Document:

ex10one.htm

     

     

     

    
      

      

    

     

    

    EMPLOYMENT
AGREEMENT

    

    THIS
EMPLOYMENT AGREEMENT (the “Agreement”)
is made and entered into as of September 30, 2008 (the “Effective
Date”) by and between Precision Aerospace Components, Inc., a Delaware
corporation (the “the
Company”), and Andrew S. Prince (the “Executive”).

     

    
      	
              1.  

            	
                      POSITION

            

    

     

    a.  Title;
Office.  Executive has been employed by and is serving as the
President and Chief Executive Officer of the Company.  Executive’s
office will be located at the Company’s headquarters at 2200 Arthur Kill Road,
Staten Island, New York.

     

    b.  Duties. Executive shall report
to the Company’s Board of Directors (the “Board of
Directors”) and shall perform such duties as the Board of Directors may
from time to time require, consistent with the general level and type of duties
and responsibilities customarily associated with the position of Chief Executive
Officer.  For as long as Executive is a member of the Board of
Directors, during the term of this Agreement, Executive shall serve as a member
of the Board of Directors without additional consideration other than what is
provided in this Agreement.

     

    c.  Other Obligations. Executive agrees to the
best of Executive’s ability and experience that he will at all times loyally and
conscientiously perform all of the duties and obligations required of Executive
pursuant to the terms of this Agreement, and will do so to the reasonable
satisfaction of the Board of Directors.  During the term of
Executive’s employment, Executive may engage in other activities while he
manages the Company provided that such activities neither unreasonably interfere
with his management of and duties to the Company nor adversely reflect on the
Company’s reputation.  Executive shall notify the Board of Directors
if an outside activity would be expected to take more than ten hours of normal
work time during the month on a regular basis.

     

    
      	
              2.  

            	
                      EMPLOYMENT
      TERM

            

    

     

    The Company hereby agrees to employ
Executive, and Executive hereby agrees to be employed by the Company, subject to
the terms and conditions of this Agreement, for a term commencing on the
Effective Date and continuing until September 30, 2009 unless sooner replaced or
terminated as provided in Section 5 below (the “Employment
Term”).  This Agreement
shall be deemed to be renewed for additional one-year terms after its initial
term (or any subsequent renewal term), unless either party delivers written
notice of its intent not to renew this Agreement.

     

    
      	
              3.  

            	
                      COMPENSATION

            

    

     

    a.  Base Salary.  During
the Employment Term, Executive will be paid an annual salary of two hundred ten
thousand dollars and no cents ($210,000.00).  Executive’s salary will
be payable in equal weekly installments pursuant to the Company’s regular
payroll practices (or in the same manner as other employees of the Company), and
shall be subject to the usual, required withholding of income and employment
taxes.  Executive’s annual salary of two hundred ten thousand dollars
and no cents ($210,000.00), together with any changes thereto, shall be referred
to in this Agreement as “Base
Salary.”  Base Salary will be subject to review by, and change
at, the sole discretion of the Board of Directors, acting or through a
Compensation Committee of the Board of Directors if it so chooses (the “Compensation
Committee”).

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    b.  Incentive
Bonus.  During the Employment Term, Executive will be eligible
for incentive bonuses based on the achievement of specified financial or other
performance objectives as determined by the Compensation Committee each year (or
such other period as determined by the Compensation Committee) in its sole
discretion (the “Incentive
Bonus”).  The initial bonus elements shall be as
follows:

     

    (i)  Cash
bonuses and/or other form of consideration received bonuses not to exceed 50% of
pretax income, calculated without including expenses for non cash compensation,
are to be calculated and paid upon the achievement of the
following:

     

    
      	
              1.  

            	
              1%
      of net sales from Freundlich subsidiary greater than 10 Million dollars
      for the 12 month period ending on September 30, 2009 (the “Anniversary
      Date”) payable at the time of filing of the Company’s 10 Q for the third
      quarter 2009.

            

    

    
      	
              2.  

            	
              2%
      of net equity
      or 1% of debt raised by the Company or its subsidiaries; this shall
      include any such funding which refinances existing credit obligations of
      the Company or its subsidiaries, but shall not include the extension of
      existing obligations or lines of credit; payable at the time of first
      funding from the financing. (Recognizing the unique role Mr. Prince is
      presently playing within the
Company.)

            

    

    
      	
              3.  

            	
              3%
      of net pretax consolidated profits in excess of prior year pretax
      consolidated profits for the 12 month period ending on the Anniversary
      Date payable at the time of filing of the Company’s 10 Q for the third
      quarter 2008.

            

    

    
      	
              4.  

            	
              2%
      of any sale price of a major asset of the Company payable in form of
      consideration received for sale of asset – e.g. if either the Freundlich
      operation or any other direct subsidiary or subsidiary of a subsidiary or
      the Company as a whole is sold either in one or more asset sales, stock
      sales or mergers.

            

    

    
      	
              5.  

            	
              In
      any event total cash bonus or form of consideration received not to exceed
      50% of pretax income, calculated without including expenses for non-cash
      compensation expenses.

            

    

    

    ii) Stock
Option or other equity plan that will be calculated valued and vest pursuant to
a plan to be developed within the first six months of the Effective date of this
Agreement   Such incentive award shall take into account the
Executive's positions, duties and responsibilities at the Company.

    

    c.      Employee
Benefits

     

    During the Employment Term, Executive
shall be eligible to participate in the employee benefits plans currently and
hereafter maintained from time to time by the Company, in its sole discretion,
including family group health insurance and a 401(k) savings plan, provided the
Company in its sole discretion elects to adopt such plans.  In the
event Executive does not avail himself of such health insurance, he shall be
paid the premiums which would have been paid by the Company had he and his
spouse participated in the plan Executive shall be entitled to 20 days of
vacation per calendar year accrued at the rate of 1.67 days per month in
addition to Company paid holidays.  Executive may, at his election,
carry over or be paid for all or any portion of his unused
vacation.  Additionally, if Executive obtains a disability insurance
policy or a term life insurance policy on his life, up to $500,000, each at a
cost that is acceptable to the Company, the Company shall reimburse the
Executive for the associated disability or life insurance premiums incurred by
the Executive during the Employment Term.  The Company reserves the
right, at its discretion, to cancel or change the employee benefit plans and
programs it offers to its employees and consequently to Executive at any
time.  Executive will be given a copy of, and must abide by, the
Company’s employee handbook and employee benefit plan documents which will
describe more fully these and other benefits of Executive’s employment, as well
as the personal policies and procedures which apply to employment with the
Company.

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    
      	
              4.  

            	
                      EXPENSE
      REIMBURSEMENT

            

    

     

    Executive
will be authorized to incur ordinary, necessary and reasonable travel,
entertainment and other business expenses in connection with Executive’s duties
and in accordance with the Company policy.  The Company shall also
reimburse Executive for reasonable out-of-pocket travel and living expenses
incurred by Executive to commute to and work from the Company’s headquarters, up
to a maximum amount of $3,000 per month.  Executive shall receive
reimbursement for out-of-pocket continuing professional education fees and
expenses required to maintain Executive’s CLE requirements for the New York Bar
and for out-of-pocket Bar licensing fees.  Executive shall also be
entitled to receive reimbursement for attorney’s fees for services incurred for
review and advice regarding this Agreement, up to a maximum amount of one
thousand dollars ($1,000.00).  All expenses subject to reimbursement
shall require Executive to present appropriate supporting documentation and
receipts in accordance with the Company’s standard reimbursement
policy.

     

    
      	
              5.  

            	
                      TERMINATION OF
      EMPLOYMENT

            

    

     

    This Agreement and the Executive’s
employment may be terminated as provided in this Section 5, subject to the
respective continuing obligations of the Company and the Executive under
Sections 5, 6, 7, 8, 9, 10 and 11 below.  The date this Agreement and
the Executive’s employment with the Company are terminated in accordance with
this Section 5 is herein referred to as the “Termination Date.”

     

    
      	
              a.  

            	
                   Termination by the
  Company

            

    

     

    
      	
              (i)  

            	
              For
      Cause:  The Company may terminate the Executive’s
      employment immediately for “Cause” which means serious misconduct or
      cause, which will include:

            

    

     

    
      	
              1)  

            	
              The
      Executive’s material breach of any of the Executive’s duties under this
      Agreement, or the Executive’s failure or refusal to satisfactorily perform
      his or her duties, responsibilities, and obligations as an executive of
      the Company, for reasons other than
disability;

            

    

     

    
      	
              2)  

            	
              Any
      dishonesty or other breach of the duty of loyalty to the Company by the
      Executive, which adversely affects the
Company;

            

    

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    
      	
              3)  

            	
              Indictment
      of the Executive of any crime related to or arising from the operation of
      the Company’s business, or conviction of (or guilty plea or plea of nolo contendere
      regarding) a felony;

            

    

     

    
      	
              4)  

            	
              Indictment
      by the Executive of any other intentional act which the Company reasonably
      concludes would be likely to injure the reputation, business or regulatory
      status of the Company;

            

    

     

    
      	
              5)  

            	
              The
      existence of any court order or settlement agreement prohibiting the
      Executive’s continued employment with the
  Company;

            

    

     

    
      	
              6)  

            	
              Any
      violation of the Company’s policies, procedures, or standards with respect
      to equal employment opportunity, prohibition of unlawful discrimination or
      harassment;

            

    

     

    
      	
              7)  

            	
              Abuse,
      misuse, or misappropriation of the Company’s property or business
      opportunities.

            

    

     

    
      	
              (ii)  

            	
              Without
      Cause:  The Company may terminate the Executive’s
      employment without Cause upon one hundred and eighty (180) days written
      notice to the Executive. 

            

    

     

    
      	
                                      
      b.  

            	
              Resignation.  The
      Executive may terminate his employment at any time and for any reason upon
      one hundred and eighty (180) days written notice to
      the Company.  Upon receiving such notice, the Company may, in
      its sole discretion, opt not to have the Executive provide active
      employment services during some or all of the notice period, and place him
      on a paid leave of absence for some or all of the notice period, or
      accelerate the effective date of the Executive’s
      resignation.  In either case, unless the Company waives the
      notice period as described below, the Company will provide not less than
      one hundred and eighty (180) days of notice pay.  If the Company
      exercises either of the preceding options, such exercise shall not convert
      the resignation to a termination by the
Company.

            

    

     

    
      	
                                     
      c.  

            	
              Termination
      in the Event of Death or Disability.  The term of the
      Executive’s employment under this Agreement shall terminate in the event
      of his death or Disability.  “Disability” means a physical or
      mental condition of the Executive, which renders him unable to perform the
      essential functions of his or her position, with or without reasonable
      accommodation, for a period of six months in any 12 month
      period.

            

    

     

    
      	
                                     
      d.  

            	
              Compensation
      Upon Termination.

            

    

     

    
      	
              (i)  

            	
              If
      the Company terminates the Executive’s employment for Cause pursuant to
      Section 5(a)(i), or as a result of the Executive’s death or Disability
      pursuant to Section 5(c), the Company will only be obligated to pay the
      Executive his regular payroll period Base Salary payments earned or
      accrued through the Termination Date, plus any other compensation and
      reimbursements to the extent they were earned or accrued up through the
      Termination Date.  Such Base Salary, compensation, and
      reimbursements will be paid to the Executive in one lump sum payment as
      soon as practicable following the Termination Date.  In the
      event the Company terminates the Executive’s employment in the event of
      the Executive’s Death or Disability pursuant to Section 5(c) the Company
      shall also (i) in the case of disability, pay 3 months, of the Executive’s
      regular payroll period Base Salary payments and (ii) shall consider paying
      such additional bonuses which would have been earned by the Executive from
      the conclusion of events put in process during his tenure had he not had
      an untimely demise or disability.

            

    

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (ii)  

            	
              If
      the Executive’s employment is terminated pursuant to subsections 5(a)(ii)
      or 5(b), then, during the notice period and until the Termination Date,
      the Executive shall receive his regular payroll period Base Salary
      payments earned and accrued (including payment for accrued vacation)
      through the Termination Date, plus any other compensation and
      reimbursements to the extent they were earned and accrued up through the
      Termination Date if he continues to render services in accordance
      herewith; provided, however, the Company may, in its sole discretion, opt:
      (i) not to have the Executive provide active employment services during
      some or all of the notice period, and may place him on a paid leave of
      absence for some or all of the notice period and pay him during that time;
      or (ii) accelerate the effective date of termination, and provide 180 days
      pay in lieu of notice.

            

    

     

    
      	
              (iii)  

            	
              Notwithstanding
      any other provision of this Agreement and in addition thereto if the
      Executive is terminated, or the Executives contract is not renewed within
      12 months of any Change of Control of the Company and such event is not
      occasioned by any occurrence set forth in sub-section 5(a), the Executive
      shall be entitled to one year salary payable at the time of termination or
      non-renewal.

            

    

     

    A "Change in Control" shall mean
the occurrence during the Term of any of the following: (i) the sale, lease,
transfer, conveyance, or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than a principal owner of the Company or a related party of a
principal; (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13(d)(3) and Rule 13(d)(5) under the Exchange Act of the Company.

     

    
      	
              (iv)  

            	
              The
      Company’s obligation under this Agreement or otherwise to provide the
      Executive with paid leave, notice pay, pay in lieu of notice, post
      termination salary continuation, pay during a notice period, or any other
      payment other than for wages earned because of the Executive’s provision
      of services, shall, other than in the event of the Executive’s Death or
      disability which precludes such action, be contingent upon the Executive’s
      execution of a Separation Agreement and comprehensive Release of Claims in
      a form drafted by and satisfactory to the
  Company.

            

    

     

     

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

     

    
      	
              6.  

            	
                      CONFIDENTIAL
      INFORMATION

            

    

     

    a.  Executive
agrees that during the Employment Term or at any time thereafter, (i) Executive
shall not use for any purpose other than the duly authorized business of the
Company, or disclose to any third party, any information relating to the
Company, or any of the Company’s affiliated companies which is non-public
information (“Confidential Information”), including any trade secret or any
written (including in any electronic form) or oral communication incorporating
Confidential Information in any way (except as may be required by law or in the
performance of Executive’s duties under this Agreement consistent with the
Company’s policies); and (ii) Executive will comply with any and all
confidentiality obligations of the Company to a third party, whether arising
under a written agreement or otherwise.  Information shall not be
deemed Confidential Information which (x) is or becomes generally
available to the public other than as a result of a disclosure by Executive or
at his direction or by any other person who directly or indirectly receives such
information from Executive, or (y) is or becomes available to
Executive on a non-confidential basis from a source which is entitled to
disclose it to Executive.

     

    b.  Upon the
termination of this Agreement, or upon the Company's earlier request, Executive
will deliver to the Company all of the Company's property or Confidential
Information that Executive may have in his possession or control, including, but
not limited to, all electronically stored information and passwords to access
such property and any and all copies of such property, material or
databases.

     

    
      	
              7.  

            	
              CERTAIN
      RESTRICTIONS

            

    

     

    a.  Competitive Activity. Executive agrees that,
during the Employment Term and continuing until the expiration of one year
following the termination of Executive’s employment with the Company for any
reason, Executive will not, without the prior written consent of the Board of
Directors, directly or indirectly, as an employee, agent, consultant, advisor,
owner, manager, lender, officer, director, partner, stockholder, or otherwise,
engage in any Competitive Activity, or have any such relationship with any
person or entity that engages in any Competitive Activity; provided, however,
that nothing in this Agreement will prohibit Executive from owning a passive
investment of less than one percent of the outstanding equity securities of any
the Company listed on any national securities exchange so long as Executive has
no other relationship with such the Company in violation of this
Agreement.  “Competitive
Activity” means being engaged in any business engaged in the aerospace
fastener distribution business or any other business which is competitive with
the existing or planned business of the Company or planned business of the
Company which it had taken action to implement and had not abandoned at any time
during the Employment Term.

     

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    b.  Agreement Not to Solicit
Employees.  Executive agrees that, during the Employment Term
and continuing until the expiration of one year following the termination of
Executive’s employment with the Company for any reason, Executive will not,
either directly or indirectly, on Executive’s own behalf or in the service or on
the behalf of others solicit, divert, or hire away, or attempt to solicit,
divert, or hire away any person then employed by the Company, nor encourage
anyone to leave the Company’s employ.

     

    c.  Agreement Not to Solicit
Customers.  Executive agrees that, during the Employment Term
and continuing until the expiration of one year following the termination of
Executive’s employment with the Company for any reason, Executive will not,
either directly or indirectly, on Executive’s own behalf or in the service or on
behalf of others, solicit, divert, or appropriate, or attempt to solicit,
divert, or appropriate, to any business that engages in Competitive Activity (i)
any person or entity whose account with the Company was sold or serviced by or
under Executive’s supervision during the twelve months preceding the termination
of such employment, or (ii) any person or entity whose account with the Company
has been directly solicited by the Company within the year preceding the
termination of employment.

     

    d.  Reasonableness.  Executive
and the Company agree that the covenants set forth in this Agreement are
appropriate and reasonable when considered in light of the nature and extent of
the Company’s business.  Executive further acknowledges and agrees
that (i) the Company has a legitimate interest in protecting the Company’s
business activities and its current, pending, and potential trade secrets; (ii)
the covenants set forth herein are not oppressive and contain reasonable
limitations as to time, scope, and activity; (iii) the covenants do not harm in
any manner whatsoever the public interest; (iv) Executive’s chosen profession,
trade, or business is in finance and executive management (the “Profession”)
(v) the Competitive Activity is only a very small or limited part of the
Profession, and Executive can work in many different jobs in Executive’s
Profession besides the Competitive Activity; (vi) the covenants set forth herein
do not completely restrain Executive from working in Executive’s Profession, and
Executive can earn a livelihood in Executive’s Profession without violating any
of the covenants set forth herein; (vii) Executive has received and will receive
substantial consideration for agreeing to such covenants, including without
limitation the consideration to be received by Executive under this Agreement;
(viii) if Executive were to work for a competing the Company that engages in
Competitive Activity, there would be a substantial risk that Executive would
inevitably disclose trade secrets to that the Company; (ix) the Company competes
with other companies that engage in Competitive Activity, and if Executive were
to engage in prohibited activities, it would harm the Company; (x) the Company
expends considerable resources on hiring, training, and retaining its Executives
and if Executive were to engage in prohibited activities during the restricted
period, it would harm the Company; and (xi) the Company expends considerable
resources acquiring, servicing, and retaining its customers, vendors, investors,
lenders and other key business relationships and if Executive were to engage in
prohibited activities during the restricted period, it would harm the
Company.

     

     

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    
      	
              8.  

            	
                      
      INDEMNIFICATION

            

    

     

    As an
officer and director of the Company, Executive shall be entitled to be
indemnified by the Company to the extent provided under the Company’s bylaws,
subject to applicable law, and to receive the benefits of any director and
officer liability insurance obtained by the Company from time to time, subject
to the terms, provisions and conditions of any such insurance.

     

    
      	
              9.  

            	
              APPLICABLE LAW;
      SEVERABILITY

            

    

     

    This
Agreement shall be governed by the laws of the State of New York, without
reference to rules relating to conflicts of law.  In the event that
any provision of this Agreement becomes or is declared by a court of competent
jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement
shall continue in full force and effect without said provision.

     

    
      	
              10.  

            	
                      
      DISPUTE
      RESOLUTION

            

    

     

    Executive
and the Company agree to arbitrate any dispute, claim, or controversy arising
out of this Agreement or Executive’s employment.  The arbitration
shall be conducted by a single neutral arbitrator in accordance with the rules
issued by JAMS for resolution of employment disputes. The arbitration shall take
place in New York City.  The Company will pay the fee for the
arbitration proceeding, as well as any other charges by JAMS.  Executive
shall be entitled to indemnification against attorneys’ fees and costs to the
extent provided in the Delaware General Corporation Law Subchapter IV, Section
145.  The arbitrator shall issue a written decision or award. 
The decision or award of the arbitrator shall be final and binding upon the
Company and Executive.  The arbitrator shall have the power to award any
type of relief that would be available in a court of competent
jurisdiction.  Any award may thereafter be entered as a judgment in
any court of competent jurisdiction.  Executive agrees that any relief to
which he is entitled arising out of said arbitration shall be limited to that
awarded by the arbitrator.  Executive agrees to file any demand for
arbitration within the time limit established by the applicable statute of
limitations for the asserted claims.  Failure to demand arbitration within
the prescribed time period shall result in waiver of any
claims.  Executive agrees to waive any right he may have to a jury
trial with respect to any dispute or claim against the Company relating to this
Agreement, his employment, his termination from employment, or any terms and
conditions of his employment with the Company.

     

    
      	
              11.  

            	
                      
      SUCCESSORS AND
      ASSIGNS

            

    

     

    This
Agreement shall be binding upon the Company’s successors and assigns and upon
Executive’s heirs, executors, administrators, estate, successors and
assigns.  For all purposes under this Agreement, the term “the
Company” shall include any successor to the Company’s business and/or assets,
which becomes bound by this Agreement.  Executive may not assign this
Agreement, provided, however, this shall not preclude Executive from assigning
certain rights or property granted to him pursuant to this
agreement.

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    
      	
              12.  

            	
                       
      NO INCONSISTENT
      OBLIGATIONS

            

    

     

    By
signing this Agreement and accepting this offer of employment, Executive
represents and warrants to the Company that Executive is under no obligations or
commitments, whether contractual or that otherwise, that are inconsistent with
Executive’s obligations set forth in this Agreement or otherwise restrict
Executive’s ability to enter into this Agreement or fully perform the services
required hereunder.  Executive also represents and warrants that
Executive will not use or disclose, in connection with Executive’s employment by
the Company, any trade secrets or other proprietary information or intellectual
property in which Executive or any other person has any right, title, or
interest and that Executive’s employment by the Company as contemplated by this
Agreement will not infringe upon or violate the rights of any other person or
entity.  Executive represents and warrants to the Company that
Executive has returned all property and confidential information belonging to
any prior employers.

     

    
      	
              13.  

            	
                        
      ENTIRE
      AGREEMENT

            

    

     

    This
Agreement and the Exhibits set forth the full and complete agreement between the
Company and Executive regarding the subject matter hereof and supersede any and
all prior representations or agreements between Executive and the Company, if
any, whether written or oral, except for the stock option agreements referenced
above.  This Agreement may not be modified or amended except by a
written agreement, signed by Executive and a member of the Board of
Directors.  No failure on the part of the Company or Executive to
exercise any power, right or privilege or remedy under this Agreement, and no
delay on the part of the Company or Executive in such exercise shall operate as
a waiver of such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
further exercise thereof or any other power, right, privilege or
remedy.  Any waiver must be in writing and executed by the
parties.  The captions contained in this Agreement are for convenience
only and shall not be considered part of this Agreement.  All
definitions used in this Agreement shall apply to the Exhibits to this Agreement
and other related documentation signed simultaneously.

     

    

     

    IN WITNESS WHEREOF, the parties hereto
have executed this Employment Agreement as of the date written
above.

     

    
    

     

     

    
      
        	 
      	 
      	 
      	 
      	 
      	 
      
	
                DATED:

              	 
      	 
      	
                ANDREW
      S. PRINCE

              	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                DATED:

              	 
      	 
      	
                PRECISION
      AEROSPACE COMPONENTS, INC.

              	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                DAVID
      WALTERS

                Director

              	 
      	 
      

      

      

    

     

     

     

    

    
      
        
           

        

        
          9ex10_1.htm

    
      

    

    
      Exhibit 10.1

      

      

      

      

      DEED
OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE
FILING

       

       

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

      
        

        
          
            

          

        

      

       

      CARUTH HAVEN
L.P.,  a Delaware limited
partnership, as grantor (Borrower)

      

      to

       

      ________________________,
as trustee (Trustee)

       

      for the
benefit of

       

      CORNERSTONE OPERATING PARTNERSHIP,
LP,

      as
beneficiary, and its successors and assigns (Lender)

      ________________________________________

      

      THE
COLLATERAL IS OR INCLUDES FIXTURES

      

      This
document serves as a fixture filing under the Uniform Commercial
Code

       

      

      Borrower’s
Federal Identification No.: 26-3650072

      
        	
                 
      

              	
                Date:

              	
                As
      of January ___, 2009

              

      

      
        	
                 
      

              	
                Location:

              	
                Dallas,
      Texas

              

      

      
        	
                 
      

              	
                County:

              	
                Dallas
      County

              

      

       

      
        
          

        

      

      

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

      

       

      DEED
OF TRUST, ASSIGNMENT OF LEASES AND RENTS,

      SECURITY
AGREEMENT AND FIXTURE FILING

      

       

      THIS DEED
OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING
(this “Mortgage”)
is made as of this ___ day of January, 2009, by CARUTH HAVEN L.P.,  a Delaware
limited partnership, having its principal place of business at c/o Cornerstone
Growth & Income REIT, Inc., 1920 Main Street, Suite 400, Irvine, California
92614, as grantor (“Borrower”
or “Grantor”),
to PETER S. GRAF, having
an address at c/o Republic Title of Texas, Inc., 2626 Howell Street, 10th Floor,
Dallas, Texas 75204, as trustee (“Trustee”),
for the benefit of CORNERSTONE
OPERATING PARTNERSHIP,  LP, a Delaware limited partnership,
its successors and assigns, having an address at 1920 Main Street, Suite 400,
Irvine, California 92614, as beneficiary (“Lender”
or “Beneficiary”).

       

      W I T N E S S E T
H:

       

      WHEREAS,
this Mortgage is given to secure a loan (the “Loan”) in the principal sum of
FOURTEEN MILLION 00/100 DOLLARS ($14,000,000.00) evidenced by that certain
Promissory Note dated the date hereof made by Borrower to Lender (such Note,
together with all extensions, renewals, replacements, restatements,
consolidations or modifications thereof being hereinafter referred to as the
“Note”),
which Note provides, among other things, for final payment of principal and
interest thereunder, if not sooner paid or payable as provided therein, to be
due on January ___, 2010;

       

      WHEREAS,
Borrower desires to secure the payment of the indebtedness evidenced by the Note
and the performance of all of its obligations under the Note and the other Loan
Documents; and

       

      WHEREAS,
this Mortgage is that certain “Security Instrument” as defined in the Note, and
payment, fulfillment, and performance by Borrower of its obligations thereunder
and under the other Loan Documents are, subject to the limitations set forth
herein, secured hereby, and each and every term and provision of the Note,
including the rights, remedies, obligations, covenants, conditions, agreements,
indemnities, representations and warranties of the parties therein, are hereby
incorporated by reference herein as though set forth in full and shall be
considered a part of this Mortgage.

       

      NOW
THEREFORE, in consideration of the making of the Loan by Lender and the
covenants, agreements, representations and warranties set forth in this
Mortgage:

       

      THAT FOR
AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS ($10.00), AND OTHER
VALUABLE CONSIDERATION, INCLUDING THE INDEBTEDNESS HEREIN RECITED AND THE TRUST
HEREIN CREATED, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED,
GRANTOR HEREBY IRREVOCABLY GRANTS, BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES,
SETS OVER AND ASSIGNS, AND GRANTS A SECURITY INTEREST, TO

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      AND IN
FAVOR OF TRUSTEE FOR THE BENEFIT OF BENEFICIARY, ITS SUCCESSORS AND ASSIGNS,
WITH POWER OF SALE, in all of Grantor's estate, right, title and interest in, to
and under any and all of the following described property, whether now owned or
hereafter acquired (collectively, the "Property"):

       

      (A)   All that certain
real property situated in the County of Dallas, State of Texas, more
particularly described on Exhibit A attached
hereto and incorporated herein by this reference (the “Real Estate”),
together with all of the easements, rights, privileges, franchises, tenements,
hereditaments and appurtenances (including without limitation, any air rights
and development rights) now or hereafter thereunto belonging or in any way
appertaining and all of the estate, right, title, interest, claim and demand
whatsoever of Grantor therein or thereto, either at law or in equity, in
possession or in expectancy, now owned or hereafter acquired;

       

      (B)           All
structures, buildings and improvements of every kind and description now or at
any time hereafter located or placed on the Real Estate (the "Improvements");

       

      (C)           All
easements, rights-of-way, strips and gores of land, vaults, streets, ways,
alleys, passages, sewer rights, and other emblements now or hereafter located on
the Real Estate or under or above the same or any part or parcel thereof, and
all estates, rights, titles, interests, tenements, hereditaments and
appurtenances, reversions and remainders whatsoever, in any way belonging,
relating or appertaining to the Property or any part thereof, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Grantor (collectively, “Appurtenant Rights”;
and together with the Real Estate and Improvements, referred to collectively
herein as the “Real
Property”);

       

      (D)           All
furniture, furnishings, fixtures, goods, equipment, inventory or personal
property owned by Grantor and now or hereafter located on, attached to or used
in or about the Improvements, including, but not limited to, all machines,
engines, boilers, dynamos, elevators, stokers, tanks, cabinets, awnings,
screens, shades, blinds, carpets, draperies, lawn mowers, and all appliances,
plumbing, heating, air conditioning, lighting, ventilating, refrigerating,
disposal and incinerating equipment, and all fixtures and appurtenances thereto,
and such other goods and chattels and personal property owned by Grantor as are
now or hereafter used or furnished in operating the Improvements, or the
activities conducted therein, and all building materials and equipment hereafter
situated on or about the Real Estate or Improvements, and all warranties and
guaranties relating thereto, and all additions thereto and substitutions and
replacements therefor (exclusive of any of the foregoing owned or leased by
tenants of space in the Improvements);

       

      (E)           All
water, water courses, ditches, wells, reservoirs and drains and all water,
ditch, well, reservoir and drainage rights and powers which are appurtenant to,
located on, under or above or used in connection with the Real Estate or the
Improvements, or any part thereof, together (i) with all utilities, utility
lines, utility commitments, utility capacity, capital recovery charges, impact
fees and other fees paid in connection with same, (ii) reimbursements or
other rights pertaining to utility or utility services provided to the Real
Estate and/or Improvements and (iii) the present or future use or
availability of waste water capacity, or other utility facilities to the extent
same pertain to or benefit the Real Estate and/or Improvements,

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      including,
without limitation, all reservations of or commitments or letters covering any
such use in the future, whether now existing or hereafter created or
acquired;

       

      (F)           All
minerals, crops, timber, trees, shrubs, flowers and landscaping features now or
hereafter located on, under or above the Real Estate;

       

      (G)           All
cash funds, deposit accounts, reserve accounts, collection accounts and/or
sub-accounts thereof, and other rights and evidence of rights to cash, now or
hereafter created or held by Beneficiary pursuant to this Security Instrument or
any other of the Loan Documents (as hereinafter defined), including, without
limitation, the Reserves (as such term is defined in Section 1.8
hereof);

       

      (H)           All
leases, subleases, licenses, tenancies, concessions, occupancy and residency
agreements of the Real Estate or the Improvements now or hereafter entered into
(including, without limitation, that certain Lease Agreement by and between
Grantor, as landlord, and Caruth Haven TRS, LLC, a Delaware limited liability
company, as tenant (“Tenant”); dated as of
January 1, 2009; hereinafter referred to as the “TRS Lease”) and all
rents, royalties, issues, profits, bonus money, revenue, income, accounts
receivable and other benefits (collectively, the "Rents" or "Rents and Profits")
of the Real Estate, the Improvements, or the fixtures or equipment, now or
hereafter arising from the use or enjoyment of all or any portion thereof or
from any lease, license, tenancy, concession, occupancy agreement, residency
agreement or other agreements (including, without limitation, oil, gas and
mineral leases, cable television, laundry, satellite and/or cell tower
agreements, whether in the nature of a lease, license, contract, or otherwise),
pertaining thereto or arising from any of the Contracts (as hereinafter defined)
or any of the General Intangibles (as hereinafter defined) and all cash or
securities (the "Security Deposits")
that secure performance by the tenants, lessees or licensees, as applicable, of
their obligations under any such leases, licenses, concessions or occupancy
agreements, or which may be available to Grantor or its designee to effect
repairs or maintenance, whether said cash or securities are to be held until the
expiration of the terms of said leases, licenses, concessions or occupancy
agreements or applied to one or more of the installments of rent coming due
prior to the expiration of said terms, subject to, however, the provisions
contained in Section
1.11 of this Security Instrument;

       

      (I)           
All contracts and agreements now or hereafter entered into covering any part of
the Real Estate or the Improvements (collectively, the "Contracts") and all
revenue, income and other benefits thereof, including, without limitation,
management agreements, service contracts, maintenance contracts, equipment
leases, personal property leases and any contracts or documents relating to
construction on any part of the Real Estate or the Improvements (including
plans, specifications, studies, drawings, surveys, tests, operating and other
reports, bonds and governmental approvals) or to the management or operation of
any part of the Real Estate or the Improvements;

       

      (J)           
All present and future monetary deposits given to any public or private utility
with respect to utility services furnished to any part of the Real Estate or the
Improvements;

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      (K)           All
present and future funds, accounts, instruments, (including without limitation,
promissory notes), investment property, letter of credit rights, letters of
credit, money, supporting obligations, accounts receivable, documents, causes of
action, claims, general intangibles (including, without limitation, payment
intangibles and software, trademarks, trade names, servicemarks and symbols now
or hereafter used in connection with any part of the Real Estate or the
Improvements, all names by which the Real Estate or the Improvements may be
operated or known, all rights to carry on business under such names, and all
rights, interest and privileges which Grantor has or may have as developer or
declarant under any covenants, restrictions or declarations now or hereafter
relating to the Real Estate or the Improvements) and all notes or chattel paper
(whether tangible or electronic) now or hereafter arising from or by virtue of
any transactions related to the Real Estate or the Improvements (collectively,
the "General
Intangibles");

       

      (L)           All
water taps, sewer taps, certificates of occupancy, permits, special permits,
uses, licenses, franchises, certificates, consents, approvals and other rights
and privileges now or hereafter obtained in connection with the Real Estate or
the Improvements and all present and future warranties and guaranties relating
to the Improvements or to any equipment, fixtures, furniture, furnishings,
personal property or components of any of the foregoing now or hereafter located
or installed on the Real Estate or the Improvements;

       

      (M)          All
building materials, supplies and equipment now or hereafter placed on the Real
Estate or in the Improvements and all architectural renderings, models,
drawings, plans, specifications, studies and data now or hereafter relating to
the Real Estate or the Improvements;

       

      (N)           All
right, title and interest of Grantor in any insurance policies or binders now or
hereafter relating to the Property including any unearned premiums
thereon;

       

      (O)           All
proceeds, products, substitutions and accessions (including claims and demands
therefor) of the conversion, voluntary or involuntary, of any of the foregoing
into cash or liquidated claims, including, without limitation, proceeds of
insurance and condemnation awards;

       

      (P)           all
refunds, rebates or credits in connection with a reduction in ad valorem taxes,
assessments or similar impositions, including, without limitation, rebates,
refunds or credits as a result of tax certiorari or any other application,
proceeding or appeal (administrative, judicial or otherwise) for reduction in
taxes, assessments or similar impositions; and

       

      (Q)           All
other or greater rights and interests of every nature in the Real Estate or the
Improvements and in the possession or use thereof and income therefrom, whether
now owned or hereafter acquired by Grantor.

       

      FOR THE
PURPOSE OF SECURING:

       

      (1)           The
debt evidenced by that certain Promissory Note (such Promissory Note; together
with any and all renewals, modifications, amendments, restatements,
consolidations, substitutions, replacements, and extensions thereof, is
hereinafter referred to as the "Note") of even date
with this Security Instrument, made by Grantor and payable to the order of
Beneficiary in the original principal amount of FOURTEEN MILLION AND
NO/00

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      ($14,000,000.00)
(the "Loan" or
the "Loan
Amount"), together with interest (including, without limitation, interest
at the Default Interest Rate (as defined in the Note)) and any fees as therein
provided;

       

      (2)           The
full and prompt payment and performance of all of the provisions, agreements,
covenants and obligations herein contained and contained in any other
agreements, documents or instruments now or hereafter evidencing, securing or
otherwise relating to the indebtedness evidenced by the Note (the Note, this
Security Instrument, the Assignment (as hereinafter defined) and such other
agreements, documents and instruments, together with any and all renewals,
modifications, amendments, restatements, consolidations, substitutions,
replacements, and extensions and modifications thereof, are hereinafter
collectively referred to as the "Loan Documents") and
the payment of all other sums therein covenanted to be paid, including, without
limitation, any prepayment fees or yield maintenance premium;

       

      (3)           Any
and all future or additional advances (whether or not obligatory) made by
Beneficiary to protect or preserve the Property, or the lien or security
interest created hereby on the Property, or for taxes, assessments or insurance
premiums as hereinafter provided or for performance of any of Grantor's
obligations hereunder or under the other Loan Documents or for any other purpose
provided herein or in the other Loan Documents (whether or not the original
Grantor remains the owner of the Property at the time of such advances),
together with interest thereon at the Default Interest Rate (as defined in the
Note), such advances to be secured to the same extent as if such future advances
were made on the date hereof and although there may be no indebtedness
outstanding at the time any advance is made; and

       

      (4)           Any
and all other indebtedness now owing or which may hereafter be owing by Grantor
to Beneficiary under the Note and related Loan Documents and related to the
Property, however and whenever incurred or evidenced, whether express or
implied, direct or indirect, absolute or contingent, or due or to become due,
and all renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements and extensions thereof.

       

      (All of
the sums referred to in Paragraphs (1) through (4) above are herein sometimes
referred to as the "secured indebtedness"
or the "indebtedness
secured hereby" or the “Debt”).

       

      TO HAVE
AND TO HOLD the above granted and described Property unto Trustee, as trustee
for the benefit of Lender, and its successors and assigns, forever;

       

      IN TRUST,
WITH THE POWER OF SALE, to secure payment to Lender of the Debt at the time and
in the manner provided for in the Note, the Loan Agreement, and this
Mortgage;

       

      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, the Loan Agreement and this Mortgage, shall well and truly perform the
Other Obligations as set forth in this Mortgage and shall well and truly abide
by and comply with each and every covenant and condition set forth herein and in
the Note and the other Loan Documents, these presents and the estate hereby
granted shall cease, terminate and be void and Lender shall mark the Note “paid
in full” and will, at Borrower’s sole cost and expense, release

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      the lien
of this Mortgage; provided, however, that Borrower’s obligation to indemnify and
hold harmless Lender pursuant to the provisions hereof shall survive any such
payment or release.

       

       

      COVENANTS
OF GRANTOR

       

      For the
purpose of further securing the indebtedness secured hereby and for the
protection of the security of this Security Instrument, for so long as the
indebtedness secured hereby or any part thereof remains unpaid, Grantor
represents, covenants and agrees as follows:

       

      1.1 Warranties of
Grantor.  Grantor, for itself and its successors and assigns,
does hereby represent, warrant and covenant to and with Beneficiary, its
successors and assigns, that:

       

      (a)           
Organization and
Existence.  Grantor is duly organized and validly existing as a
limited partnership in good standing under the laws of Delaware and in all other
jurisdictions in which Grantor is transacting business.

       

      (b)           Authorization.  Grantor
has the power and authority to execute, deliver and perform the obligations
imposed on it under the Loan Documents and to consummate the transactions
contemplated by the Loan Documents and has taken all necessary actions in
furtherance thereof including, without limitation, that those partners,
shareholders, managers, or members of Grantor whose approval or consent is
required by the terms of Grantor's organizational documents have duly approved
or consented to the transactions contemplated by the Loan Documents and have
authorized execution and delivery thereof by the respective
signatories.  To the best of Grantor's knowledge, no other consent by
any local, state or federal agency is required in connection with the execution
and delivery of the Loan Documents.

       

      (c)           Valid Execution and
Delivery.  All of the Loan Documents requiring execution by
Grantor have been duly and validly executed and delivered by
Grantor.

       

      (d)           Enforceability. All
of the Loan Documents constitute valid, legal and binding obligations of Grantor
and are fully enforceable against Grantor in accordance with their terms,
subject only to bankruptcy laws and general principles of equity.

       

      (e)           No
Defenses.  The Note, this Security Instrument and the other
Loan Documents are not subject to any right of rescission, set-off, counterclaim
or defense, nor would the operation of any of the terms of the Note, this
Security Instrument or any of the other Loan Documents, or the exercise of any
right thereunder, render this Security Instrument unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.

       

      (f)           
Defense of
Usury.  Grantor knows of no facts that would support a claim of
usury to defeat or avoid its obligation to repay the principal of, interest on,
and other sums or amounts due and payable under, the Loan
Documents.

       

      (g)           No Conflict/Violation of
Law.  The execution, delivery and performance of the Loan
Documents by the Grantor will not cause or constitute a default under or
conflict

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      with the
organizational documents of Grantor, any indemnitor or any general partner,
manager, or managing member of Grantor or any indemnitor.  The
execution, delivery and performance of the obligations imposed on Grantor under
the Loan Documents will not cause Grantor to be in default, including after due
notice or lapse of time or both, under the provisions of any agreement, judgment
or order to which Grantor is a party or by which Grantor is bound.

       

      (h)           Compliance with Applicable
Laws and Regulations.  All of the Improvements and the use of
the Property by the Grantor comply in all material respects with, and shall
remain in compliance with, all applicable statutes, rules, regulations and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Property, including all applicable statutes, rules and
regulations pertaining to requirements for equal opportunity,
anti-discrimination, fair housing, environmental protection, zoning and land
use.  The Improvements comply with, and shall remain in compliance
with, applicable health, fire and building codes.  There is no
evidence of any illegal activities relating to controlled substances on the
Property.  All certifications, permits, licenses and approvals,
including, without limitation, certificates of completion and occupancy permits
required for the legal use, occupancy and operation of the Property for the use
currently being made thereof have been obtained and are in full force and
effect.  All of the Improvements comply with all material requirements
of any applicable zoning and subdivision laws and
ordinances.   The Grantor has all requisite licenses, permits,
franchises, qualifications, certificates of occupancy or other governmental
authorizations to own, lease and operate the Property (provided that to the
extent the Property is operated by Tenant, Tenant has all such requisite
licenses, permits, franchises, qualifications and other governmental
authorizations) and carry on its business.

       

      (i)           
Consents
Obtained.  All consents, approvals, authorizations, orders or
filings with any court or governmental or administrative agency or body, if any,
required for the execution, delivery and performance of the Loan Documents by
Grantor have been obtained or made.

       

      (j)           
No
Litigation.  There are no pending actions, suits or
proceedings, arbitrations or governmental investigations against the Property,
Grantor or any guarantor of Grantor an adverse outcome of which would materially
affect (i) the Grantor's performance under the Note, this Security Instrument or
the other Loan Documents, (ii) the Property, (iii) the Loan, or (iv) the ability
of the Property to continue to generate income, or continue in operation, in a
manner consistent with current operations.

       

      (k)           Title.  The
Grantor has good and marketable fee simple title to the Property, subject only
to those matters expressly listed as exceptions to title or subordinate matters
in the title insurance policy accepted by Beneficiary in connection with this
Security Instrument (all such matters, excluding therefrom all preprinted and/or
standard exceptions are referred to herein, collectively, as the "Permitted
Exceptions").  The possession of the Property has been peaceful
and undisturbed and title thereto has not been disputed or questioned to the
best of Grantor's knowledge.  Further, Grantor and has full power and
lawful authority to grant, bargain, sell, convey, assign, transfer and mortgage
its interest in the Property in the manner and form hereby done or
intended.  Grantor will preserve its interest in and title to the
Property and will forever warrant and defend the same to Beneficiary against any
and all claims whatsoever and will forever warrant and defend the validity and
priority of the lien and security interest

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      created
herein against the claims of all persons and parties whomsoever, subject to the
Permitted Exceptions.  The foregoing warranty of title shall survive
the foreclosure of this Security Instrument and shall inure to the benefit of
and be enforceable by Beneficiary in the event Beneficiary acquires title to the
Property pursuant to any foreclosure.

       

      (l)           
Permitted
Exceptions.  The Permitted Exceptions do not and will not
materially and adversely affect (1) the ability of the Grantor to pay in full
the principal and interest on the Note in a timely manner or (2) the use of the
Property for the use currently being made thereof, the operation of the Property
as currently being operated or the value of the Property.

       

      (m)          First
Lien.  Upon the execution by the Grantor and the recording of
this Security Instrument, and upon the execution and filing of UCC-1 financing
statements or amendments thereto, the Beneficiary will have a valid first lien
on the Property and a valid security interest in all personal property
encumbered hereby, subject to no liens, charges or encumbrances other than the
Permitted Exceptions.

       

      (n)           ERISA.  The
Grantor has made and shall continue to make all required contributions to all
employee benefit plans, if any, established or maintained by it, if any, and the
Grantor has no knowledge of any material liability which has been incurred by
the Grantor which remains unsatisfied for any taxes or penalties with respect to
any such employee benefit plan or any such multi-employer plan, and each such
plan has been administered in compliance with its terms and the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and
any other federal or state law.

       

      (o)           Contingent
Liabilities.  The Grantor has no known material contingent
liabilities.

       

      (p)           No Other
Obligations.  The Grantor has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Grantor is a party or by which the Grantor or the
Property is otherwise bound, other than obligations incurred in the ordinary
course of the operation of the Property and other than obligations under this
Security Instrument, the Note and the other Loan Documents.

       

      (q)           Fraudulent
Conveyance.  The Grantor (1) has not entered into the Loan or
any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (2) received reasonably equivalent value in exchange for its
obligations under the Loan Documents.  Giving effect to the Loan
contemplated by the Loan Documents, the fair saleable value of the Grantor's
assets exceed and will, immediately following the execution and delivery of the
Loan Documents, exceed the Grantor's total liabilities, including, without
limitation, subordinated, unliquidated, disputed or contingent liabilities (if
permitted hereunder).  The fair saleable value of the Grantor's assets
is and will, immediately following the execution and delivery of the Loan
Documents, be greater than the Grantor's probable liabilities, including the
maximum amount of its contingent liabilities or its debts as such debts become
absolute and matured (if permitted hereunder).  The Grantor's assets
do not and, immediately following the execution and delivery of the Loan
Documents will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. The Grantor does not
intend to, and does not believe

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      that it
will, incur debts and liabilities (including, without limitation, contingent
liabilities and other commitments) beyond its ability to pay such debts as they
mature (taking into account the timing and amounts to be payable on or in
respect of obligations of the Grantor).

       

      (r)           
Investment Company
Act.  The Grantor is not (1) an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended; (2) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (3) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.

       

      (s)           Access/Utilities.  The
Property has adequate rights of access to public ways and is served by adequate
water, sewer, electric, gas, telephone, cable (where appropriate), sanitary
sewer and storm drain facilities.  All public utilities necessary to
the continued use and enjoyment of the Property as presently used and enjoyed
are located in the public right-of-way abutting the Property, and all such
utilities are connected so as to serve the Property without passing over other
property.  All roads, and access to such roads, necessary for the full
utilization of the Property for its current purpose have been completed and
dedicated to public use and accepted by all governmental authorities or are the
subject of access easements for the benefit of the Property without any further
condition or cost to Grantor or any tenants or other legal occupants of the
Property (collectively, the “Tenants”).

       

      (t)           
Taxes
Paid.  Grantor has filed all federal, state, county and
municipal tax returns required to have been filed by Grantor or with respect to
the Property, and has paid all taxes which have become due pursuant to such
returns or to any notice of assessment relating to the Property, and Grantor has
no knowledge of any basis for additional assessment with respect to such
taxes.  Grantor has paid or caused to be paid all sales and payroll
taxes applicable to Borrower or the Property.  Further, the Property
is free from delinquent water charges, sewer rents, taxes and
assessments.

       

      (u)           Single Tax
Lot.  The Real Estate consists of a single tax lot and no
portion of said tax lot covers property other than the Real Estate or a portion
of the Real Estate and no portion of the Real Estate lies in any other tax
lot.

       

      (v)           Special
Assessments.  Except as disclosed in the title insurance
policy, there are no pending or, to the knowledge of the Grantor, proposed
special or other assessments for public improvements or otherwise affecting the
Property, nor, to the knowledge of the Grantor, are there any contemplated
improvements to the Property that may result in such special or other
assessments.

       

      (w)           Flood
Zone.  The Property is not located in a flood hazard area as
defined by the Federal Insurance Administration.

       

      (x)           
Seismic
Exposure.  The Real Estate are not located in Zone 3 or Zone 4
of the "Seismic Zone Map of the U.S.".

       

      (y)           Misstatements of
Fact.  No statement made in application for the Loan
or

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      the Loan
Documents contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading.  There is no fact presently known to the Grantor which has
not been disclosed which adversely affects, nor as far as the Grantor can
foresee, might adversely affect the business, operations or condition (financial
or otherwise) of the representing party.  Further, and in
clarification of the foregoing, all reports, certificates, affidavits,
statements and other data furnished by or on behalf of Grantor to Beneficiary,
or their respective agents, in connection with the Loan are true and correct in
all material respects and do not include or omit to state any fact or
circumstance which inclusion or omission, respectively, would make the
statements therein misleading.

       

      (z)           Condition of
Improvements.  The Property has not been damaged by fire,
water, wind or other cause of loss and any previous damage to the Property has
been fully restored.   To Grantor’s knowledge, the Improvements
are structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial compliance
with the plans and specifications relating thereto.  To Grantor’s
knowledge, all major building systems located within the Improvements,
including, without limitation, the heating and air conditioning systems and the
electrical and plumbing systems, are in good working order and
condition.

       

      (aa)         
No Insolvency or
Judgment.  None of Grantor, any general partner, manager or
member of Grantor, or any guarantor of the Loan, is currently (a) the subject of
or a party to any completed or pending bankruptcy, reorganization or insolvency
proceeding; or (b) the subject of any unsatisfied judgment of record or docketed
in any court of the state in which the Property is located or in any other court
located in the United States.  The proposed Loan will not render the
Grantor nor any general partner or member of Grantor insolvent.  As
used in this paragraph, the term "insolvent" means that the sum total of all of
an entity's liabilities (whether secured or unsecured, contingent or fixed, or
liquidated or unliquidated) is in excess of the value of all such entity's
non-exempt assets, i.e., all of the assets of the entity that are available to
satisfy claims of creditors.

       

      (bb)         No
Condemnation.  No part of any property subject to the Security
Instrument has been taken in condemnation or other like proceeding to an extent
which would impair the value of the Property, the Security Instrument or the
Loan or the usefulness of such property for the purposes contemplated by the
loan application relating to the Loan (the "Loan Application"),
nor is any proceeding pending, known or, to Grantor’s knowledge, threatened, to
be contemplated for the partial or total condemnation or taking of the
Property.

       

      (cc)          No Labor or Materialmen
Claims/Labor Disputes.  All parties furnishing labor and
materials have been paid in full and, except for such liens or claims insured
against by the policy of title insurance to be issued in connection with the
Loan, there are no mechanics', laborers' or materialmen's liens or claims
outstanding for work, labor or materials affecting the Property, whether prior
to, equal with or subordinate to the lien of the Security
Instrument.  To the best of Grantor’s knowledge, there are no strikes,
boycotts, or labor disputes which could reasonably be anticipated to have a
material adverse effect on the operation of the Property.

       

      (dd)         No Purchase
Options.  No Tenant, Person, or party has an option to purchase
the Property, any portion thereof or any interest therein.  For
purposes hereof, “Person”

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      shall
mean and refer to an individual, partnership, limited partnership, corporation,
limited liability company, trust, joint stock company, corporation,
unincorporated association, joint venture, governmental authority or agency, or
any other entity of any nature whatsoever, whether similar or dissimilar to the
foregoing.

       

      (ee)         
Leases.  The
Property is not subject to any leases, subleases, licenses, concessions or other
agreements related to the occupancy, leasing or renting of the Property or any
portion thereof, except for the TRS Lease and as set forth on the rent roll
provided to Beneficiary and certified by Grantor on the date
hereof.  No person has any possessory interest in the Property or
right to occupy the same, except pursuant to a written lease, license, rental
agreement or occupancy agreement (collectively, the “Leases”) identified on the
rent roll provided by Beneficiary and certified by Grantor on the date
hereof.  As of the date hereof, (i) the Grantor is the owner and
holder of the landlord's interest under the TRS Lease and the Tenant is the sole
owner and holder of the landlord’s interest under the other Leases; (ii) there
are no prior assignments of all or any portion of the Leases or any portion of
the Rents and Profits which are presently outstanding and have priority over the
assignment of leases and rents contained herein in Section 1.11 given by
Grantor to Beneficiary; (iii) all Rents due and payable under the TRS Lease and,
to Grantor’s knowledge, each other Lease, have been paid in full and no said
Rents have been paid more than one (1) month in advance of the due dates thereof
and (iv) there are no offsets or defenses to the payment of any portion of the
Rents under the TRS Lease or, to Grantor’s knowledge, under any of the other
Leases.  The representations set forth in this Paragraph (ee) are in
addition to those set forth in Section 1.12 of this
Security Instrument.

       

      (ff)           Appraisal.  All
requirements and conditions of the appraisal of the Property submitted to
Beneficiary as part of the Loan Application, upon which the value of the
Property was conditioned, have been fully satisfied (or waived in writing by
Lender).

       

      (gg)         Boundary
Lines.  To Grantor’s knowledge, all of the Improvements which
were included in determining the appraised value of the Property lie wholly
within the boundaries and building restriction lines of the Property, and no
improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Real Estate encroach upon any of the
Improvements, so as to affect the value or marketability of the Property except
those which are insured against by title insurance.

       

      (hh)         Survey.  The
survey of the Property delivered to Beneficiary in connection with this Security
Instrument has been performed by a duly licensed surveyor or registered
professional engineer in the jurisdiction in which the Property is situated, is
certified to the Beneficiary, its successors and assigns, and the title
insurance company, and, to Grantor’s knowledge, is in accordance with the most
current minimum standards for title surveys as determined by the American Land
Title Association, with the signature and seal of a licensed engineer or
surveyor affixed thereto, and does not fail to reflect any material matter
affecting the Property or the title thereto.

       

      (ii)           Forfeiture.  There
has not been and shall never be committed by Grantor or, to Grantor’s knowledge
after due investigation, any other person in occupancy of or involved with the
operation or use of the Property any act or omission affording the federal
government or any state or local government the right of forfeiture as against
the Property or any part thereof or

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      any
monies paid in performance of Grantor's obligations under any of the Loan
Documents.

       

      (jj)           
Use of Rents and
Profits.  All Rents and Profits generated by or derived from
the Property shall first be utilized solely for current expenses directly
attributable to the ownership and operation of the Property, including, without
limitation, current expenses relating to Grantor's liabilities and obligations
with respect to this Security Instrument and the other Loan Documents, and none
of the Rents and Profits generated by or derived from the Property shall be
diverted by Grantor and utilized for any other purposes unless all such current
expenses attributable to the ownership and operation of the Property (including
payment of management fees due under the Management Agreement, as such term is
hereinafter defined) have been fully paid and satisfied. Any license agreements
which generate income with respect to the Property, including cable licenses or
similar arrangements, are not prepaid and the benefits thereof have been
assigned for the benefit of Beneficiary.

       

      (kk)          No
Broker.  No financial advisors, brokers, underwriters,
placement agents, agents or finders have been dealt with by the Grantor in
connection with the Loan, except for any broker whose full commission was paid
out of the proceeds of the Loan and is set forth in the written instructions
from Grantor to Beneficiary regarding disbursement of the proceeds of the
Loan.

       

      (ll)           
Work.  All
work to be performed by Grantor under any Lease has been substantially
performed, all contributions to be made by Grantor to the Tenant under such
Lease have been made and all other conditions precedent to the Tenant's
obligations thereunder have been satisfied.

       

      (mm)        Conviction of Criminal
Acts.  Each of Grantor, any indemnitor and guarantor of
Grantor's obligations under the Loan Documents, and any general partner, member
or principal of Grantor, and any such indemnitor or guarantor of Grantor, has
never been convicted of a crime and is not currently the subject of any pending
or threatened criminal investigation or proceeding.

       

      (nn)         Security
Agreements.  There are no security agreements or financing
statements affecting any of the Property other than (i) as disclosed in writing
by Grantor to Beneficiary prior to the date hereof and (ii) the security
agreements and financing statements created in favor of
Beneficiary.

       

      (oo)         Homestead.  The
Property forms no part of any property owned, used or claimed by Grantor as a
residence or business homestead and is not exempt from forced sale under the
laws of the State in which the Real Estate is located.  Grantor hereby
disclaims and renounces each and every claim to all or any portion of the
Property as a homestead.

       

      (pp)         Contracts.  Grantor
will comply with all of its obligations under all Contracts which are material
to the operation of the Property in accordance with Grantor's current practice,
and with all material obligations under all other Contracts.

       

      (qq)         No Margin
Stock.  None of the proceeds of the indebtedness secured hereby
will be used for the purpose of purchasing or carrying "margin stock" within the
meaning of Regulation U or a "margin security" with the meaning of Regulation T
issued by the Board of

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      Governors
of the Federal Reserve System, or for any other purpose which would be
inconsistent with such Regulations T or U or any other Regulations of such Board
of Governors, or for any purpose prohibited by legal requirements or by the
terms and conditions of the Loan Documents.

       

      (rr)           All Appropriate
Inquiry.  Grantor has completed all appropriate inquiry in
accordance with 40 CFR Part 312 and ASTM E1527-05 and has met all of the
requirements and obligations of a bona fide prospective purchaser pursuant to 42
U.S.C. 9601(40).

      

      (qq)         TRS
Lease.  With respect to the TRS Lease:  (i) Grantor
has delivered to Beneficiary a true and complete copy of the TRS Lease,
including all amendments thereto, (ii) the TRS Lease is in full force and effect
on the date hereof, (iii) no notice of termination of the TRS Lease has been
given or received by Grantor, (iv) such TRS Lease is (and shall continue to be,
at Beneficiary’s option) subject and subordinate to this Security Instrument
without necessity of any further agreement or acknowledgment on the part of the
tenant thereunder, and (v) there are no defaults under the TRS Lease as of the
date hereof, nor, to Grantor’s knowledge, any circumstances which, with the
passage of time or giving of notice would constitute a default thereunder by
landlord or tenant.

       

      1.2  Defense of
Title.  If, while this Security Instrument is in force, the
title to the Property or the interest of Beneficiary therein shall be the
subject, directly or indirectly, of any action at law or in equity, or be
attacked directly or indirectly, or endangered, clouded or adversely affected in
any manner, Grantor, at Grantor's expense, shall take all necessary and proper
steps for the defense of said title or interest, including the employment of
counsel reasonably approved by Beneficiary, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title or
interest.  Notwithstanding the foregoing, in the event that
Beneficiary reasonably determines that Grantor is not adequately performing its
obligations under this Section, Beneficiary may, without limiting or waiving any
other rights or remedies of Beneficiary hereunder, take such steps with respect
thereto as Beneficiary shall deem necessary or proper; any and all costs and
expenses incurred by Beneficiary in connection therewith, together with interest
thereon at the Default Interest Rate (as defined in the Note) from the date
incurred by Beneficiary until actually paid by Grantor, shall be immediately
paid by Grantor on demand and shall be secured by this Security Instrument and
by all of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.

       

      1.3  Performance of
Obligations.  Grantor shall pay when due the principal of and
the interest on the indebtedness secured hereby including all charges, fees and
other sums required to be paid by Grantor as provided in the Loan Documents, and
shall observe, perform and discharge all obligations, and conditions, and comply
with all prohibitions, covenants and agreements to be observed, performed or
discharged by Grantor set forth in the Loan Documents in accordance with their
terms.  In the event that Beneficiary determines that Grantor is not
adequately performing any of its obligations under this Security Instrument or
under any of the other Loan Documents, Beneficiary may, without limiting or
waiving any other rights or remedies of Beneficiary hereunder, take such steps
with respect thereto as Beneficiary shall deem necessary or
proper,  and any and all costs and expenses reasonably incurred by
Beneficiary in connection therewith, together with interest thereon at the
Default Interest Rate (as defined in the Note) from the date incurred by
Beneficiary until actually paid by Grantor,

       

      
        
          
             

          

          
            14

            
              

            

          

          
             

          

        

      

      

      shall be
immediately paid by Grantor on demand and shall be secured by this Security
Instrument and by all of the other Loan Documents securing all or any part of
the indebtedness evidenced by the Note.

       

      1.4  Insurance.  Grantor
shall, at Grantor's expense, maintain in force and effect on the Property at all
times while this Security Instrument continues in effect the following
insurance:

       

      (a)           Insurance
against loss or damage to the Property by fire, windstorm, lightning, tornado
and hail and against loss and damage by such other, further and additional risks
including, but not limited to, vandalism, malicious mischief, acts of terrorism,
riot and civil commotion, burglary and theft, as may be now or hereafter
embraced by an "all-risk" form of insurance policy.  The amount of
such insurance shall be not less than one hundred percent (100%) of the full
replacement (insurable) cost of the Improvements, furniture, furnishings,
fixtures, equipment and other items (whether personalty or fixtures) included in
the Property and owned by Grantor from time to time, without reduction for
depreciation.  The determination of the replacement cost amount shall
be adjusted annually to comply with the requirements of the insurer issuing such
coverage or, at Beneficiary's election, by reference to such indices, appraisals
or information as Beneficiary determines in its reasonable
discretion.  Full replacement cost, as used herein (“Full Replacement
Cost”), means, with respect to the Improvements, the cost of replacing
the Improvements without regard to deduction for depreciation, exclusive of the
cost of excavations, foundations and footings below the lowest basement floor,
and means, with respect to such furniture, furnishings, fixtures, equipment and
other items, the cost of replacing the same, in each case, with inflation guard
coverage to reflect the effect of inflation, or annual
valuation.  Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the operation of
any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Beneficiary's approval.  If the Property is non-conforming
with respect to zoning requirements, at a minimum (Beneficiary having the right,
in its reasonable discretion to require greater coverage), Grantor shall be
required to maintain ‘demolition’ insurance (in a minimum amount equal to ten
percent (10%) of the value of the Improvements) and ‘increased cost of
construction’ insurance (in a minimum amount equal to twenty–five (25%) of the
value of the Improvements.

       

      (b)           Comprehensive
Commercial General Liability Insurance including broad form coverage property
damage, contractual damage and personal injury (including bodily injury and
death), with liquor liability endorsement if liquor is sold at the Property, in
amounts not less than $___________ per occurrence and $________________ in the
aggregate (both inclusive of umbrella coverage).  During any
construction on the Property, each contractor having a contract for construction
in an amount equal to or greater than $100,000 shall also provide the insurance
required in this Subsection (b),
except that the minimum required coverages shall be $1,000,000 per occurrence
and $2,000,000 in the aggregate (both inclusive of umbrella
coverage).  Beneficiary hereby retains the right to periodically
review the amount of said liability insurance being maintained by Grantor and to
require an increase in the amount of said liability insurance should Beneficiary
deem an increase to be reasonably prudent under then existing
circumstances.

       

      (c)           General
boiler and machinery insurance coverage is required if steam boilers or other
pressure-fired vessels are in operation at the Property.  Minimum
liability

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      amount
per accident must equal the greater of the replacement (insurable) value of the
Improvements housing such boiler or pressure-fired machinery or
$2,000,000.00.

       

      (d)           If
the Property or any part thereof is identified by the Federal Emergency
Management Agency (or successor governmental agency or authority performing such
identification function) as being situated in an area now or subsequently
designated as having special flood hazards (including, without limitation, those
areas designated as Zone A or Zone V), flood insurance in an amount equal to (a)
the maximum insurance available under the appropriate National Flood Insurance
Administration program plus such excess limits as Beneficiary may require and
(b) having deductibles not in excess of $25,000.00.  To the extent the
Property is not in a flood zone as described above, but is located in the
vicinity of a body of water, Beneficiary may require flood
coverage.

       

      (e)           During
the period of any construction on the Property or renovation or alteration of
the Improvements, a so-called "Builder's All-Risk Completed Value" or "Course of
Construction" insurance policy in non-reporting form for any Improvements under
construction, renovation or alteration in an amount approved by Beneficiary and
Worker's Compensation Insurance covering all persons engaged in such
construction, renovation or alteration.

      

      (f)           
Business interruption and/or loss of rental income insurance must be maintained
in an amount sufficient to provide proceeds which will cover the ‘actual loss’
sustained during restoration.  Actual loss shall mean projected gross
revenues (less non-recurring expenses) for a period of not less than twelve
(12) months with a one hundred eighty day ‘extended period of indemnity’. The
amount of coverage shall be adjusted annually to reflect changes to ‘actual
loss’ during the succeeding twelve (12) month period.  The perils
covered by this insurance shall be the same as those required to be covered on
the Property, including, but not limited to, flood, windstorm and earthquake, as
applicable.

       

      (g)           Automobile
liability coverage for all owned and non-owned vehicles, including rented and
leased vehicles containing minimum limits per occurrence of One Million and
No/100 Dollars ($1,000,000.00).

       

      (h)           Worker’s
compensation coverage and employee’s liability coverage subject to the worker’s
compensation laws of the applicable State.

       

      (i)           
Such other insurance on the Property or on any replacements or substitutions
thereof or additions thereto as may from time to time be required by Beneficiary
against other insurable hazards or casualties which at the time are commonly
insured against in the case of property similarly situated including, without
limitation, Sinkhole, Mine Subsidence, Law and Ordinance, Earthquake and
Environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.

       

      All such
insurance shall (i) be with insurers authorized to do business in the State
within which the Property is located and who have and maintain a rating of at
least “A" (or its equivalent) from Standard & Poor’s, a Division of The
McGraw-Hill Companies, Inc. or any other nationally recognized statistical
agency selected by Beneficiary, or at Beneficiary's election, a Best Rating of
A-IX or better, (ii) contain the complete address of the Property (or
a

      
        
           

        

        
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      complete
legal description), (iii) be for terms of at least one year, (iv) contain
deductibles which do not exceed $10,000.00 or, with respect to the policy
described in clause
(d) above $3,000, and (v) be subject to the approval of Beneficiary as to
insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates.  Without limitation to the
generality of the foregoing, the all risk insurance and loss of rents or
business income insurance policies required under subsections (a), (b) and (f)
above, respectively, shall be required to cover perils of terrorism and acts of
terrorism.

       

      Grantor
shall as of the date hereof deliver to Beneficiary evidence that said insurance
policies have been paid current as of the date hereof and certified copies of
such insurance policies and original certificates of insurance signed by an
authorized agent of the applicable insurance companies evidencing such insurance
satisfactory to Beneficiary.  Grantor shall renew all such insurance
and deliver to Beneficiary certificates evidencing such renewals at least thirty
(30) days before any such insurance shall expire.  Without limiting
the required endorsements to the insurance policies, Grantor further agrees that
all such policies shall include a standard, non-contributory, mortgagee clause
naming:

       

      Cornerstone
Operating Partnership, LP

      1920 Main
Street

      Suite
400

      Irvine,
California 92614

       

      (x) as an
additional insured under all liability insurance policies, (y) as the first
mortgagee on all property insurance policies and (z) as the loss payee on all
loss of rents or loss of business income insurance policies.  Grantor
further agrees that all such insurance policies: (1) shall provide for at least
thirty (30) days' prior written notice to Beneficiary prior to any cancellation
or termination thereof and prior to any modification thereof which affects the
interest of Beneficiary; (2) shall contain an endorsement or agreement by the
insurer that any loss shall be payable to Beneficiary in accordance with the
terms of such policy notwithstanding any act or negligence of Grantor which
might otherwise result in forfeiture of such insurance; (3) shall waive all
rights of subrogation against Beneficiary; and (4) in the event that the Real
Estate or the Improvements constitutes a legal non-conforming use under
applicable building, zoning or land use laws or ordinances, shall include an
ordinance or law coverage endorsement which will contain Coverage
A:  "Loss Due to Operation of Law" (with a minimum liability limit
equal to Replacement Cost With Agreed Value Endorsement), Coverage
B:  "Demolition Cost" and Coverage C: "Increased Cost of Construction"
coverages.  Beneficiary agrees that such insurance policies may be in
the form of a blanket policy provided that, in the event that any such coverage
is provided in the form of a blanket policy, Grantor hereby acknowledges and
agrees that failure to pay any portion of the premium therefor which is not
allocable to the Property or by any other action not relating to the Property
which would otherwise permit the issuer thereof to cancel the coverage thereof,
would require the Property to be insured by a separate, single-property
policy.  The blanket policy must properly identify and fully protect
the Property as if a separate policy were issued for 100% of Full Replacement
Cost at the time of loss and otherwise meet all of Beneficiary's applicable
insurance requirements set forth in this Section
1.4.  The delivery to Beneficiary of the insurance policies or
the certificates of insurance as provided above shall constitute an assignment
of all proceeds payable under such insurance policies relating to the Property
by Grantor to Beneficiary as further security for the indebtedness secured
hereby.  In

       

      
        
          
             

          

          
            17

            
              

            

          

          
             

          

        

      

       

      the event
of foreclosure of this Security Instrument, or other transfer of title to the
Property in extinguishment in whole or in part of the secured indebtedness, all
right, title and interest of Grantor in and to all proceeds payable under such
policies then in force concerning the Property shall thereupon vest in the
purchaser at such foreclosure, or in Beneficiary or other transferee in the
event of such other transfer of title.  Approval of any insurance by
Beneficiary shall not be a representation of the solvency of any insurer or the
sufficiency of any amount of insurance.  In the event Grantor fails to
provide, maintain, keep in force or deliver and furnish to Beneficiary the
policies of insurance required by this Security Instrument or evidence of their
renewal as required herein, Beneficiary may, but shall not be obligated to,
procure such insurance and Grantor shall pay all amounts advanced by Beneficiary
therefore, together with interest thereon at the Default Interest Rate from and
after the date advanced by Beneficiary until actually repaid by Grantor,
promptly upon demand by Beneficiary.  Any amounts so advanced by
Beneficiary, together with interest thereon, shall be secured by this Security
Instrument and by all of the other Loan Documents securing all or any part of
the indebtedness secured hereby.  Beneficiary shall not be responsible
for nor incur any liability for the sufficiency of any insurance, the insolvency
of the insurer or any other failure of the insurer to perform, even though
Beneficiary has caused the insurance to be placed with the insurer after failure
of Grantor to furnish such insurance in accordance herewith.  Grantor
shall not obtain insurance for the Property in addition to that required by
Beneficiary without the prior written consent of Beneficiary, which consent will
not be unreasonably withheld provided that (i) Beneficiary is a named insured on
such insurance, (ii) Beneficiary receives complete copies of all policies
evidencing such insurance, and (iii) such insurance and the related insurer
comply with all of the applicable requirements set forth herein.

       

      1.5  Payment of
Taxes.  Grantor shall pay or cause to be paid, except to the
extent provision is actually made therefore pursuant to Section 1.6 of this
Security Instrument, all taxes and assessments which are or may become a lien on
the Property or which are assessed against or imposed upon the
Property.  Upon request by Beneficiary, Grantor shall furnish
Beneficiary with receipts (or if receipts are not immediately available, with
copies of canceled checks evidencing payment with receipts to follow promptly
after they become available) showing payment of such taxes and assessments at
least fifteen (15) days prior to the applicable delinquency date
therefore.  Notwithstanding the foregoing, Grantor may in good faith,
by appropriate proceedings and upon notice to Beneficiary, contest the validity,
applicability or amount of any asserted tax or assessment so long as
(a) such contest is diligently pursued, (b) Beneficiary determines, in
its subjective opinion, that such contest suspends the obligation to pay the tax
or assessment and that nonpayment of such tax or assessment will not result in
the sale, loss, forfeiture or diminution of the Property or any part thereof or
any interest of Beneficiary therein, and (c) prior to the earlier of the
commencement of such contest or the delinquency date of the asserted tax or
assessment, Grantor deposits in the Impound Account (as hereinafter defined) an
amount determined by Beneficiary to be adequate to cover the payment of such tax
or assessment and a reasonable additional sum to cover possible interest, costs
and penalties; provided, however, that Grantor shall
promptly cause to be paid any amount adjudged by a court of competent
jurisdiction to be due, with all interest, costs and penalties thereon, promptly
after such judgment becomes final; and provided further that in any event
each such contest shall be concluded and the taxes, assessments, interest, costs
and penalties shall be paid prior to the date any writ or order is issued under
which the Property may be sold, lost or forfeited.

      
        
           

        

        
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      1.6  Tax and Insurance Impound
Account.  If and when required by Beneficiary by notice to
Grantor on or after the date hereof (it being acknowledged that the same is not
required prior to the occurrence of an Event of Default hereunder), Grantor
shall establish and maintain at all times while this Security Instrument
continues in effect an impound account (the "Impound Account")
with Beneficiary for payment of real estate taxes and assessments and insurance
on the Property and as additional security for the indebtedness secured
hereby.  Grantor shall deposit in the Impound Account an amount
determined by Beneficiary to be sufficient (when added to the monthly deposits
described herein) to pay the next due annual installment of real estate taxes
and assessments on the Property at least one (1) month prior to the delinquency
date thereof and the next due annual insurance premiums with respect to the
Property at least one (1) month prior to the due date thereof.  Upon
requirement by Lender for establishment of such Impound Account, and continuing
thereafter on each monthly payment date under the Note, Grantor shall pay to
Beneficiary, concurrently with the monthly payment due under the Note, deposits
in an amount equal to one-twelfth (1/12) of the amount of the annual real estate
taxes and assessments that will next become due and payable on the Property,
plus one-twelfth (1/12) of the amount of the annual premiums that will next
become due and payable on insurance policies which Grantor is required to
maintain hereunder, each as estimated and determined by
Beneficiary.  So long as no default hereunder or under the other Loan
Documents has occurred and is continuing, all sums in the Impound Account shall
be held by Beneficiary in the Impound Account to pay said taxes, assessments and
insurance premiums in one installment before the same become
delinquent.  Grantor shall be responsible for ensuring the receipt by
Beneficiary, at least thirty (30) days prior to the respective due date for
payment thereof, of all bills, invoices and statements for all taxes,
assessments and insurance premiums to be paid from the Impound Account, and so
long as no default hereunder or under the other Loan Documents has occurred and
is continuing, Beneficiary shall pay the governmental authority or other party
entitled thereto directly to the extent funds are available for such purpose in
the Impound Account.  In making any payment from the Impound Account,
Beneficiary shall be entitled to rely on any bill, statement or estimate
procured from the appropriate public office or insurance company or agent
without any inquiry into the accuracy of such bill, statement or estimate and
without any inquiry into the accuracy, validity, enforceability or
contestability of any tax, assessment, valuation, sale, forfeiture, tax lien or
title or claim thereof.  No interest on funds contained in the Impound
Account shall be paid by Beneficiary to Grantor and any interest or other
earnings on funds deposited in the Impound Account shall be solely for the
account of Beneficiary.  If the total funds in the Impound Account
shall exceed the amount of payments actually applied by Beneficiary for the
purposes of the Impound Account, such excess may be credited by Beneficiary on
subsequent payments to be made hereunder or, at the option of Beneficiary,
refunded to Grantor.  If, however, the Impound Account shall not
contain sufficient funds to pay the sums required when the same shall become due
and payable, Grantor shall, within the earlier to occur of ten (10) days after
receipt of written notice thereof and two (2) Business Days prior to the tax due
date, deposit with Beneficiary the full amount of any such
deficiency.

       

      1.7  Intentionally
reserved.  

       

      1.8  Security Interest In
Reserves.  i)  As additional security for the payment
and performance by Grantor of all duties, responsibilities and obligations under
the Note and the other Loan Documents, Grantor hereby unconditionally and
irrevocably assigns, conveys,

      
        
           

        

        
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      pledges,
mortgages, transfers, delivers, deposits, sets over and confirms unto
Beneficiary, and hereby grants to Beneficiary a security interest in all sums on
deposit or due under this Security Instrument and the other Loan Documents
including, without limitation, (i) the Impound Account, and, to the extent set
forth on Exhibit
"B"
attached hereto, any Repair and Remediation Reserve, Replacement Reserve,
Environmental Reserve, Curtailment Reserve, and any other reserve set forth on
Exhibit "B" attached hereto,
the Lease Termination Payment Reserve, the Cash Collateral Account and any other
accounts or sub-accounts thereof established pursuant to the Cash Management
Agreement, as such terms are defined in that certain Cash Management Agreement
date on or about the date hereof (the “Cash Management
Agreement”) by and among Grantor, Beneficiary and Manager (collectively,
the "Reserves"), (ii) the
accounts into which the Reserves have been deposited, (iii) all insurance on
said accounts, (iv) all accounts, contract rights and general intangibles or
other rights and interests pertaining thereto, (v) all sums now or hereafter
therein or represented thereby, (vi) all replacements, substitutions or proceeds
thereof, (vii) all instruments and documents now or hereafter evidencing the
Reserves or such accounts, (viii) all powers, options, rights, privileges and
immunities pertaining to the Reserves (including the right to make withdrawals
therefrom), and (ix) all proceeds of the foregoing.  Grantor hereby
authorizes and consents to the account into which the Reserves have been
deposited being held in Beneficiary's name or the name of any entity servicing
the Note for Beneficiary and hereby acknowledges and agrees that Beneficiary, or
at Beneficiary's election, such servicing agent, shall have exclusive control
over said account.  Notice of the assignment and security interest
granted to Beneficiary herein may be delivered by Beneficiary at any time to the
financial institution wherein the Reserves have been established, and
Beneficiary, or such servicing entity, shall have possession of all passbooks or
other evidences of such accounts.  Grantor hereby holds Beneficiary
harmless with respect to all risk of loss regarding amounts on deposit in the
Reserves, except to the extent that any such loss is caused by the gross
negligence or intentional misconduct of Beneficiary.  Grantor hereby
knowingly, voluntarily and intentionally stipulates, acknowledges and agrees
that the advancement of the funds from the Reserves as set forth herein is at
Grantor's direction and is not the exercise by Beneficiary of any right of
set-off or other remedy upon a default.  If a default shall occur
hereunder or under any other of the Loan Documents which is not cured within any
applicable grace or cure period, then Beneficiary may, without notice or demand
on Grantor, at its option:  (A) withdraw any or all of the funds
(including, without limitation, interest) then remaining in the Reserves and
apply the same, after deducting all costs and expenses of safekeeping,
collection and delivery (including, but not limited to, attorneys' fees, costs
and expenses) to the indebtedness evidenced by the Note or any other obligations
of Grantor under the other Loan Documents in such manner or as Beneficiary shall
deem appropriate in its sole discretion, and the excess, if any, shall be paid
to Grantor, (B) exercise any and all rights and remedies of a secured party
under any applicable Uniform Commercial Code, or (C) exercise any other remedies
available at law or in equity.  No such use or application of the
funds contained in the Reserves shall be deemed to cure any default or Event of
Default hereunder or under the other Loan Documents.

       

      The
Reserves are solely for the protection of Beneficiary and entail no
responsibility on Beneficiary's part beyond the payment of the respective costs
and expenses in accordance with the terms thereof and beyond the allowing of due
credit for the sums actually received.  Upon assignment of this
Security Instrument by Beneficiary, any funds in the Reserves shall be turned
over to the assignee and any responsibility of Beneficiary, as assignor, with
respect thereto shall terminate.  The Reserves shall not, unless
otherwise explicitly required by

      
        
           

        

        
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      applicable
law, be or be deemed to be escrow or trust funds, but, at Beneficiary's option
and in Beneficiary's discretion, may either be held in a separate account or be
commingled by Beneficiary with the general funds of Beneficiary.  Upon
full payment of the indebtedness secured hereby in accordance with its terms (or
if earlier, the completion of the applicable conditions to release of each
Reserve to Beneficiary's satisfaction) or at such earlier time as Beneficiary
may elect, the balance in Reserves then in Beneficiary's possession shall be
paid over to Grantor and no other party shall have any right or claim
thereto.

       

      Any
amounts received by Beneficiary from Grantor may be invested by Beneficiary (or
its servicer) for its benefit, and Beneficiary shall not be obligated to pay, or
credit, any interest earned thereon to Grantor except as may be otherwise
specifically provided in this Security Instrument.

       

      1.9  Casualty and
Condemnation.  Grantor shall give Beneficiary prompt written
notice of the occurrence of any casualty affecting, or the institution of any
proceedings for eminent domain or for the condemnation of, the Property or any
portion thereof (collectively, an "Insured
Event").  All insurance proceeds on the Property, and all
causes of action, claims, compensation, awards and recoveries for any damage,
condemnation or taking of all or any part of the Property or for any damage or
injury to it for any loss or diminution in value of the Property, are hereby
assigned to and shall be paid to Beneficiary (and Grantor hereby covenants and
agrees that Grantor shall deliver or cause to be delivered to Beneficiary any
proceeds or awards which may be payable to, or received by,
Grantor).  Beneficiary may participate in any suits or proceedings
relating to any such proceeds, causes of action, claims, compensation, awards or
recoveries and Beneficiary is hereby authorized, in its own name or in Grantor's
name, to adjust any loss covered by insurance or any condemnation claim or cause
of action, and to settle or compromise any claim or cause of action in
connection therewith, and Grantor shall from time to time deliver to Beneficiary
any instruments required to permit such participation; provided, however, that
Beneficiary shall not have the right to participate in the adjustment of any
loss which is not in excess of $350,000.00 (the “Threshold
Amount”).  If requested by Beneficiary, Grantor shall provide
copies to Beneficiary of all notices or filings made or received by Grantor in
connection with such casualty or condemnation suits or proceedings or with
respect to the collection of the insurance proceeds or condemnation award, as
the case may be.  Provided no default is then continuing hereunder or
under any of the other Loan Documents beyond applicable notice and/or cure
period, if any, provided herein, and no event has occurred which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default hereunder or under any of the other Loan
Documents,  Beneficiary shall apply any sums received by it under this
Section first to the payment of all of its costs and expenses (including, but
not limited to, reasonable legal fees and disbursements) incurred in obtaining
those sums, and then, as follows:

       

      In the
event that Beneficiary receives insurance proceeds or condemnation awards upon
the occurrence of an Insured Event in an amount not in excess of the Threshold
Amount, Beneficiary shall, to the extent such insurance proceeds or condemnation
awards are available for such purpose, disburse to Grantor the amount paid or
incurred by Grantor as a result of any such Insured Event for costs and expenses
incurred by Grantor to repair or restore the Property (collectively the "Casualty Repairs")
within ten (10) days following: (A) the receipt by Beneficiary of a written
request from Grantor for disbursement and a certification by Grantor
to

      
        
           

        

        
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      Beneficiary
that the applicable item of Repair has been completed; (B) the delivery to
Beneficiary of invoices, receipts or other evidence verifying the cost of
performing the Casualty Repairs; and (C) for disbursement requests (i) in
excess of $20,000.00 with respect to any single Casualty Repair, or (ii) for any
single Casualty Repair that is structural in nature, delivery to Beneficiary of
(1) affidavits, lien waivers or other evidence reasonably satisfactory to
Beneficiary showing that all materialmen, laborers, subcontractors and any other
parties who might or could claim statutory or common law liens and are
furnishing or have furnished material or labor to the Property have been paid
all amounts due for labor and materials furnished to the Property; (2) a
certification from an inspecting architect or other third party acceptable to
Beneficiary describing the completed Casualty Repairs and verifying the
completion of the Casualty Repairs and the value of the completed Casualty
Repairs; and (3) a new (or amended) certificate of occupancy for the portion of
the Improvements covered by such Casualty Repairs, if said new certificate of
occupancy was required by law, or a certification by Grantor that no new
certificate of occupancy was required by law.  Beneficiary shall not
be required to make any such advances more frequently than one time in any
calendar month.  In the event any proceeds or awards from an Insured
Event exceed the Threshold Amount but less than thirty-five (35%) percent of the
Improvements located on the Real Estate have been taken or destroyed, then
if:

       

      (a)    the Property
can, in Beneficiary's reasonable judgment, with diligent restoration or repair,
be returned to a condition at least equal to the condition thereof that existed
prior to the casualty or partial taking causing the loss or damage within the
earlier to occur of (i) six (6) months after the receipt of insurance
proceeds or condemnation awards by either Grantor or Beneficiary, (ii) six (6)
months prior to the stated maturity date of the Note, (iii) the earliest date by
which completion is required under applicable law to preserve the right to
rebuild the Improvements as they existed prior to the casualty or condemnation,
(iv) the earliest date by which completion is required under any Major Lease,
(v) Leases covering in the aggregate at least fifty percent (50%) of the
rentable square feet of the Property (as existed immediately prior to the
occurrence of the casualty or condemnation) shall remain in effect during and
upon completion of the restoration, and (vi) the expiration of Grantor’s
business interruption insurance policy, and

       

      (b)    all necessary
governmental approvals can be obtained to allow the rebuilding and re-occupancy
of the Property as described in subsection (b)(1) above, and

       

      (c)    there are
sufficient sums available (through insurance proceeds or condemnation awards and
contributions by Grantor, the full amount of which shall at Beneficiary's option
have been deposited with Beneficiary) for such restoration or repair (including,
without limitation, for any reasonable costs and expenses of Beneficiary to be
incurred in administering said restoration or repair) and for payment of
principal and interest to become due and payable under the Note during such
restoration or repair, and

       

      (d)    the economic
feasibility of the Improvements after such restoration or repair will be such
that income from their operation is reasonably anticipated to be sufficient to
pay operating expenses of the Property and debt service on the indebtedness
secured hereby in full with the same coverage ratio considered by Beneficiary in
its determination to make the Loan, and

      
        
           

        

        
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      (e)    Grantor shall
have delivered to Beneficiary, at Grantor's sole cost and expense, an appraisal
report from an appraiser, in form and substance, satisfactory to Beneficiary
appraising the value of the Property as proposed to be restored or repaired to
be not less than the appraised value of the Property considered by Beneficiary
in its determination to make the Loan, and

       

      (f)    Grantor
confirms by written notice delivered to Beneficiary within five (5) days after
settlement of the aforesaid insurance or condemnation claim its intention to
repair and restore as herein provided, and

       

      (g)    the Property
can, in Beneficiary’s and Grantor’s reasonable judgment, be repaired or restored
such that the Property, taken as a whole, as repaired or restored, will conform
to all applicable governmental laws and ordinances including, without
limitation, then current zoning ordinances,

       

      then,
Beneficiary shall, provided no Event of Default has occurred which is then
continuing, solely for the purposes of such restoration or repair, advance so
much of the remainder of such sums as may be required to facilitate such
restoration or repair, and any funds deposited by Grantor therefore, to Grantor
in the manner and upon such terms and conditions as would be required by a
prudent interim construction lender, including, but not limited to, the prior
approval by Beneficiary of plans and specifications, contractors and the form of
construction contracts and the furnishing to Beneficiary of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors
in form and substance reasonably satisfactory to Beneficiary.  Any
remaining proceeds shall be applied by Beneficiary for payment of the
indebtedness secured hereby in whatever order as Beneficiary directs, or
released to Grantor, in its absolute discretion.  Grantor shall, in
good faith, undertake reasonable efforts to cause the conditions described in
this Section 1.9(b) to be fully satisfied (e.g., Grantor shall timely make
applications for necessary governmental permits, shall order an appropriate
appraisal report, etc.).  Any disbursement pursuant to this clause (b) of sums by
Beneficiary shall, subject to Grantor's satisfaction of the provisions hereof,
be in a manner to promptly facilitate the restoration or repair of the
Property.  In the event Grantor fails to meet the requirements of this
clause (b),
then Beneficiary may elect in its absolute discretion and without regard to the
adequacy of Beneficiary's security, to accelerate the maturity date of the Note
and declare any and all of the indebtedness secured hereby to be immediately due
and payable and apply the remainder of such sums to the payment of the secured
indebtedness in whatever order Beneficiary directs in its sole discretion, with
any remainder being paid to Grantor.

       

      In all
other cases, namely, in the event that thirty-five (35%) percent or more of the
Improvements located on the Real Estate have been taken or destroyed or in the
event the conditions described in Section 1.9(b) are not fully satisfied,
Beneficiary may elect, in Beneficiary's absolute discretion and without regard
to the adequacy of Beneficiary's security, to (i) accelerate the maturity date
of the Note and declare any and all indebtedness secured hereby to be
immediately due and payable and apply the remainder of such sums received
pursuant to this Section to the payment of the secured indebtedness in whatever
order Beneficiary directs in its absolute discretion, with any remainder being
paid to Grantor, or (ii) make insurance or condemnation proceeds available to
Grantor for repair or restoration if Grantor establishes to the satisfaction of
Beneficiary, in its sole discretion, that Grantor otherwise satisfies the
requirements

      
        
           

        

        
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      of clause (b)
above.  Should Beneficiary make the election described immediately
above in item (ii) of this Section 1.9(c), Grantor shall be obligated to
undertake restoration and repair of the damaged Improvements consistent with the
provisions of this Section 1.9.

       

      Any
reduction in the indebtedness secured hereby resulting from Beneficiary's
application of any sums received by it hereunder shall take effect only when
Beneficiary actually receives such sums and elects to apply such sums to the
indebtedness secured hereby and, in any event, the unpaid portion of the
indebtedness secured hereby shall remain in full force and effect and Grantor
shall not be excused in the payment thereof.  Partial payments
received by Beneficiary, as described in the preceding sentence, shall be
applied as set forth in Section 1.02(c) of the Note.  If Grantor
undertakes to restore or repair the Property after the occurrence of a casualty
or partial taking of the Property as provided above, Grantor shall promptly and
diligently, at Grantor's sole cost and expense and regardless of whether the
insurance proceeds or condemnation award, as appropriate, shall be sufficient
for the purpose, restore, repair, replace and rebuild the Property as nearly as
possible to its value, condition and character immediately prior to such
casualty or partial taking in accordance with the foregoing provisions and
Grantor shall pay to Beneficiary all costs and expenses of Beneficiary incurred
in administering said rebuilding, restoration or repair, provided that
Beneficiary makes such proceeds or award available for such
purpose.  Grantor agrees to execute and deliver from time to time such
further instruments as may be requested by Beneficiary to confirm the foregoing
assignment to Beneficiary of any award, damage, insurance proceeds, payment or
other compensation.  Grantor hereby irrevocably constitutes and
appoints Beneficiary the attorney-in-fact of Grantor (which power of attorney
shall be irrevocable so long as any indebtedness secured hereby is outstanding,
shall be deemed coupled with an interest, shall survive the voluntary or
involuntary dissolution of Grantor and shall not be affected by any disability
or incapacity suffered by Grantor subsequent to the date hereof), with full
power of substitution, subject to the terms of this Section, to settle for,
collect and receive any such awards, damages, insurance proceeds, payments or
other compensation from the parties or authorities making the same, to appear in
and prosecute any proceedings therefor and to give receipts and acquittance
therefor.

       

      1.10  Mechanics'
Liens.  Grantor shall pay when due all claims and demands of
mechanics, materialmen, laborers and others for any work performed or materials
delivered for the Real Estate or the Improvements; provided, however, that Grantor
shall have the right to contest in good faith any such claim or demand, so long
as it does so diligently, by appropriate proceedings and without prejudice to
Beneficiary and provided that neither the Property nor any interest therein
would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest.  In the event Grantor shall contest any such
claim or demand, Grantor shall promptly notify Beneficiary of such contest and
thereafter shall, upon Beneficiary's request, promptly provide a bond, cash
deposit or other security satisfactory to Beneficiary to protect Beneficiary's
interest and security should the contest be unsuccessful.  If Grantor
shall fail to immediately discharge or provide security against any such claim
or demand as aforesaid, Beneficiary may do so and any and all expenses incurred
by Beneficiary (of which Beneficiary shall give notice to Grantor), together
with interest thereon at the Default Interest Rate from the date incurred by
Beneficiary until actually paid by Grantor, shall be immediately paid by Grantor
on demand and shall be secured by this Security Instrument and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note.

      
        
           

        

        
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      1.11  Assignment of Leases and
Rents.  As additional and collateral security for the payment
of the indebtedness secured hereby and cumulative of any and all rights and
remedies herein provided for, Grantor hereby absolutely and presently assigns to
Beneficiary all existing and future Leases (including, without limitation, the
TRS Lease), and all existing and future Rents and Profits.  Grantor
hereby grants to Beneficiary the sole, exclusive and immediate right, without
taking possession of the Property, to demand, collect (by suit or otherwise),
receive and give valid and sufficient receipts for any and all of said Rents and
Profits, for which purpose Grantor does hereby irrevocably make, constitute and
appoint Beneficiary its attorney-in-fact with full power to appoint substitutes
or a trustee to accomplish such purpose (which power of attorney shall be
irrevocable so long as any indebtedness secured hereby is outstanding, shall be
deemed to be coupled with an interest, shall survive the voluntary or
involuntary dissolution of Grantor and shall not be affected by any disability
or incapacity suffered by Grantor subsequent to the date
hereof).  Beneficiary shall be without liability for any loss which
may arise from a failure or inability to collect Rents and Profits, proceeds or
other payments.  However, until the occurrence of an Event of Default
under this Security Instrument, Grantor shall have a license to collect and
receive the Rents and Profits when due and prepayments thereof for not more than
one month prior to due date thereof.  Upon the occurrence of an Event
of Default, Grantor's license shall automatically terminate without notice to
Grantor and Beneficiary may thereafter, without taking possession of the
Property, collect the Rents and Profits itself or by an agent or
receiver.  From and after the termination of such license, Grantor
shall be the agent of Beneficiary in collection of the Rents and Profits and all
of the Rents and Profits so collected by Grantor shall be held in trust by
Grantor for the sole and exclusive benefit of Beneficiary and Grantor shall,
within one (1) business day after receipt of any Rents and Profits, pay the same
to Beneficiary to be applied by Beneficiary as hereinafter set
forth.  Neither the demand for or collection of Rents and Profits by
Beneficiary, nor the exercise of Beneficiary's rights as assignee of the
Leases,  shall constitute any assumption by Beneficiary of any
obligations under any Lease or other agreement relating
thereto.  Beneficiary is obligated to account only for such Rents and
Profits as are actually collected or received by Beneficiary.  Grantor
irrevocably agrees and consents that the respective payors of the Rents and
Profits shall, upon demand and notice from Beneficiary of an Event of Default
hereunder, pay said Rents and Profits to Beneficiary without liability to
determine the actual existence of any Event of Default claimed by
Beneficiary.  Grantor hereby waives any right, claim or demand which
Grantor may now or hereafter have against any such payor by reason of such
payment of Rents and Profits to Beneficiary, and any such payment shall
discharge such payor's obligation to make such payment to
Grantor.  All Rents and Profits collected or received by Beneficiary
shall be applied against all expenses of collection, including, without
limitation, attorneys' fees, against costs of operation and management of the
Property and against the indebtedness secured hereby, in whatever order or
priority as to any of the items so mentioned as Beneficiary directs in its sole
subjective discretion and without regard to the adequacy of its
security.  Neither the exercise by Beneficiary of any rights under
this Section nor the application of any Rents and Profits to the secured
indebtedness shall cure or be deemed a waiver of any default or Event of Default
hereunder.  The assignment of Leases and of Rents and Profits
hereinabove granted shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Property.  As additional
security for the indebtedness secured hereby, Grantor has executed and delivered
an Assignment of Leases and Rents dated of even date herewith (as hereafter
amended, consolidated or modified from time to time, the "Assignment") in favor
of Beneficiary

       

      
        
          
             

          

          
            25

            
              

            

          

          
             

          

        

      

      

      covering
all of the right, title and interest of Grantor, as landlord, lessor or
licensor, in and to any Leases.  All rights and remedies granted to
Beneficiary under the Assignment shall be in addition to and cumulative of all
rights and remedies granted to Beneficiary hereunder.

       

      1.12  Leases and
Licenses.

       

      (a)    Lease Requirements.  Prior
to execution of any Leases (other than the residency agreements entered into on
the form approved by Beneficiary in connection with the closing of the Loan)
after the date hereof, Grantor shall submit to Beneficiary, for Beneficiary's
prior approval, which approval shall not be unreasonably withheld so long as no
default exists hereunder, a copy of the form lease Grantor plans to use in
leasing space in the Improvements.  Each Lease executed after the date
hereof affecting any of the Real Estate or the Improvements must provide, in a
manner approved by Beneficiary, that (i) such Lease is subject and subordinate
to this Security Instrument, and (ii) the Tenant will attorn to, and recognize
as its landlord, lessor or licensor, any person succeeding to the interest of
Grantor in such Lease upon any foreclosure of this Security Instrument or deed
in lieu of foreclosure.  Each such Lease shall also provide that, upon
request of said successor-in-interest, the Tenant shall execute and deliver an
instrument or instruments confirming its attornment as provided for in this
Section; provided, however, that neither Beneficiary nor any
successor-in-interest shall be bound by any payment of rental for more than one
(1) month in advance, or any amendment or modification of said Lease made
without the express written consent of Beneficiary or said
successor-in-interest.  No Lease shall contain any option or right of
first refusal to purchase all or any portion of the Property.  No
Lease (other than any residency agreement entered into in the form approved by
Lender in connection with the origination of this Loan) shall contain any right
to terminate the term thereof (except in the event of the destruction of all or
substantially all of the Property).

       

      (b)    Acts Requiring Consent of Beneficiary.  Grantor
shall not, without the prior written consent of Beneficiary, (i) enter into any
Lease of all or any portion of the Property either (Y) for space in excess of
five percent (5%) of the rentable square feet, or represents ten (10%) percent
or more of the gross rents reflected on the rent roll for the Property, or (Z)
for a term (including, without limitation, options exercisable by the lessee
thereunder) of greater than five (5) years (any such lease, a "Major Lease"); (ii)
cancel, terminate, abridge or otherwise modify the terms of the TRS Lease or any
other Major Lease, or accept a surrender thereof; (iii) consent to any
assignment of, or subletting of all or any portion of the premises demised
under, the TRS Lease or any other Major Lease unless required by the terms
thereof; (iv) cancel, terminate, abridge, release or otherwise modify any
guaranty of the TRS Lease or any other Major Lease or the terms thereof; (v)
enter into any Lease not meeting the requirements of Section 1.12(a) of this
Security Instrument; or (vi) enter into any Lease containing material adverse
variations from the current form lease approved by Beneficiary.  The
request for approval of each such proposed Lease shall be made to Beneficiary in
writing.  As part of such request, Grantor shall furnish to
Beneficiary (and any loan servicer specified from time to time by Beneficiary)
to the extent required by Beneficiary and/or such loan servicer: (1) such
biographical and financial information about the proposed tenant as Beneficiary
may require in conjunction with its review, (2) a copy of the proposed Lease,
and (3) a summary of the material terms of such proposed Lease (including,
without limitation, rental terms and the term of the proposed Lease and any
options).

      
        
           

        

        
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      (c)    Affirmative Covenants Regarding Leases.  Grantor
shall at all times promptly and faithfully perform, or cause to be performed,
all of the covenants, conditions and agreements contained in all Leases, now or
hereafter existing, on the part of the landlord, lessor or licensor thereunder
to be kept and performed.  Grantor shall promptly send copies to
Beneficiary and any servicer of all notices of default which Grantor shall send
or receive under the TRS Lease and, upon request by Beneficiary, under any other
Lease.  Grantor, at no cost or expense to Beneficiary, shall enforce,
short of termination, the performance and observance of each and every condition
and covenant of each of the other parties under each Lease.  Grantor
shall furnish to Beneficiary, within ten (10) days after a request by
Beneficiary to do so, and in any event by January 1 of each year, a current rent
roll certified by Grantor as being true and correct containing the names of all
Tenants, the terms of their respective Leases, the spaces occupied and the
rentals or fees payable thereunder and the amount of each Tenant's security
deposit.  Upon the request of Beneficiary, Grantor shall deliver to
Beneficiary (i) a copy of each Lease; and (ii) an estoppel certificate from the
tenant under the TRS Lease (provided that Beneficiary shall not be required to
deliver such certificates more frequently than twice in any calendar
year).

       

      (d)    Negative Covenants Regarding Leases.  Grantor
shall not enter into any Lease (i) without the prior written consent of
Beneficiary where such consent is required pursuant to this Security Instrument;
(ii) except on terms consistent with the terms for similar leases in the market
area of the Real Estate, including, without limitation, as to the rental rate,
security deposit, tenant improvement and work letter terms and free rent
periods; (iii) other than with a third-party Tenant unrelated to Grantor or any
general partner, principal, manager, member or affiliate of Grantor or any
affiliate of any such general partner, principal, manager, or member of Grantor
(provided that the foregoing is not applicable with respect to the TRS Lease);
or (iv) except for an actual occupancy by the tenant, lessee or licensee
thereunder.  Grantor shall not do or suffer to be done any act that
might result in a default by the landlord, lessor or licensor under any Lease or
allow the Tenant thereunder to withhold payment of rent.  Grantor
shall not, without the prior written consent of Beneficiary:  (1)
(x)modify the TRS Lease, or (y)modify any Major Lease in any material respect,
or (z) other than in the ordinary course of business and in compliance with
applicable legal requirements, otherwise modify any other Lease; (2) terminate
or accept the surrender of the TRS Lease, any other Major Lease or, except in
the ordinary course of business and in compliance with the requirements thereof,
any other Lease; or (3) waive or release any other party from the performance or
observance of any obligation or condition under any Lease; provided, however, that with
respect to all Leases other than Major Leases, provided no default exists
hereunder, Grantor may do any of the foregoing in the normal course of business
in a manner which is consistent with sound and customary leasing and management
practices for similar properties in the community in which the Property is
located.  Grantor shall not solicit or accept the prepayment of any
rents under any Lease for more than one (1) month prior to the due date
thereof.  Except for the Assignment, Grantor shall not execute any
other assignment of the lessor's interest in the Leases or the Rents and Profits
or otherwise encumber, pledge or hypothecate lessor’s interest
therein.

       

      (e)    Security Deposits.  All
security deposits of Tenants, whether held in cash or in any other form, shall
not be commingled with any other funds of Grantor or any other person and, if
cash, shall be deposited by Grantor at such commercial or savings bank or banks,
or otherwise held in compliance with applicable law, as may be reasonably
satisfactory to Beneficiary.  Any bond or other instrument which
Grantor is permitted to hold in lieu of cash

      
        
           

        

        
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      security
deposits under any applicable legal requirements shall be maintained in full
force and effect in the full amount of such deposits unless replaced by cash
deposits as hereinabove described; shall be issued by an institution reasonably
satisfactory to Beneficiary; shall, if permitted pursuant to any applicable
legal requirements, name Beneficiary as payee or mortgagee thereunder or, at
Beneficiary's option, be assigned or fully assignable to Beneficiary; and shall,
in all respects, comply with any applicable legal requirements and otherwise be
reasonably satisfactory to Beneficiary.  Grantor shall, upon request,
provide Beneficiary with evidence reasonably satisfactory to Beneficiary of
Grantor's compliance with the foregoing.  Upon an Event of Default
under this Security Instrument, Grantor shall, immediately upon Beneficiary's
request (if permitted by applicable law), deliver to Beneficiary the security
deposits (and any interest previously earned thereon and not disbursed to the
person(s) lawfully entitled to receive same) with respect to all or any portion
of the Property, to be held by Beneficiary subject to the terms of the
Leases.

       

      (f)    Rights of Beneficiary Upon Default.  Upon
an Event of Default, whether before or after the whole principal sum secured
hereby is declared to be immediately due or whether before or after the
institution of legal proceedings to foreclose this Security Instrument,
forthwith, upon demand of Beneficiary, Grantor shall surrender to Beneficiary
and Beneficiary shall be entitled to take actual possession of the Property or
any part thereof personally, or by its agent or attorneys.  In such
event, Beneficiary shall have, and Grantor hereby gives and grants to
Beneficiary, the right, power and authority to make and enter into Leases for
such rents and for such periods of occupancy and upon conditions and provisions
as Beneficiary may deem desirable in its sole discretion, and Grantor expressly
acknowledges and agrees that the term of such Lease may extend beyond the date
of any foreclosure sale at the Property; it being the intention of Grantor that
in such event Beneficiary shall be deemed to be and shall be the
attorney-in-fact of Grantor for the purpose of making and entering into Leases
for the rents and upon the terms, conditions and provisions deemed desirable to
Beneficiary in its sole discretion and with like effect as if such Leases had
been made by Grantor as the owner in fee simple of the Property free and clear
of any conditions or limitations established by this Security
Instrument.  The power and authority hereby given and granted by
Grantor to Beneficiary shall be deemed to be coupled with an interest, shall not
be revocable by Grantor so long as any indebtedness secured hereby is
outstanding, shall survive the voluntary or involuntary dissolution of Grantor
and shall not be affected by any disability or incapacity suffered by Grantor
subsequent to the date hereof.  In connection with any action taken by
Beneficiary pursuant to this Section, Beneficiary shall not be liable for any
loss sustained by Grantor resulting from any failure to let the Property, or any
part thereof, or from any other act or omission of Beneficiary in managing the
Property, nor shall Beneficiary be obligated to perform or discharge any
obligation, duty or liability under any Lease or under or by reason of this
instrument or the exercise of rights or remedies hereunder.  GRANTOR
SHALL, AND DOES HEREBY, INDEMNIFY BENEFICIARY FOR, AND HOLD BENEFICIARY HARMLESS
FROM, ANY AND ALL CLAIMS, ACTIONS, DEMANDS, LIABILITIES, LOSS OR DAMAGE WHICH
MAY OR MIGHT BE INCURRED BY BENEFICIARY UNDER ANY SUCH LEASE OR UNDER THIS
SECURITY INSTRUMENT OR BY THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER AND FROM
ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST
BENEFICIARY 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

      
        
           

        

        
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      LEASE
OTHER THAN THOSE FINALLY DETERMINED TO HAVE RESULTED SOLELY FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF BENEFICIARY.   SHOULD
BENEFICIARY INCUR ANY SUCH LIABILITY, THE AMOUNT THEREOF, INCLUDING, WITHOUT
LIMITATION, COSTS, EXPENSES AND ATTORNEYS' FEES, TOGETHER WITH INTEREST THEREON
AT THE DEFAULT INTEREST RATE FROM THE DATE INCURRED BY BENEFICIARY UNTIL
ACTUALLY PAID BY GRANTOR, SHALL BE IMMEDIATELY DUE AND PAYABLE TO BENEFICIARY BY
GRANTOR ON DEMAND AND SHALL BE SECURED HEREBY AND BY ALL OF THE OTHER LOAN
DOCUMENTS SECURING ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY THE
NOTE.  Nothing in this Section shall impose on Beneficiary any duty,
obligation or responsibility for the control, care, management or repair of the
Property, or for the carrying out of any of the terms and conditions of any such
Lease, nor shall it operate to make Beneficiary responsible or liable for any
waste committed on the Property by the tenants or by any other parties or for
any dangerous or defective condition of the Property, or for any negligence in
the management, upkeep, repair or control of the Property.  Grantor
hereby assents to, ratifies and confirms any and all actions of Beneficiary with
respect to the Property taken under this Section.  The foregoing
rights are in addition to all other rights and remedies granted to Beneficiary
pursuant to this Security Instrument.

       

      (g)    Representations to Leases.  Grantor
hereby represents and warrants that (i) each Tenant under a non-residential
Lease has entered into occupancy of the demised premises; and (ii) Grantor has
delivered to Beneficiary true, correct and complete copies of all Leases
described in the Rent Roll.

       

      (h)    Tenant Financial
Information.  Grantor shall cause the tenant under the TRS
Lease (a "Major Income
Lease") to deliver to Grantor periodic operating statements with respect
to (i) such Tenant's operations at the Property, and (ii) the operations of such
Tenant and, if applicable, any parent or affiliated entity of such Tenant which
operates, or has subsidiaries that operate, comparable businesses (collectively,
"Tenant Financial
Information").  Notwithstanding the provisions of Section 1.12(b)
above, any Major Income Lease entered into after the date hereof which does not
require the Tenant to provide Tenant Financial Information upon request shall
require the prior written approval of Beneficiary.  Grantor shall,
from time to time promptly upon request of Beneficiary, request Tenant Financial
Information from the Tenant under each Major Income Lease (and use all
commercially reasonable efforts to obtain such Tenant Financial Information),
and promptly upon receipt thereof, deliver such Tenant Financial Information to
Beneficiary, provided, however, that
provided no Event of Default is continuing, Beneficiary shall not request such
information without reasonable cause (which reasonable cause shall include,
without limitation, the occurrence of any default by the Tenant).
Notwithstanding anything to the contrary contained herein, Grantor shall provide
the Tenant Financial Information (A) annually, (B) each time a new Major Income
Lease is executed and (iii) upon any material change in such Tenant financial
situation of which Grantor shall become aware.

       

      For
purposes of this Section 1.12, in the event Beneficiary does not approve or
disapprove a requested (x) proposed new Lease, or a proposed modification,
extension, termination of a Lease, within ten (10) Business Days, in each case
from the date Beneficiary receives such request together with a copy of the
final version of such proposed new Lease or proposed extension, modification or
termination of an existing Lease, as the case may be,

      
        
           

        

        
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      Grantor
shall re-submit such request, with the notation “IMMEDIATE RESPONSE REQUIRED,
CONSENT DEEMED GIVEN IF NO RESPONSE IS MADE WITHIN 5 DAYS” prominently displayed
in bold, all caps, 14 point type or larger, at the top of each page of such
re-submitted request and on any cover page or envelope, and if Beneficiary does
not approve such request within five (5) calendar days from the date Beneficiary
receives the re-submitted request, same shall be deemed approved.

       

      1.13  Alienation and Further
Encumbrances.

       

      Grantor
acknowledges that Beneficiary has relied upon the Grantor and the principals of
Grantor and their experience in owning and operating properties similar to the
Property in agreeing to make the loan evidenced by the Note and will continue to
rely upon Grantor’s ownership of the Property as a means of maintaining the
value of the Property as security for repayment of the Note and the performance
of the obligations of Grantor contained herein and the other Loan
Documents.  Grantor acknowledges that Beneficiary has a valid interest
in maintaining the value of the Property so as to ensure that the indebtedness
secured hereby may be recovered by Beneficiary should Grantor default in the
repayment of the indebtedness secured hereby or the performance of the
obligations of Grantor hereunder and under the other Loan
Documents.

       

      Accordingly,
except as specifically allowed hereinbelow in this Section and notwithstanding
anything to the contrary contained in Section 4.6 hereof,
in the event that the Property or any part thereof or any interest therein or
any interest in Borrower or its general partner shall be sold, conveyed,
disposed of, alienated, hypothecated, leased (except to Tenants under Leases
which are approved, or deemed approved, in accordance with the provisions of
Section 1.12
hereof), assigned, pledged, mortgaged, further encumbered or otherwise
transferred or Grantor or any other Restricted Party (as such term is
hereinafter defined) shall be divested of its title to the Property or any
interest (whether direct or indirect) therein, in any manner or way, whether
voluntarily or involuntarily, by operation of law or otherwise, without the
prior written consent of Beneficiary being first obtained, which consent may be
withheld in Beneficiary's sole discretion (any of the foregoing being herein
referred to as a “Transfer”), then, the
same shall constitute an Event of Default hereunder and Beneficiary shall have
the right, at its option, to declare any or all of the indebtedness secured
hereby, irrespective of the maturity date specified in the Note, immediately due
and payable and to otherwise exercise any of its other rights and remedies
contained in Article
III hereof.  As used in this Section 1.13, the term “Restricted Party”
shall mean collectively, the Grantor and (i) any Transfer Principal (“Transfer Principal”
shall mean any Person which is a managing member or non-member manager of
Grantor if Grantor is a limited liability company, or a general partner of
Grantor if Grantor is a partnership, and (ii) any partner, member, non-member
manager, managing member, or equity owner (or, if a trust, beneficial owner) of
Grantor or a Transfer Principal.

       

      For
purposes of this Section 1.13, a Transfer shall include, but not be limited to,
(1) an installment sales agreement wherein Grantor agrees to sell the Property
or any part thereof for a price to be paid in installments, (2) if a Restricted
Party is a corporation, any merger, consolidation or voluntary or involuntary
sale, conveyance, assignment, transfer, encumbrance or pledge of a legal or
beneficial interest of such corporation’s stock or the creation or issuance of
new stock, (3) if a Restricted Party is a limited or general partnership, or
joint venture, any

      
        
           

        

        
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      merger or
consolidation or the change, removal, resignation or addition of a general
partner or any voluntary or involuntary sale, conveyance, assignment, transfer,
encumbrance or pledge of a legal or beneficial interest of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest, or any voluntary or involuntary sale, conveyance,
assignment, transfer encumbrance or pledge of a legal or beneficial interests of
limited partnership interests or any profits or proceeds relating to such
limited partnership interests or the creation or issuance of new limited
partnership interests, (4) if a Restricted Party is a limited liability company,
any merger or consolidation or the change, removal, resignation or addition of a
managing member or non-member manager (or if no managing member, any member) or
any voluntary or involuntary sale, conveyance, assignment, transfer encumbrance
or pledge of a legal or beneficial interest of the membership interests of a
managing member (or if no managing member, any member) or any profits or
proceeds relating to such membership interest, or any voluntary or involuntary
sale, conveyance, assignment, transfer, encumbrance or pledge of a legal or
beneficial interest of non-managing membership interests or the creation or
issuance of new non-managing membership interests, or (5) if a Restricted Party
is a trust or nominee trust, any merger, consolidation or any voluntary or
involuntary sale, conveyance, assignment, transfer, encumbrance or pledge of a
legal or beneficial interest of the legal or beneficial interest in a Restricted
Party or the creation or issuance of new legal or beneficial
interests.

       

      For the
purposes of this Section 1.13: (i) in
the event either Grantor or any of its general partners or managing members is a
corporation or trust, the sale, conveyance, transfer or disposition of more than
10% of the issued and outstanding capital stock of Grantor or any of its general
partners or managing members or of the beneficial interest of such trust (or the
issuance of new shares of capital stock in Grantor or any of its general
partners or managing members so that immediately after such issuance the total
capital stock then issued and outstanding is more than 110% of the total
immediately prior to such issuance) shall be deemed to be a transfer of an
interest in the Property, and (ii) in the event Grantor or any general partner
or managing member of Grantor is a limited or general partnership, a joint
venture or a limited liability company, a change in the ownership interests in
any general partner, any joint venturer or any member, either voluntarily,
involuntarily or otherwise, or the sale, conveyance, transfer, disposition,
alienation, hypothecation or encumbering of all or any portion of the interest
of any such general partner, joint venturer or member in Grantor or such general
partner (whether in the form of a beneficial or partnership interest or in the
form of a power of direction, control or management, or otherwise), shall be
deemed to be a transfer of an interest in the
Property.  Notwithstanding the foregoing, however, (1) up to, but not
in excess of, in the aggregate, 49% of the limited partnership, non-managing
member interests and/or aggregate of the issued and outstanding capital stock,
as the case may be, in Grantor or in any general partner or managing member of
Grantor shall be freely transferable without the consent of Beneficiary,
provided, however, no such Transfer shall result in a change of voting control
in such Restricted Party, and as a condition to each such Transfer, Beneficiary
shall receive not less than thirty (30) days prior notice of the proposed
Transfer, and (2) any involuntary Transfer caused by the death of Grantor or any
general partner, shareholder, joint venturer, or beneficial owner of a trust
shall not be a default under this Security Instrument so long as Grantor is
reconstituted, if required, following such death and so long as those persons
responsible for the management of Grantor and the Property remain unchanged as a
result of such death or any replacement management is approved by Beneficiary
and (3) gifts for estate planning purposes of any individual's interests in
Grantor or in any of Grantor's general partners, managing members or joint
venturers to the

      
        
           

        

        
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      spouse or
any lineal descendant of such individual, or to a trust for the benefit of any
one or more of such individual, spouse or lineal descendant, shall not be an
Event of Default under this Security Instrument so long as Grantor is
reconstituted, if required, following such gift and so long as those persons
responsible for the day to day management of the Property and Grantor remain
unchanged following such gift or any replacement management is approved by
Beneficiary.

       

      1.14  Payment of Utilities,
Assessments, Charges, Etc.  Grantor shall pay or cause to be
paid when due all utility charges which are incurred by Grantor or which may
become a charge or lien against any portion of the Property for gas,
electricity, water and sewer services furnished to the Real Estate and/or the
Improvements and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Real Estate and/or the Improvements or any portion
thereof, whether or not such assessments or charges are or may become liens
thereon.

       

      1.15  Access Privileges and
Inspections.  Beneficiary and the agents, representatives and
employees of Beneficiary shall, subject to the rights of tenants, have full and
free access to the Real Estate and the Improvements and any other location where
books and records concerning the Property are kept at all reasonable times for
the purposes of inspecting the Property and, subject to applicable law, of
examining, copying and making extracts from the books and records of Grantor
relating to the Property.  Grantor shall lend assistance to all such
agents, representatives and employees of Beneficiary.

       

      1.16  Waste; Alteration of the
Property.  Grantor shall not commit, suffer or permit any waste
on the Property nor take any actions that might invalidate any insurance carried
on the Property.  Grantor shall maintain the Property in good
condition and repair.  No part of the Improvements may be removed,
demolished or materially altered, without the prior written consent of
Beneficiary.  Without the prior written consent of
Beneficiary,  Grantor shall not commence construction of any
improvements on the Real Estate other than improvements required for the
maintenance or repair of the Property.

       

      1.17  Zoning;
Use.  Without the prior written consent of Beneficiary, Grantor
shall not seek, make, suffer, consent to or acquiesce in any change in the
zoning or conditions of use of the Real Estate or the
Improvements.  Grantor shall comply with and make all payments
required under the provisions of any covenants, conditions or restrictions
affecting the Real Estate or the Improvements.  Grantor shall comply
with all existing and future requirements of all governmental authorities having
jurisdiction over the Property.  Grantor shall keep or cause to be
kept all licenses, permits, franchises, certificates of occupancy,
consents, and other approvals necessary for the operation of the Property
in full force and effect.  Grantor shall operate the Property (or
cause the Property to be operated) as an assisted living facility for so long as
the indebtedness secured hereby is outstanding.  If, under applicable
zoning provisions, the use of all or any part of the Real Estate or the
Improvements is or becomes a nonconforming use, Grantor shall not cause or
permit such use to be discontinued or abandoned without the prior written
consent of Beneficiary.  Further, without Beneficiary's prior written
consent, Grantor shall not file or subject any part of the Real Estate or
the Improvements to any declaration of condominium or cooperative or convert
any part of the Real Estate or the Improvements to a condominium,
cooperative or other form of multiple ownership and governance.

      
        
           

        

        
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      1.18  Financial Statements and
Books and Records.  Grantor shall keep accurate books and
records of account of the Property and its own financial affairs sufficient to
permit the preparation of financial statements therefrom in accordance with
generally accepted accounting principles.  Beneficiary and its duly
authorized representatives shall have the right to examine, copy and audit
Grantor's records and books of account at all reasonable times.  So
long as this Security Instrument continues in effect, Grantor shall provide to
Beneficiary, in addition to any other financial statements required hereunder or
under any of the other Loan Documents, the following financial statements and
information, all of which must be certified to Beneficiary as being true and
correct by Grantor or the entity to which they pertain, as applicable, be
prepared in accordance with generally accepted accounting principles
consistently applied and be in form and substance acceptable to
Beneficiary:

       

      (a)    copies of all
tax returns filed by Grantor, within thirty (30) days after the
date  of filing;

       

      (b)    quarterly
operating statements for the Property, within thirty (30) days after the end of
each March, June, September and December, provided,
notwithstanding the foregoing to the contrary, operating statements shall be
delivered monthly within thirty (30) days after the end of each calendar month
until the occurrence of a Securitization;

       

      (c)    current rent
rolls for the Property, within thirty (30) days after the end of each March,
June, September and December, provided,
notwithstanding the foregoing to the contrary, rent rolls shall be delivered
monthly within thirty (30) days after the end of each calendar month until the
occurrence of a Securitization;

       

      (d)    annual
balance sheets for the Property and annual financial statements for Grantor,
each principal, manager, managing member or general partner in Grantor, and each
indemnitor and guarantor under any indemnity or guaranty executed in connection
with the Loan secured hereby within ninety (90) days after the end of each
calendar year; and

       

      (e)    such other
information with respect to the Property, Grantor, the principals, each manager,
managing member or general partner of Grantor, and each indemnitor and guarantor
under any indemnity or guaranty executed in connection with the Loan secured
hereby, which may be requested from time to time by Beneficiary, within a
reasonable time after the applicable request.

       

      If
Grantor fails to timely furnish Beneficiary with any of the financial
information, statements and/or reports set forth above within the required time
periods, Beneficiary shall be entitled to receive a late charge equal to $500.00
for each such information, statement or report not so furnished to Beneficiary
(the “Financial Late
Charge”).  The Financial Late Charge shall be due and payable
by Grantor immediately upon receipt by Grantor of an invoice for same from
Beneficiary.  Until paid, the Financial Late Charge shall bear
interest at the Default Interest Rate, and shall be deemed additional
indebtedness of Grantor secured by the Loan Documents.  In addition,
if any of the aforementioned materials are not furnished to Beneficiary within
the applicable time periods or Beneficiary is dissatisfied with the contents of
any of the foregoing, in addition to any other rights and remedies of
Beneficiary contained herein, Beneficiary shall have the right, but not the
obligation, to obtain the same by means of an audit by an
independent

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

      certified
public accountant selected by Beneficiary, in which event Grantor agrees to pay,
or to reimburse Beneficiary for, any expense of such audit and further agrees to
provide all necessary information to said accountant and to otherwise cooperate
in the making of such audit.  Grantor agrees that any and all
materials furnished hereunder are the property of Beneficiary (and Beneficiary's
servicer) and may be released and made available to such parties as Beneficiary
or its servicer deems appropriate,

       

      1.19  Further
Documentation.  Grantor shall, on the request of Beneficiary in
its reasonable discretion and at the expense of Grantor, promptly correct any
defect, error or omission which may be discovered in the contents of this
Security Instrument or in any of the other Loan Documents and promptly execute,
acknowledge, deliver and record or file such further instruments and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Security Instrument and the other Loan
Documents or as may be deemed advisable by Beneficiary to protect, continue or
preserve the liens and security interests hereunder including, without
limitation, security instruments, financing statements and continuation
statements.

       

      1.20  Payment of
Costs.   Grantor shall pay all reasonable costs and
expenses of every character incurred in connection with the closing of the Loan
or otherwise attributable or chargeable to Grantor as the owner of the Property,
including, without limitation, appraisal fees, recording fees, documentary,
stamp, mortgage or intangible taxes, brokerage fees and commissions, title
policy premiums and title search fees, uniform commercial code/tax
lien/litigation search fees, escrow fees and reasonable attorneys' fees. Unless
otherwise specified herein, with respect to any action by Grantor permitted
hereunder, Grantor shall pay all of its own costs and expenses relating thereto
as well as any costs and expenses incurred by Beneficiary.

       

      1.20  Advances to Protect
Property.  Without limiting or waiving any other rights and
remedies of Beneficiary hereunder, if Beneficiary determines that Grantor is not
adequately performing or has failed to perform any of its obligations, covenants
or agreements contained in this Security Instrument or in any of the other Loan
Documents and such inadequacy or failure is not cured within any applicable
grace or cure period, or if any action or proceeding of any kind (including, but
not limited to, any bankruptcy, insolvency, arrangement, reorganization or other
debtor relief proceeding) is commenced which might affect Beneficiary's interest
in the Property or Beneficiary's right to enforce its security, then Beneficiary
may, at its option, with or without notice to Grantor, make any appearances,
disburse or advance any sums and take any actions as may be necessary or
desirable to protect or enforce the security of this Security Instrument or to
remedy the failure of Grantor to perform its covenants and agreements (without,
however, waiving any default of Grantor).  Grantor agrees to pay on
demand all expenses of Beneficiary reasonably incurred with respect to the
foregoing (including, but not limited to, fees and disbursements of counsel),
together with interest thereon at the Default Interest Rate from and after the
date on which Beneficiary has notified Grantors that Beneficiary has incurred
such expenses until reimbursement thereof by Grantor.  Any such
expenses so incurred by Beneficiary, together with interest thereon as provided
above, shall be additional indebtedness of Grantor secured by this Security
Instrument and by all of the other Loan Documents securing all or any part of
the indebtedness evidenced by the Note.  The necessity for any such
actions and of the amounts to be paid shall be determined by Beneficiary in its
sole and absolute discretion.

      
        
           

        

        
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      Beneficiary
is hereby empowered to enter and to authorize others to enter upon the Property
or any part thereof for the purpose of performing or observing any such
defaulted term, covenant or condition without thereby becoming liable to Grantor
or any person in possession holding under Grantor.  Grantor
hereby acknowledges and agrees that the remedies set forth in this Section 1.20(b) shall
be exercisable by Beneficiary, and any and all payments made or costs or
expenses incurred by Beneficiary in connection therewith shall be secured hereby
and shall be, without demand, immediately repaid by Grantor with interest
thereon at the Default Interest Rate, notwithstanding the fact that such
remedies were exercised and such payments made and costs incurred by
Beneficiary after the filing by Grantor of a voluntary case or the filing
against Grantor of an involuntary case pursuant to or within the meaning of the
Bankruptcy Reform Act of 1978, as amended (the "Act"), Title 11
U.S.C., or after any similar action pursuant to any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable to
Grantor, Beneficiary, any guarantor or indemnitor, the secured indebtedness or
any of the Loan Documents.  This indemnity shall survive payment in
full of the indebtedness secured hereby.  This Section 1.20(b) shall
not be construed to require Beneficiary to incur any expenses, make any
appearances or take any actions.

       

      1.21  Security
Interest.  This Security Instrument is also intended to
encumber and create a security interest in, and Grantor hereby grants to
Beneficiary a security interest in, all Reserves (as hereinabove defined), and
all right, title and interest of Grantor in and to fixtures, chattels, accounts,
equipment, inventory, contract rights, general intangibles and other personal
property included within the Property, all renewals, replacements of any of the
aforementioned items, or articles in substitution therefor or in addition
thereto or the proceeds thereof (said property is hereinafter referred to
collectively as the "Collateral"), whether
or not the same shall be attached to the Real Estate or the Improvements in any
manner.  It is hereby agreed that to the extent permitted by law, all
of the foregoing property is to be deemed and held to be a part of and affixed
to the Real Estate and the Improvements.  The foregoing security
interest shall also cover Grantor's leasehold interest in any of the foregoing
property which is leased by Grantor.  Notwithstanding the foregoing,
all of the foregoing property shall be owned by Grantor and no leasing or
installment sales or other financing or title retention agreement in connection
therewith shall be permitted without the prior written approval of
Beneficiary.  Grantor shall promptly replace all of the Collateral
subject to the lien or security interest of this Security Instrument when worn
out or obsolete with Collateral comparable to the worn out or obsolete
Collateral when new and will not, without the prior written consent of
Beneficiary, remove from the Real Estate or the Improvements any of the
Collateral subject to the lien or security interest of this Security Instrument
except such as is replaced by an article of equal suitability and value as above
provided, owned by Grantor free and clear of any lien or security interest
except that created by this Security Instrument and the other Loan Documents and
except as otherwise expressly permitted by the terms of Section 1.13 of this
Security Instrument.  All of the Collateral shall be kept at the
location of the Real Estate except as otherwise required by the terms of the
Loan Documents.  Grantor shall not use any of the Collateral in
violation of any applicable statute, ordinance or insurance policy.

       

      1.22  Security
Agreement.  This Security Instrument constitutes both a real
property mortgage and a "security agreement" between Grantor and Beneficiary
with respect to the Collateral in which Beneficiary is granted a security
interest hereunder, and, cumulative of all

      
        
           

        

        
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      other
rights and remedies of Beneficiary hereunder, Beneficiary shall have all of the
rights and remedies of a secured party under any applicable Uniform Commercial
Code.  Grantor hereby authorized Beneficiary to prepare, file of
record or otherwise effectuate new financing statements or financing statement
amendments which describe all or any portion of the assets of Grantor as
collateral thereunder.  Grantor specifically agrees that Beneficiary
may cause such financing statements and financing statement amendments to be
filed without any signature of a representative of the Grantor appearing
thereon, where such filings are permitted by applicable law.  Grantor
hereby agrees to execute and deliver on demand and hereby irrevocably
constitutes and appoints Beneficiary the attorney-in-fact of Grantor to execute
and deliver and, if appropriate, to file with the appropriate filing officer or
office such security agreements, financing statements, continuation statements
or other instruments as Beneficiary may request or require in order to impose,
perfect or continue the perfection of the lien or security interest created
hereby.  Expenses of retaking, holding, preparing for sale, selling or
the like (including, without limitation, Beneficiary's reasonable attorneys'
fees and legal expenses), together with interest thereon at the Default Interest
Rate from the date Beneficiary notifies Grantor of the incurrence thereof until
actually paid by Grantor, shall be paid by Grantor on demand and shall be
secured by this Security Instrument and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the
Note.  If notice is required by law, Beneficiary shall give Grantor at
least ten (10) days' prior written notice of the time and place of any public
sale of such property or of the time of or after which any private sale or any
other intended disposition thereof is to be made, and if such notice is sent to
Grantor, as the same is provided for the mailing of notices herein, it is hereby
deemed that such notice shall be and is reasonable notice to
Grantor.  No such notice is necessary for any such property which is
perishable, threatens to decline speedily in value or is of a type customarily
sold on a recognized market.  Any sale made pursuant to the provisions
of this Section
1.22 shall be deemed to have been a public sale conducted in a
commercially reasonable manner if held contemporaneously with the foreclosure
sale as provided in Section 3.1(e) hereof
upon giving the same notice with respect to the sale of the Property hereunder
as is required under said Section
3.1(e).  Furthermore, to the extent permitted by law, in
conjunction with, in addition to or in substitution for the rights and remedies
available to Beneficiary pursuant to any applicable Uniform Commercial
Code:

       

      (a)    In the event
of a foreclosure sale, the Property may, at the option of Beneficiary, be sold
as a whole;

       

      (b)    It shall not
be necessary that Beneficiary take possession of the aforementioned Collateral,
or any part thereof, prior to the time that any sale pursuant to the provisions
of this Section
1.22 is conducted and it shall not be necessary that said Collateral, or
any part thereof, be present at the location of such sale; and

       

      (c)    Beneficiary
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 Beneficiary, including the
sending of notices and the conduct of the sale, but in the name and on behalf of
Beneficiary.

       

      The name,
principal place of business and chief executive office of Grantor (as Debtor
under any applicable Uniform Commercial Code) are:

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

       

      Caruth
Haven, L.P.

      c/o
Cornerstone Growth & Income REIT, Inc.

      1920 Main
Street, Suite 400

      Irvine,
CA 92614

       

      The
federal employer identification number/social security number of Grantor is 26
-3650072.

       

      The name
and address of Beneficiary (as Secured Party under any applicable Uniform
Commercial Code) is:

      

      
        
          	 
      	
                  Cornerstone
      Operating Partnership LP

                
	 
      	
                  1920
      Main Street, Suite 400

                
	 
      	
                  Irvine,
      CA 92614

                

        

      

       

      (d)           Grantor
shall not change its principal place of business, chief executive office, state
of organization or registration or its name, without in each case, obtaining the
prior written consent of Beneficiary.  Without limitation to the
foregoing, Beneficiary may condition its consent thereto upon Grantor’s
execution and delivery of additional financing statements or related documents
as Beneficiary may determine to be necessary to effectively evidence, perfect or
continue the perfection of Beneficiary’s security interest in the Collateral as
a result of any such change.

       

      (e)           The
security interests herein granted shall not be deemed or construed to constitute
Trustee or Beneficiary as a trustee in possession of the Property, to obligate
Trustee or Beneficiary to lease the Property or attempt to do so, or to take any
action, incur any expense or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise.

       

      1.23  Easements and
Rights-of-Way.  Grantor shall not grant any easement or
right-of-way with respect to all or any portion of the Real Estate or the
Improvements without the prior written consent of Beneficiary.  The
purchaser at any foreclosure sale hereunder may, at its discretion, disaffirm
any easement or right-of-way granted in violation of any of the provisions of
this Security Instrument and may take immediate possession of the Property free
from, and despite the terms of, such grant of easement or
right-of-way.  If Beneficiary consents to the grant of an easement or
right-of-way, Beneficiary agrees to grant such consent without charge to Grantor
other than reasonable expenses, including, without limitation, reasonable
attorneys' fees, incurred by Beneficiary in the review of Grantor's request and,
if applicable, in the preparation of documents relating to the subordination of
this Security Instrument to such easement or right-of-way.

       

      1.24  Compliance with
Laws.  (a)  Grantor shall, and shall cause the tenant
under the TRS Lease, at all times comply with all statutes, ordinances,
regulations and other governmental or quasi-governmental requirements and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Property or the provision o f services to the occupants of
the Property, including, but not limited to, those concerning employment and
compensation of persons engaged in operation and maintenance of the Property,
employee health and safety, quality and safety standards, accreditation
standards and

      
        
           

        

        
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      requirements
of applicable state department of health or other applicable state regulatory
agencies, quality and adequacy of medical care, distribution of pharmaceuticals,
rate setting, equipment, personnel, operating policies, additions to facilities
and services and fee splitting, and any environmental or ecological
requirements, even if such compliance shall require structural changes to the
Property; provided, however, that Grantor
may, upon providing Beneficiary with security satisfactory to Beneficiary,
proceed diligently and in good faith to contest the validity or applicability of
any such statute, ordinance, regulation or requirement so long as during such
contest the Property shall not be subject to any lien, charge, fine or other
liability and shall not be in danger of being forfeited, lost or
closed.  Grantor shall not use or occupy, or allow the use or
occupancy of, the Property in any manner which violates any lease of or any
other agreement applicable to the Property or any applicable law, rule,
regulation or order or 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.  Grantor shall maintain or obtain,
and shall require and cause the tenant under the TRS Lease (and/or its property
manager, as applicable) to obtain and maintain, all licenses, qualifications and
permits now held or hereafter required to be held by Grantor for which the loss
or suspension, revocation or failure to obtain or renew could reasonably be
expected to have a material adverse effect upon the financial condition of the
Grantor or the ability to operate the Property in compliance with the
requirements of this Security Instrument and as it has been operated prior to
the date hereof.

       

      (b)    Grantor
agrees that the Property shall at all times comply, to the extent applicable,
with the requirements of the Americans with Disabilities Act of 1990, the Fair
Housing Amendments Act of 1988 and all other state and local laws and ordinances
related to handicapped access and all rules, regulations, and orders issued
pursuant thereto including, without limitation, the Americans with Disabilities
Act Accessibility Guidelines for Buildings and Facilities (collectively, “Access
Laws”).  Grantor agrees to give prompt notice to Beneficiary of
the receipt by Grantor of any complaints related to violations of any Access
Laws and of the commencement of any proceedings or investigations which relate
to compliance with applicable Access Laws.

       

      (c)
(i)      Without limiting the generality of any
other provision of this Security Instrument, Borrower shall be, and shall use
its best efforts to cause the tenant under the TRS Lease and any property
manager, and its respective employees and contractors (other than contracted
agencies) in the exercise of their duties on behalf of Grantor or any such
property manager (with respect to its operation of the Property) to be in
compliance in all material respects with all applicable laws relating to patient
healthcare and/or patient healthcare information, including without limitation
the Health Insurance Portability and Accountability Act of 1996, as amended, and
the rules and regulations promulgated thereunder (“HIPAA”)
(collectively, “Healthcare
Laws”).  Borrower and such tenant shall maintain in all
material respects all records required to be maintained by any governmental
authority or otherwise under the Healthcare Laws and there are, to Grantor’s
knowledge, after due inquiry, no presently existing circumstances which would
result or likely would result in material violations of the Healthcare
Laws.  Borrower and such tenant has and will maintain all governmental
approvals necessary under applicable laws for the ownership and operation of the
Property, as applicable (including such Governmental Approvals as are required
under such the Healthcare Laws).

      
        
           

        

        
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      (ii)    If
(1) Borrower or such tenant is a “covered entity” within the meaning of
HIPAA or (2) Borrower (with respect to its operation of the Property) is
subject to the “Administrative Simplification” provisions of HIPAA, then such
person(s) (x) have undertaken or will promptly undertake all necessary
surveys, audits, inventories, reviews, analyses and/or assessments (including
any necessary risk assessments) of all areas of its business and operations
required by HIPAA and/or that could be adversely affected by the failure of such
person(s) to be HIPAA Compliant (as defined below); (y) has developed or
will promptly develop a detailed plan and time line for becoming HIPAA Compliant
(a “HIPAA Compliance
Plan”); and (z) has implemented or will implement those provisions
of such HIPAA Compliance Plan in all material respects necessary to ensure that
such person(s) are or become HIPAA Compliant.  For purposes hereof,
“HIPAA
Compliant” shall
mean that Borrower and such tenant, as applicable (A) is or will be in
compliance in all material respects with each of the applicable requirements of
the so-called “Administrative Simplification” provisions of HIPAA on and as of
each date that any part thereof, or any final rule or regulation thereunder,
becomes effective in accordance with its or their terms, as the case may be
(each such date, a “HIPAA Compliance
Date”) if and to the extent Borrower and/or such tenant are subjected to
such provisions, rules or regulations, and (B) are not and could not
reasonably be expected to become, as of any date following any such HIPAA
Compliance Date, the subject of any civil or criminal penalty, process, claim,
action or proceeding, or any administrative or other regulatory review, survey,
process or proceeding (other than routine surveys or reviews conducted by any
government health plan or other accreditation entity) that could result in any
of the foregoing or that could reasonably be expected to adversely affect
Borrower’s business, operations, assets, properties or condition (financial or
otherwise), in connection with any actual or potential violation by Borrower or
such tenant of the then effective provisions of HIPAA.

       

      (iii)   If required under
applicable law, Borrower or such tenant has and shall maintain in full force and
effect a valid certificate of need (“CON”) or similar
certificate, license, or approval issued by any state regulator or regulatory
agency for the requisite number of beds and/or units, as applicable, in the
Property, and a provider agreement or other required documentation of approved
provider status for each provider payment or reimbursement program, if
applicable.  Borrower shall operate the Property (or cause the
Property to be operated) in a manner such that the all required licenses
therefore shall remain in full force and effect.  True and complete
copies of such licenses have been delivered to Beneficiary.  No such
licenses are or shall be pledged as collateral security for any loan or
indebtedness, other than this Loan and Grantor shall not, and shall not suffer
or permit: (1) any such license to be rescinded, withdrawn, revoked, amended,
modified, supplemented, or otherwise alter the nature, tenor or scope of any of
the licenses for the Property without Beneficiary’s consent, (2) any amendment
or other change to the Property’s authorized units/beds capacity and/or the
number of units/beds approved by any governmental authority or agency, replace
or transfer all of any part of the units or beds to another site or location, or
(3) voluntarily transfer or encourage the transfer of any resident of the
Property to any other facility, unless such transfer is at the request of the
resident or is for reasons relating to the health, required level of medical
care or safety of the resident to be transferred.

       

      (d)           Without
limitation to the generality of any other provisions herein: (i) if Borrower or
the tenant under the TRS Lease participates in any Medicare or Medicaid or other
third-party payor programs with respect to the Property, the Property will
remain in compliance

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

      with all
requirements for participation in Medicare and Medicaid, including the Medicare
and Medicaid Patient Protection Act of 1987, as it may be amended, and such
other third party payor programs.  The Property is and will remain in
conformance in all material respects with all insurance, reimbursement and cost
reporting requirements, and, if applicable, have a current provider agreement
that is in full force and effect under Medicare and Medicaid.

       

      (ii)           There
is no, and during the term of this Loan there shall be no, threatened, existing
or pending revocation, suspension, termination, probation, restriction,
limitation, or nonrenewal affecting Borrower the tenant under the TRS Lease, any
property manager, or the Property or any participation or provider agreement
with any third-party payor, if any, including Medicare, Medicaid, Blue Cross
and/or Blue Shield, and any other private commercial insurance managed care and
employee assistance program (such programs, the “Third-Party Payor
Programs”) to
which any Borrower or the tenant under the TRS Lease may presently be subject
with respect to any Property, or at any time hereafter is
subject.  Notwithstanding the preceding sentence, Borrowers or the
tenant under the TRS Lease may contest (to the extent such contest rights are
available by statute or as otherwise permitted by law) in good faith by
appropriate proceedings, any of the foregoing so long as (i) Borrowers have
given prior written notice to Beneficiary of the intent to so contest or object
to same, (ii) such contest will not result in a material adverse change upon
Borrower, the Property or Borrower’s ability to (A) operate the Property for the
uses set forth herein or (B) repay the Loan, and (iii) Borrower and/or such
tenant under the TRS Lease is diligently contesting the same by appropriate
legal proceedings in good faith and at their own expense.  Neither
Borrower or tenant under the TRS Lease shall or shall permit, other than in the
normal course of business, any change in the terms of any of the Third-Party
Payor Programs now or hereinafter in effect or their normal billing payment or
reimbursement policies and procedures with respect thereto (including the amount
and timing of finance charges, fees and write-offs).  Notwithstanding
the foregoing, Borrower or such tenant under the TRS Lease may voluntarily
withdraw from or terminate any Third-Party Payor Program to which Borrower or
such tenant under the TRS Lease may be subject to with respect to any
Property.  All Medicaid, Medicare and private insurance cost reports
and financial reports submitted by Borrower or such tenant under the TRS Lease,
if any, are and will be materially accurate and complete and have not been and
will not be misleading in any material respects.  No cost reports for
the Property remain open or unsettled.

       

      (e)           To
Borrower’s knowledge, (i) no “F” Tags or higher with a scope and severity
of “G” or higher have been issued by any governmental authority with respect to
the Property which deficiencies remain uncured (whether or not such cure has
been formally recognized in a subsequent audit or inspection by a governmental
authority), and (ii) no penalties have been imposed on or enforcement
action has been undertaken by any governmental authority against any Property,
Borrower (or the tenant under the TRS Lease) or against any officer, director,
partner, member, manager or owner of Borrower (or the tenant under the TRS
Lease) which has not been paid in full and/or cured or is being contested in
good faith through administrative or judicial proceedings, as
applicable.

       

      (f)           
(i) To Grantor’s knowledge, there are no current, pending or outstanding
Medicaid, Medicare or Third-Party Payor Programs reimbursement audits or appeals
pending at the Property, and there are no years that are subject to
audit.

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

       

      (ii)           To
Grantor’s knowledge, there are no current or pending Medicaid or Medicare or
Third-Party Payor Programs recoupment efforts at the
Property.  Neither Borrower nor the tenant under the TRS Lease is a
participant in any federal program whereby any Governmental Authority may have
the right to recover funds by reason of the advance of federal funds, including
those authorized under the Hill-Burton Act (42 U.S.C. 291, et seq.), as it may be
amended.

       

      (iii)           To
Grantor’s knowledge, there are no and there will remain no patient or resident
care agreements with patients or residents which deviate in any material adverse
respect from the form agreements which have been delivered to and approved by
Beneficiary.

       

      (iv)           To
Grantor’s knowledge, in the event any management agreement is terminated or in
the event of foreclosure or other acquisition of the Property by Beneficiary or
its designee or any purchaser at a foreclosure sale or by acceptance of a deed
in lieu of foreclosure, Borrower, Beneficiary, any subsequent manager or any
subsequent purchaser need not obtain a CON prior to applying for and receiving
Medicare or Medicaid payments.

       

      (v)           To
Grantor’s knowledge, all patient or resident records at the Property, including
patient or resident trust fund accounts, are true and correct in all material
respects, and will remain true and correct in all material
respects.

      

      (g)           Upon
the occurrence of an uncured Event of Default and the request of Beneficiary,
Borrower shall and shall cause the tenant under the TRS Lease and its property
manager, if any, to complete, execute and deliver to Beneficiary any
applications, notices, documentation, and other information necessary or
desirable, in Beneficiary’s judgment, to permit Beneficiary or its designee
(including a receiver) to obtain, maintain or renew any one or more of the
licenses for the Property (or to become the owner of the existing licenses for
the Property) and to the extent permitted by applicable laws to obtain any other
provider agreements or governmental approvals then necessary or desirable for
the operation of the Property by Beneficiary or its designee for their current
use (including, without limitation, any applications for change of ownership of
the existing licenses or change of control of the owner of the existing
licenses).  After the occurrence and continuation of an Event of
Default, to the extent permitted by applicable laws, (i) Beneficiary is
hereby authorized (without the consent of Borrower or such tenant under the TRS
Lease or any other person) to submit any such applications, notices,
documentation or other information which Borrower caused to be delivered to
Beneficiary in accordance with the above provisions to the applicable
governmental authorities, or to take such other steps as Beneficiary may deem
advisable to obtain, maintain or renew any license or other governmental
approvals in connection with the operation of the Property for their current
use, and Borrower agrees to, and shall cause the tenant under the TRS Lease, to
cooperate and to cause to cooperate with Beneficiary in connection with the same
and (ii) Borrower, upon demand by Beneficiary, shall and shall cause the
tenant under the TRS Lease to take any action and cause to take any action
necessary or desirable, in Beneficiary’s sole judgment, to permit Beneficiary or
its designee (including a receiver) to use, operate and maintain the Property
for its current use.  If Borrower fails to comply with the provisions
of this Secion for any reason whatsoever, Borrower hereby irrevocably appoints
Beneficiary and its designee as Borrower’s attorney-in-fact, with full power of
substitution, to take any action and execute any documents and instruments
necessary or desirable in Beneficiary’s sole judgment to permit Beneficiary or
its

      
        
           

        

        
          41

          
            

          

        

        
           

        

      

      designee
to undertake Borrower’s obligations under this Section, including obtaining any
licenses or governmental approvals then required for the operation of the
Property by Beneficiary or its designee for its current use.  The
foregoing power of attorney is coupled with an interest and is irrevocable and
Beneficiary may exercise its rights thereunder in addition to any other remedies
which Beneficiary may have against Borrower as a result of a Borrower’s breach
of the obligations contained in this Section.

      

      1.25  Additional
Taxes.  In the event of the enactment after this date of any
law of the state where the Property is located or of any other governmental
entity deducting from the value of the Property for the purpose of taxation any
lien or security interest thereon, or imposing upon Beneficiary the payment of
the whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Grantor, or changing in any way the laws relating to the
taxation of mortgages or security agreements or debts secured by mortgages or
security agreements or the interest of the mortgagee or secured party in the
property covered thereby, or the manner of collection of such taxes, so as to
adversely affect this Security Instrument or the indebtedness secured hereby or
Beneficiary, then, and in any such event, Grantor, upon demand by Beneficiary,
shall pay such taxes, assessments, charges or liens, or reimburse Beneficiary
therefore; provided, however, that if in
the opinion of counsel for Beneficiary (a) it might be unlawful to require
Grantor to make such payment, or (b) the making of such payment might result in
the imposition of interest beyond the maximum amount permitted by law, then and
in either such event, Beneficiary may elect, by notice in writing given to
Grantor, to declare all of the indebtedness secured hereby to be and become due
and payable in full, thirty (30) days from the giving of such
notice.

       

      1.26  Grantor's
Waivers.  To the full extent permitted by law, Grantor agrees
that Grantor shall not at any time insist upon, plead, claim or take the benefit
or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the indebtedness secured
hereby prior to any sale of the Property to be made pursuant to any provisions
contained herein or prior to the entering of any decree, judgment or order of
any court of competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold.  To the full extent permitted
by law, Grantor shall not have or assert any right under any statute or rule of
law pertaining to the exemption of homestead or other exemption under any
federal, state or local law now or hereafter in effect, the administration of
estates of decedents or any other matters whatsoever to defeat, reduce or affect
the right of Beneficiary under the terms of this Security Instrument to a sale
of the Property, for the collection of the secured indebtedness without any
prior or different resort for collection, or the right of Beneficiary under the
terms of this Security Instrument to the payment of the indebtedness secured
hereby out of the proceeds of sale of the Property in preference to every other
claimant whatsoever.  Grantor, for Grantor and Grantor's successors
and assigns, and for any and all persons ever claiming any interest in the
Property, to the full extent permitted by law, hereby knowingly, intentionally
and voluntarily with and upon the advice of competent counsel waives, releases,
relinquishes and forever forgoes:  (a) all rights of valuation,
appraisement, stay of execution, reinstatement and notice of election or
intention to mature or declare due the secured indebtedness (except such notices
as are specifically provided for herein); (b) all right to a marshalling of the
assets of Grantor, including the Property, to a sale in the inverse order of
alienation, or to direct the order in which any of the Property shall be sold in
the event of foreclosure of the liens and security

      
        
           

        

        
          42

          
            

          

        

        
           

        

      

      interests
hereby created and agrees that any court having jurisdiction to foreclose such
liens and security interests may order the Property sold as an entirety; (c) all
rights and periods of redemption provided under applicable law; and (d) all
present and future statutes of limitations as a defense to any action to enforce
the provisions of this Security Instrument or to collect any of the indebtedness
secured hereby to the fullest extent permitted by law and agrees that it shall
not solicit or aid the solicitation of the filing of any Petition (as
hereinafter defined) against Grantor, whether acting on its own behalf or on
behalf of any other party.  Without limiting the generality of the
foregoing, Grantor shall not (i) provide information regarding the identity of
creditors or the nature of creditors' claims to any third party unless compelled
to do so by order of a court of competent jurisdiction or by regulation
promulgated by a governmental agency; or (ii) pay the legal fees or expenses of
any creditor of or interest holder in Grantor with respect to any matter
whatsoever.

       

      1.27  SUBMISSION
TO JURISDICTION; WAIVER OF JURY TRIAL.

       

      GRANTOR,
TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (i) SUBMITS TO
PERSONAL JURISDICTION IN THE STATE OF TEXAS OVER ANY SUIT, ACTION OR
PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS SECURITY
INSTRUMENT OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION SITTING IN DALLAS COUNTY, TEXAS, (iii) SUBMITS TO
THE JURISDICTION OF SUCH COURTS, AND (iv) AGREES THAT IT WILL NOT
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN
SHALL AFFECT THE RIGHT OF BENEFICIARY TO BRING ANY ACTION, SUIT OR PROCEEDING IN
ANY OTHER FORUM).  GRANTOR, TO THE FULLEST EXTENT PERMITTED BY LAW,
FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S.
MAIL, POSTAGE PREPAID, TO GRANTOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5.4 HEREOF,
AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT
VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).

       

      GRANTOR,
TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES
AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE INDEBTEDNESS SECURED
HEREBY OR ANY CONDUCT, ACT OR OMISSION OF BENEFICIARY OR GRANTOR, OR ANY OF
THEIR DIRECTORS, OFFICERS, PARTNERS, MANAGERS, MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH BENEFICIARY OR GRANTOR,
IN

      
        
           

        

        
          43

          
            

          

        

        
           

        

      

      EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.

       

      1.28  Contractual Statute of
Limitations.  Grantor hereby agrees that any claim or cause of
action by Grantor against Beneficiary, or any of Beneficiary's directors,
officers, employees, agents, accountants or attorneys, based upon, arising from
or relating to the indebtedness secured hereby, or any other matter, cause or
thing whatsoever, whether or not relating thereto, occurred, done, omitted or
suffered to be done by Beneficiary or by Beneficiary's directors, officers,
employees, agents, accountants or attorneys, whether sounding in contract, in
tort or otherwise, shall be barred unless asserted by Grantor by the
commencement of an action or proceeding in a court of competent jurisdiction by
the filing of a complaint within one (1) year after Grantor first acquires or
reasonably should have acquired knowledge of the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is based
and service of a summons and complaint on an officer of Beneficiary or any other
person authorized to accept service of process on behalf of Beneficiary, within
thirty (30) days thereafter.  Grantor agrees that such one (1) year
period of time is reasonable and sufficient time for a borrower to investigate
and act upon any such claim or cause of action.  The one (1) year
period provided herein shall not be waived, tolled or extended except by the
specific written agreement of Beneficiary.  This provision shall
survive any termination of this Security Instrument or any of the other Loan
Documents.

       

      1.29  Management.  The
management of the Property shall be by either:  (a) Grantor or
an entity affiliated with Grantor approved by Beneficiary for so long as
Grantor or said affiliated entity is managing the Property in a first class
manner; or (b) a professional property management company approved by
Beneficiary (any such person or entity which manages the Property, other than
Grantor is herein referred to as the “Manager”).  Such
management by an affiliated entity or a professional property management company
shall be pursuant to a written agreement approved by Beneficiary (the “Management
Agreement”); Beneficiary acknowledges that as of the date hereof, there
is a management agreement agreement in effect between 12 Oaks Management
Services, Inc. and Tenant.  In no event shall any Manager be removed
or replaced or the terms of any Management Agreement modified or amended without
the prior written consent of Beneficiary.  In the event (x) of a
default hereunder or under any Management Agreement then in effect, which
default is not cured within any applicable grace or cure period, (y) of a change
in control (fifty percent or more) of the ownership of the Manager (if Grantor
is self-managing or the Manager is an affiliate of Grantor), or (z) Manager
provides cause for termination pursuant to the Management Agreement, including,
without limitation, gross negligence, willful misconduct or fraud, or the
Manager becomes insolvent or a debtor in any bankruptcy or insolvency
proceeding, Beneficiary shall have the right to terminate, or to direct Grantor
to terminate, such Management Agreement at any time and, in any such event of
termination of the Management Agreement, to retain or direct Grantor to retain,
a new management agent approved by Beneficiary.  Without limitation to
the foregoing, in the event the Manager becomes insolvent or a debtor in any
bankruptcy or insolvency proceeding, without regard to whether Beneficiary shall
have requested any such termination, Grantor shall be required to terminate the
Manager and provide for management in conformity with this Section unless
Grantor shall have obtained Beneficiary’s written consent to retain the Manager
which is insolvent, or a debtor in bankruptcy or other insolvency
proceeding.   All Rents and Profits generated by or derived from
the Property shall first be utilized solely for

      
        
           

        

        
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      current
expenses directly attributable to the ownership and operation of the Property,
including, without limitation, current expenses relating to Grantor's
liabilities and obligations with respect to this Security Instrument and the
other Loan Documents and, subject to the terms and conditions of the other Loan
Documents, the management fees payable pursuant to the Management Agreement, and
none of the Rents and Profits generated by or derived from the Property shall be
diverted by Grantor and utilized for any other purposes unless all such current
expenses attributable to the ownership and operation of the Property have been
fully paid and satisfied.

       

      1.30  Hazardous Materials and
Environmental Concerns.

       

      (a)           Grantor
hereby represents and warrants to Beneficiary that, as of the date
hereof:  (i) the Property is not, and to the best of Grantor's
knowledge, information and belief, after due inquiry and investigation, the
Property has not been, in direct or indirect violation of any local, state or
federal law, rule or regulation pertaining to environmental regulation,
contamination, remediation or human health and safety (including the regulation
or remediation of Hazardous Substances as defined below) including, without
limitation, the Architectural Barriers Act of 1968, the Texas Architectural
Barriers Statute of 1978, and the Fair Housing Amendments Act of 1988, all as
amended from time to time and including all regulations promulgated pursuant to
any one or more of them, and laws, statutes, ordinances, rules, regulations,
orders, or determinations relating to “wetlands,” including without limitation
those set forth in the Clean Water Act (33 U.S.C. §1251 et seq.), as
amended from time to time, the Texas Water Code, as amended from time to time;
and the Texas Solid Waste Disposal Act (TEX. HEALTH& SAFETY CODE ANN.
§§361.001-361.345), as amended from time to time  (collectively,
"Environmental
Laws"), all as amended from time to time; (ii) no hazardous, toxic
or harmful substances, wastes, materials, pollutants or contaminants (including,
without limitation, asbestos, polychlorinated biphenyls, petroleum products,
radon, lead-based paint, flammable explosives, radioactive materials, infectious
substances or raw materials which may include hazardous constituents), mold,
mycotoxins, microbial matter and airborne pathogens (naturally occurring or
otherwise), or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, "Hazardous
Substances") are located on or have been handled, manufactured,
generated, stored, processed, transported to or from, or disposed of on or
Released or discharged from the Property (including underground contamination)
except, to Grantor’s knowledge after due inquiry, for those substances used by
Grantor in the ordinary course of its business and in compliance with all
Environmental Laws; (iii) the Property is not subject to any private or
governmental lien or judicial, administrative or other notice or action relating
to Hazardous Substances or noncompliance with Environmental Laws, nor is Grantor
aware of any basis for such lien, notice or action; (iv) to Grantor’s knowledge,
after due inquiry, there are no underground storage tanks or other underground
storage receptacles (whether active or abandoned) for Hazardous Substances on
the Property; (v) Grantor has received no notice of, and to the best of
Grantor's knowledge and belief, after due inquiry and investigation, there does
not exist any, investigation, action, proceeding or claim by any agency,
authority or unit of government or by any third party which could result in any
liability, penalty, sanction or judgment under any Environmental Laws with
respect to any condition, use or operation of the Property, nor does Grantor
know of any basis for such investigation, action, proceeding or claim; (vi)
Grantor has received no notice that, and to the best of Grantor's knowledge and
belief after due inquiry and investigation, there has been no

      
        
           

        

        
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      claim by
any party that, any use, operation or condition of the Property has caused any
nuisance, trespass or any other liability or adverse condition on any other
property, nor does Grantor know of any basis for such notice or claim; and (vii)
there are no present environmental conditions or events or, to the best of
Grantor's knowledge, after due inquiry and investigation, past environmental
conditions or events on or near the Property that could be reasonably
anticipated to materially adversely affect the value of the
Property.

       

      Grantor
shall keep or cause the Property to be kept free from Hazardous Substances
(except those substances used by Grantor in the ordinary course of its business
and in compliance with all Environmental Laws) and in compliance with all
Environmental Laws, shall not install or use any underground storage tanks,
shall expressly prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all tenants, (except those
substances used by Tenants in the ordinary course of their activities and in
compliance with all Environmental Laws), invitees and trespassers, and, without
limiting the generality of the foregoing, during the term of this Security
Instrument, shall not install in the Improvements or permit to be installed in
the Improvements asbestos or any substance containing asbestos.  If
required by Beneficiary (including if recommended in any third-party
environmental report delivered to Beneficiary) or under any Environmental Law,
Grantor shall maintain an Operations and Maintenance Program ("O&M Program") for
the management of asbestos, lead-based paint, radon or any other Hazardous
Substances at the Property.

       

      Grantor
shall promptly notify Beneficiary if Grantor shall become aware of (i) any
Hazardous Substances at, on, under, affecting or threatening to affect the
Property (except those substances used by Grantor or tenants in the ordinary
course of their business or activities, respectively, and in compliance with all
Environmental Laws), (ii) any lien, action or notice affecting or threatening to
affect the Property or Grantor resulting from any violation or alleged violation
of Environmental Law, (iii) any investigation, inquiry or proceeding concerning
Grantor on the Property pursuant to any Environmental Law or otherwise relating
to Hazardous Substances, or (iv) any occurrence, condition or state of facts
which would render any representation or warranty in this Section incorrect in
any respect if made at the time of such
discovery.  Further, immediately upon receipt of the same,
Grantor shall deliver to Beneficiary copies of any and all orders,
notices, permits, applications, reports, and other communications, documents
and instruments pertaining to the actual, alleged or potential
non-compliance with any Environmental Laws in connection with the Property or
presence or existence of any Hazardous Substances at, on, about, under,
within, near or in connection with the Property (except those substances used in
the ordinary course of its business and in compliance with all Environmental
Laws).  Grantor shall, promptly and when and as required, at Grantor's
sole cost and expense, take all actions as shall be necessary or advisable
for compliance with the terms of this Section 1.30 or for
the remediation of any and all portions of the Property or other affected
property, including, without limitation, all investigative, monitoring, removal,
containment, remedial and response actions in accordance with all applicable
Environmental Laws (and in all events in a manner satisfactory to Beneficiary),
and shall further pay or cause to be paid, at no expense to Beneficiary, all
remediation, response, administrative and enforcement costs of applicable
governmental agencies which may be asserted against the Property.  In
the event Grantor fails to do so (i) Beneficiary may, but shall not be obligated
to, undertake remediation at the Property or other affected property necessary
to bring the Property into conformance with the terms of Environmental Laws, and
(ii) Grantor hereby grants to Beneficiary and its agents and

      
        
           

        

        
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      employees
access to the Property and a license to do all things Beneficiary shall deem
necessary to bring the Property into conformance with Environmental
Laws.  Any and all costs and expenses reasonably incurred by
Beneficiary in connection therewith, together with interest thereon at the
Default Interest Rate from the date incurred by Beneficiary until actually paid
by Grantor, shall be immediately paid by Grantor on demand and shall be secured
by this Security Instrument and by all of the other Loan Documents securing all
or any part of the indebtedness evidenced by the Note.  Grantor
covenants and agrees, at Grantor's sole cost and expense, to indemnify, defend
(at trial and appellate levels, and with attorneys, consultants and experts
acceptable to Beneficiary), and hold Beneficiary harmless from and against any
and all liens, damages, losses, liabilities, obligations, settlement payments,
penalties, assessments, citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs, disbursements or expenses of any
kind or of any nature whatsoever (including, without limitation, reasonable
attorneys', consultants' and experts' fees and disbursements actually incurred
in investigating, defending, settling or prosecuting any claim, litigation or
proceeding) which may at any time be imposed upon, incurred by or asserted or
awarded against Beneficiary or the Property, and arising directly or indirectly
from or out of:  (i) the presence, Release or threat of Release of any
Hazardous Substances on, in, under, affecting or threatening to affect all or
any portion of the Property or any surrounding areas, regardless of whether or
not caused by or within the control of Grantor; (ii) the violation of any
Environmental Laws relating to, affecting or threatening to affect the Property,
whether or not caused by or within the control of Grantor; (iii) the failure by
Grantor to comply fully with the terms and conditions of this Section 1.30; (iv)
the breach of any representation or warranty contained in this Section 1.30; or (v)
the enforcement of this Section 1.30,
including, without limitation, the cost of assessment, containment and/or
removal of any and all Hazardous Substances on and/or from all or any portion of
the Property or any surrounding areas, the cost of any actions taken in response
to the presence, Release or threat of Release of any Hazardous Substances on,
in, under or affecting any portion of the Property or any surrounding areas to
prevent or minimize such release or threat of release so that it does not
migrate or otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to comply with
the Environmental Laws in connection with all or any portion of the Property or
any surrounding areas.  The indemnity set forth in this Section 1.30(c) shall
also include any diminution in the value of the security afforded by the
Property or any future reduction in the sales price of the Property by reason of
any matter set forth in this Section
1.30(c).  Beneficiary's rights under this Section shall survive
payment in full of the indebtedness secured hereby and shall be in addition to
all other rights of Beneficiary under this Security Instrument, the Note and the
other Loan Documents.

       

      Upon
Beneficiary's request, at any time after the occurrence of a default hereunder
or at such other time as Beneficiary has reasonable grounds to believe that
Hazardous Substances are or have been handled, generated, stored, processed,
transported to or from, or released or discharged from or disposed of on or
around the Property (other than in the normal course of Grantor's or the
Tenants' business or activities, respectively, and in compliance with all
Environmental Laws) or that Grantor, any Tenant or the Property may be in
violation of Environmental Laws,  Grantor shall provide, at Grantor's
sole cost and expense, an inspection or audit of the Property prepared by a
hydrogeologist or environmental engineer or other appropriate consultant
approved by Beneficiary indicating the presence or absence of Hazardous
Substances on the Property (including asbestos-containing material or lead-based
paint).  If

      
        
           

        

        
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      Grantor
fails to provide such inspection or audit within thirty (30) days after such
request, Beneficiary may order the same, and Grantor hereby grants to
Beneficiary and its employees and agents access to the Property and a license to
undertake such inspection or audit.  The cost of such inspection or
audit, together with interest thereon at the Default Interest Rate from the date
Beneficiary notifies Grantor that Beneficiary has incurred same until actually
paid by Grantor, shall be immediately paid by Grantor on demand and shall be
secured by this Security Instrument and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note.

       

      Without
limiting the foregoing, Beneficiary and its authorized representatives may,
during normal business hours and at its own expense, but subject to the rights
of tenants, if any, inspect the Property and Grantor's records related thereto
for the purpose of determining compliance with Environmental Laws and the terms
and conditions of this Section
1.30.

       

      As used
herein, the term "Release" shall
include, without limitation, any intentional or unintentional placing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, discarding or abandoning of any Hazardous
Substance, other than in the normal course of business or activities or its
tenants, and in compliance with all Environmental Laws.

       

      Grantor
represents and warrants that, from and after its acquisition of the Property,
Grantor has provided, and Grantor covenants and agrees that Grantor shall
provide all legally required notices with respect to the discovery or release of
any hazardous substances at the Property and shall perform each of the
continuing obligations of a bona fide prospective purchaser pursuant to 42
U.S.C. 9601(40).   Grantor shall notify Beneficiary of any notice
given or action taken pursuant to this Section 1.30(g).  This Section
1.30(g) shall survive any termination, satisfaction or foreclosure or other
enforcement of this Security Instrument.

       

      1.31  Indemnification;
Subrogation.

       

      GRANTOR
SHALL INDEMNIFY, DEFEND AND HOLD BENEFICIARY HARMLESS AGAINST: (I) ANY AND ALL
CLAIMS FOR BROKERAGE, LEASING, FINDER'S OR SIMILAR FEES WHICH MAY BE MADE
RELATING TO THE PROPERTY OR THE SECURED INDEBTEDNESS, (II) ANY AND ALL
LIABILITY, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS,
LIENS, CHARGES, ENCUMBRANCES, COSTS AND EXPENSES (INCLUDING BENEFICIARY'S
ATTORNEYS' FEES, TOGETHER WITH APPELLATE COUNSEL FEES, IF ANY) OF WHATEVER KIND
OR NATURE WHICH MAY BE ASSERTED AGAINST, IMPOSED ON OR INCURRED BY BENEFICIARY
UNDER ANY LEASE OR OCCUPANCY AGREEMENT FOR ANY LOSS ARISING FROM A FAILURE OR
INABILITY TO COLLECT RENTS AND PROFITS OR IN CONNECTION WITH THE SECURED
INDEBTEDNESS, THIS SECURITY INSTRUMENT, THE PROPERTY, OR ANY PART THEREOF, OR
THE EXERCISE BY BENEFICIARY OF ANY RIGHTS OR REMEDIES GRANTED TO IT UNDER THIS
SECURITY INSTRUMENT, AND ANY DEFAULT UNDER THIS SECURITY
INSTRUMENT,  (III) ANY LIENS (WHETHER JUDGMENTS, MECHANICS',
MATERIALMEN'S OR OTHERWISE), CHARGES AND ENCUMBRANCES FILED AGAINST THE
PROPERTY, AND (IV) ANY CLAIMS AND DEMANDS FOR

      
        
           

        

        
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      DAMAGES
OR INJURY, INCLUDING CLAIMS FOR PROPERTY DAMAGE, PERSONAL INJURY OR WRONGFUL
DEATH, ARISING OUT OF OR IN CONNECTION WITH ANY ACCIDENT OR FIRE OR OTHER
CASUALTY ON THE REAL ESTATE OR THE IMPROVEMENTS OR ANY NUISANCE OR TRESPASS MADE
OR SUFFERED THEREON, INCLUDING, IN ANY CASE, ATTORNEYS’ FEES, COSTS AND EXPENSES
AS AFORESAID, WHETHER AT PRETRIAL, TRIAL OR APPELLATE LEVEL FOR ANY CIVIL,
CRIMINAL OR ADMINISTRATIVE PROCEEDINGS.  SHOULD BENEFICIARY INCUR ANY
LIABILITY UNDER THIS SECURITY INSTRUMENT OR ANY OF THE OTHER LOAN DOCUMENTS, THE
AMOUNT THEREOF, INCLUDING, WITHOUT LIMITATION, COSTS, EXPENSES AND REASONABLE
ATTORNEYS' FEES, TOGETHER WITH INTEREST THEREON AT THE DEFAULT INTEREST RATE
FROM THE DATE BENEFICIARY NOTIFIES GRANTOR THAT BENEFICIARY HAS INCURRED THE
SAME UNTIL ACTUALLY PAID BY GRANTOR, SHALL BE IMMEDIATELY DUE AND PAYABLE TO
BENEFICIARY BY GRANTOR ON DEMAND AND SHALL BE SECURED HEREBY AND BY ALL OF THE
OTHER LOAN DOCUMENTS SECURING ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY
THE NOTE.  HOWEVER, NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE
GRANTOR TO INDEMNIFY, DEFEND AND HOLD HARMLESS BENEFICIARY FROM AND AGAINST ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
SUITS, COSTS AND EXPENSES ENACTED AGAINST, IMPOSED ON OR INCURRED BY
BENEFICIARY BY REASON OF BENEFICIARY'S WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE.  THIS INDEMNITY SHALL SURVIVE PAYMENT IN FULL OF THE
INDEBTEDNESS SECURED HEREBY.

       

      BENEFICIARY
MAY ENGAGE THE SERVICES OF ATTORNEYS IF IT IS MADE A PARTY DEFENDANT TO ANY
LITIGATION (OR THREATENED ACTION OR CLAIM) OR TO ENFORCE THE TERMS OF THIS
SECURITY INSTRUMENT OR TO PROTECT ITS RIGHTS HEREUNDER, AND, IN THE EVENT OF ANY
SUCH ENGAGEMENT, GRANTOR SHALL PAY BENEFICIARY'S ATTORNEYS' FEES (TOGETHER WITH
REASONABLE APPELLATE COUNSEL FEES, IF ANY), CONSULTANTS' FEES, EXPERTS FEES, AND
EXPENSES REASONABLY INCURRED BY BENEFICIARY, WHETHER OR NOT AN ACTION IS
ACTUALLY COMMENCED AGAINST GRANTOR.  ALL REFERENCES TO "ATTORNEYS" IN
THIS SUBSECTION AND ELSEWHERE IN THIS SECURITY INSTRUMENT SHALL INCLUDE WITHOUT
LIMITATION ANY ATTORNEY OR LAW FIRM ENGAGED BY BENEFICIARY AND BENEFICIARY'S
IN-HOUSE COUNSEL, AND ALL REFERENCES TO "FEES AND EXPENSES" IN THIS SUBSECTION
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 BENEFICIARY'S IN-HOUSE COUNSEL.

       

      A WAIVER
OF SUBROGATION SHALL BE OBTAINED BY GRANTOR FROM ITS INSURANCE CARRIER AND,
CONSEQUENTLY, GRANTOR WAIVES ANY AND ALL RIGHT TO CLAIM OR RECOVER AGAINST
BENEFICIARY, ITS OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES, FOR LOSS
OF OR DAMAGE TO GRANTOR, THE PROPERTY, GRANTOR'S PROPERTY OR THE PROPERTY OF
OTHERS UNDER GRANTOR'S CONTROL FROM ANY CAUSE INSURED AGAINST
OR

      
        
           

        

        
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      REQUIRED
TO BE INSURED AGAINST BY THE PROVISIONS OF THIS SECURITY
INSTRUMENT.

       

      1.32  Covenants with Respect to
Indebtedness; Operations and Fundamental Changes of
Grantor.  Grantor  represents, warrants and covenants
as of the date hereof and until such time as the indebtedness secured hereby is
paid in full, that Grantor:

       

      (a)    has not
owned, does not own and will not own any asset other than (i) the Property, and
(ii) incidental personal property necessary for the operation of the
Property;

       

      (b)    has not
engaged, is not engaged and will not engage in any business other than the
ownership, management and operation of the Property;

       

      (c)    will not
(other than the TRS Lease) enter into any contract or agreement with any general
partner, principal, member or affiliate of Grantor or any affiliate of any such
general partner, principal, or member of Grantor, 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 an
affiliate;

       

      (d)    has not
incurred and will not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (i) the secured
indebtedness, and (ii) unsecured trade payables or accrued expenses incurred in
the ordinary course of business of operating the Property and not outstanding
for more than sixty days with trade creditors and in amounts as are normal and
reasonable under the circumstances;

       

      (e)    no debt
whatsoever may be secured (senior, subordinate or pari passu) by the
Property;

       

      (f)    has not made
and will not make any loans or advances (other than as may be expressly required
pursuant to the terms of the TRS Lease) to any third party (including any
general partner, principal, member or affiliate of Grantor, or any
guarantor);

       

      (g)    is and will
be solvent and pay its debts from its assets as the same shall become
due;

       

      (h)    has done or
caused to be done and will do all things necessary to preserve its existence and
corporate, limited liability company and partnership formalities (as
applicable), and will not, nor will any partner, limited or general, or member
or shareholder thereof, amend, modify or otherwise change its partnership
certificate, partnership agreement, certificate or articles of incorporation or
organization, or by-laws or operating agreement or regulations, in a manner
which adversely affects Grantor's, or any such partner's, member's or
shareholders' existence as a single-purpose, single-asset "bankruptcy remote"
entity.  If Grantor is a single member limited liability company,
Grantor shall be organized and formed under (and shall maintain its existence
under) the laws of the State of Delaware and shall have at all times at least
one individual who has been designated as a ‘special member’ of such limited
liability company, which special member shall, pursuant to the terms of the
certificate of formation and/or operating agreement of such limited liability
company, automatically become a member of such limited liability company
(without any further consent or action required) upon the occurrence of
any

      
        
           

        

        
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      event or
circumstance which would cause the sole member of such limited liability company
to cease to be a member of such limited liability company;

       

      (i)     will conduct
and operate its business as presently conducted and operated;

       

      (j)     will
maintain books and records and bank accounts separate from those of its
affiliates, including its general partners, principals and members;

       

      (k)    will be, and
at all times will hold itself out to the public as, a legal entity separate and
distinct from any other entity (including any affiliate of Grantor, any
constituent party of Grantor, any guarantor or any affiliate of any constituent
party or guarantor); has corrected, and shall correct, any known
misunderstanding regarding its status as a separate entity; has conducted and
shall conduct, its business in its own name; has paid, and will pay, its own
liabilities out of its own funds and assets; has not, and shall not identify
itself or any of its affiliates as a division or a part of the other; and has
maintained and utilized, and shall maintain separate stationery, invoices and
checks from any other entity);

       

      (l)     will file
its own tax returns;

       

      (m)   will 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;

       

      (n)    will not, nor
will any shareholder, partner, member or affiliate, seek the dissolution or
winding up, in whole or in part, of Grantor;

       

      (o)    will not
enter into any transaction of merger or consolidation, or acquire by purchase or
otherwise all or substantially all of the business or assets of, or any stock or
beneficial ownership of, any entity;

       

      (p)    will not
commingle the funds and other assets of Grantor with those of any general
partner, principal, member or affiliate, or any other person;

       

      (q)           
has and will maintain its assets in such a manner that it is not costly or
difficult to segregate, ascertain or identify its individual assets from those
of any affiliate or any other person;

       

      (r)     has, and any
general partner or operating member of Grantor has, at all times since its
formation, observed all legal and customary formalities regarding its formation
and will continue to observe all legal and customary formalities;

       

      (s)    does not and
will not hold itself out to be responsible for the debts or obligations of any
other person; and

       

      (t)     upon the
commencement of a voluntary or involuntary bankruptcy proceeding by or against
Grantor, Grantor shall not seek a supplemental stay or otherwise pursuant to 11
U.S.C. 105 or any other provision of the Act, or any other debtor relief law
(whether statutory, common law, case law, or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect,

      
        
           

        

        
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      which may
be or become applicable, to stay, interdict, condition, reduce or inhibit the
ability of Beneficiary to enforce any rights of Beneficiary against any
guarantor or indemnitor of the secured obligations or any other party liable
with respect thereto by virtue of any indemnity, guaranty or
otherwise.

       

      1.33
Litigation.  Grantor
will give prompt written notice to Beneficiary and any servicer of any
litigation or governmental proceedings pending or threatened (in writing)
against Grantor which might have a material adverse effect upon Grantor or the
Property.

       

      1.34
ERISA. Grantor
shall not engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Beneficiary of any of its
rights under the Note, this Security Instrument or any of the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA.

       

      Grantor
further covenants and agrees to deliver to Beneficiary such certifications or
other evidence from time to time throughout the term of this Security
Instrument, as requested by Beneficiary in its sole discretion, that (i) Grantor
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(3) of ERISA; and (ii) Grantor is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans.

       

      GRANTOR
SHALL INDEMNIFY BENEFICIARY AND DEFEND AND HOLD BENEFICIARY HARMLESS FROM AND
AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST DAMAGE AND
EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES AND
DISBURSEMENTS AND COSTS INCURRED IN THE INVESTIGATION, DEFENSE AND SETTLEMENT OF
CLAIMS AND LOSSES INCURRED IN CORRECTING ANY PROHIBITED TRANSACTION OR IN THE
SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY INDIVIDUAL PROHIBITED
TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN BENEFICIARY'S SOLE
DISCRETION) THAT BENEFICIARY MAY INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF A
DEFAULT UNDER THIS SECTION.  THIS INDEMNITY SHALL SURVIVE ANY
TERMINATION, SATISFACTION OR FORECLOSURE OF THIS SECURITY
INSTRUMENT.

       

      Section
1.35. Compliance with
Anti-Terrorism Laws.  (a) None of Grantor, any guarantor or any
other Person which owns a direct or indirect equity interest in any of the
foregoing (x) is identified by the Office of Foreign Assets Control, Department
of the Treasury (“OFAC”) or otherwise
qualifies as an Embargoed Person (as hereinafter defined), or (y) has been
previously indicted for or convicted of any felony involving a crime or crimes
of moral turpitude or for any Patriot Act Offense (as defined below), or (z) is
currently under investigation by any governmental authority for alleged criminal
activity.  Grantor has performed and shall perform reasonable due
diligence to insure that at all times throughout the term of the Loan, including
after giving effect to any transfers permitted pursuant to the Loan Documents,
(i) that none of the funds or other assets of Grantor, any guarantor or any
other Person who owns a direct or indirect equity interest in Grantor or any
guarantor constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to
trade

      
        
           

        

        
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      restrictions
under U.S. law, including, but not limited to, The USA Patriot Act (including
the anti-terrorism provisions thereof), the International Emergency Economic
Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading with the Enemy Act, 50
U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated
thereunder or related thereto including without limitation those related to
Specially Designated Nationals, Specially Designated Global Terrorists and
blocked persons, with the result that the investment in Grantor, Principal or
Guarantor, as applicable (whether directly or indirectly), is prohibited by law
or the Loan made by the Beneficiary is in violation of law (“Embargoed Person”);
(ii) no Embargoed Person has any interest of any nature whatsoever in
Grantor, any guarantor or any other Person which owns a direct or indirect
equity interest in any of the foregoing, as applicable, with the result that the
investment in any such parties, as applicable (whether directly or indirectly),
is prohibited by law or the Loan is in violation of law; and (iii) none of
the funds of Grantor, any guarantor or any other Person which owns a direct or
indirect equity interest in any of the foregoing, as applicable, have been
derived from, or are the proceeds of, any unlawful activity, including money
laundering, terrorism or terrorism activities, with the result that the
investment in Grantor, any guarantor or any other Person which owns a direct or
indirect equity interest in any of the foregoing, as applicable (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law, or may cause the Property to be subject to forfeiture or
seizure.  Grantor shall, and shall cause any guarantor to provide such
evidence and confirmation of identity (including, without limitation,
certificates) as may be requested by Beneficiary at any time, and from time to
time, to enable Beneficiary to verify such party’s identity or to comply with
any applicable law or regulation, including without limitation, the USA Patriot
Act.  In addition, Grantor shall provide to Beneficiary such
additional information and confirmation (including, without limitation,
certificates) as Beneficiary may request from time to time in order to comply
with, and/or confirm Grantor’s and/or guarantor’s compliance with, all
applicable requirements of governmental authorities having jurisdiction of the
Grantor and/or the Property, including without limitation, those laws and
regulations concerning money laundering and similar activities.  For
purposes hereof, “Patriot Act Offense”
means any violation of the criminal laws of the United States of America or of
any of the several states, or that would be a criminal violation if committed
within the jurisdiction of the United States of America or any of the several
states, relating to terrorism or the laundering of monetary instruments,
including any offense under (a) the criminal laws against terrorism; (b) the
criminal laws against money laundering; (c) the Bank Secrecy Act, as amended,
(d) the Money Laundering Control Act of 1986, as amended, or the (e) Patriot
Act. “Patriot
Act Offense" also
includes the crimes of conspiracy to commit, or aiding and abetting another to
commit, a Patriot Act Offense.  Grantor will advise Beneficiary
immediately of any material change that would affect the representations,
warranties and covenants set forth in this Section 1.36.

       

      (b)    If a tenant
under any Lease is charged with crimes involving money laundering or predicate
crimes to money laundering, and such charges are not dismissed without further
investigation within thirty days, then Grantor shall give notice of such charges
of which Grantor has actual knowledge to Beneficiary and upon Beneficiary’s
request, Grantor shall exclude from the debt service any Rents from such tenant
or resident of the Property.

      
        
           

        

        
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      ARTICLE
II

       

      EVENTS
OF DEFAULT

       

      2.1  Events of
Default.  The indebtedness secured hereby shall become
immediately due and payable at the option of Beneficiary upon the happening of
any one or more of the following events of default (each, an "Event of
Default"):

       

      (a)    Grantor fails
to make any payment under the Note when due.

       

      (b)    Grantor fails
to punctually perform any covenant, agreement, obligation, term or condition
hereof which requires payment of any money to Beneficiary (except those
regarding payments to be made under the Note).

       

      (c)    Grantor fails
to provide insurance as required by Section 1.4 hereof or
fails to perform any covenant, agreement obligation, term or condition set forth
in Section 1.16
or Section 1.30
hereof.

       

      (d)    Grantor fails
to perform any other covenant, agreement, obligation, term or condition set
forth herein other than those otherwise described in this Section 2.1 and, to
the extent such failure or default is susceptible of being cured, the
continuance of such failure or default for thirty (30) days after written notice
thereof from Beneficiary to Grantor; provided, however, that if such
default is susceptible of cure but such cure cannot be accomplished with
reasonable diligence within said period of time, and if Grantor commences to
cure such default promptly after receipt of notice thereof from Beneficiary, and
thereafter prosecutes the curing of such default with reasonable diligence, such
period of time shall be extended for such period of time as may be necessary to
cure such default with reasonable diligence, but not to exceed an additional
thirty (30) days.

       

      (e)    Any
representation or warranty made herein, in or in connection with any application
or commitment relating to the Loan, or in any of the other Loan Documents to
Beneficiary by Grantor, by any principal or general partner in Grantor or by any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the Loan is determined by Beneficiary to have been false or misleading in
any material respect at the time made.

       

      (f)     There shall
be a sale, conveyance, disposition, alienation, hypothecation, leasing,
assignment, pledge, mortgage, granting of a security interest in or other
transfer or further encumbrancing of the Property, Grantor or its owners, or any
portion thereof or any interest therein, in violation of Section 1.13
hereof.

       

      (g)    A default
occurs under any of the other Loan Documents which has not been cured within any
applicable grace or cure period therein provided.

       

      (h)    Grantor, any
principal, general partner or managing member (as applicable) in Grantor or any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby becomes insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of creditors,
shall file a petition in bankruptcy, shall voluntarily be adjudicated insolvent
or bankrupt or shall admit in writing the inability to pay

      
        
           

        

        
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      debts as
they mature, shall petition or apply to any tribunal for or shall consent to or
shall not contest the appointment of a receiver, trustee, custodian or similar
officer for Grantor, for any such principal, general partner or managing member
(as applicable) of Grantor or for any such indemnitor or guarantor or for a
substantial part of the assets of Grantor, of any such principal, managing
member or general partner of Grantor or of any such indemnitor or guarantor, or
shall commence any case, proceeding or other action under any bankruptcy,
reorganization, arrangement, readjustment or debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in
effect.

       

      (i)     A petition
("Petition") is
filed or any case, proceeding or other action is commenced against Grantor,
against any principal, general partner or managing member of Grantor or against
any indemnitor or guarantor under any indemnity or guaranty executed in
connection with the loan secured hereby seeking to have an order for relief
entered against it as debtor or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or other relief under
any law relating to bankruptcy, insolvency, arrangement, reorganization,
receivership or other debtor relief under any law or statute of any
jurisdiction, whether now or hereafter in effect, or a court of competent
jurisdiction enters an order for relief against Grantor, against any principal,
managing member or general partner of Grantor or against any indemnitor or
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby, as debtor, or an order, judgment or decree is entered
appointing, with or without the consent of Grantor, of any such principal,
managing member or general partner of Grantor or of any such indemnitor or
guarantor, a receiver, trustee, custodian or similar officer for Grantor, for
any such principal, managing member or general partner of Grantor or for any
such indemnitor or guarantor, or for any substantial part of any of the
properties of Grantor, of any such principal,  general partner or
managing member of Grantor or of any such indemnitor or guarantor, and if any
such event shall occur, such Petition, case, proceeding, action, order, judgment
or decree shall not be dismissed within sixty (60) days after being
commenced.

       

      (j)     Grantor
solicits or aids the solicitation of the filing of any Petition against Grantor
including, without limitation:  (i) providing information regarding
the identity of creditors or the nature of creditors' claims to any third party
unless compelled to do so by order of a court of competent jurisdiction or by
regulation promulgated by a governmental agency, or (ii) paying the legal fees
or expenses of any creditor of or interest holder in Grantor with respect to any
matter whatsoever.

       

      (k)    The Property
or any part thereof shall be taken on execution or other process of law in any
action against Grantor.

       

      (l)     Grantor
abandons all or a portion of the Property.

       

      (m)          
The holder of any lien or security interest on the Property (without implying
the consent of Beneficiary to the existence or creation of any such lien or
security interest), whether superior or subordinate to this Security Instrument
or any of the other Loan Documents, declares a default and such default is not
cured within any applicable grace or cure period set forth in the applicable
document or such holder institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder.

      
        
           

        

        
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      (n)    The Property,
or any part thereof, is subjected to actual or threatened waste or to removal,
demolition or material alteration so that the value of the Property is
materially diminished thereby and Beneficiary determines (in its subjective
determination) that it is not adequately protected from any loss, damage or risk
associated therewith.

       

      (o)    Any
dissolution, termination, partial or complete liquidation, merger or
consolidation of Grantor, any of its principals, members, or general
partners.

       

      (p)    An event of
default occurs pursuant to the TRS Lease.

      

      (q)    The Required
Debt Service Coverage Ratio is not achieved and maintained for any calendar
quarter during the term of the Loan.

      

      (r)     Grantor or
any operator of the Property fails within the time deadlines set by any
governmental authority to correct any deficiency that may cause any action by
such agency with respect to the Property to have a material adverse affect on
the income or operation of the Property or on Grantor’s or any operator’s
interest in the Property, including without limitation, a termination,
revocation or suspension of any license or permit or a ban on new resident
admissions.

      

      ARTICLE
III

       

      REMEDIES

       

      3.1  Remedies
Available.  If there shall occur a default under this Security
Instrument, and such default has not been cured within any applicable grace or
cure period, then this Security Instrument is subject to foreclosure as provided
by law and Beneficiary may, at its option and by or through a trustee, nominee,
assignee or otherwise, to the fullest extent permitted by law,
exercise  any or all of the following rights, remedies and recourses,
either successively or concurrently.

       

      (a)    Acceleration.  Accelerate
the maturity date of the Note and declare any or all of the indebtedness secured
hereby to be immediately due and payable without any presentment, demand,
protest, notice or action of any kind whatever (each of which is hereby
expressly waived by Grantor), whereupon the same shall become immediately due
and payable.  Upon any such acceleration, payment of such accelerated
amount shall constitute a prepayment of the principal balance of the Note shall
then be immediately due and payable.  Beneficiary shall not be
required to demonstrate any actual impairment of its security or any increased
risk of default hereunder in order to declare the indebtedness secured hereby
immediately due and payable upon an Event of Default.

       

      (b)    Entry on the
Property.  Without in any way curing or waiving any default of
Grantor, either in person, by agent or by court-appointed receiver, with or
without bringing any action or proceeding, or by a receiver appointed by a court
and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, in its own name, without force
or with such force as is permitted by law and without notice or process or with
such notice or process as is required by law unless such notice and process are
waivable, in

      
        
           

        

        
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      which
case Grantor hereby waives such notice and process, and do any and all acts and
perform any and all work which may be desirable or necessary in Beneficiary's
judgment to complete any unfinished construction on the Real Estate, to preserve
and/or enhance the value, marketability or rentability of the Property, to
increase the income therefrom, to manage and operate the Property or to protect
the security hereof and all sums expended by Beneficiary therefor, together with
interest thereon at the Default Interest Rate (as defined in the Note), shall be
immediately due and payable to Beneficiary by Grantor on demand and shall be
secured hereby and by all of the other Loan Documents securing all or any part
of the indebtedness evidenced by the Note.

       

      (c)    Collect Rents and
Profits.  With or without taking possession of the Property,
sue for or otherwise collect the Rents and Profits, including those past due and
unpaid, and apply the same, less costs and expenses of operation and collection,
including reasonable  attorney's fees, upon any indebtedness secured
hereby, all in such order as Beneficiary in its discretion may
determine.

       

      (d)    Appointment of
Receiver.  Upon, or at any time prior or after, initiating the
exercise of any power of sale, instituting any judicial foreclosure or
instituting any other foreclosure of the liens and security interests provided
for herein or any other legal proceedings hereunder, make application, ex-parte,
to a court of competent jurisdiction for appointment of a receiver, trustee,
liquidator or conservator for all or any part of the Property, as a matter of
strict right and without notice to Grantor and without regard to
the adequacy of the Property for the repayment of the indebtedness secured
hereby or the solvency of Grantor or any person or persons liable for the
payment of the indebtedness secured hereby, and Grantor does hereby irrevocably
consent to such appointment, waives any and all notices of and defenses to such
appointment and agrees not to oppose any application therefor by Beneficiary,
but nothing herein is to be construed to deprive Beneficiary of any other right,
remedy or privilege Beneficiary may now have under the law to have a receiver,
trustee, liquidator or conservator appointed, provided, however, that
the appointment of such receiver, trustee, liquidator or conservator or
other appointee by virtue of any court order, statute or regulation shall not
impair or in any manner prejudice the rights of Beneficiary to receive payment
of the Rents and Profits pursuant to other terms and provisions of this Security
Instrument or the Assignment.  Any such receiver, trustee, liquidator
or conservator shall have all of the usual powers and duties of
receivers, trustees, liquidators or conservators in similar cases, including,
without limitation, the full power to hold, develop, rent, lease, manage,
maintain, operate and otherwise use or permit the use of the Property upon such
terms and conditions as said receiver may deem to be prudent and reasonable
under the circumstances as more fully set forth in Section 3.3
below.  Such receivership shall, at the option of Beneficiary,
continue until full payment of all of the indebtedness secured hereby or until
title to the Property shall have passed by foreclosure sale under this Security
Instrument or deed in lieu of foreclosure.

       

      (e)    Foreclosure.  Sell
or offer for sale the Property in such portions, order and parcels as
Beneficiary may determine, with or without having first taken possession of
same, to the highest bidder for cash at public auction.  Such sale
shall be made at a location designated for foreclosure sales in accordance with
the Texas Property Code at the courthouse of the County wherein the Land (or any
portion thereof to be sold) is located on the first Tuesday of any month between
the hours of 10:00 A.M. and 4:00 P.M. after giving notice of the time, place and
terms of sale and that portion of the Property to be sold, by (1) (A) posting or
causing to be posted

      
        
           

        

        
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      written
or printed notice thereof at least 21 days prior to the date of said sale at the
County courthouse door thereof, (B) at least 21 days preceding the date of such
sale, filing such notice in the office of the county clerk of the County in
which the Land (or any portion thereof to be sold) is located and (C) at least
21 days preceding the date of such sale serving written notice of the proposed
sale by certified mail on each person or entity obligated to pay the
Indebtedness according to the records of the Beneficiary; or (2) by
accomplishing all or any of the aforesaid in such manner as permitted or
required by Chapter 51, Section 51.002 of the Texas Property Code
relating to the sale of real estate or by Chapter 9 of the UCC relating to
the sale of collateral after default by a debtor (as said article and chapter
now exist or may be hereafter amended or succeeded), or by any other present or
subsequent articles or enactments relating to same.  Service of the
notice called for herein shall be completed and be effective upon deposit of the
notice enclosed in a post-paid wrapper properly addressed to such Person
obligated to pay the Indebtedness at the most recent address as shown by the
records of the Beneficiary in a post office or official depository under the
care and custody of the United States Postal Service.  The affidavit
of any Person having knowledge of the facts to the effect that such service was
so completed shall be prima facie evidence of the fact of service.  At
any such sale (i) whether made under the power herein contained, the Texas
Property Code, the UCC, any other Legal Requirement or by virtue of any judicial
proceedings or any other legal right, remedy or recourse, it shall not be
necessary for Trustee to have physically present, or to have constructive
possession of, the Property (Grantor shall deliver to Trustee any portion of the
Property not actually or constructively possessed by Trustee immediately upon
demand by Trustee), and the title to and right of possession of any such
property shall pass to the purchaser thereof as completely as if it had been
actually present and delivered to purchaser at such sale, (ii) each instrument
of conveyance executed by Trustee shall contain a general warranty of title,
binding upon Grantor, (iii) each recital contained in any instrument of
conveyance made by Trustee shall conclusively establish the truth and accuracy
of the matters recited therein, including, without limitation, nonpayment of the
Indebtedness, advertisement and conduct of such sale in the manner provided
herein and otherwise by law and appointment of any successor Trustee hereunder,
(iv) any prerequisites to the validity thereof shall be conclusively presumed to
have been performed, (v) the receipt of Trustee or of such other party or
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers for his or their purchase money and no such purchaser or purchasers,
or his or their assigns or personal representatives, shall thereafter be
obligated to see to the application of such purchase money or be in any way
answerable for any loss, misapplication or non-application thereof, (vi) to the
fullest extent permitted by law, Grantor shall be completely and irrevocably
divested of all of its right, title, interest, claim and demand whatsoever,
either at law or in equity, in and to the property sold and such sale shall be a
perpetual bar both at law and in equity against Grantor, and against all other
persons claiming or to claim the property sold or any part thereof, by, through
or under Grantor, and (vii) to the extent and under such circumstances as are
permitted by law, Beneficiary may be a purchaser at any such sale.

       

      (f)     Judicial
Remedies.  Proceed by suit or suits, at law or in equity,
instituted by Beneficiary, or Trustee, upon written request of Beneficiary, to
enforce the payment of the indebtedness secured hereby or the other obligations
of Grantor hereunder or pursuant to the Loan Documents, 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.  In the event
of a judicial sale pursuant

      
        
           

        

        
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      to a
foreclosure decree, it is understood and agreed that Beneficiary or its assigns
may become the purchaser of the Property or any part thereof.  This
remedy shall be cumulative of any other non-judicial remedies available to the
Beneficiary with respect to the Loan Documents.  Proceeding with the
request or receiving a judgment for legal relief shall not be or be deemed to be
an election of remedies or bar any available non-judicial remedy of the
Beneficiary.

       

      (g)    Other.  Exercise
any other right or remedy available hereunder, under any of the other Loan
Documents or at law or in equity (including without limitation, rights and
remedies under any applicable Uniform Commercial Code, and use and/or
application of any Reserves and letters of credit).

       

      (h)    Application of
Proceeds.  To the fullest extent permitted by law, the proceeds
of any sale under this Security Instrument shall be applied to the extent funds
are so available to the following items in such order as Beneficiary in its
discretion may determine:

       

      (i)     To payment
of the costs, expenses and fees of taking possession of the Property, and of
holding, operating, maintaining, using, leasing, repairing, improving, marketing
and selling the same and of otherwise enforcing Beneficiary's right and remedies
hereunder and under the other Loan Documents, including, but not limited to,
receivers' fees, court costs, attorneys', accountants', appraisers', managers'
and other professional fees, title charges and transfer taxes.

       

      (ii)           
To payment of all sums expended by Beneficiary under the terms of any of the
Loan Documents and not yet repaid, together with interest on such sums at the
Default Interest Rate.

       

      (iii)          
To payment of the secured indebtedness and all other obligations secured by this
Security Instrument, including, without limitation, interest at the Default
Interest Rate and, to the extent permitted by applicable law, any prepayment
fee, charge or premium required to be paid under the Note in order to prepay
principal, in any order that Beneficiary chooses in its sole
discretion.

       

      (iv)          
The remainder, if any, of such funds shall be disbursed to Grantor or to the
person or persons legally entitled thereto.

       

      3.2  Right and Authority of
Receiver or Beneficiary in the Event of Default; Power of
Attorney.  Upon the occurrence of a default hereunder, which
default is not cured within any applicable grace or cure period, and entry upon
the Property pursuant to Section 3.1(b) hereof
or appointment of a receiver pursuant to Section 3.1(d)
hereof, and under such terms and conditions as may be prudent and reasonable
under the circumstances in Beneficiary's or the receiver's sole discretion, all
at Grantor's expense, Beneficiary or said receiver, or such other persons or
entities as they shall hire, direct or engage, as the case may be, may do or
permit one or more of the following, successively or
concurrently:  (a) enter upon and take possession and control of any
and all of the Property; (b) take and maintain possession of all documents,
books, records, papers and accounts relating to the Property; (c) exclude
Grantor and its agents, servants and employees wholly from the Property;
(d) manage and operate the Property; (e) preserve and maintain the
Property; (f) make repairs and alterations to the Property;
(g) complete

      
        
           

        

        
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      any
construction or repair of the Improvements, with such changes, additions or
modifications of the plans and specifications or intended disposition and use of
the Improvements as Beneficiary may in its sole discretion deem appropriate or
desirable to place the Property in such condition as will, in Beneficiary's sole
discretion, make it or any part thereof readily marketable or rentable; (h)
conduct a marketing or leasing program with respect to the Property, or employ a
marketing or leasing agent or agents to do so, directed to the leasing or sale
of the Property under such terms and conditions as Beneficiary may in its sole
discretion deem appropriate or desirable; (i) employ such contractors,
subcontractors, materialmen, architects, engineers, consultants, managers,
brokers, marketing agents, or other employees, agents, independent contractors
or professionals, as Beneficiary may in its sole discretion deem appropriate or
desirable to implement and effectuate the rights and powers herein granted; (j)
execute and deliver, in the name of Beneficiary as attorney-in-fact and agent of
Grantor or in its own name as Beneficiary, such documents and instruments as are
necessary or appropriate to consummate authorized transactions; (k) enter into
such leases, whether of real or personal property, or tenancy agreements, under
such terms and conditions as Beneficiary may in its sole discretion deem
appropriate or desirable; (l) collect and receive the Rents and Profits from the
Property; (m) eject Tenants or repossess personal property, as provided by law,
for breaches of the conditions of their Leases or other agreements; (n) sue for
unpaid Rents and Profits, payments, income or proceeds in the name of Grantor or
Beneficiary; (o) maintain actions in forcible entry and detainer, ejectment for
possession and actions in distress for rent; (p) compromise or give
acquittance for Rents and Profits, payments, income or proceeds that may become
due; (q) delegate or assign any and all rights and powers given to Beneficiary
by this Security Instrument; and (r) do any acts which Beneficiary in its sole
discretion deems appropriate or desirable to protect the security hereof and use
such measures, legal or equitable, as Beneficiary may in its sole discretion
deem appropriate or desirable to implement and effectuate the provisions of this
Security Instrument.  This Security Instrument shall constitute a
direction to and full authority to any lessee, or other third party who has
heretofore dealt or contracted or may hereafter deal or contract with Grantor or
Beneficiary, at the request of Beneficiary, to pay all amounts owing under any
Lease, contract, concession, license or other agreement to Beneficiary without
proof of the default relied upon.  Any such lessee or third party is
hereby irrevocably authorized to rely upon and comply with (and shall be fully
protected by Grantor in so doing) any request, notice or demand by Beneficiary
for the payment to Beneficiary of any Rents and Profits or other sums which may
be or thereafter become due under its Lease, contract, concession, license or
other agreement, or for the performance of any undertakings under any such
Lease, contract, concession, license or other agreement, and shall have no right
or duty to inquire whether any default under this Security Instrument or under
any of the other Loan Documents has actually occurred or is then
existing.  Grantor hereby constitutes and appoints Beneficiary, its
assignees, successors, transferees and nominees, as Grantor's true and lawful
attorney-in-fact and agent, with full power of substitution in the Property, in
Grantor's name, place and stead, to do or permit any one or more of the
foregoing described rights, remedies, powers and authorities, successively or
concurrently, and said power of attorney shall be deemed a power coupled with an
interest and irrevocable so long as any indebtedness secured hereby is
outstanding.  Any money advanced by Beneficiary in connection with any
action taken under this Section 3.3, together
with interest thereon at the Default Interest Rate from the date of making such
advancement by Beneficiary until actually paid by Grantor, shall be a demand
obligation owing

      
        
           

        

        
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      by
Grantor to Beneficiary and shall be secured by this Security Instrument and by
every other instrument securing the secured indebtedness.

       

      3.3  Occupancy After
Foreclosure.  In the event there is a foreclosure sale
hereunder and at the time of such sale, Grantor or Grantor's representatives,
successors or assigns, or any other persons claiming any interest in the
Property by, through or under Grantor, are occupying or using the Property, or
any part thereof, then, to the extent not prohibited by applicable law, each and
all shall, at the option of Beneficiary or the purchaser at such sale, as the
case may be, immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day-to-day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
Property occupied or used, such rental to be due daily to the
purchaser.  Further, to the extent permitted by applicable law, in the
event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Real Estate is located.

       

      3.4  Notice to Account
Debtors.  Beneficiary may, at any time after a default
hereunder, which default is not cured within any applicable grace or cure
period, notify the account debtors and obligors of any accounts, chattel paper,
negotiable instruments or other evidences of indebtedness to Grantor included in
the Property to pay Beneficiary directly.  Grantor shall at any time
or from time to time upon the request of Beneficiary provide to Beneficiary a
current list of all such account debtors and obligors and their
addresses.

       

      3.5  Cumulative
Remedies.  All remedies contained in this Security Instrument
are cumulative and Beneficiary shall also have all other remedies provided at
law and in equity or in any other Loan Documents.  Such remedies may
be pursued separately, successively or concurrently at the sole subjective
direction of Beneficiary and may be exercised in any order and as often as
occasion therefor shall arise.  No act of Beneficiary shall be
construed as an election to proceed under any particular provisions of this
Security Instrument to the exclusion of any other provision of this Security
Instrument or as an election of remedies to the exclusion of any other remedy
which may then or thereafter be available to Beneficiary.  No delay or
failure by Beneficiary to exercise any right or remedy under this Security
Instrument shall be construed to be a waiver of that right or remedy or of any
default hereunder.  Beneficiary may exercise any one or more of its
rights and remedies at its option without regard to the adequacy of its
security.

       

      3.6  Payment of
Expenses.  Grantor shall pay on demand all of Beneficiary's
expenses reasonably incurred in any efforts to enforce any terms of this
Security Instrument, whether or not any lawsuit is filed and whether or not
foreclosure is commenced but not completed, including, but not limited to,
reasonable legal fees and disbursements, foreclosure costs and title charges,
together with interest thereon from and after the date Beneficiary notifies
Grantor of Beneficiary’s incurrence thereof until actually paid by Grantor at
the Default Interest Rate, and the same shall be secured by this Security
Instrument and by all of the other Loan Documents securing all or any part of
the indebtedness evidenced by the Note.

      
        
           

        

        
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      ARTICLE
IV

       

      CONCERNING
THE TRUSTEE

       

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

       

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

       

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

      
        
           

        

        
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      4.4  Successor
Trustees.  Trustee may resign by the giving of notice of such
resignation in writing or verbally to Beneficiary.  If Trustee shall
die, resign, or become disqualified from acting in the execution of this trust,
or if, for any reason, Beneficiary shall prefer to appoint a substitute trustee
or multiple substitute trustees, or successive substitute trustees or successive
multiple substitute trustees, to act instead of the aforenamed Trustee,
Beneficiary shall have full power to appoint a substitute trustee (or, if
preferred, multiple substitute trustees) in succession who shall succeed (and if
multiple substitute trustees are appointed, each of such multiple substitute
trustees shall succeed) to all the estates, rights, powers, and duties of the
aforenamed Trustee.  Such appointment may be executed by any
authorized agent of Beneficiary, and if such Beneficiary be a corporation and
such appointment be executed in its behalf by any officer of such corporation,
such appointment shall be conclusively presumed to be executed with authority
and shall be valid and sufficient without proof of any action by the board of
directors or any superior officer of the corporation.  Grantor hereby
ratifies and confirms any and all acts which the aforenamed Trustee, or
Trustee’s successor or successors in this trust, shall do lawfully by virtue
hereof.  If multiple substitute Trustees are appointed, each of such
multiple substitute Trustees shall be 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.

       

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

       

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

       

      4.7  No Representation by
Trustee.  By accepting or approving anything required to be
observed, performed, or fulfilled or to be given to Trustee (on its own behalf
or on behalf of Beneficiary) pursuant to the Loan Documents, including, without
limitation, any officer's certificate, balance sheet, statement of profit and
loss or other financial statement, survey, appraisal, or insurance policy,
neither Trustee nor Beneficiary shall be deemed to have warranted, consented to,
or affirmed the sufficiency, legality, effectiveness, or legal effect of the
same, or of any term, provision, or condition thereof, and such acceptance or
approval thereof shall not be or constitute any warranty or affirmation with
respect thereto by Trustee, either on its own behalf or on behalf of
Beneficiary.

      
        
           

        

        
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      ARTICLE
V

       

      MISCELLANEOUS
TERMS AND CONDITIONS

       

      5.1  Time of
Essence.  Time is of the essence with respect to all provisions
of this Security Instrument.

       

      5.2  Release of Security
Instrument.  If and when Grantor has paid all of the secured
indebtedness as the same becomes due and payable, then, and in such event only,
all rights under this Security Instrument shall terminate except for those
provisions hereof which by their terms survive, and the Property shall become
wholly clear of the liens, security interests, conveyances and assignments
evidenced hereby, which shall be released by Beneficiary in due form at
Grantor's cost.  Grantor shall be responsible for the recordation of
such release and payment of any recordation costs associated
therewith.

       

      5.3  Certain Rights of
Beneficiary.  Without affecting Grantor's liability for the
payment of any of the indebtedness secured hereby, Beneficiary may from time to
time and without notice to Grantor: (a) release any Person liable for the
payment of the indebtedness secured hereby; (b) extend or modify the terms of
payment of the indebtedness secured hereby; (c) accept additional real or
personal property of any kind as security or alter, substitute or release any
property securing the indebtedness secured hereby; (d) recover any part of the
Property; (e) consent in writing to the making of any subdivision map or plat
thereof; (f) join in granting any easement therein; or (g) join in any extension
agreement of this Security Instrument or any agreement subordinating the lien
hereof.

       

      5.4  Notices.  All
notices, demands, requests or other communications to be sent by one party to
the other hereunder or required by law shall be in writing and shall be deemed
to have been validly given or served by delivery of the same in person to the
intended addressee, or by depositing the same with Federal Express or another
reputable private courier service for next business day delivery, or by
depositing the same in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, in any event addressed to the intended
addressee at its address set forth on the first page of this Security Instrument
or at such other address as may be designated by such party as herein
provided.  All notices, demands and requests shall be effective upon
such personal delivery, or one (1) Business Day after being deposited with the
private courier service, or two (2) Business Days after being deposited in the
United States mail as required above.  Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice
was given as herein required shall be deemed to be receipt of the notice, demand
or request sent.  By giving to the other party hereto at least fifteen
(15) days' prior written notice thereof in accordance with the provisions
hereof, the parties hereto shall have the right from time to time to change
their respective addresses and each shall have the right to specify as its
address any other address within the United States of America.

       

      5.5  Successors and
Assigns.  The terms, provisions, indemnities, covenants and
conditions hereof shall be binding upon Grantor and the successors and assigns
of Grantor, including all successors in interest in and to all or any part of
the Property, and shall inure to the benefit of Beneficiary, and its successors
and assigns and shall constitute covenants running with

      
        
           

        

        
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      the
land.  If Grantor consists of more than one person or entity, each
will be jointly and severally liable to perform the obligations of
Grantor.

       

      5.6  Severability.  A
determination that any provision of this Security Instrument is unenforceable or
invalid shall not affect the enforceability or validity of any other
provision.

       

      5.7  General Interpretative
Principles.  Within this Security Instrument, words of any
gender shall be held and construed to include any other gender, and words in the
singular shall be held and construed to include the plural, and vice versa,
unless the context otherwise requires.

       

      5.8  Waiver; Discontinuance of
Proceedings.  Beneficiary may waive any single default or Event
of Default by Grantor hereunder without waiving any other prior or subsequent
default or Event of Default, and may remedy any default or Event of Default by
Grantor hereunder without waiving the default or Event of Default
remedied.  Neither the failure or delay by Beneficiary in exercising,
any right, power or remedy upon any default by Grantor hereunder shall be
construed as a waiver of such default or Event of Default or as a waiver of the
right to exercise any such right, power or remedy at a later date.  No
single or partial exercise by Beneficiary of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further exercise
thereof, and every such right, power or remedy hereunder may be exercised at any
time and from time to time.  No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by
Beneficiary, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose given.  No notice to
nor demand on Grantor in any case shall of itself entitle Grantor to any other
or further notice or demand in similar or other
circumstances.  Acceptance by Beneficiary of any payment in an amount
less than the amount then due on any of the secured indebtedness shall be deemed
an acceptance on account only and shall not in any way affect the existence of a
default or Event of Default hereunder.

       

      5.9  Section
Headings.  The headings of the sections and paragraphs of this
Security Instrument are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.

       

      5.10  Governing
Law.  This Security Instrument will be governed by and
construed in accordance with the laws of the State in which the Property is
located, provided that to the extent that any of such laws may now or hereafter
be preempted by Federal law, in which case such Federal law shall so govern and
be controlling.

       

      5.11  Counting of
Days.  The term "days" when used herein shall mean calendar
days.  If any time period ends on a Saturday, Sunday or holiday
officially recognized by the State within which the Real Estate is located, the
period shall be deemed to end on the next succeeding business
day.  The term "business day" or "Business Day" when used herein shall
mean a weekday, Monday through Friday, except a legal holiday or a day on which
banking institutions in New York, New York are authorized by law to be
closed.

      
        
           

        

        
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      5.12  Application of the Proceeds
of the Note.  To the extent that proceeds of the Note are used
to pay indebtedness secured by any outstanding lien, security interest, charge
or prior encumbrance against the Property, such proceeds have been advanced by
Beneficiary at Grantor's request and Beneficiary shall be subrogated to any and
all rights, security interests and liens owned by any owner or holder of such
outstanding liens, security interests, charges or encumbrances, irrespective of
whether said liens, security interests, charges or encumbrances are
released.

       

      5.13  Unsecured Portion of
Indebtedness.  If any part of the secured indebtedness cannot
be lawfully secured by this Security Instrument or if any part of the Property
cannot be lawfully subject to the lien and security interest hereof to the full
extent of such indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is unsecured by
this Security Instrument.

       

      5.14  Cross
Default.  A default hereunder which has not been cured within
any applicable grace or cure period shall be an event of default under each of
the other Loan Documents.

       

      5.15  Interest After
Sale.  In the event the Property or any part thereof shall be
sold upon foreclosure as provided hereunder, to the extent permitted by law, the
sum for which the same shall have been sold shall, for purposes of redemption
(pursuant to the laws of the State in which the Property is located), bear
interest at the Default Interest Rate.

       

      5.16  Construction of this
Document.  This document may be construed as a mortgage,
security deed, deed of trust, chattel mortgage, conveyance, assignment, security
agreement, pledge, financing statement, hypothecation or contract, or any one or
more of the foregoing, in order to fully effectuate the liens and security
interests created hereby and the purposes and agreements herein set
forth.

       

      5.17  No
Merger.  It is the desire and intention of the parties hereto
that this Security Instrument and the lien hereof do not merge in fee simple
title to the Property.

       

      5.18  Rights With Respect to
Junior Encumbrances.  Any person or entity purporting to have
or to take a junior mortgage or other lien upon the Property or any interest
therein shall be subject to the rights of Beneficiary to amend, modify,
increase, vary, alter or supplement this Security Instrument, the Note or any of
the other Loan Documents and to extend the maturity date of the indebtedness
secured hereby and to increase the amount of the indebtedness secured hereby and
to waive or forebear the exercise of any of its rights and remedies hereunder or
under any of the other Loan Documents and to release any collateral or security
for the indebtedness secured hereby, in each and every case without obtaining
the consent of the holder of such junior lien and without the lien or security
interest of this Security Instrument losing its priority over the rights of any
such junior lien.

       

      5.19  Beneficiary May File Proofs
of Claim.  In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
proceedings affecting Grantor or the principals or general partners in Grantor,
or their respective creditors or property, Beneficiary, to the extent permitted
by law, shall be entitled to file such

      
        
           

        

        
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      proofs of
claim and other documents as may be necessary or advisable in order to have the
claims of Beneficiary allowed in such proceedings for the entire secured
indebtedness at the date of the institution of such proceedings and for any
additional amount which may become due and payable by Grantor hereunder after
such date.

       

      5.20  After-Acquired
Property.  All property acquired by Grantor after the date of
this Security Instrument which by the terms of this Security Instrument shall be
subject to the lien and the security interest created hereby, shall immediately
upon the acquisition thereof by Grantor and without further mortgage, conveyance
or assignment become subject to the lien and security interest created by this
Security Instrument.

       

      5.21  No
Representation.  By accepting delivery of any item required to
be observed, performed or fulfilled or to be given to Beneficiary pursuant to
the Loan Documents, including, but not limited to, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Beneficiary shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Beneficiary.

       

      5.22  Counterparts.  This
Security Instrument may be executed in any number of counterparts, each of which
shall be effective only upon delivery and thereafter shall be deemed an
original, and all of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same signature
page.

       

      5.23  Personal
Liability.  Notwithstanding anything to the contrary contained
in this Security Instrument, the liability of Grantor and its general partners
for the indebtedness secured hereby and for the performance of the other
agreements, covenants and obligations contained herein and in the Loan Documents
shall be limited as set forth in Section 1.05 of the
Note; provided,
however, that
nothing herein shall be deemed to be a waiver of any right which Beneficiary may
have under Sections 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the indebtedness secured
hereby or to require that all collateral shall continue to secure all
indebtedness owing to Beneficiary in accordance with the Note, this Security
Instrument and the other Loan Documents.

       

      5.24  Recording and
Filing.  Grantor will cause the Loan Documents and all
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded and re-filed in such manner and in such places as Beneficiary
shall reasonably request, and will pay on demand all such recording, filing,
re-recording and re-filing taxes, fees and other charges.  Grantor
shall reimburse Beneficiary, or its servicing agent, for the costs incurred in
obtaining a tax service company to verify the status of payment of taxes and
assessments on the Property.

       

      5.25  Entire Agreement and
Modifications.  This Security Instrument and the other Loan
Documents contain the entire agreements between the parties and supersede any
prior agreements (oral or written), and may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against

      
        
           

        

        
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      which
enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted.

       

      5.26  Maximum
Interest.  The provisions of this Security Instrument and of
all agreements between Grantor and Beneficiary, whether now existing or
hereafter arising and whether written or oral, are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the amount paid, or
agreed to be paid ("Interest"), to
Beneficiary for the use, forbearance or retention of the money loaned under the
Note exceed the maximum amount permissible under applicable law.  If,
from any circumstance whatsoever, performance or fulfillment of any provision
hereof or of any agreement between Grantor and Beneficiary shall, at the time
performance or fulfillment of such provision shall be due, exceed the limit for
Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then ipso facto the obligation
to be performed or fulfilled shall be reduced to such limit and if, from
any circumstance whatsoever, Beneficiary shall ever receive anything of
value deemed Interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive Interest shall be applied to the reduction of
the principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or at the option of Beneficiary be paid over to
Grantor, and not to the payment of Interest.  All Interest (including
any amounts or payments deemed to be Interest) paid or agreed to be paid to
Beneficiary shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal balance of the Note so that the Interest thereon for such full
period will not exceed the maximum amount permitted by applicable
law.  This Section 5.26 will
control all agreements between Grantor and Beneficiary.

       

      5.27  Application of Default
Interest Rate Not a Waiver.  Application of the Default
Interest Rate shall not be deemed to constitute a waiver of any default or any
rights or remedies of Beneficiary under this Security Instrument, any other Loan
Document or applicable legal requirements, or a consent to any extension of time
for the payment or performance of any obligation with respect to which the
Default Interest Rate may be invoked.

       

      5.28  Intentionally
Reserved. 

       

      5.29  Brokers and
Correspondents.  Grantor acknowledges, consents to and agrees
that in addition to any broker or correspondent fee payable by Grantor to the
broker or correspondent, Beneficiary may pay additional compensation, fees or
other payments to the broker or correspondent in connection with or arising out
of the origination, closing, sale, securitization or servicing of the
Loan.  Such compensation may include, but is not limited to, direct
one time payments, payments based on volume, profit sharing, or an on going
financial interest in the Loan.  In addition, broker or correspondent
may act as a sub-servicer with respect to the Loan and receive additional fees
for doing so.  Grantor acknowledges and agrees that it is a
sophisticated Person capable of evaluating these and other circumstances
relevant to obtaining financing in the form of the Loan and that it has or will
obtain from any such broker or correspondent such information regarding any such
compensation as it deems relevant.

       

      5.30  Further
Stipulations.  The additional covenants, agreements and
provisions set forth in Exhibit B attached
hereto, if any, shall be a part of this Security Instrument and
shall,

      
        
           

        

        
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      in the
event of any conflict between such further stipulations and any of the other
provisions of this Security Instrument, be deemed to control.

       

      5.31
Relationship of the
Parties.  The relationship between Grantor and Beneficiary is
that of a borrower and a lender only and neither of those parties is, nor shall
it hold itself out to be, the agent, employee, joint venturer or partner of the
other party.

       

      

      5.32  Fixture
Filing.  This Security Instrument shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Property which are or are to
become fixtures.

       

      

      [No
Further Text on this Page; Signature Page Follows]

      
        
           

        

        
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      IN
WITNESS WHEREOF, Grantor, intending to be legally bound hereby, has duly
executed this Security Instrument as of the day and year first above
written.

       

      
        
          
            
              
                
                  
                    	 
      	
                            Caruth
      Haven, L.P., a Delaware limited partnership

                          
	 
      	 
      	 
      
	 
      	
                            By:   Caruth
      Haven GP, LLC, a Delaware limited liability company, its sole general
      partner

                          
	 
      	 
      	 
      
	 
      	
                            By:  CGI
      Healthcare Operating Partnership, L.P., its sole member

                          
	 
      	 
      	 
      
	 
      	
                            By:  Cornerstone
      Growth & Income Operating Partnership, L.P., its sole general
      partner

                          
	 
      	 
      	 
      
	 
      	
                            By:  Cornerstone
      Growth & Income REIT, Inc., a Maryland corporation, its sole general
      partner

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                            By:      ________________

                          
	 
      	 
      	
                            Name:
      ________________

                          
	 
      	 
      	
                            Title:   ________________

                          

                  

                

              

            

          

        

      

      

      

      

      

      RECORD
AND RETURN TO:

      

      DLA Piper
LLP (US)

      1251
Avenue of the Americas

      New York,
New York 10020

      Attention:  Koren
Blair

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      
        	
                THE
      STATE OF ______________

              	
                §

              

      

      §

      
        	
                COUNTY
      OF ________________

              	
                §

              

      

      

      This
instrument was acknowledged before me on January _____________, 2009, by
_________________________________________, the _________________ of Cornerstone
Growth & Income REIT, Inc., a Maryland corporation, which is the sole
general partner of Cornerstone Growth & Income Operating Partnership, L.P.,
a Delaware limited partnership, which is the sole general partner of CGI
Healthcare Operating Partnership, L.P. a Delaware limited partnership, which is
the sole member of Caruth Haven GP, LLC, a Delaware limited liability company,
which is the sole general partner of Caruth Haven L.P., a Delaware limited
partnership, on behalf of said limited partnership.

       

      

      
        
          
            
              	 
      	___________________________________
	 
      	
                      Notary
      Public, State of _________________

                    
	 	 
	 
      	
                      My
      Commission
Expires:

                    

            

          

        

      

      

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

      

       

      EXHIBIT
A

       

      LEGAL
DESCRIPTION

       

      Tract 1 -
FEE SIMPLE TRACT

      

      Being a
tract or parcel of land situated in the City of Dallas, Dallas County, Texas,
and being all of Lot 4, Block P/5450 of Lincolnshire Addition, an addition to
the City of Dallas, according to the plat recorded in Volume 97182, Page 4718,
Map Records, Dallas County, Texas, and being more particularly described as
follows:

      

      BEGINNING
at a 1/2" iron rod with yellow plastic cap stamped "RLG" set for corner at the
intersection of the Northeasterly line of Caruth Haven Lane (variable width
R.O.W.) with the West line of North Central Expressway (variable width R.O.W.),
being North 26 degrees 42 minutes 20 seconds East a distance of 66.36 feet from
the Northeast corner of a tract of land conveyed to George P. Caruth by deed
recorded in Volume 79140, Page 3698, Deed Records, Dallas County,
Texas;

      

      THENCE
with the Northeasterly line of Caruth Haven Lane as follows:

      

      South 58
degrees 35 minutes 23 seconds West a distance of 16.98 feet to a 1/2" iron rod
with yellow plastic cap stamped "RLG" set for corner;

      

      North 89
degrees 31 minutes 33 seconds West a distance of 19.85 feet to a 1/2" iron rod
with yellow plastic cap stamped "RLG" set for corner, being the beginning of a
curve to the right;

      

      Northwesterly
with said curve to the right whose chord bears North 85 degrees 28 minutes 54
seconds West a distance of 75.67 feet, having a central angle of 08 degrees 05
minutes 18 seconds, a radius of 536.50 feet, and an arc length of 75.74 feet to
a 1/2" iron rod with yellow plastic cap stamped "RLG" set for corner, being the
beginning of a curve to the left;

      

      Northwesterly
with said curve to the left whose chord bears North 84 degrees 45 minutes 57
seconds West a distance of 36.05 feet, having a central angle of 06 degrees 39
minutes 23 seconds, a radius of 310.50 feet, and an arc length of 36.07 feet to
a 1/2" iron rod with yellow plastic cap stamped "RLG" set for corner, being the
beginning of a curve to the right;

      

      Northwesterly
with said curve to the right whose chord bears North 77 degrees 01 minute 24
seconds West a distance of 111.18 feet, having a central angle of 22 degrees 08
minutes 27 seconds, a radius of 289.50 feet, and an arc length of 111.87 feet to
a 1/2" iron rod with yellow plastic cap stamped "RLG" set for corner, being the
beginning of a curve to the right;

      

      Northwesterly
with said curve to the right whose chord bears North 63 degrees 23 minutes 33
seconds West a distance of 49.14 feet, having a central angle of 05 degrees 07
minutes 15 seconds, a radius of 550.00 feet, and an arc length of 49.16 feet to
a chisel mark set for corner, being the southerly common corner between said Lot
4 and Lot 5, Block P/5450 of said Lincolnshire Addition.

      

      THENCE
with the common line between said Lot 4 and said Lot 5 as follows: North 11
degrees 45 minutes 52 seconds West a distance of 19.96 feet to a chisel mark set
for corner;

      

      THENCE
North 36 degrees 31 minutes 19 seconds East a distance of 13.56 feet to a chisel
mark set for corner, being the beginning of a curve to the
left;

      
        
           

        

        
          A -
1

          
            

          

        

        
           

        

      

       

      THENCE in
a Northeasterly direction with said curve to the left whose chord bears North 17
degrees 52 minutes 07 seconds East a distance of 93.07 feet, having a central
angle of 37 degrees 18 minutes 24 seconds, a radius of 145.50 feet, and an arc
length of 94.74 feet to a 1/2" iron rod with yellow plastic cap stamped "RLG"
set for corner;

      

      THENCE
North 00 degrees 47 minutes 05 seconds West a distance of 69.74 feet to a 1/2"
iron rod with yellow plastic cap stamped "RLG" set for corner;

      

      THENCE
North 04 degrees 34 minutes 41 seconds West a distance of 106.19 feet to a
chisel mark set for corner;

      

      THENCE
North 89 degrees 12 minutes 55 seconds East a distance of 281.01 feet to an
aluminum monument found for corner in the West line of said North Central
Expressway;

      

      THENCE
South 01 degree 01 minute 52 seconds East with the West line of said North
Central Expressway a distance of 24.27 feet to a 1/2" iron rod with yellow
plastic cap stamped "RLG" set for corner;

      

      THENCE
South 01 degree 01 minute 57 seconds East with the West line of said North
Central Expressway a distance of 298.00 feet to a 1/2" iron rod with yellow
plastic cap stamped "RLG" set for corner;

      

      THENCE
South 26 degrees 42 minutes 20 seconds West with the West line of said North
Central Expressway a distance of 26.61 feet to the POINT OF BEGINNING and
containing 96,492 square feet or 2.2151 acres of land, more or
less.

      

      Said
2.2152 acre tract is more particularly described on the survey of The Matthews
Company, Inc., certified to by Robert W. Schneeberg, R.P.L.S. #4804, dated
09/24/2008, last revised __/__/2008, and as follows:

      

      Description
of a 2.2152 acre tract of land situated in the Absalom Brandenburg Survey,
Abstract No. 77, City of Dallas, Dallas County, Texas and being all of Lot 4,
Block P/5450, Lincolnshire Addition, an addition to the City of Dallas, Texas
according to the plat thereof recorded in Volume 97182, Page 4718, Map Records,
Dallas County, Texas; said 2.2152 acre tract being more particularly described
by metes and bounds as follows:

      

      BEGINNING,
at the intersection of the northeasterly line of Caruth Haven Lane (variable
width right-of-way) with the west line of U. S. Highway 75 (North Central
Expressway, variable width right-of-way) a disturbed 1/2-inch iron rod with
illegible yellow plastic cap bears S 03 degrees 30 minutes E, 0.69
feet;

      

      THENCE,
with the said northeasterly line of Caruth Haven Lane as follows:

      

      South 58
degrees 35 minutes 23 seconds West, a distance of 16.98 feet to a 1/2-inch iron
rod with yellow plastic cap stamped "RLG" found for corner;

      

      North 89
degrees 31 minutes 33 seconds West, a distance of 19.85 feet to a 1/2-inch iron
rod with yellow plastic cap stamped "RLG" found at the beginning of a curve to
the right having a radius of 536.50 feet;

      

      northwesterly,
with said curve to the right through a central angle of 08 degrees 05 minutes 18
seconds, an arc distance of 75.74 feet (chord bears North 85 degrees 28 minutes
54 seconds West, 75.67 feet) to the beginning of a reverse curve to the left
having a radius of 310.50 feet, a leaning 1/2-inch iron rod found bears N 04
degrees 36 minutes E, 0.50 feet;

      

      northwesterly,
with said curve to the left through a central angle of 06 degrees 39 minutes 23
seconds, an distance of 36.07 feet (chord bears North 84 degrees 45 minutes 57
seconds West, 36.05 feet) to a 1/2-inch iron rod with yellow plastic cap stamped
"RLG" found at the beginning of a reverse curve to the right having a central
angle of 289.50 feet;

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      northwesterly,
with said curve to the right through a central angle of 22 degrees 08 minutes 27
seconds, an arc distance of 111.87 feet (chord bears North 77 degrees 01 minutes
24 seconds West, 111.18 feet) to the beginning of a continuous curve to the
right, a horizontal 1/2-inch iron rod found bears S 45 degrees 33 minutes E,
0.63 feet;

      

      northwesterly,
with said curve to the right having a central angle of 05 degrees 07 minutes 15
seconds, an arc distance of 49.16 feet (chord bears North 63 degrees 23 minutes
33 seconds West, 49.14 feet) to a "+" cut in concrete found at the southwest
corner of said Lot 4, Block P/5450; said point also being the western most
southeast corner of Lot 5, Block P/5450 of said Lincolnshire
Addition;

      

      THENCE,
with the common line of said Lot 4 and Lot 5, Block P/5450 the following metes
and bounds:

      

      North 11
degrees 45 minutes 52 seconds West, a distance of 19.96 feet to a "+" cut in
concrete found for corner;

      

      North 36
degrees 31 minutes 19 seconds East, a distance of 13.56 feet to a "+" cut in
concrete found at the beginning of a curve to the left having a radius of 145.50
feet;

      

      northeasterly,
with said curve to the left through a central angle of 37 degrees 27 minutes 52
seconds, an arc distance of 93.45 feet (chord bears North 17 degrees 52 minutes
07 seconds East, 93.07 feet)(plat calls a central angle of 37 degrees 18 minutes
24 seconds, a radius of 145.50 feet, and an arc distance of 94.74 feet, chord
bearing North 17 degrees 52 minutes 07 seconds East, 93.07 feet) to a 1/2-inch
iron rod with yellow plastic cap stamped "RLG" found at the end of said
curve;

      

      North 00
degrees 47 minutes 05 seconds West, a distance of 69.34 feet (plat calls 69.74
feet) to a point for corner;

      

      North 04
degrees 34 minutes 41 seconds West, a distance of 106.19 feet to point at the
northwest corner of said Lot 4, Block P/5450; said point also being an interior
corner of said Lot 5, Block P/5450;

      

      North 89
degrees 12 minutes 55 seconds East, a distance of 281.01 feet to the northeast
corner of said Lot 4, Block P/5450; said point also being the easternmost
southeast corner of said Lot 5, Block P/5450; said point also being on the said
west right-of-way line of said U. S. Highway 75, a 5/8-inch iron rod found bears
N 27 degrees 51 seconds W, 0.33 feet;

      

      THENCE,
with the said west right-of-way line of U. S. Highway 75, the following metes
and bounds;

      

      South 01
degree 01 minute 52 seconds East, a distance of 24.27 feet to a 1/2-inch iron
rod with yellow plastic cap stamped "RLG" found for corner (TXDOT Monument found
bears South 68 degrees 16 minutes 37 seconds East, 0.26 feet);

      

      South 01
degree 01 minute 57 seconds East, a distance of 298.00 feet to a point for
corner;

      

      South 26
degrees 42 minutes 20 seconds West, a distance of 26.61 feet to the POINT OF
BEGINNING;

      

      CONTAINING
96,493 square feet or 2.2152 acres of land, more or less.

      

      Tract 2 -
Easement Tract

      

      Non-exclusive
easement rights as set forth in Volume 97186, Page 4996, Real Property Records
of Dallas County, Texas.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      Tract 3 -
Easement Tract

      

      Private
Drive created by instrument recorded in Volume 97186, Page 4996, Real Property
Records of Dallas County, Texas.

      

      Tract 4 -
Easement Tract

      

      Driveway
Easement created by instrument recorded in Volume 97207, Page 1290, Real
Property Records, Dallas County, Texas, said easement more particularly
described in the instrument and incorporated herein by
reference.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      EXHIBIT
B

       

      ADDITIONAL
STIPULATIONS

       

      
        	
                B-1

              	
                Lease Termination
      Payment Reserve.

              

      

       

      
        	
                 
      

              	
                (a)

              	
                For
      purposes of this Security Instrument, the capitalized terms defined in
      this Section shall have the meanings ascribed to them as
      follows:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                "Lease Termination
      Payment" shall mean any amounts paid under Leases containing
      early  lease termination options in favor of Tenants thereunder,
      in connection with the exercise of  such Tenant's lease
      termination rights, other than amounts paid for rent and other
      charges  in respect of periods prior to the lease termination
      date.

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                "Lease Termination
      Payment Reserve" shall have the meaning hereinafter set forth in
      this Section.

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                "Tenant Termination
      Improvement Expenditure" shall mean the costs and expenses incurred
      by Grantor for payment of leasing commissions, lease buy-outs and
      expenditures  related to repairs, replacements and improvements
      to Tenant Termination Improvement Space in  connection with
      releasing such Tenant Termination Improvement
  Space.

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                "Tenant Termination
      Improvement Space" shall mean any space subject to a Lease under
      which the Tenant has exercised an option to terminate such Lease and the
      required Lease Termination Payment has been
  received.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                As
      additional security for the indebtedness secured hereby, Grantor shall
      establish and maintain at all times while this Security Instrument
      continues in effect a reserve (the "Lease Termination
      Payment Reserve") with Beneficiary for payment of Tenant
      Termination Improvement Expenditures.  Notwithstanding any
      provision of this Security Instrument or the other Loan Documents to the
      contrary, Grantor shall, within one (1) business day of receipt thereof,
      deliver all Lease Termination Payments (or cause the Manager to deliver
      all such Lease Termination Payments) to Beneficiary for deposit in the
      Lease Termination Payment Reserve.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                (1)

              	
                Grantor
      shall pay all Tenant Termination Improvement Expenditures without regard
      to the amount then available in the Lease Termination Payment
      Reserve.  So long as no default hereunder or under the other
      Loan Documents has occurred and is continuing, and, subject to the
      provisions hereof, Beneficiary shall, to the extent funds are available
      for such purpose in the Lease Termination Payment Reserve, apply any
      portion of each Lease Termination Payment held in the Lease Termination
      Payment Reserve in payment of the Tenant Termination Improvement
      Expenditures incurred with respect to the corresponding Tenant Termination
      Improvement Space to which such Lease
  Termination

              

      

       

      
        
           

        

        
          A - 1

          
            

          

        

        
           

        

      

      Payment
relates.  Provided that (i) Beneficiary has received written
notice at least ten (10) days prior to the due date of any payment relating to
such Tenant Termination Improvement Expenditures, not more frequently than once
each month, or if Grantor makes timely payment therefor, not more than
forty-five (45) days after Grantor has made such payment; (ii) Grantor
furnishes Beneficiary with a written disbursement request for the payment or
reimbursement of such Tenant Termination Improvement Expenditures, not more
frequently than once each month; (iii) Grantor shall have theretofore
furnished Beneficiary with satisfactory evidence of the progress and/or
completion of tenant improvement work, the cost of tenant improvement work,
satisfactory evidence that any and all completed tenant improvement work
complies with law, lien waivers for lienable work, copies of bills, invoices and
other reasonable documentation as may be required by Beneficiary to substantiate
the use of such funds and establish that the Tenant Termination Improvement
Expenditures which are the subject of such disbursement request represent
completed or partially completed capital work and improvements performed at all
or any portion of the applicable Tenant Termination Improvement Space; and
(iv) there are sufficient funds available in the Lease Termination Payment
Reserve, Beneficiary shall make such payment to Grantor for payment of the
Tenant Termination Improvement Expenditures or for reimbursement for Grantor's
payment thereof, within ten (10) days after receipt of the documentation
required thereby.

       

      
        	
                 
      

              	
                (2)

              	
                If
      Grantor shall have received approval from Beneficiary to perform any
      capital improvements to the Property requiring Beneficiary's approval, so
      long as no default hereunder or under the other Loan Documents has
      occurred and is continuing and, subject to the provisions hereof,
      Beneficiary shall permit Grantor to utilize any funds on deposit in the
      Lease Termination Payment Reserve in payment of the related capital
      improvement expenditures.  Provided that (i) Beneficiary
      has received written notice at least ten (10) days prior to the due date
      of any payment relating to such capital improvement expenditure or if
      Grantor makes timely payment therefor, not more than forty-five (45) days
      after Grantor has made such payment; (ii) Grantor furnishes
      Beneficiary with a written disbursement request for the payment or
      reimbursement of such capital expenditures not more frequently than once a
      month; (iii) Grantor shall have theretofore furnished Beneficiary
      with satisfactory evidence of the progress and/or completion of any
      capital improvement work, satisfactory evidence that any and all completed
      capital improvement work complies with law, lien waivers for lienable
      work, copies of bills, invoices and other reasonable documentation as may
      be required by Beneficiary to substantiate the use of such funds; and
      (iv) there are sufficient funds available in the Lease Termination
      Payment Reserve, Beneficiary shall make such payment to Grantor for
      payment of such capital improvement expenditures or reimbursement of
      Grantor's payment thereof, within ten

              

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

      

       

      (10) days
after receipt of the documentation required in connection
therewith.

       

      
        	
                 
      

              	
                (3)

              	
                Notwithstanding
      anything contained herein to the contrary, Beneficiary shall disburse to
      Grantor any portion of any Lease Termination Payment remaining on deposit
      in the Lease Termination Payment Reserve promptly after (i) the
      related Tenant Termination Improvement Space has been leased to an
      unrelated, third-party tenant for a net effective rent which is at an
      arm's length competitive market rate; (ii) such tenant has taken
      possession of such Tenant Termination Improvement Space and the obligation
      to pay rent under the related lease shall have commenced; (iii) such
      tenant shall have delivered an estoppel certificate confirming that it has
      accepted such Tenant Termination Improvement Space, that Grantor has
      completed any construction obligations under the related lease and that
      the obligation to pay rent thereunder has commenced and (iv) if required
      by Beneficiary, evidence satisfactory to Beneficiary that the Real
      Property is free from mechanic’s or similar liens and an endorsement to
      Beneficiary’s title policy confirming there are no liens, encumbrances or
      other matters affecting title to the Real Property other than the
      Permitted Exceptions.

              

      

       

      
        	
                 
      

              	
                (4)

              	
                Beneficiary
      shall not be required to make advances from the Lease Termination Payment
      Reserve more frequently than once in any thirty (30) day
      period.  In making any payment from the Lease Termination
      Payment Reserve, Beneficiary shall be entitled to rely on such request
      from Grantor without any inquiry into the accuracy, validity or
      contestability of any such amount.  Beneficiary may (but without
      any obligation to do so), at Grantor's expense, make or cause to be made
      during the term of this Security Instrument an inspection of the Property
      to verify the scope, nature and quality of the work for which payment is
      being requested from the Lease Termination Payment
  Reserve.

              

      

       

      (d)                      The
Lease Termination Payment Reserve shall not, unless otherwise explicitly
required by applicable law, be or be deemed to be escrow or trust funds, but, at
Beneficiary's option and in Beneficiary's discretion, may either be held in a
separate account or be commingled by Beneficiary with the general funds of
Beneficiary.  Interest on the funds contained in the Lease Termination
Payment Reserve shall be credited to Grantor as provided in Section 5.28
hereof.  The Lease Termination Payment Reserve is solely for the
protection of Beneficiary and entails no responsibility on Beneficiary's part
beyond the payment of the costs and expenses described in this Section in
accordance with the terms hereof and beyond allowing of due credit for the sums
actually received.  In the event that the amounts on deposit or
available in the Lease Termination Payment Reserve are inadequate to pay for all
or any Tenant Termination Improvement Expenditure, Grantor shall pay the amount
of such deficiency.  Upon assignment of this Security Instrument by
Beneficiary, any funds in the Lease Termination Payment Reserve shall be turned
over to the assignee and any responsibility of Beneficiary, as assignor, with
respect thereto shall terminate.  If there is a default under this
Security Instrument which is not cured within any applicable grace or cure
period, Beneficiary may, but shall not be

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      obligated
to, apply at any time the balance then remaining in the Lease Termination
Payment Reserve against the indebtedness secured hereby in whatever order
Beneficiary shall subjectively determine.  No such application of the
Lease Termination Payment Reserve shall be deemed to cure any default
hereunder.  Beneficiary shall not be required to make advances from
the Lease Termination Payment Reserve more frequently than once in any thirty
(30) day period.  In making any payment from the Lease Termination
Payment Reserve, Beneficiary shall be entitled to rely on such request from
Grantor without any inquiry into the accuracy, validity or contestability of any
such amount.  Beneficiary may (but without any obligation to do so),
at Grantor's expense, make or cause to be made during the term of this Security
Instrument an inspection of the Property to verify the scope, nature and quality
of the work for which payment is being requested from the Lease Termination
Payment Reserve.  Upon repayment in full of the indebtedness secured
by this Security Instrument in accordance with its terms or at such earlier time
as Beneficiary may elect, the balance of the Lease Termination Payment Reserve
then in Beneficiary's possession shall be paid over to Grantor and no other
party shall have right or claim thereto

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