Document:

PROMISSORY
NOTE

 

	
  $131,000,000.00

  	
  June 21,
  2006

  

 

FOR
VALUE RECEIVED, BEHRINGER HARVARD TERRACE LP, a Delaware
limited partnership having an address at 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, together with certain future borrowers not a signatory to
this Note on the date hereof, (“Maker”), hereby promises to pay to the order of LEHMAN BROTHERS BANK, FSB, a federal stock
savings bank, having an address at 1000 West Street, Suite 200, Wilmington,
Delaware 19801 (together with its successors and assigns “Payee”) or at such
place as the holder hereof may from time to time designate in writing, the
principal sum of ONE HUNDRED THIRTY ONE MILLION AND NO/DOLLARS
($131,000,000.00) (the “Principal”)
(or such lesser amount thereof as shall be advanced by Payee to Maker under the
Loan Agreement), in lawful money of the United States of America, with interest
on the unpaid principal balance from time to time outstanding at the Interest
Rate, in installments as follows:

A.   A payment of $418,472.22 on the date hereof, representing interest
from the date of funding through July 10, 2006;

B.   On August 11, 2006 (which shall be the first Payment Date
hereunder) and each Payment Date thereafter through and including the Payment
Date immediately preceding the Amortization Commencement Date, Maker shall pay
interest only on the unpaid Principal accrued at the Interest Rate during the
Interest Period immediately preceding such Payment Date (the “Monthly Interest Payment Amount”);

C.   On the Amortization Commencement Date and each Payment Date thereafter
through and including July 11, 2016 (as such date may be changed in
accordance with Section 2.2.4 of the Loan Agreement), Maker shall make
constant payments with respect to this Note in equal monthly installments of
$804,291.90 (the “Monthly
Debt Service Payment Amount”); which is based on the Interest
Rate and a 360-month amortization schedule; each of such payments,
subject to the provisions of Section 3.11 of the Loan Agreement
(hereinafter defined), to be applied (a) First, to the payment of interest
computed at the rate aforesaid; and (b) Second, the balance applied toward
the reduction of the principal sum; and

D.   The balance of the principal sum of this Note together with all
accrued and unpaid interest thereon shall be due and payable on the Maturity
Date.

 

1.    Definitions.
Capitalized terms used but not otherwise defined herein shall have the meanings
given in that certain Loan Agreement (the “Loan Agreement”) dated the date hereof between
Maker and Payee. The following terms have the meanings set forth below:

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

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

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

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

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

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

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

Stated Maturity
Date: July11, 2016, as such date may be changed in
accordance with Section 2.2.4 of the Loan Agreement.

Yield
Maintenance Premium: an amount which, when added to the
outstanding Principal, would be sufficient to purchase U.S. Obligations which
provide payments (a) on or prior to, but as close as possible to, all
successive scheduled payment dates under this Note through the Stated Maturity
Date and (b) in amounts equal to the Monthly Debt Service Payment

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Amount and/or Monthly Interest Payment Amount, as the
case may be, required under this Note through the Stated Maturity Date together
with the outstanding principal balance of this Note as of the Stated Maturity
Date assuming payment of all such Monthly Debt Service Payment Amounts and/or
Monthly Interest Payment Amount, as the case may be, are made (including any servicing
costs associated therewith). In no event shall the Yield Maintenance Premium be
less than zero.

2.    Payments and Computations.
Interest on the unpaid Principal shall be computed on the basis of the actual
number of days elapsed over a 360-day year. All amounts due under this Note
shall be payable without setoff, counterclaim or any other deduction whatsoever
and are payable without relief from valuation and appraisement laws and with
all costs and charges incurred in the collection or enforcement hereof,
including, attorneys’ fees and court costs.

3.    Loan Documents.
This Note is evidence of that certain Loan made by Payee to Maker
contemporaneously herewith and is executed pursuant to the terms and conditions
of the Loan Agreement. This Note is secured by and entitled to the benefits of,
among other things, the Security Instrument and the other Loan Documents.
Reference is made to the Loan Documents for a description of the nature and
extent of the security afforded thereby, the rights of the holder hereof in
respect of such security, the terms and conditions upon which this Note is
secured and the rights and duties of the holder of this Note. No reference
herein to and no provision of any other Loan Document shall alter or impair the
obligation of Maker, which is absolute and unconditional (except for Section 10.1
of the Loan Agreement), to pay the principal of and interest on this Note at
the time and place and at the rates and in the monies and funds described herein.
All of the agreements, conditions, covenants, provisions and stipulations
contained in the Loan Documents to be kept and performed by Maker are by this
reference hereby made part of this Note to the same extent and with the same
force and effect as if they were fully set forth in this Note, and Maker
covenants and agrees to keep and perform the same, or cause the same to be kept
and performed, in accordance with their terms.

4.    Loan Acceleration; Prepayment.
The Debt shall, without notice, become immediately due and payable at the
option of Payee upon the happening of any Event of Default. Maker shall have no
right to prepay or defease all or any portion of the Principal except in accordance
with Sections 2.2.3, 2.3.2, 2.3.3, 2.3.4, 2.4 and 7.4.2 of the Loan Agreement.
If prior to the third Payment Date prior to the Stated Maturity Date (i) Maker
shall (notwithstanding such prohibition of prepayment) tender, and Payee shall,
in its sole discretion, elect to accept, payment of the Debt, or (ii) the
Debt is accelerated by reason of an Event of Default, then the Debt shall include,
and Payee shall be entitled to receive, in addition to the outstanding
principal and accrued interest and other sums due under the Loan Documents, an
amount equal to the Yield Maintenance Premium, if any, that would be required
in connection with a Defeasance if a Defeasance were to occur at the time of
Payee’s acceptance of such tender or other receipt of the Debt (through
foreclosure or otherwise), as the case may be. The principal balance of this
Note is subject to mandatory prepayment, without premium or penalty, (a) in
certain instances of Insured Casualty or Condemnation, as more particularly set
forth in Sections 2.3.2 and 7.4.2 of the Loan Agreement, or (b) provided
no Event of Default is continuing, if payment is required in accordance with Section 5
or Section 6 of the Security Instrument. Except during the continuance of
an Event of Default, all proceeds of any repayment, including permitted prepayments,
of Principal shall be applied in accordance with Section 2.3.1 of the Loan

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Agreement. During the continuance of an Event of
Default, all proceeds of repayment, including any payment or recovery on the
Property (whether through foreclosure, deed-in-lieu of foreclosure, or
otherwise) shall, unless otherwise provided in the Loan Documents, be applied
in such order and in such manner as Payee shall elect in Payee’s discretion.

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

6.    Late Payment Charge.
If any regularly scheduled payment of Principal, interest or other monthly
payment due under any Loan Document is not paid by Maker on the date on which
it is due (other than the balloon payment of Principal due on the Maturity Date
or acceleration of the Loan) and, Maker shall pay to Payee upon demand an
amount equal to the lesser of 5% of such unpaid sum or the maximum amount
permitted by applicable law (the “Late Payment Charge”), in order to defray the
expense incurred by Payee in handling and processing such delinquent payment
and to compensate Payee for the loss of the use of such delinquent payment.

7.    Amendments. This
Note may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Maker or
Payee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought. Whenever used, the singular number shall
include the plural, the plural the singular, and the words “Payee” and “Maker” shall include
their respective successors, assigns, heirs, executors and administrators. If
Maker consists of more than one person or party, the obligations and liabilities
of each such person or party shall be joint and several.

8.    Waiver. Maker and
all others who may become liable for the payment of all or any part of the Debt
do hereby severally waive presentment and demand for payment, notice of dishonor,
protest, notice of protest, notice of nonpayment, notice of intent to
accelerate the maturity hereof and of acceleration. No release of any security
for the Debt or any person liable for payment of the Debt, no extension of time
for payment of this Note or any installment hereof, and no alteration,
amendment or waiver of any provision of the Loan Documents made by agreement
between Payee and any other person or party shall release, modify, amend, waive,
extend, change, discharge, terminate or affect the liability of Maker, and any
other person or party who may become liable under the Loan Documents, for the
payment of all or any part of the Debt.

9.    Exculpation. It is
expressly agreed that recourse against Maker for failure to perform and observe
its obligations contained in this Note shall be limited as and to the extent
provided in Section 10.1 of the Loan Agreement.

10. Notices. All notices
or other communications required or permitted to be given pursuant hereto shall
be given in the manner specified in the Loan Agreement directed to the parties
at their respective addresses as provided therein.

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11. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS) AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

12. No Conflicts. In the
event of any conflict between the provisions of this Note and any provision of
the Loan Agreement, then the provisions of the Loan Agreement shall control.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, Maker
has executed this Promissory Note as of the day and year first written.

	
  

  	
   

  	
  BEHRINGER HARVARD TERRACE LP,

  
	
   

  	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Behringer Harvard Terrace GP, LLC, a

  
	
   

  	
   

  	
  Delaware limited liability company, its general

  
	
   

  	
   

  	
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III, Secretary

  

 

 

 

	
  STATE OF ________________

  	
  )

  
	
   

  	
  )ss:

  
	
  COUNTY OF ______________

  	
  )

  

 

 

On the _____ day of
_____________ in the year 2006, before me, the undersigned, personally appeared
Gerald J. Reihsen, III, as Secretary of Behringer Harvard Terrace GP, LLC,
a Delaware limited liability company, as general partner of BEHRINGER HARVARD TERRACE
LP, a Delaware limited partnership, on behalf of said limited liability company
and limited partnership, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity as aforesaid, and that by his signature on the instrument, he, or the
person upon behalf of which he acted, executed the instrument.

 

 

	
  

  	
   

  
	
   

  	
  Notary PublicExhibit 10.7

BEHRINGER
HARVARD TERRACE LP, as trustor

(Borrower)

to

BARNET
B. SKELTON, JR., as trustee

(Trustee)

for the benefit of

LEHMAN
BROTHERS BANK, FSB, as beneficiary

(Lender)

 

DEED OF
TRUST AND

SECURITY AGREEMENT

 

	
  

  	
  Dated:

  	
  June 21, 2006

  
	
   

  	
  Location:

  	
  2600, 2700, 2801 and 2901 Via Fortuna Drive,

  
	
   

  	
   

  	
  Austin, Texas

  
	
   

  	
  County:

  	
  Travis

  
	
   

  	
   

  	
   

  
	
   

  	
  UPON RECORDATION RETURN TO:

  
	
   

  	
   

  	
   

  
	
   

  	
  Stroock & Stroock & Lavan LLP

  
	
   

  	
  180 Maiden Lane

  
	
   

  	
  New York, New York 10038-4982

  
	
   

  	
  Attention: 

  	
  Patrick Myers

  

 

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.

 

 

THIS DEED OF TRUST AND SECURITY
AGREEMENT (this “Security Instrument”), by BEHRINGER HARVARD TERRACE LP, a Delaware
limited partnership, having its principal place of business at 15601 Dallas
Parkway, Suite 600, Addison, Texas 75001, as trustor (“Borrower”) to BARNET B. SKELTON, JR., an individual,
having an address at 1111 Bagby, 47th Floor, Houston, Texas 77002, as trustee (“Trustee”) for the
benefit of LEHMAN BROTHERS BANK, FSB,
a federal stock savings bank, having an address at 1000 West Street, Suite 200,
Wilmington, Delaware 19801, as beneficiary (“Lender”).

Borrower and Lender have entered into a Loan Agreement
dated as of the date hereof (as amended, modified, restated, consolidated or
supplemented from time to time, the “Loan Agreement”) pursuant to which Lender is
making a secured loan to Borrower in the maximum principal amount of ONE
HUNDRED THIRTY ONE MILLION AND NO/DOLLARS ($131,000,000.00) (the “Loan”). Capitalized
terms used herein without definition are used as defined in the Loan Agreement.
The Loan is evidenced by a Note dated the date hereof made by Borrower to
Lender in such principal amount (as the same may be amended, modified,
restated, severed, consolidated, renewed, replaced, or supplemented from time
to time, the “Note”).

Borrower is the owner of fee simple title to certain
parcels of real property (the “Premises”) located in the County of Travis, State of
Texas and more particularly described in Exhibit A attached hereto, and
the buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (collectively, the “Improvements”).

To secure the payment of the Note and all sums which
may or shall become due thereunder or under any of the other documents
evidencing, securing or executed in connection with the Loan (the Note, this
Security Instrument, the Loan Agreement and such other documents, as any of the
same may, from time to time, be modified, amended or supplemented, being
hereinafter collectively referred to as the “Loan Documents”), including (i) the
payment of interest and other amounts which would accrue and become due but for
the filing of a petition in bankruptcy (whether or not a claim is allowed
against Borrower for such interest or other amounts in any such bankruptcy
proceeding) or the operation of the automatic stay under Section 362(a) of
Title 11 of the United States Code (the “Bankruptcy Code”), and (ii) the costs
and expenses of enforcing any provision of any Loan Document (all such sums
being hereinafter collectively referred to as the “Debt”), Borrower, has granted,
bargained, transferred, assigned, set-over and conveyed and by these presents
does grant, bargain, transfer, assign, set over and convey unto Trustee, and
unto his or its successors in the trust hereby created and his or its assigns,
forever, the Premises and the Improvements.

TOGETHER WITH: all
right, title, interest and estate of Borrower now owned, or hereafter acquired,
in and to the following property, rights, interests and estates (the Premises,
the Improvements, and the property, rights, interests and estates hereinafter
described are collectively referred to herein as the “Property”):

(a)  all
easements, rights-of-way, strips and gores of land, streets, ways, alleys,
passages, sewer rights, water, water courses, water rights and powers, air
rights and development rights, rights to oil, gas, minerals, coal and other
substances of any kind or character, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances

 

 

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

(b)  all
machinery, furniture, furnishings, equipment, computer software and hardware,
fixtures (including all heating, air conditioning, plumbing, lighting,
communications and elevator fixtures), inventory, materials, supplies and other
articles of personal property and accessions thereof, renewals and replacements
thereof and substitutions therefor, and other property of every kind and
nature, tangible or intangible, owned by Borrower, or in which Borrower has or
shall have an interest, now or hereafter located upon the Premises or the
Improvements, or appurtenant thereto, and usable in connection with the present
or future operation and occupancy of the Premises and the Improvements
(hereinafter collectively referred to as the “Equipment”), including any leases of,
deposits in connection with, and proceeds of any sale or transfer of any of the
foregoing, and the right, title and interest of Borrower in and to any of the
Equipment that may be subject to any “security interest” as defined in the
Uniform Commercial Code, as in effect in the State where the Property is
located (the “UCC”),
superior in lien to the lien of this Security Instrument;

(c)  all awards
or payments, including interest thereon, that may heretofore or hereafter be
made with respect to the Premises or the Improvements, whether from the
exercise of the right of eminent domain or condemnation (including any transfer
made in lieu of or in anticipation of the exercise of such right), or for a
change of grade, or for any other injury to or decrease in the value of the
Premises or Improvements;

(d)  all leases
and other agreements or arrangements heretofore or hereafter entered into
providing for the use, enjoyment or occupancy of, or the conduct of any
activity upon or in, the Premises or the Improvements, including any
extensions, renewals, modifications or amendments thereof (hereinafter
collectively referred to as the “Leases”) and all rents, rent equivalents, moneys
payable as damages (including payments by reason of the rejection of a Lease in
a Bankruptcy Proceeding or in lieu of rent or rent equivalents), royalties
(including all oil and gas or other mineral royalties and bonuses), income,
fees, receivables, receipts, revenues, deposits (including security, utility
and other deposits), accounts, cash, issues, profits, charges for services
rendered, and other consideration of whatever form or nature received by or
paid to or for the account of or benefit of Borrower or its agents or employees
(other than fees paid under the Management Agreement and salaries paid to
employees) from any and all sources arising from or attributable to the
Premises and the Improvements, including all receivables, customer obligations,
installment payment obligations and other obligations now existing or hereafter
arising or created out of the sale, lease, sublease, license, concession or
other grant of the right of the use and occupancy of the Premises or the
Improvements, or rendering of services by Borrower or any of its agents or
employees, and proceeds, if any, from business interruption or other loss of
income insurance (hereinafter collectively referred to as the “Rents”), together
with all proceeds from the sale or other disposition of the Leases and the
right to receive and apply the Rents to the payment of the Debt;

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(e)  all proceeds
of and any unearned premiums on any insurance policies covering the Property
(in the case of a blanket policy of insurance, to the extent allocable to the
Property), including the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for damage to the
Property;

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

(g)  all accounts
(including reserve accounts), escrows, documents, instruments, chattel paper,
claims, deposits and general intangibles, as the foregoing terms are defined in
the UCC, and all franchises, trade names, trademarks, symbols, service marks, books,
records, plans, specifications, designs, drawings, surveys, title insurance
policies, permits, consents, licenses, management agreements, contract rights
(including any contract with any architect or engineer or with any other
provider of goods or services for or in connection with any construction,
repair or other work upon the Property), approvals, actions, refunds of real
estate taxes and assessments (and any other governmental impositions related to
the Property) and causes of action that now or hereafter relate to, are derived
from or are used in connection with the Property, or the use, operation,
maintenance, occupancy or enjoyment thereof or the conduct of any business or
activities thereon (hereinafter collectively referred to as the “Intangibles”); and

(h)  and all
proceeds, products, offspring, rents and profits from any of the foregoing,
including those from sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of any of the foregoing.

Without limiting the generality of any of the
foregoing, in the event that a case under the Bankruptcy Code is commenced by
or against Borrower, pursuant to Section 552(b)(2) of the Bankruptcy
Code, the security interest granted by this Security Instrument shall
automatically extend to all Rents acquired by the Borrower after the
commencement of the case and shall constitute cash collateral under Section 363(a) of
the Bankruptcy Code.

TO HAVE AND TO HOLD the
above granted and described Property unto Trustee, as trustee for the benefit
of Lender, to its successors in the trust created by this Security Instrument
and to its or their respective assigns, forever, in trust, upon the terms and
conditions set forth herein;

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

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 Loan
Documents and shall well and truly abide by and comply with each and every
covenant and condition set forth in the Loan Documents in a timely manner,
these presents and the estate hereby granted shall cease, terminate and be
void;

AND Borrower
represents and warrants to and covenants and agrees with Lender as follows:

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PART I
- GENERAL PROVISIONS.

1.    Payment of Debt and Incorporation of Covenants
Conditions and Agreements. Borrower shall pay the Debt at the
time and in the manner provided in the Loan Documents. All the covenants,
conditions and agreements contained in the Loan Documents are hereby made a
part of this Security Instrument to the same extent and with the same force as
if fully set forth herein. Without limiting the generality of the foregoing,
Borrower (i) agrees to insure, repair, maintain and restore damage to the
Property, pay Taxes and Other Charges, and comply with Legal Requirements, in
accordance with the Loan Agreement, and (ii) agrees that the Proceeds of
Insurance and Awards for Condemnation shall be settled, held and applied in
accordance with the Loan Agreement.

2.    Leases and Rents.

(a)  Borrower
does hereby absolutely and unconditionally assign to Lender all of Borrower’s
right, title and interest in all current and future Leases and Rents, it being
intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Such assignment
shall not be construed to bind Lender to the performance of any of the
covenants or provisions contained in any Lease or otherwise impose any
obligation upon Lender. Nevertheless, subject to the terms of this paragraph,
Lender grants to Borrower a revocable license to operate and manage the
Property and to collect the Rents subject to the requirements of the Loan
Agreement (including the deposit of Rents into the Clearing Account). Upon an
Event of Default, without the need for notice or demand, the license granted to
Borrower herein shall automatically be revoked, and Lender shall immediately be
entitled to possession of all Rents in the Clearing Account, the Deposit
Account (including all Subaccounts thereof) and all Rents collected thereafter
(including Rents past due and unpaid), whether or not Lender enters upon or
takes control of the Property. Borrower hereby grants and assigns to Lender the
right, at its option, upon revocation of the license granted herein, to enter
upon the Property in person, by agent or by court-appointed receiver to collect
the Rents. Unless prohibited by applicable law, any Rents collected after the
revocation of such license may be applied toward payment of the Debt in such
priority and proportions as Lender in its sole discretion shall deem proper.

(b)  Borrower
shall not enter into, modify, amend, cancel, terminate or renew any Lease
except as provided in Section 5.10 of the Loan Agreement.

3.    Use of Property. Except as provided in
the Loan Agreement, (a) Borrower shall not initiate, join in, acquiesce in
or consent to any change in any private restrictive covenant, zoning law or
other public or private restriction, limiting or defining the uses which may be
made of the Property; (b) if under applicable zoning provisions the use of
the Property is or shall become a nonconforming use, Borrower shall not cause
or permit such nonconforming use to be discontinued or abandoned without the
consent of Lender; and (c) Borrower shall not (i) change the use of
the Property, (ii) permit or suffer to occur any waste on or to the
Property, or (iii) take any steps to convert the Property to a condominium
or cooperative form of ownership.

4.    Transfer or Encumbrance of the Property.

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(a)  Borrower
acknowledges that (i) Lender has examined and relied on the
creditworthiness and experience of the principals of Borrower in owning and
operating properties such as the Property in agreeing to make the Loan, (ii) Lender
will continue to rely on Borrower’s ownership of the Property as a means of
maintaining the value of the Property as security for the Debt, and (iii) Lender
has a valid interest in maintaining the value of the Property so as to ensure
that, should Borrower default in the repayment of the Debt, Lender can recover
the Debt by a sale of the Property. Borrower shall not sell, convey, alienate,
mortgage, grant, encumber, pledge or otherwise transfer the Property or any
part thereof, or suffer or permit any Transfer to occur, other than a Permitted
Transfer or as otherwise expressly permitted under the Loan Documents.

(b)  Lender shall
not be required to demonstrate any actual impairment of its security or any
increased risk of default hereunder in order to declare the Debt immediately
due and payable upon Transfer in violation of this Paragraph 4. This provision
shall apply to every sale, conveyance, alienation, granting, mortgage,
encumbrance, pledge or transfer of the Property (and every other Transfer)
regardless of whether voluntary or not. Any Transfer made in contravention of
this Paragraph 4 shall be null and void and of no force and effect. Borrower
agrees to bear and shall pay or reimburse Lender on demand for all reasonable
expenses (including reasonable attorneys’ fees and disbursements, title search
costs and title insurance endorsement premiums) incurred by Lender in
connection with the review, approval and documentation of any Permitted
Transfer.

5.    Changes in Laws Regarding Taxation. If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender’s interest in the Property, Borrower will pay such tax, with interest
and penalties thereon, if any. If Lender is advised by its counsel that the
payment of such tax or interest and penalties by Borrower would be unlawful,
taxable to Lender or unenforceable, or would provide the basis for a defense of
usury, then Lender shall have the option, by notice of not less than 90 days,
to declare the Debt immediately due and payable.

6.    No Credits on Account of the Debt. Borrower
shall not claim or demand or be entitled to any credit on account of the Debt
for any part of the Taxes or Other Charges assessed against the Property, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property for real estate tax purposes by reason of this Security Instrument or
the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by notice of not less than 90 days, to declare the Debt
immediately due and payable.

7.    Further Acts, Etc. Borrower shall, at
its sole cost, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, grantings, mortgages, assignments, notices of
assignment, transfers and assurances as Lender shall, from time to time,
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Lender the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or
for carrying out the intention or facilitating the performance of the terms of this
Security Instrument, or for filing, registering or recording this Security
Instrument or for facilitating the sale and transfer of

 6
 

 

 

the Loan and the Loan Documents in connection with a
Secondary Market Transaction as described in Section 9.1 of the Loan
Agreement. Upon foreclosure, the appointment of a receiver or any other
relevant action, Borrower shall, at its sole cost, cooperate fully and
completely to effect the assignment or transfer of any license, permit,
agreement or any other right necessary or useful to the operation of the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all
rights and remedies available to Lender at law and in equity, including such
rights and remedies available to Lender pursuant to this paragraph.
Notwithstanding anything to the contrary in the immediately preceding sentence,
Lender shall not execute any document as attorney-in-fact of Borrower unless (x) Borrower
shall have failed or refused to execute the same within five (5) Business
Days after Lender’s request therefor, or (y) in Lender’s good faith
determination it would be materially prejudiced by the delay involved in making
such a request. Lender shall give prompt notice to Borrower of any exercise of
the power of attorney as provided for in this Paragraph 7, along with copies of
all documents executed in connection therewith.

8.    Recording of Security Instrument, Etc. Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, shall cause this Security Instrument, and any
security instrument creating a lien or security interest or evidencing the lien
hereof upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect
the lien or security interest hereof upon, and the interest of Lender in, the
Property. Borrower shall pay all filing, registration and recording fees, all
expenses incident to the preparation, execution and acknowledgment of and all
federal, state, county and municipal, taxes, duties, imposts, documentary
stamps, assessments and charges arising out of or in connection with the
execution and delivery of, this Security Instrument, any Security Instrument
supplemental hereto, any security instrument with respect to the Property and
any instrument of further assurance, except where prohibited by applicable law
so to do. EXCEPT TO THE EXTENT THE FOLLOWING
RELATE SOLELY TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE APPLICABLE
INDEMNIFIED PARTY, Borrower shall hold harmless and indemnify
Lender, Trustee and their respective successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making or
recording of this Security Instrument.

9.    Right to Cure Defaults. Upon the
occurrence of any Event of Default, Lender may, but without any obligation to
do so and without notice to or demand on Borrower and without releasing
Borrower from any obligation hereunder, perform the obligations in Default in
such manner and to such extent as Lender may deem necessary to protect the
security hereof. Lender is authorized to enter upon the Property for such
purposes or appear in, defend or bring any action or proceeding to protect its
interest in the Property or to foreclose this Security Instrument or collect
the Debt, and the cost and expense thereof (including reasonable attorneys’
fees and disbursements to the extent permitted by law), with interest thereon
at the Default Rate for the period after notice from Lender that such cost or
expense was incurred to the date of payment to Lender, shall constitute a
portion of the Debt, shall be secured by this Security Instrument and the other
Loan Documents and shall be due and payable to Lender upon demand.

10.  Remedies.

 7
 

 

 

(a)  Upon the
occurrence of any Event of Default, Lender or Trustee may take such action,
without notice or demand, as Lender deems advisable to protect and enforce
Lender’s and Trustee’s rights against Borrower and in and to the Property, by
Lender itself, Trustee or otherwise, including the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such order
as Lender may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Trustee or Lender:

(i)         declare
the entire Debt to be immediately due and payable;

(ii)        institute
a proceeding or proceedings, judicial or nonjudicial, to the extent permitted
by applicable law, by advertisement, by action or otherwise, for the complete
foreclosure of this Security Instrument, in which case the Property may be sold
for cash or upon credit in one or more parcels or in several interests or
portions and in any order or manner;

(iii)       with
or without entry, to the extent permitted and pursuant to the procedures
provided by applicable law, institute proceedings for the partial foreclosure
of this Security Instrument for the portion of the Debt then due and payable,
subject to the continuing lien of this Security Instrument for the balance of
the Debt not then due;

(iv)       sell
for cash or upon credit the Property and all estate, claim, demand, right,
title and interest of Borrower therein and rights of redemption thereof,
pursuant to the power of sale, to the extent permitted by applicable law, or
otherwise, at one or more sales, as an entirety or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by applicable law;

(v)        institute
an action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein or in any other Loan
Document;

(vi)       recover
judgment on the Note either before, during or after any proceeding for the
enforcement of this Security Instrument;

(vii)      apply
for the appointment of a trustee, receiver, liquidator or conservator of the
Property, without notice and without regard for the adequacy of the security
for the Debt and without regard for the solvency of the Borrower or of any
person, firm or other entity liable for the payment of the Debt;

(viii)     enforce
Lender’s interest in the Leases and Rents and enter into or upon the Property,
either personally or by its agents, nominees or attorneys and dispossess
Borrower and its agents and employees therefrom, and thereupon Lender may (A) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal
with the Property and conduct the business thereat; (B) complete any
construction on the Property in such manner and form as Lender deems advisable;
(C) make alterations, additions, renewals, replacements and improvements
to or on the Property; (D) exercise all rights and powers of Borrower with
respect to the Property, whether in the name of Borrower or otherwise,
including the right to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive Rents; and (E) unless prohibited
by

 8
 

 

 

applicable law,
apply the receipts from the Property to the payment of the Debt, after
deducting therefrom all expenses (including reasonable attorneys’ fees and
disbursements) incurred in connection with the aforesaid operations and all
amounts necessary to pay the Taxes, insurance and other charges in connection
with the Property, as well as just and reasonable compensation for the services
of Lender, and its counsel, agents and employees;

(ix)  require Borrower to pay monthly in advance to
Lender, or any receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the Property occupied
by Borrower, and require Borrower to vacate and surrender possession of the
Property to Lender or to such receiver, and, in default thereof, evict Borrower
by summary proceedings or otherwise;

(x)   foreclose this Security Instrument in
accordance with the laws of the State of Texas. The costs and expenses incurred
by Lender in the exercise of any of the remedies provided in this Security
Instrument shall be secured by this Security Instrument; or

(xi)  pursue such other rights and remedies as may
be available at law or in equity or under the UCC, including the right to
receive and/or establish a lock box for all Rents and proceeds from the
Intangibles and any other receivables or rights to payments of Borrower
relating to the Property.

In the event of a sale, by foreclosure or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien on the remaining portion of the Property.

(b)  The proceeds
of any sale made under or by virtue of this Paragraph 10, together with any
other sums which then may be held by Lender under this Security Instrument,
whether under the provisions of this paragraph or otherwise, shall be applied
by Lender to the payment of the Debt in such priority and proportion as Lender
in its sole discretion shall deem proper.

(c)  Lender may
adjourn from time to time any sale by it to be made under or by virtue of this
Security Instrument by announcement at the time and place appointed for such
sale or for such adjourned sale or sales; and, except as otherwise provided by
any applicable law, Lender, without further notice or publication, may make
such sale at the time and place to which the same shall be so adjourned.

(d)  Upon the
completion of any sale or sales pursuant hereto, Lender, or an officer of any
court empowered to do so, shall execute and deliver to the accepted purchaser
or purchasers a good and sufficient instrument, or good and sufficient
instruments, conveying, assigning and transferring all estate, right, title and
interest in and to the property and rights sold. Any sale or sales made under
or by virtue of this Paragraph 10, whether made under the power of sale herein
granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of Borrower
in and to the properties and rights so sold, and shall be a perpetual bar both
at law and in equity against Borrower and against any and all persons claiming
or who may claim the same, or any part thereof, from, through or under
Borrower.

 

 9

 

 

(e)  Upon any sale made under or by virtue of this
Paragraph 10, whether made under a power of sale or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, Lender
may bid for and acquire the Property or any part thereof and in lieu of paying
cash therefor may make settlement for the purchase price by crediting upon the
Debt the net sales price after deducting therefrom the expenses of the sale and
costs of the action and any other sums which Lender is authorized to deduct
under this Security Instrument or any other Loan Document.

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

(g)  Lender may terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies
provided in this Paragraph 10 at any time before the conclusion thereof, as
determined in Lender’s sole discretion and without prejudice to Lender.

(h)  Lender may resort to any remedies and the
security given by this Security Instrument or in any other Loan Document in
whole or in part, and in such portions and in such order as determined by
Lender’s sole discretion. No such action shall in any way be considered a
waiver of any rights, benefits or remedies evidenced or provided by any Loan
Document. The failure of Lender to exercise any right, remedy or option
provided in any Loan Document shall not be deemed a waiver of such right,
remedy or option or of any covenant or obligation secured by any Loan Document.
No acceptance by Lender of any payment after the occurrence of any Event of
Default and no payment by Lender of any obligation for which Borrower is liable
hereunder shall be deemed to waive or cure any Event of Default, or Borrower’s
liability to pay such obligation. No sale of all or any portion of the
Property, no forbearance on the part of Lender, and no extension of time for
the payment of the whole or any portion of the Debt or any other indulgence
given by Lender to Borrower, shall operate to release or in any manner affect
the interest of Lender in the remaining Property or the liability of Borrower
to pay the Debt. No waiver by Lender shall be effective unless it is in writing
and then only to the extent specifically stated. All costs and expenses of
Lender in exercising its rights and remedies under this Paragraph 10 (including
reasonable attorneys’ fees and disbursements to the extent permitted by law),
shall be paid by Borrower immediately upon notice from Lender, with interest at
the Default Rate for the period after notice from Lender, and such costs and
expenses shall constitute a portion of the Debt and shall be secured by this
Security Instrument.

(i)   The interests and rights of Lender under the
Loan Documents shall not be impaired by any indulgence, including: (i) any
renewal, extension or modification which Lender may grant with respect to any
of the Debt; (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Lender may grant with respect to the Property or
any portion thereof; or (iii) any release or indulgence granted to any
maker, endorser, guarantor or surety of any of the Debt.

11.  Right of
Entry. In addition to any other rights or remedies granted under
this Security Instrument, Lender and its agents shall have the right to enter
and inspect the Property

 10
 

 

 

at any reasonable time during the term of this
Security Instrument. The cost of such inspections or audits shall be borne by
Borrower should Lender determine that an Event of Default exists, including the
cost of all follow up or additional investigations or inquiries deemed
reasonably necessary by Lender. The cost of such inspections, if not paid for
by Borrower following demand, may be added to the principal balance of the sums
due under the Note and this Security Instrument and shall bear interest
thereafter until paid at the Default Rate.

12.  Security
Agreement.

(a)  This Security Instrument is both a real
property Security Instrument and a “security agreement” within the meaning of
the UCC. The Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Borrower in
the Property. Borrower by executing and delivering this Security Instrument has
granted and hereby grants to Lender, as security for the Debt, a security
interest in the Property to the full extent that the Property may be subject to
the UCC (such portion of the Property so subject to the UCC being called in
this paragraph the “Collateral”).
This Security Instrument shall also constitute a “fixture filing” for the
purposes of the UCC and is to be filed for record in the real estate records
where any part of the Property (including said fixtures) is situated. As such,
this Security Instrument covers all items of the Collateral that are or are to
become fixtures. Information concerning the security interest herein granted
may be obtained from the parties at the addresses of the parties set forth in
the first paragraph of this Security Instrument. If an Event of Default shall
occur, Lender, in addition to any other rights and remedies which it may have,
shall have and may exercise immediately and without demand, any and all rights
and remedies granted to a secured party upon default under the UCC, including,
without limiting the generality of the foregoing, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Lender may deem necessary for the care, protection and preservation of the
Collateral. Upon request or demand of Lender, Borrower shall at its expense
assemble the Collateral and make it available to Lender at a convenient place
acceptable to Lender. Borrower shall pay to Lender on demand any and all
expenses, including reasonable attorneys’ fees and disbursements, incurred or
paid by Lender in protecting its interest in the Collateral and in enforcing
its rights hereunder with respect to the Collateral. Any notice of sale,
disposition or other intended action by Lender with respect to the Collateral,
sent to Borrower in accordance with the provisions hereof at least ten (10) days
prior to such action, shall constitute commercially reasonable notice to
Borrower. The proceeds of any disposition of the Collateral, or any part thereof,
may be applied by Lender to the payment of the Debt in such priority and
proportions as Lender in its sole discretion shall deem proper. In the event of
any change in name, identity or structure of Borrower, Borrower shall notify
Lender thereof and promptly after request shall execute, file and record such
UCC forms as are necessary to maintain the priority of Lender’s lien upon and
security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Lender shall require the
filing or recording of additional UCC forms or continuation statements,
Borrower shall, promptly after request, execute, file and record such UCC forms
or continuation statements as Lender shall deem necessary, and shall pay all
expenses and fees in connection with the filing and recording thereof, it being
understood and agreed, however, that no such additional documents shall
increase Borrower’s obligations under the Loan Documents. Borrower hereby
irrevocably appoints Lender as its attorney-in-fact, coupled with an interest,
to file with the appropriate

 11
 

 

 

public office on its behalf any financing or other
statements (be they unsigned or signed only by Lender, as secured party) in
connection with the Collateral covered by this Security Instrument.

13.  Actions
and Proceedings. Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its sole discretion, decides should be brought to protect its or their interest
in the Property. Lender shall, at its option, be subrogated to the lien of any
other security instrument discharged in whole or in part by the Debt, and any
such subrogation rights shall constitute additional security for the payment of
the Debt.

14.  Marshalling
and Other Matters. Borrower hereby waives, to the extent
permitted by law, the benefit of all homestead, appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by applicable law. The lien of this Security Instrument
shall be absolute and unconditional and shall not in any manner be affected or
impaired by any acts or omissions whatsoever of Lender and, without limiting
the generality of the foregoing, the lien hereof shall not be impaired by (i) any
acceptance by Lender of any other security for any portion of the Debt, (ii) any
failure, neglect or omission on the part of Lender to realize upon or protect
any portion of the Debt or any collateral security therefor or (iii) any
release (except as to the property so released), sale, pledge, surrender,
compromise, settlement, renewal, extension, indulgence, alteration, changing,
modification or disposition of any portion of the Debt or of any of the
collateral security therefor; and Lender may foreclose, or exercise any other
remedy available to Lender under any of the other Loan Documents without first
exercising or enforcing any of its remedies under this Security Instrument, and
any exercise of the rights and remedies of Lender hereunder shall not in any
manner impair the Debt or the liens of any other Loan Document or any of Lender’s
rights and remedies thereunder.

15.  Notices.
All notices, consents, approvals and requests required or permitted
hereunder shall be in writing, and shall be sent, and shall be deemed
effective, as provided in the Loan Agreement.

16.  Inapplicable
Provisions. If any term, covenant or condition of this Security
Instrument is held to be invalid, illegal or unenforceable in any respect, this
Security Instrument shall be construed without such invalid, illegal or
unenforceable provision, and so construing the remaining provisions of this
Security Instrument shall not be deemed to invalidate or render such remaining
provisions hereof unenforceable, and to such ends the provisions hereof are
deemed to be severable.

17.  Headings.
The paragraph headings in this Security Instrument are for convenience of
reference only and are not to be construed as defining or limiting, in any way,
the scope or intent of the provisions hereof.

 12
 

 

 

18.  Duplicate
Originals. This Security Instrument may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.

19.  Definitions.
Unless the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Security Instrument may be
used interchangeably in singular or plural form; and the word “Borrower” shall mean
“each Borrower and any subsequent owner or owners of a fee interest in the
Property or any part thereof,” the word “Lender” shall mean “Lender and any
subsequent holder of the Note,” the words “Property” shall include any portion of the
Property and any interest therein, the words “include” and “including” shall be
deemed to mean “including but not limited to” and the words “attorneys’ fees” shall
include any and all attorneys’ fees, paralegal and law clerk fees, including
fees at the pre-trial, trial and appellate levels incurred or paid by Lender in
protecting its interest in the Property and Collateral and enforcing its rights
hereunder.

20.  Homestead.
Borrower hereby waives and renounces all homestead and exemption rights
provided by the Constitution and the laws of the United States and of any
state, in and to the Property as against the collection of the Debt, or any
part thereof.

21.  Assignments.
Lender shall have the right to assign or transfer its rights under this
Security Instrument in connection with any transfer of its interest in the
Loan, or any portion thereof, in accordance with the Loan Agreement. Any
assignee or transferee shall be entitled to all the benefits afforded Lender
under this Security Instrument.

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

23.  Consents.
Any consent or approval by Lender in any single instance shall not be
deemed or construed to be Lender’s consent or approval in any like matter
arising at a subsequent date, and the failure of Lender to promptly exercise
any right, power, remedy, consent or approval provided herein or at law or in
equity shall not constitute or be construed as a waiver of the same nor shall
Lender be estopped from exercising such right, power, remedy, consent or
approval at a later date. Any consent or approval requested of and granted by
Lender pursuant hereto shall be narrowly construed to be applicable only to
Borrower and the matter identified in such consent or approval and no third
party shall claim any benefit by reason thereof, and any such consent or
approval shall not be deemed to constitute Lender a venturer or partner with
Borrower nor shall privity of contract be presumed to have been established
with

 13
 

 

 

any such third party. If Lender deems it to be in its
best interest to retain assistance of persons, firms or corporations (including
attorneys, title insurance companies, appraisers, engineers and surveyors) with
respect to a request for consent or approval, Borrower shall reimburse Lender
for all costs reasonably incurred in connection with the employment of such
persons, firms or corporations.

24.  Loan
Repayment and Defeasance. The lien of this Security Instrument
shall be terminated, released and reconveyed of record by Lender prior to the
Maturity Date only in accordance with the terms and provisions set forth in the
Loan Agreement.

25.  Governing
Law. This Security Instrument shall be governed by, and be construed
in accordance with, the laws of the state in which the Property is located
without regard to conflict of law provisions thereof.

26.  Exculpation.
The liability of Borrower hereunder is limited pursuant to Section 10.1
of the Loan Agreement.

27.  Substitution
Of Trustee. Lender shall have, and is hereby granted by Borrower
with warranty of further assurances, the irrevocable power to appoint one or
more persons or entities as a substitute Trustee hereunder, to be exercised at
any time hereafter without specifying any reason therefor, by filing for record
in the office where this Security Instrument is recorded a deed of appointment.
Said power of appointment of one or more successor Trustees may be exercised as
often and whenever Lender deems it advisable. The exercise of said power of
appointment, no matter how often, shall not be an exhaustion thereof. Upon the
recordation of such deed of appointment, the Trustee so appointed shall
thereupon, without any further act or deed of conveyance, become fully vested
with identically the same title and estate in and to the Property and with all
the rights, powers, trusts and duties of their, his, hers or its predecessor in
the trust hereunder with like effect as if originally named as Trustee.
Whenever in this Security Instrument reference is made to Trustee, it shall be
construed to mean each person or entity appointed as Trustee for the time
being, whether original or successors or successor in trust. All title, estate,
rights, powers, trusts and duties hereunder given or appertaining to or
devolving upon Trustee shall be in each of the persons or entities appointed as
Trustee so that any action hereunder or purporting to be hereunder of any one
of the persons or entities appointed as Trustee shall for all purposes be
considered to be, and as effective as, the action of Trustee.

28.  The
Trustee’s Fees. Borrower shall pay all reasonable costs, fees
and expenses incurred by the Trustee and the Trustee’s agents and counsel in
connection with the performance by the Trustee of the Trustee’s duties
hereunder and all costs, fees and expenses shall be secured by this Security
Instrument.

29.  Certain
Rights. With the approval of Lender, the Trustee shall have the
right to take any and all of the following actions: (i) to select, employ,
and advise with counsel (who may be, but need not be, counsel for Lender) upon
any matters arising hereunder, including the interpretation of the Note, this
Security Instrument or the other 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 his agents or attorneys, (iii) to select and employ,
in and about the execution of his duties hereunder,

 14
 

 

 

suitable accountants, engineers and other experts,
agents and attorneys-in-fact, either corporate or individual, not regularly in
the employ of the Trustee, and the 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 the Trustee in good faith, or be otherwise responsible
or accountable under any circumstances whatsoever, except for the Trustee’s
gross negligence or bad faith, and (iv) any and all other lawful action as
Lender may instruct the Trustee to take to protect or enforce Lender’s rights
hereunder. The Trustee shall not be personally liable in case of entry by the
Trustee, or anyone entering by virtue of the powers herein granted to the
Trustee, upon the Property for debts contracted for or liability or damages
incurred in the management or operation of the Property. The Trustee shall have
the right to rely on any instrument, document, or signature authorizing or
supporting any action taken or proposed to be taken by the Trustee hereunder,
believed by the Trustee in good faith to be genuine. The Trustee shall be
entitled to reimbursement for actual expenses incurred by the Trustee in the
performance of the Trustee’s duties hereunder and to reasonable compensation
for such of the Trustee’s services hereunder as shall be rendered. IT BEING UNDERSTOOD AND AGREED BY BORROWER THAT
TRUSTEE IS HEREBY RELEASED FOR ANY ERROR OF JUDGMENT OR ACT DONE BY THE TRUSTEE
IN GOOD FAITH THAT CONSTITUTES SIMPLE NEGLIGENCE.

30.  Retention
of Money. All moneys received by the 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 the Trustee shall be
under no liability for interest on any moneys received by the Trustee
hereunder.

31.  Perfection
of Appointment. Should any deed, conveyance, or instrument of
any nature be required from Borrower 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 Borrower.

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

33.  Reliance
of Trustee. As to all matters concerning the existence of
defaults hereunder and the amount of indebtedness subject to the Note and
secured hereby, as well as similar or related matters, the Trustee is hereby
authorized by Borrower to rely conclusively upon, without further inquiry, the
affidavit of any officer of Lender.

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PART II
- TEXAS PROVISIONS

1.    State Specific Provisions.
The following provisions shall also constitute an integral part of this
Security Instrument. Furthermore, in the event that any prior provisions set
forth in Part I of this Security Instrument conflict with the following
provisions of this Part II of this Security Instrument, the provisions of
this Part II shall control and shall be deemed a modification of or
amendment to the section or provision in Part I at issue.

2.    If Borrower shall well and truly pay, or cause to be paid, the
Debt and does keep and perform each and every covenant, condition and stipulation
herein and in the other Loan Documents contained, then these presents shall
become null and void; otherwise to be and remain in full force and effect; but
if an Event of Default shall occur and the Debt, shall, at the option of
Lender, become at once due and payable, then, without limitation to any other
rights or remedies of Lender contained herein, Trustee shall be and is hereby
authorized and empowered, when requested so to do by Lender after such default,
to sell the Property covered hereby at public auction to the highest bidder for
cash between the hours of ten o’clock a.m. and four o’clock p.m. of
the first Tuesday in any month, at the County Court House in the county in
which the Property is situated (or, if the Property is located in more than one
county, the sale may be made at the county courthouse in any county in which
the Property is located), after complying with the statutes and procedures of
the State of Texas governing such sales and after advertising the time, place,
and terms of said sale and the Property to be sold and by posting or causing to
be posted for at least twenty-one consecutive days prior to the date of said
sale written or printed notice thereof at the courthouse door of the county in
which the sale is to be made and if the Property is located in more than one
county, one notice shall be posted at the courthouse door of each county in
which the Property is located. In addition to such posting of notice, Lender
shall at least twenty-one (21) days preceding the date of sale file a copy of
such notice with the Clerk of each county in which the Property is located and
shall serve written notice of the proposed sale by certified mail on Borrower
and on each other debtor, if any, obligated to pay the Debt. Service of such
notice shall be completed upon deposit of the notice enclosed in a postpaid
wrapper, properly addressed to Borrower and such other debtors at their most
recent address or addresses as shown by the records of Lender 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 completed shall be prima facie evidence of the
fact of service. Borrower agrees that no notice of any sale other than as set
out in this paragraph need be given by Trustee, Lender or any other person.
Notwithstanding the foregoing provisions of this paragraph, notice of such sale
given in accordance with the applicable laws of the State of Texas in effect at
the time of such sale shall constitute sufficient notice of such sale. The
Borrower does hereby authorize and empower said Trustee and each and all of his
or its successors in this trust, to sell the Property, together, or in lots or
parcels, as Trustee shall deem expedient, and to execute and deliver to the
purchaser or purchasers of the Property good and sufficient deeds of conveyance
thereof by fee simple title, with covenants of general warranty, and the title
of such purchaser or purchasers, when so made by Trustee, Borrower binds itself
to warrant and forever defend; and to receive the proceeds of said sale which
shall be applied in accordance with the following order of priority: (i) Taxes
and all ground rents, maintenance charges and similar charges, now or hereafter
levied or assessed or imposed against the Property or any part thereof; (ii) Insurance
Premiums; (iii) Interest on the unpaid principal balance of the Note; (iv) Amortization
of the unpaid principal balance of the

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

3.    Lender may bid and become the purchaser of the Property at any such
sale. The deed or deeds which shall be given by Trustee to the purchaser or
purchasers at such sale shall be prima facie evidence of the truth of all the
recitals therein as to default in the payment of the Debt, or of interest due
thereon, or of the sums thereunder and hereunder due, the request to the
Trustee to sell, the advertisement or posting of such sale, the proceedings at
such sale, the facts, if any, authorizing a substitute Trustee to act in the
Property, and everything necessary to the validity of such sale. Or upon any
such default, at the option of Lender, this Security Instrument may be
foreclosed according to law.

4.    Subject to the conditions hereinafter set forth, the Borrower
specifically agrees that after any sale under this Security Instrument it shall
be a mere tenant at sufferance of the purchaser of said property at Trustee’s
sale and that the purchaser of said property shall be entitled to immediate
possession thereof, and if the Borrower fails to vacate the Property
immediately, the purchaser may, and shall have the right to, go into any
justice court in the precinct or county in which any portion of the Property is
located and file an action in forcible entry and detainer, which action shall
lie against Borrower as tenant at sufferance. This remedy is cumulative of any
and all remedies the purchaser may have hereunder or otherwise.

5.    It is agreed that in the event a foreclosure hereunder shall be
commenced by Trustee advertising the Property for sale, Lender may, at any time
before the sale of the Property by Trustee, direct Trustee to abandon the sale
of the Property as advertised, and Lender may institute legal proceedings for a
foreclosure under this Security Instrument, and such election on the part of
Lender in directing Trustee to make such sale shall not constitute an election
of remedies or preclude the prosecution of said foreclosure suit hereunder; and
it is further agreed that if Lender should institute a suit for foreclosure the
plaintiff in any such suit may dismiss such suit at any time before the entry
of final judgment of foreclosure and require Trustee to advertise the Property
and sell the same under the powers given Trustee herein, and the filing of such
suit shall not constitute an election of remedies on the part of Lender, or
preclude Lender from dismissing said suit and requiring the Trustee to sell the
Property as authorized in this Security Instrument.

6.    In the case of death of the Trustee (or any of the persons
comprising Trustee) or his refusal, failure or inability for any reason to make
said sale or to perform said trusts, or in any event and at the option of
Lender, Lender shall have the right and is hereby authorized and empowered to
appoint in writing but without notice (notice of such appointment being hereby
specifically waived by Borrower) and without specifying the reason therefor, a
successor Trustee, as the substitute for the said Trustee, without other
formality than the designation in writing of such substitution of Trustee, such
authority hereby conferred shall extend to the appointment of other substitute
trustees successively until the Debt has been paid in full. Each substitute
Trustee shall thereupon succeed to all the estate, rights, powers and trusts
hereinabove granted to or vested in the said Trustee. Such appointment may be
executed by anyone acting in a representative capacity, including, without
limitation, an attorney-in-fact of Lender, and such appointment shall be
exclusively presumed to have been executed with appropriate authority.

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7.    In the event any item, items, terms
or provisions contained in this instrument are in conflict with the laws of the
State of Texas, this instrument shall be affected only as to its application to
such item, items, terms or provisions, and shall in all other respects remain
in full force and effect. Notwithstanding any of the terms and conditions of
this instrument and/or all other contracts and obligations executed in
connection therewith, there shall never be paid or collected and Lender shall
have no right to charge any sum or sums as interest as defined by the laws of
Texas (after giving effect to the choice of law provisions contained herein and
in the Note) which would cause the total interest (including that charged or
stipulated for in this and all other contracts and obligations executed in
connection herewith) on the actual principal sum or sums loaned or advanced to
exceed the maximum rate allowed by law (after giving effect to the choice of
law provisions contained herein and in the Note). It is hereby agreed that no
interest in excess of the maximum rate allowed by law shall be charged, paid or
received for the use or forbearance or detention of said actual principal sum
or sums loaned or advanced. Further, nothing contained herein shall require
Borrower to make any payment or do anything contrary to law, but if any clause
or provision herein contained shall otherwise operate to invalidate this
Security Instrument in whole or in part, then such clauses and provisions only
shall be held to naught as though not herein contained and the remainder of
this Security Instrument shall remain operative and in full force and effect.

8.    It is hereby agreed that Lender is
hereby subrogated to all of the rights, liens, remedies, equities, superior
title and benefits held, owned, possessed or enjoyed at any time by any owners
or holders of indebtedness discharged from funds advanced under the Note.
Borrower further agrees that if it becomes necessary for Lender to advance any
sum greater than the maximum principal amount of the Debt (which advancement
may be for taking up vendor’s or other liens, past due taxes, insurance
premiums, liens for labor or materials, for procuring deeds or any other
instruments to protect title of Borrower), it may do so and this Security
Instrument shall secure such advancement which Borrower hereby agrees to pay
upon demand.

9.    All costs and expenses incurred by Trustee in connection with the
enforcement of its rights and remedies hereunder (including, but not limited,
its reasonable attorneys’ fees and expenses) shall be paid for by Borrower upon
demand of Trustee or Lender and shall constitute additional sums secured
hereunder.

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK. BORROWER’S SIGNATURE

FOLLOWS ON NEXT PAGE.]

 

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IN
WITNESS WHEREOF, Borrower has executed this instrument as of
the day and year first written above.

	
   

  	
   

  	
  BEHRINGER HARVARD TERRACE LP, a Delaware limited
  partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Behringer Harvard Terrace GP, LLC, a Delaware

  
	
   

  	
   

  	
  limited liability company, its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III, Secretary

  

 

[BORROWER’S SIGNATURE IS
NOTARIZED ON NEXT PAGE]

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