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86-- 106927 1.04 Compliance with Laws. The Trustor shall comply with all laws, ordinances, regulations, covenants, conditions and restrictions affecting said Premises or the operation thereof, and shall pay all fees or charges of any kind in connection therewith. 1.05 Insurance. Trustor shall keep all buildings and improvements and Collateral now or hereafter situated on the Property insured against loss or damage by fire and other hazards in a company approved by Beneficiary for their full replacement value. 1.06 Casualty. Trustor shall promptly notify Beneficiary of any loss whether covered by insurance or not. In case of loss or damage by fire or other casualty Beneficiary is authorized (a) to settle and adjust any claim under insurance policies which insure against such risks, or (b) to allow Trustor to agree with the insurance company or companies on the amount to be paid in regard to such loss. In either case, the Beneficiary is authorized to collect and receipt for any such insurance money. Such insurance proceeds may, at the option of the Beneficiary, be applied in the reduction of the indebtedness secured hereby, whether due or not, and without payment of premium, or to be held by the Beneficiary without any allowance of interest and used to reimburse Trustor for the cost of the rebuilding or restoration of buildings or improvements on said Premises. Notwithstanding the foregoing: (a) if the cost to rebuild or restore the buildings or improvements following any such casualty shall be less than $25,000, Beneficiary shall make the insurance proceeds available to reimburse Trustor for the costs of such rebuilding or restoration; and (b) if the cost to rebuild or restore the buildings or improvements following any such casualty is in excess of $25,000 and the proceeds of insurance paid to Beneficiary by reason of such casualty are sufficient, in the judgment of Beneficiary, to restore the improvements to their previous condition, then Beneficiary shall disburse such proceeds to Trustor as provided below. If Beneficiary elects to make said proceeds available to reimburse Trustor for the cost of the rebuilding or restoration of the buildings or improvements on the Property, such proceeds shall be made available as construction progresses in progress payments for disbursements of advances thereunder. The buildings and improvements shall be so restored or rebuilt so as to bs of at least equal value and substantially the same character as prior to such damage or destruction. If the proceeds are made available by Beneficiary to reimburse Trustor for the cost of said rebuilding or restoration, any surplus which may remain out of said insurance proceeds after payment of such cost of rebuilding or restoration shall, at the option of Beneficiary, be applied on account of the indebtedness secured hereby or to be paid to Trustee. -7-