Document:

EXHIBIT 10.10

SECOND AMENDMENT TO LOAN AND SECURITY
AGREEMENT

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
dated as of September 21, 2006 (the AMENDMENT), between HENNESSEY FINANCIAL,
LLC, a Minnesota limited liability company (MEZZANINE BORROWER) and CS
FINANCING CORPORATION, a Delaware corporation (together with its successors and
assigns, MEZZANINE LENDER).

RECITALS:

A.                                   Mezzanine
Borrower and Mezzanine Lender have entered into that certain Mezzanine Loan and
Security Agreement dated October 5, 2005 and amended on August 22, 2006 (“Loan
Agreement”).

B.                                     Mezzanine
Borrower and Mezzanine Lender desire to amend the Loan Agreement as stated
herein.

AGREEMENTS:

NOW, THEREFORE, in consideration of the foregoing
Recitals, the mutual promises of the parties hereto and the mutual benefits to
be gained by the performance hereof, Mezzanine Borrower and Mezzanine Lender
hereby agree as follows:

1.                                       The
definition of “Loan” in the Loan Agreement shall be amended and restated as
follows:

“LOAN shall mean the loan in the amount of Forty Million Dollars ($40,000,000)
made, if at all, in a series of Advances by Mezzanine Lender to Mezzanine
Borrower pursuant to this Agreement.”

2.                                       The
definition of “Mezzanine Note” in the Loan Agreement shall be amended and
restated as follows:

“MEZZANINE NOTE shall mean that certain Mezzanine Note, dated the date
hereof, in the principal amount of Forty Million Dollars ($40,000,000), made by
Mezzanine Borrower, as maker, in favor of Mezzanine Lender, as payee, as the
same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.”

3.                                       The
definition of “Permitted Debt” in the Loan Agreement shall be amended and
restated as follows:

“PERMITTED DEBT shall mean any Debt of Mezzanine Borrower in excess of
$75,000,000 to a single creditor permitted in writing by the Mezzanine Lender,
such permission not to be unreasonable withheld.  All Debt of Mezzanine Borrower is deemed to
be permitted by Mezzanine 

 

Lender until such time as Mezzanine Lender shall have Advanced $40,000,000
hereunder.”

4.                                       The
definition of “Mezzanine Note” in the Loan Agreement shall be amended and
restated as follows:

“MEZZANINE NOTE shall mean that certain Mezzanine Note, dated the date
hereof, in the principal amount of Forty Million Dollars ($40,000,000), made by
Mezzanine Borrower, as maker, in favor of Mezzanine Lender, as payee, as the
same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.”

5.                                       Exhibit
A to the Loan Agreement shall be replaced by Exhibit A attached hereto.

6.                                       Unless
expressly changed pursuant to this Amendment, all other provisions of the Loan
Agreement remain in full force and effect but this Second Amendment to Loan and
Security Agreement shall replace the First Amendment to Loan and Security
Agreement.

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their duly authorized representatives,
all as of the day and year first above written.    

	
   

  	
   

  
	
  

  	
  MEZZANINE BORROWER:

  
	
   

  	
   

  
	
   

  	
  HENNESSEY FINANCIAL LLC,

  
	
   

  	
  a Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey Allen Gardner

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey Allen Gardner

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEZZANINE LENDER:

  
	
   

  	
   

  
	
   

  	
  CS FINANCING CORPORATION

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy R. Redpath

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Timothy R. Redpath

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
						

 

 

 2

 

EXHIBIT A

MEZZANINE
NOTE

Minneapolis, Minnesota

$40,000,000

This MEZZANINE NOTE, dated as of                                      ,
2006 (this NOTE), by Hennessey Financial, LLC, a Minnesota limited liability
company (BORROWER), having an address at 418 East County Road D, St. Paul, MN
55117, in favor of CS Financing Corporation, a Delaware corporation (together
with its successors and assigns, LENDER), having an office at 45 San Clemente
Drive, Suite B210, Corte Madera, CA 94925.

RECITALS

WHEREAS, Borrower and Lender have entered into that
certain Mezzanine Loan and Security Agreement dated October 5, 2005 and finally
amended on September 21, 2006 (“Loan Agreement”) and intend these Recitals to
be a material part of this Note.

NOW, THEREFORE, FOR VALUE RECEIVED, Borrower promises
to pay to the order of Lender the Principal Amount (as defined below), together
with interest from the date of each Advance hereof and other fees, expenses and
charges as provided in this Note.

1.                                       DEFINED
TERMS.

a.                                       Capitalized
terms used but not otherwise defined herein shall have the respective meanings
given thereto in the Loan Agreement, unless otherwise expressly provided
herein. All references to sections shall be deemed to be references to sections
of this Note, unless otherwise indicated.

b.                                      The
following terms shall have the meaning ascribed thereto:

BORROWER shall have the meaning provided in the first paragraph hereof.

DEFAULT RATE shall mean, with respect to an acceleration of the Loan, a
rate per annum equal to the lesser of (a) the Maximum Legal Rate and (b) four
percent (4%) above the Fixed Rate.

FIXED RATE shall mean an interest rate per annum equal to thirteen and
400/1000 (13.4%).

INTEREST PERIOD shall mean each interest period commencing on the
fifteenth (15th) calendar day of a calendar month and ending on (and 

 A-1
 

 

including) the fourteenth (14th) calendar day of the following calendar
month; provided that the first interest period shall commence on the date
hereof.

LENDER shall have the meaning provided in the first paragraph hereof.

LIQUIDATED DAMAGES AMOUNT shall have the meaning set forth in Section
4(d).

LOAN AGREEMENT shall mean the Mezzanine Loan and Security Agreement,
dated October 5, 2005, between Borrower and Lender.

LOAN FEE shall equal five and one-half percent (5.5%) of the aggregate
amount of each Advance.

MATURITY DATE shall mean fifty-nine (59) months from the date of the
first Advance for Advances received in the calendar year 2006 and seventy-one
(71) months from the date of the first Advance for Advances made in the
calendar year 2007 and eighty-three (83) months from the date of the first
Advance for Advances made in the calendar year 2008.

MATURITY DATE PAYMENT shall have the meaning set forth in Section 3(d).

NOTE shall have the meaning provided in the first paragraph hereof.

PAYMENT DATE shall be the ninth (9th) calendar day of each calendar
month and if such day is not a Business Day, then the Business Day immediately
preceding such day, commencing on                         
and continuing to and including the Maturity Date.

PRINCIPAL AMOUNT shall mean $40,000,000 or so much as may be
outstanding under this Note.

2.                                       INTEREST.

a.                                       Prior
to the Maturity Date, interest shall accrue on the Principal Amount at the
Fixed Rate.

b.                                      From
and after the Maturity Date and from and after the occurrence (but only during
the continuance) of an Event of Default, interest shall accrue on the Principal
Amount at the Default Rate.

c.                                       Reserved.

d.                                      Interest,
for any given Interest Period, shall be computed on the Principal Amount on the
basis of a fraction, the denominator of which shall be 365 

 A-2
 

 

and the numerator
of which shall be the actual number of days in the relevant Interest Period.

e.                                       The
provisions of this Section 2 are subject in all events to the provisions of
Section 2.2.4 of the Loan Agreement.

3.                                       PAYMENTS.

a.                                       On
each Payment Date, Borrower shall pay to Lender interest accruing hereunder
during the entire Interest Period in which said Payment Date occurs.  Borrower shall also pay Lender the Loan Fee
on the Closing Date of each Advance.

b.                                      All
payments made by Borrower hereunder or under any of the Loan Documents shall be
made on or before 2:00 p.m. Central Standard Time. Any payments received after
such time shall be credited to the next following Business Day.

c.                                       All
amounts advanced by Lender pursuant to the Loan Documents, other than the
Principal Amount, or other charges provided in the Loan Documents, shall be due
and payable as provided in the Loan Documents. In the event any such advance or
charge is not so repaid by Borrower, Lender may, at its option, first apply any
payments received under this Note to repay such advances, together with any
interest thereon, or other charges as provided in the Loan Documents, and the
balance, if any, shall be applied in payment of any installment of interest or
principal then due and payable.

d.                                      The
entire Principal Amount of this Note, all unpaid accrued interest, all interest
that would accrue on the Principal Amount through the end of the Interest
Period during which the Maturity Date occurs (even if such period extends
beyond the Maturity Date) and all other fees and sums then payable hereunder or
under the Loan Documents (collectively, the MATURITY DATE PAYMENT) shall be due
and payable in full on the Maturity Date.

e.                                       Amounts
due on this Note shall be payable, without any counterclaim, setoff or
deduction whatsoever, at the office of Lender or its agent or designee at the
address set forth on the first page of this Note or at such other place as
Lender or its agent or designee may from time to time designate in writing.

f.                                         All
amounts due under this Note, including, without limitation, interest and the
Principal Amount, shall be due and payable in lawful money of the United
States.

g.                                      To
the extent that Borrower makes a payment or Lender receives any payment or
proceeds for Borrower’s benefit, which are subsequently 

 A-3
 

 

invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
obligations of Borrower hereunder intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.

4.                                       PREPAYMENTS.  Prior to the Maturity Date, the outstanding
Principal Amount may not be paid in whole or in part except in connection with
a payment pursuant to Section 4(b) of this Note.

a.                                       Reserved.

b.                                      MANDATORY
PREPAYMENTS.

i.                                          On
the next occurring Payment Date following the date on which any of the events
set forth in Section 2.3.1(a) of the Loan Agreement shall occur, Borrower shall
prepay the entire Principal Amount and any other amounts then due and payable
pursuant to the Loan Agreement and Borrower shall comply with the provisions
set forth in Section 4(c) and Section 4(d) of this Note.

ii.                                       On
the next occurring Payment Date following the date on which Borrower actually
receives any Excess Proceeds, Borrower shall prepay the Principal Amount in an
amount equal to one hundred percent (100%) of such Excess Proceeds and Borrower
shall comply with the provisions set forth in Section 4(c) of this Note.

c.                                       PAYMENTS
IN CONNECTION WITH A PREPAYMENT.

i.                                          On
the date on which a prepayment is made under this Note or as required under the
Loan Agreement, Borrower shall pay to Lender all unpaid interest on the
Principal Amount, such unpaid interest calculated (even if such period extends
beyond the date of prepayment) (i) through the end of the Interest Period
during which such prepayment is made if the Loan is prepaid from the fifteenth
(15th) day of any calendar month through the ninth (9th) day of the succeeding
calendar month, or (ii) through the end of the Interest Period next succeeding
the Interest Period in which such prepayment is made if the Loan is prepaid
from the Interest Determination Date in any calendar month through the
fourteenth (14th) day of any calendar month;

ii.                                       On
the Prepayment Date, Borrower shall pay to Lender all other sums then due under
the Note, the Loan Agreement and the other Loan Documents; and

 A-4
 

 

iii.                                    Borrower
shall pay all costs and expenses of Lender incurred in connection with the
prepayment (including without limitation, any costs and expenses incurred by
Lender in connection with a notice of prepayment which is subsequently revoked,
and including without limitation, any costs and expenses associated with a
release of the Lien of the Loan Agreement and the Loan Documents as set forth
in Section 2.3.3 of the Loan Agreement as well as reasonable attorneys’ fees
and expenses).

d.                                      LIQUIDATED
DAMAGES AMOUNT.  IF OTHER THAN IN
CONNECTION WITH THE APPLICATION OF PROCEEDS, NOTWITHSTANDING THE PROHIBITIONS
OF THIS SECTION 4, THE LOAN IS VOLUNTARILY OR INVOLUNTARILY REPAID PRIOR TO THE
MATURITY DATE, INCLUDING AS A RESULT OF AN ACCELERATED MATURITY DATE, THEN
BORROWER SHALL PAY TO LENDER, AS LIQUIDATED DAMAGES FOR SUCH DEFAULT AND NOT AS
A PENALTY, AND IN ADDITION TO ANY AND ALL OTHER SUMS AND FEES PAYABLE UNDER
THIS NOTE AND THE OTHER LOAN DOCUMENTS, AN AMOUNT EQUAL TO FOUR PERCENT (4%) OF
THE PRINCIPAL AMOUNT BEING REPAID (THE LIQUIDATED DAMAGES AMOUNT).

5.                                       Reserved.

6.                                       MISCELLANEOUS.

a.                                       WAIVER.  Borrower and all endorsers, sureties and
guarantors hereby jointly and severally waive all applicable exemption rights,
valuation and appraisement, presentment for payment, demand, notice of demand,
notice of nonpayment or dishonor, protest and notice of protest of this Note,
and, except as otherwise expressly provided in the Loan Documents, all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of the payment of this Note. Borrower and all endorsers, sureties
and guarantors consent to any and all extensions of time, renewals, waivers or
modifications that may be granted by Lender with respect to the payment or
other provisions of this Note and to the release of the collateral securing
this Note or any part thereof, with or without substitution, and agree that
additional makers, endorsers, guarantors or sureties may become parties hereto
without notice to them or affecting their liability under this Note.

b.                                      Reserved.

c.                                       NOTE
SECURED.  This Note and all
obligations of Borrower hereunder are secured by the Loan Agreement and the
other Loan Documents.

 A-5
 

 

d.                                      NOTICES.  Any notice, election, request or demand which
by any provision of this Note is required or permitted to be given or served
hereunder shall be given or served in the manner required for the delivery of
notices pursuant to the Loan Agreement.

e.                                       ENTIRE
AGREEMENT.  This Note, together with
the other Loan Documents, constitutes the entire and final agreement between
Borrower and Lender with respect to the subject matter hereof and may only be
changed, amended, modified or waived by an instrument in writing signed by
Borrower and Lender.

f.                                         NO
WAIVER.  No waiver of any term or
condition of this Note, whether by delay, omission or otherwise, shall be
effective unless in writing and signed by the party sought to be charged, and
then such waiver shall be effective only in the specific instance and for the
purpose for which given. No notice to, or demand on, Borrower shall entitle
Borrower to any other or future notice or demand in the same, similar or other
circumstances.

g.                                      SUCCESSORS
AND ASSIGNS.  This Note shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and permitted assigns. Upon any endorsement, assignment,
or other transfer of this Note by Lender or by operation of law, the term “Lender,”
as used herein, shall mean such endorsee, assignee, or other transferee or
successor to Lender then becoming the holder of this Note. The term “Borrower”
as used herein shall include the respective successors and assigns, legal and
personal representatives, executors, administrators, devisees, legatees and
heirs of Borrower, if any.

h.                                      CAPTIONS.  All paragraph, section, exhibit and schedule
headings and captions herein are used for reference only and in no way limit or
describe the scope or intent of, or in any way affect, this Note.

i.                                          SEVERABILITY.  The provisions of this Note are severable,
and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, and not any other
clause or provision of this Note.

j.                                          GOVERNING
LAW.  THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA.  BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS NOTE OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF MINNESOTA OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON BORROWER IN THE MANNER AND AT 

 A-6
 

 

THE ADDRESS SPECIFIED FOR
NOTICES IN THE LOAN AGREEMENT. BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT
SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

k.                                       JURY
TRIAL WAIVER.  BORROWER AND ALL
PERSONS CLAIMING BY, THROUGH OR UNDER IT, HEREBY EXPRESSLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS NOTE, INCLUDING,
WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (II) IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE (AS NOW OR HEREAFTER MODIFIED)
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
BORROWER HEREBY AGREES AND CONSENTS THAT AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT HERETO
TO THE WAIVER OF ANY RIGHT TO TRIAL BY JURY. BORROWER ACKNOWLEDGES THAT IT HAS
CONSULTED WITH LEGAL COUNSEL REGARDING THE MEANING OF THIS WAIVER AND
ACKNOWLEDGES THAT THIS WAIVER IS AN ESSENTIAL INDUCEMENT FOR THE MAKING OF THE
LOAN. THIS WAIVER SHALL SURVIVE THE REPAYMENT OF THE LOAN.

l.                                          Counterclaims
and other Actions.  Borrower hereby
expressly and unconditionally waives, in connection with any suit, action or
proceeding brought by Lender on this Note, any and every right it may have to
(i) interpose any counterclaim therein (other than a counterclaim which can
only be asserted in the suit, action or proceeding brought by Lender on this
Note and cannot be maintained in a separate action) and (ii) have any such
suit, action or proceeding consolidated with any other or separate suit, action
or proceeding; provided, however, the foregoing shall not prohibit Borrower
from asserting any unrelated claim in a separate suit, action or proceeding.

[REMAINDER OF PAGE
INTENTIONALLY BLANK]

 A-7
 

 

IN WITNESS WHEREOF, Borrower
has caused this Note to be executed and delivered as of the day and year first
above written.

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  HENNESSEY
  FINANCIAL, LLC

  
	
   

  	
  a Minnesota
  limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jon C. Essen

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Jon C. Essen

  	
   

  
	
   

  	
  Title:

  	
   President

  	
   

  
						

 

 A-8EXHIBIT
10.11

Hennessey Financial, LLC

and Subsidiary

December 31, 2005

Schedules of Total
Return Performance

Loan Portfolio

Investor Portfolio

 

HENNESSEY FINANCIAL, LLC AND
SUBSIDIARY

TABLE OF CONTENTS

	
  Independent Auditors’ Report

  	
  1

  
	
   

  	
   

  
	
  Schedules:

  	
   

  
	
   

  	
   

  
	
  Schedule of Total Return Investment
  Performance - Loan Portfolio

  	
  2

  
	
   

  	
   

  
	
  Schedule of Total Return
  Investment Performance - Investor Portfolio

  	
  3

  
	
   

  	
   

  
	
  Schedule of Total Return
  Investment Performance

  	
  4

  
	
   

  	
   

  
	
  Notes to Schedules

  	
  5 - 6

  
	
   

  	
   

  
	
  Supplemental Information:

  	
   

  
	
   

  	
   

  
	
  Monthly
  Returns for Loan Portfolio

  	
  7

  
	
   

  	
   

  
	
  Monthly Returns for Investor
  Portfolio

  	
  8

  

 

 

INDEPENDENT AUDITORS’ REPORT

Governors

Hennessey Financial, LLC and Subsidiary

St. Paul, Minnesota

We have audited
the accompanying Schedules of Total Return Investment Performance of the Loan
Portfolio and Investor Portfolio of Hennessey Financial, LLC and subsidiary (the
Company) for each of the years from inception (March 17, 2000 and April 3, 2001
for Loan Portfolio and Investor Portfolio, respectively) through December 31,
2005.  These schedules are the
responsibility of the Company’s management. 
Our responsibility is to express an opinion on these schedules based on
our audits.

We conducted our
audits in accordance with auditing standards generally accepted in the United
States of America.  Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the schedules are free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the schedules.  Our procedures included the verification of
portfolio assets and liabilities by third party confirmation and physical
examination of signed contracts.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall schedule
presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion,
the schedules referred to above present fairly, in all material respects, the Schedules
of Total Return Investment Performance of the Loan Portfolio and Investor
Portfolio of Hennessey Financial, LLC and subsidiary for the periods referred
to in the first paragraph in conformity with accounting principles generally
accepted in the United States of America.

Our audits were
concluded for the purpose of forming an opinion on the schedules stated
above.  The supplemental information
provided, as identified in the table of contents, is presented for additional
analysis and has been subjected to the auditing standards applied to the schedules
and, in our opinion, is fairly stated in all material respects.

	
   

  
	
  

  	
  /s/ Virchow, Krause & Company, LLP

  	
   

  
	
   

  
	
   

  
	
  Minneapolis, Minnesota

  
	
  August 21, 2006

  

 

 1
 

 

HENNESSEY
FINANCIAL, LLC AND SUBSIDIARY

Schedule of Total Return Investment Performance

Loan
Portfolio

	
   

  	
   

  	
  Total return

  after

  management

  fee (1)

  	
   

  	
  Total return

  before

  management

  fee

  	
   

  	
  Total

  return

  dispersion

  (2)

  	
   

  	
  Number

  of 

  portfolios

  (3)

  	
   

  	
  Total

  portfolio

  assets

  (000s) (3)

  	
   

  	
  Percentage 

  of total

  assets

  managed

  (3)

  	
   

  
	
  Year ended:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  23.2

  	
  %

  	
  23.2

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  48,868

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  22.1

  	
  %

  	
  22.1

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  22,293

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2003

  	
   

  	
  20.6

  	
  %

  	
  20.6

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  11,121

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2002

  	
   

  	
  19.2

  	
  %

  	
  19.2

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  4,074

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2001

  	
   

  	
  19.1

  	
  %

  	
  19.1

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  2,259

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Period from:

  March 17, 2000 to December 31, 2000

  	
   

  	
  15.1

  	
  %

  	
  15.1

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  226

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cumulative total return for the period from March 17, 2000 to
  December 31, 2005

  	
   

  	
  196.4

  	
  %

  	
  196.4

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1), (2), and (3) – See page 4 for explanation.

See accompanying
notes to schedules.

 2
 

 

HENNESSEY
FINANCIAL, LLC AND SUBSIDIARY

Schedule of Total Return Investment Performance

Investor
Portfolio

	
   

  	
   

  	
  Total return

  after

  management 

  fee (1)

  	
   

  	
  Total return

  before

  management 

  fee

  	
   

  	
  Total

  return

  dispersion

  (2)

  	
   

  	
  Number

  of

  portfolios

  (3)

  	
   

  	
  Total

  portfolio

  $’s

  (000s) (3)

  	
   

  	
  Percentage

  of total $’s

  managed

  (3)

  	
   

  
	
  Year ended:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  13.6

  	
  %

  	
  13.6

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  41,856

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  12.9

  	
  %

  	
  12.9

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  18,000

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2003

  	
   

  	
  13.4

  	
  %

  	
  13.4

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  8,656

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2002

  	
   

  	
  15.5

  	
  %

  	
  15.5

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  2,565

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Period from: April 3,
  2001 to December 31, 2001

  	
   

  	
  13.2

  	
  %

  	
  13.2

  	
  %

  	
  N/A

  	
   

  	
  1

  	
   

  	
  $

  	
  2,103

  	
   

  	
  100.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cumulative total return for the period from April 3, 2001 to December
  31, 2005

  	
   

  	
  90.2

  	
  %

  	
  90.2

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1), (2), and (3) – See page 4 for explanation.

See accompanying
notes to schedules.

 3
 

 

HENNESSEY
FINANCIAL, LLC AND SUBSIDIARY

Schedule of Total Return Investment Performance

The total returns
presented below for one year represent the cumulative total returns for the
year ended December 31, 2005.  Total
returns presented below for five years represent the average annual returns
calculated since January 1, 2001 for the loan portfolio.  Returns since inception represent the average
annual returns calculated since March 17, 2000 for the loan portfolio and since
April 3, 2001 for the investor portfolio.

	
  

  	
   

  	
  Loan Portfolio

  annual total

  eturn after

  management fee

  	
   

  	
  Loan Portfolio

  annual total

  return before

  management fee

  	
   

  	
  Investor Portfolio

  annual total 

  return after

  management fee

  	
   

  	
  Investor Portfolio

  annual total

  return before 

  management fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  One year

  	
   

  	
  23.2

  	
  %

  	
  23.2

  	
  %

  	
  13.6

  	
  %

  	
  13.6

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Five years

  	
   

  	
  20.8

  	
  %

  	
  20.8

  	
  %

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ten years

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Since inception (average)

  	
   

  	
  20.6

  	
  %

  	
  20.6

  	
  %

  	
  14.5

  	
  %

  	
  14.5

  	
  %

  

 

1.               The
total returns after management fee percentages for the Loan Portfolio and
Investor Portfolio for the periods presented are equal to the total return
before management fee percentages because Hennessey Financial, LLC and subsidiary
has not charged management fees.

2.               Total
return dispersion is not applicable for periods less than one year or in the
case where there is not more than one account under management for the entire
year.

3.               The
number of portfolios, total portfolio assets, and percentage of total assets
managed represents accounts managed at the end of the year. For purposes of the
Loan Portfolio schedule, total portfolio assets include the outstanding
principal and accrued interest and fees for all loans originated and issued by
Hennessey Financial, LLC and subsidiary. 
For purposes of the Investor Portfolio schedule, total portfolio assets
include the outstanding principal and accrued interest for all debt investors
in Hennessey Financial, LLC and subsidiary.

4.               The
investment performances of the Loan Portfolio and Investor Portfolio exclude
the impact of any administrative expenses and the impact of any income taxes an
investor might have incurred as a result of taxable ordinary income and capital
gains realized by the accounts.

5.               The investment
performances exclude the impact of any sales charges investors might have paid
when purchasing Hennessey Financial, LLC and subsidiary’s debt investments.  Investors have not paid any sales charges to
invest in Hennessey Financial, LLC and subsidiary’s debt investments.  Any sales charges or commissions paid in
conjunction with an investor’s account have been paid by Hennessey Financial,
LLC and subsidiary.

See accompanying
notes to schedules.

 4
 

 

HENNESSEY
FINANCIAL, LLC AND SUBSIDIARY

Notes to Schedules

1.              General

Hennessey Financial, LLC provides secured mezzanine
financing to companies engaged in residential building construction, land
development, commercial real estate investments, and other business
ventures.  The accompanying schedules include the accounts of the parent
company Hennessey Financial, LLC (the Company) and one of its wholly-owned subsidiaries,
Hennessey Funding, LLC (formed in March 2005 to provide mezzanine financing for
certain land development projects).  The Company has managed a portfolio
of loans since March 17, 2000.  The Company believes these loans will
provide high rates of return while using real estate assets as
collateral.  The Company has been capitalized in large part through
various offerings of debt instruments since April 3, 2001.  The Company
has provided fixed rate debt instruments to investors that provide a high rate
of return relative to many other debt offerings.

2.              Types of Investments

The schedules present investment performance for all
loans originated and issued (in the case of the Loan Portfolio) and all debt
investors (in the case of the Investor Portfolio).

3.              Calculation of Total
Return Investment Performance

The investment performance for the portfolios has been
calculated on a time-weighted rate of return basis.  Significant parameters inherent in the performance
are listed below:

·                  Returns for the
portfolios include all loans and debt investors managed during the periods
presented.  Beginning in 2000 (for the
Loan Portfolio) and in 2001 (for the Investor Portfolio), monthly investment
performance for the Loan Portfolio and the Investor Portfolio was derived
through a dollar weighting of the underlying account returns.

·                  Performance
percentages have been computed on a total return basis and reflect the results
of capital repayments, interest and fees. 
Typically, loans and investor accounts have a stated fixed rate of
interest (as well as stated origination and extension fees for loans) and a
stated length of term.  It is common for
accrued interest to be compounded for both loan and investor accounts.

·                  Monthly
valuations and linking, as adjusted for advances and pay downs in Loan accounts
and contributions and withdrawals in Investor accounts, were utilized for the
individual accounts underlying the aggregated Portfolio returns.  Monthly account performance is asset weighted
to arrive at a Portfolio’s monthly return. 
Monthly returns are linked to produce quarterly returns and quarterly
returns are linked to produce annual returns.

·                  For new Loan and
Investor accounts, the actual number of days invested in the first month was
used to derive a monthly average account balance in the first month.

·                  For Loan
accounts, investment income is derived from repayment of principal, interest
and fees.  Loan interest is included on
an accrual basis.  Origination fees for
Loan accounts are accrued and amortized over the anticipated term of the
Loan.  In the event the Loan account is
repaid early, the remaining unamortized origination fees are recognized in the
month of repayment.

 5
 

 

·                  For Investor
accounts, investment return is derived from repayment of principal plus
interest.  Investor interest is included
on an accrual basis.

·                  Performance
percentages before management fees have been presented.  Additionally, performance percentages net of
management fees are provided.  Since the
Company has not charged management fees during the periods presented, the
performance before management fee equals the performance after management fee
in all cases.

The total return
dispersion measures the consistency of the Company’s performance results with
respect to the underlying account returns. 
The disclosed dispersion represents the standard deviation of accounts
that have been managed for the entire year. 
Total return dispersion is not applicable for periods less than one year
or in the case where there is not more than one account under management for
the entire year.

The total
return investment performance presented in the schedules may not be indicative
of future performance.  Investors should
be aware that other performance calculation methods may produce different
results, and that comparison of investment results should consider qualitative circumstances
and should be made only for portfolios with generally similar investment
objectives.

 6

 

SUPPLEMENTAL INFORMATION

 

HENNESSEY FINANCIAL, LLC AND SUBSIDIARY

Monthly Returns for Loan Portfolio

	
  December 2005

  	
   

  	
  2.3

  	
  %

  
	
  November 2005

  	
   

  	
  2.0

  	
  %

  
	
  October 2005

  	
   

  	
  2.1

  	
  %

  
	
  September 2005

  	
   

  	
  1.9

  	
  %

  
	
  August 2005

  	
   

  	
  1.9

  	
  %

  
	
  July 2005

  	
   

  	
  1.9

  	
  %

  
	
  June 2005

  	
   

  	
  1.9

  	
  %

  
	
  May 2005

  	
   

  	
  1.9

  	
  %

  
	
  April 2005

  	
   

  	
  1.8

  	
  %

  
	
  March 2005

  	
   

  	
  1.9

  	
  %

  
	
  February 2005

  	
   

  	
  1.7

  	
  %

  
	
  January 2005

  	
   

  	
  1.9

  	
  %

  
	
  December 2004

  	
   

  	
  1.9

  	
  %

  
	
  November 2004

  	
   

  	
  2.0

  	
  %

  
	
  October 2004

  	
   

  	
  1.9

  	
  %

  
	
  September 2004

  	
   

  	
  1.8

  	
  %

  
	
  August 2004

  	
   

  	
  1.9

  	
  %

  
	
  July 2004

  	
   

  	
  1.9

  	
  %

  
	
  June 2004

  	
   

  	
  1.8

  	
  %

  
	
  May 2004

  	
   

  	
  1.8

  	
  %

  
	
  April 2004

  	
   

  	
  1.8

  	
  %

  
	
  March 2004

  	
   

  	
  1.8

  	
  %

  
	
  February 2004

  	
   

  	
  1.7

  	
  %

  
	
  January 2004

  	
   

  	
  1.8

  	
  %

  
	
  December 2003

  	
   

  	
  1.8

  	
  %

  
	
  November 2003

  	
   

  	
  1.7

  	
  %

  
	
  October 2003

  	
   

  	
  1.7

  	
  %

  
	
  September 2003

  	
   

  	
  1.7

  	
  %

  
	
  August 2003

  	
   

  	
  1.7

  	
  %

  
	
  July 2003

  	
   

  	
  1.7

  	
  %

  
	
  June 2003

  	
   

  	
  1.6

  	
  %

  
	
  May 2003

  	
   

  	
  1.7

  	
  %

  
	
  April 2003

  	
   

  	
  1.6

  	
  %

  
	
  March 2003

  	
   

  	
  1.7

  	
  %

  
	
  February 2003

  	
   

  	
  1.7

  	
  %

  
	
  January 2003

  	
   

  	
  1.9

  	
  %

  
	
  December 2002

  	
   

  	
  1.7

  	
  %

  
	
  November 2002

  	
   

  	
  1.6

  	
  %

  
	
  October 2002

  	
   

  	
  1.6

  	
  %

  
	
  September 2002

  	
   

  	
  1.6

  	
  %

  
	
  August 2002

  	
   

  	
  1.6

  	
  %

  
	
  July 2002

  	
   

  	
  1.6

  	
  %

  
	
  June 2002

  	
   

  	
  1.5

  	
  %

  
	
  May 2002

  	
   

  	
  1.6

  	
  %

  
	
  April 2002

  	
   

  	
  1.5

  	
  %

  
	
  March 2002

  	
   

  	
  1.8

  	
  %

  
	
  February 2002

  	
   

  	
  1.4

  	
  %

  
	
  January 2002

  	
   

  	
  1.6

  	
  %

  
	
  December 2001

  	
   

  	
  1.6

  	
  %

  
	
  November 2001

  	
   

  	
  1.6

  	
  %

  
	
  October 2001

  	
   

  	
  1.7

  	
  %

  
	
  September 2001

  	
   

  	
  1.6

  	
  %

  
	
  August 2001

  	
   

  	
  1.7

  	
  %

  
	
  July 2001

  	
   

  	
  1.7

  	
  %

  
	
  June 2001

  	
   

  	
  1.6

  	
  %

  
	
  May 2001

  	
   

  	
  1.7

  	
  %

  
	
  April 2001

  	
   

  	
  1.6

  	
  %

  
	
  March 2001

  	
   

  	
  1.5

  	
  %

  
	
  February 2001

  	
   

  	
  1.4

  	
  %

  
	
  January 2001

  	
   

  	
  1.5

  	
  %

  
	
  December 2000

  	
   

  	
  1.5

  	
  %

  
	
  November 2000

  	
   

  	
  1.5

  	
  %

  
	
  October 2000

  	
   

  	
  1.5

  	
  %

  
	
  September 2000

  	
   

  	
  1.5

  	
  %

  
	
  August 2000

  	
   

  	
  1.5

  	
  %

  
	
  July 2000

  	
   

  	
  1.5

  	
  %

  
	
  June 2000

  	
   

  	
  1.5

  	
  %

  
	
  May 2000

  	
   

  	
  1.5

  	
  %

  
	
  April 2000

  	
   

  	
  1.5

  	
  %

  
	
  March 2000 (b)

  	
   

  	
  1.5

  	
  % (a)

  

 

(a) Adjusted to reflect
entire month

(b) Inception date: March 17,
2000

 7

 

HENNESSEY FINANCIAL, LLC AND
SUBSIDIARY

Monthly
Returns for Investor Portfolio

 

 

	
  December 2005

  	
   

  	
  1.2

  	
  %

  
	
  November 2005

  	
   

  	
  1.2

  	
  %

  
	
  October 2005

  	
   

  	
  1.2

  	
  %

  
	
  September 2005

  	
   

  	
  1.2

  	
  %

  
	
  August 2005

  	
   

  	
  1.1

  	
  %

  
	
  July 2005

  	
   

  	
  1.2

  	
  %

  
	
  June 2005

  	
   

  	
  1.1

  	
  %

  
	
  May 2005

  	
   

  	
  1.1

  	
  %

  
	
  April 2005

  	
   

  	
  1.1

  	
  %

  
	
  March 2005

  	
   

  	
  1.1

  	
  %

  
	
  February 2005

  	
   

  	
  1.0

  	
  %

  
	
  January 2005

  	
   

  	
  1.1

  	
  %

  
	
  December 2004

  	
   

  	
  1.1

  	
  %

  
	
  November 2004

  	
   

  	
  1.0

  	
  %

  
	
  October 2004

  	
   

  	
  1.1

  	
  %

  
	
  September 2004

  	
   

  	
  1.1

  	
  %

  
	
  August 2004

  	
   

  	
  1.1

  	
  %

  
	
  July 2004

  	
   

  	
  1.1

  	
  %

  
	
  June 2004

  	
   

  	
  1.1

  	
  %

  
	
  May 2004

  	
   

  	
  1.1

  	
  %

  
	
  April 2004

  	
   

  	
  1.1

  	
  %

  
	
  March 2004

  	
   

  	
  1.1

  	
  %

  
	
  February 2004

  	
   

  	
  1.0

  	
  %

  
	
  January 2004

  	
   

  	
  1.1

  	
  %

  
	
  December 2003

  	
   

  	
  1.1

  	
  %

  
	
  November 2003

  	
   

  	
  1.1

  	
  %

  
	
  October 2003

  	
   

  	
  1.1

  	
  %

  
	
  September 2003

  	
   

  	
  1.1

  	
  %

  
	
  August 2003

  	
   

  	
  1.1

  	
  %

  
	
  July 2003

  	
   

  	
  1.1

  	
  %

  
	
  June 2003

  	
   

  	
  1.1

  	
  %

  
	
  May 2003

  	
   

  	
  1.1

  	
  %

  
	
  April 2003

  	
   

  	
  1.1

  	
  %

  
	
  March 2003

  	
   

  	
  1.2

  	
  %

  
	
  February 2003

  	
   

  	
  1.0

  	
  %

  
	
  January 2003

  	
   

  	
  1.2

  	
  %

  
	
  December 2002

  	
   

  	
  1.2

  	
  %

  
	
  November 2002

  	
   

  	
  1.1

  	
  %

  
	
  October 2002

  	
   

  	
  1.2

  	
  %

  
	
  September 2002

  	
   

  	
  1.3

  	
  %

  
	
  August 2002

  	
   

  	
  1.3

  	
  %

  
	
  July 2002

  	
   

  	
  1.3

  	
  %

  
	
  June 2002

  	
   

  	
  1.2

  	
  %

  
	
  May 2002

  	
   

  	
  1.3

  	
  %

  
	
  April 2002

  	
   

  	
  1.3

  	
  %

  
	
  March 2002

  	
   

  	
  1.5

  	
  %

  
	
  February 2002

  	
   

  	
  1.3

  	
  %

  
	
  January 2002

  	
   

  	
  1.5

  	
  %

  
	
  December 2001

  	
   

  	
  1.4

  	
  %

  
	
  November 2001

  	
   

  	
  1.4

  	
  %

  
	
  October 2001

  	
   

  	
  1.5

  	
  %

  
	
  September 2001

  	
   

  	
  1.4

  	
  %

  
	
  August 2001

  	
   

  	
  1.5

  	
  %

  
	
  July 2001

  	
   

  	
  1.5

  	
  %

  
	
  June 2001

  	
   

  	
  1.5

  	
  %

  
	
  May 2001

  	
   

  	
  1.6

  	
  %

  
	
  April 2001 (b)

  	
   

  	
  1.5

  	
  % (a)

  

 

(a) Adjusted to
reflect entire month

(b) Inception
date: April 3, 2001

 8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]