Document:

EXHIBIT 10.1

 

LOAN AND
SECURITY AGREEMENT

 

Dated as
of October 5, 2005

 

Between

 

HENNESSEY
FINANCIAL, LLC

as
Mezzanine Borrower

 

and

 

CS
FINANCING CORPORATION

as
Mezzanine Lender

 

 

TABLE OF
CONTENTS

 

	
  I.

  	
  DEFINITIONS; PRINCIPLES OF CONSTRUCTION

  	
   

  
	
   

  	
  Section 1.1. Definitions.

  	
   

  
	
   

  	
  Section 1.2. Principles of Construction.

  	
   

  
	
   

  	
   

  	
   

  
	
  II.

  	
  GENERAL TERMS

  	
   

  
	
   

  	
  Section 2.1. Loan; Disbursement to
  Mezzanine Borrower.

  	
   

  
	
   

  	
  Section 2.2. Interest; Loan Payments;
  Late Payment Charge.

  	
   

  
	
   

  	
  Section 2.3. Prepayments

  	
   

  
	
   

  	
  Section 2.4. Regulatory Change; Taxes.

  	
   

  
	
   

  	
  Section 2.5. Conditions Precedent to
  Closing.

  	
   

  
	
   

  	
   

  	
   

  
	
  III.

  	
  CASH MANAGEMENT

  	
   

  
	
   

  	
  Section 3.1. Cash Management.

  	
   

  
	
   

  	
   

  	
   

  
	
  IV.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  Section 4.1. Mezzanine Borrower Representations.

  	
   

  
	
   

  	
  Section 4.2. Survival of Representations

  	
   

  
	
   

  	
   

  	
   

  
	
  V.

  	
  MEZZANINE BORROWER COVENANTS

  	
   

  
	
   

  	
  Section 5.1. Affirmative Covenants.

  	
   

  
	
   

  	
  Section 5.2. Negative Covenants.

  	
   

  
	
   

  	
   

  	
   

  
	
  VI.

  	
  INSURANCE; CASUALTY; CONDEMNATION;
  RESTORATION

  	
   

  
	
   

  	
  Section 6.1. Insurance Coverage Requirements.

  	
   

  
	
   

  	
  Section 6.2. Condemnation

  	
   

  
	
   

  	
  Section 6.3. Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  VII.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  VIII.

  	
  transfers, indebtedness and subordinate
  liens

  	
   

  
	
   

  	
  Section 8.1. Restrictions on Transfers

  	
   

  
	
   

  	
  Section 8.2. Deliveries to Mezzanine Lender

  	
   

  
	
   

  	
  Section 8.3. Permitted Transfers.

  	
   

  
	
   

  	
   

  	
   

  
	
  IX.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  X.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  XI

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  XII.

  	
  ENVIRONMENTAL MATTERS

  	
   

  
	
   

  	
  Section 12.1. Representations

  	
   

  
	
   

  	
  Section 12.2. Covenants.

  	
   

  
	
   

  	
  Section 12.3. Environmental Reports

  	
   

  

 

i

 

	
   

  	
  Section 12.4. Environmental Indemnification

  	
   

  
	
   

  	
  Section 12.5. Recourse Nature of Certain Indemnifications

  	
   

  
	
   

  	
   

  	
   

  
	
  XIII.

  	
  ASSIGNMENTS AND PARTICIPATIONS

  	
   

  
	
   

  	
  Section 13.1. Assignment and Acceptance

  	
   

  
	
   

  	
  Section 13.2. Effect of Assignment and Acceptance

  	
   

  
	
   

  	
  Section 13.3. Content

  	
   

  
	
   

  	
  Section 13.4. Register

  	
   

  
	
   

  	
  Section 13.5. Substitute Mezzanine Notes

  	
   

  
	
   

  	
  Section 13.6. Participations

  	
   

  
	
   

  	
  Section 13.7. Disclosure of Information

  	
   

  
	
   

  	
  Section 13.8. Security Interest in Favor of Federal Reserve Bank

  	
   

  
	
   

  	
   

  	
   

  
	
  XIV.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  XV.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  XVI.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  XVII.

  	
  DEFAULTS

  	
   

  
	
   

  	
  Section 17.1. Event of Default.

  	
   

  
	
   

  	
  Section 17.2. Remedies.

  	
   

  
	
   

  	
  Section 17.3. Remedies Cumulative; Waivers

  	
   

  
	
   

  	
  Section 17.4. Costs of Collection

  	
   

  
	
   

  	
  Section 17.5. Distribution of Collateral Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  XVIII.

  	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  XIX.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
  Section 19.1. Survival

  	
   

  
	
   

  	
  Section 19.2. Mezzanine Lender’s Discretion

  	
   

  
	
   

  	
  Section 19.3. Governing Law.

  	
   

  
	
   

  	
  Section 19.4. Modification, Waiver in Writing

  	
   

  
	
   

  	
  Section 19.5. Delay Not a Waiver

  	
   

  
	
   

  	
  Section 19.6. Notices

  	
   

  
	
   

  	
  Section 19.7. Trial by Jury

  	
   

  
	
   

  	
  Section 19.8. Headings

  	
   

  
	
   

  	
  Section 19.9. Severability

  	
   

  
	
   

  	
  Section 19.10. Preferences

  	
   

  
	
   

  	
  Section 19.11. Waiver of Notice

  	
   

  
	
   

  	
  Section 19.12. Expenses; Indemnity.

  	
   

  
	
   

  	
  Section 19.13. Exhibits and Schedules Incorporated

  	
   

  
	
   

  	
  Section 19.14. Offsets, Counterclaims and Defenses

  	
   

  
	
   

  	
  Section 19.15. Liability of Assignees of Mezzanine Lender

  	
   

  
	
   

  	
  Section 19.16. No Joint Venture or Partnership; No Third Party
  Beneficiaries.

  	
   

  
	
   

  	
  Section 19.17. Publicity

  	
   

  

 

ii

 

	
   

  	
  Section 19.18. Waiver of Marshalling of Assets

  	
   

  
	
   

  	
  Section 19.19. Waiver of Counterclaim and Other Actions

  	
   

  
	
   

  	
  Section 19.20. Conflict; Construction of Documents; Reliance

  	
   

  
	
   

  	
  Section 19.21. Prior Agreements

  	
   

  
	
   

  	
  Section 19.22. Brokers

  	
   

  
	
   

  	
  Section 19.23. Counterparts

  	
   

  

 

iii

 

LIST OF
EXHIBITS

 

	
  Exhibit A

  	
  Mezzanine Note

  	
   

  

 

i

 

LOAN AND SECURITY
AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT dated as of October               ,
2005 (as amended, restated, replaced, supplemented or otherwise modified from
time to time, this AGREEMENT), between HENNESSEY FINANCIAL, LLC, a Minnesota
limited liability company (MEZZANINE BORROWER) having an address 418 East
County Road D, St. Paul, Minnesota, 55117 and CS FINANCING CORPORATION, a Delaware
corporation, having an address at 45 San Clemente Drive, Suite B210, Corte
Madera, California, 94925 (together with its successors and assigns, MEZZANINE
LENDER).

 

W I T N E S S E T
H:

 

WHEREAS, Mezzanine Borrower has requested that Mezzanine Lender extend
a multiple-draw term credit facility to Mezzanine Borrower of up to One Hundred
Million Dollars ($100,000,000) in the aggregate for the purpose of financing
Mezzanine Borrower’s mezzanine finance business and Mezzanine Lender is willing
to make certain loans and other extension of credit to Mezzanine Borrower of up
to such amount upon the terms and conditions set forth herein;

 

WHEREAS, Mezzanine Borrower shall use the proceeds of each Advance of
the Loan to make secured mezzanine real estate related loans.

 

WHEREAS, Mezzanine Lender will endeavor to raise up to $100,000,000 via
a registered Bond Offering or other similar issuance of debt instruments to
fund Advances to Mezzanine Borrower; and

 

WHEREAS, a portion of the proceeds of the Bond Offering, if any, will
be used to fund this credit facility.

 

NOW, THEREFORE, in consideration of the making of the Loan by Mezzanine
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereto hereby covenant, agree, represent and
warrant as follows:

 

I. 
DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

Section 1.1.            Definitions.

 

For all purposes of this Agreement, except as otherwise expressly required
or unless the context clearly indicates a contrary intent:

 

ACCOUNT AGREEMENT shall mean the Account and Control Agreement among Mezzanine
Lender, Mezzanine Borrower and Cash Management Bank executed prior to any
Advance hereunder.

 

ACCOUNT COLLATERAL shall have the meaning set forth in Section 3.1.2.

 

1

 

ADVANCE shall mean an advance or disbursement of the Loan made from
time to time pursuant to the terms of the Loan Documents and at Mezzanine
Lender’s discretion.

 

AFFILIATE shall mean, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with, or any general partner or managing member in, such
specified Person. An Affiliate of a Person includes, without limitation, (i) any
officer or director of such Person, (ii) any record or beneficial owner of
more than 10% of any class of ownership interests of such Person and (iii) any
Affiliate of the foregoing. For the purposes of this definition, “control” when
used with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities or other beneficial interest, by contract or otherwise;
and the terms “controlling” and “controlled” have the meanings correlative to
the foregoing.

 

AGREEMENT shall mean this Agreement, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

ALTA shall mean American Land Title Association, or any successor thereto.

 

APPROVED BANK shall have the meaning set forth in the Account Agreement.

 

ASSIGNMENT shall mean those certain Assignment of loan documents from
Mezzanine Borrower to Mezzanine Lender assigning Mezzanine Borrower’s rights,
privileges and assets necessary to qualify Mezzanine Borrower for an Advance.

 

BANKRUPTCY CODE shall mean Title 11, U.S.C.A., as amended from time to
time and any successor statute thereto.

 

BOND OFFERING shall mean Mezzanine Lender’s attempt to acquire
financing to fund Advances to Mezzanine Borrower via issuing debt securities of
Mezzanine Lender.

 

BUSINESS DAY shall mean any day other than a Saturday, Sunday or any other
day on which national banks in Minnesota are not open for business. When used
with respect to an Interest Determination Date, Business Day shall mean any day
on which dealings in deposits in U.S. Dollars are transacted in the London
interbank market.

 

CASH shall mean the legal tender of the United States of America.

 

CASH AND CASH EQUIVALENTS shall mean any or a combination of the following:
(i) Cash, and (ii) U.S. Government Obligations.

 

CASH MANAGEMENT BANK shall mean any Approved Bank acting as Cash
Management Bank under the Account Agreement, or another financial institution
reasonably approved by the Mezzanine Lender.

 

2

 

CERTIFICATE shall have the meaning set forth in the Pledge.

 

CLOSING DATE(S) shall mean the dates Mezzanine Lender disburses an
Advance to Mezzanine Borrower or the date this Agreement is executed, whichever
is applicable.

 

CODE shall mean the Internal Revenue Code of 1986, as amended, as it may
be further amended from time to time, and any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.

 

COLLATERAL shall mean collectively (i) all of Pledged Collateral
and all proceeds thereof, (ii) all Receipts, (iii) any stock certificates
or other certificates, membership interest certificates or instruments,
mortgages, deeds of trust, security agreement or instrument evidencing any of the
foregoing property described in clauses (i) and (ii) above, (iv) Guaranty
and Assignment, (v) the Account Collateral and (vi) all other rights
appurtenant to the property described in clauses (i) through (v) above
or all other rights appurtenant to any property Mezzanine Lender intends to
take a security interest as an inducement to making this Loan or any Advance
thereunder.

 

COLLATERAL ACCOUNTS shall have the meaning set forth in Section 3.1.1.

 

CONTROL shall mean (i) the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise and (ii) the
ownership, direct or indirect, of no less than 51% of the voting securities of
such Person, and the terms Controlled, Controlling and Common Control shall
have correlative meanings.

 

CREDIT ENHANCEMENT shall have the meaning set forth in Section 2.5.2(r).

 

DEBT shall mean, with respect to any Person at any time, (a) indebtedness
or liability of such Person for borrowed money whether or not evidenced by
bonds, debentures, notes or other instruments, or for the deferred purchase
price of property or services (excluding trade obligations); (b) obligations
of such Person as lessee under leases which should have been or should be, in
accordance with GAAP, recorded as capital leases; (c) current liabilities
of such Person in respect of unfunded vested benefits under plans covered by
Title IV of ERISA; (d) obligations issued for, or liabilities incurred on
the account of, such Person; (e) obligations or liabilities of such Person
arising under letters of credit, credit facilities or other acceptance
facilities; (f) obligations of such Person under any guarantees or other
agreement to become secondarily liable for any obligation of any other Person,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person or otherwise to assure a
creditor against loss; (g) obligations of such Person secured by any Lien
on any property of such Person, whether or not the obligations have been
assumed by such Person; or (h) obligations of such Person under any
interest rate or currency exchange agreement.

 

3

 

DEBT SERVICE shall mean, with respect to any particular period of time,
scheduled interest payments under the Mezzanine Note.

 

DEFAULT shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.

 

DEFAULT RATE shall have the meaning set forth in the Mezzanine Note.

 

DISTRIBUTIONS shall have the meaning set forth in the Pledge.

 

ELIGIBLE ACCOUNT has the meaning set forth in the Account Agreement.

 

ENFORCEMENT COSTS shall have the meaning set forth in Section 17.4.

 

ENVIRONMENTAL CERTIFICATE shall have the meaning set forth in Section 12.2.1.

 

ENVIRONMENTAL EVENT shall have the meaning set forth in Section 12.2.1.

 

ENVIRONMENTAL INDEMNITY shall mean any environmental indemnity
agreement made by Mezzanine Borrower in favor of Mezzanine Lender whether
pursuant to this Agreement or any Loan Document.

 

ENVIRONMENTAL LAWS shall have the meaning provided in the Environmental
Indemnity.

 

ENVIRONMENTAL REPORTS shall have the meaning set forth in Section 12.1.

 

EVENT OF DEFAULT shall have the meaning set forth in Section 17.1(a).

 

EXCESS PROCEEDS shall have the meaning set forth in Section 2.3.1(b).

 

EXCUSABLE DELAY shall mean a delay solely due to acts of god, governmental
restrictions, stays, judgments, orders, decrees, enemy actions, civil
commotion, fire, casualty, strikes, work stoppages, shortages of labor or materials
or other cases beyond the reasonable control of Mezzanine Borrower, but
Mezzanine Borrower’s lack of funds in and of itself shall not be deemed a cause
beyond the control of Mezzanine Borrower.

 

FISCAL YEAR shall mean each twelve (12) month period commencing on January 1
and ending on December 31 during each year of the term of the Loan or the
portion of any such 12-month period falling within the term of the Loan in the
event that such a 12-month period occurs partially before or after, and partially
during, the term of the Loan.

 

FIXED RATE shall have the meaning set forth in the Mezzanine Note.

 

4

 

FOREIGN LENDER shall mean any Lender that is organized under the laws
of a jurisdiction other than that in which the Mezzanine Borrower is located.
For purposes of this definition, the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

GAAP shall mean the generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board (or agencies with similar functions
of comparable stature and authority within the accounting profession), or in
such other statements by such entity as may be in general use by significant
segments of the U.S. accounting profession, to the extent such principles are
applicable to the facts and circumstances on the date of determination.

 

GOVERNMENTAL AUTHORITY shall mean any court, board, agency, commission,
office or other authority of any nature whatsoever for any governmental unit
(federal, state, county, district, municipal, city or otherwise) whether now or
hereafter in existence.

 

GUARANTOR shall mean any other party or entity so requested by
Mezzanine Lender prior to each Advance or pursuant to the Loan Documents.

 

HAZARDOUS SUBSTANCE shall have the meaning provided for the term “Hazardous
Materials” in the Environmental Indemnity.

 

INCREASED COSTS shall have the meaning set forth in Section 2.4.1.

 

INDEBTEDNESS shall mean, at any given time, the Principal Amount, together
with all accrued and unpaid interest thereon and all other obligations and
liabilities due or to become due to Mezzanine Lender pursuant hereto, under the
Mezzanine Note or in accordance with the other Loan Documents and all other
amounts, sums and expenses paid by or payable to Mezzanine Lender hereunder or
pursuant to the Mezzanine Note or the other Loan Documents.

 

INDEMNIFIED PARTIES shall have the meaning set forth in Section 19.12(b).

 

INDEPENDENT shall mean, when used with respect to any Person, a Person
who: (i) does not have any direct financial interest or any material indirect
financial interest in any Mezzanine Borrower or in any of its Affiliates, (ii) is
not connected with Mezzanine Borrower or any of its Affiliates, as an officer,
employee, promoter, underwriter, trustee, partner, member, manager, creditor,
director, supplier, customer or person performing similar functions, and (iii) is
not a member of the immediate family of a Person defined in (i) or (ii) above.

 

INDEPENDENT ARCHITECT shall mean an architect, engineer or construction
consultant selected by Mezzanine Borrower which is Independent, licensed to
practice in the State and has at least five (5) years of architectural
experience and which is selected by Mezzanine Borrower.

 

5

 

INDEPENDENT, INDEPENDENT MANAGER, INDEPENDENT MEMBER OR INDEPENDENT
DIRECTOR shall mean a Person who is not and will not be while serving and has
never been (i) a member (other than an Independent Member), manager (other
than an Independent Manager), director (other than an Independent Director),
employee, attorney, or counsel of Mezzanine Borrower or its Affiliates, (ii) is
not a customer, supplier or other Person who derives more than 1% of its
purchases or revenues from its activities with Mezzanine Borrower or its Affiliates,
or (iii) is not a member of the immediate family of any member (other than
an Independent Member), manager (other than an Independent Manager), employee,
attorney, customer, supplier or other Person referred to above or (iv) a
person Controlling or under the common Control of anyone listed in (i) through
(iii) above. A Person that otherwise satisfies the foregoing shall not be disqualified
from serving as an Independent Manager or Independent Member if such individual
is at the time of initial appointment, or at any time while serving as an
Independent Manager, Independent Member or Independent Director, as applicable,
of a Single Purpose Entity affiliated with Mezzanine Borrower.

 

INTEREST DETERMINATION DATE shall have the meaning set forth in the Mezzanine
Note.

 

INTEREST PERIOD shall have the meaning set forth in the Mezzanine Note.

 

LATE PAYMENT CHARGE shall have the meaning set forth in Section 2.2.3.

 

LIEN shall mean any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance or charge on or
affecting Mezzanine Borrower, the Collateral, any portion thereof or any
interest therein, 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, the filing of any financing statement,
and the filing of mechanic’s, materialmen’s and other similar liens and
encumbrances.

 

LIQUIDATED DAMAGES AMOUNT shall have the meaning set forth in the Mezzanine
Note.

 

LOAN shall mean the loan in the amount of One Hundred Million Dollars
($100,000,000) made, if at all, in a series of Advances by Mezzanine Lender to
Mezzanine Borrower pursuant to this Agreement.

 

LOAN DOCUMENTS shall mean, collectively, this Agreement, the Mezzanine
Note, the Account Agreement, the Guaranty, the Environmental Indemnity, the Assignment
and the Pledge and any and all other agreements, instruments or documents
executed by Mezzanine Borrower (or another Person) evidencing, securing or
delivered in connection with the Loan or an Advance and the transactions contemplated
thereby, including, without limitation, any certificates or representations
delivered by or on behalf of Mezzanine Borrower, any Affiliate of Mezzanine
Borrower, or any Affiliate of Mezzanine Borrower to induce Mezzanine Lender to
make an Advance hereunder.

 

LOAN FEE shall have the meaning set forth in the Mezzanine Note.

 

6

 

MATERIAL ADVERSE EFFECT shall mean any event or condition that has a material
adverse effect on (i) the Collateral taken as a whole, (ii) the
business, profits, operations or financial condition of Mezzanine Borrower (iii) the
ability of Mezzanine Borrower to repay the principal and interest of the Loan
as it becomes due or to satisfy any of Mezzanine Borrower’s obligations under
the Loan Documents, (iv) the validity or enforceability of any of the Loan
Documents against any party thereto, (v) the Collateral, taken as a whole
or (vi) the priority of the Liens in favor of Mezzanine Lender.

 

MATURITY DATE shall have the meaning set forth in the Mezzanine Note.

 

MATURITY DATE PAYMENT shall have the meaning set forth in the Mezzanine
Note.

 

MAXIMUM LEGAL RATE shall mean the maximum non-usurious interest rate,
if any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Mezzanine
Note and as provided for herein or the other Loan Documents, under the laws of
such state or states whose laws are held by any court of competent jurisdiction
to govern the interest rate provisions of the Loan.

 

MEMBER POWER shall mean the member power executed by Mezzanine Borrower
and substantially in the form required by the Pledge.

 

MEZZANINE ACCOUNT shall have the meaning set forth in Section 3.1.1.

 

MEZZANINE BORROWER shall have the meaning set forth in the first paragraph
of this Agreement.

 

MEZZANINE BORROWER’S ACCOUNT shall be the account so designated by
Mezzanine Borrower in writing to Mezzanine Lender prior to any Advance.

 

MEZZANINE DEBT SERVICE RESERVE ACCOUNT shall have the meaning set forth
in Section 3.1.1(a).

 

MEZZANINE LENDER shall have the meaning set forth in the first
paragraph of this Agreement.

 

MEZZANINE NOTE shall mean that certain Mezzanine Note, dated the date
hereof, in the principal amount One Hundred Million Dollars ($100,000,000),
made by Mezzanine Borrower, as maker, in favor of Mezzanine Lender, as payee,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.

 

MONETARY DEFAULT shall mean a Default (i) that can be cured with
the payment of money or (ii) arising pursuant to Section 17.1(a)(vi) or
(vii).

 

MOODY’S shall mean Moody’s Investors Service, Inc.

 

NET EXCESS CASH FLOW shall have the meaning set forth in Section 3.1.6(a).

 

7

 

NET EXCESS CASH FLOW COMMENCEMENT DATE shall have the meaning set forth
in Section 3.1.6(a).

 

NON-CONSOLIDATION OPINION shall have the meaning provided in Section 2.5.16.

 

NOTES shall mean the Mezzanine Note.

 

OBLIGATIONS shall mean all indebtedness, obligations and liabilities of
Mezzanine Borrower, its Affiliates, and Guarantor to Mezzanine Lender, under
this Agreement or any of the other Loan Documents or in respect of the Loan,
any Advance, or the Mezzanine Note, or other instruments at any time evidencing
any of the foregoing, whether existing on the date of this Agreement or arising
or incurred hereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise.

 

OFFICER’S CERTIFICATE shall mean a certificate executed by an authorized
signatory of Mezzanine Borrower that is familiar with the financial condition
of Mezzanine Borrower and the operation of the Collateral.

 

OPINION OF COUNSEL shall mean an opinion of counsel of a law firm selected
by Mezzanine Borrower and reasonably acceptable to Mezzanine Lender.

 

OTHER CHARGES shall mean maintenance charges and any other charges,
including, without limitation, vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Collateral, now or hereafter
levied or assessed or imposed against the Collateral or any part thereof by any
Governmental Authority, other than those required to be paid by a tenant
pursuant to its respective lease.

 

OTHER TAXES shall have the meaning set forth in Section 2.4.3.

 

PAYMENT DATE shall have the meaning set forth in the Mezzanine Note.

 

PERMITTED DEBT shall mean any Debt of Mezzanine Borrower in excess of
$75,000,000 to a single creditor permitted in writing by the Mezzanine Lender, such
permission not to be unreasonably withheld. 
All Debt of Mezzanine Borrower is deemed to be permitted by Mezzanine
Lender until such time as Mezzanine Lender shall have Advanced $100,000,000
hereunder.

 

PERMITTED ENCUMBRANCE shall mean any encumbrance on the Collateral
permitted, in writing, by the Mezzanine Lender in the Mezzanine Lender’s sole
discretion.

 

PERMITTED INVESTMENTS shall have the meaning set forth in the Account Agreement.

 

PERSON shall mean any individual, corporation, partnership, joint venture,
limited liability company, estate, trust, unincorporated association, any
federal, state,

 

8

 

county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.

 

PHYSICAL CONDITIONS REPORT shall mean the structural engineering report
with respect to the Collateral (i) prepared by an Independent Architect, (ii) addressed
to Mezzanine Lender or with respect to which Mezzanine Lender shall have
received a reliance letter.

 

PLAN ASSETS shall have the meaning provided in Section 4.1.9(b).

 

PLEDGE shall mean any pledge agreements from Mezzanine Borrower to Mezzanine
Lender pledging the assets of Mezzanine Borrower necessary to qualify Mezzanine
Borrower for an Advance.

 

PLEDGED COLLATERAL shall have the meaning set forth in the Pledge or
Assignment.

 

PRE-APPROVED COLLATERAL shall mean unencumbered assets of Mezzanine
Borrower that will be available to be pledged as Collateral for future Advances
and have been pre-approved by Mezzanine Lender, in its sole discretion.

 

PRINCIPAL AMOUNT shall be the amount outstanding under the Loan and have
the meaning set forth in the Mezzanine Note.

 

PROTECTIVE ADVANCES shall mean sums advanced by Mezzanine Lender for the
purposes of payment of items reasonably necessary to protect the Collateral.

 

RATING AGENCIES shall be a rating agency acceptable to Mezzanine Lender,
in its sole discretion.

 

RECEIPTS shall mean with respect to any Person, the declaration or payment
of any cash, cash flow, dividend or distribution on or in respect of any member’s
or partner’s interest, shares of any class of capital stock or other beneficial
interest of such Person; the purchase, redemption, exchange or other retirement
of any member’s or partner’s interest, shares of any class of capital stock or
other beneficial interest of such Person, directly or indirectly; the return of
capital by such Person to its members, shareholders or partners as such; or any
other distribution of any nature whatsoever on or in respect of any member’s or
partner’s interest, shares of any class of capital stock or other beneficial
interest of such Person.

 

RECOURSE GUARANTY shall mean that certain Guaranty of recourse Obligations
of Mezzanine Borrower, dated as of the date of any Advance, by Guarantor in
favor of Mezzanine Lender, as the same may be amended, supplemented, restated
or otherwise modified from time to time.

 

REGISTER shall have the meaning set forth in Section 13.4.

 

9

 

REGULATORY CHANGE shall mean any change after the date of this Agreement
in federal, state or foreign laws or regulations or the adoption or the making,
after such date, of any written interpretations, directives or requests
applying to Mezzanine Lender, or any Person Controlling Mezzanine Lender or to
a class of banks or companies controlling banks of or under any federal, state
or foreign laws or regulations (whether or not having the force of law) by any
court or Governmental Authority or monetary authority charged with the
interpretation or administration thereof.

 

S&P shall mean Standard & Poor’s Ratings Group, a division
of The McGraw-Hill Companies.

 

SERVICER shall mean such Person designated in writing with an address
for such Person by Mezzanine Lender, in its sole discretion, to act as Mezzanine
Lender’s agent hereunder with such powers as are specifically delegated to the
Servicer by Mezzanine Lender, whether pursuant to the terms of this Agreement,
the Account Agreement or otherwise, together with such other powers as are
reasonably incidental thereto.

 

SINGLE PURPOSE ENTITY shall mean a Person, other than an individual, which
(i) is formed or organized solely for the purpose of holding, developing, using,
operating and financing, directly, or, in the case of Mezzanine Borrower, indirectly,
an ownership interest in the Collateral, (ii) does not engage in any business
unrelated to the Collateral and the development, use, operation and financing
thereof, (iii) has not and will not have any assets other than those related
to its interest in the Collateral or the operation, management and financing
thereof or any indebtedness other than the Permitted Debt, (iv) maintains
its own separate books and records and its own accounts, in each case which are
separate and apart from the books and records and accounts of any other Person,
(v) holds itself out as being a Person, separate and apart from any other
Person, (vi) does not and will not commingle its funds or assets with those
of any other Person, (vii) conducts its own business in its own name, (viii) maintains
separate financial statements, (ix) pays its own liabilities out of its own
funds, (x) observes all partnership, corporate or limited liability company
formalities, as applicable, (xi) pays the salaries of its own employees, if
any, and maintains a sufficient number of employees, if any, in light of its
contemplated business operations, (xii) does not guarantee or otherwise
obligate itself with respect to the debts of any other Person or hold out its
credit as being available to satisfy the obligations of any other Person,
(xiii) does not acquire obligations or securities of its partners, members or
shareholders, (xiv) allocates fairly and reasonably shared expenses, including,
without limitation, any overhead for shared office space, if any, (xv) does not
and will not pledge its assets for the benefit of any other Person or make any
loans or advances to any other Person, (xvi) does and will continue to use
commercially reasonable efforts to correct any known misunderstanding regarding
its separate identity, (xvii) maintains adequate capital in light of its
contemplated business operations, and (xviii) has and will continue to have a
partnership or operating agreement, certificate of incorporation, articles of organization
or other organizational document which has been approved by Mezzanine Lender
which approval shall not be unreasonably withheld, conditioned or delayed. In
addition, if such Person is a partnership, (1) all general partners of
such Person shall be Single Purpose Entities; and

 

10

 

(2) if such Person has more than one general
partner, then the organizational documents shall provide that such Person shall
continue (and not dissolve) for so long as a solvent general partner exists. In
addition, if such Person is a corporation, then, at all times: (a) such
Person shall have at least two (2) independent directors (which
independent directors must satisfy the criteria set forth in the definition of “Independent
Manager” herein) and (b) the board of directors of such Person may not
take any action requiring the unanimous affirmative vote of 100% of the members
of the board of directors unless all of the directors, including the
independent directors, shall have participated in such vote. In addition, if
such Person is a limited liability company, (a) such Person shall have at
least two (2) Independent Managers or Independent Members, (b) if
such Person is managed by a board of managers, the board of managers of such
Person may not take any action requiring the unanimous affirmative vote of 100%
of the members of the board of managers unless all of the managers, including
the Independent Managers, shall have participated in such vote, (c) if
such Person is not managed by a board of managers, the members of such Person
may not take any action requiring the affirmative vote of 100% of the members
of such Person unless all of the members, including the Independent Members,
shall have participated in such vote, (d) each managing member shall be a
Single Purpose Entity, (e) its articles of organization, certificate of
formation and/or operating agreement, as applicable, shall provide that until
all of the Indebtedness and Obligations are paid in full such entity will not
dissolve. In addition, the organizational documents of such Person shall
provide that such Person (1) without the unanimous consent of all of the
partners, directors or members, as applicable, shall not with respect to itself
or to any other Person in which it has a direct or indirect legal or beneficial
interest (a) seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or other similar official for the
benefit of the creditors of such Person or all or any portion of such Person’s
properties, or (b) take any action that may be reasonably likely to cause
such Person to become insolvent, (2) has and will maintain its books,
records, resolutions and agreements as official records, (3) has held and
will hold its assets in its own name, (4) has and will maintain its
financial statements, accounting records and other organizational documents,
books and records separate and apart from any other Person, and (5) has
not and will not identify its partners, members or shareholders, or any
affiliates of any of them as a division or part of it.

 

SPECIAL TAXES shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, or any liabilities with respect
thereto, including those arising after the date hereof as result of the adoption
of or any change in law, treaty, rule, regulation, guideline or determination
of a Governmental Authority or any change in the interpretation or application
thereof by a Governmental Authority but excluding (i) in the case of any
Mezzanine Lender, such taxes (including income taxes, franchise taxes and branch
profit taxes) as are imposed on or measured by Mezzanine Lender’s net income by
the United States of America or any Governmental Authority of the jurisdiction
under the laws under which such Mezzanine Lender is organized or maintains its
principal office or a lending office or (ii) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Mezzanine Borrower
under this Agreement), any withholding tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Mezzanine Lender becomes a
party to this Agreement (or designates a new lending office).

 

11

 

STATE shall mean the State in which the Collateral or any part thereof is
located.

 

SUB-ACCOUNT(S) shall have the meaning set forth in Section 3.1.1.

 

SURVEY shall mean a survey of any Collateral acceptable to Mezzanine
Lender in its sole discretion.

 

TAKING shall mean any governmental or other intrusion on the Collateral
that substantially diminishes the Collateral value in the sole determination of
the Mezzanine Lender.

 

TENANT shall mean any party having a right to occupy, posses or use any
Collateral.

 

TITLE COMPANY shall mean a company issuing a Title Policy acceptable to
Mezzanine Lender in its sole discretion.

 

TITLE POLICY shall mean an insurance policy covering a Collateral
acceptable to Mezzanine Lender in its sole discretion.

 

TRANSFER shall mean, directly or indirectly, to sell, assign, convey,
mortgage, transfer, pledge, hypothecate, encumber, grant a security interest in,
exchange or otherwise dispose of any beneficial interest or grant any option or
warrant with respect to, or where used as a noun, a direct or indirect sale,
assignment, conveyance, transfer, pledge or other disposition of any beneficial
interest by any means whatsoever whether voluntary, involuntary, by operation
of law or otherwise.

 

UCC OR UNIFORM COMMERCIAL CODE shall mean the Uniform Commercial Code
as in effect in the State.

 

U.S. GOVERNMENT OBLIGATIONS shall have the meaning set forth in the Account
Agreement.

 

Section 1.2.            Principles
of Construction.

 

All references to sections and schedules are to sections and schedules
in or to this Agreement unless otherwise specified. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term “financial statements” shall include the notes and
schedules thereto. Unless otherwise specified herein or therein, all terms defined
in this Agreement shall have the definitions given them in this Agreement when
used in any other Loan Document or in any certificate or other document made or
delivered pursuant thereto. All uses of the word “including” shall mean
including, without limitation unless the context shall indicate otherwise.
Unless otherwise specified, the words hereof, herein and hereunder and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless otherwise
specified, all meanings attributed to defined terms herein shall be equally
applicable to both the singular and plural forms of the terms so defined.  To the extent a term referenced herein

 

12

 

is to be defined in any Loan Document, and
such Loan Document has not been executed, such term shall have the definition
most commonly given to it in similar transactions.  To the extent a term referenced herein is to
be defined in any Loan Document, and there are subsequent executions of
numerous versions of such document, the last executed Loan Document shall
control the definition of such term.

 

II.  GENERAL TERMS

 

Section 2.1.            Loan;
Disbursement to Mezzanine Borrower.

 

2.1.1.       The
Loan.  Subject to and upon the terms
and conditions set forth herein, Mezzanine Lender hereby agrees to make and
Mezzanine Borrower hereby agrees to accept the Loan on the Closing Date.

 

2.1.2.       Disbursement
to Mezzanine Borrower.  Mezzanine Lender
shall lend, and Mezzanine Borrower shall accept, such amounts as Mezzanine
Lender desires to lend out of the Bond Offering, if any. Any amount borrowed
and repaid hereunder in respect of the Loan may not be reborrowed. Mezzanine
Borrower acknowledges and agrees that the Loan will only be disbursed if funds
become available to Mezzanine Lender via the Bond Offering. The Loan shall be
made in multiple pre-approved Advances pursuant to the terms of this Agreement
and Loan Documents.

 

2.1.3.       The
Mezzanine Note, Assignment, Pledge and Loan Documents.  The Loan shall be evidenced by the Mezzanine
Note and secured by the Pledge, Assignment, Guaranty, this Agreement and the
other Loan Documents.

 

2.1.4.       Use
of Proceeds.  Mezzanine Borrower
shall use the proceeds of the Loan or any Advance to make (a) mortgage
secured mezzanine real estate loans and (b) loans to a Special Purpose
Entity secured by 100% of the issued and outstanding stock, units, membership
interests, partnership interests or other ownership interests of companies
whose primary asset is real estate.

 

Section 2.2.            Interest;
Loan Payments; Late Payment Charge.

 

2.2.1.       Payment
of Principal and Interest.

 

(a)           Except
as set forth in Section 2.2.1(b), interest and fees shall accrue on the
Principal Amount as set forth in the Mezzanine Note.

 

(b)           Upon
the occurrence and during the continuance of an Event of Default and from and
after the Maturity Date if the entire then outstanding balance of the Principal
Amount is not repaid on the Maturity Date, interest on the

 

13

 

outstanding principal balance
of the Loan and, to the extent permitted by law, overdue interest and other
amounts due in respect of the Loan shall accrue at the Default Rate calculated
from the date such payment was due without regard to any grace or cure periods
contained herein. Interest at the Default Rate shall be computed from the
occurrence (but only during the continuance) of the Event of Default until the
actual receipt and collection of the Indebtedness (or that portion thereof that
is then due). To the extent permitted by applicable law, interest at the
Default Rate shall be added to the Indebtedness, shall itself accrue interest
at the same rate as the Loan and shall be secured by this Agreement and the
Pledge.

 

This paragraph shall not be construed as an agreement or privilege to
extend the date of the payment of the Indebtedness, nor as a waiver of any
other right or remedy accruing to Mezzanine Lender by reason of the occurrence
of any Event of Default; and Mezzanine Lender retains its rights under the
Mezzanine Note to accelerate and to continue to demand payment of the
Indebtedness upon the happening (but only during the continuance) of any Event
of Default.

 

2.2.2.       Method
and Place of Payment.

 

(a)           On
each Payment Date, Mezzanine Borrower shall pay to Mezzanine Lender interest
accruing pursuant to the Mezzanine Note for the entire Interest Period during
which said Payment Date shall occur. 
Mezzanine Borrower shall also pay Mezzanine Lender the Loan Fee on each
Closing Date.

 

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

 

14

 

(c)           The
Maturity Date Payment shall be due and payable in full on the Maturity Date.

 

2.2.3.       Late
Payment Charge.  If any principal,
interest or any other sums due under the Loan Documents (other than the outstanding
Principal Amount due and payable on the Maturity Date) is not paid by Mezzanine
Borrower on the date on which it is due, Mezzanine Borrower shall pay to
Mezzanine Lender upon demand an amount equal to the lesser of five percent (5%)
of such unpaid sum or the Maximum Legal Rate (the LATE PAYMENT CHARGE) in order
to defray the expense incurred by Mezzanine Lender in handling and processing
such delinquent payment and to compensate Mezzanine Lender for the loss of the
use of such delinquent payment. Any such amount shall be secured by this
Agreement and the other Loan Documents to the extent permitted by applicable
law.

 

2.2.4.       Usury
Savings.  This Agreement and the
Mezzanine Note are subject to the express condition that at no time shall
Mezzanine Borrower be obligated or required to pay interest on the principal
balance of the Loan at a rate which could subject Mezzanine Lender to either
civil or criminal liability as a result of being in excess of the Maximum Legal
Rate. If, by the terms of this Agreement or the other Loan Documents, Mezzanine
Borrower is at any time required or obligated to pay interest on the principal balance
due under the Mezzanine Note at a rate in excess of the Maximum Legal Rate,
then the Fixed Rate or the Default Rate, as the case may be, shall be deemed to
be immediately reduced to the Maximum Legal Rate and all previous payments in
excess of the Maximum Legal Rate shall be deemed to have been payments in
reduction of principal and not on account of the interest due under the Note.
All sums paid or agreed to be paid to Mezzanine Lender for the use, forbearance,
or detention of the sums due under the Loan, shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Loan until payment in full so that the rate or amount
of interest on account of the Loan does not exceed the Maximum Legal Rate of
interest from time to time in effect and applicable to the Loan for so long as
the Loan is outstanding.

 

Section 2.3.            Prepayments.  No prepayments of the Indebtedness shall be permitted
prior to the Maturity Date except as set forth in Section 2.3.1 hereof and
Section 4 of the Mezzanine Note.

 

15

 

2.3.1.       Mandatory
Prepayment.

 

(a)           Subject
to Article VIII, Mezzanine Borrower shall repay the Mezzanine Note, in
full, together with the Liquidated Damages Amount (if applicable), in
accordance with Section 4(b) and Section 4(d) (if
applicable) of the Mezzanine Note upon the occurrence of any of the following
events:

 

(i)            if
the Collateral is Transferred;

 

(ii)           if
all or any portion of the Mezzanine Borrower’s interest in the Collateral is
Transferred;

 

(iii)          reserved

 

(iv)          reserved

 

(v)           if
a Transfer or series of Transfers of any direct or indirect ownership interest
in the Mezzanine Borrower shall occur which either individually or in the
aggregate with all such Transfers violates the requirements of Article VIII;
or

 

(vi)          reserved

 

(b)           If
there shall occur a casualty or Taking in respect of the Collateral and as a
result thereof the Loan is prepaid in whole or in part, then, to the extent
that there shall be excess proceeds or awards available following the
application of the proceeds or awards to reconstruct or repair the Collateral
or to the payment of all or any portion of the Loan pursuant to the terms of
the Loan Documents and the Loan pursuant to the terms of the Loan Documents
(EXCESS PROCEEDS), Mezzanine Borrower shall repay the Mezzanine Note, or a
portion thereof, in the amount of such available Excess Proceeds in accordance
with Section 4(b) of the Mezzanine Note and no Liquidated Damages Amount
shall be due in connection therewith. All Excess Proceeds shall be deposited
directly into the Mezzanine Account.

 

2.3.2.       Prepayments
After Event of Default.  If, following
an Event of Default, Mezzanine Lender shall accelerate the Indebtedness and Mezzanine
Borrower thereafter tenders payment of all or any part of the Indebtedness, or
if all or any portion of the Indebtedness is recovered by Mezzanine Lender
after such Event of Default, (a) such payment may be made only on the next
occurring Payment Date together with all unpaid interest thereon as calculated
through the end of the Interest Period during which such Payment Date

 

16

 

occurs (even if such period
extends beyond such Payment Date and calculated as if the Loan had not been
repaid on such Payment Date), and all other fees and sums payable hereunder or
under the Loan Documents, including without limitation, interest that has
accrued at the Default Rate and any Late Payment Charges), (b) such
payment shall be deemed a voluntary prepayment by Mezzanine Borrower, and (c) Mezzanine
Borrower shall pay, in addition to the Indebtedness the Liquidated Damages
Amount.

 

2.3.3.       Release
of Collateral.  Mezzanine Lender
shall, upon the written request and at the expense of Mezzanine Borrower, upon
payment in full of the Principal Amount and interest on the Loan and all other
amounts due and payable under the Loan Documents in accordance with the terms
and provisions of the Mezzanine Note and this Agreement, release the Lien of (i) this
Agreement upon the Account Collateral and the Collateral and (ii) the
Pledge on the Collateral or assign it, in whole or in part, to a new lender. In
such event, Mezzanine Borrower shall submit to Mezzanine Lender, not less than
ten (10) Business Days prior to the date of such release or assignment, a
release of lien or assignment of lien, as applicable, for such Collateral for
execution by Mezzanine Lender. Such release or assignment, as applicable, shall
be in a form appropriate in each jurisdiction in which the Collateral is
located and satisfactory to Mezzanine Lender in its reasonable discretion. In
addition, Mezzanine Borrower shall provide all other documentation Mezzanine Lender
reasonably requires to be delivered by Mezzanine Borrower in connection with
such release or assignment, as applicable.

 

Section 2.4.            Regulatory
Change; Taxes.

 

2.4.1.       Increased
Costs.  If as a result of any
Regulatory Change or required compliance of Mezzanine Lender therewith, the
basis of taxation of payments to Mezzanine Lender or any company Controlling
Mezzanine Lender of the principal of or interest on the Loan is changed or
Mezzanine Lender or the company Controlling Mezzanine Lender shall be subject
to (i) any tax, duty, charge or withholding of any kind with respect to
this Agreement (excluding federal taxation of the overall net income of
Mezzanine Lender or the company Controlling Mezzanine Lender and taxes covered
by Subsections 2.4.2, 2.4.3 and 2.4.4 below); or (ii) any reserve, special
deposit or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities, of Mezzanine Lender or
any company Controlling Mezzanine Lender is imposed, modified or deemed
applicable; or (iii) any other condition affecting loans to borrowers
subject to bond financed-based interest rates is imposed on Mezzanine Lender or

 

17

 

any company Controlling
Mezzanine Lender and Mezzanine Lender determines that, by reason thereof, the
cost to Mezzanine Lender or any company Controlling Mezzanine Lender of making,
maintaining or extending the Loan to Mezzanine Borrower is increased, or any
amount receivable by Mezzanine Lender or any company Controlling Mezzanine
Lender hereunder in respect of any portion of the Loan to Mezzanine Borrower is
reduced, in each case by an amount deemed by Mezzanine Lender in good faith to
be material (such increases in cost and reductions in amounts receivable being
herein called INCREASED COSTS), then Mezzanine Lender shall provide notice
thereof to Mezzanine Borrower and Mezzanine Borrower agrees that it will pay to
Mezzanine Lender upon Mezzanine Lender’s written request such additional amount
or amounts as will compensate Mezzanine Lender or any company Controlling
Mezzanine Lender for such Increased Costs to the extent Mezzanine Lender
determines that such Increased Costs are allocable to the Loan. The payment of
such Increased Costs shall be amortized over the period remaining to the
applicable Maturity Date.  If Mezzanine
Lender requests compensation under this Section 2.4.1, Mezzanine Borrower
may, by notice to Mezzanine Lender, require that Mezzanine Lender furnish to
Mezzanine Borrower a statement setting forth the basis for requesting such
compensation and the method for determining the amount thereof.

 

2.4.2.       Special
Taxes.  Mezzanine Borrower shall make
all payments hereunder free and clear of and without deduction for Special
Taxes. If Mezzanine Borrower shall be required by law to deduct any Special
Taxes from or in respect of any sum payable hereunder or under any other Loan
Document to Mezzanine Lender, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.4.2) Mezzanine
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Mezzanine Borrower shall make such deductions,
and (iii) Mezzanine Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.

 

2.4.3.       Other
Taxes.  In addition, Mezzanine
Borrower agrees to pay any present or future stamp or documentary taxes or
other excise or property taxes, charges, or similar levies which arise from any
payment made hereunder, or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the other Loan Documents, or the Loan
(hereinafter referred to as OTHER TAXES).

 

18

 

2.4.4.       Indemnity.  Mezzanine Borrower shall indemnify Mezzanine Lender
for the full amount of Special Taxes and Other Taxes (including any Special
Taxes or Other Taxes imposed by any Governmental Authority on amounts payable
under this Section 2.4.4) paid by Mezzanine Lender and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto,
whether or not such Special Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within thirty (30) days after the
date Mezzanine Lender makes written demand therefor. Mezzanine Borrower shall
not, however, be required to pay any additional amounts under this Section 2.4
or otherwise indemnify Lender for Special Taxes, other Taxes or Increased Costs
to the extent such indemnification obligations result from a Foreign Lender’s
failure to comply with Subsection 2.4.6 below.

 

2.4.5.       Change
of Office.  To the extent that
changing the jurisdiction of Mezzanine Lender’s applicable office would have
the effect of minimizing Special Taxes, Other Taxes or Increased Costs,
Mezzanine Lender shall use reasonable efforts to make such a change, provided
that same would not otherwise be materially disadvantageous to Mezzanine
Lender.

 

2.4.6.       Tax
Exemptions and Reductions.  Any Foreign
Lender that is entitled to an exemption from or reduced rate of withholding tax
under the law of the jurisdiction in which Mezzanine Borrower is located, or
any treaty to which such jurisdiction is a party, with respect to payments
under this Agreement, shall deliver to Mezzanine Borrower within 10 days after
the Closing Date (or in the case of an assignee, on or before the date such
assignee becomes a party to this Agreement) such properly completed and
executed documentation prescribed by applicable law or reasonably requested by
Borrower as will permit such payments to be made without withholding or at a
reduced rate.

 

2.4.7.       Survival.  Without prejudice to the survival of any
other agreement of Mezzanine Borrower hereunder, the agreements and obligations
of Mezzanine Borrower contained in this Section 2.4 shall survive the
payment in full of principal and interest hereunder, and the termination of
this Agreement.

 

Section 2.5.            Conditions
Precedent to Closing.

 

The obligation of Mezzanine Lender to make any Advance hereunder is subject
to the fulfillment by, or on behalf of, Mezzanine Borrower or waiver by Mezzanine
Lender of the following conditions precedent no later than any Closing Date of
each Advance; provided, however, that unless a condition precedent shall
expressly survive any Closing

 

19

 

Date pursuant to a separate agreement, by
funding an Advance, Mezzanine Lender shall be deemed to have waived any such
conditions related exclusively to such Advance not theretofore fulfilled or
satisfied:

 

2.5.1.       Representations
and Warranties; Compliance with Conditions.

 

(a)           The
representations and warranties of Mezzanine Borrower contained in this
Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the Closing Date with the same effect as if made
on and as of such date, and no Default with respect to the payment of money or
Event of Default shall have occurred and be continuing; and Mezzanine Borrower
shall be in compliance in all material respects with all terms and conditions
set forth in this Agreement and in each other Loan Document on its part to be
observed or performed; and

 

(b)           Reserved.

 

(c)           Reserved.

 

2.5.2.       Delivery
of Loan Documents; Title Insurance; Reports; Leases.

 

(a)           Loan
Documents.  Mezzanine Lender shall have
received an original copy of this Agreement, the Mezzanine Note and all of the
other Loan Documents, in each case, duly executed (and to the extent required,
acknowledged) and delivered on behalf of Mezzanine Borrower and any other
parties thereto;

 

(b)           Certificate.  If applicable, Mezzanine Lender shall have
received an original of the Certificate together with a Member Power endorsed
in blank;

 

(c)           UCC
Financing Statements.  Mezzanine
Lender shall have received evidence that the UCC financing statements relating
to the Collateral have been delivered to Mezzanine Lender for filing in the
applicable jurisdictions;

 

(d)           Account
Agreement.  Mezzanine Lender shall have
received the original of the Account Agreement executed by each of Cash
Management Bank and Mezzanine Borrower;

 

20

 

(e)           Title
Insurance.

 

(i)            If
applicable, Mezzanine Lender shall have received a copy of the Title Policy (or
a marked up and signed commitment having the force and effect of a title
policy, marked paid by an authorized representative of the Title Company)
issued by the Title Company with respect to the Collateral dated as of the
applicable Closing Date in form and substance acceptable to Mezzanine Lender.
Mezzanine Lender also shall have received evidence that all premiums in respect
of the Title Policy have been paid;

 

(ii)           Reserved;

 

(iii)          Reserved;

 

(f)            Survey.  If applicable, Mezzanine Lender shall have
received a current Survey for the Collateral in a form satisfactory to
Mezzanine Lender;

 

(g)           Insurance.  Mezzanine Lender shall have received valid certificates
of insurance for the policies of insurance covering the Collateral reasonably
requested by the Mezzanine Lender naming Mezzanine Lender as an additional
insured and containing a cross liability/severability endorsement, satisfactory
to Mezzanine Lender in its sole discretion, and evidence of the payment of all
insurance premiums currently due and payable for the existing policy period;

 

(h)           Environmental
Reports.  If applicable, Mezzanine
Lender shall have received an Environmental Report in respect of the Collateral
satisfactory to Mezzanine Lender;

 

(i)            Zoning.  If applicable, Mezzanine Lender shall have
received evidence reasonably acceptable to Mezzanine Lender that the Collateral
complies with applicable zoning laws and regulations;

 

(j)            Encumbrances.  Mezzanine Borrower shall have taken or caused
to be taken such actions in such a manner so that Mezzanine Lender has a valid
and perfected Lien as of the Closing Date on the Collateral and Mezzanine Lender
shall have received satisfactory evidence thereof;

 

(k)           Reserved;

 

(l)            Reserved;

 

21

 

(m)          Reserved;

 

(n)           Leases,
REAs and Rent Roll.  If applicable, Mezzanine
Lender shall have received (i) copies of all leases certified as requested
by Mezzanine Lender; (ii) a current certified rent roll of the Collateral;
and (iii) copies of all Tenant estoppel certificates and REA estoppel
certificates;

 

(o)           Pledgor
Acknowledgment.  If applicable, Mezzanine
Lender shall have received an original of a Pledge, in a form satisfactory to
it, in its sole discretion, executed by Mezzanine Borrower and dated as of the
applicable Closing Date;

 

(p)           Reserved;

 

(q)           Reserved;

 

(r)            Credit
Enhancement.  Mezzanine Borrower
shall have received an irrevocable letter of credit, or other satisfactory
credit enhancement, in Mezzanine Lender’s sole discretion, equal to five
percent (5%) of the gross amount of any Advance (CREDIT ENHANCEMENT).  Such Credit Enhancement, if in the form of an
irrevocable letter of credit, shall be from an institution and in a form acceptable
to Mezzanine Lender in its sole discretion.

 

2.5.3.       Satisfactory
Collateral.  The Pledge and the other
Loan Documents shall constitute a valid and perfected Lien on the Collateral
for the full amount of the Principal Amount, free and clear of all Liens other
than encumbrances specifically approved by Mezzanine Lender, in writing, in its
sole discretion; Mezzanine Lender shall have received such UCC, tax, lien and
judgment searches in respect of the Collateral as it shall have deemed
necessary and the results of such searches shall be acceptable to Mezzanine
Lender in its sole discretion;

 

2.5.4.       Collateral
Accounts.  The Collateral Accounts shall
have been established with the Cash Management Bank;

 

2.5.5.       Reserved;

 

2.5.6.       Financial
Statements.  Mezzanine Borrower shall
have delivered its unaudited financial statements for the current Fiscal Year,
and audited financial statements for the previous fiscal year, which shall be reasonably
acceptable to Mezzanine Lender and shall be certified by an Officer’s Certificate;

 

22

 

2.5.7.       No
Default or Event of Default.  No
Default or Event of Default shall have occurred and be continuing on such date
either before or after the execution of this Agreement;

 

2.5.8.       Consent
of Other Lender.  Any other lender
having or claiming an interest in the Collateral shall have consented in
writing to the underlying transactions contemplated by each Advance and the other
Loan Documents;

 

2.5.9.       Reserved.

 

2.5.10.     Intercreditor
Agreement.  Mezzanine Lender shall
have executed an intercreditor agreement in form and substance satisfactory to
Mezzanine Lender in its sole discretion;

 

2.5.11.     No
Injunction.  No law or regulation
shall have been adopted, no order, judgment or decree of any Governmental
Authority shall have been issued, and no litigation shall be pending or
threatened, which in the good faith judgment of Mezzanine Lender would enjoin,
prohibit or restrain, or impose or result in the imposition of any material
adverse condition upon, the repayment of the Mezzanine Note or the consummation
of the transaction contemplated hereunder;

 

2.5.12.     Financial
Information.  Mezzanine Lender shall
have received or had access to financial information relating to the Collateral,
the Mezzanine Borrower and the Guarantor prepared in accordance with agreed
upon procedures satisfactory to Mezzanine Lender, certified to Mezzanine Lender
as true and correct by Mezzanine Borrower’s officers and otherwise in form and substance
satisfactory to Mezzanine Lender;

 

2.5.13.     Reserved.

 

2.5.14.     Related
Documents.  Each additional document
not specifically referenced herein, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered by
all parties thereto and Mezzanine Lender shall have received and approved
certified copies thereof;

 

2.5.15.     Delivery
of Organizational Documents.  On or
before the Closing Date of each Advance, Mezzanine Borrower shall deliver, or
cause to be delivered, to Mezzanine Lender copies certified by an Officer’s
Certificate, of all organizational documentation related to Mezzanine Borrower,
the Collateral (where applicable), Guarantor and certain of its Affiliates as
have been requested by Mezzanine Lender and/or the formation, structure,
existence, good standing and/or qualification to do business of Mezzanine
Borrower, the

 

23

 

Collateral (where applicable),
Guarantor and such Affiliates, as Mezzanine Lender may request in its sole discretion,
including, without limitation, good standing certificates, qualifications to do
business in the appropriate jurisdictions, resolutions authorizing the entering
into of the Loan and incumbency certificates as may be requested by Mezzanine
Lender. Each of the organizational documents of any Person that is a Single
Purpose Entity shall contain language satisfactory to Mezzanine Lender, in its
sole discretion.

 

2.5.16.     Opinions
of Mezzanine Borrower’s Counsel.

 

(a)           Mezzanine
Lender shall have received the Non-Consolidation Opinion in a form acceptable
to Mezzanine Lender in its sole discretion;

 

(b)           Mezzanine
Lender shall have received the Opinion of Counsel in a form acceptable to
Mezzanine Lender in its sole discretion;

 

(c)           Reserved.

 

(d)           Reserved.

 

(e)           Reserved.

 

2.5.17.     Completion
of Proceedings.  All corporate and other
proceedings taken or to be taken in connection with the transactions contemplated
by this Agreement and other Loan Documents and all documents incidental thereto
shall be satisfactory in form and substance to Mezzanine Lender, and Mezzanine
Lender shall have received all such counterpart originals or certified copies
of such documents as Mezzanine Lender may reasonably request;

 

2.5.18.     Material
Adverse Effect.  All features of the transaction
giving rise to a request for an Advance shall be as represented to Mezzanine
Lender without material adverse change. None of Mezzanine Borrower, Collateral
(where applicable), the Guarantor nor any of their constituent Persons
(excluding for purposes of this Section 2.5.18 any limited partners in any
Guarantor) shall be the subject of any bankruptcy, reorganization, or
insolvency proceeding.

 

2.5.19.     Reserved.

 

2.5.20.     Physical
Conditions Reports.  If applicable, Mezzanine
Lender shall have received a Physical Conditions Report with respect to the Collateral,
which report shall be satisfactory in form and substance to Mezzanine Lender;

 

24

 

2.5.21.     Appraisal.  Mezzanine Lender shall have received an appraisal
of the Collateral, which shall be satisfactory in form and substance to Mezzanine
Lender;

 

2.5.22.     Further
Documents.  Mezzanine Lender or its
counsel shall have received an Assignment, if applicable, and such other and
further approvals, opinions, documents and information as Mezzanine Lender or
its counsel may have reasonably requested including the Loan Documents in form
and substance satisfactory to Mezzanine Lender and its counsel in their sole
discretion.

 

III.  CASH MANAGEMENT

 

Section 3.1.            Cash
Management.

 

3.1.1.       Establishment
of Account.  Mezzanine Borrower
hereby confirms that, prior to the first Advance, pursuant to the Account
Agreement, it has established with Cash Management Bank, in the name of
Mezzanine Lender, as secured party, for Mezzanine Borrower, one (1) segregated
account, the mezzanine account (the MEZZANINE ACCOUNT), which has been
established as a securities account. The Mezzanine Account and the funds
deposited therein and securities and other assets credited thereto shall serve
as additional security for the Loan.  Pursuant
to the Account Agreement, Mezzanine Borrower shall irrevocably instruct and
authorize Cash Management Bank to disregard any and all orders for withdrawal
from the Mezzanine Account made by, or at the direction of, Mezzanine Borrower.
Mezzanine Borrower agrees that, prior to the payment in full of the
Indebtedness, the terms and conditions of the Account Agreement shall not be
amended or modified without the prior written consent of Mezzanine Lender (which
consent Mezzanine Lender may grant or withhold in its sole discretion). In
recognition of Mezzanine Lender’s security interest in the funds deposited into
the Mezzanine Account, Mezzanine Borrower shall identify the Mezzanine Account
with the name of Mezzanine Lender, as secured party. The Mezzanine Account
shall be named as follows: “CS FINANCING CORPORATION, as secured party,
Mezzanine Account”. Mezzanine Borrower confirms that it has established with Cash
Management Bank the following sub-accounts of the Mezzanine Account (each, a
SUB-ACCOUNT and, collectively, the SUB-ACCOUNTS and together with the Mezzanine
Account, the COLLATERAL ACCOUNTS), which (i) may be ledger or book entry
sub-accounts and need not be actual sub-accounts, (ii) shall each be linked
to the Mezzanine Account, (iii) shall each be a “Securities Account”
pursuant to Article 8 of the UCC and (iv) shall each be an Eligible
Account to which certain funds shall be

 

25

 

allocated and from which
disbursements shall be made pursuant to the terms of this Agreement

 

(a)           a
sub-account for the retention of Account Collateral in respect of Debt Service
on the Loan in a form acceptable to Mezzanine Lender, in its sole discretion (the
MEZZANINE DEBT SERVICE RESERVE ACCOUNT).

 

3.1.2.       Pledge
of Account Collateral.  To secure the
full and punctual payment and performance of the Obligations, Mezzanine
Borrower hereby collaterally assigns, grants a security interest in and pledges
to Mezzanine Lender, to the extent not prohibited by applicable law, a first
priority continuing security interest in and to the following property of
Mezzanine Borrower, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all of the same, collectively, the
ACCOUNT COLLATERAL):

 

(a)           Reserved.

 

(b)           the
Collateral Accounts and all cash, checks, drafts, securities entitlements,
certificates, instruments and other property, including, without limitation,
all deposits and/or wire transfers from time to time deposited or held in,
credited to or made to Collateral Accounts;

 

(c)           any
and all amounts invested in Permitted Investments;

 

(d)           all
interest, dividends, cash, instruments, real estate, notes, securities entitlements
and other property from time to time received, receivable or otherwise payable
in respect of, or in exchange for, any or all of the foregoing or purchased
with proceeds of the Loan or funds from the Collateral Accounts; and

 

(e)           to
the extent not covered by clauses (a), (b), (c) or (d) above, all
proceeds (as defined under the UCC) of any or all of the foregoing.

 

In addition to the rights and remedies herein set forth, Mezzanine Lender
shall have all of the rights and remedies with respect to the Account Collateral
available to a secured party at law or in equity, including, without
limitation, the rights of a secured party under the UCC, as if such rights and
remedies were fully set forth herein.

 

This Agreement shall constitute a security agreement for purposes of the
UCC other applicable law.

 

26

 

3.1.3.       Maintenance
of Mezzanine Account.

 

(a)           Mezzanine
Borrower agrees that each of the Mezzanine Account and the Sub- Accounts is and
shall be maintained (i) as a “securities account” (as such term is defined
in Section 8-501(a) of the UCC), (ii) in such a manner that
Mezzanine Lender shall have control (within the meaning of Section 8-106(d)(2) of
the UCC) over the Mezzanine Account and any Sub-Account thereof, (iii) such
that neither Mezzanine Borrower shall have any right of withdrawal from the
Mezzanine Account or the Sub-Accounts and, except as provided herein, no
Account Collateral shall be released to Mezzanine Borrower from the Mezzanine
Account. Cash Management Bank shall comply with the instructions of Mezzanine
Lender directing depository of funds in their Collection Account without
further consent of Mezzanine Borrower or any other Person, (iv) in such a
manner that the Cash Management Bank shall agree to treat all property credited
to the Mezzanine Account or the Sub-Accounts as “financial assets” (within the
meaning of Section 102(a)(9) of the UCC) and (v) such that all securities
or other property underlying any financial assets credited to any of the
Sub-Accounts shall be registered in the name of Cash Management Bank, indorsed
to Cash Management Bank or in blank or credited to another securities account
maintained in the name of Cash Management Bank and in no case will any financial
asset credited to the Collateral Accounts be registered in the name of
Mezzanine Borrower, payable to the order of Mezzanine Borrower or specially
indorsed to Mezzanine Borrower except to the extent the foregoing have been
specially indorsed to Cash Management Bank or in blank. Without limiting
Mezzanine Borrower’s obligations under the immediately preceding sentence,
Mezzanine Borrower shall only establish and maintain the Mezzanine Account with
a financial institution that has executed an agreement substantially in the
form of the Account Agreement or in such other form acceptable to Mezzanine
Lender in its sole discretion. Cash Management Bank shall comply with “all
entitlement orders” (as defined in Section 8-102(a)(8) of the UCC)
and instructions originated by Mezzanine Lender without further consent by
Mezzanine Borrower or any other party.

 

3.1.4.       Eligible
Accounts.  The Collateral Accounts
shall be Eligible Accounts. The Collateral Accounts shall be subject to such
applicable laws, and such applicable regulations of the Board of

 

27

 

Governors of the Federal
Reserve System and of any other banking or governmental authority, as may now
or hereafter be in effect.  Income and
interest accruing on the Collateral Accounts or any investments held in such
accounts shall be periodically added to the principal amount of such account
and shall be held, disbursed and applied in accordance with the provisions of
this Agreement and the Account Agreement. Mezzanine Borrower shall be the
beneficial owner of the Collateral Accounts for federal income tax purposes and
shall report all income on the Collateral Accounts.

 

3.1.5.       Deposits
into Sub-Accounts.  Unless Mezzanine
Lender has approved an alternative Credit Enhancement, Mezzanine Borrower has
deposited the following amounts into the Sub-Accounts:

 

(i)            an
amount equal to 5% of the Principal Amount into the Mezzanine Debt Service
Reserve Account.

 

3.1.6.       Monthly
Funding.

 

(a)           Mezzanine
Borrower hereby irrevocably authorizes Mezzanine Lender to transfer (and,
pursuant to the Account Agreement shall irrevocably authorize Cash Management
Bank to execute any corresponding instructions of Mezzanine Lender), and Mezzanine
Lender shall transfer, from the Mezzanine Account by 11:00 a.m. Central
Standard Time commencing on the tenth (10th) calendar day of each calendar
month (and if such day is not a Business Day then on the immediately preceding Business
Day) and on each Business Day thereafter until the earlier of (i) the ninth
(9th) calendar day of the next succeeding calendar month (or, if such day is
not a Business Day, then the immediately preceding Business Day), or (ii) as
soon after the tenth (10th) calendar day of such month as there shall be sufficient
collected funds on deposit in the Mezzanine Account, and from time to time (but
no less frequently than weekly thereafter) funds in an amount equal to the sum
of any Protective Advances which may have been advanced by (and not previously reimbursed
to) the Mezzanine Lender pursuant to the terms of the Loan Documents to cure
any Default or Event of Default, or to protect the Collateral together with any
interest payable on such amounts pursuant to the Loan Documents, plus (x) the
unpaid Debt Service for the next occurring Payment Date, plus (y) an amount
equal to such payments for any prior month(s), to the extent not previously paid,
plus (z) an amount equal to the amount sufficient to pay any other amounts due
under the Loan Documents (other than any

 

28

 

Debt Service).  Mezzanine Borrower acknowledges that
Mezzanine Lender shall not be required to make such withdrawal and deposit
until such time as Mezzanine Lender is able to calculate the amount of the Debt
Service for the next occurring Payment Date. As used herein, the term NET
EXCESS CASH FLOW means the amount available in the Mezzanine Account after the
transfers to the Mezzanine Debt Service Reserve Account required under this Section 3.1.6
have been made and the term NET EXCESS CASH FLOW COMMENCEMENT DATE shall mean
the date such amounts have been fully funded or reserved within the Mezzanine
Account in any given calendar month.

 

(b)           If
for any reason there will be insufficient amounts in the Mezzanine Debt Service
Reserve Account on any Payment Date to pay the Debt Service due on such Payment
Date, Mezzanine Borrower shall immediately deposit into the Mezzanine Account
an amount equal to the shortfall of available funds in the Mezzanine Debt
Service Reserve Account. Any failure by Mezzanine Borrower to deposit the full
amount required by the preceding sentence shall constitute an Event of Default
hereunder. If Mezzanine Lender shall reasonably determine that there will be
insufficient amounts in the Mezzanine Account to pay any Protective Advances as
and when the same are due and payable, Mezzanine Lender shall provide written notice
of same to Mezzanine Borrower setting forth the basis for such determination.
Within five (5) Business Days of receipt of said notice, Mezzanine
Borrower shall deposit into the Mezzanine Account an amount equal to the
shortfall of available funds in the Mezzanine Account. Any failure by Mezzanine
Borrower to deposit the full amount required by the preceding sentence shall
constitute an Event of Default hereunder. Notwithstanding anything to the
contrary contained in this Agreement or in the other Loan Documents, Mezzanine
Borrower shall not be deemed to be in default hereunder or thereunder in the
event funds sufficient for a required transfer are held in the Mezzanine
Account or an appropriate Sub-Account and Mezzanine Lender or Cash Management
Bank fails to timely make any transfer as contemplated by this Agreement.

 

(c)           Provided
that (i) no Event of Default shall have occurred and be continuing
hereunder or under any of the other Loan Documents, (ii) Mezzanine
Borrower shall have delivered to Mezzanine Lender an Officer’s Certificate (in a
form

 

29

 

approved by Mezzanine Lender)
(which Mezzanine Borrower shall not be obligated to deliver more frequently
than once per calendar month) certifying that the signatories know of no Event
of Default that has occurred and is then outstanding hereunder or under any of the
other Loan Documents, and (iii) Mezzanine Borrower shall have deposited
into the Mezzanine Account all funds then required to have been so deposited,
then Mezzanine Lender shall transfer the Net Excess Cash Flow from the
Mezzanine Account to Mezzanine Borrower’s Account within two (2) Business Days
following the Net Excess Cash Flow Commencement Date for each month and on a
daily basis thereafter until the end of the applicable collection period.  From and after the transfer of such Net
Excess Cash Flow to Mezzanine Borrower, Mezzanine Lender shall have no further
liability or responsibility with respect to the funds so transferred or the
investment thereof, such Net Excess Cash Flow shall be the property of
Mezzanine Borrower and may be further distributed by Mezzanine Borrower and its
Affiliates in accordance with their separate agreements.

 

3.1.7.       Cash
Management Bank.

 

(a)           For
the purposes of this Agreement, the Cash Management Bank named herein shall be
deemed to be an Approved Bank; provided, however, that the term “Approved Bank”
shall be applicable for all other purposes and shall be applicable to any
successor or assign of Cash Management Bank. Without cost to Mezzanine
Borrower, Mezzanine Lender shall have the right to replace the Cash Management
Bank with any other financial institution reasonably satisfactory to Mezzanine
Borrower, which will promptly execute and deliver to Mezzanine Lender an
Account Agreement (and Mezzanine Borrower shall reasonably cooperate with
Mezzanine Lender in connection with such transfer) in the event that (i) the
Cash Management Bank fails, in any material respect, to comply with the Account
Agreement or (ii) in the event the Cash Management Bank named herein is no
longer the Cash Management Bank, or (iii) in the event any successor Cash
Management Bank is no longer an Approved Bank.

 

(b)           During
the term of the Loan, so long as no Event of Default shall have occurred and is
continuing, at its sole cost and expense, Mezzanine Borrower shall have the
right to replace the Cash Management Bank with any other

 

30

 

financial institution that is
an Approved Bank provided such institution shall execute and deliver to
Mezzanine Lender the Account Agreement (and Mezzanine Lender shall reasonably cooperate
with Mezzanine Borrower in connection with such transfer).  Upon the occurrence and during the continuance
of an Event of Default, Mezzanine Lender shall have the right to replace Cash
Management Bank at any time, upon notice to Mezzanine Borrower.

 

3.1.8.       Reserved.

 

3.1.9.       Account
Collateral and Remedies.

 

(a)           Upon
the occurrence and during the continuance of an Event of Default, without
additional notice from Mezzanine Lender to Mezzanine Borrower, (i) Mezzanine
Lender may, in addition to and not in limitation of Mezzanine Lender’s other
rights, make any and all withdrawals from, and transfers between and among, the
Collateral Account as Mezzanine Lender shall determine in its sole and absolute
discretion to pay any Obligations, operating expenses and/or capital
expenditures for the Collateral; (ii) all Excess Cash Flow shall be delivered
to and retained in the Mezzanine Account or applicable Sub-Accounts, and (iii) all
transfers to the Mezzanine Borrower’s Account pursuant to Section 3.1.6
shall immediately cease, and (iv) Lender may liquidate and transfer any amounts
then invested in Permitted Investments to the Collateral Accounts to which they
relate or reinvest such amounts in other Permitted Investments as Mezzanine
Lender may reasonably determine is necessary to perfect or protect any security
interest granted or purported to be granted hereby or to enable Mezzanine
Lender to exercise and enforce Mezzanine Lender’s rights and remedies hereunder
with respect to any Account Collateral or to preserve the value of the Account
Collateral.

 

(b)           Upon
the occurrence and during the continuance of an Event of Default, Mezzanine
Borrower hereby irrevocably constitutes and appoints Mezzanine Lender as
Mezzanine Borrower’s true and lawful attorney-in-fact, with full power of
substitution, to execute, acknowledge and deliver any instruments and to
exercise and enforce every right, power, remedy, option and privilege of Mezzanine
Borrower with respect to the Account Collateral, and do in the name, place and
stead of Mezzanine Borrower, all such acts, things and deeds for and on behalf
of and in the name of Mezzanine

 

31

 

Borrower, which Mezzanine
Borrower could or might do or which Mezzanine Lender may deem necessary or
desirable to more fully vest in Mezzanine Lender the rights and remedies
provided for herein and to accomplish the purposes of this Agreement. The
foregoing powers of attorney are irrevocable and coupled with an interest. Upon
the occurrence and during the continuance of an Event of Default, Mezzanine
Lender may perform or cause performance of any such agreement, and any reasonable
expenses of Mezzanine Lender incurred in connection therewith shall be paid by
Mezzanine Borrower as provided in Section 5.1.13.

 

(c)           Mezzanine
Borrower hereby expressly waives, to the fullest extent permitted by law,
presentment, demand, protest or any notice of any kind in connection with this
Agreement or the Account Collateral. Mezzanine Borrower acknowledges and agrees
that ten (10) days’ prior written notice of the time and place of any
public sale of the Account Collateral or any other intended disposition thereof
shall be reasonable and sufficient notice to Mezzanine Borrower within the
meaning of the UCC.

 

3.1.10.     Transfers
and Other Liens.  Mezzanine Borrower
agrees that it will not (i) sell or otherwise dispose of any of the
Account Collateral or (ii) create or permit to exist any Lien upon or with
respect to all or any of the Account Collateral, except for the Lien granted to
Mezzanine Lender, under this Agreement.

 

3.1.11.     Reasonable
Care.  Beyond the exercise of
reasonable care in the custody thereof, Mezzanine Lender shall have no duty as
to any Account Collateral in its possession or control as agent therefor or
bailee thereof or any income thereon or the preservation of rights against any
person or otherwise with respect thereto. Mezzanine Lender shall be deemed to
have exercised reasonable care in the custody and preservation of the Account
Collateral in its possession if the Account Collateral is accorded treatment
substantially equal to that which Mezzanine Lender accords its own property, it
being understood that Mezzanine Lender shall not be liable or responsible for
any loss or damage to any of the Account Collateral, or for any diminution in
value thereof, by reason of the act or omission of Mezzanine Lender, its
Affiliates, agents, employees or bailees, except to the extent that such loss
or damage results from Mezzanine Lender’s or its Affiliate’s, agent’s, employee’s
or bailee’s gross negligence or willful misconduct. In no event shall Mezzanine
Lender be liable either directly or indirectly for losses or delays resulting
from any event which may

 

32

 

be the basis of an Excusable
Delay, computer malfunctions, interruption of communication facilities, labor
difficulties or other causes beyond Mezzanine Lender’s reasonable control or
for indirect, special or consequential damages except to the extent of Lender’s
or its Affiliate’s, agent’s, employee’s or bailee’s gross negligence or willful
misconduct. Notwithstanding the foregoing, Mezzanine Borrower acknowledges and
agrees that (i) Mezzanine Lender does not have custody of the Account
Collateral, (ii) Cash Management Bank has custody of the Account
Collateral, (iii) Cash Management Bank was chosen by Mezzanine Borrower
and (iv) Mezzanine Lender has no obligation or duty to supervise Cash
Management Bank or to see to the safe custody of the Account Collateral.

 

3.1.12.     Mezzanine
Lender’s Liability.

 

(a)           Mezzanine
Lender shall be responsible for the performance only of such duties with
respect to the Account Collateral as are specifically set forth in this Section 3.1
or elsewhere in the Loan Documents, and no other duty shall be implied from any
provision hereof. Mezzanine Lender shall not be under any obligation or duty to
perform any act with respect to the Account Collateral which would cause it to
incur any expense or liability or to institute or defend any suit in respect
hereof, or to advance any of its own monies. Mezzanine Borrower shall indemnify
and hold Mezzanine Lender, its employees and officers harmless from and against
any loss, cost or damage (including, without limitation, reasonable attorneys’
fees and disbursements) incurred by Mezzanine Lender in connection with the
transactions contemplated hereby with respect to the Account Collateral except
as such may be caused by the gross negligence or willful misconduct of
Mezzanine Lender, its employees, officers or agents, Affiliates or bailees.

 

(b)           Mezzanine
Lender shall be protected in acting upon any notice, resolution, request, consent,
order, certificate, report, opinion, bond or other paper, document or signature
believed by it in good faith to be genuine, and, in so acting, it may be
assumed that any person purporting to give any of the foregoing in connection
with the provisions hereof has been duly authorized to do so. Mezzanine Lender
may consult with counsel, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered by it hereunder and in good faith in accordance therewith.

 

33

 

3.1.13.     Continuing
Security Interest.  This Agreement
shall create a continuing security interest in the Account Collateral and shall
remain in full force and effect until payment in full of the Indebtedness. Upon
payment in full of the Indebtedness, this security interest shall automatically
terminate without further notice from any party and Mezzanine Borrower shall be
entitled to the return, upon its request, of such of the Account Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof and
Mezzanine Lender shall execute such instruments and documents as may be
reasonably requested by Mezzanine Borrower to evidence such termination and the
release of the Account Collateral.

 

IV. 
REPRESENTATIONS AND WARRANTIES

 

Section 4.1.            Mezzanine
Borrower Representations.

 

Mezzanine Borrower represents and warrants as of the Closing Date of
each Advance that:

 

4.1.1.       Organization.  Mezzanine Borrower has been duly organized
and is validly existing and in good standing pursuant to the laws of their
state of incorporation or organization with requisite power and authority to
own its properties and to transact the businesses in which it is now engaged.
Mezzanine Borrower has duly qualified to do business and is in good standing in
each jurisdiction where it is required to be so qualified in connection with
its properties, businesses and operations. Mezzanine Borrower possesses all
rights, licenses, permits and authorizations, governmental or otherwise,
necessary to entitle it to own its properties and to transact the businesses in
which it is now engaged. Mezzanine Borrower shall not itself change its name,
identity, corporate structure or jurisdiction of organization unless it shall
have given Mezzanine Lender 30 days prior written notice of any such change and
shall have taken all steps reasonably requested by Mezzanine Lender to grant,
perfect, protect and/or preserve the security interest granted hereunder to
Mezzanine Lender.

 

4.1.2.       Proceedings.  Mezzanine Borrower has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and the other Loan Documents to which it is a party. This Agreement and the
other Loan Documents have been duly executed and delivered by, or on behalf of
Mezzanine Borrower and constitute legal, valid and binding obligations of
Mezzanine Borrower, enforceable against Mezzanine Borrower in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency and similar
laws affecting rights of creditors generally,

 

34

 

and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law).

 

4.1.3.       No
Conflicts.  The execution, delivery
and performance of this Agreement and the other Loan Documents by Mezzanine Borrower
will not result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the
property or assets of Mezzanine Borrower pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, partnership agreement or other
agreement or instrument to which such Person is a party or by which any of such
Person’s property or assets is subject (unless consents from all applicable parties
thereto have been obtained), nor will such action result in any violation of
the provisions of any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over Mezzanine Borrower
or any of Mezzanine Borrower’s properties or assets, and any consent, approval,
authorization, order, registration or qualification of or with any court or any
such regulatory authority or other governmental agency or body required for the
execution, delivery and performance by Mezzanine Borrower of this Agreement or
any other Loan Documents has been obtained and is in full force and effect.

 

4.1.4.       Litigation.  There are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or other agency now
pending or, to the best of Mezzanine Borrower’s knowledge, threatened in
writing against or affecting Mezzanine Borrower, Guarantor, or the Collateral.

 

4.1.5.       Agreements.  Mezzanine Borrower is not a party to any agreement
or instrument or subject to any restriction which is reasonably likely to
materially and adversely affect Mezzanine Borrower or Mezzanine Borrower’s business,
properties or assets, operations or condition, financial or otherwise.  Mezzanine Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
to which it is a party or by which Mezzanine Borrower or the Collateral is
bound. Mezzanine Borrower has no material financial obligation (contingent or
otherwise) under any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which Mezzanine Borrower is a party or by
which Mezzanine Borrower or the Collateral is otherwise bound, other than (a) obligations

 

35

 

incurred in the ordinary course
of the operation of the Collateral and (b) obligations under the Loan
Documents.

 

4.1.6.       Title
to Properties.  Mezzanine Borrower
owns all of the assets reflected in the pro forma balance sheet of Mezzanine Borrower
as of the date of such pro forma balance sheet, subject to no rights of others,
including any mortgages, leases, conditional sales agreements, title retention
agreements, liens or other encumbrances, except for the Permitted Encumbrances.

 

4.1.7.       No
Bankruptcy Filing.  Mezzanine
Borrower is not contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
major portion of such entity’s assets or property, and Mezzanine Borrower has
no knowledge of any Person contemplating the filing of any such petition
against it or against any Collateral.

 

4.1.8.       Tax
Status.  Mezzanine Borrower (a) has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, as the
filing periods may have been extended, (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings and (c) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
Except as provided in the foregoing sentence, there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of such Person know of no basis for any such claim.

 

4.1.9.       No
Plan Assets.

 

(a)           Mezzanine
Borrower does not maintain an employee benefit plan as defined by Section 3(3) of
ERISA, which is subject to Title IV of ERISA; and

 

(b)           Mezzanine
Borrower is not an employee benefit plan, as defined in Section 3(3) of
ERISA. Subject to Title I of ERISA, none of the assets of Mezzanine Borrower
constitute or will during any period when the Loan remains outstanding
constitute plan assets of one or more such plans (within the meaning of 29
C.F.R. Section 2510.3-101 (PLAN ASSETS) and Mezzanine Borrower is not a “governmental
plan” within the meaning of Section 3(32) of ERISA) nor is Mezzanine
Borrower subject to state

 

36

 

statutes and fiduciary
obligations that are similar to the provisions of Section 406 of ERISA or Section 4975
of the Code currently in effect which prohibit or otherwise restrict the
transactions contemplated by this Agreement.

 

4.1.10.     Compliance.  Mezzanine Borrower and the Collateral and the
use thereof comply in all material respects with all applicable Legal
Requirements, including, without limitation, building and zoning ordinances and
codes. To the best of Mezzanine Borrower’s knowledge, it is not in default or
in violation of any order, writ, injunction, decree or demand of any Governmental
Authority. To the best of Mezzanine Borrower’s knowledge, there has not been
committed by Mezzanine Borrower, any act or omission affording the federal
government or any other Governmental Authority the right of forfeiture as
against the Collateral or any part thereof or any monies paid in performance of
Mezzanine Borrower’s obligations under any of the Loan Documents.

 

4.1.11.     Financial
Information.  All financial data of
Mezzanine Borrower, Guarantor, including, without limitation, the statements of
cash flow and income and operating expense, that have been delivered to
Mezzanine Lender in respect of the Collateral, (i) are true, complete and
correct in all material respects, (ii) fairly represent the financial
condition of the Collateral and the Mezzanine Borrower as of the date of such
reports, and (iii) to the extent prepared or audited by an independent
certified public accounting firm, have been prepared in accordance with GAAP
throughout the periods covered, except as disclosed therein. Mezzanine Borrower
does not have any contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Mezzanine Borrower and likely to have a Material
Adverse Effect. Since the date of such financial statements, there has been no
materially adverse change in the financial condition, operations or business of
Mezzanine Borrower from that set forth in said financial statements.

 

4.1.12.     Absence
of U.C.C. Financing Statements, Etc. 
Except with respect to the Permitted Encumbrances, there is no financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry, or other public
office, that purports to cover, affect or give notice of any present or
possible future lien on, or security interest or security title in any of the
Collateral.

 

4.1.13.     Federal
Reserve Regulations.  None of the
proceeds of the Loan will be used for the purpose of purchasing or carrying any
“margin

 

37

 

stock” as defined in Regulation
U, Regulation X or Regulation T 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 Regulation U or Regulation X. As of the Closing
Date, Mezzanine Borrower does not own any “margin stock.”

 

4.1.14.     Setoff,
Etc.  The Collateral and the rights
of Mezzanine Lender with respect to the Collateral are not subject to any
setoff, claims, withholdings or other defenses.

 

4.1.15.     Not
a Foreign Person.  None of Mezzanine
Borrower or Guarantor is a foreign person within the meaning of Section.
1445(f)(3) of the Code.

 

4.1.16.     Enforceability.  The Loan Documents are not subject to any
existing right of rescission, set-off, counterclaim or defense by Mezzanine
Borrower including the defense of usury, nor would the operation of any of the
terms of the Loan Documents, or the exercise of any right thereunder, render
the Loan Documents unenforceable, and Mezzanine Borrower has not asserted any
right of rescission, set-off, counterclaim or defense with respect thereto.

 

4.1.17.     Insurance.  Mezzanine Borrower has obtained and has delivered
to Mezzanine Lender certified copies or originals of all insurance Policies
reflecting the insurance coverages, amounts and other requirements set forth in
this Agreement. Mezzanine Borrower has not, and to the best of Mezzanine
Borrower’s knowledge, no Person has, done by act or omission anything which
would impair the coverage of any such Policy.

 

4.1.18.     Physical
Condition.  To the best of Mezzanine
Borrower’s knowledge and except as expressly disclosed in the Physical
Conditions Report, the Collateral, including, without limitation, if
applicable, all buildings, improvements, parking facilities, sidewalks, storm
drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good
condition, order and repair in all material respects; to the best of Mezzanine
Borrower’s knowledge and except as disclosed in the Physical Conditions Report,
there exists no structural or other material defects or damages in the Collateral,
whether latent or otherwise, and Mezzanine Borrower has not received any
written notice from any insurance company or bonding company of any defects or
inadequacies in the Collateral, or any part thereof, which

 

38

 

would adversely affect the
insurability of the same or cause the imposition of extraordinary premiums or
charges thereon or of any termination or threatened termination of any policy
of insurance or bond.

 

4.1.19.     Leases.  The Collateral is not subject to any leases
other than the leases described in the certified rent roll delivered in
connection with the origination of the Loan. Such certified rent roll is true,
complete and correct in all material respects as of the date set forth therein.
No Person has any possessory interest in the Collateral or right to occupy the
same except under and pursuant to the provisions of the leases or the REAs. The
current leases are in full force and effect and to Mezzanine Borrower’s
knowledge, there are no material defaults thereunder by either party, on the certified
rent roll delivered to Mezzanine Lender or the Tenant estoppel certificates
delivered to Mezzanine Lender in connection with the closing of the Loan) and
there are no conditions that, with the passage of time or the giving of notice,
or both, would constitute material defaults thereunder. No rent has been paid
more than one (1) month in advance of its due date, except as disclosed in
the Tenant estoppel certificates delivered to Mezzanine Lender in connection
with the closing of the Loan. There has been no prior sale, transfer or
assignment, hypothecation or pledge by Mezzanine Borrower of any lease or of
the rents received therein, which will be outstanding following the funding of
the Loan, other than those being assigned to Mezzanine Lender concurrently
herewith. No Tenant under any lease has a right or option pursuant to such lease
or otherwise to purchase all or any part of the property of which the leased
premises are a part.

 

4.1.20.     Reserved.

 

4.1.21.     Reserved.

 

4.1.22.     Subsidiaries.  Mezzanine Borrower does not have any subsidiaries.

 

4.1.23.     Solvency/Fraudulent
Conveyance.  Mezzanine Borrower (a) has
not entered into the transaction contemplated by this Agreement or any Loan Document
with the actual intent to hinder, delay, or defraud any creditor and (b) has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents.  After giving effect to
the Loan, the fair saleable value of Mezzanine Borrower’s assets exceeds and
will, immediately following the making of the Loan, exceed Mezzanine Borrower’s
total liabilities, including, without limitation, subordinated, unliquidated,
disputed and contingent liabilities. The fair saleable value of Mezzanine
Borrower’s assets is and will, immediately

 

39

 

following the making of the
Loan, be greater than Mezzanine Borrower’s probable liabilities, including the
maximum amount of its contingent liabilities on its Debts as such Debts become
absolute and matured, Mezzanine Borrower’s assets do not and, immediately
following the making of the Loan will not, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted.
Mezzanine Borrower does not intend to, and does not believe that it will, incur
Debt and liabilities (including contingent liabilities and other commitments)
beyond its ability to pay such Debt and liabilities as they mature (taking into
account the timing and amounts of cash to be received by Mezzanine Borrower and
the amounts to be payable on or in respect of obligations of Mezzanine Borrower).

 

4.1.24.     Investment
Company Act.  Mezzanine Borrower is
not (a) an investment company or a company Controlled by an investment
company, within the meaning of the Investment Company Act of 1940, as amended; (b) a
holding company or a subsidiary company of a holding company or an affiliate of
either a holding company or a subsidiary company within the mean of the Public
Utility Holding Company Act of 1935, as amended; or (c) subject to any
other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.

 

4.1.25.     Reserved.

 

4.1.26.     No
Other Debt.  Mezzanine Borrower has
not borrowed or received Debt that has not been heretofore repaid in full,
other than the Permitted Debt.

 

4.1.27.     Taxpayer
Identification Number.  Mezzanine Borrower’s
Federal taxpayer identification number is 41-1955234.

 

4.1.28.     Reserved.

 

4.1.29.     Representations
and Warranties in the Loan Documents. 
Mezzanine Borrower hereby represents and warrants that each of the
representations and warranties contained in the Loan Documents (which are
hereby incorporated by reference as if fully set forth herein) is true and
correct in all material respects, as of the Closing Date.

 

Section 4.2.            Survival
of Representations.  Mezzanine Borrower
agrees that all of the representations and warranties of Mezzanine Borrower set
forth in Section 4.1 and elsewhere in this Agreement and in the other Loan
Documents shall be deemed given and made as of the date of advance under the
Loan and survive for so long as any amount remains owing to Mezzanine

 

40

 

Lender under this Agreement or
any of the other Loan Documents by Mezzanine Borrower unless a longer survival period
is expressly stated in a Loan Document with respect to a specific
representation or warranty, in which case, for such longer period. All
representations, warranties, covenants and agreements made in this Agreement or
in the other Loan Documents by Mezzanine Borrower shall be deemed to have been
relied upon by Mezzanine Lender notwithstanding any investigation heretofore or
hereafter made by Mezzanine Lender or on its behalf.

 

V. 
MEZZANINE BORROWER COVENANTS

 

Section 5.1.            Affirmative
Covenants.

 

From the Closing Date and until payment and performance in full of all
obligations of Mezzanine Borrower under the Loan Documents, Mezzanine Borrower
hereby covenants and agrees with Mezzanine Lender that:

 

5.1.1.       Performance
by Mezzanine Borrower.

 

(a)           Mezzanine
Borrower shall in a timely manner observe, perform and fulfill each and every
covenant, term and provision of each Loan Document executed and delivered by,
or applicable to, Mezzanine Borrower. Mezzanine Borrower shall not enter into
or otherwise suffer or permit any amendment, waiver, supplement, termination or
other modification of any Loan Document executed and delivered by Mezzanine
Borrower without the prior written consent of Mezzanine Lender.

 

(b)           Reserved.

 

(c)           Reserved.

 

5.1.2.       Existence;
Compliance with Legal Requirements; Insurance.  Mezzanine Borrower shall at all times comply
in all material respects with all Legal Requirements applicable to the
Mezzanine Borrower and the Collateral and the uses permitted upon the Collateral.
Mezzanine Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its existence, rights, licenses,
permits and franchises necessary to comply with all Legal Requirements
applicable to it and the Collateral. There shall never be committed by
Mezzanine Borrower, and Mezzanine Borrower shall not knowingly permit any Person
in occupancy of or involved with the operation or use of the Collateral to
commit, any act or omission affording the federal government or any state or
local government the right of forfeiture as against the Collateral or any part
thereof or any monies paid in performance of Mezzanine Borrower’s obligations

 

41

 

under any of the Loan
Documents. Mezzanine Borrower hereby covenants and agrees not to commit, knowingly
permit or suffer to exist any act or omission affording such right of forfeiture.
All franchises, trade names and other property used in the conduct of the
business of Mezzanine Borrower and/or the Collateral shall be maintained,
preserved and protected. The Collateral shall be maintained, preserved and
protected in good working order and repair.

 

5.1.3.       Litigation.  Mezzanine Borrower shall give prompt written notice
to Mezzanine Lender of any litigation or governmental proceedings pending or
threatened in writing against Mezzanine Borrower or the Collateral which, if
determined adversely to Mezzanine Borrower or the Collateral, would reasonably
be likely to have a Material Adverse Effect.

 

5.1.4.       Reserved.

 

5.1.5.       Consents.  If Mezzanine Borrower is a corporation, the board
of directors of such Person may not take any action requiring the unanimous
affirmative vote of 100% of the members of the board of directors unless all of
the directors, including the independent directors, shall have participated in such
vote. If Mezzanine Borrower is a limited liability company, (a) if such
Person is managed by a board of managers, the board of managers of such Person
may not take any action requiring the unanimous affirmative vote of 100% of the
members of the board of governors unless all of the governors, shall have
participated in such vote, (b) if such Person is not managed by a board of
managers, the members of such Person may not take any action requiring the
affirmative vote of 100% of the members of such Person unless all of the
members, including the Independent Members, shall have participated in such
vote. An affirmative vote of 100% of the directors, board of managers or
members, as applicable, of Mezzanine Borrower shall be required to (i) file
a bankruptcy or insolvency petition or otherwise institute insolvency
proceedings or to authorize Mezzanine Borrower to do so or, (ii) file an
involuntary bankruptcy petition against any Affiliate. Furthermore, Mezzanine
Borrower’s formation documents shall expressly state that for so long as the
Loan is outstanding, Mezzanine Borrower shall not be permitted to (i) dissolve,
liquidate, consolidate, merge or sell all or substantially all of Mezzanine
Borrower’s assets other than in connection with the repayment of the Loan or (ii) engage
in any other business activity and such restrictions shall not be modified or
violated for so long as the Loan is outstanding.

 

42

 

5.1.6.       Access
to Collateral.  Agents,
representatives and employees of Mezzanine Lender shall have the right to
inspect the Collateral or any part thereof during Business Days, upon
reasonable advance notice, subject in all instances to the REAs and the rights
of Tenants, and provided that neither Mezzanine Lender nor any such Persons
shall unreasonably interfere with the operation of business on the Collateral.

 

5.1.7.       Notice
of Default.  Mezzanine Borrower shall
promptly advise Mezzanine Lender (a) of any event or condition that has or
is reasonably likely to have a Material Adverse Effect and (b) of the
occurrence of any Default or Event of Default of which Mezzanine Borrower has
knowledge.

 

5.1.8.       Cooperate
in Legal Proceedings.  Mezzanine Borrower
shall cooperate fully with Mezzanine Lender with respect to any proceedings
before any court, board or other Governmental Authority which may in any way
affect the rights of Mezzanine Lender hereunder or under any of the other Loan
Documents and, in connection therewith, permit Mezzanine Lender, at its
election, to participate in any such proceedings which is reasonably likely to
have a Material Adverse Effect.

 

5.1.9.       Perform
Loan Documents.  Mezzanine Borrower
shall observe, perform and satisfy all the terms, provisions, covenants and
conditions of, and shall pay when due all costs, fees and expenses to the
extent required, under the Loan Documents executed and delivered by, or
applicable to, Mezzanine Borrower.

 

5.1.10.     Further
Assurances; Separate Notes.

 

(a)           Mezzanine
Borrower shall execute and acknowledge (or cause to be executed and
acknowledged) and deliver to Mezzanine Lender all documents, and take all
actions, reasonably required by Mezzanine Lender from time to time to confirm
the rights created or intended to be created under this Agreement and the other
Loan Documents and any security interest created or purported to be created
thereunder, to protect and further the validity, priority and enforceability of
this Agreement and the other Loan Documents, to subject to the Loan Documents
any property of Mezzanine Borrower intended by the terms of any one or more of
the Loan Documents to be encumbered by the Loan Documents, or otherwise carry
out the purposes of the Loan Documents and the transactions contemplated thereunder.
Mezzanine Borrower agrees that it shall, upon request, reasonably cooperate
with Mezzanine Lender in

 

43

 

connection with any request by
Mezzanine Lender to sever the Mezzanine Note into two (2) or more separate
substitute notes in an aggregate principal amount equal to the then outstanding
Principal Amount and to reapportion the Loan among such separate substitute
notes, including, without limitation, by executing and delivering to Mezzanine
Lender new substitute notes to replace the Mezzanine Note, amendments to or replacements
of existing Loan Documents to reflect such severance and/or Opinions of Counsel
with respect to such substitute notes, amendments and/or replacements, provided
that Mezzanine Borrower shall bear no costs or expenses in connection therewith
(other than administrative nominal costs and expenses of Mezzanine Borrower).
Any such substitute notes, amendments or replacements may have varying
principal amounts, maturity dates and economic terms, provided, however, that (i) the
maturity date of any such substitute note shall be the same as the scheduled
Maturity Date of the Mezzanine Note immediately prior to the issuance of such
substitute notes, (ii) the economics of the Loan, taken as a whole, shall
not change in a manner which is adverse to Mezzanine Borrower, and (iii) Mezzanine
Borrower’s rights and obligations under the Loan Documents in effect
immediately prior to the issuance of such substitute notes, amendments or
replacements shall not change in any manner adverse to Mezzanine Borrower.

 

(b)           Reserved.

 

(c)           In
addition, Mezzanine Borrower shall, at Mezzanine Borrower’s sole cost and
expense:

 

(i)            furnish
to Mezzanine Lender, to the extent not otherwise already furnished to Mezzanine
Lender and reasonably acceptable to Mezzanine Lender, all instruments,
documents, boundary surveys, footing or foundation surveys, certificates, plans
and specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and instrument
required to be furnished by Mezzanine Borrower pursuant to the terms of its
other indebtedness;

 

(ii)           execute
and deliver, from time to time, such further instruments as may be reasonably
requested by Mezzanine Lender to confirm the lien on any Collateral;

 

44

 

(iii)          execute
and deliver to Mezzanine Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the obligations of Mezzanine Borrower under the Loan Documents, as
Mezzanine Lender may reasonably require; and

 

(d)           do
and execute all and such further lawful and reasonable acts, conveyances and assurances
for the carrying out of the terms and conditions of this Agreement and the
other Loan Documents, as Mezzanine Lender shall reasonably require from time to
time.

 

5.1.11.     Business
and Operations.  Mezzanine Borrower
shall continue to engage in the businesses presently conducted as and to the
extent the same is necessary for the ownership, maintenance, management and
operation of the Collateral, as applicable.

 

5.1.12.     Title
to the Collateral.  Mezzanine Borrower
will warrant and defend (a) the title to the Collateral and every part
thereof and (b) the validity and priority of the Lien and this Agreement
on the Collateral, in each case against the claims of all Persons whomsoever.
Mezzanine Borrower shall reimburse Mezzanine Lender for any losses, costs,
damages or expenses (including reasonable attorneys’ fees and court costs)
incurred by Mezzanine Lender if an interest in the Collateral is claimed by
another Person.

 

5.1.13.     Costs
of Enforcement.  In the event (a) that
any Loan Document is foreclosed in whole or in part or that this Agreement or
the Loan Documents are put into the hands of an attorney for collection, suit,
action or foreclosure, (b) of the foreclosure of any security agreement
prior to or subsequent to this Agreement or the Loan Documents in which
proceeding Mezzanine Lender is made a party, or (c) of the bankruptcy,
insolvency, rehabilitation or other similar proceeding in respect of Mezzanine
Borrower or any of its constituent Persons or an assignment by Mezzanine
Borrower or any of its constituent Persons for the benefit of its creditors,
Mezzanine Borrower, its successors or assigns, shall be chargeable with and
agrees to pay all costs of collection and defense, including reasonable
attorneys’ fees and costs, incurred by Mezzanine Lender or Mezzanine Borrower
in connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, together with all required service or
use taxes.

 

45

 

5.1.14.     Estoppel
Statement.

 

(a)           Mezzanine
Borrower and Mezzanine Lender shall each from time to time, upon thirty (30)
days’ prior written request from the other, execute, acknowledge and deliver to
the requesting party, an Officer’s Certificate (or in the case of Mezzanine
Lender a certificate signed by an authorized officer), stating that (i) this
Agreement and the other Loan Documents are unmodified and in full force and
effect (or, if there have been modifications, that this Agreement and the other
Loan Documents are in full force and effect as modified and setting forth such
modifications); (ii) the amount of accrued and unpaid interest and the
outstanding principal amount of the Mezzanine Note; and (iii) such other
information with respect to the Mezzanine Borrower, the Collateral, the Loan as
the Mezzanine Lender shall reasonably request. The estoppel certificate shall
also state either that to requesting party’s knowledge no Event of Default
exists hereunder or thereunder or, if any Event of Default shall exist hereunder
or thereunder, specify such Event of Default and, in the case of Mezzanine
Borrower’s estoppel, the steps being taken to cure such Event of Default.

 

(b)           Mezzanine
Borrower shall request and make commercially reasonable efforts to deliver to
Mezzanine Lender within twenty (20) Business Days of receipt of Mezzanine
Lender’s written request, tenant estoppel certificates from each commercial
tenant leasing space at the Collateral, provided that, except after the
occurrence and during the continuance of an Event of Default, Mezzanine
Borrower shall not be required to request or make commercially reasonable
efforts to deliver such certificates with respect to any particular Tenant more
frequently than one time in any calendar year.

 

Notwithstanding the foregoing, nothing contained in this Section 5.1.14
shall require Mezzanine Borrower to issue or threaten to issue any notice of
default to any Tenant in connection with obtaining such certificates or otherwise
interfere with or disturb the use and occupancy of the Collateral by any Tenant.

 

5.1.15.     Loan
Proceeds.  Mezzanine Borrower shall
use the proceeds of the Loan received by it on any Closing Date only for the
purposes set forth in Section 2.1.4.

 

46

 

5.1.16.     No
Joint Assessment.  Mezzanine Borrower
shall not suffer, permit or initiate the joint assessment of the Collateral (a) with
any other real property constituting a tax lot separate from the Collateral,
and (b) which constitutes real property with any portion of the Collateral
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal
property shall be assessed or levied or charged to such real property portion
of the Collateral.

 

5.1.17.     No
Further Encumbrances.  Mezzanine Borrower
shall do, or cause to be done, all things necessary to keep and protect the Collateral
and all portions thereof unencumbered from any Liens, easements or agreements
granting rights in or restricting the use or development of the Collateral,
except for (a) with respect to the Collateral, Permitted Encumbrances, (b) Liens
created or permitted pursuant to the Loan Documents, (c) Liens for the
imposition of any interest, charges or expenses for the non-payment thereof, (d) Liens
permitted pursuant to any leases of the Collateral, and (e) any Transfers
permitted by Section 8.3 herein.

 

5.1.18.     Leases
and REAs.  Copies of any notice
received by Mezzanine Borrower with respect to the REAs and any leases claiming
any default in the performance or observance of any of the material terms,
covenants or conditions of any of the REAs or any leases by any other party
having a security interest in, or other claim to, the Collateral shall be
promptly delivered to Mezzanine Lender.

 

5.1.19.     Pre-Approved
Collateral.  Mezzanine Borrower shall
at all times after December 1, 2005 maintain Pre-Approved Collateral in a
minimum amount of Five Million Dollars ($5,000,000).  To the extent Pre-Approved Collateral is pledged
as Collateral for an Advance hereunder, Mezzanine Borrower shall replenish the
Pre-Approved Collateral within thirty (30) days of the last Advance.

 

5.1.20.     Plan
Assets, Etc.  Mezzanine Borrower will
do, or cause to be done, all things necessary to ensure that it will not be
deemed to hold “plan assets” (within the meaning of U.S. Department of Labor
Regulation Section 2510.3-101) at any time during the term the Loan is
outstanding.

 

5.1.21.     Impositions.  All impositions, claims for labor, material or
supplies that if unpaid or unbonded might by law become a lien or charge upon
any of its property (including the Collateral) shall be timely paid and the Collateral
shall be kept free from any Lien and the Permitted Encumbrances. All Liens
imposed upon the Collateral or any portion thereof shall be promptly, fully and
unconditionally discharged within thirty (30) days after receipt of written notice

 

47

 

(whether from Mezzanine Lender,
the lienholder or any other Person) of the filing thereof.

 

5.1.22.     Reserved.

 

Section 5.2.            Negative
Covenants.

 

From the Closing Date until payment and performance in full of all
obligations of Mezzanine Borrower under the Loan Documents or the earlier
release of the Lien of this Agreement or the Loan Documents in accordance with
the terms of this Agreement and the other Loan Documents, Mezzanine Borrower
covenants and agrees with Mezzanine Lender that Mezzanine Borrower will not do,
directly or indirectly, any of the following without Mezzanine Lender’s prior
written consent:

 

5.2.1.       Debt.  Without the prior written consent of Mezzanine
Lender, such consent to be made in Mezzanine Lender’s reasonable discretion,
incur, create, assume or be liable with respect to any additional Debt
(including, but not limited to, any secondary or junior financing, or any preferred
equity investment, but excluding Permitted Debt), or create or permit to be
created or to remain, any Lien on, or conditional sale or other title retention
agreement with respect to the Collateral or any part thereof or income therefrom,
other than the Loan Documents.

 

5.2.2.       Encumbrances.  Other than in connection with and as
expressly permitted under the Loan Documents, Mezzanine Borrower will not (a) create
or incur or suffer to be created or incurred or to exist any lien, security
title, encumbrance, mortgage, pledge, negative pledge, charge, restriction or
other security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or
profits therefrom; (b) transfer any of its property or assets or the
income or profits therefrom for the purpose of subjecting the same to the payment
of Debt or performance of any other obligation in priority to payment of its
general creditors; (c) acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase money
security agreement, device or arrangement; (d) suffer to exist for a period
of more than 30 days after the same shall have been incurred any Debt or claim
or demand against it that if unpaid might by law or upon bankruptcy or insolvency,
or otherwise, be given any priority whatsoever over its general creditors; (e) sell,
assign, pledge or otherwise transfer any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse; or (f) incur
or maintain any obligation to any holder of Debt which prohibits the creation
or maintenance of any lien securing the Obligations.

 

48

 

5.2.3.       Engage
in Different Business.  Engage, directly
or indirectly, in any business other than that of entering into this Agreement and
the other Loan Documents to which Mezzanine Borrower is a party and the use,
ownership, management, leasing, renovation, financing, development, operation
and maintenance of the Collateral and activities related thereto;

 

5.2.4.       Reserved.

 

5.2.5.       Partition.  Permit any Person to partition the Collateral;

 

5.2.6.       Commingle.  Commingle its assets with the assets of any
of its Affiliates;

 

5.2.7.       Guarantee
Obligations.  Guarantee any obligations
of any Person;

 

5.2.8.       Transfer
Assets.  Transfer any asset other
than in the ordinary course of business except as may be permitted hereby or in
the other Loan Documents;

 

5.2.9.       Amend
Organizational Documents.  Amend or
modify any of its organizational documents without Mezzanine Lender’s consent
(which consent shall not be unreasonably withheld, conditioned or delayed),
other than to reflect any change in capital accounts, contribution,
distributions, allocations or other provisions that do not and could not
reasonably be anticipated to have a Material Adverse Effect;

 

5.2.10.     Dissolve.  Dissolve, wind-up, terminate, liquidate,
merge with or consolidate into another Person, except as expressly permitted
pursuant to this Agreement;

 

5.2.11.     Bankruptcy.  (i) file a bankruptcy or insolvency
petition or otherwise institute insolvency proceedings with respect to itself, (ii) dissolve,
liquidate, consolidate, merge or sell all or substantially all of Mezzanine
Borrower’s assets other than in connection with the repayment of the Loan or (iii) file
or solicit the filing of an involuntary bankruptcy petition against Mezzanine Borrower
or any Affiliate of such Persons, without obtaining the prior consent of each
of the members of Mezzanine Borrower;

 

5.2.12.     ERISA.  Engage in any activity that would cause Mezzanine
Borrower’s assets to constitute Plan Assets;

 

5.2.13.     Distributions.  From and after the occurrence and during the
continuance of an Event of Default, make any distributions to or for the
benefit of any of its partners or members or its or their Affiliates;

 

49

 

5.2.14.     Reserved.

 

5.2.15.     Reserved.

 

5.2.16.     Reserved.

 

5.2.17.     Modify
Account Agreement.  Without the prior
consent of Mezzanine Lender, which shall not be unreasonably withheld, delayed
or conditioned, Mezzanine Borrower will not execute any modification to the Account
Agreement;

 

5.2.18.     Zoning
Reclassification.  Without the prior written
consent of Mezzanine Lender, initiate or permit any party to consent to (a) any
zoning reclassification of any portion of the Collateral, (b) seek any
variance under any existing zoning ordinance that could result in the use of
the Collateral becoming a non-conforming use under any zoning ordinance or any
other applicable land use law, rule or regulation, or (c) allowing
any portion of the Collateral to be used in any manner that could result in the
use of the Collateral becoming a non-conforming use under any zoning ordinance
or any other applicable land use law, rule or regulation;

 

5.2.19.     Change
of Principal Place of Business. 
Change its principal place of business and chief executive office set
forth on the first page of this Agreement without first giving Mezzanine
Lender thirty (30) days’ prior written notice (but in any event, within the
period required pursuant to the UCC) and there shall have been taken such
action, reasonably satisfactory to Mezzanine Lender, as may be necessary to
maintain fully the effect, perfection and priority of the security interest of
Mezzanine Lender hereunder in the Account Collateral at all times;

 

5.2.20.     Debt
Cancellation.  Cancel or otherwise
forgive or release any material claim or debt owed to it by any Person, except
for adequate consideration or in the ordinary course of its business;

 

5.2.21.     Misapplication
of Funds.  (i) Distribute any revenue
from the Collateral or any Proceeds in violation of the provisions of this Agreement,
(ii) fail to remit amounts to the Mezzanine Account, as required by Section 3.1
or (iii) misappropriate any security deposit or portion thereof or misapply
the proceeds of the Loan; or

 

5.2.22.     Reserved.

 

50

 

VI. 
INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

 

Section 6.1.            Insurance
Coverage Requirements.

 

(a)           Each
of the insurance policies required by the Loan Documents shall be procured and
maintained. Each commercial general liability or umbrella liability policy with
respect to the Collateral shall name Mezzanine Lender as an additional insured
and shall contain a cross liability/severability endorsement in form and
substance acceptable to Mezzanine Lender.

 

(b)           In
the event of any loss or damage to the Collateral, Mezzanine Borrower shall
give prompt written notice to the insurance carrier and Mezzanine Lender. No
claims under any insurance policies maintained pursuant to this Agreement or
the Loan Documents shall be settled, adjusted or compromised without the prior
written consent of Mezzanine Lender, which shall not be unreasonably withheld,
delayed or conditioned; provided, that proof of loss may be made, adjusted and
compromised under casualty insurance policies for claims in an amount less than
$5,000,000 so long as no Event of Default has occurred. Any proceeds of such
claim which are not used to reconstruct or repair the Collateral, or applied to
the balance of a senior debt relating to the Collateral, then shall be paid to
Mezzanine Lender and applied to the payment of the Obligations whether or not
then due.

 

(c)           Reserved.

 

(d)           Reserved.

 

Section 6.2.            Condemnation.  In the event that all or any portion of the Collateral
shall be damaged or taken through condemnation (which term shall include any
damage or taking by any governmental authority, quasi-governmental authority,
any party having the power of condemnation, or any transfer by private sale in
lieu thereof), or any such condemnation shall be threatened in writing,
Mezzanine Borrower shall give prompt written notice to Mezzanine Lender.
Mezzanine Lender acknowledges that Mezzanine Borrower’s rights to any condemnation
award is subject to the terms of other agreements. Notwithstanding the
foregoing, Mezzanine Borrower may not and shall not permit any person to settle
or compromise any claim, action or proceeding relating to such damage or condemnation
without the prior written consent of Mezzanine Lender, which shall not be
unreasonably withheld, delayed or conditioned; provided, further, that Mezzanine
Borrower may settle, adjust and compromise any such claim, action or proceeding
which is of an amount less than $5,000,000 so long as no Default or Event of
Default has occurred. Any Excess Proceeds shall be paid to Mezzanine Lender and
applied to the payment of the Obligations whether or not then due pursuant to Section 2.3.1(b).
In the

 

51

 

event that Mezzanine Borrower
is permitted pursuant to the terms of the Loan Documents to reconstruct,
restore or repair the Collateral following a condemnation of any portion of the
Collateral, the Collateral shall be promptly and diligently repaired and
restored in the manner and within the time periods required by the Loan Documents,
any Collateral leases and any other agreements affecting the Collateral. In the
event that Mezzanine Borrower is permitted pursuant to the terms of the Loan Documents
to elect not to reconstruct, restore or repair the Collateral following a condemnation
of any portion of the Collateral, the Collateral shall not be reconstructed,
restored or repaired without the prior written consent of Mezzanine Lender, not
to be unreasonably withheld, delayed or conditioned.

 

Section 6.3.            Certificates.  Concurrently with the renewal of the insurance
policies required hereunder, a certificate from Mezzanine Borrower’s insurance
agent stating that the insurance policies are maintained with insurers who
comply with the terms of the Loan Documents, setting forth a schedule describing
all premiums required to be paid by Mezzanine Borrower and stating that
Mezzanine Borrower has paid such premiums shall be delivered to Mezzanine
Lender. Certificates of insurance with respect to all replacement policies
shall be delivered to Mezzanine Lender not less than fifteen (15) Business Days
prior to the expiration date of any of the insurance policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums. Originals (or certified copies) of such replacement insurance
policies shall be delivered to Mezzanine Lender within thirty (30) days after
the effective date thereof (including the insurance certificates delivered
pursuant to Section 2.5.2(h)). If Mezzanine Borrower fails to (i) maintain
or to deliver to Mezzanine Lender the certificates of insurance required by
this Agreement or (ii) maintain and deliver originals (or certified copies)
such insurance policies within thirty (30) days after the effective date thereof,
upon five (5) Business Days’ prior notice to Mezzanine Borrower, Mezzanine
Lender may procure such insurance, and all costs thereof (and interest thereon
at the Default Rate) shall be added to the Indebtedness. Mezzanine Lender shall
not, by the fact of approving, disapproving, accepting, preventing, obtaining
or failing to obtain any insurance, incur any liability for or with respect to
the amount of insurance carried, the form or legal sufficiency of insurance
contracts, solvency of insurance companies, or payment or defense of lawsuits,
and Mezzanine Borrower hereby expressly assumes full responsibility therefor
and all liability, if any, with respect thereto.

 

52

 

VII.  RESERVED

 

VIII. 
TRANSFERS, INDEBTEDNESS AND SUBORDINATE LIENS

 

Section 8.1.            Restrictions
on Transfers.  Unless such action is permitted
by the Loan Documents, Mezzanine Borrower shall not, and shall not permit any
other Person to, except with the prior written consent of Mezzanine Lender in
each instance, directly or indirectly: (i) Transfer all or any part of the
Collateral or any part thereof, or any income or profits from the Collateral,
or any other accounts, contract rights, general intangibles, instruments,
chattel paper or other assets or claims, whether now owned or hereafter
acquired except Excess Cash Flow released to Mezzanine Borrower; or (ii) except
as may be further permitted by Article V, create or suffer to be created
or to exist any lien, encumbrance, security interest, mortgage, pledge, restriction,
attachment or other charge of any kind upon, or any levy, seizure, attachment
or foreclosure of, the Collateral or any part thereof, or any part thereof or
interest therein, or any income or profit therefrom, or any other accounts,
contract rights, general intangibles, instruments, chattel paper or other
assets or claims, whether now owned or hereafter acquired, except for Permitted
Encumbrances.

 

Section 8.2.            Deliveries
to Mezzanine Lender.  Not less than thirty
(30) days prior to the closing of any transaction subject to the provisions of
this Article VIII (other than a Transfer pursuant to Section 8.3(b)),
Mezzanine Borrower shall deliver to Mezzanine Lender an Officer’s Certificate
describing the proposed transaction and stating that such transaction is
permitted by this Article VIII, together with any appraisal or other
documents upon which such Officer’s Certificate is based. In addition, Mezzanine
Borrower shall provide Mezzanine Lender with copies of executed transfer instruments
or other similar closing documents within ten (10) Business Days after
such closing.

 

Section 8.3.            Permitted
Transfers.

 

(a)           A
Transfer (but not a pledge or encumbrance) of a direct or indirect beneficial
interest in Mezzanine Borrower shall be permitted without Mezzanine Lender’s
consent (unless noted otherwise below) provided each of the following
conditions is satisfied:

 

(i)            Mezzanine
Lender receives thirty (30) days prior written notice thereof,

 

(ii)           immediately
prior to such Transfer, no Event of Default shall have occurred and be
continuing,

 

(iii)          no
more than 49% of the direct or indirect ownership interests in Mezzanine
Borrower is being Transferred (in the aggregate of all such Transfers) unless a
Nonconsolidation Opinion and Mezzanine Lender’s prior written consent is
obtained,

 

53

 

(iv)          no
such Transfer or Transfers shall, either individually or in the aggregate of
all Transfers result in a Person or a group of Affiliates acquiring, directly
or indirectly, more than a 49% interest in Mezzanine Borrower or shall result
in any Transfer of the managing member interest in Mezzanine Borrower or any
direct or indirect Transfer of any beneficial ownership of the managing member
of Mezzanine Borrower unless a Nonconsolidation Opinion and Mezzanine Lender’s
prior written consent is obtained,

 

(v)           Reserved.

 

(vi)          no
such Transfer or Transfers shall result in a change in the Control of Mezzanine
Borrower or its managing member, unless a Nonconsolidation Opinion and
Mezzanine Lender’s prior written consent is obtained,

 

(vii)         Reserved.

 

(viii)        Mezzanine
Borrower pays to Mezzanine Lender, on the date of such Transfer, all of
Mezzanine Lender’s costs and expenses, including without limitation, reasonable
attorney’s fees and disbursements, incurred or to be incurred by Mezzanine
Lender in connection with such Transfer.

 

(b)           Reserved.

 

(c)           The
determination of whether Mezzanine Borrower has satisfied the conditions for
Transfer set forth in this Section 8.3 shall be made by Mezzanine Lender
in its reasonable discretion.

 

IX.  RESERVED

 

X.  RESERVED

 

XI.  RESERVED

 

XII.  ENVIRONMENTAL MATTERS

 

Section 12.1.          Representations.  Mezzanine Borrower hereby represents and
warrants that except as set forth in the environmental reports and studies
delivered to Mezzanine Lender (the ENVIRONMENTAL REPORTS), (i) Mezzanine
Borrower has not engaged in or knowingly permitted any

 

54

 

operations or activities upon,
or any use or occupancy of the Collateral, or any portion thereof, for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, dumping or disposal of
any Hazardous Substances on, under, in or about the Collateral, or transported
any Hazardous Substances to, from or across the Collateral, except in all cases
in material compliance with environmental laws and only in the course of
legitimate business operations at the Collateral; (ii) to Mezzanine
Borrower’s knowledge, no tenant, occupant or user of the Collateral, nor any
other person, has engaged in or permitted any operations or activities upon, or
any use or occupancy of the Collateral, or any portion thereof, for the purpose
of or in any material way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, dumping or disposal of
any Hazardous Substances on, in or about the Collateral, or transported any
Hazardous Substances to, from or across the Collateral, except in all cases in
material compliance with environmental laws and only in the course of
legitimate business operations at the Collateral; (iii) to Mezzanine
Borrower’s knowledge, no Hazardous Substances are presently constructed,
deposited, stored, or otherwise located on, under, in or about the Collateral
except in material compliance with environmental laws; (iv) to Mezzanine
Borrower’s knowledge, no Hazardous Substances have migrated from the Collateral
upon or beneath other properties which would reasonably be expected to result
in material liability for Mezzanine Borrower; and (v) no Hazardous
Substances have migrated or threaten to migrate from other properties upon,
about or beneath the Collateral which would reasonably be expected to result in
material liability for Mezzanine Borrower.

 

Section 12.2.          Covenants.

 

12.2.1.     Compliance
with Environmental Laws.  Mezzanine
Borrower shall comply in all material respects with all applicable environmental
laws. If at any time prior to the repayment in full of the Obligations, a
Governmental Authority having jurisdiction over the Collateral requires
remedial action to correct the presence of Hazardous Materials in, around, or
under the Collateral (an ENVIRONMENTAL EVENT), Mezzanine Borrower shall deliver
prompt notice of the occurrence of such Environmental Event to Mezzanine Lender.
Within thirty (30) days after Mezzanine Borrower has knowledge of the occurrence
of an Environmental Event, Mezzanine Borrower shall deliver to Mezzanine Lender
an Officer’s Certificate (an ENVIRONMENTAL CERTIFICATE) explaining the
Environmental Event in reasonable detail and setting forth the proposed
remedial action, if any. Mezzanine Borrower shall promptly provide Mezzanine
Lender with copies of all notices which allege or identify any actual or
potential violation or noncompliance received by or prepared by or for Mezzanine

 

55

 

Borrower in connection with any
environmental law. For purposes of this paragraph, the term “notice” shall mean
any summons, citation, directive, order, claim, pleading, letter, application,
filing, report, findings, declarations or other materials pertinent to
compliance of the Collateral and Mezzanine Borrower with such environmental laws.

 

Section 12.3.          Environmental
Reports.  Upon the occurrence of an Environmental
Event with respect to the Collateral or during the continuance of any Event of
Default, Mezzanine Lender shall have the right to have its consultants perform
a comprehensive environmental audit of the Collateral. Such audit shall be
conducted by an environmental consultant chosen by Mezzanine Lender and may
include a visual survey, a record review, an area reconnaissance assessing the
presence of hazardous or toxic waste or substances, PCBs or storage tanks at
the Collateral, an asbestos survey of the Collateral, which may include random
sampling of the improvements and air quality testing, and such further site
assessments as Mezzanine Lender may reasonably require due to the results
obtained from the foregoing. Mezzanine Lender, its agents, consultants and
contractors shall have the right to enter the Collateral as reasonable or appropriate
for the circumstances for the purposes of performing such studies and the
reasonable cost of such studies shall be due and payable by Mezzanine Borrower
to Mezzanine Lender upon demand and shall be secured by the Lien of this
Agreement and the Loan Documents. Mezzanine Lender shall not unreasonably
interfere with, and shall direct the environmental consultant to use its
commercially reasonable efforts not to hinder, any Tenant’s or other occupant’s
operations upon the Collateral when conducting such audit, sampling or
inspections. By undertaking any of the measures identified in and pursuant to
this Section 12.3, Mezzanine Lender shall not be deemed to be exercising
any control over the operations of Mezzanine Borrower or the handling of any
environmental matter or hazardous wastes or substances of Mezzanine Borrower
for purposes of incurring or being subject to liability therefor.

 

Section 12.4.          Environmental
Indemnification.  Mezzanine Borrower shall
protect, indemnify, save, defend, and hold harmless the Indemnified Parties
from and against any and all liability, loss, damage, actions, causes of action,
costs or expenses whatsoever (including reasonable attorneys’ fees and expenses)
and any and all claims, suits and judgments which any Indemnified Party may
suffer, as a result of or with respect to: (a) any Environmental Claim relating
to or arising from the Collateral; (b) the violation of any environmental law
in connection with the Collateral; (c) any release, spill, or the presence
of any Hazardous Substances affecting the Collateral; and (d) the presence
at, in, on or under, or the release, escape, seepage, leakage, discharge or
migration at or from, the Collateral of any Hazardous Substances, whether or
not such condition was known or unknown to Mezzanine Borrower; provided that,
in each case,

 

56

 

Mezzanine Borrower shall be
relieved of its obligation under this subsection if any of the matters
referred to in clauses (a) through (d) above did not occur (but need
not have been discovered) prior to the foreclosure of the Pledge. If any such
action or other proceeding shall be brought against Mezzanine Lender, upon
written notice from Mezzanine Borrower to Mezzanine Lender (given reasonably
promptly following Mezzanine Lender’s notice to Mezzanine Borrower of such
action or proceeding), Mezzanine Borrower shall be entitled to assume the
defense thereof, at Mezzanine Borrower’s expense, with counsel reasonably
acceptable to Mezzanine Lender; provided, however, Mezzanine Lender may, at its
own expense, retain separate counsel to participate in such defense, but such
participation shall not be deemed to give Mezzanine Lender a right to control such
defense, which right Mezzanine Borrower expressly retains.  Notwithstanding the foregoing, each
Indemnified Party shall have the right to employ separate counsel at Mezzanine
Borrower’s reasonable expense if, in the reasonable opinion of legal counsel, a
conflict or potential conflict exists between the Indemnified Party and
Mezzanine Borrower that would make such separate representation advisable.
Notwithstanding anything set forth herein, Mezzanine Borrower shall have no
obligation to indemnify an Indemnified Party for damage or loss resulting from
such Indemnified Party’s gross negligence or willful misconduct.

 

Section 12.5.          Recourse
Nature of Certain Indemnifications. 
Notwithstanding anything to the contrary provided in this Agreement or
in any other Loan Document, the indemnification provided in Section 12.4
shall be fully recourse to Mezzanine Borrower and shall be independent of, and
shall survive: (i) the discharge of the Indebtedness, the release of the
Liens created by this Agreement and the Loan Documents, and/or (ii) the
conveyance of title to the Collateral to Mezzanine Lender or any purchaser or
designee in connection with a foreclosure of this Agreement and the Loan
Documents or conveyance in lieu of foreclosure.

 

XIII. 
ASSIGNMENTS AND PARTICIPATIONS

 

Section 13.1.          Assignment
and Acceptance.  Mezzanine Lender may
assign to one or more Persons all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, all
or a portion of the Mezzanine Note); provided that the parties to each such
assignment shall execute and deliver to Mezzanine Lender, for its acceptance
and recording in the Register (as hereinafter defined), an Assignment and
Acceptance. In addition, Mezzanine Lender may participate to one or more
Persons all or any portion of its rights and obligations under this Agreement
and the other Loan Documents (including without limitation, all or a portion of
the Mezzanine Note) utilizing such documentation to evidence such participation
and the parties’ respective rights thereunder as Mezzanine Lender, in its sole discretion,
shall elect. Notwithstanding anything to the contrary in this

 

57

 

Article XIII, Mezzanine
Borrower shall not be required to indemnify any assignee or participant (with
respect to circumstances existing as of the date of the assignment or
participation) for Special Taxes or Other Taxes in excess of amounts that would
be payable to Mezzanine Lender under this Agreement or any Loan Document.

 

Section 13.2.          Effect
of Assignment and Acceptance.  Upon
such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of Mezzanine Lender, as the case
may be, hereunder and such assignee shall be deemed to have assumed such rights
and obligations, and (ii) Mezzanine Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement and the other Loan Documents (and, in the case
of an Assignment and Acceptance covering all or the remaining portion of
Mezzanine Lender’s rights and obligations under this Agreement and the other
Loan Documents, Mezzanine Lender shall cease to be a party hereto) accruing
from and after the effective date of the Assignment and Acceptance, except with
respect to (A) any payments made by Mezzanine Borrower to Mezzanine Lender
pursuant to the terms of the Loan Documents after the effective date of the
Assignment and Acceptance and (B) any letter of credit, cash deposit or other
deposits or security (other than the Liens of this Agreement and the Pledge)
and the other Loan Documents delivered to or for the benefit of or deposited
with CS Financing Corporation, as Mezzanine Lender, for which CS Financing Corporation,
as Mezzanine Lender, shall remain responsible for the proper disposition
thereof until such items are delivered to a party who is qualified as an
Approved Bank and agrees to hold the same in accordance with the terms and
provisions of the agreement pursuant to which such items were deposited.

 

Section 13.3.          Content.  By executing and delivering an Assignment and
Acceptance, Mezzanine Lender and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, Mezzanine Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of any lien
or security interest created or purported to be created under or in connection
with, this Agreement or any other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (ii) Mezzanine Lender makes
no representation or warranty and assumes no responsibility with respect to the
financial

 

58

 

condition of Mezzanine Borrower
or the performance or observance by Mezzanine Borrower of any of its
obligations under any Loan Documents or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of such other documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon Mezzanine Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents; (v) such assignee
appoints and authorizes Mezzanine Lender to take such action as agent on its
behalf and to exercise such powers and discretion under the Loan Documents as
are delegated to Mezzanine Lender by the terms hereof together with such powers
and discretion as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform, in accordance with their terms, all of
the obligations which by the terms of this Agreement and the other Loan
Documents are required to be performed by Mezzanine Lender.

 

Section 13.4.          Register.  Mezzanine Lender shall maintain a copy of
each Assignment and Acceptance delivered to and accepted by it and a register for
the recordation of the names and addresses of Mezzanine Lender and each assignee
pursuant to this Article XIII and the principal amount of the Loan owing
to each such assignee from time to time (the REGISTER). The entries in the Register
shall, with respect to such assignees, be conclusive and binding for all
purposes, absent manifest error. The Register shall be available for inspection
by Mezzanine Borrower or any assignee pursuant to this Article XIII at any
reasonable time and from time to time upon reasonable prior written notice.

 

Section 13.5.          Substitute
Mezzanine Notes.  Upon its receipt of
an Assignment and Acceptance executed by an assignee, together with any Mezzanine
Note or Mezzanine Notes subject to such assignment, Mezzanine Lender shall (i) accept
such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt written notice thereof to
Mezzanine Borrower. Within five (5) Business Days after its receipt of
such notice, Mezzanine Borrower, at Mezzanine Lender’s own expense, shall
execute and deliver to Mezzanine Lender in exchange and substitution for the
surrendered Mezzanine Note or Mezzanine Notes a new Mezzanine Note to the order
of such assignee in an amount equal to the portion of the Loan assigned to it and
a new Mezzanine Note to the order of Mezzanine Lender in an amount equal to the
portion of the Loan retained by it hereunder. 
Such new Mezzanine Note or Mezzanine Notes shall be in an aggregate
principal amount equal to the aggregate then outstanding principal amount of
such surrendered Mezzanine Note or Mezzanine Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the

 

59

 

Mezzanine Note (modified,
however, to the extent necessary so as not to impose duplicative or increased
obligations on Mezzanine Borrower and to delete obligations previously
satisfied by Mezzanine Borrower). Notwithstanding the provisions of this Article XIII,
Mezzanine Borrower shall not be responsible or liable for any additional taxes,
reserves, adjustments or other costs and expenses that are related to, or arise
as a result of, any transfer of the Loan or any interest or participation
therein that arise solely and exclusively from the transfer of the Loan or any
interest or participation therein or from the execution of the new Mezzanine
Note contemplated by this Section 13.5, including, without limitation, any
mortgage tax. Mezzanine Lender and/or the assignees, as the case may be, shall
from time to time designate one agent through which Mezzanine Borrower shall
request all approvals and consents required or contemplated by this Agreement
and on whose statements Mezzanine Borrower may rely.

 

Section 13.6.          Participations.  Each assignee pursuant to this Article XIII
may sell participations to one or more Persons (other than Mezzanine Borrower
or any of its Affiliates) in or to all or a portion of its rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of the Mezzanine Note held by it);
provided, however, that (i) such assignee’s obligations under this
Agreement and the other Loan Documents shall remain unchanged, (ii) such
assignee shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such assignee shall remain the
holder of any such Mezzanine Note for all purposes of this Agreement and the
other Loan Documents and (iv) Mezzanine Borrower, Mezzanine Lender and the
assignees pursuant to this Article XIII shall continue to deal solely and
directly with such assignee in connection with such assignee’s rights and
obligations under this Agreement and the other Loan Documents. In the event
that more than one (1) party comprises Mezzanine Lender, Mezzanine Lender
shall designate one party to act on the behalf of all parties comprising
Mezzanine Lender in providing approvals and all other necessary consents under
the Loan Documents and on whose statements Mezzanine Borrower may rely.

 

Section 13.7.          Disclosure
of Information.  Any assignee
pursuant to this Article XIII may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Article XIII,
disclose to the assignee or participant or proposed assignee or participant,
any information relating to Mezzanine Borrower furnished to such assignee by or
on behalf of Mezzanine Borrower; provided, however, that, prior to any such
disclosure, the assignee or participant or proposed assignee or participant
shall agree in writing for the benefit of Mezzanine Borrower to preserve the
confidentiality of any confidential information received by it.

 

60

 

Section 13.8.          Security
Interest in Favor of Federal Reserve Bank. 
Notwithstanding any other provision set forth in this Agreement or any other
Loan Document, any assignee pursuant to this Article XIII may at any time
create a security interest in all or any portion of its rights under this
Agreement or the other Loan Documents (including, without limitation, the
amounts owing to it and the Mezzanine Note or Mezzanine Notes held by it) in
favor of any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System.

 

XIV.  RESERVED

 

XV.  RESERVED

 

XVI.  RESERVED

 

XVII.  DEFAULTS

 

Section 17.1.          Event
of Default.

 

(a)           Each
of the following events shall constitute an event of default hereunder (an
EVENT OF DEFAULT):

 

(i)            subject
to the last sentence of Section 3.1.6(b), if (A) the Indebtedness is
not paid in full on the Maturity Date, (B) any regularly scheduled monthly
payment of interest due under the Mezzanine Note is not paid in full on the
applicable Payment Date, (C) any prepayment of principal due under this
Agreement or the Mezzanine Note is not paid when due, (D) the Liquidated
Damages Amount is not paid when due, (E) any deposit to the Mezzanine
Account is not made on the required deposit date therefor; or (F) except
as to any amount included in (A), (B), (C), (D) and/or (E) of this
clause (i), any other amount payable pursuant to this Agreement, the Mezzanine
Note or any other Loan Document is not paid in full when due and payable in
accordance with the provisions of the applicable Loan Document, with such
failure continuing for ten (10) Business Days after Mezzanine Lender
delivers written notice thereof to Mezzanine Borrower;

 

(ii)           reserved;

 

(iii)          if
the insurance policies required by the Loan Documents are not kept in full force
and effect;

 

61

 

(iv)          if
any transfer is made in violation of Article VIII or a declaration of
condominium is filed with respect to the Collateral;

 

(v)           if
any representation or warranty made by Mezzanine Borrower herein or in any
other Loan Document, or in any report, certificate, financial statement or
other instrument, agreement or document furnished to Mezzanine Lender on or
prior to the date hereof shall have been false or misleading in any material respect
as of the date the representation or warranty was made;

 

(vi)          if
Mezzanine Borrower shall make an assignment for the benefit of creditors;

 

(vii)         if
a receiver, liquidator or trustee shall be appointed for Mezzanine Borrower, or
if Mezzanine Borrower shall be adjudicated a bankrupt or insolvent, or if any
petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by, Mezzanine Borrower, or if any proceeding
for the dissolution or liquidation of Mezzanine Borrower shall be instituted; provided,
however, if such appointment, adjudication, petition or proceeding was involuntary
and not consented to by Mezzanine Borrower upon the same not being discharged, stayed
or dismissed within ninety (90) days;

 

(viii)        if
Mezzanine Borrower attempts to assign its rights under this Agreement or any of
the other Loan Documents or any interest herein or therein in contravention of
the Loan Documents;

 

(ix)           the
occurrence of a Event of Default under any Loan Document;

 

(x)            reserved;

 

(xi)           with
respect to any term, covenant or provision set forth herein or in any other
Loan Document which specifically contains a notice requirement or grace period
(other than the other subsections of this Section 17.1 and the provisions
referenced therein), if Mezzanine Borrower shall be in default under

 

62

 

such term, covenant or condition
after the giving of such notice or the expiration of such grace period, with
such failure continuing for ten (10) Business Days after Mezzanine Lender
delivers written notice thereof to Mezzanine Borrower;

 

(xii)          if
any of the assumptions contained in the Non-Consolidation Opinion, in any
Additional Non-Consolidation Opinion or in any other non-consolidation opinion
delivered to Mezzanine Lender in connection with the Loan, or in any other
non-consolidation delivered subsequent to the closing of the Loan, is or shall
become untrue in any material respect;

 

(xiii)         reserved;

 

(xiv)        if
Mezzanine Borrower shall fail to comply with any covenants set forth in Article V
with such failure continuing for ten (10) Business Days after Mezzanine
Lender delivers written notice thereof to Mezzanine Borrower; provided,
however, that if such breach is not a Monetary Default and is susceptible of
cure but cannot reasonably be cured within such fifteen (15) Business Day
period and provided further that Mezzanine Borrower shall have commenced to
cure such breach within such fifteen (15) Business Day period and thereafter
diligently proceeds to cure the same, such fifteen (15) Business Day period
shall be extended for such time as is reasonably necessary for Mezzanine
Borrower in the exercise of due diligence to cure such breach, such additional
period not to exceed thirty (30) days;

 

(xv)         reserved;

 

(xvi)        if
Mezzanine Borrower shall fail to deposit the full amount required to be
deposited in the Mezzanine Account pursuant to Section 3.1.5 within the
time periods (if any) required by Section 3.1.5(i);

 

(xvii)       if
this Agreement or any other Loan Document or any Lien granted hereunder or
thereunder, in whole or in part, shall cease to be effective or shall cease to
be a legally valid, binding and enforceable obligation of Mezzanine Borrower,
or any Lien

 

63

 

securing the Indebtedness
shall, in whole or in part, cease to be a perfected first priority Lien (except
in any of the foregoing cases by reason of any affirmative act of Mezzanine
Lender);

 

(xviii)      reserved;

 

(xix)         reserved;

 

(xx)          reserved;

 

(xxi)         if
Mezzanine Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement or any Loan Documents not
specified in subsections (i) to (xix) above, for thirty (30) days after
notice from Mezzanine Lender; provided, however, that if such Default is
susceptible of cure but cannot reasonably be cured within such thirty (30) day
period and provided further that Mezzanine Borrower shall have commenced to
cure such Default within such thirty (30) day period and thereafter diligently
proceeds to cure the same, such thirty (30) day period shall be extended for
such time as is reasonably necessary for Mezzanine Borrower in the exercise of
due diligence to cure such Default, such additional period not to exceed 90
days;

 

(xxii)        reserved;

 

(xxiii)       reserved;

 

(b)           Reserved.

 

Section 17.2.          Remedies.

 

(a)           Unless
waived in writing by Mezzanine Lender, upon the occurrence and during the
continuance of an Event of Default, all or any one or more of the rights,
powers, privileges and other remedies available to Mezzanine Lender against
Mezzanine Borrower under this Agreement or any of the other Loan Documents
executed and delivered by, or applicable to, Mezzanine Borrower or at law or in
equity may be exercised by Mezzanine Lender at any time and from time to time,
whether or not all or any of the Indebtedness shall be declared due and
payable, and whether or not Mezzanine Lender shall have commenced any
foreclosure proceeding or other action for the

 

64

 

enforcement of its rights and
remedies under any of the Loan Documents with respect to the Collateral. Any
such actions taken by Mezzanine Lender shall be cumulative and concurrent and
may be pursued independently, singly, successively, together or otherwise, at
such time and in such order as Mezzanine Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Mezzanine Lender permitted
by law, equity or contract or as set forth herein or in the other Loan
Documents. Without limiting the generality of the foregoing, Mezzanine Borrower
agrees that if an Event of Default is continuing (i) Mezzanine Lender is
not subject to any one action or election of remedies law or rule, and (ii) all
liens and other rights, remedies or privileges provided to Mezzanine Lender shall
remain in full force and effect until Mezzanine Lender has exhausted all of its
remedies against the Collateral and this Agreement and the Pledge have been
foreclosed, sold and/or otherwise realized upon in satisfaction of the
Indebtedness or the Indebtedness has been paid in full.

 

(b)           Upon
the occurrence and during the continuance of any Event of Default, Mezzanine
Lender may, but without any obligation to do so and without notice to or demand
on Mezzanine Borrower and without releasing Mezzanine Borrower from any
obligation hereunder, take any action to cure such Event of Default. Upon the
occurrence and during the continuance of an Event of Default, Mezzanine Lender
may appear in, defend, or bring any action or proceeding to protect its
interests in the Collateral or to foreclose its security interest under this
Agreement and the Pledge or under any of the other Loan Documents or collect
the Indebtedness.

 

(c)           Upon
the occurrence and during the continuance of an Event of Default, with respect
to the Account Collateral, the Mezzanine Lender may:

 

(i)            without
notice to Mezzanine Borrower, except as required by law, and at any time or
from time to time, charge, set-off and otherwise apply all or any part of the
Account Collateral against the Obligations, operating expenses and/or capital
expenditures for the Collateral or any part thereof;

 

65

 

(ii)           in
Mezzanine Lender’s sole discretion, at any time and from time to time, exercise
any and all rights and remedies available to it under this Agreement, and/or as
a secured party under the UCC;

 

(iii)          demand,
collect, take possession of or receipt for, settle, compromise, adjust, sue
for, foreclose or realize upon the Account Collateral (or any portion thereof)
as Mezzanine Lender may determine in its sole discretion; and

 

(iv)          take
all other actions provided in, or contemplated by, this Agreement.

 

(d)           Nothing
contained herein or in any other Loan Document shall be construed as requiring
Mezzanine Lender to resort to the Collateral for the satisfaction of any of the
Indebtedness, and Mezzanine Lender may seek satisfaction out of the Collateral
or any part thereof, in its absolute discretion in respect of the Indebtedness.
In addition, Mezzanine Lender shall have the right from time to time to
partially foreclose this Agreement and the Pledge in any manner and for any
amounts secured by this Agreement or the Pledge then due and payable as determined
by Mezzanine Lender in its sole discretion including, without limitation, the
following circumstances: (i) in the event Mezzanine Borrower defaults
beyond any applicable grace period in the payment of one or more scheduled
payments of principal and interest, Mezzanine Lender may foreclose this
Agreement and the Pledge to recover such delinquent payments, or (ii) in
the event Mezzanine Lender elects to accelerate less than the entire
outstanding principal balance of the Loan, Mezzanine Lender may foreclose this
Agreement and the Loan Documents to recover so much of the principal balance of
the Loan as Mezzanine Lender may accelerate and such other sums secured by this
Agreement or the Loan Documents as Mezzanine Lender may elect. Notwithstanding
one or more partial foreclosures, the Collateral shall remain subject to this
Agreement and the Loan Documents to secure payment of sums secured by this
Agreement and the Loan Documents and not previously recovered.

 

Section 17.3.          Remedies
Cumulative; Waivers.  The rights,
powers and remedies of Mezzanine Lender under this Agreement and the Loan
Documents shall be cumulative and not exclusive of any other right, power or
remedy which Mezzanine Lender may have against Mezzanine Borrower pursuant to
this

 

66

 

Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Mezzanine Lender’s rights,
powers and remedies may be pursued singly, concurrently or otherwise, at such
time and in such order as Mezzanine Lender may determine in Mezzanine Lender’s
sole discretion. No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed expedient. A
waiver of one Default or Event of Default with respect to Mezzanine Borrower or
any Guarantor shall not be construed to be a waiver of any subsequent Default
or Event of Default by Mezzanine Borrower or any Guarantor or to impair any
remedy, right or power consequent thereon.

 

Section 17.4.          Costs
of Collection.  In the event that
after an Event of Default: (i) the Mezzanine Note or any of the Loan
Documents is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding; (ii) an attorney
is retained to represent Mezzanine Lender in any bankruptcy, reorganization,
receivership, or other proceedings affecting creditors’ rights and involving a
claim under this Agreement, the Mezzanine Note or any of the Loan Documents; or
(iii) an attorney is retained to protect or enforce the lien or any of the
terms of this Agreement, the Pledge or any of the Loan Documents; then
Mezzanine Borrower shall pay to Mezzanine Lender all reasonable attorney’s fees,
costs and expenses actually incurred in connection therewith, including costs
of appeal, together with interest on any judgment obtained by Mezzanine Lender
in respect of such fees, costs and expenses at the Default Rate (collectively,
ENFORCEMENT COSTS).

 

Section 17.5.          Distribution
of Collateral Proceeds.  In the event
that, following the occurrence and during the continuance of any Event of Default,
any monies are received in connection with the enforcement of any of the Loan
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:

 

(a)           First,
to the payment of, or (as the case may be) the reimbursement of, Mezzanine
Lender for or in respect of all reasonable costs, expenses, disbursements and
actual losses which shall have been incurred or sustained by Mezzanine Lender
to protect or preserve the Collateral or in connection with the collection of
such monies by Mezzanine Lender (including without limitation, Enforcement
Costs), for the exercise, protection or enforcement by Mezzanine Lender of all
or any of the rights, remedies, powers and privileges of Mezzanine Lender under
this Agreement or any of the other Loan Documents or in respect of the
Collateral or in support of

 

67

 

any provision of adequate
indemnity to Mezzanine Lender against any taxes or liens which by law shall
have, or may have, priority over the rights of Mezzanine Lender to such monies;

 

(b)           Second,
to all other Obligations in such order or preference as Mezzanine Lender shall
determine in its sole and absolute discretion;

 

(c)           Third,
the excess, if any, shall be returned to Mezzanine Borrower or to such other
Persons as are entitled thereto.

 

XVIII.  RESERVED

 

XIX.  MISCELLANEOUS

 

Section 19.1.          Survival.  This Agreement and all covenants, indemnifications,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by Mezzanine Lender of the
Loan and the execution and delivery to Mezzanine Lender of the Mezzanine Note,
and shall continue in full force and effect so long as all or any of the
Indebtedness is outstanding and unpaid unless a longer period is expressly set
forth herein or in the other Loan Documents; provided however that this
sentence shall not mean that any representations or warranties set forth in the
Agreement shall be deemed made on any date other than the date hereof unless
otherwise specifically provided herein. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All covenants, promises and agreements in
this Agreement, by or on behalf of Mezzanine Borrower, shall inure to the benefit
of the successors and assigns of Mezzanine Lender.

 

Section 19.2.          Mezzanine
Lender’s Discretion.  Whenever pursuant
to this Agreement, Mezzanine Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Mezzanine Lender,
the decision of Mezzanine Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is
otherwise specifically herein provided) be in the sole discretion of Mezzanine
Lender and shall be final and conclusive.

 

Section 19.3.          Governing
Law.

 

(A)          THIS AGREEMENT WAS
NEGOTIATED IN THE STATE OF MINNESOTA, THE LOAN WAS MADE BY MEZZANINE LENDER AND
ACCEPTED BY MEZZANINE BORROWER IN THE STATE OF MINNESOTA WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE

 

68

 

PARTIES AND TO
THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF MINNESOTA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE
LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW,
MEZZANINE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO
ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE
MEZZANINE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA.

 

(B)           ANY LEGAL SUIT, ACTION
OR PROCEEDING AGAINST MEZZANINE LENDER OR MEZZANINE BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY AT MEZZANINE LENDER’S OPTION BE INSTITUTED
IN ANY FEDERAL OR STATE COURT IN THE CITY OF MINNEAPOLIS, COUNTY OF HENNEPIN,
AND MEZZANINE BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER
HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND MEZZANINE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MEZZANINE
BORROWER DOES HEREBY DESIGNATE AND APPOINT:

 

JON C. ESSEN

HENNESSEY FINANCIAL, LLC

418 EAST COUNTY ROAD D

ST. PAUL, MN 55117

 

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE
OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN MINNESOTA, AND AGREE THAT SERVICE
OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE

 

69

 

MAILED OR DELIVERED TO MEZZANINE BORROWER IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF MINNESOTA. MEZZANINE
BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) HEREBY DESIGNATES:

 

LARRY NEUMANN

HENNESSEY FINANCIAL, LLC

418 EAST COUNTY ROAD D

ST. PAUL, MN 55117

 

AS A SUBSTITUTE IF ITS INITIAL AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN MINNESOTA OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR AND (III) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE
IN MINNESOTA (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE
PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE
SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN MINNESOTA
OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

Section 19.4.          Modification,
Waiver in Writing.  No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement,
or of the Mezzanine Note, or of any other Loan Document, nor consent to any
departure by Mezzanine Borrower therefrom, shall in any event be effective
unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein no notice to or demand on, Mezzanine
Borrower shall entitle Mezzanine Borrower to any other or future notice or
demand in the same, similar or other circumstances.

 

Section 19.5.          Delay
Not a Waiver.  Neither any failure
nor any delay on the part of Mezzanine Lender in insisting upon strict
performance of any term, condition, covenant or agreement, or exercising any
right, power, remedy or privilege hereunder, or under the Mezzanine Note or
under any other Loan Document, or any other instrument given as security therefor,
shall operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any

 

70

 

other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Mezzanine
Note or any other Loan Document, Mezzanine Lender shall not be deemed to have
waived any right either to require prompt payment when due of all other amounts
due under this Agreement, the Mezzanine Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other
amount.

 

Section 19.6.          Notices.  All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return
receipt requested or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery,
or (c) by telecopier (with answer back acknowledged), addressed as follows
(or at such other address and Person as shall be designated from time to time
by any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section:

 

	
  If to Mezzanine Lender:

  	
  CS Financing Corporation

  
	
   

  	
  45 San Clemente Drive, Suite B210

  
	
   

  	
  Corte Madera, California 94925

  
	
   

  	
  Attention: Timothy Redpath and Michael
  Bozora

  
	
   

  	
  Telecopy No.: (415) 927-7291

  
	
   

  	
  Confirmation No.: (415) 927-7302

  
	
   

  	
   

  
	
  If to Mezzanine Borrower:

  	
  Hennessey Financial, LLC

  
	
   

  	
  418 East County Road D

  
	
   

  	
  St. Paul, Minnesota 55117

  
	
   

  	
  Attention: Jeffrey Gardner

  
	
   

  	
  Telecopy No.: (651) 294-2119

  
	
   

  	
  Confirmation No.: (651) 294-2100

  

 

All notices, elections, requests and demands under this Agreement shall
be effective and deemed received upon the earliest of (i) the actual
receipt of the same by personal delivery or otherwise, (ii) one (1) Business
Day after being deposited with a nationally recognized overnight courier
service as required above, (iii) three (3) Business Days after being
deposited in the United States mail as required above or (iv) on the day
sent if sent by facsimile with confirmation on or before 5:00 p.m. Minneapolis
time on any Business Day or on the next Business Day if so delivered after 5:00 p.m.
Minneapolis time or on any day other than a Business Day. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given as herein required shall be deemed to be receipt of
the notice, election, request, or demand sent.

 

71

 

Section 19.7.          Trial
by Jury.  MEZZANINE BORROWER AND ALL
PERSONS CLAIMING BY, THROUGH OR UNDER IT, HEREBY EXPRESSLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT, THE PLEDGE,
THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT, INCLUDING, WITHOUT LIMITATION,
ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (II) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO THIS AGREEMENT, THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT
(AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED
HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE; AND MEZZANINE BORROWER HEREBY AGREES AND CONSENTS THAT AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION MAY BE FILED WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT HERETO TO THE WAIVER OF ANY RIGHT
TO TRIAL BY JURY. MEZZANINE BORROWER ACKNOWLEDGES THAT IT HAS CONSULTED WITH
LEGAL COUNSEL REGARDING THE MEANING OF THIS WAIVER AND ACKNOWLEDGES THAT THIS
WAIVER IS AN ESSENTIAL INDUCEMENT FOR THE MAKING OF THE LOAN. THIS WAIVER SHALL
SURVIVE THE REPAYMENT OF THE LOAN.

 

Section 19.8.          Headings.  The Article and/or Section headings
and the Table of Contents in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.

 

Section 19.9.          Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

 

Section 19.10.        Preferences.  To the extent Mezzanine Borrower makes a
payment or payments to Mezzanine Lender, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received,

 

72

 

the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Mezzanine Lender.

 

Section 19.11.        Waiver
of Notice.  Mezzanine Borrower shall
not be entitled to any notices of any nature whatsoever from Mezzanine Lender
except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by
Mezzanine Lender to Mezzanine Borrower and except with respect to matters for
which Mezzanine Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Mezzanine Borrower hereby expressly
waives the right to receive any notice from Mezzanine Lender with respect to
any matter for which this Agreement or the other Loan Documents do not
specifically and expressly provide for the giving of notice by Mezzanine Lender
to Mezzanine Borrower.

 

Section 19.12.        Expenses;
Indemnity.

 

(a)           Mezzanine
Borrower covenants and agrees to pay or, if Mezzanine Borrower fails to pay, to
reimburse, Mezzanine Lender upon receipt of written notice from Mezzanine
Lender for all reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) incurred by Mezzanine Lender in connection with (i) the
request and possible subsequent closing of an Advance including the
preparation, negotiation, execution and delivery of the other Loan Documents
and the consummation of the transactions contemplated thereby and all the costs
of furnishing all opinions by counsel for Mezzanine Borrower (including without
limitation any opinions requested by Mezzanine Lender pursuant to an Advance); (ii) Mezzanine
Lender’s ongoing performance and compliance with all agreements and conditions
contained in this Agreement and the other Loan Documents on its part to be
performed or complied with after the Closing Date; (iii) the negotiation,
preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications to this Agreement and the other Loan
Documents requested by Mezzanine Borrower and any other documents or matters as
required herein or under the other Loan Documents; (iv) securing Mezzanine
Borrower’s compliance with any requests made pursuant to the provisions of this
Agreement; (v) the filing and recording fees and expenses, mortgage
recording taxes, title insurance and reasonable fees and expenses of counsel
for providing to Mezzanine Lender all required legal opinions, and other similar
expenses incurred in creating and perfecting the

 

73

 

Lien in favor of Mezzanine
Lender pursuant to this Agreement and the other Loan Documents; (vi) enforcing
or preserving any rights, in response to third party claims or the prosecuting
or defending of any action or proceeding or other litigation, in each case
against, under or affecting Mezzanine Borrower, this Agreement, the other Loan
Documents, the Collateral, or any other security given for the Loan; (vii) enforcing
any obligations of or collecting any payments due from Mezzanine Borrower under
this Agreement, the other Loan Documents or with respect to the Collateral or in
connection with any refinancing or restructuring of the credit arrangements provided
under this Agreement in the nature of a work-out or of any insolvency or bankruptcy
proceedings; (viii) procuring insurance policies pursuant to Section 6;
provided, however, that Mezzanine Borrower shall not be liable for the payment
of any such costs and expenses to the extent the same arise (A) by reason
of the gross negligence, illegal acts, fraud or willful misconduct of Mezzanine
Lender or (B) in connection with a securitization, other than the Mezzanine
Borrower’s internal administrative costs and up to $5,000 for Mezzanine
Borrower’s external legal costs. Any cost and expenses due and payable to
Mezzanine Lender may be paid from any amounts in the Mezzanine Account; and (ix) to the extent Mezzanine Borrower does not proceed in good
faith to accept financing from Mezzanine Lender pursuant to the terms of this
Agreement (provided Mezzanine Lender receives proceeds from the Bond Offering),
all out of pocket costs and expenses including reasonable attorney fees in
connection with the preparation of the Bond Offering (such cost to be capped at
$500,000.00).

 

(b)           Mezzanine
Borrower will protect, indemnify and save harmless Mezzanine Lender, and all
officers, directors, stockholders, members, partners, employees, agents,
successors and assigns thereof (collectively, the Indemnified Parties) from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including all reasonable attorneys’ fees and
expenses actually incurred) imposed upon or incurred by or asserted against the
Indemnified Parties, the Collateral or any part of its interest therein, by
reason of the occurrence or existence of any of the following (to the extent
Proceeds payable on account of the following shall be inadequate; it being
understood that in no event will the Indemnified Parties be required to
actually pay or incur any costs or expenses as a condition to the effectiveness
of the

 

74

 

foregoing indemnity) prior to (i) the
acceptance by Mezzanine Lender or its designee of a deed-in-lieu of foreclosure
with respect to the Collateral, (ii) an Indemnified Party or its designee
Parties taking possession or control of the Collateral, or (iii) the
foreclosure of the Loan Documents, except to the extent caused by the fraud,
illegal acts, willful misconduct or gross negligence of the Indemnified Parties
(other than such fraud, illegal acts, willful misconduct or gross negligence
imputed to the Indemnified Parties because of their interest in the Collateral):
(1) ownership of Mezzanine Borrower’s indirect interest in the Collateral,
or any interest therein, or receipt of any rents or other sum therefrom, (2) any
accident, injury to or death of any persons or loss of or damage to property
occurring on or about the Collateral or any appurtenances thereto, (3) any
design, construction, operation, repair, maintenance, use, non- use or
condition of the Collateral or appurtenances thereto, including claims or
penalties arising from violation of any Legal Requirement or Insurance
Requirement, as well as any claim based on any patent or latent defect, whether
or not discoverable by Mezzanine Lender, any claim the insurance as to which is
inadequate, and any Environmental Claim, (4) any Default under this
Agreement or any of the other Loan Documents, (5) any performance of any
labor or services or the furnishing of any materials or other property in
respect of the Collateral or any part thereof, (6) any negligence or
tortious act or omission on the part of Mezzanine Borrower or any of its
agents, contractors, servants, employees, sublessees, licensees or invitees, (7) any
contest referred to in the Loan Documents, (8) any obligation or
undertaking relating to the performance or discharge of any of the terms,
covenants and conditions of the landlord contained in the leases, (9) the
presence at, in or under the Collateral or any improvements to the Collateral of
any Hazardous Substances in violation of any environmental law or (10) Mezzanine
Lender’s disclosure of the terms of the settlement agreement referenced in the
Loan Agreement to prospective purchasers of interests in the Loan. Any amounts
the Indemnified Parties are legally entitled to receive under this Section 19.12(b) which
are not paid within fifteen (15) Business Days after written demand therefor by
the Indemnified Parties or Mezzanine Lender, setting forth in reasonable detail
the amount of such demand and the basis therefor, shall bear interest from the
date of demand at the Default Rate, and shall, together with

 

75

 

such interest, be part of the
Indebtedness and secured by this Agreement and the Pledge. In case any action,
suit or proceeding is brought against the Indemnified Parties by reason of any
such occurrence, Mezzanine Borrower shall at Mezzanine Borrower’s reasonable
expense resist and defend such action, suit or proceeding or will cause the
same to be resisted and defended by counsel at Mezzanine Borrower’s reasonable
expense for the insurer of the liability or by counsel designated by Mezzanine
Borrower (unless reasonably disapproved by Mezzanine Lender promptly after
Mezzanine Lender has been notified of such counsel); provided, however, that
nothing herein shall compromise the right of Mezzanine Lender (or any
Indemnified Party) to appoint its own counsel at Mezzanine Borrower’s
reasonable expense for its defense with respect to any action which in its
reasonable opinion presents a conflict or potential conflict between Mezzanine
Lender and Mezzanine Borrower that would make such separate representation
advisable; provided further that if Mezzanine Lender shall have appointed
separate counsel pursuant to the foregoing, Mezzanine Borrower shall not be
responsible for the expense of additional separate counsel of any Indemnified
Party unless in the reasonable opinion of Mezzanine Lender a conflict or
potential conflict exists between such Indemnified Party and Mezzanine Lender.
So long as Mezzanine Borrower is resisting and defending such action, suit or
proceeding as provided above in a prudent and commercially reasonable manner,
Mezzanine Lender and the Indemnified Parties shall not be entitled to settle
such action, suit or proceeding without Mezzanine Borrower’s consent which
shall not be unreasonably withheld or delayed, and claim the benefit of this Section 19.12(b) with
respect to such action, suit or proceeding and Mezzanine Lender agrees that it
will not settle any such action, suit or proceeding without the consent of
Mezzanine Borrower; provided, however, that if Mezzanine Borrower is not
diligently defending such action, suit or proceeding in a prudent and
commercially reasonable manner as provided above, and Mezzanine Lender has
provided Mezzanine Borrower with thirty (30) days’ prior written notice, or
shorter period if mandated by the requirements of applicable law, and
opportunity to correct such determination, Mezzanine Lender may settle such
action, suit or proceeding and claim the benefit of this Section 19.12(b) with
respect to settlement of such action, suit or proceeding. Any Indemnified Party
will give Mezzanine

 

76

 

Borrower prompt notice after
such Indemnified Party obtains actual knowledge of any potential claim by such
Indemnified Party for indemnification hereunder. The Indemnified Parties shall
not settle or compromise any action, proceeding or claim as to which it is indemnified
hereunder without notice to Mezzanine Borrower.

 

Section 19.13.        Exhibits
and Schedules Incorporated.  The
Exhibits annexed hereto are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.

 

Section 19.14.        Offsets,
Counterclaims and Defenses.  Any
assignee of Mezzanine Lender’s interest in and to this Agreement, the Mezzanine
Note and the other Loan Documents shall take the same free and clear of all
offsets, counterclaims or defenses which are unrelated to such documents which
Mezzanine Borrower may otherwise have against any assignor of such documents,
and no such unrelated counterclaim or defense shall be interposed or asserted
by Mezzanine Borrower or in any action or proceeding brought by any such
assignee upon such documents and to the extent permitted by controlling law any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by
Mezzanine Borrower.

 

Section 19.15.        Liability
of Assignees of Mezzanine Lender.  No
assignee of Mezzanine Lender shall have any personal liability, directly or indirectly,
under or in connection with this Agreement or any other Loan Document or any
amendment or amendments hereto made at any time or times, heretofore or
hereafter, any different than the liability of Mezzanine Lender hereunder. In
addition, no assignee shall have at any time or times hereafter any personal
liability, directly or indirectly, under or in connection with or secured by
any agreement, lease, instrument, encumbrance, claim or right affecting or
relating to the Collateral or to which the Collateral is now or hereafter
subject any different than the liability of Mezzanine Lender hereunder. The
limitation of liability provided in this Section 19.15 is (i) in addition
to, and not in limitation of, any limitation of liability applicable to the
assignee provided by law or by any other contract, agreement or instrument, and
(ii) shall not apply to any assignee’s gross negligence or willful misconduct.

 

Section 19.16.        No
Joint Venture or Partnership; No Third Party Beneficiaries.

 

(a)           Mezzanine
Borrower and Mezzanine Lender intend that the relationships created hereunder
and under the other Loan Documents be solely that of Mezzanine Borrower and Mezzanine
Lender.  Nothing herein or therein is
intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Mezzanine Borrower

 

77

 

and Mezzanine Lender nor to
grant Mezzanine Lender any interest in the Collateral other than that of
mezzanine lender.

 

(b)           This
Agreement and the other Loan Documents are solely for the benefit of Mezzanine
Lender and Mezzanine Borrower and nothing contained in this Agreement or the
other Loan Documents shall be deemed to confer upon anyone other than Mezzanine
Lender or Mezzanine Borrower any right to insist upon or to enforce the performance
or observance of any of the obligations contained herein or therein. All
conditions to the obligations of Mezzanine Lender to make the Loan hereunder
are imposed solely and exclusively for the benefit of Mezzanine Lender and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Mezzanine Lender will
refuse to make the Loan in the absence of strict compliance with any or all
thereof and no other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Mezzanine Lender if, in Mezzanine Lender’s sole discretion,
Mezzanine Lender deems it advisable or desirable to do so.

 

Section 19.17.        Publicity.  All news releases, publicity or advertising
by Mezzanine Borrower, Mezzanine Lender or their Affiliates through any media intended
to reach the general public which refers to the Loan Documents or the financing
evidenced by the Loan Documents, shall be subject to the reasonable prior
written approval of Mezzanine Lender and Mezzanine Borrower which approval
shall not be unreasonably withheld or delayed or conditioned.

 

Section 19.18.        Waiver
of Marshalling of Assets.  To the
fullest extent permitted by law, Mezzanine Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Mezzanine Borrower, Mezzanine Borrower’s members and others with interests in
Mezzanine Borrower and of the Collateral, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Mezzanine Lender under the Loan Documents to a sale of the Collateral
for the collection of the Indebtedness without any prior or different resort
for collection or of the right of Mezzanine Lender to the payment of the Indebtedness
out of the net proceeds of the Collateral in preference to every other claimant
whatsoever.

 

78

 

Section 19.19.        Waiver
of Counterclaim and Other Actions. 
Mezzanine Borrower hereby expressly and unconditionally waives, in
connection with any suit, action or proceeding brought by Mezzanine Lender on
this Agreement, the Mezzanine Note, the Pledge or any Loan Document, any and
every right it may have to (i) interpose any counterclaim therein (other
than a counterclaim which can only be asserted in the suit, action or
proceeding brought by Mezzanine Lender on this Agreement, the Mezzanine Note,
the Pledge or any Loan Document and cannot be maintained in a separate action) and
(ii) have any such suit, action or proceeding consolidated with any other
or separate suit, action or proceeding.

 

Section 19.20.        Conflict;
Construction of Documents; Reliance. 
In the event of any conflict between the provisions of this Agreement
and any of the other Loan Documents, the provisions of this Agreement shall
control. The parties hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and execution of the Loan
Documents and that such Loan Documents shall not be subject to the principle of
construing their meaning against the party which drafted same. Mezzanine Borrower
acknowledges that, with respect to the Loan, Mezzanine Borrower shall rely
solely on its own judgment and advisors in entering into the Loan without relying
in any manner on any statements, representations or recommendations of Mezzanine
Lender or any parent, subsidiary or Affiliate of Mezzanine Lender.  Mezzanine Lender shall not be subject to any
limitation whatsoever in the exercise of any rights or remedies available to it
under any of the Loan Documents or any other agreements or instruments which govern
the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate
of Mezzanine Lender of any equity interest any of them may acquire in Mezzanine
Borrower, and Mezzanine Borrower hereby irrevocably waives the right to raise
any defense or take any action on the basis of the foregoing with respect to
Mezzanine Lender’s exercise of any such rights or remedies. Mezzanine Borrower
acknowledges that Mezzanine Lender engages in the business of real estate
financings and other real estate transactions and investments which may be
viewed as adverse to or competitive with the business of Mezzanine Borrower or
their Affiliates.

 

Section 19.21.        Prior
Agreements.  This Agreement and the
other Loan Documents contain the entire agreement of the parties hereto and
thereto in respect of the transactions contemplated hereby and thereby, and all
prior agreements among or between such parties, whether oral or written, are
superseded by the terms of this Agreement and the other Loan Documents and
unless specifically set forth in a writing contemporaneous herewith the terms,
conditions and provisions of any and all such prior agreements do not survive
execution of this Agreement.

 

Section 19.22.        Brokers.  Neither Mezzanine Lender nor Mezzanine
Borrower has dealt with any broker or finder with respect to the transactions contemplated
by

 

79

 

the Loan Documents and neither
Mezzanine Lender nor Mezzanine Borrower has done any acts, had any negotiations
or conversations, or made any agreements or promises which will in any way
create or give rise to any obligation or liability for the payment by either
party of any brokerage fee, charge, commission or other compensation to any
Person with respect to the transactions contemplated by the Loan Documents.  Mezzanine Borrower and Mezzanine Lender shall
each indemnify and hold harmless the other from and against any loss,
liability, cost or expense, including any judgments, attorneys’ fees, or costs
of appeal, incurred by the other party and arising out of or relating to any
breach or default by the indemnifying party of its representations, warranties
and/or agreements set forth in this subsection.

 

Section 19.23.        Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which
shall constitute one document.

 

80

 

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

 

 

	
   

  	
  MEZZANINE BORROWER:

  
	
   

  	
   

  
	
   

  	
  HENNESSEY FINANCIAL LLC,

  
	
   

  	
  a Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey Allen Gardner

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Jeffrey Allen Gardner

  
	
   

  	
  Title: President

  

 

 

[Mezzanine Lender’s signature
appears on following page]

 

81

 

	
   

  	
  MEZZANINE LENDER:

  
	
   

  	
   

  
	
   

  	
  CS FINANCING CORPORATION

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy R. Redpath

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Timothy R. Redpath

  
	
   

  	
  Title: President

  
	
   

  	
   

  

 

82

 

EXHIBIT A

 

MEZZANINE
NOTE

 

Minneapolis, Minnesota

$100,000,000

 

This MEZZANINE NOTE, dated as of                           ,
2005 (this NOTE), by Hennessey Financial, LLC, a Minnesota limited liability
company (BORROWER), having an address at 418 East County Road D, St. Paul, MN
55117, in favor of CS Financing Corporation, a Delaware corporation (together
with its successors and assigns, LENDER), having an office at 45 San Clemente
Drive, Suite B210, Corte Madera, CA 94925.

 

RECITALS

 

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

 

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

 

1.             DEFINED
TERMS.

 

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

 

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

 

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

 

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

 

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

 

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

 

83

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

PRINCIPAL AMOUNT shall mean $100,000,000 or so much as may be
outstanding under this Note.

 

2.             INTEREST.

 

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

 

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

 

c.             Reserved.

 

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

 

84

 

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

 

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

 

3.             PAYMENTS.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

85

 

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

 

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

 

a.             Reserved.

 

b.             MANDATORY
PREPAYMENTS.

 

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

 

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

 

c.             PAYMENTS
IN CONNECTION WITH A PREPAYMENT.

 

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

 

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

 

86

 

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

 

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

 

5.             Reserved.

 

6.             MISCELLANEOUS.

 

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

 

b.             Reserved.

 

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

 

87

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

88

 

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

 

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

 

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

 

[REMAINDER OF PAGE
INTENTIONALLY BLANK]

 

89

 

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

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  HENNESSEY FINANCIAL, LLC

  
	
   

  	
  a Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

90Exhibit 10.24

 

Loan
No. Z269T01F

 

REVOLVING TERM LOAN
SUPPLEMENT

 

THIS SUPPLEMENT to the Amended and Restated Master Loan
Agreement dated July 21, 2003 (the “MLA”), is entered into as of July 11,
2005, between CoBANK,  ACB (“CoBank”) and AMERICAN
CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the “Company”), and
amends and restates the Supplement dated August 13, 2004 and numbered
Z269T01E.

 

SECTION 1.         The
Revolving Term Loan Commitment.  On
the terms and conditions set forth in the MLA and this Supplement, CoBank
agrees to make loans to the Company during the period set forth below in an
aggregate principal amount not to exceed $58,276,702.22 at any one time
outstanding (the “Commitment”). Within the limits of the Commitment, the
Company may borrow, repay and reborrow.

 

SECTION 2.         Purpose. 
The purpose of the Commitment is to finance the operating needs of the
Company.

 

SECTION 3.         Term. 
The term of the Commitment shall be from the date hereof, up to and including
August 1, 2006, or such later date as CoBank may, in its sole discretion,
authorise in writing.

 

SECTION 4.         Interest.  The Company agrees to pay interest on the
unpaid balance of the loans in accordance with one or more of the following
interest rate options, as selected by the Company:

 

(A)          CoBank Base Rate. 
At a rate per annum equal at all times to the rate of interest established
by CoBank from time to time as its CoBank Base Rate, which Rate is intended by
CoBank to be a reference rate and not its lowest rate. The CoBank Base Rate
will change on the date established by CoBank: as the effective date of any
change therein and CoBank agrees to notify the Company of any such change.

 

(B)          Quoted Rate. 
At a fixed rate per annum to be quoted by CoBank in its sole discretion
in each instance. Under this option, rates may be fixed on such balances and
for such periods, as may be
agreeable to CoBank in its sole discretion in each instance, provided
that;  (1) the maximum fixed period
shall be 1 day; and (2) the minimum amount that may be fixed each time
shall be $2,000,000.00.

 

(C)          LIBOR Option.  At a fixed rate equal to “LIBOR.” (as
hereinafter defined) plus 90 basis points per annum (the “LIBOR” Spread).  Under this option: (a) rates may be
fixed for “Interest Periods” (as hereinafter defined) of 1, 2, 3, or 6 months,
or 1 year, as selected by the Company; (b) the minimum amount that may be
fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed
on a “Banking Day” (as hereinafter defined) or, at the option of the Company,
on 3 Banking Days’ prior notice.  For
purposes hereof: (i) “LIBOR” shall mean the rate (rounded upward to the
nearest sixteenth, and adjusted for reserves required on “Eurocurrency
Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D”
(as hereinafter defined) or required by any other federal law or regulation)
quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London
time two Banking Days before the commencement of the Interest Period for the
offering of U.S. dollar deposits in the London interbank market for the
interest Period designated by the Company; (ii) “Banking Day” shall mean a
day on which CoBank is open for business, dealings in U.S. dollar deposits are
being carried out in the London interbank market, and banks are open for
business in New York City and London, England;

 

 

and (iii) “Interest Period” shall mean a period commencing on the
day the Company elects to fix a rate under this option and ending on the
numerically corresponding day in the next calendar month or the month that is
2, 3, or 6 months or 1 year thereafter, as the case may be; provided, however,
that: (x) in the event such ending day is not a Banking Day, such period shall
be extended to the next Banking Day unless such next Banking Day falls in the
next calendar month, in which case it shall end on the preceding Banking Day;
and (y) if there is no numerically corresponding day in the month, then such
period shall end on the last Banking Day in the relevant month; and (v) “FRB
Regulation D” shall mean Regulation D as promulgated by the Board of Governors
of the Federal Reserve System, 12 CFR Part 204, as amended.

 

(D)          Treasury Option.  At a fixed rate equal to Applicable Treasury
Margin per annum (as described in terms of basis points (“bps”) in the chart immediately
set forth below) above the “U.S. Treasury Rate” (as hereinafter defined). Under
this option, balances of $2,000,000.00 or more may be fixed on or before for
periods ranging from two years to the final maturity date of the loan, as
selected by the Company. However, rates may not be fixed in such a manner as to
require the Company to have to repay any fixed rate balance prior to the last
day of its fixed rate period in order to pay any installment of principal. For
purposes hereof, the “U.S. Treasury Rate” shall mean the yield to maturity on
U.S. Treasury instruments having the same maturity date as the last day of the
fixed rate period selected by the Company, as calculated from the bid price
indicated by Telerate (page 5) at the time the rate is fixed. If, however,
no instrument is indicated for the maturity selected, then the rate shall be interpolated
based on the bid prices quoted for the next longest and shortest maturities so
indicated. In the event Telerate ceases to provide such quotations or
materially changes the form or substance of page 5 (as determined by
CoBank), then CoBank will notify the Company and the parties hereto will agree
upon a substitute basis for obtaining such quotations

 

TREASURY
MARGINS

 

	
  FIXED RATE

  PRODUCT

  	
   

  	
  INDEX

  	
   

  	
  SPREAD OVER INDEX IN BASIS

  POINTS (Applicable Treasury Margin)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Two Years

  	
   

  	
  U.S.$ Constant Maturity Treasury Rate (“US$CMT”)

  	
   

  	
  125 bps

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Three Years

  	
   

  	
  US$CMT

  	
   

  	
  125 bps

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Four Years

  	
   

  	
  US$CMT

  	
   

  	
  125 bps

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Five Years

  	
   

  	
  US$CMT

  	
   

  	
  125 bps

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Seven Years

  	
   

  	
  US$CMT

  	
   

  	
  140 bps

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ten Years

  	
   

  	
  US$CMT

  	
   

  	
  140 bps

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Floor (Minimum) Rate (For Two to Ten Year
  Fixed Rate Products Only)

  	
   

  	
  CoBank’s cost of funds (as reasonably determined by CoBank in its
  sole discretion)

  	
   

  	
  105 bps

  	
   

  

 

The spread over all of the above indices, including
the Floor (Minimum) Rate, may increase or decrease for future fixed amounts
based on the Company’s previous fiscal quarter’s leverage ratio, as follows;

 

2

 

	
  LEVERAGE RATIO

  (as defined below)

  	
   

  	
  INCREASE / DECREASE

  TO SPREAD

  	
   

  	
  CHANGE TO

  APPLICABLE LIBOR

  and TREASURY

  MARGINS

  (IN BASIS POINTS)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A. Equal to or greater than 1.35:1.00

  	
   

  	
  Increase

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B. Equal to or greater than 1.20: 1.00, but less than 1.35:1.00

  	
   

  	
  None

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C. Less than 1.20:1.00, but greater than or equal to 1.00:1.00

  	
   

  	
  Decrease

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D. Less than 1.00:1.00

  	
   

  	
  Decrease

  	
   

  	
  20

  	
   

  

 

Leverage Ratio: 
The Company will maintain a leverage ratio of not more than 1.50:1.0.
Leverage ratio is long term debt (excluding current maturities) calculated in
accordance with GAAP plus or minus the difference between actual working
capital and Minimum Net Working Capital (as defined in the MLA No. Z269, Section 10,
as it may be amended), divided by total members’ investments plus the estimated
unit retains.

 

Changes to the Applicable LIBOR or Treasury
Margin shall be made quarterly on the latter of either: (a) five business
days after the Bank’s receipt of the Company’s certification of compliance with
the leverage ratio, or (b) 30 days after the end of each calendar quarter.
If the Company fails to timely furnish to CoBank the compliance certificate as
required to be delivered pursuant to the MLA, then the change to the Applicable
LIBOR and Treasury Margin shall be an increase of the highest permitted under
the above chart.

 

The Company shall select the applicable rate option
at the time it requests a loan hereunder and may, subject to the limitations
set forth above, elect to convert balances bearing interest at the variable
rate option to one of the fixed rate options. Upon the expiration of any fixed
rate period, interest shall automatically accrue at the variable rate option
unless the amount fixed is repaid or fixed for an additional period in
accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank
otherwise consents in its sole discretion in each instance, rates may not be
fixed for periods expiring after the maturity date of the loans. In the event
CoBank so consents and the Commitment is not renewed, then each balance so
fixed shall be due and payable on the last day of its fixed rate period, and
the promissory note set forth below shall be deemed amended accordingly. All
elections provided for herein shall be made telephonically or in writing and
must be received by 12:00 noon Company’s local time. Interest shall be
calculated on the actual number of days each loan is outstanding on the basis
of a year consisting of 360 days and shall be payable quarterly in arrears by
the 20th day of the following month,

 

SECTION 5.          Promissory Note.  The Company promises to repay the bans that
are outstanding in 4 equal, consecutive annual principal payments of
$9,396,579.17, with the first such payment due on or before December 31,
2006, and a final principal payment due in an amount equal to the remaining
unpaid principal balance on or before December 31, 2010. If any
installment due date is not a day on which CoBank is open for business, then
such payment shall be made on the next day on

 

3

 

which CoBank is open for business. In addition to the above, the
Company promises to pay interest on the unpaid principal balance hereof at the
times and in accordance with the provisions set forth in Section 4 hereof.
This note replaces and supersedes, but does not constitute payment of the
indebtedness evidenced by, the promissory note set forth in the Supplement
being amended and restated hereby.

 

The Company shall be permitted to make special
payments, in a minimum amount of $388,500,00, on the variable rate portion of
this loan, when all short term financing, including the Company’s seasonal
loans, Commodity Credit Corporation loans and other short term loans have been
zeroed out. These special payments may be readvanced through the expiration
date of the Commitment. Reinstatement may be denied and canceled at any time at
the option of CoBank. The reinstatable commitments arising from such special
payments shall be subject to the Commitment Fee as described in Section 8
below.

 

SECTION 6.         Prepayment.  
Subject to Section 13 of the MLA, the loans may be prepaid in whole or
in part on one CoBank business day’s prior written notice. During the term of
the Commitment, prepayments shall be applied to such balances, fixed or
variable, as the Company shall specify. After the expiration of the term of the
Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to
principal installments in the inverse order of their maturity and to such
balances, fixed or variable, as CoBank shall specify.

 

SECTION 7.         Commitment
Fee.   In consideration of the Commitment, the
Company agrees to pay to CoBank a commitment fee on the average daily unused
portion of the Commitment at the rate of 20 basis points per annum (calculated on
a 360 day basis), payable quarterly in arrears by the 20th day following each
calendar quarter. Such fee shall be payable for each quarter (or portion
thereof) occurring during the original or any extended term of the Commitment.

 

SECTION 8.         Commitments
Arising From Special Payments.   Commitments
arising as a result of special payments described in Section 5 above shall
be subject to a commitment fee of 25 basis points (0.25%) on an annualized
basis, on the average daily unused commitment. Any such fees incurred shall be
payable on the last day of the calendar quarter, in arrears, computed on the
basis of a year of 360 days for the actual number of days elapsed in which such
reinstatable commitments were outstanding,

 

SECTION 9.          Security.   In addition to any other security that may
otherwise be required or provided, the Company’s obligations to CoBank under
this Supplement are secured by that Restated Mortgage and Security Agreement
dated September 15, 1998, from American Crystal Sugar Company to St. Paul
Bank for Cooperatives (now known as CoBank as a result of merger), as
Collateral Agent, as amended on January 31, 2003 by that certain
Modification Agreement to the Amended and Restated Mortgage and Security
Agreement.

 

SECTION 10.       Amendment Fee.   In consideration of the amendment, the
Company agrees to pay to CoBank on the execution hereof a fee in the amount of
$9,396,58.

 

IN WITNESS WHEREOF, the parties have caused this
Supplement to be executed by their duly authorized officers as of the date
shown above.

 

	
  CoBANK, ACB

  	
   

  	
  AMERICAN CRYSTAL SUGAR COMPANY

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Pat
  Schulz

  	
   

  	
   

  	
  By:

  	
     /s/  Sam
  Wai

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Assistant
  Corporate Secretary

  	
   

  	
   

  	
  Title:

  	
     Treasurer

  	
   

  

 

4

 

Loan No.
Z269T01FNP

 

REVOLVING
TERM LOAN SUPPLEMENT

 

THIS SUPPLEMENT to the Amended and Restated
Master Loan Agreement dated July 21, 2003 (the “MLA”), is entered, into as
of July 8, 2005, between CoBANK, ACB
(“CoBank”) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead,
Minnesota (the “Company”), and amends and restates the Supplement
dated August 13, 2004 and numbered Z269T01ENP.

 

SECTION 1.         The Revolving Term Loan Commitment.   On the terms and conditions set forth in the
MLA and this Supplement, CoBank agrees to make loans to the Company during the
period set forth below in an aggregate principal amount not to exceed
$49,079,855.68 at any one time outstanding (the “Commitment”). Within the
limits of the Commitment, the Company may borrow, repay and reborrow.

 

SECTION 2.         Purpose.   The purpose of the Commitment is to finance
the operating needs of the Company.

 

SECTION 3.         Term.   The term of the Commitment shall be from the
date hereof, up to and including August 1, 2006, or such later date as
CoBank may, in its sole discretion, authorize in writing.

 

SECTION 4.         Interest. 
 The Company agrees to pay
interest on the unpaid balance of the loans in accordance with one or more of
the following interest rate options, as selected by the Company:

 

(A)          CoBank Base Rate. 
 At a rate per annum equal at all
times to the rate of interest established by CoBank from time to time as its
CoBank Base Rate, which Rate is intended by CoBank to be a reference rate and
not its lowest rate. The CoBank Base Rate will change on the date established
by CoBank as the effective date of any change therein and CoBank agrees to
notify the Company of any such change.

 

(B)          Quoted Rate.  
At a fixed rate per annum to be quoted by CoBank in its sole discretion
in each instance. Under this option, rates may be fixed on such balances and for
such periods, as may be agreeable to CoBank in its sole discretion in each
instance, provided that:  (1) the
maximum fixed period shall be 1 day; and (2) the minimum amount that may
be fixed each time shall be $2,000,000.00.

 

(C)          LIBOR Option. 
At a fixed rate equal to “LIBOR” (as hereinafter defined) plus 90 basis
points per annum (the “LIBOR” Spread). Under this option:  (a) rates may be fixed for “Interest Periods”
(as hereinafter defined) of 1, 2, 3 or 6 months, or 1 year, as selected by the
Company; (b) the minimum amount that may he fixed at any one time shall be
$2,000,000.00; and (c) rates may only be fixed on a “Banking Day” (as
hereinafter defined) or, at the option of the Company, on 3 Banking Days’ prior
notice.  For purposes hereof: (i) “LIBOR”
shall mean the rate (rounded upward to the nearest sixteenth and adjusted for
reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for banks
subject to “PRB Regulation D” (as hereinafter defined) or required by any other
federal law or regulation) quoted by the British Bankers Association (the “BBA”)
at 11:00 a.m. London time 2 Banking Days before the commencement of the
Interest for Period for the offering of U.S. dollar deposits in the London
interbank market for the Interest Period designated by the Company, as
published by Bloomberg or another major information vendor listed on the BBA’s
official website; (ii) “Banking Day” shall mean a day on which CoBank is
open for business, dealings in U.S. dollar deposits are being carried out in
the London interbank market, and banks are open for business in New York City
and London, England; (iii) “Interest Period” shall mean a period commencing on
the day the Company elects to fix a rate under this

 

 

option and ending on the numerically corresponding day in the next
calendar month or the month that is 2, 3 or 6 months or 1 year thereafter, as
the case may be; provided, however, that: (x) in the event such ending day is
not a Banking Day, such period shall be extended to the next Banking Day unless
such next Banking Day falls in the next calendar month, in which case it shall
end on the preceding Banking Day; and (y) if there is no numerically
corresponding day in the month, then such period shall end on the last Banking
Day in the relevant month; (iv) “Eurocurrency Liabilities” shall have
meaning as set forth in FRB Regulation D; and (v) “FRB Regulation D” shall
mean Regulation D as promulgated by the Board of Governors of the Federal
Reserve System, 12 CFR Part 204, as amended.

 

(D)          Treasury Option. 
 At a fixed rate equal to the
Applicable Treasury Margin per annum (as described in terms of basis points (“bps”)
in the chart immediately set forth below) above the “U.S. Treasury Rate” (as
hereinafter defined). Under this option, balances of $2,000,000.00 or more may
be fixed on or before for periods ranging from two years to the final maturity
date of the loan, as selected by the Company. However, rates may not be fixed
in such a manner as to require the Company to have to repay any fixed rate
balance prior to the last day of its fixed rate period in order to pay any
installment of principal. For purposes hereof, the “U.S. Treasury Rate” shall
mean the yield to maturity on U.S. Treasury instruments having the same
maturity date as the last day of the fixed rate period selected by the Company,
as calculated from the bid price indicated by Telerate (page 5) at the
time the rate is fixed. If, however, no instrument is indicated for the
maturity selected, then the rate shall be interpolated based on the bid prices
quoted for the next longest and shortest maturities so indicated. In the event
Telerate ceases to provide such quotations or materially changes the form or
substance of page 5 (as determined by CoBank), then CoBank will notify the
Company and the parties hereto will agree upon a substitute basis for obtaining
such quotations,

 

TREASURY
MARGINS

 

	
  FIXED RATE

  PRODUCT

  	
   

  	
  INDEX

  	
   

  	
  SPREAD OVER INDEX IN BASIS

  POINTS (Applicable Treasury Margin)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Two Years

  	
   

  	
  U.S. $ Constant Maturity

  Treasury (“US$CMT”)

  	
   

  	
  125 bps

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Three Years

  	
   

  	
  US$CMT

  	
   

  	
  125 bps

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Four Years

  	
   

  	
  US$CMT

  	
   

  	
  125 bps

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Five Years

  	
   

  	
  US$CMT

  	
   

  	
  125 bps

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Seven Years

  	
   

  	
  US$CMT

  	
   

  	
  140 bps

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ten Years

  	
   

  	
  US$CMT

  	
   

  	
  140 bps

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Floor (Minimum) Rate (For Two to Ten Year
  Fixed Rate Products Only)

  	
   

  	
  CoBank’s cost of funds (as reasonably determined by CoBank in its
  sole discretion)

  	
   

  	
  105 bps

  

 

The spread over all of the above indices, including
the Floor (Minimum) Rate, may increase or decrease for future fixed amounts
based on the Company’s previous fiscal quarter’s leverage ratio, as follows:

 

2

 

	
  LEVERAGE RATIO

  (as defined below)

  	
   

  	
  INCREASE / DECREASE

  TO SPREAD

  	
   

  	
  CHANGE TO

  APPLICABLE LIBOR

  and TREASURY

  MARGINS

  (IN BASIS POINTS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A. Equal to or greater than 1.35:1.00

  	
   

  	
  Increase

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B. Equal to or greater than 1.20:1.00, but less than 1.35:1.00

  	
   

  	
  None

  	
   

  	
  0

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C. Less than 1.20:1.00, but greater than or equal to 1.00:1.00

  	
   

  	
  Decrease

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D. Less than 1.00:1.00

  	
   

  	
  Decrease

  	
   

  	
  20

  

 

Leverage Ratio:   The
Company will maintain a leverage ratio of not more than 1.50:1.0. Leverage
ratio is long term debt (excluding current maturities) calculated in accordance
with GAAP plus or minus the difference between actual working capital and
Minimum Net Working Capital (as defined in the MLA No. Z269, Section 10, as it may be amended),
divided by total members investments plus the estimated unit retains.

 

Changes to the Applicable LIBOR or Treasury
Margin shall be made quarterly on the latter of either: (a) five business
days after the Bank’s receipt of the Company’s certification of compliance with
the leverage ratio, or (b) 30 days after the end of each calendar quarter.
If the Company fails to timely furnish to CoBank the compliance certificate as
required to be delivered pursuant to the MLA, then the change to the Applicable
LIBOR and Treasury Margin shall be an increase of the highest permitted under
the above chart.

 

The Company shall select the applicable rate
option at the time it requests a loan hereunder and may, subject to the
limitations set forth above, elect to convert balances bearing interest at the
variable rate option to one of the fixed rate options. Upon the expiration of
any fixed rate period, interest shall automatically accrue at the variable rate
option unless the amount fixed is repaid or fixed for an additional period in
accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank
otherwise consents in its sole discretion in each instance, rates may not be
fixed for periods expiring after the maturity date of the loans. In the event
CoBank so consents and the Commitment is not renewed, then each balance so
fixed shall be due and payable on the last day of its fixed rate period, and
the promissory note set forth below shall be deemed amended accordingly. All
elections provided for herein shall be made telephonically or in writing and
must be received by 12:00 noon Company’s local time. Interest shall be
calculated on the actual number of days each loan is outstanding on the basis
of a year consisting of 360 days and shall be payable quarterly in arrears by
the 20th day of the following month.

 

SECTION 5.          Promissory Note.   The
Company promises to repay the loans that are outstanding in 3 equal,
consecutive annual principal payments of $7,603,420.83, with the first such
payment due on or before December 31, 2006, and a final principal payment
due in an amount equal to the remaining unpaid principal balance on or before December 31,
2009. If any installment due date is not a day on which CoBank is open for
business, then such payment shall be made on the next day on which CoBank is
open for business. In addition to the above, the Company promises to pay
interest on the unpaid principal balance hereof at the times and in accordance
with the provisions set forth in Section

 

3

 

4 hereof.  This note replaces and
supersedes, but does not constitute payment of the indebtedness evidenced by,
the promissory note set forth in the Supplement being amended and restated
hereby.

 

The Company shall be permitted to make special
payments, in a minimum amount of $111,500.00, on the variable rate portion of
this loan, when all short term financing, including the Company’s seasonal
loans, Commodity Credit Corporation loans and other short term loans have been
zeroed out. These special payments may be readvanced through the expiration
date of the Commitment. Reinstatement may be denied and canceled at any time at
the option of CoBank. The reinstatable commitments arising from such special
payments shall be subject to the Commitment Fee as described in Section 8
below.

 

SECTION 6.         Prepayment.   Subject to Section 13 of the MLA, the
loans may be prepaid in whole or in part on one CoBank business day’s prior
written notice. During the term of the Commitment, prepayments shall be applied
to such balances, fixed or variable, as the Company shall specify. After the
expiration of the term of the Commitment, prepayments shall, unless CoBank
otherwise agrees, be applied to principal installments in the inverse order of
their maturity and to such balances, fixed or variable, as CoBank shall
specify.

 

SECTION 7.         Commitment
Fee.   In consideration of the Commitment, the
Company agrees to pay to CoBank a commitment fee on the average daily unused
portion of the Commitment at the rate of 20 basis points per annum (calculated
on a 360 day basis), payable quarterly in arrears by the 20th day following
each calendar quarter. Such fee shall be payable for each quarter (or portion
thereof) occurring during the original or any extended term of the Commitment.

 

SECTION 8.         Commitments
Arising From Special Payments.   Commitments
arising as a result of special payments described in Section 5 above shall
be subject to a commitment fee of 25 basis points (0.25%) on an annualized
basis, on the average daily unused commitment. Any such fees incurred shall be
payable on the last day of the calendar quarter, in arrears, computed on. the
basis of a year of 360 days for the actual number of days elapsed in which such
reinstatable commitments were outstanding.

 

SECTION 9.         Security. 
 In addition to any other security
that may otherwise be required or provided, the Company’s obligations to CoBank
under this Supplement are secured by that Restated Mortgage and Security
Agreement dated September 15, 1998, from American Crystal Sugar Company to
St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as
Collateral Agent, as amended on January 31, 2003 by that certain Modification
Agreement to the Amended and Restated Mortgage and Security Agreement.

 

SECTION 10.       Amendment Fee.   In
consideration of the amendment, the Company agrees to pay to CoBank on the
execution hereof a fee in the amount of $7,603.42.

 

IN WITNESS WHEREOF, the parties have caused this
Supplement to be executed by their duly authorized officers as of the date
shown above.

 

 

	
  CoBANK, ACB

  	
   

  	
  AMERICAN CRYSTAL SUGAR COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Pat
  Schulz

  	
   

  	
   

  	
  By:

  	
     /s/  Sam
  Wai

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Assistant
  Corporate Secretary

  	
   

  	
   

  	
  Title:

  	
     Treasurer

  	
   

  

 

4

 

Loan No. Z269T06C

 

REVOLVING TERM LOAN
SUPPLEMENT

 

THIS SUPPLEMENT to the Amended and Restated Master Loan
Agreement dated July 21, 2003 (the “MLA”), is entered into as of July 11,
2005, between CoBANK, ACB (“CoBank”)
and AMERICAN  CRYSTAL SUGAR COMPANY,  Moorhead,  Minnesota
(the “Company”), and amends and restates the Supplement dated September 8,
2004, and numbered Z269T06B.

 

SECTION 1.         The Revolving Term Loan Commitment.  On the terms and conditions set forth in the
MLA and this Supplement, CoBank agrees to make loans to the Company from the
date hereof, up to and including August 1, 2006, in an aggregate principal
amount not to exceed, at any one time outstanding, $35,000,000.00 less the
amounts scheduled to be repaid during the period set forth below in Section 5
(the “Commitment”). Within the limits of the Commitment, the Company may
borrow, repay and reborrow.

 

SECTION 2.         Purpose. 
The purpose of the Commitment is to finance the operating needs and
general corporate purposes of the Company and provide for short-term commercial
and standby letters of credit.

 

SECTION 3.         Term. 
Intentionally Omitted.

 

SECTION 4.         Interest. 
The Company agrees to pay interest on the unpaid balance of the loans in
accordance with one or more of the following interest rate options, as selected
by the Company.

 

(A)          CoBank
Base Rate.   At a rate per annum equal at all times to
the rate of interest established by CoBank from time to time as its CoBank Base
Rate, which Rate is intended by CoBank to be a reference rate and not its
lowest rate. The CoBank Base Rate will change on the date established by CoBank
as the effective date of any change therein and CoBank agrees to notify the
Company of any such change.

 

(B)          Quoted
Rate.  At a fixed rate per annum to be quoted by
CoBank in its sole discretion in each instance. Under this option, rates may be
fixed on such balances and for such periods, as may be agreeable to CoBank in
its sole discretion in each instance, provided that: (1) the maximum fixed
period shall be 1 day; (2) the minimum amount that may be fixed each time
shall be $2,000,000.00.

 

(C)          LIBOR
Option.  At a fixed rate equal to “LIBOR” (as
hereinafter defined) plus 100 basis points per annum (the “LIBOR Spread”).
Under this option: (a) rates may be fixed for “Interest Periods” (as
hereinafter defined) of 1, 2, 3 or 6 months, or 1 year, as selected by the
Company; (b) the minimum amount that may be fixed at any one time shall be
$2,000,000.00; and (c) rates may only be fixed on a “Banking Day” (as
hereinafter defined) or, at the option of the Company, on 3 Banking Days’ prior
notice. For purposes hereof: (i) “LIBOR” shall mean the rate (rounded
upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency
Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D”
(as hereinafter defined) or required by any other federal law or regulation)
quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time
2 Banking Days before the commencement of the Interest for Period for the
offering of U.S. dollar deposits in the London interbank market for the
Interest Period designated by the Company, as published by Bloomberg or another
major information vendor listed on the BBA’s official website; (ii) “Banking
Day” shall mean a day on which CoBank is open for business, dealings in U.S.
dollar deposits are being carried out in the London interbank market, and banks
are open for business in New York City and London, England; (iii) “Interest

 

 

Period” shall mean a period commencing on the day the Company elects to
fix a rate under this option and ending on the numerically corresponding day in
the next calendar month or the month that is 2, 3 or 6 months or 1 year
thereafter, as the case may be; provided, however, that: (x) in the event such
ending day is not a Banking Day, such period shall be extended to the next
Banking Day unless such next Banking Day falls in the next calendar month, in
which case it shall end on the preceding Banking Day; and (y) if there is no
numerically corresponding day in the month, then such period shall end on the
last Banking Day in the relevant month; (iv) “Eurocurrency Liabilities”
shall have meaning as set forth in FRB Regulation D; and (v) “FRB
Regulation D” shall mean Regulation D as promulgated by the Board of Governors
of the Federal Reserve System, 12 CFR Part 204, as amended.

 

The L1BOR Spread may increase or decrease for future fixed amounts
based on the Company’s previous fiscal quarter’s leverage ratio, as follows:

 

	
  LEVERAGE RATIO

  (as defined below)

  	
   

  	
  INCREASE/DECREASE

  TO LIBOR SPREAD

  	
   

  	
  CHANGE TO THE

  LIBOR SPREAD (IN

  BASIS POINTS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A. Equal to or greater than 1.35:1.00

  	
   

  	
  Increase

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B. Equal to or greater than 1.20:1.00, but less than 1.35:1.00

  	
   

  	
  None

  	
   

  	
  0

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C. Less than 1.20:1.00, but greater than or equal to 1.00:1.00

  	
   

  	
  Decrease

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D. Less than 1.00:1.00

  	
   

  	
  Decrease

  	
   

  	
  20

  

 

Leverage Ratio:  The Company will maintain a
leverage ratio of not more than 1.50:1.0. Leverage ratio is long term debt
(excluding current maturities) calculated in accordance with GAAP plus or minus
the difference between actual working capital and Minimum Net Working Capital
(as defined in the MLA No. Z269, Section 10, as it may be amended),
divided by total members’ investments plus the estimated unit retains.

 

Changes to the LIBOR Spread shall be made quarterly on the latter of
either: (a) five business days after the Bank’s receipt of the Company’s
certification of compliance with the leverage ratio, or (b) 30 days after
the end of each calendar quarter. If the Company fails to timely furnish to
CoBank the compliance certificate as required to be delivered pursuant to the
MLA, then the change to the LIBOR Spread shall be an increase of the highest
permitted under the above chart.

 

The Company shall select the applicable rate option at the time it
requests a loan hereunder and may, subject to the limitations set forth above,
elect to convert balances bearing interest at the variable rate option to one
of the fixed rate options. Upon the expiration of any fixed rate period,
interest shall automatically accrue at the variable rate option unless the
amount fixed is repaid or fixed for an additional period in accordance with the
terms hereof.  Notwithstanding the
foregoing, unless CoBank otherwise consents in its sole discretion in each
instance, rates may not be fixed for periods expiring after the maturity date
of the loans. In the event CoBank consents to one or more balances being fixed
for a period or periods extending beyond the maturity date of the loans and the
Commitment is not renewed, then each such balance shall be due and payable on
the last day of its fixed rate period and the promissory note set

 

2

 

forth below shall be deemed amended accordingly. All elections provided
for herein shall be made telephonically or in writing and must be received by
12:00 Noon Company’s local time. Interest shall be calculated on the actual
number of days each loan is outstanding on the basis of a year consisting of
360 days and shall be payable monthly in arrears by the 20th day of the
following month; provided, however, in the event the Company elects to fix all
or a portion of the indebtedness outstanding under the LIBOR interest rate
option above, interest shall be payable at the maturity of the interest period
and if the LIBOR interest rate fix is for a period longer than 3 months,
interest on that portion of the indebtedness outstanding shall be payable
quarterly in arrears by the 20th day of the following month and at maturity.

 

SECTION 5.          Promissory Note. 
The Company promises to repay on the dates set forth below, the outstanding
principal, if any, that is in excess of the listed amounts:

 

	
  Payment Date

  	
   

  	
  Reducing Commitment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  29,166,666.67

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  23,333,333.34

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  17,500,000.01

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  11,666,666.68

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  5,833,333.35

  	
   

  

 

followed by a final installment in an amount equal to the remaining
unpaid principal balance of the loans on December 31, 2011. This note
replaces and supersedes, but does not constitute payment of the indebtedness
evidenced by, the promissory note set forth in the Supplement being amended and
restated hereby.

 

SECTION 6.          Prepayment.  Subject to Section 13 of the MLA, the
loans may be prepaid in whole or in part on one Business Day’s prior written
notice. During the term of the Commitment, prepayments shall be applied to such
balances, fixed or variable, as the Company shall specify. After the expiration
of the term of the Commitment, prepayments shall, unless CoBank otherwise
agrees, be applied to principal installments in the inverse order of their
maturity and to such balances, fixed or variable, as CoBank shall specify.

 

SECTION 7.          Security.  In addition to any other security that may
otherwise be required or provided, the Company’s obligations to CoBank under
this Supplement are secured by that Restated Mortgage and Security Agreement
dated September 15, 1998, from American Crystal Sugar Company to St. Paul
Bank for Cooperatives (now known as CoBank as a result of merger), as
Collateral Agent, as amended on January 31, 2003 by that certain
Modification Agreement to the Amended and Restated Mortgage and Security
Agreement.

 

SECTION 8.          Commitment Fee. 
In consideration of the Commitment, the Company agrees to pay to CoBank
a commitment fee on the average daily unused portion of the Commitment at the
rate of 20 basis points per annum (calculated on a 360 day basis), payable
quarterly in arrears by the 20th day following each calendar quarter. Such fee
shall be payable for each quarter (or portion thereof) occurring during the
original or any extended term of the Commitment.

 

3

 

SECTION 9.         Amendment Fee.  In consideration of the amendment, the Company
agrees to pay to CoBank on the execution hereof a fee in
the amount of $15,000.00.

 

SECTION 10.       Loan Origination Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank
on the execution hereof a loan origination fee in the amount of $20,000.00.

 

IN WITNESS WHEREOF, the parties have caused this
Supplement to be executed by their duly authorized officers as of the date shown
above.

 

	
  CoBANK, ACB

  	
   

  	
  AMERICAN CRYSTAL SUGAR COMPANY

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Pat
  Schulz

  	
   

  	
   

  	
  By:

  	
     /s/  Sam
  Wai

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Assistant
  Corporate Secretary

  	
   

  	
   

  	
  Title:

  	
     Treasurer

  	
   

  

 

4

 

Loan No. Z269T07

 

STATUSED
REVOLVING TERM LOAN SUPPLEMENT

 

THIS SUPPLEMENT to the Master Loan Agreement dated July 21,
2003 (the “MLA”), is entered into as of July 11, 2005, between CoBANK, ACB (“CoBank”) and AMERICAN CRYSTAL SUGAR COMPANY,  Moorhead,  Minnesota
(the “Company”).

 

SECTION 1.         The Revolving Credit Facility.  On the terms and conditions set forth in the
MLA and this Supplement, CoBank agrees to make loans to the Company during the
period set forth below in an aggregate principal amount not to exceed, at any
one time outstanding, the lesser of the “Borrowing Base” (as calculated
pursuant to the Borrowing Base Certificate, the form of this is attached hereto
as Exhibit A) or the sum of $280,000,000.00. Within the limits of the
Commitment, and the limit of the Borrowing Base, the Company may borrow, repay
and reborrow.

 

SECTION 2.         Purpose.  The purpose of the Commitment is to finance
the Company’s general corporate purposes, fund working capital requirements,
support the Company’s commercial paper program, provide for short-term commercial
and standby letters of credit and to renew, extend, and refinance the Company’s
obligations to CoBank under the Statused Revolving Credit Supplement dated July 20,
2004 and numbered Z269S01G, as amended, and the Revolving Term Loan Supplement
dated July 20, 2004 and numbered Z269T05A (the “Existing Agreements”). The
Company agrees that on the date when all conditions precedent to CoBank’s
obligation to extend credit hereunder have been satisfied: (a) the
principal balance outstanding under the Existing Agreements shall be
transferred to and charged against the Commitment; (b) all obligations
relating to letters of credit issued and outstanding under the Existing
Agreements shall be transferred to and continued as if letters of credit had
been issued under this Supplement; (c) all accrued obligations of the
Company under the Existing Agreements for the payment of interest or other
charges shall survive such cancellation and be transferred to and become part
of the Company’s obligations under this Supplement as if fully set forth
herein; and (d) the Existing Agreements and the promissory note set forth
in or executed in connection therewith shall be deemed replaced and superseded,
but the indebtedness evidenced by such notes shall not be deemed to have been
paid off, by this Supplement and the MLA. 
In addition, in the event any balances bearing interest at a fixed rate
are outstanding on the date such loans are being transferred hereto, then such
balances shall continue to be subject to such rates for the remaining agreed
upon fixed rate periods but shall otherwise be subject to the terms hereof.

 

SECTION 3.         Term. 
The term of the Commitment shall be from the date hereof, up to and
including August 1, 2007, or such later date as CoBank may, in its sole
discretion, authorize in writing.

 

SECTION 4.         Interest. 
The Company agrees to pay interest on the unpaid balance of the loans in
accordance with one or more of the following interest rate options, as selected
by the Company:

 

(A)          Base Rate Option. 
At a rate per annum at all times equal to the Base Rate. For the
purposes hereof, Base Rate means that rate in effect from day to day defined as
the “prime rate” as published from time to time in the Eastern Edition of The
Wall Street Journal as the average prime lending rate for seventy-five percent
(75%) of the United States’ thirty (30) largest commercial banks, or

 

 

if The Wall Street Journal shall cease publication or cease publishing
the “prime rate” on a regular basis, such other regularly published average prime
rate applicable to such commercial banks as is acceptable to the Lender in its
reasonable discretion. Loans for which the Base Rate option is selected are
referred to herein as “Base Rate Loans”. Base Rate Loans shall be: (a) in
minimum amounts of $5,000,000.00 and incremental multiples of $1,000,000.00;
and (b) made available on any Banking Day.

 

(B)          Quoted Rate. 
At a fixed rate per annum to be quoted by CoBank in its sole discretion in
each instance. Under this option, rates may be fixed on such balances and for
such periods, as may be agreeable to CoBank in its sole discretion in each
instance, provided that: (1) the maximum fixed period shall be 1 day; and (2) the
minimum amount that may be fixed each time shall be $5,000,000.00.

 

(C)          LIBOR Option. 
At a fixed rate equal to “LIBOR” (as hereinafter defined) plus 75 basis
points per annum. Under this option: (a) rates may be fixed for “Interest
Periods” (as hereinafter defined) of 1, 2, 3 or 6 months, or 1 year, as
selected by the Company; (b) the minimum amount that may be fixed at any
one time shall be $5,000,000.00; and (c) rates may only be fixed on a “Banking
Day” (as hereinafter defined) or, at the option of the Company, on 3 Banking
Days’ prior notice.  For purposes hereof:
(i) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth
and adjusted for reserves required on “Eurocurrency Liabilities” (as
hereinafter defined) for banks subject to “FRB Regulation D” (as hereinafter
defined) or required by any other federal law or regulation) quoted by the British
Bankers Association (the “BBA”) at 11:00 a.m. London time 2 Banking Days
before the commencement of the Interest Period for the offering of U.S. dollar
deposits in the London interbank market for the Interest Period designated by the
Company, as published by Bloomberg or another major information vendor listed
on the BBA’s official website; (ii) “Banking Day” shall mean a day on
which CoBank is open for business, dealings in U.S. dollar deposits are being
carried out in the London interbank market, and banks are open for business in
New York City and London, England; (iii) “Interest Period” shall mean a
period commencing on the day the Company elects to fix a rate under this option
and ending on the numerically corresponding day in the next calendar month or
the month that is 2, 3 or 6 months or 1 year thereafter, as the case may be;
provided, however, that:  (x) in the
event such ending day is not a Banking Day, such period shall be extended to
the next Banking Day unless such next Banking Day falls in the next calendar
month, in which case it shall end on the preceding Banking Day; and (y) if
there is no numerically corresponding day in the month, then such period shall
end on the last Banking Day in the relevant month; (iv) “Eurocurrency
Liabilities” shall have meaning as set forth in FRB Regulation D; and (v) “FRB
Regulation D” shall mean Regulation D as promulgated by the Board of Governors
of the Federal Reserve System, 12 CFR Part 204, as amended.

 

(1)           Notwithstanding
anything herein to the contrary, if, on or prior to the determination of the
LIBOR rate for any LIBOR Interest Period, CoBank determines (which
determination shall be conclusive) that quotations of interest rates in
accordance with the definition of LIBOR rate are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining
rates of interest for LIBOR rate advances as provided in this Supplement, then
CoBank shall give the Company prompt notice thereof, and so long as such condition
remains in effect, CoBank shall be under no obligation to make LIBOR rate
loans, convert Base Rate loans into LIBOR rate loans, or continue LIBOR rate
loans, and the Company shall, on the last day(s) of the then current applicable
LIBOR Interest Period(s) for the outstanding LIBOR rate loans, either prepay
such LIBOR rate loans or such LIBOR rate loans shall automatically be converted
into a Base Rate loan in accordance with this Section 4.

 

2

 

(2)           If
any law, treaty, rule, regulation or determination of a court or governmental authority
or any change therein or in the interpretation or application thereof
subsequent to the date hereof (each, a “Change in Law”) shall make it unlawful
for CoBank to (a) advance any LIBOR rate loan or (b) maintain all or any
portion of a LIBOR rate loan, then CoBank shall promptly notify the Company thereof.  In the former event, any obligation of CoBank
to make available any future LIBOR rate loan shall immediately be canceled
(and, in lieu thereof shall be made as a Base Rate loan or Quoted Rate loan at
the option of the Company), and in the latter event, any such unlawful LIBOR
rate loan or portions thereof then outstanding shall be converted, at the
option of the Company, to either a Base Rate loan or a Quoted Rate loan;
provided, however, that if any such Change in Law shall permit the LIBOR rate
to remain in effect until the expiration of the LIBOR rate period applicable to
any such unlawful LIBOR rate loan, then such LIBOR rate loan shall continue in
effect until the expiration of such LIBOR rate period. Upon the occurrence of
any of the foregoing events on account of any Change in Law, the Company shall pay
to CoBank immediately upon demand such amounts as may be necessary to
compensate CoBank for any fees, charges, or other costs incurred or payable by
CoBank as a result thereof and which are attributable to any LIBOR rate loans
made available to the Company hereunder.

 

(3)           If
CoBank shall determine that, after the date hereof, the adoption of any applicable
Law, rule or regulation regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, 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 capital of CoBank as a consequence
of CoBank’s obligations hereunder to a level below that which CoBank could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy existing on the
date of this Supplement) by an amount deemed by CoBank to be material, then
from time to time, within fifteen (15) days after demand by CoBank, the Company
shall pay to CoBank such additional amount or amounts as will compensate CoBank
for such reduction.  CoBank agrees to
take reasonable steps to reduce the amount of such increase, provided, however,
that CoBank shall not be required to take any such step, if in CoBank’s sole
opinion, CoBank would suffer an economic loss or any negative legal or
regulatory consequences as a result thereof. 
If CoBank is to require the Company to make payments under this Section then
CoBank must make a demand on the Company to make such payment within ninety
(90) days of the later of (1) the date on which such capital costs are
actually incurred by CoBank, or (2) the date on which CoBank knows, or should
have known, that such capital costs have been incurred by CoBank.

 

The Company shall select the applicable rate option at the time it
requests a loan hereunder and may, subject to the limitations set forth above,
elect to convert balances bearing interest at the variable rate option to one
of the fixed rate options. Upon the expiration of any fixed rate period,
interest shall automatically accrue at the variable rate unless the amount
fixed is repaid or fixed for an additional period. Notwithstanding the
foregoing, rates may not be fixed for periods expiring after the maturity date
of the loans. All elections provided for herein shall be made telephonically or
in writing and must be received by 12:00 Noon Company’s local time; in the case
of LIBOR rate loans, all such elections must be made in writing. Interest shall
be calculated on the actual number of days each loan is outstanding on the
basis of a year consisting of 360 days and shall be payable monthly in arrears
by the 20th day of the following month or such other day that CoBank shall
require in a written notice to the Company, and at

 

3

 

maturity; provided, however, in the event the Company elects to fix all
or a portion of the indebtedness
outstanding under the LIBOR interest rate option above, interest shall be
payable at the maturity of the interest period and if the LIBOR interest rate
fix is for a period longer than 3 months, interest on that portion of the
indebtedness outstanding shall be payable quarterly in arrears on each
anniversary of the date the LIBOR interest rate fix was made and at maturity.

 

SECTION 5.         Promissory
Note.  Notwithstanding anything to the contrary
herein, any loan taken by the Company pursuant to this Commitment shall be
repaid on or before the earlier of (i) 360 days following the date that
funds are advanced to the Company hereunder, or (ii) the expiration of
this Commitment on August 1, 2007. If any installment due date is not a
day on which CoBank is open for business, then such payment shall be made on
the next day on which CoBank is open for business. In addition to the above,
the Company promises to pay interest on the unpaid principal balance hereof at
the times and in accordance with the provisions set forth in Section 4
hereof.

 

SECTION 6.         Borrowing Base Certificate, Etc. 
The Company agrees to furnish a Borrowing Base Certificate to CoBank at
such times or intervals as CoBank may from time to time request. Until receipt
of such a request, the Company agrees to furnish a Borrowing Base Certificate
to CoBank as soon as available after the end of each quarter, but in no event
more than 5 days after the Company’s quarterly filing with the Securities
Exchange Commission, calculating the Borrowing Base as of the last day of the
quarter for which the Certificate is being furnished. However, if no balance is
outstanding hereunder on the last day of such period, no Report need be
furnished. Regardless of the frequency of the reporting, if at any time the
amount outstanding under the Commitment exceeds the lesser of the Borrowing
Base or $280,000,000.00, the Company shall immediately notify CoBank and repay
so much of the loans as is necessary to reduce the amount outstanding under the
Commitment to the limits of the lesser of the Borrowing Base or
$280,000,000.00.

 

SECTION 7.         Prepayment.  Subject to the broken funding surcharge
provision of the MLA, the Company may on one Business Day’s prior written
notice prepay all or any portion of the loan(s). During the term of the
Commitment, prepayments shall be applied to such balances, fixed or variable,
as the Company shall specify. After the expiration of the term of the Commitment,
prepayments shall, unless CoBank otherwise agrees, be applied to principal
installments in the inverse order of their maturity and to such balances, fixed
or variable, as CoBank shall specify.

 

SECTION 8.         Letters
of Credit.  If agreeable to CoBank in its sole
discretion in each instance, in addition to loans, the Company may utilize the
Commitment to open irrevocable letters of credit for its account. Each letter
of credit will be issued within a reasonable period of time after receipt of a
duly completed and executed copy of CoBank’s then current form of application
(or, if applicable, in accordance with the terms of any CoTrade Agreement
between the parties), and shall reduce the amount available under the
Commitment by the maximum amount capable of being drawn thereunder.  Any draw under any letter of credit issued
hereunder shall be deemed an advance under the Commitment. Each letter of
credit must be in form and content acceptable to CoBank in its sole discretion,
must expire no later than the time the Commitment expires. The fee for issuing
each letter of credit shall be 75 basis points of the face amount of each
letter of credit, along with an issuance fee to CoBank, for its own account,
equal to the greater of (a) 1/8% of the face amount of the letter of
credit, or (b) $2,000.00, payable by the Company at or before issuance or
as otherwise agreed. The Company promises to repay

 

4

 

the outstanding balance on the Commitment in full on demand, or if no demand
is made, then any time on or before the Commitment expiration date of August 1,
2007.

 

SECTION 9.         Bid Borrowing.

 

(A)  General. 
CoBank agrees that the Company may from time to time request CoBank to submit
an offer to make a loan to the Company, provided, however, that CoBank may, but
shall have no obligation to, submit such offer, and the Company may, but shall
have no obligation to, accept any such offer. A request that CoBank submit an
offer to make a loan hereunder shall be referred to herein as a “bid request”, and an offer to make a loan that specifies the
loan amount, interest rate and maturity shall be referred to herein as the “bid”. Bid requests may be made orally or in writing (in a
form approved by CoBank) but if made orally shall be confirmed promptly by
telecopy (facsimile) of a written completed bid request in a form approved by
CoBank. Each bid request shall specify (a) the amount of the requested loan,
which amount must be a minimum amount of $1,000,000.00 or integral multiples
thereof (or the entire available balance of the Commitment), (b) the date
of the loan, and (c) the maturity date or Interest Period of the loan,
CoBank may, in response to a bid request, in its discretion, irrevocably submit
to the Company a bid containing an offer to make the loan.  Each bid, if submitted, must be submitted to
the Company, whether orally or in writing, by 10:00 a.m. (Denver,
Colorado, time) on the day following the bid request. Each bid shall specify
(x) the amount of the loan for which such bid is being made, (y) the rate of
interest per annum offered for the loan (which may be expressed in the form of
an index plus any margin), and (z) the maturity date or Interest Period of the
loan, which date shall not be beyond the term of the Commitment. Not later than
11:00 a.m. (Denver, Colorado, time) on the day the Company receives CoBank’s
bid (or at such later time as CoBank may agree), the Company shall either
reject the bid or accept the bid by giving notice to CoBank by telephone in either
case, confirmed by facsimile. Failure to properly notify CoBank of an
acceptance of the bid may be treated by CoBank as a rejection. Any loan made as
result of the Company’s acceptance of CoBank’s bid (such loan to be referred to
herein as a “bid loan”) shall be subject to the terms of the MLA, this
Supplement and all other Loan Documents entered into by the Company in
connection with the MLA.

 

(B)  Limitations. 
If CoBank has sold participation interests in the Commitment, then bid loans
by CoBank shall be deemed to reduce only CoBank’s pro rata share of the total
Commitment. The sum of all bid loans outstanding may not at any time exceed the
leaser of (a) $50,000,000.00 or (b) the dollar amount of CoBank’s pro
rata share of the Commitment (as said amount may be reduced as a result of
other loans made pursuant to the Commitment).

 

SECTION 10.       Consent of Participants. 
CoBank has sold Participation interests in the Loan Documents to the
following Participants: Ag Country PCS; AgFirst, FCB; First Farm Credit
Services; Wells Fargo Bank, N.A. (formerly Norwest Bank of North Dakota); U.S.
AgBank, FCB; and The Bank of Tokyo-Mitsubishi, Ltd.

 

SECTION 11.       Security.  Except for CoBank’s lieu on the Company’s
equity in CoBank, the Company’s obligations hereunder and, to the extent
related hereto, the MLA, shall be unsecured.

 

SECTION 12.       Commitment
Fee.  In consideration of the Commitment, the
Company agrees to pay to CoBank a commitment fee on the average daily unused
portion of the Commitment at the rate of 15 basis points per annum (calculated
on a 360 day basis), payable quarterly in arrears by the 20th day

 

5

 

following each calendar quarter. Such fee shall be payable for each
quarter (or portion thereof) occurring during the original or any extended term
of the Commitment.

 

SECTION 13.       Loan Origination Fee.   In
consideration of the Commitment, the Company agrees to pay to CoBank on the
execution hereof a loan origination fee in the amount of $210,000.00.

 

IN WITNESS WHEREOF,
the parties have caused this Supplement to be executed by their duly
authorized officers as of the date shown above.

 

	
  CoBANK, ACB

  	
   

  	
  AMERICAN CRYSTAL SUGAR COMPANY

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Pat
  Schulz

  	
   

  	
   

  	
  By:

  	
     /s/  Sam
  Wai

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Assistant
  Corporate Secretary

  	
   

  	
   

  	
  Title:

  	
     Treasurer

  	
   

  

 

6

 

EXHIBIT “A”

 

[Form of Borrowing
Base]

American
Crystal Sugar Company

Monthly Borrowing Base

For the month ended
                   

 

 

	
  Trade Accounts Receivables

  	
   

  	
  $                                       

  	
  @ 80%

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $                                         

  	
  (a)

  

 

Trade Accounts Receivables are defined as those of the Company and all
Subsidiaries which: (1) arise from the sale and delivery of inventory on
ordinary trade terms; (2) are evidenced by an invoice; (3) are net of
any credit, trade or other allowance given to the account debtor; (4) are
not owing by an account debtor who has become “insolvent or is the subject of
any bankruptcy, reorganization, liquidation or like proceeding; (5) are
not subject to any offset or deduction; (6) are not owing by an affiliate
of Company; (7) are not owing by an obligor located outside of the U.S.
unless the receivable is supported by a letter of credit issued by a bank
acceptable to the CoBank; and (8) are not government receivables. The
above provisions notwithstanding, Trade Receivables shall also exclude (i) any
accounts that are past due more than 90 days, and (ii) any contra account
regardless of the date;

 

	
  Inventory

  	
   

  	
  $

  	
  (b)

  

 

Inventory as determined on the basis of Net Realizable Value, defined
as the expected selling price of an inventory item less expected costs to
complete and dispose, as determined in accordance with GAAP.

 

	
  Crop Payments due Non-members and members

  	
   

  	
  $

  	
  (c)

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Inventory Value (b-c)

  	
   

  	
  $

  	
  @ 75%

  
	
  $                               (d)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrowing Base (a+d)

  	
   

  	
   

  	
   

  
	
  $                               

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Commercial Paper

  	
   

  	
   

  	
   

  
	
  $                               (c)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Statused Revolving Term – RI0013T07

  	
   

  	
   

  	
   

  
	
  $                               (f)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Commodity Credit Corp. loans

  	
   

  	
   

  	
   

  
	
                                       (g)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Short-term Loans (e+f+g)

  	
   

  	
  $

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