Document:

<PAGE>

                                                                    EXHIBIT 10.1

                                                                  Execution Copy

================================================================================

                                 LOAN AGREEMENT

                                     Between

                             MICHIGAN STRATEGIC FUND

                                       And

                           THE DETROIT EDISON COMPANY

                                  $119,175,000
                             MICHIGAN STRATEGIC FUND
            VARIABLE RATE LIMITED OBLIGATION REFUNDING REVENUE BONDS
             (THE DETROIT EDISON COMPANY EXEMPT FACILITIES PROJECT),
                                  SERIES 2005DT

                         ------------------------------

                                   Dated as of

                                 August 1, 2005

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                                TABLE OF CONTENTS

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                                                                                                    PAGE
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<S>                                                                                                 <C>
ARTICLE I  DEFINITIONS AND INTERPRETATIONS........................................................    1
         Section 1.1. Definitions.................................................................    1
         Section 1.2. Interpretations.............................................................    2
ARTICLEII  REFUNDING OF PRIOR BONDS...............................................................    3
         Section 2.1. Refunding Fund..............................................................    3
         Section 2.2. Refunding of Prior Bonds....................................................    3
         Section 2.3  Investment of Bond Fund; Non-Arbitrage Covenant.............................    3
ARTICLE III  ISSUANCE OF THE BONDS; LOAN; DISPOSITION OF LOAN PROCEEDS............................    3
         Section 3.1. Issuance of the Bonds.......................................................    3
         Section 3.2. Loan........................................................................    4
         Section 3.3. Procurement of Municipal Bond Insurance Policy..............................    4
ARTICLE IV  COMPANY OBLIGATIONS, LOAN PAYMENTS AND OTHER PECUNIARY OBLIGATIONS....................    4
         Section 4.1. Company Approval of Issuance of Bonds.......................................    4
         Section 4.2. Refunding of Bonds..........................................................    5
         Section 4.3. Redemption of Bonds.........................................................    5
         Section 4.4. Loan Payments...............................................................    5
         Section 4.5. Purchase Price Payments of the Company......................................    7
         Section 4.6. Administrative Expenses.....................................................    8
         Section 4.7. Payment of Other Costs of Issuer............................................    8
         Section 4.8. Obligations of the Company Absolute and Unconditional.......................    8
         Section 4.9. Option to Prepay Amounts Under Agreement in Whole in Certain Events.........    8
         Section 4.10. Company's Performance Under Indenture......................................    9
         Section 4.11. Credit Facility............................................................    9
ARTICLE V  RESERVED
ARTICLE VI  REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER...............................   10
         Section 6.1. Representations and Warranties of the Issuer................................   10
         Section 6.2. Covenants of the Issuer.....................................................   12
ARTICLE VII  INDEMNIFICATION; REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY............   12
</TABLE>

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<TABLE>
<S>                                                                                                  <C>
         Section 7.1. Indemnification of Issuer and Indemnified Persons...........................   12
         Section 7.2. Filing and Recording........................................................   14
         Section 7.3. Removal of Liens............................................................   14
         Section 7.4. Federal Income Tax Exemption................................................   14
         Section 7.5.Company Representations and Covenants .......................................   17
         Section 7.6. Maintenance of Corporate Existence..........................................   19
         Section 7.7. Financial Information.......................................................   19
         Section 7.8. Agreement of Issuer Not to Assign or Pledge.................................   19
         Section 7.9. Reference to Bonds Ineffective After Bonds Paid.............................   19
         Section 7.10. Assignments or Lease of Project............................................   19
         Section 7.11. Amendment of Agreement or Indenture........................................   20
         Section 7.12. Indemnification of the Trustee.............................................   20
ARTICLE VIII  ASSIGNMENT..........................................................................   20
         Section 8.1. Assignment by the Company...................................................   20
         Section 8.2. Issuer's Rights of Assignment...............................................   21
ARTICLE IX  EVENTS OF DEFAULT AND REMEDIES........................................................   21
         Section 9.1. Trustee and Remedies........................................................   21
         Section 9.2. Annulment of Acceleration...................................................   22
         Section 9.3. Agreement to Pay Attorneys' Fees and Expenses...............................   22
         Section 9.4. General Enforcement Provisions..............................................   23
ARTICLE X  GENERAL PROVISIONS.....................................................................   23
         Section 10.1. Force Majeure..............................................................   23
         Section 10.2. Third Party Beneficiaries..................................................   23
         Section 10.3. Notices; Communications....................................................   24
         Section 10.4. Amendments, Governing Law, Etc.............................................   24
         Section 10.5. Severability...............................................................   25
         Section 10.6. Term of Agreement..........................................................   25
         Section 10.7. Company's Approval of Bond Documents.......................................   25
         Section 10.8. Counterparts...............................................................   25
         Section 10.9. Captions...................................................................   25
         Section 10.10. Payments on Non-Business Days.............................................   25

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                                                                  Execution Copy

                                 LOAN AGREEMENT

                                     between

                             MICHIGAN STRATEGIC FUND

                                       and

                           THE DETROIT EDISON COMPANY

      THIS LOAN AGREEMENT, dated as of August 1, 2005, is made and entered into
between MICHIGAN STRATEGIC FUND, a public body corporate and politic of the
State of Michigan (the "Issuer"), and THE DETROIT EDISON COMPANY, a Michigan
corporation (the "Company").

                                R E C I T A L S:

      The Issuer is authorized and empowered under the Michigan Strategic Fund
Act, which is Act No. 270, Public Acts of Michigan, 1984, as amended (the
"Act"), to issue bonds for the purposes of paying all or part of the cost of
construction and installation of certain pollution control facilities of the
Company or to refund bonds permitted to be refunded under the Act, and to enter
into loan agreements for the purpose of providing funds sufficient to pay the
principal of, and premium, if any, and interest on, such bonds; and

      The Issuer proposes to issue and sell bonds to refund certain bonds issued
by the Issuer, for the benefit of the Company, all in accordance with the Bond
Resolution adopted by the governing body of the Issuer on July 21, 2005.

      NOW, THEREFORE, the parties hereto, intending to be legally bound hereby
and in consideration of the premises, DO HEREBY AGREE as follows:

                                    ARTICLE I

                         DEFINITIONS AND INTERPRETATIONS

      Section 1.1. Definitions. Terms used in this Agreement which are defined
in the Indenture and not defined in this Agreement have the same meanings which
are assigned to such terms in the Indenture (as defined below). The following
terms have the meanings assigned to them below whenever they are used in this
Agreement. Except where the context otherwise requires, words imparting the
singular number shall include the plural number and vice versa. Reference to any
Bond Document means that Bond Document as amended or supplemented from time to
time. Reference to any party in a Bond Document means that party and its
successors and assigns.

<PAGE>

      "Act" means the Michigan Strategic Fund Act, Act No. 270, Public Acts of
Michigan, 1984, as amended.

      "Agreement" means this Loan Agreement.

      "Costs of Issuance" means any items of expense directly or indirectly
payable or reimbursable by the Company and directly or indirectly attributable
to the authorization, sale and issuance of the Bonds, including, but not limited
to, printing costs; costs of preparation and reproduction of documents; initial
fees and charges of the Trustee, the Registrar and the Paying Agent; legal fees
and charges, if any; underwriting discount or fees paid to the Underwriter in
connection with the initial offering and sale of the Bonds; the Issuer fees and
direct out-of-pocket expenses incurred in issuing and paying the Bonds and
loaning the proceeds of the Bonds to the Company; municipal bond insurance
premiums; fees and disbursements of Bond Counsel and other attorneys' fees; and
costs of credit ratings.

      "Event of Default" means an Event of Default as defined in Section 9.1(b)
of this Agreement.

      "Force Majeure" means acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, orders of any kind of the government of
the United States of America, or of any state thereof, or any civil or military
authority, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, storms, floods, washouts, droughts, arrests,
restraining of government and people, civil disturbances, explosions, nuclear
accidents, wars, breakage or accidents to machinery, transmission pipes or
canals, partial or entire failure of utilities or energy suppliers, shortages of
labor, material, supplies or transportation, or any other cause not reasonably
within the control of the party claiming the inability to perform.

      "Indemnified Persons" means the Issuer or any of its officers, members,
employees, agents, and any other Person acting for or on behalf of the Issuer.

      "Indenture" means that certain Trust Indenture, dated as of the date of
this Agreement, between the Issuer and the Trustee, pursuant to which the Bonds
are issued.

      "Loan Payments" means the payments to be made by the Company pursuant to
Section 4.4 of this Agreement.

      "Organizational Documents" means as to the Company, its Articles of
Incorporation as filed with the Secretary of State of the State of Michigan, and
its Bylaws in effect on the date of this Agreement.

      "State" means the State of Michigan.

      Section 1.2. Interpretations. The table of contents and article and
section headings of this Agreement are for reference purposes only and shall not
affect its interpretation in any respect.

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                                   ARTICLE II

                            REFUNDING OF PRIOR BONDS

      Section 2.1. Refunding Fund. The Issuer has authorized the issuance and
sale of the Bonds in the aggregate principal amount of $119,175,000. Upon
issuance and delivery thereof, the proceeds of the Bonds shall be deposited with
the Trustee in the Refunding Fund and the Bond Fund in accordance with the
Indenture. The obligations of the Issuer and the Company under this Agreement
are expressly conditioned upon delivery of the Bonds and receipt of the proceeds
thereof.

      Section 2.2. Refunding of Prior Bonds. The Company agrees to pay all Costs
of Issuance and all costs of refunding the Prior Bonds which are not, or cannot
be, paid or reimbursed from the proceeds of the Bonds, including accrued
interest and redemption premiums, if any, and to make such payments in
compliance with its covenants in Section 7.4 of this Agreement. The Company
agrees that it shall not be entitled to reimbursement from the Issuer or from
any Owners for payment of the Costs of Issuance or costs of refunding the Prior
Bonds, nor shall it be entitled, as a consequence of such unreimbursed payments,
to any abatement, postponement or diminution of the amounts payable under this
Agreement.

      Section 2.3 Investment of Bond Fund; Non-Arbitrage Covenant. Any moneys
held as part of the Bond Fund or Refunding Bond shall be invested, reinvested or
applied by the Trustee in accordance with and subject to the conditions of
Article VII of the Indenture. The Company and the Issuer shall make no use of
the proceeds of the Bonds, or any funds which may be deemed to be proceeds of
the Bonds pursuant to Section 148 of the Code and the applicable regulations
thereunder, which would cause the Bonds to be "arbitrage bonds" within the
meaning of such Section and such regulations, and the Company shall comply with
the requirements of such Section and such regulations while any Bonds remain
Outstanding.

      In order to insure that interest on the Bonds is not and will not become
subject to Federal income taxes as a result of failure of the Bonds to satisfy
Section 103(b) of the Code, the Company covenants with the Issuer and the
Trustee that it will, on or before the date of issuance of the Bonds, supply to
the Issuer and the Trustee all information required under Internal Revenue
Service Form 8038, Information Return for Private Activity Bond Issues.

                                   ARTICLE III

                             ISSUANCE OF THE BONDS;
                       LOAN; DISPOSITION OF LOAN PROCEEDS

      Section 3.1. Issuance of the Bonds. The Issuer agrees that immediately
following the delivery of this Agreement it will execute and deliver the
Indenture and issue, sell and deliver the Bonds to the Underwriter. The Bonds
shall be limited obligations of the Issuer and shall be

                                     - 3 -
<PAGE>

payable by the Issuer solely out of the Revenues derived from or in connection
with the Bond Documents. The Bonds shall never be payable out of any other funds
of the Issuer or the State.

      The Company agrees to pay, promptly following demand therefor, all Costs
of Issuance paid, incurred or charged by the Issuer, the Trustee, the Paying
Agent, the Remarketing Agent, the Auction Agent and the Registrar, including
without limitation all fees required to be paid to the Issuer by the Company,
and all out-of-pocket expenses and costs of issuance reasonably incurred by the
Issuer, the Trustee, the Paying Agent, the Remarketing Agent, the Auction Agent
and the Registrar in connection with the issuance and remarketing of the Bonds.

      Section 3.2. Loan. Concurrently with the delivery of the Bonds, the Issuer
will, upon the terms and subject to the conditions of this Agreement, lend to
the Company, by deposit of the proceeds thereof with the Trustee in the
Refunding Fund in accordance with the Indenture, an amount equal to the proceeds
of the Bonds for application as provided in the Indenture to refund the Prior
Bonds. Interest and redemption premiums, if any, due on the Prior Bonds and
Costs of Issuance with respect to the Bonds shall be paid with money provided by
the Company, which may include investment income on amounts on deposit in the
Refunding Fund as provided in Section 6.01 of the Indenture.

      Section 3.3 Procurement of Municipal Bond Insurance Policy. The Company,
at no cost to the Issuer, shall procure the Municipal Bond Insurance Policy so
that it is in full force and effect concurrent with the delivery of the Bonds by
the Issuer to secure the payment of the principal of and interest on the Bonds.

                                   ARTICLE IV

                       COMPANY OBLIGATIONS, LOAN PAYMENTS
                         AND OTHER PECUNIARY OBLIGATIONS

      Section 4.1. Company Approval of Issuance of Bonds. Simultaneously with
the authorization of this Agreement by the governing body of the Issuer, the
governing body has adopted the Bond Resolution and authorized the execution of
the Indenture. The Company hereby approves the Bond Resolution and the
Indenture. It is hereby agreed that the foregoing approval of the Bond
Resolution and the Indenture constitutes the acknowledgement and agreement of
the Company that the Bonds, when issued, sold and delivered as provided in the
Bond Resolution and the Indenture, will be issued in accordance with and in
compliance with this Agreement, notwithstanding any other provisions of this
Agreement or any other contract or agreement to the contrary. Any Owner is
entitled to rely fully and unconditionally on the foregoing approval.
Notwithstanding any provisions of this Agreement or any other contract or
agreement to the contrary, the Company's approval of the Bond Resolution and the
Indenture shall be the Company's agreement that all covenants and provisions in
this Agreement and the Indenture affecting the Company shall, upon the delivery
of the Bonds and the Indenture, become unconditional, valid and binding
covenants and obligations of the Company so long as the Bonds and the interest
thereon are outstanding and unpaid. Particularly, the obligation of the

                                     - 4 -
<PAGE>

Company to pay, promptly when due, all Loan Payments specified in this Agreement
and the Indenture shall be absolute and unconditional, and said obligation may
be enforced as provided in this Agreement and the Indenture.

      Section 4.2. Refunding of Bonds. After the issuance of any Bonds, the
Issuer shall not refund any of the Bonds or change or modify the Bonds in any
way, except as provided for in the Indenture, without the prior written approval
of an Authorized Company Representative; nor shall the Issuer redeem any Bonds
prior to the Maturity Date except upon the request of an Authorized Company
Representative, unless such redemption is required by the Indenture.

      Section 4.3. Redemption of Bonds. The Issuer, upon the written request of
the Company (and provided that the affected Bonds are subject to redemption
prior to maturity at the option of the Issuer, or the Company, and provided that
such request is received in sufficient time prior to the date upon which such
redemption is proposed), promptly shall take or cause to be taken all action
that may be necessary under the applicable redemption provisions to effect such
redemption prior to maturity, to the full extent of funds either made available
for such purpose by the Company or already on deposit in the Bond Fund and
available for such purpose. The redemption of any Outstanding Bonds prior to
maturity at any time shall not relieve the Company of its absolute and
unconditional obligation to pay each remaining Loan Payment, with respect to any
Outstanding Bonds, as specified in the Indenture. If a redemption of Bonds is
required pursuant to the provisions of the Indenture, the Company agrees as
provided herein to promptly make Loan Payments sufficient to pay the principal
of, premium, if any, and interest on the Bonds due on such redemption date.

      Section 4.4. Loan Payments. (a) To repay the loan, the Company hereby
covenants and agrees to make the Loan Payments, as hereinafter provided in
subsections (b), (c), (f) and (h) of this Section, to the Trustee, or the Paying
Agent for the account of the Trustee, on behalf of the Issuer in accordance with
this Agreement.

      (b) The Company shall make Loan Payments, subject to the limitations of
subsection (e) below of this Agreement, in immediately available funds directly
to the Trustee or the Paying Agent for deposit in the Bond Fund on or before
each day on which any payment of principal of, premium, if any, or interest on
the Bonds shall become due (whether at maturity or upon redemption or
acceleration or otherwise) in an amount which, together with other money held by
the Trustee under the Indenture and available therefor, will enable the Trustee
to make such payment in full when due in accordance with the Indenture.

      (c) In the event the Company should fail to make any of the Loan Payments
required in this Section, the Loan Payment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully
paid, and the Company agrees to pay the same with interest thereon at the rate
then borne by the Bonds, to the extent permitted by law and subject to the
provisions of subsection (e) below, from the date when such payment was due as
provided in the Indenture.

      (d) If, subsequent to or on a date on which the Company is obligated to
pay the Loan Payments (subject to provisions of Article VIII of the Indenture),
losses (net of gains) shall be

                                     - 5 -
<PAGE>

incurred in respect of any investments, or any other event has occurred causing
the money in the Bond Fund, together with any other money then held by the
Trustee and available for the purpose of the Bond Fund, to be less than the
amount sufficient at the time of such occurrence or other event to pay, in
accordance with the provisions of the Indenture, all amounts due and payable or
to become due and payable, the Trustee shall notify the Company of such fact and
thereafter the Company, as and when required for purposes of such Bond Fund,
shall pay in immediately available funds to the Trustee for deposit in the Bond
Fund the amount of any such reduction below such sufficient amount.

      (e) Notwithstanding any provision of the Bond Documents to the contrary,
in no event (including without limitation the acceleration of maturity of the
Bonds or the redemption of the Bonds pursuant to the Bond Documents) shall the
amount of interest contracted for, charged, received, reserved or taken in
connection with the loan made hereunder (together with any other costs or
considerations that constitute interest under applicable law which are
contracted for, charged, received, reserved or taken pursuant to the Bond
Documents) (collectively, "Interest") exceed the amount of interest which could
have been contracted for, charged, reserved, received or taken at the Maximum
Interest Rate. This provision shall be held to operate to deny the Owners the
right, in any event, to collect usury.

      (f) The Company further agrees that in the event payment of the principal
of and the interest on the Bonds is accelerated upon the occurrence of an Event
of Default under the Indenture, all amounts payable under Section 4.4(b) for the
remainder of the term hereof (other than interest not yet due) shall be
immediately due and payable.

      (g) Any amount held in the Bond Fund on any payment date specified in
subsection (b) above shall be credited against the Loan Payments required to be
made by the Company on such date.

      (h) The Company shall be obligated to prepay in whole or in part the
amounts payable hereunder upon a Determination of Taxability (as defined below)
giving rise to a mandatory redemption of the Bonds pursuant to Section 4.03 of
the Indenture, by paying an amount equal to, when added to other funds on
deposit in the Bond Fund, the aggregate principal amount of the Bonds to be
redeemed pursuant to the Indenture plus accrued interest to the redemption date.

      (i) The Company shall cause a mandatory redemption to occur within 180
days after a Determination of Taxability (as defined below) shall have occurred.
A "Determination of Taxability" shall be deemed to have occurred if, as a result
of the failure of the Company to observe any covenant, agreement or
representation in this Agreement, an opinion of Bond Counsel obtained by the
Company, or a final decree or judgment of any federal court or a final action of
the Internal Revenue Service determines that interest paid or payable on any
Bond is or will be includible in the gross income of an Owner of the Bonds for
federal income tax purposes under the Code (other than an Owner who is a
"substantial user" or "related person" within the meaning of Section 103(b)(13)
of the 1954 Code). However, no such decree or action will be considered final
for this purpose unless the Company has been given written notice of the same,
either directly or in the name of any Owner of a Bond, and, if it so desires and
is legally allowed,

                                     - 6 -
<PAGE>

has been afforded the opportunity to contest the same, either directly or in the
name of any Owner of a Bond, and until conclusion of any appellate review, if
sought. If the Trustee receives written notice from the Issuer or any Owner of a
Bond stating (a) that the Issuer or the Owner has been notified in writing by
the Internal Revenue Service that it proposes to include the interest on any
Bond in the gross income of such Owner for the reasons described therein or any
other proceeding has been instituted against the Issuer or such Owner which may
lead to a final decree or action as described herein, and (b) that the Issuer or
such Owner will afford the Company the opportunity to contest the same, either
directly or in the name of the Issuer or the Owner, until a conclusion of any
appellate review, if sought, then the Trustee shall promptly give notice thereof
to the Company, the Issuer, the Provider, if any, and the Owner of each Bond
then Outstanding. If a final decree or action as described above thereafter
occurs and the Trustee has received written notice thereof, the Trustee promptly
shall request prepayment from the Company of the amounts payable hereunder and
give notice of the redemption of the Bonds at the earliest practical date, but
not later than the date specified in this Article, and in the manner provided by
Section 4.05 of the Indenture.

      At the time of any such prepayment of the amounts payable hereunder
pursuant to this Section, the prepayment amount shall be applied, together with
other available moneys in the Bond Fund, to the redemption of the Bonds on the
date specified in the notice as provided in the Indenture, whether or not such
date is an Interest Payment Date, to the Trustee's fees and expenses under the
Indenture accrued to such redemption of the Bonds, and to all sums due to the
Issuer under this Agreement.

      Notwithstanding any provision herein or in the Insurance Agreement to the
contrary, no payments of principal of or interest on the Bonds shall be due or
paid by the Company hereunder to the extent that such amounts have been paid by
or on behalf of the Municipal Bond Insurer pursuant to the Municipal Bond
Insurance Policy and applied by the Trustee for such payment in accordance with
the Indenture and the Company has provided sufficient funds for reimbursement to
the Municipal Bond Insurer under the Insurance Agreement for such payment.

      Whenever any notice of prepayment of the amounts payable hereunder
pursuant to this Article IV has been given, which includes a notice for
redemption of the Bonds pursuant to the Indenture, all amounts payable under the
first paragraph of this Section 4.4(i) shall become due and payable on the date
fixed for redemption of such Bonds.

      Section 4.5. Purchase Price Payments of the Company. (a) In addition to
the amounts payable by the Company under Section 4.4, on or prior to each date
on which the Paying Agent is required to disburse the purchase price for any
Bond tendered or deemed tendered in accordance with Article III of the
Indenture, the Company will pay or cause to be paid, as necessary, by the time
and in the manner specified in the Indenture, to the extent remarketing proceeds
are unavailable therefor, the purchase price of bonds tendered to the Paying
Agent (as agent for the Owners) pursuant to Article III of the Indenture, in
lawful money of the United States of America (as required by the Indenture),
which will be held in trust for the benefit of the tendering Owners or Owners
that are deemed to have been tendered in an amount which, together with any
amounts available to the Paying Agent for said purpose, will be sufficient to
pay the purchase price for all Bonds which are to be purchased on such date.

                                     - 7 -
<PAGE>

      (b) The Issuer shall have no obligation, financial or otherwise, with
respect to payment of the purchase price of any Bonds required to be purchased
pursuant to the Indenture, or for arrangements therefor, except that the Issuer
shall generally cooperate with the Company, the Trustee, the Paying Agent and
the Remarketing Agent, as contemplated in the Indenture.

      Section 4.6. Administrative Expenses. The Company shall pay, or cause to
be paid, an amount equal to (i) the reasonable fees and charges of the Trustee
for services rendered as Trustee under the Indenture and its reasonable expenses
incurred as Trustee under the Indenture, including reasonable fees of its
counsel, and (ii) the reasonable fees and charges of the Paying Agent and the
reasonable expenses incurred by the Paying Agent as and when the same become
due, including the reasonable fees of its counsel.

      Section 4.7. Payment of Other Costs of Issuer. The Company shall pay to
the Issuer, upon receipt of statements therefor from time to time, such amounts
as are necessary to pay or reimburse the Issuer for its reasonable and necessary
expenses and costs attributable to the Bonds.

      Section 4.8. Obligations of the Company Absolute and Unconditional. The
obligations of the Company to make the payments required in Sections 2.2, 3.1,
4.4, 4.5, 4.6, 4.7, 7.1 and 9.3 and to perform and observe the other agreements
on its part contained herein shall be absolute and unconditional and shall not
be subject to diminution by set-off, counterclaim, abatement or otherwise. Until
payment of all principal of, premium, if any, and interest on the Bonds, and
payment in full of the purchase price of any Bonds purchased pursuant to the
Indenture, and payment of all other amounts payable by the Company hereunder,
the Company (a) will not suspend or discontinue any payments provided for in
this Agreement, except to the extent the same have been prepaid, (b) will
perform and observe all its other agreements contained herein, and (c) except as
provided in Section 7.6, will not terminate this Agreement for any cause,
including, without limiting the generality of the foregoing, any acts or
circumstances that may constitute failure of consideration, sale, loss, eviction
or constructive eviction, destruction of or damage to the Project, commercial
frustration of purpose, any change in the tax or other laws of the United States
of America or of the State or any political subdivision of either, or any
failure of the Issuer to perform and observe any agreement, whether express or
implied, or any duty, liability or obligation arising out of or in connection
herewith or with the Indenture. Nothing contained in this Section shall be
construed to release the Issuer from the performance of any of the agreements on
its part herein contained and in the event the Issuer shall fail to perform any
such agreement on its part, the Company may take such action as the Company may
deem necessary to perform or compel performance, provided that no such action
shall violate the agreements on the part of the Company contained in this
Agreement or postpone or diminish the amounts required to be paid by the Company
pursuant to this Agreement. Upon the issuance and delivery of the Bonds to the
initial purchasers thereof, the Company shall have received, and the Issuer
shall have given, full and complete consideration for the Company's obligation
hereunder to make Loan Payments.

      Section 4.9. Option to Prepay Amounts Under Agreement in Whole in Certain
Events. The Company shall have, and is hereby granted, the option to prepay the
amounts required to be paid by the Company under Section 4.4 in whole and to
direct the Trustee to redeem the Bonds

                                     - 8 -
<PAGE>

in whole if any of the events described in the Indenture permitting such
redemption shall have occurred. The Company may at any time deliver money,
and/or Government Obligations to the Trustee with instructions to the Trustee to
hold such money and Government Obligations pursuant to Article VIII of the
Indenture in connection with a discharge of the Indenture.

      The Issuer agrees that, at the request at any time of the Company, it will
cooperate with the Company to cause the Bonds or any portion thereof to be
redeemed to the extent permitted by the Indenture.

      Section 4.10. Company's Performance Under Indenture. The Company agrees,
for the benefit of the Owners, to do and perform all acts and things
contemplated in the Indenture to be done or performed by it and to not interfere
with the exercise of the power and authority granted to the Trustee in the
Indenture. The Company further agrees to aid in furnishing to the Issuer or the
Trustee any documents, certificates or opinions that may be required under the
Indenture.

      Section 4.11 Credit Facility. (a) Initially, there shall be no Credit
Facility. The Company, after receiving the written consent of the Municipal Bond
Insurer (unless a Municipal Bond Insurer Default shall have occurred and be
continuing), may at any time provide for a Change of Credit Facility, provided
that the Company delivers to the Trustee, the Auction Agent, the Municipal Bond
Insurer and the Remarketing Agent, not less than five Business Days prior to the
date on which the Trustee must notify the Owners of a Change of Credit Facility
pursuant to Section 2.18 of the Indenture and prior to the effective date of any
such Change of Credit Facility, the following:

            (1) a notice which (A) states the effective date of the delivery of
      the Credit Facility or the date of the Change of Credit Facility, (B)
      describes the terms of the Change of Credit Facility, and (C) directs the
      Trustee to give notice pursuant to Section 2.18(a) of the Indenture;

            (2) a Favorable Opinion of Bond Counsel with respect to such Change
      of Credit Facility and stating, in effect, that such Change of Credit
      Facility is authorized under this Agreement;

            (3) a certificate of an Authorized Company Representative as to
      whether the Bonds are then rated by either Moody's or S&P, or both; and

            (4) written evidence from Moody's, if the Bonds are then rated by
      Moody's, and from S&P, if the Bonds are then rated by S&P, in each case to
      the effect that such rating agency has reviewed the proposed Change of
      Credit Facility and that such Change of Credit Facility will not, by
      itself, result in a reduction, suspension or withdrawal of its rating or
      ratings of the Bonds.

      (b) In lieu of satisfying the requirements of subsection (a) above, the
Company, after receiving the written consent of the Municipal Bond Insurer
(unless a Municipal Bond Insurer Default shall have occurred and be continuing),
may provide for a Change of Credit Facility at any time that the Bonds are
subject to optional redemption pursuant to Section 4.02(b) of the

                                     - 9 -
<PAGE>

Indenture, provided that the Company delivers to the Trustee, the Municipal Bond
Insurer, the Auction Agent and the Remarketing Agent not less than 30 days
before the effective date of the Change of Credit Facility:

            (1) a notice which (A) states the effective date of the Change of
      Credit Facility, (B) describes the terms of the Change of Credit Facility,
      (C) directs the Trustee to give notice pursuant to Section 2.18(b) of the
      Indenture that the Bonds are subject to mandatory purchase, in whole, on
      or before the effective date of the Change of Credit Facility in
      accordance with Section 3.02(a)(iii) of the Indenture, and (D) directs the
      Trustee to take any other action as shall be necessary for the Trustee to
      take to effect the Change of Credit Facility; and

            (2) on or before the effective date of the Change of Credit
      Facility, the Company shall furnish to the Trustee a Favorable Opinion of
      Bond Counsel satisfying the requirements of Section 4.11(a)(2) above.

      (c) The Company, after receiving the written consent of the Municipal Bond
Insurer (unless a Municipal Bond Insurer Default shall have occurred and be
continuing), may provide for one or more extensions of a Credit Facility for any
period commencing after its then-current expiration date without complying with
the foregoing provisions of this Section.

      (d) The Company may rescind its election to make a Change of Credit
Facility at any time prior to the effective date thereof.

                                    ARTICLE V

                                    RESERVED

                                   ARTICLE VI

      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER

      Section 6.1. Representations and Warranties of the Issuer. The Issuer
represents and warrants that:

            (a) The Issuer is a public body corporate and politic of the State
      of Michigan duly created under the Act.

            (b) The Issuer has full power and authority under the Act and the
      Constitution and laws of the State to adopt the Bond Resolution, to issue
      the Bonds, to execute and deliver the Bond Documents to be executed and
      delivered by it and to perform its obligations under the Bond Documents.

                                     - 10 -
<PAGE>

            (c) The Issuer has duly adopted the Bond Resolution, and has duly
      authorized the execution and delivery of the Bond Documents to be executed
      and delivered by it. All action required on the part of the Issuer for the
      authorization of the issuance of the Bonds and the execution and delivery
      of the Bond Documents to be executed and delivered by it has been duly and
      effectively taken.

            (d) The Bond Documents to which the Issuer is a party constitute
      valid and binding obligations of the Issuer, enforceable against the
      Issuer in accordance with their terms (except that (i) the enforceability
      of such Bond Documents may be limited by bankruptcy, reorganization,
      insolvency, moratorium or other similar laws of general application
      relating to the enforcement of creditors' rights, (ii) certain equitable
      remedies, including specific performance, may be unavailable and (iii) the
      indemnification provisions contained therein may be limited by applicable
      securities laws and public policy).

            (e) All filings with, or approvals or consents of, governmental
      authorities (other than approvals or consents required under the Blue Sky
      or other securities laws of any jurisdiction) required to be made or
      obtained by the Issuer for (i) the valid adoption of the Bond Resolution,
      (ii) the valid authorization, execution and delivery by the Issuer of the
      Bond Documents to which it is a party and (iii) the valid issuance of the
      Bonds, have been, or prior to the issuance of the Bonds, will be, duly
      made or obtained.

            (f) There is no pending action, suit, proceeding or investigation at
      law or in equity before or by any court, either state or federal, or
      public board or body served upon the Issuer or, to the Issuer's knowledge,
      threatened, calling into question the creation or existence of the Issuer,
      the validity of the Bond Resolution and the Bond Documents to be executed
      and delivered by it, the authority of the Issuer to execute and deliver
      the Bond Documents to be executed and delivered by it and to perform its
      obligations under the Bond Documents, or the title of any person to the
      office held by that person with the Issuer.

            (g) The execution and delivery by the Issuer of the Bond Documents
      to be executed and delivered by it, and the performance of its obligations
      under the Bond Resolution and the Bond Documents, will not violate any
      provision of law or regulation, or of any judgment, decree, writ, order or
      injunction, and will not contravene the provisions of, or constitute a
      default under, or result in the creation of a lien, charge or encumbrance
      under, any agreement (other than the Indenture) to which the Issuer is a
      party or by which any of its properties constituting a part of the Trust
      Estate are bound.

            (h) No event has occurred, and no condition currently exists, which
      constitutes or may, with the passage of time or the giving of notice, or
      both, constitute an Event of Default on the part of the Issuer.

            (i) Neither this Agreement nor the Loan Payments have been pledged
      or hypothecated in any manner or for any purpose other than as provided in
      the Indenture as security for the payment of the Bonds.

                                     - 11 -
<PAGE>

            (j) All of the proceedings approving this Agreement and the
      Indenture were conducted by the Issuer at meetings which complied with the
      Open Meetings Act, 1976 PA 267.

            Each of the foregoing representations and warranties shall be deemed
      to have been made as of the date of delivery of the Bonds.

            Section 6.2. Covenants of the Issuer. The Issuer covenants and
      agrees that:

            (a) The Issuer will faithfully perform all of its obligations under
      the Bond Documents.

            (b) The Issuer will not knowingly take any action, which action will
      adversely affect the exclusion from gross income for federal income tax
      purposes of interest on the Bonds.

            (c) To the extent that it is within its power to do so, the Issuer
      will maintain the validity and effectiveness of the Bond Documents, and of
      the Issuer's pledge and assignment to the Trustee thereunder, and (except
      as expressly permitted by such Bond Documents) will not take any action,
      the taking of which will release the Company from its obligations under
      such Bond Documents or result in the surrender, termination or
      modification (except as permitted by the Bond Documents) of, or impair the
      validity of, such Bond Documents.

            (d) The Issuer will observe the covenants made by it in the
      Indenture; it will use its best efforts to cause the Company to have and
      exercise all the rights, powers and benefits stated to be in the Company
      in this Agreement and the Indenture; and so long as no Event of Default
      exists, it will not join in the modification of the Bond Documents in any
      manner without the prior written consent of the Company and the Trustee.

                                   ARTICLE VII

                  INDEMNIFICATION; REPRESENTATIONS, WARRANTIES
                          AND COVENANTS OF THE COMPANY

      Section 7.1. Indemnification of Issuer and Indemnified Persons.

      (a) The Issuer and the Indemnified Persons shall not be liable to the
Company for any reason. The Company shall indemnify and hold the Issuer and the
Indemnified Persons harmless from any loss, expense (including reasonable
counsel fees), or liability of any nature due to any and all suits, actions,
legal or administrative proceedings, or claims arising or resulting from, or in
any way connected with:

      (i)   the financing, installation, operation, use, or maintenance of the
            Project,

                                     - 12 -
<PAGE>

      (ii)  the refunding of the Prior Bonds,

      (iii) any act, failure to act, or misrepresentation by any person, firm,
            corporation or governmental agency, including the Issuer, in
            connection with the issuance, sale, delivery or remarketing of the
            Bonds, or

      (iv)  any act, failure to act, or misrepresentation by the Issuer in
            connection with this Agreement, the other Bond Documents or any
            other document involving the Issuer in this matter.

If any suit, action or proceeding is brought against the Issuer or any
Indemnified Person relating to clauses (i) through (iv) above, that action or
proceeding shall be defended by counsel to the Issuer or the Company, as the
Issuer shall determine. If the defense is by counsel to the Issuer, which is the
Attorney General of the State of Michigan or may, in some instances, be private,
retained counsel, the Company shall indemnify the Issuer and the Indemnified
Persons for the reasonable cost of that defense including reasonable counsel
fees. If the Issuer determines that the Company shall defend the Issuer or
Indemnified Person, the Company shall immediately assume the defense at its own
cost. The Company shall not be liable for any settlement of any proceeding made
without its consent (which consent shall not be unreasonably withheld).

      (b) The Company shall not be obligated to indemnify the Issuer or any
Indemnified Person under subsection (a), if a court with competent jurisdiction
finds that the liability in question was caused by the willful misconduct or
sole gross negligence of the Issuer or the involved Indemnified Person, unless
the court determines that, despite the adjudication of liability but in view of
all circumstances of the case, the Issuer or the Indemnified Person(s) is (are)
fairly and reasonably entitled to indemnity for the expenses which the court
considers proper.

      (c) The Company shall also indemnify the Issuer for all reasonable costs
and expenses, including reasonable counsel fees, incurred in:

      (i)   enforcing any obligation of the Company under this Agreement, the
            other Bond Documents or any related agreement,

      (ii)  taking any action requested by the Company,

      (iii) taking any action required by this Agreement, the other Bond
            Documents or any related agreement, or

      (iv)  taking any action considered necessary by the Issuer and which is
            authorized by this Agreement, the other Bond Documents or any
            related agreement.

      (d) The obligations of the Company under this section shall survive any
assignment or termination of this Agreement.

                                     - 13 -
<PAGE>

      Section 7.2. Filing and Recording. The Company covenants that if required
by statute: (i) from time to time, it will cause any Bond Document and each
amendment and supplement thereto (or a memorandum with respect thereto or to
such amendment or supplement) to be filed, registered and recorded and to be
refiled, reregistered and rerecorded in such manner and in such places as may be
required in order to publish notice of and fully to protect the liens, if any,
or to perfect or continue the perfection of the security interests, if any,
created thereby and (ii) it shall perform or cause to be performed from time to
time any other act as required by law, and it will execute or cause to be
executed any and all instruments of further assurance that may be necessary for
such publication, perfection, continuation and protection.

      Section 7.3. Removal of Liens. If any lien, encumbrance or charge of any
kind based on any claim of any kind (including, without limitation, any claim
for income, franchise or other taxes, whether federal, state or otherwise) shall
be asserted or filed against the Trust Estate, or any amount paid or payable by
the Company under or pursuant to this Agreement or any order (whether or not
valid) of any court shall be entered with respect to the Trust Estate, or any
such amount by virtue of any claim of any kind, in either case so as to:

            (a) interfere with the due payment of such amount to the Trustee or
      the due application of such amount by the Trustee pursuant to the
      applicable provisions of the Indenture,

            (b) subject the Owners to any obligation to refund any money applied
      to payment of principal of, and premium, if any, and interest on, the
      Bonds, or

            (c) result in the refusal of the Trustee to make such due
      application because of its reasonable determination that liability might
      be incurred if such due application were to be made,

then the Company will promptly take such action (including, but not limited to,
the payment of money) as may be necessary to prevent, or to nullify the cause or
result of, such interference, obligation or refusal, as the case may be.

      Section 7.4. Federal Income Tax Exemption. The Company covenants to take
such action to assure and to refrain from any action which would adversely
affect the treatment of the Bonds as obligations described in Section 103 of the
Code, the interest on which is not includable in the "gross income" of the
holder (other than the income for a "substantial user" of the Project or a
"related person" within the meaning of Section 147(a) of the Code) for purposes
of federal income taxation. In particular, but not by way of limitation thereof,
the Company hereby covenants and represents as follows:

            (a) Substantially all (i.e., at least 95%) of the net proceeds of
      the sale of the Prior Bonds (which for the purposes of this subparagraph
      shall include the bonds refunded with the proceeds of Prior Bonds when
      Prior Bonds were refunding bonds) have been used to provide "water and/or
      air pollution control facilities" within the meaning of Section
      103(b)(4)(F) of the 1954 Code, and all of the costs of the Project paid
      with the proceeds of the Prior Bonds constitute costs which are properly
      chargeable to a capital account of the Company for Federal income tax
      purposes or would be so chargeable

                                     - 14 -
<PAGE>

      either with a proper election by the Company or but for a proper election
      by the Company to deduct such costs. All of the proceeds of the Prior
      Bonds have been expended.

            (b) The principal amount of the Bonds does not exceed the combined
      aggregate outstanding principal amount of the Prior Bonds on the date
      hereof. The original proceeds of the Bonds shall be fully utilized within
      90 days of the Issue Date to pay the principal of the Prior Bonds.

            (c) No portion of the proceeds of the Bonds or the Prior Bonds were
      or will be used to provide the following: airplanes, skyboxes or other
      private luxury boxes, any health club facility, any facility primarily
      used for gambling or any store the principal business of which is the sale
      of alcoholic beverages for consumption off premises. (Code Section. 147(e)
      provides and 1954 Code Section. 103(b)(18) provided that interest on any
      obligation issued as part of an issue will not be excluded from gross
      income for Federal income tax purposes if any portion of the proceeds of
      such issue is to be used to provide any airplane, skybox or other private
      luxury box, any health club facility, any facility primarily used for
      gambling or any store the principal business of which is the sale of
      alcoholic beverages for consumption off premises).

            (d) Less than 25% of the proceeds of the Prior Bonds were used
      directly or indirectly for the acquisition of land used for other than
      farming purposes, and no portion of the Bond proceeds is to be used,
      directly or indirectly, for the acquisition of land used for farming
      purposes (Code Sections. 144(a)(11) and 147(c) provide and 1954 Code
      Section 103(b)(16) provided that interest with respect to any obligation
      issued as part of an issue will not be excluded from gross income for
      Federal income tax purposes if any portion of the proceeds of such issue
      is to be used (directly or indirectly) for the acquisition of land (or an
      interest therein) to be used for farming purposes, or 25% or more of the
      proceeds of such issue is to be used (directly or indirectly) for the
      acquisition of land not used for farming purposes).

            (e) No portion of the Bond proceeds or the proceeds of the Prior
      Bonds was used for the acquisition of any property (or an interest
      therein) the first use of which property is not pursuant to such
      acquisition unless the rehabilitation requirements of 1954 Code Section
      103(b)(17) are met with respect to the Project or the property financed
      with proceeds of the Prior Bonds. (Code Section. 147(d) provides and 1954
      Code Section. 103(b)(17) provided that interest with respect to any
      obligation issued as part of an issue will not be excluded from gross
      income for Federal income tax purposes if any portion of the proceeds of
      such issue is to be used for the acquisition of any property (or an
      interest therein) unless the first use of such property is pursuant to
      such acquisition, or unless certain rehabilitation requirements are met).

            (f) Except as is permitted by Code Section. 149(b) and 1954 Code
      Section. 103(h), the Bonds are not federally guaranteed within these
      provisions.

            (g) The weighted average maturity of the Bonds does not exceed 120%
      of the weighted average of the expected economic life of the Project
      originally financed with

                                     - 15 -
<PAGE>

      the proceeds of the Prior Bonds reduced by the period of time which has
      elapsed between the date such property was placed in service and the Issue
      Date. For purposes of this representation, the term "expected economic
      life" means (a) the lives used in the Company's long-range planning
      studies of the retirement dates for its steam-driven electric generation
      property, or (b) the life for which such property is designed and
      licensed.

            (h) Section 103(o) of the 1954 Code provides that interest on any
      "consumer loan bond" is not exempt from Federal income taxation. "Consumer
      loan bond" is defined as any obligation which is issued as part of an
      issue all or a significant portion of the proceeds of which are reasonably
      expected to be used directly or indirectly to make or finance loans,
      except as otherwise allowed to persons who are not exempt persons within
      Section 103(o) of the 1954 Code, but does not include, inter alia, any
      industrial development bond. The Company hereby certifies that all or a
      major portion of the proceeds of the Bonds will be used directly or
      indirectly in the trade or business of the Company, and the payment of the
      principal of or interest on the Bonds, under the terms of the Bonds, is,
      in whole or in major part, secured by an interest in property used or to
      be used in the trade or business of the Company or in payments in respect
      of such property, or to be derived from payments in respect of property,
      or borrowed money, used or to be used in the trade or business of the
      Company.

            (i) None of the proceeds of the Bonds will be used to finance Costs
      of Issuance.

            (j) The Company covenants and represents that it has not taken, or
      permitted to be taken on its behalf, or failed to take and agrees that it
      will not take, or permit to be taken on its behalf, or fail to take any
      action which, if taken or omitted to be taken, would adversely affect the
      exclusion from gross income for federal income tax purposes of the
      interest paid on the Bonds and that it will take, or require to be taken,
      such acts as may from time to time be required under applicable law or
      regulation to preserve the exclusion from gross income for federal income
      tax purposes of the interest on the Bonds, except to the extent that the
      Bonds are held by a substantial user of the Project or a related person
      thereto as those terms are used in Section 147 of the Code. In furtherance
      of the foregoing, the Company also agrees on behalf of the Issuer to
      comply with all arbitrage rebate requirements and procedures as may become
      applicable to the Bonds.

            (k) The Company will not sell or cause to be sold any other
      obligations issued by or on behalf of any state, territory or possession
      of the United States, or political subdivision of the preceding, or the
      District of Columbia on behalf of or for the benefit of the Company or any
      related person to the Company which are private activity bonds (within the
      meaning of Section 103(b) of the Code) within 15 days of the date of sale
      of the Bonds pursuant to a common plan of marketing with the Bonds without
      (a) delivering a certificate to Miller, Canfield, Paddock and Stone,
      P.L.C., and the Attorney General of the State of Michigan to the effect
      that such obligations meet all applicable requirements of the Code such
      that their aggregation will not cause the Bonds or the aggregate issue to
      fail to meet such requirements thereby impairing the tax-exempt status of
      the interest on

                                     - 16 -
<PAGE>

      such obligations, and the tax-exempt status of the obligations as a whole,
      is maintained, and (b) obtaining an opinion of nationally recognized bond
      counsel, which may be Miller, Canfield, Paddock and Stone, P.L.C., in a
      form acceptable to Miller, Canfield, Paddock and Stone, P.L.C. and the
      Attorney General of the State of Michigan, that the interest on such
      obligations is excluded from gross income for Federal income tax purposes,
      unless the foregoing requirements are waived by Miller, Canfield, Paddock
      and Stone, P.L.C. and by the Attorney General of the State of Michigan.

            (l) The Company agrees to follow the remedial action requirements of
      Treas. Reg. Section. 1.142-2 with respect to any actions which cause the
      Bonds or the Prior Bonds not to meet the requirements of Sections
      103(b)(4)(F) of the 1954 Code (such Section requires that substantially
      all of the proceeds of the obligations qualifying thereunder must be used
      for air or water pollution control facilities). Any proceeds received upon
      the sale or other disposition of any of the property which is included in
      the Project or constitutes property financed or refinanced with the
      proceeds of the Prior Bonds prior to the final maturity of the Bonds will
      be invested at a yield not greater than the yield on the Bonds, as defined
      in Exhibit A to the Tax Certificate of the Company, and used as required
      by Treas. Reg. Section. 1.142-2, unless in the opinion of Bond Counsel
      some other use of such proceeds will not impair the exclusion from gross
      income of the interest on the Bonds.

            (m) The Company is aware of no facts or circumstances which would
      cause the original approving opinions issued with respect to the Prior
      Bonds to have been improperly issued.

            (n) The Company has complied with and intends to comply with its
      obligations, covenants and representations under the documents related to
      the Prior Bonds and the Bond Documents to the extent such obligations
      affect the Tax-Exempt status of the Bonds.

            (o) The Company shall agree at the time of the delivery of the
      Bonds, in accordance with the provisions of Rule 15c2-12 (the "Rule")
      promulgated by the Securities and Exchange Commission (the "SEC") pursuant
      to the Securities Exchange Act of 1934 (the "Exchange Act"), to provide or
      cause to be provided to each nationally recognized municipal securities
      information repository ("NRMSIR") and to the appropriate state information
      repository, if any, for the State of Michigan ("SID"), in each case as
      designated by the SEC in accordance with the Rule, the information
      required to be periodically disclosed pursuant to such Rule 15c2-12.
      Failure by the Company to comply with the continuing disclosure
      undertaking shall not constitute a default or an Event of Default under
      this Agreement or the Indenture.

      Section 7.5. Company Representations and Covenants.

            (a) The Company represents and warrants: (i) that it has no present
      intention of disposing of or abandoning the Project nor of directing the
      Project to a use other than the purposes represented to the Issuer; (ii)
      that it intends to cause the Project to be operated as a "project" as
      defined in Section 4(f) of the Act; (iii) that the Project is in

                                     - 17 -
<PAGE>

      furtherance of the public purposes of the Act, to wit: the promotion and
      development of industrial and manufacturing enterprises to promote and
      encourage employment and the public welfare; and (iv) that it has all
      necessary licenses and permits to operate the Project, and that the
      Project has been approved by all necessary governmental bodies or agencies
      having jurisdiction.

            (b) The Company has been duly incorporated and is validly existing
      as a corporation in good standing under the laws of and is qualified to do
      business in the State of Michigan, with full corporate power to own its
      properties and conduct its business and has full legal right, power and
      authority to enter into this Agreement and any other Bond Documents to
      which it is a party and to carry out and consummate all transactions
      contemplated by this Agreement and any other Bond Documents to which it is
      a party.

            (c) The execution and delivery of this Agreement and any other Bond
      Documents to which it is a party and the consummation of the transactions
      herein contemplated will not conflict with or constitute on the part of
      the Company a breach of or default under the Organizational Documents, and
      do not and will not constitute on the part of the Company a breach or a
      default under any material indenture, mortgage, deed of trust, lease, note
      agreement or other agreement or instrument to which the Company is a party
      or by which it or its properties are bound, or any statute, order, rule or
      regulation of any court or governmental agency or body having jurisdiction
      over the Company or any of its activities or properties.

            (d) This Agreement or any other Bond Documents to which it is a
      party have been duly authorized, executed and delivered by the Company and
      constitute the legal, valid and binding obligations of the Company
      enforceable in accordance with their terms, (except that (i) the
      enforceability of this Agreement and such other Bond Documents may be
      limited by bankruptcy, reorganization, insolvency, moratorium or other
      similar laws of general application relating to the enforcement of
      creditors' rights, (ii) certain equitable remedies, including specific
      performance, may be unavailable and (iii) the indemnification provisions
      contained therein may be limited by applicable securities laws and public
      policy).

            (e) Neither the Company nor any of its business or properties, nor
      any relationship between the Company and any other person, nor any
      circumstances in connection with the execution, delivery and performance
      by the Company of this Agreement or the offer, issue, sale or delivery by
      the Issuer of the Bonds, is such as to require the consent, approval or
      authorization of, or the filing, registration or qualification with, any
      governmental authority on the part of the Company, other than those
      already obtained as of the Issue Date; provided, however, no
      representation is made herein as to compliance with the securities or
      "blue sky" laws of any jurisdiction.

            (f) No event has occurred and no condition exists with respect to
      the Company that would constitute an Event of Default under the Indenture
      or which, with the lapse of time or by giving of notice or both, would
      become an Event of Default under the Indenture.

                                     - 18 -
<PAGE>

            (g) The Project was for the purpose of constructing and installing
      certain pollution control facilities at the Plant.

            (h) The refinancing of the Project will not have the effect of
      transferring employment from one municipality of the State of Michigan to
      another except for any transfer of employment consented to by any
      municipality from which that employment is transferred.

      Section 7.6. Maintenance of Corporate Existence. The Company agrees that
during the term of this Agreement it will maintain its corporate existence, will
not dissolve or otherwise dispose of all or substantially all of its assets and
will not consolidate with or merge into another corporation; provided, however,
that the Company may, without violating the agreement contained in this Section,
consolidate with or merge into another corporation, or sell or otherwise
transfer to another corporation all or substantially all of its assets as an
entirety and thereafter dissolve, if the surviving, resulting or transferee
corporation, as the case may be, assumes in a writing delivered to the Trustee
all of the obligations of the Company herein and is duly qualified to do
business in the State.

      Section 7.7. Financial Information. The Company agrees to furnish to the
Issuer and the Municipal Bond Insurer (unless a Municipal Bond Insurer Default
shall have occurred and be continuing), at either of their written request, a
copy of the Company's most recent annual report to its stockholders and to
furnish the Trustee, the Paying Agent, the Municipal Bond Insurer (unless a
Municipal Bond Insurer Default shall have occurred and be continuing) or the
Issuer a copy of the Company's most recent Form 10-K Annual Reports and Form
10-Q Quarterly Reports filed with the United States Securities and Exchange
Commission.

      Section 7.8. Agreement of Issuer Not to Assign or Pledge. Except for the
assignment and pledge described in the Indenture, the Issuer agrees that it will
not attempt to further assign, pledge, transfer or convey its interest in or
create any assignment, pledge, lien, charge or encumbrance of any form or nature
with respect to the rights and interests therein described.

      Section 7.9. Reference to Bonds Ineffective After Bonds Paid. Upon payment
of all principal of, premium, if any, and interest due and owing on the Bonds,
payment in full of the purchase price of Bonds required to be purchased pursuant
to the Indenture, and payment of all fees and charges of the Issuer, the
Trustee, the Registrar and the Paying Agent, all references herein to the Bonds
and the Trustee shall be ineffective and neither the Issuer, the Trustee nor the
holders of any of the Bonds shall thereafter have any rights hereunder and the
Company shall have no further obligation hereunder, saving and excepting those
that shall have theretofore vested and any right of the Issuer or the Trustee to
indemnification under Section 7.1 and payment of fees under Section 9.3, which
right shall survive the payment of all principal of, premium if any, and
interest on the Bonds and the termination of this Agreement. Reference is hereby
made to Article VIII of the Indenture.

      Section 7.10. Assignments or Lease of Project. Subject to the provisions
of Section 7.4 and Section 7.6, the Company may assign its interest in this
Agreement and may sell or lease the Project, in whole or in part, without the
prior written consent of the Trustee or the Issuer; provided that no assignment,
lease or sale shall relieve the Company of primary liability for the

                                     - 19 -
<PAGE>

Loan Payments due hereunder and of the performance of all other obligations
required hereunder, and that the Company delivers to the Trustee and to the
Municipal Bond Insurer (unless a Municipal Bond Insurer Default shall have
occurred and be continuing), within thirty (30) days after the date of execution
and delivery thereof, a copy of such assignment, sales agreement or lease.

      Section 7.11. Amendment of Agreement or Indenture. No amendment, change,
addition to, or waiver of any of the provisions of this Agreement or the
Indenture shall be binding upon the parties hereto unless in writing signed by
the Authorized Company Representative and a member of the Issuer or other
officer authorized by the governing body of the Issuer and such amendment,
change, addition to or waiver has been consented to in writing by the Municipal
Bond Insurer (unless a Municipal Bond Insurer Default shall have occurred and be
continuing) which consent shall not be unreasonably withheld.

      Notwithstanding any of the foregoing, it is covenanted and agreed, for the
benefit of the Owners and the Trustee, that (without the concurrence of all of
the Owners and the Trustee) the provisions of this Agreement shall not be
amended, changed, added to or waived in any way which would relieve or abrogate
the obligations of the Company to make or pay, or cause to be made or paid, when
due, all Loan Payments and purchase price payments with respect to any then
Outstanding Bonds in the manner and under the terms and conditions provided
herein and the Bond Resolution or the Indenture, or which would materially
change or affect Sections 4.4 through 4.8, 7.1, 7.4, 7.6 and 9.3.

      Section 7.12. Indemnification of the Trustee. The Company shall
compensate, reimburse for expenses and indemnify and hold harmless the Trustee,
the Paying Agent and the Registrar to the extent and in the manner provided by
the Indenture.

                                  ARTICLE VIII

                                   ASSIGNMENT

      Section 8.1. Assignment by the Company. The Company may transfer or assign
this Agreement or transfer or assign any or all of its rights and delegate any
or all of its duties hereunder without the necessity of obtaining the consent of
the Issuer, the Trustee, the Provider, if any, the Municipal Bond Insurer or the
Owners of the Bonds, but no such transfer, assignment or delegation shall
relieve the Company or any successor Company of its liability for the payment of
the Loan Payments or for the payment of any other amounts to be paid by it under
this Agreement and for the full observance and performance of all of the
covenants and conditions to be observed and performed by it which are contained
in this Agreement, unless the Company has received the express prior written
consent of the Issuer, the Municipal Bond Insurer (unless a Municipal Bond
Insurer Default shall have occurred and be continuing), the Provider, if any
(unless a Provider Default shall have occurred and be continuing), and of the
Owners of not less than 60% in the aggregate principal amount of the Bonds then
Outstanding.

                                     - 20 -
<PAGE>

      Section 8.2. Issuer's Rights of Assignment. The Issuer may, only in
accordance with the Indenture, assign this Agreement and the Loan Payments
thereunder and pledge the moneys receivable hereunder to the Trustee as security
for payment of principal of, and premium, if any, and interest on, the Bonds.
The Company hereby assents to such assignment and agrees that the Trustee may
exercise and enforce in accordance with the Indenture any of such rights of the
Issuer under this Agreement. Any such assignment, however, shall be subject to
all of the rights and privileges of the Company as provided in this Agreement.

                                   ARTICLE IX

                         EVENTS OF DEFAULT AND REMEDIES

      Section 9.1. Trustee and Remedies. (a) The Company is advised and
recognizes that the Issuer will assign all of its right, title, and interest in
and to all of the Loan Payments required to be made pursuant to this Agreement,
and the right to receive and collect same, to the Trustee under the Indenture.
All rights of the Issuer against the Company arising under this Agreement, the
Bond Resolution or the Indenture may be enforced by the Issuer; or such rights
may be enforced by the Trustee, or the Owners of the Bonds, to the extent
provided in the Indenture, without making the Issuer a party.

      (b) The following shall be "Events of Default" under this Agreement, and
the term "Events of Default" shall mean, whenever used in this Agreement, any
one or more of the following events:

            (i) Failure by the Company to pay the Loan Payments in the amounts
      and at the times provided in this Agreement.

            (ii) Any misrepresentation or breach of a warranty made by the
      Company in the Agreement which impairs the exclusion of interest on the
      Bonds or any portion thereof from gross income for Federal income tax
      purposes.

            (iii) Failure by the Company to perform any obligation or observe
      any condition on its part to be performed or observed pursuant to this
      Agreement for a period of 90 days after receipt of written notice
      specifying such failure and requesting that it be remedied, given to the
      Company by the Issuer, the Municipal Bond Insurer (unless a Municipal Bond
      Insurer Default shall have occurred and be continuing) or the Trustee;
      provided, however, that if said failure shall be such that it cannot be
      corrected within such period, it shall not constitute an Event of Default
      if the failure, in the judgment of the Trustee in reliance upon advice of
      counsel, is correctable without material adverse effect on the Bonds and
      if corrective action is instituted by the Company within such period and
      diligently pursued until corrected.

            (iv) The dissolution or liquidation of the Company except as
      permitted under this Agreement; or failure by the Company promptly to lift
      any execution, garnishment or attachment of such consequence as will
      impair its ability to carry out its obligations under

                                     - 21 -
<PAGE>

      this Agreement; or if the Company becomes insolvent or bankrupt, or makes
      an assignment for the benefit of creditors or consents to the appointment
      of a trustee or receiver for the Company or for the greater part of its
      properties; or a trustee or receiver is appointed for the Company or for
      the greater part of its properties without its consent and is not
      discharged within 90 days; or bankruptcy, reorganization or liquidation
      proceedings are commenced by or against the Company, and if commenced
      against the Company are consented to by it or remain undismissed for 90
      days; or if an order for relief is entered against the Company in a
      bankruptcy or similar proceeding and remains undismissed for 90 days.

            (v) The occurrence and continuance of an Event of Default under the
      Indenture.

      (c) Upon the occurrence of an Event of Default, the Trustee shall have the
power to proceed with any right or remedy granted by the Constitution and laws
of the State, as it may deem best, including any suit, action or special
proceeding in equity or at law, including mandamus proceedings, for the specific
performance of any agreement, obligation or covenant contained herein or for the
enforcement of any proper legal or equitable remedy as the Trustee shall deem
most effectual to protect the rights of the Owners; provided, however, any such
proceedings shall be subject to the provisions of Section 15.14 of the Indenture
relating to Force Majeure. Upon the occurrence of an Event of Default under the
Indenture pursuant to the terms of which the Trustee shall have declared the
Bonds immediately due and payable, then all payments required to be made by the
Company under Section 4.4(b) (other than interest not yet accrued) shall become
immediately due and payable, as directed by the Municipal Bond Insurer (unless a
Municipal Bond Insurer Default shall have occurred and be continuing).

      (d) Any amounts collected pursuant to actions taken under this Section
shall be paid into the Bond Fund and applied in accordance with the provisions
of the Indenture.

      Section 9.2. Annulment of Acceleration. If, in compliance with the
requirements of Section 9.02 of the Indenture, the Trustee shall annul an
acceleration declared due to any Event of Default under the Indenture such
annulment shall be deemed to also rescind any acceleration of all payments
required under Section 4.4. In case of any such annulment, or in case any
proceeding taken by the Trustee on account of any such Event of Default shall
have been discontinued or abandoned or determined adversely, then and in every
such case the Issuer, the Company, the Trustee and the Owners shall be restored
to their former positions and rights hereunder, but no such annulment shall
extend to any subsequent or other Event of Default or impair any right
consequent thereon.

      Section 9.3. Agreement to Pay Attorneys' Fees and Expenses. In the event
the Company should default under any of the provisions of this Agreement and the
Issuer or the Trustee should employ attorneys or incur other expenses for the
collection of payments required hereunder or the enforcement of performance or
observance of any obligation or agreement on the part of the Company herein
contained, the Company agrees that it will upon demand therefor pay to the
Issuer or the Trustee the reasonable fees of such attorneys and such other
reasonable expenses so incurred by the Issuer or the Trustee.

                                     - 22 -
<PAGE>

      Section 9.4. General Enforcement Provisions. (a) The terms of this
Agreement may be enforced as to one or more breaches either separately or
cumulatively.

      (b) No remedy conferred upon or reserved to the Issuer, the Trustee, or
the Owners of the Bonds in this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default, omission, or failure of performance
hereunder shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In the event any provision contained in
this Agreement should be breached by the Company and thereafter duly waived,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach of this Agreement. No waiver by any party of
any breach by any other party of any of the provisions of this Agreement shall
be construed as a waiver of any subsequent breach, whether of the same or of a
different provision of this Agreement.

                                    ARTICLE X

                               GENERAL PROVISIONS

      Section 10.1. Force Majeure. If, by reason of Force Majeure, either the
Issuer or the Company shall be rendered unable wholly or in part to carry out
its obligations under this Agreement, and if such party gives notice and full
particulars of such Force Majeure in writing to the other party within a
reasonable time after failure to carry out its obligations under this Agreement,
such obligations (other than the obligations of the Company specified in the
last sentence of this Section) of the party giving such notice, so far as they
are affected by such Force Majeure, shall be suspended during the continuance of
the inability then claimed, including a reasonable time for removal of the
effect thereof. The requirement that any Force Majeure shall be reasonably
beyond the control of the party shall be deemed to be fulfilled even though any
existing or impending strike, lockout or other industrial disturbance may not be
settled but could have been settled by acceding to the demand of the opposing
person or persons. The occurrence of any Force Majeure shall not suspend or
otherwise abate, and the Company shall not be relieved from, the obligation to
pay the Loan Payments and to pay any other payments required to be made by it
under this Agreement at the times required.

      Section 10.2. Third Party Beneficiaries. This Agreement is entered into in
part to induce the purchase of the Bonds, and accordingly, so long as any Bonds
are Outstanding, all respective covenants and agreements of the parties herein
contained are hereby declared to be for the benefit of any and all Owners and
may be enforced by or on behalf of the Owners only by the Trustee in accordance
with the provisions of the Indenture. This Agreement shall not be deemed to
create any right of subrogation or otherwise in any person who is not a party
hereto (other than the permitted successors and assigns of a party) and shall
not be construed in any respect to be a contract in whole or in part for the
benefit of any third party (other than the permitted successors

                                     - 23 -
<PAGE>

or assigns of a party hereto), except in each case the Owners, the Trustee, the
Municipal Bond Insurer and the Indemnified Persons.

      Section 10.3. Notices; Communications. All notices, approvals, consents,
requests and other communications hereunder shall be in writing and shall be
deemed to have been given when delivered or mailed by first class registered or
certified mail, return receipt requested, or overnight mail, postage prepaid,
and addressed as follows:

      (a)   If to the Issuer:

                        Michigan Strategic Fund
                        300 N. Washington Square, 4th Floor
                        Lansing, MI 48909
                        Attention: President

      (b)   If to the Company:

                        The Detroit Edison Company
                        2000 Second Avenue
                        Detroit, Michigan 48226
                        Attention: Vice President and Treasurer

      (c)   If to the Trustee, Registrar or the Paying Agent:

                        J.P. Morgan Trust Company, National Association
                        611 Woodward Avenue, Mail Suite MI1-8110

                        Detroit, Michigan 48226

                        Attention: Corporate and Municipal Trust Services

      A duplicate copy of each notice, approval, consent, request or other
communication given hereunder by the Issuer, the Company, the Trustee, the
Registrar or the Paying Agent to any one of the others shall also be given to
all of the others. The Issuer, the Company, the Trustee, the Registrar and the
Paying Agent may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, approvals, consents, requests or other
communications shall be sent or persons to whose attention the same shall be
directed.

      Section 10.4. Amendments, Governing Law, Etc. This Agreement (a) may be
modified or amended only as provided in the Indenture and in Section 7.11
hereof; and (b) shall be governed in all respects including validity,
interpretation and effect by, and shall be enforceable in accordance with, the
laws of the United States of America and the State. The parties agree that, in
accordance with the Act and subject to the limitations of Section 4.4(e), they
will amend this Agreement to increase the payments to be made by the Company
hereunder if for any reason such payments, if made, are not sufficient to pay
the principal of, and premium, if any, and interest on, the Bonds as the same
become due.

                                     - 24 -
<PAGE>

      Section 10.5. Severability. In the event that any clause or provision of
this Agreement shall be held to be invalid by any court of competent
jurisdiction, the invalidity of such clause or provision shall not affect any of
the remaining provisions of this Agreement.

      Section 10.6. Term of Agreement. This Agreement shall remain in full force
and effect from the date of execution and delivery hereof until the Indenture
has been discharged in accordance with the provisions thereof; provided,
however, that the provisions of Sections 4.6 and 7.1 of this Agreement shall
survive any expiration or termination of this Agreement.

      Section 10.7. Company's Approval of Bond Documents. The Bond Documents
have been submitted to the Company for examination, and the Company acknowledges
that, by execution of this Agreement, it has approved the Bond Documents and
will perform the obligations imposed upon it thereunder.

      Section 10.8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.

      Section 10.9. Captions. The captions and headings herein are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions hereof.

      Section 10.10. Payments on Non-Business Days. If any payment required
hereunder is due on a date not a Business Day, payment shall be made on the next
succeeding Business Day with the same force and effect as if made on the date
fixed for such payment, and no interest shall accrue on such amount for the
period after such date.

                [the rest of this page intentionally left blank]

                                     - 25 -
<PAGE>

      IN WITNESS WHEREOF, the Issuer and the Company have signed this Agreement
by their duly authorized representatives as of the date set forth above.

                                       MICHIGAN STRATEGIC FUND

                                       By /s/ Diane E. Cranmer
                                          --------------------------------

                                             Its Authorized Officer

                                       THE DETROIT EDISON COMPANY

                                       By /s/ N.A. Khouri
                                          --------------------------------
                                             N.A. Khouri
                                             Its Vice President and Treasurer

                                     - 26 -exv10w53

 

EXHIBIT 10.53

CONTRACT OF SALE

SUTTON HILL CAPITAL L.L.C.

SELLER

SUTTON HILL PROPERTIES, LLC

PURCHASER

	 	 	 
	Premises:

	 	1001-1007 Third Avenue
	 

	 	New York, NY
	 
	 	 
	Date:

	 	September 19, 2005

 

 

CONTRACT OF SALE

            CONTRACT
OF SALE dated as of the 19th day of September, 2005 between SUTTON HILL CAPITAL L.L.C., a
New York limited liability company, having an office at 120 North Robertson Blvd., 3rd
Floor, Los Angeles, CA 90048 (“Seller”) and SUTTON HILL PROPERTIES, LLC, a Nevada limited liability
company, having an office at c/o Reading International Inc. 500 Citadel Drive, Suite 300, Commerce,
CA 90040 (“Purchaser”).

WITNESSETH:

            WHEREAS, Seller is the tenant under a certain ground lease dated February 9, 1961 between
Andrew C. Mayer, Berna L. Osnos, Francis M. Perlman and Richard Heller, Frances H. Cahen and
Phillis H. Rosenthal, as Trustees under the Last Will and Testament of Isaac S. Heller, deceased,
as landlord (the “Landlord”), and Turtle Bay Theatre Corporation, as tenant, as assigned from
Cinema 5 Ltd. to Sutcin Holding Corp. by assignment dated as of December 31, 1984, and further
assigned from Sutcin Holding Corp. to Sutton Hill Associates by assignment dated as of July 3, 1986
and from Sutton Hill Associates to Sutton Hill Capital, L.L.C. by assignment dated as of July 28,
2000, and as amended by Agreement dated June 1, 2005 (collectively, the “Lease”), covering certain
premises located at 1001-1007 Third Avenue, New York, New York, as more particularly set forth in
the Lease (the “Premises”). The landlord’s interest under the Lease is now owned by Purchaser; and

            WHEREAS, Seller desires to sell and assign to Purchaser and Purchaser desires to acquire from
Seller all of Seller’s right, title and interest as Tenant under the Lease (the “Leasehold
Interest”), pursuant to the terms and conditions hereinafter set forth,

            NOW, THEREFORE, in consideration of the mutual promises herein contained it is agreed:

            1. Purchase and Sale; No Merger of Estates.

                  Subject to the terms and conditions of this Contract, Seller hereby agrees to sell, transfer,
assign and convey the Leasehold Interest to Purchaser and Purchaser agrees to acquire

1

 

the Leasehold Interest from Seller. In no event shall Purchaser’s acquisition of the Leasehold
Interest result in a merger of the fee and leasehold estates in and to the Premises, it being the
express intention of Purchaser that each of such estates shall remain separate and distinct.
Neither the preceding sentence nor the inclusion of non-merger language in the
Assignment/Assumption (as hereinafter defined) shall be deemed to impose any obligation or
liability upon Seller, except that Seller will not take a position that is inconsistent with
Purchaser’s intention not to effectuate a merger of such estates in any dispute or other matter
that may arise. Purchaser acknowledges that it is not acquiring any of Seller’s fee interest in
and to the building situated on the premises (the “Building”).

            2. Purchase Price.

                  The purchase price (the “Purchase Price”) to be paid by Purchaser to Seller for the Leasehold
Interest is NINE MILLION DOLLARS ($9,000,000.00) payable by Purchaser’s execution and delivery to
Seller of a Purchase Money Installment Sale Note in the form annexed hereto as Exhibit A (the
“Note”). Purchaser’s obligations under the Note shall be guaranteed by Reading International, Inc.
(“RDI”) pursuant to a guaranty in the form annexed hereto as Exhibit B (the “Guaranty”). RDI has
joined in the execution of this Contract solely to confirm that it shall, at Closing (as
hereinafter defined) execute and deliver the Guaranty to Seller at Closing.

            3. Closing.

                  Closing shall be held at the offices of Marcus Rosenberg & Diamond LLP, 488 Madison Avenue,
New York, New York concurrently with the execution hereof (the “Closing” or “Closing Date”).

            4. Seller’s Deliveries at Closing.

                  Purchaser’s obligations under this Contract are subject to Seller’s delivery to Purchaser, at
the Closing, of the following, all of which Seller hereby agrees to deliver at Closing:

	 	(i)	 	An Assignment of the Lease, duly executed and acknowledged by
Seller, in the form annexed hereto as Exhibit C (the “Lease
Assignment/Assumption”);

2

 

	 	(ii)	 	The original counterparts of all of the documents comprising
the Lease, together with all tax bills and other documents required under or in
connection with the Lease;
	 
	 	(iii)	 	The License and Option Agreement in the form annexed hereto as
Exhibit D, duly executed by Seller (the “License/Option Agreement”);
	 
	 	(iv)	 	An affidavit under Section 1445 of the Internal Revenue Code,
confirming that Seller is not a non-resident alien and providing the other
information required therein to permit Purchaser not to withhold any portion of
the Purchase Price;
	 
	 	(v)	 	Transfer and other tax returns and other filings required with
respect to this transaction under any law, duly executed and acknowledged by
Seller, as may be required by law;
	 
	 	(vi)	 	A resolution signed by Seller’s managers, authorizing the
execution and delivery of all of the documents and the payment of all sums
required in order to effectuate the Closing;
	 
	 	(vii)	 	Any and all documents and instruments, duly executed and, if
required, acknowledged by Seller, necessary in order to record the Lease
Assignment/Assumption;
	 
	 	(viii)	 	Such truthful affidavits, certifications or other documents as Purchaser’s
title insurance company may reasonably require in order to issue a policy of
title insurance to Purchaser; and
	 
	 	(ix)	 	Such other and further documents or instruments, reasonably
necessary or appropriate with respect to the transaction embodied in this
Contract.

            If Seller fails to deliver any or all of the foregoing documents or instruments to Purchaser
at Closing, Purchaser shall have the right to terminate this Contract on notice to Seller,
whereupon Purchaser shall have no further obligation or liability under this Contract, but Seller
shall remain liable to Purchaser and Purchaser shall have the right to exercise all of its remedies

3

 

available at law or in equity arising from Seller’s default.

            5. Purchaser’s Closing Obligations; No Assumption of Liabilities (Except Lease).

            At the Closing, Purchaser shall:

	 	(i)	 	Execute and deliver the Note to Seller;
	 
	 	(ii)	 	Cause RDI to execute and deliver the Guaranty to Seller;
	 
	 	(iii)	 	Duly execute and acknowledge the Lease Assignment/Assumption.
Seller acknowledges that, other than the assumption of all of Seller’s
obligations as tenant under the Lease, Purchaser shall not, directly or
indirectly, assume any of Seller’s obligations. Purchaser agrees that the Lien
Law covenant contained in the Lease Agreement/Assignment shall only apply to
the cost of improvements performed by Seller or by any contractor, agent,
employee or other party retained or engaged by Seller to perform any
improvement;
	 
	 	(iv)	 	Duly execute and deliver the License/Option Agreement to
Seller;
	 
	 	(v)	 	Duly execute and acknowledge any and all transfer tax returns
and other returns and filings required to be executed by Purchaser with respect
to this transaction, and deliver certified or bank cashier’s checks payable to
the appropriate taxing or other governmental authorities in full payment of any
and all transfer taxes payable with respect to this transaction;
	 
	 	(vi)	 	Deliver to Seller a resolution signed by Purchaser’s managing
members, authorizing the execution and delivery of all of the documents and the
payment of all sums required in order to effectuate the Closing;
	 
	 	(vii)	 	Pay to Seller’s attorneys their reasonable attorneys’ fees
incurred in connection with this Contract and a prior transaction involving the
Premises, in the aggregate amount of $77,019.25, as reflected in its attorneys’
invoices, a copy of which shall be delivered to Purchaser at Closing; and
	 
	 	(viii)	 	Deliver such other and further documents or instruments, reasonably

4

 

	 	 	 	necessary or appropriate with respect to the transaction embodied in this
Contract.

If Purchaser fails to deliver any or all of the foregoing documents or instruments to Seller at
Closing, Seller shall have the right to terminate this Contract on notice to Purchaser, whereupon
Seller shall have no further obligation or liability under this Contract, but Purchaser shall
remain liable to Seller and Seller shall have the right to exercise all of its remedies available
at law or in equity arising from Purchaser’s default

            6. Conditions to Purchaser’s Obligations.

                  The obligations of Purchaser under this Contract shall be subject to the fulfillment of the
conditions set forth below, except to the extent waived in writing by Purchaser:

                  (i) Seller shall have complied in all respects with all of the terms, covenants and
conditions required by this Contract to be complied with by it and shall have delivered all of the
instruments and documents required for Closing, as hereinabove set forth;

                  (ii) All of Seller’s representations and warranties set forth herein shall be true in all
material respects as of the date of Closing;

                  (iii) The Lease shall be in full force and effect pursuant to its terms and there shall have
been no notice of default given or sent to Seller, as tenant thereunder, and no event shall have
occurred thereunder which could give the Landlord the right to give notice of any default
thereunder or to terminate the Lease. If any notice to cure or notice of default is sent to
Seller, Seller shall take or shall cause to be taken such action as may be necessary to comply with
such notice and cure such default prior to Closing; and

                  (iv) Title to the Leasehold Interest shall be free and clear of all liens and encumbrances and
Purchaser’s title company shall be prepared to issue to Purchaser a policy of leasehold title
insurance subject only to such matters as Purchaser has agreed to accept as exceptions to title.

                  If any of the foregoing conditions are not satisfied as of the Closing in any material
respect, Purchaser shall have the right to terminate this Contract on notice to Seller,

5

 

whereupon Purchaser shall have no further obligation or liability under this Contract but Seller
shall remain liable provided to Purchaser and Purchaser shall have the right to exercise all of its
remedies available at law or in equity arising from Seller’s default; provided, however, that
Seller’s liability with respect to matters of title shall be as stated in Section 9 of this
Contract.

            7. Conditions to Seller’s Obligations.

                  The obligations of Seller under this Contract shall be subject to the fulfillment of the
conditions set forth below, except to the extent waived in writing by Seller:

                  (i) Purchaser shall have complied in all material respects with all of the terms, covenants
and conditions required by this Contract to be complied with by it and shall have delivered all of
the instruments and documents required for Closing, as hereinabove set forth; and

                  (ii) All of Purchaser’s representations and warranties set forth herein shall be true in all
material respects as of the date of Closing;

                  If any of the foregoing conditions are not satisfied as of the Closing in any material
respect, Seller shall have the right to terminate this Contract on notice to Purchaser, whereupon
Seller shall have no further obligation or liability under this Contract but Purchaser shall remain
liable to Seller and Seller shall have the right to exercise all of its remedies available at law
or in equity arising from Purchaser’s default.

            8. Closing Adjustments.

                  At Closing, rent under the Lease shall be prorated between the parties on a per
diem basis (based upon a 365 day year and the actual number of days in any month, quarter
or half year) as of 11:59 p.m. of the day immediately preceding the date of Closing. The
provisions of this Section and any errors or omissions in the making of closing adjustments shall
survive the Closing.

            9. Title.

                  If the Leasehold Interest is affected by any lien, encumbrance or other matter affecting title
to the Leasehold Interest, subject to which Purchaser is unwilling to take title under this
Contract (collectively, “Title Defects”), Seller shall use its commercially reasonable efforts to

6

 

remove or satisfy the same. If, despite such efforts, Seller shall be unable to convey title in
accordance with the provisions of this Contract, or if the fee title to the Premises is affected by
any lien, encumbrance or other matter that could (a) prevent or interfere with Purchaser’s use or
occupancy of the Premises, (b) diminish the value of the Leasehold Interest or any other portion of
the Premises, (c) impose any obligation or liability upon Purchaser (other than those as tenant
under the Lease), or (d) result in the forfeiture or termination of the Lease by foreclosure or
otherwise (except for any mortgage with respect to which Purchaser shall have received a
non-disturbance agreement in form satisfactory to Purchaser), Purchaser shall have the option of
either (i) terminating this Contract on notice to Seller, whereupon neither party shall have any
further rights or obligations hereunder, or (ii) waiving any objection and proceeding to the
Closing, in which event Purchaser shall accept title in such condition as Seller may convey, or
(iii) as otherwise agreed by the parties.

            10. Intentionally Omitted

            11. Condemnation.

            (A) If, prior to Closing, the Premises or any portion thereof is taken by any public or
quasi-public authority under the power of condemnation, eminent domain, expropriation or conveyance
in lieu thereof (collectively, a Taking”), or if notice of any Taking shall be given by any public
or quasi-public authority, Seller shall promptly notify Purchaser thereof and Purchaser shall have
the option of either:

                  (i) terminating this Contract on notice to Seller, in which event neither party shall have any
further rights or obligations hereunder; or

                  (ii) proceeding with the Closing, in which event Seller shall assign and pay over to Purchaser
any and all condemnation awards or rights to receive any of the foregoing as a result of such
Taking, as the case may be, and this Contract shall remain in full force and effect.

            (B) In the event of a Taking prior to Closing, resulting in the termination of the Lease, this
Contract shall automatically be deemed terminated and neither party shall have any further rights
or liabilities hereunder.

7

 

            12. Representations and Warranties.

            (A) Seller represents and warrants:

                  (i) Seller is a limited liability company duly organized and in good standing under the laws
of the State of New York. This Contract and all transactions required hereunder to be performed
by Seller have been duly and validly authorized and approved by all necessary action on the part of
Seller’s members and managers. This Contract has been duly and validly executed and delivered on
behalf of Seller by its duly authorized managers.

                  (ii) The Lease consists only of the documents annexed as Exhibit D; the Lease for the
Premises, is in full force and effect and has not been modified, amended or extended; all rent,
additional rent and other charges reserved in the Lease have been paid, to the extent payable to
the date hereof, and will be paid to the extent then payable at Closing; and Seller has received no
notice to cure, notice of default or any similar notice under the Lease, which has not been cured
and that no condition or state of facts exists except for notices which Purchaser has received as a
tenant which, but for the giving of notice or the passage of time, could constitute a default of
Seller thereunder or give the lessor thereto the right to terminate the Lease. Seller is the sole
owner of the Leasehold Interest, free and clear of all liens, encumbrances, restrictions and
claims, except as shown on the title report issued by Chicago Title Insurance Company for this
transaction, as amended (the “Title Report”), and any other matters disclosed by the title company.

                  (iii) There are no leases, subleases or any other agreements, oral or written, granting any
rights of possession, rights of purchase or rights of first refusal with respect to the Premises
except for (aa) the Lease, (bb) Seller’s ownership of the building and certain improvements on the
Premises and (cc) the Master Operating Lease dated July 28, 2000, as amended, between Seller, as
Landlord, and Citadel Cinemas, Inc., as Tenant (“Citadel”) covering the building and improvements
on the Premises (“Sublease”).

                  (iv) The consummation of the transaction contemplated hereunder by Seller will not violate or
conflict with or result in the breach of any conditions or constitute any default under any
contracts, liens, mortgages, agreements or instruments to which Seller is a party

8

 

or which affect, or purport to affect, the Premises or the Leasehold Interest, or result in the
creation or imposition of any liens, charges or encumbrances upon the Premises or the Leasehold
Interest.

                  (v) Seller has not received notice of any mechanic’s liens, materialmen’s liens or tax liens
filed against the Premises or the Leasehold Interest, except for the NYC Tax Warrant disclosed in
the Title Report.

                  (vi) Seller has not received notice and has no knowledge of any pending or threatened Taking;
there are no commitments made by Seller to any governmental or quasi-governmental authority or
other third party or parties to dedicate or grant any portion of the Premises for public use or to
incur any other obligations or expenses in respect thereof.

                  (vii) Seller has not filed nor has there been filed against it a bankruptcy or insolvency
proceeding, or petition for arrangement or reorganization, whether under state or federal law. No
action by any governmental authority or agency is necessary to make this Contract a valid
instrument binding upon Seller.

                  (viii) There is not at present any action, proceeding, suit or claim pending or, to Seller’s
knowledge, threatened against, affecting or pertaining to the Premises (collectively, the
“Claims”), nor does Seller have knowledge of any basis for the assertion of same, except as set
forth in the Title Report.

            All of Seller’s representations and warranties contained in this Section shall be deemed
restated as of the Closing Date.

            (B) Purchaser represents and warrants:

                  (i) Purchaser is a limited liability company duly organized and in good standing under the
laws of the State of Nevada. This Contract and all transactions required hereunder to be performed
by Purchaser have been duly and validly authorized and approved by all necessary action on the part
of Purchaser’s members and managers; this Contract has been duly and validly executed on behalf of
Purchaser by its duly authorized managing member.

                  (ii) Purchaser has not filed nor, to Purchaser’s knowledge, has there been filed against it a
bankruptcy or insolvency proceeding, or petition for arrangement or

9

 

reorganization, whether under state or federal law. No action by any governmental authority or
agency is necessary to make this Contract a valid instrument binding upon Purchaser.

                  (iii) The consummation of the transaction contemplated hereunder by Purchaser will not violate
or conflict with or result in the breach of any conditions or constitute any default under any
contracts, liens, mortgages, agreements or instruments to which Purchaser is a party.

                  (iv) Purchaser has no knowledge of any claim that it would presently have against Seller, as
landlord under the Lease or any knowledge of the basis for the assertion of any such claim.

     All of Purchaser’s representations and warranties contained in this Section shall be deemed
restated as of the Closing Date.

            (C) RDI, by signing below, represents and warrants that RDI is a corporation duly authorized
and in good standing under the laws of the State of Nevada. The execution and delivery of the
Guaranty pursuant to this Contract has been duly and validly authorized and approved by all
necessary action on the part of RDI’s Board of Directors; the Guaranty has been duly and validly
executed and delivered on behalf of RDI by its duly authorized officer.

            13. Broker.

                  Seller and Purchaser each represents that it has dealt with no broker in connection with this
transaction.

            14. Default; Remedies; Attorneys’ Fees

            (A) If either party shall default in the performance of its obligations under this Contract
and if such default shall continue after fifteen (15) days notice from the other party, such other
party shall be entitled to exercise such remedies as may be available at law or in equity
including, without limitation (if Purchaser is such other party), specific performance.

10

 

            (B) In the event any dispute arises between Seller and Purchaser with respect to any default
under this Contract, the prevailing party in any litigation shall be entitled to reimbursement from
the other party in such dispute of its reasonable attorneys’ fees incurred in connection therewith.

            15. Notices.

                  All notices, requests, consents and other communications required or permitted to be delivered
hereunder (collectively, “notices”) shall be in writing and shall be deemed valid only if delivered
(a) by registered or certified mail, return receipt requested, postage prepaid, or (b) by
next-business day delivery by FedEx, U.P.S. or U.S. priority overnight mail, to Purchaser, at its
address set forth above with a copy to Purchaser’s counsel at Marcus Rosenberg & Diamond LLP, 488
Madison Avenue, New York, New York 10022, Attention: Jeffrey M. Diamond, Esq. or to Seller, at its
address set forth above with a copy to Seller’s counsel at De Castro, West, Chodorow, Glickfeld &
Nass, Inc., Fourteenth Floor East, 10960 Wilshire Boulevard, Los Angeles, California 90024-3881,
Attention: Menasche Nass, Esq.. Either party hereto may, from time to time, designate any other
address to which such notice, request, consent or other communication addressed to it shall be
sent. All notices shall be deemed given on the date of delivery or refusal to accept delivery.
Counsel for either party may give notices to the other party with the same effect as if given by
the party and may extend time periods set forth in this Contract on its client’s behalf.

            16. 1031 Exchange.

                  Purchaser shall retain the option, exercisable on or at any time prior to the Closing Date, to
include the Leasehold Interest in an exchange of real properties (including, without limitation, a
deferred exchange in accordance with the provisions of Section 1031 of the Internal Revenue Code of
1986, as amended). Seller expressly acknowledges and agrees that Purchaser may transfer or assign
this Contract and/or Purchaser’s rights hereunder to a third party, including, without limitation,
a Qualified Intermediary, in order to facilitate any such tax-free exchange; provided that
Purchaser shall remain liable to Seller for all of Purchaser’s obligations, covenants,
representations and warranties pursuant to the terms hereof. Seller agrees to fully cooperate with

11

 

Purchaser in any such exchange and to execute such documents and agreements as Purchaser (or any
other party to such exchange) may reasonably require, without assuming any liability thereunder or
incurring any additional costs.

            17. Miscellaneous.

            (A) The parties hereto agree that this Contract shall be governed by and construed according
to the laws of the State of New York.

            (B) In the event any one or more provisions contained in the Contract shall for any reason be
held to be invalid, illegal or unenforceable in any respect, this Contract shall otherwise remain
in full force and effect, shall be unaffected thereby and shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.

            (C) This Contract constitutes the entire agreement between the parties and supersedes any
prior understandings or agreements, written or oral, between the parties concerning the Leasehold
Interest.

            (D) This Contract shall not be altered, changed, modified or amended except by instrument in
writing, signed by the parties hereto.

            (E) In the event of any ambiguity or dispute with respect to this Contract, no inference,
presumption or conclusion shall be drawn against Purchaser by virtue of Purchaser having drafted
this Contract.

            (F) This Contract may be signed in any number of counterparts, each of which shall be an
original, but all shall constitute one agreement; and it shall be sufficient if each party hereto
signs any such counterpart.

            (G) All of Seller’s and Purchaser’s obligations and liabilities under this Contract shall
survive Closing. All of Seller’s and Purchaser’s representations and warranties under this Contract
shall survive for two (2) years after the Closing.

            (H) The granting of any right or remedy to any party under this Contract shall not be deemed
to preclude the exercise by such of any other right or remedy available at law or in equity, unless
expressly precluded by the terms of this Contract.

12

 

            (I) Any provision of this Contract that refers to “attorneys’ fees” shall be deemed to include
fees and disbursements.

            IN WITNESS WHEREOF, this Contract has been duly executed by the parties hereto on the date
first above written.

	 	 	 	 	 	 	 
	 	 	 	 	SUTTON HILL CAPITAL L.L.C.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ James J. Cotter
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	    James J. Cotter
	 

	 	 	 	 	 	    Manager
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Michael R. Forman
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	    Michael R. Forman
	 

	 	 	 	 	 	    Manager
	 
	 	 	 	 	 	 
	 	 	SUTTON HILL PROPERTIES, LLC
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ S. Craig Tompkins
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	    S. Craig Tompkins
	 

	 	 	 	 	 	    Title:
President

READING INTERNATIONAL, INC. has signed below to confirm its agreement to execute and deliver the
Guaranty at Closing and to confirm its warranty and representation under Section 12 (C) hereof.

	 	 	 	 	 
	 	 	READING INTERNATIONAL, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ S. Craig Tompkins
	 

	 	 	 	 
	 

	 	 	 	    S. Craig Tompkins
	 

	 	 	 	    Title:
Director — Business Affairs
	 

	 	 	 	    Federal ID No.: 95-3885184

13

 

LIST OF EXHIBITS

	 	 	 	 	 
	Exhibit A

	 	-
	 	Note
	Exhibit B

	 	-
	 	Guaranty
	Exhibit C

	 	-
	 	Assignment and Assumption of Lease
	Exhibit D

	 	-
	 	Documents comprising Lease

14

 

EXHIBIT A

PURCHASE MONEY

INSTALLMENT SALE NOTE

			
	$9,000,000.00
	 	September 19, 2005

     FOR VALUE RECEIVED, the undersigned, SUTTON HILL PROPERTIES, LLC, a Nevada limited
liability company, having an office at c/o Reading International, Inc., 500 Citadel Drive, Suite
300, Commerce, CA 90040 (the “Borrower”), hereby gives this purchase money installment sale note
and promises, in consideration for the purchase of the tenant’s interest under a certain ground
lease dated February 9, 1961 between Andrew C. Mayer, Berna L. Osnos, Francis M. Perlman and
Richard Heller, Frances H. Cahen and Phillis H. Rosenthal, as Trustees under the Last Will and
Testament of Isaac S. Heller, deceased, as landlord (the “Landlord”), and Turtle Bay Theatre
Corporation, as tenant, as subsequently assigned, covering certain premises located at 1001-1007,
New York, New York, to pay to the order of SUTTON HILL CAPITAL L.L.C., its successors or assigns
(the “Lender”) at Lender’s office at 120 North Robertson Blvd., 3rd Floor, Los Angeles,
CA 90048, or to such other address as Lender may from time-to-time designate, the sum of Nine
Million and 00/100 ($9,000,000.00) Dollars, on December 31, 2010 together with interest thereon,
payable in arrears, at the rate of eight and one quarter percent (8.25%) per annum, as follows:

     Except as set forth below in the event of any partial prepayment of this Note, payments of
interest only in the amount of Sixty One Thousand Eight Hundred Seventy-Five and 00/100
($61,875.00) Dollars, shall be due and payable commencing on October 1, 2005 and on the first day
of each and every month thereafter, to and including December 1, 2010. The entire principal
balance of this Note, together with all accrued and unpaid interest thereon, shall be due and
payable on December 31, 2010.

     Borrower is executing and delivering this Note to Lender in payment of the purchase price
under a Contract of Sale between Lender, as Seller, and Borrower, as Purchaser, dated September 1,
2005, with respect to the tenant’s estate under a Ground Lease for premises at 1001-1007 Third
Avenue, New York, New York (the “Contract”).

     Lender shall have the right to surrender this Note to Borrower at any time prior to December
31, 2010, whereupon Borrower shall, at Lender’s direction, issue two new notes, on the same terms
as this Note (but only as to payments that shall not have been made under this Note prior to the
date of surrender) in the aggregate principal amount of Nine Million and 00/100 ($9,000,000.00)
Dollars, to Lender’s designated assignees.

     In the event any payment due under this Note is not paid when due, and such failure continues
for five (5) days after notice to Borrower (provided that no such notice shall be required more
than once in any twelve-month period) then, without limiting any of Lender’s other rights and
remedies, Borrower shall pay to Lender (a) a late payment charge in an amount equal to one and
one-half percent (1-1/2%) of any such payment not received by the due date, and (b) interest upon

15

 

any such late payment, from the date such payment was due until the date payment is made, at a
rate equal to the lesser of (a) 16% per annum or (b) the highest rate of interest then allowed by
the laws of the State of New York (such lesser rate is defined as the “Default Rate”). All
computation of interest shall be calculated on the basis of the actual number of days elapsed over
a year of 360 days.

     In the event any payment due under this Note is not paid when due and such failure continues
for ten (10) days after notice to Borrower, Lender may declare the principal amount of this Note
and all accrued but unpaid interest thereon to be immediately payable.

     If Borrower defaults under this Note after notice and expiration of applicable grace period
and Lender obtains a money judgment against Borrower with respect thereto, Lender shall have the
right, on notice to Borrower, to offset against any monetary obligations owed by Lender to Borrower
all or any portion of the amount of said judgment. Any such offset shall reduce Borrower’s
liability under said judgment to the extent of said offset.

     Borrower’s obligations to the Lender under this Note have been guaranteed by Reading
International, Inc.

     Borrower agrees to pay all reasonable costs and expenses incurred by Lender in order to
enforce the obligations of Borrower hereunder including, but not limited to, reasonable attorneys’
fees and expenses, whether or not litigation is commenced.

     This Note may not be amended, and compliance with its terms may not be waived, orally or by
course of dealing, but only by a writing signed by Lender and Borrower. Any extension of time
granted by Lender shall not release Borrower or constitute a waiver of any payment obligation, or
otherwise diminish the rights and remedies of Lender.

     No failure on the part of Lender to exercise, and no delay in exercising, any right, remedy or
power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by
Lender of any right, remedy or power hereunder preclude any other or future exercise thereof or the
exercise of any other right, remedy or power.

     Each and every right, remedy and power hereby granted to Lender or allowed it by law or other
agreement shall be cumulative and not exclusive of any other right, remedy or power and may be
exercised by Lender at any time and from time to time.

     Every provision of this Note is intended to be severable; if any term or provision of this
Note shall be invalid, illegal or unenforceable for any reason, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be affected or impaired
thereby.

     The Borrower hereby waives presentment, demand, protest and notice of protest, non-payment or
dishonor of this Note and any other notices unless specifically provided for herein. Notices shall
be sent in accordance with the notice provisions set forth in the Contract.

     The provisions of this Note shall be construed and interpreted, and all rights and obligations

16

 

hereunder determined, in accordance with the laws of the State of New York.

     Borrower waives the right to trial by jury in any action or proceeding based upon, arising out
of or in any way connected to this Note or the transaction in connection with which this Note is
executed.

	 	 	 	 	 
	 	 	SUTTON HILL PROPERTIES, LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name: S. Craig Tompkins
	 	 	Title: President

17

 

EXHIBIT B

GUARANTY

            GUARANTY by READING INTERNATIONAL, INC., a Nevada corporation, having its principal office at
500 Citadel Drive, Suite 300, Commerce, CA 90040 (“Guarantor”), which term shall be deemed to
include Reading International, Inc. and its successors and assigns, dated the 1st day of
September, 2005, in favor of Sutton Hill Capital L.L.C. (“Lender”, which term shall be deemed to
include Sutton Hill Capital L.L.C. and its successors and assigns).

            WHEREAS, Sutton Hill Properties, LLC (“Borrower”, which term shall be deemed to include Sutton
Hill Properties, LLC and its successors and assigns) has this day executed and delivered a Purchase
Money Installment Sale Note to Lender in the principal amount of $9,000,000.00 (“Note”) in
connection with Borrower’s purchase of a leasehold interest under a lease covering premises located
at 1001-1007 Third Avenue, New York, New York; and

            WHEREAS, in order to induce Lender to accept the Note in payment of the purchase price for
such leasehold interest, Guarantor has agreed to guarantee Borrower’s obligations thereunder;

            NOW THEREFORE, for good and valuable consideration, Guarantor hereby agrees as follow:

     1. Guarantor hereby guarantees to Lender, absolutely and unconditionally, the full and timely
payment and performance of all of Borrower’s obligations and liabilities under the Note.

     2. This Guaranty is absolute and unconditional. This Guaranty shall be enforceable against
Guarantor without the necessity of any suit or proceeding on Lender’s part of any kind or nature
whatsoever against Borrower and without the necessity of any notice of nonpayment, nonperformance
or non-observance and any other notice unless specifically provided for herein, and without the
necessity of presentment, notice, protest or demand, all of which Guarantor hereby expressly
waives. Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of
Guarantor hereunder shall in no way be terminated, affected, diminished or impaired by reason of
(a) the assertion or the failure to assert by Lender against Borrower of any of the rights or
remedies reserved to Lender pursuant to the terms, covenants and conditions of the Note, or (b) any
non-liability of Borrower under the Note, whether by insolvency, discharge in bankruptcy or any
other defect or defense which may now or hereafter exist in favor of Borrower.

     3. This Guaranty shall be a continuing Guaranty, and the liability of Guarantor hereunder
shall in no way be affected, modified or diminished by reason of (a) any assignment, renewal,
modification, amendment or extension of the Note, or (b) any modification or waiver of or change in
any of the terms, covenants and conditions of the Note, or (c) any extension of time that may be
granted by Lender to Borrower, (d) any consent, indulgence or other action, inaction or omission
under or in respect of the Note, or (e) any dealings or transactions or matter or thing occurring
between Lender and Borrower, or (f) any bankruptcy, insolvency, reorganization, liquidation,
arrangement, assignment for the benefit of creditors, receivership, trusteeship or

18

 

similar proceeding affecting Borrower, whether or not notice thereof or of any thereof is given to
Guarantor.

     4. No delay on the part of Lender in exercising any right, power or privilege under this
Guaranty or failure to exercise the same shall operate as a waiver of or otherwise affect any such
right, power or privilege, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.

     5. No waiver or modification of any provision of this Guaranty or any termination of this
Guaranty shall be effective unless in writing, signed by Lender; nor shall any such waiver be
applicable except in the specific instance for which given.

     6. All of Lender’s rights and remedies under the Note or this Guaranty are intended to be
distinct, separate and cumulative. No exercise or partial exercise of any such right or remedy
therein or herein mentioned or resort to any other security is intended to be in exclusion of or a
waiver of any of any of Guarantor’s obligations or liabilities under this Guaranty or the Note.

     7. Guarantor agrees that it will, at any time and from time to time, within ten (10) business
days following written request by Lender, execute, acknowledge and deliver to Lender a statement
certifying that this Guaranty is unmodified and in full force and effect (or if there has been any
modification, that the same is in full force and effect as modified).

     8. Guarantor covenants and agrees that in any action or proceeding brought on, under or by
virtue of this Guaranty, Guarantor shall and does hereby waive trial by jury. Without regard to
principles of conflicts of laws, the validity, interpretation, performance and enforcement of this
Guaranty shall be governed by and construed in accordance with the laws of the State of New York.

     9. As used herein, the term “successors and assigns” shall be deemed to include the heirs,
legal representatives, successors and assigns of Lender, Borrower and Guarantor, as the case may
be. All terms and words used in this Guaranty, regardless of the number or gender in which they are
used, shall be deemed to include any other number and any other gender as the context may require.
This Guaranty shall be binding upon Guarantor and its successors and assigns and shall inure to the
benefit of Lender and its successors and assigns.

     10. If Guarantor fails to pay any amount payable under this Guaranty when due, interest on
such amount shall accrue at a rate equal to the lesser of (a) 16% per annum or (b) the highest rate
of interest then allowed by the laws of the State of New York.

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]

19

 

     11. Guarantor shall pay to Lender, upon demand, all costs and expenses incurred by Lender in
order to enforce the provisions of the Note and this Guaranty including, but not limited to,
reasonable attorneys’ fees and expenses, whether or not litigation is commenced.

     IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty this 1st day of September,
2005.

	 	 	 	 	 	 	 
	 	 	 	 	READING INTERNATIONAL, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	     S. Craig Tompkins
	 

	 	 	 	 	 	     Title: Director – Business Affairs

	 	 	 	 	 	 	 
	STATE OF

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.:
	COUNTY OF

	 	 	)	 	 	 

            On                     , 2005, before me, the undersigned, personally appeared S. Craig Tompkins,
personally known to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that he executed the same
in his capacity (ies), and that by his signature on the instrument, the individual, or the person
upon behalf of which the individual acted, executed the instrument.

	 	 	 	 	 
	 	 	 
	 

	 	 	 	Notary Public

20

 

EXHIBIT C

ASSIGNMENT AND ASSUMPTION OF LEASE

            AGREEMENT made as of this 1st day of September, 2005, between SUTTON HILL CAPITAL L.L.C., a
New York limited liability company, having an office at 120 North Robertson Blvd., 3rd
Floor, Los Angeles, CA 90048 (“Assignor”) and SUTTON HILL PROPERTIES, LLC, a Nevada limited
liability company, having an office at c/o Reading International Inc., 500 Citadel Drive, Suite
300, Commerce, CA 90040 (”Assignee”).

            WHEREAS, the Assignor is the tenant under a ground lease dated February 9, 1961 between
Assignee, as successor-in-interest to Andrew C. Mayer, Berna L. Osnos, Francis M. Perlman and
Richard Heller, Frances H. Cahen and Phillis H. Rosenthal, as Trustees under the Last Will and
Testament of Isaac S. Heller, deceased, as landlord (the “Landlord”), and Turtle Bay Theatre
Corporation, as tenant, a Memorandum of which was recorded in the Office of the City Register, New
York County (the “Office”) on August 14, 1961, in liber 5159, cp 151, as assigned by Cinema 5 Ltd.
to Sutcin Holding Corp. by assignment dated as of December 31, 1984, recorded in the Office on
February 26, 1985 in reel 880, page 1155, by Sutcin Holding Corp. to Sutton Hill Associates by
unrecorded assignment dated as of July 3, 1986 and by Sutton Hill Associates to Assignor by
Assignment dated July 28, 2000, and recorded on September 19, 2000 in reel 3160, page 2497, and as
amended by Extension and Modification of Lease Agreement dated as of June 1, 2005 between
Assignee’s predecessor-in-interest and Assignor, a Memorandum of which was recorded in the Office
on June 10, 2005 under CRFN 2005000338999 (collectively, the “Lease”), covering the parcel of land
located at 1001-1007 Third Avenue, New York, New York, as more particularly set forth on Exhibit A
annexed hereto (the “Premises”).

            NOW, THEREFORE, in consideration of the mutual promises herein contained and other good and
valuable considerations, receipt of which is hereby acknowledged, the Assignor hereby assigns,
conveys and transfers to the Assignee, its successors and assigns, all of Assignor’s right, title
and interest in and to the Lease.

21

 

            TO HAVE AND TO HOLD the same unto the Assignee, its successors and assigns, from this day
forward for the remainder of the term of the Lease, as same may be modified or extended.

            Assignee hereby assumes the performance of all the terms, covenants and conditions of the
Lease on the part of the tenant arising after the date hereof.

            It is the intention of the parties hereto that, notwithstanding Assignee’s ownership of the
fee interest of the Premises and of the Landlord’s interest under the Lease, the assignment and
assumption of Assignee’s interest, as tenant under the Lease, shall not result in a merger of the
fee and leasehold estates in and to the Premises, and that the Lease shall remain in full force and
effect.

            Assignor shall indemnify, defend and hold harmless Assignee from and against any liability,
claim, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or
accruing on or prior to the date hereof under, with respect to or in connection with any obligation
of Tenant under the Lease, except for any liability, claim, damage or expense resulting from the
acts or omissions of Assignee or its affiliate, Citadel Cinemas, Inc. (“Citadel”) or their
respective contractors and any obligations assumed by Citadel under the Master Operating Lease
dated July 28, 2000, as amended between Assignor as Landlord and Citadel as Tenant (the “Citadel
Lease”). Notwithstanding anything to the contrary set forth herein, the Assignor’s indemnity
obligations are limited to those in the existing Citadel Lease and have not been expanded.

            Assignee shall indemnify, defend and hold harmless Assignor from and against any liability,
claim, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or
accruing after the date hereof under, with respect to or in connection with any obligation of
Tenant under the Lease, except for any such liability, claim, damage or expense (a) arising under
any agreement between Assignor and Assignee with respect to the Premises or any document executed
pursuant to any such agreement or (b) resulting from the acts or omissions of Assignor or its
agents, employees, contractors, subtenants (other than Citadel) or licensees.

            Assignor, in compliance with Section 13 of the Lien Law, covenants that it will receive the
consideration for this conveyance and will hold the right to receive such consideration

22

 

as a trust fund to be applied first for the purpose of paying the cost of the improvement and will
apply the same first to the payment of the cost of the improvement before using any part of the
total of the same for any other purpose.

            This agreement shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and assigns.

            IN WITNESS WHEREOF, the Assignor and the Assignee have duly executed this instrument the day
and year first above written.

	 	 	 	 	 
	 	 	SUTTON HILL CAPITAL L.L.C.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	    James J. Cotter
	 

	 	 	 	    Manager
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	    Michael R. Forman
	 

	 	 	 	    Manager
	 
	 	 	 	 
	 	 	SUTTON HILL PROPERTIES, LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	    S. Craig Tompkins
	 

	 	 	 	    Title:
	 

	 	 	 	    Federal ID No.: 20-1163759

23

 

EXHIBIT D

Provided Separately

24

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