-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IO5WI3BV6KNGQboQ5V94oODQuC9AIptyosICxTSp7fhBEYrgm6vhkTKhZMC3qTKT Q7q+MjgibYkuxL8u/8lduQ== 0001104659-07-062435.txt : 20070814 0001104659-07-062435.hdr.sgml : 20070814 20070814154753 ACCESSION NUMBER: 0001104659-07-062435 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070814 DATE AS OF CHANGE: 20070814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVENTURE GROUP, INC. CENTRAL INDEX KEY: 0000944508 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 860786101 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14556 FILM NUMBER: 071054853 BUSINESS ADDRESS: STREET 1: 3500 S LA COMETA DR CITY: GOODYEAR STATE: AZ ZIP: 85338 BUSINESS PHONE: 6239326200 MAIL ADDRESS: STREET 1: 3500 S LA COMETA DR CITY: GOODYEAR STATE: AZ ZIP: 85338 FORMER COMPANY: FORMER CONFORMED NAME: POORE BROTHERS INC DATE OF NAME CHANGE: 19960926 10-Q 1 a07-18752_110q.htm 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

		For the quarterly period ended June 30, 2007

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

		For the transition period from to

Commission File Number: 1-14556

THE INVENTURE GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		86-0786101
(State or Other Jurisdiction of Incorporation or		(I.R.S. Employer
Organization)		Identification No.)

5050 N. 40th Street, Suite # 300 Phoenix, Arizona		85018
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (623) 932-6200

Indicate by check whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 19,303,394 as of July 15, 2007.

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements - Unaudited

	Condensed consolidated balance sheets as of June 30, 2007 and December 30, 2006

	Condensed consolidated statements of income for the quarters ended June 30, 2007 and July 1, 2006

	Condensed consolidated statements of cash flows for the quarters ended June 30, 2007 and July 1, 2006.

	Notes to unaudited condensed consolidated financial statements

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Item 4.		Controls and Procedures

Part II. OTHER INFORMATION

Item 1.		Legal Proceedings

Item 1A.		Risk Factors

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.		Defaults Upon Senior Securities

Item 4.		Submission of Matters to a Vote of Security Holders

Item 5.		Other Information

Item 6.		Exhibits

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE INVENTURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30,			December 30,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	4,271,154		$	8,671,259
Accounts receivable, net of allowance of $21,931 in 2007 and $26,452 in 2006	8,507,009			6,284,163
Inventories	11,403,079			3,459,236
Deferred income tax asset	799,026			1,103,064
Other current assets	564,636			521,208
Total current assets	25,544,904			20,038,930

Property and equipment, net	22,642,513			12,534,444
Goodwill	12,370,593			5,986,252
Trademarks	4,207,032			4,207,032
Other intangibles, net	231,405			—
Other assets	274,990			45,606
Total assets	$	65,271,437		$	42,812,264
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,928,717		$	3,440,033
Line of Credit	6,000,000			—
Accrued liabilities	4,395,420			2,975,723
Current portion of long-term debt	1,172,054			112,113
Current portion of accrued costs related to brand discontinuance and other exit cost accruals	94,886			98,400
Total current liabilities	19,591,077			6,626,269

Long-term debt, less current portion	12,928,532			3,973,461
Non-current portion of accrued costs related to brand discontinuance and other exit cost accruals	—			91,428
Deferred income tax liability	2,200,115			2,200,114
Total liabilities	34,719,724			12,891,272

Commitments and contingencies (Note 6)

Shareholders’ equity:
Preferred stock, $100 par value; 50,000 shares authorized; no shares issued or outstanding at June 30, 2007 and December 30, 2006	—			—
Common stock, $.01 par value; 50,000,000 shares authorized 20,112,685 and 20,150,746 shares issued and outstanding at June 30, 2007 and December 30, 2006, respectively	201,127			201,508
Additional paid-in capital	29,048,058			28,854,243
Retained earnings	3,147,949			2,710,662
	32,397,134			31,766,413
Less: treasury stock, at cost: 818,740 shares in 2007 and 2006	(1,845,421		)	(1,845,421		)
Total shareholders’ equity	30,551,713			29,920,992
Total liabilities and shareholders’ equity	$	65,271,437		$	42,812,264

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE INVENTURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Quarter Ended						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
	2007			2006			2007			2006

Net revenues	$	22,926,095		$	18,497,664		$	39,905,992		$	36,092,912

Cost of revenues	18,564,049			14,797,005			32,447,385			29,294,543

Gross profit	4,362,046			3,700,659			7,458,607			6,798,369

Selling, general and administrative expenses	3,595,589			2,870,876			6,503,283			5,887,219

Operating income	766,457			829,783			955,324			911,150

Interest income	69,704			108,235			174,149			200,734
Interest expense	(245,811		)	(45,454		)	(330,114		)	(97,136		)
Interest income (expense), net	(176,107		)	62,781			(155,965		)	103,598

Income before income tax provision	590,350			892,564			799,359			1,014,748

Income tax provision	(258,573		)	(349,581		)	(362,073		)	(403,600		)

Net income	$	331,777		$	542,983		$	437,286		$	611,148
Earnings per common share:
Basic	$	0.02		$	0.03		$	0.02		$	0.03
Diluted	$	0.02		$	0.03		$	0.02		$	0.03

Weighted average number of common shares:
Basic	19,303,394			20,106,027			19,302,822			20,090,551
Diluted	19,381,322			20,124,950			19,426,747			20,127,382

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE INVENTURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended
	June 30, 2007			July 1, 2006

Cash flows from operating activities:
Net income	$	437,286		$	611,148
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	819,225			623,463
Amortization	8,056			2,918
Provision for bad debts	(4,839		)	34,665
Deferred income taxes	304,038			342,898
Share-based compensation expense	153,975			121,770
Amortization of deferred compensation expense	31,686			29,108
Loss on disposition of equipment	(2,760		)	153
Change in operating assets and liabilities, net of effects from business acquisition:
Accounts receivable	(162,788		)	392,003
Inventories	(1,572,672		)	(45,507		)
Other assets and liabilities	(29,785		)	(101,487		)
Tax benefit from share-based payments	—			(8,916		)
Accounts payable and accrued liabilities	1,814,054			291,549
Net cash provided by operating activities	1,795,476			2,293,765

Cash flows from investing activities:
Acquisition of Rader Farms, Inc., net of cash acquired	(21,051,101		)	—
Increase in restricted cash – nonqualified deferred comp	(63,391		)	—
Purchase of equipment	(1,012,451		)	(197,563		)
Proceeds from sale of fixed assets	13,336			4,500
Net cash used in investing activities	(22,113,607		)	(193,063		)

Cash flows from financing activities:
Line of credit borrowings	6,000,000			—
Debt borrowings	10,037,727			—
Proceeds from issuance of common stock	7,774			150,698
Tax benefit from exercise of stock options	—			8,916
Payments made on long-term debt	(127,475		)	(500,830		)
Net cash provided by (used in) financing activities	15,918,026			(341,216		)
Net increase (decrease) in cash and cash equivalents	(4,400,105		)	1,759,486
Cash and cash equivalents at beginning of period	8,671,259			9,695,245
Cash and cash equivalents at end of period	$	4,271,154		$	11,454,731

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Six Months Ended
	June 30, 2007			July 1, 2006

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	158,252		$	107,446

Supplemental disclosure of non-cash investing activities:
*Price Allocation of Rader Farms, Inc.:*
Accounts receivable	$	2,055,218
Inventory	6,371,172
Other current assets	14,714
Fixed assets	9,925,417
Other assets	98,227
Intangibles - covenant-not-to compete	235,327
Deferred financing charges	119,774
Goodwill	6,384,341
Long-term debt	(104,760		)
Accounts payable	(3,758,930		)
Other current liabilities.	(289,399		)
Total estimated cost of acquisition	$	21,051,101

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE INVENTURE GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies:

The Inventure Group, Inc., (“the Company”) a Delaware corporation, was formed in 1995 as a holding company to acquire a potato chip manufacturing and distribution business, which had been founded by Donald and James Poore in 1986. The Company changed its name from Poore Brothers, Inc. to The Inventure Group, Inc. on April 10, 2006.

In December 1996, the Company completed an initial public offering of its Common Stock. In November 1998, the Company acquired the business and certain assets (including the Bob’s Texas Style® potato chip brand) of Tejas Snacks, L.P. (“Tejas”), a Texas-based potato chip manufacturer. In October 1999, the Company acquired Wabash Foods, LLC (“Wabash”) including the Tato Skins®, O’Boisies®, and Pizzarias® trademarks and the Bluffton, Indiana manufacturing operation and assumed all of Wabash Foods’ liabilities. In June 2000, the Company acquired Boulder Natural Foods, Inc. (“Boulder”) and the Boulder Canyon Natural FoodsTM brand of totally natural potato chips.

In October 2000, the Company launched its T.G.I. Friday’s® brand salted snacks pursuant to a license agreement with TGI Friday’s Inc., which expires in 2014.

The Company continues to introduce line extensions and test market new and innovative snack food products.

Acquisition of Rader Farms, Inc.

On May 17, 2007, The Inventure Group, Inc. and subsidiaries (“The Inventure Group” or the Company) completed the acquisition of Rader Farms, Inc. (“Rader Farms”) for an estimated total cost of approximately $20.7 million which was funded by cash of $4.7 million plus $16 million in debt subject to working capital adjustments, direct expenses and assumed certain liabilities of Rader Farms relating to existing business contracts and leases, and accounts payable and accrued liabilities included on Rader Farms’ balance sheet as of December 31, 2006 and incurred in the ordinary course of business since such date. Rader Farms is a Washington corporation located in Whatcom County. The Company grows raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries and strawberries from a select network of fruit growers for resale. The fruit is processed, frozen and packaged for sale and distribution to wholesale customers. We believe the acquisition provides The Inventure Group access to a growing specialty food category with a best-in-class business that generated approximately $27 million in 2006 net revenues.

The acquisition will be accounted for as a purchase pursuant to Statement of Financial Accounting Standards No. 141, Business Combinations (“SFAS No. 141”), and accordingly, the operating results of Rader Farms will be included in our consolidated financial statements from the date of acquisition. The purchase price was determined through an arms-length negotiation between the parties, and has been initially allocated to the underlying assets based on an estimate of fair values and remaining economic lives. In connection with the Rader Farms acquisition, our preliminary purchase price allocation, includes $6.4 million of goodwill, $0.3 million of intangible assets which include $0.2 million in a covenant-not-to-compete from the former owners and $0.1 million of deferred financing costs associated with the debt incurred to acquire Rader Farms. The Company has not finalized its valuation of intangible assets for the initial purchase price allocation. We are obtaining an independent third party appraisal of the intangible assets as of the transaction date to assist management in its valuation. In addition, we are still in the process of obtaining all information necessary to finalize the allocation of the purchase price to the individual assets and liabilities. This could result in adjustments to the carrying value of the assets and liabilities acquired, the useful lives of intangible assets and the residual amount allocated to goodwill. The preliminary allocation of the purchase price is based on the best estimates of management and is subject to revision based on the final valuations and estimates of useful lives. The estimated amortization period for the intangibles acquired in this transaction consist of the covenant-not-to-compete amortization over 5 years and the estimated weighted average amortization period for the deferred financing costs over 8.5 years.

The following table summarizes the fair value for the assets acquired and liabilities assumed as the date of acquisition.

				Useful Life	Weighted Average Amortization Period
Accounts receivable	$	2,055,218
Inventory	6,371,172
Other current assets	14,714
Fixed assets	9,925,417			3 - 20 years
Other assets	98,227
Intangibles - covenant-not-to compete	235,327				5 years
Deferred financing charges	119,774				8.5 years
Goodwill	6,384,341
Long-term debt	(104,760		)
Accounts payable	(3,758,930		)
Other current liabilities	(289,399		)
Total estimated cost of acquisition	$	21,051,101

The following unaudited pro forma financial information for the three and six months ended June 30, 2007 and 2006 gives effect to the (i) Rader Farms acquisition, and (ii) financing transactions described above which occurred on May 17, 2007, as if each had occurred at the beginning of the periods presented. The pro forma results were determined using estimates and assumptions, which management believes to be reasonable, based upon limited available information. This pro forma information is not necessarily indicative of the results of future operations.

	Quarter Ended				Six Months Ended
	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006

Net revenues	$	27,239,272	$	25,357,568	$	52,845,523	$	49,812,721

Net income	$	500,099	$	772,417	$	942,250	$	1,070,015

Earnings per common share:
Basic	$	0.03	$	0.04	$	0.05	$	0.05
Diluted	$	0.03	$	0.04	$	0.05	$	0.05

Business

The Company is engaged in the development, production, marketing and distribution of innovative snack food products that are sold primarily through grocery retailers, mass merchandisers, club stores, convenience stores and vend distributors across the United States. The Company currently manufactures and sells nationally T.G.I. Friday’s® brand snacks under license from TGI Friday’s Inc. The Company also distributes Braids® and pretzels. The Company also currently (i) manufactures and sells its own brands of snack food products, including Poore Brothers®, Bob’s Texas Style®, and Boulder Canyon Natural FoodsTM brand batch-fried potato chips and Tato Skins® brand potato snacks, (ii) manufactures private label potato chips for grocery retail chains in the Southwest, and (iii) distributes in Arizona snack food products that are manufactured by others. The Company sells its T.G.I. Friday’s® brand snack products to mass merchandisers, grocery, club and drug stores directly and to convenience stores and vend operators through independent distributors. The Company’s other brands are also sold through independent distributors.

In addition, with the acquisition of Rader Farms, the Company grows raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries and strawberries from a select network of fruit growers for resale. The fruit is processed, frozen and packaged for sale and distribution nationally to wholesale customers under the Rader Farms® brand, as well as through store brands.

The Company’s business strategy is to continue building a diverse portfolio of specialty food brands with annualized revenues of $5 million to $50 million each through licensing, acquisition or development. This represents a broadening of the Company’s strategy beyond snack foods and may include opportunities other than food brands. The goals of our strategy are to (i) capitalize on specialty food brand opportunities, (ii) deliver incremental category growth for retailers, (iii) provide product innovation targeted to a defined consumer segment, (iv) complement, rather than compete directly against, large national competitors with leading national brands, and (v) build relationships with major retailers in all channels of distribution by providing them higher margins, excellent customer service and constant innovation.

Basis of Presentation

The consolidated financial statements include the accounts of The Inventure Group, Inc. and all of its wholly owned subsidiaries. All significant intercompany amounts and transactions have been eliminated. The financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary in order to make the condensed consolidated financial statements not misleading. A description of the Company’s accounting policies and other financial information is included in the audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006. The results of operations for the quarter and six months ending June 30, 2007 are not necessarily indicative of the results expected for the full year.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. Exercises of outstanding stock options are assumed to occur for purposes of calculating diluted earnings per share for periods in which their effect would not be anti-dilutive. Earnings per common share was computed as follows for the quarters and six months ending June 30, 2007 and July 1, 2006:

	Quarter Ended				Six Months Ended
	June 30, 2007		July 1, 2006		June 30, 2007		July 1, 2006
Basic Earnings Per Share:
Net income	$	331,777	$	542,983	$	437,286	$	611,148
Weighted average number of common shares	19,303,394		20,106,027		19,302,822		20,090,551
Earnings per common share	$	0.02	$	0.03	$	0.02	$	0.03
Diluted Earnings Per Share:
Net Income	$	331,777	$	542,983	$	437,286	$	611,148

Weighted average number of common shares	19,303,394		20,106,027		19,302,822		20,090,551
Incremental shares from assumed conversions of stock options and non- vested shares of restricted stock	77,728		18,923		123,925		36,831
Adjusted weighted average number of common shares	19,381,122		20,124,950		19,426,747		20,127,382
Earnings per common share	$	0.02	$	0.03	$	0.02	$	0.03

Stock Options and Stock-Based Compensation

The Company’s 1995 Stock Option Plan (the “1995 Plan”), as amended, provided for the issuance of options to purchase 3,500,000 shares of Common Stock. The options granted pursuant to the 1995 Plan expire over a five-year period and generally vest over three years. In addition to options granted under the 1995 Plan, the Company also issued non-qualified options (non-plan options) to purchase Common Stock to certain Directors and Officers which are exercisable and expire either five or ten years from date of grant. All options are issued at an exercise price of fair market value of the underlying common stock on the date of grant and are non-compensatory. The 1995 Plan expired in May 2005 and was replaced by the Inventure Group, Inc. 2005 Equity Incentive Plan (the “2005 Plan”) as described below.

The 2005 Plan expires in May 2015. Awards granted under the 2005 Plan may include: nonqualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and stock-reference awards. If any shares of Common Stock subject to awards granted under the 1995 Plan or the 2005 Plan are canceled, those shares will be available for future awards under the 2005 Equity Incentive Plan. As of June 30, 2007, there were 123,232 shares of Common Stock available for Awards under the 2005 Plan.

During the six months ending June 30, 2007 and July 1, 2006 the total share-based compensation expense from restricted stock recognized in the financial statements was $31,686 and $29,108, respectively and is included in selling, general and administrative expenses. There were no share-based compensation costs which were capitalized. As of June 30, 2007, the total unrecognized costs related to non-vested restricted stock awards granted was $67,918. The Company expects to recognize such costs in the financial statements over a period of generally three years.

During the six months ended June 30, 2007, the Company recorded $153,975 of share-based compensation expense (and a reduction of income before taxes) related to stock options.

The Company estimated the fair value of stock options issued using the Black-Scholes option pricing model, with the following assumptions:

	June 30, 2007		July 1, 2006
Expected dividend yield	0	%	0	%
Expected volatility	50	%	50	%
Risk-free interest rate	4.76	%	5.16	%
Expected life – Employees Options	2.4 years		2.4 years
Expected life – Board of Directors Options	1.4 years		1.4 years

The expected dividend yield was based on the Company’s expectation of future dividend payouts. The expected volatility assumption was based on historical volatility during the time period that corresponds to the expected life of the option. The expected life (estimated period of time outstanding) of stock options granted was estimated based on expected vesting on the date the option was granted. The risk-free interest rate assumption was based on the interest rate of U.S. Treasuries on the date the option was granted.

As of June 30, 2007 the amount of unrecognized compensation expense to be recognized in future periods, in accordance with SFAS 123R, is approximately $555,000. This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future.

Stock options become exercisable, based on a three year vesting schedule, in annual increments of thirty-three percent beginning one year after grant date and become fully exercisable after three years from the date of grant. Share-based compensation expense related to stock option awards is recognized on the straight-line method over the requisite service period which is approximately three years.

The following table summarizes stock option activity during the six months ended June 30, 2007:

	Plan Options				Non-Plan Options
	Options Outstanding		Weighted Average Exercise Price		Options Outstanding		WWeighted Average Exercise Price
Balance, December 30, 2006	722,000		$	2.80	52,500		$	3.60
Granted	812,500		$	2.69	—		—
Forfeited	—		—		—		—
Exercised	—		—		—		—
Balance, March 31, 2007	1,534,500		$	2.74	52,500		$	3.60
Granted	189,000		$	2.96	—		—
Forfeited	(84,400	)	$	2.96	(7,500	)	$	3.60
Exercised	(2,600	)	$	2.99	—		—
Balance, June 30, 2007	1,636,500		$	2.76	45,000		$	3.60

Tax benefits on stock options exercised are recorded as increases to additional paid-in capital and totaled $0 and $8,916 for June 30, 2007 and July 1, 2006, respectively.

There were no restricted stock awards granted during the six months ended June 30, 2007 and July 1, 2006. All restricted stock awards vest three years from the date of grant. Share-based compensation expense related to restricted stock awards is recognized on the straight-line method over the requisite service period, which is approximately three years, and the related share-based compensation expense is included in selling, general and administrative expenses.

Deferred Compensation Plan

Effective January 1, 2007 the Company entered into a deferred compensation plan. The assets are vested in mutual funds and are reflected in other current assets and the related obligation is reflected in accrued liabilities in the balance sheet.

2. Accrued Liabilities:

Accrued liabilities consisted of the following as of June 30, 2007 and December 30, 2006:

	June 30, 2007		December 30, 2006
Accrued payroll and payroll taxes	$	1,489,933	$	1,300,653
Accrued royalties and commissions	552,601		509,157
Accrued advertising and promotion	1,299,919		838,934
Accrued other	1,052,967		326,979
	$	4,395,420	$	2,975,723

3. Inventories:

Inventories consisted of the following as of June 30, 2007 and December 30, 2006:

	June 30, 2007		December 30, 2006
Finished goods	$	4,617,605	$	1,833,495
Raw materials and deferred crop costs	6,785,474		1,625,741
	$	11,403,079	$	3,459,236

4. Long-Term Debt:

Long-term debt consisted of the following as of June 30, 2007 and December 30, 2006:

	June 30,			December 30,
	2007			2006
Mortgage loan due in monthly installments through July, 2012; interest at 9.03%; collateralized by land and building in Goodyear, AZ	$	1,659,919		$	1,685,574
Mortgage loan due in monthly installments through December, 2016; interest at LIBOR plus 165 basis points; collateralized by land and building in Bluffton, IN	2,372,367			2,400,000
Equipment term loan due in monthly installments through May, 2104; interest at LIBOR plus 165 basis points; collateralized by equipment at Rader Farms in Lynden, WA	5,928,571			—
Real Estate term loan due in monthly installments through July, 2017; interest at LIBOR plus 165 basis points; secured by a leasehold interest in the real property we are leasing from the former owners of Rader Farms in Lynden, WA	4,000,000			—
Vehicle term loan and capital leases due in various monthly installments, the last of which is due in February, 2011; collateralized by vehicles at Rader Farms in Lynden, WA	139,729			—
	14,100,586			4,085,574
Less current portion	(1,172,054		)	(112,113		)
Long-term debt, less current portion	$	12,928,532		$	3,973,461

Interest Rate Swap

The Company entered into an interest rate swap in 2006 to convert the interest rate of the mortgage to purchase the Bluffton, Indiana plant to a fixed rate of 6.85%. The swap is not accounted for as a cash flow hedge, and as result, unrealized gains and losses are recorded in the Company’s consolidated statement of income. The swap has a fixed pay-rate of 6.85% and a notional amount of approximately $2.4 million at June 30, 2007 and expires in December, 2016. The value of the swap was recorded as a $43,784 asset at June 30, 2007 and a $29,309 liability at December 31, 2006.

Long-Term Debt

The Company’s Goodyear, Arizona manufacturing and distribution facility is subject to a $1.7 million mortgage loan from Morgan Guaranty Trust Company of New York bears interest at 9.03% per annum and is secured by the building and the land on which it is located. The loan matures on July 1, 2012; however monthly principal and interest installments of $16,825 are determined based on a twenty-year amortization period.

The Company’s Bluffton, Indiana manufacturing and distribution facility was purchased for $3.0 million in December, 2006. The facility is subject to a $2.4 million mortgage loan from U.S. Bank National Association, bears interest at the 30 day LIBOR plus 165 basis points and is secured by the building and the land on which it is located. The loan matures in December, 2016; however monthly principal and interest installments of $18,392 are determined based on a twenty-year amortization period.

To fund the acquisition of Rader Farms, the Company entered into a Loan Agreement (the “Loan Agreement”) with U.S. Bank National Association (“U.S. Bank”). Each of our subsidiaries is a guarantor of the Loan Agreement, which is secured by a pledge of all of the assets of our consolidated group. The borrowing capacity available to us under the Loan Agreement consists of notes representing: (i) a $15,000,000 revolving line of credit maturing on June 30, 2011; (ii) an equipment term loan, secured by the equipment acquired, subject to a $5.9 million mortgage loan from U.S. Bank National Association, bears interest at the 30 day LIBOR plus 165 basis points. The loan matures in May, 2014.

Monthly principal installments are $71,429 plus interest and (iii) a real estate term loan, secured by a leasehold interest in the real property we are leasing from the former owners of Rader Farms in connection with the Acquisition, subject to a $4.0 million real estate term loan from U.S. Bank National Association, bears interest at the 30 day LIBOR plus 165 basis points. The loan matures in July, 2017; however monthly principal and interest installments of $36,357 are determined based on a fifteen-year amortization period.

All borrowings under the revolving line of credit will bear interest at either (i) the prime rate of interest announced by U.S. Bank from time to time or (ii) LIBOR, plus the LIBOR Rate Margin (as defined in the revolving credit facility note). The term loan will bear interest at LIBOR, plus the LIBOR Rate Margin (as defined in the term loan note). As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period.

As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period. The agreement requires the Company to maintain compliance with certain financial covenants, including a minimum tangible net worth, a minimum fixed charge coverage ratio and a minimum current ratio. At June 30, 2007, the Company was in compliance with all of the financial covenants.

5. Brand Discontinuance:

On June 11, 2004, the Company discontinued its Crunch Toons® brand. As a result of the discontinuance, the Company recorded expenses of approximately $1.8 million. The charge included approximately $1.1 million related to minimum royalties under the license agreements and $0.3 million in inventory write-downs, which are shown in “Costs related to brand discontinuance” on the accompanying Consolidated Statements of Income. In addition, charges of $0.3 million in estimated allowances given to the Company’s customers to sell-off remaining distributor and retailer inventories were recorded and are included in “Net revenues” on the accompanying Consolidated Statements of Income.

In connection with the brand discontinuation, and included in the $1.1 million charge above, the Company negotiated amendments to its license agreements with Warner Bros. Consumer Products pursuant to which the Agreements will remain in effect, but will become non-exclusive. However, because the Company has ceased using the Crunch Toons® brand, the Company accrued the fair value of remaining royalties in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The Company estimated the fair value of the remaining guaranteed future minimum payments under the agreements by computing the present value of the future cash payments.

The following table summarizes the activity of the accrued costs related to brand discontinuance and other exit costs for the three months ended June 30, 2007:

	Mar 31, 2007					June 30, 2007
	Accrued Expense					Accrued Expense
	Balance		Payments			Balance

Present value of guaranteed Minimum royalty payments	$	93,715	$	1,171	(2)	$	94,886	(1)

(1) These amounts are reflected in the Consolidated Balance Sheets as “Current portion of accrued costs related to brand discontinuance and other exit cost accruals.”

(2) In accordance with SFAS No. 146, interest accretion was recorded for the period and future royalty payments will be made in accordance with the amended agreements. Final payment is due March 30, 2008.

6. Litigation:

The Company is periodically a party to various lawsuits arising in the ordinary course of business. Management believes, based on discussions with legal counsel, that the resolution of such lawsuits, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or results of operations.

7. Business Segments:

The Company’s operations consist of three segments: manufactured snack products, distributed snack products, and processed berry products. The manufactured snack products segment produces potato chips, potato crisps and potato skins, for sale primarily to snack food distributors and retailers. The distributed snack products segment sells snack food products manufactured by other companies to the Company’s Arizona snack food distributors. The processed berry products segment was acquired by the Company in May 2007 through the Rader Farms acquisition. This segment grows raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries and strawberries from a select network of fruit growers for resale. The fruit is processed, frozen and packaged for sale and distribution nationally to wholesale customers. The Company’s reportable segments offer different products and services. All of the Company’s revenues are attributable to primarily to external customers in the United States and all of its assets are located in the United States.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies included in Note 1 to the audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006. The Company does not allocate assets, selling, general and administrative expenses, income taxes or other income and expense to its segments.

	Manufactured Snack Products		Distributed Snack Products		Processed Berry Products		Consolidated
Quarter ended June 30, 2007
Net revenues from external customers	$	17,884,818	$	728,100	$	4,313,177	$	22,926,095
Depreciation and amortization in segment gross profit	225,185		—		76,268		301,453
Segment gross profit	3,482,827		100,573		778,646		4,362,046

Quarter ended July 1, 2006
Net revenues from external customers	$	17,640,428	$	857,236	—		$	18,497,664
Depreciation and amortization in segment gross profit	216,578		—		—		216,578
Segment gross profit	3,576,480		124,179		—		3,700,659

Six months ended June 30, 2007
Net revenues from external customers	$	34,180,722	$	1,412,093	$	4,313,177	$	39,905,992
Depreciation and amortization in segment gross profit	442,143		—		76,268		518,411
Segment gross profit	6,480,059		199,902		778,646		7,458,607

Six months ended July 1, 2006
Net revenues from external customers	$	34,385,455	$	1,707,457	—		$	36,092,912
Depreciation and amortization in segment gross profit	431,221		—		—		431,221
Segment gross profit	6,587,358		211,011		—		6,798,369

The following table reconciles reportable segment gross profit to the Company’s consolidated income before income tax provision.

	Quarter Ended					Six Months Ended
	June 30, 2007			July 1, 2006		June 30, 2007			July 1, 2006

Segment gross profit	$	4,362,046		$	3,700,659	$	7,458,607		$	6,798,369
Unallocated amounts:
Selling, general and administrative expenses	3,595,589			2,870,876		6,503,283			5,887,219
Interest income (expense), net	(176,107		)	62,781		(155,965		)	103,598
Income before income tax provision	$	590,350		$	892,564	$	799,359		$	1,014,748

8. Income Taxes:

The Company experienced significant net losses in prior fiscal years resulting in a net operating loss (“NOL”) carryforward for federal income tax purposes of approximately $2.0 million at December 30, 2006. The Company’s NOL will begin to expire in varying amounts between 2010 and 2018. The Company also has an alternative minimum tax (“AMT”) credit carryforward for federal income tax purposes of approximately $34,000 at December 30, 2006.

Generally accepted accounting principles require that a valuation allowance be established when it is more-likely-than-not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account all positive and negative evidence with regard to the utilization of a deferred tax asset including our past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company provides for income taxes at a rate equal to the combined federal and state effective rates, which approximated 44% under current tax rates.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of the beginning of our 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The adoption of FIN 48 on December 31, 2006 (the first day of fiscal year 2007) did not have a material effect on the consolidated financial statements of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including all documents incorporated by reference, includes “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and the Company desires to take advantage of the “safe harbor” provisions thereof. Therefore, the Company is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all of such forward-looking statements. In this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “expects,” “intends,” “estimates,” “projects,” “will likely result,” “will continue,” “future” and similar terms and expressions identify forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q reflect the Company’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including specifically the possibility that the Company will need additional financing due to future operating losses or in order to implement the Company’s business strategy, the possible diversion of management resources from the day-to-day operations of the Company as a result of strategic acquisitions, potential difficulties resulting from the integration of acquired businesses with the Company’s business, other acquisition-related risks, lack of consumer acceptance of existing and future products, dependence upon key license agreements, dependence upon major customers, significant competition, risks related to the food products industry, volatility of the market price of the Company’s common stock, par value $.01 per share (the “Common Stock”), the possible de-listing of the Common Stock from the Nasdaq SmallCap Market if the Company fails to satisfy the applicable listing criteria (including a minimum share price) in the future and those other risks and uncertainties discussed herein and in the Company’s other periodic reports filed with the Securities and Exchange Commission, that could cause actual results to differ materially from historical results or those anticipated. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Quarterly Report on Form 10-Q will in fact transpire or prove to be accurate. Readers are cautioned to consider the specific risk factors described herein and in “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006, and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereof. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this section.

Significant Trends and Developments in Our Business

Acquisition of Rader Farms, Inc. On May 17, 2007, the Company completed the acquisition of Rader Farms, Inc. (“Rader Farms”) for an estimated total cost of approximately $20.7 million which was funded by cash of $4.7 million plus $16 million in debt subject to working capital adjustments, direct expenses and assumed certain liabilities of Rader Farms relating to existing business contracts and leases, and accounts payable and accrued liabilities included on Rader Farms’ balance sheet as of December 31, 2006 and incurred in the ordinary course of business since such date. Rader Farms is a Washington corporation located in Whatcom County. The Company grows raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries and strawberries from a select network of fruit growers for resale. The fruit is processed, frozen and packaged for sale and distribution to wholesale customers. We believe the acquisition provides The Inventure Group access to a growing specialty food category with a best-in-class business that generated approximately $27 million in 2006 net revenues.

The acquisition will be accounted for as a purchase pursuant to Statement of Financial Accounting Standards No. 141, Business Combinations (“SFAS No. 141”), see Note 1 “Organization and Summary of Significant Accounting Policies — Acquisition of Rader Farms, Inc.”.

Debt and Equity Financing Arrangements

All borrowings under the revolving line of credit will bear interest at either (i) the prime rate of interest announced by U.S. Bank from time to time or (ii) LIBOR, plus the LIBOR Rate Margin (as defined in the revolving credit facility note). The term loan will bear interest at LIBOR, plus the LIBOR Rate Margin (as defined in the term loan note). As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period.

Results of Operations

Quarter ended June 30, 2007 compared to the quarter ended July 1, 2006

Net revenues for the second quarter of fiscal 2007 were $22.9 million, 23.9% over last year’s second quarter net revenues of $18.5 million. Total net revenues in the second quarter of 2007 include $4.3 million from Rader Farms. Excluding the impact of the Rader Farms acquisition, net revenues increased 0.6% compared to second quarter 2006. Poore Brothers® and Boulder Canyon Natural Foods® net revenues grew by 21.4% and 21.2%, respectively, with potato chip net revenues increasing 17.3% overall. T.G.I. Friday’s® brand products decreased slightly by 1.4%.

Gross profit for the quarter ended June 30, 2007 was $4.4 million, representing an increase of $0.7 million compared to July 1, 2006 gross profit of $3.7 million. Gross profit as a percentage of net revenues decreased to 19.0% from 20.0% comparing 2007 to 2006. The decrease in percentage is due primarily to the impact of rising industry-wide commodity prices on the manufacturing of our snack products, offset by the Company’s continued focus on lowering trade and promotional allowances, which are deducted from gross revenue, and decreased freight expense as a result of operational efficiencies the Company is enacting.

Selling, general and administrative expenses increased $0.7 million to $3.6 million in the second quarter of 2007, as compared to 2006 of $2.9 million, but remained relatively flat as a percentage of net revenues, amounting to 15.7% and 15.5% of net revenues, comparing the second quarter of 2007 to the second quarter of 2006. Increased investments in growth oriented snack food business marketing programs (e.g. sampling programs, racks for convenience stores, market research, etc.) of approximately $0.3 million and increased organizational investments particularly focused on IT improvements were the primary factors affecting the increase versus the year-ago quarter.

Net interest expense was $176,107 in the second quarter of 2007 compared to net interest income of $62,781 in the second quarter of 2006 due primarily to increased interest expense resulting from the mortgage on the purchase of the Bluffton, Indiana property in December, 2006 and the increased debt and cash used to acquire Rader Farms.

Net income was $0.3 million, or $0.02 per basic and diluted share, compared to net income of $0.5 million, or $0.03 per basic and diluted share last year. Increased investments in growth oriented snack food business marketing programs (e.g. sampling programs, racks for convenience stores, market research, etc.) of approximately $0.3 million, snack food commodity cost increases of approximately $0.7 million, increased organizational investments particularly focused on IT improvements and the impact of the change in net interest expense mentioned above were the primary factors affecting the net income decline versus the quarter ended July 1, 2006.

Six months ended June 30, 2007 compared to the six months ended July 1, 2006

For the six months ended June 30, 2007 net revenues increased 10.6% to $39.9 million, compared with net revenue of $36.1 million in the first half of the previous year. Total net revenues for the six months ended June 30, 2007 include $4.3 million from Rader Farms. Excluding the impact of the Rader Farms acquisition, net revenues decreased slightly by 1.4% compared to the first half of 2006. Poore Brothers® and Boulder Canyon Natural Foods® net revenues grew by 22.6% and 12.5%, respectively, with potato chip net revenues increasing 14.5% overall. T.G.I. Friday’s® brand products decreased slightly by 2.5%. The first half of 2006 included $0.5 million of Cinnabon® product sales. Excluding the impact of the Cinnabon® product sales, total net revenues increased slightly comparing the first six months of 2007 with 2006. We plan to continue to test market several new products in the second half of the year, including new T.G.I. Friday’s® brand products, some of which will be “better-for-you” items.

Gross profit for the six months ended June 30, 2007 was $7.5 million, or 18.7% of net revenues, compared to $6.8 million, or 18.8% of net revenues for the six months ended July 1, 2006. Consistent with the decrease in gross profit as a percentage of net revenues described above, the decrease is due primarily to the impact of rising industry-wide commodity prices on the manufacturing of our snack products, offset by the Company’s continued focus on lowering trade and promotional allowances, which are deducted from gross revenue, and decreased freight expense as a result of operational efficiencies the Company is enacting.

Selling, general and administrative expenses increased to $6.5 million for the six months ended June 30, 2007 from $5.9 million for the six months ended July 1, 2006, but decreased slightly as a percentage of net revenues from 16.3% of net revenues for the first six months of 2006 to 16.2% of net revenues for the first six months of 2007.

Net interest expense was $155,965 in the first half of 2007 compared to net interest income of $103,598 in the first half of 2006 due primarily to increased interest expense resulting from the mortgage on the purchase of the Bluffton, Indiana property in December, 2006 and the increased debt and cash used to acquire Rader Farms.

Net income for the six months ended June 30, 2007 was $0.4 million, or $0.02 per basic and diluted share, compared with net income of $0.6 million, or $0.03 per basic and diluted share, in the prior-year period. Increased investments in growth oriented snack food business marketing programs (e.g., sampling programs, racks for convenience stores, market research, etc.) of approximately $0.3 million, snack food commodity cost increases of approximately $0.7 million, increased organizational investments particularly focused on IT improvements and the impact of the change in net interest expense mentioned above were the primary factors affecting the net income decline versus the quarter ended July 1, 2006.

Liquidity and Capital Resources

Net working capital was $5.9 million (a current ratio of 1.3:1) at June 30, 2007 and $13.4 million (a current ratio of 3.0:1) at December 30, 2006. For the quarter ended June 30, 2007, the Company provided cash flow from operating activities of $1.8 million, invested $1.0 million in equipment, invested $21.1 million in the acquisition of Rader Farms, acquired $16.0 million in debt acquiring Rader Farms and made $0.1 million in payments on long-term debt. The large decrease in working capital and cash resulted primarily from the actions taken to acquire Rader Farms, including: expending approximately $21 million, increasing borrowings on the line of credit by $6 million and term debt borrowings of $10 million thereby increasing current portion of debt by $1 million (see Acquisition of Rader Farms, Inc.). For the six months ended July 1, 2006, the Company provided cash flow from operating activities of $2.3 million, invested $0.2 million in equipment, made $0.5 million in payments on long-term debt and realized cash flow from common stock option exercises of $0.2 million.

The Company’s Goodyear, Arizona manufacturing and distribution facility is subject to a $1.7 million mortgage loan from Morgan Guaranty Trust Company of New York, bears interest at 9.03% per annum and is secured by the building and the land on which it is located. The loan matures on July 1, 2012; however monthly principal and interest installments of $16,825 are determined based on a twenty-year amortization period.

To fund the acquisition of Rader Farms the Company entered into a Loan Agreement (the “Loan Agreement”) with U.S. Bank National Association (“U.S. Bank”). Each of our subsidiaries is a guarantor of the Loan Agreement, which is secured by a pledge of all of the assets of our consolidated group. The borrowing capacity available to us under the Loan Agreement consists of notes representing: (i) a $15,000,000 revolving line of credit maturing on June 30, 2011; (ii) an equipment term loan, secured by the equipment acquired, subject to a $5.9 million mortgage loan from U.S. Bank National Association, bears interest at the 30 day LIBOR plus 165 basis points. The loan matures in May, 2014. Monthly principal installments are $71,429 plus interest and (iii) a real estate term loan, secured by a leasehold interest in the real property we are leasing from the former owners of Rader Farms in connection with the Acquisition, subject to a $4.0 million real estate term loan from U.S. Bank National Association, bears interest at the 30 day LIBOR plus 165 basis points. The loan matures in July, 2017; however monthly principal and interest installments of $36,357 are determined based on a fifteen-year amortization period.

As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period. The agreement requires the Company to maintain compliance with certain financial covenants, including a minimum tangible net worth, a minimum fixed charge coverage ratio and a debt to equity ratio. At June 30, 2007, the Company was in compliance with all of the financial covenants.

Interest Rate Swap

The Company entered into an interest rate swap in 2006 to convert the interest rate of the mortgage to purchase the Bluffton, Indiana plant to a fixed rate of 6.85%. The swap is not accounted for as a cash flow hedge, and as result, unrealized gains and losses are recorded in the Company’s consolidated statement of income. The swap has a fixed pay-rate of 6.85% and a notional amount of $2.4 million at December 30, 2006 and expires in December, 2016. The value of the swap was recorded as a $43,784 asset at June 30, 2007 and a $29,309 liability at December 31, 2006.

Contractual Obligations

The Company’s future contractual obligations consist principally of long-term debt, operating leases, minimum commitments regarding third party warehouse operations services and remaining minimum royalty payments due licensors pursuant to brand licensing agreements. Under the amendments to the license agreements with Warner Bros. Consumer Products, the remaining minimum royalty payments will continue to be due throughout the remaining term of the agreements. The Company currently has no material marketing or capital expenditure commitments. As of June 30, 2007 there have been no material changes to the Company’s contractual obligations since its December 30, 2006 fiscal year end, other than those incurred as part of the acquisition of Rader Farms (see Acquisition of Rader Farms, Inc.).

Management’s Plans

In connection with the implementation of the Company’s business strategy, the Company may incur operating losses in the future and may require future debt or equity financings (particularly in connection with future strategic acquisitions, new brand introductions or capital expenditures). Expenditures relating to acquisition-related integration costs, market and territory expansion and new product development and introduction may adversely affect promotional and operating expenses and consequently may adversely affect operating and net income. These types of expenditures are expensed for accounting purposes as incurred, while revenue generated from the result of such expansion or new products may benefit future periods. Management believes that the Company will generate positive cash flow from operations during the next twelve months, which, along with its existing working capital and borrowing facilities, will enable the Company to meet its operating cash requirements for the next twelve months. This belief is based on current operating plans and certain assumptions, including those relating to the Company’s future revenue levels and expenditures, industry and general economic conditions and other conditions. If any of these factors change, the Company may require future debt or equity financings to meet its business requirements. There can be no assurance that any required financings will be available or, if available, on terms attractive to the Company.

Critical Accounting Policies and Estimates

The Securities and Exchange Commission indicated that a “critical accounting policy” is one which is both important to the portrayal of the Company’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company believes that the following accounting policies fit this definition:

Allowance for Doubtful Accounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories. The Company’s inventories are stated at the lower of cost (first-in, first-out) or market. The Company identifies slow moving or obsolete inventories and estimates appropriate loss provisions related thereto. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Deferred crop costs are costs generally incurred from July 1 to December 31 relating to the following year’s harvest season. These costs generally include labor and related employee benefits, maintenance of fields and plants, and fixed and variable overhead.

Goodwill, Trademarks and Other Intangibles. Goodwill and trademarks are reviewed for impairment annually, or more frequently, if impairment indicators arise. Goodwill is required to be tested for impairment between the annual tests if an event occurs or circumstances change that more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Intangible assets with indefinite lives are required to be tested for impairment between the annual tests if an event occurs or circumstances change indicating that the asset might be impaired. The Company believes at this time that the carrying values continue to be appropriate. Further discussion of goodwill and trademarks is set forth below:

· The Company’s Bob’s Texas Style potato chip brand was acquired in 1998 when the business of Tejas Snacks, L.P. was acquired. The Bob’s Texas Style trademark has a carrying value of approximately $1.2 million.

· The Company’s Tato Skins potato chip brand was acquired in 1999 when the business of Wabash Foods was acquired. The Wabash - - Tato Skins trademark has a carrying value of approximately $2.1 million.

· The Company’s Boulder Canyon potato chip brand was acquired in 2000 when the business of Boulder Natural Foods, Inc. was acquired. The Boulder Canyon trademark has a carrying value of $0.9 million.

· The Company’s Rader Farms brand was acquired in 2007 when the business of Rader Farms, Inc. was acquired. The Company is currently in the process of obtaining an independent valuation of the trademark that was acquired.

· The covenant-not-to-compete was entered into in 2007 when the business of Rader Farms, Inc. was acquired. The agreement is with Lyle and Sue Rader, the former owners of Rader Farms, Inc. The agreement has a carrying value, net of accumulated amortization, of $231,405.

In determining that each of these trademarks has an indefinite life, management considered the factors found in paragraph 11 of SFAS No. 142. Management believes that each of these trademarks has the continued ability to generate cash flows indefinitely. Management’s determination that these trademarks have indefinite lives includes an evaluation of historical cash flows and projected cash flows for each of these trademarks. The Company continues making investments to market and promote each of these brands, and management continues to believe that the market opportunities and brand extension opportunities will generate cash flows for an indefinite period of time. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the useful life of these trademarks, and management intends to renew each of these trademarks, which can be accomplished at little cost.

The Company recorded goodwill for each of the four acquisitions noted above. The acquired businesses were fully integrated into and are included in the Company’s Branded Products business segments. Consequently, goodwill is attributable to either the Company’s Manufactured Products/Processed Berry business segments.

Advertising and Promotional Expenses and Trade Spending. The Company expenses production costs of advertising the first time the advertising takes place, except for cooperative advertising costs which are expensed when the related sales are recognized. Costs associated with obtaining shelf space (i.e., “slotting fees”) are accounted for as a reduction of revenue in the period in which such costs are incurred by the Company. Anytime the Company offers consideration (cash or credit) as a trade advertising or promotional allowance to a purchaser of products at any point along the distribution chain, the amount is accrued and recorded as a reduction in revenue. Marketing programs that deal directly with the consumer, primarily consisting of in-store demonstrations/samples and a sponsorship with a professional baseball team, are recorded as a marketing expense in selling, general and administrative expenses. Further discussion is set forth below:

· Demonstrations/Samples: The Company periodically arranges in-store product demonstrations with club stores (i.e., Sam’s, Costco or BJ’s) or grocery retailers. Product demonstrations are conducted by independent third party providers designated by the various retailer or club chains. During the in-store demonstrations the consumers in the stores receive small samples of the Company’s products, and consumers are not required to purchase the products in order to receive the samples. The cost of product used in the demonstrations, which is insignificant, and the fee the Company pays to the independent third party providers who conduct the in-store demonstrations are recorded as a sales and marketing expense in selling, general and administrative expenses. When the Company conducts in-store product demonstrations, it does not pay or give any consideration to the club stores or grocery retailers in which the demonstrations occur.

· Sponsorship: The Company has one sponsorship with the Arizona Diamondbacks Major League Baseball team which takes place during their baseball season. The Company does not sell product to the Arizona Diamondbacks, but the sponsorship clearly involves an identifiable benefit as the fans at the stadium see the Company’s name on the main scoreboard during each game and the value is reasonably estimated due to the fact that the team charges a fixed amount per game which the Company records as a sales and marketing expense in selling, general and administrative expenses.

Income Taxes. The Company has been profitable since 1999; however, it experienced significant net losses in prior fiscal years resulting in a net operating loss (“NOL”) carryforward for federal income tax purposes at December 30, 2006. Generally accepted accounting principles require that the Company record a valuation allowance against the deferred tax asset associated with this NOL if it is “more likely than not” that the Company will not be able to utilize it to offset future taxes.

Stock-Based Compensation. On January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) 123R, “Share-Based Payment”, under the modified prospective method. SFAS 123R requires us to measure the cost of employee services received in exchange for stock options granted using the fair value method as of the beginning of 2006. The Company accounts for stock options under the fair value method of accounting using a Black-Scholes valuation model to measure stock option fair values at the date of grant. All stock option grants have a 5-year term. The fair value of stock option grants are expensed over the vesting period, generally three years for employees and one year for the Board of Directors.

The above listing is not intended to be a comprehensive list of all of the Company’s accounting policies. In many cases the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application. See the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006 which contains accounting policies and other disclosures required by accounting principles generally accepted in the United States.

New Accounting Policies

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value and establishes a framework for measuring fair value under GAAP. The pronouncement describes fair value as being based on a hypothetical transaction to sell an asset or transfer a liability at a specific measurement date, as considered from the perspective of a market participant who holds the asset or owes the liability. In addition, fair value should be viewed as a market-based measurement, not an entity-specific measurement. Therefore, fair value should be determined based on the assumptions that market participants would use in pricing an asset or liability, including all risks associated with that asset or liability. SFAS 157 will be effective for the Company January 1, 2008. We are currently evaluating the impact an election under SFAS No. 157 could have on our consolidated financial statements; however, we do not anticipate SFAS No. 157 will have a material effect.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This statement permits an entity to measure certain financial assets and financial liabilities at fair value. The statement’s objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 becomes effective, if elected by the Company, beginning January 1, 2008. We are currently evaluating the impact an election under SFAS No. 159 could have on our consolidated financial statements; however, we do not anticipate SFAS No. 159 will have a material effect.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The principal market risks to which the Company is exposed that may adversely impact the Company’s results of operations and financial position are changes in certain raw material prices and interest rates. The Company has no market risk sensitive instruments held for trading purposes.

Raw materials used by the Company are exposed to the impact of changing commodity prices. The Company’s most significant raw material requirements include potatoes, potato flakes, wheat flour, corn and oil and with the acquisition of Rader Farms, purchased berries to meet customer demands. The Company attempts to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from one to 12 months. Futures contracts are not used in combination with the forward purchasing of these raw materials. The Company’s procurement practices are intended to reduce the

risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases. Inflation and changing prices have not had a material impact on the Company’s net revenues and net income. Increased transportation costs, driven by higher fuel prices, could result in higher commodity costs in the future.

The Company entered into an interest rate swap in 2006 to effectively convert the interest rate of the mortgage to purchase the Bluffton, Indiana plant to a fixed rate of 6.85%. The swap is not accounted for as a cash flow hedge, and as a result, unrealized gains and losses are recorded in the Company’s consolidated statement of income. The swap has a fixed pay-rate of 6.85% and a notional amount of $2.4 million at June 30, 2007 and expires in December, 2016. The value of the swap was recorded as a $43,784 asset at June 30, 2007 and a $29,309 liability at December 31, 2006.

The Company’s primary concentration of credit risk is related to certain trade accounts receivable. In the normal course of business, the Company extends unsecured credit to its customers. Substantially all of the Company’s snack product customers are distributors or retailers whose sales are concentrated in the grocery industry throughout the United States and substantially all of our Rader Farms’ subsidiary sales are concentrated in the wholesale industry throughout the United States. The Company investigates a customer’s credit worthiness before extending credit. Three customers (Wal*Mart, Vistar and Costco) accounted for approximately 33% of the Company’s net revenues for the quarter ended June 30, 2007 and for approximately 31% of the Company’s accounts receivable balance at the end of the quarter.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

(b) Change in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s Chief Executive Officer and Chief Financial Officer do not expect that the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Part II. Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

During the quarter ended June 30, 2007, there were no material changes from the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006 other than those noted below as part of the acquisition of Rader Farms, Inc.:

Risks Related to the Rader Farms Business

Farming is subject to numerous inherent risks including changes in weather conditions or natural disasters that can have an adverse impact on crop production and materially affect our results of operations.

The Company, through its subsidiary Rader Farms, Inc. is subject to the risks that generally relate to the agricultural industry. Change in weather conditions and natural disasters, such as earthquakes, droughts, extreme cold or pestilence, may affect the planting, growing and delivery of crops, reduce sales stock, interrupt distribution, and have a material adverse impact on our business, financial condition and results of operation. Our competitors may be affected differently by such weather conditions and natural disasters depending on the location of their supplies or operations.

Revenues are derived from one brand; the loss or impairment of this brand may have a material adverse effect on operating results.

Rader Farms derives the majority of its revenue from the sales of one brand. The Company’s net revenues are predominantly attributable to the Rader Farms® brand of frozen berries. A decrease in the popularity of frozen berries during any year could have a material adverse effect on the Company’s business, financial condition and results of operations. There can be no assurance that the Rader Farms® brand will retain its historical level of popularity or increase in popularity. Any impact to the licensed brand’s reputation could also lead to an impact on the Company’s other snack food products associated with that brand. Decreased sales from any one of our key snack food brands without a corresponding increase in sales from other existing or newly introduced products would have a material adverse effect on the Company’s financial condition and results of operations.

The majority of revenues are derived from one predominant customer; the loss of this customer may have a material adverse effect on operating results.

Costco accounted for approximately 70% of the Rader Farms’ 2006 net revenues, with the remainder of Rader Farms’ net revenues being derived from sales to a limited number of additional customers, predominantly to wholesale customers. A decision by Costco to cease or substantially reduce its purchases could have a material adverse effect on the Company’s business.

The loss of certain key employees could adversely affect our business.

Rader Farms’ success is dependent in large part upon the ability of Rader Farms’ general manager Brad Rader. The inability of Mr. Rader to perform his duties or the inability of Rader Farms to attract and retain other highly qualified personnel could have a material adverse effect upon the Company’s business and prospects. Mr. Rader is signed to an employment agreement through May, 2010.

Unavailability of purchased berries, at reasonable prices, could materially adversely affect our operations.

The Company’s manufacturing costs are subject to fluctuations in the prices of certain commodity prices. Berries are not readily available year-round, as a result the Company uses an individual quick frozen (IQF) technique to freeze the berries harvested for use during the year to meet processing demands. In addition to freezing our own home-grown berries, we also purchase a significant amount of berries from outside suppliers to meet customer demands. The Company is dependent on its suppliers to provide the Company with adequate supply and on a timely basis. The failure of certain suppliers to meet the Company’s performance specifications, quality standards or delivery schedules could have a material adverse effect on the Company’s operations. In particular, a sudden scarcity, a substantial price increase, or an unavailability of certain types of berries could materially adversely affect the Company’s operations. There can be no assurance that alternative products would be available when needed and on commercially attractive terms, if at all.

We may incur material losses and costs as a result of product liability claims that may be brought against us or any product recalls we have to make.

The sale of food products for human consumption involves the risk of injury to consumers. Such hazards could result from: tampering by unauthorized third parties; product contamination (such as listeria, e-coli, and salmonella) or spoilage; the presence of foreign objects, substances, chemicals, and other agents; residues introduced during the growing, storage, handling or transportation phases; or improperly formulated products. As a manufacturer and marketer of food products, the Company may be subjected to various product liability claims. There can be no assurance that the product liability insurance maintained by the Company will be adequate to cover any loss or exposure for product liability, or that such insurance will continue to be available on terms acceptable to the Company. Any product liability claim not fully covered by insurance, as well as any adverse publicity from a product liability claim or product recall, could have a material adverse effect on the financial condition or results of operations of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

(a) The annual Meeting of Shareholders of the Company (the “Meeting”) was held on May 22, 2007.

(b) Proxies for the Meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to Management’s nominees as listed in the proxy statement and all of such nominees were elected.

(c) At the Meeting, the Company’s shareholders voted upon the election of four directors of the Company. Management’s nominees were Messrs. Ashton D. Asensio, Macon Bryce Edmonson, Mark S. Howells, Eric J. Kufel and Larry R. Polhill. There were no other nominees. The following are the respective numbers of votes cast “for” and “withheld” with respect to each nominee.

Name of Nominee	Votes Cast For	Votes Withheld
Ashton D. Asensio	15,929,984	430,438
Macon Bryce Edmonson	16,080,212	280,210
Mark S. Howells	15,952,206	408,216
Eric J. Kufel	15,101,937	1,258,485
Larry R. Polhill	15,088,235	1,272,187

Item 5. Other Information

None.

Item 6. Exhibits

(a)	Exhibits:

	10.1	Asset Purchase Agreement dated as of May 17, 2007, by and among Rader Farms Acquisition Corp., Rader Farms, Inc. and the Company Shareholders named therein.

	10.2	Agricultural Ground Lease dated as of May 17, 2007, by and among Lyle Rader, Sue Rader, Brad Rader, Julie Newell and Rader Farms Acquisition Corp.

	10.3	Loan Agreement (Revolving Line of Credit and Term Loan) dated as of May 16, 2007, by and between The Inventure Group, Inc. and U.S. Bank, National Association.

	10.4	Promissory Note (Facility 1 – Revolving Line of Credit Loan) dated May 16, 2007, by The Inventure Group, Inc. in favor of U.S. Bank, National Association.

	10.5	Promissory Note (Facility 2 – Term Loan) dated May 16, 2007, by The Inventure Group, Inc. in favor of U.S. Bank, National Association.

	10.6	Security Agreement (Blanket – All Business Assets) dated as of May 16, 2007, by and among between The Inventure Group, Inc., La Cometa Properties, Inc., Poore Brothers Bluffton, LLC, Tejas PB Distributing, Inc., Boulder Natural Foods, Inc., BN Foods, Inc., Rader Farms Acquisition Corp. and U.S. Bank, National Association.

	10.7	Term Loan Agreement dated as of June 28, 2007, by and between The Inventure Group, Inc. and U.S. Bank, National Association.

	10.8	Promissory Note Secured by Deed of Trust (Term Loan) dated June 28, 2007, by The Inventure Group, Inc. in favor of U.S. Bank, National Association.

	10.9	Deed of Trust dated June 28, 2007, by and between Rader Farms Acquisition Corp. and U.S. Bank National Association.

	10.10	Executive Employment Agreement dated as of May 17, 2007, by and between Rader Farms Acquisition Corp. and Brad Rader.

	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

	32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:	August 14, 2007	THE INVENTURE GROUP, INC.


		By:	/s/ Eric J. Kufel
			Eric J. Kufel
			Chief Executive Officer
			(Principal Executive Officer)

EXHIBIT INDEX

10.1		Asset Purchase Agreement dated as of May 17, 2007, by and among Rader Farms Acquisition Corp., Rader Farms, Inc. and the Company Shareholders named therein.

10.2		Agricultural Ground Lease dated as of May 17, 2007, by and among Lyle Rader, Sue Rader, Brad Rader, Julie Newell and Rader Farms Acquisition Corp.

10.3		Loan Agreement (Revolving Line of Credit and Term Loan) dated as of May 16, 2007, by and between The Inventure Group, Inc. and U.S. Bank, National Association.

10.4		Promissory Note (Facility 1 – Revolving Line of Credit Loan) dated May 16, 2007, by The Inventure Group, Inc. in favor of U.S. Bank, National Association.


10.5		Promissory Note (Facility 2 – Term Loan) dated May 16, 2007, by The Inventure Group, Inc. in favor of U.S. Bank, National Association.

10.6		Security Agreement (Blanket – All Business Assets) dated as of May 16, 2007, by and among between The Inventure Group, Inc., La Cometa Properties, Inc., Poore Brothers Bluffton, LLC, Tejas PB Distributing, Inc., Boulder Natural Foods, Inc., BN Foods, Inc., Rader Farms Acquisition Corp. and U.S. Bank, National Association.

10.7		Term Loan Agreement dated as of June 28, 2007, by and between The Inventure Group, Inc. and U.S. Bank, National Association.

10.8		Promissory Note Secured by Deed of Trust (Term Loan) dated June 28, 2007, by The Inventure Group, Inc. in favor of U.S. Bank, National Association.

10.9		Deed of Trust dated June 28, 2007, by and between Rader Farms Acquisition Corp. and U.S. Bank National Association.

10.10		Executive Employment Agreement dated as of May 17, 2007, by and between Rader Farms Acquisition Corp. and Brad Rader.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1 2 a07-18752_1ex10d1.htm EX-10.1

EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

by and among

RADER FARMS ACQUISITION CORP.,

RADER FARMS INC. and the COMPANY SHAREHOLDERS

Dated as of May 17, 2007

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS	1

1.1	Definitions	1

1.2	Other Definitions	7

ARTICLE 2	PURCHASE AND SALE OF ASSETS	8

2.1	Purchased Assets	8

2.2	Limited Assumption of Liabilities	10

2.3	Closing; Conditions to Closing; Closing Transactions	11

2.4	Purchase Price	12

2.5	Transfer of Title	12

2.6	Prorations and Closing Costs	12

2.7	Purchase Price Adjustment	12

2.8	Nonassignable Contracts	14

2.9	Post-Closing Amounts Received and Paid	14

2.10	Escrow	15

ARTICLE 3	DELIVERABLES	16

3.1	Company Deliverables	16

3.2	Buyer’s Deliverables	17

ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND COMPANY SHAREHOLDERS	18

4.1	Organization and Corporate Power	18

4.2	Authorization of Transactions	18

4.3	Absence of Conflicts	19

4.4	Financial Statements	19

4.5	Absence of Undisclosed Liabilities	20

4.6	Absence of Certain Developments	20

4.7	Title to Properties	21

4.8	Condition of Facilities	22

4.9	Title and Condition of Assets	22

4.10	Taxes	23

4.11	Contracts and Commitments	24

4.12	Proprietary Rights	26

4.13	Litigation; Proceedings	26

4.14	Brokerage	27

4.15	Governmental Authorizations and Permits	27

4.16	Employees	27

4.17	Employee Benefit Plans	28

4.18	Insurance	29

4.19	Affiliate Transactions	30

4.20	Compliance with Laws	30

4.21	Environmental Matters	30

4.22	Product Recall	32

4.23	Customers and Suppliers	32

4.24	Books and Records	32

4.25	Disclosure	32

4.26	Limitation on Company and Company Shareholders’ Representations and Warranties	32

4.27	Disclosure	33

ARTICLE 5	REPRESENTATIONS AND WARRANTIES OF BUYER	33

5.1	Organization and Corporate Power	33

5.2	Authorization of Transactions	33

5.3	No Violation	33

5.4	Governmental Authorities and Consents	33

5.5	Brokerage	34

5.6	Disclosure	34

ARTICLE 6	INDEMNIFICATION AND RELATED MATTERS	34

6.1	Survival	34

6.2	Indemnification	35

ARTICLE 7	ADDITIONAL AGREEMENTS	38

7.1	Tax Matters	38

7.2	Press Releases and Announcements	40

7.3	Further Transfers	40

7.4	Specific Performance	40

7.5	Expenses	40

7.6	Non-Competition; Non-Solicitation and Confidentiality	40

7.7	Employee and Employee Benefit Matters	43

7.8	Insurance	44

7.9	Transition Services	44

7.10	Discharge of Liabilities	45

7.11	Use of Names	45

ARTICLE 8	MISCELLANEOUS	45

8.1	Amendment and Waiver	45

8.2	Notices	45

8.3	Binding Agreement; Assignment	46

8.4	Severability	46

8.5	Construction	46

8.6	Captions and Headings	46

8.7	Entire Agreement	47

8.8	Counterparts	47

8.9	Governing Law	47

8.10	Parties in Interest	47

8.11	Consent to Jurisdiction	47

8.12	Delivery by Facsimile or Electronic Transmission	47

8.13	Attorneys’ Fees	48

iii

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made as of May 17, 2007, by and among Rader Farms Acquisition Corp., a Delaware corporation and wholly owned subsidiary of The Inventure Group, Inc., a Delaware corporation (“Buyer”), Rader Farms Inc., a Washington corporation (the “Company”), and the shareholders of the Company listed on Schedule I (the “Company Shareholders”). Buyer, the Company and the Company Shareholders are collectively referred to herein as the “Parties” and each individually is referred to as a “Party.”

WHEREAS, on the terms and subject to the conditions set forth in this Agreement, Buyer desires to acquire from the Company, and the Company desires to sell to Buyer, certain assets and properties used in or relating to the vegetable and berry growing business conducted by the Company as of the Closing Date, including without limitation the planting, growing, farming, harvesting, freezing, packaging, distributing and selling of raspberries, blueberries, marionberries, cranberries, dark sweet cherries, strawberries and rhubarb under the Rader Farms brand name (the “Business”), and Buyer desires to assume, and the Company desires to assign and transfer, certain liabilities of the Company primarily incurred in connection with the Business, in each case as more fully set forth herein; and

WHEREAS, the Company Shareholders acknowledge that they will be substantially benefited by the transactions contemplated by this Agreement, and as a material inducement to Buyer’s willingness to enter into this Agreement, which Buyer would not enter into absent the Company Shareholders’ execution of this Agreement, the Company Shareholders have agreed to join in this Agreement as contemplated herein;

NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and the representations, warranties, promises and covenants set forth herein, the Parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Accounts Receivable” means all notes and accounts receivable of the Company relating to the Business as of the Closing Date.

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise.

“Buildings, Improvements and Fixtures” means all buildings, improvements, fixtures, furniture and fittings located at the Owned Real Property.

“Business Day” means each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which banking institutions in Phoenix, Arizona are authorized or obligated to close by law.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code, and any similar state law.

“Code” means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder.

“Contract” means any contract, license, sublicense, franchise, permit, mortgage, purchase order, indenture, loan agreement, note, Lease, sublease, agreement, obligation, commitment, instrument or other written agreement or commitment to enter into any of the foregoing.

“Customer List” means the list of customers of the Business listed on Schedule 1.1 attached hereto, which list also includes the gross amount received from each such customer during the fiscal year ended December 31, 2006.

“Deposits and Prepaid Expenses” means deposits and prepaid expenses, other than prepaid income taxes, attributable to the Business as of the Closing Date.

“Environmental and Safety Requirements” means all federal, state, local and foreign statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law, in each case concerning public health and safety, worker health and safety and pollution or protection of the environment, including all those relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, Release, threatened Release, control or cleanup of any hazardous or otherwise regulated materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, odor or radiation, as the foregoing are enacted and in effect prior to or on the Closing Date.

“Environmental Lien” means any Lien, whether recorded or unrecorded, in favor of any governmental entity, relating to any liability of the Company arising under any Environmental and Safety Requirements.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Equipment” means all vehicles, machinery, equipment, tools, computers and other tangible personal property and assets used in the Business.

“Excluded Liabilities” means any Liabilities arising out of, relating to, resulting from or caused by any transaction, status, event, condition, occurrence or situation existing, arising or occurring (i) in connection with the ownership or operation of the Business and/or the Purchased Assets on or prior to the Closing Date or (ii) in connection with the Company’s businesses or activities at any time prior to, on or after the Closing Date, in each case other than the Assumed Liabilities. Without limiting the generality of the foregoing, Excluded Liabilities shall include (a) Liabilities of the Company under the Transaction Documents to which the Company is a party, (b) except to the extent (but only to the extent) reflected in any negative adjustment of the Purchase Price under Section 2.7, Liabilities for any claims (whenever made) or proceedings arising out of, relating to, resulting from or caused by the operation of the Business or any products grown, manufactured, packaged, distributed or sold by the Company with respect to the Business at any time on or prior to the Closing Date; (c) Liabilities for any Indebtedness or any other payment owed to a third party by the Company or Taxes including any assessments, claims or liabilities (including interest and/or penalties) for Taxes relating to, imposed upon or assessed against the Purchased Assets, the Business or the sales, income, property or business of the Company in each instance for periods ending on or before the Closing Date and/or resulting from the sale or transfer of the Purchased Assets hereunder, and (d) any claim, damage, fine or penalty (including interest) arising from events occurring prior to the Closing Date for personal injury, property damage, violation of immigration laws or employee welfare and safety laws, employment discrimination or infringement relating to the Company’s use of any intellectual property.

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Authority” means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Hazardous Substance” means any substance or material that is considered, described, characterized or listed as a toxic or hazardous substance, waste or material, or a pollutant, or a contaminant or an infectious waste, or words of similar import, in or under any applicable Environmental and Safety Requirements, or chemicals, substances, materials or compounds that are otherwise subject to regulation, prohibition, control or remediation under or that give rise to liability under, any applicable Environmental and Safety Requirements, and includes without limitation asbestos, petroleum and petroleum products, methyl tertiary-butyl ether, polychlorinated biphenyls, urea formaldehyde, radon gas and radioactive matter.

“Indebtedness” means (i) any indebtedness for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by any note, bond, debenture or other debt security, (iii) any indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise, (iv) any commitment by which a Person assures a creditor against loss (including contingent reimbursement Liabilities with respect to letters of credit), (v) any indebtedness guaranteed in any manner by a Person (including guarantees in the form of an agreement to repurchase or reimburse), (vi) any Liabilities under capitalized leases with respect to which a Person is liable, contingently or otherwise, as obligor,

guarantor or otherwise, or with respect to which Liabilities a Person assures a creditor against loss, (vii) any indebtedness secured by a Lien on a Person’s assets, and (viii) all Liabilities (including increased obligations) of the Business arising in whole or in part from the transactions contemplated hereby (including transaction bonuses, retention bonuses and severance obligations); together with, in each case, interest, penalties, redemption premiums, and prepayment obligations.

“IT Assets” means the computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment, and all associated documentation, owned or leased by the Company, part of which is used in the operation of the Business.

“Inventory” means seeds and plants at all stages of growth and harvesting, raw materials, work-in-process, finished goods, inventories, repair and replacement parts, collateral materials and supplies.

“Knowledge” as used in the phrases “to the Knowledge of the Company”, “to the Company’s Knowledge” or phrases of similar import means (i) the actual knowledge or awareness of Lyle Rader, Sue Rader, Brad Rader and Tara Lambert and (ii) the knowledge or awareness of such individuals which a prudent business person would have obtained in the conduct of his business after making reasonable inquiry and exercising reasonable diligence with respect to the particular matter in question.

“Lease” means all of the right, title and interest of the Company in the written leases, subleases, licenses, concessions, leasehold improvements and any other agreements in the nature of a lease, including the right to all security deposits and other amounts and instruments deposited by or on behalf of the Company for the Business.

“Letter of Intent” means that certain letter agreement between The Inventure Group, Inc. and the Company dated as of March 19, 2007.

“Liability” means any liability, debt, obligation, deficiency, Tax, penalty, assessment, fine, claim, cause of action or other loss, fee, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.

“Lien” means any mortgage, pledge, security interest, purchase money interest, encumbrance, claim, Tax, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof) or any agreement to file any of the foregoing, any sale of receivables with recourse against the Company or any of its Affiliates, and any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute.

“Material” shall be interpreted based on a reasonable purchaser’s view after considering the context in which the term is used, but in no event shall it include any matter that, results in or might result in costs, expenses, damages, payments or other Liabilities of, to or

involving, or claims by or against the Business involving less than $5,000.00 or, taken in the aggregate with all other related matters, involving less than $50,000.00.

“Material Adverse Effect” means an event, transaction, condition or change which has had or could reasonably be expected to have a Material adverse effect on the business, assets, condition (financial or otherwise), or operating results of the Business;

“Ordinary Course of Business” means in the ordinary course of business, consistent with past practice.

“Owned Real Property” means the real property owned by Lyle Rader, Sue Rader, Brad Rader, and Julie Newell (formerly known as Julie Rader), located at 1270 E. Badger Road, Lynden, Washington 98264 and the approximately 736 acres of land in Whatcom County, Washington used in connection with the operation of the Business (but specifically excluding the real property located at 8629 Benson Road, Lynden, WA 98264 and the real property located at 9046 Line Road, Lynden, WA 98264, which are the personal residences of Lyle and Sue Rader and Brad and Kari Rader, respectively, which parcels are not used in the operation of the Business), including all easements, servitudes, licenses, rights of way, permits, and the other appurtenances thereto, including appurtenant rights in and to public streets, whether or not vacated.

“Permitted Encumbrances” means, collectively, the following Special Exceptions contained in Schedule B of the Preliminary Title Report: 1 through 32, inclusive; 34 through 106, inclusive; and 123; provided, however, that Permitted Encumbrances shall not include any liens to be paid off at Closing, including but not limited to currently existing liens in favor of Horizon Bank, John B. Romerman Jr. and Jackie Romerman, Robert Nonhoff and Janet Nonhoff, and Mar-G Real Estate, LLC.

“Person” means an individual, a partnership, a limited liability company, a corporation (including any non-profit corporation), a cooperative, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a Governmental Authority, body or entity or any department, agency or political subdivision thereof.

“Personal Property Leases” means the Leases under which the Company is lessee of, or holds or operates, any personal property owned by any other party.

“Proprietary Rights” means all of the Company’s proprietary rights in and to intellectual property used by the Company in connection with the Business including, without limitation, all patents, patent applications, patent licenses, trademarks, trade names (whether or not registered) and registrations and applications therefore, domain names, trade secrets, technology, technical information, know-how, formulae, designs and drawings, computer software, slogans, copyrights, processes and other similar intangible property and rights, including all income, royalties, damages, equitable relief and payments due or payable prior to or at the Closing or thereafter (including damages, equitable relief and payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world). With respect to all trademarks, service marks,

industrial designs, trade dress, internet domain names and web sites, logos, topographies, trade names, brand names and corporate names, Proprietary Rights shall include all goodwill associated therewith. With respect to all trade secrets, Proprietary Rights shall include all ideas, formulae, plates, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, financial, business and marketing plans, and customer and supplier lists and related information (including pricing and margins therefor).

“Real Estate Encumbrances” means any restrictions on use of the Owned Real Property that would prevent or hinder the use of such Owned Real Property in a manner consistent with the current use of the particular parcel of Owned Real Property by the Business.

“Real Property Lease” means the Company’s Lease, as lessee, of real property used in connection with the Business which real property is not owned by the Company, Company Shareholders, or Affiliates thereof, as listed on Schedule 4.7(b). The sole Real Property Lease of the Company is the Farmland Lease Agreement dated November 14, 2006, between the Company, as lessee, and Harriet A. Nielsen-Howlett, as lessor.

“Release” shall have the meaning set forth in CERCLA, except that it shall be deemed to include without limitation the release of any Hazardous Substance as defined herein.

“Subsidiary” means with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons shall be allocated a majority of partnership, limited liability company, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, limited liability company, association or other business entity.

“Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, capital gains, franchise, alternative or add-on minimum, estimated, sales, use, goods and services, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, employment, disability, payroll, license, employee or other withholding, contribution or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

“Tax Returns” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or

collection of Taxes of any party or the administration of any laws, regulations or administrative requirements relating to any Taxes.

“Transaction Documents” means this Agreement, the Ground Lease, the Employment Agreement, and any and all ancillary documents necessary to consummate the transaction contemplated hereby.

“Working Capital” means the sum of (i) Accounts Receivable (less a reasonable allowance for bad debt) plus (ii) Inventory plus (iii) Deposits and Prepaid Expenses, (the sum of (i), (ii) and (iii) constitute the “Current Assets”), minus the sum of (i) Accounts Payable plus (ii) accrued expenses as would be required to be shown on the Company’s balance sheet. To the extent any of the prorations described in Section 2.6 are not adjusted for in the Purchase Price on the Closing Date, such prorations shall be reconciled in the Final Working Capital Amount determined in accordance with Section 2.7.

1.2 Other Definitions. Each of the following defined terms has the meaning given such term in the Section set forth opposite such defined term:

Defined Term		Section Reference
Agreement		Preamble
Allocation		Section 7.1(b)
Applicable Limitation Date		Section 6.1(a)
Arbitrating Accountants		Section 2.7(c)
Assumed Liabilities		Section 2.2(a)
Business		Recitals
Buyer		Preamble
Buyer Parties		Section 6.2(a)
Cap		Section 6.2(c)(ii)
Claim		Section 6.2(d)
Closing		Section 2.3(a)
Closing Date		Section 2.3(a)
Closing Transactions		Section 2.3(c)
Company		Preamble
Company Shareholders		Preamble
Company Parties		Section 6.2(b)
Competitive Business		Section 7.6(a)
Confidential Information		Section 7.6(c)
Controlled Group		Section 4.17(d)
Deductible		Section 6.2(c)(ii)
Distribution Contracts		Section 4.11(a)(xii)
Employees		Section 7.7(a)
Employment Agreement		Section 2.3(c)(ii)
Escrow Agent		Section 2.10(a)
Escrow Agreement		Section 2.10(a)
Escrow Amount		Section 2.10(a)
Escrow Claim		Section 2.10(b)
Escrow Termination Date		Section 2.10(a)

Estimated Working Capital Statement		Section 2.7(a)
Excluded Assets		Section 2.1(b)
Final Working Capital Amount		Section 2.7(b)
Financial Statements		Section 4.4(a)
Governmental Authorizations		Section 4.15
Ground Lease		Section 2.3(c)(i)
Indemnified Party		Section 6.2(d)
Indemnifying Party		Section 6.2(d)
Insiders		Section 4.19
Interim Financial Statements		Section 4.4(a)
Loss		Section 6.2(a)
Non-Compete Period		Section 7.6(a)
Notice of Claim		Section 6.2(d)
Party and Parties		Preamble
Plans		Section 4.17(a)
Purchase Price		Section 2.4
Purchased Assets		Section 2.1(a)
Real Property		Section 4.7(c)
Restricted Parties		Section 7.6(a)
Retained Policies		Section 7.8
Transferred Employees		Section 7.7(a)
Restricted Territory		Section 7.6(a)
Unaudited Financial Materials		Section 4.4(a)
Unresolved Escrow Claims		Section 2.10(c)
Working Capital Adjustment		Section 2.7(b)

ARTICLE 2
PURCHASE AND SALE OF ASSETS

2.1 Purchased Assets.

(a) On the terms and subject to the conditions contained in this Agreement, on the Closing Date, Buyer shall purchase from the Company, and the Company shall sell, convey, assign, transfer and deliver to Buyer, free and clear of all Liens (except for Permitted Encumbrances), all rights, titles and interests of every kind and nature in and to all of the following assets, but excluding all Excluded Assets (the “Purchased Assets”):

(i) all Accounts Receivable;

(ii) all Deposits and Prepaid Expenses;

(iii) all Buildings, Improvements and Fixtures;

(iv) all Real Property Leases;

(v) all Personal Property Leases;

(vi) all Inventory;

(vii) all Equipment;

(viii) all right, title and interest of the Company in and to the Contracts listed on Schedule 4.7(b) and Schedule 4.11(a) and all of the contract rights, claims, causes of action, refunds, credits, rights of recovery and set-off, security interests, licenses, permits, consents, authorizations, approvals, qualifications and registrations related to such Contracts and accruing or otherwise coming due subsequent to the Closing Date;

(ix) all rights, whether arising under Contract or otherwise in connection with the Business, with respect to the customers set forth on the Customer List, including all related customer records and marketing, franchise and distribution rights (including, without limitation, all rights under any franchise and/or distribution agreements);

(x) all rights to hire or engage the Transferred Employees listed on Schedule 7.7(a) (Employee and Employee Benefit Matters), and any confidentiality, work product, non-competition and/or non-solicitation agreements entered into with such employees and independent contractors, or, to the extent applicable to the Business, with former employees and independent contractors used in the operation of the Business;

(xi) all of the Company’s business records and files including, without limitation, sales information, advertising and marketing materials, supplier records, cost and pricing information, production data, employment and personnel records, accounting and credit records, correspondence, and other records (including those maintained in computer tapes, disks, or other computer retrievable format, and whether maintained by the Company or others); provided, however, that (A) the Company may retain its tax returns and related work papers and any other records or documents required by applicable law to be retained by the Company (the Company shall deliver to Buyer complete and accurate copies of all such writings), and (B) Buyer shall (1) provide the Company and the Company Shareholders access to such records transferred to Buyer as may be reasonably required from time to time (a) to prepare their income tax returns for their current taxable year, (b) to respond to any audit by any taxing authority related to any tax returns of the Company or such Company Shareholder, or (c) for other reasonable purposes related to pre-Closing matters, and (2) retain such records for at least six (6) years after the Company and the Company Shareholders file their federal income tax returns for their current taxable year (the Company and each Company Shareholder will notify Buyer in writing of the date of such filing as soon as practicable thereafter) or, at Buyer’s option, make such records available to the Company and the Company Shareholders;

(xii) all claims, deposits, prepayments, warranties, guarantees, refunds, causes of action, rights of recovery, rights of set-off and rights of compensation of every kind and nature, to the extent relating to the Purchased Assets or the Assumed Liabilities;

(xiii) all Proprietary Rights and other intangible rights and intangible property of the Company (including without limitation the “Rader Farms” trademark, the raderfarms.com website, telephone, telecopy and e-mail addresses and listings);

(xiv) all Governmental Authorizations listed on Schedule 4.15 and all data and records pertaining thereto;

(xv) all rights under or pursuant to all written warranties, representations, guarantees and service contracts made by suppliers, manufacturers and contractors in connection with the Purchased Assets;

(xvi) all insurance, warranty, guarantee and condemnation proceeds received on or after the Closing Date with respect to damage, non-conformance of or loss to the Purchased Assets;

(xvii) all brochures, artwork and other promotional and printed materials, consumables, trade show materials and equipment (including displays), videos, advertising and/or marketing materials; and

(xviii) all goodwill as a going concern and associated with the items listed above.

(b) Excluded Assets. All right, title, and interest of every kind and nature in and to all of the other assets and properties owned or leased by the Company (including indirect and other forms of beneficial ownership) as of the Closing Date, whether tangible, intangible, personal or real and wherever located and by whomever possessed are expressly excluded from the purchase and sale contemplated hereby (the “Excluded Assets”) and, as such, are not included in the Purchased Assets. Without limiting the generality of the foregoing, Excluded Assets shall include:

(i) the Owned Real Property; and

(ii) other assets, if any, listed on Schedule 2.1(b)(ii).

2.2 Limited Assumption of Liabilities.

(a) Limited Assumed Liabilities. Subject to the conditions specified in this Agreement, and in reliance upon the representations, warranties and agreements set forth herein, from and after the Closing Date, Buyer will not assume or in any way be responsible for any Liabilities of the Company or any other Liabilities whatsoever related to the ownership, operation or condition of the Business or the Purchased Assets at any time prior to the Closing Date, except as specifically provided below. From and after the Closing Date, Buyer assumes and agrees to pay, defend, discharge and perform as and when due only the following specific Liabilities of the Company that relate exclusively to the Business (the “Assumed Liabilities”):

(i) Liabilities to the extent arising after the Closing Date pursuant to all Real Property Leases, Personal Property Leases and Contracts which are set forth on Schedule 4.7(b) or Schedule 4.11(a), excluding, except to the extent (but only to the extent) reflected in any negative adjustment to the Purchase Price pursuant to Section 2.7, any Liability relating to or arising out of such Contracts and Leases as a result of (A) any transaction, status, event, condition, occurrence or situation existing, occurring or arising on or prior to the Closing Date, (B) any breach of such Contracts occurring on or prior to the Closing Date, (C) any violation of law, breach of warranty, tort or infringement

occurring on or prior to the Closing Date, or (D) any related charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand;

(ii) Liabilities to the extent (but only to the extent) reflected in any negative adjustment to the Purchase Price pursuant to Section 2.7;

(iii) Short-term Liabilities constituting accounts payable and accrued liabilities included on the Company’s balance sheet as of December 31, 2006, plus other accounts payable and accrued liabilities incurred in the Ordinary Course of Business after December 31, 2006, through and including the Closing Date, documented in writing prior to Closing and reflected as non-debt current liabilities in Working Capital under Section 2.7.

(b) Excluded Liabilities. Notwithstanding anything to the contrary contained in this Agreement and regardless of whether such Liability is disclosed herein or on any schedule hereto, Buyer will not assume or be liable for any Excluded Liabilities.

2.3 Closing; Conditions to Closing; Closing Transactions.

(a) Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Chicago Title Insurance Company, 1616 Cornwall Avenue, Suite 115, Bellingham, Washington 98225, at 10:00 a.m. local time on May 16, 2007 or at such other place or time and on such other date as may be mutually agreeable to the Parties. The date and time of the Closing are herein referred to as the “Closing Date.” The Parties may attend the Closing personally, via facsimile, or via telephone conference.

(b) Conditions to Closing. The Closing shall be subject to the satisfaction of the following conditions:

(i) At Buyer’s sole cost and expense, Chicago Title Insurance Company shall be prepared to issue its standard leasehold policy of title insurance in the amount of $20,700,000.00 insuring good and clear title in fee ownership of the buildings and fixtures and in the leasehold estate created by the Ground Lease in favor of Buyer, subject only to those matters listed on Schedule 2.3(b)(i) attached hereto and the usual exceptions in such form of policy.

(ii) The lessor under the Real Property Lease shall have consented to the assignment of the Real Property Lease to Buyer.

(iii) Buyer, the Company, and the Company Shareholders shall have performed all other acts required hereunder to Close.

(c) Closing Transactions. The Parties shall consummate the following “Closing Transactions” on the Closing Date:

(i) Lyle and Sue Rader, Brad Rader and Julie Newell (formerly known as Julie Rader) (the “Leasing Parties”) shall enter into a ground lease agreement substantially in the form of Exhibit A (the “Ground Lease”) pursuant to which Buyer, or

an Affiliate of Buyer acceptable to Company Shareholders will lease all of the Owned Real Property for a term of twenty (20) years from the Leasing Parties;

(ii) Buyer and Brad Rader shall enter into an employment agreement substantially in the form of Exhibit B (the “Employment Agreement”).

2.4 Purchase Price. In consideration for the Purchased Assets, Buyer will pay to the Company an amount equal to $20,700,000.00, subject to adjustment in accordance with Section 2.7 and Article 6, plus the Assumed Liabilities (the “Purchase Price”), payable as follows:

(a) an amount equal to the Assumed Liabilities, payable by Buyer’s assumption of the Assumed Liabilities on the Closing Date; and

(b) an amount equal to $20,700,000.00 less the Escrow Amount, and subject to adjustment as set forth in Section 2.7 and Article 6, payable by wire transfer of immediately available funds on the Closing Date.

2.5 Transfer of Title. At the Closing, title to all of the Purchased Assets and risk of loss shall pass to Buyer. The Company shall convey all of the Purchased Assets to Buyer and shall deliver to Buyer such appropriately executed instruments of sale, transfer, assignment, conveyance and delivery, warranty, assignments of leases, assignments, vehicle titles, transfer tax declarations and all other instruments of conveyance which are necessary or desirable to effect transfer to Buyer of good and marketable title to the Purchased Assets (free and clear of all Liens other than Permitted Encumbrances), in each case in form and substance satisfactory to Buyer and its counsel. From and after Closing, the Company and each of the Company Shareholders shall cooperate with Buyer and execute, deliver and record such instruments of title and other documents reasonably requested by Buyer in order to more fully perfect Buyer’s right, title and interest thereto and therein.

2.6 Prorations and Closing Costs. Buyer, the Company and each of the Company Shareholders hereby agrees that rents, utilities and other payments or obligations under the Leases listed on Schedule 4.7(b) and Schedule 4.11(a) and the Contracts listed on Schedule 4.11(a), and all personal property taxes and assessments shall be prorated as of the Closing Date and the Purchase Price shall be adjusted to reflect such proration. Buyer shall pay the cost of any policy of title insurance; escrow fees, recording fees and other closing costs shall be split equally between Buyer and the Company.

2.7 Purchase Price Adjustment.

(a) Estimated Working Capital Statement. Set forth at Exhibit C is the Company’s estimated statement of the Working Capital of the Company as of the Closing Date (the “Estimated Working Capital Statement”). Such statement was prepared in accordance with GAAP, consistently applied.

(b) Final Working Capital Amount; Working Capital Adjustment. No later than one hundred twenty (120) days following the Closing Date, Buyer will review the Estimated Working Capital Statement and provide the Company with its calculation

of any adjustments to such statement so as to confirm the actual Working Capital of the Company as of the Closing (the “Final Working Capital Amount”), with such adjustments and calculations to be prepared in accordance with GAAP, consistently applied. To the extent that the Final Working Capital Amount as finally determined pursuant to this Section 2.7 is between $4,100,000.00 and $5,500,000.00, there shall be no adjustment to the Purchase Price. To the extent that the Final Working Capital Amount as finally determined pursuant to this Section 2.7 exceeds $5,500,000.00, the Purchase Price shall be adjusted upward dollar for dollar to the extent of the difference. To the extent that the Final Working Capital Amount as finally determined pursuant to this Section 2.7 is lower than $4,100,000.00, the Purchase Price shall be adjusted downward dollar for dollar to the extent of the difference. The amount of such increase or decrease, if any, shall be the “Working Capital Adjustment” and shall be treated as an adjustment to the Purchase Price.

(c) Review of Working Capital Adjustment. The Company shall have thirty (30) days from the date of delivery to the Company by Buyer of its statement of the Final Working Capital Amount to review Buyer’s calculation of the Final Working Capital Amount. Such calculation of the Final Working Capital Amount and the Working Capital Adjustment shall be final and binding upon Buyer, the Company and the Company Shareholders unless the Company shall dispute the same in writing within such thirty (30)-day period. The Company may dispute Buyer’s calculation of the Final Working Capital Amount and the Working Capital Adjustment by specifying in reasonable detail the nature of the disagreement, the basis for such disagreement and the Company’s calculation of the Final Working Capital Amount and the Working Capital Adjustment. In the event the Company so notifies Buyer in writing within such thirty (30)-day period of any such dispute, Buyer and the Company shall attempt to resolve all such disputes in writing, and the Working Capital Adjustment shall be adjusted to reflect any such resolution (it being understood that Buyer and the Company shall negotiate in good faith during a period of at least ninety (90) days from the date of such notice by Company to resolve such dispute). If Buyer and the Company are unable to resolve all such disputes within ninety (90) days after the Company’s notification, then the matters still in dispute shall be submitted to a nationally recognized accounting firm mutually acceptable to Buyer and the Company, and if Buyer and the Company are unable to agree on the choice of an accounting firm, then the accounting firm will be a nationally recognized accounting firm independent with respect to both Buyer and the Company selected by lot from a list of such firms compiled by the Company and the auditors of Buyer (the “Arbitrating Accountants”). Buyer and the Company shall be afforded the opportunity to present to the Arbitrating Accountants (with copies to be provided to the other party) any material related to the unresolved disputes and to discuss the issues with the Arbitrating Accountants. The Arbitrating Accountants shall determine the amount of each of the items being disputed and notify the parties in writing within thirty (30) days after the submission of the unresolved disputes to the Arbitrating Accountants. The Arbitrating Accountants shall resolve all remaining points of disagreement with respect to the Working Capital Adjustment, which resolution shall be final and binding upon Buyer, the Company and the Company Shareholders, with no right of appeal, and the Working Capital Adjustment shall be adjusted to reflect any such resolution; provided, however, that the Arbitrating Accountants may only consider those matters identified by

Buyer and the Company to be in dispute and may only determine the Working Capital Adjustment to be an amount equal to the amount proposed by Buyer, the amount proposed by the Company or some amount within the range of the amounts proposed by Buyer and the Company. All fees of the Arbitrating Accountants shall be paid by the party that proposed the Working Capital Adjustment furthest from the Working Capital Adjustment determined by the Arbitrating Accountants. If the Company is obligated to pay any such fees, such fees shall be paid as a further adjustment to the Working Capital Adjustment. Following the delivery of Buyer’s calculation of the Final Working Capital Amount and continuing during any period of dispute, the Company Shareholders, the Company and its agents and advisors shall have full access to the working papers and books and records of Buyer and the Company, and their respective representatives relating to the Working Capital Adjustment.

(d) To the extent that the Working Capital Adjustment, as finally determined in accordance with this Section 2.7, represents an upward adjustment of the Purchase Price, Buyer shall pay to the Company the amount of such Working Capital Adjustment by wire transfer of immediately available funds within five (5) Business Days following such determination.

(e) To the extent that the Working Capital Adjustment, as finally determined in accordance with this Section 2.7, represents a downward adjustment of the Purchase Price, the amount of such downward adjustment shall be deemed an undisputed Escrow Claim, such amount shall not be payable to the Company and Buyer and the Company shall execute joint written instructions to the Escrow Agent for the release of such amount from the Escrow to Buyer.

2.8 Nonassignable Contracts. The Company shall use reasonable efforts to obtain all consents and approvals necessary to assign to Buyer any Contract that is included in the Purchased Assets. To the extent that the assignment by the Company to Buyer of any Contract is not permitted or is not permitted without the consent of any other party to the Contract, this Agreement shall not be deemed to constitute an assignment of any such Contract if such consent is not given or if such assignment otherwise would constitute a breach of, or cause a loss of contractual benefits under, any such Contract, and Buyer shall assume no Liabilities thereunder. If any such consent is not obtained or if such assignment is not permitted irrespective of consent, the Company shall use commercially reasonable efforts, at the Company’s expense, to (i) provide to Buyer, at the request of Buyer, the benefits of any such Contract transferred herein, (ii) cooperate in any lawful arrangement prescribed by Buyer to provide such benefits to Buyer and (iii) enforce, to the extent enforceable by the Company, at the request of and for the account of Buyer, any rights of the Company arising from any Purchased Asset referred to herein against any third person (including a Governmental Authority) including the right to elect to terminate a Contract in accordance with the terms thereof upon the advice of Buyer.

2.9 Post-Closing Amounts Received and Paid. Except as provided in Section 7.12, all cash collected on or after the Closing Date from Accounts Receivable which constitute Purchased Assets shall belong to Buyer, and if received by the Company, shall be received for the benefit and the account of Buyer, and the Company shall, on a weekly basis, transfer and remit to Buyer all such amounts received by or paid to the Company on or after the

Closing Date. All cash collected on or after the Closing Date from accounts receivable which do not constitute Purchased Assets shall belong to the Company, and if received by Buyer, shall be received for the benefit and the account of the Company, and Buyer shall, on a weekly basis, transfer and remit to the Company all such amounts received by or paid to Buyer on or after the Closing Date.

2.10 Escrow.

(a) Escrow of Part of the Purchase Price. At the Closing, Buyer, the Company and the Company Shareholders shall enter into an escrow agreement in the form of Exhibit H (the “Escrow Agreement”) with an independent third party escrow agent (the “Escrow Agent”) acceptable to Buyer in its sole discretion pursuant to which Buyer shall deposit $1,000,000.00 of the Purchase Price (the “Escrow Amount”) with the Escrow Agent to (i) cover any Working Capital Adjustment under Section 2.7(e) and (ii) secure the due performance and payment of the indemnification obligations of the Company and the Company Shareholders for a period of twelve (12) months following the Closing Date. The Escrow Amount is subject to the covenants (including all procedures) set forth in the provisions of this Section 2.10 and the Escrow Agreement. Subject to the provisions of Section 2.10(c) below, the Escrow Agreement shall terminate upon the date that is twelve (12) months after the Closing Date (the “Escrow Termination Date”).

(b) Deductions from the Escrow Amount. In the event that Buyer reasonably believes that indemnification by the Company or the Company Shareholders is required under Article 6 after applying any applicable limitations described in Article 6, Buyer shall deliver written notice thereof to the Company and the Company Shareholders with copies to Company’s counsel and the Escrow Agent, which notice shall contain a statement reasonably describing the nature of the indemnification obligation, the identity of the Person (including Buyer) by whom it is being asserted, and the amount asserted as a Loss or Losses as a result thereof (the “Escrow Claim”). Buyer shall deliver to the Company and the Company Shareholders copies of all material documentation relating to each Escrow Claim, including (as applicable) any pleadings and amended pleadings filed in connection with any such Escrow Claim and will provide the Company Shareholders and the Company and its counsel with such further information concerning the Escrow Claim as the Company Shareholders and the Company and its counsel may reasonably request. If the Company or the Company Shareholders dispute any Escrow Claim or portion thereof, the Company and the Company Shareholders shall, within thirty (30) days of receipt of such Escrow Claim, deliver to Buyer and Escrow Agent a notice of objection (a “Dispute Notice”), setting forth with reasonable particularity the grounds and the basis upon which the Escrow Claim or any portion thereof is disputed. If the Company and Company Shareholders do not provide Buyer and Escrow Agent with a timely Dispute Notice, Buyer shall have the right to receive the full amount of the Escrow Claim from the Escrow Amount and such amount shall not be payable to the Company. If the Company and Company Shareholders provide Buyer and Escrow Agent with a timely Dispute Notice and such Dispute Notice disputes only a portion of such Escrow Claim, Buyer shall have the right to receive an amount equal to the non-disputed portion of such Escrow Claim from the Escrow Amount and such non-disputed portion of the Escrow Claim shall not be payable to the Company. Whenever the Company provides Buyer with a timely Dispute Notice, the Parties shall thereafter negotiate in good faith to attempt to resolve such dispute. If the Parties are not able to resolve such dispute within thirty (30)

days of the receipt by Buyer of the Dispute Notice, then the Company, the Company Shareholders and Buyer shall each have the right to take such legal steps as any of them deem necessary with respect to such dispute.

(c) Escrow Termination. On the Escrow Termination Date, Buyer shall promptly, and in any event no later than three (3) Business Days after the Escrow Termination Date, instruct the Escrow Agent to pay over to the Company the remaining amount of the Escrow Amount, less any Unresolved Escrow Claims. The Escrow Agreement shall not be terminated with respect to timely noticed Escrow Claims by Buyer, if any, which remain unresolved at the Escrow Termination Date (“Unresolved Escrow Claims”). In the event that any Unresolved Escrow Claims remain disputed on and after the Escrow Termination Date, the Escrow Agent shall retain the disputed amount of the Unresolved Escrow Claim until such Unresolved Escrow Claim is either (i) resolved by Buyer, the Company and the Company Shareholders and joint written instructions are delivered to the Escrow Agent, or (ii) there is an order of a court of competent jurisdiction that the amount of the Unresolved Escrow Claim (and any other amount) shall be paid by from the Escrow Amount to the Company, the Company Shareholders or Buyer. At the time of the final settlement or determination of any Unresolved Escrow Claim (or any reduction in the amount asserted as Loss), the Escrow Agent shall pay to Buyer from the Escrow Amount Buyer’s portion of the Escrow Amount applicable to such Unresolved Escrow Claim in accordance with said final settlement or determination and pay over to the Company or the Company Shareholders, as the case may be, the balance of the Escrow Amount until the Escrow Amount is exhausted.

ARTICLE 3
DELIVERABLES

3.1 Company Deliverables. On or before the Closing Date, the Company shall deliver the following items to Buyer, each of which shall be to Buyer’s satisfaction in its commercially reasonable discretion:

(a) Subject to the terms of Section 2.8, all consents and approvals by third parties that are required for the transfer of the Purchased Assets, that are required for the assignment and transfer of the Distribution Contracts, and other Contracts included in the Purchased Assets, that are required for the assignment of the Real Property Lease, that are required for the consummation of the transactions contemplated hereby or that are required in order to prevent a breach of or a default under or a termination or modification of or any right of acceleration of any Liability under any Contract which is included as one of the Purchased Assets, in each case on terms and conditions satisfactory to Buyer;

(b) All governmental and regulatory filings, authorizations and approvals and other Governmental Authorizations that are required for the transfer of the Purchased Assets to Buyer and the consummation of the transactions contemplated hereby shall have been duly made and obtained on terms reasonably satisfactory to Buyer;

(c) Releases of any and all Liens with respect to the Purchased Assets (except for Permitted Encumbrances);

(d) The Ground Lease, duly executed by the Leasing Parties;

(e) An original of an Assignment and Assumption Agreement in substantially the form of Exhibit D, assigning the Real Property Lease to Buyer, executed by the Company;

(f) An original of a Bill of Sale in substantially the form of Exhibit E, transferring all of the Company’s right, title and interest in the Purchased Assets to Buyer, executed by the Company;

(g) The Employment Agreement, duly executed by Brad Rader;

(h) An opinion, dated the Closing Date, of counsel to the Company, in the form of Exhibit F;

(i) The Escrow Agreement, duly executed by the Company and the Company Shareholders;

(j) A certificate duly executed by the Secretary of the Company certifying as to (i) the Company’s certificate of incorporation and bylaws of the Company, (ii) resolutions of the Company’s board of directors and, to the extent required, of the Company’s shareholders, authorizing the execution, delivery and performance of this Agreement, and approving the consummation of the transactions contemplated hereby and (iii) the incumbency of the officers of the Company executing this Agreement;

(k) Certificates of good standing for the Company dated within ten (10) days prior to the Closing Date issued by the Secretary of State of the State of Washington and each jurisdiction where the Company is qualified to do business (including the jurisdictions listed on Schedule 4.1); and

(l) Such other documents or instruments as Buyer may reasonably request to effect the transactions contemplated hereby.

3.2 Buyer’s Deliverables. On or before the Closing Date, Buyer shall deliver the following items to the Company, each of which shall be to the Company’s satisfaction in its sole discretion:

(a) The Ground Lease, duly executed by Buyer;

(b) An original of an Assignment and Assumption Agreement in substantially the form of Exhibit D, assigning the Real Property Lease to Buyer, executed by the Company;

(c) The Employment Agreement, duly executed by Buyer;

(d) A certificate duly executed by the Secretary of Buyer certifying as to (i) Buyer’s certificate of incorporation and bylaws, (ii) resolutions of Buyer’s board of directors authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents, and approving the consummation of the transactions contemplated hereby and thereby and (iii) the incumbency of the officers of Buyer executing this Agreement;

(e) An opinion, dated the Closing Date, of counsel to Buyer, in the form of Exhibit G;

(f) The Escrow Agreement, duly executed by Buyer; and

(g) Such other documents or instruments as the Company may reasonably request to effect the transactions contemplated hereby.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND COMPANY SHAREHOLDERS

As a material inducement to Buyer to enter into this Agreement, the Company and each Company Shareholder hereby represents and warrants, jointly and severally, to Buyer as follows:

4.1 Organization and Corporate Power.

(a) The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Washington and is qualified to do business in the State of Washington and in no other jurisdiction.

(b) The Company does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture, or other entity or enterprise. The Company is not obligated to make any future investment in or capital contribution to any corporation, partnership, joint venture or other entity or enterprise, and the Company has not guaranteed and is not liable for any obligation of any such Person.

(c) The Company has full corporate power and authority and all Governmental Authorizations necessary to own and operate the Purchased Assets and to carry on the Business as currently conducted and as presently proposed to be conducted.

(d) The copies of the articles of incorporation and bylaws of the Company that have been furnished to Buyer reflect all amendments thereto and are correct and complete.

4.2 Authorization of Transactions. The Company has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The board of directors and the shareholders of the Company have duly approved this Agreement and have duly authorized the execution and delivery of this Agreement and all ancillary documents and the consummation of the transactions contemplated hereby. No other corporate proceedings on the part of the Company are necessary to approve and authorize the execution and delivery of this Agreement or any of the ancillary documents and the consummation of the transactions contemplated hereby. As of Closing, this Agreement and all other Transaction Documents to which any of the Company or the Company Shareholders is a party have been duly executed and delivered by the Company and any such Company Shareholder, as applicable, and constitute the valid and binding agreements of the Company and each Company Shareholder, as applicable, enforceable against the Company and each Company Shareholder, as applicable, in accordance with their terms.

4.3 Absence of Conflicts. Except as set forth in Schedule 4.3, the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby by the Company and the Company Shareholders do not and shall not (a) conflict with or result in any breach of any of the terms, conditions or provisions of, (b) constitute a default under, (c) result in a violation of, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in the creation of any Lien upon the Purchased Assets, or (f) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or other Governmental Authority, under the provisions of the articles of incorporation or bylaws of the Company or any Contract to which the Purchased Assets are bound or affected, or any law, statute, rule or regulation to which the Company or any of the Purchased Assets is subject or any judgment, order or decree to which the Company is subject.

4.4 Financial Statements.

(a) Attached as Schedule 4.4 are (i) the Company’s unaudited balance sheet and the related unaudited statements of income and cash flows for the twelve (12) months ending December 31, 2006, (ii) the Company’s audited balance sheet and unaudited statement of income and cash flows for the twelve (12) months ending December 31, 2005 ((i) and (ii) collectively, the “Financial Statements”), and (iii) the Company’s unaudited balance sheet and the related unaudited statements of income and cash flows for the three (3) months ending March 31, 2007 (the “Interim Financial Statements” and, together with the unaudited statement of income and cash flows for the twelve (12) months ending December 31, 2005, the “Unaudited Financial Materials”). The Company has not undergone any independent audit or review of its Interim Financial Statements. The Financial Statements and the Interim Financial Statements have been prepared in accordance with GAAP, consistently applied, and fairly present in all material respects the financial condition and the results of operations, changes in shareholders’ equity, and cash flows of the Company as of the respective dates of and for the periods referred to therein, except that the Unaudited Financial Materials do not include schedules and footnotes required under GAAP, or normal year-end adjustments.

(b) The Company has not identified any significant deficiencies or material weaknesses in the design or operation of its internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and, with respect to the Company and to the Company’s Knowledge, there has been no fraud, whether or not material, that involves management or other employees who have a significant role in its internal control over financial reporting. The Company has not received prior to the Closing Date any written complaint, allegation, assertion or claim regarding any significant deficiencies or material weaknesses in the design or operation of its internal accounting controls.

(c) On Monday, May 21, 2007 by 5:00 P.M. Mountain Standard Time, the Company shall provide to Buyer unqualified audited financial balance sheet and related audited statement of income and cash flows for the twelve (12) months ending December 21, 2006, the content of which does not materially differ from the unaudited financial balance sheet and related unaudited statement of income and cash flows for the twelve (12) months ending December 21, 2006 provided on Schedule 4.4. On or before June 29, 2007, the Company shall provide to

Buyer a draft form of audited statement of income and cash flows for the twelve (12) months ending December 31, 2005. On or before July 13, 2007, the Company shall provide to Buyer the final audited statement of income and cash flows for the twelve (12) months ending December 31, 2005.

4.5 Absence of Undisclosed Liabilities. Except for liabilities (a) reflected or reserved against in the balance sheet of the Company as at December 31, 2006, (b) incurred in the Ordinary Course of Business since December 31, 2006 (none of which resulted from, arose out of, is related to, or was caused by any breach of contract, breach of warranty, tort, infringement or violation of Law), (c) arising under Contracts to which the Company is a party, and/or (d) described on the Schedule 4.5, the Company, to its Knowledge, has no material obligations or liabilities (whether accrued, absolute, contingent or otherwise) that are required to be reflected as liabilities on a balance sheet prepared in accordance with GAAP consistently applied. The Company does not have any liability which will become due as a result of the consummation by the Company of the transactions contemplated by this Agreement.

4.6 Absence of Certain Developments. Except as set forth in Schedule 4.6 or as expressly contemplated by this Agreement, since December 31, 2006, the Company has not with respect to the Business, except in the Ordinary Course of Business:

(a) suffered a Material Adverse Effect;

(b) suffered any theft, damage, destruction or casualty loss in excess of $10,000.00 to any of the Purchased Assets, whether or not covered by insurance, or suffered any substantial destruction of the Company’s books and records;

(c) experienced any labor dispute or threatened labor dispute involving any employees involved in the Business;

(d) borrowed any amount or incurred or become subject to any Indebtedness or other Liabilities;

(e) subjected any portion of the Purchased Assets to any Lien;

(f) sold, leased, assigned or transferred (including transfers to any Insider) a portion of the Purchased Assets (including Proprietary Rights), or canceled without fair consideration any material debts or claims owing to or held by it, or disclosed any confidential information (other than pursuant to agreements requiring the disclosure to maintain the confidentiality of and preserving all rights of the Company in such confidential information);

(g) waived any rights of Material value under any Material Contract;

(h) entered into, amended or terminated any material Contract;

(i) entered into any other material transaction, or materially changed any business practice;

(j) received written notification that any material customer or supplier will stop or decrease in any material respect the rate of Business done with the Company or experienced an actual or threatened material dispute with any material customer or supplier;

(k) instituted or settled any claim or lawsuit involving equitable or injunctive relief of more than $10,000.00 in the aggregate;

(l) granted any performance guarantee to any of its customers;

(m) offered any Material discounts on any of its products or any promotions, rebates, coupons or special offers with respect to any of its products with terms and conditions that differ in any material respect from the terms and conditions previously offered by the Company with respect to the Business;

(n) changed any of the terms and conditions with respect to the pricing of any of its products (including any terms and conditions that are ancillary to, or otherwise affect, the aggregate price paid for any of its products) that differ in any material respect from the terms and conditions previously offered by the Company with respect to the Business;

(o) acquired any other business or entity (or any significant portion or division thereof), whether by merger, consolidation or reorganization or by purchase of assets or stock or acquired any other material assets; or

(p) committed or agreed to any of the foregoing in any manner that would be legally enforceable.

4.7 Title to Properties.

(a) Schedule 4.7(a) sets forth a list of each parcel of Owned Real Property. True and complete copies of (i) all deeds and existing title insurance policies of or pertaining to the Owned Real Property and (ii) all instruments, agreements and other documents evidencing, creating or constituting any Real Estate Encumbrances have been delivered to Buyer. With respect to each such parcel of Owned Real Property: (A) the Company Shareholders and their children (Brad Rader and Julie Newell, formerly known as Julie Rader) own, or will own immediately following Closing, marketable title to such parcel, free and clear of all Liens, except Permitted Encumbrances; (B) there are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any person the right of use or occupancy of any portion of such parcel; and (C) there are no outstanding actions or rights of first refusal to purchase such parcel, or any portion thereof or interest therein.

(b) Schedule 4.7(b) sets forth the address and/or tax parcel number of the property leased pursuant to the Real Property Lease, and a true and complete list of all Real Property Leases (including all amendments, extensions, renewals, guaranties and other agreements with respect thereto) for each such leased real property. Each of the Real Property Leases is in full force and effect, and the Company holds a valid and existing leasehold or subleasehold interest under each of the Real Property Leases. The Company has delivered to Buyer true, correct, complete and accurate copies of each of the Real Property Leases listed on Schedule 4.7(b). With respect to each Real Property Lease listed on the Schedule 4.7(b): (i) the Real Property

Lease is legal, valid, binding, enforceable and in full force and effect; (ii) the Real Property Lease will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing for the duration stated in such Real Property Lease, subject to the terms thereof; (iii) to the Company’s Knowledge, no party to any Real Property Lease has repudiated any provision thereof; (iv) to the Company’s Knowledge, there are no disputes, oral agreements, or forbearance programs in effect with respect to any Real Property Lease; (v) no Real Property Lease has been modified in any respect, except to the extent that such modifications are disclosed by the documents delivered to Buyer; and (vi) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in any Real Property Lease.

(c) The Owned Real Property and Real Property Leases are referred to collectively herein as the “Real Property”.

4.8 Condition of Facilities. Except as noted on Schedule 4.8, use of the Real Property for the various purposes for which it is presently being used is permitted as of right under all applicable zoning legal requirements or is a “permitted nonconforming” use of structure classifications that has received all necessary Governmental Authorizations. To the Knowledge of the Company, except as noted on Schedule 4.8, all Buildings, Improvements and Fixtures are in material compliance with all applicable legal requirements, including but not limited to Environmental and Safety Regulations, including those pertaining to zoning, building and the disabled, to the extent applicable, are in good repair and in good condition, ordinary wear and tear excepted, and, to the Knowledge of the Company, are free from latent and patent defects. To the Knowledge of the Company, except as noted on Schedule 4.8, no part of any Buildings, Improvements and Fixtures encroaches on any real property not included in the Real Property, and there are no buildings, structures, fixtures or other improvements primarily situated on adjoining property which encroach on any part of the Real Property. To the Knowledge of the Company, there is no existing or proposed plan to modify or realign any street or highway or any existing or proposed eminent domain proceeding that would result in the taking of all or any part of any facility or that would prevent or hinder the continued use of any facility as heretofore used in the conduct of the Business.

4.9 Title and Condition of Assets.

(a) Title; Sufficiency. The Company has good, valid and marketable title to all of the Purchased Assets, and at Closing, the Company will convey good, valid and marketable title to each of the Purchased Assets to Buyer. The title to each Purchased Asset is, and at Closing will be, free and clear of all Liens, except for Permitted Encumbrances. The Purchased Assets constitute all of the material assets and rights necessary for the conduct of the Business as presently conducted.

(b) Inventory. Except as disclosed on Schedule 4.9(b), the Inventory consists of a quality and quantity saleable in the Ordinary Course of Business in accordance with normal industry practice.

(c) Equipment. Except with respect to any individual item originally purchased by the Company for less than $25,000.00 and as otherwise disclosed on Schedule 4.9(c), the

Equipment is in good operating condition and repair (normal wear and tear excepted), has been maintained in accordance with normal industry practice and is suitable for the purposes for which it is presently used.

(d) Accounts Receivable. The Accounts Receivable represent valid obligations arising from sales actually made or services actually performed by the Company in the Ordinary Course of Business. The reserve against liability for uncollectible Accounts Receivable set forth on the Estimated Working Capital Statement is reasonable based on past practice.

4.10 Taxes. Except as set forth on Schedule 4.10, with regard to the Business and the Purchased Assets:

(a) the Company is and has always been a valid subchapter S corporation;

(b) the Company has timely filed or shall timely file all Tax Returns which are required to be filed on or before the Closing Date, and all such Tax Returns are true, complete and accurate;

(c) all Taxes due and payable by the Company, whether or not shown on a Tax Return, have been paid or shall be paid by the Company and no Taxes are delinquent;

(d) no deficiency for any amount of Tax has been asserted or assessed by a taxing authority against the Company and the Company does not reasonably expect that any such assertion or assessment of Tax liability will be made;

(e) the Company has not consented to extend the time in which any Tax may be assessed or collected by any taxing authority;

(f) no claim has ever been made by a taxing authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to Taxes assessed by such jurisdiction;

(g) the Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party; and

(h) the Company will not be required (i) as a result of a change in method of accounting for a taxable period ending on or prior to the Closing Date, to include any adjustment in taxable income for any taxable period (or any portion thereof) or (ii) as a result of any “closing agreement,” as described in Section 7121 of the Code (or any corresponding provision of state, local or foreign income Tax law), to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date.

Schedule 4.10 contains a list of states, territories and jurisdictions (whether foreign or domestic) in which the Company is required to file Tax Returns relating to the Business. The Purchased Assets are free and clear of any Lien related to any Tax Liability other than Permitted

Encumbrances whatsoever or howsoever arising (whether accrued, absolute, contingent or otherwise).

4.11 Contracts and Commitments.

(a) Except for the Purchased Assets and other matters specifically contemplated by this Agreement, and except as set forth in Schedule 4.11(a), with respect to the Business, the Company is not a party to or bound by, and the Purchased Assets are not bound by, whether written or oral, any:

(i) collective bargaining agreement or Contract with any labor union or any bonus, commissions, pension, profit sharing, retirement or any other form of deferred compensation plan or any stock purchase, stock option, hospitalization insurance or similar plan or practice, whether formal or informal;

(ii) Contract for the employment of any Transferred Employees listed on Schedule 7.7(a) on a full-time or consulting basis or any notice, severance or change-of-control agreements;

(iii) Contract relating to Indebtedness or to mortgaging, pledging or otherwise placing a Lien on any of the Purchased Assets;

(iv) license or royalty Contract;

(v) guaranty of any obligation, other than endorsements made for collection;

(vi) Contract with any customer listed on Schedule 1.1 or any supplier listed on Schedule 4.23;

(vii) Contract under which it is lessee of, or holds or operates, any personal property owned by any other party calling for payments in excess of $10,000.00 annually or under which it is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by it;

(viii) Contract or group of related Contracts with the same party for the purchase or sale of supplies, products or other personal property or for the furnishing or receipt of services which either calls for performance over a period of more than one year or involves a sum in excess of $10,000.00;

(ix) Contract with any Person for the purchase or supply of vegetables or berries or any other ingredient or material used in a product of the Business;

(x) Contract for the co-packaging or similar arrangement for any product of the Business;

(xi) Contract which prohibits the Company from freely engaging in the Business anywhere in the world;

(xii) Contract relating to the distribution (including with respect to systems, routes or networks), marketing or sales of the Company’s products (the “Distribution Contracts”);

(xiii) Contract pursuant to which the Company subcontracts work to third parties;

(xiv) Contract relating to the acquisition or sale of the Business (or any material portion thereof);

(xv) Contract for warehouse management;

(xvi) Contract for movement of freight;

(xvii) “take-or-pay” or “requirements” Contract;

(xviii) any other Contract not already listed under one of the subsections above that involves future payments, performance by the Company of services or delivery by the Company of goods or materials of an aggregate amount or value in excess of $10,000.00 on an annual basis, or that otherwise is material to the Business or prospects of the Business, taken as a whole; or

(xix) any amendment, waiver or modification to any of the foregoing.

(b) Except as disclosed in Schedule 4.11(b) or as would not reasonably be expected to result in a Material Adverse Effect, (i) to the Company’s Knowledge, no Contract or commitment disclosed on, or required to be disclosed on, Schedule 4.11(a) has been breached, defaulted on, or canceled by the other party, and the Company has no Knowledge of any anticipated breach, default or cancellation by any other party to any Contract set forth or required to be set forth on Schedule 4.11(a), (ii) the Company has performed all the obligations required to be performed by it in connection with the Contracts disclosed on, and the Contracts required to be disclosed on, Schedule 4.11(a) and is not in default under or in breach of any such Contract, and no event has occurred which with the passage of time or the giving of notice or both would result in a default or breach thereunder, (iii) the Company does not have a present expectation or intention of not fully performing any obligation pursuant to any Contract set forth on, or any Contract that is required to be set forth on, Schedule 4.11(a), and (iv) each Contract with respect to the Business is legal, valid, binding, existing, enforceable and in full force and effect and will continue as such following the consummation of the transactions contemplated hereby.

(c) The Company has provided Buyer with a true and correct copy of all written Contracts, or provided Buyer with access to such Contracts, which are required to be disclosed on Schedule 4.11(a), in each case together with all amendments, waivers or other changes thereto.

4.12 Proprietary Rights.

(a) Schedule 4.12 lists the Proprietary Rights included in the Purchased Assets. The Proprietary Rights used by the Company with respect to the Business immediately prior to the Closing hereunder will be owned or available for use on identical terms and conditions immediately subsequent to the Closing hereunder.

(b) Except as set forth on Schedule 4.12, (i) the Company owns and possesses all right, title and interest in and to, or has a valid and enforceable right to use, each of the Proprietary Rights listed on Schedule 4.12, free and clear of all Liens, except Permitted Encumbrances, and no claim by any third party contesting the validity, enforceability, use or ownership of any of the Proprietary Rights has been made, is currently outstanding or, to the Company’s Knowledge, is threatened, (ii) the Company has not received any notices of, nor is the Company aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to any Proprietary Right owned by, issued to or licensed to the Company (including any demand or request that the Company license rights from a third party), (iii) the Company has not infringed, misappropriated or otherwise conflicted with any rights of any third parties and the Company is not aware of any infringement, misappropriation or conflict which shall occur as a result of the continued operation of the Business as currently conducted, and (iv) to the Company’s Knowledge, the Proprietary Rights owned or licensed to the Company have not been infringed, misappropriated or conflicted by any third party.

(c) The transactions contemplated by this Agreement shall have no material adverse effect on Buyer’s right, title and interest in and to any of the Proprietary Rights included as Purchased Assets. The Company’s trade secrets included in the Proprietary Rights are treated by the Company as confidential information with respect to the Business. Except as set forth in Schedule 4.12, the Company has entered into written confidentiality agreements and written proprietary rights agreements with all of its employees and independent contractors with access to trade secrets included in the Purchased Assets or involved in creating or developing inventions relating to the Business within the scope of their employment and, to the Company’s Knowledge, no such agreements have been breached by such employee or independent contractor. The Company has taken reasonable actions to maintain and protect its Proprietary Rights.

4.13 Litigation; Proceedings. Except as set forth in Schedule 4.13, there are no claims, disputes, actions, suits, proceedings, orders, writs, injunctions, judgments, decrees or investigations pending or, to the Company’s Knowledge, threatened against or affecting the Company with respect to the Business or the Purchased Assets at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and to the Company’s Knowledge there is no basis known for any of the foregoing. Except as set forth on Schedule 4.13, the Company has not received any opinion or legal advice in writing to the effect that the Company is exposed from a legal standpoint to any liability or disadvantage which may be material to the Business as previously, presently or as proposed to be conducted or the business prospects of the Business. Neither the Company with respect to the Business nor any of the Purchased Assets is subject to any outstanding order, judgment or decree issued by any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or any arbitrator. Except as set forth in

Schedule 4.13, the Company is fully insured with respect to each of the matters set forth on Schedule 4.13. The Company Shareholders agree to continue to diligently pursue a resolution to the matter set forth on Schedule 4.13, including continuing their efforts to seek approval to use the parcel that is the subject of such matter for agricultural purposes from all applicable Governmental Authorities; the Company Shareholders shall continue to pay the legal fees relating to such matter and shall pay all fees and expenses (including attorneys’ fees) incurred in the event such matter becomes subject to litigation. The Company Shareholders shall keep Buyer apprised of the status of the matter set forth on Schedule 4.13, and shall not settle such matter without the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed. The Company Shareholders agree to be liable for any loss, claim or damage relating to actions taken prior to Closing on the parcel that is the subject of the matter described on Schedule 4.13.

4.14 Brokerage. Except as set forth in Schedule 4.14, there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any Contract made by or on behalf of the Company.

4.15 Governmental Authorizations and Permits. Schedule 4.15 contains a list of all written permits, licenses, variances, franchises, orders, approvals, waivers, consents, certificates, registrations and other authorizations of foreign, federal, provincial, state and local governments, governmental agencies, judicial authority or regulatory body or other similar rights owned, possessed, necessary, or used by the Company in the conduct of the Business that have been issued in writing to the Company or Company Shareholders (collectively, the “Governmental Authorizations”). Except as set forth on Schedule 4.15, no Governmental Authorizations are required to operate the Business as currently conducted.

4.16 Employees.

(a) Except as set forth on Schedule 4.16(a),

(i) to the Company’s Knowledge, no Transferred Employee has any plans to terminate his, her or its employment or relationship as an independent contractor with the Company. The Company has complied with all applicable laws relating to the employment of personnel and labor, including provisions thereof relating to wages, hours, vacation, overtime, notice, pay in lieu of notice, termination and severance pay, obligation, human rights, occupational health and safety, equal opportunity, collective bargaining and the payment of social security and other Taxes, the Worker Adjustment and Retraining Notification Act, and the Immigration Reform and Control Act of 1986, or any similar provisions of foreign, federal, state or local law with respect to the Business;

(ii) the Company is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, unfair labor practices claims or other material employee or labor disputes with respect to the Business. The Company has not engaged in any unfair labor practice with respect to the Business and there are no charges of unfair labor practices or other employee-related complaints pending or, to the Company’s Knowledge, threatened against the Company before the National Labor

Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor, or any other Governmental Authority;

(iii) the Company is not subject to any claim for wrongful dismissal, constructive dismissal or any other claim or complaint, actual or threatened, or any litigation, actual or threatened, relating to employment, discrimination or termination of employment of any employee or former employee of the Company, who is or was employed in connection with the Business;

(iv) neither the Company, nor to the Company’s Knowledge, any employee of the Company is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar Contract with a party other than the Company relating to, affecting or in conflict with the Business as presently conducted;

(v) within the sixty (60) days preceding the Closing Date, no Employees have ceased to be employed by the Company, whether by reason of termination or otherwise. There are no Employees currently receiving COBRA benefits or entitled to elect to receive COBRA benefits.

(b) Schedule 4.16(b) sets forth the names, present annual or, as the case may be, hourly rate of compensation (including salary, bonuses and commissions) of all persons employed on a full-time basis by the Company in connection with the Business (including independent contractors) together with their job title; provided such Schedule 4.16(b) does not include employees that are seasonal or otherwise not employed full-time.

(c) The Company has not made any promises or representations to any employee or Person concerning employment with the Company or Buyer following the Closing Date, and the Company has not informed any employee or other Person that such Person will receive any compensation as a result of the transactions contemplated by this Agreement or otherwise. The transactions contemplated by this Agreement will not result in any liability for severance pay to any employee of the Company or any other Person.

4.17 Employee Benefit Plans.

(a) Except as set forth on Schedule 4.17, with respect to current or former employees of the Company, independent contractors, or the spouses, beneficiaries or dependents thereof, the Company does not maintain and has not maintained, does not contribute to and has not contributed to, does not have and has not had any obligation to contribute to, and does not have and has not had any actual Liability or potential Liability with respect to any (i) deferred compensation or bonus or retirement plans or arrangements, (ii) qualified or nonqualified defined contribution or defined benefit plans or arrangements which are employee pension benefit plans (as defined in Section 3(2) of ERISA), (iii) employee welfare benefit plans (as defined in Section 3(1) of ERISA), stock option or stock purchase plans, or fringe benefit plans or programs whether in writing or oral and whether or not terminated, or (iv) employee benefit plan (as defined in Section 3(3) of ERISA) or other employee benefit plan, program or arrangement of any kind. The Company has never contributed to any multiemployer pension plan (as defined in

Section 3(37) of ERISA), and the Company has never maintained or contributed to any defined benefit plan (as defined in Section 3(35) of ERISA). The plans listed on Schedule 4.17 are referred to herein as the “Plans.”

(b) The employee pension benefit plans and employee welfare benefit plans (and related trusts and insurance contracts) listed on Schedule 4.17 comply in form and in operation in all respects with the requirements of applicable laws and regulations, including ERISA and the Code and the nondiscrimination rules thereof. The employee pension benefit plans which are intended to be “qualified plans” qualify under Section 401(a) of the Code, and each such employee pension benefit plan has received a favorable determination letter from the Internal Revenue Service as to the qualification under the Code of such plan. The Company and all members of the Controlled Group have complied with the requirements of COBRA.

(c) With respect to each employee pension benefit plan listed on Schedule 4.17, all contributions which are due (including all employer contributions and employee salary reduction contributions) have been paid to such employee pension benefit plan and, with respect to the employee welfare benefit plans, all premiums or other payments which are due have been timely paid.

(d) The Company has not, incurred any Liability to the Pension Benefit Guaranty Corporation, the Internal Revenue Service, any multiemployer plan or otherwise with respect to any employee pension benefit plan currently or previously maintained by members of the controlled group of corporations or trades or businesses (as defined in Section 414 of the Code) that includes or included the Company (the “Controlled Group”) that has not been satisfied in full, and no condition exists that presents a risk to the Company or any member of the Controlled Group of incurring such a Liability.

(e) With respect to each employee pension benefit plan and each employee welfare benefit plan listed on Schedule 4.17 no actions, investigations, suits or claims with respect to the assets thereof (other than routine claims for benefits) are pending or threatened, and the Company has no Knowledge of any facts which would give rise to or could reasonably be expected to give rise to any such actions, suits or claims.

(f) With respect to each of the Plans, the Company has furnished or made available to Buyer true and complete copies of (i) the plan documents, summary plan descriptions and summaries of material modifications and other material employee communications, (ii) the most recent determination letter received from the Internal Revenue Service, (iii) the Form 5500 Annual Report (including all schedules and other attachments for the most recent three years), (iv) all related trust agreements, insurance contracts or other funding agreements which implement such plans and (v) all Contracts relating to each such plan, including service provider agreements, insurance contracts, investment management agreements and recordkeeping agreements.

4.18 Insurance. The Company has the liability insurance listed on Schedule 4.18. Schedule 4.18 lists and briefly describes each insurance policy (including the type of coverage, insurer, premium paid, policy number, named insured and expiration date of each policy) maintained by or on behalf of the Company with respect to the Business and the

Purchased Assets, together with a claims history for the past three (3) years. All of such insurance policies are in full force and effect, and the Company is not in default with respect to its obligations under any such insurance policies. The Company has never been denied insurance coverage with respect to any aspect of the Business or any of the Purchased Assets. Except as set forth on Schedule 4.18, the Company does not have any self-insurance or co-insurance programs with respect to the Business and the Purchased Assets. Schedule 4.18 contains a summary of the Company’s loss experience under each policy since January 1, 2004. The Company has delivered to Buyer accurate and complete copies of all policies of insurance (and correspondence relating to coverage thereunder) that relate to the Business or the Purchased Assets to which the Company is a party or under which the Company is or has been covered at any time during the three (3)-year period ending on the Closing Date.

4.19 Affiliate Transactions. Except for the Company Shareholders’ rights as shareholders of the Company, the Transaction Documents, or as otherwise disclosed on Schedule 4.19, no officer, director, employee, stockholder, or Affiliate of the Company or any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person owns any beneficial interest (collectively, the “Insiders”), is a party to any agreement, Contract, commitment, promissory note, loan or any other actual or proposed transaction with the Company or the Business, or has any material interest in any of the Purchased Assets or other property used by the Company which is material to the operation of the Business.

4.20 Compliance with Laws. The Company and its officers, directors, agents and employees have complied in all material respects with all applicable laws, regulations and ordinances of foreign, federal, state and local governments and all agencies thereof which are applicable to the Business or any of the Purchased Assets, and no claims have been filed against the Company alleging a violation of any such laws or regulations, and the Company has not received written notice of any such violations. To the Company’s Knowledge, the Company is not in default under or in violation of any, and has complied with all, statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to the Company or to the Business or the Purchased Assets. To the Company’s Knowledge, there is no basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing. The Company has not received any written notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder.

4.21 Environmental Matters. Except as set forth on Schedule 4.21, with regard to the Business, the Purchased Assets and the Owned Real Property:

(a) The Company has complied with and is currently in compliance with all Environmental and Safety Requirements. The Company has no Liabilities, including corrective, investigatory or remedial obligations arising under Environmental and Safety Requirements and has not received any oral or written notice, report or information regarding any Liabilities, including corrective, investigatory or remedial obligations arising under Environmental and Safety Requirements which relate to the Owned Real Property, the Business or any of its properties or facilities or any of the Purchased Assets.

(b) Without limiting the generality of the foregoing, the Company has obtained and complied with, and is currently in compliance with, all Governmental Authorizations that may be required pursuant to any Environmental and Safety Requirements for the occupancy of its properties or facilities or the operation of the Business. A list of all such Governmental Authorizations which are material to the Company is set forth on Schedule 4.21.

(c) Neither this Agreement or the other Transaction Documents nor the consummation of the transactions contemplated hereby and thereby shall impose any Liabilities on the Company with respect to the Business, Buyer or otherwise for site investigation or cleanup, or notification to or consent of any government agencies or third parties under any Environmental and Safety Requirements (including any so called “transaction-triggered” or “responsible property transfer” laws and regulations).

(d) None of the following exists at any property or facility owned, occupied or operated by the Company with respect to the Business in violation of Environmental and Safety Requirements: (i) underground storage tanks or surface impoundments; (ii) asbestos-containing material in any form or condition; or (iii) materials or equipment containing polychlorinated biphenyls.

(e) The Company has not treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or Released any Hazardous Substance in violation of Environmental and Safety Requirements, or owned, occupied or operated any facility or property (and no such facility or property is contaminated with any such substance), so as to give rise to Liabilities of the Company with respect to the Business pursuant to CERCLA or any other Environmental and Safety Requirements.

(f) Without limiting the generality of the foregoing, no facts, events or conditions relating to the past or present properties, facilities or operations of the Company shall prevent, hinder or limit continued compliance with Environmental and Safety Requirements, give rise to any corrective, investigatory or remedial obligations pursuant to Environmental and Safety Requirements or give rise to any other Liabilities pursuant to Environmental and Safety Requirements, including those Liabilities relating to onsite or offsite Releases or threatened Releases of hazardous materials, substances or wastes (including any Hazardous Substance), personal injury, property damage or natural resources damage.

(g) The Company has not, either expressly or by operation of law, assumed, undertaken or otherwise become subject to any Liability with respect to the Business, including any corrective, investigatory or remedial obligation, of any other Person relating to any Environmental and Safety Requirements.

(h) No Environmental Lien has attached to any property owned, leased or operated by the Company with respect to the Business.

(i) The Company has furnished or made available to Buyer all Governmental Authorizations, environmental audits, reports, correspondence, notices, studies, filings with any Governmental Authority and other material environmental documents (including, but not limited to, any site assessment or environmental, health or safety audit report, and including a listing of

all Hazardous Substances utilized in connection with the Business) relating to the Company and the Business which are in the Company’s possession or under its reasonable control.

4.22 Product Recall. Since January 1, 2004, the Company has not, with respect to the Business, made any formal recall of any of its products.

4.23 Customers and Suppliers. Schedule 4.23 sets forth a list of each supplier that has previously supplied a material amount of materials, products or services to the Business together with the aggregate amount paid to such supplier from the Company during the fiscal year ended December 31, 2006. Except as set forth on Schedule 1.1 with respect to customers, and Schedule 4.23 with respect to suppliers, since December 31, 2006, no customer or supplier listed on such schedules has notified or, to the Company’s Knowledge, threatened the Company that it intends to cease doing business with, or to materially reduce or terminate its commitments or level of business during calendar year 2007 with, the Business.

4.24 Books and Records. The books of account and other financial records of the Company, all of which have been made available to Buyer, are, to the Knowledge of the Company, complete and correct and represent actual, bona fide transactions and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of the Company, all of which have been made available to Buyer, contain accurate and complete records of all meetings held of, and corporate action taken by, the shareholders, the board of directors and committees of the board of directors of the Company, and no meeting of any such shareholders, board of directors or committee has been held for which minutes have not been prepared or are not contained in such minute books.

4.25 Disclosure. No representation or warranty in this Agreement, as qualified by the schedules hereto, contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty, in light of the circumstances in which it was made, not misleading.

4.26 Limitation on Company and Company Shareholders’ Representations and Warranties.

BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN ARTICLE IV, (I) THE PURCHASE OF THE PURCHASED ASSETS SHALL BE ON AN “AS IS”, “WHERE IS”, “WITH ALL FAULTS BASIS”, SUBJECT TO REASONABLE WEAR AND TEAR FROM THE CLOSING DATE, AND (II) NEITHER THE COMPANY NOR ANY OF ITS SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS, CONSULTANTS, AGENTS OR REPRESENTATIVES, NOR ANY PERSON PURPORTING TO REPRESENT ANY OF THE FOREGOING, HAVE MADE ANY REPRESENTATION, WARRANTY, GUARANTY, PROMISE, PROJECTION OR PREDICTION WHATSOEVER WITH RESPECT TO THE ASSETS OR ANY ASPECT THEREOF, WRITTEN OR ORAL, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BUYER ACKNOWLEDGES AND AGREES THAT BUYER IS

NOT RELYING ON ANY STATEMENT MADE OR INFORMATION PROVIDED TO BUYER BY THE COMPANY OR ANY OF ITS SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS, CONSULTANTS, AGENTS OR REPRESENTATIVES, OR ANY PERSON PURPORTING TO REPRESENT ANY OF THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE COMPANY AND THE COMPANY SHAREHOLDERS IN THE ABOVE ARTICLE IV OF THIS AGREEMENT.

4.27 Disclosure. The Company may amend and supplement the representations in Article IV and the related schedules to this Agreement from time to time prior to Closing by providing a written copy of such amendment or supplement to Buyer; provided, however, that it will remain a condition of Buyer’s obligations hereunder that the representations and warranties as stated herein, as qualified by the related schedules, and as amended or supplemented shall remain true and correct as of the Closing Date; and provided further, that no representation or warranty by any of the Company or Company Shareholders in this Agreement, as qualified by the schedules hereto, contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty, in light of the circumstances in which it was made, not misleading.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER

As a material inducement to the Company to enter into this Agreement, Buyer hereby represents and warrants to the Company that:

5.1 Organization and Corporate Power. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is a party and perform its obligations hereunder and thereunder.

5.2 Authorization of Transactions. The execution, delivery and performance of this Agreement and the other Transaction Documents to which Buyer is a party have been duly and validly authorized by all requisite corporate action on the part of Buyer, and no other corporate proceedings on its part are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement constitutes, and each of the other Transaction Documents to which Buyer is a party shall, when executed, constitute, a valid and binding obligation of Buyer, enforceable in accordance with their terms.

5.3 No Violation. Buyer is not subject to or obligated under its certificate of incorporation, its by-laws, any applicable law, or rule or regulation of any Governmental Authority, or any agreement or instrument, or any license, franchise or permit, or subject to any order, writ, injunction or decree, which would be breached or violated by its execution, delivery or performance of this Agreement and the other Transaction Documents to which Buyer is a party.

5.4 Governmental Authorities and Consents. Buyer is not required to submit any notice, report or other filing with any Governmental Authority in connection with the execution

or delivery by it of this Agreement and the other Transaction Documents to which Buyer is a party or the consummation of the transactions contemplated hereby or thereby. No consent, approval or authorization of any Governmental Authority or any other party or person is required to be obtained by Buyer in connection with its execution, delivery and performance of this Agreement and the other Transaction Documents to which Buyer is a party or the transactions contemplated hereby or thereby.

5.5 Brokerage. There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Buyer.

5.6 Disclosure. No representation or warranty in this Agreement, as qualified by the schedules hereto, contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty, in light of the circumstances in which it was made, not misleading.

ARTICLE 6
INDEMNIFICATION AND RELATED MATTERS

6.1 Survival.

(a) Survival of Representations, Warranties, Covenants and Agreements. All representations, warranties, covenants and agreements set forth in this Agreement shall survive the Closing Date. Notwithstanding the foregoing, no Party shall be entitled to recover for any Loss pursuant to Section 6.2(a)(i) or Section 6.2(b)(i) unless written notice of a claim thereof is delivered to the other Party prior to the Applicable Limitation Date. For purposes of this Agreement, the term “Applicable Limitation Date” means the twenty-four (24)-month anniversary of the Closing Date; provided that the Applicable Limitation Date with respect to the following Losses shall be as follows:

(i) with respect to any Loss arising from or related to a breach of the representations and warranties of the Company and each of the Company Shareholders set forth in Section 4.10 (Taxes), the Applicable Limitation Date shall be the thirtieth (30th) day after expiration of the statute of limitations (including any extensions thereto to the extent that such statute of limitations may be tolled) applicable to the Tax which gave rise to such Loss;

(ii) with respect to any Loss arising from or related to a breach of the representations and warranties of the Company and each of the Company Shareholders set forth in Section 4.17 (Employee Benefit Plans) and Section 4.21 (Environmental Matters), the Applicable Limitation Date shall be the fifth (5th) anniversary of the Closing Date;

(iii) with respect to any Loss arising from or related to a breach of the representations and warranties of the Company set forth in Section 4.1 (Organization and Corporate Power), Section 4.2 (Authorization of Transactions), Section 4.3 (Absence of Conflicts) and Section 4.7 (Title to Properties), the Applicable Limitation Date shall be the seventh (7th) anniversary of the Closing Date.

(b) Special Rule For Fraud. Notwithstanding anything in this Section 6.1 to the contrary, in the event of any breach of a representation or warranty by a party hereto that constitutes actual fraud, the representation or warranty shall survive consummation of the transactions contemplated in this Agreement and continue in full force and effect without any time limitation.

(c) Risk Allocation. The representations, warranties, covenants and agreements made herein, together with the indemnification provisions herein, are intended among other things to allocate the economic cost and the risks inherent in the transactions contemplated hereby between the Parties hereto and, accordingly, a Party shall be entitled to the indemnification or other remedies provided in this Agreement by reason of any breach of any such representation, warranty, covenant or agreement by another party hereto notwithstanding whether any employee, representative or agent of the Party seeking to enforce a remedy knew or had reason to know of such breach, unless such representation, warranty, covenant or agreement is qualified to “Knowledge”.

6.2 Indemnification.

(a) Company and Company Shareholder Indemnification. The Company and each of the Company Shareholders shall, jointly and severally, indemnify Buyer and its officers, directors, employees, agents, representatives, Affiliates, successors and permitted assigns (collectively, the “Buyer Parties”) and hold each of them harmless from and against and pay on behalf of or reimburse such Buyer Parties in respect of any loss (excluding diminution in value), Liability, demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine or expense, whether or not arising out of third party claims (including interest, penalties, reasonable attorneys’ fees and expenses, court costs and all amounts paid in investigation, defense or settlement of any of the foregoing) (collectively, “Losses” and each individually, a “Loss”) which any such Buyer Party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of:

(i) the breach of any representation or warranty made by the Company and each of the Company Shareholders contained in this Agreement, as qualified by the Schedules attached hereto;

(ii) the breach of any covenant or agreement made by the Company or any of the Company Shareholders contained in this Agreement;

(iii) except as disclosed on the Schedules attached hereto, any claim for payment of fees and/or expenses as a broker or finder in connection with the origin, negotiation or execution of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby based upon any alleged agreement, arrangement or understanding between the claimant and the Company or any of their agents or representatives;

(iv) any Excluded Liability; or

(v) any Liability arising out of the matter described in Schedule 4.13.

(b) Buyer’s Indemnification. Buyer shall indemnify the Company and its officers, shareholders, directors, employees, agents, representatives, Affiliates, successors and permitted assigns (collectively, the “the Company Parties”) and hold each of them harmless from and against and pay on behalf of or reimburse the Company Parties in respect of any Loss which any such Company Party may suffer, sustain or become subject to, as the result of, in connection with, relating or incidental to or by virtue of:

(i) the breach of any representation or warranty made by Buyer contained in this Agreement;

(ii) the breach of any covenant or agreement made by Buyer contained in this Agreement;

(iii) except as disclosed on the Schedules attached hereto, any claim for payment of fees and/or expenses as a broker or finder in connection with the origin, negotiation or execution of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby based upon any alleged agreement, arrangement or understanding between the claimant and Buyer or any of its agents or representatives;

(iv) any Liability arising out of the ownership or operation of the Business or Purchased Assets after the Closing Date other than Excluded Liabilities; or

(v) any Assumed Liability.

(c) Limitations on Indemnity. The indemnification provided for in subsections (a) and (b) above is subject to the following limitations:

(i) No party hereto will be liable hereunder with respect to claims referred to in subsection (a)(i) or subsection (b)(i) above unless a Party gives written notice thereof within the Applicable Limitation Date. Notwithstanding any implication to the contrary contained in this Agreement, so long as a Party delivers written notice of a claim no later than the Applicable Limitation Date, the other Parties hereto shall be required to indemnify hereunder for all Losses which such Parties may incur (subject to the Deductible and Cap, if applicable) in respect of the matters which are the subject of such claim, regardless of when incurred.

(ii) The Company and each of the Company Shareholders shall not be liable to Buyer Parties, and Buyer shall not be liable to the Company Parties, for any Loss arising under Section 6.2(a)(i) or Section 6.2(b)(i) unless, and only to the extent, the aggregate amount of all such Losses exceeds $150,000.00 (the “Deductible”), in which case such party(ies) shall be liable for all such Losses in excess of the Deductible, but not the initial $150,000.00; provided that the Company’s and each of the Company Shareholder’s aggregate liability rising under Section 6.2(a)(i) or Buyer’s aggregate liability under Section 6.2(b)(i) shall in no event exceed $2,000,000.00, respectively (the “Cap”); provided further that the foregoing limitations (i.e., the Deductible and the Cap) shall not apply with respect to any Loss arising from or related to a breach of:

(A) the covenants of the Company or each of the Company Shareholders in Section 7.6 (Non-Competition; Non-Solicitation and Confidentiality) or any of the matters referred to in Sections 6.2(a)(iii) and 6.2(a)(iv) above or

(B) the representations and warranties of the Company and each of the Company Shareholders set forth in Section 4.1 (Organization and Corporate Power), Section 4.2 (Authorization of Transactions), Section 4.3 (Absence of Conflicts), Section 4.7 (Title to Properties), Section 4.10 (Taxes), or Section 4.21 (Environmental Matters).

(iii) To the extent any claim for indemnification by any Buyer Party is covered by applicable insurance, Buyer agrees that it must first use commercially reasonable efforts to seek recovery from such insurance and the indemnification claim shall be reduced to the extent of any such insurance proceeds actually paid to Buyer.

(d) Procedure. If a party hereto seeks indemnification under this Article 6 (the “Indemnified Party”) with respect to any claim, demand, action, proceeding or other matter pursuant to this Agreement or arising out of the transactions contemplated hereby (the “Claim”), the Indemnified Party shall give written notice to the other party(ies) (the “Indemnifying Party”) after receiving written notice of or discovering facts giving rise to the Claim (a “Notice of Claim”), which Notice of Claim shall contain the following information to the extent it is reasonably available to the Indemnified Party: (i) an estimate of the amount then reasonably ascertainable of the alleged loss, expense or liability against which the Indemnified Party is indemnified; (ii) a description, in reasonable detail, of the circumstances giving rise to the alleged loss, expense, or liability; and (iii) a statement identifying each party against whom a Claim is asserted; provided that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its or his obligations hereunder except to the extent the Indemnifying Party is materially prejudiced by such failure. If the Indemnifying Party notifies the Indemnified Party within thirty (30) days after receiving the Notice of Claim that it will assume the defense thereof:

(i) the Indemnifying Party shall defend the Indemnified Party against the matter with counsel of the Indemnifying Party’s choice reasonably satisfactory to the Indemnified Party;

(ii) the Indemnified Party may retain separate counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate counsel to the extent the Indemnifying Party reasonably concludes based upon advice of counsel that a conflict of interest exists between the Indemnified Party and Indemnifying Party based on the existence of one or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or available to the Indemnifying Party, but the assertion of which would be adverse to the interest of the Indemnified Party);

(iii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the matter without the written consent of the Indemnifying Party (not to be withheld unreasonably); and

(iv) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement which does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the written consent of the Indemnified Party (not to be withheld unreasonably).

If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days that it will assume the defense thereof, then the Indemnified Party may defend against, or enter into any settlement with respect to, the matter in any manner it reasonably may deemed appropriate, without prejudice to any of its rights hereunder. The Indemnified Party and the Indemnifying Party shall each use commercially reasonable efforts to cooperate with the other such Party in connection with the defense of third-party Claims.

(e) Payments. The Indemnifying Party shall pay the Indemnified Party in immediately available funds for any actual Loss that has occurred promptly after the Indemnified Party provides the Indemnifying Party with written notice of a claim hereunder and such parties reasonably agree that there is a reasonable basis for such claim.

(f) Right of Setoff. Subject to Section 2.10, which includes the process under which Buyer may request funds from the Escrow, Buyer shall have the right to obtain any amount Buyer is entitled to receive from the Company or any Company Shareholder under this Article 6 from the Escrow or any other amounts otherwise payable by Buyer to the Company or any Company Shareholder under this Agreement.

(g) Purchase Price Adjustments. Amounts paid to or on behalf of the Company or Buyer as indemnification shall be treated as adjustments to the Purchase Price.

(h) Maximum Contribution. If and to the extent any provision of this Article 6 is unenforceable for any reason, the Indemnifying Party hereby agrees to make the maximum contribution to the payment and satisfaction of any Loss for which indemnification is provided for in this Section 6.2 which is permissible under applicable legal requirements.

(i) Exclusive Remedy. The provisions of this Section 6.2 shall be the Parties’ exclusive remedy to recover monetary damages pursuant to this Agreement; provided, however, that the foregoing shall not in any way diminish any Party’s right to maintain or recover (i) any Working Capital Adjustment, (ii) any other amounts in connection with any action or claim based on fraud or willful misrepresentation, (iii) any remedy under Section 7.6, or (iv) any other remedy of specific performance otherwise available to any party hereunder or under applicable laws.

ARTICLE 7
ADDITIONAL AGREEMENTS

7.1 Tax Matters.

(a) Transfer Taxes. All transfer, documentary, use, stamp, registration, sales and other such Taxes and fees (including any penalties and interest thereon) incurred in connection with this Agreement shall be paid by the Company when due, and the Company shall, at its own

expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, use, stamp, registration, sales and other Taxes and fees, and if required by applicable law, Buyer shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

(b) Allocation. Buyer and the Company shall jointly allocate the Purchase Price in accordance with Section 1060 of the Code (the “Allocation”) among the Purchased Assets using the methodology and allocation amounts set forth on the Schedule 7.1(b) attached hereto. The allocation will be generally consistent with the Letter of Intent. Fixed assets will be valued at their appraised values, inventory will be valued at fair market value (which is assumed to approximate the current cost, not the LIFO value), and any excess Purchase Price allocation will be applied to goodwill. For purposes of the Allocation, the Purchase Price shall include Assumed Liabilities for U.S. federal income Tax purposes. To the extent that the Purchase Price is adjusted after the Closing Date pursuant to Section 2.7, Buyer and the Company agree to revise and amend the Allocation in accordance with the character of each such adjustment, consistent with the methodology set forth on Schedule 7.1(b). The Company and Buyer agree to prepare and file an IRS Form 8594 or such other form or statement as may be required by applicable law, rule or regulation, and any comparable state or local income tax form, in a manner consistent with the Allocation. The Company and Buyer shall adhere to the Allocation for all Tax-related purposes including any federal, foreign, state, county or local income and franchise Tax Return filed by them after the Closing Date, including the determination by the Company of taxable gain or loss on the sale of the Purchased Assets and the determination by Buyer of its tax basis with respect to the Purchased Assets. Neither Buyer nor the Company shall file any Tax Returns or, in a judicial or administrative proceeding, assert or maintain any Tax reporting position that is inconsistent with this Agreement or the Allocation agreed to in accordance with this Agreement, unless required to do so by applicable law.

(c) The Parties hereto agree that the Purchase Price and the Assumed Liabilities will be allocated to the Purchased Assets for all purposes (including Tax and financial accounting purposes) in a manner consistent with the fair market values as reasonably determined and described above in Section 7.1(b) by Buyer and the Company prior to Closing. The Company and Buyer will file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with such values and allocation.

(d) Cooperation on Tax Matters. Buyer and the Company shall cooperate fully, as and to the extent reasonably requested by any Party, in connection with the filing of Tax Returns for the Business and any audit, litigation or other proceeding with respect to Taxes for the Business. Such cooperation shall include the retention and (upon any Party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company agrees (i) to retain all books and records with respect to Tax matters and pertinent to the Business relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer, any extensions thereof) for the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give Buyer reasonable written notice prior to transferring, destroying

or discarding any such books and records and, if Buyer so requests, the Company shall allow Buyer to take possession of such books and records.

7.2 Press Releases and Announcements. Prior to the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers or suppliers of the Company shall be issued by the Company, the Company Shareholders or Buyer without the approval of all Parties, except as required by law or regulation (in which case the disclosure shall be prepared jointly by the Company and Buyer). After the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers or suppliers of the Company shall be issued by the Company or the Company Shareholders without the approval of Buyer, except as required by law or regulation (in which case the disclosure shall be prepared jointly by the Company and Buyer).

7.3 Further Transfers. The Company shall execute and deliver such further instruments of conveyance and transfer and take such additional action as Buyer may reasonably request (provided the Company incurs no out-of-pocket costs in taking such actions) to effect, consummate, confirm or evidence the transfer to Buyer of the Purchased Assets and any other transactions contemplated hereby. The Company will execute such documents as may be necessary to assist Buyer in preserving or perfecting its rights in the Purchased Assets. Buyer will execute and deliver such further instruments and take such additional actions as the Company may reasonably request to effect, consummate, confirm or evidence the assumption by Buyer of the Assumed Liabilities and any other transactions contemplated hereby.

7.4 Specific Performance. Each of the Company and the Company Shareholders acknowledges that the Business is unique and recognizes and affirms that in the event of a breach of this Agreement by the Company or any Company Shareholder, money damages may be inadequate and Buyer may have no adequate remedy at law. Accordingly, each of the Company and the Company Shareholders agrees that Buyer shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the obligations of the Company and each of the Company Shareholders hereunder not only by an action or actions for damages but also by an action or actions for specific performance, injunctive and/or other equitable relief. If any such action is brought by Buyer to enforce this Agreement, each of the Company and the Company Shareholders hereby waives the defense that there is an adequate remedy at law.

7.5 Expenses. Except as otherwise provided herein, each Party shall pay all of its, his or her own fees, costs and expenses (including fees, costs and expenses of legal counsel, investment bankers, accountants, brokers or other representatives and consultants and appraisal fees, costs and expenses) incurred in connection with the negotiation of the Letter of Intent, this Agreement, the other Transaction Documents, the performance of its, his or her obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby.

7.6 Non-Competition; Non-Solicitation and Confidentiality.

(a) Non-competition. The Company and each of the Company Shareholders (the “Restricted Parties”) covenants and agrees, in further consideration of the Purchase Price and

other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), that during the period beginning on the Closing Date and ending on the five (5)-year anniversary of the Closing Date (the “Non-Compete Period”), such party will not, and will cause its Affiliates not to, directly or indirectly, own any interest in, operate, manage, join, control, finance, participate in the ownership, management, operation or control of, or be paid or employed by, or acquire any securities of, or otherwise become associated with or provide assistance to, as an employee, consultant, director, officer, shareholder, partner, member, agent, associate, principal, creditor, representative or in any other capacity, any sole proprietorship or business entity engaged either directly or indirectly in the sourcing, manufacture, distribution and/or sale of vegetables and berries, including farming, harvesting, packaging and selling (each and collectively, a “Competitive Business”) in the United States and each, state, territory, county, city or other political subdivision of the United States (the “Restricted Territory”), except as contemplated by the Employment Agreement or the Ground Lease. Notwithstanding the foregoing, each of the Restricted Parties shall not be prohibited from being a passive owner of not more than two percent (2%) of the outstanding shares of any publicly-held Competitive Business that has shares listed for trading on a securities exchange registered with the Securities and Exchange Commission or through an automated quotation system of a registered securities association so long as such Person does not have active participation in the business of such Competitive Business.

(b) Non-Solicitation. Each of the Restricted Parties agrees that, without the prior written consent of Buyer, during the five (5)-year period beginning on the Closing Date, such Restricted Party shall not, directly or indirectly, contact, approach or solicit for the purpose of offering employment (whether as an employee, consultant, agent, independent contractor or otherwise) or actually hire any person employed by Buyer at any time after the Closing Date. Each of the Restricted Parties agrees that it shall not take any action that would reasonably be expected to interfere with or damage Buyer’s business relationships with its employees, customers, suppliers, distributors, brokers or other material business relations.

(c) Confidentiality. Each of the Restricted Parties shall treat and hold as confidential any information concerning the Business or the Purchased Assets that is not generally available to the public (the “Confidential Information”), refrain from using any of the Confidential Information except in connection with this Agreement and the other Transaction Documents, and deliver promptly to Buyer, at the request and option of Buyer, all tangible embodiments (and all copies) of the Confidential Information which are in its possession or under its control. In the event that any of the Restricted Parties is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Party shall notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 7.6(c). If, in the absence of a protective order or the receipt of a waiver hereunder, any of the Restricted Parties is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, such Party may disclose the Confidential Information to the tribunal; provided that such disclosing Party shall use reasonable efforts to obtain, at the request and expense of Buyer, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as Buyer shall designate.

(d) Remedy for Breach. Each Party acknowledges and agrees that in the event of a breach of any of the provisions of this Section 7.6, monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach, each Party and/or its respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages.

(e) Enforcement. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 7.6 is invalid or unenforceable, each of the Company, the Company Shareholders and Buyer agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. Without limiting the generality of the foregoing, if a court of competent jurisdiction determines that:

(i) The geographic scope is unenforceable under applicable law because it is too broad, the Restricted Territory shall be amended by eliminating geographical areas and states from the following list until the Restricted Territory is determined to be reasonable: Arizona, Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, District of Columbia, West Virginia, Wisconsin, Wyoming, Washington, Whatcom County, Washington and Lynden, Washington. The parties acknowledge and agree that if any of the geographic areas or States listed above are required by law to be eliminated, it would be fair and appropriate to do so in the inverse order of the volume of revenue received or projected to be received by the Company from such area or State at the time of determination.

(ii) The time period for the restriction is unenforceable because it is too long, the time period shall be for the longest of the following periods that the court determines is reasonable under the circumstances: 4 years, 3 years, 2 years, 1 year, 11 months, 10 months, 9 months, 8 months, 7 months, or 6 months after the Closing Date.

(f) Acknowledgment. The Company and each of the Company Shareholders acknowledges and agrees that (i) the restrictions contained in this Section 7.6 are reasonable in all respects (including with respect to subject matter, time period and geographical area) and are necessary to protect Buyer’s interest in, and value of, the Business (including the goodwill inherent therein), (ii) the Company is primarily responsible for the creation of such value, and (iii) Buyer would not have consummated the transactions contemplated hereby without the restrictions contained in this Section 7.6.

7.7 Employee and Employee Benefit Matters

(a) Effective as of the Closing Date, Buyer shall offer employment to the employees of the Company who are actively employed by the Company as of the Closing Date and other employees of the Company that are listed on Schedule 4.16(b), except Lyle Rader and Sue Rader, (collectively, the “Employees”) on such terms and conditions as are acceptable to Buyer in its sole discretion. All Employees who, on or immediately after the Closing Date, accept any offer of employment from Buyer and become employees of Buyer shall be referred to herein as the “Transferred Employees”.

(b) Buyer agrees that, at the Closing Date, it shall provide benefits similar to those currently provided by the Company to the Transferred Employees (including vacation, sick time, health and insurance benefits) and Buyer shall assume, be responsible for, perform and pay for such benefits for the Transferred Employees; provided, however, that such benefits shall not include any retirement benefits, including but not limited to any Simple IRA plans previously maintained by the Company. Buyer reserves the right to transition Transferred Employees to alternative benefit plans at any time in its sole discretion.

(c) Buyer shall assume all Liability for providing and administering all required notices and benefits under COBRA to Transferred Employees. The Company shall retain all Liability for providing and administering all required notices and benefits under COBRA to all Employees other than Transferred Employees and to any “M&A qualified beneficiaries” as defined under Treasury Regulation Section 54.4980B-9.

(d) Without limiting the generality of the Excluded Liabilities, the Company agrees that it shall retain, be responsible for, perform and pay:

(i) all Liabilities (including, but not limited to, any claim of any governmental agency, any trustee, any fiduciary, any plan administrator, any person dealing with any Plan, any employee or any beneficiary and without regard to whether such Liability arises prior to or after the Closing Date or results from an event, prior to or after the Closing Date) which relate to (A) any program, plan, policy or arrangement (whether or not terminated) (w) which is or has been maintained, established, or offered by the Company, (x) to which the Company contributes or has contributed, (y) to which the Company has or has had any obligation to contribute, or (z) to which the Company has or has had any Liability or potential Liability including, but not limited to, any Plan; all Liabilities relating to any such program, plan, policy, or Plan, which may result as a violation of law or any Liability, including any potential or actual Liability, relating to any failure to comply with the requirements of law;

(ii) duties and Liabilities relating to any claims by current or former employees or independent contractors (including dependents, spouses and other beneficiaries thereof) of the Company or its Subsidiaries (or any predecessors) for: (A) medical costs and expenses incurred as a result of claims, injuries, facts or conditions suffered on or prior to the Closing Date including any claims, costs or expenses relating to or arising under any Plan (including any claims, costs or expenses related to continuation coverage provided to any former employee or dependent thereof as of or

prior to the Closing Date), and (B) costs, expenses and other Liabilities under any workers’ compensation laws, regulations, requirements or programs to the extent related to any claim arising from or alleged to arise from or in connection with any fact, event, claim, injury or condition occurring on or prior to the Closing Date;

(iii) duties, contributions and Liabilities relating to any claims for notice, pay in lieu of notice, severance pay, vacation pay, bonus, commissions, overtime pay, death, disability or other health or welfare or fringe benefits, including any benefit offered or available under any Plan, payable as a result of facts, actions or conditions occurring on or prior to the Closing Date or which are provided to any Person who is not an active employee (or a dependent thereof) of the Company on or immediately prior to the Closing Date; and

(iv) contributions, premiums, duties and Liabilities relating to the Company’s obligation to contribute to any Plan with respect to the operation of the Company’s business on or prior to the Closing Date (regardless of when any such contribution is required to be made).

7.8 Insurance. The Parties acknowledge that insurance coverage applicable to the Business for periods prior to Closing is maintained by the Company and, except as otherwise set forth herein, the insurance policies governing such Business are not being transferred to Buyer at Closing (the policies for the benefit of the Business but not being transferred to Buyer, the “Retained Policies”). The Company covenants and agrees that (i) it shall maintain, without amendment or modification, the Retained Policies (or if such policies are terminated, substantially equivalent policies that come into effect immediately upon such termination) for the benefit of the Business, with respect to occurrences prior to the Closing Date, regardless of whether claims are brought prior to or after the Closing Date; (ii) prior to Closing, the Company shall give notice to the insurers under the Retained Policies and other policies of each claim then pending or threatened with respect to any of the Purchased Assets or the Business which they reasonably expect to exceed 50% of the applicable deductible or other loss retention feature of the Retained Policies; (iii) Buyer will, with respect to the Purchased Assets and the Business, be provided full coverage under the Retained Policies after the Closing (subject only to deductibles, self-insured retentions and policy limits thereof set forth on Schedule 4.18), with respect to occurrences prior to the Closing, regardless of whether claims are brought prior to or after the Closing; (iv) after Closing, Buyer will have the right to bring claims (whenever brought) as a direct insured party under the Retained Policies for all occurrences that relate to actions, events, conditions and/or operations of the Purchased Assets and the Business prior to and on the Closing Date within the scope of the Retained Policies; and (v) the Company shall cause Buyer to be an “additional named insured” under each Retained Policy and shall ensure that Buyer will, in such capacity, have the same coverage under such insurance after the Closing as existed for the Purchased Assets and the Business prior to Closing. The Company will be responsible for satisfying any deductibles, self-insured portions, retentions and other retained amounts on insurance coverage with respect to losses arising under claims made under the Retained Policies.

7.9 Transition Services. The Company shall not in any manner take any action which is designed, intended or might reasonably be anticipated to have the effect of discouraging customers, suppliers, vendors, service providers, employees, lessors, licensors and other business

relations from maintaining the same business relationships with the Business after the date of this Agreement. The Company shall refer all customer inquiries relating to the Business to Buyer from and after the Closing Date.

7.10 Discharge of Liabilities. The Company shall pay and perform all of the Excluded Liabilities (including Indebtedness incurred by the Company in connection with the operation of the Business outstanding as of the Closing Date) in a timely manner and so as to prevent claims by third parties against the Buyer Parties.

7.11 Use of Names. The Company shall, on or before June 1, 2007, change its name to a name that does not include the words “Rader Farms”, or any name confusingly similar to any of the foregoing. For the avoidance of doubt, as between Buyer and its Affiliates, on the one hand, and the Company and its Affiliates, on the other hand, Buyer and its Affiliates shall have the exclusive right to use such names from and after June 1, 2007 (it being understood and agreed that such names are included as Purchased Assets). The Company Shareholders hereby covenant and agree to consent to such name change.

7.12 Right to Berries. When available, Buyer shall provide Company Shareholders with berries produced by the Business free of charge, which berries shall be made available for pick up by Company Shareholders in reasonable amounts at such reasonable times and place(s) as Buyer shall designate. The amount of such berries provided to Company Shareholders shall not exceed a reasonable amount for personal consumption by Company Shareholders and shall not be re-sold.

ARTICLE 8
MISCELLANEOUS

8.1 Amendment and Waiver. This Agreement may be amended and any provision of this Agreement may be waived, provided that any such amendment or waiver shall be binding upon a Party only if such amendment or waiver is set forth in a writing executed by such Party. No course of dealing between or among any persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Party under or by reason of this Agreement.

8.2 Notices. All notices, demands and other communications given or delivered under this Agreement shall be in writing and shall be deemed to have been given when personally delivered, mailed by first class mail, return receipt requested, or delivered by express courier service or by facsimile, if a facsimile number is provided below (with hard copy to follow). Notices, demands and communications to the Company and the Company Shareholders and Buyer shall, unless another address is specified in writing, be sent to the address or fax number indicated below:

Notices to the Company and the Company Shareholders:	with a copy to:

Lyle Rader 8629 Benson Road Lynden, WA 98246	Hillis Clark Martin & Peterson, P.S. 1221 Second Avenue, Suite 500 Seattle, WA 98101 Attn: Gabriel S. Rosenthal Fax: (206) 623-7789
Notices to Buyer:	with a copy to:

Rader Farms Acquisition Corp. 5050 N. 40th Street, Suite 300 Phoenix, AZ 85018 Attention: Steve Weinberger Fax: (602) 522-2690	Osborn Maledon, PA 2929 N. Central Ave., 21st Floor Phoenix, AZ 85012 Attention: Christopher S. Stachowiak Fax: (602) 664-2055

8.3 Binding Agreement; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns; provided that neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by the any Party hereto without the prior written consent of all other Parties.

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

8.5 Construction. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires. The word “including” shall mean including without limitation. Nothing in the schedules hereto shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. In addition, each of the Parties acknowledges and agrees that any Purchase Price adjustment as a result of the application of Section 2.7 does not prejudice or limit in any respect whatsoever any Party’s rights to indemnification under any other provision of this Agreement.

8.6 Captions and Headings. The captions used in this Agreement are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no caption had been used in this Agreement.

8.7 Entire Agreement. The schedules identified in this Agreement are incorporated herein by reference. This Agreement and the documents referred to herein contain the entire agreement between the Parties and supersede any prior understandings, agreements or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way, including the Letter of Intent.

8.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.

8.9 Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Arizona, without giving effect to any choice of law or conflict of law provision (whether of the State of Arizona or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Arizona.

8.10 Parties in Interest. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Parties and their respective successors and assigns any rights or remedies under or by virtue of this Agreement.

8.11 CONSENT TO JURISDICTION. THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS AGREEMENT SHALL PROPERLY (BUT NOT EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN PHOENIX, ARIZONA. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.

8.12 Delivery by Facsimile or Electronic Transmission. This Agreement and any Transaction Document, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or electronic transmission, shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person. At the request of any Party hereto or to any such contract, each other Party hereto or thereto shall re-execute original forms thereof and deliver them to all other Parties. No Party hereto or to any such contract shall raise the use of a facsimile machine or electronic transmission to deliver a signature or the fact that any signature or contract was transmitted or communicated through the use of facsimile machine or electronic transmission as a defense to the formation of a contract and each such Party forever waives any such defense.

8.13 Attorneys’ Fees. In the event of a dispute regarding the interpretation or enforcement of this Agreement, the prevailing party in such dispute shall be entitled to recover its reasonable attorneys’ fees and costs incurred in connection therewith, including but not limited to fees and costs of trial and in appeal.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase Agreement as of the date first written above.

	THE COMPANY:

	RADER FARMS, INC.


	By:	/s/ Lyle Rader
	Name:	Lyle Rader
	Its:	President


	COMPANY SHAREHOLDERS:


	/s/ Lyle Rader
	Lyle Rader


	/s/ Sue Rader
	Sue Rader


	BUYER:

	RADER FARMS ACQUISITION CORP.


	By:	/s/ Steve Weinberger
	Name:	Steve Weinberger
	Its:	Secretary and Treasurer

Signature Page to Asset Purchase Agreement

EX-10.2 3 a07-18752_1ex10d2.htm EX-10.2

EXHIBIT 10.2

AGRICULTURAL GROUND LEASE

THIS AGRICULTURAL GROUND LEASE (“Lease”) is made and entered into as of May 17, 2007 (the “Effective Date”) by and between Lyle Rader, Sue Rader, Brad Rader and Julie Newell (formerly known as Julie Rader) (collectively, “Lessor”), and RADER FARMS ACQUISITION CORP., a Delaware corporation (“Lessee”).

RECITALS

A. Lessor is the owner of that certain real property located in Whatcom County, Washington, consisting of approximately 696 acres, more or less, as more particularly described on Exhibit ”A” attached hereto and incorporated herein by this reference (the “Property”).

B. Lessee desires to lease the Property from Lessor and subject to the terms and conditions set forth below, to manage and conduct farming operations on the Property.

C. Lessor is willing to lease the Property to Lessee, subject to the terms and conditions set forth below.

AGREEMENTS

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Leased Premises. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, upon the terms and conditions set forth in this Lease, the approximately 696 acres of real property described in Exhibit ”A”, together with all improvements and structures thereon and all appurtenant rights thereto, including, without limitation, wells, pumps, motors, electrical panels, electrical hookups, water discharge facilities, pipelines, irrigation systems, easements, rights-of-way for ingress and egress, licenses and water rights and privileges (collectively, the “Premises”).

2. Term. The term of this Lease shall commence on the Effective Date, and end ten (10) years thereafter (the “Lease Term”).

3. Rent.

3.1 Commencement of Rent Payments. As and for rental of the Premises, Lessee shall pay to Lessor annual rent (the “Rent”) in the amounts determined in accordance with this Section 3, such Rent to be paid in equal monthly installments on or before the first (1st) day of each month.

3.2 Payment. All payments of Rent shall be payable in lawful money of the United States of America in immediately available funds, and shall be payable without offset, deduction or counterclaim except as otherwise allowed herein, and without notice or demand at the address of Lessor specified in Section 30 below or at such other address as Lessor may designate from time to time to Lessee in writing.

3.3 Initial Rent. Beginning on the Effective Date and continuing until May 17, 2017, Rent will be due and payable at the rate of Forty-Three Thousand Five Hundred and No/100 Dollars ($43,500.00) per month (Five Hundred Twenty-Two Thousand and No/100 Dollars ($522,000.00) per annum).

3.4 Rent After Tenth Year. Beginning on May 18, 2017, Rent shall increase to Fifty-Two Thousand Two Hundred and No/100 Dollars ($52,200.00) per month (Six Hundred Twenty-Six Thousand Four Hundred and No/100 Dollars ($626,400.00) per annum).

3.5 Pro Rata Rent. If the Effective Date occurs on a date other than the first day of a month, and if the rent increase specified in Section 3.4 above commences on other than the first day of a month, Rent shall be prorated in such month on the basis of the actual number of days in such month.

4. Real Property and Water District Taxes and Assessments; Water Costs. All real estate taxes, assessments or similar levies of any kind and all water district taxes, assessments or similar levies of any kind levied against the Premises as of the Effective Date and assessed or falling due during the Lease Term shall be paid by Lessee. All such taxes, assessments or similar levies shall be prorated for Lessee’s period of occupancy. All taxes and assessments assessed against or attributable to improvements placed upon the Premises by the Lessee and Lessee’s personal property on the Premises, shall be paid by Lessee. The cost of water, together with any water standby or other charges, necessary for the adequate and proper irrigation of crops grown on the Premises shall be borne by Lessee.

5. Utilities. Lessee shall pay for all charges for light, power, and all other services and utilities supplied to the Premises during the Lease Term.

6. Water Supply. Any and all of Lessor’s rights to extract any groundwater beneath the Premises, use of any irrigation district facilities serving the Premises, and any future allocations of irrigation water from any irrigation district to which the Premises might be entitled during the Lease Term are hereby transferred to Lessee for the Lease Term.

7. Compliance with Laws; Waste.

7.1 Compliance with Laws. Lessee shall not do or suffer to be done on or about the Property, anything that would or does violate or conflict with any law, ordinance, rule or regulation now in force or effect, or that may hereinafter be enacted, promulgated or adopted by Federal, State or local authorities.

7.2 Waste. Lessee shall not commit or suffer to be committed any waste on the Premises (provided that, the use or application of pesticides, herbicides, sprays or other materials on the Premises or on any crops, in accordance with federal, state or county laws and regulations, shall not constitute waste). Lessee shall not maintain any nuisance on the Premises, and shall not use the Premises for any unlawful purposes. Lessor and Lessee acknowledge and agree that any and all deterioration of the Premises due to salinity, drainage and related problems or the use of the Premises by Lessee in accordance with normal and customary agricultural practices does not constitute waste or a nuisance or a breach of any of the terms of this Lease.

8. Use of Property. The Premises shall be used only for planting, caring for, harvesting, and processing (including freezing and storing) of crops and for other incidental uses. In so doing, Lessee will comply with all requirements of law and governmental regulations thereunder.

9. Department of Agriculture Rules and Regulations. Lessee shall have the use of any contract acres, crop base, yield, history, allotment and other farm program attributes allocated to the Premises, and Lessee may farm the same in combination with any other real property of which Lessee is the owner or operator, provided that such use shall at all times conform to the rules and regulations of the U.S. Department of Agriculture (“USDA”). Lessor shall execute such documents as may be necessary in order to combine the Premises with such other property into a single farm unit for USDA purposes. Lessor disclaims all representations and warranties as to the contract acres, crop base, yield, history, allotment and other farm program attributes allocated to the Premises. The parties agree and understand that at the expiration of the Lease Term, all of the contract acres, crop base, yield, history, allotment and other farm program attributes allocated to the Premises as of the inception of this Lease shall revert to Lessor.

10. Environmental Indemnity and Covenants.

10.1 Lessor’s Representations and Warranties. Lessor represents and warrants, to the best of its knowledge, that any handling, transportation, storage, treatment or usage of Hazardous Substances (as defined in Section 10.6 below) that has occurred on the Premises during the period of its ownership has been in compliance with all Environmental and Safety Requirements (as defined in Section 10.5 below). Lessor further represents and warrants that, to the best of its knowledge and belief and except as otherwise disclosed to Lessee in writing, any currently known Hazardous Substances which might be present above, on, or beneath the Premises do not exceed those concentrations which would violate current applicable laws and regulations.

10.2 Lessor’s Indemnity of Lessee. Lessor hereby agrees to indemnify and hold harmless Lessee from and against, any and all losses, costs, claims, or damages to the Premises or suffered by Lessee resulting from use, generation, manufacture, production, storage, release, discharge, or disposal of Hazardous Substances on, under, or about the Premises which are caused by Lessor or occurred prior to the commencement of this Lease. Further, Lessor assumes all liabilities for any clean-up, remediation, and/or restoration costs which result from such use, generation, manufacture, production, storage, release, discharge, or disposal of Hazardous Substances which are caused by Lessor or occurred prior to the commencement of this Lease.

10.3 Lessee’s Indemnity of Lessor. Lessee hereby agrees to indemnify and hold harmless Lessor from and against, any and all losses, costs, claims, or damages to the Premises or suffered by Lessor resulting from use, generation, manufacture, production, storage, release, discharge, or disposal of Hazardous Substances on, under, or about the Premises which are caused by Lessee or occur during the Lease Term, other than caused by Lessor. Further, Lessee assumes all liabilities for any clean-up, remediation, and/or restoration costs which result from such use, generation, manufacture, production, storage, release, discharge, or disposal of

Hazardous Substances which are caused by Lessee or occur during the Lease Term, other than caused by Lessor.

10.4 Covenants Regarding Use. Lessee covenants that during the Lease Term it will not use, generate, manufacture, produce, store, release, discharge, or dispose of on, under or about the Premises or transport to or from the Premises any Hazardous Substances except: (i) petroleum, gasoline or diesel fuel, propane or natural gas used to operate motor vehicles or farm machinery or equipment; and (ii) Hazardous Substances used in the production of agricultural crops on the Premises or activities related thereto, which are commonly used for such purposes in the vicinity of the Premises, and which are used in compliance with applicable laws.

10.5 “Environmental and Safety Requirements” Defined. “Environmental and Safety Requirements” means all federal, state, local and foreign statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law, in each case concerning public health and safety, worker health and safety and pollution or protection of the environment, including all those relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, Release (as “Release” is defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time), threatened Release, control or cleanup of any hazardous or otherwise regulated materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, odor or radiation, as the foregoing are enacted and in effect on the Closing Date.

10.6 “Hazardous Substances” Defined. The term “Hazardous Substances” means any substance or material that is considered, described, characterized or listed as a toxic or hazardous substance, waste or material, or a pollutant, or a contaminant or an infectious waste, or words of similar import, in or under any applicable Environmental and Safety Requirements, or chemicals, substances, materials or compounds that are otherwise subject to regulation, prohibition, control or remediation under or that give rise to liability under, any applicable Environmental and Safety Requirements, and includes asbestos, petroleum and petroleum products, methyl tertiary-butyl ether, polychlorinated biphenyls, urea formaldehyde, radon gas and radioactive matter.

11. Concerning the Premises. Lessor represents and warrants to Lessee that it is the sole and lawful record and beneficial owner of the Premises and that it has the full authority to enter into this Lease and perform as herein contemplated. Lessor warrants quiet possession of the Premises in Lessee during the Lease Term. In the event Lessee defaults under any lien, encumbrance, agreement for sale, mortgage or deed of trust against the Premises which may jeopardize Lessee’s leasehold estate, Lessee may, but is not required to, pay amounts then due under such lien, encumbrance, agreement for sale, mortgage or deed of trust and offset such payment against the rent coming due hereunder.

12. Indemnity and Insurance.

12.1 Indemnity of Lessor. Except as otherwise provided in this Lease, Lessee shall indemnify, defend, and hold Lessor, Lessor’s employees and agents, and Lessor’s property harmless from and against all claims, losses, damages, liabilities and expenses (including attorneys’ fees) arising from personal injury or physical damage to any person or property occurring on the Premises and caused by Lessee, Lessee’s employees, agents or representatives, or due to Lessee’s operations on the Premises during the Lease Term. The obligation of Lessee to indemnify, defend, and hold harmless Lessor, however, shall not apply to, and Lessee shall not be liable for, claims, losses, damages, liabilities and expenses as and to the extent the same arise from or relate to (i) the negligence or willful misconduct of Lessor or Lessor’s employees, agents or representatives, or (ii) any condition on, of or affecting the Premises on or prior to the Effective Date.

12.2 Indemnity of Lessee. Lessor shall indemnify, defend and hold Lessee harmless from all claims, losses, damages, liabilities and expenses (including attorneys’ fees) arising from or relating to (i) the negligence or willful misconduct of Lessor or Lessor’s employees, agents or representatives, or (ii) any condition on, of or affecting the Premises prior to the Effective Date.

12.3 Insurance. Lessee shall, at Lessee’s sole expense, keep and maintain in full force during the term hereof, (a) worker’s compensation insurance, unless Lessee has no employees, (b) a general liability insurance policy (covering both bodily injury and property damage) in an amount not less than One Million Dollars ($1,000,000.00) for injury or death of one person, in an amount not less than Five Million and No/100 Dollars ($5,000,000.00) for injury or death of more than one person in any one accident or occurrence, and property damage insurance in an amount not less than Two Million and No/100 Dollars ($2,000,000.00). Lessee shall also maintain property insurance for no less than the replacement cost of the equipment and structures on the Premises and designate Lessor as loss payee. Said policies shall name Lessor as additional insured and shall provide that policy will not be cancelled or reduced in coverage without ten (10) days’ written notice to Lessor.

13. Farming Practices. Lessee agrees to use the commercially reasonable practices and measures to prevent the entry or growth of Johnson grass, morning glory, Bermuda grass, knapweed and other noxious weeds or grasses upon the Premises, including necessary control measures on adjacent or adjoining public and private roads, ditches, banks, fence lines, lanes and ways. It shall be the responsibility of the Lessee to maintain clear vehicular access to and around all water distribution and drainage collection facilities. It shall be the obligation of Lessee to bear the expense of compliance with all lawful requirements governing extermination and destruction of noxious growth, rodents and harmful insects and protection against orchard and plant infection on the Premises and adjacent property.

14. Improvements and Mechanic’s Liens. Except for maintenance required pursuant to Section 15 of this Lease, Lessee shall not construct, alter or repair structures of any character upon the Premises without first obtaining the written consent of Lessor, which consent shall not be unreasonably withheld or delayed. Lessee shall pay for all materials joined or affixed to the Premises, and pay in full all persons that perform labor upon Premises at Lessee’s

instance or request. Lessee shall not permit or suffer any mechanic’s, materialmen’s or other liens of any kind or nature to be enforced against the Premises for any work done, or materials furnished thereon, at Lessee’s instance or request. Lessee agrees to indemnify, defend and hold Lessor harmless against any and all such liens. Lessor shall have the right to pay any amount required to release any such lien or liens, or to defend any action brought thereon, and to pay any judgment entered therein. Lessee shall be liable to Lessor for all costs, damages and reasonable attorneys’ fees and any amounts expended in defending any proceedings, or in the payment of any of said liens or any judgment obtained therefor. Lessor may post and maintain upon the Premises notice of non-responsibility as provided by law.

15. Repairs and Upkeep. Lessee, at Lessee’s expense, shall keep in good condition and repair all buildings, fences, wells, pumping plants, and irrigation systems or other improvements now located upon the Premises, whether the property of Lessor or Lessee. Upon the termination of this Lease, Lessee shall leave the same in as good repair as they now are, damage by the elements, acts of God and ordinary wear and tear excepted. Lessor shall not be called upon or required to make any repairs or incur any expenses of any kind or nature, upon or in connection with the Premises or improvements, for and during the Lease Term.

16. Right of First Offer.

16.1 In the event that Lessor desires to sell the Property or a portion thereof during the term of this Lease, Lessor shall notify Lessee in writing of such desire, and shall designate in writing the purchased price, down payment, interest rate, closing date, and other material terms of the purchase which Lessor is willing to accept.

16.2 Within thirty (30) days after the Lessor’s notice provided under Section 16.1, Lessee shall notify the Lessor in writing either (i) that Lessee desires to purchase the Property from the Lessor, or (ii) that Lessee does not desire to purchase the Property. If Lessee elects to purchase the Property, then the parties will execute a purchase and sale agreement for the Property within thirty (30) days of Lessee’s notice to the Lessor of desire to purchase the Property. If Lessee does not elect to purchase the Property from the Lessor, then the Lessor shall, within one (1) year thereafter, have the right to sell, convey, trade, or exchange the Property to a third party on terms that are the same or more favorable to the Lessor than the Lessor’s original terms as set forth in Lessor’s notification to Lessee, which sale, conveyance, trade or exchange of the Property shall be subject to all the terms and conditions of this Lease, except for Lessee’s right of first offer under this Section 16 which shall be thereafter be extinguished.

16.3 For the purposes of this Section 16, a higher purchase price shall be considered more favorable to the Lessor than a lower purchase price, a higher down payment more favorable than a lower down payment, and a higher interest rate (in the event of seller financing) more favorable than a lower interest rate. If the Lessor does not sell, convey, trade, exchange, or otherwise dispose of the Property within the period specified in Section 16.2, or if the Lessor desires to sell, convey, trade, or exchange the Property at a price, down payment, interest rate, and other material terms less favorable to the Lessor than those terms as set forth in the initial notice to Lessee, the Lessor shall first resubmit the Property or portion thereof to Lessee pursuant to the provisions of this Section.

16.4 Any sale of the Property by Lessor during the term of the Lease shall be subject to all the terms and conditions of this Lease, including but not limited to Lessee’s option to purchase a portion of the Property as set forth in Section 37 and, unless Lessee’s right of first offer has been extinguished under Section 16.2 above or Section 37.8 below, Lessee’s right of first offer to purchase the Property as set forth in this Section 16.

17. Subleasing and Assigning. Lessee shall have no right to assign this Lease or sublease the Premises, or portions thereof, without the prior written consent of Lessor. A consent by Lessor to one assignment, subletting, occupation or use by another person shall not exhaust any covenant against assigning or subletting, but the same shall remain in full force and effect notwithstanding one or more consents, or be deemed to be a consent to any subsequent assignment, subletting, occupation or use by another person. Any encumbrance, assignment, transfer or subletting without the prior written consent of Lessor, whether it be voluntary or involuntary, by operation of law or otherwise, is void and shall, at the option of Lessor, terminate this Lease. The consent of Lessor to any such assignment of Lessee’s interest in this Lease or the subletting by Lessee on the Premises shall not unreasonably be withheld.

18. Surrender of Premises. Immediately upon the expiration or earlier termination of this Lease, Lessee shall surrender possession of the Premises to the then current owner of the Premises, excepting that Lessee shall be permitted to care for, harvest and remove any crops then growing on the Premises.

19. Lessee’s Bankruptcy. If Lessee is adjudicated as bankrupt, or shall make an assignment for the benefit of creditors, or file a voluntary petition under any law (having for its purpose the adjudication of Lessee as bankrupt, or the extension of time of payment, composition, adjustment, modification, settlement or satisfaction of the liabilities of Lessee), or receiver be appointed for the property of Lessee by reason of the insolvency of Lessee, notwithstanding anything to the contrary elsewhere in this Lease, Lessor shall have the immediate right to terminate this Lease and to take exclusive possession of the Premises. The acceptance of rent or other payment for the use of the Premises shall not constitute a waiver of Lessor’s right to terminate this Lease as above set forth.

20. Lessor’s Right of Entry. Lessor and its agents or representative shall have the right, upon notice and during reasonable business hours, to enter upon the Premises, to inspect the same or any crops growing or harvested thereon or being removed therefrom, the improvements therein, appurtenances thereto, and all equipment located thereon. Lessor shall also have the right to enter the Premises to exercise, protect or defend any of the rights reserved to Lessor hereunder.

21. No Warranty. Lessee expressly acknowledges that Lessor has made no warranty in this Lease and no warranty shall be implied by reason of any term or provision of this Lease concerning the availability or sufficiency of water or any other utility for use upon the Premises; nor has Lessor made any warranty in this Lease concerning the sufficiency of wells, pumping plants, canals, pipelines or any other irrigation equipment for provision of water to the crops, any dwellings or machinery upon the Premises; nor has Lessor made any warranty in this Lease concerning the sufficiency of any provisions for the control of flooding of the Premises, nor has

Lessor made any warranty in this Lease concerning the sufficiency of adequacy of the Premises for the use or uses intended by Lessee.

22. Holding Over. Any holding over after the Lease Term with the consent of Lessor expressed or implied shall not extend the Lease Term or renew this Lease, regardless of the period of holding over. Any such holding over shall constitute a tenancy from month to month upon each and every term, condition and covenant of this Lease insofar as the same may be applicable, excepting that the rental reserved shall be at the rate of one hundred and fifty percent (150%) of the immediately prior monthly rental rate.

23. Condemnation. In the event the Premises or any part thereof are taken or sold under threat of condemnation, the rental shall be reduced pro rata to the Premises and improvements for the taking thereof, and shall be payable to Lessor, and Lessee does sell, assign, transfer and set over any interest Lessee might otherwise have in and to such compensation to Lessor. Lessee shall, nevertheless, be entitled to any compensation for damages paid with respect to unharvested growing crops resulting from such condemnation.

24. Default. The failure by Lessee to observe or perform any covenant, condition or provision of this Lease to be observed or performed by Lessee, where such failure continues for a period of thirty (30) days after written notice from Lessor to Lessee shall constitute a default under this Lease by Lessee. Notwithstanding the foregoing, Lessor shall not terminate this Lease or disturb or terminate Lessee’s possession unless such default continues for an additional fifteen (15) days after Lessee’s receipt of a second notice of such failure. Such second notice must (a) be given at least thirty (30) days after the first notice, (b) must state in bold type that it is a second notice, (c) must state in bold type that the Lease may be terminated or that Lessee’s right of occupancy may be terminated if such failure is not cured within fifteen (15) days, and (d) must specify the nature of the default and the cure demanded. If such failure continues after such second notice, Lessor shall have the right to take possession Premises or relet the Premises.

25. Waiver and Modification. This Lease may be amended or supplemented only by a written instrument signed by the parties hereto.

26. Severability. In the event any provision of this Lease shall be held by any court of competent jurisdiction to be illegal, invalid or unenforceable for any reason, the remaining provisions of this Lease shall nonetheless remain in full force and effect.

27. Construction of Lease. The paragraph headings in this Lease have been inserted for convenience only, and shall not be considered or referred to in resolving questions of interpretation or construction. In determining the meaning of, or resolving any ambiguity with respect to, any provision of this Lease, such provision shall be interpreted without construing such provision in favor of or against the party responsible for drafting this document.

28. Further Assurances. Lessee and Lessor shall, at their own expense, execute, acknowledge and deliver all instruments and documents and take all actions as may reasonably be required in order to carry out the intent of, and the transactions contemplated by, this Lease.

29. Attorneys’ Fees. In any action or proceeding by either party to enforce this Lease or any provisions thereof, the prevailing party shall be entitled to all costs and reasonable attorneys’ fees.

30. Notices. Any notice to be given to either party by the other shall be in writing and deemed served on the date of delivery if hand delivered to the person to whom notice is to be given, and on the third (3rd) day after mailing if sent by certified mail, with postage prepaid and return receipt requested, and addressed as follows:

Notices to Lessor:		with a copy to:

Rader Farms, Inc. 1270 East Badger Road Lynden, Washington 98264 Attn: Lyle Rader Fax: (360) 354-7070		Hillis Clark Martin & Peterson, P.S. 1221 Second Avenue, Suite 500 Seattle, Washington 98101 Attn: Gabriel S. Rosenthal Fax: (206) 623-7789


Notices to Lessee:		with a copy to:

Rader Farms Acquisition Corp. c/o The Inventure Group, Inc. 5050 North 40th Street, Suite 300 Phoenix, Arizona 85018 Attention: Steve Weinberger Fax: (602) 522-2690		Osborn Maledon, PA 2929 North Central Ave., 21st Floor Phoenix, Arizona 85012 Attention: Christopher S. Stachowiak Fax: (602) 664-2055

31. Binding Effect. The provisions of this Lease shall benefit and bind the heirs, successors, executors, administrators and assigns of all parties to this Lease.

32. Time. Time is of the essence of this Lease.

33. Entire Agreement. This Lease constitutes the entire agreement between the parties pertaining to the lease of the Premises, and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties with regard thereto. No supplement, modification or amendment of this Lease shall be binding unless executed in writing by all of the parties hereto.

34. Relationship Limited. It is expressly understood and agreed that the relationship of Lessor and Lessee is one of Lessor and Lessee and not one of partnership or joint venture, and that Lessor shall not become responsible for any debt or obligation contracted or incurred by Lessee nor shall Lessee become responsible for any debt or obligation contracted or incurred by Lessor.

35. Authority. Each party represents and warrants to the other that (i) such party has the requisite legal capacity and authority to enter into and fully perform each and all of their

obligations under this Lease and (ii) this Lease does not in any way violate any covenant, contract, agreement, instrument or understanding by which such party is bound.

36. Recordation. The parties agree that Lessee may, during the Lease Term, record a memorandum of this Lease, subject to Lessor’s prior approval of any such memorandum.

37. Option to Purchase. Lessor hereby grants to Lessee an option to purchase either (a) that portion of the Premises on which the processing plant is currently located as described on Exhibit ”B” (the “Building Land”), or (b) the Property, on the terms and conditions set forth in this Section 37.

37.1 Exercise. The option may be exercised by written notice to Lessor no earlier than one hundred eighty (180) days and no later than ninety (90) days prior to the expiration of the Term of this Lease.

37.2 Price. The purchase price shall be the fair market value of the Building Land or the Property, depending on which Lessee elects to purchase, as land only and without considering the value of any buildings or other improvements. The purchase price shall be paid in cash at close of escrow. If the parties cannot agree upon the value of the land within thirty (30) days after Lessee shall have exercised the option, the parties shall appoint an arbitrator to establish the value of the land. If the parties cannot agree upon an arbitrator, the then presiding judge of Whatcom County Superior Court shall appoint the arbitrator. The arbitrator must be a licensed appraiser with at least five years experience valuing land in the general area of the Property. The decision of the arbitrator shall be final. Lessor and Lessee shall split the arbitrator’s fees.

37.3 Closing. The closing shall occur on the date this Lease expires, or such earlier date as the parties shall agree.

37.4 Escrow Agent. Closing shall occur at Chicago Title Insurance Company located at 1616 Cornwall Avenue, Suite 115, Bellingham, Washington 98225.

37.5 Title. Marketable fee title shall be conveyed to Lessee by general warranty deed subject only to those matters to which the Building Land or Property was subject as of the date of this Lease, and shall be insured by a standard owner’s policy of title insurance subject only to said matters and the usual exceptions and exclusions in such form of policy.

37.6 Closing Costs. Escrow fees shall be split equally between Lessor and Lessee, Lessor shall pay the cost of the owners policy of title insurance, and all other closing costs and prorations shall follow prevailing custom.

37.7 Cooperation. The parties shall take such actions and shall execute such documents as shall be necessary to close escrow and to carry out the intent and purpose of this Section 37.

37.8 Failure to Exercise/Close. In the event either (i) Lessor does not exercise the option to purchase set forth in this Section 37 by providing notice within the time period specified in Section 37.1 above, or (ii) closing of the option to purchase set forth in this

Section 37 does not occur within the time period required through no fault of Lessor, then, in either event, Lessor shall be free to sell or otherwise transfer the property to any third party or related party and Lessee shall have no further rights under this Section 37 or Section 16 above.

37.9 Additional Acreage. It is acknowledged that the land described on Exhibit “C”, consisting of approximately 40 acres, is not currently farmable due to environmental restrictions. At such time as the land or some portion thereof becomes legally farmable, Lessor shall notify Lessee and such additional farmable acreage shall be added to this Lease upon all the same terms and conditions, except that the rent hereunder shall be increased by $750.00 per acre per year for the initial ten years of the term of this Lease and by $900.00 per acre per year for the second ten years, payable monthly, commencing upon the delivery of such land to Lessee in a farmable condition.

IN WITNESS WHEREOF, the parties hereto have executed this lease as of the year and day first written above.

LESSEE:

RADER FARMS ACQUISITION CORP.,
a Delaware corporation

By		/s/ Steve Weinberger
Name		Steve Weinberger
Its		CFO/Secretary

LESSOR:

/s/ Lyle Rader		/s/ Sue Rader
LYLE RADER		SUE RADER


/s/ Brad Rader		/s/ Julie Newell
BRAD RADER		JULIE NEWELL
		(fka Julie Rader)

STATE OF ARIZONA

COUNTY OF MARICOPA

}

ss.

On this day personally appeared before me Steve Weinberger, to me known to be the CFO/Secretary of RADER FARMS ACQUISITION CORP., the Delaware corporation that executed the foregoing instrument, and acknowledged such instrument to be the free and voluntary act and deed of such corporation, for the uses and purposes therein mentioned, and on oath stated that [he/she] was duly authorized to execute such instrument.

GIVEN UNDER MY HAND AND OFFICIAL SEAL this 15th day of May, 2007.

	/s/ Pamela A. Dahlmeier
	Printed Name Pamela A. Dahlmeier
[OFFICIAL SEAL]	NOTARY PUBLIC in and for the State of Washington,
	residing at Phoenix, AZ
	My Commission Expires May 11, 2009

STATE OF WASHINGTON

COUNTY OF WHATCOM

}

ss.

On this day personally appeared before me LYLE RADER and SUE RADER, to me known to be the individuals that executed the foregoing instrument, and acknowledged such instrument to their the free and voluntary act and deed, for the uses and purposes therein mentioned.

GIVEN UNDER MY HAND AND OFFICIAL SEAL this 16th day of May, 2007.

	/s/ Jolene M. Burdette
[OFFICIAL SEAL]	Printed Name Jolene M. Burdette
	NOTARY PUBLIC in and for the State of Washington,
	residing at Whatcom County/Everson
	My Commission Expires March 19, 2010

STATE OF WASHINGTON

COUNTY OF WHATCOM

}

ss.

On this day personally appeared before me BRAD RADER, to me known to be the individual that executed the foregoing instrument, and acknowledged such instrument to be his free and voluntary act and deed, for the uses and purposes therein mentioned.

GIVEN UNDER MY HAND AND OFFICIAL SEAL this 16th day of May, 2007.

	/s/ Jolene M. Burdette
	Printed Name Jolene M. Burdette
[OFFICIAL SEAL]	NOTARY PUBLIC in and for the State of Washington, residing at Whatcom County/Everson
	My Commission Expires March 19, 2010

STATE OF WASHINGTON

COUNTY OF KING

}

ss.

On this day personally appeared before me JULIE NEWELL (f.k.a. Julie Rader), to me known to be the individual that executed the foregoing instrument, and acknowledged such instrument to be her free and voluntary act and deed, for the uses and purposes therein mentioned.

GIVEN UNDER MY HAND AND OFFICIAL SEAL this 16th day of May, 2007.

	/s/ Gabriel Rosenthal
[OFFICIAL SEAL]	Printed Name Gabriel Rosenthal
	NOTARY PUBLIC in and for the State of Washington, residing at Seattle, Washington
	My Commission Expires April 19, 2010

GUARANTY

IN CONSIDERATION OF, and as an inducement for the granting, execution and delivery of that certain Agricultural Ground Lease, dated May 18th, 2007 (the “Lease”) between Lyle Rader, Sue Rader, Brad Rader and Julie Newell (formerly known as Julie Rader) (collectively, “Landlord”), and RADER FARMS ACQUISITION CORP., a Delaware corporation (“Tenant”), and as a material inducement for Landlord to enter into the Lease, THE INVENTURE GROUP, INC., a Delaware corporation (the “Guarantor”), hereby guarantees to Landlord, its successors and assigns, the full, prompt and timely payment of Rent, as defined in the Lease, and any and all other sums and charges payable by Tenant, its successors and assigns, under the Lease and the full, prompt and timely performance and observance of all of the covenants, terms, conditions and agreements therein provided to be performed and observed by Tenant, its successors and assigns. Guarantor hereby covenants and agrees to and with Landlord, its successors and assigns, that if default shall at any time be made by Tenant, its successors and assigns, in the payment of any such sums or in the performance of any of the terms, covenants, provisions or conditions contained in the Lease, Guarantor shall forthwith pay such sums to Landlord, its successors and assigns, upon demand and shall forthwith faithfully perform and fulfill all of such terms, covenants, conditions and provisions, and will forthwith pay to Landlord all damages that may arise in consequence of any default by the Tenant, its successors and assigns under the Lease, including, without limitation, all reasonable attorneys’ fees and costs incurred by Landlord or caused by any such default and/or by the enforcement of the Lease and this Guaranty.

This Guaranty is an absolute and unconditional personal Guaranty of payment and of performance. It shall be enforceable against Guarantor, its heirs, successors and assigns, without the necessity for any suit or proceedings on Landlord’s part of any kind or nature whatsoever against Tenant, its successors and assigns, and without the necessity of any notice of nonpayment, nonperformance or non-observance or of any notice of acceptance of this Guaranty, or of any other notice or demand to which the Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected or impaired by reason of the assertion or the failure to assert by Landlord against the Tenant, or Tenant’s successors and assigns, of any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease.

The Guaranty shall be a continuing Guaranty, and the liability of Guarantor hereunder shall in no way be affected, modified or diminished by reason of any assignment, renewal, amendment, modification or extension of the Lease or by reason of any modification, amendment or waiver of or change in any of the terms, covenants, conditions or provisions of the Lease, or by reason of any extension of time that may be granted by Landlord to Tenant, its successors or assigns, or by reason of any dealings or transactions or matter or things occurring between Landlord and Tenant, its successors or assigns, whether or not notice thereof is given to Guarantor. This Guaranty shall be construed under the provisions of Washington law.

All of Landlord’s rights and remedies under the Lease or under this Guaranty are intended to be distinct, separate and cumulative and no such right and remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any of the others.

EXECUTED as of May 18th, 2007.

GUARANTOR:


THE INVENTURE GROUP, INC.,
a Delaware corporation


By		/s/ Steve Weinberger
Name			Steve Weinberger
Its	CFO

EXHIBIT A

PROPERTY DESCRIPTION

EX-10.3 4 a07-18752_1ex10d3.htm EX-10.3

Exhibit 10.3

LOAN AGREEMENT

(Revolving Line of Credit Loan and Term Loan)

This Loan Agreement (the “Agreement”) is dated for reference purposes as of May 16, 2007, between THE INVENTURE GROUP, INC., a Delaware corporation (the “Borrower”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), with the agreement and acknowledgement of all other Obligated Group Parties as to the covenants, representations, and warranties set forth herein applicable to them as part of the Obligated Group.

Unless defined elsewhere in this Agreement, defined terms used herein have the meanings given them in the Definitions Section hereof.

Factual Background

A. Bank has agreed to extend credit and/or other financial accommodations to Borrower as follows: (1) Bank has agreed to make a revolving line of credit loan (“Facility 1”) to Borrower in the maximum principal amount of Fifteen Million and No/100 Dollars ($15,000,000.00) (the “Facility 1 Maximum Committed Amount”), and (2) Bank has agreed to make a term loan (“Facility 2”) to Borrower in the principal amount of Six Million and No/100 Dollars ($6,000,000.00) (each, individually, a “Loan” and collectively, the “Loans” or the “Loan,” as the context may require). Borrower will use Facility 1 and Facility 2 for working capital and general corporate purposes of Borrower, and to provide funds to RFAC to acquire the Rader Acquisition Assets through the Rader Acquisition. Borrower is a holding company for several affiliated entities, and each of the Obligated Group Parties (other than Borrower) is an Affiliate, and a wholly owned subsidiary, of Borrower.

B. Borrower is executing (1) a promissory note payable to Bank evidencing Facility 1 (the “Facility 1 Note”) and a promissory note payable to Bank evidencing Facility 2 (the “Facility 2 Note”). Facility 1 and Facility 2 will be secured by a Security Agreement covering all business assets of the Obligated Group. The Facility 1 Note and the Facility 2 Note are herein collectively referred to as the “Notes.” The Credit Facilities shall be cross-collateralized and cross-defaulted, and will also be cross-collateralized and cross-defaulted to the RE Loan (as such term is defined below).

C. The following parties have each agreed to guarantee all or certain of Borrower’s obligations to Bank in accordance with one or more Guaranties:

(1) LA COMETA PROPERTIES, INC., an Arizona corporation (“La Cometa”);

(2) POORE BROTHERS - BLUFFTON, LLC, a Delaware limited liability company (the “PBC”);

(3) TEJAS PB DISTRIBUTING, INC., an Arizona corporation (“Tejas”);

(4) BOULDER NATURAL FOODS, INC., an Arizona corporation (“Boulder”);

(5) BN FOODS INC., a Colorado corporation (“BN Foods”); and

(6) RADER FARMS ACQUISITION CORP., a Delaware corporation (“RFAC”).

information required of Borrower under this Agreement shall be prepared on a consolidated basis to include all Obligated Group Parties, (iv) that all covenants of Borrower shall be covenants of the Obligated Group Parties as applicable to the appropriate Obligated Group Party(ies), and (v) that all representations and warranties of Borrower shall be representations and warranties of the Obligated Group Parties as applicable to the appropriate Obligated Group Party(ies).

D. This Agreement and the Notes, together with all of their exhibits (if any), and all other documents which evidence, guaranty, secure, or otherwise pertain to the Credit Facilities, including each Loan, collectively constitute the “Loan Documents.”

THEREFORE, Bank and Borrower agree as follows:

Agreement

Definitions: The following capitalized words and terms shall have the meanings set forth in the “Factual Background” section above, or if not defined therein, shall have the following meanings when used in this Agreement. All references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. The term “Guarantor,” as used in this Agreement and the other Loan Documents shall apply only if any such party exists, and should be ignored if inapplicable.

“Account” means Borrower’s checking account number 151701212137 at Bank.

“Affiliate of” or “affiliated with” means in control of, controlled by or under common control with.

“Agricultural Laws” means all existing and future laws relating to perishable agricultural commodities, including but not limited to the Food Security Act, the Perishable Agricultural Commodities Act, and all applicable state and federal agricultural laws.

“Approved Existing Liens” means, collectively, the liens set forth on Exhibit D attached hereto, and any other lien on collateral for any Credit Facility approved in writing by Bank from time to time.

“Approved Existing Lien Collateral” means collateral for any Credit Facility which is subject to any Approved Existing Lien.

“BN Foods” has the meaning set forth in Recital C above.

“Bailee Letter” means a letter or other written agreement executed by a third party having possession of certain of inventory and/or farm products of any Obligated Group Party that serves as collateral for any Credit Facility, which letter or agreement provides that such party (a) acknowledges the Bank’s paramount lien on, and security interest in, such collateral, and (b) gives Bank the right to remove such collateral from such party’s premises in exercise of Bank’s rights and remedies under the Loan Documents. Any Bailee Letter must be is in form and substance acceptable to Bank.

“Boulder” has the meaning set forth in Recital C above.

“Borrowing Base” means an amount equal to:

(a) the sum of (i) eighty percent (80%) of Net Eligible Accounts, plus (ii) fifty percent (50%) of the applicable Obligated Group Party’s(ies’), cost (determined on a lower of cost or market basis or on such other basis as may be designated by Bank from time to time) of Eligible Raw Material Inventory, as such cost may be diminished as a result of any event causing loss or depreciation in value of Eligible Raw Material Inventory, plus (iii) sixty percent (60%) of the applicable Obligated Group Party’s(ies’) cost

(determined on a lower of cost or market basis or on such other basis as may be designated by Bank from time to time) of Eligible Finished Goods Inventory, as such cost may be diminished as a result of any event causing loss or depreciation in value of Eligible Finished Goods Inventory, plus (iv) sixty-five percent (65%) of the RFAC’s cost (determined on a lower of cost or market basis or on such other basis as may be designated by Bank from time to time) of RFAC Eligible Inventory, as such cost may be diminished as a result of any event causing loss or depreciation in value of RFAC Eligible Inventory, plus (v) only during the period from the Closing Date through May 15, 2008, the amount of Two Million and No/100 Dollars ($2,000,000.00); provided, however, that in no event shall total Eligible Inventory exceed fifty percent (50%) of the Borrowing Base, less

(b) undrawn amounts of outstanding letters of credit issued by Bank or any Affiliate thereof.

“Borrowing Base Certificate” has the meaning set forth in Section 3.5 below.

“Change in Control” means any transaction or series of transactions that result in any transfer, direct or indirect, of fifty percent (50%) or more of the voting power of Borrower or any Guarantor, or other power to direct or cause the direction of the management and policies of Borrower or any Guarantor, as the case may be, or fifty percent (50%) or more of the direct or indirect beneficial ownership of Borrower or any Guarantor, as the case may be.

“Closing Date” means the date of the closing of the Credit Facilities, which shall be the date when all Loan Documents have been fully executed by all parties thereto and all other conditions to closing set forth in this Agreement and any other Loan Documents have been satisfied or waived or deferred in writing by Bank.

“Collateral” means, collectively, all personal property business assets of the Obligated Group now or hereafter assigned, pledged, or hypothecated to Lender as collateral security for the Loans

“Commitment Reduction” has the meaning set forth in Section 2.2 below.

“Commitment Reduction Date” has the meaning set forth in Section 2.2 below.

“Commitment Reduction Notice” has the meaning set forth in Section 2.2 below.

“Compliance Certificate” has the meaning set forth in Section 3.5 below.

“Contra Accounts Payable” means the aggregate amounts payable to account debtors holding Eligible Accounts.

“Covered by Insurance” is when defense of a lawsuit has been tendered to the applicable insurance carrier under a valid insurance policy that provides coverage with respect to the claim and has a deductible amount of less than Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), such insurance carrier has accepted such tender of defense, and such insurance carrier proceeds with such defense without denying liability for any part of such claim which could result in liability of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or more to Borrower or any Guarantor.

“Credit Facilities” means all extensions of credit from the Bank to Borrower or any other Obligated Group Party, whether now existing or hereafter arising, including but not limited to the Loans described in Recital A above.

“Default Rate” has the meaning given it in the applicable Note or other debt instrument evidencing the particular Credit Facility; provided, however, that if a default rate is not used or defined in the applicable Note or other debt instrument evidencing the particular Credit Facility, “Default Rate” shall mean a per

annum interest rate of five percent (5%) in excess of the rate of interest charged from time to time (the “Note Rate”) under the applicable Note or other debt instrument evidencing the particular Credit Facility.

“EBITDA” means, for the Obligated Group for the applicable period, net income, plus interest expense, plus income tax expense, plus depreciation expense, plus amortization expense.

“EBITDAR” means, for the Obligated Group for the applicable period, net income, plus interest expense, plus income tax expense, plus depreciation expense, plus amortization expense, plus rent or lease expense.

“EDGAR System” means the Electronic Data Gathering Analysis and Retrieval System owned and operated by the United States Securities and Exchange Commission or any replacement system.

“Eligible Account” shall mean an account owing to any Obligated Group Party which meets all of the following requirements at the time it comes into existence and continues to meet the same until it is collected in full:

(i) Sale of Goods or Services Rendered. It arose from the performance of services by such Obligated Group Party, or from a bona fide sale or lease of goods on terms in effect as of the date of the Agreement as disclosed by such Obligated Group Party to Bank; which services have been fully performed for or which goods have been delivered or shipped to an account debtor residing in the United States or a foreign account debtor acceptable to Bank and supported by a letter of credit acceptable to Bank; and for which such Obligated Group Party has genuine and complete invoices, shipping documents or receipts.

(ii) Age and Due Date. It is payable within ninety (90) days of the date of invoice, and in each instance is not more than sixty (60) days past due.

(iii) Ownership. It is owned and assignable by such Obligated Group Party free of all claims, encumbrances and security interests (except Bank’s paramount security interest).

(iv) No Defenses; Exclusions. It is enforceable by such Obligated Group Party and Bank against the account debtor for the amount shown as owing in the statements furnished by Borrower to Bank; it and the transaction out of which it arose comply with all applicable laws and regulations; it is not subject to any setoff, retainage, contra, counterclaim, credit allowance or adjustment except discount for prompt payment, nor has the account debtor returned the goods or disputed liability; it does not include any service charges; and it did not arise from a conditional sale, guaranteed sale, sale on approval, cash sale, cash on delivery (“COD”) sale, sale or return or sale on consignment; and it is otherwise deemed satisfactory to Bank in its sole discretion.

(v) Financial Condition of Account Debtor. Neither the Obligated Group Party nor Bank has any notice or knowledge of anything which might impair the credit standing of the account debtor or the prospect of payment of the account, and the account debtor is otherwise deemed satisfactory to Bank in its sole discretion.

(vi) Affiliates. It is not due from an affiliate of such Obligated Group Party, including, without limitation, (a) a parent entity; (b) a subsidiary entity; (c) an entity controlled by any controlling owner of Borrower; or (d) any officer, director, shareholder, employee, agent, partner, manager, member or owner of Borrower or of any Affiliate.

(vii) Government Receivables. The account debtor is not the United States or any agency or department thereof.

(viii) Foreign Receivables. The account debtor is outside of the United States, unless supported by foreign credit insurance in form and amount acceptable to Bank in its sole discretion.

(ix) Receivables Concentration. “Eligible Accounts” shall not include that portion of the account(s) due from any single account debtor, other than Costco or Walmart/Sam’s Club, which exceeds five percent (5%) of such Obligated Group Party’s aggregate accounts.

(x) Cross-Age. If the dollar amount of accounts of an account debtor, other than Costco or Walmart/Sam’s Club, which are not Eligible Accounts under subparagraph (ii) above exceeds ten percent (10%) of the total dollar amount due from such account debtor (which percentage limitation may change from time to time at Bank’s discretion), all of such account debtor’s accounts shall be excluded from Eligible Accounts.

“Eligible Finished Goods Inventory” means, collectively, the value of each Obligated Group Party’s, excepting RFAC’s, finished goods inventory so long as it meets the following conditions:

(i) Ownership. It is owned and assignable by such Obligated Group Party free of any title defects or all claims, encumbrances and security interests (except Bank’s paramount security interest).

(ii) Location. It is permanently located at locations within the United States which such Obligated Group Party has disclosed to the Bank and which are acceptable to the Bank. If the inventory is covered by a negotiable document of title (such as a warehouse receipt) that document must be delivered to the Bank, and if the inventory is located at any location not owned or leased by any of the Obligated Group Parties, then Bank shall have received a Bailee’s Letter for such inventory.

(iii) Held for Sale; Quality. It is held for sale or use in the ordinary course of such Obligated Group Party business and is of good and merchantable quality. Inventory which is obsolete, unsalable, damaged, defective, discontinued, in-transit, slow-moving or which has been returned by the buyer, is not includable as part of Eligible Finished Goods Inventory. Display items, work-in-process and packing and shipping materials are not includable as part of Eligible Finished Goods Inventory.

(iv) Not on Consignment. It is not placed on consignment.

(v) Acceptable to Bank as Collateral. It is otherwise acceptable to the Bank in Bank’s reasonable discretion.

(vi) No Grower’s Liens. It is not subject to any Grower’s Lien, unless Bank has received a lien waiver or subordination agreement, in form and substance acceptable to Bank, waiving such Grower’s Lien or fully subordinating such Grower’s Lien to Bank’s paramount security interest.

“Eligible Inventory” means, collectively, all Eligible Raw Materials Inventory, all Eligible Finished Goods Inventory, and all RFAC Eligible Inventory.

“Eligible Raw Materials Inventory” means, collectively, the value of each Obligated Group Party’s, excepting RFAC’s, raw materials inventory so long as it meets the following conditions:

(i) Ownership. It is owned and assignable by such Obligated Group Party free of any title defects or all claims, encumbrances and security interests (except Bank’s paramount security interest).

(ii) Location. It is located at locations which such Obligated Group Party has disclosed to the Bank and which are acceptable to the Bank. If the inventory is covered by a negotiable document of title (such as a warehouse receipt) that document must be delivered to the Bank, and if the inventory is

located at any location not owned or leased by any of the Obligated Group Parties, then Bank shall have received a Bailee’s Letter for such inventory.

(iii) Held for Sale; Quality. It is held for use by such Obligated Group Party in manufacturing or creating Eligible Finished Goods Inventory, or for sale to third parties as raw materials, in the ordinary course of such Obligated Group Party’s business and is of good and merchantable quality. Inventory which is obsolete, unsalable, damaged, defective, or discontinued, is not includable as part of Eligible Raw Materials Inventory. Display items, work-in-process and packing and shipping materials are not includable as part of Eligible Raw Materials Inventory.

(iv) Not on Consignment. It is not placed on consignment.

(v) Acceptable to Bank as Collateral. It is otherwise acceptable to the Bank in Bank’s reasonable discretion.

(vi) No Grower’s Liens. It is not subject to any Grower’s Lien, unless Bank has received a lien waiver or subordination agreement letter, in form and substance acceptable to Bank, waiving such Grower’s Lien or fully subordinating such Grower’s Lien to Bank’s paramount security interest.

“Events of Default” means those events of default set forth in Section 6.1 (each, an “Event of Default”).

“Facility 1” has the meaning set forth in Recital A above.

“Facility 1 Expiration Date” has the meaning set forth in Section 2.2 below.

“Facility 1 Maturity Date” has the meaning set forth in Section 2.2 below.

“Facility 1 Maximum Committed Amount” has the meaning set forth in Recital A above.

“Facility 1 Maximum Funding Amount” means Ten Million and No/100 Dollars ($10,000,000.00).

“Facility 1 Note” has the meaning set forth in Recital B above.

“Facility 2” has the meaning set forth in Recital A above.

“Facility 2 Maturity Date” has the meaning set forth in Section 2.3 below.

“Facility 2 Note” has the meaning set forth in Recital B above.

“Facility Fee” has the meaning set forth in Section 2.6 below.

“Fee and Rate Schedule” means the tiered fee and rate schedule attached hereto as Exhibit C.

“Fixed Charge Coverage Ratio” means, for the Obligated Group for the applicable period, (a) EBITDAR minus cash taxes, cash dividends, and Maintenance Capital Expenditures, divided by (b) the sum of all required principal payments (on short and long term debt and capital leases), interest and rental or lease expense.

“GAAP” means generally accepted accounting principles, consistently applied.

“Grower Lien” any lien on any collateral for any Credit Facility pursuant to PACA or any other Agricultural Law.

“Ground Lease” means that certain ground lease by and among Lyle Rader, Sue Rader, Brad Rader and Julie Newell (formerly known as Julie Rader) and RFAC dated as of May 17, 2007.

“Guarantor” means, each person or entity guaranteeing all or any portion of Borrower’s obligations under the Loan Documents, or all or any portion of any other party’s obligations under the Loan Documents, pursuant to a Guaranty, including those parties described in Recital C above (collectively, the “Guarantor” or “Guarantors”). “Guarantor” also means any indemnitor under any indemnity agreement.

“Guaranty” means, each guaranty executed or required to be executed in favor of Bank in connection with any of the Credit Facilities, including each continuing guaranty, payment guaranty, payment and performance guaranty, or other guaranty or indemnity agreement (collectively, the “Guaranty” or “Guaranties”).

“Home Page” means Borrower’s corporate home page on the World Wide Web accessible through the Internet via the universal resource locator (URL) identified as “www.inventuregroup.net” or such other universal resource locator that Borrower shall designate in writing to Bank as its corporate home page on the World Wide Web.

“Hazardous Substance” means and includes any substance, material, or waste, including asbestos, petroleum, and petroleum products (including crude oil), that is or becomes designated, classified, or regulated as “toxic” or “hazardous” or a “pollutant,” or that is or becomes similarly designated, classified, or regulated, under any federal, state, or local law, regulation, or ordinance, but does not include any such substance that is a customary and ordinary household, cleaning, or office product used by Borrower or any tenant or agent of Borrower, provided such use is in accordance with applicable hazardous materials laws and regulations..

“Indemnified Costs” means all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages), costs, expenses, fines, penalties and losses (including sums paid in settlement of claims and all consultant, expert and legal fees and expenses of Bank’s counsel), including those incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work (with respect to any property), or any resulting damages, harm, or injuries to the person or property of any third parties or to any natural resources, excepting those arising out of, or resulting, solely from the applicable Indemnified Party’s gross negligence or willful misconduct.

“Indemnified Parties,” means Bank, its parent, subsidiary, and any affiliated companies, any assignees of any of Bank’s interest in any of the Credit Facilities or the Loan Documents, any owners of participation or other interests in any of the Credit Facilities or the Loan Documents, and the officers, directors, employees, and agents of each of them (each individually, an “Indemnified Party”).

“Initial Minimum TNW Amount” means Fourteen Million Seven Hundred Fifty Thousand and No/100 Dollars ($14,750,000.00).

“Insolvency Payments” means all monetary obligations incurred or accrued during the pendency of any Insolvency Proceeding regardless of whether allowed or allowable in such proceeding.

“Insolvency Proceeding” means any bankruptcy, receivership, or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships.

“La Cometa” has the meaning set forth in Recital C above.

rolling four (4) quarter basis, calculated at the end of each fiscal quarter, using the results of that fiscal quarter and each of the three (3) immediately preceding fiscal quarters.

“Loan” and “Loans” have the meanings set forth in Recital A above.

“Loan Documents” has the meaning set forth in Recital D above.

“Maintenance Capital Expenditures” means One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00).

“Minimum TNW Amount” means, initially, the Initial Minimum TNW Amount; provided, however, that Bank shall have the right to increase or decrease this Initial Minimum TNW Amount as determined by Bank based upon the post-Rader Acquisition consolidated balance sheet of Borrower that Borrower is required to promptly deliver to Bank; provided further, however, that the Minimum TNW Amount shall be increased annually, as of the end of each fiscal year of Borrower, by an amount equal to fifty percent (50%) of Borrower’s consolidated positive net income in accordance with GAAP.

“Net Eligible Accounts” means the sum of (a) all Eligible Accounts, less (b) all Royalties Payable, less (c) all Contra Accounts Payable.

“New Facility 1 Maximum Committed Amount” has the meaning set forth in Section 2.2 below.

“Notes” means all promissory notes, instruments, reimbursement agreements, or other contracts or agreements evidencing the terms and conditions of the Obligations, including the Facility 1 Note and the Facility 2 Note.

“Obligations” or “obligations” means all obligations, indebtedness, and liabilities of Borrower to Bank, or any of Bank’s Affiliates, successors or assigns, of every kind and nature, including but not limited to all loans, advances, drafts, overdrafts, checks, promissory notes, and all other debts, liabilities, and obligations of every kind owning by Borrower to Bank, whether direct or indirect, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated, of the same or a different nature, whether now existing or hereafter incurred or created, or whether incurred directly or acquired by Bank by assignment or otherwise, including interest thereon and all costs, expenses, and reasonable attorney’s fees (including the fees of in-house counsel) paid or incurred by Bank at any time before or after judgment in attempting to collect any of the foregoing, to realize on any collateral securing any of the foregoing, to realize on any guaranty or indemnity executed in connection with the foregoing, and to enforce this Agreement. The “Obligations” specifically include, but are not limited to, all indebtedness of Borrower to Bank under the Credit Facilities, and all advances made by Bank to or for the benefit of Borrower thereunder, and Surrendered Payments. In the event that Bank makes any Surrendered Payment, including pursuant to a negotiated settlement, the Surrendered Payments shall immediately and automatically without any further action required on behalf of Bank or any other party, be reinstated as Obligations, regardless of whether this Agreement has been terminated, cancelled, or released pursuant to its terms or otherwise and regardless of whether Bank has surrendered, terminated, cancelled, or released this Agreement prior to returning any Surrendered Payments. Unless Borrower shall have otherwise agreed in writing, for the purposes of this Agreement, “Obligations” shall not include “consumer credit” subject to the disclosure requirements of the Federal Truth in Lending Act or any regulations promulgated thereunder.

“Obligated Group” and “Obligated Group Parties” shall mean, collectively, (a) Borrower, (b) La Cometa, (c) PBC, (d) Tejas, (e) Boulder, (f) BN Foods, and (g) RFAC (each, individually, an “Obligated Group Party”).

“PACA” means the Perishable Agricultural Commodities Act, as such may be amended, recodified, and in effect from time to time.

“Patriot Act” has the meaning set forth in Section 8.22 below.

“Payment” and “Payments” have the meaning set forth in Section 2.7 below.

“PBC” has the meaning set forth in Recital C above

“Plan” has the meaning set forth in Section 4.10 below.

“Rader Acquisition” means the acquisition by RFAC and/or the other Obligated Group Parties, of all or a portion of the assets of RADER FARMS, INC., which acquisition is being financed in part with the proceeds of the Credit Facilities.

“Rader Acquisition Assets” means all business assets of RADER FARMS, INC. being acquired by RFAC and/or the other Obligated Group Parties as part of the Rader Acquisition.

“RE Deed of Trust” means that certain Leasehold Deed of Trust, with Assignment of Rents, Security Agreement, and Fixture Filing, executed by RFAC, as Trustor, for the benefit of Bank, as Beneficiary granting a first- priority lien on Lessee’s Rights under the Ground Lease, subject only to such title exceptions as are approved by Bank, which (a) secures the RE Loan Agreement and all obligations of Borrower in connection with the RE Loan, and (b) also secures all obligations of Borrower in connection with the Loans.

“RE Loan” means that certain loan anticipated to be made by Bank to Borrower, in the approximate amount of Four Million and No/100 Dollars ($4,000,000.00) pursuant to the RE Loan Agreement. The Loans and the RE Loan shall be cross-collateralized and cross-defaulted.

“RE Loan Agreement” means that certain loan agreement between Borrower and Bank evidencing the RE Loan, which shall be in form and substance acceptable to Bank.

“RE Loan Closing Date” means the date of recordation of the RE Deed of Trust or such earlier date when any RE Loan proceeds as funded by Bank to Borrower or for Borrower’s benefit.

“RE Loan Documents” means all documents which evidence, guarantee, secure, or otherwise pertain to the RE Loan, including but not limited to the RE Loan Agreement, the RE Deed of Trust, and any other security instrument or agreement securing the RE Loan.

“Request for Credit” means a written request signed by Borrower requesting a disbursement of funds under this Agreement (or a telephonic, telefax, or electronic mail request as allowed pursuant to the terms of this Agreement), together with such documentation and information as Bank may require and meeting the requirements set forth in this Agreement and the other Loan Documents.

“Requirements” means all existing and future laws, regulations, orders, codes, restrictions, and requirements of, and all permits and approvals from, and agreements with and commitments to, all governmental, judicial, or legal authorities having jurisdiction over Borrower’s and/or any other Obligated Group Party’s business.

“RFAC” has the meaning set forth in Recital C above

“RFAC Eligible Inventory” means, collectively, the value of RFAC’s inventory so long as it meets the following conditions:

(i) Ownership. It is owned and assignable by RFAC free of any title defects or all claims, encumbrances and security interests (except Bank’s paramount security interest).

(ii) Location. It is permanently located at locations which RFAC has disclosed to the Bank and which are acceptable to the Bank. If the inventory is covered by a negotiable document of title (such as a warehouse receipt) that document must be delivered to the Bank, and if the inventory is located at any location not owned or leased by any of the Obligated Group Parties, then Bank shall have received a Bailee’s Letter for such inventory.

(iii) Held for Sale; Quality. It is held for sale or use in the ordinary course of RFAC’s business and is of good and merchantable quality. Inventory which is obsolete, unsalable, damaged, defective, discontinued, in-transit, or slow-moving or which has been returned by the buyer, is not includable as part of RFAC Eligible Inventory. Display items, work-in-process and packing and shipping materials are not includable as part of RFAC Eligible Inventory.

(iv) Not on Consignment. It is not placed on consignment.

(v) Acceptable to Bank as Collateral. It is otherwise acceptable to the Bank in Bank’s reasonable discretion.

“Royalties Payable” means, the aggregate of all accrued and unpaid royalties payable of the Obligated Group as show on Borrower’s consolidated balance sheet.

“Security Agreement” means any pledge, assignment, or grant of a security interest in favor of Bank of all or any portion of the Obligated Group’s assets, including the assignment and security interest created in favor of Bank pursuant to that certain Security Agreement (Blanket - All Business Assets) being executed by each Obligated Group Party in favor of Bank dated of even date herewith. Each Security Agreement shall be in form and substance acceptable to Bank.

“Subject Party” means, for any and all financial covenants set for this Agreement, the subject party (i.e., Borrower, Guarantor, Obligated Group, or other applicable party) or each subject party, as the context may require, with respect the particular covenant. For any Subject Party who does not have a separate fiscal year end for tax reporting purposes, the fiscal year will be deemed to be the calendar year.

“Surrendered Payments” means, collectively, the amount of any payments made to Bank or any other party on behalf of Borrower or any other Obligated Group Party (including payments resulting from liquidation of collateral) which are recovered from the Bank by a trustee, receiver, creditor, or other party pursuant to applicable federal or state law.

“Swap Contract” means, individually and collectively, as the context may require, any rate lock agreement or interest rate protection agreement, such as any rate lock agreement, interest rate swap agreement, the International Swaps and Derivatives Association, Inc. Master Agreement, or similar agreement or arrangements now existing or hereafter entered into by Borrower and/or any other Obligated Group Party and Bank in connection with one or more of the Credit Facilities, to hedge the risk of variable rate interest volatility or fluctuations in interest rates, as any such agreement or arrangement may be modified, supplemented and in effect from time to time.

“Swap Payments” has the meaning set forth in Section 5.1.

limitation, all such items as goodwill, trademarks, trademark rights, trade names, trade name rights, brands, copyrights, patents, patent rights, licenses, deferred charges and unamortized debt discount and expenses, (ii) any write-up in the book value of any such assets resulting from a revaluation thereof subsequent to the date of the Agreement, (iii) all reserves which have not already been deducted in calculating total assets on Borrower’s consolidated balance sheet, including reserves for depreciation, depletion, insurance, and inventory valuation, but not including contingency reserves not allocated for any particular purpose and not deducted from assets, (iv) the amount, if any, at which any shares of stock of Borrower or any other Obligated Group Party appear on the asset side of such balance sheet, (v) all liabilities of Borrower or any other Obligated Group Party shown on such balance sheet, (vi) all investments in foreign affiliates and non-consolidated domestic affiliates, and (vii) all accounts or notes due to Borrower or any other Obligated Group Party from any shareholder, director, officer, employee or affiliate of Borrower or any other Obligated Group Party or from any relative of such party.

“Tejas” has the meaning set forth in Recital C above.

“Total Funded Debt” means, for the Obligated Group for the applicable period, the sum of (a) outstanding borrowings under the Credit Facilities and the Real Estate Loan, plus (b) the face amount of issued and outstanding letters of credit, plus (c) the aggregate outstanding principal balance of all other indebtedness for borrowed money, including capital lease obligations, plus (d) the aggregate of all guaranties executed by Borrower or any other Obligated Group Party.

“Unmatured Event of Default” means an event that, with notice or the passage of time, or both, could become an Event of Default.

“Unused Commitment Fee” has the meaning set forth in Section 2.2.

1. Conditions Precedent to Closing and Disbursements.

1.1 Conditions to Closing. Before Bank becomes obligated to close the Loans herein contemplated or make any disbursement under this Agreement, the following closing conditions shall have been satisfied at Borrower’s sole cost and expense in a manner acceptable to Bank in its sole and absolute discretion. No waiver of any closing condition is effective unless expressly made in writing by Bank.

(a) Financial Statements of Borrower and Other Financial Information; Pro Forma Financial Statements and Information.

(i) Borrower shall have delivered to Bank all financial statements and other financial information currently required under the Loan Documents, certified as being true, correct, and complete in all material respects by an authorized officer of Borrower or other applicable parties. All such financial information shall be prepared on a consolidated basis with the other Obligated Group Parties.

(ii) Borrower shall deliver to Bank (1) pro forma financial statements giving effect to the Rader Acquisition, which demonstrate, in the Bank’s reasonable judgment, together with all other information then available to the Bank, that each Obligated Group Party can repay its debts and satisfy its other obligations as and when they become due, and can comply with the financial covenants contained in this Agreement, (2) such information as the Bank may reasonably request to confirm the tax, legal, and business assumptions made in such pro forma financial statements, (3) filed form 10-K financial statements for the fiscal period ended December 30, 2006, and (4) audited financial statements for RADER FARMS, INC. for its prior two (2) fiscal years.

(b) Organizational Documents and Certificates. Borrower shall have delivered to Bank, for each party to each of the Loan Documents:

(i) All organization documents and evidence of due formation and good standing requested by Bank in its sole and absolute discretion.

(ii) All resolutions, certificates of authority, incumbency certificates, or other evidence of authorization requested by Bank in its sole and absolute discretion.

(iii) Evidence of such party’s Federal Tax Identification Number.

(iv) An Article 9 Certificate in form and substance acceptable to Bank.

(c) Loan Documents and Other Items. Borrower shall have duly executed or obtained the due execution of, and delivered to Bank, all Loan Documents and other items required by Bank to be executed in connection with the Loans, including but not limited to this Agreement, the Note, the Security Agreement required hereunder, UCC-1 financing statements, and any and all other such documentation otherwise required by Bank to fulfill the purposes of this Agreement.

(d) Security Interests Perfected. Bank’s security interest in all property pledged as collateral security for the Loans, as described in one or more Security Agreements executed by Borrower, and/or any third party pledgor, in favor of Bank, shall have been duly perfected in a first-priority lien position, except for the Approved Existing Lien Collateral, wherein Bank’s security interest shall have been duly perfected in a second-priority lien position subject only to the applicable Approved Existing Liens.

(e) Insurance. Borrower shall have provided evidence that there is in effect all insurance required by Bank pursuant to this Agreement and the other Loan Documents, written by insurers, and in form and in amount satisfactory to Bank in its sole and absolute discretion.

(f) Accounts Opened. Borrower shall have opened all accounts required pursuant to the Loan Documents, if any.

(g) Fees. Borrower shall have paid to Bank, in immediately available funds, all fees and costs called for under this Agreement or by any Loan commitment letter, including but not limited to the Facility Fee.

(h) No Default. No event shall have occurred and be continuing which would constitute a default or Event of Default (as defined in the applicable document) or an Unmatured Event of Default under any of the Loan Documents.

(i) No Material Adverse Change. Bank shall have received evidence acceptable to Bank, including the financial and other information described in Section 1.1(a) above, and shall have determined that (i) there has been no material adverse change in the financial condition of Borrower and/or any other Obligated Group Party since the most current financial statements and other financial information given to Bank by Borrower, except as disclosed in writing to Bank and found acceptable to Bank in its sole and absolute discretion, and (ii) the Rader Acquisition will not cause a material adverse change in the financial condition of Borrower and/or any other Obligated Group Party.

(j) No Litigation. Bank shall have received evidence acceptable to Bank, and shall have determined, that no litigation or other action, proceedings, or investigation is pending against Borrower or any other Obligated Group Party, except for those previously disclosed by Borrower to Bank in writing, and Bank shall have determined that no such litigation or other action, proceedings, or

investigation exists that could result in a material adverse change in Borrower’s or and/or any other Obligated Group Party’s financial condition, operations, or ability to timely perform any of their respective obligations under the Loan Documents.

(k) Third Party Consents. Bank shall have received, reviewed and approved evidence acceptable to Bank that all third party consents and approvals have been obtained to allow Borrower and/or any other Obligated Group Party, as the case may be, to complete the Rader Acquisition, close the Loans and perform under the Loan Documents, and close the RE Loan and perform under the RE Loan Documents when such are fully executed.

(l) Opinion Letters. Borrower has delivered to Bank a favorable opinion from independent counsel, opining to such matters as Bank may require, in form and substance satisfactory to Bank in its sole and absolute discretion, by counsel acceptable to Bank for Borrower and/or any other parties to the Loan Documents.

(m) Rader Acquisition. Bank has received evidence acceptable to Bank in its sole and absolute discretion that the Rader Acquisition has closed and all Rader Acquisition Assets have been acquired by and transferred to RFAC free and clear of liens and encumbrances other than the Approved Existing Liens, and that the Ground Lease has been acquired by and transferred to RFAC free and clear of liens and encumbrances other than those approved by Bank.

(n) Miscellaneous. Borrower shall have delivered to Bank any other item reasonably deemed necessary by Bank and shall have fulfilled any other condition reasonably required by Bank to fulfill the intention of this Agreement and any Loan commitment issued to Borrower.

1.2 Conditions to Each Disbursement. Before Bank becomes obligated to make any disbursement of funds or to extend any credit or make any financial accommodation under this Agreement, the following conditions shall have been satisfied at Borrower’s sole cost and expense in a manner acceptable to Bank in its sole and absolute discretion. No waiver of any condition is effective unless expressly made in writing by Bank.

(a) Closing Conditions. All closing conditions set forth above shall have been satisfied, and shall be and remain satisfied as of the date of any disbursement of funds or extension any credit, or shall have been waived or deferred by Bank in its sole and absolute discretion.

(b) Request for Credit. For each disbursement or extension of credit under this Agreement, Bank shall have received a complete and accurate Request for Credit from Borrower as described below, and Bank shall have determined that all conditions contained in this Agreement to the disbursement set forth in the Request for Credit have been met.

(c) Representations. All representations and warranties of Borrower and the other Obligated Group Parties under this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of any disbursement of funds or extension any credit.

(d) Closing of Real Estate Loan Prior to Disbursements in Excess of Maximum Funding Amount. Prior to any advance of Loan funds under Facility 1 in excess of the Facility 1 Maximum Funding Amount, the RE Loan shall have closed, the RE Deed of Trust shall have been recorded in the applicable public records, and all conditions to closing and disbursement set forth in the RE Loan Documents shall have been satisfied by Borrower or any other applicable Obligated Group Party (or waived in writing by Bank) as determined by Bank in its sole and absolute discretion.

2. Credit Facilities.

2.1 Scope. The agreement governs Facility 1 and Facility 2, and covers other Credit Facilities, unless otherwise agreed to in writing by Bank and Borrower or prohibited by applicable law. If Bank and Borrower have entered into, or in the future enter into, a separate agreement regarding any Credit Facility other than Facility 1 and Facility 2, in the event of a conflict between the terms of this Agreement and the terms of the other separate written loan agreement or other agreement as to such Credit Facility, the terms of that separate agreement as to such Credit Facility shall control.

2.2 Facility 1 - Revolving Line of Credit Loan.

(a) Revolving Line of Credit. Facility 1 is a revolving line of credit with a within line facility for letters of credit. During the availability period, Borrower may repay principal amounts and reborrow them. Borrower agrees not to permit the outstanding principal balance of Facility 1 plus the outstanding amounts of any letters of credit, including amounts drawn on letters of credit and not yet reimbursed, to exceed the Facility 1 Maximum Committed Amount, as such may be reduced pursuant to Section 2.2(h) below. If Borrower exceeds this limit, Borrower will immediately pay the excess to Bank upon Bank’s demand. Bank may apply payments received from Borrower under this Section to the obligations of Borrower to Bank in the order and the manner as Bank, in its discretion, may determine.

(b) Availability; Borrowing Base. Availability under the Facility 1 line of credit will be governed by a borrowing base formula, and is available between the date of this Agreement and June 30, 2011 (the “Facility 1 Expiration Date”) unless Borrower is in default. The outstanding principal balance of Facility 1 plus the outstanding amounts of any letters of credit, including amounts drawn on letters of credit and not yet reimbursed under Facility 1, shall not exceed the Borrowing Base. Borrower will provide Bank with information regarding the Borrowing Base in such form and at such times as Bank may request.

(c) Maturity Date. The maturity date of Facility 1 is June 30, 2011 (the “Facility 1 Maturity Date”). All sums owing under Facility 1 shall be due and payable no later than the Facility 1 Maturity Date.

(d) Facility 1 Interest Rate and Repayment Terms. All advances under Facility 1 shall bear interest at the interest rate set forth in the Facility 1 Note. The Borrower shall repay Facility 1 pursuant to the terms of the Facility 1 Note.

(e) Facility 1 Maximum Funding Amount Limitation. Notwithstanding anything herein to the contrary, Lender shall not be obligated to make any advance of Loan funds under Facility 1 in excess of the Facility 1 Maximum Funding Amount unless and until the RE Loan has closed, the RE Deed of Trust has been recorded in the applicable public records, and all conditions to closing and disbursement set forth in the RE Loan Documents have been satisfied by RFAC and/or the other applicable Obligated Group Parties (or waived in writing by Bank) as determined by Bank in its sole and absolute discretion.

(f) Unused Commitment Fee. Borrower shall pay to Bank an unused commitment fee (the “Unused Commitment Fee”) on the average daily unused portion of Facility 1 (i) for the calendar quarters ending June, 30, 2007, September 30, 2007, December 31, 2007, March 31, 2008, and June, 30, 2008, at the rate of fifteen-hundredths of one percent (0.15%) (15 basis points) per annum, and (ii) for each calendar quarter thereafter, at the tiered rate determined in accordance with Fee and Rate Schedule attached hereto as Exhibit C, such fee calculated quarterly and payable in arrears by Borrower, in immediately available funds, within fifteen (15) days after the end of each calendar quarter for which the fee is owing.

(g) Voluntary Commitment Reductions. Borrower may elect to voluntarily permanently reduce the Facility 1 Maximum Committed Amount and the remaining available line of credit (each, a “Commitment Reduction”) from time to time so long as all of the following conditions are satisfied as determined by Bank in its sole and absolute discretion, unless otherwise waived in writing by Bank:

(i) Notice of Election to Reduce Commitment. Borrower shall deliver to Bank, at least ten (10) days prior to the requested effective date of such Commitment Reduction (the “Commitment Reduction Date”), a written notice of Borrower’s election to make the Commitment Reduction (a “Commitment Reduction Notice”) in form and substance satisfactory to Bank in its reasonable discretion. The Commitment Reduction Notice shall specify (1) the requested Commitment Reduction Date, which shall be not less than ten(10) days nor more than thirty (30) days after the date of the Commitment Reduction Notice, (2) the amount of the Facility 1 Maximum Committed Amount immediately after the Commitment Reduction (the “New Facility 1 Maximum Committed Amount”), (3) Borrower’s agreement that the outstanding principal balance of Facility 1 plus the outstanding amounts of any letters of credit, including amounts drawn on letters of credit and not yet reimbursed shall not exceed the New Facility 1 Maximum Committed Amount as of the Commitment Reduction Date, and (4) that such Commitment Reduction to the new reduced Facility 1 Maximum Committed Amount shall be a permanent reduction to the Facility 1 Maximum Committed Amount and the remaining availability under the line of credit.

(ii) Outstanding Balance; Principal Paydown. The outstanding principal balance of Facility 1 plus the outstanding amounts of any letters of credit, including amounts drawn on letters of credit and not yet reimbursed, shall not exceed the New Facility 1 Maximum Committed Amount. If the outstanding principal balance of Facility 1 plus the outstanding amounts of any letters of credit, including amounts drawn on letters of credit and not yet reimbursed, exceeds the New Facility 1 Maximum Committed Amount, Borrower shall make a principal payment on or before the Commitment Reduction Date to pay down Facility 1 to the New Facility 1 Maximum Committed Amount, and the Facility 1 Maximum Committed Amount will not be so reduced unless and until such principal payment to pay down Facility 1 to the New Facility 1 Maximum Committed Amount is made.

(iii) No Default. Unless otherwise agreed in writing by Bank, no default or Event of Default (as defined in the applicable document), or Unmatured Event of Default shall have occurred and be continuing under any of the Loan Documents, and if the RE Loan has closed, no default or Event of Default (as defined in the applicable document), or Unmatured Event of Default shall have occurred and be continuing under the RE Loan.

(h) Letters of Credit. This line of credit may be used for financing:

(i) Commercial letters of credit or standby letters of credit but not to extend beyond the Facility 1 Expiration Date. Each commercial letter of credit will require drafts payable at sight.

(ii) The amount of the letters of credit outstanding at any one time (including amounts drawn on the letters of credit and not yet reimbursed) may not exceed One Million and No/100 Dollars ($1,000,000.00).

(iii) For each letter of credit issued hereunder, Borrower shall pay to Bank an annual non-refundable letter of credit fee, payable in advance, in accordance with the Fee and Rate Schedule attached hereto as Exhibit C.

With respect to any letter of credit issued pursuant to this Agreement, Borrower agrees as follows:

(1) Any sum drawn under a letter of credit may, at the option of the Bank, be added to the principal amount outstanding under Facility 1. The amount will bear interest and be due as described elsewhere in this Agreement and the Facility 1 Note.

(2) Upon the occurrence of a default or Event of Default (as defined in that document, subject to applicable notice and cure periods) under any of the Loan Documents, Borrower shall immediately prepay and make Bank whole for any outstanding letters of credit.

(3) The issuance of any letter of credit or any amendment to any letter of credit is subject to the Bank’s prior written approval and shall be in form and substance acceptable to Bank and in favor of a beneficiary acceptable to Bank.

(4) Borrower shall sign Bank’s form of Application and Agreement for Commercial Letter of Credit or Application and Agreement for Standby Letter of Credit and such other related documents reasonably requested by Bank.

(5) Borrower shall pay any issuance and/or other fees that Bank notifies Borrower will be charged for issuing and processing any letter of credit for Borrower.

(6) Borrower shall allow Bank to automatically charge the Account for applicable fees, discounts, and other charges related to any letter of credit issued hereunder.

2.3 Facility 2 - Term Loan.

(a) Term Loan. Facility 2 is a term loan. The Facility 2 Loan Amount shall be disbursed concurrently with the closing of the Loans in a single disbursement (unless otherwise agreed by Bank). Borrower may not reborrow principal amounts repaid under Facility 2.

(b) Maturity Date. The maturity date of Facility 2 is May 31, 2014 (the “Facility 2 Maturity Date”). All sums owing under Facility 2 shall be due and payable no later than the Facility 2Maturity Date.

(d) Facility 2 Interest Rate and Repayment Terms. All advances under Facility 2 shall bear interest at the interest rate set forth in the Facility 2 Note. Borrower shall repay Facility 2 pursuant to the terms of the Facility 2 Note.

2.4 Disbursements.

(a) Disbursement to Pay Fees and Costs; Debit of Loans at Closing. Acting in its reasonable discretion, Bank may use loan funds to pay fees owing to Bank, interest on the Credit Facilities, legal fees and expenses of Bank’s attorneys which are payable by Borrower, and such other sums as may be owing from time to time by Borrower to Bank with respect to the Credit Facilities, all without further notice to or authorization by Borrower. Bank at its option may make any such payment on Borrower’s behalf by (a) debiting loan funds in the amount of the payment and disbursing such amount to itself, or (b) disbursing all or part of the payment amount into the Account (if any), and then either debiting the Account (if any) or invoicing Borrower in the amount of the payment(s). As of the day the Loans close, Bank is authorized to make payments on Borrower’s behalf by debiting loan funds and disbursing such amounts to itself for all costs and expenses payable by Borrower to Bank pursuant to the terms of this Agreement, if such have not been received by Bank in immediately available funds directly from Borrower’s own funds.

(b) Interest on Disbursements. Interest on each disbursement, whether initiated by Borrower or Bank, shall be payable from the time Bank debits loan funds in the amount of such disbursement.

(c) Requests for Credit. Each request for an extension of credit will be made in writing in a manner acceptable to the Bank, or by another means acceptable to the Bank (each, a “Request for Credit”). Borrower authorizes either STEVE WEINBERGER or ERIC KUFEL to sign all Requests for Credit and other documents in connection with the administration of the Credit Facilities. Borrower represents and warrants to Bank that the following signatures are specimen signatures of the persons named in the preceding sentence:

	/s/ Steve Weinberger		/s/ Eric Kufel
	Steve Weinberger		Eric Kufel

(d) Disbursements Into Account. Unless Bank and Borrower have otherwise agreed in writing, Bank shall make disbursements into the Account.

(e) Telephone, Telecopy, or Electronic Mail Authorization.

(i) The Bank may honor telephone, telecopy, or electronic mail instructions for advances or repayments given by any person authorized to sign a Request for Credit pursuant to the terms of this Agreement, or any one of the individual signer(s) of this Agreement, or a person or persons authorized by any person authorized to sign a Request for Credit pursuant to the terms of this Agreement or any one of the signer(s) of this Agreement.

(ii) Borrower hereby indemnifies, defends, and holds Bank and all Indemnified Parties harmless for, from, and against all liability, loss, and costs in connection with any act resulting from telephone, telecopy, or electronic mail instructions it reasonably believes are made by any person authorized to sign a Request for Credit pursuant to the terms of this Agreement, or by one of the individual signer(s) of this Agreement, or by a person or persons authorized by any person authorized to sign a Request for Credit pursuant to the terms of this Agreement or any one of the signer(s) of this Agreement, or by any other individual authorized by Borrower to give such instructions. This indemnity shall survive the termination of Agreement and/or the payment in full of any and all Credit Facilities.

2.5 Disbursement Conditions.

(a) Fulfillment of Conditions. Bank need not make any disbursement under any of the Credit Facilities until Borrower fulfills all conditions of the Loan Documents, at Borrower’s sole cost and expense and in a manner acceptable to Bank in it sole and absolute discretion (unless another standard is specified) including the closing and disbursement conditions set forth in Section 1 above. If Bank makes a disbursement before fulfillment of one or more required conditions, that disbursement alone shall not be a waiver of such conditions, and Bank reserves the right to require their fulfillment before making any subsequent disbursements. Bank shall have no obligation to disburse any loan funds or make an financial accommodations to or for Borrower if an Event of Default has occurred or an Unmatured Event of Default has occurred and is continuing.

(b) Deferral of Conditions; Conditions Subsequent. If Borrower has not fulfilled all closing and disbursement conditions prior to the date set for closing the Loans, Bank, at its option, may close the Loan and may disburse some or all loan funds subject to Borrower’s compliance with any or all such condition(s) as conditions subsequent to the closing. In such event, Bank shall notify Borrower of

the conditions subsequent that must be met and the time period(s) within which Borrower is required to comply. If no time period for compliance is specified by Bank as to any condition subsequent, then Borrower shall comply with such condition subsequent within thirty (30) days of the date of closing of the Loans. Failure of Borrower to comply with all conditions subsequent within the applicable time periods shall be an Event of Default hereunder.

2.6 Facility Fee. Borrower shall pay to Bank in immediately available funds (unless paid from Loan funds as specifically set forth below), on or prior to the closing of the Loans, a closing and facility fee (the “Facility Fee”) in an amount equal to Twenty Thousand and No/100 Dollars ($20,000.00).

2.7 Automatic Deduction.

(a) Payments and Fees. Borrower agrees that payments and fees due from Borrower to Bank on the Notes and/or pursuant to the terms of this Agreement or other Loan Documents (each a “Payment” and collectively, “Payments”), including any Unused Commitment Fees due hereunder, will be deducted automatically on the due date from the Account.

(b) Date of Debit. Bank will debit the Account on the dates that Payments become due. If a due date does not fall on a Banking Day (as such term is defined in the Note), Bank will debit the Account on the first Banking Day following the due date.

(c) Maintenance of Funds. Borrower will maintain sufficient funds in the Account on the dates Bank enters debits authorized by this Agreement. If there are insufficient funds in the Account on the date Bank enters any debit authorized by this Agreement, the debit will be reversed.

(d) Security. Borrower hereby grants to Bank a security interest in the Account, and any other accounts from which Borrower may hereafter authorize Bank to debit payments due on the Credit Facilities, for the purpose of securing the payment of amounts Bank is authorized to deduct from the Account or such other accounts. The security interest is granted only to the extent of such authorized deductions, and does not create a lien to secure any other obligation owed by Borrower to Bank, whether under this Agreement or otherwise.

2.8 Collateral Security.

(a) Collateral. The Credit Facilities shall be secured by all of the following:

(i) Business Assets. A first-priority security interest in all business assets of the Obligated Group, including but not limited to all Rader Acquisition Assets being purchased by RFAC as part of the Rader Acquisition, as more particularly described in one or more Security Agreements; provided, however, that as to any business assets subject to an Approved Existing Lien, Bank shall obtain a second-priority security interest, subject only to the Approved Existing Lien; provided further, however, that with respect to any vehicles currently owned by any being purchased as part of the Rader Acquisition Assets, no lien of Bank on the certificates of title for such vehicles shall be required.

(ii) Accounts. An assignment of, and first-priority security interest in the Account and all other accounts of Borrower, and all funds contained or deposited therein.

(iii) Swap Contract Payments. An assignment of, a lien on, and first-priority security interest in all payments due at any time and from time to time from Bank to Borrower under any Swap Contract.

(b) Release of Collateral. Unless otherwise agreed in writing by Bank, Bank’s security interest in all collateral for the Loan shall be released by Bank when the Credit Facilities are paid in full and no further credit or financial accommodations are available to Borrower thereunder unless such collateral also serves as collateral for other indebtedness of Borrower or any other party to Bank; provided, however, that if there is any conflict in the release terms contained in any security agreement, assignment, or other security instrument as to the terms upon which the Bank’s security interest in the collateral described in that document (or any portion thereof) shall be terminated and/or released, and the terms of this Section, then the terms of any such security agreement, assignment, or other security instrument shall control and govern the collateral described therein.

(c) Collateral Documents. Borrower and each other Obligated Group Party agrees to execute and/or authorize, as the case may be, any and all documents, including security agreements and financing statements, as Bank may reasonably request in order to create, perfect, or continue the security interests described above.

(d) Cross-Collateralization; Payment Application.

(i) Borrower and each other Obligated Group Party understands and acknowledges that certain collateral will secure both Facility 1 and Facility 2, and may secure other Obligations (which will include the RE Loan effective as of the RE Loan Closing Date), and thus Facility 1 and Facility 2 (and any other secured Obligations) will be cross-collateralized by such collateral. Without limitation, at the closing of the Credit Facilities the Security Agreement(s) executed by Borrower and/or the other Obligated Group Parties covering the collateral described therein will cover all Obligations, including Facility 1 and Facility 2, and thus Facility 1 and Facility 2 will be cross-collateralized by such collateral.

(ii) Borrower and each other Obligated Group Party agrees that all involuntary payments and prepayments by liquidation of all or any portion of such collateral, through foreclosure or otherwise, shall be applied to Borrower’s obligations under the Loan Documents, and any other Obligations secured thereby, in such order and manner as Bank shall determine in its sole and absolute discretion.

(iii) Borrower and each other Obligated Group Party understands and agrees that, unless otherwise agreed in writing by Bank, (i) Bank may direct the order and manner of any sale of all or any part of the collateral held for any Credit Facility, and Bank may also bid at any such sale, and (ii) Bank may apply any proceeds of any collateral to payment of Facility 1 and Facility 2 (and any other secured Obligations) in such manner, order, and priority as Bank may elect, whether or not those obligations are guaranteed by any Guaranty or secured by other collateral at the time of the application.

(iv) Each of Borrower, RFAC, and each other Obligated Group Party understands and acknowledges that, effective as of the RE Loan Closing Date, (i) the RE Loan Deed of Trust encumbering the real and personal property described therein (the “RE Property”) will secure the RE Loan and will also secure Facility 1 and Facility 2, thus the RE Loan and Facility 1 and Facility 2 will be cross-collateralized by the RE Property, (ii) the Security Agreement(s) covering Borrower’s and each other Obligated Group Party’s business assets, including the Rader Acquisition Assets, will secure both the RE Loan and the Credit Facilities (and other indebtedness described therein), thus the Credit Facilities and the RE Loan will also be cross-collateralized by the collateral described in the Security Agreement(s). All other collateral for the RE Loan, if any, will also secure the Credit Facilities. All other collateral for the Credit Facilities, if any, will also secure the RE Loan.

(v) Each of Borrower, RFAC, and each other Obligated Group Party agrees that all involuntary payments and prepayments by liquidation of the RE Property, or any portion thereof, as collateral under the RE Deed of Trust, through foreclosure or otherwise, shall be applied (i) first, to Borrower’s obligations under the RE Loan Documents; and (ii) then, to Borrower’s obligations under the Loan Documents and any other Obligations secured thereby in such order and manner as Bank shall determine in its sole and absolute discretion.

2.9 Termination of Existing Revolving Line of Credit. As a material condition and a material consideration of the making of the Loans, Borrower hereby agrees that the existing revolving line of credit loan made pursuant to that certain Loan Agreement (Revolving Line of Credit Loan and Term Loan) dated as of August 19, 2005 between Borrower, formerly known as Poore Brothers, Inc., and Bank, as amended and modified prior to the date hereof, is hereby terminated and Bank shall have no obligation to make any disbursements thereunder. There are no current outstanding sums due under this existing revolving line of credit loan.

3. Covenants of Borrower. Borrower and each other Obligated Group Party, as applicable to their respective businesses and assets, promises to keep each of the covenants set forth below, unless Bank has waived compliance in writing.

3.1 Compliance with Laws; Maintenance of Business. Borrower and each other Obligated Group Party shall (a) comply with Requirements and shall maintain its existence and business operations in accordance therewith, (b) pay its debts and obligations when due under normal terms, and pay on or before their due date, all taxes, assessments, fees, and other governmental monetary obligations (except as may be contested in good faith by proper proceedings if properly reflected on Borrower’s and the applicable Obligated Group Party’s books, and (c) comply with the terms of any and all agreements entered into by Borrower or any other Obligated Group Party, as the case may be, with respect to its business operations, including but not limited to all franchise, licensing, or similar contracts or agreements, unless the failure to comply would not a have materially adverse effect on Borrower’s or any other Obligated Group Party’s business, Borrower’s or any other Obligated Group Party’s financial condition, or Borrower’s or any other Obligated Group Party’s ability to repay the Credit Facilities.

3.2 Taxes; Additional Costs. Borrower shall not deduct any taxes from any payments it makes to the Bank. If any government authority imposes any taxes on any payments made by Borrower, Borrower shall pay the taxes and shall also pay to Bank, at the time interest is paid, any additional amount which the Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such taxes had not been imposed. Upon request by the Bank, Borrower will confirm that it has paid the taxes by giving the Bank official tax receipts (or notarized copies) within thirty (30) days after the due date. However, Borrower will not pay the Bank’s net income taxes. Additionally, Borrower shall pay the Bank, on demand, for the Bank’s costs or losses arising from any statute or regulation, or any request or requirement of a regulatory agency. The costs and losses (a) will be allocated to the loan in a manner determined by the Bank, using any reasonable method, and (b) include the following: (i) any reserve or deposit requirements, and (ii) any capital requirements relating to the Bank’s assets and commitments for credit.

3.3 Insurance.

(a) Borrower and each other Obligated Group Party shall provide, maintain, and keep in force at all times until the Credit Facilities are paid in full and no further credit or financial accommodations are available to Borrower thereunder, any and all insurance Bank may from time to time require, covering (i) property damage (including loss of use and occupancy) to any of Borrower’s properties, (ii) public liability insurance including coverage for contractual liability, product liability and workers’ compensation, and (ii) any other insurance which is usual for Borrower and/or Borrower’s business and/or each other Obligated Group Party and/or its business, all such insurance to be satisfactory to Bank as to amount, nature, and carrier. Such insurance may include (A) comprehensive liability insurance naming

Bank as an additional insured, on an “occurrence” basis against claims for “personal injury” liability, including bodily injury, death, or property damage liability, with limits of not less than those required under current Bank policy, such insurance to be primary and noncontributory with any other insurance carried by Bank, and (B) such policy or policies of worker’s compensation insurance as may be required by applicable worker’s compensation insurance laws (including employer’s liability insurance, if required by Bank), covering all employees of Borrower and each other Obligated Group Party.

(b) All policies of insurance required by Bank shall be issued by companies approved by Bank having an A.M. Best’s rating acceptable to Bank, with limits, coverage, forms, deductibles, inception and expiration dates and cancellation provisions acceptable to Bank. An approval by Bank is not, and may not be deemed to be, a representation of the solvency of any insurer or the sufficiency of any amount of insurance. Each policy of insurance required under the Loan Documents shall provide that it may not be modified or canceled without at least thirty (30) days’ prior written notice to Bank. When any required insurance policy expires, Borrower and any other applicable Obligated Group Parties, as the case may be, shall furnish Bank with proof acceptable to Bank that the policy has been reinstated or a new policy issued, continuing in force the insurance covered by the expired policy. Borrower and any other applicable Obligated Group Parties, as the case may be, shall also furnish evidence satisfactory to Bank that all premiums for such policy have been paid within thirty (30) days of renewal or issuance. If Bank fails to receive such proof and evidence, Bank has the right, but not the obligation, to obtain current coverage and advance funds to pay the premiums for it. Borrower and/or any other applicable Obligated Group Parties, as the case may be, shall repay Bank immediately on demand for any advance for such premiums, which will be an additional loan to Borrower bearing interest at the Default Rate. At Bank’s request, Borrower and any other applicable Obligated Group Parties, as the case may be, shall supply Bank with an original, countersigned original, or certified copy of any policy.

3.4 Payment of Expenses. Borrower shall pay Bank’s reasonable costs and expenses incurred in connection with the making, disbursement, and administration of the Credit Facilities, including Bank’s field audit fees. Borrower shall also pay any and all of Bank’s costs and expenses incurred in connection with any revisions, extensions, renewals, or “workouts” of any of the Credit Facilities, and in the exercise of any of Bank’s rights or remedies under this Agreement. Such costs and expenses include charges for document review and preparation, reasonable legal fees and expenses of Bank’s counsel, and any other reasonable fees and costs for services, regardless of whether such services are furnished by Bank’s employees or agents or independent contractors. Borrower acknowledges that amounts payable under this Section are not included in any loan or commitment fees for any of the Credit Facilities. All such sums incurred by Bank and not immediately reimbursed by Borrower will be considered an additional loan to Borrower bearing interest at the Default Rate.

3.5 Financial and Other Information. Borrower and each other Obligated Group Party shall keep true and correct financial books and records, using GAAP, or such other accounting principles as Bank in its reasonable judgment may find acceptable from time to time. The financial statements and other information required of Borrower under this Section shall be prepared on a consolidated basis including all Obligated Group Parties. Borrower, and each other Obligated Group Party if applicable, shall provide to Bank the following:

(a) Annual Financial Statements; Annual Report on Form 10-K. Via either the Edgar System, Borrower’s Home Page, or such other system acceptable to Bank, within ninety (90) days after the filing of Borrower’s Annual Report on Form 10-K for the fiscal year then ended with the Securities and Exchange Commission, the annual Independent Registered Public Accounting Firm prepared and audited financial statements for such fiscal year as contained in such Annual Report on Form 10-K and, as soon as it shall become available, the annual report to shareholders of Borrower for the fiscal year then ended.

(b) Interim Financial Statements; Quarterly Report on Form 10-Q. For each fiscal quarter other than the last fiscal quarter of each fiscal year, via the Edgar System, Borrower’s Home

Page, or such other system acceptable to Bank, within forty-five (45) days after the filing of its Quarterly Report on Form 10-Q for the fiscal quarter then ended with the Securities and Exchange Commission, copies of the financial statements for such fiscal quarter as contained in such Quarterly Report on Form 10-Q.

(c) Other Reports. Via the Edgar System, Borrower’s Home Page, or such other system acceptable to Bank, promptly after the same become publicly available, copies of all periodic reports, proxy statements, and other materials filed by Borrower or any Affiliate of Borrower with the Securities and Exchange Commission or any governmental authority succeeding to any or all of the functions of the Securities and Exchange Commission.

(d) Compliance Certificate. Within forty-five (45) days after the end of each fiscal quarter, a certificate in the form attached hereto as Exhibit A (each, a “Compliance Certificate”), executed by Borrower’s chief financial officer or other officer or person acceptable to Bank, certifying (1) that the Obligated Group is in compliance with the financial covenants set forth in this agreement, including (i) the minimum Fixed Charge Coverage Ratio required under Section 3.17, (ii) the maximum Leverage Ratio required under Section 3.17, and (ii) the minimum Tangible Net Worth required under Section 3.17, (2) that the representations and warranties set forth in the Agreement are true and correct as of the date of the certificate, and (3) that, as of the date of the certificate, no default or Event of Default, or Unmatured Event of Default, has occurred and is continuing under the Agreement.

(e) Agings of Accounts Receivable Report. Within thirty (30) days after the end of each calendar month, the Obligated Group’s detailed aging by invoice date of accounts and contracts receivable as of the last day of such monthly reporting period, together with an explanation of any adjustments made at the end of such period.

(f) Accounts Payable Report. Not later than thirty (30) days after the end of each calendar month, the Obligated Group’s detailed accounts payable report as of the last day of such period, together with an explanation of any adjustments made at the end of such period. Such detailed accounts payable report shall include Royalties Payable.

(g) Inventory Report. Not later than thirty (30) days after the end of each calendar month, the Obligated Group’s detailed schedule of inventory, together with an explanation of any adjustments made at the end of such period. Such detailed inventory report shall include the total of all inventory of the Obligated Group, and the portions of such total representing (i) Eligible Raw Material Inventory, (ii) Eligible Finished Goods Inventory, and (iii) RFAC Eligible Inventory.

(h) Borrowing Base Certificate. Not later than thirty (30) days after the end of each calendar month, or as otherwise requested by Bank, a certificate in the form attached hereto as Exhibit B (each, a “Borrowing Base Certificate”) executed by Borrower’s chief financial officer or other officer or person acceptable to Bank and detailing the status of the Borrowing Base as of the last day of the applicable calendar month. Such borrowing base certificate shall include the calculated total of the Borrowing Base.

(i) Monthly Leadership Financial Package. Promptly upon the request of Bank, Borrower’s monthly leadership financial package, together with such related information as requested by Bank.

(j) Other Information. Promptly upon the request of Bank, such other information as Bank may reasonably request concerning the affairs and properties of Borrower and/or any other Obligated Group Party.

Notwithstanding anything in this Section to the contrary, if for any reason the Edgar System, Borrower’s Home Page, and/or such other system acceptable to Bank are not available to Borrower as is required for making available the financial statements or reports referred to above, Borrower shall then furnish a copy of such financial statements or reports to Bank.

By signing where indicated below in this Agreement, the Obligated Group Parties hereby authorize Borrower to represent, warrant, and certify on their behalf as to the financial covenants and other items concerning the Obligated Group set forth in Compliance Certificate and as to any other financial and other information provided by Borrower to Bank concerning the Obligated Group and/or any individual Obligated Group Party.

3.6 Notices. Borrower and any other Obligated Group Party to the extent applicable to them shall notify Bank promptly in writing of any and all of the following:

(a) Any existing and/or threatened litigation, claims, investigations, administrative proceedings, and similar actions affecting Borrower or any other Obligated Group Party where, if monetary in nature, the amount claimed is or may be Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or more, and which (i) is not dismissed within sixty (60) days of the filing thereof, and (ii) is not Covered by Insurance.

(b) Any material adverse change in Borrower’s or any Guarantor’s financial condition, any material adverse change in Borrower’s any other Obligated Group Party’s operations, or any other circumstance, event, or occurrence that results in a material adverse change in Borrower’s or any Guarantor’s ability to timely perform any of its obligations under any of the Loan Documents.

(c) Any notice that Borrower’s or any Guarantor’s business fails in any respect to comply with any Requirement, and/or any material dispute between Borrower and any Guarantor, or between Borrower or any Guarantor and any government authority.

(d) Any (i) material dispute between Borrower, or other Obligated Group Party, and any third party franchisor or licensor, where such party’s franchise or license is material to Borrower’s or any other Obligated Group Party’s business, or (ii) any default or breach under any franchise agreement or license agreement to which Borrower or other Obligated Group Party is a party, where the franchise or license under such agreement is material to Borrower’s or any other Obligated Group Party’s business.

(e) Any change in Borrower’s or any other Obligated Group Party’s name, legal structure or business structure, state in which Borrower or any other Obligated Group Party has filed its entity incorporation or organizational documents, and/or location of its place of business or its chief executive office if it has more than one place of business, Borrower’s or any other Obligated Group Party’s organizational identification number assigned by the state of its incorporation or organization, and/or any change in the location of Borrower’s or any other Obligated Group Party’s books and records, all which are currently located at Borrower’s chief executive office (except as otherwise disclosed in writing to Bank).

(f) The institution of any steps by Borrower or any other Obligated Group Party to withdraw from or terminate any employee benefit plan as to which Borrower or any other Obligated Group Party may have liability.

(g) Any Change in Control or any change in the key management of Borrower.

(h) Any default, Event of Default, or Unmatured Event of Default under any of the Loan Documents by Borrower or any other Obligated Group Party and any alleged breach or default any of the Loan Documents by Bank.

(i) Any notice that any collateral for the Credit Facilities is subject to any Grower Lien.

3.7 Audits. Borrower shall allow Bank and its agents to inspect Borrower’s, and any other Obligated Group Party’s properties and examine, audit, and make copies of Borrower’s, and any other Obligated Group Party’s books and records at any reasonable time. If any of Borrower’s or any other Obligated Group Party’s properties, books, or records are in the possession of a third party, Borrower or and each other Obligated Group Party authorizes that third party to permit Bank or its agents to have access to perform inspections or audits and to respond to Bank’s requests for information concerning such properties, books and records.

3.8 Keeping Guarantors and Third Party Pledgors Informed. If any Credit Facility is guaranteed at any time, or of any third party has pledged or hypothecated any collateral for any Credit Facility, Borrower shall keep each Obligated Group Party and any other Guarantor and/or third party pledgor informed of Borrower’s financial condition and business operations, and any and all other circumstances that may affect Borrower’s ability to pay or perform its obligations under the Loan Documents. However, any failure to do so shall not give rise to any defense to any Guarantor and/or third party pledgor.

3.9 Use of Proceeds. Borrower shall use the Loans for the purposes described in Recital A. above unless other wise agreed in writing by Bank.

3.10 Performance of Acts. Upon Bank’s request, Borrower and each other Obligated Group Party shall perform all acts necessary or advisable to perfect any lien or security interest provided for in the Loan Documents or to carry out the intent of the Loan Documents.

3.11 Maintenance of Properties; Preservation of Rights. Borrower and each other Obligated Group Party shall make any repairs, renewals, or replacements to keep its respective properties in good working condition. Borrower and each other Obligated Group Party shall obtain, preserve and maintain in good standing, as applicable, all rights, privileges and franchises necessary or desirable for the operation of its respective business.

3.12 Indemnity Regarding Hazardous Substances and Other Risks. Borrower and each other Obligated Group Party’s indemnifies, defends, and holds the Indemnified Parties harmless for, from, and against any and all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages), costs, expenses, fines, penalties, and losses (including sums paid in settlement of claims and all reasonable consultant, expert and legal fees and expenses of Bank’s counsel), and any resulting damages, harm or injuries to the person or property of any third parties, directly or indirectly arising out of or resulting from (a) the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of any Hazardous Substance by Borrower, any other Obligated Group Party, or any of their affiliates, and the officers, directors, employees, and agents of each of them, (b) any failure to satisfy any Requirements, (c) breach of any representation or warranty made or given by Borrower or any other Obligated Group Party to any of the Indemnified Parties, and/or (d) any claim or cause of action of any kind by any party that any Indemnified Party is liable for any act or omission of Borrower or any other Obligated Group Party or any other person or entity in connection with the ownership or operation or Borrower’s or any other Obligated Group Party’s respective businesses or any property of Borrower or any other Obligated Group Party, excepting those arising out of, or resulting, solely from the applicable Indemnified Party’s gross negligence or willful misconduct. Notwithstanding, anything to the contrary in any other Loan Document, the provisions of this Section shall survive the termination of this Agreement and the repayment of any and/or all of the Credit Facilities.

3.13 Other Debts. Except as otherwise disclosed in writing to Bank prior to the date of this Agreement or provided herein or in any other Loan Document, without Bank’s prior written consent, Borrower and each other Obligated Group Party agrees that it shall not have outstanding or incur any direct or contingent debts or lease obligations (other than those to Bank), or become liable for the debts of others. This does not prohibit:

(a) Acquiring goods, supplies, or merchandise on normal trade credit.

(b) Endorsing negotiable instruments received in the usual course of business.

(c) Debts, lines of credit, and/or leases in existence on the date of this Agreement previously disclosed in writing to Bank.

3.14 Other Liens. Except as otherwise disclosed in writing to Bank prior to the date of this Agreement or provided herein or in any other Loan Document, without Bank’s prior written consent, Borrower and each other Obligated Group Party agrees that it shall not create, assume, or allow any security interest or lien (including judicial liens) on property such party now or later owns, except:

(a) Security agreements and other security instruments in favor of Bank.

(b) Liens for taxes not yet due.

(c) Liens outstanding on the date of this Agreement previously disclosed in writing to the Bank, which includes the Approved Existing Liens.

3.15 Negative Covenants. Without Bank’s prior written consent, Borrower and each other Obligated Group Party agrees that it shall not:

(a) engage in any business activities substantially different from such party’s present business;

(b) liquidate or dissolve its business;

(c) lease, sell, or otherwise dispose of all or a substantial part of its business or assets or sell or otherwise dispose of any assets for less than fair market price, or sell or make any distribution of its assets that could adversely affect Borrower’s or such party’s financial condition;

(d) enter into any consolidation, merger, pool, joint venture, syndicate or other combination;

(e) enter into any sale and leaseback agreement covering any of the fixed or capital assets of such party;

(f) acquire or purchase a business or its assets;

(g) cause, permit, or suffer any direct or indirect Change in Control in Borrower or any other Obligated Group Party; or

(h) make any loans, advances, or other extensions of credit to anyone.

case may be, may have any liability, in compliance with all applicable laws, rules, and regulations. Borrower and each other Obligated Group Party shall at all times comply with, and cause each Guarantor to comply with, the provisions of ERISA with respect to any retirement or other employee benefit plan to which it/they is/are a party as employer. As soon as possible after Borrower or and any other Obligated Group Party knows, or has reason to know, that any Reportable Event (as defined in ERISA) with respect to any such plan of Borrower, any other Obligated Group Party, or any Guarantor has occurred, it shall furnish to Bank a written statement setting forth details as to such Reportable Event and the action, if any, which Borrower or the applicable other Obligated Group Party or applicable Guarantor proposes to take with respect thereto, together with a copy of the notice of such Reportable Event furnished to the Pension Benefit Guaranty Corporation.

3.17 Financial Covenants. Financial terms used herein which are not specifically defined herein shall have the meanings ascribed to them under GAAP. Borrower and each other Obligated Group Party understands and acknowledges that a default of any of the covenants set forth shall be an Event of Default under this Agreement.

(a) Fixed Charge Coverage Ratio. The Obligated Group shall maintain, and Borrower shall cause the Obligated Group to maintain, a Fixed Charge Coverage Ratio of at least 1.15 to 1.00. This Fixed Charge Coverage Ratio shall be tested quarterly (i) on a cumulative consolidated basis for the first four quarters ending after the Closing Date, and (ii) thereafter, on a rolling four (4) quarter basis, calculated at the end of each fiscal quarter, using the results of that fiscal quarter and each of the three (3) immediately preceding fiscal quarters.

(b) Leverage Ratio. The Obligated Group shall maintain, and Borrower shall cause the Obligated Group to maintain, a Leverage Ratio as of the last day of each fiscal year quarter beginning with fiscal quarter ended June, 30, 2008, of not more than 3.50 to 1.00.

(c) Tangible Net Worth. The Obligated Group shall maintain, and Borrower shall cause the Obligated Group to maintain, Tangible Net Worth as of June 30, 2007 of at least the Initial Minimum TNW Amount, and thereafter, of at least the Minimum TNW Amount.

4. Representations and Warranties. Borrower and each other Obligated Group Party promises that each representation and warranty set forth below is and will be true, accurate and correct as of the date of this Agreement as to such party to the extent applicable. Each Request for Credit delivered to Bank will be deemed a reaffirmation of each and every representation and warranty made by Borrower and each other Obligated Group Party in this Agreement.

4.1 Authority; Enforceability. Borrower and each other Obligated Group Party has complied with any and all laws and regulations concerning its organization, existence, and the transaction of its business. Borrower and each other Obligated Group Party and each Guarantor is authorized to execute, deliver, and perform its obligations under the Loan Documents. Those documents are valid and binding obligations of Borrower, each other Obligated Group Party, and each Guarantor, as applicable.

4.2 Compliance With Law. Borrower and each other Obligated Group Party is familiar and has complied with all of the Requirements, as well as all other applicable laws, regulations, and ordinances. No provision or obligation of Borrower, each other Obligated Group Party, or any Guarantor contained in any of the Loan Documents violates any of the Requirements or any order or ruling of any court or governmental entity.

4.3 No Violation. The execution and delivery of this Agreement and the other Loan Documents and performance by Borrower and each other Obligated Group Party of its obligations hereunder and thereunder will not result in a default under any other material agreement to which Borrower or any other Obligated Group Party is a party.

4.4 No Claims. No claims, actions, proceedings, or investigations are pending against Borrower or any other Obligated Group Party, except for those previously disclosed by Borrower and/or such other Obligated Group Party to Bank in writing. To the best of Borrower’s and each other Obligated Group Party’s knowledge, no threat of any such claim, action, proceeding, or investigation exists, except for those previously disclosed by Borrower or such other Obligated Group Party to Bank in writing.

4.5 Financial Information. All financial information delivered to Bank, including all information relating to the financial condition of Borrower and/or any other Obligated Group Party fairly and accurately represents the financial condition being reported on as of its date. All such information is prepared in accordance with GAAP consistently applied, unless otherwise noted. There has been no material adverse change in the financial condition of Borrower and/or any other Obligated Group Party, except as previously disclosed to Bank in writing in later financial information and found acceptable to Bank in its sole and absolute discretion.

4.6 Accuracy. All reports, documents, instruments, information, and forms of evidence delivered to Bank concerning the Credit Facilities or required by this Agreement, any loan commitment, and/or the other Loan Documents are accurate, correct, and sufficiently complete to give Bank true and accurate knowledge of their subject matter. None of them contains any misrepresentation or material omission.

4.7 Taxes. Borrower, and each other Obligated Group Party to the extent applicable, has filed all required state, federal, and local income tax returns and has paid all taxes when due and payable. Borrower and each other Obligated Group Party knows of no basis for any additional assessment of taxes.

4.8 Borrower Not a “Foreign Person”. Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time. No other Obligated Group Party is a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time.

4.9 No Breaches or Defaults. No event has occurred and is continuing which would constitute a default or Event of Default (as defined in the applicable document) or an Unmatured Event of Default under any of the Loan Documents.

4.10 ERISA Plans. Either:

(a) Borrower, and each other Obligated Group Party, are not parties in interest to any plan defined or regulated under ERISA (each, a “Plan”), and the assets of Borrower and/or any other Obligated Group Party are not “plan assets” of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code, or

(b) If Borrower or any other Obligated Group Party is a party in interest to a plan defined or regulated under ERISA, then all of the following are true: (i) each of Borrower and such other Obligated Group Party has fulfilled its obligations, if any, under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and has not incurred any liability with respect to any Plan under Title IV of ERISA, (ii) no reportable event has occurred under Section 4043(b) of ERISA for which the PBGC requires thirty (30) days notice, (iii) no action by Borrower and/or any other Obligated Group Party to terminate or withdraw from any Plan has been taken, and no notice of intent to terminate a Plan has been filed under Section 4041 of ERISA, and (iv) no proceeding has been commenced with respect to a Plan under Section 4042 of ERISA, and no event has occurred or condition exists which might constitute grounds for the commencement of such a proceeding.

4.11 Disclosure to Guarantors and Third Parties. Before any Guarantor and/or any other third party (if any) became obligated in connection with the Credit Facilities (or any of them) or under any of the Loan Documents, Borrower made full disclosure to that Guarantor and/or third party trustor or pledgor regarding Borrower’s financial condition and business operations, and all other circumstances bearing upon Borrower’s ability to pay and perform its obligations under the Loan Documents.

5. Swap Contract. Not later than ninety (90) days after the Closing Date, Borrower may elect to purchase from Bank a swap for one or more of the Credit Facilities, which if purchased will be governed by a Swap Contract entered into between Bank and Borrower. The Swap Contract is a “Loan Document.” Capitalized terms used here without definition shall have the meanings given to them in the Swap Contract. With respect to the any swap purchased and to each Swap Contract executed by Borrower, the following shall apply:

5.1 Swap Payments; Grant of Security Interest. Under each Swap Contract, Bank or Borrower may be obligated from time to time to make certain payments (“Swap Payments”) to the other party. Each Swap Payment to be made by Bank to Borrower shall be collateral for the Credit Facilities. Effective as of the date that Borrower and Bank executed any Swap Contract, as security for the prompt payment and performance of the Credit Facilities, and all obligations and indebtedness of Borrower to Bank under the Loan Documents, and all renewals, extensions, modifications, amendments, and/or supplements thereto, Borrower hereby irrevocably and unconditionally assigns, grants, pledges, transfers, and sets over to Bank, and there is hereby created a security interest in favor of Bank, in and to each Swap Payment due from Bank to Borrower, whether now or hereafter existing, and all proceeds thereof.

5.2 No Assumption of Borrower’s Obligations. Borrower expressly understands and agrees that Bank does not assume any duties or obligations of Borrower arising out of the Note, any Swap Contract, or any other Loan Document.

6. Default and Remedies.

6.1 Events of Default. An Event of Default will occur under this Agreement upon the occurrence of any of the following events:

(a) Borrower fails to make any payment of principal or interest under the Note within ten (10) days after the date when due; or

(b) Borrower fails to comply with any provision or covenant contained in this Agreement calling for the payment of money and does not cure that failure within ten (10) days after written notice from Bank; or

(c) Borrower or any Guarantor becomes insolvent or the subject of any Insolvency Proceeding, or any such party consents to the appointment or taking of possession by a receiver (or similar official) with respect to its business or property, or makes an assignment for the benefit of creditors; provided, however, that any involuntary Insolvency Proceeding shall not be considered an Event of Default hereunder if it is either (i) consented to in writing by Bank, or (ii) dismissed within ninety (90) days of the filing thereof; or

(d) Borrower or any Guarantor dissolves or liquidates; or

(e) Any representation or warranty when made or given in any of the Loan Documents proves to be false or misleading in any material respect; or

(f) A material adverse change in Borrower’s or any Guarantor’s financial condition, or an event or condition materially impairing Borrower’s or any Guarantor’s ability to repay the Loans occurs; or

(g) Borrower fails to meet the conditions of, or fails to perform any obligation under, any other agreement Borrower has with Bank or any affiliate of Bank; or

(h) Any Guarantor fails to meet the conditions of, or fails to perform any obligation under, any other agreement any of Guarantor or such affiliated person has with Bank or any affiliate of Bank (subject to applicable notice and cure periods); or

(i) Borrower defaults under any agreement in connection with any credit in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00) or more that Borrower has obtained from anyone else if the default consists of failing to make a payment when due or gives the other lender the right to accelerate the obligation; or

(j) Any Guarantor defaults under any agreement in connection with any credit in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00) or more that Guarantor has obtained from anyone else if the default consists of failing to make a payment when due or gives the other lender the right to accelerate the obligation (each subject to applicable notice and cure periods); or

(k) Any of the following occurs: (i) a lawsuit is filed against Borrower or any Guarantor where the amount claimed is Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or more and which (A) is not dismissed within sixty (60) days of the filing thereof, and (B) is not Covered by Insurance, (ii) a judgment or judgments are entered against Borrower or any Guarantor, or (iii) any government authority takes action materially adversely affecting Borrower’s or any Guarantor’s ability to repay the Loans; or

(l) Bank fails to have an enforceable first-priority lien on or first-priority security interest in any property given as security for the Loans, except as otherwise agreed by Bank in writing, and except for as to Approved Existing Lien Collateral wherein it shall only be an Event of Default hereunder if Bank fails to have an enforceable second-priority lien on or second-priority security interest in such collateral, subject only the applicable Approved Existing Lien(s); or

(m) Under any of the Loan Documents, a default or an Event of Default (as defined in that document, subject to applicable notice and cure periods) occurs; or

(n) The occurrence of any one or more of the following events with respect to Borrower and/or any other Obligated Group Party, provided such event or events could reasonably be expected, in the judgment of the Bank, to subject Borrower and/or any other Obligated Group Party to any tax, penalty, or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of Borrower and/or any other Obligated Group Party with respect to a Plan: (i) a reportable event shall occur with respect to a Plan which is, in the reasonable judgment of the Bank, likely to result in the termination of such Plan for purposes of Title IV of ERISA, or (ii) any Plan termination (or commencement of proceedings to terminate a Plan) or the Borrower’s and/or any other Obligated Group Party’s full or partial withdrawal from a Plan; or

(o) A default or Event of Default (as defined in that document, subject to applicable notice and cure periods) occurs under any Guaranty, or any Guaranty becomes unenforceable for any reason, or any Guarantor purports to revoke or terminate its Guaranty; or

(p) Borrower or the Obligated Group or any Obligated Group Party, as the case may be, has failed to timely deliver to Bank any Compliance Certificate or Borrowing Base Certificate, or (i)

fails to maintain at least the minimum Fixed Charge Coverage Ratio required under Section 3.17, (ii) exceeds the maximum Leverage Ratio required under Section 3.17, or (iii) fails to maintain at least the minimum Tangible Net Worth required under Section 3.17; or

(q) Under any Swap Contract, a default or an Event of Default (as defined in that document, subject to applicable notice and cure periods) of Borrower occurs; or

(r) After the closing of the RE Loan, under any of the RE Loan Documents a default or an Event of Default (as defined in that document, subject to applicable notice and cure periods) occurs; or

(s) Borrower and/or any other Obligated Group Party fails to comply with any provision contained in this Agreement, other than those events specifically referred to above and thus set out as separate Events of Default in this Section 6.1.

6.2 Remedies.

(a) If an Event of Default occurs under this Agreement, Bank may exercise any right or remedy under any of the Loan Documents or otherwise available at law or in equity, and all of Bank’s rights and remedies are cumulative. If any Event of Default occurs, Bank’s obligation to lend under the Loan Documents automatically terminates, and Bank in its sole and absolute discretion may withhold any one or more disbursements. Bank may also withhold any one or more disbursements after an Unmatured Event of Default occurs and is continuing. By making any disbursement under any Credit Facility, Bank will not be deemed to have waived any Event of Default unless Bank agrees otherwise in writing in each instance.

(b) If Borrower or any other Obligated Group Party becomes the subject of any Insolvency Proceeding (which, if an involuntary Insolvency Proceeding has not been (i) consented to in writing by Bank, or (ii) dismissed within ninety (90) days of the filing thereof), all of Borrower’s and the other Obligated Group Parties obligations under the Loan Documents automatically become immediately due and payable upon the filing of the petition commencing such proceeding, all without notice of default, presentment or demand for payment, protest, or notice of nonpayment or dishonor, or other notices or demands of any kind or character. Upon the occurrence of any other Event of Default, all of Borrower’s obligations under the Loan Documents may become due and payable immediately without notice of default, presentment, or demand for payment, protest, or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all at Bank’s option, exercisable in its sole and absolute discretion. If such acceleration occurs, Bank may apply any undisbursed loan funds and any sums in the Account (if any) to Borrower’s obligations under the Loan Documents, in any order and proportions as Bank may determine in its sole and absolute discretion.

(c) As security for the payment and performance of all obligations of Borrower and the other Obligated Group Parties under the Loan Documents, Borrower hereby grants Bank a security interest in, a lien on, and an express contractual right to set off against all depository account balances, cash, and any other property of Borrower and the other Obligated Group Parties now or hereafter in the possession of Bank and the right to refuse to allow withdrawals from any account. Without limiting the foregoing, the security interest granted herein and the right of setoff granted to Bank hereunder is intended to cover and include the Account. Bank may, at any time upon the occurrence of any default or Event of Default or Unmatured Event of Default under this Agreement or any other Loan Document, setoff against any amounts outstanding under any of the Credit Facilities whether or not such Credit Facility or any portion thereof is then due or has been accelerated, all without any advance or contemporaneous notice of demand of any kind to Borrower or any other Obligated Group Party, such notice and demand being expressly waived.

7. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER, AND TO THE EXTENT APPLICABLE, EACH OTHER OBLIGATED PARTY, HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OR OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DISCUSSIONS, DEALINGS, OR ACTIONS OF THE PARTIES TO THIS AGREEMENT OR EITHER OF THEM (WHETHER ORAL OR WRITTEN) WITH RESPECT THERETO, OR TO THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREINAFTER ARISING, AT LAW OR IN EQUITY, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND EACH OTHER OBLIGATED PARTY, HEREBY CONSENTS AND AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY A TRIAL COURT WITHOUT A JURY, AND THAT EITHER PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY HEREOF WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER AND EACH OTHER OBLIGATED PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. BORROWER AND EACH OTHER OBLIGATED PARTY, ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF THIS AGREEMENT AND EACH OTHER DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK IN MAKING THE LOANS. BORROWER AND EACH OTHER OBLIGATED PARTY FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

8. Miscellaneous Provisions.

8.1 No Waiver; Consents. Each waiver by Bank must be in writing, and no waiver may be construed as a continuing waiver. No waiver shall be implied from Bank’s delay in exercising or failure to exercise any right or remedy against Borrower or any other Obligated Party. Bank’s consent to any act or omission by Borrower or any other Obligated Party shall not be construed as a consent to any other or subsequent act or omission or as a waiver of the requirement for Bank’s consent to be obtained in any future or other instance. All Bank’s rights and remedies are cumulative.

8.2 Standard for Bank Approvals; Purpose and Effect of Bank Approval. Unless a different standard is specifically prescribed, (a) all documents and items submitted to Bank under this Agreement or under the other Loan Documents must be acceptable to Bank in its sole and absolute discretion, and (b) consents and approvals by Bank required under this Agreement or under the other Loan Documents shall be in Bank’s sole and absolute discretion. Bank’s approval of any matter in connection with any Credit Facility is for the sole purpose of protecting Bank’s and rights. No such approval shall result in a waiver of any default of Borrower or any other Obligated Party. In no event shall Bank’s approval be a representation of any kind with regard to the matter being approved.

8.3 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and benefit of Bank and Borrower and their permitted successors and assigns. No trust fund is created by this Agreement, and no other persons or entities have any right of action under this Agreement or any right to any funds, credit, or financial accommodation under any Credit Facility.

8.4 Joint and Several Liability. If more than one person or entity executes this Agreement as Borrower, each shall be jointly and severally liable to Bank for the faithful performance of the obligations of Borrower under this Agreement and the other Loan Documents.

8.5 Notices. All notices given under this Agreement shall be in writing and be given by personal delivery, overnight receipted courier (such as UPS, Airborne, or Federal Express) or by registered or certified United States mail, postage prepaid, sent to the party at its address appearing below its signature. Notices shall be effective upon the first to occur of receipt, when proper delivery is refused, or the expiration of forty-eight (48) hours after deposit in registered or certified United States mail as described above. Addresses for notice may be changed by any party by notice to any other party in accordance with this Section. If more than one person or entity executes this Agreement as Borrower, service of any notice on any one Borrower shall be effective service on all Borrower parties for all purposes.

8.6 Actions. Bank shall have the right, but not the obligation, to commence, appear in, and defend any action or proceeding that might affect its security or its rights, duties, or liabilities relating to the Credit Facilities or any of the Loan Documents. Borrower shall pay promptly on demand all of Bank’s out-of-pocket costs, expenses, and reasonable legal fees and expenses of Bank’s counsel incurred in those actions or proceedings.

8.7 Attorneys’ Fees. In any lawsuit or arbitration arising out of or relating to this Agreement, the Loan Documents or any of the Credit Facilities, the prevailing party will be entitled to recover from each other party such sums as the court or arbitrator adjudges to be reasonable attorneys’ fees in the action or arbitration, in addition to costs and expenses otherwise allowed by law. In all other actions or proceedings, including any matter arising out of or relating to any Insolvency Proceeding, Borrower agrees to pay all of Bank’s costs and expenses, including reasonable attorneys’ fees, incurred in enforcing or protecting Bank’s rights or interests. From the time(s) incurred until paid in full to Bank, all such sums shall bear interest at the Default Rate. Whenever Borrower is obligated to pay or reimburse Bank for any attorneys’ fees, those fees include the allocated costs for services of in-house counsel, to the extent not prohibited by applicable law.

8.8 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Arizona, without regard to the choice of law rules of that State, except to the extent that any of such laws may now or hereafter be preempted by Federal law. Borrower and each other Obligated Party consents to the jurisdiction of any Federal or State court within the State of Arizona, submits to venue in such state, and also consents to service of process by any means authorized by Federal law or the law of such state. Without limiting the generality of the foregoing, Borrower and each other Obligated Party hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) Borrower or any other Obligated Party is not subject to the jurisdiction of the courts of the above-referenced state or the United States District Court for such state, or (ii) such suit, action, or proceeding is brought in an inconvenient forum, or (iii) the venue of such suit, action, or proceeding is improper.

8.9 Heirs, Successors, and Assigns; Participations. The terms of this Agreement shall bind and benefit the heirs, legal representatives, successors, and assigns of the parties; provided, however, that Borrower may not assign this Agreement or any rights under any Credit Facility, or assign or delegate any of its rights or obligations, without the prior written consent of Bank in each instance. Bank in its sole and absolute discretion may sell or assign any Credit Facility or participations or other interests in all or part of Credit Facility on the terms and subject to the conditions of the Loan Documents, all without notice to or the consent of Borrower or any other Obligated Party. Also without notice to or the consent of Borrower or any other Obligated Party, Bank or its affiliates may disclose to any actual or prospective purchaser of any securities issued or to be issued by Bank and to any actual or prospective purchaser or assignee of any participation or other interest in any Credit Facility (whether under this Agreement or otherwise), any financial or other information, data or material in Bank’s possession relating to Borrower, any other Obligated Party, or any Credit Facility.

8.10 Relationships With Other Bank Customers. From time to time, Bank may have business relationships with Borrower’s or any other Obligated Party’s customers, suppliers, contractors, tenants, partners, members, shareholders, officers, or directors, or with businesses offering products or services similar to those of Borrower or any other Obligated Party, or with persons seeking to invest in, borrow from, or lend to Borrower or any other Obligated Party. Borrower and each other Obligated Party agrees that Bank may extend credit to such parties and take any action it deems necessary to collect the credit, regardless of the effect that such extension or collection of credit may have on Borrower’s or any other Obligated Party’s financial condition or operations. Borrower and each any other Obligated Party further agrees that in no event shall Bank be obligated to disclose to Borrower or any other Obligated Party any information concerning any other Bank customer.

8.11 Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall in no way affect any other provision. If any court of competent jurisdiction determines any provision of this Agreement or any of the other Loan Documents to be invalid, illegal or unenforceable, that portion shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable portion had never been a part of the Loan Documents.

8.12 Interpretation. Whenever the context requires, all words used in the singular shall be construed to have been used in the plural, and vice versa, and each gender shall include any other gender. The captions of the sections of this Agreement are for convenience only and do not define or limit any terms or provisions. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.” No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Agreement. Whenever any provision of this Agreement, including any representation, covenant, or Event of Default contained herein, applies to a guarantor, third party pledgor, or any other party to any Loan Document other than Borrower or the other Obligated Parties, such provision only applies to such party during the time that such party’s guaranty, pledge, or other Loan Document, as applicable, remains in effect.

8.13 Amendments. This Agreement may not be modified or amended except by a written agreement signed by the party against whom enforcement is sought.

8.14 Counterparts. This Agreement and any attached consents or exhibits requiring signatures may be executed in counterparts, and all counterparts constitute but one and the same document.

8.15 Language of Agreement. The language of this Agreement shall be construed as a whole according to its fair meaning and not strictly for or against any party.

8.16 Exchange of Information. Borrower and each other Obligated Party agrees that Bank may exchange or disclose financial and other information about Borrower and any other Obligated Party with or to any of Bank’s affiliates or other related entities and with any party that acquires a participation or other interest in all or part of any Credit Facility.

8.17 Survival. The representations, warranties, acknowledgments, and agreements set forth herein shall survive the date of this Agreement.

8.18 Further Performance. Borrower and each other Obligated Party, whenever and as often as they shall be requested by Bank, shall execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered to Bank, such further instruments and documents, and do any and all things as may be requested, in order to carry out the intent and purpose of this Agreement and the other Loan Documents.

8.19 Time is of the Essence. Time is of the essence in the performance of this Agreement and the other Loan Documents by Borrower and each other Obligated Party, and each and every term thereof.

8.20 Recitals. The recitals to this Agreement set forth above in the “Factual Background” are true, complete, accurate, and correct, and such recitals are incorporated hereby by reference.

8.21 Loan Commission. Except as otherwise agreed in writing by Bank: (a) Bank shall not be obligated to pay any brokerage commission or fee in connection with or arising out of any Credit Facility, and (b) Borrower shall pay any and all brokerage commissions or fees arising out of or in connection with the Credit Facilities.

8.22 Patriot Act Provisions. The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318 (as such maybe amended or recodified from time to time, the “Patriot Act”):

(a) Important Information About Procedures for Opening a New Account. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. Borrower is hereby notified that when Borrower opens an account, including but not limited to any Account, that may be required pursuant to the terms of this Agreement, (i) if Borrower is not an individual, Bank will ask for Borrower’s name, taxpayer identification number, business address, and other information that will allow Bank to identify Borrower, and may also ask to see Borrower’s legal organizational documents or other identifying documents, and (ii) if Borrower is an individual, Bank will ask for Borrower’s name, taxpayer identification number, residential address, date of birth, and other information that will allow Bank to identify Borrower, and may also ask to see Borrower’s driver’s license or other identifying documents.

(b) Government Regulation. Borrower shall not (i) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Bank from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, or (ii) fail to provide documentary and other evidence of Borrower’s identity as may be requested by Bank at any time to enable Bank to verify Borrower’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the Patriot Act.

8.23 Integration and Relation to Loan Commitment. The Loan Documents (a) integrate all the terms and conditions mentioned in or incidental to this Agreement, (b) supersede all oral negotiations and prior writings with respect to their subject matter, including Bank’s loan commitment to Borrower, and (c) are intended by the parties as the final expression of the agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties. No representation, understanding, promise or condition shall be enforceable against any party unless it is contained in the Loan Documents. If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other agreement or instrument, including any other Loan Document, the terms, conditions and provisions of this Agreement shall prevail.

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See the following pages for signatories.)

IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of the date first above written.

“BORROWER”

THE INVENTURE GROUP, INC., a Delaware corporation				Address for notices to Borrower:
				The Inventure Group, Inc.
				5050 N. 40th Street, Suite 300
By:	/s/ Steve Weinberger			Phoenix, Arizona 85018
Name:			Steve Weinberger	Attention: Steve Weinberger
Title:		CFO

(Remainder of page intentionally left blank.
See the following pages for additional signatories.)

“BANK”

U.S. BANK NATIONAL ASSOCIATION, a national banking association		Address for notices to Bank:
		U.S. Bank National Association
		101 North First Avenue, Suite
By:	/s/ Timothy Coffey	1600 Phoenix, AZ 85003
	Timothy Coffey, Vice President	Attention: Commercial Banking

(Remainder of page intentionally left blank.
See the following pages for Obligated Group’s signatories.)

ACKNOWLEDGED AND AGREED TO THIS

16th DAY OF May, 2007:

“OBLIGATED GROUP”

BN FOODS, INC., a Colorado corporation

Address for notices to PBC:

BN Foods, Inc.

By:

/s/ Steve Weinberger

c/o The Inventure Group, Inc.

Name:

Steve Weinberger

5050 N. 40TH Street, Suite 300

Title:

CFO

Phoenix, AZ 85018

Attention: Steve Weinberger

BOULDER NATURAL FOODS, INC.,
an Arizona corporation

Address for notices to Boulder:

Boulder Natural Foods, Inc.

c/o The Inventure Group, Inc.

By:

/s/ Steve Weinberger

5050 N. 40TH Street, Suite

Name:

Steve Weinberger

300Phoenix, AZ 85018

Title:

CFO

Attention: Steve Weinberger

LA COMETA PROPERTIES, INC., an Arizona corporation

Address for notices to La Cometa:

Poore Brothers - Bluffton, LLC

c/o The Inventure Group, Inc.

By:

/s/ Steve Weinberger

5050 N. 40TH Street, Suite 300

Name:

Steve Weinberger

Phoenix, AZ 85018

Title:

CFO

Attention: Steve Weinberger

POORE BROTHERS - BLUFFTON, LLC,
a Delaware limited liability company

Address for notices to PBC:

Poore Brothers - Bluffton, LLC

c/o The Inventure Group, Inc.

By:

/s/ Steve Weinberger

5050 N. 40TH Street, Suite 300

Name:

Steve Weinberger

Phoenix, AZ 85018

Title:

CFO

Attention: Steve Weinberger

RADER FARMS ACQUISITION CORP.,
a Delaware corporation

Address for notices to Rader:

Poore Brothers - Bluffton, LLC

c/o The Inventure Group, Inc.

By:

/s/ Steve Weinberger

5050 N. 40TH Street, Suite 300

Name:

Steve Weinberger

Phoenix, AZ 85018

Title:

CFO

Attention: Steve Weinberger

TEJAS PB DISTRIBUTING, INC.,
an Arizona corporation

Address for notices to Tejas:

Tejas PB Distributing, Inc.

c/o The Inventure Group, Inc.

By:

/s/ Steve Weinberger

5050 N. 40TH Street, Suite 300

Name:

Steve Weinberger

Phoenix, AZ 85018

Title:

CFO

Attention: Steve Weinberger

EXHIBIT A
COMPLIANCE CERTIFICATE

The undersigned, being the being the Chief Financial Officer and Treasurer of THE INVENTURE GROUP, INC., a Delaware corporation (the “Borrower”) hereby certifies to U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”) for itself and each of the other Obligated Group Parties, as follows:

1. This certificate (the “Compliance Certificate”) is being provided pursuant to Section 3.5 of that certain loan agreement (the “Loan Agreement”) dated as of May 16, 2007, by and between Bank and Borrower, made with the acknowledgment and agreement of the other Obligated Group Parties. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

2. As of the effective date set forth below, the undersigned has no knowledge of any event which constitutes, or which, with the giving of notice or the passage of time, or both, would constitute a default or an Event of Default under any of the Loan Documents.

3. As of the effective date set forth below, the financial condition of Borrower, and each other Obligated Group Party, remains essentially the same as it was the date of the last financial statement submitted by Borrower to Bank and that no material adverse change has occurred in the financial condition of Borrower or the other Obligated Group Parties that affects the any collateral securing the Credit Facilities or Borrower’s or any Obligated Group Party’s ability to repay any of the Credit Facilities pursuant to the terms of the Loan Documents.

4. As of the effective date set forth below, the Obligated Group is in compliance with the financial covenants set forth in the Loan Agreement, including the minimum Fixed Charge Coverage Ratio, maximum Leverage Ratio, and minimum Tangible Net Worth requirements set forth in Section 3.17 of the Loan Agreement. Upon the request of Bank, Borrower shall provide financial covenant analyses and information in form and substance acceptable to Bank showing Borrower’s compliance with the financial covenants set forth in the Loan Agreement, which shall be true and accurate on and as of the effective date of this Compliance Certificate.

5. As of the effective date set forth below, neither Borrower nor any other Obligated Group Party has any claim against Bank, or any defenses or offsets to payment of any Credit Facility or any other amounts due under the Loan Documents.

6. As of the effective date set forth below, the representations and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects as of the date of this Certificate to the same extent as though made on and as of such date, except to the extent such representations and warranties specifically relate to an earlier date.

IN WITNESS WHEREOF, this Certificate has been executed to be effective as of , 2007.

“BORROWER”

THE INVENTURE GROUP, INC.,					Address for notices to Borrower:
a Delaware corporation
					The Inventure Group, Inc.
					5050 N. 40th Street, Suite 300
By:					Phoenix, Arizona 85018
Name:					Attention: Steve Weinberger
Title:

Exhibit B

Borrower Base Certificate

Consolidated Company - Inventure Group

MONTH-END COLLATERAL CERTIFICATE

Month Ending:
3/31/2007

ACCOUNTS RECEIVABLE

1)	Beginning of month aging balance:						$	7,415,120.00

2)	(ADD)	Gross sales per sales journal Includes Cash sales $					$	12,819,992.52

3)	(MINUS)	Sales Adjustments, Credit Memos, Misc Journal Adjustments					$	608,599.86

4)	(MINUS)	Cash receipts per cash receipts journal					$	11,637,406.00

5)	(ADD)	Debit memos, returned checks or other adjustments					$	0.00

5a)	End of month aging balance:						$	7,989,106.66

6)	General Ledger balance:		$	7,989,107

7)	(MINUS)	INELIGIBLES					$	1,545,414.00

	ELIGIBLE ACCOUNTS RECEIVABLE: (Line 6 minus Line 7 @ advance rate):				80	%	$	5,154,954.13
					(Advance rate)


8)	Consolidated Inventory Month End Balance						$	8,736,325.00

8a)	General Ledger Inventory Balance		$	8,736,325

9)	INELIGIBLE INVENTORY						$	727,801.00

10)	ELIGIBLE INVENTORY:						$	8,008,524.00

11)	ELIGIBLE INVENTOR AFTER REQUIRED ADVANCE RATES						$	4,892,967.20

12)	AVAILABILITY VIA MACHINERY, EQUIPMENT AND GROWING PLANTS						$	2,000,000.00

13)	BBC AVAILABILITY						$	12,047,921.33

14)	GROWERS LIENS & OTHER LIENS (PERISHABLE AGRICULTURAL COMMODITIES ACT)			$	1,860,000.00

13)	CONSOLIDATED BBC AVAILABILITY			$	10,187,921.33

LOAN DETAIL

14)	Line of Credit Outstanding:	$	0.00

	Commercial Letters of Credit (100%)	$

	Standby Letters of Credit (100%)	$

	Standby IDB - (100%)	$

	Other Loans (Reserved under Base)	$

15)	TOTAL LOANS OUTSTANDING: (Sum of Loan Detail)			$	0.00

16)	REMAINING AVAILABLE: (Line 12 minus Line 14)			$	10,187,921.33

The undersigned represents and warrants that:

The foregoing information is true, complete and correct, and that the collateral, designated as eligible, hereby complies fully with the conditions, terms, warranties, representations and covenants set forth in the Loan Agreement (“Agreement”) between the undersigned and U.S. Bank (“Lender”).

COMPUTATION OF INELIGIBLES

Consolidated Company - Inventure Group
Borrower		Authorized signature		Date

Exhibit C

FEE AND RATE SCHEDULE

	Tier 1	Tier 2	Tier 3	Tier 4	Tier 5
Total Funded Debt /	<= 1.0	>1.0<=1.5	>1.5<=2.25	>2.25<=3.00	>3.00
EBITDA
LIBOR Margin	95 bps	125 bps	145 bps	165 bps	210 bps
Base Rate Margin	0 bps	0 bps	0 bps	0 bps	0 bps
Unused Fee	12.5bps	12.5 bps	15 bps	15 bps	20 bps
Letter of Credit Fee	95 bps	125 bps	145 bps	165 bps	210 bps

Exhibit D

Approved Existing Liens

1. CNH Capital American, LLC, secured by two (2) Korvan pickers, Model # 9000R, Serial # 01023 and Serial # 01024.

2. Toyota Motor Credit Corp., secured by one (1) Toyota Fork Lift Model 7FBCU25, Serial #67279.

3. Trinity Lease, secured by one (1) 2006 53 foot reefer unit (semi trailer).

EX-10.4 5 a07-18752_1ex10d4.htm EX-10.4

Exhibit 10.4

PROMISSORY NOTE

(Facility 1 - Revolving Line of Credit Loan)

$15,000,000.00

May 16, 2007

Phoenix, Arizona

1. Borrower’s Promise To Pay.

FOR VALUE RECEIVED, THE INVENTURE GROUP, INC., a Delaware corporation (the “Borrower”), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), at 101 N. First Avenue, Suite 1600, Phoenix, Arizona 85003, Attention: Commercial Banking, or at such other place as the holder of this Note may from time to time designate, the principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00) (“Maximum Loan Amount”), or such lesser amount as may be advanced and outstanding under this promissory note (the “Note”), plus interest as specified in this Note. Bank shall not be required to make any advance if that would cause the outstanding principal of this Note to exceed the Maximum Loan Amount. This Note evidences a revolving line of credit loan (“Loan”) made by Bank to Borrower pursuant to the terms of a loan agreement (the “Loan Agreement”) between Bank and Borrower of even date herewith. During the availability period described in the Loan Agreement, Borrower may repay principal amounts and reborrow them upon the terms and conditions set forth in the Loan Agreement.

This Note is secured by a certain Security Agreement (Blanket - All Business Assets) being executed by Borrower in favor of Bank dated of even date herewith (the “Security Agreement”) and may be secured by other collateral. This Note and the Loan Agreement, together with all other documents which evidence, guaranty, secure, or otherwise pertain to the Loan collectively constitute the “Loan Documents.” Some or all of the Loan Documents, including the Loan Agreement, contain provisions for the acceleration of the maturity of this Note. This Note is subject to the terms and conditions of the Loan Agreement. Capitalized terms used but not defined herein shall have the meanings set forth in the Loan Agreement.

2. Maturity Date. All principal and all accrued and unpaid interest and other sums due hereunder shall be due and payable on June 30, 2011 (the “Maturity Date”).

3. Interest Rate and Payment Terms.

3.1 Interest Rate. Interest on each advance hereunder shall accrue at one of the following per annum rates selected by Borrower (i) upon notice to Bank, zero percent (0%) (0 basis points) plus the prime rate announced by Bank from time to time, as and when such rate changes (a “Prime Rate Loan”); or (ii) upon a minimum of two New York Banking Days prior notice, the LIBOR Rate Margin (as such term is defined below) plus the 1, 2, 3, 6 or 12 month LIBOR rate quoted by Bank from Reuters Screen LIBOR01 Page or any successor thereto (which shall be the LIBOR rate in effect two New York Banking Days prior to commencement of the advance), adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation (a “LIBOR Rate Loan”). The term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York. The term “Money Markets” refers to one or more wholesale funding markets available to and selected by Bank, including negotiable certificates of deposit, commercial paper, eurodollar deposits, bank notes, federal funds, interest rate swaps or others. The term “LIBOR Rate Margin” means (A) through and including November 15, 2007, one and sixty-five hundredths percent (1.65%) (165 basis points), and (B) thereafter the tiered LIBOR Rate Margin determined in accordance with the Fee and Rate Schedule attached as Exhibit C to the Loan Agreement, adjusted quarterly, as determined by Bank, based upon Bank’s testing of the Leverage Ratio (as such term is defined in the Loan Agreement) in accordance with the terms of the Loan Agreement.

In the event Borrower does not timely select another interest rate option at least two New York Banking Days before the end of the Loan Period for a LIBOR Rate Loan, Bank may at any time after the end of the Loan Period convert the LIBOR Rate Loan to a Prime Rate Loan, but until such conversion, the funds advanced under the LIBOR Rate Loan shall continue to accrue interest at the same rate as the interest rate in effect for such LIBOR Rate Loan prior to the end of the Loan Period. The term “Loan Period” means the period commencing on the advance date of the applicable LIBOR Rate Loan and ending on the numerically corresponding day 1, 2, 3, 6 or 12 months thereafter matching the interest rate term selected by Borrower; provided, however, (a) if any Loan Period would otherwise end on a day which is not a New York Banking Day, then the Loan Period shall end on the next succeeding New York Banking Day unless the next succeeding New York Banking Day falls in another calendar month, in which case the Loan Period shall end on the immediately preceding New York Banking Day; or (b) if any Loan Period begins on the last New York Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of the Loan Period), then the Loan Period shall end on the last New York Banking Day of the calendar month at the end of such Loan Period.

No LIBOR Rate Loan may extend beyond the maturity of this Note. In any event, if the Loan Period for a LIBOR Rate Loan should happen to extend beyond the maturity of this Note, such loan must be prepaid at the time this Note matures. Bank’s internal records of applicable interest rates shall be determinative in the absence of manifest error. Each LIBOR Rate Loan shall be in a minimum principal amount of Five Hundred Thousand and No/100 Dollars ($500,000.00).

The aggregate number of LIBOR Rate Loans in effect at any one time may not exceed three (3).

If a LIBOR Rate Loan is prepaid prior to the end of the Loan Period, as defined above, for such loan, whether voluntarily or because prepayment is required due to this Note maturing or due to acceleration of this Note upon default or otherwise, Borrower agrees to pay all of Bank’s costs, expenses and Interest Differential (as determined by Bank) incurred as a result of such prepayment. The term “Interest Differential” shall mean that sum equal to the greater of zero or the financial loss incurred by Bank resulting from prepayment, calculated as the difference between the amount of interest Bank would have earned (from like investments in the Money Markets as of the first day of the LIBOR Rate Loan) had prepayment not occurred and the interest Bank will actually earn (from like investments in the Money Markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment. Because of the short-term nature of this facility, Borrower agrees that the Interest Differential shall not be discounted to its present value. Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining entire principal balance of such loan.

3.2 Separate Principal Plus Interest Payments.

(a) Interest Payments. Interest is payable beginning July 1, 2007, and on the same date of each CONSECUTIVE month thereafter, with a final interest payment with the final payment of principal.

(b) Principal Payment on Maturity Date. If not sooner paid, all principal shall be due and payable on the Maturity Date.

3.3 Principal Prepayments. Borrower may prepay some or all of the principal under any Prime Rate Loan, from time to time, without payment of any prepayment premium or fee. Any prepayment of some or all of the principal under any LIBOR Rate Loan is subject to the terms and conditions set forth in Section 3.1 above.

4. General Interest and Payment Terms.

4.1 Note Rate. The interest rate in effect from time to time under this note is herein referred to as the “Note Rate.”

4.2 Effective Contracted Rate. Borrower agrees to pay an effective contracted for rate of interest equal to the rate of interest resulting from all interest payable as provided in this Note plus the additional rate of interest resulting from (a) any loan or facility fee(s) or other similar fees described or defined in the Loan Documents, and (b) all Other Sums. For purposes hereof, the “Other Sums” shall mean all fees, charges, goods, things in action, or any other sums or things of value (other than interest payable as provided in this Note and any loan or facility fee) paid or payable by Borrower, whether pursuant to this Note, any of the other Loan Documents, or any other document or instrument in any way pertaining to this lending transaction, that may be deemed to be interest for the purpose of any law of the State of Arizona, or any other applicable law, that may limit the maximum amount of interest to be charged with respect to this lending transaction. The Other Sums shall be deemed to be interest and part of the “contracted for rate of interest” for the purposes of any such law only.

4.3 Usury Savings Clause. It is expressly stipulated and agreed to be the intent of Borrower and Bank at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Bank to contract for, charge, take, reserve, or receive greater amount of interest than under state law) and that this Section shall control every other covenant and agreement in this Note and the other Loan Documents. If applicable state or federal law should at any time be judicially interpreted so as to render usurious any amount charged, taken, reserved, or received with respect to the Loan, or if Bank’s exercise of the option to accelerate the Maturity Date, or if any prepayment by Borrower, results in Borrower having paid any interest in excess of that permitted by applicable law, then it is Bank’s express intent that all such excess amounts theretofore collected by Bank shall be credited to the principal balance of this Note and all other indebtedness, and that the provisions of this Note and the other Loan Documents shall immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Bank for the use, forbearance, or detention of the Loan shall, to the extent not prohibited by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the maximum lawful rate from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

4.4 Calculation of Interest. Interest will be computed for the actual days elapsed on the basis of a three hundred sixty (360) day year, which results in more interest than if a three hundred sixty-five (365) day year method were used.

4.5 Payments. Except as otherwise provided herein, all amounts payable under this Note are payable in lawful money of the United States during normal business hours on a Banking Day. For purposes hereof, “Banking Day” means a day, other than a Saturday or Sunday, on which Bank is open for business for all banking functions in Phoenix, Arizona. Checks and drafts constitute payment only when collected. All payments made under this Note shall be made without offset, demand, counter-claim, deduction or recoupment (each of which is hereby waived), and acceptance by Bank of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, notwithstanding any notation on or accompanying such partial payment to the contrary, and shall not constitute a waiver by Bank of any Event of Default. Except as otherwise set forth herein or in any other Loan Document, payments shall be applied in such order and manner as Bank may determine in its sole and absolute discretion.

5. Late Payments; Default Rate

5.1 Late Charge for Overdue Payments. If Bank has not received the full amount of any payment scheduled to be made under this Note, other than the final principal payment, by the end of ten (10) calendar days after the date it is due, Borrower shall pay a late charge to Bank in the amount of five percent (5%) of the overdue payment; provided, however, in no event shall any late charge be payable hereunder without Bank first having provided Borrower with any notice required by applicable law. Borrower shall pay this late charge only once on any late payment. This late charge shall not be construed as in any way extending the due date of any payment, and is in addition to, and not in lieu of, any other remedy Bank may have.

5.2 Default Rate. Upon the occurrence of any Event of Default (subject to any applicable notice and cure periods), the unpaid balance of the Loan shall bear interest at the rate which is five percent (5%) above the then applicable Note Rate as it may thereafter change pursuant to the terms of this Note (the “Default Rate”). Additionally, from and after the Maturity Date, or such earlier date as all sums owing on this Note become due and payable by acceleration or otherwise, the Loan shall bear interest at the Default Rate. Accrued interest, at the Note Rate, if not paid when due, shall accrue interest at the Default Rate, as hereinabove provided, which may result in compounding of interest. Except as otherwise set forth herein or in any other Loan Document, payments under this Note or under any other Loan Document that are due on demand, shall bear interest at the Default Rate (i) from the date costs or expenses are incurred by Bank that give rise to the demand or (ii) if there is no such date, then from the date of demand, until Borrower pays the full amount of such payment, including interest.

6. Events of Default. If any of the following “Events of Default” occur, any obligation of the holder to make advances under this Note terminates and, at the holder’s option, exercisable in its sole and absolute discretion, all sums of principal and interest under this note immediately become due and payable without notice of default, presentment, demand for payment, protest, or notice of nonpayment or dishonor, or other notices or demands of any kind or character:

6.1 Borrower fails to perform any obligation under this Note to pay principal or interest within ten (10) days after the date when due; or

6.2 Borrower fails to perform any other obligation under this Note to pay money within ten (10) days after the date when due; or

6.3 Under any of the Loan Documents, a default or Event of Default occurs, except as provided in Section 7 below.

7. Insolvency. It is an “Event of Default” under this Note if Borrower becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (“Insolvency Proceeding”), and as to any involuntary Insolvency Proceeding, it either: (i) is consented to or (ii) has not been dismissed within ninety (90) days. Upon such an Event of Default, all sums of principal and interest under this Note automatically become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. If Borrower becomes the subject of any Insolvency Proceeding, any obligation of the holder to make advances under this Note shall automatically terminate, and in the case of an involuntary Insolvency Proceeding which is dismissed within ninety (90) days, the holder’s obligation to make advances under this Note shall resume upon the dismissal thereof.

PERTAINING TO, THIS NOTE, THE LOAN AGREEMENT, OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

9. Miscellaneous.

9.1 Waivers. Borrower hereby waives presentment, demand, notice of dishonor, notice of default or delinquency, notice of acceleration, notice of nonpayment, notice of costs, expenses, or losses and interest thereon; and notice of interest on interest and late charges.

9.2 Delay In Enforcement. If Bank delays in exercising or fails to exercise any of its rights under this Note, that delay or failure does not constitute a waiver of any of Bank’s rights, or of any breach, default or failure of condition of or under this Note. No waiver by Bank of any of its rights, or of any breach, default or failure of condition is effective, unless the waiver is expressly stated in writing by Bank.

9.3 Joint and Several Liability. If more than one person or entity is signing this Note as Borrower, their obligations under this Note shall be joint and several. As to any Borrower that is a partnership, the obligations of Borrower under this Note are the joint and several obligations of each general partner thereof. Any married person signing this Note agrees that recourse may be had against community property assets and against his or her separate property for the satisfaction of all obligations contained herein.

9.4 Heirs, Successors, and Assigns; Participations. This Note inures to and binds the heirs, legal representatives, successors and assigns of Borrower and Bank; provided, however, Borrower may not assign this Note or any Loan funds, or assign or delegate any of its rights or obligations, without the prior written consent of Bank in each instance, which consent is at the sole and absolute discretion of Bank. Bank, in its sole and absolute discretion, may transfer this Note, and may sell or assign participations or other interests in all or part of the Loan, on the terms and subject to the conditions of the Loan Documents, all without notice to or the consent of Borrower. Without notice to or the consent of Borrower, Bank may disclose to any actual or prospective purchaser of any securities issued or to be issued by Bank or its affiliates, and to any actual or prospective purchaser or assignee of any participation or other interest in this Note, the Loan, or any other loans made by Bank to Borrower (whether evidenced by this Note or otherwise), any financial or other information, data or material in Bank’s possession relating to Borrower, or the Loan. If Bank so requests, Borrower shall sign and deliver a new note, in the form and substance of this Note, to be issued in exchange for this Note.

9.5 Cumulative Remedies. All of Bank’s remedies in connection with this Note or under applicable law are cumulative, and Bank’s exercise of any one or more of those remedies shall not constitute an election of remedies.

also consents to service of process by any means authorized by Federal law or the law of such state. Without limiting the generality of the foregoing, Borrower hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) Borrower is not subject to the jurisdiction of the courts of the above-referenced state or the United States District Court for such state, or (ii) such suit, action, or proceeding is brought in an inconvenient forum, or (iii) the venue of such suit, action, or proceeding is improper.

9.7 Attorney’s Fees and Costs. In any lawsuit or arbitration arising out of or relating to this Note, the Loan Documents or the Loan, the prevailing party will be entitled to recover from each other party such sums as the court or arbitrator adjudges to be reasonable attorneys’ fees in the action or arbitration, in addition to costs and expenses otherwise allowed by law. In all other actions or proceedings, including any matter arising out of or relating to any Insolvency Proceeding, Borrower agrees to pay all of Bank’s costs and expenses, including reasonable attorneys’ fees, incurred in enforcing or protecting Bank’s rights or interests. From the time(s) incurred until paid in full to Bank, all such sums shall bear interest at the Default Rate. Whenever Borrower is obligated to pay or reimburse Bank for any attorneys’ fees, those fees shall include the allocated costs for services of in-house counsel.

9.8 Holder’s Rights. Borrower agrees that the holder of this Note may accept additional or substitute security for this Note, or release any security or any party liable for this Note, or extend or renew this Note, all without notice to Borrower and without affecting the liability of Borrower.

9.9 Interpretation. As used in this Note, the terms “Bank,” “holder” and “holder of this Note” are interchangeable. As used in this Note, the word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.”

9.10 Time of the Essence. Time is of the essence with regard to all payment obligations under this Note.

9.11 Amendments. This Note may not be modified or amended except by a written agreement signed by the parties.

9.12 Counterparts. This Note may be executed in counterparts, and all counterparts constitute but one and the same document.

IN WITNESS WHEREOF, Borrower has duly executed and delivered this Note to Bank as of the date first above written.

BORROWER:

THE INVENTURE GROUP, INC.,				Address for notices to Borrower:
a Delaware corporation
				The Inventure Group, Inc.
				5050 N. 40TH Street, Suite 300
By:	/s/ Steve Weinberger			Phoenix, AZ 85018
Name:			Steve Weinberger	Attention: Steve Weinberger - SVP, CFO
Title:		CFO
				Tax I.D. #: 86-0786101

EX-10.5 6 a07-18752_1ex10d5.htm EX-10.5

Exhibit 10.5

PROMISSORY NOTE

(Facility 2 - Term Loan)

$6,000,000.00

May 16, 2007

Phoenix, Arizona

1. Borrower’s Promise To Pay.

FOR VALUE RECEIVED, THE INVENTURE GROUP, INC., a Delaware corporation (the “Borrower”), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), at 101 N. First Avenue, Suite 1600, Phoenix, Arizona 85003, Attention: Commercial Banking, or at such other place as the holder of this Note may from time to time designate, the principal sum of Six Million and No/100 Dollars ($6,000,000.00) (“Loan Amount”), or such lesser amount as may be advanced and outstanding under this promissory note (the “Note”), plus interest as specified in this Note. Bank shall not be required to make any advance if that would cause the outstanding principal of this Note to exceed the Loan Amount. This Note evidences a term loan (“Loan”) made by Bank to Borrower pursuant to the terms of a loan agreement (the “Loan Agreement”) between Bank and Borrower of even date herewith.

2. Maturity Date. All principal and all accrued and unpaid interest and other sums due hereunder shall be due and payable on May 31, 2014 (the “Maturity Date”).

3. Interest Rate and Payment Terms.

3.1 Interest Rate. Interest on each advance hereunder shall accrue at an annual rate equal to the LIBOR Rate Margin (as such term is defined below) plus the one-month LIBOR rate quoted by Bank from Reuters Screen LIBOR01 Page or any successor thereto, which shall be that one-month LIBOR rate in effect two New York Banking Days prior to the beginning of each calendar month, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate to be reset at the beginning of each succeeding month. The term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York. If the initial advance under this Note occurs other than on the first day of the month, the initial one-month LIBOR rate shall be that one-month LIBOR rate in effect two New York Banking Days prior to the date of the initial advance, which rate plus the percentage described above shall be in effect for the remaining days of the month of the initial advance; such one-month LIBOR rate to be reset at the beginning of each succeeding month. Bank’s internal records of applicable interest rates shall be determinative in the absence of manifest error.

The term “LIBOR Rate Margin” means (A) through and including November 15, 2007, one and sixty-five hundredths percent (1.65%) (165 basis points), and (B) thereafter the tiered LIBOR Rate Margin determined in accordance with Fee and Rate Schedule attached as Exhibit C to the Loan Agreement, adjusted quarterly, as determined by Bank, based upon Bank’s testing of the Leverage Ratio (as such term is defined in the Loan Agreement) in accordance with the terms of the Loan Agreement.

3.2 Separate Principal Plus Interest Payments.

(a) Interest Payments. Interest is payable beginning July 1, 2007, and on the same date of each CONSECUTIVE month thereafter, with a final interest payment with the final payment of principal.

(b) Monthly Principal Payments. Borrower shall make monthly payments of principal each in the amount of Seventy-One Thousand Four Hundred Twenty-Eight and 57/100 Dollars ($71,428.57) on the first day of each month beginning on July 1, 2007.

3.3 Principal Prepayments. Borrower may prepay some or all of the principal under the Loan, from time to time, without payment of any prepayment premium or fee.

4. General Interest and Payment Terms.

4.1 Note Rate. The interest rate in effect from time to time under this note is herein referred to as the “Note Rate.”

5. Late Payments; Default Rate

6.1 Borrower fails to perform any obligation under this Note to pay principal or interest within ten (10) days after the date when due; or

6.2 Borrower fails to perform any other obligation under this Note to pay money within ten (10) days after the date when due; or

6.3 Under any of the Loan Documents, a default or Event of Default occurs, except as provided in Section 7 below.

either: (i) is consented to or (ii) has not been dismissed within ninety (90) days. Upon such an Event of Default, all sums of principal and interest under this Note automatically become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. If Borrower becomes the subject of any Insolvency Proceeding, any obligation of the holder to make advances under this Note shall automatically terminate, and in the case of an involuntary Insolvency Proceeding which is dismissed within ninety (90) days, the holder’s obligation to make advances under this Note shall resume upon the dismissal thereof.

8. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND BANK MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS NOTE, THE LOAN AGREEMENT, OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

9. Miscellaneous.

9.4 Heirs, Successors, and Assigns; Participations. This Note inures to and binds the heirs, legal representatives, successors and assigns of Borrower and Bank; provided, however, Borrower may not assign this Note or any Loan funds, or assign or delegate any of its rights or obligations, without the prior written consent of Bank in each instance, which consent is at the sole and absolute discretion of Bank. Bank, in its sole and absolute discretion, may transfer this Note, and may sell or assign participations or other interests in all or part of the Loan, on the terms and subject to the conditions of the Loan Documents, all without notice to or the consent of Borrower. Without notice to or the consent of Borrower, Bank may disclose to any actual or prospective purchaser of any securities issued or to be issued by Bank or its affiliates, and to any actual or prospective purchaser or assignee of any participation

or other interest in this Note, the Loan, or any other loans made by Bank to Borrower (whether evidenced by this Note or otherwise), any financial or other information, data or material in Bank’s possession relating to Borrower, or the Loan. If Bank so requests, Borrower shall sign and deliver a new note, in the form and substance of this Note, to be issued in exchange for this Note.

9.6 Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of Arizona, without regard to the choice of law rules of that State, except to the extent that any of such laws may now or hereafter be preempted by Federal law. Borrower consents to the jurisdiction of any Federal or State court within the State of Arizona, submits to venue in such state, and also consents to service of process by any means authorized by Federal law or the law of such state. Without limiting the generality of the foregoing, Borrower hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) Borrower is not subject to the jurisdiction of the courts of the above-referenced state or the United States District Court for such state, or (ii) such suit, action, or proceeding is brought in an inconvenient forum, or (iii) the venue of such suit, action, or proceeding is improper.

9.10 Time of the Essence. Time is of the essence with regard to all payment obligations under this Note.

9.11 Amendments. This Note may not be modified or amended except by a written agreement signed by the parties.

9.12 Counterparts. This Note may be executed in counterparts, and all counterparts constitute but one and the same document.

(Remainder of page intentionally left blank.
See the following page for Borrower’s signatory.)

IN WITNESS WHEREOF, Borrower has duly executed and delivered this Note to Bank as of the date first above written.

BORROWER:

THE INVENTURE GROUP, INC.,				Address for notices to Borrower:
a Delaware corporation
				The Inventure Group, Inc.
				5050 N. 40TH Street, Suite 300
By:	/s/ Steve Weinberger			Phoenix, AZ 85018
Name:			Steve Weinberger	Attention: Steve Weinberger - SVP, CFO
Title:		CFO
				Tax I.D. #: 86-0786101

EX-10.6 7 a07-18752_1ex10d6.htm EX-10.6

Exhibit 10.6

SECURITY AGREEMENT
(Blanket - All Business Assets)

This Security Agreement (Blanket - All Business Assets) (the “Agreement”) is dated for reference purposes as of May 16, 2007 by THE INVENTURE GROUP, INC., a Delaware corporation (the “Borrower”), and LA COMETA PROPERTIES, INC., an Arizona corporation (“La Cometa”), POORE BROTHERS - BLUFFTON, LLC, a Delaware limited liability company (the “PBC”), TEJAS PB DISTRIBUTING, INC., an Arizona corporation (“Tejas”), BOULDER NATURAL FOODS, INC., an Arizona corporation (“Boulder”), BN FOODS INC., a Colorado corporation (“BN Foods”), RADER FARMS ACQUISITION CORP., a Delaware corporation (“RFAC”) in favor of U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”). For purposes hereof, “Obligated Group” and “Obligated Group Parties” shall mean, collectively, (a) Borrower, (b) La Cometa, (c) PBC, (d) Tejas, (e) Boulder, (f) BN Foods, and (g) RFAC (each, individually, an “Obligated Group Party”).

Borrower’s Organizational Identification Number is: DE-2483575.
La Cometa’s Organizational Identification Number is: AZ-08064380.
PBC’s Organizational Identification Number is: DE-2867321.
Tejas’ Organizational Identification Number is: AZ-08541660.
Boulder’s Organizational Identification Number is: AZ-09522220.

BN Foods’ Organizational Identification Number is: CO-19971102791.
RFAC’s Organizational Identification Number is: DE-4351069.

Unless defined elsewhere in this Agreement, defined terms used herein have the meanings given them in the Definitions Section hereof.

Factual Background

A. Bank is extending credit and/or other financial accommodations to Borrower, now and/or in the future, including a revolving line of credit loan in the maximum principal amount of Fifteen Million and No/100 Dollars ($15,000,000.00) (“Facility 1”) and a term loan in the principal amount of Six Million and No/100 Dollars ($6,000,000.00) (“Facility 2”) (each, individually, a “Loan” and collectively, the “Loans”). The Loans are is being made under a loan agreement (the “Loan Agreement”) between Bank and Borrower dated as of the date hereof. Each Loan is evidenced by a promissory note (the “Notes”) made payable to Bank in the principal amount of such Loan, is secured by the collateral described below, and may also be secured by other collateral. Borrower is a holding company for several affiliated entities, and each of the Obligated Group Parties (other than the Borrower) is an Affiliate of, and a wholly owned subsidiary of Borrower.

B. Each of the Obligated Group Parties other than the Borrower is a Guarantor or the Loans. It is intended (i) that each Obligated Group Party shall be liable for the Credit Facilities, directly or indirectly, as a Borrower or as a Guarantor, and (ii) that all business assets of each Obligated Group Party shall be pledged to Bank as collateral for the Credit Facilities and other Obligations.

C. This Agreement, and all other documents which evidence, secure, or otherwise pertain to any of the Obligations, including the Loans, collectively constitute the “Loan Documents.” Capitalized terms used in this Agreement without definition have the meanings given them in the Loan Agreement. All terms not defined herein or in the Loan Agreement shall have the meaning given them in the Uniform Commercial Code, as enacted in the state of formation of the Borrower and as enacted in the state of formation of each of the other Obligated Group Parties, or under the Uniform Commercial Code in any other state to the extent the same is applicable law (collectively, as amended, recodified, and in effect

from time to time, the “UCC”). If a term is defined differently in Article 9 of the UCC than in another Article, Article 9 shall control.

D. As a material condition to Bank extending credit and/or other financial accommodations to Borrower, including but not limited to the Loans, Bank has required that Borrower and the other Obligated Group Parties pledge to Bank, and create a security interest in favor of Bank, in and to all of the Collateral described below, pursuant to the terms and conditions set forth below.

NOW THEREFORE, in consideration of Bank’s agreement to extend credit and/or other financial accommodations to Borrower, now and/or in the future, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and the other Obligated Group Parties and Bank hereby agree as follows:

AGREEMENT

Definitions: The following capitalized words and terms shall have the meanings set forth in the “Factual Background” section above, or if not defined therein, shall have the following meanings when used in this Agreement. All references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require.

“Credit Facilities” means all extensions of credit from the Bank to Borrower or any other Obligated Party, whether now existing or hereafter arising, including but not limited to the Loans described in Recital A above.

“Insolvency Obligations” means all monetary obligations incurred or accrued during the pendency of any Insolvency Proceeding regardless of whether allowed or allowable in such proceeding.

“Insolvency Proceeding” means any bankruptcy, receivership, or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships

“Obligations” means, collectively, all obligations, indebtedness, and liabilities of Borrower or any other Obligated Party to Bank, or any of Bank’s Affiliates, successors or assigns, of every kind and nature, including but not limited to all loans, advances, interest, costs, drafts, overdrafts, checks, credit card indebtedness, lease obligations, obligations under any Rate Management Agreement, and all other debts, liabilities, and obligations of every kind owning by the Borrower or any other Obligated Party to the Bank, whether direct or indirect, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated, of the same or a different nature, whether now existing or hereafter incurred or created, or whether incurred directly or acquired by Bank by assignment or otherwise, together with all renewals, extensions, modifications, consolidations, and substitutions of any of the them, including interest thereon and all costs, expenses, and reasonable attorney’s fees paid or incurred by Bank at any time before or after judgment in attempting to collect any of the foregoing, to realize on any collateral securing any of the foregoing, to realize on any guaranty or indemnity executed in connection with the foregoing, and to enforce this Agreement. The “Obligations” specifically include, but are not limited to, all indebtedness of Borrower to Bank under the Credit Facilities, and all advances made by Bank to or for the benefit of Borrower thereunder. The “Obligations” also specifically include all Insolvency Obligations and all Surrendered Payments.. Unless Borrower or any other Obligated Party shall have otherwise agreed in writing, for the purposes of this Agreement, “Obligations” shall not include “consumer credit” subject to the disclosure requirements of the Federal Truth in Lending Act or any regulations promulgated thereunder.

“Rate Management Agreement” means any rate lock agreement or interest rate protection agreement (such as any interest rate swap agreement, International Swaps and Derivatives Association, Inc. Master

Agreement, or similar agreement or arrangements now existing or hereafter entered into by Borrower or any other Obligated Party and Bank in connection with any Credit Facility to hedge the risk of variable rate interest volatility or fluctuations in interest rates as any such agreement or arrangement may be modified, supplemented and in effect from time to time).

“Surrendered Payments” means, collectively, the amount of any payments made to Bank or any other party on behalf of Borrower or any other Obligated Party (including payments resulting from liquidation of collateral) which are recovered from the Bank by a trustee, receiver, creditor, or other party pursuant to applicable federal or state law.

1. Assignment and Grant of Security. For the purpose of securing payment and performance of the Obligations, including the prompt payment and performance of all obligations and indebtedness of Borrower to Bank under the Loan Documents, and all renewals, extensions, modifications, amendments, and/or supplements thereto, in such order of priority as Bank may determine in its sole and absolute discretion, the Obligated Parties each hereby irrevocably and unconditionally assign, grant, pledge, transfer, and set over to Bank, and there is hereby created a security interest in favor of Bank, in and to all of each Obligated Party’s right, title, and interest in, to, and under all of the following, whether now or hereafter existing, or now owned or hereafter acquired (all or any part of such property, or any interest in all or any part of it, as the context may require, the “Collateral”):

1.1 All assets of each such Obligated Party, including all personal and fixture property of every kind and nature including but not limited to those specifically described below.

1.2 All of the following, whether now owned or hereafter acquired by each such Obligated Party: accounts (including health-care-insurance receivables) and other rights of such Obligated Party to the payment of money no matter how evidenced, including but not limited to accounts receivable, pledges receivable, grants receivable, capital campaign receivables, and any other receivables, contract rights, instruments, documents, promissory notes, certificates of deposit, chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), supporting obligations, and general intangibles of every nature, all permits, regulatory approvals, copyrights, copyright applications, patents, trademarks, trademark applications, service marks, trade names, software, symbols, mask works, engineering drawings, customer lists, goodwill, licenses, permits, all agreements of any kind or nature by which such Obligated Party possesses, uses, or has authority to possess or use property (whether tangible or intangible) of others or others possess, use, or have authority to possess or use property (whether tangible or intangible) of such Obligated Party, all recorded data of any kind or nature (regardless of the medium of recording) including but not limited to all software, writings, plans, specifications, and schematics, and all other intellectual property owned by such Obligated Party or used in such Obligated Party’s business.

1.3 All fixed assets, machinery, furniture, fixtures, and other equipment of every type now owned or hereafter acquired by each such Obligated Party.

1.4 All inventory now owned or hereafter acquired by each such Obligated Party, including, without limitation, all raw materials, work in process, materials used or consumed in such Obligated Party’s business, finished goods, and supplies.

1.5 All other property of each such Obligated Party now or hereafter in the possession, custody, or control of Bank, including, without limitation, all deposit accounts of each such Obligated Party with Bank, and all property of each such Obligated Party in which Bank now has or hereafter acquires a security interest.

1.6 All investment property, including all investment securities and investment securities accounts (each, and “ISA”), now owned or hereafter acquired, together with all assets and investment of any kind or nature now or hereafter held in each ISA, including cash, certificated or uncertificated securities, notes, instruments, documents, general intangibles, and commercial paper, together with (a) all new substituted and additional documents, instruments, and general intangibles issued with respect thereto, (b) all voting and rights to and interest in all cash, non-cash dividends and all other property now or hereafter distributable on account of or receivable with respect thereto, (c) interest thereon, stock and subscription rights; dividends and dividend rights; and new securities or other property such Obligated Party receives in connection therewith, which such Obligated Party agrees to deliver to the Bank immediately, and (d) all proceeds thereof, including, without limitation, proceeds consisting of cash, dividends (including dividends consisting of stock), stock splits, distributions, interest, certificated or uncertificated securities, notes, instruments, documents, general intangibles, commercial paper, and any other earnings of whatever nature.

1.7 All tort claims and insurance claims and proceeds, including commercial tort claims.

1.8 All software embedded within or used in connection with any of the above-described property.

1.9 All negotiable and nonnegotiable documents of title now owned or hereafter acquired by each such Obligated Party covering any of the above-described property.

1.10 All rights under contracts of insurance now owned or hereafter acquired by each such Obligated Party covering any of the above-described property.

1.11 All books and records now owned or hereafter acquired by each such Obligated Party pertaining to any of the above-described property, including but not limited to any computer-readable memory and any computer hardware or software (including embedded software) necessary to process such memory (collectively, the “Books and Records”).

1.12 All products, rents, and profits now owned or hereafter acquired by each such Obligated Party of any of the above-described property.

1.13 All cash and non-cash proceeds of, additions and accretions to, substitutions and replacements for, and changes in any of the above-described property (collectively, “Proceeds”), including without limitation (i) all interest and dividends earned on the Proceeds; (ii) all monies and other tangible or intangible property received upon a sale or other disposition of any of the Proceeds; (iii) all rights to payment in connection with any cause of action with respect to any Proceeds and all proceeds of any voluntary or involuntary disposition or claim respecting any of the foregoing (arising out of any judgment or award, or otherwise arising) and (iv) all goods, documents, general intangibles, chattel paper and accounts, wherever located, acquired with cash proceeds of any of the foregoing or its proceeds, and all supporting obligations ancillary to or arising in any way in connection with any of the above-described property.

2. Further Assurances; Authorization to File Financing Statements; Attorney-in-Fact.

2.1 Further Assurances. Each Obligated Party agrees that, from time to time, at its own expense, it will:

(a) Protect and defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein, and preserve and protect Bank’s security interest in the Collateral.

(b) Promptly execute and deliver to Bank all instruments and documents, and take all further action necessary or desirable, as Bank may reasonably request to (i) correct any defect, error, or omission which may be discovered in the contents, execution, or acknowledgment of this Agreement; (ii) continue, perfect, or protect any security interest granted or purported to be granted hereby, and (iii) enable Bank to exercise and enforce any of its rights and remedies hereunder with respect to any Collateral. Such actions may include but not be limited to executing, authenticating, authorizing, acknowledging, delivering, procuring, and recording and/or filing such further documents (including, without limitation, further security agreements, financing statements, financing statement amendments, and continuation statements), and doing such further acts as may be necessary, desirable, or proper to (A) carry out more effectively the purposes of this Agreement or (B) more fully identify and subject to the liens and security interests hereof any property intended to be covered hereby (including specifically, but without limitation, any renewals, additions, substitutions, or replacements, of or to the Collateral), (C) protect the lien or the security interest hereunder against the rights or interests of third persons, and/or (D) enable Bank to exercise and enforce any of its rights and remedies hereunder with respect to any Collateral.

(c) Permit Bank’s representatives to inspect and make copies of all Books and Records relating to the Collateral, wherever such Books and Records are located, and to conduct an audit relating to the Collateral at any reasonable time or times.

(d) Provide, promptly on request of Bank, such certificates, documents, reports, information, affidavits, and other instruments to Bank, and do such further acts as may be necessary, desirable, or proper in the reasonable determination of Bank, to enable Bank to comply with the requirements or requests of any agency having jurisdiction over Bank, and/or any examiners of such agencies, with respect to the Obligations, Borrower, each other Obligated Party, or the Collateral.

2.2 Authorization to File Financing Statements. Each Obligated Party hereby irrevocably authorizes Bank at any time, and from time to time, to file in any Uniform Commercial Code jurisdiction, any initial financing statements, amendments thereto, and continuation statements with or without signature of such Obligated Party as authorized by applicable law, as applicable to the Collateral. Except to the extent expressly prohibited by applicable law, a carbon, photographic, facsimile, or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. For purposes of such filings, each Obligated Party agrees to furnish any information requested by Bank promptly upon request by Bank. Each Obligated Party also ratifies its authorization for Bank to have filed any like initial financing statements, amendments thereto, or continuation statements if filed prior to the date of this Agreement.

2.3 Attorney-in-Fact; Exercise of Rights. Each Obligated Party hereby irrevocably constitutes and appoints Bank, including any officer or agent of Bank, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Obligated Party, or in such Obligated Party’s own name, to execute any such documents and to otherwise carry out the purposes of this Agreement, to the extent that such Obligated Party’s authorization above is not sufficient. To the extent not expressly prohibited by law, each Obligated Party hereby ratifies and affirms all acts said attorneys-in-fact shall lawfully do, have done in the past or cause to be done in the future by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. Additionally, effective upon the occurrence of a Event of Default under this Agreement, each Obligated Party hereby irrevocably appoints Bank as its attorney-in-fact, to demand, receive, and enforce such Obligated Party’s rights with respect to the Collateral, including the protection thereof, and to give appropriate receipts, releases, and satisfactions for and on behalf of, and in the name of, such Obligated Party. Such powers are deemed to be coupled with an interest, and are therefore irrevocable. Any third party may rely on representations of Bank that an Event of Default exists hereunder or that the power of attorney hereby granted by each Obligated Party to Bank is effective, without further inquiry. In addition

to the foregoing facilitate Bank’s exercise of the rights and remedies set forth herein, each Obligated Party authorizes Bank to (a) enter any premises where any Books or Records relating to the Collateral may be located, at reasonable times and following reasonable notice, for the purpose of inspecting, and/or copying any documents, files, and records relating to the Collateral, and to use such supplies and space of such Obligated Party at its places of business as may be reasonably necessary to administer and control the Collateral or the handling of collections and realizations thereon, (b) give notices to and to communicate with any party in possession or control of any of the Collateral with respect to such Collateral, and (c) take all steps and to institute (in Bank’s name or such Obligated Party’s name) all actions and proceedings deemed necessary or advisable by Bank to effect the collection or realization upon any of the Collateral.

3. Obligated Party’s Representations and Warranties. Each Obligated Party promises that each representation and warranty set forth below is and will be true, accurate, and correct:

3.1 Authority; Enforceability. Each Obligated Party’s exact legal name and correct organizational identification number is correctly set forth in the introductory paragraph of this Agreement. Each Obligated Party has complied with any and all laws and regulations concerning its organization, existence, and the transaction of its business. Each Obligated Party has the right, power, and authority to make this Agreement and to grant the security interests granted hereunder. When fully executed, this Agreement will create a valid and enforceable first-priority security interest in the Collateral, excepting the Approved Existing Lien Assets, which are subject only to the Approved Existing Liens, and except to the extent previously disclosed in writing to Bank.

3.2 No Violation; Compliance With Law. The execution and delivery of this Agreement and performance by each Obligated Party of its obligations hereunder will not result in a default under any other material agreement to which such Obligated Party is a party. To the best of each Obligated Party’s knowledge and belief, such Obligated Party is in full compliance with all applicable federal, state, and local statutes, rules, and regulations pertaining to the Collateral.

3.3 No Consent of Action Required. To the best of each Obligated Party’s knowledge and belief, no authorization, consent, approval, other action by, notice to, or filing with, any governmental authority, regulatory body, or any other person or entity is required for the execution of this Agreement or the grant or perfection of the security interests granted herein, except any written consent attached hereto or otherwise previously provided by such Obligated Party to Bank. There exist no restrictions on each Obligated Party’s ability to pledge and assign such Collateral to Bank by virtue of any arrangement or agreement with any other third party.

3.4 No Other Pledge. Except as previously disclosed in writing to Bank, and specifically excepting the Approved Existing Liens on the Approved Existing Lien Assets, the Obligated Parties are collectively the sole legal and equitable owners and holders of all right, title, and interest in and to all of the Collateral, free and clear of any liens, encumbrances, or interests of third parties, other than those in favor of Bank, specifically allowed pursuant to the terms of the Loan Documents, or otherwise agreed to in writing by Bank. The Obligated Parties have not pledged or assigned any of its right, title, or interest in or to all or any portion of the Collateral to any other person or entity, except for the Approved Existing Liens on the Approved Existing Lien Assets.

3.5 Use of Secured Obligations. The Obligations, including all loans secured hereby, are solely for business and/or investment purposes, and are not intended for personal, family, household, or agricultural purposes. All loans secured hereby are considered and construed for all purposes as commercial loans. The proceeds of the Obligations shall be used for commercial purposes.

3.6 Collateral Attributes. Except as previously disclosed in writing to Bank, (i) none of the account debtors or other persons obligated on any of the Collateral is a governmental authority subject to the Federal Assignment of Claims Act or any similar federal, state, or local law, rule, or regulation with respect to such Collateral, and (ii) to the best of each Obligated Group Party’s knowledge and belief, each Obligated Group Party holds no commercial tort claims. To the best of each Obligated Group Party’s knowledge and belief, except as otherwise disclosed to Bank in writing prior to the execution of this Agreement, each of the presently existing Collateral Documents (as such term is defined below) is genuine, valid, in full force and effect, and enforceable against all applicable parties in accordance with its terms (except to the extent that enforceability is limited by bankruptcy, insolvency, or other laws affecting the enforcement of creditors’ rights generally).

3.7 Obligated Party’s Location and Information. Each Obligated Group Party is an organization of the type and (if not an unregistered entity) is incorporated in or organized under the laws of the state specified in the introductory paragraph of this Agreement. Each Obligated Group Party’s principal place of business and chief executive office, and the place where such Obligated Group Party keeps its books and records, has for the preceding four (4) months (or, if less, the entire period of the existence of such Obligated Group Party) been and will continue to be (unless such Obligated Group Party notifies Bank of any change in writing at least thirty (30) days prior to the date of such change) at the address or addresses specified on the signature page of this Agreement, and (d) if such Obligated Group Party is an unregistered entity (including, without limitation, a general partnership) it is organized under the laws of the state specified in the introductory paragraph of this Agreement.

4. Obligated Party’s Covenants. Each Obligated Group Party covenants and warrants that unless compliance is waived by Bank in writing:

4.1 Collateral Preservation. Each Obligated Group Party will properly preserve the Collateral, keep the Collateral in good order and repair, keep accurate Books and Records, protect and defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein, and preserve and protect Bank’s security interest in the Collateral.

4.2 No Liens. Each Obligated Group Party has not granted and will not grant any security interest in any of the Collateral except to Bank and except for any other security interests specifically allowed pursuant to the terms of Loan Documents or otherwise agreed to in writing by Bank, and will keep the Collateral free of all liens, claims, security interests, and encumbrances of any kind or nature, except the security interest of Bank and other security interests specifically allowed pursuant to the terms of Loan Documents or otherwise agreed to in writing by Bank.

4.3 Restriction on Assignment or Transfer. Each Obligated Group Party will not sell, convey, lease, assign, encumber, pledge, or otherwise transfer or dispose of all or any portion of the Collateral, or any interest therein, whether such transfer is voluntary, involuntary, by operation of law, or otherwise, except for (a) those transfers of Collateral, if any, specifically allowed pursuant to the terms of Loan Documents or otherwise agreed to in writing by Bank, and (b) so long as no Event of Default has occurred and is continuing hereunder, inventory sold or supplies used in the ordinary course of such Obligated Group Party’s business. The foregoing restriction on transfer specifically includes transfers to any trust. Any attempted transfer of any Collateral, or any interest therein, which is not specifically authorized pursuant to the terms of this Agreement or otherwise consented to by Bank in writing shall be null and void and of no force or effect for any purpose whatsoever.

4.4 Collateral Documents; Actions Without Consent. Each Obligated Group Party will not (i) amend, supplement, terminate, or otherwise modify any contract or other document or instrument now or hereafter included in the Collateral (each, a “Collateral Document” and collectively, the “Collateral Documents”); (ii) release, relinquish, or waive any right, or grant any approval or consent, with respect to

any Collateral Document; (iii) enter into any new agreement with respect to any Collateral; or (iv) take any other action with respect to any Collateral which is inconsistent with this Agreement or which could impair Bank’s interests hereunder, except as may be specifically allowed pursuant to the terms of Loan Documents or otherwise agreed to in writing by Bank. Any such termination, modification, waiver, approval, or other action taken which is not specifically authorized pursuant to the terms of this Agreement shall, at Bank’s option, be null and void and of no force or effect for any purpose whatsoever.

4.5 Defense of Proceedings; Payments of Taxes, Assessments, and Charges. Each Obligated Group Party shall, at such Obligated Group Party’s sole expense, defend all actions, proceedings and other claims affecting the Collateral owned by it, including without limitation actions, proceedings, and claims challenging such Obligated Group Party’s title to the Collateral or the validity or priority of Bank’s rights hereunder. Each Obligated Group Party shall promptly pay all taxes and other governmental charges, and all license fees, and other public and private charges, levied or assessed upon or against any of the Collateral owned by it (if any) or upon or against the creation, perfection or continuance of the Bank’s security interest created hereunder, as well as all other claims of any kind against or with respect to the Collateral, except to the extent (a) such taxes, charges or claims are being contested in good faith by appropriate proceedings, (b) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Collateral or any interest therein, and (c) such taxes, charges or claims are adequately reserved against on such Obligated Group Party’s books in accordance with generally accepted accounting principles.

4.6 Location and Identification. Each Obligated Group Party will not cause or permit any change to be made in (a) its name, identity, or corporate, partnership, limited liability company, or other entity structure, (b) its jurisdiction on organization (c) its organizational identification number, (d) its place of business or, if more than one, its chief executive office, or (e) its mailing address, or (f) any change in the location of any Collateral, including the Books and Records, unless such Obligated Group Party shall have notified Bank in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action required by Bank for the purpose of further perfecting or protecting the lien and security interest of Bank in the Collateral. If such Obligated Group Party does not have an organizational identification number and later obtains one, such Obligated Group Party shall promptly notify Bank of such organizational identification number.

4.7 Books and Records; Collateral. Each Obligated Group Party will keep accurate and complete Books and Records with respect to the Collateral owned by it, and shall, if required by Bank from time to time, promptly deliver reports to Bank with respect to the Collateral in form and substance satisfactory to Bank in its sole and absolute discretion. Each Obligated Group Party will permit Bank’s representatives to inspect the Collateral owned by it and/or make copies of, and /or extracts from, all Books and Records, wherever such Books and Records are located, and to conduct an audit relating to the Collateral owned by it at any reasonable time or times. Upon the request of Bank, each Obligated Group Party will deliver to Bank (a) copies of or extracts from the Books and Records, and (b) information on any matters affecting the Collateral owned by it.

4.8 Compliance With Law; Notice of Material Events. Each Obligated Group Party will not use any of the Collateral in violation of any applicable law or regulation, or in violation of any policy of insurance thereon. Each Obligated Group Party will promptly notify Bank in writing of any event which affects the value of the Collateral, the ability of such Obligated Group Party or Bank to dispose of the Collateral, or the rights and remedies of Bank in relation thereto, including but not limited to, the levy of any legal process against any Collateral and the adoption of any marketing order, arrangement, or procedure affecting the Collateral, whether governmental or otherwise.

4.9 Attachment. Each Obligated Group Party will not attach any Collateral to any real property or fixture in a manner which might cause such Collateral to become a part thereof unless such Obligated

Group Party first obtains the written consent of any owner, holder of any lien on the real property or fixture, or other person having an interest in such property to the removal by Bank of the Collateral from such real property or fixture. Such written consent shall be in form and substance acceptable to Bank and shall provide that Bank has no liability to such owner, holder of any lien, or any other person.

4.10 Insurance. Each Obligated Group Party will maintain and keep in force insurance covering Collateral owned by it designated by Bank against fire and extended coverages. Such insurance shall require losses to be paid on a replacement cost basis, be issued by insurance companies acceptable to Bank and include Bank’s standard form Certification and Material Change Endorsement and Commodity Loss Payable Endorsement, or such other material change and/or loss payable endorsements in favor of Bank requested by Bank, all in a form and substance acceptable to Bank in its sole and absolute discretion.

4.11 Delivery of Documents; Collection. If any Collateral is or becomes the subject of any registration certificate or negotiable document of title including any warehouse receipt or bill of lading, the applicable Obligated Group Party shall immediately deliver such document to Bank. If requested by Bank, each Obligated Group Party will deliver to Bank any instruments, certificates of deposit, or chattel paper. If requested by Bank, each Obligated Group Party will segregate all collections and proceeds of the Collateral so that they are capable of identification and deliver daily such collections and proceeds to Bank in kind, and/or direct all account debtors to forward all payments and proceeds of the Collateral to a post office box under Bank’s exclusive control. To the extent that any of the Collateral consists of accounts, promissory notes, instruments, or other items for which payments are due or coming due, unless otherwise agreed in writing by Bank, until Bank exercises its rights to make collection, the applicable Obligated Group Party will diligently collect such Collateral.

5. Obligations of Bank with Respect to Collateral. Neither Bank’s acceptance of the assignment and security interests granted hereunder nor any exercise by Bank of its rights and remedies hereunder shall be deemed to be an assumption by Bank of any obligation or liability of any Obligated Group Party with respect to any Collateral or under the terms of any Collateral Document, and each Obligated Group Party shall indemnify, defend, and hold Bank harmless for, from, and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, and costs or expenses, including litigation costs and reasonable attorneys’ fees, arising from or in any way connected with any such obligation or liability. Bank’s obligations with respect to Collateral in its possession shall be limited to the duty to exercise reasonable care in the custody and preservation of such Collateral; provided, however, that Bank shall have no duty to take any steps to preserve the rights of any Obligated Group Party against other persons, or to initiate any action to protect any Collateral. Upon any transfer by Bank of any or all of the Obligations, Bank may transfer any or all of the Collateral and shall thereupon be fully discharged of liability and responsibility with respect to the Obligations and/or Collateral so transferred; but Bank shall retain all applicable rights and interest hereunder with respect to any Obligations and/or Collateral not then transferred.

6. Defaults and Remedies.

6.1 Events of Default. Each Obligated Group Party will be in default under this Agreement upon the occurrence of any one or more of the following events (each an “Event of Default”):

(a) A default or Event of Default occurs under any of the Loan Documents (as defined in the applicable document, subject to applicable notice and cure periods).

(b) Any Obligated Group Party fails to comply with any of the terms and conditions of this Agreement within ten (10) days after Bank’s written demand.

(c) Any representation or warranty made or given by any Obligated Group Party in this Agreement proves to be false or misleading in any material respect.

(d) Any involuntary lien of any kind or character attaches to any Collateral.

(e) Any Obligated Group Party becomes insolvent or the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (an “Insolvency Proceeding”), or any Obligated Group Party consents to the appointment or taking of possession by a receiver (or similar official) of any Obligated Group Party, or its property, or any Obligated Group Party makes an assignment for the benefit of creditors; provided, however, that an involuntary Insolvency Proceeding shall not be considered an Event of Default hereunder if it is either (i) consented to in writing by Bank, or (ii) has been dismissed within ninety (90) days of the filing thereof.

6.2 Remedies. If an Event of Default occurs under this Agreement, Bank may exercise any right or remedy available at law or in equity or by statute, including but not limited to all rights, powers and remedies of an owner and as a secured party under the UCC, and all of Bank’s rights and remedies shall be cumulative. Bank’s rights and remedies, each of which may be exercised with or without further notice to any Obligated Group Party, shall specifically include, without limitation, the right to: (a) exercise all rights and remedies available upon the occurrence of an Event of Default under any Loan Document, including without limitation the right to declare any and/or all Obligations immediately due and payable and to foreclose Bank’s security interests in any and/or all Collateral by any means allowed by law, with or without judicial process; (b) notify any person obligated with respect to any Collateral that the same has been assigned to Bank and that all payments thereon are to be made to Bank, and (c) renew, extend, amend, or otherwise modify any Collateral Document (subject to any required consents of third parties required pursuant to the terms thereof) and to otherwise exercise rights and remedies and act with respect to any Collateral as if it were the owner thereof.

Without limiting the foregoing, Bank’s rights after an Event of Default hereunder specifically include it’s right, at its option to: (i) declare any Obligations, including any Credit Facility, immediately due and payable, without notice or demand, (ii) enforce the security interest given hereunder pursuant to the UCC and/or any other applicable law, (iii) enforce the security interest of Bank, or exercise any right of setoff, in any deposit account of any Obligated Group Party by applying such account to the Obligations in such order and manner as Bank shall determine, (iv) grant extensions and compromise or settle claims with respect to the Collateral for less than face value, all without prior notice to any Obligated Group Party, (v) have a receiver appointed by any court of competent jurisdiction to take possession of all or any portion of the Collateral, and/or (vi) take such measures as Bank may deem necessary or advisable to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of any Collateral (each a “Collateral Disposition”).

6.3 Other Rights of Bank.

(a) The remedies provided herein in favor of Bank are not exclusive, but are cumulative and in addition to all other remedies in favor of Bank existing under the Loan Documents, and at law or in equity. Without limiting the foregoing, Bank may exercise its rights with respect to a portion of the Collateral without exercising its rights with respect to any other portion of the Collateral, and may exercise any of its rights under this Agreement without any obligation to enforce any of its rights to any other security for the Obligations.

(b) Bank may comply with any applicable federal, state, or local law or regulatory requirements in connection with a disposition of the Collateral, and such compliance will not be considered to affect adversely the commercial reasonableness of any sale of the Collateral. Bank may sell the Collateral without giving any warranties as to the Collateral, and specifically disclaim any

warranties of title, merchantability, fitness for a specific purpose or the like, and this procedure will not be considered to affect adversely the commercial reasonableness of any sale of the. Each Obligated Group Party acknowledges that a private sale of the Collateral may result in less proceeds than a public sale. Each Obligated Group Party acknowledges that the Collateral may be sold at a loss to such Obligated Group Party, and that, in such event, Bank shall have no liability or responsibility to such Obligated Group Party or any other Obligated Group Party for such loss.

(c) Upon any public or private sale of all or any portion of the Collateral, (i) Bank may bid for and purchase the Collateral being sold, and, upon compliance with the terms of sale, may hold, retain, possess, and dispose of such Collateral in its own absolute right without further accountability, and (i) all rights, title, interests, claims, and demands whatsoever, either at law or in equity, of any Obligated Group Party of, in, and to the property so sold will be divested; such sale will be a perpetual bar both at law and in equity against each Obligated Group Party and its respective successors and assigns. Each Obligated Group Party shall make and deliver to the purchaser or purchasers a good and sufficient deed, certificate, bill of sale, and instrument of assignment and transfer of the Collateral sold. To the extent it may do so lawfully, Each Obligated Group Party agrees not to insist upon, plead, claim, or take the benefit or advantage of, at any time, or in any manner whatsoever, any appraisement, valuation, stay, extension, or redemption laws, or any law permitting them to direct the order in which the Collateral or any portion thereof will be sold, now or at any time hereafter in force, which may delay, prevent, or otherwise affect the performance or enforcement of the this Agreement, and each Obligated Group Party hereby expressly waives all benefit or advantage of any such laws, and covenant that it will not hinder, delay, or impede the execution of any power granted or delegated to Bank in this Agreement, but will suffer and permit the execution of every such power as though no such laws were in force.

(d) Following an Event of Default, Bank is expressly granted the right, at its option, to transfer the Collateral, or any part thereof, to itself, or its nominee, and to receive the payments, collections, monies, income, proceeds, attributable or accruing thereto, and to hold same as security for the Obligations, or to apply same to the Obligations secured by this Agreement in such order and manner as Bank shall determine in its sole and absolute discretion. Except to the extent expressly prohibited by law, the right of Bank to take possession of the Collateral following an Event of Default hereunder may be exercised without resort to any court proceeding or judicial process, and without any hearing, whatsoever. Each Obligated Group Party expressly waives any and all rights (i) with regard to judicial process or hearing prior to the exercise of Bank’s right to take possession and control of the Collateral after an Event of Default, and (ii) to marshalling of assets, including such right with respect to the Collateral.

(e) Each Obligated Group Party agrees that Bank may at its option at any time, whether or not any Obligated Group Party is in default, notify any account debtors, any buyers of the Collateral, or any other persons of Bank’s interest in the Collateral. Bank is expressly granted the right, at its option, following an Event of Default, to demand and collect any payments and proceeds of the Collateral. In connection with the foregoing, each Obligated Group Party irrevocably authorizes Bank, and irrevocably appoints Bank as such Obligated Group Party’s attorney-in-fact, with full power of substitution, to endorse or sign such Obligated Group Party’s name on all checks, drafts, collections, receipts, and other documents, and to take possession of and open the mail addressed to such Obligated Group Party and remove therefrom any payments and proceeds of the Collateral, such appointment being a power coupled with an interest.

(f) In connection with any Collateral Disposition, Bank may (A) require the applicable Obligated Group Party to assemble all of any portion of the Collateral and make it available to Bank at a place designated by Bank, and/or enter upon the property where any such Collateral is located and take possession of such Collateral, and use such property (including any buildings and facilities) and any of such Obligated Group Party ‘s equipment, if Bank deems such use necessary or advisable for or in connection with such Collateral Disposition, and/or (B) use or transfer, without any additional consideration to any

Obligated Group Party, any of such Obligated Group Party’s rights and interests in any Intellectual Property now owned or hereafter acquired by such Obligated Group Party, including, but not limited to, all trade secrets, computer software, service marks, trademarks, trade names, trade styles, copyrights, patents, applications for any of the foregoing, customer lists, working drawings, instructional manuals, and rights in processes for technical manufacturing, packaging and labeling in which such Obligated Group Party has any right or interest, whether by ownership, license, contract or otherwise, if Bank deems such use or transfer necessary or advisable for or in connection with such Collateral Disposition. Each Obligated Group Party hereby irrevocably constitutes and appoints Bank as such Obligated Group Party’s attorney-in-fact, with full power of substitution, to perform all acts and execute all documents in connection with any Collateral Disposition, such appointment being a power coupled with an interest.

(g) Each Obligated Group Party agrees to take all steps necessary to avoid the violation of any current and future securities laws, and consents to any steps Bank takes to avoid violation of the same. Each Obligated Group Party further agrees to enter into any amendments hereto that Bank may reasonably request to avoid the violation of such laws. Each Obligated Group Party recognizes that, due to certain prohibitions contained in the Securities Act of 1933, as amended, or other applicable securities laws, Bank may, with respect to any securities, consider it advisable to resort to one or more private sales to a restricted group of purchasers who will agree to acquire any securities for their own accounts for investment and not to engage in a distribution of resale thereof, and that private sales so made may be at prices and on other terms less favorable to the seller than if such securities were sold at public sale. Each Obligated Group Party acknowledges that the price received for the purchase of such Collateral may be substantially lower than such Obligated Group Party might have negotiated under other circumstances, and each Obligated Group Party agrees that such procedures are commercially reasonable. If a deficiency remains due, the Borrower or applicable Obligated Group Party, as the case may be, must pay the same promptly to Bank.

6.4 Setoff. As additional security for the Obligations, including the payment and performance of all obligations of Borrower under the Loan Documents, each Obligated Group Party hereby grants Bank a security interest in, a lien on, and an express contractual right to set off against each account (including all deposit accounts), including all depository account balances, cash, and any other property of such Obligated Group Party, now or hereafter in the possession of Bank and the right to refuse to allow withdrawals from any account. Bank may, at any time upon the occurrence of any default or Event of Default, or an event that, with notice or the passage of time, or both, could become an Event of Default, under this Agreement or any other Loan Document, setoff against any amounts outstanding under the Obligations, whether or not any of the Obligations are then due or have been accelerated, all without any advance or contemporaneous notice of demand of any kind to any Obligated Group Party, such notice and demand being expressly waived.

6.5 Surrendered Payments. In the event that Bank makes any Surrendered Payment, including pursuant to a negotiated settlement, the Surrendered Payments, the Surrendered Payments shall immediately and automatically without any further action required on behalf of Bank or any other party, be reinstated as Obligations, regardless of whether this Agreement has been terminated, cancelled, or released pursuant to its terms or otherwise and regardless of whether Bank has surrendered, terminated, cancelled, or released this Agreement prior to returning any Surrendered Payments

7. Miscellaneous Provisions.

7.1 No Waiver; Consents. Each waiver by Bank shall be in writing, and no waiver may be construed as a continuing waiver. No waiver will be implied from Bank’s delay in exercising or failure to exercise any right or remedy against any party or any security. Bank’s consent to any act or omission by any Obligated Group Party may not be construed as a consent to any other or subsequent act or omission or as a waiver of the requirement for Bank’s consent to be obtained in any future or other instance.

7.2 Purpose and Effect of Bank Approval. Bank’s approval of any matter in connection with this Agreement is for the sole purpose of protecting Bank’s security and rights. No such approval will result in a waiver of any default of any Obligated Group Party. In no event may Bank’s approval be a representation of any kind with regard to the matter being approved.

7.3 Notices. All notices given under this Agreement shall be in writing and be given by personal delivery, overnight receipted courier (such as Airborne or Federal Express) or by registered or certified United States mail, postage prepaid, sent to the party at its address appearing below its signature. Notices shall be effective upon the first to occur of receipt, when proper delivery is refused, or the expiration of forty-eight (48) hours after deposit in registered or certified United States mail as described above. Addresses for notice may be changed by any party by notice to any other party in accordance with this Section.

7.4 Actions. If any Obligated Group Party fails to perform any agreement contained herein, Bank may itself perform, or cause the performance of, such agreement, and the reasonable expenses of Bank incurred in connection therewith shall be payable by the applicable non-performing party. Bank also shall have the right, but not the obligation, to commence, appear in, and defend any action or proceeding that might affect its security hereunder. The applicable Obligated Group Party shall pay promptly on demand all of Bank’s reasonable out-of-pocket costs, expenses and legal fees and expenses of Bank’s counsel incurred in those actions or proceedings.

7.5 Dispute Resolution. Disputes under this Agreement shall be resolved in the manner specified in the Loan Agreement.

7.6 Attorneys’ Fees. In any lawsuit or arbitration arising out of or relating to this Agreement, the Loan Documents, or the Loans, the prevailing party will be entitled to recover from each other party such sums as the court or arbitrator adjudges to be reasonable attorneys’ fees in the action or arbitration, in addition to costs and expenses otherwise allowed by law. In all other actions or proceedings, including any matter arising out of or relating to any Insolvency Proceeding, Borrower and each other applicable Obligated Party agrees to pay all of Bank’s costs and expenses, including reasonable attorneys’ fees, incurred in enforcing or protecting Bank’s rights or interests. From the time(s) incurred until paid in full to Bank, all such sums shall bear interest at the Default Rate. Whenever any Obligated Group Party is obligated to pay or reimburse Bank for any attorneys’ fees, those fees include the allocated costs for services of in-house counsel, to the extent not prohibited by applicable law.

7.7 Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Arizona, without regards to the choice of law rules of that state, except (a) to the extent that any of such laws may now or hereafter be preempted by Federal law, and (a) as otherwise required by mandatory provisions of law, and (c) to the extent that remedies provided by the laws of any jurisdiction other than the such state are governed by the laws of such other jurisdiction. Each Obligated Group Party consents to the jurisdiction of any Federal or State court within such state, submits to venue in such state, and also consents to service of process by any means authorized by Federal law or the law of such state. Without limiting the generality of the foregoing, each Obligated Group Party hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) such Obligated Group Party is not subject to the jurisdiction of the courts of the above-referenced state or the United States District Court for such state, or (ii) such suit, action, or proceeding is brought in an inconvenient forum, or (iii) the venue of such suit, action, or proceeding is improper.

7.8 Heirs, Successors and Assigns. The terms of this Agreement will bind and benefit the heirs, legal representatives, successors and assigns of the parties; provided, however, that no Obligated Group Party may assign this Agreement, or assign or delegate any of their rights or obligations, without the prior written consent of Bank in each instance.

7.9 Severability. The invalidity or unenforceability of any one or more provisions of this Agreement in no way affects any other provision.

7.10 Interpretation. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the sections of this Agreement are for convenience only and do not define or limit any terms or provisions. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.” No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Agreement.

7.11 Amendments. This Agreement may not be modified or amended except by a written agreement signed by the parties.

7.12 Counterparts. This Agreement and any attached consents or exhibits requiring signatures may be executed in counterparts, and all counterparts constitute but one and the same document.

7.13 Language of Agreement. The language of this Agreement will be construed as a whole according to its fair meaning and not strictly for or against any party.

7.14 Exchange of Information. Each Obligated Group Party agrees that the Bank may exchange or disclose financial information and other information about Borrower and any other Obligated Party with or to any of Bank’s affiliates or other related entities and with any party that acquires a participation or other interest in all or part of any Credit Facility..

7.15 Survival. The representations, warranties, acknowledgments, and agreements set forth herein shall survive the date of this Agreement.

7.16 Time is of the Essence. Time is of the essence in the performance of this Agreement, and each and every term thereof, by each Obligated Group Party.

7.17 Relationship of Parties. This Agreement is intended to be and is deemed for all purposes to constitute additional security granted to Bank for the repayment of the Loan. The execution and delivery of this Agreement and the enforcement of this Agreement by Bank does not alter or expand upon the debtor and creditor relationship between any Obligated Group Party and Bank, and nothing contained herein is to be construed to constitute Bank a partner of or a joint venturer with any party.

7.18 Continuing Agreement. This is a continuing agreement and all the rights, powers and remedies hereunder shall apply to all past, present, and future Obligations of Borrower and the other Obligated Group Parties, including those arising under successive transactions which shall either continue some or all the Obligations, increase or decrease any of them, or from time to time create new Obligations after all or any prior Obligations have been satisfied, and notwithstanding the bankruptcy of any Obligated Group Party, or any other event or proceeding affecting any Obligated Group Party.

7.19 Recitals; Exhibits. The Recitals to this Agreement set forth above are true, complete, accurate, and correct, and such recitals are incorporated hereby by reference. The exhibits to this Agreement are incorporated hereby by reference.

7.20 Integration. This Agreement integrates all the terms and conditions mentioned in or incidental to the subject matter contained herein, supersede all oral negotiations and prior writings with

respect to such subject matter, and is intended by the parties as the final expression of their agreement with respect to the terms and conditions set forth in herein.

7.21 Patriot Act Provisions. The following notification is provided to each Obligated Group Party pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318 (as such maybe amended or recodified from time to time, the “Patriot Act”):

(a) Important Information About Procedures for Opening a New Account. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. Each Obligated Group Party is hereby notified that when such party opens an account, including but not limited to any deposit account or other account that may be required pursuant to the terms of this Agreement, (i) if such party is not an individual, Bank will ask for such party’s name, taxpayer identification number, business address, and other information that will allow Bank to identify such party, and may also ask to see such party’s legal organizational documents or other identifying documents, and (ii) if such party is an individual, Bank will ask for such party’s name, taxpayer identification number, residential address, date of birth, and other information that will allow Bank to identify Borrower, and may also ask to see such party’s driver’s license or other identifying documents.

(b) Government Regulation. Each Obligated Group Party shall not (a) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Bank from making any advance or extension of credit to such party or from otherwise conducting business with such party, or (b) fail to provide documentary and other evidence of such party’s identity as may be requested by Bank at any time to enable Bank to verify such party’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the Patriot Act.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

“BORROWER”

THE INVENTURE GROUP, INC.,				Address for notices to Borrower:
a Delaware corporation
				The Inventure Group, Inc.
By:	/s/ Steve Weinberger			5050 N. 40TH Street, Suite 300
Name:			Steve Weinberger	Phoenix, AZ 85018
Title:		CFO		Attention: Steve Weinberger


“OBLIGATED GROUP”

BN FOODS, INC., a Colorado corporation				Address for notices to PBC:

				BN Foods, Inc.
By:	/s/ Steve Weinberger			c/o The Inventure Group, Inc.
Name:			Steve Weinberger	5050 N. 40TH Street, Suite 300
Title:			CFO	Phoenix, AZ 85018
				Attention: Steve Weinberger

(Remainder of page intentionally left blank.
See the following page for additional Obligated Group signatories.)

BOULDER NATURAL FOODS, INC.,
an Arizona corporation			Address for notices to Boulder:

			Boulder Natural Foods, Inc.
			c/o The Inventure Group, Inc.
By:	/s/ Steve Weinberger		5050 N. 40TH Street, Suite 300
Name:		Steve Weinberger	Phoenix, AZ 85018
Title:		CFO	Attention: Steve Weinberger

LA COMETA PROPERTIES, INC., an Arizona corporation			Address for notices to La Cometa:

			Poore Brothers - Bluffton, LLC
			c/o The Inventure Group, Inc.
By:	/s/ Steve Weinberger		5050 N. 40TH Street, Suite 300
Name:		Steve Weinberger	Phoenix, AZ 85018
Title:		CFO	Attention: Steve Weinberger

POORE BROTHERS - BLUFFTON, LLC,			Address for notices to PBC:
a Delaware limited liability company
			Poore Brothers - Bluffton, LLC
			c/o The Inventure Group, Inc.
By:	/s/ Steve Weinberger		5050 N. 40TH Street, Suite 300
Name:		Steve Weinberger	Phoenix, AZ 85018
Title:		CFO	Attention: Steve Weinberger

RADER FARMS ACQUISITION CORP.,			Address for notices to Rader:
a Delaware corporation
			Poore Brothers - Bluffton, LLC
			c/o The Inventure Group, Inc.
By:	/s/ Steve Weinberger		5050 N. 40TH Street, Suite 300
Name:		Steve Weinberger	Phoenix, AZ 85018
Title:		CFO	Attention: Steve Weinberger


TEJAS PB DISTRIBUTING, INC.,			Address for notices to Tejas:
an Arizona corporation
			Tejas PB Distributing, Inc.
			c/o The Inventure Group, Inc.
By:	/s/ Steve Weinberger		5050 N. 40TH Street, Suite 300
Name:		Steve Weinberger	Phoenix, AZ 85018
Title:		CFO	Attention: Steve Weinberger

			Address for notices to Bank:

			U.S. Bank National Association
			101 North First Avenue, Suite 1600
			Phoenix, AZ 85003
			Attention: Commercial Banking

EX-10.7 8 a07-18752_1ex10d7.htm EX-10.7

Exhibit 10.7

TERM LOAN AGREEMENT

This Term Loan Agreement (the “Agreement”) is dated for reference purposes as of June 28, 2007, between THE INVENTURE GROUP, INC., a Delaware corporation (as further defined below, the “Borrower”) and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), with the agreement and acknowledgement of all other Obligated Group Parties as to the covenants, representations, and warranties set forth herein applicable to them as part of the Obligated Group.

Unless defined elsewhere in this Agreement, defined terms used herein have the meanings given them in the Definitions Section hereof.

Factual Background

A. Bank has agreed to make a term loan (the “Loan”) to Borrower in the principal amount of Four Million and No/100 Dollars ($4,000,000.00) (the “Loan Amount”). The Loan will be secured by, among other things, the lessee’s interest in that certain Ground Lease wherein Lyle Rader, Sue Rader, Brad Rader and Julie Newell (formerly known as Julie Rader) are the current lessors (collectively, “Ground Lessor”) and RADER FARMS, INC., a Delaware corporation (“RFI”), is the current ground lessee, dated May 15, 2007 (the “Ground Lease”). The Ground Lease is also described in that certain Memorandum of Lease and Purchase Agreement, and recorded May 17, 2007, as Instrument No. 2070502840, Official Records of Whatcom County, Washington. The Ground Lease covers certain real property (the “Land”) owned by Ground Lessor, consisting of approximately 736 acres of real property and located in Whatcom County, Washington, as more particularly described in the attached Exhibit A, together with all buildings, structures, and other Improvements now or hereafter located on the Land, and certain other property. Borrower will use the Loan to reimburse Borrower for funds used to acquire the Property that will serve as collateral security for the Loan. Borrower is a holding company for several affiliated entities, and each of the Obligated Group Parties (other than Borrower) is an Affiliate, and a wholly owned subsidiary, of Borrower.

B. Borrower is executing a promissory note (the “Note”) payable to Bank evidencing the Loan. The Loan is secured by a Leasehold Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing (the “Deed of Trust”) covering the Land, the Improvements, and certain other property, and is also secured by other Collateral. The Credit Facilities, including the Loan and the RLOC/TL Loan shall be cross-collateralized and cross-defaulted. The RLOC/TL Security Agreement also secures the Loan. In this Agreement, the term “Lessee’s Rights” means all of the RFI’s right, title, and interest under the Ground Lease, including all possessory rights to the Land, and all rights and interests of the RFI in all Improvements now existing or hereafter located on the Land, and the term “Property” means all or any part of the property affected by the Deed of Trust, or any interest in all or any part of it, as the context requires, which includes but is not limited to all of the Lessee’s Rights and all now existing or hereafter acquired interests of RFI in and to the Land together with all Improvements now or hereafter located on it. As a material condition and material consideration of Bank making the Loan to Borrower, Bank has required that (i) Ground Lessor consent to the liens and security interests under the Deed of Trust, and (ii) Ground Lessor and RFI agree to certain other terms and conditions, including nondisturbance of the Lessee’s Rights under the Ground Lease following a foreclosure under the Deed of Trust, deed or assignment in lieu of foreclosure or similar action, and certain clarifications to the Ground Lease required by Bank, pursuant to a Ground Lessor’s Consent Agreement in form and substance mutually agreed between Ground Lessor, RFI, Borrower, and Bank (the “Ground Lessor’s Consent”).

C. The following parties have each agreed to guarantee all or certain of Borrower’s obligations to Bank in accordance with one or more Guaranties:

(1) LA COMETA PROPERTIES, INC., an Arizona corporation (“La Cometa”);

(2) POORE BROTHERS - BLUFFTON, LLC, a Delaware limited liability company (the “PBB”);

(3) TEJAS PB DISTRIBUTING, INC., an Arizona corporation (“Tejas”);

(4) BOULDER NATURAL FOODS, INC., an Arizona corporation (“Boulder”);

(5) BN FOODS INC., a Colorado corporation (“BN Foods”); and

(6) RFI (i.e., RADER FARMS, INC., a Delaware corporation).

Each of the Guarantors described above is an Obligated Group Party (as such term is defined below). It is intended (i) that each Obligated Group Party shall be liable for the Credit Facilities, directly or indirectly, as a Borrower or as a Guarantor, (ii) that all business assets of each Obligated Group Party shall be pledged to Bank as collateral for the Credit Facilities, (iii) that the financial statements and other information required of Borrower under this Agreement shall be prepared on a consolidated basis to include all Obligated Group Parties, (iv) that all covenants of Borrower shall be covenants of the Obligated Group Parties as applicable to the appropriate Obligated Group Party(ies), and (v) that all representations and warranties of Borrower shall be representations and warranties of the Obligated Group Parties as applicable to the appropriate Obligated Group Party(ies).

D. The Loan is due and payable on July 1, 2017 (the “Maturity Date”).

E. This Agreement, the Note, and the Deed of Trust, together with all of their exhibits, and all other documents which evidence, guaranty, secure, or otherwise pertain to the Loan collectively constitute the “Loan Documents.”

THEREFORE, Bank and Borrower agree as follows:

Agreement

“Accelerating Transfer” has the meaning set forth in the Deed of Trust.

“Account” means Borrower’s checking account number 151701212137 at Bank.

“Affiliate of” or “affiliated with” means in control of, controlled by or under common control with.

“Agreement” means this term loan agreement between Borrower and Bank.

“Approved Existing Liens” means, collectively, the liens set forth on Exhibit B attached hereto, and any other lien on collateral for any Credit Facility approved in writing by Bank from time to time.

“Approved Existing Lien Collateral” means collateral for any Credit Facility which is subject to any Approved Existing Lien.

“BN Foods” has the meaning set forth in Recital C above.

“Bailee Letter” has the meaning set forth in the RLOC/TL Loan Agreement.

“Boulder” has the meaning set forth in Recital C above.

“Borrower” means the entity described in the introductory paragraph to this Agreement; provided, however, that because RFI is the Ground Lessee under the Ground Lease and the owner/holder of the Lessee’s Rights that are collateral for the Loan, Borrower, and RFI by it’s signature below, each agrees that anywhere in this Agreement where the obligation is related to or in connection with the Ground Lease or the Property or any portion thereof, RFI shall comply with any such obligation and Borrower shall also have the obligation to cause RFI to comply with any such obligation. If RFI does not comply with any such obligation, then Borrower shall be obligated and hereby agrees to timely perform such obligation in RFI’s stead. Borrower and RFI agree that the non-performance of such obligation by them shall constitute an Event of Default under this Agreement.

“Borrowing Base” has the meaning set forth in the RLOC/TL Loan Agreement.

“Borrowing Base Certificate” has the meaning set forth in the RLOC/TL Loan Agreement.

“Borrower’s Indemnity” means, collectively, all of Borrower’s obligations under each indemnity by Borrower in favor of Bank and/or the Indemnified Parties relating to Hazardous Substances, including but not limited to Borrower’s covenants, warranties, and indemnification obligations set forth in any provisions contained within the Loan Documents, and/or separate secured or unsecured indemnity agreement, relating to Hazardous Substances executed by Borrower in connection with the Loan, and specifically including that certain Indemnity Agreement dated of even date herewith executed by Borrower in connection with the Loan.

“Closing Date” means the date of recordation of the Deed of Trust.

“Collateral” means all real and/or personal property now or hereafter assigned, pledged, or hypothecated to Bank as collateral security for the Loan. The Collateral includes all collateral covered under the Deed of Trust, and all includes all personal property business assets of the Obligated Group now or hereafter assigned, pledged, or hypothecated to Lender as collateral security for the Loan.

“Compliance Certificate” has the meaning set forth in Section 3.5 below.

defense without denying liability for any part of such claim which could result in liability of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or more to Borrower or any Guarantor.

“Deed of Trust” has the meaning set forth in Recital B above.

“Default Rate” has the meaning given it in the Note; provided, however, that if a default rate is not used or defined in the Note, “Default Rate” shall mean a per annum interest rate of five percent (5%) in excess of the rate of interest charged from time to time under the Note (the “Note Rate”); provided, however, that if a default rate is not used or defined in the Note evidencing the Loan, or if more than one Note Rate applies, the “Default Rate” shall mean a per annum interest rate of five percent (5%) in excess of the highest Note Rate.

“EBITDA” means, for the Obligated Group for the applicable period, net income, plus interest expense, plus income tax expense, plus depreciation expense, plus amortization expense.

“EDGAR System” means the Electronic Data Gathering Analysis and Retrieval System owned and operated by the United States Securities and Exchange Commission or any replacement system.

“Eligible Account” has the meaning set forth in the RLOC/TL Loan Agreement.

“Eligible Finished Goods Inventory” has the meaning set forth in the RLOC/TL Loan Agreement.

“Eligible Inventory” has the meaning set forth in the RLOC/TL Loan Agreement.

“Eligible Raw Materials Inventory” has the meaning set forth in the RLOC/TL Loan Agreement.

“Events of Default” means those events of default set forth in Section 7.1 (each, an “Event of Default”).

“Facility 1” has the meaning set forth in Recital A of the RLOC/Term Loan Agreement.

“Facility 2” has the meaning set forth in Recital A of the RLOC/Term Loan Agreement.

“GAAP” means generally accepted accounting principles, consistently applied.

“Grower Lien” any lien on any collateral for any Credit Facility pursuant to PACA or any other Agricultural Law.

“Ground Lease” has the meaning set forth in Recital A above.

“Ground Lease Default Notice” has the meaning set forth in Section 4.2 below.

“Ground Lessor” has the meaning set forth in Recital A above.

“Ground Lessor’s Consent” has the meaning set forth in Recital B above.

“Hazardous Substance” means and includes any substance, material, or waste, including asbestos, petroleum, and petroleum products (including crude oil), that is or becomes designated, classified, or regulated as “toxic” or “hazardous” or a “pollutant,” or that is or becomes similarly designated, classified, or regulated, under any federal, state, or local law, regulation, or ordinance, but does not include any such substance that is a customary and ordinary household, cleaning, or office product used on the Property by Borrower or any tenant or agent of Borrower, or customary construction materials used during the course of construction of any Improvements on the Property by Borrower or it contractors, provided such use is in accordance with applicable hazardous materials laws and regulations.

“Improvements” means all existing and hereafter constructed improvements to the Land. All such Improvements shall be constructed and maintained in accordance with the terms of the Ground Lease.

“Indemnified Costs” means all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages), costs, expenses, fines, penalties and losses (including sums paid in settlement of claims and all consultant, expert and legal fees and expenses of Bank’s counsel), including those incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work (whether of the Property or any other property), or any resulting damages, harm, or injuries to the person or property of any third parties or to any natural resources, excepting those arising out of, or resulting, solely from the applicable Indemnified Party’s gross negligence or willful misconduct.

“Indemnified Parties,” means Bank, its parent, subsidiary, and any affiliated companies, any assignees of any of Bank’s interest in the Loan or the Loan Documents, any owners of participation or other interests in the Loan or the Loan Documents, any purchasers of all or any portion of the Property at any foreclosure sale or from Bank or any of its affiliates, and the officers, directors, employees, and agents of each of them (each individually, an “Indemnified Party”).

“Initial Minimum TNW Amount” means Fourteen Million Seven Hundred Fifty Thousand and No/100 Dollars ($14,750,000.00).

“Insolvency Payments” means all monetary obligations incurred or accrued during the pendency of any Insolvency Proceeding regardless of whether allowed or allowable in such proceeding.

“Insolvency Proceeding” means any bankruptcy, receivership, or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships.

“La Cometa” has the meaning set forth in Recital C above.

“Land” has the meaning set forth in Recital A above.

“Lessee’s Rights” has the meaning set forth in Recital B above.

“Leverage Ratio” means, for the Obligated Group, the relationship, expressed as a numerical ratio, between: (a) Total Funded Debt of the Obligated Group, and (b) EBITDA of the Obligated Group on a rolling four (4) quarter basis, calculated at the end of each fiscal quarter, using the results of that fiscal quarter and each of the three (3) immediately preceding fiscal quarters.

“Loan” means the loan being made available by Bank to Borrower pursuant to the terms of this Agreement as described in Recital A above.

“Loan Amount” has the meaning set forth in Recital A above.

“Loan Documents” has the meaning set forth in Recital E above.

“Maintenance Capital Expenditures” means One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00).

“Maturity Date” has the meaning set forth in Recital D above.

“Maximum Loan-to-Value Ratio” means the ratio of the Loan Amount to the Property Value.

“Net Eligible Accounts” has the meaning set forth in the RLOC/TL Loan Agreement.

“Net Monthly Cash Income” means all actual cash income received from the Property during a calendar month less the actual operating expenses incurred for or attributable to the Property, excluding amounts payable under the Note.

“Note” means that certain promissory note described in Recital B above made by Borrower to the order of Bank in the Loan Amount, as amended, renewed, restated, or replaced from time to time. “Notes” means, collectively, all promissory notes, instruments, reimbursement agreements, or other contracts or agreements evidencing the terms and conditions of the Obligations, including the “Note” described in Recital B above, and also including the Facility 1 Note and the Facility 2 Note.

“Obligations” or “obligations” means all obligations, indebtedness, and liabilities of Borrower to Bank, or any of Bank’s Affiliates, successors or assigns, of every kind and nature, including but not limited to all loans, advances, drafts, overdrafts, checks, promissory notes, and all other debts, liabilities, and obligations of every kind owning by Borrower to Bank, whether direct or indirect, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated, of the same or a different nature, whether now existing or hereafter incurred or created, or whether incurred directly or acquired by Bank by assignment or otherwise, including interest thereon and all costs, expenses, and reasonable attorney’s fees (including the fees of in-house counsel) paid or incurred by Bank at any time before or after judgment in attempting to collect any of the foregoing, to realize on any collateral securing any of the foregoing, to realize on any guaranty or indemnity executed in connection with the foregoing, and to enforce this Agreement. The “Obligations” specifically include, but are not limited to, all indebtedness of Borrower to Bank under the Loan and under the Credit Facilities, and all advances made by Bank to or for the benefit of Borrower thereunder, and Surrendered Payments. In the event that Bank makes any Surrendered Payment, including pursuant to a negotiated settlement, the Surrendered Payments shall immediately and automatically without any further action required on behalf of Bank or any other party, be reinstated as Obligations, regardless of whether this Agreement has been terminated, cancelled, or released pursuant to its terms or otherwise and regardless of whether Bank has surrendered, terminated, cancelled, or released this Agreement prior to returning any Surrendered Payments. Unless Borrower shall have otherwise agreed in writing, for the purposes of this Agreement, “Obligations” shall not include “consumer credit” subject to the disclosure requirements of the Federal Truth in Lending Act or any regulations promulgated thereunder.

“Obligated Group” and “Obligated Group Parties” shall mean, collectively, (a) Borrower, (b) La Cometa, (c) PBB, (d) Tejas, (e) Boulder, (f) BN Foods, and (g) RFAC (each, individually, an “Obligated Group Party”).

“PACA” means the Perishable Agricultural Commodities Act, as such may be amended, recodified, and in effect from time to time.

“Patriot Act” has the meaning set forth in Section 9.26 below.

“PBB” has the meaning set forth in Recital C above

“Property” has the meaning set forth in Recital B above.

“Property Value” means the lower of (a) the actual acquisition cost of the Land and existing Improvements as previously disclosed by Borrower to Bank, or (b) the “as is” market value of the Land and existing Improvements as determined by Bank using, as appropriate, a methodology which (i) conforms to then-current regulatory requirements, (ii) is considered by Bank to be reasonable and appropriate under the circumstances, and (iii) takes into account then-current market conditions, all as determined by Bank in its sole and absolute discretion.

“Rader Acquisition Assets” means all business assets of RADER FARMS, INC. being acquired by RFAC and/or the other Obligated Group Parties as part of the Rader Acquisition.

“Requirements” has the meaning set forth in Section 3.1.

“Reserve Account” means each reserve or impound account established and thereafter maintained at Bank in the name of Borrower, on and subject to such terms and conditions, and at such interest rates, as Bank may offer to Borrower in connection with the Loan (collectively, the “Reserve Accounts”).

“Reserve Deposit” means each deposit of funds required pursuant to the Loan Documents to be made into a Reserve Account (collectively, the “Reserve Deposits”).

“RFAC” has the meaning set forth in Recital C above

“RFAC Eligible Inventory” has the meaning set forth in the RLOC/TL Loan Agreement.

“RLOC/TL Security Agreement” means that certain Security Agreement (Blanket — All Business Assets) dated as of May 16, 2007 executed by all Obligated Group Parties in favor of Bank, which secures, among other things, (a) the Loan Agreement and all obligations of Borrower in connection with the Loan, and (b) all obligations of Borrower in connection with Facility 1 and Facility 2.

“RLOC/TL Loans” means, collectively, Facility 1 and Facility 2, which Credit Facilities were made available by Bank to Borrower pursuant to and as described in the RLOC/TL Loan Agreement. The Loan and the RLOC/TL Loans shall be cross-collateralized and cross-defaulted.

“RLOC/TL Loan Agreement” means that certain Loan Agreement (Revolving Line of Credit Loan and Term Loan) between Borrower and Bank dated as of May 16, 2007 evidencing the RLOC/TL Loans, which RLOC/TL Loan Agreement was made with the agreement and acknowledgement of all other Obligated Group Parties as to the covenants, representations, and warranties set forth therein applicable to them as part of the Obligated Group.

“RLOC/TL Loan Closing Date” means May 17, 2007.

“RLOC/TL Loan Documents” means all documents which evidence, guarantee, secure, or otherwise pertain to the RLOC/TL Loans, including but not limited to the RLOC/TL Loan Agreement, the RLOC/TL Security Agreement, and any other security instrument or agreement securing the RLOC/TL Loan.

“Royalties Payable” means, the aggregate of all accrued and unpaid royalties payable of the Obligated Group as show on Borrower’s consolidated balance sheet.

“Security Agreement” means any pledge, assignment, or grant of a security interest in favor of Bank of all or any portion of the Obligated Group’s assets, including the assignment and security interest created in favor of Bank pursuant to that certain Security Agreement (Blanket - All Business Assets) dated as of May 16, 2007 executed by each Obligated Group Party in favor of Bank dated of even date herewith. Each Security Agreement shall be in form and substance acceptable to Bank.

“Swap Payments” has the meaning set forth in Section 6.1.

“Tangible Net Worth” means (1) the total of all assets properly appearing on the consolidated balance sheet of Borrower (i.e. of the Obligated Group) in accordance with GAAP, less (2) the sum of (i) the book amount of all such assets which would be treated as intangibles under GAAP, including, without limitation, all such items as goodwill, trademarks, trademark rights, trade names, trade name rights, brands, copyrights, patents, patent rights, licenses, deferred charges and unamortized debt discount and expenses, (ii) any write-up in the book value of any such assets resulting from a revaluation thereof subsequent to the date of the Agreement, (iii) all reserves which have not already been deducted in calculating total assets on Borrower’s consolidated balance sheet, including reserves for depreciation, depletion, insurance, and inventory valuation, but not including contingency reserves not allocated for any particular purpose and not deducted from assets, (iv) the amount, if any, at which any shares of stock of Borrower or any other Obligated Group Party appear on the asset side of such balance sheet, (v) all liabilities of Borrower or any other Obligated Group Party shown on such balance sheet, (vi) all investments in foreign affiliates and non-consolidated domestic affiliates, and (vii) all accounts or notes due to Borrower or any other Obligated Group Party from any shareholder, director, officer, employee or affiliate of Borrower or any other Obligated Group Party or from any relative of such party.

“Tejas” has the meaning set forth in Recital C above.

“Third Party Indemnity” means any indemnity agreement executed by a Guarantor or any other third party in favor of Bank, including the indemnity in favor of Bank pursuant to those certain Third Party Indemnity Agreements being executed by each Guarantor in connection with the Loan.

“Total Funded Debt” means, for the Obligated Group for the applicable period, the sum of (a) outstanding borrowings under the Loan and the RLOC/TL Loans, plus (b) the face amount of issued and outstanding letters of credit, plus (c) the aggregate outstanding principal balance of all other indebtedness for borrowed money, including capital lease obligations, plus (d) the aggregate of all guaranties executed by Borrower or any other Obligated Group Party.

“Unmatured Event of Default” means an event that, with notice or the passage of time, or both, could become an Event of Default.

1. Conditions Precedent to Closing and Disbursement.

1.1 Conditions to Closing and Disbursements Upon Closing. Before Bank becomes obligated to close the Loan herein contemplated or make any disbursement under this Agreement, the following closing conditions shall have been satisfied at Borrower’s sole cost and expense in a manner acceptable to Bank in its sole and absolute discretion. No waiver of any closing condition is effective unless expressly made in writing by Bank.

(a) Financial Statements of Borrower and Other Financial Information. Borrower shall have delivered to Bank all financial statements and other financial information currently required under the Loan Documents, certified as being true, correct, and complete in all material respects by an authorized officer, manager, member, or general partner of Borrower or other applicable parties.

(b) Organizational Documents and Certificates. Borrower shall have delivered to Bank, for each party to each of the Loan Documents:

(i) All organization documents and evidence of due formation and good standing requested by Bank.

(ii) All resolutions, certificates of authority, incumbency certificates, or other evidence of authorization requested by Bank.

(iii) Evidence of such party’s Federal Tax Identification Number.

(iv) An Article 9 Certificate in form and substance acceptable to Bank.

(c) Loan Documents and Other Items. Borrower shall have duly executed or obtained the due execution of, and delivered to Bank, all Loan Documents and other items required by Bank to be executed in connection with the Loan, including but not limited to this Agreement, the Note, the Deed of Trust, the Guaranties, the Third Party Indemnities, UCC-1 financing statements, and any and all other such documentation otherwise required by Bank to fulfill the purposes of this Agreement.

(d) Security Interests Perfected. The Deed of Trust shall have been duly recorded in a first-priority lien position. Bank’s security interest in all personal property and fixtures described in the Deed of Trust shall have been duly perfected in a first-priority lien position. Bank’s security interest in all property pledged as collateral security for the Loan, as described in one or more Security Agreements or other security instruments executed by Borrower, and/or any third party pledgor, in favor of Bank, shall have been duly perfected in a first-priority lien position.

(e) Title Insurance Commitment. Bank shall have received a commitment to issue an ALTA extended coverage lender’s policy of title insurance underwritten by a title insurance company approved by Bank in its sole and absolute discretion in an amount not less than the Loan Amount and insuring the lien of the Deed of Trust to be a first-priority lien on the Property, including the Lessee’s Rights, subject only to such exceptions and conditions to title as Bank has approved, and containing such endorsements as Bank may require, which may include zoning, survey, access, parcel contiguity, variable rate, environmental, tax parcel, and leasehold policy endorsements. In addition, if required by Bank, one or more other title insurance companies acceptable to Bank shall have issued such coinsurance and/or reinsurance as Bank may require. No title matter may be insured over by any title company without the express written consent of Bank. The final title insurance policy shall be delivered to Bank within a reasonable time following the issuance of the title insurance commitment.

(f) Survey. If requested by Bank, Borrower shall have delivered to Bank an ALTA/ACSM survey of the Land and any existing Improvements thereon certified to Bank and the title insurance company by a licensed land surveyor and showing the location of all boundary lines, easements, rights of way, and other matters affecting the Land. Such survey shall be certified by the land surveyor within ninety (90) days of the Loan Closing Date. Such survey shall be sufficient for the deletion of the survey exception, if any, from the Bank’s title insurance policy.

(g) Flood Hazard Evidence and Insurance. Borrower shall have provided Bank with evidence as to whether or not the Land or any portion thereof is located in an area identified as having “special flood hazards” as such term is defined in the federal Flood Disaster Protection Act of 1973, as amended. If any part of the Improvements is in a special flood hazard area, Borrower shall have provided Bank with a flood insurance policy as part of the insurance requirements of this Agreement.

(h) Insurance. Borrower shall have provided evidence that there is in effect all insurance required by Bank pursuant to this Agreement and the other Loan Documents, written by

insurers, and in form and in amount satisfactory to Bank. Borrower shall also have provided evidence that there is in effect all insurance required by Bank pursuant to the RLOC/TL Loan Agreement and the other RLOC/TL Loan Documents, written by insurers, and in form and in amount satisfactory to Bank.

(i) Taxes and Tax Service Contract. Borrower shall have provided to Bank the tax identification number(s) assigned to the Land and evidence that all taxes and assessments levied against or affecting the Land have been paid current, or in the event Borrower has commenced a legal or administrative challenge to any such tax or assessment, evidence that such liability has been bonded over, or that funds for the payment thereof (in the amount of the original assessment) have been escrowed with an independent third party with provisions for the payment thereof satisfactory to Bank in its sole and absolute discretion. Borrower shall have provided to Bank, at Borrower’s cost and expense, a tax service contract for the Land with a tax service company, and containing terms and conditions, acceptable to Bank in its sole and absolute discretion. Additionally if requested by Bank, Borrower shall also provide a sales tax clearance letter from the appropriate taxing authority.

(j) Appraisal. Bank shall have received, reviewed and approved, in Bank’s sole and absolute discretion, an MAI certified appraisal of the Property, performed in accordance with FIRREA and Bank’s appraisal requirements by an appraiser selected and retained by Bank, in form and content acceptable to Bank.

(k) Environmental. Bank shall have received, reviewed, and approved, in Bank’s sole and absolute discretion, a Phase I Environmental Site Assessment prepared by a licensed or registered environmental engineer or other qualified party satisfactory to Bank, and the information set forth in it must be acceptable to Bank.

(l) Agreements Related to the Property. If requested by Bank, Borrower shall provide Bank with copies of all ongoing agreements related to the Property, including but not limited to all property management agreements, all service contracts and warranties, all leases affecting the Property, and such other Property-related information which Bank may reasonably request. All such agreements required by Bank shall be in full force and effect.

(m) Existing Leases; Subordinations. If there are any leases of any part of the Property in existence as of the loan closing date other than the Ground Lease (i) copies of those leases must be delivered to and approved by Bank, and (ii) if required by Bank, Bank shall have received fully executed estoppel certificates, subordination agreements, and/or subordination, nondisturbance and attornment agreements, in form and substance acceptable to Bank.

(n) Fees. Borrower shall have paid to Bank, in immediately available funds, all fees and costs called for under this Agreement or by any Loan commitment letter.

(o) Approval of Items. Bank shall have approved or consented to, as the case may be, all items required by Bank prior to the closing of the Loan pursuant to this Agreement which are subject to the consent or approval of Bank. All contracts or agreements included in such items shall be in full force and effect.

(p) Zoning. If required by Bank, Borrower shall have provided to Bank evidence satisfactory to Bank in its sole and absolute discretion that the Property is properly zoned for its intended use and that any and all zoning stipulations have been complied with.

(q) Condition of Property. Unless otherwise agreed in writing by Bank, the Property and all existing improvements thereon shall not be in need of immediate repairs (except de minimis repairs), as determined by Bank in its sole and absolute discretion.

(r) No Default. No event shall have occurred and be continuing which would constitute a default or Event of Default (as defined in the applicable document) or an Unmatured Event of Default under any of the Loan Documents.

(s) No Condemnation Proceedings. Neither the Property nor any interest in it shall be affected by eminent domain or condemnation proceedings.

(t) Opinion Letters. If required by Bank, Borrower has delivered to Bank a favorable opinion from independent counsel, opining to such matters as Bank may require, in form and substance satisfactory to Bank in its sole and absolute discretion, by counsel acceptable to Bank for Borrower and/or any other parties to the Loan Documents.

(u) Miscellaneous. Borrower shall have delivered to Bank any other item reasonably deemed necessary by Bank and shall have fulfilled any other condition reasonably required by Bank to fulfill the intention of this Agreement and any Loan commitment issued to Borrower.

2. Disbursement Conditions and Procedures; Other Loan Terms.

2.1 Disbursement Conditions, Amounts, and Procedures.

(a) Single Disbursement. Subject to the terms hereof, unless otherwise agreed in writing by Bank, Bank shall disburse the Loan as a single disbursement upon the closing of the Loan.

(b) Debit of Loan at Closing. As of the day the Loan closes, Bank is authorized to make payments on Borrower’s behalf by debiting the Loan funds and disbursing such amounts to itself for all costs and expenses payable by Borrower to Bank pursuant to the terms of this Agreement, if such have not been received by Bank in immediately available funds directly from Borrower’s own funds. Such expenses shall include but not be limited to: (i) legal fees and expenses of Bank’s counsel; (ii) loan administration and documentation fees; (iii) appraisal fees, and, if applicable, appraisal review fees; and (iv) and other fees and costs required to be paid to Bank by Borrower under this Agreement.

(c) Interest on Disbursement. Interest on the Loan shall be payable from the time Bank debits the Loan funds in the amount of the disbursement.

(d) Use of Disbursements. Borrower agrees to use disbursements solely in conformity with the uses set forth above, except as otherwise provided herein or agreed to in writing by Bank.

(c) Debit of Loan at Closing. As of the day the Loan closes, Bank is authorized to make payments on Borrower’s behalf by debiting the Loan funds and disbursing such amounts to itself for all costs and expenses payable by Borrower to Bank pursuant to the terms of this Agreement, if such have not been received by Bank in immediately available funds directly from Borrower’s own funds. Such expenses shall include but not be limited to: (i) legal fees and expenses of Bank’s counsel; (ii) loan administration and documentation fees; (iii) appraisal fees, and, if applicable, appraisal review fees; and (iv) other fees and costs required to be paid to Bank by Borrower under this Agreement.

(f) Interest on Disbursement. Interest on the Loan shall be payable from the time Bank debits the Loan funds in the amount of the disbursement.

2.2 Escrow for Loan Closing; Fulfillment of Conditions.

(a) Escrow for Loan Closing. In connection with the Loan closing and the disbursement of Loan proceeds by Bank under this Agreement, Bank, at its option, may require that such

disbursement be made through an escrow maintained with a title company or law firm acceptable to Bank in its sole and absolute discretion, in accordance with escrow instructions prepared by Bank.

(b) Fulfillment of Conditions. Bank need not make any disbursement of the Loan funds until Borrower fulfills all conditions of the Loan Documents, at Borrower’s sole cost and expense. All such conditions shall be satisfied at Borrower’s sole cost and expense.

(c) Deferral of Conditions; Conditions Subsequent. If Borrower has not fulfilled all closing and disbursement conditions prior to the date set for closing the Loan, Bank, at its option, may close the Loan without disbursing any Loan funds or may close the Loan and disburse some or all of the Loan funds subject to Borrower’s compliance with any or all such condition(s) as conditions subsequent to the Loan closing. In such event, Bank shall notify Borrower of the conditions subsequent that must be met and the time period(s) within which Borrower is required to comply. If no time period for compliance is specified by Bank as to any condition subsequent, then Borrower shall comply with such condition subsequent within thirty (30) days of the date of closing of the Loan. Failure of Borrower to comply with all conditions subsequent within the applicable time periods shall be an Event of Default hereunder.

2.3 Automatic Deduction. At Borrower’s election, automatic deduction may be used to make payments under the Loan. If Borrower so elects, then the following shall apply:

(a) Monthly Payments. Borrower agrees that monthly payments on the Loan will be deducted automatically on the due date from the Account.

(b) Date of Debit. Bank will debit the Account on the dates the payments on the Loan become due. If a due date does not fall on a Banking Day (as such term is defined in the Note) , Bank will debit the Account on the first Banking Day following the due date.

2.4 Collateral Security.

(a) Other Collateral. In addition to the Property described above, the Loan shall be secured by all of the following:

(i) Personalty Related to the Land and Improvements. A first-priority lien on and security interest in all equipment, furniture, fixtures, and materials to be incorporated into any Improvements, and any other personal property owned by Borrower located on or used in connection with the Land and Improvements; provided, however, that as to any such property assets subject to an Approved Existing Lien, Bank shall obtain a second-priority security interest, subject only to the Approved Existing Lien.

(ii) Contracts. If requested by Bank, an assignment of, and first-priority security interest in and all development contracts, management contracts, service and warranty contracts, and all other agreements now or hereafter entered into by Borrower in connection with the leasing, management, operation, or maintenance of Property, or for services on or related to, the Property.

(iii) Business Assets. A first-priority security interest in all business assets of the Obligated Group, as more particularly described in one or more Security Agreements; provided, however, that as to any business assets subject to an Approved Existing Lien, Bank shall obtain a second-priority security interest, subject only to the Approved Existing Lien; provided further, however, that with respect to any vehicles currently owned by any being purchased as part of the Rader Acquisition Assets (as such term is defined in the RLOC/TL Loan Agreement), no lien of Bank on the certificates of title for such vehicles shall be required.

(iv) Accounts. An assignment of, and first-priority security interest in all of the following accounts (if any, whether opened prior to, concurrently with, or subsequent to, the closing of the Loan), and all funds contained or deposited therein: (A) the Account, and (B) all Reserve Accounts, is any.

(v) Swap Contract Payments. An assignment of, a lien on, and first-priority security interest in all payments due at any time and from time to time from Bank to Borrower under any Swap Contract.

(b) Release of Collateral. Unless otherwise agreed in writing by Bank, Bank’s security interest in all collateral for the Loan shall be released by Bank when the Loan has been paid and performed in full unless such collateral also serves as collateral for other indebtedness of Borrower or any other party to Bank; provided, however, that if there is any conflict in the release terms contained in any security agreement, assignment, or other security instrument as to the terms upon which the Bank’s security interest in the collateral described in that document, or any portion thereof, shall be terminated and/or released and the terms of this Section, the terms of any such security agreement, assignment, or other security instrument shall control and govern the collateral described therein.

(c) Collateral Documents. Borrower agrees to execute and/or authorize, as the case may be, any and all documents, including security agreements and financing statements, as Bank may reasonably request in order to create, perfect, or continue the security interests described above.

(d) Cross-Collateralization; Payment Application.

(i) Borrower and each other Obligated Group Party understands and acknowledges that certain collateral will secure both the Loan and the RLOC/TL Loans, and may secure other Obligations, and thus the Loan and the RLOC/TL Loans (and any other secured Obligations) will be cross-collateralized by such collateral. Without limitation, at the closing of the Loan, the Deed of Trust executed by Borrower covering the Property described therein will cover all Obligations, including the Loan and the RLOC/TL Loans, and thus the Loan and the RLOC/TL Loans will be cross-collateralized by such collateral. Additionally, the Security Agreement(s) executed by Borrower and/or the other Obligated Group Parties at or prior to the RLOC/TL Closing Date covering the collateral described therein cover all Obligations, including the Loan and the RLOC/TL Loans, and thus the Loan and the RLOC/TL Loans will be cross-collateralized by such collateral.

such sale, and (ii) Bank may apply any proceeds of any collateral to payment of the Loan and/or either of the RLOC/TL (and any other secured Obligations) in such manner, order, and priority as Bank may elect, whether or not those obligations are guaranteed by any Guaranty or secured by other collateral at the time of the application.

(iv) Each of Borrower, RFAC, and each other Obligated Group Party understands and acknowledges that, effective as of the Closing Date, (i) the Deed of Trust encumbering the Property will secure the Loan and will also secure the RLOC/TL Loans, thus the Loan and the RLOC/TL Loans will be cross-collateralized by the Property, (ii) the Security Agreement(s) covering Borrower’s and each other Obligated Group Party’s business assets, including the Rader Acquisition Assets, will secure both the Loan and the RLOC/TL Loans (and other indebtedness described therein), thus the Loan and the RLOC/TL Loans will also be cross-collateralized by the collateral described in the Security Agreement(s). All other collateral for the Loan, if any, will also secure the RLOC/TL Loans. All other collateral for the RLOC/TL Loans, if any, will also secure the Loan.

(v) Each of Borrower, RFAC, and each other Obligated Group Party agrees that all involuntary payments and prepayments by liquidation of the Property, or any portion thereof, as collateral under the Deed of Trust, through foreclosure or otherwise, shall be applied (i) first, to Borrower’s obligations under the Loan Documents; and (ii) then, to Borrower’s obligations under the RLOC/TL Loan Documents and any other Obligations secured thereby in such order and manner as Bank shall determine in its sole and absolute discretion.

3. Covenants of Borrower. Borrower promises to keep each of the covenants set forth below, unless Bank has waived compliance in writing.

3.1 Compliance with Law and Ground Lease. Borrower shall comply, and shall cause RFI to comply, with all existing and future laws, regulations, orders, building codes, restrictions and requirements of, and all permits and approvals from, and agreements with and commitments to, all governmental, judicial, or legal authorities having jurisdiction over the Property, including those pertaining to the acquisition, ownership, management, maintenance, operation, or enjoyment of the Property, and with all covenants and restrictions and other title encumbrances affecting the Property, and with the terms and conditions of the Ground Lease, and Borrower shall also comply with all existing and future laws, regulations, orders, codes, restrictions, and requirements of, and all permits and approvals from, and agreements with and commitments to, all governmental, judicial, or legal authorities having jurisdiction over Borrower’s business and other properties (collectively, the “Requirements”).

3.2 Taxes; Additional Costs. Borrower shall not deduct any taxes from any payments it makes to the Bank. If any government authority imposes any taxes on any payments made by Borrower, Borrower shall pay the taxes and shall also pay to the Bank, at the time interest is paid, any additional amount which the Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such taxes had not been imposed. Upon request by the Bank, the Borrower will confirm that it has paid the taxes by giving the Bank official tax receipts (or notarized copies) within thirty (30) days after the due date. However, the Borrower will not pay the Bank’s net income taxes. Additionally, Borrower shall pay the Bank, on demand, for the Bank’s costs or losses arising from any statute or regulation, or any request or requirement of a regulatory agency. The costs and losses (a) will be allocated to the loan in a manner determined by the Bank, using any reasonable method, and (b) include the following: (i) any reserve or deposit requirements, and (ii) any capital requirements relating to the Bank’s assets and commitments for credit.

3.3 Insurance.

(a) Borrower shall provide, maintain, and keep in force at all times prior to repayment of the Loan:

(i) All-risk hazard insurance covering the Property, reflecting coverage in an amount not less than one hundred percent (100%) of the full insurable value of the Property on a replacement cost basis, that includes (unless otherwise agreed in writing by Bank): (A) a lender’s loss payable endorsement with a severability of interest clause with a thirty (30) day notice to Bank in the event of cancellation, non-renewal, or material change, (B) a replacement cost endorsement, (C) no coinsurance clause, (D) boiler and machinery coverage, (E) vandalism and malicious mischief coverage, (F) extra expense coverage and (G) loss of rents insurance in an amount of not less than the greater of (1) 100% of one year’s Rental Value of the Property or (2) to twelve (12) months’ principal and interest payments, taxes, and insurance premiums relating to the Property. For purposes hereof, “Rental Value” shall include, as applicable (1) the total projected gross rental income from tenant occupancy of the Property as set forth in any tenant leases, and any other projections delivered to Bank, (2) the amount of all charges which are the legal obligation of tenants and which would otherwise be the obligation of the applicable Borrower, and (3) the fair rental value of any portion of the Property which is occupied by Borrower, or any Affiliate of Borrower.

(ii) Commercial General Liability coverage with such limits as Bank may require. This policy shall name Bank as an additional insured. Coverage shall be written on an occurrence, not claims made, basis. Initially (i.e. as of the Closing Date), the Commercial General Liability insurance coverage limits required are One Million and no/100 Dollars ($1,000,000.00) per occurrence and Two Million and No/100 Dollars ($2,000,000.00) aggregate.

(b) Borrower shall provide, maintain, and keep in force at all times prior to repayment of the Loan, any and all additional insurance Bank in its reasonable judgment may from time to time require, against commonly insured hazards for similarly situated properties. Such additional insurance may include flood insurance as required by federal law and earthquake and/or sinkhole insurance as required by Bank. At Bank’s request, Borrower shall supply Bank with an original, countersigned original, or certified copy of any policy. All policies of insurance required under the Loan Documents shall be issued by companies approved by Bank having an A.M. Best’s rating acceptable to Bank, with limits, coverage, forms, deductibles, inception and expiration dates and cancellation provisions acceptable to Bank, and shall provide that all proceeds be payable to Bank to the extent of its interest. In addition, each required property insurance policy shall contain a mortgagee clause or Lender’s Loss Payable Form (Form CP1218 or equivalent) in favor of Bank, and any other endorsements required by Bank, and shall provide that all proceeds be payable to Bank to the extent of its interest. An approval by Bank is not, and may not be deemed to be, a representation of the solvency of any insurer or the sufficiency of any amount of insurance. Each policy of insurance required under the Loan Documents shall provide that it may not be modified or canceled without at least thirty (30) days’ prior written notice to Bank. When any required insurance policy expires, Borrower shall furnish Bank with proof acceptable to Bank that the policy has been reinstated or a new policy issued, continuing in force the insurance covered by the expired policy. Borrower shall also furnish evidence satisfactory to Bank that all premiums for such policy have been paid within thirty (30) days of renewal or issuance. If Bank fails to receive such proof and evidence, Bank has the right, but not the obligation, to obtain current coverage and advance funds to pay the premiums for it. Borrower shall repay Bank immediately on demand for any advance for such premiums, which will be an additional loan to Borrower bearing interest at the Default Rate and secured by the Deed of Trust and any other collateral held by Bank in connection with the Loan. As to all policies of insurance provided by Borrower, Borrower shall be named as the insured and any additional insured parties shall be subject to Bank’s approval. As to all policies of insurance provided by a third party other than Borrower, Borrower shall be named as an additional insured.

3.4 Payment of Expenses. Borrower shall pay Bank’s reasonable costs and expenses incurred in connection with the making, disbursement, and administration of the Loan. Borrower shall also pay any and all of Bank’s costs and expenses incurred in connection with any revisions, extensions, renewals, or “workouts” of the Loan, and in the exercise of any of Bank’s rights or remedies under this

Agreement. Such costs and expenses include charges for title insurance (including endorsements), filing, recording, and escrow charges, fees for appraisal and appraisal review, environmental services, mortgage taxes, document review and preparation, reasonable legal fees and expenses of Bank’s counsel, and any other reasonable fees and costs for services, regardless of whether such services are furnished by Bank’s employees or agents or independent contractors. Borrower acknowledges that amounts payable under this Section are not included in any loan or commitment fees for the Loan. All such sums incurred by Bank and not immediately reimbursed by Borrower will be considered an additional loan to Borrower secured by the Deed of Trust and bearing interest at the Default Rate.

(b) Interim Financial Statements; Quarterly Report on Form 10-Q. For each fiscal quarter other than the last fiscal quarter of each fiscal year, via the Edgar System, Borrower’s Home Page, or such other system acceptable to Bank, within forty-five (45) days after the filing of its Quarterly Report on Form 10-Q for the fiscal quarter then ended with the Securities and Exchange Commission, copies of the financial statements for such fiscal quarter as contained in such Quarterly Report on Form 10-Q.

(d) Compliance Certificate. Within forty-five (45) days after the end of each fiscal quarter, a certificate in the form attached hereto as Exhibit C (each, a “Compliance Certificate”), executed by Borrower’s chief financial officer or other officer or person acceptable to Bank, certifying (1) that the Obligated Group is in compliance with the financial covenants set forth in this agreement, including (i) the minimum Fixed Charge Coverage Ratio required under Section 3.17, (ii) the maximum Leverage Ratio required under Section 3.17, and (ii) the minimum Tangible Net Worth required under Section 3.17, (2) that the representations and warranties set forth in the Agreement are true and correct as of the date of the certificate, and (3) that, as of the date of the certificate, no default or Event of Default, or Unmatured Event of Default, has occurred and is continuing under this Agreement.

(f) Accounts Payable Report. Not later than thirty (30) days after the end of each calendar month, the Obligated Group’s detailed accounts payable report as of the last day of such period,

together with an explanation of any adjustments made at the end of such period. Such detailed accounts payable report shall include Royalties Payable.

(h) Monthly Leadership Financial Package. Promptly upon the request of Bank, Borrower’s monthly leadership financial package, together with such related information as requested by Bank.

(i) Other Information. Promptly upon the request of Bank, such other information as Bank may reasonably request concerning the affairs and properties of Borrower and/or any other Obligated Group Party.

3.6 Audits. Borrower shall allow Bank and its agents to inspect Borrower’s properties and examine, audit, and make copies of Borrower’s books and records at any reasonable time. If any of Borrower’s properties, books, or records are in the possession of a third party, Borrower authorizes that third party to permit Bank or its agents to have access to perform inspections or audits and to respond to Bank’s requests for information concerning such properties, books and records.

3.7 Notices. Borrower shall notify Bank promptly in writing of any and all of the following:

(d) Any (i) material dispute between Borrower, or other Obligated Group Party, and any third party franchisor or licensor, where such party’s franchise or license is material to Borrower’s or any

other Obligated Group Party’s business, or (ii) any default or breach under any franchise agreement or license agreement to which Borrower or other Obligated Group Party is a party, where the franchise or license under such agreement is material to Borrower’s or any other Obligated Group Party’s business.

(g) Any Change in Control or any change in the key management of Borrower.

(i) Any notice that any collateral for the Loan is subject to any Grower Lien.

(j) Any written or oral communication Borrower or any other Obligated Group Party receives from any governmental, judicial, or legal authority giving notice of any claim or assertion that the Land or Improvements fail in any respect to comply with any of the Requirements or any other applicable governmental law.

(k) Any material adverse change in the physical condition of the Property (including any damage suffered as a result of fire, earthquakes, or floods).

(l) Any event that shall have occurred and be continuing that would constitute a breach or default, or that, with notice or the passage of time, or both, could become a breach or default under the Ground Lease by any party thereto.

3.8 Keeping Guarantors and Third Party Pledgors Informed. If the Loan is guaranteed, Borrower shall keep each Guarantor and/or third party pledgor informed of Borrower’s financial condition and business operations, the condition and all uses of the Property, including all changes in condition or use, and any and all other circumstances that may affect Borrower’s ability to pay or perform its obligations under the Loan Documents. However, any failure to do so shall not give rise to any defense to Guarantor and/or any third party pledgor.

3.9 Use of Proceeds. Borrower shall use the Loan for the purposes described in Recital A. above unless other wise agreed in writing by Bank.

3.10 Performance of Acts. Upon Bank’s request, Borrower shall perform all acts necessary or advisable to perfect any lien or security interest provided for in the Loan Documents or to carry out the intent of the Loan Documents.

3.11 Maintenance of Properties; Preservation of Rights. Borrower shall make any repairs, renewals, or replacements to keep the Borrower’s properties in good working condition. Borrower shall

obtain, preserve and maintain in good standing, as applicable, all rights, privileges and franchises necessary or desirable for the operation of the Property and for the operation of Borrower’s business.

3.12 Indemnity Regarding Ownership of Property and Other Risks. Borrower indemnifies, defends, and holds the Indemnified Parties harmless for, from, and against any and all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages), costs, expenses, fines, penalties, and losses (including sums paid in settlement of claims and all reasonable consultant, expert and legal fees and expenses of Bank’s counsel), and any resulting damages, harm or injuries to the person or property of any third parties, directly or indirectly arising out of or resulting from (a) the ownership, management, maintenance, operation, marketing, leasing, sale, or use of the Property, as applicable, whether such claims are based on theories of derivative liability, comparative negligence or otherwise, (b) any development of or improvement to the Property, including any defective workmanship or materials; (c) any failure to satisfy any requirements of any laws, regulations, ordinances, governmental policies or standards, reports, maps, development agreements, or regulatory agreements that apply or pertain to the Property; (d) breach of any representation or warranty made or given by Borrower to any of the Indemnified Parties or to any prospective or actual lessee or buyer of all or any portion of the Property; and/or (e) any claim or cause of action of any kind by any party that any Indemnified Party is liable for any act or omission of Borrower or any other person or entity in connection with the ownership, management, maintenance, operation, marketing, leasing, sale, or use of the Property, or any development of or improvement to the Property, excepting those arising out of, or resulting, solely from the applicable Indemnified Party’s gross negligence or willful misconduct. Notwithstanding, anything to the contrary in any other Loan Document, the provisions of this Section shall survive the termination of this Agreement, repayment of the Loan, and foreclosure of the Deed of Trust or similar proceedings.

(a) Acquiring goods, supplies, or merchandise on normal trade credit.

(b) Endorsing negotiable instruments received in the usual course of business.

(c) Debts, lines of credit, and/or leases in existence on the date of this Agreement previously disclosed in writing to Bank.

(a) Deeds of trust and Security Agreements and other security instruments in favor of Bank.

(b) Liens for taxes not yet due.

(c) Liens outstanding on the date of this Agreement previously disclosed in writing to the Bank, which includes the Approved Existing Liens.

3.15 Negative Covenants. Without Bank’s prior written consent, Borrower and each other Obligated Group Party agrees that it shall not:

(a) engage in any business activities substantially different from such party’s present business;

(b) liquidate or dissolve its business;

(d) enter into any consolidation, merger, pool, joint venture, syndicate or other combination;

(e) enter into any sale and leaseback agreement covering any of the fixed or capital assets of such party;

(f) acquire or purchase a business or its assets;

(g) cause, permit, or suffer any direct or indirect Change in Control in Borrower or any other Obligated Group Party; or

(h) make any loans, advances, or other extensions of credit to anyone.

3.16 Employee Benefit Plans; ERISA Compliance. Borrower and each other Obligated Group Party shall at all times maintain, and cause each Guarantor to at all times maintain, each employee benefit plan as to which Borrower, any other Obligated Group Party, or any Guarantor, as the case may be, may have any liability, in compliance with all applicable laws, rules, and regulations. Borrower and each other Obligated Group Party shall at all times comply with, and cause each Guarantor to comply with, the provisions of ERISA with respect to any retirement or other employee benefit plan to which it/they is/are a party as employer. As soon as possible after Borrower or any other Obligated Group Party knows, or has reason to know, that any Reportable Event (as defined in ERISA) with respect to any such plan of Borrower, any other Obligated Group Party, or any Guarantor has occurred, it shall furnish to Bank a written statement setting forth details as to such Reportable Event and the action, if any, which Borrower or the applicable other Obligated Group Party or applicable Guarantor proposes to take with respect thereto, together with a copy of the notice of such Reportable Event furnished to the Pension Benefit Guaranty Corporation.

3.18 Site Visits.

(a) Bank and its agents and representatives shall have the right to enter and visit the Property at any reasonable time for the purposes of observing or inspecting the Property, performing an appraisal, taking soil or ground water samples, and conducting tests, among other things to investigate for the presence of Hazardous Substances. Bank shall also have the right to examine, copy and audit the books, records, accounting data and other documents of Borrower. In each instance, Bank shall give Borrower reasonable notice before entering the Property and make reasonable efforts to avoid interfering with Borrower’s use of the Property when exercising any of the rights granted in this Section.

(b) Bank has no duty to visit the Property, or to observe or inspect it, or to examine any books or records. Any site visit, observation, or examination by Bank is solely for the purpose of protecting Bank’s rights and interests. No site visit, observation, or examination by Bank shall impose any liability on Bank or result in a waiver of any default of Borrower. Neither Borrower nor any other party is entitled to rely on any site visit, observation, or examination by Bank. Bank owes no duty of care to protect Borrower or any other party against, or to inform Borrower or any other party of, any other adverse condition affecting the Property, including any defects in the design or construction of any Improvements located on the Property, or the presence of Hazardous Substances on the Property. Bank shall not be obligated to disclose to Borrower or any other party any report or findings made as a result of, or in connection with, any site visit, observation, or examination by Bank.

(c) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, Bank has required and Borrower hereby agrees that after the Closing Date, (i) Borrower shall fully cooperate with Bank’s RETECHS department and/or other Bank consultants to perform additional testing as to the following items located on the Property: (1) wells, (2) septic tank, and (3) area where an underground storage tank was removed, and (ii) if requested by Bank after such additional testing, Borrower shall also provide to Bank a report prepared by a licensed or registered environmental engineer or other qualified party satisfactory to Bank stating that no Hazardous Substances are present in, on, under or around the Property and that no condition or circumstance warranting further investigation or analysis exists in the opinion of the preparer of the report.

3.19 No Construction; Protection Against Lien Claims. Borrower shall not construct any Improvements on the Property without the prior written consent of Bank in Bank’s sole and absolute discretion. Borrower shall pay or otherwise discharge promptly all claims and liens for labor done and materials and services furnished in connection with the Property or the construction of any Improvements. Borrower has the right to contest in good faith any claim or lien, provided that it does so diligently and without prejudice to Bank. Promptly upon Bank’s request, Borrower shall provide a bond, cash deposit, or other security satisfactory to Bank in its sole and absolute discretion.

3.20 Appraisals. If required by Bank or if required by applicable law or regulations, Bank shall have the right to order appraisals of the Property from time to time from an appraiser selected by Bank, which appraisals shall comply with all federal and state standards for appraisals and otherwise shall be satisfactory to Bank in all material respects. Borrower agrees to pay the cost and expense for all such appraisals and reviews thereof ordered by Bank pursuant to this Section when (a) an Event of Default has occurred or an

Unmatured Event of Default has occurred and is continuing hereunder, or (b) such appraisal or update is required by applicable law or regulation.

3.21 Tax Service Contract. At Borrower’s sole expense, Bank shall be furnished with a tax service contract issued by a tax-reporting agency satisfactory to Bank with respect to the Land and Improvements. Unless otherwise agreed in writing by Bank, such tax service contract shall remain in place at all times prior to repayment of the Loan.

3.22 Maintenance and Repair. Borrower shall (a) maintain the Property, including the parking and landscaping portions thereof, in good condition and repair, (b) promptly make all necessary structural and non-structural repairs to the Improvements (or cause tenants under any leases to perform such obligation), (c) not demolish, alter, remove, or add to any Improvements, excepting (i) the repair and restoration of Improvements following damage thereto as required by the Deed of Trust, (ii) the construction or installation of non-structural alterations or improvements, provided the same are in all respects consistent with the character and utility of the existing Improvements, (iii) the installation or construction of tenant improvements and related demolition in connection with any leases approved in accordance with this Agreement, and (d) not erect any new buildings, structures or building additions on the Land, without the prior written consent of Bank in each instance. Borrower shall pay when due all claims for labor performed and materials furnished therefor in connection with any improvements or construction activities.

3.23 Conditional Sales Contracts; Removal of Fixtures and Equipment. Without the Bank’s prior written consent, Borrower shall not (a) purchase or contract for any materials, equipment, furnishings, fixtures, or articles of personal property to be placed or installed on the Land or any Improvements under any security agreement or other agreement where the seller reserves or purports to reserve a lien, security interest, or title thereto, or the right of removal or repossession after such items are installed on or in the Property; or (b) remove or permit to be removed from the Land or the Improvements any equipment, machinery, or fixtures used in connection with the ownership, management, maintenance, operation, or enjoyment thereof unless replaced by articles of equal suitability and value owned by Borrower free and clear of any lien or security interest.

3.23 Income from Property. Borrower shall first apply, and shall cause RFI to apply, all income from leases, and all other income derived from the Property, if any, to pay costs and expenses associated with the ownership, maintenance, operation, and marketing of the Land and Improvements, including all amounts then required to be paid under the Loan Documents and all payments under the Ground Lease then due, before using or applying such income for any other purpose. Neither Borrower nor RFI may distribute any income to any of its members, partners, or shareholders, allow any member, partner, or shareholder to withdraw capital, or make any payments on indebtedness owed to any member, partner, or shareholder, unless all property expenses then due, including all payments under the Ground Lease then due, have been paid in full.

3.24 Property Management. If any Property will be managed at any time during the term of the Loan by a third party property manager, any property manager must be a reputable and creditworthy property manager subject to the prior approval of Bank, which approval shall not be unreasonably withheld, and any property management agreement entered into with respect to any Property must be in writing and be terminable upon no more than thirty (30) days written notice without penalty or charge (other than for unpaid accrued management fees), unless otherwise agreed in writing by Bank, and a copy any such property management agreement shall promptly be provided by Borrower to Bank.

3.25 Restrictions. Except as otherwise set forth herein, Borrower shall not record any covenants, conditions, restrictions, or easements (collectively, “Restrictions”), affecting all or part of the Property without the prior written consent of Bank, in Bank’s sole and absolute discretion, in each instance. Borrower may submit to Bank a proposed form of any covenants, conditions, restrictions and/or

easements affecting all or part of the Property and may request Bank to approve and to subordinate the Deed of Trust to such Restrictions. Bank has no obligation to grant such a request by Borrower. However, Bank will consider and honor any such request if it does not impair or affect the security of any obligation evidenced by the Loan Documents, all as Bank may determine in its sole and absolute discretion. Borrower acknowledges that delays may result from the approval process and agrees that, so long as the delays are not unreasonable in duration, they shall not affect Borrower’s obligations to timely perform any other requirement set forth in this Agreement. With respect to any Restrictions which are recorded, upon Bank’s request, Borrower shall execute and deliver to Bank an assignment of Borrower’s rights thereunder, in form and substance acceptable to Bank in its sole and absolute discretion, as security for the performance of Borrower’s obligations under the Loan Documents.

3.26 Reserve Accounts. Upon the occurrence of an Event of Default hereunder, at Bank’s option in its sole and absolute discretion, Bank may require Borrower to establish and thereafter maintain one or more Reserve Accounts, which may include (a) a replacement reserve account, (b) an operating reserve account, and/or (c) a taxes and insurance reserve account. Each Reserve Account shall be under the sole dominion and exclusive control of Bank, and shall be pledged to Bank as additional collateral security for the Loan. If Bank requires the establishment of any Reserve Accounts pursuant to this Section, Bank shall determine in its sole and absolute discretion (i) any initial deposit to be deposited by Borrower in each such Reserve Account, (ii) any periodic deposits to be deposited by Borrower in each such Reserve Account, and (iii) any other terms, conditions, and requirements applicable to each such Reserve Account, and shall notify Borrower in writing of such terms, conditions, and requirements, including deposit requirements, and Borrower shall thereafter timely make all such Reserve Deposits. Borrower, whenever and as often as it shall be requested by Bank, shall execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered to Bank, such further instruments and documents, and shall do any and all things, as may be reasonably requested by Bank in order to (1) establish and maintain any Reserve Accounts required by Bank pursuant to this Section, and/or (2) to create and perfect a collateral security interest in all such Reserve Accounts in favor of Bank.

4. Use of the Property; Leases; Ground Lease.

4.1 Use of the Property; Leases. Borrower shall not change, or allow RFI to change, Borrower’s or RFI’s intended use of the Property without Bank’s prior written approval. Neither Borrower nor RFI may lease or any portion of the Property without Bank’s prior written consent, together with the approval of all other parties whose consent is required. As to any lease of any part of the Land or Improvements (which lease shall be approved by Bank), such lease must be permitted pursuant to the terms of the Ground Lease, and if Ground Lessor’s consent to or approval of any such lease is required pursuant to the Ground Lease, such consent or approval shall first be obtained by Borrower or RFI prior to the execution of any such lease (even if such lease has been approved by Bank), and Borrower shall promptly deliver, or shall cause RFI to promptly deliver, a copy of any such consent or approval to Bank.

4.2 Ground Lease. As to the Ground Lease, (i) Borrower shall have provided to Bank a true, correct, and complete copy of such Ground Lease, including all amendments or modifications thereto and any agreements related thereto, prior to the Closing Date, (ii) the Ground Lease is subject to Bank’s review and approval in its sole and absolute discretion, (iii) for such Ground Lease, Borrower shall obtain and deliver to Lender a Ground Lessor’s Consent Agreement fully executed by the Ground Lessor, RFI, and, if required by Bank, the Borrower in form and substance acceptable to Bank in its sole and absolute discretion. Borrower and RFI each agree that notwithstanding anything in the Ground Lease to the contrary, RFI shall not have the right to terminate, allow termination of, or consent to termination of the Ground Lease for any reason whatsoever, without the prior written consent of Bank. Borrower and RFI each agree further that they will promptly, and in no event later than three (3) business days after RFI’s or Borrower’s receipt thereof, as the case may be, deliver to Bank a copy of any notice of breach or default or any other notice relating to RFI’s failure of any performance under the Ground Lease that Borrower or RFI receives from Ground Lessor (each a “Ground Lease Default Notice”). Borrower and RFI each

understand that and acknowledge that (i) the Lessee’s Rights will serve as the Bank’s primary collateral security for the Loan; (ii) the Bank’s collateral security can be at eliminated if the Ground Lease is terminated by Ground Lessor, and (iii) Bank desires to have to the best opportunity to cure any such breach or default or failure of performance to protect it’s security (although it is not obligated to do so). Therefore, it is a material condition and a material consideration to Bank’s making and continuing the Loan to Borrower that Borrower shall timely provide, or shall cause RFI to timely provide, any Ground Lease Default Notice to Bank. Borrower agrees that failure of Borrower or RFI, as applicable, to timely provide any Ground Lease Default Notice to Bank shall be an Event of Default hereunder.

5. Representations and Warranties. Borrower promises that each representation and warranty set forth below is and will be true, accurate and correct as of the date of this Agreement, and, if applicable, as of the date of any requested disbursement.

5.1 Authority; Enforceability. Borrower has complied with any and all laws and regulations concerning their organization, existence, and the transaction of their business. RFI has the right and power to ground lease the Land and the Improvements, own the Lessee’s Rights, and operate and maintain the Land and Improvements as contemplated in the Loan Documents. Borrower and each Guarantor is authorized to execute, deliver, and perform its obligations under the Loan Documents. Those documents are valid and binding obligations of Borrower and each Guarantor, as applicable.

5.2 Compliance With Law. Borrower, and RFI with respect to the Ground Lease, is familiar and has complied with all of the Requirements, as well as all other applicable laws, regulations, and ordinances. No provision or obligation of Borrower or any Guarantor contained in any of the Loan Documents violates any of the Requirements or any order or ruling of any court or governmental entity. No such provision or obligation conflicts with, or constitutes a breach or default under, any agreement binding or regulating the Property.

5.3 No Violation. The execution and delivery of this Agreement and the other Loan Documents and performance by Borrower of its obligations hereunder and thereunder will not result in a default under any other material agreement to which Borrower is a party.

5.4 No Claims. No claims, actions, proceedings, or investigations are pending against Borrower or affecting the Property or any collateral for the Loan, except for those previously disclosed by Borrower to Bank in writing. To the best of Borrower’s knowledge, no threat of any such claim, action, proceeding, or investigation exists, except for those previously disclosed by Borrower to Bank in writing.

5.5 Financial and Other Information. All financial information delivered to Bank, including all information relating to the financial condition of (a) Borrower or any of its partners, shareholders, or members (as applicable), (b) any Guarantor, and (c) the Property, fairly and accurately represents the financial condition being reported on as of its date. All such information is prepared in accordance with GAAP consistently applied, unless otherwise noted. There has been no material adverse change in the financial condition of any of the persons described above-reported at any time to Bank, except as previously disclosed to Bank in writing in later financial information and found acceptable to Bank in its sole and absolute discretion. Other than the Ground Lease, there are no existing leases affecting the Property or any portion thereof or interest therein.

5.6 Accuracy. All reports, documents, instruments, information, and forms of evidence delivered to Bank concerning the Loan or required by this Agreement, any Loan commitment, and/or the other Loan Documents are accurate, correct, and sufficiently complete to give Bank true and accurate knowledge of their subject matter. None of them contains any misrepresentation or material omission.

5.7 Taxes. Borrower has filed all required state, federal, and local income tax returns and has paid all taxes when due and payable. Borrower knows of no basis for any additional assessment of taxes.

5.8 Borrower Not a “Foreign Person”. Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time.

5.9 No Breaches or Defaults. No event has occurred and is continuing which would constitute a default or Event of Default (as defined in the applicable document) or an Unmatured Event of Default under any of the Loan Documents. No event shall have occurred and be continuing that would constitute a breach or default, or that, with notice or the passage of time, or both, could become a breach or default under the Ground Lease by any party thereto.

5.10 ERISA Plans. Either:

(a) Borrower is not a party in interest to any plan defined or regulated under ERISA, and the assets of Borrower are not “plan assets” of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code, or

(b) If Borrower is a party in interest to a plan defined or regulated under ERISA, then all of the following are true: (i) the Borrower has fulfilled its obligations, if any, under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and has not incurred any liability with respect to any Plan under Title IV of ERISA, (ii) no reportable event has occurred under Section 4043(b) of ERISA for which the PBGC requires thirty (30) days notice, (iii), no action by the Borrower to terminate or withdraw from any Plan has been taken and no notice of intent to terminate a Plan has been filed under Section 4041 of ERISA, and (iv) no proceeding has been commenced with respect to a Plan under Section 4042 of ERISA, and no event has occurred or condition exists which might constitute grounds for the commencement of such a proceeding.

5.11 Disclosure to Guarantor and Third Parties. Before any Guarantor and/or any other third party (if any) became obligated in connection with the Loan or under any of the Loan Documents, Borrower made full disclosure to that Guarantor and/or third party trustor or pledgor regarding Borrower’s financial condition and business operations, the present and former condition, uses, and ownership of the Property and all other circumstances bearing upon Borrower’s ability to pay and perform its obligations under the Loan Documents.

6. Swap Contract. Borrower may elect to purchase from Bank a swap for the Loan, which if purchased will be governed by a Swap Contract entered into between Bank and Borrower. Any such Swap Contract is a “Loan Document.” Capitalized terms used here without definition shall have the meanings given to them in the Swap Contract. With respect to any Swap Contract entered into between Bank and Borrower, the following shall apply:

6.1 Swap Payments; Grant of Security Interest. Under the Swap Contract, Bank or Borrower may be obligated from time to time to make certain payments (“Swap Payments”) to the other party. Each Swap Payment to be made by Bank to Borrower shall be collateral for the Loan. As security for the prompt payment and performance of the Loan, and all obligations and indebtedness of Borrower to Bank under the Loan Documents, and all renewals, extensions, modifications, amendments, and/or supplements thereto, Borrower hereby irrevocably and unconditionally assigns, grants, pledges, transfers, and sets over to Bank, and there is hereby created a security interest in favor of Bank, in and to each Swap Payment due from Bank to Borrower, whether now or hereafter existing, and all proceeds thereof.

6.2 No Assumption of Borrower’s Obligations. Borrower expressly understands and agrees that Bank does not assume any duties or obligations of Borrower arising out of the Note, any Swap Contract, or any other Loan Document.

7. Default and Remedies.

7.1 Events of Default. An Event of Default will occur under this Agreement upon the occurrence of any of the following events:

(a) Borrower fails to make any payment of principal or interest under the Note within ten (10) days after the date when due; or

(d) Borrower or any Guarantor dissolves or liquidates, or any of these events happens to any indemnitor hereunder or under any of the other Loan Documents (if any); or

(e) An Accelerating Transfer occurs; or

(f) Any representation or warranty when made or given in any of the Loan Documents proves to be false or misleading in any material respect; or

(g) A material adverse change in Borrower’s or any Guarantor’s financial condition, or an event or condition materially impairing RFI’s intended use of the Property, or Borrower’s or any Guarantor’s ability to repay the Loan occurs; or

(h) Borrower fails to meet the conditions of, or fails to perform any obligation under, any other agreement Borrower has with Bank or any affiliate of Bank; or

(i) Any Guarantor fails to meet the conditions of, or fails to perform any obligation under, any other agreement any of Guarantor has with Bank or any affiliate of Bank (subject to applicable notice and cure periods); or

(j) Borrower defaults under any agreement in connection with any credit in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00) or more that Borrower has obtained from anyone else if the default consists of failing to make a payment when due or gives the other lender the right to accelerate the obligation; or

(k) Any Guarantor defaults under any agreement in connection with any credit in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00) or more that Guarantor has obtained from anyone else if the default consists of failing to make a payment when due or gives the other lender the right to accelerate the obligation (each subject to applicable notice and cure periods); or

(l) Any of the following occurs: (i) a lawsuit is filed against Borrower or any Guarantor where the amount claimed is Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or more and which (A) is not dismissed within sixty (60) days of the filing thereof, and (B) is not Covered by Insurance, (ii) a judgment or judgments are entered against Borrower or any Guarantor, or (iii) any government authority takes action materially adversely affecting either (A) RFI’s rights under the Ground Lease or intended use of the Land or Improvements, or (B) Borrower’s or any Guarantor’s ability to repay the Loan; or

(m) Bank fails to have an enforceable first-priority lien on or first-priority security interest in any property given as security for the Loan, except as otherwise agreed by Bank in writing, and except for as to Approved Existing Lien Collateral wherein it shall only be an Event of Default hereunder if Bank fails to have an enforceable second-priority lien on or second-priority security interest in such collateral, subject only the applicable Approved Existing Lien(s); or

(n) Under any of the Loan Documents, a default or an Event of Default (as defined in that document, subject to applicable notice and cure periods) occurs.

(o) The occurrence of any one or more of the following events with respect to Borrower and/or any other Obligated Group Party, provided such event or events could reasonably be expected, in the judgment of the Bank, to subject Borrower and/or any other Obligated Group Party to any tax, penalty, or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of Borrower and/or any other Obligated Group Party with respect to a Plan: (i) a reportable event shall occur with respect to a Plan which is, in the reasonable judgment of the Bank, likely to result in the termination of such Plan for purposes of Title IV of ERISA, or (ii) any Plan termination (or commencement of proceedings to terminate a Plan) or the Borrower’s and/or any other Obligated Group Party’s full or partial withdrawal from a Plan; or

(p) A default or an Event of Default (as defined in the applicable document, subject to applicable notice and cure periods) occurs under any Guaranty, or any Guaranty becomes unenforceable for any reason, or any Guarantor purports to revoke or terminate its Guaranty; or

(q) Borrower or the Obligated Group or any Obligated Group Party, as the case may be, has failed to timely deliver to Bank any Compliance Certificate or Borrowing Base Certificate, or (i) fails to maintain at least the minimum Fixed Charge Coverage Ratio required under Section 3.17, (ii) exceeds the maximum Leverage Ratio required under Section 3.17, or (iii) fails to maintain at least the minimum Tangible Net Worth required under Section 3.17; or

(r) Under any Swap Contract, a default or an Event of Default (as defined in that document, subject to applicable notice and cure periods) of Borrower occurs; or

(s) Under any of the RLOC/TL Loan Documents a default or an Event of Default (as defined in that document, subject to applicable notice and cure periods) occurs; or

(t) Under the Ground Lease, a breach or default occurs and is not cured by the applicable party within any applicable cure period, or Borrower and/or RFI, as the case may be, fails to timely provide to Bank any Ground Lease Default Notice in accordance with Section 4.2 above.

(u) Borrower and/or any other Obligated Group Party fails to comply with any provision contained in this Agreement, other than those events specifically referred to above and thus set out as separate Events of Default in this Section 7.1.

7.2 Remedies.

(a) If an Event of Default occurs under this Agreement, Bank may exercise any right or remedy under any of the Loan Documents or otherwise available at law or in equity, and all of Bank’s rights and remedies are cumulative. If any Event of Default occurs, Bank’s obligation to lend under the Loan Documents automatically terminates, and Bank in its sole and absolute discretion may withhold any one or more disbursements. Bank may also withhold any one or more disbursements after an Unmatured Event of Default occurs and is continuing. By making a Loan disbursement, Bank will not be deemed to have waived any Event of Default unless Bank agrees otherwise in writing in each instance.

(b) If any Event of Default occurs, Bank shall have the right in its sole and absolute discretion to enter the Property and take possession of it, whether in person, by agent or by court-appointed receiver, collect rents and otherwise protect its collateral and rights under the Loan Documents. If Bank exercises any of the rights or remedies provided in this Section, that exercise shall not make Bank a partner or joint venturer of Borrower or RFI. All sums which are expended by Bank in preserving its collateral shall be considered an additional loan to Borrower secured by the Deed of Trust and bearing interest at the Default Rate, and shall be secured by the Deed of Trust and any other collateral held by Bank in connection with the Loan.

(c) If Borrower or any other Obligated Group Party becomes the subject of any Insolvency Proceeding (which, if an involuntary Insolvency Proceeding has not been (i) consented to in writing by Bank, or (ii) dismissed within ninety (90) days of the filing thereof), all of Borrower’s and the other Obligated Group Parties obligations under the Loan Documents automatically become immediately due and payable upon the filing of the petition commencing such proceeding, all without notice of default, presentment or demand for payment, protest, or notice of nonpayment or dishonor, or other notices or demands of any kind or character. Upon the occurrence of any other Event of Default, all of Borrower’s obligations under the Loan Documents may become due and payable immediately without notice of default, presentment, or demand for payment, protest, or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all at Bank’s option, exercisable in its sole and absolute discretion. If such acceleration occurs, Bank may apply any undisbursed Loan funds and any sums in the Account and/or any Reserve Account (if any) to Borrower’s obligations under the Loan Documents, in any order and proportions as Bank may determine in its sole and absolute discretion.

(d) As security for the payment and performance of all obligations of Borrower and the other Obligated Group Parties under the Loan Documents, Borrower and each other Obligated Group Party, each as the case may be, hereby grants Bank a security interest in, a lien on, and an express contractual right to set off against all depository account balances, cash, and any other property of Borrower and the other Obligated Group Parties, respectively, now or hereafter in the possession or control of Bank and the right to refuse to allow withdrawals from any account. Without limiting the foregoing, the security interest granted herein and the right of setoff granted to Bank hereunder is intended to cover and include the Account and/or any Reserve Account (if any). Bank may, at any time upon the occurrence of any Event of Default or Unmatured Event of Default under this Agreement or any other Loan Document, setoff against any amounts outstanding under the Loan whether or not the Loan or any portion thereof is then due or has been accelerated, all without any advance or contemporaneous notice of demand of any kind to Borrower or any other Obligated Group Party, such notice and demand being expressly waived.

8. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER, AND TO THE EXTENT APPLICABLE, EACH OTHER OBLIGATED PARTY, HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY FOR ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL

TO THE DISCUSSIONS, DEALINGS, OR ACTIONS OF THE PARTIES TO THIS AGREEMENT OR EITHER OF THEM (WHETHER ORAL OR WRITTEN) WITH RESPECT THERETO, OR TO THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREINAFTER ARISING, AT LAW OR IN EQUITY, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND EACH OTHER OBLIGATED PARTY, HEREBY CONSENTS AND AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY A TRIAL COURT WITHOUT A JURY, AND THAT EITHER PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY HEREOF WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER AND EACH OTHER OBLIGATED PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. BORROWER AND EACH OTHER OBLIGATED PARTY, ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF THIS AGREEMENT AND EACH OTHER DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK IN MAKING THE LOAN. BORROWER AND EACH OTHER OBLIGATED PARTY FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

9. Miscellaneous Provisions.

9.1 No Waiver; Consents. Each waiver by Bank must be in writing, and no waiver may be construed as a continuing waiver. No waiver shall be implied from Bank’s delay in exercising or failure to exercise any right or remedy against Borrower or any other Obligated Party or any Collateral. Bank’s consent to any act or omission by Borrower or any other Obligated Party shall not be construed as a consent to any other or subsequent act or omission or as a waiver of the requirement for Bank’s consent to be obtained in any future or other instance. All Bank’s rights and remedies are cumulative.

9.2 Purpose and Effect of Bank Approval. Bank’s approval of any matter in connection with the Loan is for the sole purpose of protecting Bank’s security and rights. No such approval shall result in a waiver of any default of Borrower or any other Obligated Group Party. In no event shall Bank’s approval be a representation of any kind with regard to the matter being approved.

9.3 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and benefit of Bank and Borrower and their permitted successors and assigns. No trust fund is created by this Agreement, and no other persons or entities have any right of action under this Agreement or any right to the Loan funds.

9.4 Joint and Several Liability. If more than one person or entity executes this Agreement as Borrower, each shall be jointly and severally liable to Bank for the faithful performance of the obligations of Borrower under this Agreement and the other Loan Documents.

9.5 Notices. All notices given under this Agreement shall be in writing and be given by personal delivery, overnight receipted courier (such as UPS, Airborne, or Federal Express) or by registered or certified United States mail, postage prepaid, sent to the party at its address appearing below its signature. Notices shall be effective upon the first to occur of receipt, when proper delivery is refused, or the expiration of forty-eight (48) hours after deposit in registered or certified United States mail as described above. Addresses for notice may be changed by any party by notice to any other party in accordance with this Section. If more than one person or entity executes this Agreement as Borrower, service of any notice on any one Borrower shall be effective service on all Borrower parties for all purposes.

9.6 Actions. Bank shall have the right, but not the obligation, to commence, appear in, and defend any action or proceeding that might affect its security or its rights, duties, or liabilities relating to the Loan, the Property, or any of the Loan Documents. Borrower shall pay promptly on demand all of Bank’s out-of-pocket costs, expenses, and reasonable legal fees and expenses of Bank’s counsel incurred in those actions or proceedings.

9.7 Attorneys’ Fees. In any lawsuit or arbitration arising out of or relating to this Agreement, the Loan Documents, or the Loan, the prevailing party will be entitled to recover from each other party such sums as the court or arbitrator adjudges to be reasonable attorneys’ fees in the action or arbitration, in addition to costs and expenses otherwise allowed by law. In all other actions or proceedings, including any matter arising out of or relating to any Insolvency Proceeding, Borrower agrees to pay all of Bank’s costs and expenses, including reasonable attorneys’ fees, incurred in enforcing or protecting Bank’s rights or interests. From the time(s) incurred until paid in full to Bank, all such sums shall bear interest at the Default Rate. Whenever Borrower is obligated to pay or reimburse Bank for any attorneys’ fees, those fees include the allocated costs for services of in-house counsel, to the extent not prohibited by applicable law.

9.8 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Arizona, without regard to the choice of law rules of that state, except to the extent that any of such laws may now or hereafter be preempted by Federal law. Borrower and each other Obligated Group Party consents to the jurisdiction of any Federal or State court within the State of Arizona, submits to venue in such state, and also consents to service of process by any means authorized by Federal law or the law of such state. Without limiting the generality of the foregoing, Borrower and each other Obligated Party hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) Borrower or any other Obligated Party is not subject to the jurisdiction of the courts of the above-referenced state or the United States District Court for such state, or (ii) such suit, action, or proceeding is brought in an inconvenient forum, or (iii) the venue of such suit, action, or proceeding is improper.

9.9 Heirs, Successors, and Assigns; Participations. The terms of this Agreement shall bind and benefit the heirs, legal representatives, successors, and assigns of the parties; provided, however, that Borrower may not assign this Agreement or any Loan funds, or assign or delegate any of its rights or obligations, without the prior written consent of Bank in each instance. Bank in its sole and absolute discretion may sell or assign the Loan or participations or other interests in all or part of the Loan on the terms and subject to the conditions of the Loan Documents, all without notice to or the consent of Borrower or any other Obligated Group Party. Also without notice to or the consent of Borrower or any other Obligated Group Party, Bank or its affiliates may disclose to any actual or prospective purchaser of any securities issued or to be issued by Bank and to any actual or prospective purchaser or assignee of any participation or other interest in the Loan or any other loans made by Bank to Borrower or any other Obligated Group Party (whether under this Agreement or otherwise), any financial or other information, data or material in Bank’s possession relating to Borrower, any partners of Borrower, the Loan, the Improvements, or the Property.

9.10 Relationships With Other Bank Customers. From time to time, Bank may have business relationships with Borrower’s or any other Obligated Group Party’s customers, suppliers, contractors, tenants, partners, members, shareholders, officers, or directors, or with businesses offering products or services similar to those of Borrower or any other Obligated Group Party, or with persons seeking to invest in, borrow from, or lend to Borrower or any other Obligated Group Party. Borrower and each other Obligated Group Party agrees that Bank may extend credit to such parties and take any action it deems necessary to collect the credit, regardless of the effect that such extension or collection of credit may have on Borrower’s or any other Obligated Group Party’s financial condition or operations. Borrower and each any other Obligated Group Party further agrees that in no event shall Bank be obligated to

disclose to Borrower or any other Obligated Group Party any information concerning any other Bank customer.

9.11 Disclosure to Title Company. Without notice to or the consent of Borrower or any other Obligated Group Party, Bank may disclose to any title insurance company insuring any interest of Bank under the Deed of Trust (whether as primary insurer, coinsurer or reinsurer) any information, data, or material in Bank’s possession relating to Borrower, the other Obligated Group Parties, the Loan, the Improvements, or the Property.

9.12 Improvement District. Borrower shall not consent to, vote in favor of, or directly or indirectly advocate or assist in, the incorporation of any part of the Property into any improvement or community facilities district, special assessment district or other district without Bank’s prior written consent in each instance.

9.13 Restriction on Personal Property. Except for the replacement of personal property made in the ordinary course of Borrower’s business with items of equal or greater value, Borrower shall not sell, convey or otherwise transfer or dispose of its interest in any personal property in which Bank has a security interest, or contract to do any of the foregoing, without the prior written consent of Bank in each instance.

9.14 Publicity. Borrower hereby agrees that Bank, at its expense, may publicize the financing of the Property and, in connection therewith, may use the address, description and photographs or other illustrative drawings of the Property.

9.15 Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall in no way affect any other provision. If any court of competent jurisdiction determines any provision of this Agreement or any of the other Loan Documents to be invalid, illegal or unenforceable, that portion shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable portion had never been a part of the Loan Documents.

9.16 Interpretation. Whenever the context requires, all words used in the singular shall be construed to have been used in the plural, and vice versa, and each gender shall include any other gender. The captions of the sections of this Agreement are for convenience only and do not define or limit any terms or provisions. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.” No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Agreement. Whenever any provision of this Agreement, including any representation, covenant, or Event of Default contained herein, applies to a guarantor, third party pledgor, or any other party to any Loan Document other than Borrower, such provision only applies to such party during the time that such party’s guaranty, pledge, or other Loan Document, as applicable, remains in effect.

9.17 Amendments. This Agreement may not be modified or amended except by a written agreement signed by the party against whom enforcement is sought.

9.18 Counterparts. This Agreement and any attached consents or exhibits requiring signatures may be executed in counterparts, and all counterparts constitute but one and the same document.

9.19 Language of Agreement. The language of this Agreement shall be construed as a whole according to its fair meaning and not strictly for or against any party.

9.20 Exchange of Information. Borrower and each other Obligated Group Party agrees that Bank may exchange or disclose financial and other information about Borrower, the other Obligated Group Parties, or the Property with or to any of Bank’s affiliates or other related entities and with any party that acquires a participation or other interest in all or part of the Loan.

9.21 Survival. The representations, warranties, acknowledgments, and agreements set forth herein shall survive the date of this Agreement.

9.22 Further Performance. Borrower and the other Obligated Group Parties, whenever and as often as they shall be requested by Bank, shall execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered to Bank, such further instruments and documents, and do any and all things as may be requested, in order to carry out the intent and purpose of this Agreement and the other Loan Documents.

9.23 Time is of the Essence. Time is of the essence in the performance of this Agreement and the other Loan Documents by Borrower and the other Obligated Group Parties, and each and every term thereof.

9.24 Recitals; Exhibits. The recitals to this Agreement set forth above in the “Factual Background” are true, complete, accurate, and correct, and such recitals are incorporated hereby by reference. The exhibits to this Agreement are incorporated hereby by reference.

9.25 Loan Commission. Except as otherwise agreed in writing by Bank: (a) Bank shall not be obligated to pay any brokerage commission or fee in connection with or arising out of the Loan, and (b) Borrower shall pay any and all brokerage commissions or fees arising out of or in connection with the Loan.

9.26 Patriot Act Provisions. The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318 (as such maybe amended or recodified from time to time, the “Patriot Act”):

(a) Important Information About Procedures for Opening a New Account. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. Borrower is hereby notified that when Borrower opens an account, including but not limited to the Account, and any reserve account that may be required pursuant to the terms of this Agreement, (i) if Borrower is not an individual, Bank will ask for Borrower’s name, taxpayer identification number, business address, and other information that will allow Bank to identify Borrower, and may also ask to see Borrower’s legal organizational documents or other identifying documents, and (ii) if Borrower is an individual, Bank will ask for Borrower’s name, taxpayer identification number, residential address, date of birth, and other information that will allow Bank to identify Borrower, and may also ask to see Borrower’s driver’s license or other identifying documents.

(b) Government Regulation. Borrower shall not (a) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Bank from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, or (b) fail to provide documentary and other evidence of Borrower’s identity as may be requested by Bank at any time to enable Bank to verify Borrower’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the Patriot Act.

9.27 Integration and Relation to Loan Commitment. The Loan Documents (a) integrate all the terms and conditions mentioned in or incidental to this Agreement, (b) supersede all oral negotiations and prior writings with respect to their subject matter, including Bank’s loan commitment to Borrower, and (c) are intended by the parties as the final expression of the agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties. No representation, understanding, promise or condition shall be enforceable against any party unless it is contained in the Loan Documents. If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other agreement or instrument, including any other Loan Document, the terms, conditions and provisions of this Agreement shall prevail.

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IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of the date first above written.

“BORROWER”

THE INVENTURE GROUP, INC.,		Address for notices to Borrower:
a Delaware corporation
		The Inventure Group, Inc.
By:	/s/ Eric J. Kufel	5050 N. 40th Street, Suite 300
	Eric J. Kufel, its President/CEO	Phoenix, Arizona 85018
		Attention: Steve Weinberger

(Remainder of page intentionally left blank.
See the following pages for additional signatories.)

“BANK”

U.S. BANK NATIONAL ASSOCIATION,		Address for notices to Bank:
a national banking association		U.S. Bank National Association
		101 North First Avenue, Suite 1600
By:	/s/ Timothy Coffey	Phoenix, AZ 85003
Timothy Coffey, Vice President		Attention: Commercial Banking

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See the following pages for Obligated Group’s signatories.)

ACKNOWLEDGED AND AGREED TO THIS

DAY OF JUNE, 2007:

“OBLIGATED GROUP”

BN FOODS, INC., a Colorado corporation		Address for notices to BN Foods:

By:	/s/ Eric J. Kufel	BN Foods, Inc.
	Eric J. Kufel, its President	c/o The Inventure Group, Inc. 5050 N. 40TH Street, Suite 300 Phoenix, AZ 85018 Attention: Steve Weinberger

BOULDER NATURAL FOODS, INC.,		Address for notices to Boulder:
an Arizona corporation
		Boulder Natural Foods, Inc.
		c/o The Inventure Group, Inc.
By:	/s/ Eric J. Kufel	5050 N. 40TH Street, Suite 300
	Eric J. Kufel, its President	Phoenix, AZ 85018
		Attention: Steve Weinberger

LA COMETA PROPERTIES, INC., an Arizona		Address for notices to La Cometa:
corporation
		La Cometa Properties, Inc.
		c/o The Inventure Group, Inc.
By:	/s/ Eric J. Kufel	5050 N. 40TH Street, Suite 300
	Eric J. Kufel, its President	Phoenix, AZ 85018
		Attention: Steve Weinberger

POORE BROTHERS - BLUFFTON, LLC,		Address for notices to PBB:
a Delaware limited liability company


		Poore Brothers - Bluffton, LLC
		c/o The Inventure Group, Inc.
By:	/s/ Eric J. Kufel	5050 N. 40TH Street, Suite 300
	Eric J. Kufel, its Manager	Phoenix, AZ 85018
		Attention: Steve Weinberger

RADER FARMS, INC.,		Address for notices to Rader:
a Delaware corporation
		Rader Farms, Inc.
		c/o The Inventure Group, Inc.
By:	/s/ Eric J. Kufel	5050 N. 40TH Street, Suite 300
	Eric J. Kufel, its President	Phoenix, AZ 85018
		Attention: Steve Weinberger

TEJAS PB DISTRIBUTING, INC.,		Address for notices to Tejas:
an Arizona corporation
		Tejas PB Distributing, Inc.
By:	/s/ Eric J. Kufel	c/o The Inventure Group, Inc.
	Eric J. Kufel, its President	5050 N. 40TH Street, Suite 300
		Phoenix, AZ 85018
		Attention: Steve Weinberger

EXHIBIT A

Description of Property

PARCEL A:

The North half of the West half of the East half of the Northwest quarter (also known as Government Lot 3) of Section 6, Township 40 North, Range 4 East of W.M.; Except the North 420 feet of the East 332 feet thereof and except right of way for Halverstick Road tying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL B:

The West three-fourths of Government Lot 2 in Section 6, Township 40 North, Range 4 East of W.M., excepting a strip 16 feet wide along the West side thereof for road, and except right of way for Halverstick Road No. 257, lying along the North line thereof. Also, the East half of the Northeast quarter of the Northwest quarter (also known as Government Lot 3) of Section 6, Township 40 North, Range 4 East of W.M.; (East half of Government Lot 3). Except right of way for Halverstick Road No. 257, lying along the North line thereof;

Also, except that portion of the East half of the Northeast quarter of the Northwest quarter (also known as Government Lot 3) described as follows:

Beginning at the Northwest corner of the East half of the Northeast quarter of the Northwest quarter (also known as Government Lot 3); thence East 600 feet; thence South 363 feet; thence West 600 feet; thence North 363 feet to the point of beginning; Less road.

Except also a tract of land within Government Lot 2, also known as the Northwest quarter of the Northeast quarter of Section 6, Township 40 North, Range 4 East of W.M., said tract being more particularly described as follows:

Commencing at the Northwest corner of said Government Lot 2; thence South 88°13’57” East along the North line of said Government Lot 2 a distance of 313.45 feet to the true point of beginning; thence South 02°40’29” West along an existing fence line and its Southerly extension a distance of 642.79 feet; thence South 88°13’57” East a distance of 681.43 feet to the West line of the East half of said Government Lot 2; thence North 02°03’24” East along said West line a distance of 642.72 feet to the North line of said Government Lot 2; thence North 88°13’57” West along said North line a distance of 674.74 feet to the true point of beginning;

Except the right-of-way for Halverstick Road No. 257, lying along the Northerly line thereof.

Situate in Whatcom County, Washington.

PARCEL C:

Government Lot 4 (the Northwest quarter of the Northwest quarter) in Section 6, Township 40 North, Range 4 East of W.M., excepting the East 20 acres thereof, and except right of way for Halverstick Road, lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL D:

The West half of the West half of the Southeast quarter of the Northeast quarter of Section 1, Township 40 North, Range 3 East of W.M.

Also Government Lots 1 and 2, except right of way for Halverstick Road, lying along the North line thereof;

Also the Southwest quarter of the Northeast quarter, except that portion of Government Lot 2, described as follows:

Beginning at the Northeast corner of Government Lot 2; thence West 161 feet to the true point of beginning; thence West 537 feet; thence South 140 feet; thence East 537 feet; thence North 140 feet to the true point of beginning.

Except the South half of the Southwest quarter of the Northeast quarter;

Except the Northeast quarter of the Southwest quarter of the Northeast quarter;

Except the Southeast quarter of the Northwest quarter of the Northeast quarter;

Also, except that portion of Government Lot 2, described as follows:

The West 600 feet of the North 363 feet of Government Lot 2:

Together with the South 200 feet of the South half of the Southwest quarter of the Northeast quarter;

And also except that portion of Government Lot 2 of Section 1, Township 40 North, Range 3 East of W.M., described as follows:

Beginning at the Northeast corner of said Government Lot 2; thence West 161 feet to the point of beginning; thence South 140 feet; thence West 268.5 feet; thence South 33 feet; thence East 304.5 feet; thence North 173 feet; thence West 36 feet to the true point of beginning.

All situate in Whatcom County, Washington.

PARCEL E:

The South half of the Southwest quarter of the Northeast quarter, except the South 200 feet. Together with the Northeast quarter of the Southwest quarter of the Northeast quarter. Also together with the Southeast quarter of the Northwest quarter of the Northeast quarter.

Also the East half of Government Lot 3 and a tract 50 feet square in the Northeast corner of the South half of the Northwest quarter, all in Section 1, Township 40 North, Range 3 East of W.M.

Except that portion of the East half of Government Lot 3, described as follows:

The North 363 feet of the East half of Government Lot 3, less roads.

Situate in Whatcom County, Washington.

PARCEL F:

Beginning at the Northwest corner of the East half of the Northeast quarter of the Northwest quarter (also known as Government Lot 3) Section 6, Township 40 North, Range 4 East, W.M.; thence East 600 feet; thence South 363 feet; thence West 600 feet; thence North 363 feet to the point of beginning.

Except the right-of-way for Halverstick Road, lying along the Northerly line thereof.

Situate in Whatcom County, Washington.

PARCEL G:

The East 20 acres of Government Lot 4, except the West 165 feet of the East 330 feet of the Worth 264 feet thereof, in Section 6, Township 40 North, Range 4 East of W.M.

Except right of way for Halverstick Road, lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL H:

The West 16 feet of Government Lot 2 of Section 6, Township 40 North, Range 4 East of WM, except the right-of-way for Halverstick Road, lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL I:

The West 600 feet of the North 363 feet of Government Lot 2 of Section 1, Township 40 North, Range 3 East of W.M.;

Except the right-of-way for Halverstick Road, lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL J:

The North 363 feet of the East half of Government Lot 3 of Section 1, Township 40 North, Range 3 East of W.M.

Except the right-of-way for Halverstick Road, lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL K:

The West 165 feet of the East 330 feet of the North 264 feet of the East 20 acres of Government Lot 4, Section 6, Township 40 North, Range 4 East of W.M., Whatcom County, Washington, except right of way for Halverstick Road, lying along the Northerly line thereof.

Situate in Whatcom County, Washington.

PARCEL L:

The South 555 feet of the following described tract:

A tract of land situated in the Northeast quarter of the Northeast quarter of Section 3, Township 40 North, Range 3 East of W.M., described as follows:

Commencing at a point 40 feet of the Northwest corner of the Northeast quarter of the Northeast quarter of said Section 3; running thence East, a distance of 50 rods; thence South, a distance of 48 rods; thence West, a distance of 50 rods; thence North, a distance of 48 rods to the point of beginning. Except right-of-way for Halverstick Road.

Situate in Whatcom County, Washington.

PARCEL M:

The East half of the Northeast quarter of Section 3, Township 40 North, Range 3 East of W.M.; Except the North 48 rods thereof; Except 40 feet of the West 50 rods thereof; And also except the South half of the Southeast quarter of the Northeast quarter thereof; And except right-of-way for Halverstick Road No. 419 lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL N:

The North 15 acres of the West 20 acres of the South half of the Southeast quarter of Section 9, Township 40 North, Range 3 East of W.M.; Except right-of-way for county road over the East 20 feet as conveyed to Whatcom County by deed recorded August 14, 1908, under Auditors File No. 123163; Except the right-of-way for East Badger Road lying along the Southerly line thereof.

Situate in Whatcom County, Washington.

PARCEL N-1:

An easement for ingress, egress and utilities as disclosed by that certain instrument recorded December 29, 1975. under Whatcom County Auditor’s File No. 1205059.

This easement is for the benefit of Parcel N alone.

Situate in Whatcom County, Washington.

PARCEL O:

The South half of the Northwest quarter of the Southeast quarter of Section 9, Township 40 North, Range 3 East of W.M.; Except right-of-way for county road over the South 40 feet conveyed to Whatcom County by deed recorded August 14, 1908, under Auditors File No. 123760.

Southwest quarter of the Southeast quarter of the Southeast quarter; And except right-of-way for East Badger Road No. 408 lying along the South line thereof. All in said Section 9.

Situate in Whatcom County, Washington.

PARCEL P:

The West 10 acres of the following described tract:

Situate in Whatcom County, Washington.

PARCEL Q:

The North 150 feet of the East 150 feet of the Southwest quarter of the Southeast quarter of the Southeast quarter, and the East 16 feet of the Southwest quarter of the Southeast quarter of the Southeast quarter; Except right-of-way for East Badger Road No. 408 lying along the South line thereof, in Section 9, Township 40 North, Range 3 East of W.M. Except that portion conveyed to the State of Washington for highway purposes by deed recorded July 27, 1989, under Auditor’s File No. 1641973.

Situate in Whatcom County, Washington.

PARCEL R:

The South 203 feet of the Northeast quarter of the Southeast quarter of the Southeast quarter and the South 203 feet of the East 3 acres of the Northwest quarter of the Southeast quarter of the Southeast quarter, all in Section 9, Township 40 North, Range 3 East of W.M., except the East 450 feet thereof.

Situate in Whatcom County, Washington.

PARCEL S:

The Northeast quarter of the Southeast quarter of the Southeast quarter and the East 3 acres of the Northwest quarter of the Southeast quarter of the Southeast quarter, all in Section 9, Township 40 North, Range 3 East of W.M., excepting therefrom the South 203 feet of the Northeast quarter of the Southeast quarter of the Southeast quarter, and the South 203 feet of the East 3 acres of the Northwest quarter of the Southeast quarter of the Southeast quarter of said section. Except the East 450 feet thereof, Except the right-of-way for Line Road tying along the Easterly line thereof.

Situate in Whatcom County, Washington.

PARCEL S-1:

An easement for the perpetual benefit of the present and successive owners of the above-described property for ingress, egress and utilities over, under and across the following described property:

The North 60 feet of the East 450 feet of the following described property:

The Northeast quarter of the Southeast quarter of the Southeast quarter, and the East 3 acres of the Northwest quarter of the Southeast quarter of the Southeast quarter, all in Section 9, Township 40 North, Range 3 East of W.M., excepting therefrom the South 203 feet of the Northeast quarter of the Southeast quarter of the Southeast quarter, and the South 203 feet of the East 3 acres of the Northwest quarter of the Southeast quarter of the Southeast quarter of said section. Except right-of-way for Line Road lying along the East line thereof.

Situate in Whatcom County, Washington.

PARCEL T:

That portion of the following described tract of land lying West of a line being a Northerly extension of the West line of the tract of land conveyed by deed recorded April 12, 1988, under Auditors File No. 1599600, more particularly described as follows:

The North half of the Northeast quarter of the Southeast quarter, and the North 30 feet of the South half of the Northeast quarter of the Southeast quarter of Section 9, Township 40 North, Range 3 East of W.M., excepting therefrom those parcels of land conveyed to deeds on May 11, 1972, April 29, 1977, February 20, 1980, March 13, 1986, and April 12, 1988, under Auditor’s File Nos. 1114731, 1250007, 1350015, 1531510 and 1599600, respectively. Also excepting thereof the rights-of-way for Haveman Road lying along the Northerly line thereof, and Line Road lying along the Easterly line thereof. Also, except the West 10 acres thereof.

Situate in Whatcom County, Washington.

PARCEL U:

The Southeast quarter of the Southeast quarter of the Southeast quarter of Section 9, Township 40 North, Range 3 East of W.M., except right-of-way for East Badger Road No. 408 lying along the South line thereof, and except right-of-way for Line Road No. 149 lying along the East line thereof. Also, except those portions deeded to the State of Washington for highway purposes recorded June 27, 1989 under Auditor’s File Nos. 1641973 and 1641974, respectively.

Situate in Whatcom County, Washington.

PARCEL V:

Beginning at the Southwest corner of Section 10, Township 40 North, Range 3 East of W.M.; thence East 365 feet; thence North 600 feet; thence West 365 feet to the West section line; thence South 600 feet along the West section line to the point of beginning. Except the right-of-way for East Badger Road lying along the Southerly line thereof, and also except the right-of-way for Line Road lying along the Westerly line thereof. Except that portion deeded to the State of Washington for road purposes by deed recorded April 18, 1989, under Whatcom County Auditor’s File No. 1634072.

Situate in Whatcom County, Washington.

PARCEL W:

excluding that portion of the Northwest quarter of the Southwest quarter of that section described as follows:

Beginning at the Southwest corner of the Northwest quarter of the Southwest quarter; thence North along the West line, 899 feet, 4 inches East, parallel with the North section tine, 200.0 feet; thence South, parallel with the West section line, 339.4 feet; thence East, parallel with the North section line, 460.0 feet; thence North, parallel with the West section line, 100.0 feet; thence East, parallel with the North section line to the East line of the Northwest quarter of the Southwest quarter; thence South along the East line of the Northwest quarter of the Southwest quarter to the Northeast corner of the Northwest quarter of the Southwest quarter; thence West along the South line of the Northwest quarter of the Southwest quarter to the point of beginning. Except the right-of-way of County Road 149 (commonly referred to as Line Road) lying along the West line thereof, and except the right-of-way of the County Road 649 (commonly referred to as Haveman Road) along the North line thereof. Except the West 200,0 feet of the North 220.0 feet thereof.

Situate in Whatcom County, Washington.

PARCEL X:

Beginning 365 feet East of the Southwest corner of Section 10, Township 40 North, Range 3 East, the true point of beginning; thence continuing East 600 feet; thence North 365 feet; thence West 600 feet; thence South 365 feet to the true point of beginning. Except the right-of-way for East Badger Road lying along the Southerly line thereof. Except that portion deeded to the State of Washington for road purposes by deed recorded April 18, 1989, under Whatcom County Auditor’s File No. I 634072.

Situate in Whatcom County, Washington.

PARCEL Y:

The Southwest quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., except the South 571.28 feet of the East 305.00 feet thereof. Except a tract beginning 365.00 feet East of the Southwest corner of said Section 10, the true point of beginning; thence continuing East 600.00 feet; thence North 365.00 feet; thence West 600.00 feet; thence South 365.00 feet to the true point of beginning. Also except a tract beginning at the Southwest corner of said Section 10; thence East 365.00 feet; thence North 600.00 feet; thence West 365.00 feet to the West section line; thence South 600.00 feet along the West section line to the point of beginning. And except right-of-way for East Badger Road lying along the Southerly line thereof, and also except the right-of-way for Line Road lying along the Westerly line thereof.

Situate in Whatcom County, Washington.

PARCEL Z:

The portion of the Northwest quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., described as follows:

Northwest quarter of the Southwest quarter of said section; thence South along the East line of the Northwest quarter of the Southwest quarter to the Southeast corner of the Northwest quarter of the Southwest quarter of said section; thence West along the South line of the Northwest quarter of the Southwest quarter to the true point of beginning. Except the South 264.0 feet of the West 160.0 feet of the Southwest quarter of the Northwest quarter of the Southwest quarter of said Section 10; and except the North 335 feet, 4 inches of the South 599 feet, 4 inches of the West 130.0 feet of the Southwest quarter of the Northwest quarter of the Southwest quarter of said Section 10; and except right-of-way for Line Road No. 149 lying along the West line thereof; and except right-of-way for Haveman Road No. 649 lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL AA:

The Northeast quarter of the Northwest quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., except right-of-way for Haveman Road (County Road No. 649) lying along the North line thereof.

Situate in Whatcom County, Washington.

PARCEL BB:

The South 571.28 feet of the East 305.00 feet of the Southwest quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., except right-of-way for East Badger Road lying along the South line thereof, and except the South 325.00 feet thereof.

Situate in Whatcom County, Washington.

PARCEL CC:

The West half of the East half of the Southeast quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., also the West half of the Southeast quarter of the Southwest quarter of said Section 10; except the South 325 feet of the West 400 feet thereof; also, except a tract beginning 400 feet East of the Southwest corner of the Southeast quarter of the Southwest quarter of said Section 10, the true point of beginning; thence North 400 feet; thence East 625 feet, more or less, to the East line of the West half of the East half of the Southeast quarter of the Southwest quarter; thence South 400 feet; thence West 625 feet, more or less, to the point of beginning. All except East Badger Road lying along the Southerly line thereof.

Situate in Whatcom County, Washington.

PARCEL DD:

Beginning 400 feet East of the Southwest corner of the Southeast quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., the true point of beginning; thence North 400 feet; thence East 625 feet, more or less, to the East line of the West half of the East half of the Southeast quarter of the Southwest quarter; thence South 400 feet; thence West 625 feet, more or less, to the point of beginning. Except the right-of-way for East Badger Road lying along the Southerly line thereof.

Situate in Whatcom County, Washington.

PARCEL EE:

The Northeast quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., except the North 5 rods of the East 16 rods of the Northeast quarter of the Southwest quarter of said Section 10, and except right-of-way for Haveman Road No. 649 lying along the Northerly line thereof, and except right-of-way for Northwood Road (County Road No. 185) lying along the Easterly line thereof.

Situate in Whatcom County, Washington.

PARCEL FF:

The North 5 rods of the East 16 rods of the Northeast quarter of the Southwest quarter of Section 10, Township 40 North, Range 3 East of W.M., and except right-of-way for Haveman Road No. 649 lying along the North line thereof, and except right-of-way for Northwood Road (County Road No. 185) lying along the Easterly line thereof.

Situate in Whatcom County, Washington.

PARCEL GG:

Government Lot 3, except the South 366 feet of the West 165 feet thereof, Section 33, Township 41 North, Range 3 East of W.M., except East Boundary Road lying along the Northerly line thereof, and except right-of-way for Assink Road lying along the Easterly line thereof.

Also except the following described tract:

Beginning at the Northwest corner of said Government Lot 3; thence South 327 feet, more or less, to the North line of the South 366 feet of said Government Lot 3; thence East 165 feet; thence South 23 feet; thence East 497 feet; thence North 350 feet, more or less, to the North line of said Government Lot 3; thence West to the point of beginning.

Together with the Northeast quarter of the Southwest quarter (except the West 10 rods thereof), in Section 33, except right-of-way for Assink Road.

Situate in Whatcom County, Washington.

PARCEL GG-1:

A perpetual non-exclusive easement for the existing poles and overhead power lines now in place (and the right to enter the premises for maintenance, repair and replacement of the same) under, over, through and across the property described as follows:

The West 70 feet of the East 110 feet of a tract of land described as follows:

Beginning at the Northwest corner of Government Lot 3 of Section 33, Township 41 North, Range 3 East of W.M.; thence South 327 feet, more or less, to the North line of the South 386 feet of said Government Lot 3; thence East 165 feet; thence South 23 feet; thence East 497 feet; thence North 350 feet, more or less, to the North line of said Government Lot 3; thence West to the point of beginning.

The easement is for the benefit of Parcel GG above.

Situate in Whatcom County, Washington.

PARCEL GG-2:

An easement, 15 feet in width, for the purposes of installing, utilizing and maintaining a pressurized underground pipeline as disclosed by that certain instrument recorded January 10, 2003, under Whatcom County Auditor’s File No.2030101660.

The easement is for the benefit of Parcel GG above.

Situate in Whatcom County, Washington.

PARCEL HH:

Government Lots Sand 6 of Section 31, Township 41 North, Range 4 East of the Willamette Meridian, except that portion thereof lying within Holmquist Road and Halverstick Road;

Also, except that portion of Government Lots 5 and 6, described as follows:

The West 363 feet of Government Lots 5 and 6, except the South 1200 feet thereof;
And except that portion lying North of the South line of Judson Lake; less roads;

Also, except that portion of Government Lot 6, described as follows:

The West 353 feet of the South 600 feet; less roads;

Also, except that portion of Government Lot 6, described as follows:

The West 363 feet of the South 1200 feet of Government Lot 6, except the South 600 feet thereof; less roads;

Situate in Whatcom County, Washington.

PARCEL II:

The West 363 feet of Government Lots 5 and 6 of Section 31, Township 41 North, Range 4 East of W.M.;

Except the South 1200 feet thereof;

And except that portion lying North of the South line of Judson Lake: less roads. Situate in Whatcom County, Washington.

PARCEL JJ:

The West 363 feet of the South 600 feet of Government Lot 6 of Section 31, Township 41 North, Range 4 East of W,M.; Less roads;

Situate in Whatcom County, Washington.

PARCEL KK:

The West 363 feet of the South 1200 feet of Government Lot 6 of Section 31, Township 41 North, Range 4 East of W.M.;

Except the South 600 feet thereof; Less roads;

Situate in Whatcom County, Washington.

Parcel LL:

Government Lot 2, except the South 49 1/2 feet thereof of Section 4, Township 40 North, Range 3 East of W.M.;

Except right of way for Assink Road lying along the West line thereof;

Also

Government Lot 3, Section 4, Township 40 North, Range 3 East of W.M., EXCEPT 30 feet off the East side deeded to Whatcom County for road; except Assink Road.

Situate in Whatcom County, Washington.

Parcel MM:

The Northeast quarter of the Northeast quarter of Section 9, Township 40 North, Range 3 East of W.M., except therefrom the South half of the Southwest quarter of the Northeast quarter of the Northeast quarter of said Section 9 and excepting therefrom the South half of the Southeast quarter of the Northeast quarter of the Northeast quarter of Section 9, Township 40 North, Range 3 East of W.M., except Pangborn Road.

Situate in Whatcom County, Washington.

Street Address of Property

1270 East Badger Road

Lynden, Washington

EXHIBIT B

Compliance Certificate

1. This certificate (the “Compliance Certificate”) is being provided pursuant to Section 3.5 of that certain loan agreement (the “Loan Agreement”) dated as of June 28, 2007, by and between Bank and Borrower, made with the acknowledgment and agreement of the other Obligated Group Parties. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

IN WITNESS WHEREOF, this Certificate has been executed to be effective as of , 2007.

“BORROWER”

THE INVENTURE GROUP, INC., a Delaware corporation		Address for notices to Borrower:

		The Inventure Group, Inc.
		5050 N. 40th Street, Suite 300
By:		Phoenix, Arizona 85018
	Eric J. Kufel, its President/CEO	Attention: Steve Weinberger

EXHIBIT C

Approved Existing Liens

1. CNH Capital American, LLC, secured by two (2) Korvan pickers, Model # 9000R, Serial # 01023 and Serial # 01024.

2. Toyota Motor Credit Corp., secured by one (1) Toyota Fork Lift Model 7FBCU25, Serial #67279.

3. Trinity Lease, secured by one (1) 2006 53 foot reefer unit (semi trailer).

EX-10.8 9 a07-18752_1ex10d8.htm EX-10.8

Exhibit 10.8

PROMISSORY NOTE SECURED BY DEED OF TRUST

(Term Loan)

$4,000,000.00

June 28, 2007

Phoenix, Arizona

1. Borrower’s Promise To Pay.

FOR VALUE RECEIVED, THE INVENTURE GROUP, INC., a Delaware corporation (the “Borrower”), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), at 101 N. First Avenue, Suite 1600, Phoenix, Arizona 85003, Attention: Commercial Banking, or at such other place as the holder of this Note may from time to time designate, the principal sum of Four Million and No/100 Dollars ($4,000,000.00) (“Maximum Loan Amount”), or such lesser amount as may be advanced and outstanding under this promissory note (the “Note”), plus interest as specified in this Note. Bank shall not be required to make any advance if that would cause the outstanding principal of this Note to exceed the Maximum Loan Amount. This Note evidences a term loan (the “Loan”) made by Bank to Borrower pursuant to the terms of a loan agreement (the “Loan Agreement”) between Bank and Borrower of even date herewith.

This Note is secured by a Leasehold Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing (the “Deed of Trust”) covering certain real and personal property, as therein described (the “Property”) and is also secured by other Collateral. The RLOC/TL Security Agreement (as such term is defined in the Loan Agreement) also secures the Loan. This Note, the Loan Agreement, the Deed of Trust, and the RLOC/TL Security Agreement, together with all of their exhibits, and all other documents which evidence, guaranty, secure, or otherwise pertain to the Loan collectively constitute the “Loan Documents.” Some or all of the Loan Documents, including the Loan Agreement, contain provisions for the acceleration of the maturity of this Note. This Note is subject to the terms and conditions of the Loan Agreement. Capitalized terms used but not defined herein shall have the meanings set forth in the Loan Agreement.

2. Maturity Date. All principal and all accrued and unpaid interest and other sums due hereunder shall be due and payable on July 1, 2017 (the “Maturity Date”).

3. Interest Rate and Payment Terms.

3.1 Interest Rate. Interest on each advance hereunder shall accrue at an annual rate equal to one and sixty-five hundredths percent (1.65%) (165 basis points) plus the one-month LIBOR rate quoted by Bank from Reuters Screen LIBOR01 or any successor thereto, which shall be that one-month LIBOR rate in effect two New York Banking Days prior to the beginning of each calendar month, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate to be reset at the beginning of each succeeding month. The term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York. If the initial advance under this Note occurs other than on the first day of the month, the initial one-month LIBOR rate shall be that one-month LIBOR rate in effect two New York Banking Days prior to the date of the initial advance, which rate plus the percentage described above shall be in effect for the remaining days of the month of the initial advance; such one-month LIBOR rate to be reset at the beginning of each succeeding month. Bank’s internal records of applicable interest rates shall be determinative in the absence of manifest error.

3.2 Separate Principal Plus Interest Payments.

(a) Interest Payments. Interest is payable beginning August 1, 2007, and on the same date of each CONSECUTIVE month thereafter, plus a final interest payment with the final payment of principal.

(b) Principal Payments. Principal is payable in installments, each in the amounts set forth in Exhibit A attached hereto, beginning August 1, 2007, and on the same date of each CONSECUTIVE month thereafter (except that if a given month does not have such a date, the last day of such month), plus a final payment equal to all unpaid principal on July 1, 2017, the Maturity Date. This means that on the amortization schedule attached hereto as Exhibit A the principal payment shown as payment number 1, will be the principal payment due on August 1, 2007 and the following principal payments shown as payments numbered 2 through 120, will be the principal payments due on following CONSECUTIVE months thereafter.

3.3 Payment in Full on Maturity Date. If not sooner paid, all principal and all accrued and unpaid interest and other sums due hereunder shall be due and payable no later than the Maturity Date.

3.4 Principal Prepayments. Borrower may prepay some or all of the principal under this Note, from time to time, without payment of any prepayment premium or fee; provided, however, that any prepayment is subject the terms and conditions of any Swap Contract (as such term is defined in the Loan Agreement) entered into between Bank and Borrower.

4. General Interest Rate and Payment Terms.

4.1 Note Rate. The interest rate in effect from time to time under this note is herein referred to as the “Note Rate.”

4.2 Effective Contracted Rate. Borrower agrees to pay an effective contracted for rate of interest equal to the rate of interest resulting from all interest payable as provided in this Note plus the additional rate of interest resulting from (a) any loan fee(s) or other similar fees described or defined in the Loan Documents, and (b) all Other Sums. For purposes hereof, the “Other Sums” shall mean all fees, charges, goods, things in action, or any other sums or things of value (other than interest payable as provided in this Note and any loan fee) paid or payable by Borrower, whether pursuant to this Note, any of the other Loan Documents, or any other document or instrument in any way pertaining to this lending transaction, that may be deemed to be interest for the purpose of any law of the State of Arizona, or any other applicable law, that may limit the maximum amount of interest to be charged with respect to this lending transaction. The Other Sums shall be deemed to be interest and part of the “contracted for rate of interest” for the purposes of any such law only.

and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Bank for the use, forbearance, or detention of the Loan shall, to the extent not prohibited by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the maximum lawful rate from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. If the outstanding principal balance and all other indebtedness of Borrower to Bank under the Loan Documents has been repaid in full, the excess amount paid will be refunded to the Borrower.

4.5 Payments. Except as otherwise provided herein, all amounts payable under this Note are payable in lawful money of the United States during normal business hours on a Banking Day. For purposes hereof, “Banking Day” means a day, other than a Saturday or Sunday, on which Bank is open for business for all banking functions in Phoenix, Arizona. Checks and drafts constitute payment only when collected. All payments made under this Note shall be made without offset, demand, counter-claim, deduction or recoupment (each of which is hereby waived), and acceptance by Bank of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, notwithstanding any notation on or accompanying such partial payment to the contrary, and shall not constitute a waiver by Bank of any Event of Default. Except as otherwise set forth herein or in any other Loan Document, payments shall be applied in such order and manner as Bank may determine in its sole and absolute discretion.

5. Late Payments; Default Rate

5.1 Late Charge for Overdue Payments. If Bank has not received the full amount of any payment scheduled to be made under this Note, other than the final principal payment, by the end of ten (10) calendar days after the date it is due, Borrower shall pay a late charge to Bank in the amount of five percent (5%) of the overdue payment; provided, however, in no event shall any late charge be payable hereunder without Bank first having provided Borrower with any notice required by applicable law. Borrower shall pay this late charge only once on any late payment. This late charge shall not be construed as in any way extending the due date of any payment, and is in addition to, and not in lieu of, any other remedy Bank may have.

5.2 Default Rate. Upon the occurrence of any Event of Default (subject to any applicable notice and cure periods), the unpaid balance of the Loan shall bear interest at the rate which is five percent (5%) above the then applicable Note Rate as it may thereafter change pursuant to the terms of this Note (the “Default Rate”). Additionally, from and after the Maturity Date, or such earlier date as all sums owing on this Note become due and payable by acceleration or otherwise, the Loan shall bear interest at the Default Rate. Accrued interest, at the Note Rate, if not paid when due, shall accrue interest at the Default Rate, as hereinabove provided, which may result in compounding of interest. Except as otherwise set forth herein or in any other Loan Document, payments under this Note or under any other Loan Document that are due on demand, shall bear interest at the Default Rate (i) from the date costs or expenses are incurred by Bank that give rise to the demand or (ii) if there is no such date, then from the date of demand, until Borrower pays the full amount of such payment, including interest.

6. Events Of Default; Remedies. If any of the following “Events of Default” occur, any obligation of the holder of this Note to make advances under this Note, the Loan Agreement, and/or any other Loan Document terminates and, at the holder’s option, exercisable in its sole and absolute discretion, all sums

of principal and interest under this Note immediately become due and payable without notice of intent to accelerate, notice of acceleration, or of notice of default, presentment, demand for payment, or protest, or of notice of nonpayment, notice of dishonor, or other notices or demands of any kind or character:

6.1 Borrower fails to perform any obligation under this Note to pay principal or interest within ten (10) days after the date when due; or

6.2 Borrower fails to perform any other obligation under this Note to pay money within ten (10) days after written notice from Bank; or

6.3 Under any of the Loan Documents, a default or an Event of Default (as defined in the applicable document, subject to applicable notice and cure periods) occurs, except as provided in Section 7 below.

In addition to the right to accelerate the Maturity of this Note upon the occurrence of an Event of Default, Bank shall have all rights and remedies described in the other Loan Documents.

7. Insolvency. It is an “Event of Default” under this Note if Borrower becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships (“Insolvency Proceeding”), and as to any involuntary Insolvency Proceeding, it either: (i) is consented to or (ii) has not been dismissed within ninety (90) days. Upon such an Event of Default, all sums of principal and interest under this Note automatically become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. If Borrower becomes the subject of any Insolvency Proceeding, any obligation of the holder to make advances under this Note shall automatically terminate, and in the case of an involuntary Insolvency Proceeding which is dismissed within ninety (90) days, the holder’s obligation to make advances under this Note shall resume upon the dismissal thereof.

8. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND BANK MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS NOTE, THE LOAN AGREEMENT, OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

9. Miscellaneous.

9.1 Waivers. Borrower hereby waives presentment; demand; notice of dishonor; notice of default or delinquency; without notice of intent to accelerate, notice of acceleration, notice of nonpayment; notice of costs, expenses or losses and interest thereon; and notice of interest on interest and late charges.

9.2 Delay In Enforcement. If Bank delays in exercising or fails to exercise any of its rights under this Note, that delay or failure does not constitute a waiver of any of Bank’s rights, or of any breach, default or failure of condition of or under this Note. No waiver by Bank of any of its rights, or of any breach, default or failure of condition is effective, unless the waiver is expressly stated in writing by Bank.

9.3 Joint and Several Liability. If more than one person or entity is signing this Note as Borrower, their obligations under this Note shall be joint and several. As to any Borrower that is a partnership, the obligations of Borrower under this Note are the joint and several obligations of each general partner thereof.

9.4 Successors, and Assigns; Participations. This Note inures to and binds the legal representatives, successors and assigns of Borrower and Bank; provided, however, Borrower may not assign this Note or any Loan funds, or assign or delegate any of its rights or obligations, without the prior written consent of Bank in each instance, which consent is at the sole and absolute discretion of Bank. Bank, in its sole and absolute discretion, may transfer this Note, and may sell or assign participations or other interests in all or part of the Loan, on the terms and subject to the conditions of the Loan Documents, all without notice to or the consent of Borrower. Without notice to or the consent of Borrower, Bank may disclose to any actual or prospective purchaser of any securities issued or to be issued by Bank or its affiliates in connection with Loan, and to any actual or prospective purchaser or assignee of any participation or other interest in this Note, the Loan, or any other loans made by Bank to Borrower (whether evidenced by this Note or otherwise), any financial or other information, data or material in Bank’s possession relating to Borrower, the Loan, or any collateral for the Loan, including any improvements thereon. If Bank so requests and at no cost or expense to Borrower, Borrower shall sign and deliver a new note, in the form and substance of this Note, to be issued in exchange for this Note; provided, such new note shall in no way effect or change Borrower’s obligations under this Note.

9.5 Cumulative Remedies. All of Bank’s remedies in connection with this Note or under applicable law are cumulative, and Bank’s exercise of any one or more of those remedies shall not constitute an election of remedies.

9.6 Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of Arizona without regard to the choice of law rules for that state, except to the extent that any such laws may now or hereafter be preempted by Federal law. Borrower consents to the jurisdiction of any Federal or State court within the State of Arizona, submits to venue in such state, and also consents to service of process by any means authorized by Federal law or the law of such state. Without limiting the generality of the foregoing, Borrower hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) Borrower is not subject to the jurisdiction of the courts of the above-referenced state or the United States District Court for such state; (ii) such suit, action, or proceeding is brought in an inconvenient forum; or (iii) the venue of such suit, action, or proceeding is improper.

9.7 Attorney’s Fees and Costs. In any lawsuit or arbitration arising out of or relating to this Note, the Loan Documents or the Loan, the prevailing party will be entitled to recover from each other party such sums as the court or arbitrator adjudges to be reasonable attorneys’ fees in the action, reference, or arbitration, in addition to costs and expenses otherwise allowed by law. In all other actions or proceedings, including any matter arising out of or relating to any Insolvency Proceeding, Borrower agrees to pay all of Bank’s costs and expenses, including reasonable attorneys’ fees, incurred in enforcing or protecting Bank’s rights or interests. From the time(s) incurred until paid in full to Bank, all such sums shall bear interest at the Default Rate.

9.8 Holder’s Rights. Borrower agrees that the holder of this Note may accept additional or substitute security for this Note, or release any security or any party liable for this Note, or extend or renew this Note, all without notice to Borrower and without affecting the liability of Borrower.

9.9 Interpretation. As used in this Note, the terms “Bank,” “holder” and “holder of this Note” are interchangeable. As used in this Note, the word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.”

9.10 Time of the Essence. Time is of the essence with regard to all payment obligations under this Note.

9.11 Amendments. This Note may not be modified or amended except by a written agreement signed by the parties.

9.12 Counterparts. This Note may be executed in counterparts, and all counterparts constitute but one and the same document.

IN WITNESS WHEREOF, Borrower has duly executed and delivered this Note to Bank as of the date first above written.

“BORROWER”

THE INVENTURE GROUP, INC.,		Address for notices to Borrower:
a Delaware corporation
		The Inventure Group, Inc.
		5050 N. 40th Street, Suite 300
By:	/s/ Eric J. Kufel	Phoenix, Arizona 85018
	Eric J. Kufel, its President/CEO	Attention: Steve Weinberger

Tax I.D. No.: 86-0786101

Exhibit A

Amortization Schedule

	Payment	Principal			Principal
Period	Date	Balance			Payment

		$		4,000,000.00
1	08/01/07	$	3,987,552.53		$	12,447.47
2	09/01/07	$	3,975,105.06		$	12,447.47
3	10/01/07	$	3,962,657.59		$	12,447.47
4	11/01/07	$	3,950,210.12		$	12,447.47
5	12/01/07	$	3,937,762.65		$	12,447.47
6	01/01/08	$	3,925,315.18		$	12,447.47
7	02/01/08	$	3,912,188.29		$	13,126.89
8	03/01/08	$	3,899,061.40		$	13,126.89
9	04/01/08	$	3,885,934.51		$	13,126.89
10	05/01/08	$	3,872,807.62		$	13,126.89
11	06/01/08	$	3,859,680.73		$	13,126.89
12	07/01/08	$	3,846,553.84		$	13,126.89
13	08/01/08	$	3,833,426.95		$	13,126.89
14	09/01/08	$	3,820,300.06		$	13,126.89
15	10/01/08	$	3,807,173.17		$	13,126.89
16	11/01/08	$	3,794,046.28		$	13,126.89
17	12/01/08	$	3,780,919.39		$	13,126.89
18	01/01/09	$	3,767,792.50		$	13,126.89
19	02/01/09	$	3,753,640.95		$	14,151.55
20	03/01/09	$	3,739,489.40		$	14,151.55
21	04/01/09	$	3,725,337.85		$	14,151.55
22	05/01/09	$	3,711,186.30		$	14,151.55
23	06/01/09	$	3,697,034.75		$	14,151.55
24	07/01/09	$	3,682,883.20		$	14,151.55
25	08/01/09	$	3,668,731.65		$	14,151.55
26	09/01/09	$	3,654,580.10		$	14,151.55
27	10/01/09	$	3,640,428.55		$	14,151.55
28	11/01/09	$	3,626,277.00		$	14,151.55
29	12/01/09	$	3,612,125.45		$	14,151.55
30	01/01/10	$	3,597,973.90		$	14,151.55
31	02/01/10	$	3,582,789.25		$	15,184.65
32	03/01/10	$	3,567,604.60		$	15,184.65
33	04/01/10	$	3,552,419.95		$	15,184.65
34	05/01/10	$	3,537,235.30		$	15,184.65
35	06/01/10	$	3,522,050.65		$	15,184.65
36	07/01/10	$	3,506,866.00		$	15,184.65
37	08/01/10	$	3,491,681.35		$	15,184.65
38	09/01/10	$	3,476,496.70		$	15,184.65

	Payment	Principal		Principal
Period	Date	Balance		Payment

39	10/01/10	$	3,461,312.05	$	15,184.65
40	11/01/10	$	3,446,127.40	$	15,184.65
41	12/01/10	$	3,430,942.75	$	15,184.65
42	01/01/11	$	3,415,758.10	$	15,184.65
43	02/01/11	$	3,399,464.94	$	16,293.16
44	03/01/11	$	3,383,171.78	$	16,293.16
45	04/01/11	$	3,366,878.62	$	16,293.16
46	05/01/11	$	3,350,585.46	$	16,293.16
47	06/01/11	$	3,334,292.30	$	16,293.16
48	07/01/11	$	3,317,999.14	$	16,293.16
49	08/01/11	$	3,301,705.98	$	16,293.16
50	09/01/11	$	3,285,412.82	$	16,293.16
51	10/01/11	$	3,269,119.66	$	16,293.16
52	11/01/11	$	3,252,826.50	$	16,293.16
53	12/01/11	$	3,236,533.34	$	16,293.16
54	01/01/12	$	3,220,240.18	$	16,293.16
55	02/01/12	$	3,202,811.79	$	17,428.39
56	03/01/12	$	3,185,383.40	$	17,428.39
57	04/01/12	$	3,167,955.01	$	17,428.39
58	05/01/12	$	3,150,526.62	$	17,428.39
59	06/01/12	$	3,133,098.23	$	17,428.39
60	07/01/12	$	3,115,669.84	$	17,428.39
61	08/01/12	$	3,098,241.45	$	17,428.39
62	09/01/12	$	3,080,813.06	$	17,428.39
63	10/01/12	$	3,063,384.67	$	17,428.39
64	11/01/12	$	3,045,956.28	$	17,428.39
65	12/01/12	$	3,028,527.89	$	17,428.39
66	01/01/13	$	3,011,099.50	$	17,428.39
67	02/01/13	$	2,992,344.59	$	18,754.91
68	03/01/13	$	2,973,589.68	$	18,754.91
69	04/01/13	$	2,954,834.77	$	18,754.91
70	05/01/13	$	2,936,079.86	$	18,754.91
71	06/01/13	$	2,917,324.95	$	18,754.91
72	07/01/13	$	2,898,570.04	$	18,754.91
73	08/01/13	$	2,879,815.13	$	18,754.91
74	09/01/13	$	2,861,060.22	$	18,754.91
75	10/01/13	$	2,842,305.31	$	18,754.91
76	11/01/13	$	2,823,550.40	$	18,754.91
77	12/01/13	$	2,804,795.49	$	18,754.91
78	01/01/14	$	2,786,040.58	$	18,754.91
79	02/01/14	$	2,765,916.51	$	20,124.07

	Payment	Principal		Principal
Period	Date	Balance		Payment

80	03/01/14	$	2,745,792.44	$	20,124.07
81	04/01/14	$	2,725,668.37	$	20,124.07
82	05/01/14	$	2,705,544.30	$	20,124.07
83	06/01/14	$	2,685,420.23	$	20,124.07
84	07/01/14	$	2,665,296.16	$	20,124.07
85	08/01/14	$	2,645,172.09	$	20,124.07
86	09/01/14	$	2,625,048.02	$	20,124.07
87	10/01/14	$	2,604,923.95	$	20,124.07
88	11/01/14	$	2,584,799.88	$	20,124.07
89	12/01/14	$	2,564,675.81	$	20,124.07
90	01/01/15	$	2,544,551.74	$	20,124.07
91	02/01/15	$	2,522,958.57	$	21,593.17
92	03/01/15	$	2,501,365.40	$	21,593.17
93	04/01/15	$	2,479,772.23	$	21,593.17
94	05/01/15	$	2,458,179.06	$	21,593.17
95	06/01/15	$	2,436,585.89	$	21,593.17
96	07/01/15	$	2,414,992.72	$	21,593.17
97	08/01/15	$	2,393,399.55	$	21,593.17
98	09/01/15	$	2,371,806.38	$	21,593.17
99	10/01/15	$	2,350,213.21	$	21,593.17
100	11/01/15	$	2,328,620.04	$	21,593.17
101	12/01/15	$	2,307,026.87	$	21,593.17
102	01/01/16	$	2,285,433.70	$	21,593.17
103	02/01/16	$	2,262,302.31	$	23,131.39
104	03/01/16	$	2,239,170.92	$	23,131.39
105	04/01/16	$	2,216,039.53	$	23,131.39
106	05/01/16	$	2,192,908.14	$	23,131.39
107	06/01/16	$	2,169,776.75	$	23,131.39
108	07/01/16	$	2,146,645.36	$	23,131.39
109	08/01/16	$	2,123,513.97	$	23,131.39
110	09/01/16	$	2,100,382.58	$	23,131.39
111	10/01/16	$	2,077,251.19	$	23,131.39
112	11/01/16	$	2,054,119.80	$	23,131.39
113	12/01/16	$	2,030,988.41	$	23,131.39
114	01/01/17	$	2,007,857.02	$	23,131.39
115	02/01/17	$	1,983,406.27	$	24,450.75
116	03/01/17	$	1,958,955.52	$	24,450.75
117	04/01/17	$	1,934,504.77	$	24,450.75
118	05/01/17	$	1,910,054.02	$	24,450.75
119	06/01/17	$	1,885,603.27	$	24,450.75
120	07/01/17	$	1,861,152.52	$	24,450.75

EX-10.9 10 a07-18752_1ex10d9.htm EX-10.9

Exhibit 10.9

Recording Requested By
And When Recorded Mail To:

U.S. Bank National Association

101 North First Avenue, Suite 1600
Phoenix, AZ 85003-1902

Attention: Commercial Banking

Space Above For Recorder’s Use

WASHINGTON STATE COUNTY AUDITOR’S/RECORDER’S INFORMATION (RCW 65.04):

GRANTOR: RADER FARMS ACQUISITION CORP. (“GRANTOR”)

GRANTEE: U.S. BANK NATIONAL ASSOCIATION (“BENEFICIARY”)

ABBREVIATED

LEGAL DESCRIPTION:

Ptn. of Sections 1, 3, 4, 9, 10, 31, 33, Township 40 North, Range 3 East of W.M., Ptn. of Sections 6 and 31, Township 40 North, Range 4 East of W.M.

[SEE ATTACHED EXHIBIT A FOR FULL LEGAL DESCRIPTION]

ASSESSOR’S	400406 235480 0000 and 400310 258263 0000 and 400309 466060 0000
PROPERTY TAX PARCEL	and 400405 096537 0000 and 410333 205232 0000 and 400310 121045
ACCOUNT NUMBER(S):	0000 and 400309 475078 0000 and 400309 476112 0000 and 400310
	024030 0000 and 400310 067020 0000 and 400406 198523 0000 and
	410431 019031 0000 and 410431 019090 0000 and 400310 207022 0000
	and 400309 490232 0000 and 410431 019156 0000 and 400310 038225
	0000 and 400309 505035 0000 and 400310 105237 0000 and 400309
	441228 0000 and 400303 449478 0000 and 400406 037482 0000 and
	400309 305089 0000 and 400310 070169 0000 and 400301 235478 0000
	and 400310 187087 0000 and 400310 070085 0000 and 400309 470490
	0000 and 400301 363356 0000 and 400405 104471 0000 and 400406
	250460 0000 and 400304 344458 0000 and 410431 086075 0000 and
	400310 213195 0000 and 400304 209456 0000 and 400303 487407 0000
	and 400309 395110 0000 and 400301 402485 0000

LEASEHOLD DEED OF TRUST
with Assignment of Rents, Security Agreement, and
Fixture Filing
(Washington)

This Document Serves as a Fixture Filing under the Washington Uniform Commercial Code.

Grantor’s Organizational Identification Number is: DE-4351069.

THIS DEED OF TRUST SECURES A VARIABLE RATE PROMISSORY NOTE WHICH VARIES ACCORDING TO CHANGES IN CERTAIN CONTRACT RATES OF INTEREST IN ACCORDANCE WITH THE TERMS OF THE PROMISSORY NOTE AND THE LOAN AGREEMENT BETWEEN GRANTOR AND BENEFICIARY.

The parties to this Leasehold Deed of Trust, with Assignment of Rents, Security Agreement, and Fixture Filing (this “Deed of Trust”), dated for reference purposes as of June 27, 2007, are THE INVENTURE GROUP, INC., a Delaware corporation, as trustor (the “Grantor”), CHICAGO TITLE INSURANCE COMPANY, as trustee (the “Trustee”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as beneficiary and secured party (the “Beneficiary”). The parties mailing addresses are set forth on the signature page(s) below.

This Deed of Trust secures, among other things, repayment of a term loan (the “Loan”) evidenced by the promissory note described in Section 1.2(a)(i), which Loan is made pursuant to a certain loan agreement (the “Loan Agreement”), dated as of the date hereof, entered into by Grantor and Beneficiary. Capitalized terms used above and elsewhere in this Deed of Trust without definition have the meanings given them in the Loan Agreement. All terms not defined herein or in the Loan Agreement shall have the meaning given them in the Uniform Commercial Code, as enacted in the state where the Land is located, or under the Uniform Commercial Code in any other state to the extent the same is applicable law (collectively, as amended, recodified, and in effect from time to time, the “UCC”). If a term is defined differently in Article 9 of the UCC than in another Article, Article 9 shall control.

In addition to the Loan, this Deed of Trust secures, repayment of a revolving line of credit loan (the “Facility 1 Loan”) evidenced by the promissory note described in Section 1.2(a)(ii) and a term loan (the “Facility 2 Loan”) evidenced by the promissory note described in Section 1.2(a)(iii) (collectively, the “RLOC/TL Loans”), which RLOC/TL Loans are made pursuant to a certain Loan Agreement (Revolving Line of Credit Loan and Term Loan) between Grantor and Beneficiary dated as of May 16, 2007 (the “RLOC/TL Loan Agreement”). The Loan and the RLOC/TL Loans will be cross-collateralized and cross-defaulted.

For purposes hereof, (a) the terms “Loan” or “Loans” shall, as the context may require, include and refer to the Loan described in Section 1.2(a)(i), the Facility 1 Loan described in Section 1.2(a)(ii) and the Facility 2 Loan described in Section 1.2(a)(iii), (b) the terms “Note” or “Notes” shall, as the context may require, include and refer to the Note described in Section 1.2(a)(i) the Facility 1 Note described in Section 1.2(a)(ii), and the Facility 2 Note described in Section 1.2(a)(iii). For purposes hereof, this Deed of Trust, the Loan Agreement, the RLOC/TL Loan Agreement, and the Notes described in Sections 1.2(a)(i),(ii), and (iii), together with all of their exhibits, and all other documents which evidence, guaranty, secure, or otherwise pertain to the Loan and/or the RLOC/TL Loans collectively constitute the “Loan Documents.”

1. Grant in Trust and Secured Obligations.

1.1 Grant in Trust. In consideration and for the purpose of securing payment and performance of the Secured Obligations (as defined below), Grantor hereby irrevocably and unconditionally grants, bargains, conveys, sells, transfers, and assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all estate, right, title, and interest which Grantor now has or may later acquire in and to the following property (all or any part of such property, or any interest in all or any part of it, as the context may require, the “Property”):

(a) The leasehold estate created by that certain Agricultural Ground Lease dated to be effective as of May 27, 2007, wherein Lyle Rader, Sue Rader, Brad Rader and Julie Newell, fka Julie Rader, collectively are the current lessor (“Lessor” or “Ground Lessor”) and Grantor is the current lessee as described in an undated memorandum, and recorded May 17, 2007, as Instrument No. 2070502840, Official Records of Whatcom County, Washington (the “Ground Lease”) relating to that certain real property located in Whatcom County, Washington, as more fully described in Exhibit A attached hereto and made a part hereof, together with all rights, privileges, easements, appurtenances, tenements, hereditaments, rights of way, appendages, projections, water rights including riparian and littoral rights and whether or not

appurtenant, streets, ways, alleys, and strips and gores of land, now or hereafter in any way belonging, adjoining, crossing or pertaining to such real property (the “Land”); together with all existing and future easements and rights affording access to it (the “Land”), together with all of the right, title and estate of the Grantor in and to the Ground Lease and the property subject thereto, all options and rights now existing hereafter or arising thereunder, all of Grantor’s right to waive, excuse, release or consent to any waiver, excuse or release of any provision of the Ground Lease or to consent to subordination of the Ground Lease to any mortgage or estate superior to the Ground Lease to any other estate and all deposits made by Grantor pursuant to the Ground Lease; together with

(b) All buildings, structures and improvements now located or later to be constructed on the Land (the “Improvements”); together with

(c) All articles of personal property (including those specified below) and any software imbedded therein, now owned or hereafter acquired by Grantor and attached to, placed upon for an indefinite term, or used in connection with the Land and/or Improvements, together with all goods and other property that are, or at any time become, so related to the Property that an interest in them arises under real estate law, or they are otherwise a “fixture” under applicable law (each a “Fixture,” collectively “Fixtures”); together with

(d) All existing and future as-extracted collateral produced from or allocated to the Land, including, all minerals, oil, gas, other hydrocarbons and associated substances, sulphur, nitrogen, carbon dioxide, helium and any other commercially valuable substances which may be in, under or produced from any part of the Land, and all products processed or obtained therefrom, and the proceeds thereof, and all development rights and credits, air rights, water, water courses, water rights (whether riparian, appropriative or otherwise, and whether or not appurtenant) and water stock, easements, rights-of-way, gores or strips of land, and any land lying in the streets, ways, alleys, passages, roads or avenues, open or proposed, in front of or adjoining the Land and Improvements; together with

(e) All existing and future leases, subleases, subtenancies, licenses, occupancy agreements, concessions, and other agreements of any kind relating to the use or occupancy of all or any portion of the Property, whether now in effect or entered into in the future (each a “Lease,” collectively, the “Leases”) relating to the use and enjoyment of all or any part of the Land and Improvements (including but not limited to all leasehold estate, right, title and interest of Grantor in and to the Ground Lease, and any sub-ground leases), including all amendments, extensions, renewals, or modifications thereof (subject to Beneficiary’s right to approve same pursuant to the terms of the Loan Documents), and any and all guaranties of, and security for, lessees’ performance under any and all Leases, and all other agreements relating to or made in connection with any of such Leases; together with

All rents (and payments in lieu of rents), royalties, issues, profits, income, proceeds, payments, and revenues of or from the Property (specifically excluding all rents due to the Ground Lessor by Grantor under the Ground Lease), and/or at any time payable under any and all Leases, including all rent loss insurance proceeds, prepaid rents and any and all security deposits received or to be received by Grantor pursuant to any and all Leases, and all rights and benefits accrued, or to accrue to, Grantor under any and all Leases (some or all collectively, as the context may require, “Rents”); together with

(g) All right, title and interest now owned or hereafter acquired by Grantor in and to any greater estate in the Land and Improvements, whether pursuant to the terms of the Ground Lease, the terms of any option or first right of refusal, or otherwise, together with

(h) All real property and improvements on it, and all appurtenances and other property and interests of any kind or character, whether described in Exhibit A or not, which may be reasonably

necessary or desirable to promote the present and any reasonable future beneficial use and enjoyment of the Land and Improvements; together with

(i) All rights to the name, signs, trade names, trademarks, trademark applications, service marks, licenses, software, and symbols used in connection with the Land and Improvements; together with

(j) All goods, materials, supplies, chattels, furniture, fixtures, machinery, apparatus, fittings, equipment, and articles of personal property of every kind and nature whatsoever, including consumable goods, now or hereafter located in or upon the Property or any part thereof, or to be attached to or placed in or on, or used or useable in connection with any present or future use, enjoyment, occupancy or operation of all or any part of the Land and Improvements, whether stored on the Land or elsewhere, including by way of description but without limiting the generality of the foregoing, all computer systems, telephone and telecommunication systems, televisions and television systems, pumps or pumping plants, tanks, motors, conduits, engines, pipes, ditches and flumes, and also all gas and electrical apparatus (including, but not limited to, all electrical transformers, switches, switch boxes, and equipment boxes), cooking, heating, cooling, air conditioning, sprinkler equipment, lighting, power equipment, ventilation, incineration, refrigeration and plumbing apparatus, fixtures and equipment, screens, storm doors and windows, stoves, wall beds, refrigerators, attached cabinets, partitions, ovens, ranges, disposals, dishwashers, carpeting, plants and shrubbery, ground maintenance equipment, ducts and compressors; together with all building materials, goods and personal property on or off the Property intended to be affixed to or incorporated in the Property but not yet affixed to or incorporated in the Property, all which shall be considered to the fullest extent of the law to be real property for purposes of this Deed of Trust; together with

(k) All building materials, equipment, work in process or other personal property of any kind, whether stored on the Land or elsewhere, which have been or later will be acquired for the purpose of being delivered to, incorporated into or installed in or about the Land or Improvements; together with

(I) All deposit accounts of Grantor, including but not limited to, any deposit account (if any), any Borrower’s Funds Account (if any), any Replacement Reserve Account (if any), any Operating Reserve Account (if any), and all Loan funds deposited into any such account, whether disbursed or not, and Grantor’s own funds now or later to be held on deposit in all such accounts; together with

(m) To the extent not expressly prohibited by law, all federal, state, and local tax credits, and other tax benefits related to the Property; together with

(n) All rights to the payment of money and all guaranties thereof and judgments therefor, and all accounts, accounts receivable, reserves, deferred payments, refunds of real property and personal property taxes and other refunds, cost savings, payments and deposits, whether now or later to be received from third parties (including all earnest money sales deposits) or deposited by Grantor with third parties (including all utility deposits), warranty rights, contract rights, management contracts, service contracts, construction and architectural contracts, contracts for the purchase and sale of the Property or any part thereof, end-loan or other financing commitments, development and use rights, governmental permits and licenses, applications, architectural and engineering plans, specifications and drawings, as-built drawings, chattel paper, instruments, documents, promissory notes, drafts, letters of credit (other than letters of credit in favor of Beneficiary), letter of credit rights (whether or not the letter of credit is evidenced by a writing), supporting obligations, and general intangibles, including payment intangibles, whether any of the foregoing are tangible or electronic, which arise from or relate to construction on the Land or to any business now or later to be conducted on it, or to the Land and Improvements generally; together with

(o) All insurance policies (and the unearned premiums therefor) and bonds required by the Loan Documents and all proceeds thereof, and all proceeds (including all claims to and demands for

them) of the voluntary or involuntary conversion of any of the Land, the Improvements, or the other property described above into cash or liquidated claims, including proceeds of all present and future fire, hazard or casualty insurance policies and all condemnation awards or payments now or later to be made by any public body or decree by any court of competent jurisdiction for any taking or in connection with any condemnation or eminent domain proceeding, and all causes of action and their proceeds for any damage or injury to, or defect in, the Land, the Improvements, or the other property described above or any part of them, or breach of warranty in connection with the construction of the Improvements, including causes of action arising in tort, contract, fraud, misrepresentation, or concealment of a material fact; together with

(p) All books, records, and all recorded data of any kind or nature (regardless of the medium of recording) pertaining to any and all of the property described above, including records relating to tenants under any leases, and the qualification of such tenants, and all certificates, vouchers, and other documents in any way related thereto, and all records relating to the application and allocation of any federal, state, and local tax credits or benefits, including computer-readable memory and any computer hardware or software necessary to access and process such memory (collectively, the “Books and Records”); together with

(q) All commercial tort claims Grantor now has or hereafter acquires relating to any of the property described above; together with

(r) All software embedded within or used in connection with any of the property described above; together with

(s) All products, accounts, and proceeds (cash or non-cash) of, additions, betterments, extensions, accessions and accretions to, substitutions, renewals and replacements for, and changes in any of the property described above, including all proceeds of any voluntary or involuntary disposition or claim respecting any such property (arising out of any judgment, condemnation or award, or otherwise arising) and all supporting obligations ancillary to or arising in connection therewith, general intangibles (including payment intangibles) arising in connection therewith, and all goods, accounts, instruments, documents, promissory notes, chattel paper, deposit accounts, supporting obligations, and general intangibles (including payment intangibles) (whether any of the foregoing are tangible or electronic), wherever located, acquired with cash proceeds of any of the foregoing or its proceeds.

Grantor shall and will warrant and forever defend the above-bargained Property in the quiet and peaceable possession of Trustee, its successors and assigns, against all and every person or persons lawfully claiming or to claim the whole or any part thereof. Grantor agrees that any greater title to the Property hereafter acquired by Grantor during the term hereof shall be subject hereto.

1.2 Secured Obligations.

(a) Grantor makes the grant, bargain, conveyance, sale, transfer, and assignment set forth above and grants the security interest set forth in Section 3 below for the purpose of securing the following obligations (the “Secured Obligations”) in such order of priority as Beneficiary may determine:

(i) Payment of all obligations at any time owing under that certain Promissory Note Secured By Deeds of Trust (the “Note”) dated as of June 27, 2007, payable by Grantor as maker to the order of Beneficiary in the stated principal amount of Four Million and No/100 Dollars ($4,000,000.00) to the order of Beneficiary; and

(ii) Payment of all obligations at any time owing under that certain Promissory Note Secured By Deeds of Trust (Facility 1 - Revolving Line of Credit Loan) (the “Facility 1 Note”) dated as of May 16, 2007, payable by Grantor as maker to the order of

Beneficiary in the stated principal amount of Fifteen Million and No/100 Dollars ($15,000,000.00) to the order of Beneficiary; and

(iii) Payment of all obligations at any time owing under a Promissory Note Secured By Deeds of Trust (Facility 2 – Term Loan) (the “Facility 2 Note”) dated as of May 16, 2007, payable by Grantor as maker to the order of Beneficiary in the stated principal amount of Six Million and No/100 Dollars ($6,000,000.00) to the order of Beneficiary; and

(iv) Payment and performance of all obligations of Grantor under this Deed of Trust; and

(v) Payment and performance of all obligations of Grantor under the Loan Agreement, under any Loan Documents, and under any rate lock agreement or interest rate protection agreement (such as any rate lock agreement, interest rate swap agreement, International Swaps and Derivatives Association, Inc. Master Agreement, or similar agreement or arrangements now existing or hereafter entered into by Grantor and Beneficiary in connection with the Loans evidenced by the Notes to hedge the risk of variable rate interest volatility or fluctuations in interest rates as any such agreement or arrangement may be modified, supplemented and in effect from time to time); provided, however, that this Deed of Trust does not secure any Loan Document or other document, or any provision of any Loan Document or other document, that is expressly stated to be unsecured; and

(vi) Payment and performance of all future advances and other obligations that Grantor, or any successor in interest to Grantor, and/or any other obligor (if different than Grantor), or any successor in ownership of all or part of the Property, may agree to pay and/or perform (whether as principal, surety, or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust; and

(vii) Payment and performance of all modifications, amendments, extensions, and renewals, however evidenced, of any of the Secured Obligations, including any successor agreements or instruments which restate and supersede any agreements or instruments evidencing the Secured Obligations.

(b) All persons who may have or acquire an interest in all or any part of the Property will be considered to have notice of, and will be bound by, the terms of the Secured Obligations and each other agreement or instrument made or entered into in connection with each of the Secured Obligations. Such terms include any provisions in the Note or the Loan Agreement which permit borrowing, repayment, and reborrowing, or which provide that the interest rate on one or more of the Secured Obligations may vary from time to time.

2. Assignment of Lessor’s Interest in Leases and Assignment of Rents.

2.1 Absolute Assignment. Effective upon the recordation of this Deed of Trust, Grantor hereby irrevocably, absolutely, presently, and unconditionally assigns, transfers, and sets over to Beneficiary:

(a) All of Grantor’s right, title, and interest in, to, and under any and all Leases, all amendments, extensions, renewals, or modifications thereof (subject to Beneficiary’s right to approve same pursuant to the terms of the Loan Documents), and any and all guaranties of, and security for, lessees’ performance under any and all Leases, and all other agreements relating to or made in connection with any of such Leases; and

(b) All Rents.

In the event that anyone establishes and exercises any right to develop, bore for, or mine for any water, gas, oil, or mineral on or under the surface of the Property, any sums that may become due and payable to Grantor as bonus or royalty payments, and any damages or other compensation payable to Grantor in connection with the exercise of any such rights, shall also be considered Rents assigned under this Section.

THIS IS AN ABSOLUTE ASSIGNMENT, NOT AN ASSIGNMENT FOR SECURITY ONLY.

2.2 Grant of License. Beneficiary hereby confers upon Grantor a license (the “License”) to collect and retain the Rents as they become due and payable, so long as no Event of Default (as such term is defined below) shall exist. Upon the occurrence of an Event of Default, the License shall terminate (automatically and without notice or demand of any kind and without regard to the adequacy of Beneficiary’s security under this Deed of Trust).

2.3 Collection and Application of Rents and Enforcement of Leases. Subject to the License granted to Grantor above and the other provisions of this Section, Beneficiary has the right, power, and authority to collect any and all Rents and enforce the provisions of any Lease. In connection with the provisions of this Section, Grantor hereby constitutes and irrevocably appoints Beneficiary its attorney-in-fact, with full power of substitution, to perform any and all of the following acts, if and at the times when Beneficiary in its sole and absolute discretion may so choose:

(a) Demand, receive, and enforce payment of any and all Rents, and endorse all checks and other payment instruments related thereto;

(b) Give receipts, releases, and satisfactions for any and all Rents;

(d) Enforce the provisions of any and all Leases;

(e) Enter into Leases; and/or

(f) Perform and discharge any and all undertakings of Grantor or otherwise under any Lease.

The appointment granted in this Section shall be deemed to be a power coupled with an interest. Beneficiary’s rights under this Section do not depend on whether or not Beneficiary takes possession of the Property as permitted under this Deed of Trust. In Beneficiary’s sole and absolute discretion, Beneficiary may choose to collect Rents or enforce any and all Leases either with or without taking possession of the Property and either in person or through a court-appointed receiver. Beneficiary’s rights and powers under this Section are in addition to the other remedies herein provided for upon the occurrence of an Event of Default and may be exercised independently of or concurrently with any other such remedies.

2.4 Notice. All lessees under any and all Leases are hereby irrevocably authorized and notified by Grantor to rely upon and to comply with (and will be fully protected in so doing) any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of lessees’ undertakings under the Leases, and lessees have no right or duty to inquire whether any Event of Default has actually occurred or is then existing hereunder or to obtain Grantor’s consent.

2.5 Proceeds. Beneficiary has the right to apply all amounts received by it pursuant to this assignment to pay any of the following in the amounts and in the order Beneficiary deems appropriate: (a) any and all Secured Obligations, in any order and proportions as Beneficiary in its sole and absolute discretion may choose, and (b) the costs and expenses of operation of the Property and collection of Rents and other sums that may be incurred by Trustee, Beneficiary, and/or any receiver, including but not limited to reasonable attorneys’ fees and any and all expenses of leasing, operating, maintaining, and managing the Property, and all other costs and charges incident to the Property; including, without limitation, (i) salaries, fees, commissions and wages of a managing agent, and other employees, agents, or independent contractors; (ii) taxes, charges, claims, assessments, any other liens, and premiums for all insurance; and (iii) the cost of all alterations, renovations, repairs or replacements, and all expenses incident to taking and retaining possession of the Property. In addition, Beneficiary may hold the same as security for the payment of the Secured Obligations. Beneficiary shall have no liability for any funds which it does not actually receive.

2.6 Beneficiary Not Responsible. Under no circumstances shall Beneficiary have any duty to produce Rents from the Property. Regardless of whether or not Beneficiary, in person or by agent, takes actual possession of the Land and the Improvements, Beneficiary is not and shall not be deemed to be:

(a) A “mortgagee in possession” for any purpose; or

(b) Responsible for performing any of the obligations of the Grantor as lessor under any lease; or

(c) Responsible for any waste committed by lessees or any other parties, any dangerous or defective condition of the Property, or any negligence in the management, upkeep, repair or control of the Property; or

(d) Liable in any manner for the Property or the use, occupancy, enjoyment or operation of all or any part of it.

2.7 Leasing. Grantor shall not accept any deposit or prepayment of Rents for any rental period exceeding one (1) month without Beneficiary’s express prior written consent. Grantor shall not lease the Property or any part of it except strictly in accordance with the Loan Agreement. Grantor shall apply all Rents received by it in the manner required by the Loan Agreement.

3. Grant of Security Interest.

3.1 Security Agreement. The parties intend for this Deed of Trust to create a lien on the Property, and an absolute assignment of the Rents and Leases, all in favor of Beneficiary. The parties acknowledge that some of the Property and some of the Rents and Leases may be determined under applicable law to be personal property or fixtures. To the extent that any Property, Rents, or Leases may be or be determined to be personal property, Grantor, as debtor, hereby grants to Beneficiary, as secured party, a security interest in all such Property, Rents, and Leases, to secure payment and performance of the Secured Obligations. This Deed of Trust constitutes a security agreement under the UCC, covering all such Property, Rents, and Leases. To the extent such Property, Rents, or Leases are not real property encumbered by the lien granted above, and are not absolutely assigned by the assignment set forth above, it is the intention of the parties that such Property, Rents, and/or Leases shall constitute “proceeds, products, offspring, rents, or profits” (as defined in and for the purposes of Section 552(b) of the United States Bankruptcy Code, as such section may be modified or supplemented) of the Land and Improvements.

3.2 Financing Statements; Authorization to File; Power of Attorney. Grantor hereby authorizes Beneficiary, at any time and from time to time, to file any initial financing statements,

amendments thereto, and continuation statements, with or without the signature of Grantor, as authorized by applicable law, as applicable to the Property or any part thereof. Grantor shall pay all fees and costs that Beneficiary may incur in filing such documents in public offices and in obtaining such record searches as Beneficiary may reasonably require and all other reasonable fees and costs Beneficiary incurs in connection with perfection of its security interests. For purposes of such filings, Grantor agrees to promptly furnish any information requested by Beneficiary. Grantor also ratifies its authorization for Beneficiary to have filed any like initial financing statements, amendments thereto, or continuation statements if filed prior to the date of this Deed of Trust. Grantor hereby irrevocably constitutes and appoints Beneficiary, with full power of substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in the place and stead of Grantor to execute in Grantor’s name any such documents and to otherwise carry out the purposes of this Section, to the extent that Grantor’s authorization above is not sufficient. Such power is deemed to be coupled with an interest, and is therefore irrevocable. If any financing statement or other document is filed in the records normally pertaining to personal property, that filing shall never be construed as in any way derogating from or impairing this Deed of Trust or the rights or obligations of the parties under it.

Everything used in connection with the Property and/or adapted for use therein and/or which is described or reflected in this Deed of Trust is, and at all times and for all purposes and in all proceedings both legal or equitable shall be regarded as part of the real estate encumbered by this Deed of Trust regardless of whether (i) any such item is physically attached to the Improvements, (ii) serial numbers are used for the better identification of certain equipment items capable of being thus identified in a recital contained herein or in any list filed with Beneficiary or (iii) any such item is referred to or reflected in any such Financing Statement so filed at any time. Similarly, the mention in any such Financing Statement of (1) rights in or to the proceeds of any fire and/or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for lessening of value, or (3) Grantor’s interest as lessor in any present or future lease or rights to income growing out of the use and/or occupancy of the property conveyed hereby, whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Beneficiary as determined by this instrument or impugning the priority of Beneficiary’s lien granted hereby or by any other recorded document. Such mention in the Financing Statement is declared to be solely for the protection of Beneficiary in the event any court or judge shall at any time hold, with respect to the matters set forth in the foregoing clauses (1), (2), and (3), that notice of Beneficiary’s priority of interest is required in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivisions or entity of the federal government, shall be filed in the UCC records.

4. Effective as a Financing Statement; Fixture Filing and Construction Mortgage.

This Deed of Trust constitutes a financing statement filed as a fixture filing under the applicable section of the UCC, covering any Property which now is or later may become fixtures attached to the Land or Improvements. This Deed of Trust shall also be effective as a financing statement covering as-extracted collateral (including oil and gas), accounts, and general intangibles under the UCC, which will be financed at the wellhead or minehead of the wells or mines located on the Land and is to be filed of record in the real estate records of each county where any part of the Land is situated. This Deed of Trust shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office. The mailing address of Grantor is the address of Grantor set forth at the end of this Deed of Trust, and the address of Beneficiary from which information concerning the security interests hereunder may be obtained is the address of Beneficiary set forth at the end of this Deed of Trust. A carbon, photographic, or other reproduction of this Deed of Trust or of any financing statement related to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. This Deed of Trust is also a “Construction Mortgage,” as defined in the UCC to the extent it secures an obligation incurred for the construction of an improvement on the Land (including the acquisition cost of the Land), or the refinancing of an obligation incurred for the construction of an improvement on the Land (including the acquisition cost of the Land).

5. Rights and Duties of the Parties.

5.1 Representations and Warranties. Grantor represents and warrants that, except as previously disclosed to Beneficiary in writing:

(a) Grantor lawfully, possesses and holds a leasehold interest in the Land in accordance with the Ground Lease, and has not encumbered or assigned any of its right title or interest under, in and to the Ground Lease or any of the lessee’s rights thereunder; and Grantor and its successors and assigns warrant and shall forever defend title to the leasehold interest in the Land, subject only to such exceptions and conditions to title as Beneficiary has approved in its sole and absolute discretion (the “Permitted Title Exceptions”) (and any later such encumbrances approved by Beneficiary in writing), unto Trustee and Trustee’s successors and assigns against the claims and demands of all persons claiming or to claim the same or any part thereof;

(b) Grantor has the full and unlimited power, right, and authority to encumber the Property and assign the Rents;

(c) This Deed of Trust creates a first and prior lien on the Property free and clear of all liens, encumbrances, and claims whatsoever, subject only to the Permitted Title Exceptions;

(d) The Property includes all property and rights which may be reasonably necessary or desirable to promote the present and any reasonable future beneficial use and enjoyment of the Land and the Improvements;

(e) Grantor owns any Property which is personal property free and clear of all liens, encumbrances, and claims whatsoever, as well as any security agreements, reservations of title, or conditional sales contracts, and there is no presently effective financing statement affecting such personal property on file in any public office nor is any of such personal property subject to a security interest having priority over Beneficiary’s priority to the same except with respect to junior indebtedness, if any, approved and permitted by Beneficiary as a Permitted Title Exception and Grantor has the right to convey and encumber such property and will warrant and defend such property against the claims of all persons and parties;

(f) The Property has frontage on and direct access for ingress and egress to publicly dedicated streets;

(g) Electricity (and gas, if available), water facilities, sewer facilities and any other necessary utilities are, and at all times hereafter shall be, available in sufficient capacity to service the Property satisfactorily and any easements necessary to the furnishing of such utilities are or will be granted and duly recorded; and

(h) Grantor’s exact legal name, and, if Grantor is not an individual, organizational identification number (if any assigned by Grantor’s state of incorporation or organization) are correctly set forth in this Deed of Trust. If Grantor is an individual, Grantor’s principal residence has for the preceding four months been and will continue to be (unless Grantor notifies Beneficiary of any change in writing at least thirty (30) days prior to the date of such change) the address of the principal residence of Grantor as set forth at the end of this Deed of Trust. If Grantor is not an individual, Grantor is an organization of the type and (if not an unregistered entity) is incorporated in or organized under the laws of the state specified in the introductory paragraph of this Deed of Trust. If Grantor is an unregistered entity (including a general partnership), it is organized under the laws of the state specified in the introductory paragraph of this Deed of Trust. Grantor’s principal place of business and chief executive office and the place where it keeps its Books and Records has for the preceding four months (or, if less, the entire period of the existence of Grantor) been

and will continue to be (unless Grantor notifies Beneficiary of any change in writing at least thirty (30) days prior to the date of such change) the address of Grantor set forth at the end of this Deed of Trust.

5.2 Taxes and Assessments.

(a) Grantor shall pay prior to delinquency all taxes, levies, charges and assessments, including assessments on appurtenant water stock (individually and collectively, an “Imposition”), imposed by any public or quasi-public authority or utility company that are (or if not paid, may become) a lien on all or part of the Property or any interest in it, or that, if not paid, may cause any decrease in the value of the Property or any part of it. If any Imposition becomes delinquent, Beneficiary may require Grantor to present evidence that it has been paid in full, on ten (10) days’ written notice by Beneficiary to Grantor. Notwithstanding the foregoing provisions of this Section, Grantor may, at its expense, contest the validity or application of any Imposition by appropriate legal proceedings promptly initiated and conducted in good faith and with due diligence, provided that (i) Beneficiary is reasonably satisfied that neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, or lost as a result of such contest, and (ii) Grantor shall have posted a bond or furnished other security as may be reasonably required from time to time by Beneficiary; and provided further that if at any time payment of any obligation imposed upon Grantor by this Section becomes necessary to prevent a lien foreclosure sale or forfeiture or loss of the Property, or any part thereof, then Grantor must pay the same in sufficient time to prevent such sale, forfeiture, or loss.

(b) Following an Event of Default, Grantor shall, upon demand of Beneficiary, pay monthly to Beneficiary an amount sufficient, as estimated by Beneficiary, to accumulate the sum required to pay thirty (30) days prior to the due date thereof the annual cost of any real property taxes and any assessments or other Impositions and the estimated next premiums for hazard and other required insurance on the Property. These funds will be held by Beneficiary (and may be commingled with other funds of Beneficiary) without interest and will be released to Grantor for payment of Impositions and insurance premiums, or directly applied to such costs by Beneficiary, as Beneficiary may elect.

(c) Notwithstanding anything to the contrary in subsection (b) above, if a property tax reserve account, taxes and insurance reserve account, or similar reserve for real property taxes is required pursuant to the terms of the Loan Agreement or other Loan Documents, then, if and at all such times as such reserve is required pursuant to the terms of the Loan Agreement, Grantor shall pay to Beneficiary the reserve deposits, including, if applicable, any initial reserve deposit and any monthly or periodic reserve deposits, as described in the Loan Agreement or other applicable Loan Document, and all terms and conditions set forth in therein related to such reserve shall apply and are herein incorporated by reference.

5.3 Performance of Secured Obligations. Grantor shall promptly pay and perform each Secured Obligation in accordance with its terms.

5.4 Liens, Charges, and Encumbrances. Grantor shall immediately discharge any lien on the Property that Beneficiary has not expressly consented to in writing. Grantor shall pay when due each obligation secured by or reducible to a lien, charge, or encumbrance which now does or later may encumber all or part of the Property or any interest in it, whether the lien, charge, or encumbrance is or would be senior or subordinate to this Deed of Trust. This Section is subject to any right granted to Grantor in the Loan Agreement to contest in good faith claims and liens for labor done and materials and services furnished in connection with construction of the Improvements. Grantor shall pay, perform and observe all obligations under any Permitted Title Exceptions, and will not modify or permit modification of them without Beneficiary’s prior written consent.

5.5 Damages and Insurance and Condemnation Proceeds.

(a) Grantor hereby absolutely and irrevocably assigns to Beneficiary, and authorizes the payor to pay to Beneficiary, the following claims, causes of action, awards, payments, and rights to payment (whether awarded or to be awarded or which may be awarded because of judicial action, private action, settlement, or compromise):

(i) All awards of damages and all other compensation payable directly or indirectly because of a condemnation, proposed condemnation or taking for public or private use which affects all or part of the Property or any interest in it; and

(ii) All other awards, claims, and causes of action, arising out of any warranty affecting all or any part of the Property, or for damage or injury to or decrease in value of all or part of the Property or any interest in it; and

(iii) All proceeds of any insurance policies payable because of loss sustained to all or part of the Property, whether or not such insurance policies are required by Beneficiary; and

(iv) All interest which may accrue on any of the foregoing.

(b) Grantor shall immediately notify Beneficiary in writing if:

(i) Any damage occurs or any injury or loss is sustained to all or any part of the Property, or any action or proceeding relating to any such damage, injury, or loss is commenced; or

(ii) Any offer is made, or any action or proceeding is threatened or commenced, which relates to any actual or proposed condemnation or taking of all or part of the Property.

(c) If Beneficiary chooses to do so, Beneficiary may in its own name appear in or prosecute any action or proceeding to enforce any cause of action based on warranty, or for damage, injury, or loss to all or part of the Property, and Beneficiary may make any compromise or settlement of the action or proceeding with respect to its rights and interests. Beneficiary, if it so chooses, may participate in any action or proceeding relating to condemnation or taking of all or part of the Property, and may join Grantor in adjusting any loss covered by insurance, and in connection therewith, Beneficiary shall have the right to be represented by counsel of its choice.

(d) All proceeds of these assigned claims and all other property and rights which Grantor may receive or be entitled to shall be paid to Beneficiary. In each instance, Beneficiary shall apply such proceeds first toward reimbursement of all of Beneficiary’s costs and expenses of recovering the proceeds, including reasonable attorneys’ fees. If, in any instance, each and all of the following conditions are satisfied in Beneficiary’s reasonable judgment, Beneficiary shall permit Grantor to use the balance of such proceeds (the “Net Claims Proceeds”) to pay costs of repairing or reconstructing the Property in the manner described below:

(i) The plans and specifications, cost breakdown, construction contract, construction schedule, contractor and payment and performance bond for the work of repair or reconstruction shall all be reasonably acceptable to Beneficiary; and

(ii) Beneficiary shall receive evidence reasonably satisfactory to it that after repair or reconstruction, the Property would be at least as valuable as it was immediately before the damage or condemnation occurred, and in this regard and notwithstanding any other

provisions of the Loan Documents, Beneficiary may order an appraisal from an appraiser acceptable to Beneficiary, the cost of which shall be borne by Grantor; and

(iii) The Net Claims Proceeds (together with the net proceeds of any rental interruption insurance and reasonably projected rental receipts during the repair or reconstruction period) shall be sufficient in Beneficiary’s determination to pay for the total cost of repair or reconstruction, including all associated development costs and interest and other sums projected to be payable on the Secured Obligations until the repair or reconstruction is complete; or Grantor shall provide its own funds in an amount equal to the difference between the Net Claims Proceeds and a reasonable estimate, made by Grantor and found acceptable by Beneficiary, of the total cost of repair or reconstruction; and

(iv) Unless otherwise agreed to by Beneficiary, Beneficiary shall receive evidence satisfactory to it that, after the repair or reconstruction is complete, (1) all non-residential leases acceptable to Beneficiary will continue (or a replacement therefor reasonably satisfactory to Beneficiary immediately commences); and (2) the Property will continue to operate in substantially the same manner, and will generate the same debt service coverage as immediately before the damage or condemnation occurred; and

(v) Beneficiary shall be satisfied that the repair or reconstruction can be completed prior to the maturity date of the Note; and

(vi) No default or Event of Default (as defined in the applicable document, subject to applicable notice and cure periods) shall have occurred and be continuing under this Deed of Trust, the Note, the Loan Agreement or any other Loan Document.

If Beneficiary finds that such conditions have been met, Beneficiary shall hold the Net Claims Proceeds, and any funds which Grantor is required to provide, in an account and shall disburse them to Grantor to pay costs of repair or reconstruction upon presentation of evidence reasonably satisfactory to Beneficiary that repair or reconstruction has been completed satisfactorily and lien-free, including partial progress payments of Net Claims Proceeds from time to time, in accordance with a cost breakdown approved by Beneficiary and the same procedures and subject to the same conditions as are set forth in the Loan Agreement for Loan disbursements. However, if Beneficiary finds that one or more of such conditions have not been satisfied, Beneficiary may apply the Net Claims Proceeds to pay or prepay some or all of the Secured Obligations in such order and proportions as Beneficiary may determine, all without affecting the lien and security interest created by this Deed of Trust.

(e) Notwithstanding the foregoing, in the event any governmental agency or authority shall require, or commence any proceedings for, the demolition of any buildings or structures comprising a substantial part of the Improvements, or shall commence any proceedings to condemn or otherwise take pursuant to the power of eminent domain a material portion of the Land or Improvements, Beneficiary may, at its option, declare the Secured Obligations to be immediately due and payable and apply any condemnation awards or proceeds to the Secured Obligations.

(f) Grantor hereby specifically, unconditionally, and irrevocably waives all rights of a property owner granted under any applicable law that provides for allocation of condemnation proceeds between a property owner and a lienholder, and any other law or successor statute of similar import.

5.6 Surety Bond Proceeds.

(a) Grantor hereby absolutely and irrevocably assigns to Beneficiary, and authorizes the payor to pay to Beneficiary, all payments, rights to payment, and all other compensation payable, directly or indirectly, under any payment, performance, or other bond (each a “Surety Bond”) related to, or issued in connection with, the construction of any Improvements or the performance of any acts, related to the Property or any interest in it, whether or not such Surety Bonds are required by Beneficiary.

(b) Grantor shall immediately notify Beneficiary in writing of:

(i) Any threatened or actual default or breach of any obligation under any Surety Bond; or

(ii) Any action or inaction, including a breach by any contractor under their contract (if applicable), which would give rise to the obligation of the payor/surety to pay any sums or perform any acts pursuant to the terms of any Surety Bond.

(c) If Beneficiary chooses to do so, Beneficiary may in its own name appear in or prosecute any action or proceeding to enforce any cause of action based on any claim under a Surety Bond, and Beneficiary may make any compromise or settlement of any such action or proceeding.

(d) All proceeds of these assigned payments, rights to payment, and compensation payable, directly or indirectly, under any Surety Bond which Grantor may receive or be entitled to, shall be paid to Beneficiary. In each instance, Beneficiary shall apply such proceeds first toward reimbursement of all of Beneficiary’s costs and expenses of recovering the proceeds, including reasonable attorneys’ fees. If Grantor desires to use the balance of such proceeds (the “Net Bond Proceeds”) to pay the costs of completing all or a part of the construction of certain of the Improvements, and each and all of the following conditions are satisfied in Beneficiary’s reasonable judgment, Beneficiary shall permit Grantor to pay such costs of construction, in the manner described below:

(i) The plans and specifications, cost breakdown, construction contract (including any replacement contract), construction schedule (including all revisions thereto), contractor (including any replacement contractor), and, if required by Beneficiary, any replacement payment and performance bond for the construction work, shall all be acceptable to Beneficiary; and

(ii) To the extent allowed pursuant to the terms of the Surety Bond, Beneficiary shall have approved any replacement contractor(s); and

(iii) Beneficiary shall receive evidence satisfactory to it that after the construction is complete, the Property would be at least as valuable as it would have been if completed pursuant to the original construction contract, and in this regard and notwithstanding any other provisions of the Loan Documents, Beneficiary may order an appraisal from an appraiser acceptable to Beneficiary, the cost of which shall be borne by Grantor; and

(iv) The Net Bond Proceeds shall be sufficient in Beneficiary’s determination to pay for the total cost of the applicable construction, including all associated development costs and interest and other sums projected to be payable on the Secured Obligations until the applicable construction is complete; or Grantor shall provide its own funds in an amount equal to the difference between the Net Bond Proceeds and a reasonable estimate, made by Grantor and found acceptable by Beneficiary, of the total cost of such construction; and

(v) Beneficiary shall be satisfied that the repair or reconstruction can be completed prior to the maturity date of the Note; and

If Beneficiary finds that such conditions have been met, Beneficiary shall hold the Net Bond Proceeds, and any funds which Grantor is required to provide, in a non-interest-bearing account and shall disburse them to Grantor to pay costs of construction upon presentation of evidence reasonably satisfactory to Beneficiary that the construction has been completed satisfactorily and lien-free, including partial progress payments of Net Bond Proceeds from time to time, in accordance with a cost breakdown approved by Beneficiary and the same procedures and subject to the same conditions, as are set forth in the Loan Agreement for Loan disbursements. However, if Beneficiary finds that one or more of such conditions have not been satisfied, Beneficiary may apply the Net Bond Proceeds to pay or prepay some or all of the Secured Obligations in such order and proportions as Beneficiary may choose, all without affecting the lien and security interest created by this Deed of Trust.

(e) Notwithstanding anything herein to the contrary, to the extent that any of the terms of this Section conflict with the terms of any Surety Bond which has been approved in writing by Beneficiary, the terms of such Surety Bond shall control.

5.7 Maintenance and Preservation of Property.

(a) Grantor shall insure the Property as required by the Loan Agreement and keep the Property in good condition and repair.

(b) Grantor shall not remove or demolish the Property or any part of it, or alter, restore or add to the Property, or initiate or allow any change in any zoning or other land use classification which affects the Property or any part of it, except as permitted or required by the Loan Documents or with Beneficiary’s express prior written consent in each instance.

(c) If all or part of the Property becomes damaged or destroyed, Grantor shall promptly and completely repair and/or restore the Property in a good and workmanlike manner in accordance with sound building practices and notwithstanding the unavailability (for whatever reason) of insurance proceeds from any Property insurer; provided, however this subsection is subject to the provisions of Sections 5.5 and 5.6 above.

(d) Grantor shall not commit or allow any act upon or use of the Property which would violate: (i) any applicable law or order of any governmental authority, whether now existing or later to be enacted and whether foreseen or unforeseen; or (ii) any public or private covenant, condition, restriction or equitable servitude affecting the Property. Grantor shall not bring or keep any article on the Property or cause or allow any condition to exist on it, if that could invalidate or would be prohibited by any insurance coverage required to be maintained by Grantor on the Property or any part of it under the Loan Documents.

(e) Grantor shall not commit or allow waste of the Property, including those acts or omissions characterized under the Loan Agreement as waste that arise out of Hazardous Substances (as such term is defined in the Loan Agreement).

(f) Grantor shall perform all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value and utility.

(g) Grantor shall observe and perform all obligations of Grantor under the Ground Lease, and any subleases or agreements related thereto, and shall refrain from taking any actions prohibited by any lease or leases, and Grantor shall preserve and protect such leasehold estate and its value.

(h) If any easement or right of way appurtenant to, or recorded agreement which benefits, the Property exists or is hereafter entered into, Grantor shall perform its obligations and duties under such easement, right of way, or agreement, and shall take all such actions as may be necessary to prevent such easement, right of way, or agreement from being terminated for Grantor’s non-performance. Grantor irrevocably appoints Beneficiary its attorney-in-fact, with full power of substitution, for the purpose of performing any act to be performed by Grantor under any such easement, right of way, or agreement, such power deemed to be coupled with an interest and therefore irrevocable.

5.8 Trustee’s Acceptance of Trust. Trustee accepts this trust when this Deed of Trust is recorded.

5.9 Releases, Extensions, Modifications, and Additional Security.

(a) From time to time, Beneficiary may perform any of the following acts without incurring any liability or giving notice to any person:

(i) Release any person liable for payment of any Secured Obligation; or

(ii) Extend the time for payment, or otherwise alter the terms of payment, of any Secured Obligation; or

(iii) Accept additional real or personal property of any kind as security for any Secured Obligation, whether evidenced by deeds of trust, mortgages, security agreements or any other instruments of security; or

(iv) Alter, substitute or release any property securing the Secured Obligations.

(b) From time to time, when requested to do so by Beneficiary in writing, Trustee may perform any of the following acts without incurring any liability or giving notice to any person:

(i) Consent to the making of any plat or map of the Property or any part of it; or

(ii) Join in granting any easement or creating any restriction affecting the Property; or

(iii) Join in any subordination or other agreement affecting this Deed of Trust or the lien of it; or

(iv) Reconvey the Property or any part of it without any warranty.

5.10 Reconveyance; Release. When all of the Secured Obligations have been paid and performed in full, and no further commitment to extend credit continues under the Secured Obligations, then (except to the extent expressly provided herein with respect to the survival of any indemnifications, representations, warranties, and other rights which are to continue following the release or reconveyance hereof) Trustee shall reconvey the Property from the liens, security interests, conveyances and assignments

herein, and this Deed of Trust and all promissory notes and instruments evidencing the Secured Obligations shall be returned to the appropriate party or parties. Any such reconveyance shall be without warranty to the person or persons legally entitled to it. Such person or persons shall pay any costs of recordation. Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance.

5.11 Compensation, Exculpation, Indemnification.

(a) Grantor agrees to pay fees in the maximum amounts legally permitted, or reasonable fees as may be charged by Beneficiary and Trustee when the law provides no maximum limit, for any services that Beneficiary or Trustee may render in connection with this Deed of Trust, including Beneficiary’s providing a statement of the Secured Obligations or Trustee’s rendering of services in connection with a release or reconveyance (full or partial). Grantor shall also pay or reimburse all of Beneficiary’s and Trustee’s costs and expenses which may be incurred in rendering any such services. Grantor further agrees to pay or reimburse Beneficiary for all costs, expenses, and other advances which may be incurred or made by Beneficiary or Trustee in any efforts to enforce any terms of this Deed of Trust, including the exercise of any rights or remedies afforded to Beneficiary or Trustee or both of them under the remedies section below, whether any lawsuit is filed or not, or in defending any action or proceeding arising under or relating to this Deed of Trust, including reasonable attorneys’ fees and other legal costs (which shall include reimbursement for the allocated costs of in-house counsel used by Beneficiary and/or Trustee to the extent not prohibited by law), costs of any Trustee’s Sale (as described below), any judicial foreclosure of this Deed of Trust, and any cost of evidence of title. If Beneficiary chooses to dispose of Property through more than one Trustee’s Sale or judicial foreclosure, Grantor shall pay all costs, expenses, or other advances that may be incurred or made by Trustee or Beneficiary in each of such Trustee’s Sales or judicial foreclosure actions.

(b) Beneficiary shall not be directly or indirectly liable to Grantor or any other person as a consequence of any of the following:

(i) Beneficiary’s exercise of or failure to exercise any rights, remedies or powers granted to Beneficiary in this Deed of Trust;

(ii) Beneficiary’s failure or refusal to perform or discharge any obligation or liability of Grantor under any agreement related to the Property or under this Deed of Trust;

(iii) Any waste committed by lessees of the Property or any other parties, or any dangerous or defective condition of the Property; or

(iv) Any loss sustained by Grantor or any third party resulting from Beneficiary’s failure to lease the Property, or from any other act or omission of Beneficiary in operating or managing the Property, after an Event of Default, unless the loss is caused solely by the gross negligence or willful misconduct of Beneficiary.

Grantor hereby expressly waives and releases all liability of the types described above, and agrees that no such liability shall be asserted against or imposed upon Beneficiary.

(c) Grantor agrees to indemnify, defend, and hold Trustee and Beneficiary harmless, for, from, and against, and reimburse them for, all losses, damages, liabilities, claims, causes of action, judgments, penalties, court costs, reasonable attorneys’ fees and other legal expenses and expenses of professional consultants and experts, cost of evidence of title, cost of evidence of value, and other costs and expenses, including the settlement of any such matter, excepting those arising out of, or resulting, solely from

Beneficiary’s or Trustee’s, as the case may be, gross negligence or willful misconduct, which either may suffer or incur:

(i) In performing any act required or permitted by this Deed of Trust or any of the other Loan Documents or by law;

(ii) Because of any failure of Grantor to perform any of Grantor’s obligations;

(iii) Because of any alleged obligation of or undertaking by Beneficiary to perform or discharge any of the representations, warranties, conditions, covenants, or other obligations in any document relating to the Property other than the Loan Documents.

This agreement by Grantor to indemnify Trustee and Beneficiary shall survive payoff, termination, or the release and cancellation of any or all of the Secured Obligations, and the full or partial release and/or reconveyance of this Deed of Trust.

(d) Grantor shall pay all obligations to pay money arising under this Section immediately upon written demand by Trustee or Beneficiary. Each such obligation shall be added to, and considered to be part of, the principal of the Note, and shall bear interest from the date the obligation arises at the Default Rate (as such term may be defined in the Note), or if no Default Rate is specified, at five percent (5%) in excess of the Stated Rate. For purposes hereof, “Stated Rate” means the stated interest rate in effect from time to time under the Note and/or other debt instrument evidencing the Loan; provided that if more than one rate of interest is in effect, the highest rate shall be used.

5.12 Defense and Notice of Claims and Actions. At Grantor’s sole expense, Grantor shall protect, preserve and defend the Property and title to and right of possession of the Property, and the security of this Deed of Trust and the rights and powers of Beneficiary and Trustee created under it, against all adverse claims. Grantor shall give Beneficiary and Trustee prompt notice in writing if any claim is asserted which does or could affect any of such matters, or if any action or proceeding is commenced which alleges or relates to any such claim.

5.13 Subrogation. Beneficiary shall be subrogated to the liens of all encumbrances affecting the Property, whether released or not, which are discharged in whole or in part by Beneficiary in accordance with this Deed of Trust or with the proceeds of any loan secured by this Deed of Trust.

5.14 Site Visits, Observation and Testing. Beneficiary and its agents and representatives and the other Indemnified Parties (as such term is defined in the Loan Agreement), and their agents and representatives, shall have the right at any reasonable time to enter and visit the Property for the purposes of observing the Property, performing appraisals, taking and removing soil or groundwater samples, and conducting tests on any part of the Property. The Indemnified Parties have no duty, however, to visit or observe the Property or to conduct tests, and no site visit, observation, or testing by any Indemnified Party shall impose any liability on any Indemnified Party. In no event shall any site visit, observation, or testing by any Indemnified Party be a representation that Hazardous Substances (as such term is defined in the Loan Agreement) are or are not present in, on, or under the Property, or that there has been or shall be compliance with any law, regulation, or ordinance pertaining to Hazardous Substances or any other applicable governmental law. Neither Grantor nor any other party is entitled to rely on any site visit, observation, or testing by any Indemnified Party. The Indemnified Parties owe no duty of care to protect Grantor or any other party against, or to inform Grantor or any other party of, any Hazardous Substances or any other adverse condition affecting the Property. The Indemnified Parties may in their discretion disclose to Grantor or any other party any report or findings made as a result of, or in connection with, any site visit,

observation, or testing by the Indemnified Parties. Grantor understands and agrees that the Indemnified Parties make no representation or warranty to Grantor or any other party regarding the truth, accuracy, or completeness of any such report or findings that may be disclosed. Grantor also understands that, depending on the results of any site visit, observation, or testing by any Indemnified Party which are disclosed to Grantor, Grantor may have a legal obligation to notify one or more environmental agencies of the results. Any Indemnified Party shall give Grantor reasonable notice before entering the Property. Such Indemnified Party shall make reasonable efforts to avoid interfering with Grantor’s use of the Property in exercising any rights provided in this Section. In connection with any such site visit, observation, or testing, Grantor shall have any rights with respect to the release and/or disclosure of environmental reports as set forth in the Loan Agreement.

5.15 Notice of Change. Grantor will not cause or permit any change to be made in (a) its name, identity, or corporate, partnership, limited liability company, or other entity structure, (b) its jurisdiction of organization (c) its organizational identification number, (d) its place of business or, if more than one, its chief executive office, (e) its mailing address, or (f) any change in the location of any Property, unless Grantor shall have notified Beneficiary in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action required by Beneficiary for the purpose of further perfecting or protecting the lien and security interest of Beneficiary in the Property. Unless otherwise approved by Beneficiary in writing, all Property that consists of personal property (other than Books and Records) will be located on the Land and all Books and Records will be located at Grantor’s place of business or chief executive office if Grantor has more than one place of business.

5.16 Further Assurances. Grantor shall, promptly on request of Beneficiary, (a) correct any defect, error or omission which may be discovered in the contents, execution, or acknowledgment of this Deed of Trust or any other Loan Document; (b) execute, authenticate, acknowledge, deliver, procure, and record and/or file and/or authorize the filing of such further documents (including, without limitation, further deeds of trust, security agreements, financing statements, financing statement amendments, continuation statements, and assignments of rents or leases) and do such further acts as may be necessary, desirable, or proper (i) to carry out more effectively the purposes of this Deed of Trust and the other Loan Documents, (ii) to more fully identify and subject to the liens and security interests hereof any property intended to be covered hereby (including specifically, but without limitation, any renewals, additions, substitutions, replacements, or appurtenances to the Property), or (iii) as deemed advisable by Beneficiary to protect the lien or security interest hereunder against the rights or interests of third persons; and (c) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts as may be necessary, desirable or proper to enable Beneficiary to comply with the requirements or requests of any agency having jurisdiction over Beneficiary or any examiners of such agencies with respect to the Secured Obligations, the Grantor, or the Property. Grantor shall pay all costs connected with any of the foregoing within five (5) days after the written demand by Trustee or Beneficiary. If not paid when due, such costs shall be added to, and considered to be part of, the principal of the Note, and shall bear interest from the date of such written demand at the Default Rate (as such term may be defined in the Note), or if no Default Rate is specified, at three percent (3%) in excess of the Stated Rate.

5.17 Leasehold. Grantor agrees not to amend, modify, extend, renew or terminate the leasehold estate which constitutes a portion of the Property, any interest therein, or the lease granting such leasehold estate without the prior written consent of Beneficiary, which consent may be withheld by Beneficiary in its absolute and sole discretion. Consent to one amendment, modification, extension or renewal shall not be deemed to be a waiver of the right to require consent to other, future or successive amendments, modifications, extensions or renewals. Grantor agrees to perform all obligations and agreements under said leasehold and shall not take any action or omit to take any action which would effect or permit the termination of said leasehold. Grantor agrees to promptly notify Beneficiary in writing with respect to any default or alleged default by any party thereto and to promptly deliver to Beneficiary

copies of all notices, demands, complaints or other communications received or given by Grantor with respect to any such default or alleged default. Beneficiary shall have the option to cure any such default and to perform any or all of Grantor’s obligations thereunder. All sums expended by Beneficiary in curing any such default shall be secured hereby and shall be immediately due and payable without demand or notice and shall bear interest from date of expenditure at the Default Rate.

5.18 Ground Lease - Grantor Representations, Warranties, and Agreements. Grantor hereby represents, warrants, covenants and agrees that:

(a) This Deed of Trust is duly executed and delivered in conformity with, and does not violate or breach any term of covenant of, the Ground Lease.

(b) Grantor will promptly pay, when due and payable, the net rent, additional rent, taxes and all other sums and charges mentioned in and made payable pursuant to the Ground Lease.

(c) Grantor will promptly perform and observe all of the terms, covenants and conditions required to be performed and observed by Grantor as lessee under the Ground Lease, within the period (exclusive of grace periods) provided in the Ground Lease, or such lesser periods (exclusive of grace periods) as are provided in this Deed of Trust, and will do all things necessary to preserve and to keep unimpaired its rights under the Ground Lease. Grantor specifically acknowledges Beneficiary’s right, while any default by Grantor under any Ground Lease remains uncured, to perform the defaulted obligations and take all other actions which Beneficiary reasonably deems necessary to protect its interests with respect thereto, and Grantor hereby irrevocably appoints Beneficiary its true and lawful attorney-in-fact in its name or otherwise to execute all documents, and perform all other acts, which Beneficiary reasonably deems necessary to preserve its or Grantor’s rights with respect to any Leasehold. Such appointment is deemed coupled with an interest.

(d) Grantor will promptly notify Beneficiary in writing of any default (including the expiration of all notice and cure periods) by Grantor in the performance or observance of any of the terms, covenants or conditions on the part of Grantor to be performed or observed under the Ground Lease.

(e) Grantor will (i) promptly notify Beneficiary in writing of the receipt by Grantor of any notice from the Ground Lessor and of any notice noting or claiming any default by Grantor in the performance or observance of any of the terms, covenants or conditions on the part of Grantor to be performed or observed under the Ground Lease; (ii) promptly notify Beneficiary in writing of the receipt by Grantor of any notice from the Ground Lessor to Grantor of termination of the Ground Lease pursuant to the provisions of the Ground Lease; (iii) promptly cause a copy of each such notice received by Grantor from the Ground Lease to be delivered to Beneficiary; provided, however, that no such delivery by Grantor to Beneficiary of any such notices shall be deemed to waive, release, or modify any obligation of the Ground Lessor to separately provide such notice to Beneficiary pursuant to the terms of the Ground Lease; and (iv) will promptly notify Beneficiary in writing of any default by the Ground Lessor in the performance or observance of any of the terms, covenants or conditions on the part of the Ground Lessor to be performed or observed.

(f) Grantor will promptly notify Beneficiary in writing of all arbitration or other proceedings regarding the Property or the Ground Lease. Beneficiary shall have the right to participate in any such arbitration proceedings in association with Grantor or on its own behalf as an interested party and no determination made in such proceeding or settlement or agreement in connection therewith shall be binding upon Beneficiary unless and until Beneficiary has participated in such proceeding and/or consented to such settlement or agreement.

(g) Grantor will not, without the prior written consent of Beneficiary (which may be granted or withheld in the sole and absolute discretion of Beneficiary), terminate, materially modify or surrender or suffer or permit any termination, material modification or surrender of the Ground Lease.

(h) Grantor will, within thirty (30) days after written demand from Beneficiary, obtain from the Ground Lessor and deliver to Beneficiary a certificate stating that such Ground Lease is in full force and effect, is unmodified, that no notice of termination thereon has been served on Grantor, stating that no default or event which with notice or lapse of time (or both) would become a default is existing under the Ground Lease (or specifying the nature of any defaults or events which with notice or lapse of time, or both, would become a default under the Ground Lease), stating the date to which net rent has been paid, and containing such other statements and representations as may be requested by Beneficiary.

(i) Grantor will furnish to Beneficiary, within fifteen (15) days after request by Beneficiary, proof of payment of all items that are required to be paid by Grantor pursuant to the Ground Lease and proof of payment which is required to be given to the Ground Lessor.

(j) Grantor shall not consent to any waiver of Ground Lessor’s obligations under the Ground Lease, or any material modification or cancellation of any provision of the Ground Lease nor to the subordination of the Ground Lease to any mortgage of the fee interest of the Ground Lessor, except as expressly provided in this Deed of Trust or a writing signed by Beneficiary.

(k) Grantor shall execute and deliver, on request of Beneficiary, such instruments as Beneficiary may deem useful or require to permit Beneficiary to cure any default under the Ground Lease or permit Beneficiary to take such other action as Beneficiary considers desirable to cure or remedy the matter in default and preserve the interest of Beneficiary in the Premises.

(I) Grantor agrees and acknowledges that, to the extent any provision of this Deed of Trust conflicts with any term or condition of the Ground Lease, the terms of this Deed of Trust shall control.

(m) Grantor shall not subordinate the Ground Lease or any of its leasehold estate thereunder to any deed of trust or other encumbrance of, or lien on, any interest in the real property subject to the Ground Lease without the prior written consent of Beneficiary. Any such subordination without such consent shall, at Beneficiary’s option, be void.

(n) Grantor shall exercise any option or right to renew or extend the term of the Ground Lease at least six (6) months prior to the date of termination (or if later, then the earliest date for such exercise provided in the Ground Lease) of any such option, or right, shall give immediate written notice thereof to Beneficiary, and shall execute, deliver and record any documents requested by Beneficiary to evidence the lien of this Deed of Trust on such extended or renewed lease term. If Grantor fails to exercise any such option or right as required herein, Beneficiary may exercise the option or right as Grantor’s agent and attorney-in-fact pursuant to this Deed of Trust, or in Beneficiary’s own name or in the name of and on behalf of a nominee of Beneficiary, as Beneficiary chooses in its absolute discretion. Such appointment is deemed coupled with an interest.

(o) Without limiting the provisions of this Deed of Trust, Grantor hereby specifically assigns to Beneficiary, as security for the Secured Obligations, all prepaid rents and security deposits and all other security which the Ground Lessor under the Ground Lease holds for the performance of Grantor’s obligations thereunder.

(p) Promptly upon demand by Beneficiary, Grantor shall use reasonable efforts to obtain from the Ground Lessor under the Ground Lease and furnish to Beneficiary an estoppel of such

Ground Lessor stating the date through which rent has been paid, whether or not there are any defaults, and the specific nature of any claimed defaults.

(q) Grantor shall notify Beneficiary promptly in writing of any request by either party to any Ground Lease for arbitration, appraisal or other proceedings relating to the Ground Lease and of the institution of any such proceeding, and shall promptly deliver to Beneficiary a copy of all determinations in any such proceeding. Beneficiary shall have the right, but not the obligation, following written notice to Grantor, to participate in any such proceeding in association with Grantor or on its own behalf as an interested party. Grantor shall notify Beneficiary promptly in writing of the institution of any legal proceeding involving obligations under the Ground Lease, and Beneficiary may intervene in any such legal proceeding and be made a party, at its option. Grantor shall promptly provide Beneficiary with a copy of any decision rendered in connection with any such proceeding.

(r) To the extent not expressly prohibited by law, the price payable by Grantor or any other party in the exercise of the right of redemption, if any, from any sale under, or decree of foreclosure of, this Deed of Trust shall include all rents and other amounts paid and other sums advanced by Beneficiary on behalf of Grantor as the ground lessee under the Ground Lease.

(s) In addition to all other Events of Default described in this Deed of Trust, the occurrence of any of the following shall be an Event of Default hereunder:

(i) A breach or default by Grantor under any Lease (subject to any applicable notice and cure periods); or

(ii) The occurrence of any event or circumstance which gives the Ground Lessor under any Lease a right to terminate such Lease.

(t) As used in this Deed of Trust, the “Bankruptcy Code” shall mean 11 U.S.C. §§ 101 et seq., as modified and/or recodified from time to time. Notwithstanding anything to the contrary contained herein with respect to the Ground Lease:

(i) Grantor shall not treat the Ground Lease as terminated by any election made under Section 365(h) of the Bankruptcy Code of 1978 or under any similar law or right of any nature, and hereby assigns to Beneficiary any right to acquiesce in any such termination.

(ii) The lien of this Deed of Trust attaches to all of Grantor’s rights under Subsection 365(h) of the Bankruptcy Code, including without limitation any and all elections to be made thereunder, any and all rights under the Ground Lease which Grantor is entitled to retain pursuant to 11 U.S.C. § 365(h)(1)(A)(ii) in the event of a rejection under the Bankruptcy Code of such Lease by the Ground Lessor thereunder (or any trustee thereof), and any and all rights of offset under or as described in 11 U.S.C. § 365(h)(1)(B).

(iii) Grantor acknowledges and agrees that, as the beneficiary under this Deed of Trust and by operation of 11 U.S.C. §365(h)(1)(D), Beneficiary has, and until this Deed of Trust has been fully reconveyed continuously shall have, whether before or after any default under any of the Secured Obligations or the taking of any action to enforce any of Beneficiary’s rights and remedies under this Deed of Trust or any foreclosure sale hereunder, the complete, unfettered and exclusive right, in its sole and absolute discretion, to elect (the “365(h) Election”) whether (i) the Ground Lease that has been rejected under the Bankruptcy Code by the Ground Lessor thereunder (or any trustee therefor) shall be treated as terminated under 11 U.S.C. §365(h)(1)(A)(i), or (ii) the rights under such Ground Lease that are in or appurtenant to the real property, as described in 11 U.S.C. §365(h)(1)(A)(ii), should be retained pursuant to that

subsection. To the extent that, notwithstanding the preceding sentence and 11 U.S.C. §365(h)(1)(D), Grantor now or at any time in the future has any right to make, or to participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to the Ground Lease, Grantor hereby absolutely assigns and conveys to Beneficiary any and all such rights, and all of Grantor’s right, title, and interest therein, which may be used and exercised by Beneficiary completely, exclusively, and without any restriction whatsoever, in Beneficiary’s sole and absolute discretion, whether before or after any default upon any of the Secured Obligations, the taking of any action to enforce any of Beneficiary’s rights and remedies under this Deed of Trust, or any foreclosure sale hereunder. Grantor hereby unconditionally and irrevocably appoints Beneficiary as its attorney-in-fact to exercise Grantor’s right, if any, to make, or participate in or otherwise in any matter affect the making of, the 365(h) Election with respect to the Ground Lease. Such appointment shall be deemed coupled with an interest. Grantor shall not in any manner impede or interfere with any action taken by Beneficiary and, at the request of Beneficiary, Grantor shall take or join in the taking of any action to make, or participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to the Ground Lease, in such manner as Beneficiary determines in its sole and absolute discretion. Unless and until instructed to do so by Beneficiary (as determined by Beneficiary in its sole and absolute discretion), Grantor shall not take any action to make, or participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to the Ground Lease, including in particular, but without limitation, any election to treat the Ground Lease as terminated. Beneficiary shall have no obligation whatsoever to Grantor or any other person or entity in connection with the making of the 365(h) Election with respect to the Ground Lease or any instruction by Beneficiary to Grantor given, withheld or delayed in respect thereof, nor shall Beneficiary have any liability to Grantor or any other person or entity arising from any of the same.

(iv) As security for the Secured Obligations, Grantor hereby irrevocably assigns to Beneficiary all of Grantor’s rights to damages arising from any rejection by the Ground Lessor (or any trustee thereof) of the Ground Lease under the Bankruptcy Code. Beneficiary and Grantor shall proceed jointly or in the name of Grantor in respect of any claim or proceeding relating to the rejection of the Ground Lease, including without limitation the right to file and prosecute any proofs of claim, complaints, motions and other documents in any case in respect of such Ground Lessor under the Bankruptcy Code. This assignment shall continue in effect until all of the Secured Obligations have been satisfied in full. Any amounts received by Beneficiary or Grantor as damages arising from the rejection of the Ground Lease as aforesaid shall be applied first to all costs reasonably incurred by Beneficiary (including attorneys’ fees) in connection with this subsection (c) and then in accordance with other applicable provisions of this Deed of Trust.

(v) If, pursuant to the Bankruptcy Code, Grantor seeks to offset against the rent reserved in the Ground Lease the amount of any damages caused by the nonperformance of the Ground Lessor’s obligations after the rejection by the Ground Lessor (or any trustee thereof) of such Ground Lease, Grantor shall, prior to effecting such offset, notify Beneficiary in writing of its intent to do so, setting forth the amounts proposed to be offset and, in the event that Beneficiary objects, Grantor shall not effect any offset of the amounts to which Beneficiary objects. If Beneficiary fails to object within ten (10) days following receipt of such notice, Grantor may offset the amounts set forth in Grantor’s notice.

(vi) If any legal proceeding is commenced with respect to the Ground Lease in connection with any case under the Bankruptcy Code, Beneficiary and Grantor shall cooperatively conduct any such proceeding with counsel reasonably agreed upon between Grantor and Beneficiary. Grantor shall, upon demand, pay to Beneficiary all costs (including attorneys’ fees) reasonably incurred by Beneficiary in connection with any such proceeding.

(vii) Grantor shall immediately notify Beneficiary orally upon learning of any filing by or against the Ground Lessor under the Ground Lease of a petition under the Bankruptcy Code. Grantor shall thereafter promptly give written notice of such filing to Beneficiary, setting forth any information available to Grantor with respect to the date of such filing, the court in which such petition was filed, and the relief sought therein. Grantor shall promptly deliver to Beneficiary all notices, pleadings and other documents received by Grantor in connection with any such proceeding.

The generality of the provisions of this section relating to Ground Lease shall not be limited by other provisions of this Deed of Trust setting forth particular obligations of Grantor which are also required by Grantor as the lessee under the Ground Lease.

6. Accelerating Transfers, Default and Remedies.

6.1 Accelerating Transfers.

(a) “Accelerating Transfer” means any sale, contract to sell, conveyance, encumbrance, pledge, mortgage, lease not expressly permitted under this Deed of Trust or the Loan Agreement, or other transfer of all or any material part of the Property or any interest in it, whether voluntary, involuntary, by operation of law, or otherwise. If Grantor is a corporation, “Accelerating Transfer” also means any transfer or transfers of shares that would require the transferee (or group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to file a statement on Schedule 13D pursuant to Rule 13d-1(e) of the Exchange Act, provided, that in addition to being required to file a statement on Schedule 13D pursuant to Rule 13d-1(e), such transferee (or group as defined in Section 13d(3) of the Exchange Act) must possess, in the aggregate, more than fifty percent (50%) of the voting power or more than fifty percent (50%) of the direct or indirect beneficial ownership of Grantor. If Grantor is a partnership, “Accelerating Transfer” also means withdrawal or removal of any partner, dissolution of the partnership under applicable law, or any transfer or transfers of, in the aggregate, more than fifty percent (50%) of the partnership interests. If Grantor is a limited liability company, “Accelerating Transfer” also means withdrawal or removal of any member, termination of the limited liability company, or any transfer or transfers of, in the aggregate, more than fifty percent (50%) of the voting power or, in the aggregate, more than fifty percent (50%) of the ownership interests in Grantor.

(b) Grantor acknowledges that Beneficiary is making one or more advances under the Loan Agreement in reliance on the expertise, skill, and experience of Grantor; thus, the Secured Obligations include material elements similar in nature to a personal service contract. In consideration of Beneficiary’s reliance, Grantor agrees that Grantor shall not make any Accelerating Transfer, other than a transfer allowed pursuant to the express terms of the Loan Documents, unless the transfer is preceded by Beneficiary’s express written consent to the particular transaction and transferee. Beneficiary may withhold such consent in its sole and absolute discretion. If any Accelerating Transfer occurs, an Event of Default will occur under the Loan Agreement, and Beneficiary may implement available rights and remedies under the Loan Agreement and the other Loan Documents including declaration of all of the Secured Obligations to be immediately due and payable, and Beneficiary and Trustee may invoke any rights and remedies under this Deed of Trust. Grantor acknowledges the materiality of the provisions of this Section as a covenant of Grantor, given individual weight and consideration by Beneficiary in entering into the Secured Obligations, and that any Accelerating Transfer in violation of the prohibited transfer provisions herein set forth shall result in a material impairment of Beneficiary’s interest in the Property and be deemed a breach of the foregoing covenant.

(c) Notwithstanding the foregoing, Beneficiary acknowledges and agrees that any transfer specifically allowed or permitted by, and made in accordance with, the terms of the Loan Agreement, if any, shall not be an Accelerating Transfer under this Section.

6.2 Events of Default. Grantor will be in default under this Deed of Trust upon the occurrence of any one or more of the following events (some or all collectively, “Events of Default;” any one singly, an “Event of Default”):

(a) Grantor fails to perform any obligation to pay money which arises under this Deed of Trust, and does not cure that failure within ten (10) days after written notice from Beneficiary or Trustee; or

(b) Grantor fails to perform any obligation arising under this Deed of Trust other than one to pay money; or

(c) A default or Event of Default (as such term is defined in the applicable document, subject to any applicable notice and cure periods) has occurred under the Loan Agreement or any other Loan Document or any other Secured Obligation; or

(d) Grantor makes or permits the occurrence of an Accelerating Transfer; or

(e) Any default (subject to any applicable notice and cure period) occurs under any other mortgage, deed of trust, security deed, or other security instrument on all or any part of the Property, or under any obligation secured by such security instrument, whether such security instrument is prior to or subordinate to this Deed of Trust.

6.3 Remedies. Except as otherwise expressly set forth in the Loan Agreement or any other Loan Document, at any time after an Event of Default, Beneficiary and Trustee shall be entitled to invoke any and all of the rights and remedies described below or permitted by applicable law or in equity. All of such rights and remedies shall be cumulative, and the exercise of any one or more of them shall not constitute an election of remedies.

(a) Acceleration. Beneficiary may declare any or all of the Secured Obligations to be due and payable immediately and may terminate any Loan Document in accordance with its terms.

(b) Receiver. Beneficiary may apply to any court of competent jurisdiction for, and obtain appointment of, a receiver for the Property. Grantor hereby consents to such appointment.

(c) Entry. Beneficiary, in person, by agent or by court-appointed receiver, may enter, take possession of, manage and operate all or any part of the Property, and in its own name or in the name of Grantor sue for or otherwise collect any and all Rents, including those that are past due, and may also do any and all other things in connection with those actions that Beneficiary may in its sole and absolute discretion consider necessary and appropriate to protect the security of this Deed of Trust. Such other things may include: taking and possessing all of Grantor’s or the then owner’s Books and Records; entering into, enforcing, modifying, or canceling leases on such terms and conditions as Beneficiary may consider proper; obtaining and evicting tenants; fixing or modifying Rents (but not in excess of any applicable maximum low income rents for residential tenants); collecting and receiving any payment of money owing to Grantor; completing any unfinished construction; contracting for and making repairs and alterations; performing such acts of cultivation or irrigation as necessary to conserve the value of the Property; and/or, if applicable, preparing for harvest, harvesting and selling any crops that may be growing on the property. If Beneficiary so requests, Grantor shall assemble all of the Property that has been removed from the Land and make all of it available to Beneficiary at the site of the Land. Grantor hereby irrevocably constitutes and appoints Beneficiary as Grantor’s attorney-in-fact, with full power of substitution, to perform such acts and execute such documents as Beneficiary in its sole and absolute discretion may consider to be appropriate in connection with taking these measures, including endorsement of Grantor’s name on any instruments. The appointment granted in this Section shall be deemed to be a power coupled with an interest. Regardless of

any provision of this Deed of Trust, or any other Loan Document, Beneficiary shall not be considered to have accepted any property other than cash or immediately available funds in satisfaction of any obligation of Grantor to Beneficiary, unless Beneficiary has given express written notice of Beneficiary’s election of that remedy in accordance with applicable law. Grantor agrees to deliver to Beneficiary all Books and Records pertaining to the Property, including computer-readable memory and any computer hardware or software necessary to access or process such memory, as may reasonably be requested by Beneficiary in order to enable Beneficiary to exercise its rights under this Section.

(d) Cure; Protection of Security. Either Beneficiary or Trustee may cure any breach or default of Grantor, and if it chooses to do so in connection with any such cure, Beneficiary or Trustee may also enter the Property and/or do any and all other things that it may, in its sole and absolute discretion, consider necessary and appropriate to protect the security of this Deed of Trust. Such other things may include: appearing in and/or defending any action or proceeding that purports to affect the security of, or the rights or powers of Beneficiary or Trustee under, this Deed of Trust; paying, purchasing, contesting or compromising any encumbrance, charge, lien or claim of lien, which in Beneficiary’s or Trustee’s sole judgment is or may be senior in priority to this Deed of Trust; obtaining insurance and/or paying any premiums or charges for insurance required to be carried under the Loan Documents; otherwise caring for and protecting any and all of the Property; and/or employing counsel, accountants, contractors and other appropriate persons to assist Beneficiary or Trustee. Beneficiary and Trustee may take any of the actions permitted under this Section either with or without giving notice to any person.

(e) UCC Remedies. Beneficiary may exercise any or all of the remedies granted to a secured party under the UCC.

(f) Judicial Action. Beneficiary may bring an action in any court of competent jurisdiction to foreclose this Deed of Trust in the manner provided by law for the foreclosure of deeds of trusts or mortgages on real property and/or to obtain specific enforcement of any of the covenants or agreements of this Deed of Trust. If Beneficiary brings such an action, Grantor agrees to pay Beneficiary’s reasonable attorneys’ fees and court costs as determined by the court.

(g) Power of Sale. Except to the extent prohibited by applicable law, under the power of sale hereby granted, Beneficiary shall have the discretionary right to cause some or all of the Property, including any Property which constitutes personal property, to be sold or otherwise disposed of in any combination and in any manner permitted by applicable law. To the extent that a sale by non-judicial power of sale is prohibited by applicable law, and a judicial foreclosure is required, the terms and provisions of this subsection (g) shall be inapplicable.

(i) Sales of Personal Property.

(A) For purposes of this power of sale, and to the extent not prohibited by applicable law, Beneficiary may elect to treat as personal property any Property which is intangible or which can be severed from the Land or Improvements without causing structural damage. If it chooses to do so, Beneficiary may dispose of any personal property separately from the sale of real property, in any manner permitted by the UCC, including any public or private sale, or in any manner permitted by any other applicable law. Any proceeds of any such disposition shall not cure any Event of Default or reinstate any Secured Obligation.

(B) In connection with any sale or other disposition of such personal property disposed of separately from the sale of the real property, Grantor agrees that the following procedures constitute a commercially reasonable sale. Beneficiary shall mail written notice of the sale to Grantor not later than ten (10) days prior to the date of public

sale of the Property or prior to the date after which a private sale of the Property will be made, and such notice shall constitute reasonable notice; provided that, if Beneficiary fails to comply with this subsection in any respect, its liability for such failure shall be limited to the liability, if any, imposed on it as a matter of law under the UCC. Upon receipt of any written request, Beneficiary will make the personal property available to any bona fide prospective purchaser for inspection during reasonable business hours. Notwithstanding, Beneficiary shall be under no obligation to consummate a sale if, in its judgment, none of the offers received by it equal the fair value of the personal property offered for sale. The foregoing procedures do not constitute the only procedures that may be commercially reasonable.

(ii) Sales of Real Property or Mixed Collateral.

(A) Beneficiary may choose to dispose of some or all of the Property which consists solely of real property in any manner then permitted by applicable law. In its sole and absolute discretion, and to the extent not prohibited by applicable law, Beneficiary may also or alternatively choose to dispose of some or all of the Property, in any combination consisting of both real and personal property, together in one sale to be held in accordance with the law and procedures applicable to real property, as may be permitted by the UCC. Grantor agrees that such a sale of personal property together with real property constitutes a commercially reasonable sale of the personal property. For purposes hereof, either a sale of real property alone, or a sale of both real and personal property together in accordance with the UCC, will sometimes be referred to as a “Trustee’s Sale.”

(B) Before any Trustee’s Sale, Beneficiary or Trustee shall give such statement of breach or nonperformance, notice of sale, and/or notice of default as may then be required by applicable law. When all time periods then legally mandated have expired, and after such notice of sale and/or other notice as may then be legally required has been given, Trustee shall sell the property being sold at a public auction to be held at the time and place specified in the notice of sale. Neither Trustee nor Beneficiary shall have any obligation to make demand on Grantor before any Trustee’s Sale. From time to time in accordance with then applicable law, Trustee may, and in any event at Beneficiary’s request shall, postpone any Trustee’s Sale by public announcement at the time and place noticed for that Trustee’s Sale, unless otherwise required by applicable law.

(C) At any Trustee’s Sale, Trustee shall sell to the highest bidder at public auction for cash in lawful money of the United States, payable at the time of sale unless otherwise required by applicable law. Trustee shall execute and deliver to the purchaser(s) a deed or deeds conveying the property being sold without any covenant or warranty whatsoever, express or implied. The recitals in any such deed of any matters or facts, including any facts bearing upon the regularity or validity of any Trustee’s Sale, shall be conclusive proof of their truthfulness, absent manifest error. Absent manifest error, any such deed shall be (1) conclusive against all persons as to the facts recited in it; and (2) conclusive evidence in favor of purchasers and encumbrancers for value and without actual notice, that all requirements of this Deed of Trust and all requirements of law were met relating to the exercise of the power of sale and the Trustee’s Sale of the Property conveyed by such deed. Knowledge of the Trustee shall not be imputed to the Beneficiary.

(h) Attorney-in-Fact. Grantor hereby irrevocably constitutes and appoints Beneficiary as Grantor’s attorney-in-fact, with full power of substitution, to perform such acts and execute such documents as Beneficiary in its sole and absolute discretion may consider to be appropriate (1) to effect

the purpose of this Deed of Trust; and (2) in connection with taking the measures described in this Section, including endorsement of Grantor’s name on any instruments. This appointment granted in this Section shall be deemed to be a power coupled with an interest, and is therefore irrevocable.

(i) Single or Multiple Foreclosure Sales. Unless prohibited by applicable law, Beneficiary may elect to dispose of the Property, or any portion thereof, including but not limited to lots, parcels, and/or items through a single consolidated sale or disposition to be held or made under the power of sale granted above, or in connection with judicial proceedings, or by virtue of a judgment and decree of foreclosure and sale; or through two or more such sales or dispositions; or in any other manner Beneficiary may deem to be in its best interests (any such sale or disposition, a “Foreclosure Sale;” any two or more, “Foreclosure Sales”). If the Property consists of more than one lot, parcel or item of property, Beneficiary may designate the order in which the lots, parcels and/or items shall be sold or disposed of or offered for sale or disposition. If Beneficiary chooses to have more than one Foreclosure Sale, Beneficiary at its option may cause the Foreclosure Sales to be held simultaneously or successively, on the same day, or on such different days and at such different times and in such order as Beneficiary may deem to be in its best interests. No Foreclosure Sale shall terminate or affect the lien of this Deed of Trust on any part of the Property which has not been sold, until all of the Secured Obligations have been paid and performed in full.

(j) Expenses During Redemption Period. If this Deed of Trust is foreclosed as a mortgage and the Property sold at a foreclosure sale, the purchaser may during any redemption period allowed, make such repairs or alterations on the Property as may be reasonably necessary for the proper operation, care, preservation, protection and insuring thereof. Any sums so paid together with interest thereon from the time of such expenditure at the lesser of the Default Rate under the Note or the maximum rate permitted by law shall be added to and become a part of the amount required to be paid for redemption from such sale.

(k) Foreclosure Subject to Tenancies. Beneficiary shall have the right at its option to foreclose this Deed of Trust subject to the rights of any tenant or tenants of the Property.

6.4 Personal Property. It shall not be necessary that Beneficiary take possession of all or any part of the Property that is personal property or fixture property prior to the time that any sale pursuant to the provisions of this Section is conducted, and it shall not be necessary that such Property or any part thereof be present at the location of such sale. With respect to application of proceeds from disposition of such Property, the costs and expenses incident to disposition shall include the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the reasonable attorneys’ fees and legal expenses (including, without limitation, the allocated costs for in-house counsel to the extent not prohibited by applicable law) incurred by Beneficiary. Any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the Secured Obligations or as to the occurrence of any default or Event of Default, or as to Beneficiary having declared all of such indebtedness to be due and payable, or as to notice of time, place, and terms of sale, and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Beneficiary, shall be taken as prima facie evidence of the truth of the facts so stated and recited (absent manifest error). Beneficiary may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Beneficiary, including the sending of notices and the conduct of the sale, but in the name and on behalf of Beneficiary. Beneficiary may comply with any applicable state or federal law or regulatory requirements in connection with a disposition of the Property or any part thereof, and such compliance will not be considered to affect adversely the commercial reasonableness of any sale of such Property. Beneficiary may sell all or any portion of the Property without giving any warranties as to such Property, and may specifically disclaim any warranties of title, merchantability, fitness for a specific purpose, or the like, and this procedure will not be considered to affect adversely the commercial reasonableness of any sale of such Property. Grantor acknowledges that a private sale of all or any part of the Property may result in

less proceeds than a public sale, and Grantor acknowledges that the Property may be sold at a loss to Grantor, and that, in such event, Beneficiary shall have no liability or responsibility to Grantor for such loss. In addition to the rights granted elsewhere in this Deed of Trust, after the occurrence of any default or Event of Default, Beneficiary may at any time notify the account debtors or obligors of any accounts, chattel paper (whether tangible or electronic), general intangibles (including payment intangibles), negotiable instruments, promissory notes, or other evidences of indebtedness included in the Property to pay Beneficiary directly.

6.5 Credit Bids. At any Trustee’s Sale, Foreclosure Sale, or any sale of personal property collateral under this Deed of Trust, any person, including Grantor, Trustee or Beneficiary, may bid for and acquire the Property being sold or any part of it to the extent not expressly prohibited by then applicable law. Instead of paying cash for such property, Beneficiary shall have the benefit of any applicable law permitting credit bids.

6.6 Application of Trustee’s Sale or Foreclosure Sale Proceeds. Except as may be otherwise required by law, Beneficiary and Trustee shall apply the proceeds of any Trustee’s Sale, Foreclosure Sale, or any other sale of personal property collateral under this Deed of Trust, in the following manner:

(a) First, to pay the portion of the Secured Obligations attributable to the expenses of sale, including all costs and expenses of exercising the power of sale and other costs of sale, including, but not limited to, trustee’s fees and reasonable attorneys’ fees, the costs of any action, and any other sums for which Grantor is obligated to reimburse Beneficiary or Trustee under this Deed of Trust; and

(b) Second, to pay the portion of the Secured Obligations attributable to any sums expended or advanced by Beneficiary or Trustee under the terms of this Deed of Trust which then remain unpaid; and

(c) Third, to pay all other Secured Obligations, to the extent not expressly prohibited by applicable law, in any order and proportions as Beneficiary in its sole and absolute discretion may choose; and

(d) Fourth, to remit the remainder, if any, to the person or persons entitled to it, or, if permitted or required by applicable law, to the clerk of the court of the county in which the Trustee’s Sale, Foreclosure Sale, or any other sale of personal property collateral under this Deed of Trust, took place.

If the Secured Obligations include more than one loan or line of credit, by cross-collateralization or otherwise, it is specifically agreed that the proceeds of any Trustee’s Sale or other foreclosure action shall not be applied pro-rata unless such application is directed by Beneficiary, but instead shall be applied to all such Secured Obligations in any order, proportions and manner as Beneficiary in its sole and absolute discretion may choose.

6.7 Application of Rents and Other Sums. Beneficiary shall apply any and all Rents collected by it in such order as set forth in Section 2.5 above, and any and all other sums, other than proceeds of a Trustee’s Sale or a judicial foreclosure sale under this Deed of Trust, which Beneficiary may receive or collect under this Section, in the following manner:

(a) First, to pay the portion of the Secured Obligations attributable to the costs and expenses of operation of the Property and collection of Rents and other sums that may be incurred by Trustee, Beneficiary, and/or any receiver, including but not limited to reasonable attorneys’ fees and any and all expenses of leasing, operating, maintaining, and managing the Property, and all other costs and charges incident to the Property; and

(b) Second, to pay all other Secured Obligations in any order and proportions as Beneficiary in its sole and absolute discretion may choose; and

(c) Third, to remit the remainder, if any, to the person or persons entitled to it. Beneficiary shall have no liability for any funds which it does not actually receive.

7. Miscellaneous Provisions.

7.1 Additional Provisions. The Loan Documents fully state all of the terms and conditions of the parties’ agreement regarding the matters mentioned in or incidental to this Deed of Trust. The Loan Documents also grant further rights to Beneficiary and certain of them contain further agreements and affirmative and negative covenants by Grantor which apply to this Deed of Trust and to the Property.

7.2 No Waiver or Cure.

(a) Each waiver by Beneficiary or Trustee shall be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from any delay or failure by Beneficiary or Trustee to take action on account of any default of Grantor. Consent by Beneficiary or Trustee to any act or omission by Grantor shall not be construed as a consent to any other or subsequent act or omission or to waive the requirement for Beneficiary’s or Trustee’s consent to be obtained in any future or other instance. Reinstatement after an Event of Default shall not constitute a waiver of any Event of Default then existing or subsequently occurring, nor impair the right of Beneficiary to declare other Events of Default, nor otherwise affect this Deed of Trust or any of the Loan Documents, or any of the rights, obligations, or remedies of Beneficiary or Trustee under this Deed of Trust or any of the Loan Documents.

(b) If any of the events described below occurs, that event alone shall not: cure or waive any breach, Event of Default, or notice of default under this Deed of Trust or invalidate any act performed pursuant to any such default or notice; or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and all other defaults under the Loan Documents have been cured); or impair the security of this Deed of Trust; or prejudice Beneficiary, Trustee, or any receiver in the exercise of any right or remedy afforded any of them under this Deed of Trust; or be construed as an affirmation by Beneficiary of any tenancy, lease or option, or a subordination of the lien of this Deed of Trust.

(i) Beneficiary, its agent, or a receiver takes possession of all or any part of the Property in the manner provided this Deed of Trust; or

(ii) Beneficiary collects and applies Rents and enforces any Lease provision as permitted under this Deed of Trust, either with or without taking possession of all or any part of the Property; or

(iii) Beneficiary receives and applies to any Secured Obligation any proceeds of any Property, including any proceeds of insurance policies, condemnation awards, surety bond proceeds, or other claims, property or rights assigned to Beneficiary under this Deed of Trust; or

(iv) Beneficiary makes a site visit, observes the Property, and/or conducts tests as permitted under this Deed of Trust; or

(v) Beneficiary receives any sums under this Deed of Trust or any proceeds of any collateral held for any of the Secured Obligations, and applies them to one or more Secured Obligations; or

(vi) Beneficiary, Trustee, any agent of either of them, or any receiver performs any act which it is empowered or authorized to perform, or invokes any right or remedy provided under this Deed of Trust.

7.3 Powers of Beneficiary and Trustee.

(a) Trustee shall have no obligation to perform any act which it is empowered to perform under this Deed of Trust unless it is requested to do so in writing and is reasonably indemnified against loss, cost, liability and expense.

(b) If either Beneficiary or Trustee performs any act which it is empowered or authorized to perform under this Deed of Trust, that act alone shall not release or change the personal liability of any person for the payment and performance of the Secured Obligations then outstanding or the lien of this Deed of Trust on all or the remainder of the Property for full payment and performance of all outstanding Secured Obligations. The liability of the original Grantor shall not be released or changed if Beneficiary grants any successor in interest to Grantor any extension of time for payment, or modification of the terms of payment, of any Secured Obligation. Beneficiary shall not be required to comply with any demand by the original Grantor that Beneficiary refuse to grant such an extension or modification to, or commence proceedings against, any such successor in interest.

(c) Beneficiary may take any of the actions permitted under this Deed of Trust, including without limitation appointment of a receiver, regardless of the adequacy of the security for the Secured Obligations, or whether any or all of the Secured Obligations have been declared to be immediately due and payable, or whether notice of default and election to sell has been given under this Deed of Trust.

(d) From time to time, Beneficiary or Trustee may apply to any court of competent jurisdiction for aid and direction in executing the trust and enforcing the rights and remedies created under this Deed of Trust. Beneficiary or Trustee may from time to time obtain orders or decrees directing, confirming, or approving acts in executing this trust and enforcing such rights and remedies.

7.4 Merger. No merger shall occur as a result of Beneficiary’s acquiring any other estate in or any other lien on the Property unless Beneficiary consents to a merger in writing. If both the lessor’s and lessee’s estate under any lease or any portion thereof which constitutes a part of the Property, including but not limited to the Ground Lease, shall at any time become vested in one owner, this Deed of Trust and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger unless Beneficiary so elects as evidenced by recording a written declaration executed by Beneficiary so stating, and, unless and until Beneficiary so elects, Beneficiary shall continue to have and enjoy all of the rights and privileges of Beneficiary as to the separate estates. In addition, upon the foreclosure of the lien created by this Deed of Trust on the Property pursuant to the provisions hereof, any leases or subleases then existing and affecting all or any portion of the Property, including but not limited to the Ground Lease, shall not be destroyed or terminated by application of the law of merger or as a matter of law or as a result of such foreclosure unless Beneficiary or any purchaser at such foreclosure sale shall so elect. No act by or on behalf of Beneficiary or any such purchaser shall constitute a termination of any lease or sublease unless Beneficiary or such purchaser shall give written notice thereof to such tenant or subtenant.

7.5 Joint and Several Liability. If more than one person has executed this Deed of Trust as Grantor, each shall be jointly and severally liable for the faithful performance of all of Grantor’s obligations under this Deed of Trust

7.6 Governing Law and Jurisdiction. The creation, perfection, enforcement, termination and release of the liens and security interests created pursuant to the Deed of Trust and the conveyance of any right, title, and interest in and to any of the Property shall be governed by and construed in accordance with the laws of the State of Washington, which is the state where such Property is located. Subject to the foregoing, irrespective of the place of execution and/or delivery, in all respects, including all matters of construction, validity, and performance, this Deed of Trust shall be governed by, and construed and enforced in accordance with, the laws of the State of Arizona, except to the extent that any of such laws may now or hereafter be preempted by Federal law. Grantor hereby consents to the jurisdiction of any Federal or State court within (a) the state in which the Property is located, and (b) the State of Arizona, submits to venue in each such state, and also consents to service of process by any means authorized by Federal law or the law of each such state. Without limiting the generality of the foregoing, each Grantor hereby waives and agrees not to assert by way of motion, defense, or otherwise in such suit, action, or proceeding, any claim that (i) such Grantor is not subject to the jurisdiction of the courts of the above-referenced states or the United States District Court for each such state; or (ii) such suit, action, or proceeding is brought in an inconvenient forum; or (iii) the venue of such suit, action, or proceeding is improper. Nothing in this agreement shall preclude lender from bringing a proceeding in any other jurisdiction nor will the bringing of a proceeding in any one or more jurisdictions preclude the bringing of a proceeding in any other jurisdiction. Grantor further agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any proceeding in any Federal or State court within (a) the state in which the Property is located, or (2) the State of Arizona, may be made by certified or registered mail, return receipt requested, directed to each such Grantor at the address indicated below, and service so made shall be complete upon receipt; except that if any such Grantor shall refuse to accept delivery, service shall be deemed complete five (5) days after the same shall have been so mailed. Except to the extent prohibited by applicable law, Grantor hereby unconditionally waives any claim to assert that the law of any other jurisdiction governs this Deed of Trust.

7.7 Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, GRANTOR WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH GRANTOR AND BENEFICIARY MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS DEED OF TRUST. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS DEED OF TRUST. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GRANTOR, AND GRANTOR HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. GRANTOR FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN SIGNING THIS DEED OF TRUST AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

7.8 Successors in Interest. The terms, covenants, and conditions of this Deed of Trust shall be binding upon and inure to the benefit of the permitted successors and assigns of the parties; provided, however, that this Section shall not waive or modify the provisions of Section 6.1 above.

7.9 Statute of Limitations. To the extent not expressly prohibited by law, Grantor hereby waives the right to plead the statute of limitations as a defense to any and all obligations secured by this Deed of Trust.

7.10 Substitution of Trustee. From time to time, Beneficiary may substitute a successor to any Trustee named in or acting under this Deed of Trust in any manner now or later to be provided at law, or by a written instrument executed and acknowledged by Beneficiary and recorded in the office(s) of the recorder(s) of the county or counties where the Land and the Improvements are situated. Any such instrument shall be conclusive proof of the proper substitution of the successor Trustee, who shall automatically upon recordation of the instrument succeed to all estate, title, rights, powers and duties of the predecessor Trustee, without conveyance from it.

7.11 Time of Essence. Time is of the essence of this Deed of Trust and each and every term thereof.

7.12 Interpretation.

(a) Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the sections of this Deed of Trust are for convenience only and do not define or limit any terms or provisions. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.”

(b) The word “obligations” is used in its broadest and most comprehensive sense, and includes all primary, secondary, direct, indirect, fixed, and contingent obligations. It further includes all principal, interest, prepayment fees, late charges, loan fees, and any other fees and charges accruing or assessed at any time, as well as all obligations to perform acts or satisfy conditions.

(c) No listing of specific instances, items, or matters in any way limits the scope or generality of any language of this Deed of Trust. The Exhibits to this Deed of Trust are hereby incorporated by reference in this Deed of Trust.

(d) No course of prior dealing, usage of trade, or parol or extrinsic evidence of any nature shall be used to supplement, modify, or vary any of the terms hereof.

7.13 Attorneys’ Fees. In any lawsuit or arbitration arising out of or relating to this Deed of Trust, the prevailing party will be entitled to recover from each other party such sums as the court or arbitrator adjudges to be reasonable attorneys’ fees in the action or arbitration, in addition to costs and expenses otherwise allowed by law. In all other actions or proceedings, including any matter arising out of or relating to any Insolvency Proceeding, Grantor agrees to pay all of Beneficiary’s costs and expenses, including reasonable attorneys’ fees, incurred in enforcing or protecting Beneficiary’s rights or interests hereunder. From the time(s) incurred until paid in full to Beneficiary, all such sums shall bear interest at the Default Rate.

7.14 Waiver of Marshaling. Grantor waives all rights, legal and equitable, it may now or hereafter have to require marshaling of assets or to direct the order in which any of the Property will be sold in the event of any sale under this Deed of Trust. Each successor and assign of Grantor, including any holder of a lien subordinate to this Deed of Trust, by acceptance of its interest or lien agrees that it shall be bound by the above waiver, as if it had given the waiver itself.

7.15 Severability. If any provision of this Deed of Trust should be held unenforceable or void, that provision shall be deemed severable from the remaining provisions and shall in no way affect the

validity of this Deed of Trust, except that if such provision relates to the payment of any monetary sum, then Beneficiary may, at its option, declare all Secured Obligations immediately due and payable.

7.16 Notices. Grantor hereby requests that a copy of any notice of default, notice of sale, and/or other notices prescribed by applicable law, be mailed to it at the address set forth below. If any Grantor fails to insert an address, that failure will constitute a designation of Grantor’s last known address as the address of such notice. That address is also the mailing address of Grantor as debtor under the UCC. Beneficiary’s address given below is the address for Beneficiary as secured party under the UCC.

7.17 Partial Releases. Grantor may, regardless of consideration, cause the release of any part of the Property from the lien of this Deed of Trust without in any manner affecting or impairing the lien or priority of this Deed of Trust as to the remainder of the Property. Notwithstanding anything contained herein to the contrary, this Deed of Trust is subject to any partial release provisions set forth in the Loan Agreement.

7.18 Reporting Compliance. Grantor agrees to comply with any and all reporting requirements applicable to Secured Obligations which are set forth in any law, statute, ordinance, rule, regulation, order, or determination of any governmental authority, and further agrees to furnish Beneficiary with evidence of such compliance upon the request of Beneficiary.

7.19 Release Fee. Unless expressly prohibited by applicable law, Grantor shall pay to Beneficiary, at the time of each partial or complete release of the lien of this Deed of Trust, a reasonable release fee, as determined by Beneficiary.

(Remainder of page intentionally left blank.
See the following page for signatory and notary jurat.)

IN WITNESS WHEREOF, Grantor has executed this Deed of Trust the date first above written.

“GRANTOR”

THE INVENTURE GROUP, INC.,			Address for notices to Grantor:
a Delaware corporation
			The Inventure Group, Inc.
			5050 N. 40th Street, Suite 300
By:	/s/ Eric J. Kufel		Phoenix, Arizona 85018
Eric J. Kufel, its President/CEO			Attention: Steve Weinberger

Address for notice to Trustee:			Address for notices to Beneficiary:

Chicago Title Insurance Company			U.S. Bank National Association
1616 Cornwall Avenue, Suite 115			101 North First Avenue, Suite 1600
Bellingham, WA 98225			Phoenix, AZ 85003-1902
Attention:			Attention: Commercial Banking



STATE OF		)
		) ss.
County of		)

On this day of June, 2007, before me, , a Notary Public in and for said State, personally appeared Eric J. Kufel, its President/CEO of THE INVENTURE GROUP, INC., a Delaware corporation, o personally known or me or o proved to me on basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal the day and year in this certificate first above written.

Exhibit A to DEED OF TRUST dated for reference purposes as of June 27, 2007, by THE INVENTURE GROUP, INC., a Delaware corporation, as “Grantor” to CHICAGO TITLE INSURANCE COMPANY, as “Trustee” for the benefit of U.S. BANK NATIONAL ASSOCIATION, a national banking association, as “Beneficiary.”

Description of Property
PARCEL A:

Situate in Whatcom County, Washington.

PARCEL B:

Also, except that portion of the East half of the Northeast quarter of the Northwest quarter (also known as Government Lot 3) described as follows:

Except the right-of-way for Halverstick Road No. 257, lying along the Northerly line thereof.

Situate in Whatcom County, Washington.

PARCEL C:

A - 1

lying along the North line thereof.