LOAN AGREEMENT

Dated as of June 29, 2017

among

Double Canyon Vineyards, LLC, a Delaware limited liability company,
and
A Fine Old Building, LLC, a Washington limited liability company,

Individually and collectively, as borrower

and

American AgCredit, FLCA,
as lender

$10,000,000 Term Loan

This Loan Agreement (this “ Agreement ”), dated as of June 29, 2017, is entered into by and between by Double Canyon Vineyards, LLC, a Delaware limited liability company, and A Fine Old Building, LLC, a Washington limited liability company (individually and collectively, as the context may require, “ Borrower ”) and American AgCredit, FLCA (“ Lender ”) with reference to the following:

RECITALS

A.    Borrower has requested that Lender provide Borrower with a term loan in the original principal amount of Ten Million Dollars ($10,000,000).

B.    Lender is willing to provide Borrower with such loan on the terms and conditions set forth herein.

Now, therefore, in consideration of the premises and the mutual covenants herein contained the parties hereby agree as follows:

1.1      Advance of the Loan . On the Closing Date, Lender will make a loan to Borrower (the “ Loan ”) in the principal amount of Ten Million Dollars ($10,000,000)). Borrower’s obligations with respect to the Loan will be evidenced by a Term Loan Promissory Note dated on or about the date hereof in the principal amount of the Loan (the “ Note ”), by this Agreement, and by the other Loan Documents. No amount of the Loan that is repaid or prepaid may be reborrowed hereunder.

2.1      Maturity Date . The maturity date (the “ Maturity Date ”) for the Loan and the Note shall be July 1, 2037.

2.2      Interest Rate .

(a)      Fixed Interest Rate. The Loan shall bear interest at a fixed rate per annum of Five and 39/100 percent (5.39%), subject to increase to the Default Rate as set forth in Section 2.4.

(b)      Computation of Interest. All computations of interest hereunder shall be made by Lender on the basis of a three hundred sixty (360) day year, in each case based upon a thirty (30) day month. Each determination by Lender of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error or bad faith.

(c)      Interest Rate Not to Exceed Maximum Lawful Rate. Notwithstanding anything to the contrary set forth in this Agreement, if at any time until payment in full of all of the Obligations, the rate of interest payable hereunder exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the “ Maximum Lawful Rate ”), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum

Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Lender hereunder, is equal to the total interest which Lender would have received had the interest rate payable hereunder been (but for the operation of this Section 2.2(c)) the interest rate payable since the Closing Date. Thereafter, the interest rate payable hereunder shall be the rate of interest set forth herein, unless and until the rate of interest again exceeds the Maximum Lawful Rate, in which event this paragraph shall again apply. In no event shall the total interest received by Lender pursuant to the terms hereof exceed the amount which Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to this Section 2.2(c), such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the provisions of this Section 2.2(c), shall make a final determination that Lender has received interest hereunder or under any of the Loan Documents in excess of the Maximum Lawful Rate, Lender shall to the extent permitted by applicable law, promptly apply such excess first to any interest due and not yet paid on the Loan, then to the outstanding principal of the Loan (without premium or penalty), and then to Fees and any other unpaid Obligations and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order.

2.3      Payments .

(a)      General . Any payment to be made by Borrower under this Agreement shall be made not later than 12:00 p.m., Pacific Time, on the date of payment to the bank accounts designated by Lender for the making of payments hereunder and shall be made by wire transfer of immediately available funds to such designated bank account, marked for attention as indicated, or in any other manner or any other place as may be directed, in writing, by Lender. All payments to be made to or for the account of Lender under this Agreement shall be made without setoff or counterclaim, and clear of and without deduction for any taxes or amounts in consequence of taxes, including any stamp, registration or other like taxes payable on or in respect of the, and of any levies, imposts, duties, charges, fees, deductions, withholdings, restrictions and conditions of any nature now or hereafter imposed by any governmental agency unless Borrower is compelled by law to deduct or withhold any such taxes, levies, imposts, duties, charges, fees or deductions in respect of Lender. If Borrower is so compelled, Borrower will, concurrently with any such payment hereunder, pay the necessary amount to enable Lender to receive a net amount equal to the full amount which Lender would have received had no such deduction been made.

(b)      Payment of Principal and Interest . On the first day of each January, April, July, and October, commencing October 1, 2017, Borrower shall pay to Lender a principal payment in the amount of One Hundred Twenty Five Thousand Dollars ($125,000) and an interest payment equal to the amount of all interest accrued through the previous day.

(c)      Payment on Maturity Date . A final payment of all unpaid principal, interest and any other charges with respect to the Loan shall be due and payable, without demand, on the Maturity Date.

2.4      Default Rate . Any overdue principal of or interest with respect to the Loan, and the amount of any fees, costs, or expenses that Borrower is obligated to pay to Lender under this Agreement or any Loan Document not paid when due, shall bear interest, payable on demand, for each day from such due date until paid at a rate per annum equal to the Default Rate. In addition, upon and after the occurrence of an Event of Default and continuing until such Event of Default has been cured or waived in writing by Lender in accordance with the terms of this Agreement, interest shall accrue on all Obligations at the Default Rate. The interest rate increase to the Default Rate shall take effect immediately upon the occurrence of an Event of Default, without prior notice to Borrower.

2.5      Prepayments; Prepayment Premium .

(a)      Prepayment in Full . Borrower shall have the right at any time to voluntarily prepay the entire amount of the outstanding Loan and to terminate this Agreement upon at least thirty (30) days prior written notice to Lender; provided that if Borrower shall prepay the Loan prior to the Open Prepayment Date, prepayment shall be accompanied by the applicable Prepayment Premium calculated in accordance with Section 2.5(c). Prepayment in full shall be accompanied by the payment of all accrued and unpaid interest and all Fees and other remaining Obligations.

(b)      Prepayment in Part . Borrower shall have the right at any time to voluntarily prepay the Loan in part in increments of One Million Dollars ($1,000,000) after at least thirty (30) days prior written notice to Lender; provided that if any such prepayment is made prior to the Open Prepayment Date, prepayment shall be accompanied by the applicable Prepayment Premium calculated in accordance with Section 2.5(c). A partial prepayment shall be accompanied by the payment of all accrued and unpaid interest on the amount being prepaid. Partial prepayments shall be applied to the most remote installment and shall not reduce the amount of ongoing installment payments.

(c)      Prepayment Premium . If all or any portion of the Loan is prepaid prior to the Open Prepayment Date, Borrower shall pay to Lender a prepayment premium as set forth in this Section 2.5(c) (“ Prepayment Premium ”) for the benefit of Lender and any financial institution that has purchased a participation interest in the Loan (“ Participant ”). Lender shall not be obligated to accept any such prepayment unless the Prepayment Premium is paid concurrently with such prepayment. The amount of the Prepayment Premium shall be a “make-whole” amount calculated by Lender using any reasonable methodology chosen by Lender. Lender shall notify Borrower of the amount and basis of determination of the Prepayment Premium and Lender’s determination shall be conclusive, absent manifest error.

(d)      Acknowledgements . Borrower acknowledges that the Prepayment Premium is not a penalty, does not constitute damages for Borrower’s breach of this Agreement, and does not constitute payment of unmatured interest. Instead, it is a fee payable by Borrower to Lender if any portion of the Loan is repaid prior to the Open Prepayment Date. Borrower acknowledges that Lender makes available to its borrowers a variety of interest rate options. Some of those options include prepayment premiums and some do not. Those options that included a prepayment premium were available at a lower cost than those options that did not. Borrower selected an interest rate option that included a prepayment premium and as a result obtained a lower rate of interest than

would otherwise have been available. Borrower acknowledges that the Prepayment Premium is a reasonable fee and charge of Lender and reflects a fair and reasonable return to Lender for the consideration advanced to Borrower.

2.6      Fees . Borrower shall pay to Lender such fees as may be set forth in a separate fee letter to be executed and delivered by Borrower and Lender (the “ Fee Letter ”). All fees paid hereunder shall be considered fully earned upon receipt by Lender and no portion thereof shall be refundable under any circumstances.

2.7      Farm Credit Stock . So long as any Obligations remains outstanding under the terms of this Agreement, Borrower shall maintain its ownership of One Thousand Dollars ($1,000) of stock in American AgCredit, ACA or such other amount thereof as may be required by Lender in accordance with Lender’s bylaws and other governing documents and regulations.

2.8      Taxes . Any and all payments by Borrower hereunder shall be made, in accordance with this Section 2.8, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “ Taxes ”). If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to Lender, (a) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.8) Lender receives an amount equal to the sum it would have received had no such deductions been made, (b) Borrower shall make such deductions, and (c) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. In addition, Borrower agrees to pay any present or future stamp or documentary taxes or any other sales, transfer, excise, mortgage recording, or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, sale, transfer, delivery or registration of, or otherwise with respect to, this Agreement any Loan Document and any other agreements and instruments contemplated thereby (hereinafter referred to as “ Other Taxes ”). Borrower shall indemnify Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.8) paid by Lender and any liability (including penalties, interest and expenses arising therefrom or with respect thereto), whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date Lender makes written demand therefor. Within thirty (30) days after the date of any payment of Taxes, Borrower shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this Section 2.8 shall survive the payment in full of all Obligations.

2.9      Capital Adequacy. Borrower shall pay to Lender from time to time on written request such amounts as Lender may reasonably determine to be necessary to compensate Lender for any increased costs to Lender that it reasonably determines are attributable to any law or regulation, or any interpretation, directive, or request (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) of any court or governmental or

monetary authority (a) following any Regulatory Change or (b) implementing after the Closing Date any risk-based capital guideline or other capital requirement heretofore or hereafter issued by any governmental authority (such compensation to include an amount equal to any reduction of the rate of return on assets or equity of Lender to a level below that which Lender could have achieved but for such law, regulation, interpretation, directive or request); provided that with respect to this Section 2.9, Lender shall treat Borrower as Lender generally treats its other similarly situated borrowers. Lender will furnish to Borrower a certificate setting forth the basis and amount of each request by Lender for compensation under this Section 2.9. Determinations and allocations by Lender for purposes of this Section 2.9 of the effect of any Regulatory Change pursuant to or of capital maintained pursuant to this Section 2.9, on its costs or rate of return with respect to the Loan, and of the amounts required to compensate Lender under this Section 2.9, shall be conclusive absent manifest error or bad faith. As used in this Section 2.9, “Regulatory Change” means any change after the Closing Date in federal, state, or foreign law or regulations (including Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of lenders including Lender of or under any Federal, state, or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

2.10      Use of Proceeds . The proceeds of the Loan will be used by Borrower for Borrower’s working capital needs and other corporate purposes not prohibited by this Agreement.

2.11      Records of Lender . Lender will maintain a record in which appropriate entries will be made from time to time showing the original principal thereof, the unpaid balance thereof, the interest rate thereon, the interest accrued thereon and payments in respect of principal, interest and fees. The entries made by Lender in such record shall, absent manifest error or bad faith, constitute prima facie evidence of Borrower’s obligations hereunder and thereunder and payment of principal, interest and fees. Notwithstanding the foregoing, the failure by Lender to make such entries shall not affect the rights of Lender or the obligations of Borrower hereunder or thereunder.

2.12      Security for Notes . All Obligations shall be secured by one or more of a Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing (collectively, as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Deed of Trust ”) in a form approved by Lender covering certain real and personal property in which Borrower has an interest, (any land subject to Deed of Trust being the “ Mortgaged Land ” and the Mortgaged Land, together with all personal property covered by the Deed of Trust being the “ Collateral ”). Borrower shall also execute and deliver, or cause to be executed and delivered, such other agreements, instruments, financing statements and documents as are deemed necessary by Lender in order to perfect any security for any of the Obligations or otherwise effectuate the purpose of this Section 2.12.

2.13      Release of Land . As of the Closing Date, the Mortgaged Land includes 57.2 acres of land improved with an apple orchard (the “ Orchard ”). Lender agrees to release the Orchard from the lien of the applicable Deed of Trust in connection with a sale of the Orchard by Borrower to a Person that is not an affiliate of Borrower upon satisfaction of the following conditions precedent:

(a)      Borrower shall have delivered written notice to Lender requesting the release of the Orchard, which notice shall be accompanied by a copy of the purchase agreement pursuant to which the Orchard is to be sold and shall include a certification that, as of the date of such notice, no Event of Default or Unmatured Event of Default is in existence nor, as far as Borrower can reasonably foresee, will result from the release of the Orchard from the Mortgaged Land;

(b)      Borrower shall have obtained such approvals as are required to convey the Orchard as a separate legal lot and furnished copies of such approvals to Lender;

(c)      No Event of Default or Unmatured Event of Default shall have occurred and be continuing as of the date the Orchard is released nor shall result from such release;

(d)      Lender shall have determined that, following the release of the Orchard, the value of the remaining Mortgaged Land will equal or exceed $15,500,000; and

(e)      Borrower shall have reimbursed Lender for its costs and expenses (including reasonable attorney’s fees) incurred in connection with such release.

Upon the release of the Orchard pursuant to this Section 2.13, such property shall no longer be considered Mortgaged Land hereunder.

 

3.1      Conditions Precedent to Closing Date . Lender’s obligation to make the Loan at the Closing Date shall be subject to the following conditions precedent, which conditions shall be satisfied on or before the Closing Date:

(a)      Proceedings Satisfactory . All proceedings in connection with making of the Loan and entry into the Loan Documents shall be satisfactory to Lender and its counsel. Lender shall have received copies of such certificates, instruments, documents and other papers as Lender may reasonably request in connection therewith, all in form and substance reasonably satisfactory to Lender and its counsel.

(b)      Title to Properties . Except as set forth on Lender’s title insurance policy, the entities comprising Borrower, taken collectively, shall hold fee simple title to all of the Mortgaged Land and all improvements and fixtures thereon.

(c)      Representations and Warranties True . Each of the representations and warranties contained in this Agreement, the Deeds of Trust and the other Loan Documents shall be true on and as of the Closing Date.

(d)      No Event of Default, etc . No Event of Default or Unmatured Event of Default shall have occurred and be continuing.

(e)      No Material Adverse Change . No event shall have occurred or condition shall exist involving, or which could reasonably be expected to result in, a Material Adverse Change.

(f)      Documents . Lender shall have received all documents specified in a closing checklist to be delivered by Lender to Borrower, including the following, all of which shall be satisfactory to Lender:

(1)      The Note . The Note.

(2)      Farm Credit Stock . Evidence that Borrower has purchased $1,000 of stock in American AgCredit, ACA.

(3)      Certificate of Corporate Action . A certificate of the Secretary of each Borrower or other equivalent representative acceptable to Lender, dated the Closing Date, certifying the formation documents of each Borrower and all legal action taken by such Borrower authorizing the execution, delivery and performance of this Agreement, the Note, the Deeds of Trust, and the other documents contemplated hereby to which such Borrower is a party and certifying the names and true signatures of the officers or other representatives of such Borrower authorized to execute the Loan Documents and having good standing certificates attached thereto.

(4)      UCC Search . The results of a UCC search with respect to each Borrower with the appropriate governmental office showing the financing statement in favor of Lender of record.

(5)      Evidence of Consents and Approvals . Evidence satisfactory to Lender of each Borrower having obtained all orders, consents, approvals and other authorizations, and having made all filings and other notifications (governmental or otherwise), required in connection with the transactions contemplated.

(6)      Guaranty . The Guaranty from Guarantor pursuant to which Guarantor guarantees to Lender the payment of all obligations of Borrower to Lender.

(g)      Recordings, Filings and Priority . The Deed of Trust shall have been duly executed by each Borrower and notarized, and all recordings and filings of or with respect to each Deed of Trust shall have been duly made and all financing statements and other instruments relating thereto shall have been duly executed, delivered and recorded or filed, in all such places as may be required by law, or as may be deemed necessary or desirable by counsel for Lender, in order to establish, protect and perfect as of the Closing Date the interests and rights (and the priority thereof) created or intended to be created thereby. The lien of the Deed of Trust shall constitute a first mortgage Lien of record on the Mortgaged Land and a first security interest of record in all other Collateral, subject only to such Permitted Liens as Lender shall approve.

(h)      Title Insurance . Lender shall have received a title insurance policy with respect to the Mortgaged Land, issued by a title insurance company or companies satisfactory to Lender, and containing affirmative coverages and agreements, satisfactory in form and substance to Lender and its counsel, insuring an amount at least equal to the amount of the Loan and insuring Lender, as beneficiary under the Deed of Trust, as the holder of a valid first mortgage Lien of record on such Mortgaged Land subject only to such Permitted Liens as are approved by Lender in writing, and containing affirmative coverage as to claims and liens of mechanics and materialmen and such other

affirmative endorsements and coverages as Lender may request, all satisfactory in substance and form to Lender and its counsel.

(i)      Environmental Reports and Matters . If requested, Lender shall have received a Level I, Phase I environmental report relating to the Mortgaged Land, and such additional environmental reports as Lender shall have requested, in form and substance satisfactory to Lender and prepared by a consultant satisfactory to Lender.

(j)      Compliance with Laws . Lender shall have had made available to it such evidence as may be requested by it and satisfactory to it that the Mortgaged Land is in material compliance with all applicable laws, rules and regulations.

(k)      Permits, etc . Lender shall have had made available to it true and correct copies of all permits, licenses or certificates as may be requested by it and are applicable to the Mortgaged Land, and all such documents shall be in form and substance satisfactory to Lender.

(l)      Appraisals . Lender shall have received appraisals of the Mortgaged Land in form and substance satisfactory to Lender and prepared by an appraiser satisfactory to Lender, which appraisals conclude that the Mortgaged Land has an aggregate “as is” appraised value reasonably acceptable to Lender.

In order to induce Lender to enter into this Agreement, each Borrower represents and warrants as of the date hereof that, except as set forth in the Disclosure Statement with a specific reference to the section affected thereby:

4.1      Due Organization . Borrower is a duly organized and validly existing limited liability company under laws of the jurisdiction of its formation, is in good standing under the laws of such state of and is duly qualified to conduct business in all jurisdictions where the portion of the Mortgaged Land owned by such Borrower is located and where such Borrower’s failure to do so could reasonably be expected to result in a Material Adverse Change.

4.2      Requisite Power . Borrower has the requisite right, power, legal capacity and authority to enter into, perform and comply with the Loan Documents, to carry out the provisions of the Loan Documents and to consummate the transactions contemplated hereby and thereby. Borrower has all governmental licenses, authorizations, consents and approvals necessary to own and operate its Properties and to carry on its business as conducted on the date of this Agreement and as proposed to be conducted, the absence of which could reasonably be expected to result in a Material Adverse Change. The execution, delivery and performance of the Loan Documents have been duly authorized by the members of Borrower and all necessary action in respect thereof has been or will have been taken, and the execution, delivery and performance thereof do not require any other consent or approval of any Person holding any equity in Borrower.

4.3      Consents . Other than such as may have previously been obtained, filed or given, as applicable, no consent, license, permit, approval or authorization of, exemption by, notice or

report to, or registration, filing or declaration with, any governmental authority or agency is required on the part of Borrower in connection with the execution, delivery and performance by Borrower of the Loan Documents.

4.4      Binding Agreements . This Agreement has been duly executed and delivered by Borrower and constitutes, and the other Loan Documents, when executed and delivered by Borrower, will constitute, the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with its or their, as applicable, terms, except as the enforceability hereof or thereof may be affected by bankruptcy, insolvency and other similar laws affecting creditors’ rights generally and principles of equity. The execution, delivery and performance by Borrower of the Loan Documents, and the borrowing of the Loan and execution of the Deeds of Trust, do not or will not: (a) contravene Borrower’s Articles of Organization or Operating Agreement; (b) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect applicable to Borrower; or (c) result in or require the imposition of any Lien upon or with respect to any Properties now owned or hereafter acquired by Borrower.

4.5      Litigation; Adverse Facts . There is no action, suit, proceeding or arbitration at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of Borrower, threatened, by or against or affecting Borrower or any Properties of Borrower which could reasonably be expected to result in a Material Adverse Change or which challenges in any manner the validity or enforceability of any of the Loan Documents (or any of the transactions contemplated hereby or thereby), or the ability of Borrower to execute, deliver and perform any of the Loan Documents. Borrower is not subject to or in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or of any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any material contract or agreement of Borrower, in a manner which could reasonably be expected to result in any Material Adverse Change.

4.6      Financial Condition . Borrower has delivered to Lender Guarantor’s most recent annual and quarterly financial statement and such other monthly statements financial projections as Lender has requested. All of the foregoing financial statements have been prepared in accordance with GAAP and, are true and correct in all material respects and the financial projections, without warranting the achievement of any result, represent Guarantor’s best current estimate of its future results.

4.7      Title to Collateral; Liens . Except as set forth in the Disclosure Statement, Borrower will own all equipment located on the Mortgaged Loan and any other items affixed in any way to the Mortgaged Land. Except for Permitted Liens, all of the Collateral will be free from all Liens of any nature whatsoever. Except for Permitted Liens, Borrower will have good and marketable title to all of the Collateral. The Collateral is, in all material respects, in good operating condition and adequate for the currently contemplated conduct of the business of Borrower.

4.8      Payment of Taxes . All tax returns and reports of Borrower required to be filed by it have been timely filed, and all Taxes, assessments, fees, amounts required to be withheld and paid to a governmental agency or regulatory authority, and other governmental charges upon Borrower, which are due and payable have been paid. Borrower does not know of any proposed, asserted or

assessed tax deficiency against it that could reasonably be expected to result in any Material Adverse Change.

4.9      Disclosure . None of the representations or warranties made by Borrower in or pursuant to any of the Loan Documents, and none of the statements contained in any exhibit or report or financial information furnished by or on behalf of Borrower to Lender in connection with this Agreement or any negotiations leading thereto (except in each case solely to the extent that such representation, warranty or statement has prior to the date hereof been corrected in a subsequent written instrument delivered to Lender), contain any untrue statement of a material fact or omit any material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. There is no fact known to Borrower which has not been expressly disclosed herein or in such other documents, certificates and statements furnished to Lender for use in connection with the transactions contemplated hereby which could reasonably be expected to result in a Material Adverse Change.

4.10      Intellectual Property . Borrower has all necessary intellectual property rights and licenses to own its Property and to conduct its business as now conducted, and as currently contemplated to be conducted, without known conflict with the rights of others, and all of same are valid and subsisting, except where such lack of validity or subsistence or any such conflict could reasonably be expected to result in a Material Adverse Change.

4.11      No Existing Defaults and Violations . Borrower is not in default under any material term of any contractual obligation to which it is a party, including any agreements relating to the incurrence of Indebtedness where such default could reasonably be expected to result in a Material Adverse Change. Borrower is not in violation of any law, ordinance, rule or regulation to which it or any of its Properties is subject, failure to comply with which law, ordinance, rule or regulation could reasonably be expected to result in a Material Adverse Change.

4.12      Fire; Explosion and Labor Disputes . Neither the business nor the Properties nor the operations of Borrower is affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hurricane, hail, earthquake, embargo, act of God or of the public enemy, or other casualty (irrespective of whether covered by insurance), which could reasonably be expected to result in a Material Adverse Change.

4.13      Joint Ventures, etc . Except for wholly owned subsidiaries of Borrower as disclosed to Lender, Borrower is not (a) a general or limited partner in any partnership or a member of any Limited Liability Company, (b) a joint venturer in any joint venture, or (c) a direct or indirect owner of stock or other equity, or options or warrants to acquire stock or other equity or securities convertible into stock or other equity, of any other Person.

4.14      Use of Proceeds . The proceeds from the Loan shall be used by Borrower only as set forth in this Agreement. The use of said proceeds will not violate or result in a violation of, or require the making of any disclosures under, (a) Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Chapter II, (b) the Truth in Lending Act, as amended, or Regulation Z issued pursuant thereto, or (c) the Real Estate Settlement

Procedures Act of 1974, as amended, or any regulations pursuant thereto. Borrower does not own or intend to carry or purchase any “margin security” within the meaning of said Regulation T, including margin securities originally issued by it. Without limiting the provisions of Section 2.10, none of the proceeds from the Loan will be used to purchase or carry (or refinance any borrowing the proceeds of which were used to purchase or carry) any “security” within the meaning of the Securities Exchange Act of 1934, as amended.

4.15      Solvency . Borrower is not insolvent as defined by GAAP or in the Uniform Commercial Code.

4.16      Status Under Certain Federal Statutes . Borrower is not subject to regulation under the Investment Borrower Act of 1940, as amended, the Public Utility Holding Borrower Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended.

4.17      Brokers, etc . Borrower has not dealt with any broker, finder, commission agent or other Person in connection with the Loan and the transactions contemplated by this Agreement.

4.18      No Default . No Event of Default or Unmatured Event of Default will exist on the Closing Date.

4.19      No Subordination . None of the obligations of Borrower under this Agreement, the Deeds of Trust or any Loan Document is subordinate in right of payment to any other obligation of Borrower.

5.1      Swap Transactions . Borrower may, if approved by Lender, enter into one or more Permitted Swap Transactions with a Swap Counterparty. All Swap Obligations owed at any time by Borrower to a Swap Counterparty shall constitute Obligations outstanding under this Agreement and shall be secured by all Collateral just as if such Swap Obligations were owed directly to Lender. If Lender shall at any time provide a guarantee to any Swap Counterparty of any Swap Obligations owed to such Swap Counterparty, all obligations of Lender under such guarantee and all amounts remitted by Lender to such Swap Counterparty with respect to such guarantee shall constitute Swap Obligations. Lender shall provide Borrower with written notice of its agreement to guarantee any Swap Obligations for the benefit of a Swap Counterparty.

Each Borrower covenants and agrees that, from the date hereof until payment in full of the Obligations and all obligations under this Agreement and the other Loan Documents:

6.1      Payments . Borrower shall punctually pay or cause to be paid the principal, Prepayment Premium, if any, and interest on the Loan in accordance with the terms of this Agreement and the other Loan Documents.

6.2      Conduct of Business . Borrower shall continue to engage in an efficient and economical manner in the business in which Borrower is presently engaged consistent with Borrower’s current and prior business practices or customary wine industry practices.

6.3      Accounting Records and Inspection . Borrower shall maintain adequate financial and accounting books and records in accordance with sound business practices and GAAP consistently applied and permit any representative of Lender, with reasonable prior notice if no Event of Default or Unmatured Event of Default has occurred and is continuing and during usual business hours, reasonable access to inspect, audit and examine such books and records and to make copies and take extracts therefrom, and discuss its affairs, financing and business with its officers and independent public accountants. Borrower shall furnish to Lender any information reasonably requested by it regarding Borrower’s affairs, business or finances promptly upon Lender’s request. Borrower shall permit those Persons designated by Lender to visit and/or inspect or appraise any of the Collateral. Borrower shall reimburse Lender for all costs and expenses incurred by Lender in connection therewith; provided that Lender shall not charge Borrower for an inspection or appraisal of the Collateral more than once in any twelve month period unless an Event of Default or Unmatured Event of Default has occurred and is continuing, in which case there shall be no limit on the number of such appraisals at Borrower’s expense.

6.4      Financial Statements and Other Information . Borrower will cause Guarantor to maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to Lender:

(a)      Within 120 days after the end of each of fiscal year, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted accounting principles) audit report of Guarantor, with no going concern modifier, certified by independent certified public accountants reasonably acceptable to Lender, which shall include any accounting firm of recognized regional standing, prepared in accordance with GAAP on a consolidated and consolidating basis (consolidating statements need not be certified by such accountants) for Guarantor and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows.

(b)      Within 45 days after the end of the first three fiscal quarters of each year, for Guarantor and its Subsidiaries, consolidated and consolidating unaudited balance sheets as at the close of each such period and consolidated and consolidating profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, and a detailed listing of all Permitted Equipment Financing Liens.

(c)      As soon as available, but not later than March 31 of each fiscal year, projections of the consolidated and consolidating financial statements of Guarantor and its Subsidiaries for the such fiscal year on a monthly basis, including a projected consolidated and consolidating balance sheet and consolidated and consolidating statement of income, owners’ equity and cash flow of Guarantor and its Subsidiaries, which projection shall (i) state the assumptions used in the preparation thereof, (ii) contain such other information as reasonably requested by Lender, and (iii) be in form reasonably satisfactory to Lender.

(d)      Together with the financial statements required under Sections 6.4(a), (b) and (c), a compliance certificate in substantially the form of Exhibit A signed by Guarantor’s chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Unmatured Event of Default or Event of Default exists, or if any Unmatured Event of Default or Event of Default exists, stating the nature and status thereof.

(e)      Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which Guarantor or any of its Subsidiaries files with the Securities and Exchange Commission.

(f)      Promptly after the commencement thereof, written notice of all actions, suits, investigations, proceedings or arbitrations affecting Borrower or Guarantor which, if determined adversely to Borrower or Guarantor could reasonably be expected to result in a Material Adverse Change, and any and all orders, judgments, decisions or findings therein.

(g)      As soon as practicable, and in any event within five (5) Business Days, after any officer of Borrower or Guarantor becomes aware (i) of the existence of any event or condition which constitutes an Event of Default or Unmatured Event of Default, or (ii) that Lender has given any notice or taken any other action with respect to a claimed Event of Default or Unmatured Event of Default, a written notice specifying the nature, extent and period of existence thereof and what action Borrower proposes to take with respect thereto.

(h)      Promptly upon receipt thereof, copies of any notices to Borrower or Guarantor from any federal or state administrative agency relating to any order, ruling, statute or other law or regulation which could reasonably be expected to result in a Material Adverse Change.

(i)      Within twenty (20) days after request of Lender a reasonably detailed listing of all equipment and fixtures constituting Collateral.

(j)      Promptly upon the occurrence of any of the following events, written notice describing such event: (i) either Borrower or Guarantor shall have changed its name or jurisdiction of formation, or (ii) any merger or consolidation involving Borrower or Guarantor.

(k)      Such other information as Lender may from time to time reasonably request.

6.5      Corporate Existence . Borrower shall preserve and maintain its limited liability company existence and good standing in the jurisdiction of its organization, and qualify and remain qualified, as a foreign limited liability company in each jurisdiction in which such qualification is required, where failure to do so could reasonably be expected to result in a Material Adverse Change.

6.6      Maintenance of Permits and Licenses . Borrower shall preserve and maintain in full force and effect, all permits, licenses, filings or registrations required of Borrower by any governmental authority or agency where failure to preserve or maintain in full force and effect such permit, license, filing or registration could reasonably be expected to result in a Material Adverse Change.

6.7      Payment of Taxes and Claims . Borrower shall pay or shall cause to be paid all Taxes, assessments and other governmental charges imposed upon it or any of its Properties or in respect of its business, income or Properties before any penalty or interest accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien upon any of its Properties prior to the time when any penalty or fine shall be incurred with respect thereto; provided, however, that no such Tax, assessment, charge or claim need be paid if the same is being contested in good faith, by appropriate proceedings promptly instituted and diligently conducted and an adequate reserve or other appropriate provision shall have been made as required by GAAP. Unless Borrower has provided Lender with a tax service contract acceptable to Lender, Borrower shall provide evidence of payment of all real property taxes and assessments within thirty (30) days after payment thereof.

6.8      Maintenance of Properties . For Properties of Borrower not covered by any Deed of Trust, Borrower shall maintain or shall cause to be maintained, in good repair, working order and condition (ordinary wear and tear and obsolescence excepted) all of such Properties useful or necessary to its business or which are used in connection therewith or related thereto except where the failure to do so could not reasonably be expected to have a Material Adverse Change.

6.9      Insurance . For Properties of Borrower not covered by any Deed of Trust, Borrower shall maintain or shall cause to be maintained, with financially sound and reputable insurers, insurance with respect to the Properties, business and liabilities of Borrower against loss or damage of the kinds customarily insured against by Persons of established reputation engaged in the same or similar business and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations.

6.10      Compliance with Laws . Borrower shall comply in all respects with the requirements of all applicable laws, rules and regulations (including all Environmental Requirements) and orders of any governmental authority if failure to so comply would in any such case result in a Material Adverse Change.

6.11      Financial Covenants .

(a)      General . Compliance with the covenants in this Section 6.11 shall be measured by the information contained in any financial statements required to be furnished to Lender under Section 6.4 (and with any adjustments required as a result of the definitions of financial terms contained herein), or, if Lender deems it necessary or advisable to measure compliance based on other sources of information, in any other source reasonably deemed necessary or advisable by Lender.

(b)      Consolidated Debt Service Coverage Ratio . Borrower shall cause Guarantor to maintain a Consolidated Debt Service Coverage Ratio of not less than 1.5:1.0 for the twelve (12) fiscal month period ending on the last day of each fiscal year commencing with the fiscal year ending December 31, 2017.

6.12      Further Assurances . At any time or from time to time upon the request of Lender, Borrower shall, or cause Guarantor to, promptly (but in no event later than 10 days after such

request) execute, and deliver such further documents and do such other acts and things as Lender may reasonably request in order to effect fully the purpose of this Agreement, the Deeds of Trust, or the other Loan Documents and to provide for repayment of the principal and interest due under any Loan Document and the amount of principal funded thereunder in accordance with the terms of this Agreement and the other Loan Documents.

Each Borrower covenants and agrees that, from the date hereof until payment in full of the Obligations:

7.1      Indebtedness. Borrower shall not incur any Indebtedness unless Borrower has determined in good faith that Borrower shall have sufficient resources to pay such Indebtedness as and when it becomes due.

7.2      Liens . Borrower shall not create, incur, assume or permit to exist, directly or indirectly, any Lien on any Collateral except for Permitted Liens.

7.3      Use of Proceeds . Borrower shall not use any proceeds from the Loan in any way that will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Chapter II. Borrower shall not own or carry or purchase any “margin security” within the meaning of said Regulation T, including margin securities originally issued by it. Borrower shall not use any of said proceeds to purchase or carry (or refinance any borrowing the proceeds of which were used to purchase or carry) any “security” within the meaning of the Securities Exchange Act of 1934, as amended.

7.4      Restricted Payments . During any time that an Event of Default or Unmatured Event of Default has occurred and is continuing, neither Borrower nor Guarantor shall make any Restricted Payment. At all other times, neither Borrower nor Guarantor shall make any Restricted Payment that would leave such Person with inadequate capital or liquidity to satisfy such Person’s reasonably anticipated obligations.

7.5      Merger . Borrower shall not (a) consolidate with or merge with or into any other Person unless (i) Borrower is the surviving entity in such consolidation or merger, and after giving effect thereto, no Event of Default or Unmatured Event of Default would exist, or (ii) such consolidation or merger is in connection with a corporate restructuring where Guarantor remains the ultimate parent of Borrower or Borrower’s successor, or (b) convey, transfer or lease all or substantially all of its Property to any Person.

7.6      Restrictions on Disposition of Collateral . Borrower shall not sell, transfer, or otherwise dispose of (a) any Mortgaged Land or any interest in any Mortgaged Land, or (b) any material equipment or material fixtures (any such items being the “ Sold Equipment ”) that constitute Collateral unless (i) the Sold Equipment is worn out, obsolete, or no longer of use in Borrower’s business and the function performed by such Sold Equipment is adequately performed by other equipment or fixtures constituting Collateral, or (ii) the Sold Equipment is replaced by other

equipment or fixtures of equal or greater value than the Sold Equipment and all such replacement equipment or fixtures constitutes Collateral.

7.7      Leases . Without Lender’s consent, Borrower shall not lease any Mortgaged Land for a period greater than one (1) year.

7.8      Conduct of Business . Borrower shall not engage in any business other than the business in which it is engaged on the Closing Date or any business substantially related thereto.

7.9      Misrepresentations . Except with respect to the financial projections that have been furnished by Borrower to Lender, which projections have been certified to Lender pursuant to the last sentence of Section 4.6 hereof, neither Borrower nor Guarantor shall furnish Lender with any certificate or other document that: (a) contains any untrue statement of material fact; or (b) omits to state a fact necessary to make it not materially misleading in light of the circumstances under which it was furnished.

7.10      Reserved.

7.11      Ownership of Improvements. Borrower shall not permit any Person other than Borrower to own any items affixed to any Mortgaged Land other than trade fixtures, equipment or other items leased by Borrower under capital leases in the ordinary course of business.

7.12      No Subordination . Borrower shall not create, incur, assume, become or remain liable in any manner in respect of or in any way allow or suffer to exist any Indebtedness that is senior in any way in respect to payments of any interest, principal, Prepayment Premium or any other payment owed to Lender under this Agreement or under any of the other Loan Documents.

7.13      Accounting Changes; Fiscal Year. Borrower shall not, and shall not suffer or permit Guarantor or any of its Subsidiaries to (a) make any change in accounting treatment or reporting practices, except as permitted or required by GAAP or (b) change its fiscal year.

8.1      Events of Default . The occurrence of any one or more of the following events, acts or occurrences shall constitute an event of default (“ Event of Default ”):

(a)      Failure to Make Payments When Due . Borrower shall fail to pay any amount owing under this Agreement or any Loan Document (including any Swap Agreement) when such amount is due, whether at stated maturity, as a result of a mandatory repayment requirement, by acceleration, by notice of prepayment or otherwise, provided in the case of a Swap Agreement, such failure to pay shall constitute a default only after the expiration of any relevant grace period and the giving or any written notice required under any such Swap Agreement as a condition of a default under such Swap Agreement;

(b)      Breach of Certain Covenants . Borrower (or, if applicable, Guarantor) shall fail to perform or comply fully with any covenant in any Deed of Trust or contained in Sections 6.1, 6.2,

6.3, 6.5, 6.6, 6.7 (with respect to real property taxes and assessments), 6.9, 6.11 or in any portion of Section 7 (subject to any applicable grace periods set forth within such sections);

(c)      Breach of Other Covenants . Borrower (or, if applicable, Guarantor) shall fail to perform or comply fully with any covenant, term or condition contained in this Agreement or any Deed of Trust (other than those referred to in Section 8.1(a), 8.1(b) or 8.1 (e)), and such failure if by its nature is capable of being cured or remedied shall not have been cured or remedied within 30 days after notice from Lender of such failure provided , however that in the case such breach is not capable of being cured within such 30-day period and Borrower timely notifies Lender of such fact and Borrower diligently pursues such cure, then the cure period shall be extended to the date requested in Borrower’s notice but in no event more than 60 days from the initial breach; provided , further , that such additional 30-day opportunity to cure shall not apply in the case of any failure to perform or observe any covenant which has been the subject of a prior failure within the preceding 180 days or which is a willful and knowing breach by Borrower;

(d)      Breach of Representation or Warranty . Any financial statement, representation, warranty or certification made or furnished by Borrower pursuant to or in connection with this Agreement or in any of the other Loan Documents or in any statement, document, letter or other writing or instrument furnished or delivered by or on behalf of Borrower to Lender pursuant to or in connection with this Agreement or any Loan Document or as an inducement to Lender to enter into this Agreement shall, at any time, prove to have been materially false, incorrect or incomplete when made;

(e)      Bankruptcy or Insolvency . Borrower: (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; (ii) shall make an assignment for the benefit of creditors or petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; (iii) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of any debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; (iv)  shall have had any such petition or application filed or any such proceeding shall have been commenced against it, in which an adjudication or appointment is made or order for relief is entered, or which petition, application or proceeding remains undismissed for a period of 90 days or more; (v) by any act or omission indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or a substantial part of its assets; or (vi) shall suffer any custodianship, receivership or trusteeship to continue undischarged for a period of 90 days or more;

(f)      Cessation of Operations . Borrower shall permanently close substantially all of Borrower’s business operations on the Mortgaged Land or Borrower shall cease operations of substantially all of Borrower’s business on the Mortgaged Land for more than 30 consecutive days, unless such cessation is for the purpose of undertaking renovations or improvements in which case such cessation shall continue for no more than 180 days;

(g)      Environmental Laws .

(1)      Borrower shall be required under any Environmental Requirements (A) to implement any remedial, neutralization or stabilization process or program, the cost of which could constitute a Material Adverse Change, (B) to close permanently Borrower’s business operations on the Mortgaged Land, or to cease operations of Borrower’s business on the Mortgaged Land for more than 120 consecutive days, or (C) to pay any penalty, fine, or damages with respect to any Mortgaged Land in an aggregate amount in excess of Five Hundred Thousand Dollars ($500,000); or

(2)      The Properties (whether leased or owned) of Borrower or the operations conducted thereon by Borrower or any current or prior owner or operator thereof (in the case of real property), shall violate or have violated any applicable Environmental Requirements, if such violation would constitute a Material Adverse Change; or Borrower shall not obtain or maintain any license, permit, authorization or consent required to be obtained or filed under any Environmental Requirements in connection with the use of such property and assets, including past or present treatment, storage, disposal or release of Hazardous Material into the environment, if the failure to obtain or maintain the same would constitute a Material Adverse Change;

(h)      Impairment of Loan Documents . This Agreement or any of the other Loan Documents shall terminate or cease in whole or in part to be the valid, binding and enforceable obligation of Borrower or any Person acting for or on behalf of Borrower contests such validity, binding effect or enforceability, or purports to revoke any such document;

(i)      Dissolution . Borrower shall file any documents instituting or relating to its dissolution, or any order, judgment or decree shall be entered decreeing the dissolution of Borrower;

(j)      Guaranty Default . An Event of Default (as defined in the Guaranty) shall occur.

(k)      Cross-Default. An event of default shall occur under any loan agreement, credit agreement, security agreement, or similar agreement between Borrower and Lender or any affiliate of Lender.

(l)      Change in Control . Any Change in Control shall occur .

8.2      Remedies .

(a)      Automatic Acceleration . If any Event of Default described in Section 8.1(e) shall occur, all Obligations shall immediately become due and payable.

(b)      Optional Acceleration . If any Event of Default other than those referred to in Section 8.2(a) shall occur and be continuing, Lender may declare all Obligations to be due and payable immediately.

(c)      Enforcement Actions, etc . Upon the occurrence and during the continuation of an Event of Default, then and in every such case Lender may proceed to protect and enforce the rights of Lender either (i) by foreclosure on some or all of the Collateral as permitted by the Deeds of Trust or by law in order to satisfy the obligations secured by the Deeds of Trust, (ii) by taking any other actions permitted by the Deeds of Trust in order to satisfy the obligations secured by the Deeds of Trust, (iii) by suit in equity or by action at law, or both, whether for the specific performance or enforcement of any covenant, condition or agreement contained in this Agreement, any Deed of Trust or any other Loan Document or in aid of the exercise of any power granted in this Agreement, any Deed of Trust or any other Loan Document, or (iv) by proceeding to enforce the payment of this Agreement and the other Loan Documents or any other contractual, legal or equitable rights of Lender. All payments received by Lender shall be applied in such order as Lender shall determine.

(d)      Unconditional Right of Lender to Receive Principal, Prepayment Premium, if any, and Interest . Notwithstanding any provision of this Section 8.2, Lender shall have the right, which is absolute and unconditional, to receive payment of the principal of, the Prepayment Premium, if any, and interest on, the Loan on the due dates therefor and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of Lender.

9.1      Expenses . Borrower hereby agrees to pay on demand:

(a)      the reasonable out-of-pocket costs and expenses of Lender incurred in connection with the negotiation, preparation, reproduction, execution and delivery of this Agreement and the Loan Documents and any amendments, modifications, restatements, consents or waivers hereto or thereto (whether or not any such amendments, etc. are approved by the party or parties to which the request therefor was made);

(b)      the costs and expenses of Lender of and related to all title insurance, surveys, environmental audits, engineering and architect fees and filing and recording fees or incurred in connection with the closing of the Loan or upon and during the continuance of an Event of Default, monitoring Collateral, or following a reasonable determination by Lender that the Property is not in material compliance with Environmental Requirements or other applicable law, subject to Section 6.3;

(c)      the reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Lender in connection with obtaining advice about Lender's rights and obligations under this Agreement or the other Loan Documents, to address any default or to enforce any provision of this Agreement or any of the other Loan Documents;

(d)      the reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Lender in connection with any litigation, contest, dispute, suit, proceeding, or action (whether instituted by Lender, Borrower or any other Person) in any way relating to the Collateral, this Agreement, or any of the Loan Documents; and

(e)      the reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Lender in connection with any bankruptcy or other insolvency proceeding, reorganization, workout, composition or other creditor arrangement of Borrower (including the seeking of relief from the automatic stay or proposal of opposition to a plan of reorganization).

9.2      Indemnification . Borrower shall defend, indemnify and hold Lender and the officers, directors, employees, agents of and counsel to Lender (each, an “ Indemnitee ”) harmless against and from any and all liabilities, obligations, losses, damages, penalties, actions, causes of action, judgments, suits, claims, costs and expenses, however caused, of any kind or nature whatsoever, including the reasonable fees and expenses of counsel to Indemnitees, which may be imposed on, incurred by or asserted (whether actually asserted in any proceeding or threatened, and whether or not such Indemnitee is a party thereto) against such Indemnitee (collectively “ Losses ”) in any manner relating to, connected with or arising out of the negotiation, execution, delivery or performance of this Agreement or any of the other Loan Documents, the breach by Borrower of any representation or warranty contained herein or therein, any claim by any broker or finder relating in any way to the Agreement, any of the Loan Documents, or the consummation of the transactions contemplated by this Agreement or any of the other Loan Documents (the “ Indemnified Liabilities ”); provided, however, that Borrower’s obligations to indemnify shall not extend to any Losses arising as a result of the gross negligence, willful misconduct or unlawful conduct of an Indemnitee as determined in a final judgment by a court of competent jurisdiction. Each Indemnitee shall promptly notify Borrower of each event of which it has knowledge which may give rise to a claim under the indemnification provisions of this Section 9.2, but no such failure to give notice shall relieve Borrower of its obligations under this Section 9.2. If any investigative, judicial or administrative action, suit or proceeding arising from any of the foregoing is brought against any Indemnitee, Borrower will resist and defend such action, suit or proceeding or cause the same to be resisted and defended by counsel designated by Borrower (which counsel shall be reasonably satisfactory to such Indemnitee). Such Indemnitee will use its reasonable efforts to cooperate in the defense of any such action, suit or proceeding. To the extent that the undertaking to indemnify and hold harmless set forth in this Section 9.2 may be unenforceable because it is violative of any law or public policy, Borrower shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The obligations of Borrower under this Section 9.2 shall survive the termination of this Agreement and the other Loan Documents and the discharge of Borrower’s other obligations hereunder and thereunder.

10.1      No Election; Remedies Cumulative; Waivers; Amendments . No failure or delay on the part of Lender in exercising any right, power, privilege or remedy under this Agreement or any of the other Loan Documents shall impair or operate as a waiver thereof, nor shall any single

or partial exercise of any such right, power, privilege or remedy preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. The remedies provided for under this Agreement and the other Loan Documents are cumulative and are not exclusive of any remedies that may be available to Lender at law, in equity or otherwise. Neither this Agreement nor any of the other Loan Documents, nor any of its or their terms may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by Lender and Borrower. Any waiver of any provision of this Agreement or any of the other Loan Documents, and any consent to any departure by Borrower from the terms of any provisions hereof or thereof, shall be effective only in the specific instance and for the specific purpose for which given. In any event, no notice to, or demand on, Borrower shall entitle Borrower to any other or further notice or demand in similar or other circumstances.

10.2      Notices . All notices, demands, instructions and other communications required or permitted to be given to, or made upon, any party to this Agreement or any of the other Loan Documents shall be in writing and (except for financial statements and other related informational documents to be furnished pursuant hereto which may be sent by first-class mail, postage prepaid, and except for any of the foregoing for which the method of delivery is specifically prescribed by statute) shall be personally delivered or sent by facsimile or electronic transmission, by registered mail, postage prepaid, return receipt requested, or by a nationally recognized overnight courier service, and shall be deemed to be given for purposes of this Agreement (a) on the day that such writing is received by the Person to whom it is to be sent if given by personal delivery, by facsimile or electronic transmission or by courier, and (b) three Business Days after mailing if mailed pursuant to this Section 10.2. Notices, demands, instructions and other communications covered by this Section 10.2 shall be given to or made upon the respective parties hereto to the addresses below. Either party may designate a change of address within the United States of America by written notice to the other by giving at least five (5) days prior written notice of such change of address.

If to Borrower:

Double Canyon Vineyards, LLC

A Fine Old Building, LLC

2700 Napa Valley Corporate Drive, Suite B

Napa, CA 94558

Attn: Chief Financial Officer

Facsimile: 707-265-7928

Email: shannon.mclaren@crimsonwinegroup.com

If to Lender:

American AgCredit, FLCA

5560 S. Broadway

Eureka, CA 95503 (if delivered by courier)

                

P.O. Box 398

Fields Landing, CA 95537-0398 (if delivered by mail)

Attn: Account Officer – Double Canyon Vineyards

Facsimile: 707-442-1268

Email: operations-cmg@agloan.com ; eadams@agloan.com ;

10.3      Time of the Essence . Time is of the essence in this Agreement and the Loan Documents.

10.4      Transfers; Participations . Lender may sell, assign, transfer, grant a participation in, or otherwise dispose of all or any portion of its interest in this Agreement at any time without consent of Borrower. In connection therewith, Lender shall be entitled to provide to any assignee or participant or prospective assignee or participant such information pertaining to Borrower as Lender may deem appropriate or such assignee or participant or prospective assignee or participant may request; provided, that such assignee or participant or prospective assignee or participant shall agree (a) to treat in confidence such information, and (b) not to make use of such information for purposes of transactions other than contemplated by such assignment or participation.

10.5      Headings . Section headings used in this Agreement or any of the other Loan Documents and any table of contents herein or therein are for convenience of reference only and shall not constitute a part hereof or thereof for any other purpose or affect the construction hereof or thereof.

10.6      Execution in Counterparts and via Electronic Transmission . This Agreement may be executed in any number of counterpart signature pages and by different parties on separate counterpart signature pages, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. Signature pages to this Agreement and any Loan Document may be delivered via facsimile or electronic transmission and any Loan Document containing such a signature page shall be considered an original for all purposes hereunder.

10.7      Successors and Assigns . This Agreement and the other Loan Documents shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties. The provisions of this Agreement and the other Loan Documents are intended to be for the benefit of Lender and shall be enforceable by Lender pursuant to the terms hereof or thereof. This Agreement and the other Loan Documents may not be assigned by Borrower in whole or in part without the prior written consent of Lender, which consent may be withheld in its sole and absolute discretion,

and any such assignment of this Agreement and/or the other Loan Documents without such prior written consent shall be void.

10.8      Reproduction of Documents . This Agreement and the other Loan Documents, including (a) consents, waivers and modifications which may hereafter be executed, (b)  documents received by Lender at the Closing Date, and (c)  financial statements, certificates and other information previously or hereafter furnished to Lender or Borrower, may be reproduced by Lender or Borrower, respectively, by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and Lender or Borrower, respectively, may destroy any original document so reproduced. Borrower and Lender agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

10.9      Severability of Provisions . Any provision of this Agreement or any of the other Loan Documents which is illegal, invalid, prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity, prohibition or unenforceability without invalidating or impairing the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

10.10      Survival of Agreements; Representations and Warranties . All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the other Loan Documents.

10.11      Independence of Covenants . All covenants under this Agreement and the other Loan Documents shall be given independent effect so that if a particular action or condition is not permitted by any one covenant, the fact that it would be permitted by another covenant, by an exception thereto or would otherwise be within the limitations thereof, shall not avoid the occurrence of an Event of Default if such action is taken or condition exists. In addition, any representation, warranty, covenant or indemnification herein is supplemented and cumulative to, and shall not in any way limit, any representation, warranty, covenant or indemnification in any Deed of Trust or any Note, regardless of whether or not the subject matter of any such provisions may overlap or be redundant in any way.

10.12      Complete Agreement . This Agreement, together with the other Loan Documents, is intended by the parties hereto as a final expression of their agreement and is intended as a complete statement of the terms and conditions of their agreement with respect to the subject matter of this Agreement.

10.13      Payments on a Day that is not a Business Day . Whenever any payment to be made hereunder or under any other Loan Document shall be stated to be due on a day that is not a Business Day, such payment shall be due and may be made on the next succeeding Business Day and such extension of time shall in such case be included in computing interest, if any, in connection with such payment.

10.14      Governing Law . This Agreement and the other Loan Documents shall be governed by, and interpreted and construed in accordance with, the laws of the State of California applicable to contracts made and to be performed in California.

10.15      JURY WAIVER; JUDICIAL REFERENCE .

(a)      EACH OF THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR UNDER ANY AMENDMENT, MODIFICATION, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE DELIVERED) IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH OF THE PARTIES AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

(b)      Each of the parties hereto prefer that any dispute between them be resolved in litigation subject to the jury trial waiver set forth in Section 10.15(a) herein, but the California Supreme Court in Grafton Partners L.P. v. Superior Court has held such pre-dispute jury trial waivers are unenforceable under California law. Each of the parties hereto agree that the provisions of Section 10.15(b)-(i) shall be applicable until such pre-dispute jury trial waivers are deemed enforceable under California law or unless any dispute between them is brought before a court that is not applying California law.

(c)      Other than (i) non-judicial foreclosure of security interests in real or personal property, (ii) the appointment of a receiver or (iii) the exercise of other provisional remedies (any of which may be initiated pursuant to applicable law), any controversy, dispute or claim (each, a “ Claim ”) arising out of or relating to this Agreement or any other Loan Documents, will be resolved by a reference proceeding in California in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure (“ CCP ”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference proceeding. Venue for the reference proceeding will be in the Superior Court or Federal District Court in the County or District where venue is otherwise appropriate under this Agreement (the “ Court ”).

(d)      The referee shall be a retired Judge or Justice selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. The referee shall be appointed to sit with all the powers provided by law. Pending appointment of the referee, the Court has power to issue temporary or provisional remedies.

(e)      The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. All disputes relating to discovery

which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding.

(f)      Except as expressly set forth in this Agreement, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding.

(g)      The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including motions for summary judgment or summary adjudication. The referee shall issue a decision pursuant to CCP §644 and the referee’s decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court. The final judgment or order entered by the Court is fully appealable as provided by law. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

(h)      If the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or Justice, in accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.

(i)      THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

10.16      Confidentiality . Lender agrees that it will keep confidential from all Persons, other than its counsel, accountants, financial advisors, officers, directors, employees, consultants and agents, all information obtained by Lender pursuant to this Agreement or the other Loan Documents and designated or marked in writing by Borrower as confidential in accordance with procedures and standards that Lender applies generally as a matter of institutional policy to information of a confidential nature; provided, however, that Lender may disclose any such information (a) as has become generally available to the public (through no action on its part), (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over Lender or to any nationally recognized rating agency, (c) as may be required in response to any summons or subpoena or in connection

with any litigation, (d) in order to comply with any law, regulation or rule applicable to Lender, (e) to a prospective assignee in connection with any contemplated transfer of the Loan Documents provided that Lender advises such prospective assignee of the confidential nature of such information and such prospective assignee agrees to be bound by the provisions of this Section 10.16, (f) to any participant, or (g) otherwise as may be reasonably necessary for the enforcement of the rights of Lender with respect to this Agreement or any of the other Loan Documents.

10.17      General Construction . Unless otherwise noted, as used in this Agreement: (a) all “ Section ” references are to Sections of this Agreement; (b) use of the word “ including ” means “including, without limitation”; (c) the words “ hereof ,” “ herein ” and “ hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) all references to “ day ” or “ days ” means calendar days; (v) all meanings attributed to defined terms are equally applicable to both the singular and plural forms of the defined term; and (e) all references to a “ Loan Document ” mean such document as it is constituted as of the Closing Date, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

10.18      Section 2955.5(a) Notice . Borrower is hereby notified that Section 2955.5(a) of the California Civil Code provides, in relevant part, as follows: “No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property.” Borrower confirms that Lender advised Borrower of the provisions of Section 2955.5(a) prior to the Closing Date.

10.19      Joint and Several Liability . The Obligations constitute and single obligation, and the liability of each Borrower hereunder is joint and several.

11.1      Definitions . For purposes of this Agreement, the following initially capitalized terms shall have the following meanings:

“ Borrower ” shall have the meaning specified in the introductory paragraph hereto.

“ Business Day ” means any day that is not a Saturday, a Sunday, or a day on which banks are required or permitted to be closed in the State of California.

“ Capitalized Lease ” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP as in effect as of the date of this Agreement.

“ Capitalized Lease Obligations ” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.

“ Change in Control ” means that Guarantor shall cease to own one hundred percent (100%) of the membership interests in Borrower.

“ Closing Date ” means the date on which the escrow established for closing of the Loan closes and the documents held in escrow become legally effective between Borrower and Lender, which date may not be the same date as the date on the face page hereof.

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

“ Collateral ” shall have the meaning set forth in Section 2.12 and shall also mean any and all property of Borrower in which Lender now or hereafter has a Lien to secure all or any portion of the Obligations.

“ Consolidated Adjusted EBITDA ” means, with reference to any period, for Guarantor and its Subsidiaries on a consolidated basis, the sum (without duplication) of: (a) Consolidated Net Income; plus (b) the sum of (i) Federal, state, local, and foreign income taxes, (ii) interest expense (including the implicit interest portions of any capitalized lease obligations), (iii) depreciation and amortization, (iv) non-cash losses on asset sales, (v) deferred revenue and (vi) all other non-cash expenses; minus (c) the sum of (i) non-operating gains (including gains on asset sales (other than sales of inventory)), extraordinary or nonrecurring gains, gains from discontinuance of operations, (ii) non-operating losses, and (iii) deferred revenue, in each case to the extent included in Consolidated Adjusted EBITDA in any prior period.

“ Consolidated Debt Service ” means, for any period, without duplication, cash Consolidated Interest Expense, plus scheduled principal payments on Indebtedness, all calculated for Guarantor and its Subsidiaries on a consolidated basis in accordance with GAAP.

“ Consolidated Debt Service Coverage Ratio ” means, for any period, the ratio of (a) Consolidated Adjusted EBITDA to (b) Consolidated Debt Service, all calculated for Guarantor and its Subsidiaries on a consolidated basis in accordance with GAAP.

“ Consolidated Interest Expense ” means, with reference to any period, total interest expense (including that attributable to Capitalized Lease Obligations) of Guarantor and its Subsidiaries for such period with respect to all outstanding Indebtedness of Guarantor and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptances and net costs under Rate Management Transactions in respect of interest rates, to the extent such net costs are treated as interest expense for such period in accordance with GAAP), calculated for Guarantor and its Subsidiaries on a consolidated basis for such period in accordance with GAAP.

“ Consolidated Net Income ” means, with reference to any period, the consolidated net income (or loss) determined for Guarantor and its Subsidiaries, on a consolidated basis in accordance with GAAP.

“ Contingent Obligation ” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds

for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership.

“ Deed of Trust ” shall have the meaning set forth in Section 2.12.

“ Default Rate ” means a rate of interest that is two percent (2%) per annum higher than the rate otherwise applicable.

“ Disclosure Statement ” means the disclosure statement attached hereto.

“ Environmental Requirements ” shall have the meaning set forth in the Deeds of Trust.

“ Event of Default ” shall have the meaning set forth in Section 8.

“ Fee Letter ” shall have the meaning set forth in Section 2.6.

“ Fees ” means any fees referred to in the Fee Letter, any Prepayment Premium, and any other fees due to Lender pursuant to the Loan Documents.

“ GAAP ” means generally accepted accounting principles in the United States of America in effect on the date of this Agreement; provided, however, that all financial statements to be furnished to Lender after the Closing Date shall utilize such generally accepted accounting principles in effect at the time of preparation.

“ Guarantor ” means Crimson Wine Group, Ltd., a Delaware corporation.

“ Guaranty ” means the Guaranty dated on or about the date hereof from Guarantor in favor of Lender and any other document or instrument pursuant to which Guarantor guarantees to Lender all or any portion of the Obligations.

“ Hazardous Material ” shall have the meaning set forth in the Deeds of Trust.

“ Indebtedness ” of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) obligations of such Person as an account party with respect to standby and commercial letters of credit, (viii) Contingent Obligations of such Person, (ix) Net Mark-to-Market Exposure under Rate Management Transactions and other financial contracts, and (xi) any other obligation for borrowed money or

other financial accommodation which in accordance with GAAP as of the date of this Agreement would be shown as a liability on the consolidated balance sheet of such Person.

“ Indemnified Liabilities ” shall have the meaning set forth in Section 9.2.

“ Indemnitee ” shall have the meaning set forth in Section 9.2.

“ Lender ” means American AgCredit, FLCA.

“ Liabilities ” means, with respect to any Person, at any time any determination thereof is to be made, the total of all of the liabilities of such Person which have been or properly should be classified as liabilities on the balance sheet in accordance with GAAP.

“ Lien ” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind, any conditional sale or other title retention agreement, any lease in the nature thereof, any Capitalized Lease, and any agreement to give any Lien.

“ Loan ” shall have the meaning set forth in Section 1.1.

“ Loan Documents ” means this Agreement (as amended from time to time), each such amendment, the Note, each Swap Agreement, the Deeds of Trust, the Guaranty, and all other agreements, documents, instruments, and certificates listed in any closing checklist of schedule of documents delivered in connection with this Agreement or at any time delivered by Borrower to Lender in connection with the Loan, as the same may be amended, restated, supplemented or modified from time to time.

“ Losses ” shall have the meaning set forth in Section 9.2.

“ Material Adverse Change ” means a material adverse change (i) in the Properties, Indebtedness, business, operations, prospects or condition (financial or other) of Borrower or Guarantor, or (ii) in the ability of Borrower to perform the obligations set forth in this Agreement, the Note, any of the Deeds of Trust or any other Loan Document.

“ Maturity Date ” shall have the meaning set forth in Section 2.1.

“ Members ” means any Person who is now or hereafter becomes a member of Borrower.

“ Mortgaged Land ” shall have the meaning set forth in Section 2.12.

“ Net Mark-to-Market Exposure ” of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. “Unrealized losses” means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date).

“ Note ” shall have the meaning set forth in Section 1.1.

“ Obligations ” means (a) all loans, advances, Indebtedness, liabilities, and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable and whether or not allowed as a claim in any bankruptcy or insolvency proceeding) owing by Borrower to Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Loan Documents, and (b) all Swap Obligations. This term includes the Loan, all principal, interest, Fees, charges, expenses, attorneys' fees and any other sum chargeable by Lender to Borrower under this Agreement or any of the Loan Documents.

“ Operating Lease ” means any lease of an Asset by a Person as a lessee which would, in conformity with GAAP, not be required to be accounted for as a capital lease on the balance sheet of such Person.

“ Open Prepayment Date ” means the date that is six (6) months after the Closing Date.

“ Orchard ” shall have the meaning set forth in Section 2.13.

“ Permitted Equipment Financing Liens ” means (a) Liens listed as equipment financing liens on the Disclosure Statement, and (b) purchase money Liens incurred after the Closing Date on any fixtures or equipment hereafter acquired or the assumption of any Lien on such property existing at the time of such acquisition, or a Lien incurred in connection with any conditional sale or other title retention agreement; provided that:

(i)      any fixtures or equipment subject to any of the foregoing is acquired by Borrower in the ordinary course of its business and the Lien on any such property is created contemporaneously or substantially contemporaneously (but not in excess of 20 days) with such acquisition;

(ii)      each such Lien shall attach only to the property so acquired and fixed improvements thereon; and

(iii)      the incurrence of such Lien shall not cause the aggregate outstanding amount of Indebtedness secured by Permitted Equipment Financing Liens to exceed $1,000,000.

“ Permitted Liens ” means:

(a)      With respect to any Mortgaged Land, any Lien or other encumbrance existing on the Closing Date and disclosed in Lender’s title insurance policy issued with respect to such Mortgaged Land;

(b)      With respect to any Mortgaged Land, easements, rights-of-way, restrictions, minor defects or other irregularities in title, and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case

materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of Borrower and its Subsidiaries;

(c)      Liens for taxes or assessments, or governmental charges or claims, if not yet due and payable or if due and payable if they are being contested in good faith by appropriate proceedings and for which appropriate cash reserves are maintained;

(d)      Liens imposed by law, such as mechanic’s, materialmen’s, landlord’s, warehousemen’s, landlord’s and carrier’s Liens, and other similar Liens securing obligations incurred in the ordinary course of business which are not past due for more than 30 days, or which are being contested in good faith by appropriate proceedings and for which appropriate cash reserves have been established;

(e)      any attachment or judgment Lien arising in connection with court proceedings, provided that the execution or other enforcement of such Liens is effectively stayed and the claims thereby are being actively contested in good faith and by appropriate proceedings;

(f)      Liens in favor of Lender;

(g)      Liens on crops growing on the Mortgaged Land in favor of a Person providing financing for such crops; and

(h)      Permitted Equipment Financing Liens.

“ Permitted Swap Transaction ” means an interest rate swap transaction between Borrower and a Swap Counterparty relating to the Loan.

“ Person ” means and include natural persons, corporations, limited partnerships, general partnerships, limited liability companies, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

“ Prepayment Premium ” shall have the meaning set forth in Section 2.5(c).

“ Property ” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

“ Rate Management Transaction ” means any transaction (including an agreement with respect thereto) now existing or hereafter entered by Borrower or any Subsidiary and a Lender or any of its affiliates, which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions)

or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

“ Rate Management Obligations” of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions.

“ Restricted Payment ” means, with respect to each and both of Borrower, and Guarantor, any dividend, payment, or other distribution of assets, properties, cash, rights, obligations, or securities on account of any shares of any class of such Person’s capital stock or any membership interest or other equity investment or purchase, redemption, or other acquisition for value of any shares of such Person’s capital stock or any membership or other equity interest or any warrants, rights or options to acquire such shares or membership or other equity interest, now or hereafter outstanding.

“ Subsidiary ” of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” means a Subsidiary of Borrower.

“ Swap Agreement ” means, with respect to any Permitted Swap Transaction, (a) the ISDA Master Agreement, with accompanying schedules, confirmations, instruments, and other documents entered into between Borrower and a Swap Counterparty related to an ISDA Master Agreement between Borrower and the Swap Counterparty, and (b) any guaranty by Lender of any obligations owed by Borrower under or in connection with any Swap Agreement described in clause (a) of this definition.

“ Swap Counterparty ” means CoBank, ACB, or such other Person approved by Lender as a Swap Counterparty.

“ Swap Obligations ” means any amounts at any time owed by Borrower to any Swap Counterparty pursuant to any Swap Agreement and any obligations of Lender to any Swap Counterparty under a Swap Agreement to which Lender is a party.

“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.

“ Unmatured Event of Default ” means the occurrence or existence of an event or circumstance that with the passage of time or the giving of notice or both would become an Event of Default.

[Signatures begin on following page.]

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

BORROWER:

Double Canyon Vineyards, LLC, a Delaware limited liability company

By: /s/ Shannon McLaren        

Name: Shannon McLaren

Title: Chief Financial Officer

A Fine Old Building, LLC, a Washington limited liability company

By: /s/ Shannon McLaren        

Name: Shannon McLaren

Title: Chief Financial Officer

LENDER:

American AgCredit, FLCA

By: /s/ Edwin A. Adams, Jr.        

Name: Edwin A. Adams, Jr.

Title: Vice President

[Signature Page Loan Agreement]

Exhibit A

FORM OF COMPLIANCE CERTIFICATE

To: American AgCredit, FLCA

This Compliance Certificate is furnished pursuant to that certain Loan Agreement dated as of June 29, 2017 (as amended, modified, renewed or extended from time to time, the “ Agreement ”) among Double Canyon Vineyards, LLC , a Delaware limited liability company, and A Fine Old Building, LLC, a Washington limited liability company (“ Borrower ”) and American AgCredit, FLCA (“ Lender ”). Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. I am the _______________ of Double Canyon Vineyards, LLC, and the ___________ of A Fine Old Building, LLC;

2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Borrower and of Guarantor and its Subsidiaries during the accounting period covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Unmatured Event of Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; and

4. Schedule I attached hereto sets forth financial data and computations evidencing Guarantor's compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct.

5. Schedule II attached hereto sets forth the various reports and deliveries which are required at this time under the Loan Agreement and the other Loan Documents and the status of compliance.

6. All real estate taxes assessed with respect to Mortgaged Land have been paid prior to delinquency. Copies of all tax bills issued with respect to the Mortgaged Land that have been received by Borrower during the most recent fiscal quarter are attached as Schedule III, together with evidence of payment of any real estate taxes during such quarter.

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Borrower or Guarantor has taken, is taking, or proposes to take with respect to each such condition or event:

The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this    day of     ,     .

______________________________

______________, in his/her capacity as the ____________________ of Double Canyon Vineyards, LLC, a Delaware limited liability company, and the ____________________ of A Fine Old Building, LLC, a Washington limited liability company

Schedule I

Financial Covenant Calculations

[__________]

COMPLIANCE CERTIFICATE

FOR THE PERIOD ENDING: _________________

American AgCredit Term Loan

Schedule III

Real Estate Taxes and Assessments; Evidence of Payment

[Attached]

Disclosure statement

SCHEDULE 4.3

Section 4.3      Consents

Execution, delivery and performance by Borrower of the Loan Documents requires filing of a Form 8-k with the Securities and Exchange Commission. Borrower will file Form 8-k after the Closing Date consistent with applicable law.

Section 4.7      Equipment Owned by Third Parties

The following equipment is leased by Borrower from third parties :

The following equipment is located on the Mortgaged Land, but is owned by third parties :

Permitted Equipment Financing Liens

TERM LOAN PROMISSORY NOTE

$10,000,000.00    June 29, 2017

FOR VALUE RECEIVED, Double Canyon Vineyards, LLC, a Delaware limited liability company, and A Fine Old Building, LLC, a Washington limited liability company (individually and collectively, " Borrower "), hereby promise, on a joint and several basis, to pay to the order of American AgCredit, FLCA (" Lender "), in lawful money of the United States of America, the principal sum of Ten Million Dollars ($10,000,000.00) with interest on the unpaid principal sum owing hereunder at the rate or rates or in the amounts computed in accordance with the Loan Agreement of even date herewith between Borrower and Lender (as the same may be amended from time to time, the " Loan Agreement "), together with all other amounts due Lender under the Loan Agreement, all payable in the manner and at the time or times provided in the Loan Agreement. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreement.

If not sooner due and payable in accordance with the Loan Agreement, Borrower shall pay to Lender all amounts due and unpaid under the Loan Agreement on July 1, 2037, or on any earlier Maturity Date as set forth in the Loan Agreement. Unless otherwise specified in writing by Lender, all payments hereunder shall be paid to Lender at the office or other location as Lender may hereafter designate from time to time. Lender reserves the right to require any payment on this Note, whether such payment is a regular installment, prepayment or final payment, to be by wired federal funds or other immediately available funds.

Borrower and each and every co-maker, surety, endorser and guarantor of the indebtedness evidenced by this Note and the Loan Agreement, expressly waive demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of intent to accelerate the maturity hereof, notice of the acceleration of the maturity hereof, bringing of suit and diligence in taking any action to collect amounts due hereunder and in the handling of security at any time existing in connection herewith, and such parties are and shall be jointly, severally, directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice (except as expressly provided in the Loan Documents), diligence, act or omission as or with respect to the collection of any amount called for hereunder or in connection with any right, lien, interest or property at any and all times had or existing as security for any amount called for hereunder.

This Note evidences all advances of the principal amount hereof made, interest due and all amounts otherwise owed to Lender under the Loan Agreement. This Note is secured by the liens and security interests created under the Loan Documents (including those arising under any Deed of Trust). Reference is made to the Loan Agreement for provisions relating to repayment of the indebtedness evidenced by this Note, including mandatory repayment, acceleration following default, Default Interest, limitations on interest, and restrictions on prepayment.

This Note has been executed and delivered in and shall be construed in accordance with and governed by the laws of the State of California and of the United States of America.

NOTICE TO BORROWER:

DO NOT SIGN THIS PROMISSORY NOTE BEFORE YOU READ IT AND CONSULT WITH LEGAL COUNSEL OF YOUR CHOICE, OR IF YOU BELIEVE THAT THERE ARE ANY ORAL UNDERSTANDINGS, PROMISES, OR AGREEMENTS NOT SET FORTH IN WRITING IN THIS NOTE AND/OR THE OTHER LOAN DOCUMENTS.

IN WITNESS WHEREOF, this Note has been executed by Borrower and is effective as of the day and year first above written.

BORROWER:

Double Canyon Vineyards, LLC, a Delaware limited liability company

By: /s/ Shannon McLaren        

Name: Shannon McLaren

Title: Chief Financial Officer

A Fine Old Building, LLC, a Washington limited liability company

By: /s/ Shannon McLaren        

Name: Shannon McLaren

Title: Chief Financial Officer

[Signature Page Term Loan Note]

GUARANTY

This Guaranty (“ Guaranty ”), dated as of June 29, 2017, is executed by Crimson Wine Group, LTD, a Delaware corporation (“ Guarantor ”) in favor of American AgCredit, FLCA (“ Lender ”), with reference to the following facts:

RECITALS

A. Pursuant to a Loan Agreement of even date herewith by and among Double Canyon Vineyards, LLC, a Delaware limited liability company, and A Fine Old Building, LLC, as borrower (individually and collectively, and together with all other entities that may hereafter become obligors under the Loan Agreement, collectively, " Borrower ") and American AgCredit, FLCA, as Lender (including all annexes, exhibits and schedules thereto, and as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), Lender has made a loan (the “ Loan ”) in the amount of Ten Million Dollars ($10,000,000) to Borrower. The Loan is evidenced by the Loan Agreement and by a Term Loan Promissory Note of even date herewith in the amount of Ten Million Dollars ($10,000,000), and which may be amended from time to time and certain other documents referred to the Loan Agreement as "Loan Documents."

B.      Guarantor is the owner of one hundred percent (100%) of the equity of Borrower and will derive substantial benefit from Lender’s making the Loan to Borrower. Without the support of this Guaranty from Guarantor, Borrower would not have been able to obtain the Loan in the amount and on the terms that are set forth in the Loan Agreement. Guarantor understands that Lender would not have made the Loan to Borrower without the financial support of Guarantor, that the delivery of this Guaranty to Lender is a condition precedent to the making of the Loan, and Lender is making the Loan in reliance upon this Guaranty.

AGREEMENT

NOW THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and in order to induce Lender to make the Loan, Guarantor agrees, for the benefit of Lender, as follows:

1.      Affirmation of Recitals . The recitals set forth above are true and correct and are incorporated herein by this reference.

2.      Defined Terms . All capitalized terms that are not defined herein shall have the meanings ascribed to such terms in the Loan Agreement.

3.      Certain Matters of Construction . The terms “herein,” “hereof” and “hereunder” and other words of similar impact shall refer to this Guaranty as a whole and not to any particular section, paragraph or subdivision. Any reference to a “Section” shall refer to the relevant Section to this Guaranty, unless specifically indicated to the contrary. Any pronoun used

shall be deemed to cover all genders. The term “including” shall not be limiting or exclusive, unless specifically indicated to the contrary. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.

4.      Guaranty of Guaranteed Obligations . Guarantor acknowledges that it is in Guarantor’s best interests to execute this Guaranty as Guarantor and will derive substantial direct and indirect benefits from the advances provided by Lender to Borrower under the Loan Agreement (the obligations of Borrower to Lender under the Loan Agreement and the other Loan Documents are hereafter referred to as the “Obligations” and the obligations of Guarantor to Lender hereunder are hereafter referred to as the “Guaranteed Obligations”). Guarantor absolutely, irrevocably and unconditionally guarantees and promises to pay to Lender, and its successors, endorsees, transferees and assigns, on demand in lawful money of the United States of America, any and all Obligations of Borrower to Lender arising from or in connection with the Loan Documents.

5.      Independent Obligations . Guarantor’s obligations hereunder are independent of the Obligations of Borrower, any other guarantor or any other person, and Lender may enforce any of its rights hereunder independently of any other right or remedy that Lender may at any time hold with respect to the Guaranteed Obligations or any security or other guaranty therefor. This Guaranty is a guaranty of payment when due and not of collection. Without limiting the generality of the foregoing, Lender may bring a separate action against Guarantor without first proceeding against Borrower, any other guarantor, any other person or any security held by Lender and regardless of whether Borrower, any other guarantor or any other person is joined in any such action. Guarantor’s liability hereunder shall at all times remain effective with respect to the full amount of the Guaranteed Obligations, notwithstanding any limitations on the liability of Borrower to Lender contained in the Loan Agreement or elsewhere. Lender’s rights hereunder shall not be exhausted by any action taken by Lender until all Guaranteed Obligations have been fully and finally paid and performed.

6.      Authority to Modify Guaranteed Obligations . Guarantor acknowledges that the sum of the Guaranteed Obligations may significantly vary from time to time. Guarantor authorizes Lender, at any time and from time to time without notice and without affecting the liability of Guarantor hereunder, to alter the terms of all or any part of the Guaranteed Obligations and any security and guaranties therefor including modification of times for payment and rates of interest.

7.      Demand by Lender . In addition to the terms of this Guaranty set forth in Sections 4, 5, and 6, and in no manner imposing any limitation on such terms, it is expressly understood and agreed that, if the Obligations are declared to be or otherwise become immediately due and payable, then Guarantor shall, upon demand in writing therefor by Lender to Guarantor, immediately pay the Guaranteed Obligations to Lender. Payment by Guarantor shall be made to Lender to be credited and applied upon the Obligations, in immediately available funds, to an account designated by Lender or at any address that may be specified in writing from time to time by Lender within the continental United States. This section shall in no way affect Lender’s right to resort to any collateral that may be held by Lender (the “ Collateral ”) without demand, as provided in Section 18.2. Any payment received by Lender with respect to the Obligations shall reduce the Guaranteed Obligations by the amount of such payment.

8.      Guarantor Waivers . In addition to any other waivers provided in this Guaranty, Guarantor hereby waives each of the following, to the fullest extent allowed by law:

8.1      Guarantor expressly waives any right it may now or in the future have to require Lender to, and Lender shall not have any liability to, first pursue or enforce against Borrower, the Collateral, or any other security, guaranty, or pledge that may now or hereafter be held by Lender for the Obligations or for the Guaranteed Obligations, or to apply such security, guaranty, or pledge to the Obligations or to the Guaranteed Obligations (except with respect to funds or proceeds thereof or received with respect thereto), or to pursue any other remedy in Lender’s power that Guarantor may or may not be able to pursue itself and that may lighten Guarantor’s burden, before proceeding against the Collateral. Guarantor shall remain liable for the Guaranteed Obligations, notwithstanding any judgment Lender may obtain against Borrower, any other guarantor of the Obligations, or any other person, or any modification, extension, or renewal with respect thereto.

8.2      Guarantor has entered into this Guaranty based solely upon its independent knowledge of Borrower’s financial condition and Guarantor assumes full responsibility for obtaining any further information with respect to Borrower or the conduct of its business. Guarantor represents that it is now, and during the terms of this Guaranty will be, responsible for ascertaining the financial condition of Borrower. Guarantor hereby waives any duty on the part of Lender to disclose to Guarantor, and agrees that it is not relying upon nor expecting Lender to disclose to it, any fact known or hereafter known by Lender relating to the operation or condition of Borrower or its business. Guarantor knowingly accepts the full range of risk encompassed in a contract of guaranty, which risk includes the possibility that Borrower may incur indebtedness after its financial condition or its ability to pay its debts as they mature has deteriorated.

8.3      Lender shall not be under any liability to marshal any assets in favor of Guarantor or in payment of any or all of the Obligations or Guaranteed Obligations.

8.4      Guarantor hereby waives: (i) presentment, demand, protest, notice of acceleration, dishonor, non-payment, protest, or any delay related thereto, with respect to any instruments or documents relating to the Obligations or the Guaranteed Obligations, except as specifically provided in Section 7; (ii) notice of any extension, modification, renewal, or amendment of any of the terms of the Loan Agreement or any other Loan Document relating to the Obligations or the Guaranteed Obligations; (iii) notice of the occurrence of any Event of Default with respect to the Obligations, the Guaranteed Obligations, or the Collateral; and (iv) notice of any exercise or non-exercise by Lender of any right, power, or remedy with respect to the Obligations, the Collateral, or the Guaranteed Obligations.

If Lender may, under applicable law, proceed to realize its benefits under any Loan Document giving Lender a lien upon any Collateral, either by judicial foreclosure or by nonjudicial sale or enforcement, Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Guaranty. If, in the exercise of any of its rights and remedies, Lender shall forfeit any of its rights or remedies under any Loan Document, including obtaining a deficiency judgment against Borrower or any other person, whether because of any applicable laws pertaining to “election of remedies,” anti-deficiency rules, or the

like, Guarantor hereby consents to such action by Lender and waives any claim based upon such action. Any election of remedies that results in the denial or impairment of the right of Lender to seek a deficiency judgment against Borrower shall not impair Guarantor’s obligations under this Guaranty. In the event Lender shall bid at any foreclosure or trustee’s sale or at any public or private sale permitted by law or the Loan Documents, Lender may bid all or less than the amount of the Obligations or the Guaranteed Obligations and the amount of such bid need not be paid by Lender but shall be credited and applied as set forth in Section 19. The amount of the successful bid at any such sale, whether Lender or any other party (including Guarantor) is the successful bidder, shall be deemed to be prima facie evidence of the fair market value of the Collateral and the amount remaining after application of such bid amount in the manner set forth in Section 19 shall be deemed to be prima facie evidence of the amount of the Obligations guaranteed under this Guaranty.

8.5      Until payment in full of the Guaranteed Obligations, Guarantor shall have no right of subrogation, reimbursement, indemnity, or contribution, and shall have no recourse with respect to the Collateral or any lien held therefor, all of which Guarantor expressly waives.

8.6      Guarantor agrees and represents that the Obligations are and shall be incurred by Borrower, and that the Guaranteed Obligations are and shall be incurred by Guarantor, for business and commercial purposes only. Guarantor agrees that any claim of Lender against Guarantor arising out of this Guaranty arises out of the conduct by Guarantor of its trade, business, or profession. Guarantor undertakes all the risks encompassed in the Loan Agreement and the other Loan Documents as they may be now or are hereafter agreed upon by Lender and Borrower. Lender, in such manner and upon such terms and at such time as it deems best, and with or without notice to Guarantor, may release, add, subordinate or substitute security for the Obligations or the Guaranteed Obligations.

8.7      Guarantor waives and agrees that it shall not at any time insist upon, plead, or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent, or otherwise affect the performance by Guarantor of the Guaranteed Obligations or the enforcement by Lender of this Guaranty.

8.8      A separate action or actions may be brought under this Guaranty or any of the Loan Documents and prosecuted by Lender against Guarantor whether or not an action is brought against Borrower, or whether Borrower are joined in any such action or actions. Without limiting the generality of the foregoing, Guarantor expressly waives the benefit of any statute of limitation affecting the Obligations and expressly agrees that the running of a period of limitation on, or Lender’s delay or omission in, any action by Lender against Borrower or for the foreclosure of any lien or the enforcement of any security interest in the Collateral shall not exonerate or affect Guarantor’s liability to pay and perform the Guaranteed Obligations.

9.      Waivers of Defenses Regarding Real Property Security .

9.1      Guarantor understands and acknowledges the following:

(a)      If Borrower defaults in the payment or performance of the Obligations and Guarantor pays to Lender all or part of the Obligations, Guarantor would, except to the extent limited or waived pursuant to Section 8.5, have a right to proceed against Borrower to the extent of the Obligations so paid by Guarantor and to have the benefit of any security held by Lender for the Obligations to the extent of the Obligations so paid by Guarantor. Such right is commonly known as the “right of subrogation.”

(b)      If Lender forecloses on Borrower’s real property by means of a trustee’s sale under a power of sale contained in a deed of trust or other security instrument, applicable statutory and decisional law, including California Code of Civil Procedure (“ CCP ”) Section 580a and 580d, might limit or prohibit both Lender and Guarantor from recovering any further payment from Borrower personally on account of the Obligations or limit such recovery. This means that Guarantor’s right to proceed against Borrower for any amounts Guarantor was required to pay under the Guaranty would then be impaired or destroyed by Lender’s election to complete a trustee’s sale of Borrower’s real property. Lender’s election to complete a trustee’s sale of Borrower’s real property could thus give Guarantor a defense to its obligations under the Guaranty, in addition to any statutory or decisional law protections against a personal judgment that benefits Guarantor directly.

(c)      If Lender forecloses on Borrower’s real property by means of a judicial foreclosure, applicable statutory and decisional law, including CCP Section 726(b), might limit the amount that both Lender and Guarantor could collect from Borrower personally, and thus such an action by Lender might give Guarantor a complete or partial defense to its obligations under the Guaranty, in addition to any statutory or decisional law protections against a personal judgment that benefits Guarantor directly.

(d)      Lender has given only a basic description above of Guarantor’s rights against Borrower, the limitation or destruction of those rights by Lender’s actions in foreclosing on Borrower’s real property, and the potential claims or defenses that Guarantor could therefore raise against Lender’s demand for payment on the Guaranty, in addition to any statutory or decisional law protections against a personal judgment that benefits Guarantor directly. Lender has advised Guarantor that the relationships of Borrower, Lender, and Guarantor under applicable real property law are complex issues such that Guarantor may wish to retain counsel to review these issues and review the obligations that Guarantor is undertaking under the Guaranty, as well as the waivers of rights that Guarantor will make pursuant to the provisions set forth below.

(e)      Lender desires the right to foreclose against Borrower’s real property either by trustee’s sale or by judicial foreclosure, as well as to pursue all Lender’s rights and remedies against Borrower and Guarantor, without giving rise to any claims or defenses by Guarantor under the Guaranty, including any defense that Lender’s foreclosure of Borrower’s real property has limited or destroyed Guarantor’s rights against Borrower. For these reasons, Lender requires Guarantor to waive its rights and defenses, as described basically above, and in the form stated below.

9.2      Guarantor expressly, knowingly and intentionally waives and relinquishes the following of its rights:

(a)      all rights, defenses or benefits Guarantor might have arising out of an election of foreclosure by Lender even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has, by the operation of CCP section 580d or otherwise, destroyed Guarantor’s rights as against Borrower of subrogation, reimbursement, indemnity, or contribution;

(b)      all rights, defenses or benefits Guarantor might have, whether directly or derivatively, under the following California statutes and decisions: CCP sections 580a, 580d, 726, 726(b), or their application in case law, including the case of Union Bank v. Gradsky ; and

(c)      all rights, defenses or benefits Guarantor might have directly under any applicable state statutory or decisional law limiting or protecting Guarantor against a personal judgment on the Guaranty after Lender’s nonjudicial foreclosure of the Borrower’s real property.

9.3      In particular, Guarantor agrees that the Guaranty will remain effective on its terms and that:

(a)      Guarantor will be required to pay in full the unpaid amount of any Obligations to Lender even if Lender forecloses on Borrower’s real property by trustee’s sale and the effect of such sale is to prevent Guarantor from taking action against Borrower to recover amounts paid by Guarantor to Lender under the Guaranty or otherwise limits or destroys Guarantor’s rights, including rights of subrogation;

(b)      Guarantor will be required to pay in full the unpaid amount of any Obligations to Lender even if Lender forecloses on Borrower’s real property by judicial foreclosure action and Guarantor’s rights against Borrower are thereby limited by the operation of applicable statutory and decisional law.

10.      Waivers of Defenses . Guarantor waives any defense based upon or arising by reason of: (a) any disability or other defense of Borrower or any other person; (b) the cessation of liability or limitation from any cause whatsoever of the Obligations or any portion thereof, other than payment in full or payment of such portion; (c) any lack of authority of any agent or other person acting or purporting to act on behalf of Borrower, or any defect in the formation of Borrower; (d) the application by Borrower of the proceeds of the Obligations or any other obligation of Borrower or Lender for purposes other than the purposes represented to, or intended or understood by Lender; (e) any act or omission by Lender that directly or indirectly results in or aids the discharge of Borrower or any portion of the Obligations or any other obligation of Borrower to Lender by operation of law or otherwise; or (f) any modification of the Obligations or any other obligation of Borrower to Lender in any form whatsoever, including the renewal, extension, acceleration or other change in time for payment of the Obligations, or other change in the terms of the Obligations or any part thereof, including increase or decrease of the rate of interest thereon.

Without limiting the generality of the foregoing, Guarantor waives any defenses or rights arising under California Civil Code sections 2787 through 2855, inclusive, and Sections 2899 and 3433.

11.      Reasonableness and Effect of Waivers . Guarantor warrants and agrees that each of the waivers set forth in this Guaranty is made with full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law.

12.      Continuing Guaranty . Guarantor agrees that (a) this is a continuing guaranty, (b) the Guaranteed Obligations hereunder shall extend to each and every extension or renewal, if any, of the Loan Documents, regardless of whether the Guaranteed Obligations may, in successive transactions, be paid, repaid, advanced, or renewed from time to time, and (c) this Guaranty shall remain in full force and effect until the Guaranteed Obligations are paid in full and have been completely satisfied, and shall not be impaired or affected by, or be deemed to be satisfied by, nor shall Guarantor or the Collateral be exonerated, discharged, or released by, any of the following events:

12.1      Lender’s exercise or enforcement of, or failure or delay in exercising or enforcing, legal proceedings to collect the Obligations or any power, right, or remedy with respect to any of the Obligations, the Collateral, or the Guaranteed Obligations including: (i) any action or inaction of Lender to perfect, protect, or enforce any security interest in any Collateral; (ii) any impairment or invalidity of the Collateral or any suspension of Lender’s right to enforce against Borrower any Obligations, any Guaranteed Obligations, or any security interest in or lien upon the Collateral; or (iii) any change in the time, manner, or place of payment of, or in any other term of, any or all of the Obligations or the Guaranteed Obligations, or any other amendment to or waiver of the Loan Agreement, any other Loan Document, or any other agreement or instrument governing or evidencing any of the Obligations or the Guaranteed Obligations;

12.2      insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver or trustee for all or any part of Borrower’s or Guarantor’s assets, liquidation, winding-up, or dissolution of Borrower or Guarantor;

12.3      any limitation, discharge, cessation, or partial satisfaction of the Obligations, of any Guaranteed Obligations, whether by operation of any statute, regulation, or rule of law, or otherwise, regardless of the intervention or omission of Lender or any invalidity, voidability, unenforceability, or irregularity, or future change to or amendment of, in whole or in part, the Loan Agreement, this Guaranty, any other Loan Document, or any other document evidencing any Obligations;

12.4      any merger, acquisition, consolidation or change in structure of Borrower or Guarantor; or any sale, lease, transfer, or other disposition of any or all of the assets or shares of Borrower or Guarantor;

12.5      any assignment or other transfer, in whole or in part, of Lender’s interest in and rights under the Loan Agreement or any other Loan Document, including this Guaranty, or of Lender’s interest in the Obligations, the Guaranteed Obligations, or the Collateral;

12.6      any claim, defense, counterclaim, or set-off, other than (i) any defense of prior performance or (ii) any defense based on any applicable provision of the Uniform Commercial Code requiring that the Collateral be disposed of in a commercially reasonable manner, which Borrower or Guarantor may have or assert, including any defense of incapacity, disability, or lack of corporate or other authority to execute any documents relating to the Obligations, the Guaranteed Obligations, or the Collateral;

12.7      any cancellation, renunciation, or surrender of any debt instrument evidencing the Obligations or the Guaranteed Obligations;

12.8      Lender’s vote, claim, distribution, election, acceptance, action, or inaction in any bankruptcy or reorganization case related to the Collateral, the Obligations, or the Guaranteed Obligations;

12.9      any other action or circumstances that might otherwise constitute a defense available to, or a legal or equitable discharge of, any surety, guarantor or pledgor; or

12.10      the fact that any of the Obligations or the Guaranteed Obligations may become due or payable in connection with or by reason of any agreement or transaction that may be illegal, invalid, or unenforceable in whole or in part; it being agreed by Guarantor that the Guaranteed Obligations shall not be discharged.

13.      Subordination .

13.1      Guarantor hereby agrees that, until the date of termination of the Loan under the Loan Agreement (the “ Termination Date ”), all obligations and all indebtedness of Borrower to Guarantor, including any and all present and future indebtedness regardless of its nature or manner of origination now or hereafter to become due and owing by Borrower to Guarantor (collectively, the “ Subordinated Indebtedness ”), are hereby subordinated and postponed (except as set forth in Section 13.3 below) and shall be inferior, in all respects, to the Obligations.

13.2      In no circumstance shall any Subordinated Indebtedness be entitled to any collateral security; provided , that in the event any such collateral security exists, Guarantor hereby agrees that any now existing or hereafter arising Lien upon any of the assets of Borrower in favor of Guarantor, whether created by contract, assignment, subrogation, reimbursement, indemnity, operation of law, principles of equity or otherwise, shall be junior and inferior to, and is hereby subordinated in priority to any now existing or hereafter arising Liens in favor of Lender in and against the Collateral, regardless of the time, manner or order of creation, attachment or perfection of the respective Liens.

13.3      Except as permitted in the Loan Agreement, Guarantor hereby agrees: (i) that it shall not assert, collect, accept payment on or enforce any of the Subordinated Indebtedness

or take collateral or other security to secure payment of the Subordinated Indebtedness until the Termination Date; (ii) that it shall not demand payment of, accelerate the maturity of, or declare a default or event of default under the Subordinated Indebtedness until the Termination Date; (iii) that is shall not cause or permit Borrower to make or give, and Guarantor shall not receive or accept, payment in any form (whether direct or indirect, including by transfer to an Affiliate or Subsidiary of Borrower or Guarantor) on account of the Subordinated Indebtedness, make any transfers in respect of the Subordinated Indebtedness without the express prior written consent of Lender (which consent may be withheld for any reason in Lender’s sole discretion), or give any collateral security for the Subordinated Indebtedness; and (iv) that any payment, transfer, or collateral security so made or given by Borrower and received or accepted by Guarantor, without the express prior written consent of Lender, shall be held in trust by Guarantor for the account of Lender, and Guarantor shall immediately turn over, in kind, any such payment to Lender for application in reduction of, or (in the case of property other than cash) as security for, the Guaranteed Obligations.

14.      Subrogation . Guarantor will not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all the Obligations shall have been paid in full. If any amount is paid to Guarantor on account of such subrogation rights at any time when all the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of Lender, and shall forthwith be paid to Lender to be credited and applied upon the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. If (i) Guarantor makes payment to Lender of all or any part of the Obligations and (ii) all the Obligations are paid in full, Lender shall, at Guarantor’s request, execute and deliver to Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of an interest in the Obligations resulting from such payment by Guarantor. Nothing herein limits any right of Guarantor to pay all Obligations in full and thereafter become subrogated to the position of Lender.

15.      Limit of Liability . The obligations of Guarantor under this Guaranty shall be limited to an aggregate amount equal to the largest amount that would not render its obligations under this Guaranty subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law.

16.      Representations and Warranties . To induce Lender to make advances under the Loan Documents, Guarantor makes the following representations and warranties, each of which shall survive the execution and delivery of this Guaranty:

16.1      Organization . Guarantor is duly formed under the laws of its formation and is in good standing in the State of California and in all jurisdictions in which it does business or the ownership of its properties requires such qualification, except to the extent that the failure to be so qualified would not have a material adverse effect on the properties, business, results of operations or financial or other condition of Guarantor.

16.2      Relationship of Parties . (a) Guarantor has received copies of the Loan Agreement and the other Loan Documents and is familiar with and fully understands all of their terms and conditions; (b) Lender has not made any representations or warranties to Guarantor regarding the creditworthiness of Borrower or the prospects of repayment from sources other than

Borrower; (c) this Guaranty is executed at the request of Borrower; (d) Guarantor has established adequate means of obtaining from Borrower on a continuing basis financial and other information pertaining to the business of Borrower; and (e) Guarantor assumes full responsibility for keeping fully informed with respect to the business, operation, condition and assets of Borrower. Guarantor hereby agrees that Lender shall have no duty to disclose or report to Guarantor any information now or hereafter known to Lender relating to the business, operation, condition and assets of Borrower. Lender shall have no duty to inquire into the authority or powers of Borrower or any officer, employee or agent of Borrower with regard to any Guaranteed Obligations, and all Guaranteed Obligations made or created in good faith reliance upon the professed exercise of any such authority or powers shall be guaranteed hereunder.

16.3      Execution, Delivery and Performance of Guaranty . The execution, delivery, and performance by Guarantor of all of its obligations under this Guaranty have been duly authorized by all necessary action and do not and will not:

(a)      result in or require the creation or imposition of any lien, right of others, or other encumbrance of any nature (other than under this Guaranty and any related security documents) upon or with respect to any property now owned or leased or hereafter acquired by Guarantor;

(b)      violate any provision of any law, regulation, judgment, decree or award presently in effect having applicability to Guarantor;

(c)      result in a breach of, constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture, loan agreement, lease, or any other agreement or instrument, to which Guarantor is a party or by which Guarantor or any of its property is bound or affected, except where such breach, default or acceleration would not have a material adverse effect;

(d)      require any consent or approval not heretofore obtained; or

(e)      violate any provision of, or require any consent under, any agreement applicable to Guarantor.

16.4      Enforceability . This Guaranty, when executed and delivered, shall constitute a valid and binding obligation of Guarantor which is enforceable in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors rights generally or by principles of equity pertaining to the availability of equitable remedies.

16.5      Compliance with Laws . Guarantor has complied in all material respects with all laws, regulations and requirements applicable to its business and has obtained all authorizations, consents, approvals, orders, licenses, exemptions from, and has accomplished all filings or registrations or qualifications with, any court or governmental department, public body, authority, commission, board, bureau, agency or instrumentality, that may be necessary for the transaction of its business, except where the failure to do so would not have a material adverse effect.

16.6      Guarantor’s Addresses . Guarantor’s name and address are accurately set forth in Section 22.9.

16.7      No Offset, Defense, or Counterclaim . Guarantor represents, warrants, and agrees that, as of the date of this Guaranty, the Guaranteed Obligations are not subject to any offset or defense against Lender or Borrower of any kind, and Guarantor specifically waives its right to assert any such defense or right of offset. Guarantor further agrees that the Guaranteed Obligations shall not be subject to any counterclaims, offsets, or defenses against Lender or Borrower that may arise in the future, except for (a) any defense of prior performance or payment, (b) any defense based on any applicable provision of the Uniform Commercial Code requiring that the Collateral be disposed of in a commercially reasonable manner, which Borrower or Guarantor may have or assert, or (c) applicable provisions of the laws of the State of California governing the disposal of the Collateral upon foreclosure of the liens created thereon by any Security Agreement in favor of Lender.

16.8      Pending or Threatened Litigation . There are no actions, suits, proceedings or other litigation (including proceedings by or before any arbitrator or governmental authority) pending, or to the knowledge of Guarantor, threatened against Guarantor, which (a) challenge the validity or propriety of this Guaranty or of the secured financing transactions contemplated under the Loan Agreement and the other Loan Documents, (b) could, if adversely determined, have a material adverse effect on the properties, businesses, results of operations or financial or other condition of Guarantor, or (c) could materially affect the ability of Guarantor to perform its obligations under this Guaranty.

16.9      Consultation with Legal Counsel . Guarantor acknowledges that the waivers in Sections 8, 9 and 10 herein are a material inducement to Lender to make the advances under the Loan Documents and that Lender is relying upon the foregoing waivers in its future dealings with Borrower. Guarantor warrants and represents that it has reviewed the foregoing waivers with its legal counsel and that, after such review with its legal counsel, Guarantor has agreed to the foregoing waivers.

17.      COVENANTS

17.1      Costs and Expenses of Enforcement . Guarantor agrees to pay to Lender, on demand, all out-of-pocket costs and expenses, including reasonable attorneys’ fees, incurred by Lender in exercising any right, power or remedy conferred by this Guaranty, or in the enforcement of this Guaranty, whether or not any action is filed in connection therewith. Until paid to Lender, such amounts shall bear interest, commencing with Lender’s demand therefor, at the Default Rate set forth in the Loan Agreement.

18.      DEFAULTS AND REMEDIES

18.1      Events of Default . It shall be an “Event of Default” hereunder upon the occurrence of any one or more of the following events (regardless of the reason therefor):

(a)      any Event of Default occurs under the Loan Agreement or any other Loan Document;

(b)      Guarantor fails or neglects to perform, keep or observe any material provision of this Guaranty or any of the other Loan Documents to which it is a party;

(c)      any material representation or warranty of Guarantor made under this Guaranty or in any Loan Document or in any written statement pursuant thereto or hereto, report, financial statement, or certificate made or delivered to Lender by Guarantor is untrue or incorrect, as of the date when made or deemed made;

(d)      Guarantor renounces or revokes, or attempts to renounce or revoke, this Guaranty;

(e)      (i) any of the assets of Guarantor are attached, seized, levied upon, or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian, or assignee for the benefit of creditors of Guarantor and remain unstayed or undismissed for thirty (30) consecutive days, (ii) any person other than Guarantor applies for the appointment of a receiver, trustee or custodian for any of Guarantor’s assets and such application remains unstayed or undismissed for thirty (30) consecutive days, or (iii) Guarantor conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay, or defraud its creditors or any of them or makes or suffers a transfer of any of its property or the incurring of an obligation which may reasonably be expected to be fraudulent under any bankruptcy, fraudulent conveyance or other similar law, in each case only to the extent any of the events set forth in clauses (i), (ii) or (iii) would, individually or in the aggregate, have a material adverse effect on Guarantor;

(f)      a case or proceeding has been commenced against Guarantor in a court having competent jurisdiction seeking a decree or order (i) under the Bankruptcy Code, or any other applicable federal, state, or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of Guarantor, of any substantial part of its properties, or (iii) ordering the winding-up or liquidation of the affairs of Guarantor and such case or proceeding shall remain undismissed or unstayed for ninety (90) consecutive days or such court shall enter a decree or order granting the relief sought in such case or proceeding;

(g)      Guarantor (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, or sequestrator (or similar official) of Guarantor or of any substantial part of its properties, (iii) fails generally to pay its debts as such debts become due, or (iv) takes any corporate or similar action in furtherance of any such action;

18.2      Remedies . Upon the occurrence of an Event of Default hereunder and the continuation of such Event of Default after any applicable cure period provided therefor, Lender may declare all of the Guaranteed Obligations, immediately and without demand, notice or legal process of any kind, to be, and such Guaranteed Obligations shall immediately become, due and payable, and then, or at any subsequent time, Lender may exercise any or all of its rights and remedies under this Guaranty, the Loan Agreement, and any other Loan Documents, and under applicable law, and may, in addition

(a)      make demand upon Guarantor for the payment of the Guaranteed Obligations;

(b)      resort to the Collateral for payment of the Guaranteed Obligations, without notice, declaration, or demand by Lender to the extent not prohibited by applicable law;

provided , that upon the occurrence of an Event of Default specified in clauses (e) or (f) of Section 18.1, the Guaranteed Obligations shall become immediately due and payable without declaration, notice or demand by Lender.

19.      Application of Payments . Any payment made by Guarantor under this Guaranty may be applied by Lender, in Lender’s sole discretion, first, to the satisfaction of Guarantor’s indemnification liabilities pursuant to Section 20, and then, in any order that Lender, in its sole discretion, may determine.

20.      Indemnification . Guarantor agrees to indemnify and hold Lender harmless from and against any liabilities, claims and damages, including reasonable costs, attorneys’ fees, and disbursements, and other expenses incurred or arising by reason of the taking or the failure to take action by Lender, in good faith, in respect of any transaction effected under this Guaranty, including any action to enforce payment of the Guaranteed Obligations, or in connection with any liens upon the Collateral. The liabilities of Guarantor under this Section 20 shall survive the termination of this Guaranty.

21.      Reinstatement . This Guaranty shall remain in full force and effect and continue to be effective, as the case may be, if at any time payment and performance of the Obligations under the Loan Documents or the Guaranteed Obligations, or any part thereof, is, pursuant to applicable law, avoided, rescinded or reduced in amount, or must otherwise be restored or returned by Lender, or any obligee of the Obligations under the Loan Documents or the Guaranteed Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is avoided, rescinded, reduced, restored, or returned, the Obligations under the Loan Documents or the Guaranteed Obligations, as the case may be, shall be reinstated and deemed reduced only by such amount paid and not so avoided, rescinded, reduced, restored, or returned.

22.      Miscellaneous .

22.1      Cumulative Remedies; No Waiver . The rights, powers and remedies of Lender hereunder are cumulative and not exclusive of any other right, power or remedy which Lender would otherwise have. No failure or delay on the part of Lender in exercising any such right, power or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under the Loan Documents.

22.2      Binding Agreement; Assignment; Amendment . This Guaranty and the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of Guarantor, Lender and their respective successors and assigns, except that Guarantor shall not have power or authority to transfer, convey or assign this Guaranty or any right or obligation hereunder

without the prior written consent of Lender (and any attempt to do so shall be void). Guarantor consents to Lender’s assignment of its interests hereunder to any person, in accordance with the terms of the Loan Documents. Neither this Guaranty nor any provision hereof may be amended, modified, waived, discharged or terminated except by an instrument in writing duly signed by or on behalf of Lender.

22.3      Consent to Loan Documents . Guarantor hereby acknowledges that it has received copies of, and consents to, all of the Loan Documents.

22.4      Counterparts; Delivery by Facsimile or Electronic Transmission . This Guaranty may be executed in any number of counterparts and any party hereto may execute any counterpart, each of which when executed and delivered shall be deemed to be an original and all of which, taken together, shall be deemed to be but one and the same instrument. Signature pages hereto may be delivered via facsimile or electronic transmission and any copy of this Guaranty containing such a signature page shall be considered an original for all purposes hereunder.

22.5      Severability . In the event that any one or more of the provisions contained in this Guaranty shall be determined to be invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision or provisions in every other respect, and the remaining provisions of this Guaranty, shall not be in any way impaired.

22.6      Section Titles . The section titles contained in this Guaranty are and shall be without substantive meaning or context of any kind whatsoever and are not a part of the agreement between the parties hereto.

22.7      Interpretation . No provision of this Guaranty or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party’s having or being deemed to have structured, drafted or dictated such provision.

22.8      Further Assurances . Guarantor agrees that it will, at its expense, upon the written request of Lender, from time to time, promptly execute and deliver to Lender any additional instruments or documents reasonably considered necessary by Lender to cause this Guaranty to be, become, or remain valid and effective in accordance with its terms.

22.9      Notices . All notices, demands, instructions and other communications required or permitted to be given to, or made upon, any party with respect to this Guaranty shall be in writing and (except for any item for which the method of delivery is specifically prescribed by statute) shall be personally delivered or sent by facsimile or electronic transmission, by registered mail, postage prepaid, return receipt requested, or by a nationally recognized overnight courier service, and shall be deemed to be given for purposes of this Agreement (a) on the day that such writing is received by the Person to whom it is to be sent if given by personal delivery, by facsimile or electronic transmission or by courier, and (b) three Business Days after mailing if mailed pursuant to this Section 22.9. Notices, demands, instructions and other communications covered by this Section 22.9 shall be given to or made upon the respective parties hereto to the addresses below. Either party may designate a change of address within the United States of America

by written notice to the other by giving at least five (5) days prior written notice of such change of address

GUARANTOR:

Crimson Wine Group, Ltd.

2700 Napa Valley Corporate Drive, Suite B

Napa, CA 94558

Attention: Chief Financial Officer

LENDER:

American AgCredit, PCA

5560 S. Broadway

Eureka, CA 95503 (if delivered by courier)

                

P.O. Box 398

Fields Landing, CA 95537-0398 (if delivered by mail)

Attn: Account Officer for Double Canyon Vineyard

22.10      Non-Waiver . None of the obligations of Guarantor, and no right or remedy of Lender under this Guaranty, shall be deemed to have been suspended or waived by Lender, nor shall Lender be estopped from asserting any such right or remedy, by Lender’s conduct or oral statements, but any such suspension or waiver of any such right or remedy by Lender must be in writing and signed by Lender. Any suspension or waiver by Lender of any of its rights or remedies under this Guaranty shall not suspend or waive any prior or subsequent right or remedy, whether of the same or of a different type.

22.11      Limitation of Liability . Neither Lender nor any of its officers, directors, employees, agents, or counsel shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own respective gross negligence or willful misconduct.

22.12      Benefits of Agreement . The provision of this Guaranty are for the benefit of Lender, and its successors, transferees, endorsees, and assigns. In the event all or any part of the Obligations are transferred, endorsed, or assigned by Lender to any person in accordance with the terms of the Loan Documents, any reference to “Lender” herein shall be deemed to refer equally to such person.

22.13      Entire Agreement . This Guaranty constitutes the entire and final agreement between Guarantor and Lender with respect to the subject matter hereof, and supersedes any and all representations or statements, either written or oral, express or implied, other than those expressly set forth in this guaranty, made to any party hereto by any person.

22.14      Reserved .

(a)      EACH OF THE PARTIES HERETO THIS HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER OR UNDER ANY AMENDMENT, MODIFICATION, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY LENDING OR OTHER RELATIONSHIP RELATED HERETO. EACH OF THE PARTIES AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

(b)      Each of the parties hereto prefer that any dispute between them be resolved in litigation subject to the jury trial waiver set forth in Section 22.16(a) herein, but the California Supreme Court in Grafton Partners L.P. v. Superior Court has held such pre-dispute jury trial waivers are unenforceable under California law. Each of the parties hereto agree that the provisions of Section 22.16(b)-(i) shall be applicable until such pre-dispute jury trial waivers are deemed enforceable under California law or unless any dispute between them is brought before a court that is not applying California law.

(a)      Other than (i) non-judicial foreclosure of security interests in real or personal property, (ii) the appointment of a receiver or (iii) the exercise of other provisional remedies (any of which may be initiated pursuant to applicable law), any controversy, dispute or claim (each, a “ Claim ”) arising out of or relating hereto will be resolved by a reference proceeding in California in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure (“ CCP ”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference proceeding. Venue for the reference proceeding will be in the Superior Court or Federal District Court in the County or District where venue is otherwise appropriate under this Agreement (the “ Court ”).

(b)      The referee shall be a retired Judge or Justice selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. The referee shall be appointed to sit with all the powers provided by law. Pending appointment of the referee, the Court has power to issue temporary or provisional remedies.

(c)      The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding.

(d)      Except as expressly set forth in this Agreement, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding.

(e)      The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including motions for summary judgment or summary adjudication. The referee shall issue a decision pursuant to CCP §644 and the referee’s decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court. The final judgment or order entered by the Court is fully appealable as provided by law. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

(f)      If the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or Justice, in accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.

(c)      THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED HERETO.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed to be effective as of the date first written above.

Guarantor:

Crimson Wine Group, LTD, a Delaware corporation

By:     /s/ Shannon McLaren            

Name:    Shannon McLaren

Title:    Chief Financial Officer

ACCEPTED BY LENDER:

American AgCredit, FLCA

By: /s/ Edwin A. Adams, Jr.        

Name: Edwin A. Adams, Jr.

Title: Vice President

SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE

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

DOUBLE CANYON VINEYARDS, LLC , as grantor,

(Grantor)

to

FIRST AMERICAN TITLE INSURANCE COMPANY , as trustee,
(Trustee)

for the benefit of

AMERICAN AGCREDIT, FLCA , as beneficiary,
(Beneficiary)

Dated for reference purposes as of June 29, 2017

THIS INSTRUMENT IS TO BE INDEXED AS BOTH A DEED OF TRUST AND AS A FIXTURE FILING

Type of transaction: Creation of deed of trust lien and security interests encumbering the properties described herein. THIS DOCUMENT CONSTITUTES A FIXTURE FILING IN ACCORDANCE WITH ORS 79.0502(3).

The maturity date of the obligations under the Loan Agreement (as hereinafter defined) secured by this Trust Deed, exclusive of any option to renew or extend such maturity date, is July 1, 2037. The maximum principal amount to be advanced pursuant to the Loan Agreement is $10,000,000.00; however, such maximum principal amount may be exceeded by principal advances made to complete construction on the property or for the reasonable protection of the property pursuant to ORS 86.155.

Tax Account Number(s) of Trust Property: Code 7-14, Map No. 6N-35-32, Tax Lot No. 801, Serial No. 129651; Code 7-14, Map No. 6N-35-32, Tax Lot No. 900, Serial No. 129652; Code 7-13, Map No. 6N-35-33C, Tax Lot No. 500, Serial No. 151948; Code 7-14, Map No. 6N-35-33C, Tax Lot No. 500, Serial No. 129682; Code 7-14, Map No. 6N-35-33C, Tax Lot No. 501, Serial No. 136038; Code 7-13, Map No. 6N-35-32, Tax Lot No. 506, Serial No. 151011; Code 7-13, Map No. 6N-35-32, Tax Lot No. 1401, Serial No. 129343; Code 7-13, Map No. 6N-35-33C, Tax Lot No. 602, Serial No. 129345

This Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing (“ Deed of Trust ”) is made as of June 29, 2017, by Double Canyon Vineyards, LLC, a Delaware limited liability company, whose principal place of business is 2700 Napa Valley Corporate Drive, Suite B, Napa, CA 94558 Attn: Chief Financial Officer (herein “ Grantor ”), the owner of the real property described hereinbelow, to First American Title Insurance Company, as trustee, subject to substitution as provided in Section 4.13 (herein “ Trustee ”), for the benefit of American AgCredit, FLCA, whose principal place of business is 200 Concourse Boulevard, Santa Rosa, CA 95402 (herein “ Beneficiary ”).

For purposes hereof, references to Beneficiary shall mean and include the named beneficiary herein as well as its successors and assigns.

Unless otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Loan Agreement.

W I T N E S E T H :

WHEREAS, Grantor and its affiliate, A Fine Old Building, LLC, as borrowers, and Beneficiary, as lender, are concurrently entering into a Loan Agreement dated of even date herewith (as supplemented, amended, modified or restated from time to time, the “ Loan Agreement ”) pursuant to which Beneficiary has agreed to provide certain financial accommodations to Grantor upon the terms set forth therein;

WHEREAS, Grantor owns the Real Property (as hereinafter defined) covered by this Deed of Trust;

WHEREAS, Grantor owns and may hereafter acquire certain fixtures located on or about the Real Property;

WHEREAS, Grantor, for good and valuable consideration received, has agreed to absolutely assign the rents, issues and profits of the Mortgaged Property (hereinafter defined) to Beneficiary; and

WHEREAS, Grantor, for good and valuable consideration received, has agreed to execute and deliver this Deed of Trust to secure the obligations of Grantor under the Loan Agreement and the other Loan Documents.

NOW, THEREFORE:

In consideration of the indebtedness herein recited and the trust herein created, Grantor irrevocably grants, conveys, transfers and assigns to Trustee, its successors and assigns, in trust, with power of sale and right of entry and possession, all of Grantor’s estate, right, title and interest in, to and under the following described property, whether now existing or hereafter acquired (herein the “ Mortgaged Property ”):

A.      The real property (herein the “ Real Property ”) described in the attached Exhibit A which is incorporated into this Deed of Trust by reference.

B.      All structures and improvements now existing or hereafter erected on the Real Property; all easements, rights and appurtenances thereto or used in connection therewith; all rents, royalties, issues, profits, revenues, income and other benefits thereof or arising from the use or enjoyment of all or any portion thereof (subject, however, to the rights and authorities given herein to Grantor to collect and apply such rents, royalties, issues, profits, revenues, income and other benefits); all interests in and rights, royalties and profits in connection with all minerals, oil and gas and other hydrocarbon substances thereon or therein; all development rights or credits, air rights, water, water rights (whether riparian, appropriative, or otherwise, and whether or not appurtenant) and water stock; all fixtures machinery, equipment, building materials, appliances and goods of every nature (other than inventory) now or hereafter located in, or on, or attached or affixed to, use in connection with, the Real Property, or any structures or improvements thereon, including all heating, lighting, laundry, incinerating, gas, electric and power equipment, engines, pipes, pumps, tanks, motors, conduits, switchboards, plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, and communications apparatus, air cooling and air conditioning apparatus, elevators and escalators and related machinery and equipment, shades, awnings, blinds, curtains, drapes, attached floor coverings, including rugs and carpeting, television, radio and music cable antennae and systems, screens, storm doors and windows, stoves, refrigerators, dishwashers and other installed appliances, attached cabinets, partitions, ducts and compressors; crops growing or to be grown, farm products, and trees, vines, and plants whether used for production of crops or used for purposes of landscaping and any other items of landscaping, including machinery, apparatus, equipment, fittings, and similar articles of personal property and all trade fixtures used in the business of Grantor, whether the same are annexed to the Real Property or not; all replacements and additions to any of the foregoing; all present and future leases, subleases, occupancy agreements and concessions affecting the Real Property, including any security deposits; and any present or future condemnation awards, insurance proceeds, or any causes of action, damages or recoveries relating to the Real Property and any of the foregoing described collateral.

C.      All equipment and winery equipment, fixtures and accessions, now owned or hereafter acquired, that are located on or used in connection with operation of Grantor’s business on the Real Property including (i) all bottling line equipment, including loading and unloading tables, purgers, fillers, corkers, labelers, cappers, spinners and associated conveyers, tanks and pumps, (ii) all crushing equipment including unloading hoist or crane, grape hopper, stemmer, crusher, must pump, must line and associated valves, hoses, couplers, and conveyers, (iii) all fermentation and storage equipment including jacketed stainless steel tanks, non-jacketed stainless steel tanks and associated tank stands and catwalks, large wood cooperage, portable and fixed barrel racks, puncheons, as well as any other containers or vessels capable or utilized for the storing, aging, processing of grapes, must, wine, or any other product purchased, processed or manufactured, (iv) all wine presses and filters including wine presses, lees presses, plate filters, cartridge filters, centrifuges or any other device used to clarify or remove solids from wine or wine products, (v) all pumps, piping, fittings, valves, and hoses including transfer pumps, must pumps, racking pumps, carts, and miscellaneous hoses and fittings, (vi) all quality control equipment including scales, lab testing equipment, refrigeration equipment, and temperature control equipment, (vii) all office equipment including furniture, furnishings, data processing equipment, computers, printers, clerical and accounting equipment, desks, tables, chairs, and kitchen equipment, (viii) all rolling stock including fork lifts, pallet jacks, trailers, trucks, vans, or autos, and (ix) all miscellaneous equipment including small tools, pallets, hand carts, floor grates, bottled gas, and hot water heaters; provided that the foregoing shall not include barrels.

D.      All appurtenances of the Real Property and all rights of Grantor in and to any streets, roads or public places, easements or rights of way relating to the Real Property.

E.      All fixed, minimum, percentage and other rents, expense pass-through payments, parking fees, rental and business interruption insurance payments, liability insurance payments, temporary condemnation proceeds, casualty insurance proceeds and other condemnation proceeds relating to the Real Property, all receipts from licenses, concessions and other sources relating to the Real Property, all recoveries of Grantor in any litigation respecting the Real Property or based upon any third-party warranties or guarantees or otherwise based upon or respecting the construction, physical condition or value of the Real Property, including payments in settlement thereof, payments in consideration of the early termination or modification of any lease or other agreement affecting the Real Property, and all income and revenue of a non-rental nature attributable to the Real Property.

F.      All leases or subleases covering the Real Property or any portion thereof now or hereafter existing or entered into, and all right, title, and interest of Grantor thereunder, including all cash or security deposits, advance rentals, and deposits or payments of similar nature.

G.      To the extent assignable, all options to purchase, lease or sublease or otherwise acquire:

(i)      the Real Property or any portion thereof or interest therein, any greater estate in the Real Property now owned or hereafter acquired; or

(ii)      any other property of any kind used or to be used in connection with any of the Mortgaged Property.

H.      To the extent assignable, all other interests, estates or other claims, both in law and in equity, in the Real Property.

I.      All easements, rights of way or other rights, and all tenements, hereditaments and appurtenances thereof and thereto, held or used in connection with:

(i)      the Real Property as a means of access to the Real Property, or

(ii)      any of the Mortgaged Property for any purpose.

J.      All causes of action, claims, compensation, proceeds and recoveries for any damage or injury to or condemnation or taking of the Real Property or any improvements thereon or any part thereof or for any loss or diminution in the value of the Real Property or any Improvements.

K.      All general intangibles relating to the development or use or operation of the Real Property, including all governmental licenses (to the extent permitted by the terms of such licenses), permits, variances, approvals and authorizations relating to construction on the Real Property or relating to the use or operation of the Mortgaged Property, and all management contracts, and all other contracts, contract rights, administrative records, agreements, commitments, undertakings and arrangements relating to the use or operation of the Mortgaged Property, and all warranties, guaranties, covenants, commitments and purchase orders specifically relating to the Mortgaged Property, but excluding any trademarks and/or licenses of trademarks.

L.      All plans and specifications prepared for construction or renovation of improvements on the Real Property or operations to be conducted on the Real Property and all studies, data and drawings related thereto; and also all contracts and agreements of Grantor relating to the aforesaid plans and specifications or to the aforesaid studies, data and drawings, or to the construction or renovation of improvements on the Real Property.

M.      All reserves, deferred payments, deposits, refunds, cost savings and payments of any kind relating to the construction or operations on the Real Property, all present and future accounts and other rights of Grantor to the payment of money, no matter how evidenced, which arise from the use or operation of the Real Property, and all writings evidencing such accounts and other rights.

To the extent that any of the foregoing constitutes personal property, this Deed of Trust shall also be deemed to be a security agreement with respect to such personal property and Grantor does hereby create and grant to Beneficiary a security interest in all such personal property described herein and further grants to Beneficiary all of the rights and remedies of a secured party under the Oregon Commercial Code and other applicable state law, which rights are cumulative.

N.      All proceeds of the property described in clauses A through M above. For purposes of this Deed of Trust, the term “proceeds” includes all rents, royalties, issues, income, payments and profits from the property referred to above and whatever is receivable or received when the property referred to above or proceeds are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and including all insurance and condemnation proceeds and products of any and all of the foregoing and all rights to payment, including return premiums with respect to any insurance relating thereto, and any and all right, title, interest that Grantor may hereafter acquire in and to any of the foregoing.

FOR THE PURPOSE OF SECURING, in such order of priority as Beneficiary may elect:

a.      The obligations owed by Grantor and the other borrowers under the Loan Agreement, which obligations include a Loan in the original principal amount of Ten Million Dollars ($10,000,000), all Swap Obligations (as defined in the Loan Agreement), and all fees and expenses and reasonable attorneys’ fees required under the Loan Agreement, and all extensions, renewals, modifications, amendments and replacements thereof;

b.      The payment of all other sums which may be advanced by or otherwise be due to Trustee or Beneficiary under any provision of this Deed of Trust or under any other instrument or document referred to in section (c), below, with interest thereon at the rate provided herein or therein;

c.      The performance of each and every one of the covenants and agreements of Grantor contained (i) in this Deed of Trust; (ii) in the Loan Agreement; and (iii) in the other Loan Documents.

d.      The obligations and indebtedness secured by this Deed of Trust arising under various other deeds of trust and security instruments executed in favor of Beneficiary by Grantor and that secure Obligations under the Loan Documents.

All of the obligations and indebtedness set forth in sections (a), (b), (c), and (d) above secured by this Deed of Trust are hereinafter collectively known as the “ Obligations .”

TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges hereby conveyed or intended to be, unto Trustee, its successors and assigns for the uses and purposes herein set forth, until the Obligations are fully paid and performed in accordance with the provisions set forth herein, in the Loan Agreement, and in the Loan Documents.

ARTICLE I     

REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTOR

To protect the security of this Deed of Trust, and to effect the foregoing assignment of rents, Grantor represents, warrants, covenants and agrees as follows:

1.1.      Performance of Obligations Secured .

Grantor shall promptly pay when due the principal of and interest on the indebtedness constituting the Obligations, the principal of and interest on any advance of funds by Beneficiary for the benefit of Grantor and any loan fees provided for in the Obligations, and shall further perform fully and in a timely manner all Obligations.

1.2.      Insurance .

A.      Grantor shall keep the Mortgaged Property insured, with loss payable to Beneficiary, as its interests may appear, under policies of All Risk Replacement Cost Insurance with Agreed Amount Endorsement, flood insurance (if the Mortgaged Property is in an area which is considered a flood risk area by the U.S. Department of Housing and Urban Development and if such insurance is available pursuant to the provisions of the Flood Disaster Protection Act of 1973 or other applicable legislation), comprehensive general public liability insurance, builder’s risk insurance (to the extent applicable during any construction of any improvements on the Mortgaged Property), and other appropriate insurance covering such other hazards (excluding earthquake insurance) as Beneficiary may reasonably require from time to time, all in amounts, form, and substance reasonably satisfactory to Beneficiary, and with reputable and financially sound independent insurers having an A.M. Best rating of “A-” or better (or such other rating as Beneficiary may reasonably approve in its discretion). All losses under said insurance, except public liability losses, shall be payable to Beneficiary and shall be applied in the manner provided in Section 1.3 hereof. All insurance policies shall be endorsed, at Grantor’s expense and in form and substance acceptable to Beneficiary, to name Beneficiary as an additional insured or lender loss payee thereunder, as its interest may appear, with loss payable to Beneficiary, without contribution.

B.      All hazard insurance policies shall be endorsed with a standard noncontributory mortgagee clause in favor of and in form reasonably acceptable to Beneficiary, and may be canceled or modified only upon not less than thirty (30) days’ prior written notice to Beneficiary.

C.      All of the above-mentioned insurance policies or certificates of such insurance reasonably satisfactory to Beneficiary, together with receipts for the payment of premiums

thereon, shall be delivered to and held by Beneficiary, which delivery shall constitute assignment to Beneficiary of all return premiums to be held as additional security hereunder.

D.      In the event of the foreclosure of this Deed of Trust or other transfer of the title to the Mortgaged Property in extinguishment, in whole or in part, of the Obligations, to the extent assignable, all right, title and interest of Grantor in and to any insurance policy, or premiums or payments in satisfaction of claims or any other rights thereunder then in force, shall pass to the purchaser or grantee notwithstanding the amount of any bid at such foreclosure sale.

E.      All renewal and replacement policies or certificates of insurance regarding the same shall be delivered to Beneficiary at least ten (10) days before the expiration of the expiring policies. Beneficiary shall not by the fact of approving, disapproving, accepting, preventing, obtaining or failing to obtain any insurance, incur any liability for, or with respect to, the amount of insurance carried, the form or legal sufficiency of insurance contracts, solvency of insurance companies, or payment or defense of lawsuits.

1.3.      Condemnation and Insurance Proceeds .

A.      The proceeds of any award or claim for damages, direct or consequential, in connection with any condemnation or other taking of or damage or injury to the Mortgaged Property, or any part thereof, or for conveyance in lieu of condemnation, are hereby assigned to and shall be paid to Beneficiary. In addition, all causes of action, whether accrued before or after the date of this Deed of Trust, of all types for damages or injury to the Mortgaged Property or any part thereof, or in connection with any transaction financed by funds loaned to Grantor by Beneficiary and secured hereby, or in connection with or affecting the Mortgaged Property or any part thereof, including causes of action arising in tort or contract and causes of action for fraud or concealment of a material fact, are hereby assigned to Beneficiary as additional security and the proceeds shall be paid to Beneficiary.

B.      Grantor, promptly upon obtaining knowledge of the institution of any proceedings relating to condemnation or other taking of or damage or injury (exceeding $250,000 with respect to damage or injury, provided no Event of Default is then in existence) to the Mortgaged Property or any portion thereof, or knowledge of any casualty damage (exceeding $250,000, provided no Event of Default is then in existence) to the Mortgaged Property, will promptly notify Beneficiary in writing. Beneficiary may participate in any such proceedings and may join Grantor in adjusting any loss covered by insurance.

C.      All compensation, awards, proceeds, damages, claims, insurance recoveries, rights of action and payments which Grantor may receive or to which Grantor may become entitled with respect to the Mortgaged Property or any part thereof exceeding $250,000 (or, if an Event of Default is then in existence, all such compensation, awards, proceeds, damages, insurance recoveries, rights of action and payments) with respect to any one occurrence giving rise thereto shall be paid over to Beneficiary and shall be applied first toward reimbursement of all costs and expenses of Beneficiary in connection with recovery of the same, and then shall be applied, in the sole and absolute discretion of Beneficiary and without regard to the adequacy of its security hereunder, but subject to the provisions of subsection (D) below with respect to any condemnation proceeds or insurance recoveries resulting from condemnation, damage or injury to the Mortgaged Property, to the payment or prepayment of the Obligations in such order as Beneficiary may

determine, or to the reimbursement of Grantor for expenses incurred by it in the repair or restoration of the Mortgaged Property. Any application of such amounts or any portion thereof to the Obligations or any release of funds by Beneficiary to Grantor shall not be construed to cure or waive any default or notice of default hereunder or invalidate any act done pursuant to any such default or notice.

D.      In the event of any condemnation or other taking or damage or injury to the Mortgaged Property, if Grantor shall seek to apply any such condemnation proceeds or insurance recoveries to the rebuilding and restoration of the Mortgaged Property so damaged, then Beneficiary shall make such condemnation proceeds and insurance recoveries available, providing that Grantor shall have fulfilled all of the following conditions:

(i)      no Event of Default (as defined in Article II below) shall have occurred under this Deed of Trust;

(ii)      Grantor shall not be in material default under any of the terms, covenants and conditions of any of the leases, licenses or other occupancy agreements, to which Grantor is a party and which affects the Mortgaged Property;

(iii)      Beneficiary shall be satisfied that such condemnation proceeds or insurance recoveries shall in addition to any cash Grantor can use without disrupting its business operations, be sufficient to fully restore and rebuild the Mortgaged Property free and clear of all liens except the lien of this Deed of Trust (and any other liens expressly approved by the terms of this Deed of Trust or by Beneficiary), or, in the event that such condemnation proceeds or insurance recoveries are in Beneficiary’s judgment insufficient to restore and rebuild the Mortgaged Property, then,

(a)      in the case of damage or injury to the Mortgaged Property, Grantor shall deposit promptly with Beneficiary funds which, together with the insurance recoveries, shall be sufficient in Beneficiary’s reasonable judgment to restore and rebuild the Mortgaged Property, and

(b)      in the case of a partial condemnation or other taking, Grantor shall deposit promptly with Beneficiary funds which, together with the condemnation proceeds shall be sufficient in Beneficiary’s judgment to restore what remains of the Mortgaged Property to an economically viable property;

(iv)      construction and completion of restoration and rebuilding of the Mortgaged Property shall be completed in accordance with plans and specifications and drawings submitted to and approved by Beneficiary, which approval shall not be unreasonably withheld, conditioned or delayed. The plans, specifications and drawings shall provide for the reconstruction of the Mortgaged Property to its original condition (unless otherwise approved by Beneficiary, which approval shall not be unreasonably withheld, conditioned or delayed). The plans shall not be modified in any material respect without Beneficiary’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed;

(v)      Beneficiary shall also have approved all prime contractors and subcontractors, and the general contract or contracts Grantor proposes to enter into with respect to the restoration and rebuilding, which approval Beneficiary shall not unreasonably withhold or delay;

(vi)      any and all monies which are made available for restoration and rebuilding hereunder shall be held in an interest-bearing account (which interest shall become a part of such fund) and disbursed through Beneficiary, Trustee or a title insurance or trust company satisfactory to Beneficiary, in accordance with standard construction lending practice, including, if requested by Beneficiary, monthly lien waivers and title insurance date-downs, and the provision of payment and performance bonds by Grantor, or in any other manner approved by Beneficiary in Beneficiary’s reasonable discretion; and

(vii)      Beneficiary shall be satisfied that the quality of the materials and workmanship of the repair or reconstruction of the Mortgaged Property will be at least substantially equal to the quality of the materials and workmanship of the Mortgaged Property prior to such damage.

The excess of the above condemnation proceeds or insurance recoveries above the amount necessary to complete such restoration or rebuilding, if any, shall be disbursed to Grantor if Beneficiary determines, in its reasonable discretion, that its security under this Deed of Trust will not be impaired. Otherwise, such excess shall be applied as a credit upon the Obligations secured hereby.

1.4.      Taxes, Liens and Other Items .

Except as may be provided in the Loan Agreement:

A.      Grantor shall pay all taxes (including all real and personal property taxes and assessments), bonds, assessments, fees, liens, charges, fines, impositions and any and all other items which are attributable to or affect the Mortgaged Property and which may attain a priority over this Deed of Trust by making payment prior to delinquency directly to the payee thereof, unless Grantor is contesting the same and has posted reserves therefore in accordance with GAAP; and

B.      Grantor shall promptly discharge any lien which has or may attain priority over this Deed of Trust.

1.5.      Leases .

A.      Grantor represents and warrants that leases, licenses, contracts for hire or rental agreements pertaining to the use or occupancy of any of the Mortgaged Property entered into at any time by Grantor or any predecessor to Grantor, as landlord or lessor, and any other party, as tenant or lessee (“ Tenant Leases ”), if any, (i) are in full force and effect, are enforceable in accordance with their respective terms, and are not in default; (ii) have not been paid by any lessee more than one (1) month in advance; and (iii) have not been transferred or assigned by the lessor.

B.      Grantor shall (i) give written notice to Beneficiary of the entering into any new Tenant Lease, including a copy thereof; (ii) at all times fully perform the obligations of the lessor under all Tenant Leases; and (iii) whenever requested by Beneficiary, furnish to Beneficiary a certificate of Grantor setting forth the names of all lessees under any Tenant Leases, the terms of their respective Tenant Leases, the area occupied by such lessees, and the rents payable thereunder.

1.6.      Rents .

A.      All of the rents, royalties, issues, profits, revenue, income and other benefits of the Mortgaged Property, arising from the use or enjoyment of all or any portion thereof or services provided in connection therewith, or from any Tenant Lease or agreement pertaining thereto, whether now due, past due, or to become due, and including all prepaid rents and security deposits (the “ Rents ”), are hereby absolutely, presently and unconditionally assigned, transferred, conveyed and set over to Beneficiary to be applied by Beneficiary in payment of the principal and interest and all other sums payable on the Obligations, and of all other sums payable under this Deed of Trust.

B.      Grantor agrees and stipulates that the absolute, present, and unconditional assignment of the Rents herein to Beneficiary perfects Beneficiary’s interest in the Rents and that no further act by Beneficiary is needed to perfect Beneficiary’s interest in the Rents.

C.      Beneficiary shall not, for any purpose or under any circumstance, be deemed to be a mortgagee-in-possession or otherwise responsible or liable in any manner with respect to the Mortgaged Property or the use, occupancy, enjoyment or operation of all or any portion thereof, unless and until Beneficiary, in person or by agent, assumes actual possession thereof.

D.      Without the prior written consent of Beneficiary, Grantor shall not take action that might impair Beneficiary’s rights and interest with respect to the Rents. A default by Grantor in the performance of any covenant in any Tenant Lease assigned to Beneficiary, by reason of which default the tenant has the right to cancel such Tenant Lease or to claim any diminution of or offset against future rents, shall, at the option of Beneficiary, constitute an Event of Default hereunder.

E.      Any Tenant Leases entered into by Grantor after the Closing Date shall contain a provision satisfactory to Beneficiary that in the event of the exercise of the private power of sale or a judicial foreclosure hereunder, such Tenant Lease, at the sole and exclusive option of the purchaser at such sale, shall not be terminated and the tenant thereunder shall attorn to such purchaser and, if requested to do so, shall enter into a new Tenant Lease for the balance of the term of such Tenant Lease then remaining upon the same terms and conditions.

1.7.      Uniform Commercial Code, Security Agreement and Fixture Filing .

A.      This Deed of Trust is intended to be a security agreement pursuant to the Oregon Commercial Code for any items of personal property specified above as part of the Mortgaged Property which, under applicable law, may be subject to a security interest pursuant to the Oregon Commercial Code and which are not herein effectively made part of the real property, and Grantor hereby grants Beneficiary a security interest in said property, and in all additions thereto, substitutions therefor and proceeds thereof, for the purpose of securing all of the Obligations.

B.      Grantor agrees that Beneficiary may file any appropriate document in the appropriate index as a financing statement for any of the items specified above as part of the Mortgaged Property. Grantor agrees to execute and deliver financing and continuation statements covering said property from time to time and in such form as Beneficiary may require to perfect and continue the perfection of Beneficiary’s lien or security interest with respect to said property. Grantor shall pay all costs of filing such statements and renewals and releases thereof and shall pay

all reasonable costs and expenses of any record searches for financing statements Beneficiary may reasonably require.

C.      Without the prior written consent of Beneficiary, except as otherwise provided in the Loan Agreement, Grantor shall not create or suffer to be created any other security interest in said property, including replacements and additions thereto.

D.      Upon the occurrence of an Event of Default hereunder and during the continuation thereof, Beneficiary shall have the rights and remedies of a secured party under the Oregon Commercial Code as well as all other rights and remedies available at law or in equity.

E.      In exercising any of said remedies, Beneficiary may proceed against the items of Real Property and any items of personal property specified above as part of the Mortgaged Property separately or together and in any order whatsoever, without in any way affecting the availability of Beneficiary’s rights or remedies under the Oregon Commercial Code or of the other remedies provided in this Deed of Trust, in the Loan Agreement, or by law.

F.      Grantor warrants and agrees that on the date hereof and except as disclosed in the Loan Agreement there is no financing statement covering any such property, or any part thereof, on file in any public office and agrees that all or such portion of any such property now or hereafter subject to this Deed of Trust is, and shall be kept (except with the prior written consent of Beneficiary, or as otherwise permitted in the Loan Agreement) free from any other lien, security interest or encumbrance.

G.      This Deed of Trust constitutes a financing statement filed as a fixture filing under ORS 79.0334 and 79.0502, as amended or recodified from time to time, with respect to any part of the Mortgaged Property that is or may become a fixture and for the purposes of such financing statement: (a) the “Debtor” shall be Grantor and the “Secured Party” shall be the Beneficiary and its successors and assigns; (b) the addresses of Grantor as “Debtor” and of the Beneficiary as “Secured Party” are as specified above in the first paragraph of this Deed of Trust; (c) the name of the record owner is Grantor; and (d) the types or items of collateral consist of any part of the Mortgaged Property that is or may become a fixture.

1.8.      Further Encumbrances; Transfers of Property; Change of Ownership; Attorneys’ Fees .

A.      Except as expressly provided in the Loan Agreement and except as expressly provided in Section 1.8(B) below, without the prior written consent of Beneficiary being first had and obtained, Grantor shall not execute or deliver any pledge, security agreement, mortgage, deed of trust or other instrument of hypothecation, covering all or any portion of the Mortgaged Property or any interest therein, grant a security interest in the Mortgaged Property or permit the creation of a voluntary or contractual lien or other encumbrance in the Mortgaged Property.

B.      Notwithstanding Section 1.8(A) above, Grantor may from time to time replace items of personal property and fixtures owned by Grantor and constituting a part of the Mortgaged Property, provided that:

(i)      the replacements for such items of personal property or fixtures are of substantially equivalent value and quality and such replacement does not violate the terms of the Loan Agreement; and

(ii)      Grantor has good title to such replacement property which, except for the Permitted Liens as defined in the Loan Documents, is free and clear of any and all liens, encumbrances, security interests, ownership interests, claims of title (contingent or otherwise), or charges of any kind, or the rights of any conditional sellers, vendors or any other third parties in or to such replacement property have been expressly subordinated at no cost to Beneficiary to the lien of this Deed of Trust in a manner satisfactory to Beneficiary.

C.      Grantor acknowledges that ownership by Grantor of the Real Property in fee simple estate was a material inducement to Beneficiary in providing the Obligations secured hereby, and that Beneficiary, in providing the Obligations secured hereby, are relying upon the creditworthiness, business reputation, and knowledge of Grantor in operating and managing properties similar to the Mortgaged Property. Accordingly, without the prior written consent of Beneficiary being first had and obtained, which consent can be granted or denied in Beneficiary’s sole discretion, and except as provided in the Loan Agreement:

Grantor shall not, voluntarily or involuntarily, by operation of law or otherwise, sell, convey, transfer (including any foreclosure sale or deed in lieu of foreclosure under any mortgage or deed of trust, the lien of which is junior to the lien of this Deed of Trust, whether or not Beneficiary has approved such mortgage or deed of trust) or dispose of all or any portion of the Real Property or any interest therein or any Water Rights or any interest therein. For purposes of this Section 1.8(C) , a transfer or disposition of the Real Property or Water Rights or any interest therein shall include the sale, execution of a contract to sell or option to purchase, pledge assignment, conditional sale, execution of a title retention agreement, lease for space in the improvements located on the Real Property containing an option to purchase, transfer (including a transfer as a result of or in lieu of condemnation), or other alienation of all or any portion of the Real Property or any interest therein (collectively “ Transfer ”). In the event of a breach of any of the foregoing covenants, Beneficiary may at its option and without limiting any other right or remedy available to Beneficiary at law, in equity or by agreement with Grantor, accelerate the maturity of the Obligations secured hereby and require the payment of the then existing outstanding principal balance and all other sums secured by this Deed of Trust. As used herein, the term “ Water Rights ” means the ground water on, under, pumped from or otherwise available to the Real Property or any other water rights appurtenant to the Real Property, whether as a result of groundwater rights, contractual rights, or otherwise and whether riparian, appropriative, or otherwise; the right to remove or extract any such ground water including any permits, rights or licenses granted by any governmental authority and any rights granted or created by any easement, covenant, agreement or contract with any person; and any rights to which the Real Property is entitled with respect to surface water, whether such rights are appropriative, riparian, prescriptive or otherwise and whether or not pursuant to permit or other governmental authorization; any water right, water allocation for water not yet delivered, distribution right, delivery right, water storage right, or other water-related entitlement appurtenant to or otherwise applicable to the Real Property by virtue of the Real Property being situated within the boundaries of any governmental water district or within the boundaries of any private water company, mutual water company, or other non-governmental entity; and any shares, or any rights under such shares, of any private water company, mutual water company, or other non-governmental

entity pursuant to which Grantor or the Real Property may receive water, water rights and water stock relating to the Real Property. Notwithstanding the foregoing, the merger of the leasehold interest in the portion of the Real Property constituting a leasehold interest upon the acquisition by Grantor of the fee interest in such portion of the Real Property shall not constitute a “Transfer” hereunder.

D.      Grantor shall reimburse Beneficiary for all costs and expenses, including reasonable attorneys’ fees and expenses, incurred by Beneficiary in connection with the review by Beneficiary of Grantor’s request for Beneficiary’s consent to any Transfer.

1.9.      Preservation and Maintenance of Mortgaged Property .

A.      Grantor shall keep the Mortgaged Property and every part thereof in good condition and repair ordinary wear and tear excepted, and shall not permit or commit any waste material, impairment, or deterioration outside of the ordinary course of business of the Mortgaged Property, nor commit, suffer or permit any act upon or use of the Mortgaged Property in material violation of law or applicable order of any governmental authority, whether now existing or hereafter enacted and whether foreseen or unforeseen, or in material violation of any covenants, conditions or restrictions affecting the Mortgaged Property, or bring or keep any article upon any of the Real Property or cause or permit any condition to exist thereon which would be prohibited by or could invalidate any insurance coverage maintained, or required hereunder to be maintained, by Grantor on or with respect to any part of the Mortgaged Property, and Grantor further shall do all other acts which from the character or use of the Mortgaged Property may be reasonably necessary to protect the security hereof, the specific enumerations herein not excluding the general. Grantor shall underpin and support, when necessary under applicable laws, any building, structure or other improvement situated on the Real Property. Grantor shall complete or restore and repair promptly and in a good workmanlike manner any building, structure or improvement which may be constructed, damaged or destroyed thereon and pay when due all claims for labor performed and materials furnished therefor, whether or not insurance or other proceeds are available to cover in whole or in part the costs of any such completion, restoration or repair; provided, however, except as permitted under the terms of the Loan Agreement, Grantor shall not demolish, remove, expand or extend any building, structure or improvement on the Real Property, nor construct, add to or materially alter any such building, structure or improvement, nor consent to or permit any of the foregoing to be done, without in each case obtaining the prior written consent of Beneficiary thereto, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor’s expenditures of Rents of the Mortgaged Property for the foregoing purposes and for purposes of satisfying the other obligations described in this Deed of Trust, shall be limited as provided in the Loan Agreement.

B.      Grantor shall obtain and at all times shall keep in full force and effect and comply with all governmental permits and requirements as may be necessary under applicable law, whether now existing or hereafter created, to lawfully construct, own and operate the Mortgaged Property, including, without limiting the generality of the foregoing, all applicable environmental and zoning laws, ordinances and regulations and all certificates of occupancy or equivalent permits required for such portion of the Mortgaged Property and its occupancy.

C.      Except as disclosed to Beneficiary in writing in accordance with the Loan Agreement and in any environmental report delivered by Grantor to Beneficiary in connection with the closing of the indebtedness secured hereby, Grantor represents and warrants that Grantor has

not, and, to the best of Grantor’s knowledge, no predecessor in title nor any third person at any time occupying or present on the Mortgaged Property has, at any time prior to or during the existence of the Obligations, used, generated, disposed of, discharged, stored, released or threatened the release of any Hazardous Substances (as hereinafter defined) on, from, under or affecting the Mortgaged Property in any manner that materially violates any federal, state or local environmental, health or safety laws, ordinances, regulations, or rules of common law regulating Hazardous Substances, including those governing the use, refinement, handling, treatment, removal, storage, production, manufacture, transportation or disposal of Hazardous Substances as such laws, ordinances, regulations, and rules may be in effect from time to time and be applicable to the Mortgaged Property (collectively, the “ Environmental Laws ”).

D.      Grantor further covenants that Grantor will not, nor shall Grantor permit any tenants or other occupants of the Mortgaged Property to, at any time in the future, use, generate, dispose of, discharge, store, release or threaten the release of any Hazardous Substances on, from, under or affecting the Mortgaged Property in any manner that materially violates any Environmental Law.

E.      “ Hazardous Substances ” means and includes any flammable explosives, radioactive materials or hazardous, toxic or dangerous wastes, substances or related materials or any other chemicals, materials or substances, exposure to which is prohibited, limited or regulated by any federal, state, county, regional or local authority, including asbestos, PCBs, petroleum products and by-products, substances defined or listed as “hazardous substances,” “hazardous wastes” or “toxic substances” or similarly identified in, pursuant to, or for purposes of, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. Section 9601, et seq.); the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.); the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); and any so-called “Superfund” or “Superlien” law; or any other federal, state or local statute, law, ordinance, code, rule, or regulation regulating, relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material; or any substances or mixture regulated under the Toxic Substance Control Act of 1976, as now or hereafter amended (15 U.S.C. Section 2601 et seq.); and any “toxic pollutant” under the Clean Water Act, as now or hereafter amended (33 U.S.C. Section 1251 et seq.); and any hazardous air pollutant under the Clean Air Act, as now or hereafter amended (42 U.S.C. Section 7401 et seq.).

F.      Grantor hereby does and shall defend and indemnify Beneficiary and hold Beneficiary harmless from and against any and all Claims except for Claims arising out of Beneficiary’s gross negligence or willful misconduct. As used herein, “ Claims ” mean any and all actual out-of-pocket cost (including reasonable attorneys’ fees and expenses, and also including fees and expenses of both outside and staff counsel), expense or loss arising from any and all claims, losses, liabilities, damages, fines, penalties, charges, administrative and judicial proceedings and orders, injunctive relief, judgments, remedial action requirements and enforcement actions of any kind, injury to person, property or natural resources, and arising, directly or indirectly, in whole or in part, out of or attributable to the presence, use, generation, disposal, discharge, storage, release or threatened release of any Hazardous Substances at, about, on, from, under, within or affecting the Mortgaged Property, or elsewhere in connection with the transportation of Hazardous Substances to or from the Mortgaged Property, whether foreseeable or unforeseeable, regardless of when such

presence is discovered and regardless of whether by Grantor, any employees, agents, contractors or subcontractors of Grantor or any third person.

G.      Without limiting the generality of the foregoing and for purposes of clarification only, Claims include reasonable and actual out-of-pocket costs incurred by Beneficiary in connection with (i) determining whether the Mortgaged Property is in compliance with all applicable Environmental Laws, if the investigation thereof is based on the Beneficiary’s reasonable suspicion of noncompliance, (ii) any removal, remediation of any kind and disposal of any Hazardous Substances present at, on, about, under or within the Mortgaged Property to the extent required by applicable Environmental Laws in effect at the time of such removal, remediation or disposal, and (iii) any repair of any damage to the Mortgaged Property or any other property caused by any such removal, remediation or disposal. The rights of Beneficiary hereunder shall not be limited by any investigation or the scope of any investigation undertaken by or on behalf of Beneficiary in connection with the Mortgaged Property prior to the date hereof. This indemnity shall not be limited by any representation, warranty or indemnity of Grantor made in connection with the Obligations, irrespective of whether Grantor has knowledge as of the date of this Deed of Trust or during the term of this Deed of Trust of the matters to which such representation, warranty or indemnity relate; provided, however, this indemnity shall not apply to any Claims that are attributable to the presence, use, generation, disposal, discharge, storage, release or threatened release of any Hazardous Substance affecting the Mortgaged Property that first occurs after the date of the foreclosure sale of this Deed of Trust or other acceptable transfer of the Mortgaged Property to Beneficiary or its nominee or a transfer of the Mortgaged Property that is first approved in writing by Beneficiary.

H.      Grantor shall give prompt, written notice to Beneficiary of:

(a)      any proceeding or inquiry by any governmental authority of which Grantor has knowledge, with respect to the presence of any Hazardous Substances on the Mortgaged Property or the migration thereof from or to other property;

(b)      all claims made or threatened by any third party against Grantor or the Mortgaged Property, of which Grantor has knowledge, relating to any loss or injury resulting from any Hazardous Substances; and

(c)      Grantor’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Mortgaged Property that could reasonably be expected cause the Mortgaged Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of the Mortgaged Property under any Environmental Laws.

I.      At any time after the occurrence and during the continuation of an Event of Default, Beneficiary shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Environmental Laws and have its reasonable attorneys’ fees and expenses in connection therewith, including fees and expenses of both outside and staff counsel, paid by Grantor.

J.      In the event that any investigation, site monitoring, containment, cleanup, removal, restoration or other remedial work of any kind or nature (the “ Remedial Work ”) is required under any applicable local, state or federal law or regulation, any judicial order, or by any

governmental entity because of, or in connection with, the current or future presence, suspected presence, release or suspected release of Hazardous Substances in or into the air, soil, groundwater, surface water or soil vapor at, on, about, under or within the Mortgaged Property (or any portion thereof), Grantor shall within thirty (30) days after receipt of information that such Remedial Work is required (or such shorter or longer period of time as may be required under applicable law, regulation, order or agreement), take reasonable steps to commence to perform, or cause to be commenced, and thereafter diligently prosecute to completion, all such Remedial Work.

K.      All costs and expenses of such Remedial Work shall be paid by Grantor, including the charges of such contractor(s) and/or the consulting engineer, and Beneficiary’s reasonable attorneys’ fees and costs, including reasonable fees and costs of both outside and staff counsel incurred in connection with monitoring or review of such Remedial Work. In the event Grantor shall fail to timely commence, or cause to be commenced, or fail to diligently prosecute to completion, such Remedial Work as required in Section 1.9(J) herein, Beneficiary may, but shall not be required to, cause such Remedial Work to be performed and all costs and expenses thereof, or incurred in connection therewith, subject to the provisions of Section 3.7 herein shall become part of the Obligations.

L.      Grantor shall not drill or extract or enter into any new 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 Mortgaged Property or any part thereof without first obtaining Beneficiary’s written consent.

M.      Unless required by applicable law or unless Beneficiary has otherwise first agreed in writing, which agreements shall not be unreasonably withheld or delayed, Grantor shall not make or allow any material changes to be made in the nature of the occupancy or use of the Mortgaged Property or any part thereof for which the Mortgaged Property or such part was intended at the time this Deed of Trust was delivered. Grantor shall not initiate or acquiesce in any change in any zoning or other land use classification now or hereafter in effect and affecting the Mortgaged Property or any part thereof without in each case obtaining Beneficiary’s prior written consent thereto, which consent shall not be unreasonably withheld or delayed.

1.10.      Financial Statements; Offset Certificates .

A.      Grantor, without expense to Beneficiary, shall furnish financial statements as described in the Loan Agreement.

B.      Grantor, within ten (10) days after receiving a request from Beneficiary therefor, shall furnish a written statement certified by a Responsible Officer of all amounts Grantor believes are due on the Obligations, whether for principal or interest on the Notes or otherwise, and stating whether any offsets or defenses exist against the Obligations and covering such other matters with respect to any such Obligations as Beneficiary may reasonably require.

1.11.      Trustee’s Costs and Expenses; Taxes and Water Payments; Husbandry; Subordination to Crop Financing .

Grantor shall pay all costs, fees and expenses of Trustee, its agents and counsel in connection with the performance of its duties hereunder, including the cost of any trustee’s sale

guaranty or other title insurance coverage ordered in connection with any foreclosure proceedings hereunder. Grantor shall pay all Taxes constituting a lien upon the Real Property as and when such Taxes become due and Grantor shall not permit any real estate taxes or assessments to become delinquent. Grantor shall pay on or before the due date all assessments upon water company stock and all charges for water delivered to, appurtenant to, or used in connection with the Real Property. Grantor shall at all times work, prune, cultivate, fertilize, irrigate, spray, dust, harvest, care for and maintain in a husbandlike manner according the most current industry standards any groves, orchards, vineyards, or crops growing on the Real Property. If the Real Property is improved with any orchards, vineyards, or permanent plantings, Grantor shall not allow more than five percent of such orchards, vineyards, or permanent plantings to be removed, uprooted, damaged, or otherwise removed from production. If Grantor grants a security interest in crops growing on the Real Property to a person providing financing for such crops, the security interest of Beneficiary in such crops shall be subordinate to the security interest of such person.

1.12.      Protection of Security; Costs and Expenses .

A.      Grantor shall appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of the Beneficiary or Trustee, and shall pay all costs and expenses, including cost of evidence of title and reasonable attorneys’ fees and expenses, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust or to enforce or establish any other rights or remedies of Beneficiary hereunder.

B.      If Grantor fails to perform any of the covenants or agreements contained in this Deed of Trust, or if any action or proceeding is commenced which affects Beneficiary’s interest in the Mortgaged Property or any part thereof, including eminent domain, code enforcement, or proceedings of any nature whatsoever under any federal or state law, whether now existing or hereafter enacted or amended, relating to bankruptcy, insolvency, arrangement, reorganization or other form of debtor relief, or to a decedent, then Beneficiary or Trustee may, but without obligation to do so upon reasonable notice to Grantor (or without notice in a case of emergency, or where the giving of notice is impracticable or where the Tenant or Grantor has abandoned the Mortgaged Property) and without releasing Grantor from any obligation hereunder, make such appearances, disburse such sums and take such action as Beneficiary or Trustee deems reasonably necessary or appropriate to protect Beneficiary’s interest, including disbursement of reasonable attorneys’ fees, entry upon the Mortgaged Property to make repairs or take other action to protect the security hereof, and payment, purchase, contest or compromise of any encumbrance, charge or lien which in the judgment of either Beneficiary or Trustee appears to be prior or superior hereto.

C.      Grantor further agrees to pay all reasonable expenses of Beneficiary (including fees and disbursements of counsel) incident to the protection of the rights of Beneficiary hereunder, or to enforcement or collection of payment of the Obligations, whether by judicial or non-judicial proceedings, or in connection with any bankruptcy, insolvency, arrangement, reorganization or other debtor relief proceeding of Grantor, or otherwise, including costs of collection of judgment and costs of appeal.

D.      Any amounts disbursed by Beneficiary or Trustee pursuant to this Section 1.12 shall be additional indebtedness of Grantor secured by this Deed of Trust and each of the Loan Documents as of the date of disbursement and shall bear interest at the variable interest

rate set forth in the Loan Agreement. All such amounts shall be payable by Grantor upon written demand. Nothing contained in this Section 1.12 shall be construed to require Beneficiary or Trustee to incur any expense, make any appearance, or take any other action.

1.13.      Warranty of Title .

Grantor hereby represents and warrants to Beneficiary that, except for the Permitted Liens, Grantor is well seized of an indefeasible estate in fee simple or leasehold, as applicable, in the Mortgaged Property hereby encumbered and has good title to all existing personal property hereby encumbered and has good right, full power and lawful authority to convey and encumber the same in the manner and form aforesaid; that the same is free and clear of all liens, charges and encumbrances whatsoever, including, as to the personal property and fixtures, security agreements, conditional sales contracts and anything of a similar nature, excepting only the Permitted Liens, and that Grantor shall and will warrant and forever defend the title to the Mortgaged Property against the claims of all persons whomsoever.

1.14.      Subordinate Mortgage .

Grantor (i) represents as a special inducement to Beneficiary to make the loan secured hereby that as of the date hereof the Mortgaged Property is not encumbered for purposes of securing debt junior to this Deed of Trust other than as specifically permitted by the Loan Agreement, and covenants that there shall be none as of the date when this Deed of Trust becomes of record, and (ii) agrees that Grantor will not, without the prior written consent of Beneficiary being first had and obtained, which consent may be withheld by Beneficiary in its sole and absolute discretion and without regard to the adequacy of its security hereunder, execute or deliver any pledge, security agreement, mortgage or deed of trust covering all or any portion of the Mortgaged Property or any interest therein.

1.15.      Collection of Rents, Issues and Profits .

A.      Notwithstanding Section 1.6 herein, Beneficiary confers upon Grantor a license to collect and retain the Rents as they become due and payable; provided, however, that Beneficiary may at any time after the occurrence and during the continuation of an Event of Default (as hereinafter defined) and without regard to the value of the security, in Beneficiary’s sole discretion and without notice to Grantor, revoke said license and may collect and retain any or all of the Rents, without taking possession of all or any part of the Mortgaged Property.

B.      Upon such revocation of Grantor’s license, Grantor shall immediately turn over to Beneficiary all of the Rents.

C.      The right of Beneficiary to collect Rents as herein provided shall not be deemed to grant to Beneficiary or Trustee the right to possession of the Property, except as expressly herein provided, or to impose upon Beneficiary or Trustee the duty to produce any Rents or maintain the Property in whole or in part.

D.      Any Rents collected by Beneficiary may be applied by Beneficiary, in its sole discretion, against any of the Obligations whether now existing or hereafter arising. Collection

of any Rents by Beneficiary shall not waive any other right or remedy of Beneficiary hereunder or any notice of default given hereunder or invalidate any acts done pursuant to notice.

ARTICLE II     

EVENTS OF DEFAULT

Each of the following shall constitute an event of default (“ Event of Default ”) hereunder:

2.1.      The occurrence of any Event of Default under and as defined in any of the Loan Documents (giving effect to any grace period set forth therein).

2.2.      Failure to make any payment of principal or interest, fees, expenses or any other amount owing in respect of the Obligations or failure to make any other payment of money required on the part of Grantor under this Deed of Trust and the Loan Documents when and as the same shall become due and payable (giving effect to any grace period set forth in the Loan Agreement), whether at maturity or by acceleration or as part of any prepayment or otherwise.

2.3.      Failure to perform any of the covenants or agreements of Grantor contained (a) herein, or (b) in the Loan Agreement, or (c) in any of the Loan Documents, which covenant or agreement does not involve the payment of money subject, however, in the case of any of the Loan Documents, to the expiration of the period of time, if any, permitted for cure of such failure thereunder.

2.4.      Any representation or warranty made herein, in any of the Loan Documents, in any written statement pursuant thereto or hereto, or in any other report, financial statement, certificate or schedule made or delivered to Beneficiary by Borrower proves to be untrue or incorrect in any material respect, as of the date when made.

2.5.      Any other event which constitutes an Event of Default (giving effect to any applicable grace period) by Grantor under any of the Loan Documents, or gives Beneficiary the right to accelerate the maturity of the Obligations, or any part thereof.

ARTICLE III     

REMEDIES

Upon the occurrence of any Event of Default and during the continuation thereof, Trustee and Beneficiary shall have, in their sole discretion, any and all of the following rights and remedies without regard to the adequacy of any security for the Obligations hereby secured:

3.1.      Acceleration .

A.      Beneficiary may declare the entire principal amount of the Notes then outstanding (if not then due and payable) and accrued and unpaid interest thereon, and all other sums or payments required thereunder, to be due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Grantor.

B.      Upon such acceleration and notwithstanding the stated maturity of the Obligations, the principal amount of each Obligation, the accrued and unpaid interest thereon and all other sums or payments required thereunder shall thereupon become and be immediately due and payable. Any acceleration may be rescinded and annulled by Beneficiary. No such rescission and annulment shall affect any subsequent Event of Default or acceleration or impair any right of Beneficiary with respect to any subsequent Event of Default or acceleration.

3.2.      Entry .

A.      Irrespective of whether Beneficiary exercises the option to accelerate provided in Section 3.1 above, Beneficiary, in person or by agent, with or without bringing any action or proceeding, may enter upon, take possession of, manage and operate the Mortgaged Property or any part thereof and do all things necessary or appropriate in Beneficiary’s sole discretion in connection therewith, including making and enforcing, and if the same be subject to modification or cancellation, modifying or canceling Tenant Leases upon such terms or conditions as Beneficiary deems proper, obtaining and evicting tenants, and fixing or modifying rents, contracting for and making repairs and alterations, and doing any and all other acts which Beneficiary deems proper to protect the security hereof; and either with or without so taking possession, in its own name or in the name of Grantor, sue for or otherwise collect and receive the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys’ fees and expenses, upon any of the Obligations, and in such order as Beneficiary may determine.

B.      Upon request of Beneficiary, Grantor shall assemble and make available to Beneficiary at the site of the Real Property covered hereby any of the Mortgaged Property which has been removed therefrom to the extent such assemblage and return is commercially reasonable.

C.      The entering upon and taking possession of the Mortgaged Property, or any part thereof, the collection of any Rents and the application thereof as aforesaid shall not cure or waive any default theretofore or thereafter occurring or affect any notice of default hereunder or invalidate any act done pursuant to any such default or notice, and, notwithstanding continuance in possession of the Mortgaged Property or any part thereof by Beneficiary, Trustee or a receiver, and the collection, receipt and application of the Rents, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust or by law or in equity upon or after the occurrence of an Event of Default, including the right to exercise the power of sale.

D.      Any of the actions referred to in this Section 3.2 may be taken by Beneficiary irrespective of whether any notice of default or election to sell has been given hereunder and without regard to the adequacy of the security for the Obligations.

3.3.      Appointment of Receiver .

A.      Upon an Event of Default and at any time during the continuation thereof, Beneficiary may elect to seek the court appointment of a receiver to enter upon, take possession of, manage, and operate the Mortgaged Property or any part thereof, and Grantor hereby consents to the appointment of a receiver hereunder.

B.      Grantor hereby consents and stipulates that Beneficiary need only provide Grantor with two (2) Business Days’ notice of Beneficiary’s motion to seek court appointment of a receiver for Mortgaged Property.

C.      Grantor further stipulates that at such hearing on Beneficiary’s motion to appoint a receiver for the Mortgaged Property, a copy of this recorded Deed of Trust can be entered into evidence without any objection from Grantor.

D.      Upon the appointment of a receiver for the Mortgaged Property, Grantor agrees to immediately furnish to such receiver any and all (i) security deposits, and (ii) Rents that Grantor has in its possession or control.

E.      Any action taken under this section may be taken by Beneficiary or Trustee with or without regard to the adequacy of the security for the Obligations secured hereunder, and whether or not notice of default has been recorded.

3.4.      Judicial Action .

Beneficiary may bring an action in any court of competent jurisdiction to foreclose this instrument or to enforce any of the covenants and agreements hereof.

3.5.      Power of Sale .

A.      Beneficiary may elect to cause the Mortgaged Property or any part thereof to be sold under the power of sale herein granted in any manner permitted by applicable law.

B.      In connection with any sale or sales hereunder, Beneficiary may elect to treat any of the Mortgaged Property which consists of a right in action or which is property that can be severed from the Real Property covered hereby or any improvements thereon without causing structural damage thereto as if the same were personal property, and dispose of the same in accordance with applicable law, separate and apart from the sale of Real Property.

C.      Any sale of any personal property hereunder shall be conducted in any manner permitted by the Oregon Commercial Code. Where the Mortgaged Property consists of real and personal property or fixtures, whether or not such personal property is located on or within the Real Property, Beneficiary may elect in its discretion to exercise its rights and remedies against any or all of the Real Property, personal property, and fixtures in such order and manner as is now or hereafter permitted by applicable law.

D.      Without limiting the generality of the foregoing, Beneficiary may, in its sole and absolute discretion and without regard to the adequacy of its security, elect to proceed against any or all of the Real Property, personal property and fixtures in any manner permitted under the Oregon Commercial Code; and if the Beneficiary elects to proceed in the manner permitted under the Oregon Commercial Code, the power of sale herein granted shall be exercisable with respect to all or any of the Real Property, personal property and fixtures covered hereby, as designated by Beneficiary, and the Trustee is hereby authorized and empowered to conduct any such sale of any of the Real Property, personal property and fixtures in accordance with the procedures applicable to real property.

E.      Trustee, from time to time upon the request of Beneficiary, may postpone or continue the sale of all or any portion of the Mortgaged Property by public declaration at the time and place last appointed for the sale or otherwise in accordance with applicable law. No other notice of the postponed sale shall be required except as required by applicable law.

F.      If the Mortgaged Property consists of several lots, parcels or items of property, Beneficiary may: (i) designate the order in which such lots, parcels or items shall be offered for sale or sold, or (ii) elect to sell such lots, parcels or items through a single sale, or through two or more successive sales, or in any other manner Beneficiary deems in its best interest.

G.      Any person, including Grantor, Trustee or Beneficiary, may purchase at any sale hereunder, and Beneficiary shall have the right to purchase at any sale hereunder by crediting upon the bid price the amount of all or any part of the Obligations.

H.      If Beneficiary is the successful bidder, it may apply any of the outstanding Obligations secured hereby in settlement of the purchase price.

I.      Should Beneficiary desire that more than one sale or other disposition of the Mortgaged Property be conducted, Beneficiary may, at its option, cause the same to be conducted simultaneously, or successively, on the same day, or at such different days or times and in such order as Beneficiary may deem to be in its best interests, and no such sale shall terminate or otherwise affect the lien of this Deed of Trust on any part of the Mortgaged Property not sold until the Obligations have been fully paid.

J.      In the event Beneficiary elects to dispose of the Mortgaged Property through more than one sale, Grantor agrees to pay the costs and expenses of each such sale and of any judicial proceedings wherein the same may be made, including reasonable compensation to Trustee and Beneficiary, their agents and counsel, and to pay all expenses, liabilities and advances made or incurred by Trustee in connection with such sale or sales, together with interest on all such advances made by Trustee at the Default Rate provided in the Loan Agreement.

K.      Upon any sale hereunder, Trustee shall execute and deliver to the purchaser or purchasers a deed or deeds conveying the property so sold, but without any covenant or warranty whatsoever, express or implied, whereupon such purchaser or purchasers shall be let into immediate possession; and the recitals in any such deed or deeds of facts, such as default, the giving of notice of default and notice of sale, and other facts affecting the regularity or validity of such sale or disposition, shall be conclusive proof of the truth of such facts and any such deed or deeds shall be conclusive against all persons as to such facts recited therein.

3.6.      Proceeds of Sale .

The proceeds of any sale made under or by virtue of this Article III , together with all other sums which then may be held by Trustee or Beneficiary under this Deed of Trust, whether under the provisions of this Article III or otherwise, shall be applied as follows:

FIRST: To the payment of the costs and expenses of sale and of any judicial proceedings wherein the same may be made, including reasonable compensation to Trustee and Beneficiary, their agents and counsel, recording and title fees, escrow fees and to the payment of

all expenses, liabilities and advances made or incurred by Trustee under this Deed of Trust, together with interest on all advances made by Trustee at the Default Rate.

SECOND: To the payment of any and all sums expended by Beneficiary under the terms hereof, not then repaid, with accrued interest at the Default Rate, and all other sums required to be paid by Grantor pursuant to any provisions of this Deed of Trust or any of the Loan Documents, including all expenses, liabilities and advances made or incurred by Beneficiary under this Deed of Trust or in connection with the enforcement thereof, together with interest thereon as herein provided.

THIRD: To the payment of the entire amount then due, owing or unpaid for principal and interest upon the Obligations.

FOURTH: The remainder, if any, to the person or persons legally entitled thereto.

3.7.      Environmental Remedies .

At any time after the occurrence and during the continuance of an Event of Default under Grantor’s obligations contained in Section 1.9 hereof but without limiting any other rights of remedies of Beneficiary hereunder, under the Loan Documents or at law or in equity:

A.      Beneficiary, acting by itself or through a court-appointed receiver, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with any Governmental Authority with respect to the Mortgaged Property’s compliance with Environmental Laws and any Remedial Action; take any action necessary to enforce compliance with Environmental Laws, including spending Rents to abate the problem; make, terminate, enforce or modify Tenant Leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary’s judgment, to protect the security hereof; and/or take any and all other actions which may be necessary or desirable to comply with Grantor’s Obligations hereunder and under the Documents.

B.      With notice (or without notice in a case of emergency, or where the giving of notice is impracticable or where the Tenant or Grantor has abandoned the Mortgaged Property), and without releasing Grantor from any Obligation hereunder, to cure any default of Grantor and, in connection therewith, Beneficiary or its agents, acting by itself or through a court appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including of any of its other rights:

(i)      to obtain a court order to enforce Beneficiary’s right to enter and inspect the Mortgaged Property, to which the decision of Beneficiary as to whether there exists a Release or threatened Release of Hazardous Materials onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto, if made in reasonable and good faith; and

(ii)      to have a receiver appointed to enforce Beneficiary’s right to enter and inspect the Mortgaged Property for Hazardous Materials.

C.      All reasonable costs and expenses reasonably incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Grantor. All such costs and expenses reasonably incurred by Trustee and Beneficiary (including court costs, reasonable consultant fees and attorney fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate, from the date they are incurred until said sums have been paid.

D.      To seek a judgment that Grantor has breached its covenants, representations and/or warranties with respect to Hazardous Materials set forth above in Section 1.9, by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to foreclosure of the Mortgaged Property or after foreclosure of the Mortgaged Property, for Environmental Liabilities relating to the Mortgaged Property. All Environmental Liabilities incurred by Beneficiary (including court costs, consultant fees and reasonable attorneys fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid.

E.      Grantor acknowledges and agrees that Grantor shall be fully liable for the Environmental Liabilities hereunder, and such liability shall not be limited to the original principal amount of the Obligations secured hereby, and Grantor’s Obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust.

3.8.      Waiver of Marshalling .

A.      Grantor, for itself and for all persons hereafter claiming through or under it or who may at any time hereafter become holders of liens junior to the lien of this Deed of Trust, hereby expressly waives and releases all rights to direct the order in which any of the Mortgaged Property shall be sold in the event of any sale or sales pursuant hereto and to have any of the Mortgaged Property and/or any other property now or hereafter constituting security for any of the indebtedness secured hereby marshaled upon any foreclosure of this Deed of Trust or of any other security for any of said indebtedness.

B.      Grantor hereby waives and disclaims any state law or principle of equity which limits the ability of Beneficiary to sell or dispose of the Mortgaged Property in multiple nonjudicial foreclosure actions, rather than one nonjudicial foreclosure action, by parcel rather than en masse, or to obtain and/or force a deficiency judgment in respect of any sale of any piece of Mortgaged Property.

3.9.      Remedies Cumulative .

A.      No remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to be exclusive of any other remedy herein or by law provided, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute.

B.      No delay or omission of Trustee or Beneficiary to exercise any right or power accruing upon any Event of Default shall impair any right or power or shall be construed to be a

waiver of any Event of Default or any acquiescence thereof, and every power and remedy given by this Deed of Trust to Trustee or Beneficiary may be exercised from time to time as often as may be deemed expedient by Trustee or Beneficiary.

C.      If there exists additional security for the performance of the Obligations secured hereby, Beneficiary, at its sole option, and without limiting or affecting any of its rights or remedies hereunder, may exercise any of the rights and remedies to which it may be entitled hereunder either concurrently with whatever rights and remedies it may have in connection with such other security or in such order as it may determine.

D.      Any application of any amounts or any portion thereof held by Beneficiary at any time as additional security hereunder to any indebtedness secured hereby shall not extend or postpone the due dates of any payments due from Grantor to Beneficiary hereunder or under the Obligations or any of the Loan Documents, or change the amounts of any such payments or otherwise be construed to cure or waive any default or notice of default hereunder or invalidate any act done pursuant to any such default or notice.

ARTICLE IV     

MISCELLANEOUS

4.1.      Notice of Sale .

Any power granted to Beneficiary in this Deed of Trust may be exercised, pursuant to a single notice of trustee’s sale, separately with respect to each and every item or parcel of property or with respect to groups and assemblages of property, in Beneficiary’s sole discretion, and may be exercised on separate days or at separate times or in separate places; the exercise of such power of sale shall not be an action for purposes of any law or statute pertaining to actions to enforce secured transactions.

4.2.      Non-Waiver .

A.      By accepting payment of any amount after its due date or late performance of any obligation secured hereby, Beneficiary will not waive its right either to require prompt payment when due of any other amounts or prompt performance of any other Obligations so secured or to declare a default for failure to pay or perform when due. No exercise of any right or remedy by Beneficiary or Trustee hereunder shall constitute a waiver of any other right or remedy herein contained or provided by law.

B.      No waiver by Trustee or Beneficiary will be effective unless it is in writing and then only to the extent specifically stated. Without limiting the generality of the foregoing, any payment made by the Beneficiary for insurance premiums or any other charges affecting the Mortgaged Property, shall not constitute a waiver of Grantor’s default in making such payments and shall not obligate Beneficiary to make any further payments.

4.3.      Severability .

If any provision hereof should be held unenforceable or void, then such provision shall be deemed separable from the remaining provisions and shall in no way affect the validity of this Deed of Trust, except that if such provision relates to the payment of any monetary sum, then Beneficiary may at its option declare the Obligations and all other sums secured hereby immediately due and payable.

4.4.      Certain Charges .

A.      Grantor agrees to pay Beneficiary for each statement of Beneficiary as to the Obligations secured hereby, furnished at Grantor’s request, the maximum fee allowed by law, or if there be no maximum fee, then such reasonable fee as is charged by Beneficiary as of the time said statement is furnished.

B.      Grantor further agrees to pay the lawful charges of Beneficiary for any other service rendered Grantor, or on its behalf, connected with this Deed of Trust or the indebtedness secured hereby, including the delivery to an escrow holder of a request for full or partial reconveyance of this Deed of Trust, transmitting to an escrow holder moneys secured hereby, changing its records pertaining to this Deed of Trust and indebtedness secured hereby to show a new owner of the Mortgaged Property, and replacing an existing policy of insurance held hereunder with another such policy.

4.5.      Notices . Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication shall or may be given or delivered to or served upon any of the parties by another, or whenever any of the parties desires to give or deliver or serve upon another any communication with respect to this Deed of Trust, each such notice, demand, request, consent, approval, declaration, or other communication shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission or electronic transmission, provided that any matter transmitted by Grantor by facsimile or electronic transmission shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified below (or to such other address as shall be designated by such party in a written notice to the other parties). All such notices, requests and communications shall, when transmitted by overnight delivery, faxed, or electronic transmission be effective when delivered by overnight (next-day) delivery, or transmitted in legible form by facsimile machine or email, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery

A.      If to Beneficiary at:

American AgCredit, FLCA

5560 S. Broadway

Eureka, California 95503

Attention:    Account Officer – Double Canyon Vineyards

 

B.      If to Trustee at:

First American Title Insurance Company

200 SW Market St; Suite 250
Portland, OR 97201

C.      If to Grantor, at:

Double Canyon Vineyards, LLC

2700 Napa Valley Corporate Drive, Suite B

Napa, CA 94558

Attention: Chief Financial Officer

or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, or other communication.

4.6.      Grantor Not Released .

A.      Extension of the time for payment or modification of the terms of payment of any sums secured by this Deed of Trust granted by Beneficiary to any successor in interest of Grantor shall not operate to release, in any manner, the liability of the original Grantor except to the extent set forth in such extension or modification. Beneficiary shall not be required to commence proceedings against such successor or refuse to extend time for payment or otherwise modify the terms of payment of the sums secured by this Deed of Trust by reason of any demand made by the original Grantor.

B.      Without affecting the liability of any person, including Grantor, for the payment of any indebtedness secured hereby, or the lien of this Deed of Trust on the remainder of the Mortgaged Property for the full amount of any such indebtedness and liability unpaid, Beneficiary and Trustee are respectively empowered as follows:

(i)      Beneficiary may from time to time and without notice:

4.7.      Inspection .

Upon reasonable notice to Grantor, Beneficiary may at any reasonable time or times make or cause to be made entry upon and inspections of the Mortgaged Property or any part thereof in person or by agent.

4.8.      Reconveyance .

A.      Upon the payment in full of all sums secured by this Deed of Trust and upon satisfaction of other conditions set forth in the Loan Agreement, Beneficiary shall request Trustee to reconvey the Mortgaged Property and shall surrender this Deed of Trust and all notes evidencing indebtedness secured by this Deed of Trust to Trustee.

B.      Under the conditions referred to in subparagraph (A) above, and upon payment of its fees and any other sums owing to it under this Deed of Trust, Trustee shall reconvey the Mortgaged Property without warranty to the person or persons legally entitled thereto. Such person or persons shall pay all costs of recordation, if any.

C.      The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as “the person or persons legally entitled thereto.”

4.9.      Interpretation .

A.      Wherever used in this Deed of Trust, unless the context otherwise indicates a contrary intent, or unless otherwise specifically provided herein, the word “Grantor” shall mean and include both Grantor and any subsequent owner or owners of the Mortgaged Property, and the word “Beneficiary” shall mean and include not only the original Beneficiary hereunder but also any future owner and holder, including pledgees, of the Obligations secured hereby.

B.      In this Deed of Trust whenever the context so requires the singular number includes the plural and conversely. Use of the term “including” shall mean “including, but not limited to.”

C.      Specific enumeration of rights, powers and remedies of Trustee and Beneficiary and of acts which they may do and of acts to be done and not to be done by Grantor is not to be deemed to exclude or limit the general.

D.      The captions, headings and arrangements used in this deed of trust are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions hereof.

E.      No provision of this Deed of Trust shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party’s having or being deemed to have structured, drafted or dictated such provision.

4.10.      Consent; Delegation to Sub-Agents .

The granting or withholding of consent by Beneficiary to any transaction as required by the terms hereof shall not be deemed a waiver of the right to require consent to future or successive transactions. Wherever a power of attorney is conferred upon Beneficiary hereunder, it is understood and agreed that such power is conferred with full power of substitution, and Beneficiary may elect in its sole discretion to exercise such power itself or to delegate such power, or any part thereof, to one or more sub agents.

4.11.      Successors and Assigns .

Subject to the provisions of Section 1.8 of this Deed of Trust, all of the grants, Obligations, covenants, agreements, terms, provisions and conditions herein shall run with the land and shall apply to, bind and inure to the benefit of, the heirs, administrators, executors, personal representatives, successors, legatees, devisees and assigns of Grantor and the successors in trust of Trustee and the endorsees, transferees, successors and assigns of Beneficiary.

4.12.      Governing Law .

Except as otherwise as expressly provided in any of the Loan Documents, in all respects, including all matters of construction, validity and performance, this Deed of Trust and the Obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Oregon applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflict of laws, and any applicable laws of the United States of America.

4.13.      Substitution of Trustee .

A.      Beneficiary may remove Trustee at any time or from time to time and appoint a successor trustee, and upon such appointment, all powers, rights, duties and authority of Trustee, as aforesaid, shall thereupon become vested in such successor (the “ Substitute Trustee ”).

B.      The Substitute Trustee shall be appointed by written instrument duly recorded in the county where the Mortgaged Property is located, which appointment may be executed by Beneficiary or in any manner permitted by applicable law.

C.      Trustee may resign by written instrument executed by Trustee, containing reference to this Deed of Trust and its place of record, which, when recorded in the office in which this Deed of Trust is recorded, and when delivered to Beneficiary in accordance with Section 4.5 hereof, shall be conclusive proof of the proper appointment of such successor Trustee.

4.14.      No Merger .

There shall be no merger of the lien created by this Deed of Trust with the fee estate in the Mortgaged Property, or any interest therein or portion thereof, by reason of the fact that the same person or entity may own or hold (a) the lien created by this Deed of Trust or any interest therein and (b) the fee estate in the Mortgaged Property or any interest therein or portion thereof; and no merger shall occur unless and until Beneficiary and Trustee shall join in a written instrument effecting such merger and shall duly record the same.

4.15.      Consistency with Loan Agreement .

The parties hereto agree that all actions taken by the parties hereto and all interpretations of all terms and provisions hereof shall be taken or interpreted (as the case may be) in a manner consistent with the Loan Agreement.

4.16.      Statutory Warning .

A.      BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON’S RIGHTS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007, SECTIONS 2 TO 9 AND 17, CHAPTER 855, OREGON LAWS 2009, AND SECTIONS 2 TO 7, CHAPTER 8, OREGON LAWS 2010. THIS INSTRUMENT DOES NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY THAT THE UNIT OF LAND BEING TRANSFERRED IS A LAWFULLY ESTABLISHED LOT OR PARCEL, AS DEFINED IN ORS 92.010 OR 215.010, TO VERIFY THE APPROVED USES OF THE LOT OR PARCEL, TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST PRACTICES, AS DEFINED IN ORS 30.930, AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING PROPERTY OWNERS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007, SECTIONS 2 TO 9 AND 17, CHAPTER 855, OREGON LAWS 2009, AND SECTIONS 2 TO 7, CHAPTER 8, OREGON LAWS 2010.

B.      UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY A LENDER CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER TO BE ENFORCEABLE.

4.17.      Notice Under ORS 746.201 - WARNING .

A.      Unless Grantor provides Beneficiary with evidence of insurance coverage as required by this Deed of Trust or the Loan Agreement, Beneficiary may purchase insurance at Grantor’s expense to protect Beneficiary’s interest. If the Mortgaged Property is damaged, the coverage purchased by Beneficiary may not pay any claim made by Grantor or any claim made against Grantor. Grantor may later cancel the coverage obtained by Beneficiary by providing evidence that it has provided the insurance coverage required by this Deed of Trust.

B.      Grantor is responsible for the cost of any insurance obtained by Beneficiary. The cost of that insurance may be added to the Indebtedness. If the cost is added, the Default Rate will apply to the added amount. The effective date of coverage may be the date Grantor’s prior coverage lapsed or the date Grantor failed to provide proof of coverage.

4.18.      The coverage purchased by Beneficiary may be considerably more expensive than insurance Grantor may be able to obtain on its own and may not satisfy the need for property damage coverage or any mandatory liability insurance requirements imposed by applicable law.

[remainder of page intentionally left blank; signature is on next page.]

IN WITNESS WHEREOF, the undersigned has executed this Deed of Trust the day and year first hereinabove written.

Grantor:

Double Canyon Vineyards, LLC, a Delaware limited liability company

By: /s/ Shannon McLaren        

Name: Shannon McLaren

Title: Chief Financial Officer

[Signature Page Trust Deed]

ACKNOWLEDGMENT OF INSTRUMENTS

STATE OF CALIFORNIA        )

)    SS.

COUNTY OF                  )

On __________ before me,                      , Notary Public, personally appeared ________________________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under penalty of perjury under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

    

Signature _______________________________    (Seal)

[Signature Page Trust Deed]

EXHIBIT A

(Description of the Real Property)

Real property in the City of Milton-Freewater, County of Umatilla, State of Oregon, described as follows:

TRACT 1 (MAP NO. 6N-35-32, TAX LOT NO. 801 AND 900)

TOWNSHIP 6 NORTH, RANGE 35, E.W.M.

SECTION 32: NORTHEAST QUARTER OF THE SOUTHEAST QUARTER.

EXCEPTING THEREFROM THAT TRACT OF LAND CONVEYED TO GREGORY J. KELLY, ET UX, BY DEED RECORDED IN MICROFILM R-79, PAGE 752, UMATILLA COUNTY RECORDS.

ALL BEING EAST OF THE WILLAMETTE MERIDIAN, UMATILLA COUNTY, OREGON.

TRACT 2 (MAP NO. 6N-35-33C, TAX LOT NO. 500 ARID 501)

TOWNSHIP 6 NORTH, RANGE 35, E.W.M.

SECTION 33: NORTHWEST QUARTER OF THE SOUTHWEST QUARTER.

SECTION 33: BEGINNING AT A POINT ON THE SOUTH LINE OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SAID SECTION 33, SAID POINT BEING 298.2 FEET EAST OF THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SAID SECTION 33; THENCE SOUTH 0°15' WEST, 169.9 FEET; THENCE SOUTH 64°35' EAST, 336.3 FEET; THENCE NORTH 25°25' EAST, 349.3 FEET; THENCE WEST ALONG THE SOUTH LINE OF SAID NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SAID SECTION 33, A DISTANCE OF 453.6 FEET, MORE OR LESS TO THE POINT OF BEGINNING.

EXCEPTING THEREFROM ANY LYING WITHIN THE COUNTY ROAD RIGHT-OF-WAYS.

ALL BEING EAST OF THE WILLAMETTE MERIDIAN, UMATILLA COUNTY, OREGON.

TRACT 3 (EASEMENT)

EASEMENT FOR ACCESS TO AND FROM AND FOR USE OF THE IRRIGATION WATER WELL, PIPES AND PUMPS, CONTAINED UNDER DEED FROM JOHN E. KELLY, ET UX, TO MCKIBBEN FAMILY LIMITED PARTNERSHIP RECORDED IN MICROFILM R-278, PAGE 665, UMATILLA COUNTY RECORDS.

EXCEPTING THEREFROM ANY LYING WITHIN THE COUNTY ROAD RIGHT-OF-

WAYS.

TRACT 4 (MAP NO. 6N-35-32, TAX LOT NO. 506)

TOWNSHIP 6 NORTH, RANGE 35, E.W.M.

SECTION 32: BEGINNING AT THE NORTHEAST CORNER OF THAT TRACT OF LAND CONVEYED TO HERBERT H. HENDRICKS, ET UX, BY DEED RECORDED IN MICROFILM R-32, PAGE 1538, DEED RECORDS AND THE TRUE POINT OF BEGINNING FOR THIS DESCRIPTION; THENCE SOUTH ALONG THE EASTERLY LINE OF SAID HENDRICKS TRACT, 1,337.3 FEET TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF COUNTY ROAD NO.773; THENCE WEST ALONG SAID NORTHERLY RIGHT OF WAY LINE, 304.17 FEET TO THE CENTERLINE OF THE HUDSON BAY
IRRIGATION CANAL AS IT EXISTED JULY 27, 1979; THENCE NORTH 41°23'56" WEST, ALONG SAID CENTERLINE, 1,020.51 FEET; THENCE NORTH 00°20'59" EAST, 548.99 FEET; THENCE EASTERLY TO THE POINT OF BEGINNING.

EXCEPTING THEREFROM ANY LYING WITHIN THE COUNTY ROAD RIGHT-OF-WAYS.

ALL BEING EAST OF THE WILLAMETTE MERIDIAN, UMATILLA COUNTY, OREGON.

TRACT 5, PARCEL "A" (MAP NO. 6N-35-32, TAX LOT NO. 1401)

TOWNSHIP 6 NORTH, RANGE 35, E.W.M.

SECTION 32 and 33: BEGINNING AT A POINT WHICH IS 825 FEET WEST OF AND 609.3 FEET NORTH OF THE SOUTHEAST CORNER OF SECTION 32; THENCE SOUTH 89 29' EAST, 1,223.3 FEET; THENCE NORTH 25°53' EAST, 464.2 FEET; THENCE NORTH 64°35' WEST, 336 FEET; THENCE NORTH 0°15' EAST, 169.9 FEET; THENCE NORTH 89°37'40" WEST, 1,117.0 FEET; THENCE SOUTH 0°29' WEST, 728 FEET MORE OR LESS TO THE POINT OF BEGINNING.

ALL BEING EAST OF THE WILLAMETTE MERIDIAN, UMATILLA COUNTY, OREGON.

TRACT 5, PARCEL "B" (EASEMENT)

AN EASEMENT FOR INGRESS AND EGRESS OVER AND ACROSS A TRACT OF LAND 30 FEET IN WIDTH, THE CENTERLINE OF WHICH IS DESCRIBED AS BEGINNING AT A POINT 810 FEET WEST OF AND 20 FEET NORTH OF THE SOUTHEAST CORNER OF SECTION 32, TOWNSHIP 6 NORTH, RANGE 35, EAST OF THE WILLAMETTE MERIDIAN, UMATILLA COUNTY, OREGON, AND THE TRUE POINT OF BEGINNING FOR THIS CENTERLINE DESCRIPTION; THENCE NORTH 0°29' EAST, 589.3 FEET TO THE SOUTH LINE OF PARCEL "A" DESCRIBED HEREINABOVE AND THE POINT OF TERMINUS OF THIS CENTERLINE DESCRIPTION.

TRACT 5, PARCEL "C" EASEMENT

AN EASEMENT FOR INGRESS AND EGRESS OVER AND ACROSS A TRACT OF LAND 30 FEET IN WIDTH, THE CENTERLINE OF WHICH IS DESCRIBED AS BEGINNING AT A POINT WHICH IS 836 FEET NORTH OF AND 510 FEET EAST OF THE SOUTHEAST CORNER OF SECTION 32, TOWNSHIP 6 NORTH, RANGE 35, EAST OF THE WILLAMETTE MERIDIAN, UMATILLA COUNTY, OREGON, AND THE TRUE POINT OF BEGINNING FOR THIS CENTERLINE DESCRIPTION; THENCE SOUTH 64°07' EAST, 227 FEET, MORE OR LESS TO THE WESTERLY LINE OF THE COUNTY ROAD NO. 774 AND THE POINT OF TERMINUS OF THIS CENTERLINE DESCRIPTION.

APN:  6N35320001401 

Recording Requested by and after

Recording Return to:

Winston & Strawn LLP

101 California Street, 34 ^th Floor

San Francisco, CA 94111

Attn: Loren Kessler Higgins

---

SPACE ABOVE THIS LINE FOR RECORDER’S USE

TITLE OF DOCUMENT:    Deed of Trust, Assignment of Rents, Security Agreement and                     Fixture Filing

NAME OF GRANTEE:    AMERICAN AGCREDIT, FLCA, as beneficiary

Complete legal description appears on Exhibit A hereto.

ASSESSOR’S PROPERTY TAX PARCEL ACCOUNT NUMBERS: 36-07-20-72-5512 and 36-07-20-72-5503

This Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (“ Deed of Trust ”) is made as of June 29, 2017, by A Fine Old Building, LLC, a Washington limited liability company, whose principal place of business is 2700 Napa Valley Corporate Drive, Suite B, Napa, CA 94558 Attn: Chief Financial Officer (herein “ Grantor ”), the owner of the real property described hereinbelow, to First American Title Insurance Company, as trustee, subject to substitution as provided in Section 4.13 (herein “ Trustee ”), for the benefit of American AgCredit, FLCA, whose principal place of business is 200 Concourse Boulevard, Santa Rosa, CA 95402 (herein “ Beneficiary ”).

For purposes hereof, references to Beneficiary shall mean and include the named beneficiary herein as well as its successors and assigns.

Unless otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Loan Agreement.

W I T N E S S E T H :

WHEREAS, Grantor and its affiliate, Double Canyon Vineyard, LLC, as borrowers, and Beneficiary, as lender, are concurrently entering into a Loan Agreement dated of even date herewith (as supplemented, amended, modified or restated from time to time, the “ Loan Agreement ”) pursuant to which Beneficiary has agreed to provide certain financial accommodations to Grantor upon the terms set forth therein;

WHEREAS, Grantor owns the Real Property (as hereinafter defined) covered by this Deed of Trust;

WHEREAS, Grantor owns and may hereafter acquire certain fixtures located on or about the Real Property;

WHEREAS, Grantor, for good and valuable consideration received, has agreed to absolutely assign the rents, issues and profits of the Mortgaged Property (hereinafter defined) to Beneficiary; and

WHEREAS, Grantor, for good and valuable consideration received, has agreed to execute and deliver this Deed of Trust to secure the obligations of Grantor under the Loan Agreement and the other Loan Documents.

NOW, THEREFORE:

In consideration of the indebtedness herein recited and the trust herein created, Grantor irrevocably grants, conveys, transfers and assigns to Trustee, its successors and assigns, in trust, with power of sale and right of entry and possession, all of Grantor’s estate, right, title and interest in, to and under the following described property, whether now existing or hereafter acquired (herein the “ Mortgaged Property ”):

A.      The real property (herein the “ Real Property ”) described in the attached Exhibit A which is incorporated into this Deed of Trust by reference.

B.      All structures and improvements now existing or hereafter erected on the Real Property; all easements, rights and appurtenances thereto or used in connection therewith; all rents, royalties, issues, profits, revenues, income and other benefits thereof or arising from the use or enjoyment of all or any portion thereof (subject, however, to the rights and authorities given herein to Grantor to collect and apply such rents, royalties, issues, profits, revenues, income and other benefits); all interests in and rights, royalties and profits in connection with all minerals, oil and gas and other hydrocarbon substances thereon or therein; all development rights or credits, air rights, water, water rights (whether riparian, appropriative, or otherwise, and whether or not appurtenant) and water stock; all fixtures machinery, equipment, building materials, appliances and goods of every nature (other than inventory) now or hereafter located in, or on, or attached or affixed to, use in connection with, the Real Property, or any structures or improvements thereon, including all heating, lighting, laundry, incinerating, gas, electric and power equipment, engines, pipes, pumps, tanks, motors, conduits, switchboards, plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, and communications apparatus, air cooling and air conditioning apparatus, elevators and escalators and related machinery and equipment, shades, awnings, blinds, curtains, drapes, attached floor coverings, including rugs and carpeting, television, radio and music cable antennae and systems, screens, storm doors and windows, stoves, refrigerators, dishwashers and other installed appliances, attached cabinets, partitions, ducts and compressors; crops growing or to be grown, farm products, and trees, vines, and plants whether used for production of crops or used for purposes of landscaping and any other items of landscaping, including machinery, apparatus, equipment, fittings, and similar articles of personal property and all trade fixtures used in the business of Grantor, whether the same are annexed to the Real Property or not; all replacements and additions to any of the foregoing; all present and future leases, subleases, occupancy agreements and concessions affecting the Real Property, including any security deposits; and any present or future condemnation awards, insurance proceeds, or any causes of action, damages or recoveries relating to the Real Property and any of the foregoing described collateral.

C.      All equipment and winery equipment, fixtures and accessions, now owned or hereafter acquired, that are located on or used in connection with operation of Grantor’s business on the Real Property including (i) all bottling line equipment, including loading and unloading tables, purgers, fillers, corkers, labelers, cappers, spinners and associated conveyers, tanks and pumps, (ii) all crushing equipment including unloading hoist or crane, grape hopper, stemmer, crusher, must pump, must line and associated valves, hoses, couplers, and conveyers, (iii) all fermentation and storage equipment including jacketed stainless steel tanks, non-jacketed stainless steel tanks and associated tank stands and catwalks, large wood cooperage, portable and fixed barrel racks, puncheons, as well as any other containers or vessels capable or utilized for the storing, aging, processing of grapes, must, wine, or any other product purchased, processed or manufactured, (iv) all wine presses and filters including wine presses, lees presses, plate filters, cartridge filters, centrifuges or any other device used to clarify or remove solids from wine or wine products, (v) all pumps, piping, fittings, valves, and hoses including transfer pumps, must pumps, racking pumps, carts, and miscellaneous hoses and fittings, (vi) all quality control equipment including scales, lab testing equipment, refrigeration equipment, and temperature control equipment, (vii) all office equipment including furniture, furnishings, data processing equipment, computers, printers, clerical and accounting equipment, desks, tables, chairs, and kitchen equipment, (viii) all rolling stock including fork lifts, pallet jacks, trailers, trucks, vans, or autos, and (ix) all miscellaneous equipment including small tools, pallets, hand carts, floor grates, bottled gas, and hot water heaters; provided that the foregoing shall not include barrels.

D.      All appurtenances of the Real Property and all rights of Grantor in and to any streets, roads or public places, easements or rights of way relating to the Real Property.

E.      All fixed, minimum, percentage and other rents, expense pass-through payments, parking fees, rental and business interruption insurance payments, liability insurance payments, temporary condemnation proceeds, casualty insurance proceeds and other condemnation proceeds relating to the Real Property, all receipts from licenses, concessions and other sources relating to the Real Property, all recoveries of Grantor in any litigation respecting the Real Property or based upon any third-party warranties or guarantees or otherwise based upon or respecting the construction, physical condition or value of the Real Property, including payments in settlement thereof, payments in consideration of the early termination or modification of any lease or other agreement affecting the Real Property, and all income and revenue of a non-rental nature attributable to the Real Property.

F.      All leases or subleases covering the Real Property or any portion thereof now or hereafter existing or entered into, and all right, title, and interest of Grantor thereunder, including all cash or security deposits, advance rentals, and deposits or payments of similar nature.

G.      To the extent assignable, all options to purchase, lease or sublease or otherwise acquire:

(i)      the Real Property or any portion thereof or interest therein, any greater estate in the Real Property now owned or hereafter acquired; or

(ii)      any other property of any kind used or to be used in connection with any of the Mortgaged Property.

H.      To the extent assignable, all other interests, estates or other claims, both in law and in equity, in the Real Property.

I.      All easements, rights of way or other rights, and all tenements, hereditaments and appurtenances thereof and thereto, held or used in connection with:

(i)      the Real Property as a means of access to the Real Property, or

(ii)      any of the Mortgaged Property for any purpose.

J.      All causes of action, claims, compensation, proceeds and recoveries for any damage or injury to or condemnation or taking of the Real Property or any improvements thereon or any part thereof or for any loss or diminution in the value of the Real Property or any Improvements.

K.      All general intangibles relating to the development or use or operation of the Real Property, including all governmental licenses (to the extent permitted by the terms of such licenses), permits, variances, approvals and authorizations relating to construction on the Real Property or relating to the use or operation of the Mortgaged Property, and all management contracts, and all other contracts, contract rights, administrative records, agreements, commitments, undertakings and arrangements relating to the use or operation of the Mortgaged Property, and all warranties, guaranties, covenants, commitments and purchase orders specifically relating to the Mortgaged Property, but excluding any trademarks and/or licenses of trademarks.

L.      All plans and specifications prepared for construction or renovation of improvements on the Real Property or operations to be conducted on the Real Property and all studies, data and drawings related thereto; and also all contracts and agreements of Grantor relating to the aforesaid plans and specifications or to the aforesaid studies, data and drawings, or to the construction or renovation of improvements on the Real Property.

M.      All reserves, deferred payments, deposits, refunds, cost savings and payments of any kind relating to the construction or operations on the Real Property, all present and future accounts and other rights of Grantor to the payment of money, no matter how evidenced, which arise from the use or operation of the Real Property, and all writings evidencing such accounts and other rights.

To the extent that any of the foregoing constitutes personal property, this Deed of Trust shall also be deemed to be a security agreement with respect to such personal property and Grantor does hereby create and grant to Beneficiary a security interest in all such personal property described herein and further grants to Beneficiary all of the rights and remedies of a secured party under the Washington Commercial Code and other applicable state law, which rights are cumulative.

N.      All proceeds of the property described in clauses A through M above. For purposes of this Deed of Trust, the term “proceeds” includes all rents, royalties, issues, income, payments and profits from the property referred to above and whatever is receivable or received when the property referred to above or proceeds are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and including all insurance and condemnation proceeds and products of any and all of the foregoing and all rights to payment, including return premiums with respect to any insurance relating thereto, and any and all right, title, interest that Grantor may hereafter acquire in and to any of the foregoing.

FOR THE PURPOSE OF SECURING, in such order of priority as Beneficiary may elect:

a.      The obligations owed by Grantor and the other borrowers under the Loan Agreement, which obligations include a Loan in the original principal amount of Ten Million Dollars ($10,000,000), all Swap Obligations (as defined in the Loan Agreement), and all fees and expenses and reasonable attorneys’ fees required under the Loan Agreement, and all extensions, renewals, modifications, amendments and replacements thereof;

b.      The payment of all other sums which may be advanced by or otherwise be due to Trustee or Beneficiary under any provision of this Deed of Trust or under any other instrument or document referred to in section (c), below, with interest thereon at the rate provided herein or therein;

c.      The performance of each and every one of the covenants and agreements of Grantor contained (i) in this Deed of Trust; (ii) in the Loan Agreement; and (iii) in the other Loan Documents.

d.      The obligations and indebtedness secured by this Deed of Trust arising under various other deeds of trust and security instruments executed in favor of Beneficiary by Grantor and that secure Obligations under the Loan Documents.

All of the obligations and indebtedness set forth in sections (a), (b), (c), and (d) above secured by this Deed of Trust are hereinafter collectively known as the “ Obligations .”

TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges hereby conveyed or intended to be, unto Trustee, its successors and assigns for the uses and purposes herein set forth, until the Obligations are fully paid and performed in accordance with the provisions set forth herein, in the Loan Agreement, and in the Loan Documents.

ARTICLE I     

REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTOR

To protect the security of this Deed of Trust, and to effect the foregoing assignment of rents, Grantor represents, warrants, covenants and agrees as follows:

1.1.      Performance of Obligations Secured .

Grantor shall promptly pay when due the principal of and interest on the indebtedness constituting the Obligations, the principal of and interest on any advance of funds by Beneficiary for the benefit of Grantor and any loan fees provided for in the Obligations, and shall further perform fully and in a timely manner all Obligations.

1.2.      Insurance .

A.      Grantor shall keep the Mortgaged Property insured, with loss payable to Beneficiary, as its interests may appear, under policies of All Risk Replacement Cost Insurance with Agreed Amount Endorsement, flood insurance (if the Mortgaged Property is in an area which is considered a flood risk area by the U.S. Department of Housing and Urban Development and if such insurance is available pursuant to the provisions of the Flood Disaster Protection Act of 1973 or other applicable legislation), comprehensive general public liability insurance, builder’s risk insurance (to the extent applicable during any construction of any improvements on the Mortgaged Property), and other appropriate insurance covering such other hazards (excluding earthquake insurance) as Beneficiary may reasonably require from time to time, all in amounts, form, and substance reasonably satisfactory to Beneficiary, and with reputable and financially sound independent insurers having an A.M. Best rating of “A-” or better (or such other rating as Beneficiary may reasonably approve in its discretion). All losses under said insurance, except public liability losses, shall be payable to Beneficiary and shall be applied in the manner provided in Section 1.3 hereof. All insurance policies shall be endorsed, at Grantor’s expense and in form and substance acceptable to Beneficiary, to name Beneficiary as an additional insured or lender loss payee thereunder, as its interest may appear, with loss payable to Beneficiary, without contribution.

B.      All hazard insurance policies shall be endorsed with a standard noncontributory mortgagee clause in favor of and in form reasonably acceptable to Beneficiary, and may be canceled or modified only upon not less than thirty (30) days’ prior written notice to Beneficiary.

C.      All of the above-mentioned insurance policies or certificates of such insurance reasonably satisfactory to Beneficiary, together with receipts for the payment of premiums

thereon, shall be delivered to and held by Beneficiary, which delivery shall constitute assignment to Beneficiary of all return premiums to be held as additional security hereunder.

D.      In the event of the foreclosure of this Deed of Trust or other transfer of the title to the Mortgaged Property in extinguishment, in whole or in part, of the Obligations, to the extent assignable, all right, title and interest of Grantor in and to any insurance policy, or premiums or payments in satisfaction of claims or any other rights thereunder then in force, shall pass to the purchaser or grantee notwithstanding the amount of any bid at such foreclosure sale.

E.      All renewal and replacement policies or certificates of insurance regarding the same shall be delivered to Beneficiary at least ten (10) days before the expiration of the expiring policies. Beneficiary shall not by the fact of approving, disapproving, accepting, preventing, obtaining or failing to obtain any insurance, incur any liability for, or with respect to, the amount of insurance carried, the form or legal sufficiency of insurance contracts, solvency of insurance companies, or payment or defense of lawsuits.

1.3.      Condemnation and Insurance Proceeds .

A.      The proceeds of any award or claim for damages, direct or consequential, in connection with any condemnation or other taking of or damage or injury to the Mortgaged Property, or any part thereof, or for conveyance in lieu of condemnation, are hereby assigned to and shall be paid to Beneficiary. In addition, all causes of action, whether accrued before or after the date of this Deed of Trust, of all types for damages or injury to the Mortgaged Property or any part thereof, or in connection with any transaction financed by funds loaned to Grantor by Beneficiary and secured hereby, or in connection with or affecting the Mortgaged Property or any part thereof, including causes of action arising in tort or contract and causes of action for fraud or concealment of a material fact, are hereby assigned to Beneficiary as additional security and the proceeds shall be paid to Beneficiary.

B.      Grantor, promptly upon obtaining knowledge of the institution of any proceedings relating to condemnation or other taking of or damage or injury (exceeding $250,000 with respect to damage or injury, provided no Event of Default is then in existence) to the Mortgaged Property or any portion thereof, or knowledge of any casualty damage (exceeding $250,000, provided no Event of Default is then in existence) to the Mortgaged Property, will promptly notify Beneficiary in writing. Beneficiary may participate in any such proceedings and may join Grantor in adjusting any loss covered by insurance.

C.      All compensation, awards, proceeds, damages, claims, insurance recoveries, rights of action and payments which Grantor may receive or to which Grantor may become entitled with respect to the Mortgaged Property or any part thereof exceeding $250,000 (or, if an Event of Default is then in existence, all such compensation, awards, proceeds, damages, insurance recoveries, rights of action and payments) with respect to any one occurrence giving rise thereto shall be paid over to Beneficiary and shall be applied first toward reimbursement of all costs and expenses of Beneficiary in connection with recovery of the same, and then shall be applied, in the sole and absolute discretion of Beneficiary and without regard to the adequacy of its security hereunder, but subject to the provisions of subsection (D) below with respect to any condemnation proceeds or insurance recoveries resulting from condemnation, damage or injury to the Mortgaged Property, to the payment or prepayment of the Obligations in such order as Beneficiary may

determine, or to the reimbursement of Grantor for expenses incurred by it in the repair or restoration of the Mortgaged Property. Any application of such amounts or any portion thereof to the Obligations or any release of funds by Beneficiary to Grantor shall not be construed to cure or waive any default or notice of default hereunder or invalidate any act done pursuant to any such default or notice.

D.      In the event of any condemnation or other taking or damage or injury to the Mortgaged Property, if Grantor shall seek to apply any such condemnation proceeds or insurance recoveries to the rebuilding and restoration of the Mortgaged Property so damaged, then Beneficiary shall make such condemnation proceeds and insurance recoveries available, providing that Grantor shall have fulfilled all of the following conditions:

(i)      no Event of Default (as defined in Article II below) shall have occurred under this Deed of Trust;

(ii)      Grantor shall not be in material default under any of the terms, covenants and conditions of any of the leases, licenses or other occupancy agreements, to which Grantor is a party and which affects the Mortgaged Property;

(iii)      Beneficiary shall be satisfied that such condemnation proceeds or insurance recoveries shall in addition to any cash Grantor can use without disrupting its business operations, be sufficient to fully restore and rebuild the Mortgaged Property free and clear of all liens except the lien of this Deed of Trust (and any other liens expressly approved by the terms of this Deed of Trust or by Beneficiary), or, in the event that such condemnation proceeds or insurance recoveries are in Beneficiary’s judgment insufficient to restore and rebuild the Mortgaged Property, then,

(a)      in the case of damage or injury to the Mortgaged Property, Grantor shall deposit promptly with Beneficiary funds which, together with the insurance recoveries, shall be sufficient in Beneficiary’s reasonable judgment to restore and rebuild the Mortgaged Property, and

(b)      in the case of a partial condemnation or other taking, Grantor shall deposit promptly with Beneficiary funds which, together with the condemnation proceeds shall be sufficient in Beneficiary’s judgment to restore what remains of the Mortgaged Property to an economically viable property;

(iv)      construction and completion of restoration and rebuilding of the Mortgaged Property shall be completed in accordance with plans and specifications and drawings submitted to and approved by Beneficiary, which approval shall not be unreasonably withheld, conditioned or delayed. The plans, specifications and drawings shall provide for the reconstruction of the Mortgaged Property to its original condition (unless otherwise approved by Beneficiary, which approval shall not be unreasonably withheld, conditioned or delayed). The plans shall not be modified in any material respect without Beneficiary’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed;

(v)      Beneficiary shall also have approved all prime contractors and subcontractors, and the general contract or contracts Grantor proposes to enter into with respect to the restoration and rebuilding, which approval Beneficiary shall not unreasonably withhold or delay;

(vi)      any and all monies which are made available for restoration and rebuilding hereunder shall be held in an interest-bearing account (which interest shall become a part of such fund) and disbursed through Beneficiary, Trustee or a title insurance or trust company satisfactory to Beneficiary, in accordance with standard construction lending practice, including, if requested by Beneficiary, monthly lien waivers and title insurance date-downs, and the provision of payment and performance bonds by Grantor, or in any other manner approved by Beneficiary in Beneficiary’s reasonable discretion; and

(vii)      Beneficiary shall be satisfied that the quality of the materials and workmanship of the repair or reconstruction of the Mortgaged Property will be at least substantially equal to the quality of the materials and workmanship of the Mortgaged Property prior to such damage.

The excess of the above condemnation proceeds or insurance recoveries above the amount necessary to complete such restoration or rebuilding, if any, shall be disbursed to Grantor if Beneficiary determines, in its reasonable discretion, that its security under this Deed of Trust will not be impaired. Otherwise, such excess shall be applied as a credit upon the Obligations secured hereby.

1.4.      Taxes, Liens and Other Items .

Except as may be provided in the Loan Agreement:

A.      Grantor shall pay all taxes (including all real and personal property taxes and assessments), bonds, assessments, fees, liens, charges, fines, impositions and any and all other items which are attributable to or affect the Mortgaged Property and which may attain a priority over this Deed of Trust by making payment prior to delinquency directly to the payee thereof, unless Grantor is contesting the same and has posted reserves therefore in accordance with GAAP; and

B.      Grantor shall promptly discharge any lien which has or may attain priority over this Deed of Trust.

1.5.      Leases .

A.      Grantor represents and warrants that leases, licenses, contracts for hire or rental agreements pertaining to the use or occupancy of any of the Mortgaged Property entered into at any time by Grantor or any predecessor to Grantor, as landlord or lessor, and any other party, as tenant or lessee (“ Tenant Leases ”), if any, (i) are in full force and effect, are enforceable in accordance with their respective terms, and are not in default; (ii) have not been paid by any lessee more than one (1) month in advance; and (iii) have not been transferred or assigned by the lessor.

B.      Grantor shall (i) give written notice to Beneficiary of the entering into any new Tenant Lease, including a copy thereof; (ii) at all times fully perform the obligations of the lessor under all Tenant Leases; and (iii) whenever requested by Beneficiary, furnish to Beneficiary a certificate of Grantor setting forth the names of all lessees under any Tenant Leases, the terms of their respective Tenant Leases, the area occupied by such lessees, and the rents payable thereunder.

1.6.      Rents .

A.      All of the rents, royalties, issues, profits, revenue, income and other benefits of the Mortgaged Property, arising from the use or enjoyment of all or any portion thereof or services provided in connection therewith, or from any Tenant Lease or agreement pertaining thereto, whether now due, past due, or to become due, and including all prepaid rents and security deposits (the “ Rents ”), are hereby absolutely, presently and unconditionally assigned, transferred, conveyed and set over to Beneficiary to be applied by Beneficiary in payment of the principal and interest and all other sums payable on the Obligations, and of all other sums payable under this Deed of Trust.

B.      Grantor agrees and stipulates that the absolute, present, and unconditional assignment of the Rents herein to Beneficiary perfects Beneficiary’s interest in the Rents and that no further act by Beneficiary is needed to perfect Beneficiary’s interest in the Rents.

C.      Beneficiary shall not, for any purpose or under any circumstance, be deemed to be a mortgagee-in-possession or otherwise responsible or liable in any manner with respect to the Mortgaged Property or the use, occupancy, enjoyment or operation of all or any portion thereof, unless and until Beneficiary, in person or by agent, assumes actual possession thereof.

D.      Without the prior written consent of Beneficiary, Grantor shall not take action that might impair Beneficiary’s rights and interest with respect to the Rents. A default by Grantor in the performance of any covenant in any Tenant Lease assigned to Beneficiary, by reason of which default the tenant has the right to cancel such Tenant Lease or to claim any diminution of or offset against future rents, shall, at the option of Beneficiary, constitute an Event of Default hereunder.

E.      Any Tenant Leases entered into by Grantor after the Closing Date shall contain a provision satisfactory to Beneficiary that in the event of the exercise of the private power of sale or a judicial foreclosure hereunder, such Tenant Lease, at the sole and exclusive option of the purchaser at such sale, shall not be terminated and the tenant thereunder shall attorn to such purchaser and, if requested to do so, shall enter into a new Tenant Lease for the balance of the term of such Tenant Lease then remaining upon the same terms and conditions.

1.7.      Uniform Commercial Code, Security Agreement and Fixture Filing .

A.      This Deed of Trust is intended to be a security agreement pursuant to the Washington Commercial Code for any items of personal property specified above as part of the Mortgaged Property which, under applicable law, may be subject to a security interest pursuant to the Washington Commercial Code and which are not herein effectively made part of the real property, and Grantor hereby grants Beneficiary a security interest in said property, and in all additions thereto, substitutions therefor and proceeds thereof, for the purpose of securing all of the Obligations.

B.      Grantor agrees that Beneficiary may file any appropriate document in the appropriate index as a financing statement for any of the items specified above as part of the Mortgaged Property. Grantor agrees to execute and deliver financing and continuation statements covering said property from time to time and in such form as Beneficiary may require to perfect and continue the perfection of Beneficiary’s lien or security interest with respect to said property. Grantor shall pay all costs of filing such statements and renewals and releases thereof and shall pay

all reasonable costs and expenses of any record searches for financing statements Beneficiary may reasonably require.

C.      Without the prior written consent of Beneficiary, except as otherwise provided in the Loan Agreement, Grantor shall not create or suffer to be created any other security interest in said property, including replacements and additions thereto.

D.      Upon the occurrence of an Event of Default hereunder and during the continuation thereof, Beneficiary shall have the rights and remedies of a secured party under the Washington Commercial Code as well as all other rights and remedies available at law or in equity.

E.      In exercising any of said remedies, Beneficiary may proceed against the items of Real Property and any items of personal property specified above as part of the Mortgaged Property separately or together and in any order whatsoever, without in any way affecting the availability of Beneficiary’s rights or remedies under the Washington Commercial Code or of the other remedies provided in this Deed of Trust, in the Loan Agreement, or by law.

F.      Grantor warrants and agrees that on the date hereof and except as disclosed in the Loan Agreement there is no financing statement covering any such property, or any part thereof, on file in any public office and agrees that all or such portion of any such property now or hereafter subject to this Deed of Trust is, and shall be kept (except with the prior written consent of Beneficiary, or as otherwise permitted in the Loan Agreement) free from any other lien, security interest or encumbrance.

G.      This Deed of Trust constitutes a financing statement filed as a fixture filing in the Official Records of the County Recorder of the county in which the Mortgaged Property is located with respect to any and all fixtures included within the term Mortgaged Property as used herein and with respect to any goods or other personal property that may now be or hereafter become such fixtures.

1.8.      Further Encumbrances; Transfers of Property; Change of Ownership; Attorneys’ Fees .

A.      Except as expressly provided in the Loan Agreement and except as expressly provided in Section 1.8(B) below, without the prior written consent of Beneficiary being first had and obtained, Grantor shall not execute or deliver any pledge, security agreement, mortgage, deed of trust or other instrument of hypothecation, covering all or any portion of the Mortgaged Property or any interest therein, grant a security interest in the Mortgaged Property or permit the creation of a voluntary or contractual lien or other encumbrance in the Mortgaged Property.

B.      Notwithstanding Section 1.8(A) above, Grantor may from time to time replace items of personal property and fixtures owned by Grantor and constituting a part of the Mortgaged Property, provided that:

(i)      the replacements for such items of personal property or fixtures are of substantially equivalent value and quality and such replacement does not violate the terms of the Loan Agreement; and

(ii)      Grantor has good title to such replacement property which, except for the Permitted Liens as defined in the Loan Documents, is free and clear of any and all liens, encumbrances, security interests, ownership interests, claims of title (contingent or otherwise), or charges of any kind, or the rights of any conditional sellers, vendors or any other third parties in or to such replacement property have been expressly subordinated at no cost to Beneficiary to the lien of this Deed of Trust in a manner satisfactory to Beneficiary.

C.      Grantor acknowledges that ownership by Grantor of the Real Property in fee simple estate was a material inducement to Beneficiary in providing the Obligations secured hereby, and that Beneficiary, in providing the Obligations secured hereby, are relying upon the creditworthiness, business reputation, and knowledge of Grantor in operating and managing properties similar to the Mortgaged Property. Accordingly, without the prior written consent of Beneficiary being first had and obtained, which consent can be granted or denied in Beneficiary’s sole discretion, and except as provided in the Loan Agreement:

Grantor shall not, voluntarily or involuntarily, by operation of law or otherwise, sell, convey, transfer (including any foreclosure sale or deed in lieu of foreclosure under any mortgage or deed of trust, the lien of which is junior to the lien of this Deed of Trust, whether or not Beneficiary has approved such mortgage or deed of trust) or dispose of all or any portion of the Real Property or any interest therein or any Water Rights or any interest therein. For purposes of this Section 1.8(C) , a transfer or disposition of the Real Property or Water Rights or any interest therein shall include the sale, execution of a contract to sell or option to purchase, pledge assignment, conditional sale, execution of a title retention agreement, lease for space in the improvements located on the Real Property containing an option to purchase, transfer (including a transfer as a result of or in lieu of condemnation), or other alienation of all or any portion of the Real Property or any interest therein (collectively “ Transfer ”). In the event of a breach of any of the foregoing covenants, Beneficiary may at its option and without limiting any other right or remedy available to Beneficiary at law, in equity or by agreement with Grantor, accelerate the maturity of the Obligations secured hereby and require the payment of the then existing outstanding principal balance and all other sums secured by this Deed of Trust. As used herein, the term “ Water Rights ” means the ground water on, under, pumped from or otherwise available to the Real Property or any other water rights appurtenant to the Real Property, whether as a result of groundwater rights, contractual rights, or otherwise and whether riparian, appropriative, or otherwise; the right to remove or extract any such ground water including any permits, rights or licenses granted by any governmental authority and any rights granted or created by any easement, covenant, agreement or contract with any person; and any rights to which the Real Property is entitled with respect to surface water, whether such rights are appropriative, riparian, prescriptive or otherwise and whether or not pursuant to permit or other governmental authorization; any water right, water allocation for water not yet delivered, distribution right, delivery right, water storage right, or other water-related entitlement appurtenant to or otherwise applicable to the Real Property by virtue of the Real Property being situated within the boundaries of any governmental water district or within the boundaries of any private water company, mutual water company, or other non-governmental entity; and any shares, or any rights under such shares, of any private water company, mutual water company, or other non-governmental entity pursuant to which Grantor or the Real Property may receive water, water rights and water stock relating to the Real Property. Notwithstanding the foregoing, the merger of the leasehold interest in the portion of the Real Property constituting a leasehold interest upon the acquisition by

Grantor of the fee interest in such portion of the Real Property shall not constitute a “Transfer” hereunder.

D.      Grantor shall reimburse Beneficiary for all costs and expenses, including reasonable attorneys’ fees and expenses, incurred by Beneficiary in connection with the review by Beneficiary of Grantor’s request for Beneficiary’s consent to any Transfer.

1.9.      Preservation and Maintenance of Mortgaged Property .

A.      Grantor shall keep the Mortgaged Property and every part thereof in good condition and repair ordinary wear and tear excepted, and shall not permit or commit any waste material, impairment, or deterioration outside of the ordinary course of business of the Mortgaged Property, nor commit, suffer or permit any act upon or use of the Mortgaged Property in material violation of law or applicable order of any governmental authority, whether now existing or hereafter enacted and whether foreseen or unforeseen, or in material violation of any covenants, conditions or restrictions affecting the Mortgaged Property, or bring or keep any article upon any of the Real Property or cause or permit any condition to exist thereon which would be prohibited by or could invalidate any insurance coverage maintained, or required hereunder to be maintained, by Grantor on or with respect to any part of the Mortgaged Property, and Grantor further shall do all other acts which from the character or use of the Mortgaged Property may be reasonably necessary to protect the security hereof, the specific enumerations herein not excluding the general. Grantor shall underpin and support, when necessary under applicable laws, any building, structure or other improvement situated on the Real Property. Grantor shall complete or restore and repair promptly and in a good workmanlike manner any building, structure or improvement which may be constructed, damaged or destroyed thereon and pay when due all claims for labor performed and materials furnished therefor, whether or not insurance or other proceeds are available to cover in whole or in part the costs of any such completion, restoration or repair; provided, however, except as permitted under the terms of the Loan Agreement, Grantor shall not demolish, remove, expand or extend any building, structure or improvement on the Real Property, nor construct, add to or materially alter any such building, structure or improvement, nor consent to or permit any of the foregoing to be done, without in each case obtaining the prior written consent of Beneficiary thereto, which consent shall not be unreasonably withheld, conditioned or delayed. Grantor’s expenditures of Rents of the Mortgaged Property for the foregoing purposes and for purposes of satisfying the other obligations described in this Deed of Trust, shall be limited as provided in the Loan Agreement.

B.      Grantor shall obtain and at all times shall keep in full force and effect and comply with all governmental permits and requirements as may be necessary under applicable law, whether now existing or hereafter created, to lawfully construct, own and operate the Mortgaged Property, including, without limiting the generality of the foregoing, all applicable environmental and zoning laws, ordinances and regulations and all certificates of occupancy or equivalent permits required for such portion of the Mortgaged Property and its occupancy.

C.      Except as disclosed to Beneficiary in writing in accordance with the Loan Agreement and in any environmental report delivered by Grantor to Beneficiary in connection with the closing of the indebtedness secured hereby, Grantor represents and warrants that Grantor has not, and, to the best of Grantor’s knowledge, no predecessor in title nor any third person at any time occupying or present on the Mortgaged Property has, at any time prior to or during the existence of the Obligations, used, generated, disposed of, discharged, stored, released or threatened the release

of any Hazardous Substances (as hereinafter defined) on, from, under or affecting the Mortgaged Property in any manner that materially violates any federal, state or local environmental, health or safety laws, ordinances, regulations, or rules of common law regulating Hazardous Substances, including those governing the use, refinement, handling, treatment, removal, storage, production, manufacture, transportation or disposal of Hazardous Substances as such laws, ordinances, regulations, and rules may be in effect from time to time and be applicable to the Mortgaged Property (collectively, the “ Environmental Laws ”).

D.      Grantor further covenants that Grantor will not, nor shall Grantor permit any tenants or other occupants of the Mortgaged Property to, at any time in the future, use, generate, dispose of, discharge, store, release or threaten the release of any Hazardous Substances on, from, under or affecting the Mortgaged Property in any manner that materially violates any Environmental Law.

E.      “ Hazardous Substances ” means and includes any flammable explosives, radioactive materials or hazardous, toxic or dangerous wastes, substances or related materials or any other chemicals, materials or substances, exposure to which is prohibited, limited or regulated by any federal, state, county, regional or local authority, including asbestos, PCBs, petroleum products and by-products, substances defined or listed as “hazardous substances,” “hazardous wastes” or “toxic substances” or similarly identified in, pursuant to, or for purposes of, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. Section 9601, et seq.); the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.); the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); and any so-called “Superfund” or “Superlien” law; or any other federal, state or local statute, law, ordinance, code, rule, or regulation regulating, relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material; or any substances or mixture regulated under the Toxic Substance Control Act of 1976, as now or hereafter amended (15 U.S.C. Section 2601 et seq.); and any “toxic pollutant” under the Clean Water Act, as now or hereafter amended (33 U.S.C. Section 1251 et seq.); and any hazardous air pollutant under the Clean Air Act, as now or hereafter amended (42 U.S.C. Section 7401 et seq.).

F.      Grantor hereby does and shall defend and indemnify Beneficiary and hold Beneficiary harmless from and against any and all Claims except for Claims arising out of Beneficiary’s gross negligence or willful misconduct. As used herein, “ Claims ” mean any and all actual out-of-pocket cost (including reasonable attorneys’ fees and expenses, and also including fees and expenses of both outside and staff counsel), expense or loss arising from any and all claims, losses, liabilities, damages, fines, penalties, charges, administrative and judicial proceedings and orders, injunctive relief, judgments, remedial action requirements and enforcement actions of any kind, injury to person, property or natural resources, and arising, directly or indirectly, in whole or in part, out of or attributable to the presence, use, generation, disposal, discharge, storage, release or threatened release of any Hazardous Substances at, about, on, from, under, within or affecting the Mortgaged Property, or elsewhere in connection with the transportation of Hazardous Substances to or from the Mortgaged Property, whether foreseeable or unforeseeable, regardless of when such presence is discovered and regardless of whether by Grantor, any employees, agents, contractors or subcontractors of Grantor or any third person.

G.      Without limiting the generality of the foregoing and for purposes of clarification only, Claims include reasonable and actual out-of-pocket costs incurred by Beneficiary in connection with (i) determining whether the Mortgaged Property is in compliance with all applicable Environmental Laws, if the investigation thereof is based on the Beneficiary’s reasonable suspicion of noncompliance, (ii) any removal, remediation of any kind and disposal of any Hazardous Substances present at, on, about, under or within the Mortgaged Property to the extent required by applicable Environmental Laws in effect at the time of such removal, remediation or disposal, and (iii) any repair of any damage to the Mortgaged Property or any other property caused by any such removal, remediation or disposal. The rights of Beneficiary hereunder shall not be limited by any investigation or the scope of any investigation undertaken by or on behalf of Beneficiary in connection with the Mortgaged Property prior to the date hereof. This indemnity shall not be limited by any representation, warranty or indemnity of Grantor made in connection with the Obligations, irrespective of whether Grantor has knowledge as of the date of this Deed of Trust or during the term of this Deed of Trust of the matters to which such representation, warranty or indemnity relate; provided, however, this indemnity shall not apply to any Claims that are attributable to the presence, use, generation, disposal, discharge, storage, release or threatened release of any Hazardous Substance affecting the Mortgaged Property that first occurs after the date of the foreclosure sale of this Deed of Trust or other acceptable transfer of the Mortgaged Property to Beneficiary or its nominee or a transfer of the Mortgaged Property that is first approved in writing by Beneficiary.

H.      Grantor shall give prompt, written notice to Beneficiary of:

(a)      any proceeding or inquiry by any governmental authority of which Grantor has knowledge, with respect to the presence of any Hazardous Substances on the Mortgaged Property or the migration thereof from or to other property;

(b)      all claims made or threatened by any third party against Grantor or the Mortgaged Property, of which Grantor has knowledge, relating to any loss or injury resulting from any Hazardous Substances; and

(c)      Grantor’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Mortgaged Property that could reasonably be expected cause the Mortgaged Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of the Mortgaged Property under any Environmental Laws.

I.      At any time after the occurrence and during the continuation of an Event of Default, Beneficiary shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Environmental Laws and have its reasonable attorneys’ fees and expenses in connection therewith, including fees and expenses of both outside and staff counsel, paid by Grantor.

J.      In the event that any investigation, site monitoring, containment, cleanup, removal, restoration or other remedial work of any kind or nature (the “ Remedial Work ”) is required under any applicable local, state or federal law or regulation, any judicial order, or by any governmental entity because of, or in connection with, the current or future presence, suspected presence, release or suspected release of Hazardous Substances in or into the air, soil, groundwater, surface water or soil vapor at, on, about, under or within the Mortgaged Property (or any portion

thereof), Grantor shall within thirty (30) days after receipt of information that such Remedial Work is required (or such shorter or longer period of time as may be required under applicable law, regulation, order or agreement), take reasonable steps to commence to perform, or cause to be commenced, and thereafter diligently prosecute to completion, all such Remedial Work.

K.      All costs and expenses of such Remedial Work shall be paid by Grantor, including the charges of such contractor(s) and/or the consulting engineer, and Beneficiary’s reasonable attorneys’ fees and costs, including reasonable fees and costs of both outside and staff counsel incurred in connection with monitoring or review of such Remedial Work. In the event Grantor shall fail to timely commence, or cause to be commenced, or fail to diligently prosecute to completion, such Remedial Work as required in Section 1.9(J) herein, Beneficiary may, but shall not be required to, cause such Remedial Work to be performed and all costs and expenses thereof, or incurred in connection therewith, subject to the provisions of Section 3.7 herein shall become part of the Obligations.

L.      Grantor shall not drill or extract or enter into any new 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 Mortgaged Property or any part thereof without first obtaining Beneficiary’s written consent.

M.      Unless required by applicable law or unless Beneficiary has otherwise first agreed in writing, which agreements shall not be unreasonably withheld or delayed, Grantor shall not make or allow any material changes to be made in the nature of the occupancy or use of the Mortgaged Property or any part thereof for which the Mortgaged Property or such part was intended at the time this Deed of Trust was delivered. Grantor shall not initiate or acquiesce in any change in any zoning or other land use classification now or hereafter in effect and affecting the Mortgaged Property or any part thereof without in each case obtaining Beneficiary’s prior written consent thereto, which consent shall not be unreasonably withheld or delayed.

1.10.      Financial Statements; Offset Certificates .

A.      Grantor, without expense to Beneficiary, shall furnish financial statements as described in the Loan Agreement.

B.      Grantor, within ten (10) days after receiving a request from Beneficiary therefor, shall furnish a written statement certified by a Responsible Officer of all amounts Grantor believes are due on the Obligations, whether for principal or interest on the Notes or otherwise, and stating whether any offsets or defenses exist against the Obligations and covering such other matters with respect to any such Obligations as Beneficiary may reasonably require.

1.11.      Trustee’s Costs and Expenses; Taxes and Water Payments; Husbandry; Subordination to Crop Financing .

Grantor shall pay all costs, fees and expenses of Trustee, its agents and counsel in connection with the performance of its duties hereunder, including the cost of any trustee’s sale guaranty or other title insurance coverage ordered in connection with any foreclosure proceedings hereunder. Grantor shall pay all Taxes constituting a lien upon the Real Property as and when such Taxes become due and Grantor shall not permit any real estate taxes or assessments to become

delinquent. Grantor shall pay on or before the due date all assessments upon water company stock and all charges for water delivered to, appurtenant to, or used in connection with the Real Property. Grantor shall at all times work, prune, cultivate, fertilize, irrigate, spray, dust, harvest, care for and maintain in a husbandlike manner according the most current industry standards any groves, orchards, vineyards, or crops growing on the Real Property. If the Real Property is improved with any orchards, vineyards, or permanent plantings, Grantor shall not allow more than five percent of such orchards, vineyards, or permanent plantings to be removed, uprooted, damaged, or otherwise removed from production. If Grantor grants a security interest in crops growing on the Real Property to a person providing financing for such crops, the security interest of Beneficiary in such crops shall be subordinate to the security interest of such person.

1.12.      Protection of Security; Costs and Expenses .

A.      Grantor shall appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of the Beneficiary or Trustee, and shall pay all costs and expenses, including cost of evidence of title and reasonable attorneys’ fees and expenses, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust or to enforce or establish any other rights or remedies of Beneficiary hereunder.

B.      If Grantor fails to perform any of the covenants or agreements contained in this Deed of Trust, or if any action or proceeding is commenced which affects Beneficiary’s interest in the Mortgaged Property or any part thereof, including eminent domain, code enforcement, or proceedings of any nature whatsoever under any federal or state law, whether now existing or hereafter enacted or amended, relating to bankruptcy, insolvency, arrangement, reorganization or other form of debtor relief, or to a decedent, then Beneficiary or Trustee may, but without obligation to do so upon reasonable notice to Grantor (or without notice in a case of emergency, or where the giving of notice is impracticable or where the Tenant or Grantor has abandoned the Mortgaged Property) and without releasing Grantor from any obligation hereunder, make such appearances, disburse such sums and take such action as Beneficiary or Trustee deems reasonably necessary or appropriate to protect Beneficiary’s interest, including disbursement of reasonable attorneys’ fees, entry upon the Mortgaged Property to make repairs or take other action to protect the security hereof, and payment, purchase, contest or compromise of any encumbrance, charge or lien which in the judgment of either Beneficiary or Trustee appears to be prior or superior hereto.

C.      Grantor further agrees to pay all reasonable expenses of Beneficiary (including fees and disbursements of counsel) incident to the protection of the rights of Beneficiary hereunder, or to enforcement or collection of payment of the Obligations, whether by judicial or non-judicial proceedings, or in connection with any bankruptcy, insolvency, arrangement, reorganization or other debtor relief proceeding of Grantor, or otherwise, including costs of collection of judgment and costs of appeal.

D.      Any amounts disbursed by Beneficiary or Trustee pursuant to this Section 1.12 shall be additional indebtedness of Grantor secured by this Deed of Trust and each of the Loan Documents as of the date of disbursement and shall bear interest at the variable interest rate set forth in the Loan Agreement. All such amounts shall be payable by Grantor upon written demand. Nothing contained in this Section 1.12 shall be construed to require Beneficiary or Trustee to incur any expense, make any appearance, or take any other action.

1.13.      Warranty of Title .

Grantor hereby represents and warrants to Beneficiary that, except for the Permitted Liens, Grantor is well seized of an indefeasible estate in fee simple or leasehold, as applicable, in the Mortgaged Property hereby encumbered and has good title to all existing personal property hereby encumbered and has good right, full power and lawful authority to convey and encumber the same in the manner and form aforesaid; that the same is free and clear of all liens, charges and encumbrances whatsoever, including, as to the personal property and fixtures, security agreements, conditional sales contracts and anything of a similar nature, excepting only the Permitted Liens, and that Grantor shall and will warrant and forever defend the title to the Mortgaged Property against the claims of all persons whomsoever.

1.14.      Subordinate Mortgage .

Grantor (i) represents as a special inducement to Beneficiary to make the loan secured hereby that as of the date hereof the Mortgaged Property is not encumbered for purposes of securing debt junior to this Deed of Trust other than as specifically permitted by the Loan Agreement, and covenants that there shall be none as of the date when this Deed of Trust becomes of record, and (ii) agrees that Grantor will not, without the prior written consent of Beneficiary being first had and obtained, which consent may be withheld by Beneficiary in its sole and absolute discretion and without regard to the adequacy of its security hereunder, execute or deliver any pledge, security agreement, mortgage or deed of trust covering all or any portion of the Mortgaged Property or any interest therein.

1.15.      Collection of Rents, Issues and Profits .

A.      Notwithstanding Section 1.6 herein, Beneficiary confers upon Grantor a license to collect and retain the Rents as they become due and payable; provided, however, that Beneficiary may at any time after the occurrence and during the continuation of an Event of Default (as hereinafter defined) and without regard to the value of the security, in Beneficiary’s sole discretion and without notice to Grantor, revoke said license and may collect and retain any or all of the Rents, without taking possession of all or any part of the Mortgaged Property.

B.      Upon such revocation of Grantor’s license, Grantor shall immediately turn over to Beneficiary all of the Rents.

C.      The right of Beneficiary to collect Rents as herein provided shall not be deemed to grant to Beneficiary or Trustee the right to possession of the Property, except as expressly herein provided, or to impose upon Beneficiary or Trustee the duty to produce any Rents or maintain the Property in whole or in part.

D.      Any Rents collected by Beneficiary may be applied by Beneficiary, in its sole discretion, against any of the Obligations whether now existing or hereafter arising. Collection of any Rents by Beneficiary shall not waive any other right or remedy of Beneficiary hereunder or any notice of default given hereunder or invalidate any acts done pursuant to notice.

ARTICLE II     

EVENTS OF DEFAULT

Each of the following shall constitute an event of default (“ Event of Default ”) hereunder:

2.1.      The occurrence of any Event of Default under and as defined in any of the Loan Documents (giving effect to any grace period set forth therein).

2.2.      Failure to make any payment of principal or interest, fees, expenses or any other amount owing in respect of the Obligations or failure to make any other payment of money required on the part of Grantor under this Deed of Trust and the Loan Documents when and as the same shall become due and payable (giving effect to any grace period set forth in the Loan Agreement), whether at maturity or by acceleration or as part of any prepayment or otherwise.

2.3.      Failure to perform any of the covenants or agreements of Grantor contained (a) herein, or (b) in the Loan Agreement, or (c) in any of the Loan Documents, which covenant or agreement does not involve the payment of money subject, however, in the case of any of the Loan Documents, to the expiration of the period of time, if any, permitted for cure of such failure thereunder.

2.4.      Any representation or warranty made herein, in any of the Loan Documents, in any written statement pursuant thereto or hereto, or in any other report, financial statement, certificate or schedule made or delivered to Beneficiary by Borrower proves to be untrue or incorrect in any material respect, as of the date when made.

2.5.      Any other event which constitutes an Event of Default (giving effect to any applicable grace period) by Grantor under any of the Loan Documents, or gives Beneficiary the right to accelerate the maturity of the Obligations, or any part thereof.

ARTICLE III     

REMEDIES

Upon the occurrence of any Event of Default and during the continuation thereof, Trustee and Beneficiary shall have, in their sole discretion, any and all of the following rights and remedies without regard to the adequacy of any security for the Obligations hereby secured:

3.1.      Acceleration .

A.      Beneficiary may declare the entire principal amount of the Notes then outstanding (if not then due and payable) and accrued and unpaid interest thereon, and all other sums or payments required thereunder, to be due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Grantor.

B.      Upon such acceleration and notwithstanding the stated maturity of the Obligations, the principal amount of each Obligation, the accrued and unpaid interest thereon and all other sums or payments required thereunder shall thereupon become and be immediately due

and payable. Any acceleration may be rescinded and annulled by Beneficiary. No such rescission and annulment shall affect any subsequent Event of Default or acceleration or impair any right of Beneficiary with respect to any subsequent Event of Default or acceleration.

3.2.      Entry .

A.      Irrespective of whether Beneficiary exercises the option to accelerate provided in Section 3.1 above, Beneficiary, in person or by agent, with or without bringing any action or proceeding, may enter upon, take possession of, manage and operate the Mortgaged Property or any part thereof and do all things necessary or appropriate in Beneficiary’s sole discretion in connection therewith, including making and enforcing, and if the same be subject to modification or cancellation, modifying or canceling Tenant Leases upon such terms or conditions as Beneficiary deems proper, obtaining and evicting tenants, and fixing or modifying rents, contracting for and making repairs and alterations, and doing any and all other acts which Beneficiary deems proper to protect the security hereof; and either with or without so taking possession, in its own name or in the name of Grantor, sue for or otherwise collect and receive the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys’ fees and expenses, upon any of the Obligations, and in such order as Beneficiary may determine.

B.      Upon request of Beneficiary, Grantor shall assemble and make available to Beneficiary at the site of the Real Property covered hereby any of the Mortgaged Property which has been removed therefrom to the extent such assemblage and return is commercially reasonable.

C.      The entering upon and taking possession of the Mortgaged Property, or any part thereof, the collection of any Rents and the application thereof as aforesaid shall not cure or waive any default theretofore or thereafter occurring or affect any notice of default hereunder or invalidate any act done pursuant to any such default or notice, and, notwithstanding continuance in possession of the Mortgaged Property or any part thereof by Beneficiary, Trustee or a receiver, and the collection, receipt and application of the Rents, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust or by law or in equity upon or after the occurrence of an Event of Default, including the right to exercise the power of sale.

D.      Any of the actions referred to in this Section 3.2 may be taken by Beneficiary irrespective of whether any notice of default or election to sell has been given hereunder and without regard to the adequacy of the security for the Obligations.

3.3.      Appointment of Receiver .

A.      Upon an Event of Default and at any time during the continuation thereof, Beneficiary may elect to seek the court appointment of a receiver to enter upon, take possession of, manage, and operate the Mortgaged Property or any part thereof, and Grantor hereby consents to the appointment of a receiver hereunder.

B.      Grantor hereby consents and stipulates that Beneficiary need only provide Grantor with two (2) Business Days’ notice of Beneficiary’s motion to seek court appointment of a receiver for Mortgaged Property.

C.      Grantor further stipulates that at such hearing on Beneficiary’s motion to appoint a receiver for the Mortgaged Property, a copy of this recorded Deed of Trust can be entered into evidence without any objection from Grantor.

D.      Upon the appointment of a receiver for the Mortgaged Property, Grantor agrees to immediately furnish to such receiver any and all (i) security deposits, and (ii) Rents that Grantor has in its possession or control.

E.      Any action taken under this section may be taken by Beneficiary or Trustee with or without regard to the adequacy of the security for the Obligations secured hereunder, and whether or not notice of default has been recorded.

3.4.      Judicial Action .

Beneficiary may bring an action in any court of competent jurisdiction to foreclose this instrument or to enforce any of the covenants and agreements hereof.

3.5.      Power of Sale .

A.      Beneficiary may elect to cause the Mortgaged Property or any part thereof to be sold under the power of sale herein granted in any manner permitted by applicable law.

B.      Beneficiary, from time to time before Trustee’s sale, may rescind any such notice of breach or default and of election to cause the Mortgaged Property to be sold by executing and delivering to Trustee a written notice of such rescission, which notice, when recorded shall also constitute a cancellation of any prior declaration of default and demand for sale. The exercise by Beneficiary of such right of rescission shall not constitute a waiver of any breach or default then existing or subsequently occurring, or impair the right of Beneficiary to execute and deliver to Trustee, as above provided, other declarations of default and demand for sale, and notices of breach or default, and of election to cause the Mortgaged Property to be sold to satisfy the obligations hereof, nor otherwise affect any provision, agreement, covenant or condition of this Deed of Trust, any Loan Document or any of the rights, obligations or remedies of the parties hereunder.

C.      In connection with any sale or sales hereunder, Beneficiary may elect to treat any of the Mortgaged Property which consists of a right in action or which is property that can be severed from the Real Property covered hereby or any improvements thereon without causing structural damage thereto as if the same were personal property, and dispose of the same in accordance with applicable law, separate and apart from the sale of Real Property.

D.      Any sale of any personal property hereunder shall be conducted in any manner permitted by the Washington Commercial Code. Where the Mortgaged Property consists of real and personal property or fixtures, whether or not such personal property is located on or within the Real Property, Beneficiary may elect in its discretion to exercise its rights and remedies against any or all of the Real Property, personal property, and fixtures in such order and manner as is now or hereafter permitted by applicable law.

E.      Without limiting the generality of the foregoing, Beneficiary may, in its sole and absolute discretion and without regard to the adequacy of its security, elect to proceed against

any or all of the Real Property, personal property and fixtures in any manner permitted under the Washington Commercial Code; and if the Beneficiary elects to proceed in the manner permitted under the Washington Commercial Code, the power of sale herein granted shall be exercisable with respect to all or any of the Real Property, personal property and fixtures covered hereby, as designated by Beneficiary, and the Trustee is hereby authorized and empowered to conduct any such sale of any of the Real Property, personal property and fixtures in accordance with the procedures applicable to real property.

F.      Trustee, from time to time upon the request of Beneficiary, may postpone or continue the sale of all or any portion of the Mortgaged Property by public declaration at the time and place last appointed for the sale or otherwise in accordance with applicable law. No other notice of the postponed sale shall be required except as required by applicable law.

G.      If the Mortgaged Property consists of several lots, parcels or items of property, Beneficiary may: (i) designate the order in which such lots, parcels or items shall be offered for sale or sold, or (ii) elect to sell such lots, parcels or items through a single sale, or through two or more successive sales, or in any other manner Beneficiary deems in its best interest.

H.      Any person, including Grantor, Trustee or Beneficiary, may purchase at any sale hereunder, and Beneficiary shall have the right to purchase at any sale hereunder by crediting upon the bid price the amount of all or any part of the Obligations.

I.      If Beneficiary is the successful bidder, it may apply any of the outstanding Obligations secured hereby in settlement of the purchase price.

J.      Should Beneficiary desire that more than one sale or other disposition of the Mortgaged Property be conducted, Beneficiary may, at its option, cause the same to be conducted simultaneously, or successively, on the same day, or at such different days or times and in such order as Beneficiary may deem to be in its best interests, and no such sale shall terminate or otherwise affect the lien of this Deed of Trust on any part of the Mortgaged Property not sold until the Obligations have been fully paid.

K.      In the event Beneficiary elects to dispose of the Mortgaged Property through more than one sale, Grantor agrees to pay the costs and expenses of each such sale and of any judicial proceedings wherein the same may be made, including reasonable compensation to Trustee and Beneficiary, their agents and counsel, and to pay all expenses, liabilities and advances made or incurred by Trustee in connection with such sale or sales, together with interest on all such advances made by Trustee at the Default Rate provided in the Loan Agreement.

L.      Upon any sale hereunder, Trustee shall execute and deliver to the purchaser or purchasers a deed or deeds conveying the property so sold, but without any covenant or warranty whatsoever, express or implied, whereupon such purchaser or purchasers shall be let into immediate possession; and the recitals in any such deed or deeds of facts, such as default, the giving of notice of default and notice of sale, and other facts affecting the regularity or validity of such sale or disposition, shall be conclusive proof of the truth of such facts and any such deed or deeds shall be conclusive against all persons as to such facts recited therein.

M.      To the extent permitted by the Loan Documents, following a sale pursuant to the exercise of the power of sale, as provided herein, Grantor and any indemnitor or guarantor of the loan secured hereby shall remain personally liable to the full extent provided by applicable law.

3.6.      Proceeds of Sale .

The proceeds of any sale made under or by virtue of this Article III , together with all other sums which then may be held by Trustee or Beneficiary under this Deed of Trust, whether under the provisions of this Article III or otherwise, shall be applied as follows:

FIRST: To the payment of the costs and expenses of sale and of any judicial proceedings wherein the same may be made, including reasonable compensation to Trustee and Beneficiary, their agents and counsel, recording and title fees, escrow fees and to the payment of all expenses, liabilities and advances made or incurred by Trustee under this Deed of Trust, together with interest on all advances made by Trustee at the Default Rate.

SECOND: To the payment of any and all sums expended by Beneficiary under the terms hereof, not then repaid, with accrued interest at the Default Rate, and all other sums required to be paid by Grantor pursuant to any provisions of this Deed of Trust or any of the Loan Documents, including all expenses, liabilities and advances made or incurred by Beneficiary under this Deed of Trust or in connection with the enforcement thereof, together with interest thereon as herein provided.

THIRD: To the payment of the entire amount then due, owing or unpaid for principal and interest upon the Obligations.

FOURTH: The remainder, if any, to the person or persons legally entitled thereto.

3.7.      Environmental Remedies .

At any time after the occurrence and during the continuance of an Event of Default under Grantor’s obligations contained in Section 1.9 hereof but without limiting any other rights of remedies of Beneficiary hereunder, under the Loan Documents or at law or in equity:

A.      Beneficiary, acting by itself or through a court-appointed receiver, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with any Governmental Authority with respect to the Mortgaged Property’s compliance with Environmental Laws and any Remedial Action; take any action necessary to enforce compliance with Environmental Laws, including spending Rents to abate the problem; make, terminate, enforce or modify Tenant Leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary’s judgment, to protect the security hereof; and/or take any and all other actions which may be necessary or desirable to comply with Grantor’s Obligations hereunder and under the Documents.

B.      With notice (or without notice in a case of emergency, or where the giving of notice is impracticable or where the Tenant or Grantor has abandoned the Mortgaged Property), and without releasing Grantor from any Obligation hereunder, to cure any default of Grantor and, in connection therewith, Beneficiary or its agents, acting by itself or through a court appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including of any of its other rights:

(i)      to obtain a court order to enforce Beneficiary’s right to enter and inspect the Mortgaged Property, to which the decision of Beneficiary as to whether there exists a Release or threatened Release of Hazardous Materials onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto, if made in reasonable and good faith; and

(ii)      to have a receiver appointed to enforce Beneficiary’s right to enter and inspect the Mortgaged Property for Hazardous Materials.

C.      All reasonable costs and expenses reasonably incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Grantor. All such costs and expenses reasonably incurred by Trustee and Beneficiary (including court costs, reasonable consultant fees and attorney fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate, from the date they are incurred until said sums have been paid.

D.      To seek a judgment that Grantor has breached its covenants, representations and/or warranties with respect to Hazardous Materials set forth above in Section 1.9, by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to foreclosure of the Mortgaged Property or after foreclosure of the Mortgaged Property, for Environmental Liabilities relating to the Mortgaged Property. All Environmental Liabilities incurred by Beneficiary (including court costs, consultant fees and reasonable attorneys fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid.

E.      Grantor acknowledges and agrees that Grantor shall be fully liable for the Environmental Liabilities hereunder, and such liability shall not be limited to the original principal amount of the Obligations secured hereby, and Grantor’s Obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust.

3.8.      Waiver of Marshalling .

A.      Grantor, for itself and for all persons hereafter claiming through or under it or who may at any time hereafter become holders of liens junior to the lien of this Deed of Trust, hereby expressly waives and releases all rights to direct the order in which any of the Mortgaged Property shall be sold in the event of any sale or sales pursuant hereto and to have any of the Mortgaged Property and/or any other property now or hereafter constituting security for any of the indebtedness secured hereby marshaled upon any foreclosure of this Deed of Trust or of any other security for any of said indebtedness.

B.      Grantor hereby waives and disclaims any state law or principle of equity which limits the ability of Beneficiary to sell or dispose of the Mortgaged Property in multiple nonjudicial foreclosure actions, rather than one nonjudicial foreclosure action, by parcel rather than en masse, or to obtain and/or force a deficiency judgment in respect of any sale of any piece of Mortgaged Property.

3.9.      Remedies Cumulative .

A.      No remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to be exclusive of any other remedy herein or by law provided, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute.

B.      No delay or omission of Trustee or Beneficiary to exercise any right or power accruing upon any Event of Default shall impair any right or power or shall be construed to be a waiver of any Event of Default or any acquiescence thereof, and every power and remedy given by this Deed of Trust to Trustee or Beneficiary may be exercised from time to time as often as may be deemed expedient by Trustee or Beneficiary.

C.      If there exists additional security for the performance of the Obligations secured hereby, Beneficiary, at its sole option, and without limiting or affecting any of its rights or remedies hereunder, may exercise any of the rights and remedies to which it may be entitled hereunder either concurrently with whatever rights and remedies it may have in connection with such other security or in such order as it may determine.

D.      Any application of any amounts or any portion thereof held by Beneficiary at any time as additional security hereunder to any indebtedness secured hereby shall not extend or postpone the due dates of any payments due from Grantor to Beneficiary hereunder or under the Obligations or any of the Loan Documents, or change the amounts of any such payments or otherwise be construed to cure or waive any default or notice of default hereunder or invalidate any act done pursuant to any such default or notice.

3.10.      Redemption .

To the extent permitted by law, this Deed of Trust shall continue and remain in full force and effect during any period of foreclosure or any redemption period with respect to the Mortgaged Property

ARTICLE IV     

MISCELLANEOUS

4.1.      Notice of Sale .