Document:

EXHIBIT 10.1

 

 

CREDIT AGREEMENT

 

 

by and among

 

BEAZER MORTGAGE CORPORATION,

 

as Borrower

 

 

the Lenders party hereto,

 

GUARANTY BANK,

as Agent

 

 

JPMORGAN CHASE BANK, N.A.,

as Syndication Agent

 

 

and

 

 

U.S. BANK NATIONAL ASSOCIATION,

as Documentation Agent

 

 

 

 

January 11, 2006

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I                                   GENERAL TERMS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Certain
  Definitions

  	
  1

  
	
  Section 1.2

  	
  Exhibits and
  Schedules

  	
  19

  
	
  Section 1.3

  	
  Calculations
  and Determinations

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE II                               AMOUNT AND TERMS OF LOANS

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Commitment
  and Loans

  	
  20

  
	
  Section 2.2

  	
  Promissory
  Notes; Interest on the Notes

  	
  22

  
	
  Section 2.3

  	
  Notice and
  Manner of Obtaining Loans

  	
  22

  
	
  Section 2.4

  	
  Fees

  	
  24

  
	
  Section 2.5

  	
  Mandatory
  Repayments

  	
  24

  
	
  Section 2.6

  	
  Payments to
  Lenders

  	
  24

  
	
  Section 2.7

  	
  Notification
  by the Agent

  	
  25

  
	
  Section 2.8

  	
  Non-Receipt
  of Funds by the Agent

  	
  25

  
	
  Section 2.9

  	
  Increased
  Cost and Reduced Return

  	
  26

  
	
  Section 2.10

  	
  Settlement
  Account

  	
  26

  
	
  Section 2.11

  	
  Approved
  Letter of Credit

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE III                           CONDITIONS PRECEDENT

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Initial Loan

  	
  27

  
	
  Section 3.2

  	
  All Loans

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV                          BORROWER REPRESENTATIONS AND WARRANTIES

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Organization
  and Good Standing

  	
  29

  
	
  Section 4.2

  	
  Authorization
  and Power

  	
  29

  
	
  Section 4.3

  	
  No Conflicts
  or Consents

  	
  29

  
	
  Section 4.4

  	
  Enforceable
  Obligations

  	
  30

  
	
  Section 4.5

  	
  Priority of
  Liens

  	
  30

  
	
  Section 4.6

  	
  No Liens

  	
  30

  
	
  Section 4.7

  	
  Financial
  Condition of Borrower

  	
  30

  
	
  Section 4.8

  	
  Full
  Disclosure

  	
  30

  
	
  Section 4.9

  	
  No Default

  	
  30

  
	
  Section 4.10

  	
  No
  Litigation

  	
  30

  
	
  Section 4.11

  	
  Taxes

  	
  31

  
	
  Section 4.12

  	
  Principal
  Office, etc

  	
  31

  
	
  Section 4.13

  	
  Compliance
  with ERISA

  	
  31

  
	
  Section 4.14

  	
  Subsidiaries

  	
  31

  
	
  Section 4.15

  	
  Indebtedness

  	
  31

  
	
  Section 4.16

  	
  Permits,
  Patents, Trademarks, etc

  	
  31

  
	
  Section 4.17

  	
  Status Under
  Certain Federal Statutes

  	
  31

  
	
  Section 4.18

  	
  Securities
  Act

  	
  32

  
	
  Section 4.19

  	
  No Approvals
  Required

  	
  32

  
	
  Section 4.20

  	
  Survival of
  Representations

  	
  32

  

 

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  Page

  
	
   

  	
   

  	
   

  
	
  Section 4.21

  	
  Compliance
  with Laws

  	
  32

  
	
  Section 4.22

  	
  Payment of
  Obligations

  	
  32

  
	
  Section 4.23

  	
  Individual
  Mortgage Loans

  	
  32

  
	
  Section 4.24

  	
  Environmental
  Matters

  	
  34

  
	
  Section 4.25

  	
  Status as
  Approved Seller/Servicer

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE V                              AFFIRMATIVE COVENANTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
  Financial
  Statements and Reports

  	
  34

  
	
  Section 5.2

  	
  Taxes and
  Other Liens

  	
  35

  
	
  Section 5.3

  	
  Maintenance

  	
  36

  
	
  Section 5.4

  	
  Further
  Assurances

  	
  36

  
	
  Section 5.5

  	
  Reimbursement
  of Expenses

  	
  36

  
	
  Section 5.6

  	
  Insurance

  	
  37

  
	
  Section 5.7

  	
  Accounts and
  Records: Servicing Records

  	
  37

  
	
  Section 5.8

  	
  Right of
  Inspection

  	
  37

  
	
  Section 5.9

  	
  Notice of
  Certain Events

  	
  38

  
	
  Section 5.10

  	
  Performance
  of Certain Obligations and Information Regarding Investors

  	
  38

  
	
  Section 5.11

  	
  Use of
  Proceeds: Margin Stock

  	
  38

  
	
  Section 5.12

  	
  Notice of
  Default

  	
  38

  
	
  Section 5.13

  	
  Compliance
  with Loan Documents

  	
  39

  
	
  Section 5.14

  	
  Operations
  and Properties

  	
  39

  
	
  Section 5.15

  	
  Environmental
  Matters

  	
  39

  
	
  Section 5.16

  	
  Compliance
  with Laws

  	
  39

  
	
  Section 5.17

  	
  MERS Status

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI                          NEGATIVE COVENANTS

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
  No Merger;
  Limitation on Issuance of Securities

  	
  40

  
	
  Section 6.2

  	
  Limitation
  on Indebtedness

  	
  40

  
	
  Section 6.3

  	
  Fiscal Year,
  Method of Accounting

  	
  41

  
	
  Section 6.4

  	
  Business

  	
  41

  
	
  Section 6.5

  	
  Liquidations,
  Consolidations and Dispositions of Substantial Assets

  	
  41

  
	
  Section 6.6

  	
  Loans,
  Advances, and Investments

  	
  41

  
	
  Section 6.7

  	
  Use of
  Proceeds

  	
  41

  
	
  Section 6.8

  	
  Actions with
  Respect to Mortgage Collateral

  	
  42

  
	
  Section 6.9

  	
  Transactions
  with Affiliates

  	
  42

  
	
  Section 6.10

  	
  Liens

  	
  42

  
	
  Section 6.11

  	
  ERISA Plans

  	
  43

  
	
  Section 6.12

  	
  Change of
  Principal Office

  	
  43

  
	
  Section 6.13

  	
  Consolidated
  Tangible Net Worth

  	
  43

  
	
  Section 6.14

  	
  Consolidated
  Adjusted Tangible Net Worth

  	
  43

  
	
  Section 6.15

  	
  Total Debt
  to Adjusted Tangible Net Worth Ratio

  	
  43

  

 

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  Page

  
	
   

  	
   

  	
   

  
	
  Section 6.16

  	
  Profitability

  	
  43

  
	
  Section 6.17

  	
  Dividends

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII                      EVENTS OF DEFAULT

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
  Nature of
  Event

  	
  43

  
	
  Section 7.2

  	
  Default
  Remedies

  	
  46

  
	
  Section 7.3

  	
  Application
  of Proceeds

  	
  46

  
	
  Section 7.4

  	
  Preservation
  of Rights

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII                  INDEMNIFICATION

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 8.1

  	
  Indemnification

  	
  47

  
	
  Section 8.2

  	
  Limitation
  of Liability

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX                          THE AGENT

  	
  48

  
	
   

  	
   

  	
   

  
	
  Section 9.1

  	
  Appointment

  	
  48

  
	
  Section 9.2

  	
  Delegation
  of Duties

  	
  48

  
	
  Section 9.3

  	
  Exculpatory
  Provisions

  	
  48

  
	
  Section 9.4

  	
  Reliance by
  Agent

  	
  49

  
	
  Section 9.5

  	
  Notice of
  Default

  	
  49

  
	
  Section 9.6

  	
  Non-Reliance
  on Agent and Other Lenders

  	
  49

  
	
  Section 9.7

  	
  Indemnification

  	
  50

  
	
  Section 9.8

  	
  Agent in Its
  Individual Capacity

  	
  50

  
	
  Section 9.9

  	
  Successor
  Agent

  	
  51

  
	
  Section 9.10

  	
  Agent’s
  Discretionary Authority

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE X                              TAXES AND YIELD PROTECTION

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 10.1

  	
  Taxes

  	
  51

  
	
  Section 10.2

  	
  Increased
  Costs

  	
  53

  
	
  Section 10.3

  	
  Mitigation
  Obligations; Replacement of Lenders

  	
  54

  
	
  Section 10.4

  	
  Survival

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI                          MISCELLANEOUS

  	
  55

  
	
   

  	
   

  	
   

  
	
  Section 11.1

  	
  Notices

  	
  55

  
	
  Section 11.2

  	
  Amendments,
  Etc

  	
  56

  
	
  Section 11.3

  	
  CHOICE OF
  LAW; VENUE

  	
  57

  
	
  Section 11.4

  	
  Invalidity

  	
  57

  
	
  Section 11.5

  	
  Survival of
  Agreements

  	
  58

  
	
  Section 11.6

  	
  Renewal,
  Extension or Rearrangement

  	
  58

  
	
  Section 11.7

  	
  Waivers

  	
  58

  
	
  Section 11.8

  	
  Cumulative
  Rights

  	
  58

  
	
  Section 11.9

  	
  Limitation
  on Interest

  	
  58

  
	
  Section 11.10

  	
  Bank
  Accounts; Offset

  	
  59

  
	
  Section 11.11

  	
  Assignments

  	
  59

  
	
  Section 11.12

  	
  Exhibits

  	
  61

  

 

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  Page

  
	
   

  	
   

  	
   

  
	
  Section 11.13

  	
  Titles of
  Articles, Sections and Subsections

  	
  61

  
	
  Section 11.14

  	
  Counterparts;
  Fax

  	
  61

  
	
  Section 11.15

  	
  Termination:
  Limited Survival

  	
  61

  
	
  Section 11.16

  	
  Joint and
  Several Liability

  	
  62

  
	
  Section 11.17

  	
  Disclosures

  	
  62

  
	
  Section 11.18

  	
  Time is of
  the Essence

  	
  62

  
	
  Section 11.19

  	
  USA Patriot
  Act Notice

  	
  62

  
	
  Section 11.20

  	
  Electronic
  Transactions

  	
  62

  
	
  Section 11.21

  	
  No Reliance

  	
  62

  
	
  Section 11.22

  	
  WAIVER OF
  JURY TRIAL

  	
  62

  
	
  Section 11.23

  	
  CONSEQUENTIAL
  DAMAGES

  	
  63

  
	
  Section 11.24

  	
  ENTIRE
  AGREEMENT

  	
  63

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.1   -
  Commitments and Commitment Percentages

  	
   

  
	
  Schedule 6.10 -
  Existing Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A    - Form of Note

  	
   

  
	
  Exhibit B      - Form of Borrowing
  Request

  	
   

  
	
  Exhibit C      - Investors

  	
   

  
	
  Exhibit D     - Subsidiaries

  	
   

  
	
  Exhibit E       - Certificate
  Accompanying Financial Statement

  	
   

  
	
  Exhibit F       - Approved Letter of
  Credit Form

  	
   

  
	
  Exhibit G      - Borrowing Base
  Certificate

  	
   

  

 

iv

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT is made and entered into as of January 11,
2006 by and among BEAZER MORTGAGE CORPORATION, a Delaware corporation (“Borrower”), the banks
identified on the signature pages hereof (together with any successors and
assigns thereof, hereinafter referred to individually as a “Lender” and collectively as the “Lenders”), GUARANTY BANK, as
administrative and collateral agent for the Lenders (“Agent”), JPMORGAN
CHASE BANK, N.A. as syndication agent, and U.S. BANK NATIONAL ASSOCIATION, as
documentation agent.

 

The parties hereto hereby agree as follows:

 

ARTICLE I

 

GENERAL TERMS

 

Section 1.1                            Certain
Definitions.  As used in this
Agreement, the following terms have the following meanings:

 

“Adjusted Tangible Net Worth”
means, as of any date, the Tangible Net Worth of Borrower plus the
available undrawn amount of any Approved Letter of Credit.

 

“Affiliate”
means, as to any Person, each other Person that directly or indirectly (through
one or more intermediaries or otherwise) controls, is controlled by, or is
under common control with, such Person.

 

“Aged Loan”
means an Eligible Mortgage Loan which has been included in the Borrowing Base
for more than ninety (90) days but less than or equal to one hundred twenty
(120) days.

 

“Agent” means Guaranty Bank,
in its capacity as the administrative and collateral agent for the Lenders
under this Agreement and the other Loan Documents and not in its individual
capacity as a Lender, and any successor agent appointed pursuant to Article IX.

 

“Agreement”
means this Credit Agreement, as the same may from time to time be amended,
supplemented or restated.

 

“Agreement to
Pledge” means each agreement by Borrower set forth in a
Borrowing Request for Wet Mortgage Loans, to deliver Required Mortgage
Documents to Agent.

 

“Alt-A Loan” means a Single
Family Mortgage Loan which (a) is secured by a first-lien Mortgage, (ii) is
not a Conforming Mortgage Loan, FHA Loan or VA Loan, (iii) has an original
principal balance of less than or equal to the current FNMA/FHLMC loan size
limit, (iv) is a Limited Documentation Mortgage Loan, (v) has a FICO
score greater than or equal to 620, and (vi) has a LTV less than or equal
to 100%.

 

 

“Applicable Advance Rate Percentage” means ninety-eight percent
(98%), provided, however, if an Approved Letter of Credit exists,
the Applicable Advance Rate Percentage means ninety-nine percent (99%).

 

“Applicable Margin” means one
percent (1%).

 

“Applicable
Sublimit” means, for each Mortgage Loan classification listed
below, the percentage of the total Commitments listed opposite such Mortgage
Loan classification:

 

	
  Wet Loans

  	
   

  	
  30

  	
  %*

  
	
  Prime Loans

  	
   

  	
  100

  	
  %

  
	
  Jumbo Loans

  	
   

  	
  30

  	
  %

  
	
  Second
  Lien/HELOC Loans

  	
   

  	
  25

  	
  %

  
	
  Nonprime-A
  Loans

  	
   

  	
  10

  	
  %}**

  
	
  Nonprime-B
  Loans

  	
   

  	
  5

  	
  %}**

  
	
  Alt-A Loans

  	
   

  	
  30

  	
  %

  

 

* provided, however,
that in the last five (5) and first five (5) Business Days of every
calendar month, the Applicable Sublimit for Wet Loans shall be forty percent
(40%) of the total Commitments; and

 

** provided further, however, that the Unit Collateral Value of
all Nonprime-A Loans when added to the Unit Collateral Value of all Nonprime-B
Loans shall not exceed ten percent (10%) of the total Commitments.

 

“Appraised Value”
means, for any Mortgage Loan, the current appraised value of the property
secured by the Mortgage as determined by an appraisal performed in full
compliance with FNMA/FHLMC appraisal requirements and on an appraisal form
approved by FNMA or FHLMC, and performed by a state licensed or state-certified
real estate appraiser (in accordance with the provisions of Title XI of
FIRREA).

 

“Approved Letter of Credit”
means an irrevocable, unconditional standby letter of credit issued for the
account of Parent to the Agent for the benefit of the Lenders, as additional security
and as an additional source of repayment of the Obligations, in the form of Exhibit F, and in an amount
not less than $3,500,000.

 

“Borrower”
shall have the meaning assigned to such term in the preamble hereof.

 

“Borrowing”
means a borrowing of a Loan.

 

“Borrowing Base”
means at any date all Eligible Mortgage Loans which have been delivered to and
held by Agent or otherwise identified as Mortgage Collateral.

 

“Borrowing Base
Certificate” means a certificate describing the Eligible
Mortgage Loans to be included in the Borrowing Base substantially in the form
of Exhibit G.

 

“Borrowing
Request” means a request, in the form of Exhibit B,
for a Loan pursuant to Article II.

 

2

 

“Business Day”
means a day, other than a Saturday or Sunday, on which commercial banks are
open for business with the public in Dallas, Texas.

 

“Cash
Equivalents” means (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or instrumentality
thereof which mature within ninety (90) days from the date of acquisition, and (ii) time
deposits and certificates of deposit, which mature within ninety (90) days from
the date of acquisition, of any Lender or any other domestic commercial bank
having capital and surplus in excess of $200,000,000, which has, or the holding
company of which has, a commercial paper rating of at least A-1 or the
equivalent thereof by Standard & Poors Corporation or P-1 or the
equivalent thereof by Moody’s Investors Service, Inc., (iii) commercial
paper having ratings at least equal to those described in the preceding clause
(ii), and (iv) overnight investments in money market mutual funds
registered under the 1940 Investment Company Act.

 

“Change of
Control” means Parent ceases to own, directly or indirectly, one
hundred percent (100%) of the voting power of the voting stock of Borrower.

 

“Change in Law” means the
occurrence, after the date of this Agreement, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any guideline or directive (whether or not having the
force of law) by any Governmental Authority.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

“Collateral”
has the meaning given to it in the Security Agreement.

 

“Collateral
Value of the Borrowing Base” means, on any day, the sum of the
Unit Collateral Values of all Eligible Mortgage Loans included in the Borrowing
Base on such day as determined by Agent based upon information then available
to Agent.

 

“Combined Loan
to Value” or “CLTV” means, as to any Mortgage Loan, the ratio
expressed as a percentage determined by dividing (i) the total amount
owing and outstanding on all loans secured by the residential real property and
improvements serving as collateral for the Mortgage Loan, by (ii) the
Appraised Value of the residential real property and improvements serving as
collateral for the Mortgage Loan.

 

“Commitment”
means, as to any Lender, the obligation of such Lender to make Committed Loans
(or purchase participations in Swingline Loans as set forth in Section 2.1(b)(ii))
to Borrower pursuant to Section 2.1 hereof in an aggregate amount
not to exceed the amount set forth under the heading “Commitment” opposite such
Lender’s name on Schedule 1.1
hereof, provided, however, that during the following thirty (30)
day periods during any calendar year: (i) March 15 through April 14,
(ii) June 15 through July 14, (iii) September 15
through October 14, and (iv) December 15 through January 14,
the obligation of such Lender to make Committed Loans to Borrower pursuant to Section 2.1
hereof shall automatically increase to an aggregate amount not to exceed the
amount set forth under the heading “Maximum Commitment” opposite such Lender’s
name on Schedule 1.1 hereof.  The original aggregate amount of all Lenders’
Commitments is $250,000,000.00, provided, however, that during
each of

 

3

 

the thirty
(30) day periods listed above, the aggregate amount of all Lenders’ Commitments
shall be $350,000,000.00; provided further, however, that notwithstanding
the aggregate amount of the Lenders’ Commitments, at all times the aggregate
amount advanced by the Lenders hereunder shall not exceed the lesser of (i) the
aggregate amount of the Lenders’ Commitments, or (ii) the Collateral Value
of the Borrowing Base.

 

“Committed Loan”
has the meaning given such term in Section 2.1.

 

“Commitment Percentage” means,
for each Lender as of any date, the percentage of the total Commitments of all
Lenders represented by such Lender’s Commitment, as it may be amended from time
to time, which initially shall be as set forth on Schedule 1.1.

 

“Conforming
Mortgage Loan” means a Mortgage Loan which (i) receives one
of the following responses from Fannie Mae Desktop Underwriter: (a) Approve/Eligible,
(b) Approve/Ineligible, (c) Refer/Eligible, or (d) EA-I,-II,-III/Eligible,
or (ii) receives one of the following responses from Freddie Mac Loan
Prospector: (x) Accept/Accept, or (y) A-Minus.  Mortgage Loans receiving a “Refer/Eligible”
response are Conforming Mortgage Loans only if accompanied by the Investor’s
approval to the exception.  Mortgage
Loans receiving approval under the “Expanded Approval” (“EA”) criteria
or “A-Minus” criteria are Conforming Mortgage Loans only if Borrower provides
Agent with a copy of the Fannie Mae or Freddie Mac contract which allows
delivery by Borrower for this loan type.

 

“Consolidated”
refers to the consolidation of any Person, in accordance with GAAP, with its
properly consolidated subsidiaries. 
References herein to a Person’s Consolidated financial statements,
financial position, financial condition, liabilities, etc. refer to the
consolidated financial statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated subsidiaries.

 

“Debtor Laws”
means all applicable liquidation, conservatorship, bankruptcy, moratorium,
arrangement, receivership, insolvency, reorganization or similar Laws from time
to time in effect affecting the rights of creditors generally and general
principles of equity.

 

“Default”
means any of the events specified in Section 7.1 hereof, whether or
not any requirement for notice or lapse or time or any other condition has been
satisfied.

 

“Default Rate”
means, at the time in question, with respect to all Obligations, the sum of (i) four
percent (4%) per annum, plus (ii) the per annum interest rate
otherwise payable in respect of the Obligations; provided  that in
no event shall the Default Rate ever exceed the Maximum Rate.

 

“Dividends,”
in respect of any corporation, means:  (a) cash
distributions or any other distributions on, or in respect of, any class of
equity security of such corporation, except for distributions made solely in
shares of securities of the same class; and (b) any and all funds, cash or
other payments made in respect of the redemption, repurchase or acquisition of
such securities.

 

4

 

“Drawdown
Termination Date” means the earlier of January 10, 2007 or
the day on which the Notes first become due and payable in full in accordance
with the terms thereof or this Agreement.

 

“Dry Loan”
means an Eligible Mortgage Loan included in the Borrowing Base and for which
the Required Mortgage Documents have been delivered to Agent.

 

“Eligible
Mortgage Loan” means a Mortgage Loan with respect to which each
of the following statements is accurate and complete (and the Borrower by
including such Mortgage Loan in any computation of the Collateral Value of the
Borrowing Base shall be deemed to so represent to Agent and each Lender at and
as of the date of such computation):

 

(a)                                  Such
Mortgage Loan is a binding and valid obligation of the Obligor thereon, in full
force and effect and enforceable in accordance with its terms, except as
enforceability may be limited by Debtor Laws;

 

(b)                                 The
Mortgage Note evidencing such Mortgage Loan is genuine in all respects as
appearing on its face and as represented in the books and records of Borrower,
and all information set forth therein is true and correct;

 

(c)                                  Such
Mortgage Loan is free of any default (other than as permitted by subparagraph (d) below)
of any party thereto (including Borrower), counterclaims, offsets and defenses,
including the defense of usury, and from any rescission, cancellation or
avoidance, and all right thereof, whether by operation of law or otherwise;

 

(d)                                 No
payment under such Mortgage Loan is more than thirty (30) days past due the
payment due date set forth in the underlying Mortgage Note and Mortgage;

 

(e)                                  The
Mortgage Note and related Mortgage evidencing such Mortgage Loan contains the
entire agreement of the parties thereto with respect to the subject matter
thereof, has not been modified or amended in any respect not expressed in
writing therein and is free of concessions or understandings with the Obligor
thereon of any kind not expressed in writing therein;

 

(f)                                    Such
Mortgage Loan is in all respects in accordance with all Requirements of Law
applicable thereto, including, without limitation, the federal Consumer Credit
Protection Act and the regulations promulgated thereunder and all applicable
usury Laws and restrictions, and all notices, disclosures and other statements
or information required by Law or regulation to be given, and any other act
required by Law or regulation to be performed, in connection with such Mortgage
Loan have been given and performed as required;

 

(g)                                 All
advance payments and other deposits on such Mortgage Loan have been paid in
cash, and no part of said sums has been loaned, directly or indirectly, by
Borrower to the Obligor, and, other than as disclosed to Agent in writing,
there have been no prepayments;

 

(h)                                 At
all times such Mortgage Loan will be free and clear of all Liens, except those
Liens in favor of Agent, for the benefit of the Lenders;

 

5

 

(i)                                     The
Property covered by such Mortgage Loan is insured against loss or damage by
fire and all other hazards normally included within standard extended coverage
in accordance with the provisions of such Mortgage Loan with Borrower named as
a loss payee thereon;

 

(j)                                     Such
Mortgage Loan is secured by a first Mortgage, or in the case of any Second Lien
Loan or HELOC, as applicable, a second Mortgage, on Single Family property;

 

(k)                                  The
date of origination of such Mortgage Loan is not more than sixty (60) days
prior to the date such Mortgage Loan was first included in the Borrowing Base;

 

(l)                                     Such
Mortgage Loan has not been included in the Borrowing Base for more than ninety
(90) days unless such Mortgage Loan is an Aged Loan;

 

(m)                               If
such Mortgage Loan is included in the Borrowing Base and has been withdrawn
from the possession of the Agent on terms and subject to conditions set forth
in the Security Agreement:

 

(i)                                     If
such Mortgage Loan was withdrawn by Borrower for purposes of correcting clerical
or other non-substantive documentation problems, the Mortgage Note and other
documents relating to such Mortgage Loan are returned to the Agent within ten (10) calendar
days from the date of withdrawal; and the Unit Collateral Value of such
Mortgage Loan when added to the Unit Collateral Value of other Mortgage Loans
which have been similarly released to Borrower and have not been returned does
not exceed ten percent (10%) of the aggregate amount of the Lenders’
Commitments;

 

(ii)                                  If
such Mortgage Loan was shipped by the Agent directly to a permanent investor
for purchase or to a custodian for the formation of a pool, (x) such investor
or custodian is in full compliance with the terms of the bailee letter under
which such Mortgage Loan was shipped, and (y) the full purchase price for such
Mortgage Loan has been received by the Agent (or such Mortgage Loan has been
returned to the Agent) within forty-five (45) calendar days from the date of
shipment by the Agent;

 

(n)                                 Such
Mortgage Loan is subject to a Take-Out Commitment which is in full force and
effect;

 

(o)                                 Such
Mortgage Loan (a) conforms to and satisfies the requirements for one of
the following Mortgage Loan classifications and has been designated by Borrower
as one (1), and only one (1), of the following: 
(i) Prime Loan (ii) Jumbo Loan, (iii) Second Lien/HELOC
Loan, (iv) Nonprime-A Loan, (v) Nonprime-B Loan or (vi) Alt-A
Loan; provided  that, within each Mortgage Loan classification
listed above, the Unit Collateral Value of such Mortgage Loan when added to the
Unit Collateral Value of all other Mortgage Loans in the same Mortgage Loan
classification does not exceed the Applicable Sublimit for such Mortgage Loan
classification;

 

(p)                                 The
Required Mortgage Documents have been delivered to Agent prior to the inclusion
of such Mortgage Loan in any computation of the Borrowing Base or, if such
items have not been delivered to Agent on or prior to the date such Mortgage
Loan is first included in any computation of the Borrowing Base, (a) Borrower
has pledged and agreed to deliver all Required Mortgage Documents pursuant to a
Borrowing Request delivered to Agent prior to

 

6

 

such
inclusion, and (b) the Collateral Value of such Mortgage Loan when added
to the Collateral Value of all other Mortgage Loans for which Agent has not
received the Required Mortgage Documents does not exceed the Applicable
Sublimit for Wet Loans, provided that all Required Mortgage
Documents with respect to such Mortgage Loan shall be delivered to Agent within
seven (7) Business Days after the date of the Agreement to Pledge with
respect thereto;

 

(q)                                 If
such Mortgage Loan is an Investment Loan, no more than three (3) other
Investment Loans with the same Obligor or an Affiliate of such Obligor are
included in the Borrowing Base, such that no more than six (6) Eligible
Mortgage Loans with the same Obligor or an Affiliate of such Obligor are
included in the Borrowing Base at the same time, being a maximum of one (1) Principal
Residence Mortgage Loan, one (1) Second/Vacation Property Mortgage Loan,
and four (4) Investment Loans;

 

(r)                                    The
Property covered by such Mortgage Loan is located within the fifty United
States; and

 

(s)                                  Such
Mortgage Loan has been underwritten by the originator thereof in accordance
with such originator’s then current underwriting guidelines, which underwriting
guidelines have been previously approved by Agent (such approval not to be
unreasonably withheld or delayed).

 

“Environmental
Laws” means any and all Laws relating to (a) the protection
of the environment, (b) emissions, discharges or releases of pollutants,
contaminants, chemicals or hazardous or toxic substances or wastes into the
environment including ambient air, surface water, ground water or land, or (c) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes or the clean-up or other remediation
thereof.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, together with the regulations from time to time promulgated with
respect thereto.

 

“ERISA Affiliate”
means all members of the group of corporations and trades or businesses
(whether or not incorporated) which, together with Borrower, are treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code.

 

“ERISA Plan”
means any pension benefit plan subject to Title IV of ERISA or Section 412
of the Code maintained or contributed to by Borrower or any ERISA Affiliate
with respect to which Borrower has a fixed or contingent liability.

 

“E-Sign Act”
means the Electronic Signatures in Global and National Commerce Act, as amended
from time to time.

 

“Event of
Default” means any of the events specified in Section 7.1
hereof, provided that, any requirement in connection with such event for
the giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.

 

7

 

“Excluded Taxes” means, with
respect to the Agent, any Lender or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which the Borrower is located and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 10.3(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new lending office) or is
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with Section 10.1(e), except
to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 10.1(a).

 

“Federal Funds Rate” means,
for any day, the rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate (rounded upward, if
necessary, to a whole multiple of 1/100 of 1%) charged to Guaranty Bank on such
day on such transactions as determined by the Agent.

 

“Fee Letter” means the letter
agreement of even date herewith between Borrower and Agent.

 

“FHA”
means the Federal Housing Administration or any successor thereto.

 

“FHA Loan”
means a Mortgage Loan insured by the FHA.

 

“FHLMC”
or “Freddie Mac”
means the Federal Home Loan Mortgage Corporation, or any successor thereto.

 

“FICO”
means FICO®, a registered trademark of Fair Isaacs and Company, being the “delinquency
predictor” model established by Fair Isaacs and Company and shown on a credit
report prepared by Equifax, Experian, Trans Union, or any other authorized
national credit reporting agency.  For
all purposes hereunder, if two FICO scores are obtained for any individual, the
lower score shall be used.  If three FICO
scores are obtained for any individual, the middle score shall be used.

 

“Financing Lease”
means (i) any lease of Property if the then present value of the minimum
rental commitment thereunder should, in accordance with GAAP, be capitalized on
a

 

8

 

balance sheet
of the lessee, and (ii) any other lease obligations which are capitalized
on a balance sheet of the lessee.

 

“FIRREA”
means the Financial Institutions Reform Recovery and Enforcement Act of 1989,
as amended from time to time, together with the regulations from time to time
promulgated with respect thereto.

 

“Fiscal Quarter”
means each period of three calendar months ending March 31, June 30, September 30
and December 31 of each year.

 

“Fiscal Year”
means each period of twelve calendar months ending September 30 of each
year.

 

“FNMA”
or “Fannie Mae”
means the Federal National Mortgage Association, or any successor thereto.

 

“Foreign Lender” means any
Lender that is organized under the laws of a jurisdiction other than that in
which the Borrower is resident for tax purposes.  For purposes of this definition, the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.

 

“Full
Documentation Mortgage Loan” means a Mortgage Loan supported by
all of the customary documentation required to underwrite the Mortgage Loan,
including, without limitation, the following: 
(i) Verification of Income (“VOI”), (ii) Verification of
Assets (“VOA”), and (iii) Verification of Employment (“VOE”).

 

“Funding Account”
means the non-interest bearing demand checking account established by Borrower
with Agent to be used for (a) the initial deposit of proceeds of Loans;
and (b) the funding or purchase of a Mortgage Note by Borrower; provided
that the Funding Account shall be pledged to Agent, for the benefit of
Lenders, and the Borrower shall not be entitled to withdraw funds from the
Funding Account.

 

“GAAP”
means those generally accepted accounting principles and practices which are
recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
consolidated subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the financial statements described in Section 4.7.  If any change in any accounting principle or
practice is required by the Financial Accounting Standards Board (or any such
successor) in order for such principle or practice to continue as a generally
accepted accounting principle or practice, all reports and financial statements
required hereunder with respect to Borrower or Parent may be prepared in
accordance with such change, but all calculations and determinations to be made
hereunder may be made in accordance with such change only after notice of such
change is given to Agent and Agent agrees to such change insofar as it affects
the accounting of Borrower.

 

“Governmental
Authority” means any nation or government, any agency,
department, state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

9

 

“Governmental
Requirement” means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing which relate to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of any arbitrator, court or other Governmental Authority, which
exercises jurisdiction over any Related Person or any of its Property.

 

“Guaranty Obligation” of any
Person means any contract, agreement or understanding of such Person pursuant
to which such Person guarantees, or in effect guarantees, any Indebtedness,
lease, dividends or other obligations (the “Primary Obligations”) of any other
Person (the “Primary
Obligor”) in any manner, whether directly or indirectly,
contingently or absolutely, in whole or in part, including without limitation
agreements:

 

(a)                                  to
purchase such Primary Obligation or any property constituting direct or
indirect security therefor;

 

(b)                                 to
advance or supply funds (A) for the purchase or payment of any such
Primary Obligation, or (B) to maintain working capital or other balance
sheet conditions of the Primary Obligor or otherwise to maintain the net worth
or solvency of the Primary Obligor;

 

(c)                                  to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such Primary Obligation of the ability of the Primary Obligor
to make payment of such Primary Obligation; or

 

(d)                                 otherwise
to assure or hold harmless the owner of any such Primary Obligation against
loss in respect thereof;

 

provided that “Guaranty Obligation”
shall not include endorsements that are made in the ordinary course of business
of negotiable instruments or documents for deposit or collection.  The amount of any Guaranty Obligation shall
be deemed to be the maximum amount for which the guarantor may be liable
pursuant to the agreement that governs such Guaranty Obligation, unless such
maximum amount is not stated or determinable, in which case the amount of such
obligation shall be the maximum reasonably anticipated liability thereon, as
determined by such guarantor in good faith.

 

“Hedging
Agreement” shall mean any agreement relating to a Hedging
Transaction.

 

“Hedging Transaction” means
each interest rate swap transaction, basis swap transaction, forward rate
transaction, equity transaction, equity index transaction, foreign exchange
transaction, cap transaction and floor transaction (including any option with
respect to any of these transactions and any combination of any of the
foregoing)

 

“HELOC”
means a home equity line of credit.

 

“Indebtedness”
of any Person at a particular date means the sum (without duplication) at such
date of (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services or which is evidenced by a
note, bond, debenture, or similar instrument, (b) all obligations of such
Person under any Financing Lease, (c) all obligations of

 

10

 

such Person in
respect of letters of credit, acceptances, or similar obligations issued or
created for the account of such Person, (d) all Guaranty Obligations of
such Person, (e) all liabilities secured by any Lien on any property owned
by such Person, whether or not such Person has assumed or otherwise become
liable for the payment thereof, (f) any liability of such Person in
respect of unfunded vested benefits under an ERISA Plan, (g) net
obligations of such Person under any Hedging Agreement, and (g) all
liabilities of such Person in respect of indemnities or repurchase obligations
(other than customary, industry-standard indemnities given in connection with
the sale of Mortgage Loans by such Person which are not of a nature which would
cause such sale to be classified as a sale on a “recourse” basis) made in
connection with the sale of Mortgage Loans.

 

“Indemnified Taxes” means
Taxes other than Excluded Taxes.

 

“Investment Loan”
means a Mortgage Loan secured by a Mortgage on an Investment Property.

 

“Investment
Property” means a Single Family dwelling which the Obligor has
represented to Borrower is not the Principal Residence or Second/Vacation
Property of the Obligor under the related Mortgage Loan.

 

“Investor”
means any Person listed on Exhibit C
or any other Person approved by Agent from time to time, such approval not to
be unreasonably withheld, with notice of such approval thereafter provided to
Lenders, which notice may be given electronically or by posting on Intralinks.

 

“Jumbo Loan”
means a Single Family Mortgage Loan which (i) is secured by a first-lien
Mortgage, (ii) has an original principal balance of greater than the
current FNMA/FHLMC loan size limit but less than or equal to $1,500,000, (iii) is
a Limited Documentation Mortgage Loan or a Full Documentation Mortgage Loan, (iv) has
a FICO score greater than or equal to 620, and (v) has a LTV less than or
equal to 100%.

 

“Law”
means any statute, law, regulation, ordinance, rule, treaty, judgment, order,
decree, permit, concession, franchise, license, agreement or other governmental
restriction of the United States or any state or political subdivision
thereof.  Any reference to a Law includes
any amendment or modification to such Law, and all regulations, rulings, and
other Laws promulgated under such Law.

 

“Lender”
and “Lenders” have the meaning assigned
to such terms in the preamble hereof.

 

“LIBOR”
means, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) equal to the rate appearing on Bloomberg Professional (or,
if not available, any other nationally recognized trading screen reporting the
British Bankers’ Association LIBOR) at 10:00 a.m. (Central time) as the
British Bankers’ Association LIBOR for deposits in U.S. Dollars with a term
equivalent to one month.  In the event
that such rate does not appear on Bloomberg Professional, “LIBOR”
for purposes of this definition shall be determined by reference to such other
comparable publicly available service for displaying London inter-bank offered
rates as may be selected by the Agent.

 

11

 

“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (whether statutory or otherwise), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever intended to secure payment of any obligations or liabilities
(including, without limitation, any conditional sale or other title retention
agreement, any Financing Lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing).

 

“Limited
Documentation Mortgage Loan” means a Mortgage Loan supported by
all of the customary documentation required to underwrite the Mortgage Loan
except that a minimum of one (1) and a maximum of two (2) of the
following verifications were performed:  (i) Verification
of Income (“VOI”), (ii) Verification of Assets (“VOA”), and/or (iii) Verification
of Employment (“VOE”).

 

“Loan”
means a Committed Loan or a Swingline Loan and “Loans”
means all Committed Loans and all Swingline Loans.

 

“Loan Balance”
means for any day, the principal balance of the Loans outstanding on such day.

 

“Loan Document”
means any, and “Loan
Documents” shall mean all, of this Agreement, the Notes, the
Security Instruments, the Fee Letter, any Approved Letter of Credit and any and
all other agreements or instruments now or hereafter executed and delivered by
Borrower or Parent in connection with, or as security for the payment or
performance of any or all of the Obligations, as any of such may be renewed,
amended or supplemented from time to time.

 

“Loan to Value”
or “LTV”
means, as to any Mortgage Loan, the ratio expressed as a percentage determined
by dividing (i) the total principal amount owing and outstanding on the
first-lien Mortgage Loan, by (ii) the Appraised Value of the residential
real property and improvements serving as collateral for the Mortgage Loan.

 

“Market Value”
on any day shall be determined by Agent, in its reasonable discretion, based
upon (a) information then available to Agent regarding quotes to dealers
for the purchase of mortgage notes similar to the Mortgage Notes that have been
delivered to Agent pursuant to this Agreement or (b) sales prices actually
received by Borrower for mortgage notes sold by Borrower during the immediately
preceding thirty (30) day period similar to the Mortgage Notes that have been
delivered to Agent pursuant to this Agreement.

 

“Material
Adverse Effect” means any material adverse effect on (a) the
validity or enforceability of this Agreement, the Notes or any other Loan
Document, (b) the business, operations, total Property or financial
condition of the Borrower or the Borrower and the Related Persons taken as a
whole, (c) the Collateral under the Security Agreement, or (d) the
ability of Borrower to fulfill its obligations under this Agreement, the Notes,
or any other Loan Document to which it is a party.

 

“Maximum Rate”
means, with respect to each Lender, the maximum nonusurious rate of interest
that such Lender is permitted under applicable Law to contract for, take,
charge, or receive with respect to its Loans.

 

12

 

“MERS”
means Mortgage Electronic Registration Systems, Inc., a Delaware
corporation, or any successor thereto.

 

“MERS Agreement”
means those agreements by and among Borrower, Agent, MERS and MERSCORP, Inc.,
as amended, modified, supplemented, extended, restated or replaced from time to
time, including, without limitation, the “Electronic Tracking Agreement:
Warehouse Lender Agreement” executed of even date herewith.

 

“MERS® System”
means the system of recording transfers of mortgages electronically maintained
by MERS.

 

“MIN”
means, with respect to each Mortgage Loan, the Mortgage Identification Number
for such Mortgage Loan registered with MERS on the MERS® System.

 

“Mortgage”
means a mortgage, deed of trust or deed to secure debt on standard forms
customary for transactions of such type and otherwise in form and substance
satisfactory to Agent in its reasonable discretion, securing a Mortgage Note
and granting a perfected, first or second priority lien on Single Family
property.

 

“Mortgage
Collateral” means all Mortgage Notes (a) which are made
payable to the order of Borrower or have been endorsed (without restriction or
limitation) payable to the order of Borrower, (b) in which Agent has been
granted and continues to hold a perfected first priority security interest for
the benefit of the Lenders, (c) which are in form and substance acceptable
to Agent in its reasonable discretion, (d) which are secured by Mortgages,
and (e) which conform in all respects with all the requirements for
purchase of such Mortgage Note under the Take-Out Commitments and are valid and
enforceable in accordance with their respective terms.

 

“Mortgage Loan”
means a mortgage loan which is evidenced by a Mortgage Note and secured by a
Mortgage, together with the rights and obligations of a holder thereof and
payments thereon and proceeds therefrom.

 

“Mortgage Note”
means the note or other evidence of indebtedness evidencing the indebtedness of
an Obligor under a Mortgage Loan.

 

“Net Income”
of any Person means, for any period, the net income of such Person for such
period, calculated in accordance with GAAP.

 

“Net Worth”
of any Person means, as of any date, an amount equal to all Consolidated assets
of such Person minus such Person’s Consolidated liabilities, each as
determined by GAAP.

 

“Nonprime-A Loan”
means a Single Family Mortgage Loan which (i) is secured by a first-lien
Mortgage, (ii) is not a Conforming Mortgage Loan, FHA Loan or VA Loan, (iii) has
an original principal balance of less than or equal to the current FNMA/FHLMC
loan size limit, (iv) is a Full Documentation Mortgage Loan, (v) has
a FICO score greater than or equal to 580 but less than 620, and (vi) has
a LTV less than or equal to 90%.

 

“Nonprime-B Loan”
means a Single Family Mortgage Loan which (i) is secured by a first-lien
Mortgage, (ii) is not a Conforming Mortgage Loan, FHA Loan or VA Loan, (iii) has
an

 

13

 

original
principal balance of less than or equal to $400,000, and (iv) is either (A) a
Full Documentation Mortgage Loan with a FICO score greater than or equal to 500
but less than 580 and with a LTV less than or equal to 90%, or (B) a
Limited Documentation Mortgage Loan with a FICO score greater than or equal to
550 but less than 580 and with a LTV less than or equal to 80%.

 

“Note”
means any promissory note delivered by Borrower to any Lender pursuant to Section 2.2
in the form attached hereto as Exhibit A
and all renewals, modifications and extensions thereof.

 

“Obligations”
means all present and future Indebtedness, obligations, and liabilities of
Borrower to Lenders, and all renewals and extensions thereof, or any part
thereof, arising pursuant to this Agreement or any other Loan Document, and all
interest accrued thereon, and reasonable attorneys’ fees and other reasonable
out-of-pocket costs actually incurred in the drafting, negotiation, enforcement
or collection thereof, regardless of whether such Indebtedness, obligations,
and liabilities are direct, indirect, fixed, contingent, joint, several or
joint and several.

 

“Obligor”
means the Person or Persons obligated to pay the Indebtedness which is the
subject of a Mortgage Loan.

 

“Operating
Account” means any non-interest bearing demand checking account (whether
one or more) established by Borrower with Agent to be used for Borrower’s
operations.  Subject to Agent’s rights
under Section 10.10 hereof, Borrower shall be entitled to withdraw
funds from the Operating Account.

 

“Other Taxes” means all
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Parent”
means Beazer Homes USA, Inc., a Delaware corporation, and owner, directly
or indirectly, of one hundred percent (100%) of the outstanding capital stock
of Borrower.

 

“PBGC”
means the Pension Benefit Guaranty Corporation or any Governmental Authority
succeeding to any of its functions.

 

“Permitted Warehouse Debt”
means Indebtedness not in excess of $100,000,000 under other mortgage
collateralized credit facilities the terms and conditions of which shall be
customary for financings of this type and otherwise acceptable to the Agent in
its reasonable discretion, provided  that the collateral agent for
other mortgage collateralized credit facilities shall be the Agent hereunder.

 

“Person”
means any individual, corporation, partnership, joint venture, association,
joint stock company, limited liability company, trust, unincorporated
organization, Governmental Authority, or any other form of entity.

 

14

 

“Prime Loan”
means a Single Family Mortgage Loan which (a)(i) is secured by a
first-lien Mortgage, and (ii) is a Conforming Mortgage Loan, FHA Loan or
VA Loan, or (b)(i) is secured by a first-lien Mortgage, (ii) has an
original principal balance of less than or equal to the current FNMA/FHLMC loan
size limit, (iii) is a Full Documentation Mortgage Loan, (iv) has a
FICO score greater than or equal to 620, and (v) has a LTV less than or
equal to 100%.

 

“Prime Rate” means the rate of
interest per annum then most recently established by Guaranty Bank as its
published or publicly announced prime rate, which rate may not be the lowest
rate of interest charged by Guaranty Bank to its borrowers.  Each change in any interest rate provided for
herein based upon the Prime Rate resulting from a change in the Prime Rate
shall take effect without notice to the Borrower at the time of such change in
the Prime Rate.

 

“Principal
Residence” means a Single Family dwelling that the Obligor
represents as being occupied as the Obligor’s primary residence.

 

“Property”
means any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.

 

“Regulation U”
means Regulation U issued by the Board of Governors of the Federal Reserve
System as in effect from time to time.

 

“Regulation X”
means Regulation X issued by the Board of Governors of the Federal Reserve
System as in effect from time to time.

 

“Regulation Z”
means Regulation Z issued by the Board of Governors of the Federal Reserve
System as in effect from time to time.

 

“Related Persons”
means Borrower and each of Borrower’s Subsidiaries.

 

“Reportable
Event” means (1) a reportable event described in Sections
4043(c)(5) or (6) of ERISA or the regulations promulgated thereunder,
or (2) any other reportable event described in Section 4043(c) of
ERISA or the regulations promulgated thereunder other than a reportable event
not subject to the provision for 30-day notice to the PBGC pursuant to a waiver
by the PBGC under Section 4043(a) of ERISA.

 

“Required Lenders” means, at
any time, the holders of 66 2/3% or more of the total Commitments, or if at any
time, the Commitments are terminated, the holders of 66 2/3% or more of the
aggregate outstanding principal amount of all Loans; provided, however,
that if only two Lenders hold 100% of the Commitments or 100% of the aggregate
outstanding principal amount of all Loans when the Commitments are terminated,
then Required Lenders shall mean both Lenders.

 

“Required
Mortgage Documents” means, as to any Mortgage Loan, the items
described on Schedule A to the
Security Agreement.

 

“Requirement of
Law” as to any Person means the charter and by-laws or other
organizational or governing documents of such Person, and any law, statute,
code, ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license,

 

15

 

authorization
or other determination, direction or requirement (including, without
limitation, any of the foregoing which relate to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of any arbitrator, court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.

 

“Second
Lien/HELOC Loan” means a Single Family Mortgage Loan which (a)(i) is
secured by a traditional closed-end second-lien Mortgage or an open-end HELOC
Mortgage, (ii) is a Limited Documentation Mortgage Loan or a Full
Documentation Mortgage Loan, (iii) has a FICO score greater than or equal
to 620, and (iv) has a CLTV less than or equal to 100%, or (b)(i) is
secured by a traditional closed-end second-lien Mortgage or an open-end HELOC
Mortgage, (ii) has a CLTV less than or equal to 100%, and (iii) is
closed concurrently with a first-lien Mortgage Loan that is also pledged as
Collateral and accepted as an Eligible Mortgage Loan hereunder.

 

“Second/Vacation
Property” means a Single Family dwelling that the Obligor has
represented to Borrower is not used for rental purposes and that the Obligor
occupies for some portion of the year.

 

“Security
Agreement” means the Security Agreement between Borrower and
Agent of even date herewith, as the same may from time to time be further
supplemented, amended or restated.

 

“Security
Instrument” means (a) the Security Agreement and (b) such
other executed documents as are or may be necessary to grant to Agent, for the
benefit of the Lenders, a perfected first prior and continuing security
interest in and to all Mortgage Collateral, and any and all other agreements or
instruments now or hereafter executed and delivered by Borrower in connection
with, or as security for the payment or performance of, all or any of the Obligations,
including Borrower’s obligations under the Notes and this Agreement, as such
agreements may be amended, modified or supplemented from time to time.

 

“Servicing
Agreements” means all agreements between the Related Persons and
Persons other than a Related Person pursuant to which a Related Person
undertakes to service Mortgage Loans.

 

“Servicing
Records” means all contracts and other documents, books, records
and other information (including without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to the Servicing Rights.

 

“Servicing
Rights” means all of right, title and interest of any Related
Person in and under the Servicing Agreements, including, without limitation,
the rights of a Related Person to income and reimbursement thereunder.

 

“Settlement
Account” means the non-interest bearing demand deposit account
established by Borrower with Agent to be used for (i) the deposit of
proceeds from the sale of Mortgage Collateral, and (ii) the payment of the
Obligations; provided  that (a) the Settlement

 

16

 

Account shall
be pledged to Agent for the benefit of the Lenders, and (b) Borrower shall
not be entitled to withdraw funds from the Settlement Account.

 

“Single Family”
means residential real property consisting a completed one-to-four unit single
family dwelling thereon (including Principal Residences, Second/Vacation
Property and Investment Property), which may be a condominium unit, and which
is fully completed and ready for occupancy, and which is not used for
commercial purposes, is not a leasehold interest, and is not a manufactured or
mobile home.

 

“Subsidiary”
means, with respect to any Person, any corporation, association, partnership,
joint venture, or other business or corporate entity, enterprise or
organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent (50%) or more by such
Person.

 

“Swingline Amount” means Fifty
Million Dollars ($50,000,000.00).

 

“Swingline Lender” means
Guaranty Bank in its capacity as Swingline Lender under this Agreement.

 

“Swingline Loan” has the
meaning ascribed to such term in Section 2.1(b).

 

“Swingline Obligations” has
the meaning ascribed to such term in Section 2.1(b).

 

“Take-Out
Commitment” means with respect to any Eligible Mortgage Loan, a
written master commitment of an Investor to purchase a pool of Mortgage Loans
or an individual commitment of an Investor to purchase an individual Mortgage
Loan under which such Eligible Mortgage Loan(s) will be delivered to such
Investor on terms customary for transactions of this type and otherwise
satisfactory to Agent, in its reasonable discretion.

 

“Tangible Net
Worth” of any Person means, as of any date, the Net Worth of
such Person minus (a) all Consolidated assets of such Person which
would be classified as intangible assets under GAAP, including but not limited
to goodwill (whether representing the excess cost over book value of assets
acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises, deferred charges and capitalized servicing rights, minus (b) all
Indebtedness owing to such Person from (i) Affiliates of such Person, and (ii) shareholders,
members or partners of such Person.

 

“Taxes” means all present or
future taxes, levies, imposts, duties, deductions, withholdings, assessments,
fees or other charges imposed by any Governmental Authority, including any
interest, additions to tax or penalties applicable thereto.

 

“Termination
Event” means (a) the occurrence with respect to any ERISA
Plan of a Reportable Event, (b) the withdrawal of the Borrower or any
ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial
employer,” as defined in Section 4001(a)(2) of ERISA, (c) the
distribution to affected parties of a notice of intent to terminate any ERISA
Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041
of ERISA, (d) the institution of proceedings to terminate any ERISA Plan
by the PBGC under Section 4042 of ERISA, or (e) any other event or
condition which might

 

17

 

constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any ERISA Plan.

 

“Total Debt”
of any Person means, as of any date, all amounts which would be included as
liabilities on a Consolidated balance sheet of such Person as of such date
prepared in accordance with GAAP.

 

“UCC”
means the Texas Uniform Commercial Code, as the same may hereafter be amended.

 

“UETA”
means the Texas Uniform Electronic Transaction Act, as amended from time to
time.

 

“Unit Collateral
Value” means, on any day, with respect to each Eligible Mortgage
Loan included in the Borrowing Base, the Applicable Advance Rate Percentage of
the least of the following:

 

(i)                                     the outstanding
principal balance of the Mortgage Note constituting such Mortgage Loan;

 

(ii)                                  the
actual out-of-pocket cost to Borrower of such Mortgage Loan minus the amount of
principal paid under such Mortgage Loan and delivered to Agent for application
to the prepayment of the Loans;

 

(iii)                               as
applicable, either (a) the amount at which an Investor has committed to
purchase an individual Mortgage Loan pursuant to a Take-Out Commitment, or (b) the
weighted average purchase price (expressed as a percentage of par) committed to
under those Take-Out-Commitments that could cover such Mortgage Loan multiplied
by the unpaid principal balance of such Mortgage Loan; or

 

(iv)                              the
Market Value of the Mortgage Note constituting such Mortgage Loan.

 

provided  that
if any such Eligible Mortgage Loan included in the Borrowing Base becomes an
Aged Loan, the Unit Collateral Value of such Mortgage Loan as determined by the
above calculation shall be reduced by five percent (5%), and Borrower shall
immediately, on such Eligible Mortgage Loan’s ninety-first (91st)
day in the Borrowing Base, make mandatory repayment required by Section 2.5;
and

 

provided  further,
that no Eligible Mortgage Loan may be included in the Borrowing Base for more
than one hundred twenty (120) days, such that on the one hundred twenty-first
(121st) day after such Eligible Mortgage Loan is first included in
the Borrowing Base, the Unit Collateral Value of such Mortgage Loan shall be
reduced to zero, and Borrower shall immediately make mandatory repayment
required by Section 2.5.  The
values described in clauses (i), (ii) and (iii) above shall be
initially determined by Borrower as of the date the applicable Eligible
Mortgage Loan is initially pledged to Agent and shall be reported by Borrower
to Agent in the Borrowing Request.

 

“VA”
means the Veterans Administration and any successor thereto.

 

18

 

“VA Loan”
means a Mortgage Loan guaranteed by the VA.

 

“Weighted Average Commitment”
means the average amount of a Lender’s Commitment from the date hereof until
the Drawdown Termination Date, taking into account the automatic increases in
each Lender’s Commitment (as described in the definition of Commitment).  The Weighted Average Commitment for each
Lender shall be calculated by (a) multiplying the amount set forth under
the heading “Maximum Commitment” opposite such Lender’s name on Schedule 1.1
hereof by 120 days, (b) multiplying the amount set forth under the heading
“Commitment” opposite such Lender’s name on Schedule 1.1 hereof
multiplied by 244 days, and (c) adding the results in (a) and (b) above
and then dividing the sum by 364.

 

“Wet Loan”
means an Eligible Mortgage Loan which is included in the Borrowing Base, but
for which the Required Mortgage Documents have not been delivered to Agent.

 

Other Definitional Provisions.

 

(a)                                  Unless
otherwise specified therein, all terms defined in this Agreement shall have the
above-defined meanings when used in the Notes or any other Loan Document,
certificate, report or other document made or delivered pursuant hereto.

 

(b)                                 Each
term defined in the singular form in Section 1.1 shall mean the
plural thereof when the plural form of such term is used in this Agreement, the
Notes or any other Loan Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in Section 1.1
shall mean the singular thereof when the singular form of such term is used
herein or therein.

 

(c)                                  The
words “hereof,” “herein,” “hereunder” and similar terms when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and section, subsection, schedule and exhibit
references herein are references to sections, subsections, schedules and
exhibits to this Agreement unless otherwise specified.  The word “or” is not exclusive, and the word “including”
(in its various forms) means “including without limitation.”

 

(d)                                 Unless
the context otherwise requires or unless otherwise provided herein the terms
defined in this Agreement which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions, modifications,
amendments and restatements of such agreement, instrument or document, provided
that nothing contained in this section shall be construed to authorize any
such renewal, extension, modification, amendment or restatement.

 

(e)                                  As
used herein, in any Note or in any other Loan Document, certificate, report or
other document made or delivered pursuant hereto, accounting terms relating to
any Person and not specifically defined in this Agreement or therein shall have
the respective meanings given to them under GAAP.

 

Section 1.2                            Exhibits
and Schedules.  All Exhibits and
Schedules attached to this Agreement are a part hereof for all purposes.

 

19

 

Section 1.3                            Calculations
and Determinations.  All calculations
under the Loan Documents of interest and of fees shall be made on the basis of
actual days elapsed (including the first day but excluding the last) and a year
of three hundred sixty (360) days.  Each
determination by Agent of amounts to be paid hereunder shall, in the absence of
manifest error, be conclusive and binding. 
Unless otherwise expressly provided herein or unless Lenders otherwise
consent, all financial statements and reports furnished to Lenders hereunder
shall be prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP. 
Agent shall deliver to Borrower an interest billing statement for each
month on or before the fifth (5th) day of the next succeeding month,
which interest billing statement shall set forth the interest accrued on the
Loans for such month; provided that any failure or delay in delivering such
interest billing or any inaccuracy therein shall not affect the Obligations.

 

ARTICLE II

 

AMOUNT AND TERMS OF LOANS

 

Section 2.1                            Commitment
and Loans.

 

(a)                        Committed
Loans.  Subject to the terms and
conditions contained in this Agreement, each Lender severally agrees to make
loans (“Committed Loans”) to Borrower, on a pro-rata
basis in accordance with such Lender’s Commitment Percentage, on a revolving
credit basis from time to time on any Business Day from the date of this
Agreement through the Drawdown Termination Date.  The aggregate amount of all Loans requested
in any Borrowing Request must be equal to the lesser of (i) an amount
greater than or equal to $25,000 or (ii) an amount equal to the unadvanced
portion of the Borrowing Base.  After
giving effect to the transactions contemplated by the Borrowing Request
pursuant to which a Loan is requested, and at all other times, the aggregate
amount of all Committed Loans and all Swingline Loans outstanding shall not
exceed the Collateral Value of the Borrowing Base.

 

(b)                       Swingline
Loans.

 

(i)                                     Swingline
Loans.  Subject to the terms and
conditions hereof, the Swingline Lender, in its sole and absolute discretion,
and in reliance upon the agreements of the other Lenders set forth in this Section 2.1(b),
may make loans (each a “Swingline Loan”
and collectively, the “Swingline Loans”)
to the Borrower from time to time during the period from and including the date
of this Agreement and through the Drawdown Termination Date, notwithstanding
the fact that such Swingline Loans, when aggregated with the outstanding
principal amount of all Committed Loans of the Lender acting as Swingline Lender,
may exceed the amount of such Lender’s Commitment, provided, however,
that at no time shall the Swingline Lender make a Swingline Loan if,
immediately after giving effect thereto, (i) the aggregate outstanding
principal amount of all Swingline
Loans would exceed the Swingline Amount, (ii) the aggregate outstanding
principal amount of all Swingline Loans and the aggregate outstanding principal
amount of all Committed Loans would exceed either (A) the total
Commitments of all Lenders, or (B) the Collateral Value of the Borrowing
Base, or (iii) the aggregate outstanding principal amount of all Committed
Loans of any Lender plus such Lender’s applicable

 

20

 

Commitment Percentage of the aggregate
outstanding principal amount of all Swingline Loans would exceed such Lender’s
Commitment.

 

(ii)                                  Swingline
Take-Out.  By no later than 2:00 p.m.
(Central time) on any Business Day upon which the Swingline Lender shall so
demand (and in any event not more than five (5) Business Days after a
particular Swingline Loan is made or such earlier date on which the Swingline
Amount is fully funded), the Agent shall notify each Lender of the aggregate
outstanding principal balance of the Swingline Loans as of the commencement of business
of the Agent on such Business Day (the “Swingline Obligations”) and,
subject only to its receipt of such notice and regardless of whether any
Default or Event of Default shall have occurred, whether the Commitments shall
have been reduced or terminated or any other matter whatsoever, each Lender
shall (i) make a Loan to the Borrower in an amount equal to its Commitment
Percentage of such Swingline Obligations, and (ii) make the amount of such
Loan available to the Agent for the account of the Borrower not later than 3:00 p.m.
(Central time), on such Business Day, in funds immediately available to the
Agent at Agent’s office.  The funds so
made available to the Agent on such Business Day in respect of such Loans will
then be disbursed by the Agent directly to the Swingline Lender as payment in
respect of the Swingline Obligations. 
Notwithstanding anything to the contrary contained in this Agreement, to
the extent that the Swingline Lender, in its capacity as a Lender hereunder,
shall be required to fund its Commitment Percentage of any Swingline Loan
take-out under this Section 2.1(b)(ii), the Swingline Lender and
the Agent shall net out the funding thereof against the payments to be received
by the Swingline Lender in respect of such take-out.  In the event one of the events described in Section 7.1(f)(ii) shall
have occurred and be continuing with respect to the Borrower or if for any
other reason, as determined by Agent in its sole discretion, Loans may not be
made as contemplated by this Section 2.1(b)(ii), each Lender shall,
on the date such Loan was to have been made pursuant to this section, purchase
for cash an undivided participating interest in the then outstanding Swingline
Loans by paying to the Agent, for distribution to the Swingline Lender, an
amount equal to its Commitment Percentage of such Swingline Obligations.

 

(iii)                               Indemnification
of Swingline Lender.  The Lenders
agree to reimburse and indemnify the Swingline Lender ratably in proportion to
their Commitment Percentages (or, if the Commitments have been terminated, in
proportion to their Commitment Percentages immediately prior to such
termination) from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, costs and expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
arising out of or in connection with any Swingline Loan, including
the foregoing in respect of losses, liabilities or other obligations suffered
by the Swingline Lender resulting from its own negligence or strict liability and
excluding the foregoing with respect to losses, liabilities and other
obligations resulting from its own gross negligence or willful misconduct.  If a Lender does not make available to
the Swingline Lender when due such Lender’s Commitment Percentage of any such
loss, liability, judgment, cost or expense, such Lender shall be required to
pay on demand interest thereon for the account of the Swingline Lender at a
rate of interest per annum equal to LIBOR, from the date such Lender’s payment
is due until the date such payment is received by the Swingline Lender.

 

21

 

Section 2.2         Promissory Notes; Interest on the
Notes.  The obligation of Borrower to
repay the Loans made by Lenders, together with interest accruing in connection
therewith, shall be evidenced by a Note payable to the order of each Lender in
the amount of such Lender’s Commitment. 
Interest on the Notes shall be due and payable as provided herein and
therein.  The entire Loan Balance and all
accrued and unpaid interest thereon shall be finally due and payable on the
Drawdown Termination Date.

 

Interest on each Loan shall accrue at a rate
per annum equal to the lesser of (a) the sum of LIBOR, floating daily, plus the
Applicable Margin, or (b) the Prime Rate. 
Interest on the Notes shall be calculated on the basis of the actual
days elapsed but computed as if each year consisted of 360 days, subject to the
provisions hereof limiting interest to the Maximum Rate, which Maximum Rate
shall be calculated on the basis of actual days elapsed computed on the basis
of a 365/366 day year, as applicable. 
All accrued but unpaid interest shall be payable in arrears on the
fifteenth (15th) day of the succeeding month.

 

After an Event of Default, at the option of
Required Lenders, interest shall accrue on the outstanding principal balance of
the Notes at a rate per annum equal to the lesser of (x) the Default Rate or
(y) the Maximum Rate.  All
calculations of interest shall be on the basis of the actual days elapsed but
computed as if each year consisted of 360 days, except that calculations of
interest based on the Maximum Rate shall be computed on a 365/366 day year, as
applicable.

 

Section 2.3         Notice and Manner of Obtaining Loans.  Borrower must give written notice (which may
be sent by electronic mail) to Agent, or telephonic notice promptly confirmed
in writing, of each request for Loans. 
Each such written request or confirmation must be made in the form and
substance of the “Borrowing Request” attached hereto as Exhibit B,
duly completed.  Each such Borrowing
Request must:

 

(a)        specify the aggregate amount of any such Borrowing of new
Loans and the date on which such Loans are to be advanced; and

 

(b)        for any Committed Loan, be received by Agent not later than
2:00 p.m. (Central time) on the day on which any such Committed Loans are to be
made, and for any Swingline Loan, be received by Agent not later than 3:00 p.m.
(Central time) on the day on which any such Swingline Loans are to be made.  Notwithstanding the foregoing, Agent is
hereby authorized by the Lenders to treat any Borrowing Request as a request
for Committed Loans or a request for Swingline Loans, in its sole discretion,
regardless of the time such Borrowing Request is received by Agent.

 

With each
delivery of a Borrowing Request to Agent, Borrower represents and warrants to
Agent and Lenders the following:

 

(i)         Borrower
is entitled to receive the requested Loan under the terms and conditions of
this Agreement;

 

(ii)        all
items which Borrower is required to furnish to Agent pursuant to this Agreement
accompany the Borrowing Request (or, if Wet Loans, shall be delivered to Agent
in accordance with this Agreement and the Security Agreement);

 

22

 

(iii)       all
Mortgage Loans offered thereby conform in all respects with the applicable
requirements set forth in the Agreement;

 

(iv)       no
Default or Event of Default has occurred and is continuing under the Agreement;

 

(v)        after
giving effect to the Loan requested thereby the aggregate amount of the
outstanding principal balance of the Loans will not exceed the lesser of (l) the
Collateral Value of the Borrowing Base and (2) the total Commitments of all
Lenders; and

 

(vi)       after
giving effect to the Loans requested thereby, no Applicable Sublimit will be
exceeded.

 

Additionally,
with each Borrowing Request, Borrower represents and warrants that, except as
permitted under this Agreement or the Security Agreement, Borrower holds with
respect to each of the Mortgage Notes offered the following:

 

(i)         unless
delivered therewith, the original filed copy of the Mortgage relating to such
Mortgage Note;

 

(ii)        mortgagee
policies of title insurance conforming to the requirements of this Agreement
and the Security Agreement or binding commitments for the issuance of same;

 

(iii)       insurance
policies insuring the mortgaged premises as required by this Agreement and the
Security Agreement; and

 

(iv)       unless
delivered therewith, an original of any executed Take-Out Commitment relating
to such Mortgage Note.

 

With the
delivery of each Borrowing Request, Borrower agrees that, unless delivered to
the Agent therewith, it holds the above referenced items in trust for Agent,
and will at any time deliver the same to Agent upon written request or, upon
written instructions from Agent, to any Person designated by Agent, promptly,
and in any event within seven (7) Business Days after such request or
instructions.  Borrower further agrees
that it will not deliver any of the above items, nor give, transfer, or assign
any interest in same, to any Person other than Agent (or the Person or Persons
designated by Agent) without the prior written consent of Agent.

 

Each such
telephonic request shall be deemed a representation, warranty, acknowledgment
and agreement by Borrower as to the matters which are required to be set out in
such written confirmation.  If all conditions
precedent to such Loan have been met, Agent will, promptly upon receipt of
funds from the Lenders or the Swingline Lender, remit to Borrower the amount of
such Loan in immediately available dollars, by crediting the Funding Account
with immediately available funds as the amount of such Loan.

 

23

 

Section 2.4         Fees.

 

(a)        Facility Fee.  In
consideration of the Lenders’ commitment to make the Loans, Borrower will pay
to each Lender a non-refundable facility fee determined by applying a rate of
twenty two and one-half basis points (0.225%) per annum to each Lender’s Weighted
Average Commitment.  This facility fee
shall be due and payable on the date of this Agreement.

 

(b)        Agent’s Fees. 
Borrower shall pay to Agent, for its own account, a collateral handling
fee and an agency fee in the amounts and at the times set forth in the Fee Letter.

 

Section 2.5         Mandatory Repayments.  If at any time the Loan Balance exceeds the
Collateral Value of the Borrowing Base (as a result of an Applicable Sublimit
being exceeded or otherwise), Borrower shall repay the amount of such excess or
deliver sufficient Eligible Mortgage Loans to increase the Collateral Value of
the Borrowing Base by the amount of such excess Loan Balance, or a combination
of the foregoing, within one (1) Business Day after written notice thereof is
given by Agent to Borrower.

 

Section 2.6         Payments to Lenders.  All payments of interest on the Notes, all
payments of principal, including any principal payment made with proceeds of
Mortgage Collateral, and fees hereunder shall be made directly to Agent without
condition or deduction for any counterclaim, defense, recoupment, setoff, or
withholding or deduction for taxes, for the pro-rata benefit of each Lender, in
federal or other immediately available funds before 10:00 a.m. (Central time)
on the respective dates when due via wire transfer to the Settlement
Account.  The Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received, and in
any event before 3:00 p.m. on the day received.  Borrower shall send notice to Agent before 10:00
a.m. (Central time) on the day any payment of principal or interest is received
by Agent which sets forth the Loans against which such payment is to be
applied.  Any payment (or any payment
received without a notice regarding application of such payment) received by
Agent after such time will be deemed to have been made on the next following
Business Day.  Should any such payment
become due and payable on a day other than a Business Day, the maturity of such
payment shall be extended to the next succeeding Business Day, and, in the case
of a payment of principal or past due interest, interest shall accrue and be
payable thereon for the period of such extension as provided in the Loan
Document under which such payment is due. 
Each payment under a Loan Document shall be payable at the place
provided therein and, if no specific place of payment is provided, shall be
payable at the place of payment of the Notes. 
Prior to the occurrence of an Event of Default and the exercise of
remedies by Agent, when Agent collects or receives money on account of the
Obligations, Agent shall apply all such money so distributed, as follows:

 

(a)        first, to any reimbursements due Agent under Section 5.5
and to any fees due Agent under the Fee Letter;

 

(b)        second, to any reimbursements due Lenders under Section 5.5;

 

(c)        third, prior to a Default or Event of Default, to the payment
of the Loans then due, as directed by Borrower;

 

(d)        fourth, to the prepayment of principal on the Notes, together
with accrued and unpaid interest on the principal so prepaid; and

 

24

 

(e)        last, to the payment or prepayment of any other Obligations,
and the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to the Borrower or as otherwise required by law.

 

All payments
applied to principal or interest on any Note shall be applied first to any
interest then due and payable, then to principal then due and payable, and last
to any prepayment of principal.

 

Section 2.7         Notification by the Agent.  Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Borrowing Request and repayment
notice received by it hereunder.  Upon
the request of Agent, not later than 3:00 p.m. (Central time) on the day on
which any Committed Loans are to be made, each Lender shall make available its
pro rata portion of the Loan or Loans in accordance with such Lender’s
Commitment in immediately available funds to the Agent at its address specified
on Agent’s signature page hereto.

 

Section 2.8         Non-Receipt of Funds by the Agent.

 

(a)        Unless the Agent shall have been notified in writing by any
Lender prior to a Borrowing that such Lender will not make the amount that
would constitute its share of such Borrowing available to the Agent, the Agent
may assume that such Lender is making such amount available to the Agent, and
the Agent may, in its sole and absolute discretion, in reliance upon such
assumption, make available to the Borrower a corresponding amount.  If such amount is not made available to the
Agent by the required time therefor, and Agent elects to make such
corresponding amount available to the Borrower, such Lender shall pay to the
Agent, on demand, such amount with interest thereon, at a rate equal to the
Federal Funds Rate, for the period until such Lender makes such amount
immediately available to the Agent.  A
certificate of the Agent submitted to any Lender with respect to any amounts
owing under this paragraph shall be conclusive in the absence of manifest
error.  If such Lender’s share of such
borrowing is not made available to the Agent by such Lender within three (3)
Business Days after such Borrowing date, the Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
the relevant Loan, on demand, from the Borrower.  Nothing in this Section shall be deemed to
limit the rights of the Borrower against any such Lender.

 

(b)        Unless the Agent shall have been notified in writing by the
Borrower prior to the date of any payment due to be made by the Borrower
hereunder that the Borrower will not make such payment to the Agent (including
but not limited to situations in which the Borrower informs the Agent that the
Agent will be receiving proceeds of Collateral on a specific date and that the
Borrower intends to use such proceeds to make a payment of principal), the
Agent may assume that the Borrower is making such payment, and the Agent may,
but shall not be required to, in reliance upon such assumption, make available
to the Lenders their respective pro  rata shares of a
corresponding amount.  If such payment is
not made to the Agent by the Borrower within three (3) Business Days after such
due date, the Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding
sentence, such amount with interest thereon at the rate per annum equal to the Federal
Funds Rate.  Nothing in this Section
shall be deemed to limit the rights of the Agent or any Lender against the
Borrower.

 

25

 

Section 2.9         Increased Cost and Reduced Return.

 

(a)        If, after the date hereof, any Lender shall have determined
that the adoption of any applicable Law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of Law)
of any such Governmental Authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender, due to the obligations of
such Lender hereunder, to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then, within fifteen (15) days after demand by such Lender (with a
copy to the Agent), Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction, but only to the
extent that such Lender has not been compensated therefor by any increase in
the LIBOR.

 

(b)        Each Lender shall promptly notify Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle
such Lender to compensation pursuant to this Section.  In the event that any Lender claims
compensation under this Section, such Lender shall furnish to Borrower a
statement setting forth in reasonable detail the additional amount or amounts
to be paid to it hereunder which shall be conclusive in the absence of manifest
error.  In determining such amount, such
Lender shall act in good faith and may use any reasonable averaging and
attribution methods.

 

Section 2.10       Settlement Account.  Borrower shall not be entitled to withdraw
funds from the Settlement Account.  Except upon the occurrence of any Event of
Default, to the extent that on any Business Day amounts in the Settlement
Account exceed the amount needed in order to maintain the Collateral Value of
the Borrowing Base at an amount equal to or greater than the amount of the Loan
Balance, Agent shall cause such excess amount to be automatically transferred
to any Operating Account designated by Borrower or as Borrower may otherwise
direct the application of such excess amount. 
If on any Business Day the amount in the Settlement Account is less than
the amount needed to maintain the Collateral Value of the Borrowing Base in an
amount equal to or greater than the amount of the Loan Balance, and Borrower
has not made any payment as provided in Section 2.5, Agent may cause an
amount equal to such deficiency to be transferred from any Operating Account to
the Settlement Account.

 

Section 2.11       Approved Letter of Credit.  If Borrower elects to provide Agent with an
Approved Letter of Credit, then Agent, for the benefit of the Lenders, may draw
upon such Approved Letter of Credit at any time for any reason; provided,
however, that prior to making any such draw, and so long as no Event of
Default shall have occurred and then be continuing, Agent shall give Borrower
not less than three (3) Business Days’ prior written notice of its intention to
make such draw and the amount of such intended draw; and provided, further,
that if Borrower shall, within three (3) Business Days after receiving such
written notice, make or cause to be made a principal payment in respect of the
outstanding Loans in the amount of such intended draw, then Agent agrees that
no such draw shall be made by Agent under the Approved Letter of Credit.  The then available undrawn amount of any
Approved Letter of Credit shall be

 

26

 

automatically reduced by the amount of any draws by Agent under the Approved
Letter of Credit, and by the amount of any payments made or caused to be made
by Borrower pursuant to this Section 2.11, and Agent agrees to enter
into an amendment of, or accept a replacement of, or agree to the cancellation
of, as the case may be, such Approved Letter of Credit to reflect such
reduction in the available undrawn amount. 
Notwithstanding anything to the contrary set forth in this Agreement,
the amount of any payment made or caused to be made by Borrower pursuant to
this Section 2.11, and the amount of any draw made by Agent under any
Approved Letter of Credit, shall be applied against the principal amounts
outstanding in respect of the Loans.

 

ARTICLE III

CONDITIONS PRECEDENT

 

The obligation
of Lenders to make Loans hereunder is subject to fulfillment of the conditions
precedent stated in this Article III.

 

Section 3.1         Initial Loan.  The obligation of Lenders to fund any Loan
hereunder shall be subject to, in addition to the conditions precedent
specified in Section 3.2, the following terms and conditions:

 

(a)        Borrower shall have delivered to Agent the following (each of
the following documents being duly executed and delivered and in form and
substance satisfactory to each Lender, Agent and Agent’s counsel, and, with the
exception of the Notes and any Approved Letter of Credit, each in a sufficient
number of originals that each Lender, Agent, and Agent’s counsel may have an
executed original of each document):

 

(i)         an
executed counterpart of this Agreement and of all instruments, certificates and
opinions referred to in this Article III not theretofore delivered
(except the Borrowing Request which is to be delivered at the time provided in Subsection
3.2(a) hereof);

 

(ii)        a
Note for each Lender;

 

(iii)       the
Security Agreement dated of even date herewith;

 

(iv)       a
certificate of the Secretary or Assistant Secretary of Borrower setting forth
(i) resolutions of its board of directors authorizing the execution,
delivery, and performance of the Loan Documents to which it is a party and
identifying the officers authorized to sign such instruments,
(ii) specimen signatures of the officers so authorized, and (iii) articles
of incorporation of Borrower certified by the appropriate Secretary of State as
of a recent date, and (iv)  bylaws of Borrower, certified as being
accurate and complete;

 

(v)        a
certificate of the existence and good standing for Borrower in its state of
incorporation or organization dated no earlier than fifteen days prior to the
date hereof;

 

(vi)       an
opinion of counsel for Borrower in form and substance customary for
transactions of this type and otherwise reasonably satisfactory to Agent;

 

27

 

(vii)      a
Borrowing Request and a Borrowing Base Certificate dated as of the date of the
first Loan, certified by the chief financial officer or treasurer of Borrower;

 

(viii)     a
duly executed original of the MERS Agreement;

 

(ix)       the
Approved Letter of Credit, if any; and

 

(x)        such
other documents as Agent or any Lender or their counsel may reasonably request
at any time at or prior to the date of the initial Loan hereunder.

 

(b)        No Person, other than Agent, holds any mortgage, pledge,
lien, security interest or other charge or encumbrance in, against or to any of
the Mortgage Loans.

 

(c)        Borrower shall have paid all fees and reimbursements to be
paid to Agent or Lenders pursuant to any Loan Document, or otherwise due Agent
or Lenders, and including reasonable fees and disbursements of Agent’s
attorneys, Bracewell & Giuliani LLP.

 

Section 3.2         All Loans.  The obligation of Lenders to fund any Loan
pursuant to this Agreement is subject to the following further conditions
precedent:

 

(a)        Borrower shall have delivered to Agent a Borrowing Request
accompanied by a Borrowing Base Certificate dated as of the date of such Loan,
certified by the chief financial officer of Borrower, and the Required Mortgage
Documents for all Eligible Mortgage Loans other than Wet Loans;

 

(b)        all other Property in which Borrower has granted a Lien to
Agent, for the benefit of the Lenders, and which under the terms of this
Agreement or the Security Agreement shall have been required to have been
physically delivered to the Agent, shall have been physically delivered to the
possession of Agent, such that Agent has a valid and perfected first lien on
such Property, for the benefit of the Lenders;

 

(c)        the representations and warranties of each Related Person
contained in this Agreement or any Security Instrument (other than those
representations and warranties which are by their terms expressly limited to the
date of this Agreement) shall be true and correct in all material respects on
and as of the date of such Loan;

 

(d)        no Default or Event of Default shall have occurred and be
continuing or would result from such Borrowing, and no change or event which
constitutes a Material Adverse Effect shall have occurred as of the date of
such Loan;

 

(e)        the Funding Account, the Settlement Account and the Operating
Account shall be established and in existence;

 

(f)         the making of such Loan shall not be prohibited by any
Governmental Requirement;

 

(g)        the delivery to Agent, any Lender or its counsel of such
other documents and opinions of counsel, including such documents as may be
necessary or desirable to perfect or

 

28

 

maintain the priority of any Lien granted or intended to be granted
hereunder or otherwise and including favorable written opinions of counsel with
respect thereto, as Agent or any Lender may reasonably request; and

 

(h)        No Person, other than Agent, for the benefit of the Lenders,
shall be listed in the field designated “interim funder” on the MERS® System.

 

Delivery to
Agent of a Borrowing Request shall be deemed to constitute a representation and
warranty by Borrower to Agent and each Lender on the date thereof and on the
date on which the Loan is made of the facts specified in Subsections (c)
and (d) of this Section.

 

ARTICLE IV

BORROWER REPRESENTATIONS AND WARRANTIES

 

Borrower
represents and warrants as follows:

 

Section 4.1         Organization and Good Standing.  Each Related Person (a) is a
corporation, limited liability company or limited partnership duly incorporated
or organized and existing in good standing under the Laws of the jurisdiction
of its incorporation or organization, (b) is duly qualified as a foreign
entity and in good standing in all jurisdictions in which its failure to be so
qualified could have a Material Adverse Effect, (c) has the corporate or
organizational power and authority to own its properties and assets and to
transact the business in which it is engaged and is or will be qualified in
those states wherein it proposes to transact business in the future, and
(d) is in compliance with all Requirements of Law except to the extent
that the failure to comply therewith could not, in the aggregate, have a
Material Adverse Effect.

 

Section 4.2         Authorization and Power.  Each Related Person has the corporate or
organizational power and requisite authority to execute, deliver and perform
the Loan Documents to which it is a party; each Related Person is duly
authorized to and has taken all action necessary to authorize it to, execute,
deliver and perform the Loan Documents to which it is a party and is duly
authorized to perform such Loan Documents.

 

Section 4.3         No Conflicts or Consents.  Neither the execution and delivery by any
Related Person of the Loan Documents to which it is a party, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and
provisions thereof, will (a) materially contravene or conflict with any
Requirement of Law to which any Related Person is subject, or any indenture,
mortgage, deed of trust, deed to secure debt, or other agreement or instrument
to which any Related Person is a party or by which any Related Person may be
bound, or to which the Property of any Related Person may be subject, or
(b) result in the creation or imposition of any Lien, other than the Lien
of the Security Agreement, on the Property of any Related Person.  All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, from any
Governmental Authority that are necessary in connection with the transactions
contemplated by the Loan Documents have been obtained.

 

29

 

Section 4.4         Enforceable Obligations.  This Agreement, the Notes, and the other Loan
Documents to which any Related Person is a party are the legal, valid and
binding obligations of such Related Person, enforceable in accordance with
their respective terms, except as limited by Debtor Laws.

 

Section 4.5         Priority of Liens.  Upon delivery to Agent of each Borrowing
Request, Agent shall have, for the benefit of the Lenders, valid, enforceable,
perfected, first priority Liens and security interests in each Mortgage Note
identified therein.

 

Section 4.6         No Liens.  Borrower has good and indefeasible title to
the Mortgage Collateral free and clear of all Liens and other adverse claims of
any nature, except for ad valorem taxes and assessments not yet due and payable
and Liens in the Mortgage Collateral in favor of Agent, for the benefit of the
Lenders.

 

Section 4.7         Financial Condition of Borrower.  Borrower has delivered to Lenders copies of
its annual audited balance sheet as of September 30, 2005, and the related
statements of income, stockholders’ equity and cash flows for the period ended
such date; such financial statements fairly present the financial condition of
Borrower as of such date and the results of operations of Borrower for the
period ended on such date and have been prepared in accordance with GAAP, as of
the date thereof, there were no obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) of Borrower which were required under
GAAP to be reflected in such financial statements that were not reflected in
such financial statements and no change which constitutes a Material Adverse
Effect has occurred in the financial condition or business of Borrower since September
30, 2005.  Borrower has also delivered to
Lenders its unaudited quarterly balance sheet for the period ending September 30,
2005 and management reports for September 30, 2005; such reports fairly and
accurately present Borrower’s commitment position, pipeline position, servicing
and production as of the end of such months and for the fiscal year to date for
the periods ending on such dates.

 

Section 4.8         Full Disclosure.  There is no material fact that Borrower has
not disclosed to Lenders which could have a Material Adverse Effect.  To the knowledge of Borrower, none of
(i) the financial statements referred to in Section 4.7
hereof, (ii) any Borrowing Request or officer’s certificate, or
(iii) any statement delivered by any Related Person to Agent or any Lender
in connection with this Agreement, contains any untrue statement of material fact.

 

Section 4.9         No Default.  No Related Person is in default under any
loan agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its Property is bound.

 

Section 4.10       No Litigation.  There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against any Related Person the adverse
determination of which could reasonably be expected to have a Material Adverse
Effect.

 

Section 4.11       Taxes.  All federal income tax returns and all other
tax returns required to be filed by each Related Person in any jurisdiction
have been filed and all taxes, assessments,

 

30

 

fees and other governmental charges upon each Related Person or upon
any of its properties, income or franchises have been paid prior to the time
that such taxes could give rise to a Lien thereon, unless protested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been established on the books of such Related Person.

 

Section 4.12       Principal Office, etc.  The principal office, chief executive office
and principal place of business of each Related Person is at the address set
forth on the Borrower’s signature page hereto or in a written notice given
pursuant to Section 6.12.

 

Section 4.13       Compliance with ERISA.  No Related Person currently maintains,
contributes to, is required to contribute to or has any liability, whether
absolute or contingent, with respect to an ERISA Plan.  With respect to all other employee benefit
plans maintained or contributed to by each Related Person, each Related Person
is in material compliance with ERISA.

 

Section 4.14       Subsidiaries.  No Related Person has any Subsidiary or owns
any stock in any other corporation or association except those listed in Exhibit D (as such exhibit may
be updated from time to time by Borrower and delivered to Agent).  As of the date hereof, each Related Person
owns, directly or indirectly, the equity interest in each of its Subsidiaries
which is indicated in such exhibit.

 

Section 4.15       Indebtedness.  No Related Person has any indebtedness
outstanding other than the Indebtedness permitted by Section 6.2.

 

Section 4.16       Permits, Patents, Trademarks, etc.

 

(a)        Each Related Person has all permits and licenses necessary
for the operation of its business.

 

(b)        Each Related Person owns or possesses (or is licensed or
otherwise has the necessary right to use) all patents, trademarks, service
marks, trade names and copyrights, technology, know-how and processes, and all
rights with respect to the foregoing, which are necessary for the operation of
its business, without any known material conflict with the rights of
others.  The consummation of the
transactions contemplated hereby will not alter or impair in any material
respect any of such rights of each Related Person.

 

Section 4.17       Status Under Certain Federal Statutes.  No Related Person is (a) a “holding company”
or a “subsidiary company” of a “holding company” or an “affiliate” of a “holding
company” or of a “subsidiary company” of a “holding company,” as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended,
(b) a “public utility,” as such term is defined in the Federal Power Act,
as amended, (c) required to register as an “investment company,” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended or (d) a “rail carrier,” or a “person
controlled by or affiliated with a rail carrier,” within the meaning of
Title 49, U.S.C., and no Related Person is a “carrier” to which
49 U.S.C. §l1301(b)(1) is applicable.

 

Section 4.18       Securities Act.  No Related Person has issued any unregistered
securities in violation of the registration requirements of the Securities Act
of 1933, as amended, or of any

 

31

 

other Requirement of Law, and is not violating any rule, regulation, or
requirement under the Securities Act of 1933, as amended, or the Securities and
Exchange Act of 1934, as amended.  No
Related Person is required to qualify an indenture under the Trust Indenture
Act of 1939, as amended, in connection with its execution and delivery of the
Notes.

 

Section 4.19       No Approvals Required.  Other than consents and approvals previously
obtained and actions previously taken, neither the execution and delivery of
this Agreement, the Notes and the other Loan Documents to which any Related
Person is a party, nor the consummation of any of the transactions contemplated
hereby or thereby requires the consent or approval of, the giving of notice to,
or the registration, recording or filing by any Related Person of any document
with, or the taking of any other action in respect of, any Governmental
Authority which has jurisdiction over each Related Person or any of its
Property, except for (a) the filing of the Uniform Commercial Code
financing statements and other similar filings to perfect the interest of
Lenders in the Collateral, and (b) such other consents, approvals,
notices, registrations, filings or action as may be required in the ordinary
course of business of the Related Persons in connection with the performance of
the obligations of the Related Persons hereunder.

 

Section 4.20       Survival of Representations.  All representations and warranties by
Borrower herein shall survive delivery of the Notes and the funding of the
Loans, and any investigation at any time made by or on behalf of Lenders shall
not diminish the right of Agent and the Lenders to rely thereon.

 

Section 4.21       Compliance with Laws.  Each Related Person is in compliance in all
material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property,
including ERISA and FIRREA, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in
good faith by appropriate proceedings diligently conducted; or (b) the
failure to comply therewith would not reasonably be expected to have a Material
Adverse Effect.

 

Section 4.22       Payment of Obligations.  No Related Person is in default in the
payment and discharge of its material obligations and liabilities, including
all tax liabilities, assessments and governmental charges or levies upon it or
its properties or assets, unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained by such Related Person.

 

Section 4.23       Individual Mortgage Loans.  Borrower hereby represents the following
matters with respect to each Mortgage Note and Mortgage Loan that is part of
the Collateral:

 

(a)        Borrower has good and marketable title to each Mortgage Note
and Mortgage, was the sole owner thereof and had full right to pledge the
Mortgage Loan to Agent, for the benefit of Lenders, free and clear of any other
Lien at the time of pledging to Agent;

 

(b)        To the knowledge of Borrower, other than any delinquency of
payments permitted in subparagraph (d) of the definition of Eligible
Mortgage Loan, there is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and there is no event
which, with the passage of time or with notice and/or the expiration of any

 

32

 

grace or cure period, would constitute a default, breach, violation or
event of acceleration and no such default, breach, violation or event of
acceleration has been waived;

 

(c)        To the knowledge of Borrower, the physical condition of the
Property subject to the Mortgage has not deteriorated since the date of
origination of the related secured Mortgage Loan (normal wear and tear
excepted) and there is no proceeding pending for the total or partial
condemnation of any Property subject to the Mortgage;

 

(d)        Each Mortgage contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for
the realization against the related Property subject to the Mortgage of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee’s sale, and
(ii) otherwise, by judicial or private foreclosure;

 

(e)        Each Mortgage Loan is a first lien or second lien Single
Family loan, and has been underwritten by the originator thereof in accordance
with such originator’s then current underwriting guidelines, which guidelines
have been previously submitted to and approved by Agent;

 

(f)         Each Mortgage Note is either (i) payable in monthly
installments of principal and interest, with interest payable in arrears, and
requires a monthly payment which is sufficient to amortize the original
principal balance over the original term, not to exceed thirty (30) years, and
to pay interest at the related interest rate, or (ii) payable in monthly
installments of interest only, with interest payable in arrears, with principal
payments to begin no later than ten (10) years from closing with payments which
are sufficient to fully amortize the original principal balance over a period
not to exceed thirty (30) years; and no Mortgage Note provides for any
extension of the original term;

 

(g)        No Mortgage Loan is a loan in respect of either the purchase
of a manufactured home or mobile home or the purchase of the land on which a
manufactured home or mobile home will be placed;

 

(h)        The origination practices used by the originator of each Mortgage
Loan and the collection practices used by the Borrower with respect to each
Mortgage Loan have been in all material respects legal, proper, prudent and
customary in the loan origination and servicing business;

 

(i)         No Mortgage Loan is subject to Section 32 of Regulation Z or
is a Mortgage Loan classified as predatory under any applicable Law;

 

(j)         Each Mortgage Loan was originated in compliance with all
applicable Laws and no fraud or misrepresentation was committed by any Person
in connection therewith; and

 

(k)        For each Mortgage Loan, Borrower has obtained closing
protection letters from the underwriter for the respective title insurance
policy.

 

Section 4.24           Environmental
Matters.  In the ordinary course of
each Related Person’s business, the officers and managers of each Related
Person consider the effect of Environmental

 

33

 

Laws on the business of such Related Person, in the course of which
they identify and evaluate potential risks and liabilities accruing to such Related
Person due to Environmental Laws.  On the
basis of this consideration, each Related Person has reasonably concluded that
neither violation of nor compliance with Environmental Laws can reasonably be
expected to have a Material Adverse Effect. 
No Related Person has received any notice from any Governmental
Authority to the effect that its operations are not in material compliance with
any of the requirements of applicable Environmental Laws or are the subject of
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any toxic or hazardous waste or substance
into the environment, which non-compliance or remedial action could reasonably
be expected to have a Material Adverse Effect.

 

Section 4.25       Status as Approved Seller/Servicer.  Borrower is an approved seller and servicer for
FNMA and FHLMC in good standing and is an approved lender with FHA, VA and HUD.

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

Each Related
Person shall at all times comply with the covenants contained in this Article V,
from the date hereof and for so long as any part of the Obligations or the
Commitment is outstanding unless Required Lenders have agreed otherwise in
writing.

 

Section 5.1         Financial Statements and Reports.

 

(a)        Borrower shall furnish to Agent (who shall deliver or
otherwise make such information available to the Lenders within five (5) days
of receipt) the following, all in form and detail reasonably satisfactory to Agent:

 

(i)         Promptly
after becoming available, and in any event within ninety (90) days after the
close of each Fiscal Year, Borrower’s audited Consolidated balance sheet as of
the end of such Fiscal Year, and the related audited Consolidated statements of
income, stockholders’ equity and cash flows of Borrower for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures for
the preceding Fiscal Year.  Such
financial statements shall be unqualified and shall be accompanied by the
related audit report of independent certified public accountants acceptable to Agent
which report shall be to the effect that such statements have been prepared in
accordance with GAAP applied on a basis consistent with prior periods except
for such changes in such principles with which the independent public
accountants shall have concurred;

 

(ii)        Promptly
after becoming available, and in any event within ninety (90) days after the
close of each Fiscal Year, Parent’s audited Consolidated and consolidating
balance sheet as of the end of such Fiscal Year, and the related audited
Consolidated and consolidating statements of income, stockholders’ equity and
cash flows of Parent for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the preceding Fiscal Year, such financial
statements shall be unqualified and shall be accompanied by the related audit
report of independent certified public accountants

 

34

 

acceptable to Agent which report shall be to the effect that such
statements have been prepared in accordance with GAAP applied on a basis
consistent with prior periods except for such changes in such principles with
which the independent public accountants shall have concurred (subject to
year-end audit adjustments and the absence of notes thereto);

 

(iii)       Promptly
after becoming available, and in any event within forty-five (45) days after
the end of each calendar month, including the twelfth calendar month in each
Fiscal Year, a Consolidated balance sheet of Borrower as of the end of such
month and the related Consolidated statements of income, stockholders’ equity
and cash flows of Borrower for such month and the period from the first day of
the then current Fiscal Year through the end of such month, prepared internally
by Borrower and certified by the chief financial officer or other executive
officer of Borrower as being fairly stated in all material respects;

 

(iv)       Promptly
and in any event within forty-five (45) days after the end of each calendar
month (except the last) in each Fiscal Year of Borrower, and within fifteen
(15) days after the completion of each year-end audit by Borrower’s independent
public accountants, a completed Officer’s Certificate in the form of Exhibit E hereto, executed by
the president or chief financial officer of Borrower;

 

(v)        Promptly
after becoming available, a monthly management report (delivered in any event within
forty-five (45) days after the end of such calendar month) in form and detail
reasonably acceptable to Agent including, without limitation detail on Borrower’s
pipeline position, commitment position, repurchase requests by investors,
production statistics and any other report reasonably requested by Agent;

 

(vi)       With
each Borrowing Request and in any event within thirty (30) days after the end
of each calendar month, a Borrowing Base Certificate;

 

(vii)      Promptly
upon receipt thereof, a copy of the results of any field or desktop audit of
the Borrower’s business and/or records performed by FNMA, FHLMC, the Department
of Housing and Urban Development or any other federal agency, together with a
copy of all subsequent correspondence relating to such audit between the
Borrower and such agency (subject, however, to any applicable legal
restrictions or limitations in respect of the disclosure of such audit results
and correspondence);

 

(viii)     Promptly
upon receipt thereof, a copy of each other report submitted to Borrower by
independent accountants in connection with any annual, interim or special audit
of the books of Borrower; and

 

(ix)       such
other information concerning the business, properties or financial condition of
any Related Person as Agent or any Lender may reasonably request.

 

Section 5.2         Taxes and Other Liens.  Each Related Person shall pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or upon any of its Property as well as all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien upon any or all of its

 

35

 

Property; provided, however, each Related Person shall
not be required to pay any such tax, assessment, charge, levy or claim if the
amount, applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings diligently conducted by or on behalf of such
Related Person and if such Related Person shall have set up reserves therefor
adequate under GAAP.

 

Section 5.3         Maintenance.  Each Related Person shall (a) maintain
its corporate or partnership existence (as applicable) and rights and
franchises; (b) observe and comply in all material respects with all
Governmental Requirements, and (c) maintain its Properties (and any
Properties leased by or consigned to it or held under title retention or
conditional sales contracts) in good and workable condition at all times and
make all repairs, replacements, additions, betterments and improvements to its
Properties as are needed and proper so that the business carried on in
connection therewith may be conducted properly and efficiently at all times.  Borrower shall maintain good standing as an
approved seller and servicer for FNMA and FHLMC and as an approved lender with
FHA, VA and HUD.

 

Section 5.4         Further Assurances.  Borrower shall, within three (3) Business
Days after the request of Agent or any Lender, cure any defects in the
execution and delivery of any Note, this Agreement or any other Loan Document
and each Related Person shall, at its expense, promptly execute and deliver to
Agent or any Lender upon request all such other and further documents,
agreements and instruments in compliance with or accomplishment of the
covenants and agreements of each Related Person in this Agreement and in the
other Loan Documents or to further evidence and more fully describe the
collateral intended as security for the Notes, or to correct any omissions in
this Agreement or the other Loan Documents, or more fully to state the security
for the obligations set out herein or in any of the other Loan Documents, or to
make any recordings, to file any notices, or obtain any consents.

 

Section 5.5         Reimbursement of Expenses.  Borrower shall pay (a) all reasonable
legal fees incurred by Agent (Agent’s counsel is Bracewell & Giuliani LLP) in
connection with the preparation, negotiation, syndication, execution and
delivery of this Agreement, the Notes and the other Loan Documents and any
amendments, consents or waivers executed in connection therewith, (b) all
fees, charges or taxes for the recording or filing of the Security Instruments,
(c) all reasonable out-of-pocket expenses of Agent in connection with the
administration of this Agreement, the Notes and the other Loan Documents,
including courier expenses incurred in connection with the Mortgage Collateral,
(d) all amounts expended, advanced or incurred by Agent to satisfy any
obligation of Borrower under this Agreement or any of the other Loan Documents
or to collect the Notes, or to protect, preserve, exercise or enforce the
rights of Lenders under this Agreement or any of the other Loan Documents,
(e) all reasonable out-of-pocket costs and expenses (including
fees and disbursements of attorneys and other experts employed or retained by
Agent or any Lender) incurred in connection with, arising out of, or in any way
related to (i) consulting during a Default with respect to (A) the
protection, preservation, exercise or enforcement of any of its rights in,
under or related to the Collateral or the Loan Documents or (B) the
performance of any of its obligations under or related to the Loan Documents,
or (ii) protecting, preserving, exercising or enforcing during a Default
any of its rights in, under or related to the Collateral or the Loan Documents,
each of (a) through (e) shall include all underwriting expenses, collateral
liquidation costs, court costs, attorneys’ fees (including, without limitation,
for trial, appeal or other proceedings), fees of auditors and

 

36

 

accountants, and investigation expenses reasonably incurred by Agent or
any Lender in connection with any such matters, together with interest at the
post-maturity rate specified in the Notes on each item specified in clause (a)
through (e) from thirty (30) days after the date of written demand or request
for reimbursement until the date of reimbursement.

 

Section 5.6         Insurance.  Each Related Person shall maintain with
financially sound and reputable insurers, insurance with respect to its
Properties and business against such liabilities, casualties, risks and
contingencies and in such types and amounts as is customary in the case of
Persons engaged in the same or similar businesses and similarly situated,
including, without limitation, a fidelity bond or bonds with financially sound
and reputable insurers with such coverage and in such amounts as is customary
in the case of Persons engaged in the same or similar businesses and similarly
situated.  The improvements on the land
covered by each Eligible Mortgage Loan shall be kept continuously insured at
all times by responsible insurance companies against fire and extended coverage
hazards under policies, binders, letters, or certificates of insurance, with a
standard mortgagee clause in favor of Borrower and its assigns.  Each such policy must be in an amount equal
to or greater than the lesser of (a) the maximum insurable value of the
improvements, or (b) the amount of the Mortgage Loan.  Upon request of Agent, Borrower shall furnish
or cause to be furnished to Agent from time to time a summary of the insurance
coverage of Borrower in form and substance satisfactory to Agent and if
requested shall furnish Agent copies of the applicable policies.

 

Section 5.7         Accounts and Records: Servicing
Records.  Each Related Person shall
keep books of record and account in which full, true and correct entries will
be made of all dealings or transactions in relation to its business and
activities, in accordance with GAAP. 
Each Related Person shall maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate all
records pertaining to the performance of such Related Person’s obligations
under the Servicing Agreements in the event of the destruction of the originals
of such records) and keep and maintain all documents, books, records, computer
tapes and other information reasonably necessary or advisable for the
performance by each Related Person of its obligations under the Servicing
Agreements.

 

Section 5.8         Right of Inspection.  Each Related Person shall permit authorized
representatives of Agent and/or any Lender to discuss the business, operations,
assets and financial condition of such Related Person with their officers and
employees, to examine their Servicing Records and books of records and account
and make copies or extracts thereof and to visit and inspect any of the
Properties of each Related Person, all at such reasonable times during normal
business hours and as often as Agent or any Lender may request, provided
that, unless a Default or an Event of Default has occurred, such visits,
examinations and inspections shall be made not more than two (2) times during
any Fiscal Year and shall be made at the sole cost and expense of Agent and/or
any such Lender.  Each Related Person
will provide its accountants with a copy of this Agreement promptly after the
execution hereof and will instruct its accountants to meet with any designated
officers or other authorized representatives of Agent and/or such Lender to
answer candidly any and all questions that such officers or authorized
representatives may address to them in reference to the financial condition or
affairs of any Related Person as those conditions or affairs relate to this
Agreement.  Agent and/or any such Lender
shall give Borrower prior notice of the request for any such in-person or
telephonic meeting with Borrower’s accountants. 
Each Related Person may have its representatives in attendance at any

 

37

 

meetings between the officers or other representatives of Agent or any
Lender and Borrower’s accountants held in accordance with this authorization.

 

Section 5.9         Notice of Certain Events.  Borrower shall promptly notify the Agent and
the Lenders upon (a) the receipt of any notice from, or the taking of any
other action by, the holder of any promissory note, debenture or other evidence
of Indebtedness of any Related Person with respect to a claimed default,
together with a detailed statement by a responsible officer of Borrower
specifying the notice given or other action taken by such holder and the nature
of the claimed default and what action Borrower is taking or proposes to take
with respect thereto; (b) the commencement of, or any determination in,
any legal, judicial or regulatory proceedings between any Related Person and
any Governmental Authority or any other Person which, if adversely determined,
could have a Material Adverse Effect; (c) any change in senior management or
ownership of Borrower; (d) any material adverse change in the business, operations,
prospects or financial condition of any Related Person, including, without
limitation, the insolvency of any Related Person; (e) any event or
condition which, if adversely determined, could have a Material Adverse Effect;
(f) the occurrence of any Termination Event, (g) the execution of any
Permitted Warehouse Debt agreement or other material financing agreement, or
(h) any default under any material Indebtedness that continues beyond any
applicable grace or cure period.

 

Section 5.10       Performance of Certain Obligations and
Information Regarding Investors. 
Borrower shall perform and observe in all material respects each of the
provisions of each Take-Out Commitment and each of the Servicing
Agreements on its part to be performed or observed and will use commercially
reasonable efforts to cause all things to be done which are necessary to have
each item of Mortgage Collateral covered by a Take-Out Commitment comply
with the requirements of such Take-Out Commitment.  Upon request by Agent, Borrower will deliver
to Agent financial information possessed by Borrower and publicly available concerning
any Person requested by Borrower to be approved as an Investor; all such
financial information must be delivered to Agent prior to any request by
Borrower for Mortgage Collateral to be delivered to such Person.

 

Section 5.11       Use of Proceeds: Margin Stock.  The proceeds of all Loans shall be used by
Borrower solely for the origination and purchase of Eligible Mortgage Loans
pending sale to an Investor and for payment of interest, fees, and expenses in
connection with the Obligations.  None of
such proceeds shall be used for the purpose of purchasing or carrying any “margin
stock” as defined in Regulation U, or for the purpose of reducing or retiring
any Indebtedness which was originally incurred to purchase or carry margin
stock or for any other purpose which might constitute this transaction a “purpose
credit” within the meaning of such Regulation U.  Neither Borrower nor any Person acting on
behalf of Borrower shall take any action in violation of Regulation U or
Regulation X or shall violate Section 7 of the Securities Exchange Act of
1934 or any rule or regulation thereunder, in each case as now in effect or as
the same may hereafter be in effect.

 

Section 5.12       Notice of Default.  Borrower shall furnish to Agent and Lenders
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto.

 

38

 

Section 5.13       Compliance with Loan Documents.  Each Related Person shall promptly comply
with any and all covenants and provisions of this Agreement, the Notes and the
other Loan Documents to be complied with by such Related Person.

 

Section 5.14       Operations and Properties.  Each Related Person shall (i) comply with all
rules, regulations and guidelines applicable to it, except in such instances in
which (a) such rule, regulation or guideline is being contested in good
faith by appropriate proceedings diligently conducted; or (b) the failure
to comply therewith would not likely be expected to have a Material Adverse
Effect, and (ii) act prudently and in accordance with customary industry
standards in managing and operating its Property.

 

Section 5.15       Environmental Matters.

 

(a)        Each Related Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Related Person and
shall obtain, at or prior to the time required by applicable Environmental
Laws, all environmental, health and safety permits, licenses and other
authorizations necessary for its operations and will maintain such
authorizations in full force and effect.

 

(b)        Borrower will promptly furnish to Agent and each Lender all
written notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Related Person, or of
which it has notice, pending or threatened against any Related Person, by any
Governmental Authority with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business.

 

Section 5.16       Compliance with Laws.  Each Related Person will at all times comply
in all material respects with the requirements of all Laws and all orders,
writs, injunctions and decrees applicable to it or to its business or property,
including ERISA and FIRREA, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in
good faith by appropriate proceedings diligently conducted; or (b) the
failure to comply therewith would not likely be expected to have a Material
Adverse Effect.

 

Section 5.17       MERS Status.

 

(a)        Borrower will (a) at all times, maintain its status as a MERS
member in good standing, (b) at all times remain in full compliance with all
terms and conditions of membership in MERS, including the MERSCORP, Inc. “Rules
of Membership” most recently promulgated by MERSCORP, Inc., the “MERS
Procedures Manual” most recently promulgated by MERS, and any and all other
guidelines or requirements set forth by MERS or MERSCORP, Inc., as each of the
foregoing may be modified from time to time, including, but in no way limited
to compliance with guidelines and procedures set forth with respect to
technological capabilities, drafting and recordation of Mortgages, registration
of Mortgages on the MERS System, including registration of the interest of the
Agent and the Lenders in such mortgages and membership requirements, (c)
promptly, upon the request of the Agent, execute and deliver to the Agent an
assignment of mortgage, in blank, with respect to any MERS Mortgage that the

 

39

 

Agent determines shall be removed from the MERS System and (d) at all
times maintain the Electronic Tracking Agreement executed of even date herewith
in full force and effect.

 

(b)        Borrower shall not de-register or attempt to de-register any
Mortgage from the MERS System unless Borrower has complied with the
requirements set forth in the Electronic Tracking Agreement and the
requirements hereof and of the Security Agreement relating to release of
Collateral.

 

ARTICLE VI

NEGATIVE COVENANTS

 

Each Related
Person shall at all times comply with the covenants contained in this Article VI,
from the date hereof and for so long as any part of the Obligations or the
Commitment is outstanding unless the Required Lenders have agreed otherwise in
writing:

 

Section 6.1         No Merger; Limitation on Issuance of
Securities.  No Related Person shall
merge or consolidate with or into any Person provided  that
Borrower may merge or consolidate with any wholly owned subsidiary of Borrower
if Borrower is the surviving corporation; and provided  further,
that after giving effect thereto, no Default would exist hereunder.  No Related Person shall acquire by purchase,
or otherwise, all or substantially all of the assets or capital stock of any
Person except as permitted by Section 6.6(d).  Borrower will not issue any securities other
than shares of its common stock and any options or warrants giving the holders
thereof only the right to acquire such shares. 
No Related Person will issue any additional shares of its capital stock
or other securities or any options, warrants or other rights to acquire such
additional shares or other securities except to Borrower and only to the extent
not otherwise forbidden under the terms hereof. 
No Subsidiary of Borrower which is a partnership will allow any
diminution of Borrower’s interest (direct or indirect) therein.  There shall be no Change of Control.

 

Section 6.2         Limitation on Indebtedness.  No Related Person shall incur, create,
contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness or Guaranty
Obligations except:

 

(a)        the Obligations;

 

(b)        trade debt, equipment leases, office leases, equipment loans
and liens for taxes and assessments not yet due and payable owed in the
ordinary course of business;

 

(c)        any Permitted Warehouse Debt;

 

(d)        any Indebtedness secured by a Lien permitted pursuant to the
terms of Section 6.10;

 

(e)        any Indebtedness arising under any Hedging Agreement entered
into in respect of Indebtedness otherwise permitted under this Agreement and
not for speculative purposes; and

 

40

 

(f)         any Indebtedness owing to Parent or a wholly owned
Subsidiary of Parent provided that the terms of such Indebtedness shall
not permit any payment of principal or interest to be made if any Default or
Event of Default hereunder has occurred.

 

Section 6.3         Fiscal Year, Method of Accounting.  No Related Person shall change its Fiscal
Year or make any material change in its method of accounting not required by
GAAP.

 

Section 6.4         Business.  No Related Person shall, directly or
indirectly, engage in any business which differs materially from that currently
engaged in by Borrower.

 

Section 6.5         Liquidations, Consolidations and
Dispositions of Substantial Assets. 
No Related Person shall dissolve or liquidate or sell, transfer, lease
or otherwise dispose of any material portion of their property or assets or
business; provided, however, nothing in this Section 6.5
shall be construed to prohibit (i) any Related Person from selling Mortgage
Notes or Mortgage Loans or rights to service Mortgage Loans and pools of Mortgage
Loans or Mortgage Notes in the ordinary course of its business, or (ii) any
dissolution, liquidation, or sale, transfer, lease or other disposition by any
Subsidiary of the Borrower of its property, assets or business to the Borrower
or a wholly-owned Subsidiary of the Borrower.

 

Section 6.6         Loans, Advances, and Investments.  No Related Person shall make any loan (other
than Mortgage Loans), advance, extension of credit, or capital contribution to,
or investment in (including any investment in any Subsidiary, joint venture or
partnership), or purchase or otherwise acquire any of the capital stock,
securities, or evidences of indebtedness of, any Person (including, without
limitation, any employee, officer or Affiliate of any Related Person)
(collectively, “Investment”),
or otherwise acquire any interest in, or control of, another Person, except for
the following:

 

(a)        Cash Equivalents;

 

(b)        Any acquisition of securities or evidences of indebtedness of
others when acquired by a Related Person in settlement of accounts receivable
or other debts arising in the ordinary course of its business, so long as the
aggregate amount of any such securities or evidences of indebtedness is not
material to the business or financial condition of such Related Person;

 

(c)        Mortgage Notes acquired by Borrower in the ordinary course of
Borrower’s business; and

 

(d)        Investments other than those described in the preceding clauses
(a) through (c), provided that the aggregate amount of all such
other Investments shall at no time exceed $500,000.00.

 

Section 6.7         Use of Proceeds.  Borrower shall not permit the proceeds of the
Loans to be used for any purpose other than those permitted by Section 5.11
hereof.  Borrower shall not, directly or
indirectly, use any of the proceeds of the Loans for the purpose, whether
immediate, incidental or ultimate, of buying any “margin stock” or of
maintaining, reducing or retiring any Indebtedness originally incurred to
purchase a stock that is currently any “margin stock,” or for any other purpose
which might constitute this transaction a “purpose credit,” in each case within

 

41

 

the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 C.F.R. 207, as amended), or Regulation U, or otherwise take
or permit to be taken any action which would involve a violation of such
Regulation G or Regulation U or of Regulation T (12 C.F.R. 220, as amended) or
Regulation X (12 C.F.R. 224, as amended) or any other regulation of such board.

 

Section 6.8         Actions with Respect to Mortgage
Collateral.  Borrower shall not:

 

(a)        Compromise, extend, release, or adjust payments on any
Mortgage Collateral, accept a conveyance of mortgaged property in full or
partial satisfaction of any Mortgage Collateral, or release any Mortgage
securing or underlying any Mortgage Collateral;

 

(b)        Agree to the amendment or termination of any Take-Out
Commitment in which Agent, on behalf of the Lenders, has a security interest or
to substitution of a Take-Out Commitment for a Take-Out Commitment in which
Agent, on behalf of the Lenders, has a security interest hereunder, if such
amendment, termination or substitution may reasonably be expected to have a
Material Adverse Effect;

 

(c)        Transfer, sell, assign, or deliver any Mortgage Collateral
pledged to Agent, for the benefit of the Lenders, to any Person other than
Agent, except pursuant to a Take-Out Commitment; or

 

(d)        Grant, create, incur, permit or suffer to exist any Lien upon
any Mortgage Collateral except for Liens granted to Agent, for the benefit of
the Lenders, to secure the Notes and Obligations and such non-consensual Liens
as may be deemed to arise as a matter of law pursuant to any Take-Out
Commitment.

 

Section 6.9         Transactions with Affiliates.  Borrower shall not enter into any
transactions including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transactions are not otherwise prohibited under this Agreement, are in the
ordinary course of Borrower’s business and are upon fair and reasonable terms
no less favorable to Borrower than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

 

Section 6.10       Liens.  No Related Person shall grant, create, incur,
assume, permit or suffer to exist any Lien, upon any of its Property, including
without limitation any and all of Borrower’s Mortgage Collateral and Servicing
Rights and the proceeds from any thereof, other than (a) Liens which
secure payment of the Obligations, (b) first Liens on Property subject to
Second Lien Mortgages, so long as the aggregate amount of the Mortgage Notes
secured thereby does not exceed the Applicable Sublimit for Second Lien/HELOC
Loans, (c) to the extent not otherwise prohibited hereunder, Liens which
secure payment of the Indebtedness described in Section 6.2(b) and (c)
on Property other than Collateral, (d) Liens for taxes not yet due or which are
being contested in good faith and by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP, (e) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period
of more than 30 days or which are being contested in good faith and by
appropriate proceedings

 

42

 

diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person, (f) easements, rights-of-way,
restrictions and other similar encumbrances affecting real property which, in
the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the applicable Person, (g)
pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation, other than any Lien imposed by ERISA, (h) Liens securing judgments
for the payment of money not constituting an Event of Default under Section
7.1(f)(iv), (i) Liens of landlords on fixtures and moveable personal
property located on the premises leased in the ordinary course of business, (j)
non-consensual Liens as described in Section 6.8(d), and (k) Liens
existing on the date of this Agreement and described on Schedule 6.10,
and any Liens existing or arising in connection with any renewal, extension,
modification, refinancing or replacement of the Indebtedness secured thereby,
provided the amount of such Indebtedness is not increased and such Liens do not
attach to any other Property not previously subject thereto.

 

Section 6.11       ERISA Plans.  No Related Person shall adopt or agree to
maintain or contribute to any ERISA Plan. 
Borrower shall promptly notify Lenders in writing in the event an ERISA
Affiliate adopts an ERISA Plan.

 

Section 6.12       Change of Principal Office.  No Related Person shall move its principal
office, executive office or principal place of business from the address set forth
on the Borrower’s signature page without prior written notice to Agent and
Lenders.

 

Section 6.13       Consolidated Tangible Net Worth.  As of any date, the Consolidated Tangible Net
Worth of Borrower shall not be less than $5,000,000.00.

 

Section 6.14       Consolidated Adjusted Tangible Net
Worth.  As of any date, the
Consolidated Adjusted Tangible Net Worth of Borrower shall not be less than
$10,000,000.00.

 

Section 6.15       Total Debt to Adjusted Tangible Net
Worth Ratio.  As of any date, the
ratio of the Consolidated Total Debt of Borrower to the Consolidated Adjusted Tangible
Net Worth of Borrower shall not be more than 12 to 1.

 

Section 6.16       Profitability.  As of the end of each Fiscal Quarter,
Borrower’s Consolidated Net Income for such Fiscal Quarter shall be a positive
number equal to or greater than $1.00.

 

Section 6.17       Dividends.  During the existence of an Event of Default,
the Borrower shall not, nor shall it permit any Subsidiary to, declare or pay
any Dividends.

 

ARTICLE VII

EVENTS OF DEFAULT

 

Section 7.1         Nature of Event.  An Event of Default shall exist if any one or
more of the following occurs:

 

43

 

(a)        Borrower fails to make when due any payment of principal on
the Notes; or Borrower fails to make any payment of any interest, fee, expense
or other amount due hereunder, under the Notes, or under any other Loan
Document, within three (3) days after the same becomes due;

 

(b)        Default is made in the due observance or performance by any
Related Person of any covenant set forth in Article V of this Agreement
(other than Sections 5.8, 5.9 and 5.11) and such
Default continues for a period of fifteen (15) days after Agent gives Borrower
notice thereof;

 

(c)        Default is made in the due observance or performance by any
Related Person of any of the covenants or agreements contained in this
Agreement other than those described in subsections (a) or (b) immediately
above;

 

(d)        Any Related Person defaults in the due observance or
performance or any of the covenants or agreements contained in any other Loan
Document to which it is a party, and (unless such default also constitutes an
Event of Default pursuant to other provisions of this Section 7.1)
such default continues unremedied beyond the expiration of any applicable grace
period which may be expressly allowed under such other Loan Document;

 

(e)        Any material statement, warranty or representation by or on
behalf of any Related Person contained in this Agreement, the Notes or any
other Loan Document to which it is a party, or in any Borrowing Request,
officer’s certificate or other writing furnished in connection with this
Agreement, proves to have been incorrect or misleading in any material respect
as of the date made or deemed made (it being understood that if any
representations and warranties made in respect of any Mortgage Loans included
as Eligible Mortgage Loans in the Borrowing Base are not true and correct in
all material respects as of any date Borrower may cure such Default by
removing, within one (1) Business Day after receipt of written notice from
Agent to Borrower, such Mortgage Loan from inclusion as an Eligible Mortgage
Loan in the Borrowing Base by making any mandatory repayment required by Section 2.5);

 

(f)         Any Related Person:

 

(i)         suffers
the entry against it of a judgment, decree or order for relief by a court of
competent jurisdiction in an involuntary proceeding commenced under any
applicable bankruptcy, insolvency or other similar law of any jurisdiction now
or hereafter in effect, including the federal Bankruptcy Code, as from time to
time amended, or has any such proceeding commenced against it which remains
undismissed for a period of sixty (60) days; or

 

(ii)        commences
a voluntary case under any applicable bankruptcy, insolvency or similar law now
or hereafter in effect, including the federal Bankruptcy Code, as from time to
time amended, or applies for or consents to the entry of an order for relief in
an involuntary case under any such law; or makes a general assignment for the
benefit of creditors; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes corporate or
other action to authorize any of the foregoing; or

 

44

 

(iii)       suffers
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of all or a substantial
part of its assets or of any part of the Mortgage Collateral in a proceeding
brought against or initiated by it, and such appointment or taking possession
is neither made ineffective nor discharged within sixty (60) days after the
making thereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or

 

(iv)       suffers
the entry against it of a final judgment for the payment of money in excess of
$250,000.00 (not covered by insurance satisfactory to Required Lenders in its
discretion), unless the same is discharged within thirty (30) days after the
date of entry thereof or an appeal or appropriate proceeding for review thereof
is taken within such period and a stay of execution pending such appeal is obtained;
or

 

(v)        suffers
a writ or warrant of attachment or any similar process to be issued by any
court against all or any substantial part of its assets or any part of the
Mortgage Collateral.

 

(g)        Any Related Person fails to make when due or within any applicable
grace period any payment on any Indebtedness (other than the Obligations) with
an unpaid principal balance of over $250,000.00; or any event or condition
occurs under any provision contained in any agreement under which such
obligation is governed, evidenced or secured (or any other material breach or
default under such obligation or agreement occurs) if the effect thereof is to
cause or permit the holder or trustee of such obligation to cause such
obligation to become due prior to its stated maturity; or any such obligation
becomes due (other than by regularly scheduled payments) prior to its stated
maturity; or any of the foregoing occurs with respect to any one or more items
of Indebtedness of any Related Person with unpaid principal balances exceeding,
in the aggregate, $250,000.00;

 

(h)        Any default or event of default occurs under any provision
contained in any other credit facility maintained by Borrower;

 

(i)         This Agreement, any Note or any other Loan Document shall
for any reason cease to be in full force and effect, or be declared null and
void or unenforceable in whole or in part as the result of any action initiated
by any Person other than Agent or the validity or enforceability of any such
document shall be challenged or denied by any Person other than Agent;

 

(j)         Either (i) any “accumulated funding deficiency” (as
defined in Section 412(a)) of the Code in excess of $25,000.00 exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, or (ii) any Termination Event occurs with
respect to any ERISA Plan and the then current value of such ERISA Plan’s
benefits guaranteed under Title IV of ERISA exceeds the then current value
of such ERISA Plan’s assets available for the payment of such benefits by more
than $10,000.00 (or in the case of a Termination Event involving the withdrawal
of a substantial employer, the withdrawing employer’s proportionate share of
such excess exceeds such amount) or (iii) any Related Person or any ERISA
Affiliate withdraws from a multiemployer plan resulting in liability under
Title IV of ERISA of an amount in excess of $10,000.00 in the case of any
Related Person or $10,000.00 in the case of any other ERISA Affiliate;

 

45

 

(k)        Any default or event of default (after expiration of any
applicable notice and cure period) occurs under (i) any provision contained in
any credit facility maintained by Parent with an original principal amount
greater than or equal to $10,000,000 or (ii) any other recourse obligation of
Parent greater than or equal to $10,000,000; or

 

(l)         A Change of Control occurs.

 

Section 7.2         Default Remedies.  Upon the occurrence and during the
continuance of an Event of Default, Agent may, with the consent of the Required
Lenders, or Agent, shall, upon the request of the Required Lenders, declare the
Commitments to be terminated and/or declare the entire principal and all
interest accrued on the Notes to be, and the Notes, together with all
Obligations, shall thereupon become, forthwith due and payable, without any
presentment, demand, protest, notice of protest and nonpayment, notice of
acceleration or of intent to accelerate or other notice of any kind, all of
which hereby are expressly waived. 
Notwithstanding the foregoing, if an Event of Default specified in Subsections
7.1(f)(i), (ii) or (iii) above occurs with respect to Borrower, the
Commitments shall automatically and immediately terminate and the Notes and all
other Obligations shall become automatically and immediately due and payable,
both as to principal and interest, without any action by Agent or any Lender
and without presentment, demand, protest, notice of protest and nonpayment,
notice of acceleration or of intent to accelerate, or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein, in
the Notes to the contrary notwithstanding.

 

Section 7.3         Application of Proceeds.  After an Event of Default and acceleration of
the Obligations, the proceeds of any sale or enforcement of all or any part of
the Collateral pursuant to the Security Agreement and the balance of any moneys
in the Settlement Account and the Funding Account shall be applied by the
Agent:

 

FIRST, to the payment of all reasonable costs and expenses of such sale
or enforcement, including reasonable compensation to the Agent’s agents and
counsel, and all reasonable expenses, liabilities and advances made or incurred
by the Agent acting on instructions of the Required Lenders in connection
therewith, and to any reimbursements due Agent under Section 5.5;

 

SECOND, to the payment of all reasonable costs and expenses incurred by
the Agent under the Security Agreement;

 

THIRD, to any reimbursements due Lenders under Section 5.5;

 

FOURTH, to the payment of all accrued and unpaid interest on and fees
attributable to, all Loans under this Agreement, ratably according to the
amount so due to each Lender; and thereafter to the payment of the outstanding
principal balance of all Loans under this Agreement, ratably according to the
amount so due to each Lender;

 

FIFTH, to the extent proceeds remain after application under the
preceding subparagraphs, to the payment of all remaining Obligations, until
such amounts are paid in full; and

 

46

 

SIXTH, to the
payment to the Borrower, or to its successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.

 

If the proceeds of any such sale are
insufficient to cover the costs and expenses of such sale, as aforesaid, and
the payment in full of the Obligations, the Borrower shall remain liable for
any deficiency.

 

Section 7.4         Preservation of Rights.  No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. 
Any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in writing signed by the Lenders
required pursuant to Section 11.2, and then only to the extent in such
writing specifically set forth.  All
remedies contained in the Loan Documents or by law afforded shall be cumulative
and all shall be available to the Agent and the Lenders until the Obligations
have been paid in full.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.1         Indemnification.  Borrower agrees to indemnify Agent, Lenders
and each of their directors, officers, agents, attorneys, employees,
representatives and Affiliates (each an “Indemnified Party”), upon demand, from and
against any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this Section 8.1 collectively
called “liabilities and costs”) which to any extent (in whole or in part) may
be imposed on, incurred by, or asserted against any Indemnified Party growing
out of, resulting from or in any other way associated with any of the Mortgage
Collateral, the Loan Documents, and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Related Person).

 

THE
FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS
ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY, OR ARE CAUSED IN WHOLE OR PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY,

 

provided
only that such Indemnified Party shall not be entitled under this
section to receive indemnification for that portion, if any, of any liabilities
and costs which is proximately caused by its own individual gross negligence or
willful misconduct.  All amounts payable
by Borrower shall be immediately due upon Agent or any Lender’s request for the
payment thereof.

 

47

 

Section 8.2             Limitation
of Liability.  Neither the Agent nor
any Lender, or their directors, officers, agents, attorneys, employees,
representatives or Affiliates shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this Agreement.  THE
FOREGOING EXCULPATION SHALL APPLY TO ANY NEGLIGENT ACT OR OMISSION OF ANY KIND
BY ANY SUCH PERSON, OR ANY ACT OR OMISSION WHICH CAUSES SUCH PERSON TO BE
SUBJECT TO STRICT LIABILITY, PROVIDED THAT SUCH PERSON SHALL BE LIABLE FOR ITS
OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 

ARTICLE IX

 

THE AGENT

 

Section 9.1             Appointment.  Each Lender hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto.  The Agent
is hereby authorized to enter into the Security Agreement thereby appointing
Agent as collateral agent to act on behalf of Lenders and all obligations of
the Lenders under the Security Agreement shall be binding upon each Lender as
if such Lender had executed the Security Agreement.  Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.

 

Section 9.2             Delegation
of Duties.  The Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.

 

Section 9.3             Exculpatory
Provisions.  Neither the Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable to any Lender or any other Person for any
damage, loss or injury resulting from any action taken or omitted to be taken
by Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates under or in connection with this Agreement or any other Loan
Document, whether sounding in tort, contract or otherwise, INCLUDING IN
RESPECT OF LOSSES, LIABILITIES OR OTHER OBLIGATIONS SUFFERED BY SUCH PERSON’S
OWN NEGLIGENCE OR STRICT LIABILITY but except to the extent that any
of the foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person’s own gross
negligence or willful misconduct, (ii) responsible in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by any
Related Person or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the 

 

48

 

Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Person a party thereto to perform its obligations hereunder or
thereunder, or (iii) responsible in any manner to any of the Lenders for any
fraud of any Related Person or any officer thereof in this Agreement, in the
performance of this Agreement, or in any way related to the transactions
contemplated hereby.  The Agent shall not
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Related Person.

 

Section 9.4             Reliance
by Agent.  The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any instrument,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including counsel to the Borrower), independent accountants and other experts
selected by the Agent.  The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent.  The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders (or, if so specified by this
Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense that may be incurred by it by reason of taking or continuing to
take any such action.  The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.  Any request, authority or consent of any
Person who, at the time of making such request of giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or endorsee, as the case may be, of
such Note or of any Note or Notes issued in exchange therefor.

 

Section 9.5             Notice
of Default.  The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”.  In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders.  The Agent shall take such action with respect
to such Default or Event of Default as shall be reasonably directed by the
Required Lenders (or, if so specified by this Agreement or all Lenders); provided
that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.

 

Section 9.6             Non-Reliance
on Agent and Other Lenders.  Each
Lender expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of a Related Person or any affiliate

 

49

 

of a Related Person, shall be deemed to constitute any representation
or warranty by the Agent to any Lender. 
Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Related Persons and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement.  Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Related Persons and their affiliates.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Related Person or any affiliate of a Related Person
that may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.

 

Section 9.7             Indemnification.  The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective percentage of the total Commitments in effect on the date on which
indemnification is sought under this Section (or, if indemnification is sought
after the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with their respective
percentage of the total Commitments immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (whether before or after the payment of the
Loans) be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided  that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements that are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from the Agent’s gross
negligence or willful misconduct, PROVIDED
FURTHER, HOWEVER, THAT SUCH INDEMNIFICATION SHALL COVER AGENT’S NEGLIGENCE AND
STRICT LIABILITY.  The
agreements in this Section shall survive the payment of the Loans and all other
amounts payable hereunder.

 

Section 9.8             Agent
in Its Individual Capacity.  In the
event the Agent is a Lender, the Agent shall have the same rights and powers
hereunder and under any other Loan Document with respect to its Commitment and
its Loans as any Lender and may exercise the same as though it were not the
Agent, and the terms “Lender” and “Lenders” shall, at any time when the Agent
is a Lender, unless the context otherwise indicates, include the Agent in its
individual capacity.  The Agent and its
affiliates may make loans to, accept deposits from and generally 

 

50

 

engage in any kind of business with any Related Person as though the
Agent were not the Agent.  The Agent, in
its individual capacity, is not obligated to be or remain a Lender.

 

Section 9.9             Successor
Agent.  The Agent may resign as Agent
upon thirty (30) days’ notice to the Lenders and the Borrower.  If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default shall have occurred and be continuing) be
subject to approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term “Agent” shall mean such
successor agent effective upon such appointment and approval, and the former
Agent’s rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Loans.  If no successor agent has accepted
appointment as Agent by the date that is 30 days following a retiring Agent’s
notice of resignation, the retiring Agent’s resignation shall nevertheless
thereupon become effective, and the Lenders shall assume and perform all of the
duties of the Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.  After any retiring Agent’s resignation as
Agent, the provisions of this Article IX shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.

 

Section 9.10           Agent’s
Discretionary Authority. 
Notwithstanding anything to the contrary, in connection with the Borrowing
Base, the Agent is hereby authorized by the Lenders to grant temporary waivers
of compliance by the Borrower with the eligibility requirements regarding
qualification of any Collateral as an Eligible Mortgage Loan or with the
Borrowing Base sublimits when the Agent deems it appropriate, in its sole
discretion, as to all matters (other than (x) any requirement that a Mortgage
Loan be covered by a Take-Out Commitment, (y) the requirements contained in
subparts (a) through (j) of the definition of “Eligible Mortgage Loan” or (z)
the requirements contained in the definition of “Single Family”), if the
aggregate amount of deviation from strict compliance, based on the Unit Collateral
Value so included in the Borrowing Base and the amount of excess permitted over
the Borrowing Base sublimits does not exceed $10,000,000.00 at any time
(provided, however, that the duration of any such temporary waiver shall not
exceed twenty (20) days with respect to any Wet Loan unless the Mortgage Note
related to such Mortgage has been delivered to the Agent).

 

ARTICLE X

 

TAXES AND YIELD PROTECTION

Section 10.1           Taxes.

 

(a)           Payments
Free of Taxes.  Any and all payments
by or on account of any obligation of the Borrower hereunder or under any other
Loan Document shall be made free and clear of and without reduction or
withholding for any Indemnified Taxes or Other Taxes, provided that if
the Borrower shall be required by applicable law to deduct any Indemnified
Taxes (including any Other Taxes) from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions 

 

51

 

applicable to additional sums payable under this Section) the Agent or
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall timely pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable law.

 

(b)           Payment
of Other Taxes by the Borrower. 
Without limiting the provisions of subsection (a) above, the
Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

 

(c)           Indemnification
by the Borrower.  The Borrower shall
indemnify the Agent and each Lender, within 10 days after demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) paid by the Agent or such Lender, as the case may be, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate in reasonable
detail as to the amount of such payment or liability delivered to the Borrower
by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.

 

(d)           Evidence
of Payments.  As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by the Borrower to a
Governmental Authority, the Borrower shall deliver to the Agent the original or
a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Agent.

 

(e)           Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which the Borrower is resident for tax purposes, or any
treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower (with
a copy to the Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower or the Agent, such properly completed and
executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender, if
requested by the Borrower or the Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the
Agent as will enable the Borrower or the Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements.

 

Without limiting the generality of the foregoing, in the event that the
Borrower is resident for tax purposes in the United States, any Foreign Lender
shall deliver to the Borrower and the Agent (in such number of copies as shall
be requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Borrower or the Agent, but only if such Foreign Lender
is legally entitled to do so), whichever of the following is applicable:

 

52

 

(i)            duly completed
copies of Internal Revenue Service Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party,

 

(ii)           duly completed
copies of Internal Revenue Service Form W-8ECI,

 

(iii)          in the case of a
Foreign Lender claiming the benefits of the exemption for portfolio interest
under section 881(c) of the Code, (x) a certificate to the effect that such
Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A)
of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning
of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation”
described in section 881(c)(3)(C) of the Code and (y) duly completed copies of
Internal Revenue Service Form W-8BEN, or

 

(iv)          any other form
prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by applicable law to
permit the Borrower to determine the withholding or deduction required to be
made.

 

(f)            Treatment
of Certain Refunds.  If the Agent or any
Lender determines, in its good faith discretion, that it has received a refund
of any Taxes or Other Taxes as to which it has been indemnified by the Borrower
or with respect to which the Borrower has paid additional amounts pursuant to
this Section, it shall pay to the Borrower an amount equal to such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
the Borrower under this Section with respect to the Taxes or Other Taxes giving
rise to such refund), net of all reasonable out-of-pocket expenses of the Agent
or such Lender, as the case may be, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrower, upon the request of the Agent or
such Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Agent or such Lender in the event the Agent or such Lender is
required to repay such refund to such Governmental Authority.  This subsection shall not be construed to
require the Agent or any Lender to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to the Borrower
or any other Person.  Agent and each
Lender agree to take such action as Borrower may reasonably request in order to
apply for and obtain any refund of such amounts as Borrower reasonably
determines to be appropriate under the circumstances, provided that any such
actions shall be at the sole cost and expense of Borrower.

 

Section 10.2           Increased
Costs.

 

(a)           Increased
Costs Generally.  If any Change in
Law shall:

 

(i)            impose, modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge
or similar requirement against assets of, deposits with or for the account of,
or credit extended or participated in by, any Lender;

 

(ii)           subject any Lender
to any tax of any kind whatsoever with respect to this Agreement, or change the
basis of taxation of payments to such Lender in respect thereof 

 

53

 

(except for
Indemnified Taxes or Other Taxes covered by Section 10.1 and the
imposition of, or any change in the rate of, any Excluded Tax payable by such
Lender); or

 

(iii)          impose on any
Lender any other condition, cost or expense affecting this Agreement;

 

and the result
of any of the foregoing shall be to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender, the Borrower will pay to such
Lender such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered.

 

(b)           Capital
Requirements.  If any Lender
determines that any Change in Law affecting such Lender regarding capital
requirements has or would have the effect of reducing the rate of return on
such Lender’s capital or on the capital of such Lender’s holding company, if
any, as a consequence of this Agreement, the Commitment of such Lender or the
Loans made by such Lender to a level below that which such Lender or such
Lender’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s policies and the policies of such Lender’s
holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender or such Lender’s holding company for any such reduction
suffered.

 

(c)           Certificates
for Reimbursement.  A certificate of
a Lender setting forth in reasonable detail the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in subsection (a) or (b) of this Section and delivered to the Borrower
shall be conclusive absent manifest error. 
The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.

 

(d)           Delay
in Requests.  Failure or delay on the
part of any Lender to demand compensation pursuant to the foregoing provisions
of this Section shall not constitute a waiver of such Lender’s right to demand
such compensation, provided that the Borrower shall not be required to
compensate a Lender pursuant to the foregoing provisions of this Section for
any increased costs incurred or reductions suffered more than nine months prior
to the date that such Lender notifies the Borrower of the Change in Law giving
rise to such increased costs or reductions and of such Lender’s intention to
claim compensation therefor (except that, if the Change in Law giving rise to
such increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

 

Section 10.3           Mitigation
Obligations; Replacement of Lenders.

 

(a)           Designation of a Different Lending Office.  If
any Lender requests compensation under Section 10.2, or the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 10.1, then
such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 10.1 or 10.2,
as the case may 

 

54

 

be, in the future, and (ii) in each case, would not subject such Lender
to any unreimbursed cost or expense and would not otherwise be disadvantageous
to such Lender.  The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

(b)           Replacement of Lenders.  If
any Lender requests compensation under Section 10.2, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 10.1,
the Borrower may at its sole expense and effort, upon notice to such
Lender and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 11.11), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment), provided that:

 

(i)            the Agent shall
have received the assignment fee specified in Section 11.11(b);

 

(ii)           such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder and under the other Loan Documents from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts);

 

(iii)          in the case of any
such assignment resulting from a claim for compensation under Section 10.2
or payments required to be made pursuant to Section 10.1, such
assignment will result in a reduction in such compensation or payments
thereafter; and

 

(iv)          such assignment does
not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

 

Section 10.4           Survival.

 

All of the Borrower’s obligations under this Article X shall
survive termination of the Commitments and repayment of all other Obligations
hereunder.

 

ARTICLE XI

 

MISCELLANEOUS

 

Section 11.1           Notices.  Any notice or request required or permitted
to be given under or in connection with this Agreement, any Note or the other
Loan Documents (except as may otherwise be expressly required therein) shall be
in writing and shall be mailed by first class or express mail, postage prepaid,
or sent by telex, telegram, telecopy or other similar form of rapid 

 

55

 

transmission, confirmed by mailing (by first class or express mail,
postage prepaid) written confirmation at substantially the same time as such
rapid transmission, or personally delivered to an officer of the receiving
party.  All such communications shall be
mailed, sent or delivered to the parties hereto at their respective addresses
as listed on each parties’ signature page hereto, or at such other addresses or
to such individual’s or department’s attention as any party may have furnished
the other party in writing.  Any
communication so addressed and mailed shall be deemed to be given when so mailed,
except that Borrowing Requests, and communications related thereto shall not be
effective until actually received by Agent or Borrower, as the case may be; and
any notice so sent by rapid transmission shall be deemed to be given when
receipt of such transmission is acknowledged, and any communication so
delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of Borrower, Agent, or any Lender,
as the case may be.

 

Section 11.2           Amendments,
Etc.  Neither this Agreement, any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this Section
11.2.  The Required Lenders and each
Related Person party to the relevant Loan Document may, or, with the written
consent of the Required Lenders, the Agent and each Related Person party to the
relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Related
Persons hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders or the Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, the written consent of the Borrower, the Agent and all Lenders
shall be required to:

 

(i)            Extend the final
maturity of any Loan or postpone any regularly scheduled payment of principal
of any Loan or forgive all or any portion of the principal amount thereof, or
reduce the rate or extend the time of payment of interest or fees thereon;

 

(ii)           Reduce the
percentage specified in the definition of Required Lenders;

 

(iii)          Extend the Drawdown
Termination Date, or reduce the amount of or extend the payment date for the
mandatory payments required under Section 2.5, or increase the amount of
the total Commitments or the Commitment of any Lender hereunder;

 

(iv)          Amend this Section
11.2;

 

(v)           Except as provided
herein or in the Security Agreement, release any Collateral;

 

(vi)          Amend the definition
of “Unit Collateral Value”, “Borrowing Base”, “Applicable Margin”, “Applicable
Advance Rate Percentage”, or any provision in Section 2.2;

 

56

 

(vii)         Permit the Borrower
to assign its rights under this Agreement or amend or waive any restriction on
the Borrower’s ability to assign its rights or obligations under any of the
Loan Documents;

 

(viii)        Amend the definition
of Applicable Sublimit;

 

(ix)           Amend or waive any
provision herein regarding the indemnification of the Agent or any Lender; or

 

(x)            Amend or waive any
provision herein regarding the allocation among the Lenders of any payments or
proceeds received by the Agent hereunder.

 

No amendment of any provision of this Agreement relating to the Agent
shall be effective without the written consent of the Agent.  Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Related Persons, the Lenders, the Agent and all future
holders of the Loans.  In the case of any
waiver, the Related Persons, the Lenders and the Agent shall be restored to
their former position and rights hereunder and under the other Loan Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.

 

Section 11.3           CHOICE OF LAW; VENUE.  THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF TEXAS.  SECTION 346 OF
THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS.  BORROWER AND LENDERS HEREBY
AGREE THAT THE OBLIGATIONS CONTAINED HEREIN ARE PERFORMABLE IN DALLAS COUNTY,
TEXAS.  ALL PARTIES HERETO AGREE THAT
(I) ANY ACTION ARISING OUT OF THIS TRANSACTION SHALL BE FILED IN DALLAS
COUNTY, TEXAS, (II) VENUE FOR ENFORCEMENT OF ANY OF THE OBLIGATIONS
CONTAINED IN THIS AGREEMENT SHALL BE IN DALLAS COUNTY, (III) PERSONAL
JURISDICTION SHALL BE IN DALLAS COUNTY, TEXAS, (IV) ANY ACTION OR
PROCEEDING UNDER THIS AGREEMENT SHALL BE COMMENCED AGAINST ANY PARTY IN DALLAS
COUNTY, (V) SUCH ACTION SHALL BE INSTITUTED IN THE COURTS OF THE STATE OF TEXAS
LOCATED IN DALLAS COUNTY, TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS, AT THE OPTION OF
AGENT AND (VI) BORROWER AND LENDERS HEREBY WAIVE ANY OBJECTION TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING AND ADDITIONALLY WAIVE ANY RIGHT EACH MAY
HAVE TO BE SUED ELSEWHERE.  NOTHING
HEREIN SHALL AFFECT THE RIGHT OF AGENT TO ACCOMPLISH SERVICE OF PROCESS IN ANY
MANNER PERMITTED BY LAW.

 

Section 11.4           Invalidity.  In the event that any one or more of the
provisions contained in any Note, this Agreement or any other Loan Document
shall, for any reason, be held invalid,

 

57

 

illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of such document.

 

Section 11.5           Survival
of Agreements.  All covenants and
agreements herein and in any other Loan Document not fully performed before the
date hereof or the date thereof, and all representations and warranties herein
or therein, shall survive until payment in full of the Obligations and
termination of the Commitment.

 

Section 11.6           Renewal,
Extension or Rearrangement.  All
provisions of this Agreement and of the other Loan Documents shall apply with
equal force and effect to each promissory note hereafter executed which in whole
or in part represents a renewal, extension for any period, increase or
rearrangement of any part of the Obligations originally represented by the Notes
or of any part of such other Obligations.

 

Section 11.7           Waivers.  No course of dealing on the part of Agent or
any Lender, or any of their officers, employees, consultants or agents, nor any
failure or delay by Agent or any Lender with respect to exercising any right,
power or privilege of Lender under any Note, this Agreement or any other Loan
Document shall operate as a waiver thereof, except as otherwise provided in Section 11.2
hereof.

 

Section 11.8           Cumulative
Rights.  The rights and remedies of
Agent and each Lender under the Notes, this Agreement, and any other Loan
Document shall be cumulative, and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.

 

Section 11.9           Limitation
on Interest.  Each Lender, each
Related Person and any other parties to the Loan Documents intend to contract
in strict compliance with applicable usury Law from time to time in
effect.  In furtherance thereof such
Persons stipulate and agree that none of the terms and provisions contained in
the Loan Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable Law from time to time
in effect.  Neither each Related Person
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable Law from time
to time in effect, and the provisions of this section shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith.  Each Lender expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is
accelerated.  If (a) the maturity of
any Obligation is accelerated for any reason, (b) any Obligation is
prepaid and as a result any amounts held to constitute interest are determined
to be in excess of the legal maximum, or (c) any Lender or any other
holder of any or all of the Obligations shall otherwise collect moneys which
are determined to constitute interest which would otherwise increase the
interest on any or all of the Obligations to an amount in excess of that
permitted to be charged by applicable Law then in effect, then all such sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at such Lender’s or such holder’s option, promptly
returned to each Related Person or the other payor 

 

58

 

thereof upon such determination. 
In determining whether or not the interest paid or payable, under any
specific circumstance, exceeds the maximum amount permitted under applicable
Law, each Lender and each Related Persons (and any other payors thereof) shall
to the greatest extent permitted under applicable Law, (i) characterize
any non-principal payment as an expense, fee or premium rather than as
interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the instruments evidencing the
Obligations in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable Law in order to lawfully charge the maximum amount of interest
permitted under applicable Law.  In the
event applicable Law provides for an interest ceiling under Section 303 of
the Texas Finance Code, that ceiling shall be the weekly ceiling.

 

Section 11.10         Bank
Accounts; Offset.  To secure the
repayment of the Obligations, each Related Person hereby grants to each Lender
and its successors and assigns (in this section called an “Assignee”) a security
interest, a lien, and a right of offset, each of which shall be in addition to all
other interests, liens, and rights of any Lender or Assignee at common law,
under the Loan Documents, or otherwise, and each of which shall be upon and
against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of any Related Person now or hereafter held or received by
or in transit to any Lender, any Lender or Assignee from or for the account any
Related Person, whether for safekeeping, custody pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special,
time or demand, provisional or final) of any Related Person with any Lender or
any Assignee, and (c) any other credits and claims of any Related Person
at any time existing against any Lender or any Assignee, including claims under
certificates of deposit, excluding, however, any collateral clearly
identified and held by Agent in its capacity as collateral agent under a
Permitted Warehouse Debt facility.  During
the existence of any Event of Default, each Lender and each Assignee is hereby
authorized to foreclose upon, offset, appropriate, and apply, at any time and
from time to time, without notice to Borrower, any and all items hereinabove
referred to against the Obligations then due and payable.

 

If any Lender, whether by setoff or otherwise, has payment made to it
upon its Loans in a greater proportion than that received by any other Lender,
such Lender agrees, promptly upon demand, to purchase a portion of the Loans
held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of Loans.  If any
Lender, whether in connection with setoff or amounts which might be subject to
setoff or otherwise, receives collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such Lender agrees,
promptly upon demand, to take such action necessary such that all Lenders share
in the benefits of such collateral ratably in proportion to their Loans.  In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.

 

Section 11.11         Assignments.

 

(a)           Successors
and Assigns.  The terms and
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lenders and their respective successors and assigns,
except that (i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents and (ii) an assignment by any Lender must
be made in compliance with Section 11.11(c).  The parties to this Agreement acknowledge
that clause (ii) of this Section 11.11(a) relates only to absolute
assignments and does not prohibit assignments 

 

59

 

creating security interests, including, without limitation, any pledge
or assignment by any Lender of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank; provided, however, that no such pledge or assignment creating a security
interest shall release the transferor Lender from its obligations hereunder
unless and until the parties hereto have complied with the provisions of Section
11.11(c).  The Agent may treat the
Person which made any Loan or which holds any Note as the owner thereof for all
purposes hereof unless and until such Person complies with Section 11.11(c),
provided, however, that
the Agent may in its discretion (but shall not be required to) follow
instructions from the Person which made any Loan or which holds any Note to
direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loans or
any Note agrees by acceptance of such transfer or assignment to be bound by all
the terms and provisions of the Loan Documents. 
Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the owner of the rights
to any Loan (whether or not a Note has been issued in evidence thereof), shall
be conclusive and binding on any subsequent holder, or assignee of the rights
to such Loan.

 

(b)           Assignments.

 

(i)            Permitted
Assignments.  Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities (“Purchasers”) all or
any part of its rights and obligations under the Loan Documents.  The consent of the Borrower and the Agent,
which shall not be unreasonably withheld or delayed, shall be required prior to
an assignment becoming effective, provided, however, that
if a Default or Event of Default has occurred and is continuing, the consent of
the Borrower shall not be required, and provided further, however,
that the consent of neither the Borrower nor the Agent shall be required if the
Purchaser is (i) a Lender, (ii) an Affiliate of a Lender, or (iii) a successor
by merger to a Lender.  Each such
assignment shall (unless it is to a Lender or an Affiliate thereof or each of
the Borrower and the Agent otherwise consents) be in an amount not less than
the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning
Lender’s Commitment (calculated as of the date of such assignment).

 

(ii)           Effect;
Effective Date.  Upon delivery to the
Agent by the transferor Lender of a notice of assignment (the “Notice of
Assignment”), together with any consents required by Section 11.11(b)(i)
and payment of a $3,500 fee to the Agent for processing such assignment, such
assignment shall become effective on the effective date specified in such
Notice of Assignment, provided, however, that no fee shall be due
to the Agent for an assignment by a Lender to an Affiliate thereof.  The Notice of Assignment shall contain a
representation by the Purchaser to the effect that none of the consideration
used to make the purchase of the Commitment and Loans under the applicable
assignment agreement are “plan assets” as defined under ERISA and that the
rights and interests of the Purchaser in and under the Loan Documents will not
be “plan assets” under ERISA.  On and
after the effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan Document
executed by or on behalf of the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the
Borrower, the Lenders or the Agent shall 

 

60

 

be required to
release the transferor Lender with respect to the percentage of the Commitments
and Loans assigned to such Purchaser. 
Upon the consummation of any assignment to a Purchaser pursuant to this Section 11.11(b),
the transferor Lender, the Agent and the Borrower shall, if the transferor
Lender or the Purchaser desires that its Loans be evidenced by Notes, make
appropriate arrangements so that new Notes or, as appropriate replacement Notes
are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in principal
amounts reflecting their respective Commitments, as adjusted pursuant to such
assignment.  In addition, within a
reasonable time after the effective date of any assignment, the Agent shall,
and is hereby authorized and directed to, revise Schedule 1.1
reflecting the revised Commitments and Commitment Percentages of each of the
Lenders and shall distribute such revised Schedule 1.1
to each of the Lenders and the Borrower, whereupon such revised Schedule shall
replace the old Schedule and become part of this Agreement.

 

(c)           Distribution
of Information.  It is understood and
agreed that Agent and each Lender may provide to assignees and prospective
assignees financial information and reports and data concerning Borrower’s
properties and operations which was provided to Agent and such Lender pursuant
to this Agreement.

 

Section 11.12         Exhibits.  The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.

 

Section 11.13         Titles
of Articles, Sections and Subsections. 
All titles or headings to articles, sections, subsections or other
divisions of this Agreement or the exhibits hereto are only for the convenience
of the parties and shall not be construed to have any effect or meaning with
respect to the other content of such articles, sections, subsections or other
divisions, such other content being controlling as to the agreement between the
parties hereto.

 

Section 11.14         Counterparts;
Fax.  This Agreement may be executed
in counterparts, and it shall not be necessary that the signatures of both of
the parties hereto be contained on any one counterpart hereof, each counterpart
shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.  This Agreement
may be duly executed by facsimile or other electronic transmission.

 

Section 11.15         Termination:
Limited Survival.  In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Agent and Lenders to terminate this Agreement.  Upon receipt by Agent and Lenders of such a
notice, if no Obligations are then owing, this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from
all prospective obligations thereunder. 
Notwithstanding the foregoing or anything herein to the contrary, any
waivers or admissions made by any Person in any Loan Documents, any
Obligations, and any obligations which any Person may have to indemnify or
compensate Agent or any Lender shall survive any termination of this Agreement
or any other Loan Document.  At the
request and expense of Borrower, Agent

 

61

 

and Lenders shall prepare and execute all necessary instruments to
reflect and effect such termination of the Loan Documents.

 

Section 11.16         Joint
and Several Liability.  All
obligations which are incurred by two or more Related Persons shall be their
joint and several obligations and liabilities.

 

Section 11.17         Disclosures.  Agent and any Lender may disclose to, and
exchange and discuss with, any other Person any information concerning the
Collateral of Borrower or any Subsidiary (whether received by Agent, any Lender
or any other Person) for the purpose of (a) complying with Governmental
Requirements or any legal proceedings, (b) protecting or preserving the
Collateral, (c) protecting, preserving, exercising or enforcing any of
their rights in, under or related to the Collateral or the Loan Documents,
(d) performing any of their obligations under or related to the Loan
Documents, or (e) consulting with respect to any of the foregoing matters.

 

Section 11.18         Time
is of the Essence.  Time is of the
essence with respect to the performance of the obligations contained in this
Agreement.

 

Section 11.19         USA
Patriot Act Notice.  Each Lender
hereby notifies Borrower that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2003))
(the “Act”),
it is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other
information that will allow such Lender to identify Borrower in accordance with
the Act.

 

Section 11.20         Electronic
Transactions.  Borrower hereby
affirmatively consents and agrees to permit Agent and Lenders and their
successors and assigns to enter into transactions with Borrower involving “electronic
records” and “electronic means,” as those terms are defined in UETA and the
E-Sign Act.

 

Section 11.21         No
Reliance.  In executing this
Agreement, Borrower warrants and represents that Borrower is not relying on any
statement or representation other than those in this Agreement and is relying
upon its own judgment and advice of its attorneys.

 

Section 11.22         WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO WAIVES, TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. 
EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. 
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN 

 

62

 

PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY PROVISION
HEREOF OR THEREOF.  THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS.

 

Section 11.23         CONSEQUENTIAL DAMAGES.  NEITHER BORROWER, AGENT NOR ANY LENDER SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND EACH SUCH PERSON HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE EACH OTHER SUCH PERSON FOR, ANY SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY SUCH OTHER PERSON IN CONNECTION
WITH ANY CLAIM RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREIN.

 

Section 11.24         ENTIRE AGREEMENT.  THE NOTES, THIS AGREEMENT, AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

[the remainder of this page is
intentionally left blank]

 

63

 

IN WITNESS
WHEREOF, the parties hereto have caused this instrument to be duly executed as
of the date first above written.

 

	
  BORROWER:

  	
  BEAZER MORTGAGE CORPORATION,

  
	
  Borrower’s
  Address:

  	
  a Delaware corporation

  
	
  1000 Abernathy Road, Suite
  1200

  	
   

  
	
  Atlanta, GA 30328

  	
   

  
	
  Attention: Mr.
  Ron Kuhn

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Cory J. Boydston

  	
   

  
	
  With a copy of all notices
  to:

  	
  Name: 

  	
  Cory J. Boydston

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice President

  	
   

  
								

 

Mr.
Kenneth J. Gary

Executive
Vice President & General Counsel

Beazer
Homes USA, Inc.

1000
Abernathy Road

Atlanta,
GA 30328

 

 

	
  STATE OF GEORGIA

  	
  §

  	
   

  
	
   

  	
  §

  	
   

  
	
  COUNTY OF FULTON

  	
  §

  	
   

  

 

Before me, the
undersigned notary public, on this 10th day of January, 2006, personally
appeared Cory J. Boydston, Senior Vice President of Beazer Mortgage Corporation,
a Delaware corporation, known to me (or proved to me by the production of a
driver’s license as identification) to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same on
behalf of said corporation for the purposes and consideration therein
expressed.

 

 

	
   

  	
  /s/ Teresa
  Rose Dietz

  	
   

  
	
   

  	
  Notary
  Public - State of Georgia

  
	
   

  	
   

  
	
  My
  Commission expires:

  	
  Teresa Rose
  Dietz

  	
   

  
	
  May 5, 2007

  	
  Printed Name
  of Notary

  
				

 

64

 

 

	
  AGENT:

  	
  GUARANTY BANK,

  
	
  Address:

  	
  a
  Federal savings bank

  
	
  8333 Douglas Avenue, 11th
  Floor

  	
   

  
	
  Dallas, Texas 75225

  	
   

  
	
  Attention: Mr. Doug Dixon

  	
   

  
	
  Fax: 214.360.4892

  	
   

  
	
  Tel: 214.360.2674

  	
  By: 

  	
  /s/ Doug Dixon

  	
   

  
	
   

  	
   

  	
  Doug Dixon

  
	
   

  	
   

  	
  Senior Vice President

  
					

 

65

 

	
  LENDER:

  	
  GUARANTY BANK,

  
	
  Address:

  	
  a
  Federal savings bank,

  
	
  8333 Douglas Avenue, 11th
  Floor

  	
  as a Lender and as Swingline
  Lender

  
	
  Dallas, Texas 75225

  	
   

  
	
  Attention: Mr. Doug Dixon

  	
   

  
	
  Fax: 214.360.4892

  	
   

  
	
  Tel: 214.360.2674

  	
  By: 

  	
  /s/ Doug Dixon

  	
   

  
	
   

  	
   

  	
  Doug Dixon

  
	
   

  	
   

  	
  Senior Vice President

  
					

 

 

66

 

	
  LENDER:

  	
  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ R. B. Langford

  	
   

  
	
   

  	
  Name: 

  	
  R. Britt Langford

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice President

  	
   

  
								

 

67

 

	
  LENDER:

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William J. Umscheid

  	
   

  
	
   

  	
  Name:

  	
   William J. Umscheid

  	
   

  
	
   

  	
  Title: 

  	
    Vice President

  	
   

  
							

 

68

 

	
  LENDER:

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Elizabeth Kurilecz

  	
   

  
	
   

  	
  Name:

  	
  Elizabeth Kurilecz

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice President

  	
   

  
							

 

69

 

	
  LENDER:

  	
  WASHINGTON MUTUAL BANK

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Anne D. Brehony

  	
   

  
	
   

  	
  Name:

  	
  Anne D. Brehony

  	
   

  
	
   

  	
  Title: 

  	
   Vice President

  	
   

  
							

 

70

 

	
  LENDER:

  	
  NATIONAL CITY BANK OF KENTUCKY

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Michael A. Johnson

  	
   

  
	
   

  	
  Name:

  	
  Michael A. Johnson

  	
   

  
	
   

  	
  Title: 

  	
   Vice President

  	
   

  
							

 

71

 

	
  LENDER:

  	
  COMERICA BANK

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Paul G. Dufault

  	
   

  
	
   

  	
  Name:

  	
  Paul G. Dufault

  	
   

  
	
   

  	
  Title: 

  	
   Vice President

  	
   

  
							

 

72

 

	
  LENDER:

  	
  COLONIAL BANK, N.A.

  
	
  Colonial
  Bank, N.A.

  	
  as
  a Lender

  
	
  Mortgage Warehouse Lending

  	
   

  
	
  201 E. Pine Street, Suite 730

  	
   

  
	
  Orlando, FL 32801

  	
  By: 

  	
  /s/Amy J. Nunneley

  	
   

  
	
  Attn:  Jennifer Branker

  	
  Name:

  	
  Amy J. Nunneley

  	
   

  
	
  Fax: 407.835.6690

  	
  Title: 

  	
   SeniorVice President

  	
   

  
	
  Tel: 407.835.6700

  	
   

  	
   

  	
   

  
							

 

73

 

	
  LENDER:

  	
  CALYON NEW YORK BRANCH

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Samuel L. Hill

  	
   

  
	
   

  	
  Name:

  	
  Samuel L. Hill

  	
   

  
	
   

  	
  Title: 

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David P. Cagle

  	
   

  
	
   

  	
  Name:

  	
  David P. Cagle

  	
   

  
	
   

  	
  Title: 

  	
  Managing Director

  	
   

  
									

 

74

 

	
  LENDER:

  	
  BNP PARIBAS

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Duane Helkowski

  	
   

  
	
   

  	
  Name:

  	
  Duane Helkowski

  	
   

  
	
   

  	
  Title: 

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Angela Arrnold

  	
   

  
	
   

  	
  Name:

  	
  Angela Bentley Arrnold

  	
   

  
	
   

  	
  Title: 

  	
  Vice President

  	
   

  
										

 

75

 

SCHEDULE
1.1

 

COMMITMENTS AND COMMITMENT PERCENTAGES

 

	
  LENDER

  	
   

  	
  (A)

  

  

  

  COMMITMENT

  	
   

  	
  (B)

  

  

  MAXIMUM COMMITMENT

  	
   

  	
  (C)

  COMMITMENT

  PERCENTAGE

  ((A or B)÷Total

  Commitments)

  	
   

  
	
  Guaranty Bank

  	
   

  	
  $

  	
  39,285,714

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  15.7143

  	
  %

  
	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  $

  	
  39,285,714

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  15.7143

  	
  %

  
	
  U.S. Bank National Association

  	
   

  	
  $

  	
  32,142,857

  	
   

  	
  $

  	
  45,000,000

  	
   

  	
  12.8571

  	
  %

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  10.0000

  	
  %

  
	
  Washington Mutual Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  10.0000

  	
  %

  
	
  National City Bank of Kentucky

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  10.0000

  	
  %

  
	
  Comerica Bank

  	
   

  	
  $

  	
  21,428,571

  	
   

  	
  $

  	
  30,000,000

  	
   

  	
  8.5714

  	
  %

  
	
  Colonial Bank, N.A.

  	
   

  	
  $

  	
  17,857,143

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  7.1429

  	
  %

  
	
  Calyon New York Branch

  	
   

  	
  $

  	
  14,285,714

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  5.7143

  	
  %

  
	
  BNP Paribas

  	
   

  	
  $

  	
  10,714,286

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  4.2857

  	
  %

  
	
  Total

  	
   

  	
  $

  	
  250,000,000.00

  	
   

  	
  $

  	
  350,000,000.00

  	
   

  	
  100

  	
  %

  

 

 

SCHEDULE
6.10

EXISTING LIENS

 

1.             Liens
granted to HPS Office Systems on various copiers, fax machines and printers.

 

2.             Liens
granted to U.S. Bancorp on various copiers, fax machines and printers.Exhibit 10.10

 

INDUSTRIAL LEASE

(Multi-Tenant; Net ; “As-Is”)

 

 

BETWEEN

 

 

THE IRVINE COMPANY

 

 

AND

 

 

GOREMOTE INTERNET COMMUNICATIONS, INC.

 

 

INDEX TO LEASE

 

	
  ARTICLE I.

  	
   

  	
  BASIC
  LEASE PROVISIONS

  
	
   

  	
   

  	
   

  
	
  ARTICLE II.

  	
   

  	
  PREMISES

  
	
  Section 2.1

  	
   

  	
  Leased
  Premises

  
	
  Section 2.2

  	
   

  	
  Acceptance
  of Premises

  
	
  Section 2.3

  	
   

  	
  Building
  Name and Address

  
	
  Section 2.4

  	
   

  	
  Right
  of First Refusal

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.

  	
   

  	
  TERM

  
	
  Section 3.1

  	
   

  	
  General

  
	
  Section 3.2

  	
   

  	
  Existing
  Master Lease and Tenant’s Sublease

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  RENT
  AND OPERATING EXPENSES

  
	
  Section 4.1

  	
   

  	
  Basic
  Rent

  
	
  Section 4.2

  	
   

  	
  Operating
  Expenses

  
	
  Section 4.3

  	
   

  	
  Security
  Deposit

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.

  	
   

  	
  USES

  
	
  Section 5.1

  	
   

  	
  Use

  
	
  Section 5.2

  	
   

  	
  Signs

  
	
  Section 5.3

  	
   

  	
  Hazardous
  Materials

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.

  	
   

  	
  COMMON
  AREAS; SERVICES

  
	
  Section 6.1

  	
   

  	
  Utilities
  and Services

  
	
  Section 6.2

  	
   

  	
  Operation
  and Maintenance of Common Areas

  
	
  Section 6.3

  	
   

  	
  Use
  of Common Areas

  
	
  Section 6.4

  	
   

  	
  Parking

  
	
  Section 6.5

  	
   

  	
  Changes
  and Additions by Landlord

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.

  	
   

  	
  MAINTAINING
  THE PREMISES

  
	
  Section 7.1

  	
   

  	
  Tenant’s
  Maintenance and Repair

  
	
  Section 7.2

  	
   

  	
  Landlord’s
  Maintenance and Repair

  
	
  Section 7.3

  	
   

  	
  Alterations

  
	
  Section 7.4

  	
   

  	
  Mechanic’s
  Liens

  
	
  Section 7.5

  	
   

  	
  Entry
  and Inspection

  
	
  Section 7.6

  	
   

  	
  Communications
  Equipment

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII.

  	
   

  	
  TAXES
  AND ASSESSMENTS ON TENANT’S PROPERTY

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX.

  	
   

  	
  ASSIGNMENT
  AND SUBLETTING

  
	
  Section 9.1

  	
   

  	
  Rights
  of Parties

  
	
  Section 9.2

  	
   

  	
  Effect
  of Transfer

  
	
  Section 9.3

  	
   

  	
  Sublease
  Requirements

  
	
  Section 9.4

  	
   

  	
  Certain
  Transfers

  
	
  Section 9.5

  	
   

  	
  Facilities
  Sharing Arrangements

  
	
   

  	
   

  	
   

  
	
  ARTICLE X.

  	
   

  	
  INSURANCE
  AND INDEMNITY

  
	
  Section 10.1

  	
   

  	
  Tenant’s
  Insurance

  
	
  Section 10.2

  	
   

  	
  Landlord’s
  Insurance

  
	
  Section 10.3

  	
   

  	
  Tenant’s
  Indemnity

  
	
  Section 10.4

  	
   

  	
  Landlord’s
  Nonliability

  
	
  Section 10.5

  	
   

  	
  Waiver
  of Subrogation

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI.

  	
   

  	
  DAMAGE OR DESTRUCTION

  
	
  Section 11.1

  	
   

  	
  Restoration

  
	
  Section 11.2

  	
   

  	
  Lease
  Governs

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII.

  	
   

  	
  EMINENT DOMAIN

  
	
  Section 12.1

  	
   

  	
  Total
  or Partial Taking

  
	
  Section 12.2

  	
   

  	
  Temporary
  Taking

  
	
  Section 12.3

  	
   

  	
  Taking
  of Parking Area

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII.

  	
   

  	
  SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

  
	
  Section 13.1

  	
   

  	
  Subordination

  
	
  Section 13.2

  	
   

  	
  Estoppel Certificate

  
	
  Section 13.3

  	
   

  	
  Financials

  

 

i

 

	
  ARTICLE XIV.

  	
   

  	
  DEFAULTS AND REMEDIES

  
	
  Section 14.1

  	
   

  	
  Tenant’s Defaults

  
	
  Section 14.2

  	
   

  	
  Landlord’s Remedies

  
	
  Section 14.3

  	
   

  	
  Late Payments

  
	
  Section 14.4

  	
   

  	
  Right
  of Landlord to Perform

  
	
  Section 14.5

  	
   

  	
  Default
  by Landlord

  
	
  Section 14.6

  	
   

  	
  Expenses
  and Legal Fees

  
	
  Section 14.7

  	
   

  	
  Waiver
  of Jury Trial

  
	
  Section 14.8

  	
   

  	
  Satisfaction
  of Judgment

  
	
  Section 14.9

  	
   

  	
  Limitation
  of Actions Against Landlord

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV.

  	
   

  	
  END
  OF TERM

  
	
  Section 15.1

  	
   

  	
  Holding
  Over

  
	
  Section 15.2

  	
   

  	
  Merger
  on Termination

  
	
  Section 15.3

  	
   

  	
  Surrender
  of Premises; Removal of Property

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI.

  	
   

  	
  PAYMENTS
  AND NOTICES

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII.

  	
   

  	
  RULES
  AND REGULATIONS

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVIII.

  	
   

  	
  BROKER’S
  COMMISSION

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIX.

  	
   

  	
  TRANSFER
  OF LANDLORD’S INTEREST

  
	
   

  	
   

  	
   

  
	
  ARTICLE XX.

  	
   

  	
  INTERPRETATION

  
	
  Section 20.1

  	
   

  	
  Gender
  and Number

  
	
  Section 20.2

  	
   

  	
  Headings

  
	
  Section 20.3

  	
   

  	
  Joint
  and Several Liability

  
	
  Section 20.4

  	
   

  	
  Successors

  
	
  Section 20.5

  	
   

  	
  Time
  of Essence

  
	
  Section 20.6

  	
   

  	
  Controlling
  Law

  
	
  Section 20.7

  	
   

  	
  Severability

  
	
  Section 20.8

  	
   

  	
  Waiver
  and Cumulative Remedies

  
	
  Section 20.9

  	
   

  	
  Inability
  to Perform

  
	
  Section 20.10

  	
   

  	
  Entire
  Agreement

  
	
  Section 20.11

  	
   

  	
  Quiet
  Enjoyment

  
	
  Section 20.12

  	
   

  	
  Survival

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXI.

  	
   

  	
  EXECUTION
  AND RECORDING

  
	
  Section 21.1

  	
   

  	
  Counterparts

  
	
  Section 21.2

  	
   

  	
  Corporate
  and Partnership Authority

  
	
  Section 21.3

  	
   

  	
  Execution
  of Lease; No Option or Offer

  
	
  Section 21.4

  	
   

  	
  Recording

  
	
  Section 21.5

  	
   

  	
  Amendments

  
	
  Section 21.6

  	
   

  	
  Executed
  Copy

  
	
  Section 21.7

  	
   

  	
  Attachments

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXII

  	
   

  	
  MISCELLANEOUS

  
	
  Section 22.1

  	
   

  	
  Nondisclosure
  of Lease Terms

  
	
  Section 22.2

  	
   

  	
  Guaranty

  
	
  Section 22.3

  	
   

  	
  Changes
  Requested by Lender

  
	
  Section 22.4

  	
   

  	
  Mortgagee
  Protection

  
	
  Section 22.5

  	
   

  	
  Covenants
  and Conditions

  
	
  Section 22.6

  	
   

  	
  Security
  Measures

  
	
  Section 22.7.

  	
   

  	
  Jams
  Arbitration

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Description
  of Premises

  
	
  Exhibit B

  	
   

  	
  Environmental
  Questionnaire

  
	
  Exhibit C

  	
   

  	
  Landlord’s
  Disclosures

  
	
  Exhibit D

  	
   

  	
  Insurance
  Requirements

  
	
  Exhibit E

  	
   

  	
  Rules and
  Regulations

  
	
  Exhibit Y

  	
   

  	
  Project
  Site Plan

  

 

ii

 

INDUSTRIAL LEASE

(Multi-Tenant; Net)

 

THIS
LEASE is made as of the 8th day of February, 2005, by and between
THE IRVINE COMPANY, hereafter called “Landlord,” and GOREMOTE INTERNET
COMMUNICATIONS, INC., a Delaware corporation, which will do business in
California as GoRemote Internet Communications, Inc., hereinafter called “Tenant.”

 

ARTICLE I. 
BASIC LEASE PROVISIONS

 

Each
reference in this Lease to the “Basic Lease Provisions” shall mean and refer to
the following collective terms, the application of which shall be governed by
the provisions in the remaining Articles of this Lease.

 

1.             Premises:  Suite No. 
100 (the Premises are more
particularly described in Section 2.1).

 

Address
of Building:  130 Theory, Irvine, CA
92714

 

2.             Project Description (if applicable):  University Research Park VII

 

3.             Use of Premises:  General Office, subject to the
restrictions set forth in Section 5.1 below.

 

4.             Commencement Date:  March 1, 2005

 

5.             Expiration Date:  March 31, 2007

 

6.             Basic Rent: 
Commencing on the Commencement Date, the Basic Rent shall be Thirty Nine
Thousand Six Hundred Fifty Dollars ($39,650.00) per month, based on $1.25 per
rentable square foot. [See Section 4.3 of the Lease for “credit”
provisions.]

 

Basic
Rent is subject to adjustment as follows:

 

Tenant
shall not be obligated to pay Basic Rent for the period from July 1, 2005
through July 31, 2005.  However,
Tenant shall pay its “Tenant’s Share” of “Operating Expenses”  (as hereinafter defined) for such one-month
period.

 

Commencing
August 1, 2005, the Basic Rent shall be Thirty Nine Thousand Six Hundred
Fifty Dollars ($39,650.00) per month, based on $1.25 per rentable square foot.

 

7.             Guarantor(s): 
None

 

8.             Floor Area of Premises:  Approximately 31,720 rentable square feet

 

9.             Security Deposit:  $43,615.00

 

10.           Broker(s): 
Orion Property Partners

 

11.           Additional Insureds:  None

 

12.           Address for Payments and Notices:

 

	
  LANDLORD

  	
   

  	
  TENANT

  
	
   

  	
   

  	
   

  
	
  THE IRVINE COMPANY

  	
   

  	
  GOREMOTE INTERNET

  
	
  550 Newport Center Drive

  	
   

  	
  COMMUNICATIONS, INC.

  
	
  Newport Beach, CA 92660

  	
   

  	
  130 Theory, Suite 100

  
	
  Attn: Senior Vice President, Operations

  	
   

  	
  Irvine, CA 92617

  
	
  Irvine Office Properties

  	
   

  	
   

  

 

	
  with a copy of notices to:

  	
   

  	
  with a copy of notices to:

  

 

	
  THE IRVINE COMPANY

  	
   

  	
  GOREMOTE INTERNET

  
	
  550 Newport Center Drive

  	
   

  	
  COMMUNICATIONS, INC.

  
	
  Newport Beach, CA 92660

  	
   

  	
  1421 McCarthy Boulevard

  
	
  Attn: Vice President, Operations

  	
   

  	
  Milpitas, CA 95035

  
	
  Irvine Office Properties, Technology Portfolio

  	
   

  	
  Attn: General Counsel

  

 

13.           Tenant’s Liability Insurance Requirement:  $2,000,000.00

 

14.           Vehicle Parking Spaces:  One Hundred Sixteen (116)

 

 

15.           Tenant understands and acknowledges that a
material consideration for Landlord’s entering into this Lease is the nature of
Tenant’s business and the mutual benefits to be derived by Tenant and by the
University of California at Irvine (the “University”) as a result of Tenant’s
business operating in a project located proximately to the University.  Accordingly, in the event of any proposed
assignment of this Lease, or sublease of the Premises, in addition to all of
the provisions of Section 9.1(b) of this lease, Landlord may
reasonably withhold its consent to any such proposed assignment or sublease if
Landlord determines that such mutual benefits will not be derived as a result
of the proposed use of the Premises by such assignee, sublessee or transferee.

 

 

ARTICLE II.  PREMISES

 

SECTION 2.1.  LEASED PREMISES.  Landlord leases to Tenant and
Tenant leases from Landlord the premises shown in Exhibit A (the “Premises”),
containing approximately the floor area set forth in Item 8 of the Basic Lease
Provisions and known by the suite number identified in Item 1 of the Basic
Lease Provisions.  The Lease includes
furniture and fixtures installed in the Premises as of the Commencement Date,
which is leased to Tenant in an “as is” condition.  The Premises are located in the building
identified in Item 1 of the Basic Lease Provisions (which together with the
underlying real property, is called the “Building”), and is a portion of the
project shown in Exhibit Y (the “Project”).  Tenant understands that the floor area set
forth in Item 8 of the Basic Lease Provisions includes a factor
approximating the total square footage of any common lobby or internal common
features of the Building.  If, upon
completion of the space plans for the Premises, Landlord’s architect or space
planner determines that the rentable square footage of the Premises differs
from that set forth in the Basic Lease Provisions, then Landlord shall so
notify Tenant and the Basic Rent (as shown in Item 6 of the Basic Lease
Provisions) shall be promptly adjusted in proportion to the change in square
footage.  Within five (5) days
following Landlord’s request, the parties shall memorialize the adjustments by
executing an amendment to this Lease prepared by Landlord, provided that the
failure or refusal by either party to execute the amendment shall not affect
its validity.

 

SECTION 2.2.  ACCEPTANCE OF PREMISES.  Tenant acknowledges that neither Landlord nor
any representative of Landlord has made any representation or warranty with
respect to the Premises, the Building or the Project or their respective
suitability or fitness for any purpose, including without limitation any
representations or warranties regarding the compliance of Tenant’s use of the
Premises with the applicable zoning or regarding any other land use matters,
and Tenant shall be solely responsible as to such matters.  Further, neither Landlord nor any
representative of Landlord has made any representations or warranties regarding
(i) what other tenants or uses may be permitted or intended in the
Building or the Project, (ii) any exclusivity of use by Tenant with
respect to its permitted use of the Premises as set forth in Item 3 of the
Basic Lease Provisions, or (iii) any construction of portions of the
Project not yet completed.  Tenant
further acknowledges that neither Landlord nor any representative of Landlord
has agreed to undertake any alterations or additions or construct any
improvements to the Premises, and that Tenant’s lease of the Premises shall be
on an “as is” basis.  As of the
Commencement Date, Tenant shall be conclusively deemed to have accepted the
Premises and those portions of the Building and Project in which Tenant has any
rights under this Lease, which acceptance shall mean that it is conclusively
established that the Premises and those portions of the Building and Project in
which Tenant has any rights under this Lease were in satisfactory condition and
in conformity with the provisions of this Lease.

 

SECTION 2.3. 
BUILDING NAME AND ADDRESS.  Tenant shall not utilize any
name selected by Landlord from time to time for the Building and/or the Project
as any part of Tenant’s corporate or trade name.  Landlord shall have the right to change the
name, address, number or designation of the Building or Project without
liability to Tenant.

 

ARTICLE III. 
TERM

 

SECTION 3.1.  GENERAL.  Subject to the provisions of Section 3.2
below, the term of this Lease (“Term”)
shall commence on the date set forth in Item 4 of the Basic Lease Provisions
(the “Commencement Date”), and
shall expire on the date set forth in Item 5 of the Basic Lease Provisions (the
“Expiration Date”).

 

SECTION 3.2. 
EXISTING MASTER LEASE AND TENANT’S SUBLEASE.  It is understood and agreed that the Premises
are presently being leased by Telecore, Inc., a Delaware corporation doing
business as Delaware Telecore, Inc. (the “Current Tenant”) pursuant to an undated lease (the “Existing Master Lease”), and that Tenant is
in possession and subleasing the Premises from the Current Tenant pursuant to a
separate sublease agreement (the “Tenant’s
Sublease”).  The Existing
Master Lease is scheduled to expire by its terms at midnight March 31,
2005, and Tenant and Landlord do hereby agree that both the Existing Master
Lease and the Tenant’s Sublease shall be terminated effective as of midnight on
the day preceding the Commencement Date of this Lease.  Landlord shall have no obligation to Tenant
or responsibility for possessory issues as to the Premises as between Current
Tenant and Tenant, nor for any conflicting claims or rights to trade fixtures,
furniture, equipment or other personal property in the Premises as between
Current Tenant and Tenant.

 

ARTICLE IV. 
RENT AND OPERATING EXPENSES

 

SECTION 4.1. 
BASIC RENT.  From and after the Commencement Date, Tenant
shall pay to Landlord without deduction or offset, Basic Rent for the Premises
in the total amount shown (including subsequent adjustments, if any) in Item 6
of the Basic Lease Provisions.  Any
rental adjustment shown in Item 6 shall be deemed to occur on the specified
monthly anniversary of the Commencement Date, whether or not that date occurs
at the end of a calendar month.  The rent
shall be due and payable in advance commencing on the Commencement Date (as
prorated for any partial month) and continuing thereafter on the first day of
each successive calendar month of the Term. 
No demand, notice or invoice shall be required for the payment of Basic
Rent.

 

 

SECTION 4.2. 
OPERATING EXPENSES.

 

(a)          Tenant shall pay to Landlord, as additional
rent, Tenant’s Share of “Operating Expenses”, as defined below, incurred by
Landlord in the operation of the Building and Project.  The term “Tenant’s Share” means that portion
of an Operating Expense determined by multiplying the actual cost of such item
by a fraction, the numerator of which is the floor area of the Premises and the
denominator of which is the total square footage of the floor area, as of the
date on which the computation is made, to be charged with such Operating
Expense.

 

(b)         Commencing prior to the start of the first
full “Expense Recovery Period” (as defined below) of the Lease, and prior to
the start of each full or partial Expense Recovery Period thereafter, Landlord
shall give Tenant a written estimate of the amount of Tenant’s Share of
Operating Expenses for the Expense Recovery Period.  Tenant shall pay the estimated amounts to
Landlord in equal monthly installments, in advance, with Basic Rent.  If Landlord has not furnished its written
estimate for any Expense Recovery Period by the time set forth above, Tenant
shall continue to pay cost reimbursements at the rates established for the
prior Expense Recovery Period, if any; provided that when the new estimate is
delivered to Tenant, Tenant shall, at the next monthly payment date, pay any
accrued cost reimbursements based upon the new estimate.  For purposes hereof, “Expense Recovery Period”
shall mean every twelve month period during the Term (or portion thereof for
the first and last lease years) commencing July 1 and ending June 30.

 

(c)          Within one hundred twenty (120) days after
the end of each Expense Recovery Period, Landlord shall furnish to Tenant a
statement showing in reasonable detail the actual or prorated Operating Expenses
incurred by Landlord during the period, and the parties shall within thirty
(30) days thereafter make any payment or allowance necessary to adjust Tenant’s
estimated payments, if any, to the actual Tenant’s Share as shown by the annual
statement.  Any delay or failure by
Landlord in delivering any statement hereunder shall not constitute a waiver of
Landlord’s right to require Tenant to pay Tenant’s Share of Operating Expenses
pursuant hereto.  Any amount due Tenant
shall be credited against installments next coming due under this Section 4.2,
and any deficiency shall be paid by Tenant together with the next
installment.  If Tenant has not made
estimated payments during the Expense Recovery Period, any amount owing by
Tenant pursuant to subsection (a) above shall be paid to Landlord in
accordance with Article XVI.  Should
Tenant fail to object in writing to Landlord’s determination of actual
Operating Expenses within sixty (60) days following delivery of Landlord’s
expense statement, Landlord’s determination of actual Operating Expenses for
the applicable Expense Recovery Period shall be conclusive and binding on the
parties and any future claims to the contrary shall be barred.

 

(d)         Even though the Lease has terminated and the
Tenant has vacated the Premises, when the final determination is made of Tenant’s
Share of Operating Expenses for the Expense Recovery Period in which the Lease
terminates, Tenant shall upon notice pay the entire increase due over the
estimated expenses paid.  Conversely, any
overpayment made in the event expenses decrease shall be rebated by Landlord to
Tenant.

 

(e)          If, at any time during any Expense Recovery
Period, any one or more of the Operating Expenses are increased to a rate(s) or
amount(s) in excess of the rate(s) or amount(s) used in calculating the
estimated expenses for the year, then the estimate of Tenant’s Share of
Operating Expenses shall be increased for the month in which such rate(s) or
amount(s) becomes effective and for all succeeding months by an amount equal to
Tenant’s Share of the increase.  Landlord
shall give Tenant written notice of the amount or estimated amount of the
increase, the month in which the increase will become effective, Tenant’s Share
thereof and the month for which the payments are due.  Tenant shall pay the increase to Landlord as
a part of Tenant’s monthly payments of estimated expenses as provided in
paragraph (b) above, commencing with the month in which effective.

 

(f)          The term “Operating Expenses” shall mean and
include all “Project Costs” (as hereafter defined) and “Property Taxes” (as
hereafter defined).

 

(g)         The term “Project Costs” shall include all
expenses of operation and maintenance of the Building and the Project, together
with all appurtenant Common Areas (as defined in Section 6.2), and shall
include the following charges by way of illustration but not limitation:  water and sewer charges; insurance premiums
or reasonable premium equivalents should Landlord elect to self-insure any risk
that Landlord is authorized to insure hereunder; license, permit, and
inspection fees; heat; light; power; janitorial services to any interior Common
Areas; air conditioning; supplies; materials; equipment; tools; the cost of any
environmental, insurance, tax or other consultant utilized by Landlord in
connection with the Building and/or Project; establishment of reasonable
reserves for replacements and/or repair of the Building and/or Common Area
improvements, equipment and supplies; costs incurred in connection with
compliance of any laws or changes in laws applicable to the Building or the
Project; the cost of any capital investments (other than tenant improvements
for specific tenants) to the extent of the amortized amount thereof over the
useful life of such capital investments calculated at a market cost of funds,
all as determined by Landlord, for each such year of useful life during the
Term; costs associated with the procurement and maintenance of an air
conditioning, heating and ventilation service agreement, and procurement and
maintenance of an intrabuilding network cable service agreement for any
intrabuilding network cable telecommunications lines within the Project, and
any other installation, maintenance, repair and replacement costs associated
with such lines; labor; reasonably allocated wages and salaries, fringe
benefits, and payroll taxes for administrative and other personnel directly
applicable to the Building and/or Project, including both Landlord’s personnel
and outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4,
7.2, and 10.2; and a reasonable overhead/management fee for the professional
operation of the Project. 
Notwithstanding anything to the contrary herein, Tenant’s Share of any
such property management fees shall be determined by multiplying the actual
property management fee charged (which from time to time may be with respect to
the Building only, a portion of the Project only, the entire Project, or the
Project together with other properties owned by Landlord and/or its affiliates)
by a fraction, the numerator of which is the floor area of the Premises (as set
forth in Item 8 of the Basic Lease Provisions contained in the Lease), and the
denominator of which is the total square footage of space charged with such
management fee actually leased to tenants (including Tenant).  It is understood that Project Costs shall
include reasonably competitive charges for direct services provided by any
subsidiary or division of Landlord.

 

 

(h)         The term “Property Taxes” as used herein
shall include the following:  (i) all
real estate taxes or personal property taxes, as such property taxes may be
reassessed from time to time; and (ii) other taxes, charges and
assessments which are levied with respect to this Lease or to the Building
and/or the Project, and any improvements, fixtures and equipment and other
property of Landlord located in the Building and/or the Project, except that
general net income and franchise taxes imposed against Landlord shall be
excluded; and (iii) all assessments and fees for public improvements,
services, and facilities and impacts thereon, including, without limitation,
arising out of any Community Facilities Districts, “Mello Roos” districts,
similar assessment districts, and any traffic impact mitigation assessments or
fees; (iv) any tax, surcharge or assessment which shall be levied in
addition to or in lieu of real estate or personal property taxes, other than
taxes covered by Article VIII; and (v) costs and expenses incurred in
contesting the amount or validity of any Property Tax by appropriate
proceedings.

 

SECTION 4.3. 
SECURITY DEPOSIT.  As of the execution of this Lease, Landlord
currently holds the sum of One Hundred Thirty Thousand and Fifty-Two Dollars
($130,052.00) as the “Security Deposit” under the Tenant’s Sublease.  Provided Tenant is not then in default of its
obligations under this Lease, Landlord shall credit the sum of Thirty-Nine
Thousand Six Hundred-Fifty Dollars ($39,650.00) of said “Security Deposit”
under the Tenant’s Sublease against Basic Rent due and payable for each of the
months of March and April, 2005, and shall credit the sum of Seven
Thousand, One Hundred Thirty-Seven Dollars ($7,137.00) against Basic Rent due
and payable for the month of May, 2005. 
Following said credits, Landlord shall continue to hold the remaining
sum stated in Item 9 of the Basic Lease Provisions as security for the full and
faithful performance of Tenant’s obligations under this Lease (the “Security
Deposit”).  Subject to the last sentence
of this Section, the Security Deposit shall be understood and agreed to be the
property of Landlord upon Landlord’s receipt thereof, and may be utilized by
Landlord in its discretion towards the payment of all prepaid expenses by
Landlord for which Tenant would be required to reimburse Landlord under this
Lease, including, without limitation, brokerage commissions and Tenant
Improvement costs.  Upon any default by
Tenant, including specifically Tenant’s failure to pay rent or to abide by its
obligations under Sections 7.1 and 15.3 below, whether or not Landlord is
informed of or has knowledge of the default, the Security Deposit shall be
deemed to be automatically and immediately applied, without waiver of any
rights Landlord may have under this Lease or at law or in equity as a result of
the default, as a setoff for full or partial compensation for that
default.  If any portion of the Security
Deposit is applied after a default by Tenant, Tenant shall within five (5) days
after written demand by Landlord deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount.  Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on the Security Deposit. 
If Tenant fully performs its obligations under this Lease, the Security
Deposit shall be returned to Tenant (or, at Landlord’s option, to the last
assignee of Tenant’s interest in this Lease) after the expiration of the Term,
provided that Landlord may retain the Security Deposit to the extent and until
such time as all amounts due from Tenant in accordance with this Lease have
been determined and paid in full. 
Notwithstanding the foregoing, upon determination that the only
obligation of Tenant remaining after expiration of the Term or earlier
termination of this Lease is to pay any adjustment of Operating Expenses which
may result upon reconciliation of the Operating Expenses attributable to the
final Expense Recovery Period of the Lease Term, Landlord shall return to
Tenant the Security Deposit less an amount equal to the amount paid by Tenant
after reconciliation of the Operating Expenses for the immediately preceding
period, if any.  No return or retention
of all or any portion of the Security Deposit shall be deemed to relieve Tenant
of its obligations to pay any Operating Expenses which may be due for the final
Expense Recovery Period of the Lease Term.

 

ARTICLE V.  USES

 

SECTION 5.1.  USE.  Tenant shall use the Premises only for the
purposes stated in Item 3 of the Basic Lease Provisions, all in accordance with
applicable laws and restrictions and pursuant to approvals to be obtained by
Tenant from all relevant and required governmental agencies and
authorities.  The parties agree that any
contrary use shall be deemed to cause material and irreparable harm to Landlord
and shall entitle Landlord to injunctive relief in addition to any other
available remedy.  Tenant, at its
expense, shall procure, maintain and make available for Landlord’s inspection
throughout the Term after reasonable advance notice, all governmental
approvals, licenses and permits required for the proper and lawful conduct of
Tenant’s permitted use of the Premises. 
Tenant shall not do or permit anything to be done in or about the
Premises which will in any way interfere with the rights of other occupants of
the Building or the Project, or use or allow the Premises to be used for any
unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in
the Premises or the Project.  Tenant
shall not perform any work or conduct any business whatsoever in the Project
other than inside the Premises.  Tenant
shall not do or permit to be done anything which will invalidate or increase
the cost of any insurance policy(ies) covering the Building, the Project and/or
their contents, and shall comply with all applicable insurance underwriters rules and
the requirements of the Pacific Fire Rating Bureau or any other organization
performing a similar function.  Tenant
shall comply at its expense with all present and future laws, ordinances,
restrictions, regulations, orders, rules and requirements of all
governmental authorities that pertain to Tenant or its use of the Premises,
including, without limitation, all federal and state occupational health and
safety requirements, whether or not Tenant’s compliance will necessitate
expenditures or interfere with its use and enjoyment of the Premises.  Tenant shall comply at its expense with all
present and future covenants, conditions, easements or restrictions now or
hereafter affecting or encumbering the Building and/or Project, and any
amendments or modifications thereto, including, without limitation, the payment
by Tenant of any periodic or special dues or assessments charged against the Premises
or Tenant which may be allocated to the Premises or Tenant in accordance with
the provisions thereof.  Tenant shall
promptly upon demand reimburse Landlord for any additional insurance premium
charged by reason of Tenant’s failure to comply with the provisions of this
Section, and shall indemnify Landlord from any liability and/or expense
resulting from Tenant’s noncompliance.

 

SECTION 5.2. 
SIGNS.   Provided Tenant continues to occupy the
entire Premises, Tenant shall have the non-exclusive right to one (1) exterior
building top sign on the Building for Tenant’s name and/or graphics, subject to
Landlord’s right of prior approval that such exterior signage is in compliance
with the Signage Criteria (defined below).

 

 

Except
as provided in the foregoing or as otherwise approved in writing by Landlord,
in its sole discretion, Tenant shall have no right to maintain identification
signs in any location on or about the Premises, the Building or the Project
(except for signs wholly within the interior of the Premises) and shall not
place or erect any signs, displays or other advertising materials within the
Premises that are visible from the exterior of the Building.  The size, design, graphics, material, style,
color and other physical aspects of any permitted sign shall be subject to
Landlord’s written approval prior to installation (which approval may be
withheld in Landlord’s discretion), any covenants, conditions or restrictions
encumbering the Premises, Landlord’s signage program for the Project, as in
effect from time to time and approved by the City in which the Premises are
located (“Signage Criteria”), and any applicable municipal or other
governmental permits and approvals. 
Tenant acknowledges having received and reviewed a copy of the current
Signage Criteria for the Project.  Tenant
shall be responsible for the cost of any permitted sign, including the
fabrication, installation, maintenance and removal thereof.  If Tenant fails to maintain its sign, or if
Tenant fails to remove same upon termination of this Lease and repair any
damage caused by such removal, Landlord may do so at Tenant’s expense.

 

SECTION 5.3. 
HAZARDOUS MATERIALS.

 

(a)          For purposes of this Lease, the term “Hazardous
Materials” includes (i) any “hazardous materials” as defined in Section 25501(o)
of the California Health and Safety Code, (ii) any other substance or
matter which results in liability to any person or entity from exposure to such
substance or matter under any statutory or common law theory, and (iii) any
substance or matter which is in excess of permitted levels set forth in any
federal, California or local law or regulation pertaining to any hazardous or
toxic substance, material or waste.

 

(b)         Tenant shall not cause or permit any
Hazardous Materials to be brought upon, stored, used, generated, released or disposed
of on, under, from or about the Premises (including, without limitation, the
soil and groundwater thereunder) without the prior written consent of
Landlord.  Notwithstanding the foregoing,
Tenant shall have the right, without obtaining prior written consent of
Landlord, to utilize within the Premises standard office products that may
contain Hazardous Materials (such as photocopy toner, “White Out”, and the
like), provided  however, that (i) Tenant shall maintain such
products in their original retail packaging, shall follow all instructions on
such packaging with respect to the storage, use and disposal of such products,
and shall otherwise comply with all applicable laws with respect to such
products, and (ii) all of the other terms and provisions of this Section 5.3
shall apply with respect to Tenant’s storage, use and disposal of all such
products.  Landlord may, in its sole
discretion, place such conditions as Landlord deems appropriate with respect to
any such Hazardous Materials, and may further require that Tenant demonstrate
that any such Hazardous Materials are necessary or useful to Tenant’s business
and will be generated, stored, used and disposed of in a manner that complies
with all applicable laws and regulations pertaining thereto and with good
business practices.  Tenant understands
that Landlord may utilize an environmental consultant to assist in determining
conditions of approval in connection with the storage, generation, release,
disposal or use of Hazardous Materials by Tenant on or about the Premises,
and/or to conduct periodic inspections of the storage, generation, use, release
and/or disposal of such Hazardous Materials by Tenant on and from the Premises,
and Tenant agrees that the reasonable costs incurred by Landlord in connection
therewith shall be reimbursed by Tenant to Landlord as additional rent
hereunder upon written demand.

 

(c)          Prior to the execution of this Lease, Tenant
shall complete, execute and deliver to Landlord an Environmental Questionnaire
and Disclosure Statement (the “Environmental Questionnaire”) in the form of Exhibit B
attached hereto.  The completed
Environmental Questionnaire shall be deemed incorporated into this Lease for
all purposes, and Landlord shall be entitled to rely fully on the information
contained therein.  On each anniversary
of the Commencement Date until the expiration or sooner termination of this
Lease, Tenant shall disclose to Landlord in writing the names and amounts of
all Hazardous Materials which were stored, generated, used, released and/or
disposed of on, under or about the Premises for the twelve-month period prior
thereto, and which Tenant desires to store, generate, use, release and/or
dispose of on, under or about the Premises for the succeeding twelve-month
period.  In addition, to the extent
Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant
shall promptly provide Landlord with complete and legible copies of all the
following environmental documents relating thereto:  reports filed pursuant to any self-reporting
requirements; permit applications, permits, monitoring reports, workplace
exposure and community exposure warnings or notices and all other reports,
disclosures, plans or documents (even those which may be characterized as
confidential) relating to water discharges, air pollution, waste generation or
disposal, and underground storage tanks for Hazardous Materials; orders,
reports, notices, listings and correspondence (even those which may be
considered confidential) of or concerning the release, investigation of,
compliance, cleanup, remedial and corrective actions, and abatement of
Hazardous Materials; and all complaints, pleadings and other legal documents
filed by or against Tenant related to Tenant’s use, handling, storage, release
and/or disposal of Hazardous Materials.

 

(d)         Landlord and its agents shall have the right,
but not the obligation, to inspect, sample and/or monitor the Premises and/or
the soil or groundwater thereunder at any time to determine whether Tenant is
complying with the terms of this Section 5.3, and in connection therewith
Tenant shall provide Landlord with full access to all relevant facilities,
records and personnel.  If Tenant is not
in compliance with any of the provisions of this Section 5.3, or in the
event of a release of any Hazardous Material on, under or about the Premises
caused or permitted by Tenant, its agents, employees, contractors, licensees or
invitees, Landlord and its agents shall have the right, but not the obligation,
without limitation upon any of Landlord’s other rights and remedies under this
Lease, to immediately enter upon the Premises without notice and to discharge
Tenant’s obligations under this Section 5.3 at Tenant’s expense,
including, without limitation, the taking of emergency or long-term remedial
action.  Landlord and its agents shall
endeavor to minimize interference with Tenant’s business in connection
therewith, but shall not be liable for any such interference.  In addition, Landlord, at Tenant’s expense,
shall have the right, but not the obligation, to join and participate in any
legal proceedings or actions initiated in connection with any claims arising
out of the storage, generation, use, release and/or disposal by Tenant or its
agents, employees, contractors, licensees or invitees of Hazardous Materials
on, under, from or about the Premises.

 

 

(e)          If the presence of any Hazardous Materials
on, under, from or about the Premises or the Project caused or permitted by
Tenant or its agents, employees, contractors, licensees or invitees results in (i) injury
to any person, (ii) injury to or any contamination of the Premises or the
Project, or (iii) injury to or contamination of any real or personal
property wherever situated, Tenant, at its expense, shall promptly take all
actions necessary to return the Premises and the Project and any other affected
real or personal property owned by Landlord to the condition existing prior to
the introduction of such Hazardous Materials and to remedy or repair any such
injury or contamination, including, without limitation, any cleanup,
remediation, removal, disposal, neutralization or other treatment of any such
Hazardous Materials.  Notwithstanding the
foregoing, Tenant shall not, without Landlord’s prior written consent, take any
remedial action in response to the presence of any Hazardous Materials on,
under or about the Premises or the Project or any other affected real or
personal property owned by Landlord or enter into any similar agreement,
consent, decree or other compromise with any governmental agency with respect
to any Hazardous Materials claims; provided however, Landlord’s prior written
consent shall not be necessary in the event that the presence of Hazardous
Materials on, under or about the Premises or the Project or any other affected
real or personal property owned by Landlord (i) imposes an immediate
threat to the health, safety or welfare of any individual or (ii) is of
such a nature that an immediate remedial response is necessary and it is not
possible to obtain Landlord’s consent before taking such action.  To the fullest extent permitted by law,
Tenant shall indemnify, hold harmless, protect and defend (with attorneys
acceptable to Landlord) Landlord and any successors to all or any portion of
Landlord’s interest in the Premises and the Project and any other real or
personal property owned by Landlord from and against any and all liabilities,
losses, damages, diminution in value, judgments, fines, demands, claims,
recoveries, deficiencies, costs and expenses (including, without limitation,
reasonable attorneys’ fees, court costs and other professional expenses),
whether foreseeable or unforeseeable, arising directly or indirectly out of the
use, generation, storage, treatment, release, on- or off-site disposal or
transportation of Hazardous Materials on, into, from, under or about the
Premises, the Building and the Project and any other real or personal property
owned by Landlord caused or permitted by Tenant, its agents, employees,
contractors, licensees or invitees, specifically including, without limitation,
the cost of any required or necessary repair, restoration, cleanup or
detoxification of the Premises, the Building and the Project and any other real
or personal property owned by Landlord, and the preparation of any closure or
other required plans, whether or not such action is required or necessary
during the Term or after the expiration of this Lease.  If Landlord at any time discovers that Tenant
or its agents, employees, contractors, licensees or invitees may have caused or
permitted the release of a Hazardous Material on, under, from or about the
Premises or the Project or any other real or personal property owned by
Landlord, Tenant shall, at Landlord’s request, immediately prepare and submit
to Landlord a comprehensive plan, subject to Landlord’s approval, specifying
the actions to be taken by Tenant to return the Premises or the Project or any
other real or personal property owned by Landlord to the condition existing
prior to the introduction of such Hazardous Materials.  Upon Landlord’s approval of such cleanup
plan, Tenant shall, at its expense, and without limitation of any rights and
remedies of Landlord under this Lease or at law or in equity, immediately
implement such plan and proceed to cleanup such Hazardous Materials in
accordance with all applicable laws and as required by such plan and this
Lease.  The provisions of this subsection (e) shall
expressly survive the expiration or sooner termination of this Lease.

 

(f)          Landlord hereby discloses to Tenant, and Tenant
hereby acknowledges, certain facts relating to Hazardous Materials at the
Project known by Landlord to exist as of the date of this Lease, as more
particularly described in Exhibit C attached hereto.  Tenant shall have no liability or
responsibility with respect to the Hazardous Materials facts described in Exhibit C,
nor with respect to any Hazardous Materials which Tenant proves were not caused
or permitted by Tenant, its agents, employees, contractors, licensees or
invitees.  Notwithstanding the preceding
two sentences, Tenant agrees to notify its agents, employees, contractors,
licensees, and invitees of any exposure or potential exposure to Hazardous
Materials at the Premises that Landlord brings to Tenant’s attention.

 

ARTICLE VI.  COMMON AREAS; SERVICES

 

SECTION 6.1. 
UTILITIES AND SERVICES.  Tenant shall be responsible for
and shall pay promptly, directly to the appropriate supplier, all charges for
water, gas, electricity, sewer, heat, light, power, telephone, refuse pickup,
janitorial service, interior landscape maintenance and all other utilities,
materials and services furnished directly to Tenant or the Premises or used by
Tenant in, on or about the Premises during the Term, together with any taxes
thereon.  If any utilities or services
are not separately metered or assessed to Tenant, Landlord shall make a
reasonable determination of Tenant’s proportionate share of the cost of such
utilities and services and Tenant shall pay such amount to Landlord, as an item
of additional rent, within ten (10) days after receipt of Landlord’s
statement or invoice therefor. 
Alternatively, Landlord may elect to include such cost in the definition
of Building Costs in which event Tenant shall pay Tenant’s proportionate share
of such costs in the manner set forth in Section 4.2.  Landlord shall not be liable for damages or
otherwise for any failure or interruption of any utility or other service
furnished to the Premises, and no such failure or interruption shall be deemed
an eviction or entitle Tenant to terminate this Lease or withhold or abate any
rent due hereunder.  Landlord shall at
all reasonable times have free access to all electrical and mechanical
installations of Landlord.  Tenant
shall also pay to Landlord as an item of additional rent, within ten (10) days
after receipt of Landlord’s statement or invoice therefor, a reasonable charge
(which shall be in addition to the electricity charge paid to the utility
provider) for Tenant’s “after hours” usage of each HVAC unit servicing the
Premises.  “After hours” shall mean more
than two hundred eighty-three (283) hours of usage during any month during the
Term.  “After hours” usage shall be
determined based upon the operation of the applicable HVAC unit during each
month on a “non-cumulative” basis (that is, without regard to Tenant’s usage or
nonusage of other unit(s) serving the Premises, or of the applicable unit
during other months of the Term).

 

Notwithstanding
the foregoing, if as a result of the actions of Landlord, its agents,
contractors or employees or the inactions of Landlord if Landlord is required
to act under this Lease, for more than three (3) consecutive business days
following written notice to Landlord there is no HVAC service or electricity
service to all or a portion of the Premises, or such an interruption of other
essential utilities and building services, such as fire protection or water, so
that all or a portion of the Premises cannot be used by Tenant, then Tenant’s
obligation to pay Basic Rent and Operating Expenses (or an equitable portion of
such Basic Rent and Operating Expenses to the extent that less than all of the
Premises are

 

 

affected)
shall thereafter be abated until the Premises are again useable by Tenant;
provided, however, that if Landlord is diligently pursuing the repair of such
utilities or services and Landlord provides substitute services reasonably
suitable for Tenant’s purposes, as for example, bringing in portable
air-conditioning equipment, then there shall not be an abatement of Basic Rent
or Operating Expenses.  Any disputes
concerning the foregoing shall be resolved by JAMS arbitration pursuant to Section 22.7
of this Lease.  The foregoing provisions
shall not apply in case of damage to, or destruction of, the Premises, which
shall be governed by the provisions of Article XI of the Lease.

 

SECTION 6.2. 
OPERATION AND MAINTENANCE OF COMMON AREAS. 
During the Term, Landlord shall operate all Common Areas within the
Building and the Project.  The term “Common
Areas” shall mean all areas within the exterior boundaries of the Building and
other buildings in the Project which are not held for exclusive use by persons
entitled to occupy space, and all other appurtenant areas and improvements
provided by Landlord for the common use of Landlord and tenants and their respective
employees and invitees, including, without limitation, parking areas and
structures, driveways, sidewalks, landscaped and planted areas, hallways and
interior stairwells not located within the premises of any tenant, common
electrical rooms and roof access entries, common entrances and lobbies,
elevators, and restrooms not located within the premises of any tenant.

 

SECTION 6.3. 
USE OF COMMON AREAS.  The occupancy by Tenant of the Premises shall
include the use of the Common Areas in common with Landlord and with all others
for whose convenience and use the Common Areas may be provided by Landlord,
subject, however, to compliance with all rules and regulations as are
prescribed from time to time by Landlord. 
Landlord shall operate and maintain the Common Areas in a manner
consistent with the operation of comparable properties in the vicinity of the
Project and otherwise as Landlord may determine to be appropriate.  All costs incurred by Landlord for the
maintenance and operation of the Common Areas shall be included in Project
Costs unless any particular cost incurred can be charged to a specific tenant
of the Project.  Landlord shall at all
times during the Term have exclusive control of the Common Areas, and may
restrain any use or occupancy, except as authorized by Landlord’s rules and
regulations.  Tenant shall keep the
Common Areas clear of any obstruction or unauthorized use related to Tenant’s
operations.  Nothing in this Lease shall
be deemed to impose liability upon Landlord for any damage to or loss of the
property of, or for any injury to, Tenant, its invitees or employees.  Landlord may temporarily close any portion of
the Common Areas for repairs, remodeling and/or alterations, to prevent a
public dedication or the accrual of prescriptive rights, or for any other
reason deemed sufficient by Landlord, without liability to Landlord.

 

SECTION 6.4. 
PARKING.  Tenant shall be entitled to the number of
vehicle parking spaces set forth in Item 14 of the Basic Lease Provisions,
which spaces shall be unreserved and unassigned on those portions of the Common
Areas designated by Landlord for parking. 
Tenant shall not use more parking spaces than such number.  All parking spaces shall be used only for
parking by vehicles no larger than full size passenger automobiles or pickup
trucks.  Tenant shall not permit or allow
any vehicles that belong to or are controlled by Tenant or Tenant’s employees,
suppliers, shippers, customers or invitees to be loaded, unloaded or parked in
areas other than those designated by Landlord for such activities.  If Tenant permits or allows any of the
prohibited activities described above, then Landlord shall have the right,
without notice, in addition to such other rights and remedies that Landlord may
have, to remove or tow away the vehicle involved and charge the costs to
Tenant.  Parking within the Common Areas
shall be limited to striped parking stalls, and no parking shall be permitted
in any driveways, access ways or in any area which would prohibit or impede the
free flow of traffic within the Common Areas. 
Except as required to accommodate Tenant’s employees who are working on
the Premises overnight or traveling, there shall be no overnight parking of any
vehicles of any kind unless otherwise authorized by Landlord, and vehicles
which have been abandoned or parked in violation of the terms hereof may be
towed away at the owner’s expense. 
Nothing contained in this Lease shall be deemed to create liability upon
Landlord for any damage to motor vehicles of visitors or employees, for any
loss of property from within those motor vehicles, or for any injury to Tenant,
its visitors or employees, unless ultimately determined to be caused by the
sole active negligence or willful misconduct of Landlord.  Landlord shall have the right to establish,
and from time to time amend, and to enforce against all users all reasonable rules and
regulations (including the designation of areas for employee parking) that
Landlord may deem necessary and advisable for the proper and efficient operation
and maintenance of parking within the Common Areas.  Landlord shall have the right to construct,
maintain and operate lighting facilities within the parking areas; to change
the area, level, location and arrangement of the parking areas and improvements
therein; to restrict parking by tenants, their officers, agents and employees
to employee parking areas; to enforce parking charges (by operation of meters
or otherwise); and to do and perform such other acts in and to the parking
areas and improvements therein as, in the use of good business judgment,
Landlord shall determine to be advisable. 
Any person using the parking area shall observe all directional signs
and arrows and any posted speed limits. 
In no event shall Tenant interfere with the use and enjoyment of the
parking area by other tenants of the Building or their employees or
invitees.  Parking areas shall be used
only for parking vehicles.  Washing,
waxing, cleaning or servicing of vehicles, or the storage of vehicles for 24-hour
periods, is prohibited unless otherwise authorized by Landlord.  Tenant shall be liable for any damage to the
parking areas caused by Tenant or Tenant’s employees, suppliers, shippers,
customers or invitees, including, without limitation, damage from excess oil
leakage.  Tenant shall have no right to
install any fixtures, equipment or personal property in the parking areas.

 

SECTION 6.5. 
CHANGES AND ADDITIONS BY LANDLORD. 
Landlord reserves the right to make alterations or additions to the
Building or the Project, or to the attendant fixtures, equipment and Common
Areas.  Landlord may at any time relocate
or remove any of the various buildings, parking areas, and other Common Areas,
and may add buildings and areas to the Project from time to time.  No change shall entitle Tenant to any
abatement of rent or other claim against Landlord, provided that the change
does not deprive Tenant of reasonable access to or use of the Premises.

 

 

ARTICLE VII.  MAINTAINING THE PREMISES

 

SECTION 7.1. 
TENANT’S MAINTENANCE AND REPAIR.  Tenant
at its sole expense shall comply with all applicable laws and governmental
regulations governing the Premises and make all repairs necessary to keep the
Premises in the condition as existed on the Commencement Date (or on any later
date that the improvements may have been installed), excepting ordinary wear
and tear, including, without limitation, the electrical and mechanical systems,
all interior glass, windows, doors, door closures, hardware, fixtures,
electrical, plumbing, fire extinguisher equipment and other equipment.  Any damage or deterioration of the Premises
shall not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices by Tenant.  As part of its maintenance obligations
hereunder, Tenant shall, at Landlord’s request, provide Landlord with copies of
all maintenance schedules, reports and notices prepared by, for or on behalf of
Tenant.  All repairs shall be at least
equal in quality to the original work, shall be made only by a licensed
contractor approved in writing in advance by Landlord (which approval shall not
be unreasonably withheld) and shall be made only at the time or times approved
by Landlord.  Any contractor utilized by
Tenant shall be subject to Landlord’s standard requirements for contractors, as
modified from time to time.  Landlord may
impose reasonable restrictions and requirements with respect to repairs, as
provided in Section 7.3, and the provisions of Section 7.4 shall
apply to all repairs.  Alternatively,
Landlord may elect to make any such repair on behalf of Tenant and at Tenant’s
expense, and Tenant shall promptly reimburse Landlord for all costs incurred
upon submission of an invoice.

 

SECTION 7.2. 
LANDLORD’S MAINTENANCE AND REPAIR. 
Subject to Section 7.1 and Article XI, Landlord shall provide
service, maintenance and repair with respect to the roof, foundations, and
footings of the Building, all landscaping, walkways, parking areas, Common
Areas, exterior lighting, the air conditioning, ventilating or heating equipment
servicing the Premises (except for any supplemental HVAC equipment, if any,
installed by Tenant), and the exterior surfaces of the exterior walls of the
Building (including exterior glass), except that Tenant at its expense shall
make all repairs which Landlord deems reasonably necessary as a result of the
act or negligence of Tenant, its agents, employees, invitees, subtenants or
contractors.  Landlord shall have the
right to employ or designate any reputable person or firm, including any
employee or agent of Landlord or any of Landlord’s affiliates or divisions, to
perform any service, repair or maintenance function.  Landlord need not make any other improvements
or repairs except as specifically required under this Lease, and nothing
contained in this Section shall limit Landlord’s right to reimbursement
from Tenant for maintenance, repair costs and replacement costs as provided
elsewhere in this Lease.  Tenant
understands that it shall not make repairs at Landlord’s expense or by rental
offset.  Tenant further understands that
Landlord shall not be required to make any repairs to the roof, foundations,
footings, structural, electrical or mechanical systems unless and until Tenant
has notified Landlord in writing of the need for such repair and Landlord shall
have a reasonable period of time thereafter (not to exceed sixty (60) days) to
commence and thereafter diligently complete said repair, if warranted.  All costs of any maintenance and repairs on
the part of Landlord provided hereunder shall be considered part of Project
Costs.

 

SECTION 7.3. 
ALTERATIONS.  Tenant shall make no alterations, additions
or improvements to the Premises without the prior written consent of Landlord,
which consent may be given or withheld in Landlord’s sole discretion.  Notwithstanding the foregoing, Landlord shall
not unreasonably withhold its consent to any alterations, additions or
improvements to the Premises which cost less than One Dollar ($1.00) per square
foot of the improved portions of the Premises (excluding warehouse square
footage) and do not (i) affect the exterior of the Building or outside
areas (or be visible from adjoining sites), or (ii) affect or penetrate
any of the structural portions of the Building, including, but not limited to,
the roof, or (iii) require any change to the basic floor plan of the
Premises, any change to any structural or mechanical systems of the Premises,
or any governmental permit as a prerequisite to the construction thereof, or (iv) interfere
in any manner with the proper functioning of or Landlord’s access to any
mechanical, electrical, plumbing or HVAC systems, facilities or equipment
located in or serving the Building, or (v) diminish the value of the
Premises.  Landlord may impose, as a
condition to its consent, any requirements that Landlord in its discretion may
deem reasonable or desirable, including, but not limited to, a requirement that
all work be covered by a lien and completion bond satisfactory to Landlord and
requirements as to the manner, time, and contractor for performance of the
work.  Tenant shall obtain all required
permits for the work and shall perform the work in compliance with all
applicable laws, regulations and ordinances, all covenants, conditions and
restrictions affecting the Project, and the Rules and Regulations
(hereafter defined).  Tenant understands
and agrees that Landlord shall be entitled to a supervision fee in the amount
of five percent (5%) of the cost of work which requires a government permit. If
any governmental entity requires, as a condition to any proposed alterations,
additions or improvements to the Premises by Tenant, that improvements be made
to the Common Areas, and if Landlord consents to such improvements to the
Common Areas, then Tenant shall, at Tenant’s sole expense, make such required
improvements to the Common Areas in such manner, utilizing such materials, and
with such contractors (including, if required by Landlord, Landlord’s
contractors) as Landlord may require in its sole discretion.  Under no circumstances shall Tenant make any
improvement which incorporates any Hazardous Materials, including, without
limitation, asbestos-containing construction materials into the Premises.  Any request for Landlord’s consent shall be
made in writing and shall contain architectural plans describing the work in
detail reasonably satisfactory to Landlord. 
Unless Landlord otherwise agrees in writing, all alterations, additions
or improvements affixed to the Premises (excluding moveable trade fixtures and
furniture) shall become the property of Landlord and shall be surrendered with
the Premises at the end of the Term, except that Landlord may, by notice to
Tenant, require Tenant to remove by the Expiration Date, or sooner termination
date of this Lease, all or any alterations, decorations, fixtures, additions,
improvements and the like installed either by Tenant or by Landlord at Tenant’s
request and to repair any damage to the Premises arising from that
removal.  Except as otherwise provided in
this Lease or in any Exhibit to this Lease, should Landlord make any
alteration or improvement to the Premises for Tenant, Landlord shall be
entitled to prompt reimbursement from Tenant for all costs incurred.

 

SECTION 7.4. 
MECHANIC’S LIENS.  Tenant shall keep the Premises free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by or for Tenant.  Upon request
by Landlord, Tenant shall promptly cause any such lien to be released by
posting a bond in accordance with California Civil Code Section 3143 or any
successor statute.  In the event that
Tenant shall not, within thirty (30) days following the imposition of any lien,

 

 

cause
the lien to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other available remedies, the right to
cause the lien to be released by any means it deems proper, including payment
of or defense against the claim giving rise to the lien.  All expenses so incurred by Landlord,
including Landlord’s attorneys’ fees, and any consequential or other damages
incurred by Landlord arising out of such lien, shall be reimbursed by Tenant
promptly following Landlord’s demand, together with interest from the date of
payment by Landlord at the maximum rate permitted by law until paid.  Tenant shall give Landlord no less than
twenty (20) days’ prior notice in writing before commencing construction of any
kind on the Premises so that Landlord may post and maintain notices of
nonresponsibility on the Premises.

 

SECTION 7.5. ENTRY AND INSPECTION. 
Landlord shall at all reasonable times (subject to Tenant’s reasonable
security procedures), upon reasonable advance written or oral notice of not
less than twenty-four (24) hours (except in emergencies, when no notice shall
be required) have the right to enter the Premises to inspect them, to supply
services in accordance with this Lease, to protect the interests of Landlord in
the Premises, and to submit the Premises to prospective or actual purchasers or
encumbrance holders (or, during the last one hundred and eighty (180) days of
the Term or when an uncured Tenant default exists, to prospective tenants), all
without being deemed to have caused an eviction of Tenant and without abatement
of rent except as provided elsewhere in this Lease.  Landlord shall have the right, if desired, to
retain a key which unlocks all of the doors in the Premises, excluding Tenant’s
vaults, safes, or other areas reasonably designated by Tenant as secure areas
and Landlord shall have the right to use any and all means which Landlord may
deem proper to open the doors in an emergency in order to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord shall not under
any circumstances be deemed to be a forcible or unlawful entry into, or a
detainer of, the Premises, or any eviction of Tenant from the Premises.

 

SECTION 7.6. 
COMMUNICATIONS EQUIPMENT.  Landlord hereby grants to
Tenant a non-exclusive license (the “License”) to install, maintain and operate
on the roof of the Building a single satellite antenna dish (the “Antenna”) in
accordance with and subject to the terms and conditions set forth below.  The Antenna shall be installed at a location
designated by Landlord and reasonably acceptable to Tenant (“Licensed Area”).  The Licensed Area shall be considered to be a
part of the Premises for all purposes under the Lease, and except as otherwise
expressly provided in this Section, all provisions applicable to the use of the
Premises under the Lease shall apply to the Licensed Area and its use by
Tenant.

 

(1)          The Term of the License shall be coterminous
with this Lease;

 

(2)          Tenant shall not be obligated to pay any
license fee for the use of the Licensed Area pursuant to this Section during
the Term of this Lease.

 

(3)          Tenant shall use the Licensed Area only for
the installation, operation, repair, replacement and maintenance of the Antenna
and the necessary mechanical and electrical equipment to service said Antenna
and for no other use or purpose.  The
installation of the Antenna and all equipment and facilities related thereto,
including any required conduit from the Premises to the Antenna, shall be
deemed to constitute an alteration subject to the provisions of Section 7.3
of the Lease, provided that Landlord shall not unreasonably withhold its
approval of the same.  Landlord may
require appropriate screening for the Antenna as a condition of Landlord’s
approval of the installation of the Antenna. 
Tenant may have access to the Licensed Area for such uses during normal
business hours and at times upon reasonably prior notice to Landlord and shall
reimburse Landlord for any reasonable out-of-pocket expenses incurred by
Landlord in connection therewith;

 

(4)          The Antenna shall be used only for
transmitting and/or receiving data, audio and/or video signals to and from
Tenant’s facilities within the Premises for Tenant’s use, and shall not be used
or permitted to be used by Tenant for purposes of broadcasting signals to the
public or to provide telecommunications or other communications transmitting or
receiving services to any third parties;

 

(5)          Landlord reserves the right upon reasonable
prior written notice to Tenant to require either (a) the relocation of all
equipment installed by Tenant to another location on the roof of the Building
reasonably designated by Landlord, or (b) the removal of any and all of
such equipment should Landlord reasonably determine that its presence results
in material damage to the Building unless Tenant makes satisfactory
arrangements to protect Landlord therefrom;

 

(6)          Tenant shall require its employees, when
using the Licensed Area, to stay within the immediate vicinity thereof.  In addition, in the event any communications
system or broadcast or receiving facilities are operating in the area, Tenant
shall at all times during the term of the License conduct its operations so as
to ensure that such system or facilities shall not be subjected to harmful
interference as a result of such operations by Tenant.  Upon notification from Landlord of any such
interference, Tenant agrees to immediately take the necessary steps to correct
such situation, and Tenant’s failure to do so shall be deemed a default under
the terms of this Lease.

 

(7)          During the term of the License, Tenant shall
comply with any standards promulgated by applicable governmental authorities or
otherwise reasonably established by Landlord regarding the generation of
electromagnetic fields.  Should Landlord
determine in good faith at any time that the Antenna poses a health or safety
hazard to occupants of the Building, Landlord may require Tenant to make
arrangements satisfactory to Landlord to mitigate such hazard or, if Tenant
either fails or is unable to make such satisfactory arrangements, to remove the
Antenna.  Any claim or liability resulting
from the use of the Antenna or the Licensed Area shall be subject to the
indemnification provisions of this Lease applicable to Tenant’s use of the
Premises;

 

(8)          During the term of the License, Tenant shall
pay all taxes attributable to the Antenna and other equipment owned and
installed by Tenant, and Tenant shall assure and provide Landlord with evidence
that the Licensed Area and 

 

 

Tenant’s
use thereof are subject to the insurance coverages otherwise required to be
maintained by Tenant as to the Premises pursuant to Exhibit D;

 

(9)          Upon the expiration or sooner termination of
the Lease, Tenant shall remove the Antenna and all related equipment and
facilities, including any conduit from the Premises to the Antenna, from the
Licensed Area and any other portions of the Building within or upon which the
same may be installed, and shall restore the Licensed Area and all other areas
affected by such removal to their original condition, reasonable wear and tear
excepted, all at its sole cost and expense; and

 

(10)        The License is personal to Tenant and shall
not be assignable in whole or in part, and any attempted assignment thereof
without he consent of Landlord, which consent may be withheld by Landlord in
its sole and absolute discretion, shall immediately terminate the License.  Notwithstanding the foregoing, Landlord’s
consent shall not be required with respect to an assignment of the License made
in connection with an assignment of this Lease permitted to be made without
Landlord’s consent pursuant to Section 9.4 above.

 

ARTICLE VIII. 
TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

 

Tenant
shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes and assessments levied against all personal property of
Tenant located in the Premises, against all improvements to the Premises made
by Landlord or Tenant which are above Landlord’s Project standard in quality
and/or quantity for comparable space within the Project (“Above Standard
Improvements”), and against any alterations, additions or like improvements
made to the Premises by or on behalf of Tenant. 
When possible Tenant shall cause its personal property, Above Standard
Improvements and alterations to be assessed and billed separately from the real
property of which the Premises form a part. 
If any taxes on Tenant’s personal property, Above Standard Improvements
and/or alterations are levied against Landlord or Landlord’s property and if
Landlord pays the same, or if the assessed value of Landlord’s property is
increased by the inclusion of a value placed upon the personal property, Above
Standard Improvements and/or alterations of Tenant and if Landlord pays the
taxes based upon the increased assessment, Tenant shall pay to Landlord the
taxes so levied against Landlord or the proportion of the taxes resulting from
the increase in the assessment.  In
calculating what portion of any tax bill which is assessed against Landlord
separately, or Landlord and Tenant jointly, is attributable to Tenant’s Above
Standard Improvements, alterations and personal property, Landlord’s reasonable
determination shall be conclusive.

 

ARTICLE IX. 
ASSIGNMENT AND SUBLETTING

 

SECTION 9.1. 
RIGHTS OF PARTIES.

 

(a)          Notwithstanding any provision of this Lease
to the contrary, Tenant will not, either voluntarily or by operation of law,
assign, sublet, encumber, or otherwise transfer all or any part of Tenant’s
interest in this lease, or permit the Premises to be occupied by anyone other
than Tenant, without Landlord’s prior written consent, which consent shall not
unreasonably be withheld in accordance with the provisions of Section 9.1(b).  No assignment (whether voluntary, involuntary
or by operation of law) and no subletting shall be valid or effective without
Landlord’s prior written consent and, at Landlord’s election, any such
assignment or subletting or attempted assignment or subletting without such
consent shall constitute a material default of this Lease.  Landlord shall not be deemed to have given
its consent to any assignment or subletting by any other course of action,
including its acceptance of any name for listing in the Building
directory.  To the extent not prohibited
by provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et  seq.,
(the “Bankruptcy Code”), including Section 365(f)(1), Tenant on behalf of
itself and its creditors, administrators and assigns waives the applicability
of Section 365(e) of the Bankruptcy Code unless the proposed assignee
of the Trustee for the estate of the bankrupt meets Landlord’s standard for
consent as set forth in Section 9.1(b) of this Lease.  If this Lease is assigned to any person or
entity pursuant to the provisions of the Bankruptcy Code, any and all monies or
other considerations to be delivered in connection with the assignment shall be
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code.  Any
person or entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed to have assumed all of the obligations arising
under this Lease on and after the date of the assignment, and shall upon demand
execute and deliver to Landlord an instrument confirming that assumption.

 

(b)         If Tenant desires to transfer an interest in
this Lease, it shall first notify Landlord of its desire and shall submit in
writing to Landlord:  (i) the name
and address of the proposed transferee; (ii) the nature of any proposed
subtenant’s or assignee’s business to be carried on in the Premises; (iii) the
terms and provisions of any proposed sublease or assignment, including a copy
of the proposed assignment or sublease form; (iv) evidence of insurance of
the proposed assignee or subtenant complying with the requirements of Exhibit D
hereto; (v) a completed Environmental Questionnaire from the proposed
assignee or subtenant; and (vi) any other information requested by
Landlord and reasonably related to the transfer.  Except as provided in Subsection (c) of
this Section, Landlord shall not unreasonably withhold its consent,
provided:  (1) the use of the
Premises will be consistent with the provisions of this Lease and with Landlord’s
commitment to other tenants of the Building and Project; (2) the proposed
assignee or subtenant has not been required by any prior landlord, lender or
governmental authority to take remedial action in connection with Hazardous
Materials contaminating a property arising out of the proposed assignee’s or
subtenant’s actions or use of the property in question and is not subject to
any enforcement order issued by any governmental authority in connection with
the use, disposal or storage of a Hazardous Material; (3) at Landlord’s
election, insurance requirements shall be brought into conformity with Landlord’s
then current leasing practice; (4) any proposed subtenant or assignee demonstrates
that it is financially

 

 

responsible
by submission to Landlord of all reasonable information as Landlord may request
concerning the proposed subtenant or assignee, including, but not limited to, a
balance sheet of the proposed subtenant or assignee as of a date within ninety
(90) days of the request for Landlord’s consent, statements of income or profit
and loss of the proposed subtenant or assignee for the two-year period
preceding the request for Landlord’s consent, and/or a certification signed by
the proposed subtenant or assignee that it has not been evicted or been in
arrears in rent at any other leased premises for the 3-year period preceding
the request for Landlord’s consent; (5) the proposed assignee or subtenant
is not an existing tenant of the Building or Project or a prospect with whom
Landlord is negotiating to become a tenant at the Building or Project; and (6) the
proposed transfer will not impose additional burdens or adverse tax effects on
Landlord.  If Tenant has any exterior
sign rights under this Lease, such rights are personal to Tenant and may not be
assigned or transferred to any assignee of this Lease or subtenant of the
Premises without Landlord’s prior written consent, which may be withheld in
Landlord’s sole and absolute discretion.

 

If
Landlord consents to the proposed transfer, Tenant may within ninety (90) days
after the date of the consent effect the transfer upon the terms described in
the information furnished to Landlord; provided that any material change in the
terms shall be subject to Landlord’s consent as set forth in this Section.  Landlord shall approve or disapprove any
requested transfer within thirty (30) days following receipt of Tenant’s
written request, the information set forth above, and the fee set forth below.

 

(c)          Notwithstanding the provisions of Subsection (b) above,
in lieu of consenting to a proposed assignment or subletting, Landlord may
elect to (i) sublease the Premises (or the portion proposed to be
subleased), or take an assignment of Tenant’s interest in this Lease, upon the
same terms as offered to the proposed subtenant or assignee (excluding terms
relating to the purchase of personal property, the use of Tenant’s name or the
continuation of Tenant’s business), or (ii) terminate this Lease as to the
portion of the Premises proposed to be subleased or assigned with a
proportionate abatement in the rent payable under this Lease, effective on the
date that the proposed sublease or assignment would have become effective.  Landlord may thereafter, at its option,
assign or re-let any space so recaptured to any third party, including, without
limitation, the proposed transferee of Tenant.

 

(d)         Tenant agrees that fifty percent (50%) of any
amounts paid by the assignee or subtenant, however described, in excess of (i) the
Basic Rent payable by Tenant hereunder, or in the case of a sublease of a
portion of the Premises, in excess of the Basic Rent reasonably allocable to
such portion, plus (ii) Tenant’s direct out-of-pocket costs which Tenant
certifies to Landlord have been paid to provide occupancy related services to
such assignee or subtenant of a nature commonly provided by landlords of
similar space, shall be the property of Landlord and such amounts shall be
payable directly to Landlord by the assignee or subtenant or, at Landlord’s
option, by Tenant.  At Landlord’s
request, a written agreement shall be entered into by and among Tenant,
Landlord and the proposed assignee or subtenant confirming the requirements of
this subsection.

 

(e)          Tenant shall pay to Landlord a fee of Five
Hundred Dollars ($500.00) if and when any transfer hereunder is requested by
Tenant.  Such fee is hereby acknowledged
as a reasonable amount to reimburse Landlord for its costs of review and
evaluation of a proposed assignee/sublessee, and Landlord shall not be
obligated to commence such review and evaluation unless and until such fee is
paid.

 

SECTION 9.2. 
EFFECT OF TRANSFER.  No subletting or assignment,
even with the consent of Landlord, shall relieve Tenant of its obligation to
pay rent and to perform all its other obligations under this Lease.  Moreover, Tenant shall indemnify and hold
Landlord harmless, as provided in Section 10.3, for any act or omission by
an assignee or subtenant. Each assignee, other than Landlord, shall be deemed
to assume all obligations of Tenant under this Lease and shall be liable
jointly and severally with Tenant for the payment of all rent, and for the due
performance of all of Tenant’s obligations, under this Lease.  No transfer shall be binding on Landlord
unless any document memorializing the transfer is delivered to Landlord and
both the assignee/subtenant and Tenant deliver to Landlord an executed consent
to transfer instrument prepared by Landlord and consistent with the
requirements of this Article.  The
acceptance by Landlord of any payment due under this Lease from any other
person shall not be deemed to be a waiver by Landlord of any provision of this
Lease or to be a consent to any transfer.  Consent by Landlord to one or more transfers
shall not operate as a waiver or estoppel to the future enforcement by Landlord
of its rights under this Lease.

 

SECTION 9.3. 
SUBLEASE REQUIREMENTS.  The following terms and
conditions shall apply to any subletting by Tenant of all or any part of the
Premises and shall be deemed included in each sublease:

 

(a)          Each and every provision contained in this
Lease (other than with respect to the payment of rent hereunder) is
incorporated by reference into and made a part of such sublease, with “Landlord”
hereunder meaning the sublandlord therein and “Tenant” hereunder meaning the
subtenant therein.

 

(b)         Tenant hereby irrevocably assigns to Landlord
all of Tenant’s interest in all rentals and income arising from any sublease of
the Premises, and Landlord may collect such rent and income and apply same
toward Tenant’s obligations under this Lease; provided, however, that until a
default occurs in the performance of Tenant’s obligations under this Lease,
Tenant shall have the right to receive, collect and retain the sublease
rentals.  Landlord shall not, solely by
reason of this assignment or the collection of sublease rentals, be deemed
liable to the subtenant for the performance of any of Tenant’s obligations
under the sublease.  Tenant hereby
irrevocably authorizes and directs any subtenant, upon receipt of a written
notice from Landlord stating that an uncured default exists in the performance
of Tenant’s obligations under this Lease, to pay to Landlord all sums then and
thereafter due under the sublease. 
Tenant agrees that the subtenant may rely on that notice without any
duty of further inquiry and notwithstanding any notice or claim by Tenant to
the contrary.  Tenant shall have no right
or claim against the subtenant or Landlord for any rentals so paid to Landlord
other than a right to an accounting thereof.

 

 

(c)          In the event of the termination of this
Lease, Landlord may, at its sole option, take over Tenant’s entire interest in
any sublease and, upon notice from Landlord, the subtenant shall attorn to
Landlord.  In no event, however, shall
Landlord be liable for any previous act or omission by Tenant under the
sublease or for the return of any advance rental payments or deposits under the
sublease that have not been actually delivered to Landlord, nor shall Landlord
be bound by any sublease modification executed without Landlord’s consent or
for any advance rental payment by the subtenant in excess of one month’s
rent.  The general provisions of this
Lease, including, without limitation, those pertaining to insurance and
indemnification, shall be deemed incorporated by reference into the sublease
despite the termination of this Lease.

 

SECTION 9.4. 
CERTAIN TRANSFERS.  The sale of all or
substantially all of Tenant’s assets (other than bulk sales in the ordinary
course of business) or, if Tenant is a corporation, an unincorporated
association, or a partnership, the transfer, assignment or hypothecation of any
stock or interest in such corporation, association, or partnership in the
aggregate of twenty-five percent (25%) (except for publicly traded shares of
stock constituting a transfer of twenty-five percent (25%) or more in the
aggregate, so long as no change in the controlling interest of Tenant occurs as
a result thereof) shall be deemed an assignment within the meaning and
provisions of this Article. 
Notwithstanding the foregoing, Landlord’s consent shall not be required
for the assignment of this Lease as a result of a merger by Tenant with or into
another entity, so long as (i) the net worth of the successor entity after
such merger is at least equal to the greater of the net worth of Tenant as of
the execution of this Lease by Landlord or the net worth of Tenant immediately
prior to the date of such merger, evidence of which, satisfactory to Landlord,
shall be presented to Landlord prior to such merger, (ii) Tenant shall
provide to Landlord, prior to such merger, written notice of such merger and
such assignment documentation and other information as Landlord may request in
connection therewith, and (iii) all of the other terms and requirements of
this Article shall apply with respect to such assignment.

 

SECTION 9.5. 
FACILITIES SHARING ARRANGEMENTS.  For
purposes of this Article IX, a facilities sharing service arrangement with
an unrelated third party whereby rights are granted by Tenant to such party to
access and use a portion of the Premises on a temporary basis and any
substantially similar arrangements (provided, however, that no exclusive
occupancy rights are granted as part of any such arrangement), will not
constitute an assignment, subletting, encumbrance, or transfer of any of Tenant’s
interest in this Lease or an occupancy of the Premises by someone other than
Tenant.

 

ARTICLE X. 
INSURANCE AND INDEMNITY

 

SECTION 10.1. 
TENANT’S INSURANCE.  Tenant, at its sole cost and
expense, shall provide and maintain in effect the insurance described in Exhibit D.  Evidence of that insurance must be delivered
to Landlord prior to the Commencement Date.

 

SECTION 10.2. 
LANDLORD’S INSURANCE.  Landlord may, at its election,
provide any or all of the following types of insurance, with or without
deductible and in amounts and coverages as may be determined by Landlord in its
discretion:  “all risk” property
insurance, subject to standard exclusions, covering the Building or Project,
and such other risks as Landlord or its mortgagees may from time to time deem
appropriate, including leasehold improvements made by Landlord, and commercial
general liability coverage.  Landlord
shall not be required to carry insurance of any kind on Tenant’s property,
including leasehold improvements, trade fixtures, furnishings, equipment, plate
glass, signs and all other items of personal property, and shall not be
obligated to repair or replace that property should damage occur.  All proceeds of insurance maintained by
Landlord upon the Building and Project shall be the property of Landlord,
whether or not Landlord is obligated to or elects to make any repairs.  At Landlord’s option, Landlord may
self-insure all or any portion of the risks for which Landlord elects to
provide insurance hereunder.

 

SECTION 10.3. TENANT’S INDEMNITY.  To
the fullest extent permitted by law, Tenant shall defend, indemnify, protect,
save and hold harmless Landlord, its agents, and any and all affiliates of
Landlord, including, without limitation, any corporations or other entities
controlling, controlled by or under common control with Landlord, from and
against any and all claims, liabilities, costs or expenses arising from and
after the Commencement Date from Tenant’s use or occupancy of the Premises, the
Building or the Common Areas, or from the conduct of its business, or from any
activity, work, or thing done, permitted or suffered by Tenant or its agents,
employees, invitees or licensees in or about the Premises, the Building or the
Common Areas, or from any default in the performance of any obligation on
Tenant’s part to be performed under this Lease, or from any act or negligence
of Tenant or its agents, employees, visitors, patrons, guests, invitees or
licensees.  Landlord may, at its option,
require Tenant to assume Landlord’s defense in any action covered by this Section through
counsel satisfactory to Landlord.  The
provisions of this Section shall expressly survive the expiration or
sooner termination of this Lease.

 

SECTION 10.4. 
LANDLORD’S NONLIABILITY.  Landlord shall not be liable to
Tenant, its employees, agents and invitees, and Tenant hereby waives all claims
against Landlord for loss of or damage to any property, or loss or interruption
of business or income, or any other loss, cost, damage, injury or liability
whatsoever (including, without limitation, any consequential damages and lost
profit or opportunity costs) resulting from, but not limited to, Acts of God,
acts of civil disobedience or insurrection, acts or omissions of other tenants
within the Project or their agents, employees, contractors, guests or invitees,
fire, explosion, falling plaster, steam, gas, electricity, water or rain which
may leak or flow from or into any part of the Premises or from the breakage,
leakage, obstruction or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning, electrical works or other fixtures in
the Building, whether the damage or injury results from conditions arising in
the Premises or in other portions of the Building.  It is understood that any such condition may
require the temporary evacuation or closure of all or a portion of the Building.  Except as provided in Sections 11.1 and 12.1
below, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to

 

 

or
interference with Tenant’s business (including, without limitation,
consequential damages and lost profit or opportunity costs) arising from the
making of any repairs, alterations or improvements to any portion of the
Building, including repairs to the Premises, nor shall any related activity by
Landlord constitute an actual or constructive eviction; provided, however, that
in making repairs, alterations or improvements, Landlord shall interfere as
little as reasonably practicable with the conduct of Tenant’s business in the
Premises.  Neither Landlord nor its
agents shall be liable for interference with light or other similar intangible
interests.  Tenant shall immediately
notify Landlord in case of fire or accident in the Premises, the Building or
the Project and of defects in any improvements or equipment.

 

SECTION 10.5. 
WAIVER OF SUBROGATION.  Landlord and Tenant each hereby
waives all rights of recovery against the other and the other’s agents on
account of loss and damage occasioned to the property of such waiving party to
the extent only that such loss or damage is required to be insured against
under any “all risk” property insurance policies required by this Article X;
provided however, that (i) the foregoing waiver shall not apply to the
extent of Tenant’s obligations to pay deductibles under any such policies and
this Lease, and (ii) if any loss is due to the act, omission or negligence
or willful misconduct of Tenant or its agents, employees, contractors, guests
or invitees, Tenant’s liability insurance shall be primary and shall cover all
losses and damages prior to any other insurance hereunder.  By this waiver it is the intent of the
parties that neither Landlord nor Tenant shall be liable to any insurance
company (by way of subrogation or otherwise) insuring the other party for any
loss or damage insured against under any “all-risk” property insurance policies
required by this Article, even though such loss or damage might be occasioned
by the negligence of such party, its agents, employees, contractors, guests or
invitees.  The provisions of this Section shall
not limit the indemnification provisions elsewhere contained in this Lease.

 

ARTICLE XI.  DAMAGE OR DESTRUCTION

 

SECTION 11.1. 
RESTORATION.

 

(a)          If the Building of which the Premises are a
part is damaged, Landlord shall repair that damage as soon as reasonably
possible, at its expense, unless:  (i) Landlord
reasonably determines that the cost of repair is not covered by Landlord’s fire
and extended coverage insurance plus such additional amounts Tenant elects, at
its option, to contribute, excluding however the deductible (for which Tenant
shall be responsible for Tenant’s Share); (ii) Landlord reasonably
determines that the Premises cannot, with reasonable diligence, be fully
repaired by Landlord (or cannot be safely repaired because of the presence of
hazardous factors, including, without limitation, Hazardous Materials,
earthquake faults, and other similar dangers) within two hundred seventy (270)
days after the date of the damage; (iii) an event of default by Tenant has
occurred and is continuing at the time of such damage; or (iv) the damage
occurs during the final twelve (12) months of the Term.  Should Landlord elect not to repair the
damage for one of the preceding reasons, Landlord shall so notify Tenant in
writing within sixty (60) days after the damage occurs and this Lease shall
terminate as of the date of that notice.

 

(b)         Unless Landlord elects to terminate this
Lease in accordance with subsection (a) above, this Lease shall
continue in effect for the remainder of the Term; provided that so long as
Tenant is not in default under this Lease, if the damage is so extensive that
Landlord reasonably determines that the Premises cannot, with reasonable
diligence, be repaired by Landlord (or cannot be safely repaired because of the
presence of hazardous factors, earthquake faults, and other similar dangers) so
as to allow Tenant’s substantial use and enjoyment of the Premises within two
hundred seventy (270) days after the date of damage, then Tenant may elect to
terminate this Lease by written notice to Landlord within the sixty (60) day
period stated in subsection (a).

 

(c)          Commencing on the date of any damage to the
Building, and ending on the sooner of the date the damage is repaired or the
date this Lease is terminated, the rental to be paid under this Lease shall be
abated in the same proportion that the floor area of the Premises that is
rendered unusable by the damage from time to time bears to the total floor area
of the Premises, but only to the extent that any business interruption
insurance proceeds are received by Landlord therefor from Tenant’s insurance
described in Exhibit D.

 

(d)         Notwithstanding the provisions of subsections
(a), (b) and (c) of this Section, and subject to the provisions of Section 10.5
above, the cost of any repairs shall be borne by Tenant, and Tenant shall not
be entitled to rental abatement or termination rights, if the damage is due to
the fault or neglect of Tenant or its employees, subtenants, invitees or
representatives.  In addition, the
provisions of this Section shall not be deemed to require Landlord to
repair any improvements or fixtures that Tenant is obligated to repair or
insure pursuant to any other provision of this Lease.

 

(e)          Tenant shall fully cooperate with Landlord in
removing Tenant’s personal property and any debris from the Premises to
facilitate all inspections of the Premises and the making of any repairs.  Notwithstanding anything to the contrary
contained in this Lease, if Landlord in good faith believes there is a risk of
injury to persons or damage to property from entry into the Building or
Premises following any damage or destruction thereto, Landlord may restrict
entry into the Building or the Premises by Tenant, its employees, agents and
contractors in a non-discriminatory manner, without being deemed to have
violated Tenant’s rights of quiet enjoyment to, or made an unlawful detainer
of, or evicted Tenant from, the Premises. 
Upon request, Landlord shall consult with Tenant to determine if there
are safe methods of entry into the Building or the Premises solely in order to
allow Tenant to retrieve files, data in computers, and necessary inventory,
subject however to all indemnities and waivers of liability from Tenant to
Landlord contained in this Lease and any additional indemnities and waivers of
liability which Landlord may require.

 

SECTION 11.2. 
LEASE GOVERNS.  Tenant agrees that the provisions of this
Lease, including, without limitation, Section 11.1, shall govern any
damage or destruction and shall accordingly supersede any contrary statute or rule of
law.

 

 

ARTICLE XII.  EMINENT DOMAIN

 

SECTION 12.1.  TOTAL OR PARTIAL TAKING.  If all or a
material portion of the Premises is taken by any lawful authority by exercise
of the right of eminent domain, or sold to prevent a taking, either Tenant or
Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to the authority. 
In the event title to a portion of the Building or Project, other than
the Premises, is taken or sold in lieu of taking, and if Landlord elects to
restore the Building in such a way as to alter the Premises materially, either
party may terminate this Lease, by written notice to the other party, effective
on the date of vesting of title.  In the
event neither party has elected to terminate this Lease as provided above, then
Landlord shall promptly, after receipt of a sufficient condemnation award,
proceed to restore the Premises to substantially their condition prior to the
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration.  In the event of a taking, Landlord shall be
entitled to the entire amount of the condemnation award without deduction for
any estate or interest of Tenant; provided that nothing in this Section shall
be deemed to give Landlord any interest in, or prevent Tenant from seeking any
award against the taking authority for, the taking of personal property and
fixtures belonging to Tenant or for relocation or business interruption
expenses recoverable from the taking authority.

 

SECTION 12.2. 
TEMPORARY TAKING.  No temporary taking of the Premises shall
terminate this Lease or give Tenant any right to abatement of rent, and any
award specifically attributable to a temporary taking of the Premises shall
belong entirely to Tenant.  A temporary
taking shall be deemed to be a taking of the use or occupancy of the Premises
for a period of not to exceed ninety (90) days.

 

SECTION 12.3. 
TAKING OF PARKING AREA.  In the event there shall be a
taking of the parking area such that Landlord can no longer provide sufficient
parking to comply with this Lease, Landlord may substitute reasonably
equivalent parking in a location reasonably close to the Building; provided
that if Landlord fails to make that substitution within one hundred eighty
(180) days following the taking and if the taking materially impairs Tenant’s
use and enjoyment of the Premises, Tenant may, at its option, terminate this
Lease by written notice to Landlord.  If
this Lease is not so terminated by Tenant, there shall be no abatement of rent
and this Lease shall continue in effect.

 

ARTICLE XIII.  SUBORDINATION; ESTOPPEL CERTIFICATE;
FINANCIALS

 

SECTION 13.1. 
SUBORDINATION.  At the option of Landlord, this Lease shall
be either superior or subordinate to all ground or underlying leases, mortgages
and deeds of trust, if any, which may hereafter affect the Building, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as Tenant is not in default under this Lease, this Lease
shall not be terminated or Tenant’s quiet enjoyment of the Premises disturbed
in the event of termination of any such ground or underlying lease, or the
foreclosure of any such mortgage or deed of trust, to which Tenant has
subordinated this Lease pursuant to this Section.  In the event of a termination or foreclosure,
Tenant shall become a tenant of and attorn to the successor-in-interest to
Landlord upon the same terms and conditions as are contained in this Lease, and
shall execute any instrument reasonably required by Landlord’s successor for
that purpose.  Tenant shall also, upon
written request of Landlord, execute and deliver all instruments as may be
reasonably required from time to time to subordinate the rights of Tenant under
this Lease to any ground or underlying lease or to the lien of any mortgage or
deed of trust (provided that such instruments include the nondisturbance and
attornment provisions set forth above), or, if requested by Landlord, to
subordinate, in whole or in part, any ground or underlying lease or the lien of
any mortgage or deed of trust to this Lease.

 

SECTION 13.2. ESTOPPEL CERTIFICATE.

 

(a)          Tenant shall, at any time upon not less than
ten (10) days prior written notice from Landlord, execute, acknowledge and
deliver to Landlord, in any form that Landlord may reasonably require, a
statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of the modification
and certifying that this Lease, as modified, is in full force and effect) and
the dates to which the rental, additional rent and other charges have been paid
in advance, if any, and (ii) acknowledging that, to Tenant’s knowledge,
there are no uncured defaults on the part of Landlord, or specifying each
default if any are claimed, and (iii) setting forth all further
information that Landlord may reasonably require.  Tenant’s statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the Building or
Project.

 

(b)         Notwithstanding any other rights and remedies
of Landlord, Tenant’s failure to deliver any estoppel statement within the
provided time shall be conclusive upon Tenant that (i) this Lease is in
full force and effect, without modification except as may be represented by
Landlord, (ii) there are no uncured defaults in Landlord’s performance,
and (iii) not more than one month’s rental has been paid in advance.

 

 

SECTION 13.3. 
FINANCIALS.

 

(a)          Tenant shall deliver to Landlord, prior to
the execution of this Lease and thereafter at any time upon Landlord’s request,
Tenant’s current tax returns and financial statements, certified true, accurate
and complete by the chief financial officer of Tenant, including a balance
sheet and profit and loss statement for the most recent prior year
(collectively, the “Statements”), which Statements shall accurately and
completely reflect the financial condition of Tenant.  Landlord agrees that it will keep the
Statements confidential, except that Landlord shall have the right to deliver
the same to any proposed purchaser of the Building or Project, and to any
encumbrancer of all or any portion of the Building or Project.  Landlord shall cause any such proposed
purchaser to enter into a reasonable confidentiality agreement with respect to
such financial details.

 

(b)         Tenant acknowledges that Landlord is relying
on the Statements in its determination to enter into this Lease, and Tenant
represents to Landlord, which representation shall be deemed made on the date
of this Lease and again on the Commencement Date, that no material change in
the financial condition of Tenant, as reflected in the Statements, has occurred
since the date Tenant delivered the Statements to Landlord.  The Statements are represented and warranted
by Tenant to be correct and to accurately and fully reflect Tenant’s true
financial condition as of the date of submission by any Statements to Landlord.

 

(c)          Notwithstanding anything to the contrary
contained in this Section 13.3, so long as Tenant is a publicly-traded
corporation whose stock is traded on a nationally recognized exchange or on
NASDAQ, the “Statements” required by the provisions of this Section 13.3
shall consist of Tenant’s current publicly disclosed financial statements.

 

ARTICLE XIV. 
DEFAULTS AND REMEDIES

 

SECTION 14.1. 
TENANT’S DEFAULTS.  In addition to any other event
of default set forth in this Lease, the occurrence of any one or more of the
following events shall constitute a default by Tenant:

 

(a)          The failure by Tenant to make any payment of
rent or additional rent required to be made by Tenant, as and when due, where
the failure continues for a period of three (3) days after written notice
from Landlord to Tenant; provided, however, that any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 and 1161(a) as amended.  For purposes of these default and remedies
provisions, the term “additional rent” shall be deemed to include all amounts
of any type whatsoever other than Basic Rent to be paid by Tenant pursuant to
the terms of this Lease.

 

(b)         Assignment, sublease, encumbrance or other
transfer of the Lease by Tenant, either voluntarily or by operation of law, whether
by judgment, execution, transfer by intestacy or testacy, or other means,
without the prior written consent of Landlord.

 

(c)          The discovery by Landlord that any financial
statement provided by Tenant, or by any affiliate, successor or guarantor of Tenant,
was materially false.

 

(d)         The failure of Tenant to timely and fully
provide any subordination agreement, estoppel certificate or financial
statements in accordance with the requirements of Article XIII.

 

(e)          The failure or inability by Tenant to observe
or perform any of the express or implied covenants or provisions of this Lease
to be observed or performed by Tenant, other than as specified in any other subsection of
this Section, where the failure continues for a period of thirty (30) days
after written notice from Landlord to Tenant or such shorter period as is
specified in any other provision of this Lease; provided, however, that any
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 and 1161(a) as
amended. However, if the nature of the failure is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be deemed
to be in default if Tenant commences the cure within thirty (30) days, and
thereafter diligently pursues the cure to completion.

 

(f)          (i) The making by Tenant of any general
assignment for the benefit of creditors; (ii) the filing by or against
Tenant of a petition to have Tenant adjudged a Chapter 7 debtor under the Bankruptcy
Code or to have debts discharged or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within thirty (30) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant’s assets located at the Premises or of Tenant’s interest in this Lease,
if possession is not restored to Tenant within thirty (30) days; (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant’s
assets located at the Premises or of Tenant’s interest in this Lease, where the
seizure is not discharged within thirty (30) days; or (v) Tenant’s
convening of a meeting of its creditors for the purpose of effecting a
moratorium upon or composition of its debts. 
Landlord shall not be deemed to have knowledge of any event described in
this subsection unless notification in writing is received by Landlord,
nor shall there be any presumption attributable to Landlord of Tenant’s
insolvency.  In the event that any
provision of this subsection is contrary to applicable law, the provision
shall be of no force or effect.

 

SECTION 14.2. 
LANDLORD’S REMEDIES.

 

(a)          In the event of any default by Tenant, or in
the event of the abandonment of the Premises by Tenant, then in addition to any
other remedies available to Landlord, Landlord may exercise the following
remedies:

 

 

(i)     Landlord may terminate Tenant’s right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord.  Such termination shall not affect any accrued
obligations of Tenant under this Lease. 
Upon termination, Landlord shall have the right to reenter the Premises
and remove all persons and property. 
Landlord shall also be entitled to recover from Tenant:

 

(1)       The worth at the time of award of the unpaid
rent and additional rent which had been earned at the time of termination;

 

(2)       The worth at the time of award of the amount
by which the unpaid rent and additional rent which would have been earned after
termination until the time of award exceeds the amount of such loss that Tenant
proves could have been reasonably avoided;

 

(3)       The worth at the time of award of the amount
by which the unpaid rent and additional rent for the balance of the Term after
the time of award exceeds the amount of such loss that Tenant proves could be
reasonably avoided;

 

(4)       Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant’s failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result from Tenant’s default, including, but not
limited to, the cost of recovering possession of the Premises, refurbishment of
the Premises, marketing costs, commissions and other expenses of reletting,
including necessary repair, the unamortized portion of any tenant improvements
and brokerage commissions funded by Landlord in connection with this Lease,
reasonable attorneys’ fees, and any other reasonable costs; and

 

(5)       At Landlord’s election, all other amounts in
addition to or in lieu of the foregoing as may be permitted by law.  The term “rent” as used in this Lease shall
be deemed to mean the Basic Rent and all other sums required to be paid by
Tenant to Landlord pursuant to the terms of this Lease.  Any sum, other than Basic Rent, shall be
computed on the basis of the average monthly amount accruing during the twenty-four
(24) month period immediately prior to default, except that if it becomes
necessary to compute such rental before the twenty-four (24) month period has
occurred, then the computation shall be on the basis of the average monthly
amount during the shorter period.  As
used in subparagraphs (1) and (2) above, the “worth at the time of
award” shall be computed by allowing interest at the rate of ten percent (10%)
per annum.  As used in subparagraph (3) above,
the “worth at the time of award” shall be computed by discounting the amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%).

 

(ii)    Landlord may elect not to terminate Tenant’s right to possession of the
Premises, in which event Landlord may continue to enforce all of its rights and
remedies under this Lease, including the right to collect all rent as it
becomes due.  Efforts by the Landlord to
maintain, preserve or relet the Premises, or the appointment of a receiver to
protect the Landlord’s interests under this Lease, shall not constitute a
termination of the Tenant’s right to possession of the Premises.  In the event that Landlord elects to avail
itself of the remedy provided by this subsection (ii), Landlord shall not
unreasonably withhold its consent to an assignment or subletting of the
Premises subject to the reasonable standards for Landlord’s consent as are
contained in this Lease.

 

(b)         Landlord shall be under no obligation to
observe or perform any covenant of this Lease on its part to be observed or
performed which accrues after the date of any default by Tenant unless and
until the default is cured by Tenant, it being understood and agreed that the
performance by Landlord of its obligations under this Lease are expressly
conditioned upon Tenant’s full and timely performance of its obligations under
this Lease.  The various rights and
remedies reserved to Landlord in this Lease or otherwise shall be cumulative
and, except as otherwise provided by California law, Landlord may pursue any or
all of its rights and remedies at the same time.

 

(c)          No delay or omission of Landlord to exercise
any right or remedy shall be construed as a waiver of the right or remedy or of
any default by Tenant.  The acceptance by
Landlord of rent shall not be a (i) waiver of any preceding breach or
default by Tenant of any provision of this Lease, other than the failure of
Tenant to pay the particular rent accepted, regardless of Landlord’s knowledge
of the preceding breach or default at the time of acceptance of rent, or (ii) a
waiver of Landlord’s right to exercise any remedy available to Landlord by
virtue of the breach or default.  The
acceptance of any payment from a debtor in possession, a trustee, a receiver or
any other person acting on behalf of Tenant or Tenant’s estate shall not waive
or cure a default under Section 14.1. 
No payment by Tenant or receipt by Landlord of a lesser amount than the
rent required by this Lease shall be deemed to be other than a partial payment
on account of the earliest due stipulated rent, nor shall any endorsement or
statement on any check or letter be deemed an accord and satisfaction and
Landlord shall accept the check or payment without prejudice to Landlord’s
right to recover the balance of the rent or pursue any other remedy available
to it.  No act or thing done by Landlord
or Landlord’s agents during the Term shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept a surrender shall be
valid unless in writing and signed by Landlord. 
No employee of Landlord or of Landlord’s agents shall have any power to
accept the keys to the Premises prior to the termination of this Lease, and the
delivery of the keys to any employee shall not operate as a termination of the
Lease or a surrender of the Premises.

 

 

SECTION 14.3. 
LATE PAYMENTS.

 

(a)          Any rent due under this Lease that is not
received by Landlord within five (5) days of the date when due shall bear
interest at the maximum rate permitted by law from the date due until fully
paid.  The payment of interest shall not
cure any default by Tenant under this Lease. 
In addition, Tenant acknowledges that the late payment by Tenant to
Landlord of rent will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult and impracticable
to ascertain.  Those costs may include,
but are not limited to, administrative, processing and accounting charges, and
late charges which may be imposed on Landlord by the terms of any ground lease,
mortgage or trust deed covering the Premises. 
Accordingly, if any rent due from Tenant shall not be received by
Landlord or Landlord’s designee within ten (10) days after the date due,
then Tenant shall pay to Landlord, in addition to the interest provided above,
a late charge in a sum equal to the greater of five percent (5%) of the amount
overdue or Two Hundred Fifty Dollars ($250.00) for each delinquent
payment.  Acceptance of a late charge by
Landlord shall not constitute a waiver of Tenant’s default with respect to the
overdue amount, nor shall it prevent Landlord from exercising any of its other
rights and remedies.

 

(b)         Following each second consecutive installment
of rent that is not paid within ten (10) days following notice of
nonpayment from Landlord, Landlord shall have the option (i) to require
that beginning with the first payment of rent next due, rent shall no longer be
paid in monthly installments but shall be payable quarterly three (3) months
in advance and/or (ii) to require that Tenant increase the amount, if any,
of the Security Deposit by one hundred percent (100%).  Should Tenant deliver to Landlord, at any
time during the Term, two (2) or more insufficient checks, the Landlord
may require that all monies then and thereafter due from Tenant be paid to
Landlord by cashier’s check.

 

SECTION 14.4. 
RIGHT OF LANDLORD TO PERFORM.  All covenants and agreements to
be performed by Tenant under this Lease shall be performed at Tenant’s sole
cost and expense and without any abatement of rent or right of set-off.  If Tenant fails to pay any sum of money,
other than rent, or fails to perform any other act on its part to be performed
under this Lease, and the failure continues beyond any applicable grace period
set forth in Section 14.1, then in addition to any other available
remedies, Landlord may, at its election make the payment or perform the other
act on Tenant’s part.  Landlord’s
election to make the payment or perform the act on Tenant’s part shall not give
rise to any responsibility of Landlord to continue making the same or similar
payments or performing the same or similar acts.  Tenant shall, promptly upon demand by
Landlord, reimburse Landlord for all sums paid by Landlord and all necessary
incidental costs, together with interest at the maximum rate permitted by law
from the date of the payment by Landlord. 
Landlord shall have the same rights and remedies if Tenant fails to pay
those amounts as Landlord would have in the event of a default by Tenant in the
payment of rent.

 

SECTION 14.5. 
DEFAULT BY LANDLORD.  Landlord shall not be deemed to
be in default in the performance of any obligation under this Lease unless and
until it has failed to perform the obligation within thirty (30) days after
written notice by Tenant to Landlord specifying in reasonable detail the nature
and extent of the failure; provided, however, that if the nature of Landlord’s
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it commences
performance within the thirty (30) day period and thereafter diligently pursues
the cure to completion.

 

SECTION 14.6. 
EXPENSES AND LEGAL FEES.  All sums reasonably incurred by
either party in connection with any event of default by the other party under
this Lease or by Landlord as a result of holding over of possession by Tenant
after the expiration or earlier termination of this Lease, including, without
limitation, all costs, expenses and actual accountants, appraisers, attorneys
and other professional fees, and any collection agency or other collection
charges, shall be due and payable by such party to the other party on demand,
and shall bear interest at the rate of ten percent (10%) per annum.  Should either Landlord or Tenant bring any action
in connection with this Lease, the prevailing party shall be entitled to
recover as a part of the action its reasonable attorneys’ fees, and all other
costs.  The prevailing party for the
purpose of this paragraph shall be determined by the trier of the facts.

 

SECTION 14.7. 
WAIVER OF JURY TRIAL.  LANDLORD
AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF
COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND EACH
PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY
HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF
THE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.

 

SECTION 14.8. 
SATISFACTION OF JUDGMENT.  The obligations of Landlord do
not constitute the personal obligations of the individual partners, trustees,
directors, officers or shareholders of Landlord or its constituent
partners.  Should Tenant recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
proceeds of sale received upon execution of such judgment and levied thereon
against the right, title and interest of Landlord in the Project and out of the
rent or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord’s right, title or interest in the Project and no action
for any deficiency may be sought or obtained by Tenant.

 

SECTION 14.9.  
LIMITATION OF ACTIONS AGAINST LANDLORD.  Any
claim, demand or right of any kind by Tenant which is based upon or arises in
connection with this Lease shall be barred unless Tenant commences an action
thereon within twelve (12) months after the date that the act, omission, event
or default upon which the claim, demand or right arises, has occurred.

 

 

ARTICLE XV. 
END OF TERM

 

SECTION 15.1. 
HOLDING OVER.  This Lease shall terminate without further
notice upon the expiration of the Term, and any holding over by Tenant after
the expiration shall not constitute a renewal or extension of this Lease, or
give Tenant any rights under this Lease, except when in writing signed by both
parties.  If Tenant holds over for any
period after the expiration (or earlier termination) of the Term without the
prior written consent of Landlord, such possession shall constitute a tenancy
at sufferance only; such holding over with the prior written consent of
Landlord shall constitute a month-to-month tenancy commencing on the first
(1st) day following the termination of this Lease.  In either of such events, possession shall be
subject to all of the terms of this Lease, except that the monthly Basic Rent
shall be the greater of (a) one hundred-fifty percent (150%) (for the
initial two (2) months of holdover), and two hundred percent (200%) (for
each month of holdover thereafter), of the Basic Rent for the month immediately
preceding the date of termination or (b) the then currently scheduled
Basic Rent for comparable space in the Building.  If Tenant fails to surrender the Premises
upon the expiration of this Lease despite demand to do so by Landlord, Tenant
shall indemnify and hold Landlord harmless from all loss or liability,
including without limitation, any claims made by any succeeding tenant relating
to such failure to surrender.  Acceptance
by Landlord of rent after the termination shall not constitute a consent to a
holdover or result in a renewal of this Lease. 
The foregoing provisions of this Section are in addition to and do
not affect Landlord’s right of re-entry or any other rights of Landlord under
this Lease or at law.

 

SECTION 15.2. 
MERGER ON TERMINATION.  The voluntary or other
surrender of this Lease by Tenant, or a mutual termination of this Lease, shall
terminate any or all existing subleases unless Landlord, at its option, elects
in writing to treat the surrender or termination as an assignment to it of any
or all subleases affecting the Premises.

 

SECTION 15.3. 
SURRENDER OF PREMISES; REMOVAL OF PROPERTY.  Upon
the Expiration Date or upon any earlier termination of this Lease, Tenant shall
quit and surrender possession of the Premises to Landlord in as good order,
condition and repair as when received or as hereafter may be improved by
Landlord or Tenant, reasonable wear and tear and repairs which are Landlord’s
obligation excepted, and shall, without expense to Landlord, remove or cause to
be removed from the Premises all personal property and debris, except for any
items that Landlord may by written authorization allow to remain.  Tenant shall repair all damage to the
Premises resulting from the removal, which repair shall include the patching
and filling of holes and repair of structural damage, provided that Landlord
may instead elect to repair any structural damage at Tenant’s expense.  If Tenant shall fail to comply with the
provisions of this Section, Landlord may effect the removal and/or make any
repairs, and the cost to Landlord shall be additional rent payable by Tenant
upon demand.  If Tenant fails to remove
Tenant’s personal property from the Premises upon the expiration of the Term,
Landlord may remove, store, dispose of and/or retain such personal property, at
Landlord’s option, in accordance with then applicable laws, all at the expense
of Tenant.  If requested by Landlord,
Tenant shall execute, acknowledge and deliver to Landlord an instrument in
writing releasing and quitclaiming to Landlord all right, title and interest of
Tenant in the Premises.  It is understood
and agreed that Tenant shall not remove the furniture and fixtures installed in
the Premises at any time during the Term of this Lease.  Provided further that Tenant has not been in
default during the Term of this Lease, Tenant shall remove the furniture and
fixtures in the Premises, and the furniture and fixtures shall become the
property of Tenant upon the expiration of the Term of this Lease.

 

ARTICLE XVI.  PAYMENTS AND
NOTICES

 

All
sums payable by Tenant to Landlord shall be paid, without deduction or offset,
in lawful money of the United States to Landlord at its address set forth in
Item 12 of the Basic Lease Provisions, or at any other place as Landlord may designate
in writing.  Unless this Lease expressly
provides otherwise, as for example in the payment of rent pursuant to Section 4.1,
all payments shall be due and payable within ten (10) days after
demand.  All payments requiring proration
shall be prorated on the basis of a thirty (30) day month and a three hundred
sixty (360) day year.  Any notice,
election, demand, consent, approval or other communication to be given or other
document to be delivered by either party to the other may be delivered in person
or by courier or overnight delivery service to the other party, or may be
deposited in the United States mail, duly registered or certified, postage
prepaid, return receipt requested, and addressed to the other party at the
address set forth in Item 12 of the Basic Lease Provisions, or if to Tenant, at
that address or, from and after the Commencement Date, at the Premises (whether
or not Tenant has departed from, abandoned or vacated the Premises), or may be
delivered by telegram, telex or telecopy, provided that receipt thereof is
telephonically confirmed.  Either party
may, by written notice to the other, served in the manner provided in this
Article, designate a different address. 
If any notice or other document is sent by mail, it shall be deemed served
or delivered forty-eight (48) hours after mailing.  If more than one person or entity is named as
Tenant under this Lease, service of any notice upon any one of them shall be
deemed as service upon all of them.

 

ARTICLE XVII. 
RULES AND REGULATIONS

 

Tenant
agrees to observe faithfully and comply strictly with the Rules and
Regulations, attached as Exhibit E, and any reasonable and
nondiscriminatory amendments, modifications and/or additions as may be adopted
and published by written notice to tenants by Landlord for the safety, care,
security, good order, or cleanliness of the Premises, Building, Project and
Common Areas.  Landlord shall not be
liable to Tenant for any violation of the Rules and Regulations or the
breach of any covenant or condition in any lease by any other tenant or such
tenant’s agents, employees, contractors, guests or invitees.  One or more waivers by Landlord of any breach
of the Rules and Regulations by Tenant or by any other tenant(s) shall not
be a waiver of any subsequent breach of that rule or any other.  Tenant’s failure to keep and observe the Rules and
Regulations shall constitute a default under this Lease.  In the case of any conflict between the Rules and
Regulations and this Lease, this Lease shall be controlling.

 

 

ARTICLE XVIII. 
BROKER’S COMMISSION

 

The
parties recognize as the broker(s) who negotiated this Lease the firm(s), if
any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions,
and agree that Landlord shall be responsible for the payment of brokerage
commissions to those broker(s) unless otherwise provided in this Lease.  Tenant warrants that it has had no dealings
with any other real estate broker or agent in connection with the negotiation
of this Lease, and Tenant agrees to indemnify and hold Landlord harmless from
any cost, expense or liability (including reasonable attorneys’ fees) for any
compensation, commissions or charges claimed by any other real estate broker or
agent employed or claiming to represent or to have been employed by Tenant in
connection with the negotiation of this Lease. 
The foregoing agreement shall survive the termination of this
Lease.  If Tenant fails to take
possession of the Premises or if this Lease otherwise terminates prior to the
Expiration Date as the result of failure of performance by Tenant, Landlord
shall be entitled to recover from Tenant the unamortized portion of any
brokerage commission funded by Landlord in addition to any other damages to
which Landlord may be entitled.

 

ARTICLE XIX. 
TRANSFER OF LANDLORD’S INTEREST

 

In
the event of any transfer of Landlord’s interest in the Premises, the
transferor shall be automatically relieved of all obligations on the part of
Landlord accruing under this Lease from and after the date of the transfer,
provided that any funds held by the transferor in which Tenant has an interest
shall be turned over, subject to that interest, to the transferee and Tenant is
notified of the transfer as required by law. 
No holder of a mortgage and/or deed of trust to which this Lease is or
may be subordinate, and no landlord under a so-called sale-leaseback, shall be
responsible in connection with the Security Deposit, unless the mortgagee or
holder of the deed of trust or the landlord actually receives the Security
Deposit.  It is intended that the
covenants and obligations contained in this Lease on the part of Landlord
shall, subject to the foregoing, be binding on Landlord, its successors and
assigns, only during and in respect to their respective successive periods of
ownership.

 

ARTICLE XX.  INTERPRETATION

 

SECTION 20.1.  GENDER AND NUMBER.  Whenever the context of this
Lease requires, the words “Landlord” and “Tenant” shall include the plural as
well as the singular, and words used in neuter, masculine or feminine genders shall
include the others.

 

SECTION 20.2. 
HEADINGS.  The captions and headings of the articles and
sections of this Lease are for convenience only, are not a part of this Lease
and shall have no effect upon its construction or interpretation.

 

SECTION 20.3. 
JOINT AND SEVERAL LIABILITY.  If more than one person or
entity is named as Tenant, the obligations imposed upon each shall be joint and
several and the act of or notice from, or notice or refund to, or the signature
of, any one or more of them shall be binding on all of them with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
termination or modification of this Lease.

 

SECTION 20.4. 
SUCCESSORS.  Subject to Articles IX and XIX, all rights
and liabilities given to or imposed upon Landlord and Tenant shall extend to
and bind their respective heirs, executors, administrators, successors and
assigns.  Nothing contained in this Section is
intended, or shall be construed, to grant to any person other than Landlord and
Tenant and their successors and assigns any rights or remedies under this
Lease.

 

SECTION 20.5. 
TIME OF ESSENCE.  Time is of the essence with respect to the
performance of every provision of this Lease.

 

SECTION 20.6. 
CONTROLLING LAW.  This Lease shall be governed by and
interpreted in accordance with the laws of the State of California.

 

SECTION 20.7. 
SEVERABILITY.  If any term or provision of this Lease, the
deletion of which would not adversely affect the receipt of any material
benefit by either party or the deletion of which is consented to by the party
adversely affected, shall be held invalid or unenforceable to any extent, the
remainder of this Lease shall not be affected and each term and provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.

 

SECTION 20.8. 
WAIVER AND CUMULATIVE REMEDIES.  One or more waivers by Landlord
or Tenant of any breach of any term, covenant or condition contained in this
Lease shall not be a waiver of any subsequent breach of the same or any other
term, covenant or condition.  Consent to
any act by one of the parties shall not be deemed to render unnecessary the
obtaining of that party’s consent to any subsequent act.  No breach by Tenant of this Lease shall be
deemed to have been waived by Landlord unless the waiver is in a writing signed
by Landlord.  The rights and remedies of
Landlord under this Lease shall be cumulative and in addition to any and all
other rights and remedies which Landlord may have.

 

SECTION 20.9. 
INABILITY TO PERFORM.  In the event that either party
shall be delayed or hindered in or prevented from the performance of any work
or in performing any act required under this Lease by reason of any cause
beyond the reasonable control of that party, then the performance of the work
or the doing of the act shall be excused for 

 

 

the
period of the delay and the time for performance shall be extended for a period
equivalent to the period of the delay. 
The provisions of this Section shall not operate to excuse Tenant
from the prompt payment of rent or either party from the timely performance of
any other obligation under this Lease within such party’s reasonable control.

 

SECTION 20.10. 
ENTIRE AGREEMENT.  This Lease and its exhibits and other
attachments cover in full each and every agreement of every kind between the
parties concerning the Premises, the Building, and the Project, and all
preliminary negotiations, oral agreements, understandings and/or practices,
except those contained in this Lease, are superseded and of no further
effect.  Tenant waives its rights to rely
on any representations or promises made by Landlord or others which are not
contained in this Lease.  No verbal
agreement or implied covenant shall be held to modify the provisions of this
Lease, any statute, law, or custom to the contrary notwithstanding.

 

SECTION 20.11. 
QUIET ENJOYMENT.  Upon the observance and performance of all
the covenants, terms and conditions on Tenant’s part to be observed and
performed, and subject to the other provisions of this Lease, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Term without
hindrance or interruption by Landlord or any other person claiming by or
through Landlord.

 

SECTION 20.12. 
SURVIVAL.  All covenants of Landlord or Tenant which
reasonably would be intended to survive the expiration or sooner termination of
this Lease, including, without limitation, any warranty or indemnity hereunder,
shall so survive and continue to be binding upon and inure to the benefit of
the respective parties and their successors and assigns.

 

ARTICLE XXI. 
EXECUTION AND RECORDING

 

SECTION 21.1. 
COUNTERPARTS.  This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.

 

SECTION 21.2. 
CORPORATE AND PARTNERSHIP AUTHORITY.  If
Tenant is a corporation or partnership, each individual executing this Lease on
behalf of the corporation or partnership represents and warrants that he is
duly authorized to execute and deliver this Lease on behalf of the corporation
or partnership, and that this Lease is binding upon the corporation or
partnership in accordance with its terms. 
Tenant shall, at Landlord’s request, deliver a certified copy of its
board of directors’ resolution or partnership agreement or certificate
authorizing or evidencing the execution of this Lease.

 

SECTION 21.3. 
EXECUTION OF LEASE; NO OPTION OR OFFER.  The
submission of this Lease to Tenant shall be for examination purposes only, and
shall not constitute an offer to or option for Tenant to lease the
Premises.  Execution of this Lease by
Tenant and its return to Landlord shall not be binding upon Landlord,
notwithstanding any time interval, until Landlord has in fact executed and
delivered this Lease to Tenant, it being intended that this Lease shall only
become effective upon execution by Landlord and delivery of a fully executed
counterpart to Tenant.

 

SECTION 21.4. 
RECORDING.  Tenant shall not record this Lease without
the prior written consent of Landlord. 
Tenant, upon the request of Landlord, shall execute and acknowledge a “short
form” memorandum of this Lease for recording purposes.

 

SECTION 21.5. 
AMENDMENTS.  No amendment or termination of this Lease
shall be effective unless in writing signed by authorized signatories of Tenant
and Landlord, or by their respective successors in interest.  No actions, policies, oral or informal
arrangements, business dealings or other course of conduct by or between the parties
shall be deemed to modify this Lease in any respect.

 

SECTION 21.6. 
EXECUTED COPY.  Any fully executed photocopy or similar
reproduction of this Lease shall be deemed an original for all purposes.

 

SECTION 21.7. 
ATTACHMENTS.  All exhibits, amendments, riders and addenda
attached to this Lease are hereby incorporated into and made a part of this
Lease.

 

ARTICLE XXII. 
MISCELLANEOUS

 

SECTION 22.1. 
NONDISCLOSURE OF LEASE TERMS.  Tenant acknowledges and agrees
that the terms of this Lease are confidential and constitute proprietary
information of Landlord.  Disclosure of
the terms could adversely affect the ability of Landlord to negotiate other
leases and impair Landlord’s relationship with other tenants.  Accordingly, Tenant agrees that it, and its
partners, officers, directors, employees and attorneys, shall not intentionally
and voluntarily disclose the terms and conditions of this Lease to any other
tenant or apparent prospective tenant of the Building or Project, either
directly or indirectly, without the prior written consent of Landlord,
provided, however, that Tenant may disclose the terms to prospective subtenants
or assignees under this Lease.

 

SECTION 22.2. 
GUARANTY.  As a condition to the execution of this Lease
by Landlord, the obligations, covenants and performance of the Tenant as herein
provided shall be guaranteed in writing by the Guarantor(s) listed in
Item 7 of the Basic Lease Provisions, if any, on a form of guaranty
provided by Landlord.

 

 

SECTION 22.3. 
CHANGES REQUESTED BY LENDER.  If, in connection with
obtaining financing for the Project, the lender shall request reasonable
modifications in this Lease as a condition to the financing, Tenant will not
unreasonably withhold or delay its consent, provided that the modifications do
not materially increase the obligations of Tenant or materially and adversely
affect the leasehold interest created by this Lease.

 

SECTION 22.4. 
MORTGAGEE PROTECTION.  No act or failure to act on
the part of Landlord which would otherwise entitle Tenant to be relieved of its
obligations hereunder or to terminate this Lease shall result in such a release
or termination unless (a) Tenant has given notice by registered or
certified mail to any beneficiary of a deed of trust or mortgage covering the
Building whose address has been furnished to Tenant and (b) such
beneficiary is afforded a reasonable opportunity to cure the default by
Landlord (which in no event shall be less than sixty (60) days), including, if
necessary to effect the cure, time to obtain possession of the Building by
power of sale or judicial foreclosure provided that such foreclosure remedy is
diligently pursued.  Tenant agrees that
each beneficiary of a deed of trust or mortgage covering the Building is an
express third party beneficiary hereof, Tenant shall have no right or claim for
the collection of any deposit from such beneficiary or from any purchaser at a
foreclosure sale unless such beneficiary or purchaser shall have actually
received and not refunded the deposit, and Tenant shall comply with any written
directions by any beneficiary to pay rent due hereunder directly to such
beneficiary without determining whether an event of default exists under such
beneficiary’s deed of trust.

 

SECTION 22.5. 
COVENANTS AND CONDITIONS.  All of the provisions of this
Lease shall be construed to be conditions as well as covenants as though the
words specifically expressing or imparting covenants and conditions were used
in each separate provision.

 

SECTION 22.6. 
SECURITY MEASURES.  Tenant hereby acknowledges that
Landlord shall have no obligation whatsoever to provide guard service or other
security measures for the benefit of the Premises or the Project.  Tenant assumes all responsibility for the
protection of Tenant, its agents, invitees and property from acts of third
parties.  Nothing herein contained shall
prevent Landlord, at its sole option, from providing security protection for
the Project or any part thereof, in which event the cost thereof shall be
included within the definition of Project Costs.

 

SECTION 22.7. 
JAMS ARBITRATION.

 

(a)        All claims or disputes between Landlord and
Tenant arising out of, or relating to the Lease which either party is expressly
authorized by a provision hereof to submit to arbitration, shall be decided by
the JAMS/ENDISPUTE, or its successor, in Orange, California (“JAMS”), unless
the parties mutually agree otherwise. 
Within ten (10) business days following submission to JAMS,
JAMS shall designate three arbitrators and each party may, within five (5) business
days thereafter, veto one of the three persons so designated.  If two different designated arbitrators have
been vetoed, the third arbitrator shall hear and decide the matter.  Any arbitration pursuant to this Section shall
be decided within thirty (30) days of submission of JAMS.  The decision of the arbitrator shall be final
and binding on the parties.  All costs
associated with arbitration shall be awarded to the prevailing party as
determined by the arbitrator.

 

(b)        Notice of the demand for arbitration by
either party to the Lease shall be filed in writing with the other party to the
Lease and with JAMS and shall be made within a reasonable time after the
dispute has arisen.  The award rendered
by the arbitrators shall be final, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof.  Except by written consent of the person or
entity sought to be joined, no arbitration arising out of or relating to the
Lease shall include, by consolidation, joinder or in any other manner, any
person or entity not a party to the Lease under which such arbitration is filed
if (1) such person or entity is substantially involved in a common
question of fact or law, (2) the presence of such person or entity is
required if complete relief is to be accorded in the arbitration, or (3) the
interest or responsibility of such person or entity in the matter is not
insubstantial.

 

(c)        The agreement herein among the parties to the
Lease and any other written agreement to arbitrate referred to herein shall be
specifically enforceable under prevailing law.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  THE
  IRVINE COMPANY

  	
   

  	
  GOREMOTE
  INTERNET COMMUNICATIONS, INC.,

  
	
   

  	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /S/STEVEN M. CASE

  	
   

  	
  By:

  	
   /S/
  DAVID L. TEICHMANN

  
	
   

  	
  Steven M. Case, Senior Vice President

  	
   

  	
   

  	
        David L.
  Teichmann,

  
	
   

  	
  Leasing, Office Properties

  	
   

  	
   

  	
        Senior Vice
  President,

  
	
   

  	
   

  	
   

  	
   

  	
        General
  Counsel and Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /S/ CHRISTOPHER J. POPMA

  	
   

  	
  By:

  	
   /S/
  DANIEL W. FAIRFAX

  
	
   

  	
  Christopher J. Popma, Vice President

  	
   

  	
   

  	
        Daniel
  W. Fairfax,

  
	
   

  	
  Operations, Office Properties

  	
   

  	
   

  	
        Senior
  Vice President and

  
	
   

  	
   

  	
   

  	
   

  	
        Chief
  Financial Officer

  

 

 

EXHIBIT B

 

THE
IRVINE COMPANY – INVESTMENT PROPERTIES GROUP

 

HAZARDOUS
MATERIAL SURVEY FORM

 

The purpose of this form is to obtain information regarding the use of
hazardous substances on Investment Properties Group (“IPG”) property.  Prospective tenants and contractors should
answer the questions in light of their proposed activities on the premises.  Existing tenants and contractors should
answer the questions as they relate to ongoing activities on the premises and
should update any information previously submitted.

 

If additional space is needed to answer the questions, you may attach
separate sheets of paper to this form. 
When completed, the form should be sent to the following address:

 

THE
IRVINE COMPANY MANAGEMENT OFFICE

111
Innovation Drive

Irvine,
CA 92617

 

Your cooperation in this matter is appreciated.  If you have any questions, please call your
property manager at (949) 720-4400 for assistance.

 

	
  1.

  	
  GENERAL INFORMATION.

  
	
   

  	
   

  
	
   

  	
  Name of Responding
  Company:

  	
   

  	
   

  
	
   

  	
  Check all that apply:

  	
   

  	
  Tenant

  	
  o

  	
   

  	
  Contractor

  	
  o

  
	
   

  	
   

  	
   

  	
  Prospective

  	
  o

  	
   

  	
  Existing

  	
  o

  
	
   

  
	
   

  	
  Mailing Address:

  	
   

  	
   

  
	
   

  	
  Contact person &
  Title:

  	
   

  	
   

  
	
   

  	
  Telephone Number:  (   )

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Current TIC Tenant(s):

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address of Lease Premises:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Length of Lease or
  Contract Term:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Prospective TIC Tenant(s):

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address of Leased
  Premises:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address of Current
  Operations:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Describe the proposed
  operations to take place on the property, including principal products
  manufactured or services to be conducted. 
  Existing tenants and contractors should describe any proposed changes
  to ongoing operations.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  2.

  	
  HAZARDOUS MATERIALS. 
  For the purposes of this Survey Form, the term “hazardous material”
  means any raw material, product or agent considered hazardous under any state
  or federal law.  The term does not
  include wastes which are intended to be discarded.

  
	
   

  	
   

  
	
   

  	
  2.1

  	
  Will any hazardous
  materials be used or stored on site?

  
	
   

  	
   

  
	
   

  	
  Chemical Products

  	
  Yes

  	
  o

  	
   

  	
  No

  	
  o

  	
   

  
	
   

  	
  Biological Hazards/

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Infectious Wastes

  	
  Yes

  	
  o

  	
   

  	
  No

  	
  o

  	
   

  
	
   

  	
  Radioactive Materials

  	
  Yes

  	
  o

  	
   

  	
  No

  	
  o

  	
   

  
	
   

  	
  Petroleum Products

  	
  Yes

  	
  o

  	
   

  	
  No

  	
  o

  	
   

  
																										

 

 

	
   

  	
  2.1

  	
  List any hazardous
  materials to be used or stored, the quantities that will be on-site at any
  given time, and the location and method of storage (e.g., bottles in storage
  closet on the premises).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hazardous Materials

  	
   

  	
  Location
  and Method

  of Storage

  	
   

  	
  Quantity

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Is any underground storage
  of hazardous materials proposed or currently conducted on the premises?  Yes o  
  No  o

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If yes, describe the
  materials to be stored, and the size and construction of the tank.  Attach copies of any permits obtained for
  the underground storage of such substances.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  HAZARDOUS WASTE. 
  For the purposes of this Survey Form, the term “hazardous waste” means
  any waste (including biological, infectious or radioactive waste) considered
  hazardous under any state or federal law, and which is intended to be
  discarded.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  List any hazardous waste
  generated or to be generated on the premises, and indicate the quantity
  generated on a monthly basis.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hazardous Materials

  	
   

  	
  Location
  and Method

  of Storage

  	
   

  	
  Quantity

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Describe the method(s) of
  disposal (including recycling) for each waste.  Indicate where and how often disposal will
  take place.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hazardous Materials

  	
   

  	
  Location
  and Method

  of Storage

  	
   

  	
  Disposal
  Method

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Is any treatment or
  processing of hazardous, infectious or radioactive wastes currently conducted
  or proposed to be conducted on the premise?

  
	
   

  	
   

  	
  Yes o  
  No  o

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If yes, please describe
  any existing or proposed treatment methods.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Attach copies of any
  hazardous waste permits or licenses issued to your company with respect to
  its operations on the premises.

  
											

 

 

	
  4.

  	
  SPILLS

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  During the past year, have
  any spills or releases of hazardous materials occurred on the premises?
     Yes o    No o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, please describe the
  spill and attach the results of any testing conducted to determine the extent
  of such spills.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Were any agencies notified
  in connection with such spills?       Yes o       No
  o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, attach copies of
  any spill reports or other correspondence with regulatory agencies.

  
	
   

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Were any clean-up actions
  undertaken in connection with the spills?

  
	
   

  	
   

  	
  Yes o       No
  o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, briefly describe
  the actions taken. Attach copies of any clearance letters obtained from any
  regulatory agencies involved and the results of any final soil or groundwater
  sampling done upon completion of the clean-up work.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  WASTEWATER
  TREATMENT/DISCHARGE

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Do you discharge
  industrial wastewater to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o   storm drain?

  	
  o   sewer?

  
	
   

  	
   

  	
  o   surface water?

  	
  o   no industrial discharge

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Is your industrial
  wastewater treated before discharge?    Yes  o   No  o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.3           Attach copies of any wastewater discharge permits issued
  to your company with respect to its operations on the premises.

  
	
   

  	
   

  	
   

  
	
  6.

  	
  AIR DISCHARGES.

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Do you have any air
  filtration systems or stacks that discharge into the air?

  
	
   

  	
   

  	
  Yes o       No
  o

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Do you operate any
  equipment that require air emissions permits?

  
	
   

  	
   

  	
  Yes o       No
  o

  
	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Attach copies of any air
  discharge permits pertaining to these operations.

  
	
   

  	
   

  	
   

  
	
  7

  	
  HAZARDOUS MATERIALS
  DISCLOSURES.

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Does your company handle
  an aggregate of at least 500 pounds, 55 gallons or 200 cubic feet of
  hazardous material at any given time?    Yes  o   No  o

  
	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Has your company prepared
  a Hazardous Materials Disclosure — Chemical Inventory and Business Emergency
  Plan or similar disclosure document pursuant to state or county requirements?
      Yes  o   No  o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, attach a copy.

  

 

 

 

	
   

  	
  7.3

  	
  Are any of the chemicals
  used in your operations regulated under Proposition 65?

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, describe the procedures
  followed to comply with these requirements.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Is your company subject to
  OSHA Hazard Communication Standard Requirements?

  
	
   

  	
   

  	
  Yes    o

  	
   

  	
  No    o

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, describe the
  procedures followed to comply with these requirements.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  ANIMAL TESTING.

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Does your company bring or
  intend to bring live animals onto the premises for research or development
  purposes?  Yes    o    No    o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, describe the
  activity.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Does your company bring or
  intend to bring animal body parts or bodily fluids onto the premises for
  research or development purposes?   Yes    o    No    o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, describe the
  activity.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  ENFORCEMENT
  ACTIONS, COMPLAINTS.

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Has your company ever been
  subject to any agency enforcement actions, administrative orders, lawsuits,
  or consent orders/decrees regarding environmental compliance or health and
  safety?   Yes    o    No    o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If so, describe the
  actions and any continuing obligations imposed as a result of these actions.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Has your company ever
  received any request for information, notice of violation or demand letter,
  complaint, or inquiry regarding environmental compliance or health and
  safety?   Yes    o    No    o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9.3        Has
  an environmental audit ever been conducted which concerned operations or
  activities on premises occupied by you?   Yes    o    No    o

  
									

 

 

	
   

  	
   

  	
  9.4        If
  you answered “yes” to any questions in this section, describe the environmental
  action or complaint and any continuing compliance obligation imposed as a
  result of the same.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
										

 

 

EXHIBIT C

 

LANDLORD’S DISCLOSURES

 

None

 

 

EXHIBIT D

 

TENANT’S INSURANCE

 

The
following requirements for Tenant’s insurance shall be in effect at the
Building, and Tenant shall also cause any subtenant to comply with these
requirements.  Landlord reserves the
right to adopt reasonable nondiscriminatory modifications and additions to
these insurance requirements.  Tenant
agrees to obtain and present evidence to Landlord that it has fully complied
with the insurance requirements.

 

1.             Tenant shall, at its sole cost and expense,
commencing on the date Tenant is given access to the Premises for any purpose
and during the entire Term, procure, pay for and keep in full force and
effect:  (i) commercial general
liability insurance with respect to the Premises and the operations of or on
behalf of Tenant in, on or about the Premises, including but not limited to
coverage for personal injury, independent contractors, broad form property
damage, fire and water legal liability, products liability (if a product is
sold from the Premises), and liquor law liability (if alcoholic beverages are
sold, served or consumed within the Premises), which policy(ies) shall be
written on an “occurrence” basis and for not less than the amount set forth in
Item 13 of the Basic Lease Provisions, with a combined single limit (with
a $50,000 minimum limit on fire legal liability) per occurrence for bodily
injury, death, and property damage liability, or the current limit of liability
carried by Tenant, whichever is greater, and subject to such increases in
amounts as Landlord may determine from time to time; (ii) workers’
compensation insurance coverage as required by law, together with employers’
liability insurance of at least One Million Dollars ($1,000,000.00); (iii) with
respect to Alterations and the like required or permitted to be made by Tenant
under this Lease, builder’s risk insurance, in an amount equal to the
replacement cost of the work; (iv) insurance against fire, vandalism,
malicious mischief and such other additional perils as may be included in a
standard “special form” policy, insuring Tenant’s Alterations, trade fixtures,
furnishings, equipment and items of personal property of Tenant located in the
Premises, in an amount equal to not less than ninety percent (90%) of their
actual replacement cost (with replacement cost endorsement); and (v) business
interruption insurance in amounts satisfactory to cover one (1) year of
loss.  In no event shall the limits of
any policy be considered as limiting the liability of Tenant under this Lease.

 

2.             In the event Landlord consents to Tenant’s
use, generation or storage of Hazardous Materials on, under or about the
Premises pursuant to Section 5.3 of this Lease, Landlord shall have the
continuing right to require Tenant, at Tenant’s sole cost and expense (provided
the same is available for purchase upon commercially reasonable terms), to
purchase insurance specified and approved by Landlord, with coverage not less
than Five Million Dollars ($5,000,000.00), insuring (i) any Hazardous
Materials shall be removed from the Premises, (ii) the Premises shall be
restored to a clean, healthy, safe and sanitary condition, and (iii) any
liability of Tenant, Landlord and Landlord’s officers, directors, shareholders,
agents, employees and representatives, arising from such Hazardous Materials.

 

3.             All policies of insurance required to be
carried by Tenant pursuant to this Exhibit D containing a
deductible exceeding Ten Thousand Dollars ($10,000.00) per occurrence must be
approved in writing by Landlord prior to the issuance of such policy.  Tenant shall be solely responsible for the
payment of all deductibles.

 

4.             All policies of insurance required to be
carried by Tenant pursuant to this Exhibit D shall be written by
responsible insurance companies authorized to do business in the State of
California and with a general policyholder rating of not less than “A-” and
financial rating of not less than “VIII” in the most current Best’s Insurance
Report.  Any insurance required of Tenant
may be furnished by Tenant under any blanket policy carried by it or under a
separate policy.  A true and exact copy
of each paid up policy evidencing the insurance (appropriately authenticated by
the insurer) or a certificate of insurance, certifying that the policy has been
issued, provides the coverage required by this Exhibit D and
contains the required provisions, together with endorsements acceptable to
Landlord evidencing the waiver of subrogation and additional insured provisions
required below, shall be delivered to Landlord prior to the date Tenant is
given the right of possession of the Premises. 
Proper evidence of the renewal of any insurance coverage shall also be
delivered to Landlord not less than five (5) days after the renewal of the
coverage.  Landlord may at any time, and
from time to time, inspect and/or copy any and all insurance policies required
by this Lease.

 

5.             Each policy evidencing insurance required to
be carried by Tenant pursuant to this Exhibit D shall contain the
following provisions and/or clauses satisfactory to Landlord:  (i) with respect to Tenant’s commercial
general liability insurance, a provision that the policy and the coverage
provided shall be primary and that any coverage carried by Landlord shall be
noncontributory with respect to any policies carried by Tenant, together with a
provision including Landlord, the Additional Insureds identified in Item 11 of
the Basic Lease Provisions, and any other parties in interest designated by
Landlord, as additional insureds; (ii) except with respect to Tenant’s
commercial general liability insurance, a waiver by the insurer of any right to
subrogation against Landlord, its agents, employees, contractors and
representatives which arises or might arise by reason of any payment under the
policy or by reason of any act or omission of Landlord, its agents, employees,
contractors or representatives; and (iii) a provision that the insurer
will endeavor to provide written 

 

1

 

notice
to the Landlord thirty (30) days prior to canceling or changing coverage provided
by the policy.

 

6.             In the event that Tenant fails to procure,
maintain and/or pay for, at the times and for the durations specified in this Exhibit D,
any insurance required by this Exhibit D, or fails to carry
insurance required by any governmental authority, Landlord may at its election
procure that insurance and pay the premiums, in which event Tenant shall repay
Landlord all sums paid by Landlord, together with interest at the maximum rate
permitted by law and any related costs or expenses incurred by Landlord, within
ten (10) days following Landlord’s written demand to Tenant.

 

NOTICE TO TENANT: 
IN ACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST PROVIDE EVIDENCE
OF THE REQUIRED INSURANCE TO LANDLORD’S MANAGEMENT AGENT PRIOR TO BEING AFFORDED
ACCESS TO THE PREMISES.

 

2

 

EXHIBIT E

RULES AND REGULATIONS

 

This Exhibit sets forth the rules and regulations governing
Tenant’s use of the Premises leased to Tenant pursuant to the terms, covenants
and conditions of the Lease to which this Exhibit is attached and therein
made part thereof.  In the event of any
conflict or inconsistency between this Exhibit and the Lease, the Lease
shall control.

 

1.             Tenant shall not
place anything or allow anything to be placed near the glass of any window,
door, partition or wall, which may appear unsightly from outside the Premises.

 

2.             The walls, walkways,
sidewalks, entrance passages, elevators, stairwells, courts and vestibules
shall not be obstructed or used for any purpose other than ingress and egress
of pedestrian travel to and from the Premises, and shall not be used for
smoking, loitering or gathering, or to display, store or place any merchandise,
equipment or devices, or for any other purpose. 
The walkways, sidewalks, entrance passageways, courts, vestibules and
roof are not for the use of the general public and Landlord shall in all cases
retain the right to control and prevent access thereto by all persons whose
presence in the judgment of the Landlord shall be prejudicial to the safety,
character, reputation and interests of the Building and its tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom Tenant normally deals in the ordinary course of Tenant’s
business unless such persons are engaged in illegal activities.  Smoking is permitted outside the building and
within the project only in areas designated by Landlord.  No tenant or employee or invitee or agent of
any tenant shall be permitted upon the roof of the Building without prior
written approval from Landlord.

 

3.             No awnings or other
projection shall be attached to the outside walls of the Building.  No security bars or gates, curtains, blinds,
shades or screens shall be attached to or hung in, or used in connection with,
any window or door of the Premises without the prior written consent of
Landlord.  Neither the interior nor
exterior of any windows shall be coated or otherwise sunscreened without the
express written consent of Landlord.

 

4.             Tenant shall not
mark, nail, paint, drill into, or in any way deface any part of the Premises or
the Building except to affix standard pictures or other wall hangings on the
interior walls of the premises so long as they are not visible from the
exterior of the building.  Tenant shall
not lay linoleum, tile, carpet or other similar floor covering so that the same
shall be affixed to the floor of the Premises in any manner except as approved
by Landlord in writing.  The expense of
repairing any damage resulting from a violation of this rule or removal of
any floor covering shall be borne by Tenant.

 

5.             The toilet rooms,
urinals, wash bowls and other plumbing apparatus shall not be used for any
purpose other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein.  Any pipes or tubing used by Tenant to
transmit water to an appliance or device in the Premises must be made of copper
or stainless steel, and in no event shall plastic tubing be used for that purpose.  The expense of any breakage, stoppage or
damage resulting from the violation of this rule shall be borne by the
tenant who, or whose employees or invitees, caused it.

 

6.             Landlord shall direct
electricians as to the manner and location of any future telephone wiring.  No boring or cutting for wires will be
allowed without the prior consent of Landlord. 
The locations of the telephones, call boxes and other office equipment affixed
to the Premises shall be subject to the prior written approval of Landlord.

 

7.             The Premises shall
not be used for manufacturing or for the storage of merchandise except as such
storage may be incidental to the permitted use of the Premises.  No exterior storage shall be allowed at any
time without the prior written approval of Landlord.  The Premises shall not be used for cooking or
washing clothes without the prior written consent of Landlord, or for lodging
or sleeping or for any immoral or illegal purposes.

 

8.             Tenant shall not
make, or permit to be made, any unseemly or disturbing noises or disturb or
interfere with occupants of this or neighboring buildings or premises or those
having business with them, whether by the use of any musical instrument, radio,
phonograph, noise, or otherwise.  Tenant
shall not use, keep or permit to be used, or kept, any foul or obnoxious gas or
substance in the Premises or permit or suffer the Premises to be used or
occupied in any manner offensive or objectionable to Landlord or other
occupants of this or neighboring buildings or premises by reason of any odors,
fumes or gases.

 

9.             No animals, except
for seeing eye dogs, shall be permitted at any time within the Premises.

 

10.           Tenant shall
not use the name of the Building or the Project in connection with or in
promoting or advertising the business of Tenant, except as Tenant’s address,
without the written consent of Landlord. 
Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord’s reasonable opinion, tends to impair the reputation of the
Project or its desirability for its intended uses, and upon written notice from
Landlord any Tenant shall refrain from or discontinue such advertising.

 

11.           Canvassing, soliciting,
peddling, parading, picketing, demonstrating or otherwise engaging in any
conduct that unreasonably impairs the value or use of the Premises or the
Project are prohibited and each Tenant shall cooperate to prevent the
same.  Landlord shall have full and
absolute authority to regulate or prohibit the entrance to the Premises of any
vendor, supplier, purveyor, petitioner, proselytizer or other similar person
if, in the good faith judgment of Landlord, such person will be involved in
general solicitation activities, or the proselytizing, petitioning, or
disturbance of other tenants or their customers or invitees, or engaged or
likely to engage in conduct which may in 

 

1

 

Landlord’s opinion distract from the use of the Premises for its
intended purpose.  Notwithstanding the
foregoing, Landlord reserves the absolute right and discretion to limit or
prevent access to the Buildings by any food or beverage vendor, whether or not
invited by Tenant, and Landlord may condition such access upon the vendor’s
execution of an entry permit agreement which may contain provisions for
insurance coverage and/or the payment of a fee to Landlord.

 

12.           No equipment of
any type shall be placed on the Premises which in Landlord’s opinion exceeds
the load limits of the floor or otherwise threatens the soundness of the structure
or improvements of the Building.

 

13.           Regular building hours
of operation are from 6:00 AM to 6:00 PM Monday through Friday and 9:00 AM to
1:00 PM on Saturday.  No air conditioning
unit or other similar apparatus shall be installed or used by any Tenant
without the prior written consent of Landlord.

 

14.           The entire Premises,
including vestibules, entrances, parking areas, doors, fixtures, windows and
plate glass, shall at all times be maintained in a safe, neat and clean
condition by Tenant.  All trash, refuse
and waste materials shall be regularly removed from the Premises by Tenant and
placed in the containers at the locations designated by Landlord for refuse
collection.  All cardboard boxes must be “broken
down” prior to being placed in the trash container.  All styrofoam chips must be bagged or
otherwise contained prior to placement in the trash container, so as not to
constitute a nuisance.  Pallets must be
immediately disposed of by tenant and may not be disposed of in the Landlord
provided trash container or enclosures. 
Pallets may be neatly stacked in an exterior location on a temporary
basis (no longer than 5 days) so long as Landlord has provided prior written
approval.  The burning of trash, refuse
or waste materials is prohibited.

 

15.           Tenant shall use at
Tenant’s cost such pest extermination contractor as Landlord may direct and at
such intervals as Landlord may require.

 

16.           All keys for the
Premises shall be provided to Tenant by Landlord and Tenant shall return to
Landlord any of such keys so provided upon the termination of the Lease.  Tenant shall not change locks or install
other locks on doors of the Premises, without the prior written consent of
Landlord.  In the event of loss of any
keys furnished by Landlord for Tenant, Tenant shall pay to Landlord the costs
thereof.  Upon the termination of its
tenancy, Tenant shall deliver to Landlord all the keys to lobby(s), suite(s)
and telephone & electrical room(s) which have been furnished to Tenant
or which Tenant shall have had made.

 

17.           No person shall enter
or remain within the Project while intoxicated or under the influence of liquor
or drugs.  Landlord shall have the right
to exclude or expel from the Project any person who, in the absolute discretion
of Landlord, is under the influence of liquor or drugs.

 

18.           The moving of large or
heavy objects shall occur only between those hours as may be designated by, and
only upon previous written notice to, Landlord, and the persons employed to
move those objects in or out of the Building must be reasonably acceptable to
Landlord.  Without limiting the
generality of the foregoing, no freight, furniture or bulky matter of any
description shall be received into or moved out of the lobby of the Building or
carried in the elevator.

 

19.           Tenant shall not
install equipment, such as but not limited to electronic tabulating or computer
equipment, requiring electrical or air conditioning service in excess of that
to be provided by Landlord under the Lease without prior written consent of
Landlord.

 

20.           Landlord may from time
to time grant other tenants of the project individual and temporary variances
from these Rules, provided that any variance does not have a material adverse
effect on the use and enjoyment of the Premises by Tenant.

 

21.           Landlord reserves the
right to amend or supplement the foregoing Rules and Regulations and to
adopt and promulgate additional rules and regulations applicable to the
Premises.  Notice of such rules and
regulations and amendments and supplements thereto, if any, shall be given to
the Tenant.

 

2

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