RECORDING REQUESTED BY,
 
AND WHEN RECORDED, MAIL TO:
 
Pircher, Nichols & Meeks
1925 Century Park East, Suite 1700
Los Angeles, California  90067
Attention:  Shelby Q. McMahon, Esq.

 
 (SPACE ABOVE THIS LINE FOR RECORDER’S USE ONLY)
 

DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING
 
 
COLLATERAL INCLUDES FIXTURES
 
THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FILING (this "Deed of Trust") is made as of the 27th day of February,
2013, by NetREIT National City Partners, LP, a California limited partnership
(the "Trustor"), whose address is 1282 Pacific Oaks Place, Escondido, California
92029 in favor of Western-Southern Life Assurance Company, an Ohio corporation
(the "Beneficiary"), whose address is 400 Broadway, Cincinnati, Ohio 45202.
 
RECITALS
 
A.  
Trustor is indebted to the Beneficiary (hereinafter sometimes also referred to
as the "Lender") in the principal sum of Ten Million Eight Hundred Thousand
Dollars ($10,800,000) (the "Loan"), which indebtedness is evidenced by Trustor’s
note dated as of the date hereof (the "Note"), such principal sum being payable
as set forth in the Note with interest at the rate set forth therein, and
containing a provision for the payment of a reasonable additional amount as
attorneys’ fees.

 
B.
Trustor desires to secure to Lender the following (hereinafter referred to as
the "Indebtedness"):  (a) the repayment of the indebtedness evidenced by the
Note, with interest thereon, and all renewals, increases, extensions and
modifications thereof, in whole or in part, and all other notes given in
substitution therefor or in modification, increase, renewal or extension
thereof, in whole or in part; (b) the payment of all other sums and future
advances, with interest thereon, advanced in accordance herewith to protect the
security of this Deed of Trust; and (c) the performance of the obligations,
covenants and agreements of Trustor contained in the Note, this Deed of Trust
and any and all other documents executed now or hereafter in connection with the
Note or this Deed of Trust for the purpose of further evidencing, securing,
governing or guaranteeing the indebtedness secured by this Deed of Trust
(hereinafter sometimes collectively referred to as the "Loan Documents").

 
In order to secure the payment of the Indebtedness and the performance of the
obligations described herein and in the Loan Documents, Trustor does hereby
GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN, GRANT A SECURITY INTEREST IN and
SET OVER TO CHICAGO TITLE COMPANY, as Trustee ("Trustee") in trust, with power
of sale and right of entry and possession, for the use and benefit of Lender,
the real property described in Exhibit "A" attached hereto and made a part
hereof (the "Land"), TOGETHER WITH the following, whether now owned or hereafter
acquired by Trustor:
 
(a)  
all buildings, fixtures and other improvements now or hereafter attached to or
placed, erected, constructed or developed on the Land (the "Improvements")
during the existence of this lien;

 
(b)  
all “Accounts”, “Cash Proceeds”, “Chattel Paper”, “Collateral”, “Commercial Tort
Claims”, “Deposit Accounts”, “Documents”, “Electronic Chattel Paper”,
“Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”,
“Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Money”, “Noncash
Proceeds”, “Payment Intangibles”, “Proceeds”, “Software”, “Support Obligations”,
and “Tangible Chattel Paper” as such terms are defined in the Uniform Commercial
Code as adopted in the state where the Land is located ("Personal Property"),
whatsoever now or hereafter delivered to, attached to, installed in, or used in
or about the Improvements or which are necessary or useful for the complete and
comfortable use and occupancy of the Improvements for the purposes for which
they were or are to be attached, placed, erected, constructed or developed, or
which Personal Property is or may be used in the development of the
Improvements, and all renewals of or replacements or substitutions for any of
the foregoing whether or not the same shall be attached to the Land or
Improvements;

 
(c)  
all water and water rights, timber, crops, and mineral interests pertaining to
the Land;

 
(d)  
all building materials and equipment now or hereafter delivered to and intended
to be installed in or on the Land or Improvements;

 
(e)  
all security deposits and advance rentals under any lease agreements now or at
any time hereafter arising from or by virtue of any transactions related to the
Land, Improvements or the Personal Property and held by or for the benefit of
Trustor;

 
(f)  
all monetary deposits which Trustor has been required to give to any public or
private utility with respect to utility services furnished to the Land or
Improvements;

 
(g)  
all leases, rents, issues, profits, revenues, royalties, bonuses or other
benefits of the Land, the Improvements or the Personal Property, including,
without limitation, cash or securities deposited pursuant to leases of all or
any part of the Land, Improvements or Personal Property to secure performance by
the lessees of their obligations thereunder;

 
(h)  
all proceeds (including premium refunds) of each policy of insurance relating to
the Land, Improvements or Personal Property;

 
(i)  
all proceeds from the taking of any of the Land, Improvements, Personal Property
or any part thereof or any interest or right or estate appurtenant thereto by
right of eminent domain or by purchase in lieu thereof;

 
(j)  
all Trustor’s right, title and interest (but not its obligations) in, under and
to any and all contracts (including, without limitation, all construction
contracts, development agreements, agreements of purchase and sale, engineering
contracts, management agreements or other contracts relating to use, management
or operation, consulting agreements, architectural agreements and all other
contracts or agreements, whether relating to the construction of improvements or
otherwise) now or hereafter affecting or relating to all or any portion of the
Land, the Improvements or the Personal Property;

 
(k)  
all Trustor’s rights as declarant under any restrictions now or hereafter
affecting the Mortgaged Property and all Trustor’s rights with respect to any
property owner’s or homeowner’s association or architectural control committee
established with respect to the Mortgaged Property (as hereinafter defined);

 
(l)  
all Trustor’s rights (but not its obligations) under any documents, contract
rights, commitments, (including trademarks, trade names and symbols used in
connection therewith) arising by virtue of any transactions related to the Land,
Improvements or Personal Property;

 
(m)  
all deposits, bank accounts, funds, instruments, notes or chattel paper arising
from or related to the Land, Improvements or Personal Property;

 
(n)  
all permits, licenses, franchises, certificates and other rights and privileges
obtained in connection with the Land, Improvements or Personal Property;

 
(o)  
all plans, specifications, maps, surveys, reports, books of account, insurance
policies and other documents, of whatever kind or character, relating to the
use, construction upon, occupancy, leasing, sale or operation of the Land or
Improvements;

 
(p)  
all oil, gas and other hydrocarbons and other minerals produced from or
allocated to the Land or Improvements and all products processed or obtained
therefrom, the proceeds thereof, and all accounts and general intangibles under
which such proceeds may arise and all proceeds of the Personal Property;

 
(q)  
all easements and rights of way used in connection with the Land or Improvements
or as a means of ingress to or egress from said Land or Improvements;

 
(r)  
all right, title and interest of Trustor in and to all streets, roads, ways,
alleys, public places, easements and rights-of-way, existing or proposed, public
or private, adjacent to or used in connection with, belonging or pertaining to
the Land or any part thereof;

 
(s)  
all proceeds from the sale, lease, or other disposition of all or any portion of
the Land, the Improvements or the Personal Property;

 
(t)  
all consumer goods located in, on, or about the Land or the Improvements or used
in connection with the operation or use thereof, provided, however, the term
“consumer goods” shall not include clothing, furniture, appliances, linens,
china, crockery, kitchenware, or personal effects used primarily for personal,
family, or household purposes;

 
(u)  
all of Trustor’s right, title and interest (but not its obligations) in, to and
under all contracts of purchase and sale now or hereafter affecting or relating
to all or any portion of the Land, the Improvements or the Personal Property,
including without limitation, all of the right, title and interest of the
Trustor in and to all sales proceeds, escrow funds, earnest money deposits and
other fees paid or monies by the buyers or any other parties thereunder;

 
(v)  
all rights, estates, powers, privileges, hereditaments and interests of whatever
kind or character appurtenant or incident to the foregoing and all other
interests of every kind and character that Trustor now has or at any time
hereafter acquires in and to the Land, Improvements, and Personal Property and
all property that is used or useful in connection therewith, including rights of
ingress and egress and all reversionary rights or interests of Trustor with
respect to such property; and

 
(w)  
all products and proceeds of any of the foregoing.

 
As used in the phrase immediately above, the term “proceeds” shall have the
meaning assigned to it under the Uniform Commercial Code in effect in the
jurisdiction in which this Deed of Trust (hereafter defined) is filed and, to
the extent not otherwise included, shall include, but not be limited to, (i) any
and all proceeds of any insurance, causes and rights of action, settlements
thereof, judicial and arbitration judgments and awards, and indemnity, warranty
or guaranty payments payable to Trustor from time to time with respect to any of
the Mortgaged Property, (ii) all claims of the Trustor for losses or damages
arising out of or related to or for any breach of any agreements, covenants,
representations or warranties or any default under any of the Mortgaged Property
(without limiting any direct or independent rights of Trustor with respect to
the Mortgaged Property), and (iii) any and all other amounts from time to time
paid or payable under or in connection with any of the Mortgaged Property.  If
the estate of Trustor in any of the above-described property is a leasehold
estate ("Leasehold Estate"), this conveyance shall include and the lien and
security interest created hereby shall encumber all additional title, estate,
interest, and other rights that may hereafter be acquired by Trustor in the
property demised under the Leasehold Estate.  The above-described property is
collectively herein referred to as the "Mortgaged Property."
 
As to any part of the Mortgaged Property that is Personal Property, this Deed of
Trust is hereby deemed to be, as well, a security agreement under the California
Uniform Commercial Code for the purpose of creating hereby a security interest
in such Personal Property, which security interest, Trustor, as Trustor, hereby
grants to Beneficiary, as Lender, to further secure the Indebtedness.
 
If the Trustor shall pay the Note secured hereby in accordance with its terms,
together with interest thereon, and any renewals or extensions thereof in whole
or in part, and shall comply with all the covenants, terms and conditions of
this Deed of Trust, then this conveyance shall be reconveyed of record at the
request and at the cost of the Trustor.  If, however, there shall be an Event of
Default hereunder (as hereinafter defined) or under any Loan Document, then the
Note, at the option of the Beneficiary, shall become at once due and payable,
regardless of the stated maturity date thereof; and the Trustee and Beneficiary
shall have all rights and remedies afforded to each of them under the Loan
Documents.
 
TO HAVE AND TO HOLD the Mortgaged Property, with the appurtenances belonging
thereto, to the use and benefit of Trustee, its successors and assigns in fee
simple forever, upon the trusts and for the uses and purposes herein set out.
 
1.
SECURED INDEBTEDNESS.

 
This Deed of Trust is made to secure and enforce the payment and performance of
the Indebtedness, including future advances, whether such advances are
obligatory or to be made at the option of Lender, or otherwise, and whether made
before or after default or maturity or other similar events, to the same extent
as if such future advances were made on the date of the execution hereof.
 
2.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF TRUSTOR.

 
 
2.1
Representations and Warranties.  Trustor does hereby represent and warrant to
Lender as follows:

 
 
2.1.1
Title and Authority.  Trustor is the lawful owner of good and indefeasible,
title to the Land and Improvements and has good right and authority to grant,
bargain, sell, transfer, assign and mortgage the Land and Improvements and to
grant a security interest in the Personal Property.  Trustor does not do
business with respect to the Mortgaged Property under any trade name.

 
 
2.1.2
Permitted Encumbrances.  The Mortgaged Property is free and clear from all
liens, security interests and encumbrances except the lien and security interest
evidenced hereby and those permitted encumbrances, if any, described in the
title policy being issued to Beneficiary insuring the lien of this Deed of Trust
(hereinafter called the "Permitted Encumbrances").  There are no mechanic’s or
materialmen’s liens, lienable bills or other claims constituting or that may
constitute a lien on the Mortgaged Property, or any part thereof.

 
 
2.1.3
No Financing Statement.  There is no financing statement covering all or any
part of the Mortgaged Property or its proceeds on file in any public office that
has not been terminated or assigned to Lender.

 
 
2.1.4
Location of Personal Property.  All tangible Personal Property is located on the
Land.

 
 
2.1.5
No Homestead.  No portion of the Mortgaged Property is being used as Trustor’s
business or residential homestead.

 
 
2.1.6
No Default or Violation.  The execution, delivery and performance of this Deed
of Trust, the Note and all other Loan Documents do not contravene, result in a
breach of or constitute a default under any mortgage, deed of trust, lease,
promissory note, loan agreement or other contract or agreement to which Trustor
is a party or by which Trustor or any of its properties may be bound or affected
and do not violate or contravene any law, order, decree, rule or regulation to
which Trustor is subject.

 
 
2.1.7
Compliance with Covenants and Laws.  The Mortgaged Property and the intended use
thereof by Trustor comply with all applicable restrictive covenants, zoning
ordinances and building codes, flood disaster laws, and applicable health and
environmental laws and regulations and all Hazardous Materials Laws (as defined
herein) and all other applicable laws, statutes, ordinances, rules, regulations,
orders, determinations and court decisions, including, without limitation, the
Americans With Disabilities Act of 1990, as amended (all of the foregoing
hereinafter sometimes collectively referred to as "Applicable Laws") without
reliance upon grandfather provisions or adjacent or other properties.  Without
limitation, Trustor shall cause the Mortgaged Property to comply with all
Applicable Laws. Trustor has obtained all requisite zoning, utility, building,
health and operating permits from the governmental authority or municipality
having jurisdiction over the Mortgaged Property.  All engineering specifications
with respect to the Mortgaged Property are within applicable environmental
standards.

 
 
2.1.8
Condition of Mortgaged Property.  The Mortgaged Property is served by electric,
gas, storm and sanitary sewers, sanitary water supply, telephone and other
utilities and storm drain facilities required for the use thereof as represented
by Trustor at or within the boundary lines of the Mortgaged Property.  All
streets, alleys and easements necessary to serve the Mortgaged Property for the
use represented by Trustor have been or will be completed and serviceable, and
such streets have been or will be dedicated and accepted by applicable
governmental entities.  The Mortgaged Property is in good condition and repair
with no deferred maintenance and is free from damage caused by fire or other
casualty.  Trustor is aware of no latent or patent structural or other
significant defect or deficiency in the Mortgaged Property.  Design and as-built
conditions of the Mortgaged Property are such that no drainage or surface or
other water will drain across or rest upon either the Mortgaged Property or land
of others except as contemplated by the engineering plans and specifications
prepared in connection with the development of the Mortgaged Property and
approved by any required governmental authority.  None of the Mortgaged Property
is within a flood plain or if any of the Mortgage Property is within the flood
plain, Borrower has obtained the flood insurance required by the Beneficiary or
by the terms of this Deed of Trust.  None of the improvements on the Mortgaged
Property create an encroachment over, across or upon any of the Mortgaged
Property boundary lines, rights of way or easements and no buildings or other
improvements on adjoining land create such an encroachment.

 
 
2.2
Covenants and Agreements.  So long as the Indebtedness or any part thereof
remains unpaid, Trustor covenants and agrees with Lender as follows:

 
 
2.2.1
Payment and Performance.  Trustor will make prompt payment, as the same becomes
due, of the Indebtedness and shall punctually and properly perform all of
Trustor’s covenants, obligations, and liabilities under the Loan Documents.

 
 
2.2.2
Existence.  Trustor will continuously maintain its existence, its good standing
and its right to do business in the State where the Mortgaged Property is
located.

 
 
2.2.3
Taxes on Note and Other Taxes.  Trustor will promptly pay all income, franchise
and other taxes owing by Trustor and any stamp or recordation taxes that may be
required to be paid with respect to the Note, this Deed of Trust or any other
Loan Documents.

 
 
2.2.4
Operation of Mortgaged Property.  Trustor will operate the Mortgaged Property in
a good and workmanlike manner and in accordance with all Applicable Laws and
will pay all fees or charges of any kind in connection therewith.  Trustor will
not abandon all or any portion of the Mortgaged Property and will keep the
Mortgaged Property occupied so as not to impair the insurance carried
thereon.  Trustor will not use or occupy, or allow the use or occupancy of, the
Mortgaged Property in any manner which violates any Applicable Law or which
constitutes a public or private nuisance or which makes void, voidable or
cancelable, or increases the premium of, any insurance then in force with
respect thereto.  Trustor will not initiate or permit any zoning
reclassification of the Mortgaged Property or seek any variance under existing
zoning ordinances applicable to the Mortgaged Property or use or permit the use
of the Mortgaged Property in such a manner which would result in such use
becoming a nonconforming use under applicable zoning ordinances or other
Applicable Laws.  Trustor will not impose any restrictive covenants or
encumbrances upon the Mortgaged Property, execute or file any subdivision plat
affecting the Mortgaged Property or consent to the annexation of the Mortgaged
Property to any municipality, without the prior written consent of Lender in its
sole and absolute discretion.  Trustor shall not cause or permit any drilling or
exploration for, or extraction, removal or production of, minerals from the
surface or subsurface of the Mortgaged Property.  Trustor will not do or suffer
to be done any act whereby the value of any part of the Mortgaged Property may
be lessened.  Trustor will allow Lender or its authorized representative to
enter the Mortgaged Property at any reasonable time to inspect the Mortgaged
Property and Trustor’s books and records pertaining thereto and Trustor will
assist Lender or said representative in whatever way necessary to make such
inspection.  If Trustor receives a notice or claim from any federal, state or
other governmental entity pertaining to the Mortgaged Property, including,
without limitation, a notice that the Mortgaged Property is not in compliance
with any Applicable Law, Trustor will promptly furnish a copy of such notice or
claim to Lender.

 
 
2.2.5
Books and Records.  Trustor will keep accurate books and records in accordance
with sound accounting principles in which full, true and correct entries shall
be promptly made as to all operations on the Mortgaged Property, and will permit
all such books and records (including without limitation all contracts,
statements, invoices, bills and claims for labor, materials and services
supplied for the construction and operation of the improvements forming a part
of the Mortgaged Property) to be inspected and copied by Lender and its duly
accredited representatives at all times during reasonable business hours.

 
 
2.2.6
Financial Statements.  Trustor will furnish the Trustor’s “Financial Statements”
(as hereinafter defined) to the Lender within ninety (90) days after the end of
each fiscal year.  Such Financial Statements (i) shall be in accordance with
sound and prudent accounting principles consistently applied, (ii) shall fairly
and accurately present the financial position of Trustor, (iii) shall be
certified by Trustor as being true, correct, complete and not misleading in any
respect, and (iv) shall be in form acceptable to Lender.  "Financial Statements"
means the Trustor’s consolidated and, if required by the Lender in its sole and
absolute discretion, consolidating, balance sheets, income statements and
statements of cash flows for the year, month or quarter together with
year-to-date figures and comparative figures for the corresponding periods of
the prior year.

 
 
2.2.7
Rent Roll.  Trustor will annually deliver to Lender within ninety (90) days
after the end of each fiscal year, a current rent roll, which shall include
effective annual rental (showing fixed rent, percentage rent, and
reimbursements), and leased area, certified by Trustor and in form reasonably
acceptable to Lender.

 
 
2.2.8
Debts for Construction.  Trustor will cause all debts and liabilities of any
character, including without limitation all debts and liabilities for labor,
material and equipment and all debts and charges for utilities servicing the
Mortgaged Property, incurred in the construction, maintenance, operation and
development of the Mortgaged Property to be promptly paid.

 
 
2.2.9
Ad Valorem Taxes.  Trustor will cause to be paid prior to delinquency all taxes
and assessments heretofore or hereafter levied or assessed against the Mortgaged
Property, or any part thereof, or against Trustee or Lender for or on account of
the Note or any other Indebtedness or the interest created by this Deed of Trust
and will furnish Lender with receipts showing payment of such taxes and
assessments at least ten (10) days prior to the applicable default date
therefor; provided that Trustor may in good faith, by appropriate proceedings,
contest the validity, applicability, or amount of any asserted tax or
assessment, and pending such contest Trustor shall not be deemed in default
hereunder if (i) Trustor shall diligently prosecute such contest in a manner not
prejudicial to the rights, liens and security interests of Lender; (ii) prior to
delinquency of the asserted tax or assessment Trustor establishes with Lender an
escrow acceptable to Lender adequate to cover the payment of such tax or
assessment with interest, costs and penalties and a reasonable additional sum to
cover possible costs, interest and penalties (which escrow shall be returned to
Trustor upon payment of all such taxes, assessments, interest, costs and
penalties or disbursed in accordance with the resolution of the contest to the
claimant) or furnishes Lender with an indemnity bond or other security
acceptable to Lender, in the amount of the tax or assessment being contested by
Trustor plus a reasonable additional sum to pay all costs, interests and
penalties which may be imposed or incurred in connection therewith; (iii)
Trustor pays to Lender promptly after demand therefor all costs and expenses
incurred by Lender in connection with such contest; and (iv) Trustor promptly
causes to be paid any amount adjudged by a court of competent jurisdiction to be
due, with all costs, penalties and interest thereon, promptly after such
judgment becomes final and unappealable; provided, however, that in any event
each such contest shall be concluded and the tax, assessment, penalties,
interest and costs shall be paid prior to the date any writ or order is issued
under which the Mortgaged Property may be sold.

 
2.2.10  
Repair and Maintenance.  Trustor will keep the Mortgaged Property in first class
order, repair, operating condition and appearance, causing all necessary
repairs, renewals, replacements, additions and improvements to be promptly made,
and will not allow any of the Mortgaged Property to be misused, abused or wasted
or to deteriorate.  Trustor will promptly replace all worn-out or obsolete
fixtures or personal property covered by this Deed of Trust with fixtures or
personal property comparable to the replaced fixtures or personal property when
new, and will repaint the Mortgaged Property when needed.  Trustor will make all
renovations, modifications and alterations to the Mortgaged Property in
compliance with all Applicable Laws.  Notwithstanding any of the foregoing,
Trustor will not, without the prior written consent of Lender, (i) remove from
the Mortgaged Property any fixtures or personal property covered by this Deed of
Trust except such as is replaced by Trustor by an article of equal suitability
and value, owned by Trustor, free and clear of any lien or security interest
(except that created by this Deed of Trust); (ii) make any structural alteration
to the Mortgaged Property or any other alterations thereto which impair the
value thereof; or (iii) make any alteration to the Mortgaged Property involving
an estimated expenditure exceeding $25,000.00 except pursuant to plans and
specifications approved in writing by Lender in its sole discretion.  Upon
request of Lender, Trustor will promptly deliver to Lender an inventory
describing and showing the make, model, serial number and location of all
fixtures and personal property used in the management, maintenance and operation
of the Mortgaged Property with a certification by Trustor that said inventory is
a true and complete schedule of all such fixtures and personal property used in
the management, maintenance and operation of the Mortgaged Property, that such
items specified in the inventory constitute all of the fixtures and personal
property required in the management, maintenance and operation of the Mortgaged
Property, and that all such items are owned by Trustor free and clear of any
lien or security interest (except that created by this Deed of Trust).

 
2.2.11  
Insurance.  For the benefit of Trustor and Lender and as further security for
the payment of the Indebtedness, Trustor shall obtain and keep in force at all
times, or cause to be obtained and kept in force, the following policies of
insurance: (a) all risk property insurance, insuring Improvements now existing
or hereafter erected on the Land against loss or damage caused by fire,
lightning, sprinkler, windstorm, tornado, hurricane, hail, explosion, vandalism,
malicious mischief, terrorism, mold, water intrusion and such other casualties
and hazards as are covered by such insurance, for not less than their full
insurable value, with a full replacement cost endorsement; (b) boiler and
machinery insurance; (c) flood insurance, if any portion of the Mortgaged
Property is located in a flood risk area as designated by the United States
Department of Housing and Urban Development, in the maximum amount available for
the Mortgaged Property; (d) commercial general liability insurance coverage with
a minimum combined single limit coverage of at least $5,000,000 per occurrence;
(e) rent loss/business interruption insurance coverage in a minimum amount of
not less than twelve (12) months gross pro forma rental income receivable from
the Mortgaged Property; (f) workers compensation insurance as may be required by
law; and (g) such other insurance, including without limitation, earthquake
insurance if the probable maximum loss is 15% greater, in such form and in such
amounts as may from time to time be required by Lender.  Insurance shall be
written by a company or companies approved by Lender, which shall have a current
Best’s Key Rating Guide Mortgaged Property-Casualty and Liability, rating of at
least "A-" and a financial rating of VIII or better.  If the insurer is a
holding company issuing insurance through one of its subsidiaries, the
subsidiary must have its own acceptable Best's rating, or a rating assigned to a
pool of which the insuring company is a member.  Trustor shall be shown as the
insured, unless a tenant is providing insurance coverage, in which case the
Trustor may be shown as an additional insured, except for workers compensation
insurance, and Beneficiary shall be shown as additional insured, except for
workers compensation insurance.  No lien upon any of such policies of insurance
or upon any refund or return of premium that may be payable on the cancellation
or termination thereof shall be given other than to Lender, except by proper
endorsement affixed to such policy and approved by Lender.  Lender shall
determine the amount of full replacement insurance in the following
manner:  (a) Lender shall determine the “replacement cost new” (i.e., the cost
of improvements undepreciated) pursuant to an MAI appraisal acceptable to
Lender; and (b) multiply the “replacement cost new” by 90%.  Without limitation,
builder's risk policies are not acceptable.

 
Other requirements relating to property insurance include:
 
(a) If the coverage is subject to coinsurance, the percentage of coinsurance
must be shown on the policy.  Lender will not accept coinsurance of less than
90%.
 
(b) Replacement Cost Endorsement coverage is required.  Evidence of Insurance
(binder) and policy (when issued) must refer to this coverage.
 
(c) If a blanket policy is used and the policy includes a coinsurance provision,
an agreed amount or similar endorsement is required, and the subject property
must be identified as one of the properties insured.
 
(d) If the policy schedules locations, the amount of coverage on the subject
property must satisfy all coinsurance provisions.
 
(e) Lender must be shown as mortgagee with coverage under a standard or “union”
Mortgagee Endorsement Clause.
 
(f) ACTUAL CASH VALUE COVERAGE IS NOT PERMITTED.
 
Trustor shall deliver to Lender an original or certified copy of any all risk
insurance policies and a certificate of insurance for all other policies.  All
insurance policies and renewals thereof shall be in a form acceptable to Lender
and shall include (a) a clause that said insurance will not be terminated until
thirty (30) days after receipt by Lender of written notice thereof from the
insurance carrier, and (b) a noncontributory standard mortgagee clause in favor
of and in form acceptable to Lender, and (c) for property insurance, deductibles
may not exceed $25,000.  Trustor shall promptly furnish to Lender all renewal
notices and all receipts of paid premiums.  At least thirty (30) days prior to
the expiration date of a policy, Trustor shall deliver to Lender a renewal
policy or certified copy thereof in form satisfactory to Lender.
 
In the event of loss, Trustor shall give immediate written notice to the
insurance carrier and to Lender.  Trustor hereby authorizes and empowers Lender
as attorney-in-fact for Trustor to make proof of loss, to adjust and compromise
any claim under insurance policies, to appear in and prosecute any action
arising from such insurance policies, to collect and receive property insurance
proceeds, and to deduct therefrom Lender's expenses incurred in the collection
of such proceeds, provided, however, that nothing contained in this Section
2.2.11 shall require Lender to incur any expense or take any action
hereunder.  Trustor further authorizes Lender, at Lender's option, (a) to hold
the balance of such proceeds to be used to reimburse Trustor for the cost of
reconstruction or repair of the Mortgaged Property, or (b) to apply the balance
of such proceeds to the payment of the sums secured by this Deed of Trust,
whether or not then due, in the order of application set forth in the Note.
 
If the insurance proceeds are held by Lender to reimburse Trustor for the cost
of restoration and repair of the Mortgaged Property, the Mortgaged Property
shall be restored to the equivalent of its original condition or such other
condition as Lender may approve in writing.  Lender may, at Lender's option,
condition disbursement of said proceeds on Lender's approval of plans and
specifications of an architect satisfactory to Lender, contractor's cost
estimates, architect's certificates, waivers of liens, sworn statements of
mechanics and material suppliers and such other evidence of costs, percentage
completion of construction, application of payments, and satisfaction of liens
as Lender may require.  If the insurance proceeds are applied to the payment of
the sums secured by this Deed of Trust, any such application of proceeds to
principal shall not extend or postpone the due dates of the monthly installments
required by the terms of the Note or change the amounts of such
installments.  If the Mortgaged Property is sold pursuant to Section 6.3 or
Section 6.5 hereof or if Lender acquires title to the Mortgaged Property, Lender
shall have all of the right, title and interest of Trustor in and to any
insurance policies and unearned premiums thereon and in and to the proceeds
resulting from any damage to the Mortgaged Property prior to such sale or
acquisition.
 
Notwithstanding the foregoing and the terms of this Section 2.2.11, Lender will
make insurance proceeds, proceeds of condemnation awards or proceeds of sale in
lieu of condemnation with respect to the Mortgaged Property and all judgments,
decrees and awards for injury or damage to the Mortgaged Property available to
Trustor for the restoration of the Mortgaged Property provided that (i) no Event
of Default has occurred and is continuing, (ii) funds sufficient to complete the
repair or restoration of the Mortgaged Property are available to Trustor from
such proceeds or funds of Trustor (Trustor agreeing to deposit with Lender, in
cash, the difference between the cost of restoration and the amount of such
proceeds available therefor), or both, as determined by Lender in its reasonable
discretion; (iii) restoration is commenced promptly following the date of such
damage or destruction; (iv) Lender is provided evidence, satisfactory to Lender
in its sole and absolute discretion, that such restoration will be completed
within six (6) months of the date of such damage, destruction, condemnation or
sale with respect to a condemnation and that in the case of a condemnation or
sale in connection with a condemnation, the Mortgaged Property will not be
substantially impaired or diminished so as to materially impair the value
thereof  and (v) prior to the disbursement for such restoration, Lender is
provided assurances, satisfactory to Lender in its sole and absolute discretion,
that upon completion of restoration, tenants will lease space within the
Mortgaged Property at equal or better rents than were contemplated prior to the
condemnation, sale in connection with a condemnation, damage or destruction, as
applicable.
 
BENEFICIARY HAS AND HEREBY DISCLOSES TO TRUSTOR IN WRITING THAT UNDER SECTION
2955.5 OF THE CALIFORNIA CIVIL CODE:

“NO LENDER SHALL REQUIRE A BORROWER, AS A CONDITION OF RECEIVING OR MAINTAINING
A LOAN SECURED BY REAL PROPERTY, TO PROVIDE HAZARD INSURANCE COVERAGE AGAINST
RISKS TO THE IMPROVEMENTS ON THAT REAL PROPERTY IN AN AMOUNT EXCEEDING THE
REPLACEMENT VALUE OF THE IMPROVEMENTS ON THE PROPERTY.”
 
Waiver of Allocation Rights. Without limitation of the foregoing, Trustor hereby
specifically, unconditionally and irrevocably waives all rights of a property
owner granted under California Code of Civil Procedure Section 1265.225(a),
which provides for allocation of condemnation proceeds between a property owner
and a lienholder, and any other law or successor statute of similar import.
 
2.2.12  
Condemnation.  Immediately upon obtaining knowledge of the institution of any
proceedings for the condemnation of the Mortgaged Property or any portion
thereof, or any other proceedings arising out of injury or damage to the
Mortgaged Property, or any portion thereof, Trustor will notify Lender of the
pendency of such proceedings.  Lender may participate in any such proceedings,
and Trustor shall from time to time deliver to Lender all instruments requested
by it to permit such participation.  Trustor shall, at its expense, diligently
prosecute any such proceedings, and shall consult with Lender, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such
proceedings.  All proceeds of condemnation awards or proceeds of sale in lieu of
condemnation with respect to the Mortgaged Property and all judgments, decrees
and awards for injury or damage to the Mortgaged Property shall be paid to
Lender and shall be applied, first, to reimburse Lender or Trustee for all costs
and expenses, including, without limitation, reasonable attorneys’ fees,
incurred in connection with collection of such proceeds and, second, the
remainder of said proceeds shall be applied, at the sole and absolute discretion
of Lender, to the payment of the Indebtedness (without premium or penalty) in
the order determined by Lender in its sole and absolute discretion or paid out
to repair or restore the Mortgaged Property so affected by such condemnation,
injury or damage in the same manner as provided in Section 2.2.11.  In any event
the unpaid portion of the Indebtedness shall remain in full force and effect and
Trustor shall not be excused in the payment thereof.  In the event any of the
foregoing proceeds are applied to the repair, restoration or replacement of the
Mortgaged Property, Trustor shall promptly commence and complete such repair,
restoration or replacement of the Mortgaged Property as nearly as possible to
its value, condition and character immediately prior to such damage or taking in
accordance with plans and specifications submitted to and approved by Lender in
its sole and absolute discretion.  Trustor hereby assigns and transfers all such
proceeds, judgments, decrees and awards to Lender and agrees to execute such
further assignments of all such proceeds, judgments, decrees and awards as
Lender may request.  Lender is hereby authorized, in the name of Trustor, to
execute and deliver valid acquittances for, and to appeal from, any such
judgment, decree, or award.  Lender shall not be, in any event or circumstances,
liable or responsible for failure to collect, or exercise diligence in the
collection of, any such proceeds, judgments, decrees or awards.

 
2.2.13  
Protection and Defense of Lien.  Trustor shall not permit the Mortgaged Property
or any part thereof to be taken by execution or other process of law.  If the
validity or priority of this Deed of Trust or of any rights, titles, liens or
security interests created or evidenced hereby with respect to the Mortgaged
Property or any part thereof shall be endangered or questioned or shall be
attacked directly or indirectly or if any legal proceedings are instituted
against Trustor with respect thereto, Trustor will give prompt written notice
thereof to Lender and at Trustor’s own cost and expense will diligently endeavor
to cure any defect that may be developed or claimed, and will take all necessary
and proper steps for the defense of such legal proceedings, including, without
limitation, the employment of counsel, the prosecution or defense of litigation
and the release or discharge of all adverse claims, and Trustee and Lender, or
either of them (whether or not named as parties to legal proceedings with
respect thereto) are hereby authorized and empowered to take such additional
steps as in their judgment and sole and absolute discretion may be necessary or
proper for the defense of any such legal proceedings or the protection of the
validity or priority of this Deed of Trust and the rights, titles, liens and
security interests created or evidenced hereby, including, without limitation,
the employment of counsel, the prosecution or defense of litigation, the
compromise or discharge of any adverse claims made with respect to the Mortgaged
Property, the purchase of any tax title and the removal of prior liens or
security interests (including, without limitation, the payment of debts as they
mature or the payment in full of matured or unmatured debts, which are secured
by these prior liens or security interests), and all expenses so incurred of
every kind and character shall be subject to and covered by the provisions of
Section 2.4 hereof.

 
2.2.14  
No Other Liens.  Trustor will not create, place or permit to be created or
placed, or through any act or failure to act, acquiesce in the placing of, or
allow to remain, any deed of trust, mortgage, voluntary or involuntary lien,
whether statutory, constitutional or contractual (except for the lien for ad
valorem taxes on the Mortgaged Property which are not delinquent), security
interest, encumbrance or charge, or conditional sale or other title retention
document, against or covering the Mortgaged Property, or any part thereof,
regardless of whether the same are expressly or otherwise subordinate to the
lien or security interest created in this Deed of Trust, and should any of the
foregoing become attached hereafter in any manner to any part of the Mortgaged
Property, Lender may at Lender's option, declare all of the sums secured by this
Deed of Trust to be immediately due and payable and Lender may invoke any
remedies permitted by Section 6 of this Deed of Trust.  Provided, however, that
if there is filed an affidavit claiming a mechanic’s or materialman’s lien
against the Mortgaged Property, Lender will not accelerate the indebtedness if
Trustor causes the lien to be removed within 30 days or provides a bond or other
security satisfactory to Lender, in its sole and absolute discretion, to protect
its interest as Beneficiary.  Trustor will own all parts of the Mortgaged
Property and will not acquire any fixtures, equipment or other property forming
a part of the Mortgaged Property pursuant to a lease, license or similar
agreement without the prior written consent of Lender in its sole and absolute
discretion.

 
2.2.15  
Escrow.  Trustor shall pay to Lender, on the day monthly installments of
principal and/or interest are payable under the Note (or on another day
designated in writing by Beneficiary) and until the Note is paid in full, a sum
(herein "Funds") equal to one-twelfth of (a) the yearly taxes and assessments
that may be levied on the Mortgaged Property, and (b) the yearly premium
installments for fire and other hazard insurance, rent loss insurance and such
other insurance covering the Mortgaged Property as Lender may require pursuant
to Section 2.2.11 of this Deed of Trust, all as reasonably estimated initially
and from time to time by Lender so that Lender may pay the items identified in
(a) and (b) above at least thirty (30) days prior to their respective due dates.

 
On the date the Loan is funded, an account shall be established by Lender for
the deposit of Funds in an amount equal to the next assessment or levy of real
estate and/or property taxes and insurance premiums on the Mortgaged Property
minus the monthly Fund installments remaining before such assessment, levy, or
premium installment is due.  Thereafter, Funds shall be deposited in said
account as provided above.
 
Upon Trustor's breach of any covenant or agreement of Trustor in this Deed of
Trust, Lender may apply, in any amount and in any order as Beneficiary shall
determine in Lender's sole and absolute discretion, any Funds held by Lender at
the time of application (i) to pay taxes, assessments and insurance premiums
that are now or will hereafter become due or (ii) as a credit against sums
secured by this Deed of Trust.  Upon payment in full of all sums secured by this
Deed of Trust, Lender shall promptly refund to Trustor any Funds held by Lender.
 
Lender shall make no charge for so holding and applying the Funds, analyzing
said account or for verifying and compiling said assessments and bills.  Lender
shall not be required to pay Trustor any interest, earnings or profits on the
Funds.  The Funds are pledged, free and clear of any creditor liens, and a
security interest is hereby granted to Lender therein, as additional security
for the sums secured by this Deed of Trust and shall be subject to the right of
set-off.
 
If the amount of the Funds held by Lender shall exceed the amount deemed
necessary by Lender to provide for the payment of taxes, assessments and
insurance premiums thirty (30) days prior to the date when they become due and
payable, such excess shall be credited to Trustor on the next monthly
installment or installments of Funds due.  If at any time the amount of the
Funds held by Beneficiary shall be less than the amount deemed necessary by
Lender to pay taxes, assessments and insurance premiums, Trustor shall pay to
Lender any amount necessary to make up the deficiency within fifteen (15) days
after notice from Lender to Trustor requesting payment thereof and at least
thirty (30) days prior to the date when they become due and payable.
 
The conveyance or transfer of Trustor’s interest in the Mortgaged Property for
any reason (including, without limitation, the foreclosure of a subordinate lien
or security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Trustor’s interest in and rights to such funds held by
Lender under this Section but subject to the rights of Lender hereunder.
 
Lender may waive in a separate writing the escrow provisions of this Section
2.2.15 upon such terms and conditions as it shall require.
 
 
2.2.16
Further Assurances.  Trustor will, on request of Lender, promptly (i) correct
any defect, error or omission which may be discovered in the contents of this
Deed of Trust or in any other instrument now or hereafter executed in connection
herewith or in the execution of acknowledgment thereof; (ii) execute,
acknowledge, deliver and record or file such further instruments (including,
without limitation, further deeds of trust, security agreements, financing
statements, continuation statements and assignments of rents or leases) and do
such further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Deed of Trust and such other instruments and to
subject to the liens and security interests hereof and thereof any property
intended by the terms hereof and thereof to be covered hereby and thereby
including, without limitation, any renewals, additions, substitutions,
replacements or appurtenances to the Mortgaged Property; (iii) execute,
acknowledge, deliver, procure and record or file any document or instrument
(including, without limitation, any financing statement) deemed advisable by
Lender to protect the lien or the security interest hereunder against the rights
or interests of third persons; and (iv) provide such certificates, documents,
reports, information, affidavits and other instruments and do such further acts
as may be necessary, desirable or proper in the reasonable determination of
Lender to enable Lender to comply with the requirements or requests of any
agency having jurisdiction over Lender or any examiners of such agencies with
respect to the Indebtedness, Trustor or the Mortgaged Property and Trustor will
pay all costs connected with any of the foregoing.

 
 
2.2.17
Title Insurance.  Trustor shall, at its sole cost and expense obtain and
maintain title insurance in the form of a commitment, binder or policy
(collectively, "Policy") as Lender may require, issued by a title company
acceptable to Lender.  If for any reason during the period the Indebtedness is
outstanding such title insurance is no longer valid or the issuing title company
is insolvent or unable to adequately insure the validity and priority of the
lien evidenced by this Deed of Trust (as determined by Lender in its sole and
absolute discretion), Trustor agrees to obtain, at its sole cost and expense, a
replacement Policy issued by a title company acceptable to Lender in favor of
Lender as Beneficiary, in such amount and form as required by Lender, insuring
the validity and priority of the lien evidenced by this Deed of Trust.

 
 
2.2.18
Fees and Expenses; Indemnification.  Trustor will pay all appraisal fees, filing
and recording fees, inspection fees, survey fees, taxes, brokerage fees and
commissions, abstract fees, title policy fees, uniform commercial code search
and/or filing fees, escrow fees, reasonable attorneys’ fees, and all other costs
and expenses of every character incurred by Trustor or Lender in connection with
the Indebtedness, either at the closing thereof or at any time during the term
thereof, or otherwise attributable or chargeable to Trustor as owner of the
Mortgaged Property, and will reimburse Lender for all such costs and expenses
incurred by Lender.  Trustor shall pay all expenses and reimburse Lender for any
expenditures, including, without limitation, reasonable attorneys’ fees and
legal expenses, incurred or expended in connection with (i) the breach by
Trustor of any covenant herein or in any other Loan Document; (ii) Lender’s
exercise of any of its rights and remedies hereunder or under the Note or any
other Loan Document or Lender’s protection of the Mortgaged Property and its
lien and security interest therein; or (iii) any amendments to this Deed of
Trust, the Note or any other Loan Document or any matter requested by Trustor or
any approval required hereunder.  Trustor will indemnify and hold harmless
Trustee and Lender (for purposes of this Section, the terms "Trustee" and
“Lender” shall include the directors, officers, partners, employees,
representatives and agents of Trustee and Lender, respectively, and any persons
or entities owned or controlled by, owning or controlling, or under common
control or affiliated with Trustee and Lender, respectively) from and against,
and reimburse them for, all claims, demands, liabilities, losses, damages,
causes of action, judgments, penalties, costs and expenses (including, without
limitation, reasonable attorneys’ fees) that may be imposed upon, asserted
against or incurred or paid by them by reason of, on account of or in connection
with any bodily injury or death or property damage occurring in or upon or in
the vicinity of the Mortgaged Property through any cause whatsoever or asserted
against them on account of any act performed or omitted to be performed
hereunder or on account of any transaction arising out of or in any way
connected with the Mortgaged Property or with this Deed of Trust, the Note or
any other Loan Documents and occurring or arising prior to the date Trustor
obtained title to the Mortgaged Property or during the time that Trustor held
title to the Mortgaged Property. In no event will Trustor be liable to Trustee
or Lender under this Section for matters arising from any cause whatsoever that
occurs after the date Trustor transfers fee title to the Mortgaged Property in a
manner permitted under the terms of the Loan Documents or in connection with the
payment in full of the Note.  To the extent that any liability under this
Section relates to a matter that occurs prior to the date Trustor transfers fee
title to the Mortgaged Property in a manner permitted under the terms of the
Loan Documents or in connection with the payment in full of the Note, but the
existence of such matter is not evident until after the date of such transfer,
Trustor will remain liable under this Section.  Without limitation of the
foregoing, it is the intention of Trustor and Trustor agrees that the foregoing
indemnities shall apply to each indemnified party with respect to claims,
demands, liabilities, losses, damages, causes of action, judgments, penalties,
costs and expenses (including, without limitation, reasonable attorneys’ fees)
which in whole or in part are caused by or arise out of the negligence of such
(and/or any other) indemnified party.  However, such indemnities shall not apply
to any indemnified party to the extent the subject of the indemnification is
caused by or arises out of the willful misconduct of such indemnified
party.  The foregoing indemnities shall not terminate upon release, foreclosure
or other termination of this Deed of Trust but will survive foreclosure of this
Deed of Trust or conveyance in lieu of foreclosure and the repayment of the
Indebtedness and the discharge and release of this Deed of Trust and the other
Loan Documents.  Any amount to be paid hereunder by Trustor to Lender and/or
Trustee shall be subject to and governed by the provisions of Section 2.4
hereof.

 
 
2.2.19
Warranty.  Trustor does hereby warrant the title to the Mortgaged Property and
every part thereof and will defend the same against the claims of all persons
whomsoever claiming or to claim the same or any part thereof, subject to the
Permitted Encumbrances.

 
 
2.2.20
Tax on Lien.  In the event of the enactment after this date of any law of
California or of any other governmental entity deducting from the value of
property for the purpose of taxation any lien or security interest thereon, or
imposing upon Lender the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Trustor, or
changing in any way the laws relating to the taxation of deeds of trust or
mortgages or security agreements or debts secured by deeds of trust or mortgages
or security agreements or the interest of the Beneficiary or secured party in
the property covered thereby, or the manner of collection of such taxes, so as
to affect this Deed of Trust or the Indebtedness or Lender, then, and in any
such event, Trustor upon demand by Lender, shall pay such taxes, assessments,
charges or liens, or reimburse Lender therefor; provided, however, that if in
the opinion of counsel for Lender (i) it might be unlawful to require Trustor to
make such payment; or (ii) the making of such payment might result in the
contracting for, charging or receiving of interest beyond the maximum amount
permitted by law, then and in such event, Lender may elect, by notice in writing
given to Trustor, to declare all of the Indebtedness to be and become due and
payable 120 days from the giving of such notice.

 
 
2.2.21
Change of Name, Identity or Structure.  The present structure and ownership of
Trustor is a material consideration to Lender in making the Loan secured by this
Deed of Trust.  Therefore, Trustor will not dissolve, liquidate, merge or
consolidate or permit any interest in Trustor, directly or indirectly, to be
sold, assigned, transferred, mortgaged, pledged, encumbered or otherwise
disposed of, voluntarily or involuntarily, including, without limitation, any
sale or transfer of a partnership or other ownership interest, whether same be a
profits interest, a capital interest or a combination of same, to any third
party, or an admission of a new general partner, limited partner, manager or
member or any alteration of the distribution of partnership or ownership
interests, whether same be a change in the distribution of profits interests,
capital interests, or a combination of same, or any such attempted sale,
transfer, admission or alteration, without the prior written consent of Lender
in its sole and absolute discretion.  Trustor will not change Trustor’s name,
identity (including its trade name or names) or, if not an individual, Trustor’s
corporate, partnership or other structure without notifying Lender of such
change in writing at least thirty (30) days prior to the effective date of such
change.  Trustor will execute and deliver to Lender, prior to or
contemporaneously with the effective date of any such change, any financing
statement or financing statement change required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted
herein.  At the request of Lender, Trustor shall execute a certificate in form
satisfactory to Lender, in its good faith discretion, listing the trade names
under which Trustor intends to operate the Mortgaged Property, and representing
and warranting that Trustor does business under no other trade name with respect
to the Mortgaged Property.

 
 
2.2.22
Location and Use of Personal Property.  All tangible Personal Property will be
used in the business of Trustor and shall remain in Trustor’s possession or
control at all times at Trustor’s risk of loss and shall be located on the Land.

 
 
2.2.23
Estoppel Certificate.  Trustor shall at any time and from time to time furnish
promptly upon request by Lender a written statement in such form as may be
required by Lender stating that the Note, this Deed of Trust and the other Loan
Documents are valid and binding obligations of Trustor, enforceable against
Trustor in accordance with their terms; the unpaid principal balance of the
Note; the date to which interest on the Note is paid; that the Note, this Deed
of Trust and the other Loan Documents have not been released, subordinated or
modified; and that there are no offsets or defenses against the enforcement of
the Note, this Deed of Trust or any other Loan Documents, or if any of the
foregoing statements are untrue, specifying the reasons therefor.

 
 
2.2.24
Proceeds of Personal Property.  Trustor shall account fully and faithfully for
and, if Lender so elects, shall promptly pay or turn over to Lender the proceeds
in whatever form received from disposition in any manner of any of the Personal
Property, except as otherwise specifically authorized herein.  Trustor shall at
all times keep the Personal Property, and its proceeds separate and distinct
from other property of Trustor and shall keep accurate and complete records of
the Personal Property and its proceeds.

 
 
2.2.25
Permitted Encumbrances.  Trustor will comply with and will perform all of the
covenants, agreements and obligations imposed upon it or the Mortgaged Property
in the Permitted Encumbrances in accordance with their respective terms and
provisions.  Trustor will not modify or permit any modification of any Permitted
Encumbrance, without the prior written consent of Lender in its sole and
absolute discretion.

 
2.2.26  
Transfers of the Mortgaged Property or Beneficial Interests in Trustor.

 
A.  
The present ownership and management of the Mortgaged Property is a material
consideration to Lender in making the Loan secured by this Deed of
Trust.  Therefore, Trustor agrees that Trustor shall not, without the prior
written consent of the Lender, in its sole and absolute discretion, sell,
convey, alienate, pledge, mortgage or encumber the Mortgaged Property or any
part thereof, or any interest therein or shall contract to do the same, or shall
be divested of its title or any interest therein in any manner or way, whether
voluntary or involuntary (whether direct or indirect, legal or equitable,
including the sale, assignment, transfer, disposition, conveyance, alienation,
pledge, or encumbrance of any ownership interest in Trustor or in any entity
having an ownership interest in Trustor, whether direct or indirect) (any such
event a "transfer").  Trustor further agrees that no merger, consolidation, or
dissolution affecting Trustor shall occur without the prior written consent of
Beneficiary, in its sole and absolute discretion.  Upon the occurrence of a
default under this paragraph, in addition to all other rights and remedies of
Lender, Lender may, at Lender's option, declare all of the sums secured by this
Deed of Trust to be immediately due and payable and Lender may invoke any
remedies permitted by Section 6 of this Deed of Trust.

 
B.  
Notwithstanding the foregoing provisions of Section 2.26A, Trustor shall have a
one-time right, while the Indebtedness remains unpaid, to sell or transfer its
entire ownership interest in the Mortgaged Property, without any changes to the
terms and conditions of the Loan Documents, provided that (a)  (i) the
transferee (the “Transferee”) or its principals are acceptable to Lender in its
sole and absolute discretion in terms of financial strength, (ii) the Transferee
or its principals are acceptable to Lender in its sole and absolute discretion
in terms of creditworthiness, and (iii) at the time of transfer of the Mortgaged
Property, Transferee or its principals have a net worth, exclusive of the
Mortgaged Property, in excess of fifty percent (50%) of the amount of then
existing balance under the Loan (including accrued but unpaid interest); (b) the
Transferee (or its principals) has had at least five (5) years of experience
owning and/or managing properties similar to the Mortgaged Property; (c) the
Transferee agrees to assume all of the duties and obligations of Trustor under
the Loan Documents pursuant to documentation satisfactory to Lender in its sole
and absolute discretion; (d) the Transferee and Trustor agree to execute and
deliver to Lender such documents regarding the transfer and assumption as Lender
may require (including, but not limited to, a recordable assumption agreement
and acceptable endorsements to Lender’s title insurance policy); (e) an
assumption fee equal to one percent (1%) of the outstanding principal balance of
the Loan is paid to Lender prior to such transfer; (f) Trustor is not then in
default under the terms or conditions of the Loan; (g) all costs relating to the
transfer are paid by Trustor or the Transferee (including attorneys’ fees and
costs); (h) Lender is provided with all documents required by Lender to consider
the transfer, and prior written notice of the proposed transfer, at least thirty
(30) days before such proposed transfer; (i) Lender receives written
confirmation from any guarantor or guarantors under any guaranty of any
obligations under the Loan confirming that such guaranty shall remain unmodified
and in full force and effect after such transfer; and (j) if any lease of the
Mortgaged Property requires the tenant thereunder to consent to such transfer,
written evidence of such tenant’s consent, in form acceptable to Lender in its
sole and absolute discretion, shall be provided to Lender prior to such
transfer.  No subsequent transfers of the Mortgaged Property shall be
allowed.  If the proposed transfer does not occur for any reason, Trustor shall
still be responsible for reimbursing Lender for all costs incurred by Lender in
connection with the proposed transfer (including attorneys’ fees and costs), as
well as the processing fee.

 
C.  
In addition, the following listed transfers of ownership interests in Trustor
(but not transfers of the Mortgaged Property) shall be permitted during the term
of the Loan provided that (a) Lender is given at least thirty (30) days prior
written notice of any such transfer; (b) Trustor and the Transferee agree to
execute and deliver to Lender such documents regarding the transfer as required
by Lender; (c) the Trustor is not then in default under the terms and conditions
of the Loan; (d) Trustor and/or the Transferee pay all costs and expenses
related to such transfer; (e) Lender is paid a processing fee (to be determined
by Lender at the time of each transfer) of not less than One Thousand Dollars
($1,000) for each such transfer; and (f) Lender receives written confirmation
from any guarantor(s) that any guaranty(ies) executed in connection with the
Loan remain(s) unmodified and in full force and effect after such transfer:

 
(i)  
transfers of ownership interests in Trustor to a new entity in which NetREIT,
Inc., a Maryland corporation, owns at least sixty-seven percent (67%) of the
interests in and solely controls all decision making of such entity.

 
D.  
Without limitation, it shall be an Event of Default hereunder if any party with
an ownership interest in Trustor shall solicit any person or entity to, or
direct or cause either the Trustor or any entity which controls Trustor (the
“Trustor Group”) to: (i) commence any case, proceeding or other action against
Trustor under any existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors (a “Proceeding”);
(ii) institute proceedings to have Trustor adjudicated a bankrupt or insolvent;
(iii) consent to, or acquiesce in, the institution of bankruptcy or insolvency
proceedings against Trustor; (iv) file a petition or consent to the filing of a
petition seeking reorganization, arrangement, adjustment, winding-up,
dissolution, composition, liquidation or other relief by or on behalf of
Trustor; (v) seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for Trustor,
the Mortgaged Property (or any portion thereof); (vi) make an assignment for the
benefit of any creditor of Trustor; (vii) seek to consolidate the Mortgaged
Property (or any portion thereof) with the assets of any member of the Trustor
Group in any proceeding relating to bankruptcy, insolvency, reorganization or
relief of debtors; or (viii) take any action in furtherance of any of the
foregoing.

 
 
2.3
Right of Lender to Inspect.  Lender shall have the right to inspect the physical
condition, books and records of the Trustor which relate to the Mortgaged
Property or the Indebtedness at any time while the Indebtedness remains unpaid,
upon reasonable notice during normal business hours.  Lender may charge $750 for
a physical inspection of the Mortgaged Property, but no more often than once
every two (2) years commencing on the date of recording this Deed of
Trust.  Trustor will be obligated to pay said fee within ten (10) business days
after billing for such inspection.

 
 
2.4
Right of Lender to Perform.  Trustor agrees that, if Trustor fails to perform
any act or to take any action which hereunder Trustor is required to perform or
take, or to pay any money which hereunder Trustor is required to pay, or takes
any action prohibited hereby, Lender, in Trustor’s name or in its own name, may
but shall not be obligated to perform or cause to be performed such act or take
such action, including, without limitation, entering the Mortgaged Property for
such purpose and to take all such action thereon as it may deem necessary or
appropriate, or pay such money or remedy any action so taken, and any expenses
so incurred by Lender, and any money paid by Lender in connection therewith,
shall be a demand obligation owing by Trustor to Lender and Lender, upon making
such payment, shall be subrogated to all of the rights of the party receiving
such payment.  Any amounts due and owing by Trustor to Lender pursuant to this
Deed of Trust shall bear interest from the date such amount becomes due until
paid at the rate of interest payable on matured but unpaid principal of or
interest on the Note and shall be a part of the Indebtedness and shall be
secured by this Deed of Trust and by any other Loan Documents.

 
 
2.5
Partial Release.  Beneficiary shall consent to causing a one-time release from
the lien of this Deed of Trust of a portion of the Land containing one building
(such portion to be released, the "Released Property"), but only upon the
satisfaction of all of the following terms and conditions:

 
 
a.
Beneficiary shall have received from Trustor at least thirty (30) days' prior
written notice of the date proposed for such release (the "Release Date") and
the identification of the Released Property;

 
 
b.
No Event of Default (and no event or condition shall exist that, with the
passage of time or giving of notice, would constitute an Event of Default) shall
have occurred and be continuing as of the date of such notice and the Release
Date;

 
 
c.
The release shall occur contemporaneously with the sale of the Released Property
pursuant to an arm's-length, bona fide contract to a person or entity that does
not have any interest, whether direct or indirect, in Trustor and is not an
affiliate of Trustor;

 
 
d.
Trustor shall pay to Beneficiary on the Release Date an amount equal to Three
Million and 00/100 Dollars ($3,000,000.00) for that portion of the Land
containing the 2101 Haffley Avenue building and Seven Million Eight Hundred
Thousand and 00/100 Dollars ($7,800,00.00) for that portion of the Land
containing the 940 W. 19th Street building (the “Release Price”);

 
 
e.
The release of the Released Property shall not result in a Loan to Value Ratio,
as determined by Beneficiary in its sole discretion, in excess of seventy
percent (70%) of the remaining collateral (the “Remaining Property”).  As used
herein, the “Loan to Value Ratio” means the ratio, expressed as a percentage, of
(i) maximum outstanding principal balance that may be secured hereby (i.e., the
maximum possible amount of the Loan, after the requested prepayment and release
under this paragraph, as if any reserves or holdbacks were fully funded), to
(ii) the as-is value of the Remaining Property as determined by Beneficiary in
its sole discretion, and Beneficiary may elect to have an appraisal be performed
by an appraiser and under an MAI appraisal acceptable to Beneficiary in its sole
discretion; any such appraisal shall be performed at Borrower’s sole cost and
expense;

 
 
f.
After application of the Release Price to pay down the Loan (in accordance with
paragraph (m) below), the Remaining Property would have achieved a “Debt Service
Coverage Ratio” (as hereinafter defined) of 1.25 or more based on the prior
twelve (12) calendar months and is projected by Beneficiary to continue to
achieve at least a 1.25 Debt Service Coverage Ratio.

 
 
(i)
“Debt Service” means the aggregate scheduled interest and principal payments due
under the Loan;

 
 
(ii)
“Debt Service Coverage Ratio” means the ratio calculated by Beneficiary of (x)
the “Net Operating Income” (as hereinafter defined) of the Remaining Property to
(y) the Debt Service;

 
 
(iii)
"Net Operating Income" means the Operating Revenues for any period less Expenses
for such period;

 
 
(iv)
"Operating Revenues" means, with respect to the period being measured, all rent
and expense reimbursements (but only to the extent such amounts are used to pay
Expenses during such period) under the Leases.  Without limitation, Operating
Revenues do not including parking revenue, concession fees and charges and other
miscellaneous operating revenues, proceeds from rental or business interruption
insurance, security deposits and earnest money deposits or any nonrecurring
receipts;

 
 
(v)
"Expenses" means, with respect to the period being measured, all Remaining
Property expenses during such period, including all operating expenses, which
are paid in or which are directly associated with and fairly allocable to the
Remaining Property for the applicable period, and further including, without
limitation, ad valorem real estate taxes and assessments, insurance premiums,
maintenance costs, accounting, legal, and other professional fees, and expenses
incurred by Beneficiary and reimbursed by Trustor under this Deed of Trust and
the other Loan Documents, but excluding Debt Service;

 
 
g.
Trustor shall have provided Beneficiary with evidence acceptable to Beneficiary
that the Released Property has been formally designated as a distinct tax lot
separate from the Remaining Property;

 
 
h.
Trustor shall have provided Beneficiary with evidence acceptable to Beneficiary
that the Released Property and the Remaining Property shall be legal lots or
parcels in compliance with the all California subdivision acts and local
ordinances thereunder and that the Remaining Property has adequate ingress,
egress and parking, with such easements recorded to ensure the foregoing that
are satisfactory to Beneficiary in its sole discretion;

 
 
i.
Trustor shall retain administrative control over all common areas grounds, the
parking lot and all maintenance and management of the common areas, and such
agreements satisfactory to Beneficiary in its sole discretion shall be in place
that provide that the purchaser(s) of the Released Property shall reimburse
Trustor for a pro rata share of the expenses related to the foregoing;

 
 
j.
Trustor, at its sole cost and expense, shall have delivered to Beneficiary one
or more endorsements to the mortgagee policy of title insurance delivered to
Beneficiary on the date hereof in connection with this Deed of Trust insuring
that, after giving effect to such release, (i) the lien created hereby and
insured under such title policy is a first priority lien on the Remaining
Property subject only to original permitted exceptions applicable to the
Remaining Property, and (ii) such title policy is in full force and effect and
unaffected by such release;

 
 
k.
Trustor shall have paid all of Beneficiary's costs and expenses, including,
without limitation, attorneys' fees and expenses, in connection with the release
of the Released Property;

 
 
l.
Beneficiary shall determine, in its sole and absolute discretion, that the
Remaining Property is acceptable as security for the remaining Loan
amount.  Trustor acknowledges and agrees that Beneficiary may make this
determination in its sole and absolute discretion.  If Beneficiary does not
permit the sale of the Released Property solely on the basis of this paragraph
(l), then Beneficiary may require Trustor to prepay the Loan in full and the
prepayment premium applicable thereto shall be (i) the prepayment premium that
would have been received by Beneficiary had such sale of the Released Property
occurred and (ii) one percent (1%) of the principal balance of the Loan that
would have been remaining after such sale of the Released Property and
application of the Release Price to the Loan had such sale of the Released
Property occurred; and

 
 
m.
The Release Price shall be applied to the Loan in such order as determined by
Beneficiary.

 
 
Upon payment of the Release Price and the satisfaction of the other conditions
set forth in this Section 2.5 for the release of the Released Property, the
security interests and liens of Beneficiary under this Deed of Trust shall be
released from the Released Property, and Beneficiary will execute and deliver
any agreements reasonably requested by Trustor to release and terminate the lien
of this Deed of Trust as to the Released Property; provided, however, that such
release and termination shall be without recourse to Beneficiary and made
without any representation or warranty.  Upon the release and termination of
Beneficiary's security interests and liens under this Deed of Trust and the
other Loan Documents relating to the Released Property, all references in this
Deed of Trust and the other Loan Documents relating to the Released Property
shall be deemed deleted, except as otherwise provided herein with respect to
indemnities.

 
 
2.6
Replacement Reserve.

 
 
2.6.1
Replacement Reserve Monthly Deposit.  Trustor shall pay to Beneficiary on the
day monthly installments of principal and/or interest are payable under the Note
(or on another day designated in writing by Beneficiary) a monthly deposit in
the amount of $5,000 (the “Replacement Reserve Monthly Deposit”).  Amounts so
deposited shall hereinafter be referred to as Trustor’s “Replacement Reserve
Funds” and the account in which such amounts are held shall hereinafter be
referred to as Trustor’s “Replacement Reserve Account”.

 
 
2.6.2
Trustor may replace the roof of the building located at 940 W. 19th Street,
National City (the “Roof Replacement”) pursuant to plans and specifications
approved by Beneficiary (the “Plans and Specifications”), such approval not to
be unreasonably withheld.  Upon completion of the Roof Replacement, Beneficiary
shall disburse the full amount of the Replacement Reserve Funds (and Trustor
shall have no further obligation to make any Replacement Reserve Monthly
Deposit), but only upon Beneficiary’s determination, such determination not to
be unreasonably withheld, that the following terms and conditions have been
satisfied:  (a) the Roof Replacement has been completed in a good and
workmanlike manner and in accordance the Plans and Specifications and any and
all Applicable Laws; (b) the Roof Replacement has been completed free of any and
all liens and, if requested by Beneficiary, Beneficiary has received lien
waivers and releases satisfactory to Beneficiary from all parties furnishing
materials and/or services in connection with the Roof Replacement; (c) no Event
of Default (and no event or condition shall exist that, with the passage of time
or giving of notice, would constitute an Event of Default) shall have occurred
and be continuing as of the date of Trustor’s request for such disbursement; and
(d) Beneficiary has received such other evidence as Beneficiary shall reasonably
request to demonstrate that the Roof Replacement has been completed and is paid
for or will be paid upon such disbursement to Trustor.  Trustor hereby
acknowledges that, without limitation, Beneficiary may require an inspection of
the Property, at Trustor’s sole cost and expense, prior to making such
disbursement in order to verify completion of the Roof Replacement.  In the
event that Trustor does not make the Roof Replacement during the term of the
Loan, then upon payment of all outstanding principal in full satisfaction of the
Loan, Beneficiary shall disburse to Trustor the full amounts of the Replacement
Reserve Funds.

 
 
2.6.3
Balance in the Replacement Reserve Account.  The insufficiency of any balance in
the Replacement Reserve Account shall not relieve Trustor from its obligation to
fulfill all preservation and maintenance covenants in the Loan Documents.

 
 
2.6.4
Reserve Funds, Generally.

 
 
(a)
Trustor (i) hereby grants to Beneficiary a first priority security interest in
all of the Replacement Reserve Funds and any and all monies now or hereafter
deposited in each Reserve Account as additional security for payment and
performance of the Indebtedness and (ii) will take all actions necessary to
maintain in favor of Beneficiary a perfected first priority security interest in
the Replacement Reserve Funds, including, without limitation, filing or
authorizing Beneficiary to file UCC-1 financing statements and continuations
thereof.  Until expended or applied in accordance herewith, the Replacement
Reserve Funds shall constitute additional security for the Obligations.

 
 
(b)
Upon the occurrence of an Event of Default, Beneficiary may, in addition to any
and all other rights and remedies available to Beneficiary, apply any sums then
present in any or all of the Replacement Reserve Funds to the reduction of the
Outstanding Principal Balance in any order in its sole discretion.

 
 
(c)
Trustor shall not further pledge, assign or grant any security interest in any
Replacement Reserve Funds or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1
financing statements, except those naming Beneficiary as the secured party, to
be filed with respect thereto.

 
 
(d)
The Replacement Reserve Funds shall not constitute trust funds and may be
commingled with other monies held by Beneficiary.  No earnings or interest on
the Replacement Reserve Funds shall be payable to Trustor.  Neither Beneficiary
nor any servicer that at any time holds or maintains the Replacement Reserve
Funds shall have any obligation to keep or maintain such Replacement Reserve
Funds or any funds deposited therein in interest bearing accounts.  If
Beneficiary or any such servicer elects in its sole and absolute discretion to
keep or maintain the Replacement Reserve Funds or any funds deposited therein in
an interest bearing account, (i) such funds shall not be invested except as
directed by Beneficiary, and (ii) all interest earned or accrued thereon shall
be for the account of and be retained by Beneficiary or any such
servicer.  Beneficiary shall not be responsible and shall have no liability
whatsoever for the rate of return earned or losses incurred on the investment of
any Replacement Reserve Funds in any investments permitted pursuant to this
subsection (d).

 
 
(e)
Trustor shall indemnify Beneficiary and hold Beneficiary harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the Replacement Reserve Funds or the performance of the obligations for
which the Replacement Reserve Funds were established.  Trustor shall assign to
Beneficiary all rights and claims Trustor may have against all Persons supplying
labor, materials or other services which are to be paid from or secured by the
Replacement Reserve Funds; provided, however, that Beneficiary may not pursue
any such right or claim unless an Event of Default has occurred and remains
uncured.

 
3.
ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS; EASEMENT AND LICENSE.

 
3.1  
Representations, Warranties and Covenants.

 
3.1.1           Provisions Relating to Hazardous Materials.
 
3.1.1.1                 Except as has been disclosed in writing to Beneficiary,
Trustor represents and warrants that:  (a) the Mortgaged Property complies with
all Hazardous Materials Law as to use and conditions on, under or about the
Mortgaged Property including soil and groundwater condition; (b) neither Trustor
nor, to the best of Trustor’s knowledge, neither Trustor nor any other person,
has used, generated, manufactured, stored or disposed of on, under or about the
Mortgaged Property or transported to or from the Mortgaged Property any
Hazardous Materials; and (c) to the best knowledge of Trustor, there are no
Hazardous Materials in, attributable to or affecting the Mortgaged Property or
the area within 2,000 feet of the Mortgaged Property.  Without limitation on the
foregoing, to the best knowledge of Trustor:  (i) the primary potable or
drinking water source and groundwater has never been known to exceed the EPA
Recommended Maximum Contaminant Level Goals set forth under the Safe Drinking
Water Act and Clean Water Act, as amended; (ii) there is not and has never been
landfill containing decomposable material, petroleum wells, mineral bearing
mines, sewage treatment facilities, underground storage tanks, sinkholes, radon
or other toxic emissions within 2,000 feet of any boundary of the Mortgaged
Property, and (iii) no electrical transformers, fluorescent light fixtures with
ballasts or other equipment containing polychlorinated biphenyls (PCBs) have
been located on the Mortgaged Property at any time.
 
3.1.1.2                 Trustor covenants and agrees that Trustor shall not
cause or permit the presence, use, generation, manufacture, release, discharge,
storage or disposal of any Hazardous Materials on, under, in or about the
Mortgaged Property, or the transportation of any Hazardous Materials to or from
the Mortgaged Property other than materials used in the ordinary course of
Trustor’s or a tenant of Trustor’s business that are used, stored, handled, and
disposed of strictly in compliance with all laws or used in the ordinary course
of managing, cleaning, renovating or repairing the Mortgaged Property strictly
in compliance with all Hazardous Materials Laws).  Trustor shall immediately
notify Beneficiary in writing of:  (a) any enforcement, cleanup, removal or
other governmental or regulatory action instituted, completed or threatened in
connection with any Hazardous Materials of which it has received written notice
or is otherwise aware; (b) any claim made or threatened by any third party
against Trustor or the Mortgaged Property relating to damage, contribution, cost
recovery, compensation, loss or injury to persons or property resulting from any
Hazardous Materials of which it has received written notice or is otherwise
aware; and (c) Trustor’s discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Mortgaged Property that could cause
all or any portion of the Mortgaged Property to be classified as “border-zone
property” under the provisions of the California Health and Safety Code or any
regulation adopted in accordance therewith, or to be otherwise subject to any
restrictions on the ownership, occupancy, transferability or use of the
Mortgaged Property under Hazardous Materials Law.  Without Beneficiary’s prior
written consent, in its sole and absolute discretion, Trustor shall not take any
remedial action in response to the presence of any Hazardous Materials on, in,
under or about the Mortgaged Property, nor enter into any settlement agreement,
consent decree or other compromise in respect to any Hazardous Materials (except
that in the case of an emergency, Trustor shall take such action as may be
reasonably required under the circumstances and shall immediately notify
Beneficiary in writing of any such action taken).
 
3.1.1.3                 Trustor shall indemnify, defend and hold Beneficiary,
its employees, agents, officers and directors, harmless from and against any
claim, action, suit, proceeding, loss, cost, damage, liability, deficiency,
fine, penalty, punitive damage or expense (including attorneys’, experts’ and
consultant fees), directly or indirectly resulting from, arising out of, or
based upon (a) the presence, release, use, manufacture, generation, discharge,
storage or disposal of any Hazardous Materials on, under, in or about, or the
transportation of any such materials to or from, the Mortgaged Property, or
(b) the violation, or alleged violation, of any Hazardous Materials Law
affecting the Mortgaged Property, or the transportation of Hazardous Materials
to or from the Mortgaged Property.  This indemnity shall (i) include any damage,
liability, fine, penalty, punitive damage, cost or expense arising from or out
of any claim, action, suit or proceeding for personal injury (including
sickness, disease or death), tangible or intangible property damage,
compensation for lost wages, business income, profits or other economic loss,
damage to the natural resources or the environment, nuisance, pollution,
contamination, leak, spill, release or other adverse effect on the environment,
and the cost of any required or necessary repair, cleanup, treatment or
detoxification of the Mortgaged Property, and the preparation and implementation
of any closure, disposal, remedial or other required actions in connection with
the Mortgaged Property, and (ii) survive foreclosure (whether judicial or
nonjudicial) of this Deed of Trust and the full or partial payment or discharge
of all indebtedness secured hereby.  Notwithstanding Section 2941 of the
California Civil Code, Trustor hereby waives its rights to any damages resulting
from a delayed reconveyance of this Deed of Trust pending the identification and
liquidation of Trustor’s liabilities under this Section.  Trustor hereby waives
any defenses or limits to the foregoing indemnification of Beneficiary that
would otherwise be available to Trustor under California Code of Civil Procedure
Section 736(b)(3).
 
3.1.1.4                 At any time during the term of this Deed of Trust,
Beneficiary shall have the right, on twenty-four (24) hours prior written notice
to Trustor, at Trustor’s expense, to enter the Mortgaged Property and to conduct
such tests and investigations as Beneficiary requires, in its sole and absolute
discretion, to determine whether any Hazardous Materials are present in, under,
on or about the Mortgaged Property.  Such tests and investigation shall include
underground borings, ground water analyses and borings from the floors, ceilings
and walls of any improvements located on the Mortgaged Property.  Without
limitation on any other terms provided herein, Trustor shall, at Trustor’s sole
cost and expense, implement any and all operations and maintenance plans
recommended for asbestos or other matters relating to Hazardous Materials
recommended in any environmental report and shall complete all surveys and/or
questionnaires in connection therewith.
 
3.1.1.5                 “Hazardous Materials Law”, for purposes of this
Section 3.1, means any federal, state, or local law, ordinance or regulation or
any rule adopted or guideline promulgated pursuant thereto, or any order, ruling
or directive of any federal, state, local, executive, judicial, legislative,
administrative or other governmental or public agency, board, body or authority
relating to health, industrial hygiene, the environment, or the occupational or
environmental conditions or relating to the remediation, generation, production,
installation, use, storage, treatment, transportation, release, threatened
release, or disposal of Hazardous Materials on, under or about the Mortgaged
Property (including ambient air, soil, soil vapor, groundwater, surface water or
land use), whether now or hereafter in force, including those relating to the
release, emission or discharge of Hazardous Materials, those in connection with
the construction, fuel supply, power generation and transmission, waste disposal
or any other operations or processes relating to the Mortgaged
Property.  “Hazardous Materials Law” shall include the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the
Carpenter-Presley-Tannel Hazardous Substance Account Act and the California
Health and Safety Code, as the same are now or hereafter amended.
 
“Hazardous Materials”, for purposes of this Section 3.1, means any chemical,
substance, object, condition, material or waste that is or may be hazardous to
human health or safety or to the environment, due to its radioactivity,
ignitability, corrosivity, flammability, reproductive toxicity, infectiousness
or other harmful properties or effects, including all chemicals, substances,
materials and wastes that are now or hereafter may be regulated in any manner,
classified as dangerous, hazardous or toxic, or as pollutants or contaminants,
or to which exposure is prohibited or restricted by any federal, state or local
government or public agency, board, body or authority or by any Hazardous
Material Law.  “Hazardous Materials” include flammable explosives, radioactive
materials, polychlorinated biphenyls, asbestos, hazardous waste, radon, toxic
substances or other related materials whether in the form of a chemical,
element, compound, solution, mixture or otherwise, including those materials
defined as “hazardous substances”, “hazardous materials”, “toxic substances”,
“air pollutants”, “toxic pollutants”, “hazardous wastes”, “extremely hazardous
waste” or “restricted hazardous waste” by any Hazardous Materials Law.
 
3.1.1.6                 Nothing herein shall be construed for purposes of any
Hazardous Materials Law as devolving control of the Mortgaged Property or
imposing owner or operator status on the Trustee or Beneficiary.
 
3.1.1.7                 Notwithstanding anything to the contrary contained in
the Note, this Deed of Trust or any Loan Document, and without limitation on any
other rights and remedies of Beneficiary, Beneficiary shall have each and all of
the rights and remedies under California Civil Code Section 2929.5 and
California Code of Civil Procedure Sections 564, 726.5 and 736.
 
3.1.1.8                 Trustor shall, at Trustor’s sole cost and expense,
implement and at all times comply with the “Asbestos-Containing Materials & Lead
Based Paint Operations & Maintenance Plan”, dated February 6, 2013, prepared by
Partner Engineering and Science, Inc. as Project No. 13-99374.1, as the same may
be amended, supplemented or modified from time to time (the “O&M Plan”), and
shall complete all surveys and/or questionnaires in connection
therewith.  Trustor shall not amend, supplement, modify or terminate the O&M
Plan without the prior written consent of Beneficiary, such consent not to be
unreasonably withheld.  Trustor’s failure to comply with the terms of this
Section 3.1.1.8 shall constitute an Event of Default.
 
 
3.2
Easement and License.  In addition to other inspection rights of Lender, the
Trustor shall and hereby does grant and convey to the Lender, its agents,
representatives, contractors, and employees, an easement and license to enter on
the Mortgaged Property at any time and from time to time for the purpose of
making such audits, tests, inspections, and examinations, including, without
limitation, inspection of buildings and improvements, subsurface exploration and
testing and groundwater testing, as the Lender, in its sole discretion, deems
necessary, convenient, or proper to determine whether the ownership, use and
operation of the Mortgaged Property are in compliance with the terms and
conditions set forth in the Loan Documents, and specifically with the terms and
conditions of the Agreement.  Any tests or inspections made by Lender shall be
for Lender’s purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Trustor or to any other
person or entity.  Lender shall have no obligation to perform any such audits,
tests, inspections, or examinations, or to take any remedial action.  All the
costs and expenses incurred by the Lender with respect to any audits, tests,
inspections, examinations, and interviews which the Lender may conduct or take
pursuant to this Section, including, without limitation, the fees of any
engineers, laboratories, and contractors, shall be repaid by the Trustor, with
interest, and shall be accrued by the Deed of Trust and the other Loan
Documents.

 
4.  
ASSIGNMENT OF RENTS, LEASES, PROFITS, INCOME, CONTRACTS AND BONDS.

 
 
4.1
Assignment of Rents.  As part of the consideration for the indebtedness
evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and
transfers to Lender all the rents, issues, profits and revenues (including all
security deposits) of the Mortgaged Property, whether now due, past due, or to
become due by virtue of that certain lease or leases more fully described in
Exhibit “B” hereto, and under any other lease or other agreement for the
occupancy or use of all or any part of the Mortgaged Property, regardless of to
whom the rents, issues, profits and revenues of the Mortgaged Property are
payable (the "Rents").  Trustor hereby authorizes Lender or Lender's agents to
collect the aforesaid rents, issues, profits and revenues, and hereby directs
each tenant of the Mortgaged Property to pay such rents, issues, profits and
revenues to Lender or Lender's agents; provided, however, that prior to written
notice given by Lender to Trustor of the breach by Trustor of any covenant or
agreement of Trustor in this Deed of Trust or under any of the Loan Documents,
Trustor shall have the right to collect and receive all rents, issues, profits
and revenues of the Mortgaged Property as trustee for the benefit of Lender and
Trustor, to apply the rents, issues, profits and revenues so collected to the
sums secured by this Deed of Trust in the order provided in the Note with the
balance, so long as no such breach has occurred, to the account of Trustor, it
being intended by Trustor and Lender that this assignment of rents, issues,
profits and revenues constitutes an absolute assignment and not an assignment
for additional security only.  Upon delivery of written notice by Lender to
Trustor of the breach by Trustor of any covenant or agreement of Trustor in this
Deed of Trust or under any of the other Loan Documents, and without the
necessity of Lender entering upon and taking and maintaining full control of the
Mortgaged Property in person, by agent or by a court-appointed receiver, Lender
shall immediately be entitled to possession of all rents, issues, profits and
revenues and shall have paid over to it all tenant deposits with a full
accounting thereof relating to the Mortgaged Property as specified in this
Section 4.1 as the same become due and payable, including but not limited to
rents then due and unpaid, and all such rents, issues, profits and revenues
shall immediately, upon delivery of such notice, be held by Trustor as trustee
for the benefit of Lender only; provided, however, that the written notice by
Lender to Trustor of the breach by Trustor shall contain a statement that Lender
exercises its rights to such rents, issues, profits  and revenues.  Trustor
agrees that commencing upon delivery of such written notice of Trustor's breach
by Lender to Trustor, each tenant of the Mortgaged Property shall make such
rents, issues, profits and revenues payable to and pay such rents, issues,
profits and revenues to Lender or Lender's agents on Lender's written demand to
each tenant therefor, delivered to each tenant personally, by mail or by
delivering such demand to each tenant's premises on the Mortgaged Property,
without any liability on the part of said tenant to inquire further as to the
existence of a default by Trustor.

 
 
Trustor hereby covenants that Trustor has not executed any prior assignment of
said rents, issues, profits and revenues, except as set forth on the title
insurance policy insuring Lender's interest in the Mortgaged Property, that
Trustor has not performed, and shall not perform, any acts, or has not executed,
and shall not execute, any instrument which would prevent Lender from exercising
its rights under this Section 4.1, and that at the time of execution of this
Deed of Trust there has been no anticipation or prepayment of any of the rents,
issues, profits and revenues of the Mortgaged Property for more than one (1)
month prior to the due dates of such rents, issues, profits and
revenues.  Trustor covenants that Trustor shall not hereafter collect or accept
payment of any rents, issues, profits and revenues of the Mortgaged Property
more than one (1) month prior to the due dates of such rents, issues, profits
and revenues, without the prior written consent of Lender, in its sole and
absolute discretion.  Trustor further covenants that Trustor shall execute and
deliver to Lender such further assignments of rents, issues, profits and
revenues of the Mortgaged Property as Lender may from time to time request.

 
 
Upon Trustor's breach of any covenant or agreement of Trustor in this Deed of
Trust, Lender may in person, by agent or by a court-appointed receiver,
regardless of the adequacy of Lender's security, enter upon and take and
maintain full control of the Mortgaged Property in order to perform all acts
necessary and appropriate for the operation and maintenance thereof including,
but not limited to, the execution, cancellation or modification of leases, the
collection of all rents, issues, profits and revenues of the Mortgaged Property,
the making of repairs to the Mortgaged Property and the execution or termination
of contracts providing for the management or maintenance of the Mortgaged
Property, all on such terms as are deemed best to protect the security of this
Deed of Trust.  In the event Lender elects to seek the appointment of a receiver
for the Mortgaged Property upon Trustor's breach of any covenant or agreement of
Trustor in this Deed of Trust, Trustor hereby expressly consents to the
appointment of such receiver.  Lender or the receiver shall be entitled to
receive a reasonable fee for so managing the Mortgaged Property.  Any such
receiver may be appointed by any court of competent jurisdiction upon ex parte
application (Trustor hereby waiving any right to any hearing or notice of
hearing prior to the appointment of a receiver).

 
 
All rents, issues, profits and revenues, collected subsequent to delivery of
written notice by Lender to Trustor of the breach by Trustor of any covenant or
agreement of Trustor in this Deed of Trust shall be applied first to the costs,
if any, of taking control of and managing the Mortgaged Property and collecting
the rents, issues, profits and revenues, including, but not limited to,
attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs
to the Mortgaged Property, premiums on insurance policies, taxes, assessments
and other charges on the Mortgaged Property, and the costs of discharging any
obligation or liability of Trustor as lessor or landlord of the Mortgaged
Property and then to the sums secured by this Deed of Trust.  Lender or the
receiver shall have access to the books and records used in the operation and
maintenance of the Mortgaged Property and shall be liable to account only for
those rents, issues, profits and revenues actually received.  Lender shall not
be liable to Trustor, anyone claiming under or through Trustor or anyone having
an interest in the Mortgaged Property by reason of anything done or left undone
by Lender under this Section 4.1.

 
 
If the rents, issues, profits and revenues of the Mortgaged Property are not
sufficient to meet the costs, if any, of taking control of and managing the
Mortgaged Property and collecting the rents, issues, profits and revenues, any
funds expended by Lender for such purposes shall become indebtedness of Trustor
to Lender secured by this Deed of Trust pursuant to Section 7 hereof.  Unless
Lender and Trustor agree in writing to other terms of payment, such amounts
shall be payable upon notice from Lender to Trustor requesting payment thereof
and shall bear interest from the date of disbursement at the default rate of
interest set forth in the Note.

 
 
Any entering upon and taking and maintaining of control of the Mortgaged
Property by Lender or the receiver and any application of rents, issues, profits
and revenues as provided herein shall not cure or waive any default hereunder or
invalidate any other right or remedy of Lender under applicable law or provided
herein.  This assignment of rents of the Mortgaged Property shall terminate at
such time as this Deed of Trust ceases to secure indebtedness held by Lender.

 
 
4.2
Assignment of Leases.  Trustor hereby absolutely and unconditionally assigns to
Lender its interest under all existing and future leases, rents, purchase
proceeds, income and profits due Trustor from the Mortgaged Property, and all
permitted subleases thereof, and any and all extensions, renewals,
modifications, and replacements thereof, upon any part of the Mortgaged Property
(collectively, the “Leases”).  Trustor hereby further assigns to Lender all
guaranties of tenants’ performance under the Leases.  Prior to the occurrence of
an Event of Default, Trustor shall have the right, without joinder of Lender, to
enforce the Leases, unless Lender directs otherwise.

 
 
4.3
Warranties Concerning Leases and Rents.  Trustor represents and warrants that:

 
(i)  
Trustor has good title to the Leases and Rents and authority to assign them, and
no other person or entity has any right, title or interest therein;

 
(ii)  
all existing Leases are valid, unmodified and in full force and effect, except
as indicated herein, and no default exists thereunder;

 
(iii)  
unless otherwise provided herein, no Rents have been or will be assigned,
mortgaged or pledged;

 
(iv)  
no Rents have been or will be anticipated, waived, released, discounted, set off
or compromised; and

 
(v)  
except as indicated in the Leases, Trustor has not received any funds or
deposits from any tenant for which credit has not already been made on account
of accrued Rents.

 
 
4.4
Trustor’s Covenants of Performance.  Trustor covenants to:

 
(i)  
perform all of its obligations under the Leases and give prompt notice to Lender
of any failure to do so, and comply with the terms and provisions of any and all
federal, state and local laws, rules, ordinances and regulations applicable to
Trustor or the Mortgaged Property;

 
(ii)  
give immediate notice to Lender of any notice Trustor receives from any tenant
or subtenant under any Leases, specifying any claimed default by any party under
such Leases, excluding, however, notices of default under residential leases;

 
(iii)  
enforce the tenant’s obligations under the Leases except when Trustor deems it
inadvisable to do so in the exercise of good business judgment;

 
(iv)  
defend, at Trustor’s expense, any proceeding pertaining to the Leases,
including, if Lender so requests, any such proceeding to which Lender is a
party; and

 
(v)  
neither create nor permit any encumbrance upon its interest as lessor of the
Leases, except this Deed of Trust and any other encumbrances permitted by this
Deed of Trust.

 
 
4.5
Prior Approval for Actions Affecting Leases.  Trustor shall not, without the
prior written consent of Lender, in its sole and absolute discretion:

 
(i)  
receive or collect Rents more than one month in advance;

 
(ii)  
encumber or assign future Rents;

 
(iii)  
waive or release any obligation of any tenant under the Leases except when
Trustor deems it advisable to do so in the exercise of good business judgment;

 
(iv)  
amend or modify any Lease, including, without limitation, extending or renewing
(except in accordance with the existing Lease provisions, if any) any Lease;

 
(v)  
cancel, terminate or accept the surrender of any Lease; or cause or permit any
cancellation, termination or surrender of any of the Leases, or commence any
proceedings for dispossession of any tenant under any of the Leases;

 
(vi)  
enter into any new Lease of the Mortgaged Property or any part thereof; or

 
(vii)  
permit any assignment of the Leases.

 
Trustor shall, promptly after entering into any new Lease or amendment to Lease
that does not require the consent of Beneficiary hereunder, provide Beneficiary
with a copy of any such new Lease or amendment to Lease.  Notwithstanding the
foregoing or any other provision of this Deed of Trust to the contrary, Trustor
shall not accept any payment of rent more than one (1) month in advance under
any Lease.  Furthermore, should Trustor consent to a one-time transfer of the
Mortgaged Property as set forth in Section 2.2.26 of this Deed of Trust,
Beneficiary shall have the right to revoke the rights of Trustor set forth in
subsections (a) and (b) above; provided Beneficiary shall deliver written notice
to Trustor to the extent Beneficiary elects to invoke such right.
 
Notwithstanding the foregoing provisions of this Section 4.5, any Lease will not
require Beneficiary's consent if it satisfies the following requirements: (1)
such Lease is on Borrowers’ standard form lease as approved in writing by
Beneficiary with no material deviations, (2) such Lease is not to any Trustor,
as lessee, or any person or entity with any interest in any Trustor, whether
direct or indirect, nor to any such party’s affiliates, (3) the lease term is at
least three (3) years (excluding any rights of extension or renewal) but not
more than ten (10) years (including any rights of extension or renewal), (4) the
rent payable under such Lease is on market rate terms, and (5) the aggregate
amount of space leased to any tenant and any of its affiliates under such Lease
is less than 4,000 net rentable square feet.
 
 
4.6
Settlement for Termination.  Trustor agrees that no settlement for damages for
termination of any of the Leases under the Federal Bankruptcy Code, or under any
other federal, state or local statute, shall be made without the prior written
consent of Lender, and any check in payment of such damages will be made payable
to both Trustor and Lender.  Trustor hereby assigns any such payment to Lender
to be applied to the Indebtedness as Lender may elect and agrees to endorse any
check for such payment to the order of Lender.

 
 
4.7
Lender in Possession.  Lender’s acceptance of this assignment shall not, prior
to entry upon and taking possession of the Mortgaged Property by Lender, be
deemed to constitute Lender a “mortgagee in possession,” nor obligate Lender to
appear in or defend any proceedings relating to any of the Leases or to the
Mortgaged Property, take any action hereunder, expend any money, incur any
expenses, or perform any obligation or liability under the Leases, or assume any
obligation for any deposits delivered to Trustor by any tenant and not delivered
to Lender.  Lender shall not be liable for any injury or damage to person or
property in or about the Mortgaged Property.

 
 
4.8
Appointment of Attorney.  Trustor hereby appoints Lender its attorney-in-fact,
coupled with an interest, empowering Lender to subordinate any Leases to this
Deed of Trust.

 
 
4.9
Indemnification.  Trustor hereby indemnifies and holds Lender (which shall
include the directors, officers, partners, employees, representatives and agents
of Lender and any persons or entities owned or controlled by, owning or
controlling, or under common control or affiliated with Lender) harmless from
all liability, damage or expense imposed on or incurred by Lender from any
claims under the Leases, including, without limitation, any demands which may be
asserted against Lender by reason of any alleged obligations  or undertakings on
its part to perform or discharge any of the terms, covenants, or conditions of
such Leases, or any claims by Trustor with respect to payments of Rents made
directly to Lender after an Event of Default or the exercise of rights or
remedies pursuant to Section 6.2 hereof, and claims by tenants for security
deposits or for rental payments more than one (1) month in advance and not
delivered to Lender.  All amounts indemnified against hereunder, including,
without limitation, attorneys’ fees, if paid by Lender shall bear interest at
the maximum lawful rate and shall be payable by Trustor in accordance with
Section 2.4 hereof.  The foregoing indemnities shall not terminate upon the
foreclosure, release or other termination of this Deed of Trust but will survive
foreclosure of this Deed of Trust or conveyance in lieu of foreclosure and the
repayment of the Indebtedness and the discharge and release of this Deed of
Trust and the other Loan Documents.

 
 
4.10
Records.  Upon request by Lender, Trustor shall deliver to Lender executed
originals of all Leases (if executed originals are not available, then true
copies of such documents certified as such by tenant and Trustor) and copies of
all records relating thereto.

 
 
4.11
Merger.  There shall be no merger of the leasehold estates created by the
Leases, with the fee estate of the Land without the prior written consent of
Lender, in its sole and absolute discretion.

 
 
4.12
Right to Rely.  Trustor hereby authorizes and directs the tenants under the
Leases (or any successor to the interest of any of said tenants) to pay Rents to
Lender upon written demand by Lender without further consent of Trustor, and the
tenants may rely upon any written statement delivered by Lender to the
tenants.  Any such payment to Lender shall constitute payment to Trustor under
the Leases.  The provisions of this Section are intended solely for the benefit
of the tenants and shall never inure to the benefit of Trustor or any person
claiming through or under Trustor, other than a tenant who has not received such
notice.  The assignment of Rents set forth in Section 4.1 is not contingent upon
any notice or demand by Lender to the tenants.

 
5.  
EVENTS OF DEFAULT.  “Event of Default” or “Default” means the occurrence of any
of the following, regardless of the cause thereof, or the circumstances giving
rise thereto:

 
(1)           Trustor’s failure to make any payment when due in accordance with
the terms of the Note or any Loan Document;
 
(2)           Any of Trustor’s representations or warranties contained in the
Note or any Loan Document is untrue;
 
(3)           A breach occurs under Section 2.2.14, Section 2.2.21, Section
2.2.26 and Section 3.1.1.8;
 
(4)           Should any guarantor of the Note, any shareholder owning ten
percent (10%) or more of the shares of Trustor or any general partner (each an
“Additional Essential Party”), or any joint venturer, manager or any managing
member of Trustor, or any successors and permitted assigns of any of them:
 
(a)           file a petition in voluntary bankruptcy or for an arrangement or
reorganization under any bankruptcy or insolvency laws, or debtor relief
statutes (hereinafter referred to as a “Bankruptcy Proceeding”);
 
(b)           file any answer in any Bankruptcy Proceeding or any other action
or proceeding admitting insolvency or inability to pay its debts;
 
(c)           fail to oppose, or fail to obtain a vacation or stay of, any
involuntary Bankruptcy Proceeding within forty-five (45) days after the filing
thereof;
 
(d)           be granted a decree or order for relief, or be adjudicated a
bankrupt or declared insolvent in any Bankruptcy Proceeding, whether voluntary
or involuntary;
 
(e)           have a trustee or receiver appointed for or have any court take
jurisdiction of its Mortgaged Property, or the major part thereof, or the
Mortgaged Property, in any voluntary or involuntary proceeding for the purpose
of reorganization, arrangement, dissolution or liquidation, if such trustee or
receiver is not discharged or if such jurisdiction is not relinquished, vacated
or stayed on appeal or otherwise, within forty-five (45) days after the
commencement thereof;
 
(f)           make an assignment for the benefit of creditors;
 
(g)           consent to any appointment of a receiver or trustee or liquidator
of all of its Mortgaged Property, or the major part thereof, or the Mortgaged
Property;
 
(h)           have an attachment or execution levied with respect to, or other
judicial seizure be effected for, all or substantially all of its assets or
interest in the Mortgaged Property, or the placing of any attachment, levy of
execution, charging order, or other judicial seizure on the interest of any
member in Trustor; or
 
(i)           dissolve as an entity, whether voluntarily or involuntarily, or by
operation of law;
 
(5)           The granting of a final judgment, final order or final decree for
the payment of money against Trustor in an amount in excess of $15,000, which is
not satisfied and paid, or enforcement of which has not been stayed, within
sixty (60) days after the date of entry of such judgment, order or decree;
 
(6)           If (a) the term of any policy of insurance required by this Deed
of Trust shall expire or lapse, or (b) Trustor receives notice of cancellation
of any such policy and Trustor does not provide Beneficiary with written
evidence of a replacement or renewal policy of insurance complying with this
Deed of Trust at least ten (10) business days prior to the date of cancellation
or expiration of such policy;
 
(7)           A default shall have occurred under any other encumbrance or
security agreement affecting the Mortgaged Property whether senior or junior; or
 
(8)           Trustor’s default in the performance of any other term, covenant
or condition contained in the Note or any Loan Document, which is not cured
within thirty (30) days after written notice of such default given by
Beneficiary to Trustor (except that, if the default is such that it cannot be
cured within said thirty (30) day period, and Trustor promptly commences the
cure of such default within ten (10) days after such written notice and
diligently pursues such cure to completion, then such thirty (30) day period
shall be extended to such period of time as may be reasonably necessary.
 
6.  
REMEDIES AND RELATED RIGHTS.  If a Default shall occur, Lender may exercise any
one or more of the following remedies and shall, in addition to any other
rights, have the following related rights, without notice (unless notice is
required by applicable law):

 
 
6.1
Immediate Payment of Obligations.  Upon the occurrence of a Default, Lender
shall have the option of declaring all Indebtedness in its entirety to be
immediately due and payable, and the liens and security interests evidenced
hereby shall be subject to foreclosure in any manner provided for herein or
provided for by applicable law as Lender may elect.

 
 
6.2
Cure Default.  With or without notice, and without releasing Trustor from any
obligation hereunder, to cure any default of Trustor and, in connection
therewith, to enter upon the Mortgaged Property in person, or by an agent or
employee, or by a receiver appointed by a Court of competent jurisdiction, and
to do such acts and things as Beneficiary or Trustee may deem necessary or
desirable to protect the security hereof.

 
 
6.3
Judicial Proceedings.  To commence and maintain an action or actions in any
Court of competent jurisdiction to foreclose this Deed of Trust as a mortgage,
or without regard to the adequacy of any security for the indebtedness secured
hereby, to obtain specific enforcement of the covenants of Trustor hereunder,
for an injunction against any violation of this Deed of Trust, the appointment
of a receiver, or for such other equitable relief as may be appropriate, in
addition to any other remedies Beneficiary may otherwise have.

 
 
6.4
Manage and Operate Mortgaged Property.  To enter upon, possess, manage and
operate the Mortgaged Property, or any part thereof, either in person, or by an
agent or employee, or by a receiver appointed by a Court of competent
jurisdiction; to make, terminate, enforce or modify leases of the Mortgaged
Property upon such terms and conditions as Beneficiary deems necessary or proper
and to act in any manner which Beneficiary or Trustee may deem necessary or
desirable in connection therewith; and to make repairs, alterations and
improvements to the Mortgaged Property necessary, in Beneficiary’s or Trustee’s
judgment, to protect or enhance the security hereof.  All sums realized by
Beneficiary under this Section 6.4, less all costs and expenses incurred by it
hereunder, including reasonable attorneys’ fees, shall be applied on any
indebtedness secured hereby in such order of priority as Beneficiary shall
determine.  Neither application of such sums to such indebtedness, nor any other
action taken by Beneficiary under this Section 6.4, shall cure or waive any
Event of Default or notice of Event of Default or nullify the effect of any such
notice.

 
 
6.5
Elect to Sell Mortgaged Property.  To execute a written notice of such Event of
Default and of the election to cause the Mortgaged Property to be sold to
satisfy the obligations secured hereby, Trustee shall give and record such
notice as the law then requires as a condition precedent to a trustee’s
sale.  When the minimum period of time required by law after such notice has
elapsed, Trustee, without notice to or demand upon Trustor except as otherwise
may then be required by law, shall sell the Mortgaged Property at the time and
place of sale fixed by it in the notice of sale, either as a whole or in
separate parcels or through one or more successive sales and in such order as it
or Beneficiary may determine, at public auction to the highest bidder for cash,
in lawful money of the United States, or other form of payment acceptable to
Beneficiary, payable at the time of sale.  Trustor shall have no right to direct
the order in which the Mortgaged Property is sold.  Beneficiary may, in its sole
and absolute discretion, designate the order in which the Mortgaged Property is
offered for sale or sold and determine if the Mortgaged Property shall be sold
through a single sale or through two or more successive sales, or in any other
manner Beneficiary deems to be in its best interest.  If Beneficiary elects more
than one sale or other disposition of the Mortgaged Property, Beneficiary may at
its option cause the same to be conducted simultaneously or in such order and at
such times as Beneficiary may deem to be in its best interests, and no such sale
shall terminate or otherwise affect the lien of this Deed of Trust on any part
of the Mortgaged Property not then sold until all indebtedness secured hereby
has been fully paid.  If Beneficiary elects to dispose of the Mortgaged Property
through more than one sale, Trustor shall pay the costs and expenses of each
such sale and of any judicial proceedings where the same may be
undertaken.  Trustee may postpone any such sale by public announcement at the
time and place fixed by the notice of sale, and may thereafter continue such
postponement by like announcements at the time and place fixed by the preceding
postponement, at Beneficiary’s direction and without necessity of additional
notices of sale.  Trustee shall deliver to the purchaser at such sale a deed in
form and manner as the law then requires conveying the Mortgaged Property or
portion thereof so sold, but without any covenant or warranty, express or
implied.  The recitals in such deed of any matters or facts shall be conclusive
proof of the truthfulness thereof.  Any person, including Trustee, Trustor or
Beneficiary, may purchase at such sale.  Notwithstanding anything to the
contrary contained herein, Trustee shall (to the extent permitted by applicable
law) allocate or apply the proceeds of sale (including the amount of any credit
bid) in such manner and in such priority as Beneficiary may elect in its sole
and absolute discretion.  Notwithstanding anything to the contrary contained
herein, Beneficiary’s rights and remedies under California Code of Civil
Procedure Section 736 shall not be waived, limited or otherwise adversely
affected by virtue of a full or partial credit bid upon foreclosure of this Deed
of Trust.

 
 
6.6
Resort to Security.  To resort to and realize upon the security hereunder and
any other security now or hereafter held by Beneficiary in such order and manner
as Beneficiary and Trustee, or either of them, may in their sole and absolute
discretion determine.  Resort to any or all such security may be taken
concurrently or successively and in one or several consolidated or independent
judicial actions or lawfully taken non-judicial proceedings, or both.

 
 
6.7
Appointment of Receiver.  To apply to any court having jurisdiction to appoint a
receiver or receivers for the Mortgaged Property, as a matter of right and
without notice (notice hereby being expressly waived) to Trustor or anyone
claiming under Trustor, and without regard to the then value of the Mortgaged
Property or the adequacy of any security for the obligations secured hereby,
Trustor hereby irrevocably consents to such appointment and waives notice of any
application therefor.  Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers and
duties of Beneficiary in case of entry as provided herein.  Further, any such
receiver or receivers may be appointed by any court of competent jurisdiction
upon ex parte application (Trustor hereby waiving any right to any hearing or
notice of hearing prior to the appointment of a receiver).  Trustor agrees to
promptly deliver to any such receiver all leases, rents, issues and profits
(including security deposits), documents, financial data and other information
requested by such receiver in connection with the Mortgaged Property and,
without limiting the foregoing, Trustor hereby authorizes Beneficiary to deliver
to any such receiver any or all of the leases, rents, issues and profits,
documents, data and information in Beneficiary’s possession relating to the
Mortgaged Property.

 
 
6.8
Exercise Other Rights and Remedies.  To exercise or invoke any and all other
rights and remedies as may be available to Beneficiary or Trustee now or
hereafter at law or in equity.

 
 
6.9
No action taken, or right or remedy invoked, by Beneficiary or Trustee under
this Section 6, including the appointment of a receiver for the Mortgaged
Property, or the entry into possession of the Mortgaged Property, or any part
thereof, by such receiver, or otherwise, shall be deemed to make Beneficiary a
“mortgagee in possession” or otherwise responsible or liable in any manner with
respect to the Mortgaged Property, or the use, occupancy, enjoyment or operation
of all or any part thereof.  In no event shall Beneficiary be required to accept
a cure of any Event of Default, if any, notwithstanding any statement or
provision to the effect that rights or remedies are available while an Event of
Default “exists”, “continues” or is “outstanding”, or during the “existence” or
“continuation” of an Event of Default (or any similar statement or provision) in
any of the Loan Documents, or anything else in the Loan Documents.

 
 
6.10
Payment of Costs, Expenses and Attorneys’ Fees.  All costs and expenses incurred
by Beneficiary and Trustee pursuant to Sections 6.1-6.8 herein or otherwise in
regards to the Loan (including court costs and attorneys’ fees, whether or not
incurred in litigation and whether or not foreclosure is concluded, including,
without limitation, attorney’s fees incurred in connection with any judicial or
nonjudicial foreclosure of this Deed of Trust or the other Loan Documents, or in
connection with both judicial and nonjudicial foreclosure, if Beneficiary shall
elect to pursue each such remedy whether concurrently or independently) shall be
secured by this Deed of Trust and shall bear interest at the interest rate of
the Note or at the Default Rate if the Note contains a Default Rate, from the
date of expenditure until such sums have been paid.  Beneficiary shall be
entitled to bid, at any sale of the Mortgaged Property held pursuant to
Section 6.5 above, the amount of all such costs, expenses, and interest in
addition to the amount of any other obligations hereby secured by a credit bid
as the equivalent of cash.

 
 
6.11
Releases, Extensions, Modifications and Additional Security.  Without affecting
the liability of any person for payment of any indebtedness secured hereby, or
the lien or priority of this Deed of Trust or any other Loan Document upon the
Mortgaged Property, Beneficiary may, from time to time, with or without notice,
do one or more of the following:  release the liability of any person for the
payment of any indebtedness secured hereby; make any agreement or take any
action extending the maturity or otherwise altering the terms or increasing the
amount of any indebtedness secured hereby; and accept additional security, or
release all or a portion of the Mortgaged Property and other security held to
secure the indebtedness secured hereby.  If Beneficiary holds any other or
additional security for the payment of any indebtedness or performance of any
obligation hereby secured, then any sale or foreclosure of such security upon
any Event of Default, in the sole and absolute discretion of Beneficiary, may be
prior to, subsequent to, or contemporaneous with, any sale or foreclosure
hereunder and any property in which Beneficiary holds a security interest may be
sold as a unit with the Mortgaged Property.

 
 
6.12
Marshalling of Assets.  Trustor waives all right to require a marshalling of
assets by Trustee or Beneficiary; and Trustor waives the right to require
Trustee or Beneficiary to resort first to any portion of the Mortgaged Property
retained by Trustor before resorting to any other portion of the Mortgaged
Property which may have been transferred or conveyed subject hereto, whether
such resort to security is undertaken by non-judicial sale or through
proceedings in judicial foreclosure.

 
 
6.13
Additional Remedies under the Uniform Commercial Code.  Lender shall have all
the rights and remedies of a secured party under the Uniform Commercial Code of
those states governing disposition of the Personal Property upon the occurrence
and during the continuance of an Event of Default, including, but not limited
to, the right to sell the Personal Property at public or private sale, and the
right to be a purchaser at any such sale.

 
 
6.14
Remedies Cumulative.  All rights and remedies herein expressly provided for are
cumulative of any and all other remedies existing at law or in equity and are
cumulative of any and all other remedies provided for in any of the other Loan
Documents, or any part thereof, or otherwise benefiting Lender, and Trustee and
Lender shall, in addition to the remedies herein provided, be entitled to avail
themselves of all such other remedies as may now or hereafter exist at law or in
equity for the collection of the Indebtedness and the enforcement of the
covenants herein and the foreclosure of the liens and security interests
evidenced hereby, and resort to any remedy provided for hereunder or under any
such Loan Documents or provided for by law shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies.

 
 
6.15
Resort to Any Security.  Lender may resort to any security given by this Deed of
Trust or to any other security now existing or hereafter given to secure the
payment of the Indebtedness, in whole or in part, and in such portions and in
such order as may seem best to Lender in its sole and uncontrolled discretion,
and any such action shall not in anywise be considered as a waiver of any of the
rights, benefits, liens or security interests evidenced by this Deed of Trust.

 
 
6.16
Waiver.  To the full extent Trustor may do so, Trustor agrees that Trustor will
not at any time insist upon, plead, claim or take the benefit or advantage of
any law now or hereafter in force pertaining to the rights and remedies of
sureties or providing for any appraisement, valuation, stay, extension or
redemption, and Trustor, for Trustor and Trustor’s heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, valuation, appraisement,
stay of execution, notice of intention to mature or declare due the whole of the
Indebtedness, notice of election to mature or declare due the whole of the
Indebtedness and all rights to a marshaling of the assets of Trustor, including,
without limitation, the Mortgaged Property, or to a sale in inverse order of
alienation in the event of foreclosure of the liens and security interests
hereby created.  Trustor shall not have or assert any right under any statute or
rule of law pertaining to the marshaling of assets, sale in inverse order of
alienation, the exemption of homestead, the administration of estates of
decedents or other matters whatever to defeat, reduce or affect the right of
Lender under the terms of this Deed of Trust to a sale of the Mortgaged Property
for the collection of the Indebtedness without any prior or different resort of
collection, or the right of Lender under the terms of this Deed of Trust to the
payment of such Indebtedness out of the proceeds of sale of the Mortgaged
Property in preference to every other claimant whatever.  If any law referred to
in this Section and now in force, of which Trustor or Trustor’s heirs, devisees,
representatives, successors and assigns and such other persons claiming any
interest in the Mortgaged Property might take advantage despite this Section,
shall hereafter be repealed or cease to be enforced, such law shall not
thereafter be deemed to preclude the application of this Section.  Without
limitation, Trustor waives, to the extent permitted by law, (a) the benefit of
all laws now existing or that may hereafter be enacted providing for any
appraisement before sale of any portion of the Mortgaged Property, (b) all
rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the obligation secured hereby in
the event of foreclosure of the liens hereby created, (c) all rights and
remedies which Trustor may have or be able to assert by reason of the laws of
California pertaining to the rights and remedies of sureties, (d) the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Deed of Trust or to any action brought to enforce the Note or any other
obligation secured hereby, and (e) any rights, legal or equitable, to require
marshalling of assets or to require foreclosure sales in a particular order,
including any rights under California Civil Code Sections 2899 and
3433.  Beneficiary shall have the right to determine the order in which any or
all of the Mortgaged Property shall be subjected to the remedies provided
herein.  Beneficiary shall have the right to determine the order in which any of
all portions of the obligations secured hereby are satisfied from the proceeds
realized upon the exercise of the remedies provided herein.  Nothing contained
herein shall be deemed to be a waiver of the Trustor’s rights under Section
2924c of the California Civil Code.

 
 
6.17
Delivery of Possession After Foreclosure.  Subject to the terms of any separate
written agreement with a tenant, in the event there is a foreclosure sale
hereunder and at the time of such sale Trustor or Trustor’s heirs, devisees,
representatives, successors or assigns or any other persons claiming any
interest in the Mortgaged Property by, through or under Trustor are occupying or
using the Mortgaged Property, or any part thereof, each and all shall
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day-to-day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of the property
occupied, such rental to be due daily to the purchaser.  In the event the tenant
fails to surrender possession of said property upon demand, the purchaser shall
be entitled to institute and maintain an action for forcible entry and detainer
of said property in the appropriate court having jurisdiction.

 
7.
MISCELLANEOUS.

 
 
7.1
Defeasance.  If all of the Indebtedness is paid as the same becomes due and
payable and if all of the covenants, warranties, undertakings and agreements
made in this Deed of Trust are kept and performed, then and in that event only,
all rights under this Deed of Trust shall terminate and the Deed of Trust shall
be reconveyed by Lender in due form at Trustor’s cost.

 
 
7.2
Successor Trustee.  From time to time, by an instrument signed and acknowledged
by Beneficiary, referring to this Deed of Trust filed for record as required by
law, Beneficiary may appoint another trustee to act in the place and stead of
Trustee.  The recordation of such instrument shall discharge Trustee herein
named and shall appoint the new trustee as the Trustee hereunder.  An instrument
so recorded shall be conclusive proof of the proper substitution of such new
trustee, who shall then have all the title, powers, duties and rights of Trustee
hereunder, without necessity of any conveyance from such predecessor, with the
same effect as if originally named Trustee herein.  In the event the
Indebtedness is owned by more than one person or entity, the holders of not less
than a majority in the amount of such Indebtedness shall have the right and
authority to make the appointment of a successor or substitute Trustee provided
for in the preceding sentence.  Such appointment and designation by Lender or by
the holder or holders of not less than a majority of the Indebtedness shall be
full evidence of the right and authority to make the same and of all facts
therein recited.  If Lender is a state or national banking association or
corporation and such appointment is executed in its behalf by an officer of such
association or corporation, such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of the
corporation.  Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Mortgaged Property shall vest in the
named successor or substitute Trustee and he shall thereupon succeed to and
shall hold, possess and execute all the rights, powers, privileges, immunities
and duties herein conferred upon Trustee; but nevertheless, upon the written
request of Lender or of the successor or substitute Trustee, Trustee ceasing to
act shall execute and deliver an instrument transferring to such successor or
substitute Trustee all of the estate and title in the Mortgaged Property of
Trustee so ceasing to act, together with all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee, and shall duly assign,
transfer and deliver any of the properties and moneys held by said Trustee
hereunder to said successor or substitute Trustee.  All references herein to
Trustee shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time acting
hereunder.  Trustor hereby ratifies and confirms any and all acts which the
herein named Trustee or his successor or successors, substitute or substitutes,
in this trust, shall do lawfully by virtue hereof.

 
 
7.3
Liability and Indemnification of Trustee.  Trustee shall not be liable for any
error of judgment or act done by Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever (including,
without limitation, Trustee’s negligence), except for Trustee’s gross negligence
or willful misconduct.  Trustee shall have the right to rely on any instrument,
document, or signature authorizing or supporting any action taken or proposed to
be taken by him hereunder, believed by him in good faith to be genuine.  All
moneys received by Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required by
law), and Trustee shall be under no liability for interest on any moneys
received by him hereunder.  Trustor will reimburse Trustee for, and indemnify
and save him harmless against, any and all liability and expenses (including,
without limitation, reasonable attorneys’ fees) which may be incurred by him in
the performance of his duties hereunder (as used herein, “Trustee” shall
include, without limitation, the directors, officers, partners, employees,
representatives and agents of Trustee and any persons or entities owned or
controlled by, owning or controlling or under common control or affiliated with
Trustee).  The foregoing indemnity shall not terminate upon release, foreclosure
or other termination of this Deed of Trust.

 
 
7.4
Waiver by Lender.  Lender may at any time and from time to time in writing (a)
waive compliance by Trustor with any covenant herein made by Trustor to the
extent and in the manner specified in such writing; (b) consent, in its sole and
absolute discretion, to Trustor doing any act which hereunder Trustor is
prohibited from doing, or consent, in its sole and absolute discretion, to
Trustor failing to do any act which hereunder Trustor is required to do, to the
extent and in the manner specified in such writing; (c) release any part of the
Mortgaged Property, or any interest therein, from the lien and security interest
of this Deed of Trust without the joinder of Trustee; or (d) release any party
liable, either directly or indirectly, for the Indebtedness or for any covenant
herein or in any of the other Loan Documents now or hereafter securing the
payment of the Indebtedness, without impairing or releasing the liability of any
other party.  No such act shall in any way impair the rights of Lender hereunder
except to the extent specifically agreed to by Lender in such writing.

 
 
7.5
Actions by Lender.  The lien, security interest and other security rights of
Lender hereunder shall not be impaired by any indulgence, moratorium or release
granted by Lender, including but not limited to (a) any renewal, extension,
increase or modification which Lender may grant with respect to any of the
Indebtedness; (b) any surrender, compromise, release, renewal, extension,
exchange or substitution which Lender may grant in respect of the Mortgaged
Property, or any part thereof or any interest therein; or (c) any release or
indulgence granted to any endorser, guarantor or surety of any of the
Indebtedness.  The taking of additional security by Lender shall not release or
impair the lien, security interest or other security rights of Lender hereunder
or affect the liability of Trustor or of any endorser or guarantor or other
surety or improve the rights of any permitted junior lienholder in the Mortgaged
Property.

 
 
7.6
Rights of Lender.  Lender may waive any Default without waiving any other prior
or subsequent Default.  Lender may remedy any Default without waiving the
Default remedied.  Neither the failure by Lender to exercise, nor the delay by
Lender in exercising, any right, power or remedy upon any Default shall be
construed as a waiver of such Default or as a waiver of the right to exercise
any such right, power or remedy at a later date.  No single or partial exercise
by Lender of any right, power or remedy hereunder shall exhaust the same or
shall preclude any other or further exercise thereof, and every such right,
power or remedy hereunder may be exercised at any time and from time to
time.  No modification or waiver of any provision hereof nor consent to any
departure by Trustor therefrom shall in any event be effective unless the same
shall be in writing and signed by Lender and then such waiver or consent shall
be effective only in the specific instances, for the purpose for which given and
to the extent therein specified.  No notice to nor demand on Trustor in any case
shall of itself entitle Trustor to any other or further notice or demand in
similar or other circumstances.  Acceptance by Lender of any payment in an
amount less than the amount then due on any of the Indebtedness shall be deemed
an acceptance on account only and shall not in any way affect the existence of a
Default hereunder.

 
 
7.7
Notification of Account Debtors.  Lender may at any time after Default by
Trustor notify the account debtors or obligors of any accounts, chattel paper,
negotiable instruments or other evidences of indebtedness included in the
Personal Property to pay Lender directly.

 
 
7.8
Reproduction as Financing Statement.  A carbon, photographic or other
reproduction of this Deed of Trust or of any financing statement relating to
this Deed of Trust shall be sufficient as a financing statement.

 
7.9  
Personal Property

 
7.9.1  Grant of Security Interest.  Trustor hereby grants to Beneficiary a
security interest in the Personal Property and other items of the Mortgaged
Property which are personal property to secure all of Trustor’s obligations to
Beneficiary contained in this Deed of Trust and any other Loan Documents.  This
Deed of Trust constitutes a Security Agreement with respect to all personal
property in which Beneficiary is granted a security interest hereunder, and
Beneficiary shall have all of the rights and remedies of a secured party under
the Uniform Commercial Code as enacted in California (the “Uniform Commercial
Code”) as well as all other rights and remedies available at law or in equity.
 
7.9.2           Perfection.  Trustor will execute, acknowledge, deliver and
cause to be recorded or filed, in the manner and place required by any present
or future law, any instrument that may be requested by Beneficiary to publish
notice or protect, perfect, preserve, continue, extend, or maintain the security
interest and lien, and the priority thereof, of this Deed of Trust or the
interest of Beneficiary in the Mortgaged Property, to the extent of its interest
therein, including, without limitation, deeds of trust, security agreements,
financing statements, continuation statements, and instruments of similar
character, and Trustor shall pay or cause to be paid (i) all filing and
recording taxes and fees incident to each such filing or recording, (ii) all
expenses, including without limitation, attorneys’ fees and costs, incurred by
Beneficiary in connection with the preparation, execution, and acknowledgement
of all such instruments, and (iii) all federal, state, county and municipal
stamp taxes and other taxes, duties, imposts, assessments, and charges arising
out of or in connection with the execution and delivery of such
instruments.  Trustor hereby irrevocably constitutes and appoints Beneficiary as
the attorney-in-fact of Trustor, to execute, deliver and, if appropriate, file
with the appropriate filing officer or office any such instruments if Trustor
should fail to do so.  In addition to all other rights herein, Trustor hereby
authorizes Beneficiary to cause any financing statement or fixture filing to be
filed or recorded without the necessity of any signature of Trustor on such
financing statement or fixture filing.
 
7.9.3  Remedies.  Upon the occurrence of any Event of Default, Beneficiary shall
have the right to cause any of the Mortgaged Property that is Personal Property
and subject to the security interest of Beneficiary hereunder to be sold at any
one or more public or private sales as permitted by applicable law, and
Beneficiary shall further have all other rights and remedies, whether at law, in
equity, or by statute, as are available to secured creditors under applicable
law, specifically including, without limitation, the right to proceed as to both
the real property and the personal property contained within the Mortgaged
Property as permitted by Uniform Commercial Code Section 9-604(a).  Any such
disposition may be conducted by an employee or agent of Beneficiary or
Trustee.  Any person, including both Trustee and Beneficiary, shall be eligible
to purchase any part or all of such property at any such disposition.
 
7.9.4  Expenses.  Expenses of retaking, holding, preparing for sale, selling or
the like shall be borne by Trustor and shall include, without limitation,
Beneficiary’s and Trustee’s actual attorneys’ fees and legal expenses.  Trustor,
upon demand of Beneficiary, shall assemble such personal property and make it
available to Beneficiary at such place as shall be required by Beneficiary in
its sole and absolute discretion.  Beneficiary shall give Trustor at least five
(5) days’ prior written notice of the time and place of any public sale or other
disposition of such personal property or of the time of or after which any
private sale or any other intended disposition is to be made, and if such notice
is sent to Trustor, at the same address as is provided for the mailing of
notices herein, it is hereby deemed that such notice shall be and is reasonable
notice to Trustor.
 
7.9.5  Place of Business.  Trustor maintains a place of business in the State of
California, as set forth as the address of Trustor provided herein, and Trustor
will immediately notify Beneficiary in writing of any change in its place of
business.
 
7.9.6  Fixtures.  Portions of the Mortgaged Property are goods or other property
that are or are to become fixtures relating to the Mortgaged Property, and
Trustor covenants and agrees that the filing of this Deed of Trust in the real
estate records of the county where the Mortgaged Property is located shall also
operate from the time of filing as a fixture filing in accordance with
Section 9-334 and 9-502(c) of the Uniform Commercial Code.
 
 
7.10
Filing and Recordation.  Trustor will cause this Deed of Trust and all
amendments and supplements thereto and substitutions therefor and all financing
statements and continuation statements relating hereto to be recorded, filed,
re-recorded and refiled in such manner and in such places as Trustee or Lender
shall reasonably request, and will pay all such recording, filing, re-recording
and refiling taxes, fees and other charges.

 
 
7.11
Dealing with Successor.  In the event the ownership of the Mortgaged Property or
any part thereof becomes vested in a person other than Trustor, Lender may,
without notice to Trustor, deal with such successor or successors in interest
with reference to this Deed of Trust and to the Indebtedness in the same manner
as with Trustor, without in any way vitiating or discharging Trustor’s liability
hereunder or for the payment of the Indebtedness; provided, however, nothing in
this Section shall be construed as permitting any transfer of the Mortgaged
Property which would constitute a Default under this Deed of Trust.  No sale of
the Mortgaged Property, no forbearance on the part of Lender and no extension of
the time for the payment of the Indebtedness given by Lender shall operate to
release, discharge, modify, change or affect, in whole or in part, the liability
of Trustor hereunder or for the payment of the Indebtedness or the liability of
any other person hereunder or for the payment of the Indebtedness, except as
agreed to in writing by Lender.

 
 
7.12
Place of Payment.  The Indebtedness shall be payable at the place designated in
the Note, or if no such designation is made, at the office of Lender at the
address indicated in this Deed of Trust, or at such other place as Lender may
designate in writing.

 
 
7.13
Subrogation.  To the extent that proceeds of the Note are used to pay
indebtedness secured by any outstanding lien, security interest, charge or prior
encumbrance against the Mortgaged Property, such proceeds have been advanced by
Lender at Trustor’s request and Lender shall be subrogated to any and all
rights, security interests and liens owned or held by any owner or holder of
such outstanding liens, security interests, charges or encumbrances,
irrespective of whether said liens, security interests, charges or encumbrances
are released; provided, however, that the terms and provisions of this Deed of
Trust shall govern the rights and remedies of Lender and shall supersede the
terms, provisions, rights and remedies under and pursuant to the instruments
creating the liens, security interests, charges or encumbrances to which Lender
is subrogated hereunder.

 
 
7.14
Application of Indebtedness.  If any part of the Indebtedness cannot be lawfully
secured by this Deed of Trust or if any part of the Mortgaged Property cannot be
lawfully subject to the lien and security interest hereof to the full extent of
the Indebtedness, then all payments made shall be applied on said Indebtedness
first in discharge of that portion thereof which is unsecured by this Deed of
Trust.

 
 
7.15
Usury.  This Deed of Trust has been executed under, and shall be construed and
enforced in accordance with, the laws of the state where the Mortgaged Property
is located, except as such laws are preempted by federal law.  This Deed of
Trust and all of the other Loan Documents are intended to be performed in
accordance with, and only to the extent permitted by, all applicable usury
laws.  If any provision hereof or of any of the other Loan Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the application of such
provision to any other person or circumstance nor the remainder of the
instrument in which such provision is contained shall be affected thereby and
shall be enforced to the greatest extent permitted by applicable law.  It is
expressly stipulated and agreed to be the intent of Trustor and Lender to at all
times comply with the usury and other applicable laws now or hereafter governing
the interest payable on the Indebtedness.  If the applicable law is ever
revised, repealed or judicially interpreted so as to render usurious any amount
called for under the Note or under any of the other Loan Documents, or
contracted for, charged, taken, reserved or received with respect to the
Indebtedness, or if Lender’s exercise of the option to accelerate the maturity
of the Indebtedness, or if any prepayment of the Indebtedness results in the
payment of any interest in excess of that permitted by law, then it is the
express intent of Trustor and Lender that all excess amounts theretofore
collected by Lender be credited on the principal balance of the Note (or, if the
Note and all of such other Indebtedness have been paid in full, refunded), and
the provisions of the Note and the other Loan Documents immediately be deemed
reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest lawful amount otherwise called for hereunder or thereunder.  All sums
paid, or agreed to be paid, for the use, forbearance, detention, taking,
charging, receiving or reserving on the Indebtedness shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness until payment in full so that the
rate or amount of interest on account of such Indebtedness does not exceed the
usury ceiling from time to time in effect and applicable thereto (the "Maximum
Rate") for so long as debt is outstanding under the Indebtedness.  To the extent
federal law permits Lender to contract for, charge, receive, reserve or take a
greater amount of interest, Lender will rely on federal law instead of such
article, as amended, for the purpose of determining the Maximum
Rate.  Additionally, to the extent permitted by applicable law now in effect,
Lender may, at its option and from time to time, implement any other method of
computing the Maximum Rate under such article, as amended, or under other
applicable law by giving notice, if required, to Trustor as provided by
applicable law now or hereafter in effect.  Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.

 
 
7.16
Notice.  Any notice, request, demand or other communication required or
permitted hereunder, or under the Note, or under any of the other Loan Documents
(unless otherwise expressly provided therein) shall be given in writing by (a)
personal delivery, (b) expedited delivery service (including Federal Express or
other comparable services) with proof of delivery, or (c) United States mail,
postage prepaid, registered or certified mail, return receipt requested, sent to
the intended addressee at the address shown in this Deed of Trust, or to such
different address as the addressee shall have designated by written notice sent
in accordance herewith, and shall be deemed to have been given and received
either at the time of personal delivery or, in the case of delivery service, as
of the date of first attempted delivery at the address and in the manner
provided herein, or in the case of mail, as of the date of first attempted
delivery at the address and in the manner provided herein.

 
 
7.17
Heirs, Successors and Assigns.  The terms, provisions, covenants and conditions
hereof shall be binding upon Trustor and the heirs, devisees, representatives,
successors and assigns of Trustor, including all successors-in-interest of
Trustor in and to all or any part of the Mortgaged Property, and shall inure to
the benefit of Trustee and Lender and their respective heirs, successors,
substitutes and assigns and shall constitute covenants running with the
Land.  All references in this Deed of Trust to Trustor, Trustee, or Lender shall
be deemed to include all such heirs, devisees, representatives, successors,
substitutes, and assigns.

 
 
7.18
Severability.  A determination that any provision of this Deed of Trust is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision and any determination that the application of any provision of
this Deed of Trust to any person or circumstance is illegal or unenforceable
shall not affect the enforceability or validity of such provision as it may
apply to any other persons or circumstances.

 
 
7.19
Gender and Number.  Within this Deed of Trust, words of any gender shall be held
and construed to include any other gender, and words in the singular number
shall be held and construed to include the plural and words in the plural number
shall be held and construed to include the singular, unless in each instance the
context otherwise requires.

 
 
7.20
Counterparts.  This Deed of Trust may be executed in any number of counterparts
with the same effect as if all parties hereto had signed the same document.  All
such counterparts shall be construed together and shall constitute one
instrument, but in making proof hereof it shall only be necessary to produce one
such counterpart.

 
7.21  
Joint and Several.  Where two or more persons or entities have executed this
Deed of Trust, unless the context clearly indicates otherwise, the term
"Trustor" as used in this Deed of Trust means the Trustors hereunder or either
or any of them and the obligations of Trustor hereunder shall be joint and
several.

 
 
7.22
Reporting Requirements.  Trustor agrees to comply with any and all reporting
requirements applicable to the transaction evidenced by the Note and secured by
this Deed of Trust which are set forth in any law, statute, ordinance, rule,
regulation, order or determination of any governmental authority, including but
not limited to The International Investment Survey Act of 1976, The Agricultural
Foreign Investment Disclosure Act of 1978, The Foreign Investment in Real
Mortgaged Property Tax Act of 1980 and the Tax Reform Act of 1984 and further
agrees upon request of Lender to furnish Lender with evidence of such
compliance.

 
 
7.22
Headings.  The Section headings contained in this Deed of Trust are for
convenience only and shall in no way enlarge or limit the scope or meaning of
the various and several Sections hereof.

 
 
7.23
Consent of Lender.  Except where otherwise provided herein, in any instance
hereunder where the approval, consent or the exercise of judgment of Lender is
required, the granting or denial of such approval or consent and the exercise of
such judgment shall be within the sole and absolute discretion of Lender, and
Lender shall not, for any reason or to any extent, be required to grant such
approval or consent or exercise such judgment in any particular manner,
regardless of the reasonableness of either the request or Lender’s judgment.

 
 
7.24
Modification or Termination.  The Loan Documents may only be modified or
terminated by a written instrument or instruments executed by the party against
which enforcement of the modification or termination is asserted.  Any alleged
modification or termination that is not so documented shall not be effective as
to any party.  Trustor agrees that it shall be bound by any modification of this
Deed of Trust or any of the other Loan Documents made by Lender and any
subsequent owner of the Mortgaged Property, with or without notice to or consent
of Trustor, and no such modification shall impair the obligations of Trustor
under this Deed of Trust or under any other Loan Document.

 
 
7.25
Negation of Partnership.  Nothing contained in the Loan Documents is intended to
create any partnership, joint venture, or association between Trustor and
Lender, or in any way make Lender a co-principal with Trustor with reference to
the Mortgaged Property, and any inferences to the contrary are hereby expressly
negated.

 
 
7.26
Entire Agreement.  The Loan Documents constitute the entire understanding and
agreement between Trustor and Lender with respect to the transactions arising in
connection with the Indebtedness and supersede all prior written or oral
understandings and agreements between Trustor and Lender with respect
thereto.  Trustor hereby acknowledges that, except as incorporated in writing in
the Loan Documents, there are not, and were not, and no persons are or were
authorized by Lender to make, any representations, understandings, stipulations,
agreements or promises, oral or written, with respect to the transaction which
is the subject of the Loan Documents.

 
 
7.27
WAIVER OF JURY TRIAL.  THE TRUSTOR IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE
RELATING TO THIS DEED OF TRUST, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
DEED OF TRUST OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE
TRUSTOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

 
 
7.28
The limitations on liability contained in Section 10 of the Note are hereby
incorporated herein by reference, and, except as provided therein, there shall
be no personal liability hereunder to Trustor.

 
 
[signature follows on next page]

 

 
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date and
year first written above.
 

 
TRUSTOR:

NETREIT NATIONAL CITY PARTNERS, LP,
a California limited partnership

By:           NetREIT, Inc.,
a Maryland corporation,
its general partner

By:           _________________________
Name:                      _________________________
Title:           _________________________

STATE OF CALIFORNIA
)
   
)
 
COUNTY OF _____________________
)
 

On ____________________, before me, ____________________________, a Notary
Public, personally appeared _______________________________, who proved to me on
the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument, and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
 
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
 
WITNESS my hand and official seal.
 

 
Signature _____________________________ (Seal)
 

EXHIBIT “A”
 
TO
 
DEED OF TRUST, SECURITY AGREEMENT AND
 
ASSIGNMENT OF RENTS AND LEASES
 
Legal Description
 

 
All that certain property situated in the County of San Diego, State of
California, described as follows:
 
A PARCEL OF LAND SITUATED IN THE CITY OF NATIONAL CITY, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, BEING THAT PORTION OF THE SOUTHERN CALIFORNIA RAILROAD
(PREDECESSOR OF THE ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY) TERMINAL
GROUNDS, AS SAID TERMINAL GROUNDS ARE SHOWN ON MAP OF NATIONAL CITY, CALIFORNIA,
FILED OCTOBER 2, 1882, AS MAP NO. 348 IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE INTERSECTION OF THE WESTERLY LINE OF HARRISON AVENUE (40 FEET
WIDE) WITH THE SOUTHERLY LINE OF NINETEENTH STREET, SAID WESTERLY LINE BEING THE
EASTERLY LINE OF SAID TERMINAL GROUNDS AND FORMER CENTER LINE OF NINTH AVENUE,
AS SHOWN ON SAID MAP NO. 348; THENCE ALONG THE SOUTHERLY LINE OF SAID NINETEENTH
STREET SOUTH 71° 00' WEST 175.47 FEET TO A POINT IN A LINE PARALLEL WITH AND
DISTANT 25 FEET SOUTHWESTERLY AT RIGHT ANGLES FROM THE CENTER LINE OF SAID
RAILWAY COMPANY'S MAIN TRACK, WHICH SAID POINT IS THE TRUE POINT OF BEGINNING
FOR THIS DESCRIPTION; THENCE ALONG SAID PARALLEL LINE SOUTH 19°02'30” EAST
784.96 FEET; THENCE SOUTH 71° 00' WEST 340.00 FEET; THENCE NORTH 19° 02' 30"
WEST 784.96 FEET TO THE SOUTHERLY LINE OF SAID NINETEENTH STREET; THENCE ALONG
THE SOUTHERLY LINE OF SAID NINETEENTH STREET NORTH 71° 00' EAST 340.00 FEET TO
THE TRUE POINT OF BEGINNING, CONTAINING AN AREA OF 6.127 ACRES MORE OR LESS.

EXCEPTING ALL OIL, GAS AND OTHER HYDROCARBON AND MINERAL SUBSTANCES LYING NOT
LESS THAN 100 FEET BELOW SURFACE OF HEREINABOVE DESCRIBED LAND.

APNS:  559-040-35-01; 559-040-36-01

 
EXHIBIT “B”
 
TO
 
DEED OF TRUST, SECURITY AGREEMENT AND
 
ASSIGNMENT OF RENTS AND LEASES
 

 
Leases
 

1.
That certain Standard Industrial/Commercial Multi-Tenant Lease (Net), dated as
of March 12, 2008, by and between NetREIT National City Partners, LP, a
California limited partnership, as successor-in-interest to LGI Delaware, LLC,
as landlord, and Caliber Bodyworks, Inc., as tenant, as the same may be amended,
restated or extended.

2.
That certain Standard Industrial/Commercial Multi-Tenant Lease (Net), dated as
of October 16, 2007, by and between NetREIT National City Partners, LP, a
California limited partnership, as successor-in-interest to LGI Delaware, LLC,
as landlord, and Epsilon Systems Solutions, Inc., as tenant, as the same may be
amended, restated or extended.

3.
That certain Multi-Tenant Industrial/Commercial Lease (Net), dated as of
November 13, 2012, by and between NetREIT National City Partners, LP, a
California limited partnership, as landlord, and Acosta, Inc., as tenant, as the
same may be amended, restated or extended.