necessary to maintain
the priority of Lender’s lien upon and security interest in the Collateral, and
shall pay all expenses and fees in connection with the filing and recording
thereof. If Lender shall require the filing or recording of additional Uniform
Commercial Code forms or continuation statements, Borrower shall, promptly
after request, execute, file and record such Uniform Commercial Code forms or
continuation statements as Lender shall deem necessary, and shall pay all
expenses and fees in connection with the filing and recording thereof it being
understood and agreed, however, that no such additional documents shall
increase Borrower’s obligations under the Note, this Security Instrument and
the Other Loan Documents. Borrower hereby irrevocably appoints Lender as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any financing or other statements signed only by Lender,
as Borrower’s attorney-in-fact, in connection with the Collateral covered by
this Security Instrument. Notwithstanding the foregoing, Borrower shall appear
and defend in any action or proceeding which affects or purports to affect the
Property and any interest or right therein, whether such proceeding effects
title or any other rights in the Property (and in conjunction therewith,
Borrower shall fully cooperate with Lender in the event Lender is a party to
such action or proceeding).

 

ARTICLE 13 - WAIVERS

 

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

 

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

 

Section 13.3.   SOLE DISCRETION OF LENDER.
Wherever pursuant to this Security Instrument Lender exercises any right given
to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to
decide that arrangements or terms are satisfactory or not satisfactory shall be
in the sole

 

44

 

discretion of
Lender and shall be final and conclusive, except as may be otherwise expressly
and specifically provided herein.

 

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

 

Section 13.5.   WAIVER OF TRIAL BY JURY.

 

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

 

Section 13.6.   WAIVER OF AUTOMATIC OR SUPPLEMENTAL
STAY. In the event of the filing of any voluntary or involuntary petition
under the Bankruptcy Code by or against Borrower (other than an involuntary
petition filed by or joined in by Lender), the Borrower shall

 

45

 

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

 

ARTICLE 14 - NOTICES

 

Section 14.1.   NOTICES. All notices or
other written communications hereunder shall be deemed to have been properly
given (i) upon delivery, if delivered in person or by facsimile transmission
with receipt acknowledged, (ii) one (1) Business Day after having been
deposited for overnight delivery with any reputable overnight courier service,
or (iii) three (3) Business Days after having been deposited in any post office
or mail depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, addressed as follows:

 

	
  If to Borrower:

  	
  A-S 60 Hwy 75-Loy Lake,
  L. P.

  
	
   

  	
  c/o NewQuest Properties

  
	
   

  	
  8807 W. Sam Houston Parkway
  N., Suite 200

  
	
   

  	
  Houston, Texas 77040

  
	
   

  	
  Attention: Steven D.
  Alvis

  
	
   

  	
  Facsimile No.: (281)
  477-4399

  
	
   

  	
   

  
	
  With a copy to:

  	
  Nathan Sommers Jacobs
  & Gorman

  
	
   

  	
  2800 Post Oak
  Boulevard, 61st Floor

  
	
   

  	
  Houston, Texas 77056

  
	
   

  	
  Attn: Marvin D. Nathan

  
	
   

  	
  Facsimile No.: (713)
  892-4800

  
	
   

  	
   

  
	
  If to Lender:

  	
  ARCap Servicing, Inc.

  
	
   

  	
  5605 N. MacArthur
  Blvd., Suite 950

  
	
   

  	
  Irving, Texas 75038

  
	
   

  	
  Attention: 

  	
  Clyde Greenhouse

  
	
   

  	
   

  	
  Director of
  Administration

  
	
   

  	
  Facsimile No.: (972)
  580-3888

  

 

46

 

	
  With a copy to:

  	
  Kelley Drye &
  Warren LLP

  
	
   

  	
  200 Kimball Drive

  
	
   

  	
  Parsippany, New Jersey
  07054

  
	
   

  	
  Attention: Paul A.
  Keenan, Esq.

  
	
   

  	
  Facsimile No.: (973)
  503-5950

  

 

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

 

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

 

ARTICLE 15 - APPLICABLE LAW

 

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

 

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

 

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

 

47

 

ARTICLE 16 - SECONDARY MARKET

 

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

 

ARTICLE 17 - COSTS

 

Section 17.1.   PERFORMANCE AT BORROWER’S
EXPENSE. Borrower acknowledges and confirms that Lender shall impose
certain administrative processing and/or commitment fees in connection with (a)
the extension, renewal, modification, amendment and termination (excluding the
scheduled maturity of the Note) of its loans, (b) the release or substitution
of collateral therefore, or (c) obtaining certain consents, waivers and
approvals with respect to the Property (the occurrence of any of the above
shall be called an “Event”).
Borrower hereby acknowledges and agrees to pay, immediately, upon demand, all
such fees (as the same may be increased or decreased from time to time), and
any additional fees of a similar type or nature which may be imposed by Lender
from time to time, upon the occurrence of any Event.

 

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

 

ARTICLE 18 - DEFINITIONS

 

Section 18.1.   GENERAL DEFINITIONS.
Unless the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Security Instrument may be
used interchangeably in singular or plural form and the word “Borrower” shall mean “each Borrower and any
subsequent owner or owners of the Property or any part thereof or any interest
therein,” the word “Lender” shall
mean “Lender and any subsequent holder of the Note,” the word “Note” shall mean “the Note and any other
evidence of indebtedness secured by this Security Instrument,” the word “person” shall include an

 

48

 

individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, the word “Property” shall include any portion of the
Property and any interest therein, and the phrases “attorney’s fees,” “legal
fees” and “counsel fees”
shall include any and all attorneys’, paralegal and law clerk fees and
disbursements, including, but not limited to, fees and disbursements at the
pre-trial, trial and appellate levels incurred or paid by Lender in protecting
its interest in the Property, the Leases and the Rents and enforcing its rights
hereunder.

 

ARTICLE 19 - MISCELLANEOUS PROVISIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 19.7.   SUBROGATION. If any or
all of the proceeds of the Note have been used to extinguish, extend or renew
any indebtedness heretofore existing against the Property, then, to the extent
of the funds so used, Lender shall be subrogated to all of the rights, claims,
liens, titles, and interests existing against the Property heretofore held by,
or in favor of, the holder of such indebtedness and such former rights, claims,
liens, titles, and interests, if any, are not waived but rather are continued
in full force and effect in favor of Lender and are merged

 

49

 

with the lien and
security interest created herein as cumulative security for the repayment of
the Debt, the performance and discharge of Borrower’s obligations hereunder,
under the Note and the Other Loan Documents and the performance and discharge
of the Other Obligations.

 

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

 

ARTICLE 20 - TRUSTEE

 

Trustee may resign by the giving of notice of such resignation in
writing or verbally to Lender. If Trustee shall die, resign, or become
disqualified from acting in the execution of this trust, or if, for any reason,
Lender shall prefer to appoint a substitute trustee or multiple substitute
trustees, or successive substitute trustees or successive multiple substitute
trustees, to act instead of the aforenamed Trustee, Lender shall have full
power to appoint a substitute trustee (or, if preferred, multiple substitute
trustees) in succession who shall succeed (and if multiple substitute trustees
are appointed, each of such multiple substitute trustees shall succeed) to all
the estates, rights, powers, and duties of the aforenamed Trustee. Such
appointment may be executed by any authorized agent of Lender, and if such
Lender be a corporation and such appointment be executed in its behalf by any
officer of such corporation, such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of the
corporation. Borrower hereby ratifies and confirms any and all acts which the
aforenamed Trustee, or his successor or successors in this trust, shall do
lawfully by virtue hereof. If multiple substitute Trustees are appointed, each
of such multiple substitute Trustees shall be empowered and authorized to act
alone without the necessity of the joinder of the other multiple substitute
trustees, whenever any action or undertaking of such substitute trustees is
requested or required under or pursuant to this Security Instrument or
applicable law. Any substitute Trustee appointed pursuant to any of the
provisions hereof shall, without any further act, deed, or conveyance, become
vested with all the estates, properties, rights, powers, and trusts of its or
his predecessor in the rights hereunder with like effect as if originally named
as Trustee herein; but nevertheless, upon the written request of Lender or of
the substitute Trustee, the Trustee ceasing to act shall execute and deliver
any instrument transferring to such substitute Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver any of
the property and moneys held by such Trustee to the substitute Trustee so
appointed in the Trustee’s place. No fees or expenses shall be payable to
Trustee, except in connection with a foreclosure of the Property or any part
thereof or in connection with the release of the Property following payment in
full of the Debt.

 

50

 

ARTICLE 21 - SPECIAL STATE OF TEXAS PROVISIONS

 

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

 

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

 

“The assignments set forth in this Section 1.2
are not intended to constitute payment to Lender or Trustee unless Borrower’s
license to collect Rents is terminated, and then only to the extent that the
Rents are actually received by Lender (as opposed to constituting a portion of
the voluntary payments of principal and interest on the Note) and are not used
for the operation or maintenance of the Property or for the payment of costs
and expenses in connection therewith, taxes, assessments, water charges, sewer
rents, and other charges levied, assessed or imposed against the Property,
insurance premiums, costs and expenses with respect to any litigation affecting
the Property, the leases, the concessions, and the rent, any wages and salaries
of employees, commissions of agents and reasonable attorneys’ fees, all in
accordance with the terms of the Loan Documents. It is further the intent of
Borrower and Lender that the Rents hereby absolutely assigned are no longer,
during the term of this Security Instrument, property of Borrower or property
of any estate of Borrower as defined in 11 U.S.C. § 541 and shall not
constitute collateral, cash or otherwise, of Borrower. The term “Rents” as used
herein shall mean the gross rents without deduction or offsets of any kind.”

 

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

 

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

 

51

 

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

 

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

 

Section 10.6    No Waiver of Remedies.
Lender may resort to any remedies and the security given by the Note, this
Security Instrument or the Loan Documents in whole or in part, and in such
portions and in such order as determined by Lender’s sole discretion. No such
action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by the Note, this Security Instrument or any of
the other Loan Documents. The failure of Lender to exercise any right, remedy
or option provided in the Note, this Security Instrument or any of the other
Loan Documents shall not be deemed a waiver of such right, remedy or option or
of any covenant or obligation secured by the Note, this Security Instrument or
the other Loan Documents. No acceptance by Lender of any payment after the
occurrence of any Event of Default and no payment by Lender of any obligation
for which Borrower is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Borrower, or Borrower’s liability to pay such
obligation, unless simultaneously with such acceptance or payment by Lender,
Lender waives in writing the Event of Default cured thereby. No sale of all or
any portion of the Property, no forbearance on the part of Lender, and no
extension of time for the payment of the whole or any portion of the Debt or
any other indulgence given by Lender to Borrower, shall operate to release or
in any manner affect the interest of Lender in the remaining Property or the
liability of Borrower to pay the Debt. No waiver by Lender shall be effective
unless it is in writing and then only to the extent specifically stated. All
reasonable out-of-pocket costs and expenses of Lender in exercising its rights
and remedies under this Article (including reasonable attorneys’ fees and
disbursements to the extent permitted by law), shall be paid by Borrower within
five (5) business days after notice from Lender, and such costs and expenses
shall constitute a portion of the Debt and shall be secured by this Security
Instrument.

 

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

 

52

 

respect to the
Property or any portion thereof; or (iii) any release or indulgence granted to
any maker, endorser, guarantor or surety of any of the Debt.

 

Section 10.8.   Foreclosure.
Upon the occurrence and during the continuance of any Event of Default, Lender
may request Trustee to proceed with foreclosure under the power of sale which
is hereby conferred, such foreclosure to be accomplished in accordance with the
following provisions:

 

(a)         Public
Sale. Trustee is hereby authorized and empowered, and it shall be Trustee’s
special duty, upon such request of Lender, to sell the Property, or any part
thereof, at public auction to the highest bidder for cash, with or without having
taken possession of same. Any such sale (including notice thereof) shall comply
with the applicable requirements, at the time of the sale, of Section 51.002 of
the Texas Property Code or, if and to the extent such statute is not then in
force, with the applicable requirements, at the time of the sale, of the
successor statute or statutes, if any, governing sales of Texas real property
under powers of sale conferred by deeds of trust. If there is no statute in
force at the time of the sale governing sales of Texas real property under
powers of sale conferred by deeds of trust, such sale shall comply with
applicable law, at the time of the sale, governing sales of Texas real property
under powers of sale conferred by deeds of trust. Trustee or his successor or
substitute may appoint or delegate any one or more persons as agent to perform
any act or acts necessary or incident to any sale held by Trustee, including
the posting of notices, and the conduct of sale, but in the name and on behalf
of Trustee, his successor or substitute.

 

(b)        Intentionally
Deleted.

 

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

 

(d)        Partial
Foreclosure. Sale of a part of the Property shall not exhaust the power of
sale, but sales may be made from time to time until the Debt is paid in full.
It is intended by each of the foregoing provisions of this subsection that
Trustee may, after any request or direction by Lender, sell not only the Land
and the Improvements, but also the equipment and other interests constituting a
part of the Property or any part thereof, along with the Land and the
Improvements or any part thereof, as a unit and as a part of a

 

53

 

single sale, or
may sell at any time or from time to time any part or parts of the Property
separately from the remainder of the Property. It shall not be necessary to
have present or to exhibit at any sale any of the Property. Any sale of
personal property made hereunder shall be deemed to have been a public sale
conducted in a commercially reasonable manner if held contemporaneously with,
or as part of, and upon the same notice as required for the sale of real
property under the power of sale granted herein.

 

(e)         Trustee’s
Deeds. After any sale under this subsection, Trustee shall make good and
sufficient deeds, assignments, and other conveyances to the purchaser or
purchasers thereunder in the name of Borrower, conveying the Property or any
part thereof so sold to the purchaser or purchasers with special warranty of
title by Borrower. It is agreed that in any deeds, assignments or other
conveyances given by Trustee, absent fraud, willful misconduct or gross negligence,
any and all statements of fact or other recitals therein made as to the
identity of Lender, the occurrence or existence of any Event of Default, the
notice of intention to accelerate, or acceleration of, the maturity of the
Debt, the request to sell, notice of sale, time, place, terms and manner of
sale, and receipt, distribution, and application of the money realized
therefrom, the due and proper appointment of a substitute trustee, and without
being limited by the foregoing, any other act or thing having been duly done by
or on behalf of Lender or by or on behalf of Trustee, shall be taken by all
courts of law and equity as prima  facie evidence that such
statements or recitals state true, correct, and complete facts and are without
further question to be so accepted, and Borrower does hereby ratify and confirm
any and all acts that Trustee may lawfully do in the premises by virtue
hereof.”

 

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

 

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

 

Section 21.6.   Notice of Indemnification.
BORROWER ACKNOWLEDGES THAT THIS SECURITY INSTRUMENT PROVIDES FOR
INDEMNIFICATION OF LENDER AND TRUSTEE BY BORROWER PURSUANT TO ARTICLE 11.
SUBJECT TO THE TERMS THEREOF, IT IS SPECIFICALLY INTENDED BY BORROWER, LENDER,
AND TRUSTEE THAT ALL INDEMNITY OBLIGATIONS AND LIABILITIES ASSUMED BY BORROWER
HEREUNDER BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF
(INCLUDING PREEXISTING CONDITIONS), STRICT LIABILITY,

 

54

 

OR THE NEGLIGENCE
OF ANY PARTY OR PARTIES (INCLUDING LENDER AND TRUSTEE) WHETHER SUCH NEGLIGENCE
BE SOLE, JOINT OR CONCURRENT, OR PASSIVE. THE PARTIES SPECIFICALLY INTEND THAT
LENDER AND TRUSTEE ARE TO BE INDEMNIFIED AGAINST THEIR OWN NEGLIGENCE;
PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE BORROWER
TO INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER OR TRUSTEE FROM AND AGAINST ANY
OR ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS,
COSTS AND EXPENSES ENACTED AGAINST, IMPOSED ON OR INCURRED BY LENDER OR TRUSTEE
BY THEIR OWN WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.

 

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

 

Section 21.8.   Duties of Trustee. It
shall be no part of the duty of the Trustee to see to any recording, filing or
registration of this Security Instrument or any other instrument in addition or
supplemental thereto, or to give any notice thereof, or to see to the payment
of or be under any duty in respect of any tax or assessment or other
governmental charge which may be levied or assessed on the Property, or any
part thereof, or against the Borrower, or to see to the performance or
observance by the Borrower of any of the covenants and agreements contained
herein. The Trustee shall not be responsible for the execution, acknowledgment
or validity of this Security Instrument or of any instrument in addition or
supplemental hereto or for the sufficiency of the security purported to be
created hereby, and makes no representation in respect thereof or in respect of
the rights of the Lender. The Trustee shall have the right to advise with
counsel upon any matters arising hereunder and shall be fully protected in
relying as to legal matters on the advice of counsel. The Trustee shall not
incur any personal liability hereunder except for his own gross negligence or
willful misconduct; and the Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine.

 

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

 

55

 

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

 

	
   

  	
   

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  A-S 60 HWY 75-LOY LAKE,
  L.P., a Texas limited

  partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Sherman GP, LLC, a
  Delaware limited liability

  company, its General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Steven D. Alvis

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Steven D. Alvis

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]