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Exhibit 10.1

 
QAD Ortega Hill, LLC
 
Real Estate Term Loan: 353914-01

CREDIT AGREEMENT
 
This agreement is dated as of May 30, 2012.  It is between QAD ORTEGA HILL, LLC,
a Delaware limited liability company (“Borrower”) and RABOBANK, N.A., a national
banking association (“Lender”).
 
Borrower requests that Lender make a term loan to Borrower.  Lender will make a
term loan, subject to the terms of this agreement.
 
ARTICLE 1- THE REAL ESTATE TERM LOAN
 
1.01           Loan Amount.   Lender shall lend Borrower the principal sum of
$16,053,651.44 (the "Loan").
 
1.02           Purpose. The Loan must be used only to refinance Borrower’s
existing term loan with Lender (Loan No. 9417427988)
 
1.03           Interest.  The unpaid principal balance of the Loan will bear
interest at a rate equal to the one month LIBOR plus 2.250% per annum, Adjusted
on the fifteenth day of each Loan Month, with LIBOR determined two London
Banking Days immediately preceding the date of the respective Adjustment (the
"LIBOR Indexed Rate").  The term "Loan Month" means the one month period
beginning on the fifteenth day of the calendar month immediately following the
Closing Date, and each successive one month period.
 
1.04           Required Payments; Maturity Date.
 
(a)              Borrower shall pay accrued interest on the Loan on July 15,
2012 and on the fifteenth day of each month after the Closing Date to the
Maturity Date.
 
(b)              Borrower shall pay Loan principal at the times and in the
respective amount shown on Schedule 1.04(b) attached.
 
(c)              The unpaid principal balance of, all unpaid accrued interest
on, and all other charges under this agreement with respect to the Loan, shall
be paid on June 1, 2022 (the "Maturity Date").
 
1.05           Prepayments.  Prepayments of the Loan may be made at any time
without prepayment fee or penalty.
 
1.06           The Note.  The Loan will be evidenced by this agreement and a
promissory note in a form provided by Lender (the "Note").
 
ARTICLE 2 - COVENANTS REGARDING THE LOAN
 
2.01           Computation of Interest.  All computations of accrued interest
under the Loan Documents other than interest at the Maximum Rate, and all
computations of fees under the Loan Documents, will be made on the basis of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) elapsed; and all computations of interest accrued at the
Maximum Rate will be based upon a year of the actual number of days in the
respective year.  Subject to Section 2.04, there is no limit on the amount that
a rate of interest subject to Adjustment by Lender may increase at any one time,
or in the aggregate.  Lender's determination of a rate of interest will be
conclusive, absent manifest error.
 
2.02           Late Fee.  To the extent permitted by Applicable Law, Borrower
shall pay a late fee in the amount of 2.000% of the amount of any scheduled
payment due prior to the Maturity Date that is not paid in full when due;
provided, however, that any payment for the full amount then due that is made
within 10 days of its due date shall not be subject to a late fee.  The
imposition and payment of a late fee will not constitute a waiver of Lender's
rights with respect to an Event of Default as a result of that late payment.
 
2.03           Default Rate.  Upon the occurrence of an Event of Default, the
principal balance of the Loan and, to the extent permitted by Applicable Law,
all other Loan Obligations shall, from the date of an Event of Default until the
date Lender notifies Borrower that such Event of Default is waived or cured or
all Loan Obligations are paid in full, bear interest at the Default
Rate.  Subject to the provisions of Section 2.04, the "Default Rate" means (a)
with respect to the unpaid principal balance of any Loan, the rate per annum
which is equal to the otherwise applicable rate, plus 2.000% per annum; and (b)
with respect to all other Loan Obligations, 5.000% per annum.  Interest payable
at the Default Rate shall be paid from time to time on demand, or if not sooner
demanded, on the fifteenth day of each month.  The provisions of this section
may result in the compounding of interest.  The provisions of this section will
not constitute a waiver of any Event of Default.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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2.04           Maximum Rate.  Notwithstanding any provision of this agreement to
the contrary, (a) no interest will be due on any amount due under this agreement
if, under Applicable Law, Lender is not permitted to charge interest on that
amount, and (b) in all other cases interest due under this agreement will be
calculated at a rate not to exceed the Maximum Rate.  If Borrower is requested
by Lender to pay interest on any amount due under this agreement at a rate
greater than the Maximum Rate, the amount of interest due on that amount will be
deemed the Maximum Rate and all payments in excess of the Maximum Rate will be
deemed to have been Prepayments without prepayment fee or penalty, and not
interest.  All amounts other than interest which are paid or agreed to be paid
to Lender for the use, forbearance, or detention of Borrower's indebtedness to
Lender under this agreement shall, to the extent permitted by Applicable Law, be
amortized over the full stated term of the indebtedness, so that the rate of
interest on account of that indebtedness does not exceed the Maximum Rate for so
long as the indebtedness is outstanding.
 
2.05           Method and Application of Payments. All payments of principal,
interest, and other amounts to be made under the Loan Documents shall be made to
Lender in U.S. dollars and in immediately available funds, without set-off,
deduction, or counterclaim, not later than 2:00 pm (California time) on the
dates on which those payments will become due (any of those payments made after
the time on the due date will be deemed to have been made on the next succeeding
Business Day).  Unless otherwise agreed to in writing, or otherwise required by
Applicable Law, payments will be applied first to accrued, unpaid interest, then
to any unpaid collection costs, late charges and other charges, and any
remaining amount to principal, provided, however, during the continuance of an
Event of Default, Lender reserves the right to apply payments among principal,
interest, late charges, collection costs and other charges in such order of
priority as Lender shall from time to time determine in its sole
discretion.  The early or late date of making a regularly scheduled payment will
be disregarded for purposes of allocating the payment between principal and
interest.  For this purpose, the payment will be treated as though made on the
date due.  In any legal action or proceeding, the entries made by Lender in an
account or accounts maintained by Lender or Rabobank International or any of
their Affiliates in accordance with its usual practice and evidencing the
Obligations, will be prima facie evidence of the existence and amounts of those
Obligations.
 
2.06           ACH Payments.  So long as any Loan Obligations are unpaid or
unsatisfied, Borrower and/or QAD Inc., a Delaware corporation (“QAD”), shall
maintain a demand deposit account with Lender (the "Designated Account") in good
standing.  Borrower authorizes (and shall cause QAD to authorize, as applicable)
Lender to, at Lender's option in each instance, initiate debits to the
Designated Account, on the due date, for all interest and principal payments,
any fees and expenses, and any other amounts due and payable by Borrower with
respect to the Loan and Interest Hedging Obligations, by means of the automatic
clearinghouse electronic funds transfer system, by direct debit of the
Designated Account, or by any other commercially accepted method (hereafter,
"ACH Payments").  Lender shall give Borrower not less than ten days notice
before beginning ACH Payments.   If Lender elects to initiate ACH Payments,
Borrower will thereafter maintain sufficient funds in the Designated Account on
the dates Lender enters debits for ACH Payment of regularly scheduled payments
of interest, principal, and fees, if any.  If there are insufficient funds in
the Designated Account on the date Lender enters any debit authorized by this
agreement, Lender may reverse the debit.  Borrower agrees to upon request by
Lender, execute and deliver to Lender an ACH Payment authorization in form and
content satisfactory to Lender.  Subject to Section 2.04, all rates of interest
specified in this agreement shall be increased by 0.100% per annum if Borrower
does not maintain the Designated Account in good standing.
 
2.07           Inability to Determine Rates.  If, in connection with any Loan
bearing interest at a rate to be determined in whole or in part on the basis of
an applicable LIBOR based index (a “LIBOR Based Rate”), Lender determines that
(a) United States dollar deposits are not being offered to banks in the London
interbank market for the applicable amount of such Loan, (b) adequate and
reasonable means do not exist for determining the applicable LIBOR Based Rate,
or (c) the applicable LIBOR Based Rate does not adequately and fairly reflect
the cost to Lender of funding that Loan, Lender will promptly so notify the
Borrower.  Thereafter, the obligation of Lender to make or maintain any Loan
bearing interest at the applicable LIBOR Based Rate shall be suspended until
Lender revokes such notice, and all Loans which would otherwise bear interest at
the applicable LIBOR Based Rate shall accrue interest at a comparable rate based
on an index designated by Lender in its sole discretion after notice to
Borrower.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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ARTICLE 3- COLLATERAL
 
3.01           Collateral Documents.  The payment and performance of the
Obligations are secured by the following:
 
(a)               all Liens in favor of Lender created under (i) the Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of
the date of this agreement by Borrower to and in favor of RABOBANK, N.A., a
national banking association, for the benefit of Lender, on behalf of itself
and, if Borrower enters into Interest Hedging Agreements with Swap
Counterparties, as agent for the other Secured Parties, and encumbering real
estate located in Santa Barbara County, California; and (ii) any other
instrument or agreement delivered to Lender in conjunction with this agreement,
which states that it secures all or any of the Obligations (the property
encumbered by those Liens, the "Collateral;" and those instruments and
agreements securing all or any of the Obligations, the "Collateral Documents")
and
 
(b)              all Liens upon and security interests created under any other
written instrument or agreement stating expressly that it secures all or any
portion of the indebtedness, liabilities or obligations of Borrower under the
terms of this specific agreement.
 
3.02           Due on Sale or Encumbrance Provisions.  Each Collateral Document
which is a mortgage, deed of trust or deed to secure debt includes the following
provision:  Grantor shall not make or permit any Prohibited Transfer.  Any
Prohibited Transfer shall be an Event of Default, permitting Beneficiary to
declare all of the Secured Obligations to be due and payable
immediately.  "Prohibited Transfer" means:  (a) any sale, contract to sell,
conveyance, encumbrance, pledge, mortgage, lease of the Property not expressly
permitted under this instrument or the other Secured Obligation Documents, or
other transfer of all or any material part of the Property or any interest in
it, including any transfer of Mineral Rights, Water Rights, or Water Stock,
whether voluntary, involuntary, by operation of law or otherwise; (b) if Grantor
is a corporation, any transfer or transfers of shares of the voting power or the
direct or indirect beneficial ownership of Grantor; (c) if Grantor is a
partnership, withdrawal or removal of any general partner, dissolution of the
partnership under Applicable Law, or any transfer or transfers of the
partnership interests; (d) if Grantor is a limited liability company, withdrawal
or removal of any managing member (but not of any non-member manager),
termination of the limited liability company or any transfer or transfers of the
voting power or the ownership of the economic interest in the Grantor; or (e) if
Grantor is a trust, withdrawal or removal of any trustee or revocation of the
trust.
 
ARTICLE 4- CONDITIONS
 
4.01           Conditions of the Loan.  Lender's obligation to make the Loan is
subject to satisfaction of Lender’s sole discretion of the following conditions
precedent:
 
(a)               Borrower has executed and delivered the Loan Documents to
Lender; and Lender has executed this agreement and all other Loan Documents to
which Lender is a Party;
 
(b)              Lender has received evidence satisfactory to Lender, of (i) the
formation and existence of all Parties to the Transaction Documents other than
Lender, and except for any Party that is an individual, (ii) due authorization
of the individuals executing the Transaction Documents on behalf of those
Parties;
 
(c)               Lender has received all appraisals and inspection reports
required by Lender, in a form and content satisfactory to Lender;
 
(d)              Lender has received evidence satisfactory to Lender, that
Borrower is in compliance with all applicable Environmental Laws, including a
phase I environmental assessment of the real estate collateral performed by a
third party consultant approved by Lender (that evidence, the "Environmental
Information");
 
(e)               Lender has received evidence satisfactory to Lender, that all
regulatory approvals, Permits and licenses required under Applicable Law for
Borrower's business operations have been issued and are in full force and
effect;
 
(f)               Lender has received evidence satisfactory to Lender, that the
Liens granted to Lender under the Collateral Documents are valid and enforceable
and, upon the Closing will be, properly perfected, and prior to the rights and
interests of all other Persons, except those rights and interests acceptable to
Lender in its sole discretion;
 
(g)              Lender has received evidence satisfactory to Lender, that all
policies of insurance required under the Loan Documents are in full force and
effect and all premiums for those policies have been paid through the date
required by Lender;
 
(h)              Lender has received, at least 5 Business Days prior to the
Closing Date, all documentation and other information required by bank
regulatory authorities under applicable “know your customer laws” and
Anti-Terrorism Laws, including the U.S.A. Patriot Act;
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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(i)                all representations and warranties of all Parties other than
Lender in the Transaction Documents are true and correct;
 
(j)                Lender has received a written opinion from Borrower's legal
counsel acceptable to Lender, covering all issues required by Lender;
 
(k)               Lender’s receipt of a closing fee in the amount of $80,500.00
(the “Closing Fee”);
 
(l)                Lender has received reimbursement of Lender's out of pocket
expenses, including Legal Fees, incurred in connection with the underwriting of
the Loans or the Closing (collectively, the “Closing Expenses”);
 
(m)              Lender has received copies of all Leases and such estoppel
certificates and subordination, non-disturbance and attornment agreements signed
by Tenants, landlords and, if applicable, in recordable form, as Lender may have
requested;
 
(n)              Lender shall have received such subordination agreements signed
by such lien holders and creditors of Borrower, if applicable, in recordable
form, as Lender may request;
 
(o)              Lender shall have received in form and substance satisfactory
to Lender (i) an irrevocable written commitment by the Title Insurer or, if the
Title Policy is to be issued by the Title Company on behalf of the Title
Insurer, the Title Company that it will issue to Lender the Title Policy upon
the Closing, and (ii) if the Title Policy is to be issued by the Title Company
on behalf of the Title Insurer, a closing protection letter or insured closing
letter;
 
(p)              as of the Closing Date, the following shall be true and
correct:
 
(i)           no Default or Event of Default has occurred and is continuing; and
 
(ii)           no event has occurred and no condition exists which has resulted
in or could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect; and
 
(q)           Lender has received all other documents, certificates, filings,
consents, approvals, legal opinions, information and other preconditions
requested by Lender.
 
4.02           Closing Deadline.  Lender shall have no obligation to make the
Loan unless the conditions precedent to the Closing set forth herein have been
fully complied with and the Closing has occurred on or before the Closing
Deadline.  Termination of Lender’s commitment to make the Loan pursuant to this
Section shall not relieve Borrower of its obligation to reimburse Lender for its
costs, expenses and other charges payable by Borrower hereunder or of any
indemnity obligations hereunder or under the other Loan Documents, but Borrower
shall not be obligated to pay the Closing Fee.  Lender shall also be relieved of
its obligation to make the Loan hereunder in the event of a material change in
the Real Estate or the financial condition of Borrower prior to the Closing.  If
Lender elects to close the Loan after the Closing Deadline, Lender’s commitment
to make the Loan shall be deemed to have been extended to the actual Closing
Date.
 
ARTICLE 5– BORROWER REPRESENTATIONS
 
5.01           Representations.  From and after the date hereof and until such
time as all Obligations have been paid in full, Borrower represents and warrants
to Lender that:
 
(a)               it has complied with all applicable laws concerning its
organization, existence and the transaction of its business, and is in existence
and good standing in its state of organization and each state in which it
conducts its business, except to the extent failure to do so could not
reasonably be expected to have a Material Adverse Effect;
 
(b)              the execution, delivery and performance by Borrower of each
Transaction Document to which it is a party, is within the powers and authority
of Borrower and have been duly authorized; and the Transaction Documents have
been duly executed and delivered by each of the Loan Parties thereto;
 
(c)               the Transaction Documents do not conflict with any Applicable
Law;
 
(d)              each Transaction Document to which Borrower is a Party is a
legal, valid and binding agreement of Borrower, enforceable against Borrower in
accordance with its terms, and any instrument or agreement required thereunder,
when executed and delivered to Lender, will be similarly legal, valid, binding
and enforceable subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, and similar laws generally affecting
creditors’ rights and to general principles of equity;
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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(e)               all financial statements and other reports, documents,
instruments, information and forms of evidence concerning Borrower or the
Collateral (the "Financial Information"), delivered to Lender in connection with
this agreement, are accurate, correct and sufficiently complete in all material
respects to provide Lender true and accurate knowledge of their subject matter,
including, without limitation, all material contingent liabilities;
 
(f)               there has been no event or occurrence which has resulted in or
could reasonably be expected to result in, individual or in the aggregate, any
Material Adverse Effect since the effective date of the Financial Information
provided to Lender;
 
(g)              Borrower has good and marketable title to, or a valid leasehold
interest in, all of its property and assets as reflected in the Financial
Information provided to Lender, and such assets and properties are subject to no
Liens and Borrower has complied with all material obligations under all material
leases to which it is a party and enjoys peaceful and undisturbed possession
under such leases;
 
(h)              the Collateral Documents are effective to create, in favor of
Lender, legally valid and enforceable security interests in such right, title
and interest each applicable Loan Party shall from time to time have in the
Collateral and such security interests are subject to no Liens and are prior to
the rights and interests of all other Persons, except those rights and interests
acceptable to Lender in its sole discretion.  Each of the Loan Parties has
properly delivered to Lender all Collateral that requires perfection of the
security interests by possession and has authorized all filing and recording by
Lender required for the perfection of the security interests by filing or
recording;
 
(i)                Borrower is not the subject of any Judgment which could
reasonably be expected to have a Material Adverse Effect; and there is no
lawsuit, tax claim or other dispute pending or to Borrower's knowledge
threatened against Borrower that, if determined adverse to Borrower, is
reasonably likely to have a Material Adverse Effect;
 
(j)                the Transaction Documents do not conflict with, nor is
Borrower in default in any material respect under any agreement or arrangement
in effect providing for or relating to extensions of credit or other
indebtedness of any nature in respect of which Borrower is in any manner
directly or contingently obligated;
 
(k)               Borrower has filed all tax returns (federal, state, and local)
required to be filed by Borrower and has paid all material taxes, assessments,
and governmental charges and levies thereon, including interest and penalties;
 
(l)                Borrower and the Real Estate are in material compliance with
all Applicable Laws (including all Environmental Laws), and there is no claim,
action, proceeding or investigation pending or to Borrower's knowledge
threatened against Borrower or the Real Estate with respect to a violation of
any Applicable Law (including any Environmental Law) by Borrower;
 
(m)              no Loan Party has treated, stored, used or Released any
Hazardous Material in, on or at any of the properties or facilities owned or
leased by the Loan Parties (except for inventories of substances that are used
or to be used in the ordinary course of business of the Loan Parties (which
inventories have been stored and used and wastes disposed of in material
compliance will all applicable Environmental Laws), and there are no underground
tanks, surface impoundments or lagoons, whether operative or temporarily or
permanently closed, asbestos-containing materials, or PCB-containing equipment
located in, on or at any of the properties or facilities owned or leased by the
Loan Parties;
 
(n)              Borrower has previously delivered to Lender each environmental
audit, assessment or investigation report in the possession or control of any
Loan Party which have been prepared by any party during the 5-year period
preceding the Closing date relating to environmental conditions or compliance
with Environmental Laws on any of the properties or facilities owned or leased
by any Loan Party;
 
(o)              Borrower is not a "foreign person" within the meaning of
Section 1445 of the Internal Revenue Code of 1986;
 
(p)              Borrower is not an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended;
 
(q)              no Loan Party is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock, and no part of the proceeds of any Loan
will be used, either directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend
credit to others for the purpose of purchasing or carrying Margin Stock or to
refund indebtedness originally incurred for such purpose; or (ii) for any
purpose that entails a violation of, or that is inconsistent with, the
provisions of the Regulations of the Board;
 
(r)               no Default or Event of Default has occurred and is continuing;
and
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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(s)              no Loan Party or any Affiliate thereof is in violation of any
Anti-Terrorism Laws and the use of the proceeds of the Loan by Borrower will not
violate any Anti-Terrorism Laws.
 
5.02           Information Accurate and Complete.  Borrower's submission of any
report, record, certificate or other information pertaining to the condition or
operations, financial or otherwise, of Borrower, from time to time, whether or
not required under this agreement, will be deemed accompanied by a
representation by Borrower that the report, record or information is complete
and accurate in all material respects as to the condition or operations of
Borrower (and, if applicable, Borrower's Subsidiaries, Affiliates, partners,
shareholders, members, or other principals), including, without limitation, all
material contingent liabilities and does not omit to state any material fact
necessary to make the information contained therein misleading.
 
ARTICLE 6 – BORROWER COVENANTS
 
Until such time as all Obligations have been paid in full in cash:
 
6.01           Interest Hedging.  Borrower shall maintain in full force and
effect, one or more interest rate swaps or other similar agreements with Lender,
an Affiliate of Lender, or another counterparty acceptable to Lender, and in a
form and substance satisfactory to Lender, which effectively enables Borrower to
protect itself against the risk of interest rate fluctuations as to a notional
principal amount equal to the unpaid principal balance of the Loan for a term up
to and including the applicable Maturity Date.
 
6.02           Debt Service Coverage Ratio.  At all times prior to repayment of
the Obligations, the Annual Net Operating Income for the Real Estate shall be
adequate to support a minimum Debt Service Coverage Ratio of 1.25:1.00.  The
Debt Service Coverage Ratio shall be tested annually based on a calendar year,
with the initial testing commencing as of January 31, 2013 with respect to
calendar year 2012.  Accordingly, Borrower shall demonstrate to Lender’s
reasonable satisfaction that the Real Estate has a minimum Debt Service Coverage
Ratio of 1.25:1.00 with respect to the preceding year as set forth above (the
“Preceding Year”).  If the Debt Service Coverage Ratio is less than 1.25:1.00
for the Preceding Year, then it shall be an event of default entitling Lender,
at its option, to any or all of the following remedies: (i) have Borrower
provide Lender with quarterly operating statements and rent rolls by no later
than the 15th day of the month following each calendar quarter until Borrower
demonstrates achievement of a minimum Debt Service Coverage Ratio of 1.25:1.00
for 4 successive quarters; (ii) charge default interest until Borrower
demonstrates achievement of a minimum Debt Service Coverage Ratio of 1.25:1.00
for 4 successive quarters; (iii) pledge other collateral, in a form and on terms
acceptable to Lender, to remargin the Obligations so that they are in compliance
with a minimum Debt Service Coverage Ratio of 1.25:1.00; or (iv) require
Borrower, within 30 days of demand, to make a principal reduction payment on the
Obligations in an amount equal to the amount of principal necessary to cause the
principal balance of the Obligations, when calculating the Debt Service Coverage
Ratio of not less than 1.25:1.00.  Nothing contained herein shall be construed
as altering or eliminating any obligation on the part of Borrower to make any
other principal reduction payments as provided for in the Loan Documents.
 
6.03           Other Debt.  Borrower shall have no outstanding and shall not
incur any direct or contingent liabilities or lease obligations, or guaranty of
the liabilities of others, except the following if not otherwise prohibited
under the Transaction Documents:  (a) liabilities and obligations to Lender or
any of its Affiliates; (b) normal trade credit not more than 90 days past due or
being contested in good faith by appropriate proceedings; (c) lease obligations
or debt incurred for the purpose of purchasing equipment used in the ordinary
course of business; and (d) other liabilities and obligations in existence on
the date of this transaction and disclosed in the most recent financial
statement submitted to Lender.
 
6.04           Other Liens.  Borrower shall not create, assume or suffer to
exist any Liens on the rights, title or interests in its property, except the
following if not otherwise prohibited under the Loan Documents:  (a) Liens in
favor of Lender or any of its Affiliates; and (b) Liens for taxes not yet due or
which are being contested in good faith and by appropriate proceedings
diligently conducted, if adequate reserves with respect thereto are maintained
on the books of Borrower in accordance with generally accepted accounting
principles ("GAAP"); and (c) easements, rights-of-way, restrictions and other
similar encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower or interfere or otherwise result in a
breach of any Lease.
 
6.05           Sale of Assets. Borrower shall not sell or transfer any business
or asset, except the following if not otherwise prohibited by the Loan
Documents:  (a) sales or transfers of inventory in the ordinary course of
business and (b) sales or transfers of obsolete or worn out property, in the
ordinary course of business.
 
6.06           [Intentionally Omitted]
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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6.07           Loans to Others.  Borrower shall not make loans to others except
the following to the extent not otherwise prohibited by the Loan Documents:  (a)
extensions of credit made prior to the date of this agreement and disclosed to
and approved by Lender in writing on or before the date of this agreement (b)
extensions of credit to current Subsidiaries and Affiliates and (c) extensions
of credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business to
persons other than family members, Subsidiaries, and Affiliates.
 
6.08           Books and Records.  Borrower shall maintain and cause each of its
Subsidiaries to maintain proper books of record and account including full,
true, and correct entries of all dealings and transactions relating to its and
their business and activities on an accrual basis, in all material respects in
conformity with GAAP.
 
6.09           Deposit Account. Borrower and/or QAD shall maintain with Lender a
deposit account during the entire term of the Loan.
 
6.10           Reporting Requirements.  Borrower shall furnish to Lender:
 
(a)               as soon as available, but no later than 30 days after filing,
copies of federal income tax returns filed by Borrower, including all schedules
and exhibits and any extensions of the filing date (with copies of extensions to
be provided to Lender not later than 30 days following the original date for
filing of said extensions);
 
(b)              promptly upon sending or receipt, copies of any management
letters and correspondence relating to management letters, sent to or received
from Borrower's accountants; and
 
(c)               promptly upon receipt, copies of all notices, orders, or other
communications regarding (i) any enforcement action by any Governmental
Authority relating to health, safety, the environment, or any Hazardous
Materials with regard to Borrower's property, activities, or operations, or (ii)
any claim against Borrower regarding Hazardous Materials;
 
(d)              notice of the occurrence of any of the following, promptly, but
in any event no later than five days after such occurrence: (i) any lawsuit, tax
claim or other dispute if filed or threatened against Borrower in an amount
greater than $250,000.00; (ii) any substantial dispute between Borrower and any
Governmental Authority; (iii) the failure by Borrower to comply with the terms
and provisions of this agreement; (iv) any Material Adverse Effect as to
Borrower; (v) any change in Borrower's name, legal structure, place of business,
or chief executive office or federal identification number; or (vi) the Release
of any Hazardous Materials on the property of any Loan Party or violation of any
Environmental Laws by any Loan Party; ; and
 
(e)               promptly upon Lender's request, all other books, records,
statements, lists of property and accounts, budgets, forecasts, reports, records
or other information pertaining to the condition or operations of Borrower
requested by Lender.
 
6.11           Change in Accounting.  Borrower shall not make any material
change or modification of Borrower’s manner and method of accounting except as
required by the applicable accounting standard.
 
6.12           Maintenance of Assets.  Borrower shall maintain and preserve all
rights, privileges, intellectual property rights and franchises Borrower now has
or later acquires in the normal conduct of its business, except to the extent
that such failure could not reasonably be expected to have a Material Adverse
Effect; and make any repairs, renewals, or replacements to keep Borrower's
properties in good working condition, ordinary wear and tear excepted, except to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.
 
6.13           Existence and Good Standing.  If Borrower is anything other than
an individual, Borrower shall preserve and maintain its existence and good
standing in the jurisdiction of its formation, and qualify and remain qualified
to conduct its business in each jurisdiction in which such qualification is
required, except to the extent such failure could not reasonably be expected to
have a Material Adverse Effect.
 
6.14           Change in Business or Organizational Structure.  Borrower shall
not engage in any material line of business substantially different from those
lines of business conducted by Borrower and its Subsidiaries on the date hereof
or any business substantially related or incidental thereto; and if Borrower is
anything other than an individual, Borrower shall not (a) form or otherwise
acquire any Subsidiary, unless that Subsidiary executes and delivers to Lender a
guaranty of all of the Obligations and all other instruments and agreements
required by Lender; or (b) merge, dissolve, liquidate, consolidate with or into
another Person, or dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person.
 
6.15           Compliance with Laws; Permits.  Borrower shall comply in all
material respects with all Applicable Laws and pay before delinquency, all
taxes, assessments, and governmental charges imposed upon Borrower or its
property, except to the extent such failure to comply and or pay could not
reasonably be expected to have a Material Adverse Effect.  Each Loan Party shall
obtain and maintain in full force and effect and comply in all material respects
with all necessary Permits and government approvals, except to the extent such
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
7

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6.16           Inspections. Borrower shall, at any reasonable time during normal
operating hours and from time to time, permit Lender or any of its agents or
representatives to examine and make copies of and abstracts from the records and
books of, and visit the properties of, Borrower and to discuss the affairs,
finances, and accounts of Borrower, at Lender’s sole cost and expense with (if
Borrower is other than an individual) officers, directors, partners, or managers
or Borrower, as applicable; Borrower's independent accountants; and any other
person dealing with Borrower.
 
6.17           Insurance.
 
(a)              Borrower shall maintain, or cause to be maintained, public
liability insurance; all risk property damage insurance policies covering
tangible property comprising the Collateral for the full insurable value on a
replacement cost basis; workers’ compensation insurance as required by law; and
such additional insurance as required by Lender or any Swap Counterparty from
time to time.
 
(b)              If any Real Estate is located in an area now or hereafter
designated by the Director of the Federal Emergency Management Agency as a
special flood hazard area, Borrower agrees to obtain and maintain Federal Flood
Insurance, if available, within 45 days after notice is given by Lender that the
Real Estate is located in a special flood hazard area, for the full unpaid
principal balance of the Loan, plus any Swap Counterparties' derivative exposure
under the Interest Hedging Agreements as calculated by the Swap Parties, plus
any prior liens on the property securing the Loan, up to the maximum policy
limits set under the National Flood Insurance Program, or as otherwise required
by Lender, and to maintain such insurance for the term of the Loan.
 
(c)              All policies of insurance required under the Transaction
Documents must be issued by companies approved by Lender and, if applicable, the
Swap Counterparties, and must be acceptable to Lender and the Swap
Counterparties as to amounts, forms, risk coverages, expiration dates, and loss
payable and cancellation provisions with deductibles of a maximum of $10,000 on
improvements and fixtures located on the Real Estate  In addition, each required
policy must stipulate that coverage will not be cancelled or diminished without
a minimum of 10 days prior written notice to Lender or the Swap Counterparties
and without disclaimer of the insurer’s liability for failure to provide such
notice; contain a First Loss Payable Endorsement and any other endorsements as
Lender or the Swap Counterparties may require and must name Lender as an
additional insured and loss payee so that all proceeds of such property or
casualty insurance shall be payable to Lender and the Swap Counterparties to the
extent of its respective interest.
 
(d)              Borrower agrees to deliver to Lender and, if applicable, the
Swap Counterparty, on or before the Closing Date, evidence of the required
insurance as provided herein, with an effective date on or before the Closing
Date.  If Borrower fails to provide any required insurance or fails to continue
any required insurance in force, Lender or a Swap Counterparty may do so at
Borrower’s expense.  At the option of Lender or a Swap Counterparty, Borrower
shall reimburse Lender or a Swap Counterparty, on demand, the cost of any such
insurance paid by Lender or a Swap Counterparty or shall be added to the
Obligations.  BORROWER ACKNOWLEDGES THAT IF LENDER OR A SWAP COUNTERPARTY SO
PURCHASES ANY REQUIRED INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO AN AMOUNT EQUAL TO THE LESSER
OF (1) THE UNPAID BALANCE OF THE OBLIGATIONS, EXCLUDING ANY UNEARNED FINANCE
CHARGES, OR (2) THE VALUE OF THE COLLATERAL; HOWEVER, BORROWER’S EQUITY IN THE
COLLATERAL MAY NOT BE INSURED.  IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY
PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
 
(e)               For purpose of insurance coverage on the Collateral, Borrower
authorizes Lender and, if applicable, the Swap Counterparties to provide to any
Person all Information Lender or a Swap Counterparty deems appropriate, whether
regarding the Collateral, the Loan or other financial accommodations, or both.
 
6.18           Arms' Length Dealing.  Borrower shall not enter into any
transaction of any kind with any family member, Subsidiary or Affiliate, other
than on fair and reasonable terms substantially as favorable to Borrower as
would be obtainable by Borrower at the time in a comparable arm’s length
transaction with a Person other than a family member, Subsidiary or Affiliate,
and, if such transaction is not in the ordinary course of business, with prior
written notice to Lender.
 
6.19           Use of the Loan.  Borrower shall not use the Loan (a) for
personal, family or household purposes, or (b) to purchase or carry Margin Stock
or to invest in other Persons for the purpose of carrying Margin Stock or to
reduce or retire any indebtedness incurred for that purpose.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
8

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6.20           ERISA Plans.  Borrower shall promptly pay and cause all
Subsidiaries to pay contributions adequate to meet not less than the minimum
funding standards under ERISA with respect to each and every Plan; file each
annual report required to be filed pursuant to ERISA in connection with each
Plan for each year; and notify Lender within ten days following the occurrence
of any Reportable Event that might constitute grounds for termination of any
capital Plan by the Pension Benefit Guaranty Corporation or for the appointment
by the appropriate United States District Court of a trustee to administer any
Plan.  "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
 
6.21           Legal Fees; Costs.  Borrower shall pay the following:  (a) costs,
expenses and Legal Fees paid or incurred in connection with any amendments,
modifications or waivers of the provisions of the Loan Documents; (b) costs,
expenses and Legal Fees paid or incurred in connection with the collection or
enforcement of the Transaction Documents, whether or not suit is filed; (c)
costs, expenses and Legal Fees paid or incurred in connection with any
Insolvency Proceeding involving a claim under the Transaction Documents; (d)
costs of suit and such sum as the court may adjudge as Legal Fees in any action
to enforce payment of the Notes or any part thereof; and (e) costs, expenses and
Legal Fees incurred to protect the liens and security interests under the
Collateral Documents.
 
6.22           Remargining Requirement.  If at any time the Debt Service
Coverage Ratio is less than the minimum Debt Service Coverage Ratio, then within
15 days after Lender’s demand therefor, Borrower shall make such prepayment
under the Loan as may be necessary to cause Borrower to meet the minimum Debt
Service Coverage Ratio, as appropriate.
 
6.23           Leases.
 
(a)               Borrower shall perform all obligations required to be
performed by it as landlord under the Leases.  Borrower shall not accept payment
of more than one month’s rent in advance from any Tenant under a Lease.  Except
as otherwise approved by Lender in writing, all Leases shall be entered into
with bona fide third party subtenants financially capable, at the time of
entering into their respective Leases, of performing their obligations under
their Leases throughout the terms thereof and shall reflect arm’s-length
transactions at the then current market rate for comparable space.  Furthermore,
Borrower shall not grant any Tenant any rights or options to purchase the Real
Estate or any portion thereof or release any Tenant or lease guarantor from any
obligation or conditions without Lender’s prior written consent.  Borrower shall
obtain Lender’s written approval prior to executing any new Major Lease,
modifying, amending, terminating or surrendering an existing Lease, or
consenting to any sublease under or assignment of any Major Lease, unless
Borrower is unconditionally obligated under the terms of the Major Lease to
consent to the sublease or assignment.  Lender shall respond to Borrower’s
written request for approval of a new Major Lease or modification, amendment,
termination or surrender of a Major Lease (which written request must contain
the following on the first page thereof in bold, fully-capitalized 12-point or
greater text:  “IMPORTANT:  PURSUANT TO SECTION 6.23 OF THE CREDIT AGREEMENT
BETWEEN BORROWER AND LENDER, IF LENDER FAILS TO PROVIDE WRITTEN NOTICE OF THE
ATTACHED LEASE OR MODIFICATION, AMENDMENT, TERMINATION OR SURRENDER THEREOF OR
SUBLEASE THEREUNDER OR ASSIGNMENT THEREOF WITHIN 10 DAYS FOLLOWING LENDER’S
RECEIPT HEREOF, LENDER SHALL BE DEEMED TO HAVE APPROVED THE ATTACHED LEASE OR
THE MODIFICATION, AMENDMENT, TERMINATION OR SURRENDER THEREOF, SUBLEASE
THEREUNDER, OR ASSIGNMENT THEREOF”) within 10 business days following Lender’s
receipt of a copy of the proposed Major Lease, modification or amendment, or
request for approval of termination or surrender or approval of sublease or
assignment, as the case may be, together with financial statements and
references on the prospective tenant and such other information concerning such
new Major Lease, sublease or assignment, as the case may be, or prospective
tenant, subtenant or assignee, as the case may be, or concerning the
modification, amendment, termination or surrender, as the case may be, as Lender
shall reasonably require.  If Lender shall fail to respond to any such written
request by Borrower for such approval within such 10 business day period, Lender
shall be deemed to have approved such matter.  Borrower shall submit to Lender,
within 30 days following execution, all new Leases, all modifications,
amendments, consents to assignment or subletting of existing Leases, and shall
promptly notify Lender of the termination or surrender of any Lease.
 
(b)              Borrower shall promptly deliver to Lender such rent rolls,
leasing schedules and reports, operating statements or other leasing information
as Lender may request from time to time, and shall promptly notify Lender of any
material dispute with a Tenant or material adverse change in leasing activity on
the Real Estate.  Borrower shall use reasonable efforts promptly to obtain and
deliver to Lender such subordination, non-disturbance and attornment agreements
and tenant estoppel certificates, as Lender may require.  In no event shall any
approval by Lender of a Lease be a representation of any kind with regard to the
Lease or its enforceability, or the financial capacity of any Tenant or lease
guarantor.
 
(c)              Borrower shall first apply all income derived from the Real
Estate, including all income from the Leases, to pay the costs and expenses
associated with the ownership, maintenance, operation and leasing of the Real
Estate that are then due and payable, including all amounts then required to be
paid under the Loan Documents, before using or applying such income for any
other purpose.  No such income shall be distributed or paid to any partner,
shareholder or member, or, if Borrower is a trust, to any beneficiary or
trustor, unless all such costs and expenses which are then due and payable have
been paid in full.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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6.24           Management.  Borrower shall not enter into any agreement
providing for the construction, development, management, sale, leasing or
operation of the Real Estate (including any such agreement with any Affiliate),
and shall not modify, amend or terminate any such agreement approved by Lender,
without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed.  Without limiting the foregoing, any property
manager for the Real Estate and the property management agreement under which
such property manager is or is to be engaged by Borrower must be approved by
Lender in writing.  Borrower shall not enter into any agreement providing for
the construction, development, management, sale, leasing or operation of the
Real Estate or any other agreement with respect to the Real Estate with any
Affiliate except on terms and provisions that are no less favorable to Borrower
than are generally available in the market for goods and services to be provided
to Borrower under such agreement.  Borrower shall not cause or permit any change
in the management of Borrower without prior written consent of Lender.  At the
request of Lender, Borrower shall (a) execute and deliver to Lender an
assignment of management agreement for any management agreement affecting the
Real Estate, including a consent and subordination of property manager thereto,
in form and substance satisfactory to Lender, and (b) upon  the occurrence of an
Event of Default, upon Lender’s request, terminate the management agreement of
any property manager for the Real Estate that is an Affiliate of Borrower and
replace such property manager with a property manager satisfactory to Lender, in
its reasonable judgment.
 
6.25           Inspections; Appraisals.  Lender shall have the right, in its
sole discretion, to inspect the Real Estate and to obtain new appraisals, or to
update existing appraisals, at any time while the Loan or any portion thereof
remains outstanding.  Borrower shall cooperate with Lender and the appraiser
(and use its best efforts to cause the Tenants of the Real Estate to cooperate
with Lender and the appraiser) in permitting access to the Real Estate and in
obtaining operating and other relevant information on the Real Estate.  Borrower
agrees to pay the cost and expense for (a) more than one Appraisal and review
ordered by Lender during any consecutive 12 calendar month period, and (b) for
any additional appraisals and reviews (i) as are required pursuant to a change
in applicable law or regulations, and (ii) after the occurrence and during the
continuation of an Event of Default.
 
6.26           Lender Expenses.  Within ten Business Days after demand from
Lender to Borrower, Borrower shall pay (or reimburse Lender for payment of)
reasonable Closing Expenses not previously received by Lender.
 
6.27           Other Acts.  Upon request by Lender, Borrower shall cooperate
with Lender for the purposes of, and perform all acts which may be necessary or
advisable to establish, perfect and/or monitor any Lien granted under this
agreement or the Collateral Documents, or to carry out the intent of the
Transaction Documents.
 
ARTICLE 7 - EVENTS OF DEFAULT AND REMEDIES
 
7.01           Events of Default.  The following each will be an event of
default under this agreement (an "Event of Default"):
 
(a)               any payment required under the Loan Documents is not made
within 10 days after the date when due;
 
(b)              the Financial Information or any representation or warranty in
the Loan Documents is materially incorrect or misleading when made or provided;
 
(c)               Borrower does not (i) pay (or cause payment of) all material
taxes of Borrower prior to the date when delinquent, except those which are
being contested in good faith by appropriate proceedings diligently conducted
for which adequate reserves have been provided in accordance with GAAP; or (ii)
maintain (or cause to be maintained) all policies of insurance required under
the Transaction Documents and pay (or cause payment of) all premiums for that
insurance on or prior to the date when due; or (iii) maintain the Collateral (or
cause the Collateral to be maintained) in good condition and repair, all in
accordance with the terms and conditions of the Transaction Documents.
 
(d)              the death of (i) any Borrower who is an individual, (ii) if
Borrower is a partnership, any general partner of that partnership who is an
individual, or (iii) if Borrower is the trustee under a trust acting in that
capacity, any individual trustor under the trust;
 
(e)               a change in the equity interest of Borrower;
 
(f)               the filing of any tax lien against Borrower, any member or
general partner of Borrower, or against any of the Collateral and the same is
not discharged of record within 30 days after the date filed;
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
10

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(g)              an Insolvency Proceeding is initiated by Borrower; or any
Insolvency Proceeding initiated against Borrower by another Person is not
discharged within 60 days after filing;
 
(h)              Borrower or any Subsidiary of Borrower is or becomes subject to
a Judgment or Judgments:  (i) for the payment of money in an aggregate amount
(as to all such Judgments or orders) exceeding $250,000.00, which are not
covered by independent third-party insurance as to which the insurer does not
dispute coverage, or (ii) that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case,
(A) enforcement proceedings are commenced by any creditor upon any such
Judgment, or (B) there is a period of ten consecutive days during which a stay
of enforcement of any such Judgment, by reason of a pending appeal or otherwise,
is not in effect;
 
(i)                the violation of any Financial Covenant;
 
(j)                any "Event of Default" as that term is defined in the Loan
Documents other than this agreement which is not cured within any applicable
cure or grace period;
 
(k)               any material default in the payment or performance of a term
or condition of any credit agreement, note, security agreement, mortgage, deed
of trust, deed to secure debt, or other agreement or instrument evidencing or
securing any other indebtedness, liabilities or obligations of Borrower to
Lender or any Affiliates of Lender, or any Swap Counterparty;
 
(l)                any default termination event or other similar event under
any Interest Hedging Agreement which is not cured within any applicable cure or
grace period;
 
(m)              any Material Adverse Effect as to Borrower;
 
(n)              any ERISA Event;
 
(o)              for more than ten days after notice from Lender, Borrower is in
default under any term, covenant or condition of this agreement not previously
described in this Section 7.01, which can be cured by the payment of a sum of
money;
 
(p)              title to the Real Estate is not satisfactory to Lender by
reason of any defect, except those matters affecting title that have at any time
been consented to in writing by Lender or the lien of the Collateral Documents
ceases to be a perfected lien on fee title to the Real Estate vested in
Borrower, except as specifically contemplated herein;
 
(q)               (i) any default by Borrower under a Lease beyond the
applicable cure period, or (ii) except as otherwise permitted herein, (A) a
Major Lease is terminated or (B) Borrower attempts to terminate a Major Lease
without Lender’s prior written consent;
 
(r)               for more than 30 days after notice from Lender, Borrower is in
default under any term, covenant or condition of this agreement not previously
described in this Section 7.01; provided that if (i) it is reasonably certain
that the default cannot be cured by Borrower within that 30 day period and (ii)
Borrower has commenced curing that default within that 30 day period and
thereafter diligently and expeditiously proceeds to cure that default, then that
30 day period will be extended for so long as reasonably required by Borrower in
the exercise of due diligence to cure that default, up to a maximum of 90 days
after the notice to Borrower of the Event of Default; and
 
(s)               any Loan Document ceases to be in full force and effect or is
declared void by a Governmental Authority or any party thereto shall claim such
unenforceability or invalidity, or any security interest in the Collateral
created by the Collateral Documents shall fail or cease to be, or shall be
asserted in writing that it is not, a valid and perfected security interest in
the securities, assets or properties covered thereby;
 
7.02           Remedies.  Upon the occurrence of an Event of Default, Lender
may: (a) declare any and all Obligations due and payable, without presentment,
notice of intent to accelerate or notice of acceleration, demand, protest or
further notice of any kind, all of which are expressly waived by Borrower; and
(b) exercise all other rights and remedies afforded to Lender under the Loan
Documents or Applicable Law or in equity; except that upon an actual or deemed
entry of an order for relief with respect to Borrower or any of its Subsidiaries
in any Insolvency Proceeding, all Loan Obligations shall automatically become
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are expressly waived by Borrower.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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ARTICLE 8 - NOTICES
 
All requests, notices, approvals, consents, and other communications between the
Parties (collectively, "Notices") under the terms and conditions of the Loan
Documents must be in writing and mailed or delivered to the address specified in
that Loan Document, or to the address designated by any Party in a notice to the
other Parties; and in the case of any other Person, to the address designated by
that Person in a notice to Borrower and Lender.  All Notices will be deemed to
be given or made upon the earlier to occur of (a) actual receipt by the intended
recipient or (b) (i) if delivered by hand or by courier, upon delivery; or (ii)
if delivered by mail, four Business Days after deposit in the mails, properly
addressed, postage prepaid; except that notices and other communications to
Lender shall not be effective until actually received by Lender.  Borrower
requests that Lender accept, and Lender may, at its option, accept and is
entitled to rely and act upon any Notices purportedly given by or on behalf of
Borrower, even if not made in a manner specified herein (including Notices made
verbally, by telephone, telefacsimile, email, or other electronic means of
communication), were incomplete or were not preceded or followed by any other
form of Notice specified herein, or the terms thereof, as understood by the
recipient, varied from any confirmation thereof.  All telephonic Notices to and
other telephonic communications with Lender may be recorded by Lender, and each
Party consents to such recording.
 
ARTICLE 9 – GENERAL DEFINITIONS, ACCOUNTING MATTERS AND DRAFTING CONVENTIONS
 
9.01           Defined Terms.  Capitalized terms defined in this section are
used in this agreement as so defined. Except as otherwise defined in this
agreement, or unless the context otherwise requires, each term that is used in
this agreement which is defined in Article 9 of the UCC shall have the meaning
ascribed to that term in Article 9 of the UCC.
 
"Adjust" means to increase or decrease; "Adjusted" means increased or decreased;
and "Adjustment" means an increase or decrease.
 
"Adjustment Date" means each date on which the rate of interest on a LIBOR
Indexed Rate Loan is or may be Adjusted by Lender pursuant to this agreement.
 
“Affiliate” of a Person which is anything other than an individual means another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
 
"Annual Net Operating Income for the Real Estate" means all revenues generated
by and from the operation of the Real Estate, including, but not limited to all
lease payments or rental charges and other fees, less all costs of operating the
Real Estate, including without limitation property taxes and assessments,
salaries, wages, and insurance premiums but excluding depreciation, amortization
and interest expenses related to the Loan.
 
“Anti-Terrorism Laws” mean (a) the U.S.A. Patriot Act, (b) any of the foreign
assets control regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto, and (c) any other laws relating to terrorism or money
laundering.
 
"Applicable Law" means all existing and future laws, orders, ordinances, rules
and regulations of or by a Governmental Authority; except that in determining
the Maximum Rate, Applicable Law shall mean those laws, orders, ordinances,
rules and regulations in effect as of the date hereof or if there is a change in
Applicable Law which (a) permits Lender to charge interest on amounts which
Lender would not otherwise be permitted to charge interest, or (b) increases the
permissible rate of interest, then the new Applicable Law as of its effective
date.
 
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.
 
"Borrower" shall have the meaning specified in the preamble of this agreement.
 
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required to close under the Applicable
Laws of the State of California, or are in fact closed in the State of
California.
 
"Closing" means (a) the acknowledgement by Lender that all conditions precedent
to the Loan are satisfied or waived in accordance with this agreement, or (b)
the Loan is made, whichever is earlier.
 
"Closing Date" means the date of the Closing.
 
“Closing Deadline” means June 1, 2012.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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"Control" of a Person which is anything other than an individual means the power
to direct the management and policies of that Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.
 
"Debt Service Coverage Ratio" means, at any date of determination, the ratio of
the Annual Net Operating Income for the Real Estate for the 12 month period
ending on such date of determination to the principal, interest and other
charges due on all indebtedness of the Real Estate on an annual basis.
 
“Default” means any event or condition which, with the passage of time or the
giving of notice or both, would constitute an Event of Default.
 
"Environmental Law" means all Applicable Laws that relate to (a) the prevention,
abatement or elimination of pollution, or the protection of the environment,
natural resources (including water vapor, surface water and subsurface water,
surface and subsurface land, air, aquatic life, wildlife, vegetation, and any
other biota) or human health (to the extent relating to exposure to Hazardous
Materials), or natural resource damages, and (b) the use, generation, handling,
treatment, storage, Release , transportation or regulation of, or exposure to,
Hazardous Materials, including the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq., the Endangered
Species Act, 16 U.S.C. §§ 1531 et seq., the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., the
Clean Air Act, 42 U.S.C. §§ 7401 et seq., the Clean Water Act, 33 U.S.C. §§ 1251
et seq.,  the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., the
Emergency Planning and Community Right to Know Act, 42 U.S.C. §§ 11001 et seq.,
the Carpenter-Presley-Tanner Hazardous Substance Account Act (Health & Safety
Code §2530 et seq.), the Hazardous Waste Control Law (Health & Safety Code §2510
et seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986 (Health &
Safety Code §252249.5 et seq.), the Underground Storage of Hazardous Substances
Act (Health & Safety Code §25280 et seq.) and the Porter-Cologne Water Quality
Control Act (Water Code §13100 et seq.) .
 
“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Loan Party, is treated as a single employer under
Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code.
 
“ERISA Event” means (a) the occurrence of any “reportable event” as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, other than those
events as to which the 30-day notice period has been waived, with respect to a
Plan; (b) any failure by any Plan to satisfy the applicable minimum funding
standards under Section 412 or 430 of the Code or Section 302 or 303 of ERISA,
whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or
Section 302(c) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan, the failure to make by its due date a
required installment under Section 430(j) of the Code with respect to any Plan
or the failure to make any required contribution to a Multiemployer Plan; (d) a
determination that any Plan is, or is expected to be, in “at risk” status (as
defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (e) the
incurrence by any Loan Party or any ERISA Affiliate of any liability under Title
IV of ERISA with respect to the termination of any Plan; (f) the receipt by any
Loan Party or any ERISA Affiliate from the Pension Benefit Guaranty Corporation
or a plan administrator of any notice relating to an intention to terminate any
Plan or to appoint a trustee to administer any Plan, or the occurrence of any
event or condition which could reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (g) the incurrence by any Loan Party or any ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; (h) the receipt by any Loan Party or any
ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Loan Party or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, in critical or endangered status, within the meaning of Section
305 of ERISA; (i) the occurrence of a nonexempt prohibited transaction (within
the meaning of Section 4975 of the Code or Section 406 of ERISA) which could
reasonably be expected to result in material liability to any Loan Party; or (j)
the occurrence of any other event or condition with respect to a Plan or a
Multiemployer Plan with respect to which any Loan Party is likely to incur
material liability other than in the ordinary course.
 
"Financial Covenant" means any covenant contained in the Loan Documents
regarding the financial status of a Person other than Lender.
 
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
 
"Hazardous Material" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "caustic," "pollutant," or
"contaminant" or a similar designation or regulation under any Environmental Law
or could reasonably be expected to lead to liability under any Environmental
Law, and shall also include, without limitation, asbestos in any form that is or
could reasonably be expected to become friable or asbestos containing materials,
polychlorinated byphenyls or radon gas, PCBs, petroleum, petroleum products,
natural gas and explosive or radioactive substances and lead.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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"Insolvency Proceeding" means the insolvency of a Person, the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official of
any part of a Person's property, an assignment by a Person for the benefit of
creditors, or the voluntary or involuntary commencement of any proceeding under
the Federal Bankruptcy Code or any other bankruptcy or insolvency law, by or
against a Person, including the winding-up or liquidation of a Person.
 
"Interest Hedging Agreement" means any interest rate swap, cap, collar or other
similar agreement related to an extension of credit under this agreement that is
entered into by and between Borrower and a Swap Counterparty.
 
"Interest Hedging Obligations" means all indebtedness, liabilities and
obligations of Borrower under any Interest Hedging Agreement, whether now
existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several.
 
"Interest Payment Date" means a date on which regularly scheduled payments of
interest are due.
 
"Interest Period" means with respect to a LIBOR Indexed Rate Loan, each period
commencing on the date that Loan is made or the applicable rate is recalculated,
until the next Adjustment Date or, if earlier, the respective Maturity Date.
 
"Judgment" means a judgment, order, writ, injunction, decree, or rule of any
court, arbitrator, or Governmental Authority.
 
“Lease” means a lease, rental or occupancy agreement affecting all or any part
of the Real Estate or an interest therein.
 
"Legal Fees" means any and all counsel, attorney, paralegal and law clerk fees
and disbursements, including, but not limited to fees and disbursements at the
pre-trial, trial, appellate, discretionary review, or any other level, incurred
or paid by Lender in drafting and negotiating the Loan Documents, closing the
transactions contemplated hereby, and protecting and enforcing its rights and
interests under the Loan Documents.
 
"Lender" shall have the meaning specified in the preamble of this agreement and
any successors and assigns of any of its rights and obligations under this
agreement.
 
"LIBOR" means, for any Interest Period, the rate of interest appearing on
Bloomberg L.P. (the "Service") Page BBAM1/(Official BBA USD Dollar Libor
Fixings) (or on any successor or substitute page of the Service, or any
successor to or substitute for the Service providing rate quotations comparable
to those currently provided on such page of the Service, selected by Lender from
time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in an amount equal to the Loan in the London interbank
market) at approximately 11:00 a.m., London time, as the rate for dollar
deposits with a maturity comparable to the applicable contract period; provided,
that LIBOR may be Adjusted from time to time in Lender's discretion for reserve
requirements, deposit insurance assessment rates and other regulatory costs.
 
"LIBOR Indexed Rate Loan" means a Loan which bears interest at the LIBOR Indexed
Rate.
 
“Lien” means any mortgage, pledge, assignment, deposit arrangement, privilege,
encumbrance, lien (statutory or other), charge, or preference, priority or other
security interest or preferential arrangement in the nature of a security
interest of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any easement, right of way or other encumbrance
on title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).
 
"Loan Documents" means this agreement, the Note, the Collateral Documents, and
all other agreements and instruments required by Lender for purposes of
evidencing or securing the Loan.
 
"Loan Obligations" means all indebtedness, liabilities and obligations of
Borrower to Lender arising pursuant to any of the Loan Documents, whether now
existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several.
 
“Loan Party” means, individually and collectively, Borrower and a grantor of a
security interest in the Collateral.
 
"London Banking Day" means a day on which banks are open for dealings in dollar
deposits in the London interbank market.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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"Losses" means any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, fines, penalties, charges, fees, Judgments,
awards, amounts paid in settlement of whatever kind or nature (including Legal
Fees).
 
“Major Lease” means any Lease (excluding any subleases) of space in the Real
Estate of at least 10% of the total net rentable area thereof.
 
“Major Tenant” means a Tenant under a Major Lease.
 
“Margin Stock” shall have the meaning assigned to such term in Regulation U.
 
"Material Adverse Effect" means any set of circumstances or events which (a) has
or could reasonably be expected to have any material adverse effect as to the
validity or enforceability or any right or remedy of Lender under any
Transaction Document or any material term or condition therein against the
applicable Person; (b) is or could reasonably be expected to be material and
adverse to the financial condition, business assets, operations, or property of
the applicable Person, including any material portion of the Collateral; or (c)
materially impairs or could reasonably be expected to materially impair the
ability of the applicable Person to perform the Obligations.
 
"Maximum Rate" means that rate per annum which, under Applicable Law, may be
charged without subjecting Lender to civil or criminal liability, or limiting
Lender's rights under the Loan Documents as a result of being in excess of the
maximum interest rate which Borrower is permitted to contract or agree to pay;
except that the Maximum Rate on any amount upon which Lender is not permitted to
charge interest will be zero percent.
 
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA subject to the provisions of Title IV of ERISA and in respect of which
any Loan Party or any ERISA Affiliate is an “employer” as defined in Section
3(5) of ERISA.
 
"Obligations" means the Loan Obligations and the Interest Hedging Obligations.
 
"Party" refers only to a named party to this agreement or another Loan Document,
as the context requires.
 
“Permits” mean any and all franchises, licenses, leases, permits, approvals,
notifications, certifications, registrations, authorizations, exemptions,
qualifications, easements, rights of way, Liens and other rights, privileges and
approvals required to be obtained from a Governmental Authority under any
Applicable Law.
 
"Person" means an individual, a corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, or other business entity, or a government or any
agency or political subdivision thereof.
 
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA and in respect of which any Loan Party or any ERISA
Affiliate is (or if such plan were terminated would under Section 4069 of ERISA
be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
 
"Prepay" means to make a Prepayment.
 
"Prepayment" means a payment of all or a portion of the unpaid principal balance
of the Loan prior to the date when due, whether voluntary, by reason of
acceleration, or otherwise.
 
"Real Estate" means that portion of the Collateral which is real property, as
opposed to personal property.
 
“Regulation U” means Regulation U of the Board as from time to time in effect
and all official rulings and interpretations thereunder and thereof.
 
“Release” means any placing, spilling, leaking, seepage, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing or migrating in, into or onto or through the environment.
 
“Secured Parties” means Lender and, as appropriate, any other Swap
Counterparties.
 
“Subsidiary” of a Person which is anything other than an individual means a
business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body are at the time beneficially owned, or the management of which is
otherwise controlled, directly, or indirectly by that Person.  Unless otherwise
specified, all references to a “Subsidiary” or to “Subsidiaries” shall refer to
any Subsidiary or Subsidiaries, if any.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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"Swap Counterparty" means any party to an Interest Hedging Agreement related to
an extension of credit under this agreement which can be Lender, or any other
counterparty acceptable to Lender.
 
“Tenant” means each Person that is a lessee, tenant, renter or occupant under a
Lease.
 
“Title Company” means the agent of the Title Insurer issuing the Title Policy on
behalf of the Title Insurer.
 
“Title Insurer” means Fidelity National Title Insurance Company.
 
“Title Policy” means a 2006 ALTA lender’s title insurance policy, extended
coverage, in such form and with such endorsements as may be required by Lender,
issued by Title Insurer insuring that the Collateral Documents which are
mortgages, deeds of trust, or deeds to secure debt are and will continue to be
an encumbrance against the fee simple title to the Real Estate, securing a debt
in the amount of the Loan, prior and paramount to all other liens and
encumbrances of any nature or kind whatsoever except such exceptions as Lender,
in its sole discretion, may approve in writing.
 
"Transaction Documents" means the Loan Documents and all Interest Hedging
Agreements.
 
"UCC" means the Uniform Commercial Code as enacted in the Governing Law State.
 
“U.S.A. Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56 (signed into law on October 26, 2001).
 
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
 
9.02           Accounting Matters.  All accounting terms not specifically
defined herein will be construed in accordance with GAAP.  All financial
covenants applicable to an individual will be calculated based on that
individual's business, excluding personal assets and liabilities  Borrower will
not change the manner in which either the last day of its fiscal year or the
last days of the first three fiscal quarters of its fiscal years is
calculated.  If at any time any change in GAAP would affect the computation of
any financial ratio or requirement set forth in any Loan Document Lender may
amend that ratio or requirement to preserve the original intent thereof in light
of that change.
 
9.03           Drafting Conventions.  Unless expressly stated therein or the
context otherwise requires, the Loan Documents will be interpreted in accordance
with the following (the "Drafting Conventions"):  (a) the words "include,"
"includes," and "including" are to be read as if they were followed by the
phrase "without limitation"; (b) unless otherwise expressly stated, terms and
provisions applicable to two or more Persons shall apply on an individual, as
well as collective basis; (c) headings and captions are provided for convenience
only and do not affect the meaning of the text which follows; (d) references to
a parcel or tract of real estate means, without limitation, the land described,
and any and all improvements located thereupon and all easements or other rights
or interests benefiting that land; (e) references to an agreement or instrument
means that agreement or instrument, together with all extensions, renewals,
modifications, substitutions and amendments thereof, subject to any restrictions
thereon in that agreement or instrument or in the Loan Documents; (F) ANY REPORT
OR DOCUMENT TO BE RECEIVED BY LENDER SHALL BE SATISFACTORY IN FORM AND CONTENT
TO LENDER; (G) WHEREVER (I) LENDER EXERCISES ANY RIGHT GIVEN TO IT TO APPROVE OR
DISAPPROVE, (II) ANY ARRANGEMENT OR TERM IS TO BE SATISFACTORY TO LENDER, OR
(III) ANY OTHER DECISION OR DETERMINATION IS TO BE MADE BY LENDER, THEN EXCEPT
AS MAY BE OTHERWISE EXPRESSLY AND SPECIFICALLY PROVIDED THEREIN, THE DECISION TO
APPROVE OR DISAPPROVE, ALL DECISIONS THAT ARRANGEMENTS OR TERMS ARE SATISFACTORY
OR NOT SATISFACTORY, AND ALL OTHER DECISIONS AND DETERMINATIONS MADE BY LENDER,
SHALL BE IN THE SOLE DISCRETION OF LENDER, WITHOUT REGARD FOR THE ADEQUACY OF
ANY SECURITY FOR THE OBLIGATIONS; (h) whenever by the terms of the Loan
Documents, Borrower is prohibited from taking an action or permitting the
occurrence of some circumstance, Borrower shall not, directly or indirectly take
that action or permit that circumstance, or directly or indirectly permit any
Subsidiary to take that action or permit that circumstance; (i) evidence of the
occurrence or non-occurrence of any event, or the existence or non-existence of
any circumstance to be delivered to Lender must be in a form satisfactory to
Lender; (j) unless specified otherwise, references to a statute or regulation
means that statute or regulation as amended or supplemented from time to time
and any corresponding provisions of successor statutes or regulations; (k)
unless otherwise specified, all references to a time of day are references to
the time in California; (l) references to "month" or "year" are references to a
calendar month or calendar year, respectively, unless otherwise specifically
provided; (m) if any date specified in this agreement as a date for taking
action falls on a day that is not a Business Day, then that action may be taken
on the next Business Day; (n) a pronoun used in referring generally to any
member of a class of Persons, or Persons and things, applies to each member of
that class, whether of the masculine, feminine, or neuter gender; (o) references
to "articles," "sections," "subsections," "paragraphs;" "exhibits," and
"schedules" reference articles, sections, subsections, paragraphs, exhibits, and
schedules, respectively, of this agreement unless otherwise specifically
provided; (p) the words "hereof," "herein," "hereunder," and "hereby" refer to
this agreement as a whole and not to any particular provision of this agreement;
(q) the definitions in this agreement apply equally to both singular and plural
forms of the terms defined; and (r) for purposes of computing periods of time
from a specified date to a later specified date, the word "from " means "from
and including" and the words "to" and "until" each mean "to but excluding".
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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ARTICLE 10 - MISCELLANEOUS
 
10.01         Entire Agreement.  This agreement and the other Loan Documents,
collectively: (i) represent the sum of the understandings and agreements between
Lender and Borrower concerning this credit; (ii) replace any prior oral or
written agreements between Lender and Borrower concerning this credit; and (iii)
are intended by Lender and Borrower as the final, complete and exclusive
statement of the terms agreed to by them.  In the event of any conflict between
this agreement and any other agreements required by this agreement, this
agreement will prevail.
 
10.02         Joint and Several Obligations.  If Borrower consists of more than
one Person, each Borrower (a) expressly acknowledges that it has benefited and
will benefit, directly and indirectly, from the Loan and acknowledges and
undertakes, together with the other Borrowers, joint and several liability for
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all Loan Obligations; (b) acknowledges that this agreement is the
independent and several obligation of each Borrower and may be enforced against
each Borrower separately, whether or not enforcement of any right or remedy
hereunder has been sought against any other Borrower; and (c) agrees that its
liability hereunder and under any other Loan Document is absolute,
unconditional, continuing and irrevocable.  BORROWER EXPRESSLY WAIVES ANY
REQUIREMENT THAT LENDER EXHAUST ANY RIGHT, POWER OR REMEDY AND PROCEED AGAINST
THE OTHER BORROWERS UNDER THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENTS, OR
AGAINST ANY OTHER PERSON UNDER ANY GUARANTY OF, OR SECURITY FOR, ANY OF THE
OBLIGATIONS.
 
10.03         Authority to Bind Borrower.  If Borrower is comprised of multiple
Persons, any Person comprising Borrower is authorized to bind all parties
comprising Borrower.  Without limitation of the foregoing, Lender may require
any Loan Request or other request, authorization, or other action by or on
behalf of Borrower be by one or more individuals designated in writing by the
parties comprising Borrower (a "Designated Person").  Lender may, at any time
and without notice, waive any prior requirement that requests, authorizations,
or other actions be taken only by a Designated Person.
 
10.04         Binding Effect; Successors and Assigns.  The Loan Documents will
inure to the benefit of and be binding upon the parties and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under any Loan Document without prior written consent
of the Lender.
 
10.05         Assignment; Participations.  Borrower shall not assign its rights
or obligations hereunder without Lender's consent.  Lender may assign or sell
participations in all or any portion of its interest in the Loan or under the
Loan Documents to any Person.  Lender may disclose to any actual or potential
assignee or participant any information that Borrower has delivered to Lender in
connection with the Loan Documents; and Borrower shall cooperate fully with
Lender in providing that information.  If Lender assigns or sells a
participation in the Loan or the Loan Documents, the purchaser will have the
right of set-off against Borrower.
 
10.06         Severability.  Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of that Loan Document or affecting the
validity or enforceability of that provision in any other jurisdiction; except
that if such provision relates to the payment of any monetary sum, then Lender
may, at its option, declare all Loan Obligations immediately due and payable.
 
10.07         Amendments in Writing.  The Loan Documents may not be amended,
changed, modified, altered or terminated without the prior written consent of
all Parties to the respective Loan Document.
 
10.08         Governing Law.  Except as expressly stated therein, the Loan
Documents will be governed and interpreted by applying the laws of the State of
California (the "Governing Law State") without regard to its conflict of laws
principles.
 
10.09         JURISDICTION AND VENUE.  BORROWER IRREVOCABLY AGREES THAT, AT THE
OPTION OF LENDER, ALL ACTIONS, PROCEEDINGS OR COUNTERCLAIMS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT WILL BE LITIGATED
IN THE SUPERIOR COURT OF CALIFORNIA, SACRAMENTO COUNTY, CALIFORNIA, OR THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA.  BORROWER
IRREVOCABLY CONSENTS TO SERVICE, JURISDICTION, AND VENUE OF THOSE COURTS FOR ALL
SUCH ACTIONS, PROCEEDINGS AND COUNTERCLAIMS AND WAIVES ANY OTHER VENUE TO WHICH
IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR
OTHERWISE.  FINAL JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY
SUIT ON THE JUDGMENT, A CERTIFICATE OR EXEMPLIFIED COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  BORROWER IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW (A) ANY OBJECTION WHICH IT MAY HAVE NOW OR IN THE FUTURE TO THE LAYING OF
THE VENUE OF ANY SUCH ACTION, SUIT OR PROCEEDING IN ANY COURT REFERRED TO IN THE
FIRST SENTENCE ABOVE; (B) ANY CLAIM THAT ANY SUCH ACTION, SUIT OR PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM; (C) ITS RIGHT OF REMOVAL OF ANY MATTER
COMMENCED BY ANY OTHER PARTY IN THE COURTS OF THE STATE OF CALIFORNIA TO ANY
COURT OF THE UNITED STATES OF AMERICA; (D) ANY IMMUNITY WHICH IT OR ITS ASSETS
MAY HAVE IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT FROM ANY SUIT, EXECUTION, ATTACHMENT (WHETHER PROVISIONAL OR FINAL, IN
AID OF EXECUTION, BEFORE JUDGMENT OR OTHERWISE) OR OTHER LEGAL PROCESS; AND (E)
ANY RIGHT IT MAY HAVE TO REQUIRE THE MOVING PARTY IN ANY SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY OF THE COURTS REFERRED TO ABOVE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO POST SECURITY FOR
THE COSTS OF BORROWER OR TO POST A BOND OR TO TAKE SIMILAR ACTION.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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10.10         Counterpart Execution.  The Loan Documents may be executed in
counterparts, each of which will be an original and all of which together are
deemed one and the same instrument.
 
10.11         Optically Imaged Reproductions.  Lender may make an optically
imaged reproduction of any or all Loan Documents and, at its election, destroy
the original or originals.  Borrower consents to the destruction of the original
or originals and agrees that a copy of the optically imaged reproduction of any
Loan Document will be the equivalent of and for all purposes constitute an
"original" document.  For purposes of this section, "for all purposes" includes
use of the optically imaged reproduction (a) to prove the content of the
original document at trial, mediation, arbitration or administrative hearing;
(b) for any business purpose; (c) for internal or external audits and/or
examination by or on behalf of Governmental Authorities; (d) in canceling or
transferring any document; and (e) in conjunction with any other transaction
evidenced by the original document.
 
10.12           Necessary Action. Lender is authorized to execute any other
documents or take any other actions necessary to effectuate the Loan Documents
and the consummation of the transactions contemplated therein.
 
10.13           Credit Report. Lender is authorized to order a credit report and
verify all other credit information, including past and present loans and
standard references from time to time to evaluate the creditworthiness of
Borrower.  Without limitation, a copy of the consent for release of information,
general authorization or similar document on file with Lender shall authorize
third Persons to provide the information requested from time to time.
 
10.14           No Construction Against Drafter.  Each Party has participated in
negotiating and drafting this agreement, so if an ambiguity or a question of
intent or interpretation arises, this agreement is to be construed as if the
parties had drafted it jointly, as opposed to being construed against a Party
because it was responsible for drafting one or more provisions of this
agreement.
 
10.15         INDEMNIFICATION.  BORROWER SHALL DEFEND, INDEMNIFY AND HOLD LENDER
AND ITS OFFICERS, DIRECTORS, EMPLOYEES, PARTNERS, AGENTS, ATTORNEYS AND
AFFILIATES (THE "INDEMNIFIED PERSONS") HARMLESS AGAINST ANY AND ALL LOSSES OF
ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST ANY INDEMNIFIED PERSON ARISING OUT OF, IN ANY WAY CONNECTED WITH OR AS A
RESULT OF: (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE
PERFORMANCE BY THE PARTIES HERETO OR THERETO OF THEIR RESPECTIVE OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY; (II) THE USE OF THE PROCEEDS OF THE LOANS; (III) THE FAILURE
BY BORROWER TO BORROW THE AMOUNT SPECIFIED IN A LOAN REQUEST (INCLUDING ANY
FAILURE RESULTING FROM THE FAILURE TO FULFILL THE APPLICABLE CONDITIONS
PRECEDENT BUT EXCLUDING LENDER’S FAILURE TO LEND SUCH AMOUNT), INCLUDING ANY
LOSS OF ANTICIPATED PROFITS AND LOSSES BY REASON OF THE LIQUIDATION OR
REEMPLOYMENT OF DEPOSITS OR OTHER FUNDS ACQUIRED BY LENDER TO FUND THE LOAN;
(IV) SUCH INDEMNIFIED PERSON’S ACTS OR OMISSIONS WHICH RESULT FROM
COMMUNICATIONS GIVEN OR PURPORTED TO BE GIVEN, BY BORROWER OR ANY DESIGNATED
PERSON, WHICH ARE INTERRUPTED, WHICH ARE MISUNDERSTOOD, OR WHICH ARE IN FACT
FROM UNAUTHORIZED PERSONS, BUT WHICH LENDER BELIEVES IN GOOD FAITH TO BE FROM
BORROWER OR ANY DESIGNATED PERSON; (V) THE VIOLATION BY BORROWER OF ANY
APPLICABLE LAW, INCLUDING ANY ENVIRONMENTAL LAW; (VI) THE RELIANCE BY LENDER ON
EACH NOTICE PURPORTEDLY GIVEN BY OR ON BEHALF OF BORROWER; (VII) ANY BREACH BY
BORROWER OF ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS
UNDER ANY LOAN DOCUMENT, INCLUDING ANY DEFAULT OR EVENT OF DEFAULT; OR (VIII)
ANY CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATED TO ANY OF THE
FOREGOING, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO, OR ASSERTED
AGAINST ANY INDEMNIFIED PERSON AS A RESULT OF LENDER BEING PARTY TO THIS
AGREEMENT OR THE TRANSACTIONS CONSUMMATED PURSUANT TO THIS AGREEMENT; EXCEPT
THAT BORROWER SHALL HAVE NO OBLIGATION TO AN INDEMNIFIED PERSON UNDER THIS
SECTION WITH RESPECT TO LOSSES RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THAT INDEMNIFIED PERSON AS DETERMINED BY THE FINAL JUDGMENT OF A
COURT OF COMPETENT JURISDICTION. IF AND TO THE EXTENT THAT ANY INDEMNITY UNDER
THE LOAN DOCUMENTS IN FAVOR OF INDEMNIFIED PARTIES IS UNENFORCEABLE FOR ANY
REASON, BORROWER SHALL TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND
SATISFACTION THEREOF WHICH IS PERMISSIBLE UNDER APPLICABLE LAW.  ALL INDEMNITIES
UNDER THE LOAN DOCUMENTS IN FAVOR OF INDEMNIFIED PARTIES SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT..
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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10.16         WAIVER OF TRIAL BY JURY.  THE PARTIES (A) COVENANT AND AGREE NOT
TO ELECT A TRIAL BY JURY IN ANY ACTION OR PROCEEDING FOR THE RESOLUTION OF ANY
DISPUTE,  CONTROVERSY OR CLAIM THAT ARISES OUT OF OR RELATES TO: (I) THIS
AGREEMENT; OR (II) ANY TRANSACTION DOCUMENT, WHETHER ARISING IN CONTRACT, TORT
OR BY STATUTE (INDIVIDUALLY AND COLLECTIVELY, A "DISPUTE"); AND, (B) TO THE
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A
TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY  TRANSACTION DOCUMENT TO THE
EXTENT SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THE PROVISIONS OF THIS SECTION
ARE SEPARATELY GIVEN BY EACH PARTY KNOWINGLY AND VOLUNTARILY; AND ARE A MATERIAL
INDUCEMENT FOR THE LENDER ENTERING INTO THE LOAN DOCUMENTS AND THE SWAP
COUNTERPARTIES ENTERING INTO THE INTEREST HEDGING AGREEMENTS.
 
10.17         BALLOON PAYMENT.  THIS AGREEMENT PROVIDES FOR A BALLOON
PAYMENT.  BORROWER ACKNOWLEDGES THAT LENDER HAS NOT AGREED TO REFINANCE THAT
PAYMENT.
 
10.18         USA Patriot Act Notice.  Federal law requires all financial
institutions to obtain, verify and record information that identifies each
person who obtains a loan.  Lender will ask for the Borrower’s legal name,
address, tax ID number or social security number and other identifying
information.  Lender may also ask for additional information or documentation or
take other actions reasonably necessary to verify the identity of Borrower, any
guarantors or other related persons.
 
10.19         Treatment of Certain Information; Confidentiality.
 
(a)               The Lender agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (i) to
its Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, advisors and representatives (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (ii) to the extent requested by any regulatory authority
purporting to have jurisdiction over it, (iii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process
(provided that the Lender shall exercise commercially reasonable efforts, to the
extent practicable and not contrary to any request or order of any Governmental
Authority or to applicable Law, to provide prompt prior written notice thereof
to the Borrower to enable the Borrower to seek a protective order or otherwise
prevent or condition such disclosure), (iv) to any other party hereto, (v) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other
Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject
to an agreement containing provisions substantially the same as those of this
Section, to any assignee of or participant in, or any prospective assignee of or
participant in, any of its rights or obligations under this Agreement, (vii)
with the consent of the Borrower or (viii) to the extent such Information (x)
becomes publicly available other than as a result of a breach of this Section or
(y) becomes available to the Lender or any of its Affiliates on a
nonconfidential basis from a source other than the Borrower.
 
(b)               For purposes of this Section, “Information” means all
information received from the Borrower or any Subsidiary relating to the
Borrower or any Subsidiary or any of their respective businesses, other than any
such information that is available to the Lender on a nonconfidential basis
prior to disclosure by the Borrower or any Subsidiary. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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(c)               The Lender acknowledges that (i) the Information may include
material non public information concerning the Borrower or a Subsidiary, as the
case may be, (ii) it has developed compliance procedures regarding the use of
material non-public information and (iii) it will handle such material
non-public information in accordance with Applicable Law, including Federal and
state securities laws.
 
[Signatures on Following Page]
 
 
20

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The parties have signed this agreement effective as of the day and year first
written above.
 
BORROWER
 

Address for notices:
QAD ORTEGA HILL, LLC, a Delaware limited liability company
          100 Innovation Place
By:
/s/ John Neale   Santa Barbara, California 93108  
JOHN NEALE
  Attention:  John Neale  
Manager
 

 

 
By:
/s/ Kara Bellamy      
KARA BELLAMY
     
Manager
 

 
 
LENDER
 

Address for notices:
RABOBANK, N.A.
        33 East Carrillo St.      
Santa Barbara, CA 93101
By:
/s/ Andy Clark   Attention:  Commercial Lending Closing Department   Name : ANDY
CLARK       Title : SVP-Commercial Regional Manager  

 

 
By:
/s/ Jason Wilson       Name : JASON WILSON       Title : VP-Commercial Banking
Officer  

 
QAD Ortega Hill, LLC
Credit Agreement
 
 
21

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SCHEDULE 1.04(b)
 
QAD Ortega Hill, LLC
CREDIT AGREEMENT

Principal Payments - Real Estate Term Loan
 
End Date (PMT Date)
 Principal Schedule
 Principal PMT
15-Jul-12
16,053,651.44
30,416.14
15-Aug-12
16,023,235.30
28,607.04
15-Sep-12
15,994,628.26
               28,713.22
15-Oct-12
15,965,915.04
30,731.26
15-Nov-12
15,935,183.78
28,933.84
15-Dec-12
15,906,249.94
30,945.55
15-Jan-13
15,875,304.39
29,156.07
15-Feb-13
15,846,148.32
29,264.29
15-Mar-13
15,816,884.03
35,053.79
15-Apr-13
15,781,830.24
29,502.99
15-May-13
15,752,327.25
31,498.40
15-Jun-13
15,720,828.85
29,729.39
15-Jul-13
15,691,099.46
31,718.30
15-Aug-13
15,659,381.16
29,957.45
15-Sep-13
15,629,423.71
30,068.64
15-Oct-13
15,599,355.07
32,047.81
15-Nov-13
15,567,307.26
30,299.18
15-Dec-13
15,537,008.08
32,271.74
15-Jan-14
15,504,736.34
30,531.40
15-Feb-14
15,474,204.94
30,644.71
15-Mar-14
15,443,560.23
36,305.26
15-Apr-14
15,407,254.97
30,893.19
15-May-14
15,376,361.78
32,848.73
15-Jun-14
15,343,513.05
31,129.76
15-Jul-14
15,312,383.29
33,078.53
15-Aug-14
15,279,304.76
31,368.06
15-Sep-14
15,247,936.70
31,484.48
15-Oct-14
15,216,452.22
33,423.07
15-Nov-14
15,183,029.15
31,725.38
15-Dec-14
15,151,303.77
33,657.07
15-Jan-15
15,117,646.70
31,968.04
15-Feb-15
15,085,678.66
32,086.68
15-Mar-15
15,053,591.98
37,612.52
15-Apr-15
15,015,979.46
32,345.36
15-May-15
14,983,634.10
34,259.28
15-Jun-15
14,949,374.82
32,592.56
15-Jul-15
14,916,782.26
34,499.39
15-Aug-15
14,882,282.87
32,841.57
15-Sep-15
14,849,441.30
32,963.45
15-Oct-15
14,816,477.85
34,859.65
15-Nov-15
14,781,618.20
33,215.17
15-Dec-15
14,748,403.03
35,104.16
15-Jan-16
14,713,298.87
33,468.72
15-Feb-16
14,679,830.15
33,592.95
15-Mar-16
14,646,237.20
37,224.58
15-Apr-16
14,609,012.62
33,855.77
15-May-16
14,575,156.85
35,726.40
15-Jun-16
14,539,430.45
34,114.02
15-Jul-16
14,505,316.43
35,977.24
15-Aug-16
14,469,339.19
34,374.16
15-Sep-16
14,434,965.03
34,501.74
15-Oct-16
14,400,463.29
36,353.83
15-Nov-16
14,364,109.46
34,764.71
15-Dec-16
14,329,344.75
36,609.27
15-Jan-17
14,292,735.48
35,029.61
15-Feb-17
14,257,705.87
35,159.61
15-Mar-17
14,222,546.26
40,398.36
15-Apr-17
14,182,147.90
35,440.04
15-May-17
14,146,707.86
37,265.24
15-Jun-17
14,109,442.62
35,709.88
15-Jul-17
14,073,732.74
37,527.34
15-Aug-17
14,036,205.40
35,981.69
15-Sep-17
14,000,223.71
36,115.23
15-Oct-17
13,964,108.48
37,921.08
15-Nov-17
13,926,187.40
36,390.00
15-Dec-17
13,889,797.40
38,187.98

 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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End Date (PMT Date)
 Principal Schedule
 Principal PMT
15-Jan-18
13,851,609.42
36,666.79
15-Feb-18
13,814,942.63
36,802.88
15-Mar-18
 13,778,139.75
41,888.12
15-Apr-18
13,736,251.63
37,094.93
15-May-18
13,699,156.70
38,872.70
15-Jun-18
13,660,284.00
37,376.87
15-Jul-18
13,622,907.13
39,146.56
15-Aug-18
13,583,760.57
37,660.89
15-Sep-18
13,546,099.68
37,800.66
15-Oct-18
13,508,299.02
39,558.19
15-Nov-18
13,468,740.83
38,087.77
15-Dec-18
13,430,653.06
39,837.07
15-Jan-19
13,390,815.99
38,376.98
15-Feb-19
13,352,439.01
38,519.41
15-Mar-19
13,313,919.60
43,444.28
15-Apr-19
13,270,475.32
38,823.61
15-May-19
13,231,651.71
40,551.82
15-Jun-19
13,191,099.89
39,118.20
15-Jul-19
13,151,981.69
40,837.97
15-Aug-19
13,111,143.72
39,414.95
15-Sep-19
13,071,728.77
39,561.23
15-Oct-19
13,032,167.54
41,268.30
15-Nov-19
12,990,899.24
39,861.23
15-Dec-19
12,951,038.01
41,559.69
15-Jan-20
12,909,478.32
40,163.41
15-Feb-20
12,869,314.91
40,312.47
15-Mar-20
12,829,002.44
43,533.92
15-Apr-20
12,785,468.52
40,623.65
15-May-20
12,744,844.87
42,300.27
15-Jun-20
12,702,544.60
40,931.42
15-Jul-20
12,661,613.18
42,599.21
15-Aug-20
12,619,013.97
41,241.43
15-Sep-20
12,577,772.54
41,394.50
15-Oct-20
12,536,378.04
43,049.01
15-Nov-20
12,493,329.03
41,707.90
15-Dec-20
12,451,621.13
43,353.43
15-Jan-21
12,408,267.70
42,023.60
15-Feb-21
12,366,244.10
42,179.56
15-Mar-21
12,324,064.54
46,762.50
15-Apr-21
12,277,302.04
42,509.66
15-May-21
12,234,792.38
44,132.20
15-Jun-21
12,190,660.18
42,831.23
15-Jul-21
12,147,828.95
44,444.55
15-Aug-21
12,103,384.40
43,155.13
15-Sep-21
12,060,229.27
43,315.30
15-Oct-21
12,016,913.97
44,914.76
15-Nov-21
11,971,999.21
43,642.75
15-Dec-21
11,928,356.46
45,232.83
15-Jan-22
11,883,123.63
43,972.61
15-Feb-22
11,839,151.02
44,135.80
15-Mar-22
11,795,015.22
48,535.99
15-Apr-22
11,746,479.23
44,479.75
15-May-22
11,701,999.48
46,045.83
1-Jun-22
11,655,953.65
11,655,953.65

 
QAD Ortega Hill, LLC
Credit Agreement
 
 
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