Document:

lowell_ex102

 

 

 

 

 

 

 

LOAN AGREEMENT

 

by and between

 

VIRIDESCENT REALTY TRUST, INC.

 

(“Lender”)

 

 

and

 

LOWELL SR LLC,

 

(“Borrower”)

 

dated as of June 29, 2021

 

 

 

 

 

	

TABLE OF CONTENTS  
 

	

	
 

	
 Page

	
 

	
 

	
 

	

Article
I DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS 

 

	

1.1

	

Definitions

	

1

	

1.2

	

Singular and Plural Forms

	

10

	

1.3

	

UCC Definitions

	

10

	

1.4

	

Accounting Terms

	

10

	

1.5

	

Amendments, Etc

	

10

	

1.6

	

Laws, Etc

	

11

	

Article
II TERMS OF THE LOAN 

 

	

2.1

	

The Loan

	

11

	

2.2

	

Security for the Loan

	

13

	

2.3

	

Origination Fee; Transaction Costs

	

14

	

2.4

	

Conditions Precedent to Closing

	

14

	

Article
III BORROWER’S REPRESENTATIONS AND WARRANTIES

 

	

3.1

	

Existence, Power and Qualification

	

17

	

3.2

	

Power and Authority

	

17

	

3.3

	

Due Execution and Enforcement

	

18

	

3.4

	

Single Purpose Entity

	

18

	

3.5

	

Pending Matters

	

18

	

3.6

	

Financial Statements Accurate

	

18

	

3.7

	

Compliance with Facility Laws

	

18

	

3.8

	

Governmental Proceedings and Notices

	

19

	

3.9

	

Pledges of Accounts

	

19

	

3.1

	

Payment of Taxes and Property Impositions

	

19

	

3.11

	

Title to Collateral

	

19

	

3.12

	

Priority of Mortgage

	

19

	

3.13

	

Location of Chief Executive Offices

	

20

	

3.14

	

Disclosure

	

20

	

3.15

	

Trade Names

	

20

	

3.16

	

ERISA

	

20

	

3.17

	

Ownership

	

20

	

3.18

	

Intentionally Omitted

	

20

	

3.19

	

Bankruptcy

	

20

	

3.2

	

Lease Agreement

	

20

	

3.21

	

Other Indebtedness

	

20

	

3.22

	

Other Obligations

	

20

	

3.23

	

Fraudulent Conveyances

	

21

	

3.24

	

Fixtures, Furniture and Equipment

	

21

	

3.25

	

Sole Purpose

	

21

	

3.26

	

Use of Loan Proceeds

	

21

	

3.27

	

Intentionally Omitted

	

21

	

3.28

	

Other Proceedings

	

21

	

3.29

	

Access

	

21

	

3.3

	

Encroachments

	

22

	

Article
IV AFFIRMATIVE COVENANTS OF BORROWER 

 

	

4.1

	

Payment of Loan/Performance of Loan Obligations

	

22

	

4.2

	

Maintenance of Existence

	

22

	

4.3

	

Maintenance of Single Purpose

	

22

	

4.4

	

Accrual and Payment of Taxes

	

22

	

4.5

	

Insurance

	

22

	

4.6

	

Financial and Other Information

	

28

	

4.7

	

Intentionally Omitted

	

29

	

4.8

	

Books and Records

	

30

	

4.9

	

Payment of Indebtedness

	

30

	

4.1

	

Conduct of Business

	

30

	

4.11

	

Intentionally Omitted

	

30

	

4.12

	

Financial Covenants

	

30

	

4.13

	

Fixtures, Furniture and Equipment

	

30

	

4.14

	

Intentionally Omitted

	

30

	

4.15

	

Updated Appraisals

	

31

	

4.16

	

Comply with Covenants and Laws

	

31

	

4.17

	

Taxes and Other Charges

	

31

	

4.18

	

Intentionally Omitted

	

31

	

4.19

	

Certificate

	

31

	

4.2

	

Notice of Fees or Penalties

	

31

	

4.21

	

Lease Agreement

	

31

	

4.22

	

Intentionally Omitted

	

32

	

4.23

	

Loan Closing Certification

	

32

	

4.24

	

Intentionally Omitted

	

32

	

4.25

	

Management

	

32

	

4.26

	

Mortgage Tax

	

32

	

Article
V NEGATIVE COVENANTS OF BORROWER 

 

	

5.1

	

Assignment of Licenses and Permits

	

32

	

5.2

	

No Liens; Exceptions

	

33

	

5.3

	

Merger, Consolidation, Etc

	

33

	

5.4

	

Maintain Single-Purpose Entity Status

	

34

	

5.5

	

Change of Business

	

35

	

5.6

	

Changes in Accounting

	

35

	

5.7

	

ERISA Funding and Termination

	

35

	

5.8

	

Transactions with Affiliates

	

35

	

5.9

	

Transfer of Property or any Ownership Interests

	

35

	

5.1

	

Change of Use

	

35

	

5.11

	

Place of Business

	

35

	

5.12

	

Acquisitions

	

35

	

5.13

	

Dividends, Distributions and Redemptions

	

36

	

5.14

	

Conduct of Business

	

36

	

5.15

	

Regulated Assets

	

36

	

Article
VI ENVIRONMENTAL HAZARDS 

 

	

6.1

	

Prohibited Activities and Conditions

	

37

	

6.2

	

Intentionally Omitted

	

37

	

6.3

	

Preventive Action

	

37

	

6.4

	

Intentionally Omitted

	

37

	

6.5

	

Borrower’s Environmental Representations and
Warranties

	

37

	

6.6

	

Notice of Certain Events

	

38

	

6.7

	

Costs of Inspection

	

38

	

6.8

	

Remedial Work

	

38

	

6.9

	

Cooperation with Governmental Authorities

	

39

	

6.1

	

Indemnity

	

39

	

Article
VII PAYMENT RESERVES 

 

	

7.1

	

Establishment of Payment Reserves

	

41

	

7.2

	

Required Repairs

	

41

	

7.3

	

Debt Reserve

	

41

	

7.4

	

Security Interest in Payment Reserves

	

41

	

Article
VIII EVENTS OF DEFAULT AND REMEDIES 

 

	

8.1

	

Events of Default

	

43

	

8.2

	

Remedies

	

45

	

8.3

	

Costs of Collection and Enforcement

	

46

	

8.4

	

Offsets

	

47

	

Article
IX MISCELLANEOUS 

 

	

9.1

	

Waiver

	

47

	

9.2

	

Costs and Expenses

	

48

	

9.3

	

Performance of Lender

	

48

	

9.4

	

Indemnification

	

49

	

9.5

	

Headings

	

50

	

9.6

	

Survival of Covenants

	

50

	

9.7

	

Notices, etc

	

50

	

9.8

	

Benefits and Information Sharing

	

51

	

9.9

	

Supersedes Prior Agreements; Counterparts

	

51

	

9.1

	

Loan Agreement Governs

	

51

	

9.11

	

CONTROLLING LAW

	

52

	

9.12

	

WAIVER OF JURY TRIAL

	

52

	

9.13

	

Intentionally Omitted

	

52

	

9.14

	

Patriot Act Compliance

	

52

	

9.15

	

Secondary Market Transactions

	

53

	

(a)

	

Right to Sell

	

53

	

(b)

	

Right to Participate

	

54

	

9.16

	

Construction

	

54

	

9.17

	

No Partnership

	

54

	

9.18

	

Financing Statements

	

54

	

9.19

	

Press Releases

	

55

	

9.2

	

Change in Law

	

55

	

9.21

	

Applicability of Cannabis Laws

	

55

 

 

LIST OF EXHIBITS

 

	

Exhibit
A

	

Legal
Description

	

Exhibit
B

	

Required
Repairs

	

Exhibit
C

	

Amortization
Schedule

	

Exhibit
D

	

Permitted
Encumbrances

	

Exhibit
E

	

Existing
Insurance Coverages

 

 

LIST OF SCHEDULES

 

	

Schedule
3.17

	

Organizational
Chart of Each Loan Party

 

 

 

 

 

 

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this
“Agreement”) is made as of
June 29, 2021, by and between LOWELL SR LLC, a California limited
liability company, having its principal office at 20 Quail Run
Circle, Salinas, California 93907 (together with its successors and
assigns, the “Borrower”), and
VIRIDESCENT REALTY TRUST,
INC., a Maryland real estate investment trust, having an
address at c/o Viridescent Capital Partners, 10242 Greenhouse Road,
Building 1201, Cypress, Texas 77433 (“Lender”).

 

RECITALS

 

Borrower has
requested that the Lender make a loan to Borrower in the aggregate
principal sum of up to
Nine Million Three Hundred Sixty and No/100 Dollars ($9,360,000.00)
(the “Loan”) for the purpose of
purchasing the Property (hereinafter defined).

 

Lender
is willing to make the Loan, and Borrower is willing to borrow the
Loan, on the terms and conditions set forth in this Agreement and
the other Loan Documents.

 

 

AGREEMENTS

 

NOW,
THEREFORE, Borrower and Lender hereby agree as
follows:

 

ARTICLE
I 

 

DEFINITIONS,
ACCOUNTING PRINCIPLES, UCC TERMS.

 

1.1 Definitions. As used in this
Agreement, the following terms shall have the following meanings
unless the context hereof shall otherwise indicate:

 

“Accounts” any rights of
Borrower arising from the ownership of the Facility, including,
without limitation: (a) all accounts arising from the Lease and/or
ownership of the Facility; and (b) all moneys and accounts held by
Lender pursuant to this Agreement. Accounts shall include the
proceeds thereof (whether cash or non-cash, moveable or immoveable,
tangible or intangible) received from the sale, exchange, transfer,
collection or other disposition or substitution
thereof.

 

“Affiliate” means, with
respect to any Person: (a) each Person that controls, is controlled
by or is under common control with such Person; and (b) each Person
that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, twenty
percent (20%) or more of the Stock of such Person.

 

“Agreement” is defined in
this preface to this Agreement.

 

“Amortization Commencement
Date” means the first day of the 13th full calendar
month after the Closing Date.

 

“Assignment of Rents and
Leases” means that certain Assignment of Rents and
Leases executed by Borrower and Lender of even date herewith, as
the same may be amended, restated, replaced, subleased or modified
from time to time.

 

 

 

1

 

 

“Borrower”
means Lowell SR LLC, a California limited liability company,
and its successors and assigns.

 

“Borrower’s
knowledge” means
(i) the actual knowledge of Borrower, or (ii) the
knowledge a Borrower would have had if a Borrower had made due
inquiry regarding the fact or other matter in question as a prudent
business person would be expected to make in the management of the
Borrower’s business affairs.

 

“Business” means the
cannabis drying, trimming, packaging, extraction and processing to
be performed in the Facility in accordance with all Licenses,
Permits and Limited Governmental Requirements.

 

“Business Day” means any
day on which banks, savings and loan associations, savings banks,
or other financial institutions are generally open for regular
banking business in the State of California.

 

“Claim” is defined in
Section
6.10(c).

 

“Closing Date” means the
date on which all or any part of the Loan is disbursed by the
Lender to or for the benefit of Borrower, including to any loan
escrow funding agent.

 

“Collateral” means,
collectively, all of Borrower’s right, title and interest in
and to the Property, Improvements, Equipment, Rents, Accounts,
General Intangibles (including the Spence Rd Equity), Instruments,
Money, Deposit Accounts, Permits (to the full extent assignable),
Reimbursement Contracts, Imposition Deposits, Debt Reserve, and all
Proceeds, all whether now owned or hereafter acquired, and
including replacements, additions, accessions, substitutions, and
products thereof and thereto, all other assets of the Borrower,
wherever located, whether now owned or existing or hereafter
acquired or arising, together with all proceeds thereof, and all
other property of Borrower which is or hereafter may become subject
to a Lien in favor of Lender as security for any of the Loan
Obligations; notwithstanding anything to the contrary contained
herein, the “Collateral” shall not, include, (i) any
assets of Borrower over which any mortgage, pledge, hypothecation,
assignment (as security), deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest may not be
granted due to (x) the operation of any applicable legal
requirements, or (y) any agreement that by its terms would be in
breach if it served as security for a debt; (ii) any marijuana or
marijuana-related product, including any cannabidiol product; and
(iii) all other permits, licenses or agreements issued by or with
any other governmental authority related to the operation of
marijuana businesses which by their terms prohibit the pledging of
interests therein.

 

“Constituent of Borrower”
is defined in Section 9.14(b).

 

“Debt” means the
outstanding principal amount set forth in, and evidenced by, this
Agreement and the Note, including the Exit Fee, any prepayment
premium payable pursuant to Section 2.1(c)(iii) together
with all interest accrued and unpaid thereon and all other sums
owing to Lender in respect of the Loan under the Note, this
Agreement, the Security Instrument or any other Loan
Document.

 

“Debt Reserve” is defined
in Section
7.3(a).

 

 

 

2

 

 

“Debt Service” means, with
respect to any particular period of time, scheduled principal and
interest payments due under the Note.

 

“Default” means the
occurrence or existence of any event which, but for the giving of
notice or expiration of time or both, would constitute an Event of
Default.

 

“Default Rate” means a per
annum rate of interest equal to the lesser of (a) five hundred
(500) basis points (i.e., 5.00 percentage points) in excess of
Interest Rate, or (ii) the maximum rate of interest which may be
collected from Borrower under applicable law.

 

“Disbursement Date” is the
first date on which a Lender disburses any proceeds of the Loan to
or for the account of Borrower or to any loan escrow or funding
agent.

 

“Environmental Indemnity
Agreement” means that certain Environmental Indemnity
Agreement dated as of the date hereof by and among Borrower,
Operator and Guarantor in favor of Lender, as the same may be
amended, restated, replaced or modified from time to
time.

 

“Environmental Permit”
means any Permit issued under any Hazardous Materials Law with
respect to any activities or businesses conducted on or in relation
to the Property and/or the Improvements.

 

“Environmental Reports” is
defined in Section
2.4(c)(v).

 

“Equipment” means all
machinery, furniture, furnishings, equipment, computer software and
hardware, fixtures (including all heating, air conditioning,
plumbing, lighting, communications and elevator fixtures),
materials, supplies and other articles of personal property and
accessions thereof, renewals and replacements thereof and
substitutions therefor, and other property of every kind and
nature, tangible or intangible, owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located
upon the Facility or the Improvements, or appurtenant thereto, and
usable in connection with the present or future operation and
occupancy of the Facility and the Improvements.

 

“Event of Default” means
any “Event of Default” as defined in Article VIII
hereof.

 

“Exhibit” means an Exhibit
to this Agreement, unless the context refers to another document,
and each such Exhibit shall be deemed a part of this Agreement to
the same extent as if it were set forth in its entirety wherever
reference is made thereto.

 

“Exit Fee” mean an amount
equal to one percent (1.0%) of the outstanding principal balance of
the Loan.

 

“Facility” means the
cannabis drying, trimming, packaging, extraction and processing
facility located on the Property, as it may now or hereafter exist,
together with any other cannabis-related facilities, if any, now or
hereafter operated on the Property.

 

“Facility License” means
the license(s) issued to the Operator and Spence Rd to operate the
Facility.

 

 

 

3

 

 

 

 

“GAAP” means, as in effect
from time to time, generally accepted accounting principles
consistently applied as promulgated by the American Institute of
Certified Public Accountants.

 

“General Intangibles”
means all intangible personal property of Borrower arising out of
or connected with the Property or the Facility and all renewals and
replacements thereof and substitutions therefor (other than
Accounts, Rents, Instruments, Money and Permits), including,
without limitation, choses in action, contract rights and other
rights to payment of money.

 

“Governmental Authority”
means any board, commission, carrier, intermediary, department or
body of any municipal, county, state or federal governmental unit,
or any subdivision of any of them, that has or acquires
jurisdiction over the Borrower, Operator, Facility, the Property
and/or the Improvements or the use, operation or improvement of the
Property.

 

“Guarantee” by any Person
means any obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness
or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise), or (b) entered into for
the purpose of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or
in part), provided,
however, that the term Guarantee shall not include
endorsements for collection or deposit in the Ordinary Course of
Business. The term “guarantee” used as a verb
has a corresponding meaning.

 

“Guarantor” means,
individually and collectively, Indus Holding Company, a Delaware
corporation, and any Loan Party that has executed or delivered, or
shall in the future execute or deliver, any Guarantee of any
portion of the Loan Obligations.

 

“Guaranty Agreement” means
any document evidencing any Guarantee of any portion of the Loan
Obligations executed by a Guarantor.

 

“Hazardous Materials”
means petroleum and petroleum products and compounds containing
them, including gasoline, diesel fuel and oil; explosives;
flammable materials; radioactive materials; polychlorinated
biphenyls (“PCBs”) and compounds containing them; lead
and lead-based paint; asbestos or asbestos-containing materials in
any form that is or could become friable; underground storage
tanks, whether empty or containing any substance; any substance the
presence of which on the Property is prohibited by any federal,
state or local authority; any substance that requires special
handling; and any other material or substance now or in the future
defined as a “hazardous substance,” “hazardous
material,” “hazardous waste,” “toxic
substance,” “toxic pollutant,”
“contaminant,” or “pollutant” within the
meaning of any Hazardous Materials Law or regulated under any
Hazardous Materials Law.

 

 

 

4

 

 

“Hazardous Materials Laws”
means all federal, state, and local laws (including common law),
ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court
judgments and decrees (including any judicial or administrative
interpretations, guidance, directives, policy statements or
opinions) in effect now or in the future and including all
amendments, that relate to the protection or pollution of the
environment or to Hazardous Materials. Hazardous Materials Laws
include, but are not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C.
Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251,
et seq., and the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, and their state analogs.

 

“Impositions” and
“Imposition
Deposits” mean the Impositions and Imposition Deposits
defined in the Security Instrument.

 

“Improvements” means all
buildings, structures and improvements of every nature whatsoever
now or hereafter situated on the Property, including, but not
limited to, all gas and electric fixtures, radiators, heaters,
engines and machinery, boilers, ranges, elevators and motors,
plumbing and heating fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes, and cleaning apparatus
which are or shall be attached to the Property or said buildings,
structures or improvements.

 

“Indebtedness” means any
(a) obligations for borrowed money, (b) obligations, payment for
which is being deferred by more than thirty (30) days, representing
the deferred purchase price of property other than accounts payable
arising in the ordinary course of the business of Borrower, (c)
obligations, whether or not assumed, secured by Liens or payable
out of the proceeds or production from the Accounts and/or real or
personal property now or hereafter owned or acquired by Borrower or
Operator, and (d) the amount of any other obligation (including
obligations under financing leases) which would be shown as a
liability on a balance sheet prepared in accordance with
GAAP.

 

“Indemnitees” is defined
in Section
6.10(a).

 

“Instruments” means all
instruments, chattel paper, documents or other writings obtained
from or in connection with the operation of the Property or the
construction and operation of the Facility (including, without
limitation, all ledger sheets, computer records and printouts, data
bases, programs, books of account, trademarks or trade names,
utility contracts, maintenance and service contracts, and files
relating thereto).

 

“Interest Rate” means
twelve and one-half percent (12.50%) per annum.

 

“Late Charge” is defined
in Section
2.1(c)(viii).

 

“Lease Agreement” means
that certain Lease Agreement made as of the date hereof by and
between the Borrower, as Landlord and the Operator, as Tenant, with
respect to the Facility, as the same may be amended, restated,
replaced, subleased or modified from time to time.

 

 

 

5

 

 

“Leases” means,
individually and collectively, the Lease Agreement, together with
any other oral or written leases, subleases, licenses, concessions,
occupancy agreement and other agreements for the use or occupancy
made or agreed to by, any person or entity and any and all
amendments, extensions, renewals, modifications and replacements
thereof pertaining to all or any part of the Property, or any
possessory interest therein, whether such leases or other
agreements have been heretofore or are hereafter made or agreed
to.

 

“Lien” means any voluntary
or involuntary mortgage, security deed, deed of trust, lien,
pledge, assignment, security interest, title retention agreement,
financing lease, levy, execution, seizure, judgment, attachment,
garnishment, charge, lien or other encumbrance of any kind,
including those contemplated by or permitted in this Agreement and
the other Loan Documents.

 

“Limited Governmental
Requirement” means all applicable laws, laws, rules,
and regulations and other legal requirements, excluding, however, any U.S. federal laws,
statutes, codes, ordinances, decrees, rules or regulations which
apply to the cultivation, harvesting, production, trafficking,
distribution, processing, extraction, sale and/or possession of
cannabis, marijuana or related substances or products containing or
relating to the same, including, but not limited to, the
prohibition on drug trafficking under 21 U.S.C. § 841(a), et
seq., the conspiracy statute under 18 U.S.C. § 846, the bar
against aiding and abetting the conduct of an offense under 18
U.S.C. § 2, the bar against misprision of a felony (concealing
another’s felonious conduct) under 18 U.S.C. § 4, the
bar against being an accessory after the fact to criminal conduct
under 18 U.S.C. § 3, and federal money laundering statutes
under 18 U.S.C. §§ 1956, 1957, and 1960 (the
“Federal Cannabis
Laws”).

 

“Loan” is defined in the
recitals of this Agreement and is evidenced by this Agreement, the
Note and other Loan Documents.

 

“Loan Documents” means,
collectively, this Agreement, the Assignment of Rents and Leases,
the Note, the Security Instrument, the Pledge Agreement, the
Subordination Agreement, the Guaranty Agreement and the
Environmental Indemnity Agreement, together with any and all other
documents executed by Borrower, any other Loan Party, and Guarantor
or others evidencing, securing or otherwise relating to the
Loan.

 

“Loan Obligations” means
the aggregate of all principal and interest owing from time to time
under the Note and the other Loan Documents and all expenses,
charges and other amounts from time to time owing under the Note,
this Agreement, or the other Loan Documents and all covenants,
agreements and other obligations from time to time owing to, or for
the benefit of Lender pursuant to the Loan Documents.

 

“Loan Party” means
Borrower, Guarantor and Operator, individually, and
“Loan
Parties” means Borrower, Guarantor, and Operator,
collectively.

 

“Material Adverse Effect”
means any change, event or development that has caused, or would
reasonably be expected to cause, a material adverse change in (i)
the value, operations, financial or physical condition of the
Property, or (ii) the business, financial condition or results
of operations of Borrower or Guarantor and its consolidated
subsidiaries, taken as a whole, such that the ability of Borrower
(or Guarantor pursuant to the Guaranty Agreement) to repay the Loan
has been or would reasonably be expected to be materially
impaired.

 

 “Maturity
Date” means June 29, 2026, or such other date on which
the final payment of principal of the Note becomes due and payable
as therein or herein provided, whether at such stated maturity
date, by declaration of acceleration, or otherwise.

 

 

 

6

 

 

 

 

“Money” means all monies,
cash, rights to deposit or savings accounts or other items of legal
tender obtained from or for use in connection with the operation of
the Property.

 

“Monthly Principal
Payment” is defined in Section 2.1(c)(ii).

 

“Mortgaged
Property” means the
Property, the Improvements thereon and all real or personal
property owned by the Borrower and encumbered by a Security
Instrument, together with all tangible or intangible rights
pertaining to the Property and Improvements, as more particularly
defined in the Security Instrument as the “Mortgaged
Property”.

 

“Note” means the
Promissory Note of even date herewith from Borrower to Lender in
the principal amount of the Loan payable by Borrower to the order
of Lender, including all schedules, riders, allonges, endorsements,
addenda or amendments together with any renewals, replacements,
substitutions or extensions thereof.

 

“Operator” means Cypress
Manufacturing Company, a California corporation.

 

 “Parent”
means Lowell Farms Inc., a British Columbia, Canada corporation and
the owner of 100% of the outstanding voting stock of
Guarantor.

 

“Patriot Act” is defined
in Section
9.14(a).

 

“Payment Reserves” means
the Debt Reserve and any other escrow or reserve fund established
pursuant to the Loan Documents.

 

 “Permits”
means all licenses, permits, franchises, certificates of occupancy,
consents and other approvals used or necessary in connection with
the ownership, operation, use or occupancy of the Property and/or
the Facility thereon, including, without limitation, (A) to enable
the operation of the Business at the Property in accordance with
all State of California and Monterey County Permits (including
cannabis Permits), and (B) to facilitate the approval of the
transfer of ownership of the Property to Borrower in accordance
with applicable State of California and Monterey County
law.

 

“Permitted Encumbrances”
means (a) the lien of current real property taxes, water charges,
sewer rents and assessments not yet due and payable; (b) the items
specified in Exhibit D; (c) the exceptions (general and specific)
and exclusions set forth in the Title Policy; (d) other matters to
which like properties are commonly subject; (e) the rights of
tenants (as tenants only) under leases (including subleases)
pertaining to the related Mortgaged Property which the Loan
Documents do not require to be subordinated to the lien of the
Security Instrument; and (f) if the Loan is cross-collateralized
with another loan or loans, the lien of the security instrument for
such other loan(s), provided that none of such items (a), (b), (d)
and (e), individually or in the aggregate, materially interferes
with the current use or operation of the Mortgaged Property or the
security intended to be provided by the Security Instrument or the
Borrower’s ability to pay its obligations when they become
due.

 

 

 

7

 

 

“Permitted Transfer”
means, any one or a series of Transfers of direct or indirect
ownership interests in any Restricted Person and/or Guarantor, so
long as (a) such Transfer shall not result in the change of control
by Parent of Borrower, Spence Rd, Operator or Guarantor such that
the Parent does not control, directly or indirectly, the direction
of the management and policies of each of Borrower, Spence Rd,
Operator and Guarantor, (b) following such Transfer, each of
Borrower, Spence Rd and Operator shall be wholly owned, directly or
indirectly, by Guarantor, (c) such Transfer shall not result in any
violation, revocation or suspension of any Facility License or any
other material Permit necessary to operate the Business, (d) Lender
receives at least thirty (30) days’ prior written notice
thereof together with an organizational chart reflecting the
ownership interests in Borrower, Spence Rd and/or Operator
following consummation of such transfer; and (e) to the extent
reasonably required by Lender, the assignee of such Transfer
satisfiers Lender’s customary
“know-your-customer” and anti-money laundering
requirements.

 

“Person” means any natural
person, firm, trust, corporation, partnership, limited liability
company, trust and any other form of legal entity.

 

“Pledge Agreement” means
that certain Ownership Pledge, Assignment and Security Agreement
made as of the date hereof by and between the Borrower and Lender
pursuant to which the Spence Rd Equity is being pledged to the
Lender as Collateral for the Loan Obligations.

 

 “Proceeds”
means all awards, payments, earnings, royalties, issues, profits,
liquidated claims, and proceeds (including proceeds of insurance
and condemnation or any conveyance in lieu thereof) from the sale,
conversion (whether voluntary or involuntary), exchange, transfer,
collection, loss, damage, condemnation, disposition, substitution
or replacement of any of the Collateral.

 

“Prohibited Activities and
Conditions” is defined in Section 6.1.

 

“Property” means the real
estate located at 20800 Spence Road, Salinas, California 93908,
which is more particularly described in Exhibit A hereto, upon which
the Facility is located, and which, concurrent with the Closing
Date, will be owned by the Borrower and leased to the Operator
pursuant to the Lease Agreement.

 

 “Purchase
Agreement” means that certain Purchase Agreement by
and among Borrower, as purchaser, Lowell Farms Inc., a British
Columbia corporation, Michael Gregory, C Quadrant LLC, a California
limited liability company (“C Quadrant”), AMAG
Holdings, LLC, a Wyoming limited liability company
(“AMAG” and, together with C Quadrant,
“Sellers,” and each, a “Seller”),
thereunder, as the same may be amended, restated, supplemented or
otherwise modified and in effect from time to time.

 

“Remedial Work” is defined
in Section
6.8.

 

“Rents” means all rent and
other payments to Borrower of whatever nature from time to time
payable pursuant to the Lease Agreement, including deposits
(whether for security or otherwise but excluding any resident trust
accounts), issues, profits, revenues, royalties, rights, benefits,
and income of every nature of and from the Property and the
operations conducted or to be conducted thereon.

 

“Restricted Person” means
each of Borrower, Operator and Spence Rd.

 

 

 

8

 

 

“Security Instrument”
means that certain Deed of Trust, Assignment of Leases and Rents,
Security Agreement, and Fixture Filing of even date herewith from
Borrower in favor of and for the benefit of Lender and covering the
Mortgaged Property described herein as the same may be amended,
restated, replaced, subleased or modified from time to
time.

 

“Single Purpose Entity”
means a Person which owns no interest or property other than the
Property, the Improvements, the Equipment, the Spence Rd Equity and
property interests incidental to the foregoing.

 

“Spence Rd” means 20800
Spence Rd LLC, a California limited liability company.

 

“Spence Rd Equity” means
the outstanding limited liability company interests in Spence
Rd.

 

“Stock” means all shares,
options, warrants, general or limited partnership interests,
membership interests, participations or other equivalents
(regardless of how designated) in a corporation, limited liability
company, partnership or any equivalent entity, whether voting or
nonvoting, including, without limitation, common stock, preferred
stock, or any other “equity security” (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).

 

“Subordination Agreement”
means that certain Subordination and Attornment Agreement of even
date herewith by and among Borrower, Operator and
Lender.

 

“Survey”
is defined in Section
2.4(c).

 

“Taxes” means all taxes,
assessments, vault rentals and other charges, if any, general,
special or otherwise, including all assessments for schools, public
betterments and general or local improvements, which are levied,
assessed or imposed by any public authority or quasi-public
authority, and which, if not paid, will become a lien, on the Land
or the Improvements.

 

“Term” means the date
hereof through the Maturity Date, as the same may be extended, or
earlier termination of the Loan.

 

“Title
Policy” is defined
in Section
2.4(c).

 

 

 

9

 

 

“Transfer” means the
conveyance, assignment, sale, transfer, granting of options with
respect to or other disposition of (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) (collectively,
“Disposition”), or the
creation of a Lien with respect to, all or any portion of any legal
or beneficial interest (i) in all or any portion of the Mortgaged
Property or any other real or personal property of the Borrower or
Spence; (ii) in the Stock of any corporation which is a Restricted
Person, a member of a Restricted Person (if the Restricted Person
is a limited liability company), a partner of a Restricted Person
or, if applicable, a partner of a general partner of a Restricted
Person (if the Restricted Person is a limited or general
partnership), including any legal or beneficial interest in any
constituent limited partner or member of the Restricted Person;
(iii) in a Restricted Person (or any trust of which the Restricted
Person is a trustee); or (iv) if a Restricted Person is a joint
venture, trust, nominee trust, tenancy in common or other
unincorporated form of business association or form of ownership
interest, in any Person having a direct or indirect legal or
beneficial ownership in the Restricted Person, whether directly or
through multiple tiers of ownership. The term “Transfer” shall also
include, without limitation, the following: (a) an installment
sales agreement wherein a Restricted Person agrees to sell the
Mortgaged Property or any other real or personal property
constituting a portion of the Collateral, or any part thereof or
any interest therein, for a price to be paid in installments; (b)
an agreement by a Restricted Person leasing all or a substantial
part of the Mortgaged Property or any other Collateral to one or
more Persons pursuant to a single transaction or related
transactions (other than the Lease Agreement), or (c) a sale,
assignment or other transfer of, or the grant of a security
interest in, a Restricted Person’s right, title and interest
in and to the Leases or the Rents; (d) any instrument subjecting
the Mortgaged Property to a condominium regime or transferring
ownership to a cooperative corporation or other form of multiple
ownership or governance; or (e) the issuance of new Stock in any
corporation which is a Restricted Person.

 

Notwithstanding
anything to the contrary contained herein, (x) no Disposition of
direct or indirect ownership interests in Parent or any direct or
indirect subsidiary of Parent (other than a Restricted Person or
Guarantor) shall constitute a “Transfer” for purposes
of this Agreement or the other Loan Documents; provided that, in
connection with any consolidation, merger or sale of all or
substantially all of the assets of Parent, (a) Borrower shall have
provided Lender with (i) not less than fifteen (15) Business
Days’ prior written notice of such consolidation, merger or
sale, together with a description thereof, and (ii) such
information as is necessary to satisfy Lender’s customary
“know-your-customer” requirements for any such
transferee, and (b) Borrower, Guarantor and Spence Rd shall execute
such documentation as Lender reasonably requires confirming the
continued validity and effectiveness of the Loan Documents
including, without limitation, any affirmation and/or assumption of
the Guaranty and Environmental Indemnity that Lender may reasonably
require, (y) neither (a) the creation of a Lien on (i) the Stock or
other ownership interests in any Person other than Borrower or
Spence Rd or (ii) any assets (other than Stock or other ownership
interests in Borrower or Spence Rd) of a Person other than Borrower
or Spence Rd, (b) the creation of a Permitted Encumbrance nor (c)
the existence or creation of a Lien that is being contested in
compliance with Section
5.2 shall constitute a “Transfer” for purposes
of this Agreement or the other Loan Documents; and (z) no
Disposition of any assets of a Person other than Borrower or Spence
Rd (other than Stock or other ownership interests in a Restricted
Person) shall constitute a “Transfer” for purposes of
this Agreement or the other Loan Documents.

 

1.2 Singular and Plural Forms.
Singular terms shall include the plural forms and vice versa, as
applicable, of the terms defined. 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. All references to a defined term that includes more than
one written instrument, document, agreement or thing means and
includes each document, agreement or thing encompassed within the
defined term.

 

1.3 UCC Definitions. Terms
contained in this Agreement shall, unless otherwise defined herein
or unless the context otherwise indicates, have the meanings, if
any, assigned to them by the Uniform Commercial Code in effect in
the State of California.

 

1.4 Accounting Terms. All
accounting terms used in this Agreement shall be construed in
accordance with GAAP, except as otherwise specified.

 

1.5 Amendments, Etc. All references
to other documents or instruments shall be deemed to refer to such
documents or instruments as they may hereafter be extended,
renewed, modified, or amended and all replacements and
substitutions therefore.

 

 

 

10

 

 

1.6 Laws, Etc. Any reference to a
code, act, statute or regulation means that law, code, act, statute
or regulation as amended or supplemented from time to time and any
corresponding provisions of successor laws, codes, acts, statutes
or regulations and any reference to any law, code, act or statute
shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires
otherwise.

 

ARTICLE
II 

 

TERMS
OF THE LOAN

 

2.1 The Loan. Borrower agrees to
borrow the Loan from Lender, and Lender agrees to make the Loan to
Borrower, subject to Borrower’s compliance with and
observance of the terms, conditions, covenants, and provisions of
this Agreement and the other Loan Documents, and Borrower has made
the covenants, representations, and warranties herein and therein
as a material inducement to Lender to make the Loan.

 

(a) Loan. On the Closing Date,
Lender shall make a Loan to Borrower in the amount of Nine Million
Three Hundred Sixty and No/100 Dollars ($9,360,000.00). The
proceeds of the Loan shall be used to acquire the Property, to fund
the Debt Reserve and to pay closing costs and fees.

 

(b) Interest.

 

(i) Except as otherwise
provided in this Agreement, the unpaid principal amount of the Loan
and any interest not paid within 30 days of the due date, shall
bear interest with respect to so much of the principal amount of
the Loan outstanding for a calendar month, at the Interest
Rate.

 

(ii) Interest
on the unpaid principal amount of the Loan shall be payable monthly
in arrears commencing on the first day of the first full calendar
month following the calendar month in which the Disbursement Date
occurs, and on the first day of each month thereafter until the
principal, together with all interest and other charges payable
with respect to the Loan, shall be fully paid; and
(iii) calculated on the basis of a 360 day year and the actual
number of days elapsed. Interest not paid within 30 days after the
due date shall accrue like interest as principal and shall be
immediately payable.

 

(iii) All
agreements among Borrower and Lender are expressly limited, so that
in no event or contingency, whether because of the advancement of
the Loan, acceleration of maturity of the unpaid principal balance,
or otherwise, shall the amount paid or agreed to be paid to Lender
for the use, forbearance, or retention of the money to be advanced
under this Agreement or any Loan Document exceed the highest lawful
rate permissible under applicable usury laws. If, under any
circumstances, fulfillment of any provision of the Loan, this
Agreement, the other Loan Documents or any other agreement
pertaining to the Loan, after timely performance of such provision
is due, shall involve exceeding the limit of interest validity
prescribed by law that a court of competent jurisdiction deems
applicable, then, ipso
facto, the obligations to be fulfilled shall be reduced to
the limit of such validity. If, under any circumstances, Lender
shall ever receive as interest an amount that exceeds the highest
lawful rate, the amount that would be excessive interest shall be
applied to reduce the unpaid principal balance of the Loan and not
to pay interest, or, if such excessive interest exceeds the unpaid
principal balance of the Loan, such excess shall be refunded to
Borrower. This provision shall control every other provision of all
agreements among Borrower and
Lender.

 

 

 

11

 

 

(c) Principal.

 

(i) Maturity Date. The entire
unpaid principal balance of the Loan and all accrued but unpaid
interest and all other charges payable with respect to the Loan
shall be due and payable on the Maturity Date.

 

(ii) Installment
Payments. On the Amortization Commencement Date and on the
first day of each consecutive calendar month thereafter, Borrower
shall pay to Lender monthly payments of interest together with
monthly payments of principal based on a ten (10) year amortization
schedule in accordance with Exhibit C (each a
“Monthly Principal
Payment”).

 

(iii) Prepayment.
Borrower may repay all or any portion of the Loan without penalty
at any time, subject to (i) payment of the Exit Fee as provided for
herein, and (ii) any prepayment of any principal amount outstanding
under this Note shall be made together with a prepayment premium in
the following amount, as applicable:

 

(A) for any prepayment
made during the first (1st) year of the term of the Loan, in amount
equal (a) the sum of all interest that otherwise would be due and
payable on the full principal amount of this Note during the first
(1st) year of the term of the Loan, less (b) accrued interest
previously paid by Borrower during the first (1st) year of the term
of the Loan;

 

(B) for any prepayment
made during the second (2nd) year of the term of the Loan, four
percent (4%) of the principal amount being prepaid;
and

 

(C) for any prepayment
made during or after the third (3rd) year of the term of the Loan,
two percent (2%) of the principal amount being prepaid. Any partial
prepayment shall first be applied to accrued and unpaid interest
and then to the outstanding principal balance of the Loan, and no
such partial prepayment shall relieve Borrower of the obligation to
pay any subsequent installment of principal when due.

 

(iv) Manner
and Time of Payment. All payments of interest, principal and
fees shall be made in lawful money of the United States in
immediately available funds, without counterclaim or setoff and
free and clear of, and without any deduction or withholding for,
any taxes or other payments by wire transfer to Lender to such
account as Lender shall from time to time designate. Payments shall
be credited on the Business Day on which immediately available
funds are received prior to 5:00 P.M. Eastern Standard Time;
payments received after 5:00 P.M. Eastern Standard Time shall be
credited to the Loan on the next Business Day. Payments which are
by check, which Lender may at its option accept or reject, or which
are not in the form of immediately available funds shall not be
credited to the Loan until such funds become immediately available
to Lender, and, with respect to payments by check, such credit
shall be provisional (but shall not result in the accrual of
interest on any interest payment made by such check) until the item
is finally paid by the payor bank.

 

 

 

12

 

 

(v) Application of Payments. Except
to the extent otherwise required by law or by the express terms of
any other Loan Document, Lender shall apply and credit funds
received by Lender pursuant to this Agreement or any other Loan
Document as follows: (a) first, to pay, or reimburse Lender
for amounts advanced by Lender (other than principal of the Loan)
pursuant to any provision of the Loan Documents (including without
limitation those fees, charges, costs and expenses described in
subsections (vi) and (vii) below, (b) second, to pay any
interest earned or accrued, (c) third, to fund any deposits
that Borrower may be required by the terms of any Loan Document to
make with Lender, including any such deposits to be used to pay the
cost of repairing or constructing any improvements, insurance
premiums, Taxes, Payment Reserves (if any), and utility charge,
(d) fourth, to pay any Late Charges due under this Agreement
or any other Loan Document, (e) fifth, to pay any other sums
due under the Loan Documents, and (f) sixth, to pay principal
outstanding; provided, however, that during the continuance of an
Event of Default, Lender shall apply and credit funds in such
manner and order of priority as Lender shall determine in
Lender’s sole discretion.

 

(vi) Billing.
Lender may submit monthly billings reflecting payments due;
provided, however, that any changes in the interest rate which
occur between the date of billing and the due date may be reflected
in adjustments in the billing for a subsequent month. Neither the
failure of Lender to submit a bill, nor any error in any such bill
shall excuse Borrower from the obligation to make full payment of
all Borrower’s payment obligations when due.

 

(vii) Default
Rate Interest. In the event that any Event of Default shall
occur and remaining continuing for a period of 30 days, any unpaid
principal, accrued interest, Late Charges and other amounts payable
under this Agreement or any other Loan Document shall bear
interest, compounded monthly, at the Default Rate; provided, however, that if collection
from Borrower of interest at such rate would be contrary to
applicable law, then such amounts shall bear interest at the
highest rate which may be collected from Borrower under applicable
law.

 

(viii) Late
Charge. If any payment (whether of fees, interest or
principal but excluding the payment due on the Maturity Date or
upon any acceleration of the Loan) is not paid within five (5)
Business Days of the date on which the payment is due, Borrower
shall pay to Lender in addition to the delinquent payment and
without any requirement of notice or demand by Lender except as may
be imposed by law, a “Late Charge” equal to five percent (5%) of the
amount of the delinquent payment. Late Charges are (a) payable
in addition to, and not in limitation of, the Default Rate;
(b) intended to compensate Lender for administrative and
processing costs incident to late payments; (c) not interest;
and (d) not subject to refund or rebate or credit against any
other amount due. Borrower expressly acknowledges and agrees that
this Late Charges provision is reasonable under the circumstances
existing on the date of this Agreement, which it would be extremely
difficult and impractical to fix Lender’s actual damages
arising out of any late payment and that the Late Charge shall be
presumed to be the actual amount of such damages incurred by
Lender. In addition, in the event that any loan payment check
tendered by Borrower to Lender is not honored upon presentment for
demand, Borrower shall pay to Lender upon demand an amount equal to
Two Hundred Fifty Dollars ($250.00). No provision in this Agreement
(including the provisions for Late Charges and for additional
interest on any amounts remaining unpaid after the Maturity Date)
shall be construed as in any way excusing Borrower from its
obligation to make each payment promptly when due.

 

2.2 Security for the Loan. The Loan
will be evidenced, secured and guaranteed by the Loan
Documents.

 

 

 

13

 

 

2.3 Origination Fee; Transaction
Costs. On the Closing Date, Borrower shall pay to Lender
from the proceeds of the Loan an origination fee in an amount equal
to Three Hundred Sixty Thousand Dollars ($360,000.00); and Borrower
shall have paid or reimbursed Lender for all title insurance
premiums, recording and filing fees, costs of environmental
reports, physical condition reports, appraisals and other reports,
the reasonable fees and costs of Lender’s counsel and all
other third party out of pocket expenses incurred in connection
with the origination of the Loan. The origination fee shall be
deemed to be fully earned upon the earlier to occur of (a) issuance
of any commitment letter, or (b) the Closing Date, and shall be
non-refundable upon payment.

 

2.4 Conditions Precedent to
Closing. The obligation of Lender to make the Loan hereunder
is subject to the fulfillment by Borrower or waiver by Lender of
the following conditions precedent no later than the Closing
Date:

 

(a) Representations and Warranties;
Compliance with Conditions. The representations and
warranties of Borrower and other Loan Parties, as applicable,
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 or an Event of Default shall have occurred and be
continuing; and 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.

 

(b) Loan Agreement and Note. Lender
shall have received a copy of this Agreement and the Note, in each
case, duly executed and delivered on behalf of
Borrower.

 

(c) Delivery of Loan Documents; Title
Insurance; Reports; Leases.

 

(i) Security Instrument, Assignment of
Leases. Lender shall have received from Borrower and
Operator, as applicable, fully executed and acknowledged
counterparts of the Security Instrument, the Subordination
Agreement and the Assignment of Leases and evidence that
counterparts of the Security Instrument, the Subordination
Agreement and Assignment of Leases have been delivered to the title
company for recording, in the reasonable judgment of Lender, so as
to effectively create upon such recording valid and enforceable
Liens upon the Property, of the requisite priority, in favor of
Lender (or such other trustee as may be required or desired under
local law), subject only to the Permitted Encumbrances. Lender
shall have also received from each Loan Party, as applicable, fully
executed counterparts of the other Loan Documents.

 

(ii) Title
Insurance. Lender shall have received title insurance
policies issued by a title company acceptable to Lender and dated
as of the Closing Date, or a commitment to issue a policy with
title insurance (either in the form of a commitment or pro forma
policy) (the “Title
Policy”). The Title Policy shall (i) provide coverage
in amounts reasonably satisfactory to Lender, (ii) insure Lender
that the Security Instrument creates a valid first priority lien on
the Property encumbered thereby of the requisite priority, free and
clear of all exceptions from coverage other than Permitted
Encumbrances, (iii) contain such endorsements and affirmative
coverages as Lender may reasonably request, and (iv) name Lender as
the insured. The Title Policy shall be assignable. Lender also
shall have received evidence that all premiums in respect of the
Title Policy have been paid.

 

 

 

14

 

 

(iii) Survey.
Lender shall have received a current land survey for the Property,
certified to the title company, and Lender and their successors and
assigns, in form and content reasonably satisfactory to Lender and
prepared by a professional and properly licensed land surveyor
satisfactory to Lender in accordance with the Accuracy Standards
for ALTA/NSPS Land Title Surveys as adopted by ALTA, American
Congress on Surveying & Mapping and National Society of
Professional Surveyors in 2021 or such other standard as Lender may
approve in its sole discretion (the “Survey”). The Survey
shall reflect the same legal description contained in the Title
Policy and shall include, among other things, a metes and bounds
description of the real property comprising part of the Property
reasonably satisfactory to Lender. The surveyor’s seal shall
be affixed to the Survey and the surveyor shall provide a
certification for the Survey in form and substance reasonably
acceptable to Lender.

 

(iv) Insurance.
Lender shall have received valid certificates of insurance and the
endorsements related thereto for the policies required pursuant to
Section
4.5
hereunder, satisfactory to Lender in its sole discretion, and
evidence of the payment of all insurance premiums then due and
owing.

 

(v) Environmental Reports. Lender
shall have received a Phase I environmental report (and, if
recommended by the Phase I environmental report, a Phase II
environmental report) (collectively, the “Environmental Reports”)
in respect of the Property, in each case reasonably satisfactory in
form and substance to Lender.

 

(vi) Zoning.
With respect to the Property, Lender shall have received, at
Lender’s option, letters or other evidence with respect to
the Property from the appropriate municipal authorities (or other
Persons) concerning applicable zoning and building laws, in
substance reasonably satisfactory to Lender.

 

(vii) Encumbrances.
Borrower shall have taken or caused to be taken such actions in
such a manner so that Lender have a valid and perfected first
priority Lien as of the Closing Date with respect to the Security
Instrument on the Property, subject only to applicable Permitted
Encumbrances, and Lender shall have received reasonably
satisfactory evidence thereof.

 

(viii) Flood
Certificates. Lender shall have received a Flood
Determination Certificate reasonably satisfactory to
Lender.

 

(d) Related Documents. Each
additional document not specifically referenced herein, but
relating to the transactions contemplated herein, shall be in form
and substance reasonably satisfactory to Lender, and shall have
been duly authorized, executed and delivered by all parties thereto
and Lender shall have received and approved certified copies
thereof.

 

(e) Delivery of Organizational
Documents. Borrower shall deliver or cause to be delivered
to Lender copies certified by each applicable Loan Party of all
organizational documentation related to each Loan Party and/or the
formation, structure, existence, good standing and/or qualification
to do business, as Lender may request in its sole discretion,
including good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the
entering into of the Loan, execution and delivery of the Loan
Documents, as applicable, and incumbency certificates as may be
requested by Lender.

 

 

 

15

 

 

(f) Opinions of Borrower’s
Counsel. Lender shall have received opinions from
Borrower’s counsel with respect to the due execution,
authority, enforceability of the Loan Documents and such other
matters as Lender may require, all such opinions in form, scope and
substance satisfactory to Lender and Lender’s counsel in
their reasonable discretion.

 

(g) Basic Carrying Costs. Borrower
(or other Persons) shall have paid all basic carrying costs
relating to the Property which are in arrears, if any, including
without limitation, (i) accrued but unpaid insurance premiums, (ii)
currently due Taxes (including any in arrears) and (iii) currently
due other charges, which amounts shall be funded with proceeds of
the Loan.

 

(h) 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 reasonably
satisfactory in form and substance to Lender, and Lender shall have
received all such counterpart originals or certified copies of such
documents as Lender may reasonably request.

 

(i) Payments. All Payment Reserves,
payments, deposits or escrows required to be made or established by
Borrower under this Agreement, the Note and the other Loan
Documents on or before the Closing Date shall have been
paid.

 

(j) Intentionally
Omitted.

 

(k) Material Adverse Change. There
shall have been no material adverse change in the financial
condition or business condition of any Loan Party or the Property
since the date of the most recent financial statements delivered to
Lender. The income and expenses of the Property, the occupancy
thereof, and all other features of the transaction shall be as
represented to Lender without material adverse change. No Loan
Party nor any of its constituent Persons shall be the subject of
any bankruptcy, reorganization, or insolvency
proceeding.

 

(l) Lease. Lender shall have
received a fully executed copy of the Lease Agreement, which shall
be satisfactory in form and substance to Lender.

 

(m) Tenant Estoppels. Lender shall
have received an executed estoppel letter, which shall be in form
and substance satisfactory to Lender, from Operator under the Lease
Agreement.

 

(n) Subordination and Attornment.
Lender shall have received appropriate instruments acceptable to
Lender subordinating the Lease Agreement designated by Lender to
the Security Instrument. Lender shall have received an agreement to
attorn to Lender satisfactory to Lender from any tenant under a
Lease that does not provide for such attornment by its
terms.

 

(o) Tax Lot. Lender shall have
received evidence that the Property constitutes one (1) or more
separate tax lots, which evidence shall be reasonably satisfactory
in form and substance to Lender.

 

 

 

16

 

 

(p) Physical Condition Reports.
Lender shall have received physical condition reports with respect
to the Property, which reports shall be reasonably satisfactory in
form and substance to Lender.

 

(q) Intentionally
Omitted.

 

(r) Appraisal. Lender shall have
received an appraisal of the Property, which shall be satisfactory
in form and substance to Lender.

 

(s) Acquisition. The acquisition of
the Property, the Facility and related assets shall have been
completed and consummated as contemplated by the Purchase
Agreement, all on terms and conditions reasonably satisfactory to
Lender.

 

(t) Intentionally
Omitted.

 

(u) Further Documents. Lender or
its counsel shall have received such other and further approvals,
opinions, documents and information as Lender or its counsel may
have reasonably requested including the Loan Documents in form and
substance satisfactory to Lender and its counsel.

 

ARTICLE
III 

 

BORROWER’S
REPRESENTATIONS AND WARRANTIES

 

To induce Lender to enter into this
Agreement, and to make the Loan to Borrower, Borrower represents
and warrants to Lender as follows:

 

3.1 Existence, Power and
Qualification. Borrower is a duly organized and validly
existing limited liability company, has the power to own or lease
its properties and to carry on its business as is now being
conducted, and is duly qualified to do business and is in good
standing in every jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its
business makes qualification necessary. Operator is a duly
organized and validly existing corporation, has the power to own or
lease its properties and to carry on the Business, and is duly
qualified to do business and is in good standing in every
jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes its
qualification necessary.

 

3.2 Power and Authority. Borrower
has full power and authority to borrow the Indebtedness evidenced
by the Note and to incur the Loan Obligations provided for herein,
all of which have been authorized by all proper and necessary
action. All consents, approvals authorizations, orders or filings
of or with any court or Governmental Authority, if any, required
for the execution, delivery and performance of the Loan Documents
by any Loan Party have been obtained or made. Each Loan Party has
the full power and authority to incur liabilities and obligations
provided for in the respective Loan Documents to which it is a
party, all of which have been authorized by all proper and
necessary action. All consents, approvals authorizations, orders or
filings of or with any court or Governmental Authority, if any,
required for the execution, delivery and performance of the Loan
Documents by each Loan Party have been obtained or
made.

 

 

 

17

 

 

3.3 Due Execution and Enforcement.
Each of the Loan Documents to which a Loan Party is a party
constitutes a legal, valid and binding obligation of the Loan
Party, enforceable in accordance with its respective terms (except
as such enforcement may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization or other similar laws affecting
the enforcement of creditors’ rights generally and by general
principles of equity) and does not violate, conflict with, or
constitute any default under any law, government regulation,
decree, judgment, the Loan Party’s articles of organization
or incorporation, partnership agreement/operating agreement or
by-laws, as applicable, or any other material agreement or
instrument binding upon the Loan Party. There is no valid offset,
defense, counterclaim or right of rescission available to Borrower
with respect to any of the Loan Documents.

 

3.4 Single Purpose Entity. Borrower
is a Single Purpose Entity.

 

3.5 Pending Matters.

 

(A) Operations; Financial
Condition. No action or investigation is pending or, to
Borrower’s knowledge, threatened before or by any court or
administrative agency which could reasonably be expected to result
in any material adverse change in the financial condition,
operations of a Loan Party. No Loan Party, to its knowledge, is in
violation of any agreement, the violation of which could reasonably
be expected to have a material adverse effect on its business or
assets. No Loan Party, to its knowledge, is in violation of any
order, judgment, or decree of any court, or any statute or
governmental regulation to which it is subject.

 

(B) Property Improvements. There
are no proceedings pending or, to Borrower's knowledge, threatened
in writing to acquire through the exercise of any power of
condemnation, eminent domain or similar proceedings any part of the
Property, the Improvements or any interest therein, or to enjoin or
similarly prevent or restrict the use of the Property or the
operation of any of the Facility in any material manner. None of
the Improvements is subject to any unrepaired casualty or other
damage.

 

3.6 Financial Statements Accurate.
All financial statements heretofore or hereafter provided by or on
behalf of each Loan Party are and will be true and complete in all
material respects as of their respective dates and fairly present
in all material respects the respective financial condition of such
Loan Party as of such date, and there are no material liabilities,
direct or indirect, fixed or contingent, as of the respective dates
of such statements that would be required to be reflected therein
or in the notes thereto under GAAP and which are not reflected
therein or in the notes thereto or in a written certificate
delivered with such statements. The financial statements of each
Loan Party have been and will be prepared in accordance with GAAP.
There has been no material adverse change in the financial
condition, or operations of any Loan Party since the dates of such
statements previously delivered except as fully disclosed in
writing with the delivery of such statements. All financial
statements of the operations of the Facility hereafter provided to
Lender will be true and complete in all material respects as of
their respective dates, and to Borrower’s knowledge, all such
financial statements provided to Lender shall be true and correct
in all material respects.

 

3.7 Compliance with Facility
Laws.

 

(a) Borrower, Spence Rd
and Operator, as applicable, are the lawful holders of all Permits
for the Facility, all of which (i) are in full force and
effect; (ii) constitute all of the Permits required for the
use, operation and occupancy thereof; (iii) have not been
pledged as collateral for any other loan or Indebtedness;
(iv) are held free from restrictions or any encumbrance which
would materially adversely affect the use or operation of the
Facility; and (v) are not provisional, probationary or
restricted in any way.

 

 

 

18

 

 

(b) To Borrower’s
knowledge after due inquiry, Borrower Operator and the operation of
the Facility and the Business are in compliance in all material
respects with the applicable Limited
Governmental Requirements. No waivers of any laws, rules,
regulations, or requirements are required for the Facility to
operate as a cannabis drying, trimming, packaging and processing
facility.

 

3.8 Governmental Proceedings and
Notices. Loan Parties have received no notice of, and to
Borrower’s knowledge, neither Borrower, the Operator nor the
Facility is currently the subject of any proceeding by any
Governmental Authority and no written notice of any violation has
been received from a Governmental Authority that would, directly or
indirectly, or with the passage of time, (i) have a material
adverse impact on Operator’s ability to operate the Business,
or (ii) modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of
the Permits.

 

3.9 Pledges of Accounts. Borrower
has not pledged its Accounts as collateral security for any loan or
Indebtedness other than the Loan.

 

3.10 Payment
of Taxes and Property Impositions. Each Loan Party has filed
all federal, state, and local tax returns which it is required to
file and has paid, or made adequate provision for the payment of,
all taxes which are shown pursuant to such returns or are required
to be shown thereon or to assessments received by any Loan Party.
All such returns are complete and accurate in all respects.
Borrower has paid or made adequate provision for the payment of all
applicable Taxes, governmental assessments and other outstanding
governmental charges (including, without limitation, water and
sewer charges) and ground rents (if applicable) due with respect to
the Property.

 

3.11 Title
to Collateral. Borrower has good and marketable title to the
Mortgaged Property described in the Security Instrument executed by
Borrower and all of the other Collateral, subject to no lien,
mortgage, pledge, encroachment, zoning violation, or encumbrance,
except Permitted Encumbrances. There are no senior, pari passu or
junior mortgages or mortgage liens encumbering the Property or any
portion thereof other than the Security Instrument and other than
such liens that will be released at the Closing. No rights exist
which under law could give rise to any lien that would be prior to
or equal with the lien of the Security Instrument.

 

3.12 Priority
of Mortgage. The Security Instrument constitutes a legal,
valid and enforceable first lien against the Borrower’s fee
interest in the Mortgaged Property in the principal amount of the
Loan, prior to all other liens or encumbrances, including those
which may hereafter accrue, excepting only Permitted Encumbrances
and other than such liens that will be released at the Closing. The
Security Instrument and the other Loan Documents establish and
create a valid and enforceable lien on the property described
therein. There are no subordinate mortgages or junior liens
encumbering the Mortgaged Property. There is no mezzanine debt
related to the Mortgaged Property. The Assignment of Rents and
Leases creates a valid first-priority collateral assignment of, or
a valid first-priority lien or security interest in, rents and
certain rights under the related lease or leases, subject only to a
license granted to the Borrower to exercise certain rights and to
perform certain obligations of the lessor under such lease or
leases, including the right to operate the related leased property.
The Pledge Agreement creates a valid first-priority collateral
assignment of, or a valid first-priority lien or security interest
in, the Spence Rd Equity. The enforceability of the Security
Instrument, the Assignment of Lease and the Pledge Agreement may be
limited by bankruptcy, insolvency, fraudulent transfer,
reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of
equity. No person other than Borrower owns any interest in any
payments due under such lease or leases that is superior to or of
equal priority with Lender’s interest therein.

 

 

 

19

 

 

3.13 Location
of Chief Executive Offices. The location of Borrower’s
principal place of business and chief executive office is 20800
Spence Road, Salinas, California 93908 and the location of each
other Loan Party’s principal place of business and chief
executive office is 20 Quail Run Circle, Salinas, California
93907.

 

3.14 Disclosure.
All information furnished or to be furnished by a Loan Party to
Lender in connection with the Loan or any of the Loan Documents,
is, or will be at the time the same is furnished, accurate and
correct in all material respects and complete insofar as
completeness may be necessary to provide Lender with true and
accurate knowledge of the requested information.

 

3.15 Trade
Names. No Loan Party has changed its legal name, been known
by any other name or been a party to a merger, reorganization or
similar transaction within the last five (5) years.

 

3.16 ERISA.
Borrower is in compliance with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
(“ERISA”).

 

3.17 Ownership.
The record ownership of each Loan Party is correctly and accurately
set forth on Schedule
3.17.

 

3.18 Intentionally
Omitted.

 

3.19 Bankruptcy.
Neither the Mortgaged Property, nor any portion thereof, is the
subject of, and none of Borrower, Operator or Guarantor is a debtor
in, any state or federal bankruptcy, insolvency or similar
proceeding. Each Loan Party is solvent for purposes of 11 U.S.C.
§548, and the borrowing of the Loan will not render any Loan
Party insolvent for purposes of 11 U.S.C. §548.

 

3.20 Lease
Agreement. The Lease Agreement (a) is in full force and
effect and there are no defaults (either monetary or non-monetary)
by the Borrower or Operator thereunder; (b) has a term extending
for not less than five (5) years following the Closing Date; and
(c) provides for an annual aggregate triple net rent of no less
than the sum of 1.00 times Debt Service plus annual real estate
property taxes and annual property insurance.

 

3.21 Other
Indebtedness. Borrower has no outstanding Indebtedness,
secured or unsecured, direct or contingent (including any
guaranties), other than: (a) the Loan, and (c) Indebtedness
which represents trade payables or accrued expenses incurred in the
ordinary course of business of owning and operating the Property.
No other Indebtedness will be secured (senior, subordinate or pari
passu) by the Property.

 

3.22 Other
Obligations. Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Borrower is a party or
by which Borrower or the Property or other Collateral is otherwise
bound, other than obligations incurred in the ordinary course of
the operation of the Property, other than obligations under the
Security Instrument and the other Loan Documents.

 

 

 

20

 

 

3.23 Fraudulent
Conveyances. Borrower: (a) has not entered into this
Agreement or any of the other Loan Documents 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. Giving effect to the
transactions contemplated by the Loan Documents, the fair saleable
value of Borrower’s assets exceeds and will, immediately
following the execution and delivery of the Loan Documents, be
greater than Borrower’s probable liabilities, including the
maximum amount of its contingent liabilities or its debts as such
debts become absolute and mature. Borrower’s assets do not
and, immediately following the execution and delivery of the Loan
Documents will not, constitute unreasonably small capital to carry
out its business as conducted or as proposed to be conducted.
Borrower does not intend to, and does not believe that it will,
incur debts and liabilities (including, without limitation,
contingent liabilities and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of
Borrower).

 

3.24 Fixtures,
Furniture and Equipment. Borrower, Operator or Spence Rd
owns or leases the fixtures and Equipment required by all state and
federal laws and regulations for the operation of the
Property.

 

3.25 Sole
Purpose. Borrower warrants, represents and agrees that
Borrower is a single purpose entity that has not engaged in any
business other than the acquisition and leasing and the operation
of the Facility.

 

3.26 Use
of Loan Proceeds. The proceeds of the Loan shall be used to
acquire the Property, to fund the Debt Reserve and to pay closing
costs and fees pursuant to the terms and conditions set forth
herein.

 

3.27 Intentionally
Omitted.

 

3.28 Other
Proceedings. There is no pending, filed or, to Borrower's
knowledge, threatened action, suit or proceeding, arbitration or,
to the Borrower’s knowledge, governmental investigation
involving Borrower, Operator, Guarantor, Spence Rd or the Mortgaged
Property, an adverse outcome of which would reasonably be expected
to materially and adversely affect (a) title to the Mortgaged
Property, (b) the validity or enforceability of the Security
Instrument, (c) Borrower’s ability to perform under the Loan
Documents, (d) Guarantor’s ability to perform under the Loan
Documents to which it is a party, (e) the use, operation or value
of the Mortgaged Property, (f) the principal benefit of the
security intended to be provided by the Loan Documents, (g) the
current ability of the Mortgaged Property to generate net cash flow
sufficient to service the Loan, or (h) the current principal use of
the Mortgaged Property.

 

3.29 Access.
The Property (a) is located on or adjacent to a public road and has
direct legal access to such road, or has access via an irrevocable
easement or irrevocable right of way permitting ingress and egress
to/from a public road, (b) is served by or has uninhibited access
rights to public or private water and sewer (or well and septic)
and all required utilities, all of which are appropriate for the
current use of the Property, and (c) constitutes one or more
separate tax parcels which do not include any property which is not
part of the Mortgaged Property.

 

 

 

21

 

 

3.30 Encroachments.
Based solely on the Survey and the Title Policy, all material
Improvements are within the boundaries of the Property, except
encroachments that do not materially and adversely affect the value
or current use of the Mortgaged Property, after taking into account
any applicable provisions of the Title Policy. No improvements on
adjoining parcels encroach onto the Property except for
encroachments that do not materially and adversely affect the value
or current use of the Mortgaged Property, after taking into account
any applicable provisions of the Title Policy. No improvements
encroach upon any easements except for encroachments the removal of
which would not materially and adversely affect the value or
current use of the Mortgaged Property after taking into account any
applicable provisions of the Title Policy.

 

ARTICLE
IV 

 

AFFIRMATIVE
COVENANTS OF BORROWER

 

Borrower agrees
with and covenants unto Lender that until the Loan Obligations have
been paid in full:

 

4.1 Payment of Loan/Performance of Loan
Obligations. Borrower shall duly and punctually pay or cause
to be paid the principal and interest of the Note in accordance
with its terms and duly and punctually pay and perform or cause to
be paid or performed all Loan Obligations hereunder and under the
other Loan Documents.

 

4.2 Maintenance of Existence.
Borrower shall maintain its existence as a limited liability
company and shall cause each of Operator and Spence Rd to maintain
its existence as a limited liability company, and Borrower shall
maintain its qualification to do business and cause each of
Operator and Spence Rd to maintain its qualification to do business
in the jurisdiction in which the Mortgaged Property is located and
in each other jurisdiction in which the character of the property
owned by either of them or in which the transaction of its business
makes qualification necessary.

 

4.3 Maintenance of Single Purpose.
Borrower shall maintain its existence as a Single Purpose
Entity.

 

4.4 Accrual and Payment of Taxes.
During each fiscal year, Borrower shall make, and shall cause
Operator and Spence Rd to make, accurate provision for the payment
of all current tax liabilities of all kinds, including, without
limitation, federal and state income taxes, franchise taxes,
payroll taxes and Taxes, all required withholding of income taxes
of employees, and pay the same prior to delinquency.

 

4.5 Insurance. Borrower shall
maintain, or cause Operator to maintain, the following insurance
coverages with respect to the Property, the Improvements and the
Facility thereon:

 

 

 

22

 

 

(a) Insurance against
loss or damage by fire, casualty and other hazards as now are or
subsequently may be covered by a comprehensive “all
risk” policy or a policy covering “special”
causes of loss, with such endorsements as are customarily required
by institutional lenders of similar properties similarly situated,
including, without limitation, building ordinance or law,
demolition, incurred cost of construction, lightning, windstorm,
civil commotion, hail, riot, strike, water damage, sprinkler
leakage, collapse, malicious mischief, explosion, smoke, aircraft,
vehicles, vandalism, falling objects and weight of snow, ice or
sleet, and covering the Facility in an amount equal to one hundred
percent (100%) of the full insurable replacement value of the
Facility (exclusive of footings and foundations below the lowest
basement floor) without deduction for depreciation. The
determination of the replacement cost amount shall be determined by
the “Insurable Value” or “Cost Approach to
Value” as reflected in an appraisal, with a waiver of
depreciation, and shall be adjusted annually to comply with the
requirements of the insurer issuing the coverage, or as may be
determined to be reasonably required by Lender, and, unless the
insurance required by this paragraph shall be effected by blanket
and/or umbrella policies in accordance with the requirements of
this Agreement, the policy shall include inflation guard coverage
that ensures that the policy limits will be increased over time to
reflect the effect of inflation. Each policy shall, subject to
Lender’s reasonable approval, contain: (i) a replacement cost
endorsement, without deduction for depreciation; (ii) either an
agreed amount endorsement or a waiver of any co-insurance
provisions; and (iii) an ordinance or law coverage or enforcement
endorsement if the Improvements or the use of the Property
constitutes any legal nonconforming structures or uses, and shall
provide for reasonable deductibles.

 

(b) Commercial general
liability insurance under a policy containing “Comprehensive
General Liability Form” of coverage (or a comparably worded
form of coverage) and the “Broad Form CGL” endorsement
(or a policy which otherwise incorporates the language of such
endorsement), providing coverage on an occurrence (or “claims
made”) basis, which policy shall include, without limitation,
coverage against claims for personal injury, bodily injury, death
and property damage liability with respect to the Facility and the
operations related thereto, whether on or off the Property, and the
following coverages: Product Liability/Completed Operations; Broad
Form Contractual Liability, Independent Contractor, Personal Injury
and Advertising Injury Protection, Broad Form Cross Suits Liability
Endorsement, where applicable, hired and non-owned automobile
coverage (including rented and leased vehicles), and, if any
alcoholic beverages shall be sold, manufactured or distributed in
the Facility, liquor liability coverage, all of which shall be in
such amounts not less than One Million Dollars ($1,000,000) per
occurrence, Three Million Dollars ($3,000,000) in the aggregate.
The deductible amount shall not exceed $50,000 per occurrence. Such
liability policy shall delete the contractual exclusion under the
personal injury coverage, if possible, and if available, shall
include the following endorsements: Notice of Accident, Knowledge
of Occurrence, and Unintentional Error and Omission.

 

(c) Professional
liability insurance coverage for the Facility combined in an amount
equal to One Million Dollars ($1,000,000) per occurrence and Three
Million Dollars ($3,000,000) in the aggregate, with each deductible
not to exceed $100,000 in the aggregate.

 

(d) Loss of rents
insurance for the Property: (i) covering the same perils of
loss as are required to be covered by the property insurance
required under Section 4.5(a) above;
(ii) in an amount of 100% of the gross rental income of the
Facility for a period of twelve (12) months as projected by
Borrower to the reasonably satisfaction of Lender, containing a
180-day extended period of indemnity endorsement;
(iii) including either an agreed amount endorsement or a
waiver of any co-insurance provisions, so as to prevent Borrower,
Lender and any other insured thereunder from being a co-insurer;
and (iv) providing that any covered loss thereunder shall be
payable to Lender.

 

 

 

23

 

 

(e) During the period
of any new construction on the Property, a so-called
“Builder’s All-Risk Completed Value” or
“Course of Construction” insurance policy in
non-reporting form for any improvements under construction,
including, without limitation, for demolition and increased cost of
construction or renovation, in an amount equal the amount of the
general contract plus the value of any existing trust note for
improvements and materials stored on or off the real property,
including “soft cost” coverage, and Workers’
Compensation Insurance covering all persons engaged in such
construction, in an amount at least equal to the minimum required
by law. In addition, each contractor and subcontractor shall be
required to provide Lender with a certificate of insurance for
(i) workers’ compensation insurance covering all persons
engaged by such contractor or subcontractor in such construction in
an amount at least equal to the minimum required by law, and
(ii) general liability insurance showing minimum limits of at
least Five Million Dollars ($5,000,000), including coverage for
products and completed operations. Each contractor and
subcontractor also shall cover Borrower and Lender as an additional
insured under such liability policy and shall indemnify and hold
Borrower and Lender harmless from and against any and all claims,
damages, liabilities, costs and expenses arising out of, relating
to or otherwise in connection with its performance of such
construction.

 

(f) If the Facility
contains steam boilers, steam pipes, steam engines, steam turbines
or other high pressure vessels, insurance covering the major
components of the central heating, air conditioning and ventilating
systems, boilers, other pressure vessels, high pressure piping and
machinery, elevators and escalators, if any, and other similar
equipment installed in the Improvements, in an amount equal to one
hundred percent (100%) of the full replacement cost thereof, which
policies shall insure against physical damage to and loss of
occupancy and use of the Improvements arising out of an accident or
breakdown covered thereunder.

 

(g) Flood Hazard
insurance, in the maximum amount allowable by law, if any portion
of the Improvements is located in a federally designated
“special flood hazard area” and in which flood
insurance is available. In lieu thereof, Lender will accept proof,
satisfactory to it in its sole discretion, that the improvements
are not within the boundaries of a designated “special flood
hazard area.”

 

(h) Workers’
compensation insurance or other similar insurance which may be
required by governmental authorities or applicable legal
requirements in an amount at least equal to the minimum required by
law.

 

(i) Intentionally
omitted.

 

(j) Additional
Requirements/Provisions:

 

(i) Borrower is
required to provide Lender with original renewals or replacements
of such insurance policies or certificates during the Term of the
Loan.

 

(ii)  If
the Facility is located in a seismically active area or an area
prone to geologic instability and mine subsidence, Lender may
require an inspection by a qualified structural or geological
engineer satisfactory to Lender, and at Borrower’s expense.
The Facility must be structurally and geologically sound and
capable of withstanding normal seismic activity or geological
movement. Lender reserves the right to require earthquake insurance
or Maximum Probable Loss insurance on a case-by-case basis based
upon the reasonable recommendations of such engineer.

 

 

 

24

 

 

(iii) All
insurance policies shall have a term of not less than one (1) year
and shall be in the form and amount and with deductibles as, from
time to time, shall be reasonably acceptable to Lender. Except for
the insurance coverage pursuant to Section 4.5(c) above,
all insurance coverages apply to the Property and Facility
separately. All such policies shall be primary, provide for loss
payable solely to Lender and shall contain a standard
“non-contributory mortgagee” endorsement or its
equivalent relating, inter alia, to recovery by Lender
notwithstanding the negligent or willful acts or omissions of
Borrower and notwithstanding: (i) occupancy or use of the Facility
for purposes more hazardous than those permitted by the terms of
such policy; (ii) any foreclosure or other action taken by Lender
pursuant to the Security Instrument upon the occurrence of an Event
of Default thereunder; or (iii) any change in title or ownership of
the Facility.

 

(iv) All
insurance policies must be written by a licensed insurance carrier
in the State in which the Facility is located and that has a
long-term senior debt rating of at least “A-VIII” by
Standard & Poor’s Rating Service.

 

(v) All liability
insurance policies must name “Viridescent Realty Trust, Inc.,
and its successors and/or assigns as their interests may
appear” as additional insureds, and all property insurance
policies (including those provided for in 4.5(a),
(d),
(e),
(f),
(g)
and (i) as
applicable) must name “Viridescent Realty Trust, Inc., and
its successors and/or assigns as their interests may appear”
as the named mortgage holder entitled to all insurance proceeds as
loss payee. Lender shall have the right, without Borrower’s
consent, by notice to the insurance company and to Borrower, to
change the additional insured and named mortgagee endorsements in
connection with any sale, assignment or other transfer of the
Loan.

 

(vi) All
insurance policies for the above required insurance must provide
for thirty (30) days prior written notice of cancellation to
Lender.

 

(vii) Policies
or binders, together with the evidence of the above required
insurance on ACORD Form 27 or its equivalent, must be submitted to
Lender prior to setting the interest rate on the Loan. Borrower
shall not carry separate insurance, concurrent in kind or form or
contributing in the event of loss, with any insurance required
under this Section
4.5. If the
limits of any policy required hereunder are reduced or eliminated
due to a covered loss, Borrower shall pay the additional premium,
if any, in order to have the original limits of insurance
reinstated, or Borrower shall purchase new insurance in the same
type and amount that existed immediately prior to the
loss.

 

(viii) If
Borrower fails to maintain and deliver to Lender the original
policies or certificates of insurance required by this Agreement,
Lender may, at its option and following five (5) days' prior
written notice to Borrower, procure such insurance and Borrower
shall pay or, as the case may be, reimburse Lender for, all
premiums thereon promptly, upon demand by Lender, with interest
thereon from the date paid by Lender to the date of repayment and
such sum shall constitute a part of the Loan
Obligations.

 

 

 

25

 

 

(ix) The
insurance required by this Agreement may, at the option of
Borrower, be effected by blanket and/or umbrella policies issued to
Borrower or to an Affiliate of Borrower covering the Facility and
the properties of such Affiliate; provided that, in each case, the
policies otherwise comply with the provisions of this Agreement and
allocate to the Facility, from time to time, the coverage specified
by this Agreement, without possibility of reduction or coinsurance
by reason of, or damage to, any other property (real or personal)
named therein. If the insurance required by this Agreement shall be
effected by any such blanket or umbrella policies, Borrower shall
furnish to Lender original policies or certified copies thereof,
with schedules attached thereto showing the amount of the insurance
provided under such policies which is applicable to the
Facility.

 

(x) Neither Lender nor
its agents or employees shall be liable for any loss or damage
insured by the insurance policies required to be maintained under
this Agreement; it being understood that: (i) Borrower shall
look solely to its insurance company for the recovery of such loss
or damage; (ii) such insurance company shall have no rights of
subrogation against Lender or any of its agents or employees; and
(iii) Borrower shall use its best efforts to procure from such
insurance company a waiver of subrogation rights against Lender.
If, however, such insurance policies do not provide for a waiver of
subrogation rights against Lender (whether because such a waiver is
unavailable or otherwise), then Borrower hereby agrees, to the
extent permitted by law and to the extent not prohibited by such
insurance policies, to waive its rights of recovery, if any,
against Lender and each of its agents and employees, whether
resulting from any damage to the Facility, any liability claim in
connection with the Facility or otherwise. If any such insurance
policy shall prohibit Borrower from waiving such claims, then
Borrower must obtain from such insurance company a waiver of
subrogation rights against Lender.

 

(k) Lender agrees that
Lender shall make the net proceeds of insurance or condemnation
(after payment of Lender’s reasonable costs and expenses)
available to Borrower for Borrower’s repair, restoration and
replacement of the Improvements and Equipment damaged or taken on
the following terms and subject to Borrower’s satisfaction of
the following conditions:

 

(i) Omitted;

 

(ii) At
the time of such loss or damage and at all times thereafter while
Lender is holding any portion of such proceeds, there shall exist
no Default or Event of Default;

 

(iii) The
Improvements and Equipment for which loss or damage has resulted
shall be capable of being restored to its preexisting condition and
utility in all material respects with a value equal to or greater
than that which existed prior to such loss or damage and such
restoration shall be capable of being completed prior the original
Maturity Date of the Loan;

 

(iv) Within
thirty (30) days from the date of such loss or damage Borrower
shall have given Lender a written notice electing to have the
proceeds applied for such purpose;

 

(v) Within sixty (60)
days following the date of notice under the preceding subparagraph
4.5(k)(iv) and prior to any
proceeds being disbursed to Borrower, Borrower shall have provided
to Lender all of the following:

 

(A) complete plans and
specifications for restoration, repair and replacement of the
Improvements and Equipment damaged to the condition, utility and
value required by Section 4.5(k)(iii)
above;

 

 

 

26

 

 

(B) if loss or damage
exceeds $250,000, if reasonably available, fixed-price or
guaranteed maximum cost bonded construction contracts for
completion of the repair and restoration work in accordance with
such plans and specifications;

 

(C) if required by
Lender, builder’s risk insurance for the full cost of
construction with Lender named under a standard mortgagee
loss-payable clause;

 

(D) such additional
funds as in Lender’s reasonable opinion are necessary to
complete such repair, restoration and replacement; and

 

(E) copies of all
permits and licenses, if any, necessary to complete the work in
accordance with the plans and specifications;

 

(vi) Lender
may, at Borrower’s expense, retain an independent inspector
to review and approve plans and specifications and completed
construction and to approve all requests for disbursement, which
approvals shall be conditions precedent to release of proceeds as
work progresses;

 

(vii) No
portion of such proceeds shall be made available by Lender for
architectural reviews or for any other purposes which are not
directly attributable to the cost of repairing, restoring or
replacing the Improvements and Equipment for which a loss or damage
has occurred unless the same are covered by such
insurance;

 

(viii) Borrower
shall diligently pursue such work and shall complete such work
prior to the earlier to occur of the expiration of business
interruption insurance or the Maturity Date;

 

(ix) Omitted;

 

(x) Each disbursement
by Lender of such proceeds and deposits shall be funded only upon
receipt of disbursement requests on an AIA G702/703 form (or
similar form approved by Lender) signed and certified by Borrower
and, if required by the Lender, its architect and general
contractor with appropriate invoices and lien waivers as reasonably
required by Lender; and

 

(xi) Lender
shall have a first lien and security interest in all building
materials and completed repair and restoration work and in all
fixtures and equipment acquired with such proceeds, and Borrower
shall execute and deliver such mortgages, deeds of trust, security
agreements, financing statements and other instruments as Lender
shall request to create, evidence, or perfect such lien and
security interest.

 

(xii) In
the event and to the extent such insurance proceeds are not
required or used for the repair, restoration and replacement of the
Improvements and Equipment for which a loss or damage has occurred
because the conditions set forth herein for such application are
otherwise not satisfied, then Lender shall be entitled without
notice to or consent from Borrower to apply such proceeds, or the
balance thereof, at Lender’s option either (A) to the
full or partial payment or prepayment of the Loan Obligations
(without premium) in the manner aforesaid, or (B) to the repair,
restoration and/or replacement of all or any part of such
Improvements and Equipment for which a loss or damage has
occurred.

 

 

 

27

 

 

(l) Borrower appoints
Lender as Borrower’s attorney-in-fact to cause the issuance
of or an endorsement of any insurance policy to bring Borrower into
compliance herewith and, as limited above, at Lender’s sole
option during the continuance of an Event of Default, to make any
claim for, receive payment for, and execute and endorse any
documents, checks or other instruments in payment for loss, theft,
or damage covered under any such insurance policy; however, in no
event will Lender be liable for failure to collect any amounts
payable under any insurance policy.

 

Notwithstanding
anything contained in this Agreement, including, without
limitation, this Section 4.5 or elsewhere in any other Loan
Document to the contrary, Lender
hereby acknowledges that (i) as of the Closing Date, Borrower has
obtained the insurance coverages as described on
Exhibit
E attached hereto
(collectively, the “Existing Insurance
Coverages”) and (ii) for
so long as any portion of the Loan remains outstanding and Lowell
SR LLC remains the borrower hereunder, the Existing Insurance
Coverages shall satisfy the coverage requirements set forth in
this Section 4.5
and otherwise set forth in the Loan
Documents. Accordingly, so long as the Borrower maintains the
Existing Insurance Coverages in full force and effect, as the same
may be modified or amended with the prior written consent of
Lender, such consent not to be unreasonably withheld, the insurance
requirements relative to the Loan and the Property shall be deemed
satisfied. If at any time any of the Existing Insurance Coverages
is no longer in effect, then Borrower shall be solely responsible
for satisfaction of the insurance requirements of this
Section
4.5.

 

4.6 Financial and Other
Information. Borrower shall provide to Lender, and cause the
Operator and Guarantor to provide to Lender, at its address set
forth in Section
9.7, the
following financial statements and information on a continuing
basis during the Term of the Loan:

 

(a) Annual from Parent. Within one
hundred twenty (120) days after the end of each calendar year,
Borrower shall deliver to Lender financial statements for Parent
and its consolidated subsidiaries (including Guarantor, Operator
and Borrower) prepared in accordance with Regulation S-X in the
form filed by Parent with the Securities and Exchange Commission
or, if Parent is not then a U.S. reporting company, prepared in
accordance with GAAP. Such financial statements shall include for
each such year a (A) balance sheet, (B) statement of income
and (C) statement of stockholders equity. Such financial statements
shall be manually signed and certified as true and correct by an
officer of Parent.

 

(b) Periodic from Borrower. Within
sixty (60) days after the end of each calendar quarter, Borrower
shall deliver to Lender unaudited financial statements for Borrower
for such calendar quarter. Such financial statements shall include
for each such quarter a (A) balance sheet and (B) statement of
income. All such financial statements shall be manually signed and
certified as true and correct in all material respects by an
officer of Borrower.

 

(c) Periodic from Operator. Within
sixty (60) days after the end of each calendar quarter, Operator
shall deliver to Lender unaudited financial statements for Operator
for such calendar quarter. Such financial statements shall include
for each such quarter a (A) balance sheet and (B) statement of
income. All such financial statements shall be manually signed and
certified as true and correct in all material respects by an
officer of Operator.

 

 

 

28

 

 

(d) Annual from Guarantor. Within
one hundred twenty (120) days after the end of each calendar year,
Borrower shall deliver to Lender unaudited financial statements for
such calendar year for the Guarantor (which shall at a minimum
include a detailed balance sheet and a detailed statement of net
worth). Each such financial statement shall be manually signed and
certified as true and correct by an officer of the
Guarantor.

 

(e) Tax Returns. Within fifteen
(15) days after the filing deadline (including any applicable
extension thereof), as may be extended from time to time, copies of
all federal tax returns, if any, of Borrower, Guarantor and
Operator, together with all supporting documentation and required
schedules.

 

(f) Insurance Report. As soon as
practicable and in any event by the last day of each calendar year,
a report in form and substance satisfactory to Lender outlining all
material insurance coverage maintained as of the date of such
report by the Loan Parties in respect of the Property, and all
material insurance coverage planned to be maintained by the Loan
Parties with respect to the Property in the immediately succeeding
calendar year.

 

(g) Information Regarding
Collateral. Borrower will furnish to Lender prompt written
notice 30 days in advance of any change (i) in any Loan
Party’s identity or corporate structure, or (ii) in any Loan
Party’s Federal Taxpayer Identification Number. Borrower also
agrees promptly to notify Lender if Collateral having a value equal
to or greater than $250,000 is damaged or destroyed. Further, to
the extent not paid by Lender from the Payment Reserves, Borrower
agrees to furnish Lender, within one hundred twenty (120) days
after the end of each calendar year, evidence of the payment of all
property taxes owing in respect of each Property for such calendar
year.

 

(h) Post-Closing Lien Searches. As
soon as practicable and in any event within thirty (30) days
following the Closing Date, at Borrower’s sole cost expenses,
copies of such UCC and real property lien searches as Lender shall
determine to be necessary to evidence the perfection and
first-priority nature of the security interests granted to Lender
pursuant to the Loan Documents.

 

(i) Other
Requirements.

 

(i) Lender reserves the
right to require that the annual financial statements of Parent be
audited by a nationally or regionally recognized accounting firm or
independent certified public accountant registered with the PCAOB,
at its cost and expense, if: (A) an Event of Default exists;
or (B) Lender has reasonable grounds to believe that any unaudited
annual financial statements do not accurately represent the
financial condition of Parent.

 

(ii) Lender
reserves the right to require such other financial information of
Borrower or Operator as Lender may reasonably request, and Borrower
agrees promptly to provide or to cause to be provided, such
information to Lender. All financial statements must be in the form
and detail as Lender may from time to time reasonably
requests.

 

4.7 Intentionally
Omitted.

 

 

 

29

 

 

4.8 Books and Records. Borrower
shall keep and maintain, or cause to be kept and maintained, at all
times and upon Lender’s request shall make available,
complete and accurate books of account and records (including
copies of supporting bills and invoices) adequate to reflect
correctly the results of the operation of the Facility, and copies
of all written contracts, leases, subleases (if any), and other
instruments which affect the Property, which books, records,
contracts, leases, subleases (if any) and other instruments shall
be subject to examination and inspection at any reasonable time by
Lender (upon reasonable advance notice during normal business
hours, which for such purposes only may be given orally, except in
the case of an emergency or during the continuance of an Event of
Default, in which case no advance notice shall be required);
provided, however, that if an Event of Default has occurred and is
continuing, Borrower shall deliver or cause to be delivered to
Lender upon written demand copies of all books, records, contracts,
leases and subleases (if any) and other instruments relating to the
Facility or its operation, other than such documents required by
law to be maintained at the Facility and Borrower authorizes Lender
to obtain a credit report on Borrower at any time.

 

4.9 Payment of Indebtedness.
Borrower shall duly and punctually pay or cause to be paid all
other Indebtedness now owing or hereafter incurred by Borrower in
accordance with the terms of such Indebtedness, except such
Indebtedness owing to those Persons other than Lender which is
being contested in good faith and with respect to which any
execution against properties of Borrower has been effectively
stayed and for which reserves or other collateral for the payment
and security, as the case may be, thereof have been established as
determined by Lender in its reasonable discretion.

 

4.10 Conduct
of Business. Borrower shall conduct, or cause Operator to
conduct, the operation of the Facility in accordance with the
following:

 

(A) to operate the
Facility in a prudent manner and in compliance, in all material
respects, with applicable laws and regulations relating
thereto;

 

(B) to maintain
sufficient Equipment of types and quantities at the Facility to
enable Operator adequately to perform operations of the
Facility;

 

(C) to keep all
Improvements and Equipment located on or used or useful in
connection with the Facility in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time
make all needed and proper repairs, renewals, replacements,
additions, and improvements thereto to keep the same in good
operating condition; and

 

(D) to keep all
required Permits and insurance coverage current and in full force
and effect.

 

4.11 Intentionally
Omitted.

 

4.12 Financial
Covenants. Borrower covenants and agrees that for so long as
the Loan or any part thereof is unpaid, the membership interests in
Borrower and Spence Rd shall not be pledged for the benefit of any
Person other than in favor of Lender.

 

4.13 Fixtures,
Furniture and Equipment. Borrower will cause all fixtures,
furniture and equipment at the Facility to be owned by
Borrower.

 

4.14 Intentionally
Omitted.

 

 

 

30

 

 

4.15 Updated
Appraisals. For so long as the Loan remains outstanding, if
any Event of Default shall occur and continue hereunder, or if, in
Lender’s reasonable judgment, a material depreciation in the
value of the Property shall have occurred, Lender, may cause the
Property to be appraised by an appraiser selected by Lender, and in
accordance with Lender’s appraisal guidelines and procedures
then in effect, and Borrower agrees to cooperate, and to cause
Operator to cooperate, in all respects with such appraisals and
furnish to the appraisers all reasonably requested information
regarding the Property and the Facility. Borrower agrees to pay all
reasonable costs incurred by Lender in connection with such
appraisal which costs shall be secured by the Security Instrument
and, to the extent not paid within 15 days of written demand
therefor by Lender, shall accrue interest at the Default Rate until
paid.

 

4.16 Comply
with Covenants and Laws. Borrower shall comply and cause
Operator to comply, in all material respects, with all applicable
covenants and restrictions of record with respect to the Property
and all Limited Governmental Requirements.

 

4.17 Taxes
and Other Charges. Subject to Borrower’s right to
contest the same as set forth in Section 9(d) of the Security
Instrument, Borrower shall pay or cause to be paid all Taxes,
assessments, charges, claims for labor, supplies, rent, and other
obligations which, if unpaid, might give rise to a Lien against
property of Borrower, except Liens to the extent permitted by this
Agreement.

 

4.18 Intentionally
Omitted.

 

4.19 Certificate.
Within 10 days after Lender’s written request, Borrower shall
furnish Lender with a certificate stating that Borrower has
complied with and is in compliance with, in all material respects,
all terms, covenants and conditions of the Loan Documents to which
Borrower is a party and that, to Borrower's knowledge, there exists
no Default or Event of Default or, if such is not the case, that
one or more specified events have occurred, and that there has been
no Material Adverse Effect since the date of this
Agreement.

 

4.20 Notice
of Fees or Penalties. Borrower shall immediately notify
Lender, upon Borrower’s knowledge thereof, of the assessment
by any state or licensing agency of any fines or penalties against
Borrower, Spence Rd, Operator (with respect to Borrower, Spence Rd
or the Facility) or the Facility.

 

4.21 Lease
Agreement.

 

(a) Borrower shall: (i)
maintain or cause to be maintained the Lease Agreement, with a term
expiring not earlier than five (5) years after the Closing Date,
and an annual aggregate triple net rent of no less than the sum of
1.00 times Debt Service plus annual real estate property taxes,
annual property insurance, in full force and effect, (ii) timely
perform all of its obligations thereunder, (iii) timely enforce the
Lease against Operator; (iv) not waive any Operator obligations
under the Lease Agreement without the prior written consent of
Lender (which consent may be granted or refused in Lender’s
sole discretion); and (v) not permit the termination or amendment
of the Lease Agreement unless the prior written consent of Lender
is first obtained (which consent will not be unreasonably withheld,
conditioned or delayed); and

 

 

 

31

 

 

(b) Upon the occurrence
and during the continuance of an Event of Default, Lender shall
have the right to direct all payments of rent and other amounts due
to Borrower under the Lease to be made directly to Lender;
and

 

(c) In the event that
bankruptcy or insolvency proceedings are instituted by or against
Operator, Borrower shall (to the extent permitted by the applicable
bankruptcy court having jurisdiction over such proceedings), upon
written instruction received from Lender, terminate the Lease
Agreement with the Operator.

 

4.22 Intentionally
Omitted

 

4.23 Loan
Closing Certification. Upon becoming aware of the same,
Borrower shall promptly notify Lender in writing of any (i)
condemnation or threatened condemnation of the Property or any
material portion thereof, (ii) casualty event that is reasonably
likely to involve losses in excess of $250,000 and (iii) any
Material Adverse Effect since the date of this Agreement, provided
that notification shall not be required pursuant to this Section
4.23 of developments affecting the industry generally in which
Guarantor and its consolidated subsidiaries do business or
affecting the economy or financial markets as a whole.

 

4.24 Intentionally
Omitted.

 

4.25 Management.
The management of the Facility shall be by Borrower or Operator
pursuant to the terms of the Lease Agreement.

 

4.26 Mortgage
Tax. Borrower hereby agrees to pay any and all documentary
stamp taxes and intangible taxes which may become due and payable
in connection with any of the Security Instrument, together with
any fines, penalties, interest or similar charges resulting from
the non-payment thereof, whenever the same shall become due and
payable, whether upon the recording of the Security Instrument or
at any later date. Borrower hereby agrees to indemnify, defend, and
hold harmless Lender from and against any and all claims, charges,
actions, suits, proceedings, law suits, obligations, losses,
damages, expenses or liabilities (joint and/or several) including,
without limitation, reasonable attorney’s fees, suffered or
incurred by Lender as a result of any assessment by any applicable
Governmental Authority with respect to recording fees and expenses,
including documentary stamp taxes and intangible taxes, now or at
any time hereafter payable with respect to the recording of the
Security Instrument; this indemnification shall be a continuing one
and shall be unaffected by the fact that the Loan has been repaid
in full. Borrower acknowledges that Lender has relied and was
entitled to rely upon the agreements set forth in this Section as a
material condition precedent to the making of the
Loan.

 

ARTICLE
V 

 

NEGATIVE
COVENANTS OF BORROWER

 

Until
the Loan Obligations have been paid in full, Borrower shall not,
nor shall Borrower suffer, permit, tolerate or allow Spence Rd or,
where indicated below, Operator or Guarantor to:

 

5.1 Assignment of Licenses and
Permits. Assign or transfer any of its interest in any
Permits pertaining to the Facility or the Business, without
Lender’s prior written consent, which consent may be granted
or refused for any reason or for no reason whatsoever in
Lender’s sole and absolute discretion.

 

 

 

32

 

 

5.2 No Liens; Exceptions. Create,
incur, assume or suffer to exist any Lien upon or with respect to
the Property and Improvements or any of its properties, rights,
income or other assets relating thereto, including, without
limitation, the Collateral, whether now owned or hereafter
acquired, other than the following permitted Liens:

 

(a) Liens at any time
existing in favor of Lender;

 

(b) Permitted
Encumbrances;

 

(c) Inchoate Liens
arising by operation of law for the purchase of labor, services,
materials, equipment or supplies (including as a consequence of the
Lease Agreement), provided payment shall not be delinquent and, if
such Lien is a lien upon any of the Property or Improvements, such
Lien must be fully disclosed to Lender and removed from the
Property and Improvements, within thirty (30) days of its creation,
in a manner satisfactory to Lender; and

 

(d) Liens incurred in
the ordinary course of business (including as a consequence of the
Lease Agreement) in connection with workers’ compensation,
unemployment insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for money borrowed or
for credit received with respect to property acquired) entered into
in the ordinary course of business as presently conducted or to
secure obligations for surety or appeal bonds.

 

Notwithstanding
anything to the contrary contained herein, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the
amount or validity of any Liens, provided that (a) no Event of
Default has occurred and remains uncured; (b) such proceeding shall
be permitted under and be conducted in accordance with all
applicable Legal Requirements; (c) none of the Collateral, the
Property nor any part thereof or interest therein will be in
imminent danger of being sold, forfeited, terminated, cancelled or
lost; (d) Borrower shall promptly upon final determination thereof
pay the amount of any such Liens, together with all costs, interest
and penalties which may be payable in connection therewith; (e) to
insure the payment of such Liens, Borrower shall deliver to Lender
either (i) cash, or other security as may be approved by Lender, in
an amount equal to one hundred twenty-five percent (125%) of the
contested amount, or (ii) a payment and performance bond in an
amount equal to one hundred percent (100%) of the contested amount
from a surety acceptable to Lender in its reasonable discretion;
(f) failure to pay such Liens will not subject Lender to any civil
or criminal liability; (g) such contest shall not affect the
ownership, use or occupancy of the Property; and (h) Borrower
shall, upon request by Lender, give Lender prompt notice of the
status of such proceedings and/or confirmation of the continuing
satisfaction of the conditions set forth in the foregoing clauses
(a) through (h).

 

Without
limitation of Section 5.9, Borrower shall not permit Operator to
create, incur, assume or suffer to exist any Lien upon or with
respect to any Collateral.

 

5.3 Merger, Consolidation, Etc.
Except as otherwise provided in the Security Instrument, consummate
or suffer or permit Operator to consummate any merger,
consolidation or similar transaction, or sell, assign, lease or
otherwise dispose of substantially all of its assets (whether now
or hereafter acquired), without the prior written consent of the
Lender, which consent may be granted or refused in Lender’s
sole discretion, provided that none of the foregoing transactions
involving Operator shall require Lender’s consent if the
successor is a wholly owned subsidiary of Guarantor and such
transaction is in accordance with Limited Governmental Requirements
and Borrower, Operator and/or any applicable transferee shall
execute such documentation as Lender reasonably requires confirming
the continued validity and effectiveness of the Loan Documents to
which Borrower or Operator, as applicable, is a party. From and
after any such transaction, the successor to Borrower or Operator
or transferee of the assets of Borrower or Operator, as the case
may be, shall constitute “Borrower” or
“Operator,” as applicable, for all purposes
hereunder.

 

 

 

33

 

 

5.4 Maintain Single-Purpose Entity
Status. As to Borrower and Spence Rd.:

 

(a) Dissolve or
terminate or materially amend, its certificate of incorporation,
articles of organization, operating agreement or partnership
agreement or by-laws, the terms of which require Borrower or Spence
Rd, as applicable, to be a Single-Purpose Entity;

 

(b) at any time own any
encumbered asset other than (a) in the case of Borrower: (i) the
Collateral, and (ii) incidental personal property necessary
for the operation of the Property and (b) in the case of Spence Rd,
holding those certain Permits which are necessary to enable the
operation of the Business at the Property in accordance with all
State of California and Monterey County Permits (including cannabis
Permits);

 

(c) at any time be
engaged directly or indirectly, in any business other than the
ownership, management and operation of the applicable assets
described in clause (b) above;

 

(d) incur, create or
assume any Indebtedness, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than, in the case of
Borrower: (i) the Loan, or (ii) Indebtedness which represents trade
payables or accrued expenses incurred in the ordinary course of
business of owning and operating the Property; none of which shall
be secured (senior, subordinate or pari passu) by the
Property;

 

(e) fail to endeavor to
maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of
its contemplated business operations, in each case provided that
the foregoing shall not require any direct or indirect equity
holder to make any additional capital contributions;

 

(f) fail to do all
things necessary to preserve Borrower’s or Spence Rd’s
existence as a Single-Purpose Entity, and will not, nor will it
permit any partner, limited or general, member or shareholder
thereof, amend, modify or otherwise change its partnership
certificate, partnership agreement, articles of organization,
operating agreement, articles of incorporation or by-laws in a
manner which materially and adversely affects Borrower’s or
Spence Rd’s existence as a Single-Purpose
Entity;

 

(g) fail to maintain
books and records separate from those of its Affiliates, including
its members, general partners or shareholders, as
applicable;

 

(h) fail to at all
times hold itself out to the public as a legal entity separate and
distinct from any other entity (including any Affiliate thereof,
including the general partner or any member or shareholder of the
Borrower, Spence Rd or any Affiliate of the general partner or any
member or shareholder of the Borrower or Spence Rd, as applicable);
or

 

(i) fail to maintain
its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those
of any Affiliate or any other Person.

 

 

 

34

 

 

5.5 Change of Business. Permit to
be conducted at the Facility any activities other than cannabis
cultivation, drying, trimming, packaging, extraction, manufacturing
and processing, and similar cannabis activities.

 

5.6 Changes in Accounting. Change,
or suffer, permit, tolerate or allow Operator to change, its
methods of accounting, unless such change is permitted by GAAP, and
provided such change is not for the purpose of curing or preventing
what would otherwise be an Event of Default or Default had such
change not taken place.

 

5.7 ERISA Funding and Termination.
In the event that Borrower becomes the licensed operator of the
Facility, permit (a) the funding requirements of ERISA with respect
to any employee plan to be less than the minimum required by ERISA
at any time, or (b) any employee plan to be subject to involuntary
termination proceedings at any time.

 

5.8 Transactions with Affiliates.
Enter into any transaction with a Person which is an Affiliate of
Borrower other than (x) in the ordinary course of its business and
on fair and reasonable terms no less favorable to Borrower than
those they could obtain in a comparable arms-length transaction
with a Person not an Affiliate, (y) transactions that do not have a
material adverse effect on the Collateral or Lender and (z) the
transactions contemplated by the Loan Documents.

 

5.9 Transfer of Property or any Ownership
Interests. Other than any Permitted Transfer(s) in
accordance with the terms hereof, which shall not require the prior
written consent of Lender, Borrower shall not, without the prior
written consent of Lender, permit or suffer any
Transfer.

 

5.10 Change
of Use. Alter or change, or suffer, permit, tolerate or
allow Operator to alter or change, the use of the Facility (other
than a use permitted by Section 5.5). Enter into any management
agreement for the Facility or enter into any Lease for the Facility
(other than the Lease Agreement), in each case other than with
Guarantor or a wholly owned subsidiary of Guarantor, unless
Borrower first notifies Lender and provides Lender a copy of the
proposed lease agreement or management agreement, obtains
Lender’s written consent thereto, and obtains and provides
Lender with a subordination agreement in form satisfactory to
Lender, as determined by Lender in its sole discretion, from
Operator subordinating to all rights of Lender.

 

5.11 Place
of Business. Change, or suffer, permit, tolerate or allow
Borrower or Spence Rd to change, its chief executive office or its
principal place of business without first giving Lender at least
thirty (30) days prior written notice thereof and promptly
providing Lender such information and amendatory financing
statements as Lender may request in connection
therewith.

 

5.12 Acquisitions.
Directly or indirectly, purchase, lease, manage, own, operate, or
otherwise acquire any property or other assets (or any interest
therein) which are not used in connection with the operation of the
Property, Equipment and Improvements or the Facility.

 

 

 

35

 

 

5.13 Dividends,
Distributions and Redemptions. As long as any Event of
Default exists, or if any Event of Default would result from a
distribution, Borrower shall not suffer or permit Guarantor to
declare or pay any distributions to its shareholders, members or
partners, as applicable, or purchase, redeem, retire, or otherwise
acquire for value, any Stock or ownership interests in Guarantor
now or hereafter outstanding, return any capital to its
shareholders, members or partners as applicable, or make any
distribution of assets to its shareholders, members or partners, as
applicable, provided that in no event shall (i) the redemption of
Class B Common Shares and Class C Common Shares of Guarantor for
subordinate voting shares of Parent or (ii) intercompany transfers
between Guarantor and Parent to fund expenses of Parent be
prohibited by this Section 5.13 so long as Guarantor shall have the
financial wherewithal reasonably necessary to perform its
obligations under the Loan Documents to which it is a
party.

 

5.14 Conduct
of Business. Borrower shall not and shall not permit
Operator or Spence Rd to:

 

(A) Fail to operate the
Facility in a prudent manner and in compliance in all material
respects with Limited Governmental Requirements and fail to cause
all Permits, and any other agreements necessary for the use and
operation of the Facility or the Business;

 

(B) Fail to maintain
sufficient Equipment of types and quantities at the Facility to
enable Operator adequately to perform operations of the
Facility;

 

(C) Fail to keep all
Improvements and Equipment located on or used or useful in
connection with the Facility in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time
and fail to make all needed and proper repairs, renewals,
replacements, additions, and improvements thereto to keep the same
in good operating condition; and

 

(D) Fail to keep all
required Permits and insurance coverage current and in full force
and effect.

 

5.15 Regulated
Assets. Notwithstanding anything to the contrary herein,
only those authorized to possess and handle marijuana for
medical/recreational use pursuant to any law relating to the
farming, growth, manufacturing, production, processing, extraction,
packaging, sale or distribution of any marijuana or
marijuana-related product, including any cannabidiol product, are
permitted to possess regulated assets, such as marijuana and
marijuana-infused products, without being subject to law
enforcement action. Therefore, all such regulated assets are not
subject to seizure by Lender or other parties unauthorized to
possess them; rather, Lender must seek and obtain approval from the
applicable Governmental Authorities, or otherwise comply with the
requirements thereof as set forth above, before Lender and/or
Lender’s agents and employees during the continuance of an
Event of Default may lawfully, in addition to and not in derogation
of any remedies from any preceding breach of this Agreement,
immediately or at any time thereafter and with process of law enter
into upon any areas of the Facility in which cannabis products are
sold, processed, stored or manufactured or any part thereof in the
name of the whole and repossess the same and expel Borrower or
Operator and those claiming through or under Borrower or Operator
and remove its and their effects, without prejudice to any remedies
which might otherwise be used for arrears of payments due under or
with respect to the Loan or prior breach of covenant. Nothing
herein shall be construed to permit Lender to possess, sell or
otherwise dispose of Lender’s property that is cannabis or
cannabis-infused product or any waste product from the processing
thereof. If required by applicable Legal Requirements, Lender shall
at no time possess keys to any areas of the Facility in which
cannabis products are sold, store or manufactured, and shall, at
all times during any access to any portion of the Premises in which
cannabis products are sold, stored or manufactured, be accompanied
by a member of Borrower’s management team.

 

ARTICLE
VI 

 

ENVIRONMENTAL
HAZARDS

 

 

 

36

 

 

6.1 Prohibited Activities and
Conditions. Borrower shall not cause or permit, or suffer or
permit Operator or Spence Rd to cause, permit or suffer, any of the
following (other than in the ordinary course of business and to the
extent not resulting in a material adverse effect on Borrower,
Spence Rd or Operator):

 

(a) The presence, use,
generation, release, treatment, processing, storage (including
storage in above ground and underground storage tanks), handling,
or disposal of any Hazardous Materials in, on, under, at or from
the Property or any Improvements in violation of applicable
Hazardous Materials Laws;

 

(b) The transportation
of any Hazardous Materials to, from, or across the Property in
violation of applicable Hazardous Materials Laws,

 

(c) Any occurrence or
condition on the Property or in the Improvements or any other
property of Borrower that is adjacent to the Property, which
occurrence or condition is in violation of Hazardous Materials
Laws; or

 

(d) Any material
violation of or noncompliance with the terms of any Environmental
Permit with respect to the Property, the Improvements or any
property of Borrower that is adjacent to the Property.

 

The
matters described in clauses (a) through (d) above are referred to
collectively in this Article VI
as “Prohibited
Activities and Conditions” and individually as a
“Prohibited Activity
and Condition.”

 

6.2 Intentionally
Omitted.

 

6.3 Preventive Action. Borrower
shall take all appropriate steps (including the inclusion of
appropriate provisions in the Lease Agreement approved by Lender
which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of the
Facility from causing or permitting any Prohibited Activities and
Conditions.

 

6.4 Intentionally
Omitted.

 

6.5 Borrower’s Environmental
Representations and Warranties. Except as disclosed in the
Phase 1 Environmental Report prepared by Rincon Consultants, Inc.,
dated April 8, 2021 and provided to Lender, Borrower represents and
warrants to Lender that:

 

(a) Borrower has not,
to its knowledge, at any time caused or permitted any Prohibited
Activities and Conditions;

 

(b) To Borrower’s
knowledge, no Prohibited Activities and Conditions exist with
respect to the Facility;

 

 

 

37

 

 

(c) Borrower has
complied in all material respects with all Hazardous Materials
Laws, including all requirements for notification regarding
releases of Hazardous Materials. Without limiting the generality of
the foregoing, Borrower has obtained all Environmental Permits
required for the operation of the Facility, Property and the
Improvements in accordance with Hazardous Materials Laws now in
effect and all such Environmental Permits are in full force and
effect. To Borrower’s knowledge, no event has occurred or
condition exists with respect to the Facility, Property and/or
Improvements that constitutes, or with the passing of time or the
giving of notice would constitute, material noncompliance with any
Hazardous Materials Law or the terms of any Environmental
Permit;

 

(d) There are no
actions, suits, claims or proceedings pending or, to
Borrower’s knowledge, threatened that involves the Facility,
Property and/or the Improvements or allege, arise out of, or relate
to any Prohibited Activity and Condition;

 

(e) Borrower has not
received any written complaint, order, notice of violation or other
communication from any Governmental Authority with regard to air
emissions, water discharges, noise emissions or Hazardous
Materials, or any other environmental matters affecting the
Facility, Property, the Improvements or any other property of
Borrower that is adjacent to the Property.

 

6.6 Notice of Certain Events.
Borrower shall promptly notify Lender in writing of any and all of
the following that may occur:

 

(a) Borrower’s,
Spence Rd’s or Operator’s discovery of any Prohibited
Activity and Condition;

 

(b) Borrower’s,
Spence Rd’s or Operator’s receipt of any written
complaint, order, notice of violation or other communication from
any Governmental Authority or other Person with regard to present,
or future alleged violations of Hazardous Materials Law, Prohibited
Activities and Conditions or any other materially environmental
matters affecting the Property, the Improvements or any other
property of Borrower that is adjacent to the Property;
and/or

 

(c) Any such notice
given by Borrower shall not relieve Borrower or any other Person
of, or result in a waiver of, any obligation under this Agreement,
the Note, or any of the other Loan Documents.

 

6.7 Costs of Inspection. Borrower
shall pay promptly the costs of any environmental inspections,
tests or audits required by Lender in connection with any
foreclosure or deed in lieu of foreclosure, or, if required by
Lender, as a condition of Lender’s consent to any
“Transfer” (to the extent required hereunder), or
required by Lender following a reasonable determination by Lender
that Prohibited Activities and Conditions may exist. Any such costs
incurred by Lender (including the reasonable fees and out-of-pocket
costs of attorneys and technical consultants whether incurred in
connection with any judicial or administrative process or
otherwise) which Borrower fails to pay promptly shall become an
additional part of the Loan Obligations.

 

6.8 Remedial Work. If any
investigation, site monitoring, containment, clean-up, restoration
or other remedial work (“Remedial Work”) is
necessary to comply with any Hazardous Materials Law or order of
any Governmental Authority that has or acquires jurisdiction over
the Property, the Improvements or the use, operation or improvement
of the Property under any Hazardous Materials Law, Borrower shall,
by the earlier of (a) the applicable deadline required by Hazardous
Materials Law or (b) thirty (30) days after notice from Lender
demanding such action, begin performing the Remedial Work, and
thereafter diligently prosecute it to completion, and shall in any
event complete such work by the time required by applicable
Hazardous Materials Law. If Borrower fails to begin on a timely
basis or diligently prosecute any required Remedial Work, Lender
may, at its option and after five (5) days' prior written notice,
cause the Remedial Work to be completed, in which case Borrower
shall reimburse Lender on demand for the cost of doing so. Any
reimbursement due from Borrower to Lender shall become part of the
Loan Obligations.

 

 

 

38

 

 

6.9 Cooperation with Governmental
Authorities. Borrower shall cooperate with any inquiry by
any Governmental Authority and shall comply with any governmental
or judicial order which arises from any Hazardous Materials Law or
any alleged Prohibited Activity and Condition.

 

6.10 Indemnity.

 

(a) Borrower and
Guarantor shall hold harmless, defend and indemnify: (i) Lender,
(ii) omitted; (iii) any subsequent owner or holder of any interest
in the Note; (iv) the officers, directors, partners, agents,
shareholders, employees and trustees of any of the foregoing; and
(iv) the heirs, legal representatives, successors and assigns of
each of the foregoing (together, the “Indemnitees”) against all
proceedings, claims, damages (excluding punitive, consequential,
indirect or special damages except to the extent actually awarded
in favor of a third party), losses, liabilities, expenses,
penalties, costs, fines, encumbrances, liens, judgments,
assessments, obligations or settlement payments (whether initiated
or sought by any Governmental Authority or private parties),
including reasonable fees and expenses of attorneys, expert
witnesses and Remedial Work, whether incurred in connection with
any judicial or administrative process or otherwise, arising
directly or indirectly from any of the following:

 

(A) Any breach of any
representation or warranty of Borrower or any other Loan Party, as
applicable, in this Article VI
or the Environmental Indemnity Agreement;

 

(B) Any failure by
Borrower or any other Loan Party, as applicable, to perform any of
their obligations under this Article
VI or the Environmental Indemnity Agreement;

 

(C) The existence or
alleged existence of any Prohibited Activity and
Condition;

 

(D) The presence or
alleged presence of Hazardous Materials in, on, around or under the
Property, the Improvements or any property of Borrower that is
adjacent to the Property; or

 

(E) Compliance with or
actual or alleged violation of any Hazardous Materials
Law.

 

(b) Counsel selected by
Borrower to defend Indemnitees shall be subject to the reasonable
approval of those Indemnitees, which approval shall not be
unreasonably withheld, delayed or conditioned. Notwithstanding
anything contained herein, any Indemnitee may elect to defend any
claim or legal or administrative proceeding at the Borrower’s
expense if such Indemnitee has reason to believe that its interests
are not being adequately represented or diverge from other
interests being represented by such counsel (but Borrower shall be
obligated to bear the expense of at most only one such separate
counsel). Nothing contained herein shall prevent an Indemnitee from
employing separate counsel in any such action at any time and
participating in the defense thereof at its own
expense.

 

 

 

39

 

 

(c) Borrower shall not,
without the prior written consent of those Indemnitees who are
named as parties to a claim or legal or administrative proceeding
(a “Claim”) settle or
compromise the Claim if the settlement (i) does not include as an
unconditional term the delivery by the claimant or plaintiff to
Lender of a written release of those Indemnitees, reasonably
satisfactory in form and substance to Lender; or (ii) would
reasonably be expected to materially and adversely affect any
Indemnitee, as determined by such Indemnitee in its sole but
reasonable discretion.

 

(d) The liability of
Borrower to indemnify the Indemnitees shall not be limited or
impaired by any of the following, or by any failure of Borrower or
any other Loan Party to receive notice of or consideration for any
of the following:

 

(i) Any amendment or
modification of any Loan Document;

 

(ii) Any
extensions of time for performance required by any of the Loan
Documents;

 

(iii) The
accuracy or inaccuracy of any representations and warranties made
by Borrower under this Agreement or any other Loan
Document;

 

(iv) The
release of Borrower or any other Person, by Lender or by operation
of law, from performance of any obligation under any of the Loan
Documents; and

 

(v) The release or
substitution in whole or in part of any security for the Loan
Obligations.

 

(e) Borrower shall, at
its own cost and expense, do all of the following:

 

(i) Pay or satisfy any
judgment or decree that may be entered against any Indemnitee or
Indemnitees in any legal or administrative proceeding incident to
any matters against which Indemnitees are entitled to be
indemnified under this Article
VI or the Environmental Indemnity Agreement;

 

(ii) Reimburse
Indemnitees for any expenses paid or incurred in connection with
any matters against which Indemnitees are entitled to be
indemnified under this Article
VI or the Environmental Indemnity Agreement;
and

 

(iii) Reimburse
Indemnitees for any and all expenses, including reasonable fees and
costs of attorneys and expert witnesses, paid or incurred in
connection with the enforcement by Indemnitees of their rights
under this Article VI or the
Environmental Indemnity Agreement, or, except as otherwise provided
herein, in monitoring and participating in any legal or
administrative proceeding.

 

 

 

40

 

 

(f) n any circumstances
in which the Lender employs in accordance with Section 6.10(b) its
own separate legal counsel and consultants to prosecute, defend or
negotiate any Claim or legal or administrative proceeding and
Lender, with the prior written consent of Borrower (which shall not
be unreasonably withheld, delayed or conditioned) may settle or
compromise any Claim or legal or administrative proceeding.
Borrower shall reimburse Lender upon demand for all costs and
expenses incurred by Lender, including all costs of settlements
entered into in good faith, and the fees and out of pocket expenses
of such attorneys and consultants.

 

(g) The provisions of
this Article VI shall be in
addition to any and all other obligations and liabilities that
Borrower may have under the applicable law or under the other Loan
Documents, and each Indemnitee shall be entitled to indemnification
under this Article VI without
regard to whether Lender or that Indemnitee has exercised any
rights against the Property and/or any Improvements or any other
security, pursued any rights against any Indemnitee, or pursued any
other rights available under the Loan Documents or applicable law.
If Borrower consists of more than one person or entity, the
obligation of those persons or entities to indemnify the
Indemnitees under this Article
VI shall be joint and several. The obligations of Borrower
to indemnify the Indemnitees under this Article VI shall survive any repayment or
discharge of the Loan Obligations, any foreclosure proceeding, any
foreclosure sale, any delivery of any deed in lieu of foreclosure,
and any release of record of the lien of the Security
Instrument.

 

ARTICLE
VII 

 

PAYMENT
RESERVES

 

7.1 Establishment of Payment
Reserves. Borrower understands and agrees that,
notwithstanding the establishment of the Debt Reserve as herein
required, all of the proceeds of the Loan have been, and shall be
considered, fully disbursed and shall bear interest and be payable
on the terms provided in the Loan Documents.

 

7.2 Required Repairs. Borrower
shall perform or cause Operator to perform all of the repairs to
the Property as more particularly set forth on Exhibit B (the
“Required
Repairs”). The Required Repairs shall be completed in
a good and workmanlike manner on or before the “completion
date” if any, set forth on Exhibit B for the particular item
of the Required Repairs.

 

7.3 Debt Reserve.

 

(a) On the Closing
Date, if applicable, Borrower shall deposit with Lender, for the
purposes of establishing a Debt Reserve for purposes of the payment
of the Debt and satisfaction of the Loan Obligations, the amount
equal to $100,750.00, to be held as Collateral for the payment of
the Debt and satisfaction of the Loan Obligations. Amounts so
deposited are referred to as the “Debt
Reserve”.

 

(b) The Debt Reserve
shall be disbursed by the Lender and applied to the Debt and other
Loan Obligations as determined by Lender during the Term of the
Loan. Within ninety (90) days following any disbursement of funds
from the Debt Reserve, Borrower shall be obligated to replenish the
amount of any such disbursement from the Debt Reserve. Upon payment
of the Debt and satisfaction of all other Loan Obligations of
Borrower under the Loan Documents, to the extent not disbursed, the
Debt Reserve, including any interest earned thereon, shall be
refunded to Borrower.

 

7.4 Security Interest in Payment
Reserves.

 

 

 

41

 

 

(a) Lender or its
assignee may hold the Payment Reserves in a separate account or
accounts at a depository institution or trust company determined by
Lender in its sole discretion. Borrower shall not be entitled to
interest on any part of the Payment Reserves. As additional
security for the payment and performance by Borrower of the Loan
Obligations, Borrower hereby unconditionally and irrevocably
assigns, conveys, pledges, mortgages, transfers, delivers,
deposits, sets over and confirms unto Lender, and hereby grants to
Lender, a security interest in all of Borrower’s right, title
and interest in (A) the Payment Reserves, (B) the depository or
other accounts into which the Payment Reserves have been deposited,
(C) all insurance on said accounts, (C) all accounts, contract
rights, and general intangibles or other rights and interests
pertaining thereto, (E) all sums now or hereinafter therein or
represented thereby, (F) all replacements, substitutions or
proceeds thereof, (G) all instruments and documents, now or
hereafter evidencing the Payment Reserves or such accounts, (H) all
powers, options, rights, privileges, and immunities pertaining to
the Payment Reserves (including the right to make withdrawals
therefrom), and (I) all proceeds of the foregoing. Borrower hereby
expressly authorizes and consents to the accounts into which the
Payment Reserves have been deposited being held in Lender’s
name or the name of any entity servicing the Note for Lender, and
hereby acknowledges and agrees that Lender, or at Lender’s
election, such servicing agent, shall have exclusive control over
said accounts. Notice of the assignment and security interest
granted to Lender herein may be delivered by Lender at any time to
the financial institution wherein the Payment Reserves have been
established, and Lender, or such servicing entity, shall have
possession of all passbooks or other evidences of such accounts.
Borrower hereby assumes all risk of loss with respect to amounts on
deposit in the Payment Reserves. Borrower shall execute and deliver
such account control agreements as may be required by Lender to
perfect Lender’s lien on and security interest in the Payment
Reserves.

 

(b) During the
continuance of an Event of Default, Lender may, but shall not be
obligated to, apply at any time the balance then remaining in the
Payment Reserves against the Loan Obligations in whatever order
Lender shall determine in Lender’s sole and absolute
discretion. To the extent Lender withdraws any funds from the
Payment Reserves as a result of Borrower’s Default, Borrower
shall replenish the Payment Reserves within ninety (90) days of
Lender’s written demand. No such application of the Payment
Reserves by Lender shall be deemed to cure any Default or Event of
Default hereunder except to the extent of the amounts applied, and
any such application shall not limit Borrower’s obligation to
deposit any deficiency of which Lender gives notice. Upon full
payment and performance of the Loan Obligations and in accordance
with its terms or at such earlier time as Lender may elect, the
balance of the Payment Reserves then in Lender’s possession
shall be paid over to Borrower and no other party shall have any
right or claim thereto.

 

(c) Borrower hereby
knowingly, voluntarily, and intentionally stipulates, acknowledges
and agrees that the advancement of the funds from the Payment
Reserves as set forth herein is at Borrower’s direction and
is not the exercise by Lender of any right of set off or other
remedy upon an Event of Default. Borrower hereby waives all right
to withdraw funds from the Payment Reserves, and all rights to
receive disbursements from the Payment Reserves except in
compliance with the Loan Documents.

 

 

 

42

 

 

(d) During the
continuance of an Event of Default, Lender may, without notice or
demand (it being expressly agreed by Borrower that Borrower is
waiving any notice of acceleration and intent to accelerate) on
Borrower, at its option (i) withdraw any and all funds (including,
without limitation, interest) then remaining in the Payment
Reserves and apply the same, after deducting all reasonable costs
and expenses of safekeeping, collection, and delivery (including,
but not limited to, reasonable attorneys’ fees, costs, and
expenses) to the Loan Obligations in such manner as Lender shall
determine in its sole and absolute discretion, (ii) exercise any
and all rights and remedies of a secured party under the applicable
Uniform Commercial Code, and/or (iii) exercise any other remedies
available at law or in equity.

 

The
exercise of any or all of Lender’s right to initiate and
complete a judicial or non-judicial foreclosure under the Security
Instrument shall not preclude its exercise of its rights under this
Article
VII.

 

ARTICLE
VIII 

 

EVENTS
OF DEFAULT AND REMEDIES

 

8.1 Events of Default. The
occurrence of any one or more of the following shall constitute an
“Event of
Default” hereunder:

 

(a) Borrower’s
failure to pay the entire amount of the Debt and other Loan
Obligations on or before the Maturity Date; or

 

(b) Borrower’s
failure to pay any regularly scheduled monthly installment of
principal or interest (other than the amount payable on the
Maturity Date) that is payable on the first day of the month
pursuant to this Agreement or any Loan Document within 30 days of
such payment date; or

 

(c) The failure to pay
prior to delinquency, any Taxes, insurance premiums or payment of
money (other than as provided in Section 8.1(a) or
(b)) required
by the Note, this Agreement, the Security Instrument, or any of the
other Loan Documents (other than amounts owed to the Lender by
Borrower), within fifteen (15) days after notice from Lender;
or

 

(d) (i) Dissolution of
any Loan Party or (ii) any Transfer that is not a Permitted
Transfer or otherwise expressly permitted in the this Agreement,
the Security Instrument or any of the other Loan Documents);
or

 

(e) The failure of any
Loan Party to perform or keep or abide by any term, covenant or
term, covenant or condition of any of the Loan Documents (other
than as set forth in Section 8.1(a),
(b),
(c)
or (d) ), which
can be cured with the payment of money, within fifteen (15) days
after notice from Lender; or

 

(f) The failure of any
Loan Party to perform or keep or abide by any term, covenant or
term, covenant or condition of any of the Loan Documents (other
than as set forth in Section 8.1(a),
(b),
(c)
or (d)), that
cannot be cured with the payment of money (but is otherwise
susceptible of curing), within thirty (30) days after notice from
Lender, provided that if such failure cannot reasonably be cured
within such thirty (30) day period and Borrower shall have
commenced to cure within such thirty (30) day period and thereafter
diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require
Borrower in the exercise of due diligence to cure such failure, it
being agreed that no such extension shall be for a period in excess
of sixty (60) days; or

 

 

 

43

 

 

(g) Any Loan Party
shall (a) apply for, consent to, acquiesce in, or suffer the
appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (b) make a general
assignment for the benefit of creditors, (c) admit in writing its
inability, or be generally unable to pay its debts as they become
due or cease operations of its present business, (d) commence a
voluntary case under any state or federal bankruptcy laws (as now
or hereafter in effect), (e) be adjudicated a bankrupt or
insolvent, (f) file a petition seeking to take advantage of any
other law providing for the relief of debtors, or (g) acquiesce to,
or fail to have dismissed, within sixty (60) days, any petition
filed against it in any involuntary case under such bankruptcy
laws; or

 

(h) a judgment in
excess of $500,000.00 is hereafter awarded against any Loan Party
by any court of competent jurisdiction that remains unsatisfied or
otherwise in force and effect for a period of sixty (60) days after
the date of such award and the enforcement of said judgment against
the assets of any Loan Party has not been stayed by an order of a
court of competent jurisdiction; or

 

(i) if any written
representation or warranty made to the Lender by any Loan Party is
breached or is untrue in any material respect when made and not
cured within thirty (30) days of Borrower obtaining knowledge
thereof, unless with respect to the foregoing breach or untruth
(each, a “Misrepresentation”) (A) such
Misrepresentation was not knowingly or intentionally made, (B)
Lender has suffered no material losses on account thereof (or
Borrower shall have reimbursed Lender for the amount of such
losses) nor has the same resulted in a material adverse change, (C)
such Misrepresentation can be cured (meaning that the facts and
circumstances underlying the applicable Misrepresentation can be
changed such that the applicable representation or information as
made or delivered will be true and correct), and (D) such
Misrepresentation has been so cured within thirty (30) days after
the earlier of (1) the date on which Borrower first has actual
knowledge that such Misrepresentation exists, and (2) the date on
which Lender first notifies Borrower that such Misrepresentation
exists; or

 

(j) any failure to
furnish to Lender financial statements and other information
required by Section
4.6
when due; provided,
however, failure to furnish any financial statements and
other information required by pursuant to clauses (e)-(h) of
Section
4.6
shall not result in an Event of Default hereunder so long as such
information is delivered within twenty (20) days following
Lender’s request therefore; or

 

(k) failure to permit
an examination of books and records in accordance with Section 4.8
for five (5) Business Days (or two (2) Business Days in the case of
an emergency or if an Event of Default has occurred and is
continuing) after written request from Lender; or

 

(l) the Borrower shall
convey, transfer or otherwise divest itself of title to the
Property; or

 

(m) the Borrower or
Spence Rd shall encumber the Property or any other Collateral with
any Indebtedness other than the Loan Obligations without the prior
written approval of Lender which approval may be granted or
withheld for any reason or for no reason whatsoever in
Lender’s sole and absolute discretion; or

 

 

 

44

 

 

(n) if at any time
while the Loan remains outstanding, the revocation or suspension of
any Facility License held by Borrower, Operator or Spence Rd or any
other material Permit necessary to operate the Business, provided
that the foregoing shall not constitute an Event of Default for so
long as Borrower, Operator or Spence Rd, as the case may be, is
diligently and expeditiously proceeding to cure the such revocation
or suspension and no Material Adverse Effect shall have resulted
from such revocation or suspension; or

 

(o) fraud or material
and intentional misrepresentation or material and intentional
omission by any Loan Party, any of their respective officers,
directors, trustees, members, general partners or managers or any
Loan Party in connection with (1) the application for or creation
of Loan Obligations, (2) any financial statement, financial report,
certification, or other report or information required under this
Loan Agreement required to be provided to Lender during the term of
Loan Obligations; or

 

(p) if Borrower or any
Operator amends, terminates, assigns or otherwise modifies the
Lease Agreement in any material respect or any event of default
occurs under the terms of the Lease Agreement, or

 

(q) if Borrower incurs
additional Indebtedness without the prior written approval of the
Lender, or

 

(r) Omitted;
or

 

(s) if Borrower or
Operator or any lessee of the Property should be assessed fines or
penalties in excess of $500,000 in the aggregate in any calendar
year by any Governmental Authority with jurisdiction over the
Facility that is not satisfied within sixty (60) days after the
date of such fines or penalties; or

 

(t) the receipt by
Lender of a written notice from any Loan Party that was sent with
the intention of terminating, limiting or restricting the
indebtedness secured by the Security Instrument.

 

Notwithstanding
anything in this Section, all requirements of notice shall be
deemed eliminated if Lender is prevented from declaring an Event of
Default by bankruptcy or other applicable law. The cure period, if
any, shall then run from the occurrence of the event or condition
of Default rather than from the date of notice.

 

8.2 Remedies. During the
continuance of any one or more of the foregoing Events of Default,
Lender may, at its option:

 

(a) If such Event(s) of
Default continue for thirty (30) calendar days, declare the entire
unpaid principal and accrued but unpaid interest of the Loan
Obligations to be, and the same shall thereupon become, immediately
due and payable, without presentment, protest or further demand or
notice of any kind (including, without limitation, notice of
acceleration and notice of intent to accelerate), all of which are
hereby expressly waived; provided, however, that immediately upon
an Event of Default arising under Section 8.1(g), the Loan
Obligations shall automatically and immediately be due and payable
in full; and/or

 

 

 

45

 

 

(b) Proceed to protect
and enforce its rights by action at law (including, without
limitation, bringing suit to reduce any claim to judgment), suit in
equity and other appropriate proceedings including, without
limitation, for specific performance of any covenant or condition
contained in this Agreement; and/or

 

(c) Exercise any and
all rights and remedies afforded by the laws of the United States,
the states in which the Property or other Collateral is located or
any other appropriate jurisdiction as may be available for the
collection of debts and enforcement of covenants and conditions
such as those contained in this Agreement and the Loan Documents;
and/or

 

(d) Exercise the rights
and remedies of setoff and/or banker’s lien against the
interest of Borrower in and to every account and other property of
Borrower which is in the possession of Lender or any Person who
then owns a participating interest in the Loan, to the extent of
the full amount of the Loan; and/or

 

(e) Exercise its rights
and remedies pursuant to any of the Loan Documents.

 

Any
failure of Lender to make any election of remedies following an
Event of Default shall not constitute a waiver of Lender’s
right to make the election in the event of any subsequent Event of
Default. Borrower: (A) waives all rights and defenses arising out
of an election of remedies by Lender even though that election of
remedies, such as non-judicial foreclosure with respect to security
for Borrower’s obligations, has destroyed each of their
rights of subrogation and reimbursement against the other by the
operation of Section 580(d) of the California Code of Civil
Procedure or otherwise; and (B) waives any right to a fair value
hearing or similar proceeding following a nonjudicial foreclosure
of the Obligations, whether arising under California Code of Civil
Procedure Section 580a or otherwise

 

8.3 Costs of Collection and
Enforcement. Borrower agrees to pay (a) all reasonable
attorneys’ fees and other out-of-pocket costs and expenses of
any nature incurred by Lender in connection with the enforcement of
Lender’s rights and remedies under the Loan Documents,
including reasonable attorneys’ fees incurred by Lender; (b)
all reasonable attorneys’ fees, as determined by the court,
and all other out-of-pocket costs, expenses and fees incurred by
Lender in connection with any suit or proceeding instituted to
collect the Loan Obligations or to enforce Lender’s and each
Lender’s rights and remedies under the Loan Documents,
whether or not such suit or proceeding is prosecuted to judgment or
conclusion; (c) all reasonable attorneys’ fees and other
out-of-pocket costs and expenses incurred by Lender in connection
with any bankruptcy, insolvency or reorganization proceeding or
receivership involving Borrower or any affiliate of Borrower,
including any guarantor, and including all reasonable
attorneys’ fees incurred in making any appearances in any
such proceeding or in seeking relief from any stay or injunction
issued in or arising out of any such proceeding; and (d) all
reasonable attorneys’ fees and other out-of-pocket costs and
expenses incurred in any appellate proceedings and any
post-judgment proceedings to collect or enforce the
judgment.

 

 

 

46

 

 

8.4 Offsets. No indebtedness shall
be deemed to have been offset or shall be offset or compensated by
all or part of any claim, cause of action, counterclaim or
cross-claim, whether liquidated or unliquidated, which Borrower now
or hereafter may have or may claim to have against Lender.
Furthermore, in respect to the present indebtedness of, or any
future indebtedness incurred by, Borrower to Lender, Borrower
waives, to the fullest extent permitted by law, the benefits of any
applicable law, regulation, or procedure which substantially
provides that, where cross-demands for money have existed between
persons at any point in time when neither demand was barred by the
applicable statute of limitations, and an action is thereafter
commenced by one such person, the other may assert in his answer
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 answer
be barred by the applicable statute of limitations.

 

ARTICLE
IX 

 

MISCELLANEOUS

 

9.1 Waiver.

 

(a) No remedy conferred
upon, or reserved to, Lender in this Agreement or any of the other
Loan Documents is intended to be exclusive of any other remedy or
remedies, and each and every remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or
hereafter existing in law or in equity. Exercise of or omission to
exercise any right of Lender shall not affect any subsequent right
of Lender to exercise the same. No course of dealing between
Borrower and Lender or any delay on Lender’s part in
exercising any rights shall operate as a waiver of any of
Lender’s rights. No waiver of any Default under this
Agreement or any of the other Loan Documents shall extend to or
shall affect any subsequent or other then existing Default or shall
impair any rights, remedies or powers of Lender. If Borrower
consists of more than one person or entity, each such person or
entity shall be jointly and severally liable for the performance of
each of the obligations of Borrower to Lender hereunder. rights and
defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d or 726 of the California Code
of Civil Procedure. Each Borrower expressly waives any right to
receive notice of any judicial or nonjudicial foreclosure or sale
of any real property collateral provided by the other Borrowers to
secure the Obligations and failure to receive any such notice shall
not impair or affect such Borrower’s obligations hereunder or
the enforceability of this Agreement or the other Loan Documents or
any liens created or granted hereby or thereby.

 

(b) Borrower hereby
waives all of its rights under California Civil Code Section 2822,
which provides as follows: “(a) The acceptance, by a
creditor, of anything in partial satisfaction of an obligation,
reduces the obligation of a surety thereof, in the same measure as
that of the principal, but does not otherwise affect it. However,
if the surety is liable upon only a portion of an obligation and
the principal provides partial satisfaction of the obligation, the
principal may designate the portion of the obligation that is to be
satisfied; and (b) For purposes of this Section and Section 2819,
an agreement by a creditor to accept from the principal debtor a
sum less than the balance owed on the original obligation, without
the prior consent of the surety and without any other change to the
underlying agreement between the creditor and principal debtor,
shall not exonerate the surety for the lesser sum agreed upon by
the creditor and principal debtor.

 

 

 

47

 

 

9.2 Costs and Expenses. Borrower
will bear all taxes (other than Excluded Taxes as defined below),
fees and expenses (including actual reasonable attorneys’
fees and expenses of counsel for Lender) in connection with, the
preparation of this Agreement and the other Loan Documents
(including any amendments hereafter made), the administration of
the Loan by Lender and in connection with any modifications thereto
and the recording of any of the Loan Documents. Borrower will bear
the reasonable fees and expenses of administration of the Loan by
Lender that are allocated by Lender on a consistent basis among all
of its portfolio loans, provided that Borrower shall not be
required to bear the cost of any general & administrative
expenses. If, at any time, an Event of Default occurs and is
continuing or Lender becomes a party to any suit or proceeding in
order to protect its interests or priority in any collateral for
any of the Loan Obligations or its rights under this Agreement or
any of the Loan Documents, or if Lender is made a party to any suit
or proceeding by virtue of the Loan, this Agreement or any
Collateral and as a result of any of the foregoing (other than as a
consequence of a dispute with another lender or participant with
respect to the Loan Obligations or another third party (unless such
dispute is occasioned by Borrower’s breach of this Agreement
or any of the other Loan Documents)), Lender employs counsel to
advise or provide other representation with respect to this
Agreement, or to collect the balance of the Loan Obligations, or to
take any action in or with respect to any suit or proceeding
relating to this Agreement, any of the other Loan Documents, any
Collateral, Borrower, or to protect, collect, or liquidate any of
the security for the Loan Obligations, or attempt to enforce any
security interest or lien granted to Lender by any of the Loan
Documents, then in any such events, all of the actual reasonable
attorney’s fees arising from such services, including
attorneys’ fees for preparation of litigation and in any
appellate or bankruptcy proceedings, and any expenses, costs and
charges relating thereto shall constitute additional obligations of
Borrower to Lender payable on demand of Lender. Without limiting
the foregoing, Borrower has undertaken the obligation for payment
of, and shall pay, all recording and filing fees, revenue or
documentary stamps or taxes, intangibles taxes, and other taxes,
expenses and charges payable in connection with this Agreement, any
of the Loan Documents, the Loan Obligations, or the filing of any
financing statements or other instruments required to effectuate
the purposes of this Agreement (other than Taxes that are (a)
imposed on or measured by net income (however denominated),
franchise Taxes. or branch profits tax, (b) withholding tax, (c)
attributable to a failure to comply with U.S. tax law or (d)
withholding tax under the Foreign Account Tax Compliance Act
(FATCA) (collectively, “Excluded Taxes”)), and should
Borrower fail to do so, Borrower agrees to reimburse Lender for the
amounts paid by Lender, together with penalties or interest, if
any, incurred by Lender as a result of underpayment or nonpayment.
Such amounts shall constitute a portion of the Loan Obligations,
shall be secured by the Security Instrument and, to the extent not
paid within 15 days of written demand therefor by Lender, shall
bear interest at the Default Rate from the date advanced until
repaid.

 

9.3 Performance of Lender. At its
option, upon Borrower’s failure to do so after five (5) days'
prior written notice, Lender may make any payment or do any act on
Borrower’s behalf that Borrower or others are required to do
to remain in compliance with this Agreement or any of the other
Loan Documents, and Borrower agrees to reimburse Lender, on demand,
for any payment made or expense incurred by Lender pursuant to the
foregoing authorization, including, without limitation, reasonable
attorneys’ fees, and until so repaid any sums advanced by
Lender shall constitute a portion of the Loan Obligations, shall be
secured by the Security Instrument and shall, to the extent not
paid within 15 days of written demand therefor by Lender, bear
interest at the Default Rate from the date advanced until
repaid.

 

 

 

48

 

 

9.4 Indemnification. Borrower
shall, at its sole cost and expense, protect, defend, indemnify and
hold harmless the Indemnified Parties (as defined below) from and
against any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations,
debts, damages (other than punitive, consequential, indirect or
special damages except to the extent actually awarded in favor of a
third party), losses, costs, expenses, diminutions in value (but
only to the extent actually realized by an Indemnified Party in
connection with a sale of the Property by foreclosure, deed in lieu
of foreclosure or other similar exercise of remedies under the Loan
Documents or any sale of the Property thereafter), fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid
in settlement, of whatever kind or nature (including but not
limited to reasonable attorneys’ fees and other costs of
defense) imposed upon or incurred by or asserted against Lender by
reason of: (a) omitted; (b) any amendment to, or
restructuring of, the Loan Obligations and/or any of the Loan
Documents; (c) any and all lawful action that may be taken by
Lender in connection with the enforcement of the provisions of the
Security Instrument, or the Note or any of the other Loan
Documents, whether or not suit is filed in connection with same, or
in connection with Borrower or Operator and/or any partner, joint
venturer, member or shareholder thereof becoming a party to a
voluntary or involuntary federal or state bankruptcy, insolvency or
similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about
the Property, the Improvements or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (e) any use, nonuse or condition in,
on or about the Property, the Improvements or any part thereof or
on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (f) any failure on the part of
Borrower or Operator to perform or comply with any of the terms of
this Agreement or any of the other Loan Documents; (g) any
claims by any broker, person or entity claiming to have
participated in arranging the making of the Loan evidenced by the
Note (other than any such person engaged by Lender); (h) any
failure of the Property to be in compliance with any applicable
laws; (i) any and all claims and demands whatsoever which may
be asserted against Lender by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms,
covenants, or agreements contained in a Lease or any replacement or
renewal thereof or substitution therefore; (j) performance of
any labor or services or the furnishing of any materials or other
property with respect to the Property, the Improvements or any part
thereof; (k) the failure of any person to file timely with the
Internal Revenue Service an accurate Form 1099-b, statement for
recipients of proceeds from real estate, broker and barter exchange
transactions, which may be required in connection with the Security
Instrument, or to supply a copy thereof in a timely fashion to the
recipient of the proceeds of the transaction in connection with
which the Loan is made; (l) any misrepresentation made to
Lender in this Agreement or in any of the other Loan Documents;
(m) any tax on the making and/or recording of any of the
Security Instrument, the Note or any of the other Loan Documents,
other than Excluded Taxes; (n) the violation of any
requirements of the Employee Retirement Income Security Act of
1974, as amended; (o) any fines or penalties assessed or any
corrective costs incurred by Lender if the Facility or any part of
the Property is determined to be in violation of any covenants,
restrictions of record, or any applicable laws, ordinances, rules
or regulations; or (p) the enforcement by any of the
Indemnified Parties of the provisions of this Section 9.4. The
foregoing to the contrary notwithstanding, Borrower shall not have
any obligation to indemnify an Indemnified Party under this Section
9.4 with respect to any
liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of
such Indemnified Person. Any amounts payable to Lender by reason of
the application of this Section 9.4 shall become immediately due
and payable, and shall constitute a portion of the Loan
Obligations, shall be secured by any of the Security Instrument,
and, to the extent not paid within 15 days of written demand
therefor by Lender, shall accrue interest. The obligations and
liabilities of Borrower under this Section 9.4 shall
survive any termination, satisfaction, assignment, entry of a
judgment of foreclosure or exercise of a power of sale or delivery
of a deed in lieu of foreclosure of the Security Instrument. For
purposes of this Section 9.4, the term
“Indemnified Parties” means Lender and any Person who
is or will have been involved in the origination of the Loan, any
Person who is or will have been involved in the servicing of the
Loan, any Person in whose name the encumbrance created by any of
the Security Instrument is or will have been recorded, any Person
who may hold or acquire or will have held a full or partial
interest in the Loan (including, without limitation, any investor
in any securities backed in whole or in part by the Loan) as well
as the respective directors, officers, shareholder, partners,
members, employees, agents, servants, representatives, contractors,
subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including, without
limitation, any other Person who holds or acquires or will have
held a participation or other full or partial interest in the Loan
or the Property, whether during the term of the Security Instrument
or as a part of or following a foreclosure of the Loan and
including, without limitation, any successors by merger,
consolidation or acquisition of all or a substantial portion of
Lender’s assets and business).

 

 

 

49

 

 

9.5 Headings. The headings of the
Sections of this Agreement are for convenience of reference only,
are not to be considered a part hereof, and shall not limit or
otherwise affect any of the terms hereof.

 

9.6 Survival of Covenants. All
covenants, agreements, representations and warranties made herein
and in certificates or reports delivered pursuant hereto shall be
deemed to have been material and relied on by Lender,
notwithstanding any investigation made by or on behalf of Lender,
and shall survive the execution and delivery to Lender of the Note
and this Agreement.

 

9.7 Notices, etc. Any notice or
other communication required or permitted to be given by this
Agreement or the other Loan Documents or by applicable law shall be
in writing and shall be deemed received: (a) on the date
delivered, if sent by hand delivery (to the person or department if
one is specified below) with receipt acknowledged by the recipient
thereof; (b) three (3) Business Days following the date
deposited in U.S. mail, postage prepaid, certified or registered,
with return receipt requested; or (c) one (1) Business Day
following the date deposited with Federal Express or other national
overnight carrier, and in each case addressed as
follows:

 

	

If to
Borrower:

	

Lowell
SR LLC

c/o
Indus Holding Company

20
Quail Run Circle

Salinas,
California 93907

Attention:
Brian Shure

Email:
brian.shure@lowellfarms.com

	
 

	
 

	

with a
copy to:

	

Akerman
LLP

1251
Avenue of the Americas, 37th Floor

New
York, New York 10020

Attention:
Kenneth G. Alberstadt

Email:
kenneth.alberstadt@akerman.com

	

 

If to Lender:

 

 

	

 

Viridescent
Realty Trust, Inc.

c/o
Viridescent Capital Partners

10242
Greenhouse Road

Building
1201

Cypress,
Texas 77433

Attention:
Dante Domenichelli

Email:
DDomenichelli@viridescentcapital.com

	
 

	
 

	

with a
copy to:

	

Seyfarth
Shaw LLP

Seaport
East

Two
Seaport Lane, Suite 300

Boston,
Massachusetts 02210

Attention:
Robert Edgerton, Esq.

Email:
redgerton@seyfarth.com

 

 

 

50

 

 

Any
party may change its or its attorney address to another single
address by notice given as herein provided, except any change of
address notice must be actually received in order to be
effective.

 

9.8 Benefits and Information
Sharing. All of the terms and provisions of this Agreement
shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns. No Person other than Borrower
and Lender shall be entitled to rely upon this Agreement or be
entitled to the benefits of this Agreement. Lender may share with
any Affiliates, any and all financial and other information about
the Loan Parties obtained by Lender in connection with the Loan,
and the Loan Parties hereby authorizes such information
sharing.

 

9.9 Supersedes Prior Agreements;
Counterparts. This Agreement and the other Loan Documents
referred to herein supersede and incorporate all representations,
promises, and statements, oral or written, made by Borrower, Lender
in connection with the Loan. This Agreement may not be varied,
altered, or amended except by a written instrument executed by an
authorized officer of Borrower and Lender. This Agreement may be
executed in any number of counterparts, each of which, when
executed and delivered, shall be deemed an original, but such
counterparts shall together constitute one and the same instrument.
Delivery of an executed signature page to this Agreement by
facsimile or other electronic transmission (including in pdf
format) will be effective as delivery of a manually executed
counterpart to this Agreement. This Agreement and the other Loan
Documents represent the final agreement between the parties with
respect to the subject matter hereof and thereof. There are no
unwritten oral agreements between the parties.

 

9.10 Loan
Agreement Governs. The Loan is governed by terms and
provisions set forth in this Agreement and the other Loan Documents
and in the event of any irreconcilable conflict between the terms
of the other Loan Documents and the terms of this Agreement, the
terms of this Agreement shall control; provided, however, in the
event there is any apparent conflict between any particular term or
provision which appears in both this Agreement and the other Loan
Documents and it is possible and reasonable for the terms of both
this Agreement and the Loan Documents to be performed or complied
with then (except with respect to the Maturity Date or any
extension thereof, in which case this Agreement shall be
controlling) notwithstanding the foregoing both the terms of this
Agreement and the other Loan Documents shall be performed and
complied with.

 

 

 

51

 

 

9.11 CONTROLLING
LAW. THE PARTIES HERETO AGREE THAT THE VALIDITY,
INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA AND THE PARTIES HERETO SUBMIT (AND WAIVE ALL
RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL JURISDICTION IN THE
STATE OF CALIFORNIA, FOR THE ENFORCEMENT OF ANY AND ALL OBLIGATIONS
UNDER THE LOAN DOCUMENTS EXCEPT THAT IF ANY SUCH ACTION OR
PROCEEDING ARISES UNDER THE CONSTITUTION, LAWS OR TREATIES OF THE
UNITED STATES OF AMERICA, OR IF THERE IS A DIVERSITY OF CITIZENSHIP
BETWEEN THE PARTIES THERETO, SO THAT IT IS TO BE BROUGHT IN A
UNITED STATES DISTRICT COURT, IT SHALL BE BROUGHT IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OR
ANY SUCCESSOR FEDERAL COURT HAVING ORIGINAL
JURISDICTION.

 

9.12 WAIVER
OF JURY TRIAL. BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY
HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT OR THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR
PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF LENDER
AND/OR BORROWER WITH RESPECT TO THE LOAN DOCUMENTS OR IN CONNECTION
WITH THIS AGREEMENT OR THE EXERCISE OF ANY PARTY’S RIGHTS AND
REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE
RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. BORROWER AGREES THAT LENDER MAY FILE A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF BORROWER IRREVOCABLY
TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF LENDER TO
MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED
HEREIN) AMONG BORROWER, LENDER SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.

 

9.13 Intentionally
Omitted.

 

9.14 Patriot
Act Compliance.

 

(a) Borrower will use
its good faith and commercially reasonable efforts to comply with
the Patriot Act (as defined below) and all applicable requirements
of governmental authorities having jurisdiction of the Borrower and
the Property, including those relating to money laundering and
terrorism, in each case to the extent constituting Limited
Governmental Requirements. In the event that the Borrower fails to
comply with such Limited Governmental Requirements, then Lender
may, at its option, cause the Borrower to comply therewith and any
and all reasonable costs and expenses incurred by Lender in
connection therewith shall be secured by the Security Instrument
and the other Loan Documents and shall be immediately due and
payable. For purposes hereof, the term “Patriot Act” means the
Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act
of 2001, as the same may be amended from time to time, and
corresponding provisions of future laws.

 

 

 

52

 

 

(b) Neither the
Borrower nor any partner, member, shareholder or other constituent
(each a “Constituent
of Borrower”) or a partner, member or shareholder of a
Constituent of Borrower nor any owner of a direct or indirect
interest in the Borrower (i) is listed on any Government Lists (as
defined below), (ii) is a person who has been determined by
competent authority to be subject to the prohibitions contained in
Presidential Executive Order No. 13224 (Sept. 23, 2001) or any
other similar prohibitions contained in the rules and regulations
of OFAC (as defined below) or in any enabling legislation or other
Presidential Executive Orders in respect thereof, (iii) has been
previously indicted for or convicted of any felony involving a
crime or crimes of moral turpitude or for any Patriot Act Offense
(as defined below), or (iv) is currently under investigation by any
governmental authority for alleged criminal activity. For purposes
hereof, the term “Patriot Act Offense” means any
violation of the criminal laws of the United States of America or
of any of the several states, or that would be a criminal violation
if committed within the jurisdiction of the United States of
America or any of the several states, relating to terrorism or the
laundering of monetary instruments, including any offense under (i)
the criminal laws against terrorism; (ii) the criminal laws against
money laundering, (iii) the Bank Secrecy Act, as amended, (iv) the
Money Laundering Control Act of 1986, as amended, or the (v)
Patriot Act. “Patriot Act Offense” also includes the
crimes of conspiracy to commit, or aiding and abetting another to
commit, a Patriot Act Offense. For purposes hereof, the term
“Government Lists” means (i) the Specially Designated
Nationals and Blocked Persons Lists maintained by Office of Foreign
Assets Control (“OFAC”), (ii) any other list of
terrorists, terrorist organizations or narcotics traffickers
maintained pursuant to any of the Rules and Regulations of OFAC
that Lender notified Borrower in writing is now included in
“Governmental Lists”, or (iii) any similar lists
maintained by the United States Department of State, the United
States Department of Commerce or any other government authority or
pursuant to any Executive Order of the President of the United
States of America that Lender notified Borrower in writing is now
included in “Governmental Lists”.

 

9.15 Secondary
Market Transactions.

 

(a) Right to Sell. Lender shall
have the unrestricted right at any time or from time to time, and
without Borrower’s or any other Loan Party’s consent,
to assign all or any portion of its rights and obligations
hereunder to one or more banks or other financial institutions
domiciled in the United States of America (each, an
“Assignee”), and Borrower
and each other Loan Party agrees that it shall execute, or cause to
be executed, such documents, including without limitation,
amendments to this Agreement and to any other documents,
instruments and agreements executed in connection herewith as
Lender shall deem necessary to effect the foregoing. In addition,
at the request of Lender and any such Assignee, Borrower shall
issue one or more new promissory notes, as applicable, to any such
Assignee and, if Lender has retained any of its rights and
obligations hereunder following such assignment, to Lender, which
new promissory notes shall be issued in replacement of, but not in
discharge of, the liability evidenced by the Note held by Lender
prior to such assignment and shall reflect the amount of the
respective commitments and loans held by such Assignee and Lender
after giving effect to such assignment. Upon the execution and
delivery of appropriate assignment documentation, amendments and
any other documentation required by Lender in connection with such
assignment, and the payment by Assignee of the purchase price
agreed to by Lender, such Assignee shall be a party to this
Agreement and shall have all of the rights and obligations of
Lender hereunder (and under any and all other guaranties,
documents, instruments and agreements executed in connection
herewith) to the extent that such rights and obligations have been
assigned by Lender pursuant to the assignment documentation between
Lender and such Assignee, and Lender shall be released from its
obligations hereunder and thereunder to a corresponding extent;
provided, however, no
assignment, sale, negotiation, pledge, hypothecation or other
transfer of any part of any Lender’s interest in and to the
Loan shall be effective until such Lender shall have provided
Borrower with written notice of such transfer.

 

 

 

53

 

 

(b) Right to Participate. Lender
reserves the right to transfer and assign the Loan, or portion
thereof, or participation interests therein, but no such transfer
or sale of participation interests shall affect or limit the rights
and obligations of Lender, Borrower, Operator and Guarantor as set
forth in the Loan Agreement. Lender may disclose to, or share with,
any actual or prospective transferee or participant all
information, including, but not limited to, financial information,
in Lender’s possession regarding the Loan, Borrower, any
other Loan Party, or the Facility.

 

9.16 Construction.
Captions in this Agreement are included solely for convenience and
are not to be referred to in construing or interpreting this
Agreement. Defined terms may be used in the singular or the plural,
as the context requires. All references to time of day mean the
then applicable time in New York, New York, unless otherwise
expressly provided. Each reference in this Agreement to a
particular section is a reference to a section of this Agreement
unless otherwise expressly indicated. The words
“include,” “includes” and
“including” are deemed to be followed by the phrase
“without limitation”. Unless the context in which it is
used otherwise clearly requires, the word “or” has the
inclusive meaning represented by the phrase “and/or”.
Unless the context in which it is used otherwise clearly requires,
all references to days, weeks and months mean calendar days, weeks
and months. If any portion of this Agreement is declared invalid,
illegal or unenforceable by any court of competent jurisdiction,
such portion shall be deemed severed from this Agreement and the
remaining portions shall continue in full force and effect. Time is
strictly of the essence of each and every provision of this
Agreement. This Agreement shall be governed by and interpreted and
enforced under the laws of the United States and the regulations,
rules, orders, requirements and policies of any federal
departments, offices, bureaus, boards and other agencies,
instrumentalities and authorities that have jurisdiction over
Lender or this Agreement to the extent that Lender or this
Agreement is subject to or governed by such federal laws,
regulations, rules, orders, requirements and policies.

 

9.17 No
Partnership. Borrower acknowledges and agrees that the
provisions of this Agreement shall not create a partnership, joint
venture or any other relationship among the Borrower, Lender except
the relationship of borrower and lender. Accordingly, nothing
contained in this Agreement or in the other Loan Documents shall
obligate or be deemed to obligate Lender to pay any costs, fees or
expenses of the Property, or to reimburse Borrower for any such
costs or otherwise. In addition, nothing in this Agreement or in
any of the other Loan Documents shall be deemed to imply that
Lender is an owner or operator of the Property or any business or
businesses located thereon or in connection therewith and Lender
shall not be deemed to control or review Borrower’s ownership
or operation of the Property, or any business or businesses located
thereon or in connection therewith.

 

9.18 Financing
Statements. Borrower agrees that Lender may file UCC-1
Financing Statements with the following description of the
Collateral or a substantially similar description: “ALL
ASSETS OF THE DEBTOR, WHEREVER LOCATED, WHETHER NOW OWNED OR
EXISTING OR HEREAFTER ACQUIRED OR ARISING, TOGETHER WITH ALL
PROCEEDS THEREOF.”

 

 

 

54

 

 

9.19 Press
Releases. Borrower hereby consents to all news releases,
publicity or advertising by Lender, through any media intended to
reach the general public, which refers to the Loan Documents or
financing evidenced by the Loan Documents, to the Borrower or any
of its Affiliates.

 

9.20 Change
in Law. If any change in law, request, rule, guideline or
directive of any Governmental Authority enacted after the date
hereof to the extend binding on Lender (whether or not having the
force of law), or required compliance therewith by such Lender (or
any corporation controlling such Lender) (collectively, a
“Change in
Law”), has the effect of increasing such
Lender’s cost of making, issuing, funding or maintaining any
extension of credit hereunder or committing to do any of the
foregoing, or increasing the amount of capital or liquidity
required or expected to be maintained by such Lender (or such
corporation) or reducing the rate of return on capital (taking into
legal and regulatory obligations relating to capital adequacy and
liquidity) as a consequence of its obligations under any Loan
Document, then, in each case, the Borrower agrees, upon demand by
such Lender (which demand shall be accompanied by a written
statement setting forth the basis for such demand and a statement
as to the method of the calculation of the amount thereof in
reasonable detail), to pay to such Lender additional amounts
sufficient to compensate such Lender for such increased costs,
increased capital or liquidity requirements or reduced rate of
return, as the case may be, provided that no such payment of
additional amounts shall be required with as a result of any Change
in Law with respect to Excluded Taxes.

 

9.21 Applicability
of Cannabis Laws. Borrower and Lender hereby acknowledge (x)
that the production, sale, manufacture, possession, and use of
cannabis is illegal under Federal Cannabis Laws and other United
States federal laws, rules, and regulations, including (a) the
investment in a company engaging in such activities, (b) making a
loan to a company engaging in such activities, and (c) entering
into a transaction with a company engaging such activities, and (y)
that some or all of the Loan Documents and some or all of the
transactions contemplated thereby may violate or be in violation of
Federal Cannabis Laws other United States federal laws, rules, and
regulations concerning marijuana or cannabis. Given the foregoing
and notwithstanding Federal Cannabis Laws and other United States
federal laws, rules, and regulations, the Parties hereby (i)
expressly waive any defense to the enforcement of the terms and
conditions of this Agreement and the other Loan Documents based
upon non-conformance with or violation of applicable laws relating
to cannabis and the cannabis industry and (ii) no such violations
of Federal Cannabis Laws or other United States federal laws,
rules, and regulations shall render this Agreement, the other Loan
Documents, or any of the terms and conditions thereof null, void,
or otherwise unenforceable, to the extent permitted by applicable
legal requirements.

 

 

 

SIGNATURES AND ACKNOWLEDGEMENTS ON

FOLLOWING PAGES

 

 

 

55

 

IN WITNESS WHEREOF, the Borrower and
Lender have caused this Agreement to be properly executed, by their
respective duly authorized representatives, as of the date first
above written.

 

	
 

	

BORROWER:

	
 

	
 

	
 

	

LOWELL
SR LLC

 

 

By: /s/
Mark Ainsworth

Name:
Mark Ainsworth

Title:
Chief Executive Officer

 

 

	
 

	
 

	
 

	
 

 

56

 

	
 

	
 

	
 

	

LENDER:

 

VIRIDESCENT
REALTY TRUST, INC.

 

 

By: /s/
Dante Domenichelli

Name:
Dante Domenichelli

Title:
Chief Operating Officer

 

 

	
 

	
 

 

 

 

 

57

 

EXHIBIT A

 

LEGAL DESCRIPTION

 

 

The
land situated in an unincorporated area known as Salinas, the
County of Monterey, State of California, and as described as
follows:

 

Parcel
I:

 

Parcel
1, in the Unincorporated Area in the County of Monterey, State of
California, as shown and designated on that certain Parcel Map
filed March 16, 1977 in Volume 11 of Parcel Maps, at Page 85,
records of Monterey County.

 

Excepting
therefrom that mobile home located thereon.

 

Parcel
II:

 

A
non-exclusive right of way, for road and utility purposes, over the
Northeasterly 30 feet of the 60 foot right of way along the
Northeasterly line of Parcel 1, as shown on said map referred to
hereinabove, adjacent to said Parcel 1.

 

Parcel
III:

 

A
non-exclusive right of way 60 feet wide, for drainage purposes,
over and across the 60 foot right of way along the Northeasterly
line of Parcel 2, as shown on said map referred to hereinabove, and
extending from the most Northerly corner of Parcel 1 to the most
Northerly corner of Parcel 2, as said right of way and Parcels are
shown on the Parcel Map referred to in Parcel I above.

 

Parcel
IV:

 

A
non-exclusive right of way 60 feet wide, for drainage purposes,
over and across the 60 foot right of way along the Northeasterly
line of Parcel B, and extending from the most Northerly corner of
Parcel A to the most Northerly of Parcel B, as said right of way
and parcels are shown on that certain Parcel Map filed February 29,
1975 in Volume 8 of Parcel Maps, at Page 62, Records of Monterey
County.

 

Parcel
V:

 

A
non-exclusive right of way 60 feet wide, for drainage purposes,
along a Northwesterly and Northeasterly line of Parcel B, as said
Parcel is shown on the Parcel Maps recorded February 28, 1975 in
Volume 8 of Parcel Maps, at Page 62, the centerline of said right
of way beginning at the most Easterly North corner of said Parcel
B, thence S. 52’ 45’ West, along said Northwesterly Lot
Line, 490.90 feet; thence N. 66° 57’ 35’, along
said Northeasterly Lot Line, 621.71 feet to the most Westerly North
corner of said Parcel B

 

 

58

 

EXHIBIT B

 

POST CLOSING REPAIRS

 

 

 

None.

 

 

59

 

EXHIBIT C

 

AMORTIZATION SCHEDULE

 

(See
attached)

 

 

60

 

 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

Close Date

	

6/29/2021

	
 

	
 

	
 

	
 

	
 

	

Next payment Date

	

7/1/2021

	
 

	
 

	
 

	
 

	
 

	

Loan Amount

	

$9,360,000

	
 

	
 

	
 

	
 

	
 

	

Loan Interest Rate

	

12.50%

	
 

	
 

	
 

	
 

	
 

	

Balloon

	

$4,500,000

	
 

	
 

	
 

	
 

	
 

	

Amort (m)

	

120

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

Days

	

P

	

Date

	

Balance

	

Principal

	

Interest

	

Debt Service

	
 

	

0

	

6/29/2021

	

$9,360,000

	
 

	
 

	
 

	

2

	

1

	

7/1/2021

	

$9,360,000

	
 

	

$6,500.00

	

$6,500.00

	

31

	

2

	

8/1/2021

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

31

	

3

	

9/1/2021

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

30

	

4

	

10/1/2021

	

$9,360,000

	
 

	

$97,500.00

	

$97,500.00

	

31

	

5

	

11/1/2021

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

30

	

6

	

12/1/2021

	

$9,360,000

	
 

	

$97,500.00

	

$97,500.00

	

31

	

7

	

1/1/2022

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

31

	

8

	

2/1/2022

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

28

	

9

	

3/1/2022

	

$9,360,000

	
 

	

$91,000.00

	

$91,000.00

	

31

	

10

	

4/1/2022

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

30

	

11

	

5/1/2022

	

$9,360,000

	
 

	

$97,500.00

	

$97,500.00

	

31

	

12

	

6/1/2022

	

$9,360,000

	
 

	

$100,750.00

	

$100,750.00

	

30

	

13

	

7/1/2022

	

$9,335,453

	
 

	

$97,500.00

	

$97,500.00

	

31

	

14

	

8/1/2022

	

$9,310,905

	

$24,547.30

	

$100,485.78

	

$125,033.07

	

31

	

15

	

9/1/2022

	

$9,286,102

	

$24,803.00

	

$100,221.55

	

$125,024.55

	

30

	

16

	

10/1/2022

	

$9,261,041

	

$25,061.36

	

$96,730.23

	

$121,791.60

	

31

	

17

	

11/1/2022

	

$9,235,719

	

$25,322.42

	

$99,684.82

	

$125,007.24

	

30

	

18

	

12/1/2022

	

$9,210,132

	

$25,586.19

	

$96,205.40

	

$121,791.60

	

31

	

19

	

1/1/2023

	

$9,184,280

	

$25,852.72

	

$99,136.84

	

$124,989.56

	

31

	

20

	

2/1/2023

	

$9,158,158

	

$26,122.02

	

$98,858.57

	

$124,980.58

	

28

	

21

	

3/1/2023

	

$9,131,764

	

$26,394.12

	

$89,037.64

	

$115,431.77

	

31

	

22

	

4/1/2023

	

$9,105,095

	

$26,669.06

	

$98,293.29

	

$124,962.35

	

30

	

23

	

5/1/2023

	

$9,078,148

	

$26,946.86

	

$94,844.73

	

$121,791.60

	

31

	

24

	

6/1/2023

	

$9,050,920

	

$27,227.56

	

$97,716.17

	

$124,943.73

	

30

	

25

	

7/1/2023

	

$9,023,409

	

$27,511.18

	

$94,280.42

	

$121,791.60

	

31

	

26

	

8/1/2023

	

$8,995,611

	

$27,797.75

	

$97,126.97

	

$124,924.73

	

31

	

27

	

9/1/2023

	

$8,967,524

	

$28,087.31

	

$96,827.76

	

$124,915.07

	

30

	

28

	

10/1/2023

	

$8,939,144

	

$28,379.89

	

$93,411.71

	

$121,791.60

	

31

	

29

	

11/1/2023

	

$8,910,468

	

$28,675.51

	

$96,219.95

	

$124,895.47

	

30

	

30

	

12/1/2023

	

$8,881,494

	

$28,974.22

	

$92,817.38

	

$121,791.60

	

31

	

31

	

1/1/2024

	

$8,852,218

	

$29,276.03

	

$95,599.42

	

$124,875.45

	

31

	

32

	

2/1/2024

	

$8,822,637

	

$29,580.99

	

$95,284.29

	

$124,865.28

	

29

	

33

	

3/1/2024

	

$8,792,748

	

$29,889.13

	

$88,839.06

	

$118,728.18

	

31

	

34

	

4/1/2024

	

$8,762,548

	

$30,200.47

	

$94,644.16

	

$124,844.63

	

30

	

35

	

5/1/2024

	

$8,732,033

	

$30,515.06

	

$91,276.54

	

$121,791.60

	

31

	

36

	

6/1/2024

	

$8,701,200

	

$30,832.92

	

$93,990.63

	

$124,823.55

	

30

	

37

	

7/1/2024

	

$8,670,046

	

$31,154.10

	

$90,637.50

	

$121,791.60

	

31

	

38

	

8/1/2024

	

$8,638,567

	

$31,478.62

	

$93,323.41

	

$124,802.03

	

31

	

39

	

9/1/2024

	

$8,606,760

	

$31,806.53

	

$92,984.57

	

$124,791.10

	

30

	

40

	

10/1/2024

	

$8,574,623

	

$32,137.84

	

$89,653.75

	

$121,791.60

	

31

	

41

	

11/1/2024

	

$8,542,150

	

$32,472.61

	

$92,296.28

	

$124,768.90

	

30

	

42

	

12/1/2024

	

$8,509,339

	

$32,810.87

	

$88,980.73

	

$121,791.60

	

31

	

43

	

1/1/2025

	

$8,476,186

	

$33,152.65

	

$91,593.58

	

$124,746.23

	

31

	

44

	

2/1/2025

	

$8,442,688

	

$33,497.99

	

$91,236.73

	

$124,734.72

	

28

	

45

	

3/1/2025

	

$8,408,841

	

$33,846.93

	

$82,081.69

	

$115,928.62

	

31

	

46

	

4/1/2025

	

$8,374,642

	

$34,199.50

	

$90,511.84

	

$124,711.33

	

30

	

47

	

5/1/2025

	

$8,340,086

	

$34,555.74

	

$87,235.85

	

$121,791.60

	

31

	

48

	

6/1/2025

	

$8,305,171

	

$34,915.70

	

$89,771.76

	

$124,687.46

	

30

	

49

	

7/1/2025

	

$8,269,891

	

$35,279.40

	

$86,512.19

	

$121,791.60

	

31

	

50

	

8/1/2025

	

$8,234,244

	

$35,646.90

	

$89,016.19

	

$124,663.09

	

31

	

51

	

9/1/2025

	

$8,198,226

	

$36,018.22

	

$88,632.49

	

$124,650.71

	

30

	

52

	

10/1/2025

	

$8,161,833

	

$36,393.41

	

$85,398.19

	

$121,791.60

	

31

	

53

	

11/1/2025

	

$8,125,060

	

$36,772.51

	

$87,853.06

	

$124,625.57

	

30

	

54

	

12/1/2025

	

$8,087,905

	

$37,155.55

	

$84,636.04

	

$121,791.60

	

31

	

55

	

1/1/2026

	

$8,050,362

	

$37,542.59

	

$87,057.31

	

$124,599.90

	

31

	

56

	

2/1/2026

	

$8,012,428

	

$37,933.66

	

$86,653.20

	

$124,586.86

	

28

	

57

	

3/1/2026

	

$7,974,099

	

$38,328.80

	

$77,898.61

	

$116,227.41

	

31

	

58

	

4/1/2026

	

$7,935,371

	

$38,728.06

	

$85,832.32

	

$124,560.38

	

30

	

59

	

5/1/2026

	

$7,896,240

	

$39,131.48

	

$82,660.12

	

$121,791.60

	

31

	

60

	

6/1/2026

	

$7,856,701

	

$39,539.10

	

$84,994.25

	

$124,533.35

	

28

	

61

	

6/29/2026

	

$0

	

$7,856,700.86

	

$76,384.59

	

$7,933,085.45

 

61

 

 

 

 

EXHIBIT D

 

PERMITTED ENCUMBRANCES

 

(See
attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 3.17

 

ORGANIZATIONAL CHART OF EACH LOAN PARTY

 

(See
attached)Exhibit
10.1

 

$209,000,000
6.00% Class A-2 Notes

$84,000,000
7.00% Class B-2 Notes

$57,000,000
9.50% Class M-2 Notes

 

FAT
Brands GFG Royalty I, LLC

Issuer

 

FAT
Brands Inc.

Manager

 

NOTE
PURCHASE AGREEMENT

 

June
29, 2021

 

Jefferies
LLC

520
Madison Avenue

New
York, New York 10022

 

Ladies
and Gentlemen:

 

FAT
Brands GFG Royalty I, LLC, a Delaware limited liability company (the “Issuer”), confirms its agreement with Jefferies
LLC, as the initial purchaser (the “Initial Purchaser”), with respect to the sale by the Issuer and purchase by the
Initial Purchaser of (i) $209,000,000 aggregate principal amount of 6.00% Series 2021-1 Fixed Rate Senior Secured Notes, Class A-2 (the
“Class A-2 Notes”), (ii) $84,000,000 aggregate principal amount of 7.00% Series 2021-1 Fixed Rate Senior Subordinated
Secured Notes, Class B-2 (the “Class B-2 Notes”), and (iii) $57,000,000 aggregate principal amount of 9.50% Series
2021-1 Fixed Rate Subordinated Secured Notes, Class M-2 (the “Series 2021-1 Class M-2 Notes,” and collectively with
the Class A-2 Notes and the Class B-2 Notes, the “Notes”) under the terms and conditions contained in this note purchase
agreement (the “Agreement”). Capitalized terms used herein that are not otherwise defined shall have the meanings
ascribed thereto in Annex A to the Base Indenture (as defined below).

 

The
Notes will be issued pursuant to the Base Indenture, dated as of July 22, 2021 (the “Base Indenture”), by and between
FAT Brands GFG Royalty I, LLC (the “Issuer”) and UMB Bank, N.A., as trustee and securities intermediary (the “Indenture
Trustee”), as supplemented by the Series 2021-1 Supplement, dated as of the Closing Date, by and between the Issuer and the
Indenture Trustee (the “Series Supplement”, together with the Base Indenture, the “Indenture”).
The Issuer will pledge to the Indenture Trustee the Indenture Collateral. to secure the obligations of the Issuer under the Base Indenture.

 

The
sale of the Notes to the Initial Purchaser will be made without registration of the Notes under the Securities Act of 1933, as amended
(the “Securities Act”), in reliance upon one or more exemptions from the registration requirements of the Securities
Act. The Initial Purchaser intends to offer the Notes for sale within the United States to Persons who are qualified institutional buyers
(“Qualified Institutional Buyers”) within the meaning of Rule 144A under the Securities Act, in reliance on Rule 144A
or to non U.S. persons in reliance on Regulation S under the Securities Act. The Notes shall bear the legends applicable to 144A Global
Notes and Regulation S Global Notes under the Indenture until such time as no longer required under the Securities Act.

 

    	 	 	 

     

    

 

In
connection with the sale of the Notes, the Issuer has (i) prepared an initial preliminary offering memorandum dated June 28, 2021 (including
any and all exhibits and appendixes thereto, the “Preliminary Offering Memorandum”), and (ii) will prepare a final
offering memorandum dated June 29, 2021 (including any and all exhibits and appendices thereto, the “Final Offering Memorandum”).
The time when the sale of the Notes was made by the Issuer to the Initial Purchaser was approximately 3:02 p.m. (New York time) on June
29, 2021 (the “Applicable Time”). For purposes hereof, the Preliminary Offering Memorandum shall constitute the “Time
of Sale Information”.

 

Section
1. Representations and Warranties.

 

(a) Representations
and Warranties by the Issuer. The Issuer represents and warrants to the Initial Purchaser as of the date hereof, the Applicable
Time and as of the Closing Date as follows:

 

(i) Incorporation
of Representations and Warranties. The representations and warranties of the Issuer in each Transaction Document to which the
Issuer is a party will be true and correct in all material respects and are hereby incorporated by reference herein and restated for
the benefit of the Initial Purchaser with the same effect as if set forth in full herein (except with respect to Section 7(a)(iii)
herein).

 

(ii) Due
Organization. The Issuer has been duly formed and is validly existing as a limited liability company under the laws of the State
of Delaware, and all filings required at the date hereof under the Delaware Limited Liability Company Act (6 Del. C. § 18-101,
et seq.) (the “DLLCA”) with respect to the due formation and valid existence of the Issuer as a limited liability
company have been made; the Issuer has all requisite power and authority to own, lease and operate its properties and to conduct its
business as described in the Time of Sale Information and the Final Offering Memorandum and to enter into and to perform its
obligations under each Transaction Document to which it is a party, and the Issuer is duly qualified or registered as a foreign
limited liability company to transact business and is in good standing in each jurisdiction in which such qualification or
registration is required, whether by reason of the ownership of property or to conduct its respective business, except where the
failure to be so qualified has not and would not reasonably be expected to have a Material Adverse Effect on the Issuer.

 

(iii) Authorization
of this Agreement. This Agreement has been duly authorized, executed and delivered by the Issuer.

 

(iv) Authorization
of Transaction Documents. As of the Closing Date, each Transaction Document to which the Issuer is a party has been duly
authorized, executed and delivered by the Issuer and, assuming the due authorization, execution and delivery thereof by the other
parties thereto, will constitute a legal, valid and binding agreement of the Issuer, enforceable against it in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

 

    	 	 	 

     

    

 

(v) Time
of Sale Information; Final Offering Memorandum. The Time of Sale Information, as of the Applicable Time did not, and at the
Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were made, not misleading; provided, that no representation
or warranty is made with respect to the omission of information in the Time of Sale Information regarding the pricing and price
dependent information relating to the Notes. The Final Offering Memorandum, at the date thereof and at the Closing Date, will not,
as amended or supplemented as of such dates, include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances under which they were made, not
misleading.

 

(vi) No
Material Adverse Change. Since the respective dates as of which information is given in the Time of Sale Information and the
Final Offering Memorandum, except as otherwise set forth therein, (A) there has been no Material Adverse Effect with respect to the
Issuer and (B) there have been no transactions entered into by the Issuer, other than those in the ordinary course of business,
which are material with respect to it. As used herein, the term “Material Adverse Effect” means, when used with respect
to the Issuer or Manager, as the case may be, a material adverse effect on its results of operations, business, properties or
financial condition, or in its ability to perform in any material respect its obligations under this Agreement and each Transaction
Document to which it is a party.

 

(vii) General
Solicitation. The Issuer has not directly, or through any agent, engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Notes and the
Issuer has not entered into any contractual agreement with respect to the distribution of the Notes, except for the arrangement with
the Initial Purchaser for purchasing the Notes as contemplated by this Agreement.

 

(viii) Notes.
The Notes are not of the same class (within the meaning of Rule 144A under the Securities Act) as any securities of the Issuer
listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or quoted on a U.S. automated inter-dealer quotation system.

 

(ix) Free
Writing Prospectus. The Issuer has not made any offer to sell or solicitation of an offer to buy the Notes that would constitute
a “free writing prospectus” (if the offering of the Notes were made pursuant to a registered offering under the
Securities Act), as defined in Rule 405 under the Securities Act (a “Free Writing Offering Document”) without the
prior consent of the Initial Purchaser.

 

    	 	 	 

     

    

 

(x) Issuance
of the Notes. As of the Closing Date, the Notes will have been duly authorized and will have been duly executed and, when
authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price
therefor, will constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated
by, and entitled to the benefits of, the Indenture.

 

(xi) Description
of the Notes and the Transaction Documents. The Notes and the Transaction Documents conform in all material respects to the
descriptions thereof and the statements relating thereto contained in the Time of Sale Information and the Final Offering
Memorandum.

 

(xii) No
Registration Required. Registration of the Notes under the Securities Act or qualification of the Indenture under the Trust
Indenture Act of 1939 is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchaser and to
each subsequent purchaser from the Initial Purchaser, each in the manner contemplated by this Agreement, the Transaction Documents,
the Time of Sale Information and the Final Offering Memorandum. There are no contracts, agreements or understandings between the
Issuer and any person, granting such person the right to require the Issuer to file a registration statement under the Securities
Act with respect to any securities of the Issuer owned or to be owned by such person.

 

(xiii) No
Integration. Neither the Issuer nor any Affiliate of the Issuer has directly or indirectly, sold, offered for sale or solicited
offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) the offering of which security
will be integrated with the sale of the Notes in a manner which would require the registration of the Notes under the Securities
Act.

 

(xiv) No
Other Arrangement. The Issuer has not entered into any contractual agreement with respect to the distribution of the Notes,
except for the arrangement of the Issuer with the Initial Purchaser for purchasing the Notes as contemplated by this
Agreement.

 

    	 	 	 

     

    

 

(xv) Absence
of Defaults and Conflicts. The Issuer is not in violation of its certificate of formation or limited liability company agreement
or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or
by which it may be bound, or to which any of its properties, operations or assets is subject (collectively, the “Issuer
Instruments and Agreements”); and the execution, delivery and performance by the Issuer of the Transaction Documents to
which it is a party and this Agreement, the consummation of the transactions contemplated herein, therein and in the Final Offering
Memorandum (including the sale of the Notes to the Initial Purchaser pursuant to the terms of this Agreement and the use of the
proceeds therefrom as described under the heading “Use of Proceeds” in the Time of Sale Information and the Final
Offering Memorandum) and compliance by the Issuer with its obligations hereunder and thereunder have been duly and validly
authorized by all necessary action and do not and will not, whether with or without the giving of notice or passage of time or both,
conflict with or constitute a material breach of, a default or Event of Default under, or result in the creation or imposition of
any lien, mortgage, pledge, charge, encumbrance, adverse claim or other security interest upon any of its property or assets
pursuant to the Issuer Instruments and Agreements except for Liens permitted by the Transaction Documents, nor will such action
result in any violation of the provisions of its certificate of formation or limited liability company agreement or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Issuer or any of its assets, properties or operations.

 

(xvi) No
Fraud. Each Guarantor Asset was originated without any fraud, or material misrepresentation by the Securitization Entities or
the Manager.

 

(xvii) Absence
of Proceedings. Except as described in the Time of Sale Information and the Final Offering Memorandum there is no action, suit,
proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending
or threatened against or affect the Issuer, which would reasonably be expected to result in a Material Adverse Effect with respect
to the Issuer; the aggregate of all pending legal or governmental proceedings to which the Issuer is a party or which any of its
properties or assets is the subject that are not described in the Final Offering Memorandum, including ordinary routine litigation
incidental to the business, which would not reasonably be expected to result in a Material Adverse Effect with respect to the
Issuer.

 

(xviii) Absence
of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or
decree of, any court, governmental authority or agency or any other person is necessary in connection with (A) the issuance or the
offering and sale of the Notes, (B) the authorization, execution, delivery and performance by the Issuer of the Transaction
Documents to which it is a party or this Agreement or (C) the consummation by the Issuer of the transactions contemplated hereby or
thereby, except such as have been obtained and are in full force and effect as of the Closing Date.

 

    	 	 	 

     

    

 

(xix) Possession
of Licenses and Permits. The Issuer and each Securitization Entity possesses such permits, licenses, approvals, consents and
other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now operated by it, except where the failure to obtain such
Governmental Licenses, would not result in a Material Adverse Effect or would render a material portion of the Franchise Agreements
unenforceable; the Issuer and each Securitization Entity is in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure would not result in a Material Adverse Effect or would render a material portion of the Franchise
Agreements unenforceable; all of the Governmental Licenses are valid and in full force and effect, except where such failure would
not result in a Material Adverse Effect or would render a material portion of the Franchise Agreements unenforceable; and the Issuer
has not received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect
with respect to the Issuer or would render a material portion of the Franchise Agreements unenforceable.

 

(xx) Title
to Guarantor Assets; Payment of Fees. As of the Closing Date, (A) the Issuer will have good and marketable title to the
Guarantor Assets and all of the outstanding shares of capital stock, membership interests or other equity interests of each of the
Securitization Entities is owned directly by the Issuer and the Issuer is the sole owner of each Securitization Entity free and
clear of Liens other than Permitted Liens and the Lien in favor of the Indenture Trustee under the Indenture; (B) Issuer’s
grant of the Indenture Collateral to the Indenture Trustee pursuant to the Indenture will vest in the Indenture Trustee a first
priority perfected security interest therein, subject to no prior Lien other than Permitted Liens; and (C) all taxes, fees and other
governmental charges arising in connection with the transactions contemplated by this Agreement and the Transaction Documents,
including any amendments thereto and assignments and/or endorsements thereof, have been paid in full by the Issuer.

 

(xxi) Investment
Company Act. The Issuer is not a “covered fund” under the regulations adopted to implement Section 619 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), commonly known as the
“Volcker Rule”, because the Issuer is not, nor will it be following the issuance and sale of the Notes to the Initial
Purchaser pursuant to this Agreement, required to be registered as an “investment company” within the meaning of Section
3(a)(1) under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and is not relying
solely on the exemption from the definition of “investment company” set forth in section 3(c)(1) or 3(c)(7) of the
Investment Company Act.

 

(xxii) Non-Reliance.
The Issuer has not relied on the Initial Purchaser for any tax, regulatory, legal, accounting or other advice with respect to
compliance with or registration under any statute, rule or regulation of any governmental, regulatory, administrative or other
agency or authority.

 

(xxiii) Bankruptcy.
The Issuer is not the subject of any voluntary or involuntary case or proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy or insolvency law and no event of bankruptcy has occurred.

 

    	 	 	 

     

    

 

(b) Representations
and Warranties by Manager. The Manager represents and warrants to the Initial Purchaser that the representations and warranties
of the Issuer set forth in Section 1(a) are true and correct as of the time made and further represents and warrants to the Initial
Purchaser as follows:

 

(i) Incorporation
of Representations and Warranties. The representations and warranties of the Manager in each Transaction Document to which the
Manager is a party will be true and correct in all material respects and are hereby incorporated by reference herein and restated
for the benefit of the Initial Purchaser with the same effect as if set forth in full herein (except with respect to Section
7(a)(iii) herein).

 

(ii) Due
Organization. The Manager has been duly organized and is validly existing as a corporation under the laws of the State of
Delaware; the Manager is duly qualified or registered as a foreign corporation to transact business, and is in good standing, in
each jurisdiction where the qualification is necessary to conduct its business, except where the failure to be so qualified would
not be reasonably expected to have a Material Adverse Effect; the Manager has the requisite power and authority to own its
properties and conduct its business as described in the Final Offering Memorandum and to enter into and perform its obligations
under each Transaction Document to which it is a party; and the Manager holds all material licenses, certificates and permits from
all governmental authorities necessary for the conduct of its business as described in the Final Offering Memorandum.

 

(iii) Authorization
of Transaction Documents. As of the Closing Date, each Transaction Document to which the Manager is a party has been duly
authorized, executed and delivered by the Manager, and, assuming the due authorization, execution and delivery thereof by the other
parties thereto, constitutes a legal, valid and binding agreement of the Manager, enforceable against the Manager in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

 

(iv) Absence
of Defaults and Conflicts. The Manager is not in violation of its articles of incorporation or bylaws, and the Manager is not in
default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which
it may be bound, or to which any of its properties, operations or assets is subject (collectively, the “Manager Instruments
and Agreements”), except where such failure would not have a Material Adverse Effect with respect to the Manager; and the
execution, delivery and performance by the Manager of the Transaction Documents to which the Manager is a party and this Agreement,
the consummation of the transactions contemplated herein, therein and in the Final Offering Memorandum and compliance by the Manager
with its obligations hereunder and thereunder have been duly and validly authorized by all necessary action and do not and will not,
whether with or without the giving of notice or passage of time or both, conflict with or constitute a material breach of, a default
or Event of Default under, or result in the creation or imposition of any Lien upon any of its property or assets pursuant to the
Manager Instruments and Agreements except for Liens permitted by the Transaction Documents, nor will such action result in any
violation of the provisions of its certificate of incorporation or any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Manager or
any of its assets, properties or operations.

 

    	 	 	 

     

    

 

(v) Ownership.
All of the outstanding shares of capital stock, membership interests or other equity interests of the Issuer, is owned directly by
the Manager, free and clear of any Lien, charge, encumbrance or other interest which secures payment or performance of any
obligation in any real or personal property, asset or other right held, owned or being purchased or acquired, except for Liens
created by the Indenture or the other Transaction Documents or which constitute Permitted Liens (as such terms are defined in the
Indenture).

 

(vi) Absence
of Proceedings. Except as described in the Time of Sale Information and the Final Offering Memorandum there is no action, suit,
proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending
or threatened, against or affecting the Manager which is or which would reasonably be expected to result in a Material Adverse
Effect with respect to the Manager; the aggregate of all pending legal or governmental proceedings to which the Manager is a party
or of which any of its properties, operations or assets is the subject which are not described in the Final Offering Memorandum,
including ordinary routine litigation incidental to the business, which would not reasonably be expected to result in a Material
Adverse Effect with respect to the Manager.

 

(vii) No
Fraud. Each Guarantor Asset was originated without any fraud, or material misrepresentation by the Securitization Entities or
the Manager.

 

(viii) Absence
of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or
decree of, any court, governmental authority or agency is necessary in connection with (A) the issuance of the Notes or the offering
and sale of the Notes, (B) the authorization, execution, delivery and performance by the Manager of the Transaction Documents to
which it is a party or this Agreement or (C) the consummation by the Manager of the transactions contemplated hereby or thereby,
except such as have been obtained and are in full force and effect as of the date hereof.

 

    	 	 	 

     

    

 

(ix) Possession
of Licenses and Permits. The Manager possesses such Governmental Licenses issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now operated by it, except where the failure to obtain such
Governmental Licenses, would not result in a Material Adverse Effect or would render a material portion of the Franchise Agreements
unenforceable; the Manager is in compliance with the terms and conditions of all such Governmental Licenses, except where the
failure would not result in a Material Adverse Effect or would render a material portion of the Franchise Agreements unenforceable;
all of the Governmental Licenses are valid and in full force and effect, except where such failure would not result in a Material
Adverse Effect or would render a material portion of the Franchise Agreements unenforceable; and the Manager has not received any
notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect with respect to
the Manager or would render a material portion of the Franchise Agreements unenforceable.

 

(x) Securities
Act. There are no contracts, agreements or understandings between the Manager and any person, granting such person the right to
require the Manager to file a registration statement under the Securities Act with respect to any securities of the Manager owned or
to be owned by such person.

 

(xi) Free
Writing Prospectus. The Manager has not made any offer to sell or solicitation of an offer to buy the Notes that would
constitute a Free Writing Offering Document without the prior consent of the Initial Purchaser.

 

(xii) Non-Reliance.
The Manager has not relied on the Initial Purchaser for any tax, regulatory, legal, accounting or other advice with respect to
compliance with or registration under any statute, rule or regulation of any governmental, regulatory, administrative or other
agency or authority.

 

(xiii) Compliance
with Anti-Money Laundering Laws. The operations of the Manager and each of its Subsidiaries are and have been conducted at all
times in compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Manager and
its Subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines
issued, administered or enforced by any governmental or regulatory agency (collectively, the “Anti-Money Laundering
Laws”) and no action, suit or proceeding by or before any court or governmental or regulatory agency, authority or body or
any arbitrator involving the Manager or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the
Manager’s knowledge, overtly threatened.

 

    	 	 	 

     

    

 

(xiv) No
Conflicts with Sanctions Laws. None of the Manager nor any of its Subsidiaries (direct or indirect), or directors, officers,
employees or any agent, is currently the subject of any sanctions administered or enforced by the U.S. Government (including,
without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State and
including, without limitation, the designation as a “specially designated national” or “blocked person”),
the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority
(collectively, “Sanctions”), nor is the Manager nor any of its Subsidiaries located, organized or resident in a
country or territory that is the subject or the target of Sanctions, including, without limitation, Iran, North Korea, Sudan and
Syria (each, a “Sanctioned Country”); and neither the Manager nor any of its Subsidiaries will directly or
indirectly use the proceeds of the transactions hereunder, or lend, contribute or otherwise make available such proceeds to any
joint venture partner or other Person or entity (i) to fund or facilitate any activities of or business with any Person that, at the
time of such funding or facilitation, is the subject of Sanctions, (ii) to fund or facilitate any activities of or business in any
Sanctioned Country or (iii) in any other manner that will result in a violation by any Person (including any Person participating in
the transaction) of Sanctions. For the past three years, the Manager has not knowingly engaged in and is not now knowingly engaged
in any dealings or transactions with any Person that at the time of the dealing or transaction is or was the subject or the target
of Sanctions or with any Sanctioned Country.

 

(xv) USA
Patriot Act. Neither the Manager nor any Subsidiary of the Manager is (i) a country, territory, organization, person or entity
named on an Office of Foreign Asset Control list; (ii) a Person that resides or has a place of business in a country or territory
named on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on
Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a “Foreign Shell
Bank” within the meaning of the USA Patriot Act, i.e., a foreign bank that does not have a physical presence in any country
and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a
person or entity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of the
Treasury under Sections 311 or 312 of the USA Patriot Act as warranting special measures due to money laundering
concerns.

 

(xvi) No
Material Adverse Change. Since the date as of which information is given in the Final Offering Memorandum, except as otherwise
set forth therein, there has been no Material Adverse Effect with respect to the Manager.

 

(xvii) Financial
Statements. The historical consolidated financial statements of the Manager and its Subsidiaries (including the related notes
and supporting schedules) included or incorporated by reference in the Final Offering Memorandum present fairly in all material
respects the financial condition, results of operations and cash flows of the entities purported to be shown thereby, at the dates
and for the periods indicated, and have been prepared in conformity with accounting principles generally accepted in the United
States applied on a consistent basis throughout the periods involved.

 

    	 	 	 

     

    

 

(xviii) Financial
Reporting. The Manager and each of its Subsidiaries maintain a system of internal control over financial reporting (as such term
is defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and that has been designed
by, or under the supervision of, the Manager’s principal executive and principal financial officers, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States. The Manager and each of its subsidiaries maintains
internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of the
Manager’s financial statements in conformity with accounting principles generally accepted in the United States and to
maintain accountability for its assets, (iii) access to the Manager’s assets is permitted only in accordance with
management’s general or specific authorization, (iv) the recorded accountability for the Manager’s assets is compared
with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in
the Manager’s most recent Form 10-K, as of the date of the most recent balance sheet of the Manager and its consolidated
subsidiaries reviewed or audited by Independent Auditors and the audit committee of the board of directors of the Manager, there
were no material weaknesses in the Manager’s internal controls.

 

(xix) Insurance.
The Manager and each of its Subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility
(or self-insurance) in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the
value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. All such
policies of insurance of the Manager and each of its Subsidiaries are in full force and effect; the Manager and each of its
Subsidiaries are in compliance with the terms of such policies in all material respects; and none of the Manager and each of its
Subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are
required or necessary to be made in order to continue such insurance. There are no claims by the Manager or any of its Subsidiaries
under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of
rights clause, except as would not reasonably be expected to have a Material Adverse Effect; and none of the Manager nor any of its
Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage, in all material respects,
as and when such coverage expires or to obtain similar coverage, in all material respects, from similar insurers as may be necessary
to continue its business at a cost that would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.

 

(xx) Sarbanes-Oxley
Compliance. There is and has been no material failure on the part of the Manager and any of the Manager’s directors or
officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith.

 

(xxi) Bankruptcy.
The Manager is not the subject of any voluntary or involuntary case or proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy or insolvency law and no event of bankruptcy has
occurred.

 

    	 	 	 

     

    

 

(c) Rule
144A and Regulation S. The Notes will, when issued, satisfy either the eligibility requirements of Rule 144A or Regulation S
of the Securities Act. No order from the Securities and Exchange Commission (the “Commission”), any State
securities commission or any foreign government or agency thereof preventing or suspending the offering of the Notes has been issued
and no proceedings for that purpose have been instituted.

 

(d) Officer’s
Certificates. Any certificate signed by any officer of the Manager or the Issuer and delivered at the Closing Date to the
Initial Purchaser or counsel for the Initial Purchaser shall be deemed a representation and warranty by the Manager or the Issuer,
as the case may be, to the Initial Purchaser as to the matters covered thereby.

 

(e) Initial
Purchaser Representations. The parties hereto understand that the Initial Purchaser intends to offer the Notes for resale on the
terms set forth in this Agreement, the Transaction Documents, the Time of Sale Information and the Final Offering Memorandum. The
Initial Purchaser hereby represents and warrants as to itself, as of the effective date hereof, to the other parties hereto, the
following:

 

(i)
It is a Qualified Institutional Buyer.

 

(ii)
It will offer and sell the Notes as part of its distribution at any time only to institutional investors that are reasonably
believed by it to qualify as Qualified Institutional Buyers or to non U.S. persons in reliance on Regulation S, or if any such
entity is buying for one or more institutional accounts for which such entity is acting as fiduciary or agent, only when such entity
has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A or to non U.S. persons in reliance on Regulation S and in each case, in transactions
in accordance with Rule 144A or Regulation S.

 

(iii)
It will otherwise act in accordance with the terms and conditions set forth in this Agreement and the applicable provisions of the
Indenture and in the Preliminary Offering Memorandum in connection with the offering and sale of the Notes contemplated
hereby.

 

(iv)
It will send or make available to each potential Noteholder (or Note Owner) who is to purchase Notes a copy of the Time of Sale
Information and the Final Offering Memorandum as amended and supplemented at the date of such delivery.

 

(v)
It has not used any form of general solicitation or general advertising (as those terms are used in Regulation D under the
Securities Act) in violation of the Securities Act nor will any form of general solicitation or general advertising in violation of
the Securities Act be used, nor will any offer in any matter involving a public offering within the meaning of Section 4(a)(2) of
the Securities Act or with respect to the notes to be sold in reliance on Regulation S, by means of any directed selling efforts
made by the Initial Purchaser or any of its representatives in connection with the offer and sale of any of the Notes.

 

    	 	 	 

     

    

 

(vi)
It is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed and all other
jurisdictions where such qualification is necessary in light of the Initial Purchaser’s activities.

 

(vii)
(1) This Agreement has been duly and validly executed and delivered by the Initial Purchaser and constitutes the valid, binding and
enforceable agreement, except as enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws relating to or affect creditor’s rights generally and (B) general principles of
equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (2) the Initial Purchaser
has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder.

 

(viii)
(a) It has not offered, sold or otherwise made available, and will not offer, sell or otherwise make available, any Notes to (x) any
EU Retail Investor in the EEA, and (y) any UK Retail Investor in the UK; (b) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity received by it in
connection with the issue or sale of any Notes in circumstances in which Section 21(1) of FSMA does not apply to the Issuer; and (c)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the
Notes in, from or otherwise involving the UK. All terms used in this clause (viii) and not defined in this Agreement shall have the
meanings ascribed to such terms in the Preliminary Offering Memorandum.

 

(ix)
It has not made any offer to sell or solicitation of an offer to buy the Notes that would constitute a Free Writing Offering
Document without the prior consent of the Issuer.

 

Section
2. Sale and Delivery to the Initial Purchaser; Closing.

 

(a) Purchase
of Notes. On the basis of the representations, warranties and agreements herein contained and subject to the terms and
conditions herein set forth, the Issuer agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
the Issuer, the (i) Class A-2 Notes at a purchase price equal to 98.50000% of the principal amount thereof, (ii) Class B-2 Notes at
a purchase price equal to 97.02250% of the principal amount thereof and (iii) Class M-2 Notes at a purchase price equal to 91.85125%
of the principal amount thereof.

 

(b) Payment.
Payment of the purchase price for the Notes shall be made at the offices of DLA Piper LLP (US), 500 8th Street, NW, Washington, DC
20004, or at such other place as shall be agreed upon by the Initial Purchaser and the Issuer, on or around 10:00 a.m. (New York
time) on or about July 22, 2021 (such date of payment and delivery being called the “Closing Date”).

 

    	 	 	 

     

    

 

The
Notes sold in reliance on the exemption from registration under Rule 144A will each initially be represented by one or more certificates
registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). Rule 144A Notes may
also be held through Clearstream and Euroclear Bank SA/NV, Brussels Office, as operator of the Euroclear System (“Euroclear”),
as participants in DTC. Each Note offered to non U.S. persons in reliance on Regulation S will initially be issued in book-entry form
through the facilities of DTC for the accounts of Clearstream or Euroclear. The interests of the beneficial owners of the Notes will
be represented by book entries on the records of DTC and participating members thereof. The Issuer shall cause the Indenture Trustee
to settle the Notes, in each case in accordance with the applicable provisions of the Indenture.

 

Section
3. Covenants of the Issuer. The Issuer covenants and agrees as follows:

 

(a) Amendments.
The Issuer will give the Initial Purchaser notice of its intention to amend or supplement the Time of Sale Information or the Final
Offering Memorandum prior to the Closing Date, will furnish the Initial Purchaser with copies of all such documents a reasonable
amount of time prior to use thereof and will not use any such document to which the Initial Purchaser or its counsel shall
reasonably object.

 

(b) Delivery
of Offering Documents. The Issuer will furnish to the Initial Purchaser electronic copies of each of the Time of Sale
Information and Final Offering Memorandum and all amendments and supplements to such documents, in each case as soon as available.
The Issuer will pay the expenses of reproducing and distributing to the Initial Purchaser all such documents.

 

(c) Continued
Compliance with Disclosure Requirements. If at any time when the Time of Sale Information or the Final Offering Memorandum is to
be delivered in connection with the sale of the Notes, any event shall occur or condition shall exist as a result of which it is
necessary, in the reasonable opinion of counsel for the Initial Purchaser or the Issuer, to amend or supplement the Time of Sale
Information or the Final Offering Memorandum, as applicable, in order that the Time of Sale Information or the Final Offering
Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the reasonable opinion of such counsel, at any such time to amend or supplement the Time of Sale Information
or the Final Offering Memorandum in order to comply with their respective disclosure requirements under the Securities Act, the
Issuer will promptly prepare, subject to the review and approval provisions afforded to the Initial Purchaser described in Section
3(a), such amendment or supplement as may be necessary to correct such statement or omission or to make the Time of Sale Information
or the Final Offering Memorandum comply with such requirements, and the Issuer will furnish to the Initial Purchaser, without
charge, electronic copies of such amendment or supplement as the Initial Purchaser may reasonably request.

 

(d) Use
of Proceeds. The Issuer shall use the net proceeds received by it from the sale of the Notes in the manner specified in the Time
of Sale Information and the Final Offering Memorandum under the heading “Use of Proceeds” and no proceeds received by
the Issuer under this Agreement will be used by it for any purpose that violates Regulation T, U or X of the Federal Reserve
Board.

 

    	 	 	 

     

    

 

(e) Rule
144A Information. So long as the Notes are a “restricted security” within the meaning of Rule 144 under the
Securities Act, the Issuer shall, during any period when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, make
available, upon request, to any holder of a Note in connection with any sale thereof and any prospective purchaser of a Note from
such holder the information (“Rule 144A Information”) specified in Rule 144A(d)(4) under the Securities Act. The
Issuer represents and warrants that each of the Preliminary Offering Memorandum and the Final Offering Memorandum, each as of its
respective date, contains or incorporates by reference all the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Securities Act.

 

(f) General
Solicitation. Neither the Issuer nor any Affiliate of the Issuer shall sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities Act) which (i) is or shall be integrated with the sale
of a Note in a manner which would require the registration of such Note under the Securities Act, or (ii) would cause the offer and
sale of a Note pursuant to this Agreement to fail to be entitled to the exemption from registration afforded by Section 4(a)(2) of
the Securities Act. The Issuer will not enter into any contractual agreement with respect to the distribution of the Notes except
for this Agreement.

 

(g) Further
Assurances. The Issuer will promptly take such action as the Initial Purchaser shall reasonably request to qualify the Notes for
offer and sale under the securities laws of such jurisdictions as the Initial Purchaser may reasonably request and to maintain such
qualifications in effect for so long as required for the resale of the Notes by the Initial Purchaser.

 

(h) Covered
Funds. The Issuer will not take any steps to become a Covered Fund.

 

Section
4. Covenants of Manager. The Manager covenants and agrees as follows:

 

(a) General
Solicitation. Neither the Manager nor any of its Affiliates shall sell, offer for sale or solicit offers or otherwise negotiate
in respect of any security (as defined in the Securities Act) which (i) is or shall be integrated with the sale of a Note in a
manner which would require the registration of such Note under the Securities Act, or (ii) would cause the offer and sale of a Note
pursuant to this Agreement to fail to be entitled to the exemption from registration afforded by Section 4(a)(2) of the Securities
Act. The Manager will not enter into any contractual agreement with respect to the distribution of the Notes except for this
Agreement.

 

(b) Bankruptcy.
The Manager is not the subject of any voluntary or involuntary case or proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy or insolvency law and no event of bankruptcy has
occurred.

 

(c) Further
Assurances. The Manager will promptly take such action as the Initial Purchaser shall reasonably request to qualify the Notes
for offer and sale under the securities laws of such jurisdictions as the Initial Purchaser may reasonably request and to maintain
such qualifications in effect for so long as required for the resale of the Notes by the Initial Purchaser.

 

(d) Confidentiality.
So long as any of the Notes are outstanding and so long as such information is required to be provided under the Indenture, the
Manager will furnish to the Initial Purchaser, and upon request, to the Noteholders and prospective purchasers of the Notes that
agree to certain confidentiality obligations, the information required by Rule 144A(d)(4) under the Securities Act in connection
therewith; provided that so long as the information referred to above is publicly available on the Manager’s website or has
been filed with or furnished to the Commission by the Manager or the Issuer and the Manager shall be deemed to comply with this
Section 4(e).

 

    	 	 	 

     

    

 

Section
5. Payment of Expenses.

 

(a) Expenses.
The Issuer and the Manager shall each pay for all of their own expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, reproduction and delivery of the Preliminary Offering Memorandum, the Time of Sale
Information, the Final Offering Memorandum and each amendment or supplement thereto, (ii) the preparation, reproduction and delivery
to the Initial Purchaser of this Agreement, each Transaction Document and each other document as may be required in connection with
the issuance and delivery of the Notes or the offering or sale of the Notes, (iii) the fees and expenses of the counsel, accountants
and other advisors of the Issuer, in connection with the transactions contemplated by this Agreement, (iv) the reasonable and
documented fees and expenses of counsel to the Initial Purchaser, (v) the reasonable and documented fees and expenses of the
Indenture Trustee, including the fees and disbursements of its counsel in connection with the transactions contemplated by this
Agreement, and (vi) the costs and expenses (including any damages or other amounts payable in connection with legal or contractual
liability) associated with the breaking of and re-execution of any contracts for sale of the Notes made by the Initial Purchaser
caused by a breach of a representation contained herein.

 

(b) Termination
of Agreement. If this Agreement is terminated by the Initial Purchaser in accordance with the provisions of Section 10, the
Issuer shall reimburse the Initial Purchaser for all of its reasonable and documented out-of-pocket expenses, including the fees and
disbursements of counsel for the Initial Purchaser.

 

Section
6. Conditions of the Obligations of the Initial Purchaser. The obligations of the Initial Purchaser are subject to the
accuracy, in all material respects, of the representations and warranties of the Manager and the Issuer contained in Section 1 and
in certificates of any officer of the Manager or the Issuer delivered pursuant to the provisions hereof or any Transaction Document,
to the performance in all material respects, by Manager and the Issuer of their respective covenants and other obligations hereunder
and under the Transaction Documents and to the following additional conditions:

 

(a) Incorporation
of Conditions Precedent. The conditions precedent set forth in the Indenture are hereby incorporated by reference herein and
restated for the benefit of the Initial Purchaser with the same effect as if set forth in full herein.

 

(b) Officer’s
Certificate: Each of the Issuer and the Manager shall deliver an Officer’s Certificate, which shall include as exhibits
thereto: (A) incumbency certificates identifying the qualified and acting officers authorized to execute and deliver the Transaction
Documents, (B) resolutions duly adopted authorizing the execution, delivery and performance of each Transaction Document, and (C)
true and complete copies of the formation documents of each entity accompanied by a good standing certificate issued by the office
of registration of its jurisdiction of formation or organization.

 

    	 	 	 

     

    

 

(c) Accountants’
Agreed Upon Procedures Letters. No later than 10:00 a.m. (New York time) on the Closing Date, the Initial Purchaser shall have
received from the Issuer’s accounting firm a letter or letters (the “Agreed Upon Procedures Letters”), in
form and substance as previously agreed upon by the Initial Purchaser and otherwise satisfactory in form and substance to the
Initial Purchaser and counsel for the Initial Purchaser, containing statements and information of the type ordinarily included in
accountants’ “agreed upon procedures letters” with respect to certain financial, statistical and other information
contained in (A) the Preliminary Offering Memorandum, and (B) the Final Offering Memorandum.

 

(d) Officer’s
Certificates. At the Closing Date, there shall not have been, since the date hereof or since the respective dates as of which
information is given in the Final Offering Memorandum, any Material Adverse Effect with respect to the Issuer or the Manager, and
the Initial Purchaser shall have received a certificate, dated as of the Closing Date, of an authorized officer of (i) the Issuer to
the effect that (A) there has been no such Material Adverse Effect, (B) the information describing the Issuer contained in the Time
of Sale Information and the Final Offering Memorandum and the representations and warranties in Section 1(a) are true and correct,
in each case, in all material respects, with the same force and effect as though expressly made at and as of the Closing Date and
(C) the Issuer has complied with all agreements and satisfied all conditions, in each case, in all material respects, on its part to
be performed or satisfied at or prior to the Closing Date and (ii) the Manager to the effect that (A) there has been no such
Material Adverse Effect, (B) the information describing the Manager contained in the Time of Sale Information and the Final Offering
Memorandum and the representations and warranties in Section 1(b) are true and correct, in each case, in all material respects, with
the same force and effect as though expressly made at and as of the Closing Date and (C) the Manager has complied with all
agreements and satisfied all conditions, in each case, in all material respects on its part to be performed or satisfied at or prior
to the Closing Date.

 

(e) Opinion
of Counsel for the Issuer and the Manager. At the Closing Date, the Initial Purchaser shall have received the opinion, dated as
of the Closing Date, of Katten Muchin Rosenman LLP (“Katten”), counsel for the Issuer and the Manager, as to
corporate, enforceability, and security interest matters customary for transactions like the one described in this Agreement and the
Final Offering Memorandum, in form and substance reasonably satisfactory to counsel for the Initial Purchaser.

 

(f) Opinion
of Bankruptcy Counsel for the Manager. At the Closing Date, the Initial Purchaser shall have received the opinions, each dated
as of the Closing Date, of Katten, in form and substance reasonably satisfactory to counsel for the Initial Purchaser, regarding (A)
the contribution of assets by the Manager to the Issuer would not be compelled to be turned over, and (B) to the effect that should
the Manager become the debtor in a case under the United States bankruptcy code, the court would not order the substantive
consolidation of the assets and liabilities of the Issuer with those of the Manager.

 

(g) Opinion
of Tax Counsel for the Issuer and the Manager. At the Closing Date, the Initial Purchaser shall have received the opinion, dated
as of the Closing Date, of Katten, special federal income tax counsel for the Issuer and the Manager, in form and substance
reasonably satisfactory to counsel for the Initial Purchaser, substantially to the effect that for federal income tax purposes, the
Class A-2 Notes will and the Class B-2 Notes should be treated as indebtedness and the Issuer will not be classified as an
association or a publicly traded partnership taxable as a corporation and that the statements in the Time of Sale Information and
Final Offering Memorandum under the headings “Summary—Tax Status”, “Summary—ERISA
Considerations”, and “ERISA Considerations”, to the extent that they constitute matters of law or legal
conclusions with respect thereto, have been reviewed by such counsel and are correct in all material respects.

 

    	 	 	 

     

    

 

(h) Opinion
of Counsel for the Indenture Trustee. At the Closing Date, the Initial Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of Seward & Kissel LLP, counsel for the Indenture Trustee, in form and substance reasonably
satisfactory to counsel for the Initial Purchaser, substantially to the effect that:

 

		i.	The
                                            Indenture Trustee is validly existing as a national banking association under the laws of
                                            the United States.
	 	 	 
		ii.	The
                                            Indenture Trustee has the requisite power and authority to execute, deliver and perform its
                                            obligations under the Indenture and the other Transaction Documents to which it is a party,
                                            and has taken all necessary action to authorize the execution, delivery and performance by
                                            it of each of the Indenture and the other Transaction Documents to which it is a party.
	 	 	 
		iii.	The
                                            Indenture and each of the Transaction Documents to which the Indenture Trustee is a party
                                            is a legal, valid and binding obligation of the Indenture Trustee enforceable against the
                                            Indenture Trustee in accordance with the its terms, except that such enforcement may be limited
                                            by bankruptcy, insolvency, reorganization, moratorium, liquidation or other similar laws
                                            affecting the enforcement of creditors’ rights generally, and by general principles
                                            of equity, including, without limitation, concepts of materiality, reasonableness, good faith
                                            and fair dealing (regardless of whether such enforceability is considered in a proceeding
                                            in equity or at law).
	 	 	 
		iv.	The
                                            Notes have been duly authenticated and delivered by the Indenture Trustee in accordance with
                                            the Indenture.

 

(i) Opinion
of Counsel for the Initial Purchaser. At the Closing Date, the Initial Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of DLA Piper LLP (US), counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.

 

(j) Additional
Documents. At the Closing Date, the Initial Purchaser and counsel for the Initial Purchaser shall have been furnished with such
documents and legal opinions as it may reasonably require for the purpose of enabling it to pass upon the issuance of the Notes and
the sale of the Notes as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties or
the fulfillment of any of the conditions herein contained.

 

(k) Document
Delivery. At the Closing Date, the Initial Purchaser shall have received a fully executed copy of each of the Transaction
Documents.

 

    	 	 	 

     

    

 

(l) UCC
Financing Statements. The Initial Purchaser shall have received evidence reasonably satisfactory to the Initial Purchaser, on or
prior to the Closing Date, that UCC-1 financing statements are being filed (or have been sent for filing on the Closing Date) in all
applicable governmental offices reflecting the grant by the Issuer to the Indenture Trustee pursuant to the Indenture of a security
interest in the Indenture Collateral and grants by each Guarantor to the Indenture Trustee pursuant to the Guarantee and Collateral
Agreement of a security interest in the “Collateral” (as defined under the Guarantee and Collateral
Agreement).

 

(m) Termination
of Agreement. If any condition specified in this Section shall not have been fulfilled, in all material respects, when and as
required to be fulfilled, this Agreement may be terminated by the Initial Purchaser by notice to the Issuer at any time, and such
termination shall be without liability of any party to any other party except as provided in Section 5 and except that Sections 1,
7, 8, 9 and 13 shall survive any such termination and remain in full force and effect.

 

Section
7. Indemnification.

 

(a) Indemnification
of the Initial Purchaser. The Manager and the Issuer agree, jointly and severally, to indemnify and hold harmless the Initial
Purchaser and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act as follows:

 

(i)
against any and all loss, liability, claim, damage and expense whatsoever, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Time of Sale Information, the Final Offering Memorandum or the marketing materials
listed in Annex A or the omission or alleged omission therefrom of a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;

 

(ii)
against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or
of any claim whatsoever, based upon any such untrue statement or omission, or any such alleged untrue statement or
omission;

 

(iii)
against any breach by Manager or Issuer of its representations or covenants contained herein (except with respect to the
representations and warranties set forth in Section 1(a)(i) and 1(b)(i) herein) which has a material adverse effect on the Initial
Purchaser; and

 

(iv)
against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Initial
Purchaser), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim whatsoever, based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under clause (i), (ii)
or (iii) above.

 

    	 	 	 

     

    

 

(b) Actions
Against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. Upon receiving such notice, the indemnifying party will be entitled to participate in and,
to the extent it shall elect, to assume, at the indemnifying party’s expense, the defense of the matter with counsel
reasonably satisfactory to the applicable indemnified party. After written notice from the indemnifying party of its election to
assume the defense thereof, the indemnifying party will not be liable to the indemnified party under this Section 7 for any legal
expenses subsequently incurred by the indemnified party in connection with the defense of the matter unless (i) the defendants in
the matter include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the position of the indemnified party and the indemnifying party in conducting the defense of any
such matter or that there may be legal defenses available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (ii) the indemnifying party shall not have retained counsel reasonably
satisfactory to the indemnified party within a reasonable time after notice of commencement of the matter or (iii) the employment of
counsel by the indemnified party has been authorized in writing by the indemnifying party. In any circumstance described in the
preceding sentence, the indemnified party may select separate counsel to assume defense of the matter on behalf of the indemnifying
party. In no event shall the indemnifying parties be liable for fees and the reasonable and documented expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, which consent shall not be
withheld in bad faith, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section or Section 8 (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(c) Settlement
Without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and reasonable and documented expenses of counsel, such indemnifying party agrees that it
shall be liable for any settlement of the nature contemplated by Section 7(a)(ii) effected without its written consent if such
settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement.

 

    	 	 	 

     

    

 

Section
8. Contribution. If the indemnification provided for in Section 7 is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying
party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the
one hand and the Initial Purchaser on the other hand from the offering of the Notes pursuant to this Agreement or if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party on the one hand and of the Initial Purchaser on the other
hand in connection with the statements or omissions or circumstances which resulted in such losses, liabilities, claims, damages or expenses,
as well as any other relevant equitable considerations.

 

The
relative benefits received by the indemnifying party on the one hand and the Initial Purchaser on the other hand in connection with the
offering of the Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from
the placement of the Notes (before deducting expenses) received by the Issuer bear to the total amount of fees received by the Initial
Purchaser pursuant to this Agreement. The relative fault of the Issuer on the one hand and the Initial Purchaser on the other hand shall
be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by the Issuer or by the Initial Purchaser and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The
Issuer and the Initial Purchaser agrees that it would not be just and equitable if contribution pursuant to this Section were determined
by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above
in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred
to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened,
or any claim whatsoever, based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

Notwithstanding
the provisions of this Section, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which
the total amount of fees received by the Initial Purchaser in respect of the Notes exceeds the amount of any damages that the Initial
Purchaser would otherwise have been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.

 

No
person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.

 

For
purposes of this Section, each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchaser.

 

    	 	 	 

     

    

 

Section
9. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained
in this Agreement (including, without limitation, Sections 7 and 8) or in certificates of officers of Manager or the Issuer
submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf
of the Initial Purchaser or any controlling person, or by or on behalf of the Manager or the Issuer, and shall survive delivery of
the Notes to the Initial Purchaser.

 

Section
10. Termination of Agreement.

 

(a) Termination;
General. The Initial Purchaser may terminate this Agreement for itself, by notice to the Issuer, at any time at or prior to the
Closing Date (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which
information is given in the Final Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Manager or the Issuer, whether or not arising in the ordinary course of
business, (ii) if there has occurred any material adverse change in the financial markets in the United States, (iii) if any
outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic conditions, (iv) if trading in any securities of Manager or any
of its respective Affiliates has been suspended or materially limited by the Commission or if trading generally on the American
Stock Exchange, the New York Stock Exchange or in the NASDAQ National Market has been suspended or materially limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such
system or by order of the Commission, the Financial Industry Regulatory Authority, Inc. or any other governmental authority, (v) a
material disruption has occurred in commercial banking or securities settlement or clearing services in the United States or (vi) if
a banking moratorium has been declared by either federal or New York authorities, in each case of (i) through (vi), the effect of
which as to make it, in the reasonable judgment of the Initial Purchaser, impracticable or inadvisable to acquire the
Notes.

 

(b) Liabilities.
If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other
party except as provided in Section 5, and provided further that Sections 1, 7, 8, 9 and 13 shall survive such termination and
remain in full force and effect.

 

Section
11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given
if mailed or transmitted by any standard form of telecommunication. Notices to (i) Jefferies LLC shall be directed to it at Jefferies
LLC, 520 Madison Avenue, New York, NY 10022, Attention: General Counsel, (ii) the Manager shall be directed to it at FAT Brands Inc.,
9720 Wilshire Blvd., Suite 500, Beverly Hills, CA 90212, Attention: Andy Wiederhorn, E-mail: _________, Telephone: _________, and (iii)
the Issuer shall be directed to it at FAT Brands GFG Royalty I, LLC, c/o FAT Brands Inc., 9720 Wilshire Blvd., Suite 500, Beverly Hills,
CA 90212, Attention: Andy Wiederhorn, E-mail: _________, Telephone: _________.

 

    	 	 	 

     

    

 

Section
12. Parties. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser, the Manager, the Issuer
and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person,
firm or corporation, other than the Initial Purchaser, the Manager, the Issuer and their respective successors and the controlling persons,
directors and officers referred to in Sections 7 and 8 and their heirs and legal representatives any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof
are intended to be for the sole and exclusive benefit of the Initial Purchaser, the Manager, the Issuer and their respective successors,
and the controlling persons, directors and officers referred to in Sections 7 and 8 and their heirs and legal representatives and for
the benefit of no other person, firm or corporation. No purchaser of the Notes from the Initial Purchaser shall be deemed to be a successor
by reason merely of such purchase.

 

Section
13. Fiduciary Duties. The Issuer and the Manager each hereby acknowledges that in connection with the offering of the Notes
and the transactions related thereto, as contemplated herein and in the other Transaction Documents, and the discussions and
negotiations of the purchase price thereof set forth in this Agreement: (i) the Initial Purchaser has acted at arm’s length,
is not an agent of or advisor to, and owes no fiduciary duties to, any of the Issuer, the Manager or any other Person, (ii) the
Initial Purchaser owes the Issuer and the Manager only those contractual duties as are set forth in this Agreement and (iii) the
Initial Purchaser may have interests that differ from those of the Issuer and the Manager. Each of the Issuer and the Manager hereby
waive to the full extent permitted by applicable law any claims it may have against the Initial Purchaser arising from an alleged
breach of fiduciary duty in connection with the offering of the Notes and the transactions related thereto, as contemplated herein
and in the other Transaction Documents, including the discussions and negotiations of the purchase price thereof set forth in this
Agreement.

 

Section
14. Status of Initial Purchaser. Nothing contained in this Agreement (a) shall prevent the Initial Purchaser from entering
into any agency agreement, underwriting agreement or other similar agreement governing the offer and sale of securities with any
issuer or issuers of securities or (b) shall be construed in any way as precluding or restricting other rights of the Initial
Purchaser to sell or offer for sale any securities issued by any person, including securities similar to, our competing with, the
Notes.

 

Section
15. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH
THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES
WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW
PRINCIPLES OTHER THAN SECTIONS 5¬1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

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

 

Section
17. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction
hereof.

 

Section
18. Non-Petition. The Initial Purchaser hereby agrees that, prior to the date which is one year and one day after all the
Notes have been paid in full, it will not institute against, or join any Person in instituting against, the Issuer any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other similar proceedings under any Federal or
state bankruptcy or similar law.

 

    	 	 	 

     

    

 

If
the foregoing is in accordance with your understanding of our agreement, please sign and return to the Initial Purchaser a counterpart
hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Manager, the Issuer and the
Initial Purchaser in accordance with its terms.

 

	 	FAT
    BRANDS INC., as Manager
	 	 	 
	 	By:	/s/
    Andrew Wiederhorn
	 	Name:	Andrew
    Wiederhorn
	 	Title	CEO

 

	 	FAT
    BRANDS GFG ROYALTY I, LLC, as Issuer
	 	 	 
	 	By:	/s/
    Andrew Wiederhorn
	 	Name:	Andrew
    Wiederhorn
	 	Title:
    	CEO

  

	CONFIRMED
    AND ACCEPTED,	 
	as
    of the date first written above:	 
	 	 	 
	JEFFERIES
    LLC, as the Initial Purchaser	 
	 	 	 
	By:	/s/
    Michael Wade 	 
	Name:	Michael
    Wade	 
	Title:	Managing
    Director	 

 

    	 	 	 

     

    

 

ANNEX
A

 

		1.	FAT
                                            Brands GFG Royalty I, LLC (Series 2021-1) – Pricing Model Excel Spreadsheet
	 	 	 
		2.	FAT
                                            Brands GFG Royalty I, LLC Series 2021-1 Overview (see attached)

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