DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING AMREIT PRESTON ROYAL, LP, a Texas limited partnership, Borrower, having an office at 8 Greenway Plaza, Suite 1000 Houston, Texas 77046 to PETER S. GRAF, Trustee for the benefit of TRANSAMERICA...

This instrument was prepared by:

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Nyemaster ▇▇▇▇▇

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After recording, return to above address.

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

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AEGON Loan No. 10512155

1.

RECITALS

A.

Under the terms of a commercial Loan Application/Commitment dated November 14, 2012, as amended (the “Commitment”), AEGON USA Realty Advisors, LLC (“AEGON”), as agent for the Lender, agreed to fund a loan in the principal amount of $23,400,000 (the “Loan”).

B.

The Lender has funded the Loan in the principal amount of $23,400,000 in accordance with the Commitment, and to evidence the Loan, the Borrower has executed and delivered to the Lender a certain Secured Promissory Note, of even date, in the amount of $23,400,000, with a maturity and final payment date of January 1, 2020.

C.

The Commitment requires that the Loan be secured by all of the Borrower’s existing and after-acquired interest in certain real property and by certain tangible and intangible personal property.

2.

GRANTING CLAUSE

To secure the repayment of the Indebtedness, any increases, modifications, renewals or extensions of the Indebtedness, and any substitutions for the Indebtedness, as well as the performance of the Borrower’s other Obligations, and in consideration of the sum of ten dollars ($10.00) and other valuable consideration, the receipt and sufficiency of which are acknowledged, the Borrower grants, bargains, warrants, conveys, alienates, releases, assigns, sets over and confirms to the Trustee, in trust with the POWER OF SALE for the benefit of the Lender and to his successors and assigns forever, all of the Borrower’s existing and after acquired interests in the Real Property.

3.

DEFINED TERMS

The following defined terms are used in this Deed of Trust. For ease of reference, terms relating primarily to the Security Agreement are defined in Subsection 22.1.

“Affiliate” of any person means any entity controlled by, or under common control with, that person.

“Appurtenances” means all rights, estates, titles, interests, privileges, easements, tenements, hereditaments, titles, royalties, reversions, remainders and other interests, whether presently held by the Borrower or acquired in the future, that may be conveyed

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AEGON Loan No. 10512155

as interests in the Land under the laws of Texas. Appurtenances include the Easements and the Assigned Rights.

“Assigned Rights” means all of the Borrower’s rights, easements, privileges, tenements, hereditaments, contracts, claims, licenses or other interests, whether presently existing or arising in the future. The Assigned Rights include all of the Borrower’s rights in and to:

(i)

any greater estate in the Real Property;

(ii)

insurance policies required to be carried hereunder, including the right to negotiate claims and to receive Insurance Proceeds and unearned insurance premiums (except as expressly provided in Subsection 8.2);

(iii)

Condemnation Proceeds;

(iv)

licenses and agreements permitting the use of sources of groundwater or water utilities, septic ▇▇▇▇▇ fields, railroad sidings, sewer lines, and means of ingress and egress;

(v)

drainage over other property;

(vi)

air space above the Land;

(vii)

mineral rights;

(viii)

party walls;

(ix)

vaults and their usage;

(x)

franchises;

(xi)

commercial tort claims that arise during the Loan term in respect of damages to the Real Property or to its operations, in respect of any impairment to the value of the Real Property, or in respect of the collection of any Rents;

(xii)

construction contracts;

(xiii)

roof and equipment guarantees and warranties;

(xiv)

building and development licenses and permits;

(xv)

tax credits or other governmental entitlements, credits or rights, whether or not vested;

(xvi)

licenses and applications (whether or not yet approved or issued);

(xvii)

rights under management and service contracts;

(xviii)

leases of Fixtures; and

(xix)

trade names, trademarks, trade styles, service marks, copyrights, and agreements with architects, environmental consultants, property tax consultants, engineers, and any other third-party contractors whose services benefit the Real Property.

“Assignment of Leases and Rents” means the Loan Document bearing this heading. “Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended, 11 U.S.C. Sections 101 et seq., and the regulations promulgated pursuant to those statutes.

“Business Day” means any day when state and federal banks are open for business in Cedar Rapids, Iowa.

“Carveout Guarantee and Indemnity” means that certain “Carveout Guarantee and Indemnity Agreement” entered into by the Carveout Obligor on the date of this Deed of Trust, together with all substitutions, modifications, and amendments.

“Carveout Obligations” means those obligations described in Section 21.

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“Carveout Obligor” means AmREIT, Inc. Any other Person who expressly assumes liability for the Carveout Obligations during the term of the Loan shall become a “Carveout Obligor” for purposes of this Deed of Trust.

“Carveouts” means those matters from which Carveout Obligations may arise, which are described in Section 21.

“Charges” means all fees, charges, and other things of value, if any, contracted for, charged, received, taken or reserved pursuant to the Note or any of the other Loan Documents in connection with the Loan, and which are treated as interest under applicable law (whether in connection with any voluntary prepayment of the Indebtedness, or otherwise, and including fees for the forbearance of any enforcement action or for the extension or modification of the Loan).

“Condemnation Proceeds” means all money or other property that has been, or is in the future, awarded or agreed to be paid or given in connection with any taking by eminent domain of all or any part of the Real Property (including a taking through the vacation of any street dedication or through a change of grade of such a street), either permanent or temporary, or in connection with any purchase in lieu of such a taking, or as a part of any related settlement, except for the right to condemnation proceeds awarded to the tenant in a separate proceeding in respect of the lost value of the tenant’s leasehold interest, provided that the award does not reduce, directly or indirectly, the award to the owner of the Real Property.

“Curable Non-Monetary Default” means any of the acts, omissions, or circumstances specified in Subsection 10.3 below.

“Default” means any of the acts, omissions, or circumstances specified in Section 10 below.

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

“Development Agreements” means all development, utility or similar agreements included in the Permitted Encumbrances.

“Easements” means the Borrower’s existing and future interests in and to the declarations, easements, covenants, and restrictions appurtenant to the Land.

“Environmental Indemnity Agreement” means the Loan Document bearing that heading, together with all substitutions, modifications, and amendments.

“Environmental Laws” means all present and future laws, statutes, ordinances, rules, regulations, orders, guidelines, rulings, decrees, notices and determinations of any Governmental Authority to the extent that they pertain to: (A) the protection of health against environmental hazards; (B) the protection of the environment, including air, soils, wetlands, and surface and underground water, from contamination by any substance that may have any adverse health effect on humans, livestock, fish, wildlife, or plant life, or which may disturb an ecosystem; (C) underground storage tank regulation or removal; (D) wildlife conservation; (E) protection or regulation of natural resources; (F) the protection of wetlands; (G) management, regulation and disposal of solid and hazardous wastes; (H) radioactive materials; (I) biologically hazardous materials; (J) indoor air quality; or (K) the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, emission, discharge, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Substances. “Environmental Laws” include the Comprehensive Environmental Response, Compensation, and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.

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§9601 et seq., the Resource Conservation and ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. §▇▇▇▇ et seq., the Federal Water Pollution Control Act, as amended by the Clean ▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. §▇▇▇▇ et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances ▇▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. §▇▇▇▇ et seq., the Texas Solid Waste Disposal Act (V.T.C.A. Health and Safety Code §361.001 et. seq.), the Texas Water Code (V.T.C.A. §36.001 et seq.), all similar state statutes and local ordinances, and all regulations promulgated under any of those statutes, and all administrative and judicial actions respecting such legislation, all as amended from time to time.

“ESA” means the written environmental site assessment of the Real Property obtained under the terms of the Commitment.

“Escrow Expenses” means those expenses in respect of real and personal property taxes and assessments, Insurance Premiums and such other Impositions as the Lender pays from time to time directly from the Escrow Fund using monies accumulated through the collection of Monthly Escrow Payments.

“Escrow Fund” means the funds deposited by Borrower with the Lender pursuant to Section 9 hereof, as reflected in the accounting entry maintained on the books of the Lender as funds available for the payment of Escrow Expenses under the terms of this Deed of Trust.

“Fixtures” means all materials, supplies, equipment, apparatus and other items now or hereafter attached to or installed on the Land and Improvements in a manner that causes them to become fixtures under the laws of Texas, including all built-in or attached furniture or appliances, elevators, escalators, heating, ventilating and air conditioning system components, emergency electrical generators and related fuel storage or delivery systems, septic system components, storm windows, doors, electrical equipment, plumbing, water conditioning, lighting, cleaning, snow removal, lawn, landscaping, irrigation, security, incinerating, fire-fighting, sprinkler or other fire safety equipment, bridge cranes or other installed materials handling equipment, satellite dishes or other telecommunication equipment, built-in video conferencing equipment, sound systems or other audiovisual equipment, and cable television distribution systems. Fixtures do not include trade fixtures, office furniture and office equipment owned by a tenant who is unrelated to the Borrower, provided such items may be detached and removed by the tenant without damage to the Real Property, other than incidental damage that the tenant is obligated to repair under the terms of its Lease. Fixtures expressly include HVAC, mechanical, security and similar systems of general utility for the operation of the Improvements as leasable commercial real property.

“Governmental Authority” means any political entity with the legal authority to impose any requirement on the Property, including the governments of the United States, the State of Texas, Dallas County, the City of Dallas, and any other entity with jurisdiction to decide, regulate, or affect the ownership, construction, use, occupancy, possession, operation, maintenance, alteration, repair, demolition or reconstruction of any portion or element of the Real Property.

“Hazardous Substance” means any substance the release of or the exposure to which is prohibited, limited or regulated by any Environmental Law, or which poses a hazard to human health, including: (A) any “oil,” as defined by the Federal Water Pollution Control Act and regulations promulgated thereunder (including crude oil or any fraction of crude oil), (B) any radioactive substance and (C) Stachybotrys chartarum or other molds. However, the term “Hazardous Substance” includes neither (A) a substance used in the cleaning and maintenance of the Real Property, if the quantity, storage and manner of its

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AEGON Loan No. 10512155

use are customary, prudent, and do not violate applicable law, nor (B) automotive motor oil in immaterial quantities, if leaked from vehicles in the ordinary course of the operation of the Real Property and cleaned up in accordance with reasonable property management procedures and in a manner that violates no applicable law.

“Impositions” means all real and personal property taxes levied against the Property; general or special assessments; ground rent; water, gas, sewer, vault, electric or other utility charges; common area charges; owners’ association dues or fees; fees for any easement, license or agreement maintained for the benefit of the Property; and any and all other taxes, levies, user fees, claims, charges and assessments whatsoever that at any time may be assessed, levied or imposed on the Property or upon its ownership, use, occupancy or enjoyment, and any related costs, interest or penalties. In addition, “Impositions” include all documentary, stamp or intangible personal property taxes that may become due in connection with the Indebtedness, including Indebtedness in respect of any future advance made by the Lender to the Borrower, or that are imposed on any of the Loan Documents.

“Improvements” means, to the extent of the Borrower’s existing and future interest, all buildings and improvements of any kind erected or placed on the Land now or in the future, including the Fixtures, together with all appurtenant rights, privileges, Easements, tenements, hereditaments, titles, reversions, remainders and other interests.

“Indebtedness” means all sums that are owed or become due pursuant to the terms of the Note, this Deed of Trust, or any of the other Loan Documents or any other writing executed by the Borrower relating to the Loan, including scheduled principal payments, scheduled interest payments, default interest, late charges, prepayment premiums, accelerated or matured principal balances, advances, collection costs (including reasonable attorneys’ fees), reasonable attorneys’ fees and costs in enforcing or protecting the Note, this Deed of Trust, or any of the other Loan Documents in any probate, bankruptcy or other proceeding, receivership costs, fees and costs of the Trustee and all other financial obligations of the Borrower incurred in connection with the Loan transaction, provided, however, that this Deed of Trust shall not secure any Loan Document or any particular person’s liabilities or obligations under any Loan Document to the extent that such Loan Document expressly states that it or such particular person’s liabilities or obligations are unsecured by this Deed of Trust. “Indebtedness” shall also include any obligations under agreements executed and delivered by Borrower which specifically provide that such obligations are secured by this Deed of Trust.

“Insurance Premiums” means all premiums or other charges required to maintain in force any and all insurance policies that this Deed of Trust requires that the Borrower maintain.

“Insurance Proceeds” means (A) all proceeds of all insurance now or hereafter carried by or payable to the Borrower with respect to the Real Property, including with respect to the interruption of rents or income derived from the Property, all unearned insurance premiums and all related claims or demands, and (B) all Proceeds (as defined in Subsection 22.1).

“Key Lease” means any Lease that satisfies one or more of the following conditions:

(a)

The Lease is to a tenant who leases or will lease more than 12,000 square feet of the net leasable area of the Improvements, either presently or following the execution of a proposed Lease.

(b)

The Lease is to a tenant whose rental payment(s) under all Leases comprises or will comprise more than 20% of the gross rental income of

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AEGON Loan No. 10512155

the Real Property, either presently or following the execution of a proposed Lease.

“Key Principal” means AmREIT, Inc.

“Land” means that certain tract of land located in Dallas County, Texas, which is described on the attached Exhibit A, together with the Appurtenances.

“Leasehold Shopping Center Parcel” means the approximately 7.49 acre parcel of land generally located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, the leasehold interest which is being acquired by AmREIT Preston Royal NEC, LP concurrently with this Deed of Trust.

“Leases” means all leases, subleases, licenses, concessions, extensions, renewals and other agreements (whether written or oral, and whether presently effective or made in the future) through which the Borrower grants any possessory interest in and to, or any right to occupy or use, all or any part of the Real Property, and any related guaranties.

“Legal Control” means the power, either directly or indirectly, to exercise the authority of the Borrower as owner of the Real Property, either as the majority shareholder of the common stock of a corporation, the sole general partner of a limited partnership, the managing general partner of a general partnership, or the sole manager or sole managing member of a limited liability company, provided the person or entity exercising such authority cannot be divested of such authority without its consent, either directly or indirectly, except for cause.

“Legal Requirements” means all laws, statutes, rules, regulations, ordinances, judicial decisions, administrative decisions, building permits, development permits, certificates of occupancy, or other requirements of any Governmental Authority.

“Loan Documents” means all documents evidencing the Loan or delivered in connection with the Loan, whether entered into at the closing of the Loan or in the future, including, without limitation, the Note, this Deed of Trust, the Assignment of Leases and Rents, the Carveout Guarantee and Indemnity, and the Environmental Indemnity Agreement.

“Maximum Lawful Rate” means the maximum lawful rate of interest that may be contracted for, charged, received or reserved by the Lender in accordance with the applicable laws of the State of Texas (or applicable federal law to the extent that it permits the Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges.

“Monthly Escrow Payment” means the sum of the Monthly Imposition Requirement, the Monthly Insurance Premium Requirement, and the Monthly Reserve Requirement.

“Monthly Imposition Requirement” means one-twelfth (1/12th) of the annual amount that the Lender estimates will be required to permit the timely payment by the Lender of those Impositions that the Lender elects, from time to time, to include in the calculation of the Monthly Imposition Requirement. Such Impositions shall include real and personal property taxes and may include, at the Lender’s sole and absolute discretion, any Impositions that the Borrower has failed to pay on a timely basis during the term of the Loan. The Lender shall base its estimate on the most recent information supplied by the Borrower concerning future Impositions. If the Borrower fails to supply such information or if it is unavailable at the time of estimation, the Lender shall estimate future Impositions using historical information and an annual inflation factor equal to the lesser of five percent (5%) and the maximum inflation factor permitted by law.

“Monthly Insurance Premium Requirement” means one-twelfth (1/12th) of the annual amount that the Lender estimates (based on available historical data and using, if future

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AEGON Loan No. 10512155

Insurance Premiums are as yet undeterminable, a five percent (5%) inflation factor) will be required to permit the timely payment of the Insurance Premiums by the Lender.

“Monthly Reserve Requirement” means the monthly payment amount which the Lender estimates will result, over the subsequent twelve (12) months, in the accumulation of a surplus in the Escrow Fund equal to the sum of the Monthly Imposition Requirement and the Monthly Insurance Premium Requirement.

“Note” means the promissory note dated of even date herewith to evidence the Indebtedness in the original principal amount of $23,400,000, together with all extensions, renewals and modifications.

“Notice” means a notice given in accordance with the provisions of Subsection 27.12.

“Obligations” means all of the obligations required to be performed under the terms and conditions of any of the Loan Documents by any Obligor.

“Obligor” means the Borrower, the Carveout Obligor, or any other Person that is liable under the Loan Documents for the payment of any portion of the Indebtedness, or the performance of any other obligation required to be performed under the terms and conditions of any of the Loan Documents, under any circumstances.

“Participations” means participation interests in the Loan Documents granted by the Lender.

“Permitted Control Group Member” shall mean any member of a group comprised of the Key Principal, institutional trustees of estate planning trusts established for the sole benefit of Permitted Control Group Members, and executors of the estates of Permitted Control Group Members.

“Permitted Encumbrances” means (A) the lien of taxes and assessments not yet due and payable and (B) those matters of public record listed as special exceptions or subordinate matters in the Lender’s title insurance policy insuring the priority of this Deed of Trust.

“Permitted Transfer” means a transfer specifically described in Section 14 as permitted.

“Person” means any individual, corporation, limited liability company, partnership, trust, unincorporated association, government, governmental authority or other entity.

“Property” means the Real Property and the Leases, Rents and Personal Property (as such latter term is defined in Subsection 22.1 below).

“Qualified Offer” means a written offer from the Borrower to do whichever of the following the Lender elects: (A) permit an uncontested foreclosure, or (B) deliver a deed in lieu of foreclosure within sixty (60) days of the Lender’s acceptance of the offer. An offer is not a Qualified Offer if the offer is conditioned on any payment by the Lender, on the release of any Obligor from any Obligation, or on any other concession.

“Qualified Passive Interest Transfer” shall have the meaning stated in Section 14.

“Qualified Property Manager” means either (A) a property management company approved in writing by the Lender, or (B) AmREIT Realty Investment Corporation.

“Real Property” means the Land and the Improvements.

“Rents” means all rents, income, receipts, issues and profits and other benefits paid or payable for using, leasing, licensing, possessing, operating from or in, residing in, selling, mining, extracting minerals from, or otherwise enjoying the Real Property, whether presently existing or arising in the future, to which the Borrower may now or hereafter

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AEGON Loan No. 10512155

become entitled or may demand or claim from the commencement of the Loan term through the time of the satisfaction of all of the Obligations, including security deposits, amounts drawn under letters of credit securing tenant obligations, minimum rents, additional rents, common area maintenance charges, parking revenues, deficiency rents, termination payments, space contraction payments, damages following default under a Lease, premiums payable by tenants upon their exercise of cancellation privileges, proceeds from lease guarantees, proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by destruction or damage to the Real Property, all rights and claims of any kind which the Borrower has or may in the future have against the tenants under the Leases, lease guarantors, or any subtenants or other occupants of the Real Property, all proceeds of any sale of the Real Property in violation of the Loan Documents, any future award granted the Borrower in any court proceeding involving any such tenant in any bankruptcy, insolvency, or reorganization proceedings in any state or federal court, and any and all payments made by any such tenant in lieu of rent.

“Restoration” means (A) in the case of a casualty resulting in damage to or the destruction of the Improvements, the repair or rebuilding of the Improvements to their original condition, or (B) in the case of the condemnation of a portion of the Real Property, the completion of such work as may be necessary in order to remedy the effects of the condemnation so that the value and income-generating characteristics of the Real Property are restored.

“Shopping Center” means the Real Property together with the Leasehold Shopping Center Parcel.

“Termination Payments” means Rents paid to the Borrower in consideration of the Borrower’s release of a party from liability for a contractual or other legal obligation (e.g., lease termination, space contraction, and legal settlement payments). Termination Payments do not include payments of Rents under $250,000 paid pursuant to termination or space contraction options contained in Leases approved by the Lender or in Leases deemed approved or not requiring Lender approval under the Assignment.

4.

TITLE

The Borrower represents to and covenants with the Lender and with its successors and assigns that, at the point in time of the grant of this Deed of Trust, the Borrower is well seized of good and indefeasible title to the Real Property, in fee simple absolute, subject to no lien or encumbrance except the Permitted Encumbrances. The Borrower warrants this estate and title to the Lender and to its successors and assigns forever, against all lawful claims and demands of all Persons. The Borrower shall maintain mortgagee title insurance issued by a solvent carrier, covering the Real Property in an amount at least equal to the amount of the Loan’s original principal balance. This Deed of Trust is and shall remain a valid and enforceable first mortgage on and security title to the Real Property, and if the validity or enforceability of this first mortgage is attacked by appropriate proceedings, the Borrower shall diligently and continuously defend it through appropriate proceedings. Should the Borrower fail to do so, the Lender may at the Borrower’s expense take all necessary action, including the engagement and compensation of legal counsel, the prosecution or defense of litigation, and the compromise or discharge of claims. THE BORROWER SHALL DEFEND, INDEMNIFY AND HOLD THE LENDER HARMLESS IN ANY SUIT OR PROCEEDING BROUGHT TO CHALLENGE OR ATTACK THE VALIDITY,

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ENFORCEABILITY OR PRIORITY OF THE LIEN GRANTED BY THIS DEED OF TRUST, WHETHER OR NOT AS THE RESULT OF THE NEGLIGENCE OF LENDER. If a prior construction, mechanics’ or materialmen’s lien on the Real Property arises by operation of statute during any construction or repair of the Improvements, the Borrower shall either cause the lien to be discharged by paying when due any amounts owed to such persons, or shall comply with Section 12 of this Deed of Trust.

5.

REPRESENTATIONS OF THE BORROWER

The Borrower represents to the Lender as follows:

5.1

Legal Control

The Borrower is under the Legal Control of the Key Principal.

5.2

Formation, Existence, Good Standing

The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of Texas.

5.3

Power and Authority

The Borrower has full power and authority to carry on its business as presently conducted, to own the Property, to execute and deliver the Loan Documents, and to perform its Obligations.

5.4

Anti-Terrorism Regulations

No Borrower, Borrower Affiliate, or person owning an interest in the Borrower or in any Borrower Affiliate, is either a “Specially Designated National” or a “Blocked Person” as those terms are defined in the Office of Foreign Asset Control Regulations (31 CFR Section 500 et seq.).

5.5

Due Authorization

The Loan transaction and the performance of all of the Borrower’s Obligations have been duly authorized by all requisite partnership action, and each individual executing any Loan Document on behalf of the Borrower has been duly authorized to do so.

5.6

No Default or Violations

The execution and performance of the Borrower’s Obligations will not result in any breach of, or constitute a default under, any contract, agreement, document or other instrument to which the Borrower is a party or by which the Borrower may be bound or affected, and do not and will not violate or contravene any law to which the Borrower is subject; nor do any such other instruments impose or contemplate any obligations which are or will be inconsistent with the Loan Documents.

5.7

No Further Approvals or Actions Required

No approval by, authorization of, or filing with any Governmental Authority is necessary in connection with the authorization, execution and delivery of the Loan Documents by the Borrower.

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5.8

Due Execution and Delivery

Each of the Loan Documents to which the Borrower is a party has been duly executed and delivered on behalf of the Borrower.

5.9

Legal, Valid, Binding and Enforceable

Each of the Loan Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.

5.10

Accurate Financial Information

All financial information furnished by the Borrower to the Lender in connection with the application for the Loan is true, correct and complete in all material respects except as otherwise disclosed to Lender in writing, and there has been no material adverse change in the financial condition of the Borrower since the date of such financial information.

5.11

Compliance with Legal Requirements

All governmental approvals and licenses required for the conduct of the Borrower’s business and for the maintenance and operation of the Real Property in compliance with applicable law are in full force and effect, and the Real Property is currently being operated in compliance with the Legal Requirements in all material respects.

5.12

Contracts and Franchises

All contracts and franchises necessary for the conduct of the Borrower’s business and for the operation of the Real Property in accordance with reasonable commercial practice are in force.

5.13

No Condemnation Proceeding

As of the Effective Date of this Deed of Trust, the Borrower has no knowledge of any present, pending or threatened condemnation proceeding or award affecting the Real Property.

5.14

No Casualty

As of the Effective Date of this Deed of Trust, no damage to the Real Property by any fire or other casualty has occurred, other than damage that has been completely repaired, except as disclosed to Lender.

5.15

Independence of the Real Property

The Real Property may be operated independently from other land and improvements not included within or located on the Land, and it is not necessary to own or control any property other than the Real Property in order to comply with the Legal Requirements.

5.16

Complete Lots and Tax Parcels

The Land is comprised exclusively of tax parcels that are entirely included within the Land, and, if the Land is subdivided, of subdivision lots that are entirely included within the Land.

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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5.17

Intentionally Omitted

5.18

Ownership of Fixtures

The Borrower owns the Fixtures free of any encumbrances, including purchase money security interests, rights of lessors, and rights of sellers under conditional sales contracts or other financing arrangements.

5.19

Commercial Property

The Real Property is commercial rather than residential, and the Loan has not been made for personal, family or household purposes.

5.20

Real Property is not Homestead Property

The Real Property is NOT HOMESTEAD PROPERTY of the Borrower or of the spouse of any person named as the Borrower.

5.21

Performance under Development Agreements

To Borrower’s knowledge, all of the obligations of the owner of the Real Property due under the Development Agreements have been fully, timely and completely performed and such performance has been accepted by the related governmental agency or utility company, and no Governmental Authority has alleged that any default exists under any of the Development Agreements.

5.22

Status of Certain Title Matters

To Borrower’s knowledge, each of the Easements included within the Appurtenances (a) is valid and in full force and effect and may not be amended or terminated, except for cause, without the consent of the Borrower, (b) has not been amended or supplemented, (c) requires no approval of the Improvements that has not been obtained, (d) is free of defaults or alleged defaults, (e) does not provide for any assessment against the Real Property that will not be paid in full prior to delinquency, and (f) has not been violated by the owner of the Real Property or, to the best of the Borrower’s knowledge, by any tenant of the Real Property.

5.23

No Prohibited Transactions

The Borrower represents to the Lender that either (a) the Borrower is not an “employee benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is subject to Title I of ERISA, a “plan” within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or an entity that is deemed to hold “plan assets” within the meaning of 29 C.F.R. §2510.3-101 of any such employee benefit plan or (b) the execution of the Loan Documents, the acceptance of the Loan by the Borrower and the existence of the Loan will not result in a non-exempt prohibited transaction under §406 of ERISA or Section 4975 of the Code. The Borrower further warrants and covenants that the foregoing representation will remain true during the term of the Loan.

The Lender acknowledges that the Borrower has relied in full or in part on representations from, or on information furnished by, the seller of the Real Property in making the representations of Subsections 5.11 (“Compliance with Legal Requirements”), 5.12 (“Contracts and Franchises”), 5.13 (“No Condemnation Proceeding”), 5.14 (“No Casualty”), 5.21 (“Performance under Development Agreements”), 5.22 (“Status of Certain Title Matters”).

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

-12-

6.

COVENANTS

6.1

Good Standing

The Borrower shall remain in good standing as a limited partnership under the laws of Texas and shall maintain in force all statements of fictitious name and registrations necessary for the lawful operation of its business in Texas during the term of the Loan.

6.2

No Default or Violations

The Borrower shall not enter into any contract, agreement, document or other instrument, if the performance of the Borrower’s Obligations would result in any breach of, or constitute a default under, any such contract, agreement, document or other instrument, or if the contract, agreement, document or other instrument would impose or contemplate any obligations the performance of which would result in a Default under the Loan Documents or would be inconsistent with the performance of the Borrower’s Obligations.

6.3

Payment and Performance

The Borrower shall pay the Indebtedness and perform all of its other Obligations, as and when the Loan Documents require such payment and performance.

6.4

Bankruptcy Remote Entity

The Borrower has not and will not:

(i)

engage in any business or activity other than the ownership, operation and maintenance of the Property, and activities incidental thereto;

(ii)

acquire or own any assets other than (A) the Property, and (B) such incidental Personal Property as may be necessary for the operation of the Property;

(iii)

merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure;

(iv)

fail to observe all organizational formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the Legal Requirements of the jurisdiction of its organization or formation, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

(v)

own any subsidiary, or make any investment in, any Person;

(vi)

commingle its assets with the assets of any other Person;

(vii)

incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Indebtedness, unsecured trade payables and unsecured equipment leases (both of which must be incurred in the ordinary course of business relating to the ownership and operation of the Property) provided the same (x) do not exceed at any time in the aggregate a maximum amount of three percent (3%) of the outstanding principal amount of the Note, and (y) are paid within sixty (60) days after the date incurred;

(viii)

fail to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person;

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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(ix)

enter into any contract or agreement with any general partner, member, shareholder, principal or Affiliate, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties;

(x)

maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xi)

assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

(xii)

make any loans or advances to any Person;

(xiii)

fail to file its own tax returns (unless prohibited by Legal Requirements from doing so);

(xiv)

fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

(xv)

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

(xvi)

fail to allocate shared expenses (including shared office space) and to use separate stationery, invoices and checks;

(xvii)

fail to pay its own liabilities (including salaries of its own employees) from its own funds; and

(xviii)

acquire obligations or securities of its partners, members, shareholders or other Affiliates, as applicable.

6.5

Payment of Impositions

The Borrower shall pay the Impositions on or before the last day on which they may be paid without penalty or interest, and shall, within thirty (30) days, furnish the Lender with a paid receipt or a cancelled check as evidence of payment. If the Lender does not receive such evidence, the Lender may obtain it directly. If it does so, the Lender will charge the Borrower an administrative fee of $250 for securing the evidence of payment. The payment of this fee shall be a demand obligation of the Borrower. The Borrower may meet the Imposition payment requirements of this Subsection 6.5 by remitting the Monthly Escrow Payments when due, by immediately providing Notice to the Lender of any new Imposition or increased Imposition unknown to the Lender, and by paying to the Lender on demand any amount required to increase the Escrow Fund to an amount sufficient to permit the Lender to pay all Impositions from the Escrow Fund on time. If the Borrower wishes to contest the validity or amount of an Imposition, it may do so by complying with Section 12. If any new Legal Requirement (other than a general tax on income or on interest payments) taxes this Deed of Trust so that the yield on the Indebtedness would be reduced, and the Borrower may lawfully pay the tax or reimburse the Lender for its payment, the Borrower shall do so.

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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6.6

Legal Control of the Borrower

The Borrower shall remain under the Legal Control of the Key Principal during the term of the Loan.

6.7

Management of the Real Property

The Real Property shall be managed at all times by the Key Principal, by a property management company engaged by the Key Principal to manage the Real Property, or by a Qualified Property Manager.

6.8

Maintenance of the Real Property

The Borrower shall not commit or permit any waste of the Real Property as a physical or economic asset, and agrees to maintain in good repair the Improvements, including structures, roofs, mechanical systems, parking lots or garages, and other components of the Real Property that are reasonably necessary or desirable for the use of the Real Property, or which the Borrower as landlord under any Lease is required to maintain for the benefit of any tenant. In its performance of this Obligation, the Borrower shall promptly and in a good and workmanlike manner repair or restore, as required under Subsection 6.19, any elements of the Improvements that are damaged or destroyed. The Borrower shall also replace roofs, parking lots, mechanical systems, and other elements of the Improvements requiring periodic replacement. The Borrower shall carry out such replacements no less frequently than would a commercially reasonable owner intending to maintain the maximum income-generating potential of the Real Property over its reasonable economic life. The Borrower shall not, without the prior written consent of the Lender, demolish, reconfigure, or materially alter the structural elements of the Improvements, unless such an action is the obligation of the Borrower under a Lease approved by Lender. The Lender agrees that any request for its consent to such an action shall be deemed given if the Lender does not respond within fifteen (15) Business Days to any written request for such a consent, if the request is accompanied by all materials required to permit the Lender to analyze the proposed action.

6.9

Use of the Real Property

The Borrower agrees that the Real Property may only be used as a retail property and for no other purpose.

6.10

Legal Requirements

The Borrower shall maintain in full force and effect all governmental approvals and licenses required for the conduct of the Borrower’s business and for the maintenance and operation of the Real Property in compliance with applicable law, and shall comply with all Legal Requirements relating to the Real Property at all times.

6.11

Contracts and Franchises

The Borrower shall maintain in force all contracts and franchises necessary for the conduct of the Borrower’s business and for the operation of the Real Property in accordance with good commercial practice.

6.12

Covenants Regarding Certain Title Matters

The Borrower shall promptly pay, perform and observe all of its obligations under the Easements included within the Appurtenances or under reciprocal

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

-15-

easement agreements, operating agreements, declarations, and restrictive covenants included in the Permitted Encumbrances, shall not modify or consent to the termination of any of them without the prior written consent of the Lender, not to be unreasonably conditioned, withheld, or delayed, shall promptly furnish the Lender with copies of all notices of default under them, and shall cause all covenants and conditions under them and benefiting the Real Property to be fully performed and observed.

6.13

Independence of the Real Property

The Borrower shall maintain the independence of the Real Property from other land and improvements not included within or located on the Land. In fulfilling this covenant, the Borrower shall neither take any action which would make it necessary to own or control any property other than the Real Property in order to meet the obligations of the landlord under any Lease, or in order to comply with the Legal Requirements, nor take any action which would cause any land or improvements other than the Land and the Improvements to rely upon the Land or the Improvements for those purposes.

6.14

Complete Lots and Tax Parcels

The Borrower shall take no action that would result in the inclusion of any portion of the Land in a tax parcel or subdivision lot that is not entirely included within the Land.

6.15

Commercial Property

The Real Property shall be used for commercial rather than for residential, personal, family or household purposes.

6.16

Real Property is not Homestead Property

The Real Property shall NOT BECOME HOMESTEAD PROPERTY of the Borrower or of the spouse of any person named as the Borrower.

6.17

Performance under Development Agreements

The Borrower shall fully, timely and completely perform all of the obligations of the owner of the Real Property due under the Development Agreements (in all material respects) and shall cause no default under any of the Development Agreements.

6.18

Status of Certain Title Matters

The Borrower shall not take or fail to take any action with respect to the Easements included within the Appurtenances or the reciprocal easement agreements, operating agreements, declarations, and restrictive covenants included in the Permitted Encumbrances if, as the result of such an action or failure, the subject Easement or other title matter would (a) be rendered invalid or without force or effect, (b) be amended or supplemented without the consent of the Lender, (c) be placed in default or alleged default, (d) result in any lien against the Real Property, or (e) give rise to any assessment against the Real Property, unless immediately paid in full.

6.19

Restoration upon Casualty or Condemnation

If a casualty or condemnation occurs, the Borrower shall promptly commence and diligently complete the Restoration of the Real Property, provided the related

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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Insurance Proceeds or Condemnation Proceeds held by the Lender are available for Restoration under the terms of Sections 8.4 and 8.6.

6.20

Performance of Landlord Obligations

The Borrower shall perform its obligations as landlord under the Leases and shall neither take any action, nor fail to take any action, if the action or failure would be inconsistent with the commercially reasonable management of the Real Property for the purpose of enhancing its long-term performance and value.

6.21

Financial Reports and Operating Statements

(a)

Maintenance of Books and Records

During the term of the Loan, the Borrower shall maintain complete and accurate accounting and operational records, including copies of all Leases and other material written contracts relating to the Real Property, copies of all tax statements, and evidence to support the payment of all material property-related expenses.

(b)

Delivery of Financial and Property-Related Information

Within one hundred twenty (120) days after the end of each of its fiscal years, or, if a Default exists, on demand by the Lender, the Borrower shall deliver to the Lender copies of the financial statements of the Borrower, including balance sheets and earnings statements. Within thirty (30) days after the end of each of its fiscal quarters, or, if a Default exists, on demand by the Lender, the Borrower shall deliver to the Lender (A) a complete and accurate operating statement for the Real Property, and (B) a complete rent roll, all in form satisfactory to the Lender. The operating statement and rent roll must be certified by the Borrower to be true and correct and must include each tenant’s name, unit numbers, square footage occupied and leased, rents, delinquencies, vacancies, and other income received and expenses. In addition, the Borrower shall provide, with such rent rolls or otherwise at the Lender’s reasonable request, the most recent available sales reports in respect of all retail tenants occupying over 12,000 square feet and required to provide such reports under their Leases. If the Borrower fails to deliver the items required in this Subsection, the Lender may engage an accounting firm to prepare the required items. The Borrower shall cooperate fully with any investigative audit required to permit the accounting firm to produce these items, and the fees and expenses incurred in connection with their preparation shall be paid on demand by the Borrower.

(c)

Reporting Format

The Borrower shall cooperate in providing the reports required above in any industry-standard format that the Lender may designate, provided such reporting format is not cost prohibitive.

(d)

Effect of Failure to Deliver Financial and Property Reports

If no Default exists and the Borrower or the Carveout Obligor fails to provide the financial and property reports required under this Section before the applicable deadline, the Lender will provide a Notice of this

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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failure and a thirty (30)-day opportunity to cure before a Default shall exist.

(e)

Certification of Information

Lender shall not initially require that the annual financial and operating statements provided under this Subsection be certified by an independent certified public accountant as having been prepared in accordance with generally accepted accounting principles, consistently applied, or, in the case of financial statements prepared on a cash or income tax basis, or of operating statements, as not materially misleading based on an audit conducted in accordance with generally accepted auditing standards. The Borrower shall, however, certify that such statements are true and accurate in all material respects, and the Lender expressly reserves the right to require such a certification by an independent certified public accountant if a Default exists or if the Lender has reason to believe that any previously provided financial or operating statement is misleading in any material respect.

6.22

Estoppel Statements

Upon request by the Lender, the Borrower shall, within ten (10) Business Days of Notice of the request, furnish to the Lender or to whom it may direct, a written statement acknowledging the amount of the Indebtedness and disclosing all known offsets or defenses exist against the Indebtedness. Thereafter, the Borrower shall be estopped from asserting any other offsets or defenses alleged to have arisen and which should have been known to Borrower prior to the date of the statement.

6.23

Prohibition on Certain Distributions

If a Default exists under Subsection 10.1 or under any of Subparagraphs (b), (c), (d), (e) or (f) of Subsection 10.2, the Borrower shall not pay any dividend or make any partnership, trust or other distribution, and shall not make any payment or transfer any property in order to purchase, redeem or retire any interest in its beneficial interests or ownership.

6.24

Use of Loan Proceeds

The Loan proceeds shall be used solely for commercial purposes.

6.25

Prohibition on Cutoff Notices

The Borrower shall not issue any Notice to the Lender to the effect that liens on the Real Property after the date of the Notice will enjoy priority over the lien of this Deed of Trust.

6.26

Prohibited Person Compliance

The Borrower warrants, represents and covenants that neither the Borrower nor any Obligor nor any of their respective affiliated entities is or will be an entity or person (i) that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order 13224 issued on September ▇▇, ▇▇▇▇ (“▇▇▇▇▇▇▇”), (▇▇) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated Nationals and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website,

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan ▇▇. ▇▇▇▇▇▇▇▇

-▇▇-

▇▇▇▇:▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇/▇▇▇▇▇▇.▇▇▇), (▇▇▇) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO13224, or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in subparts [i] - [iv] above are herein referred to as a “Prohibited Person”). The Borrower covenants and agrees that neither the Borrower, nor any Obligor nor any of their respective affiliated entities will (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services to or for the benefit of a Prohibited Person, or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. The Borrower further covenants and agrees to deliver (from time to time) to the Lender any such certification or other evidence as may be requested by the Lender in its sole and absolute discretion, confirming that (i) neither the Borrower nor any Obligor is a Prohibited Person and (ii) neither the Borrower nor any Obligor has engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person. Notwithstanding anything contained in the foregoing to the contrary, any representation in this Section as to AmREIT, Inc., is given solely to Borrower’s actual knowledge, and unless otherwise required by law, Borrower shall have no duty to confirm that any shareholder of AmREIT, Inc., is not a Prohibited Person, except with respect to shareholders owning more than a 10% interest in AmREIT, Inc.

7.

INSURANCE REQUIREMENTS

At all times until the Indebtedness is paid in full, the Borrower shall maintain insurance coverage and administer insurance claims in compliance with this Section.

7.1

Minimum Required Coverages

(a)

“All Risk” Property Insurance Coverage

The Borrower shall maintain property insurance coverage at least equivalent or superior to the Insurance Services Offices (ISO) “Cause of Loss – Special Form” coverage in an amount not less than one hundred percent (100%) of the replacement cost of all insurable elements of the Real Property and of all tangible Personal Property, with coinsurance waived, or if a coinsurance clause is in effect, with an Agreed Amount endorsement acceptable to the Lender. Coverage shall extend to the Real Property and to all tangible Personal Property.

(b)

Broad Form Boiler and Machinery/HVAC/Equipment Breakdown

The Borrower shall maintain broad form boiler and machinery coverage, including coverage for resulting loss of income/loss of rents/extra expense if any of the following is located on the Real Property: any boiler or other fired-pressure vessel; any machinery containing pressure; or any machinery generating or transmitting power, including without limitation, centralized HVAC equipment, community water heaters, refrigeration or air conditioning vessels, or pumps.

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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(c)

Flood

If the Real Property is located in a special flood hazard area (SFHA, also known as the 100-year floodplain) according to the most current flood insurance rate map (FIRM) issued by the Federal Emergency Management Agency (FEMA) and if flood insurance is available, the Borrower shall maintain flood insurance coverage on all insurable elements of Real Property and of all tangible Personal Property for one hundred percent (100%) of the replacement cost or the maximum amount available under the National Flood Insurance Program (NFIP), and if available the resulting loss of business income/loss of rents/extra expense.

(d)

Windstorm

The Borrower shall maintain windstorm coverage that includes all named windstorms. Windstorm coverage may be provided by a policy separate from the other insurance coverage required in this Section.

(e)

Business Interruption/Time Element Coverage

The Borrower shall maintain a form of business interruption coverage or loss of rents/extra expense for resulting loss of income by a covered peril in the amount of twelve (12) months of one year’s business income from the Property or loss of rents/extra expense.

(f)

Construction-Related Coverage

During the term of the Loan, while construction of any Improvements is in progress, the Borrower shall maintain Builder’s Risk coverage written on an all risk basis, completed value form, with limits reflecting the total completed value of the structure. Coverage shall extend to all property of the Borrower that is to be used during the excavation and preparation of the site of the Improvements, the construction of the Improvements (whether underground or above-ground) or that is intended to be incorporated into the Improvements, whether located on the Real Property, stored off-site or in transit. The Borrower, the Guarantor, and the general contractor (if it is an entity other than the Borrower) shall be named as insured under liability coverage.

(g)

Comprehensive/General Liability (CGL)

The Borrower shall maintain commercial general liability coverage for not less than $1,000,000 combined single limit per occurrence and general aggregate limit of $2,000,000.

(h)

Umbrella/Excess Liability

The Borrower shall maintain umbrella or excess liability coverage in an amount reasonably determined by the Lender, but in no event less than $1,000,000 per occurrence and in the aggregate. Umbrella or excess coverage should follow form to the underlying coverage.

(i)

Elective or Additional Coverages

The Lender may require additional insurance coverages or endorsements reasonably appropriate to the property type and site location and available at commercially reasonable rates. Additional coverages may

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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include earthquake, mine subsidence, sinkhole, personal property, supplemental liability, or coverages of other property-specific risks.

7.2

Blanket Coverage

The Borrower may satisfy the requirements of this Section through a so-called “blanket insurance policy” if (a) the policy includes limits by property location and (b) the Lender determines, in the exercise of its sole and absolute discretion, that the amount of such coverage is sufficient in light of the other risks and properties insured under the blanket policy. The Obligation to provide any policy or coverage under this Section may be satisfied by the policy or coverage carried by the tenant under an approved Key Lease, provided such policy or coverage is primary and noncontributing; and further provided that, in the case of such tenant’s property policy, the Borrower is named as an additional named insured or as an additional insured, and the Lender is named as first mortgagee, or, in the case of such tenant’s liability insurance policy, the Borrower and the Lender are named as additional insureds.

7.3

How the Lender Shall Be Named

On all property insurance policies and coverages required under this Section (including coverage against loss of business income, also known as business income/loss of rents/extra expense), the Lender must be named as “first mortgagee” under a standard mortgagee clause and as a “loss payee” under a loss payee endorsement or a Lenders Loss Payable endorsement. On the Builder’s Risk and Commercial General Liability policies, the Lender must be named as an “additional insured.” The Lender shall be referred to verbatim as follows: “Transamerica Financial Life Insurance Company and its successors, assigns, and affiliates; as their interest may appear; c/o AEGON USA Realty Advisors, LLC; Mortgage Loan Dept.; ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇; ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.”

7.4

Rating

Each insurance carrier providing insurance required under this Section must have, independently of its parent’s or any reinsurer’s rating, a Best’s Rating of A-, and a Financial Size Rating of X or better, as reported in the most current issue of Best’s Insurance Guide, or as reported by Best on its internet web site.

7.5

Deductible

The maximum deductible on each required coverage or policy is $100,000.

7.6

Notices, Changes and Renewals

All policies must require the insurance carrier to give the Lender a minimum of ten (10) days’ notice in the event of modification, cancellation or termination for nonpayment of premium and a minimum of thirty (30) days’ notice of cancellation or nonrenewal, or as required under state law. Prior to each policy renewal, the Borrower shall report to the Lender all sublimits, margin clauses and other conditions and endorsements that reduce the coverages required in this Section and changes to deductibles for sub-limited coverages, self-insured retentions, fronting arrangements, or other endorsements or conditions that require the Borrower to retain additional risk. The Borrower shall report to the Lender immediately any facts known to the Borrower that may adversely affect the appropriateness or enforceability of any insurance contract, including,

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

-21-

without limitation, changes in the ownership or occupancy of the Real Property, any hazard to the Real Property and any matters that may give rise to any claim. No fewer than thirty (30) days prior to expiration of any policy required under this Section, the Borrower shall provide either (a) an original or certified copy of the renewed policy, or (b) a certificate of insurance, including an ▇▇▇▇▇ 28 (real property), ▇▇▇▇▇ 27 (personal property) or ▇▇▇▇▇ 25 (liability) certificate, or another document satisfactory to the Lender conferring on the Lender the rights and privileges of mortgagee. If the Borrower meets the foregoing requirement under clause (b), the Borrower shall supply an original or certified copy of the original policy within ninety (90) days. All certificates, documents, and original or certified copies of policies must (i) name the Borrower as a named insured or as an additional insured, (ii) include the complete and accurate property address, (iii) show that the applicable coverage or endorsement is in full force and effect, (iv) convey all of the insured’s rights and privileges under the policy to the mortgagee (Lender), (v) include the Lender as loss payee (for business interruption coverages), and (vi) include the Lender as additional insured (for liability coverages).

7.7

Unearned Premiums

If this Deed of Trust is foreclosed, the Lender may at its discretion cancel any of the insurance policies required under this Section and apply any unearned premiums to the Indebtedness.

7.8

Forced Placement of Insurance

If the Borrower fails to comply with the requirements of this Section, the Lender may, at its discretion, procure any required insurance. Any premiums paid for such insurance, or the allocable portion of any premium paid by the Lender under a blanket policy for such insurance, shall be a demand obligation under this Deed of Trust, and any unearned premiums under such insurance shall comprise Insurance Proceeds and therefore a portion of the Property.

7.9

Insurance Disclosure Notice

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

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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8.

INSURANCE AND CONDEMNATION PROCEEDS

8.1

Provisions of APproved Key Leases to Govern

The Lender agrees to permit the use of Insurance Proceeds and Condemnation Proceeds by the Borrower to meet its obligations as landlord under any Key Lease approved by the Lender at the time of the origination of the Loan or during the Loan term to effect the Restoration of the premises, provided (a) no Default exists, (b) the Lender may hold the Insurance Proceeds or Condemnation Proceeds and condition their disbursement as described in Subsections 8.6 and 8.8, and (c) the tenant under the related Key Lease confirms to the Lender in writing that it is committed to pay full Rent following the completion of the Restoration. The remaining provisions of this Section shall apply to the extent that they are consistent with the terms of the approved Key Lease.

8.2

Adjustment and Compromise of Claims and Awards

The Borrower may settle any insurance claim or condemnation proceeding if the effect of the casualty or the condemnation may be remedied for $60,000 or less. If a greater sum is required, the Borrower may not settle any such claim or proceeding without the advance written consent of the Lender. If a Default exists, the Borrower may not settle any insurance claim or condemnation proceeding without the advance written consent of the Lender.

8.3

Direct Payment to the Lender of Proceeds

If the Insurance Proceeds received in connection with a casualty or the Condemnation Proceeds received in respect of a condemnation exceed $700,000, or if there is a Default, then such proceeds shall be paid directly to the Lender. The Lender shall have the right to endorse instruments which evidence proceeds that it is entitled to receive directly.

8.4

Availability to the Borrower of Proceeds

Insurance Proceeds and Condemnation Proceeds shall be paid to the Lender for use in accordance with Subsection 8.5, unless the amount received is less than $700,000, in which case the Borrower shall have the right to use the Insurance Proceeds and Condemnation Proceeds to carry out the Restoration of the Real Property, subject to the conditions set forth in Subsections 8.6, 8.7, and 8.8.

If the amount received in respect of a casualty or condemnation equals or exceeds $700,000, and if the Loan-to-Value ratio of the Property on completion will be sixty-five percent (65%) or less, as determined by the Lender in its discretion based on its estimate of the market value of the Real Property, the Lender shall receive such Insurance Proceeds or Condemnation Proceeds directly and hold them in a fund for Restoration subject to the conditions set forth in Subsections 8.6, 8.7, and 8.8 of this Section. If the Lender’s estimate of the market value of the Real Property implies a Loan-to-Value ratio of over 65%, and the Borrower disagrees with the Lender’s estimate, the Borrower may require that the Lender engage an independent appraiser (the “Fee Appraiser”) to prepare and submit to AEGON a full narrative appraisal report estimating the market value of the Real Property. The Fee Appraiser shall be certified in Texas and shall be a member of a national appraisal organization that has adopted the Uniform Standards of Professional Appraisal Practice (USPAP) established by the Appraisal Standards Board of the Appraisal Foundation. The Fee Appraiser

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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will be required to use assumptions and limiting conditions established by the Lender prior to the funding of the Loan and to prepare the appraisal in conformity with the Lender’s Appraisal Guidelines. For purposes of this Section, the independent appraiser’s value conclusion shall be binding on both the Lender and the Borrower. The Borrower shall have the right to make a prepayment of the Loan, without premium, sufficient to achieve this Loan-to-Value ratio. The independent fee appraisal shall be at the Borrower’s expense, and the Borrower shall pay to the Lender an administrative fee of $2,500 in connection with its review. The Lender may require that the Borrower deposit $10,000 with the Lender as security for these expenses or may pay the Fee Appraiser’s and administrative fees from the proceeds at its sole discretion.

8.5

Lender’s Use of Proceeds

Unless the Borrower has the right to use the Insurance Proceeds or the Condemnation Proceeds under the foregoing paragraphs, the Lender may, in its sole and absolute discretion, either apply them to the Loan balance or disburse them for the purposes of repair and reconstruction, or to remedy the effects of the condemnation. No prepayment premium will be charged on Insurance Proceeds or Condemnation Proceeds applied to reduce the principal balance of the Loan.

8.6

Conditions to Availability of Proceeds

The Lender shall have no obligation to release Insurance Proceeds or Condemnation Proceeds to the Borrower, and may hold such amounts as additional security for the Loan, if (a) a Default exists, (b) the Lender has delivered to the Borrower Notice of any act, omission or circumstance that will, if uncured, become a Default, and the required cure has not been effected or (c) if the Insurance Proceeds or Condemnation Proceeds received by the Lender and any other funds deposited by the Borrower with the Lender are insufficient, as determined by the Lender in its reasonable discretion, to complete the Restoration. If a Default exists, the Lender may at its sole and absolute discretion apply such Insurance Proceeds and Condemnation Proceeds to the full or partial cure of the Default.

8.7

Gross Up of Restoration Fund; Permitted Mezzanine Financing

If the Lender determines that the Insurance Proceeds or Condemnation Proceeds received in respect of a casualty or a condemnation, as the case may be, would be insufficient to permit the Borrower to effect the Restoration, then the Borrower shall deposit in the Restoration Fund such additional funds as the Lender determines are necessary to effect the Restoration. The Lender agrees to permit the Borrower to secure mezzanine financing in order to meet its obligation under this Subsection. The mezzanine loan may be secured by a pledge of interests in the Borrower, subject to an inter-creditor agreement on market terms for securitized loans.

8.8

Draw Requirements

If the amount of Insurance Proceeds or Condemnation Proceeds exceed $700,000, the Borrower’s right to receive Insurance Proceeds and Condemnation Proceeds held by the Lender under this Section shall be conditioned on the Lender’s approval of plans and specifications for the Restoration. Each draw, except the last, shall be in the minimum amount of $50,000. Draw requests shall be accompanied by customary evidence of construction completion, and by

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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endorsements to the Lender’s mortgagee title insurance coverage insuring the absence of construction, mechanics’ or materialmen’s liens. Draws based on partial completion of the Restoration shall be subject to a ten percent (10%) holdback. All transactional expenses shall be paid by the Borrower.

9.

ESCROW FUND

The Borrower shall pay the Monthly Escrow Payment on the first (1st) day of every month, commencing with the month in which the first regular payment of principal and interest is due. The Lender shall hold Monthly Escrow Payments in a non-interest-bearing fund from which the Lender will pay on a timely basis those Escrow Expenses that the Lender has anticipated will become payable on a regular basis during the Loan’s term, and on which the Lender has based its determination of the Monthly Imposition Requirement, the Monthly Insurance Premium Requirement and the Monthly Reserve Requirement. The Escrow Fund will be maintained as an accounting entry in the Lender’s general account, where it may be commingled with the Lender’s other funds. The Lender may reanalyze the projected Escrow Expenses from time to time and shall advise the Borrower of any change in the amount of the Monthly Escrow Payment. Upon the foreclosure of this Deed of Trust, the delivery of a deed in lieu of foreclosure, or the payoff of the Loan, the Lender shall apply amounts in the Escrow Fund, net of accrued Escrow Expenses, to the Indebtedness. The Lender shall remit any amounts in excess of the Indebtedness to the Borrower.

10.

DEFAULT

10.1

Payment Defaults

A “Default” shall exist without Notice upon the occurrence of any of the following events:

(a)

Scheduled Payments

Subject to the terms of the Note, Borrower’s failure to pay, or to cause to be paid, (i) any regular monthly payment of principal and interest under the Note, together with any required Monthly Escrow Payment, on or before the tenth (10th) day of the month in which it is due or (ii) any other scheduled payment under the Note, this Deed of Trust or any other Loan Document.

(b)

Payment at Maturity

The Borrower’s failure to pay, or to cause to be paid, the Indebtedness when the Loan matures by acceleration under Section 16, because of a transfer or encumbrance under Section 13, or by lapse of time.

(c)

Demand Obligations

The Borrower’s failure to pay, or to cause to be paid, within five (5) Business Days of the Lender’s demand, any other amount required under the Note, this Deed of Trust or any of the other Loan Documents.

10.2

Incurable Non-Monetary Default

A Default shall exist upon any of the following (each of which is an “Incurable Non-Monetary Default”):

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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(a)

Material Untruth or Misrepresentation

The Lender’s discovery that any representation made by the Borrower in any Loan Document was materially untrue or misleading when made, if the misrepresentation either was intentional or is not capable of being cured as described in Subsection 10.3(a) below.

(b)

Due on Sale or Encumbrance

The occurrence of any sale, conveyance, transfer or vesting that would result in the Loan becoming immediately due and payable at the Lender’s option under Section 13.

(c)

Voluntary Bankruptcy Filing

The filing by the Borrower of a petition in bankruptcy or for relief from creditors under any present or future law that affords general protection from creditors.

(d)

Insolvency

The failure of the Borrower generally to pay its debts as they become due, its admission in writing to an inability so to pay its debts, the making by the Borrower of a general assignment for the benefit of creditors, or a judicial determination that the Borrower is insolvent.

(e)

Receivership

The appointment of a receiver or trustee to take possession of any of the assets of the Borrower.

(f)

Levy or Attachment

The taking or seizure of any material portion of the Property under levy of execution or attachment.

(g)

Lien

The filing against the Real Property of any lien or claim of lien for the performance of work or the supply of materials, or the filing of any federal, state or local tax lien against the Borrower, or against the Real Property, unless the Borrower promptly complies with Section 12 of this Deed of Trust.

(h)

Defaults under other Loan Documents

The existence of any default under any other Loan Document, provided any required Notice of such default has been given and any applicable cure period has expired.

(i)

Dissolution or Liquidation

The Borrower shall initiate or suffer the commencement of a proceeding for its dissolution or liquidation, and such proceeding shall not be dismissed within ninety (90) days, or the Borrower shall cease to exist as a legal entity (unless resulting in a Permitted Transfer).

10.3

Curable Non-Monetary Default

A Default shall exist, following the cure periods specified below, under the following circumstances:

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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(a)

Unintentional Misrepresentations that are Capable of Being Cured

A “Default” shall exist, with Notice, if the Lender discovers that the Borrower has unintentionally made any material misrepresentation that is capable of being cured, unless the Borrower promptly commences and diligently pursues a cure of the misrepresentation approved by the Lender, and completes the cure within sixty (60) days. Any such cure shall place the Lender in the risk position that would have existed had the false representation been true when made. If the Borrower has relied in full or in part on representations from, or on information furnished by, the seller of the Real Property as described in the last sentence of Section 5.23, and the representation is capable of being cured as described above, the misrepresentation shall be considered curable for purposes of this paragraph.

(b)

Involuntary Bankruptcy or Similar Filing

The Borrower becomes the subject of any petition or action seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief, or that may result in a composition of its debts, provide for the marshaling of the Borrower’s assets for the satisfaction of its debts, or result in the judicially ordered sale of the Borrower’s assets for the purpose of satisfying its obligations to creditors, unless a motion for the dismissal of the petition or other action is filed within twenty (20) days and results in its dismissal within ninety (90) days of the filing of the petition or other action.

(c)

Entry of a Material Judgment

Any judgment is entered against the Borrower or any other Obligor, and the judgment may materially and adversely affect the value, use or operation of the Real Property, unless the judgment is satisfied within twenty (20) Days.

(d)

Failure to provide Financial and Property Reports

If the Borrower or the Carveout Obligor fails to provide the financial and property reports required under this Deed of Trust or the Carveout Guarantee and Indemnity, as the case may be, before the applicable deadline, unless such failure within thirty (30) days after such notice

(e)

Other Defaults

The Borrower fails to observe any promise or covenant made in this Deed of Trust, unless the failure results in a Default described elsewhere in this Section 13, provided the Lender delivers written Notice to the Borrower of the existence of such an act, omission or circumstance, and that such an act, omission or circumstance shall constitute a Default under the Loan Documents unless the Borrower promptly initiates an effort to cure the potential Default, pursues the cure diligently and continuously, and succeeds in effecting the cure within one hundred twenty (120) days of its receipt of Notice. The Lender shall afford the Borrower an additional period of one hundred twenty (120) days in cases where construction or repair is needed to cure the potential Default, and the cure cannot be completed within the first one hundred twenty (120)

Deed of Trust and Security Agreement
Preston Royal Village, Dallas, Texas
AEGON Loan No. 10512155

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day cure period. During the cure period, the Borrower has the obligation to provide on demand satisfactory documentation of its effort to cure, and, upon completion, evidence that the cure has been achieved. All notice and cure periods provided in this Deed of Trust shall run concurrently with any notice or cure periods provided by law and in any of the other Loan Documents.

11.

RIGHT TO CURE

The Lender shall have the right to cure any Default. The expenses of doing so shall be part of the Indebtedness, and the Borrower shall pay them to the Lender on demand.