REVOLVING LOAN AGREEMENT

 

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                                   $75,000,000

 

                            REVOLVING LOAN AGREEMENT

 

                                  by and among

 

                           CAPITAL LEASE FUNDING, INC.

 

                                       and

 

                             CAPLEASE SERVICES CORP.

 

                                       and

 

                                   CAPLEASE, LP,

                                  as Borrowers,

 

                                       and

 

                      WACHOVIA BANK, NATIONAL ASSOCIATION,

                          in its respective capacities

                   as Initial Lender and as Administrative Agent

 

                           Dated as of August 26, 2005

 

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                                TABLE OF CONTENTS

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ARTICLE I              DEFINITIONAL PROVISIONS....................................................................1

 

         Section 1.01           Definitions.......................................................................1

 

         Section 1.02           Other Definitional Provisions....................................................18

 

         Section 1.03           Accounting Terms.................................................................19

 

         Section 1.04           Computation of Time Periods......................................................19

 

ARTICLE II             THE LOANS; AMOUNT AND TERMS...............................................................19

 

         Section 2.01           Loans............................................................................19

 

         Section 2.02           Payments to Collection Account...................................................21

 

         Section 2.03            Prepayments......................................................................22

 

         Section 2.04           Default Rate and Payment Dates...................................................23

 

         Section 2.05           Computation of Interest and Fees.................................................24

 

         Section 2.06           Pro Rata Treatment and Payments..................................................24

 

         Section 2.07           Non-Receipt of Funds by the Administrative Agent.................................26

 

         Section 2.08           Inability to Determine Interest Rate.............................................27

 

         Section 2.09           Illegality.......................................................................27

 

         Section 2.10           Requirements of Law..............................................................28

 

         Section 2.11           Indemnity........................................................................29

 

          Section 2.12           Taxes............................................................................29

 

ARTICLE III            CONDITIONS PRECEDENT......................................................................31

 

         Section 3.01            Conditions to Closing Date.......................................................31

 

         Section 3.02           Conditions to All Extensions of Credit...........................................35

 

ARTICLE IV             REPRESENTATIONS AND WARRANTIES............................................................36

 

         Section 4.01           Representations and Warranties...................................................36

 

ARTICLE V              COVENANTS.................................................................................39

 

         Section 5.01           Applied Covenants................................................................40

 

         Section 5.02           Pledged Assets...................................................................40

 

         Section 5.03           Financial Covenants..............................................................40

 

         Section 5.04           Certificates; Other Information..................................................40

 

          Section 5.05           No Other Negative Pledge.........................................................41

 

         Section 5.06           Escrowed Funds...................................................................41

 

         Section 5.07           Recourse Loans...................................................................41

 

ARTICLE VI             EVENTS OF DEFAULT.........................................................................41

 

         Section 6.01           Events of Default................................................................41

 

         Section 6.02           Acceleration; Remedies...........................................................44

 

         Section 6.03           Notice of Default................................................................44

 

         Section 6.04           Non-Reliance on Administrative Agent and Other Lenders...........................44

 

         Section 6.05           Indemnification..................................................................45

 

         Section 6.06           The Administrative Agent in Its Individual Capacity..............................45

 

         Section 6.07           Successor Administrative Agent...................................................46

 

         Section 6.08           Other Agents.....................................................................46

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                                TABLE OF CONTENTS

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ARTICLE VII            THE ADMINISTRATIVE AGENT..................................................................47

 

         Section 7.01           Appointment......................................................................47

 

         Section 7.02            Delegation of Duties.............................................................47

 

         Section 7.03           Exculpatory Provisions...........................................................47

 

         Section 7.04           Reliance by Administrative Agent.................................................48

 

ARTICLE VIII           JOINT AND SEVERAL LIABILITY...............................................................48

 

         Section 8.01           Joint and Several Liability; Full Recourse Obligations...........................48

 

ARTICLE IX             MISCELLANEOUS.............................................................................50

 

         Section 9.01           Amendments, Waivers and Release of Collateral....................................50

 

         Section 9.02           Survival of Representations and Warranties.......................................53

 

         Section 9.03           Successors and Assigns; Participations; Purchasing Lenders.......................53

 

          Section 9.04           Adjustments......................................................................56

 

         Section 9.05           Indemnification and Expenses.....................................................56

 

         Section 9.06            Notices and Other Communications.................................................57

 

         Section 9.07           Entire Agreement; Severability...................................................58

 

         Section 9.08           GOVERNING LAW....................................................................58

 

         Section 9.09           SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL..........................58

 

         Section 9.10           Periodic Due Diligence Review....................................................60

 

         Section 9.11           Termination of Repurchase Agreement; Extension of Term...........................60

 

         Section 9.12           Legal Matters....................................................................60

 

         Section 9.13           Confidentiality..................................................................61

 

         Section 9.14           Right of Set-off.................................................................61

 

          Section 9.15           Treatment of Certain Information.................................................62

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                                       -ii-

 

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SCHEDULES

 

Schedule 1.01(A)                 Advance Rate

Schedule 1.01(B)                  Lenders and Commitments

Schedule 3.01(e)                 Applicable Premium

Schedule 3.01(h)                 Organizational Chart of the Borrowers

 

EXHIBITS

 

Exhibit A                        Form of Revolving Note

Exhibit B                        Form of Commitment Transfer Supplement

Exhibit C                        Form of SPE Organizational Documents

Exhibit D                        Form of Pledge and Security Agreement

Exhibit E                        Form of Closing Certificate

Exhibit F                         Form of Deposit Account Control Agreement

Exhibit G                        Form of Solvency Certificate

Exhibit H                        Form of Compliance Certificate

Exhibit I                        Form of Negative Pledge Agreement

Exhibit J                         Form of Notice of Borrowing

Exhibit K                        Form of 2.12 Certificate

 

 

                                       -iv-

<PAGE>

 

                            REVOLVING LOAN AGREEMENT

 

      THIS REVOLVING LOAN AGREEMENT, dated as of August 26, 2005 (this "Loan

Agreement"), among CAPLEASE SERVICES CORP., a Delaware corporation ("Services"),

CAPITAL LEASE FUNDING, INC., a Maryland corporation ("Parent"), Caplease, LP, a

Delaware limited partnership ("CapLease," and together with Parent and Services,

the "Borrowers") and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking

association, in its capacity as the initial Lender ("Initial Lender") and as

administrative agent for the financial institutions and banks ("Lenders") party

hereto from time to time (in such capacity, the "Administrative Agent" or the

"Agent").

 

                              W I T N E S S E T H:

 

      WHEREAS, the Borrowers have requested, and the Initial Lender has agreed,

to extend certain credit facilities to the Borrowers on the terms and conditions

set forth herein;

 

      NOW, THEREFORE, for good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged by the parties hereto, such parties

hereby agree as follows:

 

                                    ARTICLE I

 

                             DEFINITIONAL PROVISIONS

 

      Section 1.01 Definitions.

 

            (a) As used herein, the following terms shall have the following

meanings (all terms defined in this Section 1.01 or in other provisions of this

Agreement in the singular shall have the same meanings when used in the plural

and vice versa).

 

            "Act of Insolvency": With respect to any Person, (i) the filing of a

petition, commencing, or authorizing the commencement of any case or proceeding

under any bankruptcy, insolvency, reorganization, liquidation, dissolution or

similar law relating to the protection of creditors, or suffering any such

petition or proceeding to be commenced by another which is consented to, not

timely contested or results in entry of an order for relief; (ii) the seeking or

consenting to the appointment of a receiver, trustee, custodian or similar

official for such Person or any substantial part of the property of such Person;

(iii) the appointment of a receiver, conservator, or manager for such Person by

any governmental agency or authority having the jurisdiction to do so; (iv) the

making of a general assignment for the benefit of creditors; (v) the admission

by such Person of its inability to pay its debts or discharge its obligations as

they become due or mature; or (vi) that any governmental authority or agency or

any person, agency or entity acting under governmental authority shall have

taken any action to condemn, seize or appropriate, or to assume custody or

control of, all or any substantial part of the property of such Person, or shall

have taken any action to displace the management of such Person or to curtail

its authority in the conduct of the business of such Person.

 

            "Adjusted EBITDA": For any Person, (i) EBITDA less (ii) Loss

Reserves for the applicable period.

 

            "Adjustment Event": With respect to any Eligible Asset, the

occurrence of any of the following (each of which shall be deemed to adjust the

Purchase Price of any Eligible Asset by such amount as may be determined by

Agent exercising reasonable discretion): (a) any theft, loss, physical

destruction or damage, taking, condemnation or similar event; (b) the Fair

Market Value of any Eligible Asset is not supported or validated pursuant to a

FIRREA standard appraisal, as determined by the Agent in its sole discretion;

(c) any violation or noncompliance, or claim or allegation of violation of or

noncompliance with, any Environmental Laws, including, without limitation, by

any Person or Governmental Authority; (d) any default in or nonperformance of

any material obligations by any landlord or by any tenant leasing a material

portion of any Eligible Asset or the termination of any such tenant's lease; or

(e) any default in or nonperformance of obligations by any Person arising out of

or in connection with any construction, capital improvement or similar projects

or undertakings, including, without limitation, material cost overruns (solely

to the extent included by the Agent and/or the Initial Lender in evaluating the

initial Purchase Price of such Eligible Asset and extending credit in connection

with the financing or refinancing of such Purchase Price upon the terms and

conditions set forth in this Agreement).

 

<PAGE>

 

             "Advance Rate": The percentage identified on Schedule 1.01(A) to

this Agreement and set forth opposite the month listed thereon.

 

            "Affiliate": As to any Person, an "Affiliate" of such Person, as

such term is defined in the Bankruptcy Code.

 

            "Agreement": This Loan Agreement, as amended, restated, amended and

restated and supplemented from time to time.

 

            "ALTA": The American Land Title Association.

 

            "Alternate Base Rate": The per annum rate of interest equal to the

greater of (a) the prime rate or (b) the federal funds rate plus one half of one

percent (0.5%). Any change in the Alternate Base Rate resulting from a change in

the prime rate or the federal funds rate shall become effective as of 12:01 a.m.

on the business day on which each such change occurs. The Alternate Base Rate is

a reference rate used by the Agent in determining interest rates on certain

loans and is not intended to be the lowest rate of interest charged by the Agent

or any other Lender on any extension of credit to any Borrower.

 

            "Alternate Base Rate Loans": Loans the rate of interest applicable

to which is based on the Alternate Base Rate.

 

            "Anti-Money Laundering Loans": The meaning specified in Section

4.01(q).

 

            "Applicable Premium": The meaning specified in Schedule 3.01(e).

 

            "Applied Covenants": The covenants of Parent and Caplease, as

applicable, set forth in Sections 9.01(a), (b), (c), (d), (e), (f), (i), (j),

(k), (n), (q), (r), (t), (u), (w) and (x) of the Repurchase Agreement.

 

            "Approved Fund": With respect to any Lender that is a fund that

invests in bank loans, any other fund that invests in bank loans and is managed

by the same investment advisor as such Lender or by an affiliate of such

investment advisor.

 

            "Bankruptcy Code": The United States Bankruptcy Code of 1978, as

amended from time to time.

 

            "Borrowing Date": In respect of any Loan, the date such Loan is

made.

 

            "Business Day": Any day other than a (i) Saturday or Sunday or (ii)

day on which banks in the State of North Carolina, the State of New York, the

District of Columbia, or the state in which any of the Agent or the Borrowers is

located is authorized or obligated by law or executive order to be closed.

 

            "Capital Expenditures": For any Person during any period, without

duplication, the sum of (1) actual expenditures which are capitalized in

conformity with GAAP and (ii) all recurring reserve payments for capital

expenditures which are required of such Person under any other loan documents.

 

            "Capitalized Lease Obligations": Obligations under a lease that are

required to be capitalized for financial reporting purposes in accordance with

GAAP. The amount of a Capitalized Lease Obligation is the capitalized amount of

such obligation as would be required to be reflected on the balance sheet

prepared in accordance with GAAP of the applicable Person as of the applicable

date.

 

            "Caplease": Caplease, LP, a Delaware limited partnership.

 

            "Cash and Cash Equivalents": (i) cash, (ii) direct obligations of

the United States Government, including without limitation, treasury bills,

notes and bonds, (iii) interest bearing or discounted obligations of Federal

agencies and government sponsored entities or pools of such instruments offered

by approved banks and dealers, including without limitation, Federal Home Loan

Mortgage Corporation participation sale certificates, Government National

Mortgage Association modified pass through certificates, Federal National

Mortgage Association bonds and notes, and Federal Farm Credit System securities,

(iv) time deposits, domestic and Eurodollar certificates of deposit, bankers'

acceptances, commercial paper rated at least A-1 by S&P and P-1 by Moody's

and/or guaranteed by a Person with an Aa1 rating by Moody's, an AA- rating by

S&P or better rated credit, floating rate notes, other money market instruments

and letters of credit each issued by approved banks (provided that the same

shall cease to be a "Cash or Cash Equivalent" if at any time any such bank shall

cease to be an approved bank), (v) obligations of domestic corporations,

including, without limitation, commercial paper, bonds, debentures and loan

participations, each of which is rated at least AA- by S&P and/or Aa1 by Moody's

and/or guaranteed by a Person with an Aa1 rating by Moody's and/or a AA- rating

by S&P or better rated credit, (vi) obligations issued by states and local

governments or their agencies, rated at least MIG-1 by Moody's and/or SP-1 by

S&P and/or guaranteed by an irrevocable letter of credit of an approved bank

(provided that the same shall cease to be a "Cash or Cash Equivalent" if at any

time any such bank shall cease to be an approved bank), (vii) repurchase

agreements with major banks and primary government security dealers fully

secured by the U.S. government or agency collateral equal to or exceeding the

principal amount on a daily basis and held in safekeeping, and (viii) real

estate loan pool participations, guaranteed by a Person with an AA- rating given

by S&P or Aa1 rating given by Moody's or better rated credit.

 

 

                                      -2-

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            "Change of Control": (a) any Person or two or more Persons acting in

concert shall have acquired "beneficial ownership," directly or indirectly, of,

or shall have acquired by contract or otherwise, or shall have entered into a

contract or arrangement that, upon consummation, will result in its or their

acquisition of, or control over, Voting Interests of the Parent (or other

securities convertible into such Voting Interests) representing more than 50% of

the combined voting power of all Voting Interests of Parent, (b) Continuing

Directors shall cease for any reason to constitute a majority of the members of

the board of directors of the Parent then in office, (c) the sale, lease,

transfer, conveyance or other disposition (other than by way of merger or

consolidation), in one or a series of related transactions, of all or

substantially all of the assets of the Borrowers and their Subsidiaries taken as

a whole to any "person" (as such term is used in Sections 13(d) and 14(d) of the

Securities Act of 1934) or (d) the adoption by the equity holders of the Parent

of a plan or proposal for the liquidation or dissolution of the Parent. As used

herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of

the Securities and Exchange Commission under the Securities Act of 1934.

 

            "Closing Certificate": A Closing Certificate, substantially in the

form attached hereto as Exhibit E, including all attachments and exhibits

thereto, which shall include a copy of: (a) if applicable, a copy of the escrow

instruction letters delivered by the buyer to the applicable title companies in

respect of the Eligible Asset acquisition; (b) an unrecorded copy of all deeds

evidencing title to and ownership of the Eligible Asset by an SPE Entity, in

recordable form; (c) any HUD-1 (or equivalent) settlement statements in respect

of such Eligible Asset acquisition; and (d) such other documentation as the

Administrative Agent may reasonably request.

 

            "Code": The Internal Revenue Code of 1986, as amended from time to

time.

 

            "Collateral": A collective reference to the collateral which is

identified in, and at any time covered by, the Security Documents or such other

collateral in which a security interest may be granted in favor of the Agent to

secure the Obligations.

 

            "Collection Account": The meaning given to such term in Section

2.02.

 

            "Commitment Period": The period of time commencing on the date

hereof and ending on the Business Day preceding the Termination Date.

"Commitment Transfer Supplement": A Commitment Transfer Supplement, in

substantially the form of Exhibit B.

 

            "Compliance Certificate": A Compliance Certificate, in substantially

the form of Exhibit H, demonstrating compliance by the Borrowers and their

Subsidiaries as of the date of delivery thereof with the financial covenants

contained in Section 5.03 hereof and such other matters as are set forth

therein, in each case for the periods specified therein.

 

            "Consolidated Total Assets": At any time, all amounts which would be

included as assets on a consolidated balance sheet of the Borrowers other than

(i) amounts owing to any Borrower from Affiliates, or from officers, employees,

partners, members, directors, shareholders or other Persons similarly affiliated

with any Borrower or their respective Affiliates, (ii) intangible assets

(including, without limitation, synthetic or derivative products and/or

positions) other than intangible assets arising from the allocation of the

purchase price on real property acquisitions, (iii) prepaid taxes and/or

expenses (which shall not include, for the avoidance of doubt, purchase price,

mortgage loan and other deposits and escrows), and (iv) assets which have not

yet been acquired but are consolidated under FIN 46. For the avoidance of doubt,

"Consolidated Total Assets" shall not be reduced by "accumulated depreciation

and amortization" on real estate investments.

 

 

                                      -3-

<PAGE>

 

            "Consolidated Total Liabilities": At any time, without duplication,

all amounts which would be included as liabilities on a consolidated balance

sheet of the Borrowers, plus all (i) Contingent Liabilities less any liabilities

under which the Borrowers or any Subsidiary are not obligated but are

consolidated under FIN 46 and (ii) Preferred Securities of any Subsidiary.

 

            "Contingent Liabilities": Without duplication, all items that would

constitute "Contingent Obligations" as such term is defined under GAAP or

pursuant to the reporting requirements of Sections 13 and 15 of the Securities

Exchange Act of 1934, as amended.

 

            "Continuing Director": Means (i) an individual who is a member of

the Parent's Board of Directors on the date hereof or (ii) any new director

whose appointment was approved by a majority of the persons who were already

Continuing Directors at the time of such appointment, election or approval.

 

            "Costs": Any and all claims, damages, losses, liabilities, costs and

expenses (including, without limitation, attorneys' fees and disbursements).

 

            "Debt Issuance": Means the issuance of any Indebtedness, including,

without limitation, Preferred Securities to the extent such Preferred Securities

constitute Indebtedness, including, without limitation, in accordance with

applicable federal or state Tax Laws, for borrowed money by the Borrowers or any

of their Subsidiaries.

 

            "Debt Service": Means, for any period, the sum of (a) Interest

Expense of the Borrowers and their Subsidiaries determined on a consolidated

basis for such period, and (b) all regularly scheduled and required principal

payments made with respect to Indebtedness of the Borrowers and their

Subsidiaries during such period (other than principal payments made by Borrowers

and their Subsidiaries on collateralized debt obligations, repurchase

facilities, or other substantially similar arrangements), other than any

balloon, bullet, margin or similar principal payment which repays such

Indebtedness in full. Debt Service shall include a proportionate share of items

(a) and (b) of all Unconsolidated Affiliates.

 

            "Default": Any of the events specified in Section 7.01, whether or

not any requirement for the giving of notice, the lapse of time, or both, or any

other condition, has been satisfied.

 

            "Default Rate": The meaning given to such term in Section 2.04.

 

            "Deposit Account Control Agreement": The Deposit Account Control

Agreement, in substantially the form attached hereto as Exhibit F.

 

            "Derivatives Contract": Any and all rate swap transactions, basis

swaps, credit derivative transactions, forward rate transactions, commodity

swaps, commodity options, forward commodity contracts, equity or equity index

swaps or options, bond or bond price or bond index swaps or options or forward

bond or forward bond price or forward bond index transactions, interest rate

options, forward foreign exchange transactions, cap transactions, floor

transactions, collar transactions, currency swap transactions, cross-currency

rate swap transactions, currency options, spot contracts, or any other similar

transactions or any combination of any of the foregoing (including any options

to enter into any of the foregoing), whether or not any such transaction is

governed by or subject to any master agreement. Not in limitation of the

foregoing, the term "Derivatives Contract" includes any and all transactions of

any kind, and the related confirmations, which are subject to the terms and

conditions of, or governed by, any form of master agreement published by the

International Swaps and Derivatives Association, Inc., any international foreign

exchange master agreement, or any other master agreement, including any such

obligations or liabilities under any such master agreement.

 

            "Derivatives Termination Value": In respect of any one or more

Derivatives Contracts, after taking into account the effect of any legally

enforceable netting agreement relating to such Derivatives Contracts, (a) for

any date on or after the date such Derivatives Contracts have been closed out

and termination value(s) determined in accordance therewith, such termination

value(s), and (b) for any date prior to the date referenced in clause (a) the

amount(s) determined as the mark-to-market value(s) for such Derivatives

Contracts, as determined based upon one or more mid-market or other readily

available quotations provided by any recognized dealer in such Derivatives

Contracts (which may include the Agent or any Lender).

 

 

                                      -4-

<PAGE>

 

             "Dollars" and "$": Lawful money of the United States of America.

 

            "Due Diligence Review": The performance by the Agent of any or all

of the reviews permitted under Section 9.10 with respect to any or all of the

Purchased Assets, as reasonably desired by the Agent from time to time.

 

            "EBITDA": With respect to a Person for any period: (a) net income

(or loss) of such Person for such period determined on a consolidated basis

(prior to any impact from minority interests and before deduction of preferred

dividends on preferred stock, if any, of Borrower), in accordance with GAAP,

plus the following (but only to the extent actually included in determination of

such net income (loss)): (i) income tax expense; (ii) extraordinary or

non-recurring gains and losses; (iii) depreciation and amortization expense; and

(iv) interest expense; plus (b) such Person's pro rata share of EBITDA of its

Unconsolidated Affiliates.

 

            "Effective Date": The first date upon which all of the conditions

precedent set forth in Section 3.01 shall have been satisfied.

 

            "Eligible Asset": A real estate asset that is accepted by the Agent

for financing and is subject to a Loan hereunder.

 

            "Eligible Asset Disposition": A (i) bona fide sale, transfer or

other disposition of an Eligible Asset by any SPE Entity to a Person who is not

an Affiliate, or (ii) refinancing or encumbering of any Eligible Assets.

 

            "Eligible Asset File": All documents, records, files, data,

information and correspondence in respect of the subject Eligible Asset as

maintained by the Borrowers or their Subsidiaries.

 

            "Environmental Indemnity Agreement": The Environmental Indemnity

Agreement, executed on the date hereof by the Borrowers in favor of the Agent.

 

            "Environmental Laws": Any and all foreign, Federal, state, local or

municipal laws, rules, orders, regulations, statutes, ordinances, codes,

decrees, requirements of any Governmental Authority or requirements of law

(including common law) regulating, relating to or imposing liability or

standards of conduct concerning protection of human health or the environment,

as now or may at any time hereafter be in effect.

 

            "Equity Interest": With respect to any Person, any share of capital

stock of (or other ownership or profit interests in) such Person, any warrant,

option or other right for the purchase or other acquisition from such Person of

any share of capital stock of (or other ownership or profit interests in) such

Person, any security convertible into or exchangeable for any share of capital

stock of (or other ownership or profit interests in) such Person or warrant,

right or option for the purchase or other acquisition from such Person of such

shares (or such other interests) and any other ownership or profit interest in

such Person (including, without limitation, partnership, member or trust

interests therein), whether voting or nonvoting, and whether or not such share,

warrant, option, right or other interest is authorized or otherwise existing on

any date of determination.

 

            "Equity Issuance": Any issuance by the Borrowers or any Subsidiary

to any Person which is not a Borrower of (a) Equity Interests, (b) Equity

Interests pursuant to the exercise of options or warrants; and (c) Equity

Interests pursuant to the conversion of any debt securities to equity; but

excluding any issuance pursuant to the Parent's 2004 Stock Incentive Plan or a

dividend reinvestment plan that the Parent may adopt from time to time.

 

            "ERISA": The Employee Retirement Income Security Act of 1974, as

amended from time to time.

 

            "ERISA Affiliate": Any corporation or trade or business that is a

member of any group of organizations (i) described in Section 414(b) or (c) of

the Code of which any Borrower is a member and (ii) solely for purposes of

potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of

the Code and the lien created under Section 302(f) of ERISA and Section 412(n)

of the Code, described in Section 414(m) or (o) of the Code of which Seller is a

member.

 

 

                                      -5-

<PAGE>

 

            "Escrowed Funds": Any portion of the Purchase Price of any Purchased

Assets that is the subject of a binding escrow arrangement with respect to

disbursement of such Purchase Price to the counterparty to such escrow

arrangement, including, without limitation, in connection with construction and

building projects associated with any Purchased Asset.

 

            "Eurodollar Reserve Percentage": For any day, the percentage

(expressed as a decimal and rounded upwards, if necessary, to the next higher

1/100th of 1%) which is in effect for such day as prescribed by the Federal

Reserve Board (or any successor) for determining the maximum reserve requirement

(including without limitation any basic, supplemental or emergency reserves) in

respect of Eurocurrency liabilities, as defined in Regulation D of such Board as

in effect from time to time, or any similar category of liabilities for a member

bank of the Federal Reserve System in New York City.

 

            "Event of Default": The meaning specified in Section 7.01.

 

            "Exit Fee": The meaning provided in the Fee Letter.

 

            "Extension of Credit": As to any Lender, the making of a Loan by

such Lender.

 

            "Fair Market Value": With respect to (a) a security listed on a

national securities exchange or recognized automated quotation system, the price

of such security as reported on such exchange by any widely recognized reporting

method customarily relied upon by financial institutions; (b) with respect to

any other property, including realty, other than Eligible Assets, the price

which could be negotiated in an arm's-length free market transaction, for cash,

between a willing seller and a willing buyer, neither of which is under pressure

or compulsion to complete the transaction and (c) Eligible Assets, the price

which could be negotiated in an arm's-length free market transaction, for cash

for such Eligible Asset, between a willing seller and a willing buyer, neither

of which is under pressure or compulsion to complete the transaction, in each

case, as determined by Agent in its sole discretion.

 

            "Federal Funds Effective Rate": The meaning set forth in the

definition of "Alternate Base Rate".

 

            "Federal Funds Rate": For any day, the rate per annum (rounded

upwards, if necessary, to the nearest 1/1000 of 1%) equal to the weighted

average of the rates on overnight Federal Funds transactions with members of the

Federal Reserve System arranged by Federal funds brokers on such day, as

published by the Federal Reserve Bank of New York on such day; provided that (a)

if such day is not a Business Day, the Federal Funds Rate for such day shall be

such rate on such transactions on the next preceding Business Day as so

published on the next succeeding Business Day, and (b) if no such rate is so

published on such Business Day, the Federal Funds Rate for such day shall be the

average of the quotations for such day for such transactions received by the

Agent from three Federal funds brokers of recognized standing and reputation

reasonably selected by the Agent.

 

            "Fee Letter": That certain Fee Letter, dated as of the date hereof,

among the Borrowers and the Agent, as the same may be amended, supplemented or

otherwise modified from time to time.

 

            "Fixed Charge Coverage Ratio": For any Person during any period, the

Adjusted EBITDA for such period divided by the Fixed Charges for the same

period.

 

            "Fixed Charges": For any Person during any period, the sum of (a)

Debt Service, (b) all Preferred Dividends, (c) Capitalized Lease Obligations

paid or accrued during such period, and (d) Capital Expenditures (if any). Fixed

Charges shall include a proportionate share of items (a), (b) and (c) of all

Unconsolidated Affiliates.

 

            "Floating Rate Debt": All Indebtedness of a Person that bears

interest at a variable rate during the scheduled life of such Indebtedness and

for which such Person has not obtained interest rate swap agreements that

effectively cause such variable rates to be equivalent to fixed rates through

the maturity of the Indebtedness.

 

 

                                      -6-

<PAGE>

 

            "Funds from Operations": For a given period, (a) Net Income of the

Parent and its Subsidiaries for such period (before extraordinary and

non-recurring items), minus (or plus) (b) gains (or losses) from debt

restructuring and sales of property of the Parent and its Subsidiaries during

such period, plus (c) depreciation and amortization of real and personal

property assets of the Parent and its Subsidiaries for such period, plus (d)

without duplication, income from unconsolidated partnerships and joint ventures

of the Parent and its Subsidiaries, determined in each case in accordance with

GAAP.

 

            "GAAP": Generally accepted accounting principles in effect in the

United States of America applied on a consistent basis, subject, however, in the

case of determination of compliance with the financial covenants set out in

Section 5.03 to the provisions of Section 1.03.

 

            "Governmental Authority": Any nation or government, any state or

other political subdivision thereof and any entity exercising executive,

legislative, judicial, regulatory or administrative functions of or pertaining

to government.

 

            "Guarantee": As to any Person, any obligation of such Person

directly or indirectly guaranteeing any indebtedness of any other Person or in

any manner providing for the payment of any indebtedness of any other Person or

otherwise protecting the holder of such indebtedness against loss (whether by

virtue of partnership arrangements, by agreement to keep-well another Person, to

purchase assets, goods, securities or services, or to agree to take-or-pay

arrangement or otherwise). The amount of any Guarantee of a Person shall be

deemed to be an amount equal to the stated or determinable amount of the primary

obligation in respect of which such Guarantee is made or, if not stated or

determinable, the maximum reasonably anticipated liability in respect thereof as

determined by such Person in good faith. The terms "Guarantee" and "Guaranteed"

used as verbs shall have correlative meanings.

 

            "Indebtedness": Without duplication, all items that would constitute

"Indebtedness" as such term is defined under GAAP or pursuant to the reporting

requirements of Sections 13 and 15 of the Securities Exchange Act of 1934, as

amended, but including in any event (i) any mandatory redeemable Equity

Interests, any trust preferred Equity Interests (to the extent owned directly or

beneficially by the Borrowers or any of their Subsidiaries) and any Contingent

Liabilities and (ii) without duplication, any and all of the Borrowers' or any

of their Affiliate' obligations under or in connection with Interest Rate

Protection Agreements.

 

            "Indemnified Party": The meaning set forth in Section 9.05.

 

            "Initial Lender": As defined in the Recitals.

 

             "Interest Expense": Any Person's total interest expense incurred (in

accordance with GAAP), including capitalized or accruing interest (but excluding

interest funded under a construction loan), on a consolidated basis plus the

Person's pro rata share of Interest Expense from Joint Venture Investments and

Unconsolidated Affiliates, without duplication for the most recent period.

 

            "Interest Payment Date": The eleventh (11th) day of each calendar

month, provided that if such day is not a Business Day, the Interest Payment

Date shall occur on the immediately succeeding Business Day.

 

            "Interest Period": With respect to any LIBOR Rate Loan, initially,

the period commencing on the applicable Borrowing Date and ending as of the next

succeeding Interest Payment Date; and thereafter, each period commencing on the

last day of the immediately preceding Interest Period applicable to such LIBOR

Rate Loan and ending on the earlier to occur of (x) the next occurring Interest

Payment Date or (y) the Termination Date.

 

            "Interest Rate Protection Agreement": Any futures contract, options

related contract, short sale of US treasury securities or any interest rate

swap, cap, floor or collar agreement or any other similar arrangement providing

for protection against fluctuations in interest rates or the exchange of nominal

interest obligations, either generally or under specific contingencies and

acceptable to the Agent.

 

            "Lender": The meaning given to such term in the preamble to this

Agreement.

 

            "Leverage Ratio": The ratio of Consolidated Total Assets to

Consolidated Total Liabilities.

 

 

                                      -7-

<PAGE>

 

            "LIBOR": For any LIBOR Rate Loan for any Interest Period therefor,

the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)

appearing on Telerate Page 3750 (or any successor page) as the London interbank

offered rate for deposits in Dollars at approximately 11:00 A.M. (London time)

two Business Days prior to the first day of such Interest Period for a term

comparable to such Interest Period. If for any reason such rate is not

available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest

Period therefor, the rate per annum (rounded upwards, if necessary, to the

nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London

interbank offered rate for deposits in Dollars at approximately 11:00 A.M.

(London time) two Business Days prior to the first day of such Interest Period

for a term comparable to such Interest Period; provided, however, if more than

one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be

the arithmetic mean of all such rates (rounded upwards, if necessary, to the

nearest 1/100 of 1%). If, for any reason, neither of such rates is available,

then "LIBOR" shall mean the rate per annum at which, as determined by the

Administrative Agent, Dollars in an amount comparable to the Loans then

requested are being offered to leading banks at approximately 11:00 A.M. London

time, two (2) Business Days prior to the commencement of the applicable Interest

Period for settlement in immediately available funds by leading banks in the

London interbank market for a period equal to the Interest Period selected.

 

            "LIBOR Lending Office": Initially, the office of each Lender

designated in writing as such Lender's LIBOR Lending Office and thereafter, such

other office of such Lender as such Lender may from time to time specify to the

Administrative Agent and the Borrowers as the office of such Lender at which the

LIBOR Rate Loans of such Lender are to be made.

 

            "LIBOR Rate": A rate per annum (rounded upwards, if necessary, to

the next higher 1/100th of 1%) determined by the Administrative Agent pursuant

to the following formula:

 

               LIBOR Rate =                            LIBOR

                                        ------------------------------------

                                        1.00 - Eurodollar Reserve Percentage

 

             "LIBOR Rate Loan": Loans the rate of interest applicable to which is

based on the LIBOR Rate.

 

            "Lien": Any mortgage, lien, pledge, charge, security interest or

similar encumbrance.

 

            "Loan": The meaning set forth in Section 2.01(a).

 

            "Loan Documents": This Loan Agreement, each Revolving Note, the

Intercreditor Agreement, the Security Documents, the Environmental Indemnity

Agreement, each Negative Pledge Agreement, the Deposit Account Control Agreement

and all other agreements, documents, certificates and instruments delivered to

the Administrative Agent or any Lender by any Borrowers or their Subsidiaries in

connection herewith (other than any agreement, document, certificate or

instrument related to any Interest Rate Protection Agreement).

 

            "Loss Reserves": For any period of four trailing quarters, an amount

equal to the greater of $500,000 or actual losses recorded on the Parent's

statement of operations for such period. The Loss Reserves shall be determined

on an aggregate basis with respect to all assets of the Borrowers and their

Subsidiaries and a proportionate share of all assets of all Unconsolidated

Affiliates.

 

            "Material Adverse Effect": A material adverse effect on (a) the

properties, business, operations, financial condition or prospects of the

Borrowers or the SPE Entities, (b) the ability of the Borrowers or the SPE

Entities to perform their obligations under any of the Loan Documents to which

it is a party, (c) the validity or enforceability of any of the Loan Documents,

(d) the rights and remedies of the Agent under any of the Loan Documents, (e)

the timely payment of any amounts payable under the Loan Documents and (f) the

Fair Market Value of any Eligible Asset.

 

            "Material Contracts": (a) any contract or other agreement, written

or oral, of the Borrowers or any of their Subsidiaries involving in the

aggregate a monetary liability of or to any such Person in excess of $5,000,000

(or, solely with respect to the Borrowers and not in respect of their

Subsidiaries, in an amount in excess of $250,000) and (b) any other contract,

agreement, written or oral, of the Borrowers or any of their Subsidiaries the

failure to comply with which could reasonably be expected to have a Material

Adverse Effect.

 

 

                                      -8-

<PAGE>

 

            "Moody's": Moody's Investors Service, Inc.

 

            "Multiemployer Plan": A multiemployer plan defined as such in

Section 3(37) of ERISA to which contributions have been or are required to be

made by the Borrowers or any ERISA Affiliate and that is covered by Title IV of

ERISA.

 

            "Negative Pledge Agreement": The Negative Pledge Agreement,

substantially in the form attached hereto as Exhibit I.

 

             "Net Income": With respect to any Person for any period, the net

income of such Person for such period as determined in accordance with GAAP.

 

            "Net Proceeds": With respect to any Equity Issuance or Debt Issuance

by a Person, the aggregate amount of all cash and the Fair Market Value of all

other property received by such Person in respect of such Equity Issuance or

Debt Issuance net of investment banking fees, legal fees, accountants' fees,

underwriting discounts and commissions and other customary fees and expenses

actually incurred by such Person in connection with such Equity Issuance.

 

            "Non-Recourse Indebtedness": With respect to a Person, Indebtedness

for borrowed money in respect of which recourse for payment (except for

customary exceptions for fraud, misapplication of funds, environmental

indemnities, and other similar exceptions to non-recourse liability) is

contractually limited to specific assets of such Person encumbered by a Lien

securing such Indebtedness.

 

            "Notice of Borrowing": A request for a Loan borrowing pursuant to

Section 2.01(b)(i).

 

            "Obligations": Without duplication, (i) all of the obligations

(including principal, interest, fees, reimbursements, indemnification

obligations and other amounts) of the Borrowers to the Lenders (including the

Initial Lender) and the Administrative Agent, whenever arising, under this Loan

Agreement, the Notes or any of the other Loan Documents (including, but not

limited to, any interest accruing after the occurrence of a filing of a petition

of bankruptcy under the Bankruptcy Code with respect to any Borrower or their

Subsidiaries, regardless of whether such interest is an allowed claim under the

Bankruptcy Code), (ii) all liabilities and obligations, whenever arising, owing

from any Borrower or their Subsidiaries arising under any Interest Rate

Protection Agreement, and (iii) all liabilities and obligations, whenever

arising, owing from any Borrower or their Subsidiaries to the Lenders (including

the Initial Lender), the Agent or any of their Affiliates.

 

            "Parent": Capital Lease Funding, Inc., a Maryland corporation.

 

            "Participant": The meaning set forth in Section 9.03(b).

 

            "Payment Date": For a particular Eligible Asset, the thirtieth

(30th) day after (a) the initial advance by Lender with respect to such Eligible

Asset and (b) any prior Payment Date; provided, however, that no Payment Date

shall occur on the Terminal Payment Date.

 

            "PBGC": The Pension Benefit Guaranty Corporation or any entity

succeeding to any or all of its functions under ERISA.

 

            "Person": Any individual, corporation, company, voluntary

association, partnership, joint venture, limited liability company, trust,

unincorporated association or government (or any agency, instrumentality or

political subdivision thereof).

 

            "Plan": An employee benefit or other plan established or maintained

by any Seller or any ERISA Affiliate and covered by Title N of ERISA, other than

a Multiemployer Plan,

 

            "Pledge and Security Agreement": Each of the Pledge and Security

Agreements, made by Caplease and the Parent in favor of the Initial Lender, as

amended, restated, supplemented or in the form of Exhibit D attached hereto,

otherwise modified and in effect from time to time.

 

 

                                      -9-

<PAGE>

 

            "Preferred Dividends": For any period and without duplication, all

Restricted Payments paid or accrued during such period on Preferred Securities

issued by the Borrowers or their Subsidiaries. Preferred Dividends shall not

include dividends or distributions paid or payable (a) solely in Equity

Interests (other than mandatory redeemable stock) payable to holders of such

class of Equity Interests; (b) to the Borrowers or their Subsidiaries; or (c)

constituting or resulting in the redemption of Preferred Securities, other than

scheduled redemptions not constituting balloon, bullet or similar redemptions in

full.

 

            "Preferred Securities": With respect to any Person, Equity Interests

in such Person that are entitled to preference or priority over any other Equity

Interest in such Person or the Indebtedness in respect of any payments on such

preferred Equity Interests, including but not limited to, the payment (or

accrual) of dividends or distribution of assets upon liquidation, or both.

 

            "Property": Any right or interest in or to property of any kind

whatsoever, whether real, personal or mixed and whether tangible or intangible.

 

             "Purchase Price": The Fair Market Value of aggregate consideration

given, whether in the form of cash, property or other assets, by any SPE Entity,

to acquire an Eligible Asset and shall include, without limitation, any

contingent consideration payable in respect thereof and any Escrowed Funds.

 

            "Purchased Asset": As of any time, any asset (including, without

limitation, (a) leasehold interests and (b) interests in Preferred Securities

and participating mortgages in which the lender's interest therein is

characterized as equity according to GAAP) owned directly by Borrowers or any

SPE Entity.

 

            "Recovery Event": Receipt by the Borrowers or any of their SPE

Entities of any cash insurance proceeds or condemnation award payable by reason

of theft, loss, physical destruction or damage, taking or similar event with

respect to any Eligible Asset, other than obsolete property or assets no longer

used or useful in the business of the Borrowers or such SPE Entities.

 

            "Regulations T, U and X": Regulations T, U and X of the Board of

Governors of the Federal Reserve System (or any successor), as the same may be

modified and supplemented and in effect from time to time.

 

            "REIT": A "real estate investment trust" within the meaning of the

Code.

 

            "Reportable Event": Any of the events set forth in Section 4043(c)

of ERISA, other than those events as to which the thirty day notice period is

waived under Sections .21, -22, .23, .26, .27 or .28 of PBGC Reg. 3-4043.

 

            "Repurchase Agreement": The Master Repurchase Agreement, dated as of

September 22, 2004, as amended, among Initial Lender, as buyer, Caplease and

certain special-purposes entity subsidiaries of Caplease, as Sellers, and

Parent, as guarantor.

 

            "Requested Borrowing Date": The date specified in Section

2.01(b)(ii).

 

            "Requirement of Law": As to any Person, the certificate of

incorporation and bylaws or other organizational or governing documents of such

Person, and any law, treaty, rule or regulation or determination of an

arbitrator or a court or other Governmental Authority, in each case applicable

to or binding upon such Person or any of its property or to which such Person or

any of its property is subject.

 

            "Requisite Lenders": As of any date, Lenders holding Revolving

Commitment Percentages totaling at least 66-2/3%, provided, that any Lender that

is in default hereunder shall not be included in calculating such Revolving

Commitment Percentages.

 

            "Responsible Officer": As to any Person, the chief executive

officer, the chief financial officer, the chief accounting officer, the

treasurer or the chief operating officer of such Person.

 

            "Restricted Payment": (a) any dividend or other distribution, direct

or indirect, on account of any Equity Interest of the Borrowers or any

Subsidiary now or hereafter outstanding, except a dividend payable solely in

Equity Interests of identical class to the holders of that class; (b) any

redemption, conversion, exchange, retirement, sinking fund or similar payment,

purchase or other acquisition for value, direct or indirect, of any Equity

Interest of the Borrowers or any Subsidiary now or hereafter outstanding; and

(c) any payment made to retire, or to obtain the surrender of, any outstanding

warrants, options or other rights to acquire any Equity Interests of the

Borrowers or any Subsidiary now or hereafter outstanding.

 

 

                                      -10-

<PAGE>

 

            "Revolving Commitment": With respect to each Lender, the commitment

of such Lender to make Loans in an aggregate principal amount at any time

outstanding up to such Lender's Revolving Commitment as specified in Schedule

1.01(B), as such amount may be reduced from time to time in accordance with the

provisions hereof.

 

            "Revolving Commitment Percentage": For each Lender, the percentage

identified as its Revolving Commitment Percentage on Schedule 1.01(B), as such

percentage may be modified in connection with any assignment made in accordance

with the provisions of Section 9.03(c).

 

            "Revolving Commitment Amount": The meaning set forth in Section

2.01(a).

 

            "Revolving Note": That Revolving Note, in substantially the form

attached hereto as Exhibit A.

 

            "S&P": Standard & Poor's Ratings Services, a division of The McGraw

Hill Companies, Inc.

 

            "SEC": The Securities and Exchange Commission, or any successor

thereto.

 

            "SEC Off-Balance Sheet Rules": The Disclosure in Management's

Discussion and Analysis About Off-Balance Sheet Arrangements, Securities Act

Release No. 33-8182, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified at 17 CFR pts.

228, 229 and 249).

 

            "Secured Indebtedness": With respect to any Person, (a) all

Indebtedness of such Person that is secured in any manner by any lien or

encumbrance on any property plus (b) such Person's pro rata share of the Secured

Indebtedness of any of such Person's Unconsolidated Affiliates.

 

            "Secured Recourse Indebtedness": All Total Indebtedness that is

Secured Indebtedness and is not Nonrecourse Indebtedness.

 

            "Security Documents": The Pledge and Security Agreement, the Deposit

Account Control Agreement, and such other documents executed and delivered in

connection with the granting, attachment and perfection of the Administrative

Agent's security interests and liens arising thereunder, including, without

limitation, UCC financing statements.

 

            "SPE Entity": A Subsidiary of the Parent or Caplease formed solely

for the purposes of owning real estate which is an Eligible Asset hereunder and

which Subsidiary shall have such corporate and capital structure, and have

governing documents having such terms and restrictions, as shall be consistent

with bankruptcy-remote "special-purpose entities" in the form of Exhibit C

attached hereto or otherwise reasonably satisfactory to the Agent.

Notwithstanding the foregoing, SPE Entities shall not be required to have

independent directors, and "non-consolidation" opinions in connection with any

SPE Entity shall only be required if requested by the Agent; and whenever any

real estate asset is no longer an Eligible Asset hereunder, the Subsidiary that

owns such asset shall no longer be considered an SPE Entity hereunder.

 

            "Subsidiary": With respect to any Person, any corporation,

partnership, limited liability company or other entity of which at least a

majority of the securities or other ownership interests having by the terms

thereof ordinary voting power to elect a majority of the board of directors or

other persons performing similar functions of such corporation, partnership,

limited liability company or other entity (irrespective of whether or not at the

time securities or other ownership interests of any other class or classes of

such corporation, partnership or other entity shall have or might have voting

power by reason of the happening of any contingency) is at the time directly or

indirectly owned or controlled by such Person or one or more Subsidiaries of

such Person or by such Person and one or more Subsidiaries of such Person.

 

 

                                      -11-

<PAGE>

 

            "Tax Laws": The meaning given to such term in Section 2.12.

 

            "Taxes": The meaning given to such term in Section 2.12.

 

            "Terminal Payment Date": As for any Eligible Asset, the date that is

90 days after the initial advance with respect to such Eligible Asset.

 

            "Termination Date": August 25, 2006, subject to earlier termination

upon (i) any breach by the Borrowers hereunder and (ii) the termination of

either the Repurchase Agreement or the WIH Facility.

 

            "Transfer Effective Date": The meaning set forth in each Commitment

Transfer Supplement.

 

            "2.12 Certificate": The meaning set forth in Section 2.12.

 

            "UCC Financing Statement": A financing statement on Form UCC-1 or

the proper national UCC form, naming Initial Lender as "Secured Party" and

Caplease and/or any applicable SPE Entity as "Debtor" and describing the

Collateral.

 

            "Unconsolidated Affiliates": With respect to any Person, any other

Person in whom such Person holds an Investment, which Investment is accounted

for in the financial statements of such Person on an equity basis of accounting

and whose financial results would not be consolidated under GAAP with the

financial results of such Person on the consolidated financial statements of

such Person.

 

            "Underwriting Package": The following documentation in respect of

the Subsidiary's contemplated acquisition and/or financing of real property

pursuant to this Agreement: (a) Phase I (and, if applicable, Phase II)

environmental reports; (b) engineering reports (if applicable); (c) appraisals

(to the extent conducted by the Borrowers or the SPE Entity and available); (d)

title policy commitments; (e) ALTA surveys; (f) agreement for purchase and sale

of the underlying Eligible Asset if the Purchased Asset is an acquisition

financing; (g) an executive summary, presenting in reasonable detail, the

acquisition of such Eligible Asset; (h) the name and credit rating of the tenant

leasing the Eligible Asset; and (i) copies of any (i) lease and (ii) escrow or

holdback agreements or arrangements to be entered into in connection with, or

arising out of, the acquisition of such Eligible Asset.

 

            "Uniform Commercial Code" or "UCC": The Uniform Commercial Code as

in effect on the date hereof in the State of New York; provided that if by

reason of mandatory provisions of law, the perfection, the effect of perfection

or nonperfection, or the priority of the security interest in any Collateral is

governed by the Uniform Commercial Code as in effect in a jurisdiction other

than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code

as in effect in such other jurisdiction for purposes of the provisions hereof

relating to such perfection, effect of perfection or nonperfection, or priority.

 

            "Unsecured Indebtedness": Total Indebtedness that is not Secured

Indebtedness.

 

            "Unsecured Interest Expense": All Interest Expense of the Borrowers

and their Subsidiaries attributable to Unsecured Indebtedness of the Borrowers

and their Subsidiaries for the most recent period.

 

            "USA PATRIOT Act": The USA PATRIOT Act, Title III of Pub. L. 107-56,

signed into law October 26, 2001.

 

            "Voting Interests": With respect to any Person, Equity Interests

issued by such Person the holders of which are ordinarily, in the absence of

contingencies, entitled to vote for the election of directors (or persons

performing similar functions) of such Person, even though the right so to vote

has been suspended by the happening of such a contingency.

 

            "Wachovia Indebtedness": All Indebtedness of Borrowers provided by

the Initial Lender or any of its Affiliates, and shall include, without

limitation, Indebtedness arising under the WIH Facility, the Repurchase

Agreement and any Wachovia Interest Rate Protection Agreements.

 

 

                                       -12-

<PAGE>

 

            "Wachovia Interest Rate Protection Agreements": Any and all of the

Borrowers' or any of their Affiliate' obligations arising under, or in

connection with, any Interest Rate Protection Agreements to which the Initial

Lender or any of its Affiliates is a counterparty thereto.

 

            "WIH Facility": The Revolving Loan Agreement in aggregate principal

amount of $25,000,000, dated as even date hereof, among the Borrowers and

Wachovia Investment Holdings, LLC, in its respective capacities as initial

Lender an as administrative agent for lenders party thereto from time to time

and all accompanying documentation associated therewith.

 

      Section 1.02 Other Definitional Provisions.

 

            (a) Unless otherwise specified therein, all terms defined in this

Agreement shall have the defined meanings when used in the Notes or other Loan

Documents or any certificate or other document made or delivered pursuant

hereto.

 

            (b) The meanings given to terms defined herein shall be equally

applicable to both the singular and plural forms of such terms.

 

            (c) The words "hereof," "herein" and "hereunder" and words of

similar import when used in this Agreement shall refer to this Agreement as a

whole and not to any particular provision of this Agreement, and Section,

subsection, Schedule and Exhibit references are to this Agreement unless

otherwise specified.

 

            (d) The words "include," "includes" and "including" shall be deemed

to be followed by "without limitation" whether or not they are in fact followed

by such words or words of like import.

 

            (e) The words "writing," "written" and comparable terms shall refer

to printing, typing, computer disk, e-mail and other means of reproducing words

in a visible form.

 

            (f) References to any agreement or contract are to such agreement or

contract as amended, restated, supplemented or otherwise modified from time to

time in accordance with the terms hereof and thereof. References to any Person

include the successors and permitted assigns of such Person.

 

      Section 1.03 Accounting Terms.

 

            Unless otherwise specified herein, all accounting terms used herein

shall be interpreted, all accounting determinations hereunder shall be made, and

all financial statements required to be delivered hereunder shall be prepared in

accordance with GAAP applied on a basis consistent with the most recent audited

Consolidated financial statements of Parent delivered to the Lenders.

 

            The Borrowers shall deliver to the Administrative Agent and each

Lender at the same time as the delivery of any periodic financial statements, to

the extent not disclosed in such periodic financial statements, (i) a

description in reasonable detail of any material change in the application of

accounting principles employed in the preparation of such financial statements

from those applied in the most recently preceding periodic financial statements

and (ii) a reasonable estimate of the effect on the financial statements on

account of such changes in application.

 

      Section 1.04 Computation of Time Periods.

 

            All time references in this Loan Agreement and the other Loan

Documents shall be to Charlotte, North Carolina time unless otherwise indicated.

For purposes of computation of periods of time hereunder, the word "from" means

"from and including" and the words "to" and "until" each mean "to but

excluding."

 

                                   ARTICLE II

 

                           THE LOANS; AMOUNT AND TERMS

 

      Section 2.01 Loans.

 

 

                                      -13-

<PAGE>

 

            (a) Revolving Commitment. During the Commitment Period, subject to

the terms and conditions hereof, the Initial Lender agrees initially and, upon

an assignment of any portion of the Revolving Commitment to one or more Lenders,

all Lenders, including, without limitation, the Initial Lender, severally, agree

to make revolving credit loans (each a "Loan" and collectively the "Loans") to

the Borrowers from time to time for the purposes hereinafter set forth;

provided, however, that (i) in the event of an assignment of any portion of the

Revolving Commitment Amount to one or more Lenders, with regard to each Lender

individually, the sum of such Lender's share of outstanding Loans shall not

exceed such Lender's Revolving Commitment Percentage of the aggregate Revolving

Commitment Amount, and (ii) with regard to the Lenders collectively, the sum of

the aggregate amount of outstanding Loans shall not exceed the aggregate

Revolving Commitment Amount then in effect. For purposes hereof, the aggregate

amount available hereunder shall be SEVENTY-FIVE MILLION DOLLARS ($75,000,000)

(the "Revolving Commitment Amount"). Loans shall consist of LIBOR Rate Loans and

may be repaid and reborrowed in accordance with the provisions hereof. LIBOR

Rate Loans shall be made by each Lender at its LIBOR Lending Office.

 

            (b) Revolving Loan Borrowings.

 

            (i) Notice of Borrowing. The Borrowers shall request a Loan

       borrowing by written notice (or telephonic notice promptly confirmed in

      writing which confirmation may be by fax) to the Agent in the form of the

      Notice of Borrowing attached as Exhibit J not later than 11:00 a.m. on or

      before seven (7) Business Days prior to the date of the requested

      borrowing (unless a shorter notice period is approved by the Agent). Each

      such request for borrowing shall be irrevocable (except in the event of a

      default of the seller of the subject asset resulting in a failure to

      close) and shall specify (A) that a Loan is requested, (B) the date of the

      requested borrowing (which shall be a Business Day) and (C) the aggregate

      principal amount to be borrowed. The Administrative Agent shall give

      notice to each Lender promptly upon receipt of each Notice of Borrowing,

      the contents thereof and each such Lender's share thereof.

 

            (ii) Delivery of Underwriting Package. No later than concurrently

      with the delivery to the Agent of the Notice of Borrowing (unless

      otherwise approved by the Agent), the Borrowers shall deliver to the Agent

      an Underwriting Package for each proposed Eligible Asset. The Agent shall

      notify the Borrowers on or prior to two (2) Business Days preceding the

      date specified in the Notice of Borrowing for the making of Loans (the

      "Requested Borrowing Date") whether the Agent has (i) rejected the

      proposed Loan based on the Agent's review of the Underwriting Package,

      (ii) has agreed to the proposed Loan or (iii) has agreed to make the

      requested Loan subject to remediation of any deficiencies in the

      Underwriting Package. The Borrowers shall use commercially reasonable

      efforts to remedy any deficiencies in the Underwriting Package on or prior

      to the Requested Borrowing Date. If such deficiencies remain unremedied as

      of the Requested Borrowing Date and, in the Agent's reasonable judgment,

      such deficiencies are material, the Agent shall not be obligated to make

      the Loan to the Borrowers requested in the Notice of Borrowing and the

      Agent may, in its sole discretion, refuse to honor the submitted Notice of

      Borrowing, which shall thereafter become void automatically without

      further action by any party.

 

            (iii) Minimum Amounts. Each Loan shall be in a minimum aggregate

      amount of $2,000,000 (or the remaining amount of the Revolving Commitment

      Amount, if less).

 

            (iv) Advances. Each Lender will make its Revolving Commitment

      Percentage of each approved Loan borrowing available to the Administrative

      Agent for the account of the Borrowers at the office of the Administrative

      Agent identified in the signature page to this Agreement, or at such other

      office as the Administrative Agent may designate in writing, upon

      reasonable advance notice by 1:00 P.M. on the date specified in the

      applicable Notice of Borrowing, in Dollars and in funds immediately

       available to the Administrative Agent. Such borrowing will then be made

      available to the Borrowers by the Administrative Agent by crediting the

      account of the Borrower on the books of such office with the aggregate of

      the amounts made available to the Administrative Agent by the Lenders and

      in like funds as received by the Administrative Agent.

 

            (c) Use and Repayment of Loan Proceeds. The proceeds of all Loans

shall be used solely to finance an Eligible Asset; provided, however, that no

Loan proceeds in excess of the product of the (x) Fair Market Value of such

Eligible Asset times (y) applicable Advance Rate then in effect and applicable

to such Eligible Asset may be used to finance such Eligible Asset. The Borrowers

shall repay on (i) each Payment Date that occurs prior to the Terminal Payment

Date, an amount sufficient to reduce the then-outstanding Advance Rate on such

Eligible Asset by 5% (i.e., if an Eligible Asset had a 65% Advance Rate, the

Loan attributable to such Eligible Asset would be repaid until the Advance Rate

had been reduced to 60%) and (ii) the Terminal Payment Date, the amount of Loan

proceeds used to finance such Eligible Asset less any amounts repaid under

clause (i) hereof. Notwithstanding anything in this Section 2.01(c) to the

contrary, the principal amount of all Loans shall be due and payable in full on

the Termination Date. Amounts repaid hereunder may be reborrowed in accordance

with the terms hereof.

 

 

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            (d) Additional Loan Proceeds. Without the prior written consent of

the Agent, no additional Loan proceeds may be used to finance any portion of the

Purchase Price of any Eligible Asset if any Loan proceeds were used at any time

during the term of this Agreement to initially finance any portion of the

Purchase Price of such Eligible Asset.

 

            (e) Interest. Subject to the provisions of Section 2.04, Loans shall

be comprised of LIBOR Rate Loans and each such LIBOR Rate Loan shall bear

interest at a per annum rate equal to the sum of the LIBOR Rate plus the

Applicable Premium. Interest on Loans shall be payable in arrears on each

Interest Payment Date.

 

            (f) Revolving Notes. The Borrowers' obligation to pay each Lender's

Loans shall be evidenced by a Revolving Note made payable to such Lender in

substantially the form of Exhibit A, if requested by such Lender.

 

      Section 2.02 Payments to Collection Account. Upon the delivery of one (1)

Business Day's written notice from the Administrative Agent, the Borrowers shall

pay all amounts received from the Eligible Assets on or after receipt of the

notice into the collection account established pursuant to the terms of the

Deposit Account Control Agreement (the "Collection Account"). Any failure to

make such a mandatory payment into the Collection Account within one (1)

Business Day as set forth above, shall be an Event of Default pursuant to

Section 6.01(a). Notwithstanding the foregoing mandatory payment obligation, all

other payment obligations arising under the Loan Documents may, at the option of

the Borrowers, also be deposited into the Collection Account.

 

      Section 2.03 Prepayments.

 

            (a) Optional Prepayments. The Borrowers shall have the right to make

optional prepayments hereunder from time to time upon the delivery of five (5)

Business Days' irrevocable notice; provided, however, that each optional

prepayment of Loans shall be in a minimum principal amount of $2,000,000.

Amounts prepaid under this Section 2.03(a) shall be applied first, to the extent

amounts are outstanding under the WIH Facility, to the repayment of such amounts

(pro rata with respect to advances under the WIH Facility) and then, to the

outstanding Loans hereunder (pro rata with respect to all such advances);

provided, that each Lender shall receive its pro rata share of any such

prepayment based on its Revolving Commitment Percentage. All prepayments under

this Section 2.03(a) shall be subject to Section 2.11. All prepayments under

this Facility shall, to the extent required under the Fee Letter, be accompanied

by the Exit Fee. Interest on the principal amount prepaid shall be due and

payable on any date that a prepayment is made hereunder through the date of

prepayment. Amounts prepaid on the Loans may be reborrowed in accordance with

the terms hereof.

 

            (b) Mandatory Prepayments.

 

            (i) Mandatory Prepayments. Pursuant to Section 2.01(c), at each

      Payment Date, mandatory prepayments shall be applied in accordance with

      such section.

 

            (ii) Revolving Commitment Amount. If at any time after the Closing

      Date, the sum of the aggregate principal amount of outstanding Loans shall

      exceed the aggregate Revolving Commitment Amount then in effect, the

      Borrowers immediately shall prepay the Loans in an amount sufficient to

      eliminate such excess (such prepayment to be applied as set forth in

      clause (vii) below).

 

            (iii) Eligible Asset Dispositions. Promptly following any Eligible

      Asset Disposition, the Borrowers shall prepay the Loans in an aggregate

      amount equal to the lesser of (x) 100% of the net proceeds derived from

      such Eligible Asset Disposition or (y) the portion of the Loans

      attributable to such Eligible Assets (such prepayment to be applied as set

      forth in clause (vii) below).

 

 

                                      -15-

<PAGE>

 

            (iv) Issuances of Debt and Equity. Immediately upon receipt by the

      Borrowers or any of their Subsidiaries of proceeds from any Equity

      Issuance or Debt Issuance, the Borrowers shall prepay the Loans in an

      aggregate amount equal to 100% of the Net Proceeds of such Equity Issuance

      or Debt Issuance, as the case may be (such prepayment to be applied as set

      forth in clause (vii) below).

 

            (v) Recovery Event. Promptly upon receipt, the Borrowers shall

      prepay the Loans in an aggregate amount equal to 100% of the net proceeds

      received in connection with a Recovery Event (such prepayment to be

      applied as set forth in clause (vii) below).

 

            (vi) Adjustment Event. Immediately upon the occurrence and

      continuation of an Adjustment Event, the Borrowers shall repay to Agent an

      amount sufficient to reduce borrowings outstanding hereunder to an amount

      equal the product of the (a) adjusted Fair Market Value for the affected

      Eligible Asset resulting therefrom and (b) applicable Advance Rate (such

      prepayment to be applied to the affected Loan).

 

            (vii) Application of Mandatory Prepayments. All amounts required to

      be paid pursuant to Section 2.03(b)(ii) shall be applied pro rata to the

      then-outstanding Loans. All amounts required to be paid pursuant to

      Section 2.03(b)(iii), (v) and (vi) shall be applied to repay the Loans

      attributable to Eligible Assets which were disposed, refinanced or which

      experienced a Recovery Event or Adjustment Event, as the case may be. All

      amounts (A) required to be paid pursuant to Section 2.03(b)(iv) and (B) in

      excess of amounts used to repay Loans as provided in the immediately

      preceding sentence shall be applied:

 

            FIRST, to the payment of any Obligations (as such term is defined in

      the WIH Facility) of the Borrowers then outstanding under the WIH Facility

      in the priorities set forth in such WIH Facility until fully paid and

      discharged;

 

            SECOND, to the payment of any Obligations of the Borrowers then

      outstanding under this Agreement and the other Loan Documents in the

      manner identified in Section 2.06(b) until fully paid and discharged;

 

            THIRD, to the payment of any obligations of the Borrowers then

      outstanding under the Repurchase Agreement in the priorities set forth in

      the Repurchase Agreement until fully paid and discharged; and

 

            FOURTH, to the payment of the surplus, if any, to whoever may be

      lawfully entitled to receive such surplus.

 

             All prepayments under this Section 2.03(b) shall be subject to

      Section 2.11 and be accompanied by: (A) interest on the principal amount

      prepaid through the date of prepayment; and (B) to the extent required by

      the Fee Letter, the Exit Fee.

 

      Section 2.04 Default Rate and Payment Dates.

 

            (a) (i) If all or a portion of the principal amount of any Loan

shall not be paid when due, such overdue amount shall bear interest at a rate

per annum which is equal to the rate that would otherwise be applicable thereto

plus 5.0% (the "Default Rate"), or (ii) if any interest payable on the principal

amount of any Loan or any fee or other amount, including the principal amount of

any Loan, payable hereunder shall not be paid when due (whether at the stated

maturity, by acceleration or otherwise), such overdue amount shall bear interest

at a rate per annum which is equal to the Default Rate, in each case from the

date of such non-payment until such amount is paid in full (after as well as

before judgment). Upon the occurrence, and during the continuance, of any other

Event of Default hereunder, the principal of and, to the fullest extent

permitted by law, interest on the Loans and any other amounts owing hereunder or

under the other Loan Documents shall bear interest, payable on demand, at a per

annum rate which is (A) in the case of principal, the rate that would otherwise

be applicable thereto plus 5.0% or (B) in the case of interest, fees or other

amounts, the Default Rate (after as well as before judgment). The Requisite

Lenders shall have the right to revoke the imposition of any default interest

imposed under this Section 2.04(a).

 

            (b) Interest on each Loan shall be payable in arrears on each

Interest Payment Date; provided that interest accruing pursuant to paragraph (a)

of this Section 2.04 shall be payable from time to time on demand.

 

 

                                      -16-

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      Section 2.05 Computation of Interest and Fees.

 

            (a) All fees, interest and all other amounts payable hereunder shall

be calculated on the basis of a 360 day year for the actual days elapsed. The

Administrative Agent shall as soon as practicable notify the Borrowers and the

Lenders of each determination of a LIBOR Rate on the Business Day of the

determination thereof.

 

            (b) Each determination of an interest rate by the Administrative

Agent pursuant to any provision of this Loan Agreement shall be conclusive and

binding on the Borrowers and the Lenders in the absence of manifest error. The

Administrative Agent shall, at the request of the Borrowers, deliver to the

Borrowers a statement showing the computations used by the Administrative Agent

in determining any interest rate.

 

            (c) It is the intent of the Lenders and the Borrowers to conform to

and contract in strict compliance with applicable usury law from time to time in

effect. All agreements between the Lenders and the Borrowers are hereby limited

by the provisions of this paragraph which shall override and control all such

agreements, whether now existing or hereafter arising and whether written or

oral. In no way, nor in any event or contingency (including but not limited to

prepayment or acceleration of the maturity of any Obligation), shall the

interest taken, reserved, contracted for, charged, or received under this Loan

Agreement, under the Revolving Notes or otherwise, exceed the maximum

nonusurious amount permissible under applicable law. If, from any possible

construction of any of the Loan Documents or any other document, interest would

otherwise be payable in excess of the maximum nonusurious amount, any such

construction shall be subject to the provisions of this paragraph and such

interest shall be automatically reduced to the maximum nonusurious amount

permitted under applicable law, without the necessity of execution of any

amendment or new document. If any Lender shall ever receive anything of value

which is characterized as interest on the Loans under applicable law and which

would, apart from this provision, be in excess of the maximum nonusurious

amount, an amount equal to the amount which would have been excessive interest

shall, without penalty, be applied to the reduction of the principal amount

owing on the Loans and not to the payment of interest, or refunded to the

Borrowers or the other payor thereof if and to the extent such amount which

would have been excessive exceeds such unpaid principal amount of the Loans. The

right to demand payment of the Loans or any other Indebtedness evidenced by any

of the Loan Documents does not include the right to receive any interest which

has not otherwise accrued on the date of such demand, and the Lenders do not

intend to charge or receive any unearned interest in the event of such demand.

All interest paid or agreed to be paid to the Lenders with respect to the Loans

shall, to the extent permitted by applicable law, be amortized, prorated,

allocated, and spread throughout the full stated term (including any renewal or

extension) of the Loans so that the amount of interest on account of such

indebtedness does not exceed the maximum nonusurious amount permitted by

applicable law.

 

      Section 2.06 Pro Rata Treatment and Payments.

 

            (a) Allocation of Payments Before Event of Default. Each borrowing

of Loans shall be made pro rata by the Lenders according to the respective

Revolving Commitment Percentages of the Lenders. Each payment under this Loan

Agreement or any Revolving Note shall be applied, first, to any fees then due

and owing by the Borrowers under this Agreement, second, to interest then due

and owing hereunder and under the Revolving Notes and, third, to principal then

due and owing hereunder and under the Revolving Notes. Each payment on account

of any fees shall be made pro rata in accordance with the respective amounts due

and owing. Each payment (other than prepayments) by the Borrowers on account of

principal of and interest on the Loans shall be applied to such Loans in

accordance with the terms of Section 2.06(b) hereof. Except to the extent

provided in Section 2.03, each mandatory prepayment on account of principal of

the Loans shall be applied in accordance with Section 2.06(b). All payments

(including prepayments) to be made by the Borrowers on account of principal,

interest and fees shall be made without defense, set-off or counterclaim (except

as provided in Section 2.12(b)) and shall be made to the Administrative Agent

for the account of the Lenders at the Administrative Agent's office specified on

signature page hereto in Dollars and in immediately available funds not later

than 1:00 P.M. on the date when due. The Administrative Agent shall distribute

such payments to the Lenders entitled thereto promptly upon receipt in like

funds as received. If any payment hereunder becomes due and payable on a day

other than a Business Day, such payment shall be extended to the next succeeding

Business Day, and, with respect to payments of principal, interest thereon shall

be payable at the then applicable rate during such extension.

 

            (b) Allocation of Payments After Exercise of Remedies.

Notwithstanding any other provisions of this Loan Agreement to the contrary,

after the Revolving Commitments shall have been terminated, and the Loans and

all other amounts under the Loan Documents shall have become due and payable in

accordance with the terms of Section 6.02 hereof, except as otherwise required

pursuant to the terms of