Court Opinion

ID: 4078534
Source: CourtListenerOpinion
Date Created: 2016-10-01 19:04:50.95175+00
Date Added: 2024-06-11T14:32:36.974611
License: Public Domain

ACCEPTED
                                                                                     04-15-00633-CV
                                                                         FOURTH COURT OF APPEALS
                                                                              SAN ANTONIO, TEXAS
                                                                               12/14/2015 5:36:21 PM
                                                   Oral Argument Requested            KEITH HOTTLE
                                                                                              CLERK

                        No. 04-15-00633-CV
_________________________________________________________________
                                                                    FILED IN
                                                             4th COURT OF APPEALS
                 In the Fourth Court of Appeals               SAN ANTONIO, TEXAS
                                                             12/14/2015 5:36:21 PM
                      San Antonio, Texas                         KEITH E. HOTTLE
                                                                      Clerk
_________________________________________________________________

      LSREF2 COBALT (TX), LLC, a Foreign Limited Liability Company,
                             Appellant

                                     v.

         410 CENTRE LLC, a Foreign Limited Liability Company,
                and JOHN B. URBAHNS, an Individual
                             Appellees
_________________________________________________________________

                On Appeal from the 408th District Court
             Bexar County, Texas; Cause No. 2013-CI-20922
_________________________________________________________________

                        APPELLANT’S BRIEF
_________________________________________________________________

Catherine M. Stone                        Mike Hatchell
cstone@langleybanack.com                   Texas Bar No. 09219000
 Texas Bar No. 19286000                   LOCKE LORD LLP
LANGLEY & BANACK, INC.                    600 Congress Avenue, Suite 2200
745 E. Mulberry Avenue, Suite 900         Austin, Texas 78701-2748
San Antonio, Texas 78212                  (512) 305-4700
(210) 736-6600; (210) 735-6889 Fax
                                          David L. Swanson
Cliff A. Wade                              Texas Bar No. 019554625
 Texas Bar No. 24013699                   Thomas F. Loose
CLIFF WADE LAW                             Texas Bar No. 12561500
3131 McKinney Avenue, Suite 600           LOCKE LORD LLP
Dallas, Texas 75204                       2200 Ross Avenue, Suite 2200
(214) 800-2090                            Dallas, Texas 75201-6776
                                          (214) 740-8000; (214) 740-8800 Fax
               IDENTITY OF PARTIES AND COUNSEL
APPELLANT:                             APPELLANT’S COUNSEL:

LSREF2 Cobalt (TX), LLC, a Foreign Catherine M. Stone
Limited Liability Company          cstone@langleybanack.com
                                    Texas Bar No. 19286000
                                   LANGLEY & BANACK, INC.
                                   745 E. Mulberry Avenue, Suite 900
                                   San Antonio, Texas 78212
                                   (210) 736-6600; (210) 735-6889 Fax

                                       Mike Hatchell
                                       mhatchell@lockelord.com
                                        Texas Bar No. 09219000
                                       LOCKE LORD LLP
                                       600 Congress Avenue, Suite 2200
                                       Austin, Texas 78701-2748
                                       (512) 305-4700

                                       David L. Swanson
                                       dswanson@lockelord.com
                                         Texas Bar No. 019554625
                                       Thomas F. Loose
                                       tloose@lockelord.com
                                         Texas Bar No. 12561500
                                       LOCKE LORD LLP
                                       2200 Ross Avenue, Suite 2200
                                       Dallas, Texas 75201-6776
                                       (214) 740-8000; (214) 740-8800 Fax

                                       Cliff A. Wade
                                       cliff@cliffwadelaw.com
                                        Texas Bar No. 24013699
                                       CLIFF WADE LAW
                                       3131 McKinney Avenue, Suite 600
                                       Dallas, Texas 75204
                                       (214) 800-2090

                                   i
APPELLEES:                              APPELLEES’ COUNSEL:

410 Centre, LLC, a Foreign Limited Peter M. Kelly
Liability Company and John B. Urbahns pkelly@texasappeals.com
                                      State Bar No. 00791011
                                      KELLY, DURHAM & PITTARD, L.L.P.
                                      1005 Heights Boulevard
                                      Houston, Texas 77008
                                      Telephone: 713.529.0048
                                      Facsimile: 713.529.2498

                                        Randall A. Pulman
                                        rpulman@pulmanlaw.com
                                        Thomas Rice
                                        trice@pulmanlaw.com
                                        PULMAN, CAPPUCCIO, PULLEN,
                                        BENSON & JONES LLP
                                        2161 NW Military Highway, Suite 400
                                        San Antonio, Texas 78213
                                        (210) 222-9404; (210) 892-1610 Fax

                                   ii
                                       TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL .............................................................i

TABLE OF CONTENTS......................................................................................... iii

STATEMENT OF THE CASE..................................................................................1

ISSUES PRESENTED...............................................................................................3

STATEMENT OF FACTS ........................................................................................4

  A. 410 Centre Borrows $5,100,000 and Urbahns Guarantees Payment
     and Performance of the Loan...........................................................................4

  B.    410 Centre and Urbhans Agree to Pay All Monies Owing Without
        Offset from Valuation and Appraisement Laws..............................................5

  C.    The Maturity Date on the Loan is Extended Twice. .......................................6

  D. The Parties Enter Into a Pre-Negotiation Agreement to Facilitate
     Settlement Discussions When 410 Centre Defaults Again. ............................8

  E.    Cobalt Purchases the Property With a Credit Bid at a Properly
        Conducted Foreclosure Sale. ...........................................................................9

  F.    A Deficiency Remains Due and Owing Under the Note and Guaranty..........9

  G. The Trial Court Renders a Take-Nothing Judgment. ....................................10

SUMMARY OF THE ARGUMENT ......................................................................10

ARGUMENT AND AUTHORITIES......................................................................13

  A. The PNA Did Not Alter the Parties’ Rights Under the Loan
     Documents. ....................................................................................................13

         1. Offset rights under § 51.003 can be waived and unequivocally
            were waived by the Loan Documents....................................................15

         2. When construed as a whole in light of the circumstances
            surrounding its execution, as it must be, the PNA has no legal
            effect on the § 51.003 waiver.................................................................17

                                                         iii
                (a) Defendants’ cabined view renders other portions of the PNA
                    meaningless. ...................................................................................18

                (b) The circumstances surrounding the execution of the PNA
                    also disprove Defendants’ construction. ........................................20

                (c) Defendants’ construction of Paragraph 3’s language is
                    wrong..............................................................................................22

          3. Cobalt did not have to plead the written waiver of § 51.003, but it
             did so. .....................................................................................................23

                (a) Because Cobalt’s pleadings sought judgment on the note and
                    guaranty, which both contained the waiver, no further
                    pleading was required. ...................................................................23

                (b) Cobalt pleaded waiver....................................................................24

  B.     Cobalt Conclusively Proved All Elements of its Claims to Recover the
         Deficiency Plus Attorneys’ Fees. ..................................................................26

          1. The existence and validity of the Loan Documents is not in
             question. .................................................................................................27

          2. Cobalt proved it owned the note and guaranty. .....................................27

          3. Prerequisites to foreclosure were all satisfied, and the amount of
             the deficiency was a simple mathematical calculation that was
             proved conclusively. ..............................................................................30

          4. Cobalt conclusively proved its claim for attorneys’ fees. .....................32

CONCLUSION AND PRAYER .............................................................................33

CERTIFICATE OF COMPLIANCE.......................................................................36

CERTIFICATE OF SERVICE ................................................................................37

APPENDIX                                                                                                            Tab

Trial Court’s Judgment (CR:2035) ..........................................................................A

Note (6RR:PX2).......................................................................................................B

                                                            iv
Guaranty (6RR:PX4)................................................................................................C

Forbearance Agreement (6RR:PX7)........................................................................D

Pre-Negotiation Agreement (6RR:PX31)................................................................E

                                                         v
                                     INDEX OF AUTHORITIES

                                                                                                           Page(s)
CASES
City of Celina v. Blair,
   171 S.W.3d 608 (Tex. App.—Dallas 2005, no pet.) ..........................................25

Compass Bank v. Goodman,
  416 S.W.3d 715 (Tex. App.—Dallas 2013, pet. denied)....................................15

Compass Bank v. Manchester Platinum Mgmt., Inc.,
  No. 05-11-00912-CV, 2013 WL 4081420 (Tex. App.—Dallas Aug. 13,
  2013, pet. denied)................................................................................................15

Dreiling v. Security State Bank & Trust,
  No. 01-14-00257-CV, 2015 WL 1020212 (Tex. App.—Houston [1st
  Dist.] March 5, 2015, no pet.).............................................................................15

Fountains Int’l Group, Inc. v. Summit Oak Dev., LLC,
  No. 04-14-00205-CV, 2015 WL 1138418 (Tex. App.—San Antonio Mar.
  11, 2015, no pet.) ................................................................................................25

Frost Nat’l Bank v. L & F Dist., Ltd.,
   165 S.W.3d 310 (Tex. 2005) ..............................................................................21

Holmes v. Graham Mortgage Corp.,
  449 S.W.3d 257 (Tex. App.—Dallas 2014, pet. denied)....................................15

Hometown 2006-1 1925 Valley View, L.L.C. v. Prime Income Asset Mgmt.,
  L.L.C., 595 Fed. Appx. 306 (5th Cir. 2014) .......................................................16

Horizon CMS Healthcare Corp. v. Auld,
  34 S.W.3d 887 (Tex. 2000).................................................................................23

Houston Cmty. Coll. Sys. v. Schneider,
  67 S.W.3d 241 (Tex. App.—Houston [1st Dist.] 2000, pet. denied) .................25

Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd.,
  352 S.W.3d 462 (Tex. 2011) ..............................................................................20

Hudspeth v. Investor Collection Serv. Ltd. P’ship,
  985 S.W.2d 477 (Tex. App.—San Antonio 1998, no pet.) ................................27

                                                          vi
Lane v. Travelers Indem. Co.,
  391 S.W.2d 399 (Tex. 1965) ..............................................................................21

LaSalle Bank Nat’l Ass’n v. Sleutel,
  289 F.3d 837 (5th Cir. 2002) ..............................................................................15

Lee v. Martin Marietta Materials Sw., Ltd.,
   141 S.W.3d 719 (Tex. App.—San Antonio 2004, no pet.) ................................27

Lopez-Welch v. State Farm Lloyds,
  No. 3:14-CV-2416-L, 2014 WL 5502277 (N.D. Tex. Oct. 31, 2014) ...............25

Moayedi v. Interstate 35/Chisam Road, L.P.,
  438 S.W.3d 1 (Tex. 2014).......................................................................13, 15, 17

Morgan v. Ebby Halliday Real Estate, Inc.,
  873 S.W.2d 385 (Tex. App.—Fort Worth 1993, no writ) ..................................33

Nussbaum v. City Nat’l Bank,
  No. 14-13-01052-CV, 2015 WL 545603 (Tex. App.—Houston [14th
  Dist.] Feb. 10, 2015, pet. denied) .......................................................................15

Paciwest, Inc. v. Warner Alan Props., LLC,
  No. 02-10-00378-CV, 2012 WL 3499603 (Tex. App.—Fort Worth Aug.
  16, 2012, pet. denied)..........................................................................................33

Reilly v. Rangers Mgmt., Inc.,
   727 S.W.2d 527 (Tex. 1987) ..............................................................................21

Seagull Energy E & P, Inc. v. Eland Energy, Inc.,
   207 S.W.3d 342 (Tex.2006)................................................................................18

Sun Oil (Del.) v. Madeley,
   626 S.W.2d 726 (Tex. 1981) ..............................................................................20

Tawes v. Barnes,
  340 S.W.3d 419 (Tex. 2011) ..............................................................................13

CONSTITUTION, STATUTES, AND RULES
Tex. Prop. Code § 51.003 .................................................................................passim

Tex. Prop. Code § 51.003(c)..............................................................................13, 15

                                                        vii
Tex. R. App. P. 44.1(b) ............................................................................................34

TEX. R. CIV. P. 59...............................................................................................24, 25

Tex. R. Civ. P. 296.....................................................................................................2

Tex. R. Civ. P. 297.....................................................................................................2

                                                          viii
                          STATEMENT OF THE CASE
      This suit to collect a deficiency owing on a note after default and foreclosure

by the note holder raises, among others, these important questions:

      ●      When a note and guaranty contain unequivocal waivers of the

statutory right to a “fair market value” offset against a deficiency claim, are those

waivers negated by a pre-negotiation agreement (PNA) that expressly provides

nothing contained in it relieves the borrower or guarantor of any obligation they

have under the note and guaranty?

      ●      In construing the effect of the PNA, does a court have to give effect to

and harmonize all provisions of the agreement, rather than considering one

provision in isolation?

      ●      When a lender sues on and attaches to its petition loan documents that

contain a waiver of the statutory right to offset a deficiency by the fair market

value of the collateral at the time of foreclosure, does the lender have to separately

plead that it is relying on the waiver contained in the loan documents?

      Those issues arise in this context:

      The suit: LSREF2 Cobalt (TX), LLC sued to recover a deficiency owed

under a note made by 410 Centre LLC, guaranteed by John B. Urbahns and

secured by, among other things, real property. (CR:141.) In the note and guaranty,

410 Centre and Urbahns (hereafter “Defendants”) agreed to pay all amounts owed

                                            1
without offset, including a claimed fair market value offset under Property Code

§ 51.003. (PX2, 4.) The principal dispute at trial was whether Cobalt had waived

the right to be paid all amounts owed without offset when it executed a Pre-

Negotiation Agreement less than a week before a scheduled foreclosure sale in

order to have “settlement discussions” with the borrower.            (See 2RR:124

(Defendants’ counsel described this as “the whole issue”); 3RR:10-12.)

      The trial: Trial was to the court, the Hon. Michael E. Mery presiding. (See

2RR:1.) The court initially concluded that any right to an offset “was waived at

the outset by the loan documents.” (3RR:11-12.) But, after Defendants rested, it

reversed course and held that Cobalt “waived the waiver” by entering into the Pre-

Negotiation Agreement. (3RR:85-86.) At a hearing where the parties were to

make closing arguments, the court announced that both sides would take nothing

and that each side shall pay their own attorneys’ fees. (4RR:3.)

      The trial court disposition: The trial court later rendered a take-nothing

judgment against Cobalt. (CR:2035.) Cobalt timely requested findings of fact and

conclusions of law in accordance with Rule 296 (CR:2037) and timely reminded

the court of the request when the findings were past due under Rule 297.

(CR:2180.) The trial court never filed findings of fact or conclusions of law.

      This appeal was taken timely from that judgment. (CR:2193.)

                                         2
                              ISSUES PRESENTED
      1.     Did the trial court err in granting a take-nothing judgment against

Cobalt, and in failing to render judgment for Cobalt, on its claims? In particular:

      a.     Did the trial court err as a matter of law by not entering judgment for

             Cobalt on its deficiency claim and for attorneys’ fees where Cobalt

             proved those claims as a matter of law?

      b.     Did the trial court err as a matter of law in concluding that 410 Centre

             and Urbahns were not obligated to pay all amounts due and owing

             under the note and guaranty?

      c.     Did the trial court err as a matter of law in concluding that 410 Centre

             and Urbahns were entitled to an offset against amounts owed under

             the note and guaranty, including a fair market value offset under

             Property Code § 51.003?

      d.     Did the trial court err as a matter of law in concluding that the parties’

             Pre-Negotiation Agreement altered the parties’ agreement that any

             claim for an offset under § 51.003 was waived?

      e.     To the extent the trial court concluded Cobalt was required, but failed,

             to plead waiver, did the court err as a matter of law?

      2.     In the event this Court determines there were fact issues on any

element of Cobalt’s burden of proof – including the existence of the note, the

                                          3
validity of the signatures, Cobalt’s ownership, the default, or the amount of the

deficiency – are any presumed findings on those elements against the great weight

and overwhelming preponderance of the evidence, requiring that the judgment be

reversed and the cause remanded to the trial court for retrial of those elements?

      3.     In the event the Court determines it cannot compute and render

judgment on the deficiency, must the case be remanded to the trial court either for

calculation of the deficiency amount or a trial only on those facts necessary to

determine that amount?

                            STATEMENT OF FACTS

A.    410 Centre Borrows $5,100,000 and Urbahns Guarantees Payment and
      Performance of the Loan.
      In 2008, 410 Centre, LLC, entered into a Loan Agreement with M&I

Marshall & Ilsley Bank and executed and delivered a promissory note in the

original principal amount of $5,100,000.00. (PX1, 2.) 410 Centre also executed a

Deed of Trust Security Agreement to secure repayment of the note and place a lien

on the property. (PX3.)

      “As partial consideration for and in order to induce Lender to make the

Loan,” John B. Urbahns, a sophisticated businessman and member of 410 Centre,

executed a Continuing Guaranty in which he “absolutely, unconditionally and

irrevocably” guaranteed payment and performance by 410 Centre. (PX4 (¶¶ C, 1);

3RR:48, 84.)

                                          4
       Cobalt became the owner and holder of the note and beneficiary of the

guaranty.1    (PX2 (allonges affixed to note); PX8-15 (assignments of Loan

Documents); 2RR:63-65, 68-70; 2RR:76 (Cobalt has possession of the original

Loan Documents and is the owner and holder of the note and beneficiary of the

guaranty).)

B.     410 Centre and Urbhans Agree to Pay All Monies Owing Without
       Offset from Valuation and Appraisement Laws.
       In the note, 410 Centre agreed to the following waiver of statutory rights:

       6.    Valuation and Appraisement Laws. All principal, interest and
       other amounts payable under or with respect to this Note shall be
       payable without relief from valuation and appraisement laws.

       13. Waiver and Consent. … All guarantors … of this Note hereby
       waive generally and specifically, to the extent waivable, any and all
       rights that they may have, by contract, at equity or under any state or
       federal law, to any defense, offset, claim in recoupment or
       counterclaim not specifically set forth herein.

(PX2 (¶¶ 6, 13).)

       In the guaranty, Urbahns agreed to similar terms:

       2.    Guarantor agrees to pay to Lender, without relief from
       valuation and appraisement laws, all amounts payable under this
       Guaranty …

       11.    Guarantor hereby waives each of the following:

                                          ***
              (e) Any and all rights Guarantor may have under any anti-
              deficiency statute or other similar protections.
1
 Cobalt also was assigned all other “Loan Documents,” as defined in paragraph 1.1 of the Loan
Agreement. (PX8-15.)

                                             5
(PX4 (¶¶ 2, 11).) Urbahns further agreed that his obligations “under this Guaranty

shall be absolute and unconditional under any and all circumstances … and shall

remain in full force and effect until … the Indebtedness has been paid in full.”

(PX4 (¶ 7).)2

C.     The Maturity Date on the Loan is Extended Twice.
       410 Centre failed to pay amounts due and owing when the note matured on

June 30, 2010. (See 2RR:58-59; PX2 (¶ 1 at p. 3 (defining the “Original Maturity

Date”)).) 410 Centre and M&I extended the maturity of the loan to September 30,

2011, under a Confirmation and Amendment of Loan Documents (PX5) in which

410 Centre also:

       •        reaffirmed and ratified “all warranties, representations, provisions,
                conditions, terms, covenants and agreements set forth in” the note and
                deed of trust;

       •        represented and warranted that it had “no defenses, offsets, claims or
                counterclaims against Lender;” and

       •        agreed “that Lender has not waived the full compliance by Borrower
                with all terms and provisions” of the Note and deed of trust.

(PX5 (¶¶ 7, 9, 12).)

       Contemporaneously, Urbahns also executed a Consent and Confirmation of

Guaranty in which he consented to the extension of the maturity date, and:

2
  The term “Indebtedness” is defined in the guaranty as “all of the indebtedness, obligations and
Indemnifications guaranteed hereby.” (PX4 at ¶ 1.)

                                               6
      •      reaffirmed and ratified “all warranties, representations, provisions,
             conditions, terms, covenants and agreements set forth in” the
             guaranty;

      •      represented and warranted that he had “no defenses, offsets, claims or
             counterclaims against Lender;” and

      •      agreed that Lender had not waived full compliance by “Guarantor
             with all terms and provisions of the Guaranty.”

(PX6 (¶¶ 2, 4, 5).)

      BMO Harris Bank N.A. became the successor-by-merger to M&I. 410

Centre informed that bank that it was unable to pay the loan on the new maturity

date – September 30, 2011. (PX7 (¶ E).) So, Defendants and BMO entered into a

Forbearance Agreement.      (PX7.)   In the Forbearance Agreement, Defendants

acknowledged that 410 Centre was “in default under the terms of the Loan

Documents and that Lender is entitled to exercise all of its rights, powers and

remedies thereunder.” (PX7 (¶ 3).) BMO agreed that, during the Forbearance

Period (September 30, 2011 to September 30, 2013), it would forbear from

initiating or prosecuting any legal action to collect the debt. (PX7 (¶ 5).) In the

Forbearance Agreement, Defendants again agreed that:

      •      they had “no defenses, set-offs, claims, counterclaims, affirmative
             defenses, or causes of action of any kind or nature with respect to any
             of the Loan Documents or the Indebtedness represented thereby;”

      •      “nothing contained herein shall be deemed to be a waiver by Lender
             of … any provision contained in the Loan Documents;” and

                                         7
      •      they “forever relinquish and waive, any and all debts, demands,
             claims, defenses … affirmative defenses and causes of action
             whatsoever …”

(PX7 (¶¶ 4, 21).)

D.    The Parties Enter Into a Pre-Negotiation Agreement to Facilitate
      Settlement Discussions When 410 Centre Defaults Again.
      410 Centre and Urbahns failed to pay the debt when it matured on

September 30, 2013. (2RR:60-61, 63.) Steps were initiated to foreclose on the

property.   (2RR:76-77; PX21 (notice of foreclosure); PX22 (appointment of

substitute trustee); PX23-25 (Affidavits of Preparation, Filing, Posting and Mailing

foreclosure notices).)

      After receiving notice of the foreclosure sale, Urbahns requested a further

delay in enforcement of the Loan Documents and asked to discuss resolution of the

past-due debt. (3RR:60, 76-77.) Thus, less than a week before the scheduled

foreclosure sale, 410 Centre, Urbahns, and Wells Fargo Bank – the then-holder of

the note – entered into a Pre-Negotiation Agreement. (PX31.) This is the critical

document that, according to the trial court, waived the waiver of offset rights under

Property Code § 51.003.

      The PNA recites that the “parties have had meetings, discussions and

negotiations and contemplate further meetings, discussions and possible

negotiations between themselves or their agents or representatives regarding the

Loan, and the facts and circumstances attendant thereto.” (PX31 (¶ B).) The PNA

                                         8
provided: (i) that nothing said during the course of discussions would in any way

modify the Loan Documents “except to the extent the parties otherwise agree in a

duly executed and binding written agreement pursuant to Section 4” of the PNA

(PX31 (¶ 1)); and (ii) that nothing contained in it was intended to limit or affect

Cobalt’s rights, or to relieve 410 Centre or Urbahns of any obligation, under the

Loan Documents. (PX31 (¶ 5).) The parties’ discussions did not lead to any

written agreement under Section 4 of the PNA.

E.     Cobalt Purchases the Property With a Credit Bid at a Properly
       Conducted Foreclosure Sale.
       410 Centre and Urbahns were notified on October 15, 2013, that the

foreclosure sale was scheduled for November 5, 2013. (PX21.)3 The foreclosure

sale was properly conducted on the noticed date and time, and the property was

sold to Cobalt for a credit bid (a bid by a secured lender of a credit against the debt

instead of cash) of $2,800,000.00. (PX26; see also 2RR:82-83.)

F.     A Deficiency Remains Due and Owing Under the Note and Guaranty.
       Cobalt put on a witness who testified, without rebuttal, that, as of the date of

foreclosure, the principal balance owed on the note was $5,099,909.00, the regular

interest balance was $36,726.43, and the default interest balance was $17,566.35,

for a total indebtedness of $5,154,201.78. (2RR:102-03; PX17 (loan history from

3
 The notice also provided: “Lender does not intend to waive, and nothing contained herein shall
be construed as a waiver of, any of the rights and remedies of Lender under the Loan
Documents, or under applicable law.” (PX21 at 2.)

                                              9
June 13, 2008 through October 1, 2012); PX18 (loan history from October 1, 2012

through September 1, 2013).)

G.    The Trial Court Renders a Take-Nothing Judgment.
      At the conclusion of the evidence, and prior to a hearing in which the trial

court was to hear closing arguments, the court announced that it would render

judgment that both parties “take nothing,” which it later did. (4RR:3; CR:2035.)

The court stated on the record the basis for the ruling:          “I have made a

determination … that any waiver of those rights under Chapter 51 of the Property

Code, if any, that occurred were, in fact, waived by the entry of the … pre-

negotiation agreement,” specifically, “provision number 3.” (3RR:85-86.)

      Certainly that was the central legal issue in the case. But, because of the

absence of findings and conclusions, Cobalt will brief all elements of its burden of

proof, starting with the issue of the §51.003 waiver and concluding with the

mechanical elements of the foreclosure.

                      SUMMARY OF THE ARGUMENT
      The take-nothing judgment should be reversed and judgment rendered for

Cobalt (or remanded for entry of judgment) for the following reasons:

      1.    The § 51.003 Waiver: This case should have been a straightforward

suit for a deficiency under a promissory note. The trial court rendered judgment

only because of Defendants’ argument that the parties’ agreements in the note and

                                          10
guaranty unequivocally waiving the fair market value offset in § 51.003 were

themselves waived by a single paragraph – Paragraph 3 – of the Pre-Negotiation

Agreement. That was error for several reasons:

      ●      Isolating paragraph 3 and imputing waiver from its provisions out of

the context of the entire agreement violated the rule that all provisions of a contract

must be harmonized so that all are given effect.

      ●      When considered along with paragraphs 2, 4, 5 and 6 – as proper

contract construction principles require – it is clear that, as a whole, the PNA

operates as a standstill agreement wherein the parties preserved the status quo,

without waiving existing or matured rights, for the sole purpose of entertaining

settlement negotiations. For example, paragraph 5 unequivocally says that the

PNA is not intended (i) to “limit or otherwise affect” Cobalt’s “rights or remedies

it may have before, during or after” the negotiations and, conversely (ii) it is not

intended “to relieve the Obligor [Defendants] of any obligations it has under the

Loan Documents.” Paragraph 2 says that, by executing the PNA, Cobalt is not

waiving its right to “insist on full performance” of the loan agreement. And

Paragraphs 4 and 6 say (i) that no modification of the loan documents could be

accomplished without a separate writing approved by a lender committee and

confirmed by senior management (which never occurred) and (ii) Cobalt’s

                                          11
negotiators implementing the PNA have no authority to bind Cobalt short of the

requirements of paragraph 4.

      The trial court’s allowing paragraph 3 to render all those provisions

meaningless violates fundamental contract construction principles.

      ●       Finally, the trial court’s construction is contrary to the surrounding

circumstances and common sense. The loan was in default and foreclosure was

imminent when the PNA was executed. It makes no sense that Cobalt would give

up all the protections in the various waivers of fair market value offset rights just to

open uncertain “negotiations” with Defendants which could (and did) lead

nowhere.

      2.      Elements of a deficiency judgment: The remaining elements

necessary to Cobalt’s obtaining a deficiency judgment were either admitted or

proved conclusively:

      (i)     Defendants admitted the making of the loan and the guaranty.

      (ii)    Cobalt meticulously traced its ownership of the Loan Documents.

      (iii)   The default on the loan was admitted.

      (iv)    Cobalt’s witness established without challenge the mechanical

              computation of the deficiency.

      (v)     The parties stipulated to recoverable attorneys’ fees.

                                          12
      Thus, all components essential to a final deficiency judgment were

established, permitting this court to render judgment for the deficiency or remand it

to the trial court for entry of judgment on the proved sums.

                      ARGUMENT AND AUTHORITIES
      The fact that the trial court filed no findings of fact or conclusions of law,

although timely requested (and reminded) to do so, does not affect the case

procedurally, because Cobalt’s issues all concern questions of law and are

reviewed de novo. In particular, the controlling issues involve construction of

contracts that are unambiguous and, as this Court knows, “[t]he interpretation of an

unambiguous contract . . . is a question of law,” which this Court reviews de novo.

Moayedi v. Interstate 35/Chisam Road, L.P., 438 S.W.3d 1, 7 (Tex. 2014); Tawes

v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011).

      In the following arguments, Cobalt will show (i) the documents conclusively

waived 410 Centre’s principal statutory defense that it was entitled, under § 51.003

of the Property Code, to have the deficiency wiped out by offsetting against the

loan balance the fair market value of the property; and (ii) as a matter of law,

Cobalt proved all other prerequisites to a deficiency judgment.

A.    The PNA Did Not Alter the Parties’ Rights Under the Loan Documents.
      The centerpiece of Defendants’ defense to the deficiency claim is Tex. Prop.

Code § 51.003(c), which provides:

                                         13
      If the court determines that the fair market value is greater than the
      sale price of the real property at the foreclosure sale, the persons
      against whom recovery of the deficiency is sought are entitled to an
      offset against the deficiency in the amount by which the fair market
      value, less the amount of any claim, indebtedness, or obligation of any
      kind that is secured by a lien or encumbrance on the real property that
      was not extinguished by the foreclosure exceed the sale price.

      Defendants’ principal argument is that their waiver of § 51.003’s offset

rights in the Loan Documents was itself waived and negated by the later PNA and,

therefore, the deficiency is wiped out by the fair market value of the property. For

example, Defendants’ counsel stated in his cross examination of Cobalt’s

representative, Marisa McGaughey: “ … the whole issue here in the trial … [i]s

whether your company was obligated … to give Mr. Urbahns and 410 Centre a

credit for the fair market value of the property as of November 5, 2013.”

(2RR:124.) That is the only argument the trial court appears to have credited when

he stated on the record: “I have made a determination … that any waiver of those

rights under Chapter 51 of the Property Code, if any, that occurred were, in fact,

waived by the entry of the … pre-negotiation agreement,” specifically, “provision

number 3.” (3RR:85-86.)

      That theory succumbs to the unambiguous language of the instruments

involved, established principles of contract construction, and common sense:

                                        14
       1.     Offset rights under § 51.003 can be waived and unequivocally
              were waived by the Loan Documents.
       First, there is no policy or prohibition against waiving the protections of

§ 51.003. Courts construe the § 51.003 offset right as an affirmative defense that

may be waived. Moayedi, 438 S.W.3d at 6-7. In that case, the Court held the

guarantor had waived the statutory right of offset under § 51.003(c) by agreeing to

a general waiver of defenses in a guaranty agreement. Id. at 7-8.4 Following suit,

many Texas courts have found similar language sufficient to unequivocally waive

offset rights under § 51.003.5

4
  The waiver here is clearer than that in Moayedi because it waives the specific defense 410
Centre and Urbahns purport to assert. See Moayedi, 438 S.W.3d at 7 n.31 (noting that a waiver
of a “right of offset” was more specific than a general waiver of defenses). In this case,
however, 410 Centre and Urbahns agree to pay all amounts owed without relief from – not just
general laws – but from valuation and appraisement laws, and Urbahns waived any right he may
have had specifically under “any anti-deficiency statute or other similar protections.” (PX2, 4.)
5
  Holmes v. Graham Mortgage Corp., 449 S.W.3d 257, 265 (Tex. App.—Dallas 2014, pet.
denied) (holding guarantor who waived “any defense to liability” included an offset defense
under § 51.003 as a matter of law); Nussbaum v. City Nat’l Bank, No. 14-13-01052-CV; 2015
WL 545603, at *3 (Tex. App.—Houston [14th Dist.] Feb. 10, 2015, pet. denied) (holding
agreement not to “insist upon, plead, claim, or take the benefit or advantage of any law now or
hereafter in force … providing for any appraisement, valuation, stay, extension or redemption
…” sufficient to waive offset under § 51.003 as a matter of law); Dreiling v. Security State Bank
& Trust, No. 01-14-00257-CV, 2015 WL 1020212, at * 4-5 (Tex. App.—Houston [1st Dist.]
March 5, 2015, no pet.) (holding guarantor’s agreement to make all payments “without set-off or
deduction or counterclaim” waived offset under § 51.003 as a matter of law); Compass Bank v.
Manchester Platinum Mgmt., Inc., No. 05-11-00912-CV, 2013 WL 4081420, at *3 (Tex. App.—
Dallas Aug. 13, 2013, pet. denied) (holding guaranty language stating “Guarantor waives, to the
fullest extent permitted by applicable law, the benefit of any statute of limitation or other
defenses affecting its liability hereunder or the enforcement thereof” was sufficient to waive
right under § 51.003 as a matter of law) (emphasis added); Compass Bank v. Goodman, 416
S.W.3d 715, 719 (Tex. App.—Dallas 2013, pet. denied) (same).The Fifth Circuit, construing
Texas law, holds similarly. See also LaSalle Bank Nat’l Ass’n v. Sleutel, 289 F.3d 837, 839-42
(5th Cir. 2002) (holding guarantor waived § 51.003 rights under agreement providing
“Guarantor expressly waives and relinquishes all rights and remedies now or hereafter accorded

                                               15
       Second, every document signed by Defendants unambiguously waives rights

under § 51.003. For example:

       ●        In the note, 410 Centre agreed it had no right to claim a credit or

offset based on a fair market value appraisal of the property at the time of

foreclosure and, in fact, it agreed to pay “the entire unpaid principal balance and all

accrued interest” “without relief from valuation and appraisement laws.” (PX2

(¶¶ 3.3, 6).)

       ●        In the guaranty, Urbahns agreed to pay “without relief from valuation

and appraisement laws, all amounts payable” under the guaranty, and expressly

waived “[a]ny and all rights Guarantor may have under any anti-deficiency statute

or other similar protections.” (PX4 (¶¶ 2, 11(e).) Urbahns further agreed “to

waive any anti-deficiency statute or other similar protections which may exist

under applicable law,” and promised “to pay to Lender upon demand the amount

of any such deficiency.” (PX4 (¶ 14).)

       ●        In the Forbearance Agreement, Defendants re-affirmed agreements in

the Loan Documents and acknowledged that they had “no defenses, set-offs,

claims, counterclaims, affirmative defenses, or causes of action of any kind or

by applicable law to guarantors … including … any defense, right of offset or other claim which
Guarantor may have against Lender …”); Hometown 2006-1 1925 Valley View, L.L.C. v. Prime
Income Asset Mgmt., L.L.C., 595 Fed. Appx. 306, 309-10 (5th Cir. 2014) (holding guarantor
waived offset claim when it agreed its obligations “shall not be reduced, discharged or released
because or by reason of any existing or future offset, claim or defense …”).

                                              16
nature with respect to any of the Loan Documents or the Indebtedness represented

thereby.” (PX7 (¶ 4).)

      Given the unambiguous language in all the Loan Documents, it is clear why

Defendants must find some other document to accomplish the waiver essential to

their judgment. Their argument that the PNA does so runs aground on contract

construction principles as well.

      2.     When construed as a whole in light of the circumstances
             surrounding its execution, as it must be, the PNA has no legal
             effect on the § 51.003 waiver.
      Defendants’ resort to the PNA to absolve the deficiency depends on ignoring

all provisions of the PNA except Paragraph 3. That paragraphs provides:

      3.     No Waiver by Obligor. Obligor has not in any way waived any
      rights or remedies it may have prior to and until the date of this
      Agreement with respect to the Loan or any of the Loan Documents, or
      otherwise available at law or in equity either directly in an action
      against Creditor, as a defense against any action by Creditor against
      Obligor or any other civil proceeding or otherwise.

(PX31 (¶ 3).)

      Defendants’ myopic view violates the rule that courts “must ‘examine and

consider the entire writing in an effort to harmonize and give effect to all the

provisions of the contract so that none will be rendered meaningless. No single

provision taken alone will be given controlling effect; rather, all the provisions

must be considered with reference to the whole instrument.’”       Moayedi, 438
17
S.W.3d at 7 (quoting Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207
S.W.3d 342, 345 (Tex. 2006) (emphasis in the original)).

       Defendants’ theory assaults those principles several ways.

              (a)    Defendants’ cabined view renders other portions of the PNA
                     meaningless.
       Paragraph 5 of the PNA refutes Defendants’ argument. It provides:

       … Nothing contained in this Agreement is intended (i) to limit or
       otherwise affect Creditor’s rights or Creditor’s ability to initiate,
       continue or otherwise proceed to exercise any rights or remedies it
       may have before, during or after Discussions, if any, including, but
       not limited to, giving notices of default or initiating foreclosure
       proceedings; or (ii) to relieve the Obligor of any obligations it has
       under the Loan Documents.

(PX31 (¶ 5 (emphasis added).)6 A Cobalt representative correctly explained that

the PNA “preserves the loan documents in their original state … they’re not being

modified.” (2RR:129 (emphasis added).)

       If paragraph 3 is construed as Defendants claim, i.e., to modify Cobalt’s

rights and to relieve Defendants of obligations under the Loan Documents, then

paragraph 5 is rendered meaningless – in clear violation of the rules of

construction.

       Paragraph 2 of the PNA also says Cobalt has not waived any rights or

remedies. Paragraph 2 explicitly contradicts Defendants’ limited view because it

6
 “Loan Documents” are defined in the PNA, and include, among other things, the note, the deed
of trust, and the guaranty. (PX31 (at Exhibit A).)

                                             18
unambiguously protects against and forecloses the very waiver Defendants claim

when it says:

      No Waiver by Creditor. Creditor has not in any way waived any
      rights or remedies it may have to insist on full performance by the
      Obligor of all obligations under the Loan Documents or any rights or
      remedies available to it thereunder or otherwise available at law or in
      equity.

(PX31 (¶ 2).)

      It is impossible to reconcile Defendants’ interpretation of paragraph 3 – that

it negates the Property Code waiver in the Loan Documents – without flouting the

plain language of paragraph 2 that Cobalt has not “in any way” waived its right to

“insist on full performance … of all obligations under the Loan Documents.”

(PX31 (¶ 2).) Full performance under the Loan Documents includes payment of

all amounts owed “without relief from valuation and appraisement laws.” (PX2 (¶

6); PX4 (¶ 2).)      Thus, under Defendants’ interpretation, the PNA would

nonsensically provide that, under paragraph 2 Cobalt had not waived the right to

full performance, but under paragraph 3 Cobalt had waived the right to full

performance.    The two paragraphs can rationally be harmonized, as contract

construction principles require, by construing Paragraph 3 as part of an agreement

that “preserves the loan documents in their original state.” (2RR:129.)

      PNA’s paragraphs 4 and 6 preclude any modification without specified

formalities. Paragraph 4 precludes any modification of the Loan Documents

                                        19
unless agreed to in writing, approved by Cobalt’s resolution committee, and

confirmed by its senior management. Paragraph 6 provides that the individuals

engaged in discussions with Defendants have no authority to bind Cobalt, and it

reiterates the continuing effect of paragraph 4 formalities required to modify the

Loan Documents.7

       None of those formalities accompanied execution of the PNA. Thus, the

detailed provisions specifying requirements for modification of the Loan

Documents are also rendered meaningless if the PNA itself is construed to modify

the Loan Documents.

              (b)     The circumstances surrounding the execution of the PNA
                      also disprove Defendants’ construction.
       The PNA’s purpose and meaning are further and properly informed by the

circumstances surrounding its execution.              See Houston Exploration Co. v.

Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469 (Tex. 2011) (citing

Sun Oil (Del.) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981)).8

7
 There was no evidence that any agreement to modify the Loan Documents, or the PNA itself,
was approved by Cobalt’s resolution committee and confirmed by its senior management.
8
  The parol evidence rule “does not prohibit consideration of surrounding circumstances that
inform, rather than vary from or contradict, the contract text.” Houston Exploration, 352 S.W.3d
at 469. Circumstances that may be considered include “‘the commercial or other setting in
which the contract was negotiated and other objectively determinable factors that give a context
to the transaction between the parties.’” Id. (quoting 11 Richard A. Lord, WILLISTON ON
CONTRACTS § 32.7 (4th ed. 1999)).

                                              20
       The PNA was executed October 30, 2013 – less than a week before a

scheduled foreclosure. (PX31.) At that time, 410 Centre was already in default

under the note by failing to pay the debt at maturity. (See PX21, 23.)9 There is no

evidence that, in executing the PNA, Defendants intended to negotiate an

agreement that would potentially relieve them of their deficiency liability or that

Cobalt intentionally relinquished its right to seek any deficiency without offset.

The purpose of the PNA was “for settlement discussions.” (2RR:130.)

       It is counterintuitive that Cobalt would have given up such a valuable right

on the eve of the scheduled foreclosure sale simply for the opportunity to engage in

discussions with Defendants. Given the immediate circumstances, Defendants’

construction of the PNA runs afoul of the principle that courts “construe contracts

‘from a utilitarian standpoint bearing in mind the particular business activity

sought to be served’ and ‘will avoid when possible and proper a construction

which is unreasonable, inequitable, and oppressive.’” Frost Nat’l Bank v. L & F

Dist., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (quoting Reilly v. Rangers Mgmt.,

Inc., 727 S.W.2d 527, 530 (Tex. 1987)); see also Lane v. Travelers Indem. Co.,

391 S.W.2d 399, 402 (Tex. 1965) (refusing to construe contract in manner that

would lead to absurd results). Indeed, Defendants’ construction of the PNA’s

9
 In the October 15, 2013 notice of foreclosure, Cobalt again told Defendants it did not intend to
waive “any of the rights and remedies of Lender under the Loan Documents ….” (PX21.)

                                               21
paragraph 3 as itself substantially altering the Loan Documents would be utterly

without consideration.

             (c)   Defendants’ construction of Paragraph 3’s language is
                   wrong.
       Even if contract construction principles countenanced looking at paragraph 3

in isolation, that paragraph’s language does not mean what Defendants claim:

       First, the PNA provides that the Loan Documents would not be modified,

“except to the extent the parties otherwise agree in a duly executed and binding

written agreement pursuant to Section 4….” (PX31 (¶ 1) (italics emphasis added).)

This requires an agreement other than the PNA to modify the Loan Documents.

       Second, Paragraph 3 says “Obligor has not in any way waived any rights or

remedies it may have prior to and until the date of this Agreement …” (PX31 (¶ 3)

(emphasis added).) By executing the PNA with that language, Defendants did not

waive any right or remedy they “may have,” but the PNA did not revive rights

Defendants did not have. At that time, they did not have a right to an offset under

Chapter 51 because they had waived that right in the note and guaranty. Therefore,

the parties’ agreement that 410 Centre and Urbahns would pay the debt “without

relief from valuation and appraisement laws” was unaffected by paragraph 3 of the

PNA.

                                        22
      3.     Cobalt did not have to plead the written waiver of § 51.003, but it
             did so.
      In the trial court, Defendants argued that Cobalt could not rely on the written

waivers in the note and guaranty because Cobalt did not plead waiver. (E.g.,

2RR:15.) This argument is wrong on the law, but, in fact, Cobalt did plead waiver.

Thus, the argument is meritless on several levels:

             (a)    Because Cobalt’s pleadings sought judgment on the note and
                    guaranty, which both contained the waiver, no further
                    pleading was required.
      Cobalt sued on the note and guaranty to enforce all of the rights provided

under them. Payment of all amounts owed without statutory offset was an integral

part of the claim, not something to set up as an affirmative defense in response to

Defendants’ later denials or defenses. (PX2 (¶ 6); PX4 (¶ 2).) If Defendants truly

were uncertain about Cobalt’s reliance on the offset waiver – a fact hard to believe

since they argued it to the trial court (e.g., 2RR:119-27) – they should have filed a

special exception to Cobalt’s pleadings. Their failure to do so presumes they

understood the full parameters of the claim. See Horizon CMS Healthcare Corp. v.

Auld, 34 S.W.3d 887, 896-97 (Tex. 2000) (the purpose of the fair notice pleading

rule is to give the opposing party information sufficient to enable him to prepare a

defense and, in the absence of special exceptions, “courts should construe the

pleadings liberally in favor of the pleader”).

                                          23
            (b)    Cobalt pleaded waiver.
      Similarly, because the offset waiver was an integral part of the Loan

Documents essential to Cobalt’s claim, pleading claims under those documents

inherently invoked the waiver.

      To its live petition, Cobalt attached copies of relevant Loan Documents and

incorporated them by reference. (CR:141 (First Amended Petition); CR:204 (note

attached as Exhibit 2); CR:241 (Forbearance Agreement attached as Exhibit 3);

CR:249 (guaranty attached as Exhibit 4).) Among other things, Cobalt alleged:

      10. On or about June 13, 2008, Borrower executed and delivered to
      M&I Marshall & Ilsley Bank (“M&I”) a Loan Agreement (“Loan
      Agreement”) and Promissory Note in the original principal amount of
      $5,100,000.00, as amended, renewed, modified and extended (the
      “Note”). True and correct copies of the Loan Agreement and Note
      are attached hereto as Exhibit Nos. 1 and 2, respectively, and by
      reference made a part hereof.

      21. On or about June 13, 2008, Urbahns executed and delivered to
      M&I a Continuing Guaranty, whereby Urbahns unconditionally
      guaranteed payment of all monies due under the Note (the “Urbahns
      Guaranty”). A true and correct copy of the Urbahns Guaranty is
      attached hereto as Exhibit No. 4 and by reference made a part hereof.

(CR:143, 145 (emphases added).)

      Rule 59 of the Texas Rules of Civil Procedure allows a party to attach

written instruments constituting the claim sued upon and that the terms of those

instruments are deemed a part of the pleading “for all purposes”:

      Notes, accounts, bonds, mortgages, records, and all other written
      instruments, constituting, in whole or in part, the claim sued on, or the
      matter set up in defense, may be made a part of the pleadings by

                                         24
       copies thereof, or the originals, being attached or filed and referred to
       as such, or by copying the same in the body of the pleading in aid and
       explanation of the allegations in the petition or answer made in
       reference to said instruments and shall be deemed a part thereof for all
       purposes. Such pleadings shall not be deemed defective because of
       the lack of any allegations which can be supplied from said exhibit.
       No other instrument of writing shall be made an exhibit in the
       pleading.

TEX. R. CIV. P. 59 (emphasis added).

       This court interprets Rule 59 broadly:

       Rule 59 provides the procedure whereby notes attached to pleadings
       can supply additional allegations the pleadings do not expressly
       contain. When a note is attached to a pleading, Rule 59 permits the
       allegations in the note to supplement the allegations in the pleadings
       for purposes of determining whether a party received fair notice of a
       claim.

Fountains Int’l Group, Inc. v. Summit Oak Dev., LLC, No. 04-14-00205-CV, 2015
WL 1138418, at *2 (Tex. App.—San Antonio Mar. 11, 2015, no pet.).10

       Because the note, Forbearance Agreement, and guaranty were a part of

Cobalt’s First Amended Petition, Cobalt implicitly pleaded all terms of those

instruments, including a general waiver of defenses and the specific contractual

waiver of any right to an offset based on valuation and appraisement laws.

10
   See also, e.g., Lopez-Welch v. State Farm Lloyds, No. 3:14-CV-2416-L, 2014 WL 5502277, at
*7 (N.D. Tex. Oct. 31, 2014) (construing Tex. R. Civ. P. 59, court concluded a report “attached
to and referenced in the Petition … is considered part of the pleadings.”); City of Celina v. Blair,
171 S.W.3d 608, 612 n.5 (Tex. App.—Dallas 2005, no pet.) (“Documents constituting all or part
of the claim sued on may be made a part of the pleadings by being attached and referred to in the
pleading” and, so attached, “shall be deemed a part of the pleading for all purposes”); Houston
Cmty. Coll. Sys. v. Schneider, 67 S.W.3d 241, 243 (Tex. App.—Houston [1st Dist.] 2000, pet.
denied) (“a pleading shall not be deemed defective because of the lack of any allegation that can
be supplied from attached exhibits”).

                                                25
       However one looks at the issue, Cobalt’s reliance on the written waivers of

the § 51.003 offset have been in the case via the pleadings from the beginning.

There was no requirement for further pleading.

                                         To sum up …,

       The judgment cannot be supported on the theory that the PNA retroactively

waived and nullified the consistent plethora of waivers of § 51.003’s rights

throughout all the Loan Documents. The principles of contract construction, the

unambiguous language of all the documents, the surrounding circumstances, and

common sense all auger against and disprove conclusively that the PNA can be

given such effect.

B.     Cobalt Conclusively Proved All Elements of its Claims to Recover the
       Deficiency Plus Attorneys’ Fees.
       Apart from the § 51.003 offset issue, the other elements of Cobalt’s claim to

collect a deficiency on the loan and guarantee are not seriously in dispute. The

following arguments quickly show that all those elements were established

conclusively.11

11
   The record shows the trial court entered the take-nothing judgment by construing the PNA as a
waiver of Defendants’ agreement to pay all amounts owed without relief from valuation and
appraisement laws (3RR:85-86), and Cobalt is entitled to a judgment on its claims because of the
error in that ruling. Because the trial court failed to file findings of fact and conclusions of law,
it is impossible to know if and how the court ruled on other issues. If this Court finds there were
issues of fact on other elements presumed found by the trial court in support of the judgment,
Cobalt contends, based on the facts discussed herein, that such findings are against the great
weight and overwhelming preponderance of the evidence. Therefore, at a minimum, Cobalt is
entitled to reversal of the judgment and remand for a new trial on those issues.

                                                 26
      To recover a deficiency on a note, one must establish: (1) the note in

question, (2) that defendant signed the note, (3) that the plaintiff was the legal

owner and holder of the note, and (4) that a certain balance was due and owing

under the note. Hudspeth v. Investor Collection Serv. Ltd. P’ship, 985 S.W.2d 477,

479 (Tex. App.—San Antonio 1998, no pet.). Similarly, in a suit for breach of a

guaranty agreement one must establish “(1) the existence and ownership of the

guaranty contract, (2) the terms of the underlying contract by the holder, (3) the

occurrence of the conditions upon which liability is based, and (4) the failure or

refusal to perform the promise by the guarantor.”         Lee v. Martin Marietta

Materials Sw., Ltd., 141 S.W.3d 719, 720 (Tex. App.—San Antonio 2004, no pet.).

      Cobalt’s proof addressed each element and established each conclusively:

      1.     The existence and validity of the Loan Documents is not in
             question.
      The existence of the note and the validity of the signatures on the note and

guarantee have been conceded by Defendants. (E.g., 3RR:71-72.)

      2.     Cobalt proved it owned the note and guaranty.
      The Loan Documents state that they may be transferred and assigned. For

example, the note provides that 410 Centre’s obligations “shall inure to the benefit

of Lender and Lender’s successors, assigns and legal representatives.”        (PX2

(¶ 20).)   Likewise, the deed of trust provides that its terms, provisions and

conditions “shall inure to the benefit of Trustee and Lender and their respective

                                        27
successors, substitutes and assigns.” (PX3 (¶ 6.15).) Urbahns also agreed that the

guaranty “shall inure to the benefit of Lender and its successors, assigns and legal

representatives.” (PX4 (¶ 26).)

        The allonges attached to the note prove that it was transferred from the

original lender to Cobalt as follows:

Date:             Transferor:           Transferee:             Record Cite:

September 25, BMO, as successor-        LSREF2 Cobalt, LLC  PX2
2013          by-merger to M&I                              (p. Cobalt 28)
September 25, LSREF2      Cobalt,       LSREF2 Cobalt Trust PX2
2013          LLC                       2013                (p. Cobalt 29-30)
September 25, LSREF2       Cobalt       Wells Fargo         PX2
2013          Trust 2013                                    (p. Cobalt 31-32)
November 1, Wells Fargo                 Cobalt              PX2
2013                                                        (p. Cobalt 616-17)

        The transferors / transferees listed above also executed assignments that

correspond to the allonges affixed to the note. (PX8-15.)

        On September 25, 2013, BMO – the successor-by-merger to M&I (the loan

originator) – assigned “all loan agreements, promissory notes, mortgages, security

agreements, UCC Financing Statements, guaranty agreements and all other Loan

Files” “arising from the original Loan dated June 13, 2008 by and between

Assignor and 410 Centre” to LSREF2 Cobalt, LLC. (PX9 (Exhibit 1); see also

PX8 (Assignment of Deed of Trust, Security Agreement and Assignment of

Leases, and Fixture Filing).) On the same day, LSREF2 Cobalt, LLC, transferred

the note and assigned the Loan Documents, including the guaranty, to LSREF2

                                         28
Cobalt Trust 2013. (PX10, 11.) That Trust then transferred the note and assigned

all the Loan Documents to Wells Fargo. (PX12, 13.)

      On November 1, 2013, Wells Fargo transferred the note and assigned the

Loan Documents, including the guaranty, to Cobalt. (PX14, 15.) In the transfer

documents, Wells Fargo assigned and conveyed all of its right, title, and interest in

the note, deed of trust, and “[a]ny and all documents executed or delivered in

connection with any of the foregoing and any and all amendments, modifications,

supplements and/or replacements thereto.” (PX15 (Schedule I).)

      Cobalt’s corporate representative, Marisa McGaughey (2RR:38-40), testified

that she was familiar with the loan to 410 Centre because “[i]t is and was a part of

a portfolio acquisition from BMO Harris Bank purchased by LSREF2 Cobalt,

L.L.C. and I managed that portfolio.          The legal work associated with it.”

(2RR:44.) She personally participated in the September 25, 2013, transfers and

assignments:

      I was involved actually before the transaction even occurred in
      helping evaluate the loan portfolio that LSREF2 Cobalt, L.L.C. was
      contemplating purchasing from BMO Harris Bank. And then on the
      date of September 25th of 2013, I was present when all of the
      assignments were being reviewed, put in proper order, and executed
      and notarized.

(2RR:69.) McGaughey also participated in the November 1, 2013, transaction for

the transfer of the note, and the assignment of the guaranty and related Loan

Documents to Cobalt.      (2RR:72.)    McGaughey explained “[t]he allonges are

                                         29
drafted and put in place in order to fully transfer the actual note and then the

assignments are drafted and put in place to transfer all the other loan documents.”

(2RR:70.)12

       Thus, according to McGaughey, Cobalt is the “current owner and holder of

the note” (2RR:64, 76) and beneficiary of the guaranty. (2RR:76.) Urbahns

admitted that no entity other that Cobalt (or its servicer) had made demand on him

for payment of the note and guaranty. (3RR:75.)

       3.     Prerequisites to foreclosure were all satisfied, and the amount of
              the deficiency was a simple mathematical calculation that was
              proved conclusively.
       410 Centre did not pay the loan when it matured on September 30, 2011

(PX7 (¶ E)), and Urbahns admitted the loan was not paid off during the two-year

forbearance period or when the forbearance period expired on September 30, 2013.

(3RR:74-76.)

       On October 15, 2013, Wells Fargo gave proper notice of the November 5,

2013, foreclosure sale to Defendants (PX21, 25) and the Notice of Successor

Trustee’s Sale was timely, properly filed, and posted at the Bexar County

12
   McGaughey explained why there were multiple assignments: LSREF2 Cobalt, LLC was the
initial acquiring entity – it acquired a loan portfolio of approximately 150 loans from BMO.
Certain loans that were actively performing, or under a forbearance agreement, were
subsequently transferred to LSREF2 Cobalt Trust 2013. Wells Fargo financed the acquisition,
and, as part of the financing, the entire portfolio of loans was sold to Wells Fargo either from
LSREF2 Cobalt, LLC or from LSREF2 Cobalt Trust 2013. (2RR:69-70.)

                                              30
Courthouse. (PX23-25.) The foreclosure sale was properly conducted at the date,

time, and place stated in the notice. (PX26.)13

       The property was sold to Cobalt for a $2,800,000.00 credit bid. (PX26.) On

the sale date, the total indebtedness (including principal and interest) was

$5,154,201.78. (2RR:102-03.) After crediting the foreclosure sales price, the

deficiency due and owing as of January 31, 2014, was $2,402,164.47, after

allowing all just and lawful offsets, payments, and credits. (2RR:104-05.) From

January 31, 2014, forward, interest continues to accrue on the deficiency at the rate

of $527.06 per day. (2RR:105.)

       Testimony proving the amount of the deficiency was not challenged by

Urbahns.14 He admitted that as of November 5, 2013, “there was a balance due

and owing on this debt.” (3RR:78-79.) But when asked the principal balance due

as of that date, Urbahns testified “I have no idea” and said “[y]ou’d have to ask my

accounting people.” (3RR:79, 80.) Asked whether he had asserted a different

13
  The deed of trust provides that all statements of fact or other recitals made in any deed by a
Trustee or any successor “shall be taken as prima facie evidence of the truth of the facts so stated
and recited.” (PX3 (¶ 5.4).)
14
   Urbahns did claim he did not owe Cobalt any money, but that was based solely on his
argument that “[t]he property they purchased exceeded the value of the note and therefore I don’t
owe them anything.” (3RR:65-66.) This is not conflicting testimony about the deficiency
because the question whether 410 Centre and Urbahns have a right to a fair market value credit
under Property Code § 51.003 is one of law. As shown above, they have no such right as a
matter of law.

                                                31
balance was owed than that claimed by Cobalt, Urbahns answered: “Defer to

counsel.” (3RR:81.)

      Under the note’s terms, and the undisputed facts, simple math established

the amount of the deficiency conclusively, authorizing judgment for a sum certain.

      4.     Cobalt conclusively proved its claim for attorneys’ fees.
      Cobalt also alleged a claim for attorneys’ fees pursuant to the terms of the

note, guaranty, and Chapter 38 of the Civil Practice and Remedies Code. (CR:141

(¶¶ 17, 28).) Both the note and guaranty provide that 410 Centre and Urbahns,

respectively, shall pay “reasonable attorneys’ fees incurred by Lender in

connection with” the enforcement of any provision contained in the note and

guaranty and the collection of any indebtedness evidenced by the note and

guaranty. (PX2 (note ¶ 5); PX4 (guaranty ¶ 2).)

      At trial, the parties “agreed to stipulate to the amount of attorney’s fees in

the same amount, both sides, along with the conditional award with what is

reasonable in this case” as follows: $140,000 through trial; along with conditional

awards for post-trial matters:

      •      if a motion for new trial is filed, but denied: $5,500;

      •      if an appeal is taken to the court of appeals, but is unsuccessful:
             $22,500;

      •      if a petition for review is filed, but not granted by the Texas
             Supreme court: $5,500;

                                          32
      •      if review is granted by the Texas Supreme Court, but the appeal
             is unsuccessful: $18,500;

(3RR:3-4.)

      Because “[t]he amount and reasonableness of attorney’s fees is a question of

fact,” parties are “free to stipulate to the amount and reasonableness of attorney’s

fees, and such stipulation is binding on the parties, the trial court, and this court.”

Morgan v. Ebby Halliday Real Estate, Inc., 873 S.W.2d 385, 390 (Tex. App.—Fort

Worth 1993, no writ).

      Because the stipulation is binding, Cobalt is also entitled to attorney’s fees

for the stipulated amounts. Paciwest, Inc. v. Warner Alan Props., LLC, No. 02-10-

00378-CV, 2012 WL 3499603 (Tex. App.—Fort Worth Aug. 16, 2012, pet.

denied) (modifying judgment to award the full amount of attorneys’ fees stipulated

by the parties).

                         CONCLUSION AND PRAYER
      Cobalt conclusively proved its claims for a deficiency and for attorneys’

fees. Defendants’ arguments to avoid their obligations under the note and guaranty

are without merit as a matter of law.

      Cobalt prays that this Court reverse the trial court’s judgment and render

judgment for Cobalt for the amount of the deficiency (2RR:102-03) plus interest.

In addition, the Court should render judgment for Cobalt for attorneys’ fees to

which the parties stipulated (through trial and this appeal) in the amount of

                                          33
$162,500.00. In the alternative, Cobalt prays that the Court reverse and remand

this matter for entry of judgment consistent with this Court’s opinion.

       Alternatively, in the event the court rules that there are fact issues that

prevent entry of a judgment for a certain deficiency amount, Cobalt prays that the

court reverse the judgment and remand the case to the trial court under Tex. R.

App. P. 44.1(b) for new trial on only those issues.

       Cobalt prays for such other and further relief to which it shows itself

entitled.

                                         34
Respectfully submitted,-

LANGLEY & BANACK, INC.

/s/ Catherine M. Stone
Catherine M. Stone
cstone@langleybanack.com
  Texas Bar No. 19286000
LANGLEY & BANACK, INC.
745 E. Mulberry Avenue, Suite 900
San Antonio, Texas 78212
(210) 736-6600; (210) 735-6889 Fax

Mike Hatchell
 Texas Bar No. 09219000
LOCKE LORD LLP
600 Congress Avenue, Suite 2200
Austin, Texas 78701-2748
(512) 305-4700

David L. Swanson
  Texas Bar No. 019554625
Thomas F. Loose
 Texas Bar No. 12561500
LOCKE LORD LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
(214) 740-8000; (214) 740-8800 Fax

Cliff A. Wade
cliff@cliffwadelaw.com
 Texas Bar No. 24013699
CLIFF WADE LAW
3131 McKinney Avenue, Suite 600
Dallas, Texas 75204
(214) 800-2090

ATTORNEYS FOR APPELLANT

  35
                     CERTIFICATE OF COMPLIANCE
       Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), as amended
effective December 1, 2012, the undersigned certifies that this Brief complies with
the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e).

      1.     Exclusive of the contents excluded by Rule 9.4(i)(1), this Brief
contains 7,509 words as counted by the Word Count function (including textboxes,
footnotes, and endnotes) of Microsoft Office Word 2010.

      2.    This Brief has been prepared in proportionally spaced typeface using:

            Software Name and Version: Microsoft Office Word 2010
            Typeface Name: Times New Roman
            Font Size: 14 point

                                      /s/   Catherine M. Stone
                                      Catherine M. Stone

                                        36
                        CERTIFICATE OF SERVICE
       I hereby certify that on the 14th day of December, 2015, a true and correct
copy of Appellant’s Brief was served by eFileTXcourts.gov on Appellees through
its counsel of record listed below:

                  Peter M. Kelly
                  pkelly@texasappeals.com
                  State Bar No. 00791011
                  KELLY, DURHAM & PITTARD, L.L.P.
                  1005 Heights Boulevard
                  Houston, Texas 77008

                  Randall A. Pulman
                  rpulman@pulmanlaw.com
                  Thomas Rice
                  trice@pulmanlaw.com
                  PULMAN, CAPPUCCIO, PULLEN, BENSON & JONES LLP
                  2161 NW Military Highway, Suite 400
                  San Antonio, Texas 78213

                                     /s/   Catherine M. Stone
                                     Catherine M. Stone

                                       37
                                     No. 04-15-00633-CV
 _________________________________________________________________

                           In the Fourth Court of Appeals
                                San Antonio, Texas
 _________________________________________________________________

         LSREF2 COBALT (TX), LLC, a Foreign Limited Liability Company,
                                Appellant

                                                          v.

          410 CENTRE LLC, a Foreign Limited Liability Company,
                 and JOHN B. URBAHNS, an Individual
                              Appellees
 _________________________________________________________________
                 On Appeal from the 408th District Court
              Bexar County, Texas; Cause No. 2013-CI-20922
 _________________________________________________________________

                APPENDIX TO APPELLANT’S BRIEF
 _________________________________________________________________

Trial Court’s Judgment (CR:2035) ..........................................................................A

Note (6RR:PX2).......................................................................................................B

Guaranty (6RR:PX4)................................................................................................C

Forbearance Agreement (6RR:PX7)........................................................................D

Pre-Negotiation Agreement (6RR:PX31)................................................................E

                                                     Appendix
TAB A
2035
2036
TAB B
                                     PROMISSORY NOTE

$5.I 00,000.00                                                                    Jw1e _13... 2008
                                                                              Indianapolis, Indiana

        FOR VALUE RECEIVED, 410 CENTRE LLC, an lndiana limit.ed liability company
(hereinafter referred to as "Maker), Wlconditionally promises to pay to the order of M&I
MARSHALL & ILSLEY DANK, having its principal banking offices at 135 North
Penmylvania S tree!, lndianapolis, Indiana 4620~ (hercinafurr referred to as "Lender'"), at its
principal banking offices or at 1n1ch other place or to such other party a.~ Lender may from time to
time designate, the principal swn of Five Million One Hwidred Thousand and 00/100 Dol.lms
($5,100,000.00), or so much thereof as shall be advanced 1D or for the benefit of Maker, with
interest on the principal balnn.c e from time to time remaining unpaid as provided for in this Note.

                         TERMS. PROVISIONS AND CONDITIONS

        1.     Definitions. In addition to the words and phrases defined elsewhere in this Note,
the following terms shall have the meaning indicated when capit:ali.zedand used herein:

               "Adjusted LIBOR" shall meun, for each LIBOR Interest Period, a rate per
       annum (expressed as a percentage and rounded upwards, if necessruy, to the nearest 1116
       of 1%) determined by Lender to be equal to a fraction, (a) the numerator of which is
       equal to LIBOR for such LIBOR Interest Period, ond (b) the denominator of which is
       equal to the swn of (i) 1 minus (ii) the Reserve Requirement (if any) for such LIBOR
       Interest Period.

               "Applicable lfatc" sliall mean the rate of interest which the tenns of this Note
       expressly provide sh.all be in effect from time to time with respect to the principal
       outst:anding under this Note.

              "Business Day" shall mean any day of the week (but not a Satnrday, Sunday or
       holiday) on which the offices of Lender arc open to tl1e public for canying on
       substnntinlly all of Lender•s business functions. Unless specifically referenced in this
       Note as a Business Duy, ull references to "days" shall bo to calendar days.

              "Consequential Loss" shall mean, with respect to the tennination or cancellation
       of the LIBOR Base Rate in effect for the principal balance outstanding under fuig Note
       pursuant to tllc provisions of1his Nole earlier than the last applicable Eurodollar Business
       Day of the LIBOR Interest Period, any loss, expense, penalty or premiwn incurred by
       Lender on account of such premature termination or cancellation of such LIBOR Base
       Rate. Any certificate of Lender delivered to Maker setting forth the arnow1t of
       Consequential Loss as provided herein shall show the calculations required to determine
       such Consequential Loss ond shall be conclusive and binding, absent manifest err~ ns to
       such amount and doterminatioJt

                                           Page 1 ofl6

                                                                                COBALT 000001

                                                                      PLAINTIFF EXHIBIT NO. 2
       "Deed of Tru~t" shall mean that ccr1nin Deed ofTnist, Security Agreement and
Assigronent of Leases and Fixture riling of even date herewith., executed and delivered
by Maker to Lender as from time to time amended or modified.

        "Default Rate" shall mean the rate of interest to truce effect under this Note
during any period in which an Event of Defuult oxisbl horC'Wlder, such rote of interest
shall be equal to a rate or rates per annum which is four percent (4%) above the interest
rate or rates ofuerwisc applicable under this Note, not to exceed, however, the Maximum
R.nte.                                                         ·

        "Eurodolla r Business Day" shall meru1 a day on which transactions in U.S.
dollars are con.ducted in the Interbank Eurodollar market in London, England at 11:00
o'clock a.m. Landon time and on which Lender is open to conduct normal banking
business in Indianapolis, Indiana.

       "Event of Default" shall mean the occurrence of any event or condition under
Section 10 of this N otc and the expiration of e.ny applicable cure period specified therein.

        ''Extended Maturitv Date" shall mean, following the Original Maturity Date, the
earliest to occur of (i) Jmte 30, 20 l l, or (ii) the date on which the outstanding principal
balance of this Note is accelerated upon the occwrence of an Event ofDefimlt.

        "Govern mental Authority" shall mean any foreign governmental authority, the
United States of America, any State of the United States and any political subdivision of
any of the foregoing and any sgency, department, commission, board or burean or court
which has jurisdiction over Lender or Maker or their respective assets or property,
including the loan evidenced hereby, or is charged with the interpretation or
administration of any law, rule, regulation or trenty which affects the ability of Lender to
establish a loan.

        "L(BOR" shall mean for each LIBOR Interest Period, ns of the aPPlicablc date
and fu:ne for detennination provided herein, a per annwn rate of interest equal to the rate
whioh Lender dot.emtlncs, in its solo discretion, is generally the market rare offered by
leading bnnks in the London interbank market as of 11:00 a.m., London time, two (2)
Eurodollar Business Dnys prior to 1he first dny of the applicable LIBOR Interest Period,
for United States dollar deposits in the l!l1lounl of the 11tnred principal amount of this Note
l1aving at.eon coinciding with such LIBOR Interest Period~ adjusted for any reserve
requirements and any subsequent costs arising from a change in government regulation.
Lender may make such detemrination based on the rate reported by any publicly
avnilable source of market data selected by Lender Umt, in its sole judgment, accurately
reflects roch rate offered by leading banks in the London interbank market, including
\vithout 1.imitniion any of the following sources which Lender may select to use in it sole
discretion: (i) Reuters Screen LIBOROl Page (or any successor or substitute thereto
selected by Lender in its sole discretion), (ii) tlte Wall Street Journal. or (ri.t) such other
comparable financial information reporting service used by the Lender at the time such
rate is determined.                                                              ·

                                     Pago 2of16

                                                                           COBALT 000002
       "LlBOR-Based Rate" shall mean, for each LIBOR Interest Period., the sum of(a)
Adjusted LIBOR, plus (b) the LIBOR Margin.

        "LIBOR Designation Notice" shall mean a writ:ren notice from Maker
substantially in the fonn of Exhibit "A", attached hereto rutd by reference made a part
hereof; or in such other form as Lender may from time to time require, purruant to which
Maker elects to have a LIBOR-Based Rate apply for a specified LIBOR Interest Period
with respect to the principal balance outstruicling under tlris Note, and which contains
su.ch infonnaiion and certifications as Lender may require.

       "LIBOR Margin" shall mean two hundred (200) basis points.

        "LlBOR Interest Period" sl1all mean each calendar month during which any
portion of 1he principal balance of this Note is outstanding, provided l10wever, if the
initial advance of the principal of 1his Note occurs other than on the first day of a
calendar month, then the initial LIBOR Interest Period shall be the period which begins
with the date of the initial advancement of the principal of this Note and ends on the first
day of the calendar month following the month in which the initial advancement of tho
principal of this Note was made. Each succeeding LlBOR Interest Period shall begin on
the first day of each calendar month and shall end on the first day offue next calendar
month.

       "Loan Agreement" shall mean that certain Loan Agreement dated of even date
herewith, executed by and betWeen Maker and Lender, and/or any direct or remote
agreement am ending or restating such Loan Agreement, as from time to time mnended or
modified.

        "Loan Documents" shall mean collectively, this Note, the Deed of Trust, the
Loan Agreement and all other agreements, security instrunlents and guaranties which
secure or extend to this Note or are ex~uted by Maker or any guarantor in cormcction
with the indebtedness evidenced by th.u: Note, as such documents and agreements may be
modified or amended from time to time and/or any documents and agreements which
replace or restate such documents and agreements.

       "Maximum Rate" shall mean the maximum rare of interest penni~ed by
applicable law to be in effect from ti.me to time under this Note.

       "Notice of Extension" shall me11J1 a written Notice of Extension issued by Lender
in accordance with the tenns and conditions of the Loan Agreement

         ''Original Maturity Date" shall rne811 the earliest to occur of(i) June 30, 2010, or
(ii) the date on which the outstanding principal balance of this Note is accelerated upon
the occurrence of an Event of Default.

        "Prime-Based Rate'' shall mean a rate of interest equal to the Prime Rate, from
time to time in effect, minus fifty (50) basis points.

                                    Page 3 ofl6

                                                                         COBALT 000003
        "Prime Desie11ation Notice" shall mean n written notice from Maker
substantially in the form of Exhibit "B", attached hereto nnd by reference made a part
hereof: or in such other fonn as Lender may from time to time require, pursuant to which
Maker elects to have the Prime-Based Rate apply with respect to the principal balance
outstanding under this Note, and which conlnins such infonnation and certifications as
Lender may require.

        "Prime R1lt.en shall mean the rate from time to time posted by Lender us its
"Prime Rate", with the interest rate herewider to change effective on the same date ns
each change of such Prime Rate, or in the event such Prime Rate is not available or in
effect at any point in time, a comparable rate selected by the holder of this Note. Such
Prime Rate is not necessarily the rate at which Lender lends its funds. Such Prime Rate is
only an index rate from which int.erest rotes uctuo.Uy charged to Lender's customers may
be measured. Tne use of such Prime Rate does not constitute u commitment by Lender to
lend money at a preferred rate.

        "Regulatorv Change" shall mean, with respect lo Lender, any change after the
effective date of this Note in federal, state or foreign law or regulations (including
Regulation D) or the adoption or making after such date of any interpretntion, directive or
request applying to a class of banks including Lender of or under any federal, state or
foreign lmv or regulalions (whether or not having tho force of law and whether or not
failure to comply 1herewith would be unlawful) by any Governmental Authority or
mone1Biy authority charged with the interpretation or administration thereof.

       "Regulation D" shall mean Regulation D of the Board of Oovemors of the
Federal Reserve System from time to time in effect and shall include any successor or
other regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.

       "Regulation K" shall mean Regulation K of the Board of Governors of the
Federal Reserve Syst.em from time to time in effect and shall include any successor or
other regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.

        "Reserve Requirement" shall mean, for any LIBOR Interest Period, the average
maximum rate (expressed as a p ercentage) at which reserves (including, without
limitation, any basic, marginal, supplementnl or emergency reseives) are required by the
Board of Governors of the Federal Reserve System (or any successor) to be maintained
by Lender during such LIBOR Interest Period under Regulation D with respect to
"Eurocurrcncy liabilities" (as such teem is used in Regulation D). Without limiting the
effect of the foregoing, the Reserve Requirement shall include any other reserves
required to be maintained by Lender by reason of nny Regulatory Chnnge with respect to
(i) any category of liabilities that includes deposits by reference to which LIBOR is to be
determined as provided in the definition of"LIBOR" in this Note or (ii) any categozy of
extensions of credit or other assets U1at includes loons accruing interest at a LIBOR based

                                   Page 4of16

                                                                       COBALT 000004
rate. Each determination by Lender of a Re.serve Requirement, in the absence of manifest
error, shall be conclusive and binding.

2.     Interest Rate.

       2.1      Comuutati.on of Interest. The principal balance of th.is Note from time to
time outBtn.nding shall bear interest as follows:

               (a)      The principal balance of this Note from lime to time outstanding
       shall bear interest at 1he LIBOR-Based Rate, wtless and except to the extent that
       the Prilne-Based Rate or the Default Rate is applicable in accordance with the
       terms and provisions of this Note.

              (b)      If at any time Maker has elected the Prime Base Rate to apply with
       respect to this Note or in the event any condition for tl1e use of the Prime-Based
       Rate set forth in Section 2.6 of this Note applies, then the principal balance of this
       Note from time to time outstanding shall bear interest at the Prime-Based Rate,
       unless and except to the extent that the Default Rate is applicable in accordance
       with the tenns and provisions of this Note.

         2.2     Designation__Qf_LlBOR-Based Rate and Ptjme Base Rate. Unless Maker ·
has elected the Prime-Based Rate to apply with respect to tllis Note or the Prime-Based
Rate or the Default Rate is otherwise in effect in accordance with the teons and
provisions of this Note, the LIBOR-Ba.sed Rate shall be :in effect under 1his Note. At any
time during the term of this Note when the LIBOR-Ba.sed Rate is in effect, Maker may
elect to have the Prime-Based Rate apply to all of the principal balance outstanding under
this Note upon the expiration of the then current LIBOR Interest Period by submitting to
Lender a written Prime Designation Notice. At any time during the term of this Note
when the Prime-Based Rate is in effect, provided the conditions for the we of the Prime-
Based Rate or the Default Rate do not otherwise apply, Maker may elect to have the
LIBOR-Booed Rate apply to all of the principal balance ou1standing under this Note
effective as of the first day of the next calendar month by submitting to Lender a written
LIBOR Designation Notice. It is intended 1hat, except for the initial LIBOR Interest
Period, each LIBOR Interest Period shall begin on the first day ·ofa calendar month and
shall end on the last day of a calendar month. If Maker requests changing the interest rate
effective with respect to fuis Note from the Prime-Based Rate to the LIBOR-Based Rate,
then the new interest rate with respect to this Note shall become effuctive on the first day
of the nex1: calendar month following the date Maker submits the interest rate deBignation
notice to Lender. The LIBOR-Based Rate shall automatically renew with respect to tills
Note for consecutive LIBOR Interest Periods until Maker provides a written Prime
Designation Notice with respect to this Note. If Maker requests changing the interest rate
effucti.ve with respect to fuis Note from the LIBOR-Based Rate to the Prime-Based Rate,
then the new interest rate with respect to this Note shall become effective on 1he
expiration of the then current LIBOR Interest Period following the date Maker submits
the interest rare designation notice to Lender. If Maker has elected to have the Prime-
Based Rate apply to the principal of1his Nore, then the Prime-Based Rate shall continue

                                   Page 5 of16

                                                                        COBALT 000005
                   •
to apply until Maker provides a new written LIBOR Designation Notice and such change
in interest rate has become effective pursuant to the teems hereof. Notwithstnnding any
other provision l1ereo( during any period in which any condition for the use of the Prime-
Bnsed Rate set forth in Section 2.6 of this Note applies, the obligation of Lender to accept
or implement LIBOR Designation Notices shall be suspended and, at the option of
Lender, upon the expiration of any applicable LIBOR Interest Period the mtc of interest
applicable wider 1his Note shall be the Prime-Based Rate and the Default Rate shall 1hen
be detennined based upon such Prime-Based Rafe being in effect.

       2.3     360 Day Year. lnterest shall be calculated daily on the basis of a 360-&y
year applied to the ac1ual number of days in each interest-payment period.

        2.4     Limited to Maximum Rntc. Notwithstnndi.ng anything expressed or
implied herein to the contrary, if at any time the Applicable Rate eitceeds the Maximum
Ram, then the rate ofinterest on this Note shall be Limited ID the Maximum Rate, but any
subsequent reduction in the Applicable Rate shall not reduce the rate of interest on this
Note below the Maximum Rate tmtil lho total amount of interest accrued on this Note
equals the mn ount of interest which would have accrued if the Applicable Rate had at all
 times been in effect

        2.5    [This paragraph is intentionally left blank]

       2.6     Use of Prime-Based Rate. During any period in which there exists an
Event of Default hereunder, the obligation of Lender to accept or implement the LIBOR-
Based Rate with respect to any new LIBOR Interest Period shall be suspended and, at the
option of Lender. upon the expi~&i.on of imy LIBO R Interest Period the rate of interest
applicable to the principal balnuce of this Note to which such LIBOR Interest Period
applied shall be the Prime-Based Rate and the Default Rate shall then be determined
based upon the Prime-Based Rate being in effect If, with respect to any LffiOR Interest
Period, Lender determines (which determination, in the absence of manifest error, shall
be conclusive and binding) that

               (a)     for any reason, Lender is unable, through its customary general
        practices, to obtain a quote offered by prime bwtks in the InlerblDlk Eurodollar
        market in London, England, for deposits in U.S. · dolla.rs in the appropriate
        amom1t.s for the app~opriate perio~

                (b)     by reason of nation.el or intcmational financiol, political or
        economic conditions or by reason of any applicable law, treaty, rule or regulation
        (whether domestic or foreign) now or hereafter in effect, or in the interpretation or
        administration !hereof by any Govenunentnl Authority chmgod with the
        interpretation or administrution thereof, or compliance by Lender with any request
        or directive of such authority (whether or JLOt having Ute force of law), including
        without limitation exchange controls, it is irnprocticallle, unlawful or impossible
        for Lender to utilize LIBOR for setting the interest rate from time to time in effect
        under 1his Note~

                                    Pnge 6of16

                                                                         COBALT 000006
                   •
              (c)     by reason of circumstances affecting the Interbank Eurodollar
       market in London, England generally, the offer of Lender tD accept deposits in
       U.S. dollars (m the applicable arno1miB) will not be accepted in that Interbank
       Eurcxiollar market for such LIBOR Interest Period; or

               (d)    the LIBOR-Based Rate will not adequately and fairly reflect the
       cost to Lender of the maintenance of this Note for such LIBOR Interest Period;

and Lender gives notice thereof to Maker. then the obligation of Lender to accept or
implement the LlBOR-Based Rate with respect to any new LIBOR Interest Period shal.J
be suspended until Lender notifies Maker that the circwnsmnces giving rise to such
suspension no longer exist. If after the date hereof, the adoption of any applicable law,
rule or regulation or any change in applicable law, rule or regulation or in 1ho
interpretation or administration U1ereofby any Governmental Authority charged with the
interpretation or administration thereof or compliance by Lender with any request or
directive (whether or not having the force oflaw) of any such Governmental Authority,
shall make it unlawful or impossible for Lender to comply with its obligations in
connection with any LIBOR Interest Period, then the corprnitment of Lender to accept or
implement the LIBOR-Based Rate with respect to any new LIBOR Interest Period shall
be automatically canceled and tenninated. Furthennore, if it shall then be unlawful or
impossible a.s aforesaid for Lender to pennit or participate in fue continuation of tl\e
LIBOR-Based Rate with respect to any portion of this Note, then (i) the LIBOR-Based
Rate shall terminate with respect to such portion of this Note, and (ii) upon notice being
given by Lender to Maker, Maker sJ1all pay to Lender promptly upon demand a cash
amount equal to (a) the Consequential Loss, plus (b) the amount required to compensate
Lender for all additional costs and expenses, if any, which it incurred in connection witl1
the implementation of the LIBOR-Based Rate as a result of such change in applicable law
or regulations or in the interpretation thereof or as a result of Lender's compliance with
any such request or directive of any such Governmental Authority. Lender will promptly
notify Mnker of any event of which. it has knowledge which v.ill make it unlawful or
impossible to have the LIBOR-Based Rate applicable with respect to any portion of this
Note.

        2.7   Additional LIBOR Costs.         If any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect, or any Regulatory
Change therein, or any interpret:ntion or change in interpretation or administration thereof
by any Governmental Authority charged with the interpretntion or administration thereof,
or compliance by Lender with any request or directive (whether or not having the force of
law) from any central bank or other Govennnental Authority £hall:

               (a)    subject Lender (or makes it apparent that it is subject) to any tax
       (including without limitation any U .S. in'terest equalization or other tax, however
       named), levy, impost, duty, charge, fee (collectively '"fax.es"), or any deduction or
       withholding for any Taxes on or from any payment due from Maker with respect

                                   Page 7 ofl6

                                                                        COBALT 000007
       to any portion of this Note, other than income and franchise taxes of the United
       States and its political subdivisions imposed on Lender,

                 (b)     change the basis of taxation of payments due from Maker to
       Lender under any portion of 1his Note (other titan by a change in the rate of
       ta:x.ation of the overnll net income of Lender)~

              (c)     impose, modify, increase or deem applicable any reserve
       requirement (but excluding that portion of wiy reserve requirement included in lhe
       calculation of the Reserve Requirement), special deposit requirement or similar
       requirement (mcluding, but not limited to, state law requirements, Regulation D
       and Regulation K) imposed. or deemed applicable by nny Governmental Authority
       chnrgcd with the interpretation or udministmtion of suoh requirements or deemed
       applicable against foreign assets held by or against loans made by Lender or
       against any other funds, obligations or other J1TOJ'erty owned or held by Lender;

              (d)      affect the amount of capital required or exiiecled to be maintained
       by Lender · or any corporation controlling Lender and Lender detenn.i.nes the
       amount of capiml required is increased by or based upon the existence of this
       Note or its obligation to make the loans evidenced hereby, or

               (e)     impose on Lender any other condition regarding :my portion of this
       Note;

and the result of any ofthe foregoing is to increase (by o.n amount deemed by Lender to
be material) the cost to Lender of having the LIBOR-Bascd Rate applicable to any
portion of t11is Note (or in the case of any capital adequacy or similar requirement, to
have the effect of reducing the rate of return on Lender's capital talcing into account
Lender's customary policies with respect to capital adequacy), or to reduce the amount of
principal or interest or other sum received or receivable by Lender (by an amount deemed
by Lender to be material), then upon five (5) days' written notice from Lender to Maker,
Maker shall pay to Lender, from time to time as .specified by Lender, such additional
amount or amounts as Will compensate Lender for such increased cost or reduced receipis
or receivables. Lender's determination of the amount of any such increase in cost or
reduction in amounm received or receivable, in the absence of manifest error, shall be
conclusive and binding. If Lender demands compensation under this Section, then Maker
may at anytime, upon at least three (3) Eurodollar Business Days' prior notice to Lender,
(a) give notice to Lender that it is canceling the LIBOR-Based Rate with respect to such
applicable portion of this Note, whereupon each such election so canceled shall terminate
n.nd Maker sluill be obligated to pay Lender upon demand an amowtt equal to all
Consequential Loss, if any, resulting therefrom, and (b) convert the LIBOR-Based Rate
on such applicable portion of this Note to the Prime-Based Rate. Any certificate of
Lender delivered to Maker setting forth the deteonination of any additional amowits
payable pursnant to this Section sh.all be conclusive and binding, absent manifest error, as
to ruch determination and amount. The obligations, agreements nnd covenanm of Maker

                                   Page8 ofl6

                                                                        COBALT 000008
       contnined in this Section 2.7 shall survive the tennination of this Note and the payment in
       full ofall indebtedness evidenced by tllis Note.

       3.     Payments. Principal and interest shall be payable as follows:

              3.1     Interest Pavments.      Accrued nnd unpaid interest shnll be payable
       commencing on 1he first day of the first calendar month following the calendar month in
       which the first advancement is made hereunder and continuing on 'the fin>t day of each
       calendar month thereafter until this Note is paid in full; and

              3.2     Payment on Original Maturity Date. If a written Notice of Extension has
       not been issued by Lender in accordance with the terms and conditions of the Loan
       Agreement, then on the Original Maturity Date tl1e entire unpaid principal balance and all
       accrued interest shall be due and payable. .

               3.3     E._ayment on Extended Maturity Date. !fa written Notice of Extension has
       been issued by Lender in accordance with the tenns and conditions of the Loan
       Agreement, then on the Extended Maturity Date the entire unpaid principal balance and
       all accrued interest shall be due and payable.

       4.     Prepayments. Provided Maker has paid in full all accrued interest, fees and other
amouniB then due and payable to Lender and all breakage and other termination fees which
might be payable by Mak.er in connection with any "Rate Management Transaction'~ (as that
term is defined in the Deed of Trust) entered into by Maker and Lender or any affiliate of
Lender, Maker shall have the privilege of prepaying any portion of 1he principal outstanding
under this Note on any Business Day, after at least five (5) Business Days prior written notice io
Lender, without the payment of a yield maintenance fee or prepayment penalty.

        5.     Cost of Collection and Defuult Rate of Interest. In addition, Maker shall pay to
Lender (a) reasonable attorneys' fees incurred by Lender in connection with (i) the protection of
any security for or rights arising in connection with this Note, (ii) the enforcement of any
provision contained in 'llus Note or in any document executed in connection herewith, or (iii) the
collection of any indebtedness evidenced hereby or arising in connection herewith (including
without limitation attorneys fees incurred by Lender in comiection with any banlcruproy,
reorganization, receivership or other proceeding affecting creditor's rights and involving a claim
under this Note or any document executed in coJUtection herewith), (b) costs of collection, (c)
during any period in which an Event of Default exists hereunder and/or any period of
delinquency on any amounts not paid when due, interest at the Default Rate, and (d) interest at
the Default Rate on all accrued interest which is not paid when due. If, after the occwrence of an
Event of Default hereunder, Lender employs an attorney or attorneys to protect Lender's righw
or remedies arising in connection ·with this Note or any security for this Note, then Maker shall
pay to Lender upon demand all attorneys fees and expenses incurred by Lender in connection
·with such event of dcfuult, regardless of whether nny action is actually commenced against
Maker by reason of any such event of default.

                                          Page 9 of16

                                                                              COBALT 000009
       6.     Valuation and Appraisement Laws. All principal, interest and other amounts
payaule under or with respect to this Note shall be payable without relief from valuation and
appraisement laws.

        7.      Late Charge. Maker shall pay a "late charge" for the purpose of defraying
expense incident to handling with respect to any monthly i.nstal.lroent of interest and/or principal,
or portion thereof, payable hereunder not paid within ten (J 0) days after fue date when first due,
at the mm of five cents (5¢) for each One and no/! 00 Dollar ($1.00) so overdue, with a minimum
charge ofTwenty-Five and no/100 Dollars ($25.00) and an additionul "late charge" for purposes
of defraying experu;e incident to hand.ling on the first day of each successive calendar month
thereafter at the rate of five cents (5¢) for each One and no/100 Dollar ($ 1.00) so overdue, with a
minimum charge of Twenty-Five and no/100 Dollars ($25.00) per month until any such
installment, or portion thereof, has been paid in full. Notwitl1stnnding anything contained herein
to the contr.uy, no "late charge" shall be payable with respect to 1he final payment due upon the
maturity, or the early acceleration, of this Note. Provided, however, nothing herein contained
shall be construed as a waiver by Lender of its option lo declare a default if any payment o f any
monthly instnllment of interest and/or principal, or portion thereof, is not made when due, and
the assessment of a  late   charge shall not affect the right of Lender to increase the rate of interest
as herein provided on all amounts not paid when due.

        8.      Security. Titls Note is given to evidence indebtedness of Maker to Lender arising
in connection with the tenns, provisions and conditions of the Loan AgrecmenL This Note shall
be entitled to the benefits of and is secured by (a) a certain Assignment of Leases and Rents of
even date herewith executed by Maker to Lender, as from time to time amended or modified, (b)
the Deed ofTrust, (c) any other security agreements or docmnents, as from time to time amended
or modified, executed to Lender in connection with this Note, and (d) any funds of Maker on
deposit with Lender.

        9.     Application of Payments. Each payment hereunder ehnll be applied lo the
payment of accrued and unpaid interest, the principal balance out.standing under this Note and
any other swns payable to Lender in connection with this Note or eny documents entered into by
Maker in connection herewith, in such order and in such amounts as Lender shall dcterm.ine in its
sole discretion. Such order may include, without limi1ation, tl1e application first to any advance
made by Lender under the teons of any instruments seeming this Note which has not been
repaid, then to any costs of collection or other corts or expenses for which Maker is obligated to
reimburse Lender pursuant to this Note or pUTSuant to any document executed in connection witlt
this Note, then to any late charges due and owing under this Note, tt1en to any accrued and
unpaid interest, and then to the principal balance outstnnding. All amoWlts odvnnccd by Lender
(in addition to the principal advanced under this Note) pursuant to applicable provisions of the
Deed of Trust, the Loan Agreement or any other document entered into by Maker in connection
with this Note, together with interest at the Default Rate or other charges as provided therein,
sh.all be added to and immediately due and payable Wider this Note. In the event any such
advance is not so repaid by Maker, Lender may, at its option, first apply any payments received
hereunder to repay such advances together with mty interest thereon or other charges, and the
balance, if any, shall be applied toward the payment of interest and principal fuen due hereunder
in such order as Lender shall determine, in its sole discretion. If the due dare of any payment

                                             Page 10of16

                                                                                   COBALT 000010
under this Note shall be a day 1hat is not a Business Day, then the due date shall be ex.tended to
the next succeeding Business Day and such extended time shall be included in the computation
ofinterest All amounts payable from time to time under th.is Note, including ·without limitation
principal and interest payments, shall be due and payable in immediately available funds on the
date each such payment is due at the principal office of Lender before the time of day which
Lender from time to time designates as its cut-off time for considering deposits received as being
received on such date (hereinafter referred to as 1he ..Cut-Off Time"). In the event any payment
is received by Lender after the Cut-Off Time on any day, such payment shall be deemed to be
received as of the start of business on the next Business Day and, to 1he exrent interest accrues on
such amounts paid, interest shall continue to accrue until the next Business Day.

      10.     EvBl'lts of Default.   Each of the followmg events shall constituti;: an Event of
Default hereunder:

              (a)     . a failure by Maker to pay, witllin five (5) days when due, nny installment
       ofinterest or principal due and payable pursuant to the tenns of this Note;

              (b)     a failure by Mak.er or any other obligor to pay, within :five (5) days upon
       demand or when due, any other amounts due and payable pursuant to the tenns of this
       Note or pursuant t.o the terms of any other document or agreement executed by Maker or
       any guarantor in connection with the indebtedness evidenced by this Note;

               (c)     a default Wlder or a failure to comply with any of the other tenns,
       conditions, agreements or covenantB of this Note and the continuation of such default or
       fuilure for a period of thirty (30) days after written notice of such default or failure has
       been sent to Maker; and

                (d)     the occurrence of a default under any of the other Loan Documents and a
       failure t.o cure such default within the applicable cure period specified. therein, if any.

        11.     Remedies. Upon the occurrence of an Event of Defuult, all of the indebtedness
evidenced by tiris Note and remaining unpaid, :including without limitation the entire unpaid
principal balance, any accrued and unpaid interes~ all prepayment premiums payable hereunder,
if any, and all other amounts payable under this Note, shall, at the option of Lender and without
demand or notice, become immediately due and payable, anything contained "in this Note to the
contrary·notwithstanding. Lender may exercise this option to accelerate reg11rdless of any prior
forbearance. Lender, at its option, shall have the right to perfonn all acts necessary for the
perfonnance, sale, collection and enforcement of any collateral securing this Note and/or any
other agreement or document executed in connection herewith. Enforcement by Lender of any
security for Maker's obligations under this Note shall not constitute an election by Lender of
remedies so as to preclude the exercise of any other right or remedy available to Lender. In
addition to all other remedies available t.o Lender after an Event of Defuult hereunder, Lender
may, wi1hout demand or notice of any kind, apply any funds of Maker on deposit with or in the
possession of Lender toward the payment of any indebtedness outstanding under this Not.e, in
such manner of application as Lender may choose. All rights and remedies of Lender herein

                                          Page 11 ofl6

                                                                                COBALT 000011
specified are cumulative and in addition to, not in limitation of, any rights and remedies which
Lender may have by law or at equity.

       12.      mw Section is intentionally left blank)
        13.     Waiver and Consent. Presentment, notice of intent to accelerate, notice of
acceleration, notice of dishonor and demand, valuation and appraisement, protest and diligence
in collection and bringing snit are hereby severally waived by Maker and each endorser or
guarantor, each of whom further consents tlurt the time for the paymrnt of this Note, or of any
instnllment here1mder, may be extended from time to time without notice by Lender. All
guarantors, sureties and accommodation parties of this Note hereby waive generally and
specifically, to the ex.tent waivable, nny and all right.s that they may l1ave, ·by contract, at equity
or wider ony stntc or federal law, to ony defense, offset, claim in recoupment or counterclaim not
specifically set forth herein.

        14.    No Waiver. No waiver of any default or failure or delay to exetcise my right or
remedy by Lender sh.all operate as a waiver of any other default or of the same default in the
future or us a waiver of any right or remedy with respect to the same or any ·other occurrence.
The acceptance by Lender of any payment after the due date of such payment, or in an amount
which is less than the required payment, shall not be a waiver of Lender's right to require prompt
payment when dne of all other payments or to exercise any right or remedy with respect to any
failure to make prompt payment.

        15.      Usury Laws. It is the intention of the parties hereto t.o comply strictly with all
applicable usury laws. All agreements between Maker i.md Lender, whether now existing or
hereafter nrisi.ng and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, wlieU1er by reason of ucceleration of the maturity hereof; or
otherwise, shall the amount paid, or agreed to be paid to Lender for the use, forbearance, or
detention of the money to be loaned hereunder or otherwise or for the payment or performance of
any covenant or obligation contained herein or in any 0th.er document evidencing, securing, or
pertaining to the indebtedness evidenoed hereby, exceed U1e maximum amount permissible under
applicable law. If from any circumstance whatsoever fulfillment of any provision hereof or of
such other document», at the time perfonnunce of such provision shall be due, shall involve
t:ransccruling the limit of validity prescribed by law, then ipso facto, 1he obligation to be fulfilled
shnll be reduced to t11c limit of such validity, and if from any such circumstance Lender shall
ever receive as interest or otherwise an amount which would exceed the highest lawful rate, such
amount whioh would be excessive interest s1uill be applied to the reduction of the principal
indebtedness of Maker to Lender, and not to the payment ofinrercst, or if such excessive interest
exceeds the unpaid balance of principal hereof, such excess shall be refunded to Maker. All
sums paid or agreed to be paid by Maker for the use, forbearance or derention of the
indebtedness of Maker to Lender hereunder shall, to the extent peonitted by applicable law, be
amortized, prorated, allocated and spread 1hroughout the full teon of such indebtedness until
payment in full in such manner that there will be no violation of applicable laws pertaining to the
maximum rate or amount of interest which may be contracted for, charged or received with
respect to such indebtedness. Maker shall not institum any action or file any defense based upon
the charging or collecting of usurious interest hereunder unless (i) Maker sball give Lender

                                            Page 12 ofl6

                                                                                   COBALT 000012
written notice of an intent tD do so and (ii) Lender shall fail to comply with the tenns hereof by
making necessary adjustments as required by this Section, and notify Maker of such compliance
within fifteen (15) days after receipt by Lender of such written notice from Maker. TI1e
provisions of this Section shall be given precedence over any other provision contained herein or
in any ofuer agreement between the parties hereto that is in conflict with the provisions of this
Section.

       J 6.    [This Section is intnntionallv left blank]

        17.     Waiver of Trial by Jury. Maker hereby agrees that any suit, action or proceeding,
whether a claim or counterclaim, brought or instituted by any party on or with respect to this
Note or any other document executed in connection herewith or which in any way relates,
directly or incfuectly to this Loan Agreement or any event, transaction or occurrence arising out
of or in any way connected with this N ot.e or the dealings of the parties with respect thereto, shall
be tried only by a court and not by a jury. MAKER, AND LENDER BY ACCEPTANCE OF
THIS NOTE, HEREBY EXPRESSLY WANE ANY IUOHT TO A TRIAL BY JURY IN ANY
SUCH SUIT, ACTION OR PROCEEDING. Maker acknowledges that Maker may hHVe a right
to a trial by jury in any such suit, aclion or proceeding and that Maker hereby iB knowingly,
intentionally and volunmrily waiving any such rignt Maker further acknowledges and agrees
ihat this Section is maierial to this Note and that adequate consideraiion has been given by
Lender and received by Maker in exchange for the waiver made by Maker pursuant to this
Section.

        18.    Notices. Any written notice pennitted or required hereunder shall be effective
when (a) mailed by certified United States mail, postage prepaid with return receipt requested or
(b) sent by an overnight carrier which provides for a return receipt, to the applicable address
specified below:

               Ifto Maker:             410 Centre LLC
                                       7914 North Shadeland Avenue
                                       Suite 200
                                       Indianapolis, Indiana 46250

               Ifto Lender:            M&I Marshall & Ilsley Bank
                                       135 North Permsylvania Street
                                       Indianapolis, Indiana 46204
                                       Attention: Russ Swan, Senior Vice President

or to such other addresses within the Stile of Indiana as either Maker or Lender may from time
to time specify for it.self by nonce hereunder. /Uly notice may be given on behalf of Lender or
Maker by such party's legal counsel

        19.      Legal Tender. This Note is negotiable and i.s payable il\ lawful money of the
United States of America which shall be legal tender in payment of all debt.sand dues, p ublic and
private, at the time of payment.

                                           Page 13 ofl6

                                                                                 COBALT 000013
        20.    Successors and AssilOl.B. The obligations of Maker bei:cundet shall be binding
upon Maker and Maker's successors, assigns and legal representatives (the refurence to «Makern
in this Note shall be deemed to include, without limitation, such successors, assigns and legal
representatives) and shall inure to the benefit of Lender and Lender's successors, assigns and
legal representatives (the referenc.e tn "Lender" in this Note shall be deemed to include, without
limitation, such successors, assigns and legal representatives, including, without limitation, any
subsequent holder of this Note); provided however, that this Not.e cannot be assigned by Maker
without 1he prior written consent of Lender, und any such as sigrunent or attempted assigrunent
by Maker shall be void and of no effect with respect to Lender.

       21.     Joint and Several Obligations. The obligations, agreements and covenants of the
persons or entities constituting Maker hereunder are joint and several and unconditional.

       22.     Governing Law. This Note is delivered to Lender in the State of Indiana and is
executed w1der and shall be governed by and construed in accordance with the laws of the State
of Indiana, notwithstanding that Indiana conflicts of law rules might otherwise require the
substantive rules oflaw of another jurisdiction to apply.

      23.    Time of the Essence. Time is of the essence with respect to each obligation and
agreement ofMaker under this Note.

       24.     Invalidity of Any Provision. If any provision (or portion thereof) of this Note or
the application thereof to any person or circumstance shall to any extent be invalid or
unenforceable, then the remainder of this Note or the application of such provision (or portion
ther~f) to any o1her person or ci;rcumstance shall be valid and enforceable to the fullest extent
permitted by law.

       25.     Commercial Purpose. Maker represents that the indebtedness evidenced by this
Note is being incuued by Maker solely for the purpose of canying on a business or c0mmercial
enterprise, and not for personal, family or household purposes. Maker represents to Lender that
this Note evidences a business loan exempt from the Federal Truth in Lending Act (15 USC
1601, ct seq.), Regulations G, U, X and Z of the Board of Governors of 1he Federal Reserve
Syi;tem, and the Indiana Uniform Corururner Credit Code (IC 24-4.5-3-101, et seq.).

        26.    Continuing Enforcement. It; after receipt of any payment of all or any part of this
Note, Lender is compelled or agrees, for settlement purposes, to surrender such payment to any
person or entity for any reason (mcluding, without limitation, a determination that such payment
is void OT voidable as a preference or fraudulent conveyance, an impcmtissiblc setoff, or a
diversion of trust funds), then this Note and the other Loan Documents shall continue in full
force and effect or be reinstate4, as the case may be, and Maker shall be liable for, and shall
indemnify, defend and hold harmless Lender with respect to, tlte full amount so surrendered.
The provisions of this Section shall survive the cancellation or termination of this Note and shall
remain effective notwithstanding the payment of the obligations evidenced hereby, the release of
any security interest, lien or encumbrance securing this Note or any other a..'1ion which Lender
may have tlken in reliance upon its receipt of such payrnenl Any cancellation, release or other

                                          Page 14 ofl6

                                                                               COBALT 000014
such action shall be deemed to have been conditioned upon any payment of the obligations
evidenced hereby having become final and irrevocable.

         27.    Captions. Til.e captions or headings herein have been inscrred solely for the
convenience of reference and in no way define or limit the scope, intent or substance of any
provision of this Note. Whenever the oontext requires or permits the singular shall include the
plural, the plural shall include the singular and the masculine, feminine and neuter shall be freely
interchangeable.

                                [SIGNATURE PAGE FOLLOWS]

                                           Page 15of16

                                                                                COBALT 000015
       IN \VITNF.SS WHEREOF, Maker has caused this Note to be ex~uted effective as of the
day and the year :first above written.

                                                                   Received
                                                                      JUL 0 t 2008

                                         Page 16of16

                                                                        COBALT 000016
                                          EXHIBIT"A"

                               LIBOR DESIGNATION NOTICE

MAKER:                41 O CENTRE LLC

LENDER:               M&I MARSHALL & ILSLEY BANK

DATE OF TIIlS NOTICE: _ __ __                 _   _   _   _   ___, 200

      Maker hereby submits this LIBOR Designation Notice pursuant to that certain
Promissory Note dated May_, 2008, executed by Maker in favor of Lender in the principal
amount of Five Million One Hundred Thousand and 00/100 Dollars ($5, 100,000.00) (the
"Note"). This Notice is irrevocable. All capitalized tenns not defined herein shall have the
meanings ascribed to them in the Note.

        Maker hereby requests that the entire portion of the principal balance of the Note
outstanding which is currently subject to the Prime-Based Rate begin bearing interest at the
LIBOR-Based Rate commencing effective as of the first day of the calendar month following the
calendar month in which this Notice is received by Lender. Maker acknowledges that once the
change of the interest rate requested by this Notice becomes effective, the LIBOR-Based Rate
shall apply with respect to the entire principal balance outstanding under the Note until such time
as Maker submits a Prime Designation Notice with respect to any portion of the principal
balance outstanding and such notice takes effect pursuant to the terms of the Note.

     This LIBOR Designation Notice is submitted by Maker as of the _ _ _ _ _ day of
_ _ _ _ _,200      .

                                             410 CENTRE llC

                                             By: ---~~-~~-~-~
                                                  John B. Urbahns, Managing Member

                                                                              COBALT 000017
                                          EXHIBIT ''B"

                                  PRIME DESIGNATION NOTICE

MAKER:                      410 CENTRE LLC

LENDER:                     M&I MARSHALL & ILSLEY BANK

DATE OF THIS NOTICE: _ _ _ __ __ _ ___,200_

       Maker hereby submits this Prime Designation Notice pursuant to that certain Promissory
Note dated May __, 2008, executed by Maker in favor of Lender in the principal amount of
Five Million· One Hundred Thousand and 00/100 Dollars ($5, 100,000.00) (the "Note''). This
Notice is irrevocable. All capitalized tenns not defined herein shall have the meanings ascribed
to them in the Note.

        Maker hereby requests that the entire portion of the principal balance of the Note
outstanding which is currently subject to the LIBOR-Based Rate begin bearing interest at the
Prime-Based Rate commencing effective as of the first day of the calendar month following the
calendar month in which this Notice is received by Lender. Maker acknowledges that once the
change of the interest rate requested by this Notice becomes effective, the Prime-Based Rate
shall apply with respect to the entire principal balance outstanding under the Note until such time
as Maker submits a LIBOR Designation Notice with respect to any portion of the principal
balance outstanding and such notice talH~A~a \ 20 13

               THIS ALLONGE SHOULD BE PERMANENTLY AFFIXED
                 TO THE PROMISSORY NOTE DESCRJBED ABOVE

                                                                             COBALT 000616
                          Transaction No. I OJ0759
ASS IGNOR:

WELLS FARGO BANK, NATION AL
ASSOC~ION
By:
Name: -
             ~)~
              ~
Title:       Assistant Vice President

  2

                                  COBALT 000617
TAB C
     COBALT 000328

PLAINTIFF EXHIBIT NO. 4
COBALT 000329
COBALT 000330
COBALT 000331
COBALT 000332
COBALT 000333
COBALT 000334
COBALT 000335
COBALT 000336
COBALT 000337
TAB D
     COBALT 000447

PLAINTIFF EXHIBIT NO. 7
COBALT 000448
COBALT 000449
COBALT 000450
COBALT 000451
COBALT 000452
COBALT 000453
COBALT 000454
TAB E
                                  PRE-NEGOTIATION AGREEMENT

        THIS PRE-NEGOTIATION AGREEMENT (this "Agreement"), dated October___,
2013, is made and entered into by and among Wells Fargo Bank, National Association, by Hudson
Americas, LLC, its attorney in fact C'Creditor11), the entities listed on Schedule I attached hereto
and made a pati hereof for all purposes (the "B01rnwer"), and the entities listed on Schedule 2
attached hereto and made a part hereof for all purposes (the "Guarantor") (the Borrower and the
Guarantor are hereinafter collectively referred to as "Obligor").

                                            RECITALS

        A.     Bot'l'Ower borrowed money from BMO Harris Bank, N.A. as successor-by-merger to
M&I Marshall & Ilsley Bank ("Original Lender"), Creditor's predecessor in interest, as evidenced
by those certain promissory notes (as amended, modified, assumed and/or assigned from time to
time, the "Loan") identified in Exhibit A attached hereto and made a party hereof fot• all purposes,
and such documents evidencing or securing the Loan (collectively, the "Loan Documents").

        B.      In connection with the Loan, the Obligor and Creditor desire to discuss certain issues
between themselves. The patties have had meetings, discussions and negotiations and contemplate
fu1ther meetings, discussions and possible negotiations between themselves or their agents or
representatives regarding the Loan, and the facts and circumstances attendant thereto (all of which
are collectively referred to as the "Discussions").

        NOW, THEREFORE, the patties hereto agree as follows:

          I.     Settlement Discussions: The Obliger and Creditor hereby agree that: (i) engagement
after the date hereof in and/or discontinuation after the date hereof of any and all Discussions by any
party hereto shall be at said party's sole and absolute discretion, it being the agreement and
understanding of each party hereto that there shall be no breach or claim of breach hereof or liability
hereunder associated with or arising out of a party's election, at any time or from time to time, for
any reason or no reason, not to engage in Discussions or to limit or te11ninate then existing
Discussions (as to topics one and all), and (ii) no representation, offer, concession or statement
made by any patty during the course of the Discussions shall constitute a waiver by any patty of any
rights, remedies, or defenses it may have, in any way modify or terminate any of the Loan
Documents, in any way modify the legal relationship of the parties as set forth in the Loan
Documents, or result in an admission against the interest of any party, except to the extent the
parties otherwise agree in a duly executed and binding written agreement pursuant to Section 4
below. The patties fillther acknowledge that they have entered into this Agreement in order to
facilitate Discussions, if any, in an open, frank and direct manner without dsk of exposure to
 liability as a result thereof and in order to an·ive at a resolution of the matters giving rise to the
 Discussions acceptable to the parties. Any and all Discussions shall be deemed to be discussions in
 the nature of settlement negotiations and shall be kept confidential and neithet· patty nor any third
 party shall have the right to rely upon or to use the fact or content of any such Discussions (or the
                                                     I
 Error! Unknown document propnty nam•.

                                                                                   410 CENTRE-00248

                                                                        PLAINTIFF EXHIBIT NO. 31
lack thereof) in connection with the exercise of any right, remedy ot• defense under the Loan
Documents or in any action at law or In equity arising therefrom ot· otherwise arising from the
relationship between the Obllgor and Creditor, and no statement (oral or written) made by either
paity to the other in the course of the Discussions shall be deemed, in any proceeding at law or in
equity involving the Loan Documents or the Loan described herein) (i) an admission of any fact; or
(ii) evidence or probative of any act or omission to act, or intent of any patty.

        It is expressly understood that each party reserves all legal and equitable rights and remedies
and that the parties do not intend to require the exclusion of any evidence othe1wise discoverable as
contemplated by Rule 408 of the Federal Rules of Civil Procedure or any similar state law.

        2.   No Waiver by Creditor. Creditor has not in any way waived any rights or remedies
it may have to insist on full performance by the Obligor of all obligations under the Loan
Documents or any rights or remedies available to it thereunder or otherwise available at law or in
equity.

       3.      No Waiver by Obligor. Obligor has not in any way waived any rights ot· remedies it
may have prior to and until the date of this Agt·eement with respect to the Loan or any of the Loan
Documents, 01· othetwise available at law 01· in equity either directly in an action against Creditor, as
a defense against any action by Creditor agiiinst Obligor or any other civil proceeding or otherwise.

        4.       Written Agreements. No statement made by either patty in connection with any
discussions or this Agreement shall be relied upon by the other until an agreement reflecting the
same is reduced to a duly executed and binding written agreement, approved (in the case of
Creditor, by its resolution committee and confirmed by senior management) and executed by all
parties in their sole discretion, and the Loan Documents are modified) if necessary. No agreements,
representations or warranties shall be binding or effective unless agreed to in writing by the Obligor
and Creditor as evidenced by a duly executed and binding written agreement after the approval of
Creditor's resolution committee and confirmation of its senior management have been obtained.

          5.        No Tolling. Discussions, if any, shal! not operate (i) to relieve the Obligor of its
obligations to comply in a foll and timely manner with any and all obligations (monetary or non-
monetary) set forth in the Loan Documents, or (ii) as a waiver by Creditor of its rights to demand
full and timely performance of all obligations under the Loan Documents. Neither the execution of
this Agreement nor the Creditor's pa1ticipation (or election not to participate) in any Discussions
shall operate to toll any time period which othetwise might be applicable to actions or undertakings
by any patty, including without limitation any time periods which may be provided for in the Loan
Documents. Nothing contained in this Agreement is intended (i) to limit or otherwise affect
Creditor's rights or Creditor's ability to initiate, continue or otherwise proceed to exercise any rights
or remedies it may have before, during or after Discussions, if any, including, but not limited to,
giving notices of default or initiating foreclosure proceedings; or (ii) to relieve the Obligor of any
obligations it has under the Loan Documents.

                                                      2
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       6.      Authorized Representatives. The individuals who conduct the Discussions on
Creditor's behalf do not have the authority to bind Creditor. If any of such individuals determine
or conclude that it may be appropriate to agree with Obligor concerning any proposed waiver,
modification, forbearance, amendment to or amendment of any of the Loan Documents or any
modification of any of the obligations thereunder (each, a "Proposal"), they will present the
Proposal to, and seek the approval of the Proposal by their resolution committee and if approved,
the confirmation of such approval by their senior management. Only after Creditor's senior
management confirms the approval of the Proposal and Creditor and Obligor enter into a duly
executed and binding written agreement relating thereto will any Proposal be binding on
Creditor.

        7.     Payment Statements. Fmm time to time, C1·editor (or its servicer) has sent and
may send to the Obligor payment statements. The payment statements are generated for the
Obligor's information and convenience only, and the billing statements do not waive, amend or
alter the Obligor's obligations under the Loan Documents.

        8.     No Third Party Beneficiat'ies. The paities acknowledge that Discussions, if any, are
entered into for the sole benefit of the patties hereto, and no other person or entity shall have any
rights by reason of any Discussions (or lack thereof) or this Agreement. The parties further
acknowledge that either pa1iy shall have the right to terminate the Discussions at any time, with or
without cause, without notice to the other party.

        9.      Amendments in Writing. No amendment of or supplement to this Agreement shall
be valid or effective unless made in writing and executed by all patties hereto.

         1O.     Counterparts and Electronic Signatures. This Agreement may be executed in
 multiple countet·paits, each of which shall constitute an original hereof, and all of which taken
 together shall constitute one and the same agreement. Further, this Agreement may be executed by
 facsimile or by po1table document format (.pdf) signature, such that execution of this Agreement
 by facsimile or by portable document fotmat (.pdf) signature shall be deemed effective for all
 purposes as though this Agreement was executed a~ a "blue .ink" original.

         11.    Counsel. The Obligor and Creditor acknowledge that each patty has engaged
 separate legal counsel to represent their intet·ests in connection with the Discussions and the
 negotiation and execution of this Agreement.

                                           [SIGNATURE PAGE FOLLOWS)

                                                      3
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                                                                                   410 CENTRE-00250
                                                                                                           '" "-"'

        IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of
the day and yea1· first set f011h above.

                                           <;:REDITOR:

                                           WELLS FARGO BANK,
                                           NATIONAL ASSOCIATION
                                           By:  Hudson Americas LLC, its attorney-in-fact

                                                      By:
                                                                  Marisa K. McGaughey,
                                                                  Assistant Vice President

                                           BORROWER:

                                           410       CENTRE        LLC,     an Indiana limited liability

                                                                              :;'
                                                                                 -7''"

                                          G· ., a:h .e
                                           B                            ,    ,y/

                                                                            -;1;,Jq1,,,
                                           Title: d     1   l?.,,_/,,rf-7

                                                 4
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                                              EXHIBI'f A

                                                The Loan

Loan Transactions evidenced by the following documents:

         1.        Promissory Note (as amended, assigned and/or assumed from time to
                   time, the "Note"), dated June 13, 2008 (the "Closing Date"), executed and
                   delivered by Borrower, payable to the orde1· of Original Lender, in the original
                   principal amount of $5, 100,000.00;

         2.        that certain Loan Agreement by and between Bo11·ower and Original Lender,
                   dated as of the Closing Date;

         3.        the liens, security interests, terms and provisions of that certain Deed of Trust
                   Security Agreement and Assignment of Leases and Fixture Filing, dated as of the
                   Closing Date, executed and delivered by Borrower to Scott K. McDonald, as
                   trustee for the benefit of Original Lender, recorded as Instrument No.
                   20080125701, Book 13542, Page 407, in the Real Property Records of Bexar
                   County, Texas;

         4.        the liens, security interests, terms and provisions of that cet'tain Assignment of
                   Leases and Rents dated as of the Closing Date, executed and delivered by
                   Borrower for the benefit of Original Lender, recorded as Instrument No,
                   20080125702, Book 13542, Page 445, in the Real Property Records of Bexar
                   County, Texas;

         5,         Contim1ing Guaranty dated as of the Closing Date, executed and
                    delivered by Guarantol';

          6.        Assignment of Construction Contracts dated as of the Closing Date, executed and
                    delivered by Borrower in favor of Original Lender;

          7.        Environmental Certificate and Indemnity Agreement by Borrowet· and Guarantor
                    in favor of Original Lender;
          8.        Forbearance Agreement dated effective Septembe1· 30, 2011, by·and between
                    Borrower, Gual'antm· and Ol'iginal Lender; and

          9.        various UCC-1 Financing Statements.

                                                      5
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                                                                                      410 CENTRE-00252
                                        SCHEDULE I

                                          Borrower

                                        410 Centre LLC

                                               6
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                                                         I .
                                                         \  i
                                                         ~I
                                         SCHEDULE2

                                           Guarantor

                                         John B. Urbahns

                                                 7
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                                                           410 CENTRE-00254
                                   PRE-NEGOTIATION AGREEMENT

        THIS PRE-NEGOTIATION AGREEMENT (this "Agreement"), dated October D ,                  3
2013, is made and entered into by and among Wells Fargo Bank, National Association, by Hudson
Americas, LLC, its attorney in fact ("Creditor''), the entities listed on Schedule I attached hereto
and made a part hereof for all purposes (the "Borrower''), and the entities listed on Schedule 2
attached hereto and made a part hereof for all purposes (the "Guarantor") (the Borrower and the
Guarantor are hereinafter collectively referred to as "Obligor").

                                            RECITALS

        A.     Borrower bon·owed money from BMO Harris Bank, N.A. as successor-by-merger to
M&l Marshall & Ilsley Bank ("Original Lender''), Creditor's predecessor in interest, as evidenced
by those certain promissory notes (as amended, modified, assumed and/or assigned from time to
time, the "Loan") identified in Exhibit A attached hereto and made a party hereof for all purposes,
and such documents evidencing or securing the Loan (collectively, the "Loan Documents").

        B.      In connection with the Loan, the Obliger and Creditor desire to discuss certain issues
between themselves. The parties have had meetings, discussions and negotiations and contemplate
further meetings, discussions and possible negotiations between themselves or their agents or
representatives regarding the Loan, and the facts and circumstances attendant thereto (all of which
are collectively referred to as the "Discussions").

         NOW, TIIEREFORE, the parties hereto agree as follows:

          1.     Settlement Discussions: The Obligor and Creditor hereby agree that: (i) engagement
after the date hereof in and/or discontinuation after the date hereof of any and all Discussions by any
party hereto shall be at said party's sole and absolute discretion, it being the agreement and
understanding of each party hereto that there shall be no breach or claim of breach hereof or liability
hereunder associated with or arising out of a party's election, at any time or from time to time, for
any reason or no reason, not to engage in Discussions or to limit or terminate then existing
Discussions (as to topics one and all), and (ii) no representation, offer, concession or statement
made by any party during the course of the Discussions shall constitute a waiver by any party of any
rights, remedies, or defenses it may have, in any way modify or terminate any of the Loan
Documents, in any way modify the legal relationship of the parties as set forth in the Loan
Documents, or result in an admission against the interest of any party, except to the extent the
parties otherwise agree in· a duly executed and binding written agreement pursuant to Section 4
below. The parties further acknowledge that they have entered into this Agreement in order to
 facilitate Discussions, if any, in an open, frank and direct manner without risk of exposure to
 liability as a result thereof and in order to arrive at a resolution of the matters giving rise to the
 Discussions acceptable to the parties. Any and all Discussions shall be deemed to be discussions in
 the nature of settlement negotiations and shall be kept confidential and neither party nor any third
 party shall have the right to rely upon or to use the fact or content of any such Discussions (or the
                                                   l
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lack thereof) in connection with the exercise of any right, remedy or defense under the Loan
Docwnents or in any action at law or in equity arising therefrom or otherwise arising from the
relationship between the Obligor and Creditor, and no statement (oral or written) made by either
party to the other in the course of the Discussions shall be deemed, in any proceeding at law or in
equity involving the Loan Documents or the Loan described herein, (i) an admission of any fact; or
(ii) evidence or probative of any act or omission to act, or intent of any party.

       It is expressly understood that each party reserves all legal and equitable rights and remedies
and that the parties do not intend to require the exclusion of any evidence otherwise discoverable as
contemplated by Rule 408 of the Federal Rules of Civil Procedure or any similar state law.

        2.   No Waiver by Creditor. Creditor has not in any way waived any rights or remedies
it may have to insist on full performance by the Obligor of all obligations under the Loan
Documents or any rights or remedies available to it thereunder or otherwise available at law or in
equity.

       3.      No Waiver by Obligor. Obligor has not in any way waived any rights or remedies it
may have prior to and until the date of this Agreement with respect to the Loan or any of the Loan
Documents, or otherwise available at law or in equity either directly in an action against Creditor, as
a defense against any action by Creditor against Obligor or any other civil proceeding or otherwise.

        4.       Written Agreements. No statement made by either party in connection with any
discussions or this Agreement shall be relied upon by the other until an agreement reflecting the
same is reduced to a duly executed and binding written agreement, approved (in the case of
Creditor, by its resolution committee and confinned by senior management) and executed by all
parties in their sole discretion. and the Loan Documents are modified, if necessary. No agreements,
representations or warranties shall be binding or effective unless agreed to in writing by the Obliger
and Creditor as evidenced by a duly executed and binding written agreement after the approval of
Creditor's resolution committee and confinnation of its senior management have been obtained.

         5.       No Tolling. Discussions, if any, shall not operate (i) to relieve the Obligor of its
 obligations to comply in a full and timely manner with any and all obligations (monetary or non-
 monetary) set forth in the Loan Documents, or (ii) as a waiver by Creditor of its rights to demand
 full and timely performance of all obligations under the Loan Documents. Neither the execution of
 this Agreement nor the Creditor's participation (or election not to participate) in any Discussions
 shall operate to toll any time period which otherwise might be applicable to actions or undertakings
 by any party, including without limitation any time periods which may be provided for in the Loan
 Documents. Nothing contained in this Agreement is intendoo (i) to limit or otherwise affect
 Creditor's rights or Creditor's ability to initiate, continue or otherwise proceed to exercise any rights
 or remedies it may have before, during or after Discussions, if any, including, but not limited to,
 giving notices of default or initiating foreclosure proceedings; or (ii) to relieve the Obligor of any
  obligations it has under the Loan Documents.

                                                     2
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