Document:

Exhibit 10.20

 

$12,000,000

LOAN AND SECURITY AGREEMENT

between

AVIZA TECHNOLOGY, INC.,

as Borrower

 

and

iSTAR FINANCIAL INC.,

as Lender

Dated as of September 23, 2004

 

 

TABLE OF CONTENTS

 

	
  SECTION 1

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  General
  Definitions

  	
  1

  
	
  1.2

  	
  Terms;
  Utilization of GAAP for Purposes of Financial Statements Under Agreement

  	
  22

  
	
  1.3

  	
  Other
  Definitional Provisions

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 2

  	
  AMOUNTS AND TERMS OF THE LOAN

  	
  23

  
	
  2.1

  	
  Loan
  Disbursement and Note

  	
  23

  
	
  2.2

  	
  Interest

  	
  23

  
	
  2.3

  	
  Payments

  	
  24

  
	
  2.4

  	
  Payments
  and Prepayments on the Loan

  	
  25

  
	
  2.5

  	
  Lender’s
  Records; Mutilated, Destroyed or Lost Notes

  	
  26

  
	
  2.6

  	
  Taxes

  	
  26

  
	
  2.7

  	
  Application
  of Payments

  	
  27

  
	
  2.8

  	
  Origination
  Fee

  	
  27

  
	
  2.9

  	
  Security
  Agreement

  	
  28

  
	
  2.10

  	
  Certain Secured Party Remedies

  	
  28

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  CONDITIONS TO LOAN

  	
  29

  
	
  3.1

  	
  Conditions
  to Funding of the Loan on the Closing Date

  	
  29

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  REPRESENTATIONS AND WARRANTIES

  	
  32

  
	
  4.1

  	
  Organization,
  Powers, Qualification and Organization Chart

  	
  32

  
	
  4.2

  	
  Authorization
  of Borrowing; No Conflicts; Governmental Consents; Binding Obligations and
  License and Security Interests of Loan Documents

  	
  32

  
	
  4.3

  	
  Financial
  Statements

  	
  33

  
	
  4.4

  	
  Indebtedness

  	
  33

  
	
  4.5

  	
  No
  Material Adverse Change

  	
  33

  
	
  4.6

  	
  Title
  to Property; Liens; Zoning; Contracts; Condition of the Mortgaged Property

  	
  33

  
	
  4.7

  	
  Litigation

  	
  36

  
	
  4.8

  	
  Payment of Taxes

  	
  36

  
	
  4.9

  	
  Governmental Regulation; Margin
  Loan

  	
  36

  
	
  4.10

  	
  Employee Benefit Plans; ERISA;
  Employees

  	
  37

  
	
  4.11

  	
  Intellectual Property

  	
  37

  
	
  4.12

  	
  Broker’s Fees

  	
  38

  
	
  4.13

  	
  Environmental Compliance

  	
  38

  
	
  4.14

  	
  Solvency

  	
  39

  
	
  4.15

  	
  Disclosure

  	
  39

  
	
  4.16

  	
  Insurance

  	
  39

  
	
  4.17

  	
  Budget

  	
  39

  
	
  4.18

  	
  Accounts

  	
  39

  
	
  4.19

  	
  Management Agreement

  	
  39

  
	
  4.20

  	
  Special Assessments; Taxes

  	
  40

  

 

 

	
  4.21

  	
  Leases

  	
  40

  
	
  4.22

  	
  Representations Remade

  	
  40

  
	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  AFFIRMATIVE COVENANTS

  	
  40

  
	
  5.1

  	
  Financial Statements and Other
  Reports

  	
  40

  
	
  5.2

  	
  Existence; Qualification

  	
  43

  
	
  5.3

  	
  Payment of Impositions and Lien
  Claims; Permitted Contests

  	
  43

  
	
  5.4

  	
  Insurance

  	
  45

  
	
  5.5

  	
  Tax Reserve and Insurance Reserve

  	
  48

  
	
  5.6

  	
  Maintenance of Mortgaged Property

  	
  49

  
	
  5.7

  	
  Inspection; Lender Meeting

  	
  50

  
	
  5.8

  	
  Environmental Compliance

  	
  50

  
	
  5.9

  	
  Environmental Disclosure

  	
  51

  
	
  5.10

  	
  Compliance with Laws, Employee
  Benefit Plans and Contractual Obligations

  	
  51

  
	
  5.11

  	
  Further Assurances

  	
  52

  
	
  5.12

  	
  Rate Cap Payment

  	
  53

  
	
  5.13

  	
  Future Advance Amount

  	
  53

  
	
  5.14

  	
  Government Regulation

  	
  54

  
	
  5.15

  	
  Rate Cap Replacement

  	
  54

  
	
  5.16

  	
  [INTENTIONALLY OMITTED.]

  	
  54

  
	
  5.17

  	
  [INTENTIONALLY OMITTED.]

  	
  54

  
	
  5.18

  	
  Management

  	
  54

  
	
  5.19

  	
  Construction Matters

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 6

  	
  [INTENTIONALLY OMITTED]

  	
  56

  
	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  NEGATIVE COVENANTS

  	
  56

  
	
  7.1

  	
  Indebtedness

  	
  56

  
	
  7.2

  	
  Liens and Related Matters

  	
  56

  
	
  7.3

  	
  Material Rights

  	
  56

  
	
  7.4

  	
  Restriction on Fundamental Changes

  	
  56

  
	
  7.5

  	
  Restriction on Leases

  	
  57

  
	
  7.6

  	
  Transactions with Affiliates

  	
  57

  
	
  7.7

  	
  Management Fees and Compensation;
  Contracts

  	
  57

  
	
  7.8

  	
  Conduct of Business

  	
  58

  
	
  7.9

  	
  Use of Lender’s Name

  	
  58

  
	
  7.10

  	
  Compliance with ERISA

  	
  58

  
	
  7.11

  	
  Due on Sale or Encumbrance

  	
  58

  
	
  7.12

  	
  Payments; Distributions

  	
  60

  
	
  7.13

  	
  [INTENTIONALLY OMITTED.]

  	
  60

  
	
  7.14

  	
  Alterations

  	
  60

  
	
   

  	
   

  	
   

  
	
  SECTION 8

  	
  CASUALTY AND CONDEMNATION

  	
  61

  
	
  8.1

  	
  Restoration Following Casualty or
  Condemnation

  	
  61

  
	
   

  	
   

  	
   

  
	
  SECTION 9

  	
  DEFAULT, RIGHTS AND REMEDIES

  	
  64

  
	
  9.1

  	
  Event of Default

  	
  64

  

 

 

	
  9.2

  	
  Acceleration and Remedies

  	
  67

  
	
  9.3

  	
  Remedies Cumulative; Waivers;
  Reasonable Charges

  	
  68

  
	
  9.4

  	
  Existing Indebtedness

  	
  68

  
	
   

  	
   

  	
   

  
	
  SECTION 10

  	
  SECONDARY MARKET TRANSACTION

  	
  70

  
	
  10.1

  	
  Secondary Market Transaction

  	
  70

  
	
   

  	
   

  	
   

  
	
  SECTION 11

  	
  MISCELLANEOUS

  	
  71

  
	
  11.1

  	
  Expenses and Attorneys’ Fees

  	
  71

  
	
  11.2

  	
  Certain Lender Matters

  	
  71

  
	
  11.3

  	
  Indemnity

  	
  73

  
	
  11.4

  	
  Amendments and Waivers

  	
  73

  
	
  11.5

  	
  Notices

  	
  75

  
	
  11.6

  	
  Survival of Warranties and Certain
  Agreements

  	
  75

  
	
  11.7

  	
  Miscellaneous

  	
  75

  
	
  11.8

  	
  APPLICABLE LAW

  	
  76

  
	
  11.9

  	
  Successors and Assigns

  	
  76

  
	
  11.10

  	
  CONSENT TO JURISDICTION AND SERVICE
  OF PROCESS

  	
  76

  
	
  11.11

  	
  WAIVER OF JURY TRIAL

  	
  76

  
	
  11.12

  	
  Publicity

  	
  77

  
	
  11.13

  	
  Recourse Loan

  	
  78

  
	
  11.14

  	
  Performance by
  Lender/Attorney-in-Fact

  	
  78

  
	
  11.15

  	
  Brokerage Claims

  	
  78

  
	
  11.16

  	
  Agreement

  	
  79

  

 

 

	
  EXHIBITS

  	
   

  	
   

  
	
  Exhibit A

  	
  Legal Description

  	
   

  
	
  Exhibit B

  	
  Closing Checklist

  	
   

  
	
  Exhibit C

  	
  Permitted
  Encumbrances

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
  Schedule 1.1(A)

  	
  Environmental Reports

  	
   

  
	
  Schedule 1.1(B)

  	
  Physical Conditions Reports

  	
   

  
	
  Schedule 4.1(A)-1

  	
  Borrower U.S. Taxpayer Identification
  Number

  	
   

  
	
  Schedule 4.1(A)-2

  	
  Capitalization Chart

  	
   

  
	
  Schedule 4.1(A)-3

  	
  Location of Principal Place of Business and
  Chief Executive Office

  	
   

  
	
  Schedule 4.1(A)-4

  	
  Subsidiaries

  	
   

  
	
  Schedule 4.4

  	
  Summary of Borrower’s Operating and
  Financing Leases and Letters of Credit

  	
   

  
	
  Schedule 4.6(C)

  	
  Material Contracts

  	
   

  
	
  Schedule 4.6(D)-1

  	
  Defects or Deficiencies

  	
   

  
	
  Schedule 4.6(D)-2

  	
  Flood Plain Status

  	
   

  
	
  Schedule 4.7

  	
  Litigation

  	
   

  
	
  Schedule 4.8

  	
  Taxes

  	
   

  
	
  Schedule 4.10

  	
  Employee Benefit Plans, Collective Bargaining
  Agreements and Employment Agreements

  	
   

  
	
  Schedule 4.16

  	
  Insurance

  	
   

  
	
  Schedule 4.17

  	
  Approved Budget

  	
   

  
	
  Schedule 4.18

  	
  Accounts

  	
   

  
	
  Schedule 4.20

  	
  Special Assessments; Taxes

  	
   

  
	
  Schedule 5.1(A)

  	
  Fiscal Year End Dates

  	
   

  
	
  Schedule 5.1(D)

  	
  Initial Projects

  	
   

  
	
  Schedule 5.13

  	
  Form of Modified CLTA 122 Endorsement

  	
   

  
	
  Schedule 11.5

  	
  Notice Addresses

  	
   

  

 

 

LOAN AND
SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT
(this “Agreement”) dated as of September 23,
2004, by AVIZA TECHNOLOGY, INC., a
Delaware corporation (“Borrower”),
having an address at 440 Kings Village Road, Scotts Valley, California 95066
and iSTAR FINANCIAL INC., a
Maryland corporation (together with its successors and assigns, hereinafter
referred to as “Lender”), with
offices at 1114 Avenue of the Americas, 27th Floor, New York,
New York 10036.

 

R E C I T A L S

 

A.                                   The
Mortgaged Property.  Borrower is the
fee owner of the Land and Improvements.

 

B.                                     The
Loan.  Borrower desires to borrow
from Lender, and Lender desires to lend to Borrower, a loan in the amount of $12,000,000.

 

NOW, THEREFORE, in consideration of the
foregoing and of the covenants, conditions and agreements contained herein,
Borrower and Lender agree as follows:

 

SECTION 1

DEFINITIONS

 

1.1                               General Definitions.

 

In addition to any other terms defined in this Agreement, the following
terms shall have the following meanings:

 

“Acceptable
Financial Institution” means a depository institution or trust
company incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking authorities, so long as (a) at all times the short-term commercial
paper, certificates of deposit or other debt obligations of such depository
institution or trust company are rated at least A-1 by S&P and P-1 by Moody’s
and the long-term unsecured debt obligations of which are rated at least A by
S&P and the equivalent thereof by Moody’s and (b) Lender shall have
approved (such approval not to be unreasonably withheld) such depository
institution or trust company (which approval shall be deemed given if the
applicable institution satisfies the criteria in clause (a) above).

 

“Accounting Changes” means
(A) changes in accounting principles required by GAAP consistently applied
and implemented by Borrower; and (B) changes in accounting principles
recommended or approved by Borrower’s certified public accountant, with the
approval of Lender, which approval shall not be unreasonably withheld.

 

“Accounts” means the
Borrower’s present and future rights to payment of money, accounts and accounts
receivable arising from or relating to the construction of, or the use, leasing
(as landlord or tenant), occupancy or operation by third parties of, Mortgaged
Property, and the rental of, or payment for, space at the Mortgaged Property,
whether or not yet earned by

 

1

 

performance, including (a) any reserves,
deferred payments, refunds, cost savings payments and deposits no matter how
evidenced and whether now or later to be received from third parties (including
all earnest money sales deposits) or deposited with, or by, the Borrower by, or
with, third parties (including all utility deposits), (b) any chattel
paper, instruments, documents, notes, drafts and letters of credit, and (c) Reserves
deposited with, or held by, Lender from time to time pursuant to Section 5.5,
any tenant security deposit account, and any and all other deposit accounts
held by or on behalf of Lender and/or the Borrower pursuant to the Loan
Documents.  Notwithstanding the
foregoing, “Accounts” is intended
to encompass personal property assets only to the extent arising from or
related to the Land, Improvements and Fixtures and Personalty and the Borrower’s
interest as a landowner thereof and specifically does not include personal
property assets used or otherwise owned by the Borrower (so long as Borrower’s
business does not now and will not ever include the sale, development or
leasing of real estate) in connection with or as a result of the normal conduct
of the Borrower’s business (notwithstanding the fact that the Borrower operates
such business on the Land and Improvements).

 

“Acquisition” means any
transaction or series of related transactions for the purpose of or resulting,
directly or indirectly, in (a) the acquisition of all or substantially all
of the assets of a Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any Person
to become a Subsidiary of such Person, or (c) a merger or consolidation or
any other combination with another Person.

 

“Additional Credit Facility”
means a line of credit in an aggregate maximum principal amount of $40,000,000
that is not secured by the Mortgaged Property and any refinancing or
replacement thereof.  As of the Closing
Date, Bank of America is the lender of the Additional Credit Facility.

 

“Additional Credit Lender”
means the lender or lenders under the Additional Credit Facility.

 

“Advancement Date” is
defined in Section 5.13(B).

 

“Advance Interest Rate”
means a fixed rate per annum equal to five and one-quarter percent (5.25%).

 

“Affiliate” means any
Person:  (A) directly or indirectly
controlling, controlled by, or under common control with, another Person; (B) directly
or indirectly owning or holding ten percent (10%) or more of any equity
interest in another Person; or (C) ten percent (10%) or more of whose
voting stock or other equity interest is directly or indirectly owned or held
by such other Person.  When used with
respect to Borrower, the term “Affiliate” shall also include the spouse,
ancestors, descendents and siblings of an Affiliate of Borrower (such Persons
being sometimes referred to as “Family Members”), Affiliates of such Family
Members and trusts for the benefit of another Affiliate of Borrower.

 

“Agreement” means this
Loan and Security Agreement (including all schedules, exhibits, annexes and
appendices hereto), as amended, modified or supplemented from time to time.

 

2

 

“Alteration” is defined in Section 7.14.

 

“Alternate Rate”:  In the event the LIBOR Rate is no longer
published, as of any date of determination, the “prime rate” (or ”base rate”)
reported in the Money Rates column or section of The Wall Street Journal
published on the second full Business Day preceding the first day of the
applicable Interest Period as having been the rate in effect for corporate
loans at large U.S. money center commercial banks (whether or not such rate has
actually been charged by any such bank) or, if The Wall Street
Journal ceases publication of such “prime rate” or “base rate,”
the annual rate of interest announced by JP Morgan Chase Bank (or another
financial institution with a main or branch office in New York,
New York, selected, from time to time, by Lender) from time to time as its
“prime rate” or “base rate” in effect at its principal office in
New York, New York at 5:00 p.m., New York City time
(in either case, the “Prime Rate”),
for such date plus two and one-half percent (2.5%).  Such rate of interest shall be computed on
the basis of a 360-day year for the actual number of days elapsed.

 

“Annual Budget” is defined in Section 5.1(D) hereof.

 

“Approved Budget” means the Annual Budget approved by Lender
from time to time as described in Section 5.1(D) hereof.

 

“Approved Capital Plan” means the Capital Plan approved by Lender
as part of the Approved Budget.

 

“Assignment(s)” means
individually and collectively, the assignments of contracts, agreements and
equipment leases, the assignments of licenses, permits and approvals, the
assignments of management agreements, if any, and such other assignments of
even date herewith from Borrower to or for the benefit of Lender, each granting
a security interest in collateral for the Loan.

 

“Bankruptcy Code” means
Title 11 of the United States Code entitled “Bankruptcy,” as amended from
time to time and all rules and regulations promulgated thereunder.

 

“Bank of America” means
Bank of America, N.A., a national banking association.

 

“Base Rate” means a
variable rate per annum equal to the greater of (i) six and one-half
percent (6.5%) and (ii) the sum of the LIBOR Rate, or the Alternate Rate,
as the case may be, plus five and one-quarter percent (5.25%), increasing or
decreasing with each increase or decrease in the LIBOR Rate, or the Alternate
Rate, as the case may be (as and when the LIBOR Rate or the Alternate Rate
change as described herein).

 

“Budget” means a budget
setting forth the budgeted costs and expenses for the ownership, operation
(including, but not limited to, expenses relating to utilities, maintenance,
landscaping and security) and management for the Mortgaged Property (excluding
any revenues, costs or expenses of Borrower to the extent they exclusively
relate to the normal conduct of Borrower’s business as a provider of products
and services to the semiconductor industry) for each calendar year commencing
with calendar year 2004.

 

3

 

“Business Day” means any
day excluding Saturday, Sunday and any day which is a legal holiday under the
laws of the State of New York or is a day on which banking institutions
located in such state is closed.

 

“Capital Lease” means any
lease of any property (whether real, personal or mixed) that, in conformity
with GAAP, should be accounted for as a capital lease.

 

“Capital Plan” means
Borrower’s budget for capital improvements and equipment for the Mortgaged
Property for each calendar year.

 

“Change in Control” shall
occur in the event that either (a) VantagePoint ceases to own, directly or
indirectly, and control a number of shares of outstanding voting capital stock
of the Borrower at least as great as the number of such shares that it owns as
of the Closing Date; or (b) any person (as such term is used in Section 13(d) and
Section 14(d)(2) of the Exchange Act), or related persons
constituting a group (as such term is used in Rule 13d-5 under the
Exchange Act) other than VantagePoint, owns, directly or indirectly, and
controls more than the lesser of (i) 25% of the outstanding voting capital
stock of the Borrower, or (ii) the percentage of the outstanding voting
capital stock of the Borrower held by VantagePoint.

 

“Claims” is defined in Section 5.3(A).

 

“Closing” means that all
conditions for disbursement of the proceeds of the Loan to or for the benefit
of Borrower have been satisfied or waived in writing by Lender and the
disbursement of the proceeds of the Loan shall have been made to, or upon the
order of, Borrower.

 

“Closing Checklist” means
the closing checklist attached hereto as Exhibit B.

 

“Closing Date” means the
date on which the Closing occurs.

 

“Code” means the United
States Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time.

 

“Collateral” means the
Mortgaged Property and all other real and personal property of Borrower or any
other Person pledged or mortgaged to Lender as collateral security for
repayment of the Loan.

 

“Competitor” means any
entity providing products or services (other than financial products or
services) to the semiconductor industry.

 

“Confidential Information”
is defined in Section 11.12.

 

“Construction” means the
Restoration, the Alterations, the Initial Projects and any other construction,
equipping, fixturing and furnishing, approved (or deemed approved) by Lender,
provided that neither minor construction of $300,000 or less nor the Initial
Projects shall require Lender’s approval, but the remaining requirements of
this Agreement applicable to Construction (other than any obligation to deposit
funds with Lender) shall be complied with.

 

4

 

“Construction Contract”
means one or more construction agreements in form and substance reasonably
acceptable to Lender between Borrower and a Contractor covering any portion of
the Construction.

 

“Construction Legal Compliance”
means Borrower’s satisfaction of all of the following:  (A) (i) the applicable Construction
through the applicable date of determination, has been constructed
substantially in accordance with the applicable Plans and Specifications (other
than deviations therefrom that are immaterial individually and in the
aggregate); and (ii) the applicable Construction has been, or will be,
constructed in substantial compliance with all Legal Requirements; (B) all
material entitlements, approvals, allocations, certificates, authorizations,
permits and licenses required through the then-current stage of construction
have been obtained from all appropriate Governmental Authorities and have been
validly and irrevocably obtained without qualification, appeal or existence of
unexpired appeal periods; (C) all conditions to the issuance of, and the
requirements under, all permits, conditional use permits and licenses required
through the current stage of construction have been satisfied in all material
respects; and (D) no appeals, suits or other actions are pending or
threatened in writing by any Governmental Authority which, if determined
adversely to the interests of Borrower or the Mortgaged Property, would result
in the revocation, suspension or qualification of any of such permits or
approvals.

 

“Contingent Obligation,”
as applied to any Person, means any direct or indirect liability, contingent or
otherwise, of that Person:  (A) with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; (B) with respect to any letter of credit issued for the account
of that Person or as to which that Person is otherwise liable for reimbursement
of drawings; (C) under any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect the applicable Person against fluctuations in
interest rates; or (D) under any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect that
Person against fluctuations in currency values. 
Contingent Obligations shall include (1) the direct or indirect
guaranty, endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (2) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (3) any liability of such
Person for the obligations of another through any agreement to purchase,
repurchase or otherwise acquire such obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another. 
The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.

 

“Contractor” means the
contractor(s) or construction manager(s) for the Construction as Lender may,
from time to time approve, which approval shall not be unreasonably withheld or
delayed; provided such approval shall not be required for Construction that
otherwise does not require Lender approval pursuant to the definition of
Construction.

 

5

 

“Contracts” means all
contracts, agreements, warranties and representations relating to or governing
the use, occupancy, design, construction, operation, management, repair and
service of any other component of the Mortgaged Property, as amended, modified
or supplemented from time to time.

 

“Control” (including with
correlative meanings, the terms “controlling,” “controlled by” and “under
common control with”) means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

 

“Default” means a
condition or event that, after notice or lapse of time or both, would
constitute an Event of Default if that condition or event were not cured or
removed within any applicable grace or cure period.

 

“Default Rate” means a
rate per annum equal to the Base Rate plus five percent (5%).

 

“Default Interest” is
defined in Section 2.2(A).

 

“Dollars” and the sign “$” mean the lawful money of the United
States of America.

 

“Embargoed Person” is
defined in Section 4.9.

 

“Employee Benefit Plan”
means an employee pension benefit plan which is covered by Title IV of ERISA or
subject to the minimum funding standards under Part 3 of Title I of ERISA
or Section 412 of the Code and is either (a) maintained by any Person
or any member of a Controlled Group for employees of such Person or any member
of such Controlled Group or (b) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one
employer makes contributions and to which such Person or any member of a
Controlled Group is then making or has any obligation to make contributions or,
within the preceding five (5) plan years, has made or has had any
obligation to make contributions.

 

“Environmental Claims” is
defined in Section 4.13.

 

“Environmental Indemnity Agreement”
means the Environmental Indemnity Agreement, dated of even date herewith,
executed by Borrower in favor of Lender, together with all amendments,
modifications, renewals, substitutions and extensions thereto.

 

“Environmental Laws” means
all present and future federal, state and/or local laws, statutes, ordinances,
codes, rules, regulations, orders, decrees, licenses, decisions, orders,
injunctions, requirements and/or directives of Governmental Authorities, as well as common law, imposing liability, standards of conduct
or otherwise pertains or relates to, or for, for the environment, industrial
hygiene, the regulation of Hazardous Materials, natural resources, pollution or
waste management.

 

“Environmental Reports”
means those reports and audits itemized on Schedule 1.1(A) hereto.

 

6

 

“ERISA” means the Employee
Retirement Income Security Act of 1974, and all rules and regulations
promulgated thereunder.

 

“ERISA Affiliate” means
any Person who is a member of a group which is under common control with
another Person, who together with such other Person is treated as a single
employer within the meaning of Sections 414(b), (c), (m) and (o) of the IRC or
Sections 4001 of ERISA.

 

“Excess Interest” is
defined in Section 2.2(C).

 

 “Expenses” means the costs and expenditures accrued or incurred
by Borrower, without duplication, in connection with the ownership, operation
and management of the Mortgaged Property, specifically including in Expenses (1) periodic
deposits required to be made into the Reserves; (2) capital expenditures
incurred pursuant to an Approved Budget to the extent not paid from any
Reserves or the proceeds of the Loan; and (3) management fees, and
specifically excluding from Expenses, however, (i) all expenditures to the
extent funded from any Reserves, (ii) principal, interest and all other
payments made by Borrower to Lender under the Loan Documents, (iii) federal
or state income taxes, and (iv) depreciation and other non-cash expenses
of the Mortgaged Property.

 

“Extension Conditions”
shall mean the following conditions, all of which must be satisfied, in order
for the Initial Maturity Date to be extended to the First Extended Maturity
Date and for the First Extended Maturity Date to be extended to the Second
Extended Maturity Date:  (a) not
less than sixty (60) days prior to the Initial Maturity Date or First Extended
Maturity Date, as applicable, Borrower shall have delivered to Lender an
irrevocable written notice requesting the extension and simultaneously
therewith have paid to Lender a non-refundable extension fee in the amount
equal to one-half percent (0.5%) of the outstanding principal balance of the
Loan on the date of the request for the extension; (b) no Default or Event
of Default shall exist under this Agreement or any of the other Loan Documents
either at the time of the delivery of the notice to extend or at the time of
the effective date of the extension; (c) Borrower shall deliver to Lender,
an Officer’s Certificate dated as of the Initial Maturity Date or First
Extended Maturity Date, as applicable certifying, without qualification, (i) that
no Default or Event of Default has occurred which remains uncured and (ii) that
the representations and warranties in the Loan Documents of all parties thereto
(other than Lender) are true and correct in all material respects on and as of,
as applicable, the Initial Maturity Date or First Extended Maturity Date; and (d) the
Rate Cap Agreement shall have been amended and extended pursuant to
documentation satisfactory in form and substance to Lender to extend its term
through the First Extended Maturity Date or Second Extended Maturity Date, as
applicable.

 

“Financing Statements”
means the UCC-1 Financing Statements naming Borrower, as debtor, and Lender, as
secured party, and filed with such filing offices as Lender may reasonably
require.

 

“First Extended Maturity Date”
means September 30, 2008.

 

“Fixtures and Personalty”
means all fixtures now or hereafter affixed or attached to the Land or in the
Improvements or used in connection with the use, occupancy, operation and

 

7

 

maintenance of all or any part of the Land or
Improvements, whether or not permanently affixed thereto, together with all
accessions, replacements and substitutions thereto or therefore and the
proceeds thereof, and all “farm products” (as defined in the UCC), “fixtures”
(as defined in the UCC), “manufactured homes” (as defined in the UCC), oil, gas
and other minerals (whether before or after extraction), and any and all of the
following: signs; partitions and screens; generators, boilers, compressors and
engines; fuel; water and other pumps and tanks; irrigation lines and
sprinklers; refrigeration equipment; pipes and plumbing; plumbing fixtures and
restroom installations; lighting fixtures; power generators, if any, used with
respect to the Land, Improvements and other components of Fixtures and
Personalty, electrical wiring located within the Improvements; life safety
systems; cooling towers; elevators and escalators; sprinkler systems and other
fire extinguishing machinery and equipment; heating, incinerating, ventilating,
air conditioning and air cooling ducts, machinery, equipment and systems;
facilities used to provide utility services; laundry, drying, dishwashing and
garbage disposal machinery or equipment; communication apparatus, including
television, radio, music, and cable antennae and systems; floor coverings,
rugs, carpets, window coverings, blinds, awnings, shades, curtains, drapes and
rods; screens, storm doors and windows; stoves, refrigerators, dishwashers and
other installed appliances; attached cabinets; trees, plants and other items of
landscaping; visual and electronic surveillance systems and other security
systems; and telecommunications wiring and phone jacks.  Notwithstanding the foregoing, “Fixtures and Personalty” are intended to
encompass personal property assets only to the extent arising from or related
to the Land and Improvements and the Borrower’s interest as a landowner thereof
and specifically does not include personal property assets (including but not
limited to machinery or equipment) used or otherwise owned by the Borrower (so
long as Borrower’s business does not now and will not ever include the sale,
development or leasing of real estate) in connection with or as a result of the
normal conduct of the Borrower’s business (notwithstanding the fact that the
Borrower operates such business on the Land and Improvements).

 

“Future Advance” means an
advance of $5,000,000 of Loan proceeds by Lender in accordance with the terms
and conditions set forth in Section 5.13.

 

“Future Advance Fee” is
defined in Section 5.13.

 

“GAAP” means generally
accepted accounting principles in the United States of America, consistently
applied, as of the date in question.

 

“General Intangibles”
means all causes in action, causes of action and all other intangible personal
property of the Borrower of every kind and nature (including the Accounts),
wherever located relating to or arising from the use, operation and management
of all or any part of the Land, Improvements or any other part of the Mortgaged
Property, including all “general intangibles” (as defined in the UCC), all “payment
intangibles” (as defined in the UCC), all corporate or other business records
relating solely to the Mortgaged Property, insurance policies (including claims
under, and interests in, insurance policies), condemnation awards, landlord’s
liens, liens given by statute or other rule of law for services or
materials, agricultural liens, judgments and rights represented by judgments
and rights of recoupment or set-off.  The
General Intangibles also include the Rate Cap Agreement and all Contracts.  Notwithstanding the foregoing, “General Intangibles” are intended to
encompass personal property assets only to the extent arising from or related
to the Land and Improvements and the Borrower’s interest as a

 

8

 

landowner thereof and specifically does not
include personal property assets used or otherwise owned by the Borrower (so
long as Borrower’s business does not now and will not ever include the sale,
development or leasing of real estate) in connection with or as a result of the
normal conduct of the Borrower’s business (notwithstanding the fact that the
Borrower operates such business on the Land and Improvements).

 

“Governmental Authority”
means the United States of America, any state, any foreign governments and any
political subdivision or regional division of the foregoing, and any agency,
department, court, regulatory body, commission, board, bureau or
instrumentality of any of them.

 

“Hazardous Materials”
means (a) any pollutants, toxic pollutants, oil, gasoline, petroleum
products, asbestos, materials or substances containing asbestos, explosives,
chemical liquids or solids, radioactive materials, polychlorinated biphenyls or
related or similar materials, or any other solid, liquid or other emission,
substance, material, product or by-product defined, listed or regulated as a
hazardous, noxious, toxic or solid substance, material or waste or defined,
listed or regulated as causing cancer or reproductive toxicity, or otherwise
defined, listed or regulated as hazardous or toxic in, pursuant to, or by any
federal, state or local law, ordinance, rule, or regulation, now or hereafter
enacted, amended or modified, in each case to the extent applicable to the
Mortgaged Property including the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601, et seq.); the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801, et seq.); the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901, et seq.);
Sections 25117, 25281, 25316 or 25501 of the California Health &
Safety Code; any so-called “Superfund” or “Superlien” law; the Toxic Substance
Control Act of 1976 (15 U.S.C. Section 2601 et seq.); the Clean Water Act (33 U.S.C. Section 1251
et seq.); and the Clean Air
Act (42 U.S.C. Section 7901 et seq.);
(b) any substance which is or contains asbestos, radon, polychlorinated
biphenyl, urea formaldehyde foam insulation, explosive or radioactive material,
lead paint, motor fuel or other petroleum hydrocarbons, (c) fungus, mold,
mildew, or other biological agents the presence of which may adversely affect
the health of individuals or other animals or materially adversely affect the
value or utility of the Mortgaged Property, and/or (d) any other substance
which causes or poses a threat to cause a contamination or nuisance with
respect to all or any portion of the Mortgaged Property or any adjacent
property or a hazard to the environment or to the health or safety of Persons.

 

“Impositions” means all
real estate and personal property taxes, and vault charges and all other taxes,
levies, assessments and other similar charges, general and special, ordinary
and extraordinary, foreseen and unforeseen, of every kind and nature
whatsoever, which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a Governmental Authority upon the
Mortgaged Property or upon the ownership, use, occupancy or enjoyment thereof,
and any interest, cost or penalties imposed by such Governmental Authority with
respect to any of the foregoing. 
Impositions shall not include any sales or use taxes or any income taxes
payable by Borrower.

 

“Improvements” means all
buildings, improvements, alterations or appurtenances now, or at any time
hereafter, located upon, in, under or above the Land or any part thereof.

 

“Indebtedness”:  With respect to any Person means, without
duplication, (a) any indebtedness of such Person for borrowed money (whether
by loan, the issuance and sale of debt

 

9

 

securities or the sale of any property or
asset of such Person to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such property from such
Person), (b) any obligations of such Person for the deferred purchase
price of property or services due after six (6) months of the sale or
other disposition of such property, (c) any obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) any
obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) any obligations of such Person as lessee under leases that
have been or should be, in accordance with GAAP, recorded as capital leases, (f) any
obligations, contingent or otherwise, of such Person in respect of acceptances,
letters of credit or similar extensions of credit, (g) any Contingent
Obligations, (h) any Indebtedness of others referred to in clauses (a) through
(g) above or clause (i) below guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (1) to pay or purchase such Indebtedness
or to advance or supply funds for the payment or purchase of such Indebtedness,
(2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such Indebtedness or to assure the holder of such Indebtedness
against loss, (3) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or (4) otherwise
to assure a creditor against loss, and (i) any Indebtedness referred to in
clauses (a) through (i) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on property (including accounts and contract rights)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness.

 

“Indemnified Liabilities”
is defined in Section 11.3.

 

“Indemnitees” is defined
in Section 11.3.

 

“Independent Architect” is
defined in Section 7.14.

 

“Initial Maturity Date” means September 30, 2007.

 

“Initial Projects” means
those certain alterations and repairs to the Improvements set forth and
described on Schedule 5.1(D) attached
hereto, which are hereby approved by Lender.

 

“Inspection Certificate” means a certificate from an architect or
other design professional approved by Lender in form and substance reasonably
acceptable to Lender.

 

“Interest Period” means
the period of time beginning on the 10th day of a Loan Month and
ending on the 9th day of the following Loan Month, provided,
however, the first Interest Period shall commence on the date the Loan
commences to bear interest and continues to and includes October 9, 2004.

 

“Interest Rate” means the
Base Rate or the Default Rate, as applicable.

 

10

 

“Inventory” means all of
the Borrower’s now owned and hereafter acquired inventory, goods and
merchandise, wherever located, to be furnished under any contract of service or
held for sale or lease, all returned goods, raw materials, work-in-process,
finished goods (including embedded software), other materials and supplies of
any kind, nature or description which are used or consumed in the Borrower’s
business or used in connection with the packing, shipping, advertising, selling
or finishing of such goods, merchandise, and all documents of title or other
documents representing them.

 

“Investment” means (A) any
direct or indirect purchase or other acquisition by Borrower of any beneficial
interest in, including stock, partnership interest or other Securities of, any
other Person or (B) any direct or indirect loan, advance or capital
contribution by Borrower to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.

 

“Land” means the real
estate comprising the Mortgaged Property, as more specifically described in the
Mortgage including all oil, gas and mineral rights, oil, gas and minerals
(whether before or after extraction), easements, appurtenances, water rights,
water stock, rights in and to streets, roads and highways (whether before or
after vacation thereof), hereditaments and privileges relating, in any manner
whatsoever, to the Land.  The Land is
legally described on Exhibit A.

 

“Late Charge” is defined
in Section 2.2(D).

 

“Leases” means any and all
leases, subleases, occupancy agreements or grants of other possessory
interests, whereby Borrower acts as the lessor, sublessor, licensor, grantor or
in another similar capacity, now or hereafter in force, oral or written,
covering or affecting the Land or Improvements, or any part thereof, together
with all rights, powers, privileges, options and other benefits of Borrower
thereunder and any and all guaranties of the obligations of the lessees,
sublessees, occupants, and grantees thereunder, as such leases, subleases,
occupancy agreements or grants may be extended, renewed, modified or replaced
from time to time (exclusive of any ground lease having Borrower as ground
lessee).

 

“Legal Requirements” means
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting Borrower, the Mortgaged Property or any part
thereof, the construction, use, alteration or operation thereof, or any part
thereof, or any or all of any other Collateral whether now or hereafter enacted
and in force, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record, known to Borrower or otherwise,
at any time in force affecting Borrower, the Mortgaged Property, or any part
thereof, or any or all of the other Collateral including, without limitation,
any which may (a) require repairs, modifications or alterations in or to
the Mortgaged Property or any part thereof, or (b) in any way limit the
use and enjoyment thereof.

 

“LIBOR Rate” or “London Interbank Offered Rate” means a
floating interest rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal to the London Interbank

 

11

 

Offered Rate (LIBOR) with a one month
maturity as reported in the Money Rates column or section of The Wall Street Journal
published on the second full Business Day preceding the first day of the
Interest Period.  For purposes hereof,
the LIBOR Rate for the period commencing on the date of disbursement of the
Loan to and including the final day of the Interest Period Commencing on the
Closing Date shall be 1.875%.

 

“Lien” means (a) any
lien, mortgage, pledge, security interest, charge or monetary encumbrance of
any kind, whether voluntary or involuntary (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and (b) any negative pledge or
analogous agreement including any agreement not to directly or indirectly
convey, assign, sell, mortgage, pledge, hypothecate, grant a security interest
in, grant options with respect to, transfer or otherwise dispose of,
voluntarily or involuntarily, by operation of law or otherwise, any direct or
indirect interest in an asset or direct or indirect interest in the ownership
of an asset, other than a negative pledge or analogous agreement with respect
to assets other than the Mortgaged Property in connection with the Additional
Credit Facility.

 

“Loan” means the loan in
an aggregate amount of up to $12,000,000 (as disbursed from time to time
pursuant to this Agreement) from Lender to Borrower as evidenced by the Note.

 

“Loan Documents” means
this Agreement, the Note, the Mortgage, the Assignments, the Environmental
Indemnity Agreement, the Financing Statements and all other documents,
instruments, certificates and other deliveries made by Borrower to Lender in
accordance herewith or which otherwise evidence, secure and/or govern the Loan.

 

“Loan Month” means a
calendar month.

 

“Lockout Expiration Date”
means September 30, 2005.

 

“Material Adverse Effect”
means (A) a material adverse effect upon the business, operations,
properties, assets or condition (financial or otherwise) of Borrower or the
Mortgaged Property taken as a whole, or (B) the impairment, in any
material respect, of the ability of Borrower to perform its obligations under
any of the Loan Documents or of Lender to enforce or collect any of the Obligations.  In determining whether any individual event
would result in a Material Adverse Effect, notwithstanding that such event does
not of itself have such effect, a Material Adverse Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then
existing events would result in a Material Adverse Effect.

 

“Material Contracts” means
(a) the Permitted Encumbrances (not otherwise referred to in this
definition of Material Contracts), and (b) those (i) Contracts set
forth on Schedule 4.6(D) attached
hereto and (ii) other Contracts which, if not complied with by Borrower,
could reasonably be expected to have a Material Adverse Effect.

 

“Maturity Date” means the
Initial Maturity Date, First Extended Maturity Date (if extended in accordance
with the terms of this Agreement) or the Second Extended Maturity Date (if
extended in accordance with the terms of this Agreement) or such earlier date
as the Loan is prepaid in full or accelerated.

 

12

 

“Maximum Rate” is defined
in Section 2.2(C).

 

“Mortgage” means the Deed
of Trust with Security Agreement, Assignment of Leases and Rents and Fixture
Filing of even date herewith from Borrower to or for the benefit of Lender,
constituting a first Lien on Mortgaged Property as collateral for the Loan.

 

“Mortgaged Property” means
the Land, the Improvements, the Leases, the General Intangibles, the Fixtures
and Personalty, the Proceeds, the Plans and Specifications, and all other
property of every kind and description used or useful in connection with the
ownership, occupancy, operation and maintenance of the other components of the
Mortgaged Property, and all substitutions therefor, replacements and accessions
thereto, and proceeds (including “proceeds” as defined in the UCC) derived
therefrom, all as more specifically described in the Mortgage.  Notwithstanding the foregoing, “Mortgaged
Property” is intended to encompass personal property assets only to the extent
arising from or related to the Land and Improvements and the Borrower’s
interest as a landowner thereof and specifically does not include personal
property assets used or otherwise owned by the Borrower (so long as Borrower’s
business does not now and will not ever include the sale, development or
leasing of real estate) in connection with or as a result of the normal conduct
of the Borrower’s business (notwithstanding the fact that the Borrower operates
such business on the Land and Improvements). 
In particular and without limitation, “Mortgaged Property” does not
include accounts, payment intangibles, receivables related to the Borrower’s
business, work-in-progress and inventory or equipment (other than Fixtures and
Personalty) located on the Land and Improvements, intellectual property, general
intangibles, proprietary rights, good will, deposit accounts, securities
accounts or other investment property related to the management or investments
of revenues derived from the Borrower’s business, cash or cash equivalents
arising out of such business, client lists and other similarly situated assets
and properties of the Borrower.

 

“Multiemployer Plan” means
a “multiemployer plan” as defined in Section 4001(a)(3) of
ERISA to which Borrower or any ERISA Affiliate is making, or is accruing an
obligation to make, contributions or has made, or been obligated to make,
contributions within the preceding six (6) years, or for which Borrower or
any ERISA Affiliate has any liability, including contingent liability.

 

“Note” means that the
Promissory Note, together with the Substitute Notes and all future advances,
extensions, renewals, substitutions, modifications and amendments of the
Promissory Note and Substitute Notes.

 

“Obligations” means, in
the aggregate, all obligations, liabilities and indebtedness of every nature of
Borrower from time to time owed to Lender under the Loan Documents, including
the principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable to Lender under the Loan Documents whether
before or after the filing of a proceeding under the Bankruptcy Code by or
against Borrower.  The term “Obligations”
shall also include any judgment against Borrower or the Mortgaged Property with
respect to such obligations, liabilities and indebtedness of Borrower.

 

13

 

“OFAC” is defined in Section 4.9.

 

“Officer’s Certificate”
means the certificate of an executive officer, chief financial officer or other
officer or representative with knowledge of the matters addressed in such
certificate.

 

“Organizational Documents”
means, as applicable, for any Person, such Person’s articles or certificate of
incorporation, by-laws, partnership agreement, trust agreement, certificate of
limited partnership, articles of organization, certificate of formation,
shareholder agreement, voting trust agreement, operating agreement, limited
liability company agreement and/or analogous documents, as amended, modified or
supplemented from time to time.

 

“Origination Fee” means an
amount of money equal to $120,000.

 

“Payment Date” means the
10th day of each calendar month commencing on November 10,
2004.

 

“Permitted Acquisition”
means any Acquisition that conforms to the following requirements: (i) the
assets, Person, division or line of business to be acquired is primarily in a
substantially similar or ancillary line of business as the Borrower, (ii) all
transactions related to such Acquisition shall be consummated in accordance
with applicable Legal Requirements, (iii) such Acquisition shall be
non-hostile in nature, (iv) the prior, effective written consent or
approval of such Acquisition by the board of directors or equivalent governing
body or management having the appropriate level of authority of the acquiree is
obtained, (v) with respect to any such Acquisition that is a merger or
consolidation affecting the Borrower, Borrower shall be the surviving entity,
and (vi) immediately after giving effect to such Acquisition: (A) no
Default or Event of Default exists or would result therefrom, (B) 100% of
the capital stock of any acquired or newly formed corporation, partnership,
limited liability company or other business entity or, as the case may be, the
assets, division or line of business acquired, is owned directly by the
Borrower, and (C) with respect to any Acquisition where some or all of the
consideration paid by the Borrower is other than capital stock of the Borrower,
the aggregate amount of such consideration paid for all such Acquisitions since
the Closing Date would not exceed $5,000,000 plus any new capital
contributed to Borrower for the purpose of, and substantially concurrent with,
any such Acquisition.

 

“Permitted Contest” is
defined in Section 5.3(B).

 

“Permitted Encumbrances”
means the matters identified on Exhibit C.

 

“Permitted Indebtedness”
means (a) Contingent Obligations described in parts (1) and (2) of
the definition of Contingent Obligations that are incurred in the ordinary
course of business, (b) the Additional Credit Facility, (c) ordinary
and customary trade payables incurred in the ordinary course of business of
Borrower, (d) operating and financing leases and standby letters of credit
entered into in the ordinary course of business of Borrower and consistent with
past practice (a description of all such leases (other than those leases which
have annualized rent less than $50,000 individually or $200,000 in the aggregate)
and letters of credit entered into by Borrower as of the Closing Date is
attached hereto as shown on Schedule 4.4), (e) the Rate Cap Agreement and other
interest rate and currency fluctuation protection hedges not entered into for

 

14

 

speculative purposes, (f) any
Subordinated Shareholder Debt, (g) indebtedness related to completion
guaranties, performance bonds and commercial and standby letters of credit
associated with Construction approved by Lender or for which Lender’s approval
is not required pursuant to the terms of this Agreement or the acquisition or
transportation of manufacturing materials, (h) indebtedness to employees
of Borrower incurred in connection with the repurchase of employee stock options
or the repurchase of equity of any employees of Borrower upon the death,
disability or termination of such employee, (i) the Loan, (j) such other
unsecured indebtedness (whether in the form of guaranties, pledges of
Subsidiary stock or otherwise) not otherwise permitted herein in an amount not
to exceed an aggregate of $2,000,000, (k) to the extent not subsumed in items
(a)-(i), inclusive, of this definition, the Indebtedness identified on Schedule 4.4, and (l) pledges of
Stock in Subsidiaries to secure the Additional Credit Facility, other Permitted
Indebtedness for money borrowed or Indebtedness of Subsidiaries of the Borrower
that is non-recourse to the Borrower except to the extent of the ownership
interests in such Subsidiary that are pledged by the Borrower.

 

“Permitted Investments”
means, (a) Permitted Acquisitions, (b) Subsidiary Transactions and (c) initial
capital investment in connection with each Permitted Subsidiary Formation.

 

“Permitted Rezoning” means
a rezoning of the Land and the Improvements such that residential development
is permitted on the Land and the Land and Improvements are not subject to any
conditions or limitations not approved by Lender.

 

“Permitted Subsidiary Formation”
means the creation of a new Subsidiary by the Borrower for which the Borrower
may provide initial capital so long as, (a) at the time of the formation
and capitalization of such Subsidiary, no Default or Event of Default exists or
would result therefrom; (b) the aggregate amount of initial capital
provided to all such new Subsidiaries by the Borrower for such purpose does not
exceed $1,500,000 in any fiscal year; and (c) the aggregate amount of
initial capital provided for the formation of any new Subsidiary by the
Borrower for such purpose does not exceed $500,000; provided that the
amount of any new capital contributed by VantagePoint to Borrower or any such
new Subsidiary for the purpose of, and substantially concurrent with, the
initial capitalization of such new Subsidiary shall not be counted toward calculating
the limitations under clause (c).

 

“Person” means and
includes natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof and their respective permitted
successors and assigns (or in the case of a governmental person, the successor
functional equivalent of such Person).

 

“Physical Condition Report” means the report(s) regarding the physical
inspection of the Land and Improvements listed on Schedule 1.1(B).

 

“Plans and Specifications” means the final drawings and specifications
for the development and construction of each component part of the applicable
Construction (as the same may be amended in accordance with the provisions
permitted by this Agreement), as applicable, which plans and specifications and
all amendments thereto shall be (i) with respect to

 

15

 

any Construction in excess of $300,000 other
than the Initial Projects (which have been approved by Lender as of the Closing
Date), subject to Lender’s approval, which approval shall not be unreasonably
withheld or delayed, and (ii) in accordance with all applicable Legal
Requirements.

 

“Prepayment Premium” means
(i) during the period beginning on the day immediately following the
Lockout Expiration Date through September 30, 2006, two percent (2%); (ii) during
the period beginning on October 1, 2006 through the Initial Maturity Date,
one percent (1%); and (iii) thereafter 0%. 
However, if an Event of Default occurs on or before the Lockout
Expiration Date and the Loan is accelerated, the Prepayment Premium shall be
equal to the greater of (x) ten percent (10%) of the principal balance of the
Loan and (y) the Yield Maintenance Amount.

 

“Prescribed Laws” means,
collectively, (a) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001, and relating to
Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism and implementing regulations thereto, (c) the
International Emergency Economic Power Act, 50 U.S.C. §1701 et seq., (d) all other laws,
regulations and executive orders administered by the Office of Foreign Assets
Control and (e) all other Legal Requirements relating to money laundering
or terrorism.

 

“Proceeds” is defined in Section 8.1.

 

“Promissory Note” means
the Promissory Note dated of even date herewith made by Borrower to the order
of Lender in the original principal amount of $12,000,000.

 

“Proprietary Rights” is
defined in Section 4.11.

 

“Publicly Traded Person”
means a Person (i) whose stock is listed or quoted on the New York Stock
Exchange, the American Stock Exchange or NASDAQ, (ii) who is not subject
to any investigation, inquiry or action by such exchange or market or the
Securities and Exchange Commission for the suspension or delisting of such
Person’s Securities, and (iii) who has not been the subject of any
bankruptcy proceeding, whether voluntary or involuntary, under the Bankruptcy
Code or any state insolvency law during the past two years.

 

“Punch-List Items” means
details of construction, decoration and mechanical and electrical adjustment
which in the aggregate are minor in character and do not materially interfere
with the intended use and operation of the applicable Construction.

 

“Qualified Public Offering”
means the closing and funding of a firm commitment underwritten public offering
of Common Shares of the common stock of Borrower in which the net proceeds to
Borrower and its shareholders of such offering equals at least $50,000,000.

 

“Qualified Sale Transaction”
means a Transfer of one hundred percent (100%) of the ownership interests of
Borrower, whether by merger or sale of all of the outstanding capital stock of
Borrower, to a Publicly Traded Person, provided (1) the combined net worth
of the surviving entity (the “Surviving
Entity”) immediately following such Transfer equals at least
$129,000,000, (2) the net cash, less any Indebtedness, of the Surviving
Entity equals at least

 

16

 

$75,000,000, and (3) the Surviving
Entity expressly assumes the Obligations and the Loan Documents pursuant to
documentation satisfactory to Lender and delivers to Lender such assumption
agreements, Financing Statements, legal opinions, title insurance policies or
endorsements, lien searches, and such other documentation as Lender may
reasonably require.

 

“Rate Cap Agreement” shall
mean an interest rate cap agreement including the related confirmation, obtained
at the sole cost and expense of Borrower, issued by a Rate Cap Issuer with a
notional amount equal to $7,000,000, pursuant to which Borrower will be
protected against an increase in LIBOR over the Rate Cap Strike Rate for a
period of not less than two (2) years provided, however, those interest
rate cap agreements that are to be obtained after the initial Rate Cap
Agreement shall have a minimum term of not less one (1) year.  The Rate Cap Agreement shall be subject to
the approval of Lender as to form and substance and shall be assignable to
Lender, its successors and assigns.

 

“Rate Cap Issuer” shall
mean the counterparty to the Rate Cap Agreement, which counterparty shall be an
Acceptable Financial Institution or another financial institution approved by
the Lender and the credit rating assigned to the unsecured debt of such
counterparty by S&P must, at all times, equal or exceed AA-.

 

“Rate Cap Pledge Agreement”
shall mean that certain Rate Cap Pledge and Security Agreement of even date
herewith between Borrower and Lender and replacements, from time to time,
thereof in accordance with Section 5.15. 
The Rate Cap Issuer shall acknowledge the pledge and security interest
grant by executing the joinder attached to the Rate Cap Pledge Agreement and
any replacements as, from time to time, thereof in accordance with Section 5.15.

 

“Rate Cap Strike Rate”
shall mean a rate per annum of six and three-quarters percent (6.75%).

 

“Rating Agency Confirmation”
shall mean, collectively, an affirmation from each of the Rating Agencies that
the credit rating by such Rating Agency of the securities issued in connection
with a securitization of the Loan or otherwise secured by a pledge of the Note
immediately prior to the occurrence of the event with respect to which such Rating
Agency Confirmation is sought will not be qualified, downgraded or withdrawn as
a result of the occurrence of such event, which affirmation may be granted or
withheld in such Rating Agency’s sole and absolute discretion provided, however
if the Loan has not been securitized in connection with a Securitization in
which some or all of the securities have been rated by one or more of the
Rating Agencies, Rating Agency Confirmation means Lender’s approval, which
approval is not to be unreasonably withheld or delayed.

 

“Rating Agencies” shall
mean Standard & Poor’s Ratings Services, a Division of The McGraw-Hill
Companies, Inc. (“S&P”),
Fitch Inc., and Moody’s Investors Service, Inc. (“Moody’s”) or, if any of such firms shall
for any reason no longer perform the functions of a securities rating agency,
any other nationally recognized statistical rating agency reasonably designated
by Lender; provided, however, that at any time during which the Loan is an
asset of a securitization, “Rating Agencies” shall mean the rating agencies
that from time to time rate the securities issued in connection with such
securitization.  If the Loan is not an
asset in a

 

17

 

securitization, Rating Agency shall mean
those rating agencies designated by Lender from time to time.

 

“Request for Release”
means a request from Borrower to Lender in connection with a request for
disbursement from the Proceeds accompanied by the following items, which
request and items are subject to the approval of Lender not to be unreasonably
withheld or delayed: (a) currently dated certificate approved by Borrower
from a Contractor, the Independent Architect, if any, and Lender’s
Representative, if any, on a form to be reasonably approved by Lender; (b) the
Required Lien Waivers in form and substance reasonably satisfactory to Lender; (c) if
requested by Lender, from time to time, the requisitions for payment then the
subject of such Request for Release from subcontractors and material suppliers
engaged in the construction of the applicable Construction in form and content
reasonably satisfactory to Lender; (d) an Inspection Certificate of an
architect approved by Lender based upon an on-site inspection of the applicable
Construction made by the Independent Architect and confirmed by Lender’s
Representative, if any, which shall certify to all work for which such Request
for Release has been requested; (e) evidence reasonably satisfactory to
Lender of Construction Legal Compliance in the form of (i) a certificate
of an Independent Architect as to items (a), (b) and (c) of the
definition of Construction Legal Compliance (together with copies of the
applicable entitlements, approvals, allocations, permits, licenses and
conditional use permits), (ii) a certificate from the Borrower as to item (d) of
the definition of Construction Legal Compliance (which certificate may, as to “threatened”
matters, be qualified to “the best of such Person’s knowledge following
due inquiry”) and (iii) such other showings, certificates, reports and
items as Lender or Lender’s Representative, if any, may reasonably request to
confirm Construction Legal Compliance; (f) a date-down endorsement to
the Title Policy dating the Title Policy down to the date and time of the
requested disbursement and, if the Title Policy includes exceptions,
qualifications or endorsements relating to “pending disbursements,” increasing
the amount thereof by the requested disbursement; and (g) such other
information and documents as may be reasonably requested or required by Lender
or Lender’s Representative, if any, including, but not limited to,
certificates, inspections, date-down and other title policy endorsements,
invoices, receipts, estoppel certificates, permits, licenses and certificates
of occupancy, affidavits and other documents, appropriate for the applicable
stage of construction.

 

“Required Lien Waivers”
means, waivers of liens executed by (a) for each Request for Release,
Contractor and each design professional with whom Borrower has a direct agreement,
respectively, waiving their respective rights, if any, and any right of a
subcontractor claiming through or under any of them, to file or maintain any
construction liens or claims, all in such form as may be reasonably required by
Lender or in the form set forth in the California Civil Code, and (b) for
each Request for Release that includes a request for final payment to any
subcontractor, such subcontractor, waiving its right to file or maintain any
construction liens or claims, all in such form and containing such provisions
as may be reasonably required by Lender executed with respect to and applicable
to the extent such subcontractor has received payment.  Such waivers may be conditioned upon payment
for work performed and materials supplied; provided, that the Request for
Release that includes the request described in clause (b) above shall
include (and in the case of the final Request for Release, within ten (10) days
after the funding of such final Request for Release, Borrower shall deliver to
Lender) a duly executed, unconditional waiver for each Person described in
clauses (a) or (b) above.

 

18

 

“Required Restoration Date”
is defined in Section 8.1.

 

“Reserves” means the
reserves for impositions and insurance deposited by Borrower as provided in Section 5.5.

 

“Restoration” is defined
in Section 8.1.

 

“Second Extended Maturity Date”
means September 30, 2009.

 

“Securities” means any
stock, shares, voting trust certificates, bonds, debentures, options, warrants,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as “securities”
or any certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

 

“Securitization” is
defined in Section 10.1.

 

“Shareholder Subordinated Debt”
is defined in Section 7.6.

 

“Subsidiary” means, with
respect to any Person (the “parent”)
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than fifty percent (50%) of the equity or more than
fifty percent (50%) of the ordinary voting power or, in the case of a
partnership, more than fifty percent (50%) of the general partnership interests
are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more Subsidiaries of
the parent or by the parent and one or more Subsidiaries of the parent.

 

“Subsidiary Transaction”
means, so long as in the ordinary course of the Borrower’s business consistent
with practices established (and disclosed, in writing, to the Lender) as of the
Closing Date: (a) the incurrence by the Borrower of accounts payable owing
to its Subsidiaries and the incurrence by Borrower’s Subsidiaries of accounts
payable owing to the Borrower, in each case in connection with provision of
services or sales or returns of Inventory, (b) the payment and receipt of
payment by the Borrower or of the accounts payable set forth in the foregoing clause
(a) and the payment by the Borrower of operating expenses of the
Borrower’s Subsidiaries, and (c) the making of intercompany loans or
advances by the Borrower to one or more of its Subsidiaries; provided
that (y) the Borrower shall not make any of the payments or advances described
in the foregoing clauses (b) or (c) if a Default exists
or would result therefrom and Lender has notified Borrower of such Default, or
if an Event of Default then exists or would result therefrom, and (z) the
Borrower shall not make any of the advances described in the foregoing clause
(c) if the aggregate amount of all such advances outstanding at any
one time would exceed $2,000,000.

 

“Substantial Completion and
Substantially Completed” means
the satisfaction of all of the following conditions: (a) the date when the
applicable Construction shall have been

 

19

 

completed (except for Punch List Items and
minor items which can be fully completed without material interference with the
use and operation of the Mortgaged Property) in accordance with the applicable
Plans and Specifications as certified by the Independent Architect on standard
AIA-G702 forms and approved by Lender’s Representative, if any, and Lender,
such approval not to be unreasonably withheld or delayed; and (b) all
material permits and approvals required for the normal use and occupancy of the
applicable Construction (including a certificate of occupancy if required for
occupancy under applicable Legal Requirements) shall have been issued by the
appropriate Governmental Authority and shall be in full force and effect.

 

“Substitute Note” means
all notes given in substitution or exchange for the Promissory Note or another
Substitute Note.

 

“Title Company” means
Stewart Title Guaranty Company.

 

“Title Policy” means a
mortgagee’s policy of title insurance issued on the 1970 Form B ALTA form
by the Title Company (or the closest equivalent available in any given
jurisdiction), together with such reinsurance and direct access agreements as
Lender may require, insuring that the Mortgage is a valid first and prior
enforceable lien for the full amount of the Loan (including, as and when
applicable pursuant to Section 5.13 hereof, the Future Advance) on
Borrower’s fee simple interest in the Mortgaged Property (including any
easements appurtenant thereto but excluding any non-real estate property
interests included in the definition of Mortgaged Property) subject only to the
Permitted Encumbrances.  The Title Policy
shall contain such endorsements as Lender may require (including, as applicable
those described in Section 5.13 hereof).

 

“Total Loss” means (i) a
casualty, damage or destruction of the Mortgaged Property, the cost of
restoration of which (as reasonably determined by Lender) would exceed
$5,000,000, (ii) a permanent taking of twenty-five percent (25%) or more
of the square footage of the Land or Improvements, (iii) a permanent
taking of twenty-five percent (25%) or more of the automobile parking spaces
located on the Land or such number of parking spaces as would cause the
Borrower or the Mortgaged Property to cease to comply with applicable Legal
Requirements, Leases or Material Contracts, or (iv) a permanent taking of
so much of the Land or Improvements, in either case, such that it would be
impracticable, in Lender’s reasonable discretion, even after restoration, to
operate the Mortgaged Property as an economically viable whole.

 

“Transfer” means, (a) when
used as a verb, to, directly or indirectly, lease, sell, assign, convey, give,
exchange, devise, mortgage, encumber, pledge, hypothecate, alienate, grant a
security interest, or otherwise create or suffer to exist any Lien, transfer or
otherwise dispose, or to contract or agreement to do any of the foregoing,
whether by operation of law, voluntarily, involuntarily or otherwise as well as
any other action or omission which has the practical effect of initiating or
completing the foregoing and (b) when used as a noun, a direct or
indirect, lease, sale, assignment, conveyance, gift, exchange, devise, mortgage,
encumbrance, pledge, hypothecation, alienation, grant of a security interest or
other creation or sufferance of a Lien, transfer of other disposition, or
contract or agreement by which any of the foregoing may be effected, whether by
operation of law, voluntary or involuntary and any other action or omission
which has the practical effect of initiating or completing the foregoing. 

 

20

 

“Treasury Rate” means the
annualized yield on securities issued by the United States Treasury having a
maturity corresponding to the remaining term to the originally scheduled
Maturity Date, as quoted in Federal Reserve Statistical Release H. 15(519)
under the heading “U.S. Government Securities – Treasury Constant Maturities”
for the Treasury Rate Determination Date (as defined below), converted to a
monthly equivalent yield.  If yields for
such securities of such maturity are not shown in such publication, then the
Treasury Rate shall be determined by Lender by linear interpolation between the
yields of securities of the next longer and next shorter maturities.  If said Federal Reserve Statistical Release
or any other information necessary for determination of the Treasury Rate in accordance
with the foregoing is no longer published or is otherwise unavailable, then the
Treasury Rate shall be reasonably determined by Lender based on comparable
data.

 

“Treasury Rate Determination Date”
means the date which is five (5) Business Days prior to the scheduled
prepayment date.

 

“UCC” means the Uniform
Commercial Code as in effect in the State of New York.

 

“UCC Collateral” is
defined in Section 2.9.

 

“U.S. Government Obligations”
means any direct obligations of, or obligations guaranteed as to principal and
interest by, the United States Government or any agency or instrumentality
thereof, provided that such obligations are backed by the full faith and credit
of the United States.  Any such
obligation must be limited to instruments that have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or change.  If any such obligation is rated by S&P,
it shall not have an “r” highlighter affixed to its rating.  Interest must be fixed or tied to a single
interest rate index plus a single fixed spread (if any), and move
proportionately with said index.  U.S.
Government Obligations include, but are not limited to:  U.S. Treasury direct or fully guaranteed
obligations, Farmers Home Administration certificates of beneficial ownership,
General Services Administration participation certificates, U.S. Maritime
Administration guaranteed Title XI financing, Small Business Administration
guaranteed participation certificates or guaranteed pool certificates, U.S.
Department of Housing and Urban Development local authority bonds, and
Washington Metropolitan Area Transit Authority guaranteed transit bonds.  In no event shall any such obligation have a
maturity in excess of one hundred eighty (180) days.

 

“VantagePoint” means
individually and collectively, VantagePoint Venture Partners (IV), L.P., a
Delaware limited partnership, and VantagePoint Venture Partners (IV)(Q), L.P.,
a Delaware limited partnership.

 

“Yield Maintenance Amount”
means the then-present value (determined by discounting at the Treasury Rate)
of the amount of interest that would have accrued on the outstanding principal
balance of the Loan, from the date of the prepayment to and including the
scheduled Initial Maturity Date, if no prepayment were to occur and if the rate
of interest were the Interest Rate in effect on the date of prepayment or
acceleration, as applicable.  For
purposes of computing the Yield Maintenance Amount with regard to Section 2.4(C)(iii),
the date of prepayment shall be deemed the date the Loan is accelerated.

 

21

 

1.2                               Terms; Utilization of GAAP for Purposes of
Financial Statements Under Agreement.

 

For purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP.  Financial statements and other
information furnished to Lender pursuant to subsection 5.1 shall be
prepared in accordance with GAAP as in effect at the time of such
preparation.  No Accounting Changes shall
affect financial covenants, standards or terms in this Agreement; provided,
that Borrower shall prepare footnotes to the financial statements required to
be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes).

 

1.3                               Other Definitional Provisions.

 

References to “Sections,” “Exhibits” and “Schedules” shall be to Sections, Exhibits and Schedules,
respectively, of this Agreement unless otherwise specifically provided.  Any of the terms defined in Section 1.1
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference.  In
this Agreement, “hereof,” “herein,” “hereto,”
“hereunder” and the like mean and
refer to this Agreement as a whole and not merely to the specific section,
paragraph or clause in which the respective word appears; words importing any
gender include the other genders; references to “writing” include printing, typing, lithography and other means
of reproducing words in a tangible visible form; the words “including,” “includes” and “include”
shall be deemed to be followed by the words “without
limitation”; the phrase “and/or”
shall mean that either “and” or “or” may apply; the phrases “attorneys’ fees,” “legal fees” and “counsel fees” shall include any and all attorneys’, paralegal
and law clerk fees and disbursements, including court costs, fees and
disbursements at the pre-trial, trial and appellate levels incurred or paid by
Lender in protecting its interest in the Mortgaged Property and the Collateral
and enforcing its rights hereunder and/or the other Loan Documents; references
to agreements and other contractual instruments shall be deemed to include subsequent
amendments, assignments, and other modifications thereto, but only to the
extent such amendments, assignments and other modifications are not prohibited
by the terms of this Agreement or any other Loan Document; references to
Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; references to a Person’s “knowledge”
in this Agreement or the other Loan Documents refers to the actual knowledge of
the Person in question and such knowledge as a reasonably prudent Person would
have acquired by virtue of such inquiry and due diligence as a reasonably
prudent Person would have undertaken and all references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.  Where any provision of this
Agreement or any of the other Loan Documents refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provisions
shall be applicable whether such action is taken directly or indirectly by such
Person.

 

22

 

SECTION 2

AMOUNTS AND TERMS OF THE LOAN

 

2.1                               Loan Disbursement and
Note.  Subject to the terms and
conditions of this Agreement, Lender shall lend $7,000,000 of the proceeds of
the Loan to Borrower on the Closing Date. 
The disbursement of the Future Advance shall be subject to, and in
accordance with, Section 5.13.  The
proceeds of the Loan shall be used (i) to pay the costs and expenses of
Lender pursuant to Section 11.1 in connection with the Loan and (ii) for
general working capital purposes of Borrower. The disbursement of the Loan in
accordance with the foregoing shall be made on the Closing Date.  The Loan shall be evidenced by the Note.  The Obligations of Borrower under this
Agreement, the Note and the other Loan Documents are secured by, among other
things, the Mortgage and the Liens created or arising under the other Loan
Documents.

 

2.2                               Interest.

 

(A)                              Interest Rate.  Subject to the provisions of Section 2.2(C) hereof,
the outstanding principal balance of the Loan shall bear interest at the Base
Rate.  However, (a) upon and during
the continuance of any Default by Borrower in the payment of any sum of
principal, interest or other Indebtedness of Borrower owing Lender when due, (b) during
the existence of any Event of Default, or (c) after the Maturity Date or
earlier upon acceleration of the Loan, the principal amount of the Loan shall
bear interest (“Default Interest”)
at the Default Rate.  With respect to any
scheduled payments of principal and interest (excluding the payment due on the
Maturity Date), Borrower will be entitled to a grace period of five (5) days
from such date before Default Interest is imposed by reason of such late
payment; provided, however, such grace period will not be available more than
once in any twelve (12) Loan Month period and if Borrower fails to make the
required payment within said five (5) day period, Default Interest will be
calculated from the original due date. Except as set forth in the preceding
sentence, the Default Interest shall commence, without notice, immediately upon
and from the occurrence of (a), (b) or (c) above, as the case may be,
and shall continue until all Defaults are cured and all sums then due and
payable under the Loan Documents are paid in full. Default Interest shall be
payable upon demand, and, to the extent unpaid, shall be compounded monthly at
the Default Rate.

 

(B)                                Computation and Payment of Interest.  Interest on the Loan (and the Future Advance
Fee) and all other Obligations owing to Lender shall be computed on the daily
principal balance of the Note (and, as applicable, the Future Advance Fee) on
the basis of actual days elapsed and a 360-day year.  Interest on the Loan (and the Future Advance
Fee) is payable in arrears.  Payments of
interest (and the Future Advance Fee) shall be paid to Lender as specified in Section 2.3.  In addition, all accrued and unpaid interest
shall be paid to Lender on the earlier of the date of prepayment (to the extent
prepayment is permitted under Section 2.4) and maturity, whether by
acceleration or otherwise.  The Loan
shall commence to bear interest on the date the proceeds of the Loan are to be
disbursed to or for the order of Borrower, provided, however, if the proceeds
are disbursed to an escrowee, the Loan shall commence to bear interest from and
including the date of disbursement to such escrowee regardless of the date such
proceeds are disbursed from escrow.

 

(C)                                Interest Laws.  Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Borrower shall not be
required to pay, and Lender

 

23

 

shall not be
permitted to collect, any amount of interest in excess of the maximum amount of
interest permitted by law (“Excess Interest”).  If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any of the other Loan Documents, then in such event: (1) the
provisions of this Section shall govern and control; (2) Borrower
shall not be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender’s option, (a) applied
as a credit against the outstanding principal balance of the Obligations due
and owing to Lender (without any prepayment penalty or premium therefor) or for
accrued and unpaid interest thereunder (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for herein
shall be automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the “Maximum Rate”),
and this Agreement and the other Loan Documents shall be deemed to have been
and shall be, reformed and modified to reflect such reduction; and (5) Borrower
shall not have any action against Lender for any damages arising out of the
payment or collection of any Excess Interest. 
Notwithstanding the foregoing, if for any period of time interest on any
Obligation due and owing to Lender is calculated at the Maximum Rate rather
than the applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations due and owing to Lender shall, to the extent permitted by law,
remain at the Maximum Rate until Lender shall have received or accrued the
amount of interest which Lender would have received or accrued during such
period on Obligations due and owing to Lender had the rate of interest not been
limited to the Maximum Rate during such period.

 

(D)                               Late Charges.  If any scheduled payment of principal and/or
interest or other amount owing pursuant to this Agreement or the other Loan
Documents is not paid when due, Borrower shall pay to Lender, in addition to
all sums otherwise due and payable, a late charge (“Late Charge”) in an amount equal to four percent (4%) of the
unpaid amount.  With respect to regular
monthly payments of principal and/or interest (excluding the payment due on the
Maturity Date), Borrower will be entitled to a grace period of five (5) days
from the date due before a late charge is imposed by reason of such late
payment; provided, however, such grace period will not be available more than
once in any period of twelve (12) consecutive Loan Months.  Any unpaid late charge shall bear interest at
the Default Rate until paid.

 

2.3                               Payments.

 

Interest for the period commencing on the date of disbursement of the
Loan and ending on October 9, 2004 shall be paid on the Closing Date.  On each Payment Date thereafter commencing
with the Payment Date occurring on November 10, 2004, Borrower shall pay
to Lender interest on the outstanding principal of the Loan (and the Future
Advance Fee) accrued from and including the immediately preceding Payment Date,
to, but not including, the Payment Date on which such payment is to be
made.  In addition, commencing on SeptemberNovember 10,
2004, and on each Payment Date thereafter, or until the Advancement Date in the
event of the disbursement by Lender of the Future Advance, principal of the
Loan evidenced by the Note shall be paid to Lender in monthly installments in
an amount equal to Twenty-Three Thousand Three Hundred Thirty-Three and NO/100
Dollars ($23,333.00), which amount shall be sufficient to amortize the full
principal amount outstanding as of the date of disbursement of the loan over a
twenty-five (25) year term.  Upon disbursement
of the Future Advance, on each Payment Date

 

24

 

after the Advancement Date, principal of the
Loan evidenced by the Note shall be paid to Lender in monthly installments in
an amount sufficient to amortize the full principal amount outstanding as of
the Advancement Date over a number of months equal to the difference between (i) 300
and (ii) the number of months that shall have expired between the date of
disbursement of the Loan and the Advancement Date.  A balloon payment will be required on
the Maturity Date.

 

2.4                               Payments and Prepayments on the Loan.

 

(A)                              Manner and Time of Payment.  Borrower agrees to pay all of the Obligations
relating to the Loan as such amounts become due or are declared due pursuant to
the terms of this Agreement and the other Loan Documents.  All payments shall be made without deduction,
defense, setoff or counterclaim by the wire transfer of good immediately
available wire transferred federal funds to Lender’s account at JP Morgan Chase
for the account of iStar Financial Inc., ABA #021-00-021, Account Number 910-2-757938,
Reference:  Aviza Technology, or at such
other place as Lender may direct from time to time by notice to Borrower.  Borrower shall receive credit for such funds
on the date received if such funds are received by Lender by 1:00 P.M.
(New York time) on such day.  In the
absence of timely receipt, such funds shall be deemed to have been paid by
Borrower on the following Business Day. 
Whenever any payment to be made under the Loan Documents shall be stated
to be due on a day that is not a Business Day, or any time period relating to a
payment to be made hereunder is stated to expire on a day that is not a
Business Day, the payment may be made on the following Business Day and the
period will not expire until the following Business Day.

 

(B)                                Maturity.  The outstanding principal balance of the
Loan, all accrued and unpaid interest thereon, the accrued and unpaid Future
Advance Fee and all other sums owing to Lender pursuant to the Loan Documents,
shall be due and payable on September 30, 2007 (the “Initial
Maturity Date”). 
Notwithstanding the foregoing, if the Extension Conditions are satisfied
prior to the Initial Maturity Date, the maturity of the Loan shall be extended
for an additional one year period to the First Extended Maturity Date, and if
the Extension Conditions are further satisfied prior to the First Extended
Maturity Date, the maturity of the Loan shall be further extended for an
additional one year period to the Second Extended Maturity Date.

 

(C)                                Prepayments.

 

(i)                                     No
prepayment of the Loan shall be allowed in whole or in part, on or prior to the
Lockout Expiration Date, other than principal payments required pursuant to Section 2.3.  Thereafter, the Loan may be prepaid, in
whole, but not in part, upon not less than thirty (30) days’ irrevocable prior
written notice to Lender. Any prepayments on the principal balance of the Loan
evidenced by the Note whether voluntary or involuntary, shall be accompanied by
payment of interest accrued to the date of prepayment, together with the
applicable Prepayment Premium.  Any
prepayments made pursuant to the foregoing shall be made on a Payment Date
provided, however, Borrower may elect to make any such prepayments on a
Business Day which is not a Payment Date if, in addition to all interest which
has accrued to and including the date of prepayment and the Prepayment Premium,
Borrower also pays all interest which would accrue on the Loan to, but not
including, the Payment Date following the date of prepayment.  Notwithstanding any provision contained in
this Agreement to the contrary, no

 

25

 

Prepayment Premium will be due
on account of a voluntary prepayment pursuant to this Section 2.4(C)(i) made
on any Payment Date occurring during the thirty (30) day period prior to the
scheduled Initial Maturity Date. Amounts prepaid shall not be re-borrowed.

 

(ii)                                  In
the event of (a) the payment of any principal of the Loan other than on
the last day of an Interest Period applicable thereto (including as a result of
an Event of Default) or (b) the failure to borrow or prepay the Loan as
specified in any notice delivered pursuant to this Agreement or the other Loan
Documents, then, in any such event and, in addition to the payments to be made
to Lender pursuant to 2.4(C)(i), Borrower agrees to compensate Lender for all
actual, out-of-pocket, losses, costs, expenses and damages Lender may incur
attributable to such event.  A
certificate of Lender setting forth any amount or amounts that Lender is
entitled to receive pursuant to this Section shall be delivered to
Borrower and shall be conclusive absent manifest error.  Borrower shall pay Lender the amount shown as
due on any such certificate within thirty (30) days after receipt thereof.

 

(iii)                               If,
following an Event of Default, payment of all or any part of the Loan is
tendered by Borrower or otherwise recovered by Lender, such tender or recovery
shall be deemed a voluntary prepayment by Borrower in violation of the
prohibition against prepayment set forth in Section 2.4(C)(i) and
Borrower shall pay to Lender, in addition to the other Obligations, the
applicable Prepayment Premium.  If the
Maturity Date is accelerated, due to an Event of Default or otherwise, or if
any prepayment of all or any portion of the Loan hereunder occurs, whether in
connection with Lender’s acceleration of the Loan or otherwise, or if the
Mortgage is satisfied or released by foreclosure (whether by power of sale or
judicial proceeding), deed in lieu of foreclosure or by any other means, then
the Prepayment Premium shall become immediately due and owing and Borrower
shall immediately pay the Prepayment Premium to Lender.  Nothing contained in this Section 2.4(C)(iii) shall
create any right of prepayment.

 

2.5                               Lender’s Records; Mutilated, Destroyed or
Lost Notes.  The balance
on Lender’s books and records shall be presumptive evidence (absent manifest
error) of the amounts due and owing to Lender by Borrower; provided that
any failure to so record or any error in so recording shall not limit or
otherwise affect Borrower’s obligation to pay the Obligations.  In case any Note shall become mutilated or
defaced, or be destroyed, lost or stolen, Borrower shall, upon request from
Lender, execute and deliver a new Note of like principal amount in exchange and
substitution for the mutilated or defaced Note, or in lieu of and in
substitution for the destroyed, lost or stolen Note.  In the case of a mutilated or defaced Note,
the mutilated or defaced Note shall be surrendered to Borrower upon delivery to
Lender of the new Note.  In the case of
any destroyed, lost or stolen Note, Lender shall furnish to Borrower, upon
delivery to Lender of the new Note (i) certification of the destruction,
loss or theft of such Note and (ii) such security or indemnity as may be
reasonably required by Borrower to hold Borrower harmless.

 

2.6                               Taxes.  Any and all payments or reimbursements made
under the Agreement, the Note or the other Loan Documents shall be made free
and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
arising out of or in connection with the transactions contemplated by the Loan
Documents; excluding, however, the following: taxes imposed on the income of
Lender by any jurisdiction

 

26

 

or any
political subdivision thereof; taxes that are not directly attributable to the
Loan; and any “doing business” taxes, however denominated, charged by any state
or other jurisdiction (all such taxes, levies, imposts, deductions, charges or
withholdings and all liabilities with respect thereto, excluding such taxes
imposed on income, taxes not directly attributable to the Loan and any “doing
business” taxes, herein “Tax Liabilities”).  If Borrower shall be required by law to
deduct any such amounts from or in respect of any sum payable hereunder to
Lender, then the sum payable hereunder shall be increased as may be necessary
so that, after making all required deductions, Lender receives an amount equal
to the sum it would have received had no such deductions been made.  In the event that, subsequent to the Closing
Date, (1) any changes in any existing law, regulation, treaty or directive
or in the interpretation or application thereof, (2) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (3) compliance by Lender with any new request or directive
(whether or not having the force of law) from any governmental authority,
agency or instrumentality does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or the
Loan, or change the basis of taxation of payments to Lender of principal, fees,
interest or any other amount payable hereunder (except for income taxes, or
franchise taxes imposed in lieu of income taxes, imposed generally by federal,
state or local taxing authorities with respect to interest or commitment or
other fees payable hereunder or changes in the rate of interest or tax on the
overall income of Lender, taxes that are not directly attributable to the Loan
and any “doing business” taxes, however denominated, charged by any state or
other jurisdiction) and the result of any of the foregoing is to increase the
cost to Lender of making or continuing its Loan hereunder, as the case may be,
or to reduce any amount receivable hereunder, then, in any such case, Borrower
shall promptly pay to Lender, within thirty (30) days after its demand, any
additional amounts necessary to compensate Lender, on an after-tax basis, for
such additional cost or reduced amount receivable, as determined by Lender with
respect to this Agreement or the other Loan Documents.  If Lender becomes entitled to claim any
additional amounts pursuant to this Section 2.6, it shall promptly notify
Borrower of the event by reason of which Lender has become so entitled.  Furthermore, if subsequent to the Closing
Date there are any changes in law that impose or modify any reserve, special
default or similar requirements relating to LIBOR Rate based pricing which are
applicable to Lender’s source of financing for the Loan, Lender shall advise
Borrower of such changes, and Borrower shall promptly pay to Lender within
thirty (30) days after its demand, the amount necessary (as determined by
Lender in good faith) to compensate Lender for costs arising out of such
changes.

 

2.7                               Application of Payments.  Except as otherwise expressly provided in the
last sentence of this Section 2.7, all payments made hereunder shall be
applied first, to the payment of any Late Charges and other sums (other than
principal and interest) due from Borrower to Lender under the Loan Documents,
second, to any interest then due at the Default Rate, third to interest then
due at the Base Rate, and last to the principal amount.  Following and during the continuance of an
Event of Default, all sums collected by Lender shall be applied in such order
of priority to such items set forth below as Lender shall determine in its sole
discretion:  (i) to the costs and
expenses, including reasonable attorneys’ and paralegals’ fees and costs of appeal,
incurred in the collection of any or all of the Loan due or the realization of
any collateral securing any or all of the Loan; and (ii) to any or all
unpaid amounts owing pursuant to the Loan Documents in any order of application
as Lender, in its sole discretion, shall determine.

 

2.8                               Origination Fee.  Borrower shall pay the Origination Fee to
Lender on the Closing Date.

 

27

 

2.9                               Security Agreement.  To secure the payment, performance and
discharge of the Obligations, Borrower hereby grants, assigns, transfers,
conveys and sets over unto Lender, and hereby grants to Lender a continuing
first priority, perfected security interest in all of Borrower’s right, title
and interest in, to and under any and all of the following, whether now and/or
existing and/or now owned and/or hereafter acquired and/or arising.

 

(1)                                  the Contracts;

(2)                                  the Reserves;

(3)                                  the Fixtures and
Personalty;

(4)                                  the General
Intangibles;

(5)                                  the Leases;

(6)                                  the Rate Cap
Agreement;

(7)                                  the Plans and
Specifications; and

(8)                                  the Proceeds,

 

together with all accessions to,
substitutions for, and replacements of, the foregoing and any and all cash and
non-cash proceeds of any of the foregoing (collectively, the “UCC Collateral”).

 

With respect to all UCC Collateral
constituting a part of the Mortgaged Property, this Agreement shall constitute
a “security agreement” within the meaning of, and shall create a security
interest under, the UCC. Borrower hereby acknowledges and agrees that Lender
shall be permitted to file one or more financing statements naming Borrower as
debtor and Lender as secured party identifying the Mortgaged Property in the
collateral description thereon.  As to
the UCC Collateral, the grant, transfer, and assignment provisions of this Section 2.9
shall control over the grant provision of Section 2.1 of the
Mortgage.  Borrower represents and
warrants that, except for any financing statement filed by Lender, no presently
effective financing statement covering the UCC Collateral or any part thereof
has been filed with any filing officer, and no other security interest has
attached to or has been perfected in the UCC Collateral or any part
thereof.  Borrower shall from time to
time within fifteen (15) days after request by Lender, execute, acknowledge and
deliver, or authorize the filing of any financing statement, renewal,
affidavit, certificate, continuation statement or other document as Lender may
reasonably request in order to evidence, perfect, preserve, continue, extend or
maintain this security agreement and the security interest created hereby as a
first priority Lien on the UCC Collateral, subject only to the Permitted
Encumbrances.

 

2.10                        Certain Secured Party Remedies.  If an Event of Default shall have occurred
and be continuing, Lender shall have all the remedies of a secured party under
the UCC and all other rights and remedies now or hereafter provided or
permitted by law, including, without limitation, the right to take immediate
and exclusive possession of the UCC Collateral, or any part thereof, and for
that purpose Lender may, as far as Borrower can give authority therefor, with
or without judicial process, enter (if this can be done without breach of the
peace) upon any premises on which any of the UCC Collateral or any part thereof
may be situated.  Without limitation of
the foregoing, Lender shall be entitled to hold, maintain, preserve and prepare
all of the UCC Collateral for sale and to dispose of said UCC Collateral, if Lender
so chooses, from the Mortgaged Property, provided that Lender may require
Borrower to assemble such UCC Collateral and make it available to Lender for
disposition at a place to be designated by Lender from which the UCC Collateral
would be sold or disposed of, and provided further that, for a

 

28

 

reasonable
period of time prior to the disposition of such UCC Collateral, Lender shall
have the right to use same in the operation of the Mortgaged Property.  Borrower will execute and deliver to Lender
any and all forms, documents, certificates and registrations as may be
necessary or appropriate to enable Lender to sell and deliver good and clear
title to the UCC Collateral to the buyer at the sale as herein provided.  Unless the UCC Collateral is of the type
customarily sold on a recognized market, Lender will give Borrower at least ten
(10) days’ notice of the time and place of any public sale of such UCC
Collateral or of the time after which any private sale or any other intended
disposition thereof is to be made.  The
requirements of reasonable notice shall be met if such notice is given to
Borrower at least ten (10) days before the time of the sale or
disposition.  Lender may buy at any
public sale and, if the UCC Collateral is of a type customarily sold in a
recognized market or is a type which is the subject of widely distributed
standard price quotations, it may buy at private sale.  Unless Lender shall otherwise elect, any sale
of the UCC Collateral shall be solely as a unit and not in separate lots or
parcels, it being expressly agreed, however, that Lender shall have the
absolute right to dispose of such UCC Collateral in separate lots or
parcels.  Lender shall further have the
absolute right to elect to sell the UCC Collateral as a unit with, and not
separately from, the Land and Improvements constituting a portion of the
Mortgaged Property.  The net proceeds
realized upon any disposition of the UCC Collateral, after deduction for the
expenses of retaining, holding, preparing for sale, selling and the like and
the attorneys’ fees and legal expenses incurred by Lender shall be applied
towards satisfaction of such of the Obligations secured hereby, and in such
order of application, as Lender may elect. 
If all of the Obligations are satisfied, Lender will account to Borrower
for any surplus realized on such disposition.

 

SECTION 3

CONDITIONS TO LOAN

 

3.1                               Conditions to Funding
of the Loan on the Closing Date.

 

The obligation of Lender to disburse the initial $7,000,000 advance of
the proceeds of the Loan is subject to the prior or concurrent satisfaction of
the conditions set forth below.

 

(A)                              Performance of Agreements; Truth of Representations
and Warranties; No Injunction. 
Borrower and all other Persons executing any Loan Document on behalf of Borrower
shall have performed in all material respects all agreements which any of the
Loan Documents provide shall be performed on or before the Closing Date.  The representations and warranties contained
in the Loan Documents shall be true, correct and complete in all material
respects on and as of the Closing Date to the same extent as though made on and
as of that date.  No Legal Requirements
shall have been adopted, no order, judgment or decree of any Governmental
Authority shall have been issued or entered, and no litigation shall be pending
or threatened, which in the reasonable judgment of Lender would enjoin,
prohibit or restrain, or impose or result in an adverse effect upon the making,
borrowing or repayment of the Loan or the execution, delivery or performance of
the Loan Documents.  No Default or Event
of Default shall have occurred and then be continuing.

 

(B)                                Opinion of Counsel.  Lender shall have received and approved
written opinions of counsel for Borrower and Rate Cap Issuer including such Persons’
local counsel, in form and substance reasonably satisfactory to Lender and its
counsel, dated as of the Closing Date. 
By

 

29

 

execution of
this Agreement, Borrower authorizes and directs its counsel to render and
deliver such opinion as to Borrower to Lender.

 

(C)                                Loan Documents.  On or before the Closing Date, Borrower shall
execute and deliver and cause to be executed and delivered, to Lender all of
the Loan Documents, each, unless otherwise noted, dated the Closing Date, duly
executed, in form and substance satisfactory to Lender and in quantities
designated by Lender (except for the Promissory Note, of which only the
original shall be executed).  Borrower hereby
authorizes Lender to file the Financing Statements in such filing offices as
Lender elects.

 

(D)                               Officer’s Certificate.  Lender shall have received and approved an
Officer’s Certificate executed by the chief financial officer or similar
officer of Borrower stating that: (a) on such date, and after giving
effect to the Loan, no Default or Event of Default exists; (b) no material
adverse change in the financial condition or operations of the business of
Borrower has occurred since June 25, 2004; and (c) the
representations and warranties of Borrower set forth in this Agreement and the
other Loan Documents are true, and correct in all material respects on and as
of such date with the same effect as though made on and as of such date.

 

(E)                                 Insurance Policies and Endorsements.  Lender shall have received and approved the
original policies of insurance required to be maintained under this Agreement
and the other Loan Documents, together with endorsements satisfactory to Lender
naming Lender as additional insured under such policies.  If such policies are not delivered to Lender,
Lender must receive and approve a copy of the insurance policies in question
and evidence of such insurance satisfactory to it.

 

(F)                                 Organizational and Authorization Documents.  Lender shall have received all documents
reasonably requested by Lender, including all Organizational Documents, with
regard to the due organization, existence, internal governance, power and
authority, due authorization, execution and delivery, authorization to do
business and good standing of Borrower and such other Persons as Lender may
reasonably designate, the validity and binding effect of the Loan Documents and
other matters relating thereto, in form and substance satisfactory to Lender.

 

(G)                                Closing Statement.  Lender shall have received and approved a
closing and disbursement statement executed by Borrower with respect to the
disbursement of the proceeds of the Loan.

 

(H)                               Financial Statements.  Lender shall have received and approved
financial statements of Borrower as of June 25, 2004.  Lender shall have received (a) audited
historical financial statements for the Borrower (such statements may be
unaudited, to the extent audited statements are not available), for the fiscal
year 2003 (ending September 26, 2003), and unaudited financial statements
for the fiscal year 2004 (to date); (b) an unaudited expense report
detailing the Expenses for the Mortgaged Property for the fiscal year 2004 (to
date); and (c) a pro forma balance sheet of Borrower dated as of the
Closing Date giving effect to the making of the Loan and the transactions
occurring on the Closing Date, each accompanied by an Officer’s Certificate.

 

30

 

(I)                                    Budget and Capital Plan.  Lender shall have received and approved the
initial Budget and initial Capital Plan for Borrower.

 

(J)                                   Material Contracts and Other Agreements.  Lender shall have received and approved true,
correct and complete certified copies of the Material Contracts, all other
operating agreements, service contracts and equipment leases and all permits,
licenses and documents pertaining to the Proprietary Rights, in each case,
relating to all or any of the Mortgaged Property.

 

(K)                               Environmental Assessments, Physical Condition Reports
and Lender’s Inspection. 
Lender shall have received and approved the Environmental Reports and
Physical Condition Reports relating to the Mortgaged Property, together with
letters from the preparer(s) thereof permitting Lender (and Persons designated
by Lender) to rely upon the Environmental Reports and Physical Condition
Reports.  To the extent in the possession
of, or reasonably obtainable by, the Borrower, a true, correct and complete
copy of “as-built” plans and specifications for the Improvements.

 

(L)                                 Title Policy, Survey, Searches, Perfection and
Priority.  Lender shall
have received and approved (i) the Title Policy and (ii) a plat of
survey of the Land, Improvements and other components of the Mortgaged Property
constituting real estate certified to such Persons as Lender may designate and
prepared in accordance with Lender’s requirements.  Lender shall have received and approved
copies of Uniform Commercial Code financing statement, judgment, tax lien,
bankruptcy and litigation search reports of such jurisdictions and offices as
Lender may reasonably designate with respect to Borrower and such other Persons
as Lender may reasonably require.  Lender
shall have received such other evidence as Lender may require confirming that
Lender has a perfected first priority security interests and Lien upon the
Collateral.

 

(M)                            Licenses, Permits and Approvals, Zoning and Land Use
Compliance.  Lender shall
have received and approved (i) a copy of the permanent unconditional
certificate of occupancy issued with respect to the Mortgaged Property and all
other applicable licenses, permits and approvals required to own, use, occupy,
operate and maintain the Mortgaged Property, including all necessary licenses
and permits relating to wetlands compliance, and use of water; and (ii) evidence
satisfactory to Lender as to the compliance of the Mortgaged Property with all
applicable Legal Requirements including letters from the applicable
Governmental Authorities confirming such compliance.

 

(N)                               Reserves.  The initial deposits into the Reserves on the
Closing Date, shall have been made (which amounts may, with Lender’s approval,
be made from the proceeds of the Loan).

 

(O)                               Origination Fee.  Lender shall have received its Origination
Fee.

 

(P)                                 Other Documents and Deliveries.  Borrower shall have delivered such other documents
and deliveries as are set forth on the Closing Checklist.

 

31

 

(Q)                               Legal Fees; Closing Expenses.  Borrower shall have paid any and all legal
fees and expenses of counsel to Lender, together with all recording fees and
taxes, title insurance premiums, and other costs and expenses related to the
Loan.

 

(R)                                Rate Cap Agreement.  Borrower shall have provided the Rate Cap
Agreement and the Rate Cap Pledge Agreement. 
The Rate Cap Issuer shall have consented to the Rate Cap Pledge
Agreement and acknowledged such pledge and security interest by executing a
consent joinder attached to the Rate Cap Pledge Agreement. In addition,
Borrower shall provide evidence satisfactory to Lender of payment in full of
all costs and expenses of obtaining the Rate Cap Agreement.

 

SECTION 4

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Lender that, after giving effect to
the Loan, as of the Closing Date:

 

4.1                               Organization, Powers,
Qualification and Organization Chart. 
Borrower is a corporation duly organized, validly existing and in good
standing under the laws of its state of formation.  Borrower has all requisite power and
authority to own and operate its properties, to carry on its business as now
conducted and proposed to be conducted, and to enter into each Loan Document to
which it is a party and to perform the terms thereof.  Borrower’s U.S. taxpayer identification
number is set forth on Schedule 4.1(A)-1.  Borrower is duly qualified and in good
standing wherever necessary to carry on its present business and
operations.  The capitalization chart
attached hereto as Schedule 4.1(A)-2
correctly identifies each Person directly owning (and/or indirectly owning
twenty percent (20%) or more of) the ownership interests in Borrower.  The principal place of business and chief
executive office of Borrower for the five (5) year period preceding the
Closing Date is set forth on Schedule 4.1(A)-3.  Borrower has filed in a timely manner all
reports, documents and other materials required to be filed by it with any
Governmental Authorities and the information contained in each of such filings
is true, correct and complete in all respects). 
Borrower has retained all records and documents required to be retained
by it pursuant to any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any Governmental Authority.  Borrower has no Subsidiaries except as set
forth on Schedule 4.1(A)-4.

 

4.2                               Authorization of
Borrowing; No Conflicts; Governmental Consents; Binding Obligations and License
and Security Interests of Loan Documents.  Borrower has the power and authority to incur
the Obligations evidenced by the Note and other Loan Documents, to execute and
deliver the Loan Documents and to perform its Obligations, to own the Mortgaged
Property and to continue its businesses and affairs as presently
conducted.  The incurring of the
Obligations and the execution, delivery and performance by Borrower of each of
the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action.  The incurring of the
Obligations and the execution, delivery and performance by Borrower of the Loan
Documents to which it is a party and the consummation of the transactions
contemplated thereby do not and will not: 
(1) violate any provision of law applicable to Borrower or the
Mortgaged Property, the Organizational Documents of, or applicable to, Borrower
or any order, judgment or decree of

 

32

 

any court or
other agency of government binding on Borrower or its properties including the
Mortgaged Property; (2) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
Material Contracts or any other material agreement or document to which
Borrower is a party or by which Borrower or its property may be bound; (3) result
in or require the creation or imposition of any Lien upon the Mortgaged
Property or assets of Borrower (other than the Liens of Lender); or (4) require
any approval or consent of any Person under any Material Contracts or any other
material agreement or document to which Borrower is a party or by which
Borrower or its property may be bound (except to the extent such approvals or
consents have been unconditionally obtained on or before the Closing
Date).  The incurring of the Obligations,
the execution, delivery and performance by Borrower of the Loan Documents and
the consummation of the transactions contemplated thereby do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other Governmental Authority or
regulatory body (except to the extent unconditionally obtained on or before the
Closing Date).  The Loan Documents, when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower, subject to bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors’ rights generally and to the application of general equitable
principles in connection with the enforcement thereof.  The recording of the Mortgage, together with
the filing of the Financing Statements in connection therewith, create a valid,
enforceable and perfected first priority lien and security interest in the
Mortgaged Property subject to no other interests, Liens or encumbrances, other
than the Permitted Encumbrances. 
Borrower is a “registered organization” (as defined in the UCC)
organized under the laws of the State of Delaware.

 

4.3                               Financial Statements.  All financial statements concerning Borrower
which have been furnished by Borrower to Lender pursuant to this Agreement have
been prepared in accordance with GAAP consistently applied (except as disclosed
therein, to the extent Lender approves such disclosure) and do, in all material
respects, present fairly the financial condition of the Persons covered thereby
as at the dates thereof and the results of their operations for the periods
then ended.

 

4.4                               Indebtedness.  As of the Closing Date, after giving effect
to the transactions contemplated hereby, Borrower does not have any
Indebtedness except for Permitted Indebtedness. 
All material Expenses owing or accrued as of the Closing Date, have been
paid in full or have been reserved for by deposit into the Reserves.  No claim of any creditor of Borrower exists
which, if required to be paid, would have a Material Adverse Effect.

 

4.5                               No Material Adverse Change.  Since June 25, 2004, no event or change
has occurred that has caused or evidences, either individually or together with
such other events or changes, a Material Adverse Effect.

 

4.6                               Title to Property; Liens; Zoning; Contracts;
Condition of the Mortgaged Property.

 

(A)                              Borrower
has good and marketable fee simple title to the Land, the Improvements and the
other components of the Mortgaged Property, subject only to the Permitted
Encumbrances. Except for the Permitted Encumbrances, the Mortgaged Property is
free and clear of Liens and other encumbrances. 
There are no outstanding Claims and all work, services or

 

33

 

materials the
provision of which might ripen into a Claim have been fully paid for.  There are no delinquent ground rents,
assessments for improvements or other similar outstanding charges or
Impositions affecting the Mortgaged Property. 
No Improvements lie outside the boundaries and building restriction
lines of the Land or encroach onto any easements to any extent (unless
affirmatively insured by the Title Policy), and no improvements on adjoining
properties encroach upon the Land to any extent which would materially impair
the Mortgaged Property.  The Title Policy
premium has been fully paid.  Except for
customary gap undertakings, neither Borrower, nor, to Borrower’s knowledge, any
other Person, has provided any title indemnities (or analogous documentation)
or deposits of cash or other security to the title insurer to obtain the Title
Policy.  The Permitted Encumbrances do
not and will not materially interfere with the security intended to be provided
by the Mortgage, the use or operation of the Mortgaged Property, or the
marketability or value of the Mortgaged Property.  Borrower will preserve its right, title and
interest in and to the Mortgaged Property for so long as the Obligations remain
outstanding and will warrant and defend same and the validity and priority of
the Mortgage and the Liens arising pursuant to the Loan Documents from and
against any and all claims whatsoever other than the Permitted Encumbrances.

 

(B)                                The
Mortgaged Property is zoned for use as industrial light and related amenities,
which zoning designation is unconditional, in full force and effect, and is
beyond all applicable appeal periods. 
Borrower is not in violation of, and, the Mortgaged Property is in full
compliance with all applicable zoning, subdivision, land use and other Legal
Requirements, the failure of which would have a Material Adverse Effect.  No legal proceedings are pending or, to
Borrower’s knowledge threatened, with respect to the compliance of the
Mortgaged Property with Legal Requirements. 
Neither the zoning nor any other right to construct, use or operate the
Mortgaged Property is in any way dependent upon or related to any real estate
other than the Mortgaged Property and validly created, existing appurtenant
perpetual easements insured in the Title Policy or use of public rights of
way.  In the event that all or any part
of the Improvements are destroyed or damaged, said Improvements can be legally
reconstructed to their condition prior to such damage or destruction, and
thereafter exist for the same use without violating any zoning or other Legal
Requirements applicable thereto and without the necessity of obtaining any
variances or special permits.  The
Mortgaged Property contains not less than 610 parking spaces, which is enough
permanent parking spaces to satisfy all requirements imposed by applicable
Legal Requirements with respect to parking. 
All licenses, certificates of occupancy, permits and other Proprietary
Rights necessary to operate the Mortgaged Property as it is currently operated
are in full force and effect including all water permits and approvals.  Borrower has not received any written notice
of any violation of any such licenses, permits, authorizations, registrations
or approvals that materially impair the value of the Mortgaged Property for
which such notice was given or which would affect the use or operation of the
Mortgaged Property in any material respect, which noticed violation remains
uncured.

 

(C)                                Borrower
has provided Lender with true and complete copies of all Material Contracts
affecting the Mortgaged Property, all of which are specifically listed on Schedule 4.6(C) hereof.  Except for the Loan Documents and as set
forth on Schedule 4.6(C),
Borrower is not a party to and neither it nor the Mortgaged Property is bound
by any material agreement, document or instrument which is binding upon the
Mortgaged Property other than the Loan Documents, the Permitted Encumbrances,
the other Material Contracts, if any, and Borrower’s organizational documents,
true, correct and complete copies of which have been delivered to

 

34

 

Lender.  Except for the Loan Documents, Borrower is
not party to or bound by, nor is any of its property subject to or bound by,
any contract or other agreement which restricts its ability to conduct its
business at the Mortgaged Property in the ordinary course or, either
individually or in the aggregate, has a Material Adverse Effect or could
reasonably be expected to have a Material Adverse Effect.  Borrower is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Material Contract of Borrower which could have a
Material Adverse Effect.  No Default or
Event of Default exists.

 

(D)                               All
of the Improvements are in good condition and repair.  To Borrower’s knowledge, except as disclosed
in the Physical Condition Report or as disclosed on Schedule 4.6(D)-1, there are no
latent or patent structural or other significant defects or deficiencies in the
Improvements or Fixtures and Personalty. Municipal or private water supply, storm
and sanitary sewers, and electrical, gas and telephone facilities are available
to the Mortgaged Property to the boundary lines of the Mortgaged Property
through publicly dedicated streets or highways or perpetual appurtenant
easements insured on the Title Policy as appurtenant easements, are sufficient
to meet the reasonable needs of the Mortgaged Property as now used or as
otherwise presently contemplated to be used, and are connected to, and is in
full unimpaired operation with respect to the Improvements and no other utility
facilities are necessary to meet the reasonable needs of the Mortgaged Property
as now used.  The design and as-built
conditions of the Mortgaged Property are such that surface and storm water does
not accumulate on the Mortgaged Property and does not drain from the Mortgaged
Property across land of adjacent property owners or others in any manner which
would have a Material Adverse Effect or which require any approvals or
easements not already obtained.  Except
as set forth on Schedule 4.6(D)-2
or on the plat of survey delivered to Lender, no part of the Mortgaged Property
is within a flood plain or in a flood hazard area as defined by the Federal
Insurance Administration and (except to the extent validly created and existing
perpetual appurtenant easements insured in the Title Policy have been created
therefor) none of the Improvements create encroachments over, across or upon
any of the Mortgaged Property’s boundary lines, rights of way or easements, and
no building or other improvements on adjoining land create such an
encroachment.  All irrigation lines
servicing the Mortgaged Property are entirely located on the Mortgaged Property
or are located on adjacent property pursuant to validly created and existing
perpetual appurtenant easements insured as appurtenant easements in the Title
Policy.  The Land and Improvements have
legally adequate contiguous rights of access to public ways.  All roads necessary for the full utilization
of the Land and Improvements for their current purpose have been completed and
dedicated to public use and accepted by all Governmental Authorities or are
validly created and existing perpetual appurtenant easements insured as
appurtenant easements in the Title Policy. 
No offsite improvements are necessary or used for the ownership, use or
operation of the Mortgaged Property, other than public utilities.  The Fixtures and Personalty owned by the
Borrower are sufficient to own, operate and use the Land and Improvements as
currently operated.  Except for the
Fixtures and Personalty, no other tangible personal property is located on the
Land or in the Improvements.  Borrower
has not entered into any agreement or option, and is not otherwise bound, to
sell the Mortgaged Property (or any part thereof) or to acquire any additional
real estate or Investments.  As of the
date hereof, no portion of the Improvements constituting part of the Mortgaged
Property or on the Land has been materially damaged, destroyed or injured by fire
or other casualty which has not been fully restored.

 

35

 

4.7                               Litigation.  Except as set forth on Schedule 4.7, there are no
judgments outstanding against Borrower or binding upon the Mortgaged Property
or any property of Borrower, nor is there any litigation, governmental
investigation or arbitration pending or, to Borrower’s knowledge, threatened
against Borrower.  The judgments,
litigation, investigations and arbitrations set forth on Schedule 4.7 will not result, if
adversely determined, and could not reasonably be expected to result, either
individually or in the aggregate, in any Material Adverse Effect and do not
relate to and will not affect the consummation of the transactions contemplated
hereby.  No petition in bankruptcy,
whether voluntary or involuntary, or assignment for the benefit of creditors,
or any other action involving debtors’ and creditors’ rights has ever been
filed under the laws of the United States of America or any state thereof, or
threatened, by or against, Borrower. 
There are no mechanics’ or materialmen’s liens, alienable bills or other
claims constituting or that may constitute a Lien on the Mortgaged Property or
any part thereof, and no work for which any such Lien could be asserted has
been performed which has not been fully paid for.  Borrower has not received any notice from any
governmental or quasi-governmental body or agency or from any person or entity
with respect to (and Borrower does not know of) any actual or threatened taking
of the Land or Improvements, or any portion thereof, for any public or
quasi-public propose or of any moratorium which may affect the use, operation
or ownership of the Mortgaged Property.

 

4.8                               Payment of Taxes.  All tax returns and reports of Borrower
required to be filed by Borrower have been timely filed, and all taxes,
assessments, fees and other governmental charges upon and upon the Mortgaged
Property, assets, income and franchises which are due and payable or which have
been levied, imposed or assessed have been paid in full.  To Borrower’s knowledge, no tax returns of
Borrower are under audit.  No tax liens
have been filed and, to Borrower’s knowledge no claims are being asserted with
respect to any such taxes.  The charges,
accruals and reserves on the books of Borrower in respect of any taxes or other
governmental charges are in accordance with GAAP.  Schedule 4.8
contains a complete and accurate list of all audits of all tax returns that
were filed by Borrower since the date of its formation, including a reasonably
detailed description of the nature and outcome of each audit.  All taxes that Borrower is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the applicable Governmental
Authority.  All tax returns filed by (or
that include on a consolidated basis) Borrower are true, correct and
complete.  There is no tax sharing
agreement that will require any payment by Borrower after the date of this
Agreement.  The Borrower does not intend
to treat the Loan and related transactions hereunder as being a “reportable
transaction” (within the meaning of Treasury Regulation Section 1.6011-4).  In the event the Borrower determines to take
any action inconsistent with the previous sentence, it will promptly notify the
Lender thereof.  If the Borrower so
notifies Lender, the Borrower acknowledges that Lender may treat the Loan as
part of a transaction that is subject to Treasury Regulation Section 301.6112-1,
and that Lender may maintain any lists and other records required by such
Treasury Regulation.

 

4.9                               Governmental Regulation; Margin Loan.  Borrower is not, nor after giving effect to
the Loan, will be, subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or the Investment Company Act of
1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money. The Loan is an exempt transaction under
the Truth-in-Lending Act (15 U.S.C.A. §§ 1601 et seq.).  Borrower is not a non-resident alien for
purposes of U.S. income taxation and Borrower is not a foreign

 

36

 

corporation, partnership, foreign trust or
foreign estate (as said terms are defined in the Code).  Borrower and its Affiliates are not a Person
with whom Lender is restricted from doing business with under regulations of
the Office of Foreign Asset Control (“OFAC”)
of the Department of the Treasury (including, but not limited to, those named
on OFAC’s Specially Designated and Blocked Persons list) or under any statute,
executive order (including, but not limited to, the September 24, 2001
Executive Order Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism) or other governmental action
relating to terrorism financing, terrorism support and/or otherwise relating to
terrorism and are not in any dealings or transaction or otherwise associated
with Persons named on OFAC’s Specially Designated and Blocked Persons
list.  None of the funds or other assets
of Borrower constitute property of, or are beneficially owned, directly or
indirectly, by any government or other Person subject to trade restrictions
under U.S. law, including, but not limited to, the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701 et seq.,
The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations
promulgated thereunder or any other laws, regulations or executive orders
administered by the Office of Foreign Assets Control with the result that an investment
in Borrower, as applicable (whether directly or indirectly), is prohibited by
law or the Loan made by the Lender is in violation of law (“Embargoed Person”); (b) no Embargoed
Person has any interest of any nature whatsoever in Borrower, with the result
that the investment in Borrower, as applicable (whether directly or
indirectly), is prohibited by law or the Loan is in violation of law; and (c)
none of the funds of Borrower have been derived from any unlawful activity with
result that the investment in Borrower (whether directly or indirectly), is
prohibited by law or the Loan is in violation of law.

 

4.10                        Employee Benefit Plans; ERISA; Employees.  Except for the Employee Benefit Plans set
forth on Schedule 4.10,
neither Borrower nor any ERISA Affiliate of Borrower maintains or contributes
to, or has any obligation under, any Employee Benefit Plans.  Borrower is not an “employee benefit plan”
(within the meaning of section 3(3) of ERISA) to which ERISA applies and
the Mortgaged Property and Borrower’s assets do not constitute plan
assets.  No actions, suits or claims
under any laws and regulations promulgated pursuant to ERISA are pending or, to
Borrower’s knowledge, threatened against Borrower.  Borrower has no knowledge of any material
liability incurred by Borrower which remains unsatisfied for any taxes or
penalties with respect to any employee benefit plan or any Multiemployer Plan,
or of any lien which has been imposed on Borrower’s assets pursuant to section 412
of the Code or section 302 or 4068 of ERISA.  The Loan, the execution, delivery and
performance of the Loan Documents and the transactions contemplated by this
Agreement are not a non-exempt prohibited transaction under ERISA.  Borrower employs a sufficient number of
employees to conduct the business of the Mortgaged Property.  Borrower is not a party to any collective
bargaining or other employment agreement other than the agreements identified
on Schedule 4.10.

 

4.11                        Intellectual Property.  Borrower possesses, owns or has valid
licenses, permits, certificates of public convenience, service marks,
authorizations, licenses, patents, patent rights or licenses, trademarks,
trademark rights, trade name rights, trade styles, trade dress, logos and other
source or business affiliation identifiers, and copyrights, certificates,
consents, orders, approvals and other authorizations from, and have made all
declarations and filings with, all federal, state, local and other Governmental
Authority, all self-regulatory organizations and all courts and other tribunals
(collectively, together with the goodwill associated therewith, “Proprietary Rights”) presently required or
necessary to own or lease, as the case may be, and

 

37

 

to operate, its respective properties and
to carry on its business as now conducted, except where the failure to obtain
same would not, individually or in the aggregate, have a Material Adverse
Effect.  Borrower has fulfilled and
performed all of its obligations with respect to such permits, and no event has
occurred which allows, or after notice or lapse of time would allow, revocation
or termination thereof or could result in any other material impairment of the
rights of the holder of any such permit; and Borrower has not received any
notice of any proceeding relating to unenforceability, invalidity, revocation
or modification of any Proprietary Rights, except where such revocation,
unenforceability, invalidity, or modification would not, individually or in the
aggregate, have a Material Adverse Effect. 
Borrower has not received any notice that any Proprietary Rights have
been declared unenforceable or otherwise invalid by any court or Governmental
Authority other than notices relating to Proprietary Rights the loss of which
would not, individually or in the aggregate, have a Material Adverse
Effect.  Borrower has not received any
notice of infringement of, or conflict with, and Borrower does not know of any
such infringement of or conflict with, asserted rights of others with respect
to any Proprietary Rights which, if such assertion of infringement or conflict
were sustained, would have a Material Adverse Effect.

 

4.12                        Broker’s Fees.  No broker’s or finder’s fee, commission or
similar compensation will be payable with respect to the Loan, the issuance of
the Note or any of the other transactions contemplated hereby or by any of the
Loan Documents based upon any broker or lender engaged by Borrower or any
Affiliate of Borrower, except CRESA Partners, who shall be paid by Borrower the
full amount of its fee, commission and compensation on the Closing Date.

 

4.13                        Environmental Compliance.  Except as disclosed in the Environmental
Reports, there are no claims, liabilities, investigations, litigation,
administrative proceedings, whether pending or, to Borrower’s knowledge
threatened, or judgments or orders relating to any Hazardous Materials
(collectively called “Environmental Claims”)
asserted or threatened against Borrower, any predecessor owner, tenant or
operator or relating to any real property currently or formerly owned, leased
or operated by Borrower including the Mortgaged Property.  Except as disclosed in the Environmental
Reports, to Borrower’s knowledge, neither Borrower nor any other Person has
caused or permitted any Hazardous Material to be used, generated, reclaimed,
transported, released, treated, stored or disposed of in a manner which could
form the basis for an Environmental Claim against Borrower.  Except as disclosed in the Environmental
Reports, to Borrower’s knowledge, no Hazardous Materials in violation of
applicable Environmental Laws are or were stored or otherwise located, and no
underground storage tanks or surface impoundments are or were located, on real
property currently or formerly owned, leased or operated by Borrower, including
the Mortgaged Property, or to the knowledge of Borrower, on adjacent parcels of
real property, and no part of such real property or, to the knowledge of
Borrower no part of such adjacent parcels of real property, including the
groundwater located thereon, is presently contaminated by Hazardous Materials
in violation of applicable Environmental Laws or to any extent which has, or
might reasonably be expected to have, a Material Adverse Effect.  Except as disclosed in the Environmental Reports,
to Borrower’s knowledge, Borrower and the Mortgaged Property has been and is
currently in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws.

 

38

 

4.14                        Solvency.  As of the date of this Agreement and after
giving effect to the consummation of the transactions contemplated by the Loan
Documents, Borrower:  (A) owns
assets the fair saleable value of which are (1) greater than the total
amount of liabilities (including Contingent Obligations) of Borrower, and
(2) greater than the amount that will be required to pay the probable
liabilities of Borrower’s then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to Borrower; (B) has capital that is not insufficient
in relation to its business as presently conducted or any contemplated or undertaken
transaction; and (C) does not intend to incur and does not believe that it
will incur debts beyond its ability to pay such debts as they become due.  Borrower has not entered into the Loan
Documents or the transactions contemplated under the Loan Documents with the
actual intent to hinder, delay, or defraud any creditor.  After giving effect to the transactions
occurring on the Closing Date, no Default or Event of Default exists.

 

4.15                        Disclosure.  The representations and warranties of
Borrower contained in the Loan Documents, the financial statements referred to
in Section 5.1(A), and any other documents, certificates or written
statements furnished to Lender by or on behalf of Borrower for use in
connection with the Loan do not contain any untrue statement of a material fact
or omit or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. There is no material fact known to
Borrower that has had or will have a Material Adverse Effect that has not been
disclosed in this Agreement or in such other documents, certificates and
statements furnished to Lender by or, on behalf of, Borrower for use in
connection with the Loan.

 

4.16                        Insurance.  Schedule 4.16
sets forth a complete and accurate description of all policies of insurance
that will be in effect as of the Closing Date for Borrower and such policies of
insurance satisfy all of the requirements of Section 5.4.  Except as disclosed in Schedule 4.16,
all premiums thereon have been paid in full through the first anniversary of
the Closing Date, no notice of cancellation has been received with respect to
such policies and Borrower is in compliance, in all material respects, with all
conditions contained in such policies.

 

4.17                        Budget.  The Approved Budget submitted to Lender for
the Mortgaged Property is a true, correct and complete copy of the Budget and
Capital Plan in effect on and as of the Closing Date.  A true, correct and complete copy of the
initial Approved Budget for the period ending December 31, 2004 is
attached hereto as Schedule 4.17.  The Approved Budget and all of the amounts
set forth therein, present a true, full and complete line itemization (by
category for the fiscal year to which such Annual Budget applies) of all
reasonably estimated Expenses which Borrower expects to pay or anticipates
becoming obligated to pay with respect to the Mortgaged Property.  No material capital expenditures with respect
to the Mortgaged Property are being incurred, contemplated or are reasonably
necessary, except as specified in the Approved Budget.

 

4.18                        Accounts.  Schedule 4.18
sets forth a complete and accurate itemization of all of Borrower’s time,
demand, securities or similar Accounts that are in existence as of the Closing
Date.

 

4.19                        Management Agreement.  Borrower is not party to any property
management agreement pertaining to the Mortgaged Property nor has it otherwise
contracted with any managing agent to assist Borrower in the management and
operation of the Mortgaged Property.

 

39

 

4.20                        Special Assessments; Taxes.  There are no pending
or, to the knowledge of Borrower proposed, special or other assessments for
public improvements or otherwise affecting the Mortgaged Property, nor, to
Borrower’s knowledge, are there any contemplated improvements to the Mortgaged
Property that may result in such special or other assessments.  Borrower has provided Lender with true,
correct and complete copies of all bills and invoices for Impositions which
have been levied or assessed against or are outstanding with respect to the
Mortgaged Property.  Borrower has
provided Lender with a true, correct and complete schedule of the
assessment of the Mortgaged Property in effect as of the Closing Date.  Borrower has not received any notice that any
portion of the Mortgaged Property has been re-assessed or
is currently the subject of a reassessment. 
No portion of the Mortgaged Property is exempt from taxation or
constitutes an “omitted” tax parcel.  No
Impositions are currently delinquent or outstanding with respect to the
Mortgaged Property.  Except as disclosed
on Schedule 4.20
attached hereto, no tax contests of any Impositions or assessments are
currently pending.  The Land and
Improvements constitute a separate tax lot or lots, with a separate tax
assessment or assessments, independent of any other land or improvements not
constituting a part of the Mortgaged Property and no other land or improvements
is assessed and taxed together with any portion of the Mortgaged Property.

 

4.21                        Leases.  There are no Leases or other arrangements for
occupancy of space within the Mortgaged Property that are currently in
effect.  The Mortgaged Property is
occupied solely by Borrower.

 

4.22                        Representations Remade.  Borrower warrants and covenants that the
foregoing representations and warranties will be true and shall be deemed
remade as of the date of the Closing. 
All representations and warranties made in the other Loan Document or in
any certificate or other document delivered to Lender by or on behalf of
Borrower pursuant to the Loan Documents shall be deemed to have been relied
upon by Lender, notwithstanding any investigation made by or on behalf of
Lender.  All such representations and
warranties shall survive the making of the Loan and any or all of the advances
of the Loan and shall continue in full force and effect until such time as the
Loan has been paid in full.

 

SECTION 5

AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees that so long as this Agreement shall
remain in effect or the Note shall remain outstanding, Borrower shall perform
and comply with all covenants in this Section 5.

 

5.1                               Financial Statements and Other Reports.  Borrower will maintain a system of accounting
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP and proper and accurate books, records and
accounts reflecting all of the financial affairs of Borrower with respect to
all items of income and expense in connection with the operation of the
Mortgaged Property.

 

(A)                              Financial Statements.  Within one hundred fifty (150) days after the
end of each fiscal year of Borrower, Borrower shall provide to Lender true and
complete annual audited consolidated financial statements for Borrower prepared
in accordance with GAAP.  Such

 

40

 

financial
statements shall (x) be audited by a so-called “Big-4” accounting firm or
another independent certified public accounting firm reasonably satisfactory to
Lender and (y) include a balance sheet as of the end of such year, profit and
loss statements for such year and a statement of cash flow for such year, with
such detailed supporting schedules specifically covering the operation of the
Mortgaged Property as Lender shall reasonably require including a
reconciliation to the monthly reports and statements delivered to Lender and
include an itemized accounting of all Expenses for the Mortgaged Property.  As soon as reasonably practicable (but in any
event within sixty (60) days) after the end of each fiscal quarter, Borrower
shall provide to Lender a true and complete quarterly cash flow, balance sheet,
and operating statement for Borrower, certified by the chief financial officer
(or similar position) of Borrower which quarterly statements shall be in form
and substance acceptable to Lender.  Such
quarterly statements shall be compared to the prior year’s quarter and
year-to-date, to the extent available, and to the then applicable Approved
Budget.  Borrower shall also provide such other financial information as Lender may, from time to
time, reasonably request, certified (if requested by Lender) by the applicable
chief financial officer (or similar position). 
Borrower will deliver, concurrently with the annual and quarterly
statements, a certificate of its chief financial officer (or analogous
position) certifying that no Default or Event of Default has occurred.  Borrower shall provide Lender reasonable
prior notice of any change to its fiscal year, which, as of the date hereof,
ends as set forth on Schedule 5.1(A) for the fiscal years during
the term of this Agreement.

 

(B)                                Accountants’ Certification.  Together with each delivery of annual
financial statements of Borrower pursuant to subsection 5.1(A), Borrower
will deliver a written statement by its independent certified public
accountants (1) stating that the examination has included a review of the
terms of this Agreement as such terms relate to accounting matters,
(2) stating whether, in connection with the examination, any condition or
event that constitutes a Default or an Event of Default (of which said
accountants may be aware from said review, and without obligation to review
other aspects of this Agreement or to review any of the other Loan Documents)
has come to their attention, and (3) if such a condition or event has come
to their attention, specifying the nature and period of existence thereof.

 

(C)                                Accountants’ Reports.  Promptly upon receipt thereof, Borrower will
deliver copies of all significant reports submitted to Borrower by independent
public accountants in connection with each annual, interim or special audit of
the financial statements of Borrower made by such accountants, including the
comment letter submitted by such accountants to management in connection with
their annual audit.

 

(D)                               Annual Budgets and Capital Plans.  Not later than thirty (30) days prior to the
end of each fiscal year of Borrower, Borrower shall deliver a Budget and a
Capital Plan for the following calendar year for the Mortgaged Property to
Lender for its review and approval (the Budget and Capital Plan are
collectively referred to as the “Annual
Budget” and the Annual Budget approved by Lender is referred to
herein as the “Approved Budget”).  Lender shall have thirty (30) days to approve
or reject each proposed Annual Budget (such approval not to be unreasonably
withheld).  If Lender disapproves the
Annual Budget, which disapproval shall specify the respects in which it is unacceptable, Borrower shall resubmit same to Lender for its
review until such time as the Annual Budget is approved by Lender.  Borrower shall not modify any Approved Budget
without Lender’s approval.  Borrower
shall have the right to request the

 

41

 

approval of Lender for quarterly
adjustments to the Approved Budget, in which event, Lender shall approve or
reject any such proposed quarterly adjustments to the Approved Budget within
ten (10) days after such request. 
Borrower shall not incur any Expenses which are not set forth in the
Approved Budget approved by Lender. 
Borrower shall, within one hundred twenty (120) days after the end of
each fiscal year during the term of the Loan, deliver to Lender an annual
summary of any and all Capital Expenditures made at the Mortgaged Property
during the prior twelve (12) month period. 
Borrower shall provide Lender with prior written notification of any
material modifications to the budget for, or the plans and specifications of,
the Initial Projects.  Additionally,
Borrower shall provide to Lender information regarding the status and progress
of the Initial Projects promptly after request from Lender from time to time.

 

(E)                                 Notices, Events of Default and Litigation.  Borrower shall promptly deliver, or cause
to be delivered, copies of all notices, demands, reports or requests given to,
or received by Borrower from, any Governmental Authorities or with respect to
any Indebtedness of Borrower or any Material Contracts, and shall notify Lender
within two (2) Business Days after Borrower receives notice or acquires
knowledge of, any violation of Legal Requirements, investigation, subpoena or
audit by any Governmental Authority or default with respect to the Mortgaged
Property or any Indebtedness or Material Contracts.  Promptly upon Borrower obtaining knowledge of
any of the following events or conditions, Borrower shall deliver a certificate
of such Person’s chief financial officer or similar officer specifying the
nature and period of existence of such condition or event and what action
Borrower has taken, is taking and proposes to take with respect thereto:  (1) any condition or event that
constitutes an Event of Default or Default; and/or (2) or any fact,
circumstance, event or condition which has, or would reasonably be expected to
have, a Material Adverse Effect. 
Promptly upon Borrower obtaining knowledge of (1) the institution
of any action, suit, proceeding, governmental investigation or arbitration
against or affecting Borrower or the Mortgaged Property, or any other property
of Borrower or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting Borrower or the Mortgaged Property or any other property
of Borrower, Borrower will give notice thereof to Lender and provide such other
information as may be available to it to enable Lender and its counsel to
evaluate such matters.

 

(F)                                 ERISA. 
Borrower shall deliver to Lender such certifications or other evidence
from time to time throughout the term of the Loan, as Lender, in its sole
discretion, may request, that (A) Borrower is not and does not maintain an “employee
benefit plan” as defined in Section 3(3) of ERISA, which is subject to
Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3)
of ERISA; (B) Borrower is not subject to state statutes regulating investments
and fiduciary obligations with respect to governmental plans; and (C) one
or more of the following circumstances is true: (i) equity interests in
Borrower are publicly offered securities, within the meaning of 29 C.F.R.
§2510.3-101(b)(2); (ii) less than twenty-five percent (25%) of each outstanding
class of equity interests in Borrower are held by “benefit plan investors”
within the meaning of 29 C.F.R. §2510.3-101(f)(2); or (iii) Borrower qualifies
as an “operating company” or a “real estate operating company” within the
meaning of 29 C.F.R. §2510.3-101(c) or (e).

 

(G)                                Tax Returns.  Borrower will deliver to Lender copies of all
federal and state income and other tax returns, schedules, statements and
reports to its owners within ten (10) days

 

42

 

after the
earlier of filing or delivery of such tax returns or other items with the
Internal Revenue Service or the applicable Governmental Authority or delivery
to its owners.

 

(H)                               Estoppel Certificates.  Within
ten (10) Business Days following a request by Lender, Borrower shall provide to
Lender, a duly acknowledged written statement confirming the amount of the
outstanding Obligations, the terms of payment and maturity date of the Note,
the date to which interest has been paid, and whether, to Borrower’s knowledge,
any offsets or defenses exist against the Obligations, and if any such offsets
or defenses are alleged to exist, the nature thereof shall be set forth in
detail.

 

(I)                                    Other.  With reasonable promptness, Borrower will
deliver such other information and data with respect to Borrower as from time
to time may be reasonably requested by Lender. 
In addition, Borrower shall deliver to Lender, a copy (certified as
correct and complete by the chief financial officer of Borrower or analogous
officer) of all reports, summaries, tax returns, tax schedules and material
correspondence given to its stockholders with respect to Borrower concurrently
with the giving of such items to such Person(s).  Borrower shall deliver, or cause to be
delivered, to Lender annually, concurrently with the renewal of the insurance
policies required hereunder, an Officer’s Certificate stating that the
insurance policies required to be delivered to Lender pursuant to Section 5.4
are maintained with insurers who comply with the terms of Section 5.4,
setting forth a schedule describing all premiums required to be paid by
Borrower to maintain the policies of insurance required under Section 5.4,
and confirming full payment of all such premiums.  Borrower will, promptly after it obtains
knowledge of such change, notify Lender of any change in the information set
forth in Schedule 4.1(A)-2
and, upon request from Lender from time to time, will, within five (5) Business
Days after such request is given to Borrower, provide Lender with either an
updated Schedule 4.1(A)-(2)
certified by Borrower as true and complete or a certificate of Borrower to the
effect that the information set forth on Schedule 4.1(A)-2
has not changed except as previously expressly disclosed in writing to Lender.

 

(J)                                   Electronic Format.  Borrower will provide to Lender a copy of any
reports, notices, statements or other deliveries required pursuant to this Section 5.1
in an electronic format reasonably satisfactory to Lender.

 

5.2                               Existence; Qualification.  Borrower will at all times preserve and keep
in full force and effect its existence, and all rights
and franchises material to its respective business.  Borrower will continue to be qualified in all
jurisdictions in which it is required to qualify.

 

5.3                               Payment of Impositions and Lien Claims; Permitted Contests.

 

(A)                              Subject
to Section 5.3(B), Borrower will pay, or cause payment of, (i) all
Imposition before in each instance any penalty or fine is incurred with respect
thereto, (ii) all claims (“Claims”)
(including claims for labor, services, materials and supplies) for sums that
have become due and payable and that by law have or may become a Lien upon any
of the Mortgaged Property or Borrower, before in each instance any penalty or
fine is incurred with respect thereto, and (iii) all federal, state and
local income taxes, sales taxes, excise taxes and all other taxes and
assessments levied, imposed, confirmed or assessed against Borrower, its

 

43

 

business, income, liabilities or assets or
the Mortgaged Property, before in each instance any penalty or fine is incurred
with respect thereto.

 

(B)                                With
prior notice to Lender, Borrower shall have the right to pay Impositions, in
full, under “protest.” Notwithstanding Section 5.3(A), Borrower shall not
be required to pay, discharge or remove or cause payment, discharge or removal
of any Imposition or Claims pertaining to labor, services, materials and
supplies supplied to the Land and Improvements so long as Borrower contests
(each such contest, a “Permitted Contest”)
in good faith such Imposition or Claims or the validity, applicability or
amount thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the Mortgaged Property or any
portion thereof so long as: (a) at least thirty (30) days prior to the
date on which such Imposition or Claims would otherwise have become delinquent,
Borrower shall have given Lender notice of its intent to contest said
Imposition, (b) at least thirty (30) days prior to the date on which such
Imposition would otherwise have become delinquent, Borrower shall have
deposited with Lender (or with a court of competent jurisdiction or other
appropriate Person approved by Lender) such additional amounts or other
security as are necessary to keep on deposit at all times, an amount equal to
at least one hundred twenty-five percent (125%) (or such higher amount as may
be required by applicable law) of the total of (x) the balance of such
Imposition or Claims then remaining unpaid, and (y) all interest,
penalties, costs and charges accrued or accumulated thereon, (c) no risk
of sale, forfeiture or loss of any interest in the Mortgaged Property or any
part thereof arises, in Lender’s reasonable judgment, during the pendency of
such contest, (d) such contest does not, in Lender’s reasonable
discretion, have a Material Adverse Effect and (e) in the case of Claims, the
liens, if any, securing the Claims in question have been defeased or bonded
against in a manner satisfactory to Lender. 
Each Permitted Contest shall be prosecuted, at Borrower’s sole cost and
expense, with reasonable diligence, and Borrower shall promptly pay, or cause
payment of, the amount of such Imposition or Claims as finally determined,
together with all interest and penalties payable in connection with such
Permitted Contest.  Lender, in its sole
discretion, may apply any amount or other security deposited with Lender under
this subsection or otherwise to the payment of any unpaid Imposition or
Claims to prevent the sale, loss or forfeiture of the Mortgaged Property or any
portion thereof.  Lender shall not be
liable for any failure to so apply any amount or other security deposited.  Any surplus retained by Lender after payment
of the Imposition or Claims for which a deposit was made shall be repaid to
Borrower unless an Event of Default exists, in which case the surplus may be
applied by Lender to the Obligations. 
Notwithstanding any provision of this Section 5.3 to the contrary,
Borrower shall promptly pay any Imposition or Claims which it might otherwise
be entitled to contest if, in reasonable determination of Lender, the Mortgaged
Property or any portion thereof is in jeopardy or in danger of being forfeited
or foreclosed.  If Borrower refuses to
pay any such Imposition or Claims, Lender may (but shall not be obligated to)
make such payment and Borrower shall reimburse Lender on demand for all such
advances which advances will bear interest at the Default Rate.

 

(C)                                Subject
to Section 2.6, Borrower shall pay any and all taxes, charges, filing, registration
and recording fees, excises and levies imposed upon Lender by reason of its
interests in, or measured by amounts payable under, the Note, this Agreement,
the Mortgage or any other Loan Document (other than income, franchise and doing
business taxes), and shall pay all stamp taxes and other taxes required to be
paid on the Note or any of the other Loan Documents.  If Borrower fails to make such payment within
five (5) days after notice thereof from Lender,

 

44

 

Lender may
(but shall not be obligated to) pay the amount due, and Borrower shall
reimburse Lender on demand for all such advances which will bear interest at
the Default Rate.  If applicable law
prohibits Borrower from paying such taxes, charges, filing, registration and
recording fees, excises, levies, stamp taxes or other taxes, then Lender may
declare Borrower’s Obligations to be immediately due and payable, upon ninety
(90) days’ prior written notice.

 

5.4                               Insurance.

 

(A)                              Borrower
shall at all times provide, maintain and keep in force or cause to be provided,
maintained and kept in force, at no expense to Lender, the following policies
of insurance with respect to the Mortgaged Property and Borrower, as
applicable:

 

(i)                                     Property
insurance on a special form causes of loss basis (so-called “all risk”
coverage) for not less than $15,000,000 with deductibles as approved by
Lender.  The policy should contain the
following endorsements: (a) Agreed Amount (waiving co-insurance penalties), (b)
“Building Ordinance or Law” coverage and (c) a standard mortgagee clause
acceptable to Lender.  Such policy will
also include the following coverage: (i) comprehensive boiler and machinery
coverage in amounts as determined by Lender; (ii) earthquake and earth movement
for not less than $10,000,000 with deductibles, as approved by Lender; and
(iii) flood insurance if the Improvements are located in a special flood hazard
area as designated by the Director of the Federal Emergency Management Agency,
in sufficient amounts as determined by Lender.

 

(ii)                                  Insurance
against extra expense or business interruption, in amounts satisfactory to
Lender, but not less than eighteen (18) months gross rent or gross income from
the Mortgaged Property including stabilized management fees and applicable
reserve deposits plus debt service.  The
perils covered by this policy shall be the same as those accepted on the
Mortgaged Property including flood, earthquake and earth movement.

 

(iii)                               Commercial
general liability insurance covering bodily injury and property damage
occurring on, in or about the Mortgaged Property and any adjoining streets,
sidewalks, and passageways arising out of or connected with the possession,
use, leasing, operation, or condition of the Mortgaged Property.  Policy limits will be not less than
$1,000,000 per occurrence, $2,000,000 per location in the aggregate with
respect to the Mortgaged Property and $1,000,000 per occurrence, $2,000,000 per
location in the aggregate with respect to Borrower.  Such coverage shall include but not be
limited to premises/ operations, products/completed operations and personal
injury.

 

(iv)                              Umbrella excess
liability insurance for not less than $10,000,000 with respect to the Mortgaged
Property and $10,000,000 with respect to Borrower.

 

(v)                                 Worker’s
Compensation and other statutory coverage as required by the state where the
Mortgaged Property is located to protect Borrower and Lender against claims for
injuries sustained in the course of employment at the Mortgaged Property.

 

(vi)                              [INTENTIONALLY OMITTED]

 

45

 

(vii)                           During
the course of construction of Improvements, Borrower will obtain (1) commercial
general liability insurance including contractual liability, in the amount of
$1,000,000 primary and $10,000,000 excess liability in the aggregate (the
policy shall provide coverage on an occurrence basis against claims for
personal injury, bodily injury and death or property damage occurring on, in or
about the Mortgaged Property and the adjoining streets, sidewalks and
passageways.  In addition, Borrower shall
require all contractors and subcontractors, architects and engineers to provide
appropriate insurance coverage); and (2) Builder’s risk insurance on a
completed value basis protecting against “all risks” of physical loss,
including collapse during construction, water damage, flood, earthquake and
transit coverage (coverage should be on a non-reporting form, covering the
total value of work performed and equipment, supplies and materials furnished
(with an appropriate limit for soft costs in the case of construction) with
deductibles approved by Lender). The builder’s risk insurance shall not contain
a permission to occupy limitation. 
Borrower agrees to consult with Lender prior to commencing the
construction of any Improvements and to comply with all reasonable special
insurance requirements of Lender pertaining to any construction.

 

(viii)                        When
and to the extent required by Lender, insurance against loss or damage by any
other risk commonly insured against by Persons (or which would be insured
against by a reasonably prudent Person) occupying or using like properties in
the locality or localities in which the Mortgaged Property is situated.

 

(B)                                Except
for Borrower’s “differences in coverage” policies, no policies shall contain
any exclusion for terrorism, terrorist activities or similar activities. All
insurance policies required pursuant to this Agreement shall be endorsed to
provide that:  (i) Lender, its
successors, and/or assigns, is named as mortgagee with respect to the all risk
property; as a loss payee with respect to all rent/business interruption /extra
expense coverage; as additional named insured on all liability coverage, with
the understanding that any obligation imposed upon the insureds (including the
liability to pay premiums) shall be the sole obligation of Borrower and not of
any other insured; (ii) the interests of Lender shall not be invalidated by any
action or inaction of Borrower or any other Person, and such policies shall
insure Lender regardless of any breach or violation by Borrower or any other
Person of any warranties, declaration or conditions in such policies; (iii) the
insurer under each such policy shall waive all rights of subrogation against
Lender, any right to set-off and counterclaim and any other right to deduction,
whether by attachment or otherwise; (iv) such insurance shall be primary and
without right of contribution of any other insurance carried by or on behalf of
Lender with respect to its interest in the Mortgaged Property; (v) if such
insurance is canceled for any reason whatsoever, including nonpayment of
premium or, if any substantial modification, change or reduction is made in the
coverage which affects the interests of Lender, such cancellation,
modification, change or reduction in coverage shall not be effective as to
Lender until thirty (30) days after receipt by Lender of written notice sent by
registered mail from such insurer; and (vi) any such insurance shall be
endorsed to provide in as much as the policy is written to cover more than one
insured, all terms, conditions, insuring agreements and endorsements with the
exception of limits of liability, shall operate in the same manner as if there
were a separate policy covering each insured.

 

46

 

(C)                                Borrower
shall deliver to Lender a copy of each insurance policy with further evidence
of such insurance acceptable to Lender, together with a copy of the declaration
page for each such policy.  Borrower
shall deliver renewal certificates and binders no later than five (5) days
prior to the expiration of each policy, provided that Lender shall be provided
copies of the policies promptly upon the Borrower receiving same.  Borrower shall deliver a renewed policy or
policies, or duplicate original or originals thereof, with standard
non-contributory mortgagee clause in favor of and acceptable to Lender.  Upon request of Lender, Borrower shall cause
its insurance underwriter or broker to certify to Lender in writing that all
the requirements of this Agreement applicable to Borrower governing insurance
have been satisfied.  Borrower shall
comply promptly with and conform to (i) all provisions of each such
insurance policy and (ii) all requirements of the insurers applicable to
Borrower as respects use, occupancy, possession, operation, maintenance,
alteration or repair of the Mortgaged Property. 
Borrower shall not use or permit the use of the Mortgaged Property in
any manner that would permit any insurer to cancel any insurance policy or void
coverage required to be maintained by this Agreement.  No insurance policy may provide for
assessments to be made against Lender or Lender’s servicer, if any.  If a policy permits assessments against
others, such policy must waive any right to a Lien upon the Mortgaged Property
and no such assessments may result in a Lien against the Mortgaged
Property.  The insurance coverage
required under this Section 5.4 may be effected under a blanket policy or
policies covering the Mortgaged Property and other properties and assets not
constituting a part of the Mortgaged Property; provided that any such blanket
policy shall specify the portion of the total coverage of such policy that is
allocated to the Mortgaged Property, and any sublimits in such blanket policy
applicable to the Mortgaged Property, which amounts shall not be less than the
amounts required pursuant to this Section 5.4 and which shall in any case
comply in all other respects with all of the requirements of this Section 5.4.  Borrower shall comply with all insurance
requirements and shall not bring or keep or permit to be brought or kept any article upon
the Mortgaged Property or cause or permit any condition to exist thereon which
would be prohibited by any insurance requirement, or would invalidate insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Mortgaged Property pursuant to this Section 5.4.  Borrower will not take out separate insurance
contributing in the event of loss with that required to be maintained pursuant
to this Section 5.4 unless such insurance complies with this Section 5.4.  All insurance policies shall be in form, with
endorsements, risk coverage, deductibles and amounts and maintained with
companies approved by Lender, such approval not to be unreasonably withheld or
delayed.  Without limiting Lender’s
ability to approve the aforementioned, an insurance company shall not be
reasonably satisfactory unless such insurance company (a) has a rating of a
least A with financial size of Class X or better as specified in Best’s Key
Rating Guide (other than with respect to worker’s compensation insurance, which
shall be with companies approved by Lender), (b) is licensed or authorized to
do business, as required under applicable law, in the State where the Mortgaged
Property is located and (c) a claims-paying ability rating by S&P of not
less than “A+” and an equivalent rating by another Rating Agency (other than
with respect to workers’ compensation insurance, which shall be with companies
approved by Lender).  All insurance
policies insuring against casualty, rent loss and business interruption and
other appropriate policies shall provide that no claims greater than $25,000 be
paid thereunder without thirty (30) days advance written notice to Lender.  Lender shall not, by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of

 

47

 

insurance
contracts, solvency of insurance companies, or payment or defense of lawsuits,
and Borrower hereby expressly assumes full responsibility therefore and all
liability, if any, with respect thereto. 
If Borrower fails to provide to Lender the policies of insurance
required by this Section 5.4 or any other Loan Documents, Lender may (but
shall have no obligation to) procure such insurance or single-interest
insurance for such risks covering Lender’s interest and Borrower will pay all
premiums thereon promptly upon demand by Lender, and until such payment is made
by Borrower, the amount of all such premiums shall bear interest at the Default
Rate and shall constitute additions to the Obligations.

 

5.5                               Tax Reserve and Insurance Reserve.

 

(A)                              Tax
Reserve.  Borrower shall deposit (or
cause to be deposited) with Lender (or such agent of Lender as Lender may
designate in writing to Borrower from time to time), monthly, on each Payment
Date, 1/12th of the annual charges (as estimated by Lender) for all Impositions
relating to the Mortgaged Property. 
Borrower shall also deposit with Lender, simultaneously with such
monthly deposits and/or on the Closing Date, a sum of money which, together
with such monthly deposits, will be sufficient to make the payment of each such
charge at least thirty (30) days prior to the date finally delinquent.  Should such charges not be ascertainable at
the time any deposit is required to be made, the deposit shall be made on the basis
of Lender’s estimate.  When the charges
are fixed for the then current year or period, Borrower shall deposit any
deficiency within fifteen (15) days following Lender’s demand, and to the
extent there is any excess, such amount shall, upon written request, be
returned to Borrower.  Should an Event of
Default occur, the funds so deposited may be applied in payment of the charges
for which such funds shall have been deposited or to the payment of the
Obligations or any other charges affecting the Mortgaged Property as Lender in
its sole and absolute discretion may determine, but no such application shall
be deemed to have been made by operation of law or otherwise until actually
made by Lender as herein provided. 
Borrower shall provide Lender with bills and all other documents
necessary for the payment of the foregoing charges at least ten (10) days prior
to the date on which each payment thereof shall first become delinquent.  So long as (i) no Event of Default
exists, (ii) Borrower has provided Lender with the foregoing bills and
other documents in a timely manner, and (iii) sufficient funds are held by
Lender for the payment of such charges, as applicable, Lender shall pay said
items or allow such funds to be released to Borrower for it to pay said items.  All refunds of Impositions shall be deposited
into the tax Reserve.

 

(B)                                Insurance
Reserve.

 

(i)                                     Borrower shall,
for purposes of creating an initial reserve for payment of insurance premiums,
deposit (or cause to be deposited) with Lender (or such agent of Lender as
Lender may designate in writing to Borrower from time to time), on the Closing
Date, 2/12th of the allocated annual charges (as estimated by Lender) for all
insurance premiums with respect to the insurance required pursuant to Section 5.4
with respect to the Mortgaged Property.  In
the event the annual charges for such insurance premiums increase after the
Closing Date by more than ten percent (10%), Borrower shall deposit with Lender
(or such agent of Lender as Lender may designate in writing to Borrower from
time to time), 2/12th of the amount of such increase. To the extent that funds
on deposit with Lender pursuant to this Section 5.5(B)(i) exceed the
amount, as

 

48

 

estimated by Lender, required
to be on deposit with Lender, pursuant to this Section 5.5(B)(i), Lender
shall, promptly after Borrower’s request, return such excess to the
Borrower.  Borrower shall be responsible
for the payment of the insurance premiums relating to the Mortgaged Property on
a timely basis, without disbursements being made from the Insurance Escrow
Account; provided that Borrower shall require its insurance broker or insurance
carrier, on a quarterly basis, to (y) provide Lender with confirmation of the
payment of any insurance premiums and (z) notify Lender of any default by
Borrower in the payment of any insurance premiums.

 

(ii)                                  After the occurrence,
and during the continuance, of an Event of Default, the provisions of this Section 5.5(B)(ii)
shall apply.  Borrower shall deposit (or
cause to be deposited) with Lender (or such agent of Lender as Lender may
designate in writing to Borrower from time to time), monthly, on each Payment
Date, (i) 1/12th of the allocated annual charges (as estimated by Lender) for
all insurance premiums with respect to the insurance required pursuant to Section 5.4
relating to the Mortgaged Property and (ii) a sum of money which, together with
such monthly deposits, will be sufficient to make the payment of each such
charge at least fifteen (15) days prior to the date finally delinquent.  Should such charges not be ascertainable at
the time any deposit is required to be made, the deposit shall be made on the
basis of 110% of the charges for the prior year or payment period, as
reasonably estimated by Lender.  When the
charges are fixed for the then current year or period, the Borrower shall
deposit any deficiency within thirty (30) days following demand, and to the
extent there is any excess, such amount shall, upon written request, be
returned to Borrower.  The funds so
deposited may be applied in payment of the charges for which such funds shall
have been deposited or to the payment of the Obligations or any other charges
affecting the Mortgaged Property, as Lender in its sole and absolute discretion
may determine, but no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender as herein
provided.  Borrower shall provide Lender
with bills and all other documents necessary for the payment of the foregoing
charges at least ten (10) days prior to the date on which each payment thereof
shall first become delinquent.  So long
as (i) no Event of Default exists, (ii) Borrower has provided Lender with the
foregoing bills and other documents in a timely manner, and (iii) sufficient funds
are held by Lender for the payment of the then due insurance premiums relating
to the Mortgaged Property, Lender shall pay said items or disburse to the
Borrower from the funds deposited pursuant to the Section 5.5(B)(ii) an
amount sufficient to pay said items, provided, however, Lender will not be
required to disburse funds deposited pursuant to Section 5.5(B)(i).

 

(C)                                Interest
on Funds In Reserves.  Funds on
deposit with Lender pursuant to Section 5.5 will accrue interest at money
market account rates at a financial institution in New York, New York selected,
from time to time by Lender (and, in the absence of such selection, at money
market account rates for “money market” accounts of similar size paid by JP
Morgan Chase Bank).  Such interest shall,
for all tax purposes, constitute income to the Borrower, and will be deemed
added to, and constitute part of the funds deposited with Lender pursuant to Section 5.5.

 

5.6                               Maintenance of Mortgaged Property.  Borrower will maintain or cause the Mortgaged
Property to be maintained in compliance with all Legal Requirements and in good
repair, working order and condition and will make or cause to be made all
appropriate repairs, renewals

 

49

 

and
replacements thereof.  Without regard as
to whether Proceeds are made available to Borrower for such purposes, Borrower
will promptly restore and repair all loss or damage occasioned by (i) any
casualty which has occurred to at least the condition existing prior to any such
casualty or (ii) any condemnation to an economically and structurally
integrated unit.  Borrower will prevent
any act or thing which might materially impair the value or usefulness of the
Mortgaged Property.  Borrower will not
commit or permit any waste of the Mortgaged Property or any part thereof.

 

5.7                               Inspection; Lender Meeting.  Borrower shall, upon reasonable request from
Lender, permit (and cause to be permitted) Lender’s designated representatives
to (a) visit, examine, audit, and inspect the Mortgaged Property,
(b) examine, audit, inspect, and abstract Borrower’s financial, accounting
and other books and records, (c) copy and duplicate any books and records of
Borrower pertaining to the Mortgaged Property and (d) discuss Borrower’s
and the Mortgaged Property’s affairs, finances and business with Borrower’s
officers, senior management, representatives, independent public accountants
and agents (including any property manager for the Mortgaged Property, or
portion thereof).  Borrower shall cause
its books and records to be maintained at Borrower’s principal offices located
at 440 Kings Village Road, Scotts Valley, California 95066.  Borrower will not change its principal
offices or the location where its books and records are kept without giving at
least thirty (30) days’ advance notice to Lender.  Borrower shall pay Lender’s costs and
expenses incurred in connection with such audit if an Event of Default has
occurred and is continuing at the time of the commencement of the audit or if
any audit reveals any discrepancy of five percent (5%) or greater, in Lender’s
reasonable judgment, in the financial information provided by Borrower.  All audits, inspections and reports shall be
made for the sole benefit of Lender. 
Neither Lender nor Lender’s auditors, inspectors, representatives,
agents or contractors assumes any responsibility or liability (except to
Lender) by reason of such audits, inspections or reports.  Borrower will not rely upon any of such
audits, inspections or reports.  The
performance of such audits, inspections and reports will not constitute a
waiver of any of the provisions of the Loans Documents.  Neither Lender nor any other of Lender’s
inspectors, representatives, agents or contractors, shall be responsible for
any matters related to design or construction of the Improvements or any
Construction.  Borrower shall cooperate,
from time to time, with Lender and use reasonable efforts to assist Lender in
obtaining an appraisal of the Mortgaged Property.  Such cooperation and assistance from Borrower
shall include reasonable access to the Mortgaged Property and books and records
pertaining to the Mortgaged Property for Lender and its appraiser.  The appraiser performing any such appraisal
shall be engaged by Lender.  Borrower
shall not be responsible for the expenses of any such appraisal provided,
however, Borrower shall pay the fees of such appraiser in connection with one
appraisal of the Mortgaged Property during the term of the Loan and any such
appraisal when conducted following the occurrence of an Event of Default.  Borrower shall cooperate with Lender with
respect to any proceedings before any Governmental Authority which may in any
way affect the rights of Lender under any of the Loan Documents and, in
connection therewith, not prohibit Lender, at its election, from participating
in any such proceedings.

 

5.8                               Environmental Compliance.  Borrower shall:  (a) comply (or cause compliance) at all times
with all applicable Environmental Laws in all material respects, and
(b) promptly take, or cause to be taken, any and all necessary remedial
actions upon obtaining knowledge of the presence, storage, use, disposal,
transportation, release or discharge of any Hazardous Materials

 

50

 

on, under or
about the Mortgaged Property which has a Material Adverse Effect or is in
violation of any Environmental Laws. 
Borrower shall cause all remedial action with respect to Hazardous
Material on, under or about the Mortgaged Property, to comply with all applicable
Environmental Laws and the applicable policies, orders and directives of all
federal, state and local Governmental Authorities.  If Lender at any time has a reasonable basis
to believe that there may be a violation of any Environmental Law by, or any liability
arising thereunder of, Borrower or related to the Mortgaged Property, Borrower
shall, upon request from Lender, provide Lender with such reports,
certificates, engineering studies and other written material or data as Lender
may reasonably require to confirm compliance by Borrower and the Mortgaged
Property with all applicable Environmental Laws.  Borrower shall permit Lender, its authorized
representatives, consultants or other Persons retained by Lender to enter upon,
examine, test and inspect the Mortgaged Property with regard to compliance with
Environmental Laws, the presence of Hazardous Materials and the environmental
condition of the Mortgaged Property and properties adjacent to the Land.  Such entry, examination, testing and
inspecting and reporting shall be at the expense of Borrower if (x) an
Event of Default has occurred or (y) Lender has reasonably determined that
there may be a violation of Environmental Law or any liability arising under
Environmental Law, which expense shall be paid by Borrower to Lender upon
demand.

 

5.9                               Environmental Disclosure.  Borrower shall immediately upon becoming
aware thereof advise Lender in writing and in reasonable detail of:  (1) any release, disposal or discharge of any
Hazardous Material at the Mortgaged Property required to be reported to any
federal, state or local governmental or regulatory agency under all applicable
Environmental Laws; (2) any and all written communications sent or received by
Borrower or its agents with respect to any Environmental Claims or any release,
disposal or discharge of Hazardous Material required to be reported to any
federal, state or local governmental or regulatory agency; (3) any remedial
action taken by Borrower or any other Person in response to any Hazardous
Material on, under or about any real property owned, leased or operated by
Borrower or the Mortgaged Property or its agents, the existence of which could
result in an Environmental Claim; (4) the discovery by Borrower or its agents
of any occurrence or condition on any real property adjoining or in the
vicinity of the Mortgaged Property could cause such real property or any part
thereof to be classified as “border-zone property” or to be otherwise subject
to any restrictions on the ownership, occupancy, transferability or use thereof
under any Environmental Laws; (5) any request for information from any
Governmental Authority that indicates such Governmental Authority is
investigating whether Borrower or another present or former occupant of the
Mortgaged Property may be potentially responsible for a release, disposal or
discharge of Hazardous Materials from any of the Mortgaged Property; and (6)
the release, existence, disposal or discharge of Hazardous Material which could
reasonably be anticipated to have a Material Adverse Effect.  Borrower shall promptly notify Lender of any
proposed action to be taken by Borrower to commence any operations that could
reasonably be expected to subject Borrower to additional laws, rules or regulations,
including laws, rules and regulations requiring additional or amended
environmental permits or licenses. 
Borrower shall, at its own expense, provide copies of such documents or
information as Lender may reasonably request in relation to any matters
disclosed pursuant to this Section 5.9.

 

5.10                        Compliance with Laws, Employee Benefit Plans and Contractual
Obligations.  Borrower
will promptly and faithfully (A) comply and cause the Mortgaged Property to
comply,

 

51

 

in all
material respects, with the requirements of all Legal Requirements including
the Prescribed Laws, and the orders and requirements of any Governmental
Authority in all jurisdictions in which it is now doing business or may
hereafter be doing business and of every board of fire underwriters or similar
body exercising similar functions, (B) maintain all licenses, certificates of
occupancy, permits and Proprietary Rights now held or hereafter acquired by it
or with respect to which a Material Adverse Effect will result if same are not
existing and held by Borrower and (C) perform, observe, comply and fulfill all
of its obligations, covenants and conditions contained in the Loan Documents
and, with respect to material obligations, covenants and conditions only, the
Material Contracts.  Borrower shall: (i)
promptly notify Lender of any claim made against Borrower that Borrower is in
default under any Material Contract or that any other party is in default under
any Material Contract; (ii) not terminate, or permit termination of, any
Material Contract (unless such termination could not be reasonably expected to
have a Material Adverse Effect due to replacement contracts or otherwise), and
(iii) not enter into, amend or modify any Material Contract (unless such
amendment could not reasonably be expected to have a Material Adverse Effect),
in each case under clause (ii) and (iii), without first obtaining the prior
written approval of Lender, such approval not to be unreasonably withheld with
respect to any Material Contract other than a Lease or any agreement with
respect to the management of the Mortgaged Property.  Except for the plans described in Schedule 4.10, Borrower is not a
party to, and will not establish, any Employee Benefit Plan.  Except for the plans described in Schedule 4.10, Borrower will not
commence making contributions to (or obligate itself to make contributions to)
any Employee Benefit Plan.

 

5.11                        Further Assurances.  Borrower shall, from time to time, at its
sole cost and expense, execute and/or deliver, or cause execution and/or
delivery of, such documents, agreements and reports, and perform such acts as
Lender at any time may reasonably request to carry out the purposes and
otherwise implement the terms and provisions provided for in the Loan
Documents.  Borrower shall execute any
documents and take any other actions necessary to provide Lender with a first
priority, perfected security interest in the Reserves and the other
Collateral.  Borrower shall, at Borrower’s
sole cost and expense: (i) upon Lender’s request therefore given from time to
time (but not more frequently than once per calendar year unless an Event of
Default then exists) pay for (a) current reports of Uniform Commercial Code,
federal tax lien, state tax lien, judgment and pending litigation searches with
respect to Borrower, (b) current good standing and existence certificates
with respect to Borrower and (c) current searches of title to the Mortgaged
Property, each such search to be conducted by search firms reasonably
designated by Lender in each of the locations reasonably designated by Lender;
(ii) furnish to Lender all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Loan Documents; and (iii) execute and
deliver to Lender such documents, instruments, certificates, assignments and
other writings, and do such other acts necessary, to evidence, preserve and/or
protect the other Collateral at any time securing or intended to secure the
Obligations, as Lender may require in Lender’s reasonable discretion.  Borrower shall promptly execute, acknowledge,
deliver, file or do, at its sole cost and expense, all acts, assignments,
notices, agreements or other instruments as Lender may require in order to
effectuate, assure, convey, secure, assign, transfer and convey unto Lender any
of the rights granted by this Agreement and to more fully perfect and protect
any assignment, pledge, lien and security interest confirmed or purported to be
created under the Loan Documents or to

 

52

 

enable Lender
to exercise and enforce their rights and remedies hereunder, in respect of the
Collateral.

 

5.12                        Rate Cap Payment.  Borrower shall cause all amounts payable by
the Rate Cap Issuer under the Rate Cap Agreement to be paid directly to Lender
for application to the then due or next accruing interest Obligations of the
Borrower.

 

5.13                        Future Advance Amount.

 

(A)                              The
Future Advance shall not be advanced by Lender nor disbursed to Borrower except
in accordance with the provisions of this Section 5.13.  As consideration for Lender’s agreement to
advance the Future Advance in accordance with the terms of this Section 5.13,
from the date of the Closing until the Advancement Date (as defined below) or,
if not disbursed, the Maturity Date, Borrower shall pay interest (such payments
sometimes referred to herein as the “Future Advance Fee”) on the full amount of
the Future Advance (notwithstanding that such amount has not been advanced) at
the Advance Interest Rate as an unused Loan fee.  From and after the Advancement Date, Borrower
shall pay interest on the Future Advance in accordance with Section 2.2.

 

(B)                                The
Future Advance shall be disbursed by Lender to Borrower, in one (1)
installment, upon the occurrence of one of the following: (i) a Qualified
Public Offering, (ii) a Qualified Sale Transaction, or (iii) a Permitted
Rezoning, provided the value of the Land after such Permitted Rezoning, in
Lender’s reasonable judgment, is no less than $20,000,000.  Notwithstanding the foregoing, the obligation
of Lender to disburse the Future Advance to Borrower is subject to the
satisfaction of the following additional conditions precedent, as determined by
Lender, it its reasonable discretion: 
(x) there shall exist no uncured Event of Default, nor shall any set of
circumstances then exist which, with the passage of time and/or the giving of
notice, or both, could constitute an Event of Default, (y) all representations
and warranties contained in the Loan Documents shall be true, correct and
complete in all material respects on and as of the date of disbursement of the
Future Advance (the “Advancement Date”)
to the same extent as though made on and as of the Advancement Date, and (z)
Lender shall have received an Officer’s Certificate certifying that, after
giving effect to the Future Advance, all conditions to the Future Advance have
been satisfied.  In addition, at Lender’s
request, the Title Policy shall, at Borrower’s expense, be endorsed with a “modified
CLTA 122 endorsement,” in the form attached hereto as Schedule 5.13
issued by the Title Company increasing the principal amount insured to
$12,000,000, which endorsement shall not show any title exceptions other than
the Permitted Encumbrances.

 

(C)                                Disbursement
of the Future Advance shall occur at such time as the conditions set forth in Section 5.13(B)
are satisfied, but not later than ninety (90) days prior to the Maturity Date
(the “End Date”).  Borrower must request disbursement of the
Future Advance in writing, which request must be received by Lender (i) at
least five (5) days prior to the date when such amount is requested to be
received by Borrower and (ii) no later than ten (10) days prior to the End
Date.

 

(D)                               Full
prepayment of the Loan prior to the Advancement Date shall terminate Lender’s
obligations to disburse the Future Advance.

 

53

 

5.14                        Government Regulation.  Borrower shall use the proceeds of the Loan
only for the purposes set forth in this Agreement and consistent with all
applicable laws, statutes, rules and regulations.  No portion of the proceeds of the Loan shall
be used by Borrower in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation U, Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act or any other Legal Requirements.  Borrower and its Affiliates shall not become
a Person with whom Lender is restricted from doing business with under
regulations of OFAC (including, but not limited to, those named on OFAC’s
Specially Designated and Blocked Persons list) or under any statute, executive
order (including, but not limited to, the September 24, 2001 Executive
Order Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism) or other governmental action relating
to terrorism financing, terrorism support and/or otherwise relating to
terrorism and shall not engage in any dealings or transaction or otherwise be
associated with Persons named on OFAC’s Specially Designated and Blocked
Persons list.  At all times throughout
the term of the Loan, including after giving effect to any Transfers, (a) none
of the funds or other assets of Borrower shall constitute property of, or be
beneficially owned, directly or indirectly, by any Embargoed Person with the
result that an investment in Borrower, as applicable (whether directly or
indirectly), is prohibited by law or the Loan made by the Lender is in
violation of law; (b) no Embargoed Person shall have any interest of any nature
whatsoever in Borrower, with the result that the investment in Borrower, as
applicable (whether directly or indirectly), is prohibited by law or the Loan
is in violation of law; and (c) none of the funds of Borrower shall be derived
from any unlawful activity with result that the investment in Borrower (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law.

 

5.15                        Rate
Cap Replacement.  Not later than ten (10) days prior to the
expiration of any Rate Cap Agreement, Borrower shall, at its sole cost and
expense, provide Lender with a replacement Rate Cap Agreement and, if requested
by Lender, a duly executed replacement Rate Cap Pledge Agreement consented to
by the Rate Cap Issuer (which replacement Rate Cap Pledge Agreement shall, if
requested by Lender, by accompanied by evidence reasonably satisfactory to
Lender of due authorization of such replacement Rate Cap Pledge Agreement and
the organization, existence, good standing and corporate power of the Borrower and
an opinion of counsel as to such matters and enforceability reasonably
satisfactory to Lender.  No replacement
Rate Cap Agreement shall terminate earlier than the first anniversary of the
expiration of the replaced Rate Cap Agreement.

 

5.16                        [INTENTIONALLY OMITTED.]

 

5.17                        [INTENTIONALLY OMITTED.]

 

5.18                        Management.  Borrower shall provide competent, responsible
management for the Mortgaged Property, which management, Lender acknowledges,
is currently being provided by employees of Borrower. Borrower shall not enter
into any management agreement or arrangement with any Person with respect to
the management of the Mortgaged Property without Lender’s prior written
consent, such consent to be granted or withheld in Lender’s sole discretion.
Borrower shall cause management subordination agreements in form and substance
satisfactory to Lender to be executed by the property manager under such
management agreement. Borrower shall not modify, amend or terminate any
approved management

 

54

 

agreement
without Lender’s prior written consent. 
Borrower shall provide Lender with written notice of the occurrence of
any event of default or condition which with the giving of notice or passage of
time, or both, would constitute an event of default under any management
agreement or which would entitle the manager thereunder to terminate any
approved management agreement.  Any
approved management agreement shall be terminated by Borrower, at Lender’s
request, upon thirty (30) days’ prior notice to Borrower upon the occurrence of
an Event of Default.

 

5.19                        Construction Matters.  Without limitation of Lender’s rights and
Borrower’s Obligations set forth elsewhere in the Loan Documents, Borrower
shall:  (1) cause the Restoration and all
other Construction, once commenced, to proceed with reasonable diligence and
continuously, with sufficient workers employed and sufficient materials
supplied for that purpose so that the applicable Construction is substantially
completed as promptly as reasonably practicable or, in the case of Restoration,
the Restoration is Substantially Completed prior to the Required Restoration
Date; (2) cause all Construction to be performed in accordance with the
applicable Plans and Specifications or plans and specifications for the work in
question, in substantial conformity with the Legal Requirements, the
requirements of all insurers and fire underwriters, and with the requirements
set forth herein and in the other Loan Documents, in compliance with the
Material Contracts and in a good, safe and workmanlike manner; (3) cause all
materials acquired or furnished in connection with the Construction and
Restoration to be new and stored under adequate safeguards to minimize the
possibility of loss, theft, damage or commingling with other materials or
projects; (4) utilize, or permit utilization of, only contractors approved by
Lender (such approval not to be unreasonably withheld); (5) not permit the
revision of Plans and Specifications in any material respect without consent of
Lender (not to be unreasonably withheld); and (6) from time to time upon the
reasonable request of Lender deliver to Lender such certificates and other
documentation confirming the matters set forth in the preceding clauses (1)
through (5).  Promptly upon the giving or
receipt of such notice, Borrower shall forward to Lender copies of all material
written notices given or received by, or on behalf of, Borrower with respect to
the Construction regarding any claim of default, or relating to any work
stoppage, notice of violation or cease and desist order, stop order,
construction liens, strike, claim, litigation, damage, loss or any other
materially adverse condition, circumstance or event.  Borrower shall pay and discharge or cause to
be paid and discharged promptly all payments due for labor, materials and
supplies unless the same shall be contested by Borrower in accordance with Section 5.3(B).  Borrower shall make available for inspection
at all times by Lender and its representatives copies of all contracts for
Construction and, to the extent available to or reasonably obtained by
Borrower, entered into by Contractor and design professionals relating to the
Construction.  Within sixty (60) days
after Substantial Completion of applicable Construction activities, Borrower
shall (i) complete, or cause to be completed, all Punch-List Items, (ii)
deliver to Lender two (2) copies of the as-built Plans and Specifications and
(iii) obtain all final permits and approvals required for the normal use and
occupancy of the Improvements in question (including a permanent certificate of
occupancy if required for occupancy under applicable laws or its equivalent for
the Improvements in question) provided, however, to the extent that applicable
Leases or Legal Requirements require satisfaction of items (i), (ii) or (iii)
prior to the expiration of such ninety (90)-day period, the date such items
must be satisfied prior to the date satisfaction is required pursuant to the
applicable Leases and Legal Requirements.

 

55

 

SECTION 6

[INTENTIONALLY OMITTED]

 

SECTION 7

NEGATIVE COVENANTS

 

Borrower covenants and agrees that from the date hereof and so long as
this Agreement shall remain in effect or the Note remains outstanding, Borrower
shall comply with all covenants and agreements in this Section 7.

 

7.1                               Indebtedness.  Borrower will not directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness, except Permitted
Indebtedness.

 

7.2                               Liens and Related Matters.  Borrower will not directly or indirectly
create, incur, assume or permit to exist any Lien on
or with respect to the Mortgaged Property or other Collateral whether now owned
or hereafter acquired, or any income or profits therefrom, except Permitted
Encumbrances.  Borrower shall have the
right to contest any such Lien securing Claims in accordance with Section 5.3(B).

 

7.3                               Material Rights.  Without Lender’s consent, Borrower shall not
(a) amend, modify or waive the performance of material obligations with regard
to the Material Contracts or Proprietary Rights, in each case, relating to the
ownership, operation, maintenance, occupancy and management of the Mortgaged
Property, (b) request a material waiver or consent from, any party to, or
issuer of any of the Material Contracts or Proprietary Rights, in each case,
relating to the ownership, operation, maintenance, occupancy and management of
the Mortgaged Property or (c) terminate or permit termination of any Material
Contracts or Proprietary Rights, except as permitted by Section 5.10.

 

7.4                               Restriction on Fundamental Changes.

 

(A)                              Borrower
will not: (1) amend, modify or waive in any material respect any term or
provision of its Organizational Documents, (2) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); or (3) issue,
sell, assign, pledge (except to secure the Additional Credit Facility or other
Permitted Indebtedness for money borrowed or Indebtedness of the Subsidiaries
of the Borrower that are non-recourse to the Borrower, except to the extent of
the ownership interests in such Subsidiary that are pledged by the Borrower),
convey, dispose or otherwise encumber any stock, beneficial or other ownership
interests or grant any options, warrants, purchase rights or other similar
agreements or understandings with respect thereto (each, a “Fundamental Change”), in each case, if the
effect of which would result in a Material Adverse Effect, except in connection
with a Qualified Public Offering or a Qualified Sale Transaction.  Notwithstanding the foregoing, Borrower shall
be required to provide Lender prior notice of any such Fundamental Change and
any a copy of any documentation related thereto for Lender’s review and
approval.

 

(B)                                Borrower
shall have the right to establish Subsidiaries, provided that Borrower may not
make net capital contributions in the aggregate to all of such Subsidiaries
(whether in

 

56

 

existence or formed after the date hereof)
in excess of $2,000,000 (such contributions not to include any contributions
made by the Borrower as permitted under the definition of “Permitted Subsidiary
Formation”) without the prior consent of Lender.  Borrower will not make any Investments in any
other Person other than as described in the preceding sentence and Permitted
Investments.

 

7.5                               Restriction on Leases.  Borrower and Lender acknowledge that Lender
has provided the Loan to Borrower on the basis that the Mortgaged Property is
an owner-occupied facility.  Borrower
shall not hereafter enter into any Lease or other rental or occupancy
arrangement or concession agreement with respect to the Mortgaged Property or
any portion thereof or otherwise permit any occupancy of the Mortgaged Property
other than by Borrower without Lender’s consent, such consent to be granted or
withheld in lender’s sole discretion.  In
no event will Borrower enter into any Capital Leases.

 

7.6                               Transactions with Affiliates.  Borrower shall not directly or indirectly
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
director, officer, employee or Affiliate of Borrower, except transactions in
the ordinary course of and pursuant to the reasonable requirements of the
business of Borrower and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would be
obtained in a comparable arm’s length transaction with a Person that is not an
Affiliate, director, officer or employee of Borrower.  Each such agreement pertaining to the
ownership, management, maintenance or repair of the Mortgaged Property with any
Affiliate, director, officer or employee of Borrower shall provide that the
same may be terminated by Lender at its option if an Event of Default
exists.  Notwithstanding the foregoing,
Borrower shall be permitted to incur unsecured subordinated debt from
VantagePoint (“Shareholder Subordinated Debt”),
provided that (i) Borrower shall be prohibited from paying any amounts under
any such Shareholder Subordinated Debt if an Event of Default exists or if
there shall then exist any set of circumstances which, with the passage of time
and/or the giving of notice, or both, could constitute an Event of Default,
(ii) VantagePoint shall have no right to vote, or to cause any person to vote
on behalf of the holder of the Shareholder Subordinated Debt, in respect of any
“bankruptcy plan” without the prior consent of Lender or (iii) the terms and
conditions of such Shareholder Subordinated Debt are otherwise reasonably
satisfactory to Lender.  Additionally,
and notwithstanding the foregoing, the Borrower may enter into Subsidiary
Transactions and the Borrower may make Investments in Subsidiaries, in connection
with Permitted Subsidiary Formation or as otherwise permitted pursuant to Section 7.4.  Borrower shall not pay any management or
similar fees with respect to the ownership, operation, maintenance, repair or
management of the Mortgaged Property to any Affiliate of Borrower.

 

7.7                               Management Fees and Compensation; Contracts.  Borrower will not enter into or become
obligated under any management (property and asset), brokerage or other such
similar agreement, whether with an Affiliate or any other Person, with respect
to the Mortgaged Property, without Lender’s prior written consent, and unless
the same may be terminated, without cause and without payment of a penalty or
fee, on not more than thirty (30) days’ prior written notice.  In no event will Borrower pay a management
fee with respect to the Mortgaged Property in excess of the then prevailing
market rates.

 

57

 

7.8                               Conduct of Business.  Borrower shall not use the Mortgaged Property
or any part thereof, or allow the same to be used or occupied, for any purpose
other than for the purposes of an office and manufacturing facility and related
amenities, or for any unlawful purpose, or in violation of any certificate of
occupancy or other permit or certificate, or any Legal Requirement.  Borrower will not suffer any act to be done
or any condition to exist on the Mortgaged Property or any part thereof or any article to
be brought thereon, which may be dangerous (unless safeguarded as required by
Legal Requirement) or which may constitute a nuisance, public or private, or
which may void or make voidable any insurance then in force with respect
thereto.  No tract map, parcel map,
condominium plan, condominium declaration, or plat of subdivision (or analogous
document) will be recorded with respect to the Mortgaged Property without
Lender’s consent.  The Mortgaged Property
shall not be converted to the condominium or “cooperative” form of
ownership.  Borrower will not initiate or
consent to any change in the zoning of the Mortgaged Property, other than to
effectuate a Permitted Rezoning. 
Borrower shall at all times maintain good and marketable fee title to
the Land and the Improvements free and clear of any encumbrances other than the
Permitted Encumbrances.  Borrower shall
not change its fiscal year without giving advance notice thereof to Lender.

 

7.9                               Use of Lender’s Name.  Borrower shall not use the names of Lender or
any of Lender’s Subsidiaries or Affiliates in connection with the development,
marketing, leasing, use and operation of the Mortgaged Property.  Borrower shall not disclose or permit any
Affiliate, officer, director, shareholder or employee of Borrower to disclose
any of the terms and conditions of the Loan to any Person except (a) to the
extent disclosed in the Mortgage and the Financing Statements, (b) to the
extent such disclosure is required pursuant to the Loan Documents or applicable
legal process or (c) to the extent Lender consents to such disclosure.

 

7.10                        Compliance with ERISA.  Borrower shall not adopt, modify or terminate
any Employee Benefit Plans except as described in Schedule 4.10. 
Borrower shall not fail to maintain and operate each existing Employee
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the Code and all other applicable laws and the regulations and
interpretations thereof.  Borrower shall
not engage in any transaction which would cause the Obligations or any action
taken or to be taken under this Agreement or the other Loan Documents or
otherwise (or the exercise by Lender of any of its rights under the Loan
Documents) to be a non-exempt prohibited transaction under ERISA.  Borrower shall not become an “employee
benefit plan” (within the meaning of Section 3(3) of ERISA) to which ERISA
applies and Borrower shall not permit its assets to be plan assets.

 

7.11                        Due on Sale or Encumbrance.

 

(A)                              Without
Lender’s consent, which consent may be given or withheld in the sole discretion
of Lender, neither Borrower nor any other Person directly or indirectly holding
any direct or indirect legal, beneficial, equitable or other interest in
Borrower (at each and every tier or level of ownership up to the level of
VantagePoint’s ownership of Borrower) shall, or permit other Persons to,
Transfer (whether or not for consideration or of record) all or any portion of
the Mortgaged Property or any direct or indirect legal, equitable, beneficial
or other interest (1) in all or any portion of the Mortgaged Property; or
(2) in Borrower (if the, direct or indirect, effect thereof is a Change in
Control or might result in a Change of Control in connection with remedial
action or transfers in lieu of remedial actions), including (a) an installment
sales

 

58

 

agreement for
a price to be paid in installments; (b) any Leases (other than as
permitted by Section 7.5) or a sale, assignment or other transfer of, or
the grant of a security interest in, Borrower’s right, title and interest in
and to any Leases; (c) any direct or indirect voluntary or involuntary
sale of any ownership interest in Borrower or other Person directly or
indirectly owning any direct or indirect interest in Borrower; (d) the
creation, issuance or redemption of direct or indirect ownership interests by
Borrower or any Person owning a direct or indirect interest in Borrower (at
each every tier or level of ownership); (e) any merger, consolidation,
dissolution or liquidation; and (f) without limitation of any of the foregoing,
any direct or indirect voluntary or involuntary Transfer by any Person which
indirectly controls Borrower (by operation of law or otherwise at each and
every tier or level of ownership up to the level of VantagePoint’s ownership of
Borrower) of its direct or indirect controlling interests in Borrower.  Notwithstanding the foregoing, the following
shall not be deemed to be prohibited under this Section 7.11:  (i) Transfers to the extent described in subsection (c),
(d), (e) or (f) of the preceding sentence, so long as no Change in Control
occurs, either individually or in the aggregate, in a single transaction or
series of related transactions, by virtue of such Transfers; (ii) a Qualified
Public Offering; and (iii) a Qualified Sale Transaction.  Notwithstanding the foregoing, Borrower may
sell Inventory in the ordinary course of business and transfer or dispose of
tangible personal property to Persons that are not Borrower’s Affiliates, which
tangible personal property, to the extent included in the Mortgaged Property,
is immediately replaced by an article of equivalent suitability and value
or which is no longer necessary in connection with the operation of the
Mortgaged Property provided that such transfer or disposal will (i) not have a
Material Adverse Effect, and (ii) not materially impair the utility of the
Mortgaged Property, and provided that any tangible personal property acquired
by Borrower (and not so disposed of) shall be subject to the Lien of the
Mortgage.  Borrower acknowledges that
Lender has examined and relied on the experience of Borrower and its officers,
shareholders and principals in owning and operating properties such as the
Mortgaged Property in agreeing to make the Loan and will continue to rely on
such ownership of the Mortgaged Property and Borrower as a means of maintaining
the value of the Mortgaged Property as security for repayment of the Loan and
the performance of the other Obligations. 
Borrower acknowledges that Lender has a valid interest in maintaining
the value of the Mortgaged Property so as to ensure that, should Borrower
default in the repayment of the Loan or the performance of the other
Obligations, Lender can recover the Loan by a sale of the Mortgaged Property.

 

(B)                                Notwithstanding
anything contained herein to the contrary, the Borrower shall have the right to
transfer the Mortgaged Property (the “Property
Transfer”), subject to the following conditions: (i) there being no
Event of Default under the Loan Documents at the time of the Property Transfer,
(ii) Lender’s approval (to be given or withheld in Lender’s sole
discretion) of the Property Transfer and the proposed transferee (the “Transferee”), together with the Transferee’s
direct and indirect beneficial owners, (iii) the Transferee shall expressly
assume the Obligations and the Loan Documents pursuant to documentation
satisfactory to Lender, and shall deliver to Lender such assumption agreements,
Financing Statements, legal opinions, title insurance policies or endorsements,
lien searches, and such other documentation as Lender may reasonably require, (iv)
Borrower or the Transferee shall pay a fee equal to one percent (1%) of the
outstanding principal balance of the Loan at the time of the Property Transfer,
(v) the replacement property manager, if any, must be approved by Lender, and
any replacement property management agreement must be approved by Lender and
shall comply with the requirements of the Loan Documents, (viii) in the event
of a Securitization of the Loan,

 

59

 

Transferee
must obtain confirmation from the Rating Agencies that the Property Transfer
and the assumption of the Loan by Transferee will not result in any downgrade,
withdrawal or qualification of any rating in connection with any such
Securitization, and (ix) Borrower or Transferee shall pay all costs and
expenses incurred by Lender in connection with the Property Transfer, including
title insurance premiums, documentation costs and reasonable attorneys’
fees.  No transfer shall release Borrower
from its obligations under the Loan Documents with respect to events arising or
occurring prior to the date of transfer.

 

(C)                                Lender
shall not be required to demonstrate any actual impairment of its security or
any increased risk of default hereunder in order to declare the Loan
immediately due and payable upon any Default under this Section 7.11.  Notwithstanding anything to the foregoing
contained herein, in no event shall the Mortgaged Property or any direct or
indirect interest in Borrower be transferred to an Embargoed Person.

 

7.12                        Payments; Distributions.  Borrower shall not pay any distributions,
dividends or other payments or return any capital to any of its shareholders or
any other Affiliate or make any distribution of assets, rights, options,
obligations or securities to any of its shareholders or owners or any other
Affiliate, other than payments of interest to its shareholders on any
Shareholder Subordinated Debt which may only be made by Borrower if there shall
exist no uncured Event of Default nor shall any set of circumstances then exist
which, with the passage of time and/or the giving of notice, or both, would
constitute an Event of Default.

 

7.13                        [INTENTIONALLY OMITTED.]

 

7.14                        Alterations.

 

(A)                              Borrower
shall not alter, remove or demolish or permit the alteration, removal or demolition
of, any Improvement except as the same may be necessary in connection with (i)
a Restoration in connection with a taking or casualty in accordance with the
terms and conditions of the Agreement, and (ii) other Alterations permitted in
accordance with the terms and conditions of this Agreement.

 

(B)                                If
no Event of Default exists, Borrower may undertake any alteration, improvement,
demolition or removal of Improvements or any portion thereof (any such
alteration, improvement, demolition or removal, an “Alteration”) so long as (i) Borrower provides Lender with at
least thirty (30) days’ prior notice of any such Alteration (unless related to
an Initial Project, in which case no such prior notice shall be required), (ii)
such Alteration is undertaken in accordance with the applicable provisions of
this Agreement, is not prohibited by, and is in full compliance with, and does
not violate, any Material Contracts or Legal Requirements and does not, during
Construction and upon completion, have a Material Adverse Effect, (iii)
Borrower provides Lender with evidence, satisfactory to Lender, that Borrower
has sufficient funds, through a combination of Loan proceeds, Proceeds, funds
deposited with Lender or otherwise to complete and pay all of the costs of the
Alterations, (iv) (A) such Alteration is in the nature of a Restoration
required or permitted under the Agreement or (B) such Alteration has been
consented to by Lender (such consent will not be required in the case of
Alterations the cost of which, as estimated by Lender, does not exceed $300,000
or Alterations related to Initial Projects), and (v) prior to commencement and
from time to time upon request

 

60

 

from Lender, Borrower delivers an Officer’s
Certificate certifying that conditions (i)–(iv), inclusive, have been
satisfied.  Any Alteration shall, unless
Lender otherwise approves or the Agreement otherwise provides, be conducted
under the supervision of an independent architect approved by Lender (an “Independent Architect”).  No Alteration, other than Alterations related
to the Initial Projects or the cost of which does not exceed $300,000, shall be
undertaken until Lender has approved Plans and Specifications and cost
estimates for the Alterations, prepared by such Independent Architect or
another Person approved by Lender.

 

SECTION 8

CASUALTY AND CONDEMNATION

 

8.1                               Restoration Following Casualty or Condemnation.  After the happening of any casualty or
condemnation to the Mortgaged Property or any part thereof, Borrower shall give
prompt notice thereof to Lender.

 

(a)                                  In
the event of any damage or destruction of all or any part of the Mortgaged
Property, all Proceeds shall be payable to Lender.  Borrower hereby authorizes and directs any
affected insurance company or condemning Governmental Authority or other
Persons to make payment of such proceeds directly to Lender.  Borrower shall obtain Lender’s approval prior
to any settlement, adjustment or compromise of any claims for loss, damage or
destruction under any policy or policies of insurance or with respect to any
condemnation, and Lender shall have the right to participate with Borrower in
negotiation of any such settlement, adjustment or compromise provided, however,
Borrower shall be permitted, so long as no Event of Default exists, to settle
insurance claims of $300,000 or less without Lender’s approval (but with
reasonable advance notice to Lender) and utilize any such funds for
Restoration.  Lender shall also have the
right to appear with Borrower in any action against an insurer based on a claim
for loss, damage or destruction under any policy or policies of insurance.

 

(b)                                 All
compensation, proceeds, damages, claims, insurance recoveries, rights of action
and payments which Borrower may receive or to which Borrower may become
entitled with respect to the Mortgaged Property or any part thereof as a result
of any casualty or condemnation, except as set forth below in this Section 8.1
(the “Proceeds”), shall be paid
over to Lender and shall be applied first toward reimbursement of all costs and
expenses of Lender in connection with recovery of the same, and then, except as
set forth below in this Section 8.1, shall be applied in the sole and
absolute discretion of Lender, without regard to the adequacy of Lender’s
security hereunder, to the payment or prepayment of the Obligations in such
order as Lender may determine, and any amounts so applied shall reduce the
Obligations pro tanto
(without any Prepayment Premium due in connection therewith).  Any application of the Proceeds or any
portion thereof to the Obligations shall not be construed to cure or waive any
Default or Event of Default or invalidate any act done pursuant to any such
Default or Event of Default.

 

(c)                                  Subject
to the other provisions of this Section 8.1, and provided that (i) all
Proceeds have been deposited with Lender; (ii) no Event of Default shall exist;
(iii) a Total Loss with respect to the Property shall not have occurred; (iv)
the Restoration is

 

61

 

capable, as reasonably
determined by Lender, of being completed before the earlier (the “Required Restoration Date”) to occur of (x)
the Maturity Date, (y) the date on which the insurance carried by Borrower
pursuant to Section 5.4(a)(ii), with respect to the Mortgaged Property
shall expire, and (z) six (6) months after the occurrence of the casualty
or condemnation in question; (v) Lender shall have been furnished with an
estimate of the cost of restoration accompanied by an architect’s or contractor’s
certificate as to such costs and appropriate final plans and specifications for
reconstruction of the Improvements, all of which shall be approved by Lender,
which approval shall not be unreasonably withheld, conditioned or delayed; (vi)
the Improvements so restored or rebuilt shall be of at least equal value and
substantially the same character as prior to the damage or destruction and
appropriate for the purposes for which they were originally erected (and, if
requested by Lender, Borrower will furnish, at its expense, an appraisal
confirming such valuation); (vii) Borrower shall have furnished Lender with
evidence reasonably satisfactory to Lender that all Improvements so restored
and/or reconstructed and their use fully comply with all zoning, building laws,
ordinances and regulations and other Legal Requirements and that all required
certificates of occupancy, licenses and approvals required for use, operation
and occupancy of the Improvements can be obtained; (viii) if the estimated cost
of restoration exceeds the Proceeds available, Borrower shall have deposited
with Lender such sums or other security as may be necessary, in Lender’s
reasonable judgment, to pay such excess costs; and (ix) Lender shall have
received notice within thirty (30) days of the fire or other hazard or of the
condemnation proceedings specifying the date of such fire or other hazard or
the date the notice of condemnation proceedings was received and the request to
Lender to make said Proceeds available to Borrower; then the Proceeds, less the
actual costs, fees and expenses, if any, incurred in connection with adjustment
of loss and Lender’s reasonable administrative expenses relating to such loss
and the disbursement of the Proceeds shall be applied by Lender to the payment
of all the costs of the aforesaid restoration, repairs, replacement, rebuilding
or alterations, including the cost of temporary repairs or for the protection
of property pending the completion of permanent restoration, repairs,
replacements, rebuilding or alterations (all of which temporary repairs,
protection of property and permanent restoration, repairs, replacement,
rebuilding or alterations are hereinafter collectively referred to as the “Restoration”), and shall be paid out from
time to time as such Restoration progresses upon the request of Borrower if the
work for which payment is requested has been done in a good and workmanlike
manner, in compliance with applicable Legal Requirements and substantially in
accordance with the plans and specifications therefor.  Each request by Borrower for disbursement of
Proceeds shall (unless Lender otherwise elects, in its sole discretion, with
respect to a Restoration estimated by Lender to cost $100,000 or less to
complete, to waive any of the following requirements) be accompanied by the
Required Lien Waivers, a Request for Release, and, to the extent not subsumed
within a Request for Release, the following:

 

(1)                                  A
certificate signed by Borrower, dated not more than thirty (30) days prior to
such request, setting forth the following: 
(A) That the sum then requested either has been paid, or is justly due
to contractors, subcontractors, materialmen, engineers, architects or other
persons who have rendered services or furnished materials for the restoration
therein specified or have paid for the same,

 

62

 

the names and addresses of such persons, a
brief description of such services and materials, the several amounts so paid
or due to each of said persons in respect thereof (together with supporting
statements and invoices for the same), that no part of such expenditures has
been or is being made the basis of any previous or then pending request for the
withdrawal of Proceeds or has been made out of any of the Proceeds received by
Borrower, and that the sum then requested does not exceed the value of the
services and materials described in the certificate; and (B) That the costs, as
estimated by the persons signing such certificate, of the Restoration required
to be done subsequent to the date of such certificate in order to complete and
pay for the same, do not exceed the Proceeds, plus any amount or security
approved by Lender and deposited by Borrower to defray such costs and remaining
in the hands of Lender after payment of the sum requested in such certificate.

 

(2)                                  A
title insurance report or other evidence satisfactory to Lender to the effect
that there has not been filed with respect to the Mortgaged Property, or any
part thereof, any vendor’s, contractor’s, mechanics’, laborer’s, materialmen’s
or other Lien which has not been discharged of record or bonded or insured
over, except such as will be disbursed by payment of the amount then requested.

 

(3)                                  A
certificate signed by the Independent Architect and/or engineer in charge of
the Restoration, who shall be selected by Borrower and approved in writing by
Lender, certifying that the Restoration is proceeding in accordance with the
plans and specifications approved by Lender and in accordance with all zoning,
subdivision and other Legal Requirements. 
Upon compliance with the foregoing provisions, Lender shall, out of
Proceeds (and the amount of security approved by Lender, if any, deposited by
Borrower to defray the costs of the Restoration), pay or cause to be paid to
Borrower or the Persons named (pursuant to clause (1)(A)
above) in such certificate the respective amounts stated therein to have been
paid by Borrower or to be due to them, as the case may be.

 

(d)                                 If
the Proceeds at the time held by Lender, less the actual costs, fees and
expenses, if any, incurred in connection with the adjustment of the loss and
Lender’s administrative expenses relating to such loss and the disbursement of
the Proceeds, shall be, in Lender’s reasonable judgment, insufficient to pay the
entire cost of the Restoration, Borrower shall deposit with Lender any such
deficiency prior to disbursement of any additional portion of the
Proceeds.  No payment made prior to the
final completion of the Restoration shall exceed ninety percent (90%) of the
value of the work performed from time to time (provided that, notwithstanding
the foregoing, subcontractors who have completed their work may be paid in
full), and at all times the undisbursed balance of said Proceeds remaining in
the hands of Lender shall be at least sufficient to pay for the cost of
completion of the Restoration free and clear of liens.  In addition to the requirements and
conditions set forth in Section 5.19, final payment shall be upon an
architect’s certificate to completion in accordance with the final plans and
specifications and compliance with all zoning, building, subdivision and other
governmental laws, ordinances, rules, and regulations, the filing of a notice
of completion and the expiration of the period provided under applicable law
for the filing of mechanic’s and

 

63

 

materialmen’s
liens and delivery to Lender of a certified copy of a final unconditional
permanent certificate of occupancy regarding the Restoration.  Lender may, at its option, require an
endorsement to the Title Policy insuring the continued priority of the lien of
the Mortgage as to all sums advanced hereunder, such endorsement to be paid for
by Borrower.  Upon completion of the
Restoration in a good and workmanlike manner in accordance herewith, and
provided that Lender has received satisfactory evidence that the Restoration
has been paid for in full and the Mortgaged Property is free and clear of all
Liens (including signed lien waivers from all contractors and subcontractors
conditioned only on payment of amounts specified therein), any balance of the
Proceeds at the time held by Lender (after reimbursement to Lender of all costs
and expenses of Lender, including administrative expenses, in connection with recovery
of the same and disbursement of such Proceeds for the Restoration), if any,
shall be applied as follows:  (i) to the
extent that such balance of the Proceeds is equal to or less than the amount,
if any, by which the value of the Mortgaged Property prior to such damage or
destruction exceeds the value of the Mortgaged Property after such Restoration
(for these purposes, the value of the Mortgaged Property shall be determined by
Lender in its discretion), then the portion of the balance of the Proceeds
equal to such excess amount shall be applied to the payment or prepayment of
the principal balance of the Obligations in such order as Lender may determine,
and any amounts so applied shall reduce the Obligations pro tanto (without any prepayment premium
due in connection therewith); and (ii) to the extent that the balance of the
Proceeds exceeds such excess amount, such portion of the balance of the
Proceeds shall be paid to Borrower.

 

(e)                                  Nothing
herein contained shall be deemed to excuse Borrower from repairing or
maintaining the Mortgaged Property as provided in the Agreement hereof or
restoring all damage or destruction to the Mortgaged Property, regardless of
whether or not there are insurance proceeds available or whether any such
Proceeds are sufficient in amount, and the application or release by Lender of
any Proceeds shall not cure or waive any Default or Event of Default or
invalidate any other act done by Lender to exercise its remedies under this
Agreement or the other Loan Documents.

 

SECTION 9

DEFAULT, RIGHTS AND REMEDIES

 

9.1                               Event of Default.  “Event of
Default” means the occurrence or existence of any one or more of the
following:

 

(A)                              Payment.  Failure of Borrower to pay (i) on the
Maturity Date, the outstanding principal of, accrued interest in, and other
Indebtedness owing pursuant to the Agreement, the Note and the other Loan
Documents, (ii) within five (5) days after the due date, any installment of
principal or interest due under the Note; provided, however, the aforesaid five
(5) day grace period may be utilized by Borrower no more than once in any
consecutive twelve (12) Loan Month period, or (iii) within five (5) days after
the respective due date, any other amount due under the other Loan Documents,
provided, however, the aforesaid five (5) day grace period may be utilized by
Borrower no more than once in any consecutive twelve (12) Loan Month period; or

 

64

 

(B)                                Breach of Certain Provisions.

 

(i)                                     Failure
of Borrower to perform or comply with any term, agreement, covenant,
representation, warranty or condition contained in Section 5.4, 5.15, 6,
7.1, 7.3, 7.4, 7.5, 7.10, 7.11, 7.12, 8.1(a), or 8.1(b); or

 

(ii)                                  Failure
of Borrower to perform or comply with any term, agreement, covenant, representation,
warranty or condition contained in Section 5.1, 7.2, 7.6, 7.7, 7.8, 7.9,
7.14, 8.1(c) or 10 and such failure is not remedied or waived within ten (10)
Business Days after receipt by Borrower of notice from Lender of such failure.

 

(C)                                Breach of Representation and Warranty.  Any representation, warranty, certification
or other statement made by Borrower in any Loan Document or in any statement or
certificate at any time given in writing pursuant or in connection with any
Loan Document (other than occurrences described in other provisions of this Section 9.1
for which a different grace or cure period is specified or which constitute
immediate Events of Default) is false in any material respect on the date made
which remains uncured for five (5) Business Days after notice, provided,
however, that (i) if such breach cannot be remedied with reasonably diligent
effort within such 5-Business Day period, but is susceptible to cure within a
period of thirty (30) days and (ii) the continued breach will not have a
Material Adverse Effect, Borrower shall have such longer period, not to exceed
twenty-five (25) additional days, as Borrower may need to remedy such breach,
if Borrower is proceeding with diligent effort to remedy such breach throughout
said thirty (30) day period; provided further, however, that in no event shall
any grace or curative period apply if the representation, warranty,
certification or other statement was known by Borrower to be false when made or
deemed made; or

 

(D)                               Other Defaults Under Loan
Documents.  A default
by Borrower shall occur in the performance of or compliance with any term
contained in this Agreement or the other Loan Documents and such default is not
remedied or waived within thirty (30) days after receipt by Borrower of notice
from Lender of such default (other than occurrences described in other
provisions of this Section 9.1 for which a different grace or cure period
is specified or which constitute immediate Events of Default); provided,
however, that (i) if such default cannot be remedied with reasonably
diligent effort within a period of thirty (30) days, but is susceptible to cure
within a period of one hundred twenty (120) days and (ii) the continued default
in performance will not have a Material Adverse Effect, such longer period, not
to exceed ninety (90) additional days, as Borrower may need to remedy such
default, if Borrower is proceeding with diligent effort to remedy such default
throughout said one hundred twenty (120)-day period.  The rights to notice and cure periods granted
herein shall not be cumulative with any other rights to notice or a cure period
in any other Loan Document and the giving of notice or a cure period pursuant
to this section shall satisfy any and all obligations of Lender to grant
any such notice or cure period pursuant to any of the Loan Documents; or

 

(E)                                 Involuntary Bankruptcy; Appointment of Receiver, etc.
(1) A court enters a decree or order for relief with respect to Borrower
in an involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed or other similar relief is not granted under any applicable
federal or state law; or (2) the continuance of any of the following
events for ninety (90) days

 

65

 

unless
dismissed, bonded or discharged: 
(a) an involuntary case is commenced against any Borrower under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Borrower or over all or a substantial part of its property, is
entered; or (c) an interim receiver, trustee or other custodian is
appointed without the consent of Borrower for all or a substantial part of the
property of Borrower; or

 

(F)                                 Voluntary Bankruptcy; Appointment of Receiver, etc.  (1) An order for relief is entered with
respect to Borrower or Borrower commences a voluntary case under the Bankruptcy
Code or any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law or consents to the appointment of or taking possession
by a receiver, trustee or other custodian for all or a substantial part of its
property; or (2) Borrower makes any assignment for the benefit of
creditors; or (3) partners, shareholders, or members in Borrower adopts
any resolution or otherwise authorizes action to approve any of the actions
referred to in this Section 9.1(F); or

 

(G)                                Governmental Liens.  Any lien, levy or assessment is filed or
recorded with respect to or otherwise imposed upon all or any part of the
Mortgaged Property by the United States or any department or
instrumentality thereof or by any state, county, municipality or other
governmental agency (other than Permitted Encumbrances) and such lien, levy or
assessment is not stayed, vacated, paid, discharged or insured or bonded over
within thirty (30) days; or

 

(H)                               Judgment and Attachments.  Any money judgment, writ or warrant of
attachment, or similar process (other than those described in Section 9.1(G))
involving (1) an amount in any individual case in excess of $100,000 or
(2) an amount in the aggregate at any time in excess of $250,000 (in
either case not adequately covered by insurance as to which the insurance
company has acknowledged coverage) is entered or filed against Borrower and
remains undischarged, unvacated, unbonded, uninsured or unstayed for a period
of thirty (30) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or

 

(I)                                    Dissolution.  Any order, judgment or decree is entered
against Borrower decreeing the dissolution or split up of Borrower and such
order remains undischarged or unstayed for a period in excess of twenty (20)
days; or

 

(J)                                   Injunction.  Either (i) Borrower is enjoined, restrained
or in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business
relating to the Mortgaged Property and such order continues for more than
thirty (30) days; or (ii) any order or decree is entered by any court of
competent jurisdiction directly or indirectly enjoining or prohibiting Lender
or Borrower from performing any of their obligations under this Agreement or
any of the other Loan Documents; or

 

(K)                               Invalidity of Loan Documents.  Any of the Loan Documents for any reason,
other than a partial or full release in accordance with the terms of the Loan
Documents, ceases to be in full force and effect or is declared to be null and
void by a court of competent jurisdiction,

 

66

 

or any of
Borrower denies that it has any further liability under any Loan Documents to
which it is party, or gives notice to such effect; or

 

(L)                                 Event of Default.  The occurrence of an Event of Default
specified elsewhere in this Agreement or in any of the other Loan Documents; or

 

(M)                            Cross-Default and Acceleration.  The acceleration of any Permitted
Indebtedness in the aggregate amount of $1,000,000 or more; or

 

(N)                               Death, etc.  The dissolution, cessation of existence or
felony criminal conviction or indictment of
Borrower or a punishment for which could result in forfeiture of any assets of
the Borrower or any direct or indirect equity interest to Borrower or loss of
eligibility for any material Proprietary Rights; or

 

(O)                               Rate Cap Agreement.  The Rate Cap Agreement shall terminate for
any reason or the issuer of the Rate Cap Agreement shall no longer be a Rate
Cap Issuer and a fully executed substitute Rate Cap Agreement issued by another
Rate Cap Issuer approved by Lender, is not delivered to Lender within ten (10)
days after such termination, together with a fully executed Rate Cap Pledge
Agreement; or

 

(P)                                 Zoning. 
The Land and Improvements or any portion thereof are rezoned either
voluntarily or involuntarily, so as to no longer permit the Land and
Improvements or any portion thereof to be used as an office or manufacturing
facility, other than pursuant to a Permitted Rezoning; or

 

(Q)                               Prescribed Laws.  If the Borrower or Mortgaged Property fails
to comply with any covenants, with respect to Prescribed Laws as provided in Section 5.10;
or

 

(R)                                Change in Control.  The occurrence of any direct or indirect
Change in Control with respect to Borrower.

 

9.2                               Acceleration and Remedies.  Upon the occurrence of any Event of Default
specified in Sections 9.1(E) and 9.1(F), payment of all Obligations shall be
accelerated without notice, presentment, demand, protest or notice of protest
and shall be immediately due and payable and, in addition, Lender may in
addition to any other rights and remedies available to Lender at law or in
equity or under any other Loan Documents, exercise one of more of the following
rights and remedies as it, in its sole discretion, deems necessary or
advisable.  Upon the occurrence of any
Event of Default (other than Events of Default specified in Sections 9.1(E) and
9.1(F)), Lender, in addition to any other rights or remedies available to
Lender at law or in equity, or under any of the other Loan Documents, may
exercise any one or more of the following rights and remedies as it, in its
sole discretion, deems necessary or desirable:

 

(a)                                  Acceleration.  Declare immediately due and payable, without
further notice, protest, presentment, notice of protest or demand, all
Obligations including all monies advanced under this Agreement, the Note, the
Mortgage and/or any of the Loan Documents which are then unpaid, together with
all interest then accrued thereon and all other amounts then owing (including
any Default Interest, or prepayment premium owed as a result of such acceleration).  If payment of the Obligations is accelerated,
Lender may, in its sole discretion, exercise all rights

 

67

 

and remedies
hereunder and under the Note, the Mortgage and/or any of the other Loan
Documents at law, in equity or otherwise.

 

(b)                                 Possession.  Enter upon and take possession of the
Mortgaged Property and proceed in the name of Lender or Borrower as the
attorney-in-fact of Borrower (which authority is hereby granted by Borrower, is
coupled with an interest, and is irrevocable), as Lender shall elect.  If Lender elects to so enter upon and take
possession of the Mortgaged Property, Lender (i) may enforce or cancel all
contracts entered into by Borrower or make other contracts which are in Lender’s
sole opinion advisable, and (ii) shall be reimbursed by Borrower upon demand
any reasonable amount or amounts expended by Lender for such performance
together with any reasonable costs, charges, or expenses incident thereto or
otherwise incurred or expended by Lender or its representatives (including an
appraisal) on behalf of Borrower in connection with the Mortgaged Property, and
the amounts so expended shall be considered part of the Loan evidenced by the
Note and secured by the Loan Documents and shall bear interest at the Default
Rate.

 

(c)                                  No Further Obligations.  Terminate Lender’s obligations under this
Agreement including obligations to disburse funds.

 

(d)                                 Injunctive Relief.  Institute appropriate proceedings for
injunctive relief (including specific performance of the obligations of
Borrower).

 

(e)                                  Reserves.  Apply all funds contained in the Reserves to
Borrower’s Obligations.

 

9.3                               Remedies Cumulative; Waivers; Reasonable Charges.  All of the remedies given to Lender in the
Loan Documents or otherwise available at law or in equity to Lender shall be
cumulative and may be exercised separately, successively or concurrently.  Failure to exercise any one of the remedies
herein provided shall not constitute a waiver thereof by Lender, nor shall the
use of any such remedies prevent the subsequent or concurrent resort to any
other remedy or remedies vested in Lender by the Loan Documents or at law or in
equity.  To be effective, any waiver by
Lender must be in writing and such waiver shall be limited in its effect to the
condition or default specified therein, and no such waiver shall extend to any
subsequent condition or default.  It is
agreed that (i) the actual costs and damages that Lender would suffer by reason
of an Event of Default (exclusive of the attorneys’ fees and other costs
incurred in connection with enforcement of Lender’s rights under the Loan
Documents) or a prepayment would be difficult and needlessly expensive to
calculate and establish, and (ii) the amounts of the Default Rate, the Late
Charge, payments to be made pursuant to Section 2.4(c)(ii) and the
Prepayment Premium are reasonable, taking into consideration the circumstances
known to the parties at this time, and (iii) the Default Rate, the Late Charges
and Lender’s reasonable attorneys’ fees and other costs and expenses incurred
in connection with enforcement of Lender’s rights under the Loan Documents
shall be due and payable as provided herein, and (iv) the Default Rate, Late
Charges, Prepayment Premium, the payments to be made pursuant to Section 2.4(c)(ii)
and the obligation to pay Lender’s reasonable attorneys’ fees and other
enforcement costs do not, individually or collectively, constitute a penalty.

 

9.4                               Existing Indebtedness.  For so long as the Additional Credit Facility
is outstanding, in the event Borrower fails to perform or comply with any of
the provisions of Sections 5.10 (to the

 

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extent
pertaining to Material Contracts and Proprietary Rights not related to
ownership and operation of the Mortgaged Property), 7.1 (except with respect to
Indebtedness secured by Liens on the Mortgaged Property), 7.3 (to the extent
pertaining to Material Contracts and Proprietary Rights not related to
ownership and operation of the Mortgaged Property), 7.4 (other than Section 7.4(A)(2)),
7.6 or 7.12 of this Agreement (such sections, the “Override Sections”), Lender
shall be deemed to have consented to such failure and such failure shall not be
deemed a Default or an Event of Default under this Agreement, if (i) such
action is not prohibited under the terms of the Additional Credit Facility or
(ii) if prohibited under the Additional Credit Agreement, the Additional Credit
Lender consents in writing to such failure (or takes such other action so that
such failure does not continue as a default or event of default under such
Additional Credit Agreement (whether by temporary or permanent waiver or
forbearance, amendment or otherwise)) within 180 days of becoming aware
thereof.  In the event (A) the Additional
Credit Lender takes actions in accordance with clause (ii) above and Borrower’s
failure to comply with the specific Override Sections could reasonably be
determined to have materially impaired the interests of the Lender with respect
to the full repayment of the Obligations as and when due and payable and (B)
the Additional Credit Lender received as a condition to taking such actions any
financial incentives, paydowns, additional credit support or, except (x) as
provided below in this Section 5.13 with respect to pledges of stock in
Subsidiaries from the Borrower or any of its Subsidiaries or (y) with respect
to assets that are either or both (I) then encompassed within security
interests existing in collateral granted by Borrower in favor of the Additional
Credit Lender under the Additional Credit Facility (whether pursuant to
after-acquired property clauses or, unless resulting from actions taken in
accordance with clause (ii) above, otherwise) or (II) the product of, proceeds
of or derived from existing collateral pledged by Borrower to the Additional
Credit Lender under the Additional Credit Facility, collateral (such as a fee,
increase in return on credit extensions or loan repayment, warrant or other
financial interest in Borrower or its Subsidiaries or additional Subsidiary
guaranties of the obligations under the Additional Credit Facility), Lender
shall also be provided such financial benefits on a pro rata basis (i.e., in
proportion to the respective outstandings under the facilities, with the Future
Advance not being considered outstanding under this Agreement until actually
distributed to Borrower under Section 5.13 of this Agreement).  Notwithstanding the foregoing, in no event
shall the foregoing provisions provide for (i) pledges of stock in Subsidiaries
of the Borrower, provided Lender receives unsecured guaranties of the
Obligations from Subsidiaries of the Borrower in lieu of such pledges or (ii)
Lender to receive any additional financial incentives, paydowns or additional
credit support in conjunction with the Borrower’s prepayment of obligations
under the Additional Credit Facility with proceeds from VantagePoint’s exercise
of warrants issued by the Borrower that VantagePoint holds as of the Closing
Date. Borrower shall promptly deliver copies of all notices, demands, reports
or requests given to, or received by Borrower from the Additional Credit
Lender, and shall notify Lender within two (2) Business Days after Borrower
receives notice or acquires knowledge of any default or any condition or event
that with the passage of time would constitute a default under the Additional
Credit Facility, in each case to the extent the same relate to failures to
perform or comply with the Override Sections. 
Promptly upon Borrower obtaining knowledge of any such default under the
Additional Credit Facility, Borrower shall deliver a certificate of such
Borrower’s chief financial officer or similar officer specifying the nature and
period of existence of such condition or event and what action Borrower has
taken, is taking or proposes to take, if any, with respect thereto.

 

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SECTION 10

SECONDARY MARKET TRANSACTION

 

10.1                        Secondary Market Transaction.  Borrower agrees that Lender has the absolute
right to securitize, syndicate, grant participations in, or otherwise Transfer
all or any portion of the Loan (each such transaction, a “Securitization”) to any Person other than a
Competitor of Borrower.  Lender may
determine to Transfer some or all of the Loan or retain title to some or all of
the Loan as part of a Securitization. 
Borrower further agrees that Lender may delegate any or all of Lender’s
rights, powers and privileges to a servicer (“Servicer”)
and Borrower shall, upon notice from Lender, recognize the Servicer as the
agent of Lender.  In the event this Loan
becomes or is designated by Lender to become an asset of a Securitization, upon
Lender’s request, Borrower shall meet, from time to time, with representatives
of the Rating Agencies in connection with such a Securitization to discuss the
business and operations of the Mortgaged Property and, in that regard, agrees
to cooperate with the reasonable requests of the Rating Agencies including
delivering any existing environmental materials relating to the Mortgaged
Property in Borrower’s possession. 
Lender may retain the Rating Agencies to provide rating surveillance
services on any certificates issued in a Securitization.  In no event shall Borrower be required to pay
any servicer fees, Securitization trustee fees or other Securitization
administrative expenses except as may be expressly provided in this
Agreement.  Notwithstanding the
foregoing, Borrower shall pay any reasonable fees and expenses of the Servicer
which Borrower may be obligated to pay pursuant to Section 11.1 or another
provision of this Agreement.  Borrower
shall, upon request from Lender, from time to time, cooperate, and Borrower
shall cooperate, in all reasonable respects in connection with a
Securitization.  Such cooperation may, in
Lender’s discretion, include documentation changes, changes in organizational
documents, changes in Reserves, Payment Dates, Interest Periods, insurance
endorsement changes, tenant payment direction changes, site inspections,
updated appraisals, preparation and delivery of financial information or other
diligence requested by Lender and/or any Rating Agency.  Such cooperation may include, in Lender’s
discretion, execution of one or more promissory notes and the creation of Liens
securing such notes of differing priority and/or the creation of mezzanine debt
secured by pledges of all of the membership interests in the Borrower so long
as the principal amount, interest rate, payment terms and other monetary terms
of the Loan do not, in the aggregate change. 
Borrower will not be required to incur more than de minimis expenses or
costs pursuant to this Section 10.1, except to the extent Borrower is
otherwise obligated under the Loan Documents to pay such costs and
expenses.  Borrower will, upon request
from Lender, in connection with a Securitization, enter into such
acknowledgments and confirmations of the applicable assignments as Lender may
request.  Borrower shall, subject to the
terms and provisions of this Section 10.1, use reasonable efforts to
satisfy the market standards which Lender determines are reasonably required in
the marketplace or by the Rating Agencies in connection with a
Securitization.  Borrower will not,
pursuant to any of the provisions of this Section 10.1, incur, suffer or
accept (except to a de minimis
extent) (i) any lesser rights or greater obligations as are currently set forth
in the Loan Documents or Borrower’s Organizational Documents (unless Borrower
is made whole by the holder of the Note) or (ii) subject to Section 11.13
hereof, any personal liability other than as set forth in the Loan
Documents.  Borrower will also, if
requested by Lender, cause independent counsel to render opinions customary in
securitization transactions with respect to the Mortgaged Property and Borrower
and its Affiliates (but not a true sale or 10b-5 opinion), which counsel and
opinions shall be reasonably satisfactory to Lender and the Rating Agencies and
which shall be addressed to such Persons as

 

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shall be
reasonably designated by the holder of the Note.  Borrower’s failure to deliver the opinions
required hereby within ten (10) Business Days after written request therefore
shall constitute an Event of Default hereunder. 
If requested by Lender, Borrower’s cooperation will also include (but
subject to Section 11.3) certifications and agreements pursuant to which
Borrower will certify that it has examined the portion of applicable
preliminary and final private placement memorandum or preliminary, final and supplement
or prospectus specified by Lender as pertaining to Borrower, the Loan, Borrower’s
Affiliates and the Mortgaged Property, and that each such designated portion,
as it relates to Borrower, Borrower’s Affiliates, the Mortgaged Property, and
all other aspects of the Loan, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading.  Such agreement may, if
requested by Lender, require Borrower to indemnify, defend, protect and hold
harmless Lender and other Persons designated by Lender from and against any
losses, claims, damages, liabilities, costs and expenses that arise out of or
are based upon any untrue statement of any material fact contained in the
reviewed documents or other information or documents prepared by Borrower or
its Affiliates and provided to Lender or in any representation or warranty of
Borrower contained in the Loan Documents or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated in such information or necessary in order to make the statements in such
information not materially misleading.

 

SECTION 11

MISCELLANEOUS

 

11.1                        Expenses and Attorneys’ Fees.  Whether or not the transactions contemplated
hereby shall be consummated, Borrower agrees to promptly pay all fees, costs
and expenses (including reasonable attorneys’ fees, court costs, cost of appeal
and the reasonable fees, costs and expenses of other professionals retained by
Lender) incurred by Lender in connection with the following, and all such fees,
costs and expenses shall be part of the Obligations, payable on demand: (A)
fees, costs and expenses, the examination, review, due diligence investigation,
documentation and closing of the financing arrangements evidenced by the Loan
Documents; (B) incurred in connection with the giving or withholding of any
consents, approvals, or permissions, administration of the Loan, disbursements
of the Loan and disbursements from the Reserves and in connection with any
amendments, modifications and waivers relating to the Loan Documents requested
by Borrower; (C) the review, documentation, negotiation and closing of any
subordination or intercreditor agreements, Lease reviews, and subordination,
nondisturbance and attornment agreements; (D) Lender’s Representative; and (E)
enforcement of this Agreement or the other Loan Documents, the collection of
any payments due from Borrower under the Loan Documents or any refinancing or
restructuring of the credit arrangements provided under the Loan Document,
whether in the nature of a “workout” or in connection with any insolvency or
bankruptcy proceedings or otherwise.

 

11.2                        Certain Lender Matters.  Lender may, in accordance with Lender’
customary practices, destroy or otherwise dispose of all documents, schedules,
invoices or other papers, delivered by Borrower to Lender unless Borrower
requests, at the time of delivery, in writing that same be returned.  Borrower and Lender intend that the
relationships created hereunder and under the other Loan Documents be solely
that of borrower and lender.  Nothing
herein or therein is

 

71

 

intended to create
a joint venture, partnership, tenancy-in-common, or joint tenancy relationship
between Borrower and Lender nor to grant Lender any interest in the Mortgaged
Property other than that of mortgagee, beneficiary or lender.  No provision in this Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create any fiduciary duty by Lender to Borrower or any other
Person.  All attorneys, accountants,
appraisers, and other professional Persons and consultants retained by Lender
shall have the right to act exclusively in the interest of Lender and shall
have no duty of loyalty, duty of care or any other duty to Borrower or any of
Borrower’s partners, shareholders, members, managers, Affiliates or any other Person.  By accepting or approving anything required
to be observed, performed or fulfilled or to be given to Lender pursuant to the
Loan Documents, Lender shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof, and such acceptance or approval thereof
shall not be or constitute any warranty or representation with respect hereto
or thereto by Lender.  Borrower shall
rely solely on its own judgment and advisors in entering into the Loan without
relying in any manner on any statements, representations or recommendations of
Lender or any parent, subsidiary or Affiliate of Lender or their respective
attorneys, advisors, accountants, officers, representatives, directors,
employees, partners, shareholders, trustees, members or managers.  Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower
hereby irrevocably waives the right to raise any defense or take any action on
the basis of the foregoing with respect to Lender’s exercise of any such rights
or remedies.  Borrower acknowledges that
Lender engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or competitive
with the business of Borrower or its Affiliates.  LENDER SHALL HAVE NO LIABILITY HEREUNDER FOR
ANY CONSEQUENTIAL, SPECIAL, PUNITIVE OR INDIRECT DAMAGES.  In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
proceedings affecting Borrower or its creditors or property, Lender, to the
extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of
Lender allowed in such proceedings for the entire secured Obligations at the
date of the institution of such proceedings and for any additional amount which
may become due and payable by Borrower after such date.  Lender shall have the right from time to time
to designate, appoint and replace one or more servicers and to allow servicer
to exercise any and all rights of Lender under the Loan Documents.  All documents and other matters required by
any of the provisions of this Agreement to be submitted or provided to Lender
shall be in form and substance satisfactory to Lender.  Borrower shall not be entitled to (and does
hereby waive any and all rights to receive) any notices of any nature
whatsoever from Lender except with respect to matters for which the Loan
Documents expressly provide for the giving of notice by Lender to
Borrower.  In any action or proceeding
brought by Borrower against Lender claiming or based upon an allegation that
Lender unreasonably withheld its consent to or approval of a proposed act by
Borrower which requires Lender’s consent hereunder, Borrower’s sole and
exclusive remedy in said action or proceeding shall be injunctive relief or
specific performance requiring Lender to grant such consent or approval.

 

72

 

11.3                        Indemnity.  In addition to the payment of expenses
pursuant to Section 11.1 and the indemnification obligations set forth in
other portions of this Agreement, the Environmental Indemnification Agreement
or the other Loan Documents, whether or not the transactions contemplated
hereby shall be consummated, Borrower agrees to indemnify, pay, defend and hold
Lender, its officers, directors, members, partners, shareholders, participants,
beneficiaries, trustees, employees, agents, successors and assigns, any
subsequent holder of the Note, any trustee, fiscal agent, servicer, underwriter
and placement agent, (collectively, the “Indemnitees”)
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, causes of action, suits, claims, tax
liabilities, broker’s or finders fees, costs, expenses and disbursements of any
kind or nature whatsoever (including the fees and disbursements of counsel for
such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, based upon any third party claims against
such Indemnitees in any manner related to or arises out of (A) any breach
by Borrower of any representation, warranty, covenant, or other agreement
contained in any of the Loan Documents, (B) the actual or threatened presence,
release, disposal, spill, escape, leakage, transportation, migration, seepage,
discharge, removal, or cleanup of any Hazardous Material located on, about,
within, under, affecting, from or onto the Mortgaged Property or any violation
of any applicable Environmental Law by Borrower or the Mortgaged Property, or
(C) the use or intended use of the proceeds of any of the Loan (the
foregoing liabilities herein collectively referred to as the “Indemnified Liabilities”); provided that
Borrower shall have no obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of that Indemnitee as determined in a final order by a court of competent
jurisdiction.  Borrower shall be relieved
of its obligation under clause (B) of this Section 11.3 with respect to
Hazardous Materials first introduced to the Land and Improvements after either
(1) the foreclosure of the Mortgage or (2) the delivery by Borrower to, and
acceptance by, Lender or its designee of a deed-in-lieu of foreclosure with
respect to the Mortgaged Property.  To
the extent that the undertaking to indemnify, pay, defend and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Borrower shall contribute the maximum portion that it
is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.  If any such action or other proceeding
shall be brought against Lender, upon written notice from Borrower to Lender
(given reasonably promptly following Lender’s notice to Borrower of such action
or proceeding), Borrower shall be entitled to assume the defense thereof, at
Borrower’s expense, with counsel reasonably acceptable to Lender; provided,
however, Lender may, at its own expense, retain separate counsel to participate
in such defense, but such participation shall not be deemed to give Lender a
right to control such defense, which right Borrower expressly retains.  Notwithstanding the foregoing, each
Indemnitee shall, following notice to and consultation with Borrower, have the
right to employ separate counsel at Borrower’s expense if, in the reasonable
opinion of legal counsel, a conflict or potential conflict exists between the
Indemnitee and Borrower that would make such separate representation
advisable.  Borrower shall have no
obligation to indemnify an Indemnitee for damage or loss resulting from such
Indemnitee’s gross negligence or willful misconduct.

 

11.4                        Amendments and Waivers.  Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this
Agreement, the Note or any other

 

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Loan Document,
or consent to any departure therefrom, shall in any event be effective unless
the same shall be in writing and signed by Lender (and, with respect to any
amendment or modification, unless also signed by Borrower).  Each amendment, modification, termination or
waiver shall be effective only in the specific instance and for the specific
purpose for which it was given.  No
notice to or demand on Borrower in any case shall entitle Borrower, or any
other Person to any other or further notice or demand in similar or other
circumstances.  To the fullest extent
permitted by law, Borrower, for itself and its successors and assigns, waives
all rights to a marshalling of the assets of Borrower, Borrower’s partners or
members and others with interests in Borrower, and of the Mortgaged Property,
or to a sale in inverse order of alienation in the event of foreclosure of all
or any of the Mortgage, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of the Mortgaged Property for the collection
of the obligations without any prior or different resort for collection or of
the right of Lender to the payment of the obligations owing Lender on account
of the Loan Documents out of the net proceeds of the Mortgaged Property in
preference to every other claimant whatsoever. 
In addition, Borrower, for itself and its successors and assigns, waives
in the event of foreclosure of the Mortgage, any equitable right otherwise
available to Borrower which would require the separate sale of any of any
portion of the Mortgaged Property or require Lender to exhaust its remedies
against any portion of the Mortgaged Property or any combination of the
Mortgaged Property before proceeding against any other portion; and further in
the event of such foreclosure, Borrower expressly consents to and authorizes,
at the option of Lender, the foreclosure and sale either separately of all or
any portion of the Mortgaged Property. 
Borrower hereby waives the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents.  No failure or
delay on the part of Lender or any holder of any Note in the exercise of any
power, right or privilege hereunder or under the Note or any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.  All rights and remedies existing under this
Agreement, the Note and the other Loan Documents are cumulative to, and not
exclusive of, any rights or remedies otherwise available.  Lender shall not be under any obligation to
marshal any assets in favor of any Person or against or in payment of any or
all of the Obligations.  To the extent
that any Person makes a payment or payments to Lender, or Lender enforces its
remedies or exercise its rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such recovery, the Obligations or part thereof originally
intended to be satisfied, and all Liens, if any, rights and remedies therefore,
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.  Borrower agrees (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive Borrower from paying all or
any portion of the principal of, premium, if any, or interest on Loan
contemplated herein or in any of the other Loan Documents

 

74

 

or which may
affect the covenants or the performance of this Agreement; and Borrower (to the
extent that it may lawfully do so) hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the holders, but will suffer and
permit the execution of every such power as though no such law had been
enacted.

 

11.5                        Notices.  Unless otherwise specifically provided
herein, any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and
may be personally served, telecopied (with request for confirmation) or sent by
overnight courier service or United States registered mail return receipt
requested, postage prepaid.  Any notice
so given shall be deemed effective upon delivery or on refusal or failure of
delivery during normal business hours. 
Notices shall be addressed to the parties at the addresses specified on Schedule 11.5 or to such other
address as the party addressed shall have previously designated by written
notice to the serving party, given in accordance with this Section 11.5.

 

11.6                        Survival of Warranties and Certain Agreements.  All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the making of the Loan hereunder and the execution and delivery of
the Notes.  Notwithstanding anything in
this Agreement or implied by law to the contrary, the provisions of Sections
2.6, 5.8, 11.1, 11.2, 11.3, 11.13 and 11.15 shall survive the payment of the
Loan and the termination of this Agreement. Subject to this Section 11.6,
all other representations, warranties and agreements of Borrower and Lender set
forth in this Agreement shall terminate upon indefeasible payment in full of
the Loan and the termination of this Agreement.

 

11.7                        Miscellaneous.  Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive
effect.  All covenants and agreements
hereunder shall be given in any jurisdiction independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the limitations
of, another covenant shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.  The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Agreement, the Note or other Loan Documents shall not affect or impair the
validity, legality or enforceability of the remaining provisions or obligations
under this Agreement, the Note or other Loan Documents or of such provision or
obligation in any other jurisdiction. 
This Agreement is made for the sole benefit of Borrower and Lender, and
no other Person shall be deemed to have any privity of contract hereunder nor
any right to rely hereon to any extent or for any purpose whatsoever, nor shall
any other person have any right of action of any kind hereon or be deemed to be
a third party beneficiary hereunder. 
Borrower and Lender acknowledge that each of them has had the benefit of
legal counsel of its own choice and has been afforded an opportunity to review
this Agreement and the other Loan Documents with its legal counsel and that
this Agreement and the other Loan Documents shall be construed as if jointly
drafted by Borrower and Lender.  If any
term, condition or provision of this Agreement shall be inconsistent with any
term, condition or provision of any other Loan Document, this Agreement shall control.  This Agreement and any amendments, waivers,
consents, or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and

 

75

 

delivered
shall be deemed an original, but all of which counterparts together shall
constitute but one and the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.  Upon indefeasible payment and
performance in full of the Borrower’s Obligations, the Lender shall, at the
sole cost and expense of the Borrower, release the Mortgage and the other Liens
securing the Borrower’s Obligations.

 

11.8                        APPLICABLE LAW. 
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

11.9                        Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
or under any of the other Loan Documents without the written consent of
Lender.  Any assignee of Lender’s
interest in the Loan Documents shall take the same free and clear of all
offsets, counterclaims or defenses which are unrelated to the Loan Documents
which Borrower may otherwise have against any assignor of the Loan Documents.

 

11.10                 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  BORROWER HEREBY CONSENTS TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE
OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS MORTGAGED PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION.  BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT
SERVICE BY MAIL IN ACCORDANCE WITH THIS AGREEMENT TO BORROWER AT ITS ADDRESS
PROVIDED IN SUBSECTION 11.5 SHALL CONSTITUTE SUFFICIENT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT.  NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION.

 

11.11                 WAIVER OF JURY TRIAL.  BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  BORROWER AND LENDER

 

76

 

ALSO
WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF BORROWER OR LENDER. 
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  BORROWER AND LENDER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  BORROWER AND LENDER FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN.  IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

11.12                 Publicity.  Lender (and Lender’s Affiliates) may, subject
to the applicable limitations on distribution of Confidential Information set
forth in this Section 11.12, and Borrower does hereby authorize Lender
(and its Affiliates) to, refer, subject to the prior approval of Borrower, such
approval not to be unreasonably withheld, conditioned or delayed (which
approval shall be deemed given if Borrower fails to respond to Lender’s request
for such approval within ten (10) Business Days of such request), to the Loan
in tombstone advertisements, offering memoranda in connection with
Securitizations and reports to investors, which references, may include use of
photographs, drawings and other depictions, images of the Land and Improvements
(provided such photographs, drawings and other depictions or images shall not
depict any trade secrets of Borrower), a description of the Loan, use of
Borrower’s name, the address of the Mortgaged Property and the logo of
Borrower.  Lender hereby agrees that,
without the prior written consent of Borrower, any written information relating
to Borrower which is provided by Borrower to Lender in connection with the
making of the Loan (excluding information generally available to the public and
any information Lender has obtained independently from third-party sources
without Lender’s knowledge that the source has violated any fiduciary or other
duty not to disclose such information) shall be deemed to be confidential and
proprietary (the “Confidential Information”),
and will be kept confidential by Lender, using the same standard of care in
safeguarding the Confidential Information as Lender employs in protecting its
own proprietary information which Lender desires not to disseminate or publish.
Notwithstanding the foregoing, Confidential Information may be disseminated (a)
pursuant to the requirements of applicable law, (b) pursuant to judicial
process, administrative agency process or order of Governmental Authority, (c)
in connection with litigation, arbitration proceedings or administrative
proceedings before or by any Governmental Authority or stock exchange, (d) to
Lender’s attorneys, accountants, advisors and actual or prospective financing
sources who will be instructed to

 

77

 

comply with
this Section 11.12, (e) to the Rating Agencies, (f) to actual or
prospective trustees, assignees, pledgees, participants, agents, servicers, or
securities holders in a Securitization, and (g) pursuant to the requirements or
rules of a stock exchange or stock trading system on which the Securities of
Lender or its Affiliates may be listed or traded.  In addition, notwithstanding any other
provision, any party (and its employee, representative or other agent) may
disclose to any and all persons, without limitation of any kind, any information
with respect to the tax treatment and tax structure of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are provided to such party relating to such tax treatment
and tax structure.  For purposes of this Section 11.12,
Confidential Information will not be deemed to include the Loan amount and the
other terms, conditions and provisions of the Loan Documents, the street
address and common name, if any, of the Land and Improvements, the name of
Borrower, the logo of Borrower and/or its Affiliates and photographs or other
depictions of the Mortgaged Property (provided such photographs or other
depictions shall not depict any trade secrets of Borrower).

 

11.13                 Recourse Loan. 
Borrower shall have full personal recourse liability for the Obligations
incurred under this Agreement, the Note or any of the other Loan Documents.

 

11.14                 Performance by Lender/Attorney-in-Fact.  In the event that Borrower shall at any time
fail to duly and punctually pay, perform, observe or comply with any of its
covenants and agreements hereunder or under the other Loan Documents or if any
Event of Default hereunder shall exist, then Lender may (but shall in no event
be required to) make any such payment or perform any such term, provision,
condition, covenant or agreement or cure any such Event of Default.  Lender shall not take action under this Section 11.14
prior to the occurrence of an Event of Default unless in Lender’s good faith
judgment reasonably exercised, such action is necessary or appropriate in order
to preserve the value of the Collateral, to protect Persons or property, or
Borrower has abandoned the Mortgaged Property or any portion thereof.  Lender shall not be obligated to continue any
such action having commenced the same and may cease the same without notice to
Borrower.  Any amounts expended by Lender
in connection with such action shall constitute additional advances hereunder,
the payment of which is additional Indebtedness, secured by the Loan Documents
and shall become due and payable upon demand by Lender, with interest at the
Default Rate from the date of disbursement thereof until fully paid.  No further direction or authorization from
Borrower shall be necessary for such disbursements.  The execution of this Agreement by Borrower
shall and hereby does constitute an irrevocable direction and authorization to
Lender to so disburse such funds.

 

11.15                 Brokerage Claims.  Borrower shall protect, defend, indemnify and
hold Lender harmless from and against all loss, cost, liability and expense
incurred as a result of any claim for a broker’s or finder’s fee against Lender
or any Person, in connection with the transaction herein contemplated, provided
such claim is made by or arises through or under Borrower or is based in whole
or in part upon alleged acts or omissions of Borrower.  Lender shall protect, defend, indemnify and
hold Borrower harmless from and against all loss, cost, liability and expense
incurred as a result of any claim for a broker’s or finder’s fee against
Borrower or any other Person in connection with the transaction herein
contemplated, provided such claim is made by or arises through or under Lender
or is based in whole or in part upon alleged acts or omissions of Lender.

 

78

 

11.16                 Agreement.  THE RIGHTS
AND OBLIGATIONS OF BORROWER AND LENDER SHALL BE DETERMINED SOLELY FROM THIS
WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND ANY PRIOR ORAL OR
WRITTEN AGREEMENTS BETWEEN LENDER AND BORROWER CONCERNING THE SUBJECT MATTER
HEREOF AND OF THE OTHER LOAN DOCUMENTS ARE SUPERSEDED BY AND MERGED INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS. 
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY NOT BE VARIED BY ANY
ORAL AGREEMENTS OR DISCUSSIONS THAT OCCUR BEFORE, CONTEMPORANEOUSLY WITH, OR
SUBSEQUENT TO THE EXECUTION OF THIS LOAN AGREEMENT OR THE LOAN DOCUMENTS.  THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

79

 

Witness the due execution hereof by the undersigned as of the date
first written above.

 

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  AVIZA TECHNOLOGY, INC.,
  a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Patrick C. O’Connor

  	
   

  
	
   

  	
  Name:

  	
  Patrick C. O’Connor

  	
   

  
	
   

  	
  Its:

  	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  iSTAR FINANCIAL INC.,
  a Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy J. O’Connor

  	
   

  
	
   

  	
  Name:

  	
  Timothy J. O’Connor

  	
   

  
	
   

  	
  Its:

  	
  Executive Vice President and

  Chief Financial OfficerExhibit 10.21

 

CONTINUING GUARANTY

 

This CONTINUING GUARANTY, dated as of August 6, 2004, is made by VANTAGEPOINT VENTURE PARTNERS IV, L.P., a Delaware limited
partnership (“VPVP IV”) and VANTAGEPOINT VENTURE
PARTNERS IV (Q), L.P., a Delaware limited partnership (“VPVP Q”)
(VPVP IV and VPVP Q are each individually referred to herein as a “Guarantor,”
and collectively, the “Guarantors”), in favor of BANK OF
AMERICA, N.A., (“Lender”), in light of the following:

 

R E C I T A L S

 

WHEREAS, Aviza Technology, Inc., a Delaware corporation (“Borrower”),
has entered into that certain Credit Agreement, dated as of even date herewith
(as amended and modified, supplemented and restated, from time to time, the “Aviza
Credit Agreement”) with Lender;

 

WHEREAS, each Guarantor, as an Affiliate of Borrower, will derive
substantial, direct and indirect benefit from the transactions contemplated by
the Aviza Credit Agreement; and

 

WHEREAS, as a condition to the Lender extending certain financial
accommodations to Borrower pursuant to the Aviza Credit Agreement, the Lender
has required that the Guarantors guarantee the Guaranteed Obligations (as
defined below).

 

FOR GOOD AND VALUABLE CONSIDERATION, each Guarantor irrevocably and
unconditionally undertakes and agrees for the benefit of the Lender as follows:

 

A G R E E M E N T

 

1.                                      DEFINITIONS
AND CONSTRUCTION.

 

1.1                               Definitions.  All initially capitalized terms used but not
defined in this Guaranty shall have the meanings set forth in the Aviza Credit
Agreement.  In addition, the following
terms shall have the following meanings:

 

“Aviza Credit Agreement” has the meaning set forth in the
recitals hereto.

 

“Bankruptcy Code” means Title 11 of the United States Code (11
U.S.C. Sections 101 et seq.), as amended or supplemented from time to time, and
any successor statute, and any and all rules issued or promulgated in
connection therewith.

 

“Borrower” has the meaning set forth in the recitals hereto, and
includes all successors-in-interest of such corporation by operation of law or
otherwise, including any “Trustee” (as defined in the Bankruptcy Code) or
debtor-in-possession, and any successor-in-interest arising out of any merger
or reorganization involving such corporation.

 

 

“Business Day” means any day that is not a Saturday, Sunday, or
a day on which banks in Los Angeles, California or Charlotte, North Carolina
are required or permitted to be closed.

 

“Capital Call Obligation” means, as to any Guarantor, the
obligation of each Partner to pay his, her or its Unpaid Capital Commitment in
accordance with the terms and obligations of the Partnership Agreement of such
Guarantor.

 

“Capital Commitment” means, as to any Guarantor, the total
amount agreed to be paid to such Guarantor by each Partner of such Guarantor,
all as set forth in the Partnership Agreement of such Guarantor.

 

“Capital Contribution” means, as to any Guarantor, with respect
to any Partner of such Guarantor, that portion of such Partner’s Capital
Commitment which has already been paid, funded or otherwise satisfied by such Partner
as of any date of determination.

 

“Defaulted Capital Call Obligations” means, as to any Guarantor,
any and all Capital Call Obligations of all Defaulting Partners, to the extent
that the Capital Commitments of such Defaulting Partners have not otherwise
been purchased by or allocated to other Partners of such Guarantor which are
not Defaulting Partners pursuant to the terms of the Partnership Agreement of
such Guarantor within thirty (30) days after any such Partner becomes a
Defaulting Partner.

 

“Defaulting Partner” means, as to any Guarantor, any Partner who
or which (a) is considered a “Defaulting Limited Partner” under the terms
of the applicable Partnership Agreement or (b) fails to pay any Capital
Call Obligation on or before the fifteenth (15th) Business Day following the
date on which the applicable General Partner requires such payment pursuant to
a written notice of a capital call to such Partners, unless and until such
failure to pay any such Capital Call Obligation is subsequently cured or waived
with the consent of, and to the satisfaction of, such General Partner and the
Lender.

 

“Eligible Capital Call Commitments” means, as to any Guarantor,
the aggregate Capital Call Obligations of such Guarantor’s Partners (a) that
are not subject to any lien, security interest or other encumbrance (except for
Permitted Liens as defined in the VP Credit Agreement); (b) that have not
been paid (and are not the subject of any capital call which has been made by
such Guarantor’s general partner but not yet funded by the Partner and are not
otherwise committed by such general partner) or otherwise funded by the Partner
or Partners; and (c) that do not include amounts with respect to Defaulted
Capital Call Obligations or (without duplication) amounts with respect to any
other Capital Call Obligations payable by a Defaulting Partner.

 

“Guaranteed Obligations” means all present and future loans,
advances, liabilities, obligations, covenants, duties, and Obligations owing by
Borrower to the Lender, arising under or relating to the Aviza Credit Agreement
or any other Loan Document, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, reimbursement, obligations relating to Letters of Credit, acceptance,
loan, guaranty, indemnification or otherwise, whether direct or indirect
(including,

 

2

 

without limitation, those debts of Borrower
arising under or related to the Aviza Credit Agreement or any other Loan
Document acquired by assignment from others, and any participation by the
Lender in Borrower’s debts arising under or related to the Aviza Credit
Agreement or any other Loan Document), absolute or contingent, due or to become
due, primary or secondary, as principal or guarantor, and including, without
limitation, all interest (including interest that, but for the filing of a
petition under the Bankruptcy Code with respect to Borrower, would have accrued
on any such obligations, indebtedness, or liabilities), charges, reasonable
expenses, fees, attorneys’ and paralegals’ fees and disbursements (including
the reasonable estimate of the allocable cost of in-house counsel and staff),
filing fees and any other sums chargeable to Borrower under the Aviza Credit
Agreement or under another Loan Document, whether made, incurred, or created
before or after any entry of order for relief with respect to Borrower in a
case under the Bankruptcy Code and whether recovery is or hereafter becomes
barred by any statue of limitations or otherwise becomes unenforceable for any
reason whatsoever, including any act or failure to act by the Lender.

 

“Guarantor” and “Guarantors” have the meaning set forth
in the introduction hereto.

 

“Guaranty” means this Continuing Guaranty, any concurrent or
subsequent exhibits or schedules hereto, and any extensions, supplements,
amendments, or modifications to or in connection with this Continuing Guaranty,
or to any such schedules or exhibits.

 

“Lender” has the meaning set forth in the introduction hereto.

 

“Indebtedness” shall mean, as to any individual, corporation,
partnership, trust, unincorporated association, business or other legal entity
and any government or any governmental agency or political subdivision thereof
(collectively, a “Person”) and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication: (i) every
obligation of such Person for money borrowed, (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person
with respect to letters of credit, bankers’ acceptances or similar facilities
issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(including securities repurchase agreements but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith), (v) every
obligation of such Person under any capitalized lease, (vi) every
obligation of such Person under any lease (a “synthetic lease”) treated
as an operating lease under generally accepted accounting principles and as a
loan or financing for U.S. income tax purposes, (vii) all sales by such
Person of (A) accounts or general intangibles for money due or to become
due, (B) chattel paper, instruments or documents creating or evidencing a
right to payment of money or (C) other receivables (collectively “receivables”),
whether pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person relating thereto
or a disposition of defaulted receivables for collection and not as a financing
arrangement, and together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse,

 

3

 

expenses or other amounts in connection
therewith, (viii) every obligation of such Person (an “equity related
purchase obligation”) to purchase, redeem, retire or otherwise acquire for
value any shares of capital stock of any class issued by such Person, any
warrants, options or other rights to acquire any such shares, or any rights
measured by the value of such shares, warrants, options or other rights, (ix) every
obligation of such Person under any forward contract, futures contract, swap,
option or other financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements), the value of which is
dependent upon interest rates, currency exchange rates, commodities or other
indices (a “derivative contract”), (x) every obligation in respect of
Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent that such Person is liable therefor
as a result of such Person’s ownership interest in or other relationship with
such entity, except to the extent that the terms of such Indebtedness provide
that such Person is not liable therefor and such terms are enforceable under
applicable law, (xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise acting
as surety for, any obligation of a type described in any of clauses (i) through
(x) (the “primary obligation”) of another Person (the “primary
obligor”), in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (A) to purchase or pay
(or advance or supply funds for the purchase of) any security for the payment
of such primary obligation, (B) to purchase property, securities or
services for the purpose of assuring the payment of such primary obligation, or
(C) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such primary obligation.

 

“Partner” means, as to any Guarantor, any Person who or which
holds a limited partnership interest in such Guarantor pursuant to the Partnership
Agreement of such Guarantor.

 

“Partnership Agreements” shall mean (a) as to the VPVP Q,
the Amended and Restated Limited Partnership Agreement of VantagePoint Venture
Partners IV(Q), L.P. dated August 4, 2000 by and among the applicable
General Partner and the applicable Partners (as amended by Amendment No. 1
dated June 15, 2002 among the applicable General Partner and the
applicable Partners, Amendment No. 2 dated June 15, 2002 among the
General Partner and the applicable Partners and Amendment No. 3 dated July 1,
2003 among the General Partner and the applicable Partners) and (b) as to
the VPVP LP, the Amended and Restated Limited Partnership Agreement of
VantagePoint Venture Partners IV, L.P. dated August 4, 2000 by and among
the applicable General Partners and the applicable Partners (as amended by
Amendment No. 1 dated June 15, 2002 among the applicable General
Partner and the applicable Partners, Amendment No. 2 dated June 15,
2002 among the General Partner and the applicable Partners and Amendment No. 3
dated July 1, 2003 among the General Partner and the applicable Partners).

 

“Subordination Agreement” means that certain Intercreditor and
Subordination Agreement by and between Lender and each Guarantor dated as of
even date herewith.

 

“Total Guarantor Obligations” means, as to any Guarantor, the
sum of (a) the Guaranteed Obligations, plus (b) the sum of (i) outstanding
Revolving Credit Loans (as such

 

4

 

term is defined in the VP Credit Agreement)
plus the Maximum Drawing Amount (as such term is defined in the VP Credit
Agreement) of all issued and outstanding Letters of Credit (as such term is
defined in the VP Credit Agreement) plus all Unpaid Reimbursement Obligations
(as such term is defined in the VP Credit Agreement), plus (ii) the
aggregate amount of all Indebtedness of the Guarantors consisting of the
guarantees by the Guarantors of the Indebtedness of any Portfolio Companies (as
such term is defined under each Guarantor’s Partnership Agreement), provided,
however, to the extent the VP Credit Agreement has been terminated, then
(b)(i) hereof shall be the aggregate amount of any obligations, whether
contingent or otherwise, of such Guarantor for borrowed money as of such date
of determination.

 

“Unpaid Capital Commitment” means, as to any Guarantor, with
respect to any Partner of such Guarantor, such Partner’s Capital Commitment
less such Partner’s Capital Contribution.

 

“VP Credit Agreement” means that certain Revolving Credit
Agreement dated as of December 28, 2000 by and among the Guarantors, Fleet
National Bank and certain other lending institutions party thereto and Fleet
National Bank as agent for such lenders, as the same may be amended, restated,
supplemented and/or modified from time to time.

 

1.2                               Construction.  Unless the context of this Guaranty clearly
requires otherwise: (a) references to the plural include the singular and
references to the singular include the plural; (b) references to any
gender include the other gender; (c) the terms “include” and “including”
are not limiting; and (d) the term “or” has the inclusive meaning
represented by the phrase “and/or.” The terms “hereof,” “herein,” “hereby,” and
“hereunder,” and other similar terms in this Guaranty, refer to this Guaranty
as a whole and not to any particular provision of this Guaranty.  References in this Guaranty to any “determination,”
or any matter being “determined,” by the Lender include good faith estimates
(in the case of quantitative determinations), and good faith beliefs (in the
case of qualitative determinations) by the Lender and mean that any such
determination so made shall be conclusive absent manifest error.  Unless otherwise specified, section and
subsection references are to this Guaranty.  Any reference to any statute, law, or
regulation shall include all amendments thereto and revisions thereof.  Any reference herein to any of the Loan
Documents includes any and all alterations, amendments, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.

 

2.                                      GUARANTY
BY GUARANTORS.

 

2.1                               Promise
to Pay.  Each Guarantor
unconditionally and irrevocably guarantees to the Lender the payment of the
Guaranteed Obligations when and as the same shall become due and payable
(whether at stipulated date of maturity or any accelerated or earlier date).  It is the Guarantors’ intent that this
Guaranty is a guaranty of payment and not a guaranty of collection.  If Borrower fails to pay any Guaranteed
Obligation on or before the date when due (whether at the stipulated date of
maturity or any accelerated or earlier date), Guarantors shall unconditionally
and immediately make such payment upon written demand therefor by the Lender.

 

2.2                               Cumulative
Obligations.  The obligations of each
Guarantor hereunder are in addition to any other obligations of such Guarantor
under any other guaranties of the

 

5

 

Guaranteed Obligations or other obligations of Borrower or any other
Person at any time given to Lender.  This
Guaranty shall not affect or invalidate any such other guaranties.

 

2.3                               Continuing
Guaranty.  This Guaranty is a
continuing guaranty and shall remain in full force and effect notwithstanding
the fact that, at any particular time, no Guaranteed Obligations may be
outstanding.  This Guaranty includes
Guaranteed Obligations arising under successive transactions continuing,
compromising, extending, increasing, modifying, releasing, or renewing the
Guaranteed Obligations, changing the interest rate, payment terms, or other
terms and conditions thereof, or creating new or additional Guaranteed
Obligations after prior Guaranteed Obligations have been satisfied in whole or
in part.

 

2.4                               Joint
and Several Obligation; Independent Obligation.  Each Guarantor is directly, jointly and
severally with each other and with all other guarantors of the Guaranteed
Obligations or any portion thereof, liable to the Lender.  The obligations of each Guarantor hereunder
are direct and primary and are independent of the obligations of Borrower or
any other such Guarantor, and a separate action may be brought against each
Guarantor irrespective of whether an action is brought against Borrower or any
other such other Guarantor or whether Borrower or any such other Guarantor is
joined in such action.  Each Guarantor’s
liability hereunder shall not be contingent upon the exercise or enforcement by
Lender of any remedies it may have against Borrower or any other Guarantor or
the enforcement of any Lien or realization upon any security the Lender may at
any time possess.  Any release which may
be given by the Lender to Borrower or any other guarantor shall not release any
Guarantor.  Each Guarantor acknowledges
that the Lender shall have the right to seek recourse against each Guarantor to
the fullest extent provided for herein and no election by the Lender to proceed
in one form of action or proceeding, or against any party or on any obligation,
shall constitute a waiver of the Lender’s right to proceed in any other form of
action or proceeding or against other parties unless the [                   ]
has expressly waived such right in writing.

 

2.5                               Limitation
of Guaranty.  Notwithstanding any
other term or provision of this Guaranty to the contrary, VPVP IV’s and VPVP Q’s
aggregate liability hereunder shall be limited to an amount equal to (a) the
outstanding principal amount under Revolver A, not to exceed $20,000,000, (b) all
interest, banking charges, commissions, costs and reasonable expenses
chargeable to the Borrower under Revolver A (other than costs and expenses,
including attorneys fees, incurred in connection with the enforcement against
the Borrower of the Aviza Credit Agreement, unless the Lender is required to
incur such costs and/or expenses prior to being able to demand payment hereunder),
and (c) all interest and other costs and reasonable expenses payable by
the Guarantors pursuant to Section 7.7 (other than costs and
expenses, including attorneys fees, incurred in connection with the enforcement
against the Borrower of the Aviza Credit Agreement, unless the Lender is
required to incur such costs and/or expenses prior to being able to demand
payment hereunder).  Each payment made by
any Guarantor hereunder which is applied against the obligations referred to in
clause (a) above shall reduce VPVP IV’s and VPVP Q’s aggregate liability
by such amount.  The Lender’s dealings
with the Borrower need not be limited to any particular sum notwithstanding any
limitation herein upon the liability of each Guarantor.

 

6

 

3.                                      PAYMENTS.

 

3.1                               Nature
and Application of Payments.  Each
Guarantor shall make all payments hereunder in immediately available lawful
money of the United States, without deduction or withholding (whether for taxes
(whether income, excise, or otherwise) or offset).  Without regard to the form in which received,
the Lender may apply any payment with respect to the Guaranteed Obligations or
any other amounts due hereunder in such order as is provided for in Section 3.8
of the Aviza Credit Agreement, irrespective of any contrary instructions
received from any other Person.

 

3.2                               Revival.  In the event that, for any reason, all or any
portion of any payment to the Lender is set aside or restored, including, but
not limited to, payments subject to a right of any Person whomsoever, including
Borrower, Borrower as debtor in possession, or any trustee (whether appointed
under the Bankruptcy Code or otherwise) of Borrower’s assets to invalidate or
set aside such payments, to seek to recoup the amount of such payments or any
portion thereof, or to declare same to be fraudulent or preferential, whether
voluntarily or involuntarily, and repaid by the Lender for any reason after
being made by any Guarantor, the amount so set aside shall be revived as a
Guaranteed Obligation and the Guarantors shall be liable for the full amount
the Lender is required to repay plus all costs and expenses (including
attorneys’ fees, costs, and expenses) incurred by them in connection therewith.

 

4.                                      REPRESENTATIONS
AND WARRANTIES OF THE GUARANTORS.

 

Each Guarantor represents and warrants as
follows:

 

4.1                               Corporate
Existence and Power.  Each Guarantor:
(a) is a limited partnership duly organized, validly existing, and in good
standing under the laws of the State of Delaware; and (b) has the power
and authority and all governmental licenses, authorizations, consents, and
approvals to execute, deliver, and perform such Guarantor’s obligations under
this Guaranty.

 

4.2                               Authorization;
No Contravention; No Default.  The
execution, delivery, and performance by each Guarantor of this Guaranty has
been duly authorized by all necessary partnership action by such Guarantor, and
do not and will not: (a) contravene the terms of any Guarantor’s
organization documents; (b) conflict with or result in any breach or
contravention of any material contractual obligation to which any Guarantor is
a party or any order, injunction, writ, or decree of any governmental authority
to which any Guarantor or Guarantor’s properties are subject; or (c) violate
any law, rule, or regulation of any governmental authority.

 

4.3                               Binding
Effect.  This Guaranty constitutes
the legal, valid, and binding obligations of each Guarantor, enforceable
against each Guarantor in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors’ rights generally or by equitable principles
relating to enforceability.

 

4.4                               Litigation. As of the date hereof, there are no
actions, suits, proceedings, claims, or disputes pending, or, to the best
knowledge of each Guarantor, threatened or contemplated in writing, at law, in
equity, in arbitration, or before any governmental authority, against any
Guarantor or any of the Guarantors’ properties which purport to affect or
pertain to

 

7

 

this Guaranty and any of the other Loan Documents, or any of the
transactions contemplated hereby or thereby.

 

4.5                               No
Action Required.  No consent,
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing, or declaration with any governmental authority or
any other Person, is or will be required for: (a) the execution, delivery,
or performance by each Guarantor of this Guaranty; or (b) the exercise by
the Lender of any of its rights and remedies provided for herein or therein, in
each case other than those which have been duly obtained, made, or complied
with, except where the failure to do so would not reasonably be expected to
have a Material Advance Effect.

 

4.6                               Reliance
by Guarantors; Financial Condition of Borrower.  This Guaranty is not made by any Guarantor in
reliance on any representation or warranty, express or implied, by the Lender
concerning the financial condition of Borrower, the nature, value, or extent of
any security for the Guaranteed Obligations, or any other matter.  Each Guarantor is presently informed of the
financial condition of Borrower and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Guaranteed Obligations.  Each Guarantor
has read and reviewed each of the Loan Documents and understands the terms and
conditions thereof.

 

4.7                               Accuracy
and Completeness of Supplied Information; Full Disclosure.  All information herein is, and all written
information hereafter supplied to the Lender by or on behalf of each Guarantor
in connection herewith will be, when taken as a whole with all other written
information furnished to the Lender by or on behalf of any Guarantor, the
Borrower, and any other obligors, if any, on any part of the Guaranteed
Obligations, accurate and complete in all material respects.  None of the representations or warranties
made by any Guarantor herein as of the date such representations and warranties
are made or deemed made, and none of the statements contained in each exhibit,
report, statement or certificate furnished by or on behalf of any Guarantor in
writing in connection with any of the Loan Documents, when taken as a whole
with all other written information furnished to the Lender by or on behalf of
any Guarantor, the Borrower, and any other obligors, if any, on any part of the
Guaranteed Obligations, contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements made herein or therein, in light of the circumstances under which
they are made, not misleading as of the time when made or delivered.

 

4.8                               Adequate
Consideration.  The consideration
given or provided, or to be given or provided, by the Lender in connection with
this Guaranty is adequate and satisfactory in all respects, and represents
reasonably equivalent value, to support this Guaranty and each Guarantor’s
obligations hereunder.

 

5.                                      ACKNOWLEDGMENTS
AND AGREEMENTS OF GUARANTORS.

 

5.1                               Modifications
to Credit Documents and Guaranteed Obligations.  Each Guarantor acknowledges and agrees that,
without notice to Guarantors and without affecting or impairing the obligations
of each Guarantor hereunder, in accordance with the terms of the Aviza Credit
Agreement, may, by action or inaction, compromise or settle, extend the period
of duration or the time for the payment, or discharge the performance of, or
may refuse to,

 

8

 

or otherwise not enforce, or may, by action or inaction, release all or
any one or more parties to, any one or more of the Loan Documents or otherwise
with respect to the Guaranteed Obligations or may grant other indulgences to
Borrower in respect thereof, or may amend or modify in any manner and at any
time (or from time to time) any one or more of the Loan Documents or otherwise
with respect to the Guaranteed Obligations, or may, by action or inaction,
release or substitute any guarantor, if any, of the Guaranteed Obligations, or
may enforce, exchange, release, or waive, by action or inaction, any security
for the Guaranteed Obligations or any guaranty of the Guaranteed Obligations,
or any portion thereof.

 

5.2                               The
Lender as Guarantors’ Attorney-in-Fact. 
Each Guarantor irrevocably appoints the Lender as such Guarantor’s
attorney-in-fact, with full authority in the place and stead and name of such
Guarantor, from time to time at the Lender’s discretion but only following the
occurrence and during the continuation of a default of any provision hereunder,
to take any action and to execute any instrument which the Lender may, in
accordance with the provisions of this Guaranty, require as necessary or
advisable to accomplish the purposes of this Guaranty.

 

5.3                               Subordination. Each Guarantor agrees that following the
occurrence and during the continuation of an Event of Default, any and all
present and future indebtedness of Borrower owing to any Guarantor shall be
postponed in favor of and subordinated to the payment in full, in cash, of the
Guaranteed Obligations.  In this regard,
following the occurrence and during the continuation of an Event of Default, no
payment of any kind whatsoever shall be made with respect to such indebtedness
until the Guaranteed Obligations have been paid in full, and any payment
received by any Guarantor in respect of such indebtedness shall be held by such
Guarantor as trustee for the Lender, and promptly paid over to the Lender on
account of the Guaranteed Obligations but without reducing or affecting in any
manner the liability of such Guarantor under the other provisions of this
Guaranty.  Upon request by the Lender,
any notes or other instruments now or hereafter evidencing such indebtedness of
Borrower to any Guarantor, and any security therefor, shall be marked with a
legend that the same are subject to this Guaranty or shall be delivered to the
Lender for safekeeping.

 

6.                                      CERTAIN
WAIVERS BY GUARANTORS.

 

EACH GUARANTOR MAKES THE FOLLOWING WAIVERS
WITH FULL KNOWLEDGE AND UNDERSTANDING THAT WERE SUCH WAIVERS NOT MADE,
GUARANTORS MIGHT BE ABLE TO AVOID OR LIMIT GUARANTORS’ LIABILITY HEREUNDER
EITHER IN WHOLE OR IN PART.

 

6.1                               Notices.  Each Guarantor absolutely, unconditionally,
knowingly, and expressly waives: (a) notice of the acceptance by the
Lender of this Guaranty; (b) notice of any loans or other financial
accommodations consisting of Guaranteed Obligations; (c) notice of the
amount of the Guaranteed Obligations, subject, however, to each Guarantor’s
right to make inquiry, at any reasonable time of the Lender to ascertain the
amount of the Guaranteed Obligations owing to the Lender; (d) notice of
any adverse change in the financial condition of Borrower, of any change in
value, or the release, of any Collateral, or of any other fact that might
increase any Guarantor’s risk hereunder; (e) notice of presentment for
payment, demand, protest, and notice thereof as to any instrument; (f) notice
of any default; and (g) all other notices (except

 

9

 

if such notice is to be given to any Guarantor under the express terms
of this Guaranty or any of the other Loan Documents to which such Guarantor is
a party, or the Aviza Credit Agreement) and demands to which any Guarantor
might otherwise be entitled.

 

6.2                               Termination;
Reinstatement.  This Guaranty shall
remain in full force and effect until the Lender is given written notice of any
Guarantor’s intention to discontinue this Guaranty, notwithstanding any
intermediate or temporary payment or settlement of the whole or any part of the
Guaranteed Obligations.  No such notice
shall be effective unless received and acknowledged by an officer of the Lender
at the address of the Lender for notices set forth in Section 7.8.  No such notice shall affect any rights of the
Lender hereunder, including without limitation the rights set forth in Section 5
and Section 6, with respect to any Guaranteed Obligations incurred or
accrued prior to the receipt of such notice or any Guaranteed Obligations
incurred or accrued pursuant to any contract or commitment in existence prior
to such receipt, and all checks, drafts, notes, instruments (negotiable or
otherwise) and writings made by or for the account of the Borrower and drawn on
the Lender or any of its agents purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by the
Lender after that date, shall form part of the Guaranteed Obligations.  This Guaranty shall continue to be effective
or be reinstated if any payments made or value received by Lender with respect
to any Guaranteed Obligation is rescinded as set forth in Section 3.2.

 

6.3                               Defenses
of Borrower.  Each Guarantor
absolutely, unconditionally, knowingly, and expressly waives any defense
arising by reason of any disability or other defense (other than the defense
that the Guaranteed Obligations shall have been fully and finally performed and
paid) of Borrower or by reason of the cessation from any cause whatsoever
(including any act or failure to act by Borrower or the Lender) of the
liability of Borrower in respect thereof, including any such defense or
cessation of liability arising from or as a result of: (a) any lack of
power or authority of Borrower or any person acting or purporting to act on
Borrower’s behalf; or (b) any claim of fraudulent transfer or preference.

 

6.4                               Suretyship
and Certain Other Rights and Defenses of Guarantors.  Each Guarantor absolutely, unconditionally,
knowingly, and expressly waives:

 

(a)                                  any right to assert
against the Lender any defense (legal or equitable), set-off, counterclaim, or
claim which any Guarantor may now or at any time hereafter have against
Borrower or any other Person liable to the Lender;

 

(b)                                 any defense, set-off,
counterclaim, or claim, of any kind or nature, arising directly or indirectly
from the present or future lack of perfection, sufficiency, validity, or
enforceability of any of the Guaranteed Obligations or any security therefor,
or from any failure of the Lender to act in a commercially reasonable manner;

 

(c)                                  any defense arising
by reason of or deriving from (i) any claim or defense based upon an
election of remedies by the Lender (including a nonjudicial foreclosure sale of
any real property collateral which destroys, diminishes, or otherwise adversely
affects any Guarantor’s rights of subrogation, reimbursement, indemnity, or
contribution or other rights against Borrower or any other Person), including
any defense based upon an election of remedies by the Lender under the
provisions of Sections 580a, 580b, 580d, and 726 of the California Code

 

10

 

of Civil Procedure or any similar law of California or any other
jurisdiction; or (ii) any election by the Lender under Bankruptcy Code Section 1111(b) to
limit the amount of or collateral securing its claim against Borrower.  Pursuant to California Civil Code Section 2856(b):

 

“Each Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed such Guarantor’s rights of subrogation and
reimbursement against Borrower by the operation of Section 580(d) of
the California Code of Civil Procedure or otherwise.

 

“Each Guarantor waives all rights and defenses that such Guarantor may
have because Borrower’s Obligations are secured by real property.  This means, among other things:

 

“(1)                            Lender
may collect from any Guarantor without first foreclosing on any real or
personal property collateral pledged by Borrower.

 

“(2)                            If
Lender forecloses on any real property collateral pledged by Borrower:

 

“(A)                        The amount of the Guaranteed
Obligation may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price.

 

“(B)                          Lender may collect from any
Guarantor even if Lender, by foreclosing on the real property collateral, has
destroyed any right such Guarantor may have to collect from Borrower.

 

“This is an unconditional and irrevocable waiver of any rights and
defenses any Guarantor may have because Borrower’s Obligations are secured by
real property.  These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 590d, or 726 of the California Code of Civil Procedure.”

 

In making these waivers, each Guarantor
specifically acknowledges that it understands and is aware that, under Sections
580b and 580d of the California Code of Civil Procedure, if the Lender
conducted a nonjudicial foreclosure sale of real property collateral, absent
these waivers: (A) the Lender would lose the right to pursue the pay such
deficiency following such sale, such Guarantor would be precluded from pursuing
the Borrower for reimbursement; and (C) as a result, the Lender might be
prevented from pursuing such Guarantor for such deficiency following such sale;

 

(d)                                 the benefit of any
statue of limitations affecting any Guarantor’s liability hereunder (or the
enforcement thereof) and any act which shall defer or delay the operation of
any statute of limitations applicable to the Guaranteed Obligations shall
similarly

 

11

 

operate to defer or delay the operation of such statute of limitations
applicable to any Guarantor’s liability hereunder;

 

(e)                                  any defense based on
any alteration, impairment, or release of the Guaranteed Obligations or any
security therefor, irrespective of whether resulting from any act or failure to
act by the Lender;

 

(f)                                    any right to
require the Lender: (i) to institute suit or otherwise proceed against
Borrower or any other Person; or (ii) to exhaust any rights and remedies
which the Lender may have against Borrower or any other Person; and

 

(g)                                 any other defense
(other than indefeasible payment in full) available to Borrower or any
Guarantor under applicable law.

 

6.5                               Marshaling. Each Guarantor absolutely,
unconditionally, knowingly, and expressly waives any rights it has to require
the Lender to marshal, foreclose upon, sell, or otherwise realize upon or
collect or apply any particular part of any other assets securing any of the
Guaranteed Obligations (including any rights arising by virtue of Sections 2899
and 3433 of the California Civil Code).

 

6.6                               Claims
Against Borrower And Others.  To the
extent of any claim of preference liability with respect to any Collateral upon
which the Lender acquires a Lien within a year preceding the filing of a petition
in bankruptcy under the Bankruptcy Code with respect to Borrower, except as
otherwise set forth in the Subordination Agreement, each Guarantor absolutely,
unconditionally, knowingly, and expressly waives; and in all other cases, until
such time as the Guaranteed Obligations have been fully, finally, and
indefeasibly paid in full, in cash, each Guarantor postpones: (a) any
right of subrogation, indemnity, or contribution such Guarantor has or may have
as against Borrower or any other Person with respect to any of the Guaranteed
Obligations; (b) any right to proceed against Borrower or any other
Person, now or hereafter, for contribution, indemnity, reimbursement, or any
other suretyship rights and claims (irrespective of whether direct or indirect,
liquidated or contingent) with respect to any of the Guaranteed Obligations;
and (c) any right to proceed or to seek recourse against or with respect
to any assets of Borrower or any other Person with respect to any of the
Guaranteed Obligations.  Each Guarantor
specifically acknowledges and agrees that, in light of the waivers contained in
this subsection, such Guarantor shall not be a “creditor” (as that term is
defined in the Bankruptcy Code or otherwise) of Borrower or any other Person
(whether for purposes of application of Sections 547 or 550 of the Bankruptcy
Code or otherwise) with respect to any of the Guaranteed Obligations.

 

6.7                               Certain
Additional Statutory Rights.  Without
limiting the generality of any other waiver or other provision set forth in this
Guaranty, each Guarantor absolutely, unconditionally, knowingly, and expressly
waives any and all benefits or defenses, if any, arising directly or indirectly
under any one or more of Sections 2792, 2793, 2799, 2806, 2808, 2809, 2810,
2819, 2820, 2821, 2822, 2825, 2838, 2839, 2845, 2848, 2849, 2850 and 2855 of
the California Civil Code, Sections 580a, 580b, 580c, 580d, and 726 of the
California Code of Civil Procedure, and Sections 3116, 3118, 3119, 3419, and
3605 of the California Uniform Commercial Code. 
Notwithstanding anything contained herein, such waivers by Guarantors

 

12

 

with respect to Sections 2847, 2848, and 2849 of the California Civil
Code shall only be effective until all obligations of Lender to extend credit
to Borrower have terminated and until all of the Obligations under the Aviza
Credit Agreement have been fully, finally and indefeasibly paid.

 

7.                                      GENERAL
PROVISIONS.

 

7.1                               Cumulative
Remedies.  The enumeration herein of
the Lender ‘ rights and remedies is not intended to be exclusive, and such
rights and remedies are in addition to and not by way of limitation of any
other rights or remedies that the Lender may have under the Loan Documents, the
California Uniform Commercial Code or other applicable law.  The Lender shall have the right, in their
sole discretion, to determine which rights and remedies are to be exercised by
the Lender and in which order.  The
exercise of one right or remedy shall not preclude the exercise of any others,
all of which shall be cumulative.

 

7.2                               No
Implied Waivers.  No failure by the
Lender to exercise any right, remedy, or option under this Guaranty or any Loan
Document, or delay by Lender in exercising the same, will operate as a waiver
thereof.  No waiver by the Lender will be
effective unless it is in writing, and then only to the extent specifically
stated.  No waiver by the Lender on any
occasion shall affect or diminish the Lender’s rights thereafter to require
strict performance by any Guarantor of any provision of this Guaranty.  The Lender may proceed directly to collect
the Guaranteed Obligations without any prior recourse to any Collateral
therefor.  The Lender’s rights under this
Guaranty will be cumulative and not exclusive of any other right or remedy
which the Lender may have.

 

7.3                               Severability. The illegality or unenforceability of
any provision of this Guaranty or any Loan Document or any instrument or
agreement required hereunder shall not in any way affect or impair the legality
or enforceability of the remaining provisions of this Guaranty or any
instrument or agreement required hereunder.

 

7.4                               Governing
Law; Choice of Forum; Service of Process; Jury Trial Waiver.

 

(a)                                  THIS GUARANTY SHALL
BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO AND THERETO
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF
LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF
THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET
FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT
THE LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b)                                 ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF
THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA FOR THE CENTRAL
DISTRICT OF THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT

 

13

 

OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  EACH GUARANTOR IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. 
NOTWITHSTANDING THE FOREGOING: (1) THE LENDER SHALL HAVE THE RIGHT
TO BRING ANY ACTION OR PROCEEDING AGAINST ANY GUARANTOR OR IT’S PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION THE LENDER DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE GUARANTEED OBLIGATIONS AND (2) EACH GUARANTOR
ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY
PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE
JURISDICTIONS.

 

(c)                                  EACH GUARANTOR HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO SUCH GUARANTOR AT ITS ADDRESS SET FORTH IN SECTION 7.8
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER
THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID.  NOTHING CONTAINED HEREIN SHALL AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

 

(d)                                 NOTWITHSTANDING ANY
OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM
BETWEEN OR AMONG ANY GUARANTOR AND THE LENDER, ARISING OUT OF OR RELATING TO
THIS GUARANTY INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT,
SHALL AT THE REQUEST OF EITHER PARTY BE DETERMINED BY BINDING ARBITRATION.  The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this GUARANTY, and under the
Commercial Rules of the American Arbitration Association (“AAA”).  The arbitrator(s) shall give effect to
statutes of limitation in determining any claim.  Any controversy concerning whether an issue
is arbitrable shall be determined by the arbitrator(s).  Judgment upon the arbitration award may be
entered in any court having jurisdiction.  The institution and maintenance of an action
for judicial relief or pursuant to a provisional or ancillary remedy shall not
constitute a waiver of the right of either party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

 

(e)                                  Notwithstanding the
provisions of (d) above, no controversy or claim shall be submitted to
arbitration without the consent of all parties if, at the time of the proposed
submission, such controversy or claim arises from or related to an obligation
which is secured by real property collateral (exclusive of real estate space
lease assignments).  If all the parties
do not consent to submission of such a controversy or claim to arbitration, the
controversy or claim shall be determined as provided in Section 7.4(f).

 

14

 

(f)                                    At the request of
either party a controversy or claim which is not submitted to arbitration as
provided and limited in Section 7.4(d) and (e) shall
be determined by judicial reference.  If
such an election is made, the parties shall designate to the court a referee or
referees selected under the auspices of the AAA in the same manner as
arbitrators are selected in AAA-sponsored proceedings.  The presiding referee of the panel, or the
referee if there is a single referee, shall be an active attorney or retired
judge.  Judgment upon the award rendered
by such referee or referees shall be entered in the court in which such
proceeding was commenced.

 

(g)                                 No provision of
Sections (d) through (g) shall limit the right of the Lender to
exercise self-help remedies such as setoff, foreclosure against or sale of any
real or personal property collateral or security, or obtaining provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding.  The exercise of a remedy does not waive the
right of either party to resort to arbitration or reference.  At the Lender’s option, foreclosure under a
deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.

 

7.5                               WAIVER
OF JURY TRIAL.  SUBJECT TO THE
PROVISIONS OF SECTION 7.4(d), EACH GUARANTOR IRREVOCABLY WAIVES ITS
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY LENDER-RELATED PERSON,
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS,
OR OTHERWISE.  EACH GUARANTOR AGREES THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY.  WITHOUT LIMITING THE FOREGOING,
EACH GUARANTOR FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS GUARANTY OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.

 

7.6                               Survival
of Representations and Warranties.  All
of each Guarantor’s representations, and warranties contained in this Guaranty
shall survive the execution, delivery and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or any of their agents.

 

7.7                               Fees
and Expenses.  The Guarantors shall
pay to the Lender on demand all reasonable costs and expenses (without
duplication of costs and expenses paid by Borrower or other obligor of the
Guaranteed Obligations) that the Lender pays or incurs in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Guaranty and the other Loan Documents to which any
Guarantor is a party, including, without limitation: (a) Lender’s
attorneys’ and paralegals’ fees and disbursements (including the reasonable
estimate of the allocable cost of in-house counsel and staff); (b) costs
and expense

 

15

 

(including Lender’s attorneys’ and paralegals’ fees and disbursements
(including the reasonable estimate of the allocable cost of in-house counsel
and staff)) for any amendment, supplement, waiver, consent, or subsequent closing
in connection with this Guaranty and the transactions contemplated thereby; and
(c) costs and expenses (including Lender’s attorneys’ and paralegals’ fees
and disbursements (including the reasonable estimate of the allocable cost of
in-house counsel and staff)) paid or incurred to obtain payment of the
Guaranteed Obligations and otherwise enforce the provisions of this Guaranty,
or to defend any claims made or threatened against the Lender arising out of
the transactions contemplated hereby (including without limitation,
preparations for the consultations concerning any such matters).  The foregoing shall not be construed to limit
any other provisions of the Loan Documents regarding costs and expenses to be
paid by the Guarantors.

 

7.8                               Notices. Except as otherwise provided herein, all
notices, demands, and requests that either party is required or elects to give
to the other shall be in writing (including facsimile communication), shall be
delivered personally against receipt, transmitted by facsimile, sent by
recognized overnight courier service, or mailed by registered or certified
mail, return receipt requested, postage prepaid, and shall be addressed to the
party to be notified as follows:

 

	
  If to the Lender:

  	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  	
  55 South Lake Avenue, Suite 900

  
	
   

  	
   

  	
  Pasadena, California 91101

  
	
   

  	
   

  	
  Attention:

  	
  Business Capital

  
	
   

  	
   

  	
   

  	
  Account Executive

  
	
   

  	
   

  	
  Facsimile:

  	
  626.397.1273

  
	
   

  	
   

  	
   

  
	
  If to a Guarantor:

  	
   

  	
  VANTAGEPOINT VENTURE PARTNERS IV, L.P.

  
	
   

  	
   

  	
  VANTAGEPOINT VENTURE PARTNERS IV (Q), L.P.

  
	
   

  	
   

  	
  444 Madison Avenue, 39th Floor

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Attention:

  	
  Richard C. Davis

  
	
   

  	
   

  	
  Facsimile:

  	
  212-750-8223

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  VANTAGEPOINT VENTURE PARTNERS IV, L.P.

  
	
   

  	
   

  	
  VANTAGEPOINT VENTURE PARTNERS IV (Q), L.P.

  
	
   

  	
   

  	
  1001 Bayhill Drive, Suite 300

  
	
   

  	
   

  	
  San Bruno, CA 94066

  
	
   

  	
   

  	
  Attention:

  	
  Legal Department

  
	
   

  	
   

  	
  Facsimile:

  	
  650-869-6078

  

 

or to such other address as each party may designate for itself by like
notice.  Any such notice, demand, or
request shall be deemed given when received if personally delivered or sent by
facsimile or overnight courier, or three (3) days after being deposited in
the United States mails, postage paid, if sent by registered or certified mail.

 

7.9                               Waiver
of Notices.  No notice to or demand
on any Guarantor which the Lender may elect to give shall entitle any Guarantor
to any or further notice or demand in the same, similar or other circumstances.

 

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7.10                        Binding
Effect; Assignment.  This Guaranty
shall be binding upon each Guarantor’s successors and assigns and shall inure
to the benefit of the successors and assigns of the Lender; provided, however,
no Guarantor shall assign this Guaranty or delegate any of its duties hereunder
without the Lender’s prior written consent. 
Any assignment without the consent of the Lender shall be absolutely
void.  In the event of any assignment or
other transfer of rights by the Lender, the rights and benefits herein
conferred upon the assignor/transferor shall automatically extend to and be
vested in such assignee or other transferee.

 

7.11                        Ambiguities. To the extent permitted by applicable
law, neither this Guaranty nor any uncertainty or ambiguity herein shall be
construed or resolved using any presumption against either Guarantor or the
Lender, whether under any rule of construction or otherwise.  On the contrary, this Guaranty has been
reviewed by each of Guarantors, the Lender and their respective counsel.  To the extent permitted by applicable law, in
case of any ambiguity or uncertainty, this Guaranty shall be construed and
interpreted according to the ordinary meaning of the words used to accomplish
fairly the purposes and intentions of all parties hereto.

 

7.12                        Modification. This Guaranty is intended by each
Guarantor and the Lender to be the final, complete, and exclusive expression of
the agreement between them.  This
Guaranty supersedes any and all prior oral or written agreements relating to
the subject matter hereof.  No
modification, rescission, waiver, release or amendment of any provision of this
Guaranty shall be made, except by a written agreement signed by each Guarantor
and a duly authorized officer of the Lender.

 

7.13                        Captions. The captions contained in this Guaranty
are for convenience only, are without substantive meaning and should not be
construed to modify, enlarge or restrict any provision.

 

7.14                        Covenants. Each Guarantor agrees that at all times
the ratio of (a) Eligible Capital Call Commitments of such Guarantor to (b) Total
Guarantor Obligations of such Guarantor shall not be less than 1.50:1.00.  Not later than forty-five (45) days after the
end of each fiscal quarter, each Guarantor shall provide to the Lender evidence
demonstrating compliance with this covenant contained in this Section 7.14.  To the extent that the ratio of (a) Eligible
Capital Call Commitments of a Guarantor to (b) Total Guarantor Obligations
for such Guarantor is less than 1.50:1.00, upon demand by the Lender, such
Guarantor shall deposit with the Lender cash collateral in an amount sufficient
so that when added to the Eligible Capital Call Commitment portion of such
ratio, such Guarantor complies with the covenant set forth in this Section 7.14.  In addition, each Guarantor agrees that so
long as any Guaranteed Obligation is outstanding, such Guarantor will not (1) create,
incur, assume, guarantee or be or remain liable, contingently or otherwise,
with respect to any Indebtedness other than Indebtedness permitted by Section 9.1
of the VP Credit Agreement; (2) create or incur or suffer to be created or
incurred or permit to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any Capital Call
Obligation or such Guarantor’s rights to receive such payments (except for
Permitted Liens as defined in the VP Credit Agreement), or (3) or enter
into any agreement prohibiting the creation or assumption of any lien upon its
properties, revenues or assets, whether now owned or hereafter acquired, unless
otherwise permitted by the VP Credit Agreement.

 

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[remainder of page left blank intentionally; signature to follow]

 

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IN WITNESS WHEREOF, Each Guarantor has caused this Guaranty to be duly
executed by such Guarantor’s duly authorized officers as of the date first
written above.

 

	
   

  	
   

  	
  Guarantors:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  VANTAGEPOINT VENTURE

  
	
   

  	
   

  	
  PARTNERS IV, L.P.,

  
	
   

  	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  VantagePoint Venture Associates IV, L.L.C.,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
     /s/ Alan E. Salzman

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
     Alan E. Salzman

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
     Managing Member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  VANTAGEPOINT VENTURE

  
	
   

  	
   

  	
  PARTNERS IV (Q), L.P.,

  
	
   

  	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  VantagePoint Venture Associates IV, L.L.C.,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
     /s/ Alan E. Salzman

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
     Alan E. Salzman

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
     Managing Member

  	
   

  
											

 

 

NOTICE: THIS GUARANTY CONTAINS WAIVERS OF
VARIOUS RIGHTS, BENEFITS, AND DEFENSES WHICH THE PARTY EXECUTING THIS GUARANTY
POSSESSES.  THESE RIGHTS, BENEFITS, AND
DEFENSES, IF NOT SO WAIVED, MIGHT OTHERWISE ALLOW THE PARTY EXECUTING THIS
GUARANTY TO AVOID OR LIMIT SUCH PARTY’S LIABILITY UNDER THIS GUARANTY EITHER IN
WHOLE OR IN PART.  THIS GUARANTY ALSO
CONTAINS A WAIVER BY THE PARTY EXECUTING THIS GUARANTY OF SUCH PARTY’S RIGHT TO
TRIAL BY JURY.

 

Continuing Guaranty

 

S-1

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