EX-10.9






Execution Version




CREDIT AGREEMENT




dated as of




February 28, 2005




among




GLADSTONE COMMERCIAL CORPORATION




and




GLADSTONE COMMERCIAL LIMITED PARTNERSHIP,




as Borrowers,




The Initial Guarantors Listed Herein,




The Banks Listed Herein




and




BRANCH BANKING AND TRUST COMPANY,




as Administrative Agent




1




TABLE OF CONTENTS




Page




	 	 	 
	ARTICLE I DEFINITIONS	 	 
	SECTION 1.01.

SECTION 1.02.

SECTION 1.03.

SECTION 1.04.

SECTION 1.05.

	 	Definitions

Accounting Terms and Determinations

Use of Defined Terms

Terminology

References







	 	 	 
	ARTICLE II THE CREDITS	 	 
	SECTION 2.01.

SECTION 2.02.

SECTION 2.03.

SECTION 2.04.

SECTION 2.05.

SECTION 2.06.

SECTION 2.07.

SECTION 2.08.

SECTION 2.09.

SECTION 2.10.

SECTION 2.11.

SECTION 2.12.

SECTION 2.13.

SECTION 2.14.

SECTION 2.15.

SECTION 2.16.

SECTION 2.17.

	 	Commitments to Make Advances.

Method of Borrowing Advances.

Letters of Credit.

Notes

Maturity of Advances

Interest Rates.

Fees.

Optional Termination or Reduction of Commitments

Mandatory Reduction and Termination of Commitments

Optional Prepayments.

Mandatory Prepayments.

General Provisions as to Payments.

Computation of Interest and Fees

Eligibility of Properties and Mortgage Receivables.

Release of Properties

Frequency of Calculations of Borrowing Base

Joint and Several Liability.







	 	 	 
	ARTICLE III CONDITIONS TO BORROWINGS
	SECTION 3.01.

SECTION 3.02.

SECTION 3.03.

	 	Conditions to Closing and First Borrowing

Conditions to All Borrowings

Conditions to Issuance of Letters of Credit







	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES
	SECTION 4.01.

SECTION 4.02.

SECTION 4.03.

SECTION 4.04.

SECTION 4.05.

SECTION 4.06.

SECTION 4.07.

SECTION 4.08.

SECTION 4.09.

SECTION 4.10.

SECTION 4.11.

SECTION 4.12.

SECTION 4.13.

SECTION 4.14.

SECTION 4.15.

SECTION 4.16.

SECTION 4.17.

SECTION 4.18.

SECTION 4.19.

SECTION 4.20.

SECTION 4.21.

SECTION 4.22.

SECTION 4.23.

SECTION 4.24.

SECTION 4.25.

SECTION 4.26.

SECTION 4.27.

SECTION 4.28.

SECTION 4.29.

SECTION 4.30.

SECTION 4.31.

SECTION 4.32.

SECTION 4.33.

SECTION 4.34.

SECTION 4.35.

SECTION 4.36.

SECTION 4.37.

SECTION 4.38.

	 	Existence and Power

Organizational and Governmental Authorization; No Contravention

Binding Effect

Financial Information; SEC Reports.

Litigation

Compliance with ERISA.

Taxes

Subsidiaries

Not an Investment Company

Public Utility Holding Company Act

Ownership of Property; Liens

No Default

Full Disclosure

Environmental Matters.

Compliance with Laws

Capital Securities

Margin Stock

Insolvency

Security Documents.

Labor Matters

Patents, Trademarks, Etc

Loans and Investments

Anti-Terrorism Laws

Ownership Structure

REIT Status

Properties; Mortgage Receivables

Tax Shelter Regulations

All Consents Required

Selection Procedures

Reports Accurate; Disclosure

Location of Offices

Material Contracts

Affiliate Transactions

Broker’s Fees

Survival of Representations and Warranties, Etc

Acquisition, Credit and Collection Policy

No Default or Event of Default

USA PATRIOT Act







	 	 	 
	ARTICLE V COVENANTS	 	 
	SECTION 5.01.

SECTION 5.02.

SECTION 5.03.

SECTION 5.04.

SECTION 5.05.

SECTION 5.06.

SECTION 5.07.

SECTION 5.08.

SECTION 5.09.

SECTION 5.10.

SECTION 5.11.

SECTION 5.12.

SECTION 5.13.

SECTION 5.14.

SECTION 5.15.

SECTION 5.16.

SECTION 5.17.

SECTION 5.18.

SECTION 5.19.

SECTION 5.20.

SECTION 5.21.

SECTION 5.22.

SECTION 5.23.

SECTION 5.24.

SECTION 5.25.

SECTION 5.26.

SECTION 5.27.

SECTION 5.28.

SECTION 5.29.

SECTION 5.30.

SECTION 5.31.

SECTION 5.32.

SECTION 5.33.

SECTION 5.34.

SECTION 5.35.

	 	Information

Inspection of Property, Books and Records

Minimum Debt Service Coverage

Acquisitions

Minimum Consolidated Tangible Net Worth

Restricted Payments

Total Leverage Ratio

Capital Expenditures

Loans or Advances

Investments

Negative Pledge

Maintenance of Existence, etc

Dissolution

Consolidations, Mergers and Sales of Assets

Use of Proceeds

Compliance with Laws; Payment of Taxes

Insurance

Change in Fiscal Year

Maintenance of Property

Environmental Notices

Environmental Matters

Environmental Release

Additional Covenants, Etc

Transactions with Affiliates

Joinder of Subsequent Guarantors.

No Restrictive Agreement

Partnerships and Joint Ventures

Additional Debt

Leases

REIT Status

Performance of Loan Documents

Exchange Listing

Modifications of Organizational Documents

Modifications to Acquisition, Credit and Collection Policy

ERISA Exemptions







	 	 	 
	ARTICLE VI DEFAULTS	 	 
	SECTION 6.01.

SECTION 6.02.

SECTION 6.03.

SECTION 6.04.

	 	Events of Default

Notice of Default

Cash Cover

Allocation of Proceeds







	 	 	 
	ARTICLE VII THE ADMINISTRATIVE AGENT
	SECTION 7.01.

SECTION 7.02.

SECTION 7.03.

SECTION 7.04.

SECTION 7.05.

SECTION 7.06.

SECTION 7.07.

SECTION 7.08.

SECTION 7.09.

SECTION 7.10.

	 	Appointment, Powers and Immunities

Reliance by Administrative Agent

Defaults

Rights of Administrative Agent and its Affiliates as a Bank

Indemnification

CONSEQUENTIAL DAMAGES

Payee of Note Treated as Owner

Non-Reliance on Administrative Agent and Other Banks

Failure to Act

Resignation or Removal of Administrative Agent







	 	 	 
	ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION
	SECTION 8.01.

SECTION 8.02.

SECTION 8.03.

SECTION 8.04.

SECTION 8.05.

	 	Basis for Determining Interest Rate Inadequate or Unfair

Illegality

Increased Cost and Reduced Return.

Base Rate Advances Substituted for Affected Euro-Dollar Advances

Compensation







	 	 	 
	ARTICLE IX MISCELLANEOUS	 	 
	SECTION 9.01.

SECTION 9.02.

SECTION 9.03.

SECTION 9.04.

SECTION 9.05.

SECTION 9.06.

SECTION 9.07.

SECTION 9.08.

SECTION 9.09.

SECTION 9.10.

SECTION 9.11.

SECTION 9.12.

SECTION 9.13.

SECTION 9.14.

SECTION 9.15.

SECTION 9.16.

SECTION 9.17.

	 	Notices

No Waivers

Expenses; Documentary Taxes; Indemnification.

Setoffs; Sharing of Set-Offs.

Amendments and Waivers.

Margin Stock Collateral

Successors and Assigns.

Confidentiality

Representation by Banks

Obligations Several

Survival of Certain Obligations

North Carolina Law

Severability

Interest

Interpretation

Consent to Jurisdiction

Counterparts







	 	 	 
	ARTICLE X GUARANTY	 	 
	SECTION 10.01.

SECTION 10.02.

SECTION 10.03.

SECTION 10.04.

SECTION 10.05.

SECTION 10.06.

SECTION 10.07.

SECTION 10.08.

SECTION 10.09.

	 	Unconditional Guaranty

Obligations Absolute

Continuing Obligations; Reinstatement

Additional Security, Etc

Information Concerning the Borrowers

Guarantors’ Subordination

Waiver of Subrogation

Enforcement

Miscellaneous







2




EXHIBITS AND SCHEDULES TO CREDIT AGREEMENT




Dated as of February 28, 2005




	 	 	 
	EXHIBIT A

EXHIBIT B

EXHIBIT C

EXHIBIT D

EXHIBIT E

EXHIBIT F

EXHIBIT G

EXHIBIT H

EXHIBIT I

EXHIBIT J

EXHIBIT K

EXHIBIT L

EXHIBIT M

EXHIBIT N

EXHIBIT O

EXHIBIT P

EXHIBIT Q

EXHIBIT R

	 	Notice of Borrowing (Section 2.02)

Form of Note (Section 1.01)

Form of Assignment and Acceptance (Section 1.01) (Section 9.07(c))

Form of Company’s Certificate respecting Additional Borrowing Base Assets (Section 2.14)

Acquisition Credit and Collection Policy (Section 1.01) Section 4.36)

[Intentionally Omitted]

Form of Organizational Documents (Section 4.08) (Section 5.12)

Form of Request for Release of Loan Documents and Receipt

Form of Assignment of Mortgage

Form of Officer’s Certificate as to Organizational Documents, Operating Documents and Organizational Action

(Section 3.01(e))

Officer’s Closing Certificate (Section 3.01(d))

Power of Attorney from Borrower

Compliance Certificate (Section 5.01(c))

Borrowing Base Certification Report (Section 1.01)

Subordination, Nondisturbance and Attornment Agreement (Section 1.01)

Form of Opinion of Counsel to Loan Parties (Section 3.01(c))

Joinder Agreement (Section 5.25)

Membership Pledge Agreement (Section 5.25)
	 
	 	 
	SCHEDULE I

SCHEDULE II

SCHEDULE III

SCHEDULE 2.14

SCHEDULE 4.08

SCHEDULE 4.22

SCHEDULE 4.24

SCHEDULE 4.32

SCHEDULE 5.11

SCHEDULE 5.29

	 	Schedule of Documents

List of Borrowing Base Assets

Location of Files respecting Borrowing Base Assets

List of Initial Borrowing Base Assets

Subsidiaries

Investments

Ownership Structure

Material Contracts

Liens

Existing Debt







3




CREDIT AGREEMENT




THIS CREDIT AGREEMENT is dated as of February 28, 2005 among GLADSTONE COMMERCIAL CORPORATION,
a Maryland corporation, and GLADSTONE COMMERCIAL LIMITED PARTNERSHIP, a Delaware limited
partnership, as borrowers, the INITIAL GUARANTORS listed on the signature pages hereof, as
guarantors, the BANKS listed on the signature pages hereof and BRANCH BANKING AND TRUST COMPANY, as
Administrative Agent.




The parties hereto agree as follows:



ARTICLE I




DEFINITIONS




SECTION 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all
purposes of this Agreement and any amendment hereto (except as otherwise expressly provided or
unless the context otherwise requires), have the meanings set forth herein:



“Acquisition” means the acquisition of (i) a controlling equity interest in another Person
(including the purchase of an option, warrant or convertible or similar type security to acquire
such a controlling interest at the time it becomes exercisable by the holder thereof), whether by
purchase of such equity interest or upon exercise of an option or warrant for, or conversion of
securities into, such equity interest, or (ii) assets of another Person which constitute all or any
material part of the assets of such Person or of a line or lines of business conducted by such
Person. Notwithstanding the foregoing, the term “Acquisition” shall not be deemed to include
purchases of real estate by the Borrowers or any of their Subsidiaries in the ordinary course of
business and in compliance with the Acquisition, Credit and Collection Policy.



“Acquisition Cost” means, with respect to the acquisition of a Borrowing Base Asset by an
Eligible Property Owner, an amount equal to the sum of the following (without duplication):
(i) the value of the limited partnership interests of the Operating Partnership to be transferred
by the Company or Eligible Property Owner in connection therewith as consideration for the
Borrowing Base Asset, and (ii) the amount of any cash and fair market value of other property
(excluding property described in clause (i) and the unpaid principal amount of any debt instrument)
given by the Eligible Property Owner as consideration for the Borrowing Base Asset. For purposes
of determining the Acquisition Cost for any Borrowing Base Asset, the limited partnership interests
of the Operating Partnership shall be valued (I) in the case of limited partnership interests that
are then designated as a national market system security by the National Association of Securities
Dealers, Inc. (“NASDAQ”) or are listed on a national securities exchange, the average of the last
reported bid and ask quotations or the last prices reported thereon, and (II) with respect to any
other limited partnership interests, as determined by the Board of Directors of Gladstone
Commercial Partners, LLC, a wholly owned Subsidiary of the Company, and determined to be a
reasonable valuation by the independent public accountants referred to in Section 5.01(a).



“Acquisition, Credit and Collection Policy” means those acquisition, credit, collection,
customer relation and service policies determined by the Borrowers as of the date hereof relating
to the real property acquired by the Company and its Subsidiaries and the mortgage loans made by
the Company and its Subsidiaries, a copy of which is attached hereto as Exhibit E, as the same may
be amended or modified from time to time in accordance with subsection 5.34, together with the
Mortgaged Property Diligence Package and the Pledged Mortgage Receivable Diligence Package.




“Adjusted Monthly Libor Index” has the meaning set forth in Section 2.06(c).



“Administrative Agent” means BB&T, in its capacity as administrative agent for the Banks and
the Issuing Bank hereunder, and its successors and permitted assigns in such capacity.



“Administrative Agent’s Letter Agreement” means that certain letter agreement, dated as of
December 13, 2004, between the Borrowers and the Administrative Agent relating to the terms of this
Agreement, and certain fees from time to time payable by the Borrowers to the Administrative Agent,
together with all amendments and modifications thereto. If there is any conflict between the
provisions of this Agreement and the provisions of the Administrative Agent’s Letter Agreement, the
provisions of this Agreement will control.



“Advance” shall mean an advance made to either Borrower under this Agreement pursuant to
Article II. An Advance is a “Base Rate Advance” if such Advance is part of a Base Rate Borrowing
or a “Euro-Dollar Advance” if such Advance is part of a Euro-Dollar Borrowing. The Advances shall
at all times be Euro-Dollar Advances, unless such Advances are to be Base Rate Advances pursuant to
Article VIII hereof.



“Advisory Agreement” means the Amended and Restated Investment Advisory Agreement dated as of
August 7, 2003 by and between the Company and Gladstone Management Corporation.



“Affiliate” of any Person means (i) any other Person which directly, or indirectly through one
or more intermediaries, controls such Person, (ii) any other Person which directly, or indirectly
through one or more intermediaries, is controlled by or is under common control with such Person,
or (iii) any other Person of which such Person owns, directly or indirectly, 20% or more of the
common stock or equivalent equity interests. As used herein, the term “control” means possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies
of a Person, whether through the ownership of voting securities, by contract or otherwise.




“Agreement” means this Credit Agreement, together with all amendments and supplements hereto.




“Applicable Margin” has the meaning set forth in Section 2.06(a).



“Appraised Value” means, with respect to a Borrowing Base Asset which is a Mortgaged Property,
an amount equal to the fair market value of such Borrowing Base Asset as set forth in a MAI
Appraisal prepared in accordance with the Acquisition, Credit and Collection Policies and otherwise
in form, content and all other respects satisfactory to the Administrative Agent and the Required
Banks in their sole discretion.




“Assignee” has the meaning set forth in Section 9.07(c).



“Assignment and Acceptance” means an Assignment and Acceptance executed in accordance with
Section 9.07(c) in the form attached hereto as Exhibit C.




“Authority” has the meaning set forth in Section 8.02.



“Bank” means each bank listed on the signature pages hereof as having a Commitment and their
respective successors and assigns.



“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. §§101, et.
seq.), as amended from time to time.



“Base Rate” means for any Base Rate Advance for any day, the rate per annum equal to the
higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent above the Federal
Funds Rate. For purposes of determining the Base Rate for any day, changes in the Prime Rate or
the Federal Funds Rate shall be effective on the date of each such change.



“Base Rate Advance” means, with respect to any Advance, such Advance during Interest Periods
when such Advance bears or is to bear interest at a rate based upon the Base Rate.




“BB&T” means Branch Banking and Trust Company, and its successors.



“Borrowers” means each of the Company and the Operating Partnership and their respective
successors and permitted assigns.



“Borrowing” means a borrowing hereunder consisting of Advances made to the Borrowers at the
same time by the Banks pursuant to Article II.



“Borrowing Base” shall mean, based on the most recent Borrowing Base Certification Report
which as of the date of a determination of the Borrowing Base has been received by the
Administrative Agent, an amount equal to 65% of the sum of the Borrowing Base Values of the
Borrowing Base Assets as determined and adjusted from time to time in accordance with Section 2.14;
provided that: (1) to the extent the Borrowing Base Value of any one Mortgaged Property included in
the Borrowing Base as a Borrowing Base Asset exceeds $19,230,000, such excess shall be excluded
from the Borrowing Base and (2) to the extent that the sum of the Borrowing Base Value of all
Pledged Mortgage Receivables exceeds more than 15% of the aggregate value of all Borrowing Base
Assets, such excess shall be excluded from the Borrowing Base. The Administrative Agent shall
also be entitled to hold and subtract any reserve against the Borrowing Base it deems reasonably
necessary as security for payment of the Notes and the obligations of the Guarantors under Article
X of this Agreement and the obligations of the Borrowers under the Letter of Credit Agreements.



“Borrowing Base Asset” means (i) a Mortgaged Property which is also an Eligible Property or
(ii) a Pledged Mortgage Receivable which is also an Eligible Mortgage Receivable, in each case
which is included in the Borrowing Base pursuant to Section 2.14. A Property, the value of which
was previously included in the Borrowing Base calculation as a Borrowing Base Asset, shall cease to
be a Borrowing Base Asset and shall be excluded from such Borrowing Base calculation if at any time
such Property shall cease to meet all the requirements of an Eligible Property contained in the
definition thereof (including without limitation time limits for inclusion as an Eligible Property)
or shall cease to be a Mortgaged Property. A Mortgage Receivable, the value of which was
previously included in the Borrowing Base calculation as a Borrowing Base Asset, shall cease to be
a Borrowing Base Asset if at any time such Mortgage Receivable shall cease to meet all the
requirements of an Eligible Mortgage Receivable contained in the definition thereof (including
without limitation time limits for inclusion as an Eligible Mortgage Receivable) or shall cease to
be a Pledged Mortgage Receivable.



“Borrowing Base Certification Report” means a report in the form attached hereto as Exhibit N,
and otherwise satisfactory to the Administrative Agent, certified by the chief financial officer or
other authorized officer of the Borrowers setting forth the calculations required to establish the
Borrowing Base Value for each Borrowing Base Asset and the Borrowing Base Value for all Borrowing
Base Assets as of a specified date, all in form and detail satisfactory to the Administrative
Agent.



“Borrowing Base Value” means, with respect to a Borrowing Base Asset for any date of
determination, an amount equal to: (A) in the case of Mortgaged Properties the lesser of (a) the
Acquisition Cost of such Borrowing Base Asset; and (b) the Appraised Value of such Borrowing Base
Asset (determined at the time such Borrowing Base Asset is acquired by the Eligible Property Owner
or such subsequent time as the Administrative Agent or the Required Banks may reasonably request,
or Borrowers may elect to provide an updated appraisal (provided that no such updated appraisal
provided by Borrowers shall be effective to increase the Borrowing Base Value of any Borrowing Base
Asset unless at least six months have elapsed from the date of inclusion of such Borrowing Base
Asset in the Borrowing Base and the date of the updated appraisal)); and (B) in the case of Pledged
Mortgage Receivables the lesser of: (a) the lesser of the face amount or the principal outstanding
balance of the promissory note evidencing the Pledged Mortgage Receivable; and (b) the Appraised
Value of the Mortgage Receivable Property at the time of the granting of such Mortgage or such
subsequent time as the Administrative Agent or the Required Banks may reasonably request, or
Borrowers may elect to provide an updated appraisal (provided that no such updated appraisal
provided by Borrowers shall be effective to increase the Borrowing Base Value of any Borrowing Base
Asset unless at least six months have elapsed from the date of inclusion of such Borrowing Base
Asset in the Borrowing Base and the date of the updated appraisal).



“Capital Expenditures” means for any period the sum of all capital expenditures incurred
during such period by the Company and its Consolidated Subsidiaries, as determined in accordance
with GAAP.



“Capital Securities” means, with respect to any Person, any and all shares, interests
(including membership interests and partnership interests), participations or other equivalents
(however designated, whether voting or non-voting) of such Person’s capital (including any
instruments convertible into equity), whether now outstanding or issued after the Closing Date.



“CERCLA” means the Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. §9601 et seq. and its implementing regulations and amendments.



“CERCLIS” means the Comprehensive Environmental Response Compensation and Liability
Information System established pursuant to CERCLA.




“Change of Law” shall have the meaning set forth in Section 8.02.




“Closing Certificate” has the meaning set forth in Section 3.01(d).




“Closing Date” means February 28, 2005.



“Code” means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code.
Any reference to any provision of the Code shall also be deemed to be a reference to any successor
provision or provisions thereof.



“Collateral” shall mean collectively: (1) the Mortgaged Property; (2) the Pledged Mortgage
Receivables and (3) the Pledged Membership and Related Interests.



“Collateral Documents” means, collectively, the Membership Pledge Agreement, the Mortgages,
the Mortgaged Property Security Documents, the Mortgage Receivables Pledge Agreement, the Pledged
Mortgage Receivable Security Documents and all other agreements (including control agreements),
instruments and other documents, whether now existing or hereafter in effect, pursuant to which the
Borrowers or any Subsidiary shall grant or convey to the Secured Parties a Lien in, or any other
Person shall acknowledge any such Lien in, property as security for all or any portion of the
Obligations, as any of them may be amended, modified or supplemented from time to time.



“Commitment” means, with respect to each Bank, (i) the amount set forth opposite the name of
such Bank on the signature pages hereof, or (ii) as to any Bank which enters into an Assignment and
Acceptance (whether as transferor Bank or as Assignee thereunder), the amount of such Bank’s
Commitment after giving effect to such Assignment and Acceptance, or (iii) as to any Bank which
agrees to increase its Commitment pursuant to Section 2.01(b), the amount of such Bank’s Commitment
after giving effect to such increase, in each case as such amount may be reduced from time to time
pursuant to Sections 2.08 and 2.09.




“Company” means Gladstone Commercial Corporation, a Maryland corporation and REIT.




“Compliance Certificate” has the meaning set forth in Section 5.01(c).



“Consolidated Debt” means at any time the Debt of the Company and its Consolidated
Subsidiaries, determined on a consolidated basis as of such date.



“Consolidated Debt Service” for any period means the sum of (i) Consolidated Interest Expense
for such period and (ii) all regularly scheduled payments of principal in respect of Debt
(excluding principal payments made with respect to any Advances under this Agreement or made in
connection with the refinancing of any Long Term Limited Recourse Mortgage Loan) of the Company or
any of its Consolidated Subsidiaries for such period.



“Consolidated EBITDA” shall be determined as of the end of each Fiscal Quarter and shall mean
EBITDA, of the Company and its Consolidated Subsidiaries, for the Fiscal Quarter then ending and
the immediately preceding three Fiscal Quarters, all as determined in accordance with GAAP.



“Consolidated Interest Expense” for any period means interest, whether expensed or
capitalized, in respect of Debt of the Company or any of its Consolidated Subsidiaries outstanding
during such period.



“Consolidated Net Income” means, for any period, the Net Income of the Company and its
Consolidated Subsidiaries determined on a consolidated basis, but excluding (i) extraordinary items
and (ii) any equity interests of the Company or any Subsidiary of the Company in the unremitted
earnings of any Person that is not a Subsidiary of the Company.



“Consolidated Subsidiary” means at any date any Subsidiary or other entity the accounts of
which, in accordance with GAAP, would be consolidated with those of the Company in its consolidated
and consolidating financial statements as of such date.



“Consolidated Tangible Net Worth” means, at any time, Stockholders’ Equity less the sum of the
value, (to the extent reflected in determining Stockholders Equity) as set forth or reflected on
the most recent consolidated balance sheet of the Company and its Consolidated Subsidiaries,
prepared in accordance with GAAP, of




(A) The amount of any write-up of assets subsequent to December 31, 2003;



(B) All assets which would be treated as intangible assets (other than the value allocated as
lease intangibles in accordance with GAAP) for balance sheet presentation purposes under GAAP,
including without limitation goodwill (whether representing the excess of cost over book value of
assets acquired, or otherwise), trademarks, tradenames, copyrights, patents and technologies, and
unamortized debt discount and expense.



(C) To the extent not included in (B) of this definition, any amount at which shares of
capital stock of the Company appear as an asset on the balance sheet of the Company and its
Consolidated Subsidiaries;




(D) Loans or advances to stockholders, directors, officers or employees; and




(E) To the extent not included in (B) of this definition, deferred expenses.



“Controlled Group” means all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together with the Company, are
treated as a single employer under Section 414 of the Code.



“Debt” of any Person means at any date, without duplication, (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all
obligations of such Person to reimburse any bank or other Person in respect of amounts payable
under a banker’s acceptance, (vi) all Redeemable Preferred Securities of such Person, (vii) all
obligations (absolute or contingent) of such Person to reimburse any bank or other Person in
respect of amounts which are available to be drawn or have been drawn under a letter of credit or
similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person, (ix) all Debt of others Guaranteed by such
Person, (x) all obligations of such Person with respect to interest rate protection agreements,
foreign currency exchange agreements or other hedging agreements (valued as the termination value
thereof computed in accordance with a method approved by the International Swap Dealers Association
and agreed to by such Person in the applicable hedging agreement, if any); and (xi) the principal
portion of all obligations of such Person under any synthetic lease, tax retention operating lease,
asset securitization, off-balance sheet loan or similar off-balance sheet financing product where
such transaction is considered borrowed money indebtedness for tax purposes but is not classified
as indebtedness under GAAP.



“Debt Service Coverage Ratio” shall be determined as of the end of each Fiscal Quarter and
shall mean the ratio of: (A)(i) Consolidated EBITDA for the period of four consecutive Fiscal
Quarters most recently ended on or prior to such date, less (ii) Capital Expenditures during such
period (excluding the acquisition of fee simple title to Properties by the Company and its
Consolidated Subsidiaries in the ordinary course of business consistent with the Acquisition,
Credit and Collection Policy), to (B) Consolidated Debt Service for the period of four consecutive
Fiscal Quarters most recently ended on or prior to such date.



“Document Agreement” means the Document Agreement to be executed and delivered by the parties
hereto on or prior to the first Borrowing and in form and content satisfactory to the
Administrative Agent, providing that the Deposited Collateral shall not be recorded or filed prior
to the occurrence of any Event of Default.



“Default” means any condition or event which constitutes an Event of Default or which with the
giving of notice or lapse of time or both would, unless cured or waived in writing, become an Event
of Default.



“Default Rate” means, with respect to the Advances, on any day, the sum of 2% plus the then
highest interest rate (including the Applicable Margin determined as if the Total Leverage Ratio is
greater than 1.25 to 1) which may be applicable to any Advance (irrespective of whether any such
type of Advance is actually outstanding hereunder).



“Deposited Collateral” means the Mortgages, the Assignment of Mortgages and the related
financing statements.



“Depreciation and Amortization” means for any period an amount equal to the sum of all
depreciation and amortization expenses of the Company and its Consolidated Subsidiaries for such
period, as determined in accordance with GAAP.




“Dollars” or “$” means dollars in lawful currency of the United States of America.



“Domestic Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in North Carolina are authorized or required by law to close.



“Domestic Subsidiary” means any Subsidiary which is organized under the laws of any state or
territory of the United States of America.



“EBITDA” means and includes, for any Fiscal Quarter for which the amount thereof is to be
determined, the sum of (a) Consolidated Net Income for such period; plus, (b) to the extent
such amounts were deducted in computing Consolidated Net Income for such period: (i) Consolidated
Interest Expense for such period; (ii) franchise taxes (if applicable), income taxes and other
taxes measured by income or profits in respect of the Company and its Consolidated Subsidiaries for
such period; and (iii) Depreciation and Amortization for such period; all determined on a
consolidated basis in accordance with GAAP.



“Eligible Mortgage Receivable” means a Mortgage Receivable with respect to real property which
is not owned by any Eligible Property Owner but is instead mortgaged to an Eligible Mortgage Owner
pursuant to a first priority mortgage, first priority deed of trust or first priority deed to
secure debt lien pledged to the Administrative Agent pursuant to the Mortgage Receivables Pledge
Agreement, which Mortgage Receivable meets the following requirements: (a) the Company grants the
Secured Parties a security interest in each such Mortgage Receivable pursuant to the Mortgage
Receivables Pledge Agreement which security interest will be perfected and a first priority
interest upon Administrative Agent’s receipt of the original mortgage and note evidencing such
Mortgage Receivable, (b) all of the representations and warranties set forth in the Mortgage
Receivables Pledge Agreement with respect to such Mortgage Receivable are true and correct; (c)
such Mortgage Receivable was acquired by the Eligible Mortgage Owner (1) except for any Mortgage
Receivable proposed to be included as a Borrowing Base Asset within ninety (90) days after the
Closing Date, within three months of the date such Mortgage Receivable is proposed to be included
as a Borrowing Base Asset; (2) in accordance with the terms of the Acquisition, Credit and
Collection Policy; and (3) in the ordinary course of the Company’s business through a mortgage
transaction; (d) such Mortgage Receivable has been included in calculations of the Borrowing Base
for less than 12 months; and (e) the Mortgage Receivable Property would have met all of the
requirements of an Eligible Property were it owned by, rather than mortgaged to, the Eligible
Mortgage Owner.




“Eligible Property” means a Property which satisfies all of the following requirements:




(a) such Property is located in one of the 48 contiguous states of the United States of
America or in the District of Columbia;




(b) neither such Property, nor any interest of the Company or any Subsidiary thereof
(including without limitation any Eligible Property Owner) therein, is subject to any Lien
(other than Permitted Liens) or any Negative Pledge;




(c) such Property is owned by an Eligible Property Owner and is a Wholly Owned
Property;




(d) none of the Company’s direct or indirect ownership interest in such Eligible
Property Owner is subject to any Lien or any Negative Pledge (other than any Liens pursuant
to the Loan Documents);




(e) the Company directly, or indirectly through a Wholly Owned Subsidiary, has the
right to take the following actions without the need to obtain the consent of any Person:
(A) to create Liens on such Property as security for Debt of the Company, any Loan Parties
or such Subsidiary, as applicable and (B) to sell, transfer or otherwise dispose of such
Property;




(f) such Property is free of all structural defects or architectural deficiencies,
title defects, environmental conditions or other adverse matters except for defects,
deficiencies, conditions or other matters individually or collectively which are fully
insured against (subject to reasonable and customary deductibles) or are not material to the
profitable operation of such Property;




(g) such Property was acquired: (1) except for Properties proposed to be included as
Borrowing Base Assets within ninety (90) days after the Closing Date, by the Eligible
Property Owner within three months of the date such Property is proposed to be included as a
Borrowing Base Asset; (2) by the Eligible Property Owner in accordance with the terms of the
Acquisition, Credit and Collection Policy; and (3) in the ordinary course of the Company’s
business through a sale-leaseback transaction;




(h) good and indefeasible fee simple title to such Property is owned by the Eligible
Property Owner free and clear of any liens (other than Permitted Liens) and 100% of the
membership interests of such Eligible Property Owner have been pledged pursuant to the
Membership Pledge Agreement;




(i) the tenant has an internal risk rating of 4 or higher on the Company’s 10 point
risk rating scale set forth in the Acquisition, Credit and Collection Policy and is
otherwise deemed an Eligible Tenant;




(j) the entire Property is leased to an Eligible Tenant pursuant to a lease
substantially in the form previously approved by the Administrative Agent and the Required
Lenders, except with respect to Properties acquired by an Eligible Property Owner subject to
an existing lease that has not been entered into in contemplation of such sale to the
Eligible Property Owner and which is in compliance with the Acquisition, Credit and
Collection Policy;




(k) the Eligible Tenant is in material compliance with the terms of the lease and
related documents;




(l) such property has been a Borrowing Base Asset for less than 12 months;




(m) lease payments on such Property are in U.S. Dollars; and




(n) all of the representations and warranties set forth in the Mortgage with respect to
such Property are true and correct.



“Eligible Property Owner” or “Eligible Mortgage Owner” means any limited liability company
which is a Domestic Subsidiary and a Wholly Owned Subsidiary and all of the membership interests
(and all other ownership interests) of which are pledged to the Secured Parties pursuant to the
Membership Pledge Agreement.



“Eligible Tenant” means on any day with respect to a Mortgaged Property, each Person or
Persons obligated to make payments pursuant to a lease of all or any portion of such Mortgaged
Property (which lease shall be in form and content satisfactory to the Administrative Agent),
including any guarantor thereof that satisfies each of the following requirements at all times:
(i) such tenant is not a natural person and is a legal operating entity, duly organized and validly
existing under the laws of its jurisdiction of organization; (ii) the business of such tenant has a
Operating History of at least twenty-four (24) months from the date of its incorporation or
formation; (iii) such tenant is not the subject of any Insolvency Event and such tenant has not
experienced a material adverse change, in its business, financial condition, operations, properties
or prospects since the date of the lease; (iv) no default, event of default or event which with the
giving of notice or the expiration of time would constitute a default or event of default has
occurred with respect to any other lease included within the Collateral to which such tenant is a
party; (v) such tenant is not a Governmental Authority; (vi) such tenant is in compliance with all
material terms and conditions of such lease; (vii) such tenant’s principal office is located in the
United States; and (viii) such tenant has an internal risk rating of 4 or higher on the Company’s
10 point risk rating scale set forth in the Acquisition, Credit and Collection Policy.



“Environmental Authority” means any foreign, federal, state, local or regional government that
exercises any form of jurisdiction or authority under any Environmental Requirement.



“Environmental Authorizations” means all licenses, permits, orders, approvals, notices,
registrations or other legal prerequisites for conducting the business of a Loan Party or any
Subsidiary of a Loan Party required by any Environmental Requirement.



“Environmental Judgments and Orders” means all judgments, decrees or orders arising from or in
any way associated with any Environmental Requirements, whether or not entered upon consent or
written agreements with an Environmental Authority or other entity arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or
order.



“Environmental Laws” means any and all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to the environment or
to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes into the environment, including,
without limitation, ambient air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or
hazardous substances or wastes or the clean-up or other remediation thereof.



“Environmental Liabilities” means any liabilities, whether accrued, contingent or otherwise,
arising from and in any way associated with any Environmental Requirements.



“Environmental Notices” means notice from any Environmental Authority or by any other person
or entity, of possible or alleged noncompliance with or liability under any Environmental
Requirement, including without limitation any complaints, citations, demands or requests from any
Environmental Authority or from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any Environmental
Requirement.



“Environmental Proceedings” means any judicial or administrative proceedings arising from or
in any way associated with any Environmental Requirement.



“Environmental Releases” means releases as defined in CERCLA or under any applicable state or
local environmental law or regulation.



“Environmental Requirements” means any legal requirement relating to health, safety or the
environment and applicable to a Loan Party, any Subsidiary of a Loan Party or the Properties,
including but not limited to any such requirement under CERCLA or similar state legislation and all
federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law.



“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a
reference to any successor provision or provisions thereof.



“Euro-Dollar Business Day” means any Domestic Business Day on which dealings in Dollar
deposits are carried out in the London interbank market.



“Euro-Dollar Advance” means, with respect to any Advance, such Advance during Interest Periods
when such Advance bears or is to bear interest at a rate based upon the London Interbank Offered
Rate.




“Euro-Dollar Reserve Percentage” has the meaning set forth in Section 2.06(c).




“Event of Default” has the meaning set forth in Section 6.01.



“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to
the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (i) if the day for which such rate is to be determined is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next succeeding Domestic
Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to BB&T on such day on such transactions as determined
by the Administrative Agent.



“Financing” shall mean (i) any transaction or series of transactions for the incurrence by a
Loan Party of any Debt or for the establishment of a commitment to make advances which would
constitute Debt of a Loan Party, which Debt is not by its terms subordinate and junior to other
Debt of a Loan Party, (ii) an obligation incurred in a transaction or series of transactions in
which assets of a Loan Party are sold and leased back, or (iii) a sale of accounts or other
receivables or any interest therein, other than a sale or transfer of accounts or receivables
attendant to a sale permitted hereunder of an operating division.




“Fiscal Quarter” means any fiscal quarter of the Company.




“Fiscal Year” means any fiscal year of the Company.



“GAAP” means generally accepted accounting principles applied on a basis consistent with those
which, in accordance with Section 1.02, are to be used in making the calculations for purposes of
determining compliance with the terms of this Agreement.



“Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, any court or arbitrator and any accounting board or authority (whether or
not a part of the government) which is responsible for the establishment or interpretation of
national or international accounting principles.



“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to
provide collateral security, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The term “Guarantee”
used as a verb has a corresponding meaning.



“Guaranteed Obligations” means any and all liabilities, indebtedness and obligations of any
and every kind and nature, heretofore, now or hereafter owing, arising, due or payable from either
Borrower to the Banks, the Issuing Bank, the Administrative Agent, or any of them, arising under or
evidenced by this Agreement, the Notes, the Letter of Credit Agreements, the Collateral Documents
or any other Loan Document.



“Guarantors” shall mean collectively: (a) the Initial Guarantors; and (b) all Mortgaged
Property Owners and Pledged Mortgage Receivable Owners after the Closing Date.



“Hazardous Materials” includes, without limitation, (a) solid or hazardous waste, as defined
in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. §6901 et seq. and its implementing
regulations and amendments, or in any applicable state or local law or regulation, (b) any
“hazardous substance”, “pollutant” or “contaminant”, as defined in CERCLA, or in any applicable
state or local law or regulation, (c) gasoline, or any other petroleum product or by-product,
including crude oil or any fraction thereof, (d) toxic substances, as defined in the Toxic
Substances Control Act of 1976, or in any applicable state or local law or regulation and (e)
insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and
Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act,
statute or regulation may be amended from time to time.



“Initial Guarantors” shall mean (i) EE, 208 South Rogers Lane, Raleigh, NC LLC, (ii) Little
Arch Charlotte NC LLC, (iii) OB Crenshaw PA Gladstone Commercial LLC, (iv) OB Midway NC Gladstone
Commercial LLC and (v) GCC Pocono LLC.



“Initial Rate Adjustment Date” means the later to occur of: (1) the Rate Determination Date
next following September 30, 2005; and (2) the date on which the Loan Parties receive at least
$25,000,000 of net proceeds from the issuance by the Loan Parties of Long Term Limited Recourse
Mortgage Loans.



“Insolvency Event” means with respect to a specified Person, (a) the filing of a decree or
order for relief by a court having jurisdiction in respect of such Person or any substantial part
of its property in an involuntary case under any applicable Insolvency Law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or ordering the winding-up or
liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect
for a period of sixty (60) consecutive days; or (b) the commencement by such Person of a voluntary
case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person
to the entry of an order for relief in an involuntary case under any such law, or the consent by
such Person to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the benefit of creditors,
or the failure by such Person generally to pay its debts as such debts become due, or the taking of
action by such Person in furtherance of any of the foregoing.



“Insolvency Laws” means the Bankruptcy Code and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
suspension of payments, or similar debtor relief laws from time to time in effect affecting the
rights of creditors generally.



“Insolvency Proceeding” means any case, action or proceeding before any court or Governmental
Authority relating to an Insolvency Event.



“Interest Payment Date” shall mean: (i) in the case of a Euro-Dollar Advance that is not a
Variable Monthly LIBOR Advance, the last date of the applicable Interest Period and, if such
Interest Period is longer than three (3) months, at intervals of three (3) months after the first
day thereof; (ii) in the case of a Euro-Dollar Advance that is a Variable Monthly LIBOR Advance,
the first day of each month; and (iii) in the case of a Base Rate Advance, each Quarterly Payment
Date while such Base Rate Advance is outstanding and on the date such Base Rate Advance is repaid
or converted to a Euro-Dollar Advance.



“Interest Period” means: (1) with respect to each Euro-Dollar Borrowing that is not a
Variable Monthly LIBOR Advance, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the first, third or sixth month thereafter, as the requesting
Borrower may elect in the applicable Notice of Borrowing; provided that:



(A) any Interest Period (subject to paragraph (c) below) which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business Day;



(B) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall, subject to paragraph (C) below, end on the last Euro-Dollar Business Day of
the appropriate subsequent calendar month; and



(C) no Interest Period may be selected which begins before the Termination Date and would
otherwise end after the Termination Date.



(2) with respect to each Base Rate Borrowing and each Euro-Dollar Borrowing that is comprised
of Variable Monthly LIBOR Advances, a calendar month; provided that:



(A) the initial Interest Period shall mean the period commencing on the Closing Date and
ending February 28, 2005; and




(B) the last Interest Period under this Agreement shall end on the Termination Date.



“Investment” means any investment in any Person, whether by means of purchase or acquisition
of obligations or securities of such Person, capital contribution to such Person, loan or advance
to such Person, making of a time deposit with such Person, Guarantee or assumption of any
obligation of such Person or otherwise.




“Issuing Bank” shall mean BB&T.



“Lending Office” means, as to each Bank, its office located at its address set forth on the
signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such
other office as such Bank may hereafter designate as its Lending Office by notice to the Borrowers
and the Administrative Agent.



“Letter of Credit” means the letters of credit issued by the Issuing Bank pursuant to Section
2.03(a) and “Letter of Credit” means any one of such Letters of Credit, as any of such letters of
credit may be extended, renewed, replaced or amended from time to time.



“Letter of Credit Advance” means an advance made by the Issuing Bank pursuant to Section
2.03(c).



“Letter of Credit Agreement” means any agreement entered into by either Borrower and the
Issuing Bank pursuant to which a Letter of Credit is issued, as amended, modified or restated from
time to time.



“Lien” means, with respect to any asset, any mortgage, deed to secure debt, deed of trust,
lien, pledge, charge, security interest, security title, preferential arrangement which has the
practical effect of constituting a security interest or encumbrance, servitude or encumbrance of
any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by
consensual agreement or by operation of statute or other law, or by any agreement, contingent or
otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrowers or
any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.



“Loan Documents” means this Agreement, the Notes, the Collateral Documents, the Document
Agreement, the Letter of Credit Agreements, the Letters of Credit, any other document evidencing or
securing the Advances or the Letters of Credit, and any other document or instrument delivered from
time to time in connection with this Agreement, the Notes, the Letter of Credit Agreements, the
Letters of Credit, the Collateral Documents or the Advances, as such documents and instruments may
be amended or supplemented from time to time.



“Loan Parties” means collectively the Borrowers and each Guarantor that is now or hereafter a
party to any of the Loan Documents.




“London Interbank Offered Rate” has the meaning set forth in Section 2.06(c).



“Long Term Limited Recourse Mortgage Loan” means a mortgage loan to any Loan Party from third
party institutional lender for the purpose of financing or refinancing Debt incurred to finance the
purchase of any Property or Properties, which mortgage loan shall have a term of at least five
years, shall be secured by, and have recourse for payment contractually limited to, the Properties
so financed or refinanced.



“Margin Stock” means “margin stock” as defined in Regulations T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.



“Material Adverse Effect” means, with respect to any event, act, condition or occurrence of
whatever nature (including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in conjunction with any other event or
events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the financial condition,
operations, business or properties of the Company and its Consolidated Subsidiaries taken as a
whole, (b) the rights and remedies of the Administrative Agent or the Banks under the Loan
Documents, or the ability of either Borrower or any other Loan Party to perform its obligations
under the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or
enforceability of any Loan Document.



“Material Contract” means any contract or other arrangement (other than Loan Documents),
whether written or oral, to which the Borrowers, any Subsidiary or any other Loan Party is a party
as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could
reasonably be expected to have a Material Adverse Effect.



“Membership Pledge Agreement” means collectively (or individually as the context may
indicate), (i) a Membership Pledge Agreement by the Operating Partnership in favor of the
Administrative Agent for the benefit of the Secured Parties to be executed and delivered on or
prior to the date of the first Borrowing hereunder and in form and content satisfactory to the
Administrative Agent and (ii) any joinders thereto or any additional Membership Pledge Agreement
delivered to the Administrative Agent pursuant to Section 5.25.



“Mortgages” means, collectively, (i) the Deeds of Trust and Mortgages by the Initial
Guarantors to be executed and delivered on or prior to the date of the first Borrowing hereunder
and in form and content satisfactory to the Administrative Agent and (ii) all subsequent mortgages,
deeds of trust, deeds to secure debt and assignments of leases in substantially the form of the
Deeds of Trust referred to in clause (i) (with such changes thereto as may be necessitated by state
or local law), in each case granting a Lien to the Administrative Agent (or a trustee for the
benefit of the Administrative Agent) for the benefit of the Secured Parties in Collateral
constituting real property (including certain real property leases) and related personalty, as such
documents may be amended, modified or supplemented for time to time.



“Mortgaged Property” means, collectively, the Trust Property and the Secured Property (each as
defined in the Mortgages) at the Closing Date, and thereafter, any of such property owned or
acquired by the Company or any Subsidiary, that is or is required to become a Guarantor after the
Closing Date pursuant to Section 5.25, the Loan Parties’ interests in which are pledged to
the Administrative Agent for the benefit of the Secured Parties pursuant to the Mortgaged Property
Security Documents.



“Mortgaged Property Diligence Package” shall mean, with respect to any Property, the
following: (i) a general description of the Property’s location, market and amenities; (ii) a
tenant description; (iii) information with respect to the purchase transaction (including, without
limitation, the purchase price, the name of the seller, the date of purchase and other material
terms of purchase); (iv) a summary (prepared by the environmental firm) of results of a Phase I
environmental assessment and, if reasonably requested by the Administrative Agent, based upon
issues identified in the Phase I environmental assessment summary, the full environmental
assessment and any additional environmental assessments; (v) a summary of the most recent appraisal
prepared within three months of the date the Property was acquired by the Mortgaged Property Owner;
(vi) a summary of the principal terms of the lease; (vii) copies of all internal Loan Party
analyses or reports relating to the investment in such Property, including without limitation the
investment write-up and (viii) such other information reasonably requested by the Administrative
Agent, all of such information to be prepared in accordance with the Acquisition, Credit and
Collection Policy.




“Mortgaged Property Owner” means the owner of a fee simple title to a Mortgaged Property.



“Mortgaged Property Security Documents” means collectively, the Mortgages and Subordination
Nondisturbance and Attornment Agreements and all other agreements, instruments and other documents,
whether now existing or hereafter in effect, pursuant to which the Borrowers or any Subsidiary
shall grant or convey to the Administrative Agent and the Banks a Lien in, or any other Person
shall acknowledge any such Lien in, real property as security for all or any portion of the
Obligations, as any of them may be amended, modified or supplemented from time to time.



“Mortgaged Property Support Documents” means, for each Mortgaged Property, (i) the Title
Policy pertaining thereto, (ii) such appraisals, surveys, flood hazard certifications and
environmental assessments thereof as the Administrative Agent may require prepared by recognized
experts in their respective fields selected by the Administrative Agent, (iii) as to Mortgaged
Properties located in a flood hazard area, such flood hazard insurance as the Administrative Agent
may require, (iv) with respect to facilities leased or subleased to third parties, such lessees’
estoppel, waiver and consent certificates and subordination, nondisturbance and attornment
agreements, (v) such owner’s or lessee’s affidavits as the Administrative Agent may require, (vi)
such opinions of local counsel with respect to the Mortgages or leasehold mortgages, as applicable,
as the Administrative Agent may require, and (vii) such other documentation as the Administrative
Agent may reasonably require, in each case as shall be in form and substance reasonably acceptable
to the Administrative Agent.



“Mortgage Receivable” means a promissory note secured by a first priority mortgage, deed of
trust or deed to secure debt lien on a Mortgage Receivable Property of which either Borrower or a
Guarantor is the holder and retains the rights of collection of all payments thereunder.



“Mortgage Receivables Pledge Agreement” means (i) a Mortgage Receivables Pledge Agreement
between the Borrowers, the Pledgors thereunder and the Administrative Agent for the benefit of the
Secured Parties to be executed and delivered on or prior to the date of the first Borrowing
hereunder and in form and content satisfactory to the Administrative Agent and (ii) any joinders
thereto or any additional Mortgage Receivables Pledge Agreements delivered to the Administrative
Agent pursuant to Section 5.25.




“Mortgage Receivable Property” means any real property in which any Loan Party has a Lien.




“Multiemployer Plan” shall have the meaning set forth in Section 4001(a)(3) of ERISA.



“Negative Pledge” means, with respect to a given asset, any provision of a document,
instrument or agreement (other than any Loan Document) which prohibits or purports to prohibit the
creation or assumption of any Lien on such asset as security for Debt of the Person owning such
asset or any other Person.



“Net Income” means, as applied to any Person for any period, the aggregate amount of net
income of such Person, after taxes, for such period, as determined in accordance with GAAP.



“Net Proceeds of Capital Securities/Conversion of Debt” means any and all proceeds (whether
cash or non-cash) or other consideration received by the Company or a Consolidated Subsidiary in
respect of the issuance of Capital Securities (including, without limitation, the aggregate amount
of any and all Debt converted into Capital Securities), after deducting therefrom all reasonable
and customary costs and expenses incurred by the Company or such Consolidated Subsidiary directly
in connection with the issuance of such Capital Securities.



“Nonrecourse Debt” means with respect to a Person, Debt for borrowed money in respect of which
recourse for payment is contractually limited to specific assets of such Person encumbered by a
lien securing such Debt provided such contractual limitation to specific assets may include
customary exceptions for fraud, misapplication of funds, environmental indemnities and other
similar exceptions to recourse liability.



“Notes” means the promissory notes of the Borrowers, substantially in the form of Exhibit B
hereto, evidencing the obligation of the Borrowers to repay the Advances, together with all
amendments, consolidations, modifications, renewals and supplements thereto and “Note” means any
one of such Notes.




“Notice of Borrowing” has the meaning set forth in Section 2.02.



“Obligations” means the collective reference to all indebtedness, obligations and liabilities
to the Administrative Agent, the Issuing Bank and the Banks, existing on the date of this Agreement
or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law
or otherwise, of the Loan Parties under this Agreement, the Notes, the Letter of Credit Agreement
or any other Loan Document.




“Officer’s Certificate” has the meaning set forth in Section 3.01(e).



“Operating Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the bylaws, operating agreement, partnership agreement,
limited partnership agreement, shareholder agreement or other applicable documents relating to the
operation, governance or management of such entity.



“Operating History” means with respect to any specified Person, the time since the date of
such Person’s incorporation or formation that it has continuously operated its business; provided,
however, the Operating History of any Person, newly formed as a result of a merger of two or more
Persons or as a result of the acquisition of one or more Persons by a newly formed Person (“Merged
Parties”) shall be based on the weighted average (by relative sales) of the Operating Histories of
the Merged Parties (excluding for such purposes, entities that are created only for the purpose of
being acquisition entities), for example, if Corporation A with sales of $10 million has an
Operating History of four years and Corporation B with sales of $20 million has an Operating
History of eight years, merge to form NEWCO, the Operating History of NEWCO will be 6.67 years.



“Operating Partnership” means Gladstone Commercial Limited Partnership, a Delaware limited
partnership, all of the general and limited partnership interests of which are held directly or
indirectly by the Company as of the date hereof.



“Organizational Action” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, any corporate, organizational or partnership action
(including any required shareholder, member or partner action), or other similar official action,
as applicable, taken by such entity.



“Organizational Documents” means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation,
articles of organization, certificate of limited partnership or other applicable organizational or
charter documents relating to the creation of such entity.




“Participant” has the meaning set forth in Section 9.07(b).



“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October
26, 2001.



“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA.



“Permitted Liens means those Liens permitted under Sections 5.11(b) through (e) and Section
5.11(g).



“Person” means an individual, a corporation, a limited liability company, a partnership
(including without limitation, a joint venture), an unincorporated association, a trust or any
other entity or organization, including, but not limited to, a government or political subdivision
or an agency or instrumentality thereof.



“Plan” means at any time an employee pension benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i)
maintained by a member of the Controlled Group for employees of any member of the Controlled Group
or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which a member of the Controlled Group is
then making or accruing an obligation to make contributions or has within the preceding 5 plan
years made contributions.



“Pledged Membership and Related Interests” shall have the same meaning as the term
“Collateral” set forth in the Membership Pledge Agreement.



“Pledged Mortgage Receivable Diligence Package” means, with respect to any Mortgage
Receivable, the following: (i) a general description of the Mortgage Receivable Property’s
location, market and amenities; (ii) a mortgagor description; (iii) information with respect to the
mortgage transaction; (iv) a summary (prepared by the environmental firm) of results of a Phase I
environmental assessment and, if reasonably requested by the Administrative Agent, based upon
issues identified in the Phase I environmental assessment summary, the full environmental
assessment and any additional environmental assessments; (v) a summary of the most recent appraisal
prepared within three months of the date the Mortgage Receivable was acquired by the Pledged
Mortgage Receivable Owner; (vi) a summary of the principal terms of the mortgage; (vii) a copy of
the mortgage, deed of trust or deed to secure debt in favor of the Loan Party, the original
promissory note and any related documents or instruments; (vii) copies of all internal Loan Party
analyses or reports relating to the investment in such Mortgage Receivable, including without
limitation the investment write-up and (viii) such other information reasonably requested by the
Administrative Agent, all of such information to be prepared in accordance with the Acquisition,
Credit and Collection Policy.



“Pledged Mortgage Receivable Owner” means the owner of the mortgagee interest in a Pledged
Mortgage Receivable.



“Pledged Mortgage Receivables” shall have the same meaning as the term “Collateral” as set
forth in the Mortgage Receivables Pledge Agreement.



“Pledged Mortgage Receivable Security Documents” means the Mortgage Receivables Pledge
Agreement, the promissory note and related mortgage, deed of trust or deed to secure debt pledged
pursuant thereto and all related documents, instruments and UCC financing statements executed or
delivered in connection therewith, including any security agreement, mortgage, assignment of loans,
guaranties, note purchase agreement, intercreditor and/or subordination agreement executed by the
obligor thereof or by another person on the obligor’s behalf in respect of such Pledged Mortgage
Receivables and related promissory note, together with an Assignment of Mortgage and an assignment
(which may be by allonge), in blank, signed by an officer of the payee under the respective note.



“Pledgors” means the pledgor(s) under the Membership Pledge Agreement and the Mortgage
Receivables Pledge Agreement, either collectively or individually, as the context shall require.



“Prime Rate” refers to that interest rate so denominated and set by BB&T from time to time as
an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases
used by BB&T. BB&T lends at interest rates above and below the Prime Rate.



“Properties” means all real property owned, leased or otherwise used or occupied by a Loan
Party or any Subsidiary of a Loan Party, wherever located.




“Property Release” has the meaning set forth in Section 2.15.



“Pro Rata Share” of any amount means, with respect to any Bank at any time, the product of
such amount times a fraction the numerator of which is the amount of such Bank’s Commitment at such
time and the denominator of which is the aggregate amount of the Commitments of all of the Banks at
such time.




“Quarterly Payment Date” means March 31, June 30, September 30 and December 31 of each year.




“Rate Determination Date” has the meaning set forth in Section 2.06(a).



“Redeemable Preferred Securities” of any Person means any preferred stock or similar Capital
Securities (including, without limitation, limited liability company membership interests and
limited partnership interests) issued by such Person which is at any time prior to the Termination
Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii)
redeemable at the option of the holder thereof.



“REIT” means a Person qualifying for treatment as a “real estate investment trust” under the
Code.



“Required Banks” means at any time Banks having at least 66-2/3% of the aggregate amount of
the Commitments or, if the Commitments are no longer in effect, Banks holding at least 66-2/3% of
the aggregate outstanding principal amount of the Notes, Letter of Credit Advances and Undrawn
Amounts.



“Restricted Payment” means as to any Person (i) any dividend or other distribution on any
Capital Securities of such Person (except dividends payable solely in shares of its capital stock)
or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any
Capital Securities of such Person (except shares acquired upon the conversion thereof into other
shares of its capital stock) or (b) any option, warrant or other right to acquire Capital
Securities of such Person.



“Secured Parties” shall mean collectively: (1) the Administrative Agent in its capacity as
such under this Agreement, the Collateral Documents and the other Loan Documents; (2) the Banks,
(3) the Issuing Bank, in its capacity as such under the Letter of Credit Agreement and this
Agreement; and (4) the successors and assigns of the foregoing.



“Stockholders’ Equity” means, at any time, the shareholders’ equity of the Company and its
Consolidated Subsidiaries, as set forth or reflected on the most recent consolidated balance sheet
of the Company and its Consolidated Subsidiaries prepared in accordance with GAAP, but
excluding any Redeemable Preferred Securities of the Company or any of its Consolidated
Subsidiaries. Shareholders’ equity generally would include, but not be limited to (i) the par or
stated value of all outstanding Capital Securities, (ii) capital surplus, (iii) retained earnings,
and (iv) various deductions such as (A) purchases of treasury stock, (B) valuation allowances, (C)
receivables due from an employee stock ownership plan, (D) employee stock ownership plan debt
guarantees, and (E) translation adjustments for foreign currency transactions.



“Subordination, Nondisturbance and Attornment Agreement” means, collectively, each of the
Subordination, Nondisturbance and Attornment Agreements required to be delivered by each Eligible
Tenant pursuant to this Agreement substantially in the form of Exhibit O or in such other form as
the Administrative Agent shall approve, as the same may be amended, modified, supplemented or
amended and restated from time to time.



“Subsidiary” means any corporation or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or indirectly owned by the Company.




“Taxes” has the meaning set forth in Section 2.12(c).




“Termination Date” means February 28, 2008.



“Third Party” means any lessee, sublessee, licensee or other user of any Property, excluding
any user of a Property in the ordinary course of the Borrowers’ business and on a temporary basis.



“Title Policy” means with respect to each Mortgaged Property, the mortgagee title insurance
policy (together with such endorsements as the Administrative Agent may reasonably require) issued
to the Administrative Agent in respect of such Mortgaged Property by an insurer selected by the
Administrative Agent, insuring (in an amount satisfactory to the Administrative Agent) the Lien of
the Administrative Agent for the benefit of the Secured Parties on such Mortgaged Property to be
duly perfected and first priority, subject only to such exceptions as shall be acceptable to the
Administrative Agent.



“Total Leverage Ratio” means at any time the ratio of (i) Consolidated Debt to (ii)
Stockholders’ Equity.



“Total Unused Commitments” means at any date, an amount equal to: (A) the aggregate amount of
the Commitments of all of the Banks at such time, less (B) the sum of: (i) the aggregate
outstanding principal amount of the Advances of all of the Banks at such time; (ii) the aggregate
outstanding principal amount of all Letter of Credit Advances; and (iii) the aggregate Undrawn
Amounts.




“Transferee” has the meaning set forth in Section 9.07(d).



“Undrawn Amount” means, with respect to any Letter of Credit, at any time, the maximum amount
available to be drawn under such Letter of Credit at such time and “Undrawn Amounts” means, at any
time, the sum of all Undrawn Amounts at such time.



“Unused Commitment” means at any date, with respect to any Bank, an amount equal to its
Commitment less the sum of: (i) aggregate outstanding principal amount of its Advances; (ii) such
Bank’s Pro Rata Share of the aggregate outstanding principal amount of all Letter of Credit
Advances; and (ii) such Bank’s Pro Rata Share of the Undrawn Amounts.



“Variable Monthly LIBOR Advance” means any Advance designated by the Borrowers in a Notice of
Borrowing as a Variable Monthly LIBOR Advance and during an Interest Period when such Advance bears
or is to bear interest at a rate based upon the London Interbank Offered Rate.



“Wholly Owned Property” means an Eligible Property which is wholly owned in fee simple by an
Eligible Property Owner.



“Wholly Owned Subsidiary” means any Subsidiary all of the shares of capital stock or other
ownership interests of which are at the time directly or indirectly owned by the Company.



SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein,
all terms of an accounting character used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the Company’s independent public accountants or otherwise required by a
change in GAAP) with the most recent audited consolidated financial statements of the Company and
its Consolidated Subsidiaries delivered to the Administrative Agent for distribution to the Banks,
unless with respect to any such change concurred in by the Company’s independent public accountants
or required by GAAP, in determining compliance with any of the provisions of this Agreement or any
of the other Loan Documents: (i) the Company shall have objected to determining such compliance on
such basis at the time of delivery of such financial statements, or (ii) the Required Banks shall
so object in writing within 30 days after the delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall not have been made
(which, if objection is made in respect of the first financial statements delivered under Section
5.01 hereof, shall mean the financial statements referred to in Section 4.04).



SECTION 1.03. Use of Defined Terms. All terms defined in this Agreement shall have
the same meanings when used in any of the other Loan Documents, unless otherwise defined therein or
unless the context shall otherwise require.



SECTION 1.04. Terminology. All personal pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, shall include all other genders; the singular shall
include the plural and the plural shall include the singular. Titles of Articles and Sections in
this Agreement are for convenience only, and neither limit nor amplify the provisions of this
Agreement.



SECTION 1.05. References. Unless otherwise indicated, references in this Agreement to
“Articles”, “Exhibits”, “Schedules”, and “Sections” are references to articles, exhibits, schedules
and sections hereof.



ARTICLE II




THE CREDITS





SECTION 2.01. Commitments to Make Advances.




(a) Each Bank severally agrees, on the terms and conditions set forth herein, to make
Advances to the Borrowers from time to time before the Termination Date; provided
that, immediately after each such Advance is made, the aggregate outstanding principal
amount of Advances by such Bank together with such Bank’s Pro Rata Share of the aggregate
outstanding principal amount of all Letter of Credit Advances and Undrawn Amounts shall not
exceed the amount of the Commitment of such Bank at such time, provided
further that the aggregate principal amount of all Advances, together with the
aggregate principal amount of all Letter of Credit Advances and Undrawn Amounts, shall not
exceed the lesser of: (i) the aggregate amount of the Commitments of all of the Banks at
such time, and (ii) the Borrowing Base. Each Borrowing under this Section shall be in an
aggregate principal amount of $1,000,000 or any larger multiple of $100,000 (except that any
such Borrowing may be in the aggregate amount of the Total Unused Commitments) and shall be
made from the several Banks ratably in proportion to their respective Commitments. Within
the foregoing limits, the Borrowers may borrow under this Section, repay or, to the extent
permitted by Section 2.10, prepay Advances and reborrow under this Section at any time
before the Termination Date.




(b) Subject to the terms and conditions set forth herein, the Borrowers shall have the
right, at any time from the Closing Date until the Termination Date, to increase the total
Commitments by an amount up to $25,000,000 (for a total Commitment, assuming no reductions,
of $75,000,000) in the aggregate. The following terms and conditions shall apply to any
such increase: (i) any such increase shall be obtained from existing Banks or from other
banks or other financial institutions, in each case in accordance with the terms set forth
below, (ii) the Commitment of any Bank may not be increased without the prior written
consent of such Bank, (iii) any increase in the aggregate Commitments shall be in a minimum
principal amount of $5,000,000, (iv) the Loan Parties and Banks shall execute an
acknowledgement (or in the case of the addition of a bank or other financial institution not
then a party to this Agreement, a joinder agreement) in form and content satisfactory to the
Administrative Agent to reflect the revised Commitments, (the Banks do hereby agree to
execute such acknowledgement (or joinder agreement) unless the acknowledgement purports to
increase the Commitment of a Bank without such Bank’s consent), (v) the Borrowers shall
execute such Notes as are necessary to reflect the increase in the Commitments, (vi) if any
Advances are outstanding at the time of any such increase, the Borrowers shall make such
payments and adjustments on the Advances (including payment of any break-funding amount
owing under Section 8.05) as necessary to give effect to the revised commitment percentages
and outstandings of the Banks, (vii) the Borrowers may solicit commitments from banks and
other financial institutions that are not then a party to this Agreement so long as such
banks and other financial institutions are reasonably acceptable to the Administrative Agent
and execute a joinder agreement in form and content satisfactory to the Administrative
Agent, and (viii) the conditions set forth in Section 3.02 shall be true and correct. The
amount of any increase in the Commitments hereunder shall be offered first to the existing
Banks, and in the event the additional commitments which existing Banks are willing to take
shall exceed the amount requested by the Borrowers, such excess shall be allocated in
proportion to the commitments of such existing Banks willing to take additional commitments.
If the amount of the additional commitments requested by the Borrowers shall exceed the
additional commitments which the existing Banks are willing to take, then the Borrowers may
invite other banks and financial institutions reasonably acceptable to the Administrative
Agent to join this Agreement as Banks hereunder for the portion of commitments not taken by
existing Banks, provided that such other banks and financial institutions shall
enter into such joinder agreements to give effect thereto as the Administrative Agent and
the Borrowers may reasonably request. Unless otherwise agreed by the Administrative Agent
and the Banks, the terms of any increase in the total Commitments shall be the same as those
in effect prior to any increase; provided, however, that should the terms of
the increase agreed to be other than those in effect prior to the increase, then the Loan
Documents shall be amended to the extent necessary to incorporate any such different terms.




SECTION 2.02. Method of Borrowing Advances.




(a) The Borrowers shall give the Administrative Agent notice in the form attached
hereto as Exhibit A (a “Notice of Borrowing”) prior to 11:00 A.M. (Winston-Salem, North
Carolina time) on the Domestic Business Day of each Borrowing, specifying:




(i) the date and Borrower of such Borrowing;




(ii) the aggregate amount of such Borrowing; and




(iii) the Interest Period, if any, for any Euro-Dollar Advance or if
such Borrowing is intended to be Variable Monthly LIBOR Advances; provided
that: (a) the Borrowers may not have more than six Euro-Dollar Advances
with fixed interest periods outstanding at any one time; and (b) unless
otherwise specified, a Borrowing shall be deemed a Variable Monthly LIBOR
Advance.




(b) Except as provided in Section 2.02(d) of this Agreement, upon receipt of a Notice
of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank’s ratable share of such Borrowing and such Notice of Borrowing
shall not thereafter be revocable by the Borrowers.




(c) Except as provided in Section 2.02(d) of this Agreement, not later than 1:00 P.M.
(Winston-Salem, North Carolina time) on the date of each Borrowing, each Bank shall (except
as provided in subsection (d) of this Section) make available its ratable share of such
Borrowing, in Federal or other funds immediately available in Winston-Salem, North Carolina,
to the Administrative Agent at its address referred to in or specified pursuant to Section
9.01. Unless the Administrative Agent determines that any applicable condition specified in
Article III has not been satisfied, the Administrative Agent will make the funds so received
from the Banks available to the requesting Borrower at the Administrative Agent’s address in
Winston-Salem, North Carolina not later than 2:00 p.m. (Winston-Salem, North Carolina time).
Unless the Administrative Agent receives notice from a Bank, at the Administrative Agent’s
address referred to in Section 9.01, no later than 4:00 P.M. (local time at such address) on
the Domestic Business Day before the date of a Borrowing stating that such Bank will not
make an Advance in connection with such Borrowing, the Administrative Agent shall be
entitled to assume that such Bank will make an Advance in connection with such Borrowing
and, in reliance on such assumption, the Administrative Agent may (but shall not be
obligated to) make available such Bank’s ratable share of such Borrowing to the requesting
Borrower for the account of such Bank. If the Administrative Agent makes such Bank’s
ratable share available to the requesting Borrower and such Bank does not in fact make its
ratable share of such Borrowing available on such date, the Administrative Agent shall be
entitled to recover such Bank’s ratable share from such Bank or such Borrower (and for such
purpose shall be entitled to charge such amount to any account of the Borrowers maintained
with the Administrative Agent), together with interest thereon for each day during the
period from the date of such Borrowing until such sum shall be paid in full at a rate per
annum equal to the rate set forth in Section 2.06 for each such day during such period,
provided that any such payment by either Borrower of such Bank’s ratable share and
interest thereon shall be without prejudice to any rights that such Borrower may have
against such Bank. If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank’s Advance included in such
Borrowing for purposes of this Agreement.




(d) At the Administrative Agent’s option and to facilitate the efficient administration
of this Agreement, the Administrative Agent shall be entitled to make settlements and
adjustments on a weekly basis provided that: (1) all Borrowings, Advances and all payments
of principal with respect to such Borrowings and Advances shall be shared by the Banks
ratably in proportion to their Commitments and in accordance with this Agreement; and (2)
all funds advanced by the Administrative Agent under this Agreement and all funds received
by the Administrative Agent under this Agreement shall be made or received, as the case may
be, by the Administrative Agent, as agent on behalf of the Banks and shall not constitute
separate loans or advances made by the Administrative Agent. Unless the Administrative
Agent receives notice from a Bank, at the Administrative Agent’s address referred to in
Section 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business
Day before the date of a Borrowing stating that such Bank will not make an Advance in
connection with such Borrowing, the Administrative Agent may assume that each Bank will make
an Advance in connection with each Borrowing and, in reliance on such assumption, the
Administrative Agent may make available such Bank’s ratable share of such Borrowing to the
requesting Borrower for the account of such Bank. No later than 11:00 A.M. (Winston-Salem,
North Carolina time) on Friday of each week the Administrative Agent shall advise each Bank
of its ratable share of the Borrowings and payments made or received by the Administrative
Agent for the period ending on the immediately preceding Wednesday. No later than 2:00 P.M.
(Winston-Salem, North Carolina time) on such Friday the Administrative Agent and Banks shall
effect payments (and credits) so that all Borrowings, Advances and payments with respect to
the Borrowings and Letters of Credit are shared by the Banks ratably; provided, however, at
any time, upon the request of the Administrative Agent, each Bank shall make its ratable
share of any Borrowing available to the Administrative Agent on demand but in no event later
than one Domestic Business Day following the Administrative Agent’s demand; and (2) the
Administrative Agent shall be entitled to recover such Bank’s ratable share of each
Borrowing from such Bank, together with interest thereon for each day during the period from
the date of any such demand until such sum shall be paid in full at a rate per annum equal
to the rate set forth in Section 2.06. Each Bank’s obligation under this Section 2.02(d)
shall be absolute and unconditional and shall not be affected by any circumstance,
including, without limitation: (i) any setoff, counterclaim, recoupment, defense or other
right which such Bank or any other Person may have against the Administrative Agent
requesting such adjustment or payment or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default or an Event of Default or the termination of the
Commitment; (iii) any adverse change in the condition (financial or otherwise) of the
Borrowers, any Guarantor or any other Person; (iv) any breach of this Agreement or any of
the other Loan Documents by the Borrowers, any Guarantor or any other Bank; or (v) any other
circumstance, happening or event whatsoever whether or not similar to any of the foregoing.




SECTION 2.03. Letters of Credit.




(a) The Issuing Bank may, from time to time upon request of either Borrower, in its
sole discretion issue Letters of Credit for the account of such Borrower, subject to
satisfaction of the conditions referenced in Section 3.03.




(b) Each Letter of Credit shall be subject to the provisions of this Agreement and to
the provisions set forth in the Letter of Credit Agreement executed by the Borrower for
whose account it is issued in connection with the issuance of such Letter of Credit. The
Borrowers agrees to promptly perform and comply with the terms and conditions of each Letter
of Credit Agreement.




(c) The payment by the Issuing Bank of a draft drawn under any Letter of Credit shall
constitute for all purposes of this Agreement a Letter of Credit Advance in the amount of
such draft. Upon written demand by the Issuing Bank, with a copy to the Administrative
Agent, each Bank shall purchase from the Issuing Bank, and the Issuing Bank shall sell to
each Bank, a participation interest in such Letter of Credit Advance equal to such Bank’s
Pro Rata Share of such Letter of Credit Advance as of the date of such purchase, by making
available to the Administrative Agent for the account of the Issuing Bank, in Federal or
other funds immediately available an amount equal to such Bank’s Pro Rata Share of the
outstanding principal amount of such Letter of Credit Advance. Promptly after receipt
thereof, the Administrative Agent shall transfer such funds to the Issuing Bank. The
Borrowers hereby agree to each such sale and purchase of participation interests in Letter
of Credit Advances outstanding from time to time. Each Bank agrees to purchase its
participation interest in an outstanding Letter of Credit Advance on (i) the Domestic
Business Day on which demand therefor is made by the Issuing Bank, provided notice of such
demand is given not later than 1:00 P.M. (Winston-Salem, North Carolina time) on such
Domestic Business Day or (ii) the first Domestic Business Day next succeeding the date of
such demand if notice of such demand is given after 1:00 P.M. (Winston-Salem, North Carolina
time) on any Domestic Business Day. The Issuing Bank makes no representation or warranty
and assumes no responsibility with respect to any sale and purchase of a participation
interest in any Letter of Credit Advance. If and to the extent that any Bank shall not have
so made the amount available to the Administrative Agent in connection with its purchase of
a participation interest in any Letter of Credit Advance, such Bank agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest thereon, for
each day from the date of demand by the Issuing Bank, until the date such amount is paid to
the Administrative Agent, at the Federal Funds Rate for the account of the Issuing Bank.




(d) The obligation of each Bank to purchase a participation interest in any Letter of
Credit Advance pursuant to Section 2.03(c) shall be unconditional and shall not be affected
by the existence of any Default, the failure to satisfy any condition set forth in Section
3.1, 3.2 or 3.3 or the termination of the Commitments (whether by the Borrowers pursuant to
Section 2.8 or by the Administrative Agent pursuant to Section 6.1 or otherwise).




(e) The Issuing Bank shall furnish (A) to the Administrative Agent and each Bank on the
tenth Domestic Business Day of each April, July, October and January, a written report
summarizing the issuance and expiration dates of Letters of Credit issued during the
preceding calendar quarter and (B) to the Administrative Agent and each Bank upon request a
written report setting forth the aggregate Undrawn Amounts.




(f) The failure of any Bank to purchase a participation interest in any Letter of
Credit Advance shall not relieve any other Bank of its obligation hereunder to purchase its
participation interest in any Letter of Credit Advance on such date, but no Bank shall be
responsible for the failure of any other Bank to so purchase a participation interest on
such date.




(g) The Borrower for whom any Letter of Credit is issued shall pay to the
Administrative Agent for the account of each Bank that has purchased a participation
interest in a Letter of Credit Advance on the earlier of demand and the Termination Date the
outstanding principal amount of such Letter of Credit Advance. The Administrative Agent
will promptly distribute to each Bank its ratable share of any payment of principal of or
interest on any Letter of Credit Advance received by the Administrative Agent; provided,
however, that in the event that such payment received by the Administrative Agent is
required to be returned, such Bank will return to the Administrative Agent any portion
thereof previously distributed by the Administrative Agent to it.




(h) The Issuing Bank will notify the Borrower for whom any Letter of Credit is issued
and the Administrative Agent promptly of the presentment for payment of any Letter of
Credit, together with notice of the date such payment shall be made, and the Administrative
Agent promptly will notify the Banks of such matters.



SECTION 2.04. Notes. The Advances of each Bank shall be evidenced by a single Note
payable to the order of such Bank for the account of its Lending Office in an amount equal to the
original principal amount of such Bank’s Commitment. Upon receipt of each Bank’s Note pursuant to
Section 3.01, the Administrative Agent shall deliver such Note to such Bank. Each Bank shall
record, and prior to any transfer of its Note shall endorse on the schedule forming a part thereof
appropriate notations to evidence, the date, amount and maturity of, and effective interest rate
for, each Advance made by it, the date and amount of each payment of principal made by the
Borrowers with respect thereto and such schedule shall constitute rebuttable presumptive evidence
of the principal amount owing and unpaid on such Bank’s Note; provided that the failure of
any Bank to make, or any error in making, any such recordation or endorsement shall not affect the
obligation of the Borrowers hereunder or under the Note or the ability of any Bank to assign its
Note. Each Bank is hereby irrevocably authorized by the Borrowers so to endorse its Note and to
attach to and make a part of any Note a continuation of any such schedule as and when required.



SECTION 2.05. Maturity of Advances. Each Advance included in any Borrowing shall
mature, and the principal amount thereof shall be due and payable, subject to Section 6.01, on the
Termination Date.




SECTION 2.06. Interest Rates.




(a) “Applicable Margin” shall be determined quarterly based upon the Total Leverage
Ratio (calculated as of the last day of each Fiscal Quarter), as follows:



	 	 	 	 	 	 	 	 	 
	 	 	Euro-Dollar Advances	 	Base
	Total Leverage Ratio	 	and Letters of Credit	 	Rate Advances
	Greater than 1.25

	 	 	2.75	%	 	 	0	 
	 
	 	 	 	 	 	 	 	 
	Greater than 1.00

but less than or equal to 1.25

	 	

2.50%
	 	

0

	 
	 	 	 	 	 	 	 	 
	Greater than .75

but less than or equal to 1.00

	 	

2.25%
	 	

0

	 
	 	 	 	 	 	 	 	 
	Greater than .50

but less than or equal to .75

	 	

2.00%
	 	

0

	 
	 	 	 	 	 	 	 	 
	Less than or equal to .50

	 	 	1.75	%	 	 	0	 







The Applicable Margin shall be effective as of the date (herein, the “Rate Determination
Date”) which is the first day of the first calendar month after the day the Administrative Agent
receives the quarterly financial statements for the Fiscal Quarter which the foregoing ratio is
being determined and the Applicable Margin so determined shall remain effective from such Rate
Determination Date until the date which is the first day of the first calendar month after the day
the Administrative Agent receives the quarterly financial statements for the Fiscal Quarter in
which such Rate Determination Date falls (which latter date shall be a new Rate Determination
Date); provided that (i) for the period from and including the Closing Date to but
excluding the Initial Rate Adjustment Date, the Applicable Margin shall be 2.25% for Euro-Dollar
Advances and Letters of Credit and 0% for a Base Rate Advance, (ii) in the case of any Applicable
Margin determined for the fourth and final Fiscal Quarter of a Fiscal Year, such Applicable Margin
shall be redetermined based upon the annual audited financial statements for the Fiscal Year ending
on the last day of such final Fiscal Quarter, and if such Applicable Margin as so redetermined
shall be different from the Applicable Margin for such date determined on the Rate Determination
Date for such fourth Fiscal Quarter, such redetermined Applicable Margin shall be effective
retroactive to the Rate Determination Date, and the Borrowers, the Administrative Agent and the
Banks, as applicable, shall within 10 days of such redetermination, make a payment (in the case of
amounts owing by the Borrowers to the Banks) or provide a credit applicable to future amounts
payable by the Borrowers hereunder (in the case of amounts owing by the Banks to the Borrowers)
equal to the difference between the interest and letter of credit fees actually paid under this
Agreement and the interest and letter of credit fees that would have been paid under this Agreement
had the Applicable Margin as originally determined been equal to the Applicable Margin as
redetermined, and (iii) if on any Rate Determination Date the Borrowers shall have failed to
deliver to the Administrative Agent for delivery to the Banks the financial statements required to
be delivered pursuant to Section 5.01(a) or Section 5.01(b) with respect to the Fiscal Year or
Fiscal Quarter, as the case may be, most recently ended prior to such Rate Determination Date, then
for the period beginning on such Rate Determination Date and ending on the earlier of (A) the date
on which the Borrowers shall deliver to the Administrative Agent for delivery to the Banks the
financial statements to be delivered pursuant to Section 5.01(b) with respect to such Fiscal
Quarter or any subsequent Fiscal Quarter, or (B) the date on which the Borrowers shall deliver to
the Administrative Agent for delivery to the Banks annual financial statements required to be
delivered pursuant to Section 5.01(a) with respect to the Fiscal Year which includes such Fiscal
Quarter or any subsequent Fiscal Year, the Advances shall bear interest at a rate per annum
determined as if the Total Leverage Ratio was more than 1.25 at all times during such period;
provided that at the election of the Required Banks, the principal amount of the Advances shall
bear interest at the Default Rate. Any change in the Applicable Margin on any Rate Determination
Date shall result in a corresponding change, effective on and as of such Rate Determination Date,
in the interest rate applicable to the Advances and in the fees applicable to each Letter of Credit
outstanding on such Rate Determination Date; provided, that no Applicable Margin shall be decreased
pursuant to this Section 2.06 if a Default is in existence on the Rate Determination Date.




(b) During each Interest Period in which an Advance is a Base Rate Advance, such Base
Rate Advance shall bear interest on the outstanding principal amount thereof, for each day
during the applicable Interest Period, at a rate per annum equal to the Base Rate for such
day plus the Applicable Margin for Base Rate Advances. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on any Base Rate Advance shall bear
interest, payable on demand, for each day until paid in full at a rate per annum equal to
the Default Rate.




(c) During each Interest Period in which an Advance is a Euro-Dollar Advance, such
Euro-Dollar Advance shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of: (1) the
Applicable Margin for Euro-Dollar Advances, plus (2) the applicable Adjusted Monthly Libor
Index for such Interest Period. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Euro-Dollar Advance shall bear interest, payable on
demand, for each day until paid in full at a rate per annum equal to the Default Rate.



The “Adjusted Monthly Libor Index” applicable to any Interest Period means a rate per annum
equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by
dividing (i) the applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.



The “London Interbank Offered Rate” applicable to any Euro-Dollar Advance means for the
Interest Period of such Euro-Dollar Advance the rate per annum determined on the basis of the rate
for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar
Advance offered for a term comparable to such Interest Period, which rate appears on the display
designated as Page “3750” of the Telerate Service (or such other page as may replace page 3750 of
that service or such other service or services as may be nominated by the British Banker’s
Association for the purpose of displaying London Interbank Offered Rates for U.S. dollar deposits)
determined as of 11:00 a.m. London, England time, on the first day of such Interest Period or on
the immediately preceding Euro-Dollar Business Day if the first day of such Interest Period is not
a Euro-Dollar Business Day.



“Euro-Dollar Reserve Percentage” means for any day that percentage (expressed as a decimal)
which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement for a member bank of the
Federal Reserve System in respect of “Eurocurrency liabilities” (or in respect of any other
category of liabilities which includes deposits by reference to which the interest rate on such
Euro-Dollar Advance is determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Bank to United States residents). The Adjusted
Monthly Libor Index shall be adjusted automatically on and as of the effective date of any change
in the Euro-Dollar Reserve Percentage.




(d) The Advances shall at all times be Euro-Dollar Advances unless the Advances are to
be a Base Rate Advance pursuant to Article VIII herein. Interest shall be payable for each
Interest Period on the Interest Payment Date applicable to such Interest Period; provided
that: (1) all accrued unpaid interest on the Advances shall be paid in full on the
Termination Date; and (2) should the Commitment be terminated at any time prior to the
Termination Date for any reason, any and all accrued unpaid interest shall be paid on the
date of such termination.




(e) Each Letter of Credit Advance shall bear interest on the outstanding principal
amount thereof, payable on demand, for each day from the date such Letter of Credit Advance
is made until paid in full at a rate per annum equal to the Default Rate.




(f) The Administrative Agent shall determine each interest rate applicable to the
Advances hereunder. The Administrative Agent shall give prompt notice to the Borrowers and
the Banks by telecopy of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.




(g) After the occurrence and during the continuance of a Default, the principal amount
of the Advances (and, to the extent permitted by applicable law, all accrued interest
thereon) may, at the election of the Required Banks, bear interest at the Default Rate;
provided, however, that automatically whether or not the Required Banks elect to do so, any
overdue principal of and, to the extent permitted by law, overdue interest on the Advances
shall bear interest payable on demand, for each day until paid at a rate per annum equal to
the Default Rate.




SECTION 2.07. Fees.




(a) The Borrowers shall pay to the Administrative Agent for the ratable account of each
Bank an unused commitment fee equal to the product of: (i) the aggregate of the daily
average amounts of such Bank’s Unused Commitment, times (ii) a per annum percentage equal to
        .250%. Such unused commitment fee shall accrue from and including the Closing Date to and
including the Termination Date. Unused commitment fees shall be payable quarterly in
arrears on each Quarterly Payment Date and on the Termination Date; provided that should the
Commitments be terminated at any time prior to the Termination Date for any reason, the
entire accrued and unpaid fee shall be paid on the date of such termination.




(b) The Borrowers shall pay to the Administrative Agent for the ratable account of each
Bank, with respect to each Letter of Credit, a per annum letter of credit fee (the “Letter
of Credit Fee”) equal to the product of: (i) the aggregate average daily Undrawn Amounts,
times (ii) a per annum percentage equal to the Applicable Margin for Letters of Credit
(determined in accordance with Section 2.06(a) hereof). Such Letter of Credit Fees shall be
payable in arrears for each Letter of Credit on each Quarterly Payment Date during the term
of each respective Letter of Credit and on the termination thereof (whether at its stated
expiry date or earlier).




(c) The Borrowers shall pay to the Administrative Agent for the account of the Issuing
Bank a facing fee (the “ Facing Fee”) with respect to each Letter of Credit equal to the
product of: (i) the face amount of such Letter of Credit, times (ii) one-eighth (1/8th) of
one percent (0.125%). Such Facing Fee shall be due and payable on such date as may be
agreed upon by the Issuing Bank and the Borrowers. The Borrowers shall pay to the Issuing
Bank, for its own account, transfer fees, drawing fees, modification fees, extension fees
and such other fees and charges as may be provided for in any Letter of Credit Agreement or
otherwise charged by the Issuing Bank. No Bank shall be entitled to any portion of the
Facing Fees or any other fees payable by the Borrowers to the Issuing Bank pursuant to this
Section 2.07(c).




(d) The Borrowers shall pay to the Administrative Agent, for the account and sole
benefit of the Administrative Agent, such fees and other amounts at such times as set forth
in the Administrative Agent’s Letter Agreement.



SECTION 2.08. Optional Termination or Reduction of Commitments. The Borrowers may,
upon at least 3 Domestic Business Days’ irrevocable notice to the Administrative Agent, terminate
at any time, or proportionately reduce from time to time by an aggregate amount of at least
$1,000,000 or any larger multiple of $1,000,000, the Commitments; provided, however: (1) each
termination or reduction, as the case may be, shall be permanent and irrevocable; (2) no such
termination or reduction shall be in an amount greater than the Total Unused Commitments on the
date of such termination or reduction; and (3) no such reduction pursuant to this Section 2.08
shall result in the aggregate Commitments of all of the Banks to be reduced to an amount less than
$50,000,000, unless the Commitments are terminated in their entirety, in which case all accrued
fees (as provided under Section 2.07) shall be payable on the effective date of such termination.



SECTION 2.09. Mandatory Reduction and Termination of Commitments. The Commitments
shall terminate on the Termination Date and any Advances and if demand had not been earlier made
Letter of Credit Advances then outstanding (together with accrued interest thereon) shall be due
and payable on such date.




SECTION 2.10. Optional Prepayments.




(a) The Borrowers may prepay the Advances in whole at any time, or from time to time in
part in amounts aggregating at least $1,000,000.00, or any larger multiple of $100,000 (or
lesser amount if such amount constitutes the entire outstanding Advances), by paying the
principal amount to be prepaid together with accrued interest thereon to the date of
prepayment and any payments due under Section 8.05. Other than any payment due under
Section 8.05, prepayments shall not be subject to any penalty or premium. Each such
optional prepayment shall be applied to prepay ratably the Advances of the several Banks.




(b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative
Agent shall promptly notify each Bank of the contents thereof and of such Bank’s ratable
share of such prepayment and such notice shall not thereafter be revocable by the Borrowers.




SECTION 2.11. Mandatory Prepayments.




(a) On each date on which the Commitments are reduced or terminated pursuant to Section
2.08 or Section 2.09, the Borrowers shall repay or prepay such principal amount of the
outstanding Advances, if any (together with interest accrued thereon and any amounts due
under Section 8.05(a)), as may be necessary so that after such payment the aggregate unpaid
principal amount of the Advances, together with the aggregate principal amount of all Letter
of Credit Advances and Undrawn Amounts does not exceed the aggregate amount of the
Commitments as then reduced. Each such payment or prepayment shall be applied ratably to
the Advances of the several Banks.




(b) In the event that: (1) the aggregate principal amount of all Advances, together
with the aggregate principal amount of Letter of Credit Advances and Undrawn Amounts at any
one time outstanding shall at any time exceed the Borrowing Base; or (2) the aggregate
principal amount of all Advances, together with the aggregate principal amount of the Letter
of Credit Advances and Undrawn Amounts at any one time outstanding shall at any time exceed
the aggregate amount of the Commitments of all of the Banks at such time, the Borrowers
shall immediately repay so much of the Advances as is necessary in order that: (1) the
aggregate principal amount of the Advances thereafter outstanding, together with the
aggregate principal amount of the Letter of Credit Advances and Undrawn Amounts shall not
exceed the Borrowing Base; and (2) the aggregate principal amount of the Advances thereafter
outstanding, together with the aggregate principal amount of the Letter of Credit Advances
and Undrawn Amounts shall not exceed the aggregate amount of the Commitments of all of the
Banks at such time.




SECTION 2.12. General Provisions as to Payments.




(a) The Borrowers shall make each payment of principal of, and interest on, the
Advances and of fees hereunder, not later than 11:00 A.M. (Winston-Salem, North Carolina
time) on the date when due, in Federal or other funds immediately available in
Winston-Salem, North Carolina, to the Administrative Agent at its address referred to in
Section 9.01. Subject to the terms of Section 2.02(d), the Administrative Agent will
promptly distribute to each Bank its ratable share of each such payment received by the
Administrative Agent for the account of the Banks; provided that payments of interest shall
be distributed by the Administrative Agent within three Domestic Business Days of the date
such payment is received by the Administrative Agent for the account of the Banks.




(b) Whenever any payment of principal of, or interest on, the Advances or of fees shall
be due on a day which is not a Domestic Business Day (including, without limitation, any
payments pursuant to Sections 2.02(c) and 2.02(d)), the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall be payable
for such extended time.




(c) All payments of principal, interest and fees and all other amounts to be made by
the Borrowers pursuant to this Agreement with respect to any Advance or fee relating thereto
shall be paid without deduction for, and free from, any tax, imposts, levies, duties,
deductions, or withholdings of any nature now or at anytime hereafter imposed by any
governmental authority or by any taxing authority thereof or therein excluding in the case
of each Bank, taxes imposed on or measured by its net income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Bank is organized or any political
subdivision thereof and, in the case of each Bank, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such Bank’s applicable Lending Office
or any political subdivision thereof (all such non-excluded taxes, imposts, levies, duties,
deductions or withholdings of any nature being “Taxes”). In the event that either Borrower
is required by applicable law to make any such withholding or deduction of Taxes with
respect to any Advance or fee or other amount, such Borrower shall pay such deduction or
withholding to the applicable taxing authority, shall promptly furnish to any Bank in
respect of which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to such Bank additional amounts as may be necessary in
order that the amount received by such Bank after the required withholding or other payment
shall equal the amount such Bank would have received had no such withholding or other
payment been made. If no withholding or deduction of Taxes are payable in respect of any
Advance or fee relating thereto, the Borrowers shall furnish any Bank, at such Bank’s
request, a certificate from each applicable taxing authority or an opinion of counsel
acceptable to such Bank, in either case stating that such payments are exempt from or not
subject to withholding or deduction of Taxes. If the Borrowers fail to provide such
original or certified copy of a receipt evidencing payment of Taxes or certificate(s) or
opinion of counsel of exemption, the Borrowers hereby agree to compensate such Bank for, and
indemnify them with respect to, the tax consequences of the Borrowers’ failure to provide
evidence of tax payments or tax exemption.



In the event any Bank receives a refund of any Taxes paid by the Borrowers pursuant to this
Section 2.12, it will pay to the paying Borrower the amount of such refund promptly upon receipt
thereof; provided, however, if at any time thereafter it is required to return such
refund, the Borrowers shall promptly repay to it the amount of such refund.



Without prejudice to the survival of any other agreement of the Borrowers hereunder, the
agreements and obligations of the Borrowers contained in this Section 2.12 shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations required by such
provisions (i) shall be made based upon the circumstances of such Participant, Assignee or other
Transferee, and (ii) constitute a continuing agreement and shall survive the termination of this
Agreement and the payment in full or cancellation of the Notes.



SECTION 2.13. Computation of Interest and Fees. Interest on the Advances shall be
computed on the basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day). Facility fees, unused commitment fees and
any other fees payable hereunder shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the last day).




SECTION 2.14. Eligibility of Properties and Mortgage Receivables.




(a) Initial Eligible Properties and Initial Eligible Mortgage Receivables. As
of the date hereof, the Administrative Agent and Banks have approved for inclusion in
calculations of the Borrowing Base, the Mortgaged Properties and the Pledged Mortgage
Receivables identified on Schedule 2.14, as well as the Borrowing Base Value attributable to
each such Mortgaged Property and Pledged Mortgage Receivable as set forth on Schedule 2.14.




(b) Additional Eligible Properties and Additional Eligible Mortgage
Receivables. If after the Closing Date the Borrowers desire that any additional
Mortgaged Property or Pledged Mortgage Receivable be included in calculations of the
Borrowing Base, the Borrowers shall so notify the Administrative Agent and the Banks in
writing. No Mortgaged Property or Pledged Mortgage Receivable will be included in
calculations of the Borrowing Base unless and until the Borrowers deliver to the
Administrative Agent for delivery to each Bank all of the following, in form and substance
satisfactory to the Administrative Agent and Required Banks, and unless such Mortgaged
Property or Pledged Mortgage Receivable has otherwise satisfied the terms of this Agreement
and the other Loan Documents:




(i) A Mortgaged Property Diligence Package or Pledged Mortgage Receivable
Diligence Package, as the case may be, with respect to the Property or Mortgage
Receivable that the Borrowers propose to include in the Borrowing Base;




(ii) A certificate, substantially in the form of Exhibit D of the Chief
Financial Officer of the Company certifying: (1) the Property or Mortgage
Receivable that the Borrowers propose to include in calculations of the Borrowing
Base satisfies all of the requirements contained in the definition of “Eligible
Property” or “Eligible Mortgage Receivable”, as the case may be, and (2) whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action the Loan Parties are taking or
propose to take with respect thereto; and




(iii) Such other information as the Administrative Agent or any Bank may
reasonably request in order to evaluate the Mortgaged Property or Pledged Mortgage
Receivable.



If, after receipt and review of all of the foregoing documents and information, the
Administrative Agent or any Bank rejects such Property or Mortgage Receivable as a Borrowing Base
Asset, the Administrative Agent or any such Bank, as the case may be, will so notify the Borrowers,
the Administrative Agent and each Bank within 5 Domestic Business Days after receipt of all of such
documents and information. If the Administrative Agent and Banks do not give such notice within
such time period, such Property or Mortgage Receivable shall be included as a Borrowing Base Asset;
provided, however, no presumption shall exist that a Property or Mortgage Property once included
within the Borrowing Base or classified as an “Eligible Property” or “Eligible Mortgage
Receivable”, as the case may be, shall continue to be so included or classified. In order that a
Property or Mortgage Receivable be considered a Borrowing Base Asset and included within the
calculation of the Borrowing Base, such Property or Mortgage Receivable must at all times satisfy
the requirements contained in the definition of “Eligible Property” or “Eligible Mortgage
Receivable”, as the case may be. The Administrative Agent and the Required Banks shall determine
whether to consider such Property or Mortgage Receivable as a Borrowing Base Asset in their
reasonable discretion.




(c) Nonconforming Properties. If the Administrative Agent or any Bank advises
the Borrowers that any Mortgaged Property or Pledged Mortgage Receivable shall not be
considered a Borrowing Base Asset, or if the Administrative Agent or any Bank advises the
Borrowers that a Mortgaged Property or Pledged Mortgage Receivable which the Borrowers want
to have included in calculations of the Borrowing Base does not satisfy the requirements of
an Eligible Property or Eligible Mortgage Receivable, as the case may be, then the
Administrative Agent, upon written request of the Borrowers shall request that the Banks
reconsider whether such Mortgaged Property or Pledged Mortgage Receivable shall be included
as a Borrowing Base Asset. In connection therewith, the Borrowers shall deliver the
information required by the immediately preceding subsection (b) (together with such updated
or supplemental information as the Borrowers may elect) to the Administrative Agent who
shall promptly deliver such information to each of the Banks. Within 10 Domestic Business
Days after the date on which the Administrative Agent has delivered such request to the
Banks and all of the items referred to in the immediately preceding subsection (b), each
Bank shall notify the Administrative Agent in writing whether or not such Bank approves such
Property or Mortgage Receivable as a Borrowing Base Asset. If a Bank fails to give such
notice within such time period, such Bank shall be deemed to have approved such Property or
Mortgage Receivable as a Borrowing Base Asset. A Property shall become a Borrowing Base
Asset under this subsection 2.14(c) only upon the approval of the Required Banks.




(d) Documents with Respect to Guarantor and Property. Upon the approval of a
Property or Mortgage Receivable as a Borrowing Base Asset, the Borrowers shall deliver to
the Administrative Agent, to the extent not previously delivered to the Administrative
Agent, the items that would have been delivered with respect to such Property or Mortgage
Receivable and such Guarantor under Sections 5.25 and 3.01(c), (e), (g), (h) and (l) as if
such Guarantor had been a Guarantor and such Property or Mortgage Receivable had been a
Borrowing Base Asset on the Closing Date. Until such time as the Administrative Agent shall
have received the items referred to in the foregoing sentence with respect to any Guarantor
or Property or Mortgage Receivable, the Borrowing Base Value of any such Borrowing Base
Asset shall be $0.




(e) If at any time from or after the inclusion of a Borrowing Base Asset in the
Borrowing Base, any event or occurrence, including the passage of time, causes any such
Borrowing Base Asset to fail to meet the requirements of the definition of Eligible Property
or Mortgaged Property, in the case of any Mortgaged Property, or Eligible Mortgage
Receivable or Pledged Mortgage Receivable, in the case of any Pledged Mortgage Receivable
(including without limitation by reason of any representation or warranty contained in any
Collateral Document with respect to any Borrowing Base Asset failing to continue to be true
and correct), then the Borrowing Base Value of such Borrowing Base Asset shall immediately
be deemed $0 and the Borrowing Base shall be recalculated accordingly. Borrowers shall
promptly notify the Administrative Agent of any such event or occurrence and, to the extent
so required, make any prepayment pursuant to Section 2.11(b).



The Loan Parties shall, jointly and severally, pay all expenses of the Administrative Agent,
including fees and disbursements of special counsel for the Administrative Agent in connection with
any actions taken, documents prepared or filings made in connection with this Section 2.14.



SECTION 2.15. Release of Properties. From time to time the Borrowers may request,
upon not less than five (5) Domestic Business Days prior written notice to the Administrative
Agent, that a Mortgaged Property or a Pledged Mortgage Receivable be no longer considered a
Borrowing Base Asset and that the Administrative Agent’s security interest therein pursuant to the
applicable Mortgage or Mortgage Receivables Pledge Agreement and the Document Agreement be
released, which release (the “Property Release”) shall be effected by the Administrative Agent in
accordance with the terms of the Document Agreement if the Administrative Agent determines all of
the following conditions are satisfied as of the date of such Property Release:




(a) No Default or Event of Default exists or will exist immediately after giving effect
to such Property Release and the reduction in the Borrowing Base by reason of the release of
such Borrowing Base Asset; and




(b) The Borrowers shall have delivered to the Administrative Agent a Borrowing Base
Certificate and Compliance Certificate demonstrating on a pro forma basis, and the
Administrative Agent shall have determined to its satisfaction, that the outstanding
principal balance of the Advances, will not exceed the Borrowing Base after giving effect to
such request and any prepayment to be made and/or the acceptance of any Mortgaged Property
or Pledged Mortgage Receivable as an additional or replacement Borrowing Base Asset to be
given concurrently with such request and that the Loan Parties will be in compliance with
this Agreement after giving effect to the Property Release.



The Loan Parties shall, jointly and severally, pay all expenses of the Administrative Agent,
including fees and disbursements of special counsel for the Administrative Agent in connection with
any actions taken, documents prepared or filings made in connection with this Section 2.15.



SECTION 2.16. Frequency of Calculations of Borrowing Base. Initially, the Borrowing
Base shall be the amount set forth as such in the Borrowing Base Certificate delivered under
Section 3.01. Thereafter, the Borrowing Base shall be the amount set forth as such in the
Borrowing Base Certificate delivered from time to time under this Agreement; provided, however that
no presumption shall exist that a Property or Mortgage Receivable once included within the
Borrowing Base or classified as an “Eligible Property” or “Eligible Mortgage Receivable” shall
continue to be so included or classified.




SECTION 2.17. Joint and Several Liability.




(a) The Borrowers are accepting the joint and several liability provided for hereunder
in consideration of the financial accommodations provided and to be provided by the
Administrative Agent and Banks under this Agreement for the mutual benefit, directly and
indirectly, of the Borrowers and in consideration of each of the undertakings of each
Borrower herein to accept joint and several liability, for their mutual benefit, for the
obligations of each of the other of them.




(b) The Borrowers, jointly and severally as hereinafter described, hereby irrevocably
and unconditionally accept, not merely as surety but also as co-debtors, joint and several
liability with respect to the payment and performance of all of the Obligations (including,
without limitation, all indebtedness, liabilities and obligations under this Agreement, the
Notes and the other Loan Documents), it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of all the Borrowers without
preference or distinction among them.




(c) If and to the extent that any Borrower shall fail to make any payment with respect
to any of the Obligations, as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event each of the other Borrowers will,
forthwith upon demand by the Administrative Agent, make such payment with respect to, or
perform, such Obligations pursuant to the terms hereof.




(d) Each Borrower hereby acknowledges and consents to all provisions of this Agreement.
In connection with its obligations under this Section, except to the extent that notice is
expressly required by this Agreement, each Borrower hereby waives notice of acceptance of
the joint and several liability contained in this Section, notice of any loan or advance to
any Borrower under this Agreement, notice of the occurrence of any Default or any Event of
Default or of any demand upon any Borrower for any payment under this Agreement, notice of
any action at any time taken or omitted by the Administrative Agent or any Bank under or in
respect of this Agreement, the Notes or any other Loan Document and, generally, all demands,
notices, protests and other formalities of every kind in connection with the joint and
several liability contained in this Section and the other provisions of this Agreement. In
connection with its obligations under this Section, each Borrower hereby assents to, and
waives notice of, any extension or postponement of the time for the payment of any of the
indebtedness, liabilities and obligations under this Agreement, the Notes and the other Loan
Documents, the acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by the Administrative Agent or any Bank at any time or times in
respect of any Default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, the Notes or any other Loan Document,
any and all other indulgences whatsoever by the Administrative Agent or any Bank in respect
of any of the Obligations, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Person or Persons primarily or
secondarily liable in respect of any of the Obligations. Each of the Borrowers also waives:
(I) any right to require the Administrative Agent or any Bank to (A) proceed against any
other Person, including any other Borrower or any Guarantor, or (B) pursue any other remedy;
and (II) any defense arising by reason of (A) any disability or other defense of any
Borrower, any Guarantor or any other Person, (B) the cessation from any cause whatsoever,
other than payment or performance in full, of any of the Obligations of the Borrowers, any
Guarantor or any other Person, or (C) any act or omission by the Administrative Agent or any
Bank which directly or indirectly results in or aids the discharge of any Borrower, any
Guarantor or any Obligations by operation of law or otherwise. The obligations of each
Borrower under this Section shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with
respect to any Borrower, any Guarantor, the Administrative Agent or any Bank. The joint and
several liability of each Borrower in this Section shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the
name, charter, membership, constitution or place of formation of any Borrower, any
Guarantor, the Administrative Agent or any Bank. Each of the Borrowers agrees that each of
the waivers set forth above are made with such Borrower’s full knowledge of their
significance and consequences, and such Borrower agrees that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any of said waivers are
determined to be contrary to any applicable law or public policy, such waivers shall be
effective only to the extent permitted by law.




(e) The provisions of this Section 2.17 are made for the benefit of the Administrative
Agent and the Banks and their respective successors and assigns, and may be enforced by the
Administrative Agent from time to time against any of the Borrowers as often as occasion
therefore may arise and without requirement on the part of the Administrative Agent or any
Bank first to marshal any of their claims or to exercise any of their rights against any
other Borrower or to exhaust any remedies available to the Administrative Agent or any Bank
against the other Borrower or to resort to any other source or means of obtaining payment of
any of the indebtedness, liabilities and obligations evidenced by or arising under this
Agreement, the Note and the Loan Documents or to elect any other remedy. The provisions of
this Section 2.17 shall remain in effect until all the indebtedness, liabilities and
obligations evidenced by or arising under this Agreement, the Notes and the Loan Documents
shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or
any part thereof, made in respect of any of the indebtedness, liabilities and obligations
evidenced by or arising under this Agreement, the Notes and the Loan Documents, is rescinded
or must otherwise be restored or returned by the Administrative Agent or any Bank upon the
insolvency, Administrative Agent or any bankruptcy or reorganization of any of the
Borrowers, or otherwise, the provisions of this Section 2.17 will forthwith be reinstated in
effect, as though such payment had not been made.




(f) Notwithstanding any provision to the contrary contained herein, in the Notes or in
any other of the Loan Documents, to the extent the joint obligations of any Borrower shall
be adjudicated to be invalid or unenforceable for any reason (including, without limitation,
because of any applicable state or federal law relating to fraudulent conveyances or
transfers) then the obligations of each Borrower hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state and including,
without limitation, the federal Bankruptcy Code).




(g) Without limiting in anyway the foregoing and notwithstanding anything to the
contrary contained herein or in any Letter of Credit Agreement, the Borrowers hereby
acknowledge and agree that they shall be obligated, jointly and severally, to reimburse the
applicable Issuing Bank upon each Letter of Credit Advance and it shall be deemed to be
obligated in respect of each such Letter of Credit issued hereunder (whether the account
party on such letter of credit is any other Borrower or Guarantor).



ARTICLE III




CONDITIONS TO BORROWINGS




SECTION 3.01. Conditions to Closing and First Borrowing. The obligation of each Bank
to make an Advance on the occasion of the first Borrowing is subject to the satisfaction of the
conditions set forth in Section 3.02 and the following additional conditions:




(a) receipt by the Administrative Agent from each of the parties hereto of a duly
executed counterpart of this Agreement signed by such party;




(b) receipt by the Administrative Agent of a duly executed Note for the account of each
Bank complying with the provisions of Section 2.04;




(c) receipt by the Administrative Agent of an opinion (together with any opinions of
local counsel relied on therein) of Cooley Godward LLP, counsel for the Borrowers and
Guarantors, dated as of the Closing Date (or in the case of an opinion delivered pursuant to
Section 2.14(d) such later date as specified by the Administrative Agent), substantially in
the form of Exhibit P hereto and covering such additional matters relating to the
transactions contemplated hereby as the Administrative Agent or any Bank may reasonably
request;




(d) receipt by the Administrative Agent of a certificate (the “Closing Certificate”),
dated the date of the first Borrowing, substantially in the form of Exhibit K hereto, signed
by a principal financial officer of each Loan Party, to the effect that, to his knowledge,
(i) no Default has occurred and is continuing on the date of the first Borrowing and (ii)
the representations and warranties of the Loan Parties contained in Article IV are true on
and as of the date of the first Borrowing hereunder;




(e) receipt by the Administrative Agent of all documents which the Administrative Agent
or any Bank may reasonably request relating to the existence of each Loan Party, the
authority for and the validity of this Agreement, the Notes and the other Loan Documents,
and any other matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent, including without limitation a certificate of incumbency of each Loan
Party (the “Officer’s Certificate”), signed by the Secretary or an Assistant Secretary of
the respective Loan Party, substantially in the form of Exhibit J hereto, certifying as to
the names, true signatures and incumbency of the officer or officers of the respective Loan
Party, authorized to execute and deliver the Loan Documents, and certified copies of the
following items: (i) the Loan Party’s Organizational Documents (in the case of Guarantors
other than the Initial Guarantors, said Organizational Documents to be in substantially the
form of those of the Initial Guarantors); (ii) the Loan Party’s Operating Documents (in the
case of Guarantors other than the Initial Guarantors, said Operating Documents to be in
substantially the form of those of the Initial Guarantors); (iii) a certificate of the
Secretary of State of such Loan Party’s State of organization as to the good standing of
such Loan Party, and (iv) the Organizational Action taken by the Board of Directors of the
Loan Party authorizing the Loan Party’s execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents to which the Loan Party is a party;




(f) receipt by the Administrative Agent of a Notice of Borrowing;




(g) the Membership Pledge Agreement and the other Collateral Documents applicable to
the Borrowing Base Assets included in the Borrowing Base, each in form and content
satisfactory to the Administrative Agent, shall have been duly executed by the Borrowers and
Guarantors and shall have been delivered to the Administrative Agent and shall be in full
force and effect and each document (including each Uniform Commercial Code financing
statement) required by law or reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the Administrative Agent for the
benefit of the Secured Parties, upon filing, recording or possession by the Administrative
Agent, as the case may be, a valid, legal and perfected first-priority security interest in
and lien on the Collateral described in the Mortgages, Membership Pledge Agreement and
Mortgage Receivables Pledge Agreement shall have been delivered to the Administrative Agent;




(h) the Administrative Agent shall have received the results of a search of the Uniform
Commercial Code filings (or equivalent filings) made with respect to the Borrowers and
Guarantors in the states (or other jurisdictions) in which the Borrowers and Guarantors are
organized, the chief executive office of each such Person is located, any offices of such
persons in which records have been kept relating to Collateral described in the Collateral
Documents and the other jurisdictions in which Uniform Commercial Code filings (or
equivalent filings) are to be made pursuant to the preceding paragraph, together with copies
of the financing statements (or similar documents) disclosed by such search, and accompanied
by evidence satisfactory to the Administrative Agent that the Liens other than Permitted
Liens indicated in any such financing statement (or similar document) have been released or
subordinated to the satisfaction of Administrative Agent;




(i) receipt by the Administrative Agent of a Borrowing Base Certification Report dated
as of the Closing Date on or prior to the date of first Borrowing;




(j) receipt by the Administrative Agent of the evidence of the insurance required under
this Agreement;




(k) The Borrowers shall have paid all fees required to be paid by them on the Closing
Date, including all fees required hereunder and under the Administrative Agent’s Letter
Agreement to be paid as of such date, and shall have reimbursed the Administrative Agent for
all fees, costs and expenses of closing the transactions contemplated hereunder and under
the other Loan Documents, including the reasonable legal, audit and other document
preparation costs incurred by the Administrative Agent.




(l) such other documents or items as the Administrative Agent, the Banks or their
counsel may reasonably request.



SECTION 3.02. Conditions to All Borrowings. The obligation of each Bank to make an
Advance on the occasion of each Borrowing is subject to the satisfaction of the following
conditions:




(a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section
2.02 and a Borrowing Base Certification Report;




(b) the fact that, immediately before and after such Borrowing, no Default shall have
occurred and be continuing;




(c) the fact that the representations and warranties of the Loan Parties contained in
Article IV of this Agreement shall be true, on and as of the date of such Borrowing; and




(d) the fact that, immediately after such Borrowing (i) the aggregate outstanding
principal amount of the Advances of each Bank together with such Bank’s Pro Rata Share of
the aggregate outstanding principal amount of all Letter of Credit Advances and Undrawn
Amounts will not exceed the amount of its Commitment and (ii) the aggregate outstanding
principal amount of the Advances together with the aggregate outstanding principal amount of
all Letter of Credit Advances and Undrawn Amounts will not exceed the lesser of: (A) the
aggregate amount of the Commitments of all of the Banks as of such date; and (B) the
Borrowing Base.



Each Borrowing hereunder shall be deemed to be a representation and warranty by the Loan
Parties on the date of such Borrowing as to the truth and accuracy of the facts specified in
clauses (b), (c) and (d) of this Section.



SECTION 3.03. Conditions to Issuance of Letters of Credit. The issuance by the
Issuing Bank of each Letter of Credit shall be subject to satisfaction of the conditions set forth
in the related Letter of Credit Agreement and satisfaction of the following conditions:




(a) the fact that, immediately before and after the issuance of such Letter of Credit,
no Default shall have occurred and be continuing;




(b) the fact that the representations and warranties of the Loan Parties contained in
Article IV of this Agreement shall be true, on and as of the date of issuance of such Letter
of Credit;




(c) the fact that, immediately after the issuance of such Letter of Credit the sum of
(A) the entire outstanding principal amount of the Advances, (B) the aggregate outstanding
principal amount of the Letter of Credit Advances, and (C) the aggregate Undrawn Amounts,
will not exceed the lesser of: (1) the aggregate amount of the Commitments of all of the
Banks at such time; and (2) the Borrowing Base;




(d) the fact that immediately after the issuance of such Letter of Credit the sum of:
(i) the aggregate outstanding principal amount of the Letter of Credit Advances, plus (ii)
the aggregate Undrawn Amounts, will not exceed $5,000,000; and




(e) no Letter of Credit shall have an expiry date or termination date on or after the
earlier of: (1) the date twelve months after the date of the issuance of such Letter of
Credit; or (2) the date two Domestic Business Days prior to the Termination Date.




The issuance of each Letter of Credit hereunder shall be deemed to be a representation
and warranty by the Loan Parties on the date such Letter of Credit is issued as to the truth
and accuracy of the facts specified in clauses (a), (b), (c), (d) and (e) of this Section.



ARTICLE IV




REPRESENTATIONS AND WARRANTIES





The Loan Parties represent and warrant that:



SECTION 4.01. Existence and Power. The Company is a corporation, the Operating
Partnership is a limited partnership and each Guarantor is a limited liability company duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, is duly qualified to transact business in every
jurisdiction where, by the nature of its business, such qualification is necessary, and has all
organizational powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.



SECTION 4.02. Organizational and Governmental Authorization; No Contravention. The
execution, delivery and performance by each Loan Party of this Agreement, the Notes, the Collateral
Documents and the other Loan Documents to which such Loan Party is a party (i) are within such Loan
Party’s organizational powers, (ii) have been duly authorized by all necessary organizational
action, (iii) require no action by or in respect of, or filing with, any governmental body, agency
or official, (iv) do not contravene, or constitute a default under, any provision of applicable law
or regulation or of the Organizational Documents and Operating Agreements of such Loan Party or of
any material agreement, judgment, injunction, order, decree or other instrument binding upon such
Loan Party or any of its Subsidiaries, and (v) do not result in the creation or imposition of any
Lien on any asset of such Loan Party or any of its Subsidiaries.



SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding
agreement of the Loan Parties enforceable in accordance with its terms, and the Notes, the
Collateral Documents and the other Loan Documents, when executed and delivered in accordance with
this Agreement, will constitute valid and binding obligations of the Loan Parties party to such
Loan Document enforceable in accordance with their respective terms, provided that the
enforceability hereof and thereof is subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights generally.




SECTION 4.04. Financial Information; SEC Reports.




(a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of December 31, 2003 and the related consolidated statements of income, shareholders’ equity
and cash flows for the Fiscal Year then ended, reported on by PricewaterhouseCoopers, LLP
copies of which have been delivered to the Administrative Agent for delivery to each of the
Banks, and the unaudited consolidated financial statements of the Company and its
Consolidated Subsidiaries for the interim period ended September 30, 2004, copies of which
have been delivered to each of the Banks, fairly present, in conformity with GAAP, the
consolidated financial position of the Company and its Consolidated Subsidiaries as of such
dates and their consolidated results of operations and cash flows for such periods stated.




(b) Since December 31, 2003 there has been no event, act, condition or occurrence
having a Material Adverse Effect.



SECTION 4.05. Litigation. There is no action, suit or proceeding pending, or to the
knowledge of the Loan Parties threatened, against or affecting the Loan Parties or any of their
respective Subsidiaries before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of, or could impair the
ability of the Loan Parties to perform their respective obligations under, this Agreement, the
Notes, the Collateral Documents or any of the other Loan Documents.




SECTION 4.06. Compliance with ERISA.




(a) The Loan Parties and each member of the Controlled Group have fulfilled their
obligations under the minimum funding standards of ERISA and the Code with respect to each
Plan and are in compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title
IV of ERISA.




(b) Neither the Loan Parties nor any member of the Controlled Group is or ever has been
obligated to contribute to any Multiemployer Plan.




(c) The assets of the Borrowers or any Subsidiary do not and will not constitute “plan
assets,” within the meaning of ERISA, the Code and the respective regulations promulgated
thereunder. The execution, delivery and performance of this Agreement, and the borrowing
and repayment of amounts hereunder, do not and will not constitute “prohibited transactions”
under ERISA or the Code.



SECTION 4.07. Taxes. There have been filed on behalf of the Loan Parties and their
respective Subsidiaries all Federal, state and local income, excise, property and other tax returns
which are required to be filed by them (except where the failure to file such returns would not
reasonably be expected to have a Material Adverse Effect or impair any of the Collateral) and all
taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the
Loan Parties or any Subsidiary have been paid. The charges, accruals and reserves on the books of
the Loan Parties and their respective Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Loan Parties, adequate.



SECTION 4.08. Subsidiaries. Each of the Subsidiaries is a limited liability company
(or, in the case of the Operating Partnership, a limited partnership) duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization, is duly qualified
to transact business in every jurisdiction where, by the nature of its business, such qualification
is necessary, and has all organizational powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. Each Subsidiary other
than the Operating Partnership is organized and governed pursuant to Organizational Documents, the
form and contents of which are attached hereto as Exhibit G. No Loan Party has any Subsidiaries
except those Subsidiaries listed on Schedule 4.08 and as set forth in any Compliance
Certificate provided to the Administrative Agent and Banks pursuant to Section 5.01(c) after the
Closing Date, which accurately sets forth each such Subsidiary’s complete name and jurisdiction of
organization.



SECTION 4.09. Not an Investment Company. No Loan Party nor any Subsidiary of a Loan
Party is an “investment company” within the meaning of the Investment Company Act of 1940, as
amended.



SECTION 4.10. Public Utility Holding Company Act. No Loan Party nor any Subsidiary of
a Loan Party is a “holding company”, or a “subsidiary company” of a “holding company”, or an
“affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.



SECTION 4.11. Ownership of Property; Liens. Each of the Loan Parties and their
respective Subsidiaries has title to its properties sufficient for the conduct of its business, and
none of such property is subject to any Lien except as permitted in Section 5.11.



SECTION 4.12. No Default. No Loan Party nor any of their respective Subsidiaries is
in default under or with respect to any agreement, instrument or undertaking to which it is a party
or by which it or any of its property is bound which would reasonably be expected to have or cause
a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.



SECTION 4.13. Full Disclosure. All information heretofore furnished by any Loan Party
to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished by any Loan Party
to the Administrative Agent or any Bank will be, true, accurate and complete in every material
respect or based on reasonable estimates on the date as of which such information is stated or
certified; it being recognized by Administrative Agent and Banks that the projections and forecasts
provided by the Loan Parties in good faith and based upon reasonable assumptions are not to be
viewed as facts and that actual results during the period or periods covered by any such
projections and forecasts may differ from the projected or forecasted results.




SECTION 4.14. Environmental Matters.




(a) No Loan Party nor any Subsidiary of a Loan Party is subject to any Environmental
Liability which would reasonably be expected to have a Material Adverse Effect and no Loan
Party nor any Subsidiary of a Loan Party has been designated as a potentially responsible
party under CERCLA. None of the Properties has been identified on any current or proposed
(i) National Priorities List under 40 C.F.R. § 300, (ii) CERCLIS list or (iii) any list
arising from a state statute similar to CERCLA.




(b) No Hazardous Materials have been or are being used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled
at, or shipped or transported to or from the Properties or are otherwise present at, on, in
or under the Properties, or, to the best of the knowledge of the Loan Parties, at or from
any adjacent site or facility, except for Hazardous Materials, such as cleaning solvents,
pesticides and other materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, and managed or otherwise handled in minimal amounts in the
ordinary course of business in compliance with all applicable Environmental Requirements.




(c) The Loan Parties, and each of their respective Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of the business
contemplated on such Property, and is in compliance in all material respects with all
Environmental Requirements in connection with the operation of the Properties and the Loan
Party’s, and each of their respective Subsidiary’s and Affiliate’s, respective businesses.



SECTION 4.15. Compliance with Laws. Each Loan Party and each Subsidiary of a Loan
Party is in compliance in all material respects with all applicable laws, including, without
limitation, all Environmental Laws and all regulations and requirements of the Securities and
Exchange Commission and the National Association of Securities Dealer, Inc. (including with respect
to timely filing of reports).



SECTION 4.16. Capital Securities. All Capital Securities, debentures, bonds, notes
and all other securities of each Loan Party and their respective Subsidiaries presently issued and
outstanding are validly and properly issued in accordance with all applicable laws, including, but
not limited to, the “Blue Sky” laws of all applicable states and the federal securities laws. The
issued shares of Capital Securities of each of the Loan Party’s respective Subsidiaries are owned
by the Loan Parties free and clear of any Lien or adverse claim.



SECTION 4.17. Margin Stock. No Loan Party nor any of their respective Subsidiaries is
engaged principally, or as one of its important activities, in the business of purchasing or
carrying any Margin Stock, and no part of the proceeds of any Advance will be used to purchase or
carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the
provisions of Regulation X of the Board of Governors of the Federal Reserve System.



SECTION 4.18. Insolvency. After giving effect to the execution and delivery of the
Loan Documents and the making of the Advances under this Agreement, no Loan Party will be
“insolvent,” within the meaning of such term as defined in § 101 of Title 11 of the United States
Code or Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable state law
pertaining to fraudulent transfers, as each may be amended from time to time, or be unable to pay
its debts generally as such debts become due, or have an unreasonably small capital to engage in
any business or transaction, whether current or contemplated.




SECTION 4.19. Security Documents.




(a) Upon execution by the Pledgors, the Membership Pledge Agreement shall be effective
to create in favor of the Administrative Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as defined in
the Membership Pledge Agreement) and, upon filing of a UCC financing statement in Delaware,
Administrative Agent shall have a fully perfected first priority Lien on, and security
interest in, all right, title and interest of the Operating Partnership as Pledgor
thereunder, in such Collateral and the proceeds thereof, in each case prior and superior in
any right to any other Person.




(b) Upon execution by the applicable Loan Parties, the Mortgage Receivables Pledge
Agreement shall be effective to create in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Mortgage Receivables Pledge Agreement) and, upon delivery of
the promissory note evidencing the Mortgage Receivables included in the Collateral (as
defined in the Mortgage Receivables Pledge Agreement), Administrative Agent shall have a
fully perfected first priority Lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral and the proceeds thereof, in each
case prior and superior in any right to any other Person.




(c) The Mortgages are effective to create in favor of the Administrative Agent, for the
ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in
the Trust Property and Secured Property (each as defined in the Mortgages) and, when the
Mortgages and the related financing statements are filed in the Real Estate Recording Office
(as defined in the respective Real Estate Security Documents), the Mortgages shall
constitute fully perfected Liens on, and security interest in, all right, title and interest
of the Borrowers and Guarantors in such Trust Property and Secured Property and the proceeds
thereof, in each case prior and superior in right to any other Person (subject to Permitted
Liens); it being understood that the Mortgages shall be held pursuant to the terms of the
Document Agreement.



SECTION 4.20. Labor Matters. There are no significant strikes, lockouts, slowdowns or
other labor disputes against any Loan Party or any Subsidiary of any Loan Party pending or, to the
knowledge of any Loan Party, threatened. The hours worked by and payment made to employees of the
Loan Parties and each Subsidiary of any Loan Party have been in material compliance with the Fair
Labor Standards Act and any other applicable federal, state or foreign law dealing with such
matters.



SECTION 4.21. Patents, Trademarks, Etc. To their knowledge, the Loan Parties and
their respective Subsidiaries own, or are licensed to use, all patents, trademarks, trade names,
copyrights, technology, know-how and processes, service marks and rights with respect to the
foregoing that are material to the businesses, assets, operations, properties or condition
(financial or otherwise) of the Loan Parties and their respective Subsidiaries taken as a whole.
To their knowledge, the use of such patents, trademarks, trade names, copyrights, technology,
know-how, processes and rights with respect to the foregoing by the Loan Parties and their
respective Subsidiaries, does not infringe on the rights of any Person.



SECTION 4.22. Loans and Investments. No Loan Party nor any of their respective
Subsidiaries has made a loan, advance or Investment which is outstanding or existing on the Closing
Date except as set forth on Schedule 4.22.



SECTION 4.23. Anti-Terrorism Laws. None of the Loan Parties, nor any of their
respective Subsidiaries, is in violation of any laws relating to terrorism or money laundering,
including, without limitation, the Patriot Act, except as may be disclosed in writing to the
Administrative Agent and Banks.



SECTION 4.24. Ownership Structure. As of the Closing Date, Part I of Schedule 4.24 is
a complete and correct list of all Subsidiaries of the Company setting forth for each such
Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding any
Capital Securities in such Subsidiary, (iii) the nature of the Capital Securities held by each such
Person, (iv) the percentage of ownership of such Subsidiary represented by such Capital Securities
and (v) whether such Subsidiary is a Mortgaged Property Owner or a Pledged Mortgage Receivable
Owner. Except as disclosed in such Schedule, as of the Closing Date (i) each of the Company and
its Subsidiaries owns, free and clear of all Liens and has the unencumbered right to vote, all
outstanding Capital Securities in each Person shown to be held by it on such Schedule, (ii) all of
the issued and outstanding Capital Securities of each Person is validly issued, fully paid and
nonassessable and (iii) there are no outstanding subscriptions, options, warrants, commitments,
preemptive rights or agreements of any kind (including, without limitation, any stockholders’ or
voting trust agreements) for the issuance, sale, registration or voting of, or outstanding
securities convertible into, any additional Capital Securities of any type in, any such Person. As
of the Closing Date, the Borrowers have no unconsolidated Affiliates.



SECTION 4.25. REIT Status. The Company qualifies as a REIT and is in compliance with
all requirements and conditions imposed under the Code to allow the Company to maintain its status
as a REIT.



SECTION 4.26. Properties; Mortgage Receivables. As of the Closing Date, Schedule 4.26
is a correct and complete list of all Properties and Mortgage Receivables included in the
calculation of the Borrowing Base. Each of the assets included by the Borrowers in the
calculations of the Borrowing Base satisfies all of the requirements contained in the definitions
of “Eligible Property,” “Mortgaged Properties” and “Eligible Tenant”, in the case of Properties and
“Pledged Mortgage Receivable” and “Eligible Mortgage Receivable” in the case of Mortgage
Receivables. The representations and warranties of the Loan Parties contained in the Collateral
Documents are true and correct.



SECTION 4.27. Tax Shelter Regulations. Borrowers do not intend to treat the Advances
and related transactions as being a “reportable transaction” (within the meaning of Treasury
Regulation Section 1.6011-4). In the event Borrowers determine to take any action inconsistent
with such intention, they will promptly notify Administrative Agent thereof. If Borrowers so
notify Administrative Agent, Borrowers acknowledge that one or more of the Banks may treat its
Advances as part of a transaction that is subject to Treasury Regulation 301.6112-1, and that such
Bank or Banks, as applicable, will maintain the lists and other records required by such Treasury
Regulation.



SECTION 4.28. All Consents Required. All approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority (if any) required in connection
with the due execution, delivery and performance by the Loan Parties of this Agreement and any Loan
Document to which any Loan Party is a party, have been obtained.



SECTION 4.29. Selection Procedures. No procedures believed by the Loan Parties to be
adverse to the interests of the Secured Parties were utilized by the Loan Parties in identifying
and/or selecting the Borrowing Base Assets.



SECTION 4.30. Reports Accurate; Disclosure. All information, exhibits, financial
statements, documents, books, records or reports furnished or to be furnished by the Loan Parties
to the Administrative Agent or any Bank in connection with this Agreement or any Loan Document,
including without limitation all reports furnished pursuant to Section 4.04, are true, complete and
accurate in all material respects; it being recognized by the Administrative Agent and the Banks
that the projections and forecasts provided by Borrowers in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the period or periods
covered by any such projections and forecasts may differ from the projected or forecasted results.
Neither this Agreement, nor any Loan Document, nor any agreement, document, certificate or
statement furnished to the Administrative Agent or the Banks in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made. There is no fact known to any Loan Party which
materially and adversely affects the Company and its Subsidiaries, or in the future is reasonably
likely to have a Material Adverse Effect.



SECTION 4.31. Location of Offices. The Borrowers’ names are Gladstone Commercial
Corporation and Gladstone Commercial Limited Partnership and their respective locations (within the
meaning of Article 9 of the UCC) are Maryland and Delaware. The Initial Guarantors names are (i)
EE, 208 South Rogers Lane, Raleigh, NC LLC, (ii) Little Arch Charlotte NC LLC, (iii) OB Crenshaw PA
Gladstone Commercial LLC, (iv) OB Midway NC Gladstone Commercial LLC and (v) GCC Pocono LLC and
their locations (within the meaning of Article 9 of the UCC) are all Delaware. Neither the
Borrowers nor any Guarantor has changed their respective names, identity, structure, existence or
state of formation, whether by amendment of its Organizational Documents, by reorganization or
otherwise, or has changed their respective locations (within the meaning of Article 9 of the UCC)
within the four (4) months preceding the Closing Date or any subsequent date on which this
representation is made.



SECTION 4.32. Material Contracts. Schedule 4.32 is, as of the Closing Date, a true,
correct and complete listing of all Material Contracts. Each of the Borrowers, their Subsidiaries
and the other Loan Parties that is a party to any Material Contract has performed and is in
compliance with all of the terms of such Material Contract, and no default or event of default, or
event or condition which with the giving of notice, the lapse of time, or both, would constitute
such a default or event of default, exists with respect to any such Material Contract.



SECTION 4.33. Affiliate Transactions. Except as permitted by Section 5.24, neither
the Borrowers nor any Subsidiary nor any other Loan Party is a party to or bound by any agreement
or arrangement (whether oral or written) to which any Affiliate of the Borrowers, any Subsidiary or
any other Loan Party is a party.



SECTION 4.34. Broker’s Fees. No broker’s or finder’s fee, commission or similar
compensation will be payable with respect to the transactions contemplated hereby. No other
similar fees or commissions will be payable by any Loan Party for any other services rendered to
the Borrowers or any of their Subsidiaries ancillary to the transactions contemplated hereby.



SECTION 4.35. Survival of Representations and Warranties, Etc. All statements
contained in any certificate, financial statement or other instrument delivered by or on behalf of
the Borrowers, any Subsidiary or any other Loan Party to the Administrative Agent or any Bank
pursuant to or in connection with this Agreement or any of the other Loan Documents (including, but
not limited to, any such statement made in or in connection with any amendment thereto or any
statement contained in any certificate, financial statement or other instrument delivered by or on
behalf of any Loan Party prior to the Closing Date and delivered to the Administrative Agent or any
Bank in connection with the underwriting or closing of the transactions contemplated hereby) shall
constitute representations and warranties made by the Loan Parties in favor of the Administrative
Agent and each of the Banks under this Agreement. All such representations and warranties shall
survive the effectiveness of this Agreement, the execution and delivery of the Loan Documents and
the making of the Advances.



SECTION 4.36. Acquisition, Credit and Collection Policy. The copy of the Acquisition,
Credit and Collection Policy, attached hereto as Exhibit E, is true, complete and accurate as of
the Closing Date. Since the Closing Date, there have been no changes in the Acquisition, Credit
and Collection Policy other than in accordance with this Agreement. Since December 31, 2003, no
material adverse change has occurred in the overall rate collection of the Mortgage Receivables or
the leases in respect of the Mortgaged Properties, and the Loan Parties have at all times complied
in all material respects with the Acquisition, Credit and Collection Policy with respect to each
Pledged Mortgage Receivable and Mortgaged Property.



SECTION 4.37. No Default or Event of Default. No event has occurred and is continuing
and no condition exists, or would result from any Advance or from the application of the proceeds
therefrom, which constitutes or would reasonably be expected to constitute a Default or Event of
Default.



SECTION 4.38. USA PATRIOT Act. No Loan Party nor any Affiliate of a Loan Party is (1)
a country, territory, organization, person or entity named on an OFAC list, (2) a Person that
resides or has a place of business in a country or territory named on such lists or which is
designated as a Non-Cooperative Jurisdiction by the Financial Action Task Force on Money Laundering
(“FATF”), or whose subscription funds are transferred from or through such a jurisdiction; (3) a
“Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not
have a physical presence in any country and that is not affiliated with a bank that has a physical
presence and an acceptable level of regulation and supervision; or (4) a person or entity that
resides in or is organized under the laws of a jurisdiction designated by the United States
Secretary of the Treasury under Section 311 or 312 of the USA PATRIOT Act as warranting special
measures due to money laundering concerns.



ARTICLE V




COVENANTS




The Loan Parties agree, jointly and severally, that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:



SECTION 5.01. Information. The Company will deliver to the Administrative Agent, who
will then promptly deliver to each of the Banks:




(a) as soon as available and in any event within 90 days after the end of each Fiscal
Year, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of
the end of such Fiscal Year and the related consolidated statements of income, shareholders’
equity and cash flows for such Fiscal Year, setting forth in each case in comparative form
the figures for the previous fiscal year, all certified by PricewaterhouseCoopers LLP or
other independent public accountants of nationally recognized standing, with such
certification to be free of exceptions and qualifications not acceptable to the Required
Banks;




(b) as soon as available and in any event within 45 days after the end of each of the
four Fiscal Quarters of each Fiscal Year, a consolidated balance sheet of the Company and
its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statement
of income and statement of cash flows for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in
comparative form the figures for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments)
as to fairness of presentation, GAAP and consistency by the Chief Financial Officer of the
Company;




(c) simultaneously with the delivery of each set of financial statements referred to in
clauses (a) and (b) above, a certificate, substantially in the form of Exhibit M and with
compliance calculations in form and content satisfactory to the Administrative Agent (a
“Compliance Certificate”), of the Chief Financial Officer of the Company (i) setting forth
in reasonable detail the calculations required to establish whether the Loan Parties was in
compliance with the requirements of Sections 5.03 through 5.11, inclusive, 5.14, 5.28 and
5.29 on the date of such financial statements, (ii) setting forth the identities of the
Property Owners and the Pledged Mortgage Receivable Owners on the date of such financial
statements, and (iii) stating whether any Default exists on the date of such certificate
and, if any Default then exists, setting forth the details thereof and the action which the
Loan Parties are taking or propose to take with respect thereto;




(d) [Intentionally Omitted]




(e) within 5 Domestic Business Days after the Company becomes aware of the occurrence
of any Default, a certificate of the Chief Financial Officer of the Company setting forth
the details thereof and the action which the Company is taking or proposes to take with
respect thereto;




(f) promptly upon the mailing thereof to the shareholders of the Company generally,
copies of all financial statements, reports and proxy statements so mailed;




(g) promptly upon the filing thereof, copies of all registration statements (other than
the exhibits thereto and any registration statements on Form S-8 or its equivalent) and
annual, quarterly, monthly or special (8-K) reports which the Company shall have filed with
the Securities and Exchange Commission provided that, in the case of annual and quarterly
reports on Forms 10-K and 10-Q, respectively, such reports shall be deemed to be delivered
hereunder if posted on the Company’s website;




(h) if and when the Company or any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives notice of complete
or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a
trustee to administer any Plan, a copy of such notice;




(i) promptly after the Company knows of the commencement thereof, notice of any
litigation, dispute or proceeding involving a claim against a Loan Party and/or any
Subsidiary of a Loan Party for $1,000,000 or more in excess of amounts covered in full by
applicable insurance; and




(j) as soon as available and in any event by the tenth Domestic Business Day of each
Fiscal Quarter, an aging of rents (in form and content satisfactory to the Administrative
Agent) with respect to each Borrowing Base Asset, showing the age of such rents, identifying
the Persons who are the tenants for such rents (specifying the amount and age of the rents
owing from each such tenant) and containing such other information and accompanied by such
supporting documents as the Administrative Agent, in its sole discretion may from time to
time reasonably prescribe, dated as of the last day of such period the statements in which,
in each instance, shall be certified as to truth and accuracy by the Chief Financial Officer
or other authorized officer of each Borrower and each Guarantor;




(k) as soon as available and in any event by the tenth Domestic Business Day of each
succeeding month, a Borrowing Base Certification Report in substantially the form of Exhibit
N and with borrowing base calculations in form and content reasonably satisfactory to the
Administrative Agent, dated as of the last day of the immediately preceding month, certified
as to truth and accuracy by the Chief Financial Officer or other authorized officer of each
Borrower and each Guarantor;




(l) from time to time such additional information regarding the financial position or
business of the Company, its Subsidiaries, and each Loan Party as the Administrative Agent,
at the request of any Bank, may reasonably request.



SECTION 5.02. Inspection of Property, Books and Records. The Company will (i) keep,
and will cause each Subsidiary to keep, proper books of record and account in which full, true and
correct entries in conformity with GAAP shall be made of all dealings and transactions in relation
to its business and activities; (ii) permit, and will cause each Subsidiary of the Company and each
Loan Party to permit, with reasonable prior notice which notice shall not be required in the case
of an emergency, the Administrative Agent or its designee, at the expense of the Company and Loan
Parties, to perform periodic field audits and investigations of the Company, the Loan Parties and
the Collateral, from time to time, provided that the field examinations at the Borrowers
headquarters in McLean, Virginia shall be no more frequent than once each Fiscal Quarter unless a
Default shall have occurred and be continuing; and (iii) permit, and will cause each Subsidiary to
permit, representatives of any Bank at such Bank’s expense prior to the occurrence of an Event of
Default and at the Borrowers’ expense after the occurrence of an Event of Default to visit and
inspect any of their respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, but no more frequently
than once each Fiscal Quarter unless a Default shall have occurred and be continuing. The Loan
Parties agree to cooperate and assist in such visits and inspections.



SECTION 5.03. Minimum Debt Service Coverage. At the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending September 30, 2004, the Debt Service Coverage Ratio shall
not be less than 1.50 to 1.00.



SECTION 5.04. Acquisitions. Neither the Borrowers nor any Subsidiary shall make any
Acquisitions.



SECTION 5.05. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net
Worth will at no time be less than $86,000,000 plus 75% of the cumulative Net Proceeds of Capital
Securities/Conversion of Debt received during any period after September 30, 2004, calculated
quarterly.



SECTION 5.06. Restricted Payments. The Borrowers will not declare or make any
Restricted Payment during any Fiscal Year, except that:




(a) the Company may declare or make cash distributions to its shareholders, provided
that from and after the four Fiscal Quarters of the Company ending December 31, 2005, the
aggregate amount of such distributions during any period of four consecutive Fiscal Quarters
shall not exceed the greater of (i) 95% of funds from operations of the Company for such
period or (ii) the amount required to be distributed for the Company to remain in compliance
with Section 5.30;




(b) the Company may make cash distributions to its shareholders of capital gains
resulting from gains from certain asset sales to the extent necessary to avoid payment on
such asset sales imposed under Sections 857(b)(3) and 4981 of the Code; and




(c) Subsidiaries may pay Restricted Payments to the Company, the Borrowers or any other
Loan Party;



Notwithstanding the foregoing, but subject to the following sentence, if a Default or Event of
Default exists, the Company may only declare or make cash distributions to its shareholders during
any Fiscal Year in an aggregate amount not to exceed the minimum amount necessary for the Company
to remain in compliance with Section 5.30. If a Default or Event of Default specified in Section
6.01(g) or Section 6.01(h) shall exist, or if as a result of the occurrence of any other Event of
Default any of the Obligations have been accelerated pursuant to Section 6.01, the Company shall
not, and shall not permit any Subsidiary to, make any Restricted Payments to any Person other than
to a Borrower or any Guarantor.



SECTION 5.07. Total Leverage Ratio. At the end of each Fiscal Quarter, commencing
with the Fiscal Quarter ending September 30, 2004, the Total Leverage Ratio shall not exceed 1.50
to 1.00.



SECTION 5.08. Capital Expenditures. Capital Expenditures (including without
limitation advances to tenants for capital expenditures permitted by Section 5.09(vi)) will not
exceed in the aggregate in any Fiscal Year the sum of $5,000,000; provided that after giving effect
to the incurrence of any Capital Expenditures permitted by this Section, no Default shall have
occurred and be continuing (with the effect that amounts not incurred in any Fiscal Year may not be
carried forward to a subsequent period) and provided, further that purchases of real estate and
extension of mortgage loans by any Loan Party in the ordinary course of business and consistent
with the Acquisition, Credit and Collection Policy shall not be deemed Capital Expenditures for
purposes of this Section 5.08.



SECTION 5.09. Loans or Advances. No Loan Party nor any Subsidiary of a Loan Party
shall make loans or advances to any Person except: (i) (a) non-cash loans or advances to employees
of a Loan Party or an Affiliate of a Loan Party in connection with the exercise by employees of
stock options, and (b) other employee loans or advances that do not exceed Five Hundred Thousand
Dollars ($500,000) in the aggregate at any one time outstanding made in the ordinary course of
business and consistently with practices existing on December 31, 2003; (ii) deposits required by
government agencies or public utilities; (iii) loans to owners of real property in the ordinary
course of the Company’s business and in accordance with its Acquisition, Credit and Collection
Policy and evidenced by a Mortgage Receivable secured by a first or second priority lien upon real
property; provided that the total face amount of such Mortgage Receivables shall not exceed 25% of
the total value of all Mortgage Receivables and all Properties held by the Loan Parties; (iv) loans
or advances to the Borrowers or any Guarantor that is a Consolidated Subsidiary; (v) Loans and
Advances outstanding on the Closing Date and set forth on Schedule 4.22; and (vi) loans or advances
not otherwise permitted under this Section 5.09, which when aggregated with the total Investments
made under Section 5.10(v) do not exceed two million dollars ($2,000,000) in the aggregate
outstanding; provided that after giving effect to the making of any loans, advances or deposits
permitted by clause (i), (ii), (iii), (iv), (v) or (vi) of this Section, no Default shall have
occurred and be continuing.



SECTION 5.10. Investments. No Loan Party nor any Subsidiary of a Loan Party shall
make Investments in any Person except as permitted by Section 5.09 and except Investments in (i)
direct obligations of the United States Government maturing within one year, (ii) certificates of
deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii)
commercial paper rated A-1 or the equivalent thereof by Standard & Poor’s Corporation or P-1 or the
equivalent thereof by Moody’s Investors Service, Inc. and in either case maturing within 12 months
after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on
which is fully supported by a letter of credit issued by a United States bank whose long-term
certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor’s
Corporation and Aa or the equivalent thereof by Moody’s Investors Service, Inc., (v) Investments by
the Borrowers in a Consolidated Subsidiary for the purposing of funding such Subsidiary’s purchase
of real estate or mortgage financing made in the ordinary course of business and consistent with
the Acquisition, Credit and Collection Policy, (vi) Investments existing on the Closing Date and
set forth on Schedule 4.22; (vii) Investments not otherwise permitted under this Section 5.10, made
in the ordinary course of business and consistently with practices existing on December 31, 2003,
which when aggregated with the aggregate outstanding loans and advances made under Section 5.09(vi)
do not exceed $2,000,000 and (viii) Investments in joint ventures in an aggregate amount at any one
time outstanding not to exceed 15% of the consolidated total assets of the Company and its
Subsidiaries determined in accordance with GAAP, provided that the actual or potential liability of
the Company or any Subsidiary with respect to any such investment must in no event exceed the
amount of such Investment.



SECTION 5.11. Negative Pledge. No Loan Party nor any Subsidiary of a Loan Party will
create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except:




(a) Liens existing on the date of this Agreement encumbering assets other than
Collateral securing Debt outstanding on the date of this Agreement, in each case as
described and in the principal amounts set forth on Schedule 5.11;




(b) Liens for taxes, assessments or similar charges, incurred in the ordinary course of
business that are not yet due and payable or that are being contested in good faith and with
due diligence by appropriate proceedings;




(c) pledges or deposits made in the ordinary course of business to secure payment of
workers’ compensation, or to participate in any fund in connection with workers’
compensation, unemployment insurance, old-age pensions or other social security programs;




(d) Liens of mechanics, materialmen, warehousemen, carriers or other like liens,
securing obligations incurred in the ordinary course of business that are not yet due and
payable;




(e) good faith pledges or deposits made in the ordinary course of business to secure
performance of bids, tenders, contracts (other than for the repayment of borrowed money) or
leases, not in excess of twenty percent (20%) of the aggregate amount due thereunder, or to
secure statutory obligations, or surety, appeal, indemnity, performance or other similar
bonds required in the ordinary course of business;




(f) any Lien arising out of the refinancing, extension, renewal or refunding of any
Debt secured by any Lien permitted by any of the foregoing clauses of this Section,
provided that (i) such Debt is not secured by any additional assets, and (ii) the
amount of such Debt secured by any such Lien is not increased;




(g) encumbrances consisting of zoning restrictions, easements or other restrictions on
the use of real property, none of which materially impairs the use of such property by
Borrowers in the operation of its business, and none of which is violated in any material
respect by existing or proposed restrictions on land use;




(h) any Lien on Margin Stock;




(i) Liens upon a property securing Long Term Limited Recourse Mortgage Loans the
proceeds of which were used to acquire or refinance the Debt which funded the acquisition of
such Property; and




(j) Liens securing the Administrative Agent and the Banks created or arising under the
Loan Documents.




Notwithstanding anything contained in this Section 5.11 to the contrary, no Loan Party
or any Subsidiary of a Loan Party will create, assume or suffer to exist any Lien on the
Collateral except Permitted Liens and the Liens in favor of the Secured Parties under the
Collateral Documents.



SECTION 5.12. Maintenance of Existence, etc. Each Loan Party shall, and shall cause
each Subsidiary of a Loan Party to, maintain its organizational existence and carry on its business
in substantially the same manner and in substantially the same fields as such business is now
carried on and maintained. The Operating Partnership shall at all times remain a limited
partnership and meet all requirements to maintain its tax qualification as such. Any Subsidiary
pledging Collateral hereunder shall be organized as a limited liability company pursuant to
Organizational Documents in substantially the form attached hereto as Exhibit G.



SECTION 5.13. Dissolution. No Loan Party nor any Subsidiary of a Loan Party shall
suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any
shares of its own Capital Securities or that of any Subsidiary of a Loan Party, except: (1)
through corporate reorganization to the extent permitted by Section 5.14; and (2) Restricted
Payments permitted by Section 5.06.



SECTION 5.14. Consolidations, Mergers and Sales of Assets. No Loan Party will, nor
will it permit any Subsidiary of a Loan Party to, consolidate or merge with or into, or sell, lease
or otherwise transfer all or any substantial part of its assets to, any other Person, or
discontinue or eliminate any business line or segment, provided that (a) a Loan Party may
merge with another Person if (i) such Person was organized under the laws of the United States of
America or one of its states, (ii) the Loan Party is the Person surviving such merger, (iii)
immediately after giving effect to such merger, no Default shall have occurred and be continuing,
and (iv) if a Borrower merges with another Loan Party, such Borrower is the Person surviving such
merger, (b) Subsidiaries of a Loan Party (excluding Loan Parties) may merge with one another, and
(c) the foregoing limitation on the sale, lease or other transfer of assets and on the
discontinuation or elimination of a business line or segment shall not prohibit a transfer of
assets or the discontinuance or elimination of a business line or segment (in a single transaction
or in a series of related transactions) unless the aggregate value of the assets to be so
transferred or utilized in a business line or segment to be so discontinued, when combined with all
other assets transferred, and all other assets utilized in all other business lines or segments
discontinued after the Closing Date constitute more than $500,000 in the aggregate.



SECTION 5.15. Use of Proceeds. No portion of the proceeds of any Advance will be used
by either Borrower or any Subsidiary (i) in connection with, either directly or indirectly, any
tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining
control of such other corporation, (ii) directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose in
violation of any applicable law or regulation. Except as otherwise provided herein, the proceeds
of the Advances shall be used to fund the acquisition of Eligible Properties or Eligible Mortgage
Receivables included in the Borrowing Base and for general corporate purposes.



SECTION 5.16. Compliance with Laws; Payment of Taxes. Each Loan Party will, and will
cause each Subsidiary of a Loan Party and each member of the Controlled Group to, comply in all
material respects with applicable laws (including but not limited to ERISA and the Patriot Act),
regulations and similar requirements of governmental authorities (including but not limited to
PBGC), except where the necessity of such compliance is being contested in good faith through
appropriate proceedings diligently pursued. Each Loan Party will, and will cause each Subsidiary
of a Loan Party to, pay promptly when due all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a lien against the
property of a Loan Party or any Subsidiary of a Loan Party, except liabilities being contested in
good faith by appropriate proceedings diligently pursued and against which, if requested by the
Administrative Agent, the Borrowers shall have set up reserves in accordance with GAAP. Each Loan
Party will, and will cause each Subsidiary of a Loan Party to, comply in all material respects with
all terms and conditions of all Material Contracts to which it is a party.



SECTION 5.17. Insurance. Each Loan Party will maintain, and will cause each
Subsidiary of a Loan Party to maintain (either in the name of such Loan Party or in such
Subsidiary’s own name), with financially sound and reputable insurance companies, insurance on all
its Property in at least such amounts and against at least such risks as are usually insured
against in the same general area by companies of established repute engaged in the same or similar
business. Upon request, the Loan Parties shall promptly furnish the Administrative Agent copies of
all such insurance policy and such other documents and evidence of insurance as the Administrative
Agent shall request.



SECTION 5.18. Change in Fiscal Year. No Loan Party will change its Fiscal Year
without the consent of the Required Banks.



SECTION 5.19. Maintenance of Property. Each Loan Party shall, and shall cause each
Subsidiary of a Loan Party to, maintain all of its properties and assets in good condition, repair
and working order, ordinary wear and tear excepted.



SECTION 5.20. Environmental Notices. Each Loan Party shall furnish to the Banks and
the Administrative Agent prompt written notice of all Environmental Liabilities, pending,
threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments
and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or
any adjacent property, and all facts, events, or conditions that could lead to any of the
foregoing.



SECTION 5.21. Environmental Matters. No Loan Party or any Subsidiary of a Loan Party
will, nor will any Loan Party permit any Third Party to, use, produce, manufacture, process, treat,
recycle, generate, store, dispose of, manage at, or otherwise handle or ship or transport to or
from the Properties any Hazardous Materials except for Hazardous Materials such as cleaning
solvents, pesticides and other similar materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed, managed or otherwise handled in minimal amounts in the
ordinary course of business in compliance with all applicable Environmental Requirements.



SECTION 5.22. Environmental Release. Each Loan Party agrees that upon the occurrence
of an Environmental Release at or on any of the Properties it will act immediately to investigate
the extent of, and to take appropriate remedial action to eliminate, such Environmental Release,
whether or not ordered or otherwise directed to do so by any Environmental Authority.



SECTION 5.23. Additional Covenants, Etc. In the event that at any time this Agreement
is in effect or any Note remains unpaid any Loan Party shall enter into any agreement, guarantee,
indenture or other instrument governing, relating to, providing for commitments to advance or
guaranteeing any Financing or to amend any terms and conditions applicable to any Financing, which
agreement, guarantee, indenture or other instrument includes covenants, warranties,
representations, defaults or events of default (or any other type of restriction which would have
the practical effect of any of the foregoing, including, without limitation, any “put” or mandatory
prepayment of such debt) or other terms or conditions not substantially as, or in addition to
those, provided in this Agreement or any other Loan Document, or more favorable to the lender or
other counterparty thereunder than those provided in this Agreement or any other Loan Document, the
Loan Party shall promptly so notify the Administrative Agent and the Banks. Thereupon, if the
Administrative Agent shall request by written notice to the Loan Party (after a determination has
been made by the Required Banks that any of the above referenced documents or instruments contain
any provisions which either individually or in the aggregate are more favorable than one of the
provisions set forth herein), the Loan Parties, the Administrative Agent and the Banks shall enter
into an amendment to this Agreement providing for substantially the same such covenants,
warranties, representations, defaults or events of default or other terms or conditions as those
provided for in such agreement, guarantee, indenture or other instrument, to the extent required
and as may be selected by the Administrative Agent, such amendment to remain in effect, unless
otherwise specified in writing by the Administrative Agent, for the entire duration of the term of
such Financing (to and including the date to which the same may be extended at the option of the
Loan Party), provided that if any such agreement, guarantee, indenture or other instrument
shall be subsequently modified, supplemented, amended or restated so as to modify, amend or
eliminate from such agreement, guarantee, indenture or other instrument any such covenant,
warranty, representation, default or event of default or other term or condition so made a part of
this Agreement, then unless otherwise required by the Administrative Agent pursuant to this
Section, the Loan Documents shall be modified so as to conform the provisions previously
incorporated pursuant to this Section 5.23 to such provisions as subsequently modified,
supplemented or amended.



SECTION 5.24. Transactions with Affiliates. No Loan Party nor any Subsidiary of a
Loan Party shall enter into, or be a party to, any transaction with any Affiliate of a Loan Party
or such Subsidiary (which Affiliate is not a Loan Party or a Subsidiary of a Loan Party), except as
permitted by law and in the ordinary course of business and pursuant to reasonable terms which are
no less favorable to the Loan Party or such Subsidiary than would be obtained in a comparable arm’s
length transaction with a Person which is not an Affiliate.




SECTION 5.25. Joinder of Subsequent Guarantors.




(a) The Loan Parties shall cause any Person which becomes a Mortgaged Property Owner or
a Pledged Mortgage Receivable Owner after the Closing Date to become a party to, and agree
to be bound by the terms of (i) this Agreement as a Guarantor pursuant to a Joinder
Agreement, in the form attached hereto as Exhibit Q and (ii) the Collateral Documents, in
each case satisfactory to the Administrative Agent in all respects and executed and
delivered to the Administrative Agent before such Mortgaged Property or Pledged Mortgage
Receivable is included in the calculation of the Borrowing Base. The Borrowers shall also
cause the items specified in Section 3.01(c), (e), (g), (h) and (l) to be delivered to the
Administrative Agent concurrently with the instruments referred to above, modified
appropriately to refer to such instruments and such Mortgaged Property Owner or Pledged
Mortgage Receivable Owner.




(b) The Borrowers shall, and shall cause any Person owning membership interests in a
Mortgaged Property Owner or Pledged Mortgage Receivable Owner (each, a “Pledgor Owner”) to:
(i) to the extent not already a Borrower or Guarantor hereunder, join this Agreement as a
Guarantor by executing a Joinder Agreement in the form attached hereto as Exhibit Q; (ii)
pledge 100% of the membership interests of any Person which becomes a Mortgaged Property
Owner or Pledged Mortgage Receivable Owner after the Closing Date pursuant to a Membership
Pledge Agreement in the form attached hereto as Exhibit R executed and delivered by the
Borrower or such Pledgor Owner to the Administrative Agent within ten (10) Domestic Business
Days after the day on which such Person became a Mortgaged Property Owner or Pledged
Mortgage Receivable Owner; and (iii) deliver to the Administrative Agent such Certificates
evidencing such membership interests together with stock powers executed in blank. The
Borrowers shall also cause the items specified in Section 3.01(c), (e), (g), (h) and (l) to
be delivered to the Administrative Agent concurrently with the Joinder Agreement and
Membership Pledge Agreement referred to above, modified appropriately to refer to such
Membership Pledge Agreement, Pledgor Owner and such Mortgaged Property Owner or Pledged
Mortgage Receivable Owner.




(c) Once any Subsidiary becomes a Mortgaged Property Owner or Pledged Mortgage
Receivable Owner and therefore becomes a party to this Agreement and a Guarantor in
accordance with Section 5.25(a) or any membership interests of a Mortgaged Property Owner or
Pledged Mortgage Receivable Owner are pledged by the Pledgor Owner thereof to the
Administrative Agent in accordance with Section 5.25(b) and such Pledgor Owner becomes a
party to this Agreement and a Guarantor in accordance with Section 5.25(b), such Subsidiary
or Pledgor Owner (including, without limitation, all Initial Guarantors) thereafter shall
remain a party to this Agreement and a Guarantor hereunder and the membership interests in
such Mortgaged Property Owner or Pledged Mortgage Receivable Owner (including, without
limitation, all initial Mortgaged Property Owners and all initial Pledged Mortgage
Receivable Owners) shall remain subject to the pledge to the Administrative Agent, as the
case may be, even if such Mortgaged Property Owner or Pledged Mortgage Receivable Owner
ceases to be a Mortgaged Property Owner or Pledged Mortgage Receivable Owner, as the case
may be; provided that if a Mortgaged Property Owner or Pledged Mortgage Receivable Owner
ceases to be a Subsidiary of the Borrowers as a result of a Borrower’s transfer or sale of
one hundred percent (100%) of the Capital Securities of such Subsidiary in accordance with
and to the extent permitted by the terms of Section 5.14, the Administrative Agent and the
Banks agree to release such Subsidiary from the Guaranty and release the membership
interests of such Subsidiary from the Membership Pledge Agreement.



SECTION 5.26. No Restrictive Agreement. No Loan Party will, nor will any Loan Party
permit any of its Subsidiaries to, enter into, after the date of this Agreement, any indenture,
agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or
has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, any of
the following by the Loan Party or any such Subsidiary: the incurrence or payment of Debt, the
granting of Liens, the declaration or payment of Restricted Payments or other distributions in
respect of Capital Securities of the Loan Party or any Subsidiary, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of property, real, personal or
mixed, tangible.



SECTION 5.27. Partnerships and Joint Ventures. No Loan Party shall become a general
partner in any general or limited partnership or a joint venturer in any joint venture except that
the Company shall remain the indirect general partner in the Operating Partnership.



SECTION 5.28. Additional Debt. No Loan Party or Subsidiary of a Loan Party shall
directly or indirectly issue, assume, create, incur or suffer to exist any Debt or the equivalent
(including obligations under Capital Leases), except for: (a) the Debt owed to the Banks; (b) the
Debt existing and outstanding on the Closing Date described on Schedule 5.28; (c) Debt not
otherwise permitted under this Section 5.28, the aggregate outstanding principal amount of which
shall not, at any time, exceed $5,000,000.00 and (d) Long Term Limited Recourse Mortgage Loans.



SECTION 5.29. Leases. At all times following the date which is ninety (90) days after
the Closing Date, the aggregate monthly rent paid by any one Eligible Tenant with respect to any
one Borrowing Base Asset shall not exceed 25% of the aggregate monthly rents received from all
Borrowing Base Assets. For purposes of this Section 5.29, rents shall be calculated monthly.



SECTION 5.30. REIT Status. The Company shall at all times maintain its status as a
REIT.



SECTION 5.31. Performance of Loan Documents. Each Loan Party will at its own expense:
(1) duly fulfill and comply with all obligations on its part to be fulfilled or complied with
under or in connection with each of the Mortgaged Properties, the Pledged Mortgage Receivables and
all documents related thereto and will do nothing to impair the rights of any Loan Party or the
Administrative Agent, as agent for the Secured Parties, or of the Secured Parties in, to and under
the Collateral; and (2) timely and fully comply in all material respects with the Acquisition,
Credit and Collection Policy with respect to each Mortgaged Property and Pledged Mortgage
Receivable and all documents related thereto. Each Loan Party shall clearly and unambiguously
identify each item of the Collateral in its computer or other records to reflect that the
Administrative Agent, as agent for the Secured Parties has the interest therein granted by the Loan
Parties pursuant to the Loan Documents.



SECTION 5.32. Exchange Listing. The Company shall maintain at least one class of
common shares of the Company having trading privileges on the New York Stock Exchange or the
American Stock Exchange or which is the subject of price quotations in the over-the-counter market
as reported by the National Association of Securities Dealers Automated Quotation System.



SECTION 5.33. Modifications of Organizational Documents. The Borrowers shall not, and
shall not permit any Loan Party or other Subsidiary to, amend, supplement, restate or otherwise
modify its Organizational Documents or Operating Documents or other applicable document if such
amendment, supplement, restatement or other modification could reasonably be expected to have a
Material Adverse Effect.



SECTION 5.34. Modifications to Acquisition, Credit and Collection Policy. The Loan
Parties will (a) comply with the Acquisition, Credit and Collection Policy in regard to each
Mortgaged Property and Pledged Mortgage Receivable, and (b) furnish to the Administrative Agent,
prior to its effective date, prompt notice of any changes in the Acquisition, Credit and Collection
Policy. No Loan Party shall agree to or otherwise permit any change in the Acquisition, Credit and
Collection Policy that would materially and adversely impair the collectibility or value of any
lease in respect of a Mortgaged Property, the collectibility or value of any Pledged Mortgage
Receivable or the value of the Collateral, without the prior written consent of the Administrative
Agent and the Required Banks which consent shall be granted in their sole and absolute discretion.



SECTION 5.35. ERISA Exemptions. The Borrowers shall not permit any of their
respective assets to become or be deemed to be “plan assets” within the meaning of ERISA, the Code
and the respective regulations promulgated thereunder.



ARTICLE VI




DEFAULTS




SECTION 6.01. Events of Default. If one or more of the following events (“Events of
Default”) shall have occurred and be continuing:




(a) any Borrower shall fail to pay when due any principal of any Advance (including,
without limitation, any Advance or portion thereof to be repaid pursuant to Section 2.11) or
shall fail to pay any interest on any Advance within five Domestic Business Days after such
interest shall become due, or any Loan Party shall fail to pay any fee or other amount
payable hereunder within five Domestic Business Days after such fee or other amount becomes
due; or




(b) any Loan Party shall fail to observe or perform any covenant contained in Sections
5.02(ii), 5.03 to 5.15, inclusive, or Section 5.25, 5.28, 5.29 5.30, 5.33, 5.34 or 5.35; or




(c) any Loan Party shall fail to observe or perform any covenant or agreement contained
or incorporated by reference in this Agreement (other than those covered by clause (a) or
(b) above or clauses (n) or (p) below) for thirty days after the earlier of (i) the first
day on which any Loan Party has knowledge of such failure or (ii) written notice thereof has
been given to the Company by the Administrative Agent at the request of any Bank; or




(d) any representation, warranty, certification or statement made or deemed made by the
Loan Parties in Article IV of this Agreement or in any financial statement, material
certificate or other material document or report delivered pursuant to this Agreement shall
prove to have been untrue or misleading in any material respect when made (or deemed made);
or




(e) any Loan Party or any Subsidiary of a Loan Party shall fail to make any payment in
respect of Debt (other than the Notes) having an aggregate principal amount in excess of
$2,500,000 (or in the case of Nonrecourse Debt, $10,000,000) when due or within any
applicable grace period; or




(f) any event or condition shall occur which results in the acceleration of the
maturity of Debt outstanding of any Loan Party or any Subsidiary of a Loan Party in an
aggregate principal amount in excess of $2,500,000 (or in the case of Nonrecourse Debt,
$10,000,000) or the mandatory prepayment or purchase of such Debt by any Loan Party (or its
designee) or such Subsidiary of a Loan Party (or its designee) prior to the scheduled
maturity thereof, or enables (or, with the giving of notice or lapse of time or both, would
enable) the holders of such Debt or commitment to provide such Debt or any Person acting on
such holders’ behalf to accelerate the maturity thereof, terminate any such commitment or
require the mandatory prepayment or purchase thereof prior to the scheduled maturity
thereof, without regard to whether such holders or other Person shall have exercised or
waived their right to do so; or




(g) any Loan Party or any Subsidiary of a Loan Party shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, administrator,
custodian or other similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally, or shall admit in
writing its inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or




(h) an involuntary case or other proceeding shall be commenced against any Loan Party
or any Subsidiary of a Loan Party seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
administrator, custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered against any Loan
Party or any Subsidiary of a Loan Party under the federal bankruptcy laws as now or
hereafter in effect; or




(i) any Loan Party or any member of the Controlled Group shall fail to pay when due any
material amount which it shall have become liable to pay to the PBGC or to a Plan under
Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by any Loan Party, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any
such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or




(j) one or more judgments or orders for the payment of money in an aggregate amount in
excess of $5,000,000 shall be rendered against any Loan Party or any Subsidiary of a Loan
Party and such judgment or order shall continue unsatisfied and unstayed for a period of 30
days or any Loan Party or Subsidiary of a Loan Party shall have made payments in settlement
of any litigation or threatened proceeding in excess of $1,000,000; or




(k) a federal tax lien shall be filed against any Loan Party or any Subsidiary of a
Loan Party under Section 6323 of the Code or a lien of the PBGC shall be filed against any
Loan Party or any Subsidiary of a Loan Party under Section 4068 of ERISA and in either case
such lien shall remain undischarged for a period of 30 days after the date of filing; or




(l) (i) any Person or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding
 shares of the voting stock of the Company; or (ii) as of any date a majority of the Board of
Directors of the Company consists of individuals who were not either (A) directors of the
Company as of the corresponding date of the previous year, (B) selected or nominated to
become directors by the Board of Directors of the Company of which a majority consisted of
individuals described in clause (A), or (C) selected or nominated to become directors by the
Board of Directors of the Company of which a majority consisted of individuals described in
clause (A) and individuals described in clause (B); or




(m) the Administrative Agent, as agent for the Secured Parties, shall fail for any
reason to have a valid first priority security interest in any of the Collateral; or there
shall have occurred uninsured damage to, or loss, theft or destruction of, any part of the
Collateral; or




(n) a default or event of default shall occur and be continuing under any of the
Collateral Documents or Letter of Credit Agreements or any Borrower, Pledgor or Guarantor
shall fail to observe or perform any obligation to be observed or performed by it under any
Collateral Document or Letter of Credit Agreements, and such default, event of default or
failure to perform or observe any obligation continues beyond any applicable cure or grace
period provided in such Collateral Document or Letter of Credit Agreement; or




(o) any two of David Gladstone, Terry Lee Brubaker and George Stelljes, III shall cease
to hold the offices of Chief Executive Officer, Chief Operating Officer and Chief Investment
Officer, respectively, of the Company or Gladstone Management Corporation or Gladstone
Management Corporation shall cease to be the manager and adviser to the Company pursuant to
the Advisory Agreement; or




(p) any of the Guarantors shall fail to pay when due any Guaranteed Obligations (after
giving effect to any applicable grace period) or shall fail to pay any fee or other amount
payable hereunder when due; or (ii) any Guarantor shall disaffirm or deny its obligations
under Article X; or




(q) [Intentionally Omitted.]




(r) if (i) the Operating Partnership at any time fails to own (directly or indirectly,
through Wholly Owned Subsidiaries) 100% of the outstanding shares of the voting stock (in
the case of a corporation ) or membership interests (in the case of a limited liability
company) (or equivalent equity interests) of each Subsidiary of the Operating Partnership or
(ii) the Company, or any Wholly Owned Subsidiary of the Company, shall cease to be the sole
general partner of the Operating Partnership with full power and discretion to manage and
control the business of the Operating Partnership or (iii) any other holder of any interest
(limited partnership or otherwise) in the Operating Partnership shall acquire the right (a)
to remove the general partner for reasons other than bankruptcy or dissolution of the
general partner or (b) to participate in the management or control of, transact business
for, or sign for or bind, the Operating Partnership.




(s) the occurrence of any event, act or condition which the Required Banks determine
either does or has a reasonable probability of causing a Material Adverse Effect.



then, and in every such event, the Administrative Agent shall (i) if requested by the Required
Banks, by notice to the Borrowers terminate the Commitments and they shall thereupon terminate,
(ii) if requested by the Required Banks, by notice to the Issuing Bank, instruct the Issuing Bank
to declare an Event of Default under the Letter of Credit Agreements; and (iii) if requested by the
Required Banks, by notice to the Borrowers declare the Notes (together with accrued interest
thereon) and all other amounts payable hereunder and under the other Loan Documents to be, and the
Notes (together with all accrued interest thereon) and all other amounts payable hereunder and
under the other Loan Documents shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Loan Parties; provided that if any Event of Default specified in clause (g) or (h) above
occurs with respect to any Loan Party, without any notice to any Loan Party or any other act by the
Administrative Agent or the Banks, the Commitments shall thereupon automatically terminate and the
Notes (together with accrued interest thereon) and all other amounts payable hereunder and under
the other Loan Documents shall automatically become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Loan Parties. Notwithstanding the foregoing, the Administrative Agent shall have available to it
all rights and remedies provided under the Loan Documents (including, without limitation, the
rights of a secured party pursuant to the Collateral Documents) and in addition thereto, all other
rights and remedies at law or equity, and the Administrative Agent shall exercise any one or all of
them at the request of the Required Banks.



SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the
Borrowers of any Default under Section 6.01(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.



SECTION 6.03. Cash Cover. If any Event of Default shall have occurred and be
continuing, the Borrowers shall, if requested by the Administrative Agent, pay to the
Administrative Agent, for the benefit of the Banks an amount in immediately available funds (which
funds shall be held as collateral pursuant to arrangements satisfactory to the Administrative
Agent) equal to the aggregate Undrawn Amounts, provided that, if any Event of Default specified in
clause (g) or (h) above occurs, the Borrowers shall be obligated to pay such amount to the
Administrative Agent forthwith without any notice to the Borrowers or any other act by the
Administrative Agent.



SECTION 6.04. Allocation of Proceeds. If an Event of Default has occurred and not
been waived, and the maturity of the Notes has been accelerated pursuant to Article VI hereof, all
payments received by the Administrative Agent hereunder, in respect of any principal of or interest
on the Obligations or any other amounts payable by the Borrowers or any other Loan Party hereunder,
shall be applied by the Administrative Agent in the following order:




(a) the reasonable expenses incurred in connection with retaking, holding, preserving,
processing, maintaining or preparing for sale, lease or other disposition of, any
Collateral, including reasonable attorney’s fees and legal expenses pertaining thereto;




(b) amounts due to the Banks, Issuing Bank and Administrative Agent pursuant to
Sections 2.7(a), 2.7(b), 2.7(c), 2.7(d) and 9.03(a);




(c) payments of interest on Advances and Letter of Credit Advances, to be applied for
the ratable benefit of the Banks;




(d) payments of principal of Advances and Letter of Credit Advances, to be applied for
the ratable benefit of the Banks;




(e) payments of cash amounts to the Administrative Agent in respect of outstanding
Letters of Credit pursuant to Section 6.03;




(f) amounts due to the Administrative Agent, Issuing Bank and the Banks pursuant to
Sections 7.05 and 9.03(b) and (c);




(g) payments of all other amounts due under any of the Loan Documents, if any, to be
applied for the ratable benefit of the Secured Parties;




(h) any surplus remaining after application as provided for herein, to the Borrowers or
otherwise as may be required by applicable law.



ARTICLE VII




THE ADMINISTRATIVE AGENT




SECTION 7.01. Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other
Loan Documents with such powers as are specifically delegated to the Administrative Agent by the
terms hereof and thereof, together with such other powers as are reasonably incidental thereto.
The Administrative Agent: (a) shall have no duties or responsibilities except as expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or
any other Loan Document be a trustee for any Bank; (b) shall not be responsible to the Banks for
any recitals, statements, representations or warranties contained in this Agreement or any other
Loan Document, or in any certificate or other document referred to or provided for in, or received
by any Bank under, this Agreement or any other Loan Document, or for the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any
other document referred to or provided for herein or therein or for any failure by any Loan Party
to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other Loan Document except
to the extent requested by the Required Banks, and then only on terms and conditions satisfactory
to the Administrative Agent, and (d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or any other document or instrument referred
to or provided for herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are
solely for the benefit of the Administrative Agent and the Banks, and no Loan Party shall have any
rights as a third party beneficiary of any of the provisions hereof. In performing its functions
and duties under this Agreement and under the other Loan Documents, the Administrative Agent shall
act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the Loan Parties. The duties of
the Administrative Agent shall be ministerial and administrative in nature, and the Administrative
Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary
relationship in respect of any Bank.



SECTION 7.02. Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon any certification, notice or other communication (including any thereof by
telephone, telefax, telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants or other experts selected by the Administrative Agent. As
to any matters not expressly provided for by this Agreement or any other Loan Document, the
Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required Banks, and such
instructions of the Required Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.



SECTION 7.03. Defaults. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the non-payment of
principal of or interest on the Advances) unless the Administrative Agent has received notice from
a Bank or the Borrowers specifying such Default or Event of Default and stating that such notice is
a “Notice of Default”. In the event that the Administrative Agent receives such a notice of the
occurrence of a Default or an Event of Default, the Administrative Agent shall give prompt notice
thereof to the Banks. The Administrative Agent shall give each Bank prompt notice of each
non-payment of principal of or interest on the Advances, whether or not it has received any notice
of the occurrence of such non-payment. The Administrative Agent shall (subject to Section 9.05)
take such action with respect to such Default or Event of Default as shall be directed by the
Required Banks, provided that, unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.



SECTION 7.04. Rights of Administrative Agent and its Affiliates as a Bank. With
respect to any Advance made and any of Letter of Credit issued by BB&T or an Affiliate of BB&T,
such Affiliate and BB&T in their capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not an Affiliate of BB&T
(or in BB&T’s case, acting as the Administrative Agent), and the term “Bank” or “Banks” shall,
unless the context otherwise indicates, include such Affiliate of BB&T or BB&T in its individual
capacity. Such Affiliate and BB&T may (without having to account therefor to any Bank) accept
deposits from, lend money to and generally engage in any kind of banking, trust or other business
with any Loan Party (and any of the Affiliates of any Loan Party) as if they were not an Affiliate
of the Administrative Agent or the Administrative Agent, respectively; and such Affiliate and BB&T
may accept fees and other consideration from any Loan Party (in addition to any agency fees and
arrangement fees heretofore agreed to between the Borrowers and BB&T) for services in connection
with this Agreement or any other Loan Document or otherwise without having to account for the same
to the Banks.



SECTION 7.05. Indemnification. Each Bank severally agrees to indemnify the
Administrative Agent, to the extent the Administrative Agent shall not have been reimbursed by the
Borrowers, ratably in accordance with its Commitment, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Loan Document or any other documents
contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby
(excluding, unless an Event of Default has occurred and is continuing, the normal administrative
costs and expenses incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however, that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity
furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative
Agent, be insufficient or become impaired, the Administrative Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished.



SECTION 7.06. CONSEQUENTIAL DAMAGES. THE ADMINISTRATIVE AGENT SHALL NOT BE
RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWERS OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.



SECTION 7.07. Payee of Note Treated as Owner. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the Administrative Agent
and the provisions of Section 9.07(c) have been satisfied. Any requests, authority or consent of
any Person who at the time of making such request or giving such authority or consent is the holder
of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of
that Note or of any Note or Notes issued in exchange therefor or replacement thereof.



SECTION 7.08. Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Administrative Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its own credit analysis
of the Loan Parties and decision to enter into this Agreement and that it will, independently and
without reliance upon the Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the other Loan Documents.
The Administrative Agent shall not be required to keep itself (or any Bank) informed as to the
performance or observance by the Loan Parties of this Agreement or any of the other Loan Documents
or any other document referred to or provided for herein or therein or to inspect the properties or
books of the Borrowers or any other Person. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Administrative Agent hereunder
or under the other Loan Documents, the Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information concerning the affairs,
financial condition or business of the Loan Parties or any other Person (or any of their
Affiliates) which may come into the possession of the Administrative Agent.



SECTION 7.09. Failure to Act. Except for action expressly required of the
Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall in
all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction by the Banks of their indemnification obligations
under Section 7.05 against any and all liability and expense which may be incurred by the
Administrative Agent by reason of taking, continuing to take, or failing to take any such action.



SECTION 7.10. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrowers
and the Administrative Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have been so appointed
by the Required Banks and shall have accepted such appointment within 30 days after the retiring
Administrative Agent’s notice of resignation or the Required Banks’ removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor agent. Any successor agent shall be a bank which has a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by
a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent’s resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting as the
Administrative Agent hereunder.



ARTICLE VIII




CHANGE IN CIRCUMSTANCES; COMPENSATION




SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or
prior to the first day of any Interest Period:




(a) the Administrative Agent determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest Period, or




(b) the Required Banks advise the Administrative Agent that the London Interbank
Offered Rate as determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Banks of funding the Advances for such Interest Period,



the Administrative Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Administrative Agent notifies the Borrowers that the circumstances giving rise
to such suspension no longer exist, the obligations of the Banks to make Euro-Dollar Advances shall
be suspended. Unless the Borrowers notify the Administrative Agent at least 2 Domestic Business
Days before the date of any Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate
Advance.



SECTION 8.02. Illegality. If, after the date hereof, the adoption of any applicable
law, rule or regulation, or any change in any existing or future law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental authority, central bank
or comparable agency charged with the interpretation or administration thereof (any such authority,
bank or agency being referred to as an “Authority” and any such event being referred to as a
“Change of Law”), or compliance by any Bank (or its Lending Office) with any request or directive
(whether or not having the force of law) of any Authority shall make it unlawful or impossible for
any Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar Advances and such Bank
shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice
thereof to the other Banks and the Borrowers, whereupon until such Bank notifies the Borrowers and
the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make its portion of the Euro-Dollar Advances shall be suspended. Before
giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a
different Lending Office if such designation will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its portion of the
outstanding Euro-Dollar Advances to maturity and shall so specify in such notice, the Borrowers
shall immediately prepay in full the then outstanding principal amount of the Euro-Dollar Advances
of such Bank, together with accrued interest thereon and any amount due such Bank pursuant to
Section 8.05(a). Concurrently with prepaying such Euro-Dollar Advances, the Borrowers shall borrow
a Base Rate Advance in an equal principal amount from such Bank (on which interest and principal
shall be payable contemporaneously with the related Euro-Dollar Advances of the other Banks), and
such Bank shall make such a Base Rate Advance.




SECTION 8.03. Increased Cost and Reduced Return.




(a) If after the date hereof, a Change of Law or compliance by any Bank (or its Lending
Office) with any request or directive (whether or not having the force of law) of any
Authority:




(i) shall subject any Bank (or its Lending Office) to any tax, duty or other
charge with respect to its Euro-Dollar Advances, its Notes or its obligation to make
a Euro-Dollar Advance, or shall change the basis of taxation of payments to any Bank
(or its Lending Office) of the principal of or interest on its Euro-Dollar Advances
or any other amounts due under this Agreement in respect of its Euro-Dollar Advances
or its obligation to make a Euro-Dollar Advance (except for changes in the rate of
tax on the overall net income of such Bank or its Lending Office imposed by the
jurisdiction in which such Bank’s principal executive office or Lending Office is
located); or




(ii) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement (including, without limitation, any such requirement imposed by
the Board of Governors of the Federal Reserve System, but excluding any such
requirement included in an applicable Euro-Dollar Reserve Percentage) against assets
of, deposits with or for the account of, or credit extended by, any Bank (or its
Lending Office); or




(iii) shall impose on any Bank (or its Lending Office) or on the United States
market for certificates of deposit or the London interbank market any other
condition affecting its Euro-Dollar Advances, its Notes or its obligation to make a
Euro-Dollar Advance;



and the result of any of the foregoing is to increase the cost to such Bank (or its Lending Office)
of making or maintaining any Euro-Dollar Advance, or to reduce the amount of any sum received or
receivable by such Bank (or its Lending Office) under this Agreement or under its Notes with
respect thereto, by an amount deemed by such Bank, in its reasonable discretion, to be material,
then, within 15 Domestic Business Days after demand by such Bank (with a copy to the Administrative
Agent), the Borrowers shall pay to such Bank such additional amount or amounts as will reasonably
compensate such Bank for such increased cost or reduction.




(b) If any Bank shall have determined that after the date hereof the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change in any existing
or future law, rule or regulation, or any change in the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any Authority, has or
would have the effect of reducing the rate of return on such Bank’s capital as a consequence
of its obligations hereunder to a level below that which such Bank could have achieved but
for such adoption, change or compliance (taking into consideration such Bank’s policies with
respect to capital adequacy) by an amount deemed by such Bank, in its reasonable discretion,
to be material, then from time to time, within 15 Domestic Business Days after demand by
such Bank, the Borrowers shall pay to such Bank such additional amount or amounts as will
reasonably compensate such Bank for such reduction.




(c) Each Bank will promptly notify the Borrowers and the Administrative Agent of any
event of which it has knowledge, occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section and will designate a different Lending Office
if such designation will avoid the need for, or reduce the amount of, such compensation and
will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Bank may use any reasonable averaging
and attribution methods.




(d) The provisions of this Section 8.03 shall be applicable with respect to any
Participant, Assignee or other Transferee, and any calculations required by such provisions
shall be made based upon the circumstances of such Participant, Assignee or other
Transferee.



SECTION 8.04. Base Rate Advances Substituted for Affected Euro-Dollar Advances. If
(i) the obligation of any Bank to make or maintain a Euro-Dollar Advance has been suspended
pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03, and the
Borrowers shall, by at least 5 Euro-Dollar Business Days’ prior notice to such Bank through the
Administrative Agent, have elected that the provisions of this Section shall apply to such Bank,
then, unless and until such Bank notifies the Borrowers that the circumstances giving rise to such
suspension or demand for compensation no longer apply:




(a) all Advances which would otherwise be made by such Bank as part of a Euro-Dollar
Advance shall be made instead as a Base Rate Advance, and




(b) after its portion of the Euro-Dollar Advance has been repaid, all payments of
principal which would otherwise be applied to repay such Euro-Dollar Advance shall be
applied to repay its Base Rate Advance instead.



In the event that the Borrowers shall elect that the provisions of this Section shall apply to any
Bank, the Borrowers shall remain liable for, and shall pay to such Bank as provided herein, all
amounts due such Bank under Section 8.03 in respect of the period preceding the date of conversion
of such Bank’s portion of any Advance resulting from the Borrowers’ election.



SECTION 8.05. Compensation. Upon the request of any Bank, delivered to the Borrowers
and the Administrative Agent, the Borrowers shall pay to such Bank such amount or amounts as shall
compensate such Bank for any loss, cost or expense incurred by such Bank as a result of:




(a) any payment or prepayment (pursuant to Section 2.09, Section 2.10, Section 8.02 or
otherwise) of a Euro-Dollar Advance on a date other than the last day of an Interest Period
for such Euro-Dollar Advance;




(b) any failure by the Borrowers to prepay a Euro-Dollar Advance on the date for such
prepayment specified in the relevant notice of prepayment hereunder; or




(c) any failure by the Borrowers to borrow a Euro-Dollar Advance on the date for the
Borrowing specified in the applicable Notice of Borrowing delivered pursuant to Section
2.02.



such compensation to include, without limitation, an amount equal to the excess, if any, of (x) the
amount of interest which would have accrued on the amount so paid or prepaid or not prepaid or
borrowed for the period from the date of such payment, prepayment or failure to prepay or borrow to
the last day of the then current Interest Period for such Euro-Dollar Advance (or, in the case of a
failure to prepay or borrow, the Interest Period for such Euro-Dollar Advance which would have
commenced on the date of such failure to prepay or borrow) at the applicable rate of interest for
such Euro-Dollar Advance provided for herein over (y) the amount of interest (as reasonably
determined by such Bank) such Bank would have paid on deposits in Dollars of comparable amounts
having terms comparable to such period placed with it by leading banks in the London interbank
market.



ARTICLE IX




MISCELLANEOUS




SECTION 9.01. Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including facsimile transmission or similar writing) and shall be
given to such party at its address or telecopy number set forth on the signature pages hereof or
such other address or telecopy number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopy number specified in this
Section and the telecopy machine used by the sender provides a written confirmation that such
telecopy has been so transmitted or receipt of such telecopy transmission is otherwise confirmed,
(ii) if given by mail, 72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, and (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Administrative Agent
under Article II or Article VIII shall not be effective until received.



SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note or other Loan Document
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.




SECTION 9.03. Expenses; Documentary Taxes; Indemnification.




(a) The Loan Parties shall, jointly and severally, pay (i) all expenses of the
Administrative Agent, including fees and disbursements of the Administrative Agent in
connection with any field audits and investigations and fees and disbursements of special
counsel for the Administrative Agent, in connection with the preparation of this Agreement
and the other Loan Documents, the addition or release of any Collateral pursuant to Sections
2.14 or 2.15, any waiver or consent under this Agreement or any other Loan Document or any
amendment hereof or thereof or any Default or alleged Default hereunder or thereunder
(provided that the Loan Parties shall not be responsible for paying fees, costs or expenses
associated with any Bank’s assignment or participation of any interest hereunder unless the
Loan Parties shall have requested such action) and (ii) if a Default occurs, all
out-of-pocket expenses incurred by the Administrative Agent or any Bank, including fees and
disbursements of counsel, in connection with such Default and collection and other
enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in
enforcing this Agreement and the other Loan Documents.




(b) The Loan Parties shall, jointly and severally, indemnify the Administrative Agent
and each Bank against any transfer taxes, documentary taxes, assessments or charges made by
any Authority by reason of the execution and delivery of this Agreement or the other Loan
Documents.




(c) The Loan Parties shall, jointly and severally, indemnify the Administrative Agent,
the Banks and each Affiliate thereof and their respective directors, officers, employees and
agents (each of the foregoing, an “Indemnified Person”) from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of them may become
subject, insofar as such losses, liabilities, claims or damages arise out of or result from
any actual or proposed use by the Borrowers of the proceeds of any extension of credit by
any Bank hereunder or breach by any Loan Party of this Agreement or any other Loan Document
or from investigation, litigation (including, without limitation, any actions taken by the
Administrative Agent or any of the Banks to enforce this Agreement or any of the other Loan
Documents) or other proceeding (including, without limitation, any threatened investigation
or proceeding) relating to the foregoing, and the Loan Parties shall reimburse the
Administrative Agent and each Bank, and each Affiliate thereof and their respective
directors, officers, employees and agents, upon demand for any expenses (including, without
limitation, legal fees) incurred in connection with any such investigation or proceeding;
but excluding any such losses, liabilities, claims, damages or expenses incurred by reason
of the gross negligence or willful misconduct of any Indemnified Person.




SECTION 9.04. Setoffs; Sharing of Set-Offs.




(a) Each Loan Party hereby grants to each Bank, as security for the full and punctual
payment and performance of the obligations of each Loan Party under this Agreement and the
other Loan Documents, a continuing lien on and security interest in all deposits and other
sums credited by or due from such Bank to such Loan Party or subject to withdrawal by such
Loan Party; and regardless of the adequacy of any collateral or other means of obtaining
repayment of such obligations, each Bank may at any time upon or after the occurrence of any
Event of Default, and without notice to any Loan Party, set off the whole or any portion or
portions of any or all such deposits and other sums against such obligations, whether or not
any other Person or Persons could also withdraw money therefrom.




(b) Each Bank agrees that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the aggregate amount of
principal and interest owing with respect to the Letter of Credit Advances and Notes held by
it which is greater than the proportion received by any other Bank in respect of the
aggregate amount of all Letter of Credit Advances and principal and interest owing with
respect to the Notes held by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Letter of Credit Advances and
Notes held by the other Banks owing to such other Banks, and/or such other adjustments shall
be made, as may be required so that all such payments of principal and interest with respect
to the Notes held by the Banks owing to such other Banks shall be shared by the Banks pro
rata; provided that (i) nothing in this Section shall impair the right of any Bank
to exercise any right of set-off or counterclaim it may have and to apply the amount subject
to such exercise to the payment of indebtedness of the Loan Parties other than its
indebtedness under the Letter of Credit Advances and Notes and (ii) if all or any portion of
such payment received by the purchasing Bank is thereafter recovered from such purchasing
Bank, such purchase from each other Bank shall be rescinded and such other Bank shall repay
to the purchasing Bank the purchase price of such participation to the extent of such
recovery together with an amount equal to such other Bank’s ratable share (according to the
proportion of (x) the amount of such other Bank’s required repayment to (y) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or payable by
the purchasing Bank in respect of the total amount so recovered. The Loan Parties agree, to
the fullest extent they may effectively do so under applicable law, that any holder of a
participation in the Letter of Credit Advances and Notes, whether or not acquired pursuant
to the foregoing arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a participation were
a direct creditor of the Loan Parties in the amount of such participation.




SECTION 9.05. Amendments and Waivers.




(a) Any provision of this Agreement, the Notes or any other Loan Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is signed by
the Borrowers and the Required Banks (and, if the rights or duties of the Administrative
Agent are affected thereby, by the Administrative Agent); provided that no such
amendment or waiver shall, unless signed by all the Banks, (i) reduce the Commitment of any
Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or
decrease the rate of interest on any Advance or decrease any fees (excluding Facing Fees and
other fees payable solely to the Issuing Bank for its own account) hereunder, (iii) defer
the date fixed for any payment of principal of or interest on any Advance or any fees
(excluding Facing Fees and other fees payable solely to the Issuing Bank for its own
account) hereunder, (iv) reduce the amount of principal, decrease the amount of interest or
decrease the amount of fees (excluding Facing Fees and other fees payable solely to the
Issuing Bank for its own account) due on any date fixed for the payment thereof, (v) except
as a result of Sections 2.01(b) or (c), change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the percentage of Banks, which shall be
required for the Banks or any of them to take any action under this Section or any other
provision of this Agreement, (vi) change the manner of application of any payments made
under this Agreement or the other Loan Documents, (vii) release or substitute all or
substantially all of the Collateral held as security for the Obligations, (viii) increase
the advance rate set forth in the definition of “Borrowing Base”, (ix) change or modify the
definition of “Required Banks,” or (x) release any guaranty (other than a release pursuant
to Section 5.25(c)) given to support payment of the Guaranteed Obligations and provided
further that no amendment or waiver shall, unless signed by the Issuing Bank, (A) modify or
amend Section 2.03; or (B) change in any manner, any term or condition applicable to the
Letters of Credit or the Letter of Credit Agreements. The amount of Facing Fees and other
fees payable solely to the Issuing Bank for its own account may be amended, from time to
time, by the Borrowers and the Issuing Bank without the approval of any of the Banks.




(b) No Loan Party will solicit, request or negotiate for or with respect to any
proposed waiver or amendment of any of the provisions of this Agreement unless each Bank
shall be informed thereof by the Borrowers, or by the Administrative Agent, and shall be
afforded an opportunity of considering the same and shall be supplied by the Borrowers, or
by the Administrative Agent, if the Borrowers so request and to the extent already furnished
to the Administrative Agent, with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any waiver or consent
effected pursuant to the provisions of this Agreement shall be delivered by the Borrowers to
the Administrative Agent for delivery to each Bank forthwith following the date on which the
same shall have been executed and delivered by the requisite percentage of Banks. No Loan
Party will, directly or indirectly, pay or cause to be paid any remuneration, whether by way
of supplemental or additional interest, fee or otherwise, to any Bank (in its capacity as
such) as consideration for or as an inducement to the entering into by such Bank of any
waiver or amendment of any of the terms and provisions of this Agreement unless such
remuneration is concurrently paid, on the same terms, ratably to all such Banks.



SECTION 9.06. Margin Stock Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not, directly or
indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the
extension or maintenance of the credit provided for in this Agreement.




SECTION 9.07. Successors and Assigns.




(a) The provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; provided that no Loan Party
may assign or otherwise transfer any of its rights under this Agreement.




(b) Any Bank may at any time sell to one or more Persons (each a “Participant”)
participating interests in any Advance owing to such Bank, any Note held by such Bank, any
Commitment hereunder or any other interest of such Bank hereunder. In the event of any such
sale by a Bank of a participating interest to a Participant, such Bank’s obligations under
this Agreement shall remain unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrowers and the Administrative Agent shall continue to deal
solely and directly with such Bank in connection with such Bank’s rights and obligations
under this Agreement. In no event shall a Bank that sells a participation be obligated to
the Participant to take or refrain from taking any action hereunder except that such Bank
may agree that it will not (except as provided below), without the consent of the
Participant, agree to (i) the change of any date fixed for the payment of principal of or
interest on the related Advance or Advances, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to the related
Advance or Advances, (iii) the change of the principal of the related Advance or Advances,
(iv) any change in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) any fee is payable hereunder from the rate at
which the Participant is entitled to receive interest or any fee (as the case may be) in
respect of such participation, (v) the release or substitution of all or any substantial
part of the collateral (if any) held as security for the Obligations, or (vi) the release of
any guaranty (other than a release pursuant to Section 5.26(c)) given to support payment of
the Guaranteed Obligations. Each Bank selling a participating interest in any Advance,
Note, Commitment or other interest under this Agreement shall, within 10 Domestic Business
Days of such sale, provide the Borrowers and the Administrative Agent with written
notification stating that such sale has occurred and identifying the Participant and the
interest purchased by such Participant; provided, that a Bank shall not be required to
provide written notification of a participation sold to an Affiliate of a Bank. The Loan
Parties agree that each Participant shall be entitled to the benefits of Article VIII with
respect to its participation in Advances outstanding from time to time.




(c) Any Bank may at any time assign to one or more banks or financial institutions
(each an “Assignee”) all, or a proportionate part of all, of its rights and obligations
under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume
all such rights and obligations, pursuant to an Assignment and Acceptance in the form
attached hereto as Exhibit C , executed by such Assignee, such transferor Bank and the
Administrative Agent (and, in the case of: (i) an Assignee that is not then a Bank or an
Affiliate of a Bank; and (ii) an assignment not made during the existence of a Default or an
Event of Default, by the Borrowers); provided that (i) no interest may be sold by a Bank
pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent
portions of the transferor Bank’s Commitment, (ii) the amount of the Commitment of the
assigning Bank being assigned pursuant to such assignment (determined as of the effective
date of the assignment) shall be equal to $5,000,000 (or any larger multiple of $1,000,000)
(except that any such assignment may be in the full amount of the assigning Bank’s
Commitment), (iii) no interest may be sold by a Bank pursuant to this paragraph (c) to any
Assignee that is not then a Bank or an Affiliate of a Bank without the consent of the
Borrowers, which consent shall not be unreasonably withheld, provided that the Borrowers’
consent shall not be necessary with respect to any assignment made during the existence of a
Default or an Event of Default; (iv) a Bank may not have more than two Assignees that are
not then Banks at any one time, (v) no interest may be sold by a Bank pursuant to this
paragraph (c) to any Assignee that is not then a Bank or an Affiliate of a Bank, without the
consent of the Administrative Agent, which consent shall not be unreasonably withheld,
provided, that although the Administrative Agent’s consent may not be necessary with respect
to an Assignee that is then a Bank or an Affiliate of a Bank, no such assignment shall be
effective until the conditions set forth in the following sentence are satisfied; (vi) no
interest in a Commitment may be sold by a Bank pursuant to this paragraph (c) to any
Assignee that is not then a Bank or an Affiliate of a Bank, without the consent of the
Issuing Bank, which consent may be withheld by the Issuing Bank in its sole and absolute
discretion. Upon (A) execution of the Assignment and Acceptance by such transferor Bank,
such Assignee, the Administrative Agent and (if applicable) the Borrowers, (B) delivery of
an executed copy of the Assignment and Acceptance to the Borrowers and the Administrative
Agent, (C) payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee and (D) payment by the
assigning Bank of a processing and recordation fee of $3,500 to the Administrative Agent if
the Assignee is not a Bank or Affiliate of a Bank and $1,000 if the Assignee is a Bank or
Affiliate of a Bank, such Assignee shall for all purposes be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank under this Agreement to the same
extent as if it were an original party hereto with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by the Borrowers, the
Banks or the Administrative Agent shall be required. Upon the consummation of any transfer
to an Assignee pursuant to this paragraph (c), the transferor Bank, the Administrative Agent
and the Borrowers shall make appropriate arrangements so that, if required, a new Note is
issued to each of such Assignee and such transferor Bank.




(d) Subject to the provisions of Section 9.08, the Loan Parties authorize each Bank to
disclose to any Participant, Assignee or other transferee (each a “Transferee”) and any
prospective Transferee any and all financial and other information in such Bank’s possession
concerning the Loan Parties which has been delivered to such Bank by the Loan Parties
pursuant to this Agreement (or to such Bank by the Administrative Agent on behalf of the
Loan Parties) or which has been delivered to such Bank by the Administrative Agent or the
Loan Parties in connection with such Bank’s credit evaluation prior to entering into this
Agreement.




(e) No Transferee shall be entitled to receive any greater payment under Section 8.03
than the transferor Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrowers’ prior written consent or by
reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a
different Lending Office under certain circumstances or at a time when the circumstances
giving rise to such greater payment did not exist.




(f) Anything in this Section 9.07 to the contrary notwithstanding, any Bank may assign
and pledge all or any portion of any Advance and/or obligations owing to it to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A
of the Board of Governors of the Federal Reserve System and Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned Advance
and/or obligations made by the Borrowers to the assigning and/or pledging Bank in accordance
with the terms of this Agreement shall satisfy the Borrowers’ obligations hereunder in
respect of such assigned Advance and/or obligations to the extent of such payment. No such
assignment shall release the assigning and/or pledging Bank from its obligations hereunder.



SECTION 9.08. Confidentiality. Each Bank agrees to exercise its best efforts to keep
any information delivered or made available by the Loan Parties to it which is clearly indicated to
be confidential information, confidential from anyone other than persons employed or retained by
such Bank who are or are expected to become engaged in evaluating, approving, structuring or
administering the Advances; provided, however, that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the order of any court
or administrative agency, (iii) upon the request or demand of any regulatory agency or authority
having jurisdiction over such Bank, (iv) which has been publicly disclosed, (v) to the extent
reasonably required in connection with any litigation to which the Administrative Agent, any Bank
or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (vii) to such Bank’s legal counsel and independent
auditors and (viii) to any actual or proposed Participant, Assignee or other Transferee of all or
part of its rights hereunder which has agreed in writing to be bound by the provisions of this
Section 9.08.



SECTION 9.09. Representation by Banks. Each Bank hereby represents that it is a
commercial lender or financial institution which makes loans in the ordinary course of its business
and that it will make its Advances hereunder for its own account in the ordinary course of such
business; provided, however, that, subject to Section 9.07, the disposition of the
Note or Notes held by that Bank shall at all times be within its exclusive control.



SECTION 9.10. Obligations Several. The obligations of each Bank hereunder are
several, and no Bank shall be responsible for the obligations or commitment of any other Bank
hereunder. Nothing contained in this Agreement and no action taken by the Banks pursuant hereto
shall be deemed to constitute the Banks to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Bank shall be a separate
and independent debt and each Bank shall be entitled to protect and enforce its rights arising out
of this Agreement or any other Loan Document and it shall not be necessary for any other Bank to be
joined as an additional party in any proceeding for such purpose.



SECTION 9.11. Survival of Certain Obligations. Sections 8.03(a), 8.03(b), 8.05 and
9.03, and the obligations of the Loan Parties thereunder, shall survive, and shall continue to be
enforceable notwithstanding, the termination of this Agreement, and the Commitments and the payment
in full of the principal of and interest on all Advances.



SECTION 9.12. North Carolina Law. This Agreement and each Note shall be construed in
accordance with and governed by the law of the State of North Carolina.



SECTION 9.13. Severability. In case any one or more of the provisions contained in
this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired thereby and shall be
enforced to the greatest extent permitted by law.



SECTION 9.14. Interest. In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by applicable law, and in
the event any such payment is inadvertently made to any Bank by the Borrowers or inadvertently
received by any Bank, then such excess sum shall be credited as a payment of principal, unless the
Borrowers shall notify such Bank in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Borrowers not pay and the Banks not receive,
directly or indirectly in any manner whatsoever, interest in excess of that which may legally be
paid by the Borrowers under applicable law.



SECTION 9.15. Interpretation. No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having or being deemed to
have structured or dictated such provision.



SECTION 9.16. Consent to Jurisdiction. The Loan Parties (a) and each of the Banks and
the Administrative Agent irrevocably waives, to the fullest extent permitted by law, any and all
right to trial by jury in any legal proceeding arising out of this Agreement, any of the other Loan
Documents, or any of the transactions contemplated hereby or thereby, (b) submit to personal
jurisdiction in the State of North Carolina, the courts thereof and the United States District
Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan
Documents, (c) waives any and all personal rights under the law of any jurisdiction to object on
any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within
the State of North Carolina for the purpose of litigation to enforce this Agreement, the Notes or
the other Loan Documents, and (d) agrees that service of process may be made upon it in the manner
prescribed in Section 9.01 for the giving of notice to the Borrowers. Nothing herein contained,
however, shall prevent the Administrative Agent from bringing any action or exercising any rights
against any security and against the Loan Parties personally, and against any assets of the Loan
Parties, within any other state or jurisdiction.



SECTION 9.17. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.



ARTICLE X




GUARANTY




SECTION 10.01. Unconditional Guaranty. Each Guarantor hereby irrevocably,
unconditionally and jointly and severally guarantees, each as a primary obligor and not merely as a
surety, to the Administrative Agent, the Issuing Bank and the Banks the due and punctual payment of
the principal of and the premium, if any, and interest on the Guaranteed Obligations and any and
all other amounts due under or pursuant to the Loan Documents, when and as the same shall become
due and payable (whether at stated maturity or by optional or mandatory prepayment or by
declaration, redemption or otherwise) in accordance with the terms of the Loan Documents. The
Guarantors’ guaranty under this Section is an absolute, present and continuing guarantee of payment
and not of collectibility, and is in no way conditional or contingent upon any attempt to collect
from either Borrower, any of the Guarantors or any other guarantor of the Guaranteed Obligations
(or any portion thereof) or upon any other action, occurrence or circumstances whatsoever. In the
event that either Borrower or any Guarantor shall fail so to pay any such principal, premium,
interest or other amount to the Administrative Agent, the Issuing Bank or a Bank, the Guarantors
will pay the same forthwith, without demand, presentment, protest or notice of any kind (all of
which are waived by the Guarantors to the fullest extent permitted by law), in lawful money of the
United States, at the place for payment specified in Loan Documents or specified by such
Administrative Agent in writing, to such Administrative Agent. The Guarantors further agree,
promptly after demand, to pay to the Administrative Agent, the Issuing Bank and Banks the costs and
expenses incurred by such Administrative Agent, the Issuing Bank or Bank in connection with
enforcing the rights of such Administrative Agent, the Issuing Bank and Banks against either or
both of the Borrowers and any or all of the Guarantors (whether in a bankruptcy proceeding or
otherwise) following any default in payment of any of the Guaranteed Obligations or the obligations
of the Guarantors hereunder, including, without limitation, the fees and expenses of counsel to the
Administrative Agent, the Issuing Bank and such Banks.



SECTION 10.02. Obligations Absolute. The obligations of the Guarantors hereunder are
and shall be absolute and unconditional, irrespective of the validity, regularity or enforceability
of this Agreement, any of the Guaranteed Obligations or any of the Loan Documents, shall not be
subject to any counterclaim, set-off, deduction or defense based upon any claim any of the
Guarantors may have against either Borrower, any other Guarantor or the Administrative Agent , the
Issuing Bank or any Bank hereunder or otherwise, and shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by, to the fullest extent
permitted by law, any circumstance or condition whatsoever (whether or not any of the Guarantors
shall have any knowledge or notice thereof), including, without limitation:




(a) any amendment or modification of or supplement to any of the Loan Documents or any
other instrument referred to herein or therein, or any assignment or transfer of any thereof
or of any interest therein, or any furnishing or acceptance of additional security for any
of the Guaranteed Obligations;




(b) any waiver, consent or extension under any Loan Document or any such other
instrument, or any indulgence or other action or inaction under or in respect of, or any
extensions or renewals of, any Loan Document, any such other instrument or any Guaranteed
Obligation;




(c) any failure, omission or delay on the part of the Administrative Agent to enforce,
assert or exercise any right, power or remedy conferred on or available to the
Administrative Agent, the Issuing Bank or any Bank against either Borrower or any Guarantor,
any Subsidiary of either Borrower or any Subsidiary of any Guarantor;




(d) any bankruptcy, insolvency, readjustment, composition, liquidation or similar
proceeding with respect to either Borrower, any Guarantor, any Subsidiary of either Borrower
or any Subsidiary of any Guarantor or any property of either Borrower, any Guarantor or any
such Subsidiary or any unavailability of assets against which the Guaranteed Obligations, or
any of them, may be enforced;




(e) any merger or consolidation of either Borrower, any Subsidiary of either Borrower
or any Guarantor or any of the Guarantors into or with any other Person or any sale, lease
or transfer of any or all of the assets of any of the Guarantors, either Borrower or any
Subsidiary of either Borrower or any Guarantor to any Person;




(f) any failure on the part of either Borrower, any Guarantor or any Subsidiary of
either Borrower or any Guarantor for any reason to comply with or perform any of the terms
of any agreement with any of the Guarantors;




(g) any exercise or non-exercise by the Administrative Agent, the Issuing Bank or any
Bank, of any right, remedy, power or privilege under or in respect of any of the Loan
Documents or the Guaranteed Obligations, including, without limitation, under this Section;




(h) any default, failure or delay, willful or otherwise, in the performance or payment
of any of the Guaranteed Obligations;




(i) any furnishing or acceptance of security, or any release, substitution or exchange
thereof, for any of the Guaranteed Obligations;




(j) any failure to give notice to any of the Guarantors of the occurrence of any breach
or violation of, or any event of default or any default under or with respect to, any of the
Loan Documents or the Guaranteed Obligations;




(k) any partial prepayment, or any assignment or transfer, of any of the Guaranteed
Obligations; or




(l) any other circumstance (other than indefeasible payment in full) which might
otherwise constitute a legal or equitable discharge or defense of a guarantor or which might
in any manner or to any extent vary the risk of such Guarantor.



The Guarantors covenant that their respective obligations hereunder will not be discharged
except by complete performance of the obligations contained in the Loan Documents and this
Agreement and the final and indefeasible payment in full of the Guaranteed Obligations. The
Guarantors unconditionally waive, to the fullest extent permitted by law (A) notice of any of the
matters referred to in this Section, (B) any and all rights which any of the Guarantors may now or
hereafter have arising under, and any right to claim a discharge of the Guarantor’s obligations
hereunder by reason of the failure or refusal by the Administrative Agent, the Issuing Bank or any
Bank to take any action pursuant to any statute permitting a Guarantor to request that the
Administrative Agent or any Bank attempt to collect the Guaranteed Obligations from either
Borrower, any of the Guarantors or any other guarantor, (C) all notices which may be required by
statute, rule of law or otherwise to preserve any of the rights of the Administrative Agent, the
Issuing Bank or any Bank against the Guarantors, including, without limitation, presentment to or
demand of payment from either Borrower, any of the Subsidiaries of either Borrower or any
Guarantor, or any of the other Guarantors with respect to any Loan Document or this agreement,
notice of acceptance of the Guarantors’ guarantee hereunder and/or notice to either Borrower, any
of the Subsidiaries of either Borrower or any Guarantor, or any Guarantor of default or protest for
nonpayment or dishonor, (D) any diligence in collection from or protection of or realization upon
all or any portion of the Guaranteed Obligations or any security therefor, any liability hereunder,
or any party primarily or secondarily liable for all or any portion of the Guaranteed Obligations,
and (E) any duty or obligation of the Administrative Agent, the Issuing Bank or any Bank to proceed
to collect all or any portion of the Guaranteed Obligations from, or to commence an action against,
either Borrower, any Guarantor or any other Person, or to resort to any security or to any balance
of any deposit account or credit on the books of the Administrative Agent or any Bank in favor of
either Borrower, any Guarantor or any other Person, despite any notice or request of any of the
Guarantors to do so.



SECTION 10.03. Continuing Obligations; Reinstatement. The obligations of the
Guarantors under this Article X are continuing obligations and shall continue in full force
and effect until such time as all of the Guaranteed Obligations (and any renewals and extensions
thereof) shall have been finally and indefeasibly paid and satisfied in full. The obligations of
the Guarantors under this Article X shall continue to be effective or be automatically
reinstated, as the case may be, if any payment made by either Borrower, any Guarantor or any
Subsidiary of either Borrower or any Guarantor on, under or in respect of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or returned by the recipient upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of either Borrower, any
Guarantor or any such Subsidiary, or upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to either Borrower, any
Guarantor or any such Subsidiary or any substantial part of the property of either Borrower, any
Guarantor or any such Subsidiary, or otherwise, all as though such payment had not been made. If
an event permitting the acceleration of all or any portion of the Guaranteed Obligations shall at
any time have occurred and be continuing, and such acceleration shall at such time be stayed,
enjoined or otherwise prevented for any reason, including without limitation because of the
pendency of a case or proceeding relating to either Borrower, any Guarantor or any Subsidiary of
either Borrower or any Guarantor under any bankruptcy or insolvency law, for purposes of this
Article X and the obligations of the Guarantors hereunder, such Guaranteed Obligations
shall be deemed to have been accelerated with the same effect as if such Guaranteed Obligations had
been accelerated in accordance with the terms of the applicable Loan Documents or of this
Agreement.



SECTION 10.04. Additional Security, Etc. The Guarantors authorize the Administrative
Agent on behalf of the Issuing Bank and Banks without notice to or demand on the Guarantors and
without affecting their liability hereunder, from time to time (a) to obtain additional or
substitute endorsers or guarantors; (b) to exercise or refrain from exercising any rights against,
and grant indulgences to, either Borrower, any Subsidiary of either Borrower or any Guarantor, any
other Guarantor or others; and (c) to apply any sums, by whomsoever paid or however realized, to
the payment of the principal of, premium, if any, and interest on, and other obligations consisting
of, the Guaranteed Obligations. The Guarantors waive any right to require the Administrative
Agent, the Issuing Bank or any Bank to proceed against any additional or substitute endorsers or
guarantors or either Borrower or any of their Subsidiaries or any other Person or to pursue any
other remedy available to the Administrative Agent, the Issuing Bank or any such Bank.



SECTION 10.05. Information Concerning the Borrowers. The Guarantors assume all
responsibility for being and keeping themselves informed of the financial condition and assets of
either Borrower, the other Guarantors and their respective Subsidiaries, and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature,
scope and extent of the risks which the Guarantors assume and insure hereunder, and agree that
neither the Administrative Agent, the Issuing Bank nor any Bank shall have any duty to advise the
Guarantors of information known to the Administrative Agent, the Issuing Bank or any such Bank
regarding or in any manner relevant to any of such circumstances or risks.



SECTION 10.06. Guarantors’ Subordination. The Guarantors hereby absolutely
subordinate, both in right of payment and in time of payment, any present and future indebtedness
of either Borrower or any Subsidiary of either Borrower or any Guarantor to any or all of the
Guarantors to the indebtedness of either Borrower or any such Subsidiary, the Issuing Bank or to
the Banks (or any of them), provided that the Guarantors may receive scheduled payments of
principal, premium (if any) and interest in respect of such present or future indebtedness so long
as there is no Event of Default then in existence.



SECTION 10.07. Waiver of Subrogation. Notwithstanding anything herein to the
contrary, until the indefeasible payment in full of the Guaranteed Obligations, the Guarantors
hereby waive any right of subrogation (under contract, Section 509 of the Bankruptcy Code or
otherwise) or any other right of indemnity, reimbursement or contribution and hereby waive any
right to enforce any remedy that the Administrative Agent, the Issuing Bank or any Bank now has or
may hereafter have against either Borrower, any Guarantor or any endorser or any other guarantor of
all or any part of the Guaranteed Obligations, and the Guarantors hereby waive any benefit of, and
any right to participate in, any security or collateral given to the Administrative Agent, the
Issuing Bank or any Bank to secure payment or performance of the Guaranteed Obligations or any
other liability of the Borrowers to the Administrative Agent, the Issuing Bank or any Bank. The
waiver contained in this Section shall continue and survive the termination of this Agreement and
the final and indefeasible payment in full of the Guaranteed Obligations.



SECTION 10.08. Enforcement. In the event that the Guarantors shall fail forthwith to
pay upon demand of the Administrative Agent, the Issuing Bank or any Bank any amounts due pursuant
to this Article X or to perform or comply with or to cause performance or compliance with
any other obligation of the Guarantors under this Agreement, the Administrative Agent, the Issuing
Bank and any Bank shall be entitled and empowered to institute any action or proceeding at law or
in equity for the collection of the sums so due and unpaid or for the performance of or compliance
with such terms, and may prosecute any such action or proceeding to judgment or final decree and
may enforce such judgment or final decree against the Guarantors and collect in the manner provided
by law out of the property of the Guarantors, wherever situated, any monies adjudged or decreed to
be payable. The obligations of the Guarantors under this Agreement are continuing obligations and
a fresh cause of action shall arise in respect of each default hereunder.



SECTION 10.09. Miscellaneous. Except as may otherwise be expressly agreed upon in
writing, the liability of the Guarantors under this Article X shall neither affect nor be affected
by any prior or subsequent guaranty by the Guarantors of any other indebtedness to the
Administrative Agent, the Issuing Bank or the Banks. Notwithstanding anything in this Article X to
the contrary, the maximum liability of each Guarantor hereunder shall in no event exceed the
maximum amount which could be paid out by such Guarantor without rendering such Guarantor’s
obligations under this Article X, in whole or in part, void or voidable under applicable law,
including, without limitation, (i) the Bankruptcy Code of 1978, as amended, and (ii) any applicable
state or federal law relative to fraudulent conveyances.



4




[The remainder of this page intentionally left blank.]




IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under
seal, by their respective authorized officers as of the day and year first above written.




GLADSTONE COMMERCIAL CORPORATION



	 	 	 	 	 
	By:

	 	/s/ George Stelljes III
	 	(SEAL)
	
 
	 	 
	 	

	
 
	 	George Stelljes III

Executive Vice President
	 	











	 	 	 	and Chief Investment Officer






1616 Anderson Road, Suite 208


McLean, Virginia 22101


Attention: George Stelljes III


Telecopy number: (703) 286-0768


Telephone number: (703) 286-0795




GLADSTONE COMMERCIAL LIMITED PARTNERSHIP



	 	 	 	 	 
	By:	 	Gladstone Commercial Partners, LLC	 	 
	 	 	its General Partner	 	 
	By:

	 	Gladstone Commercial Corporation

its Manager
	 	



	 
	 	 	 	 
	By:

	 	/s/ George Stelljes III
	 	(SEAL)
	 

	 	 
	 	

	
 
	 	George Stelljes III

Executive Vice President
	 	











	 	 	 	and Chief Investment Officer






1616 Anderson Road, Suite 208


McLean, Virginia 22101


Attention: George Stelljes III


Telecopy number: (703) 286-0768


Telephone number: (703) 286-0795




EE, 208 SOUTH ROGERS LANE, RALEIGH, NC LLC



	 	 	 
	By:	 	Gladstone Commercial Limited Partnership
	 	 	its Manager
	By:

	 	Gladstone Commercial Partners, LLC

its General Partner
	 
	 	 
	By:

	 	Gladstone Commercial Corporation

its Manager








By: /s/ George Stelljes III (SEAL)




	 	 	 	George Stelljes III

Executive Vice President

and Chief Investment Officer






1616 Anderson Road, Suite 208


McLean, Virginia 22101


Attention: George Stelljes III


Telecopy number: (703) 286-0768


Telephone number: (703) 286-0795




LITTLE ARCH CHARLOTTE NC LLC



	 	 	 
	By:	 	Gladstone Commercial Limited Partnership
	 	 	its Manager
	By:

	 	Gladstone Commercial Partners, LLC

its General Partner
	 
	 	 
	By:

	 	Gladstone Commercial Corporation

its Manager








By: /s/ George Stelljes III (SEAL)




	 	 	 	George Stelljes III

Executive Vice President

and Chief Investment Officer






1616 Anderson Road, Suite 208


McLean, Virginia 22101


Attention: George Stelljes III


Telecopy number: (703) 286-0768


Telephone number: (703) 286-0795




OB CRENSHAW PA GLADSTONE COMMERCIAL LLC



	 	 	 	 	 
	By:	 	Gladstone Commercial Limited Partnership	 	 
	 	 	its Manager	 	 
	By:

	 	Gladstone Commercial Partners, LLC

its General Partner
	 	



	 
	 	 	 	 
	By:

	 	Gladstone Commercial Corporation

its Manager
	 	



	 
	 	 	 	 
	By:

	 	/s/ George Stelljes III
	 	(SEAL)
	 

	 	 
	 	

	
 
	 	George Stelljes III

Executive Vice President

and Chief Investment Officer

1616 Anderson Road, Suite 208

McLean, Virginia 22101

Attention: George Stelljes III

Telecopy number: (703) 286-0768

Telephone number: (703) 286-0795
	 	























	 	 	 	OB MIDWAY NC GLADSTONE COMMERCIAL LLC





	 	 	 	 	 
	By:	 	Gladstone Commercial Limited Partnership	 	 
	 	 	its Manager	 	 
	By:

	 	Gladstone Commercial Partners, LLC

its General Partner
	 	



	 
	 	 	 	 
	By:

	 	Gladstone Commercial Corporation

its Manager
	 	



	 
	 	 	 	 
	By:

	 	/s/ George Stelljes III
	 	(SEAL)
	 

	 	 
	 	

	
 
	 	George Stelljes III

Executive Vice President

and Chief Investment Officer

1616 Anderson Road, Suite 208

McLean, Virginia 22101

Attention: George Stelljes III

Telecopy number: (703) 286-0768
	 	





















	 	 	 	Telephone number: (703) 286-0795






GCC POCONO LLC



	 	 	 
	By:	 	Gladstone Commercial Limited Partnership
	 	 	its Manager
	By:

	 	Gladstone Commercial Partners, LLC

its General Partner
	 
	 	 
	By:

	 	Gladstone Commercial Corporation

its Manager








By: /s/ George Stelljes III (SEAL)




	 	 	 	George Stelljes III

Executive Vice President

and Chief Investment Officer






1616 Anderson Road, Suite 208


McLean, Virginia 22101


Attention: George Stelljes III


Telecopy number: (703) 286-0768




Telephone number: (703) 286-0795



	 	 	 
	COMMITMENTS BRANCH

	 	BANKING AND TRUST COMPANY,
	 

	 	

	
 
	 	as Administrative Agent, as Issuing Bank and as a Bank







$25,000,000




By:  /s/ James C. Stallings III (SEAL)




	 	 	 	James C. Stallings III

Vice President






Lending Office


Branch Banking and Trust Company


1909 K Street, NW


Washington, DC 20006


Attention: James Davis, Vice President


Telecopy number: (202) 835-9285


Telephone number: (202) 835-9361




with a copy to




Branch Banking and Trust Company


200 West Second Street, 16th Floor


Winston-Salem, NC 27101


Attention: James C. Stallings III, Vice President


Telecopy number: (336) 733-2740


Telephone number: (336) 733-2717




And a copy to




Christopher E. Leon, Esq.


Womble Carlyle Sandridge & Rice, PLLC


P.O. Drawer 84


One West Fourth Street (27101)


Winston-Salem, North Carolina 27102


Telecopy: (336) 726-6932



Telephone: (336) 721-3518



5



	 	 	 	 	 	 	 
	$12,500,000

	 	FIRST HORIZON BANK,
	 	

	 	

	 
	 	 	 	 	 	 
	 	 	a Division of First Tennessee Bank, NA
	 	 
	 
	 	 	 	 	 	 
	
 
	 	By:
	 	/s/ J. Jordan O’Neil III
	 	(SEAL)
	
 
	 	 	 	 
	 	









	 	J.	 	Jordan O’Neill, III,

Senior Vice President






Lending Office


First Horizon Bank


1650 Tysons Blvd.


Suite 1150


McLean, VA 22102


Attn: J. Jordan O’Neill, III


Senior Vice President


Telecopy number: (703) 734-1834




Telephone number: (703) 394-2518



6



	 	 	 	 	 	 	 
	$12,500,000

	 	COMPASS BANK
	 	

	 	

	 
	 	 	 	 	 	 
	
 
	 	By:
	 	/s/ T. Ray Sandefur
	 	(SEAL)
	
 
	 	 	 	 
	 	









	 	T.	 	Ray Sandefur

Senior Vice President






Lending Office


Compass Bank


15 South Twentieth Street


15th Floor


Birmingham, AL 35233


Attn: T. Ray Sandefur, Senior Vice President


Telecopy number: (205) 297-7212




Telephone number: (205) 297-3652



7



SCHEDULE I

Schedule of Documents




8




9




10




11




SCHEDULE II

List of Borrowing Base Assets

SCHEDULE III

Location of Files respecting Borrowing Base Assets

SCHEDULE 2.14

List of Initial Borrowing Base Assets

SCHEDULE 4.08




Subsidiaries




	 	 	 	 	 
	Name of Subsidiary	 	Jurisdiction of Organization







12




13




14




15




16




SCHEDULE 4.22

Investments

SCHEDULE 4.24

Ownership Structure

SCHEDULE 4.32

Material Contracts

SCHEDULE 5.11

Liens

SCHEDULE 5.29

Existing Debt





17