Document:

www.EXFILE.com          888.775-4789            MATRITECH, INC.  FORM 8-K

    EXHIBIT
      10.3

    

    Extension
      Agreement made this 12th day of June, 2006 by and between Unotech Diagnostics,
      Inc. (“Unotech”) and Matritech, Inc. (“Matritech”).

    

    Whereas,
      the Unotech and Matritech are parties to a Contract Manufacturing Arrangement
      dated March 22, 2001 (the “Agreement”), and the Addendum dated June 1, 2001;
      and

    

    Whereas,
      the Agreement is due to expire on April 22, 2007, the end of the original six
      year term; and

    

    Whereas,
      both parties desire to extend the Agreement for one year, in accordance with
      the
      terms of the Agreement.

    

    The
      parties therefore agree as follows:

    

    1.    Unotech
      and Matritech mutually agree to extend the Agreement for one year to April
      22,
      2008. 

    

    2.    Except
      as
      expressly set forth herein, the terms and conditions of the original Agreement
      are hereby ratified and confirmed.

    

     

    
 

    
      	Unotech Diagnostics, Inc. 	Matritech, Inc. 
	 	 
	 	 
	 	 
	
              By:  /s/ Geng-Shuen Wu

              
                

              

              Its: 
President

              
                

              

              Date:
                6/06/06

              
                

              

               

            	
              By:  /s/ David L. Corbet

              
                

              

              Its: 
President
&
COO

              
                

              

              Date:
                6/12/06Exhibit 10.1 - Term Loan Agreement_ASDS of Orange County

     

    Exhibit
      10.1

    LOAN
      AGREEMENT

    (TERM
      LOAN)

    

    

    This
      Loan
      Agreement (Term Loan) (the "Agreement), dated June 8,
      2006 for
      reference purposes only, is executed
      by and between ASDS
      of Orange County, Inc., a Delaware corporation (the
      "Borrower"), and First
      Republic Bank
      (the
      "Lender"), with reference to the following facts:

    

    A.  Borrower
      has requested a term loan in the original principal amount of Five
      Million Three Hundred Thousand and 00/100 Dollars ($5,300,000.00)
(the
      "Loan") from the Lender for the purposes set forth in this
      Agreement.

    

    B.  Borrower
      and the Lender desire to enter into this Agreement to establish certain terms
      and conditions relating to
      the
      Loan.

    

    THEREFORE,
      for valuable consideration, Borrower and the Lender agree as follows:

    

    ARTICLE
      1

    

    DEFINITIONS

    

    For
      purposes of this Agreement, the following terms shall have the following
      definitions:

    

    1.1
      Borrower's
      Application. "Borrower's
      Application" means the written application, if any
      and
      all
financial
      statements and other information submitted by Borrower to the Lender in
      connection with the Lender's approval of the
      Loan.

    

    1.2
      Business
      Day. "Business
      Day" means any day other than a day on which commercial banks in California
      are authorized or required by law to close.

    

    1.3
      Collateral.
      "Collateral"
      means
      all
      real and personal property, if
      any, of
      Borrower or any third Person now
      or
      hereafter securing all or any part of the Obligations.

    

    1.4
      Commitment.
      "Commitment"
      means an amount equal to the original principal face amount of the Note.

    

    1.5
      Default.
      "Default"
      means any event which, with notice or passage of time or both, would constitute
      an
      Event
      of Default.

    

    1.6
      Event
      of Default. "Event
      of
      Default" means the Lender's declaration by written notice to Borrower
of
      a
      default by Borrower under the Loan Documents based on the occurrence of one
      or
      more of the events described in Section
      4.1 of this Agreement.

    

    1.7
      Governmental
      Authorities. "Governmental
      Authorities" means (a) the United States; (b) the state, county,
      city or other political subdivision in which any of the Collateral is located;
      (c) all other governmental or quasi-governmental
      authorities, boards, bureaus, agencies, commissions, departments, administrative
      tribunals, instrumentalities and authorities; and (d) all judicial authorities
      and public utilities having or exercising jurisdiction over Borrower or the
      Collateral.
      The term "Governmental Authority" means any one of the Governmental
      Authorities.

    

    1.8
      Governmental
      Permits. "Governmental
      Permits" means all permits, approvals, licenses, and authorizations
      now or hereafter issued by any Governmental Authorities for or in connection
      with the conduct of Borrower's business
      or the ownership or use by Borrower of the Collateral or any of its other
      assets.

    

    1.9
      Governmental
      Requirements. "Governmental
      Requirements" means all existing and future laws, ordinances,
      rules, regulations, orders, and requirements of all Governmental Authorities
      applicable to Borrower, the Collateral
      or any of Borrower's other assets.

    

    1.10
      Guaranties.
      "Guaranties"
      means, collectively, (a) the Continuing Guaranties of Payment and Performance
      and all other guaranty agreements of any kind, if
      any
now
      or
      hereafter executed by the Guarantors, and all extensions,
      renewals, modifications and replacements of any or all of such documents; and
      (b) any pledge of or grant of security
      interest in any certificate of deposit, account, stock, securities, bonds,
      or
      other property or asset of any kind, if
      any, now
      or
      hereafter executed by any third Person to secure any or all of the Obligations,
      and all extensions, renewals, modifications and replacements of any or all
      of
      such documents (collectively, the "Third Party Pledge Agreements").

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    1.11
      Guarantors.
      "Guarantors"
      means, collectively, (a) the Person or Persons, if
      any, now
      or
      hereafter guaranteeing
      payment of the Note or payment or performance of any or all of the other
      Obligations, including the Persons, if any,
      identified
      as guarantors in the Loan Schedule; and (b) the Person or Persons, if
      any
now
      or
      hereafter entering into any of
      the
      Third Party Pledge Agreements to secure any or all of the
      Obligations.

    

    1.12
      Loan
      Closing. "Loan
      Closing" or "Closing Date" means the earlier of the first date on which all
      or
any
      part
      of the proceeds of the Loan are initially disbursed by the Lender to or for
      the
      benefit of Borrower.

    1.13
      Loan
      Documents. "Loan
      Documents" means the Note, Security Agreements, Guaranties, Third Party
      Pledge Agreements, this Agreement, all other documents now or hereafter executed
      by Borrower and any of the Guarantors, respectively, and delivered to the Lender
      at the Lender's request in connection with the Loan, and all extensions,
      renewals, modifications and replacements of any or all of such
      documents.

    

    1.14
      Loan
      Fee. "Loan
      Fee" means the Loan fee specified in Section 8 of the Loan Schedule which shall
      be
      payable by Borrower to the Lender prior to or on the Loan Closing.

    

    1.15
      Loan
      Schedule. "Loan
      Schedule" means the Loan Schedule attached to this Agreement as Exhibit
      "A"

    

    1.16
      Maturity
      Date. "Maturity
      Date" means the stated maturity date of the Note.

    

    1.17
      Note. "Note"
      means (a) the promissory note dated the same date as this Agreement executed
      by
Borrower
      evidencing the Loan and all extensions, renewals, modifications and replacements
      of such promissory note; and (b) any additional note or notes now or hereafter
      executed by Borrower in favor of the Lender which specifically recite that
      they
      arise out of this Agreement, and all extensions, renewals, modifications and
      replacements of any or all of such note or notes.

    

    1.18
      Obligations.
      "Obligations"
      means all debts, obligations, and liabilities of Borrower to the Lender
currently
      existing or hereafter made, incurred or created, whether voluntary or
      involuntary, and however arising or evidenced,
      whether direct or acquired by the Lender by assignment or succession, whether
      due or not due, absolute or continent, liquidated or unliquidated, determined
      or
      undetermined, whether under this Agreement, the Note, any of the other Loan
      Documents, or otherwise, and whether Borrower may be liable individually or
      jointly, or whether recovery upon such debt may be or become barred by any
      statute of limitations or otherwise unenforceable, including all attorneys'
      fees
      and costs now or hereafter payable by Borrower to the Lender under the Loan
      Documents or in connection with the collection and enforcement of such debts,
      obligations and liabilities. Notwithstanding anything to the contrary contained
      in this Agreement, this Agreement shall not secure and the term "Obligations
      shall not include, any debts that are or may hereafter constitute "consumer
      credit" which is subject to the disclosure requirements of the federal Truth-In
      Lending Act (15 U.S.C. Section 1601, et
      seq.) or
      any
      similar state law in effect from time to time, unless the Lender and Borrower
      shall otherwise agree
      in
      a separate written agreement.

    

    1.19
      Person.
      "Person"
      means any natural person or any entity, including any corporation, partnership,
      joint
      venture, trust, limited liability company, unincorporated organization, trustee,
      or Governmental Authority.

    

    1.20
      Personal
      Property Security Agreements. "Personal
      Property Security Agreement" or "Personal Property
      Security Agreements" means, collectively, any and all personal security
      agreements, pledge agreements, and Third Party Pledge Agreements, if
      any, now
      or
      hereafter executed by Borrower or any other Person pursuant to which Borrower
      or
      such Person grants a personal property security interest to the Lender to secure
      any or all of the Obligations, and all extensions,
      renewals, modifications and replacements of any or all of such
      documents.

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    1.21
      Real
      Property Security Instruments. "Real
      Property Security Instrument" or "Real Property Security
      Instruments" means, collectively, any and all deeds of trust and mortgages,
      if
      any, now
      or
      hereafter executed by Borrower or any other Person pursuant to which Borrower
      or
      such Person grants a lien on real property to the Lender to secure any or all
      of
      the Obligations, and all extensions, renewals, modifications and replacements
      of
      any or all of such documents.

    

    1.22
      Security
      Agreements. "Security
      Agreements" means, collectively, the Personal Property Security Agreements
      and
      Real Property Security Instruments.

    

    1.23
      Other
      Terms. All
      accounting terms with an initial capital letter that are used but not defined
      in
      this Agreement shall have the respective meanings given to such terms in
      accordance with generally accepted accounting principles,
      consistently applied.

    

    ARTICLE
      2 

    

    DISBURSEMENT
      OF LOAN PROCEEDS

    

    2.1
      Term
      Loan. The
      Lender agrees, on the terms and conditions contained in this Agreement and
      the
other
      Loan Documents, to make a term Loan to Borrower in the aggregate original
      principal amount of the Commitment. The Loan shall be advanced on the Closing
      Date and shall be evidenced by and repaid with interest in accordance with
      the
terms
      and
      conditions of the Note.

    

    2.2
      Use
      of Loan Proceeds. All
      Loan
      proceeds received by Borrower shall be used by Borrower solely for
      payment of those costs, charges, and other items shown in the Loan Disbursement
      Instructions executed by Borrower in connection with the Loan, general working
      capital purposes in the ordinary course of Borrower's business, and any other
      use specified in the Loan Schedule. The Lender shall have no obligation to
      monitor or verify the use or application of any Loan proceeds disbursed by
      the
      Lender. Borrower shall not, directly or indirectly, use all or any part of
      the
      Loan proceeds for the purpose of purchasing or carrying any margin stock within
      the meaning of Regulation U of the Board of Governors of the Federal Reserve
      System (the "Board of Governors") or to extend credit to any Person for the
      purpose of purchasing or carrying any such margin stock or for any purpose
      which
      violates or is inconsistent with Regulation X of the Board of Governors,
      unless such use has been expressly approved in writing by the Lender, in its
      discretion.

    

    2.3
      Initial
      Loan Fee. Concurrently
      with or prior to the Closing Date, Borrower shall pay to the Lender the Loan
      Fee
      specified in the Loan Schedule. The entire Loan Fee shall be deemed to be fully
      earned by the Lender as of the
      Loan
      Closing, and no part of the Loan Fee shall be refundable to Borrower, whether
      or
      not the principal balance of the Loan
      is
      prepaid prior to the Maturity Date.

    2.4
      Reliance
      by Lender. The
      Lender may conclusively presume that all requests, statements, information,
      certifications, and representations, whether written or oral, submitted or
      made
      by Borrower or any of its agents to the Lender in connection with the Loan
      are
      true and correct, and the Lender shall be entitled to rely thereon, without
      investigation or inquiry of any kind by the Lender, in disbursing the Loan
      proceeds and taking or refraining from taking any other
      action in connection with the Loan.

    

    ARTICLE
      3 

    

    BORROWER'S
      COVENANTS

    

    3.1
      Existence
      of Borrower. If
      Borrower is a corporation or other form of entity, Borrower shall maintain
      its
      existence in good standing under the laws of the state in which it is organized
      and maintain its qualification as a foreign entity in good standing in each
      jurisdiction in which the nature of its business requires qualification as
      a
      foreign entity and where
      the
      failure to qualify would have a material adverse effect on Borrower's
      business.

    

    3.2
      Books
      and Records; Inspections by Lender. Borrower
      shall keep and maintain complete and accurate
      books and records relating to it business at its principal place of business.
      The Lender shall have access to such books and records at all reasonable times
      upon not less than two (2) Business Days prior written notice to Borrower for
      the purposes of examination, inspection, verification, copying and for any
      other
      reasonable purpose. Borrower authorizes the Lender, at its option but without
      any obligation of any kind to do so, to discuss the affairs, finances and
      accounts of Borrower with any of its officers and directors and with Borrower's
      independent accountants and auditors, and Borrower irrevocably authorizes all
      accountants and auditors employed or retained by Borrower to respond to and
      answer all requests from the Lender
      for financial and other information regarding Borrower. Borrower waives the
      benefit of any accountant-client privilege
      or other evidentiary privilege precluding or limiting the disclosure or delivery
      of any of its books and records to the Lender
      (except that Borrower does not waive any attorney-client
      privilege).

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    3.3
      Reports.
      Without
      limiting any of the other terms of the Loan Documents, from time to time within
      ten
      (10)
      Business Days after the Lender's written reasonable request to Borrower,
      Borrower shall deliver to the Lender such reports and information available
      to
      Borrower concerning the business, financial condition and affairs of Borrower
      and each Guarantor
      as the Lender may reasonably request.

    

    3.4
      Payment
      of Obligations; Compliance with Financial Covenants. Borrower
      shall pay all of its indebtedness
      under the Note and pay and perform all of its other Obligations under the Loan
      Documents as and when the same
      become due. Without limiting the generality of the immediately preceding
      sentence, Borrower shall comply with all of the
      financial covenants, if
      any
contained
      in Section 6 of the Loan Schedule (the "Financial Covenants") and the other
      terms set
      forth
      in the Loan Schedule.

    

    3.5
      Notice
      of Material Adverse Changes. Borrower
      shall immediately notify the Lender in writing of (a)
      any
      material adverse change in the financial condition of Borrower or any Guarantor;
      (b) any material adverse change in the Collateral; (c) any claim, proceeding,
      litigation or investigation in the future threatened or instituted by or against
      Borrower involving any claim or claims which, individually or in the aggregate,
      may cause or result in a material adverse change
      in
      the financial condition or business of Borrower or any material impairment
      in
      the ability of Borrower to carry on its business
      in substantially the same manner as it is now being conducted; and (d) any
      occurrence which could form the basis of
      an
      Event of Default.

    

    3.6
      Further
      Assurances. Upon
      Lender's request, Borrower, at Borrower's expense, shall: (i) execute
(or
      re-execute) and deliver such further documents and notices satisfactory to
      Lender and take any action requested by Lender to carry out the intent of this
      Agreement and the other Loan Documents; and (ii) provide such reports and
      information available
      to Borrower concerning its business and financial condition.

    

    3.7
      Claims.
      Borrower
      shall pay when due all claims which, if unpaid, might become a lien or charge
      on
any
      or
      all of the properties or assets of Borrower.

    

    3.8
      Taxes. Borrower
      shall pay when due all foreign, federal, state and local taxes, assessments,
      and
governmental
      charges now or hereafter levied upon or against Borrower or any of its
      properties or assets, including all income,
      franchise, personal property, real property, excise, withholding, sales and
      use
      taxes.

    

    3.9
      Contest.
      Borrower
      shall have the right to contest the payment of any tax, assessment, charge
      or
claim
      referred to in Section 3.7 or 3.8 above, provided that (a) appropriate contest
      proceedings are promptly and in good faith commenced and diligently prosecuted
      by Borrower; (b) a bond is posted or other appropriate action reasonably
      acceptable to the Lender is taken to prevent such tax, assessment, charge or
      claim from becoming a lien on the properties and
      assets of Borrower; and (c) Borrower notifies the Lender in writing of the
      commencement of, and any material development in, such proceedings.

    

    3.10
      Pension
      Plans. Borrower
      shall pay all amounts necessary to fund all of its present and future employee
      benefit plans in accordance with their terms, and Borrower shall not permit
      the
      occurrence of any event with respect to any such plan which would result in
      any
      liability of Borrower, including any liability to the Pension Benefit
Guaranty
      Corporation or any other Governmental Authority.

    

    3.11
      Insurance.
      Borrower
      shall maintain insurance against such risks and liabilities, in such forms,
      and
for
      such
      amounts as are customarily maintained by entities engaged in the same or similar
      businesses and similarly situated.
      The form and substance of all such insurance policies shall be reasonably
      acceptable to the Lender. Such insurance
      shall be maintained with financially sound and reputable insurers reasonably
      acceptable to the Lender. Upon the Lender's request, Borrower shall provide
      the
      Lender with evidence satisfactory to the Lender regarding the maintenance of
      the
      insurance required by this Section, including proof of premium payments and
      copies of insurance policies, certificates of insurance, and endorsements.
      If
      Borrower fails to provide or pay for any policies of insurance required by
      this
      Section, the Lender, at its option and in its discretion, but without any
      obligation of any kind to do so, shall have the right to obtain the same
      at
      Borrower's expense.

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    3.12
      Maintenance
      of Properties. Borrower
      shall maintain its properties in good condition and repair.

    

    3.13
      Licenses.
      Borrower
      shall maintain all Governmental Permits necessary for the ownership of it
properties
      and the conduct of its businesses.

    

    3.14
      Compliance
      with Applicable Laws. Borrower
      shall at all times comply with and keep in effect all Governmental
      Permits relating to Borrower, the Collateral, and Borrower's other assets.
      Borrower shall at all times comply with, and shall cause the Collateral to
      comply with (a) all Governmental Requirements, including all Hazardous Substance
      Laws; (b) all requirements and orders of all judicial authorities which have
      jurisdiction over Borrower or the Collateral; and (c)
      all
      covenants, conditions, restrictions and other documents relating to Borrower
      or
      the Collateral.

    

    3.15
      Place
      of Business; Borrower's Name. Borrower
      shall give the Lender at least thirty (30) days prior
      written notice of any change in the location of Borrower's chief executive
      office. Borrower shall give the Lender not less than thirty (30) days prior
      written notice before changing its name or doing business under any other name.
      Borrower has complied, and will in the future comply, with all Governmental
      Requirements relating to the conduct of Borrower's business under
      a
      fictitious business name.

    

    3.16
      Annual
      Financial Statements. Within
      the time period set forth in the Loan Schedule after the close
      of
      Borrower's fiscal year, Borrower shall deliver to the Lender a balance sheet
      and
      a statement of profit and loss for Borrower for such fiscal year. Borrower
      shall
      cause all financial statements furnished to the Lender under this Agreement
      to
      be certified by the party to whom such statements apply. All annual financial
      statements furnished to the Lender under this Section
      shall comply with the requirements of Section 7.1 of the Loan
      Schedule.

    

    3.17
      Quarterly/Monthly
      Financial Statements. If
      specifically required by the Lender in the Loan Schedule or at any time after
      the Loan Closing, (a) within forty-five (45) days after the close of each of
      the
      first three (3) calendar quarters, Borrower shall deliver to the Lender a
      balance sheet and a statement of profit and loss for Borrower for such calendar
      quarter; and (b) within thirty (30) days after the end of each calendar month,
      Borrower shall deliver to the Lender a balance sheet and statement of profit
      and
      loss for Borrower for such calendar month. If the Lender specifically requires
      quarterly or monthly financial statements, such statements shall comply with
      the
      requirements of Section 7.1 of the Loan
      Schedule.

    

    3.18
      Other
      Financial Information. Borrower
      shall deliver to the Lender, or cause to be delivered to the Lender, a complete
      and accurate copy of each federal income tax return, including K-1 schedules,
      and each application for an
      extension of time to file each federal income tax return filed by each Guarantor
      by October
      15.

    

    ARTICLE
      4

    

    DEFAULT
      AND REMEDIES

    

    4.1
      Events
      of Default. The
      Lender, at its option, may declare Borrower to be in default under this
Agreement
      and the other Loan Documents upon the occurrence of any or all of the following
      events (the declaration of such a
      default
      by the Lender shall constitute an "Event of Default"):

    

    (a)  Payment
      of Note and Other Monetary Obligations. If
      Borrower fails to pay any of its indebtedness
      under the Note or perform any of its other obligations under the Loan Documents
      or under any other document with Lender requiring the payment of money to the
      Lender or any third Person within fifteen (15) days after the date on which
      such
      indebtedness or monetary obligation is due; provided, however, that the fifteen
      (15) day grace period contained in this Section 4.1(a) shall not apply to
      Borrower's obligation to pay the outstanding principal balance and all
accrued
      but unpaid interest under the Note on the Maturity Date of the
      Note;

    

    (b)  Failure
      to Comply with Financial Covenants, Permit Inspections, or to Perform
Certain
      Non-Monetary Obligations Under Other Loan Documents. If
      (i)
      Borrower fails to comply with any or all of the Financial
      Covenants, if any; (ii) Borrower fails to permit any inspection the Collateral
      or any of Borrower's books and records
      in accordance with the terms of the Loan Documents; or (iii) Borrower breaches
      any of its non-monetary obligations to the Lender or any third Person under
      any
      of the Loan Documents or under any other document with Lender, which breach
      is
      not
      reasonably susceptible to being cured by Borrower;

    

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (c)  Performance
      of Non-Monetary Obligations Under Other Loan Documents Which are Curable.
If
      (i)
      Borrower fails to perform any of its non-monetary obligations to the Lender
      (other than those set forth in Section
      4.1(b) above) or any third Person under any of the Loan Documents or under
      any
      other document with Lender when due;
      and
      (ii) if such non-monetary obligation is reasonably susceptible to being cured
      by
      Borrower, Borrower fails to diligently
      complete a cure of its breach of such non-monetary obligation as soon as
      reasonably practicable after written notice
      by
      the Lender to Borrower setting forth such non-monetary breach, but in any event
      within thirty (30) days after such notice is given; provided, however, that
      the
      thirty (30) day cure period contained in this Section 4.1(c) shall not be deemed
      to apply if Borrower commits more than two (2) such non-monetary breaches within
      any twelve (12) calendar month period. Without
      limiting any of the terms of this Section 4.1(c), the cure provision contained
      in this Section 4.1(c) (the "Cure Provision")
      shall not apply with respect to Borrower's failure to comply with the Financial
      Covenants or Borrower's breach of any
      non-monetary obligation of Borrower that is not reasonably susceptible to being
      cured by Borrower, including any transfer
      of the Collateral in violation of the terms of the Loan Documents.
      Notwithstanding anything to the contrary contained
      in this Section 4.1(c) or Section 4.1(a) above, if Borrower breaches any of
      the
      terms of the Loan Documents, and if
      the
      Lender, in its discretion, determines that such breach impairs the Lender's
      security for the Loan, the Lender, immediately
      upon the occurrence of any such breach, shall have the right to take such
      actions and exercise such remedies under the Loan Documents as the Lender may
      in
      good faith determine to be necessary or appropriate to avoid such impairment;

    (d)  Misrepresentation.
      If
      any
      request, statement, information, certification, representation, or
      warranty, whether written or oral, submitted or made by Borrower to the Lender
      in connection with the Loan or any other extension
      of credit by the Lender to Borrower, now or in the future, is false or
      misleading in any material respect;

    

    (e)  Insolvency
      of Borrower. If
      (i) a
      petition is filed by or against Borrower under the federal bankruptcy
      laws or any other applicable federal or state bankruptcy, insolvency or similar
      law; (ii) a receiver, liquidator, trustee, custodian, sequestrator, or other
      similar official is appointed to take possession of Borrower, the Collateral,
      or
      any material part of Borrower's other assets, or Borrower consents to such
      appointment; (iii) Borrower makes an assignment for the benefit of creditors;
      (iv) Borrower takes any action in furtherance of any of the foregoing; or (v)
      there is a material adverse change in Borrower's financial condition as
      represented to the Lender in connection with the Lender's approval of the Loan
      and the Lender reasonably determines that such change materially impairs
      Borrower's ability to perform any or all of the Obligations; provided, however,
      that Borrower shall have sixty (60) days within which to cause any involuntary
      bankruptcy
      proceeding to be dismissed or the involuntary appointment of any receiver,
      liquidator, trustee, custodian, or sequestrator
      to be discharged. The cure provision contained in this Section shall be in
      lieu
      of, and not in addition to, any and
      all
      other cure provisions contained in the Loan Documents;

    

    (f)  Insolvency
      of Other Persons. If
      any of
      the events specified in clauses (i) through (v) of Section
      4.1(e) above occurs with respect to any Guarantor, as if such Guarantor were
      the
      Borrower described therein;

    

    (g)  Performance
      of Obligations to Third Persons. If
      (i)
      Borrower fails to pay any of its indebtedness
      or to perform any of its obligations when due under any document between
      Borrower and any other Person who holds a lien on the Collateral that is senior
      to the lien held by the Lender in the Collateral and fails to cure such breach
      within
      any applicable cure period under such document; or (ii) Borrower fails to pay
      any of its indebtedness or to perform any of
      its
      obligations when due under any other material document between Borrower and
      any
      other Person, provided the Lender
      reasonably determines that such failure has an actual or potential material
      adverse effect on the Collateral or Borrower's ability to perform any or all
      of
      the Obligations. Nothing contained in this Section constitutes or shall be
      construed as
      the
      Lender's consent to any lien being placed on the Collateral, other than the
      Permitted Liens;

    

    (h)  Attachment.
      If
      all or
      any material part of the assets of Borrower or any Guarantor are attached,
      seized, subjected to a writ or levied upon by any court process and Borrower
      fails to cause such attachment, seizure, writ or levy to be fully released
      or
      removed within sixty (60) days after the occurrence of such event. The cure
      provision contained in this Section shall be in lieu of, and not in addition
      to,
      any and all other cure periods contained in the Loan
      Documents;

    

    (i)  Injunctions. If
      a
      court order is entered against Borrower or any Guarantor enjoining the
conduct
      of all or part of such Person's business and Borrower fails to cause such
      injunction to be fully stayed, dissolved or removed within sixty (60) days
      after
      such order is entered. The cure provision contained in this Section shall be
      in
      lieu of, and
      not
      in addition to, any and all other cure periods contained in the Loan
      Documents;

    

    (j)  Dissolution. If
      Borrower or any Guarantor is a corporation, partnership, limited liability
      company,
      trust or other entity, the dissolution, liquidation, or termination of existence
      of such Person;

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (k)  Transfers
      of Interests. If
      Borrower is a corporation, partnership, limited liability company,
      or other entity, the sale or transfer of an aggregate of more than twenty-five
      percent (25%) of the beneficial interests
      in Borrower without the Lender's prior written consent;

    

    (l)  Death;
      Incompetence. If
      Borrower or any Guarantor is an individual, the death of such Person
      or
      judicial determination that such person is mentally incompetent, except where
      applicable law limits or prohibits the Lender's declaration of a default based
      on such occurrences; provided, however, that the Lender shall not declare an
      Event of Default to exist based solely on the death or mental incompetence
      of
      any individual Guarantor if, within forty-five (45) days after the occurrence
      of
      such event, Borrower causes a substitute guarantor to execute and deliver to
      the
      Lender a continuing guaranty in the form previously executed by the affected
      Guarantor, and the Lender in its discretion determines that such substitute
      guarantor's financial condition is comparable to that of the affected Guarantor
      and that such substitute Guarantor is
      otherwise reasonably acceptable to the Lender;

    

    (m)  Impairment
      of Security Interest or Lender's Rights. If
      (i)
      the validity or priority of the Lender's
      security interest in the Collateral is impaired for any reason; or (ii) the
      value of the Collateral has deteriorated, declined or depreciated as a result
      of
      any intentional act or omission by Borrower; or (iii) the Lender, acting in
      good
      faith and in a commercially reasonable manner, deems itself insecure because
      of
      the occurrence of an event affecting Borrower, or any Guarantor or the
      Collateral prior to the Closing Date of which Lender had no actual knowledge
      as
      of the Closing Date or because
      of the occurrence of such an event on or subsequent to the Closing
      Date;

    

    (n)  Default
      by Guarantors. If
      any
      Guarantor fails to pay any of its indebtedness or perform any of its obligations
      under any of the Guaranties when due or the revocation, limitation or
      termination or attempted revocation,
      limitation or termination of any of the obligations of any Guarantor under
      any
      of the Guaranties; or

    

    (o)  Misrepresentation
      by Guarantors. If
      any
      request, statement, information, certification, representation,
      or warranty, whether written or oral, submitted or made by any Guarantor to
      the
      Lender in connection with the Loan or any other extension of credit by the
      Lender to Borrower or such Guarantor, now or in the future, is
      false
      or
misleading
      in any material respect.

    

    4.2
      Remedies.
      Upon
      the
      Lender's election to declare Borrower to be in default under the Loan
Documents
      pursuant to Section 4.1 above, Borrower shall be deemed to be in default under
      the Loan Documents, and the Lender
      shall have the right to do any or all of the following:

    

    (a)  Acceleration.
      The
      Lender shall have the right to declare any or all of the Obligations to
be
      immediately due and payable, including the entire principal amount and all
      accrued but unpaid interest under the Note, and
      notwithstanding the Maturity Date of the Note, such Obligations shall thereupon
      be immediately due and payable;

    

    (b)  Remedies
      Under Other Loan Documents. The
      Lender may exercise any or all rights and
      remedies which the Lender may have under any or all of the Loan Documents and
      applicable law;

    

    (c)  Discontinuation
      of Disbursements. The
      Lender may discontinue or withhold any or all advances
      of the Loan proceeds; and

    

    (d)  Discontinuation
      of Other Extensions of Credit. The
      Lender may discontinue advancing
      money or extending credit to or for the benefit of Borrower in connection with
      any other document between the Lender
      and Borrower.

    

    ARTICLE
      5 

    

    WARRANTIES
      AND REPRESENTATIONS

    

    5.1
      Borrower's
      Warranties and Representations. As
      a
      material inducement to the Lender's extension
      of credit to Borrower in connection with the Loan, Borrower warrants and
      represents to the Lender as follows:

    

    (a)  Existence.
      If
      Borrower is a corporation, partnership, limited liability company, trust, or
      other
      form of entity, Borrower is duly organized, validly existing and in good
      standing under the laws of the state in which Borrower is organized, and
      Borrower is qualified to do business and is in good standing in each
      jurisdiction in which the ownership of its assets or the conduct of its business
      requires qualification as a foreign entity and where the failure to so
qualify
      would have a material adverse effect on Borrower's business.

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    (b)  Authority
      to Own Assets. Borrower
      has the full power and authority to own its assets and
      to
      transact the business in which it is now engaged.

    

    (c)  Authority
      to Execute Loan Documents. Borrower
      has the full power and authority to execute,
      deliver and perform its obligations under the Loan Documents, and the execution,
      delivery and performance of the Loan Documents and the consummation of the
      transactions contemplated thereby have been duly authorized by all requisite
      action
      on
      the part of Borrower. The Person or Persons signing the Loan Documents on behalf
      of Borrower are duly authorized
      to execute the Loan Documents and all other documents necessary to consummate
      the Loan on behalf of Borrower.

    

    (d)  Valid
      Obligations. The
      Loan
      Documents are legal, valid and binding obligations of Borrower
      and the Guarantors, as applicable, enforceable in accordance with their terms
      (except as enforcement may be limited by equitable principles and by bankruptcy,
      insolvency, reorganization, moratorium or similar laws relating to creditors'
      rights
      generally).

    

    (e)  No
      Consents Required. No
      consent of any other Person and no consent, approval, authorization
      or other action by or filing with any Governmental Authority not previously
      obtained by Borrower is required in connection
      with the execution, delivery and performance of the Loan Documents by
      Borrower.

    

    (f)  Chief
      Executive Office. Borrower's
      chief executive office is located at the address set forth
      in
      Borrower's Application..

    

    (g)  Borrower's
      Name. Borrower
      has set forth above its full and correct name, and Borrower does
      not
      use any other names or tradenames, except for the tradenames disclosed in
      Borrower's Application.

    

    

    (h)  No
      Violations. The
      execution, delivery and performance of the Loan Documents and compliance
      with their respective terms will not conflict with or result in a violation
      or
      breach of any of the terms or conditions of
      any
      document to which Borrower is a party or by which Borrower is bound or any
      order
      or judgment of any court or Governmental Authority binding on
      Borrower.

    

    (i)  Organizational
      Documents. Borrower's
      execution, delivery and performance of the Loan Documents
      and Borrower's compliance with their respective terms (i) will not violate
      any
      Governmental Requirements applicable
      to Borrower; (ii) Borrower's agreement or certificate of limited partnership,
      if
      Borrower is a limited partnership; (iii)
      Borrower's agreement or statement of partnership, if Borrower is a general
      partnership; (iv) Borrower's articles of incorporation
      or bylaws, if Borrower is a corporation; (v) Borrower's trust agreement, if
      Borrower is a trust; or (vi) Borrower's articles
      of organization or operating agreement, if Borrower is a limited liability
      company.

     

    (j)  Tax
      Claims. To
      the
      best of Borrower's knowledge, there are no claims or adjustments proposed
      by any taxing authority for any of Borrower's prior tax years which could result
      in additional taxes becoming due and payable by Borrower. Borrower and each
      Guarantor have filed all federal, state and local tax returns required to be
      filed under
      applicable Governmental Requirements and have paid all taxes, assessments,
      fees,
      penalties, and other governmental
      charges that are due and payable in connection therewith.

    

    (k)  Litigation.
      To
      the
      best of Borrower's knowledge, there are no actions, suits, proceedings
or
      investigations pending or threatened against or affecting Borrower or any
      Guarantor in any court or before any other Governmental
      Authority which may result, either separately or in the aggregate, in any
      material adverse change in the assets,
      properties, business, prospects, profits, or condition of Borrower or any of
      such Persons, nor does Borrower know of any
      basis
      for any such action, suit, proceeding or investigation.

    (l)  Financial
      Statements. All
      financial statements respecting the financial condition of Borrower
      which have been furnished to the Lender prior to the Closing Date (i) are
      accurate and complete in all material respects as of the dates appearing
      thereon; (ii) present fairly the financial condition and results of operations
      of the Person to whom the financial statement applies as of the dates and for
      the periods shown on such statements; and (iii) disclose all contingent
      liabilities affecting the Person to whom the financial statement applies to
      the
      extent that such disclosure is required
      by generally accepted accounting principles. Since the last date covered by
      any
      such statement, there has been no material adverse change in the financial
      condition of Borrower, and Borrower is now and at all times hereafter shall
      continue
      to be solvent.

    

    (m)  Periodic
      Financial Statements. All
      financial statements respecting the financial condition of Borrower hereafter
      delivered to the Lender by Borrower shall satisfy the requirements of clauses
      (i) through (iii) of Section 5.1(1)
      above.

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (n)  Margin
      Stock. Borrower
      is not engaged in the business of extending credit for the purpose
      of purchasing or carrying any "margin stock" (as defined in Regulation G of
      the
      Board of Governors of the Federal Reserve System), and no part of the proceeds
      of the Loan shall be used to purchase or carry any margin stock or to extend
      credit to others for the purpose of purchasing or carrying any margin stock,
      unless such use is approved in writing by the Lender
      or
      otherwise expressly contemplated by the Loan Documents.

    

    (o)  Licenses
      and Governmental Requirements. Neither
      Borrower nor any Guarantor (i) is in
      violation in any material respect of any Governmental Permits or Governmental
      Requirements (including all Hazardous Substance Laws) to which it is subject;
      or
      (ii) has failed to obtain any Governmental Permits necessary for the ownership
      of its
      properties or the conduct of its business.

    

    (p)  Other
      Facts. All
      of
      the information set forth in Borrower's Application is accurate and complete
      in
      all material respects. There is no fact which Borrower has failed to disclose
      to
      the Lender in writing which (i) may materially and adversely affect the assets,
      properties, business, prospects, profits, or condition of Borrower, or any
      Guarantor; or (ii) may be necessary to disclose in order to keep the
      representations and warranties contained in this Section 5.1
      from
      being misleading.

    

    5.2
      Borrowers
      Warranties. Borrower's
      warranties and representations set forth in Section 5.1 above shall
      be
      true and correct at the time of execution of this Agreement and as of the
      Closing Date, shall survive the closing of the Loan, and shall remain true
      and
      correct as of the date on which such warranties and representations are given.
      For purposes of this Agreement and the other Loan Documents, the term "to the
      best of Borrower's knowledge" shall be deemed to mean to the best knowledge
      of
      Borrower after a commercially reasonable and diligent investigation, inspection
      and inquiry by
      Borrower.

    

    ARTICLE
      6 

    

    MISCELLANEOUS

    

    6.1
      Relationship
      of Parties. The
      Lender shall not be deemed to be, nor do the Lender or Borrower intend
      that the Lender shall ever become, a partner, joint venturer, trustee,
      fiduciary, manager, controlling person, or other business
      associate or participant of any kind in the business or affairs of Borrower,
      whether as a result of the Loan Documents
      or any of the transactions contemplated by the Loan Documents. In exercising
      its
      rights and remedies under the Loan Documents, the Lender shall at all times
      be
      acting only as a lender to Borrower within the normal and usual scope of
activities
      of a lender.

    

    6.2
      Indemnification.
      Borrower
      shall indemnify and hold the Lender and its officers, directors, agents,
employees,
      representatives, shareholders, affiliates, successors and assigns (collectively,
      the "Indemnified Parties") harmless from and against any and all claims,
      demands, damages (including special
      and consequential damages), liabilities, actions,
      causes of action, legal proceedings, administrative proceedings, suits,
      injuries, costs, losses, debts, liens, interest, fines, charges, penalties
      and
      expenses (including attorneys', accountants', consultants', and expert witness
      fees and costs) of
      every
      kind and nature (collectively, the "Claims") arising directly or indirectly
      out
      of or relating to any or all of the following: (i)
      Borrower's breach of any of its Obligations or warranties under the Loan
      Documents; (ii) any act or omission by Borrower or any of its employees or
      agents; (iii) Borrower's use of the Collateral or any other activity or thing
      allowed or suffered by Borrower to be done on or about the any of Borrower's
      properties; and (iv) any claims for commissions, finder's fees or brokerage
      fees
      arising out of the Loan or the transactions contemplated by the Loan Documents,
      if such claim is based on any act, omission or agreement by Borrower or any
      Affiliate. Notwithstanding anything to the contrary contained in this Section,
      Borrower shall not be obligated to indemnify any Indemnified Party for any
      liabilities resulting solely from the gross negligence or intentional tortious
      conduct of such Indemnified Party which such Indemnified Party is determined
      by
      the final judgment of a court of competent jurisdiction to have committed.
      Borrower's obligation to indemnify the Indemnified Parties under this Section
      6.2 shall survive the cancellation of the Note and the release of the Lender's
      security interests under the Security
      Agreements.

    

    6.3
      Power
      of Attorney. Borrower
      irrevocably appoints the Lender, with full power of substitution, as
Borrower's
      attorney-in-fact, coupled with an interest, with full power, in the Lender's
      own
      name or in the name of Borrower to sign, record and file all documents referred
      to in Section 3.6 above. The Lender shall have the right to exercise the power
      of attorney
      granted in this Section directly or to delegate all or part of such power to
      one
      or more agents of the Lender. Nothing
      contained in the Loan Documents shall be construed to obligate the Lender to
      act
      on behalf of Borrower as attorney-in-fact.

    

    6.4
      Actions.
      Whether
      or not an Event of Default has occurred, the Lender shall have the right, but
      not the
      obligation, to commence, appear in, or defend any action or proceeding which
      affects or which the Lender determines may affect (a) the Collateral; (b)
      Borrower's or the Lender's respective rights or obligations under the Loan
      Documents; (c) the
      Loan;
      or (d) the disbursement of any proceeds of the Loan. Whether or not an Event
      of
      Default has occurred, the Lender
      shall at all times have the right to take any or all actions which the Lender
      determines to be necessary or appropriate to
      protect the Lender's interest in connection with the Loan.

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    6.5
      Attorneys'
      Fees and Costs and Other Expenses. Upon
      the
      Lender's demand, Borrower shall reimburse
      the Lender for all costs and expenses, including attorneys' fees and costs,
      incurred by the Lender in connection with the exercise of any or all of the
      Lender's rights and remedies under the Loan Documents; the enforcement of any
      or
      all Obligations, whether or not any legal proceedings are instituted by the
      Lender; or the defense of any action or proceeding by Borrower or any other
      Person relating to the Loan. Without limiting the generality of the immediately
      preceding sentence, such costs and expenses shall include all attorneys' fees
      and costs
      incurred
      by the Lender in connection with any federal or state bankruptcy, insolvency,
      reorganization, or other similar proceeding by or against Borrower or any
      Guarantor which in any
      way
      affects the Lender's exercise of its rights and remedies under the Loan
      Documents. Borrower's obligation to reimburse
      the Lender under this Section shall include payment of interest on all amounts
      expended by the Lender from the date of expenditure at the rate of interest
      applicable to principal under the Note. Wherever any of the terms of the Loan
      Documents provide for the payment or recovery of costs, fees, or other expenses
      (including attorneys' fees and costs), such term shall be deemed to provide
      for
      the payment or recovery of reasonable costs, fees, expenses, and reasonable
      attorneys' fees
      and
      costs.

    

    6.6
      No
      Third Party Beneficiaries. The
      Loan
      Documents are entered into for the sole protection and benefit
      of the Lender, Borrower and Guarantors, as applicable, and their respective
      permitted successors and assigns. No other
      Person shall have any rights or causes of action under the Loan
      Documents.

    

    6.7
      Documents.
      The
      form
      and substance of all documents and instruments which Borrower is required
to
      deliver to the Lender under this Agreement shall be subject to the Lender's
      approval.

    

    6.8
      Notices.
      All
      notices and demands by the Lender to Borrower under this Agreement shall be
      in
writing
      and shall be effective on the earliest of (a) personal delivery to Borrower;
      (b)
two
      (2)
      days
      after deposit in first class or certified United States mail, postage prepaid,
      addressed to Borrower at the address set forth in the Loan Schedule; and (c)
      one
      (1) business day after deposit with a reputable overnight delivery service,
      delivery charges prepaid, addressed to Borrower
      at the address set forth in the Loan Schedule. All notices and demands by
      Borrower to the Lender under this Agreement
      shall be in writing and shall be effective on actual receipt by the Lender
      at
      the Lender's address shown in the Loan Schedule; provided, however, that
      non-receipt of any such notice or demand by the Lender as a result of the
      Lender's refusal to accept delivery or the Lender's failure to notify Borrower
      of the Lender's change of address shall be deemed to constitute receipt by
      the
      Lender. The addresses specified in the Loan Schedule may be changed by notice
      given in accordance
      with this Section. If Borrower consists of more than one Person, service of
      any
      notice on any one of such Persons
      by the Lender shall be effective service on Borrower for all
      purposes.

    

    6.9
      Severability;
      No Offsets. If
      any
      provision of the Loan Documents shall be held by any court of competent
      jurisdiction to be unlawful, voidable, void, or unenforceable for any reason,
      such provision shall be deemed to be severable
      from and shall in no way affect the validity or enforceability of the remaining
      provisions of the Loan Documents. No
      Obligations shall be offset by all or part of any claim, cause of action, or
      cross-claim of any kind, whether liquidated or unliquidated, which Borrower
      now
      has or may hereafter acquire or allege to have acquired against the Lender.
      To
      the fullest extent permitted by law, Borrower waives the benefits of any
      applicable law, regulation, or procedure which provides, in substance, that
      where cross demands for money exist between parties at any point in time when
      neither demand is barred by the applicable statute of limitations, and an action
      is thereafter commenced by one such party, the other party may assert the
      defense of payment in that the two demands are compensated so far as they equal
      each other, notwithstanding that an independent
      action asserting the claim would at the time of filing the response be barred
      by
      the applicable statute of limitations.

    

    6.10
      Interpretation.
      Whenever
      the context of this Agreement reasonably requires, all words used in the
singular
      shall be deemed to have been used in the plural, and the neuter gender shall
      be
      deemed to include the masculine and
      feminine gender, and vice versa. The headings to sections of this Agreement
      are
      for convenient reference only and shall
      not
      be used in interpreting this Agreement. For purposes of this Agreement, (a)
      the
      term "including" shall be deemed to
      mean
      "including without limitation"; (b) the term "document" shall be deemed to
      include all written contracts, commitments,
      agreements, and instruments; and (c) the term "discretion," when applied to
      any
      determination, consent, or approval
      right by the Lender, shall be deemed to mean the Lender's sole but good faith
      business judgment.

    

    6.11
      Time
      of the Essence. Time
      is
      of the
      essence in the performance of each provision of the Loan Documents
      by Borrower.

    

    6.12
      Amendments.
      The
      Loan
      Documents (excluding the Guaranties) may be modified only by a written
agreement
      signed by Borrower and the Lender.

    

    6.13
      Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall constitute an
      original,
      and all of which together shall constitute one and the same
      document.

    

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    6.14
      Entire
      Agreement. The
      Loan
      Documents contain the entire agreement concerning the subject matter
      of
      the Loan Documents and supersede all prior and contemporaneous negotiations,
      agreements, statements, understandings,
      terms, conditions, representations and warranties, whether oral or written,
      by
      and among the Lender, Borrower
      and Guarantors concerning the Loan which is the subject matter of the Loan
      Documents.

    

    6.15
      No
      Waiver by Lender. No
      waiver
      by the Lender of any of its rights or remedies in connection with the
      Obligations or of any of the terms or conditions of the Loan Documents shall
      be
      effective unless such waiver is in writing and
      signed by the Lender.

    

    6.16
      Cumulative
      Remedies. No
      right
      or remedy of the Lender under this Agreement or the other Loan Documents
      shall be exclusive of any other right or remedy under the Loan Documents or
      to
      which the Lender may be entitled.
      The Lender's rights and remedies under the Loan Documents are cumulative and
      in
      addition to all other rights and remedies
      which the Lender may have under any other document with Borrower and under
      applicable law.

    

    6.17
      Joint
      and Several Liability. Each
      Person signing this Agreement as Borrower shall be jointly and severally
      liable to the Lender for the performance of Borrower's Obligations under the
      Loan Documents. If Borrower consists
      of more than one Person, the occurrence of any Default or Event of Default
      with
      respect to any one or more of such Persons
      shall constitute a Default or Event of Default, as applicable, and (in the
      case
      of an Event of Default) entitle the Lender
      to
      exercise its rights and remedies under Section 4.2 above. Each Borrower who
      is a
      married person agrees that the Lender
      shall have the right to recourse against his or her community property and
      separate property for any or all Obligations
      to the fullest extent permitted by law.

    

    6.18
      Assignment.
      Borrower
      shall not assign, encumber, or otherwise transfer any or all of Borrower's
      rights
      under the Loan Documents, whether voluntarily, involuntarily, or by operation
      of
      law, without the Lender's prior written consent,
      which consent may be withheld in the Lender's discretion. Any purported
      assignment, encumbrance or transfer by Borrower
      in violation of this Section shall be void. Borrower acknowledges and agrees
      that the Lender's agreement to make the Loan to Borrower and enter into the
      Loan
      Documents is based in material part on the Lender's reliance on Borrower's
      particular financial condition, credit history, character, experience, ability,
      skill, and reputation, as represented by Borrower to the
      Lender.

    

    6.19
      Waivers.
      Borrower
      waives presentment, demand for payment, protest, notice of demand, dishonor,
      protest
      and non-payment, and all other notices and demands in connection with the
      delivery, acceptance, performance, default under, and enforcement of the Loan
      Documents. Borrower waives the right to assert any statute of limitations as
      a
      defense to the enforcement of any or all of the Loan Documents to the fullest
      extent permitted by law. Borrower waives all rights, remedies, and benefits
      under California Civil Code Section 2822(a). Without limiting the generality
      of
      the immediately preceding sentence, in the event of Borrower's payment in
      partial satisfaction of any or all of the Obligations, Lender shall have the
      sole and exclusive right and authority to designate the portion of the
      Obligations that is to be satisfied. Borrower and all Persons holding a lien
      of
      any kind affecting all or part of the Collateral who have actual or constructive
      notice of this Agreement waive (a) all rights to require marshalling of assets
      or liens in the event of Lender's exercise of any of its rights and
      remedies under the Loan Documents; and (b) all rights to require Lender to
      exercise any other right or power or to pursue
      any other remedy which Lender may have under any document or applicable law
      before exercising any other such right,
      power, or remedy.

    

    6.20
      Applicable
      Law; Jurisdiction. The
      Loan
      Documents shall be governed by and construed in accordance
      with the laws of the State of California. Borrower agrees that the courts of
      the
      State of California and Federal District Courts located in San Francisco County,
      California, shall have exclusive jurisdiction and venue of any action or
proceeding
      directly or indirectly arising out of or related to the negotiation, execution,
      delivery, performance, breach, enforcement
      or interpretation of this Agreement and all of the other Loan Documents or
      any
      of the transactions contemplated
      by or related to any or all of the Loan Documents, regardless of whether or
      not
      any claim, counterclaim or defense in any such action or proceeding is
      characterized as arising out of fraud, negligence, intentional misconduct,
      breach of contract or fiduciary duty, or violation of any Governmental
      Requirements. Borrower irrevocably consents to the personal jurisdiction of
      such
      courts, to such venue, and to the service of process in the manner provided
      for
      the giving of notices in this
      Agreement. Borrower waives all objections to such jurisdiction and venue,
      including all objections that are based upon inconvenience or the nature of
      the
      forum.

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    6.21
      WAIVER
      OF RIGHT TO JURY TRIAL. BORROWER
      IRREVOCABLY WAIVES ALL RIGHTS TO A JURY
      TRIAL IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND DIRECTLY
      OR
      INDIRECTLY ARISING OUT OF OR IN ANY WAY RELATING TO THE LOAN, THIS NOTE, ANY
      AGREEMENT SECURING THIS NOTE, OR
      ANY OF
      THE OTHER DOCUMENTS EXECUTED BY BORROWER IN CONNECTION WITH THE LOAN
(COLLECTIVELY,
      THE "LOAN DOCUMENTS"), ANY OR ALL OF THE REAL AND PERSONAL PROPERTY COLLATERAL
      SECURING THE LOAN, OR ANY OF THE TRANSACTIONS WHICH ARE CONTEMPLATED BY THE
      LOAN
      DOCUMENTS. THE JURY TRIAL WAIVER CONTAINED IN THIS SECTION IS INTENDED TO APPLY,
      TO THE FULLEST
      EXTENT PERMITTED BY LAW, TO ANY AND ALL DISPUTES AND CONTROVERSIES THAT ARISE
      OUT OF OR
      IN ANY
      WAY RELATED TO ANY OR ALL OF THE MATTERS DESCRIBED IN THE IMMEDIATELY PRECEDING
      SENTENCE,
      INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON
      LAW
      AND
      STATUTORY CLAIMS OF ANY KIND. BORROWER ACKNOWLEDGES AND AGREES THAT (1) BORROWER
      HAS
      CAREFULLY READ AND UNDERSTANDS ALL OF THE TERMS OF THE LOAN DOCUMENTS; (2)
      BORROWER HAS
      EXECUTED THE LOAN DOCUMENTS FREELY AND VOLUNTARILY, AFTER HAVING CONSULTED
      WITH
      BORROWER'S INDEPENDENT LEGAL COUNSEL AND AFTER HAVING HAD ALL OF THE TERMS
      OF
      THE LOAN DOCUMENTS EXPLAINED TO IT BY ITS INDEPENDENT LEGAL COUNSEL OR AFTER
      HAVING HAD A FULL AND ADEQUATE OPPORTUNITY TO CONSULT WITH BORROWER'S
      INDEPENDENT LEGAL COUNSEL; (3) THE WAIVERS CONTAINED IN THE LOAN DOCUMENTS
      ARE
      REASONABLE, NOT CONTRARY TO PUBLIC POLICY OR LAW, AND HAVE BEEN INTENTIONALLY,
      INTELLIGENTLY, KNOWINGLY, AND VOLUNTARILY AGREED TO BY BORROWER; (4) THE WAIVERS
      CONTAINED IN THE LOAN DOCUMENTS HAVE BEEN AGREED TO BY BORROWER WITH FULL
      KNOWLEDGE OF THEIR SIGNIFICANCE AND CONSEQUENCES, INCLUDING FULL KNOWLEDGE
      OF
      THE SPECIFIC NATURE OF ANY RIGHTS OR DEFENSES WHICH BORROWER HAS AGREED TO
      WAIVE
      PURSUANT TO THE LOAN DOCUMENTS; (5) BORROWER HAS HAD A FULL AND ADEQUATE
      OPPORTUNITY TO NEGOTIATE THE TERMS CONTAINED
      IN THE LOAN DOCUMENTS; (6) BORROWER IS EXPERIENCED IN AND FAMILIAR WITH LOAN
      TRANSACTIONS
      OF THE TYPE EVIDENCED BY THE LOAN DOCUMENTS; AND (7) THE WAIVERS CONTAINED
      IN
THE
      LOAN
      DOCUMENTS ARE MATERIAL INDUCEMENTS TO THE LENDER'S EXTENSION OF CREDIT TO
BORROWER,
      AND THE LENDER HAS RELIED ON SUCH WAIVERS IN MAKING THE LOAN TO BORROWER AND
      WILL CONTINUE TO RELY ON SUCH WAIVERS IN ANY RELATED FUTURE DEALINGS WITH
      BORROWER. THE WAIVERS CONTAINED IN THE LOAN DOCUMENTS SHALL APPLY TO ALL
      SUBSEQUENT EXTENSIONS, RENEWALS, MODIFICATIONS,
      AND REPLACEMENTS OF THE LOAN DOCUMENTS. THIS NOTE MAY BE FILED WITH ANY
COURT
      OF
      COMPETENT JURISDICTION AS BORROWER'S WRITTEN CONSENT TO BORROWER'S WAIVER OF
      A
      JURY TRIAL. BORROWER HAS INITIALED THIS SECTION BELOW TO INDICATE ITS AGREEMENT
      WITH THE JURY TRIAL WAIVER AND OTHER TERMS CONTAINED IN THIS
      SECTION.

    

    6.22
      Successors.
      Subject
      to the restrictions contained in the Loan Documents, the Loan Documents
shall
      be
      binding upon and inure to the benefit of the Lender and Borrower and their
      respective permitted successors and assigns.

    

    
      	
              Dated:

            	
              June
                8, 2006

            	 
	 	 	 
	 	
              Borrower:

            	 
	 	
              ASDS
                of Orange County, Inc.

            	 
	 	
              a
                Delaware corporation

            	 
	 	 	 
	
              By:
                

            	
              /s/
                James C. Leslie

            	 
	 	
              James
                C. Leslie, President

            	 
	 	 	 
	
              By:
                

            	
              /s/
                David E. Bowe

            	 
	 	
              David
                E. Bowe, Secretary

            	 
	 	 	 
	 	
              Lender:

            	 
	 	
              First
                Republic Bank

            	 
	 	 	 
	
              By:
                

            	
              /s/
                Carolyn Powell

            	 
	 	
              Carolyn
                Powell

            	 
	
              Its:
                

            	
              Managing
                Director

            	 

    

    

     

    

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    LOAN
      AGREEMENT

    (TERM
      LOAN)

    

    EXHIBIT
      "A"

    

    LOAN
      SCHEDULE

    

    This
      Loan Schedule is an integral part of the Loan Agreement between the Lender
      and
      Borrower, and the following terms
      are incorporated in and made a part of the Loan Agreement to which this Loan
      Schedule is attached:

    

    

    
      	1.  	
              Borrower:
                ASDS
                of Orange County, Inc., a Delaware
                corporation

            

    

    

    

    
      	2.  	
              Guarantors:
                CRESA
                Partners of Orange County, LP, a Delaware limited partnership; Kevin
                John
                Hayes; Kevin
                Hayes and Alice Hayes, Trustees of the Hayes Trust; Kenneth Ward;
                Sandra
                K. Kikerpill; Jeff A. Manley; David Lee Willis; David Lee Willis
                and
                Marsha Millstead Willis, Trustees of the David and Marsha
                Willis
                Trust; Richard T. Martin; Jeffrey G. Shepard; Wayne C. Lamb and Kenneth
                Bruce Blye

            

    

    

    

    
      	3.  	
              Borrower's
                Notice Address:  ASDS
                of Orange County, Inc., a Delaware corporation 610
                Newport Center Drive, Suite 500  Newport
                Beach, California
                92660

            

    

    

    

    
      	4.  	
              Lender's
                Notice Address:      First
                Republic Bank

            

    

    111
      Pine Street

    San
      Francisco, California 94111

    Attention:
      Manager, Commercial Loan Operations

    

    

    
      	5.  	
              Loan
                Fee: Thirteen
                Thousand Two Hundred Fifty and 00/100 Dollars ($13,250.00)
                

              Loan
                Documentation Fee: Nine
                Hundred Ninety-Five and 00/100 Dollars
                ($995.00)

            

    

    

    
      	6.  	
              Financial
                Covenants. Borrower
                and/or Guarantor shall comply with the following Financial
                Covenants:

            

    

    

    6.1 Capital
      Expenditures of Guarantor: Guarantor
      (CRESA Partners of Orange County, LP) shall not make
      any
      expenditures for fixed or capital assets if, after giving effect thereto, the
      aggregate of all such expenditures
      made by Guarantor would exceed $350,000.00 during Guarantor's fiscal year end
      for 2006 and $200,000.00
      during Guarantor's fiscal year end for 2007 through 2009.

    

    6.2 Debt
      Service Coverage Ratio for Guarantor: Guarantor
      (CRESA Partners of Orange County, LP) shall maintain a Debt Service Coverage
      Ratio of not less than 1.20 to 1 based on debt outstanding at ASDS calculated
      on a rolling 4 quarter average. For purposes of this Section, the term "Debt
      Service Coverage Ratio" is based
      on
      EBITDA divided by current portion of term debt at ASDS plus
      interest.

    

    
      	6.3  	
              No
                Additional Indebtedness: Borrower
                and Guarantor (CRESA Partners of Orange County, LP) (a) shall
                not directly or indirectly make, create, incur, assume, or permit
                to exist
                any guaranty of any kind of any indebtedness
                or other obligation of any other person during the term of this Agreement,
                excluding any guaranties by Borrower and Guarantor as of the date
                of this
                Agreement that are reflected in the financial statements referred
                to in
                Section 5.1 of this Agreement; and (b) shall not directly or indirectly
                incur indebtedness for borrowed money during
                the term of this Agreement, excluding (i) debts owing by Borrower
                and
                Guarantor as of the date of this Agreement
                that are reflected in the financial statements referred to in Section
                5.1
                of this Agreement (other than those that are being paid substantially
                concurrently with the funding of the Loan); (ii) other borrowings
                from the
                Lender; and (iii) indebtedness secured by purchase money mortgages
                or
                liens which encumber only the property being
                purchased.

            

    

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    7. Accounting.

    

    7.1
      Quarterly/Annual
      Financial Statements. All
      quarterly and annual fiscal year end financial statements provided
      by Borrower and Guarantor (CRESA Partners of Orange County, LP) to the Lender
      under the Loan Documents
      shall be provided by February
      15, May 15, August 15 and November 15 and
      shall
      comply with the following
      requirements: All
      quarterly/annual financial statements shall be certified by Borrower and
Guarantor,
      respectively, or, if Borrower or Guarantor is an entity, by Borrower's or
      Guarantor's chief financial
      officer or by another officer or agent of Borrower or Guarantor acceptable
      to
      the Lender.

    

    7.2
      Annual
      Personal Financial Statements of Guarantors. Borrower
      shall ensure that all annual personal financial
      statements provided by each individual Guarantor to the Lender under the Loan
      Documents shall be provided
      by May
      15 and
      shall
      comply with the following requirements: All
      annual personal financial statements shall
      be certified by each individual Guarantor.

    

    7.3
      Quarterly/Annual
      Accounts Receivable Aging Statements of Guarantor. Borrower
      shall ensure that all quarterly
      and annual fiscal year end accounts receivable aging statements provided by
      Guarantor (CRESA Partners
      of Orange County, LP) to the Lender under the Loan Documents shall be provided
      by February
      15, May 15, August 15 and November 15 and
      shall
      comply with the following requirements: All
      quarterly/annual accounts
      receivable aging statements shall be certified by Guarantor or, if Guarantor
      is
      an entity, by Guarantor's chief financial officer or by another officer or
      agent
      of Guarantor acceptable to the Lender.

    

    8. Authorization
      to Charge Account.

    8.1
      Automatic
      Payment Authorization. Borrower
      authorizes the Lender to make automatic deductions from the following
      deposit account (the "Account") maintained by Borrower at Lender's offices
      in
      order to pay, when and as due, all of the regularly scheduled installment
      payments of interest, principal, or both principal and interest (a "Payment")
      that Borrower is required or obligated to make under the Note:    Account
      No: 953-0001-4111

     

    Without
      limiting any of the terms of the Loan Documents, Borrower acknowledges and
      agrees that if Borrower defaults in its obligation to make a Payment because
      the
      collected funds in the Account are insufficient to make such Payment in full
      on
      the date that such Payment is due, then Borrower shall be responsible for all
      late payment charges
      and other consequences of such default by Borrower under the terms of the Loan
      Documents.

    

    8.2 Revocation
      of Authorization. Subject
      to the Section immediately following this Section, this authorization
      shall continue in full force and effect until the date which is five (5)
      business days after the date on which Lender actually receives written notice
      from Borrower expressly revoking the authority granted to the Lender
to
      charge
      the Account for Payments in connection with the Loan. No such revocation by
      Borrower shall in any way release
      Borrower from or otherwise affect Borrower's obligations under the Loan
      Documents, including Borrower's obligations
      to continue to make all Payments required under the terms of the
      Note.

    

    8.3 Termination
      by Lender.The
      Lender,
      at
      its
option
      and
      in
      its discretion,
      reserves the
      right
      to
terminate
      the
      arrangement
      for automatic
      deductions
      from the
      Account
      pursuant to
      this
Section
      at
      any
time
      effective upon written
      notice of
      such
      election
      (a "Termination Notice") given
      by
      Lender
to
      Borrower. Without
      limiting
      the generality of
      the
      immediately preceding sentence, the
      Lender
      may
      elect
to
      give
a
      Termination
      Notice to
      Borrower
      if
      Borrower
      fails
      to
      comply
      with any
      of
the
      Lender's rules,
      regulations,
      or
      policies
      relating to
      the
      Account, including requirements
      regarding minimum
      balance,
      service
      charges,
      overdrafts, insufficient funds, uncollected funds, returned items,
      and
      limitations
      on
      withdrawals.

    

    8.4 Increase
      in Interest Rate Upon Termination of Automatic Debit Arrangement.
The
      date on which the
      arrangement for automatic deductions from the Account terminates (whether as
      a
      result of Borrower's revocation of such arrangement or any Termination Notice
      given by the Lender) is referred to as the "Auto Debit Termination Date."
      Borrower acknowledges and agrees that the Lender would not have been willing
      to
      make the Loan at the interest rate or interest rates contained in the Note
      in
      the absence of the arrangement
      for automatic deductions from the Account pursuant to this authorization.
      Therefore, effective
      on the first due date of a Payment following the Auto Debit Termination Date,
      the Lender, at its option and in its discretion, shall have the right to
      increase the interest rate on the outstanding principal balance
      of the Note to a rate which is equal to one-half of one percent (0.50%) per
      annum (the "Percentage Rate Increase") above the otherwise applicable interest
      rate under the terms of the Note. If the Note provides
      for amortized monthly payments of principal and interest, then the amount of
      such monthly payments
      shall be increased by the Lender based on a reamortization schedule prepared
      by
      the Lender using
      the increased interest rate and the then remaining number of months in the
      original amortization period
      that was used by the Lender to calculate the original monthly payment amount.
      Such new monthly payments
      shall be payable commencing on the first Payment due date following the date
      of
      the interest rate
      increase.

    

    9. Other
      Covenants.

    Borrower
      shall
      at all times comply with all of the
      following additional covenants:

    9.1
      Borrower shall ensure that Guarantor (CRESA Partners of Orange County, LP)
      shall
      not make distributions
      with the exception of: (1) to ASDS for taxes and debt service and (2) to ASI
      for
      management fees
      no greater than $75,000.00.

    9.2
      Borrower shall not disburse dividends or payments to Ascendant Solutions, Inc.
      (ASI).

    -16-

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