EXHIBIT 10.1

LOAN AGREEMENT

BY AND BETWEEN

PDEX FRANKLIN LLC

AND

MINNESOTA BANK & TRUST

NOVEMBER 6, 2020

TABLE OF CONTENTS

i

ii

iii

Exhibits and Schedules

Exhibit A

Legal Description and Permitted Encumbrances

Exhibit B

Buildings and Improvements

Exhibit C

Authorized Persons

Schedule of Permits

iv

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”) is made and entered into as of November 6, 2020, by and between PDEX Franklin LLC, a California limited liability company (together with its permitted successors and assigns, the “Borrower”), and Minnesota Bank & Trust, Minnesota state banking corporation (together with its successors and assigns, the “Lender”).

RECITALS

WITNESSETH THAT, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, except as otherwise provided herein or unless the context hereof clearly requires otherwise, the following terms shall have the following respective meanings:

Advance: Any portion of the Loan advanced by Lender to or for the benefit of Borrower in accordance with this Agreement.

Affiliate: Any Person directly or indirectly controlled by or under common control with Borrower, including, without limitation, any entity having indebtedness now or hereafter owed to Lender or any affiliate of Lender which is guaranteed by Borrower.

Agreement: This Loan Agreement, including, without limitation, all amendments and modifications hereof and supplements hereto executed by Borrower and Lender.

Anti-Corruption Laws: All laws, rules, and regulations of any jurisdiction applicable to Borrower or its subsidiaries (if any) from time to time concerning or relating to bribery or corruption.

Appraisal: An appraisal addressed to Lender and prepared by an appraiser acceptable to Lender, which appraisal shall be in substantial conformance with the regulations promulgated by the appropriate federal regulatory agency pursuant to Section 1110 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (12 U.S.C. §3339), as amended, and the regulations thereunder, and which appraisal shall have been reviewed and approved by Lender’s internal appraisal review group.

Assignment of Leases and Rents: The Assignment of Leases and Rents of even date herewith, executed by Borrower in favor of Lender, including, without limitation, all amendments and modifications thereof and supplements thereto executed by Borrower and Lender.

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Borrower:  As defined in the preamble to this Agreement.

Borrower’s Equity: The minimum sum to be invested on or before the Closing Date of this Agreement in order to pay a portion of the purchase price of the Project, as set forth in the closing statement approved by Lender.

Business Day: Any day other than a Saturday, a Sunday, or a legal holiday on which Lender is not open for business in Minneapolis, Minnesota.

City: Tustin, California.

Closing Date: The date on which this Agreement shall close and Lender shall direct the Title Company to record the Deed of Trust and the Assignment of Leases and Rents and issue Lender’s Title Policy.

Code: The Internal Revenue Code of 1986, as amended.

Consultants: Third party experts retained by Lender to assist it in connection with due diligence, closing, disbursing or administering the Loan.

Contractor: Any Person which has a contract or subcontract under which payment may be required for any work done, material supplied or services furnished in connection with acquiring, constructing, financing, marketing, equipping and/or developing any portion of the Project.

Deed of Trust: The Deed of Trust With Assignment of Leases and Rents, Security Agreement and Fixture Filing of even date herewith, covering the Project, executed by Borrower in favor of Lender to secure the Loan, including, without limitation, all amendments and modifications thereof and supplements thereto executed by Borrower and Lender.

Default: Any event which with the passage of time or the giving of notice or both would mature into an Event of Default.

Default Rate: The Default Rate of interest payable under the Note, as that term is defined in the Note.

Environmental Audit: A written environmental review, audit, assessment or report prepared in accordance with ASTM Standard E-1527-13 or the most current version thereof, addressed to Lender, and accompanied by a reliance letter in form and substance acceptable to Lender from the consultant setting forth the results of an environmental investigation of the Project, including, without limitation, an historical investigation of the uses and ownership of the Land, searches of available records and contacts with appropriate governmental agencies and any tests which may be requested by Lender, prepared by a competent environmental engineer or consultant who is acceptable to Lender and is licensed, bonded and insured in accordance with all applicable statutes and all supplements, updates, re-certifications and/or reliance letters relating thereto and evidence of such consultant’s insurance.

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Equipment: All fixtures, equipment and personal property owned or leased by Borrower and located or to be located in or on, and used in connection with the management, maintenance or operation of, the Land and the Improvements.

ERISA: The Employee Retirement Income Security Act of 1974, as the same may from time to time be amended, and the rules and regulations promulgated thereunder by any governmental agency or authority, as from time to time in effect.

ERISA Affiliate: Any trade or business (whether or not incorporated) which is a member of a group of which Borrower is a member and which is under common control within the meaning of Section 414 of the Code, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

ERISA Event: (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations); (b) the withdrawal of Borrower or any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate an ERISA Plan or the treatment of an ERISA Plan amendment as a termination under Section 4041 of ERISA; (d) the institution of proceedings to terminate an ERISA Plan by the PBGC under Section 4042 of ERISA; or (e) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan.

ERISA Plan: Each employee benefit plan covered by Title IV of ERISA, whether now in existence or hereafter instituted, of Borrower or any ERISA Affiliate.

Event of Default:  An Event of Default specified in Section VII.

Fair Market Value: The price a willing buyer would pay a willing seller for the Project (neither being under any compulsion to buy or sell).

Fiscal Year: The period from July 1 of any calendar year through June 30 of the following calendar year.

GAAP: Accounting principles generally accepted in the United States of America consistently applied and maintained throughout the period indicated.

Governmental Requirements: All laws, statutes, codes, ordinances, and governmental rules, regulations and requirements applicable to Borrower, Lender or the Project,  including without limitation the requirements of the Americans with Disabilities Act of 1990 and the Fair Housing Act, each as amended, and all regulations thereunder, the requirements of any development agreement or other agreement with any governmental authority and all Permits for the Project.

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Guarantor: Pro-Dex.

Guaranty: The Guaranty of even date hereof, executed by the Guarantor in favor of Lender, including, without limitation, all amendments and modifications thereof and supplements thereto.

Hazardous Substance: Any substance, material or constituent defined in or governed by any Environmental Law as a dangerous, toxic or hazardous pollutant, contaminant, chemical waste, material or substance, including, without limitation, urea formaldehyde, polychlorinated biphenyls, dioxin, radon, mold, lead, lead based paint, asbestos, asbestos containing materials, nuclear fuel or waste, radioactive materials, explosives, carcinogens and petroleum products, (including, without limitation, crude oil or any fraction thereof), methane gas, natural gas, natural gas liquids, gasoline and synthetic gas, or any other waste, material, substance, pollutant or contaminant which would subject Borrower or any Subsidiary to any damages, penalties or liabilities under any applicable Environmental Law.

Improvements: The buildings and improvements described on Exhibit B attached hereto and hereby made a part hereof which are to be placed or constructed upon the Land.

Indemnity: The Unsecured Environmental and ADA Indemnity of even date herewith executed by Borrower in favor of Lender, including, without limitation, all amendments and modifications thereof and supplements thereto executed by Borrower and Lender.

Judicial Reference Agreement: The California Judicial Reference Agreement of even date herewith executed by the Borrower, the Guarantor and the Lender.

Land: The land legally described on Exhibit A attached hereto and hereby made a part hereof, containing approximately 1.211 acres, together with all additions thereto and substitutions therefor agreed to by Borrower and Lender.

Lease: Any lease, ground lease, license or other agreement relating to the occupancy of any portion of the Project executed by a Tenant and Borrower and all amendments and modifications thereto approved by Lender.

Lender:  As defined in the preamble to this Agreement.

Loan: The loan of the proceeds of the Note by Lender to Borrower pursuant to the terms of this Agreement to pay a portion of the costs of acquiring the Project in the original principal amount of Five Million Two Hundred Seven Thousand Four Hundred Seventy Two and No/100ths Dollars ($5,207,472.00).

Loan Documents: The documents which now or hereafter evidence and/or secure the Loan, including, without limitation, the documents described in Section III.2, any letter of credit application or reimbursement agreement, and including all amendments and modifications thereof and supplements thereto executed by Borrower and Lender (and/or any other parties thereto).

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Loan Party(ies): Individually or collectively, as the case may be, the Borrower and the Guarantor.

Maturity Date: The earlier of (a) November 1, 2030, or (b) the date on which the Loan has been deemed due and payable under Section VII.2 upon the occurrence of an Event of Default.

Note: The Term Note, of even date herewith, executed and delivered by Borrower to Lender in the original principal amount of Five Million Two Hundred Seven Thousand Four Hundred Seventy Two and No/100ths Dollars ($5,207,472.00), to evidence the Loan, including, without limitation, all amendments, modifications thereof and supplements thereto executed by Borrower and Lender and any replacement notes executed by Borrower from time to time.

“NOI”: For any period of computation, the residual income produced from rentals after deducting operating expenses, but before deducting income taxes and interest expense. NOI shall be determined before the addition or subtraction for any extraordinary items, depreciation expense, and amortization expense. For elimination of doubt, NOI is an income calculation so changes to capital accounts through distributions, dividends, and draws are also not included in the computation of NOI.

Operating Budget: A detailed listing of all anticipated annual income and expenses from and for managing, maintaining and operating the Project for its first full or partial Fiscal Year and for each succeeding Fiscal Year of operation, prepared by Borrower and in form and substance acceptable to Lender.

OFAC: Shall mean the U.S. Department of Treasury’s Office of Foreign Assets Control and any successor thereto.

Operating Statement: A current, detailed statement of income and expenses from and for managing, maintaining and operating the Project, in form and substance acceptable to Lender, certified as true, correct and complete by an officer or manager of Borrower, and expressly showing all variations from the Operating Budget for the period covered thereby.

PBGC: The Pension Benefit Guaranty Corporation or any successor board, authority, agency, officer or official of the United States administering the principal functions assigned on the date hereof to the Pension Benefit Guaranty Corporation under ERISA.

Permitted Encumbrances: The liens, charges and encumbrances on title to the Project listed on Exhibit A hereto, if any.

Pro-Dex: Pro-Dex, Inc., a Colorado corporation.

Pro-Dex Credit Agreement: That certain Amended and Restated Credit Agreement dated on or about the date hereof by and between Pro-Dex and the Lender, as the same may be amended, modified, restated or replaced from time to time.

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Pro-Dex Lease: That certain Standard Industrial/Commercial Single-Tenant Lease – Net, dated November 6, 2020, by and between the Borrower and Pro-Dex, pursuant to which the Pro- Dex leases the entirety of the Project from the Borrower.

Project: The Land, the Improvements and the Equipment.

Purchase Agreement: That certain Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated September 1, 2020, by and between the Borrower and 14401 Franklin, LLC, a California limited liability company (“Seller”).

Reportable Event: Shall have the meaning given to that term in Title IV of ERISA other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under its regulations.

Sanctioned Country: Shall mean at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions.

Sanctioned Person: Shall mean at any time, (a) any Person or group listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

Sanctions: Shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

Schedule of Permits: A schedule of all necessary Permits which must be obtained in order to occupy and operate the Project.

Subsidiary: Any corporation or other entity of which more than 50% of the outstanding capital stock or interests having ordinary voting power to elect a majority of the board of directors or the board of governors or otherwise to control the activities of such entity (irrespective of whether or not at the time other class or classes of the equity of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by Borrower, or by one or more other Subsidiaries.

Tenant: Individually, each tenant under an executed Lease as to all or any portion of the Project and collectively, all such tenants.

Title Company: Fidelity National Title Company.

Title Policy:

A loan policy (or marked-up commitment) of title insurance in favor of Lender issued by the Title Company, in form and substance satisfactory to Lender.

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Transfer: Any sale, grant, pledge, assignment, mortgage, encumbrance, security interest, consensual lien, hypothecation, lease (other than bona fide third party leases for actual occupancy of  a  portion  of  the  Premises  by  an  unrelated,  unaffiliated  Tenant),  transfer  or  divesture  or otherwise of or any interest in (i) any portion of the Premises, (ii) Borrower, (iii) any underlying ownership interest in Borrower, or (iv) any entity controlling, managing or in control of Borrower.

Other terms are defined in other parts of this Agreement. Unless otherwise indicated, all accounting terms, ratios and measurements shall be interpreted or determined in accordance with GAAP in effect from time to time, applied on a basis consistent with the most recent financial statements delivered to Lender pursuant to Section V.8. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections, Articles, Schedules and like references are to this Agreement unless otherwise expressly provided. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context in which used herein otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or”, and the singular includes the plural and the plural includes the singular.

ARTICLE II

LOAN

II.1

Principal.

Subject to the terms and conditions hereof and provided that no Default or Event of Default exists, Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender, the proceeds of the Loan from time to time in accordance with the terms hereof until the Maturity Date for the purpose of acquiring the Project pursuant to the terms of the Purchase Agreement. Notwithstanding the expressed principal amount of the Note, Borrower shall not be obligated to repay more than the unpaid balance of Advances made to or for the benefit of Borrower by Lender pursuant hereto and to the other Loan Documents (including, without limitation, amounts advanced by Lender pursuant to this Agreement or the Deed of Trust or similar provisions which permit Lender to advance Loan proceeds to reimburse Lender for interest, expenses or other amounts used to complete the tenant improvements or protect the interests or liens of Lender pursuant to the Loan Documents), together with interest thereon at the rate or rates specified herein and in the Note, computed on each Advance from the date it is made by Lender. All Advances made by Lender shall be evidenced by the Note. The Note shall mature and be payable on the Maturity Date. Lender shall enter in its records the amount of each Advance, the rate of interest borne on such Advance and the payments of the principal balance received by Lender, and, as between Lender and Borrower, such records shall be conclusive evidence of the subject matter thereof, absent manifest error.

All monies advanced by Lender (including amounts payable to Lender and advanced by Lender to itself pursuant to the terms hereof) shall constitute loans made to Borrower under this Agreement, evidenced by the Note, and interest shall be computed thereon, as prescribed by this Agreement and the Note, from the date Lender’s loan account is charged with the amount of the Advance. Borrower hereby irrevocably authorizes Lender to make or cause to be made, at or about the time each Advance is made by Lender, an appropriate notation on Lender’s records of

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the principal amount of such Advance and Lender shall make or cause to be made, on or about the time a payment of any principal of the Note is received, an appropriate notation of such payment on its records. The aggregate amount of all unpaid Advances set forth on the records of Lender shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the Note.

The principal balance of the Loan shall be paid as provided in the Note.

Borrower hereby authorizes Lender, at the discretion of Lender, to make an Advance in order to pay, on behalf of Borrower, any amount due and unpaid on the Note or pursuant to any of the other Loan Documents without further action on the part of Borrower and regardless of whether Borrower is able to comply with the terms, conditions and covenants of this Agreement at the time of such Advance. Lender agrees that, as promptly as is reasonably possible after the exercise of Lender’s right to make any such Advance (other than an Advance made to pay interest due on the Note), it shall notify Borrower of its exercise of its right to make such Advance; provided, however, that the failure of Lender to provide such notice shall not affect the validity of the exercise of Lender’s right to make such Advance.

II.2

Interest.

Borrower shall pay to Lender interest on the outstanding principal balance of the Note at the rates and times provided in the Note, subject to the elections available to Borrower in the Note. The Note also provides for interest at the Default Rate after the Maturity Date or the occurrence of an Event of Default and for a late payment charge.

II.3

Prepayment.

The outstanding principal balance of the Note and accrued interest thereon may be prepaid as provided in the Note. This is not a revolving credit loan. Lender shall not be obligated hereunder or under any of the other Loan Documents to re-advance to Borrower any sums prepaid by Borrower whether paid or prepaid voluntarily or involuntarily.

II.4

Payments.

All payments and prepayments of principal of, and interest on, the Note and all fees, expenses and other obligations under the Loan Documents payable to Lender shall be made without setoff or counterclaim in immediately available funds not later than 12:00 noon (Minneapolis time) on the dates each such payment is due to Lender at its office in Edina, Minnesota. Funds received on any day after 4:00 p.m. (Minneapolis time) on any Business Day shall be deemed to have been received on the next Business Day. Whenever any payment to be made hereunder or on the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day.

Unless any Event of Default shall be continuing when any such payment is received by Lender (in which event Lender may apply such payment in any order it deems appropriate in its sole discretion), and except as otherwise provided herein or in the Note, all payments received by Lender for application to the principal, interest, fees, costs and expenses due to Lender shall be applied in the following order:

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(a)

First,  to  any  costs  and  expenses  to  which  Lender  may  be  entitled hereunder or under the Note;

(b)

Second, to any fees due to Lender hereunder;

(c)

Third, to any unpaid interest then due to Lender hereunder or under the Note; and

(d)

Fourth, to the unpaid principal balance of the Note.

Borrower irrevocably waives the right to direct the application of any and all payments received at any time by Lender, from or on behalf of Borrower and specifically waives the provisions of California Civil Code Sections 1479 and 2822 or similar provisions under any other applicable law giving Borrower the right to designate the application of payments. All amounts received by Lender, for application to Borrower's obligations shall be applied by Lender in the following order of priority: (a) to the payment of any fees then due and payable, (b) to the payment of all other amounts not otherwise referred to in this Section II.4, then due and payable hereunder or under the other Loan Documents and the Indemnity (including any costs and expenses incurred by Lender as a result of a Default or an Event of Default), (c) to the payment of interest then due and payable on the Loan, and (d) to the payment of principal then due and payable on the Loan. Notwithstanding the foregoing, Borrower irrevocably agrees that, after the occurrence, and during the continuance, of an Event of Default, Lender shall have the continuing exclusive right to determine the order and method of the application of payments against the then due and payable obligations of Borrower in Lender's sole discretion and to revise such application prospectively or retroactively in Lender’s sole discretion.

II.5

Origination Fee.

In addition to the interest and other consideration to Lender herein, Borrower agrees to pay to Lender a non-refundable Origination Fee of $26,037 in cash on the date hereof, in consideration of the agreements of Lender herein.

II.6

Changes in Capital Adequacy Regulations.

If Lender determines the amount of capital required or expected to be maintained by Lender or any corporation controlling Lender is increased as a result of a Change (as hereinafter defined), then, within 30 days of demand by Lender, Borrower shall pay Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which Lender determines is attributable to this Agreement or the other Loan Documents (after taking into account Lender’s policies as to capital adequacy). Notwithstanding the foregoing, for purposes of this Agreement, all requests, rules, guidelines or directives in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act shall be deemed to be a Change regardless of the date enacted, adopted or issued and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities shall be deemed to be a Change

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regardless of the date adopted, issued, promulgated or implemented. As used in this Section II.6: “Change” means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi- governmental rule, regulation, policy, guideline, interpretation or directive (whether or  not having the force of law) or in the interpretation, promulgation, implementation or administration thereof after the date of this Agreement which affects the amount of capital required or expected to be maintained by Lender or any corporation controlling Lender; and “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that Lender notifies Borrower of the Change giving rise to such increased costs or reductions, and of Lender’s intention to claim compensation therefor (except that, if the Change giving rise to such increased costs or reductions is retroactive, then the nine (9) month period referred to above shall be extended to include the period of retroactive effect thereof).

II.7

Authorized Persons.

Lender is hereby authorized to rely upon the continuing authority of any Authorized Person to bind Borrower with respect to all matters pertaining to establishment of the Loan and the Loan Documents including, without limitation, requests for Advances and the execution and delivery of Draw Requests. “Authorized Person” means any Person presently listed on Exhibit C; provided, that Borrower may from time to time add persons to or remove persons from such list effective upon written notice from the Borrower to Lender. Borrower shall be obligated to repay all Advances and perform all of its obligations hereunder notwithstanding the fact that the Authorized Person requesting the same was not in fact authorized by Borrower so to do.

II.8

Use of Proceeds.

Borrower shall not request any Advance and Borrower shall not use, and shall ensure that its Affiliates and its or their respective directors, officers, employees and agents shall not use, any portion of the Loan proceeds (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transactions of or with any Sanctioned Person, or in any Sanctioned Country, or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

ARTICLE III

CONDITIONS OF BORROWING

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Lender shall not be required to make any Advance hereunder until the pre-closing requirements, conditions and other requirements set forth below have been completed and fulfilled to the satisfaction of Lender, at Borrower’s sole cost and expense. It is agreed, however, that Lender may, in its discretion, make Advances prior to completion and fulfillment of any or all of such pre-closing requirements and conditions, without waiving its right to require such completion and fulfillment before any additional Advances are made.

III.1

Pre-Closing Requirements.

On or prior to the Closing Date, Borrower shall provide to Lender each of the following, in form and substance acceptable to Lender:

(a)

A commitment for the Title Policy or a preliminary title report from the Title Company, complying with Lender's standard requirements therefor, a copy of which has been delivered to Borrower, together with a copy of each document referred to therein.

(b)

Two (2) hard copies or a single digital version of a current, certified ALTA/ACSM Survey of the Land, which shall also be prepared in accordance with Lender's standard requirements therefor, a copy of which has been delivered to Borrower.

(c)

A current Environmental Audit, with, in the event such Environmental Audit is not addressed to Lender, a reliance letter addressed to Lender, and evidence of such consultant’s professional and general liability insurance. Lender may, at its option, elect to commission and order the Environmental Audit directly.

(d)

Insurance policies and/or certificates of insurance written by insurers satisfactory to Lender and in amounts satisfactory to Lender, prepared in accordance with Lender's standard requirements therefor, a copy of which has been delivered to Borrower.

(e)

A current letter addressed to Lender from an appropriate municipal officer of the City regarding the zoning status and classification of the Land and building code compliance and certifying that the Land may be used for operation of the  Project, prepared in accordance with Lender's standard requirements therefor, a copy of which has been delivered to Borrower.

(f)

UCC lien searches from the appropriate office in Orange County, California and from the office of the Secretary of State of California, covering the name of Borrower; and bankruptcy, judgment and state and federal tax lien searches on Borrower.

(g)

Copies of Borrower’s Articles of Organization and Certificate of Good Standing, each currently certified by the Secretary of State of California; copies of Borrower’s Limited Liability Company Agreement, resolutions of its sole member or board of managers authorizing the transactions described herein and an incumbency certificate, all currently certified by its Secretary.

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(h)

Copies of Guarantor’s Articles of Incorporation currently certified by the Secretary of State of the State of Colorado and Certificates of Good Standing, currently certified by the Secretary of State of California and the Secretary of State of Colorado; copies of Guarantor’s bylaws, resolutions of its board of directors authorizing the execution of the Guaranty and an incumbency certificate, all currently certified by its Secretary.

(i)

A copy of any management agreements, development agreements, operating agreements, leasing agreements, consulting agreements, franchise agreements, reciprocal easement agreements, service contracts or other agreements affecting title to the Project or the management, leasing, operation or maintenance of the Project.

(j)

Payment of the Origination Fee to Lender and Lender’s internal appraisal review fee, internal environmental review fee and any other fees required by Lender.

(k)

Other agreements, documents and exhibits, including, without limitation, which may be required, in Lender’s judgment, to assure compliance with the requirements of this Agreement.

III.2

Loan Documents; etc.

On or prior to the Closing Date, Borrower shall execute and deliver (or cause to be executed and delivered) to Lender the following documents in form and substance acceptable to Lender and to its counsel, to evidence and secure the Loan:

(a)

This Agreement.

(b)

The Note.

(c)

The Deed of Trust.

(d)

The Guaranty.

(e)

The Assignment of Leases and Rents.

(f)

A first security interest in all Equipment owned by Borrower and in all of Borrower's personal property relating to the Project, created and evidenced by a security agreement (which may be incorporated within the Deed of Trust), which Lender may perfect by appropriate Uniform Commercial Code financing statements.

(g)

The Indemnity.

(h)

California Judicial Reference Agreement.

(i)

Evidence that the Borrower has contributed the Borrower’s Equity toward the payment of the costs of acquiring the Project.

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(j)

Such other documents and certificates as Lender may reasonably require to evidence and secure the Loan.

Lender may designate which of the Loan Documents are to be placed of record, the order of recording thereof, and the offices in which the same are to be recorded. Borrower shall pay all documentary, recording and/or registration taxes and/or fees, if any, due upon the recording of the Loan Documents.

III.3

Flood Zone.

On or prior to the Closing Date, Lender shall have received a flood zone certification from a Consultant acceptable to Lender, indicating that the Project is not located in a flood plain or any other flood prone area, as designated by any governmental agency; provided, however, that if the Project is so located, Borrower shall obtain and deliver to Lender evidence of flood insurance acceptable to Lender.

III.4

Title Insurance.

On or prior to the Closing Date, Lender shall have received the Title Policy issued by Title Company or an unconditional marked-up commitment to issue the Title Policy initialed and signed by an authorized officer of the Title Company at closing hereof, including all endorsements required by Lender and otherwise in form and substance acceptable to Lender.

III.5

Opinion of Borrower’s Counsel.

On or prior to the Closing Date, Lender shall have received from outside counsel for Borrower a current written opinion, in scope, form and substance acceptable to Lender.

III.6

Appraisal.

On or prior to the Closing Date, Lender shall have received a current Appraisal indicating the Fair Market Value of the Project. Such Appraisal shall be used to determine, among other purposes, that the principal face amount of the Note does not exceed 80% of the Fair Market Value of the Project.

ARTICLE IV

ADVANCE OF LOAN PROCEEDS

IV.1

General.

Provided no Default or Event of Default has occurred and is continuing, the Loan proceeds shall be advanced by Lender, for the benefit of Borrower, in accordance with the terms and conditions set forth in this Agreement. All monies advanced by Lender with respect to the Project (including, without limitation, amounts payable to Lender and advanced by Lender to itself pursuant to the terms hereof) shall constitute a loan made to Borrower under this Agreement, evidenced by the Note and secured by the other Loan Documents, and interest shall be computed thereon, as

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prescribed by this Agreement and the Note, from the date Lender’s account is charged with the amount of the Advance, whether or not an Advance made to the Title Company is fully disbursed by the Title Company or is withheld in full or in part.

No Advance shall constitute a waiver of any condition precedent to the obligation of Lender to make any further Advance or preclude Lender from thereafter declaring the failure of Borrower to satisfy any such condition precedent with respect to any subsequent Advance to be a Default. No Advance shall constitute a waiver of any Default or Event of Default hereunder which may exist at the time of such Advances, whether or not the same is known to Lender. All conditions precedent to the obligation of Lender to make any Advance are imposed hereby solely for the benefit of Lender, and no other party may require satisfaction of any such condition precedent or shall be entitled to assume that Lender will make or refuse to make any Advance in the absence of strict compliance with such condition precedent. All requirements of this Agreement for any Advance may be waived by Lender, in its sole discretion, in whole or in part, at any time.

Lender may, at Lender’s sole option, without any obligation to do so, advance to itself all sums due and owing to Lender under this Agreement or under any of the other Loan Document, including, without limitation, accrued but unpaid interest, its fees, reasonable attorneys’ fees, Inspecting Architect’s fees, Consultant’s fees and all out-of-pocket expenses incurred by Lender in connection with this Agreement and with the Loan. Lender shall also have the right, but not the obligation, to advance and directly apply the proceeds of the Loan to the satisfaction of any of Borrower’s other obligations hereunder or under any of the other Loan Documents. Lender agrees to notify Borrower of the amount of Advances made pursuant to this paragraph.

IV.2

Inspections.

Lender, Title Company, Consultants and their representatives shall have access to the Project upon written notice at times mutually agreeable to Borrower and Lender and shall have the right to enter the Project and to conduct such inspections thereof as they shall deem reasonably necessary for the protection of Lender's interests; provided, that, (a) such inspections shall be subject to tenants’ rights under applicable law and (b) following the occurrence and during the continuance of an Event of Default, such right of entry shall be at any time Lender deems appropriate.  However, Lender shall not be obligated to conduct any inspection of the Project.

Lender may retain Consultants deemed necessary or desirable by Lender to make periodic inspections of the Project. Any such inspections done following the occurrence and during the continuation of an Event of Default shall be at the Borrower’s expense. Neither Borrower, nor any third party shall have the right to use or rely upon reports generated by Lender or its Consultants for any purpose whatsoever.

IV.3

Lender’s Responsibility.

It is expressly understood and agreed that Lender assumes no liability or responsibility for protection of the Project, for the adequacy of the plans for any tenant improvements, the compliance of the Project with Governmental Requirements or any Lease, for the satisfactory

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completion of the Project, for inspection of the Improvements or to notify Borrower or any Contractor of any construction defect discovered during any such inspection, for the adequacy of any tenant improvement reserve, for the adequacy or accuracy of any representations made by Borrower, or for any acts on the part of Borrower, or any Contractors to be performed in the construction of the Project.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BORROWER

In order to induce Lender to enter into this Agreement and make the Loan, Borrower represents, warrants and covenants to Lender that:

V.1

Legal Status of Loan Parties.

(a)

Borrower is a limited liability company duly formed, validly existing and in good standing under the laws of the State of California and in all other jurisdictions where the character of the properties owned or leased or the nature of the business transacted by it makes licensing or qualification necessary or in which failure to qualify would have a material adverse effect on Borrower or would affect the enforceability of any material contractual rights of Borrower. Borrower has all power, authority, consents and authorizations necessary to carry on its business, own and operate the Project and to execute, deliver and perform this Agreement, the Note and the other Loan Documents; all resolutions of the members of Borrower necessary to authorize the execution, delivery and performance of this Agreement, the Note and of the other Loan Documents which have been or are to be executed by and on behalf of Borrower have been duly adopted and are in full force and effect; and this Agreement, the Note and such other Loan Documents have been duly authorized, executed and delivered by and on behalf of Borrower so as to constitute this Agreement, the Note and such other Loan Documents the valid and binding obligations of Borrower, enforceable in accordance with their terms.

(b)

Guarantor is a corporation duly formed, validly existing and in good standing under the laws of the State of Colorado and in all other jurisdictions where the character of the properties owned or leased or the nature of the business transacted by it makes licensing or qualification necessary or in which failure to qualify would have a material adverse effect on Guarantor or would affect the enforceability of any material contractual rights of Guarantor. Guarantor has all power, authority, consents and authorizations necessary to carry on its business, lease the Project and to execute, deliver and perform the Guaranty and the Indemnity; all resolutions of the members of the board of directors Guarantor necessary to authorize the execution, delivery and performance of the Guaranty and the Indemnity and of any other Loan Documents which have been or are to be executed by and on behalf of Guarantor have been duly adopted and are in full force and effect; and the Guaranty and such other Loan Documents have been duly authorized, executed and delivered by and on behalf of Guarantor so as to constitute the Guaranty, the Indemnity and such other Loan Documents the valid and binding obligations of Guarantor, enforceable in accordance with their terms.

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V.2

Authority.

The execution, delivery and performance by Borrower of this Agreement, the Note, and other Loan Documents to which Borrower is a party have been duly authorized by all necessary action of the governors, managers and shareholders, as applicable, of Borrower, and do not and will not (i) require any additional consent or approval of the governors, managers or shareholders of Borrower, (ii) violate any provision of any Governmental Requirements or any order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower, or of the articles of organization or limited liability company agreement of Borrower, (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which Borrower is a party or by which it or its properties may be bound or affected, or (iv) result in or require the creation or imposition of any security interest in any of its properties pursuant to the provisions of any agreement or other document binding upon or applicable to Borrower or any of its properties, except pursuant to the Loan Documents.

V.3

Legal and Valid Obligations.

This Agreement, the Note, the Deed of Trust, the Indemnity, the Guaranty and the other Loan Documents to which each Loan Party is a party constitute the legal, valid and binding obligations of such Loan Party, enforceable against such Loan Party in accordance with their respective terms, subject to bankruptcy and insolvency laws and other laws generally affecting the enforceability of creditor’s rights generally and subject to limitations on the availability of equitable remedies.

V.4

Title.

Borrower is the owner of marketable fee simple absolute title to the Land, subject to no lien, charge, mortgage, deed of trust, restriction or encumbrance, except Permitted Encumbrances.

V.5

No Breach of Applicable Agreements or Laws.

The consummation of the transactions contemplated hereby and the execution, delivery and/or performance of this Agreement and the other Loan Documents will not result in any breach of or constitute a default under any mortgage, deed of trust, lease, bank loan, credit agreement, or other instrument or violate any Governmental Requirements in effect from time to time, to which Borrower is a party, or by which Borrower may be bound or affected.

V.6

No Litigation or Defaults.

Except as disclosed to Lender in writing prior to the date hereof, there are no actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower, the Guarantor, any Affiliate or the Project, or involving the validity or enforceability of the Loan Documents or the priority of the lien thereof, at law or in equity; and no Loan Party is in default under any order, writ, injunction, decree or demand of any court or any administrative body having jurisdiction over such Loan Party, except any litigation involving

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death, personal injury or property damage claims fully covered by liability insurance and the defense of which has been tendered to and accepted by the insurance carrier, and no Loan Party is in default with respect to any final judgment, writ, injunction, decree, rule or regulations of any court, arbitrator or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign.

V.7

Payment of Taxes.

Borrower has filed all federal, state and local tax returns with respect to Borrower and its direct and indirect business operations and properties which are required to be filed. Borrower has paid or caused to be paid to the respective taxing authorities all taxes as shown on such returns or on any assessments received by it to the extent that such taxes have become due. Borrower knows of no proposed material tax assessment against Borrower, and Borrower is not obligated by any other agreement, tax treaty, instrument or otherwise to contribute to  the payment of taxes owed by any other Person. All material tax liabilities are adequately provided for or reserved against on the books of Borrower in accordance with GAAP. For the avoidance of doubt, Guarantor is not properly withdrawn from the state of New Jersey and is required to file and pay taxes for the years ended June 30, 2018, 2019 and 2020; the amount owed will be the minimum state tax of $500 per year plus interest and penalties and final amounts due are not yet assessed but expected to be less than $5,000.

V.8

Financial and Other Information.

The financial statements of Borrower and the Guarantor previously or hereafter delivered to Lender fairly and accurately present, or will fairly and accurately present, the financial condition of Borrower and the Guarantor, as of the dates of such statements, and neither this Agreement nor any document, financial statement, financial or credit information, rent roll, operating statement, certificate or statement referred to herein or furnished to Lender by Borrower Guarantor or any Affiliate contains, or will contain, any untrue statement of a material fact or omits, or will omit, a material fact, or is or will be misleading in any material respect.

V.9

No Defaults under Loan Documents or Other Agreements.

There is, and, until Lender has been fully repaid the entire indebtedness evidenced or to be evidenced by the Note and there is no obligation of Lender to make any further Advances hereunder, there will be, no Default or Event of Default on the part of Borrower under the Loan Documents or under any other document to which any Loan Party is a party and which relates to the ownership, occupancy, use, development, construction or management of the Project or under any Loan Party’s organizational documents. Borrower is not obligated for the payment of any commission or other fee with respect to the purchase of the Project, the formation of Borrower or any Lease or if Borrower is so obligated such commission or other fee will be paid at closing.

V.10

Boundary Lines; Conformance with Governmental Requirements and Restrictions.

The exterior lines of the Improvements are, and at all times will be, within the boundary lines  of  the  Land.  Borrower  has  examined  and  is  familiar  with  all  applicable  covenants,

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conditions, restrictions and reservations, and with all applicable Governmental Requirements, including, without limitation, building codes and zoning, environmental, Hazardous Substance, energy and pollution control laws, ordinances and regulations affecting the Project. Borrower has obtained, or will promptly obtain as set forth in the Schedule of Permits, all Permits from and has satisfied, or will promptly satisfy as and when required, all of the requirements of, all governmental entities for operation of the Project. The Project in all respects conforms to and complies with all applicable covenants, conditions, restrictions, reservations and Governmental Requirements. The Land consists of one or more lawfully created lots which may lawfully be sold without the need for any partitioning, subdividing or boundary adjustment.

V.11

Utilities.

Telephone service, gas, electric power, storm sewers, sanitary sewer and water facilities are available to the boundaries of the Land, adequate to serve the Project. All streets and easements necessary for operation of the Project are available to the boundaries of the Land.

V.12

Accuracy of Information.

All factual information heretofor or herewith furnished by or on behalf of Borrower to Lender for purposes of or in connection with this Agreement or the Loan contemplated hereby is to Borrower’s knowledge after due inquiry, true and accurate in every material respect on the date as of which such information is dated or certified and no such information contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statements contained therein not misleading as of such date.

V.13

ERISA Compliance.

Borrower has no ERISA Plan.

V.14

Compliance.

Borrower:

(i)

is in material compliance and conformity with all Governmental Requirements and all other legal requirements, the violation of which, individually or in the aggregate, would have a material adverse effect on Borrower; and

(ii)

has not received and does not anticipate the receipt of any order or notice of any violation or claim of violation of any such law, ordinance, rule or regulation which would have a material adverse effect on Borrower.

V.15

Consents.

No consent, approval, license, authorization or exemption of, or registration, declaration or filing with, any court, any governmental authority (federal, state or local, domestic or foreign) or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is required in connection with the valid execution and delivery of this Agreement, the

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Note, the Deed of Trust, the Indemnity or any of the other Loan Documents and the performance of or compliance with the terms, provisions and conditions hereof and thereof, except for the filing of the Deed of Trust and the Assignment of Leases and Rents in the real property records of Orange County, California. To the extent that any franchises, licenses, certificates, authorizations, approvals or consents from any federal, state or local (domestic or foreign) government, commission, bureau or agency are material to the present conduct of the business and operations of Borrower or are required for the acquisition, ownership, operation or maintenance by Borrower of properties it now owns, operates or maintains or  the  present conduct of its businesses and operations, and the loss or termination of such franchises, licenses, certificates, authorizations, approvals and consents would have a material adverse effect on Borrower, such franchises, licenses, certificates, authorizations, approvals and consents have been validly granted, are in full force and effect and constitute valid and sufficient authorization therefor.

V.16

Environmental Laws.

Borrower: (a) has not received any notice or otherwise learned of any environmental liability relating to the Project which would individually or in the aggregate have a material adverse effect on Borrower arising in connection with (i) any non-compliance with or violation of the requirements of any Environmental Law (as defined in the Deed of Trust), or (ii) the release or threatened release of any Hazardous Substance (as defined in the Deed of Trust) into the environment relating to the Project; (b) to Borrower’s knowledge, has no threatened or actual liability in connection with the release or threatened release relating to the Project of any Hazardous Substance into the environment which would individually or in the aggregate have a material adverse effect on Borrower; or (c) has not received any notice or otherwise learned of any federal or state investigation evaluating whether any remedial action related to the Project is needed to respond to a release or threatened release of any Hazardous Substance into the environment for which Borrower is or may be liable where such liability individually or in the aggregate for all such liabilities would have a material adverse effect on Borrower. Borrower has not received any notice of any violation of any Environmental Laws relating to the Project where such violation would have a material adverse effect on Borrower.

V.17

Solvency.

The aggregate Fair Market Value of the assets of Borrower is in excess of the total amount of its liabilities as they become absolute and matured, and Borrower is able to meet its debts as they become due and payable in accordance with Borrower’s ordinary business practices. Borrower is not rendered insolvent by the execution and delivery of the Loan Documents or the borrowing of the Loan.

V.18

Borrower’s Property.

Borrower owns no assets other than its interest in the Project.

V.19

No Off-Site Improvements.

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Borrower has not entered into any development agreement, redevelopment agreement or any other agreement under which Borrower, the City, any other governmental entity or Person is required to complete any off-site improvements in connection with the Project.

V.20

Agreements.

Borrower is not a party to any agreement or instrument or subject to any restriction which would have a material adverse effect on Borrower. Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which Borrower is a party, the effect of which default would have a material adverse effect on Borrower.

V.21

Subsidiaries.

Borrower has no Subsidiaries.

V.22

Anti-Terrorism Regulations.

(a)

None of the Borrower, the Guarantor or any of their respective Affiliates is a “Special Designated National” or “Blocked Person” as those terms are defined in the office of Foreign Asset Control Regulations (31 C.F.R. § 500 et. seq.).

(b)

The Borrower and its officers and employees and, to the knowledge of the Borrower, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. Neither the Borrower nor any of its directors, officers or employees is a Sanctioned Person. The Loan, the use of the proceeds of the Loan and the other transactions contemplated hereby will not violate Anti-Corruption Laws or applicable Sanctions.

(c)

Neither the making of the Loan hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, 12 U.S.C. §§ 95a-95b and 50 U.S.C. App. §§ 1-44, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower is in compliance in all material respects with the PATRIOT Act.

V.23

Miscellaneous.

Borrower is not:

(a)

Engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), and the value of all margin stock owned by Borrower does not constitute more than twenty-five percent (25%) of the value of the assets of Borrower.

(b)

An “investment company” or a company “controlled” by an investment company within the meaning of the Investment Company Act of 1940, as amended.

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(c)

A “holding company” or a “subsidiary company” of a holding company or an “affiliate” of a holding company or a subsidiary company of a holding company within the meaning of the Public Utility Holding Company Act of 2005, as amended.

(d)

Subject to regulation under the Federal Power Act of 1920, as amended, the Interstate Commerce Act of 1887, as amended, or any other federal or state statute or regulation limiting its ability to incur indebtedness for money borrowed.

THE WARRANTIES AND REPRESENTATIONS IN THIS ARTICLE V AND ANY ADDITIONAL WARRANTIES AND REPRESENTATIONS CONTAINED HEREIN AND IN THE OTHER LOAN DOCUMENTS SHALL BE DEEMED TO HAVE BEEN RENEWED AND RESTATED BY BORROWER AT THE TIME OF EACH REQUEST BY BORROWER FOR AN ADVANCE OF LOAN PROCEEDS. ALL REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE V SHALL SURVIVE THE DELIVERY OF THE NOTE AND THE MAKING OF THE LOAN CONTEMPLATED HEREBY. ANY INVESTIGATION AT ANY TIME MADE BY OR ON BEHALF OF LENDER SHALL NOT DIMINISH ITS RIGHTS TO RELY THEREON.

ARTICLE VI

COVENANTS OF BORROWER

While this Agreement is in effect, and until Lender has been paid in full the principal, interest and all other sums payable by Borrower pursuant to the Loan Documents, and until there is no further obligation to make any Advance hereunder, Borrower agrees to comply with, observe and keep the following covenants and agreements:

VI.1

Balancing the Loan.

Borrower shall furnish to Lender, as and when required by Lender at Lender's option, but in no event more often than one (1) time per calendar year unless a Default or Event of Default exists, satisfactory evidence of Borrower's ability to pay all unpaid costs of operating the Project through the Maturity Date.

VI.2

Paying Costs of the Project and the Loan.

Borrower shall pay and discharge, when due, all taxes, assessments and  other governmental charges upon the Project, as well as all claims for labor and materials which, if unpaid, might become a lien or charge upon the Project; provided, however, that Borrower shall have the right to contest the amount, validity and/or applicability of any of the foregoing in strict accordance with the terms of the Deed of Trust.

In addition to the other fees and costs specifically provided herein, Borrower shall also pay all costs and expenses of Lender and Borrower in connection with the Project, the preparation and review of the Loan Documents and the making, closing, administration, and/or repayment of any portion of the Loan, including, without limitation, the reasonable fees of Lender's attorneys, the fees of any third party appraisers retained by Lender, the fees of Lender's internal appraisal

21

review, the fees of Lender’s Consultants, costs of the environmental reports and investigations (including, without limitation, the review thereof and the cost of satisfying any requirements set forth on Exhibit B to the Indemnity), costs of the flood plain certification, title insurance costs, Lender’s internal appraisal review fees, filing and recording fees, mortgage recording and registration taxes, disbursement expenses, and all other costs and expenses payable to third parties incurred by Lender or Borrower in connection with the Loan. Such costs and expenses shall be so paid by Borrower whether or not the Loan is fully advanced.

VI.3

Using Loan Proceeds.

Borrower shall use the Loan proceeds solely to purchase the Project.

VI.4

Keeping of Records.

Borrower shall set up and maintain accurate and complete books, accounts and records pertaining to the Project in a manner reasonably acceptable to Lender. Borrower will permit representatives of Lender, Consultants and Title Company, upon reasonable  advance  written notice and at a time or times that will not interfere with Borrower’s normal business operations, to have access to and to inspect and copy all books, records and contracts of Borrower; provided that no notice or such restriction shall apply following the occurrence and during the continuance of an Event of Default. Any such inspection by Lender, Consultants, or Title Company shall be for the sole benefit and protection of Lender or Title Company, and neither Lender nor Title Company shall have any obligation to disclose the results thereof to Borrower or to any third party.

VI.5

Providing Financial Information.

Borrower shall furnish such financial information concerning Borrower and the Project as Lender may request, and shall furnish to Lender:

(a)

Annual Financial Statements. (a) As soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Guarantor, a copy of the annual audit report of the Guarantor and its Subsidiaries for such year including a copy of the audited consolidated balance sheet of the Guarantor and its Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, together with an opinion as to such audit report of MOSS ADAMS, LLP or other independent certified public accountants of nationally or regionally recognized standing which does not contain a “going concern” or similar qualification or exception, or qualification arising out of the scope of the audit, together with related consolidating financial statements, together with related consolidating schedules.

(b)

Income Tax Returns. As soon as available and in any event within thirty

(30) days after the deadline for filing, the same copies of the federal and state income tax returns (with all supporting schedules) of Borrower due during the term of the Loan.

(c)

Litigation and Other Proceedings. Promptly in writing, notice of (i) all litigation  against  Borrower  in  which  the  amount  sought  to  be  recovered  exceeds

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$500,000, except in cases when the claim is covered by insurance and the insurance company has agreed to assume the defense of the claim and (ii) all proceedings before any governmental or regulatory agency affecting Borrower which, if adversely determined, would constitute a material adverse change as to Borrower.

(d)

Defaults. Within five (5) Business Days after the occurrence of any event becomes known to Borrower which constitutes an Event of Default or would constitute an Event of Default with the giving of notice or the lapse of time, or both, notice of such occurrence, together with a detailed statement by an officer of Borrower of the steps being taken by Borrower to cure such event.

(e)

Other Information. From time to time, with reasonable promptness, such further information regarding the business, affairs and financial condition of Borrower or the Project as Lender may reasonably request.

All such financial and other statements required hereby as to Borrower and the Project shall be in reasonable detail, shall be prepared for the Borrower in accordance with GAAP consistently applied, and shall be certified as true, correct and complete.

VI.6

Leases.

The Borrower shall not modify the Pro-Dex Lease or enter into any other Lease without the Lender’s prior written consent.

VI.7

Maintaining Insurance Coverage.

Borrower shall, at all times while the Loan is outstanding, maintain, or cause to be maintained, in effect (and shall furnish to Lender copies of), insurance policies or other evidence of insurance as required under the Deed of Trust and shall furnish to Lender upon written request proof of payment of all premiums for such insurance.

VI.8

Transferring, Conveying or Encumbering the Project.

Borrower may not (a) effect or permit a Transfer (except as permitted in Section 1.11 of the Deed of Trust) or (b) default or permit any default of Section 1.11 of the Deed of Trust, without, in each case, the prior written consent of Lender.

VI.9

Complying with the Loan Documents and Other Documents.

Borrower shall promptly and faithfully comply with and perform all of its covenants, agreements and obligations under the Loan Documents, under the Leases, and under all other contracts and agreements to which Borrower is a party relating to the ownership, occupancy, use, development, construction or management of the Project to the extent the failure to do so is likely to result in a material adverse change, and shall comply with all requests by Lender which are consistent with the terms thereof.

VI.10

Agreements with Affiliates.

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Any development, management, leasing or other agreement with Borrower or any Affiliate relating to the Project, which requires Borrower to pay any fee, commission or other compensation of any kind to Borrower or any such Affiliate, must be approved by Lender, in writing.

VI.11

Appraisals.

Borrower agrees that Lender shall have the right to obtain, at Borrower's expense, an updated Appraisal of the Project at any time that (a) an Event of Default exists hereunder, or (b) such Appraisal is required by then current banking regulations. In the event that Lender shall elect to obtain such an Appraisal, Lender may immediately commission an appraiser acceptable to Lender and Borrower, at Borrower's cost and expense, to prepare the Appraisal and Borrower shall fully cooperate with Lender and the appraiser in obtaining the necessary information to prepare such Appraisal. In the event that Borrower fails to cooperate with Lender in obtaining such an Appraisal or in the event that Borrower shall fail to pay for the cost of such Appraisal, immediately upon demand, such event shall constitute an Event of Default hereunder and Lender shall be entitled to exercise all remedies available to it hereunder.

VI.12

Other Indebtedness.

Without the prior written consent of Lender, Borrower shall not create nor permit to remain outstanding any indebtedness in excess of $50,000 for borrowed money or any guarantees or contingent liabilities of any sort whatsoever, other than the Loan. Unsecured loans by an Affiliate of Borrower can be made at any time to the Borrower without the consent of the Lender.

VI.13

Miscellaneous.

Borrower shall also:

(a)

Maintain its existence as a limited liability company in good standing under the laws of its jurisdiction of organization and its qualification to transact business in each other jurisdiction where failure so to qualify would permanently preclude Borrower from enforcing its rights with respect to any material asset or would expose Borrower to any material liability or make any material change to its organizational documents;

(b)

File all tax returns and reports which are required by law to be filed by it and pay before they become delinquent all taxes, assessments and governmental charges and levies imposed upon it and on the Project and all claims or demands of any kind which, if unpaid, might result in the creation of a lien upon its property; provided that the foregoing items need not be paid if they are being contested in accordance with Section

1.6 of the Deed of Trust; and

(c)

Give prompt written notice to Lender of the commencement of any action, suit or proceeding before any court or arbitrator or any governmental department, board, agency or other instrumentality affecting Borrower or any property of Borrower, or to which Borrower is a party in which an adverse determination or result could have a material adverse effect on the business, operations, property or condition (financial or

24

otherwise) of Borrower or on the ability of Borrower to perform its obligations under this Agreement and the other Loan Documents, stating the nature and status of such action, suit or proceeding.

(d)

Promptly notify Lender in writing of any change in the jurisdiction of organization or place of business of, or the change in the legal, trade or fictitious business names used by Borrower, and Lender is hereby authorized to file or record any additional financing statements, amendments and other certificates necessary to reflect any such changes.

VI.14

Other Agreements.

Borrower shall not execute any agreement relating to the property management, parking management, leasing, marketing, brokerage services, operation, maintenance or sale (unless an express precondition to the consummation of such sale agreement is that the Loan will be paid in full) of the Project without the prior written consent of Lender.  Borrower shall provide to Lender a copy of any such agreement covering the Project which it executes within ten (10) business days after the execution thereof. Any such agreement shall be subordinated to the lien of the Mortgage and the other security for the Loan on terms and conditions acceptable to Lender.

VI.15

ERISA Plan.

Borrower shall not adopt or have any liability with respect to any ERISA Plan.

VI.16

Operating Accounts.

Borrower agrees to maintain all checking and other operating accounts with Lender, including all accounts maintained by Borrower with respect to the Project.

VI.17

Compliance with Applicable Laws.

Borrower shall promptly and faithfully comply with, conform to and obey all present and future Governmental Requirements and all other legal requirements applicable to Borrower or the Project, including, without limitation, all Environmental Laws (as defined in the Deed of Trust), where failure to so do would have a material adverse effect on Borrower or the Project; provided, however, that Borrower shall have the ability to contest any alleged failure to perform such legal requirements so long as such obligations shall be contested by appropriate proceedings pursued in good faith and any penalties or other adverse effect of  its nonperformance shall be stayed or otherwise not in effect, or a cash escrow deposit equal to all such contested payments and potential penalties or other charges shall have been established with Lender.

VI.18

Notice.

Borrower shall give prompt written notice to Lender of any Default or Event of Default describing  the  same  and  stating  the  date  of  commencement  thereof,  what  action  Borrower

25

proposes to take with respect thereto, and the estimated date, if known, on which such action will be taken.

VI.19

Contingent Liabilities.

Without Lender’s prior written consent, Borrower shall not assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligation of any Person (other than Borrower), except (i) by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, or (ii) by indemnity agreements given by Borrower to a title insurance company or a bonding company in connection with any project being constructed or sold by Borrower.

VI.20

Escrow Assignment.

Borrower shall assign to Lender all of Borrower’s rights to any security deposit, letter of credit, or escrowed funds that any Tenant is required to provide as a credit enhancement under a Lease.

VI.21

Leases.

Borrower shall comply in all material respects with the terms, covenants, agreements, conditions and requirements of the Leases, as, when and in the manner required thereby, and shall furnish Lender with written evidence of compliance with each condition of the Leases which, if not satisfied, permits the Tenant thereunder to terminate its Lease; shall take all actions required to satisfy its obligations under the Leases in accordance with their terms; and shall notify Lender of any default or event of default under any Lease.

VI.22

Approval of Plat.

The Land shall not be subdivided or partitioned without the prior written consent of Lender, which may be given or withheld in its reasonable discretion.

VI.23

Single Purpose Entity.

Borrower shall not (i) engage in any business or activity other than the ownership, operation and maintenance of the Project and activities incidental thereto, (ii) acquire any material asset other than the Project, or (iii) make any investment in or acquire the obligations or securities of any other Person.  Borrower shall not own any interest in any other entity.

VI.24

Permits and Licenses.

Borrower shall  promptly obtain and comply with all Permits necessary for the use, operation, and occupancy of the Project.

VI.25

Merger and Consolidation.

26

Without Lender’s prior written consent, Borrower shall not merge or consolidate into any Person or permit any other Person to merge into it, or acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all or substantially all of the assets of any other Person.

VI.26

Environmental.

Borrower shall  comply with each requirement  (if any) set forth on Exhibit B of the Indemnity within the applicable time period set forth therein.

VI.27

Distributions.

Borrower shall not directly or indirectly make any distributions, loans, repayment of loans from any of its members or Affiliates, returns of capital contributions, payment of developer, management or other fees, or any other payments to its any of its members or Affiliates, whether or not such payment is required or permitted pursuant to the terms of Borrower’s organizational documents.

VI.28

Development Agreement(s); etc.

Borrower shall not execute any development agreement, redevelopment agreement, or any other agreement under which Borrower, the City, any other governmental entity or Person is required to complete any on-site or off-site improvements in connection with the Project without the prior written consent of Lender.

VI.29

USA Patriot Act.

Borrower shall not (i) conduct any business or engage in any transaction relating to any property blocked pursuant to Executive Order No. 13224, or (ii) engage in or conspire to engage in any transaction that evades or avoids, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224, the USA Patriot Act of 2001 (Public Law 107-56) and federal regulations issued with respect thereto or any other anti-terrorism law, or (iii) become a “Special Designated National” or “Blocked Person” as those terms are defined by the Office of Foreign Assets Control (31 C.F.R. § 500 et. seq.). Borrower shall deliver to Lender any certification or other evidence reasonably requested by Lender confirming Borrower’s compliance with this Section.

ARTICLE VII

EVENTS OF DEFAULT

VII.1

Events of Default.

Any of the following events shall constitute an Event of Default under this Agreement:

(a)

Borrower shall default in the payment of principal and shall fail to cure such default within five (5) days of when due according to the terms of the Note;

27

(b)

Borrower shall default in the payment of interest and shall fail to cure such default within five (5) days of when due according to the terms of the Note, or in the payment of fees or other amounts payable to Lender hereunder, under the Note or under any of the other Loan Documents and shall fail to cure such defaults within ten (10) days after the due date thereof;

(c)

Any representation or warranty made by any Loan Party in this Agreement, or in any of the other Loan Documents, in any financial statement or in any schedule, report, certificate, notice or writing furnished by Borrower pursuant to this Agreement or any Loan Document or in connection with the Loan, is untrue or incomplete in any material respect on the date stated or certified, which default, if curable, is not cured to Lender’s reasonable satisfaction within thirty (30) days after Lender gives Borrower written notice thereof;

(d)

Any Loan Party shall commit an act of bankruptcy; or shall apply for, consent to or permit the appointment of a receiver, custodian, trustee or liquidator for it or him or any of its or his property or assets; or shall generally fail to, or admit in writing its or his inability to, pay its debts as they mature; or shall make a general assignment for the benefit of creditors or shall be adjudicated bankrupt or insolvent; or shall take other similar action for the benefit or protection of its or his creditors; or shall give notice to any governmental body of insolvency or of pending insolvency or suspension of operations; or shall file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors, or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, rearrangement, dissolution, liquidation or other similar debtor relief law or statute; or shall file an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or statute; or shall be dissolved, liquidated, terminated or merged; or shall effect a plan or other arrangement with creditors; or a trustee, receiver, liquidator or custodian shall be appointed for it or for any of its property or assets and such receiver, liquidator, or custodian shall not be discharged within sixty (60) days after the date of appointment; or a petition in involuntary bankruptcy or similar proceedings is filed against it and is not dismissed within sixty (60) days after the date of its filing;

(e)

A judgment or judgments for the payment of money in excess of the sum of $100,000.00 in the aggregate shall be rendered against Borrower, and Borrower shall not discharge the same or provide for discharge thereof in accordance with the terms thereof, or procure a stay of execution thereof, prior to any execution thereon by the judgment creditor, within thirty (30) days from the date of entry thereof, and within said period of thirty (30) days, or such longer period during which execution thereon shall be stayed, appealed therefrom and cause the execution thereof to be stayed during such appeal;

(f)

The maturity of any material indebtedness of Borrower (other than indebtedness under this Agreement) shall be accelerated, or Borrower shall fail to pay any such indebtedness when due (after the lapse of any applicable grace period) or, in the case of such indebtedness payable on demand, when demanded (after the lapse of any applicable grace period), or any event shall occur or condition shall exist and shall

28

continue for more than the period of grace, if any, applicable thereto and shall have the effect of causing, or permitting the holder of any such indebtedness or any trustee or other Person acting on behalf of such holder to cause, such material indebtedness to become due prior to its stated maturity or to realize upon any collateral given as security therefor. For purposes of this Section, indebtedness of Borrower shall be deemed "material" if it exceeds $500,000 as to any item of indebtedness or in the aggregate for all items of indebtedness with respect to which any of the events described in this Section VII.1(f) has occurred;

(g)

Any execution or attachment shall be issued whereby any property of Borrower shall be taken or attempted to be taken and the same shall not have been vacated or stayed within thirty (30) days after the issuance thereof;

(h)

Any Loan Document shall, at any time, cease to be in full force and effect or shall be judicially declared null and void, or the validity or enforceability thereof shall be contested in a legal proceeding by Borrower, or Lender shall cease to have a valid and perfected security interest having the priority contemplated thereunder in all of the collateral described therein, other than by action or inaction of Lender, if any of the foregoing shall remain unremedied for ten (10) days or more after receipt or written notice thereof by Borrower from Lender;

(i)

Any default or event of default occurs under any document (other than the Loan Documents) evidencing, securing or guarantying any indebtedness of Borrower to Lender or any affiliate of Lender, after the giving of notice and the expiration of any applicable cure period;

(j)

A default occurs in the performance of any of Borrower's obligations in Sections VI.2, VI.7, VI.8, VI.9, VI.13, VI.25 or VI.27 hereof;

(k)

Any ERISA Event shall occur and there shall result from such occurrence a claimed liability of Borrower or any of its ERISA Affiliates to PBGC or the Internal Revenue Service that exceeds $1,000,000.00 in the aggregate for all such occurrences;

(l)

Borrower shall default in any other loan or indebtedness to Lender or any affiliate of Lender, after the giving of notice and the expiration of any applicable cure period;

(m)

Borrower shall default in the performance or observance  of  any agreement, covenant or condition required to be performed or observed by Borrower under the terms of this Agreement, or any of the other Loan Documents other than a default described in Sections VII.1(a) through (l) above, which default, if curable, is not cured within thirty (30) days after Lender gives Borrower written notice thereof; provided, however, that if said curable default cannot reasonably be cured within said thirty (30) day period, but Borrower commences the cure thereof within said thirty (30) day period and prosecutes said cure diligently, continuously and in good faith, said thirty

(30) day period shall be extended by the period of time reasonably required to cure the same, not to exceed an additional sixty (60) days; or

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(n)

The  occurrence  of  any  “Event  of  Default”  under  the  Pro-Dex  Credit Agreement.

VII.2

Rights and Remedies.

Upon the occurrence of an Event of Default, unless such Event of Default is subsequently waived in writing by Lender, Lender shall be entitled, at the option of Lender, to exercise any or all of the following rights and remedies, consecutively or simultaneously, and in any order:

(a)

Make one or more further Advances, without liability to make any subsequent Advance and without waiving any Default or Event of Default;

(b)

Declare the Note and all amounts payable under this Agreement to be forthwith due and payable, whereupon the Note (both as to principal and interest) and all such amounts shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived;

(c)

Proceed to protect and enforce its rights hereunder, under the Note and under any other Loan Document by a suit or suits in equity or at law, either for specific performance of any term, covenant, agreement or condition contained herein or in aid of the execution of any power herein or therein granted for collection of all amounts payable under this Agreement or the Note or for the enforcement of any other legal or equitable remedy;

(d)

Exercise any or all remedies specified herein and in the other Loan Documents, including without limitation, the right to foreclose the Deed of Trust, and/or any other remedies which it may have therefor at law, in equity or under statute;

(e)

Cure the Event of Default on behalf of Borrower, and, in doing so, enter upon the Project, and expend such sums as it may deem desirable, including reasonable attorneys' fees, all of which shall be deemed to be Advances hereunder, even if such Advances cause the Loan to exceed the face amount of the Note, and such Advances shall bear interest at the Default Rate provided herein and shall be payable by Borrower on demand;

(f)

Declare an Event of Default under any agreement to which Lender and Borrower are parties, whether or not such agreement concerns the Loan transaction contemplated by this Agreement, and may effectuate any remedies provided for in such agreement; and/or

In addition to the other remedies set forth herein and in the other Loan Documents, Borrower hereby irrevocably authorizes Lender, at any time while an Event of Default continues, to set off any sum due to or incurred by Lender against all deposits and credits of Borrower with, and any and all claims of Borrower against, Lender. Such right shall exist whether or not Lender shall have made any demand hereunder or under any other Loan Document, whether or not said sums, or any part thereof, or deposits and credits held for the account of Borrower is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to Lender.  Lender agrees that, as promptly as is reasonably

30

possible after the exercise of any such setoff right, it shall notify Borrower of its exercise of such setoff right; provided, however, that the failure of Lender to promptly provide such notice shall not affect the validity of the exercise of such setoff rights. Nothing in this Agreement shall be deemed a waiver or prohibition of or restriction on Lender to all rights of banker's lien, setoff and counterclaim available pursuant to law.

ARTICLE VIII

MISCELLANEOUS

VIII.1

Binding Effect; Waivers; Cumulative Rights and Remedies.

The provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, personal representatives, legal representatives, successors and assigns; provided, however, that neither this Agreement nor the proceeds of the Loan may be assigned by Borrower voluntarily, by operation of law or otherwise, without the prior written consent of Lender. No delay on the part of Lender in exercising any right, remedy, power or privilege hereunder, under the Note or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege hereunder constitute such a waiver or exhaust the same, all of which shall be continuing. The rights and remedies of Lender specified in this Agreement shall be in addition to, and not exclusive of, any other rights and remedies which Lender would otherwise have at law, in equity or by statute, and all such rights and remedies, together with Lender’s rights and remedies under the other Loan Documents, are cumulative and may be exercised individually, concurrently, successively and in any order.

VIII.2

Survival.

All covenants, agreements, representations and warranties made in this Agreement and the other Loan Documents shall survive the execution of this Agreement, the making of the Advances by Lender, and the execution of the other Loan Documents, and shall continue until Lender receives payment in full of the outstanding principal interest and other charges due Lender hereunder and under the other Loan Documents, and until there is no obligation to make any Advances hereunder, except that the indemnification provisions herein and in the other Loan Documents shall survive such payment and termination of such obligations.

VIII.3

Governing Law; Waiver of Jury Trial; Jurisdiction; Judicial Reference Agreement.

THIS AGREEMENT WAS NEGOTIATED, EXECUTED AND DELIVERED IN THE STATE OF CALIFORNIA, IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS). TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY RIGHT TO ASSERT THAT THE LAW OF ANY OTHER

31

JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION RELATING TO THE LOAN AND/OR THE LOAN DOCUMENTS. AT THE OPTION OF LENDER, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA OR IN EITHER THE STATE COURT SITTING IN ORANGE COUNTY, CALIFORNIA OR HENNEPIN COUNTY, MINNESOTA; BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURTS AND WAIVES ANY ARGUMENT THAT JURISDICTION IN SUCH FORUMS IS NOT PROPER OR CONVENIENT OR THAT VENUE IN SUCH FORUMS IS NOT PROPER OR CONVENIENT. IN THE EVENT AN ACTION IS COMMENCED IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM  THE RELATIONSHIP CREATED BY THIS AGREEMENT, LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE, BUT ANY APPLICABLE STATUTE OF LIMITATIONS SHALL CONTINUE TO BE TOLLED FOR A PERIOD OF SIX (6) MONTHS AFTER SUCH DISMISSAL.

THE TERMS OF THE JUDICIAL REFERENCE AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE.

VIII.4

Counterparts.

(a)

This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Lender constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect to the subject matter hereof. Except as provided in Article III, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received a counterpart hereof executed by the Borrower. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic (“pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement and each other Loan Document has been reviewed by all parties hereto and incorporate the requirements of such parties. Each party waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement or any other Loan Document.

32

(b)

The words “execution,” “signed,” “signature,” and words of similar import in any Loan Document shall be deemed to include electronic or digital signatures or the keeping of records in electronic form, each of which shall be of the same effect, validity and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic Signatures and Records Act of 1999 (NY State Technology Law §§ 301-309), or any other similar state laws based on the Uniform Electronic Transactions Act.

VIII.5

Notices.

Any notice required or permitted to be given by either party hereto to the other under the terms of this Agreement, or documents related hereto, shall be in writing and shall be deemed to have been given on the date the same is deposited in the United States Mail, registered or certified, return receipt requested, postage prepaid, or deposited with Federal Express, Airborne, UPS or another reputable overnight courier, addressed to the party to which the notice is to be given at the address set forth opposite its name below, or at any other address specified in a written notice given by such party to the other parties not less than ten (10) days prior to the effective date of the address change.

VIII.6

No Third Party Reliance.

No third party shall be entitled to rely upon this Agreement or to have any of the benefits of Lender’s interest hereunder, unless such third party is an express assignee of all or a portion of Lender’s interest hereunder.

VIII.7

Sale of Loan or Participations.

Lender may at any time sell, assign, transfer, syndicate, grant participations in or otherwise dispose of any portion of the Loan (each such interest so disposed of being herein called a “Transferred Interest”) to banks, insurance companies, other financial institutions or other Persons acceptable to Lender (hereinafter called “Transferees”), pursuant to such transfer agreements, co- lender agreements, participation agreements and/or agency agreements into which Lender and its Transferees may enter and by which, if requested by Lender, Borrower shall agree in writing to recognize. In addition, Lender may, at any time and from time to time, in its ordinary course of business and in accordance with applicable law, (i) assign an undivided interest in the Loan to an affiliate of Lender or to any successor entity by reason of any merger affecting Lender; or (ii) pledge or assign the same to any Federal Reserve Bank in accordance with applicable law. At the written request of Lender, in the event of any such sale, assignment, transfer or syndication, Borrower shall execute separate new promissory notes to the assignor and its assignee, in the amounts of their respective interests in the Loan after said assignment, and shall deliver the same to the assignor and the assignee, in exchange for the assignor’s existing promissory note. All such separate new promissory notes shall be entitled to all the rights and benefits accorded to the Note under the terms of the Loan Documents. Lender may divulge all information relating to Borrower or the Project which Lender has to any actual or potential Transferee, and Borrower shall cooperate with Lender in connection with the transfer.  Borrower agrees that each Transferee shall

33

be entitled to the benefits hereof with respect to its Transferred Interest and that each Transferee may exercise any and all rights of banker’s lien, setoff and counterclaim as if such Transferee were a direct lender to Borrower. If Lender makes any assignment to a Transferee, then such Transferee, to the extent of such assignment (unless otherwise provided therein), shall become a lender hereunder and shall have all of the rights and obligations of Lender hereunder, and Lender shall be released from its duties and obligations under this Agreement to the extent of such assignment. Borrower hereby acknowledges and agrees that (a) any assignment or participation of the Loan by Lender is not subject to Borrower’s consent; (b) there are no restrictions on the type of assignee, participant or Transferee to whom Lender may transfer its interest; and (c) Lender’s ability to provide information to prospective Transferees in advance of a transfer is not subject to Borrower’s consent or other material restriction. Lender’s election to do any of the items in this Section VIII.8 shall be at no cost to Borrower.

VIII.8

Time of the Essence.

Time is of the essence hereof with respect to the dates, terms and conditions of this Agreement.

VIII.9

Further Assurances.

Borrower agrees that at any time, and from time to time, after the execution and delivery of the Loan Documents, it will, upon the reasonable request of Lender, execute and deliver such further documents, financing statements and other documents and instruments, pay all fees in connection therewith and do such further acts and things consistent with the terms and conditions of the Loan Documents, as Lender may reasonably request, all in order fully to effect the purposes of the Loan Documents.

VIII.10

USA Patriot Act Notice, Compliance.

The USA Patriot Act of 2001 (Public Law 107-56) and federal regulations issued with respect thereto require all financial institutions to obtain, verify and record certain information that identifies individuals or business entities which open an “account” with such financial institution. Consequently, Lender may from time to time request, and Borrower shall provide to Lender, Borrower’s address, tax identification number and/or such other identification information as shall be necessary for Lender to comply with federal law. An “account” for this purpose may include, without limitation, a deposit account, cash management service, a transaction or asset account, a credit account, a loan or other extension of credit and/or other financial services product.

VIII.11

Entire Agreement; No Oral Modifications.

This Agreement, the other Loan Documents and the other documents mentioned herein set forth the entire agreement of the parties with respect to the Loan and supersede all prior written or oral understandings and agreements with respect thereto. No modification or waiver of any provision of this Agreement shall be effective unless set forth in writing and signed by the parties hereto. This Agreement, the Note and each other Loan Document has been reviewed by the parties hereto and incorporate the requirements of the parties.  Each party waives the rule of

34

construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement, the Note or any other Loan Document.

VIII.12

Captions.

The headings or captions of the Articles and Sections set forth herein are for convenience only, are not a part of this Agreement and are not to be considered in interpreting this Agreement.

VIII.13

Joint and Several Liability.

If Borrower consists of more than one (1) individual and/or entity, each of said individuals and/or entities shall be jointly and severally liable for each covenants, agreement, representation and warranty of Borrower hereunder.

VIII.14

Borrower-Lender Relationship.

The relationship between Borrower and Lender created hereby and by the other Loan Documents shall be that of a borrower and a lender only, and in no event shall Lender be deemed to be a partner of, or a joint venturer with, Borrower.

VIII.15

Document Imaging, Electronic Transactions and the UETA.

Without notice to or consent of Borrower, Lender may create electronic images of this Agreement and the other Loan Documents and destroy paper originals of any such imaged documents. Provided that such images are maintained by or on behalf of Lender as part of Lender’s normal business processes, Borrower agrees that such images have the same legal force and effect as the paper originals, and are enforceable against Borrower. Furthermore, Borrower agrees that Lender may convert any Loan Document into a “transferrable record” as such term is defined under, and to the extent permitted by, the Uniform Electronic Transactions Act (the “UETA”), with the image of such instrument in Lender’s possession constituting an “authoritative copy” under the UETA.

[Remainder of Page Intentionally Left Blank]

35

Exhibit A

Legal Description

and

Permitted Encumbrances

Legal Description:

The following real property situated in the County of Orange, State of California:

PARCEL A:

LOT 38 OF TRACT NO. 8590, IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 346, PAGES 19 THROUGH 24, INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM THE  LAND, ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOW, GEOTHERMAL STEAM, AND ALL PRODUCTS DERIVED FORM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR, AND STORING IN AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THE LAND, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE DEED RECORDED FEBRUARY 26,1976 IN BOOK 11656, PAGE 1935 OF OFFICIAL RECORDS.

APN: 432-472-21

PARCEL B:

EASEMENTS FOR VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS, DRIVEWAY AND PARKING PURPOSES AS DESCRIBED AND SET FORTH IN THAT CERTAIN DECLARATION OF ESTABLISHMENT OF EASEMENTS RECORDED NOVEMBER 30, 1990 AS INSTRUMENT NO. 90- 632492, AS AMENDED BY THAT CERTAIN AMENDMENT TO DECLARATION OF ESTABLISHMENT OF EASEMENTS RECORDED NOVEMBER 12, 1998 AS INSTRUMENT NO. 19980767973, BOTH OF OFFICIAL RECORDS.

APN: 432-472-21

A-1

Permitted Encumbrances:

1.

Property taxes, including any personal property taxes and any assessments collected with taxes, not yet due or payable.

2.

Water rights, claims or title to water, whether or not disclosed by the public records.

3.

Easement(s) for the purpose(s) shown below and rights incidental thereto as provided in a document:

Purpose:

Perpetual air or flight easement, also referred to as “avigation rights.”

Recording Date:

March 17, 1964

Recording No:

in Book 6965, Page 721 of Official Records

Affects:

All the air space above said Land.

4.

Covenants, conditions and restrictions but omitting any covenants or restrictions, if any, including but not limited to those based upon race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, veteran or military status, genetic information, medical condition, citizenship, primary language, and immigration status, as set forth in applicable state or federal laws, except to the extent that said covenant or restriction is permitted by applicable law, as set forth in the document

Recording Date:

April 30, 1974

Recording No:

in Book 11132, Page 514 of Official Records

Said covenants, conditions and restrictions provide that a violation thereof shall not defeat the lien of the Deed of Trust.

5.

Easement(s) for the purpose(s) shown below and rights incidental thereto as set forth in a document:

Purpose:

Public utilities

Recording Date:

February 29, 1976

Recording No:

in Book 11656, Page 1935 of Official Records

Affects:

A portion of said land as more particularly described in said document.

6.

Easement(s) for the purpose(s) shown below and rights incidental thereto, as granted in a document:

Granted to:

Southern California Edison Company

Purpose:

Public utilities

Recording Date:

April 13, 1976

Recording No:

in Book 11703, Page 566 of Official Records

Affects:

A portion of said land as more particularly described in said document.

7.

Covenants, conditions and restrictions but omitting any covenants or restrictions, if any, including but not limited to those based upon race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, veteran or military status, genetic information, medical condition, citizenship, primary language, and immigration status, as set forth in applicable state or federal laws, except to the extent that said covenant or restriction is permitted by applicable law, as set forth in the document

Recording Date:

October 29, 1976

Recording No:

in Book 11943, Page 1885 of Official Records

8.

Matters contained in that certain document

Entitled:

Declaration of Establishment of Easements.

Recording Date:

November 30, 1990

Recording No:

as Instrument No. 90-632492 of Official Records

Among other things, said Declaration of Establishment of Easements provides for: Easements over said land for vehicular and pedestrian ingress and egress, driveway parking purposes as described therein.

“Amendment to Declaration of Establishment of Easements” subject to all the terms, provisions and conditions therein contained recorded November 12, 1998 as Instrument No. 19980767973 of Official Records.

9.

Easement(s) for the purpose(s) shown below and rights incidental thereto, as granted in a document:

Granted to:

Pacific Bell

Purpose:

Underground communication facilities

Recording Date:

March 23, 2000

Recording No:

as Instrument No. 20000149037 of Official Records

Affects:

A portion of said land as more particularly described in said document.

10.

Matters contained in that certain document

Entitled:

Agreement With Conditions of Approval Discretionary Permit Approval

Recording Date:

October 5, 2016

Recording No:

as Instrument No. 2016000486609 of Official Records

Exhibit B

Buildings and Improvements

A commercial office building with approximately 25,230 square feet of rentable space with parking situated on the Land.

B-1

Exhibit C

AUTHORIZED PERSONS

Richard L. Van Kirk

Alisha Charlton

SCHEDULE OF PERMITS

EXHIBIT 10.2

TERM NOTE

FOR VALUE RECEIVED, the undersigned, PDEX FRANKLIN LLC, a California limited liability company (the “Borrower”), promises to pay to the order of MINNESOTA BANK & TRUST, a Minnesota state banking corporation (the “Lender”), the principal sum of FIVE MILLION TWO HUNDRED SEVEN THOUSAND FOUR HUNDRED SEVENTY TWO and No/100ths Dollars ($5,207,472.00) on or before November 1, 2030, or such earlier date as this promissory note (this “Note”) may be declared due and payable by Lender pursuant to the terms hereof and the terms of the Loan Agreement (the “Maturity Date”), together with interest on the principal amount thereof outstanding from time to time at the rate or rates described below, and any and all other amounts which may be due and payable hereunder or under any of the Loan Documents (as hereinafter defined) from time to time. This Note is made pursuant to the terms and conditions set forth in that certain Loan Agreement dated of even date herewith by and between Borrower and Lender (as amended, modified, supplemented or restated from time to time being the “Loan Agreement”). The amount disbursed by the Lender to Borrower, repayment of which is evidenced by this Note, is referred to as the “Loan”. All capitalized terms used and not expressly defined herein shall have the meanings given to such terms in the Loan Agreement.

Interest Prior to Default.

(a)

Interest Rate. The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full at a per annum rate of interest (the “Interest Rate”) of 3.55%.

(b)

Change in Capital Adequacy Requirements. Section II.6 of the Loan Agreement is hereby incorporated herein in its entirety.

(c)

Interest After Default. Upon the occurrence and during the continuance of an Event of Default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 3.000 percentage point margin (“Default Rate Margin”) over the interest rate that would otherwise be in effect hereunder. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

Payment Terms.

(a)

Principal and Interest. Payments of principal and interest due under this Note, if not sooner declared to be due in accordance with the provisions hereof, shall be made as follows (each such date when a payment is due and payable, a “Payment Date”):

(i)

On December 1, 2020, the Borrower shall make a payment of accrued interest;

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(ii)

On the first day of each subsequent month and continuing until the Maturity Date, the Borrower shall make payments of principal and interest, each in the amount of $30,335.21; and

(iii)

The Loan shall be due and payable, and Borrower hereby promises to pay the outstanding principal amount of the Loan to Lender, together with all accrued interest thereon then remaining unpaid and all other unpaid amounts, charges, fees and expenses outstanding under this Note or under any of the other Loan Documents, on the Maturity Date. THIS NOTE REQUIRES A BALLOON PAYMENT.

(b)

Method of Payments. Both principal and interest are payable in lawful money of the United States of America to the Lender at 7701 France Avenue South, Edina, MN 55435 (or other location specified by the Lender) in immediately available funds. By its execution of this Note, the Borrower authorizes the Lender to charge from time to time against any of Borrower’s depository accounts maintained with the Lender any such payments when due and the Lender will use its reasonable efforts to notify the Borrower of such charges.

Interest Calculation Method. Interest on this Note shall be calculated on the basis of a 360-day year and the actual number of days elapsed in any portion of a month in which interest is due. If any payment to be made by the Borrower hereunder shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

Prepayment; Minimum Interest Charge. Borrower may voluntarily prepay the loan evidenced by this Note in whole or in part at any time; provided, however, that any such prepayment shall, unless made in connection with a casualty or condemnation event, be accompanied by a prepayment premium in immediately available funds (the “Prepayment Premium”) equal to: (1) 4% of the amount prepaid if such event occurs during the first or second Loan Year; (2) 3% of the amount prepaid if such event occurs during the third or fourth Loan Year; (3) 2% of the amount prepaid if such event occurs during the fifth or sixth Loan Year; or (4) 1% of the amount prepaid if such event occurs during the seventh or eighth Loan Year. For purposes of this Note, the term “Loan Year” shall mean the 12-month period commencing on the date of this Note (or the anniversary date thereof in any subsequent year) and ending on the day preceding the immediately following anniversary date of this Note (i.e., the first Loan Year shall end on November 5, 2021 and the second Loan Year shall commence on November 6, 2021). Notwithstanding the foregoing, no Prepayment Premium shall be due on prepayments in an aggregate amount of up to twenty percent (20%) of outstanding principal of the Loan in any Loan Year if such prepayment is made from the Borrower’s internally-generated cash flow. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments of accrued unpaid interest. Rather, early payment will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights

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under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Minnesota Bank & Trust, 7701 France Avenue South, Edina, MN 55435.

Late Charge. If a payment due hereunder is not made within seven days after the date when due, Borrower shall pay to Lender a late payment charge of 5% of the amount of the overdue payment to compensate Lender for a portion of the cost related to handling the overdue payment.

Loan Agreement. This Note is the Term Note referred to in, and is entitled to the benefits of, the Loan Agreement. The Loan Agreement, among other things, (i) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events prior to the maturity hereof upon the terms and conditions therein specified; (ii) contains provisions for the mandatory prepayment hereof upon certain conditions; and (iii) contains provisions for the voluntary prepayment hereof, upon certain conditions.

Security Instrument. This Note is secured by, among other things, that certain Deed of Trust With Assignment of Leases and Rents, Security Agreement and Fixture Filing of even date herewith covering certain real property (“Property”) situated in the City of Tustin, County of Orange, State of California, as therein described, dated of even date herewith executed by the Borrower in favor of the Lender.

Waiver of Presentment and Demand for Payment; Etc. Borrower and any endorsers or guarantors hereof severally waive presentment and demand for payment, notice of intent to accelerate maturity, protest or notice of protest and non-payment, bringing of suit and diligence in taking any action to collect any sums owing hereunder or in proceeding against any of the rights and properties securing payment hereunder, and expressly agree that this Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further security or the release of any security for this Note, all without in any way affecting the liability of Borrower and any endorsers or guarantors hereof. No extension of time for the payment of this Note, or any installment thereof, made by agreement by Lender with any person now or hereafter liable for the payment of this Note, shall affect the original liability under this Note of the undersigned, even if the undersigned is not a party to such agreement.

Event of Default. Any Event of Default (as defined in the Loan Agreement) shall constitute an Event of Default under this Note. Upon the occurrence of an Event of Default, in addition to any other rights or remedies Lender may have at law or in equity or under the Loan Agreement or under any other Loan Document, Lender may, at its option, without notice to Borrower, declare immediately due and payable the entire unpaid principal sum hereof, together with all accrued and unpaid interest thereon plus any other sums owing at the time of such Event of Default pursuant to this Note, the Security Instrument or any other Loan Document. The failure to exercise the foregoing or any other options shall not constitute a waiver of the right to exercise the same or any

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other option at any subsequent time in respect of the same event or any other event. The acceptance by the holder of any payment hereunder which is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the foregoing options at that time or at any subsequent time.

Expense Reimbursement. Borrower agrees to reimburse Lender upon demand for all reasonable out-of-pocket expenses (including attorneys’ fees and legal expenses) in connection with Lender’s enforcement of the obligations of the Borrower hereunder or under the Security Instrument or any other collateral document, whether or not suit is commenced including, without limitation, attorneys’ fees and legal expenses in connection with any appeal of a lower court’s order or judgment. The obligations of the Borrower under this paragraph shall survive any termination of the Loan Agreement, this Note, the Security Instrument, and any other Loan Document.

Successors and Assigns. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns except that Borrower may not assign or transfer its rights hereunder without the prior written consent of Lender, which consent may be withheld in Lender’s sole discretion. In connection with the actual or prospective sale by the Lender of any interest or participation in the loan obligation evidenced by this Note, Borrower hereby authorizes the Lender to furnish any information concerning the Borrower or any of its affiliates, however acquired, to any person or entity.

Usury. Borrower and Lender agree that no payment of interest or other consideration made or agreed to be made by Borrower to Lender pursuant to this Note shall, at any time, be in excess of the maximum rate of interest permissible by law. In the event such payments of interest or other consideration provided for in this Note shall result in an effective rate of interest which, for any period of time, is in excess of the limit of the usury or any other law applicable to the loan evidenced hereby, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied to the unpaid principal balance and not to the payment of interest; if a surplus remains after full payment of principal and lawful interest, the surplus shall be remitted by Lender to Borrower, and Borrower hereby agrees to accept such remittance. This provision shall control every other obligation of the Borrower and Lender relating to this Note.

Business Purpose Loan. The Loan is a business loan. Borrower hereby represents that this loan is for commercial use and not for personal, family or household purposes. The Borrower agrees that the Loan evidenced by this Note is an exempted transaction under the Truth In Lending Act, 15 U.S.C., §1601, et seq.

Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.

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WAIVER OF DEFENSES. OTHER THAN CLAIMS BASED UPON THE FAILURE OF THE LENDER TO ACT IN A COMMERCIALLY REASONABLE MANNER, THE BORROWER WAIVES EVERY PRESENT AND FUTURE DEFENSE (OTHER THAN THE DEFENSE OF PAYMENT IN FULL OR THAT NO EVENT OF DEFAULT EXISTED), CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING THIS NOTE OR ANY OF THE LOAN DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.

Waiver of Right to Jury Trial; Venue. BORROWER WAIVES TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION RELATING TO OR ARISING FROM THIS NOTE. AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA OR THE STATE COURT SITTING IN EITHER HENNEPIN COUNTY, MINNESOTA OR IN ORANGE COUNTY, CALIFORNIA. BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT PROPER OR CONVENIENT. IN THE EVENT AN ACTION IS COMMENCED IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS NOTE, LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

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IN WITNESS WHEREOF, the Borrower has caused this Term Note to be signed by its duly authorized officer in favor of MINNESOTA BAN K & TRUST and to be dated as of the date set forth above.

BY INITIALING BELOW, THE UNDERSIGNED ACKNOWLEDGE(S) AND AGREE(S) THAT (A) THE UNDERSIGNED WAIVE(S) ANY RIGHTS UNDER SECTION 2954 .10 OF THE CALIFORNIA CIVIL CODE OR ANY SUCCESSOR STATUTE; AND (B) LENDER HAS MADE OR EXTENDED THE LOAN OR CREDIT PURSUANT TO THIS NOTE IN RELIANCE ON THESE AGREEMENTS .

EXHIBIT 10.3

This instrument was prepared with the assistance

of an attorney licensed in the State of California,

and after recording should be returned to:

Fabyanske, Westra, Hart & Thomson, P.A.

333 South Seventh Street, Suite 2600

Minneapolis, Minnesota 55402

Attn:  Frederick H. Ladner, Esquire

THIS SPACE ABOVE FOR RECORDER’S USE

DEED OF TRUST WITH ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING

THIS DEED OF TRUST WITH ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING is made as of November 6, 2020 by PDEX FRANKLIN LLC, a California limited liability company ("Borrower"), to The Heritage Escrow Company, a California corporation, as trustee ("Trustee"), for the benefit of MINNESOTA BANK & TRUST, a Minnesota state banking corporation, as beneficiary ("Lender"). The respective addresses of Borrower, Trustee and Lender are set forth in Section 5.5.

THIS DEED OF TRUST is given, among other things, for the purpose of securing a loan (the "Loan") from Lender, as lender, to Borrower, as borrower, the proceeds of which are to be used to pay, among other things, a portion of the costs of the purchasing certain real property located in County of Orange, State of California, which real property is more particularly described in Exhibit A attached hereto and by this reference incorporated herein (the "Land").

FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Borrower, as trustor, hereby irrevocably grants, bargains, sells, transfers, conveys and assigns to Trustee, as trustee, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, for the benefit and security of Lender, as beneficiary, under and subject to the terms and conditions hereinafter set forth, all of Borrower’s rights, title and interest in the Land;

TOGETHER WITH all of Borrower’s rights title and interest in any and all buildings and improvements now or hereafter erected on the Land including, without limitation, the fixtures, attachments, appliances, equipment, machinery, and other articles attached to said buildings and improvements (the "Improvements"), all of which are deemed and construed to be a part of the realty (the Land and the Improvements are collectively referred to herein as the "Premises");

TOGETHER WITH all of Borrower’s rights, title and interest in all Leases (as defined in Section 2.1 below) and all Rents (as defined in Section 2.1 below);

TOGETHER WITH all interests, estates or other claims, both in law and in equity, which Borrower now has or may hereafter acquire in the Premises;

TOGETHER WITH all right, title, and interest of Borrower in (a) the property and interests in property described on Exhibit B attached hereto and incorporated herein by reference, all other personal property now or hereafter owned by Borrower that is now or hereafter located on or used in connection with the Premises, (c) all other rights and interests of Borrower now or hereafter held in personal property that is now or hereafter located on or used in connection with the Premises, and (d) all proceeds thereof (such personal property and proceeds are collectively referred to in this Deed of Trust as the "Personal Property");

TOGETHER WITH all easements, rights-of-way and rights now owned or hereafter acquired by Borrower used in connection therewith or as a means of access thereto, and all rights to the nonexclusive use of common drive entries, and all tenements, hereditaments and appurtenances thereof and thereto, and all water and water rights and shares of stock evidencing the same;

TOGETHER WITH all leasehold estate, right, title and interest of Borrower in and to all leases, subleases, licenses, franchises and other agreements covering the Premises or any portion thereof now or hereafter existing or entered into, and all right, title and interest of Borrower thereunder including, without limitation, all cash or security deposits, advance rentals, and deposits or payments of similar nature;

TOGETHER WITH all right, title and interest now owned or hereafter acquired by Borrower in and to any greater estate in the Premises;

TOGETHER WITH all right, title and interest of Borrower, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Premises, and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Premises;

TOGETHER WITH all the estate, interest, right, title, other claim or demand, both in law and in equity, including claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Borrower now has or may hereafter acquire in the Premises, and any and all awards made for the taking by eminent domain, or by any proceeding of purchase in lieu thereof, of the whole or any part of the Trust Estate (as hereinafter defined), including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages.

The entire estate, property and interest hereby conveyed to Trustee may hereafter be collectively referred to as the "Trust Estate."

FOR THE PURPOSE OF SECURING:

(a)

payment of all principal, interest, prepayment fees and other charges, late charges and loan fees, and all other sums owing under or evidenced by that certain Term Note (the "Note") of even date herewith in the principal amount of Five Million Two Hundred Seven Thousand Four Hundred Seventy Two and No/100ths Dollars ($5,207,472.00), executed and delivered by Borrower to the order of Lender pursuant to

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that certain Loan Agreement of even date herewith between Borrower and Lender (the "Loan Agreement"), which Note and Loan Agreement and any and all modifications, extensions, renewals and replacements thereof are by this reference hereby made a part hereof;

(b)

payment of all sums advanced by Lender to protect the Trust Estate, with interest thereon from the date of the advance, including, if not paid within ten days of demand therefor at the Default Rate (as defined in the Note);

(c)

payment of all other sums, with interest thereon, which may hereafter be loaned to Borrower, or its successors or assigns, by Lender, or its successors or assigns when evidenced by a promissory note or notes executed by Borrower reciting that they are secured by this Deed of Trust;

(d)

performance of every obligation, covenant or agreement of Borrower contained herein and in the Loan Agreement, and all supplements, amendments and modifications thereto and all extensions and renewals thereof;

(e)

performance of every obligation, covenant and agreement of Borrower contained in any agreement now or hereafter executed by Borrower which recites that the obligations thereunder are secured by this Deed of Trust;

(f)

compliance with and performance of each and every material provision of any declaration of covenants, conditions and restrictions pertaining to the Trust Estate or any portion thereof; and

(g)

all present and future debts, obligations and liabilities of Borrower (or any Affiliate of Borrower) under or relating to any and all present and future interest rate hedging agreements and Hedge Agreements which Borrower (or any Affiliate of Borrower) elects to enter into with Lender or any Affiliate of Lender in connection with or relating to the Loan, heretofore, now, or hereafter made, incurred, or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined.

Notwithstanding the above or anything in this Deed of Trust to the contrary, however, this Deed of Trust shall not secure (i) Borrower's obligations under the Unsecured Environmental Indemnity (as defined in the Loan Agreement), (ii) any other third party guaranty of the Loan or Borrower's obligations under the Loan Documents, or (iii) any other Loan Document that specifically states that it is not secured by this Deed of Trust. All initially capitalized terms used herein without definition are as defined in the Loan Agreement. The rate of interest of the obligation secured hereunder may vary from time to time.

TO  PROTECT  THE  SECURITY  OF  THIS  DEED  OF  TRUST,  BORROWER HEREBY COVENANTS AND AGREES AS FOLLOWS:

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ARTICLE I

COVENANTS AND AGREEMENTS OF BORROWER

1.1

Payment of Secured Obligations. Borrower shall pay when due the principal of and the interest on the indebtedness evidenced by the Note, all charges, fees and other sums as provided in the Loan Documents (including, without limitation, any prepayment fee); the principal of and interest on any future advances secured by this Deed of Trust; and the principal of and interest on any other indebtedness secured by this Deed of Trust.

1.2

Maintenance, Repair, Alterations, and Compliance with Laws. Borrower shall keep the Trust Estate in good condition and repair, normal wear and tear excepted; Borrower shall not remove, demolish or substantially alter any of the Improvements except upon the prior written consent of Lender; Borrower shall complete promptly and in a good and workmanlike manner any Improvement which may be now or hereafter constructed on the Land and promptly restore in like manner any portion of the Improvements which may be damaged or destroyed thereon from any cause whatsoever, and pay when due all claims for labor performed and materials furnished therefor; Borrower shall comply in all material respects with all laws, ordinances, regulations, covenants, conditions and restrictions now or hereafter affecting the Trust Estate or any part thereof or requiring any alterations or improvements, and the requirements of insurance companies and any bureau or agency which establishes standards of insurability; Borrower shall not commit or permit any physical waste or deterioration of the Trust Estate, and shall keep and maintain abutting grounds, sidewalks, roads, parking and landscape areas in good and neat order and repair; Borrower shall not commit, suffer or permit any act to be done in or upon the Trust Estate in violation of any law, ordinance or regulation; and Borrower shall do all other acts which from the character or use of the Trust Estate may be reasonably necessary to maintain and preserve its value. Borrower shall not apply for, willingly suffer or permit any change in zoning, subdivision, or land use regulations affecting the Premises without the consent of Lender. Borrower shall not drill or extract or enter into any lease for the drilling for or extraction of oil, gas or other hydrocarbon substances or any mineral of any kind or character on or from the Trust Estate or any part thereof without first obtaining Lender's written consent.

1.3

Required Insurance. Borrower shall at all times provide, maintain and keep in force or cause to be provided, maintained and kept in force, at no expense to Trustee or Lender, all policies of insurance that are required pursuant to the Loan Agreement or other Loan Documents, or that are otherwise reasonably required by Lender. The insurers, coverages, endorsements, certificates, liability limits and all other matters relating to such insurance policies shall be subject to the requirements set forth in Exhibit C attached hereto and by this reference incorporated herein .

1.4

Delivery of Policies, Payment of Premiums.

(a)

At Lender's option all policies of insurance must either have attached thereto a lender's loss payable endorsement for the benefit of Lender in form satisfactory to Lender or must name Lender as an additional insured (in each case, in accordance with the requirements of the Loan Agreement). At Lender's option, Borrower shall furnish Lender with an original of all policies of insurance required under Section 1.3 above or a certificate of insurance for each required policy setting forth the coverage, the limits of

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liability, the name of the carrier, the policy number and the period of coverage (and subject to any further requirements set forth in the Loan Agreement). If Lender consents, Borrower may provide any of the required insurance through blanket policies carried by Borrower and covering more than one location, or by policies procured by a party holding under Borrower; provided, however, all such policies must be in form and substance and issued by companies reasonably satisfactory to Lender. At least ten (10) days prior to the expiration of each required policy, Borrower shall deliver to Lender evidence satisfactory to Lender of the payment of premium and the renewal or replacement of such policy continuing insurance in the form required by this Deed of Trust. All such policies must contain a provision that, notwithstanding any contrary agreement between Borrower and an insurance company, such policies will not be cancelled, allowed to lapse without renewal, surrender, reduced in scope or limits of coverage or otherwise materially amended, without at least thirty (30) days' prior written notice to Lender.

(b)

In the event Borrower fails to provide, maintain, keep in force or deliver to Lender the policies of insurance required by this Deed of Trust or by any Loan Document, Lender may (but has no obligation to) procure such insurance or single-interest insurance for such risks covering Lender's interest, and Borrower will pay all premiums thereon promptly upon demand by Lender, and until such payment is made by Borrower, the amount advanced by Lender with respect to all such premiums will bear interest at the Interest Rate and if not paid within ten (10) days of demand therefor, at the Default Rate. After the occurrence of an Event of Default (as defined below) (whether or not such Event of Default is subsequently cured), upon request by Lender, Borrower shall deposit with Lender an initial cash reserve in an amount equal to one-half (½) of the estimated aggregate annual insurance premiums on all policies of insurance required by this Deed of Trust and thereafter continue to deposit with Lender, in monthly installments, an amount equal to one-twelfth (1/12) of the estimated aggregate annual insurance premiums on all policies of insurance required by this Deed of Trust. In such event Borrower further agrees to cause all bills, statements or other documents relating to the foregoing insurance premiums to be sent or mailed directly to Lender. Upon receipt of such bills, statements or other documents evidencing that a premium for a required policy is then payable, and providing Borrower has deposited sufficient funds with Lender pursuant to this Section 1.4, Lender shall timely pay such amounts as may be due thereunder out of the funds so deposited with Lender. If at any time and for any reason the funds deposited with Lender are or will be insufficient to pay such amounts as may be then or subsequently due, Lender shall notify Borrower and Borrower shall immediately deposit an amount equal to such deficiency with Lender. Notwithstanding the foregoing, nothing contained herein will cause Lender to be deemed a trustee of said funds or to be obligated to pay any amounts in excess of the amount of funds deposited with Lender pursuant to this Section 1.4, nor will anything contained herein modify the obligation of Borrower set forth in Section 1.3 hereof to maintain and keep such insurance in force at all times. Lender may commingle said reserve with its own funds and Borrower will be entitled to no interest thereon.

1.5

Casualties; Insurance Proceeds. Borrower shall give prompt written notice thereof to Lender after the occurrence of any casualty to or in connection with the Trust Estate or any part thereof, whether or not covered by insurance, to the extent the amount claimed on account of such casualty is in excess of $500,000.00 (the “Threshold Amount”).  In the event of such

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casualty in excess of the Threshold Amount, all proceeds of insurance must be payable to Lender, and Borrower hereby authorizes and directs any affected insurance company to make payment of such proceeds directly to Lender. If Borrower receives any proceeds of insurance resulting from such casualty in excess of the Threshold Amount, Borrower shall promptly pay over such proceeds to Lender. Lender is hereby authorized and empowered by Borrower to participate in the settlement, adjustment or compromise of any and all claims for loss, damage or destruction under any policy or policies of insurance in excess of the Threshold Amount and following an Event of Default is authorized and empowered by Borrower to settle, adjust or compromise any and all claims for loss, damage or destruction under any policy or policies of insurance. So long as no Event of Default has occurred and is continuing, Borrower shall be entitled to receive and use any and all loss proceeds where the amount claimed is under the Threshold Amount to the restoration of the Improvements. In the event of any damage or destruction of the Premises in excess of the Threshold Amount, Lender shall apply all loss proceeds remaining after deductions of all expenses of collection and settlement thereof, including, without limitation, reasonable attorneys' and adjustors' fees and expenses, to the restoration of the Improvements but only as repairs or replacements are effected and continuing expenses become due and payable; provided that the following conditions are met: (a) no Event of Default exists; (b) the Loan is in balance (taking into account all costs of reconstruction and the amount of the loss proceeds, if any, the amount of operating expenses and interest that will accrue under the Note, and any additional funds deposited by Borrower with Lender to pay for such costs of reconstruction); (c) Lender has determined, in its sole discretion, that the damage or destruction can be repaired and that the damaged portion of the Improvements can be completed according to the requirements of the Loan Agreement; (d) Lender and all applicable governmental authorities have approved the final plans and specifications for reconstruction of the damaged portion of the Improvements; (e) Lender has approved, for the reconstruction of the damaged portion of the Improvements, in its sole discretion, the budget, the construction schedule and the construction contract; and (f) Lender has determined, in its sole discretion, that after the reconstruction work is completed, the value of the Project will not be less than the original appraised value of the Project, as approved by Lender. If any one or more of such conditions set forth herein have not been met, Lender will not be obligated to make any further disbursements pursuant to the Loan Agreement, and Lender shall apply all such loss proceeds, after deductions as herein provided, to the repayment of the outstanding balance of the Note, together with all accrued interest thereon, in such order as Lender may elect, notwithstanding that the outstanding balance may not be due and payable. Nothing herein contained will be deemed to excuse Borrower from repairing or maintaining the Trust Estate as provided in Section 1.2 hereof or restoring all damage or destruction to the Trust Estate, regardless of whether or not there are insurance proceeds available to Borrower or whether any such proceeds are sufficient in amount, and the application or release by Lender of any insurance proceeds will not cure or waive any default or notice of default under this Deed of Trust or invalidate any act done pursuant to such notice.

1.6

Assignment of Policies Upon Foreclosure. In the event of foreclosure of this Deed of Trust or other transfer of title or assignment of the Trust Estate in extinguishment, in whole or in part, of the debt secured hereby, all right, title and interest of Borrower in and to all policies of insurance required by Section 1.3 will inure to the benefit of and pass to the successor in interest to Borrower or the purchaser or grantee of the Trust Estate.

1.7

Indemnification; Subrogation; Waiver of Offset.

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(a)

If Lender is made a party to any litigation concerning the Note, this Deed of Trust, any of the Loan Documents, the Trust Estate or any part thereof or interest therein, or the occupancy of the Trust Estate by Borrower, then Borrower shall indemnify, defend and hold Lender harmless from all liability by reason of said litigation, including reasonable attorneys' fees and expenses incurred by Lender as a result of any such litigation, whether or not any such litigation is prosecuted to judgment. However, Borrower will not be obligated to indemnify, defend and hold Lender harmless from any claims which arise solely out of the gross negligence or willful misconduct of Lender. Lender may employ an attorney or attorneys to protect its rights hereunder, and in the event of such employment following any breach by Borrower, Borrower shall pay Lender reasonable attorneys' fees and expenses incurred by Lender, whether or not an action is actually commenced against Borrower by reason of its breach. This Section 1.7 will not apply to any matters covered by the Unsecured Environmental Indemnity.

(b)

Borrower waives any and all right to claim or recover against Lender, its officers, employees, agents and representatives, for loss of or damage to Borrower, the Trust Estate, Borrower's property or the property of others under Borrower's control from any cause insured against or required to be insured against by the provisions of this Deed of Trust.

(c)

All sums payable by Borrower pursuant to this Deed of Trust must be paid as and when due without notice or demand (except as expressly required hereunder), counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Borrower hereunder will in no way be released, discharged or otherwise affected (except as expressly provided herein) by reason of: (i) any damage to or destruction of or any condemnation or similar taking of the Trust Estate or any part thereof; (ii) any restriction or prevention of or interference by any third party with any use of the Trust Estate or any part thereof; (iii) any title defect or encumbrance or any eviction from the Premises or any part thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Lender, or any action taken with respect to this Deed of Trust by any trustee or receiver of Lender, or by any court, in any such proceeding; (v) any claim which Borrower has or might have against Lender; (vi) any default or failure on the part of Lender to perform or comply with any of the terms hereof or of any other agreement with Borrower; or (vii) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not Borrower has notice or knowledge of any of the foregoing. Except as expressly provided herein, Borrower waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any sum secured hereby and payable by Borrower.

1.8

Taxes and Impositions.

(a)

Borrower shall pay, or cause to be paid prior to delinquency, all real property taxes and assessments, general and special, and all other taxes and assessments of any kind or nature whatsoever, including, without limitation, nongovernmental levies or assessments such as maintenance charges, levies or charges resulting from covenants, conditions and restrictions affecting the Trust Estate, which are assessed or imposed upon

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the Trust Estate, or become due and payable, and which create, may create or appear to create a lien upon the Trust Estate, or any part thereof, or upon any person, property, equipment or other facility used in the operation or maintenance thereof (all the above collectively hereinafter referred to as "Impositions"); provided, however, that if, by law any such Imposition is payable, or may at the option of the taxpayer be paid, in installments, Borrower may pay the same or cause it to be paid, together with any accrued interest on the unpaid balance of such Imposition, in installments before any fine, penalty, interest or cost may be added thereto for the nonpayment of any such installment and interest.

(b)

If at any time after the date hereof there is assessed or imposed (i) a tax or assessment on the Trust Estate in lieu of or in addition to the Impositions payable by Borrower pursuant to Section 1.8(a), or (ii) a license fee, tax or assessment imposed on Lender and measured by or based in whole or in part upon the amount of the outstanding obligations secured hereby, then all such taxes, assessments or fees will be deemed to be included within the term "Impositions" as defined in Section 1.8(a) and Borrower shall pay and discharge the same as herein provided with respect to the payment of Impositions. If Borrower fails to pay such Impositions prior to delinquency or if Borrower is prohibited by law from paying such Impositions, Lender may at its option declare all obligations secured hereby together with all accrued interest thereon, immediately due and payable. Anything to the contrary herein notwithstanding, Borrower will have no obligation to pay any franchise, estate, inheritance, income, excess profits or similar tax levied on Lender or on the obligations secured hereby.

(c)

Subject to the provisions of Section 1.8(d) and upon request by Lender, Borrower shall deliver to Lender before any such Imposition is due and payable official receipts of the appropriate taxing authority, or other proof reasonably satisfactory to Lender, evidencing the payment thereof.

(d)

Borrower has the right to contest or object to the amount or validity of any such Imposition by appropriate proceedings, but this will not be deemed or construed in any way as relieving, modifying or extending Borrower's covenant to pay any such Imposition at the time and in the manner provided in this Section 1.8, unless Borrower has given prior written notice to Lender prior to delinquency of the same of Borrower's intent to so contest or object to an Imposition, and unless, at Lender's sole option, (i) Borrower demonstrates to Lender's reasonable satisfaction that the proceedings to be initiated by Borrower will conclusively operate to prevent the sale of the Trust Estate, or any part thereof, to satisfy such Imposition prior to final determination of such proceedings; or (ii) Borrower furnishes a good and sufficient bond or surety as requested by and reasonably satisfactory to Lender; or (iii) Borrower demonstrates to Lender's reasonable satisfaction that Borrower has provided as good and sufficient undertaking as may be required or permitted by law to accomplish a stay of any such sale.

(e)

After the occurrence of an Event of Default (whether or not such Event of Default is subsequently cured), upon request by Lender, Borrower shall pay to Lender an initial cash reserve in an amount equal to one-half (½) of all Impositions for the ensuing tax fiscal year and shall thereafter continue to deposit with Lender, in monthly installments, an amount equal to one-twelfth (1/12) of the sum of the annual Impositions reasonably

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estimated by Lender, for the purpose of paying the installment of Impositions next due on the Trust Estate (funds deposited for this purpose will hereinafter be referred to as "Impounds"). In such event Borrower further agrees to cause all bills, statements or other documents relating to Impositions to be sent or mailed directly to Lender. Upon receipt of such bills, statements or other documents, and providing Borrower has deposited sufficient Impounds with Lender pursuant to this Section 1.8(e), Lender shall timely pay such amounts as may be due thereunder out of the Impounds so deposited with Lender. If at any time and for any reason the Impounds deposited with Lender are or will be insufficient to pay such amounts as may then or subsequently be due, Lender may, at its option, notify Borrower and upon such notice Borrower shall deposit immediately an amount equal to such deficiency with Lender. Notwithstanding the foregoing, nothing contained herein will cause Lender to be deemed a trustee of said funds or to be obligated to pay any amounts in excess of the amount of funds deposited with Lender pursuant to this Section 1.8(e). Lender may commingle Impounds with its own funds and will not be obligated to pay or allow any interest on any Impounds held by Lender pending disbursement or application hereunder. Lender may reserve for future payment of Impositions such portion of the Impounds as Lender may in its absolute discretion deem proper. Should Borrower fail to deposit with Lender (exclusive of that portion of said payments that has been applied by Lender upon any indebtedness or obligation secured hereby) sums sufficient to fully pay such Impounds at least fifteen (15) days before delinquency thereof, Lender may, at Lender's election, but without any obligation to do so, advance any amounts required to make up the deficiency, which advances, if any, will be secured hereby and will be repayable to Lender as herein elsewhere provided, or Lender may, at its option and without making any advance notice whatever, apply any Impounds held by it upon any indebtedness or obligation secured hereby in such order as Lender may determine, notwithstanding that said indebtedness or the performance of said obligation may not yet be due according to the terms thereof. Upon the occurrence of an Event of Default, Lender may, at any time at Lender's option, apply any sums or amounts in its hands received pursuant to Sections 1.4(b) and 1.8(e) hereof, or as rents or income of the Trust Estate or otherwise, to any indebtedness or obligation of Borrower secured hereby in such manner and order as Lender may elect, notwithstanding said indebtedness or the performance of said obligation may not yet be due according to the terms thereof. The receipt, use or application of any such Impounds paid by Borrower to Lender hereunder will not be construed to affect the maturity of any indebtedness secured by this Deed of Trust or any of the rights or powers of Lender or Trustee under the terms of the Loan Documents or any of the obligations of Borrower or any guarantor under the Loan Documents.

(f)

Borrower shall not suffer, permit or initiate the joint assessment of any real and personal property which may constitute all or a portion of the Trust Estate or suffer, permit or initiate any other procedure whereby the lien of the real property taxes and the lien of the personal property taxes will be assessed, levied or charged to the Trust Estate as a single lien.

(g)

Upon the request of Lender, Borrower shall promptly cause to be furnished to Lender, at Borrower's expense, a tax reporting service covering the Trust Estate of the type, duration and with a company satisfactory to Lender.

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1.9

Utilities. Borrower shall pay or shall cause to be paid when due all utility charges that are incurred by Borrower for the benefit of the Trust Estate or that may become a charge or lien against the Trust Estate for gas, electricity, water or sewer services furnished to the Trust Estate and all other assessments or charges of a similar nature, whether public or private, affecting or related to the Trust Estate or any portion thereof, whether or not such taxes, assessments or charges are or may become liens thereon.

1.10

Actions Affecting Trust Estate. Borrower shall give Lender and Trustee prompt written notice of the assertion of any claim with respect to, or the filing of any action or proceeding purporting to affect the Trust Estate, the security hereof or the rights or powers of Lender or Trustee. Borrower shall appear in and contest any such action or proceeding and shall pay all costs and expenses, including cost of evidence of title and attorneys' fees, in any such action or proceeding in which Lender or Trustee may appear.

1.11

Actions By Trustee or Lender to Preserve Trust Estate. If Borrower fails to make any payment or to do any act as and in the manner provided in any of the Loan Documents, Lender and/or Trustee, each in its own discretion, without obligation so to do, without releasing Borrower from any obligation, and without notice to or demand upon Borrower, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof. In connection therewith (without limiting their general powers, whether conferred herein, in other Loan Documents or by law), Lender and Trustee have and are hereby given the right, but not the obligation, (i) to enter upon and take possession of the Trust Estate; (ii) to make additions, alterations, repairs and improvements to the Trust Estate that they or either of them may consider necessary or proper to keep the Trust Estate in good condition and repair; (iii) to appear and participate in any action or proceeding affecting or that may affect the security hereof or the rights or powers of Lender or Trustee; (iv) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt that in the judgment of either may affect or appears to affect the security of this Deed of Trust or be prior or superior hereto; and (v) in exercising such powers, to pay necessary expenses, including reasonable attorneys' fees and costs or other necessary or desirable consultants. Borrower shall, immediately upon demand therefor by Lender and Trustee or either of them, pay to Lender and Trustee an amount equal to all respective costs and expenses reasonably incurred by such party in connection with the exercise by either Lender or Trustee or both of the foregoing rights, including, without limitation, costs of evidence of title, court costs, appraisals, surveys and receiver's, trustee's and reasonable attorneys' fees, together with interest thereon from the date of such expenditures at the Interest Rate and if not paid within ten (10) days of demand therefor, at the Default Rate.

1.12

Transfer of Trust Estate Or Ownership Interests by Borrower. In order to induce Lender to make the loan secured hereby, Borrower agrees that, in the event of any "transfer" (as defined below), without the prior written consent of Lender, Lender has the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transfer will not be deemed to be a waiver of the right to require consent to future or successive transfers. Lender may grant or deny such consent in its sole discretion, and may impose any conditions to such consent in its sole discretion (including, without limitation, changes to the terms of the loan and the imposition of fees) and, if consent should be given, any such transfer will be subject to this Deed of Trust, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein.  Such

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assumption will not, however, release Borrower or any maker or guarantor of the Note from any liability thereunder without the prior written consent of Lender. As used herein, "transfer" includes the direct or indirect sale, agreement to sell, transfer, conveyance, pledge, mortgage, encumbrance, lien, collateral assignment or hypothecation of the Trust Estate, or any portion thereof or interest therein (other than the Permitted Encumbrances), whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Trust Estate, or the lease of all or substantially all of the Trust Estate (excluding, however, any transfers that are specifically permitted by the terms of the Loan Agreement). The term "transfer" also includes the direct or indirect transfer, assignment, withdrawal, hypothecation or conveyance of legal or beneficial ownership of any membership, partnership, stock or other ownership interest (an "ownership interest") that results in a change in control of Borrower or in any member or partner of Borrower (excluding, however, transfers of stock or limited partnership interests in a publicly traded company, or a change in control of a publicly traded company).

1.13

Full Performance Required; Survival of Warranties. All representations, warranties and covenants of Borrower contained in any loan application or made to Lender in connection with the loan secured hereby or contained in the Loan Documents or incorporated by reference therein, will survive the execution and delivery of this Deed of Trust and will remain continuing obligations, warranties and representations (provided that any warranties and representation of Borrower made as of a specific date shall only be required to remain true as of the date made) of Borrower so long as any portion of the obligations secured by this Deed of Trust remains outstanding.

1.14

Eminent Domain. If any proceeding or action is commenced for the taking of the Trust Estate, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, condemnation or otherwise, or if the same is taken or damaged by reason of any public improvement or condemnation proceeding, or in any other manner, or should Borrower receive any notice or other information regarding such proceeding, action, taking or damage, Borrower shall give prompt written notice thereof to Lender. Lender is entitled at its option, without regard to the adequacy of its security, to commence, appear in and prosecute in its own name any such action or proceeding. Lender is also entitled to make any compromise or settlement in its own name in connection with such taking or damage. All compensation, awards, damages, rights of action and proceeds awarded to Borrower by reason of any such taking or damage to the Premises or any part thereof or any interest therein for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other manner (the "Condemnation Proceeds") are hereby assigned to Lender and Borrower agrees to execute such further assignments of the Condemnation Proceeds as Lender or Trustee may require. After deducting therefrom all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit), including attorneys' fees, incurred by it in connection with any such action or proceeding, Lender shall apply all such Condemnation Proceeds to the restoration of the Improvements (other than Condemnation Proceeds attributable to temporary use or occupancy which may be applied, at Lender's option, to installments of principal and interest and other charges due under the Note and other Loan Documents when the same become due and payable) provided that:

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(a)

the taking or damage will not, in Lender's reasonable judgment, materially impair the security for the Loan; and

(b)

all conditions set forth in Section 1.5 are met.

If all of the above conditions are met, Lender shall disburse the Condemnation Proceeds in accordance with the Loan Agreement and only as repairs or replacements are effected and continuing expenses become due and payable. If any one or more of the above conditions are not met, to the maximum extent not prohibited by applicable law, Lender shall apply all of the Condemnation Proceeds, after deductions as herein provided, to the repayment of the outstanding balance of the Note, together with all accrued interest thereon, in such order as Lender may elect, notwithstanding that said outstanding balance may not be due and payable, and Lender will have no further obligation to make disbursements pursuant to the Loan Agreement or the other Loan Documents. Application or release of the Condemnation Proceeds as provided herein will not cure or waive any default or notice of default hereunder or under any other Loan Document or invalidate any act done pursuant to such notice.

1.15

Additional Security. No other security now existing, or hereafter taken, to secure the obligations secured hereby will be impaired or affected by the execution of this Deed of Trust; and all additional security will be taken, considered and held as cumulative. The taking of additional security, execution of partial releases of the security, or any extension of the time of payment of the indebtedness will not diminish the force, effect or lien of this Deed of Trust and will not affect or impair the liability of any maker, surety or endorser for the payment of said indebtedness. If Lender at any time holds additional security for any of the obligations secured hereby, Lender may enforce the sale thereof or otherwise realize upon the same, at its option, either before, concurrently, or after a sale is made hereunder.

1.16

Appointment of Successor Trustee. Lender may, from time to time, by a written instrument executed and acknowledged by Lender and recorded in the County in which the Trust Estate is located and by otherwise complying with the provisions of applicable law, substitute a successor or successors to any Trustee named herein or acting hereunder; and said successor will, without conveyance from the Trustee predecessor, succeed to all title, estate, rights, powers and duties of said predecessor.

1.17

Successors and Assigns. This Deed of Trust applies to, inures to the benefit of (subject, however, to all restrictions on transfer provided in Section 1.12) and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term "Lender" means the owner and holder of the Note, whether or not named as Lender herein. This Section 1.17 will not be deemed a waiver of the provisions of Section 1.12 hereof.

1.18

Inspections. Lender, or its agents, representatives or workers, are authorized to enter the Trust Estate for the purpose of inspecting the same and for the purpose of performing any of the acts it is authorized to perform hereunder or under the terms of any of the Loan Documents as set forth in the Loan Agreement or such other Loan Documents.

1.19

Liens. Borrower shall pay and promptly discharge, at Borrower's cost and expense, all liens, encumbrances and charges (collectively, "Liens") upon the Trust Estate, or any part

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thereof or interest therein; provided, however, that Borrower has the right to contest in good faith and with reasonable diligence the validity of any such Liens, and pending such contest Borrower shall not be deemed in default hereunder if Borrower, within ten (10) days of Lender's request, obtains an appropriate surety bond and takes all other actions required to remove and release such Lien as an encumbrance against all and any portion of the Trust Estate; provided, further, however, Lender will not be required to make any further disbursements of the Loan until all such Liens have been removed as encumbrances against all and any portion of the Trust Estate, and have been insured against by the Title Company to Lender's satisfaction. In the case of stop notices, Borrower has the right to contest, in good faith and with reasonable diligence, the validity of any stop notice, provided Borrower has filed with Lender a bond in form and amount sufficient to release such stop notice. Borrower shall cause any such stop notice to be released within ten (10) days of Lender's request, and, without limiting the foregoing, Lender shall have no obligation to make any further disbursements of the Loan until all stop notices have been fully released or discharged. Notwithstanding the foregoing or anything else contained in this Agreement which may be construed to the contrary, in the event that any action or other proceeding is instituted to enforce or foreclose any Lien against any of the Trust Estate, the Borrower shall immediately (and in any event within three days of request by Lender, or five days prior to any scheduled foreclosure sale, whichever is sooner) make such payments, obtain such surety bonds and/or take such other action as the Lender may, in its sole discretion, require in order to release the Lien. If Borrower fails to remove and discharge any such Lien or stop notice as required above, then, in addition to any other right or remedy of Lender, Lender may, but is not obligated to, discharge the same, either by paying the amount claimed to be due, or by procuring the discharge of such Lien or stop notice by depositing in a court a bond or the amount claimed or otherwise giving security for such claim, or by procuring such discharge in such manner as is or may be prescribed by law. Borrower shall, immediately upon demand therefor by Lender, pay to Lender an amount equal to all costs and expenses incurred by Lender in connection with the exercise by Lender of the foregoing right to discharge any such Lien or stop notice together with interest thereon from the date of such expenditure at the Default Rate.

1.20

Trustee's Powers. At any time, or from time to time, without liability therefor and without notice, upon written request of Lender and presentation of this Deed of Trust and the Note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness or performance of any obligation secured hereby or the effect of this Deed of Trust upon the remainder of said Trust Estate, Trustee may (i) reconvey any part of said Trust Estate, (ii) consent in writing to the making of any map or plat thereof, (iii) join in granting any easement thereon, or (iv) join in any declaration of restrictions, any extension agreement or any agreement subordinating the lien or charge hereof.

1.21

Lender's Powers. Without affecting the liability of any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Trust Estate not then or theretofore released as security for the full amount of all unpaid obligations, Lender may, from time to time and without notice (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such obligation, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed at any time at Lender's option any parcel, portion or all of the Trust Estate, (v) take or release any other or additional security for any obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto.

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1.22

Financial Statements. Borrower shall deliver to Lender copies of such financial statements, balance sheets, profit and loss statements, operating statements, income and expense statements and other financial information in reasonable detail and at the times required by the Loan Agreement. All such statements must be prepared in accordance with the requirements of the Loan Agreement and Lender has the right to audit and inspect all books and records relating thereto.

1.23

Trade Names. At the request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names or fictitious business names under which Borrower intends to operate the Trust Estate or any business located thereon and representing and warranting that Borrower does business under no other trade names or fictitious business names with respect to the Trust Estate. Borrower shall immediately notify Lender in writing of any change in said trade names or fictitious business names, and will, upon request of Lender, execute any additional financing statements and other certificates necessary to reflect the change in trade names or fictitious business names.

1.24

Leasehold. If a leasehold estate constitutes a portion of the Trust Estate, Borrower agrees not to amend, change, terminate or modify such leasehold estate or any interest therein without the prior written consent of Lender. Consent to one amendment, change, agreement or modification will not be deemed to be a waiver of the right to require consent to other, future or successive amendments, changes, agreements or modifications. Borrower shall 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. Borrower agrees to promptly notify Lender in writing with respect to any default or alleged default by any party thereto and to deliver to Lender copies of all notices, demands, complaints or other communications received or given by Borrower with respect to any such default or alleged default. Lender has the option to cure any such default and to perform any or all of Borrower's obligations thereunder. All sums expended by Lender in curing any such default will be secured hereby and will be immediately due and payable without demand or notice and will bear interest from date of expenditure at the Default Rate.

ARTICLE II

ASSIGNMENT OF RENTS AND LEASES

2.1

Assignment. Borrower does hereby absolutely, unconditionally and irrevocably grant, convey, assign, transfer and set over unto Lender the following, as security for the payment and performance of the obligations secured by this Deed of Trust:

(a)

all rights, title, interests, estates, powers, privileges, options and other benefits of Borrower in, to and under any and all leases, subleases, licenses, concessions, tenancies and any other agreements creating the right of possession without a transfer of title, whether oral or written, and whether now or hereafter existing, which cover or affect all or any portion of the Premises, together with all renewals, extensions, modifications, amendments, guaranties, subleases and assignments thereof (herein collectively referred to as the "Leases"); and

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(b)

all of the rents, income, receipts, revenues, issues, profits and other sums of money (hereinafter collectively called the "Rents") that are now and/or at any time hereafter become due and payable to Borrower under the terms of the Leases or arising or issuing from or out of the Leases or from or out of the Premises or any part thereof, including but not limited to minimum rents, additional rents, percentage rents, deficiency rents and liquidated damages following default, security deposits, advance rents, all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by destruction or damage to the Premises and all of Borrower's rights to recover monetary amounts from any lessee in bankruptcy, conservatorship, receivership or similar proceeding including, without limitation, rights of recovery for use and occupancy and damage claims arising out of lease defaults, including rejections, disaffirmances, repudiations, and similar actions, under the Federal Bankruptcy Code, the Federal Deposit Insurance Act and other statutes governing the rights of creditors, including specifically the immediate and continuing right to collect and receive each and all of the foregoing.

2.2

Borrower hereby represents and warrants unto Lender that: (i) Borrower is the sole owner of the entire lessor's interest in the Leases and has good title and good right to assign the Leases and Rents hereby assigned and no other person or entity has any right, title or interest therein; (ii) Borrower has duly and punctually performed all of the terms, covenants, conditions and warranties of the  Leases that were to be kept, observed and performed by it to date; (iii) Borrower has not at any time prior to the date hereof exercised any right to subordinate any Lease to any deed of trust or mortgage or any other encumbrance of any kind; (iv) Borrower has not executed any prior assignments of the Leases or the Rents; (v) no Rents owing under any existing Lease for any period subsequent to the date hereof (other than the first month's rent or the current month's rent) has been collected in advance; (vi) Borrower has not performed any act or executed any other instrument which might prevent Lender from enjoying and exercising any of its rights and privileges evidenced hereby; and (vii) except as disclosed to Lender in writing, each of the existing Leases are valid and subsisting and in full force and effect and unmodified, there exists no defense, counterclaim or set-off to the payment of the Rents thereunder, there are no defaults now existing thereunder and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default.

2.3

Borrower agrees that, so long as the indebtedness evidenced by the Note or any part thereof or any other indebtedness secured by this Deed of Trust shall remain unpaid, Borrower shall not (and any such actions taken by Borrower in violation of the following provisions shall be null and void), unless Lender consents thereto in advance in writing in Lender's sole discretion or such action is expressly permitted by the Loan Agreement or leasing guidelines promulgated by Lender: (i) enter into any Lease covering any portion of the Premises, nor renew or extend the term of any Lease (unless an option therefor was originally reserved by the lessee in the Lease), or relocate or expand the floor space of any lessee under a Lease within the Premises (unless an option therefor was originally reserved by the lessee in the Lease); (ii) make any assignment, pledge or disposition of the Leases or the Rents; (iii) subordinate any of the Leases to any deed of trust or mortgage or any other encumbrance of any kind or permit, consent or agree to such subordination; (iv) reduce the Rents payable under any of the Leases, nor modify, alter or amend any of the Leases or waive, excuse, condone, discount, set off, compromise or in any manner release or discharge any lessee under any Lease of and from any obligations, covenants, conditions and agreements to

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be kept, observed and performed by such lessee, including the obligation to pay the Rents thereunder in the manner and at the place and time specified therein; (v) incur any indebtedness to a lessee under or guarantor of any Lease which may under any circumstance be used as an offset against the Rents or other payments due under said Lease; (vi) exercise any option required or permitted by the terms of any of the Leases without the prior written consent of Lender;(vii) receive or collect any Rents from any present or future lessee of the Premises or any part thereof for a period of more than one month in advance of the date on which such payment is due; (ix) cancel or terminate any of the Leases, accept a surrender thereof, commence an action of ejectment or any summary proceedings for dispossession of a lessee under any of the Leases, or convey or transfer or suffer or permit a conveyance or transfer of the premises demised thereby or of any interest therein so as to effect directly or indirectly, proximately or remotely, a merger of the estates and rights of, or a termination or diminution of the obligations of any lessee thereunder; (x) consent to an assignment or sublease of the interest and estate of any lessee under any of the Leases, whether or not in accordance with its terms; or (xi) modify or change the terms of any guaranty of any of the Leases or cancel or terminate such guaranty.

2.4

Borrower covenants with Lender, for so long as the indebtedness evidenced by this Note or any part thereof or any other indebtedness secured by this Deed of Trust shall remain unpaid, that Borrower shall: (i) observe and perform duly and punctually all the obligations imposed upon any lessor under the Leases and not to do or permit to be done anything to impair the value thereof; (ii) enforce the performance of each and every term, provision, covenant, agreement and condition in the Leases to be performed by any lessee thereunder; (iii) appear in and defend any action or proceeding arising under, occurring out of or in any manner connected with any of the Leases, or the obligations, liabilities or duties of Borrower or any lessee under the Leases and, upon request by Lender, to make appearance in the name and on behalf of Lender, but at the expense of Borrower; (iv) exercise any option or election contained in or relating to any of the Leases which Lender shall require; (v) deliver to Lender executed copies of any and all Leases, renewals and extensions of existing Leases and any and all subsequent Leases upon all or any part of the Premises; (vi) deliver to Lender, promptly upon request by Lender, duly executed tenant estoppel certificates with respect to Leases designated by Lender; (vii) deliver to Lender, promptly upon request by Lender, all security deposits held by Borrower pursuant to the terms of the Leases, which Lender shall hold and disburse in accordance with the terms of the Leases; (viii) execute and deliver at the request of Lender all such further assignments and other documents, instruments and assurances with respect to the Leases, Rents and Premises as Lender shall from time to time require in order to effectuate the purposes of this Article; and (ix) deliver other records and instruments, including but not limited to rent rolls and books of account, that Lender shall from time to time require.

2.5

This is a present, absolute, effective, irrevocable and completed assignment by Borrower to Lender of the Leases and Rents and of the right to collect and apply the same, which is not contingent upon Lender being in possession of the Premises. However, so long as there exists no Event of Default, Borrower shall have a conditional license to collect, but not more than one (1) month in advance, all Rents from the Premises, in trust for Lender, and to use the same for payment of Impositions, insurance premiums which Borrower is required to pay hereunder or under the other Loan Documents, all amounts owing to Lender under the Note and the other Loan Documents, and all other costs and expenses relating to the Premises which Borrower is required to pay under the Loan Documents, as and when due, before using said Rents for any other purpose.

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2.6

Upon or at any time after the occurrence of an Event of Default, or if any representation or warranty made by Borrower to Lender in connection with the loan evidenced by the Note is untrue in any material respect, Lender may, at its option, but without obligation to do so, without notice to or consent of Borrower, either in person or by agent, without regard for the adequacy of the security for the indebtedness secured hereby, the commission of waste or the solvency of Borrower, with or without bringing any action or proceeding, or by a receiver or trustee to be appointed by a court, enter upon, take possession of, maintain, manage and operate the Premises, make, execute, enforce, modify, alter, cancel and accept the surrender of Leases (whether or not the same extend beyond the term of this Deed of Trust), obtain or evict tenants, fix or modify Rents, refund and collect security deposits, and do any acts which Lender deems proper to protect the security hereof, and either with or without taking possession of the Premises, in its own name or in the name of Borrower, sue for or otherwise demand, collect, receive, and give receipts for all Rents, and apply the same upon the costs of collection thereof, including the fees and costs of agents and attorneys employed by Lender; upon the costs of managing, operating and leasing the Premises, including taxes, insurance, maintenance, repairs, improvements, the fees of professional managing agents, architects, engineers and appraisers, license and permit fees, leasing fees and commissions, and Lender's out-of-pocket expenses; and upon any indebtedness secured hereby, in such order as Lender may determine, subject to applicable statutory requirements, if any. Lender or such a receiver shall be entitled to remain in possession of the Premises and to collect the Rents throughout any statutory period of redemption from a foreclosure sale. The entering upon and taking possession of the Premises, the collection of such Rents and the application thereof as aforesaid shall not cure or waive any Event of Default, or invalidate any act done pursuant to such Event of Default or notice of default. Lender may, without entering into possession or pursuing any other remedy as provided in this section or at law or in equity, or in conjunction with such possession or pursuit of other remedy, give notice to any or all lessees authorizing and directing said lessees to pay Rents directly to Lender. If a lessee receives such a notice, Borrower hereby directs such lessee to make payment pursuant thereto, and it shall be conclusively presumed, as between Borrower and such lessee, that such lessee is obligated and entitled to make such payment to Lender, and that such payment constitutes payment of Rents under the Lease in question. Such notice may be given either in Lender's or in Borrower's name. Borrower shall in every way facilitate the payment of Rents to Lender, when Lender has the right to receive the same hereunder. Lender shall be accountable only for Rents actually collected hereunder and not for the rental value of the Premises. Lender shall not be liable for any security deposit made by any lessee unless and until Lender comes into actual, physical possession and control thereof. Failure of Lender to collect, or discontinuance by Lender from collecting, at any time, and from time to time, any Rents, shall not in any manner affect the rights of Lender to thereafter collect the same.

2.7

Lender shall have the right to take possession of and use, without rental or charge, any fixtures, equipment, furniture, appliances, personal property, books of account and records of Borrower or its agents located in or constituting a part of the Premises in connection with Lender's occupancy, management and operation of the Premises. Lender shall be deemed to be the creditor of any lessee in respect of any assignment for the benefit of creditors and any bankruptcy, arrangement, reorganization, insolvency, dissolution, receivership or other debtor-relief proceeding affecting such lessee; provided, however, that Lender shall not be obligated to file timely claims in such proceedings or to otherwise pursue any creditor's rights therein.

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2.8

Borrower shall, at Borrower's sole cost and expense, appear in and defend any dispute, action or proceeding arising under, growing out of or in any manner connected with or affecting any of the Leases or the obligations, duties or liabilities of Borrower or any lessee thereunder, and shall pay all costs and expenses of Lender, including attorneys' fees (prior to trial, at trial and on appeal), in connection with any such dispute, action or proceeding in which Lender may appear or with respect to which it may otherwise incur costs or expenses, whether or not Lender prevails therein.

2.9

Should Borrower fail to make any payment or to do any act as herein provided, then Lender may, but without obligation to do so, without notice or demand to or upon Borrower, and without releasing Borrower from any obligation hereof, make or do the same in such manner and to such extent as Lender may deem necessary or desirable to protect the security hereof, including specifically, without limiting its general powers, appearing in and defending any action or proceeding purporting to affect the security hereof or the rights or powers of Lender, and observing, performing and discharging all or any of the obligations, covenants and agreements of Borrower in the Leases. In exercising any such powers, Lender may pay its costs and expenses, employ counsel and incur and pay attorneys' fees (prior to trial, at trial and on appeal), and shall receive reimbursement thereof from Borrower upon demand. Borrower hereby grants to Lender an irrevocable power of attorney, coupled with an interest, to perform all of the acts and things provided for in this Article as Borrower's agent and in Borrower's name.

2.10

Borrower agrees to reimburse Lender, upon demand, for all sums expended by Lender under the authority hereof, together with interest thereon at the Default Rate specified in the Note from the date expended, and the same shall be added to the indebtedness evidenced by the Note and shall be secured by this Deed of Trust.

2.11

LENDER SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY BORROWER RESULTING FROM LENDER'S FAILURE TO LET THE PREMISES, OR ANY PART THEREOF, OR FROM ANY OTHER ACT OR OMISSION OF LENDER UNDER OR RELATING TO THE LEASES (REGARDLESS OF WHETHER SUCH LOSS IS THE RESULT OF LENDER'S NEGLIGENCE) UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER, NOR SHALL LENDER BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY UNDER THE LEASES BY REASON OF THIS INSTRUMENT OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER. Lender shall not be liable for its failure to collect, or its failure to exercise diligence in the collection of, Rents under the Leases, but shall be accountable only for Rents that Lender actually receives. Borrower will indemnify and hold harmless Lender (for purposes of this paragraph, the term "Lender" shall include the directors, officers, partners, employees and agents of Lender and any persons or entities owned or controlled by, owning or controlling, or under common control or affiliated with Lender) from and against, and reimburse Lender for, all claims, demands, liabilities, losses, damages, causes of action, judgments, penalties, costs and expenses (including, without limitation, reasonable attorneys' fees) incurred under the Leases by reason of this instrument or the exercise of rights or remedies hereunder, or which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the Leases, including specifically any obligation or responsibility for any security deposits or other deposits delivered to Borrower by any lessee under any Lease and not

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assigned and delivered to Lender. THE RELEASES AND INDEMNITIES CONTAINED IN THIS PARAGRAPH SHALL INCLUDE CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) RESULTING FROM THE NEGLIGENCE OF LENDER OR ANY STRICT LIABILITY, BUT NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF

LENDER. The foregoing releases and indemnities shall not terminate upon release or other termination of the assignment pursuant to this paragraph. Any amount to be paid under this paragraph by Borrower to Lender shall be a demand obligation owing by Borrower to Lender, shall bear interest from the date such amount becomes due until paid at the Default Rate stated in the Note, and shall be secured by this Deed of Trust and by any other instrument securing the Note. The assignment pursuant to this paragraph shall not operate to place responsibility upon Lender for the control, care, management or repair of the Premises, nor for the carrying out of any of the terms and conditions of the Leases; nor shall it operate to make Lender responsible or liable for any waste committed on the Premises by the tenants or by any other parties or for any dangerous or defective condition of the Premises, or for any negligence in the management, upkeep, repair or control of the Premises resulting in loss or injury or death to any tenant, licensee, employee or stranger. Lender shall not be deemed to be a partner of, or a joint venturer with, Borrower with respect to the Premises or to be a participant of any kind in the management or operation of the Premises. Neither this assignment, nor the exercise by Lender of its rights hereunder, shall be deemed to constitute Lender a mortgagee in possession of the Premises, unless Lender elects in writing to be so constituted.

2.12

The assignment pursuant to this Article is primary in nature to the obligation evidenced and secured by the Note, this Deed of Trust and any other document given to secure and collateralize the indebtedness secured by this Deed of Trust. Borrower agrees that Lender may enforce this assignment without first resorting to or exhausting any other security or collateral; provided however, that nothing herein contained shall prevent Lender from suing on the Note, foreclosing this Deed of Trust and/or exercising any other right under any document securing the payment of the Note or at law or equity.

2.13

In the event any lessee under the Leases should be the subject of any proceeding under the Federal Bankruptcy Code or any other federal, state or local statute which provides for the possible termination or rejection of any of the Leases assigned hereby, Borrower covenants and agrees that if any Lease is so rejected, no settlement for damages shall be made without the prior written consent of Lender, and any check in payment of damages for rejection of any such Lease will be made payable to both Borrower and Lender. Borrower hereby assigns any such payment to Lender and further covenants and agrees that upon the request of Lender, it will duly endorse to the order of Lender any such check, the proceeds of which will be applied to the Note and other indebtedness secured by this Deed of Trust, principal, interest, attorneys' and collection fees and other amounts, in such order as Lender in its sole discretion may determine.

2.14

Nothing contained herein and no act done or omitted by Lender pursuant to the powers and rights granted it hereunder shall be deemed to be a waiver by Lender of its rights and remedies under the Note or a waiver or curing of any default hereunder or under the Note, and the assignment pursuant to this Article is made and accepted without prejudice to any of the rights and remedies possessed by Lender under the terms of the Note.  The right of Lender to collect said

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principal sum, interest and indebtedness and to enforce any other security therefor held by it may be exercised by Lender either prior to, simultaneously with, or subsequent to any action taken by it hereunder.

2.15

Notwithstanding (a) the fact that any Lease or the leasehold estate created thereby may be held, directly or indirectly, by or for the account of any person or entity which shall have an interest in the fee estate of the Premises, (b) the operation of law or (c) any other event, lessee's leasehold estate under such Lease shall not merge into the fee estate and the lessee shall remain obligated under such lease as assigned by this assignment.

2.16

In the event of a conflict between that separate Assignment of Leases and Rents dated of even date herewith executed by Borrower in favor of Beneficiary and this Article II, the terms which better insure the payment to Beneficiary of the Rents or which enlarge the rights and remedies of Beneficiary shall govern and control.

ARTICLE III

REMEDIES UPON DEFAULT

3.1

Events of Default. Upon written notice to Borrower, any of the following events will constitute an Event of Default hereunder (an "Event of Default"):

(a)

default in the payment of principal or interest as provided under the terms of the Note or the Loan Agreement, which is not cured within any applicable notice and cure period, if any, provided in the Note or the Loan Agreement with respect to such default; or

(b)

a breach by Borrower of any representation, warranty or covenant in this Deed of Trust which is not cured within any applicable notice and cure period, if any, provided in the Loan Agreement with respect to such breach; or

(c)

the occurrence of any other Event of Default (i.e., not described in (a) or (b) above), as defined in the Loan Agreement or in any of the other Loan Document.

3.2

Acceleration Upon Default, Additional Remedies. Upon the occurrence of an Event of Default, Lender may, at its option, declare all indebtedness secured hereby to be immediately due and payable without presentment, demand, protest or notice of any kind. Thereafter Lender may:

(a)

Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of the Trust Estate, or any part thereof, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Trust Estate, or any part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of the Trust Estate, sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation  and  collection,  including,  without  limitation,  attorneys'  fees,  upon  any

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indebtedness secured hereby, all in such order as Lender may determine. The entering upon and taking possession of the Trust Estate, the collection of such Rents, and the application thereof as aforesaid, will not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstanding the continuance in possession of all or any portion of the Trust Estate or the collection, receipt and application of Rents, Trustee or Lender will be entitled to exercise every right provided for in any of the Loan Documents or by law upon occurrence of any Event of Default, including the right to exercise the power of sale;

(b)

Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof;

(c)

Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Borrower's interest in the Trust Estate to be sold, which notice Trustee or Lender shall cause to be duly filed for record in the Official Records of the County in which the Trust Estate is located; or

(d)

Exercise all other rights and remedies provided herein, in any Loan Document or other document or agreement now or hereafter securing all or any portion of the obligations secured hereby, or by law.

3.3

Foreclosure By Power of Sale. Should Lender elect to foreclose by exercise of the power of sale herein contained, Lender shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Note and such receipts and evidence of expenditures made and secured hereby as Trustee may require.

(a)

Upon receipt of such notice from Lender, Trustee shall cause to be recorded, published and delivered to Borrower and such other persons and entities as are entitled thereto, such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Borrower, after lapse of such time as may then be required by law and after recordation of such Notice of Default and after Notice of Sale having been given as required by law, sell the Trust Estate at the time and place of sale fixed by it in said Notice of Sale, either as a whole, or in separate lots or parcels or items as Trustee deems expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts will be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Borrower, Trustee or Lender, may purchase at such sale and Borrower hereby covenants to warrant and defend the title of such purchaser or purchasers.

(b)

After deducting all costs, fees and expenses of Trustee and of this Trust, including costs of evidence of title in connection with sale, Trustee shall apply the proceeds of sale in the following priority, to payment of: (i) first, all sums expended by Lender or Trustee under the terms hereof, not then repaid, with accrued interest at the Default Rate; (ii) second, all other sums then secured hereby in such order and amounts as Lender in its

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sole discretion determines; and (iii) the remainder, if any, to the person or persons legally entitled thereto.

(c)

Subject to California Civil Code § 2924g, Trustee may postpone sale of all or any portion of the Trust Estate by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale.

3.4

Appointment of Receiver. Upon the occurrence of an Event of Default, Lender, as a matter of right and without notice to Borrower or anyone claiming under Borrower, and without regard to the then value of the Trust Estate or the adequacy of any security for the obligations then secured hereby, will have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Trust Estate, and Borrower hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers will have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Lender in case of entry as provided herein and in the Loan Agreement and will continue as such and exercise all such powers until the later of (i) the date of confirmation of sale of the Trust Estate; (ii) the disbursement of all proceeds of the Trust Estate collected by such receiver and the payment of all expenses incurred in connection therewith; or (iii) the termination of such receivership with the consent of Lender or pursuant to an order of a court of competent jurisdiction.

3.5

Remedies Not Exclusive. Trustee and Lender, and each of them, are entitled to enforce payment and performance of any indebtedness or obligations secured hereby and to exercise all rights and powers under this Deed of Trust or under any Loan Document or other agreement or any laws now or hereafter in force, notwithstanding some or all of the said indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement whether by court action or pursuant to the power of sale or other powers herein contained, will prejudice or in any manner affect Trustee's or Lender's right to realize upon or enforce any other security now or hereafter held by Trustee or Lender, it being agreed that Trustee and Lender, and each of them, is entitled to enforce this Deed of Trust and any other security now or hereafter held by Lender or Trustee in such order and manner as they or either of them may in their absolute discretion determine. No remedy herein conferred upon or reserved to Trustee or Lender is intended to be exclusive of any other remedy herein or by law provided or permitted, but each is cumulative and is in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Loan Documents to Trustee or Lender or to which either of them may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Trustee or Lender and either of them may pursue inconsistent remedies.

3.6

Request for Notice. Borrower hereby requests a copy of any notice of default and that any notice of sale hereunder be mailed to it at the address set forth in Section 5.5 of this Deed of Trust.

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ARTICLE IV

SECURITY AGREEMENT

4.1

Creation of Security Interest. Borrower hereby grants to Lender a security interest in and to all the Personal Property to secure Borrower's obligations hereunder and under the other Loan Documents.

4.2

Representations, Warranties and Covenants of Borrower. Borrower hereby represents, warrants and covenants (which representations, warranties and covenants will survive creation of any indebtedness of Borrower to Lender and any extension of credit thereunder) as follows:

(a)

The Personal Property is not used or bought for personal, family or household purposes.

(b)

The tangible portion of the Personal Property will be kept on or at the Premises; and Borrower shall not, without the prior written consent of Lender, remove the Personal Property or any portion thereof therefrom except such portions or items of Personal Property which are consumed or worn out in ordinary usage, all of which will be promptly replaced by Borrower with similar items of comparable value.

(c)

At the request of Lender, Borrower shall join Lender in executing one or more financing statements and fixture filings pursuant to the Uniform Commercial Code of California as in effect in the State of California ("Uniform Commercial Code"), in form satisfactory to Lender and shall pay the cost of recording and filing the same in all public offices wherever recording or filing is deemed by Lender to be necessary or desirable.

(d)

Borrower's principal place of business is in the State of California at 2361 McGaw Avenue, Irvine, CA 92614. Borrower does not do business under any trade name except as previously disclosed in writing to Lender. Borrower shall immediately notify Lender in writing of any change in its place of business or the adoption or change of any trade name or fictitious business name and shall, upon request of Lender, execute any additional financing statements or other certificates necessary to reflect the adoption or change in trade name or fictitious business name.

(e)

Borrower shall immediately notify Lender of any claim against the Personal Property adverse to the interest of Lender therein.

4.3

Use of Personal Property by Borrower. Until the occurrence and during the continuance of an Event of Default, Borrower may have possession of the Personal Property and use it in any lawful manner not inconsistent with this Deed of Trust and not inconsistent with any policy of insurance thereon.

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4.4

Remedies Upon an Event of Default.

(a)

In addition to the remedies provided in Section 3.2, upon the occurrence and during the continuance of an Event of Default, Lender may, at its option, do any one or more of the following:

(i)

Either personally, or by means of a court appointed receiver, take possession of all or any of the Personal Property and exclude therefrom Borrower and all others claiming under Borrower, and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powers of Borrower with respect to the Personal Property or any part thereof. In the event Lender demands or attempts to take possession of the Personal Property in the exercise of any rights under this Deed of Trust, Borrower agrees to promptly turn over and deliver possession thereof to Lender;

(ii)

Without notice to or demand upon Borrower, make such payments and do such acts as Lender may deem necessary to protect its security interest in the Personal Property (including, without limitation, paying, purchasing, contesting or compromising any lien or encumbrance, whether superior or inferior to such security interest) and in exercising any such powers or authority to pay all expenses (including, without limitation, litigation costs and reasonable attorneys' fees) incurred in connection therewith;

(iii)

Require Borrower from time to time to assemble the Personal Property, or any portion thereof, at a place designated by Lender and reasonably convenient to both parties, and promptly deliver such Personal Property to Lender or an agent or representative designated by Lender. Lender and its agents and representatives have the right to enter upon any or all of Borrower's premises and property to exercise Lender's rights hereunder;

(iv)

Realize upon the Personal Property or any part thereof as herein provided or in any manner permitted by law and exercise any and all of the other rights and remedies conferred upon Lender by this Deed of Trust, by any other Loan Document or by law, either concurrently or in such order as Lender may determine. Without limiting the generality of the foregoing, Lender may proceed, in any sequence, (i) to exercise its rights under Section 3.2 and Section 3.3 with respect to all or any portion of the Trust Estate and all or any portion of the Personal Property, (ii) to exercise its rights under this Section 4.4 with respect to all or any portion of the Personal Property, and (iii) to exercise its rights under the provisions  of Section 9604 of the Uniform Commercial Code;

(v)

Sell or cause to be sold in such order as Lender may determine, as a whole or in such parcels as Lender may determine, the Personal Property and the remainder of the Trust Estate;

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(vi)

Sell, lease or otherwise dispose of the Personal Property at public sale, upon terms and in such manner as Lender may determine. Lender may be a purchaser at any sale; and

(vii)

Exercise any remedies of a secured party under the Uniform Commercial Code or any other applicable law.

(b)

Unless the Personal Property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give Borrower at least five (5) days' prior written notice of the time and place of any public sale of the Personal Property or other intended disposition thereof to be made. Such notice may be mailed to Borrower at the address set forth in Section 5.5.

(c)

The proceeds of any sale under Section 4.4(a) will be applied as follows:

(i)

To the repayment of the reasonable costs and expenses of taking, holding and preparing for the sale and the selling of the Personal Property (including, without limitation, costs of litigation and attorneys' fees) and the discharge of all Impositions, liens and encumbrances, and claims thereof, if any, on the Personal Property prior to the security interest granted herein (except any Impositions or liens and encumbrances subject to which such sale has been made);

(ii)

To the payment of all indebtedness and obligations owing to Lender under the Note and other Loan Documents, all Hedge Agreements and all other obligations that are secured by this Deed of Trust, in such order as Lender determines; and

(iii)

The surplus, if any, will be paid to Borrower or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

(d)

Lender has the right to enforce one or more remedies under this Section 4.4 successively or concurrently; and such action will not operate to estop or prevent Lender from pursuing any further remedy that it may have. Any repossession or retaking or sale of the Personal Property pursuant to the provisions hereof will not operate to release Borrower until full payment of any deficiency has been made in cash.

4.5

Security Agreement. This Deed of Trust constitutes and is deemed to be a "security agreement" for all purposes of the Uniform Commercial Code; and Lender is entitled to all the rights and remedies of a "secured party" under the Uniform Commercial Code.

4.6

Financing Statement and Fixture Filing. This Deed of Trust is intended to be and constitutes a fixture filing pursuant to the provisions of the Uniform Commercial Code with respect to all fixtures included within the Trust Estate and is being recorded as a fixture financing statement and filing under the Uniform Commercial Code, and covers property, goods and equipment which are or are to become fixtures related to the Premises. Borrower covenants and agrees that this Deed of Trust is to be filed in the real estate records of the county where the Premises is located and shall also operate from the date of such filing as a fixture filing in

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accordance with Subsections 9-502(b) and (c) and other applicable provisions of the Uniform Commercial Code. This Deed of Trust shall also be effective as a financing statement covering minerals or the like (including oil and gas) and accounts subject to the Uniform Commercial Code, as amended, and is to be filed for record in the real estate records of the county where the Premises is situated. Borrower shall be deemed to be the "debtor" and Lender shall be deemed to be the "secured party" for all purposes under the Uniform Commercial Code. The full name of Borrower and Borrower's type of organization, and the full name of Lender and Lender's type of organization, are set forth on the signature page of this Deed of Trust. The mailing address of Borrower and Lender are set forth in Section 5.5 (Notices) below. Borrower is the record owner of the Premises. Borrower grants to Lender a security interest in all existing and future goods which are now or in the future become fixtures relating to the Premises and the proceeds thereof, including, without limitation, the goods and proceeds thereof described in Exhibit B. Borrower hereby authorizes Lender or Trustee to file any financing statement or financing statement amendment covering the Personal Property or relating to the security interest created herein without the signature of Borrower, as debtor. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements as Lender may require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in such items, including replacements and additions thereto. Upon the occurrence and during the continuance of an Event of Default, Lender will have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the other remedies provided in this Deed of Trust.

4.7

Filings to Perfect Security. Lender may (and is hereby authorized to) file with any filing office such financing statements, amendments, addenda, continuations, terminations, assignments and other records (whether or not executed by Borrower) as Lender may deem necessary in its sole discretion to perfect and to maintain perfected security interests in the Collateral. Such documents may designate Lender as the secured party and Borrower as the debtor, identify Lender's security interest in the Personal Property, and contain any other items required by law or deemed necessary by Lender. Upon Lender's request, Borrower shall execute any such documents (whether or not required by law). Any such filings made by Lender prior to Borrower's execution of this Agreement are hereby authorized, ratified and confirmed by Borrower. Borrower shall pay to Lender on demand any reasonable out-of-pocket expenses incurred by Borrower in connection with the preparation, execution and filing of any such filings.

ARTICLE V

MISCELLANEOUS

5.1

Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, discharge or termination is sought.

5.2

Borrower Waiver of Rights.  Borrower waives to the extent permitted by law, (i) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale of any portion of the Trust Estate, (ii) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the

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secured indebtedness and marshalling in the event of foreclosure of the liens hereby created, and (iii) all rights and remedies which Borrower may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties; provided, however, nothing contained herein will be deemed to be a waiver of Borrower's rights under Section 2924c of the California Civil Code. Without limiting the generality of the foregoing, Borrower waives, to the extent permitted by law, all rights to direct the order in which any of the Trust Estate will be sold in the event of any sale or sales pursuant hereto and to have any of the Trust Estate or any other property now or hereafter constituting security for the indebtedness secured hereby marshaled upon any foreclosure of this Deed of Trust or of any other security for any of such indebtedness.

5.3

Statements by Borrower. Borrower shall, within ten (10) days after written notice thereof from Lender, deliver to Lender a written statement stating the unpaid principal of and interest on the Note and any other amounts secured by this Deed of Trust and stating whether any offset or defense exists against such principal and interest.

5.4

Loan Statement Fees. Borrower shall pay the amount demanded by Lender or its authorized loan servicing agent for any statement regarding the obligations secured hereby; provided, however, that such amount may not exceed the maximum amount allowed by law at the time request for the statement is made.

5.5

Notices. All notices, requests and demands to be made hereunder to the parties hereto must be in writing and must be delivered to the applicable address stated below by any of the following means: (a) personal service; (b) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by registered or certified, first class mail, return receipt requested); or (c) registered or certified, first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice, demand or request sent pursuant to either subsection (a) or (b) hereof will be deemed received upon such personal service or upon dispatch by electronic means, and, if sent pursuant to subsection (c) will be deemed received three (3) days following deposit in the mail.

To Lender:

Minnesota Bank & Trust

7701 France Avenue South, Suite 110

Edina, MN  55435

Attention:  Mr. Eric P. Gundersen, SVP

To Borrower:

PDEX Franklin LLC c/o Pro-Dex, Inc.

2361 McGaw Avenue

Irvine, CA 92614

Attention: Alisha K. Charlton

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To Trustee:

The Heritage Escrow Company

2855 Michelle Drive, Suite 270

Irvine, CA 92606

Attention:

Janet Tilbury, Senior Escrow Officer

5.6

Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law.

5.7

Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust.

5.8

Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. If any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if such lien is invalid or unenforceable as to any part of the Trust Estate, the unsecured or partially unsecured portion of the debt must be completely paid prior to the payment of the remaining secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, will be considered to have been first paid on and applied to the full payment of that portion of the debt which is not secured or fully secured by the lien of this Deed of Trust.

5.9

Subrogation. To the extent that proceeds of the Note are used to pay any outstanding lien, charge or prior encumbrance against the Trust Estate, such proceeds have been or will be advanced by Lender at Borrower's request and Lender will be subrogated to any and all rights and liens held by any owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether said liens, charges or encumbrances are released.

5.10

Attorneys' Fees. If the Note is not paid when due or if any Event of Default occurs, Borrower promises to pay all costs of enforcement and collection, including but not limited to, reasonable attorneys' fees, whether or not such enforcement and collection includes the filing of a lawsuit.

5.11

GOVERNING LAW. THIS DEED OF TRUST IS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.

5.12

Joint and Several Obligations. Should this Deed of Trust be signed by more than one party, all obligations herein contained will be deemed to be the joint and several obligations of each party executing this Deed of Trust. Any married person signing this Deed of Trust agrees that recourse may be had against community assets and against his separate property for the satisfaction of all obligations contained herein.

5.13

Interpretation. In this Deed of Trust the singular includes the plural and the masculine includes the feminine and neuter and vice versa, if the context so requires.

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5.14

Reconveyance by Trustee. Upon written request of Lender stating that all sums secured hereby have been paid and all other obligations secured hereunder have been discharged in full (including all amounts owing by, and all other obligations of, Borrower under any Hedge Agreements), and upon surrender of this Deed of Trust and the Note to Trustee for cancellation and retention and upon payment by Borrower of Trustee's fees, Trustee shall reconvey to Borrower, or to the person or persons legally entitled thereto, without warranty, any portion of the Trust Estate then held hereunder. The recitals in such reconveyance of any matters or facts will be conclusive proof of the truthfulness thereof. The grantee in any reconveyance may be described as "the person or persons legally entitled thereto." When the Premises have been fully reconveyed, the last such reconveyance will operate as a reassignment of all future rents, issues and profits of the Premises to the person or persons legally entitled thereto. Notwithstanding the foregoing or anything else contained in the Loan Documents which may be construed to the contrary, prior to any full release or full reconveyance of the Deed of Trust, all Hedge Agreements shall have been terminated (and with respect to any partial releases of this Deed of Trust, Lender may require any Hedge Agreements to be terminated and discontinued as it deems necessary and/or Lender may require an additional paydown of the Loan so that the remaining collateral is, in Lender's sole discretion, adequate to fully secure the amounts owing under the Loan Documents and all amounts that may come due under the Hedge Agreements or could become due thereunder upon the termination thereof), and any and all settlement payments and other payments, fees and costs owing by Borrower with respect to such Hedge Agreements shall be paid prior to any such release or reconveyance. Lender's rights under this Section 5.14 shall be in addition to any and all other rights of Lender under the Hedge Agreements and applicable law.

5.15

Counterparts. This document may be executed and acknowledged in counterparts, all of which executed and acknowledged counterparts together constitute a single document. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this document to physically form one document, which may be recorded.

5.16

Debtor-Creditor Relationship. Nothing contained herein or in any Loan Document will be deemed to create or construed to create a partnership, joint venture or any relationship other than that of debtor-creditor. Borrower and Lender expressly disclaim any intent to create a partnership or joint venture pursuant to this Deed of Trust, any other Loan Document, or any other document related hereto or thereto.

5.17

Waiver. To the fullest extent permitted by law, Borrower hereby waives the provisions of Section 431.70 of the California Code of Civil Procedure and all amendments thereto.

[Signature on Following Page]

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IN WITNESS WHEREOF, Borrower has executed this Deed of Trust as of the day and year first above written.

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EXHIBIT A

LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF TUSTIN, IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL A:

LOT 38 OF TRACT NO. 8590, IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 346, PAGES 19 THROUGH 24, INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM THE LAND, ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOW, GEOTHERMAL STEAM, AND ALL PRODUCTS DERIVED FORM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR, AND STORING IN AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THE LAND, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE DEED RECORDED FEBRUARY 26,1976 IN BOOK 11656, PAGE 1935 OF OFFICIAL RECORDS.

APN: 432-472-21

PARCEL B:

EASEMENTS FOR VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS, DRIVEWAY AND PARKING PURPOSES AS DESCRIBED AND SET FORTH IN THAT CERTAIN DECLARATION OF ESTABLISHMENT OF EASEMENTS RECORDED NOVEMBER 30, 1990 AS INSTRUMENT NO. 90-632492, AS AMENDED BY THAT CERTAIN AMENDMENT TO DECLARATION OF ESTABLISHMENT OF EASEMENTS RECORDED NOVEMBER 12, 1998 AS INSTRUMENT NO. 19980767973, BOTH OF OFFICIAL RECORDS.

APN: 432-472-21

EXHIBIT A

EXHIBIT B

DESCRIPTION OF PERSONAL PROPERTY

(a)

All personal property, including all goods, supplies, equipment, furniture, furnishings, fixtures, machinery, inventory and construction materials which Borrower now or hereafter owns or in which Borrower now or hereafter acquires an interest or right, including those which are now or hereafter located on or affixed to the Premises or used or useful in the operation, development, use or occupancy thereof, including any interest of Borrower in and to personal property which is leased or subject to any superior security interest, and all books, records, leases and other documents, of whatever kind or character, relating to the Premises;

(b)

All fees, income, rents, issues, profits, earnings, receipts, royalties and revenues which, after the date hereof and while any portion of the indebtedness secured hereby remains unpaid, may accrue from said goods, fixtures, furnishings, equipment and building materials or any part thereof or from the Premises or any part thereof, or which may be received or receivable by Borrower from any hiring, using, letting, leasing, subhiring, subletting, or subleasing thereof;

(c)

All of Borrower's present and future rights to receive payments of money, services or property, including rights to all deposits from tenants of the Premises, rights to receive capital contributions from Borrower's [members,] amounts payable on account of the sale of [membership] interests in Borrower, accounts receivable, deposit accounts, chattel paper, notes, drafts, contract rights (including all rights to payment under all purchase and sale agreements and other contracts), instruments, general intangibles and principal, interest and payments due on account of goods sold, services rendered, loans made or credit extended, together with title or interest in all documents evidencing or securing the same;

(d)

All other intangible property and rights relating to the Premises or the operation thereof, or used in connection therewith, including all governmental permits relating to development or other activities on the Premises, all names under or by which the Premises may at any time be operated or known, all rights to carry on business under any such names, or any variant thereof, all trade names and trademarks relating in any way to the Premises, good will in any way relating to the Premises, and all licenses and permits relating in any way to, or to the operation of, the Premises;

(e)

Borrower's rights under all insurance policies covering the Premises or any of the aforesaid collateral, and all proceeds, loss payments and premium refunds payable regarding the same;

(f)

All reserves, deferred payments, deposits, refunds, cost savings and payments of any kind relating to the use and development of the Premises;

(g)

All water stock relating to the Premises;

(h)

All causes of action, claims, compensation and recoveries for any damage to or condemnation or taking of the Premises or the aforesaid collateral, or for any conveyance in lieu thereof, whether direct or consequential, or for any damage or injury to the Premises or the aforesaid collateral, or for any loss or diminution in value of the Premises or the aforesaid collateral;

(i)

All architectural, structural, mechanical and engineering plans and specifications prepared for construction of improvements or extraction of minerals or gravel from the Premises and all studies, data and drawings related thereto; and also all contracts and agreements of Borrower relating to the aforesaid plans and specifications or to the aforesaid studies, data and drawings or to the construction of improvements on or extraction of minerals or gravel from the Premises;

(j)

All Borrower's rights in proceeds of the loan evidenced by the Note (as defined in the Loan Agreement);

(k)

All present and future deposit accounts of Borrower held with Lender, including, without limitation, any demand, time, savings, passbook or like accounts maintained by Borrower with Lender, and all money, funds, instruments, securities, cash, cash equivalents and all other property of any nature whatsoever held with Lender, whether or not deposited in any such deposit account;

(l)

without limiting any of the foregoing, any or all other present or future "fixtures," "equipment," "software," "inventory," "goods," "general intangibles," "payment intangibles," "commercial tort claims," "accounts," "contract rights," "instruments," "promissory notes," "investment property," "letter of credit rights," "letters of credit," "deposit accounts" and "documents" (as such quoted terms are defined in or encompassed by the California Uniform Commercial Code, as now or hereafter amended) located on, used in the operation of, arising or derived from or in way relating to the Premises, Hedge Agreements (as defined in the Loan Agreement) or Swap Transactions (as defined in the Loan Agreement); and

(m)

all proceeds of the foregoing.

All terms used herein which are defined in the California Uniform Commercial Code (as now or hereafter amended) shall have the same meanings when used herein, unless the context requires otherwise.

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EXHIBIT C

SUMMARY OF MINNESOTA BANK & TRUST (“LENDER”) INSURANCE REQUIREMENTS FOR MORTGAGE LOANS

BORROWER: PDEX Franklin LLC

A.

LIABILITY INSURANCE

Commercial General Liability Policy or Policy Declarations Pages or Binders of Insurance, or such other evidence of insurance acceptable to Lender in its sole discretion, naming the Borrower as an insured, providing coverage on an “occurrence” or a “claims made” basis and written by a carrier approved by the Lender, with a current A.M. Best’s Insurance Guide Rating of at least A – VIII (which is authorized to do business in the state in which the property is located) that affirmatively includes the following, either in the standard policy terms or by separate endorsement to the policy:

II.

PROPERTY INSURANCE

All-Risk Hazard Insurance Policy or Policy Declarations Pages or Binders of Insurance, or such other evidence of insurance acceptable to Lender in its sole discretion, naming the Borrower as an insured, reflecting coverage of 100% of the replacement cost, and written by a carrier approved by Lender with a current A.M. Best's Insurance Guide Rating of at least A- VIII (which is authorized to do business in the state in which the property is located) that affirmatively includes the following, either in the standard policy terms or by separate endorsement to the policy:

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EXHIBIT 10.4

This instrument was prepared with the assistance

of an attorney licensed in the State of California,

and after recording should be returned to:

Fabyanske, Westra, Hart & Thomson, P.A.

333 South Seventh Street, Suite 2600

Minneapolis, Minnesota 55402

Attn:  Frederick H. Ladner, Esq.

THIS SPACE ABOVE FOR RECORDER’S USE

ASSIGNMENT OF LEASES AND RENTS

THIS ASSIGNMENT is made as of the sixth day of November, 2020, by PDEX FRANKLIN LLC, a California limited liability company (hereinafter called the “Borrower”), in favor of MINNESOTA BANK & TRUST, a Minnesota state banking corporation (“Lender”).

WITNESSETH:

WHEREAS, the Borrower and the Lender have entered into a Loan Agreement dated of even date herewith (hereinafter, together with all amendments and modifications thereof, called the “Loan Agreement”), pursuant to which the Lender has agreed to make a loan available to the Borrower of up to Five Million Two Hundred Seven Thousand Four Hundred Seventy Two and No/100ths Dollars ($5,207,472.00) to finance a portion of the costs of acquiring certain real property legally described on Exhibit A attached hereto. Unless the context otherwise indicates, all capitalized terms not otherwise defined herein shall have the meaning given such terms in the Loan Agreement;

WHEREAS, in accordance with the Loan Agreement, the Borrower has executed and delivered its Promissory Note to the Lender, dated of even date herewith, in the original principal amount of Five Million Two Hundred Seven Thousand Four Hundred Seventy Two and No/100ths Dollars ($5,207,472.00) (hereinafter, together with all extensions, renewals, modifications, substitutions and replacements thereof and therefor, the “Note”);

WHEREAS, to secure payment and performance of the obligations of the Borrower under the Loan Agreement and the Note, the Borrower has executed and delivered to Heritage Escrow Company, as trustee for the benefit of Lender, a Deed of Trust With Assignment of Leases and Rents, Security Agreement and Fixture Filing of even date herewith (hereinafter called the “Deed of Trust”), covering, inter alia, real estate situated in the County of Orange, State of California, legally described on Exhibit A attached hereto and hereby made a part hereof, and the buildings and improvements and certain furniture, fixtures, furnishings,

equipment, machinery and personal property owned by the Borrower now or hereafter located thereon (hereinafter collectively called the “Trust Property”); and

WHEREAS, the Lender, as a condition to making the loan evidenced by the Note and the Loan Agreement, has required the execution of this Assignment.

NOW, THEREFORE, In consideration of the premises, and in further consideration of the sum of One Dollar ($1.00) paid by the Lender to the Borrower, the receipt and sufficiency of which are hereby acknowledged, the Borrower does hereby grant, transfer, set over, assign and deliver to the Lender all of the Borrower's right, title and interest in, to and under all leases, ground leases, subleases, licenses, concessions, tenancies, management agreements, operating agreements and any other agreements creating the right of possession or the right of use without a transfer of title, whether written or oral, now or hereafter existing, and covering all or any part of the Trust Property, together with any and all security deposits made thereunder, all extensions, amendments, modifications, renewals and replacements of any thereof, and any guaranties of the lessee's, ground lessee’s, sublessee's, licensee's, concessionaire's, tenant's, user's, manager's or operator's (hereinafter collectively called “Lessees”) obligations under any thereof, each of said leases, ground leases, subleases, licenses, concessions, tenancies and agreements now existing and hereafter executed or entered, together with all such deposits, extensions, amendments, modifications, renewals, replacements and guaranties, being hereinafter collectively referred to as the “Leases”. In addition to the foregoing, the Borrower does further hereby grant, transfer, set over and assign to the Lender, and does hereby relinquish to the Lender all of the Borrower's right to collect and enjoy, all of the rents, income, revenues, royalties, issues and profits, including, without limitation, all amounts payable to the Borrower on account of maintenance, repairs, taxes, insurance and common area or other charges by any other party to any Lease, and all amounts paid in compromise or for cancellation of any Lease by any party thereto other than the Borrower, now or hereafter accruing or owing under or from Leases or otherwise from the Trust Property or any part thereof, whether accruing before or after foreclosure of the Deed of Trust or during any period of redemption therefrom (hereinafter collectively called “Rentals”). All of said Leases and Rentals are being hereby granted, transferred, set over and assigned for the purpose of securing:

(1)

Payment of all indebtedness of Borrower evidenced by the Note and the Loan Agreement (including any amendments, extensions, renewals or replacements thereof), of all other sums secured by the Deed of Trust and of all sums payable by the Borrower hereunder;

(2)

Performance and discharge of each and every obligation, covenant and agreement of the Borrower contained herein, in the Note, in the Deed of Trust, in the Loan Agreement and in any other instrument which secures or is executed in connection with the Note, other than (i) that certain Unsecured Environmental and ADA Indemnification Agreement of even date herewith executed by Borrower and Guarantor in favor of Lender (the “Indemnity”), (ii) any third party guaranty of the Loan or Borrower’s obligations under the Loan Documents, or (iii) the obligations of Borrower or any Guarantor under any Other Security Instrument (as

2

hereinafter defined) that specifically states that it is unsecured (subparagraphs (i)-(iii) are, collectively, the “Excluded Documents”); and

(3)

Performance of all obligations of Borrower under any Interest Rate Protection Agreement, as such term is defined in the Loan Agreement, entered into by Borrower and Lender with respect to the interest rate payable on the Loan, and all obligations of Borrower to pay or indemnify Lender for any and all losses, liabilities, obligations, damages, charges, costs and expenses which may be incurred, suffered, or paid by Lender by reason or on account of, or in connection with any early termination by Borrower of any such agreement; Borrower’s obligations under this paragraph shall survive the repayment, or any other satisfaction, of the Note; the amount of any such indebtedness described in this paragraph is undetermined on the date hereof.

Notwithstanding anything to the contrary herein, this Assignment shall not secure Borrower’s or any Guarantor’s obligations under any Excluded Documents.

A.

To protect this Assignment, the Borrower agrees as follows:

1.

The Borrower agrees to promptly, faithfully and diligently observe, perform and discharge in all material respects each and every term, condition, obligation, covenant and agreement which the Borrower is now, or hereafter becomes, liable to observe, perform or discharge under the Note, the Deed of Trust and the Leases; to give prompt written notice to the Lender of any notice of default under any Lease on the part of the Borrower received from a Lessee thereunder, or on the part of any Lessee given by the Borrower thereunder, together with an accurate, complete copy of any such notice; and, at the sole cost and expense of the Borrower, if Borrower so elects in the exercise of its commercially reasonable judgment, to enforce or secure the performance of each and every material obligation, covenant, condition and agreement to be performed by the Lessees under the Leases.

2.

The Borrower shall, at the Borrower's sole cost and expense, appear in and defend any dispute, action or proceeding arising under, growing out of or in any manner connected with or affecting any of the Leases or the obligations, duties or liabilities of the Borrower or any Lessee thereunder, and indemnify the Lender against, and hold Lender harmless from and to pay all reasonable and documented out-of-pocket costs and expenses of Lender, including attorneys' fees (prior to trial, at trial, and on appeal), in connection with any such dispute, action or proceeding in which the Lender may appear or with respect to which it may otherwise incur costs or expenses, whether or not the Lender prevails therein.

3.

Upon the occurrence and continuation of an Event of Default hereunder or under the Note, under the Deed of Trust, under the Loan Agreement, or under any other instrument which secures or is executed in connection with the Note (each such instrument, other than the Indemnity, hereinafter called “Other Security Instrument”) the Lender may, but without obligation to do so, upon prior notice to the Borrower, and without releasing the Borrower from any obligation hereof, make or do the same in such manner and to such extent as the Lender may

3

deem necessary or desirable to protect the enforceability of this Assignment, including specifically, without limiting its general powers, appearing in and defending any action or proceeding purporting to affect the enforceability of this Assignment or the rights or powers of the Lender, and observing, performing and discharging all or any of the obligations, covenants and agreements of the Borrower in the Leases contained. In exercising any such powers, the Lender may pay its costs and expenses, employ counsel and incur and pay attorneys' fees (prior to trial, at trial and on appeal). The Borrower hereby grants to the Lender an irrevocable power of attorney, coupled with an interest, to perform all of the acts and things provided for in this section and in Section C.2 hereof as the Borrower's agent and in the Borrower's name.

4.

The Borrower agrees to reimburse the Lender, upon demand, for all reasonable and documented out-of-pocket sums expended by the Lender under the authority hereof, together with interest thereon at the Default Rate specified in the Note from the date Lender delivers its written demand for payment to Borrower and the same shall be added to the indebtedness evidenced by the Note and shall be secured hereby and by the Deed of Trust.

5.

Until the indebtedness secured hereby shall have been paid in full, the Borrower covenants and agrees, other than as permitted by the Loan Agreement, not to enter into any Lease without the prior written approval thereof by the Lender, if the Lender’s approval is required under the Loan Agreement, to provide the Lender with executed copies of all Leases, to assign to the Lender, upon request, any and all subsequent Leases upon all or any part of the Trust Property upon the same or substantially the same terms and conditions as are herein contained, and to make, execute and deliver to the Lender, upon demand, any and all instruments that may be necessary or desirable therefor or otherwise effectuate the terms of this Assignment. The terms and conditions of this Assignment shall, however, apply to any such subsequent Leases, whether or not such instruments are executed or delivered by the Borrower.

6.

Except as permitted in the Loan Agreement, the Borrower agrees not to modify, amend, extend, waive or in any manner alter the terms of any Lease or reduce the Rental payable thereunder; not to in any manner release or discharge any Lessee of or from any obligation, covenant, condition or agreement by said Lessee to be performed under a Lease, including the obligation to pay the Rental called for thereunder in the manner and at the places and times specified therein; not to grant any concession to a Lessee; not to cancel or terminate the term of any Lease or accept a surrender thereof; not to consent to any assignment or sublease by any Lessee of its rights under any Lease; and not to enter into any new Lease. The Borrower does by these presents expressly release, relinquish and surrender unto the Lender all of the Borrower's right, power and authority to modify, amend, extend, waive or in any manner alter the terms and provisions of the Leases, to reduce Rentals, to waive, excuse or condone a default by a Lessee, to release or discharge any Lessee, to grant concessions to any Lessee, to cancel or terminate the term of a Lease or to accept a surrender thereof, to consent to an assignment or a sublease by a Lessee, and to enter into any new Lease. Any attempt on the part of the Borrower to exercise any such right, power or authority, without the prior written consent of the Lender, shall be a nullity and shall be a default hereunder.

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7.

Each Lease shall remain in full force and effect despite any merger of the interest of the Borrower and any Lessee thereunder; the Borrower shall not transfer fee title to the Trust Property to any Lessee, without the prior written consent of the Lender; and no such transfer shall relieve the Borrower of any liability to the Lender, unless the Lender specifically agrees otherwise in writing.

8.

The Borrower shall use its best efforts to obtain and deliver to the Lender, promptly upon request by the Lender a duly executed estoppel certificate from any Lessee, on the Lender's form.

9.

The Borrower shall deliver to the Lender, promptly upon request by the Lender after the occurrence of an Event of Default with respect to which Lender has commenced the exercise of remedies, all security deposits held by the Borrower pursuant to the terms of the Leases, which the Lender shall hold and disburse in accordance with the terms of the Leases and applicable law.

B.

The Borrower hereby covenants and represents and warrants to the Lender that:

1.

The Borrower has good right and lawful authority to grant, transfer, set over and assign, and, other than the Deed of Trust and the Permitted Encumbrances, has not executed any prior assignment or alienation of its rights, title and interest in, to and under the Leases and to and in the Rentals, or otherwise encumbered the same.

2.

The Borrower has not performed or committed any act or executed any instrument, and is not bound by any law, statute, regulation, order, mortgage, deed of trust, indenture, contract or agreement, which might prevent the Lender from operating under any of the terms and conditions hereof, or which would limit the Lender in such operation.

3.

No Rental has been or will be paid by any Lessee, nor has been or will be collected or accepted by the Borrower, for more than one (1) month in advance, and the payment of none of the Rentals to accrue for any portion of the Trust Property has been or will be in any other manner anticipated, waived, released, excused, reduced, discounted, or otherwise discharged, altered or compromised by the Borrower. Upon the request of the Lender, the Borrower shall waive or subordinate any right of setoff against any person in possession of any portion of the Trust Property so that the Lender may realize upon the full amount of rent or revenue from such person without reduction from such setoff. The Borrower has not incurred and shall not incur any indebtedness to any Lessee other than customary covenants of a landlord to a tenant under any lease, to the extent the same would constitute indebtedness.

4.

The Borrower has not executed or agreed to, shall not execute or agree to, and shall not permit to occur by operation of law any other assignment, alienation, pledge, encumbrance or transfer of any of its right, title or interest in, to or under the Leases or Rentals, effective on or after the date hereof, except as provided for in the Deed of Trust and this Assignment and except for the Permitted Encumbrances.

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5.

The Leases which have been executed on or before the date hereof are in full force and effect; except as disclosed in writing to Lender, the Leases have not been amended or modified; the Borrower has granted no concession and no waiver, release, reduction, postponement or alteration of rental to the Lessees under said Leases; and there is no default beyond applicable cure periods now existing under the Leases with respect to which Borrower has provided written notice to the Lessee.

6.

The Borrower shall not permit any of the Leases to become subordinate to any lien other than the liens hereof and of the Deed of Trust and the Permitted Encumbrances.

C.

It is mutually agreed that:

1.

This is a present, absolute, effective, irrevocable and completed assignment by the Borrower to the Lender of the Leases and Rentals and of the right to collect and apply the same, which is not contingent upon the Lender being in possession of the Trust Property. However, so long as there exists no Event of Default hereunder or under the Note, under the Deed of Trust, under the Loan Agreement, or under Other Security Instrument, the Borrower shall have the right to collect, but not more than (1) month in advance, all Rentals from the Trust Property.

2.

Upon and at any time during the continuation of an Event of Default hereunder, under the Note, under the Deed of Trust, under the Loan Agreement or under any Other Security Instrument, Borrower's right to collect the Rentals as set forth above shall terminate and the Lender may, at its option, but without obligation to do so, without notice to or consent of the Borrower, either in person or by agent, without regard for the adequacy of the security for the indebtedness secured hereby, the commission of waste or the solvency of the Borrower, with or without bringing any action or proceeding, or by a receiver or trustee to be appointed by a court, enter upon, take possession of, maintain, manage and operate the Trust Property, make, execute, enforce, modify, alter, cancel and accept the surrender of Leases (whether or not the same extend beyond the term of the Deed of Trust), obtain or evict tenants, fix or modify Rentals, refund and collect security deposits, and do any acts which the Lender deems proper to protect the security hereof, and either with or without taking possession of the Trust Property, in its own name or in the name of the Borrower, sue for or otherwise demand, collect, receive, and give receipts for all Rentals, and apply the same upon the costs of collection thereof, including the fees and costs of agents and attorneys employed by the Lender; upon the costs of managing, operating and leasing the Trust Property, including taxes, insurance, maintenance, repairs, improvements, the fees of professional managing agents, architects, engineers, and appraisers, license and permit fees, leasing fees and commissions, and the Lender's out-of-pocket expenses, and upon any indebtedness secured hereby, in such order as the Lender may determine, subject to applicable statutory requirements, if any, and to the requirements of Article II of the Deed of Trust.

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The Lender or such a receiver shall be entitled to remain in possession of the Trust Property and to collect the Rentals throughout any statutory period of redemption from a foreclosure sale to the extent permitted by applicable law. The entering upon and taking possession of the Trust Property, the collection of such Rentals and the application thereof as aforesaid shall not cure or waive any Event of Default or waive, modify or affect any notice of default under the Note, under the Deed of Trust, under the Loan Agreement or under any Other Security Instrument, or invalidate any act done pursuant to such Event of Default or notice of default. The Lender may, without entering into possession or pursuing any other remedy as provided in this section or at law or in equity, or in conjunction with such possession or pursuit of other remedy, give notice to any or all Lessees authorizing and directing said Lessees to pay Rentals directly to the Lender. If a Lessee receives such a notice, the Borrower hereby directs such Lessee to make payment pursuant thereto, and it shall be conclusively presumed,  as between the Borrower and such Lessee, that the Lessee is obligated and entitled to make such payment to the Lender, and that such payment constitutes payment of Rentals under the Lease in question. Such notice may be given either in the Lender's or in the Borrower's name. The Borrower shall in every way facilitate the payment of Rentals to the Lender, when the Lender has the right to receive the same hereunder. The Lender shall be accountable only for Rentals actually collected hereunder and not for the rental value of the Trust Property. The Lender shall not be liable for any security deposit made by any Lessee unless and until the Lender comes into actual, physical possession and control thereof. Failure of the Lender to collect, or discontinuance by the Lender from collecting, at any time, and from time to time, any Rentals, shall not in any manner affect the rights of the Lender to thereafter collect the same.

The right of Lender to collect and receive the Rentals from, or possession of, the Trust Property, or to exercise any of the rights or powers granted herein to Lender shall, to the extent not prohibited by law, also extend to the period from and after the filing of any suit to foreclose the lien of the Deed of Trust including any period allowed by law for the redemption of the Trust Property after any foreclosure sale.

3.

The Lender shall have the right, under this Assignment, to take possession of and use, without rental or charge, any fixtures, equipment, furniture, appliances, personal property, books of account and records of the Borrower or its agents located in or constituting a part of the Trust Property in connection with the Lender's occupancy, management and operation of the Trust Property. The Lender shall be deemed to be the creditor of any Lessee in respect of any assignment for the benefit of creditors and any bankruptcy, arrangement, reorganization, insolvency, dissolution, receivership or other debtor-relief proceeding affecting such Lessee; provided, however, so long as there exists no Event of Default under the Note, under the Deed of Trust, under the Loan Agreement or under any Other Security Instrument, the Borrower shall have a right to appear and pursue claims against any such Lessee in any such proceeding and provided further that Borrower shall have no right to require that the Lender file timely claims in such proceedings or to otherwise pursue any creditor's rights therein.

4.

The Lender shall not be deemed to be a partner of, or a joint venturer with, the Borrower with respect to the Trust Property or to be a participant of any kind in the

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management or operation of the Trust Property. Until the conveyance to the Lender of title to the Trust Property, the Lender shall not be obligated to perform or discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability under any Lease, or with respect to the Trust Property or the inspection, maintenance or repair thereof, under or by reason of this Assignment, and, except if caused solely by the gross negligence or misconduct of the Lender, the Borrower shall and does hereby agree to defend and indemnify the Lender against, and to hold it harmless from, any and all liability, loss or damage which the Lender may or might incur under the Leases, by reason of any death, personal injury or property damage occurring on or about the Trust Property, or otherwise under or by reason of this Assignment and against and from any and all claims and demand whatsoever which may be asserted against the Lender by reason of any alleged obligation or undertaking on its part to perform or discharge any of the terms, covenants or agreements contained in any Lease, or by reason of any such death, personal injury or property damage. Should the Lender incur any such liability, loss or damage under any Lease, by reason of any such death, personal injury or property damage, or under or by reason of this Assignment, or as a result of or in defending against any such claims or demands, the amount thereof, including all reasonable and documented out-of-pocket costs, expenses and attorneys' fees (including such costs, expenses and fees prior to trial, at trial and on appeal), together with interest thereon at the Default Rate specified in the Note from the date Lender delivers its written demand for payment to Borrower, shall be secured hereby and by the Deed of Trust, and the Borrower shall reimburse the Lender therefor immediately upon demand. Neither this Assignment, nor the exercise by the Lender of its rights hereunder, shall be deemed to constitute the Lender a mortgagee in possession of the Trust Property, unless the Lender elects in writing to be so constituted.

5.

If any Event of Default shall occur under the Note, under the Deed of Trust, under the Loan Agreement or under any Other Security Instrument or hereunder (unless the contracts have been reinstated in accordance with applicable law), then the Lender may, at its option, declare all sums secured hereby immediately due and payable, and, in addition to making available to the Lender any remedies for default herein set forth, such Event of Default or breach of representation or warranty shall, at the Lender's sole option, constitute and be deemed to be an event of default under the Deed of Trust, entitling the Lender to every and all rights and remedies therein contained, in addition to those rights and remedies herein set forth, without regard to the adequacy of security for the indebtedness secured hereby, the commission of waste or the insolvency of the Borrower.

6.

Upon the payment in full of all indebtedness secured hereby and the discharge in full of all other obligations secured hereby, as evidenced by the recording or filing of any instrument of satisfaction or full release of the Deed of Trust, unless there shall have been recorded another deed of trust in favor of the Lender covering all or any portion of the Trust Property, this Assignment shall become and be void and of no further effect.

7.

All rights, powers and remedies provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable law, and they are intended to be limited to the extent necessary so that they will not render this Assignment invalid,

8

unenforceable or not entitled to be recorded, registered or filed under any applicable law. If any term of this Assignment shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the other terms hereof shall be in no way affected thereby. The Lender shall be entitled to all rights and remedies available hereunder, under the Note, under the Deed of Trust, under the Loan Agreement or under any Other Security Instrument, at law, in equity or under statute now and/or at the time of exercise thereof, even though such rights and remedies were not available on the date first above written, and all such rights and remedies may be exercised at any time and from time to time concurrently, separately, successively and in any order of preference, at the Lender's sole discretion.

8.

LENDER SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY BORROWER RESULTING FROM LENDER'S FAILURE TO LET THE TRUST PROPERTY, OR ANY PART THEREOF, OR FROM ANY OTHER ACT OR OMISSION OF LENDER UNDER OR RELATING TO THE LEASES (REGARDLESS OF WHETHER SUCH LOSS IS THE RESULT OF LENDER'S NEGLIGENCE) UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE, FRAUD, ILLEGAL ACTS OR WILLFUL MISCONDUCT OF LENDER, NOR SHALL LENDER BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY UNDER THE LEASES BY REASON OF THIS INSTRUMENT OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER. Lender shall not be liable for its failure to collect, or its failure to exercise diligence in the collection of, Rents under the Leases, but shall be accountable only for Rents that Lender actually receives. Borrower will indemnify and hold harmless Lender (for purposes of this paragraph, the term “Lender” shall include the directors, officers, partners, employees and agents of Lender and any persons or entities owned or controlled by, owning or controlling, or under common control or affiliated with Lender) from and against, and reimburse Lender for, all documented claims, demands, liabilities, losses, damages, causes of action, judgments, penalties, costs and expenses (including, without limitation, reasonable attorneys' fees) actually incurred under the Leases by reason of this instrument or the exercise of rights or remedies hereunder, or which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the Leases, including specifically any obligation or responsibility for any security deposits or other deposits delivered to Borrower by any lessee under any Lease and not assigned and delivered to Lender, in each case arising prior to the date Lender acquires title to the Trust Property by foreclosure or deed-in-lieu of foreclosure. THE RELEASES AND INDEMNITIES CONTAINED IN THIS PARAGRAPH SHALL INCLUDE CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) RESULTING FROM THE NEGLIGENCE OF LENDER OR ANY STRICT LIABILITY, BUT NOT THE GROSS NEGLIGENCE, FRAUD, ILLEGAL ACTS OR WILLFUL MISCONDUCT OF LENDER. The foregoing releases and indemnities shall not terminate upon release or other termination of the assignment pursuant to this paragraph. Any amount to be paid under this paragraph by Borrower to Lender shall be a demand obligation owing by Borrower to Lender, shall bear interest from the date such amount becomes due until paid at the Default Rate stated in the Note, and shall be secured by this Assignment and by any other instrument securing the Note.

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This Assignment shall not operate to place responsibility upon Lender for the control, care, management or repair of the Trust Property, nor for the carrying out of any of the terms and conditions of the Leases; nor shall it operate to make Lender responsible or liable for any waste committed on the Trust Property by the Lessees or by any other parties or for any dangerous or defective condition of the Trust Property, or for any negligence in the management, upkeep, repair or control of the Trust Property resulting in loss or injury or death to any tenant, licensee, employee or stranger. Lender shall not be deemed to be a partner of, or a joint venturer with, Borrower with respect to the Trust Property or to be a participant of any kind in the management or operation of the Trust Property. Neither this Assignment, nor the exercise by Lender of its rights hereunder, shall be deemed to constitute Lender a mortgagee in possession of the Trust Property, unless Lender elects in writing to be so constituted.

9.

The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective heirs, executors, administrators, personal representatives, legal representatives, successors and assigns of the Borrower and the Lender (subject to any limitations on assignment set forth herein, in the Note, in the Deed of Trust, in the Loan Agreement or in any Other Security Instrument); provided, however, that nothing in this section is intended to be or shall be construed as a waiver of the rights of the Lender under Article II of the Deed of Trust.

10.

This Assignment is primary in nature to the obligation evidenced and secured by the Note and the Deed of Trust and is given in addition to the Deed of Trust, and not as part of the Deed of Trust. All rights and remedies herein conferred may be exercised whether or not foreclosure proceedings are pending under the Deed of Trust and, to the extent permitted by applicable law, during any statutory period of redemption. The Lender shall not be required to resort first to this Assignment or of the Deed of Trust before resorting to the other, and the Lender may exercise its rights and remedies hereunder and under the Deed of Trust concurrently or independently and in any order of preference, all rights and remedies of the Lender set forth herein, in the Note, in the Deed of Trust, in the Loan Agreement or in any Other Security Instruments, at law, in equity, under statute and by contract being cumulative. No failure by the Lender to avail itself of any of the terms, covenants or conditions of this Assignment for any period of time shall be deemed to constitute a waiver thereof. The Lender shall have the right to assign the Borrower's rights, title and interests in, to and under any Leases and in and to the Rentals to any other or subsequent holder of the Note or any participant therein, or to any person, party or entity which acquires title to the Trust Property through foreclosure or otherwise, and any such assignees shall have all of the rights, remedies and powers provided to the Lender herein. All words and phrases used herein shall be construed to include the singular or plural number and the masculine, feminine or neuter gender, as may be appropriate under the circumstances.

11.

Notwithstanding (a) the fact that any Lease or the leasehold estate created thereby may be held, directly or indirectly, by or for the account of any person or entity which shall have an interest in the fee estate of the Trust Property, (b) the operation of law or (c) any

10

other event, the Lessee's leasehold estate under such Lease shall not merge into the fee estate and the lessee shall remain obligated under such lease as assigned by this Assignment.

12.

All notices, demands or documents which are required or permitted to be given or served hereunder shall be in writing, and shall be deemed given or served when personally delivered or when deposited in the U.S. Mail, registered or certified mail, return receipt requested, postage prepaid, or deposited with Federal Express, DHL or another reputable overnight courier, addressed as follows:

If to the Borrower:

PDEX Franklin LLC c/o Pro-Dex, Inc.

2361 McGaw Avenue

Irvine, CA 92614

Attention:  Alisha K. Charlton

With a copy to:

___________________________

If to Lender:

Minnesota Bank & Trust

7701 France Avenue South, Suite 110

Edina, MN 55435

Attention:  Mr. Eric P. Gundersen, SVP

With a copy to:

Fabyanske, Westra, Hart & Thomson, P.A.

333 South Seventh Street Suite 2600

Minneapolis, Minnesota 55402

Attention:  Frederick H. Ladner, Esq.

Each party hereto may change its above-stated address from time to time by serving written notice of the change upon the other party hereto as above provided at least ten (10) days prior to the effective date of said change.

12.

THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW RULES AND PRINCIPLES OF SUCH STATE.

13.

THE BORROWER AND THE LENDER EACH HEREBY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION RELATING TO OR ARISING FROM THIS ASSIGNMENT, THE LOAN AGREEMENT AND/OR THE LOAN DOCUMENTS. AT THE OPTION OF THE LENDER, THIS ASSIGNMENT, THE LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT IN WHICH THE

11

TRUST PROPERTY IS LOCATED OR IN MINNEAPOLIS, MINNESOTA OR THE STATE COURT SITTING IN THE COUNTY IN WHICH THE TRUST PROPERTY IS LOCATED OR IN HENNEPIN COUNTY, MINNESOTA; THE BORROWER AND THE LENDER CONSENT TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT JURISDICTION IN SUCH FORUMS IS NOT PROPER OR CONVENIENT OR THAT VENUE IN SUCH FORUMS IS NOT PROPER OR THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT AN ACTION IS COMMENCED IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS ASSIGNMENT, THE LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH  TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE, BUT ANY APPLICABLE STATUTE OF LIMITATIONS SHALL CONTINUE TO BE TOLLED FOR A PERIOD OF SIX (6) MONTHS AFTER SUCH DISMISSAL.

[Remainder of Page Intentionally Left Blank]

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13

Exhibit A

LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF TUSTIN, IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL A:

LOT 38 OF TRACT NO. 8590, IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 346, PAGES 19 THROUGH 24, INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM THE LAND, ALL OIL, OIL RIGHTS,  MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOW, GEOTHERMAL STEAM, AND ALL PRODUCTS DERIVED FORM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR, AND STORING IN AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THE LAND, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE DEED RECORDED FEBRUARY 26,1976 IN BOOK 11656, PAGE 1935 OF OFFICIAL RECORDS.

APN: 432-472-21

PARCEL B:

EASEMENTS FOR VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS, DRIVEWAY AND PARKING PURPOSES AS DESCRIBED AND SET FORTH IN THAT CERTAIN DECLARATION OF ESTABLISHMENT OF EASEMENTS RECORDED NOVEMBER 30, 1990 AS INSTRUMENT NO. 90-632492, AS AMENDED BY THAT CERTAIN AMENDMENT TO DECLARATION OF ESTABLISHMENT OF EASEMENTS RECORDED NOVEMBER 12, 1998 AS INSTRUMENT NO. 19980767973, BOTH OF OFFICIAL RECORDS.

APN: 432-472-21

EXHIBIT 10.5

AMENDED AND RESTATED CREDIT AGREEMENT

between

PRO-DEX, INC.

and

MINNESOTA BANK & TRUST

dated as of

November 6, 2020

TABLE OF CONTENTS

AMENDED AND RESTATED CREDIT AGREEMENT

This Amended and Restated Credit Agreement (this “Agreement”), dated as of November 6, 2020, is entered into between Pro-Dex, Inc., a Colorado corporation (together with its successors and assigns, the “Borrower”), and Minnesota Bank & Trust, a Minnesota state banking corporation (together with its successors and assigns, the “Lender”).

RECITALS

A.

Borrower and Lender are parties to that certain Credit Agreement dated September 6, 2018 (as amended to date, the “Existing Credit Agreement”), pursuant to which the Lender provided Borrower with a revolving line of credit of up to $2,000,000 (the “Existing Line of Credit”), evidenced by that certain Revolving Credit Note dated September 6, 2018 (the “Existing Revolving Credit Note”), and a term loan in the original principal amount of $5,000,000 (“Existing Term Loan A”) evidenced by that certain Term Note dated September 6, 2018 (“Existing Term Note A”).

B.

Borrower has requested that Lender amend certain provisions of the Existing Credit Agreement.

C.

As a condition to such amendment, the Lender has required that the Borrower restructure the credit facilities under the Existing Credit Agreement pursuant to this Agreement.

D.

The Borrower has determined that the execution, delivery and performance of this Agreement are in its best business and pecuniary interest.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree amend and restate the Existing Credit Agreement in its entirety as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.01 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

“Adjusted Net Income”: for any period, the Net Income for such period calculated for the Borrower and its Subsidiaries on a consolidated basis, but excluding therefrom: (a) non-operating gains and losses (including extra-ordinary or unusual gains and losses, gains

and losses from discontinuance of operations, gains and losses arising from the sale of assets other than Inventory and other non-recurring gains and losses) during such period; and (b) any income attributable to the Borrower’s or any of its Subsidiaries’ Investment in any non-wholly owned Subsidiary which is not distributed in cash during such period.

“Affiliate” as to any Person, means any other Person that, directly or indirectly through one or more intermediaries, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person, or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. For the purpose of this Agreement, Air T Inc. is not considered an affiliate.

“Anti-terrorism Law” means any Requirement of Law related to money laundering or financing terrorism including the PATRIOT Act, The Currency and Foreign Transactions Reporting Act (31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959) (also known as the “Bank Secrecy Act”), the Trading With the Enemy Act (50 U.S.C. § 1 et seq.) and Executive Order 13224 (effective September 24, 2001).

“Asset Sale” means any Disposition of Property or series of related Dispositions of Property (excluding any such Disposition permitted by Section 7.05 that yields gross proceeds to any Loan Party (valued at the principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $500,000.00.

“Banking Services” means each and any of the following bank services provided to Borrower by Lender or any of its Affiliates: (a) commercial credit cards, (b) stored value cards, and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“Banking Services Liabilities” means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“Bankruptcy Code” means Title 11 of the United States Code, as amended from time to time, or any similar federal or state law for the relief of debtors.

“Blocked Person” means any Person that (a) is publicly identified on the most current list of “Specially Designated Nationals and Blocked Persons” published by the Office of Foreign Assets Control of the US Department of the Treasury (“OFAC”) or resides, is organized or chartered, or has a place of business in a country or territory subject

2

to OFAC sanctions or embargo programs, or (b) is publicly identified as prohibited from doing business with the United States under the International Emergency Economic Powers Act, the Trading With the Enemy Act, or any other Requirement of Law.

“Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor thereto).

“Borrower” has the meaning set forth in the preamble.

“Borrowing Base” means, at any date of determination, the sum of: (a) 75% of Eligible Accounts; plus (b) 50% of Eligible Inventory; plus (c) 85% of the market value of Eligible Investment Securities; provided, however, that the Lender reserves the right, in its sole discretion, to adjust such borrowing base percentages and components based on its periodic evaluation of the Collateral. The amount of the Borrowing Base shall be determined periodically from the most recent Borrowing Base Certificate and supporting reports delivered to the Lender.

“Borrowing Date” means any Business Day specified by the Borrower in a Borrowing Notice as a date on which the Borrower requests the Lender to make a Loan hereunder.

“Borrowing Notice” means any request for a borrowing of Loans hereunder by Borrower, which may be submitted in writing or in electronic form.

“Business Day” means, a day other than a Saturday, Sunday or other day on which commercial banks in Minneapolis, Minnesota are authorized or required by law to close.

“Capital Expenditures” with respect to any Person, means the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets, software or additions to Equipment (including replacements, capitalized repairs and improvements) which are required to be capitalized under GAAP on the balance sheet of such Person.

“Capital Lease Obligations” with respect to any Person, means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases under GAAP on the balance sheet of such Person and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Equivalents” as to any Person, means (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such Person,

(b) time deposits and certificates of deposit of any commercial bank having, or which is

3

the principal banking subsidiary of a bank holding company organized under the laws of the United States or any State thereof, having maturities of not more than one year from the date of acquisition by such Person, (c) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, (d) commercial paper issued by any issuer rated at least A-1 by Standard & Poor’s Ratings Services, or at least P-1 by Moody’s Investors Service, Inc. (or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally), and in each case maturing not more than one year after the date of acquisition by such Person or (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above.

“Change in Law” means the occurrence after the date of this Agreement of (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation or treaty, or (c) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided that, notwithstanding anything herein to the contrary (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Lender for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

“Change of Control” means (a) any Person or group of persons within the meaning of §13(d)(3) of the Securities Exchange Act of 1934 (other than one or more Continuing Directors or Affiliates of Continuing Directors) becomes the beneficial owner, directly or indirectly, of 50% or more of the outstanding Equity Interests of the Borrower, or (b) individuals who constitute the Continuing Directors cease for any reason to constitute at least a majority of the board of directors of the Borrower.

“Closing Date” means the date on which the conditions precedent set forth in Section 4.01 are satisfied or waived.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral” has the meaning for such term set forth in the Security Agreement.

“Commitment(s)” means individually or collectively, as the case may be, the Revolving Credit Commitment, the Term Loan A Commitment and the Term Loan B Commitment.

4

“Continuing Directors” means the directors of the Borrower on the Closing Date, and each other director, if in each case, such other director’s nomination for election to the board of directors of the Borrower is recommended by at least a majority of the Continuing Directors.

“Contractual Obligation” of any Person, means any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound, other than the Obligations.

“Control Agreement” That certain Pledge Eligibility & Notice to Securities Intermediary & Control Agreement dated as of September 6, 2018, executed by the Borrower, the Lender and the Securities Intermediary providing Lender with control over the Pledged Account, as originally executed and as it may be amended, modified, supplemented, restated or replaced from time to time.

“Current Liabilities” means, at any date of determination, the aggregate amount of all liabilities of the Borrower and its Subsidiaries, on a consolidated basis, that are classified as current liabilities in accordance with GAAP.

“Debt” of any Person at any date, without duplication, means (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than (i) trade payables and accrued expenses incurred in the ordinary course of business and not past due for more than 61 days after the date on which each such trade payable or account payable was created and (ii) any earn- out, purchase price adjustment or similar obligation until such obligation appears in the liabilities section of the balance sheet of such Person; (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (e) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit or similar facilities in respect of obligations of the kind referred to in subsections (a) through (e) of this definition; (g) all Guaranty Obligations of such Person in respect of obligations of the kind referred to in subsections (a) through (f) above; and (h) all obligations of the kind referred to in subsections (a) through (g) above secured by (or which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation.

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“Debtor Relief Law” means the Bankruptcy Code and all other liquidation, bankruptcy, assignment for the benefit of creditors, conservatorship, moratorium, receivership, insolvency, rearrangement, reorganization or similar debtor relief laws of the US or other applicable jurisdictions in effect from time to time.

“Debt Service Coverage Ratio” means, at any Measurement Date, the ratio, calculated on a consolidated basis for the Borrower and the other Loan Parties for the Measurement Period ending on such Measurement Date, of: (a) the sum of (i) EBITDA, minus (ii) dividends and other distributions paid in cash to shareholders of the Borrower; divided by (b) the aggregate amount of scheduled annual principal payments and interest expense on the Loans and other Debt for borrowed money.

“Default” means any of the events specified in Section 8.01 which constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both pursuant to Section 8.01 would, unless cured or waived, become an Event of Default.

“Default Rate” has the meaning given such term in the Revolving Credit Note. “Disposition” or  “Dispose”  means  the  sale,  transfer,  license,  lease  or  other

disposition (whether in one transaction or in a series of transactions, and including any sale

and leaseback transaction) of any property (including, without limitation, any Equity Interests) by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Dollars” means the lawful currency of the United States.

“Domestic Subsidiary” means a Subsidiary of the Borrower incorporated or organized under the laws of the United States of America, any state thereof or the District of Columbia.

“EBITDA” means, for any Measurement Period, the sum, calculated on a consolidated basis in accordance with GAAP for the Borrower and its Subsidiaries, of: (a) net income for such Measurement Period determined in accordance with GAAP (but excluding therefrom all non-operating income (including, without limitation, extra- ordinary, non-recurring or unusual gains) and all non-operating losses (including, without limitation, extra-ordinary, non-recurring or unusual losses)); plus (b) the sum of the following amounts deducted in arriving at net income (but without duplication for any item): (i) interest expense; (ii) depreciation, amortization and other non-cash charges; and

(iii)

federal, state, and local income taxes.

“Eligible Accounts” means, at any date of determination, the United States dollar value (net of deposits, finance charges and/or service charges) of only such accounts of the Borrower arising from the rendering of services in the ordinary course of business in which

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the Lender holds a first priority security interest and as to which the Lender, in its reasonable business judgment, shall from time to time determine to be collectible in a timely manner in the ordinary course of business without dispute or set-off. Without limiting the Lender’s right, in its reasonable business judgment, to consider any account not to be an Eligible Account, and by way of example only of types of accounts that the Lender will consider not to be Eligible Accounts, the Lender, notwithstanding any earlier classification of eligibility, may consider any account not to be an Eligible Account if:

(a)

any warranty is breached as to the account or the account debtor disputes liability or makes any claim with respect to the account;

(b)

the account is not paid by the account debtor within 120 days after the date of the original invoice relating thereto; or (ii) the account is owed by any account debtor who has not paid 10% or more of such account debtor’s accounts within the relevant time period specified in subsection (b)(i) above;

(c)

a petition in bankruptcy or other application for relief under any insolvency law is filed with respect to the account debtor owing the account, or the account debtor owing the account assigns for the benefit of creditors, becomes insolvent, fails, suspends, or goes out of business, or the Lender, in its reasonable business judgment, shall become dissatisfied with the creditworthiness of an account debtor owing an account;

(d)

the account arises from a sale to an account debtor that is outside the United States unless the sale is on letter of credit, acceptance or other terms acceptable to the Lender;

(e)

the account debtor is an Affiliate, supplier or creditor of a Loan Party;

(f)

the account debtor with respect thereto is the United States of America or any department, agency or instrumentality thereof (a “Federal Governmental Authority”), or any state, county or local governmental authority, or any department, agency or instrumentality thereof, unless the Borrower has assigned its right to payment of such account to the Lender pursuant to the Assignment of Claims Act of 1940 as amended in the case of the a Federal Governmental Authority, or pursuant to applicable state law, if any, in all other instances, and such assignment has been accepted and acknowledged by the appropriate government officers;

(g)

if the Lender, in its reasonable business judgment, has established a credit limit for the account debtor with respect thereto, the aggregate dollar amount of accounts due from such account debtor, including such account, exceeds such credit limit;

(h)

such Account is evidenced by chattel paper or instruments unless the original of such chattel paper or instruments is delivered to the Lender;

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(i)

such  account  arises  from  a  transaction  for  which  surety  or performance bonds are posted; or

(j)

any account for a customer deposit.

The amount of Eligible Accounts shall be computed from the Borrowing Base Certificate and other information required to be delivered by the Borrower to the Lender pursuant to Section 6.02.

“Eligible Assignee” has the meaning set forth in Section 9.04.

“Eligible Inventory” shall mean the book United States dollar value of the Borrower’s raw materials and finished goods inventory, in which only the Lender holds a first priority security interest and as to which the Lender, in its reasonable business judgment, shall elect from time to time to constitute Eligible Inventory. Without limiting the Lender’s right, in its reasonable business judgment, to consider any inventory not to be Eligible Inventory, and by way of example only of types of inventory that the Lender will consider not to be Eligible Inventory, the Lender, notwithstanding any earlier classification of eligibility, may consider any inventory not to be Eligible Inventory if: (a) such inventory is discontinued inventory; (b) such inventory (i) is not either located on premises owned, leased or rented by Borrower or (ii) stored with a bailee or warehouseman, unless a fully- executed landlord waiver has been delivered to the Lender in form reasonably satisfactory to the Lender, (c) such inventory is consigned to a Loan Party, or (d) such inventory is consigned by a Loan Party, unless such Loan Party has complied with all of the Consigned Inventory Eligibility Requirements. The value of Eligible Inventory shall be the lower of the cost or net realizable value of the Eligible Inventory computed in accordance with GAAP.

“Eligible Investment Securities” means the following categories of Pledged Securities held in the Pledged Account: Commercial Paper, Government Securities, Municipal Bonds, Listed Corporate Bonds and/or any other securities regularly traded on the NASDAQ, the New York Stock Exchange or the over-the-counter market which the Lender, in its sole discretion, determines to be of sufficient quality to accept as Collateral and in which only the Lender has a Lien.

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of violation or non-compliance, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any permit issued under any Environmental Law, or any Hazardous Material, or arising from alleged injury or threat to health, safety or the environment including (a) by any Governmental Authority for enforcement, clean-up, removal, response, remedial or other actions or damages and (b) any Governmental Authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

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“Environmental Law” means any and all Federal, state, foreign, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) as now or may at any time hereafter be in effect, and any binding judicial or administrative interpretation thereof, including any binding judicial or administrative order, consent decree or judgment, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or, to the extent relating to exposure to substances that are harmful or detrimental to the environment, or human health or safety.

“Equipment” has the meaning for such term set forth in the Security Agreement.

“Equity Interests” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership (or profit) interests in a Person (other than a corporation), securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person, and any and all warrants, rights or options to purchase any of the foregoing, whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

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

“ERISA Affiliate” means an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of §4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under §414 of the Code.

“Eurodollar Rate Loan” means a Loan that accrues interest at the LIBOR Rate, as specified in the Note evidencing such Loan.

“Excess Capital” means, as of any date of determination, calculated on a consolidated basis for the Borrower and the other Loan Parties, the aggregate amount by which the Loan Parties’ actual Tangible Assets exceeds the amount of Tangible Assets necessary to show proforma compliance with all financial covenants calculated as of such date, where the analysis supporting such proforma analysis is performed based on the consolidated balance sheet for the Borrower and the other Loan Parties then most-recently delivered to the Lender pursuant to Section 6.01(a) or (b).

“Excess Capital Certificate” means, a certificate in form and substance acceptable to the Lender and executed by a Responsible Officer of the Borrower, providing a detailed calculation of Excess Capital as of the date of a proposed Other Investment pursuant to Section 7.04(f) or of a Restricted Payment pursuant to Section 7.07.

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“Excluded Foreign Subsidiary” means any Subsidiary that is not organized and existing under the laws of the United States or any state or commonwealth thereof or under the laws of the District of Columbia, and in respect of which either (a) the pledge of all the Equity Interests of such Subsidiary as Collateral or (b) a guarantee by such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in the adverse tax consequences to the Borrower.

“Existing Credit Agreement” has the meaning given in the Recitals.

“Existing Line of Credit” has the meaning given in the Recitals.

“Existing Revolving Credit Note” has the meaning given in the Recitals.

“Existing Term Loan A” has the meaning given in the Recitals.

“Existing Term Note A” has the meaning given in the Recitals.

“Event of Default” has the meaning set forth in Section 8.01.

“Excluded Taxes” means any of the following Taxes, imposed on or with respect to the Lender (a) Taxes imposed on or measured by net income (however denominated), and franchise Taxes, (b) any branch profits Taxes imposed by the United States or any similar Tax imposed by any other jurisdiction.

“Fixed Charge Coverage Ratio” means, at any Measurement Date, the ratio, calculated on a consolidated basis for the Borrower and its Subsidiaries, of: (i) the excess of: (A) EBITDA for the Measurement Period ending at such date; plus (B) rent expense on Operating Leases deducted from the Net Income included in the Adjusted Net Income used in calculating such EBITDA; minus (C) the amount of federal, state and local income taxes deducted from the Net Income included in Adjusted Net Income used in calculating such EBITDA; minus (D) fifty percent (50%) of the amount of depreciation included in the Adjusted Net Income used in calculating such EBITDA; minus (E) dividends and other distributions paid to Borrower’s shareholders; to (ii) the Interest Expense that was paid in cash during such Measurement Period; plus (B) the principal payments scheduled to have been paid during such Measurement Period; plus (C) the rent expense on Operating Leases scheduled to have been paid during such Measurement Period.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

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“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government.

“Government Securities” means U.S. Treasury Securities and U.S. Government Agency Securities which are quoted daily in The Wall Street Journal.

“Guarantor(s)” means, individually or collectively, as the case may be, any Subsidiary of the Borrower that becomes a Loan Party by executing a Guaranty, or a joinder thereto, and their respective successors and assigns. On the Closing Date, there are no Guarantors.

“Guaranty(ies)” means, individually or collectively, as the case may be, each Guaranty now or hereafter executed by the Guarantors, in favor of the Lender, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under the Loan Documents.

“Guaranty Obligation” as to any Person, means any (a) obligation, contingent or otherwise, of such Person guaranteeing or having the effect of guaranteeing any Debt or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Debt or other obligation of the payment or performance of such Debt or other obligation, (iii) to maintain working capital, equity capital, net worth or solvency or liquidity or any level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Debt or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) Lien on any assets of such Person securing any Debt or other obligation of any other Person, whether or not such Debt or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Debt to obtain any such Lien). The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.

“Hazardous Materials” means (a) any gasoline, petroleum or petroleum products or by-products, radioactive materials, friable asbestos or asbestos-containing materials, urea-formaldehyde insulation, polychlorinated biphenyls and radon gas, and (b) any other

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chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“Heartland” means Heartland Financial USA, Inc., a Delaware corporation.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by any Loan Party under any Loan Document, and (b) to the extent not otherwise described in (a), Other Taxes.

“Insolvency” with respect to any Multiemployer Plan, means such Plan is insolvent within the meaning of §4245 of ERISA.

“Intangible Assets” means, at any date of determination, the sum, calculated on a consolidated basis in accordance with GAAP for the Borrower and the other Loan Parties, of (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, covenants not to compete, training costs and other similar intangibles; (ii) deferred charges or unamortized debt discount and expense other than deferred income taxes; (iii) Investments which are not readily marketable; (iv) any write-up in the book value of any assets resulting from a reevaluation thereof subsequent to the date of the Borrower’s consolidated annual financial statement described in Section 5.04(a); (v) accounts receivable, notes receivable or other receivables or amounts owed by officers, shareholders or Affiliates; and (vii) any asset acquired subsequent to the date of this Agreement which the Lender, in its reasonable business judgment, determines to be an intangible asset.

“Intellectual Property” means any and all intellectual property, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, all rights therein, and all rights to sue at law or in equity for any past, present, or future infringement, violation, misuse, misappropriation or other impairment thereof, whether arising under United States, multinational or foreign laws or otherwise, including the right to receive injunctive relief and all proceeds and damages therefrom.

“Investment(s)” has the meaning set forth in Section 7.04.

“Lender” has the meaning set forth in the preamble.

“Letter(s) of Credit”:  As provided in Section 2.11(a).

“Letter of Credit Application”: As provided in Section 2.11(c)

“Letter of Credit Commission”:  As provided in Section 2.11(e)(i).

“Letter of Credit Commitment” shall mean, at any date, the maximum amount of Letter of Credit Obligations which may from time to time be outstanding hereunder, being

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initially $500,000.00 and, as the context may require, the agreement of the Lender to issue the Letters of Credit for the account of the Borrower.

“Letter of Credit Commitment Termination Date”: The earlier of: (a) the Revolving Credit Termination Date; or (b) the date upon which the obligation of the Lender to issue Letters of Credit is terminated pursuant to Section 2.11(b).

“Letter of Credit Obligations”: At any date, the sum of: (a) the aggregate amount available to be drawn on the Letters of Credit on such date; plus (b) the aggregate amount owed by the Borrower to the Lender on such date as a result of draws on the Letters of Credit for which the Borrower has not reimbursed the Lender.

“Liabilities” means, at any Measurement Date, the aggregate amount of liabilities appearing on the Borrower’s consolidated balance sheet at such date prepared in accordance with GAAP.

“Lien” means any mortgage, pledge, hypothecation, assignment (as security), deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest, or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever having substantially the same economic effect as any of the foregoing (including any conditional sale or other title retention agreement and any capital lease).

“Listed Corporate Bonds” means corporate bonds quoted on a recognized domestic U.S. bond exchange and rated better than BBB+/Baa1.

“Loan” means any Revolving Credit Loan or Term Loan, as the context may require, and “Loans” means any or all of the Revolving Credit Loans and the Term Loans, as the context may require.

“Loan Documents” means, collectively, this Agreement, the Control Agreement, the Security Agreement, the Revolving Credit Note, the Term Notes and all other agreements, documents, certificates and instruments executed and delivered to the Lender by any Loan Party in connection therewith.

“Loan Parties” means the Borrower and each Subsidiary of the Borrower that at any time hereafter becomes party to a Guaranty and the Security Agreement.

“Loan Year” means the 12-month period commencing on the date of this Agreement (or the anniversary date thereof in any subsequent year) and ending on the day preceding the immediately following anniversary date of this Agreement.

“Margin Stock” has the meaning specified in Regulation U of the Board as in effect from time to time.

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“Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower, individually, or the Borrower and its Subsidiaries taken as a whole, (b) the validity or enforceability of any Loan Document, (c) the perfection or priority of any Lien purported to be created by any Loan Document, (d) the rights or remedies of the Lender under any Loan Document or (e) the ability of any Loan Party to perform any of its payment obligations under any Loan Document to which it is a party.

“Material Contracts” with respect to any Person, means each contract to which such Person is a party involving aggregate consideration payable by or to such Person equal to at least $1,000,000 annually or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person. As of the Closing Date, the Borrower is party to a single Material Contract (such Material Contract, as it may be amended, modified, replaced, restated or extended from time to time being referred to herein as the “Initial Material Contract”).

“Maturity Date”: The earlier of: (a) the date on which the Loans become due and payable under Section 8.02 upon the occurrence of an Event of Default; or (b) (i) the Revolving Credit Termination Date for the Revolving Credit Loans; or (ii) November 1, 2027 for Term Loan A; or (iii) November 1, 2027 for Term Loan B.

“Measurement Date” means the last day of each quarter of each fiscal year of the Borrower, commencing with the fiscal quarter ending September 30, 2020.

“Measurement Period” means the period of four (4) consecutive fiscal quarters ending on a Measurement Date.

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in

§ 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions.

“Municipal Bonds” means bonds issued by municipalities of the United States and rated by Moody's as Baa or better.

“Net Cash Proceeds” means (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents in an amount for any Asset Sale or Recovery Event in excess of $500,000 and in the aggregate for all Asset Sales and Recovery Events in any fiscal year in excess of $500,000 (including any such proceeds actually received from deferred payments of principal pursuant to a note, a receivable or otherwise), net of attorneys’ fees, accountants’ fees, investment banking fees, amounts required to be reserved for indemnification, adjustment of purchase price or similar obligations pursuant to the agreements governing such Asset Sale, amounts required to be applied to the repayment of Debt secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant

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to a Loan Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Equity Interests or any incurrence of Debt, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

“Note(s)” means, individually or collectively, as the case may be, the Revolving Credit Note, and the Term Notes.

“Obligations” means all Loans, Letter of Credit Obligations, advances, debts, liabilities, obligations, Banking Services Liabilities, covenants and duties, owing by any Loan Party to the Lender of any kind or nature, present or future, which arise under this Agreement, any other Loan Document or by operation of law, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guarantying or confirming of a letter of credit, guaranty, indemnification or in any other manner, whether joint, several, or joint and several, direct or indirect (including those acquired by assignment or purchases), absolute or contingent, due or to become due, and however acquired. The term includes, without limitation, all amounts owed by the Borrower to the Lender at such date as a result of draws on letters of credit paid by the Lender for which the Borrower has not reimbursed the Lender, all principal, interest, fees, charges, expenses, attorneys’ fees, and any other sum chargeable to any Loan Party under this Agreement or any other Loan Document.

“Other Investments”: As defined in Section 7.04.

“Other Taxes” means any and all present or future stamp, court, recording, filing, intangible, documentary or similar Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement or registration of, or performance under, or from the receipt or perfection of a security interest under or otherwise with respect to this Agreement or any other Loan Document (other than Excluded Taxes imposed with respect to an assignment).

“Participant” has the meaning set forth in Section 9.04(c).

“Participant Register” has the meaning set forth in Section 9.04(c).

“PATRIOT Act” has the meaning set forth in Section 9.14.

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor thereto).

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“PDEX” means PDEX Franklin LLC, a California corporation, that is a wholly- owned Subsidiary of the Borrower.

“PDEX Building” means the office warehouse building being purchased by PDEX with proceeds of the PDEX Loan and leased to the Borrower under terms of the PDEX Lease.

“PDEX Lease” means that certain Standard Industrial/Commercial Single Tenant Lease – Net dated November 6, 2020 by and between PDEX as lessor and the Borrower as lessee pursuant to which the Borrower is leasing the PDEX Building.

“PDEX Loan” means that certain term loan in the original principal amount of $5,207,472 made by the Lender to PDEX pursuant to the PDEX Loan Agreement,

“PDEX Loan Agreement” means that certain Loan Agreement dated on or about the date hereof by and between the Lender and PDEX, as the same may be amended, modified, supplemented restated or replaced from time to time.

“Person” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, Governmental Authority or other entity.

“Plan” at any one time, means any “employee benefit plan” that is covered by ERISA and in respect of which the Borrower or an ERISA Affiliate is (or, if such plan were terminated at such time, would under §4062 or §4069 of ERISA be deemed to be) an “employer” as defined in §3(5) of ERISA.

“Pledged Account” means that certain Account No. T6A-009949 maintained by Borrower with Piper Jaffray & Co and pledged to the Lender as collateral for the Obligations pursuant to the Security Agreement.

“Pledged Securities” means the securities owned by the Borrower and held in the Pledged Account.

Section 6.02“Properties” has the meaning set forth in Section 5.09(a).

“Recovery Event” means any settlement of or payment to any Loan Party in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Loan Party.

“Related Parties” with respect to any Person, means such Person’s Affiliates and the directors, officers, employees, partners, agents, trustees, administrators, managers, advisors and representatives of it and its Affiliates.

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“Reorganization” with respect to any Multiemployer Plan, means that such plan is in reorganization within the meaning of §4241 of ERISA.

“Reportable Event” means any of the events set forth in §4043© of ERISA, other than those events as to which the thirty day notice period is waived.

“Requirement of Law” as to any Person, means the certificate or articles of incorporation and by-laws or other organizational or governing documents of such Person, and any law (including common law), statute, ordinance, treaty, rule, regulation, order, decree, judgment, writ, injunction, settlement agreement, requirement or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer” with respect to any Person, means the chief executive officer, president or chief financial officer of such Person, except that with respect to financial matters, the Responsible Officer shall be the chief financial officer or treasurer of such Person.

“Restricted Payments” has the meaning set forth in Section 7.07.

“Revolving Credit Commitment” means the obligation of the Lender to make Revolving Credit Loans in an aggregate principal amount not to exceed the lesser of (a)

$2,000,000, or (b) the Borrowing Base, as the same may be changed from time to time pursuant to the terms hereof.

“Revolving Credit Commitment Period” means the period from and including the Closing Date to the Revolving Credit Termination Date.

“Revolving Credit Loans” means any revolving credit loan made by the Lender under Section 2.03.

“Revolving Credit Note” means the promissory note of the Borrower described in Section 2.05(a), substantially in the form of Exhibit A, as such promissory note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, such promissory note.

“Revolving Credit Termination Date” means the earliest to occur of (a) November 5, 2021, (b) the date the Revolving Credit Commitment is reduced to zero pursuant to Section 2.04, and (c) the termination of the Revolving Credit Commitment pursuant to Section 8.02.

“SEC” means the Securities and Exchange Commission (or successors thereto or an analogous Governmental Authority).

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“Securities Intermediary” means Piper Jaffray & Co., its successors and assigns.

“Security Agreement” means the Security Agreement made by the Borrower and the other Loan Parties in favor of the Lender, dated as of the Closing Date, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under the Loan Documents.

“Senior Cash Flow Leverage Ratio” means, at any Measurement Date, the ratio of (a) the Senior Debt at such date; to (b) EBITDA for the Measurement Period ending on such Measurement Date.

“Senior Debt” means, at any date of determination, the sum, calculated on a consolidated basis for the Borrower and its Subsidiaries, of (a) the outstanding principal balance of indebtedness for borrowed money (including, without limitation the Loans and the PDEX Loan) other than Subordinated Debt, and (b) Capitalized Lease Obligations.

“Single Employer Plan” means any Plan that is covered by Title IV of ERISA, other than a Multiemployer Plan.

“Solvent” with respect to any Person as of any date of determination, means that on such date (a) the present fair salable value of the property and assets of such Person exceeds the debts and liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the property and assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts and other liabilities, including contingent liabilities, as such debts and other liabilities become absolute and matured, (c) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts and liabilities, including contingent liabilities, beyond its ability to pay such debts and liabilities as they become absolute and matured, and (d) such Person does not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subordination Agreement” means each subordination agreement now or hereafter executed by a creditor of the Borrower in favor of the Lender.

“Subordinated Debt” means, all Debt of the Borrower which is contractually subordinated in right of payment to the Obligations pursuant to a Subordination Agreement on a form acceptable to the Lender in its reasonable discretion.

“Subsidiary” as to any Person, means any corporation, partnership, limited liability company, joint venture, trust or estate of or in which more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of

18

directors of such corporation (irrespective of whether at the time capital stock of any other class of such corporation may have voting power upon the happening of a contingency), (b) the interest in the capital or profits of such partnership, limited liability company, or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Tangible Assets” means, at any date of determination, the sum, calculated on a consolidated basis in accordance with GAAP for the Borrower and the other Loan Parties, of (a) Total Assets minus (b) Intangible Assets.

“Taxes” means any and all present or future income, stamp or other taxes, levies, imposts, duties, deductions, charges, fees or withholdings imposed, levied, withheld or assessed by any Governmental Authority, together with any interest, additions to tax or penalties imposed thereon and with respect thereto.

“Term Loan(s):” means Term Loan A, Term Loan B and each other term loan now or hereafter made by the Lender to the Borrower.

“Term Loan A”:  means the Loan described in Section 2.01(a).

“Term Loan A Commitment” means the obligation of the Lender to make Term Loan A disbursements to the Borrower in an aggregate principal amount not to exceed

$7,525,000.

“Term Loan A Commitment Period”: means the period commencing on the Closing Date and ending on May 30, 2021.

“Term Loan B Commitment” means the obligation of the Lender to make Term Loan B disbursements to the Borrower in an aggregate principal amount not to exceed

$1,000,000.

“Term Loan B”: means the Loan described in Section 2.01(b).

“Term Loan B Commitment Period”: means the period commencing on the Closing Date and ending on May 30, 2021.

“Term Note A”: means the promissory note executed by the Borrower to amend and restate the Existing Term Note A that is described in Section 2.05(b), substantially in the form of Exhibit B, as such promissory note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, such promissory note.

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“Term Note B”: means the promissory note of the Borrower described in Section 2.05(c), substantially in the form of Exhibit C, as such promissory note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, such promissory note.

“Term Note(s)”: means the Term Note A, the Term Note B, and each other term note now or hereafter made by the Borrower payable to the order of the Lender.

“Total Usage”: At any date of determination, the sum of (a) the aggregate outstanding principal balance of the Revolving Credit Loans; plus (b) the Letter of Credit Obligations; plus (c) the outstanding principal balance of Term Loan A.

“Uniform Commercial Code” means the Uniform Commercial Code as in effect in the state of Minnesota from time to time.

Section 1.02 Interpretation With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a)

The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b)

In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

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(c)

Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (and in the case of any other contingent Obligations, providing cash collateral or other collateral as may be requested by the Lender) of all of the Obligations other than unasserted contingent indemnification Obligations.

(d)

All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP as in effect from time to time, and applied on a consistent basis in a manner consistent with that used in preparing the Borrower’s audited financial statements, except as otherwise specifically prescribed herein.

ARTICLE II

The Commitments and Loans

Section 2.01

Term Loans.

(a)

Term Loan A. Effective on the Closing Date, the entire $3,770,331.00 outstanding principal balance of Existing Term Loan A under the Existing Credit Agreement shall be deemed to be the initial outstanding balance of Term Loan A hereunder. Subject to the terms and conditions of this Agreement, the Lender agrees to make additional Term Loan A disbursements (such disbursements, together with the outstanding principal balance of the Existing Term Loan A are referred to herein as the “Term Loan A”) to Borrower during the Term Loan A Commitment Period in an aggregate principal amount not to exceed the Term Loan A Commitment.

(b)

Term Loan B. Subject to the terms and conditions of this Agreement, the Lender agrees to make a loan (the “Term Loan B”) to Borrower during the Term Loan B Commitment Period in an aggregate principal amount not to exceed the Term Loan B Commitment.

Section 2.02

Revolving Credit Commitment.

(a)

Subject to the terms and conditions of this Agreement, the Lender agrees to make Revolving Credit Loans to the Borrower and to issue Letters of Credit for the account of the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding not exceeding the lesser of (i) the amount of the Revolving Credit Commitment or (ii) the Borrowing Base. During the Revolving Credit Commitment Period the Borrower may use the Revolving Credit Commitment by borrowing, prepaying the Revolving Credit Loans in whole or in part, and re-borrowing, and requesting the issuance of Letters of Credit all in accordance with the terms and conditions hereof.  Effective on the Closing Date, the Borrower and the Bank

21

acknowledge and agree that the entire outstanding principal balance, if any, of the Existing Line of Credit shall be deemed to be outstanding Revolving Credit Loans hereunder.

(b)

The Borrower shall repay all outstanding Revolving Credit Loans on the Revolving Credit Termination Date.

Section 2.03

Procedures for Borrowing.  The Borrower shall either (a) submit a draw request to the Lender in writing or telephonically; or (b) use the Lender’s electronic banking systems to request each proposed borrowing in accordance with the requirements of such systems as may be in effect from time to time. Each such notice shall be effective upon receipt by the Lender, shall be irrevocable, and shall specify the date and amount of borrowing requested. At the request of the Lender, a telephonic request must be confirmed in writing by the Borrower within three (3) Business Days after such request. So long as (a) all conditions precedent set forth in Article IV with respect to such borrowing have been satisfied, (b) with a respect to a Term Loan A borrowing, the outstanding principal balance of Term Loan A, after giving effect to such borrowing does not exceed the Term Loan A Commitment, (c) with a respect to a Term Loan B borrowing, the outstanding principal balance of Term Loan B, after giving effect to such borrowing does not exceed the Term Loan B Commitment, and (d) with respect to a request for a Revolving Credit Loan, the Total Usage at such time does not exceed the lesser of (i) the amount of the Revolving Credit Commitment or (ii) the Borrowing Base, in each case after giving effect to such Revolving Credit Loan, the Lender shall provide immediately available funds to the Borrower in the amount of such requested borrowing on the requested borrowing date by depositing such funds into depository account number 9161005393, maintained by the Borrower with the Lender. Each borrowing shall be on a Business Day.

Section 2.04

Termination or Reduction of Revolving Credit Commitment.

(a)

Upon not less than three Business Days’ notice to the Lender, the Borrower shall have the right to terminate the Revolving Credit Commitment or, from time to time, to reduce the aggregate amount of the Revolving Credit Commitment; provided, that no such termination or reduction of Revolving Credit Commitment shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount then outstanding of all Revolving Credit Loans would exceed the Revolving Credit Commitment. Any such partial reduction shall be in an amount equal to $50,000, or a whole multiple thereof, and shall reduce permanently the Revolving Credit Commitment then in effect.

Section 2.05

Repayment of Loans; Evidence of Debt.

(a)

Revolving Note. The Revolving Credit Loans made by the Lender shall be evidenced by a Revolving Credit Note in the initial amount of the Revolving Credit Commitment. The Revolving Credit Loans and the Revolving Credit Note shall mature and be payable at the Maturity Date of the Revolving Credit Loans. The Lender shall enter

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in its records the amount of each of its Revolving Credit Loans, the rate of interest borne on such Revolving Credit Loans, and the payments of the Revolving Credit Loans received by the Lender, and such records shall be conclusive evidence of the subject matter thereof, absent manifest error.

(b)

Term Note A. The Term Loan A made by the Bank shall be evidenced by the Term Note A. Term Loan A shall mature and be payable in accordance with the provisions of Term Note A. The Bank shall enter in its records the amount of Term Loan A, the rate of interest borne on Term Loan A and the payments of Term Loan A received by the Lender, and such records shall be conclusive evidence of the subject matter thereof, absent manifest error. Principal payments made on Term Note A may not be reborrowed.

(c)

Term Note B. The Term Loan B made by the Bank shall be evidenced by the Term Note B. Term Loan B shall mature and be payable in accordance with the provisions of Term Note B. The Bank shall enter in its records the amount of Term Loan B, the rate of interest borne on Term Loan B and the payments of Term Loan B received by the Lender, and such records shall be conclusive evidence of the subject matter thereof, absent manifest error. Principal payments made on Term Note B may not be reborrowed.

(d)

Maturity Date. The Borrower hereby unconditionally promises to pay to the Lender in full in cash, to the extent not previously paid, then-unpaid principal amount of each Loan on its Maturity Date.

(e)

Loan Accounting. The Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to the Lender resulting from each Loan, including the amounts of principal and interest payable and paid to the Lender from time to time under this Agreement.

Section 2.06

Optional Prepayments.

(a)

Voluntary.

(i)

Revolving Credit Loans. The Borrower shall have the right, by giving written notice to the Lender by not later than 3:00 p.m. (Minneapolis time) on the Business Day of such payment, to voluntarily prepay the Revolving Credit Loans in whole or in part at any time without premium or penalty.

(ii)

Term Loans. The Borrower shall have the right, by giving written notice to the Lender by not later than 3:00 p.m. (Minneapolis time) on the Business Day of such payment, to voluntarily prepay each Term Loan in whole or in part at any time, subject to the contemporaneous payment of any premium or fees set forth in the Term Note evidencing such Term Loan.

Section 2.07

Mandatory Prepayments.

(a) Revolving Credit Loans. If, at any time, the aggregate principal amount then outstanding of all Revolving Credit Loans would exceed the lesser of the Revolving Credit

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Commitment or the Borrowing Base, then the Borrower, upon demand, shall prepay the amount of such excess together with interest on the amount prepaid.

Section 2.08

Application of Prepayments.

(a)

Any partial prepayment of a Term Loan shall be applied to installments due on such Term Loan in the inverse order of their maturities.

Section 2.09

Interest.

(a)

Term Loans. The Borrower agrees to pay interest on the outstanding principal amount of each Term Loan from the date of such Term Loan until such Term Loan is paid at the rates and at the times specified in the Term Note evidencing such Term Loan.

(b)

Revolving Credit Loans. The Borrower agrees to pay interest on the outstanding principal amount of the Revolving Credit Loans at the rates and at the times specified in the Revolving Credit Note.

Section 2.10

Intentionally left blank

Section 2.11

Letters of Credit.

(a)

Letter of Credit Commitment. Subject to the terms and conditions hereinafter set forth, the Lender agrees to issue stand-by letters of credit (the “Letters of Credit”) from time to time on terms reasonably acceptable to the Lender on any Business Day during the period from the date hereof and ending on the Revolving Credit Termination Date; provided, however, that the Lender shall not be required to issue any Letter of Credit if, after giving effect to such issuance: (i) the Total Usage would exceed the lesser of: (A) the Revolving Credit Commitment or (B) the Borrowing Base; or (ii) the Letter of Credit Obligations would exceed the Letter of Credit Commitment.

(b)

Termination. The obligation of the Lender to issue any Letter of Credit shall terminate (i) immediately and without further action upon the occurrence of an Event of Default of the nature referred to in Section 8.01(f); or immediately when any Event of Default (other than of the nature specified in Section 8.01(f)) shall have occurred and be continuing and the Lender either shall have demanded payment of the Revolving Note or shall so elect by giving notice to the Borrower for purposes of this Section.

(c)

Manner of Issuance of Letters of Credit. Letters of Credit shall be issued for the account of the Borrower, or at the written request of the Borrower, for the account of a Loan Party other than the Borrower, within two Business Days after receipt of notice from the Borrower to the Lender specifying the date of the requested issuance, the face amount of the requested Letter of Credit, and the expiry date of the requested Letter of Credit; provided that such notice and the required accompanying documentation is received

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before 12:00 noon (Minneapolis time); any notice received after 12:00 noon (Minneapolis time) on any Business Day shall be deemed to have been received on the immediately following Business Day. In no event shall any Letter of Credit have an expiry date later than the scheduled Revolving Credit Termination Date or a maturity of greater than one year. Each request for a Letter of Credit shall be accompanied by an appropriately completed and duly executed application for a Letter of Credit in form acceptable to the Lender (a “Letter of Credit Application”).

(d)

Reimbursement on Demand. The Borrower agrees to pay to the Lender on demand at the Lender’s address shown on the signature page hereof: (i) the amount of each draft or other request for payment drawn under any Letter of Credit (whether drawn before or on its stated expiry date), and (ii) interest on all amounts referred to in clause (i) above from the date of such draw until payment in full at a fluctuating rate per annum at all times equal to the Default Rate; provided, however, that so long as the conditions precedent set forth in Section 2.03 and Article IV are satisfied as of the date of any draw under the Letter of Credit, the Lender will make a Revolving Credit Loan in accordance with Section 2.03 to pay any draw under a Letter of Credit.

(e)

Letter of Credit Fees.

(i)

The Borrower agrees to pay to the Lender a commission (the “Letter of Credit Commission”) upon the undrawn face amount of the Letters of Credit outstanding from time to time. The Letter of Credit Commission shall be computed at a per annum rate equal to one percent (1.0%). The Letter of Credit Commission with respect to each Letter of Credit is payable in advance on the date of issuance of such Letter of Credit and at the time of renewal of any such Letter of Credit.

(ii)

The Borrower agrees to pay to the Lender all reasonable and customary charges, fees and expenses which the Lender may assess in connection with the issuance, extension, amendment or payment of any Letter of Credit in accordance with the schedule therefor then in effect, and any and all reasonable out-of-pocket expenses which the Lender may pay or incur in connection therewith.

(f)

Obligations Absolute. The Obligations of the Borrower under this Section

2.11 shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or any other agreement or instrument relating thereto (collectively, the “Related Documents”); (ii) any amendment or waiver of, or any consent to departure from, all or any of the Related Documents; (iii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Lender or any other Person, whether in connection with any Related Document, the transactions contemplated therein, or any unrelated transaction, except as set forth in clause (v) below; (iv) any draft, statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any

25

respect or any statement therein being untrue or inaccurate in any respect, except as set forth in clause (v) below; (v) payment by the Lender under any Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit, except in the case of payment resulting from the gross negligence or willful misconduct of the Lender; or (vi) any other circumstance or event whatsoever, whether or not similar to any of the foregoing, except in the case of payment resulting from the gross negligence or willful misconduct of the Lender.

(g)

Conflicts. The rights of the Lender against the Borrower hereunder shall be in addition to all rights under (and shall control over any conflict under) any Letter of Credit Application.

ARTICLE III

Taxes, Etc.

Section 3.01

Taxes.

(a)

Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Taxes except as required by applicable law. If the Borrower is required by applicable law to deduct or withhold any Taxes from such payments, then:

(i)

if such Tax is an Indemnified Tax, the amount payable by the Borrower shall be increased so that after all such required deductions or withholdings are made (including deductions or withholdings applicable to additional amounts payable under this Section), the Lender receives an amount equal to the amount it would have received had no such deduction or withholding been made, and

(ii)

the Borrower shall make such deductions or withholdings and timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law.

(b)

Without limiting the provisions of Section 3.01(a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c)

The Borrower shall indemnify the Lender, within ten days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed on or attributable to amounts payable under this Section) paid or payable by the Lender, on or with respect to an amount payable by the Borrower under or in respect of this Agreement or under any other Loan Document, together with any reasonable expenses arising in connection therewith and with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate from the Lender as to the amount of such payment or liability delivered to the Borrower shall be conclusive absent manifest error.

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(d)

As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 3.01, the Borrower shall deliver to the Lender the original or certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the relevant return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.

(e)

If the Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay over such refund (or the amount of any credit in lieu of refund) to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes giving rise to such refund or credit in lieu of refund), net of all out-of-pocket expenses of the Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund or credit in lieu of refund); provided that, the Borrower, upon the request of the Lender, agrees to repay the amount paid over to the Borrower (plus any interest, penalties or other charges imposed by the relevant Governmental Authority) to the Lender in the event the Lender is required to repay such refund or credit in lieu of refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (e), in no event will the Lender be required to pay any amount to the Borrower pursuant to this paragraph if the payment of such amount would place the Lender in a less favorable net after-Tax position than it would have been in if the Tax subject to indemnification had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. Nothing in this paragraph (e) shall be construed to require the Lender to make available its tax returns or any other information relating to its taxes that it deems confidential to the Borrower or any other Person.

Section 3.02

Increased Costs; Capital Adequacy Requirements.

(a)

If any Change in Law shall:

(i)

impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Lender;

(ii)

subject the Lender to any Taxes (other than Indemnified Taxes) on its loans, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)

impose on the Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Eurodollar Rate Loans made by the Lender;

and the result of any of the foregoing shall be to increase the cost to the Lender of making, converting to, continuing or maintaining any Eurodollar Rate Loan or of maintaining its obligation to make any such Loan, or to reduce the amount of any sum received or

27

receivable by the Lender hereunder (whether of principal, interest or any other amount) then, upon request of the Lender, the Borrower will pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered.

(b)

If the Lender determines that any Change in Law affecting the Lender, or Heartland (if any), regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on the Lender’s capital or on the capital of Heartland, if any, as a consequence of this Agreement, the Revolving Credit Commitment, the Term Loan Commitment or the Loans, to a level below that which the Lender or Heartland could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of Heartland with respect to capital adequacy), then from time to time the Borrower will pay to the Lender such additional amount or amounts as will compensate the Lender or Heartland for any such reduction suffered.

(c)

A certificate from the Lender setting forth the amount or amounts necessary to compensate it or its holding company, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower, shall be conclusive absent manifest error. The Borrower shall pay the Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)

Failure or delay on the part of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender’s right to demand such compensation; provided that, the Borrower shall not be required to compensate the Lender pursuant to this Section for any increased costs incurred or reductions suffered more than 270 days prior to the date that the Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of the Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270 day period referred to above shall be extended to include the period of such retroactive effect).

ARTICLE IV

Conditions Precedent

Section 4.01 Conditions Precedent to Initial Loans. The obligation of the Lender to make Term Loan A and the initial Revolving Credit Loans or of the Lender to issue any Letter of Credit requested to be made by it hereunder is subject to the satisfaction or the waiver by the Lender of the following conditions precedent:

(a)

The Lender shall have received:

(i)

this  Agreement,  duly  executed  and  delivered  by  an  authorized officer of the Borrower;

(ii)

Term Note A, Term Note B, the Revolving Credit Note, the Control Agreement and the Security Agreement,  executed and delivered by the Borrower;

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(iii)

results of a recent lien search in the records of (a) each of the jurisdictions where the Loan Parties are organized and the assets of the Loan Parties are located, and (b) the U.S. Patent and Trademark Office, and such searches reveal no Liens on any of the assets of the Loan Parties, except for Liens permitted under this Agreement or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Lender;

(iv)

an Officer’s Certificate, duly executed by a responsible officer of the Borrower, in the form provided by Lender;

(v)

payment, in immediately available funds of non-refundable origination fees in the amounts of (A) $37,547.00 with regard to Term Loan A; and (B) $5,000.00 with regard to Term Loan B, together with reimbursement for all expenses for which invoices have been presented (including the fees and expenses of Lender’s legal counsel), on or before the Closing Date.

(b)

There shall have occurred no Material Adverse Effect since September 30, 2020.

(c)

The Lender shall have received, in form and substance satisfactory to it, a certificate of the Borrower, certified by a secretary or assistant secretary of Borrower, dated the Closing Date, including:

(i)

the articles of incorporation of Borrower, certified by the Secretary of State of the state of its incorporation;

(ii)

a copy of the Borrower’s by-laws as in effect on the date on which the resolutions referred to below were adopted;

(iii)

resolutions of the board of directors of Borrower approving the execution of this Agreement and each other Loan Document to which it is or is to be a party;

(iv)

a certification that the names and signatures of the officers of Borrower authorized to sign each Loan Document to which it is or is to be a party and other documents to be delivered hereunder and thereunder are true and correct; and

(v)

evidence of good standing for Borrower from the State of its organization and the State of California.

(d)

The Lender shall have received satisfactory evidence that each document (including any Uniform Commercial Code financing statement and appropriate filings with the United States Patent and Trademark Office or United States Copyright Office) required by the Loan Documents or any Requirement of Law or reasonably requested by the Lender to be filed, registered or recorded in order to create in favor of the Lender a perfected first priority Lien on the Collateral described therein, prior and superior in right to any other Person shall have been properly filed (or provided to the Lender) or executed and delivered in each jurisdiction.

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(e)

The Lender shall have received a Borrowing Base Certificate as of a date satisfactory to the Lender certified by a Responsible Officer of the Borrower.

(f)

The Lender shall have received evidence of insurance coverage in form, scope and substance satisfactory to the Lender and otherwise in compliance with the terms of Section 5.10 and Section 6.06 of this Agreement.

Section 4.02 Conditions Precedent to Each Loan. The obligation of the Lender to make each Loan or to issue each Letter of Credit requested to be made by it hereunder (including, without limitation, its initial extension of credit), is subject to the satisfaction or the waiver by the Lender of the following conditions precedent:

(a)

Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date.

(b)

No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date.

Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower, as of the date such Loan is made, that the conditions contained in Article IV have been satisfied.

ARTICLE V

Representations and Warranties

To induce the Lender to enter into this Agreement and to make the Loans and to issue Letters of Credit hereunder, the Borrower hereby represents and warrants to the Lender that:

Section 5.01 Existence; Compliance With Laws. Each Loan Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (b) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to qualify in such jurisdiction could not reasonably be expected to have a Material Adverse Effect, and (c) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 5.02

Power; Authorization; Enforceability.

(a)

Each Loan Party has the power and authority, and the legal right, to own or lease and operate its property, and to carry on its business as now conducted and as

30

proposed to be conducted, and to execute, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain Loans hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowing of Loans on the terms and conditions contained herein. No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect, and (ii) the filings referred to in Section 4.01(d). Each Loan Document has been duly executed and delivered by each Loan Party that is a party thereto.

(b)

This Agreement constitutes, and each other Loan Document when delivered hereunder will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

Section 5.03 No Contravention. The execution, delivery and performance of this Agreement and the other Loan Documents, the borrowing of Loans hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Loan Party and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or assets pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Loan Documents). No Requirement of Law or Contractual Obligation applicable to any Loan Party could reasonably be expected to have a Material Adverse Effect.

Section 5.04

Financial Statements.

(a)

The consolidated balance sheets of the Borrower and its Subsidiaries as at June 30, 2020, and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, audited by Moss Adams, LLP, present fairly the consolidated financial condition of the Borrower and its Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended, in accordance with GAAP.

(b)

The unaudited consolidated balance sheets of the Borrower and its Subsidiaries as at September 30, 2020, and the related unaudited consolidated statements of income and of cash flows for the year-to-date period ended on such date, duly certified by a Responsible Officer of the Borrower, present fairly the consolidated financial condition of the Borrower and its Subsidiaries as at such date, and the consolidated results

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of their operations and their consolidated cash flows for year-to-date period then ended, in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes).

Section 5.05 No Material Adverse Effect. Since September 30, 2020, no development or event has occurred that has had or could reasonably be expected to have a Material Adverse Effect.

Section 5.06 No Litigation. No action, suit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or threatened by or against any Loan Party or against any of its property or assets (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.

Section 5.07 No Default. No Default or Event of Default has occurred and is continuing and no default has occurred and is continuing under or with respect to any Contractual Obligation of the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.

Section 5.08

Ownership of Property; Liens.

(a)

Each Loan Party has a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.02.

(b)

The Borrower does not own any real property.

(c)

The Borrower has previously provided Lender with a true, correct and complete summary of all leases of real property under which any Loan Party is the lessee, showing the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof.

Section 5.09 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(a)

none of the facilities or properties currently or formerly owned, leased or operated by any Loan Party (the “Properties”) contain or previously contained, any Hazardous Materials in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could result in liability under, any Environmental Law;

(b)

no Loan Party has received any notice of actual or alleged violation, non- compliance or liability regarding compliance with Environmental Laws or other environmental matters or with respect to any of the Properties or the business operated by

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any Loan Party, nor is there any reason to believe that any such notice will be received or is being threatened;

(c)

the Properties and all operations at the Properties are and formerly have been in compliance with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by any Loan Party;

(d)

Hazardous Materials have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could result in liability under, any Environmental Law; no Hazardous Materials have been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could result in liability under, any applicable Environmental Law; and there has been no release or threat of release of Hazardous Materials at or from the Properties, or arising from or related to the operations of any Loan Party in connection with the Properties or the business operated by any Loan Party, in violation of or in amounts or in a manner that could result in liability under Environmental Laws;

(e)

no administrative or governmental action or judicial proceeding is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Loan Party is or will be a party with respect to the Properties or the business operated by any Loan Party, nor are there any decrees or orders or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the business operated by any Loan Party; and

(f)

no Loan Party has assumed any liability of any other Person under Environmental Laws.

Section 5.10 Insurance. The properties of the Loan Parties are insured with financially sound and reputable insurance companies which are not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the applicable Loan Party operates. The Borrower has provided Lender with a true, complete and correct summary of all insurance maintained by or on behalf of the Loan Parties as of the Closing Date. Each such insurance policy is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

Section 5.11 Material Contracts. No Loan Party is a party to, or bound by, any Material Contract other than the Initial Material Contract. The Borrower has delivered a true, correct and complete copy of the Initial Material Contract to Lender on or before the Closing Date. The Loan Parties are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

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Section 5.12 Intellectual Property. Each Loan Party owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted or proposed to be conducted. No material claim has been asserted and is pending by any Person challenging the use, validity or effectiveness of any Intellectual Property, nor is the Borrower aware of any valid basis for any such claim. The use of Intellectual Property by each Loan Party does not materially infringe on the rights of any Person. The listing of Intellectual Property previously provided by Borrower to Lender is a complete list of all intellectual property that is owned by, or licensed to, Borrower or any of its Subsidiaries.

Section 5.13 Taxes. Each Loan Party has filed all Federal, state and other tax returns that are required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties, and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (except those that are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Loan Party). No tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. No Loan Party is a party to any tax sharing agreement.

Section 5.14 ERISA. Each Plan is in compliance with ERISA, the Code and any Requirement of Law; neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of §412 or §430 of the Code or §302 of ERISA) has occurred (or is reasonably likely to occur) with respect to any Plan. No Single Employer Plan has terminated, and no Lien has been incurred in favor of the PBGC or a Plan. Based on the assumptions used to fund each Single Employer Plan, the present value of all accrued benefits under each such Plan did not materially exceed the value of the assets of such Plan allocable to such accrued benefit as of the last annual valuation date prior to the date on which this representation is made. Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability that could reasonably be expected to result in a material liability under ERISA, in connection with any Multiemployer Plan. No such Multiemployer Plan is (or is reasonably expected to be) terminated, in Reorganization, or insolvent (within the meaning of §4245 of ERISA).

Section 5.15 Margin Regulations. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

Section 5.16 Investment Company Act. No Loan Party is or is required to be registered as an “investment company” under the Investment Company Act of 1940, as amended.

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Section 5.17

Subsidiaries; Equity Interests.

(a)

Except as disclosed to the Lender by the Borrower in writing from time to time after the Closing Date:

(i)

The Borrower’s principal place of business, jurisdiction of formation and US taxpayer identification number is as set forth on the signature page of this Agreement;

(ii)

There are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than performance awards granted to employees, stock options granted to employees or directors and directors’ qualifying shares) relating to any Equity Interest of the Borrower or any Subsidiary, except as created by the Loan Documents.

(b)

The Borrower has no Subsidiaries other than PDEX.

(c)

Except for Eligible Investment Securities, no Loan Party has any equity investments in any other corporation or entity.

Section 5.18 Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect (a) there are no strikes, lockouts or other labor disputes pending or, to the knowledge of the Borrower, threatened against any Loan Party, (b) hours worked by and wages paid to employees of each Loan Party have not violated the Fair Labor Standards Act or any other applicable Requirement of Law, and (c) all payments due in respect of employee health and welfare insurance from any Loan Party have been paid or properly accrued on the books of the relevant Loan Party.

Section 5.19 Accuracy of Information, Etc. The Borrower has disclosed to the Lender all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No statement or information contained in this Agreement, any other Loan Document, or any other document, certificate or statement furnished by or on behalf of the Borrower to the Lender, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statement contained herein or therein not misleading. Projections included in such materials are based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made; it being recognized by the Lender that such projections as to future events are not to be viewed as fact and that actual results during the period or periods covered by the projections may differ from such projected results and such differences may be material.

Section 5.20

Security Documents.

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(a) The Security Agreement creates in favor of the Lender a legal, valid, continuing and enforceable security interest in the Collateral, the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. The financing statements, releases and other filings are in appropriate form and have been or will be filed in the offices of the Secretary of State in which each Loan Party is organized. Upon such filings and/or the obtaining of “control” (as defined in the Uniform Commercial Code), the Lender will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the Uniform Commercial Code) or by obtaining control, under the Uniform Commercial Code (in effect on the date this representation is made) in each case prior and superior in right to any other Person, except for Liens permitted under Section 7.02.

Section 5.21 Solvency. The Borrower and each of the Loan Parties is, and after giving effect to the incurrence of all Debt and obligations incurred in connection herewith will be, Solvent.

Section 5.22

PATRIOT Act; OFAC and Other Regulations.

(a)

No Loan Party, any of its Subsidiaries or any of the Affiliates or respective officers, directors, brokers or agents of such Loan Party, Subsidiary or Affiliate:

(i)

has violated any Anti-terrorism Laws; or

(ii)

has engaged in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Development’s Financial Action Task Force on Money Laundering.

(b)

No Loan Party, any of its Subsidiaries or any of the Affiliates or respective officers, directors, brokers or agents of such Loan Party, Subsidiary or Affiliate that is acting or benefiting in any capacity in connection with the Loans is a Blocked Person.

(c)

No Loan Party, any of its Subsidiaries or any of the Affiliates or respective officers, directors, brokers or agents of such Loan Party, Subsidiary or Affiliate acting or benefiting in any capacity in connection with the Loans:

(i)

conducts any business or engages in making or receiving any contribution of goods, services or money to or for the benefit of any Blocked Person;

(ii)

deals in, or otherwise engages in any transaction related to, any property or interests in property blocked pursuant to any Anti-terrorism Law; or

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(iii)

engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-terrorism Law.

ARTICLE VI

Affirmative Covenants

So long as the Lender has any outstanding Commitment hereunder, or any Loans, Letter of Credit Obligations or any other amounts payable to the Lender hereunder or under any other Loan Document have not been indefeasibly paid in full, the Borrower shall, and shall cause each cause each other Loan Party to (except that, in the case of the covenants set forth in Section 6.01, Section 6.02, and Section 6.03, the Borrower shall furnish all applicable materials to the Lender):

Section 6.01

Financial Statements. Furnish to the Lender:

(a)

As soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Borrower, a copy of the annual audit report of the Borrower and its Subsidiaries for such year including a copy of the audited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, together with an opinion as to such audit report of MOSS ADAMS, LLP or other independent certified public accountants of nationally or regionally recognized standing which does not contain a “going concern” or similar qualification or exception, or qualification arising out of the scope of the audit, together with related consolidating financial statements and

(b)

As soon as available and in any event within forty five (45) days after the end of each quarter of each fiscal year of Borrower, a copy of the unaudited financial statements of the Borrower prepared in conformity with GAAP (except for the omission of footnotes and prior period comparative data required by GAAP and for variations from GAAP which in the aggregate are not material) consisting of a consolidated balance sheet as of the close of such month and related consolidated statements of operations and retained earnings and cash flow for such month and from the beginning of such fiscal year to the end of such month and comparative figures for the corresponding portion of the preceding fiscal year together with related consolidated financial statements and the other monthly reports required by the Lender, in each case certified by a Responsible Officer of the Borrower.

All such financial statements shall be complete and correct and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or Responsible Officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

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Section 6.02 Certificates; Other Information. The Borrower shall furnish the following to the Lender:

(a)

As soon as available, and in any event within thirty (30) days after the end of each month, a true, complete and correct copy of the account statement for the Pledged Account;

(b)

As soon as available, and in any event within forty five (45) days after the end of each quarter of each fiscal year of Borrower, a compliance certificate (the “Compliance Certificate”) in the form provided by the Lender attached hereto as Exhibit C, signed by a Responsible Officer of the Borrower (i) containing all information and calculations necessary for determining compliance by the Loan Parties with the provisions of this Agreement as of the last day of such quarter of such fiscal year of the Borrower and (ii) stating that each Loan Party during such period has observed and performed all of the covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such officer has not obtained any knowledge of any Default or Event of Default except as specified in such certificate; and

(c)

As soon as available, and in any event within thirty (30) days after the end of each quarter of each fiscal year, a borrowing base certificate (the “Borrowing Base Certificate”) in the form provided by the Lender attached hereto as Exhibit D showing the Borrowing Base as of the last Business Day of the previous month, accompanied by a detailed accounts receivable aging, a detailed inventory report, a detailed accounts payable aging and other supporting reports as may be required by the Lender and the Borrowing Base Certificate and such supporting reports shall be in a form acceptable to the Lender and certified as accurate by a Responsible Officer of the Borrower; provided, that, in any month where the Borrower requests borrowing or has borrowings outstanding under the Revolving Credit Note, the Borrower will be required to provide a current Borrowing Base Certificate as of the last Business Day of the previous month, accompanied by a detailed accounts receivable aging, a detailed inventory report, a detailed accounts payable aging and other supporting reports as may be required by the Lender, within thirty (30) days after the end of such month;

(d)

Promptly, and in any event within thirty (30) days thereafter, to the extent not previously disclosed to the Lender, a description of any change in the jurisdiction of organization of any Loan Party;

(e)

Promptly after the same are sent, copies of all proxy statements, financial statements and reports that any Loan Party sends to any of its securities holders, and copies of all reports and registration statements that any Loan Party files with the SEC or any national securities exchange;

(f)

Promptly upon receipt of the same, copies of all notices, requests and other documents received by any Loan Party under or pursuant to any Material Contract or instrument, indenture, loan agreement regarding or related to any breach or default by any

38

party thereto or any other event that could materially impact the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and copies of the foregoing and such information and reports regarding Material Contracts and such instruments, indentures, loan agreements as the Lender may reasonably request from time to time;

(g)

By not later than January 30 and July 30, of each year, commencing January 30, 2021, a certificate in the form of Exhibit E attached hereto, signed by a Responsible Officer of the Borrower, certifying that the Borrower was in full compliance with the Initial Material Contract for the six-month periods respectively ending on December 30 and June 30 immediately preceding such dates of delivery;

(h)

As soon as available and in any event no later than thirty (30) days prior to the end of each fiscal year, projections for Borrower’s next fiscal year in a form acceptable to the Lender and certified by Borrower’s chief financial officer or treasurer as having been prepared in good faith and representing the most probable course of Borrowers’ business during such fiscal year; and

(i)

Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party as the Lender may from time to time request.

Section 6.03 Notices. Promptly and in any event within ten days give notice to the Lender of:

(a)

Upon Borrower’s knowledge of the occurrence of any Default or Event of Default;

(b)

Any (i) default or event of default under any Material Contract of any Loan Party or (ii) litigation, investigation or proceeding that may exist at any time between any Loan Party and any Governmental Authority;

(c)

Any litigation or proceeding against any Loan Party (i) in which the amount involved is at least $500,000 and not covered in full by insurance, (ii) in which injunctive or similar relief is sought, or (iii) which relates to any Loan Document;

(d)

The following events, as soon as possible and in any event within ten (10) days after the Borrower or any of its ERISA Affiliates knows or has reason to know thereof:

(i)

the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or any Multiemployer Plan; or

(ii)

the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any ERISA Affiliate or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan;

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(e)

The occurrence of any Environmental Action against or of any noncompliance by any Loan Party with any Environmental Law or relevant permit; and

(f)

Any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of an executive officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the relevant Loan Party proposes to take with respect thereto.

Section 6.04

Maintenance of Existence; Compliance.

(a)

(i) Preserve, renew and maintain in full force and effect its corporate or organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted under this Agreement.

(b)

Comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 6.05 Performance of Material Contracts. Perform and observe all the terms and provisions of each Material Contract to be performed or observed by it, maintain each Material Contract in full force and effect, enforce each such Material Contract in accordance with its terms, take all such action to such end as may be from time to time requested by the Lender and, upon request of the Lender, make to each other party to each Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract.

Section 6.06

Maintenance of Property; Insurance.

(a)

Maintain and preserve all of its property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

(b)

Maintain insurance with respect to its property and business (including without limitation, property, casualty and business interruption insurance) with financially sound and reputable insurance companies that are not Affiliates of the Borrower, in such amounts and covering such risks as are usually insured against by similar companies engaged in the same or a similar business. Each policy of liability insurance shall name the Lender as an additional insured and each policy of real property insurance shall name the Lender as mortgagee loss payee and each policy insuring any other Collateral shall name the Lender as lender loss payee.

Section 6.07

Inspection of Property; Books and Records; Discussions.

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(a)

Keep proper books of records and accounts, in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions and assets in relation to its business and activities.

(b)

Permit the Lender and its representatives to (i) discuss Borrower’s business operations, properties and financial and other condition with its officers and employees and its independent public accountants and (ii) upon reasonable notice to visit the Borrower’s offices and inspect and make abstracts from any of its books and records including, without limitation, permitting the Lender to examine any Collateral securing the Loans and reimburse the Lender for all examination fees and expenses incurred in connection with such examinations at its then current rate for such services and for its out-of-pocket expenses incurred in connection therewith; provided, however that the Lender agrees that, so long as no Default or Event of Default has occurred and is continuing, the Borrower’s obligations to reimburse the Lender for its examinations shall be limited to no more than one examination per any Loan Year plus its out-of-pocket expenses incurred in connection therewith.

Section 6.08

Environmental Laws.