DEED OF TRUST AND SECURITY AGREEMENT

 

                                   Exhibit 2.6

 

 

This instrument prepared by:                      Indexing Instructions:

 

Ann F. Corso

P. O. Box 427

Jackson, Mississippi   39205

(601) 949-4900

 

 

                      DEED OF TRUST AND SECURITY AGREEMENT

 

STATE OF MISSISSIPPI )

JACKSON COUNTY )

 

      THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust"), made and

entered into this 2nd day of November, 2005 by THE GRAND SHELL LANDING ,INC., a

Mississippi corporation, whose address is 3944 Shell Landing Blvd., Gautier,

Mississippi ("Grand Shell"), AZUR SHELL LANDING DEVELOPMENT II, LLC, a

Mississippi limited liability company whose address is 3499 Shell Landing Blvd.,

Gautier, Mississippi ("Azur-Shell"), AZUR INTERNATIONAL, INC., a Nevada

corporation (the "Company"), AZUR SHELL LANDING RESORT, INC., a Mississippi

corporation whose address is 3499 Shell Landing Blvd., Gautier, Mississippi

("ASLR" collectively with Grand Shell, the Company and Azur Shell are sometimes

referred to collectively as the "Grantors" and individually as the "Grantor") in

favor of Ann F. Corso ("Trustee," said term referring always to the named

Trustee and his successors in trust) for the use and benefit of Omicron Master

Trust, a foreign business trust organized in Bermuda with principal offices in

New York, New York, whose address is 650 Fifth Avenue, 26th Floor, New York, New

York 10019 as Collateral Agent for itself and the other lenders (the "Lenders")

collectively lending the Grantors the sum of Six Million and No/100 Dollars

($6,000,000.00). Herein Omicron Master Trust in its capacity as Collateral Agent

for itself and the Lenders shall be referred to as the "Beneficiary."

 

      WHEREAS, the Beneficiary and the Lenders on even date herewith

collectively loaned to the Grantors the aggregate sum of Six Million and NO/100

Dollars ($6,000,000.00);

 

      WHEREAS, the Lenders have requested Grand Shell to pledge its interest in

the property described on Exhibit A and Azur-Shell to pledge its interest in the

property described on Exhibit B to the Beneficiary to secure the Grantors'

repayment obligations and the Grantors desire to make such pledges and all of

the Grantors to grant in security agreement in their respective assets;

 

      NOW, THEREFORE, for and in consideration of the recitals made above and

other good and valuable consideration, the receipt, sufficiency and adequacy of

which are hereby acknowledged, the parties hereto agree as follows:

 

 

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                              W I T N E S S E T H:

 

      That for and in consideration of the indebtedness and other obligations of

Grantors hereinafter set forth, and the trust herein created, each Grantor does

hereby irrevocably CONVEY, WARRANT, GRANT, BARGAIN, SELL, ASSIGN, TRANSFER,

PLEDGE and set over unto Trustee, and the successors and assigns of Trustee, all

of the following described land and interests in land, estates, easements,

rights, improvements, personal property, fixtures, equipment, furniture,

furnishings, appliances and appurtenances, including replacements and additions

thereto (hereinafter referred to collectively as the "Premises"):

 

      (a) All of such Grantor's tracts, pieces or parcels of land, and interests

in land, located in Jackson County, Mississippi, more particularly described in

Exhibits A and B attached hereto and by this reference made a part hereof (the

"Land");

 

      (b) All of such Grantor's buildings, structures and improvements of every

nature whatsoever now or hereafter situated on the Land, and all gas and

electric fixtures, radiators, heaters, engines and machinery, boilers, ranges,

elevators and motors, plumbing and heating fixtures, carpeting and other floor

coverings, water heaters, awnings and storm sashes, and cleaning apparatus which

are or shall be attached to said buildings, structures or improvements, and all

other furnishings, furniture, fixtures, machinery, equipment, appliances,

vehicles and personal property of every kind and nature whatsoever now or

hereafter owned by such Grantor and located in, on or about, or used or intended

to be used with or in connection with the construction, use, operation or

enjoyment of the Premises, including all extensions, additions, improvements,

betterments, renewals and replacements, substitutions, or proceeds from a

permitted sale of any of the foregoing, and all building materials and supplies

of every kind now or hereafter placed or located on the Land (collectively the

"Improvements"), all of which are hereby declared and shall be deemed to be

fixtures and accessions to the Land and a part of the Premises as between the

parties hereto and all persons claiming by) through or under them, and which

shall be deemed to be a portion of the security for the indebtedness herein

described and to be secured by this Deed of Trust;

 

      (c) All of such Grantor's easements, rights-of-way, strips and gores of

land, vaults, streets, ways, alleys, passages, sewer rights, waters, water

courses, water rights and powers, minerals, flowers, shrubs, crops, trees,

timber and other emblements now or hereafter located on the Land or under or

above the same or any part or parcel thereof, and all ground leases, estates,

rights, titles, interests, privileges, liberties, tenements, hereditaments and

appurtenances, reversions, and remainders whatsoever, in any way belonging,

relating or appertaining to the Premises or any part thereof, or which hereafter

shall in any way belong, relate or be appurtenant thereto, whether now owned or

hereafter acquired by them; and

 

      (d) All of such Grantor's rents, issues, profits and revenues of the

Premises from time to time accruing (including without limitation all payments

under leases, ground leases or tenancies, proceeds of insurance, condemnation

payments, tenant security deposits, escrow funds and Azur-Shell's interest in

that certain Co-Ownership Agreement, dated November 2, 2005, and all of the

estate, right, title, interest, property, possession, claim and demand

whatsoever at law, as well as in equity, of each Grantor of, in and to the same,

reserving only the right to them to collect the same so long as each Grantor is

not in default hereunder or such collection is not otherwise restricted by this

Deed of Trust.

 

 

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      (e) All of such Grantor's furniture, machinery, supplies, construction

materials, goods, equipment, fixtures, inventory, accounts, contract rights,

permits, chattel paper, documents, instruments and general intangibles

(including, without limitation, the right to use all names, logos and other

identification) associated with operation of the Property or used or useful in

connection therewith and all books and records in any way related to the

Property.

 

      TO HAVE AND TO HOLD the Premises and all parts, rights, members and

appurtenances thereof, to the use and benefit of Trustee and the successors,

successors-in-title and assigns of Trustee, forever; and each Grantor covenants

that it is lawfully seized and possessed of the Premises as aforesaid and has

good right to convey the same, that the same are unencumbered except for those

matters expressly set forth in Exhibit A hereto, and each Grantor does warrant

and will forever defend the title thereto against the claims of all persons

whomsoever, except (i) as to Tract A which is currently encumbered by that

certain Deed of Trust, Security Agreement and Fixture Filing from Grand Shell to

Textron Financial Corporation and recorded in Book 2217, Page 617 of the land

records of Jackson County, Mississippi, (ii) as to Tract B which is currently

encumbered by that certain Deed of Trust from Azur-Shell in favor of Olympic

Coast Investments, Inc. and recorded in Book 2276, Page 401 of the records of

Jackson County, Mississippi, and (iii) those matters set forth in said Exhibit

C.

 

      But this conveyance is made IN TRUST for the following uses and trusts,

and for no other purposes, to-wit:

 

      (a) To secure the payment of an indebtedness for borrowed money in the

principal amount not exceeding Six Million and No/100 Dollars ($6,000,000.00),

together with interest thereon, which Beneficiary and the Lenders have advanced,

or have agreed to advance, which is evidenced by one or more promissory notes

and any extensions, modifications and/or renewals thereof and any notes given in

payment of any such principal and/or interest, being finally due and payable on

November 3, 2008 (all of which are herein sometimes individually and

collectively referred to as the "Note");

 

      (b) To secure all sums advanced by Beneficiary or any Lender to either

Grantor or expended by Beneficiary or any Lender for either Grantor's account,

including but not limited to advances for taxes and insurance pursuant to the

terms of this Deed of Trust, and the faithful performance of all terms and

conditions contained herein, and in the Loan Agreement between Grantor and

Beneficiary of even date herewith (hereinafter, together with any extensions,

revisions, modifications or amendments hereafter made, the ("Loan Agreement");

 

      (c) To secure the payment of all court costs, expenses and costs of

whatever kind incident to the collection of any indebtedness secured hereby and

the enforcement or protection of the lien of this conveyance, including

reasonable attorney's fees; and

 

 

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      (d) To secure any amounts expended by Beneficiary in removing, isolating

or cleaning up any hazardous materials from the Premises, whether or not such

action is required by any "Applicable Environmental Law" (as hereinafter

defined). Should the indebtedness secured by this Deed of Trust (hereinafter

referred to collectively as the "Secured Indebtedness") be paid according to the

tenor and effect thereof when the same shall become due and payable, and should

the Grantors perform all covenants herein contained in a timely manner, then

this Deed of Trust shall be cancelled and released.

 

      EACH GRANTOR HEREBY FURTHER COVENANTS AND AGREES WITH TRUSTEE AND

BENEFICIARY AS FOLLOWS:

 

                                    ARTICLE I

 

      1.01 Payment of Indebtedness. Grantors shall pay the indebtedness

evidenced by the Note according to the tenor thereof and the remainder of the

Secured Indebtedness promptly as the same shall become due.

 

      1.02 Taxes, Liens and Other Charges.

 

      (a) Grantors shall pay, on or before the delinquency date thereof, all

taxes, levies, license fees, permit fees and all other charges (in each case

whether general or special, ordinary or extraordinary, or foreseen or

unforeseen) of every character whatsoever (including all penalties and interest

thereon) now or hereafter levied, assessed, confirmed or imposed on, or in

respect of, or which may be a lien upon the Premises, or any part thereof, or

any estate, right or interest therein, or upon the rents, issues, income or

profits thereof, and shall submit to Beneficiary such evidence of the due and

punctual payment of all such taxes, assessments and other fees and charges as

Beneficiary may require. Each Grantor shall have the right before they become

delinquent to contest or object to the amount or validity of any such tax,

assessment, fee or charge by appropriate legal proceedings but this shall not be

deemed or construed in any way as relieving, modifying or extending such

Grantor's covenant to pay any such tax, assessment, fee or charge at the time

and in the manner provided herein, unless such Grantor has given prior written

notice to Beneficiary of such Grantor's intent to so contest or object, and

unless at Beneficiary's sole option, (i) Grantors shall demonstrate to

Beneficiary's satisfaction that the legal proceedings shall conclusively operate

to prevent the sale of the Premises, or any part thereof, to satisfy such tax,

assessment, fee or charge prior to final determination of such proceedings; and

(ii) Grantors shall furnish a good and sufficient bond or surety as requested by

and satisfactory to Beneficiary; and (iii) Grantors shall have provided a good

and sufficient undertaking as may be required or permitted by law to accomplish

a stay of such proceedings.

 

      (b) Grantors shall pay, on or before the due date thereof, all taxes,

assessments, charges, expenses, costs and fees which may now or hereafter be

levied upon, or assessed or charged against, or incurred in connection with, the

Note, the Secured Indebtedness, this Deed of Trust or any other instrument now

or hereafter evidencing, securing or otherwise relating to the Secured

Indebtedness.

 

      (c) Grantors shall pay, on or before the due date thereof, (i) all

premiums on policies of insurance covering, affecting or relating to the

Premises, as required pursuant to Section 1.03, below; (ii) all premiums on

collaterally assigned life insurance policies, if any; (iii) all ground rentals,

other lease rentals and other sums, if any, owing by Grantors and becoming due

under any lease or rental contract affecting the Premises; and (iv) all utility

charges which are incurred by Grantors for the benefit of the Premises, or which

may become a charge or lien against the Premises for gas, electricity, water and

sewer services and the like furnished to the Premises, and all other public or

private assessments or charges of a similar nature affecting the Premises or any

portion thereof, whether or not the nonpayment of same may result in a lien

thereon. Grantors shall submit to Beneficiary such evidence of the due and

punctual payment of all such premiums, rentals and other sums as Beneficiary may

require.

 

 

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      (d) In the event of the passage of any state, federal, municipal or other

governmental law, order, rule or regulation, subsequent to the date hereof, in

any manner changing or modifying the laws now in force governing the taxation of

deeds of trust or security agreements, or debts secured thereby or in the manner

of collecting such taxes so as to adversely affect Beneficiary, Grantors will

pay any such tax on or before the due date thereof.

 

      If Grantors fail to make such prompt payment or if, in the opinion, of

Beneficiary, any such state, federal, municipal, or other governmental law,

order, rule or regulation prohibits Grantors from making such payment or would

penalize Grantors if Grantors makes such payment, or if, in the opinion of

Beneficiary, the making of such payment might result in the imposition of

interest beyond the maximum amount permitted by applicable law, then the entire

balance of the Secured Indebtedness and all interest accrued thereon shall, at

the option of Beneficiary, become immediately due and payable.

 

      (e) Grantors shall not suffer any mechanic's, materialmen's, laborer's,

statutory or other lien to be created or remain outstanding against the

Premises; provided, however, that Grantors may contest any such lien in good

faith by appropriate legal proceedings provided the lien is bonded in such

manner as not to adversely affect the Premises or this Deed of Trust.

Beneficiary has not consented and will not consent to the performance of any

work or the furnishing of any materials which might be deemed to create a lien

or liens superior to the lien hereof.

 

      1.03 Insurance.

 

      (a) Upon the request of Beneficiary, Grantors shall procure for, deliver

to and maintain for the benefit of Beneficiary during the term of this Deed of

Trust, original paid-up insurance policies of such insurance companies, in such

amounts, in form and substance, and with such expiration dates as are acceptable

to Beneficiary and containing non-contributory standard mortgagee clauses, their

equivalent, or a satisfactory mortgagee loss payable endorsement in favor of

Beneficiary, providing the following types of insurance covering the Premises

and the interest and liabilities incident to the ownership, possession and

operation thereof:

 

            (i) insurance against loss or damage by fire, lightning, windstorm,

hail, explosion, riot, riot attending a strike, civil commotion, aircraft,

vehicles, smoke, vandalism and malicious mischief and against such other hazards

as, under good insurance practices, from time to time are insured against for

properties of similar character and location, the amount of which insurance

shall be not less than the full replacement cost of the Premises without

deduction for depreciation, and which policies of insurance shall contain

satisfactory replacement cost endorsements;

 

 

<PAGE>

 

            (ii) during the course of any construction or repair of the

Premises, to maintain nonreporting builder's risk insurance with standard waiver

of subrogation clauses, and, in the event any portion of the improvements are

completed prior to the satisfaction of the Secured Indebtedness, to maintain

insurance on all buildings and other improvements on the Premises against damage

by fire, windstorm, and other risks normally insured against under so-called

"extended coverage," in companies and amounts satisfactory to Beneficiary. All

policies evidencing such insurance shall have attached thereto standard

mortgagee riders making such insurance payable to Beneficiary as its interest

may appear, and all such policies or appropriate certificates, at Beneficiary's

request, shall be deposited with it;

 

            (iii) comprehensive public liability insurance on an "occurrence

basis" against claims for "personal injury," including without limitation bodily

injury, death or property damage occurring on, in or about the Premises and the

adjoining streets, sidewalks and passageways, such insurance to afford immediate

minimum protection to a limit of not less than $1,000,000 with respect to

personal injury or death to any one or more persons or damage to property and a

$10,000,000 umbrella liability policy;

 

            (iv) worker's compensation insurance (including employer's liability

insurance, if requested by Beneficiary) for all employees of Grantors engaged on

or with respect to the Premises, in such amount as is reasonably satisfactory to

Beneficiary, or, if such limits are established by law, in such amounts;

 

            (v) rental continuation or business interruption insurance against

loss of income arising out of damage or destruction by fire, lightning,

windstorm, hail, explosion, riot, riot attending a strike, civil commotion,

aircraft, vehicles, smoke, vandalism and malicious mischief and such other

hazards as are presently included in so-called "extended coverage," of twelve

(12) months' anticipated gross income from the Premises; and

 

            (vi) such other insurance on the Premises or any replacements or

substitutions therefor and in such amounts as may from time to time be

reasonably required by Beneficiary against other insurable casualties which at

the time are commonly insured against in the case of premises similarly

situated, due regard being given to the height and type of the improvements,

their construction, location, use and occupancy, or any replacements or

substitutions therefor.

 

      (b) All policies of insurance required by the terms of this Deed of Trust

shall contain an endorsement or agreement by the insurer that any loss shall be

payable in accordance with the terms of such policy notwithstanding any act of

negligence of either Grantor which might otherwise result in forfeiture of said

insurance, and the further agreement of the insurer waiving all rights of set

off, counterclaim or deductions against Grantors.

 

      (c) Beneficiary is hereby authorized and empowered, at its option, to

adjust or compromise any loss under any insurance policies maintained pursuant

to this Section 1.03, and to collect and receive the proceeds from any such

policy or policies. Each insurance company is hereby authorized and directed to

make payment for all such losses directly to Beneficiary as its interest may

appear, instead of to Grantors and Beneficiary jointly. In the event any

insurance company fails to disburse directly and solely to Beneficiary but

disburses instead either solely to Grantors or to Grantors and Beneficiary

jointly, Grantors agree immediately to endorse and transfer such proceeds to

Beneficiary to the extent of Beneficiary's interest therein. Upon the failure of

Grantors to endorse and transfer such proceeds as aforesaid, Beneficiary may

execute such endorsements or transfers for and in the name of Grantors, and

Grantors hereby irrevocably appoint Beneficiary as Grantors' agent and

attorney-in-fact so to do. After deducting from said insurance proceeds all of

its expenses incurred in the collection and administration of such sums,

including reasonable attorney's fees, Beneficiary shall apply the net insurance

proceeds or any part thereof, at its option,

 

 

<PAGE>

 

            (i) to the payment of the Secured Indebtedness, whether or not due

and in whatever order Beneficiary elects,

 

            (ii) to the repair and/or restoration of the Premises, or

 

            (iii) for any other purposes or objects for which Beneficiary is

entitled to advance funds under this Deed of Trust, all without affecting the

lien and security interest created by this Deed of Trust, and any balance of

such monies then remaining shall be paid to Grantors or the person or entity

lawfully entitled thereto. Beneficiary shall not be held responsible for any

failure to collect any insurance proceeds due under the terms of any policy

regardless of the cause of such failure.

 

      (d) At least fifteen (15) days prior to the expiration date of each policy

maintained pursuant to this Section 1.03, a renewal or replacement thereof

satisfactory to Beneficiary shall be delivered to Beneficiary. Grantors shall

deliver to Beneficiary receipts evidencing the payment for all such insurance

policies and renewals or replacements. The delivery of any insurance policies

hereunder shall constitute an assignment of all unearned premiums as further

security hereunder. In the event of the foreclosure of this Deed of Trust or any

other transfer of title to the Premises in extinguishment or partial

extinguishment of the Secured Indebtedness, all right, title and interest of

Grantors in and to all insurance policies then in force shall pass to the

purchaser or Beneficiary, and Beneficiary is hereby irrevocably appointed by

Grantors as attorney-in-fact for Grantors to assign any such policy to said

purchaser or to Beneficiary without accounting to Grantors for any unearned

premiums thereon.

 

      (e) All policies of insurance required pursuant to the terms of this

Section 1.03, shall contain a provision that such policies will not be cancelled

or materially amended, which term shall include any reduction in the scope or

limits of coverage, without at least thirty (30) days prior written notice to

Beneficiary. In the event Grantors fail to provide, maintain, keep in force or

deliver and furnish to Beneficiary the policies of insurance required by this

Section 1.03, Beneficiary may procure such insurance or single-interest

insurance for such risks covering Beneficiary's interest, and Grantors will pay

all premiums thereon promptly upon demand by Beneficiary. Until such payment is

made by Grantors, the amount of all such premiums, together with interest as

hereinafter set forth, shall be added to the Secured Indebtedness and shall be

secured by this Deed of Trust.

 

 

<PAGE>

 

      1.04 Monthly Deposits. At the option of Beneficiary and further to secure

the payment of the taxes, assessments and other sums referred to in Section 1.02

and the premiums on the insurance referred to in Section 1.03, in the event that

on or after the date of this Deed of Trust, any Grantor has failed to pay any

such taxes, assessment or other sums referred to in Section 1.02 when due,

Grantors shall upon request of Beneficiary deposit with Beneficiary, on the due

date of each installment under the Note, such amounts as, in the estimation of

Beneficiary, shall be necessary to pay such charges as they become due; said

deposits to be held and to be used by Beneficiary to pay current taxes and

assessments, insurance premiums and other charges on the Premises as the same

accrue and are payable. Payment from said sums for said purposes shall be made

by Beneficiary at its discretion and may be made even though such payments will

benefit subsequent owners of the Premises. Said deposits shall not be, nor be

deemed to be, trust funds, but may be, to the extent permitted by applicable

law, commingled with the general funds of Beneficiary, and no interest shall be

payable in respect thereof. If said deposits are insufficient to pay the taxes

and assessments, insurance premiums and other charges in full as the same become

payable, Grantors will deposit with Beneficiary such additional sum or sums as

may be required in order for Beneficiary to pay such taxes and assessments,

insurance premiums and other charges in full. Upon any default in the provisions

of this Deed of Trust or the Note, or any instrument evidencing, securing or in

any way related to the Secured Indebtedness, Beneficiary may, at its option,

apply any money in the fund relating from said deposits to the payment of the

Secured Indebtedness in such manner as it may elect.

 

      1.05 Condemnation. If all or any portion of the Premises shall be damaged

or taken through condemnation (which term when used in this Deed of Trust shall

include any damage or taking by any governmental or quasigovernmental authority

and any transfer by private sale in lieu thereof), either temporarily or

permanently, other than an insubstantial taking for the purpose of widening

existing roads bordering the Land which does not adversely affect access or the

use of the Land and is not so substantial as to permit any tenant (whether or

not then in possession) to terminate its lease or reduce the term thereof or the

rent payable thereunder, then the entire Secured Indebtedness shall, at the

option of Beneficiary, immediately become due and payable. Grantors, immediately

upon obtaining knowledge of the institution, or the proposed, contemplated or

threatened institution of any action or proceeding for the taking through

condemnation of the Premises or any part thereof will notify Beneficiary, and

Beneficiary is hereby authorized, at its option, to commence, appear in and

prosecute, through counsel selected by Beneficiary, in its own or in Grantors'

name, any action or proceeding relating to any condemnation. Grantors may

compromise or settle any claim for compensation but shall not make any

compromise or settlement for an award that is less than the Secured Indebtedness

without the prior written consent of Beneficiary. All such compensation, awards,

damages, claims, rights of action and proceeds and the right thereto are hereby

assigned by Grantors to Beneficiary, and Beneficiary is authorized, at its

option, to collect and receive all such compensation, awards or damages and to

give proper receipts and acquittance therefor without any obligation to question

the amount of any such compensation, awards or damages. After deducting from

said condemnation proceeds all of its expenses incurred in the collection and

administration of such sums, including reasonable attorney's fees, Beneficiary

shall apply the net proceeds as provided in Section 1.03 hereof.

 

      1.06 Care of Premises.

 

      (a) Grantors will keep the buildings, parking areas, roads and walkways,

landscaping, and all other improvements of any kind now or hereafter erected on

the Land or any part thereof in good condition and repair, will not commit or

suffer any waste and will not do or suffer to be done anything which would or

could increase the risk of fire or other hazard to the Premises or any other

part thereof or which would or could result in the cancellation of any insurance

policy carried with respect to the Premises.

 

 

<PAGE>

 

      (b) Grantors will not remove, demolish or alter the structural character

of any improvement located on the land without the written consent of

Beneficiary nor make or permit use of the Premises for any purpose other than

the development currently planned.

 

      (c) If the Premises or any part thereof is damaged by fire or any other

cause, Grantors will give immediate written notice thereof to Beneficiary.

 

      (d) Beneficiary or its representative is hereby authorized to enter upon

and inspect the Premises at any time.

 

      (e) Grantors will promptly comply with all present and future laws,

ordinances, rules and regulations of any governmental authority affecting the

Premises or any part thereof.

 

      (f) If all or any part of the Premises shall be damaged by fire or other

casualty, Grantors will promptly restore the Premises to the equivalent of its

original condition; and if a part of the Premises shall be damaged through

condemnation, Grantors will promptly restore, repair or alter the remaining

portions of the Premises in a manner satisfactory to Beneficiary.

Notwithstanding the foregoing, Grantors shall not be obligated so to restore

unless in each instance, Beneficiary agrees to make available to Grantors

(pursuant to a procedure satisfactory to Beneficiary) any net insurance or

condemnation proceeds actually received by Beneficiary hereunder in connection

with such casualty loss or condemnation, to the extent such proceeds are

required to defray the expense of such restoration; provided, however, that the

insufficiency of any such insurance or condemnation proceeds to defray the

entire expense of restoration shall in no way relieve Grantors of their

obligation to restore. In the event all or any portion of the Premises shall be

damaged or destroyed by fire or other casualty or by condemnation, shall

promptly deposit with Beneficiary a sum equal to the amount by which the

estimated cost of the restoration of the Premises (as determined by Beneficiary

in its good faith judgment) exceeds the actual net insurance or condemnation

proceeds with respect to such damages or destruction.

 

      1.07 Leases, Contracts, Etc.

 

      (a) As additional collateral and further security for the Secured

Indebtedness, Grantors do hereby assign to Beneficiary Grantors' interest in and

rights under any and all ground leases, leases, tenant contracts, rental

agreements, franchise agreements, management contracts, contracts for the sale

of any site within the Premises and other contracts, licenses and permits now or

hereafter affecting the Premises, or any part thereof, and Grantors agree to

execute and deliver to Beneficiary such additional instruments, in form and

substance satisfactory to Beneficiary, as hereafter may be requested by

Beneficiary further to evidence and confirm said assignment; provided, however,

that acceptance of any such assignment shall not be construed as a consent by

Beneficiary to any lease, tenant contract, rental agreement, franchise

agreement, management contract, sales contract or other contract, license or

permit, or to impose upon Beneficiary any obligation with respect thereto.

Without first obtaining on each occasion the written approval of Beneficiary

(which approval shall not be unreasonably withheld), Grantors shall not cancel

or permit the cancellation of any franchise agreement, management contract,

license, permit, lease or other contract, or accept, or permit to be made, any

prepayments of any installment of rent or fees thereunder (except the usual

prepayment of rent which results from the acceptance by a landlord on the first

day of each month of the rent for the ensuing month). Grantors shall faithfully

keep and perform, or cause to be kept and performed, all of the covenants,

conditions and agreements contained in each of said instruments, now or

hereafter existing, on the part of Grantors to be kept and performed and shall

at all times do all things necessary to compel performance by each other party

to said instruments of all obligations, covenants and agreements by such other

party to be performed thereunder.

 

 

<PAGE>

 

      (b) Grantors shall not execute an assignment of the rents, issues or

profits or any part thereof, from the Premises unless Beneficiary shall first

consent to such assignment, which consent may be given or denied in

Beneficiary's sole discretion, and unless such assignment shall expressly

provide that it is subordinate to the assignment contained in this Deed of Trust

and any assignment executed pursuant hereto.

 

      (c) Grantors shall furnish to Beneficiary, within thirty (30) days after a

request by Beneficiary to do so, a sworn statement setting forth the names of

all lessees and tenants of the Premises, the terms of their respective leases,

tenant contracts or rental agreements, the space occupied, and the rentals

payable thereunder, and stating whether any defaults, off-sets or defenses exist

under or in connection with any of said leases, tenant contracts or rental

agreements.

 

      (d) Grantors shall submit to Beneficiary, within ten (10) days of its

receipt thereof, copies of all leases executed and options exercised with

respect to the Premises. Grantors will not lease any space for a lesser rent

than is currently being paid for such space, without the prior written consent

of Beneficiary.

 

      (e) Each future lease, tenant contract or rental agreement pertaining to

the Premises, or any part thereof, shall provide that in the event of the

enforcement by Beneficiary of the remedies provided for by law or by this Deed

of Trust, the lessee or tenant thereunder will, upon request of Beneficiary or

any other person or entity succeeding to the interest of Beneficiary as a result

of such enforcement, automatically become the lessee or tenant of Beneficiary or

said successor in interest, without change in the terms or other provisions of

said lease, tenant contract or rental agreement. The Grantors shall cause the

foregoing requirement to be satisfied by the execution by such tenants of

subordination and attornment agreements satisfactory to Beneficiary.

 

       1.08 Security Agreement. With respect to the apparatus, fittings, fixtures

and articles of personal property referred to or described in this Deed of

Trust, or in any way connected with the use and enjoyment of the Premises, this

Deed of Trust is hereby made and declared to be a security agreement encumbering

each and every item of personal property included herein as a part of the

Premises, in compliance with the provisions of the Unifor