Document:

SECURITY
AGREEMENT

     

    SECURITY
AGREEMENT, dated as of November 1, 2010 (this “Agreement”), between
Point.360, a California corporation (“Debtor”) and
TroyGould PC, a California professional corporation, its endorsees, transferees
and assigns (collectively, “Secured Party”) with
reference to the following:

     

    RECITALS:

     

    WHEREAS,
pursuant to that certain understanding between Debtor and Secured
Party,  Debtor has (a) acknowledged an accrued indebtedness to Secured
Party in the amount of Nine Hundred Thirty-Four Thousand Sixty-Three and 73/100
Dollars ($934,063.73) representing the outstanding balance of all unpaid
invoices for litigation work performed by Secured Party to Debtor through
September 30, 2010, which have not been paid in full (“Accrued Invoices”) and which
are evidenced by that certain promissory note from Debtor to Secured Party of
even date herewith and any notes issued in addition to or in replacement of any
note (collectively, the “Note”) and (b) agreed
that the security interest granted by this Agreement shall also cover any
subsequently issued invoices for litigation work performed by Secured Party for
Debtor after the date of this Agreement which are not paid in full within 30
days of issuance;

     

    WHEREAS,
pursuant to the Note, Debtor has agreed to grant Secured Party a security
interest in all of the Debtor’s assets which security interest shall be subject
to the terms and potential seniority of any and all liens or security interests
which predate it and which security interest shall be subject to and junior in
position to any and all future security interests which may be necessary to
facilitate future financings for working capital, equipment and real property
acquisitions or for general corporate purposes for the Debtor or any similar
financing from or guaranteed by Haig S. Bagerdjian;

     

    WHEREAS,
in order to induce the Secured Party to accept the Note, Debtor has agreed to
execute and deliver to the Secured Party this Agreement and to grant the Secured
Party a perfected security interest in the Debtor’s assets in order to secure
the prompt payment, performance and discharge in full of all of the Debtor’s
obligations under the Note.

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the above-referenced Recitals, the covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:

     

    1.           Certain
Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1.  Terms used
but not otherwise defined in this Agreement, have the meaning given to them in
the Note and the Deed of Trust or if the terms are defined in Article 9 of
the UCC (such as “account”, “chattel paper”, “commercial tort claim”, “deposit
account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (a)           “Collateral” means the
collateral in which the Secured Party is granted a security interest by this
Agreement and which shall include the following personal property of the Debtor,
whether presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and accounts
thereof, including, without limitation, all proceeds from the sale or transfer
of the Collateral and of insurance covering the same and of any tort claims in
connection therewith, and all dividends, interest, cash, notes, securities,
equity interest or other property at any time and from time to time
acquired:

     

    (i)           All
goods, including, without limitations, (A) all machinery, equipment,
computers, motor vehicles, trucks, appliances, furniture, special and general
tools, fixtures, test and quality control devices and other equipment of every
kind and nature and wherever situated, together with all documents of title and
documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with Debtor’s
business and all improvements thereto; and (B) all inventory;

     

    (ii)           All
contract rights and other general intangibles, including, without limitation,
all partnership or joint venture interests, membership interests, stock or other
securities, licenses, distribution and other agreements, computer software
(whether “off-the-shelf”, licensed from any third party or developed by Debtor
or its predecessor), computer software development rights, leases, franchises,
customer lists, quality control procedures, grants and rights, goodwill,
trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;

     

    (iii)         All
accounts, together with all instruments, all documents of title representing any
of the foregoing (but not trade accounts receivable generated in the ordinary
course of Debtor’s business), all rights in any merchandising, goods, equipment,
motor vehicles and trucks which any of the same may represent, and all right,
title, security and guaranties with respect to each account, including any right
of stoppage in transit;

     

    (iv)         All
documents, letter-of-credit rights, instruments and chattel paper;

     

    (v)          All
commercial tort claims;

     

    (vi)         All
investment property;

     

    (vii)        All
supporting obligations; and

     

    (viii)       All
files, records, books of account, business papers, and computer programs;
and

     

    (ix)         the
products and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(viii) above.

    
      
         

      

      
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    Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
law); provided, however, that to the extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.

     

    (b)           “Intellectual
Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, (ii) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues and extensions
thereof, and all applications for letters patent of the United States or any
other country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service marks, logos,
domain names and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common law
rights related thereto, (iv) all trade secrets arising under the laws of
the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the
foregoing, (vi) all licenses for any of the foregoing, and (vii) all
causes of action for infringement of the foregoing.

     

    (c)           “Necessary
Endorsement” shall mean undated stock powers endorsed in blank or other
proper instruments of assignment duly executed and such other instruments or
documents as the Agent (as that term is defined below) may reasonably
request.

     

    (d)           “Obligations” means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing by Debtor to the Secured Party,
including, without limitation, all obligations under this Agreement, the Note,
the Deed of Trust and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Secured Party as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time.  Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and
interest on the Note (which may take the form of additional notes from Debtor to
Secured Party); (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtor from time to time under or in
connection with this Agreement, the Note, the Deed of Trust and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Debtor.

    
      
         

      

      
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    (e)           “Organizational
Documents” means with respect to the Debtor, the documents by which
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of the Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

     

    (f)           “UCC” means the
Uniform Commercial Code of the State of California and or any other applicable
law of any state or states that has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time.  It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense.  Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.

     

    (g)           “Cash Proceeds Event”
shall have the meaning set forth in the Note.

     

    (h)           “Company Sale” shall
have the meaning set forth in the Note.

     

    (i)           “Debt” shall have the
meaning given to it in accordance with GAAP.

     

    (j)           
“Fiscal
Quarter” means any of the three (3) month periods ending on March 31,
June 30, September 30, or December 31.

     

    2.           Grant of Security
Interest.  As an inducement for the Secured Party to accept the
Note from Debtor and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, the Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Party a security interest in and to, a lien upon all of its respective
right, title and interest of whatsoever kind and nature in and to, the
Collateral (the “Security
Interest”).  It is expressly acknowledged and agreed that the
Security Interest shall be subject to and junior in position to any and all
liens or security interest, whether perfected or not, which predate it and which
Security Interest shall be subject to and junior in position to any and all
future security interests which may be necessary to facilitate future financings
for working capital, equipment or real property acquisitions or for general
corporate purposes for the Debtor or any similar financing from or guaranteed by
Haig S. Bagerdjian

     

    3.           Representations, Warranties,
Covenants and Agreements of Debtor.  Debtor represents and
warrants to, and covenants and agrees with, Secured Party as
follows:

    
      
         

      

      
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    (a)           Debtor
has the requisite corporate power and authority to enter into this Agreement and
otherwise to carry out its obligations hereunder. The execution, delivery and
performance by Debtor of this Agreement and the filings contemplated therein
have been duly authorized by all necessary action on the part of Debtor and no
further action is required by Debtor.  This Agreement has been duly
executed by Debtor.  This Agreement constitutes the legal, valid and
binding obligation of Debtor, enforceable against Debtor in accordance with its
terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to
or affecting the rights and remedies of creditors and by general principles of
equity.  Debtor’s execution, delivery, and performance of this
Agreement does not conflict with, result in a violation of, or constitute a
default under (i) any provision of any agreement or other instrument
binding upon Debtor or any of the Collateral, or (ii) any laws or orders
applicable to Debtor or to Debtor’s properties.

     

    (b)           [Intentionally
Omitted]

     

    (c)           [Intentionally
Omitted]

     

    (d)           [Intentionally
Omitted]

     

    (e)           [Intentionally
Omitted]

     

    (f)           [Intentionally
Omitted]

     

    (g)           Debtor
hereby authorizes the Secured Party to file one or more financing statements
under the UCC, with respect to the Security Interest with the proper filing and
recording agencies in any jurisdiction deemed proper by them.

     

    (h)           The
execution, delivery and performance of this Agreement by the Debtor does not
(i) violate any of the provisions of the Organizational Documents of Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to Debtor or
(ii) conflict with, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing Debtor's debt or otherwise) or other understanding to
which Debtor is a party or by which any property or asset of Debtor is bound or
affected.

     

    (i)           [Intentionally
Omitted]

     

    (j)           [Intentionally
Omitted].

     

    (k)           [Intentionally
Omitted]

     

    (l)           [Intentionally
Omitted]

     

    (m)           [Intentionally
Omitted]

     

    (n)           [Intentionally
Omitted]

    
      
         

      

      
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    (o)           [Intentionally
Omitted]

     

    (p)           
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise
the Secured Party promptly, in sufficient detail, of any substantial change in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security
interest therein.

     

    (q)           Debtor
shall promptly execute and deliver to the Secured Party such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce its security interest
in the Collateral.

     

    4.           Defaults.  The
following events shall be “Events of
Default”:

     

    (a)           The
occurrence of an Event of Default (as defined in the Note) under the
Note;

     

    (b)           Any
representation or warranty of Debtor in this Agreement or Note or the Deed of
Trust shall prove to have been incorrect in any material respect when
made;

     

    (c)           The
failure by Debtor to observe or perform any of its material obligations
hereunder for ten (10) days after delivery to Debtor of notice of such failure
by or on behalf of Secured Party unless such default is capable of cure but
cannot be cured within such time frame and Debtor is using best efforts to cure
same in a timely fashion; or

     

    (d)           If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by Debtor, or a proceeding shall be commenced by Debtor, or by any governmental
authority having jurisdiction over Debtor, seeking to establish the invalidity
or unenforceability thereof, or Debtor shall deny that Debtor has any liability
or obligation purported to be created under this Agreement.

     

    5.           Duty To Hold In
Trust.

     

    (a)           Upon
the occurrence of any Event of Default and at any time thereafter, Debtor shall,
upon receipt of any revenue, income, dividend, interest or other sums subject to
the Security Interest, whether payable pursuant to the Note or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, hold the same in trust for the Secured Party and
shall forthwith endorse and transfer any such sums or instruments, or both, to
the Secured Party for application to the satisfaction of the
Obligations.

     

    (b)           If
Debtor shall become entitled to receive or shall receive any securities or other
property Debtor agrees to (i) accept the same as the agent of the Secured
Party; (ii) hold the same in trust on behalf of and for the benefit of the
Secured Party; and (iii) to deliver any and all certificates or instruments
evidencing the same to Secured Party on or before the close of business on the
fifth business day following the receipt thereof by Debtor, in the exact form
received together with the Necessary Endorsements, to be held by Secured Party
subject to the terms of this Agreement as Collateral.

    
      
         

      

      
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    6.           Rights and Remedies Upon
Default.

     

    (a)           Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Party, acting through any agent appointed by it for such purpose, shall have the
right to exercise all of the remedies conferred hereunder and under the Note and
the Deed of Trust, and the Secured Party shall have all the rights and remedies
of a secured party under the UCC.  Without limitation, the Secured
Parties shall have the following rights and powers:

     

    (i)           The
Secured Party shall have the right to take possession of the Collateral and, for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and Debtor shall assemble the Collateral and make it available to the
Secured Party at places which the Secured Party shall reasonably select, whether
at Debtor's premises or elsewhere, and make available to the Secured Party,
without rent, all of Debtor’s respective premises and facilities for the purpose
of the Secured Party taking possession of, removing or putting the Collateral in
saleable or disposable form.

     

    (ii)          Upon
notice to the Debtor by Secured Party, all rights of Debtor to exercise the
voting and other consensual rights that it would otherwise be entitled to
exercise and all rights of each Debtor to receive the dividends and interest
which it would otherwise be authorized to receive and retain, shall
cease.  Upon such notice, Secured Party shall have the right to
receive any interest, cash dividends or other payments on the Collateral and, at
the option of secured Party, to exercise in Secured Party’s discretion all
voting rights pertaining thereto.  Without limiting the generality of
the foregoing, Secured Party shall have the right (but not the obligation) to
exercise all rights with respect to the Collateral as it were the sole and
absolute owners thereof, including, without limitation, to vote and/or to
exchange, at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or other
readjustment concerning or involving the Collateral of Debtor.

     

    (iii)         The
Secured Party shall have the right to operate the business of Debtor using the
Collateral and shall have the right to assign, sell, lease or otherwise dispose
of and deliver all or any part of the Collateral, at public or private sale or
otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such time
or times and at such place or places, and upon such terms and conditions as the
Secured Party may deem commercially reasonable, all without (except as shall be
required by applicable statute and cannot be waived) advertisement or demand
upon or notice to Debtor or right of redemption of  Debtor, which are
hereby expressly waived.  Upon each such sale, lease, assignment or
other transfer of Collateral, the Secured Party may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims, right of
redemption and equities of Debtor, which are hereby waived and
released.

     

    (iv)         The
Secured Party shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Party and to enforce the Debtor’s rights against such
account debtors and obligors.

    
      
         

      

      
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    (v)          The
Secured Party may (but is not obligated to) direct any financial intermediary or
any other person or entity holding any investment property to transfer the same
to the Secured Party or its designee.

     

    (b)           The
Secured Party may comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the
Collateral.  The Secured Party may sell the Collateral without giving
any warranties and may specifically disclaim such warranties.  If the
Secured Party sells any of the Collateral on credit, the Debtor will only be
credited with payments actually made by the purchaser.  In addition,
Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the secured Party’s rights and remedies
hereunder, including, without limitation, its right following an Event of
Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.

     

    (c)           For
the purpose of enabling the Secured Party to further exercise rights and
remedies under this Section 6 or elsewhere provided by agreement or
applicable law, Debtor hereby grants to the secured Party, for the benefit of
the Secured Party, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to Debtor) to use, license or
sublicense following an Event of Default, any Intellectual Property now owned or
hereafter acquired by Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

     

    7.           Application of
Proceeds.  The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Party (based on then-outstanding principal amount of the Note at the
time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the
Debtor any surplus proceeds. If, upon the sale, license or other disposition of
the Collateral, the proceeds thereof are insufficient to pay all amounts to
which the Secured Party are legally entitled, the Debtor will be liable for the
deficiency, together with interest thereon, at the rate of 10% per annum or the
lesser amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency.  To the extent permitted by applicable law, Debtor
waives all claims, damages and demands against the Secured Party arising out of
the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Party as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.

    
      
         

      

      
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    8.           Costs and
Expenses.  The Debtor will, upon demand, pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Secured Party may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, or (iii) the
exercise or enforcement of any of the rights of the Secured Party under the
Note. Until so paid, any fees payable hereunder shall be added to the principal
amount of the Note and shall bear interest at the Default Rate.

     

    9.           Responsibility for
Collateral.  The Debtor assumes all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any
reason.  Without limiting the generality of the foregoing,
(a) the Secured Party (i) has no duty (either before or after an Event
of Default) to collect any amounts in respect of the Collateral or to preserve
any rights relating to the Collateral, or (ii) has no obligation to
clean-up or otherwise prepare the Collateral for sale, and (b) Debtor shall
remain obligated and liable under each contract or agreement included in the
Collateral to be observed or performed by Debtor thereunder.  Secured
Party shall not have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by
Secured Party of any payment relating to any of the Collateral, nor shall the
Secured Party be obligated in any manner to perform any of the obligations of
Debtor under or pursuant to any such contract or agreement, to make inquiry as
to the nature or sufficiency of any payment received by Secured Party in respect
of the Collateral or as to the sufficiency of any performance by any party under
any such contract or agreement, to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which
Secured Party may be entitled at any time or times.

     

    10.         [Intentionally
Omitted]

     

    11.         Term of
Agreement.  This Agreement and the Security Interest shall
terminate on the date on which all payments under the Note have been
indefeasibly paid in full and all other material Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtor contained in
this Agreement shall survive and remain operative and in full force and effect
regardless of the termination of this Agreement.

     

    12.         Further
Assurances.   On a continuing basis, Debtor will make,
execute, acknowledge, deliver, file and record, as the case may be, with the
proper filing and recording agencies in any jurisdiction, all such instruments,
and take all such action as may reasonably be deemed necessary or advisable, or
as reasonably requested by the Secured Party, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Party the grant or
perfection of a perfected security interest in all the Collateral under the
UCC.

     

    13.         Notices.  All
notices, requests, demands and other communications hereunder shall be subject
to the notice provision contained in the Note.

    
      
         

      

      
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    14.         Other Security.  To
the extent that the Obligations are now or hereafter secured by property other
than the Collateral or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity, then the Secured Party shall have the
right, in its sole discretion, to pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any way modifying or
affecting any of the Secured Party’s rights and remedies hereunder.

     

    15.         [Intentionally
Omitted]

     

    16.         Miscellaneous.

     

    (a)           No
course of dealing between the Debtor and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

     

    (b)           All
of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Note or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.

     

    (c)           This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto. Except as specifically set
forth in this Agreement, no provision of this Agreement may be modified or
amended except by a written agreement specifically referring to this Agreement
and signed by the parties hereto.

     

    (d)           In
the event any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.

     

    (e)           No
waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.

     

    (f)           This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.

    
      
         

      

      
        - 10
-

        
          

        

      

      
         

      

    

     

    (g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

     

    (h)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to the
principles of conflicts of law thereof.  Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Note (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of Los Angeles,
State of California.  Debtor hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
Los Angeles for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such proceeding is improper. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If any party shall commence a
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such proceeding shall be reimbursed by the other party for its
reasonable attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.

     

    (i)           This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.

     

    (j)           Debtor
shall indemnify, reimburse and hold harmless the Secured Party and their
respective partners, members, shareholders, officers, directors, employees and
agents (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the negligence or willful misconduct of the Indemnitee as determined by a
final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Note, the Deed
of Trust or any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.

    
      
         

      

      
        - 11
-

        
          

        

      

      
         

      

    

     

    (k)           Nothing
in this Agreement shall be construed to subject Secured Party to liability as a
partner of Debtor or any if its direct or indirect subsidiaries that is a
partnership or as a member of Debtor or any of its direct or indirect
subsidiaries that is a limited liability company, nor shall Secured Party be
deemed to have assumed any obligations under any partnership agreement or
limited liability company agreement, as applicable, of Debtor or any if its
direct or indirect subsidiaries or otherwise, unless and until any such Secured
Party exercises its right to be substituted for such Debtor as a partner or
member, as applicable, pursuant hereto.

     

    (l)           To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of Debtor or any direct or indirect subsidiary
of Debtor or compliance with any provisions of any of the Organizational
Documents, the Debtor hereby grants such consent and approval and waives any
such noncompliance with the terms of said documents.

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.

     

    
      
        
          
            
              
                
                  	 
      	
                          POINT.360,

                        
	 
      	
                          a
      California corporation

                        
	 
      	 
      
	 
      	
                          By:

                        	
                             

                        
	 
      	 
      	
                          Name:    Alan
      R. Steel

                        
	 
      	 
      	
                          Title:      Executive
      Vice President

                        
	 
      	 
      
	 
      	
                           “DEBTOR”

                        
	 	 
	 
      	
                          TROYGOULD
      PC

                        
	 
      	
                          a
      California professional corporation

                        
	 
      	 
      
	 
      	
                          By:

                        	
                             

                        
	 
      	 
      	
                          Name:

                        
	 
      	 
      	
                          Title:

                        
	 
      	 
      
	 
      	
                          “SECURED
      PARTY”

                        

                

              

            

          

        

      

    

     

    
      
         

      

      
        - 12
-RECORDING
REQUESTED BY

    AND
WHEN RECORDED MAIL TO:

     

    TROYGOULD
PC

    1801
Century Park East, 16th
Floor

    Los
Angeles, CA 90067

    Attn:    Sanford
J. Hillsberg

     

    INSTRUCTIONS
TO RECORDER:

    Index
this document as (1) a deed of trust;

    (2) an
assignment of rents;

    (3) a
security agreement; and

    (4) a
fixture filing

     

     

    
      
        

      

    

    (Space
above this line for Recorder’s use)

    

    DEED OF TRUST, FIXTURE
FILING, ASSIGNMENT OF

     

    RENTS, AND SECURITY
AGREEMENT

     

    THIS DEED
OF TRUST, FIXTURE FILING, ASSIGNMENT OF RENTS, AND SECURITY AGREEMENT (the
“Deed of Trust”) is made
on November 1, 2010 by POINT.360, a California
corporation (“Trustor”),
whose address is 2777 North Ontario Street, Burbank, CA 91504, in favor of CHICAGO TITLE COMPANY (“Trustee”), for the benefit of
TROYGOULD PC, a
California professional corporation (“Beneficiary”), whose principal
office is located at 1801 Century Park East, Suite 1600, Los Angeles, CA
90067.

     

    TRUSTOR
IRREVOCABLY GRANTS,
CONVEYS, TRANSFERS AND ASSIGNS TO TRUSTEE, IN TRUST, WITH POWER OF SALE and
right of entry and possession, all of Trustor’s present and future estate,
right, title and interest in and to the following described property
(collectively, the “Property”), subject to any and
all existing liens, mortgages, deeds of trust and other encumbrances or
record.  In addition, Beneficiary agrees to subordinate the lien of
this Deed of Trust to all future encumbrances which may be necessary to
facilitate future financings for working capital or to acquire real property or
equipment by Trustor or for general corporate purposes in accordance with the
terms hereinafter described:

     

    (A)           The
following described parcels of real property located in the County of Los
Angeles, State of California (the “Land”):

     

    See
Exhibit “A” attached hereto and incorporated herein by this
reference.

     

    (B)           All
easements, rights of way, licenses, covenants, agreements and other
appurtenances and rights used in connection with the Land or as a means of
access thereto, whether now or hereafter created (“Appurtenances”);

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (C)           All
buildings, structures, improvements, fixtures, pipes, wires and equipment now
and hereafter owned, constructed, located, erected or installed by or on behalf
of Trustor upon or appurtenant to the Land and all replacements and
substitutions therefor (“Improvements”), together with
all maps, plans and specifications, design, engineering and construction
contracts, bonds, warranties and other contract rights and other general
intangibles relating to the construction of any existing or additional
Improvements upon the Land, as well as all contract rights relating to sales of
all or portions of the Land and Improvements (“Contracts”);

     

    (D)           All
machinery, equipment and other personal property of Trustor if the same is now
or hereafter located at or used in connection with the Improvements, and all
replacements and substitutions therefor (“Equipment”);

     

    (E)           All
leases, subleases, licenses and other occupancy agreements with respect to the
Land, Improvements, Appurtenances and Equipment (“Leases”);

     

    (F)           All
rentals or other payments which may now or hereafter accrue or otherwise become
payable under the Leases to or for the benefit of Trustor together with all
other income, rents, revenues, sale proceeds, issues and profits produced by the
Land, Improvements, Appurtenances and Equipment (collectively the “Rents”); and

     

    (G)           All
earnings, accounts, products, inventory, damages, indemnifications, insurance
proceeds and any other proceeds from any and all of such Land, Improvements,
Appurtenances, Equipment, Leases and Rents including specifically, but without
limitation, all deposits made with or other security given to utility companies
and claims or demands relating to insurance or condemnation awards which Trustor
now has or may hereafter acquire, including all advance payments of insurance
premiums made by Trustor with respect thereto, as well as all deposits made by
purchasers of portions of the Land (“Proceeds”);

     

    (H)           All
of the above referenced Land, Improvements, Contracts, Appurtenances, Equipment,
Leases, Rents and Proceeds are collectively referred to herein as the “Property.”

     

    THIS DEED
OF TRUST SECURES THE FOLLOWING INDEBTEDNESS AND OBLIGATIONS (collectively, the
“Obligations”) in such
order of priority as Beneficiary may from time to time elect:

     

    (1)           Payment
and performance of Trustor’s indebtedness and obligations under that certain
promissory note of even date herewith in the original face principal amount of
Nine Hundred Thirty-Four Thousand Sixty-Three and 73/100 Dollars ($934,063.73)
executed by Trustor and payable to Beneficiary, or order, and all extensions,
renewals, modifications, and replacements thereof (collectively, the “Note”);

     

    (2)           Payment
and performance of any additional notes made by Trustor and payable to
Beneficiary, or order, and all extension, renewals, modifications and
replacements thereof and that refer to being secured by this Deed of Trust
(“Additional
Notes”);

     

    (3)           Payment
and performance of any other indebtedness and obligations under this Deed of
Trust and all extensions, renewals, and modifications of this Deed of Trust;
and

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (4)           Payment
of all sums of money which may be advanced by, or otherwise due to, Trustee or
Beneficiary under any provision of this Deed of Trust or to protect the security
of this Deed of Trust, with interest thereon at the rate provided in this Deed
of Trust;

     

    FOR
VALUABLE CONSIDERATION, Trustor agrees as follows:

     

    ARTICLE
1

     

    DEFINITIONS

     

    For
purposes of this Deed of Trust, the following terms shall have the following
definitions:

     

    1.1           Books and
Records.  “Books and Records” means all books and records
relating to the design, construction, improvement, development, use, ownership,
operation, maintenance, repair, or marketing of the Property.

     

    1.2           Buildings.   “Buildings”
means all buildings, structures and other improvements now existing or hereafter
located on the Land.

     

    1.3           [Intentionally
Omitted]

     

    1.4           Condemnation
Claims.   “Condemnation Claims” means all claims, actions,
causes of action, demands, liens, rights, judgments, settlements, awards,
compensation, and damages of every kind and nature which Trustor now has or
which may hereafter accrue against any Person, whether arising in tort, by
contract or statute, or in any other manner, which in any way directly or
indirectly relate to or arise out of any condemnation of the Property or other
taking of the Property for public or quasi-public use by eminent domain or to
the transfer of the Property in lieu of condemnation or any such
taking.

     

    1.5           Condemnation
Proceeds.   “Condemnation Proceeds” means all proceeds of
the Condemnation Claims, including all money, deposit accounts, accounts, notes,
drafts, instruments, documents, and all other tangible and intangible property
resulting from the payment, collection of, recovery on, or other disposition of
any or all of the Condemnation Claims.

     

    1.6           Covenants
and Restrictions.   “Covenants and Restrictions” means all
covenants, conditions, restrictions, equitable servitudes, and all other similar
matters now or hereafter affecting the Property, including any condominium,
planned unit development, or cooperative apartment declaration of covenants,
conditions and restrictions, by-laws, articles, rules, and regulations to which
Trustor or the Property is subject or bound.

     

    1.7           [Intentionally
Omitted]

     

    1.8           Development
Rights.   “Development Rights” means all existing and
future development rights, development credits, air rights, and options of any
kind relating to the Property.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    1.9           Easements.   “Easements”
means all existing and future easements, rights of way, licenses, and similar
rights relating or appurtenant to the Property and all existing and future
rights in or to streets, roads, sidewalks, alleys, strips and gores adjoining or
used in connection with the Property.

     

    1.10         Event of
Default.   “Event of Default” means any of the events
described in Article 3 of this Deed of Trust.

     

    1.11         Fixtures.   “Fixtures”
means all fixtures, machinery, equipment, building materials, and appliances now
or hereafter located in, on, attached or affixed to, or used in connection with
the Land or the Buildings, including all systems for the supply or distribution
of heat, air conditioning, electricity, gas, water, air or light; elevators,
escalators and related machinery and equipment; fire prevention and
extinguishing equipment and water sprinkler systems; security and access control
equipment; water heaters, showers, bathtubs, tanks, pumps, toilets, sinks,
pipes, and other plumbing fixtures and equipment; stoves, ranges, refrigerators,
dishwashers, and disposals; laundry equipment; engines, motors, generators,
boilers, furnaces, and incinerators; wall, window, and floor coverings,
including screens, shades, drapes, and awnings; partitions, doors, windows,
cabinets, bookcases, and hardware; janitorial, maintenance, and waste and
rubbish removal equipment; recreational equipment; signs; switchboards,
telephone systems, and other communication equipment; television, radio, and
computer cables, antennae, and other equipment; chandeliers and other light
fixtures; trees, plants and other landscaping; and all attachments,
substitutions, accessories, accessions, replacements, improvements, and
additions to any or all of the foregoing, all of which shall conclusively be
deemed to be part of the Land and Buildings and conveyed by this Deed of Trust,
whether or not affixed or attached to the Land.

     

    1.12         Governmental
Authorities.   “Governmental Authorities” means
(a) the United States; (b) the state, county, city, or other political
subdivision in which the Land is located; (c) all other governmental or
quasi-governmental authorities, boards, bureaus, agencies, commissions,
departments, administrative tribunals, and other instrumentalities or
authorities; and (d) all judicial authorities and public utilities having
or exercising jurisdiction over Trustor or the Property.

     

    1.13         Governmental
Permits.   “Governmental Permits” means all permits,
approvals, and authorizations now or hereafter issued by all Governmental
Authorities for or in connection with the design, construction, improvement,
development, use, ownership, operation, maintenance, repair, or marketing of the
Property, including grading permits, foundation permits, building permits,
tentative subdivision map approvals, zone changes, zone variances, conditional
use permits, temporary certificates of occupancy, and final certificates of
occupancy.

     

    1.14         Governmental
Requirements.   “Governmental Requirements” means all
existing and future laws, ordinances, rules, regulations, orders, and
requirements of all Governmental Authorities applicable to Trustor or the
Property, including those respecting the design, construction, improvement,
development, use, ownership, operation, maintenance, repair, or marketing of the
Property.

     

    1.15         [Intentionally
Omitted]

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    1.16         [Intentionally
Omitted]

     

    1.17         [Intentionally
Omitted].

     

    1.18         Impositions.   “Impositions”
means all (a) Taxes; (b) Insurance Premiums; (c) gas,
electricity, water, sewer, and other utility charges which are incurred for the
benefit of the Property or which may become a lien against the Property;
(d) assessments, charges, and fees imposed pursuant to any Covenants and
Restrictions; (e) assessments, charges and fees payable with respect to any
Easements, Water Rights or Development Rights; (f) principal, interest, and
other amounts payable in connection with any Liens; (g) rents and other
amounts payable under any Ground Lease; and (h) such other taxes, charges,
premiums, assessments and impositions relating to the Property, the payment of
which Beneficiary determines to be necessary to protect Beneficiary’s security
for the Obligations.

     

    1.19         Improvements.   “Improvements”
means the Buildings and Fixtures, collectively.

     

    1.20         Insurance
Claims.   “Insurance Claims” means all claims, actions,
causes of action, demands, liens, rights, judgments, settlements, awards,
compensation, and damages of every kind and nature which Trustor now has or
which may hereafter accrue against any Person, whether arising in tort, by
contract or statute, or in any other manner, which in any way directly or
indirectly relate to or arise under any policy of insurance which Trustor
maintains with respect to the Property or which Trustor is required to maintain
under this Deed of Trust (collectively, the “Insurance Policies”).

     

    1.21         Insurance
Proceeds.   “Insurance Proceeds” means all proceeds of the
Insurance Claims, including all money, deposit accounts, accounts, notes,
drafts, instruments, documents, and all other tangible and intangible property
resulting from the payment, collection of, recovery on, or other disposition of
any or all of the Insurance Claims.

     

    1.22         Insurance
Premiums.   “Insurance Premiums” means all premiums and
other amounts payable in connection with procuring or maintaining the Insurance
Policies.

     

    1.23         Leases.   “Leases”
means all existing and future rental agreements, leases, licenses, concessions,
occupancy agreements, and other similar agreements affecting the Property,
including all subleases at any level.

     

    1.24         Liens.   “Liens”
means all mortgages, deeds of trust, mechanics’ liens, and other liens and
encumbrances of every kind and nature, other than this Deed of Trust, now or
hereafter affecting the Property.

     

    1.25         Intentionally
Omitted.

     

    1.26         Mineral
Rights.   “Mineral Rights” means all existing and future
right, title, and interest in and to all minerals, oil, gas and other
hydrocarbon substances in or on the Property.

     

    1.27         Person.   “Person”
means any natural person or any entity, including any corporation, partnership,
joint venture, trust, unincorporated organization, trustee, or Governmental
Authority.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    1.28         Property
Claims.   “Property Claims” means all claims, actions,
causes of action, demands, liens, rights, judgments, settlements, awards,
compensation, and damages of every kind and nature (other than the Insurance
Claims and Condemnation Claims) which Trustor now has or which may hereafter
accrue against any Person, whether arising in tort, by contract or statute, or
in any other manner, which in any way directly or indirectly relate to or arise
out of any or all of the following:  (a) the Property;
(b) any existing or future fact, matter, occurrence, or transaction
relating to the Property; or (c) the design, construction, improvement,
development, use, ownership, operation, maintenance, repair or marketing of the
Property.

     

    1.29         Property
Proceeds.   “Property Proceeds” means all proceeds of the
Property Claims, including all money, deposit accounts, accounts, notes, drafts,
instruments, documents, and all other tangible and intangible property resulting
from the payment, collection of, recovery on, or other disposition of any or all
of the Property Claims.

     

    1.30         Rents and
Profits.   “Rents and Profits” means all existing and
future rents, royalties, issues, profits, proceeds, revenues, income and other
benefits of the Property and all Leases, including all security deposits and
prepaid rent.

     

    1.31         Taxes.   “Taxes”
means (a) all taxes, bonds, levies and assessments now or hereafter
affecting the Property, including all general and special real and personal
property taxes, bonds, and assessments affecting the Property; (b) all
other taxes, bonds, levies and assessments which now are or hereafter may become
a lien on the Property, including all income, profits, franchise, withholding,
and gross receipt taxes; (c) all other charges now or hereafter imposed on
or assessed against the Property by any Governmental Authority or arising with
respect to the design, construction, improvement, development, use, ownership,
operation, maintenance, repair or marketing of the Property; and (d) all
taxes, bonds, levies, and assessments now or hereafter imposed by any
Governmental Authorities on Trustee or Beneficiary by reason of their respective
interests in this Deed of Trust, the Note, or any promissory note evidencing a
Future Advance, excluding any franchise, estate, inheritance, income, or similar
tax imposed on Beneficiary or Trustee.

     

    1.32         Tenants.   “Tenants”
means all tenants and occupants of the Property under the Leases.

     

    1.33         Water
Rights.   “Water Rights” means all existing and future
water, water rights (whether riparian, appropriative, or otherwise, and whether
or not appurtenant), and all water stock relating to the Property.

     

    ARTICLE
2

     

    COVENANTS OF
TRUSTOR

     

    2.1           Performance
of Secured Obligations.   Trustor shall pay and perform
each and all of the Obligations in accordance with their respective
terms.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    2.2           Preservation
of the Property.   Trustor (a) shall maintain the
Property in good condition and repair; provided, however, Trustor may demolish
the existing Improvements thereon for the purpose of preparing the Property for
redevelopment; (b) shall comply and cause the Property to comply with the
provisions of all Insurance Policies; (c) shall comply and cause the
Property to comply with all Governmental Requirements; (d) shall comply and
cause the Property to comply with all Covenants and Restrictions; (e) shall
maintain in effect all Governmental Permits; (f) except for matters in the
ordinary course of Trustor’s business, shall not remove, demolish, improve, add
to, or alter the Improvements (excluding alterations which preserve or increase
the value of the Property); (g) shall not commit or permit any waste
respecting the Property or impairment of the Property; (h) shall not
abandon the Property; (i) shall not commit or permit any act upon the
Property in violation of any Governmental Requirements; and (k)  shall
maintain and do all other acts, in a timely and proper manner, which from the
character or use of the Property may be necessary or appropriate to preserve,
protect and maintain the value of the Property.

     

    2.3           Insurance.   Trustor
shall at all times maintain in full force and effect all currently existing
insurance coverage regarding the Property.

     

    2.4           Insurance
Policies.   Upon an Event of Default, Trustor shall
deliver to Beneficiary the originals of all Insurance Policies together with
receipts for the full payment of all Insurance Premiums, and Beneficiary shall
have the right to hold such policies as long as any Obligations are
outstanding.

     

    2.5           Assignment
of Insurance Claims and Proceeds.   Upon an Event of
Default, Trustor grants, transfers, and assigns to Beneficiary the Insurance
Claims and Insurance Proceeds.

     

    2.6           Assignment
of Condemnation Claims and Proceeds and Other
Claims.   Upon an Event of Default, Trustor grants,
transfers, and assigns to Beneficiary the Condemnation Claims, Condemnation
Proceeds, Property Claims, and Property Proceeds.

     

    2.7           Intentionally
Omitted.

     

    2.8           Prosecution
and Settlement of Claims.  Prior to the occurrence of any Event
of Default, Trustor shall have the right to prosecute and enforce the Insurance
Claims, Condemnation Claims, and Property Claims (collectively, the “Claims”). Upon an Event of
Default, Beneficiary shall have the right to appear in, defend, and prosecute
any action or proceeding arising out of or relating to any or all of the Claims
if Beneficiary determines that such action is necessary or appropriate to
protect Beneficiary’s interest in connection with the
Obligations.  Upon the occurrence of an Event of Default, Trustor’s
right to prosecute and enforce the Claims shall be revoked upon, and to the
extent provided in, notice by Beneficiary to Trustor.  Following such
revocation, Beneficiary, at its option, shall have the exclusive right to
prosecute and enforce any or all of the Claims to the extent provided in
Beneficiary’s notice of revocation and to compromise, adjust, settle or dismiss
any or all of the Claims, whether or not Beneficiary has taken possession of the
Property.  Without Beneficiary’s prior written consent, Trustor shall
not (a) sell, transfer, pledge, hypothecate or otherwise dispose of or
abandon any or all of the Claims; or (b) compromise, adjust, settle, or
dismiss any or all of the Claims.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    2.9           No
Liability by Beneficiary.     Prior to an Event
of Default, nothing contained in this Deed of Trust shall be deemed to obligate
Beneficiary to prosecute or enforce any or all of the Claims nor shall
Beneficiary have any liability or responsibility for any failure or delay by
Beneficiary in prosecuting or enforcing any or all of the Claims or to collect
any or all of the Proceeds.  Trustor shall at all times have the right
to determine and follow its own policies and practices in the conduct of its
business. Prior to an Event of Default, nothing contained in this Deed of Trust
nor Beneficiary’s receipt of any Proceeds shall result in any obligation or
liability by Beneficiary for the performance or observance of any of the terms
of any document or Insurance Policies relating to any or all of the Claims or
the Proceeds.

     

    2.10         [Intentionally
Omitted]

     

    2.11         [Intentionally
Omitted]

     

    2.12         Taxes and
Impositions.   Trustor (a) shall pay all Taxes at
least ten (10) days before delinquency; and (b) shall pay all other
Impositions when due.  Upon Beneficiary’s request, Trustor shall
deliver to Beneficiary receipts and such other substantiating documentation as
may be required by Beneficiary to evidence payment of all Impositions by Trustor
in accordance with this Section.

     

    2.13         [Intentionally
Omitted]

     

    2.14         Assignment
of Rents and Profits.

     

    (a)           Assignment.   Upon
the occurrence of an Event of Default, as additional security, Trustor, shall
irrevocably and unconditionally grant, transfer and assign to Beneficiary all
Rents and Profits.  Prior to the occurrence of an Event of Default,
Trustor shall have the right to collect and retain on the terms of this
Section 2.14 all Rents and Profits as they become due and
payable.  Upon the occurrence of an Event of Default, Trustor’s right
to collect the Rents and Profits shall automatically be revoked and shall be
transferred without further notice to Trustor.  Following such
revocation, Beneficiary shall be entitled to collect and retain all Rents and
Profits, whether or not Beneficiary has taken possession of the Property, and
Trustor shall immediately pay or deliver to Beneficiary any Rents and Profits
then held or thereafter collected by Trustor.  All Rents and Profits
collected by or on behalf of Beneficiary shall be applied by Beneficiary to the
Obligations in such order as Beneficiary may determine.  If
Beneficiary elects to seek the appointment of a receiver following the
occurrence of an Event of Default, Trustor irrevocably and unconditionally
consents to the appointment of a receiver without regard to the adequacy of the
security for any of the Obligations.

     

    (b)           Applications
of Rents and Profits Prior to Assignment.   Trustor shall
apply the Rents and Profits to the payment of all reasonable and necessary
operating costs and expenses of the Property, installment payments due in
connection with the Note and any Additional Notes, payment of Impositions, and a
reasonable reserve for future reasonable and necessary expenses, repairs and
replacements relating to the Property before using the Rents and Profits for any
other purpose which does not directly benefit the Property.

     

    (c)           Notices
to Tenants.   Upon assignment as described in
Section 2.14(a) above, Trustor irrevocably authorizes and directs all
Tenants under the Leases to comply with any notice or demand by Beneficiary for
payment to Beneficiary of any Rents and Profits or for the performance of any of
the Tenant’s other respective obligations under the Leases, regardless of any
conflicting demand by Trustor or notice by Trustor to any Tenant that
Beneficiary’s demand is invalid or wrongful.  No Tenant shall have any
duty to inquire as to whether any default by Trustor has occurred under the Deed
of Trust in connection with any notice or demand by Beneficiary under this
Section.

    
      
         

      

      
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    2.15         [Intentionally
Omitted]

     

    2.16         [Intentionally
Omitted]

     

    2.17         [Intentionally
Omitted]

     

    2.18         [Intentionally
Omitted]

     

    2.19         [Intentionally
Omitted]

     

    2.20         Leases.   Upon
an Event of Default, and at upon Beneficiary’s request, Trustor shall execute,
acknowledge and deliver to Beneficiary an absolute and unconditional assignment
acceptable to Beneficiary of all of Trustor’s interests in all Leases and all
guaranties of and security for the Tenants’ respective obligations under the
Leases.

     

    2.21         Attornment
at Beneficiary.  Each Tenant who enters into a Lease for the
Property after the date of recordation of this Deed of Trust (each such Lease is
referred to as a “Subordinate
Lease”) shall be deemed to be have agreed to attorn to Beneficiary and
accept Beneficiary as the landlord under its Lease on the terms of this
Section.  Such attornment shall be effective and self-operative as of
the date of acquisition of the Property without the execution of any further
documents on the part of the Tenant, Beneficiary, or any other party, and the
Tenant under the Subordinate Lease shall be bound to Beneficiary under all of
the terms, covenants, and conditions of the Subordinate Lease for the remaining
balance of the term thereof, with the same force and effect as if Beneficiary
were the landlord under such Lease. However, Beneficiary (a) shall not be
liable for any act or omission of any prior landlord under any Subordinate
Lease, including Trustor; (b) shall not be subject to any offset, defense,
or claim which any Tenant may have against any prior landlord under any
Subordinate Lease, including Trustor; (c) shall not be obligated
(i) to return any security deposit now or hereafter paid by any Tenant;
(ii) to return any prepaid rent or other amounts prepaid by any Tenant; or
(iii) to grant any Tenant a credit for any such security deposit, prepaid
rent or other prepaid amounts (excluding monthly rent and other charges which
have not been prepaid for more than one month in advance), except to the extent,
if any, that Beneficiary has actually and unconditionally received such security
deposit, prepaid rent or other prepaid amounts; and (d) shall not be
obligated to complete the construction of any or all
Improvements.  Without limiting the terms of this Section, upon
Beneficiary’s request, each Tenant under a Subordinate Lease shall execute and
deliver to Beneficiary any document which Beneficiary determines to be necessary
or appropriate to evidence such Tenant’s attornment to Beneficiary on the terms
of this Section, including a new lease with Beneficiary on the same terms and
conditions as the Subordinate Lease for a term equal to the unexpired term of
the Subordinate Lease.

     

    2.22         Compliance
with Leases.   Trustor (a) shall perform all
obligations of the landlord under the Leases and shall not permit or suffer any
default by Trustor under the terms of any of the Leases; and (b) shall
diligently enforce all remedies available to Trustor in the event of a default
by any Tenant under any of the Leases.

    
      
         

      

      
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    2.23         [Intentionally
Omitted].

     

    2.24         Notice of
Certain Matters.   Trustor shall promptly notify
Beneficiary in writing of (a) any claim, demand, right, or Lien relating to
the Property which may be adverse to the lien of this Deed of Trust;
(b) any material loss, depreciation, or adverse change in the value of the
Property and any other occurrence which may materially and adversely affect
Beneficiary’s lien on the Property; (c) any adverse change in Trustor’s
ability to perform any or all of the Obligations; (d) any event or
condition which constitutes an Event of Default; and (e) any dispute
between Trustor and any Governmental Authority relating to the Property which
may have a material adverse effect on the Property.

     

    2.25         [Intentionally
Omitted]

     

    2.26         Defense
of Actions and Protection of Security by
Trustor.   Trustor shall appear in and defend any action
or proceeding commenced by any Person other than Beneficiary which affects or
which Beneficiary determines may affect any or all of the
following:  (a) the Property; (b) the Insurance Claims,
Condemnation Claims, or Property Claims; (c) Beneficiary’s, Trustee’s or
Trustor’s respective rights and obligations under the Note, any Additional Notes
or this Deed of Trust; (d) the Obligations; or (e) any other transaction or
matter which affects Beneficiary by reason of its interest in the
Property.  Trustor shall promptly commence and diligently prosecute
all actions and proceedings which are necessary or appropriate or which
Beneficiary determines may be necessary or appropriate to do any or all of the
following:  (i) prevent any damage, destruction, or injury to the
Property; (ii) enforce or recover upon the Insurance Claims, Condemnation
Claims or Property Claims or collect the Insurance Proceeds, Condemnation
Proceeds, or Property Proceeds; or (iii) to preserve, protect, maintain,
and defend the Property and Beneficiary’s lien thereon.

     

    2.27         Further
Assurances.   Upon Beneficiary’s request, Trustor shall
execute, acknowledge and deliver to Beneficiary such further documents and
agreements and take such further actions as Beneficiary may reasonably require
from time to time to effectuate or carry out the purposes of the Deed of Trust
or to evidence, perfect, maintain, preserve or protect Beneficiary’s lien on the
Property, including Trustor’s execution of security agreements, assignments,
financing statements, and continuation financing statements.

     

    ARTICLE
3

     

    EVENTS OF
DEFAULT

     

    Beneficiary,
at its option, shall have the right to declare Trustor to be in default under
this Deed of Trust upon the occurrence of any or all of the following
events:

     

    3.1           Payment
of Note.   If Trustor fails to pay any of its indebtedness
or perform any of its obligations under the Note or Additional Notes when due
and after notice and cure period stated therein;

    
      
         

      

      
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    3.2           Performance
Under Other Documents.   If Trustor fails to pay any of
its indebtedness or to perform any of its material obligations to Beneficiary
under this Deed of Trust or any of the other documents in connection therewith
when due and after notice and cure period stated herein or therein;

     

    3.3           [Intentionally
Omitted]

     

    3.4           Misrepresentation.   If
any request, statement, information, certification, or representation, whether
written or oral, submitted or made by Trustor to Beneficiary in connection with
the Note or any other extension of credit by Beneficiary to Trustor is
materially false or misleading;

     

    3.5           Insolvency
of Trustor.   If (a) a petition is filed by or against
Trustor under the federal bankruptcy laws or any other applicable federal or
state bankruptcy, insolvency or similar law; (b) a receiver, liquidator,
trustee, custodian, sequestrator, or other similar official is appointed to take
possession of Trustor or the Property, or Trustor consents to such appointment;
(c) Trustor makes an assignment for the benefit of creditors or fails generally
to pay its debts as they become due; or (d) Trustor takes any action in
furtherance of any of the foregoing and such matters continue for 90 ninety days
without being dismissed;

     

    3.6           [Intentionally
Omitted]

     

    3.7           [Intentionally
Omitted]

     

    3.8           [Intentionally
Omitted]

     

    3.9           [Intentionally
Omitted]

     

    3.10         Dissolution.   If
Trustor is a corporation, the dissolution, liquidation, or termination of
existence of such Person;

     

    3.11         [Intentionally
Omitted]

     

    3.12         Sales,
Transfers, and Further Encumbrances.  Beneficiary shall have
the right, at its option and without notice to or demand on Trustor, to declare
any or all Obligations to be immediately due and payable if any of the following
events occurs without Beneficiary’s prior written consent:  (a) the
sale, conveyance, transfer of all or any part of the Property or any interest in
the Property, whether voluntary or involuntary, or Trustor’s grant of any option
or agreement to effect any such transaction; and (b) the dissolution or
liquidation of Trustor.  Beneficiary’s consent to any event described
in this Section may be withheld in Beneficiary’s sole and absolute
discretion.  Beneficiary’s consent to any event described in this
Section shall not be deemed to be a consent to, or a waiver of the right to
require such consent for, any other event.

     

    3.13         [Intentionally
Omitted]

     

    3.14         Condemnation.   If
any condemnation proceeding or action is pending or commenced by any
Governmental Authority with respect to more than 10% of the
Property;

    
      
         

      

      
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    3.15         [Intentionally
Omitted]

     

    ARTICLE
4

     

    REMEDIES

     

    Upon
Beneficiary’s election to declare Trustor to be in default under this Deed of
Trust pursuant to Article 3 above, Trustor shall be deemed to be in default
under this Deed of Trust, and Beneficiary shall have the following rights and
remedies:

     

    4.1           Acceleration.   Beneficiary
shall have the right to declare any or all of the Obligations to be immediately
due and payable, including the entire principal amount and all accrued but
unpaid interest under the Note, any Additional Notes and any Future Advances by
Beneficiary, and notwithstanding the stated maturity of the Note or any Future
Advances, such Obligations shall thereupon be immediately due and
payable.

     

    4.2           Entry by
Beneficiary.   Whether or not Beneficiary elects to
accelerate any or all of the Obligations under Section 4.1 above, Beneficiary
shall have the right (a) to enter, take possession of, and manage, operate
and lease the Property; (b) to take possession of any or all Books and
Records; (c) to collect any or all Rents and Profits, whether or not
Beneficiary has taken possession of the Property; and (d) to take any or
all actions which Beneficiary determines to be necessary or appropriate in
connection therewith or to preserve, protect, maintain and defend the Property
and Beneficiary’s lien thereon, including (i) the exercise and enforcement of
all of Trustor’s rights under any or all of the Leases; (ii) the termination,
acceptance of a surrender, modification or amendment of any or all of the
Leases; (iii) the execution of new Leases on such terms and conditions as
Beneficiary determines to be appropriate; and (iv) the repair, alteration,
improvement or completion of the Property in such manner and to such extent as
Beneficiary determines to be necessary or appropriate.  If Beneficiary
elects to take possession of the Property or to take any or all of the other
actions described in this Section by court process, Trustor irrevocably and
unconditionally agrees that a receiver may be appointed by a court for such
purpose pursuant to Section 4.6 below.

     

    4.3           Judicial
Action.   Beneficiary shall have the right to commence an
action or proceeding to foreclose this Deed of Trust and to enforce any or all
of the terms of the Note or Security Agreement, including specific performance
of the covenants of Trustor under this Deed of Trust.

     

    4.4           Foreclosure
by Power of Sale.

     

    (a)           Declaration
and Notice of Default.   Beneficiary shall have the right
(i) to cause the Property to be sold under the power of sale contained in
this Deed of Trust in any manner permitted by applicable law; and (ii) to
deliver to Trustee a written declaration of default and demand for sale and a
written notice of default and election to cause the Property to be sold, which
notice the Trustee or Beneficiary shall cause to be recorded as required by
law.  Upon the expiration of such period of time after the recordation
of such notice of default and election to sell and the giving of such notice of
sale as may then be required by law, and without the necessity of any demand on
Trustor, Trustee, at the time and place specified in the notice of sale, shall
sell the Property at public auction to the highest bidder for cash in lawful
money of the United States payable at the time of sale.

    
      
         

      

      
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    (b)           Postponements;
Multiple Parcels.   To the extent permitted by law,
Trustee may, and upon request of Beneficiary shall, from time to time, postpone
any sale hereunder by public announcement at the time and place noticed for such
sale or may, in its discretion, give a new notice of sale.  If the
Property consists of several lots, parcels or items of property, Beneficiary
shall have the exclusive right (i) to designate the order in which such lots,
parcels or items shall be offered for sale or sold; and (ii) to elect to sell
such lots, parcels or items through a single sale, through two or more
successive sales, or in any other manner Beneficiary determines to be in its
best interest.  Any Person, including Trustor, Trustee and
Beneficiary, may purchase at any sale under this Deed of Trust, and Beneficiary
shall have the right to purchase at any such sale by crediting upon the bid
price the amount of all or any part of the Obligations.  If
Beneficiary determines to sell the Property in more than one sale, Beneficiary
may, at its option, cause such sales of the Property to be conducted
simultaneously or successively, on the same day or on such different days or
times and in such order as Beneficiary may determine, and no such sale shall
terminate or otherwise affect the lien of this Deed of Trust on any part of the
Property that has not been sold until all Obligations have been paid in
full.

     

    (c)           Costs of
Sale; Deed to Purchaser.   Trustor shall pay all costs,
fees, and expenses of all sales of the Property under this Deed of Trust,
including the costs, fees, and expenses (including reasonable attorneys’ fees)
of Trustee and Beneficiary, together with interest thereon at the interest rate
applicable to principal under the Note.  Upon any sale under the power
of sale contained in this Deed of Trust, Trustee shall execute and deliver to
the purchaser or purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or implied.  The
recitals in any such deed or deeds of any matter or facts, including the
existence of any default by Trustor, the giving of notice of default and notice
of sale, and other facts affecting the regularity or validity of such sale or
sales, shall be conclusive proof of the truth of such facts and matters, and any
such deed or deeds shall be conclusive against all Persons as to such facts and
matters recited therein.  A sale of less than all of the Property or
any defective or irregular sale under this Deed of Trust shall not exhaust,
impair or otherwise affect the power of sale contained in this Deed of Trust,
and subsequent sales of the Property may be made under this Deed of Trust until
all Obligations have been satisfied or until the entire Property has been sold
without defect or irregularity.  If Beneficiary elects to cause the
Property to be sold under the power of sale contained in this Deed of Trust,
Beneficiary shall deposit with the Trustee this Deed of Trust, the Note, and
such receipts and evidence of such other Obligations as Trustee may reasonably
require.

     

    4.5           Application
of Sale Proceeds.   Trustee shall apply the proceeds of
the sale or sales conducted by Trustee in the following order of
priority:  (a) first, to payment of all expenses of such sale or sales
and all costs, expenses, fees, and liabilities of Trustee and this trust,
including attorneys’ fees, costs of a trustee’s sale guaranty, costs of other
evidence of title, and Trustee’s fees in connection with such sale or sales; (b)
second, to all amounts advanced by Trustee or Beneficiary under any of the terms
of this Deed of Trust which have not then been repaid, together with interest
thereon at the rate applicable to principal under the Note or, with respect to
Trustee, the maximum rate permitted by law to be charged by Trustee; (c) third,
to the payment of all other Obligations in such order and amounts as Beneficiary
determines; and (d) the remainder, if any, to the Trustor.

    
      
         

      

      
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    4.6           Appointment
of a Receiver.   Beneficiary shall have the absolute and
unconditional right to apply to any court having jurisdiction and obtain the
appointment of a receiver or receivers of the Property, and Trustor irrevocably
and unconditionally consents to such appointment and agrees that Beneficiary
shall have the right to obtain such appointment (a) without notice to
Trustor or any other Person; (b) without regard to the value of the
Property or any other collateral securing the Obligations; and (c) without
acceleration of the Obligations or commencement of foreclosure proceedings under
this Deed of Trust.  Any such receiver or receivers shall have the
usual powers and duties of receivers in similar cases and all powers and duties
necessary or appropriate to exercise the rights of Beneficiary as provided in
this Deed of Trust.

     

    4.7           Protection
of Beneficiary’s Security.   Beneficiary or Trustee,
without obligation to do so and without notice to or demand on Trustor, and
without releasing Trustor from any of its Obligations or waiving Beneficiary’s
rights under the Deed of Trust, shall have the right to perform any Obligation
which Trustor has breached in such manner, at such time, and to such extent as
Beneficiary or Trustee determines to be necessary or appropriate to preserve,
protect, maintain and defend the Property and Beneficiary’s lien
thereon.

     

    4.8           Assembly
of Property.   Upon Beneficiary’s request, Trustor shall
assemble and make available to Beneficiary at the location of the Land all
Property which has been removed from or which is not located on the
Land.

     

    4.9           [Intentionally
Omitted]

     

    4.10         Rescission
of Notice of Default.   Prior to the conduct of any sale
under the power of sale contained in this Deed of Trust, Beneficiary, at its
option, shall have the right to rescind any notice of default and election to
sell the Property by delivering to Trustee a written notice of rescission
executed by Beneficiary which, when recorded, shall cancel the foreclosure
proceedings which have been commenced by the recordation of such notice of
default and election to sell.  Beneficiary’s rescission of any notice
of default and election to sell pursuant to this Section or under applicable law
shall not constitute or be construed as a waiver of any Event of Default or
impair, prejudice or otherwise affect (a) Beneficiary’s right to record a new
notice of default and election to sell the Property based on the same or any
other Event of Default; or (b) Beneficiary’s rights and remedies in connection
with the Obligations.

     

    ARTICLE
5

     

    WARRANTIES AND
REPRESENTATIONS

     

    5.1           Warranties
and Representations.   As a material inducement to
Beneficiary in accepting this Deed of Trust as collateral for Trustor’s
Obligations to Beneficiary, Trustor warrants and represents to the Beneficiary
as follows:

     

    (a)           Corporate
Existence.   If Trustor is a corporation, Trustor is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and Trustor is qualified to do business and is in good
standing under the laws of the state in which the Property is
located.

    
      
         

      

      
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    (b)           Authority.   Trustor
has the full power and authority to carry on its business and to enter into and
perform all of its obligations under this Deed of Trust, and when executed by
the Persons signing this Deed of Trust on behalf of Trustor, shall constitute
legal, valid and binding obligations of Trustor enforceable in accordance with
their respective terms.  The Persons executing this Deed of Trust on
behalf of Trustor are duly authorized to execute the Note, any Additional Notes
and all other documents required by Beneficiary in connection with the this Deed
of Trust on behalf of Trustor.  No consent of any other Person and no
consent, approval, authorization or other action by or filing with any
Governmental Authorities is required in connection with the execution, delivery
and performance of Trustor’s obligations under this Deed of Trust.

     

    5.2           [Intentionally
Omitted]

     

    ARTICLE
6

     

    MISCELLANEOUS

     

    6.1           Beneficiary
Statement; Certain Charges.   With respect to (a) any
statement, accounting, or similar information requested by Trustor or any other
Person pursuant to California Civil Code Section 2943 or 2954 or any other
provision of applicable law; or (b) any other document furnished to Trustor
or any other Person by Beneficiary at Trustor’s request, Beneficiary shall have
the right to charge the maximum amount then permitted by law or, if there is no
such maximum, $250 for providing such statement, accounting, or other
information.  Trustor shall pay Beneficiary a reasonable charge for
any other service rendered by Beneficiary in connection with the Obligations or
the Property, including the issuance of a request for full or partial
reconveyance of this Deed of Trust, transmitting proceeds to an escrow holder
and changing Beneficiary’s records relating to the Obligations.

     

    6.2           Reconveyance.

     

    (a)           Upon
(i) Beneficiary’s written request stating that all Obligations secured by
this Deed of Trust have been paid or performed in full; (ii) surrender to
Trustee of this Deed of Trust, the Note and all other documents evidencing the
indebtedness secured by this Deed of Trust; and (iii) payment of Trustee’s
fees and expenses of this trust, Trustee shall reconvey the Property then held
under this Deed of Trust without warranty of any kind.  The recitals
in the reconveyance of any matters or facts shall be conclusive proof of their
truthfulness.  The grantee in such reconveyance may be described as
the “person or persons legally entitled thereto”.  Such reconveyance
shall operate as a reassignment of the Rents and Profits assigned to Beneficiary
under this Deed of Trust. Trustee shall deliver this Deed of Trust and the Note
after full reconveyance to the Person or Persons legally entitled
thereto.

     

    (b)           [Intentionally
Omitted].

    
      
         

      

      
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    6.3           Substitution
of Trustee.   Beneficiary, at its option, shall have the
right from time to time to appoint a successor trustee to any trustee appointed
under this Deed of Trust by Beneficiary’s execution and acknowledgement of a
written instrument which is recorded in the office of the recorder of each
county in which the Property is located.  The recordation of such an
instrument in accordance with this Section shall constitute conclusive proof of
the proper substitution of a successor trustee under this Deed of
Trust.  Upon recordation of such an instrument, the successor trustee
shall succeed to all the title, power and duties granted to the Trustee under
this Deed of Trust and by applicable law without conveyance of the
Property.  Such instrument shall contain the name of the original
Beneficiary, Trustee and Trustor named in this Deed of Trust, the book and page
or other recording information for this Deed of Trust, and the name and address
of the successor trustee.  If a notice of default has been recorded
prior to the recordation of a substitution of trustee, the power of substitution
shall not be exercised by Beneficiary until the costs, fees and expenses of the
acting trustee have been paid in full and the acting trustee has endorsed
acknowledgement of receipt of such amounts on the instrument substituting the
successor trustee.  Without limiting the terms of this Section,
Beneficiary shall have the right from time to time to substitute a successor to
any trustee appointed under this Deed of Trust in accordance with any statutory
or other procedure allowed by law for such substitution.

     

    6.4           Execution
of Instruments by Beneficiary and Trustee.   Without
notice to or affecting the liability of Trustor or any other Person for the
payment or performance of the Obligations, without affecting the lien or
priority of this Deed of Trust or Beneficiary’s rights and remedies under the
Deed of Trust, and without liability to Trustor or any other Person, Beneficiary
and Trustee (if Trustee is so requested in writing by Beneficiary) shall have
the right, at any time and from time to time, to do any one or more of the
following:  (a) reconvey any part of the Property; (b) consent in
writing to the making of any map or plat relating to the Property; (c) join
in or consent to the granting of any Easement affecting the Property; and
(d) execute any extension agreement relating to any or all of the
Obligations, any document subordinating the lien of this Deed of Trust to any
other Lien or document, or any other document relating to the Property,
Obligations, or Deed of Trust.

     

    6.5           Trust
Irrevocable; Acceptance by Trustee.   The trust created by
this Deed of Trust is irrevocable by Trustor.  Trustee accepts this
trust when this Deed of Trust, duly executed and acknowledged, is recorded in
the county in which the Property is located as provided by
law.  Trustee is not obligated to notify any party of a pending sale
under any other deed of trust or of any action or proceeding in which Trustor,
Beneficiary or the Trustee shall be a party unless brought by the
Trustee.

     

    6.6           [Intentionally
Omitted]

     

    6.7           [ Intentionally
Omitted]

     

    6.8           [Intentionally
Omitted].

     

    6.9           Beneficiary’s
Agreement to Subordinate.   Beneficiary
agrees to subordinate the lien of this Deed of Trust to any bank or other
institutional financing for the Trustor’ operations obtained by the Trustor or
to loans made to Trustor by Haig Bagerdjian which are to be secured by the
Trustor’s real property.

    
      
         

      

      
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    6.10         Taxes
Imposed on Beneficiary.   If, after the date of this Deed
of Trust, any Governmental Requirements are enacted for the purpose of taxing
any lien on the Property or changing in any way the laws for the taxation of
deeds of trust or debts secured by deeds of trust, so as to impose on
Beneficiary payment of all or part of any Taxes assessed against the Property,
then prior to the due date of such Taxes, Trustor shall pay all such Taxes and
agree to pay such Taxes when levied or assessed against the Property or
Beneficiary; provided, however, that if such payment or agreement by Trustor
shall not be permitted by law, Beneficiary, at its option, shall have the right
to declare any or all of the Obligations to be immediately due and payable upon
notice to Trustor.  Nothing contained in this Section shall be deemed
to require Trustor to pay any franchise, estate, inheritance, income or similar
tax imposed on Beneficiary.

     

    6.11         [Intentionally
Omitted]

     

    6.12         Defense
of Actions and Protection of Security by
Beneficiary.   Whether or not an Event of Default has
occurred, Beneficiary and Trustee shall each have the right, but not the
obligation, at their own expense, to appear in and defend any action or
proceeding, whether commenced by or against Trustor, any of the Guarantors, or
any other Person, which affects or which Beneficiary or Trustee reasonably
determines is likely to materially adversely affect any or all of the
following:  (a) the Property; (b) the Insurance Claims,
Condemnation Claims, or Property Claims; (c) Beneficiary’s or Trustor’s
respective rights and obligations under the Note or this Deed of Trust; or
(d) the Obligations.  Beneficiary and Trustee shall each have the
right, but not the obligation, to commence and prosecute any action or
proceeding which Beneficiary or Trustee determines to be reasonably necessary or
appropriate to do any or all of the following:  (i) prevent any
damage, destruction, or injury to the Property; (ii) enforce or recover
upon the Insurance Claims, Condemnation Claims, or Property Claims or collect
the Insurance Proceeds, Condemnation Proceeds, or Property Proceeds pursuant to
this Deed of Trust; (iii) preserve, protect, maintain, and defend the
Property and Beneficiary’s lien thereon; or (iv) enforce or exercise any
right, remedy or power available to or conferred on Beneficiary or Trustee under
the This Deed of Trust or applicable law.  Beneficiary and Trustee
shall each have the right to discontinue, suspend or dismiss any such action or
proceeding which has been commenced by Beneficiary or Trustee at any
time.

     

    6.13         [Intentionally
Omitted]

     

    6.14         Payment
of Advances by Trustor.   All Reimbursable Costs and all
other costs, fees, expenses and liabilities incurred or paid by Beneficiary
under any other provision of the This Deed of Trust or under applicable law in
connection with the Obligations or the Property (a) shall be payable by
Trustor to Beneficiary on Beneficiary’s demand; (b) shall constitute
additional indebtedness of Trustor to Beneficiary; (c) shall be secured by this
Deed of Trust; and (d) shall bear interest from the date of expenditure at
the rate of interest applicable to principal under the Note.  All
Reimbursable Costs and all other costs, fees, expenses and liabilities incurred
or paid by Trustee under this Deed of Trust or under applicable law in
connection with this Deed of Trust shall be payable by Trustor to Trustee on
Trustee’s demand and shall bear interest at the maximum rate permitted to be
charged by Trustee under applicable law.  Nothing contained in this
Deed of Trust shall be deemed to obligate Beneficiary or Trustee (i) to incur
any costs, fees, expenses, or liabilities; (ii) to make any appearances in or
defend any action or proceeding; or (iii) to commence or prosecute any action or
proceeding relating to any matter.

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    6.15         No Third
Party Beneficiaries.   This Deed of Trust is entered into
for the sole protection and benefit of Beneficiary and Trustor and their
respective permitted successors and assigns.  No other Person shall
have any rights or causes of action under this Deed of Trust.

     

    6.16         Notices.   All
notices and demands by Beneficiary to Trustor under this Deed of Trust shall be
in writing and shall be effective on the earlier of personal delivery to Trustor
or two (2) days after deposit in first-class or certified United States mail,
postage prepaid, addressed to Trustor at the address set forth in this Deed of
Trust, except that service of any notice of default or notice of sale provided
or required by law shall, if mailed, be deemed effective on the date of
mailing.  All notices and demands by Trustor to Beneficiary under this
Deed of Trust shall be in writing and shall be effective on actual receipt by
Beneficiary at Beneficiary’s address set forth in this Deed of Trust; provided,
however, that nonreceipt of any such notice or demand by Beneficiary as a result
of Beneficiary’s refusal to accept delivery or Beneficiary’s failure to notify
Trustor of Beneficiary’s change of address shall be deemed receipt by
Beneficiary.  Trustor’s and Beneficiary’s respective addresses set
forth in this Deed of Trust may be changed by written notice given to the other
party in accordance with this Section.  If Trustor consists of more
than one Person, service of any notice or demand on any one of such Persons by
Beneficiary shall be effective service on Trustor for all purposes.

     

    6.17         Performance
of Covenants.   Trustor shall perform and comply with all
of its obligations under this Deed of Trust at Trustor’s sole cost and
expense.

     

    6.18         Severability.   If
any provision of the Note, any Additional Notes or this Deed of Trust shall be
held by any court of competent jurisdiction to be unlawful, voidable, void, or
unenforceable for any reason, such provision shall be deemed to be severable
from and shall in no way affect the validity or enforceability of the remaining
provisions of the Note, any Additional Notes or this Deed of Trust.

     

    6.19         Interpretation.   Whenever
the context of the Note, any Additional Notes or this Deed of Trust reasonably
requires, all words used in the singular shall be deemed to have been used in
the plural, and the neuter gender shall be deemed to include the masculine and
feminine gender, and vice versa.  For purposes of this Deed of Trust,
all references to the Property or Improvements shall be deemed to refer to all
or any part of the Property or Improvements, respectively.  The
headings to sections of this Deed of Trust are for convenient reference only,
and they do not in any way define or limit any of the terms of this Deed of
Trust and shall not be used in interpreting this Deed of Trust.  For
purposes of this Deed of Trust, the term “including” shall be deemed to mean
“including without limitation,” and the term “document” shall include all
written contracts, commitments, restrictions, agreements, mortgages, and
instruments.

     

    6.20         Time of
the Essence.   Time is of the essence in the performance
of each provision of the Note, any Additional Notes or this Deed of Trust by
Trustor.

     

    6.21         Amendments.   The
Note and this Deed of Trust may be modified only by written agreement signed by
Beneficiary and Trustor.

    
      
         

      

      
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    6.22         Entire
Agreement.   The Note, the Security Agreement and this
Deed of Trust contain the entire agreement concerning the subject matter of the
Obligations and supersede all prior and contemporaneous negotiations,
agreements, statements, understandings, terms, conditions, representations and
warranties, whether oral or written, between Beneficiary and Trustor concerning
the Obligations.

     

    6.23         No Waiver
by Beneficiary.  No waiver by Beneficiary of any of its rights
or remedies in connection with the Obligations or of any of the terms or
conditions of the Note, Additional Notes or this Deed of Trust shall be
effective unless such waiver is in writing and signed by
Beneficiary.  Without limiting the generality of this Section, (a) no
delay or omission by Beneficiary in exercising any of its rights or remedies in
connection with the Obligations shall constitute or be construed as a waiver of
such rights or remedies; (b) no waiver by Beneficiary of any default by Trustor
under the Note, Additional Notes or this Deed of Trust  or consent by
Beneficiary to any act or omission by Trustor shall constitute or be construed
as a waiver of or consent to any other or subsequent default, act or omission by
Trustor; (c) no acceptance by Beneficiary of any late payment or late or
defective performance of any of the Obligations by Trustor shall constitute a
waiver by Beneficiary of the right to require prompt payment and performance
strictly in accordance with the Note, Additional Notes or this Deed of Trust
with respect to any other payment or performance of any of the Obligations;
(d) no acceptance by Beneficiary of any payment or performance following
any notice of default which has been given or recorded by Beneficiary shall
constitute a waiver of Beneficiary’s right to proceed with the exercise of its
remedies with respect to any Obligations which have not been paid or performed
in full; (e) no acceptance by Beneficiary of any partial payment or
performance shall constitute a waiver by Beneficiary of any of its rights or
remedies relating to any Obligations which have not been paid or performed in
full; and (f) no application of Rents and Profits, Insurance Proceeds,
Condemnation Proceeds or Property Proceeds to any of the Obligations shall
constitute or be construed as a waiver by Beneficiary or cure of any Event of
Default or impair, prejudice, invalidate or otherwise affect any action by
Beneficiary or Trustee in response to such default.

     

    6.24         Waivers
by Trustor.   Trustor waives presentment, demand for
payment, protest, notice of demand, dishonor, protest and non-payment, and all
other notices and demands in connection with the delivery, acceptance,
performance, default under, and enforcement of the Deed of
Trust.  Trustor waives the right to assert any statute of limitations
as a defense to the enforcement of any or all of the Note, Additional Notes or
this Deed of Trust to the fullest extent permitted by law.

     

    6.25         Waiver of
Marshalling.   Trustor and all Persons holding a Lien
affecting the Property who have actual or constructive notice of this Deed of
Trust waive (a) all rights to require marshalling of assets or liens in the
event of Beneficiary’s exercise of any of its rights and remedies under this
Deed or Trust, including any judicial or nonjudicial foreclosure sale of the
Property; (b) all rights to require Beneficiary to exhaust its rights and
remedies against any other collateral securing any or all of the Obligations
before pursuing its rights and remedies under this Deed of Trust; and
(c) all rights to require Beneficiary to exercise any other right or power
or to pursue any other remedy which Beneficiary may have under any document or
applicable law before pursuing its rights and remedies under this Deed of
Trust.

    
      
         

      

      
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    6.26         Waiver of
Subrogation.   Trustor waives all rights to recover
against Beneficiary for any loss or damage incurred by Trustor from any cause
which is insured under any of the Insurance Policies, except that the foregoing
waiver of subrogation shall not be effective with respect to any Insurance
Policy if the coverage under such policy would be materially reduced or impaired
as a result of such waiver.  Trustor shall use its best efforts to
obtain Insurance Policies which permit the waiver of subrogation contained in
this Section.

     

    6.27         Cumulative
Remedies.   No right or remedy of Beneficiary or Trustee
under this Deed of Trust or the Note, or any Additional Notes shall be exclusive
of any other right or remedy to which Beneficiary or Trustee may be
entitled.  Beneficiary’s rights and remedies under the Note,
Additional Notes or this Deed of Trust are cumulative and in addition to all
other rights and remedies which Beneficiary may have under any other document
with Trustor and under applicable law.  Beneficiary shall have the
right to exercise any one or more of its rights and remedies in connection with
the Obligations at Beneficiary’s option and in its sole and absolute discretion,
without notice to Trustor or any other Person (except as otherwise expressly
required by law or under the Note, Additional Notes or this Deed of Trust), and
in such order as Beneficiary may determine in its sole and absolute
discretion.  If Beneficiary holds any collateral in addition to the
Property for any of the Obligations, Beneficiary, at its option, shall have the
right to pursue its rights or remedies with respect to such other collateral
either before, contemporaneously with, or after Beneficiary’s exercise of its
rights or remedies with respect to the Property.  Upon the occurrence
of an Event of Default, Beneficiary, at its option, shall have the right to
offset against any debt or monies due from Beneficiary to Trustor against all or
part of the Obligations.

     

    6.28         [Intentionally
Omitted]

     

    6.29         Applicable
Law; Jurisdiction.   The  Deed of Trust shall be
governed by and construed in accordance with the laws of the State of
California.  Trustor consents to personal jurisdiction over Trustor by
the courts of the State of California and agrees that service of process on
Trustor may be effected by certified or registered mail, return receipt
requested, directed to Trustor at its address shown in this Deed of
Trust.

     

    6.30         Successors.   Subject
to the restrictions contained in this Deed of Trust shall be binding upon and
inure to the benefit of Beneficiary and Trustor and their respective permitted
successors and assigns.

     

    6.31         Power of
Attorney.   Trustor irrevocably appoints Beneficiary, with
full power of substitution, as Trustor’s attorney-in-fact, coupled with an
interest, with full power, in Beneficiary’s own name or in the name of Trustor
(a) to take any or all of the actions specified in Article 4 above with
respect to the Property; and (b) to sign and record notices of completion,
notices of cessation of labor, and any other similar notice or document which
Beneficiary reasonably determines to be necessary or appropriate to protect its
interests in connection with the Obligations.  Beneficiary shall have
the right to exercise the power of attorney granted in this Section directly or
to delegate all or part of such power to one or more agents of
Beneficiary.  Nothing contained in this Deed of Trust shall be
construed to obligate Beneficiary to act on behalf of Trustor as
attorney-in-fact.

     

    6.32         No
Merger.   There shall be no merger of any estate in the
Property which Trustor acquires after the date of this Deed of Trust with all or
any portion of the estate in the Property which Trustor holds as of the date of
this Deed of Trust, unless Beneficiary shall expressly agree otherwise in
writing.

    
      
         

      

      
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    6.33         Request
for Notices.   Trustor hereby requests that a copy of any
notice of default and notice of sale as may be required by law be mailed to
Trustor at its address stated above.

     

    ARTICLE
7

     

    UNIFORM COMMERCIAL CODE
SECURITY AGREEMENT

     

    7.1           Uniform
Commercial Code Security Agreement.  Article 7 of this Deed of
Trust constitutes a security agreement pursuant to the California Uniform
Commercial Code (the “Code”).  To secure payment and performance of
the Obligations, Trustor grants Beneficiary a security interest in all now owned
and hereafter acquired personal property of Trustor obtained for or in
connection with the design, planning, construction, development, use, operation,
maintenance, or marketing and sale of the Property (collectively, the
“Collateral”), including the following:  (a) all fixtures,
machinery, machines, motor vehicles, tools, parts, equipment, pumps, engines,
motors, boilers, incinerators, building materials, inventory, supplies, goods,
systems for the supply or distribution of heat, air conditioning, electricity,
gas, water, air or light, elevators and related machinery and equipment, fire
prevention and extinguishing equipment, security and access control equipment,
plumbing, showers, bath tubs, water heaters, toilets, sinks, stoves, ranges,
refrigerators, dishwashers, disposals, laundry equipment, wall, window and floor
coverings, partitions, doors, windows, hardware, waste and rubbish removal
equipment, recreational equipment, signs, furniture, furnishings, appliances,
telephone equipment, computer systems, office equipment and supplies, plants,
carpets, rugs, sculptures, art work, mirrors, tables, lamps, beds, television
sets, light fixtures, chandeliers, desks, cabinets, bookcases, chairs, sofas,
benches, and janitorial and maintenance equipment and supplies, and all
substitutions, accessories, accessions, replacements, improvements, and
additions to any or all of the foregoing; (b) all deposits, advance
payments, security deposits, and rental payments made by or on behalf of Trustor
to others in connection with the Property and relating to any or all of the
following: (i) management or operational services; (ii) marketing
services; (iii) architectural, engineering, or design services;
(iv) utility services; (v) cleaning, maintenance, security, or repair
services; (vi) rubbish or refuse removal services; (vii) sewer
services; (viii) rental of furnishings, fixtures or equipment; (ix)
parking; or (x) any service similar to any or all of the foregoing;
(c) all reports, appraisals, drawings, plans, blueprints, studies,
specifications, certificates of occupancy, building permits, grading permits,
and surveys relating to all or part of the Property, and all amendments,
modifications, supplements, general conditions and addenda thereto; (d) all
trade names, trademarks, trade styles, service marks, logos, letterheads,
advertising symbols, goodwill, telephone numbers, advertising rights, negatives,
prints, brochures, flyers, pamphlets and other media items used or intended to
be used in connection with the Property; (e) all warranties and guaranties,
whether written or oral, from any third Person which directly or indirectly
relate to all or part of the Property or personal property described in parts
(a) through (d) of this Section 7.1; (f) all legal and equitable
claims, causes of action, and rights against architects, engineers, designers,
contractors, subcontractors, suppliers, materialmen and any other Persons
supplying labor, services, materials or equipment, directly or indirectly, in
connection with the design, planning, construction, development, use, operation,
maintenance, or marketing of all or part of the Property; (g) all real
property tax refund claims, general intangibles, accounts, deposit accounts,
documents, instruments, chattel paper, and accounts receivable relating to the
design, planning, construction, development, use, operation, maintenance or
marketing of all or part of the Property, including any right to payment for
goods sold or leased or to be sold or leased or for services rendered or to be
rendered, however evidenced, including purchase orders, negotiable documents,
notes, drafts, acceptances, claims, instruments, insurance policies, and all
other forms of obligations and receivables; (h) all contracts and
agreements for the sale of all or any portion of the Property and all deposits,
advance payments, or other things of value given by buyers on account of
purchase, and (i) all products and proceeds of any or all of the foregoing
personal property, including all money, deposit accounts, accounts, chattel
paper, documents, notes, drafts, instruments, insurance proceeds, and all other
tangible and intangible property resulting from the sale, lease, or other
disposition of any or all of the foregoing personal property whether in the
hands of Trustor, an escrow company or other third party.

    
      
         

      

      
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    7.2           Filing.  Trustor
agrees that Beneficiary may file this Deed of Trust, or a reproduction thereof,
in the real estate records or other appropriate index, as a financing statement
for any of the items of Collateral specified in Section 7.1 above which is or
may be part of the Property.  Any reproduction of this Deed of Trust
or of any other security agreement or financing statement shall be sufficient as
a financing statement.  Trustor agrees to execute and deliver to
Beneficiary, upon Beneficiary’s request, any financing statements, as well as
extensions, renewals and amendments thereof, and reproductions to this Deed of
Trust in such form as Beneficiary may require to perfect a security interest
with respect to all or part of the Collateral.  Trustor shall pay all
costs of filing of such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all costs and expenses of any
record searches for financing statements Beneficiary may reasonably
require.

     

    7.3           Additional
Covenants of Trustor.  Trustor, at its sole cost and expense,
(a) shall give Beneficiary at least thirty (30) days prior written
notice of any change in Trustor’s principal place of business and the
acquisition or use of a trade name or style by Trustor; (b) shall promptly
notify Beneficiary in writing of any claim, lien, security interest, right,
encumbrance or any other occurrence which may be adverse to Beneficiary’s
security interest in the Collateral; (c) shall defend the Collateral from
all claims, liens, security interests, rights, encumbrances and other matters
which are adverse to Beneficiary’s security interest in the Collateral;
(d) shall promptly pay all costs and expenses relating to the purchase,
ownership, or use of the Collateral, including all liens, taxes,
assessments and charges of Governmental Authorities levied, assessed or imposed
on all or part of the Collateral; (e) except for matters in the ordinary course
of Trustor’s business, shall not sell, transfer, pledge, hypothecate, lease
or otherwise dispose of or abandon all or part of the Collateral without
Beneficiary’s prior written consent,; (f) except for matters in the
ordinary course of Trustor’s business, shall not remove any of the Collateral
which consists of tangible personal property from its location on the Property
without Beneficiary’s prior written consent; (g) shall, upon Beneficiary’s
request, give notice, in form and substance acceptable to Beneficiary, to any or
all account debtors designated by Beneficiary of Trustor’s grant of a security
interest in any Collateral which consists of accounts, contract rights,
instruments, documents, or general intangibles (referred to collectively as the
“Accounts” and individually as an “Account”); (h) following the occurrence
of any Event of Default, shall not compromise, settle, adjust, or grant any
discount, credit, or allowance to any Account debtor without Beneficiary’s prior
written consent; (i) shall undertake any and all other acts necessary or
appropriate to maintain, preserve and protect the Collateral and Beneficiary’s
security interest therein, including any actions requested by Beneficiary; and
(j) shall execute and deliver to Beneficiary such other documents as
Beneficiary may request in order to evidence, effectuate, perfect, maintain,
preserve or protect Beneficiary’s security interest in the Collateral, including
financing statements, continuation financing statements, financing statement
amendments, security agreements, and assignments.  If Trustor fails to
execute and deliver to Beneficiary any document requested by Beneficiary
pursuant Section 7.3(j) within ten (10) days after such request, then
Trustor irrevocably appoints Beneficiary, with full power of substitution, as
Trustor’s attorney-in-fact, coupled with an interest, with full power, in its
own name or in the name of Trustor, to execute such document on behalf of
Trustor.  Nothing contained in this Article 7 shall be construed
to obligate Beneficiary to act on behalf of Trustor as
attorney-in-fact.

    
      
         

      

      
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    7.4           Rights
and Additional Remedies of Beneficiary under Uniform Commercial
Code.  Without limiting Article 4 above, upon the occurrence of
an Event of Default, Beneficiary shall have the following additional rights and
remedies with respect to the Collateral: (a) Beneficiary shall have all the
rights and remedies of a secured party under the Code and under any other
applicable law, and, at Beneficiary’s option, shall also have the right to
invoke any or all of the remedies provided in Article 4 of this Deed of Trust
with respect to the Collateral, and in exercising any of such remedies,
Beneficiary may proceed against the items of real property and any items of
Collateral separately or together and in any order whatsoever, without in any
way affecting the availability of Beneficiary’s remedies under the Code or of
the remedies provided in Article 4 of this Deed of Trust;
(b) Beneficiary, at its option, shall have the right (i) to direct any
or all Account Debtors to make payment directly to Beneficiary; (ii) to
demand, collect, receive and give receipts for any and all money and other
property due or to become due in connection with all or part of the Collateral,
including any of the Accounts; (iii) to take possession of and endorse and
collect any or all notes, checks, drafts, money orders, or other instruments of
payment relating to all or part of the Collateral or proceeds of the Collateral,
including any of the Accounts; and (iv) to file any claim and take any
other action which Beneficiary determines to be appropriate for the purpose of
collecting any or all of the Accounts and to compromise, adjust or settle
Accounts for less than face value thereof, and to execute all releases and other
documents in connection therewith; provided, however, that Beneficiary shall not
be obligated in any manner to make any demand for or to make any inquiry as to
the nature or sufficiency of any payment received by it, or to present or file
any claim or take any action to collect or enforce the payment of any or all of
the Accounts; (c) should Beneficiary seek to take possession of any or all
of the Collateral by court process, Trustor irrevocably and unconditionally
agrees that a receiver may be appointed by a court for such purpose without
regard to the adequacy of the security for the Obligations; and (d) Trustor
irrevocably appoints Beneficiary, with full power of substitution, as Trustor’s
attorney-in-fact, coupled with an interest, with full power, in its own name or
in the name of Trustor to take any or all of the actions described
Section 7.4(b) after the occurrence of an Event of
Default.  Beneficiary, at its option, and whether or not an Event of
Default exists, shall at all times have the right (a) to take such actions
as Beneficiary determines to be necessary or appropriate to maintain, preserve
and protect the Collateral and Beneficiary’s security interest therein; and
(b) to give notice to any Account debtor containing such information and
instructions concerning the existence of Beneficiary’s security interest and
rights in the Collateral under this Deed of Trust as Beneficiary determines to
be necessary or appropriate to protect its interest.

    
      
         

      

      
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    7.5           Fixtures.  The
Collateral in which Beneficiary has a security interest under this Article 7
includes goods that are or may become Fixtures on the Property.  This
Deed of Trust constitutes a fixture filing pursuant to the terms of Sections
9313 and 9402 of the Code that shall be recorded in the real estate records of
the county in which the Property is located.  In that regard, the
following information is provided:

     

    
      
        
          	
                  Name
      of Debtor:

                	
                  POINT.360,
      a California corporation

                
	 
      	 
      
	
                  Address
      of Debtor:

                	
                  2777
      North Ontario Street

                  Burbank,
      California 91504

                
	 
      	 
      
	
                  Name
      of Secured Party:

                	
                  TROYGOULD
      PC, a California professional corporation

                
	 	 
	
                  Address
      of Secured Party:

                	
                  1801
      Century Park East

                  Suite
      1600

                  Los
      Angeles, CA 90067

                

        

      

    

     

    7.6           Indemnification.  Trustor
shall indemnify, defend and hold Beneficiary harmless from any and all claims,
demands (including demands by any governmental agency), liabilities, costs,
expenses, penalties, damages, losses and liens, including without limitation
reasonable attorneys’ fees (collectively, “Indemnified Claims”), arising
out of or with respect to (i) Hazardous Material on or under the Property, or
migrating to or from the Property or released on or under the Property
subsequent to the date hereof, and (ii) any clean-up required by law or court
order or order of any governmental authority having jurisdiction over the
Property, of any and all Hazardous Material which might remain or subsequently
be placed on or under the Property.  Without limiting the generality
of the foregoing, but subject to the exclusions described in Paragraph (b)
below, Indemnified Claims shall include liabilities and costs arising out of the
existence, migration, encapsulation, removal or non-removal
of:  asbestos-containing materials, lead paint, or other Hazardous
Material located on the Property or on adjacent or nearby property, whether
discovered before or after the date hereof, and including matters discovered
during construction by Trustor or Trustor’s successors in interest or assignees;
claims by any governmental or quasi-governmental divisions or agencies related
to Hazardous Material located on the Property; and claims arising out of
contaminated groundwater, whether located on the Property or
off-site.  The indemnity provided for herein shall survive the full
payment of the Obligations and the reconveyance of this Deed of
Trust.

     

    [Signatures
Continued on Next Page]

    
      
         

      

      
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                      TRUSTOR:

                    
	 	 
	 
      	
                      POINT.360,
      a California corporation

                    
	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	 
      	
                      Name:
      Alan R. Steel

                    
	 
      	 
      	
                      Title:
      Executive
Vice-President

                    

            

          

        

      

    

    
      
         

      

      
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              STATE
      OF CALIFORNIA

            	
              )

            
	 
      	
              )
      ss

            
	
              COUNTY
      OF LOS ANGELES 

            	
              )

            

    

    

    On
_________________________, before me,_________________________________ a Notary
Public, personally appeared ______________________________________________ who
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies) and that
by his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

     

    I certify
under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.

     

    WITNESS
my hand and official seal.

    

    
      
        
          
            	
                    Signature

                  	 
      	 
      
	 
      	 
      	 
      
	
                    Print
      Name:  

                  	 
      	 
      

          

        

      

    

    
      
         

      

      
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    REQUEST FOR FULL
RECONVEYANCE

     

    (To be
used only when the Note and all other indebtedness

    secured
by this Deed of Trust have been paid in full)

     

    TO:  _________________________,
TRUSTEE

     

    The
undersigned is the legal owner and holder of all indebtedness secured by this
Deed of Trust.   All sums secured by this Deed of Trust have been
fully paid and satisfied, and you are hereby requested and directed, on payment
to you of all sums owing to you under the terms of this Deed of Trust, to cancel
all evidences of indebtedness delivered to you and secured by this Deed of Trust
and to reconvey, without warranty, the estate now held by you hereunder to the
parties designated by the terms of this Deed of Trust.

     

    MAIL
RECONVEYANCE TO:

     

    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                                By:

                              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                Title:

                              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                Dated:  

                              	 
      

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    DEED OF
TRUST

     

    EXHIBIT
“A”

     

    LEGAL
DESCRIPTION

    

    The
Parcels of land referred to herein is situated in the State of California,
County of Los Angeles, and is described as follows:

     

    In the
City of Burbank, the following two Parcels:

     

    PARCEL
1

     

    LOTS 185,
187, 189, 191 AND THE NORTH ONE-HALF OF LOT 193 OF TRACT 7383, IN THE CITY OF
BURBNK, AS PER MAP RECORDED IN BOOK 84, PAGES 20 AND 21 OF MAPS, IN THE OFFICE
OF THE COUNTY RECORDED OR SAID COUNTY.

     

    PARCEL
2

     

    THE
NORTHWESTERLY 28.71 FEET OF LOT 39 OF TRACT 8273, IN THE CITY OF BURBANK, COUNT
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 91, PAGE 45 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDED OF SAID COUNTY.

     

    APN
2477-015-045

            
 2477-016-010

     

    In the
City of Los Angeles, the following two Parcels:

     

    PARCEL
1:

     

    THE SOUTH
70 FEET OF THE EAST 135 FEET OF LOT1, IN BLOCK 18 OF COLEGROVE, IN THE CITY OF
LOS ANGELES, COUNT OF LOS ANGELES, STGATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 53 PAGE 10 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.

     

    PARCEL
2:

     

    THE NORTH
55 FEET OF ETHE EAST 135 FEET OF LOT 2, IN BLOCK 18 OF COLEGROVE, IN THE CITY OF
LOS ANGELES, COUNT OF LOS ANGELES, STGATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 53 PAGE 10 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.

     

    APN:
5533-07-033, 002

    
      
         

      

      
        A

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