**Exhibit10.49**

 
| **RECORDING  REQUESTED BY****AND WHEN RECORDED MAIL TO:**

 

Mid-Peninsula  Bank  c/o Greater Bay Bancorp  Attention:  Loan Servicing  2860 West Bayshore Road  Palo Alto, California 94303 |                                          |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|
|                                                                                                                                                                                                   | SPACE ABOVE THIS LINE FOR RECORDER’S USE |

 

 

**FRESHCHOICE, INC.,**

a Delaware corporation,

as Trustor,

 

to

 

**GREATERBAY BANCORP,**

a California corporation,

as Trustee,

 

for the benefit of

 

**MID-PENINSULABANK,**

a California bankingcorporation,

as Beneficiary

 

 

**COMMERCIAL DEED OF TRUST, FINANCING STATEMENT, SECURITY AGREEMENT AND FIXTURE FILING (WITH ASSIGNMENT OF RENTS AND LEASES)**

 

Dated:  August 13, 2001

 

 

This instrument is a Commercial Deed of Trust,Financing Statement, Security Agreement and Fixture Filing (with Assignment ofRents and Leases) of both real and personal property, including fixtures.  This instrument contains provisionsaccelerating the obligations hereby secured upon certain sales or furtherencumbrances of the property hereby covered.

THIS COMMERCIALDEED OF TRUST, FINANCING STATEMENT, SECURITY AGREEMENT AND FIXTURE FILING (WITHASSIGNMENT OF RENTS AND LEASES) (**“Deed ofTrust”**) is made the 13th day of August, 2001, by **FRESH CHOICE, INC.,** a Delaware corporation,whose address is 485 Cochran Circle, Morgan Hill, CA 95037 (**“Trustor”**), to **GREATER BAY BANCORP**, a California corporation, whose addressis 2860 West Bayshore Road, Palo Alto, California 94303 (**“Trustee”**), for the benefit of **MID-PENINSULA BANK**, a California bankingcorporation, whose address is c/o Greater Bay Bancorp, Attention:  Loan Servicing, 2860 West BayshoreRoad, Palo Alto, California 94303 (**“Beneficiary”**).

WITNESSETH:

WHEREAS, Trustor hasexecuted and delivered that certain Promissory Note Secured by Deed of Trust ofeven date herewith payable to the order of Beneficiary in the original maximumprincipal amount of Two Million Two Hundred Thousand and No/100ths Dollars($2,200,000.00) having a maturity date of September 2, 2008 (which promissorynote, together with any and all extensions, substitutions, modifications,replacements, rearrangements and/or renewals thereof, is hereinafter referredto as the **“Note”**), with interestthereon at the rate set forth in the Note and said principal amount andinterest thereon maturing and being payable in accordance with the terms andconditions provided in the Note;

WHEREAS, the totalindebtedness and liabilities that are to be secured by this Deed of Trust shallbe as follows:

(i)            the aggregate principal amount of$2,200,000.00 with interest thereon according to the terms of the Note;

(ii)           all other amounts payable by Trustorunder the Note or this Deed of Trust (the Note and this Deed of Trust,hereinafter collectively referred to as the **“LoanDocuments”**), in each case as the same may be amended, modified orsupplemented from time to time, including all sums, amounts and expenses whichTrustee or Beneficiary may, pay or incur under or in connection with any of theLoan Documents;

(iii)          the performance of all otherobligations and liabilities of Trustor under or in connection with the LoanDocuments; and

(iv)          any other indebtedness, obligation oragreement of Trustor when evidenced or set forth in a document or instrumentreciting that it is secured by this Deed of Trust (all such amounts,obligations and liabilities described in (i) through (iv) being hereinaftercollectively referred to as the **“Obligations”**); and

WHEREAS, it has beenagreed that the payment and performance of the Obligations shall be secured bya security interest in  certain propertyas hereinafter described.

NOW, THEREFORE, inconsideration of the premises and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, and in order tosecure the due and punctual payment in full by Trustor, whether at statedmaturity, by acceleration or otherwise, and performance of the Obligations,Trustor does hereby irrevocably assign, give, grant, bargain, sell, warrant,convey, mortgage, transfer, grant a security interest in, set over, deliver,confirm and convey unto Trustee, in trust, with power ofsale and right of entry as hereinbelow provided, upon the terms and conditionsof this Deed of Trust, the following property described in Granting ClausesFirst through Sixth below (hereinafter sometimes collectively referred to asthe "Mortgaged Property"):

Granting Clauses

All the present andfuture estate, right, title and interest of Trustor in, to and under, orderived from:

Granting Clause FirstLand

All that certain lot,piece or parcel of land owned or hereafter acquired by Trustor located inthe  Counties of Collin and Dallas, theState of Texas, as more particularly described in Exhibit Aattached hereto, as the description of the same may be amended, modified orsupplemented from time to time, and all and singular the reversions orremainders in and to said land and the tenements, hereditaments, transferableentitlements and development rights, easements (in gross and/or appurtenant)existing as of the date hereof or arising thereafter, agreements, rights-of-wayor use rights (including alley, drainage, horticultural, mineral, mining,water, oil and gas rights and any other rights to produce or share in theproduction of anything therefrom or attributable thereto), privileges,royalties and appurtenances to said land, now or hereafter belonging or inanywise appertaining thereto, including any such right, title, interest in, toor under any agreement or right granting, conveying or creating, for thebenefit of said land, any easement, right or license in any way affecting saidland and/or other land and in, to or under any streets, ways, alleys, vaults,gores or strips of land adjoining said land or any parcel thereof, or in or tothe air space over said land, all rights of ingress and egress with respect tosaid land, and all claims or demands of Trustor, either at law or in equity, inpossession or expectancy, of, in or to the same (all of the foregoinghereinafter collectively referred to as the **“Land”**).

Granting Clause SecondImprovements

All buildings,structures, facilities and other improvements now or hereafter located on theLand, and all building material, and fixtures of every kind and nature now orhereafter located on the Land or attached to, contained in or used inconnection with any such buildings, structures, facilities or otherimprovements, and all appurtenances and additions thereto and betterments,renewals, substitutions and replacements thereof, owned by Trustor or in whichTrustor has or shall acquire an interest (all of the foregoing hereinaftercollectively referred to as the **“Improvements”**).

Granting Clause ThirdCertain Equipment 

To the extent that thesame are not Improvements, all machinery, apparatus, goods, inventory,equipment, materials, building materials, fittings, chattels and tangiblepersonal property, and all appurtenances and additions thereto and betterments,renewals, substitutions and replacements thereof owned by Trustor or in whichTrustor has or shall acquire an interest, and now or hereafter located on,attached to, contained in or used in connection with the properties referred toin Granting Clause First, Second, Fifth or Sixth, or placed on any partthereof, though not attached thereto (all of the foregoing hereinaftercollectively referred to as the **“Equipment”**),including without limitation all screens, awnings, shades, blinds, curtains,draperies, carpets, rugs, furniture and furnishings, heating, lighting, airconditioning, refrigerating, incinerating and/or compacting plants, systems andequipment, hoists, stoves, ranges, vacuum and other cleaning systems, callsystems, sprinkler systems and other fire prevention and extinguishingapparatus and materials, motors, machinery, pipes, ducts, conduits, dynamos,engines, compressors, generators, boilers, stokers, furnaces, pumps, tanks,appliances, equipment and fittings (the Land, the Improvements and theEquipment hereinafter collectively referred to as the **“Premises”**); all contract rights of Trustorin construction contracts, plans and specifications and architects agreementsarising out of the improvement of the Premises, all permits, licenses,franchises, certificates and other rights and privileges obtained in connectionwith the Premises; and all proceeds, substitutions and replacements of all ofthe foregoing.  Trustor hereby grants toTrustee and Beneficiary, a security interest in and to all of Trustor’s presentand future “equipment” (as defined in the Uniform Commercial Code of the Stateof Texas), to the extent that such equipment that may be now owned or hereafteracquired by Trustor and located on the Premises, and Trustee and Beneficiaryshall have, in addition to all rights and remedies provided herein and in theLoan Documents, all of the rights and remedies of a “secured party” under saidUniform Commercial Code.  This Deed ofTrust constitutes and shall be deemed to be a “security agreement” for allpurposes of said Uniform Commercial Code. It is agreed that all Equipment is part and parcel of the Land and theImprovements and appropriated to the use thereof and, whether affixed to theLand and/or the Improvements or not, shall, for purposes of this Deed of Trustbe deemed conclusively to be real estate and mortgaged or otherwise conveyed orencumbered hereby. Notwithstanding any other provision of this Deed of Trust,the security interests of Trustee and/or Beneficiary shall not extend to, andthe terms "Equipment," "Premises,""Improvements,"and "Mortgaged Property" shall not includeany of the following: (a) Trustor's interests in any property that is the subjectof a lease or lending agreement related to the financing of such property; or(b) Trustor's  interests in anydishwashing equipment, point-of-sale equipment or similar equipment andmachinery.

Granting Clause FourthLeasehold and Other Contractual Interests

All the leases,subleases, lettings and licenses of and all other contracts, bonds andagreements affecting the Premises and/or any other property or rights conveyedor encumbered hereby, or any part thereof, now or hereafter entered into, andall amendments, modifications, supplements, additions, extensions and renewalsthereof (all of the foregoing hereinafter collectively called the **“Leases”** regardless of how the same mayotherwise be denominated), and all right, title and interest of Trustorthereunder, including cash and securities deposited thereunder and any rightsof first refusal with respect thereto (as down payments, security deposits, orotherwise), the right to receive and collect the rents, security deposits,income, proceeds, earnings, royalties, revenues, issues and profits payablethereunder, including cash and securities deposited thereunder and any rightsof first refusal with respect thereto (as down payments, security deposits, orotherwise), the right to receive and collect the rents, security deposits,income, proceeds, earnings, royalties, revenues, issues and profits payablethereunder including all revenues, moneys, funds, accounts receivables,operating revenues, accounts and any other item or thing relating to thepayment of or right to receive such revenues, moneys, funds, accountsreceivables, operating revenues, accounts or other items or things arising outof or generated in connection with the operation, use, occupancy, concession,license, renting, leasing, letting or providing of the Premises, or any partthereof (including, without limitation, termination payments, damages or otherpayments in lieu thereof), and the right to enforce, whether at law or inequity or by any other means, all provisions and options thereof or thereunder(all of the foregoing hereinafter collectively called the **“Rents”** regardless of how the same may beotherwise denominated), and the right to apply the same to the payment andperformance of the Obligations.

Granting Clause FifthOther and After Acquired Property

Any and all undisbursedloan funds, any loan funds or other moneys held in escrow or other accounts atthe request or as a requirement of Beneficiary, any and all other property,which may from time to time be subjected to the lien hereof by Trustor througha supplement or amendment to this Deed of Trust, or by anyone on its behalf orwith its consent, or which may come into the possession of or be subject to thecontrol of Trustee or Beneficiary pursuant to this Deed of Trust, it being theintention and agreement of Trustor that all such property shall thereupon besubject to the lien and security interest of this Deed of Trust as if suchproperty were now owned by Trustor and conveyed or encumbered hereby orpursuant hereto, and as if such property were specifically described in thisDeed of Trust and conveyed or encumbered hereby or pursuant hereto, and Trusteeand Beneficiary are hereby authorized to receive any and all such property assecurity hereunder, subject to the provisions of this Deed of Trust.

Granting Clause SixthProceeds and Awards

All unearned premiums,accrued, accruing or to accrue under insurance policies now or hereafterobtained by Trustor with respect to the property described in these GrantingClauses, all proceeds (including funds, accounts, deposits, instruments,general intangibles, notes or chattel paper) of the conversion, voluntary orinvoluntary, of any of the property described in these Granting Clauses intocash or other liquidated claims, including proceeds of hazard, title and otherinsurance and proceeds received pursuant to any sales or rental agreements ofTrustor in respect of the property described in these Granting Clauses, and alljudgments, damages, awards, settlements and compensation (including interestthereon) heretofore or hereafter made to the present and all subsequent ownersof the Premises and/or any other property or rights conveyed or encumberedhereby for any injury to or decrease in the value thereof for any reason, or byany governmental or other lawful authority for the taking by eminent domain,condemnation or otherwise of all or any part thereof, including awards for anychange of grade of .

TO HAVE AND TO HOLD, alland singular the Mortgaged Property, whether now owned or leased or hereafteracquired and whether now or hereafter existing, together with all rights,privileges and appurtenances thereunto belonging, unto Trustee and Beneficiary,forever, for the uses and purposes herein set forth, subject however to theprovisions of Article 7 hereof.

AND Trustorcovenants with and represents and warrants to and agrees with Trustee andBeneficiary as follows:

ARTICLE1REPRESENTATIONS AND WARRANTIES OF TRUSTOR

Trustor hereby representsand warrants, in respect of itself and the Mortgaged Property set forth in theGranting Clauses, as follows:

1.1           Warrantyof Title.  (i) Trustor has andwill continue to have good, marketable and insurable fee simple title to theLand and Improvements free and clear of all liens, charges and encumbrances ofevery kind and character, subject only to such exceptions as may be approved inwriting by Beneficiary (**“PermittedExceptions”**) and any of the following liens, charges andencumbrances arising after the date of recordation of this Deed of Trust and,with the sole exception of taxes, assessments and governmental charges in thenature of taxes, junior and subordinate hereto:  (a) any lien for taxes, assessments or other governmentalcharges which are not delinquent or which are being contested in good faith byappropriate proceedings pursuant to Section 2.7.6 hereof,(b) any mechanic’s or other involuntary lien which is being contested ingood faith by appropriate proceedings pursuant to the provisions of Section 2.6.1hereof (collectively **“Future PermittedExceptions”**), and (c) any Leases, licenses or other occupancyagreements relating to a portion of the Land and/or the Improvements eitherapproved by Beneficiary or not requiring the approval of Beneficiary inaccordance with the express terms hereof; (ii) Trustor has and willcontinue to havefull power andlawful authority to encumber and convey the Premises as provided herein;(iii) Trustor owns and will own all Land and Improvements free and clearof all liens, charges and encumbrances of every kind and character, subjectonly to the Permitted Exceptions, Future Permitted Exceptions and theexceptions described in Section 1.1(i)(c) above; (iv) thisDeed of Trust is and will continue to remain a valid and enforceable firstmortgage lien on and security interest in, the Land and Improvements subject toPermitted Exceptions, Future Permitted Exceptions and the exceptions describedin Section 1.1(i)(c) above; and (v) Trustor hereby warrants and willforever warrant and defend such title and the validity, enforceability andpriority of the lien and security interest hereof against the claims of allpersons and parties whomsoever other than thosoever other than those relatingto Permitted Exceptions, Future Permitted Exceptions and the exceptionsdescribed in Section 1.1(i)(c ) above. Trustor’s obligations under this Section 1.1 shall terminateonly upon full payment in lawful currency of the United States of America ofall of the Obligations.

1.2           Operationof the Premises.  (i) Trustorhas or will have at the appropriate times, and will maintain all necessarycertificates, licenses, authorizations, registrations, permits and/or approvalsreasonably necessary for the operation of all or any part of the Premises,whether now or hereafter constructed upon the Land, and the conduct ofTrustor’s business at the Premises, including, where appropriate, one or morePermanent Certificates of Occupancy and Board of Fire Underwriters Certificatesfor those portions of the Improvements which have been completed as of the datehereof, if any, and all required zoning ordinance, building code, subdivision,land use, environmental and other similar permits or approvals, all of which,to Trustor’s knowledge, are as of the date hereof in full force and effect andnot subject to any revocation, amendment, release, suspension or forfeiture,(ii) promptly upon request by Trustee and/or Beneficiary, Trustor shalldeliver to Trustee and Beneficiary copies of all of the same, (iii) thePremises and the present use and/or occupancy of the Premises comply with, and,at all times in the future, shall comply with any of the applicable zoningordinances, building codes, subdivision laws, certificates of occupancy,environmental laws and other similar applicable laws and regulations, and(iv) Trustor has direct access adequate for all present and intended usesof the Premises from public roads to the Land and the Improvements.  Trustor’s obligations under this Section 1.2to maintain all necessary certificates, licenses, authorizations,registrations, permits and/or approvals necessary for the operation of all orany part of the Premises, and all required zoning ordinance, building code,subdivision, land use, environmental and other similar permits or approvalsshall not be deemed to require Trustor to comply with future or purely prospectivezoning ordinance or building codes except to the extent that such ordinances orcodes, by their terms, require compliance by Trustor in order to maintainnormal and customary operation of the Premises.

1.3           Statusof the Premises.  (i) In theevent that the Premises are ever deemed to be located in an area identified bythe Secretary of Housing and Urban Development or a successor thereto, or otherappropriate authority (governmental or private), as an area having specialflood hazards pursuant to the terms of the National Flood Insurance Act of1968, or the Flood Disaster Protection Act of 1973, as amended, or anysuccessor law, Trustor will obtain and maintain the insurance for the Premisesas specified in Section 2.3.1(c) hereof; (ii) the Premises areor at the appropriate times will be served by all utilities reasonably requiredfor the use thereof as a restaurant; (iii) all streets necessary to servethe Land and the Improvements for the use thereof as herein contemplated havebeen or will be timely completed and are or will be timely serviceable and havebeen or will be timely dedicated and accepted for maintenance by theappropriate governmental entities; and (iv) the Premises are free fromdamage caused by fire or other casualty.

ARTICLE2COVENANTS OF TRUSTOR

Trustor covenants and agrees, in respect of itself andthe Premises set forth in the Granting Clauses relating to it, as follows:

2.1           GeneralCovenants.

2.1.1        Paymentof Obligations.  Trustor shallpunctually pay when due and perform the Obligations.

2.1.2        FurtherAssurances.  Trustor will, atTrustor’s sole cost and expense and at the reasonable request of Trustee orBeneficiary, (i) promptly correct any defect or error which may bediscovered in the contents of the Loan Documents which Trustor is a party to orin the execution, acknowledgment or recordation thereof, (ii) promptly do,execute, acknowledge and deliver, any and all such further acts, deeds,conveyances, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates,financing statements and continuations thereof, notices of assignment and ofsecurity interest, transfers, certificates, assurances and other instruments asTrustee and/or Beneficiary may reasonably require from time to time in order tocarry out more effectively the purposes of this Deed of Trust, to subject tothe lien and security interest hereby created any of Trustor’s properties,rights or interests covered or now or hereafter intended to be covered hereby,to perfect and maintain said lien and security interest, and to better assure,convey, grant, assign, transfer and confirm unto Trustee and/or Beneficiary therights granted or now or hereafter intended to be granted to Trustee and/orBeneficiary hereunder or under any other instrument executed in connection withthis Deed of Trust or which Trustor may be or become bound to convey, mortgageor assign to Trustee and/or Beneficiary in order to carry out the intention orfacilitate the performance of the provisions of this Deed of Trust; provided however,that nothing contained in this Section 2.1.2 shall be construed topermit Beneficiary to unilaterally require a substantive change in thesubstantive terms and conditions of the Loan Documents.

2.1.3        Recordationand Re-Recordation of Deed of Trust. Trustor will, at the reasonable request of Trustee or Beneficiary,promptly record and re-record, file and refile and register and re-registerthis Deed of Trust, any financing or continuation statements and every otherinstrument in addition or supplemental to any thereof that shall be required byany present or future law in order to perfect and maintain the validity,effectiveness and priority of this Deed of Trust and the lien and securityinterest intended to be created hereby, or to subject after acquired propertyof Trustor to such lien and security interest, in such manner and places andwithin such times as may be reasonably necessary to accomplish such purposesand to preserve and protect the rights and remedies of Trustee and Beneficiary.  Trustor will furnish to Trustee andBeneficiary evidence reasonably satisfactory to Trustee and Beneficiary ofevery such recording, filing or registration. Trustee or Beneficiary may file copies or reproductions of this instrumentas financing statements at any time and from time to time at Trustee’s orBeneficiary’s option without further authorization from Trustor.

2.1.4        Defenseof Title and Litigation.  If thelien, security interest, validity, enforceability or priority of this Deed ofTrust, or if title or any of the rights of Trustee and/or Beneficiary in or tothe Mortgaged Property, shall be endangered, or shall be attacked directly orindirectly, or if any action or proceeding is instituted against Trustor orTrustee and/or Beneficiary with respect thereto, Trustor will promptly notifyTrustee and Beneficiary thereof and will diligently endeavor to cure any defectwhich may be developed or claimed, and will take all necessary and proper stepsfor the defense of such action or proceeding, including the employment ofcounsel, the prosecution or defense of litigation and, subject to Beneficiary’sapproval, the compromise, release or discharge of any and all adverseclaims.  Trustee and/or Beneficiary(whether or not named as a party to such actions or proceedings) are herebyauthorized and empowered (but shall not be obligated) to take such additionalsteps as they may deem necessary or proper for the defense of any such actionor proceeding or the protection of the lien, security interest, validity,enforceability or priority of this Deed of Trust or of such title or rights,including the employment of counsel, the prosecution or defense of litigation,the compromise, release or discharge of such adverse claims, the purchase ofany tax title and the removal of such prior liens and security interests.  Trustor shall, on demand, reimburse Trusteeand Beneficiary for all reasonable expenses (including reasonable attorneys’fees and disbursements) incurred by either of them in connection with theforegoing matters, and the party incurring such expenses shall be subrogated toall rights of the person receiving such payment.  All such costs and expenses of Trustee and/or Beneficiary, untilreimbursed by Trustor, shall be part of the Obligations and shall bear interestfrom the date of advance at the Default Rate (as defined in the Note) and shallbe deemed to be secured by this Deed of Trust.

2.2           Operationand Maintenance.

2.2.1        Repairand Maintenance.  Trustor willoperate and maintain the Premises in good order, repair and operatingcondition, will promptly make all necessary repairs, renewals, replacements,additions and improvements thereto, interior and exterior, structural andnonstructural, foreseen and unforeseen, or otherwise necessary to insure thatthe same as part of the security under this Deed of Trust shall not in any waybe materially impaired or materially diminished, and will not cause or allowany of the Land, the Improvements and/or the Equipment to be misused or wastedor to deteriorate, reasonable wear and tear excepted.  No material part of the Improvements shall be removed, demolishedor structurally altered, nor shall any new building, structure, facility orother material improvement be constructed on the Land without Beneficiary’sconsent which shall not be unreasonably withheld, conditioned or delayed.

2.2.2        Replacementof Equipment.  Trustor will keep theLand and the Improvements reasonably equipped in accordance with reasonablecustom and practice for businesses such as Trustor's and will replace all wornout or obsolete Equipment with fixtures or personal property comparabletheretoto the extent such replacement is consistent with reasonable custom andpractice for businesses such as Trustor's, and will not, without Beneficiary’sconsent, remove from the Land or the Improvements any fixtures or personaltycovered by this Deed of Trust except: (a) in the ordinary course of Trustor’sbusiness; and (b) where such removal could not reasonably be expected to have amaterial adverse effect on the value of Beneficiary's security interest in thePremises; or (c) such removal is consistent with reasonable custom and practicefor businesses such as Trustor's,unless the same is replaced by Trustor with anarticle of equal suitability and value when replaced, owned by Trustor free andclear of any lien or security interest (other than Permitted Exceptions, FuturePermitted Exceptions and the lien created by this Deed of Trust).

2.2.3        ComplianceWith Laws.  Trustor will perform andcomply promptly with, and cause the Premises to be maintained, used andoperated in accordance with, any and all (i) present and future laws,ordinances, rules, regulations, reports and requirements of every dulyconstituted governmental or quasi-governmental authority or agency applicableto Trustor or the Premises, including, without limitation, any subdivisionagreement, improvements agreement or development agreement relating to thePremises, all laws and regulations under the Subdivision Map Act and theSubdivided Lands Act, all applicable federal, state and local laws pertainingto air and water quality, hazardous waste, waste disposal, air emissions andother environmental matters, all zoning and other land use matters, and utilityavailability and the rules, regulations and ordinances of all state andmunicipal governments whose rules, regulations and ordinances are applicable tothe Premises, the United States Environmental Protection Agency and allapplicable federal, state and local agencies and bureaus, (ii) similarlyapplicable orders, rules and regulations of any regulatory, licensing,accrediting, insurance underwriting or rating organization or other bodyexercising similar functions, (iii) similarly applicable duties orobligations of any kind imposed under any Permitted Exception or FuturePermitted Exception or otherwise by law, covenant, condition, agreement oreasement, public or private, and (iv) policies of insurance at any time inforce with respect to the Premises; provided, however, Trustor shall have theright in good faith, and upon advance written notice thereof to Beneficiary, tocontest or object to any such law, requirement or obligation by appropriateadministrative or judicial proceedings. In the event that failure to comply will result in a lien or charge onthe Premises that is not a Permitted Exception or a Permitted Future Exception,Trustor shall provide Beneficiary with assurances satisfactory to Beneficiarythat such lien or charge will be satisfied prior to the foreclosure thereof.  If there is an adverse conclusion withrespect to any such contest represented by a final judgment, decree ordetermination which may not be or is otherwise not appealed by Trustor, Trustorshall thereafter comply with any such law, requirement or obligation.  If Trustor receives any notice that Trustoror the Premises is in default under or is not in compliance with any of theforegoing, or notice of any proceeding initiated under or with respect to anyof the foregoing, Trustor will promptly furnish a copy of such notice toBeneficiary.

2.2.4        Zoning,Title Matters.  Trustor will not,without the consent of Beneficiary, (i) initiate or support any zoningreclassification of the Land or the Improvements, seek any variance underexisting zoning ordinances applicable to the Land or the Improvements or use orpermit the use of the Premises in a manner which would result in such usebecoming a non–conforming use under applicable zoning ordinances,(ii) modify, amend or supplement any of the Permitted Exceptions,(iii) impose any restrictive covenants or encumbrances upon the Premises,execute or file any subdivision or parcel map affecting the Land or theImprovements or consent to the annexation of the Land or the Improvements toany municipality or (iv) permit or suffer the Premises to be used by thepublic or any person in such manner as might make possible a claim of adverseusage or possession or of any implied dedication or easement.

2.2.5        Leasing.  Trustor shall not execute or enter into anyLease of the Mortgaged Property or any portion thereof or any interest thereinwithout the advance written consent of Beneficiary as to the form and substancethereof and the acceptability of the tenant, which consent may be withheld inBeneficiary's sole discretion.  Trustorshall on demand execute such further assignments to Beneficiary of all suchLeases and rents, issues, profits or moneys to be generated thereby asBeneficiary may require and deliver to Beneficiary a fully executed original ofany or all such Leases.  All Leasesshall contain a non-disturbance and attornment provision acceptable toBeneficiary in its sole discretion.

2.2.6        ManagementAgreements.  Upon the occurrence andduring the continuance of an Event of Default hereunder, Beneficiary shall havethe right and option to terminate any management agreement, contract oragents/managers responsible for the property management of the MortgagedProperty if said property management is, in Beneficiary’s reasonable judgment,unsatisfactory in any respect.

2.3           Insurance.

2.3.1        CasualtyInsurance.  As a material inducementto Beneficiary to make the loan evidenced bytheNote, Trustor will keep the Premises insured for the benefit of Trustee andBeneficiary as follows notwithstanding any local, state or federal laws which maydetrimentally affect Trustor’s ability to obtain or may materially increase thecost of such insurance coverage:

(a)           againstdamage or loss by fire and such other hazards (including lightning, windstorm,hail, explosion, riot, riot attending a strike, civil commotion, vandalism,malicious mischief, aircraft, vehicle and smoke) as are covered by the broadestform of extended coverage endorsement as is available from time to time, in anamount not less than the full insurable value (as defined in Section 2.3.8)of the property insured, with a deductible amount not to exceed an amountsatisfactory to Beneficiary;

(b)           rentor business interruption or use and occupancy insurance on such basis and insuch amounts and with such deductibles as shall be satisfactory to Beneficiary;

(c)           againstdamage or loss by flood if the Premises are located in an area identified bythe Secretary of Housing and Urban Development or any successor thereto orother appropriate authority (governmental or private) as an area having specialflood hazards and in which flood insurance has been made available under theNational Flood Insurance Act of 1968 or the Flood Disaster Protection Act of1973, as amended, modified, supplemented or replaced from time to time, on suchbasis and in such amounts as shall be required by Beneficiary;

(d)           againstdamage or loss from  sprinkler system leakage; 

(e)           duringthe period of any alteration, construction, or replacement of the Improvements,or any substantial portion thereof, a standard builder’s risk policy withextended coverage for an amount at least equal to the full insurable value ofthe Improvements and the Equipment and worker’s compensation, in statutoryamounts; and

(f)            againstdamage or loss by earthquake, in an amount and with a deductible, satisfactoryto Beneficiary, if such insurance is required by Beneficiary in the exercise ofits business judgment in light of the commercial real estate practices existingat the time the insurance is issued and in the County where the Premises are located.

2.3.2        LiabilityInsurance.  Trustor shall procureand maintain worker’s compensation for Trustor’s employees and comprehensivegeneral liability insurance covering Trustor, Trustee and the Beneficiaryagainst claims for bodily injury or death or property damage occurring in, uponor about or resulting from the Premises, or any street, drive, sidewalk, curbor passageway adjacent thereto, in standard form and with such insurancecompany or companies and in such amounts as may be acceptable to the Beneficiary,which insurance shall include blanket contractual liability coverage whichinsures contractual liability under the indemnification set forth in Section 4.3of this Deed of Trust (but such coverage or the amount thereof shall in no waylimit such indemnification).

2.3.3        OtherInsurance.  Trustor, atBeneficiary’s request, will procure and maintain such other insurance or suchadditional amounts of insurance, covering Trustor or the Premises, as iscustomary for businesses such as Trustor's.

2.3.4        Formof Policy.  All insurance requiredunder this Section shall be paid timely in accordance with the terms thereofand the policies therefor shall contain such provisions, endorsements andexpiration dates, as Beneficiary shall from time to time reasonably request,and shall be in such form and amounts, and be issued by such insurancecompanies doing business in the State of Texas as shall be reasonably approvedby Beneficiary.  Without limiting theforegoing, all such policies shall contain a waiver of subrogationendorsement.  All such policies shallprovide that the same shall not be canceled, amended or materially altered(including by reduction in the scope or limits of coverage) without at leastthirty (30) days’ prior written notice to Beneficiary.  If a policy required under this Sectioncontains a coinsurance or average clause, such policy shall include aStipulated Value or Agreed Amount endorsement.

2.3.5        DuplicateOriginals or Certificates. Duplicate original policies evidencing the insurance required under thisSection and any additional insurance which shall be taken out on the Premisesby or on behalf of Trustor shall be deposited with and held by Beneficiary and,in addition, Trustor will deliver to Beneficiary (i) receipts evidencingpayment of all premiums thereon and (ii) duplicate original renewalpolicies or a binder thereof with evidence satisfactory to Beneficiary ofpayment of all premiums thereon, at least thirty (30) days prior to theexpiration of each such policy.  In lieuof the duplicate original policies provided herein to be delivered toBeneficiary, Trustor may deliver an underlayer of any blanket policy, andTrustor may also deliver original certificates from the issuing insurancecompany or broker, evidencing that such policies are in full force and effectand containing information which, in Beneficiary’s reasonable judgment, issufficient to allow Beneficiary to determine whether such policies comply withthe requirements of this Section. Beneficiary shall be expressly entitled to rely on any insurancecertificate and such certificate shall name Beneficiary as an additionalinsured or loss payee.

2.3.6        NoSeparate Insurance.  Trustor shallnot carry separate or additional insurance concurrent in form or contributingin the event of loss with that required under this Section unless endorsed infavor of Trustee and the Beneficiary in accordance with the requirements ofthis Section and otherwise approved by Beneficiary in all respects.

2.3.7        Transferof Title.  In the event offoreclosure of this Deed of Trust or other transfer of title or assignment ofthe Premises in extinguishment, in whole or in part, of the Obligations, allright, title and interest of Trustor in and to all policies of insurancerequired under this Section or otherwise then in force with respect to thePremises and all proceeds payable thereunder and unearned premiums thereonshall immediately vest in the purchaser or other transferee of the Premises,but only to the extent of any deficiency following such sale.

2.3.8        ReplacementCost.  For purposes of this Section,the term “full insurable value” shall mean the actual cost of replacing theproperty in question, without allowance for depreciation, as determined fromtime to time (but not more often than once every calendar year) by theinsurance company or companies holding such insurance or, upon request byBeneficiary, by appraisal made by an appraiser, engineer, architect orcontractor proposed by Trustor and approved by said insurance company or companiesand Beneficiary.  The cost of suchappraisal shall be paid by Trustor.

2.3.9        ApprovalNot Warranty.  No approval byBeneficiary of any insurer shall be construed to be a representation,certification or warranty of its solvency and no approval by Beneficiary as tothe amount, type and/or form of any insurance shall be construed to be arepresentation, certification or warranty of its sufficiency.

2.4           Damageand Destruction.

2.4.1        Trustor'sObligations.  In the event of anydamage to or loss or destruction of the Premises, Trustor shall(i) promptly notify Beneficiary of such event; (ii) take such stepsas shall be necessary to preserve any undamaged portion of the Premises; and(iii) unless otherwise instructed by Beneficiary shall, regardless ofwhether the insurance proceeds, if any, shall be sufficient for the purpose,promptly (and in any event, prior to the date on which any tenant under anyLease, as defined herein, shall be entitled to cancel or terminate said Leasebecause of any such damage, loss or destruction) commence and diligently pursueto completion the restoration, replacement and rebuilding of the Premises asnearly as possible to their value, condition and character immediately prior tosuch damage, loss or destruction and in accordance with plans andspecifications approved, and with other provisions for the preservation of thesecurity hereunder established, by Beneficiary, which approval shall not beunreasonably withheld or delayed.

2.4.2        Beneficiary'sRights; Application of Proceeds.  Inthe event that any portion of the Premises is so damaged, destroyed or lost,and any such damage, destruction or loss is covered, in whole or in part, byinsurance described in Section 2.3, then the following provisionsshall apply:

(a)           Ifan Event of Default has occurred hereunder and is continuing,(A) Beneficiary may, but shall not be obligated to, make proof of loss ifnot made promptly by Trustor, and Beneficiary is hereby authorized andempowered by Trustor to settle, adjust or compromise any claims for damage,destruction or loss thereunder unless the proposed amount of proceeds from suchclaims exceeds the then outstanding amount of the Obligations, and(B) each insurance company concerned is hereby authorized and directed tomake payment therefor directly to Beneficiary, to be applied, at Beneficiary’soption, to the Obligations then secured hereby, in such order as Beneficiarymay determine in its sole discretion. Unless otherwise required by law, such application to the Obligations byBeneficiary of such payments shall not, by itself, cure or waive any Event ofDefault hereunder or notice of default under this Deed of Trust or any otherLoan Document or invalidate any act done pursuant to such notice.

(b)           Ifno Event of Default hereunder has occurred and is continuing, and if suchproceeds are reasonably expected to be $50,000 or less, Trustor shall beentitled to receive all such proceeds and shall apply such proceeds to therestoration, replacement, and rebuilding of that portion of the Premises sodamaged, destroyed or lost to as nearly the same condition, character and valueas may have existed prior to such damage, destruction or loss, with suchchanges or alterations as may be required to conform to applicable law.

(c)           (i)            Ifsuch proceeds are reasonably expected to exceed $50,000 and if an Event ofDefault has not occurred hereunder and is not continuing, Beneficiary shallapply all such insurance proceeds to the restoration, replacement andrebuilding of the damaged portion of the Premises, and such restoration,replacement and rebuilding shall be accomplished, upon satisfaction of each andall of the following conditions: (i) except as provided in (ii) below, Beneficiary shall besatisfied that by the expenditure of such insurance proceeds the Premises willbe fully restored within a reasonable period of time to its value immediatelypreceding the loss or damage, free and clear of all liens and encumbrances,except the lien of this Deed of Trust, the Permitted Exceptions and the Future PermittedExceptions and such other liens as are specifically approved by Beneficiary inwriting under this Deed of Trust; (ii) in the event such proceeds shall beinsufficient to restore or rebuild the Premises, Trustor shall deposit promptlywith Beneficiary funds which, together with the insurance proceeds, shall besufficient in Beneficiary’s judgment to restore and rebuild the Premises;(iii) Trustor shall make reasonable efforts to obtain a waiver of theright of subrogation from any insurer under such policies of insurance who, atthat time, claims that liability exists as to Trustor or the then owner or theassured under such policies; (iv) the excess of such insurance proceedsabove the amount necessary to complete such restoration and compensate Trustorfor all other insured losses shall be applied on account of the Obligations(first to interest and other charges due under the Note, then to expensesreimbursable to Beneficiary and then to the principal amount due under the Notein inverse order of maturity); (v) Beneficiary reviews and approves inwriting the plans and specifications for the restoration work and Beneficiaryreceives written evidence satisfactory to Beneficiary that the same have beenapproved by all governmental authorities having jurisdiction; (vi) Trustorshall have furnished to Beneficiary, for Beneficiary’s approval, a detailedbudget and cost breakdown for said restoration work signed by Trustor anddescribing the nature and type of expenses and amounts thereof estimated byTrustor for said restoration work including, but not limited to, the cost ofmaterial and supplies, architect and designer fees, general contractors’ fees,and the anticipated monthly disbursement schedule, and Beneficiary shall havegiven to Trustor written approval of such budget and cost breakdown (if Trustordetermines at any time that its actual expenses differ or will differ from itsestimated budget, it will so advise Beneficiary promptly); (vii) Trustorhas delivered to Beneficiary evidence satisfactory to Beneficiary that allLeases existing at the time of the loss or damage will remain in full force andeffect subject only to abatement of rent in accordance with the terms of theLeases until completion of such repair and restoration, and (viii) inBeneficiary’s reasonable judgment, such restoration work can be completed atleast six (6) months prior to the maturity of the Note.

(ii)           Inthe event any of the conditions in Section 2.4.2(c)(i) are not orcannot be satisfied, then such insurance proceeds shall be disposed of asprovided in Section 2.4.2(a) above.

(iii)          Underno circumstances shall Beneficiary become obligated to take any action torestore the Premises; all proceeds released or applied by the Beneficiary tothe restoration of the Premises pursuant to the provisions of this Sectionshall be released and/or applied on the cost of restoration (including withinthe term “restoration” any repair, reconstruction or alteration) as suchrestoration progresses and upon the delivery to Beneficiary of such titleinsurance endorsements as Beneficiary may reasonably require, in amounts whichshall equal ninety percent (90%) of the amounts from time to time certified byan architect approved by Beneficiary to have been incurred in such restorationof any and all of the Premises (i.e., 90% of the total amount expended by thecontractor for the project under a contract approved by Beneficiary and billedby the contractor to Trustor) and performed by a contractor reasonablysatisfactory to Beneficiary and who shall furnish such corporate surety bond,if any, as may be reasonably required by Beneficiary, in accordance with theplans and specifications therefor approved by Beneficiary and the remaining tenpercent (10%) upon completion of such restoration and delivery to Beneficiaryof evidence reasonably satisfactory to Beneficiary that no mechanics’ lienexists with respect to the work of such restoration; that the restoration workhas been completed and fully paid for in accordance with plans andspecifications for said work approved by Beneficiary; and that all Leasesexisting at the time the loss or damage occurred are in full force and effectwith all tenants in possession and paying full rental under the Leases; andthat all governmental approvals required for the Premises have been obtainedand the same are in form and substance satisfactory to Beneficiary.

(iv)          Ifwithin a reasonable period of time after the occurrence of any loss or damageto the Premises, Trustor shall not have submitted to Beneficiary and receivedBeneficiary’s approval of plans and specifications for the repair, restorationor rebuilding of such loss or damage or shall not have obtained approval ofsuch plans and specifications from all governmental authorities whose approvalis required, or if, after such plans and specifications are approved byBeneficiary and by all such governmental authorities, Trustor shall fail tocommence promptly such repair, restoration or rebuilding, or if thereafterTrustor fails to carry out diligently such repair, restoration or rebuilding oris delinquent in the payment to mechanics, materialmen or others of the costsincurred in connection with such work, or if any other condition of thisSection is not satisfied within a reasonable period of time after the occurrenceof any such loss or damage, then Beneficiary may, in addition to all otherrights herein set forth, at Beneficiary’s option, (A) declare that anEvent of Default has occurred and/or dispose of such proceeds as provided in Section 2.4.2(a)above, and/or (B) Beneficiary, or any lawfully appointed receiver of thePremises may at their respective options, perform or cause to be performed suchrepair, restoration or rebuilding, and may take such other steps as they deemadvisable to carry out such repair, restoration or rebuilding, and may enterupon the Premises for any of the foregoing purposes, and Trustor hereby waives,for itself and all others holding under it, any claim against Beneficiary andsuch receiver (other than a claim based upon the alleged gross negligence orintentional misconduct of Beneficiary or any such receiver) arising out ofanything done by them or any of them pursuant to this Section and Beneficiarymay in its discretion apply any insurance or condemnation proceeds held by it toreimburse itself and/or such receiver for all amounts expended or incurred byit in connection with the performance of such work, including attorneys’ fees,and any excess costs shall be paid by Trustor to Beneficiary and Trustor’sobligation to pay such excess costs shall be secured by the lien of this Deedof Trust and shall bear interest at the Default Rate set forth in the Note,until paid.

(d)           Nothingherein, and no authority given to Trustor to repair, rebuild or restore thePremises or any portion thereof, shall be deemed to constitute Trustor theagent of Beneficiary for any purpose, or to create, either expressly or byimplication, any liens or claims or rights on behalf of laborers, mechanics,materialmen or other lien holders which could in any way be superior to thelien or claim of Beneficiary, or which could be construed as creating any thirdparty rights of any kind or nature to the insurance funds.  At reasonable times during the work ofrestoration, and upon reasonable notice, Beneficiary, either personally or byduly authorized agents, shall have the right to enter upon the Premises forinspection of the work.  Trustorexpressly assumes all risk of loss, including a decrease in the use, enjoymentor value, of the Premises from any casualty whatsoever, whether or notinsurable or insured against.

2.4.3        Effectof the Indebtedness.  Any reductionin the Obligations resulting from the application to the Obligations ofinsurance proceeds pursuant to this Section 2.4 shall be deemed totake effect only on the date of receipt by Beneficiary of such proceeds and theapplication of such proceeds to the Obligations; provided that if prior to thereceipt by Beneficiary of such proceeds, the Mortgaged Property shall have beensold on foreclosure of this Deed of Trust, or shall have been transferred bydeed in lieu of foreclosure of this Deed of Trust, notwithstanding anylimitation on Trustor’s liability contained herein or in the Note or the otherLoan Documents, Beneficiary shall have the right to receive the same to theextent of any deficiency following such sale or conveyance, together withattorneys’ fees and disbursements incurred by Trustee and Beneficiary inconnection with the collection thereof.

2.5           Condemnation.

2.5.1        Trustor'sObligations:  Proceedings.  Trustor, promptly upon obtaining knowledgeof any pending or threatened institution of any proceedings for thecondemnation of the Premises, or any part thereof or interest therein, or ofany right of eminent domain, or of any other proceedings arising out of injuryor damage to or decrease in the value of the Premises (including a change ingrade of any street), or any part thereof or interest therein (collectivelyreferred to herein as **“Condemnation”**),will notify Beneficiary of the threat or pendency thereof and the followingprovisions shall apply:

2.5.2        Beneficiary'sRights to Proceeds.  If the amountof all compensation, awards, proceeds and other payments or relief inconnection with such Condemnation, including, without limitation, proceeds ofsale in lieu of Condemnation, made or granted to Trustor (collectively the **“Proceeds”**) is reasonably expected to be inexcess of $50,000, all Proceeds and all judgments, decrees and awards forinjury or damage to the Premises are hereby assigned to Beneficiary and shallbe paid to Beneficiary to be held and disbursed as hereinafter set forth.  Trustor agrees to execute and deliver suchfurther assignments thereof as Beneficiary may request and authorizes Beneficiaryto collect and receive the same, to give receipts and acquittances therefor,and to appeal from any such judgment, decree or award unless the proposed oractual amount of such Proceeds exceeds the then outstanding amount of theObligations.

2.5.3        Applicationof Proceeds; Total Taking.  In theevent of a Condemnation of all or substantially all of the Premises or, withoutregard to the portion of the Premises subject to Condemnation, if an Event ofDefault shall have occurred hereunder and be continuing:

(a)           Beneficiaryshall be entitled to all Proceeds of such Condemnation made or granted toTrustor and shall be entitled, at Beneficiary’s option, to commence, appear inand prosecute in its own name any action or proceedings.  All such Proceeds shall be deemed assignedto Beneficiary to the extent of any sums then secured by this Deed of Trust,and Trustor agrees to execute such further assignments of the Proceeds asBeneficiary or Trustee may require.

(b)           Beneficiaryshall apply all such Proceeds, after deducting therefrom all costs and expenses(regardless of the particular nature thereof and whether incurred with orwithout suit), including reasonable attorneys’ fees, incurred by it inconnection with the collection of such Proceeds, to the Obligations secured bythis Deed of Trust, in such order as Beneficiary may determine in its solediscretion.  Unless otherwise requiredby applicable law, such application or release shall not, by itself, cure orwaive any Event of Default hereunder or notice of default under this Deed ofTrust or any other Loan Document or invalidate any act done pursuant to suchnotice.

2.5.4        Applicationof Proceeds; Partial Taking.  If anEvent of Default shall not have occurred hereunder and be continuing and in theevent of a Condemnation of less than all or substantially all of the Landand/or Improvements, the following provisions shall apply:

(a)           Inthe event that such Proceeds are in an amount less than $50,000, Trustor shallbe entitled to receive all such Proceeds and to apply such Proceeds to thepayment of the costs and expenses of repairing and restoring the Premises.

(b)           Inthe event that such Proceeds are in the amount of $50,000 or more, the Proceedsshall be paid to and shall be disbursed by Beneficiary in the same manner, forthe same purposes and subject to the same requirements as are applicable toinsurance proceeds pursuant to the provisions of Section 2.4.2(a)-(d)above.

2.5.5        Rightto Participate.  If:  (l) an Event of Default shall haveoccurred and be continuing hereunder; or (2) all or substantially all ofthe Premises have been taken by Condemnation and the Proceeds thereof arereasonably estimated to be equal to or less than the amount then due toBeneficiary by Trustor, Beneficiary shall have the right to settle, adjust orcompromise any claim in connection with a Condemnation of the Land and/orImprovements.  In the event of aCondemnation of less than all or substantially all of the Land and/orImprovements and if an Event of Default shall not have occurred hereunder andbe continuing then:  (A) Trustormay settle, adjust or compromise any claim which is reasonably expected to bein an amount less than $50,000; and (B) with respect to any claim which isreasonably expected to be in the amount of $50,000 or more, Beneficiary andTrustor shall each consult and cooperate with the other and each shall beentitled to participate in all meetings and negotiations with respect to thesettlement of such claim.  Trustor atits expense shall deliver to Beneficiary copies of all papers served inconnection with such Condemnation.  Anyadjustment or settlement by Trustor of any claim which is in an amount inexcess of $50,000 shall be subject to the approval of Beneficiary.

2.5.6        Effecton the Indebtedness. Notwithstanding any Condemnation, taking or other proceeding referred toin this Section causing injury to or decrease in value of the Premises(including a change in grade of any street), or any interest therein, Trustorshall continue to pay and perform the Obligations as provided herein.  Any reduction in the Obligations resultingfrom the application to the Obligations of any proceeds, judgments, decrees orawards pursuant to Section 2.5.3 or 2.5.4 shall be deemed totake effect only on the date of receipt by Beneficiary of such proceeds,judgments, decrees or awards and their application against the Obligations, andthe amount of all installment payments of the Obligations which thereafterbecome due shall be reduced and recalculated pro rata; provided that if priorto the receipt by Beneficiary of such proceeds, judgments, decrees or awardsthe Mortgaged Property shall have been sold on foreclosure of this Deed ofTrust, or shall have been transferred by deed in lieu of foreclosure of thisDeed of Trust, Beneficiary shall have the right to receive the same to theextent of any deficiency following such sale, with legal interest thereontogether with attorneys’ fees and disbursements incurred by Trustee andBeneficiary in connection with the collection thereof.

2.6           Liensand Liabilities.

2.6.1        Dischargeof Liens.  Trustor will pay, bond orotherwise discharge, from time to time when the same shall become due, allclaims and demands of mechanics, materialmen, laborers and others which, ifunpaid, might result in, or permit the creation of, a lien on the Land and/orthe Improvements, or on the revenues, rents, issues, income or profits arisingtherefrom and, in general, Trustor shall do, or cause to be done, at Trustor’ssole cost and expense, everything necessary to fully preserve the lien andpriority of this Deed of Trust; provided, however, that Trustor shall not beobligated to pay, bond or discharge such claim or demand if payment is not yetdue under the contract which is the foundation of such claim or demand; andprovided further that so long as an Event of Default shall not have occurredand be continuing hereunder, Trustor shall have the right to contest or objectto the amount or validity of any such claim and demand by appropriateadministrative or judicial proceedings, in which event, the following provisionsshall apply:

(a)           Trustorshall give Beneficiary written notice of Trustor’s intent to so contest orobject to such claim or demand.

(b)           Trustorshall thereafter diligently proceed to cause such claim or demand to be removedand discharged.

(c)           Trustor,if requested by Beneficiary, shall deposit with Beneficiary a bond or otherassurance reasonably satisfactory to Beneficiary in such amounts as Beneficiaryshall reasonably require, but not more than 150% of the amount of the claim(s)or demand(s) plus costs, expenses, including reasonable attorneys’ fees, andinterest.

2.6.2        Creationof Liens.  Except as otherwise setforth herein, Trustor will not, without Beneficiary’s consent, create, place orpermit to be created or placed, or through any act or failure to act, acquiescein the placing of, or allow to remain, any deed of trust, mortgage, voluntaryor involuntary lien, whether statutory, constitutional or contractual (exceptfor Impositions (as hereinafter defined) which are not yet due and payable),security interest, encumbrance or charge, or conditional sale or other titleretention document, against or covering the Land and/or the Improvements, priorto, on a parity with or subordinate to the lien of this Deed of Trust.  If any of the foregoing becomes attached tothe Land and/or the Improvements without such consent, Trustor will promptlycause the same to be discharged and released.

2.6.3        NoConsent.  Nothing in the LoanDocuments shall be deemed or construed in any way as constituting the consentor request by Trustee or Beneficiary, express or implied, to any contractor,subcontractor, laborer, mechanic or materialman for the performance of anylabor or the furnishing of any material for any improvement, construction,alteration or repair of the Land and/or the Improvements.  Trustor further agrees that neither Trusteenor Beneficiary stands in any fiduciary relationship to Trustor.

2.7           Taxesand Other Charges.

2.7.1        Taxeson the Premises.  Trustor will payprior to delinquency, all taxes, assessments, water and sewer rents, rates,charges and assessments, levies, permits, inspection and license fees and othergovernmental and quasi-governmental charges, general and special, ordinary andextraordinary, foreseen and unforeseen, heretofore or hereafter assessed,levied or otherwise imposed against or upon, or which may become a lien upon,the Premises, the revenues, rents, issues, income and profits of the Premisesor arising in respect of the occupancy, use or possession thereof (collectively,**“Impositions”**).  Trustor will also pay any penalty, interestor cost for non-payment of Impositions which may become due and payable, andsuch penalties, interest or cost shall be included within the term Impositions.

2.7.2        Receipts.  Unless Trustor is making monthly depositspursuant to Section 2.8 or unless Beneficiary otherwise directs,Trustor will furnish to Trustee and Beneficiary upon Trustee’s or Beneficiary’srequest, proof of payment at the time same is made, and thereafter, uponreceipt, validated receipts showing payment in full of all Impositions.

2.7.3        Incomeand Other Taxes Imposed on Trustor. Trustor will promptly pay all income, franchise and other taxes owing byTrustor the nonpayment of which would result in a lien against the Premises orotherwise diminish or impair the security of this Deed of Trust, and any stamptaxes which may be required to be paid in connection with this Deed of Trust,together with any interest or penalties thereon.

2.7.4        RecordingFees and Other Taxes Imposed on Trustee or Beneficiary.  Trustor will pay any and all taxes, charges,filing, registration and recording fees (other than income, franchise, license,withholding and doing business taxes), imposed upon Trustee or Beneficiary byreason of or in connection with the execution, delivery and/or recording of theLoan Documents or the ownership of this Deed of Trust or any instrumentsupplemental hereto, any security instrument with respect to any Equipment orany instrument of further assurance, and shall pay all corporate stamp taxesrequired to be paid in connection with the Obligations.

2.7.5        Reimbursementfor Certain Taxes and Costs.  In theevent of the enactment of or change in (including a change in interpretationof) any applicable law (1) deducting or allowing Trustor to deduct fromthe value of the Premises for the purpose of taxation any lien or securityinterest thereon, or (2) subjecting Trustee and/or Beneficiary to any taxmeasured by or based on in whole or in part the indebtedness secured hereby, andthe result is to increase the taxes imposed upon Trustee and/or Beneficiary orto reduce the amount of any payments receivable hereunder, then, and in anysuch event, Trustor shall, on demand, payto Trustee and Beneficiary additional amounts to compensate for such increasedcosts or reduced amounts, provided that Trustor shall have the right to prepaythe Obligations, or any portion thereof, in accordance with the provisions ofthe Note, and, provided, further, that if any such payment or reimbursement shallbe unlawful or would constitute usury or render the Obligations wholly orpartially usurious under applicable law, then Beneficiary may, at its option,declare the Obligations immediately due and payable or require Trustor to payor reimburse Trustee and Beneficiary for payment of the lawful and non-usuriousportion thereof.

2.7.6        Rightto Contest Taxes.  Notwithstandinganything set forth herein, so long as an Event of Default shall not haveoccurred hereunder and be continuing, Trustor shall have the right to contestor object to the amount or validity of any Imposition by appropriate legalproceedings so long as (i) Trustor notifies Beneficiary of Trustor’sintent to contest such Imposition; (ii) Trustor shall provide Beneficiarywith evidence reasonably satisfactory to Beneficiary that such proceedingsshall operate to prevent the sale of the Mortgaged Property or any portionthereof; (iii) Trustor shall have furnished Beneficiary with a bond orother assurances reasonably satisfactory to Beneficiary sufficient to satisfysuch Imposition; and (iv) upon any final determination of such contestwhich is not appealable or is not being appealed by Trustor, Trustor shall paythe amount of such Imposition then due.

2.8           Taxand Insurance Deposits.

2.8.1        Amountof Deposits.  Upon the occurrence ofan Event of Default hereunder, and during the continuance thereof, in order tomore fully protect the security herein described, Beneficiary may at any timerequire that Trustor thereafter deposit and Trustor shall thereafter depositeach month with Beneficiary or any loan servicer or financial institutionpursuant to Section 2.8.5 (the **“Depository”**),an amount equal to one-twelfth (1/12) of the estimated annual(i) Impositions; (ii) premiums for insurance required under Section 2.3;and (iii) other charges imposed upon the Land and/or theImprovements.  In addition, if requiredby Beneficiary, Trustor shall also deposit with the Beneficiary or Depository,as Beneficiary may direct, a sum of money which, together with the aforesaidmonthly installments, will be sufficient to make each of said payments ofinsurance premiums at least thirty (30) days before such payments are due.  If the amount of any such payments is notascertainable at the time any such deposit is required to be made, the depositshall be made on the basis of Beneficiary’s reasonable estimate thereof, and,when such amount becomes fixed for the then current year, Trustor shallpromptly deposit any deficiency with Beneficiary or the Depository, as Beneficiaryshall direct.

2.8.2        Useof Deposits.  Funds so depositedshall, until so applied, constitute additional security for the Obligations(provided that such funds shall only be used to pay Impositions and premiumsfor insurance required under Section 2.3), shall be held byBeneficiary or the Depository free of trust and without interest (except to theextent required by applicable law), may be commingled with other funds ofBeneficiary or the Depository, and shall be applied in payment of the aforesaidamounts prior to their becoming delinquent, but only to the extent thatBeneficiary or the Depository shall have such funds on hand, provided thatBeneficiary or the Depository shall have no obligation to use said funds to pay(i) any installment or Impositions prior to the last day on which paymentthereof may be made without penalty or interest or to pay any insurance premiumprior to the due date thereof, or (ii) any of the aforesaid amounts unlessTrustor shall have furnished Beneficiary (and the Depository, if applicable),the bills or invoices therefor in sufficient time to pay the same before anypenalty or interest attaches and before said policies of insurance lapse, asthe case may be.

2.8.3        Transferof Deed of Trust.  Upon anassignment or other transfer of this Deed of Trust, Beneficiary or Depositoryshall notify Trustor and shall pay over the balance of such deposits in itspossession to the assignee or other successor, and Beneficiary or theDepository shall thereupon be completely released from all liability withrespect to such deposits and Trustor or the owner of the Premises shall looksolely to the assignee or transferee with respect thereto.  This provision shall apply to every transferof such deposits to a new assignee or transferee.

2.8.4        Transferof the Premises.  Subject to Article 5hereof, transfer of record title to the Premises or any portion thereof shallautomatically transfer to the new owner the beneficial interest in any depositsunder this Section.  Upon full paymentand satisfaction of this Deed of Trust or, at Beneficiary’s option, at anyprior time, the balance of amounts deposited in the Beneficiary’s or theDepository’s possession shall be paid over to the record owner of the Premises,and no other party shall have any right or claim thereto in any event.

2.8.5        Depository.  At Beneficiary’s request, Trustor agreesthat in lieu of Beneficiary’s holding such deposits, Trustor shall, atTrustor’s expense, make the aforesaid deposits with such mortgage banker, bankor financial institution doing business in Texas as Beneficiary may from timeto time designate.

2.9           Inspection.  Subject to compliance by Beneficiary and/orTrustee with any provisions of the Leases or of applicable law establishing thesecurity of certain work areas on the Premises, Trustor will allow Trustee andBeneficiary and their authorized representatives to enter upon and inspect thePremises at all reasonable times and upon reasonable notice to provideassurance that Trustor is in compliance with Section 2.2 hereof,and will assist Trustee, Beneficiary and such representatives in effecting saidinspection.

2.10         EstoppelCertificates.  Trustor, within ten(10) days after Beneficiary’s request, shall furnish to Beneficiary a writtenstatement, duly acknowledged, certifying to Beneficiary and/or any proposedassignee of Beneficiary’s interest in this Deed of Trust, and/or any otherparty designated by Beneficiary, as to (a) the amount of the Obligationsthen owing under this Deed of Trust, (b) the terms of payment and maturitydate of the Obligations, (c) the date to which interest has been paidunder the Note, (d) whether any offsets or defenses exist against theObligations and, if any are alleged to exist, a detailed description thereof,(e) a certified current rent roll of the Property, (f) the date towhich the Rent, additional rent and other charges under the Leases have beenpaid, (g) whether or not any of the tenants under the Leases are indefault under the Leases, and, if any of the tenants are in default, settingforth the specific nature of all such default, and (h) as to any othermatters reasonably requested by Beneficiary and reasonably related to theLeases, the Obligations, the Mortgaged Property or this Deed of Trust.

ARTICLE 3ASSIGNMENT OF RENTS AND OTHER SUMS UNDER THE LEASES

3.1           DeletedIntentionally.

ARTICLE4ADDITIONAL ADVANCES; EXPENSES; INDEMNITY

4.1           AdditionalAdvances and Disbursements.  Trustoragrees that if an Event of Default occurs hereunder and is continuing withrespect to any obligations hereunder to pay any amount or to perform anyaction, including, without limitation, its obligation under Section 2.7to pay Impositions and under Section 2.3 to procure, maintain andpay premiums on the insurance policies referred to therein, then Trustee and/orBeneficiary shall have the right, but not the obligation, in Trustor’s name orin its or their own name, and without notice to Trustor, to advance all or anypart of such amounts or to perform any or all such actions, and, for suchpurpose, Trustor expressly grants to Trustee and Beneficiary, in addition andwithout prejudice to any other rights and remedies hereunder, the right toenter upon and take possession of the Premises in accordance with applicablelaw to such extent and as often as either of them may deem necessary ordesirable to prevent or remedy any such default.  Except as otherwise provided by law, no such advance orperformance shall be deemed to have cured such default by Trustor or any Eventof Default with respect thereto.  Allsums advanced and all expenses incurred by Trustee and/or Beneficiary inconnection with such advances or actions, and all other sums advanced orexpenses incurred by Beneficiary hereunder or under applicable law (whetherrequired or optional and whether indemnified hereunder or not) shall be part ofthe Obligations, shall bear interest at the Default Rate from the date ofdisbursement until paid (as defined in the Note) and shall be secured by thisDeed of Trust.  Trustee and/orBeneficiary, upon making any such advance, shall be subrogated to all of therights of the person receiving such advance.

4.2           OtherExpenses.

4.2.1        Trustorwill pay or, on demand, reimburse Trustee and Beneficiary for the payment of,all recording and filing fees, abstract fees, title insurance premiums andfees, Uniform Commercial Code search fees, escrow fees, reasonable attorneys’fees and disbursements and all other reasonable costs and expenses incurred byTrustor, Trustee and/or Beneficiary in connection with the granting,administration, enforcement and closing (including the preparation of the LoanDocuments) of the transactions contemplated hereunder or under the other LoanDocuments, or otherwise attributable or chargeable to Trustor as owner of theMortgaged Property.  Notwithstandinganything to the contrary contained herein in this Section 4.2.1,the provisions of this Section 4.2 shall not be deemed or construedto authorize Beneficiary to undertake, exercise or perform any action in theadministration of the transactions contemplated hereunder not otherwise(i) authorized by the terms of this Deed of Trust or the Loan Documents or(ii) permitted under applicable law to be undertaken, exercised orperformed by a trust deed beneficiary to protect the security afforded by adeed of trust upon real property.

4.2.2        Trustorwill pay or, on demand, reimburse Trustee and Beneficiary for the payment ofany costs or expenses (including attorneys’ fees and disbursements) incurred orexpended in connection with or incidental to (i) any default or Event ofDefault by Trustor hereunder or under the Loan Documents or (ii) theexercise or enforcement by or on behalf of Trustee and/or Beneficiary of any oftheir rights or remedies or Trustor’s obligations under this Deed of Trust orunder the other Loan Documents, including the enforcement, compromise orsettlement of this Deed of Trust or the Obligations or the defense or assertionof the rights and claims of Trustee and Beneficiary hereunder in respectthereof, by litigation or otherwise. All of the foregoing costs and expenses must be paid to Beneficiary aspart of any reinstatement tendered under this Deed of Trust.

4.3           Indemnity.

4.3.1        Trustoragrees to indemnify and hold harmless Trustee and Beneficiary from and againstany and all losses, liabilities, suits, obligations, fines, damages, judgments,penalties, claims, charges, costs and expenses (including attorneys’ fees anddisbursements) which may be imposed on, incurred or paid by or asserted againstTrustee and/or Beneficiary by reason or on account of, or in connection with,(i) any willful misconduct of Trustor or any default or Event of Defaultby Trustor hereunder or under the other Loan Documents, (ii) Trustee’sand/or Beneficiary’s good faith and commercially reasonable exercise of any oftheir rights and remedies, or the performance of any of their duties, hereunderor under the other Loan Documents to which Trustor is a party, (iii) theconstruction, reconstruction or alteration of the Premises, (iv) any negligenceof Trustor, or any negligence or willful misconduct of any lessee of thePremises, or any of their respective agents, contractors, subcontractors,servants, employees, licensees or invitees, or (v) any accident, injury,death or damage to any person or property occurring in, on or about thePremises or any street, drive, sidewalk, curb or passageway adjacent thereto,except for the willful misconduct or gross negligence of the indemnifiedperson.  Any amount payable to Trusteeor Beneficiary under this Section 4.3 shall be due and payablewithin ten (10) days after demand therefor and receipt by Trustor of astatement from Trustee, Beneficiary and/or counsel for Beneficiary settingforth in reasonable detail the amount claimed and the basis therefor, and suchamounts shall bear interest at the Default Rate (as defined in the Note) fromand after the date such amounts are paid by Beneficiary or Trustee until paidin full by Trustor.

4.3.2        Trustor’sobligations under this Section shall not be affected by the absence orunavailability of insurance covering the same or by the failure or refusal byany insurance carrier to perform any obligation on its part under any suchpolicy of covering insurance.  If anyclaim, action or proceeding is made or brought against Trustee and/orBeneficiary which is subject to the indemnity set forth in this Section,Trustor shall resist or defend against the same, if necessary in the name ofTrustee and/or Beneficiary, by attorneys for Trustor’s insurance carrier (ifthe same is covered by insurance) or otherwise by attorneys approved byBeneficiary.  Notwithstanding theforegoing, Trustee and Beneficiary, in their discretion, may engage their ownattorneys to resist or defend, or assist therein, and Trustor shall pay, or, ondemand, shall reimburse Trustee and Beneficiary for the payment of, thereasonable fees and disbursements of said attorneys.

4.3.3        Trustorshall indemnify and save and hold harmless Beneficiary and its successors andassigns for, from and against all claims, liabilities, proceedings, suits,losses, damages (including punitive damages), judgments and environmentalresponse and clean-up costs, fines, penalties and expenses (includingreasonable counsel fees, costs and expenses incurred in investigating anddefending against the assertion of any such liabilities, regardless of theirmerit), which may be asserted against, sustained, suffered or incurred byBeneficiary or its successors and assigns because of the existence of any toxicor hazardous material, substance, waste, pollutant or contaminant or arisingfrom any other violation of any governmental law, regulation or requirement nowor hereafter in effect relating to human health or the safety or protection ofthe environment.  This indemnity shallinclude claims asserted by any federal, state or local governmental agency orany private party and shall continue in effect following any release andreconveyance of this Deed of Trust or foreclosure or other realization upon thesecurity by Beneficiary or its successors and assigns, or any conveyance inlieu of such foreclosure or other realization.

ARTICLE 5SALE OR TRANSFER OF THE PREMISES

5.1           ContinuousOwnership:  Due on Sale Clause.

5.1.1        Trustoracknowledges that the continuous ownership of the Premises by Trustor is amaterial inducement to Beneficiary’s agreement to enter into the transactionshereinabove described and Beneficiary’s agreement in connection with theObligations.  Trustor agrees that,except as otherwise provided herein or in the other Loan Documents, Trustorwill not, whether voluntarily or involuntarily, (w) sell, grant, convey,assign, further encumber, otherwise transfer by operation of law or otherwise(collectively, **“Transfer”**),(x) permit to be the subject of a Transfer, (y) enter into an agreementto Transfer, or (z) grant an option which or take any action whichpursuant to the terms of any agreement to which Trustor is a party may resultin a Transfer of, the Land or the Improvements, or any legal, beneficial orequitable interest therein.

Any person or legal representative of Trustor to whomTrustor’s interest in the Premises passes by operation of law, or otherwise,shall be bound by the provisions of this Deed of Trust.

5.1.2        Theprovisions of this Section shall apply to each and every such Transfer of allor any portion of the Premises or any legal or equitable interest therein,regardless of whether or not Beneficiary has consented to, or waived by itsaction or inaction its rights hereunder with respect to any previous Transferof all or any portion of the Premises or any legal or equitable interesttherein.

5.1.3        Inthe event that Trustor shall Transfer the Premises or any legal, beneficial orequitable interest therein, or cause or permit to occur any of the othertransactions described in Section 5.1.1, without Beneficiary’sprior written consent, Beneficiary may elect to declare the Obligations,together with any other sums secured hereby, immediately due and payable.  Beneficiary may withhold its consent to anyproposed Transfer for any reason, including the failure of the prospectivetransferee of the Premises to reach an agreement in writing with Beneficiaryincreasing the interest payable on the Obligations to such rate as Beneficiaryshall request.

ARTICLE6DEFAULTS AND REMEDIES

6.1           Eventsof Default.  The term **“Event of Default”**, as used in this Deed ofTrust, shall mean the occurrence of any of the following events (after anyapplicable notice to Trustor and the expiration of any applicable period ofgrace specifically set forth herein or in any written agreement between Trustorand Beneficiary):

6.1.1        Trustorshall fail to make any payment (whether of principal, interest, expenses, feesor otherwise) required to be made to Beneficiary under the Note, this Deed ofTrust, or any of the other Loan Documents when due, whether by acceleration orotherwise; or

6.1.2        Anyrepresentation, warranty or statement made by Trustor (or any of itsrepresentatives) in this Deed of Trust or in any other Loan Document or in anycertificate or other document delivered under any of the Loan Documents or inany application or commitment for the loan evidenced by the Note shall havebeen incorrect in any material respect when made; or

6.1.3        Anyone or more of the following occurs with respect to Trustor, any guarantor ofthe Obligations or any other person liable for any of the Obligations:

(a)           Ageneral assignment by any such person for the benefit of creditors; or

(b)           Thefiling of a voluntary petition in bankruptcy, insolvency, reorganization, orliquidation, or any other petition under any section or chapter of theBankruptcy Code or any similar law, whether state, federal, or otherwise, forthe relief of debtors; or

(c)           Thefiling of any involuntary petition or any other petition against any suchperson under any section or chapter of the Bankruptcy Code, or any similar law,whether state, federal, or otherwise, relating to insolvency, reorganization,or liquidation, or for the relief of debtors, by the creditors of such person,said petition remaining undischarged for a period of ninety (90) days; or

(d)           Theappointment by any court of a receiver or similar official to take possessionof the Premises (or any portion thereof) or any property or any asset or assetsof any such person, said receivership remaining undischarged for a period ofninety (90) days; or

(e)           Theapplication by any such person or the consent or acquiescence by any suchperson to an application for the appointment of a custodian, receiver,conservator, trustee, or similar official for such person or for a substantialpart of the property or business of any of them; or

(f)            Attachment,execution or judicial seizure (whether by enforcement of money judgment, bywrit or warrant of attachment, or by any other process) of the Premises or of allor any part of the assets of any such person, such attachment, execution orother seizure remaining undismissed or undischarged for a period of ninety (90)days after the levy thereof, or, in any event, later than five (5) days priorto the date of any proposed sale thereunder; or

(g)           Theadmission in writing by any such person of its inability to pay its debts orperform its obligations as they become due; or

(h)           Thecalling of a meeting of the creditors representing a significant portion of theliabilities of any such person, for the purpose of effecting a moratorium,extension or composition of debt or any of the foregoing; or

6.1.4        Trustorshall fail to pay any indebtedness in excess of $50,000.00 (other than theObligations) or interest thereon when due (whether by scheduled maturity,required prepayment, acceleration, demand or otherwise)and such failure shallcontinue after the applicable grace period, if any specified in the agreementor instrument relating to such indebtedness that results in acceleration ofsuch indebtedness; or any other event of default shall occur under anyagreement, instrument or other document relating to any such indebtedness ifthe effect of such default is to be accelerated, or permit the acceleration of,the maturity of such indebtedness provided however that the waiver or cure ofsuch event of default under such other agreement shall and be deemed to cureany Event of Default resulting therefrom; or

6.1.5        Anyjudgment or order for the payment of money in excess of $50,000.00 shall berendered against Trustor and either (i) enforcement, collection, executionor levy proceedings shall have been commenced on such judgment, or(ii) there shall be any period of thirty (30) consecutive days duringwhich a stay of enforcement of such judgment or order, by reason of supersedes,bond or otherwise, shall not be in effect; or

6.1.6        Anyof the Loan Documents shall, as a result of any action taken by Trustor, ceaseto create a valid and perfected first priority lien upon any of the securitypurported to be covered thereby; or

6.1.7        Theoccurrence of a default in the performance or observation of any otherprovisions of this Deed of Trust or of any of the other Loan Documents; or

6.1.8        Trustorabandons the Premises or ceases to do business or terminates its business forany reason whatsoever; or

6.1.9        Trustorshall fail at any time to obtain, provide, maintain, keep in force or deliverto Trustee or Beneficiary the insurance policies required by Section 2.3hereof and such failure shall continue for five (5) days after writtennotice; or

6.1.10      Anyclaim of priority as to this Deed of Trust or any other document or instrumentsecuring the Obligations by title, lien or otherwise shall be upheld by anycourt of competent jurisdiction or shall be consented to by Trustor, unlessBeneficiary shall have received full payment for the entire loss resulting fromsuch claim; or

6.1.11      Thefiling of formal charges against Trustor under any federal or state law for theviolation of which law the forfeiture of any property of Trustor is a potentialpenalty.

6.2           Remedies.  Upon the occurrence and during thecontinuance of any one or more Events of Default, Trustee and/or Beneficiarymay (but shall not be obligated), in addition to any rights or remediesavailable to them hereunder or under the other Loan Documents, take such actionpersonally or by their agents or attorneys, with or without entry, and withoutnotice, demand, presentment or protest (each and all of which are hereby waivedto the extent permitted by law) as they deem necessary or advisable to protectand enforce Beneficiary’s rights and remedies against Trustor and in and to theMortgaged Property, including the following actions, each of which may bepursued concurrently or otherwise, at such time and in such order as Trusteeand/or Beneficiary may determine, in their sole discretion, without impairingor otherwise affecting its or their other rights or remedies:

(a)           Beneficiary may declare theObligations, including the then unpaid principal balance on the Note, theaccrued but unpaid interest thereon, court costs and attorney's fees hereunderimmediately due and payable, without notice, presentment, protest, demand oraction of any nature whatsoever (each of which hereby is expressly waived byTrustor), whereupon the same shall become immediately due and payable.  Additionally, Beneficiary shall not berequired to make any further advances on the Note or other Loan Documents uponthe occurrence of an Event of Default or an event which, with the giving ofnotice or passing of time, would constitute an Event of Default.

 

(b)           Beneficiary may enter upon theMortgaged Property and take exclusive possession thereof and of all books,records and accounts relating thereto without notice and without being guiltyof trespass, and hold, lease, manage, operate or otherwise use or permit theuse of the Mortgaged Property, either itself or by other persons, firms orentities, in such manner, for such time and upon such other terms asBeneficiary may deem to be prudent and reasonable under the circumstances(making such repairs, alterations, additions and improvements thereto andtaking any and all other action with reference thereto, from time to time, asBeneficiary shall deem necessary or desirable), and apply all rents and otheramounts collected by Beneficiary in connection therewith in accordance with theprovisions of subsection (h) of this Section 6.2.  Trustor hereby irrevocably appointsBeneficiary as the agent and attorney–in–fact of Trustor, with fullpower of substitution, and in the name of Trustor, if Beneficiary elects to doso, to (i) endorse the name of Trustor on any checks or drafts representingproceeds of the insurance policies, or other checks or instruments payable toTrustor with respect to the Mortgaged Property, (ii) prosecute or defend anyaction or proceeding incident to the Mortgaged Property, and (iii) take anyaction with respect to the Mortgaged Property that Beneficiary may at any timeand from time to time deem necessary or appropriate.  Beneficiary shall have no obligation to undertake any of the foregoing actions, and if Beneficiaryshould do so, it shall have no liability to Trustor for the sufficiency oradequacy of any such actions taken by Beneficiary.

 

(c)           (i)            Beneficiarymay, by and through Trustee, or otherwise, sell or offer for sale the MortgagedProperty in such portions, order and parcels as Beneficiary may determine, withor without having first taken possession of same, to the highest bidder forcash at public auction in accordance with the requirements of Section 51.002 ofthe Texas Property Code.  In instanceswhere the Mortgaged Property is located in the State of Texas, such sale shallbe made at the courthouse of the county in which the Mortgaged Property (or anyof that portion thereof to be sold) is located, whether the parts or parcelsthereof, if any, in different counties are contiguous or not (and without thenecessity of having any personal property present at such sale) in the areadesignated by the county commissioners for foreclosure sales (or, if no areahas been designated, at the location at the courthouse designated byBeneficiary by or through Trustee in the written notice hereinafter described)on the first Tuesday of a 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 theMortgaged Property to be sold by posting or causing to be posted written orprinted notice thereof at least twenty-one (21) days before the date of the saleboth at the courthouse door of each county in which the Mortgaged Property islocated and with the county clerk of each county in which the MortgagedProperty is located, which notice shall be posted at the courthouse door andfiled with the county clerk by the Trustee, or by any person acting forhim.  The written notice shall includethe earliest time at which the sale will be held.  Beneficiary shall serve, or shall cause to be served at leasttwenty-one (21) days before the date of sale, written or printed notice of theproposed sale by certified mail on each debtor obligated to pay theIndebtedness according to the records of Beneficiary by the deposit of suchnotice in the United States mail, postage prepaid and addressed to each debtorat such debtor's last known address as shown by the records ofBeneficiary.  The affidavit of a personknowledgeable of the facts to the effect that service was completed is primafacie evidence of service.

 

(ii)           Beneficiary, may, at its option,accomplish all or any of the aforesaid in such manner as permitted or requiredby Section 51.002 of the Texas Property Code relating to the sale of realproperty or by Chapter 9 of the Texas Business and Commerce Code relating tothe sale of personalty after default by a debtor  (as said section and chapter now exist or may be hereinafteramended or succeeded), or by any other present or subsequent articles orenactments relating to same.  At any suchsale:

 

A.            whether made under the power hereincontained, the aforesaid Section 51.002, the Texas Business and Commerce Code,any other legal requirement or by virtue of any judicial proceedings or anyother legal right, remedy or recourse, it shall not be necessary forTrustee  to have been physicallypresent, or to have constructive possession of, the Mortgaged Property (Trustorshall deliver to Trustee any portion of the Mortgaged Property not actually orconstructively possessed by Trustee immediately upon demand by Trustee), andthe title to and right of possession of any such property shall pass to thepurchaser thereof as completely as if the same had been actually present anddelivered to purchaser at such sale;

 

B.            each instrument of conveyance executed by Trustee shallcontain a general warranty of title, binding upon Trustor;

C.            each and every recital contained inany instrument of conveyance made by Trustee shall conclusively establish thetruth and accuracy of the matters recited therein, including, withoutlimitation, nonpayment of the Obligations, advertisement and conduct of suchsale in the manner provided herein and otherwise by law and appointment of anysuccessor Trustee hereunder;

 

D.            any and all prerequisites to thevalidity thereof shall be conclusively presumed to have been performed;

 

E.             the receipt by Trustee or of suchother party or officer making the sale of the full amount of the purchase moneyshall be sufficient to discharge the purchaser or purchasers from any furtherobligation for the payment thereof, and no such purchaser or purchasers, or hisor their assigns or personal representatives, shall thereafter be obligated tosee to the application of such purchase money or be in any way answerable forany loss, misapplication or nonapplication thereof;

 

F.             to the fullest extent permitted bylaw, Trustor shall be completely and irrevocably divested of all of its right,title, interest, claim and demand whatsoever, either  at law or in equity, in and to the property sold, and such saleshall be a perpetual bar, both at law and in equity, against Trustor and againstall other persons claiming or to claim the property sold or any part thereofby, through or under Trustor; and

 

G.            to the extent and under such circumstances as arepermitted by law, Beneficiary may be a purchaser at any such sale. After saleof the Mortgaged Property, or any portion thereof, Trustor will be divested ofany and all interest and claim thereto, including any interest or claim to allinsurance policies, bonds, loan commitments and other intangible propertycovered hereby.  Additionally, Trustorwill be considered a tenant at sufferance of the purchaser of the MortgagedProperty, and said purchaser shall be entitled to immediate possession thereof,and if Trustor shall fail to vacate the Mortgaged Property immediately, thepurchaser may and shall have the right, without further notice to Trustor, togo into any justice court in any precinct or county in which the MortgagedProperty is located and file an action in forcible entry and detainer, whichaction shall lie against Trustor or its assigns or legal representatives, as atenant at sufferance. This remedy is cumulative of any and all remedies thepurchaser may have hereunder or otherwise.

 

(d)           Upon, or at any time after,commencement of foreclosure of the lien and security interest provided forherein or any legal proceedings hereunder, Beneficiary may make application toa court of competent jurisdiction, as a matter of strict right and withoutnotice to Trustor or regard to the adequacy of the Mortgaged Property for therepayment of the Obligations, for appointment of a receiver of the MortgagedProperty, and Trustor does hereby irrevocably consent to such appointment.  Any such receiver shall have all the usualpowers and duties of receivers in similar cases, including the full power torent, maintain and otherwise operate the Mortgaged Property upon such terms asmay be approved by the court, and shall apply such Rents in accordance with theprovisions of subsection (h) of this Section 6.2.

 

(ii)           Beneficiary may exercise any and allother rights, remedies and recourses granted under the Loan Documents or now orhereafter existing in equity, at law, by virtue of statute or otherwise.

 

                                (e)           Trustee and Beneficiary shall haveall rights, remedies and recourses granted in the Loan Documents and availableat law or equity (including specifically those granted by the Texas Businessand Commerce Code in effect and applicable to the Property or any portionthereof) and the same (i) shall be cumulative and concurrent; (ii) may bepursued separately, successively or concurrently against Trustor, any guarantorof the Obligations or others obligated under the Note, or against the MortgagedProperty, or against any one or more of them at the sole discretion ofBeneficiary; (iii) may be exercised as often as occasion therefor shall arise,it being agreed by Trustor that the exercise or failure to exercise any of thesame shall in no event be construed as a waiver or release thereof or of anyother right, remedy or recourse; and (iv) are intended to be, and shall be,nonexclusive.

 

                                (f)            To the fullest extent permitted bylaw, Trustor hereby irrevocably and unconditionally waives and releases (i) allbenefits that might accrue to Trustor by any present or future laws exemptingthe Property from attachment, levy or sale on execution or providing for anyappraisement, valuation, stay of execution, exemption from civil process,redemption or extension of time for payment; (ii) all notices of any Event ofDefault (except as may be specifically provided for under the terms hereof),presentment, demand, notice of intent to accelerate, notice of acceleration andany other notice of Beneficiary's or Trustee's election to exercise or theactual exercise of any right, remedy or recourse provided for under the LoanDocuments; (iii) any right to appraisal or marshalling of assets or a sale ininverse order of alienation; (iv) the exemption of homestead; and (v) theadministration of estates of decedents, or other matter to defeat, reduce oraffect the right of Beneficiary under the terms of this Instrument to sell theMortgaged Property for the collection of the Obligations secured hereby(without any prior or different resort for collection) or the right ofBeneficiary, under the terms of this Instrument, to receive the payment of theIndebtedness out of the proceeds of sale of the Property in preference to everyother person and claimant whatever (only reasonable expenses of such sale beingfirst deducted).  Trustor expressly waivesand relinquishes any right or remedy which it may have or be able to assert byreason of the provisions of Chapter 34 of the Texas Business and Commerce Codepertaining to the rights and remedies of sureties.

 

                                (g)           Trustor, any guarantor of theObligations, and any other party liable on the Obligations shall be liable forany deficiency remaining in the Obligations subsequent to any sale referencedin this Section 6.2.

 

                                (h)           Beneficiary shall have the right tobecome the purchaser at any sale of the Property hereunder and shall have the rightto be credited on the amount of its bid therefor all of the Obligations due andowing as of the date of such sale.

 

6.3           Expenses.  If any action is commenced to foreclose thisDeed of Trust, or to enforce any other remedy of Trustee and/or Beneficiaryunder any of the Loan Documents, or to otherwise protect Beneficiary’sinterests in the Premises, whether such action is judicial or pursuant to thepower of sale contained herein or otherwise, there shall be added to theObligations secured by this Deed of Trust all costs and expenses, includingattorneys’ fees, appraisal fees and environmental audit or assessment fees,plus interest thereon at the Default Rate (as defined in the Note) fromexpenditure until paid, in the commencement and prosecution of such action,whether or not such action results in a foreclosure sale, foreclosure or otherjudicial decree or judgment.

6.4           RightsPertaining to Sales.  Subject to theprovisions or other requirements of law, the following provisions shall applyto any sale or sales of the Mortgaged Property under or by virtue of this Article 6,whether made under the power of sale herein granted or by virtue of judicialproceedings or of a judgment or decree of foreclosure and sale:

6.4.1        Trustee,at the request of Beneficiary, may conduct any number of sales from time totime.  The power of sale set forth in Section 6.2.4hereof shall not be exhausted by any one or more such sales as to any part ofthe Mortgaged Property which shall not have been sold, nor by any sale which isnot completed or is defective in Trustee’s or Beneficiary’s opinion, until theObligations shall have been paid in full.

6.4.2        Anysale may be postponed or adjourned by public announcement at the time and placeappointed for such sale or for such postponed or adjourned sale without furthernotice.

6.4.3        Aftereach sale, Trustee, or an officer of any court empowered to do so, shallexecute and deliver to the purchaser or purchasers at such sale a good andsufficient instrument or instruments granting, conveying, assigning andtransferring all right, title and interest of Trustor in and to the propertyand rights sold and shall receive the proceeds of said sale or sales and applythe same as herein provided.  Trustee ishereby appointed the true and lawful attorney-in-fact of Trustor, whichappointment is irrevocable and shall be deemed to be coupled with an interest,in Trustor’s name and stead, to make all necessary conveyances, assignments,transfers and deliveries of the property and rights so sold, and for thatpurpose Trustee may execute all necessary instruments of conveyance,assignment, transfer and delivery, and may substitute one or more persons withlike power, Trustor hereby ratifying and confirming all that said attorney orsuch substitute or substitutes shall lawfully do by virtue thereof.  Nevertheless, Trustor, if requested byTrustee or Beneficiary, shall ratify and confirm any such sale or sales byexecuting and delivering to Trustee or such purchaser or purchasers all suchinstruments as may be advisable, in Trustee’s or Beneficiary’s judgment, forthe purposes as may be designated in such request.

6.4.4        Anyand all statements of fact or other recitals made in any of the instrumentsreferred to in Section 6.4.3 given by Trustee and/or Beneficiary asto nonpayment of the Obligations, or as to the occurrence of any Event ofDefault, or as to Beneficiary having declared all or any of the Obligations tobe due and payable, or as to the request to sell, or as to notice of time,place and terms of sale and of the property or rights to be sold having beenduly given, or as to the refusal, failure or inability to act of Trustee, or asto the appointment of any substitute or successor Trustee, or as to any otheract or thing having been duly done by Trustor, Beneficiary, or by such Trustee,shall be taken as conclusive and binding against all persons as to evidence ofthe truth of the facts so stated and recited. Trustee and/or Beneficiary may appoint or delegate any one or morepersons as agent to perform any act or acts necessary or incident to any saleso held, including the posting of notices and the conduct of sale, but in thename and behalf of Trustee or Beneficiary, as applicable.

6.4.5        Thereceipt of Trustee for the purchase money paid at any such sale, or the receiptof any other person authorized to receive the same, shall be sufficientdischarge therefor to any purchaser of any property or rights sold asaforesaid, and no such purchaser, or its representatives, grantees or assigns,after paying such purchase price and receiving such receipt, shall be bound tosee to the application of such purchase price of any part thereof upon or forany trust or purpose of this Deed of Trust or, in any manner whatsoever, beanswerable for any loss, misapplication or non-application of any such purchasemoney, or part thereof, or be bound to inquire as to the authorization,necessity, expediency or regularity of any such sale.

6.4.6        Anysuch sale or sales shall operate to divest all of the estate, right, title,interest, claim and demand whatsoever, whether at law or in equity, of Trustorin and to the properties and rights so sold, and shall be a perpetual bar bothat law and in equity against Trustor and any and all persons claiming or whomay claim the same, or any part thereof or any interest therein, by, through orunder Trustor to the fullest extent permitted by applicable law.

6.4.7        Uponany such sale or sales, Beneficiary may bid for and acquire the MortgagedProperty and, in lieu of paying cash therefor, may make settlement for thepurchase price by crediting against the Obligations the amount of the bid madetherefor, after deducting therefrom the expenses of the sale, the cost of anyenforcement proceeding hereunder and any other sums which Trustee orBeneficiary is authorized to deduct under the terms hereof, to the extentnecessary to satisfy such bid.

6.4.8        Inthe event that Trustor, or any person claiming by, through or under Trustor,shall transfer or refuse or fail to surrender possession of the MortgagedProperty after any sale thereof, then Trustor, or such person shall be deemed atenant at sufferance of the purchaser at such sale, subject to eviction bymeans of forcible entry and detainer proceedings, or subject to any other rightor remedy available hereunder or under applicable law.

6.4.9        Uponany such sale, it shall not be necessary for Trustee, Beneficiary or any publicofficer acting under execution or order of court to have present orconstructively in its possession any of the Mortgaged Property.

6.4.10      Inthe event of any sale referred to in this Section, the entire Obligations, ifnot previously due and payable, immediately thereupon shall, notwithstandinganything to the contrary herein or in the other Loan Documents, become due andpayable.

6.4.11      Inthe event a foreclosure hereunder shall be commenced by Trustee at the requestof Beneficiary, Trustee or Beneficiary may at any time before the sale of theMortgaged Property abandon the sale, and may institute suit for the collectionof the Obligations and for the foreclosure of this Deed of Trust, or in theevent that Trustee or Beneficiary should institute a suit for collection of theObligations, and for the foreclosure of this Deed of Trust, Beneficiary may atany time before the entry of final judgment in said suit dismiss the same andsell or require Trustee to sell the Mortgaged Property in accordance with theprovisions of this Deed of Trust.

6.5           Applicationof Proceeds.  The purchase money,proceeds or avails of any sale referred to in Section 6.4, togetherwith any other sums which may be held by Trustee or Beneficiary hereunder,whether under the provisions of this Article 6 or otherwise, shall,except as herein expressly provided to the contrary, be applied as follows:

First:  To the payment of the costs and expenses ofany such sale, including compensation to Trustee and/or Beneficiary, theiragents and counsel, and of any judicial proceeding wherein the same may bemade, and of all expenses, liabilities and advances made or incurred by Trusteeand/or Beneficiary hereunder, together with interest thereon as providedherein, and all taxes, assessments and other charges, except any taxes,assessments or other charges subject to which the Mortgaged Property shall havebeen sold.

Second:  To the payment in full of the Obligations(including principal, interest, premium and fees) in such order as Beneficiarymay elect.

Third:  To the payment of any other sums securedhereunder or required to be paid by Trustor pursuant to any provision of theLoan Documents.

Fourth:  To the payment of the surplus, if any, towhomsoever may be lawfully entitled to receive the same.

6.6           AdditionalProvisions as to Remedies.

6.6.1        Noright or remedy herein conferred upon or reserved to Trustee or Beneficiary isintended to be exclusive of any other right or remedy, and each and every suchright or remedy shall be cumulative and continuing, shall be in addition toevery other right or remedy given hereunder, or under the other Loan Documentsor now or hereafter existing at law or in equity, and may be exercised fromtime to time and as often as may be deemed expedient by Trustee or Beneficiary.

6.6.2        Nodelay or omission by Trustee or Beneficiary to exercise any right or remedyhereunder upon any default or Event of Default shall impair such exercise, orbe construed to be a waiver of any such default or Event of Default or anacquiescence therein.

6.6.3        Thefailure, refusal or waiver by Trustee or Beneficiary of its right to assert anyright or remedy hereunder upon any default or Event of Default or otheroccurrence shall not be construed as waiving such right or remedy upon anyother or subsequent default or Event of Default or other occurrence.

6.6.4        NeitherTrustee nor Beneficiary shall have any obligation to pursue any rights orremedies they may have under any other agreement prior to pursuing their rightsor remedies hereunder or under the other Loan Documents.

6.6.5        Norecovery of any judgment by Trustee or Beneficiary and no levy of an execution uponthe Mortgaged Property or any other property of Trustor shall affect, in anymanner or to any extent, the lien of this Deed of Trust upon the MortgagedProperty, or any liens, rights, powers or remedies of Trustee or Beneficiaryhereunder, and such liens, rights, powers and remedies shall continueunimpaired as before.

6.6.6        Beneficiarymay resort or cause Trustee to resort to any security given by this Deed ofTrust or any other security now given or hereafter existing to secure theObligations, in whole or in part, in such portions and in such order asBeneficiary may deem advisable, and no such action shall be construed as awaiver of any of the liens, rights or benefits granted hereunder.

6.6.7        Acceptanceof any payment after the occurrence of any default or Event of Default shallnot be deemed a waiver or a cure of such default or Event of Default, andacceptance of any payment less than any amount then due shall be deemed anacceptance on account only.

6.6.8        Inthe event that Trustee or Beneficiary shall have proceeded to enforce any rightor remedy hereunder by foreclosure, sale, entry or otherwise, and suchproceeding shall be discontinued, abandoned or determined adversely for anyreason, then Trustor, Trustee and Beneficiary shall be restored to their formerpositions and rights hereunder with respect to the Mortgaged Property, subjectto the lien hereof.

6.6.9        Inevery instance when a receiver is appointed with respect to all or any portionof the Mortgaged Property pursuant to Section 6.2.10 above orotherwise, at Beneficiary’s discretion, the receiver shall be authorized, amongother such duties and powers as may be ordered or granted by the court, to takepossession of the Mortgaged Property; to manage, control and protect theMortgaged Property; to collect the rents, issues, profits, revenues, earningsand income arising therefrom, and to apply the same toward the payment ofexpenses, including management and operating expenses, taxes, assessments,utilities, mortgage payments and insurance premiums of or in connection withthe Mortgaged Property; to maintain the Mortgaged Property in a reasonablestate of repair so that there will be no excessive depreciation or devaluationthereof arising from lack of prudent management; to enter into such leaseagreements or rental agreements with new tenants for the Mortgaged Property assuch receiver deems reasonable and prudent; to amend, extend or renew existingLeases upon such terms as such receiver deems reasonable and prudent; to, ifnecessary, retain a property management firm to assist in such duties upon suchterms as such receiver deems reasonable and appropriate; to perform appraisalsand/or environmental audits of the Mortgaged Property; and to take such otheraction as is necessary in order to provide services to the tenants under anyexisting or future Leases or as is necessary to accomplish any of theforegoing.

6.7           DeletedIntentionally. 

6.8           Waiverof Rights and Defenses.  To the fullextent Trustor may do so, Trustor agrees with Beneficiary as follows:

6.8.1        Trustorwill not at any time, insist on, plead, claim or take the benefit or advantageof any statute or rule of law now or hereafter in force providing for anyappraisement, valuation, stay, extension, moratorium or redemption, or of anystatute of limitations, and Trustor, for itself and its heirs, devisees,representatives, successors and assigns, and for any and all persons everclaiming an interest in the Mortgaged Property (other than Beneficiary) hereby,to the extent permitted by applicable law, waives and releases all rights ofredemption, valuation, appraisement, notice of intention to mature or declaredue the whole of the Obligations, and all rights to a marshaling of the assetsof Trustor, including the Mortgaged Property, or to a sale in inverse order ofalienation, in the event of foreclosure of the liens and security interestscreated hereunder.

6.8.2        Trustorshall not have or assert any right under any statute or rule of law pertainingto any of the matters set forth in Section 6.8.1, to theadministration of estates of decedents or to any other matters whatsoever todefeat, reduce or affect any of the rights or remedies of Trustee andBeneficiary hereunder, including the rights of Trustee and/or Beneficiaryhereunder to a sale of the Mortgaged Property for the collection of theObligations without any prior or different resort for collection, or to thepayment of the Obligations out of the proceeds of sale of the MortgagedProperty in preference to any other person.

6.8.3        Ifany statute or rule of law referred to in this Section and now in force, ofwhich Trustor or any of its representatives, successors or assigns and suchother persons claiming any interest in the Mortgaged Property might takeadvantage despite this Section, shall hereafter be repealed of cease to be inforce, such statute or rule of law shall not thereafter be deemed to precludethe application of this Section.

6.8.4        Trustorshall not be relieved of its obligation to pay the Obligations at the time andin the manner provided herein and in the other Loan Documents, nor shall thelien or priority of this Deed of Trust or any other Loan Documents be impairedby any of the following actions, non-actions or indulgences by Trustee orBeneficiary:

(a)           anyfailure or refusal by Trustee or Beneficiary to comply with any request byTrustor (X) to consent to any action by Trustor or (Y) to take anyaction to foreclose this Deed of Trust or otherwise enforce any of theprovisions hereof or of the other Loan Documents;

(b)           anyrelease, regardless of consideration, of the whole or any part of the MortgagedProperty or any other security for the Obligations, or any person liable forpayment of the Obligations;

(c)           anywaiver by Beneficiary of compliance by Trustor with any provision of this Deedof Trust or the other Loan Documents, or consent by Beneficiary to theperformance by Trustor of any action which would otherwise be prohibitedthereunder, or to the failure by Trustor to take any action which wouldotherwise be required hereunder or thereunder; and

(d)           anyagreement or stipulation between Trustee or Beneficiary and Trustor, or, withor without Trustor’s consent, between Trustee or Beneficiary and any subsequentowner or owners of the Mortgaged Property or any other security for theseObligations, renewing, extending or modifying the time of payment or the termsof this Deed of Trust or any of the other Loan Documents (including amodification of any interest rate), and in any such event Trustor shallcontinue to be obligated to pay the Obligations at the time and in the mannerprovided herein and in the other Loan Documents, as so renewed, extended ormodified, unless expressly released and discharged by Beneficiary.

6.8.5        Regardlessof consideration, and without the necessity for any notice to or consent by theholder of any subordinate lien, encumbrance, right, title or interest in or tothe Mortgaged Property, Beneficiary may release any person at any time liablefor the payment of the Obligations or any portion thereof or any part of thesecurity held for the Obligations and with the prior written consent andagreement of Trustor may extend the time of payment or otherwise modify theterms of this Deed of Trust or of any of the Loan Documents, including amodification of the interest rate payable on the principal balance of the Note,without in any manner impairing or affecting this Deed of Trust, as so extendedand modified, as security for the Obligations over any such subordinate lien,encumbrance, right, title or interest. Beneficiary may resort for the payment of the Obligations to any othersecurity held by Beneficiary (or any trustee for the benefit of Beneficiary) insuch order and manner as Beneficiary in its discretion, may elect.  Beneficiary may take or cause to be takenaction to recover the Obligations, or any portion thereof, or to enforce anyprovision hereof or of the other Loan Documents without prejudice to the rightof Beneficiary thereafter to foreclose or cause to be foreclosed this Deed ofTrust.  Beneficiary shall not be limitedexclusively to the right and remedies herein stated but shall be entitled toevery additional right and remedy now or hereafter afforded by law or equity.  The rights of Trustee and Beneficiary underthis Deed of Trust shall be separate, distinct and cumulative and none shall begiven effect to the exclusion of the others. No act of Trustee and/or Beneficiary shall be construed as an electionto proceed under any one provision herein to the exclusion of any otherprovision.

6.9           Exerciseby Trustee.  Notwithstandinganything herein to the contrary, Trustee (a) shall not exercise, or waivethe exercise of, any of its rights or remedies under this Article (other thanits right to reimbursement) except upon the request of Beneficiary, and(b) shall exercise, or waive the exercise of, any or all of such rights orremedies upon the request of Beneficiary and at the direction of Beneficiary asto the manner of such exercise or waiver, provided that Trustee shall have theright to decline to follow any of such request or direction if Trustee shall beadvised by counsel that the action or proceeding, or manner thereof, sodirected may not lawfully be taken or waived.

ARTICLE7DEFEASANCE

7.1           Defeasance.  If all of the Obligations shall be paid asthe same become due and payable, then and in that event only all rightshereunder (except for the rights and obligations set forth in Section 4.3hereof) shall terminate and the Mortgaged Property shall become wholly releasedand cleared of the liens, security interests, conveyances and assignmentsevidenced hereby, upon receipt by Beneficiary of payment of all Obligationssecured hereby.  In such event Trusteeshall at the request of the Trustor, promptly deliver to Trustor, in recordableform, all such documents as shall be necessary to release the MortgagedProperty from the liens, security interests, conveyances and assignmentscreated or evidenced hereby. Notwithstanding anything in the preceding sentence to the contrary,Trustee shall so release the Mortgaged Property only upon the direction ofBeneficiary.

ARTICLE8ADDITIONAL PROVISIONS

8.1           Provisionsas to Payments, Advances.

8.1.1        Tothe extent that any part of the Obligations is used to pay indebtedness securedby any outstanding lien, security interest, charge or encumbrance against theMortgaged Property that is superior to this Deed of Trust, or to pay in wholeor in part the purchase price therefor, Trustee and Beneficiary shall besubrogated to any and all rights, security interests and liens held by anyowner or holder of the same, whether or not the same are released.  Trustor agrees that, in consideration ofsuch payment by Trustee or Beneficiary, effective upon such payment Trustor shalland hereby does waive and release all demands, defenses and causes of actionfor offsets and payments with respect to the same.

8.1.2        Anypayment made under this Deed of Trust by any person at any time liable for thepayment of the Obligations, or by any subsequent owner of the Mortgaged Propertyor by any person or entity that might be prejudiced in the event of a failureto make such payment, or by any partner, stockholder, officer or directorthereof, shall be deemed, as between Trustee or Beneficiary and all suchpersons, to have been made on behalf of all such persons.

8.2           UsurySavings Clause.  All agreements inthis Deed of Trust and in the other Loan Documents are expressly limited sothat in no contingency or event whatsoever, whether by reason of advancement oracceleration of maturity of the Obligations, or otherwise, shall the amountpaid or agreed to be paid hereunder for the use, forbearance or detention ofmoney exceed the highest lawful rate permitted under applicable usury laws, ifany.  If, from any circumstancewhatsoever, fulfillment of any provision of the Loan Documents, at the timeperformance of such provision shall be due, shall involve transcending thelimit of validity prescribed by law which a court of competent jurisdiction maydeem applicable hereto, then, ipsofacto, the obligation to befulfilled shall be reduced to the limit of such validity and if, from anycircumstance whatsoever, Beneficiary shall ever receive as interest an amountwhich would exceed the highest lawful rate, the receipt of such excess shall bedeemed a mistake and shall be canceled automatically or, if theretofore paid,such excess shall be credited against the principal amount of the Obligationsto which the same may lawfully be credited, and any portion of such excess notcapable of being so credited shall be rebated to Trustor.

8.3           Separability.  If all or any portion of any provision ofthis Deed of Trust or the other Loan Documents shall be held to be invalid,illegal or unenforceable in any respect, then such invalidity, illegality orunenforceability shall not affect any other provision hereof or thereof, andsuch provision shall be limited and construed in such jurisdiction as if suchinvalid, illegal or unenforceable provision or portion thereof were notcontained herein or therein.

8.4           Notices.  Any notice, demand, consent, approval,direction, agreement or other communication (any **“Notice”**) required or permitted hereunder or under the otherLoan Documents shall be in writing and shall be validly given and effectivelyserved if mailed by United States mail, first class or certified mail, returnreceipt requested, postage prepaid, addressed as set forth above to the personentitled to receive the same.

Any Notice shall bedeemed to have been validly given and effectively served hereunder two (2) daysafter so mailed.  Any person shall havethe right to specify, from time to time, as its address or addresses forpurposes of this Deed of Trust, any other address or addresses upon givingthree (3) days’ notice thereof to each other person then entitled toreceive notices or other instruments hereunder.

8.5           Rightto Deal.  In the event thatownership of the Mortgaged Property becomes vested in a person other thanTrustor, Trustee and Beneficiary may, without notice to Trustor, deal with suchsuccessor or successors in interest with reference to this Deed of Trust or theObligations in the same manner as with Trustor, without in any way vitiating ordischarging Trustor’s liability hereunder or for the payment of the Obligationsor being deemed a consent to such vesting.

8.6           NoMerger.

8.6.1        Ifboth the lessor’s and the lessee’s interest under any Lease shall at any timebecome vested in any one person, this Deed of Trust and the lien and securityinterest created hereby shall not be destroyed or terminated by the applicationof the doctrine of merger and, in such event, Trustee and Beneficiary shallcontinue to have and enjoy all of the rights and privileges of Trustee andBeneficiary hereunder as to each separate estate.

8.6.2        Uponthe foreclosure of the lien created hereby on the Mortgaged Property, as hereinprovided, any Leases then existing shall not be destroyed or terminated byapplication of the doctrine of merger or as a matter of law or as a result ofsuch foreclosure unless Beneficiary or any purchaser at a foreclosure saleshall so elect by notice to the lessee in question.

8.7           ApplicableLaw.  **THIS DEED OF TRUST SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCEWITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ITS LAWSRELATING TO CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATEOF TEXAS MANDATORILY GOVERN THE MANNER OR PROCEDURE FOR THE CREATION,PERFECTION AND ENFORCEMENT OF THE LIEN CREATED BY THIS DEED OF TRUST PROVIDEDTHAT ANY REMEDIES HEREIN PROVIDED WHICH DEED OF TRUST SHALL BE VALID UNDER THELAWS OF THE STATE OF TEXAS WHERE PROCEEDINGS FOR THE ENFORCEMENT HEREOF SHALLBE TAKEN SHALL NOT BE AFFECTED BY ANY INVALIDITY UNDER THE LAWS OF THE STATE OFCALIFORNIA.**

 

8.8           Appointmentof Trustee and Beneficiary.  In theevent Trustor is obligated to execute any document or instrument referred to inSection 2.1.2 or 2.1.3 hereof and fails or refuses to do sowithin 10 days after written demand by Beneficiary, Trustor hereby appointseach of Trustee and Beneficiary, severally its attorney-in-fact, whichappointment is irrevocable and shall be deemed to be coupled with an interest,with respect to the execution, acknowledgment, delivery and filing or recordingfor and in the name of Trustor of any of the documents or instruments referredto in Section 2.1.2 or 2.1.3.

8.9           Discretionof Trustee and Beneficiary. Whenever Trustee’s or Beneficiary’s judgment, consent or approval isrequired hereunder for any matter, such judgment, or the decision as to whetheror not to consent to or approve the same shall be in the reasonable discretionof Trustee or Beneficiary, as the case may be. Whenever Trustee or Beneficiary shall have an option or election underthis Deed of Trust, the decision whether or not to exercise such option orelection shall be in the sole and absolute discretion of Trustee orBeneficiary, as the case may be.

8.10         Provisionsas to Covenants and Agreements.  Allof Trustor’s covenants and agreements hereunder shall run with the land andtime is of the essence with respect thereto.

8.11         Mattersto be in Writing.  This Deed ofTrust cannot be altered, amended, modified, terminated or discharged except ina writing signed by the party against whom enforcement of such alteration,amendment, modification, termination or discharge is sought.  No waiver, release or other forbearance byTrustee or Beneficiary will be effective against Trustee or Beneficiary unlessit is in a writing signed by Beneficiary, and then only to the extent expresslystated.

8.12         Constructionof Provisions.  The following rulesof construction shall be applicable for all purposes of this Deed of Trust andall documents or instruments supplemental hereto, unless the context otherwiserequires:

8.12.1      Allreferences herein to numbered Articles or Sections or to lettered Exhibits arereferences to the Articles and Sections hereof and the Exhibits annexed to thisDeed of Trust, unless expressly otherwise designated in context.

8.12.2      Theterms **“include,”****“including”** and similar terms shall beconstrued as if followed by the phrase “without being limited to.”

8.12.3      Theterm **“knowledge”** or **“to best of knowledge”** when and if used inconnection with a representation or warranty made by Trustor means that Trustorand/or the representatives of Trustor have interviewed such persons,representatives, and responsible employees of Trustor, and such prior ownersand users of the Mortgaged Property as such representatives have determined arelikely to have knowledge of the matters set forth herein.

8.12.4      Theterms **“Mortgaged Property”** and **“Premises”** shall be construed as iffollowed by the phrase “or any part thereof.”

8.12.5      Theterm **“Obligations”** shall beconstrued as if followed by the phrase “or any other sums secured hereby, orany part thereof.”

8.12.6      Wordsof masculine, feminine or neuter gender shall mean and include the correlativewords of the other genders, and words importing the singular number shall meanand include the plural number, and viceversa.

8.12.7      Theterm **“person”** shall include naturalpersons, firms, partnerships, limited liability companies, corporations and anyother public and private legal entities.

8.12.8      Theterm **“provisions,”** when used withrespect hereto or to any other document or instrument, shall be construed as ifpreceded by the phrase “terms, covenants, agreements, requirements, conditionsand/or.”

8.12.9      AllArticle, Section and Exhibits captions herein are used for convenience andreference only and in no way define, limit or describe the scope or intent of,or in any way affect, this Deed of Trust.

8.12.10 The cover page of and all recitals set forth in, and all Exhibits to,this Deed of Trust are hereby incorporated in this Deed of Trust.

8.12.11 All obligations of Trustor hereunder shall be performed and satisfied byor on behalf of Trustor at Trustor’s sole cost and expense.

8.12.12 The term **“Lease”** shall mean“tenancy, subtenancy, lease or sublease,” the term “lessor” shall mean“landlord, sublandlord, owner, lessor and sublessor” and the terms “lessee” or“tenant” shall mean “tenant, subtenant, lessee and sublessee.”

8.13         Successorsand Assigns.  The provisions hereofshall be binding upon Trustor and the heirs, devisees, representatives,successors and assigns of Trustor, including successors in interest of Trustorin and to all or any part of the Mortgaged Property, and shall inure to thebenefit of Trustee, Beneficiary and their respective heirs, successors,substitutes and assigns.  All referencesin this Deed of Trust to Trustor, Trustee or Beneficiary shall be construed asincluding all of such other persons with respect to the person referredto.  Where two or more persons haveexecuted this Deed of Trust, the obligations of such persons shall be joint andseveral except to the extent the context clearly indicates otherwise.

8.14         Requestfor Notice.  Allnotices, requests, consents, demands and other communications required or whichany party desires to give hereunder shall be in writing and shall be deemedsufficiently given or furnished if delivered by personal delivery, by courier,or by registered or certified United States mail, postage prepaid, addressed tothe party to whom directed at the addresses specified in this Deed of Trust(unless changed by similar notice in writing given by the particular partywhose address is to be changed) or by telegram, telex, or facsimile.  Any such notice or communication shall bedeemed to have been given either at the time of personal delivery or, in thecase of courier or mail, as of the date of first attempted delivery at theaddress and in the manner provided herein, or, in the case of telegram, telexor facsimile, upon receipt; provided that, service of a notice required byTexas Property Code Section 51.002, as amended, shall be considered completewhen the requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall beeffective except upon receipt.

 

8.15         FixtureFiling.  Portions of the MortgagedProperty are goods which are or are to become fixtures relating to the Landand/or the Premises, and Trustor covenants and agrees that the filing of thisDeed of Trust in the real estate records of the county where the Premises arelocated shall also operate from the time of filing as a fixture filing inaccordance with Texas Uniform Commercial Code.

8.16         VariableRate.  The Note contains a provisionpermitting Beneficiary to adjust the rate of interest on the indebtednessevidenced thereby.

ARTICLE9PROVISIONS AS TO TRUSTEE

9.1           Trustee'sAppointment.  Trustee accepts thistrust when this Deed of Trust, duly executed and acknowledged, is made a publicrecord as provided by law.  Trustee mayresign by an instrument in writing addressed to Beneficiary, or Trustee may beremoved at any time with or without cause by an instrument in writing executedby Beneficiary and duly recorded.  Incase of the death, resignation, removal or disqualification of Trustee or iffor any reason Beneficiary shall deem it desirable to appoint a substitute orsuccessor trustee to act instead of Trustee herein named or any substitute orsuccessor Trustee, then Beneficiary shall have the right and is herebyauthorized and empowered to appoint a successor Trustee, or a substituteTrustee, without other formality than appointment and designation in writingexecuted and acknowledged by Beneficiary and the recordation of such writing inthe office where this Deed of Trust is recorded, and the authority herebyconferred shall extend to the appointment of other successor and substituteTrustees successively until the Obligations are paid in full or until theMortgaged Property is sold hereunder. Such appointment and designation by Beneficiary shall be full evidenceof the right and authority to make the same and of all facts thereinrecited.  If such appointment isexecuted on behalf of Beneficiary by an officer of Beneficiary, suchappointments shall be conclusively presumed to be executed with authority andshall be valid and sufficient without proof of any action by the Trustee or anysuperior officer of Beneficiary.  Uponthe making of such appointment and designation, all of the estate and title ofTrustee in the Mortgaged Property shall vest in the named successor orsubstitute Trustee and it shall thereupon succeed to and shall hold, possessand execute all the rights, powers, privileges, immunities and duties hereinconferred upon Trustee; but, nevertheless, upon the written request ofBeneficiary or of the successor or substitute Trustee, Trustee ceasing to actshall execute and deliver an instrument transferring to such successor orsubstitute Trustee all of the estate and title in the Mortgaged Property ofTrustee 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 Trusteehereunder to said successor or substitute Trustee.  All references herein to Trustee shall be deemed to refer toTrustee (including any successor or substitute, appointed and designated, asherein provided) from time to time acting hereunder.  Trustor hereby ratifies and confirms any and all acts whichTrustee herein named or its successor or successors, substitute or substitutes,in this Deed of Trust, shall do lawfully by virtue hereof.

ARTICLE10SPECIAL PROVISIONS

10.1         Non-MonetaryDefaults.  Notwithstanding anythingto the contrary contained herein, an Event of Default (as defined in Section 6.1above) shall not be deemed to have occurred if any curable default in performanceor breach of any covenant or obligation which cannot be cured by the payment ofmoney occurs under the Note, this Deed of Trust, or any other Loan Documentexecuted by Trustor evidencing or securing the indebtedness evidenced by theNote (**“non-monetary default”**) andsaid non-monetary default is cured by Trustor within thirty (30) daysafter written notice from Beneficiary to Trustor that such non-monetary defaultexists (or, in the event that such non-monetary default is not reasonablycapable of cure within such thirty (30) day period, Trustor commences to curesame within such thirty (30) day period and/or thereafter diligently prosecutessuch cure to completion in all events within ninety (90) days).

10.2         Records,Reports and Audits.

10.2.1      Maintenanceof Records.  Trustor shall maintainits books and records in accordance with generally accepted accountingprinciples, applied on a consistent basis, and permit Beneficiary to examineand audit Trustor's books and records at all reasonable times upon advancewritten notice; provided however, such examinations and audits shall notunreasonably interfere with Trustor’s operations, shall be at Beneficiary’ssole expense, and shall occur no more frequently than twice per year, unless anEvent of Default has occurred and is continuing.

                                10.2.2      Reports; Audits.  Trustor shall furnish Beneficiary with, assoon as available, but in no event later than one hundred (100) days after theend of each fiscal year, Trustor's balance sheet and income statement for theyear ended, audited by a certified public accountant, and containing anunqualified opinion of the accountant. All financial reports required to beprovided under this Deed of Trust shall be prepared in accordance withgenerally accepted accounting principles, applied on a consistent basis, andcertified by Trustor as being true and correct.  In addition, Trustor agrees to provide Beneficiary with copies ofall filings submitted to the Securities and Exchange Commission within ten (10)days of filing.

 

                10.3         Minimum Ratio.  Trustor shall maintain a ratio, as of theend of each fiscal year of Trustor, of (x) the sum of Trustor's annual earningbefore interest, taxes, depreciation and amortization expenses (but excludingany non-cash income) less dividends and distributions paid to shareholders ofTrustor, to (y) the amount of current portion of long-term obligations  plus the amount of the interest expense forthe preceding fiscal year, of 2.00 to 1.00. Except as provided above, all computations made to determine compliancewith the requirements contained in this paragraph shall be based on Trustor'smost recent annual financial statements, and shall be made in accordance withgenerally accepted accounting principles, applied on a consistent basis, andcertified by Borrower as being true and correct.

 

            10.4         UseOf Property.  The Mortgaged Propertyis not currently used for agricultural, farming, timber or grazingpurposes.  Trustor warrants that thisDeed of Trust is and will at all times constitute a commercial trust deed, asdefined under appropriate state law.

 

 

                10.5         Cross Default.  Concurrently herewith, Beneficiary andTrustor are negotiating certain documents pertaining to a revolving line ofcredit loan which Beneficiary intends to make to Borrower in the maximum amountof $2,000,000.00 within the next thirty (30) days (“Revolving Loan”).  Any event of default by Trustor under any ofthe documents evidencing or securing the Revolving Loan, if and when enteredinto, shall constitute an Event of Default hereunder.

 

                10.6         Tangible Net Worth.  Trustor shall maintain at all times a“Tangible Net Worth” in excess of $20,000,000.00. The words "Tangible NetWorth" mean Trustor's Total Shareholders’ Equity, less all intangibleassets (i.e. goodwill, trademarks, patents, copyrights, organizationalexpenses, and similar intangible items, but including leaseholds and leaseholdimprovements) plus Subordinated Debt. The words “Total Shareholders’ Equity”mean the total shareholders’ equity as set forth in Trustor’s financialstatements as approved by Beneficiary. The words “Subordinated Debt” meanindebtedness and other liabilities of Trustor, which have been subordinated bywritten agreement to indebtedness owed by Trustor pursuant to a subordinationagreement in form and substance acceptable to Beneficiary.

10.7         Locationof Trustor.  For the purposes ofenabling Beneficiary to properly file a UCC-1 financing statement in order toperfect its security interest in the personal property constituting a portionof the Mortgaged Property, Trustor hereby represents to Beneficiary that itsstate of location (“Location”) is, as of the date hereof, Delaware. Trustoragrees to notify Beneficiary in writing of its intent to change its Location,including a change in Location resulting from a reincorporation orreregistration in another State, or a merger with an entity whose Location isin another State, at least thirty (30) days prior to any such change in itsLocation.  Trustor further agrees toexecute any and all documents required by Beneficiary to continue theperfection of Beneficiary’s security interest in the personal propertyconstituting a portion of the Mortgaged Property or to perfect a new securityinterest therein and hereby specifically authorizes Beneficiary to file or causeto filed an appropriate financing statement in the state of the new Location.

 

10.8         Counterparts.        This Deed of Trust is being executed intwo counterparts in order to facilitate recordation in the Official Records ofCollin and Dallas Counties.  Said counterparts,when taken together, shall constitute one instrument.

IN WITNESS WHEREOF, theundersigned has executed this Deed of Trust the day first set forth above.
|   | **TRUSTOR:**

FRESH CHOICE, INC., a

Delaware corporation

 

By: /S/ David E. Pertl

 

Its: Senior Vice President and CFO

  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

 

 

EXHIBIT A

DESCRIPTION OF REALPROPERTY

 

PARCEL ONE

 

BEING A TRACT OF LAND LOCATED IN THE THOMAS L. CHENWORTH SURVEY,ABSTRACT NO. 273, TOWN OF ADDISON, DALLAS COUNTY, TEXAS, AND FURTHER BEING ALLOF LOT 1, BLOCK 1, OF THE AMENDED FINAL PLAT OF BELT LINE CENTRE, AN ADDITIONTO THE TOWN OF ADDISON, TEXAS, RECORDED IN VOLUME 92193, PAGE 1795, MAP RECORDSOF DALLAS COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

BEGINNING AT A POINT ON THE SOUTHERLY LINE OF BELT LINE ROAD (A 100FOOT RIGHT-OF-WAY) SAID POINT BEING AT THE NORTHEAST CORNER OF SAID LOT 1 OFTHE AMENDED FINAL PLAT OF BELT LINE CENTRE, AND THE NORTHEAST CORNER OF SAMSCLUB ADDITION, AN ADDITION TO THE TOWN OF ADDISON, TEXAS, RECORDED IN VOLUME92109, PAGE 3987, MAP RECORDS, DALLAS COUNTY, TEXAS, A 3/8 INCH IRON PIN FOUND9.3 FEET SOUTH OF THE STREET BACK OF CURB AT CORNER;

 

THENCE SOUTH 00 DEGREES 01 MINUTE 18 SECONDS WEST, ALONG THE EASTERLYLINE OF SAID LOT 1 AND THE WESTERLY LINE OF SAMS CLUB ADDITION, A DISTANCE OF389.44 FEET TO A PK NAIL SET AT CORNER;

 

THENCE NORTH 89 DEGREES 58 MINUTES 42 SECONDS WEST, ALONG THE SOUTHERLYLINE OF SAID LOT 1 AND THE NORTHERLY LINE OF LOT 2 OF SAID AMENDED FINAL PLATOF BELT LINE CENTRE, A DISTANCE OF 89.72 FEET TO A PK NAIL SET AT CORNER;

 

THENCE ALONG A COMMON LINE BETWEEN SAID LOTS 1 AND 2 AND AROUND ATANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 90 DEGREES 33 MINUTES 42SECONDS, A RADIUS OF 85.00 FEET AND A CHORD BEARING OF NORTH 44 DEGREES 41MINUTES 51 SECONDS WEST, AN ARC DISTANCE OF 134.35 FEET TO A PK NAIL SET ATCORNER;

 

THENCE NORTH 00 DEGREES 35 MINUTES 00 SECONDS EAST, ALONG THE WESTERLYLINE OF SAID LOT 1 AND THE EASTERLY LINE OF LOT 2, A DISTANCE OF 305.30 FEET TOA  POINT ON THE SAID BELT LINE ROADSOUTHERLY LINE, AN "X" IN CONCRETE CUT AT CORNER;

 

THENCE SOUTH 89 DEGREES 25 MINUTES 00 SECONDS EAST, ALONG THE SAID BELTLINE ROAD SOUTHERLY LINE, A DISTANCE OF 171.73 FEET TO THE PLACE OF BEGINNINGAND CONTAINING 66,184 SQUARE FEET OR 1.5194 ACRES OF LAND.

 

PARCEL TWO

 

TRACT I:

 

BEING LOT 5, BLOCK A OF CREEKWALK VILLAGE, AN ADDITION TO THE CITY OFPLANO, COLLIN COUNTY, TEXAS, ACCORDING TO THE REVISED MAP THEREOF RECORDED INVOLUME I, PAGE 345, MAP RECORDS OF COLLIN COUNTY, TEXAS.

 

TRACT II:

 

TOGETHER WITH THE NON-EXCLUSIVE EASEMENTS FOR ROADWAYS, WALKWAYS,INGRESS, EGRESS AND PARKING PURPOSES OVER AND ACROSS THE COMMON AREA, ASCREATED BY THAT CERTAIN DECLARATION OF EASEMENTS AND COVENANTS, CONDITIONS ANDRESTRICTIONS BY AND BETWEEN SPRINGCREEK DEVELOPMENT, INC., AND FRESH CHOICE,INC., FILED 05/04/94, RECORDED UNDER CC#94-0043373, LAND RECORDS OF COLLINCOUNTY, TEXAS.

 

[Two Notary Acknowledgments Here]