exhibit_10-3.htm


    
      

    

    Exhibit
10.3

     

     

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

    


     

     

    DEED
OF TRUST,

    ASSIGNMENT
OF RENTS AND LEASES,

    SECURITY AGREEMENT AND
FIXTURE FILING

     

    THIS DEED
OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
(“Security
Instrument”) is made as of this 16th day of
July, 2008 by Valcent Manufacturing, Ltd., a Texas limited partnership, as
Grantor (“Borrower”),
to Deborah P. Everett, Trustee (“Trustee”),
for the benefit of Platinum Long Term Growth VI, LLC, a Delaware limited
liability company, as Agent (for the benefit of the Lenders (as defined below)),
as Beneficiary (together with its successors and assigns, “Agent”).

     

    BACKGROUND

     

    Pursuant
to the Note and Warrant Purchase Agreement, dated as of July 16, 2008 (the
“Note
Purchase Agreement”), between Valcent Products, Inc. (“Valcent”),
as issuer of the Note (defined below), and the Agent and other purchasers named
therein (the Agent and the purchasers are collectively referred to as the “Lenders”),
the Lenders are making a loan to Valcent in the maximum principal amount of
$2,428,166 (the “Valcent
Loan”).  The obligations of Valcent to the Lenders will be
evidenced by one or more promissory notes of even date herewith in the original
aggregate principal amount of the Valcent Loan and are referred to herein
collectively as the “Note”.  Borrower, pursuant to
the Guaranty, dated on or about the date hereof (the “Guaranty”),
has unconditionally guaranteed the obligations of Valcent under the Note and the
other Transaction Documents (as defined in the Note Purchase
Agreement).  The obligations of the Borrower under the Guaranty are
referred to herein as the “Guaranteed
Obligations”.  Borrower desires to secure payment and
performance of Borrower’s Guaranteed Obligations in respect of the Guaranty, the
Note and the Valcent Loan by granting to Agent for itself and for the benefit of
the Lenders, the security described in this Security Instrument.  The
Borrower is a subsidiary of Valcent and the Lenders would not make the Valcent
Loan unless the Borrower executed and delivered this Security Instrument to the
Agent for the benefit of the Lenders.

     


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


    NOW,
THEREFORE, to induce Lenders to make the Valcent Loan to Valcent, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, Borrower agrees as
follows:

     

    ARTICLE
1

    DEFINED
TERMS

     

    1.01           Defined
Terms.  Capitalized terms used in this Security Instrument and
not specifically defined in this Security Instrument have the meaning provided
in the Note Purchase Agreement.

    ARTICLE
2

    GRANT OF
SECURITY

     

    2.01           Property
Mortgaged.  Borrower does hereby irrevocably deed, mortgage,
grant, bargain, sell, assign, pledge, warrant, transfer and convey to Trustee,
and to its successors and assigns, as trustee, in trust for the benefit of
Agent, as security for the Guaranty and the Obligations (defined herein) and for
the benefit of the Lenders, with power of sale, the following property, rights,
interests and estates, now owned or hereafter acquired by Borrower and whether
now existing or hereafter arising (collectively, “Property”):

     

    (a)          Land.  The
land described in Exhibit A attached
hereto and made a part hereof, together with all estates and development rights
now existing or hereafter acquired for use in connection therewith (“Land”);

     

    (b)          Additional
Land.  All land that, from time to time, by supplemental deed
or otherwise, may be expressly made subject to this Security Instrument, and all
estates and development rights hereafter acquired by Borrower for use in
connection with such land (also, the “Land”);

     

    (c)          Improvements.  All
buildings, structures, improvements and fixtures now or hereafter erected or
located on the Land (“Improvements”);

     

    (d)          Easements.  All
easements, rights-of-way or use, rights, strips and gores of land, streets,
ways, alleys, passages, sewer rights, oil, gas, and minerals, and rights thereto
or therein, water, water courses, water rights and powers, air rights and
development rights, and all estates, rights, titles, interests, privileges,
liberties, servitudes, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way now or hereafter belonging, relating or pertaining to the
Property and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof, and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Property and every part and parcel
thereof, with all appurtenances thereto;

     

    (e)          Fixtures and Personal
Property.  All machinery, equipment, fixtures (including,
without limitation, all heating, air conditioning, plumbing, lighting,
communications and elevator fixtures), furnishing, building supplies and
materials, and all other personal property of every kind and nature whatsoever
owned by Borrower (or in which Borrower has or hereafter acquires an interest)
and now or hereafter located upon, or appurtenant to, the Property or used or
useable in the present or future operation and occupancy of the Property, along
with all accessions, replacements, betterments, or substitutions of all or any
portion thereof (collectively, “Personal
Property”);

     


    
      
         


      

      
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    (f)    
      Leases and
Rents.  All leases, subleases, licenses and other agreements
granting others the right to use or occupy all or any part of the Property
together with all restatements, renewals, extensions, amendments and supplements
thereto (“Leases”),
now existing or hereafter entered into, and whether entered before or after the
filing by or against Borrower of any petition for relief under the Bankruptcy
Code, and all of Borrower’s right, title and interest in the Leases, including,
without limitation (i) all guarantees, letters of credit and any other credit
support given by any tenant or guarantor in connection therewith (“Lease
Guaranties”), (ii) all cash, notes, or security deposited thereunder to
secure the performance by the tenants of their obligations thereunder (“Tenant
Security Deposits”), (iii) all claims and rights to the payment of
damages and other claims arising from any rejection by a tenant of its Lease
under the Bankruptcy Code (“Bankruptcy
Claims”), (iv) all of the landlord’s rights in casualty or condemnation
proceeds of a tenant in respect of the leased premises (“Tenant
Claims”), (v) all rents, ground rents, additional rents, revenues,
termination and similar payments, issues and profits (including all oil and gas
or other mineral royalties and bonuses) from the Property (collectively with the
Lease Guaranties, Tenant Security Deposits, Bankruptcy Claims and Tenant Claims,
“Rents”),
whether paid or accruing before or after the filing by or against Borrower of
any petition for relief under the Bankruptcy Code, (vi) all proceeds or streams
of payment from the sale or other disposition of the Leases or disposition of
any Rents, and (vii) the right to receive and apply the Rents to the payment of
the Debt and to do all other things which Borrower or a lessor is or may become
entitled to do under the Leases or with respect to the Rents;

     

    (g)          Condemnation
Awards.  All awards or payments, including interest thereon,
which may heretofore and hereafter be made with respect to the Property, whether
from the exercise of the right of eminent domain (including, without limitation,
any transfer made in lieu of or in anticipation of the exercise of the right),
or for a change of grade, or for any other injury to or decrease in the value of
the Property;

     

    (h)          Insurance
Proceeds.  All proceeds of, and any unearned premiums on, any
insurance policies covering the Property, including, without limitation, the
exclusive right to receive and apply the proceeds of any claim awards,
judgments, or settlements made in lieu thereof, for damage to the
Property;

     

    (i)         
 Tax
Certiorari.  All refunds, abatements, rebates or credits in
connection with a reduction in Taxes, including, without limitation, rebates as
a result of tax certiorari or any other applications or proceedings for
reduction;

     

    (j)       
   Operating
Agreements.  All contracts (including, without limitation,
service, supply, maintenance and construction contracts), registrations,
franchise agreements, permits, licenses (including, without limitation, liquor
licenses, if any, to the fullest extent assignable by Borrower), plans and
specifications, and other agreements, now or hereafter entered into, and all
rights therein and thereto, respecting or pertaining to the use, occupation,
construction, management or operation of the Property, or respecting any
business or activity conducted by Borrower from the Property, and all right,
title and interest of Borrower therein and thereunder, including, without
limitation, the right, while an Event of Default remains uncured, to receive and
collect any sums payable to Borrower thereunder (collectively, “Operating
Agreements”);

     


    
      
         


      

      
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    (k)          Rate Cap
Agreements.  All interest rate cap agreements, swaps or other
interest hedging agreements now or hereafter executed with respect to the
Guaranteed Obligations or to guard against interest rate exposure in connection
with the Guaranteed Obligations, if any;

     

    (l)     
     Intangibles.  All
accounts, escrows, chattel paper, claims, deposits, trade names, trademarks,
service marks, logos, copyrights, books and records, goodwill, and all other
general intangibles relating to or used in connection with the operation of the
Property;

     

    (m)          Accounts.  All
reserves, escrows and deposit accounts maintained by Borrower with respect to
the Property or in which Borrower has any interest (including, without
limitation, all reserves, escrows, and deposit accounts), together with all
cash, checks, drafts, certificates, securities, investment property, financial
assets, instruments and other property from time to time held therein, and all
proceeds, products, distributions, dividends or substitutions thereon or
thereof;

     

    (n)          Rights to Conduct Legal
Actions.  The right, in the name and on behalf of Borrower, to
commence any action or proceeding to protect the interest of Agent in the
Property, and to appear in and defend any action or proceeding brought with
respect to the Property;

     

    (o)          Proceeds.  All  proceeds
and profits arising from the conversion, voluntary or involuntary, of any of the
foregoing into cash (whether made in one payment or a stream of payments) and
any liquidation claims applicable thereto; and

     

    (p)          Rights.  Any
and all other rights of Borrower in and to the items set forth in the foregoing
subsections (a)
through (o),
inclusive, and in and to the Property.

     

    TO HAVE
AND TO HOLD the above granted and described Property unto Trustee, and its
successors and assigns, in trust, with power of sale in accordance with the
terms and conditions hereof, for the use and benefit of the Agent, for the
benefit of the Lenders, and the successors and assigns of the Agent, forever;
subject, however, to Section 2.05
below.

     

    2.02          
 Grant of
Security Interest; Security Agreement.  Borrower hereby grants
to Agent, as security for the Guaranteed Obligations and for the benefit of the
Lenders, a security interest in the Property to the fullest extent that the
Property now or hereafter may be subject to a security interest under the
UCC.  Borrower intends for this Security Instrument to be a “security
instrument” within the meaning of the UCC.  Borrower hereby
irrevocably authorizes Agent to prepare, execute and file all initial financing
statements, and any restatements, extensions, continuations, renewals or
amendments thereof, in such form as Agent may require to perfect or continue the
perfection of this security interest or other statutory liens held by
Agent.  Unless prohibited by applicable law, Borrower agrees to pay
all reasonable expenses incident to the preparation, execution, filing and/or
recording of any of the foregoing.  With respect to any of the
Property in which a security interest is not perfected by the filing of a
financing statement, Borrower consents and agrees to undertake, and to cooperate
fully with Agent, to perfect the security interest hereby granted to Agent in
the Property.  Without limiting the foregoing, if and to the extent
any of the Property is held by a bailee for the benefit of Borrower, Borrower
shall promptly notify Agent thereof and, if required by Agent promptly obtain an
acknowledgment from such bailee that is satisfactory to Agent and confirms that
such bailee holds the Property for the benefit of Agent as secured party and
shall only act upon instructions from Agent with respect to the
Property.

     


    
      
         


      

      
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    2.03           
Assignment of Leases
and Rents.

     

    (a)          Rights Granted to
Agent.  Borrower hereby absolutely and unconditionally assigns
to Agent all of Borrower’s right, title and interest in and to all current and
future Leases and Rents.  Borrower hereby declares its intention to
establish a present, absolute and irrevocable transfer and assignment to Agent
of all Rents and Leases and to authorize and empower Agent to collect and
receive all Rents and exercise all of Borrower’s rights under the Leases
(including, without limitation, the right to modify, extend or terminate any
Lease) without any further action by Borrower; it being intended that this
assignment is effective immediately and not an assignment made for security
only, notwithstanding any provision hereof to the contrary.  For
purposes of giving effect to this assignment of Rents and Leases and for no
other purpose, Rents and Leases shall not be deemed to be part of the “Property”
as that term is defined in Section 2.01 of this
Security Instrument. If, however, this assignment of Rents and Leases is not
enforceable by its terms under the laws of the State where the Property is
located, then Rents and Leases shall be included as part of the Property and it
is Borrower’s intention that, in this circumstance, this Security Instrument
creates and perfects a lien of the Rents and Leases in favor of Agent, which
lien shall be effective as of the date of this Security Instrument.

     

    (b)          License to Borrower;
Revocation.  Nevertheless, subject to the terms of this
Security Instrument and the Note Purchase Agreement, Agent grants to Borrower a
revocable license (i) to manage the leasing activities of the Property, and (ii)
to exercise all of Borrower’s rights under the Leases.  So long as no
Event of Default exists, the Rents remaining after application pursuant to the
preceding sentence may be retained by Borrower free and clear of, and released
from, Agent’s rights with respect to Rents under this Security
Instrument.  From and after the occurrence of an Event of Default, and
without the necessity of notice or prior demand or Agent’s entering upon and
taking and maintaining control of the Property (whether directly or through a
receiver), the license granted to Borrower by this Section shall terminate
automatically, and Agent shall be entitled to receive and collect the Rents as
they become due and payable and exercise all of Borrower’s rights or the rights
of lessor under the Leases and with respect to the
Rent.   Agent’s right to revoke the license granted to Borrower
is in addition to all other rights and remedies available to Agent following an
Event of Default.

     

    (c)          No Obligations Assumed by
Agent.  Neither the granting of this assignment to Agent, nor
Agent’s exercise of any rights or remedies with respect to this assignment,
shall be construed (i) to make Agent a “mortgagee in possession” of the Property
in the absence of Agent itself taking actual possession of the Property or (ii)
to obligate Agent to take any action with respect to the Leases, including,
without limitation, the performance of any obligation to be performed on the
part of Borrower under any of the Leases, which shall remain exclusively with
Borrower.  Without limiting the foregoing, this assignment shall not
operate to place on Agent any obligation or liability for: (i) the control,
care, management or repair of the Property; (ii) for carrying out any of the
terms and conditions of the Leases; (iii) any waste committed on the Property by
tenants or any other parties; (iv) any dangerous or defective condition of the
Property (including, without limitation, the presence of any Hazardous Materials
as defined in the Environmental Indemnity); or (v) any negligence in the
management, upkeep, repair or control of the Property resulting in injury or
death to any tenant or any other party or any loss of personal
property.  Borrower, for itself and any party claiming under or
through Borrower, hereby releases and discharges Agent from any such liability
to the fullest extent permitted by law. Agent shall be obligated to account only
for Rents actually collected or received by Agent, and Agent shall not be liable
for any loss sustained by Borrower resulting from Agent’s failure to lease the
Property after an Event of Default.

     


    
      
         


      

      
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    2.04           
Fixture
Filing.  Certain of the Property is or will become “fixtures”
(as that term is defined in the UCC) on the Land, and this Security Instrument
upon being filed for record in the real estate records of the city or county
wherein such fixtures are situated, shall operate also as a financing statement
filed as a fixture filing in accordance with the applicable provisions of the
UCC upon such of the Property that is or will become fixtures.

     

    2.05     
      Pledge of Monies
Held.  Borrower hereby pledges to Agent, as security for the
Obligations and for the benefit of the Lenders, all money now or hereafter held
by Agent in escrow or reserve or on deposit pursuant to the terms hereof or
pursuant to any Transaction Document, until expended or applied as provided in
this Security Instrument or such other Transaction Document.

     

    2.06   
        Release of
Security.  The grants, deed of trust, mortgage, liens, security
interests, assignments, pledges and transfers by this Security Instrument are
subject to the express condition that, if Borrower pays to Lenders the Debt at
the time and in the manner provided in the Transaction Documents and performs
all Obligations when and as required by the Guaranty and each other Transaction
Documents, Agent shall release the Property from the grants, deed of trust,
mortgage, liens, security interests, assignments, pledges and transfers created
by this Security Instrument and reconvey the Property to
Borrower.  Agent shall prepare (at Borrower’s expense) and deliver to
Borrower such documents as are necessary to effect such release and
reconveyance.

     

    ARTICLE
3

    DEBT AND
OBLIGATIONS SECURED

     

    3.01        
   Debt.  This
Security Instrument and the interests created in favor of Agent hereunder are
given for the purpose of securing (a) payment of principal, interest and all
other amounts due at anytime under the Guaranty, the Note and each of the other
Transaction Documents, including, without limitation, interest at the Default
Rate, any late fee for delinquent payment, and amounts advanced by Agent or any
other Lender to protect and preserve the Property and the Liens hereby created
for the benefit of Agent (collectively “Debt”), and (b) performance of
all obligations of Borrower contained in the Guaranty, the Note and each of the
other Transaction Documents (collectively with the Debt, the “Obligations”).  Notwithstanding
any provision of this Security Instrument to the contrary, the obligations of
Borrower and the other indemnitors under the Environmental Indemnity Agreement
(as defined in the Purchase Agreement) shall not be deemed secured by this
Security Instrument unless and until Agent expressly declares in writing such
obligations to be secured hereby.

     


    
      
         


      

      
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    ARTICLE
4

    BORROWER
COVENANTS

     

    4.01     
      Payment of Debt and
Performance of Obligations.  Borrower will pay the Debt at the
time and in the manner provided in the Guaranty and the other Transaction
Documents and fully and punctually perform the Obligations when and as required
by the Transaction Documents.

     

    4.02     
      Compliance with Transaction
Documents.  Borrower shall comply with all covenants and
agreements in the Transaction Documents, including, without limitation, all
obligations regarding the ownership, operation, management and condition of the
Property and the protection and perfection of the Liens hereby created in favor
of Agent.  Without limiting the foregoing, Borrower
agrees:

     

    (a)          
Borrower shall not cause or permit any Transfer of the legal or beneficial
ownership of the Property or Borrower.

     

    (b)           To
keep the Property in good repair and condition;

    


    (c)           To
pay all taxes and assessments on the Property before delinquency;

    


    (d)           To
defend title to the Property subject to the Other Exceptions to Conveyance and
Warranty and preserve the lien's priority as it is established in this deed of
trust;

    


    (e)           To
maintain, in a form acceptable to Agent, an insurance policy that-

    


    (i)        
   covers all improvements for their full insurable value as
determined when the policy is issued and renewed, unless Agent approves a
smaller amount in writing;

    


    
      
        	
              	
                (ii)

              	
                contains
      an 80 percent coinsurance
clause;

              


      

    

    


    
      	
            	
              (iii) 

            	
              provides
      fire and extended coverage, including windstorm
  coverage;

            


    

    


    
      	
            	
              (iv) 

            	
              protects
      Agent with a standard mortgage
clause;

            


    

    


    
      	
            	
              (v) 

            	
              provides
      flood insurance at any time the Property is in a flood hazard area;
      and

            


    


    
      
         


      

      
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                (vi)

              	
                contains
      such other coverage as Agent may reasonably
  require;

              


      

    

    


    
      	
            	
              (vii) 

            	
              comply
      at all times with the requirements of the 80 percent coinsurance
      clause;

            


    

    


    (viii)        deliver
the insurance policy to Agent within ten days of the date of the deed of trust
and deliver renewals to Agent at least fifteen days before
expiration;

    


    (f)         
  To obey all laws, ordinances, and restrictive covenants applicable
to the Property;

    


    (g)
          To keep any
buildings occupied as required by the insurance policy; and

    


    (h)       
   Obligations upon
Condemnation or Casualty.  Borrower shall comply with all
obligations required under the Transaction Documents in the event the Property
is damaged by a Casualty or becomes involved in any Condemnation.  All
proceeds or awards recovered or payable to Borrower as a result of a Casualty or
Condemnation shall be paid to, and administered by Agent, in accordance with the
Note Purchase Agreement.

     

    (i)      
    Operating
Agreements.  Borrower shall observe and perform in a timely
manner each and every obligation to be observed or performed by Borrower
pursuant to the terms of each Operating Agreement and shall not terminate any
Operating Agreement.

     

    4.03       
    Warranty of
Title.  Borrower has good, marketable and insurable fee simple
title of record to the Property, free and clear of all liens, encumbrances and
charges whatsoever except for the Permitted Encumbrances. Borrower shall forever
warrant, defend and preserve the title and the validity and priority of the lien
of this Security Instrument and shall forever warrant and defend the same to
Agent and/or Trustee against the claims of all Persons

     

    ARTICLE
5

    SUBROGATION

     

    5.01        
   Subrogation.  If
the Guaranteed Obligations is used to pay, satisfy, discharge, extend or renew
any indebtedness secured by a pre-existing mortgage, deed of trust or other lien
encumbering the Property (“Prior
Lien”), then to the extent of funds so used, Agent shall automatically,
and without further action on its part, be subrogated to all rights, including
lien priority, held by the holder of the indebtedness secured by the Prior Lien,
whether or not the Prior Lien is released, and such former rights are not waived
but rather are continued in full force and effect in favor of Agent and are
merged with the lien and security interest created herein as cumulative security
for payment of the Debt and performance of the Obligations.

     

    ARTICLE
6

    DEFAULT

     

    6.01     
      Events of
Default.  The occurrence of default under the Guaranty shall
constitute an “Event of
Default” under this Security Instrument.

     


    
      
         


      

      
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    6.02         
  Remedies.  If
an Event of Default occurs, Agent may, at its option, acting directly or through
Trustee and without prior notice or demand, exercise, and hereby is authorized
and empowered by Borrower so to exercise, any or all of the remedies set forth
in the Note (including, without limitation, the right to accelerate the
Guaranteed Obligations and the right to appoint a receiver, trustee, liquidator
or conservator of the Property) or otherwise permitted by law or in
equity.

     

    6.03     
      Cumulative Remedies; No
Waiver; Other Security.  Agent’s remedies under this Security
Instrument are cumulative with the remedies provided in the other Transaction
Documents, by law or in equity and may be exercised independently, concurrently
or successively in Agent’s sole discretion and as often as occasion therefor
shall arise.  Agent’s delay or failure to accelerate the Guaranteed
Obligations or exercise any other remedy upon the occurrence of an Event of
Default shall not be deemed a waiver of such right as remedy.  No
partial exercise by Agent of any right or remedy will preclude further exercise
thereof.  Notice or demand given to Borrower in any instance will not
entitle Borrower to notice or demand in similar or other circumstances nor
constitute Agent’s waiver of its right to take any future action in any
circumstance without notice or demand (except where expressly required by this
Security Instrument to be given). Agent may release other security for the Debt,
may release any party liable for the Debt, may grant extensions, renewals or
forbearances with respect thereto, may accept a partial or past due payment or
grant other indulgences, or may apply any other security held by it to payment
of the Debt, in each case without prejudice to its rights under this Security
Instrument and without such action being deemed an accord and satisfaction or a
reinstatement of the Debt.  Agent will not be deemed as a consequence
of its delay or failure to act, or any forbearances granted, to have waived or
be estopped from exercising any of its rights or remedies.

     

    6.04      
     Enforcement
Costs.  Borrower shall pay, on written demand by Agent, all
costs incurred by Agent in (a) collecting any amount payable under the
Transaction Documents including, without limitation, any and all costs and
expenses incurred in connection with any foreclosure of this Security Instrument
or the exercise of any power or sale hereunder, or (b) enforcing its rights
under the Transaction Documents, in each case whether or not legal proceedings
are commenced.  Such fees and expenses include, without limitation,
reasonable fees for attorneys, paralegals, law clerks and other hired
professionals, a reasonable assessment of the cost of services performed by
Agent’s default management staff, court fees, costs incurred in connection with
pre-trial, trial and appellate level proceedings, including discovery, and costs
incurred in post-judgment collection efforts or in any bankruptcy
proceeding.  Amounts incurred by Agent shall be added to the Debt,
shall be immediately due and payable, and shall bear interest at the Default
Rate from the date of disbursement until paid in full, if not paid in full
within five (5) days after Agent’s written demand for payment.

     

    6.05           
Application of
Proceeds.  The proceeds from disposition of the Property shall
be applied by Agent to the payment of the Debt (including, without limitation,
advances made by Agent and enforcement costs incurred by Agent) in such priority
and proportion as Agent determines in its sole discretion.

     

    6.06     
      Continuing Lien; Right to
Release Property.  If less than all of the Property is, at any
time, sold through foreclosure, power of sale, or otherwise, or if Agent
releases any portion of the Property (for whatever consideration Agent deems
appropriate), this Security Instrument shall continue as a lien and security
interest on the remaining portion of the Property, unimpaired and without loss
of priority.

     


    
      
         


      

      
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    ARTICLE
7

    WAIVER OF
RIGHT OF REDEMPTION AND OTHER RIGHTS

     

    7.01          
 Waiver of Rights
of Redemption, Marshalling and Other Rights.  Borrower hereby
waives, to the fullest extent permitted by law, the benefit of all laws, now or
hereafter in force, providing for (a) the valuation or appraisement of the
Property, or any part thereof, prior to any sale or sales thereof pursuant to
this Security Instrument or any decree, judgment or order of a court of
competent jurisdiction; (b) the right to stay or extend any such proceeding, to
have this Security Instrument reinstated or to redeem the Property or any
portion thereof so sold; (c) rights of marshalling relating to any such sale or
sales; (d) any right to require that the Property be sold as separate tracts or
units in connection with enforcement of this Security Instrument; and (e) the
benefit of any moratorium, exemption or homestead rights now or hereafter
provided. Borrower makes such waivers on its own behalf and on behalf of all
parties now or hereafter claiming or having an interest (direct or indirect) by,
through or under Borrower.

     

    7.02        
   Waiver of
Counterclaim.  Borrower hereby waives, to the fullest extent
permitted by law, the right to assert a counterclaim, other than a mandatory or
compulsory counterclaim, in any action or proceeding brought against it by
Trustee or Agent arising out of, or in any way connected with, the
Obligations.

     

    7.03 
          Waiver of Foreclosure
Defense.  Borrower hereby waives, to the fullest extent
permitted by law, any defense Borrower might have by reason of Agent’s failure
to make any tenant or tenant of the Property a party defendant in any
foreclosure instituted by Agent.

     

    7.04      
     Waiver of Notices
Generally.  Borrower hereby waives, to the fullest extent
permitted by law, its rights to notice from Agent except when this Security
Instrument or the other Transaction Documents expressly provides for Agent to
give notice to Borrower.

     

    7.05       
    Waiver of Statute of
Limitations and Laches.  Borrower hereby waives, to the fullest
extent permitted by law, the benefit of any statute of limitations or laches
defense to payment of the Debt or performance of the Obligations.

     

    7.06    
       WAIVER OF
TRIAL BY JURY.  BORROWER WAIVES ITS
RIGHT, TO THE FULLEST EXTENT PERMITTED BY LAW, AND AGREES NOT TO ELECT, A TRIAL
BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS SECURITY INSTRUMENT OR THE
RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND AGENT.

     

    7.07    
       Consent to
Jurisdiction.  Borrower hereby consents and submits to the
exclusive jurisdiction and venue of any state or federal court sitting in the
county and state where the Land is located with respect to any legal action or
proceeding arising with respect to this Security Instrument and waives all
objections which it may have to such jurisdiction and venue. Nothing herein
shall, however, preclude or prevent Agent from bringing actions against Borrower
in any other jurisdiction as may be necessary to enforce or realize upon the
security herein provided.

     


    
      
         


      

      
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    ARTICLE
8

    MISCELLANEOUS
PROVISIONS

     

    8.01        
   Further
Acts.  Borrower, at Borrower’s expense, agrees to take such
further actions and execute such further documents as Agent reasonably may
request to carry out the intent of this Security Instrument or to establish and
protect the rights and remedies created or intended to be created in favor of
Agent hereunder or to protect the value of the Property and the Liens and
security hereby created in favor of Agent.  Borrower agrees to pay all
filing, registration or recording fees or taxes, and all expenses incident to
the preparation, execution, acknowledgement or filing/recording of this Security
Instrument or any such instrument of further assurance, except where prohibited
by law so to do.

     

    8.02      
     No Third Party
Beneficiary.  Notwithstanding any provision of this Security
Instrument to the contrary, this Security Instrument is not intended by the
parties to create, and shall not create, benefits on behalf of any tenant or
other occupant of the Property or anyone claiming rights through any tenant or
other occupant of the Property.

     

    8.03          
 No Agency or
Partnership.  Nothing contained in this Security Instrument
shall constitute Agent as a joint venturer, partner or agent of Borrower, or
render Agent liable for any debts, obligations, acts, omissions,
representations, or contracts of Borrower.

     

    ARTICLE
9

    TRUSTEE
PROVISIONS

     

    9.01        
   Trustee’s Fees and
Expenses.  Borrower shall pay all reasonable fees and expenses
incurred by Trustee for legal counsel and other professional advisors in
connection with Trustee’s performance of its duties hereunder. Amounts incurred
by Trustee shall be deemed a part of the Debt secured by this Security
Instrument and bear interest at 18 percent if not paid in full within five (5)
days after Trustee’s written demand for payment. Trustee hereby waives any
statutory fee or compensation for services rendered hereunder.

     

    9.02     
      Duties of
Trustee.

     

    (a)          Trustee,
by acceptance of this Security Instrument, covenants to perform and fulfill the
trusts and duties herein created and conferred upon
Trustee.  Notwithstanding the foregoing, Trustee agrees not to execute
any of the powers conferred upon Trustee hereunder, nor to take any action to
protect or enforce Agent’s rights hereunder, nor to provide any interpretation
of this Security Instrument or any of the other Transaction Documents without
Agent’s prior written consent thereto in each instance. Trustee, however, has an
affirmative duty to reasonably cooperate with Agent as Agent may require to
protect the Property and to enforce Agent’s rights hereunder, but Trustee shall
not be obligated to institute or defend any suit in respect hereof or to perform
any act which would involve Trustee in any expense or liability unless, in each
case, properly indemnified to Trustee’s reasonable
satisfaction.  Trustee also has no duty to see to any recording,
filing or registration of this Security Instrument or any other instrument in
addition or supplemental hereto, or to give any notice thereof, or to see to the
payment of, or be under any duty in respect of, any tax or assessment or other
governmental charge which may be levied or assessed on the Property or against
Borrower, or to see to the performance or observance by Borrower of any of the
covenants and agreements contained herein.  Trustee shall not be
responsible for the sufficiency of the security purported to be created hereby
and makes no representation or warranty in respect thereof or in respect of the
rights of Agent.

     


    
      
         


      

      
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    (b)          Trustee
shall not be liable for any error of judgment or act done by Trustee in good
faith or otherwise responsible or accountable under any circumstances whatsoever
(including Trustee’s negligence), except for Trustee’s gross negligence or
willful misconduct.  Trustee has the right to advice of counsel upon
any matters arising hereunder and shall be fully protected in relying on the
advice of counsel. Trustee has the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by
Trustee hereunder, believed by Trustee in good faith to be
genuine.  Trustee shall not be personally liable in case of entry upon
the Property by Trustee, or anyone entering by virtue of the powers herein
granted to Trustee, or for liability or damages incurred in the management or
operation of the Property.

     

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

     

    9.03       
    Resignation and Substitution
of Trustee.

     

    (a)          Trustee
may resign at any time upon written notice to Agent delivered not less than
thirty (30) days prior to the intended date of resignation.  In the
event of Trustee’s death, resignation, refusal to act, disqualification or other
inability to act, or if Agent shall deem it desirable to remove Trustee for any
reason with or without cause, Agent has the right, in its sole discretion, to
select and appoint a successor trustee (who may be Agent or an affiliate of
Agent if permitted by law), without application to court or compliance with any
formality other than appointment and designation in writing by Agent. If Agent
is a corporation or association and such appointment is executed in its behalf
by an officer of such corporation or association, 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 or association.

     

    (b)          Any
successor appointed as Trustee shall, without further act, deed or conveyance,
become vested with all of the estates, properties, rights, powers, privileges,
immunities and duties herein conferred upon Trustee with like effect as if such
successor were originally named as trustee herein.  Nevertheless, upon
the written request of Agent or of the successor as Trustee, the party ceasing
to act as Trustee shall execute and deliver an instrument, in recordable form,
transferring to such successor as Trustee, all of the estates, properties,
rights, powers, privileges, immunities and duties herein conferred upon Trustee
and shall duly assign, transfer and deliver to such successor, in trust, any of
the property and money then held by the party ceasing to act as
Trustee.

     


    
      
         


      

      
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    9.04      
     Multiple
Trustees.  If more than one Trustee is appointed hereunder at
any one time, or from time to time, all rights granted to and all powers
conferred upon Trustee hereunder may be exercised by any or all of such
Trustees, independently or jointly.  Action exercised by one Trustee
shall be deemed valid and binding on all Trustees.

     

    ARTICLE
10

    LOCAL LAW
PROVISIONS

     

    The
provisions set forth below control in the event of any conflict with the other
terms of this Security Instrument.

    


    10.01           Acceleration;
Remedies

     

    10.02           At
any time during the existence of an Event of Default, Agent, at Agent’s option,
may declare the Debt to be immediately due and payable without further demand,
and may invoke the power of sale and any other remedies permitted by Texas law
or provided in this Security Instrument or in any other Transaction
Document.  Borrower acknowledges that the power of sale granted in
this Security Instrument may be exercised by Agent without prior judicial
hearing.  Agent shall be entitled to collect all reasonable costs and
expenses incurred in pursuing such remedies, including reasonable attorneys’
fees, costs of documentary evidence, abstracts and title reports.

     

    (a)     
     If Agent invokes the power of sale, Agent may, by
and through the Trustee, or otherwise, sell or offer for sale the Property in
such portions, order and parcels as Agent may determine, with or without having
first taken possession of the Property, to the highest bidder at public
auction.  Such sale shall be made at the courthouse door of the county
in which all or any part of the Land to be sold is situated (whether the parts
or parcel, if any, situated in different counties are contiguous or not, and
without the necessity of having any Property present at such sale) on the first
Tuesday of any month between the hours of 10:00 A.M. and 4:00 P.M., after
advertising the time, place and terms of sale and that portion of the Property
to be sold by posting or causing to be posted written or printed notice of sale
at least twenty-one (21) days before the date of the sale at the courthouse door
of the county in which the sale is to be made and at the courthouse door of any
other county in which a portion of the Land may be situated, and by filing such
notice with the County Clerk(s) of the county(s) in which all or a portion of
the Land may be situated, which notice may be posted and filed by the Trustee
acting, or by any person acting for the Trustee, and Agent has, at least
twenty-one (21) days before the date of the sale, served written or printed
notice of the proposed sale by certified mail on each debtor obligated to pay
the Debt according to Agent’s records by the deposit of such notice, enclosed in
a postpaid wrapper, properly addressed to such debtor at debtor’s most recent
address as shown by Agent’s records, in a post office or official depository
under the care and custody of the United States Postal Service.  The
affidavit of any person having knowledge of the facts to the effect that such
service was completed shall be prima facie evidence of the
fact of service.

     

    (b)          Trustee
shall deliver to the purchaser at the sale, within a reasonable time after the
sale, a deed conveying the Property so sold in fee simple with covenants of
special warranty.  Borrower covenants and agrees to defend the
purchaser’s title to the Property against all claims and demands, subject to the
Permitted Encumbrances and any other exceptions hereafter approved by Agent in
writing.  The recitals in Trustee’s deed shall be prima facie evidence of the truth of
the statements contained in those recitals.  Trustee shall apply the
proceeds of the sale in the following order:  (i) to all reasonable
costs and expenses of the sale, including reasonable Trustee’s fees not to
exceed 5% of the gross sales price, attorneys’ fees and costs of title evidence;
(ii) to the Debt in such order as Agent, in Agent’s discretion, directs; and
(iii) the excess, if any, to the person or persons legally entitled to the
excess.

     


    
      
         


      

      
        13

        
          

        

      

      
         


      

    

     

     

    (c)    
      If all or any part of the Property is sold
pursuant to this Section, Borrower will be divested of any and all interest and
claim to the Property, including, without limitation, any interest or claim to
all insurance policies, utility deposits, bonds, loan commitments and other
intangible property included as a part of the Property.  Additionally,
after a sale of all or any part of the Land, Improvements, and Personal
Property, Borrower will be considered a tenant at sufferance of the purchaser of
the same, and the purchaser shall be entitled to immediate possession of such
property.  If Borrower shall fail to vacate the Property immediately,
the purchaser may and shall have the right, without further notice to Borrower,
to go into any justice court in any precinct or county in which the Property is
located and file an action in forcible entry and detainer, which action shall
lie against Borrower or its assigns or legal representatives, as a tenant at
sufferance.  This remedy is cumulative of any and all remedies the
purchaser may have under this Security Instrument or otherwise.

     

    (d)     
     In any action for a deficiency after a foreclosure
under this Security Instrument, if any person against whom recovery is sought
requests the court in which the action is pending to determine the fair market
value of the Property, as of the date of the foreclosure sale, the following
shall be the basis of the court’s determination of fair market
value:

     

    (i)            the
Property shall be valued “as is” and in its condition as of the date of
foreclosure, and no assumption of increased value because of post-foreclosure
repairs, refurbishment, restorations or improvements shall be made;

     

    (ii)           any
adverse effect on the marketability of title because of the foreclosure or
because of any other title condition not existing as of the date of this
Security Instrument shall be considered;

     

    (iii)          the
valuation of the Property shall be based upon an assumption that the foreclosure
purchaser desires a prompt resale of the Property for cash within a six
month-period after foreclosure;

     

    (iv)          although
the Property may be disposed of more quickly by the foreclosure purchaser, the
gross valuation of the Property as of the date of foreclosure shall be
discounted for a hypothetical reasonable holding period (not to exceed 6 months)
at a monthly rate equal to the average monthly interest rate on the Note for the
twelve months before the date of foreclosure;

     

    (v)          the
gross valuation of the Property as of the date of foreclosure shall be further
discounted and reduced by reasonable estimated costs of disposition, including
brokerage commissions, title policy premiums, environmental assessment and
clean-up costs, tax and assessment, prorations, costs to comply with legal
requirements and attorneys’ fees, reduced by the discounted value of estimated
net operating income to be generated by the Property pending disposition, if
any;

     


    
      
         


      

      
        14

        
          

        

      

      
         


      

    

     

     

    (vi)         expert
opinion testimony shall be considered only from a licensed appraiser certified
by the State of Texas and, to the extent permitted under Texas law, a member of
the Appraisal Institute, having at least five years’ experience in appraising
property similar to the Property in the county where the Property is located,
and who has conducted and prepared a complete written appraisal of the Property
taking into considerations the factors set forth in this Security Instrument; no
expert opinion testimony shall be considered without such written
appraisal;

     

    (vii)        evidence
of comparable sales shall be considered only if also included in the expert
opinion testimony and written appraisal referred to in subsection (vi),
above; and

     

    (viii)       an
affidavit executed by Agent to the effect that the foreclosure bid accepted by
Trustee was equal to or greater than the value of the Property determined by
Agent based upon the factors and methods set forth in subsections (i) through
(vii) above before the foreclosure shall constitute prima facie evidence that
the foreclosure bid was equal to or greater than the fair market value of the
Property on the foreclosure date.

     

    (e)          Agent
may, at Agent’s option, comply with these provisions in the manner permitted or
required by Title 5, Section 51.002 of the Texas Property Code (relating to the
sale of real estate) or by Chapter 9 of the Texas Business and Commerce Code
(relating to the sale of collateral after default by a debtor), as those titles
and chapters now exist or may be amended or succeeded in the future, or by any
other present or future articles or enactments relating to same
subject.  Unless expressly excluded, the Property shall include Rents
collected before a foreclosure sale, but attributable to the period following
the foreclosure sale, and Borrower shall pay such Rents to the purchaser at such
sale.  At any such sale whether made under the power contained in this
Security Instrument, Section 51.002 of the Texas Property Code, Chapter 9 of the
Texas Business and Commerce Code, any other legal requirement or by virtue of
any judicial proceedings or any other legal right, remedy or recourse, it shall
not be necessary for Trustee to have physically present, or to have constructive
possession of, the Property (Borrower shall deliver to Trustee any portion of
the Property not actually or constructively possessed by Trustee immediately
upon demand by Trustee) and the title to and right of possession of any such
property shall pass to the purchaser as completely as if the property had been
actually present and delivered to the purchaser at the sale:

     

    (i)           each
instrument of conveyance executed by Trustee shall contain a special warranty of
title, binding upon Borrower;

     

    (ii)           the
recitals contained in any instrument of conveyance made by Trustee shall
conclusively establish the truth and accuracy of the matters recited therein,
including nonpayment of the Debt and the advertisement and conduct of the sale
in the manner provided in this Security Instrument and otherwise by law and the
appointment of any successor Trustee;

     


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    (iii)          all
prerequisites to the validity of the sale shall be conclusively presumed to have
been satisfied;

     

    (iv)          the
receipt of Trustee or of such other party or officer making the sale shall be
sufficient to discharge to the purchaser or purchasers for such purchaser(s)’
purchase money, and no such purchaser or purchasers, or such purchaser(s)’
assigns or personal representatives, shall thereafter be obligated to see to the
application of such purchase money or be in any way answerable for any loss,
misapplication or nonapplication of such purchase money;

     

    (v)           to
the fullest extent permitted by law, Borrower shall be completely and
irrevocably divested of all of Borrower’s right, title, interest, claim and
demand whatsoever, either at law or in equity, in and to the property sold, and
such sale shall be a perpetual bar to any claim to all or any part of the
property sold, both at law and in equity, against Borrower and against any
person claiming by, through or under Borrower; and

     

    (vi)          to
the extent and under such circumstances as are permitted by law, Agent may be a
purchaser at any such sale.

     

    10.02           No Fiduciary
Duty. Agent
owes no fiduciary or other special duty to Borrower.

     

    10.03           Fixture Filing. This Security Instrument
is also a fixture filing under the Uniform Commercial Code of
Texas.

     

    10.04           Additional Provisions
Regarding Assignment of Rents. Section 2.03 shall
not be construed to require a pro tanto or other reduction
of the Debt resulting from the assignment of Rents.  If the provisions
of Section 2.03
and the preceding sentence cause the assignment of Rents in Section 2.03 to be
deemed to be an assignment for additional security only, Agent shall be entitled
to all rights, benefits and remedies attendant to such collateral
assignment.  The assignment of Rents contained in Section 2.03 shall
terminate upon the release of this Security Instrument.

     

    10.05          [Reserved]

     

    10.06          Waiver of
Appraisement.  Borrower hereby waives any rights of
appraisement or for determination of the fair market value of the Property under
Sections 51.003 and 51.004 of the Texas Property Code or as Borrower may
otherwise be entitled under Texas law.

     

     [Remainder
of page is blank; signatures appear on next page.]

    


     


    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the undersigned hereby signs, seals and delivers this Security
Instrument.

     

     

    
      
        	 	BORROWER:	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 


      

    

    


     

    THE STATE
OF TEXAS        §

     

    COUNTY
OF  _______________          §

     

    This
instrument was acknowledged before me on the ____ day of ________, 2008,
____________________, the __________________ of _________________________, on
behalf of said company.

     

     

    
      	 	 	 
	 	 	 	 
	
               

            	
               

            	 
	 	
              Notary
      Public in and for the State of

            	 
	 	 	 
	 	 	 
	 	 	 
	 	
              (Date
      Commission Expires)

            	 
	 	 	 	 
	 	 	 	 


    

     

    


    



    
      
        
          Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing –
Signature Page

        

         


      

      
        17

        
          

        

      

      
         


      

    


    


     

    EXHIBIT
A

     

    Description
of the Land

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    A-1