Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KSZE+R08RDwpCqXDgEStPcCcaACVbamsEK6EgBwADicF8rUH2mufo3qYT5doqA7q B5WExQ7iXZvnJWi72rk76w== 0001193125-07-025794.txt : 20070209 0001193125-07-025794.hdr.sgml : 20070209 20070209170802 ACCESSION NUMBER: 0001193125-07-025794 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20070209 DATE AS OF CHANGE: 20070209 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Meruelo Maddux Properties, Inc. CENTRAL INDEX KEY: 0001375083 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-82513 FILM NUMBER: 07598901 BUSINESS ADDRESS: STREET 1: 761 TERMINAL STREET STREET 2: BUILDING 1, SECOND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90021 BUSINESS PHONE: 213-291-2800 MAIL ADDRESS: STREET 1: 761 TERMINAL STREET STREET 2: BUILDING 1, SECOND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90021 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Meruelo Richard CENTRAL INDEX KEY: 0001382074 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: BUSINESS PHONE: 213-291-2800 MAIL ADDRESS: STREET 1: 761 TERMINAL STREET STREET 2: BUILDING 1, SECOND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90021 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

Meruelo Maddux Properties, Inc.

(Name of Issuer)

Common Stock ($0.01 par value)

(Title of Class of Securities)

590473 10 4

(CUSIP Number)

Jeffrey M. Sullivan, Esq.

DLA Piper US LLP

4141 Parklake Avenue, Suite 300

Raleigh, North Carolina 27612

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

January 30, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: ¨

CUSIP No. 590473 10 4


(1)	NAME OF REPORTING PERSON: I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only): Richard Meruelo
(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
(3)	SEC USE ONLY
(4)	SOURCE OF FUNDS OO BK
(5)	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨
(6)	CITIZENSHIP OR PLACE OF ORGANIZATION United States

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH

(7) SOLE VOTING POWER

37,992,206⁽¹⁾

(8) SHARED VOTING POWER

(9) SOLE DISPOSITIVE POWER

37,992,206

(10) SHARED DISPOSITIVE POWER


(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 37,992,206⁽¹⁾
(12)	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 47.5%
(14)	TYPE OF REPORTING PERSON IN

⁽¹⁾

Consists of (i) 26,342,309 shares of common stock, par value $0.01 per share (“Common Stock”), of Meruelo Maddux Properties, Inc. (the “Company” or the “Issuer”) held by Richard Meruelo, as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989, which were issued on January 30, 2007; (ii) 11,649,797 shares of Common Stock of the Company held by Merco Group - Roosevelt Building, LLC, in which Richard Meruelo has a controlling interest and his minor children have minority interests, which were issued on January 30, 2007; and (iii) 100 shares of Common Stock of the Company held by Richard Meruelo, as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989, which were issued in connection with the initial capitalization of the Company.

Item 1. Security and Issuer

The class of equity securities to which this initial filing relates is the common stock of Meruelo Maddux Properties, Inc., a Delaware corporation (the “Company” or the “Issuer”). The Company has its principal executive offices at 761 Terminal Street, Building 1, Second Floor, Los Angeles, California 90021.

Item 2. Identity and Background

(a)

The person filing this statement is Richard Meruelo.

(b)

Mr. Meruelo’s business address is c/o Meruelo Maddux Properties, Inc., 761 Terminal Street, Building 1, Second Floor, Los Angeles, California 90021.

(c)

Mr. Meruelo’s principal occupation is Chairman of the Board and Chief Executive Officer of Meruelo Maddux Properties, Inc.

(d)

During the last five years, Mr. Meruelo has not been convicted in a criminal proceeding.

(e)

During the last five years, Mr. Meruelo was not a party to any civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)

Mr. Meruelo is a United States citizen.

Item 3. Source and Amount of Funds or Other Consideration

Mr. Meruelo acquired 34,992,106 shares of Common Stock of the Company in a private offering that was consummated on January 30, 2007. Of these shares, 26,242,309 were issued to Richard Meruelo, as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989 which benefits his minor children. The remaining 8,749,797 shares were issued to Merco Group – Roosevelt Building, LLC, in which Mr. Meruelo has a controlling interest and his minor children have minority interests. These shares of Common Stock were acquired by Mr. Meruelo indirectly in the private offering in exchange for his ownership interests in entities owning the initial properties acquired by the Company. The acquisition of the Company’s initial properties was consummated in connection with the Company’s initial public offering, which was also consummated on January 30, 2007.

Mr. Meruelo purchased 3,000,000 shares of Common Stock at the time of the Company’s initial public offering at the initial public offering price of $10.00 per share. Of these shares, 100,000 were issued to Richard Meruelo, as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989. The remaining 2,900,000 shares were issued to Merco Group – Roosevelt Building, LLC. Mr. Meruelo purchased these shares with funds from a $33,000,000 loan from KeyBank National Association. In connection with the loan, Mr. Meruelo pledged 29,000,000 shares of Common Stock to KeyBank National Association as collateral.

Mr. Meruelo acquired 100 shares of restricted stock at the time of the Company’s initial capitalization in July in exchange for $1,500. The shares were issued to Richard Meruelo, as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989.

Item 4. Purpose of Transaction

Mr. Meruelo acquired an aggregate of 34,992,206 shares of Common Stock in the ordinary course of business and investment in connection with the original formation and IPO of the Company. Mr. Meruelo does not have, as of the date hereof, any plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board of directors; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company’s business or corporate structure; (g) any changes in the Company’s charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) causing a class of securities of the Company to become eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those enumerated above. Mr. Meruelo may consider one or more such transactions in the future depending upon factors then existing, such as the market for the Company’s Common Stock and the Company’s then prospects.

Item 5. Interest in Securities of Issuer

(a)

Mr. Meruelo is the beneficial owner of 37,992,206 shares of Common Stock, representing 47.5% of the Common Stock outstanding. The total number of shares outstanding used in calculating this percentage assumes that no LTIP Units, securities that are potentially convertible into shares of Common Stock and issued at the time of the initial public offering, held by other persons are exchanged for shares of Common Stock.

(b)

Mr. Meruelo has sole voting and dispositive power with respect to all shares of Common Stock to which this Schedule 13D relates.

(c)

Other than as described herein, there have been no transactions relating to these securities within the past 60 days.

(d)

Not Applicable.

(e)

Not Applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Mr. Meruelo entered into a Loan Agreement, dated as of January 30, 2007, with KeyBank National Association for a maximum amount of $33,000,000. Funds drawn under the loan were used by Mr. Meruelo to purchase 3,000,000 shares of Common Stock at the time of the Company’s initial public offering at the initial public offering price of $10.00 per share. In connection with the loan, Mr. Meruelo pledged 29,000,000 shares of Common Stock to KeyBank National Association as collateral.

Mr. Meruelo has the right to receive a de minimus amount of partnership interests in the Company’s operating partnership pursuant to the terms of Mr. Meruelo’s employment agreement with the Company and its operating partnership. In addition, the Company has a contingent obligation to issue additional shares of its Common Stock to Richard Meruelo. Mr. Meruelo is an indirect owner of a property that is subject to condemnation proceedings and which was not contributed to the Company at the time of its initial public offering. A note receivable related to that property was contributed to the Company at the time of its initial public offering. If and when the condemnation proceeds are paid and no longer subject to litigation risk, the note receivable is paid and the condemnation is final, Mr. Meruelo, pursuant to the terms of the contribution agreement filed as an exhibit hereto and negotiated and executed in connection with the Company’s acquisition of its initial properties and its initial public offering, will receive additional shares of Common Stock equivalent to a portion of the debt repaid divided by the $10.00 per share initial public offering price of the Company’s Common Stock.

Item 7. Material to be filed as Exhibits

The following exhibits are filed as part of this Schedule 13D:


Exhibit		Description of Exhibit
10.1		Loan Agreement, dated as of January 30, 2007, among Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989, Merco Group — Roosevelt Building, LLC and KeyBank National Association

10.2		Assignment of Interests, dated January 30, 2007, by Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989 to KeyBank National Association

10.3		Assignment of Interests, dated January 30, 2007, by Merco Group — Roosevelt Building, LLC to KeyBank National Association

10.4		Unconditional Guaranty of Payment and Performance, dated January 30, 2007, between Richard Meruelo and KeyBank National Association

10.5		Note, dated January 30, 2007, by Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989 and Merco Group — Roosevelt Building, LLC to KeyBank National Association

10.6		Contribution Agreement dated September 19, 2006, as amended

10.7		Form of Employment Agreement with Mr. Meruelo

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct.

Dated: February 9, 2007

/s/ Richard Meruelo

Richard Meruelo

EX-10.1 2 dex101.htm LOAN AGREEMENT, DATED AS OF JANUARY 30, 2007 Loan Agreement, dated as of January 30, 2007

Exhibit 10.1

LOAN AGREEMENT

Dated as of January 30, 2007

among

RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST

U/D/T DATED SEPTEMBER 15, 1989

AND

MERCO GROUP-ROOSEVELT BUILDING, LLC,

as Borrowers,

KEYBANK NATIONAL ASSOCIATION,

as a Bank,

THE OTHER BANKS WHICH MAY BECOME PARTIES TO THIS AGREEMENT,

and

KEYBANK NATIONAL ASSOCIATION,

as Agent

LOAN AGREEMENT

This LOAN AGREEMENT is made as of the 30th day of January, 2007, by and among RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989, a trust established under the laws of the State of California (the “Trust”), MERCO GROUP-ROOSEVELT BUILDING, LLC, a California limited liability company (“Merco”; Merco and Trust are hereinafter referred to individually as a “Borrower” and collectively as “Borrowers”), KEYBANK NATIONAL ASSOCIATION, and the other lending institutions which may become parties hereto pursuant to §18 (the “Banks”), and KEYBANK NATIONAL ASSOCIATION, a national banking association, as Administrative Agent for the Banks (the “Agent”).

RECITALS

WHEREAS, Borrowers have requested that the Banks provide a term loan to Borrowers; and

WHEREAS, Agent and the Banks are willing to provide such facility to the Borrowers on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the terms and conditions herein, and of any loans, advances, or extensions of credit now or hereafter made to or for the benefit of the Borrowers by the Banks, the parties hereto hereby covenant and agree as follows:

§1. DEFINITIONS AND RULES OF INTERPRETATION.

§1.1 Definitions. The following terms shall have the meanings set forth in this §1 or elsewhere in the provisions of this Agreement referred to below:

Acknowledgment. That certain Acknowledgment dated of even date herewith executed by MMPI in favor of Agent.

Affiliate. An Affiliate, as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means (a) the possession, directly or indirectly, of the power to vote ten percent (10%) or more of the stock, shares, voting trust certificates, beneficial interests, partnership interests, member interests or other interests having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (b) the ownership of (i) a general partnership interest, (ii) a managing member’s interest in a limited liability company or (iii) a limited partnership interest or preferred stock (or other ownership interest) representing ten percent (10%) or more of the outstanding limited or general partnership interests, preferred stock or other ownership interests of such Person.

Agent. KeyBank, acting as Administrative Agent for the Banks, its successors and assigns.

Agent’s Head Office. The Agent’s head office located at 127 Public Square, Cleveland, Ohio 44114-1306, or at such other location as the Agent may designate from time to time by notice to the Borrowers and the Banks.

Agent’s Special Counsel. McKenna Long & Aldridge LLP or such other counsel as may be approved by the Agent.

Agreement. This Loan Agreement, including the Schedules and Exhibits hereto.

Assignment of Hedge Agreement. The Assignment of Hedge Agreement dated of even date herewith by Borrowers in favor of Agent.

Assignment of Interests. Collectively, those certain Assignments of Interests dated of even date herewith by each Borrower in favor of Agent.

Balance Sheet Date. September 30, 2006.

Banks. KeyBank and any other Person who becomes an assignee of any rights of a Bank pursuant to §18.

Base Rate. The greater of (a) the variable per annum rate of interest announced from time to time by Agent at Agent’s Head Office as its “prime rate” or (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). The Base Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate becomes effective, without notice or demand of any kind.

Base Rate Loans. Those Loans bearing interest calculated by reference to the Base Rate.

Board. As defined in the definition of Change of Control.

Borrowers. As defined in the preamble hereto.

Business Day. Any day on which banking institutions located in Cleveland, Ohio are open for the transaction of banking business and, in the case of LIBOR Rate Loans, which also is a LIBOR Business Day.

Capitalized Lease. A lease under which a Person is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles.

Cash Collateral Agreement. That certain Cash Collateral Account and Control Agreement dated of even date herewith between KeyBank, Agent and Borrowers.

Change of Control. A Change of Control shall exist in the event that Guarantor shall fail to own at least eighty (80%) economic, voting and other beneficial interests in Merco free of any lien, encumbrance or other adverse claim, shall fail to be the sole manager of Merco, or shall fail to control the management and policies of Merco.

Closing Date. The first date on which all of the conditions set forth in §10 have been satisfied.

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

Collateral. All of the property rights and interests of the Borrowers that are subject to the security interests and liens created by the Security Documents.

Commitment. With respect to each Bank, the amount set forth on Schedule 1 hereto as the amount of such Bank’s Commitment to make or maintain Loans to the Borrowers for the account of the Borrowers, as the same may be changed from time to time in accordance with the terms of this Agreement.

Commitment Percentage. With respect to each Bank, initially the percentage set forth on Schedule 1 hereto as such Bank’s percentage of the aggregate Commitments of all of the Banks, and thereafter the Commitment of each Bank shall equal its Commitment Percentage of the aggregate principal amount of the Loans from time to time outstanding, as the same may be changed from time to time in accordance with the terms of this Agreement.

Contribution Agreement. The Contribution Agreement dated of even date herewith among the Borrowers.

Conversion Request. A notice given by the Borrowers to the Agent of their election to convert or continue a Loan in accordance with §4.1.

Default. See §12.1.

Delinquent Bank. See §14.5(c).

Dollars or $. Dollars in lawful currency of the United States of America.

Domestic Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, located within the United States that will be making or maintaining Base Rate Loans.

Drawdown Date. The date on which any Loan is made or is to be made, and the date on which any Loan which is made prior to the Maturity Date is converted or combined in accordance with §4.1.

Employee Benefit Plan. Any employee benefit plan within the meaning of §3(3) of ERISA maintained or contributed to by a Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time.

ERISA Affiliate. Any Person which is treated as a single employer with a Borrower under §414 of the Code.

ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived.

Event of Default. See §12.1.

Extension Request. See §2.9(a).

Federal Funds Effective Rate. For any day, the rate per annum (rounded to the nearest one hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of Cleveland on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate”, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by the Agent.

Governing Documents. As to any Person, the declaration of trust, certificate or articles of incorporation, by-laws, partnership agreement or operating or members agreement, as the case may be, and any other organizational or governing documents, of such Person.

Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by a Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.

Guarantor. Richard Meruelo, a resident of the State of Florida.

Guaranty. The Unconditional Guaranty of Payment and Performance dated of even date herewith made by the Guarantor in favor of the Agent and the Banks.

Hedge Obligations. All obligations and liabilities of Borrowers to any Bank or an Affiliate of a Bank (including, without limitation, any obligation to make any termination payments) under any agreement with respect to any Interest Rate Contract executed in connection with the satisfaction of the condition set forth in §7.13, and any confirming letter executed pursuant to such hedging agreement, all as amended, restated or otherwise modified.

Indebtedness. With respect to a Person, at the time of computation thereof, all of the following (without duplication): (a) all obligations of such Person in respect of money borrowed or the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business and not past due for more than sixty (60) days past the date on which such trade payable was due); (b) all obligations of such Person, whether or not for money borrowed, (i) represented by notes payable or drafts accepted, (ii) evidenced by bonds, debentures, loan agreements, notes or similar instruments, or (iii) with respect to any purchase money, conditional sale, title retention or other similar instrument; (c) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed or recourse is limited; (d) all guarantees, endorsements and other contingent

obligations, whether direct or indirect, in respect of indebtedness or other obligations payable or performable by others, including liability as a general partner in respect of liabilities of a partnership in which it is a general partner which would constitute “Indebtedness” hereunder, any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to maintain working capital or equity capital of a Person or otherwise to maintain net worth, solvency or other financial condition of a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss, including, without limitation, through an agreement to purchase property, securities, goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise; (e) the obligation to reimburse the issuer in respect of any letter of credit or obligations under acceptance facilities or similar instruments, and obligations under interest rate swaps and similar agreements; and (f) any obligation as a lessee or obligor under a Capitalized Lease; provided that the amount of any obligation under clause (d) shall for the purposes hereof be deemed to be the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such guaranty or contingent liability is made or, if not stated or determinable at the time of determination, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.

Interest Payment Date. The 30^th day of each April, July, October and January, with the first Interest Payment Date being April 30, 2007.

Interest Period. With respect to each LIBOR Rate Loan (a) initially, the period commencing on the Drawdown Date of such Loan and ending one, two, three or six months thereafter and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrowers in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall end and the next Interest Period shall commence on the next preceding or succeeding LIBOR Business Day as determined conclusively by the Agent in accordance with the then current bank practice in the London Interbank Market;

(ii) if the Borrowers shall fail to give notice as provided in §4.1, the Borrowers shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and

(iii) no Interest Period relating to any LIBOR Rate Loan shall extend beyond the Maturity Date.

Interest Rate Contract. An interest rate swap, collar, cap or similar agreement providing interest rate protection.

Interest Reserve. See §2.11.

IPO. The formation of MMPI and the initial public offering of common stock in MMPI and the registration of MMPI as a public company with the SEC, as described in Registration Statement on Form S-11, as amended, as filed with the SEC on January 3, 2007.

KeyBank. KeyBank National Association, a national banking association, and its successors by merger.

LIBOR Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London.

LIBOR Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, that shall be making or maintaining LIBOR Rate Loans.

LIBOR Rate. For any LIBOR Rate Loan for any Interest Period, the average rate (rounded to the nearest 1/100th) as shown in Dow Jones Markets (formerly Telerate) (Page 3750) at which deposits in U.S. dollars are offered by first class banks in the London Interbank Market at approximately 11:00 a.m. (London time) on the day that is two (2) LIBOR Business Days prior to the first day of such Interest Period with a maturity approximately equal to such Interest Period and in an amount approximately equal to the amount to which such Interest Period relates, adjusted for reserves and taxes if required by future regulations. If Dow Jones Markets no longer reports such rate or Agent determines in good faith that the rate so reported no longer accurately reflects the rate available to Agent in the London Interbank Market, Agent may select a replacement index. For any period during which a Reserve Percentage shall apply, the LIBOR Rate with respect to LIBOR Rate Loans shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage.

LIBOR Rate Loans. Loans bearing interest calculated by reference to a LIBOR Rate.

Lien. See §8.2.

Loan Documents. This Agreement, the Notes, the Security Documents, the Guaranty and all other documents, instruments or agreements now or hereafter executed or delivered by or on behalf of the Borrowers or the Guarantor in connection with the Loans.

Loan Request. See §2.6.

Loans. See §2.1.

Lock-up Letter. The Meruelo Maddux Properties, Inc. Lock-Up Letter Agreements dated January 24, 2007 executed by each Borrower in favor of Friedman, Billings, Ramsey & Co., Inc. and UBS Securities as representatives of the several underwriters.

Majority Banks. As of any date, any Bank or collection of Banks whose aggregate Commitment Percentage is more than fifty percent (50%); provided, that, in determining said percentage at any given time, all then existing Delinquent Banks will be disregarded and excluded and the Commitment Percentages of the Banks shall be redetermined for voting purposes only, to exclude the Commitment Percentages of such Delinquent Banks.

Market Value. If the Loans are used to purchase the applicable common stock of MMPI, the total cost of such stock (which may include commissions charged) shall be the Market Value as of the date of such purchase. Thereafter and in each other instance, Market Value as of any date of determination shall be the closing sales price for shares of common stock in MMPI on the

preceding business day, as appearing in any regularly published reporting or quotation service, or if there is no closing sales price, the reasonable estimate of Agent of the market value of such stock as of the close of business of the preceding business day.

Material Adverse Effect. A materially adverse change in or effect on (i) the business, assets, liabilities, condition (financial or otherwise), prospects or results of operations of a Borrower or Guarantor, (ii) the ability of a Borrower or Guarantor to perform its obligations under any Loan Document to which it is a party, (iii) the validity or enforceability of any of the Loan Documents, or (iv) any rights and remedies of the Banks and the Agent under any of the Loan Documents.

Maturity Date. April 30, 2008, as the same may be extended by Borrowers as provided in §2.9, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof.

MMPI. Meruelo Maddux Properties, Inc., a Delaware corporation.

Multiemployer Plan. Any multiemployer plan within the meaning of §3(37) of ERISA maintained or contributed to by a Borrower or any ERISA Affiliate.

Non-Recourse Indebtedness. Indebtedness of a Borrower which is secured by one or more parcels of real estate and related personal property or interests therein and is not a general obligation of such Borrower, the holder of such Indebtedness having recourse solely to the parcels of real estate securing such Indebtedness, the improvements and leases thereon and the rents and profits thereof.

Notes. See §2.4.

Notice. See §19.

Obligations. All indebtedness, obligations and liabilities of the Borrowers and the Guarantor to any of the Banks and the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise.

OFAC. Office of Foreign Asset Control of the Department of the Treasury of the United States of America.

Outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination.

Patriot Act. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as the same may be amended from time to time, and corresponding provisions of future laws.

PBGC. The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor entity or entities having similar responsibilities.

Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof.

Pledged Stock. The stock in MMPI owned by Borrowers and pledged to Agent as Collateral pursuant to the Assignment of Interests.

Record. The grid attached to any Note, or the continuation of such grid, or any other similar record, including computer records, maintained by Agent with respect to any Loan referred to in such Note.

Registration Statement. A registration statement on Form S-1, Form S-3 or another appropriate form filed by MMPI with the SEC covering the resale, from time to time, of the Pledged Stock by Borrower (or the Banks, upon an Event of Default).

Representative. See §14.14.

Reserve Percentage. For any day with respect to a LIBOR Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves (including, without limitation, all base, supplemental, marginal and other reserves) under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against “Eurocurrency Liabilities” (as that term is used in Regulation D or any successor or similar regulation), if such liabilities were outstanding. The Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.

SEC. The federal Securities and Exchange Commission.

Security Documents. The Assignment of Interests, the Assignment of Hedge Agreement, the Cash Collateral Agreement and any further collateral assignments to the Agent for the benefit of the Banks, including, without limitation, UCC-1 financing statements filed in connection therewith.

State. A state of the United States of America.

Total Commitment. The sum of the Commitments of the Banks, as in effect from time to time. As of the date of this Agreement, the Total Commitment is Thirty-Three Million and No/100 Dollars ($33,000,000.00).

Type. As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

UCC. The Uniform Commercial Code as in effect from time to time in the State of California (or, if applicable, any other relevant jurisdiction).

§1.2 Rules of Interpretation.

(a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement.

(b) The singular includes the plural and the plural includes the singular.

(d) A reference to any Person includes its permitted successors and permitted assigns.

(e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer.

(f) The words “include”, “includes” and “including” are not limiting.

(g) The words “approval” and “approved”, as the context so determines, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted.

(h) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the State of California, have the meanings assigned to them therein.

(i) Reference to a particular “ § “, refers to that section of this Agreement unless otherwise indicated.

(j) The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement.

§2. CREDIT FACILITY.

§2.1 Commitment to Lend. Subject to the terms and conditions set forth in this Agreement, each of the Banks severally agrees to lend to the Borrowers on the Closing Date the aggregate amount of its Commitment (except the portion allocated to the Interest Reserve, which shall be advanced as provided in §2.11) for the purposes set forth in §2.10. The Loans shall be made pro rata in accordance with each Bank’s Commitment Percentage. The acceptance of the Loan by Borrowers shall constitute a representation and warranty by the Borrowers that all of the conditions set forth in §10 have been satisfied on the date of such Loan.

§2.2 [Intentionally Omitted.]

§2.3 [Intentionally Omitted.]

§2.4 Notes. The Loans shall be evidenced by separate promissory notes of the Borrowers in substantially the form of Exhibit A hereto (collectively, the “Notes”), dated of even date as this Agreement and completed with appropriate insertions. One Note shall be payable to the order of each Bank in the principal amount equal to such Bank’s Commitment or, if less, the outstanding amount of all Loans made by such Bank, plus interest accrued thereon as set forth below. The Borrowers irrevocably authorize Agent to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on Agent’s Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on Agent’s Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Bank, but the failure to record, or any error in so recording, any such amount on Agent’s Record shall not limit or otherwise affect the obligations of the Borrowers hereunder or under any Note to make payments of principal of or interest on any Note when due.

§2.5 Interest on Loans.

(a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is repaid or is converted to a LIBOR Rate Loan at the per annum rate equal to the sum of the Base Rate plus one-fourth of one percent (0.25%).

(b) Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the sum of the LIBOR Rate determined for such Interest Period plus three percent (3%).

(c) The Borrowers promise to pay interest on each Loan to them in arrears on each Interest Payment Date with respect thereto, or on any earlier date on which the Commitments shall terminate.

(d) Base Rate Loans and LIBOR Rate Loans may be converted to Loans of the other Type as provided in §4.1.

§2.6 Request for Loan. The Borrowers shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in writing in the form of Exhibit B hereto) of the Loan requested hereunder (including a request for a disbursement from the Interest Reserve) (a “Loan Request”) not later than 11:00 a.m. (Cleveland time) three (3) Business Days prior to the proposed Drawdown Date if such Loan is to be a LIBOR Rate Loan or not later than 2:00 p.m. (Cleveland time) if such Loan is to be a Base Rate Loan. Such notice shall specify the proposed principal amount, Drawdown Date, Interest Period (if applicable) and Type. Promptly upon receipt of any such notice, the Agent shall notify each of the Banks thereof. Such Loan Request shall be irrevocable and binding on the Borrowers and shall obligate the Borrowers to accept the Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request shall be (a) for a Base Rate Loan in the minimum aggregate amount of $1,000,000 or an integral multiple of $250,000 in excess thereof, or (b) for a LIBOR Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $250,000 in excess thereof; provided, however, that there shall be no more than three (3) LIBOR Rate Loans outstanding at any one time.

§2.7 Funds for Loans.

(a) Not later than 11:00 a.m. (Cleveland time) on the proposed Drawdown Date of the Loans, each of the Banks will make available to the Agent, at the Agent’s Head Office, in immediately available funds, the amount of such Bank’s Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to §2.1. Upon receipt from each Bank of such amount, and upon receipt of the documents required by §10 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrowers (or to the Agent for the benefit of the Banks or to the holder of the Hedge Obligations with respect to disbursements from the Interest Reserve, as applicable) the aggregate amount of such Loans made available to the Agent by the Banks by crediting such amount to the account of the Borrowers maintained at the Agent’s Head Office. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank’s Commitment Percentage of any requested Loans.

(b) Unless the Agent shall have been notified by any Bank prior to the applicable Drawdown Date that such Bank will not make available to the Agent such Bank’s pro rata share of a proposed Loan, the Agent may in its discretion assume that such Bank has made such share of the proposed Loan available to Agent in accordance with the provisions of this Agreement and the Agent may, if it chooses, in reliance upon such assumption make such Loan available to Borrowers (or to the Agent for the benefit of the Banks or to the holder of the Hedge Obligations with respect to disbursements from the Interest Reserve, as applicable), and such Bank shall be liable to the Agent for the amount of such advance. If such Bank does not pay such corresponding amount upon the Agent’s demand therefor, the Agent will promptly notify the Borrowers, and the Borrowers shall promptly pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from the Bank or the Borrowers, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrowers to the date such corresponding amount is recovered by the Agent at a per annum rate equal to (i) from the Borrowers at the applicable rate for such Loan or (ii) from a Bank at the Federal Funds Effective Rate.

§2.8 Advances Do Not Constitute a Waiver. In the event the Borrowers fail to satisfy any condition to the Banks’ obligation to make Loans, no Loan made by the Banks shall have the effect of precluding the Banks from thereafter declaring such failure to satisfy such condition to be an Event of Default.

§2.9 Extension of Maturity Date. The Borrowers shall have the one-time right and option to extend the Maturity Date to July 30, 2008, upon satisfaction of the following conditions precedent, which must be satisfied prior to the effectiveness of any extension of the Maturity Date:

(a) Extension Request. The Borrowers shall deliver written notice of such request (the “Extension Request”) to the Agent not later than the date which is ninety (90) days prior to the Maturity Date (as determined without regard to such extension). Any such Extension Request shall be irrevocable and binding on the Borrowers.

(b) Payment of Extension Fee. The Borrowers shall pay to the Agent for the pro rata accounts of the Banks in accordance with their respective Commitments an extension fee in an amount equal to five (5) basis points on the Outstanding principal balance of the Loans as of the Maturity Date (as determined without regard to such extension), which fee shall, when paid, be fully earned and non-refundable under any circumstances.

(c) No Default. On the date the Extension Request is given and on the Maturity Date (as determined without regard to such extension) there shall exist no Default or Event of Default.

(d) Representations and Warranties. The representations and warranties made by the Borrowers and the Guarantor in the Loan Documents or otherwise made by or on behalf of the Borrowers and the Guarantor in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the date the Extension Request is given and on the Maturity Date (as determined without regard to such extension) except to the extent such representations and warranties expressly relate to an earlier date.

(e) Pledged Stock. There is an effective Registration Statement covering the resale of the Pledged Stock and all blue sky filings required for the resell of the Pledged Stock have been made and are effective.

§2.10 Use of Proceeds. Subject to the terms, covenants and conditions set forth herein, the Borrowers will use the proceeds of the Loans solely (a) for the acquisition of common stock in MMPI sold by MMPI in connection with the IPO, (b) to pay closing costs in connection with the Loan, and (c) for the purposes described in §2.11. The shares in MMPI to be acquired by Borrowers or their Affiliates shall not be acquired from an underwriter or other Person affiliated with KeyBank.

§2.11 Interest Reserve. The Loan includes an initial interest reserve of $2,694,100 (the “Interest Reserve”). Subject to the terms and conditions of this Agreement, Borrowers may request a disbursement from the Interest Reserve pursuant to §2.6. By execution hereof, each Borrower irrevocably authorizes the Agent, without the necessity of any further authorization, to cause the Banks to disburse directly to itself for the account of the Banks or to the holders of the Hedge Obligations, as applicable, rather than to the Borrowers out of the Interest Reserve such sums as are necessary to pay (a) accrued interest on the Loan on each Interest Payment Date, and (b) any regular quarterly payments due with respect to the Hedge Obligations (but not including any payments due as a result of a default, event of default, termination event or similar occurrence under the applicable Interest Rate Contract) (and any amount so advanced by the Banks without the submission by the Borrowers of a Loan Request shall be Base Rate Loans). Borrowers shall first use any amounts in the “Debt Service Sub-Account” (as defined in the Cash Collateral Agreement) before requesting any amounts from the Interest Reserve. Upon disbursement, the amount that is disbursed shall be disbursed pro rata by the Banks and shall be added to the then outstanding principal sum of the Loans and shall bear interest at the rate provided for in this Agreement. Upon the occurrence and during the continuance of an Event of Default under this Agreement or any other Loan Document, the Agent shall have the right but not the obligation to continue to cause disbursements of interest installments from the Interest Reserve. Establishment of the Interest Reserve shall in no way relieve the Borrowers of their obligation to make interest payments or payments with respect to the Hedge Obligations. Upon

the occurrence of a Default or an Event of Default and during the continuance thereof under any Loan Document, the Agent may, at its option, cease making any further disbursement from the Interest Reserve. Notwithstanding anything in this Agreement to the contrary, the Banks shall have no obligation to make disbursements from the Interest Reserve for any purpose from and after such time as MMPI declares and pays its first (1^st) dividend on any common stock of MMPI, at which time the amount of the Interest Reserve shall be zero ($0).

§3. REPAYMENT OF THE LOANS.

§3.1 Stated Maturity. The Borrowers promise to pay on the Maturity Date and there shall become absolutely due and payable on the Maturity Date all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon.

§3.2 Mandatory Prepayments. If at any time (i) the sum of the aggregate outstanding principal balance of the Loans plus the amount of the Interest Reserve exceeds (ii) an amount equal to thirty percent (30%) of the Market Value of the Pledged Stock, then the Borrowers shall immediately either (a) pay the amount of such excess to the Agent for the respective accounts of the Banks for application to the Loans such that the sum of the outstanding principal balance of the Loans plus the amount of the Interest Reserve does not exceed thirty percent (30%) of the Market Value of the Pledged Stock, or (b) grant to Agent a first-priority perfected lien and security interest in such additional shares of common stock in MMPI (which may be shares acquired as a part of the IPO or privately placed shares) having a Market Value such that the sum of the outstanding principal balance of the Loans plus the amount of the Interest Reserve does not exceed thirty percent (30%) of the Market Value of the Pledged Stock (including such additional shares). If Borrowers elect to provide additional Collateral pursuant to this §3.2(b), Borrowers shall enter into such amendments to the Security Documents as Agent may reasonably require to reflect the pledge of such additional shares to Agent, and shall deliver such powers or indorsements in blank, consents of Guarantor, and such other documents, instruments and opinions of counsel as Agent may reasonably require. No such additional Collateral shall be subject to any transfer restrictions or other restrictions or limitations, except those that are acceptable to Agent in its sole discretion.

§3.3 Optional Prepayments. The Borrowers shall have the right, at their election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium; provided, that if any full or partial prepayment of the outstanding amount of any LIBOR Rate Loans is made other than on the last day of the Interest Period relating thereto, such prepayment shall be accompanied by the payment of any amounts due pursuant to §4.8. The Borrowers shall give the Agent, no later than 10:00 a.m., Cleveland time, at least three (3) Business Days’ prior written notice of any prepayment pursuant to this §3.3, in each case specifying the proposed date of payment of Loans and the principal amount to be paid.

§3.4 Partial Prepayments. Each partial prepayment of the Loans under §3.3 shall be in the minimum amount of $500,000 or any an integral multiple of $100,000 in excess thereof, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment and, after payment of such interest, shall be applied, in the absence of instruction by the Borrowers, first to the principal of Base Rate Loans and then to the principal of LIBOR Rate Loans.

§3.5 Effect of Prepayments. Amounts of the Loans prepaid hereunder may not be reborrowed. Except as otherwise expressly provided herein, all payments shall first be applied to accrued but unpaid interest and then to principal as provided above.

§4. CERTAIN GENERAL PROVISIONS.

§4.1 Conversion Options.

(a) The Borrowers may elect from time to time to convert any of their outstanding Loans to a Loan of another Type and such Loan shall thereafter bear interest as a Base Rate Loan or a LIBOR Rate Loan, as applicable; provided that (i) with respect to any such conversion of a LIBOR Rate Loan to a Base Rate Loan, the Borrowers shall give the Agent at least one (1) Business Days’ prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such LIBOR Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan the Borrowers shall give the Agent at least three (3) LIBOR Business Days’ prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $1,000,000 or an integral multiple of $250,000 in excess thereof and, after giving effect to the making of such Loan there shall be no more than three (3) LIBOR Rate Loans outstanding at any one time; and (iii) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a LIBOR Rate Loan in an aggregate principal amount of less than $1,000,000 and that the aggregate principal amount of each Loan shall be in an integral multiple of $250,000. On the date on which such conversion is being made, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. Each Conversion Request relating to the conversion of a Base Rate Loan to a LIBOR Rate Loan shall be irrevocable by the Borrowers.

(b) Any Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrowers with the terms of §4.1(a); provided that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default.

(c) In the event that the Borrowers do not notify the Agent of their election hereunder with respect to any Loan to it, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period.

§4.2 Closing Fee. The Borrowers shall pay to KeyBank certain fees for services rendered or to be rendered in connection with the Loan as provided pursuant to the Agreement Regarding Fees dated of even date herewith between the Borrowers and KeyBank.

§4.3 [Intentionally Omitted.]

§4.4 Funds for Payments.

(a) All payments of principal, interest, unused facility fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Banks and the Agent, as the case may be, at the Agent’s Head Office, not later than 1:00 p.m. (Cleveland time) on the day when due, in each case in lawful money of the United States in immediately available funds. The Agent is hereby authorized to charge the accounts of the Borrowers with KeyBank designated by the Borrowers, on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Banks under the Loan Documents.

(b) All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrowers are compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrowers with respect to any amount payable by them hereunder or under any of the other Loan Documents, the Borrowers will pay to the Agent, for the account of the Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Agent to receive the same net amount which the Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrowers. The Borrowers will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrowers hereunder or under such other Loan Document.

§4.5 Computations. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year (or a 365- or 366-day year, as applicable, in the case of Base Rate Loans) and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term “Interest Period” with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount.

§4.6 Suspension of LIBOR Rate Loans. In the event that, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent shall reasonably determine that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate for such Interest Period, or the Agent shall in good faith reasonably determine that the LIBOR Rate will not adequately and fairly reflect the cost to the Banks of making or maintaining LIBOR Rate Loans for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrowers and the Banks) to the Borrowers and the Banks. In such event (a) any Loan Request with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans and (b) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and the obligations of the Banks to make LIBOR Rate Loans

shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrowers and the Banks.

§4.7 Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other governmental authority having jurisdiction over a Bank or its LIBOR Lending Office shall assert that it is unlawful, for any Bank to make or maintain LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to the Agent and the Borrowers and thereupon (a) the commitment of the Banks to make LIBOR Rate Loans or convert Loans of another type to LIBOR Rate Loans shall forthwith be suspended and (b) the LIBOR Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law; provided that the affected Bank agrees to designate a different LIBOR Lending Office if such designation will permit such Bank to make or maintain LIBOR Rate Loans and will not, in the good faith of such Bank, otherwise be materially disadvantageous to such Bank.

§4.8 Additional Interest. If any LIBOR Rate Loan or any portion thereof is repaid, or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such LIBOR Rate Loan, or if repayment of the Loans has been accelerated as provided in §12.1, the Borrowers will pay to the Agent upon demand for the account of the Banks in accordance with their respective Commitment Percentages, in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate the Banks for any losses, costs or expenses which may reasonably be incurred as a result of such payment or conversion.

§4.9 Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any present or future applicable law, or any amendment or modification of present applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and legally binding interpretations thereof by any competent court or by any governmental or other regulatory body or official with appropriate jurisdiction charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall:

(a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Bank’s Commitment, or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Agent), or

(b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank under this Agreement or the other Loan Documents, or

(c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Bank, or

(d) impose on any Bank or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Bank’s Commitment, or any class of loans or commitments of which any of the Loans or such Bank’s Commitment forms a part; and the result of any of the foregoing is

(i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans, or such Bank’s Commitment, or

(ii) to reduce the amount of principal, interest or other amount payable to such Bank or the Agent hereunder on account of such Bank’s Commitment or any of the Loans, or

(iii) to require such Bank or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Agent from the Borrowers hereunder,

then, and in each such case, the Borrowers will within fifteen (15) days after demand made by such Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Agent such additional amounts as such Bank or the Agent shall determine in good faith to be sufficient to compensate such Bank or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Bank and the Agent in determining such amounts may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent.

§4.10 Capital Adequacy. If after the date hereof any Bank determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (b) compliance by such Bank or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on such Bank’s or such holding company’s capital as a consequence of such Bank’s commitment to make Loans hereunder to a level below that which such Bank or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by such Bank to be material, then such Bank may notify the Borrowers thereof. The Borrowers agree to pay to such Bank the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Bank of a statement of the amount and setting forth such Bank’s calculation thereof. In determining such amount, such Bank may use any reasonable averaging and attribution methods.

§4.11 Indemnity of Borrowers. The Borrowers agree to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense that such Bank may sustain or incur as a consequence of (a) default by the Borrowers in payment of the principal amount of or any interest on any LIBOR Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its LIBOR Rate Loans, or (b) default by the Borrowers in making a

borrowing or conversion after the Borrowers have given (or are deemed to have given) a Loan Request or a Conversion Request.

§4.12 Interest on Overdue Amounts; Late Charge. Following the occurrence and during the continuance of an Event of Default and regardless of whether or not the Agent or the Banks shall have accelerated the maturity of the Loans, all Loans shall bear interest payable on demand at a rate per annum equal to three percent (3.0%) above the Base Rate until such amount shall be paid in full (after as well as before judgment). In addition, the Borrowers shall pay a late charge equal to four percent (4.0%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid by the Borrowers within ten (10) days after the same shall become due and payable.

§4.13 Certificate. A certificate setting forth any amounts payable pursuant to §4.8, §4.9, §4.10, §4.11 or §4.12 and a brief explanation of such amounts which are due, submitted by any Bank or the Agent to the Borrowers, shall be conclusive in the absence of manifest error.

§4.14 Limitation on Interest. Notwithstanding anything in this Agreement to the contrary, all agreements between the Borrowers and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations of the Borrowers and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations of the Borrowers, such excess shall be refunded to the Borrowers. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations of the Borrowers (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This section shall control all agreements between the Borrowers and the Banks and the Agent.

§4.15 Agreement Regarding Interest and Charges. The parties hereto hereby agree and stipulate that the only charge imposed upon the Borrowers for the use of money in connection with this Agreement is and shall be the interest specifically described in §2.5. Notwithstanding the foregoing, the parties hereto further agree and stipulate that all arrangement fees, commitment fees, amendment fees, up front fees, commitment fees, facility fees, closing fees, underwriting fees, default charges, late charges, funding or “breakage” charges, increased cost charges, attorneys’ fees and reimbursement for costs and expenses paid by the Banks or the Agent to third parties or for damages incurred by the Banks or the Agent, or any other similar amounts are charges made to compensate the Banks or the Agent for underwriting or administrative services and costs or losses performed or incurred, and to be performed or incurred, by the Banks or the Agent in connection with this Agreement and shall under no circumstances be deemed to be charges for the use of money. Borrowers hereby acknowledge and agree that the Banks and the Agent have imposed no minimum borrowing requirements,

reserve or escrow balances or compensating balances related in any way to the Obligations. Any use by Borrowers of certificates of deposit issued by any Bank or other accounts maintained with any Bank has been and shall be voluntary on the part of Borrowers. All charges other than charges for the use of money shall be fully earned and nonrefundable when due.

§4.16 Representative of Borrowers. Each of Borrowers hereby appoints Guarantor as its agent, attorney in fact and representative for the purpose of making Requests for Loans, Conversion Requests, payment and prepayment of Loans, the giving and receipt of notices by and to Borrowers under this Agreement and all other purposes incidental to any of the foregoing. Each Borrower agrees that any action taken by Guarantor as the agent, attorney-in fact and representative of such Borrower shall be binding on such Borrower to the same extent as if directly taken by such Borrower.

§5. COLLATERAL.

§5.1 Collateral. The Obligations shall be secured by a first-priority perfected security interest in the Collateral.

§5.2 Release of Collateral. Upon the repayment in full of the Obligations and the Hedge Obligations, then the Agent shall release the Collateral from the lien and security interest of the Security Documents.

§6. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.

The Borrowers hereby represent and warrant to the Agent and the Banks as follows.

§6.1 Corporate Authority, Etc.

(a) Incorporation; Good Standing, Etc. Merco is a California limited liability company duly organized pursuant to its operating agreement and articles of organization and amendments thereto filed with the Secretary of the State of California and is validly existing and in good standing under the laws of the State of Delaware. The Trust is a trust duly organized pursuant to its trust agreement and is validly existing and in good standing under the laws of the State of California. The Guarantor is a resident of the State of Florida, residing at 9540 Journeys End Road, Coral Gables, Florida 33156. Guarantor maintains an office in California at 761 Terminal Street, Los Angeles, California 90021. Each Borrower (i) has all requisite power to own its properties and interests and conduct its business as now conducted and as presently contemplated, and (ii) is in good standing as a foreign entity and is duly authorized to do business in each other jurisdiction where a failure to be so qualified in such other jurisdiction could have a Material Adverse Effect.

(b) No Violation. The execution, delivery and performance of this Agreement and the other Loan Documents to which any Borrower or Guarantor is or is to become a party and the transactions contemplated hereby and thereby (i) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which any such Person is subject or any judgment, order, writ, injunction, license or permit applicable to any such Person, (ii) as to the Borrowers, are within the authority of such Person, (iii) as to Borrowers, have been duly authorized by all necessary proceedings on the part of such Person, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or

the giving of notice, or both) under any provisions of the Governing Documents of, or any agreement or other instrument binding upon, any such Person or any of its properties (including, without limitation, the Collateral), and (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of any such Person.

(c) Enforceability. The execution and delivery of this Agreement and the other Loan Documents to which any of the Borrowers or the Guarantor is or is to become a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

§6.2 Governmental Approvals. The execution, delivery and performance of this Agreement and the other Loan Documents to which any of the Borrowers or the Guarantor is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained.

§6.3 Financial Statements. The Borrowers have delivered to the Agent: (a) the unaudited balance sheet of each Borrower and the Guarantor as of the Balance Sheet Date, and (b) certain other financial information relating to the Borrowers and the Guarantor. Such balance sheet and statements have been prepared in accordance with sound accounting principles and fairly present the financial condition of the applicable Borrower or Guarantor as of such dates for such periods. There are no liabilities, contingent or otherwise, of the Borrowers or the Guarantor involving material amounts not disclosed in said financial statements and the related notes thereto.

§6.4 No Material Changes. Since the Balance Sheet Date, there has occurred no materially adverse change in the financial condition of either Borrower or the Guarantor as shown on or reflected in the balance sheet of such Person as of the Balance Sheet Date, other than changes in the ordinary course of business that have not had and could not reasonably be expected to have any Material Adverse Effect.

§6.5 Litigation. Except as stated on Schedule 6.5 there are no actions, suits, proceedings or investigations of any kind pending or to the knowledge of such person threatened against any Borrower, Guarantor or MMPI before any court, tribunal, arbitrator, mediator or administrative agency or board that, if adversely determined, either in any case or in, the aggregate, could reasonably be expected to have a Material Adverse Effect, or which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto, or which relate to the IPO. Except as set forth on Schedule 6.5, as of the date of this Agreement, there are no judgments outstanding against or affecting any Borrower or Guarantor.

§6.6 No Materially Adverse Contracts, Etc. None of the Borrowers or the Guarantor is a party to or subject to any charter, corporate, trust, legal restriction, contract or agreement relating to the Pledged Stock except as set forth on Schedule 6.6 hereto.

§6.7 Compliance with Other Instruments, Laws, Etc. None of the Borrowers or the Guarantor is in violation of any Governing Document or any other agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or has had or could reasonably be expected to have a Material Adverse Effect.

§6.8 Tax Status. The Borrowers and Guarantor (a) have made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which such Person is subject, (b) have paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) have set aside provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and Borrowers and Guarantor know of no basis for any such claim. There are no audits pending or, to the knowledge of Borrowers and Guarantor, threatened with respect to any tax returns filed by either Borrower or Guarantor.

§6.9 No Event of Default. No Default or Event of Default has occurred and is continuing.

§6.10 Holding Company and Investment Company Acts. None of the Borrowers or the Guarantor is or after giving effect to any Loan will be, subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money.

§6.11 Employee Benefit Plans. The Borrowers and any ERISA Affiliate have or maintain no Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. None of the Collateral constitutes a “plan asset” of any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan.

§6.12 Regulations T, U and X. The principal amount of the Loans does not exceed forty-nine percent (49%) of the current Market Value of the Pledged Stock. If requested by any Bank or the Agent, the Borrowers will furnish to the Agent and each Bank a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in Regulation U.

§6.13 Loan Documents. All of the representations and warranties made by or on behalf of the Borrowers and the Guarantor in this Agreement and the other Loan Documents or any document or instrument delivered to the Agent or the Banks pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and the Borrowers and the Guarantor have not failed to disclose such information as is necessary to make such representations and warranties not misleading. There is no material fact or circumstance that has not been disclosed to the Agent and the Banks, and the written information, reports and other papers and data with respect to the Borrowers, Guarantor and MMPI (other than projections and estimates) furnished to the Agent or the Bank in connection with this Agreement or the obtaining of the commitments of the Banks hereunder was, at the time so furnished, complete and correct in all material respects, or has been subsequently supplemented by other written information,

reports or other papers or data, to the extent necessary to give in all material respects a true and accurate knowledge of the subject matter in all material respects; provided that such representation shall not apply to budgets, projections and other forward-looking speculative information prepared in good faith by Guarantor or MMPI (except to the extent the related assumptions are manifestly unreasonable).

§6.14 Brokers. None of the Borrowers or the Guarantor have engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder.

§6.15 Other Debt. As of the Closing Date, none of the Borrowers or the Guarantor is in default of the payment of any Indebtedness or any other agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of such Persons is a party.

§6.16 Solvency. As of the Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents, including all Loans made or to be made hereunder, none of the Borrowers or the Guarantor is insolvent on a balance sheet basis, such that the sum of such Person’s assets exceeds the sum of such Person’s liabilities, such Person is able to pay its debts as they become due, and such Person has sufficient capital to carry on its business. None of the Borrowers or the Guarantor is contemplating either the filing of a petition by such Person under any state or federal bankruptcy or insolvency laws or a liquidation of his assets or property, and none of such Persons has any knowledge of any Person contemplating the filing of any such petition against any Borrower or Guarantor. The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of the Borrowers and the Guarantor. Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by the Borrowers or the Guarantor with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted. The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of the Borrowers and the Guarantor. The direct and indirect benefits to inure to the Borrowers the Guarantor pursuant to this Agreement and the other Loan Documents constitute substantially more than “reasonably equivalent value” (as such term is used in Section 548 of the Bankruptcy Code) and “valuable consideration,” “fair value,” and “fair consideration,” (as such terms are used in any applicable state fraudulent conveyance law), and in exchange for the benefits to be provided by the Borrowers and the Guarantor pursuant to this Agreement and the other Loan Documents.

§6.17 Ownership. As of the date hereof, Merco and the Trust own 11,649,797 and 26,342,409 shares of common stock of MMPI, respectively. Of such shares, the following shares of Merco and the Trust are subject to an effective Registration Statement: 2,900,000 and 100,000, respectively. None of the Borrowers or Guarantor has any other ownership interest or option to acquire an ownership interest in MMPI or other interest which is convertible into an ownership interest in MMPI.

§6.18 Embargoed Persons. None of the Borrowers or the Guarantor is (and the Borrowers and the Guarantor will not be) a Person named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit,

Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transactions or otherwise be associated with such persons. In addition, Borrowers hereby agree to provide to the Banks any additional information that a Bank deems reasonably necessary from time to time in order to ensure compliance with all applicable laws concerning money laundering and similar activities.

§6.19 Contribution Agreement. Borrowers have delivered to the Agent a true, correct and complete copy of the Contribution Agreement. The Contribution Agreement is in full force and effect in accordance with its terms, there are no claims resulting from non-performance of the terms thereof or otherwise or any basis for a claim by any party to the Contribution Agreement, nor has there been any waiver of any terms thereunder.

§6.20 Validly Issued Shares. The Pledged Stock has been duly and validly authorized by MMPI, is fully paid and non-assessable, and is not subject to preemptive or other similar rights.

§7. AFFIRMATIVE COVENANTS OF THE BORROWERS.

The Borrowers covenant and agree that, so long as any Loan or Note is outstanding:

§7.1 Punctual Payment. The Borrowers will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes as well as all other sums owing pursuant to the Loan Documents.

§7.2 Maintenance of Office. Each Borrower will maintain its chief executive office at 761 Terminal Street, Building 1, 2^nd Floor, Los Angeles, California 90021, or at such other place in the United States of America as such Borrower shall designate upon prior written notice to the Agent and the Banks, where notices, presentations and demands to or upon the Borrowers in respect of the Loan Documents may be given or made. The Guarantor will maintain its residence at 9540 Journeys End Road, Coral Gables, Florida 33156, or at such other place in the United States of America as the Guarantor shall designate upon prior written notice to the Agent and the Banks, where notices, presentations and demands to or upon the Guarantor in respect of the Loan Documents may be given or made.

§7.3 [Intentionally Omitted.]

§7.4 Financial Statements, Certificates and Information. The Borrowers will deliver or cause to be delivered to the Agent and each of the Banks:

(a) as soon as practicable, but in any event not later than October 31 of each calendar year, the unaudited balance sheet of such Borrower at the end of such year, and the related unaudited statements of income, changes in shareholder’s equity and cash flows for such year, each setting forth in comparative form the figures for the previous calendar year and all such statements to be in reasonable detail, prepared in accordance with sound accounting principles, and certified without qualification by the chief operating officer of MMPI or by an independent certified public accountant reasonably acceptable to Agent;

(b) upon the request of Agent, copies of all material of a financial nature sent to the stockholders of MMPI;

(c) upon the request of Agent, copies of all annual federal income tax returns and amendments thereto of such Borrower; and

(d) from time to time such other financial data and information in the possession of the Borrowers regarding the Borrowers, MMPI or the Collateral as the Agent may reasonably request.

§7.5 Notices. The Borrowers will promptly notify the Agent in writing of the occurrence of any of the following:

(a) any Default or Event of Default;

(b) any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under any note, evidence of indebtedness, indenture or other obligation to which or with respect to which any Borrower or the Guarantor is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof;

(c) a Borrower becomes aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting any Borrower or the Guarantor involving an uninsured claim against a Borrower or the Guarantor that could cause a Default or Event of Default or could reasonably be expected to have a Material Adverse Effect and stating the nature and status of such litigation or proceedings;

(d) the entry of any judgment not covered by insurance, whether final or otherwise, against a Borrower or the Guarantor in an amount in excess of $1,000,000.00; or

(e) a Borrower becomes aware of any setoff, claims, withholdings or other defenses to which any of the Collateral, or the rights of the Agent or a Borrower with respect to the Collateral, are subject.

§7.6 Existence. Merco will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a California limited liability company. The Trust will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a trust.

§7.7 Insurance. The Borrowers and the Guarantor will procure and maintain or cause to be procured and maintained insurance with financially sound and reputable insurers covering the Borrowers and the Guarantor in such amounts and against such casualties and contingencies as shall be in accordance with the general practices of similar Persons.

§7.8 Taxes. The Borrowers and the Guarantor will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon such Person and its property, its sales and activities, or any part thereof, or upon the income or profits therefrom; provided that any such tax, assessment,

charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings which shall suspend the collection thereof and if such Person shall have set aside on its books adequate reserves with respect thereto; and provided, further that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the such Person either (i) will provide a bond issued by a surety reasonably acceptable to the Agent and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge, levy or claim.

§7.9 Inspection of Books. The Borrowers and the Guarantor shall permit the Agent and the Banks, at the Borrowers’ expense, to examine the books of account of the Borrowers and the Guarantor (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrowers and the Guarantor with, and to be advised as to the same by, Borrowers and the Guarantor, all at such reasonable times and intervals as the Agent or any Bank may reasonably request, provided that so long as no Default or Event of Default shall have occurred and be continuing, the Borrowers shall not be required to pay for such inspections more often than once in any twelve (12) month period.

§7.10 Compliance with Laws and Contracts. The Borrowers and the Guarantor will comply with (i) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all laws and regulations relating to the Collateral, (ii) the provisions of its Governing Documents, (iii) all agreements and instruments to which the Collateral may be bound or subject, and (iv) all applicable decrees, orders, and judgments relating to the Collateral.

§7.11 Further Assurances. The Borrowers will cooperate with the Agent and the Banks and execute such further instruments and documents as the Banks or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents.

§7.12 Covenants Relating to MMPI. Borrowers shall not consent to or otherwise suffer to exist any conditions, restrictions or other limitations on the ability of Borrowers to transfer, pledge or encumber the Pledged Stock except for those restrictions existing as of the date hereof and which are described on Schedule 7.12 hereto.

§7.13 Interest Rate Hedge. Borrowers shall at all times from and after the date hereof maintain in full force and effect an Interest Rate Contract in form and substance satisfactory to Agent on not less than eighty percent (80%) of the outstanding principal balance of the Loans. The Interest Rate Contract shall be provided by any Bank, an Affiliate of any Bank or other financial institution that has unsecured, uninsured and unguaranteed long-term debt which is rated at least A-3 by Moody’s Investors Service, Inc. or at least A- by Standard & Poor’s Ratings Services. The Borrowers shall upon the request of the Agent provide to the Agent evidence that the Interest Rate Contract is in effect.

§7.14 Business Operations. The Borrowers shall operate their respective businesses in substantially the same manner and in substantially the same fields and lines of business as is now conducted.

§7.15 ERISA. Neither Borrower shall have or maintain any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan.

§8. NEGATIVE COVENANTS OF THE BORROWERS.

The Borrowers covenant and agree that, so long as any Loan or Note is outstanding:

§8.1 Restrictions on Indebtedness. The Borrowers will not create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than:

(a) Indebtedness of Borrowers to the Banks arising under any of the Loan Documents;

(b) Current liabilities of the Borrowers incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;

(c) Indebtedness of Borrowers in respect of taxes, assessments, governmental charges or levies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of §7.8;

(d) Indebtedness of Borrowers in respect of judgments or awards the existence of which does not create an Event of Default;

(e) Endorsements by Borrowers for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;

(f) Non-Recourse Indebtedness of the Borrowers;

(g) Indebtedness of Borrowers with respect to the Interest Rate Contract acquired pursuant to §7.13;

(h) Indebtedness of the Trust described in Schedule 8.1 hereto and any refinancing of such debt up to the amount of the original debt being refinanced; and

(i) recourse Indebtedness of the Trust in an amount not to exceed $50,000,000.

§8.2 Restrictions on Liens, Etc. Each of the Borrowers will not (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of its property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than 30 days after the same have come due any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) pledge or otherwise encumber any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; or (f) incur or

maintain any obligation to any holder of Indebtedness of such Person which prohibits the creation or maintenance of any lien securing the Obligations (collectively “Liens”); provided that the Borrowers may create or incur or suffer to be created or incurred or to exist:

(i) liens on properties of Borrowers other than the Collateral to secure taxes, assessments and other governmental charges in respect of obligations not overdue or which are being contested or otherwise addressed as permitted by §7.8;

(ii) liens on properties of Borrowers other than the Collateral in respect of judgments, awards or indebtedness, the Indebtedness with respect to which is permitted by §8.1(d);

(iii) encumbrances on properties of Borrowers consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property, landlord’s or lessor’s liens under leases to which such Borrower is a party, tenant leases and other minor non-monetary liens or encumbrances none of which interferes materially with the use of the property affected in the ordinary conduct of the business of such Person, which encumbrances or liens individually or in the aggregate have not had or could not reasonably be expected to have a Material Adverse Effect; and

(iv) liens granted by Borrowers on property other than the Collateral to secure Indebtedness permitted to be secured by a Lien pursuant to §8.1(f) and (g).

§8.3 Merger, Consolidation. Neither Borrower will become a party to any dissolution, liquidation, disposition of all or substantially all of its assets or business, merger, reorganization, consolidation or other business combination, in each case without the prior written consent of the Majority Banks.

§8.4 Modifications to Governing Documents. The Borrowers shall not enter into any amendment or modification of any Governing Document of such Borrower which could reasonably be expected to have a Material Adverse Effect without the Agent’s prior written consent.

§9. [INTENTIONALLY OMITTED.]

§10. CLOSING CONDITIONS.

The obligation of the Agent and the Banks to make the Loans to the Borrowers is subject to the satisfaction of the following conditions precedent:

§10.1 Loan Documents. The Borrowers and the Guarantor shall have duly executed and delivered to the Agent, each of the Loan Documents to which such Person is a party, each of which shall be in full force and effect and shall be in form and substance satisfactory to the Agent.

§10.2 Certified Copies of Organizational Documents. The Agent shall have received from each Borrower and MMPI a copy, certified as of a recent date by the appropriate officer of each State in which such Person is organized and a duly authorized officer of such Person, to be

true and complete, of the Governing Documents of such Person and its qualification to do business, as applicable, as in effect on such date of certification.

§10.3 Opinion of Counsel. The Agent shall have received a favorable opinion addressed to the Banks and the Agent and dated as of the date of this Agreement, in form and substance satisfactory to the Banks and the Agent, from counsel of the Borrowers, Guarantor and MMPI, as to such matters as the Agent shall reasonably request.

§10.4 Payment of Fees. The Borrowers shall have paid to the Agent the fees payable pursuant to §4.2.

§10.5 Performance; No Default. The Borrowers and the Guarantor shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default.

§10.6 Representations and Warranties. The representations and warranties made by the Borrowers and the Guarantor in the Loan Documents or otherwise made by or on behalf of the Borrowers and the Guarantor in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date.

§10.7 Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agent’s Special Counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions or documents as the Agent and the Agent’s Special Counsel may reasonably require.

§10.8 Consents. The Agent shall have received from the Underwriters a consent in form and substance satisfactory to Agent to the consummation of the transactions contemplated by this Agreement and the other Loan Documents and to the transfer by Agent of the Pledged Stock without regard to any restrictions, conditions or limitations contained in the Lock-Up Letter.

§10.9 Borrowing Documents. The Agent shall have received a fully completed Loan Request for the Loan as required by §2.6.

§10.10 Consummation of IPO. Agent shall have received evidence satisfactory to the Agent that the IPO shall have been consummated with gross proceeds of at least $400,000,000 and a minimum dividend yield of two percent (2%).

§10.11 Other. The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agent’s Special Counsel may reasonably have requested.

§11. [INTENTIONALLY OMITTED.]

§12. EVENTS OF DEFAULT; ACCELERATION; ETC.

§12.1 Events of Default and Acceleration. If any of the following events (“Events of Default” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “Defaults”) shall occur:

(a) a Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;

(b) a Borrower shall fail to pay any interest on the Loans, or any other fees or sums due hereunder or under any of the other Loan Documents, within five (5) days of when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;

(c) the failure of MMPI to comply with the covenants contained in §7.12, or a failure of Borrowers to comply with any covenant contained in §8;

(d) a Borrower shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified in this §12), and such failure shall continue for thirty (30) days after written notice thereof shall have been given to the Borrowers by the Agent;

(e) any representation or warranty made by or on behalf of the Borrowers or the Guarantor in this Agreement or any other Loan Document, or in any report, certificate, financial statement, request for a Loan, or in any other document or instrument delivered pursuant to or in connection with this Agreement, any advance of a Loan or any of the other Loan Documents shall have been false or misleading in any material respect upon the date when made or deemed to have been made or repeated;

(f) a Borrower or Guarantor shall fail to pay when due (including without limitation at maturity), or within any applicable period of grace, any obligation for borrowed money or credit received or other Indebtedness, or fail to observe or perform any term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any such borrowed money or credit received or other Indebtedness for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof or require the prepayment or purchase thereof; provided, however, that the events described in this §12.1(f) shall not constitute an Event of Default unless such failure to perform, together with other failures to perform as described in this §12.1(f), involve singly or in the aggregate obligations totaling in excess of $1,000,000.00;

(g) a Borrower or Guarantor (i) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of any such Person or of any substantial part of the assets of any thereof, (ii) shall commence any case or other proceeding relating to any such Person under any

bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (iii) shall take any action to authorize or in furtherance of any of the foregoing;

(h) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of a Borrower or Guarantor or any substantial part of the assets of a Borrower or Guarantor, or a case or other proceeding shall be commenced against a Borrower or Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and such Person shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within sixty (60) days following the filing or commencement thereof;

(i) a decree or order is entered appointing any trustee, custodian, liquidator or receiver or adjudicating a Borrower or Guarantor bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any such Person in an involuntary case under federal bankruptcy laws as now or hereafter constituted;

(j) there shall remain in force, undischarged, unsatisfied and unstayed, for more than sixty (60) days, whether or not consecutive, any uninsured final judgment against a Borrower or Guarantor that, with other outstanding uninsured final judgments, undischarged, against any Borrower or Guarantor exceeds in the aggregate $5,000,000.00;

(k) any of the Loan Documents or the Contribution Agreement shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents or the Contribution Agreement shall be commenced by or on behalf of a Borrower or Guarantor or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents or the Contribution Agreement is illegal, invalid or unenforceable in accordance with the terms thereof;

(l) the death or mental incapacity of Guarantor;

(m) any suit or proceeding shall be filed against a Borrower or Guarantor or any of their respective assets which in the good faith business judgment of the Majority Banks after giving consideration to the likelihood of success of such suit or proceeding and the availability of insurance to cover any judgment with respect thereto and based on the information available to them if adversely determined, could reasonably be expected to have a Material Adverse Effect and such suit or proceeding is not dismissed within sixty (60) days following the filing or commencement thereof;

(n) a Borrower shall be indicted for a federal crime, a punishment for which could include the forfeiture of the Collateral;

(o) any dissolution, termination, partial or complete liquidation, merger or consolidation of any Borrower or any sale, transfer or other disposition of all or substantially all

of the assets of a Borrower other than as permitted under the terms of this Agreement or the other Loan Documents;

(p) the Guarantor denies that it has any liability or obligation under the Guaranty or any other Loan Document or shall notify the Agent or any of the Banks of such Guarantor’s intention to attempt to cancel or terminate the Guaranty or any other Loan Document, or shall fail to observe or comply with any term, covenant, condition or agreement under the Guaranty or any other Loan Document beyond any applicable cure period;

(q) a Change of Control shall occur;

(r) the Market Value of the common stock of MMPI shall at any time be less than $3.00 per share;

(s) MMPI shall fail to comply with any of the agreements contained in the Acknowledgment, or any representation or warranty made by MMPI in the Acknowledgment shall be false or misleading in any material respect;

(t) any Event of Default, as defined in any of the other Loan Documents, shall occur;

(u) MMPI shall fail to do any of the following: (i) no later than three hundred sixty (360) days following the Closing Date, prepare and file with the SEC a Registration Statement covering the resell of the Pledged Stock, (ii) cause the Registration Statement to be effective under the Securities Act of 1933, as amended (“Securities Act”), as soon as practicable, but in no event later than the date that is thirteen (13) months from the date of this Agreement, (iii) prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective or to permit the Banks to sell the Pledged Stock, until such time as all shares of the Pledged Stock have been sold, or

(v) (iv) file documents required of MMPI for normal blue sky clearance in states where such clearance is required for a sale of the Pledged Stock;

(w) MMPI shall fail at any time to be in compliance with the reporting requirements of the Securities and Exchange Act of 1934, as amended, and to meet the requirement set forth in Rule 144(c) of the Securities Act; or

(x) The common stock of MMPI shall at any time fail to be listed for trading and be traded on NASDAQ, unless otherwise consented to by the Majority Banks.

then, and in any such event, the Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrowers declare all amounts owing with respect to this Agreement, the Notes, and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; provided that in the event of any Event of Default specified in §12.1(g), §12.1(h) or §12.1(i), all such amounts shall become immediately due and payable automatically and without any requirement of presentment, demand, protest or other notice of any kind from any of the Banks or the Agent.

§12.2 [Intentionally Omitted.]

§12.3 [Intentionally Omitted.]

§12.4 Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to §12.1, the Agent on behalf of the Banks may, and upon the request of the Majority Banks shall, proceed to protect and enforce their rights and remedies under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy 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 or any other provision of law. In the event that all or any portion of the Obligations is collected by or through an attorney-at-law, the Borrowers shall pay all costs of collection including, but not limited to, reasonable attorneys’ fees.

§12.5 Distribution of Proceeds. In the event that, following the occurrence or during the continuance of any Event of Default, any monies are received from the Borrowers or Guarantor or in connection with the enforcement of any of the Loan Documents, such monies shall be distributed for application as follows:

(a) First, to the payment of, or (as the case may be) the reimbursement of, the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Agreement or any of the other Loan Documents or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies;

(b) Second, to all other Obligations and Hedge Obligations in such order or preference as the Majority Banks shall determine; provided, however, that (i) Obligations owing to the Banks with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Banks pro rata; and (ii) in the event that any Bank shall have wrongfully failed or refused to make an advance under §2.7 and such failure or refusal shall be continuing, advances made by other Banks during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b); provided, further that the Majority Banks may in their discretion make proper allowance to take into account any Obligations not then due and payable; and

§13. SETOFF.

Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of where such deposits are held) or other sums credited by or due from any of the Banks to the Borrowers and any securities or other property of the Borrowers in the possession of such Bank may be applied to or set off against the payment of Obligations of such Person and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of such Person to such Bank; provided that no Bank shall exercise such right of setoff without the prior approval of the Agent. Each of the Banks agrees with each other Bank that if such Bank shall receive from a Borrower, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Obligations held by such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Obligations held by all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Obligations held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest.

§14. THE AGENT.

§14.1 Authorization. The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement, or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank or to create any agency or fiduciary relationship. Agent shall act as the contractual representative of the Banks hereunder, and notwithstanding the use of the term “Agent”, it is understood and agreed that the Agent shall not have any fiduciary duties or responsibilities to any Bank by reason of this Agreement or any other Loan Document and is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. The Borrowers and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Banks pursuant to this Agreement and the other Loan Documents.

§14.2 Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrowers.

§14.3 No Liability. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted

to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, shall be liable for losses due to its willful misconduct or gross negligence. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent has received notice from a Bank or the Borrowers referring to the Loan Documents and describing with reasonable specificity such Default or Event of Default and stating that such notice is a “notice of default”.

§14.4 No Representations. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein, or any agreement, instrument or certificate delivered in connection therewith or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrowers or the Guarantor, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any other of the Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrowers or the Guarantor or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the creditworthiness or financial condition of the Borrowers or the Guarantor or the value of the Collateral. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. Agent’s Special Counsel has only represented Agent and KeyBank in connection with the Loan Documents and the only attorney-client relationship or duty of care is between Agent’s Special Counsel and Agent or KeyBank. Each Bank has been independently represented by separate counsel on all matters regarding the Loan Documents and the granting and perfecting of liens in the Collateral.

§14.5 Payments.

(a) A payment by the Borrowers or the Guarantor to the Agent hereunder or under any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Agent agrees to distribute to each Bank not later than one Business Day after the Agent’s receipt of good funds, determined in accordance with the Agent’s customary practices, such Bank’s pro rata share of payments received by the Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. In the event that the Agent fails to distribute such amounts within one Business Day as provided above, the Agent shall pay interest on such amount at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect.

(b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court.

(c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Agent its pro rata share of any Loan, (ii) to comply with the provisions of §13 with respect to making dispositions and arrangements with the other Banks, where such Bank’s share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, or (iii) to perform any other obligation within the time period specified for performance, or if no time period is specified, if such failure continues for a period of five (5) Business Days after notice from the Agent, shall be deemed delinquent (a “Delinquent Bank”) and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. In addition to the rights and remedies that may be available to the Agent at law and in equity, a Delinquent Bank’s right to participate in the administration of the Loan Documents, including, without limitation, any rights to consent to or direct any action or inaction of the Agent pursuant to this Agreement or otherwise, or to be taken into account in the calculation of Majority Banks or any matter requiring approval of all of the Banks, shall be suspended while such Bank is a Delinquent Bank. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrowers and the Guarantor, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Bank hereby authorizes the Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans. The provisions of this Section shall apply and be effective regardless of whether an Event of Default occurs and is then continuing, and notwithstanding (i) any other provision of this Agreement to the contrary or (ii) any instruction of Borrowers as to their desired application of payments. The Agent shall be entitled to (i) withhold or set off, and to apply to the payment of the obligations of any Delinquent Bank any amounts to be paid to such Delinquent Bank under this Agreement, (ii) to collect interest from such Bank for the period from the date on which the payment was due at the rate per annum equal to the Federal Funds Effective Rate plus two percent (2%), for each day during such period, and (iii) bring an action or suit against such Delinquent Bank in a court of competent jurisdiction to recover the defaulted obligations of such Delinquent Bank. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Banks or as a result of other payments by the Delinquent Banks to the nondelinquent Banks, the Banks’ respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.

§14.6 Holders of Notes. Subject to the terms of Article 18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof

until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee.

§14.7 Indemnity. The Banks ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrowers as required by §15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent’s actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent’s willful misconduct or gross negligence.

§14.8 Agent as Bank. In its individual capacity, the Bank acting as the Agent shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent.

§14.9 Resignation. Subject to the terms of §18.1, the Agent may resign at any time by giving 30 calendar days’ prior written notice thereof to the Banks and the Borrowers. Upon any such resignation, the Majority Banks, subject to the terms of §18.1, shall have the right to appoint as a successor Agent any Bank or any bank whose senior debt obligations are rated not less than “A” or its equivalent by Moody’s Investors Service, Inc. or not less than “A” or its equivalent by Standard & Poor’s Ratings Services and which has a net worth of not less than $500,000,000. Unless an Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrowers. If no successor Agent shall have been appointed and shall have accepted such appointment within thirty (30) days after the retiring Agent’s giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be any Bank or a bank whose debt obligations are rated not less than “A” or its equivalent by Moody’s Investors Service, Inc. or not less than “A” or its equivalent by Standard & Poor’s Ratings Services and which has a net worth of not less than $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder as Agent. After any retiring Agent’s resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Upon any change in the Agent under this Agreement, the resigning Agent shall execute such assignments of and amendments to the Loan Documents as may be necessary to substitute the successor Agent for the resigning Agent.

§14.10 Duties in the Case of Enforcement. In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent may and, if so requested by the Majority Banks and the Banks have provided to the Agent such additional indemnities and assurances in accordance with their respective Commitment Percentages against expenses and liabilities as the Agent may reasonably request, shall proceed to exercise all or any legal and equitable and other rights or remedies as it may have; provided, however, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem to be in the best interests of the

Banks. Without limiting the generality of the foregoing, if Agent reasonably determines payment is in the best interest of all the Banks, Agent may (but shall not be obligated to) without the approval of the Banks take such actions and pay such amounts as Agent reasonably deems necessary to protect the Collateral. Each Bank shall, within thirty (30) days of request therefor, pay to the Agent its Commitment Percentage of the reasonable costs incurred by the Agent in taking any such actions hereunder to the extent that such costs shall not be promptly reimbursed to the Agent by the Borrowers or out of the Collateral within such period. The Majority Banks may direct the Agent in writing as to the method and the extent of any such exercise, the Banks hereby agreeing to indemnify and hold the Agent harmless in accordance with their respective Commitment Percentages from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent’s compliance with such direction to be unlawful in any applicable jurisdiction or commercially unreasonable in any applicable jurisdiction.

§14.11 Bankruptcy. In the event a bankruptcy or other insolvency proceeding is commenced by or against a Borrower or the Guarantor with respect to the Obligations, the Agent shall have the sole and exclusive right to file and pursue a joint proof claim on behalf of all Banks. Any votes with respect to such claims or otherwise with respect to such proceedings shall be subject to the vote of the Majority Banks or all of the Banks as required by this Agreement. Each Bank irrevocably waives its right to file or pursue a separate proof of claim in any such proceedings unless Agent fails to file such claim within thirty (30) days after receipt of written notice from the Banks requesting that Agent file such proof of claim.

§14.12 Approvals. If consent is required for some action under this Agreement, or except as otherwise provided herein an approval of the Banks or the Majority Banks is required or permitted under this Agreement, each Bank agrees to give the Agent, within ten (10) days of receipt of the request for action together with all reasonably requested information related thereto (or such lesser period of time required by the terms of the Loan Documents), notice in writing of approval or disapproval (collectively “Directions”) in respect of any action requested or proposed in writing pursuant to the terms hereof. To the extent that any Bank does not approve any recommendation of Agent, such Bank shall in such notice to Agent describe the actions that would be acceptable to such Bank. If consent is required for the requested action, any Bank’s failure to respond to a request for Directions within the required time period shall be deemed to constitute a Direction to take such requested action. In the event that any recommendation is not approved by the requisite number of Banks and a subsequent approval on the same subject matter is requested by Agent, then for the purposes of this paragraph each Bank shall be required to respond to a request for Directions within five (5) Business Days of receipt of such request. Agent and each Bank shall be entitled to assume that any officer of the other Banks delivering any notice, consent, certificate or other writing is authorized to give such notice, consent, certificate or other writing unless Agent and such other Banks have otherwise been notified in writing.

§14.13 Borrowers not Beneficiary. Except for the provisions of §14.9 relating to the appointment of a successor Agent, the provisions of this §14 are solely for the benefit of the Agent and the Banks, may not be enforced by Borrowers or the Guarantor, and except for the provisions of §14.9, may be modified or waived without the approval or consent of Borrowers or the Guarantor.

§14.14 Reliance on Hedge Provider. For purposes of applying payments received in accordance with §12.5, the Agent shall be entitled to rely upon the trustee, paying agent or other similar representative (each, a “Representative”) or, in the absence of such a Representative, upon the holder of the Hedge Obligations for a determination (which each holder of the Hedge Obligations agrees (or shall agree) to provide upon request of the Agent) of the outstanding Hedge Obligations owed to the holder thereof. Unless it has actual knowledge (including by way of written notice from such holder) to the contrary, the Agent, in acting hereunder, shall be entitled to assume that no Hedge Obligations are outstanding.

§15. EXPENSES.

The Borrowers agree to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Banks (other than taxes based upon the Agent’s or any Bank’s gross or net income), including any recording, mortgage, documentary or intangibles taxes in connection with the Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Banks after the Closing Date (the Borrowers hereby agreeing to indemnify the Agent and each Bank with respect thereto), (c) the reasonable fees, expenses and disbursements of the counsel to the Agent and any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein (excluding, however, the preparation of agreements evidencing participation granted under §18.4), each closing hereunder, the addition or release of Collateral, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation or interpretation of the Loan Documents and other instruments mentioned herein, and the making of each advance hereunder, (e) all reasonable expenses (including reasonable attorneys’ fees and costs, which attorneys may be employees of any Bank or the Agent, and the fees and costs of appraisers, investment bankers or other experts retained by any Bank or the Agent) incurred by any Bank or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrowers or the Guarantor or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent’s or any of the Bank’s relationship with the Borrowers or the Guarantor, (f) all reasonable fees, expenses and disbursements of the Agent incurred in connection with UCC searches, UCC filings, title rundowns or title searches, (g) all reasonable fees, expenses and disbursements (including reasonable attorneys’ fees and costs), which may be incurred by KeyBank and the Agent in connection with the execution and delivery of this Agreement and the other Loan Documents, (h) all expenses relating to the use of Intralinks, SyndTrak or any other similar system for the dissemination and sharing of documents and information, and (i) all reasonable fees and expenses of Agent (including legal fees and costs) in connection with the assignment by KeyBank of its Commitment to an amount such that KeyBank’s Commitment does not exceed $20,000,000. The covenants of this §15 shall survive payment or satisfaction of the Obligations.

§16. INDEMNIFICATION.

The Borrowers agree to indemnify and hold harmless the Agent and the Banks and each director, officer, employee, agent and Person who controls the Agent or any Bank from and against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any brokerage, finders or similar fees asserted against any Person indemnified under this §16 based upon any agreement, arrangement or action made or taken, or alleged to have been made or taken, by the Borrowers or the Guarantor, (b) the Collateral or the IPO, including, without limitation, shareholder, investor or other lawsuits threatened or filed, or investigations undertaken, as a result of the IPO, (c) any actual or proposed use by the Borrowers of the proceeds of any of the Loans, (d) the Borrowers and the Guarantor entering into or performing this Agreement or any of the other Loan Documents, and (e) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, agreement, permit or license relating to the Collateral, in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, that the Borrowers shall not be obligated under this §16 to indemnify any Person for liabilities arising from such Person’s own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction after the expiration of all applicable appeal periods. In litigation, or the preparation therefor, the Banks and the Agent shall be entitled to select a single nationally recognized law firm as their own counsel and, in addition to the foregoing indemnity, the Borrowers agree to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrowers under this §16 are unenforceable for any reason, the Borrowers hereby agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this §16 shall survive the repayment of the Loans and the termination of the obligations of the Banks hereunder.

§17. SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrowers and the Guarantor pursuant hereto or thereto shall be deemed to have been relied upon by the Banks and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans. The indemnification obligations of the Borrowers provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Banks hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate or other paper delivered to any Bank or the Agent at any time by or on behalf of the Borrowers or the Guarantor, pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder.

§18. ASSIGNMENT AND PARTICIPATION.

§18.1 Conditions to Assignment by Banks. Except as provided herein, each Bank may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it, and the Notes held by it); provided that (a) the Agent, and provided no Event of Default exists, the Borrowers shall have given their prior written consent to such assignment, which consent shall not be unreasonably withheld (provided that such consent shall not be required for any assignment to another Bank, to a bank which is under common control with the assigning Bank or to a wholly-owned subsidiary of such Bank provided that such assignee shall remain a wholly-owned subsidiary of such Bank), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank’s rights and obligations under this Agreement, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), a notice of such assignment in the form reasonably required by Agent, together with any Notes subject to such assignment, (d) in no event shall any assignment be to any Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrowers and the Guarantor, (e) such assignee shall acquire an interest in the Loans of not less than $5,000,000, and (f) the assignor shall assign its entire interest in the Loans or retain an interest in the Loans of not less than $5,000,000. Upon such execution, delivery, acceptance and recording, of such notice of assignment, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Banks and, to the extent provided in such assignment, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in §18.2, be released from its obligations under this Agreement. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Bank as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrowers and the Guarantor. Upon any such assignment, the Agent may unilaterally amend Schedule 1 to reflect any such assignment.

§18.2 Register. The Agent shall maintain a copy of each assignment delivered to it and a register or similar list (the “Register”) for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $3,500.

§18.3 New Notes. Upon its receipt of an assignment executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrowers and the Banks (other than the assigning Bank). Within five (5) Business Days after receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee pursuant to such assignment and, if the

assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such assignment and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrowers.

§18.4 Participations. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank’s rights and obligations under this Agreement and the other Loan Documents; provided that (a) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrowers, (b) such participation shall not entitle such participant to any rights or privileges under this Agreement or any Loan Documents, including without limitation, the right to approve waivers, amendments or modifications, (c) such participant shall have no direct rights against the Borrowers or the Guarantor except the rights granted to the Banks pursuant to §13, (d) such sale is effected in accordance with all applicable laws, and (e) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by the Borrowers or the Guarantor. Any Bank which sells a participation shall promptly notify the Agent of such sale and the identity of the purchaser of such interest.

§18.5 Pledge by Bank. Any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341 or, with Agent’s prior written approval, to another Person. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents.

§18.6 No Assignment by Borrowers. The Borrowers shall not assign or transfer any of their respective rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks.

§18.7 Disclosure. The Borrowers and Guarantor agree that in addition to disclosures made in accordance with standard banking practices Agent and any Bank may disclose information obtained by Agent or such Bank pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder.

§19. NOTICES.

Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this §19 referred to as “Notice”), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telecopy and addressed as follows:

If to the Agent or KeyBank:

KeyBank National Association

127 Public Square, 8th Floor

Cleveland, Ohio 44114-1306

Attn: Jason Weaver

Telecopy No.: (216) 689-4997

and to:

McKenna Long & Aldridge LLP

5300 SunTrust Plaza

303 Peachtree Street

Atlanta, Georgia 30308

Attn: William F. Timmons, Esq.

Telecopy No.: (404) 527-4198

If to the Borrowers:

Richard Meruelo as Trustee of the Richard Meruelo Living Trust

Merco-Group-Roosevelt Building, LLC

c/o Richard Meruelo

761 Terminal Street

Building 1, 2^nd Floor

Los Angeles, California 90021

Telecopy No.:

With a copy to:

Cox Castle & Nicholson, LLP

2049 Century Park East

Suite 2800

Los Angeles, California 90067

Attn: John F. Nicholson, Esq.

Telecopy No.: (310) 277-7889

to each other Bank a party hereto at the address for such party set forth on the signature page for such Bank, and to each other Bank which may hereafter become a party to this Agreement at such address as may be designated by such Bank. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid, or if transmitted by facsimile, upon being sent and confirmation of receipt. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier or facsimile (or if sent by facsimile, next Business Day if received after 5:00 p.m. (Cleveland time) or on a day that is not a Business Day), or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, a Borrower, a Bank or Agent shall have the right from time to time and at any

time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.

§20. RELATIONSHIP.

Neither the Agent nor any Bank has any fiduciary relationship with or fiduciary duty to the Borrowers or the Guarantor arising out of or in connection with this Agreement or the other Loan Documents or the transactions contemplated hereunder and thereunder, and the relationship between each Bank and the Borrowers is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower.

§21. GOVERNING LAW: CONSENT TO JURISDICTION AND SERVICE.

THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN SHALL, BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. THE BORROWERS AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS BY MAIL AT THE ADDRESS SPECIFIED IN §19. THE BORROWERS HEREBY WAIVE ANY OBJECTION THAT EITHER OF THEM MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

§22. HEADINGS.

The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.

§23. COUNTERPARTS.

This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

§24. ENTIRE AGREEMENT, ETC.

The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in §27.

§25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.

TO THE EXTENT PERMITTED BY LAW, EACH OF THE BORROWERS, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS §25.

§26. DEALINGS WITH THE BORROWER.

The Agent, the Banks and their affiliates may accept deposits from, extend credit to, invest in, act as trustee under indentures of, serve as financial advisor of, and generally engage in any kind of banking, trust or other business with the Borrowers, the Guarantor or any of their respective affiliates regardless of the capacity of the Agent or the Bank hereunder. The Banks acknowledge that, pursuant to such activities, the Agent, a Bank or its affiliates may receive information regarding such Persons (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Agent or such Bank, as applicable, shall be under no obligation to provide such information to them.

§27. CONSENTS, AMENDMENTS, WAIVERS, ETC.

Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrowers and Guarantor of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks. Notwithstanding the foregoing, none of the following may occur without the written consent of each Bank: a decrease in the rate of interest on the Notes; a change in the Maturity Date of the Notes except as provided in §2.9; an increase in the amount of the Commitments of the Banks except pursuant to §18.1; a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon; the postponement of any date fixed for any payment of principal of or interest on the Loans; a decrease of the amount of any fee (other than late fees) payable to a Bank hereunder; the release of the Borrowers or Guarantor except as otherwise provided herein; the release of all or a material part of the Collateral, except as otherwise provided herein; a change in the manner of distribution of any payments to the

Banks or the Agent; an amendment of the definition of Majority Banks or of any requirement for consent by all of the Banks; or an amendment of this §27. The provisions of §14 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrowers or Guarantor shall entitle the Borrowers or Guarantor to other or further notice or demand in similar or other circumstances.

§28. SEVERABILITY.

The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.

§29. TIME OF THE ESSENCE.

Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrowers and Guarantor under this Agreement and the other Loan Documents.

§30. NO UNWRITTEN AGREEMENTS.

THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ANY ADDITIONAL TERMS OF THE AGREEMENT BETWEEN THE PARTIES ARE SET FORTH BELOW.

§31. REPLACEMENT OF NOTES.

Upon receipt of evidence reasonably satisfactory to Borrowers of the loss, theft, destruction or mutilation of any Note, and in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to Borrowers or, in the case of any such mutilation, upon surrender and cancellation of the applicable Note, Borrowers will execute and deliver, in lieu thereof, a replacement Note, identical in form and substance to the applicable Note and dated as of the date of the applicable Note and upon such execution and delivery all references in the Loan Documents to such Note shall be deemed to refer to such replacement Note.

§32. RIGHTS OF THIRD PARTIES.

This Agreement and the other Loan Documents are made and entered into for the sole protection and legal benefit of the Borrowers, the Guarantor, the Banks, the Agent and the holders of the Hedge Obligations, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. All

conditions to the performance of the obligations of the Agent and the Banks under this Agreement, including the obligation to make Loans, are imposed solely and exclusively for the benefit of the Agent and the Banks and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that the Agent and the Banks will refuse to make Loans in the absence of strict compliance with any or all thereof and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by the Agent and the Banks at any time if in their sole discretion they deem it desirable to do so.

§33. PATRIOT ACT.

Each Bank and the Agent (for itself and not on behalf of any Bank) hereby notifies the Borrowers and the Guarantor that, pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies Borrowers and the Guarantor, which information includes names and addresses and other information that will allow such Bank or the Agent, as applicable, to identify Borrowers and the Guarantor in accordance with the Patriot Act.

§34. ADDITIONAL AGREEMENTS CONCERNING OBLIGATIONS OF BORROWERS.

§34.1 Joint and Several Liability. Each of the Borrowers covenants and agrees that each and every covenant and obligation of any Borrower hereunder and under the other Loan Documents shall be the joint and several obligations of each Borrower.

§34.2 Waiver of Automatic or Supplemental Stay. Each of the Borrowers represents, warrants and covenants to the Banks and Agent that in the event of the filing of any voluntary or involuntary petition in bankruptcy by or against the other of the Borrowers or Guarantor at any time following the execution and delivery of this Agreement, neither of the Borrowers or Guarantor shall seek a supplemental stay or any other relief, whether injunctive or otherwise, pursuant to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy Code, to stay, interdict, condition, reduce or inhibit the ability of the Banks or Agent to enforce any rights any of them has by virtue of this Agreement, the Loan Documents, or at law or in equity, or any other rights the Banks or Agent has, whether now or hereafter acquired, against the other Borrower or Guarantor or against any property owned by such other Borrower or Guarantor.

§34.3 Consideration. The Borrowers hereby represent and warrant to the Banks and Agent that each of them has received good and valuable consideration for the execution and delivery of the Loan Documents, and the Borrowers hereby acknowledge the adequacy and sufficiency of such consideration.

§34.4 Waiver of Defenses. Each of the Borrowers hereby waives and agrees not to assert or take advantage of any defense or right based upon:

(a)(i) any change in the amount, interest rate or due date or other term of any of the Obligations or Hedge Obligations, (ii) any change in the time, place or manner of payment of all or any portion of the Obligations or the Hedge Obligations, (iii) any amendment or waiver of, or consent to the departure from or other indulgence with respect to, this Agreement, any other Loan Document, or any other document or instrument evidencing or relating to any Obligations or Hedge Obligations, or (iv) any waiver, renewal, extension, addition, or

supplement to, or deletion from, or any other action or inaction under or in respect of, this Agreement, any of the other Loan Documents, or any other documents, instruments or agreements relating to the Obligations or Hedge Obligations or any other instrument or agreement referred to therein or evidencing any Obligations or Hedge Obligations or any assignment or transfer of any of the foregoing;

(b) any subordination of the payment of the Obligations or Hedge Obligations to the payment of any other liability of the Borrowers or any other Person;

(c) any act or failure to act by Borrowers or any other Person which may adversely affect any Borrower’s subrogation rights, if any, against the other Borrower or any other Person to recover payments made;

(d) any nonperfection or impairment of any security interest or other Lien on any collateral, if any, securing in any way any of the Obligations or Hedge Obligations;

(e) any application of sums paid by the Borrowers or any other Person with respect to the liabilities of Borrowers, regardless of what liabilities of the Borrowers remain unpaid;

(f) any defense of Borrowers, including without limitation, the invalidity, illegality or unenforceability of any of the Obligations or Hedge Obligations;

(g) either with or without notice to Borrowers, any renewal, extension, modification, amendment or another changes in the Obligations or Hedge Obligations, including but not limited to any material alteration of the terms of payment or performance of the Obligations or Hedge Obligations;

(h) any statute of limitations in any action hereunder or for the collection of the Obligations or Hedge Obligations or for the payment or performance of any obligation under the Loan Documents;

(i) the incapacity, lack of authority, death or disability of a Borrower or any other Person or entity, or the failure of Agent or the Banks to file or enforce a claim against the estate (either in administration, bankruptcy or in any other proceeding) of a Borrower or any other Person;

(j) the dissolution or termination of existence of a Borrower or any other Person;

(k) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of a Borrower or any other Person;

(l) the voluntary or involuntary receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, assignment, composition, or readjustment of, or any similar proceeding affecting, a Borrower or any other Person, or any of a Borrower’s or any other Person’s properties or assets;

(m) the damage, destruction, foreclosure or surrender of all or any part of the Collateral;

(n) the failure of Agent or the Banks to give notice of the existence, creation or incurring of any new or additional indebtedness or obligation of Borrowers or of any action or nonaction on the part of any other person whomsoever in connection with the Obligations or the Hedge Obligations;

(o) any failure or delay of Agent or the Banks to commence an action against a Borrower or any other Person, to assert or enforce any remedies against a Borrower under the Note or the other Loan Documents or agreements relating to the Hedge Obligations, or to realize upon any security;

(p) any failure of any duty on the part of Agent or the Banks to disclose to a Borrower any facts it may now or hereafter know regarding Borrowers (including, without limitation a Borrower’s financial condition), any other Person, the Collateral, or any other assets or liabilities of such Persons, whether such facts materially increase the risk to Borrowers or not (it being agreed that Borrowers assume responsibility for being informed with respect to such information);

(q) failure to accept or give notice of acceptance of the Loan Documents by Agent and the Banks;

(r) failure to make or give notice of presentment and demand for payment of any of the Obligations or the Hedge Obligations;

(s) failure to make or give protest and notice of dishonor or of default to the Borrowers or to any other Person with respect to the Obligations or the Hedge Obligations;

(t) except as specifically provided in the Loan Documents, any and all other notices whatsoever to which Borrowers might otherwise be entitled;

(u) any lack of diligence by Agent or the Banks in collection, protection or realization upon any collateral securing the payment of the Obligations or the Hedge Obligations;

(v) the invalidity or unenforceability of the Note, or any of the other Loan Documents or agreements relating to the Hedge Obligations, or any assignment or transfer of the foregoing;

(w) the compromise, settlement, release or termination of any or all of the obligations of Borrowers under the Note or the other Loan Documents or agreements relating to the Hedge Obligations;

(x) any transfer by a Borrower or any other Person of all or any part of the security encumbered by the Loan Documents;

(y) the failure of Agent or the Banks to perfect any security or to extend or renew the perfection of any security;

(z) any and all of the rights and defenses described in Section 2856(a) of the California Civil Code;

(aa) any and all of the rights of subrogation, reimbursement, indemnification and contribution and other rights and defenses that are or may become available to Borrowers (or any of them) by reason of Sections 2787 to 2855 (inclusive), 2899 and 3433 of the California Civil Code;

(bb) except to the extent prohibited by Section 9602 of the California Commercial Code, any and all rights and defenses that Borrowers (or any of them) might otherwise have under the California Commercial Code; or

(cc) to the fullest extent permitted by law, any other legal, equitable or surety defenses whatsoever to which Borrowers might otherwise be entitled, it being the intention that the obligations of Borrowers hereunder are absolute, unconditional and irrevocable.

Each Borrower understands that the exercise by Agent of certain rights and remedies may affect or eliminate such Borrower’s right of subrogation against the other Borrower or the Guarantor and that such Borrower may therefore incur partially or totally nonreimbursable liability hereunder. Nevertheless, Borrowers hereby authorize and empower Agent, its successors, endorsees and assigns, to exercise in its or their sole discretion, any rights and remedies, or any combination thereof, which may then be available, it being the purpose and intent of Borrowers that the obligations hereunder shall be absolute, continuing, independent and unconditional under any and all circumstances. Notwithstanding any other provision of this Agreement or the other Loan Documents to the contrary, each Borrower hereby waives and releases any claim or other rights which such Borrower may now have or hereafter acquire against the other Borrower or Guarantor or any other Person of all or any of the obligations of Borrowers hereunder that arise from the existence or performance of such Borrower’s obligations under this Agreement or any of the other Loan Documents, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification, any right to participate in any claim or remedy of Agent and the Banks against the Borrowers or Guarantor or other Person or any Collateral which Agent now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including, without limitation, the right to take or receive from the Borrowers or Guarantor, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights, except for those rights of each Borrower under the Contribution Agreement; provided, however, each Borrower agrees not to pursue or enforce any of its rights under the Contribution Agreement and each Borrower agrees not to make or receive any payment on account of the Contribution Agreement so long as any of the Obligations or the Hedge Obligations remain unpaid or undischarged. In the event any Borrower shall receive any payment under or on account of the Contribution Agreement, it shall hold such payment as trustee for Agent and the Banks and be paid over to Agent and the Banks on account of the indebtedness of Borrowers to Agent and the Banks and the Hedge Obligations but without reducing or affecting in any manner the liability of Borrowers under the other provisions of the Loan Documents except to the extent the principal amount or other portion of such indebtedness shall have been reduced by such payment. Without limitation on the generality of the other waivers contained in this Agreement, each Borrower hereby waives all rights and defenses arising out of an election of remedies by the Agent, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed or otherwise impaired such Borrower’s rights of subrogation and reimbursement against the

principal (whether by the operation of any provision of the California Code of Civil Procedure or otherwise).

In addition, each Borrower hereby agrees that its obligations hereunder shall not be released, diminished, impaired, reduced, dependent upon or affected by, and hereby waives and agrees not to assert or take advantage of any defense based on, any one or more of the following: (i) the genuineness, validity, regularity or enforceability of, or the existence of any default with respect to, the Obligations or the Hedge Obligations, any security therefor, or any related instrument, documents, obligation, transaction or matter; (ii) the nature, extent, condition, value or continued existence of any security given in connection with the Obligations or the Hedge Obligations; (iii) any action or failure to take action by any holder of the Obligations or the Hedge Obligations under or with respect to the Loan Documents or the agreements relating to the Hedge Obligations, any security therefor, or any related documents, transaction or matter; (iv) any other dealings between any holder of the Obligations or the Hedge Obligations and Agent and the Banks; (v) any exculpatory language or provisions limiting or restricting Agent’s rights or remedies against the Borrowers or any other Person under the Loan Documents; or (vi) any claim by or on behalf of Borrowers of any credit or right of setoff with respect to the Note or any of the Obligations or the Hedge Obligations.

§34.5 Waiver. Each of the Borrowers waives, to the fullest extent that each may lawfully so do, the benefit of all appraisement, valuation, stay, extension, homestead, exemption and redemption laws which such Person may claim or seek to take advantage of in order to prevent or hinder the enforcement of any of the Loan Documents or the exercise by the Banks or Agent of any of their respective remedies under the Loan Documents and, to the fullest extent that the Borrowers may lawfully so do, such Person waives any and all right to have the assets comprised in the security intended to be created by the Security Documents (including, without limitation, those assets owned by the other of the Borrowers) marshaled upon any foreclosure of the lien created by such Security Documents. Each of the Borrowers further agrees that the Banks and Agent shall be entitled to exercise their respective rights and remedies under the Loan Documents or at law or in equity in such order as they may elect. Without limiting the foregoing, each of the Borrowers further agrees that upon the occurrence of an Event of Default, the Banks and Agent may exercise any of such rights and remedies without notice to either of the Borrowers except as required by law or the Loan Documents and agrees that neither the Banks nor Agent shall be required to proceed against the other of the Borrowers or any other person or to proceed against or to exhaust any other security held by the Banks or Agent at any time or to pursue any other remedy in Bank’s or Agent’s power or under any of the Loan Documents before proceeding against a Borrower or its assets under the Loan Documents.

§34.6 Subordination. Each of the Borrowers hereby expressly waives any right of contribution from or indemnity against the other, whether at law or in equity, arising from any payments made by such Person pursuant to the terms of this Agreement or the Loan Documents, and each of the Borrowers acknowledges that it has no right whatsoever to proceed against the other for reimbursement of any such payments. In connection with the foregoing, each of the Borrowers expressly waives any and all rights of subrogation to the Banks or Agent against the other of the Borrowers, and each of the Borrowers hereby waives any rights to enforce any remedy which the Banks or Agent may have against the other of the Borrowers and any rights to participate in any Collateral or any other assets of the other Borrower. Notwithstanding the foregoing, the Borrowers shall be entitled to the rights and benefits set forth in the Contribution

Agreement. In addition to and without in any way limiting the foregoing, each of the Borrowers hereby subordinates any and all indebtedness it may now or hereafter owe to such other Borrower to all indebtedness of the Borrowers to the Banks and Agent, and agrees with the Banks and Agent that neither of the Borrowers shall claim any offset or other reduction of such Borrower’s obligations hereunder because of any such indebtedness and shall not take any action to obtain any of the Collateral or any other assets of the other Borrower.

[CONTINUED ON NEXT PAGE]

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under seal as of the date first set forth above.


BORROWER:

RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989

/s/ Richard Meruelo		(SEAL)
Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989



MERCO GROUP-ROOSEVELT BUILDING, LLC, a California limited liability company

By:		/s/ Richard Meruelo
		Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989, as Managing Member and Manager

		[SEAL]


BANKS:

KEYBANK NATIONAL ASSOCIATION, individually and as Agent

By:		/s/ Jason Weaver
Name:		Jason Weaver
Title:		Senior Vice-President

[SEAL]

KeyBank National Association

127 Public Square, 8th Floor

Cleveland, Ohio 44114-1306

Attn: Jason Weaver

Telecopy No.: (216) 689-4997

EX-10.2 3 dex102.htm ASSIGNMENT OF INTERESTS, DATED JANUARY 30, 2007 Assignment of Interests, dated January 30, 2007

Exhibit 10.2

ASSIGNMENT OF INTERESTS

THIS ASSIGNMENT OF INTERESTS (this “Assignment”), made this 30th day of January, 2007, by RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989 (“Assignor”) to KEYBANK NATIONAL ASSOCIATION, a national banking association (“KeyBank”), as administrative agent for itself and the other lenders (the “Lenders”) from time to time party to the “Loan Agreement” (as hereinafter defined) (KeyBank, in its capacity as administrative agent, hereinafter referred to as “Agent”).

W I T N E S S E T H:

WHEREAS, Assignor is a shareholder of each of the corporations described on Exhibit “A” attached hereto and made a part hereof (collectively, the “Corporations” and individually a “Corporation”); and

WHEREAS, the Corporations are governed by the articles of incorporation and bylaws, if any, described on Exhibit “A” attached hereto opposite the respective Corporation (collectively, the “Organizational Agreements”); and

WHEREAS, Assignor, Merco Group - Roosevel Building, LLC, a California limited liability company (“Co-Borrower”; Assignor and Co-Borrower are hereinafter referred to collectively as “Borrower”), and KeyBank, individually and as administrative agent, have entered into that certain Loan Agreement dated of even date herewith (as the same may be varied, extended, supplemented, consolidated, amended, replaced, increased, renewed or modified or restated, the “Loan Agreement”), pursuant to which Lenders have agreed to provide a loan to Borrower in an amount of up to $33,000,000.00 (the “Loan”), which Loan is evidenced by that certain Note dated of even date herewith made by Borrower to the order of KeyBank in the principal face amount of $33,000,000.00 (such Note, together with such other Notes as may be issued pursuant to the Loan Agreement, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, increased or restated, are hereinafter referred to collectively as the “Note”); and

WHEREAS, Agent and the Lenders have required, as a condition to the making of the Loan to Borrower, that Assignor execute this Assignment to secure its obligations under the Note, the Loan Agreement and certain other agreements.

NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby covenant and agree as follows:

1. Definitions. Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Loan Agreement.

2. Grant of Security Interest. As security for the payment and performance by Borrower of each and all of the indebtedness, liabilities, duties, responsibilities and obligations whether such indebtedness, liabilities, duties, responsibilities and obligations are now existing or

are hereafter created or arising under this Assignment, the Note, the Assignment of Hedge, the Loan Agreement, and any and all agreements evidencing, securing or otherwise relating to the obligations evidenced by the Note (this Assignment, the Note, the Assignment of Hedge, the Loan Agreement and such other agreements, together with any and all renewals, modifications, consolidations and extensions thereof, are hereinafter referred to collectively as the “Loan Documents”; and said duties, responsibilities and obligations of Borrower and the Hedge Obligations are hereinafter referred to collectively as the “Obligations”), Assignor does hereby transfer, assign, pledge, convey, and grant to Agent, and does hereby grant a security interest to Agent in, all of Assignor’s right, title and interest in and to the following:

(a) One Hundred Thousand (100,000) shares of the common stock of the Corporation represented by Certificate No. MMPI0018 (“Certificate A”), together with any and all other securities, cash, certificates or other property, option or right in respect of, in addition to or substitution or exchange for Certificate A or any of the foregoing, or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and

(b) Twenty-Six Million (26,000,000) shares of the common stock of the Corporation represented by Certificate No. MMPI0019 (“Certificate B”; Certificate A together with Certificate B being hereinafter referred to collectively as the “Certificates), together with any and all other securities, cash, certificates or other property, option or right in respect of, in addition to or substitution or exchange for Certificate B or any of the foregoing, or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and

(c) Any and all profits, proceeds, accounts, income, dividends, distributions, payments upon dissolution or liquidation of any of the Corporations, proceeds upon a redemption or conversion, return of capital, repayment of loans, and payments of any kind or nature whatsoever, now or hereafter distributable or payable by any of the Corporations, to Assignor, by reason of Assignor’s interest in any of the Corporations, or otherwise, or now or hereafter distributable or payable to Assignor from any other source by reason of Assignor being a shareholder in any of the Corporations, or on account of any interest in or claims or rights against any of the Corporations held by Assignor, or with respect to the assets of any of the Corporations, and any and all proceeds from any transfer, assignment or pledge of any interest of Assignor in, or claim or right against, any of the Corporations (regardless of whether such transfer, assignment or pledge is permitted under the terms hereof or the other Loan Documents), and all claims, choses in action or things in action or rights as a creditor now or hereafter arising against any of the Corporations; and

(d) All accounts, contract rights, chattel paper, deposit accounts, security entitlements, securities accounts, investment property, letters of credit, letter of credit rights, money, supporting obligations, commercial tort claims and general intangibles (including, without limitation, payment intangibles and software) now or hereafter evidencing, arising from or relating to, any of the foregoing; and

(e) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and

(f) Any shareholder agreements or registration agreements relating to any of the Corporations and their respective shareholders including, without limitation, the Rights Agreement (as hereinafter defined); and

(g) All right of Assignor to collect and enforce payments distributable or payable by any of the Corporations to Assignor pursuant to the terms of any of the Organizational Agreements of any Corporation in which Assignor is a shareholder or otherwise; and

(h) All documents, writings, leases, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or used in connection with any of the foregoing; and

(i) All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and

(j) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and

(k) All products and proceeds of any of the foregoing and all cash, security or other property distributed on account of, or in exchange or substitution of, any of the foregoing (including, without limitation, all stock rights, stock splits, subscription rights, dividends, new certificates and new securities).

All of the foregoing described in this Paragraph 2 are hereinafter referred to collectively as the “Collateral”. The items described in (a) and (b) above, are sometimes hereinafter referred to as the “Shareholder Interests”, and the items described in (c)-(k), above, are sometimes hereinafter referred to collectively as the “Distributions”.

3. Obligations Secured. This Assignment secures (a) the payment and performance by Assignor of all of its obligations under the terms and conditions of this Assignment and, (b) the payment and performance by Borrower of the Obligations.

4. Collection of Distributions.

(a) It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Distributions and that this Assignment constitutes a present, absolute and current assignment of all the Distributions and is effective upon the execution and delivery hereof. Payments under or with respect to the Distributions shall be made as follows:

(i) Assignor shall not have any right to receive payments made under or with respect to the Distributions, (including without limitation any Distributions from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, any of the Collateral in, or upon any redemption or conversion of the Collateral, regardless of whether such event is permitted under the terms of the Loan Documents) and all such payments shall be delivered directly by the Corporations, as applicable, to Agent for application by Agent in satisfaction of the Obligations in accordance with the Loan Documents.

(ii) If Assignor shall receive any payments made under or with respect to the Distributions (including without limitation any Distributions from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or any of the Collateral, or upon any redemption or conversion of the Collateral, regardless of whether such event is permitted under the terms of the Loan Documents), Assignor shall hold all such payments in trust for Agent, will not commingle such payments with other funds of Assignor, and will immediately pay and deliver in kind, all such payments directly to Agent (with such endorsements and assignments as may be necessary to transfer title to Agent) for application by Agent in satisfaction of the Obligations in accordance with the Loan Documents.

(iii) Assignor hereby agrees for the benefit of each of the Corporations and any shareholder thereof, that all payments actually received by Agent hereunder or pursuant hereto shall be deemed payments to Assignor by the respective Corporation, as the case may be, Agent shall apply any and all such payments actually received by Agent in satisfaction of the Obligations in accordance with the Loan Documents.

(iv) In furtherance of the foregoing, Assignor does hereby notify and direct each of the Corporations and their shareholders that all payments under or with respect to the Distributions shall be made directly to Agent at the address of Agent set forth herein.

(b) Effective only upon the occurrence and during the continuance of an Event of Default, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact, which appointment is coupled with an interest and is irrevocable, either in the name of Agent, or in the name of Assignor, at Assignor’s sole cost and expense, and regardless of whether or not Agent becomes a shareholder in any of the Corporations, to take any or all of the following actions:

(i) to ask, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all Collateral and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing and taking any actions on behalf of Assignor which are otherwise required of Assignor under the terms of any agreement as conditions precedent to the payment of the Distributions, and the right and power to receive, endorse, assign and deliver in the name of Assignor, any checks, notes, drafts, instruments or other evidences of payment received in payment of or on account of all or any portion of the Collateral and Assignor hereby waives presentment, demand, protest, and notice of demand, protest and non-payment of any instrument so endorsed; and

(ii) to institute one or more actions against any of the Corporations in connection with the collection of the Collateral, to prosecute to judgment, settle or dismiss any such actions, and to make any compromise or settlement deemed desirable, in Agent’s sole and absolute discretion, with respect to such Distributions, to extend the time of payment, arrange for payment in installments or otherwise modify the terms of any of the Organizational Agreements of any Corporation in which Assignor is a shareholder with respect to the Distributions or release of any of the Corporations, respectively, from their respective obligations to pay any

Distribution, without incurring responsibility to, or affecting any liability of, Assignor under any of such Organizational Agreements;

it being specifically understood and agreed, however, that Agent shall not be obligated in any manner whatsoever to give any notices of default (except as may be specifically required herein or in the other Loan Documents) or to exercise any such power or authority or be in any way responsible for the preservation, maintenance, collection of or realizing upon the Collateral, or any portion thereof or any of Assignor’s rights therein. The foregoing appointment is irrevocable and continuing and any such rights, powers and privileges shall be exclusive in Agent, its successors and assigns until this Assignment terminates as provided in Paragraph 14, below.

(c) Notwithstanding anything contained in this Paragraph 4 to the contrary, provided no Event of Default has occurred and is continuing or would occur as a result thereof, but subject to the terms of this Assignment and the Loan Agreement, Assignor shall have a license (revocable upon the occurrence of an Event of Default) to receive, retain, spend, distribute or otherwise use any ordinary quarterly Distributions paid in the ordinary course of business of any of the Corporations released to Assignor pursuant to the Cash Collateral Agreement; provided, however, any Distributions relating to payments which are extraordinary or of a non-recurring nature including, without limitation, payments upon dissolution or liquidation of any of the Corporations, proceeds upon a redemption or conversion of the Collateral, return of capital or repayment of loans shall be applied against the principal balance of the Loan, and shall not be received, retained, spent, distributed or otherwise used by Assignor.

5. Warranties and Covenants. Assignor does hereby warrant and represent to, and covenant and agree with Agent, as follows:

(a) Assignor has, and shall maintain throughout the term of this Assignment, all necessary power, authority and legal right to own and grant a security interest in the Collateral, and to assign to Agent the security interest granted hereby.

(b) Each of the Corporations is a corporation, duly formed and validly existing under the laws of the State identified on Exhibit “A” attached hereto.

(c) All duties, obligations and responsibilities required to be performed by Assignor as of the date hereof under (i) the Organizational Agreements of any Corporation, (ii) the Lock-up Letter and (iii) that certain Registration Rights Agreement dated as of January 30, 2007 by and among Meruelo Maddux Properties, Inc., a Delaware corporation, Borrower and certain other parties thereto (the “Rights Agreement”) have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under any of such Organizational Agreements, Lock-up Letter or Rights Agreement.

other than the Organizational Agreements of the Corporations, the Lock-up Letter and the Rights Agreement. All conditions and requirements set forth in the Organizational Agreements of the Corporations, the Lock-up Letter and the Rights Agreement with respect to the pledge of Collateral to Agent pursuant to this Agreement have been satisfied and the granting of the pledge of the Collateral to Agent by Assignor (i) does not violate the Organizational Agreements of the Corporations, the Lock-up Letter or the Rights Agreement, and (ii) does not require the approval or consent of, or filing with, any Person, governmental agency or authority. Subject to the terms of the Lock-up Letter, all conditions and requirements set forth in the Organizational Agreements of the Corporations with respect to the transfer of the Shareholder Interests or the exercise by Agent of Assignor’s voting rights with respect thereto, in each case upon the occurrence of an Event of Default, have been satisfied. The transfer of the Shareholder Interests to Agent or the exercise by Agent of the Assignor’s voting rights with respect thereto, in each case upon the occurrence of an Event of Default, (i) does not violate the Organizational Agreements of any Corporation, (ii) does not violate the Rights Agreement and (iii) does not require the approval or consent of, or filing with any Person, governmental agency or authority. All conditions and requirements set forth in the Rights Agreement with respect to the pledge of the Collateral have been satisfied. All conditions and requirements set forth in the Rights Agreement with respect to the transfer of the Collateral or the exercise of by Agent of Assignor’s voting rights with respect thereto have been satisfied. The Organizational Agreements of the Company and the Rights Agreement are in full force and effect. Assignor has delivered to Agent true, correct and complete copies of the Organizational Agreements of the Company, the Lock-up Letter and the Rights Agreement, and the Formation Agreements (as defined below) and the Organizational Agreements of the Company, the Lock-up Letter, the Rights Agreement and the Formation Agreements have not been modified or amended in any respect. The Organizational Agreements of the Corporations, the Lock-up Letter, the Rights Agreement and Formation Agreements contain the sole and full agreements and understandings with respect to Assignor’s interest in, and obligations with respect to, the Shareholder Interests and there are no other oral or side agreements relating thereto. The term “Formation Agreements” means collectively (i) that certain Contribution Agreement dated September 19, 2006, as amended December 29, 2006, among Richard Meruelo, as Trustee of the Richard Meruelo Living Trust u/d/t dated September 15, 1989, Merco Group — Roosevelt Building, LLC, Sunstone Bella Vista, LLC, Meruelo Maddux Properties, L.P. and Meruelo Maddux Properties, Inc.; (ii) that certain Merger Agreement dated September 19, 2006, among Richard Meruelo, as Trustee of the Richard Meruelo Living Trust u/d/t dated September 15, 1989, Sante Fe & Washington Market, Inc., Sante Fe & Washington Market, LLC and Meruelo Maddux Properties, Inc.; and (iii) that certain Merger Agreement dated September 19, 2006, as amended December 29, 2006, among Richard Meruelo, as Trustee of the Richard Meruelo Living Trust u/d/t dated September 15, 1989, Alameda Produce Market, Inc., Alameda Produce Market, LLC and Meruelo Maddux Properties, Inc.

(e) Subject to the terms of the Lock-up Letter, the transfer of the Shareholder Interests to any subsequent purchaser, in each case upon the occurrence of an Event of Default, (i) does not violate the Organizational Agreements of any Corporation, (ii) does not violate the Rights Agreement and (iii) does not require the approval or consent of, or filing with any Person, governmental agency or authority other than those filings and conditions that may be required pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended.

(f) The execution, delivery and performance by Assignor of this Assignment does not and will not require the consent or approval of any person or entity, other than those previously provided to Agent, or the authorization, consent, approval of or any license or permit issued by, or any filing or registration with or the giving of any notice to any court, agency, department, board, commission or other governmental authority, other than the filing of financing statements.

(g) None of the Shareholder Interests are evidenced by any certificate, instrument, document or other writing other than the Certificates and the Organizational Agreements, as the case may be. The Certificates have been duly authorized and validly issued, and are fully paid and non-assessable.

(h) Assignor is and shall remain the sole, lawful, beneficial and record owner of Collateral owned by Assignor, free and clear of all liens, restrictions, Adverse Claims, pledges, encumbrances, charges, rights of third parties and rights of set-off or recoupment whatsoever (other than those in favor of Agent hereunder), and Assignor has the full and complete right, power and authority to grant a security interest in the Collateral in favor of Agent, in accordance with the terms and provisions of this Assignment. The term “Adverse Claims” shall mean, with respect to any item of property, any and all claims, liens, security interests, charges, options, rights, restrictions on transfer or pledge, covenants and encumbrances of any kind affecting the item of property, including (if applicable) “adverse claims” as such term is defined in Section 8-102 of the Uniform Commercial Code, other than the liens and security interests created in favor of Agent pursuant to this Assignment. Assignor is not and will not become a party to or otherwise be bound by or subject to any agreement, other than the Loan Documents, the Lockout Agreement and the Rights Agreement, which restricts in any manner the rights of any present or future holder of the Collateral with respect thereto. No Person has any option, right of first refusal, right of first offer or other right to acquire all or any portion of the Collateral.

(i) This Assignment, together with the UCC financing statements, and the Certificates and powers delivered to Agent, creates a valid and binding first priority security interest in the Collateral securing the payment and performance of the Obligations, and all filings and other actions necessary to perfect and protect such security interests have been duly made and taken. Neither Assignor nor any other Person has performed, nor will Assignor perform or permit any other Person to perform, any acts which might prevent Agent from enforcing any of the terms and conditions of this Assignment or which would limit Agent in any such enforcement. In addition, upon the delivery to Agent of all certificates evidencing or embodying the Shareholder Interests owned by Assignor, in each case duly indorsed or accompanied by duly executed instruments of assignment or transfer in blank, Agent shall be a “protected purchaser” (as such term is defined in Section 8-303 of the UCC (as hereinafter defined)) of such Shareholder Interests.

(j) All original notes and other documents or instruments evidencing, constituting, guaranteeing or securing any of the Distributions or any right to receive the Distributions have been endorsed to and delivered to Agent.

(k) (A) Assignor’s correct legal name (including, without limitation, punctuation and spacing) indicated on the public record of Assignor’s jurisdiction, mailing address, principal residence, identity or corporate structure, chief executive office, jurisdiction of organization, organizational identification number, and federal tax identification number, are as set forth on Exhibit “C” attached hereto and by this reference made a part hereof, (B) Assignor has been using or operating under said name, identity or corporate structure without change for the time period set forth on Exhibit “C” attached hereto, and (C) in order to perfect the pledge and security interests granted herein against Assignor, a U.C.C. Financing Statement must be filed with the Secretary of State of the State of California. Assignor covenants and agrees that Assignor shall not change any of the matters addressed by clauses (A), (B), or (C) of this paragraph unless it has given Agent thirty (30) days prior written notice of any such change and executed at the request of Agent or authorized the execution by Agent or Agent’s counsel of such additional financing statements or other instruments to be filed in such jurisdictions as Agent may deem necessary or advisable in its sole discretion to prevent any filed financing statement from becoming misleading or losing its perfected status.

(l) Assignor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements, documents, endorsements, assurances and instruments as Agent may reasonably at any time request in connection with the administration or enforcement of this Assignment or related to the Collateral or any part thereof or in order to better assure and confirm unto Agent its rights, powers and remedies hereunder. Without limiting the generality of the foregoing, at any time and from time to time, Assignor shall, at the request of Agent, make, execute, acknowledge, and deliver or authorize the execution and delivery of and where appropriate, cause to be recorded and/or filed and from time to time thereafter to be re-recorded and/or refiled at such time in such offices and places as shall be deemed desirable by Agent all such other and further assignments, security agreements, financing statements, continuation statements, endorsements, assurances, certificates and other documents as Agent from time to time may require for the better assuring, conveying, assigning and confirming to Agent the Collateral and the rights hereby conveyed or assigned or intended now or hereafter to be conveyed or assigned, and for carrying out the intention or facilitating the performance of the terms of this Assignment. Upon any failure of Assignor to do so, Agent may make, execute, record, file, rerecord and/or refile, acknowledge and deliver any and all such further assignments, security agreements, financing statements, continuation statements, endorsements, assurances, instruments, certificates and documents for and in the name of Assignor, and Assignor hereby irrevocably appoints Agent the agent and attorney-in-fact with full power of substitutions of Assignor so to do. This power is coupled with an interest and is irrevocable.

(m) Exhibit “C” correctly sets forth all names and tradenames that Assignor has used within the last five years, and also correctly sets forth the locations of all of the principal places of business of Assignor over the last five years.

such terms are defined by the Uniform Commercial Code as enacted in the State of California (the “UCC”) with corresponding provisions thereof defining what constitutes “control” for such items of collateral) in each case which are included as Collateral, with any agreements establishing control to be in form and substance reasonably satisfactory to Agent, and (3) otherwise to insure the continued perfection and priority of the Agent’s security interest in any of the Collateral and of the preservation of its rights therein. If Assignor shall at any time, acquire a “commercial tort claim” (as such term is defined in the UCC with respect to the Collateral or any portion thereof), Assignor shall promptly notify Agent thereof in writing, providing a reasonable description and summary thereof, and shall execute a supplement to this Assignment in form and substance acceptable to Agent granting a security interest in such commercial tort claim to Agent.

(o) Assignor hereby authorizes Agent, its counsel or its representative, at any time and from time to time, to file financing statements, amendments and continuations that describe or relate to the Collateral or any portion thereof in such jurisdictions as Agent may deem necessary or desirable in order to perfect the security interests granted by Assignor under this Assignment or any other Loan Document, and such financing statements may contain, among other items as Agent may deem advisable to include therein, the federal tax identification number and organizational number of Assignor.

(p) The pledge of the security interest contemplated by this Assignment does not violate and does not require that any filing, registration or other act be taken with respect to any and all laws pertaining to the registration or transfer of securities, including without limitation the Securities Act of 1933, as amended, the Securities and Exchange Act of 1934, as amended, and any and all rules and regulations promulgated thereunder or any similar federal, state or local law, rule, regulation or orders (all of the foregoing, and any similar laws as from time to time being in effect, being referred to collectively as the “Applicable Law”) hereafter enacted or analogous in effect, as the same are amended and in effect from time to time (hereinafter referred to collectively as the “Securities Laws”). The foreclosure by Agent on the Shareholder Interests (or transfer in lieu thereof) is permitted under Applicable Law and does not require that any filing, registration or other act be taken other than those filings and conditions that may be required pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. Assignor shall at all times comply with the Securities Laws as the same pertain to all or any portion of the Collateral or any of the transactions contemplated by this Assignment. For purposes of calculating any holding periods under the Applicable Laws and under the Lock-up Letter, Assignor’s period of ownership of the Shareholder Interests shall be deemed to have commenced on the date hereof. In the event that Agent or its nominee or designee becomes the owner of the Shareholder Interests as a result of foreclosure or otherwise, Agent or such nominee or designee shall be entitled to the benefit of adding any period of ownership of the Shareholder Interests by Assignor to the period of ownership of the Shareholder Interests by Agent or such nominee or designee for purposes of calculating any such holding periods of Agent or such nominee or designee such that Agent’s or such nominee’s or designee’s holding period under the Applicable Laws and the Lock-up Letter with respect to the Shareholder Interests shall be deemed to have commenced on the date hereof.

(q) The Certificates shall be personal property for all purposes and shall be a “security” as defined in, and governed by, Article 8 of the Uniform Commercial Code of the State of California.

6. General Covenants. Assignor covenants and agrees that, so long as this Assignment is continuing:

(a) Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, directly or indirectly or by operation of law, sell, transfer, assign, dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of the Collateral.

(b) Assignor shall at all times defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to Agent’s interest in the Collateral as granted hereunder.

(c) So long as this Assignment remains in effect, Assignor shall not modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of, any of the Lock-up Letter or Registration Rights Agreement.

(d) Assignor shall perform all of its duties, responsibilities and obligations under each of the Organizational Agreements of each Corporation of which Assignor is a shareholder, the Lock-up Letter and the Rights Agreement.

(e) Assignor shall pay all taxes and other charges against the Collateral, shall not use the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Collateral and shall suffer to exist no levy, seizure or attachment of the Collateral.

(f) Assignor, at the request of Agent, shall promptly take such actions as Agent may reasonably require to enforce or cause to be enforced the terms of any of the Organizational Agreements of any Corporation in which Assignor has an ownership interest, the Rights Agreement or any other contract, agreement or instrument included in, giving rise to, creating, establishing, evidencing or relating to the Collateral or to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder.

(g) If any amounts are due from any of the Corporations to Assignor, including, without limitation, any amounts in respect of Distributions payable to Assignor in the future, and the obligations to pay or repay such amount is to be evidenced by a separate document or instrument, then as evidence of such obligations, Assignor shall cause such Corporation to issue Assignor, as the evidence of any obligations of such Corporation to pay Distributions to Assignor in the future, a promissory note bearing the legend attached hereto as Exhibit “B” and which note shall provide that all payments due under such promissory note are to be paid directly to Agent as required by and applied as provided in this Assignment until the Obligations are paid in full and the Agent have no further obligation to make any advances under the Loan Agreement or this Assignment is otherwise terminated as provided herein. No other evidence of such obligations shall be executed by such Corporation to Assignor.

(h) Assignor shall promptly deliver to Agent any note or other document or instrument entered into after the date hereof which evidences, constitutes, guarantees or secures any of the Distributions or any right to receive a Distribution, which notes or other documents and instruments shall be accompanied by such endorsements or assignments as Agent may require to transfer title to Agent.

(i) Anything herein to the contrary notwithstanding, (i) Assignor shall remain liable under each of the Organizational Agreements of each Corporation in which Assignor is a shareholder and all other contracts, agreements and instruments included in, giving rise to, creating, establishing, evidencing or relating to the Collateral to the extent set forth therein to perform all of its duties and obligations to the same extent as if this Assignment had not been executed, (ii) the exercise by Agent of any of its rights hereunder shall not release Assignor from any of its duties or obligations under any of such Organizational Agreements or any such contracts, agreements and instruments, and (iii) neither Agent nor any of the Lenders shall have any obligation or liability under any of such Organizational Agreements or any such contract, agreement or instrument by reason of this Assignment, nor shall Agent or any of the Lenders be obligated to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder.

7. Substitution, Exchanges, Additional Interest.

If Assignor shall at any time be entitled to receive or shall receive any cash, certificate or other property, option or right, upon, in respect of, as an addition to, or in substitution or exchange for any of the Collateral, whether for value paid by Assignor or otherwise, Assignor agrees that the same shall be deemed to be Collateral and shall be delivered directly to Agent in each case, accompanied by proper instruments of assignment and powers duly executed by Assignor in such a form as may be required by Agent, to be held by Agent subject to the terms hereof, as further security for the Obligations (except as otherwise provided herein with respect to the application of the foregoing to the Obligations). If Assignor receives any of the foregoing directly, Assignor agrees to hold such cash or other property in trust for the benefit of Agent, and to surrender such cash or other property to Agent immediately. All certificates, if any, representing such interests shall be promptly delivered to Agent, together with assignments related thereto, or other instruments appropriate to transfer a certificate representing any such interest, duly executed in blank.

8. Events of Default. An Event of Default shall exist hereunder upon the occurrence of any of the following:

(a) Any warranty, representation or statement made by or on behalf of Assignor in this Assignment proves untrue or misleading in any material respect when made, deemed to have been made or repeated;

(b) Assignor shall fail to duly and fully comply with any covenant, condition or agreement in Paragraphs 5(h), 6(a), 6(c), 6(g), 6(h), or 7 of this Assignment;

(c) Assignor shall fail to, or Assignor shall fail to cause any other Person, to duly and fully comply with any covenant, condition or agreement of this Assignment (other than those specified in subsection (b) above or any default excluded from any provision of a grace period or cure of defaults contained in any other of the Loan Documents) and such failure is not cured in the applicable time period provided in the Loan Agreement;

(d) The occurrence of an Event of Default under any of the other Loan Documents;

(e) Any amendment to or termination of a financing statement naming Assignor as debtor and Agent as secured party, or any correction statement with respect thereto, is filed in any jurisdiction by, or caused by, or at the instance of Assignor or by, or caused by, or at the instance of any principal, member, general partner, shareholder or officer of Assignor without the prior written consent of Agent; or

(f) Any amendment to or termination of a financing statement naming Assignor as debtor and Agent as secured party, or any correction statement with respect thereto, is filed in any jurisdiction by any party other than Agent or Agent’s counsel without the prior written consent of Agent and the effect of such filing is not nullified to the reasonable satisfaction of Agent within ten (10) days after notice to Assignor thereof.

9. Remedies.

otherwise required under this Assignment) of any kind, all of which are expressly waived, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Assignor’s right to receive a Distribution, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the obligations evidenced by the Note. To the extent the Collateral consists of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Assignor. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Assignor shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Upon the occurrence and during the continuance of an Event of Default, Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Obligations or the Collateral are due, and for the purpose of realizing Agent’s rights therein, Agent may receive, open and dispose of mail addressed to Assignor and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage of any form of Collateral on behalf and in the name of Assignor, as its attorney-in-fact. In addition, upon the occurrence and during the continuance of an Event of Default, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact either in the name of Agent or Assignor to (i) sign Assignor’s name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the UCC; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above, sign in Assignor’s name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said attorney-in-fact are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Obligations. In the event that any transfer tax, deed tax, conveyance tax or similar tax is payable in connection with the foreclosure, conveyance in lieu of foreclosure or otherwise of the Shareholder Interests or other Collateral, Assignor shall pay such amount to Agent upon demand and if Assignor fails to pay such amount on demand, Agent

may advance such amount on behalf of Assignor and the amount thereof shall become a part of the Obligations and bear interest at the rate for overdue amounts as set forth in the Loan Agreement until paid.

(b) If Assignor fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Assignor contained in this Assignment which Assignor shall fail to perform, and the cost of such performance, together with any expenses, including reasonable attorneys’ fees actually incurred (including attorneys’ fees incurred in any appeal) by Agent in connection therewith, shall be payable by Assignor upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Loan Agreement.

(c) Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the reasonable judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay reasonable attorney’s fees. Any such advances made or expenses incurred by Agent shall be deemed advanced under the Loan Documents, shall increase the indebtedness evidenced and secured thereby, shall be payable upon demand and shall bear interest at the rate for overdue payments set forth in the Loan Agreement.

(d) Any stock or securities and stock powers held by Agent as Collateral (including stock certificates) hereunder may, at any time, and at the option of Agent, be registered in the name of Agent or its nominee, endorsed or assigned in blank or in the name of any nominee and Agent may deliver any or all of the Collateral to the issuer or issuers thereof for the purpose of making denominational exchanges or registrations or transfer or for such other purposes in furtherance of this Assignment as Agent may deem desirable. Until the occurrence of an Event of Default, Assignor shall retain the right to vote any of the Collateral, as applicable, or exercise shareholder rights, as applicable, in a manner not inconsistent with the terms of this Assignment and the other Loan Documents, and Agent hereby grants to Assignor its proxy to enable Assignor to so vote any of the Collateral or exercise such shareholder rights, as applicable, (except that Assignor shall not have any right to exercise any such power if the exercise thereof would violate or result in a violation of any of the terms of this Assignment or any of the other Loan Documents). At any time after the occurrence and during the continuance of any Event of Default, Agent or its nominee shall, without notice or demand, automatically have the sole and exclusive right to give all consents, waivers and ratifications in respect of the Collateral and exercise all voting and other shareholder, management, approval or other rights at any meeting of the shareholders of the Corporations, (and the right to call such meetings) or otherwise (and to give written consents in lieu of voting thereon), and exercise any and all rights of conversion, exchange, subscription or any of the rights, privileges or options pertaining to the Collateral and otherwise act with respect thereto and thereunder as if Agent or its nominee were the absolute owner thereof (all of such rights of Assignor ceasing to exist and terminating upon the occurrence of an Event of Default) including, without limitation, the right to exchange, at its discretion, any and all of the Collateral upon the merger, consolidation, reorganization,

recapitalization or the readjustment of the issuer thereof, all without liability except to account for property actually received and in such manner as Agent shall determine in its sole and absolute discretion, but Agent shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for the failure to do so or delay in so doing. The exercise by Agent of any of its rights and remedies under this paragraph shall not be deemed a disposition of collateral under Article 9 of the UCC nor an acceptance by Agent of any of the Collateral in satisfaction of the Obligations.

(e) Notwithstanding anything in this Assignment or any other Loan Document to the contrary, any reference in this Assignment or any other Loan Document to “the continuance of a default” or “the continuance of an Event of Default” or any similar phrase shall not create or be deemed to create any right of Assignor or any other party to cure any default following the expiration of any applicable grace or notice and cure period.

10. Duties of Agent. The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Agent’s duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties and to use such care in the custody of Collateral in the possession of Agent as is accorded to other personal property of the same type as the Collateral in the possession of the Agent. Agent shall have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any of the payments received by it.

11. Indemnification.

(a) It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon the Agent or any of the Lenders, or cause the Agent or any of the Lenders to be, or to be deemed to be, a shareholder in any of the Corporations and that in accepting this Assignment, the Agent and the Lenders neither assume nor agree to perform at any time whatsoever any obligation or duty of Assignor relating to the Collateral or under any of the Organizational Agreements or any other mortgage, indenture, contract, agreement or instrument to which the Corporations are a party or to which they are subject, all of which obligations and duties shall be and remain with and upon the Assignor.

(b) Assignor agrees to indemnify, defend and hold the Agent and the Lenders harmless from and against any and all claims, expenses, losses and liabilities growing out of or resulting from this Assignment or acts taken or omitted to be taken by the Agent or the Lenders hereunder or in connection therewith (including, without limitation, enforcement of this Assignment), except claims, expenses, losses or liabilities resulting from Agent’s or such Lender’s gross negligence or willful misconduct.

of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Agent hereunder, or (iv) the failure by Assignor to perform or observe any of the provisions hereof.

12. Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of:

(a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto;

(b) Any change in the time (including the extension of the maturity date of the Note), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents;

(c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or

(d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Assignor or any third party for the Obligations or any part thereof.

13. Amendments and Waivers. No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent’s rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Assignor hereby waives to the extent permitted by law all rights which Assignor has or may have under and by virtue of the UCC and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Assignor to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Assignor hereby waives and renounces for itself, its heirs, successors and assigns, presentment, demand, protest, advertisement or notice of any kind (except for any notice required by law or the Loan Documents) and all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Assignment and the collection of any of the Obligations.

14. Continuing Security Interest; Transfer of Note; Release of Collateral. This Assignment shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Obligations and the Lenders have no further obligation to make any advances under the Note, (b) be binding upon Assignor and its permitted heirs, successors and assigns, and (c) inure, together with the rights and remedies of Agent hereunder, to the benefit of the Agent and the Lenders and their respective successors, transferees and assigns. Upon the indefeasible payment in full of the Obligations and the termination or expiration of any obligation of the Lenders to make further advances under the Note, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Assignor that granted such security interest. Upon any such termination, Agent will, at Assignor’s expense, execute and deliver to Assignor such documents as Assignor shall reasonably request to evidence such termination.

15. Modifications, Etc. Assignor hereby consents and agrees that Agent may at any time and from time to time, without notice to or further consent from Assignor, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Obligations; substitute for any Collateral so held by it, other collateral of like kind; agree to modification of the terms of the Loan Documents; extend or renew the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents for any period or to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor, endorser or any other person or entity liable with respect to the Obligations; or take or fail to take any action of any type whatsoever; and no such action which Agent shall take or fail to take in connection with the Loan Documents, or any of them, or any security for the payment of the Obligations or for the performance of any obligations or undertakings of Assignor, nor any course of dealing with Assignor or any other person, shall release Assignor’s obligations hereunder, affect this Assignment in any way or afford Assignor any recourse against Agent.

Agreements, the Securities Laws, the Lock-up Letter or the Rights Agreement. Assignor and Agent acknowledge and agreed that Agent may be required to foreclose on and sell the Collateral in parcels and at such time as Agent may reasonably determine or an independent accounting or law firm opines that is necessary to comply with the conditions or requirements set forth in the Organizational Agreements of the Corporations, the Securities Laws the Lock-up Letter and the Rights Agreement, including, without limitation, by way of a series of sales whereby the Agent forecloses upon only a portion of the Collateral and thereafter sells such portion of the Collateral in such volume and at such times as Agent may deem or an independent accounting or law firm opines that is necessary to comply with such conditions and restrictions, and following such sale Agent may be required to repeat such process as many times as may be necessary to comply with such conditions and restrictions until all of the Collateral is foreclosed on and sold. Assignor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Agent in its sole and absolute discretion may, in accordance with Applicable Law, the Organizational Agreements, the Lock-up Letter and the Rights Agreement, (a) proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Securities Laws (b) approach and negotiate with a single potential purchaser to effect such sale and (c) sell the Collateral in parcels and at such times and to such Persons as Agent may reasonably determine is necessary to comply with such conditions and requirements. Assignor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller if such sale were a public sale without such restrictions. In the event of any such sale, Agent shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached or if all the Collateral were sold at a single sale. Assignor further agrees that any sale or sales by Agent of the Collateral made as provided in this Paragraph 16 shall be commercially reasonable. Assignor further agrees to provide to Agent any and all materials reasonably necessary under Applicable Law for the Agent to effectuate such sale. The provisions of this paragraph will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells. Agent and the Lenders shall not be liable to Assignor for any loss in value of the Collateral by reason of any delay in the sale of the Collateral.

17. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA (OTHER THAN PERFECTION OF A SECURITY INTEREST IN THE CERTIFICATE BY CONTROL THEREOF, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE CERTIFICATE IS LOCATED).

18. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Assignment (hereinafter in referred to as a “Notice”) must be in writing and shall be deemed to have been properly given or served if given in the manner prescribed in the Loan Agreement if given to Assignor.

19. Counterparts. This Assignment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Assignment by signing any such counterpart.

20. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

21. Miscellaneous. Time is of the essence of this Assignment. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. If, for any circumstances whatsoever, fulfillment of any provision of this Assignment shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Assignment, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Assignment shall remain operative and in full force and effect.

22. Lock-Up Letter. Agent agrees to be bound by the restrictions in the Lock-Up Letter.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, Assignor and Agent have executed this Assignment under seal on the date first above written.


ASSIGNOR:

RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989

/s/ Richard Meruelo Richard Meruelo, as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989		(SEAL)

[Signatures Continued on Next Page]


Agent:

KEYBANK NATIONAL ASSOCIATION, as Agent

By:		/s/ Jason Weaver
Name:		Jason Weaver
Title:		Senior Vice-President

EX-10.3 4 dex103.htm ASSIGNMENT OF INTERESTS, DATED JANUARY 30, 2007 Assignment of Interests, dated January 30, 2007

Exhibit 10.3

ASSIGNMENT OF INTERESTS

THIS ASSIGNMENT OF INTERESTS (this “Assignment”), made this 30th day of January, 2007, by MERCO GROUP — ROOSEVELT BUILDING, LLC, a California limited liability company (“Assignor”) to KEYBANK NATIONAL ASSOCIATION, a national banking association (“KeyBank”), as administrative agent for itself and the other lenders (the “Lenders”) from time to time party to the “Loan Agreement” (as hereinafter defined) (KeyBank, in its capacity as administrative agent, hereinafter referred to as “Agent”).

WITNESSETH:

WHEREAS, Assignor, Richard Meruelo as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989 (“Co-Borrower”; Assignor and Co-Borrower are hereinafter referred to collectively as “Borrower”), and KeyBank, individually and as administrative agent, have entered into that certain Loan Agreement dated of even date herewith (as the same may be varied, extended, supplemented, consolidated, amended, replaced, increased, renewed or modified or restated, the “Loan Agreement”), pursuant to which Lenders have agreed to provide a loan to Borrower in an amount of up to $33,000,000.00 (the “Loan”), which Loan is evidenced by that certain Note dated of even date herewith made by Borrower to the order of KeyBank in the principal face amount of $33,000,000.00 (such Note, together with such other Notes as may be issued pursuant to the Loan Agreement, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, increased or restated, are hereinafter referred to collectively as the “Note”); and

1. Definitions. Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Loan Agreement.

Loan Agreement, and any and all agreements evidencing, securing or otherwise relating to the obligations evidenced by the Note (this Assignment, the Note, the Assignment of Hedge, the Loan Agreement and such other agreements, together with any and all renewals, modifications, consolidations and extensions thereof, are hereinafter referred to collectively as the “Loan Documents”; and said duties, responsibilities and obligations of Borrower and the Hedge Obligations are hereinafter referred to collectively as the “Obligations”), Assignor does hereby transfer, assign, pledge, convey, and grant to Agent, and does hereby grant a security interest to Agent in, all of Assignor’s right, title and interest in and to the following:

(a) Two Million Nine Hundred Thousand (2,900,000) shares of the common stock of the Corporation represented by Certificate No. MMPI0017 (the “Certificate”), together with any and all other securities, cash, certificates or other property, option or right in respect of, in addition to or substitution or exchange for the Certificate or any of the foregoing, or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and

(b) Any and all profits, proceeds, accounts, income, dividends, distributions, payments upon dissolution or liquidation of any of the Corporations, proceeds upon a redemption or conversion, return of capital, repayment of loans, and payments of any kind or nature whatsoever, now or hereafter distributable or payable by any of the Corporations, to Assignor, by reason of Assignor’s interest in any of the Corporations, or otherwise, or now or hereafter distributable or payable to Assignor from any other source by reason of Assignor being a shareholder in any of the Corporations, or on account of any interest in or claims or rights against any of the Corporations held by Assignor, or with respect to the assets of any of the Corporations, and any and all proceeds from any transfer, assignment or pledge of any interest of Assignor in, or claim or right against, any of the Corporations (regardless of whether such transfer, assignment or pledge is permitted under the terms hereof or the other Loan Documents), and all claims, choses in action or things in action or rights as a creditor now or hereafter arising against any of the Corporations; and

(c) All accounts, contract rights, chattel paper, deposit accounts, security entitlements, securities accounts, investment property, letters of credit, letter of credit rights, money, supporting obligations, commercial tort claims and general intangibles (including, without limitation, payment intangibles and software) now or hereafter evidencing, arising from or relating to, any of the foregoing; and

(d) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and

(e) Any shareholder agreements or registration agreements relating to any of the Corporations and their respective shareholders including, without limitation, the Rights Agreement (as hereinafter defined); and

(f) All right of Assignor to collect and enforce payments distributable or payable by any of the Corporations to Assignor pursuant to the terms of any of the Organizational Agreements of any Corporation in which Assignor is a shareholder or otherwise; and

(g) All documents, writings, leases, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or used in connection with any of the foregoing; and

(h) All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and

(i) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and

(j) All products and proceeds of any of the foregoing and all cash, security or other property distributed on account of, or in exchange or substitution of, any of the foregoing (including, without limitation, all stock rights, stock splits, subscription rights, dividends, new certificates and new securities).

All of the foregoing described in this Paragraph 2 are hereinafter referred to collectively as the “Collateral”. The items described in (a) above, are sometimes hereinafter referred to as the “Shareholder Interests”, and the items described in (b)-(k), above, are sometimes hereinafter referred to collectively as the “Distributions”.

4. Collection of Distributions.

to transfer title to Agent) for application by Agent in satisfaction of the Obligations in accordance with the Loan Documents.

Agent, its successors and assigns until this Assignment terminates as provided in Paragraph 14, below.

5. Warranties and Covenants. Assignor does hereby warrant and represent to, and covenant and agree with Agent, as follows:

(b) Each of the Corporations is a corporation, duly formed and validly existing under the laws of the State identified on Exhibit “A” attached hereto.

(d) Neither Assignor nor any Corporation is a party to, nor is any of such Persons bound by or subject to, any indenture, contract or other agreement which purports to prohibit, restrict, limit, or control the transfer or pledge of the Collateral, or the exercise of Assignor’s voting rights with respect to any Corporation or the management of any Corporation other than the Organizational Agreements of the Corporations, the Lock-up Letter and the Rights Agreement. All conditions and requirements set forth in the Organizational Agreements of the Corporations, the Lock-up Letter and the Rights Agreement with respect to the pledge of Collateral to Agent pursuant to this Agreement have been satisfied and the granting of the pledge of the Collateral to Agent by Assignor (i) does not violate the Organizational Agreements of the Corporations, the Lock-up Letter or the Rights Agreement, and (ii) does not require the approval or consent of, or filing with, any Person, governmental agency or authority. Subject to the terms of the Lock-up Letter, all conditions and requirements set forth in the Organizational Agreements of the Corporations with respect to the transfer of the Shareholder Interests or the exercise by

Agent of Assignor’s voting rights with respect thereto, in each case upon the occurrence of an Event of Default, have been satisfied. The transfer of the Shareholder Interests to Agent or the exercise by Agent of the Assignor’s voting rights with respect thereto, in each case upon the occurrence of an Event of Default, (i) does not violate the Organizational Agreements of any Corporation, (ii) does not violate the Rights Agreement and (iii) does not require the approval or consent of, or filing with any Person, governmental agency or authority. All conditions and requirements set forth in the Rights Agreement with respect to the pledge of the Collateral have been satisfied. All conditions and requirements set forth in the Rights Agreement with respect to the transfer of the Collateral or the exercise of by Agent of Assignor’s voting rights with respect thereto have been satisfied. The Organizational Agreements of the Company and the Rights Agreement are in full force and effect. Assignor has delivered to Agent true, correct and complete copies of the Organizational Agreements of the Company, the Lock-up Letter and the Rights Agreement, and the Formation Agreements (as defined below) and the Organizational Agreements of the Company, the Lock-up Letter, the Rights Agreement and the Formation Agreements have not been modified or amended in any respect. The Organizational Agreements of the Corporations, the Lock-up Letter, the Rights Agreement and Formation Agreements contain the sole and full agreements and understandings with respect to Assignor’s interest in, and obligations with respect to, the Shareholder Interests and there are no other oral or side agreements relating thereto. The term “Formation Agreements” means collectively (i) that certain Contribution Agreement dated September 19, 2006, as amended December 29, 2006, among Richard Meruelo, as Trustee of the Richard Meruelo Living Trust u/d/t dated September 15, 1989, Merco Group — Roosevelt Building, LLC, Sunstone Bella Vista, LLC, Meruelo Maddux Properties, L.P. and Meruelo Maddux Properties, Inc.; (ii) that certain Merger Agreement dated September 19, 2006, among Richard Meruelo, as Trustee of the Richard Meruelo Living Trust u/d/t dated September 15, 1989, Sante Fe & Washington Market, Inc., Sante Fe & Washington Market, LLC and Meruelo Maddux Properties, Inc.; and (iii) that certain Merger Agreement dated September 19, 2006, as amended December 29, 2006, among Richard Meruelo, as Trustee of the Richard Meruelo Living Trust u/d/t dated September 15, 1989, Alameda Produce Market, Inc., Alameda Produce Market, LLC and Meruelo Maddux Properties, Inc.

(g) None of the Shareholder Interests are evidenced by any certificate, instrument, document or other writing other than the Certificate and the Organizational

Agreements, as the case may be. The Certificate has been duly authorized and validly issued, and are fully paid and non-assessable.

(i) This Assignment, together with the UCC financing statements, and the Certificate and powers delivered to Agent, creates a valid and binding first priority security interest in the Collateral securing the payment and performance of the Obligations, and all filings and other actions necessary to perfect and protect such security interests have been duly made and taken. Neither Assignor nor any other Person has performed, nor will Assignor perform or permit any other Person to perform, any acts which might prevent Agent from enforcing any of the terms and conditions of this Assignment or which would limit Agent in any such enforcement. In addition, upon the delivery to Agent of all certificates evidencing or embodying the Shareholder Interests owned by Assignor, in each case duly indorsed or accompanied by duly executed instruments of assignment or transfer in blank, Agent shall be a “protected purchaser” (as such term is defined in Section 8-303 of the UCC (as hereinafter defined)) of such Shareholder Interests.

paragraph unless it has given Agent thirty (30) days prior written notice of any such change and executed at the request of Agent or authorized the execution by Agent or Agent’s counsel of such additional financing statements or other instruments to be filed in such jurisdictions as Agent may deem necessary or advisable in its sole discretion to prevent any filed financing statement from becoming misleading or losing its perfected status.

(n) Assignor shall, at any time and from time to time, take such steps as Agent may reasonably request for Agent (1) to obtain an acknowledgment, in form and substance reasonably satisfactory to Agent, of any bailee having possession of any of the Collateral, stating that the bailee holds possession of such Collateral on behalf of Agent, (2) to obtain “control” of any investment property, deposit accounts, letter-of-credit rights, or electronic chattel paper (as such terms are defined by the Uniform Commercial Code as enacted in the State of California (the “UCC”) with corresponding provisions thereof defining what constitutes “control” for such items of collateral) in each case which are included as Collateral, with any agreements establishing control to be in form and substance reasonably satisfactory to Agent, and (3) otherwise to insure the continued perfection and priority of the Agent’s security interest in any of the Collateral and of the preservation of its rights therein. If Assignor shall at any time, acquire a “commercial tort claim” (as such term is defined in the UCC with respect to the Collateral or any portion thereof), Assignor shall promptly notify Agent thereof in writing, providing a reasonable description and summary thereof, and shall execute a supplement to this

Assignment in form and substance acceptable to Agent granting a security interest in such commercial tort claim to Agent.

(q) The Certificate shall be personal property for all purposes and shall be a “security” as defined in, and governed by, Article 8 of the Uniform Commercial Code of the State of California.

6. General Covenants. Assignor covenants and agrees that, so long as this Assignment is continuing:

executed, (ii) the exercise by Agent of any of its rights hereunder shall not release Assignor from any of its duties or obligations under any of such Organizational Agreements or any such contracts, agreements and instruments, and (iii) neither Agent nor any of the Lenders shall have any obligation or liability under any of such Organizational Agreements or any such contract, agreement or instrument by reason of this Assignment, nor shall Agent or any of the Lenders be obligated to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder.

7. Substitution, Exchanges, Additional Interest.

8. Events of Default. An Event of Default shall exist hereunder upon the occurrence of any of the following:

(a) Any warranty, representation or statement made by or on behalf of Assignor in this Assignment proves untrue or misleading in any material respect when made, deemed to have been made or repeated;

(b) Assignor shall fail to duly and fully comply with any covenant, condition or agreement in Paragraphs 5(h), 6(a), 6(c), 6(g), 6(h), or 7 of this Assignment;

(d) The occurrence of an Event of Default under any of the other Loan Documents;

at the instance of any principal, member, general partner, shareholder or officer of Assignor without the prior written consent of Agent; or

9. Remedies.

(a) Upon the occurrence of any Event of Default, Agent may take any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under this Assignment and the Loan Documents, including, without limitation, the exercise of its rights and remedies with respect to any or all of the Collateral. The remedies of Agent shall include, without limitation, all rights and remedies specified in the Loan Documents and this Assignment, all remedies of Agent under applicable general or statutory law, and the remedies of a secured party under the UCC, regardless of whether the UCC has been enacted or enacted in that form in any other jurisdiction in which such right or remedy is asserted. In addition to such other remedies as may exist from time to time, whether by way of set-off, banker’s lien, consensual security interest or otherwise, upon the occurrence of an Event of Default, Agent is authorized at any time and from time to time, without notice to or demand upon Assignor (any such notice or demand being expressly waived by Assignor) to charge any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by Agent to or for the credit of or the account of Assignor against any and all of the Obligations, irrespective of whether or not Agent shall have made any demand for payment and although such Obligations may be unmatured. Any notice required by law, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be reasonable and properly given if given in the manner prescribed for the giving of notice herein, and, in the case of any notice of disposition, if given at least ten (10) days prior to such disposition. Agent may require Assignor to assemble the Collateral and make it available to Agent at any place to be designated by Agent which is reasonably convenient to both parties. It is expressly understood and agreed that Agent shall be entitled to dispose of the Collateral at any public or private sale or sales, without recourse to judicial proceedings and without either demand, appraisement, advertisement or notice (except as such notice as is otherwise required under this Assignment) of any kind, all of which are expressly waived, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Assignor’s right to receive a Distribution, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the obligations evidenced by the Note. To the extent the Collateral consists of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so

adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Assignor. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Assignor shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Upon the occurrence and during the continuance of an Event of Default, Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Obligations or the Collateral are due, and for the purpose of realizing Agent’s rights therein, Agent may receive, open and dispose of mail addressed to Assignor and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage of any form of Collateral on behalf and in the name of Assignor, as its attorney-in-fact. In addition, upon the occurrence and during the continuance of an Event of Default, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact either in the name of Agent or Assignor to (i) sign Assignor’s name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the UCC; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above, sign in Assignor’s name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said attorney-in-fact are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Obligations. In the event that any transfer tax, deed tax, conveyance tax or similar tax is payable in connection with the foreclosure, conveyance in lieu of foreclosure or otherwise of the Shareholder Interests or other Collateral, Assignor shall pay such amount to Agent upon demand and if Assignor fails to pay such amount on demand, Agent may advance such amount on behalf of Assignor and the amount thereof shall become a part of the Obligations and bear interest at the rate for overdue amounts as set forth in the Loan Agreement until paid.

11. Indemnification.

(c) Assignor upon demand shall pay to Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and disbursements of counsel actually incurred (including those incurred in any appeal), and of any experts and agents, which Agent may incur in connection with (i) the administration of this Assignment, (ii) the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Agent hereunder, or (iv) the failure by Assignor to perform or observe any of the provisions hereof.

12. Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of:

(a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto;

16. Securities Act and Other Limitations. In view of the position of Assignor in relation to the Collateral, or because of other current or future circumstances, a question may arise under the Securities Laws or the Organizational Agreements of the Corporations, the Lock-up Letter or the Rights Agreement with respect to any disposition of the Collateral permitted hereunder (including, without limitation, any foreclosure upon the Collateral or transfer in lieu thereof). Assignor recognizes that the Organizational Agreements of the Corporations, the Lock-up Letter and the Rights Agreement may strictly limit transfers of the Shareholder Interests. Assignor understands that compliance with the Securities Laws, the Organizational Agreements, the Lock-up Letter or the Rights Agreement might very strictly limit the course of conduct of Agent if Agent were to attempt to dispose of all or any part of the Collateral in accordance with the terms hereof, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to dispose of all or part of the Collateral in accordance with the terms hereof under applicable Blue Sky or other state securities laws or similar Applicable Law analogous in purpose or effect. Assignor recognizes that in light of the foregoing restrictions and limitations Agent may, with respect to any sale of the Collateral, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof, and those who are able to satisfy any conditions or requirements set forth in the Organizational Agreements, the Securities Laws, the Lock-up Letter or the Rights Agreement. Assignor and Agent acknowledge and agreed that Agent may be required to foreclose on and sell the Collateral in parcels and at such time as Agent may reasonably determine or an independent accounting or law firm opines that is necessary to comply with the conditions or requirements set forth in the Organizational Agreements of the Corporations, the Securities Laws the Lock-up Letter and the Rights Agreement, including, without limitation, by way of a series of sales whereby the Agent forecloses upon only a portion of the Collateral and thereafter sells such portion of the Collateral in such volume and at such times as Agent may deem or an independent accounting or law firm opines that is necessary to comply with such conditions and restrictions, and following such sale Agent may be required to repeat such process as many times as may be necessary to comply with such conditions and restrictions until all of the Collateral is foreclosed on and sold. Assignor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Agent in its sole and absolute discretion may, in accordance with Applicable Law, the Organizational

Agreements, the Lock-up Letter and the Rights Agreement, (a) proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Securities Laws (b) approach and negotiate with a single potential purchaser to effect such sale and (c) sell the Collateral in parcels and at such times and to such Persons as Agent may reasonably determine is necessary to comply with such conditions and requirements. Assignor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller if such sale were a public sale without such restrictions. In the event of any such sale, Agent shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached or if all the Collateral were sold at a single sale. Assignor further agrees that any sale or sales by Agent of the Collateral made as provided in this Paragraph 16 shall be commercially reasonable. Assignor further agrees to provide to Agent any and all materials reasonably necessary under Applicable Law for the Agent to effectuate such sale. The provisions of this paragraph will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells. Agent and the Lenders shall not be liable to Assignor for any loss in value of the Collateral by reason of any delay in the sale of the Collateral.

operates or would prospectively operate to invalidate this Assignment, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Assignment shall remain operative and in full force and effect.

22. Lock-Up Letter. Agent agrees to be bound by the restrictions in the Lock-Up Letter.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, Assignor and Agent have executed this Assignment under seal on the date first above written.


ASSIGNOR:

MERCO GROUP — ROOSEVELT BUILDING, LLC, a California limited liability company

By:		/s/ Richard Meruelo
		Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989, as Managing Member and Manager

		[SEAL]

[Signatures Continued on Next Page]


Agent:

KEYBANK NATIONAL ASSOCIATION, as Agent

By:		/s/ Jason Weaver
Name:		Jason Weaver
Title:		Senior Vice-President

EX-10.4 5 dex104.htm UNCONDITIONAL GUARANTY Unconditional Guaranty

Exhibit 10.4

UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE

FOR AND IN CONSIDERATION OF the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration paid or delivered to the undersigned RICHARD MERUELO, a resident of the State of Florida (“Guarantor”), the receipt and sufficiency whereof are hereby acknowledged by Guarantor, and for the purpose of seeking to induce KEYBANK NATIONAL ASSOCIATION, a national banking association (hereinafter referred to as “Lender”, which term shall also include each other Bank which may now be or hereafter become a party to the “Loan Agreement” (as hereinafter defined), and shall also include any such individual Bank acting as agent for all of the Banks), to extend credit or otherwise provide financial accommodations to RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T dated September 18, 1989 and MERCO GROUP – ROOSEVELT BUILDING, LLC, a California limited liability company (hereinafter referred to collectively as “Borrowers”), which extension of credit and provision of financial accommodations will be to the direct interest, advantage and benefit of Guarantor, Guarantor does hereby absolutely, unconditionally and irrevocably guarantee to Lender the complete payment and performance of the following liabilities, obligations and indebtedness of Borrowers to Lender (hereinafter referred to collectively as the “Obligations”):

(a) the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of the Notes made by Borrowers to the order of the Lenders in the aggregate principal face amount of Thirty-Three Million and No/100 Dollars ($33,000,000.00), together with interest as provided in the Notes and together with any replacements, supplements, renewals, modifications, consolidations, restatements, increases and extensions thereof (the “Initial Note”); and

(b) the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of each other note as may be issued under that certain Loan Agreement dated of even date herewith (hereinafter referred to as the “Loan Agreement”) among Borrowers, KeyBank, for itself and as agent, and the other lenders now or hereafter a party thereto, together with interest as provided in each such note, together with any replacements, supplements, renewals, modifications, consolidations, restatements, increases, and extensions thereof (the Initial Note and each of the notes described in this subparagraph (b) are hereinafter referred to collectively as the “Note”); and

(c) the full and prompt payment and performance of any and all obligations of Borrowers to Lender under the terms of the Loan Agreement, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and

(d) the full and prompt payment and performance of any and all obligations of Borrowers to Lender under the Security Documents, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and

(e) the full and prompt payment and performance of any and all Hedge Obligations to the holders of any Hedge Obligations; and

(f) the full and prompt payment and performance of any and all other obligations of Borrowers to Lender under any other agreements, documents or instruments now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or the Loan

Agreement or the Hedge Obligations (the Note, the Loan Agreement, the Security Documents and said other agreements, documents and instruments are hereinafter collectively referred to as the “Loan Documents” and individually referred to as a “Loan Document”).

1. Agreement to Pay and Perform; Costs of Collection. Guarantor does hereby agree that following an Event of Default under the Loan Documents if the Note or the other Obligations are not paid by Borrowers in accordance with their terms, or if any and all sums which are now or may hereafter become due from Borrowers to Lender under the Loan Documents or the other Obligations are not paid by Borrowers in accordance with their terms, or if any and all other obligations of Borrowers to Lender under the Note or of Borrowers under the other Loan Documents or agreements relating to the Hedge Obligations are not performed by Borrowers, as applicable, in accordance with their terms, Guarantor will immediately upon demand make such payments and perform such obligations. Guarantor further agrees to pay Lender on demand all reasonable costs and expenses (including court costs and reasonable attorneys’ fees and disbursements) paid or incurred by Lender in endeavoring to collect the Obligations guaranteed hereby, to enforce any of the Obligations of Borrowers guaranteed hereby, or any portion thereof, or to enforce this Guaranty, and until paid to Lender, such sums shall bear interest at the rate for overdue amounts set forth in the Loan Agreement unless collection from Guarantor of interest at such rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate which may be collected from Guarantor under applicable law.

2. Reinstatement of Refunded Payments. If, for any reason, any payment to Lender of any of the Obligations guaranteed hereunder is required to be refunded by Lender to Borrowers, or paid or turned over to any other person, including, without limitation, by reason of the operation of bankruptcy, reorganization, receivership or insolvency laws or similar laws of general application relating to creditors’ rights and remedies now or hereafter enacted, Guarantor agrees to pay to the Lender on demand an amount equal to the amount so required to be refunded, paid or turned over (the “Turnover Payment”), the obligations of Guarantor shall not be treated as having been discharged by the original payment to Lender giving rise to the Turnover Payment, and this Guaranty shall be treated as having remained in full force and effect for any such Turnover Payment so made by Lender, as well as for any amounts not theretofore paid to Lender on account of such obligations.

3. Rights of Lender to Deal with Collateral, Borrowers and Other Persons. Guarantor hereby consents and agrees that Lender may at any time, and from time to time, without thereby releasing Guarantor from any liability hereunder and without notice to or further consent from Guarantor or any other Person or entity, either with or without consideration: release or surrender any lien or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing any indebtedness or liability hereby guaranteed; substitute for any collateral so held by it, other collateral of like kind, or of any kind; modify the terms of the Note or the Loan Documents or the agreements relating to the Hedge Obligations; extend or renew the Obligations for any period; grant releases, compromises and indulgences with respect to the Obligations or the Loan Documents and to any persons or entities now or hereafter liable thereunder or hereunder; release any other guarantor, surety, endorser or accommodation party of the Note, the Security Documents, any other Loan Documents or the agreements relating to the Hedge Obligations; or take or fail to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection

with the Obligations or the Loan Documents, or any of them, or any security for the payment of the indebtedness of Borrowers to Lender or for the performance of any obligations or undertakings of Borrowers or Guarantor, nor any course of dealing with Borrowers or any other person, shall release Guarantor’s obligations hereunder, affect this Guaranty in any way or afford Guarantor any recourse against Lender. The provisions of this Guaranty shall extend and be applicable to all replacements, supplements, renewals, amendments, extensions, consolidations, restatements and modifications of the Note, the Loan Documents or the agreements relating to the Hedge Obligations, and any and all references herein to the Note, the Loan Documents or the agreements relating to the Hedge Obligations shall be deemed to include any such replacements, supplements, renewals, extensions, amendments, consolidations, restatements or modifications thereof. Without limiting the generality of the foregoing, Guarantor acknowledges the terms of Section 18.3 of the Loan Agreement and agrees that this Guaranty shall extend and be applicable to each new or replacement note delivered by Borrowers pursuant thereto without notice to or further consent from Guarantor.

4. No Contest with Lender; Subordination. So long as any of the Obligations hereby guaranteed remain unpaid or undischarged, Guarantor will not, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, claim any set-off or counterclaim against Borrowers in respect of any liability of Guarantor to Borrowers or, in proceedings under federal bankruptcy law or insolvency proceedings of any nature, prove in competition with Lender in respect of any payment hereunder or be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Borrowers or the benefit of any other security for any of the Obligations hereby guaranteed which, now or hereafter, Lender may hold or in which it may have any share. Guarantor hereby expressly waives any right of contribution from or indemnity against Borrowers, whether at law or in equity, arising from any payments made by Guarantor pursuant to the terms of this Guaranty, and Guarantor acknowledges that Guarantor has no right whatsoever to proceed against Borrowers for reimbursement of any such payments. In connection with the foregoing, Guarantor expressly waives any and all rights of subrogation to Lender against Borrowers, and Guarantor hereby waives any rights to enforce any remedy which Lender may have against Borrowers and any rights to participate in any collateral for Borrowers’ obligations under the Loan Documents or the agreements relating to the Hedge Obligations. Guarantor hereby subordinates any and all indebtedness of Borrowers now or hereafter owed to Guarantor to all indebtedness of Borrowers to Lender, and agrees with Lender that (a) Guarantor shall not demand or accept any payment from Borrowers on account of such indebtedness, (b) Guarantor shall not claim any offset or other reduction of Guarantor’s obligations hereunder because of any such indebtedness, and (c) Guarantor shall not take any action to obtain any interest in any of the security described in and encumbered by the Loan Documents or the agreements relating to the Hedge Obligations because of any such indebtedness; provided, however, that, if Lender so requests, such indebtedness shall be collected, enforced and received by Guarantor as trustee for Lender and be paid over to Lender on account of the indebtedness of Borrowers to Lender, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty except to the extent the principal amount or other portion of such outstanding indebtedness shall have been reduced by such payment.

5. Waiver of Defenses. Guarantor hereby agrees that its obligations hereunder shall not be affected or impaired by, and hereby waives and agrees not to assert or take advantage of any right or defense based on:

(a) (i) any change in the amount, interest rate or due date or other term of any of the obligations hereby guaranteed, (ii) any change in the time, place or manner of payment of all or any portion of the obligations hereby guaranteed, (iii) any amendment or waiver of, or consent to the departure from or other indulgence with respect to, the Loan Agreement, any other Loan Document, or any other document or instrument evidencing or relating to any obligations hereby guaranteed, or (iv) any waiver, renewal, extension, addition, or supplement to, or deletion from, or any other action or inaction under or in respect of, the Loan Agreement, any of the other Loan Documents, or any other documents, instruments or agreements relating to the obligations hereby guaranteed or any other instrument or agreement referred to therein or evidencing any obligations hereby guaranteed or any assignment or transfer of any of the foregoing;

(b) any subordination of the payment of the obligations hereby guaranteed to the payment of any other liability of the Borrowers or any other Person;

(c) any act or failure to act by Borrowers or any other Person which may adversely affect Guarantor’s subrogation rights, if any, against Borrowers or any other Person to recover payments made under this Guaranty;

(d) any nonperfection or impairment of any security interest or other Lien on any collateral, if any, securing in any way any of the obligations hereby guaranteed;

(e) any application of sums paid by the Borrowers or any other Person with respect to the liabilities of Lender, regardless of what liabilities of the Borrowers remain unpaid;

(f) any defense of Borrowers, including without limitation, the invalidity, illegality or unenforceability of any of the Obligations;

(g) either with or without notice to Guarantor, any renewal, extension, modification, amendment or another changes in the Obligations, including but not limited to any material alteration of the terms of payment or performance of the Obligations; or

(h) any statute of limitations in any action hereunder or for the collection of the Note or for the payment or performance of any obligation hereby guaranteed;

(i) the incapacity, lack of authority, death or disability of Borrowers or any other Person or entity, or the failure of Lender to file or enforce a claim against the estate (either in administration, bankruptcy or in any other proceeding) of Borrowers or any other Person;

(j) the dissolution or termination of existence of Borrowers or any other Person;

(k) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of Borrowers or any other Person;

(l) the voluntary or involuntary receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, assignment, composition, or readjustment of, or any similar proceeding affecting, Borrowers or any other Person, or any of Borrowers’ or any other Person’s properties or assets;

(m) the damage, destruction, foreclosure or surrender of all or any part of the Collateral;

(n) the failure of Lender to give notice of the existence, creation or incurring of any new or additional indebtedness or obligation of Borrowers or of any action or nonaction on the part of any other person whomsoever in connection with any obligation hereby guaranteed;

(o) any failure or delay of Lender to commence an action against Borrowers or any other Person, to assert or enforce any remedies against Borrowers under the Note or the other Loan Documents or agreements relating to the Hedge Obligations, or to realize upon any security;

(p) any failure of any duty on the part of Lender to disclose to Guarantor any facts it may now or hereafter know regarding Borrowers (including, without limitation Borrowers’ financial condition), any other Person, the Collateral, or any other assets or liabilities of such Persons, whether such facts materially increase the risk to Guarantor or not (it being agreed that Guarantor assumes responsibility for being informed with respect to such information);

(q) failure to accept or give notice of acceptance of this Guaranty by Lender;

(r) failure to make or give notice of presentment and demand for payment of any of the indebtedness or performance of any of the obligations hereby guaranteed;

(s) failure to make or give protest and notice of dishonor or of default to Guarantor or to any other party with respect to the indebtedness or performance of obligations hereby guaranteed;

(t) any and all other notices whatsoever to which Guarantor might otherwise be entitled;

(u) any lack of diligence by Lender in collection, protection or realization upon any collateral securing the payment of the indebtedness or performance of obligations hereby guaranteed;

(v) the invalidity or unenforceability of the Note, or any of the other Loan Documents, or any of the agreements relating to the Hedge Obligations, or any assignment or transfer of the foregoing;

(w) the compromise, settlement, release or termination of any or all of the obligations of Borrowers under the Note or the other Loan Documents or any of the agreements relating to the Hedge Obligations;

(x) any transfer by Borrowers or any other Person of all or any part of the security encumbered by the Loan Documents;

(y) the failure of Lender to perfect any security or to extend or renew the perfection of any security;

(z) any and all of the rights and defenses described in Section 2856(a) of the California Civil Code;

(aa) any and all of the rights of subrogation, reimbursement, indemnification and contribution and other rights and defenses that are or may become available to Guarantor by reason of Sections 2787 to 2855 (inclusive), 2899 and 3433 of the California Civil Code;

(bb) except to the extent prohibited by Section 9602 of the California Commercial Code, any and all rights and defenses that Guarantor might otherwise have under the California Commercial Code; or

(cc) to the fullest extent permitted by law, any other legal, equitable or surety defenses whatsoever to which Guarantor might otherwise be entitled, it being the intention that the obligations of Guarantor hereunder are absolute, unconditional and irrevocable.

Guarantor understands that the exercise by Lender of certain rights and remedies may affect or eliminate Guarantor’s right of subrogation against the Borrowers and that Guarantor may therefore incur partially or totally nonreimbursable liability hereunder. Nevertheless, Guarantor hereby authorizes and empowers Lender, its successors, endorsees and assigns, to exercise in its or their sole discretion, any rights and remedies, or any combination thereof, which may then be available, it being the purpose and intent of Guarantor that the obligations hereunder shall be absolute, continuing, independent and unconditional under any and all circumstances. Notwithstanding any other provision of this Guaranty to the contrary, Guarantor hereby waives and releases any claim or other rights which Guarantor may now have or hereafter acquire against the Borrowers or any other Person of all or any of the obligations of Guarantor hereunder that arise from the existence or performance of Guarantor’s obligations under this Guaranty or any of the other Loan Documents, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification, any right to participate in any claim or remedy of Lender against the Borrowers or any other Person or any Collateral which Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including, without limitation, the right to take or receive from the Borrowers, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights.

Without limitation on the generality of the other waivers contained in this Guaranty, Guarantor hereby waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed or otherwise impaired Guarantor’s rights of subrogation and reimbursement against the principal (whether by the operation of any provision of the California Code of Civil Procedure or otherwise).

In addition, Guarantor hereby agrees that its obligations hereunder shall not be released, diminished, impaired, reduced, dependent upon or affected by, and hereby waives and agrees not to assert or take advantage of any defense based on, any one or more of the following: (i) the genuineness, validity, regularity or enforceability of, or the existence of any default with respect to, the Obligations, any security therefor, or any related instrument, documents, obligation, transaction or matter; (ii) the nature, extent, condition, value or continued existence of any security given in connection with the Obligations; (iii) any action or failure to take action by any holder of the Obligations under or with respect to this Guaranty or the Obligations, any security therefor, or any related documents, transaction or matter; (iv) any other dealings between any holder of the Obligations and Lender; (v) any exculpatory language or provisions limiting or

restricting Lender’s rights or remedies against the Borrowers or any other Person under the Loan Documents; or (vi) any claim by or on behalf of Borrowers of any credit or right of setoff with respect to the Note or any of the Obligations.

6. Guaranty of Payment and Performance and Not of Collection. This is a Guaranty of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be primary, direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrowers or any other Person, nor against securities or liens available to Lender, its successors, successors in title, endorsees or assigns. Guarantor hereby waives any right to require that an action be brought against Borrowers or any other Person or to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of Borrowers or any other Person.

7. Rights and Remedies of Lender. In the event of an Event of Default under the Note or the Loan Documents, or any of them, that is continuing (it being understood that the Lender has no obligation to accept cure after an Event of Default occurs), Lender shall have the right to enforce its rights, powers and remedies thereunder or hereunder or under any other Loan Document, in any order, and all rights, powers and remedies available to Lender in such event shall be nonexclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. Accordingly, Guarantor hereby authorizes and empowers Lender upon the occurrence of any Event of Default under the Note or the Loan Documents, at its sole discretion, and without notice to Guarantor, to exercise any right or remedy which Lender may have, including, but not limited to, judicial foreclosure, exercise of rights of power of sale, acceptance of a deed or assignment in lieu of foreclosure, appointment of a receiver to collect rents and profits, exercise of remedies against personal property, or enforcement of any assignment of leases, as to any security, whether real, personal or intangible. At any public or private sale of any security or collateral for any of the Obligations guaranteed hereby, whether by foreclosure or otherwise, Lender may, in its discretion, purchase all or any part of such security or collateral so sold or offered for sale for its own account and may apply against the amount bid therefor all or any part of the balance due it pursuant to the terms of the Note or Security Documents or any other Loan Document or agreements relating to the Hedge Obligations without prejudice to Lender’s remedies hereunder against Guarantor for deficiencies. If the Obligations guaranteed hereby are partially paid by reason of the election of Lender to pursue any of the remedies available to Lender, or if such Obligations are otherwise partially paid, this Guaranty shall nevertheless remain in full force and effect, and Guarantor shall remain liable for the entire balance of the Obligations guaranteed hereby even though any rights which Guarantor may have against Borrowers or any other Person may be destroyed or diminished by the exercise of any such remedy.

8. Application of Payments. Guarantor hereby authorizes Lender, without notice to Guarantor, to apply all payments and credits received from Borrowers or from Guarantor or realized from any security in such manner and in such priority as Lender in its sole judgment shall see fit to the Obligations.

9. Business Failure, Bankruptcy or Insolvency. In the event of the business failure of Guarantor or if there shall be pending any bankruptcy or insolvency case or proceeding with respect to Guarantor under federal bankruptcy law or any other applicable law or in connection with the insolvency of Guarantor, or if a liquidator, receiver, or trustee shall have been appointed for Guarantor or Guarantor’s properties or assets, Lender may file such proofs of claim and other

papers or documents as may be necessary or advisable in order to have the claims of Lender allowed in any proceedings relative to Guarantor, or any of Guarantor’s properties or assets, and, irrespective of whether the indebtedness or other obligations of Borrowers guaranteed hereby shall then be due and payable, by declaration or otherwise, Lender shall be entitled and empowered to file and prove a claim for the whole amount of any sums or sums owing with respect to the indebtedness or other obligations of Borrowers guaranteed hereby, and to collect and receive any moneys or other property payable or deliverable on any such claim. Guarantor covenants and agrees that upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrowers, Guarantor shall not seek a supplemental stay or otherwise pursuant to 11 U.S.C. §105 or any other provision of the Bankruptcy Code, as amended, or any other debtor relief law (whether statutory, common law, case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Guarantor by virtue of this Guaranty or otherwise.

10. Covenants of Guarantor.

(a) Guarantor hereby covenants and agrees with Lender that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrowers under, by reason of, or pursuant to the Note and the other Loan Documents and the agreements relating to the Hedge Obligations have been completely performed and Lender has no further obligation to make Loans, Guarantor will comply with any and all covenants applicable to Guarantor set forth in the Loan Agreement.

(b) Guarantor will deliver or cause to be delivered to the Lender:

(i) as soon as practicable, but in any event not later than October 31 of each calendar year, the unaudited balance sheet of Guarantor at the end of such year, setting forth the assets, liabilities and net worth of Guarantor and accompanied by supplementary schedules indicating the total debt on any assets shown on a net investment basis, all to be in reasonable detail, prepared in accordance with sound accounting principles, and certified without qualification by the chief operating officer of MMPI or by an independent certified public accountant reasonably satisfactory to Lender as fairly presenting Guarantor’s financial condition as of the end of such year;

(ii) contemporaneously with the delivery of the financial statements referred to in clause (i) above, a statement of all contingent liabilities of Guarantor which are not reflected in such financial statements or referred to in the notes thereto (including, without limitation, all guarantees, endorsements and other contingent obligations in respect of indebtedness of others, and obligations to reimburse the issuer in respect of any letters of credit), all in reasonable detail and certified by Guarantor;

(iii) upon the request of Lender, copies of all annual federal income tax returns and amendments thereto of Guarantor; and

(iv) from time to time such other financial data and information in the possession of the Guarantor regarding the Guarantor as the Lender may reasonably request.

11. Security and Rights of Set-off. Guarantor hereby grants to Lender, as security for the full and prompt payment and performance of Guarantor’s obligations hereunder, a continuing lien on and security interest in any and all securities or other property belonging to Guarantor now or hereafter held by Lender and in any and all deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of Lender where the deposits are held) now or hereafter held by Lender and other sums credited by or due from Lender to Guarantor or subject to withdrawal by Guarantor; and regardless of the adequacy of any collateral or other means of obtaining repayment of such obligations, during the continuance of any Event of Default under the Note or the Loan Documents, Lender may at any time and without notice to Guarantor set-off and apply the whole or any portion or portions of any or all such deposits and other sums against amounts payable under this Guaranty, whether or not any other person or persons could also withdraw money therefrom. Any security now or hereafter held by or for Guarantor and provided by Borrowers, or by anyone on Borrowers’ behalf, in respect of liabilities of Guarantor hereunder shall be held in trust for Lender as security for the liabilities of Guarantor hereunder.

12. Changes in Writing; No Revocation. This Guaranty may not be changed orally, and no obligation of Guarantor can be released or waived by Lender except as provided in §27 of the Loan Agreement. This Guaranty shall be irrevocable by Guarantor until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrowers under, by reason of, or pursuant to the Note and the Loan Documents and the agreements relating to the Hedge Obligations have been completely performed and the Lenders have no further obligation to advance Loans.

13. Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Guaranty (hereinafter in this paragraph referred to as “Notice”) must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing the same in the United States mail, postpaid and registered or certified, return receipt requested, at the addresses set forth below. Each Notice shall be effective upon being delivered personally or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to any such Notice must be given or any action taken with respect thereto, however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier or, if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit and the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address of which no Notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, Guarantor or Lender shall have the right from time to time and at any time during the term of this Guaranty to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. For the purposes of this Guaranty:

The address of Lender is:

KeyBank National Association, as Agent

127 Public Square

Cleveland, Ohio 44114-1306

Attn: Real Estate Capital Services

with a copy to:

KeyBank National Association

127 Public Square

Cleveland, Ohio 44114-1306

Attn: Jason Weaver

The address of Guarantor is:

Richard Meruelo

761 Terminal Street

Building 1, 2^nd Floor

Los Angeles, California 90021

14. Governing Law. GUARANTOR ACKNOWLEDGES AND AGREES THAT THIS GUARANTY AND THE OBLIGATIONS OF GUARANTOR HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

15. CONSENT TO JURISDICTION; WAIVERS. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF CALIFORNIA OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, AND (B) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY(LENDER HAVING ALSO WAIVED SUCH RIGHT TO TRIAL BY JURY), (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF CALIFORNIA OR VENUE IN ANY PARTICULAR FORUM WITHIN THE STATE OF CALIFORNIA, AND (III) TO THE RIGHT, IF ANY, TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN OR IN ADDITION TO ACTUAL DAMAGES. EACH LENDER IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS UNDER THE LAWS OF ANY STATE TO THE RIGHT, IF ANY, TO TRIAL BY JURY. GUARANTOR AGREES THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO GUARANTOR AT THE ADDRESS SET FORTH IN PARAGRAPH 13 ABOVE, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST GUARANTOR PERSONALLY, AND AGAINST ANY PROPERTY OF GUARANTOR, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF

CALIFORNIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF GUARANTOR AND LENDER HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY GUARANTOR TO PERSONAL JURISDICTION WITHIN THE STATE OF CALIFORNIA. GUARANTOR HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. GUARANTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND ACKNOWLEDGE THAT LENDER HAS BEEN INDUCED TO ENTER INTO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH 15. GUARANTOR ACKNOWLEDGES THAT THEY HAVE HAD AN OPPORTUNITY TO REVIEW THIS PARAGRAPH 15 WITH THEIR LEGAL COUNSEL AND THAT GUARANTOR AGREES TO THE FOREGOING AS THEIR FREE, KNOWING AND VOLUNTARY ACT.

16. Successors and Assigns. The provisions of this Guaranty shall be binding upon Guarantor and his respective heirs, successors, successors in title, legal representatives, and assigns, and shall inure to the benefit of Lender, its successors, successors in title, legal representatives and assigns. Guarantor shall not assign or transfer any of its rights or obligations under this Guaranty without the prior written consent of Lender.

17. Assignment by Lender. This Guaranty is assignable by Lender in whole or in part in conjunction with any assignment of the Obligations or portions thereof, and any assignment hereof or any transfer or assignment of the Obligations or portions thereof by Lender shall operate to vest in any such assignee the rights and powers, in whole or in part, as appropriate, herein conferred upon and granted to Lender.

18. Severability. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by law.

19. Disclosure. Guarantor agrees that in addition to disclosures made in accordance with standard banking practices, any Lender may disclose information obtained by such Lender pursuant to this Guaranty to assignees or participants and potential assignees or participants hereunder subject to the terms of the Loan Agreement.

20. No Unwritten Agreements. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

21. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Guarantor under this Guaranty.

22. Ratification. Guarantor does hereby restate, reaffirm and ratify each and every warranty and representation regarding Guarantor set forth in the Loan Agreement as if the same were more fully set forth herein.

23. Counterparts. This Guaranty and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Guaranty it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

24. Definitions. All terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

[CONTINUED ON NEXT PAGE]

IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal as of this 30th day of January, 2007.


GUARANTOR:

/s/ Richard Meruelo		(SEAL)
RICHARD MERUELO

Lender joins in the execution of this Guaranty for the sole and limited purpose of evidencing its agreement to waiver of the right to trial by jury contained in Paragraph 15 hereof and Section 25 of the Loan Agreement.


KEYBANK NATIONAL ASSOCIATION, as Agent

By:		/s/ Jason Weaver
Name:		Jason Weaver
Title:		Senior Vice-President

EX-10.5 6 dex105.htm NOTE, DATED JANUARY 30, 2007 Note, dated January 30, 2007

Exhibit 10.5

NOTE


$33,000,000.00		January 30, 2007

FOR VALUE RECEIVED, the undersigned RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989 and MERCO GROUP-ROOSEVELT BUILDING, LLC, a California limited liability company, jointly and severally hereby promise to pay to KEYBANK NATIONAL ASSOCIATION or order, in accordance with the terms of that certain Loan Agreement dated as of January 30, 2007 (the “Loan Agreement”), as from time to time in effect, among the undersigned, KeyBank National Association, for itself and as Agent, and such other Banks as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of Thirty-Three Million and No/100 Dollars ($33,000,000.00), or such amount as may be advanced by the payee hereof under the Loan Agreement with daily interest from the date hereof, computed as provided in the Loan Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Loan Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Loan Agreement. Interest shall be payable on the dates specified in the Loan Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

Payments hereunder shall be made to KeyBank National Association, as Agent for the payee hereof, at 127 Public Square, Cleveland, Ohio 44114-1306 or such other address as may be designated by Agent.

This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Loan Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Loan Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Loan Agreement.

Notwithstanding anything in this Note to the contrary, all agreements between the undersigned Borrowers and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations of the undersigned Borrowers and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations of the undersigned Borrowers, such excess shall be refunded to the undersigned Borrowers. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be

amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations of the undersigned Borrowers (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the undersigned Borrowers and the Banks and the Agent.

In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Loan Agreement. In addition to and not in limitation of the foregoing and the provisions of the Loan Agreement hereinabove defined, the undersigned further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including reasonable attorneys’ fees and legal expenses, incurred by the holder of this Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.

This Note shall be governed by and construed in accordance with the laws of the State of California.

The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Loan Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice.

IN WITNESS WHEREOF the undersigned have executed this Note under seal as of the day and year first above written.


RICHARD MERUELO AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989

/s/ Richard Meruelo		(SEAL)
Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989

MERCO GROUP-ROOSEVELT BUILDING, LLC, a California limited liability company

By:	/s/ Richard Meruelo
	Richard Meruelo as Trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989, as Managing Member and Manager

[SEAL]

EX-10.6 7 dex106.htm CONTRIBUTION AGREEMENT DATED SEPT. 19, 2006, AS AMENDED Contribution Agreement dated Sept. 19, 2006, as amended

Exhibit 10.6

CONTRIBUTION AGREEMENT

BY AND AMONG

RICHARD MERUELO, AS TRUSTEE OF

THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989

MERCO GROUP – ROOSEVELT BUILDING, LLC

SUNSTONE BELLA VISTA, LLC

MERUELO MADDUX PROPERTIES, L.P.

AND

MERUELO MADDUX PROPERTIES, INC.

DATED AS OF SEPTEMBER 19, 2006

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (including all exhibits and schedules, this “Agreement”) is made and entered into as of September 19, 2006, by and among MERUELO MADDUX PROPERTIES, INC., a Delaware corporation (the “Company”), MERUELO MADDUX PROPERTIES, L.P., a Delaware limited partnership (the “Operating Partnership”), RICHARD MERUELO, AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989 (“Meruelo Trust”), MERCO GROUP – ROOSEVELT BUILDING, LLC, a California limited liability company (“Merco;” together with Meruelo Trust, “Meruelo Group”) and SUNSTONE BELLA VISTA, LLC, a Delaware limited liability company (“Sunstone;” Meruelo Trust, Merco and Sunstone are referred to individually as a “Contributor” and collectively as the “Contributors”).

RECITALS

A. The Company, which is the sole general partner of the Operating Partnership, desires to consolidate the ownership of a portfolio of commercial and residential development and redevelopment projects in urban markets located in Southern California and related businesses, all of which projects and businesses are owned by certain limited liability companies and a corporation as set forth on Exhibit A (each, a “Participating Entity” and, collectively, the “Participating Entities”), through a series of transactions (the “Formation Transactions”).

B. The Formation Transactions relate to the proposed initial public offering (the “Public Offering”) of the common stock, par value $0.01, of the Company (the “Common Stock”).

C. The Contributors own interests in one or more of the Participating Entities in the percentages as set forth on Exhibit A, and the Participating Entities own directly or indirectly, or lease and/or have contractual rights to purchase or offer to purchase, the projects set forth on Exhibit B (each, a “Property” and together, the “Properties”). As used herein, “Participating Entity Agreements” means the articles of organization, limited liability company agreements, charters and bylaws under which each Participating Entity was formed or incorporated (including all amendments and restatements thereto).

D. The Company will acquire certain other S corporations owned by Contributors (i.e., Santa Fe & Washington Market, Inc. and Alameda Produce Market, Inc. (collectively, the “Merger Participants”)) through the mergers (collectively, the “Mergers”) of the Merger Participants with certain limited liability company subsidiaries of the Company in exchange for shares of Common Stock (collectively, the “Total Merger Consideration”) intended by the Company and the Merger Participants to qualify as “reorganizations” under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the “Code”); and the Company will subsequently contribute its interest in the entities surviving such Mergers to the Operating Partnership in exchange for common units of limited partnership in the Operating Partnership.

E. Each Contributor desires to, and the Company desires that each Contributor, contribute to the Company all of such Contributor’s direct and indirect right, title and interest,

free and clear of all Encumbrances (as defined in Section 3.3(a)), as a member or stockholder of each Participating Entity other than the Merger Participants, including, without limitation, all of its voting rights and interests in the capital, profits and losses of each such Participating Entity or any property distributable therefrom, constituting all of its rights and interests in each such Participating Entity (such right, title and interest, the “Participating Entity Interest” and collectively, the “Participating Entity Interests”), in exchange for shares of Common Stock in a transaction, along with the Mergers and the Public Offering, intended by the parties to qualify as a tax-free (except with respect to the Participating Entity Interests to the extent provided in either Section 351 or Section 357(c) of the Code) contribution to the Company in connection with its capitalization under Section 351 of the Code; and the Company will subsequently contribute the Participating Entity Interests to the Operating Partnership in exchange for common units of limited partnership in the Operating Partnership.

F. The parties acknowledge that the acquisition of the Properties by the Company or its subsidiaries, whether through the Contributors’ contribution of their Participating Entity Interests or the Mergers, are in connection with and subject to the consummation of the Formation Transactions and the Public Offering and, in the case of the contribution of the Participating Entity Interests, the satisfaction of the other conditions set forth herein. It is understood that the Company or the Operating Partnership may acquire interests in additional projects with the proceeds of the Public Offering.

G. Pursuant to the Formation Transactions, the Company shall assume all of the obligations of Contributors described on Exhibit C.

H. The parties intend this Agreement to be a “Contribution Agreement” pursuant to the terms of the Operating Partnership’s Agreement of Limited Partnership (the “Operating Partnership Agreement”).

I. The parties acknowledge that the debts, obligations and liabilities of the Participating Entities are solely the debts, obligations and liabilities of the Participating Entities, and none of the Contributors is obligated personally for any such debt, obligation or liability of the Participating Entities, solely by reason of being a member, manager, stockholder, director or officer of a Participating Entity.

J. Pursuant to the Formation Transactions, the Company and the Operating Partnership shall (i) enter into employment agreements with Affiliates (as defined below) of the Contributors providing, inter alia, for the employment of such Affiliates by the Company, the Operating Partnership and their respective subsidiaries, and annual grants of LTIP Units (as defined in the Operating Partnership Agreement) to Richard Meruelo and John Charles Maddux, (ii) enter into non-competition agreements with Richard Meruelo and John Charles Maddux and (iii) enter into an agreement of limited partnership with the Operating Partnership and others, pursuant to which, inter alia, the Operating Partnership will be obligated to issue LTIP Units annually to Messrs. Meruelo and Maddux for services performed for the Operating Partnership in their capacity as partners of the Operating Partnership.

K. All references in this Agreement to sections, articles, exhibits, schedules, attachments and recitals shall refer to the corresponding sections, articles, exhibits, schedules, attachments and recitals of or to this Agreement.

NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual undertakings set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the foregoing recitals are incorporated into, and made a part of this Agreement, and the parties hereto further agree as follows:

TERMS OF AGREEMENT

ARTICLE 1

CONTRIBUTION OF PARTICIPATING ENTITY INTERESTS IN EXCHANGE FOR COMMON STOCK

Section 1.1 Contribution Transactions.

(a) At the Closing (as defined in Section 2.2) and subject to the terms and conditions contained in this Agreement, each Contributor, severally and not jointly, shall contribute, transfer, assign, convey and deliver to the Company, absolutely and unconditionally and free and clear of all Encumbrances, but without representation or warranty except as expressly set forth herein (including without limitation Section 3.3), all of its Participating Entity Interests, including, without limitation, all rights to indemnification, reimbursement, payment and distributions in favor of such Contributor under the Participating Entity Agreements or any other agreements pursuant to which such Contributor acquired such Participating Entity Interests. The contribution of the Participating Entity Interests shall be evidenced by the execution and delivery of a Contribution and Assumption Agreement in substantially the form of Exhibit D for each Participating Entity Interest contributed to the Company hereunder.

(b) Effective upon the Closing and subject to the terms and conditions contained in this Agreement, the Company hereby assumes all of the obligations of Contributors described on Exhibit C and the Contributors shall have no further liability or obligation with respect to such obligations.

(c) The parties shall take such additional actions and execute such additional documentation as may be required by the Participating Entity Agreements and the certificate of incorporation, as amended, and bylaws of the Company or as requested in the reasonable judgment of counsel to the Company in order to effect the transactions contemplated hereby.

Section 1.2 Consideration for Participating Entity Interests. Subject to Section 1.3, in exchange for each Participating Entity Interest contributed to the Company by each Contributor, the Company shall:

obtained by dividing (i) (x) the total amount of the obligations of each Contributor referenced on Exhibit C plus (y) the Tax Coverage Payment (as defined in Section 1.2(b) below) made to each Contributor by (ii) the initial public offering price per share of Common Stock in the Public Offering (the aggregate of such Common Stock for all Contributors, as adjusted from time to time where appropriate under Sections 1.9(a), 1.9(b), 1.10 and 3.4(c), being the “Total Contributor Consideration”); and

(b) make a payment (each, a “Tax Coverage Payment”), as computed under Section 1.8(c), by wire transfer of immediately available funds pursuant to written instructions delivered to Company by each Contributor.

The parties shall take such additional actions and execute such additional documentation as may be required by the applicable Participating Entity Agreements and the certificate of incorporation, as amended, and bylaws of the Company or as requested in the reasonable judgment of counsel in order to effect the transactions contemplated hereby.

Section 1.3 Adjusted Consideration. The Company reserves the right, to be exercised only before the signing of the underwriting agreement related to the Public Offering, not to acquire any particular interest that constitutes part of the Participating Entity Interests, if the Company determines in good faith that the ownership of such interest or the underlying Property or Properties would be inappropriate for the Company. In addition, the Company may, in its sole and absolute discretion without the consent of any Contributor or any other party contributing property to the Company (but only before the signing of the underwriting agreement related to the Public Offering), increase or reduce the Participating Entity Consideration related to any or all of the Participating Entity Interests contributed hereunder in the event that the Company determines in good faith that (a) after consummation of the Public Offering, the Company will not have sufficient funds to complete the Formation Transactions or (b) in connection with the Public Offering, based on changes in the assumptions underlying the expected valuations of one or more of the Properties or other projects to be acquired by the Company or for which the Company will have contractual rights to acquire such projects, whether due to changes in the capitalization rates assumed by the Company or otherwise, the fair market value attributed to such Properties or other projects is greater than or less than the expected valuation of such Properties or such other projects on the date hereof. Each Contributor hereby agrees that, in the event that any of the foregoing occur prior to the signing of the underwriting agreement related to the Public Offering, the Participating Entity Consideration and the Total Contributor Consideration may be increased or reduced by an amount determined by the disinterested directors of the Company (or a sole disinterested director, if there be only one disinterested director) (such disinterested directors or director of the Company, the “Authorized Parties”) to reflect the adjustments in the actual sale price of the Common Stock or the total value of the Participating Entity Interests ultimately contributed by the Contributors.

The risk of loss relating to the Participating Entity Interests and the underlying Properties contributed hereunder prior to Closing shall be borne by the Contributors. If, prior to the Closing, any Property is destroyed or materially damaged by fire or other casualty, or is taken by eminent domain or through condemnation proceedings, then the Company may, at its option, determine not to acquire the Contributors’ interests in the Participating Entity that directly or indirectly owns such Property that has been destroyed or damaged or taken. Under such

circumstances, each Contributor acknowledges that the Total Contributor Consideration for the Contributors will likely be correspondingly reduced. After the occurrence of any such casualty or condemnation affecting a Property, the Company may also, at its option, elect to (a) acquire the Contributors’ interests in any such Participating Entity that directly or indirectly owns the affected Property, (b) direct Contributors to cause the Participating Entities, as applicable, to pay or cause to be paid to the Company any sums collected under any policies of insurance relating to such casualty or condemnation and otherwise assign to the Company all rights to collect such sums as may then be uncollected, and (c) adjust or settle any insurance claim or condemnation proceeding. Under such circumstances, the Total Contributor Consideration shall be reduced by the pro rata share of the amount of any deductibles or shortfalls (including lack of insurance) under the applicable insurance policies or award, plus all costs of collection, except with respect to a Property that is intended to be demolished or substantially demolished, in which case the Total Contributor Consideration shall be reduced by the lesser of (i) the pro rata share of the amount of any deductibles or shortfalls (including lack of insurance) under the applicable insurance policies or award, plus all costs of collection or (ii) the diminution in value of the Property or Participating Entity Interest. Insurance on the transferred Participating Entity Interests and the Properties shall be assigned to the Company at the Closing. If Participating Properties constituting more than 25% of the total value of the Participating Properties are partially or totally damaged or condemned prior to the Closing, the Company may elect, by notice to the Contributors given within twenty (20) days after the date of such damage or condemnation, to terminate this Agreement, in which case neither the Contributors nor the Company or Operating Partnership shall have any further rights or obligations under this Agreement.

Section 1.4 Allocation of Total Contributor Consideration. In connection with the Closing, the Total Contributor Consideration shall be allocated among the Participating Entity Interests as reasonably determined by the Company’s independent public accountants (with any adjustments thereto by reason of events occurring under Sections 1.9(b) and 1.10 being allocable to the Participating Entity Interests involved, as appropriate). At or in connection with the Closing, the Company shall cause and the Contributors shall each cause their accountants to meet with each other to determine the appropriate allocations of the Total Contributor Consideration among the various Participating Entity Interests based on their respective shares of the Total Contribution Consideration. Each Contributor, the Company and the Operating Partnership agree to (a) be bound by such allocations, (b) act in accordance with the allocation in the preparation of financial statements and filing of all tax returns and in the course of any tax audit, tax review or tax litigation relating thereto, and (c) take no position, and cause their Affiliates to take no position, inconsistent with such allocations for income tax purposes.

Section 1.5 Authorization. Each Contributor authorizes the Authorized Parties to make any and all determinations to be made by such Contributor pursuant to Section 1.3, and any and all such determinations shall be final and binding on all parties.

Section 1.6 Tax Treatment as Contribution. The contribution, transfer, conveyance and assignment of Participating Entity Interests and/or Properties to the Operating Partnership from the Company shall be effected in a transaction qualifying under Section 721 of the Code.

Section 1.7 Final Year Allocation. To the extent that a Participating Entity Agreement does not provide for final year tax allocations, each Contributor agrees to use the “interim closing of the books” method as provided in Section 706 of the Code to allocate income and loss for the year in which the Closing occurs.

Section 1.8 Other Tax Matters.

(a) Section 704(c) Method. The Operating Partnership shall use the “traditional method” described in Treas. Reg. § 1.704 3(b) with respect to the contributed Participating Entity Interest and related Properties following any Book-Up Event (as defined in the agreement of limited partnership, as it may be subsequently adopted, amended or restated of the Operating Partnership).

(b) Carryover Basis. The parties confirm that (i) the interests in the Participating Entities will be contributed to the Company at the Closing in a tax-free contribution to the Company under Section 351(a) of the Code (and then by the Company to the Operating Partnership in a tax-free contribution under Section 721 of the Code); provided, that the Contributors shall recognize income upon such contribution to the extent required by Sections 351 and 357(c) of the Code (with respect to the assumption of the Contributors’ liabilities and the Tax Coverage Payment under Section 1.2 constituting boot, and other liabilities assumed with respect to the Participating Interests in excess of basis); (ii) the Company and the Operating Partnership will have a carryover basis in the Participating Entity Interests equal to that of the Contributors (plus gain recognized by the Contributors on the contribution under Section 351 and Section 357(c) of the Code); (iii) the estimated tax basis of the Properties owned by such Participating Entities (which amount is set forth on Exhibit F) is less than their aggregate fair market value at the Closing, as a result of which there is inherent gain (“Inherent Gain”) in the hands of the Operating Partnership upon contribution; and (iv) the Operating Partnership and the Company will recognize the full amount of such Inherent Gain upon the sale of the Participating Entity Interests or underlying Property in a taxable transaction without any claim against Contributors with respect thereto by the Operating Partnership or the Company (but subject to the forfeiture provisions of Section 1.10).

(c) Tax Coverage Payments. The Contributors will recognize gain from the following elements of the Formation Transactions in the manner described below: (i) liabilities assumed in excess of the applicable Contributor’s tax basis for the property contributed, (ii) the obligations of Contributors described on Exhibit C that are being assumed by the Company in the Formation Transactions, and (iii) the payment by the Company to them of the Tax Coverage Payment under Section 1.2 and as described below in this Section 1.8(c) (collectively, the “Taxable Events”). Each Contributor shall receive a Tax Coverage Payment from the Company, if and when requested by the Contributor at any time up to 12 months after the Closing, equal to the sum of (A) the combined federal and state income tax liability that such Contributor would recognize by reason of the Taxable Events if (1) such Contributor were an individual residing in California who was subject to the maximum federal and state income tax rates on the income recognized, computed by taking into account any net operating losses attributable to the Participating Entity Interests available to offset the gain or income arising from the Taxable Events after first applying such net operating losses to offset such Contributor’s income and that of its owners from other sources for taxable years beginning before the Closing Date, the

deductibility of state taxes for federal income tax purposes, and the character of the income so recognized as being capital or ordinary (taking into account applicable holding periods), plus (B) an additional amount equal to the additional federal and state income tax payable by such Contributor on the amounts payable to such Contributor by the Company under the preceding clause (A) and this clause (B) (using the same assumptions set forth in the preceding clause (A)). The Company shall cause its certified public accountants to meet with the Contributors’ certified public accountants concerning the computation of the Tax Coverage Payment to be made to each Contributor at the Closing, and the preliminary determination of the Tax Coverage Payment to each Contributor shall be calculated at least 10 business days before the Closing, and such preliminary calculation shall be used to determine the Total Contributor Consideration and Tax Coverage Payment to be issued and paid at the Closing (or within 12 months thereafter if and when requested by a Contributor, including any adjustments described below in this Section 1.8(c)). If it is determined within 12 months after the date of the Closing that the preliminary calculation of the Tax Coverage Payment is incorrect for any reason (including by reason of the actual date of the Closing being different from the date used in the preliminary calculation or by reason of error), the Company and the Contributors shall cause such certified public accountants to meet and determine the correct Tax Coverage Payment to be made to each Contributor pursuant to Section 1.2(b) (with corresponding increases or decreases, as appropriate, using the actual per share initial public offering price in the Public Offering, in the amount of Common Stock issued pursuant to Section 1.2(a) to reflect any decrease or increase, respectively, in the amount of the Tax Coverage Payment so made or to be made). If such determination occurs after such 12 month period, there shall be no such adjustment and no Contributor shall receive any additional Tax Coverage Payment with respect thereto beyond those Tax Coverage Payments already received at the end of such period.

(d) Tax Distributions to LTIP Holders. The General Partner shall cause the Partnership to make periodic tax distributions to each LTIP Unitholder on or before the date estimated taxes would be due to be paid by such LTIP Unitholder on the income or gain allocated to such LTIP Unitholder with respect to such LTIP Unitholder’s LTIP Units (“Tax Distributions”). The amount of Tax Distributions to be made by the Partnership to each LTIP Unitholder shall be an advance against distributions otherwise distributable to such LTIP Unitholder (including amounts payable on a redemption thereof) and shall equal the excess of (1) the sum of the combined, cumulative federal and state income tax liability that such LTIP Unitholder would recognize by reason of allocations of taxable income with respect to such LTIP Units if such LTIP Unitholder were an individual residing in California who was subject to the maximum federal and state income tax rates on the income recognized, computed by taking into account (a) the deductibility of state taxes for federal income tax purposes, (b) the character of the income recognized as capital or ordinary, and (c) applicable holding periods (but not taking into account any of the LTIP Unitholder’s actual tax attributes for the year that are unrelated to the Operating Partnership), over (2) the cumulative distributions (including Tax Distributions) theretofore made (or currently being made) to such LTIP Unitholder by the Operating Partnership with respect to such LTIP Units.

Section 1.9 Contingent Common Stock for Contributors. The Company shall have the contingent obligation to issue additional Common Stock (the “Contingent Shares”) to the Contributors as follows:

(a) The Company shall have a contingent obligation to issue additional Common Stock to the Meruelo Trust in the event that the Operating Partnership sells or otherwise disposes of the Alameda Square project on or before the 10th anniversary of the Closing of the Public Offering as provided in the merger agreement related to the Merger involving Alameda Produce Market, Inc.

(b) If and when amounts owing under the note receivable from the Taylor Yards entity (the “Taylor Yards Note”) are paid from the condemnation proceeding on the Taylor Yards project, the Company shall issue to the Contributors a number of shares of Common Stock having a value equal to such payments (valuing the Common Stock for this purpose at the per share initial public offering price and treating such value as an adjustment to Total Contributor Consideration). In addition, the Company shall pay in cash (or shall cause the Operating Partnership to pay in cash) to the Contributors interest on such value, computed from the date of the Closing until the issuance of such shares, at the “applicable federal rate” established by the Internal Revenue Service for such period. Such shares and interest shall be allocated among the Contributors as follows: (x) 75% to Merco and (y) 25% to Sunstone, and such amounts shall be paid to the Contributors within three (3) business days after such amounts are paid to the Operating Partnership with respect to the Taylor Yards Note. The Company shall contribute any proceeds from the note receivable to the Operating Partnership in exchange for common units.

Section 1.10 Forfeitable Shares.

(a) Until the 10th anniversary of the consummation of the Public Offering (the “Forfeitability Period”) and as further provided in this Section 1.10, a number of shares of the Total Contributor Consideration the Meruelo Group and Sunstone will be subject to forfeiture if the Operating Partnership recognizes, in connection with the disposition during the Forfeitability Period of any of the Properties (including those owned by the Participating Entities and those contributed in the Mergers other than the Property identified as the “Alameda Square project” in the Registration Statement (as defined below)), any of the Inherent Gain (defined in Section 1.8) that the Operating Partnership will have immediately after consummation of the Public Offering and the Formation Transactions. The total number of shares of Common Stock that the Contributors will collectively forfeit is a number of shares having an aggregate value equal to the federal and state income tax liability that the Company owes on its allocated share of such recognized income from such disposition (valuing each share of Common Stock for this purpose at the per share initial public offering price in the Public Offering), with the value of the forfeited shares constituting an adjustment to the Total Contributor Consideration received by the Contributors; provided that notwithstanding anything in this Agreement or the Merger Agreements to the contrary, in no event shall Meruelo Trust and Sunstone be required to forfeit shares of Common Stock having an aggregate value (as calculated above) in excess of the Maximum Tax Forfeiture Amount. The “Maximum Tax Forfeiture Amount” means the portion of the federal and state income tax liability on the Inherent Gain of the Company that is calculated by the Company and the Contributors, reasonably and in good faith, using the following principles:

(i) the Inherent Gain will be computed based on the excess of (A) the sum of (I) the aggregate value of the Properties that are the subject of the Formation Transactions

(including the Mergers) with such aggregate value being deemed to be equal to the product of (aa) the lower of (x) the midpoint of the initial public offering price set forth on the cover of the last preliminary prospectus for the Public Offering and (y) the actual per share initial public offering price of the Public Offering, multiplied by (bb) the number of Shares of Common Stock issued in the Formation Transactions to the Contributors, plus (II) the debt attributable to the Participating Entity Interests and the Merger Participants, minus (B) the Tax Basis of the Company in the Participating Entity Interests and the Merger Participants after the Formation Transactions;

(ii) the Maximum Tax Forfeiture Amount shall be reduced by the federal and state income tax that would be payable by the Company on the amount of Inherent Gain allocated to the twenty-four Properties identified on Exhibit G, as shown on such Exhibit; and

(iii) the Maximum Tax Forfeiture Amount (after applying preceding clauses (i) and (ii) of Section 1.10(a)) shall be reduced by a percentage equal to the percentage of the shares of Common Stock of the Company outstanding immediately after the Public Offering and the Formation Transactions (assuming that no Contingent Shares are issued) that has been issued to the Contributors in connection with the Formation Transactions (including the Mergers).

(b) Meruelo Trust, Merco and Sunstone shall each bear its share of any forfeiture hereunder determined in proportion to their respective shares of the Total Contributor Consideration or Merger Consideration attributable to the particular Property being disposed of during the Forfeiture Period.

(c) Each of Meruelo Trust, Merco and Sunstone agree not to pledge, sell or otherwise dispose of a number of shares of its Total Contributor Consideration having a value (based on the per share initial public offering price in the Public Offering) equal to the portion of the remaining Maximum Tax Forfeiture Amount that could be allocable to such Contributor at such time.

(d) Any shares of Common Stock forfeited hereunder shall be forfeited for all purposes on March 15 of the calendar year following the calendar year in which the disposition of the affected Property occurs.

ARTICLE 2

CLOSING

Section 2.1 Conditions Precedent. The effectiveness of the Company’s Registration Statement on Form S-11 to be filed with the Securities and Exchange Commission after the execution of this Agreement (as amended from time to time, the “Registration Statement”) and the consummation of the Public Offering are conditions precedent to the obligations of all parties to this Agreement to effect the transactions contemplated by this Agreement on the Closing Date (as defined in Section 2.2). These conditions may not be waived by any party to this Agreement.

The obligations of the Company and the Operating Partnership to effect the transactions contemplated hereby and the Formation Transactions shall be subject to the following additional conditions precedent:

(a) the representations and warranties of each Contributor contained in this Agreement shall have been true and correct on the date such representations and warranties were made and shall be true and correct on the Closing Date as if made at and as of the Closing Date;

(b) each obligation to be performed by each Contributor it shall have been duly performed by such Contributor on or before the Closing Date, and such Contributor shall not have breached any of its covenants contained herein;

(c) concurrently with the Closing, each Contributor, directly or through the Attorney-in-Fact (as defined in Section 6.1), shall have executed and delivered to the Company the documents required to be delivered pursuant to Section 2.3;

(d) all necessary consents or approvals of governmental authorities or third parties (including, without limitation, lenders to any Contributor or Participating Entity) to the consummation of the transactions contemplated herein and the Formation Transactions shall have been obtained, other than the consents or approvals of lenders whose loans are to be repaid before or immediately after the Closing;

(e) there shall not have occurred between the date hereof and the Closing Date any material adverse change in any of the assets, business, financial condition, results or prospects of operation of the Properties, taken as a whole;

(f) no order, statute, rule, regulation, executive order, injunction, stay, decree or restraining order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or governmental or regulatory authority or instrumentality that prohibits the consummation of the transactions contemplated herein, and no litigation or governmental proceeding seeking such an order shall be pending or threatened in writing; and

(g) at the Closing, each Participating Entity shall have obtained an irrevocable commitment (in the form of a title company signed closing instruction letter) from a title insurance company satisfactory to the Company (the “Title Insurance Company”) to issue as of the Closing Date an ALTA Owner’s Title Insurance Policy 1992 Form for each Property, insuring each of the Participating Entities’ fee simple title to each Property owned by the Contributors (as opposed to Properties for which the Contributors lease and/or have contractual rights to purchase or offer to purchase all as set forth on Exhibit B) as of the Closing Date, including all recorded appurtenant easements insured as separate easements described in “Schedule A” to such Title Policies (as defined below) if such easements are necessary to the function of the property, with gap coverage from the Contributors through the date of recording (if applicable), subject only to Permitted Liens (as defined in Section 3.3(a)), in such amounts as the Company reasonably determines to be the value of the Property insured thereunder, and each of such policies shall name the Company and the Operating Partnership as additional insureds (to the extent such endorsement naming the Company as an additional insured is available on a commercially reasonable basis), shall have the creditor’s rights exception deleted, shall contain

all endorsements reasonably requested by the Company (including, without limitation, extended coverage endorsements and non-imputation endorsements to the extent available), may contain a survey exception and shall otherwise be in form and substance reasonably satisfactory to the Company (collectively, the “Title Policies”).

Any of the foregoing conditions in clauses (a) through (g) may be waived by the Company in its sole and absolute discretion.

Section 2.2 Date, Time and Place of Closing. The date, time and place of the transactions contemplated hereunder shall be the day on which the Company receives the proceeds from the Public Offering from the underwriter(s) at 10:00 a.m. in the office of DLA Piper US LLP, 550 South Hope Street, Suite 2300, Los Angeles, California (the “Closing” or “Closing Date”). The transfers described in Article 1 of this Agreement, all closing deliveries, and the consummation of the Public Offering, shall be deemed concurrent for all purposes.

Section 2.3 Closing Deliveries. At the Closing, each party shall make, execute, acknowledge and deliver, or cause to be made, executed, acknowledged and delivered through the Attorney-in-Fact, the legal documents and other items (collectively, the “Closing Documents”) necessary to carry out the intention of this Agreement, which Closing Documents and other items shall include, without limitation, the following:

(a) a Contribution and Assumption Agreement substantially in the form attached hereto as Exhibit D for each Participating Entity Interest;

(b) for each Contributor, one or more stock certificates registered in the name of such Contributor evidencing the issuance of such Contributor’s Total Contributor Consideration;

(c) an affidavit from each Contributor in the form of Exhibit H, stating, under penalty of perjury, such Contributor’s United States Taxpayer Identification Number and that such Contributor is not a foreign person pursuant to section 1445(b)(2) of the Code and a comparable affidavit satisfying California and any other state withholding requirements;

(d) all title insurance policies, leases, lease files, contracts, stock certificates, original promissory notes held by a Participating Entity and other indicia of ownership with respect to each Participating Entity that are in such Contributor’s possession or that can be obtained through reasonable efforts in such Contributor’s capacity as a partner or interest holder of any Participating Entity shall be delivered to the Company;

(e) a certificate from each Contributor affirming that the representations and warranties made by such Contributor pursuant to this Agreement remain true and correct as of the Closing Date and that all obligations to be performed by such Contributor under this Agreement have been performed by such Contributor on or before the Closing Date;

(f) if requested by the Company, certified copies of all organizational documents for each Contributor that is an entity, together with certified copies of all appropriate trust or limited liability company actions authorizing the execution, delivery and performance by each Contributor of this Agreement, any related documents and the Closing Documents;

(g) evidence reasonably satisfactory to the Company that the lender of any borrowed money secured by a mortgage or deed of trust disclosed in the Title Reports, other than those lenders whose loans are being repaid before or immediately after the Closing, has consented to the transaction as required by any loan document, deed of trust, mortgage or other evidence of indebtedness related to any Property;

(h) any other documents reasonably requested by the Company to assign, transfer, convey, contribute and deliver the Participating Entity Interests, free and clear of all Encumbrances, and effectuate the transactions contemplated hereby, including, without limitation, any documents necessary to enable the Title Insurance Company to issue the Title Policies as of the Closing Date; and

(i) all state and local transfer tax returns and any filings to be made in any applicable governmental jurisdiction in which the Company or the Operating Partnership is required to file its organizational documentation or in which the recording of the Contribution and Assumption Agreement is required.

Section 2.4 Closing Costs. The Company shall pay any documentary transfer taxes, escrow charges, title charges and recording taxes or fees and any other closing costs incurred in connection with the transactions contemplated hereby; provided, that each Contributor shall be responsible for its own legal costs incurred by such Contributor in connection herewith.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES AND INDEMNITIES

Section 3.1 Representations and Warranties of the Company. The Operating Partnership and the Company hereby represent and warrant to, and covenant with, each Contributor that:

(a) Organization; Authority. Each of the Company and the Operating Partnership has been duly formed and is validly existing under the laws of the State of Delaware with requisite corporate or limited partnership power and authority, as applicable, to enter this Agreement and all agreements contemplated hereby. The persons and entities executing this Agreement and all agreements contemplated hereby on behalf of the Company and the Operating Partnership have the power and authority to enter into this Agreement and such other contemplated agreements.

(b) No Violation. The execution, delivery and performance by the Company and the Operating Partnership of its obligations under this Agreement and all other agreements contemplated hereby will not contravene any provision of applicable law, the certificate of incorporation and bylaws of the Company or the certificate of limited partnership or agreement of limited partnership of the Operating Partnership, or any material agreement or other material instrument binding upon the Company or the Operating Partnership, or any applicable law, judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or the Operating Partnership, and no consent, approval, authorization or order of or qualification with any governmental body or agency is required for the performance by the Company or the Operating Partnership of its obligations under this Agreement and all other agreements contemplated hereby.

(c) No Brokers. Except as set forth on Schedule 3.1(c), neither the Company nor the Operating Partnership has entered into, nor will either of them enter into, any agreement, arrangement or understanding with any person or firm that will result in the obligation of any Contributor or any Contributor’s equity holders or beneficiaries to pay any finder’s fee, brokerage commission or similar payment in connection with the transactions contemplated hereby.

(d) Valid Issuance of Common Stock. The Common Stock, when issued and delivered in compliance with the provisions of the Agreement will be validly issued, and will be fully paid and nonassessable. The Common Stock will be free of any Encumbrances; provided, however, that the Common Stock is subject to restrictions on transfer under U.S. state and/or federal securities laws and as set forth in the Agreement. The Common Stock is not subject to any preemptive rights or rights of first refusal.

Section 3.2 Indemnification by Company and Operating Partnership. The Company and the Operating Partnership shall indemnify and hold harmless each Contributor and its directors, officers, employees, agents, representatives, beneficiaries, equity interest holders and Affiliates (each of which is an “Indemnified Contributor Party”) from and against any and all Losses arising out of or relating to, asserted against, imposed upon or incurred by the Indemnified Contributor Party in connection with: (a) any breach of a representation, warranty or covenant of the Company or the Operating Partnership contained in this Agreement (including, without limitation, any breach of the Power of Attorney as set forth in Article 6 below), (b) the Company’s or the Operating Partnership’s operation of any Participating Entities or the Properties following the Closing, and (c) all of (i) the liabilities and obligations of the Participating Entities whether arising before or after the Closing and (ii) the obligations of Contributors described on Exhibit C; provided, that neither the Company nor the Operating Partnership shall have any obligation under this Agreement to indemnify or hold harmless any Contributor from (A) any Losses arising from such Contributor’s breach of a representation, warranty or covenant of this Agreement or any of such Contributor’s or such Participating Entity’s organizational documents or any agreement executed and delivered to the Company or the Operating Partnership in connection with this Agreement, or (B) such Contributor’s fraud, gross negligence or willful misconduct. The notice and defense requirements set forth in Section 3.4(d) shall apply mutatis mutandis to this Section 3.2; provided, that if the Company or the Operating Partnership is required to retain counsel, any such counsel shall be selected by the Company (and may include DLA Piper US LLP). Notwithstanding anything to the contrary in this Agreement, neither the Company nor the Operating Partnership shall be liable under this Agreement for monetary damages (or otherwise) for breach of any of the Company’s representations, warranties and covenants contained in this Agreement, or in any Schedule, certificate or affidavit delivered by it pursuant hereto, other than pursuant to this Section 3.2 (and the notice and defense requirements of Section 3.4(d)), which represents the exclusive remedy available to an Indemnified Contributor Party in respect of the matters covered by this Section 3.2. Notwithstanding anything contained herein to the contrary, no Indemnified Contributor Party shall have the right to receive or recover incidental, special, consequential or punitive damages against the Company or the Operating Partnership by reason of any breach

under or in connection with this Agreement or any schedule, exhibit, certificate or affidavit or any other document delivered by the Company or the Operating Partnership pursuant to this Agreement (unless such incidental, special or consequential (but not punitive) damages are incurred by an Indemnified Company Party as a result of a third party claim for Losses), and each Indemnified Contributor Party hereby waives any and all rights to receive such damages.

Section 3.3 Representations and Warranties of the Contributors. Each Contributor represents and warrants to the Company as set forth below in this Section 3.3 with respect to each Participating Entity in which such Contributor owns an interest and the Property or Properties owned by such Participating Entity. Unless otherwise expressly provided in this Agreement, each Contributor makes no representation, warranty, covenant or agreement to indemnify any Indemnified Company Party (as defined in Section 3.4(b)(i)), except with respect to the interests in each Participating Entity to be transferred by such Contributor identified on Exhibit A and the Properties owned by such Participating Entity.

(a) Additional Defined Terms. The following terms have the meanings set forth below.

Actions: Means all actions, litigation, written claims, complaints, charges, written accusations, investigations, petitions, suits, arbitrations, mediations or other proceedings, whether civil or criminal, at law or in equity, judicial or administrative or before any arbitrator or governmental body or agency.

Affiliate: Means a person who as to another person controls, is controlled by, or is under common control with, such other person.

CalPERS: Means the California Public Employees’ Retirement System.

CalPERS Documents: Means the documents executed in connection with or pursuant to the CalPERS Facility.

CalPERS Facility: Means that certain revolving credit facility of approximately $150 million provided to Meruelo Maddux California Future Fund, LLC by CalPERS, as amended from time to time.

Claims: Means claims, disputes or Actions pending or, to Knowledge, threatened that directly or indirectly affect any of the Contributor, the Participating Entity, the Participating Entity Interests with respect to such Participating Entity or the Properties owned by such Participating Entity.

Disclosure Schedules: Means the Disclosure Schedule dated of even date herewith and delivered by Contributors to the Company and the Operating Partnership and attached to this Agreement.

Encumbrances: Means, with respect to the subject personal property, each of the following, other than any of the following that would constitute Permitted CalPERS Claims: all pledges, liens, options, charges, security interests, restrictions, prior assignments, encumbrances, rights of others, licenses, or other similar arrangement or interest in personal property of any kind or nature whatsoever, direct or indirect, including, without limitation, interests in or claims to revenues generated by the personal property in question.

Knowledge: Means, with respect to any representation or warranty so indicated, the actual knowledge of the signatory to this Agreement, without any duty of inquiry or investigation.

Liens: Means, with respect to the subject real property, each of the following, other than any of the following that would constitute Permitted Liens: all mortgages, deeds of trust, pledges, liens, options, charges, security interests, restrictions, prior assignments, encumbrances, covenants, encroachments, assessments, rights of others, licenses, easements, or other similar arrangement or interest in real property of any kind or nature whatsoever, direct or indirect, including, without limitation, interests in or claims to revenues generated by the real property in question.

Permitted CalPERS Claims: Means the security interest of CalPERS on any Participating Entity Interest that arises under the provisions of the CalPERS Documents.

Permitted Liens: Means

(i) Liens, or deposits made to secure the release of such Liens, securing taxes, the payment of which is not delinquent or the payment of which is actively being contested in good faith by appropriate proceedings diligently pursued, but only to the extent such Liens have been disclosed in the Title Reports, Disclosure Schedules or the Registration Statement;

(ii) zoning laws and ordinances generally applicable to the districts in which the Properties are located that are not violated by the existing structures or present uses thereof;

(iii) Liens imposed by laws, such as carriers’, warehousemen’s, carriers’ and mechanics’ liens, and other similar liens arising in the ordinary course of business that secure payment of obligations not more than 60 days past due or that are being contested in good faith by appropriate proceedings diligently pursued and as disclosed in the Title Reports, Disclosure Schedules or the Registration Statement;

(iv) non-exclusive easements for public utilities that do not have a material adverse effect upon, or interfere with the use of, the Properties;

(v) leases and licenses (and purchase rights contained therein) that are identified on a schedule provided pursuant to Section 4.2(d) that have otherwise been made available to Company, its agents and underwriters or that are oral leases that have a remaining term of less than twelve (12) months; and

(vi) any exceptions contained in the Title Reports or otherwise set forth in Schedule 3.3(b).

Person: Means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or governmental entity.

Registration Statement: Means the Company’s Registration Statement on Form S-11.

Title Reports. Preliminary title reports or title commitments issued by the Title Insurance Company with respect to each Property, in each case dated not earlier than thirty (30) days prior to the date of this Agreement.

Value: Means, as of the applicable measuring date with respect to a share of Common Stock, the average of the daily Market Prices for ten (10) consecutive trading days immediately preceding the measuring date. The term “Market Price” on any date means the Closing Price per share of Common Stock on such date. The “Closing Price” on any date means the last per-share sale price for the Common Stock, regular way, or, in case no such sale takes place on such day, the average of the per-share closing bid and asked prices, regular way, for the Common Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq Global Market or, if the Common Stock is not listed or admitted to trading on the Nasdaq Global Market, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted per-share price, or, if not so quoted, the average of the per-share high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the per-share closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company or, in the event that no trading price is available for the Common Stock, the per-share fair market value of the Common Stock, as determined in good faith by the Board of Directors of the Company.

(b) Title. Each Participating Entity for which such Contributor has contributed its Participating Entity Interests owns (i), to such Contributor’s Knowledge, fee title to the Property or Properties identified as owned on Exhibit B, and (ii) the leasehold estate in the Property or Properties identified as leased on Exhibit B, in each case other than as (A) set forth in the Title Reports listed on Schedule 3.3(b), (B) set forth in the Registration Statement, or (C) as specifically identified on Exhibit B.

(c) Organization; Authority. Subject to the provisions of the CalPERS Documents, such Contributor has the full right, authority, power and legal capacity to enter into this Agreement and any other agreement, document or instrument to be executed and delivered by such Contributor pursuant to this Agreement and to carry out the transactions contemplated hereby and thereby, including, without limitation, the conveyance of the Participating Entity Interests free and clear of all Encumbrances. Such Contributor is duly formed, validly existing and in good standing (to the extent applicable) under the laws of the jurisdiction of its formation, and has all requisite power and authority to own, lease or operate its property and to carry on its business as presently conducted and, to the extent required under applicable law, is qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the character of its property make such qualification necessary.

(d) Due Authorization. The execution, delivery and performance of this Agreement and any other agreement, document or instrument to be executed and delivered by such Contributor pursuant to this Agreement pursuant to which such Contributor has contributed its Participating Entity Interests has been duly and validly authorized by all necessary action of such Contributor. Each of this Agreement and the agreements, documents and instruments executed and delivered by or on behalf of such Contributor pursuant to this Agreement constitutes, or when executed and delivered will constitute, the legal, valid and binding obligation of such Contributor, each enforceable against such Contributor in accordance with its terms, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ rights generally, as from time to time in effect, or the application of equitable principles.

(e) Consents and Approvals. Other than the consent of the Participating Entity’s lenders under loans, no consent, waiver, approval or authorization of any third party, including, without limitation, any governmental authority or agency, is required to be obtained by such Contributor or such Participating Entity for which such Contributor has contributed its Participating Entity Interests in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby, except any of the foregoing that shall have been satisfied or obtained prior to the Closing Date and except for such consents, waivers, approvals and authorizations the failure of which to obtain would not have a material adverse effect on the assets, business, financial condition, or results of operations of the Company, the Operating Partnership, their subsidiaries and the Properties taken as a whole (including those projects to be acquired in the Mergers), assuming that the Formation Transactions have occurred (a “Material Adverse Effect”) or on the ability of the Contributor to execute and deliver this Agreement and perform its obligations thereunder.

(f) Ownership of the Participating Entity Interests. Such Contributor is the sole record owner of the Participating Entity Interests to be transferred by such Contributor, free and clear of any Encumbrances and has good and valid title to such Participating Entity Interests, subject to the Permitted CalPERS Claims.

(g) Contract Properties.

(i) Except as set forth on Schedule 3.3(p), the Properties denoted on Exhibit B as (a) being owned by and subject to build to suit contracts with, Dynamic Builders, Inc., (b) being subject to executory purchase and sale agreements, and (c) being subject to an option to purchase or right of first refusal (collectively, the “Contract Properties”) are, to such Contributor’s knowledge, valid and enforceable against such Contributor in accordance with their respective terms and, to such Contributor’s Knowledge, are valid and enforceable against the Persons (other than such Contributor) that are parties to such contracts and instruments, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ rights generally, as from time to time in effect, or the application of equitable principles.

(ii) To the Knowledge of such Contributor, there are no defaults or breaches with respect to the contracts and instruments governing the Contract Properties.

(h) Participating Entity Interests.

(i) The Participating Entity Interests contributed by such Contributor constitute all of the issued and outstanding interests owned (directly or indirectly) by such Contributor in the Participating Entity. Except as set forth in Schedule 3.3(h), such Contributor has no equity interest, either direct or indirect, in the Properties, except for the Participating Entity Interests which are the subject of this Agreement.

(ii) To the Knowledge of such Contributor, Schedule 3.3(h) sets forth the entire outstanding equity and distribution, profits or similar interest in the Participating Entity. The Participating Entity Interests owned by such Contributor are validly issued, fully paid and non-assessable, and were not issued in violation of any preemptive rights. The Participating Entity Interests owned by such Contributor have been issued in compliance with applicable law and the Participating Entity Agreements. To the Knowledge of such Contributor, there are no rights, subscriptions, warrants, options, conversion rights, preemptive rights or agreements of any kind outstanding to purchase or to otherwise acquire any of the interests that comprise the Participating Entity Interests or any securities or obligations of any kind convertible into any of the interests that comprise the Participating Entity Interests or other equity interests or profit participation of any kind in the Participating Entity. At the Closing, upon receipt of the consideration contemplated by this Agreement, such Contributor will have transferred its Participating Entity Interests to the Company free and clear of all Encumbrances.

(i) No Violation. Subject to the consent requirements contained in the loan documents for each Property, the CalPERS Documents and the Participating Entity Agreements, copies of which have been previously made available to the Company, its agents and underwriters, none of the execution, delivery or performance of this Agreement, the documents required pursuant thereto and the transactions contemplated hereby and thereby does or will, with or without the giving of notice, lapse of time, or both, (a) violate, conflict with, result in a breach of, or constitute a default under or give to others any right of termination or cancellation of (i) the organizational documents of such Contributor, (ii) any material agreement, document or instrument to which such Contributor is a party or by which such Contributor, its Participating Entity Interests or any of its assets or properties are bound or (iii) any applicable law, or term or provision of any judgment, order, writ, injunction, or decree of any governmental or regulatory authority, which is binding on such Contributor or by which such Contributor or any of its assets or properties are bound or subject or (b) result in the creation of any Encumbrance upon the Participating Entity Interests owned by such Contributor or any Lien on the Properties. Except as shall have been cured, consented to or waived prior to the Closing, none of the Contributors is in violation of its organizational documents.

(j) Non-Foreign Status. Such Contributor is not a foreign person, foreign corporation, foreign partnership, foreign trust or foreign estate (as defined in the Code), and is, therefore, not subject to the provisions of the Code relating to the withholding of sales proceeds to foreign persons.

(k) Withholding. Such Contributor shall execute at Closing such certificates or affidavits reasonably necessary to document the inapplicability of any federal or state withholding provisions, including, without limitation, those referred to in Section 3.3(j) above

and similar provisions under California law. If such Contributor fails to provide such certificates or affidavits, the Company may withhold a portion of any payments otherwise to be made to such Contributor as required by the Code or California law.

(l) Investment Purposes. Such Contributor acknowledges such Contributor’s understanding that the Common Stock to be acquired pursuant to this Agreement is not being registered under the Securities Act of 1933, as amended and the rules and regulations in effect thereunder (the “Act”) except as provided for in any registration rights agreement executed and delivered by the Company or any applicable state blue sky laws pursuant to a specific exemption or exemptions therefrom, and the Company’s reliance on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of such Contributor, including the following:

(i) Investment. Such Contributor is acquiring the Common Stock solely for such Contributor’s own account for the purpose of investment and not as a nominee or agent for any other Person and not with a view to, or for offer or sale in connection with, any distribution of any thereof. Such Contributor agrees and acknowledges that he or it will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of (hereinafter, “Transfer”) any of the Common Stock unless (i) the Transfer is pursuant to an effective registration statement under the Act and qualification or other compliance under applicable blue sky or state securities laws or (ii) counsel for such Contributor (which counsel shall be reasonably acceptable to the Company and may be DLA Piper) shall have furnished the Company with an opinion, reasonably satisfactory in form and substance to the Company, to the effect that no such registration is required because of the availability of an exemption from registration under the Act and qualification or other compliance under applicable blue sky or state securities laws.

(ii) Knowledge. Such Contributor is knowledgeable, sophisticated and experienced in business and financial matters; such Contributor has previously invested in securities similar to the Common Stock and fully understands the limitations on transfer imposed by the federal securities laws and as described in this Agreement. Such Contributor is able to bear the economic risk of holding the Common Stock for an indefinite period and is able to afford the complete loss of such Contributor’s investment in the Common Stock. Such Contributor has received and reviewed all information and documents about or pertaining to the Company, the Operating Partnership, the business and prospects of the Company and the Operating Partnership, and the issuance of the Common Stock as such Contributor deems necessary or desirable, and has been given the opportunity to obtain any additional information or documents and to ask questions of the proposed management of the Company and receive answers about such information and documents, the Company, the Operating Partnership, the business and prospects of the Company and the Operating Partnership and the Common Stock that such Contributor deems necessary or desirable to evaluate the merits and risks related to such Contributor’s investment in the Common Stock and to conduct its own independent valuation of the purchase of the Common Stock. Such Contributor acknowledges that any such questions posed were answered to such Contributor’s satisfaction. Such Contributor understands and has taken cognizance of all risk factors related to the purchase of the Common Stock, including, without limitation, the risk factors set forth in the Registration Statement. Such Contributor is a sophisticated real estate investor and developer. Such Contributor is relying

upon its own independent analysis and assessment (including with respect to taxes), and the advice of such Contributor’s advisors (including tax advisors), and not upon that of the Company and Operating Partnership, for purposes of evaluating, entering into, and consummating the transactions contemplated by this Agreement.

(iii) Holding Period. Such Contributor acknowledges that it has been advised that (i) unless the Common Stock is subsequently registered under the Act or an exemption from such registration is available, the Common Stock must be held (and Contributor must continue to bear the economic risk of the investment in the Common Stock) indefinitely, (ii) a restrictive legend in the form hereafter set forth shall be placed on the certificates representing the Common Stock and (iii) stop transfer and other notations shall be made in the appropriate records of the Company and its transfer agent on behalf of the Company indicating that the Common Stock is subject to restrictions on transfer.

(iv) Accredited Investor. Such Contributor is an “accredited investor” (as such term is defined in Rule 501 (a) of Regulation D under the Act).

(v) Legend. Each certificate representing the Common Stock shall bear the following legend:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

(m) No Brokers. Except as set forth on Schedule 3.3(m), neither such Contributor nor any of such Contributor’s respective managers, trustees, members or beneficiaries, as applicable, has employed or made any agreement with any broker, finder or similar agent or any Person that will result in the obligation of the Company or any of its Affiliates to pay any finder’s fee, brokerage fees or commissions or similar payment in connection with the transactions contemplated by this Agreement.

(n) NASD Affiliation. Neither such Contributor nor any Affiliate of such Contributor is a member, Affiliate of a member or person associated with a member of the National Association of Securities Dealers, Inc. (“NASD”). Neither such Contributor nor any of its Affiliates owns any stock or other securities of any NASD member not purchased in the open market, or have made any outstanding subordinated loans to a NASD member. (A company or natural person is presumed to control a member of the NASD and is therefore presumed to constitute an Affiliate of such member if the company or person is the beneficial owner of 10% or more of the outstanding securities of a member which is a corporation. Additionally, a natural person is presumed to control a member of the NASD and is therefore presumed to constitute an Affiliate of such a member if such person has the power to direct or cause the direction of the management or policies of such member.)

(o) Taxes. Each Contributor makes the following representations with respect to each Participating Entity for which such Contributor has contributed its interests (“Contributed Entity”), and with respect to itself as to Section 3.3(o)(viii) below:

(i) All tax returns required to be filed by or on behalf of each Participating Entity for which such Contributor has contributed its interests have been duly and timely filed with the appropriate taxing authorities in all jurisdictions in which such tax returns are required to be filed (after giving effect to any valid extensions of time in which to make such filings), and all such tax returns were true, complete and correct in all material respects; (ii) all taxes due and payable by or on behalf of each such Participating Entity, either directly or otherwise, have been fully and timely paid, except to the extent adequately reserved for in accordance with generally accepted accounting principles consistently applied on the balance sheet of such Participating Entity, and adequate reserves or accruals for taxes have been provided in the balance sheet of such Participating Entity with respect to any period through the date hereof for which tax returns have not yet been filed or for which taxes are not yet due and owing; (iii) no agreement, waiver or other document or arrangement extending or having the effect of extending the period for assessment or collection of taxes (including, but not limited to, any applicable statute of limitations) has been executed or filed with any taxing authority by or on behalf of such Participating Entity, and (iv) such Participating Entity (other than Meruelo Maddux Construction, Inc., which is a taxable corporation) is, and at all times during its existence has been, an S corporation or limited liability company that is taxable as a partnership (rather than being taxable as an association or a publicly-traded partnership taxable as a corporation).

(ii) Each Participating Entity for which such Contributor has contributed its interests has complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of taxes and has duly and timely withheld from employees’ salaries, wages and other compensation and has paid over to the appropriate taxing authorities all amounts required to be so withheld and paid over for all periods under all applicable laws.

(iii) Each Participating Entity for which such Contributor has contributed its interests has made available to Company, its agents and underwriters complete copies of any audit report issued within the last three years relating to any material taxes due from or with respect to such Participating Entity with respect to its income, assets or operations.

(iv) No claim has been made by a taxing authority in a jurisdiction where any Participating Entity for which such Contributor has contributed its interests Contributed Entity does not file an income or franchise tax return that such Contributed Entity is or may be subject to taxation by that jurisdiction.

(v) There are no deficiencies asserted or assessments made as a result of any examinations by any taxing authority of the tax returns of or covering or including any Participating Entity for which such Contributor has contributed its interests, or such deficiencies

or assessments have been fully paid, and there are no other audits or investigations by any taxing authority in progress, nor has such Participating Entity received any notice from any taxing authority that it intends to conduct such an audit or investigation; (ii) no requests for a ruling or a determination letter are pending with any taxing authority by such Participating Entity; and (iii) no issue has been raised in writing by any taxing authority in any current or prior examination which, by application of the same or similar principles, could reasonably be expected to result in a proposed deficiency against such Participating Entity for any subsequent taxable period that could be material.

(vi) Neither any Participating Entity for which such Contributor has contributed its interests nor any other person on behalf of such Participating Entity has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law with respect to such Participating Entity.

(vii) There are no Liens as a result of any unpaid taxes (other than statutory liens for taxes not yet delinquent) upon any of the assets of any Participating Entity for which such Contributor has contributed its interests, other than Permitted Liens.

(viii) Such Contributor is a United States person within the meaning of Section 7701(a)(30) of the Code.

(ix) No Participating Entity for which such Contributor has contributed its interests constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock to which Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code) applies and which occurred within two years of the date of this Agreement.

(x) No Participating Entity for which such Contributor has contributed its interests has engaged in a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4.

(p) Litigation. Except as set forth on Schedule 3.3(p) or in the Registration Statement, there is no Action pending and for which service has occurred or, to the Knowledge of such Contributor, threatened in writing materially and adversely affecting any Participating Entity for which such Contributor has contributed its Participating Entity Interests, all or any portion of such Contributor’s Participating Entity Interests, such Contributor’s ability to execute and deliver this Agreement and perform its obligations thereunder or any Property owned by such Participating Entity, or which (i) in any manner raises any question affecting the validity or enforceability of this Agreement or seeks restraint, prohibition, damages or other relief in connection with this Agreement or (ii) could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.3(p), no outstanding order, writ, injunction or decree of any court, government, governmental entity or authority or arbitration naming or specifically identifying such Contributor, any Participating Entity for which such Contributor has contributed its Participating Entity Interests, all or any portion of such Participating Entity Interests or any Property owned by such Participating Entity that in any such case would impair such Contributor’s ability to enter into and perform all of its obligations under this Agreement or would reasonably be expected to have a Material Adverse Effect.

(q) Leases. Other than month-to-month leases and leases that may be terminated on 30 days’ notice or less, true, correct and complete copies of all leases, subleases and rights of occupancy in effect with respect to the Property or Properties owned by any Participating Entity for which such Contributor has contributed its Participating Entity Interests (the “Leases”), together with all amendments and supplements thereto and all other documents and correspondence relating thereto, have been delivered or made available to the Company, its agents and underwriters. To such Contributor’s Knowledge, except as set forth on Schedule 3.3(q), all Leases involving annual rental payments in excess of $1,000,000 or total rental payments in excess of $12,000,000 and all leases under which a Participating Entity for which such Contributor has contributed its Participating Entity Interests and leases space (collectively “Material Leases”) are valid and enforceable and presently in full force and effect. Except as set forth on Schedule 3.3(q), neither the Participating Entity nor, to the Knowledge of such Contributor, any third party lessee or lessor, as applicable, under any Material Lease, is in default under such Material Lease. To the Knowledge of such Contributor, no third party tenant under any of the Leases has an option or right of first refusal to purchase the premises demised under such Lease. To the Knowledge of such Contributor, the consummation of the transactions contemplated by this Agreement will not give rise to any breach, default or any event that, but for the passage of time or the giving of notice, or both, would constitute a default under any of the Leases, except such defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Material Leases is assignable by the Participating Entity that is a party thereto and for which such Contributor has contributed its Participating Entity Interests and, except as disclosed on Schedule 3.3(q), none of the Material Leases requires the consent or approval of any party in connection with the transactions contemplated by this Agreement or the Closing Documents. To the Knowledge of such Contributor, with respect to each Property owned by a Participating Entity for which such Contributor has contributed its Participating Entity Interests, there is no material misstatement with respect to the information regarding the leases included in the Registration Statement.

(r) Other Contracts. To the Knowledge of such Contributor, (i) each material agreement, undertaking or contract affecting any Property owned by any Participating Entity for which such Contributor has contributed its Participating Entity Interests other than the Leases, written or oral, is valid and binding on such Participating Entity (the “Material Other Agreements”) and such Participating Entity Interest and is in full force and effect in all material respects, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ rights generally, as from time to time in effect, or the application of equitable principles, and (ii) no party to any such agreement, undertaking or contract has breached or defaulted (with or without the passage of time or the giving of notice or both) or given or received any written notice of any uncured default under the terms of such Material Other Agreement, except for such breaches or defaults that would not, individually or in the aggregate, have a Material Adverse Effect. The Participating Entities for which such Contributor has contributed its Participating Entity Interests has made and will make available to the Company, its agents and underwriters prior to the Closing Date, true, correct and complete copies of all Material Other Agreements, including all material amendments, modifications and supplements thereto.

(s) Liabilities; Indebtedness. Except as disclosed in the Registration Statement, any Participating Entity for which such Contributor has contributed its Participating Entity Interests has not incurred any indebtedness related to any of the Properties owned by such Participating Entity except in each instance for trade payables and other customary and ordinary expenses in the ordinary course of business.

(t) Insurance. Each Participating Entity for which such Contributor has contributed its Participating Entity Interests, directly or through its tenants, currently maintains or causes to be maintained customary public liability, casualty and other insurance coverage with reputable insurance companies (excluding in all cases, earthquake, flood and terrorism insurance coverage) with respect to the Property or Properties owned by such Participating Entity in commercially reasonable amounts. All such insurance coverage shall be maintained in full force and effect through the Closing Date and all premiums due and payable thereunder have been fully paid when due. No written notice of cancellation, default or non-renewal, or of non compliance with existing financing arrangements, has been received or to Contributors’ Knowledge threatened with respect thereto.

(u) Personal Property. All equipment, fixtures and personal property located at or on any Property that is owned by any Participating Entity for which such Contributor has contributed its Participating Entity Interests shall remain and not be removed by such Contributor prior to the Closing Date, except for equipment that becomes obsolete or unusable, which may be disposed of or replaced in the ordinary course of business.

(v) No Other Agreements to Sell. Except for the CalPERS Documents, the Participating Entity Agreements and as otherwise set forth on Schedule 3.3(v), such Contributor has not entered into any agreement with, and has no obligation (absolute or contingent) to, any other Person to sell, transfer or in any way encumber any of such Contributor’s Participating Entity Interests or to not sell such Contributor’s Participating Entity Interests, or to enter into any agreement with respect to a sale, transfer or encumbrance of or put or call right with respect to such Contributor’s Participating Entity Interests. Neither such Contributor nor any Participating Entity for which such Contributor has contributed its Participating Entity Interests has made any agreement with, and has no obligation (absolute or contingent) to, any other Person to sell, transfer or in any way encumber any Property owned by such Participating Entity or to sell any Property owned by such Participating Entity, or to enter into any agreement with respect to a sale, transfer or encumbrance of or put or call right with respect to any Property owned by such Participating Entity.

(w) Environmental Conditions. To the Knowledge of such Contributor and except as set forth in the environmental reports listed on Schedule 3.3(w)(i) or otherwise disclosed on Schedule 3.3(w)(ii), with respect to any Property owned by any Participating Entity for which such Contributor has contributed its Participating Entity Interests:

(i) such Participating Entity has not placed, located, sited or buried any underground storage tanks at such Property and no underground storage tanks are located on, at or under such Property;

(ii) such Participating Entity has never used any part of such Property as a sanitary landfill, waste dump site or for the treatment, storage or disposal of hazardous waste as defined in the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §§ 6901 et seq.), as amended (“RCRA”);

(iii) such Properties are currently in compliance with all Environmental Laws (as defined below) and no environmental condition exists in, on, under or upon such Property or any portion thereof that, in each case, would reasonably be likely to result in a Material Adverse Effect;

(iv) neither such Contributor nor such Participating Entity has received written notice of violation or other written communication from any person (including any governmental agency or authority, including the United States Environmental Protection Agency or any other federal, state, county or municipal entity or agency that regulates Hazardous Materials or public health risks or other environmental matters or any other private party) alleging any violation of, or requiring compliance with, any Environmental Law or environmental permit or demanding payment or contribution for any release or other environmental damage in, on, under or upon such Property that could reasonably be expected to have a Material Adverse Effect;

(v) the Participating Entity has not placed or permitted the placement of any Hazardous Materials in, on, under or over such Property in violation of any applicable Environmental Law;

(vi) no investigation or litigation with respect to Hazardous Materials located in, on, under or upon any of the Properties is pending or has been overtly threatened by any governmental entity or any third party that could reasonably be expected to have a Material Adverse Effect;

For the purposes of this Section 3.3(w), “Hazardous Materials” means (a) any “hazardous waste,” “underground storage tanks,” “petroleum,” “regulated substance,” or “used oil” as defined by the RCRA, or by any regulations promulgated thereunder, (b) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), as amended, the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.), as amended, or by any regulations promulgated thereunder (including, without limitation, asbestos, radon, mold and lead-based paint), (c) any “oil” or other “hazardous substance” as defined by the Oil and Hazardous Substance Control Act of 1976, as amended, or by any regulations promulgated thereunder, (d) any substance the presence of which on, in or under any real property is prohibited by any applicable Environmental Law or (e) any other hazardous materials as to which remedial action is required under applicable Environmental Laws; and “Environmental Laws” means all federal, state or local laws, regulations and ordinances regulating the use, transportation, characterization, remediation, treatment or disposal of Hazardous Materials or otherwise regulating public health.

(x) Compliance With Laws. In connection with the operation of the Properties, to the Knowledge of such Contributor, except as set forth in the Disclosure Schedules or in the Registration Statement and except with respect to buildings to be demolished or

substantially demolished, the Properties owned by the Participating Entities for which such Contributor has contributed its Participating Entity Interests have been maintained and are in compliance with all applicable laws, ordinances, rules, regulations, codes, orders and statutes (including, without limitation, those currently relating to fire and safety, conservation, parking, Americans with Disabilities Act, zoning and building laws) whether federal, state or local, foreign, statutory or common except where the failure to be in compliance with such laws would not reasonably be expected to have a Material Adverse Effect. Any Participating Entity for which such Contributor has contributed its Participating Entity Interests possesses such certificates, approvals, licenses, authorities or permits issued by the appropriate local, state or federal agencies or bodies as are necessary to conduct its business of owning real estate (excluding discretionary permits and approvals which have not been issued as of the Closing Date), and, to the Knowledge of such Contributor, such Participating Entity has not received any written notice of proceedings relating to the revocation or modification of any such certificate, approval, license, authority or permit that, singly or in the aggregate, if the subject of an unfavorable decision, ruling, or finding, would have a Material Adverse Effect. All approvals regarding zoning, land use, subdivision, environmental and building and construction laws, ordinances, rules and regulations have been obtained for the current use of any Property owned by any Participating Entity for which such Contributor has contributed its Participating Entity Interests, and such approvals will not be invalidated by the consummation of the transactions contemplated by this Agreement and the Closing Documents, other than any such approvals the failure of which to obtain or the invalidation of which would not have a Material Adverse Effect.

(y) Condemnation and Zoning. Except as disclosed on Schedule 3.3(p) or Schedule 3.3(y) or in the Registration Statement, (i) there are no pending or, to the Knowledge of such Contributor, proposed or threatened in writing condemnation, eminent domain or similar proceedings, or negotiations for purchase in lieu of condemnation, that affect or would affect any portion of any Property that is owned by any Participating Entity for which such Contributor has contributed its Participating Entity Interests; and (ii) such Participating Entity has not received any written notice that remains uncured from any governmental authority stating that any Property owned by such Participating Entity is currently violating any zoning, land use or other similar rules or ordinances in any material respect that would reasonably be expected to have a Material Adverse Effect.

(z) ERISA. Except as set forth on Schedule 3.3(z), to the Knowledge of such Contributor, no Participating Entity for which such Contributor has contributed its Participating Entity Interests has any (i) labor agreement to which it is a party, or by which it is bound, including, without limitation, “employee pension benefit plans” as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); (ii) employment, profit sharing, deferred compensation, bonus, pension, retainer, consulting, retirement, welfare or incentive plan, fund, program or contract to which it is a party, or by which it is bound; (iii) written or other formal personnel policies; or (iv) plan or agreement under which “fringe benefits” (including, but not limited to, vacation plans or programs, sick leave plans or programs, and related benefits) are afforded to its employees.

(aa) Bankruptcy. (i)To such Contributor’s Knowledge, there has not been filed any petition or application with respect to, or any proceeding commenced by or against, any of the assets of any Participating Entity for which such Contributor has contributed its

Participating Entity Interests under any bankruptcy law, and such Participating Entity has not made any assignment for the benefit of creditors, (ii) neither such Participating Entity nor such Contributor is “insolvent” within the meaning of any bankruptcy law and (iii) neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby shall render such Contributor insolvent.

(bb) Tax Matters; Professionals. Each Contributor jointly and not severally represents and warrants that it has obtained from DLA Piper US LLP and Ernst & Young LLP advice regarding the tax consequences of (i) the transfer of its Participating Entity Interests to the Company or its subsidiaries and the receipt of Common Stock as consideration therefor and (ii) the Mergers. Each Contributor further severally and not jointly represents and warrants that it has not relied on the Company or the Operating Partnership, or their Affiliates, advisors, representatives or counsel (other than DLA Piper US LLP and Ernst & Young LLP), for such tax advice.

(cc) Licenses and Permits. To the Knowledge of such Contributor, except as set forth in Schedule 3.3(cc) and except with respect to improvements intended to be demolished, all notices, licenses, permits, certificates (including certificates of occupancy), rights, privileges, franchises and authority that are required in connection with the construction, use, occupancy, management, leasing and operation of the Properties and the Participating Entities for which such Contributor has contributed its Participating Entity Interests have been obtained, are in full force and effect, are in good standing and (to the extent required pursuant to the transactions contemplated hereby) are assignable to the Company, except for those licenses, permits and certificates, the failure of which to obtain or maintain in good standing or be assignable, would not have a Material Adverse Effect.

Section 3.4 Indemnification by Contributors.

(a) Survival of Representations and Warranties; Remedy for Breach.

(i) All representations and warranties contained in this Agreement or in any Schedule or certificate delivered pursuant hereto shall survive the Closing for the period specified in Section 3.4(f).

(ii) Notwithstanding anything to the contrary in this Agreement, no Contributor shall be liable under this Agreement for monetary damages (or otherwise) for breach of any of its representations, warranties and covenants contained in Section 3.3 or this Agreement, or in any Schedule, certificate or affidavit delivered by it pursuant thereto, other than pursuant to the succeeding provisions of this Section 3.4.

(iii) Notwithstanding anything to the contrary in this Agreement, any party may bring suit or pursue any other legal right available to such party as a result of fraud by any other party to this Agreement.

(b) General Indemnification.

(i) Indemnification by Sunstone.

(A) Sunstone shall indemnify and hold harmless the Company, the Operating Partnership and their Affiliates and each of their respective directors, officers, employees, agents, representatives and Affiliates (each of which is an “Indemnified Company Party”) from and against any and all claims, losses, damages, liabilities and expenses, including, without limitation, amounts paid in settlement, reasonable attorneys’ fees, costs of investigation and remediation, costs of investigative, judicial or administrative proceedings or appeals therefrom, and costs of attachment or similar bonds (collectively, “Losses”), asserted against, imposed upon or incurred by such Indemnified Company Party in connection with or as a result of (i) any breach, untruth or inaccuracy of a representation or warranty of Sunstone contained in this Agreement, any Closing Document or in any Schedule, certificate or affidavit delivered by Sunstone pursuant to this Agreement, in each instance only with respect to any Participating Entity for which Sunstone has contributed its Participating Entity Interests and the Properties owned by such Participating Entity, or (ii) the failure, partial or total, to perform a covenant or agreement made by Sunstone in this Agreement, Closing Document or in any Schedule, certificate or affidavit delivered by Sunstone pursuant to this Agreement.

(B) Sunstone shall indemnify and hold harmless the Indemnified Company Parties from and against any and all Losses, asserted against, imposed upon or incurred by the Indemnified Company Parties in connection with or as a result of any liabilities or obligations incurred, arising from or out of, in connection with or as a result of the failure of Sunstone to obtain any undisclosed consents, in each case only with respect to any Participating Entity for which Sunstone has contributed its Participating Entity Interests and the Properties owned by such Participating Entity, that are required to consummate the transactions contemplated by this Agreement.

(C) Sunstone shall indemnify and hold harmless the Indemnified Company Parties from all fees and expenses incurred by Sunstone in connection with the transactions contemplated by this Agreement that relate to any Participating Entity for which Sunstone has contributed its Participating Entity Interests,

(ii) Indemnification by Meruelo Group.

(A) Meruelo Group shall indemnify and hold harmless each Indemnified Company Party from and against any and all Losses, asserted against, imposed upon or incurred by such Indemnified Company Party in connection with or as a result of (i) any breach, untruth or inaccuracy of a representation or warranty made by Meruelo Group that is contained in this Agreement, any Closing Document or in any Schedule, certificate or affidavit delivered by Meruelo Group pursuant to this Agreement, in each instance only with respect to any Participating Entity for which Meruelo Group has contributed its Participating Entity Interests and the Properties owned by such Participating Entity, or (ii) the failure, partial or total, to perform a covenant or agreement made by Meruelo Group in this Agreement, Closing Document or in any Schedule, certificate or affidavit delivered by Meruelo Group pursuant to this Agreement.

(B) Meruelo Group shall indemnify and hold harmless the Indemnified Company Parties from and against any and all Losses, asserted against, imposed upon or incurred by the Indemnified Company Parties in connection with or as a result of any

liabilities or obligations incurred, arising from or out of, in connection with or as a result of the failure of Meruelo Group to obtain any undisclosed consents, in each case only with respect to any Participating Entity for which Meruelo Group has contributed its Participating Equity Interests and the Properties owned by such Participating Entity, that are required to consummate the transactions contemplated by this Agreement.

(C) Meruelo Group shall indemnify and hold harmless the Indemnified Company Parties from and against all fees and expenses incurred by the Meruelo Group in connection with the transactions contemplated by this Agreement that relate to any Participating Entity for which Meruelo Group has contributed its Participating Entity Interests.

(c) Payment of Indemnification. A Contributor shall satisfy its obligations hereunder by the prompt delivery (paid promptly as and when expenses are incurred) to an Indemnified Company Party of Common Stock. Any Common Stock delivered to an Indemnified Company Party hereunder shall be valued based upon the initial public offering price of the Common Stock, with the value of such Common Stock so delivered being an adjustment to the Total Contributor Consideration.

(d) Notice and Defense of Claims. As soon as reasonably practicable after receipt by the Indemnified Company Party of notice of any liability or claim incurred by or asserted against the Indemnified Company Party that is subject to indemnification by a Contributor under Section 3.4, the Indemnified Company Party shall give notice thereof to such Contributor, including, without limitation, liabilities or claims to be applied against the indemnification basket established pursuant to Section 3.4(e)(i). The Indemnified Company Party may at its option demand indemnity under this Section 3.4 from a Contributor as soon as a claim has been threatened in writing by a third party, regardless of whether an actual Loss has been suffered, so long as the Indemnified Company Party shall in good faith determine that such claim is not frivolous and that the Indemnified Company Party may be liable for, or otherwise incur, a Loss as a result thereof and shall give notice of such determination to such Contributor. The Indemnified Company Party shall permit an indemnifying Contributor, at its option and expense, to assume the defense of any such claim by counsel selected by such Contributor and reasonably satisfactory to the Indemnified Company Party, and to settle or otherwise dispose of the same; provided, that the Indemnified Company Party may at all times participate (but not control) in such defense at its expense; and provided further, that a Contributor shall not, in defense of any such claim, except with the prior written consent of the Indemnified Company Party in its sole and absolute discretion, consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff in question to the Indemnified Company Party and its Affiliates of a release of all liabilities in respect of such claims, or that does not result only in the payment of money damages. If an indemnifying Contributor shall fail to undertake such defense within 30 days after such notice, or within such shorter time as may be reasonable under the circumstances, then the Indemnified Company Party shall have the right to undertake the defense, compromise or settlement of such liability or claim on behalf of and for the account of such Contributor.

(e) Limitations on and Threshold for Indemnification.

(i) Threshold for Contributors. Notwithstanding anything contained herein to the contrary, no Contributor shall be liable under Section 3.4(b) or this Agreement unless and until the aggregate amount of all Losses recoverable by the Indemnified Company Parties under Section 3.4(b) and this Agreement for which such Contributor would, but for this provision, be liable exceeds on an aggregate basis Seven Hundred Forty Thousand Dollars ($740,000) and then only to the extent of such excess; provided that this limitation shall not apply in respect of breaches of the representations or warranties contained in Sections 3.3(c), (d), (f), (g)(i), or (h)(i).

(ii) Indemnification Limitation for Sunstone. Notwithstanding anything contained herein to the contrary:

(A) other than as provided in Section 3.4(e)(ii)(B), Sunstone shall not be liable or obligated to make payments in the aggregate under this Section 3.4 and this Agreement with respect to any Participating Entity Interests contributed by it to the extent such payments in the aggregate would exceed Four Million Three Hundred Eighty One Thousand Nine Hundred Seven Dollars ($4,381,907); and

(B) notwithstanding Section 3.4(e)(ii)(A), the amount of Sunstone’s aggregate liability for breaches of the representations or warranties contained in Sections 3.3(c), (d), (f), (g)(i), or (h)(i) may not exceed the aggregate value of the Total Contributor Consideration (valuing such shares at the initial public offering price per share in the Public Offering) paid to Sunstone plus the Tax Coverage Payment paid to Sunstone.

(iii) Indemnification Limitation for Meruelo Group. Notwithstanding anything contained herein to the contrary:

(A) other than as provided in Section 3.4(e)(iii)(B), Meruelo Group shall not be liable or obligated to make payments in the aggregate under this Section 3.4 and this Agreement with respect to any Participating Entity Interests contributed by it to the extent such payments in the aggregate would exceed Twenty One Million Five Hundred Fifty Four Thousand Four Hundred Eighty Eight Dollars ($21,554,488); and

(B) notwithstanding Section 3.4(e)(iii)(A), the amount of Meruelo Group’s aggregate liability for breaches of the representations or warranties contained in Sections 3.3(c), (d), (f), (g)(i), or (h)(i) may not exceed the aggregate value of the Total Contributor Consideration (valuing such shares at the initial public offering price per share in the Public Offering) paid to Meruelo Group plus the Tax Coverage Payment paid to Meruelo Group.

(iv) Other Indemnification Matters. Notwithstanding anything contained herein to the contrary, the Indemnified Company Parties shall look first to a Contributor’s Common Stock for indemnification under this Section 3.4 and then to Contributor’s other assets. Notwithstanding anything contained herein to the contrary, no Indemnified Company Party shall have the right to receive or recover incidental, special, consequential or punitive damages against a Contributor by reason of any breach under or in connection with this Agreement or any schedule, exhibit, certificate or affidavit or any other

document delivered by a Contributor pursuant to this Agreement (unless such incidental, special or consequential (but not punitive) damages are incurred by an Indemnified Company Party as a result of a third party claim for Losses), and each Indemnified Company Party hereby waives any and all rights to receive such damages.

(f) Limitation Period.

(i) Notwithstanding the foregoing, any claim for indemnification under Section 3.4(b) must be asserted in writing by the Indemnified Company Party, stating the nature of the Losses and the basis for indemnification therefor within one year after the Closing; provided, however, that the foregoing one-year period shall be extended, in the case of (A) the representations set forth in Section 3.3(o), until sixty (60) days after the expiration of the applicable three or six-year statute of limitations period with respect to the tax returns described therein and (B) the representations set forth in Sections 3.3(c), (d), (f), (h)(i), (l), (m), (n), (w) and (aa) in which case the one-year period shall be extended to the lesser of five (5) years from the date of Closing or the applicable statute of limitations period with respect to such representation or warranty.

(ii) If so asserted in writing within one year after the Closing (or the expiration of such later applicable period described in Section 3.4(f)(i)), such claims for indemnification shall survive until resolved by mutual agreement between the applicable Contributor and the Indemnified Company Party or by judicial determination. Any claim for indemnification not so asserted in writing within one year after the Closing (or the expiration of such later applicable period described in Section 3.4(f)(i)) shall not thereafter be asserted and shall forever be waived.

(g) Reservation of Contributor Rights. Notwithstanding anything else in this Section 3.4 or this Agreement to the contrary, each Contributor reserves unto itself all rights and remedies (including, without limitation, rights to seek contribution) against any third party indemnitors and prior property owners or occupants for which the Company or the Operating Company has been indemnified by such Contributor hereunder.

(h) No Effect on Insurance. Nothing contained in this Section 3.4 or this Agreement shall be construed to release or otherwise relieve any insurer of any Contributor, Indemnified Company Party or any Affiliate thereof from paying any of its claims or otherwise performing any of its duties and obligations pursuant to the terms and provisions of any policy of insurance which insures any Contributor, Indemnified Company Party or the Property. If any claims as to which an Indemnified Company Party would be entitled to indemnification under Section 3.4(b) are covered by the insurance, the indemnification obligations shall be reduced by, but only by, the amount paid by the insurance company and not by any deductible or other amount reimbursed to the insurance company by an Indemnified Company Party.

ARTICLE 4

COVENANTS OF CONTRIBUTOR

Section 4.1 Negative Covenants.

(a) Participating Entity Interests. From the date hereof through the Closing and except in connection with the Formation Transactions or as described or will be described in the Registration Statement, no Contributor shall, without the prior written consent of the Company:

(i) sell, transfer or otherwise dispose (or agree to sell, transfer or otherwise dispose) of, or cause the sale, transfer or disposition of (or agree to do any of the foregoing) all or any portion of its Participating Entity Interests; or

(ii) encumber or pledge (or permit to become encumbered or pledged) all or any portion of its Participating Entity Interests, other than Permitted CalPERS Claims.

(b) Participating Entity Operations. From the date hereof through the Closing, each Contributor agrees that it shall cause each Participating Entity in which such Contributor owns Participating Entity Interests to conduct its business in the ordinary course, consistent with past practices. It is specifically agreed by the parties that Participating Entities may exercise options to purchase, rights under pending purchase and sale agreements and rights of first refusal with respect to properties described in the Registration Statement prior to Closing without the consent of the Company. Except as described or as will be described in the Registration Statement or the Disclosure Schedules, no Contributor shall permit any Participating Entity without the prior written consent of the Company to:

(i) enter into a material transaction not in the ordinary course of business;

(ii) sell, transfer or dispose of, or cause the sale, transfer or disposition of (or agree to do any of the foregoing) any assets of such Participating Entity, except in the ordinary course of business consistent with past practice;

(iii) mortgage, pledge or encumber (or permit to become encumbered) any assets of such Participating Entity, except for Permitted Liens, except in the ordinary course of business consistent with past practice;

(iv) amend, modify or terminate any Material Lease, except in the ordinary course of the Participating Entity’s business consistent with past practice;

(v) terminate or amend any existing insurance policies affecting the Properties that results in a material reduction in insurance coverage for one or more Properties;

(vi) knowingly cause or permit the Participating Entity to violate any applicable laws;

(vii) materially alter the manner of keeping such Participating Entity’s books, accounts or records or the accounting practices therein reflected; or

(viii) make any distribution to its beneficiaries or equity interest holders, except in the ordinary course of business consistent with past practices.

(c) Cooperation on Tax Returns. From the date hereof and subsequent to the Closing, each Contributor, severally and not jointly, agrees to provide the Company with such tax information relating to the Participating Entity Interests owned by such Contributor that is in such Contributor’s possession or control and that is reasonably requested by the Company and not otherwise in the Company’s or the Operating Partnership’s possession or control and to cooperate with the Company and the Operating Partnership with respect to the filing of their respective tax returns.

Section 4.2 Affirmative Covenants.

(a) Each Contributor shall use its commercially reasonable efforts to obtain any approvals, waivers or other consents of third parties, governmental authorities and agencies required to effect the transactions contemplated by this Agreement and the Formation Transactions.

(b) Without limiting the obligations of any Contributor set forth in this Agreement, each Contributor shall use its commercially reasonable efforts (i) to prevent the breach of any representation or warranty of such Contributor hereunder, (ii) to satisfy all covenants of such Contributor hereunder and (iii) to promptly cure any breach of a representation, warranty or covenant of such Contributor hereunder upon its learning of same. Compliance with this covenant shall not limit any Contributor’s liability for a breach of, or failure to perform, any other representation, warranty or covenant herein.

(c) Each party hereto will give written notice to the other parties of any material development affecting the ability of such party to consummate the transactions contemplated by this Agreement. In addition, five business days before each amendment to the Registration Statement filed with the Securities and Exchange Commission (other than any amendment filed solely for the purpose of filing exhibits) (each such date, a “Permitted Supplement Date”), each Contributor may supplement in writing any existing Disclosure Schedule or create a new Disclosure Schedule, to any representation or warranty in Section 3.3 and further agrees, on each Permitted Supplement Date, to give the Company written notice if it has any Knowledge that any representation or warranty made by such Contributor in this Agreement was untrue when made or that would be untrue if made as of such date (other than representations and warranties relating to a specified date). In addition, on each Permitted Supplement Date, the Contributors may update Exhibit B to reflect acquisitions of Contract Properties that may have occurred. Any such disclosure by a Contributor pursuant to this Section 4.2(c) made before the filing with the Securities and Exchange Commission of the last amendment to the Registration Statement before the commencement of the road show relating to the Public Offering, be deemed to amend and supplement each applicable Schedule and/or Exhibit B, as applicable, or shall be deemed to constitute a new Schedule, and cure any misrepresentation or breach of warranty or covenant to the extent such information would cure the misrepresentation or breach of warranty or covenant.

(d) Each Contributor agrees to provide to the Company, its agents and underwriters, not later than forty-five (45) days after the date of this Agreement: (i) a true, correct and complete list of all environmental reports within such Contributor’s possession or control in respect of the Properties, which list shall become part of the Disclosure Schedules as Schedule 3.3(w)(i), (ii) copies of the Title Reports and a list of the Title Reports (which list shall become part of the Disclosure Schedules as Schedule 3.3(b)) together with a copy of all documents referenced therein, and (iii) a true, correct and complete list (x) of all Leases that have a remaining term of twelve (12) months or more (including any renewal terms) as of the date of delivery of the list and (y) of all Leases that either (A) have base rents of $10,000 or more per month or (B) when combined with the Leases described in clause (x) above, represent at least eighty percent (80%) of the combined rental revenues of the Participating Entities and the Merger Participants for the six (6) months ending June 30, 2006 and, as available, nine months ending September 30, 2006 which list shall become part of the Disclosure Schedules as Schedule 3.3(q). After the initial 45-day period, each Contributor agrees to supplement Schedule 3.3(q) and Schedule 3.3(w)(i) at least five (5) business days prior to the filing of any amendment to the Registration Statement and at least five (5) business days prior to the Closing Date (each a “Schedule Update”) so that as of the date of each Schedule Update, each such Schedule contains true, correct and complete list of the items required to be referenced thereon.

ARTICLE 5

RELEASES AND WAIVERS

Each of the releases and waivers enumerated in this Article 5 shall become effective only upon the Closing.

Section 5.1 General Release of Company. As of the Closing, each Contributor irrevocably waives, releases and forever discharges the Company, the Operating Partnership and each of their directors, officers, subsidiaries, agents, attorneys, successors and assigns of and from, any and all Losses of any nature whatsoever existing as of the Closing (collectively, “Contributor Claims”), known or unknown, suspected or unsuspected, arising out of or relating to the Participating Entity Agreements, the Participating Entities or the Properties, except for Contributor Claims arising from the breach of any representation, warranty, covenant or obligation of the Company or the Operating Partnership under this Agreement, any agreement contemplated hereby or entered into in connection herewith, or the governing documents of the Company or the Operating Partnership, subject to the obligations of the Company and the Operating Partnership under this Agreement.

Section 5.2 General Release of Contributor. As of the Closing, the Company and the Operating Partnership irrevocably waives, releases and forever discharges each Contributor and each Contributor’s directors, officers, stockholders, members, managers, agents, attorneys, successors and assigns of and from, any and all Losses of any nature whatsoever existing as of the Closing (collectively, “Company Claims”), known or unknown, suspected or unsuspected, arising out of or relating to the Participating Entity Agreements, the Participating Entities, the

Properties or any other matter which exists at the Closing, except for Company Claims arising from the breach of any representation, warranty, covenant or obligation of Contributor under this Agreement, any agreement contemplated hereby or entered into in connection herewith, or the governing documents of the Company or the Operating Partnership, subject to the obligations of each Contributor under this Agreement.

Section 5.3 Waiver of Section 1542 Protections. As of the Closing, the Contributors, the Company and the Operating Partnership each expressly acknowledges that it has had, or has had and waived, the opportunity to be advised by independent legal counsel and hereby waives and relinquishes all rights and benefits afforded by Section 1542 of the California Civil Code and does so understanding and acknowledging the significance and consequence of such specific waiver of Section 1542, which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Section 5.4 Waiver of Rights Under Participating Entity Agreements.

(a) As of the Closing, each Contributor waives and relinquishes all rights and benefits otherwise afforded to such Contributor under the Participating Entity Agreements of any Participating Entity for which such Contributor owned an interest prior to the Closing, including, without limitation, any rights of appraisal, rights of first offer or first refusal, buy/sell agreements and any right to consent to or approve of the sale or contribution by the other members or stockholders of such Participating Entity of their interests therein to the Company. Each Contributor acknowledges that the agreements contained herein and the transactions contemplated hereby and any actions taken in contemplation of the transactions contemplated hereby may conflict with, and may not have been contemplated by, certain Participating Entity Agreements of any Participating Entity for which such Contributor owned an interest prior to the Closing, or other agreements among one or more holders of Participating Entity Interests in such Participating Entity or one or more of the partners of such Participating Entity. With respect to each Participating Entity and each Property in which a Participating Entity Interest of a Contributor represents a direct or indirect interest, each Contributor expressly gives all Consents (as defined in Section 5.4(c)) (and any consents necessary to authorize the proper parties in interest to give all Consents) and Waivers (as defined in Section 5.4(d)) necessary or desirable to facilitate any Conveyance Action (as defined in Section 5.4(b)) relating to such Participating Entity or Property. In addition, if the Closing occurs, this Agreement shall be deemed to be an amendment to any Participating Entity Agreement to the extent the terms herein conflict with the terms thereof, including, without limitation, terms with respect to allocations, distributions and the like; provided, that in the event the Closing does not occur, nothing in this Agreement shall be deemed to or construed as an amendment or modification of, or commitment of any kind to amend or modify, any Participating Entity Agreement, which shall remain in full force and effect.

(b) As used herein, the term “Conveyance Action” means, with respect to any Participating Entity having a direct or indirect ownership interest in any Property, (i) the transfer, conveyance or agreement to convey by a stockholder or member thereof or by any holder of an indirect interest therein (whether or not such stockholder, member or holder is a Contributor) directly or otherwise, of its direct or indirect interest in such Participating Entity or Property to the Company or the Operating Partnership, (ii) the entering into by any such stockholder, member or holder of any agreement relating to (x) the formation of the Company or the Operating Partnership or (y) the direct or indirect acquisition by the Company or the Operating Partnership of any such direct or indirect interest or (iii) the taking by any such stockholder, member or holder of any action necessary or desirable to facilitate any of the foregoing, including, without limitation, the following (provided that the same are taken in furtherance of the foregoing): any sale or distribution to any person or entity of a direct or indirect interest in such Participating Entity or Property, the entering into of any agreement with any person or entity that grants to such person or entity the right to purchase a direct or indirect interest in such Participating Entity or Property and the giving of the Consents and Waivers contained in this Section or consents or waivers similar thereto in form or purpose.

(c) As used herein, the term “Consents” means, with respect to any Participating Entity or Property, any consent necessary or desirable under any Participating Entity Agreement, or any other agreement among all or any of the holders of interests therein or any other agreement relating thereto or referred to therein (i) to cause such Participating Entity to have authority to permit any and all Conveyance Actions relating to such Participating Entity or the Property held by such Participating Entity, or to amend any such Participating Entity Agreement and/or other agreements so that no provision thereof prohibits, restricts, impairs or interferes with any Conveyance Action, (ii) to allow the Company or the Operating Partnership to become a stockholder in such Participating Entity or to admit the Company or the Operating Partnership as a member of such Participating Entity (as applicable), (iii) to adopt any amendment to such Participating Entity Agreement as may be necessary or desirable by the Company or the Operating Partnership to facilitate the transactions contemplated herein, either simultaneously with or immediately prior to the acquisition of any interest therein, (iv) to continue such Participating Entity following the transfer of any interest therein to the Company or the Operating Partnership and (v) to satisfy any requirement of any third party, title company, or governmental authority with respect to the Conveyance Actions.

(d) As used herein, the term “Waivers” means, with respect to any Participating Entity or Property of which a Participating Entity Interest of the Contributor that owned an interest in such Participating Entity or Property represents a direct or indirect interest, the waiving of any and all rights that such Contributor may have with respect to, and (to the extent possible) that any other person or entity may have with respect to, or that may accrue to such Contributor or such other person or entity upon the occurrence of, a Conveyance Action relating to such Participating Entity or Property, including, but not limited to, the following rights: rights of notice, rights to response periods, rights to purchase the direct or indirect interests of another stockholder or member in such Participating Entity or Property or to sell such Contributor’s or other person’s or entity’s direct or indirect interest therein to another stockholder or member, rights to sell such Contributor’s or such other person’s or entity’s direct or indirect interest therein at a price other than as provided herein, or rights to prohibit, limit, invalidate, otherwise restrict or impair any such Conveyance Action or to cause a termination or

dissolution of such Participating Entity because of such Conveyance Action. Each Contributor further severally and not jointly agrees that it will not take any action to enjoin, or seek damages resulting from, any Conveyance Action permitted hereunder by any holder of a direct or indirect interest in any Participating Entity or Property in which a Participating Entity Interest of such Contributor represents a direct or indirect interest.

(e) The Waivers and Consents contained in this Section shall terminate upon the termination of this Agreement, except as to any Conveyance Action or transactions completed hereunder concurrent with or prior to such termination.

(f) Notwithstanding any other provision in this Section 5.4, the right of any Contributor to indemnification by a Participating Entity pursuant to any Participating Entity Agreement shall not be affected in any way.

ARTICLE 6

POWER OF ATTORNEY

Section 6.1 Grant of Power of Attorney. Each Contributor hereby irrevocably appoints the Company (or its designee) and any successor thereof from time to time (the Company or such designee or any such successor of any of them acting in such Contributor’s capacity as attorney-in-fact pursuant hereto, the “Attorney-in-Fact”) as the true and lawful attorney-in-fact and agent of such Contributor, to act in the name, place and stead of such Contributor to make, execute, acknowledge and deliver all such other contracts, orders, receipts, notices, requests, instructions, certificates, consents, letters and other writings relating to the transactions contemplated by this Agreement (including, without limitation, the execution of any Closing Documents or other documents) relating to the acquisition by the Company of such Contributor’s Participating Entity Interests, all in accordance with the terms and conditions of this Agreement, as well as the organizational documents of the Company and the Operating Partnership, as they may be amended or revised, any registration rights agreements and any lock-up agreements, and to provide information to the Securities and Exchange Commission and others about the transactions contemplated hereby, as fully as could such Contributor if personally present and acting (the “Power of Attorney”). Further, each Contributor, as applicable, hereby grants to Attorney-in-Fact a proxy (the “Proxy”) to vote its Participating Entity Interests on any matter related to the Formation Transactions presented to any of the Participating Entity’s stockholders or members for a vote, including, but not limited to, the transfer of interests in the Participating Entity by the other stockholders and members. Each Contributor agrees, at the request of the Company, to execute a separate power of attorney and proxy on the same terms as set forth in this Article 6, with such execution to be witnessed and notarized.

Each of the Power of Attorney and Proxy entered into by each Contributor and all authority granted hereby shall be coupled with an interest and therefore shall be irrevocable and shall not be terminated by any act of such Contributor, by operation of law or by the occurrence of any other event or events, and if any other such act or event shall occur before the completion of the transactions contemplated by this Agreement, the Attorney-in-Fact shall nevertheless be authorized and directed to complete all such transactions as if such other act or event had not

occurred and regardless of notice thereof. Each Contributor hereby authorizes the reliance of third parties on each of the Power of Attorney and Proxy. Each Contributor hereby ratifies and confirms all that the Attorney-in-Fact shall lawfully do or cause to be done by virtue of the exercise of the powers granted to it by such Contributor hereunder.

Each Contributor acknowledges that the Company has, and any designee or successor thereof acting as Attorney-in-Fact may have, an economic interest in the transactions contemplated by this Agreement.

The Power of Attorney contained in this Article 6 shall expire on the earlier of the fourth anniversary of the Closing or the termination of this Agreement. Notwithstanding anything to the contrary, the Attorney-in-Fact may not expand a Contributor’s covenants, representations or covenants beyond those contemplated by this Agreement and the other documents and agreements contemplated hereby or modify the provisions of this Agreement pursuant to such Power of Attorney.

Section 6.2 Limitation on Liability. It is understood that the Attorney-in-Fact (but solely in its role as Attorney-in-Fact) assumes no responsibility or liability to any person or entity by virtue of the Power of Attorney or Proxy granted by any Contributor hereby. Other than as specifically set forth in this Agreement, the Attorney-in-Fact makes no representations with respect to and shall have no responsibility for the Formation Transactions or the Public Offering or the acquisition of the Participating Entity Interests by the Company or the Operating Partnership and shall not be liable for any error or judgment or for any act done or omitted or for any mistake of fact or law except for actions by the Attorney-in-Fact that constitute gross negligence or bad faith. Each Contributor agrees that the Attorney-in-Fact may consult with counsel of its own choice (who may be counsel for the Company, the Operating Partnership, the Contributors or any of their successors or Affiliates), and it shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. It is understood that the Attorney-in-Fact may, without breaching any express or implied obligation to the Contributors hereunder, release, amend or modify any other power of attorney or proxy granted by any other person or entity under any related agreement.

ARTICLE 7

MISCELLANEOUS

Section 7.1 Severability of Obligations. Notwithstanding anything to the contrary contained in this Agreement, the covenants, representations and warranties of the Contributors are made severally and not jointly by each Contributor, and no Contributor shall be liable for any breach of a representation, warranty, covenant or obligation by any other Contributor.

Section 7.2 Further Assurances. Each Contributor agrees to take such other actions and execute and deliver such additional documents following the Closing as the Company may reasonably request in order to effect the transactions contemplated hereby.

Section 7.3 Counterparts. This Agreement may be executed in one or more counterparts and by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 7.4 Governing Law, Venue.

(a) This Agreement shall be governed by the internal laws of the State of California, without regard to the choice of laws provisions thereof. Any action to enforce, which arises out of or in any way relates to, any of the provisions of this Agreement or the instruments, agreements and other documents contemplated hereby shall be brought and prosecuted in the courts of the State of California located in the County of Los Angeles or of the United States for the Central District of California. Each party irrevocably: (a) submits to the exclusive jurisdiction of the aforesaid courts, and (b) waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding (“Proceedings”) brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have jurisdiction over such party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 7.15. Nothing in this Agreement will affect the right of any party to serve process in any other manner permitted by law.

(b) The parties agree that any controversy, claim or dispute arising out of or relating to or in connection with this Agreement, including, without limitation, any dispute regarding the breach, termination, enforceability or validity hereof (each, a “Dispute”) should be regarded as a business problem to be resolved promptly through business-oriented negotiations before resorting to legal action in accordance with the provisions of Section 7.4(a) hereof. The parties therefore agree to attempt in good faith to resolve any Dispute promptly by negotiation between the executives of the parties who have authority to settle the Dispute. Such negotiations shall commence upon the mailing of a notice (the “Dispute Notice”) from the appropriate executive of the requesting party to an appropriate executive or director of the responding party. If the Dispute has not been resolved by these persons within forty-five (45) days of the date of the Dispute Notice, then either party thereto may commence legal action in accordance with Section 7.4(a) hereof. All negotiations pursuant to this Section 7.4(b) shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence and shall not be used for, or admitted in, any arbitration or court proceedings under this Agreement. Nothing contained in this Section 7.4(b) shall preclude a party from seeking provisional relief if the prerequisites to obtaining such relief are otherwise satisfied.

Section 7.5 Amendment; Waiver. Any amendment hereto shall be in writing and signed by all parties hereto. No waiver of any provisions of this Agreement shall be valid unless in writing and signed by the party against whom enforcement is sought.

Section 7.6 Entire Agreement. This Agreement and all related agreements referred to herein constitute the entire agreement and supersede conflicting provisions set forth in all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. In the event of a conflict between the provisions of this Agreement and any other agreement referred to herein, the provisions of this Agreement shall control.

Section 7.7 Assignability. This Agreement shall be binding upon, and shall be enforceable by and inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and assigns; provided, that this Agreement may not be assigned (except by operation of law) by any party without the prior written consent of the other parties, and any attempted assignment without such consent shall be void and of no effect, except that the Company may assign this Agreement, the Closing Documents, and its rights and obligations hereunder and thereunder to a direct or indirect subsidiary of the Company without the consent of either of the Contributors.

Section 7.8 Titles. The titles and captions of the Articles, Sections and paragraphs of this Agreement are included for convenience of reference only and shall have no effect on the construction or meaning of this Agreement.

Section 7.9 Third Party Beneficiary. No provision of this Agreement is intended, nor shall it be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any customer, Affiliate, stockholder, partner, member, director, officer or employee of any party hereto or any other person or entity.

Section 7.10 Severability. If any provision of this Agreement, or the application thereof, is for any reason held to any extent to be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons, entities or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision and to execute any amendment, consent or agreement deemed necessary or desirable by the parties to effect such replacement.

Section 7.11 Equitable Remedies. The Contributors, the Operating Partnership and the Company agree that irreparable damage would occur to the others in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that any of them shall be entitled to an injunction or injunctions to prevent breaches of this Agreement by any others of them and to enforce specifically the terms and provisions hereof in any federal or state court located in California (as to which the parties agree to submit to jurisdiction for the purposes of such action), this being in addition to any other remedy to which the non-breaching party is entitled under this Agreement or otherwise at law or in equity.

Section 7.12 Time of the Essence. Time is of the essence with respect to all obligations under this Agreement.

Section 7.13 Reliance. Each party to this Agreement acknowledges and agrees that it is not relying on tax advice or other advice from the other party to this Agreement and that it has or will consult with its own advisors.

Section 7.14 Survival. It is the express intention and agreement of the parties hereto that the representations, warranties and covenants of each Contributor and of the Company and the Operating Partnership set forth in this Agreement shall survive the consummation of the

transactions contemplated hereby; provided, that the representations of each Contributor shall survive only for the period specified in Section 3.4. The provisions of this Agreement that contemplate performance after the Closing and the obligations of the parties not fully performed at the Closing shall survive the Closing and shall not be deemed to be merged into or waived by the instruments of Closing.

Section 7.15 Notice. Any notice to be given hereunder by any party to the other parties shall be given in writing by personal delivery, by registered or certified mail, postage prepaid, return receipt requested or by any nationally-recognized overnight carrier, and shall be deemed communicated as of the date of personal delivery (including delivery by overnight courier). Mailed notices shall be addressed as set forth below, but any party may change the address set forth below by written notice to other parties in accordance with this paragraph.


To Meruelo Trust:		Richard Meruelo Living Trust U/D/T September 15, 1989 c/o Richard Meruelo, Trustee Meruelo Maddux Properties, Inc. 761 Terminal Street Building 1, Second Floor Los Angeles, California 90021

To Merco:		Merco Group – Roosevelt Building, LLC c/o Richard Meruelo, Manager Meruelo Maddux Properties, Inc. 761 Terminal Street Building 1, Second Floor Los Angeles, California 90021

To Sunstone:		Sunstone Bella Vista, LLC c/o John Charles Maddux Meruelo Maddux Properties, Inc. 761 Terminal Street Building 1, Second Floor Los Angeles, California 90021

To the Company or the Operating Partnership:		Meruelo Maddux Properties, Inc. 761 Terminal Street Building 1, Second Floor Los Angeles, California 90021

Section 7.16 Termination. This Agreement shall terminate if the Closing shall not have occurred on or prior to June 30, 2007. Upon such termination, this Agreement shall become void and have no effect, and no party hereto shall have any liability to the other parties hereto.

Section 7.17 Confidentiality. All press releases or other public communications of any kind relating to the Public Offering or the transactions contemplated herein, and the method and timing of release for publication there, will be subject to the proper approval of the Company.

Section 7.18 Joint Preparation. The parties acknowledge that this Agreement was jointly prepared by them, by and through their legal counsel, and any uncertainty or ambiguity existing herein shall not be interpreted against any of the parties, but otherwise according to the application of the rules on interpretation of contracts.

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


COMPANY

Meruelo Maddux Properties, Inc., a Delaware corporation

By:	/s/ Todd Nielsen
	Todd Nielsen
	General Counsel

OPERATING PARTNERSHIP

Meruelo Maddux Properties, L.P., a Delaware limited partnership

By:	Meruelo Maddux Properties, Inc., a Delaware corporation, general partner

	By:	/s/ Todd Nielsen
		Todd Nielsen
		General Counsel

MERUELO TRUST

/s/ Richard Meruelo
Richard Meruelo as trustee of the Richard
Meruelo Living Trust U/D/T dated
September 15, 1989

MERCO

Merco Group – Roosevelt Building, LLC, a Delaware limited liability company

By:	/s/ Richard Meruelo
	Richard Meruelo, Manager

SUNSTONE

Sunstone Bella Vista, LLC, a Delaware limited liability company

By:	/s/ John Charles Maddux
	John Charles Maddux, as trustee of the
	John Charles Maddux Trust U/D/T dated July 24, 2006

EXHIBIT A

CONTRIBUTION AGREEMENT

CONTRIBUTORS’ PARTICIPATING ENTITY INTERESTS


Entity Name	State	Meruelo Trust		Sunstone		Merco
788 South Alameda, LLC	CA	100.0	%	0.0	%	0.0	%
Merco Group - Little J, LLC	CA	100.0	%	0.0	%	0.0	%
Meruelo Chinatown, LLC	CA	100.0	%	0.0	%	0.0	%
Meruelo Wall Street, LLC	CA	100.0	%	0.0	%	0.0	%
Merco Group - 5707 S. Alameda, LLC	CA	100.0	%	0.0	%	0.0	%
Merco Group - 425 West 11th Street, LLC	CA	100.0	%	0.0	%	0.0	%
2640 Washington Boulevard, LLC	CA	100.0	%	0.0	%	0.0	%
Meruelo Baldwin Park, LLC	CA	100.0	%	0.0	%	0.0	%
Wall Street Market, LLC	CA	100.0	%	0.0	%	0.0	%
Merco Group - Overland Terminal, LLC	CA	100.0	%	0.0	%	0.0	%
905 8th Street, LLC	CA	100.0	%	0.0	%	0.0	%
1828 Oak Street, LLC	CA	100.0	%	0.0	%	0.0	%
Meruelo Maddux California Future Fund, LLC	DE	100.0	%	0.0	%	0.0	%
Merco Group - 1308 S. Orchard, LLC	DE	100.0	%	0.0	%	0.0	%

Merco Group - 1500 Griffith Avenue, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 1211 E. Washington Boulevard, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 3185 E. Washington Boulevard, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - Ceres Street Produce, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 620 Gladys Avenue, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - Camfield Avenue, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 1225 E. Washington Boulevard, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 4th Street Center, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 801 E. 7th Street, LLC	DE	0.0	%	0.0	%	100.0	%
Merco Group - 2955 Leonis Boulevard, LLC	DE	0.0	%	0.0	%	100.0	%

Meruelo Maddux Construction, Inc.	CA	75.0	%	25.0	%	0.0	%
Merco Group, LLC	CA	75.0	%	25.0	%	0.0	%
Merco Group - Southpark, LLC	CA	75.0	%	25.0	%	0.0	%
Meruelo Farms, LLC	CA	75.0	%	25.0	%	0.0	%
Merco Group - 2001-2021 West Mission Boulevard, LLC	CA	75.0	%	25.0	%	0.0	%
Merco Group - 146 E. Front Street, LLC	CA	75.0	%	25.0	%	0.0	%

A-1


Entity Name	State	Meruelo Trust		Sunstone		Merco
Meruelo Maddux Properties - 1060 N. Vignes, LLC	CA	75.0	%	25.0	%	0.0	%

Meruelo Maddux Properties - 760 S. Hill Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 230 W. Avenue 26, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 12385 San Fernando Road, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 2951 Lenwood Road, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 2415 E. Washington Boulevard, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 3rd & Omar Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 500 Mateo Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 915-949 S. Hill Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 1009 North Citrus Avenue, Covina, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 1800 E. Washington Boulevard, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 1919 Vineburn Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 2131 Humboldt Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux Properties - 306-330 N. Avenue 21, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 845 S. Flower Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 336 W. 11th Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 1000 E. Cesar Chavez, LLC	DE	0.0	%	25.0	%	75.0	%
Merco Group - 2529 Santa Fe Avenue, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 3000 E. Washington Blvd., LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 817-825 S. Hill Street, LLC	DE	0.0	%	25.0	%	75.0	%
Meruelo Maddux - 555 Central Avenue, LLC	DE	0.0	%	25.0	%	75.0	%

A-2

EXHIBIT B

CONTRIBUTION AGREEMENT

LIST OF PROPERTIES


OWNED PROPERTIES

Entity Name		Property Address
Merco Group, LLC		950 East 3rd Street
		960 East 3rd Street
788 South Alameda, LLC		788 S. Alameda Street
Merco Group – Little J, LLC		1124 S. Olive Street
		218 W. 11th Steet
		1117-1119 S. Olive Street
Merco Group – Southpark, LLC		228 W. 11th Street, 1114 S. Grand Avenue, 1155 S. Olive Street, 1120 S. Grand Avenue, 1229 S. Hill Street, 1211 S. Hill Street, 203 Pico Blvd., 1230 S. Olive Street
Meruelo Chinatown, LLC		129 W. College Street
Meruelo Wall Street, LLC		833 Wall Street, 419 E. 9th Street
Merco Group – 1500 Griffith Avenue, LLC		1500 Griffith & 833 E. 15th
		1506-1524 Griffith Avenue
Meruelo Farms, LLC		210-234 Center Street, 815 Temple & 740 Jackson
Merco Group – 1211 E. Washington Boulevard, LLC		1211 E. Washington Blvd
		1225 E. Washington Blvd
Meruelo Maddux Properties – 2951 Lenwood Road, LLC		2951 Lenwood Road, Barstow
Merco Group – 2001-2021 West Mission Boulevard, LLC		2001-2021 W. Mission Boulevard, Pomona
Merco Group – 5707 S. Alameda, LLC		5707-5715 S. Alameda & 5716 Alba Street
		5701 S. Alameda Street (1862 E. 55th Street)
Merco Group – 146 E. Front Street, LLC		146 E. Front Street, Covina
Merco Group – 425 West 11th Street, LLC		425 W. 11th Street
Meruelo Maddux Properties – 1060 N. Vignes, LLC		1060 N. Vignes (1000 E. Alhambra Ave.)
Merco Group – 3185 E. Washington Boulevard, LLC		3185 E. Washington Blvd
Meruelo Maddux Properties – 12385 San Fernando Road, LLC		12385 San Fernando Road
Merco Group – Ceres Street Produce, LLC		758-774 Ceres Avenue
Merco Group – 620 Gladys Avenue, LLC		644 S. Gladys Avenue
		643 S. Gladys Avenue

B-1


OWNED PROPERTIES (CONT’D)

Entity Name		Property Address
Meruelo Maddux – 3rd & Omar Street, LLC		308-310 Omar, 452, 464, 470 3rd Street
Meruelo Maddux – 500 Mateo Street, LLC		500 Mateo Street
Meruelo Maddux – 915-949 S. Hill Street, LLC		915-949 S. Hill Street
Meruelo Maddux Properties – 1009 North Citrus Avenue, Covina, LLC		1009 N. Citrus Avenue, Covina
Merco Group – 1225 E. Washington Boulevard, LLC		The Coffee Beanery (Franchise Business Only)
Merco Group – 4th Street Center, LLC		405-411 S. Hewitt Street
		926 E. 4th Street
		910 E. 4th Street
Meruelo Maddux Properties – 1919 Vineburn Street, LLC		1919 Vineburn Avenue
Meruelo Maddux Properties – 2131 Humboldt Street, LLC		2131 Humboldt Street
		350-354 N. Avenue 21
		336-346 N. Avenue 21
Meruelo Maddux Properties – 306-330 N. Avenue 21, LLC		306-330 N. Avenue 21
Meruelo Maddux Properties – 760 S. Hill Street, LLC		760 S. Hill Street (325 W. 8th Street)
Meruelo Maddux – 230 W. Avenue 26, LLC		230 W. Avenue 26, 222 N. Avenue 25
		210-212 W. Avenue 26
Meruelo Maddux – 845 S. Flower Street, LLC		717 W. 9th Street (845 S. Flower Street)
Meruelo Maddux – 336 W. 11th Street, LLC		336 W. 11th Street (1105 S. Olive Street)
905 8th Street, LLC		905 E. 8th Street
Meruelo Maddux – 1000 E. Cesar Chavez, LLC		1000 & 1016 E. Cesar Chavez Avenue
		1028 E. Cesar Chavez
Meruelo Maddux – 817-825 S. Hill Street, LLC		817-285 S. Hill Street
Merco Group - 1308 S. Orchard, LLC		1308 S. Orchard Avenue

LEASED PROPERTIES, WITH OPTION TO PURCHASE

Entity Name		Property Address
Meruelo Baldwin Park, LLC		13822 & 13916 Garvey Avenue, Baldwin Park
905 8th Street, LLC		816 Stanford Avenue
1828 Oak Street, LLC		1828 Oak Street, 829 W. Washinton Blvd.
Meruelo Maddux – 555 Central Avenue, LLC		555 Central Avenue

B-2


LEASED PROPERTIES, WITH RIGHT OF FIRST REFUSAL

Entity Name		Property Address
Wall Street Market, LLC		945 E. 10th Street
		1018 E. Olympic Blvd.

PROPERTIES UNDER PURCHASE AGREEMENT

Entity Name		Property Address
Merco Group – 2001-2021 West Mission Boulevard, LLC		1875 W. Mission Boulevard, Pomona
2640 Washington Boulevard, LLC		2640 Washington Blvd
Meruelo Maddux Properties – 12385 San Fernando Road, LLC		12361 San Fernando Road
Merco Group – 620 Gladys Avenue, LLC		620 S. Gladys Avenue, 830-838 E. 6th Street
		647-649 Ceres Avenue
Merco Group – Camfield Avenue, LLC		2035 and 2040 Camfield Avenue, Commerce
		5500 Flotilla Street, Commerce
Wall Street Market, LLC		1000-1014 E. Olympic Blvd.
		919 Ceres Avenue
Merco Group – 4th Street Center, LLC		900 E. 4th Street
Merco Group – 801 E. 7th Street, LLC		801 E. 7th Street
Meruelo Maddux – 2415 E. Washington Boulevard, LLC		2415 E. Washington Blvd.
Meruelo Maddux Properties – 1800 E. Washington Boulevard, LLC		1800 E. Washington Blvd., 1950 Stauton, 1933 S. Alameda, 1951 McGarry
Merco Group – Overland Terminal, LLC		1807 W. Olympic Blvd
Meruelo Maddux – 1000 E. Cesar Chavez, LLC		1030 E. Cesar Chavez Avenue
Merco Group – 2529 Santa Fe Avenue, LLC		2529 Santa Fe Avenue
Meruelo Maddux – 3000 E. Washington Blvd., LLC		3000 E. Washington Blvd.

B-3

EXHIBIT C

CONTRIBUTION AGREEMENT

CONTRIBUTORS’ OBLIGATIONS TO BE ASSUMED


Sunstone:		That certain loan made by Meruelo Maddux Future Fund, LLC in favor of Sunstone Bella Vista, LLC in the principal amount of $700,000, including all earned and unpaid interest thereunder.

Meruelo Trust:		None

Merco:		None

C-1

EXHIBIT D

CONTRIBUTION AGREEMENT

CONTRIBUTION AND ASSUMPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby assigns, transfers, contributes and conveys to Meruelo Maddux Properties, Inc, a Delaware corporation (the “Company”), its entire legal and beneficial right, title and interest in and to the entities listed on Attachment 1 hereto (each, a “Participating Entity” and collectively, the “Participating Entities”), including, without limitation, (a) all right, title and interest, if any, of the undersigned in and to the assets and liabilities of the Participating Entities (b) the right to receive distributions of money, profits and other assets from the Participating Entities, and (c) the obligations of the Participating Entities, including all of the obligations of such Contributor described on Exhibit C to the Contribution Agreement, in each case whether arising before or after the Closing, presently existing or hereafter at any time arising or accruing (such right, title and interest are hereinafter collectively referred to as the “Participating Entity Interests”), TO HAVE AND TO HOLD the same unto the Company, its successors and assigns, forever.

Upon the execution and delivery hereof, the Company assumes all obligations in respect of the Participating Entity Interests.

This Contribution and Assumption Agreement is in respect of the real property described in Attachment 1 attached hereto.

Executed: , 2006



a

By:

D-1

Attachment “1” to

Contribution and Assumption Agreement

D-2

EXHIBIT E

CONTRIBUTION AGREEMENT

CONTRIBUTORS’ PARTICIPATING ENTITY CONSIDERATION


Contributor		Participating Entity Consideration
Meruelo Trust		15,883,903 Shares
Merco		8,749,797 Shares
Sunstone		5,007,894 Shares
Total		29,641,594 Shares

E-1

EXHIBIT F

CONTRIBUTION AGREEMENT

TAX BASIS

[Exhibit omitted for filing]

F-1

EXHIBIT G

CONTRIBUTION AGREEMENT

CERTAIN PROPERTIES

[Exhibit omitted for filing]

G-1

EXHIBIT H

CONTRIBUTION AGREEMENT

CERTIFICATION OF NON-FOREIGN STATUS

Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”, provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. To inform Meruelo Maddux Properties, Inc., a Delaware corporation (the “Company”), that the withholding of tax is not required upon the contribution of Participating Entity Interests by the “Contributor”) to the Company in exchange for Common Stock, which transfer occurred on , 2006, the undersigned hereby certifies the following on behalf of Contributor:

1. Contributor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and the Treasury Regulations promulgated thereunder);

2. Contributor’s employer identification number (Contributor’s social security number, if Contributor is an individual) is ; and


3. Contributor’s address is:

The undersigned understands that this certification may be disclosed to the Internal Revenue Service by the Company and that any false statement contained herein could be punishable by fine, imprisonment or both.

Under penalties of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Contributor.


Dated:
						a_________________________________

						By:

H-1

TABLE OF CONTENTS


			Page
ARTICLE 1 CONTRIBUTION OF PARTICIPATING ENTITY INTERESTS IN EXCHANGE FOR COMMON STOCK			3

	Section 1.1	Contribution Transactions	3

	Section 1.2	Consideration for Participating Entity Interests	3

	Section 1.3	Adjusted Consideration	4

	Section 1.4	Allocation of Total Contributor Consideration	5

	Section 1.5	Authorization	5

	Section 1.6	Tax Treatment as Contribution	5

	Section 1.7	Final Year Allocation	6

	Section 1.8	Other Tax Matters	6

	Section 1.9	Contingent Common Stock for Contributors	7

	Section 1.10	Forfeitable Shares	8

ARTICLE 2 CLOSING			9

	Section 2.1	Conditions Precedent	9

	Section 2.2	Date, Time and Place of Closing	11

	Section 2.3	Closing Deliveries	11

	Section 2.4	Closing Costs	12

ARTICLE 3 REPRESENTATIONS AND WARRANTIES AND INDEMNITIES			12

	Section 3.1	Representations and Warranties of the Company	12

	Section 3.2	Indemnification by Company and Operating Partnership	13

	Section 3.3	Representations and Warranties of the Contributors	14

	Section 3.4	Indemnification by Contributors.	27

ARTICLE 4 COVENANTS OF CONTRIBUTOR			32

	Section 4.1	Negative Covenants	32

	Section 4.2	Affirmative Covenants	33

ARTICLE 5 RELEASES AND WAIVERS			34

	Section 5.1	General Release of Company	34

	Section 5.2	General Release of Contributor	34

	Section 5.3	Waiver of Section 1542 Protections	35

	Section 5.4	Waiver of Rights Under Participating Entity Agreements	35

ARTICLE 6 POWER OF ATTORNEY			37

	Section 6.1	Grant of Power of Attorney	37

	Section 6.2	Limitation on Liability	38

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TABLE OF CONTENTS

(continued)


			Page
ARTICLE 7 MISCELLANEOUS			38

	Section 7.1	Severability of Obligations	38

	Section 7.2	Further Assurances	38

	Section 7.3	Counterparts	39

	Section 7.4	Governing Law, Venue	39

	Section 7.5	Amendment; Waiver	39

	Section 7.6	Entire Agreement	39

	Section 7.7	Assignability	40

	Section 7.8	Titles	40

	Section 7.9	Third Party Beneficiary	40

	Section 7.10	Severability	40

	Section 7.11	Equitable Remedies	40

	Section 7.12	Time of the Essence	40

	Section 7.13	Reliance	40

	Section 7.14	Survival	40

	Section 7.15	Notice	41

	Section 7.16	Termination	41

	Section 7.17	Confidentiality	42

	Section 7.18	Joint Preparation	42

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FIRST AMENDMENT TO CONTRIBUTION AGREEMENT

This FIRST AMENDMENT TO CONTRIBUTION AGREEMENT (this “Amendment”) is made and entered into as of September 19, 2006 (although executed on December , 2006), by and among MERUELO MADDUX PROPERTIES, INC., a Delaware corporation (the “Company”), MERUELO MADDUX PROPERTIES, L.P., a Delaware limited partnership (the “Operating Partnership”), RICHARD MERUELO, AS TRUSTEE OF THE RICHARD MERUELO LIVING TRUST U/D/T DATED SEPTEMBER 15, 1989 (“Meruelo Trust”), MERCO GROUP – ROOSEVELT BUILDING, LLC, a California limited liability company (“Merco”) and SUNSTONE BELLA VISTA, LLC, a Delaware limited liability company (“Sunstone;” Meruelo Trust, Merco and Sunstone are referred to individually as a “Contributor” and collectively as the “Contributors”) and amends that certain the CONTRIBUTION AGREEMENT by and among the Company, the Operating Partnership and the Contributors dated as of September 19, 2006 (the “Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meanings as set forth in the Agreement.

WHEREAS, the parties hereto desire to amend the Agreement pursuant to Section 7.5 thereof to eliminate any tax forfeiture by the Contributors pursuant to Section 1.10 of the Agreement and otherwise and to make certain other changes all as set forth below.

WHEREAS, the parties hereto represent all of the parties to the Agreement and agree that it is in the best interest of each of the parties to the Agreement to amend the Agreement as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the receipt and sufficiency of which is hereby acknowledged by each party, the parties hereby agree as follows, effective as of the date of the Agreement:

1. Amendment of Section 1.2(a). Section 1.2(a) of the Agreement is hereby amended and restated to read as follows:

(a) issue to such Contributor the number of shares of Common Stock, in certificate form, in each case as indicated on Exhibit E as such Contributor’s “Participating Entity Consideration” relating to such Participating Entity Interest contributed hereunder minus, in the case of each Contributor, the quotient, rounded down to the nearest whole number, obtained by dividing (i) (x) the total amount of the obligations of each Contributor referenced on Exhibit C plus (y) the Tax Coverage Payment (as defined in Section 1.2(b) below) made to each Contributor by (ii) the initial public offering price per share of Common Stock in the Public Offering (the aggregate of such Common Stock for all Contributors, as adjusted from time to time where appropriate under Sections 1.9 and 3.4(c), being the “Total Contributor Consideration”); and

2. Amendment of Section 1.4. Section 1.4 of the Agreement is hereby amended and restated to read as follows:

Section 1.4 Allocation of Total Contributor Consideration. In connection with the Closing, the Total Contributor Consideration shall be allocated among the Participating Entity Interests as reasonably determined by the Company’s independent public accountants (with any adjustments thereto by reason of events occurring under Section 1.9 being allocable to the Participating Entity Interests involved, as appropriate). At or in connection with the Closing, the Company shall cause and the Contributors shall each cause their accountants to meet with each other to determine the appropriate allocations of the Total Contributor Consideration among the various Participating Entity Interests based on their respective shares of the Total Contribution Consideration. Each Contributor, the Company and the Operating Partnership agree to (a) be bound by such allocations, (b) act in accordance with the allocation in the preparation of financial statements and filing of all tax returns and in the course of any tax audit, tax review or tax litigation relating thereto, and (c) take no position, and cause their Affiliates to take no position, inconsistent with such allocations for income tax purposes.

3. Amendment of Section 1.8(b). Section 1.8(b) of the Agreement is hereby amended and restated to read as follows:

4. Amendment of Section 1.9. Section 1.9 of the Agreement is hereby amended and restated to read in its entirety as follows:

Section 1.9 Contingent Common Stock for Contributors. The Company shall have the following contingent obligation to issue additional Common Stock (the “Contingent Shares”) to the Contributors. If and when amounts owing under the note receivable from the Taylor Yards entity (the

“Taylor Yards Note”) are paid from the condemnation proceeding on the Taylor Yards project, the Company shall issue to the Contributors a number of shares of Common Stock having a value equal to such payments (valuing the Common Stock for this purpose at the per share initial public offering price and treating such value as an adjustment to Total Contributor Consideration). In addition, the Company shall pay in cash (or shall cause the Operating Partnership to pay in cash) to the Contributors interest on such value, computed from the date of the Closing until the issuance of such shares, at the “applicable federal rate” established by the Internal Revenue Service for such period. Such shares and interest shall be allocated among the Contributors as follows: (x) 75% to Merco and (y) 25% to Sunstone, and such amounts shall be paid to the Contributors within three (3) business days after such amounts are paid to the Operating Partnership with respect to the Taylor Yards Note. The Company shall contribute any proceeds from the note receivable to the Operating Partnership in exchange for common units.

5. Deletion of Section 1.10. Section 1.10 of the Agreement is hereby deleted in its entirety and shall be of no force and effect.

6. Deletion of Exhibit G. Exhibit G of the Agreement is hereby deleted in its entirety.

7. Approval of Amendment. By their signatures below, the undersigned hereby approve and adopt this Amendment.

8. Governing Law. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of California.

9. Continued Validity. Except as otherwise expressly provided herein, the Agreement shall remain in full force and effect and unmodified by the terms hereof.

10. Severability. If any provision of this Amendment, or the application thereof, is for any reason held to any extent to be invalid or unenforceable, the remainder of this Amendment and application of such provision to other persons, entities or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Amendment with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision and to execute any amendment, consent or agreement deemed necessary or desirable by the parties to effect such replacement.

11. Reliance. Each party to this Amendment acknowledges and agrees that it is not relying on tax advice or other advice from the other party to this Amendment and that it has or will consult with its own advisors.

12. Counterparts. This Amendment may be executed in one or more counterparts and by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13. Joint Preparation. The parties acknowledge that this Amendment was jointly prepared by them, by and through their legal counsel, and any uncertainty or ambiguity existing herein shall not be interpreted against any of the parties, but otherwise according to the application of the rules on interpretation of contracts.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.


COMPANY Meruelo Maddux Properties, Inc., a Delaware corporation

By:		/s/ Todd W. Nielsen
Name:		Todd W. Nielsen
Title:		General Counsel


OPERATING PARTNERSHIP Meruelo Maddux Properties, L.P., a Delaware limited partnership

By:		Meruelo Maddux Properties, Inc., a Delaware corporation, general partner

By:		/s/ Todd W. Nielsen
Name:		Todd W. Nielsen
Title:		General Counsel


MERUELO TRUST

By:		/s/ Richard Meruelo
		Richard Meruelo as trustee of the Richard Meruelo Living Trust U/D/T dated September 15, 1989


MERCO Merco Group — Roosevelt Building, LLC, a Delaware limited liability company

By:		/s/ Richard Meruelo
		Richard Meruelo, Manager


SUNSTONE Sunstone Bella Vista, LLC, a Delaware limited liability company

By:		/s/ John Charles Maddux
		John Charles Maddux, as trustee of the John Charles Maddux Trust U/D/T dated July 24, 2006

EX-10.7 8 dex107.htm FORM OF EMPLOYMENT AGREEMENT WITH MR. MERUELO Form of Employment Agreement with Mr. Meruelo

Exhibit 10.7

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made effective as of , 2007 (“Effective Date”), by and among Meruelo Maddux Properties, Inc., a Delaware corporation (“Company”), Meruelo Maddux Properties, L.P. (“Partnership”) and Richard Meruelo (“Executive”) to reaffirm and amend the terms and conditions of employment.

The parties agree as follows:

1. Employment. Employer (as defined below) hereby employs Executive, and Executive hereby accepts such employment, upon the terms and conditions set forth herein.

2. Duties.

2.1 Position. Executive is employed on a full-time basis as Chief Executive Officer, shall report directly to the Board of Directors of the Company (the “Board”), and shall have the duties and responsibilities commensurate with such position as shall be reasonably and in good faith determined from time to time by the Board, including such duties and responsibilities with respect to the Company, the Partnership and/or a subsidiary of either (collectively, “Employer”). Subject to shareholder approval, Executive shall also serve as the Chairman of the Board.

2.2 Duties. Executive shall: (i) abide by all applicable federal, state and local laws, regulations and ordinances, and (ii) except for vacation and illness periods, devote substantially all of his business time, energy, skill and efforts to the performance of his duties hereunder in a manner that will faithfully and diligently further the business interests of the Employer; provided, that, notwithstanding the foregoing, Executive may (x) make and manage personal business investments of his choice, including those described on Schedule A, (y) serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of the Employer, provided that such service either is expressly approved by the Board or relates to one or more of the real estate projects or other matters disclosed on the Schedule A attached hereto, and (z) serve in any capacity with any civic, educational, religious or charitable organization, or any governmental entity or trade association. In addition, during the Term of Employment, subject to the rules and requirements of the charter of the nominating and corporate governance committee of the Board, the Company shall cause Executive to be nominated as a member of the Board. Executive agrees to serve as a member of the Board.

3. Term of Employment. The term of Executive’s employment with Employer under this Agreement shall commence on the Effective Date and shall continue until and including the three-year anniversary of the Effective Date, unless earlier terminated as herein provided (the “Initial Term”). The Initial Term shall be automatically renewed for successive one-year periods (each an “Extended Term”) unless either party gives notice of non-renewal at least sixty (60) days prior to the end of the Initial Term or any Extended Term. As used herein, “Term of Employment” shall include the Initial Term and any Extended Term, but the Term of Employment shall end upon any termination of Executive’s employment with Employer as herein provided.

4. Compensation.

4.1 Base Salary. As compensation for Executive’s performance of Executive’s duties to the Company, Employer shall pay to Executive a base salary of $450,000 per year (“Base Salary”), payable in accordance with the normal payroll practices of Employer, less all legally required or authorized payroll deductions and tax withholdings. Base Salary shall be reviewed annually, and may be increased, at the sole discretion of the Board’s compensation committee, in light of the Executive’s performance and the Employer’s financial performance and other economic conditions and relevant factors.

4.2 LTIP Units and Other Equity Awards.

(a) On or before December 31st of each year during the Term of Employment, the Employer shall cause to be granted to Executive at least 10,000 long-term incentive plan units (“LTIP Units”) in consideration of services to be performed by Executive for the Partnership in his capacity as a partner thereof, and such LTIP Units shall be evidenced by, and subject to, the LTIP Unit award agreement attached to this Agreement as Exhibit A and the Company’s 2007 Equity Incentive Plan (a copy of which has been delivered to Executive), which award agreement shall reference that the LTIP Units are “Safe Harbor Interests” under Internal Revenue Service Notice 2005-43, as provided in the agreement of limited partnership of Meruelo Maddux Properties, L.P. and for which LTIP Units a Section 83(b) election shall be made timely by Executive showing a zero liquidation value. In addition, as part of the consideration for employment, Executive shall be eligible to receive additional awards of LTIP Units and other equity awards, subject to the terms and conditions of the Company’s 2007 Equity Incentive Plan (or plan for a subsequent year) and the applicable award agreement.

(b) Any LTIP Units granted to the Executive during the term of this Agreement shall be deemed to have been granted to the Executive in consideration of services rendered or to be rendered in Executive’s capacity as a partner of the Partnership.

(c) The Company and the Partnership shall (and shall cause each subsidiary that is a component Employer to) allocate the services provided by Executive to each component Employer and compensate Executive from the respective component Employer on a basis proportionate to the services provided by Executive to each component Employer. The provision of services to one component Employer shall satisfy any time commitment of the Executive to Employer for purposes of determining whether Executive has discharged his obligations to Employer under this or any other employment agreement with Employer. The parties confirm that Employer shall (and intends to) require that a sufficient amount of services be provided hereunder to the Partnership by Executive in his capacity as a partner of the Partnership to constitute full and adequate consideration for the issuance of LTIP Units to Executive as provided in the limited partnership agreement governing the Partnership, as may be amended from time to time.

4.3 Bonus. Executive shall be paid by Company on or before December 31st of each year during the Term of Employment a minimum cash bonus equal to fifty percent (50%) of Executive’s Base Salary. In addition, at the sole discretion of the Board’s compensation committee, Executive may be paid an additional bonus relating to each calendar year during the Term of Employment, and such additional bonus, if any, shall be paid on or before March 1st of the following year.

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5. Customary Fringe Benefits. Executive shall be eligible for all customary and usual fringe benefits generally available to full-time employees of Employer, subject to the terms and conditions of Employer’s policies and benefit plan documents. Employer reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Executive. Notwithstanding the standard vacation policy provisions on vacation accrual rates, Executive shall be entitled to earn vacation at the rate of four weeks per year. Furthermore, during the Term of Employment, Executive shall be entitled to an allowance in the amount of $20,000 per calendar year to cover Executive’s use of an automobile for business purposes.

6. Business Expenses. Executive shall be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of Executive’s duties on behalf of Employer. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Employer’s policies. All such expenses shall be reimbursed within the same fiscal year in which they were incurred or within two and one-half (2¹/2) months after the end of such year.

7. Termination of Employment. Subject to the terms and conditions of this Section 7, either Employer or Executive may terminate Executive’s employment with Employer at any time, with or without Cause (as defined in Section 7.10), during the Term of Employment. Any termination of Executive’s employment during the Term of Employment shall be communicated by written notice of termination from the terminating party to the other party (“Notice of Termination”). The Notice of Termination shall indicate the specific provision(s) of this Agreement relied upon in effecting the termination and a written statement of the reason(s) for the termination. In the case of a Notice of Termination provided by Executive to Employer, such Notice of Termination shall not be effective for a period of sixty (60) days after receipt of such Notice of Termination by Employer. In the case of a Notice of Termination provided by Employer to Executive, such Notice of Termination shall be effective on the date designated by Employer in the Notice of Termination. In the event Executive’s employment is terminated by either party, for any reason, during the Term of Employment, Employer shall pay the prorated Base Salary earned as of the date of Executive’s termination of employment and the accrued but unused vacation as of the date of Executive’s termination of employment to Executive upon Executive’s termination of employment. Except as otherwise provided in this Section 7, Employer shall have no further obligation to make or provide to Executive, and Executive shall have no further right to receive or obtain from Employer, any payments or benefits in respect of the termination of Executive’s employment with Employer during the Term of Employment.

7.1 Severance Upon Involuntary Termination without Cause. In the event that Employer causes to occur an involuntary termination without Cause (as defined in Section 7.10) of Executive’s employment with Employer during the Term of Employment and such involuntary termination qualifies as a “Separation from Service” under Section 409A (as hereinafter defined), Executive shall be entitled to a “Severance Package” that consists of the following : (a) a single cash lump-sum “Severance Payment” equal to three times the sum of (x) Executive’s annual rate of Base Salary in effect immediately prior to Executive’s termination of employment, and (y) the greater of (i) the bonus actually paid to Executive for the most recently completed fiscal year, and (ii) the minimum bonus that would have been paid to Executive for the entire fiscal year in which the termination occurs; (b) Employer’s direct-to-insurer payment of any group health premiums that Executive would otherwise have been required to pay for a period of eighteen (18) months (subject to Executive’s eligibility for, and proper and timely election of continued group health benefits under the Consolidated Omnibus Budget and Reconciliation Act (“COBRA”)); and (c) immediate vesting of all outstanding LTIP

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Units (which shall, in accordance with the applicable award agreement, remain subject to achieving parity with common units of limited partnership interest in the Partnership), stock options, restricted stock, and other equity awards granted to Executive under any of Employer’s equity incentive plans; provided, however, that all of the following conditions are first satisfied: (a) Executive reaffirms Executive’s commitment to comply with all surviving provisions of this Agreement, including Section 9 and Section 10 hereof; and (b) Executive executes a Separation Agreement that includes a general release in favor of Employer and its parent, and all subsidiary and related entities, and their officers, directors, shareholders, employees and agents to the fullest extent permitted by law, drafted by and in a form reasonably satisfactory to Employer, and does not revoke the general release within any legally required revocation period, if applicable. All legally required and authorized deductions and tax withholdings shall be made from the Severance Payment, including for wage garnishments, if applicable, to the extent required or permitted by law. Effective immediately upon termination of employment, Executive shall no longer be eligible to contribute to or to be an active participant in any retirement or benefit plan covering employees of Employer. All other Employer obligations to Executive shall be automatically terminated and completely extinguished.

7.2 Severance Upon Resignation for Good Reason. In the event that Executive resigns from employment with Employer for Good Reason (as defined in Section 7.10) during the Term of Employment and such resignation qualifies as a “Separation from Service” under Section 409A, Executive shall be entitled to a “Severance Package” that consists of the following : (a) a single cash lump-sum “Severance Payment” equal to three times the sum of (x) Executive’s annual rate of Base Salary in effect immediately prior to Executive’s termination of employment, and (y) an amount equal to the bonus actually paid to Executive for the most recently completed fiscal year, (b) Employer’s direct-to-insurer payment of any group health premiums that Executive would otherwise have been required to pay for a period of eighteen (18) months (subject to Executive’s eligibility for, and proper and timely election of continued group health benefits under COBRA); and (c) immediate vesting of all outstanding LTIP Units (which shall, in accordance with the applicable award agreement, remain subject to achieving parity with common units of limited partnership interest in the Partnership), stock options, restricted stock, and other equity awards granted to Executive under any of Employer’s equity incentive plans; provided, however, that all of the following conditions are first satisfied: (a) Executive reaffirms Executive’s commitment to comply with all surviving provisions of this Agreement, including Section 9 and Section 10 hereof; and (b) Executive executes a Separation Agreement that includes a general release in favor of Employer and its parent, and all subsidiary and related entities, and their officers, directors, shareholders, employees and agents to the fullest extent permitted by law, drafted by and in a form reasonably satisfactory to Employer, and does not revoke the general release within any legally required revocation period, if applicable. Notwithstanding anything to the contrary in this Section 7.2, in the event that (i) Executive resigns from employment with Employer for Good Reason during the Term of Employment, (ii) such resignation qualifies as a “Separation from Service” under Section 409A, and (iii) the basis for such resignation is the Company’s providing Executive with notice of non-renewal of this Agreement at any time during the Term of Employment other than during the twelve (12) month period following the effective date of a Change in Control (as defined in Section 7.10), then the phrase “three times the sum” in this Section 7.2 shall be automatically replaced with the phrase “one times the sum” and Executive’s Severance Payment shall be calculated accordingly. All legally required and authorized deductions and tax withholdings shall be made from the Severance Payment, including for wage garnishments, if applicable, to the extent required or permitted by law. Effective immediately upon termination of employment, Executive shall no longer be eligible to contribute to or to be an active participant in any retirement or benefit plan covering employees of Employer. All other Employer obligations to Executive shall be automatically terminated and completely extinguished.

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7.3 Excise Tax Gross-Up. To the extent that any payment or distribution of any type to or for Executive by Employer, or any subsidiary or affiliate of Employer, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (including, without limitation, any accelerated vesting of stock options or restricted stock granted by Employer) (collectively, the “Total Payments”) is or will be subject to the excise tax (“Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), (or any successor to such Section), Employer shall pay to Executive, at the time Executive pays any Excise Tax with respect to any of such Total Payments (which may be at the time the Employer withholds Excise Tax from any payments or at the time he files his annual federal income tax return for a year in which Excise Tax is due or payable), an additional amount (a “Gross-Up Payment”) which is, after the imposition of all income, employment, and excise taxes, equal to the Excise Tax on such Total Payments. The determination of whether any portion of the Total Payments is subject to an Excise Tax and, if so, the amount and time of any Gross-Up Payment pursuant to this Section 7.3 shall be made by an independent auditor (the “Auditor”) jointly selected by Executive and Employer and paid by the Employer. If Executive and Employer cannot agree on the firm to serve as the Auditor, then each shall select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. Unless Executive agrees otherwise in writing, the Auditor shall be a nationally recognized United States public accounting firm that has not during the two years preceding the date of its selection, acted in any way on behalf of the Employer. The parties shall cooperate with each other in connection with any proceeding or claim relating to the existence or amount of any liability for Excise Tax. All expenses relating to any such proceeding or claim (including attorneys’ fees and other expenses incurred by Executive in connection therewith) shall be paid by Employer promptly upon demand by Executive, and any such payment shall be subject to a Gross-Up Payment under this Section 7.3 in the event that Executive is subject to Excise Tax on it.

7.4 Section 409A Compliance. The parties intend for this Agreement either to satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly. If this Agreement either fails to satisfy the requirements of Section 409A or is not exempt from the application of Section 409A, then the parties hereby agree to amend or to clarify this Agreement in a timely manner so that this Agreement either satisfies the requirements of Section 409A or is exempt from the application of Section 409A.

(a) Notwithstanding any provision in this Agreement to the contrary, in the event that Executive is a “specified employee” (as defined in Section 409A), any Severance Payment, severance benefits or other amounts payable under this Agreement that would be subject to the special rule regarding payments to “specified employees” under Section 409A(a)(2)(B) of the Code (together, “Specified Employee Payments”) shall not be paid before the expiration of a period of six months following the date of Executive’s termination of employment (or before the date of Executive’s death, if earlier). The Specified Employee Payments to which Executive would otherwise have been entitled during the six-month period following the date of Executive’s termination of employment shall be accumulated and paid as soon as administratively practicable following the first date of the seventh month following the date of Executive’s termination of employment.

(b) To ensure satisfaction the requirements of Section 409A(b)(3) of the Code, assets shall not be set aside, reserved in a trust or other arrangement, or otherwise restricted for purposes of the payment of amounts payable under this Agreement.

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(c) Employer hereby informs Executive that the federal, state, local, and/or foreign tax consequences (including without limitation those tax consequences implicated by Section 409A) of this Agreement are complex and subject to change. Executive acknowledges and understands that Executive should consult with his or her own personal tax or financial advisor in connection with this Agreement and its tax consequences. Executive understands and agrees that Employer has no obligation and no responsibility to provide Executive with any tax or other legal advice in connection with this Agreement and its tax consequences. Except as otherwise provided in Section 7.3 of this Agreement, Executive agrees that Executive shall bear sole and exclusive responsibility for any and all adverse federal, state, local, and/or foreign tax consequences (including without limitation any and all tax liability under Section 409A) of this Agreement, and fully indemnifies and holds Employer harmless therefor.

7.5 Effect of Death or Disability. In the event that Executive dies or experiences a Disability (as defined in Section 7.10) during the Term of Employment, Executive shall be entitled to payment of his unpaid prorated Base Salary earned as of the date of Executive’s death or Disability (the “Measurement Date”) and a single cash lump-sum payment equal to the minimum bonus specified in this Agreement that otherwise would have been payable to Executive for Employer’s fiscal year in which the Measurement Date occurs multiplied by a fraction, the numerator of which is the number of days that have elapsed between the beginning of the fiscal year in which the Measurement Date occurs and the Measurement Date and the denominator of which is the number of days in the fiscal year in which the Measurement Date occurs. All legally required and authorized deductions and tax withholdings shall be made from the payments described in the previous sentence, including for wage garnishments, if applicable, to the extent required or permitted by law. Payment under this Section 7.5 shall be made not more than once, if at all.

7.6 Effect of a Change in Control. In the event of, and subject to the consummation of, a Change in Control, Employer shall cause to occur the immediate vesting of all outstanding LTIP Units (which shall, in accordance with the applicable award agreement, remain subject to achieving parity with common units of limited partnership interest in the Partnership), stock options, restricted stock, and other equity awards granted to Executive under any of Employer’s equity incentive plans.

7.7 Employment Reference. In the event Executive’s employment is terminated without Cause, or Executive resigns for Good Reason, Executive and Employer will negotiate in good faith to reach an agreement on a statement reflecting a benign reason for termination or resignation. This statement will include, at minimum, positions held, date of hire, employment period and confirmation of salary history (if requested by Executive).

7.8 Ineligibility For Severance. Executive shall not be entitled to any Severance Package under this Agreement, and Section 7.3 shall not apply to Executive, if at any time during the Term of Employment, either (a) Executive voluntarily resigns or otherwise terminates employment with Employer other than for Good Reason, or (b) Employer involuntarily terminates Executive’s employment for any reason other than without Cause. Effective immediately upon termination of employment, Executive shall no longer be eligible to contribute to or to be an active participant in any retirement or benefit plan covering employees of Employer. All other Employer obligations to Executive shall be automatically terminated and completely extinguished.

7.9 Taxes and Withholdings. The Employer may withhold from any amounts payable under this Agreement, including any benefits or Severance Payment, such federal,

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state or local taxes as may be required to be withheld pursuant to applicable law or regulations, which amounts shall be deemed to have been paid to Executive.

7.10 Definitions.

(a) “Cause” shall mean the occurrence during the Term of Employment of any of the following: (i) indictment for, formal admission to (including a plea of guilty or nolo contendere to), or conviction of a felony, a crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime involving Employer, (ii) gross negligence or willful misconduct by Executive in the performance of Executive’s duties which is likely to materially damage Employer’s financial position or reputation; (iii) willful or knowing unauthorized dissemination by Executive of Confidential Employer Information; (iv) breach of the Non-Competition Agreement executed by Executive in accordance with that certain Contribution Agreement, dated September 19, 2006 and subsequently amended; (v) repeated failure by Executive to perform Executive’s duties which are reasonably and in good faith requested in writing by the Board and which are not substantially cured by Executive within ten (10) days following receipt by Executive of such written request; (vi) failure of Executive to perform any lawful directive of the Board communicated to Executive in the form of a written request from the Board and which failure Executive does not begin to cure within ten (10) days following receipt by Executive of such written request or Executive has not substantially cured within thirty (30) days following receipt by Executive of such written request, or (vii) material breach of this Agreement by Executive which breach has been communicated to Executive in the form of a written notice from the Board, which material breach Executive does not begin to cure within ten (10) days following receipt by Executive of such written notice or Executive has not substantially cured within thirty (30) days following receipt by Executive of such written notice.

(b) “Change in Control” shall have the meaning ascribed to such term in the Company’s 2007 Equity Incentive Plan, as in effect on the Effective Date.

(c) “Disability” shall mean a medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and which either (i) renders Executive unable to engage in any substantial gainful activity; or (ii) results in Executive receiving income replacement benefits for a period of not less than three (3) months under any policy of long-term disability insurance maintained by the Company for the benefit of its employees.

(d) “Good Reason” shall mean the occurrence during the Term of Employment of any of the following: (i) a material breach of this Agreement by Company which is not cured by Company within 30 days following Company’s receipt of written notice by Executive to Company describing such alleged breach; (ii) Executive’s Base Salary, minimum bonus, or minimum bonus opportunity is reduced by Company; (iii) a reduction in Executive’s title, a material reduction in Executive’s duties and/or responsibilities, or the assignment to Executive of any duties materially inconsistent with Executive’s position; (iv) Executive fails to be vested with the title, duties and responsibilities of Chief Executive Officer and Chairman of the Board of the ultimate parent of Company (or its successor) following a Change in Control to which Company is a party; (v) the failure of Executive to be reelected to the Board or as Chairman of the Board, (vi) a requirement by Company that Executive, without Executive’s consent, relocate to a location other than the Los Angeles, California metropolitan area; or (vii) Company provides Executive with notice of non-renewal of this Agreement.

(e) “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and all applicable guidance promulgated thereunder.

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7.11 Nonduplication of Benefits. Notwithstanding any provision in this Agreement or in any other Employer benefit plan or compensatory arrangement to the contrary, but at all times subject to Section 7.4, (a) any payments due under either Section 7.1 or Section 7.2 shall be made not more than once, if at all, (b) payments may be due under either Section 7.1 or Section 7.2, but under no circumstances shall payments be made under both Section 7.1 and Section 7.2, (c) payment shall be made under Section 7.3 if and only if payments are due under Section 7.1 or Section 7.2, (d) no payments made under this Agreement shall be considered compensation for purposes of any benefit plan or compensatory arrangement of Employer, and (e) Executive shall not be entitled to severance benefits from Employer other than as contemplated under this Agreement, unless such other severance benefits offset and reduce the benefits due under this Agreement on a dollar-for-dollar basis, but not below zero.

8. No Competition and No Conflict of Interest. Except as otherwise provided in Section 2.2 of this Agreement (including the matters disclosed on the Schedule A attached hereto), during the Term of Employment, Executive must not engage in any work, paid or unpaid, that creates an actual conflict of interest with the essential business-related interests of the Employer where such conflict would materially and substantially disrupt operations. Such work shall include, but is not limited to, directly or indirectly competing with the Employer Business in any way, or acting as an officer, director, employee, consultant, stockholder, volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the Employer Business or any business in which Employer becomes engaged during the Term of Employment, as may be reasonably determined by the Board. Notwithstanding the foregoing, Executive’s investment in, or ownership of, less than five percent (5%) of the capital stock of any business entity that competes with or could reasonably be expected to compete with the Employer Business and whose securities are traded on any national securities exchange or registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, shall not be treated as a breach of this Section 8. For purposes of this Agreement, the term “Employer Business” shall mean the acquisition, development, redevelopment, ownership, operation or financing of commercial and residential properties in the State of California.

9. Confidentiality. During the Term of Employment, Executive has been and will continue to be given access to a wide variety of information about the Employer, its affiliates and other related businesses that the Employer considers “Confidential Employer Information.” As a condition of continued employment, Executive agrees to abide by Employer’s business policies and directives on confidentiality and nondisclosure of “Confidential Employer Information.” “Confidential Employer Information” shall mean all information applicable to the business of the Employer which confers or may confer a competitive advantage upon the Employer over one who does not possess the information; and has commercial value in the business of the Employer or any other business in which the Employer engages or is preparing to engage during Executive’s employment with Employer. “Confidential Employer Information” includes, but is not limited to, information regarding the Employer’s business plans and strategies; contracts and proposals (including leases and proposed leases); artwork, designs, drawings and specifications for development and redevelopment projects; tenants and customers and prospective tenants and customers; suppliers and other business partners and Employer’s business arrangements and strategies with respect to them; current and future marketing or advertising campaigns; software programs; codes, formulae or techniques; rent rolls; financial information; personnel information; and all ideas, plans, processes or information related to the current, future and proposed projects or other business of the Employer that has not been disclosed to the public by an authorized representative of the Employer, acting within

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the scope of his or her authority, whether or not such information would be enforceable as a trade secret of the Employer or enjoined or restrained by a court or arbitrator as constituting unfair competition. “Confidential Employer information” also includes confidential information of any third party who may disclose such information to the Employer or Executive in the course of the Employer’s business.

9.1 Nondisclosure. Executive acknowledges that Confidential Employer Information constitutes valuable, special and unique assets of the Employer’s business and that the unauthorized disclosure of such information to competitors of the Employer, or to the general public, will be highly detrimental to the Employer. Executive therefore agrees to hold Confidential Employer Information in strictest confidence. Except as shall occur as and to the extent that Executive performs his duties to Employer, Executive agrees not to disclose or allow to be disclosed to any individual or entity, other than those individuals or entities authorized by the Employer, any Confidential Employer Information that Executive has or may acquire during Executive’s employment by Employer (whether or not developed or compiled by Executive and whether or not Executive has been authorized to have access to such Confidential Employer Information).

9.2 Continuing Obligation. Executive agrees that the agreement not to disclose Confidential Employer Information will be effective during Executive’s employment and continue even after Executive is no longer employed by Employer. Any obligation not to disclose any portion of any Confidential Employer Information will continue indefinitely unless Executive can demonstrate that such information (a) has become public knowledge through no fault of Executive; or (b) has been developed independently without any reference to any information obtained during Executive’s employment with Employer; or (c) must be disclosed in response to a valid order by a court or government agency or is otherwise required by law.

9.3 Return of Employer Property. On termination of employment with Employer for whatever reason, or at the request of the Employer before termination, Executive agrees to promptly deliver to Employer all records, files, computer disks, memoranda, documents, lists and other information regarding or containing any Confidential Employer Information, including all copies, reproductions, summaries or excerpts thereof, then in Executive’s possession or control, whether prepared by Executive or others. Executive also agrees to promptly return, on termination or the Employer’s request, any and all Employer property issued to Executive, including but not limited to computers, cellular phones, keys and credits cards. Executive further agrees that should Executive discover any Employer property or Confidential Employer Information in Executive’s possession after the return of such property has been requested, Executive agrees to return it promptly to Employer without retaining copies, summaries or excerpts of any kind.

9.4 No Violation of Rights of Third Parties. Executive warrants that the performance of all the terms of this Agreement does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by Executive prior to Executive’s employment with Employer. Executive agrees not to disclose to Employer, or induce Employer to use, any confidential or proprietary information or material belonging to any previous employers or others. Executive warrants that Executive is not a party to any other agreement that will interfere with Executive’s full compliance with this Agreement. Executive further agrees not to enter into any agreement, whether written or oral, in conflict with the provisions of this Agreement while such provisions remain effective.

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10. Interference with Business Relations.

10.1 Interference with Customers, Suppliers and Other Business Partners. Executive acknowledges that Employer’s tenant and customer base and leasing and sales strategies for such tenants and customers, its suppliers and purchasing strategies for such suppliers, and its other business arrangements have been developed through substantial effort and expense, and its nonpublic business information regarding these tenants, customers, suppliers and other business partners is confidential and constitutes trade secrets. In addition, because of Executive’s position, Executive understands that Employer will be particularly vulnerable to significant harm from Executive’s use such information for purposes other than to further Employer’s business interests. Accordingly, Executive agrees that during Executive’s employment with Employer, and for a period of twelve (12) months thereafter, Executive will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Employer’s relationship with any of the tenants, customers, suppliers or other business partners of Employer with whom Executive has had contact, or conducted business, by contacting them for the purpose of inducing or encouraging any of them to divert or take away business from Employer.

10.2 Interference with Employer’s Employees. Executive acknowledges that the services provided by Employer’s employees are unique and special, and that Employer’s employees possess trade secrets and Confidential Employer Information that is protected against misappropriation and unauthorized use. As such, Executive agrees that during, and for a period of twelve (12) months after, Executive’s employment with Employer, Executive will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Employer’s business by contacting any Employer employees for the purpose of inducing or encouraging them to discontinue their employment with Employer.

10.3 Negative Information. During the Term of Employment and thereafter, Executive shall not disclose confidential or negative non-public information regarding, or take any action materially detrimental to the reputation of Employer or its directors, officers, employees, investors, shareholders or advisors and any affiliates of any of the foregoing (collectively, the “Employer Affiliates”); provided, however, that nothing contained in this Section 10.3 shall affect any legal obligation of Executive to respond to mandatory governmental inquiries concerning the Employer Affiliates or to act in accordance with, or to establish, his rights under this Agreement. Employer likewise agrees that no one acting with the actual authority of Employer shall disclose negative non-public information regarding, or take any action materially detrimental to the reputation of, Executive; provided, however, that nothing contained in this Section 10.3 shall affect any legal obligation of the Employer Affiliates to respond to mandatory governmental inquiries concerning Executive or to act in accordance with, or to establish, the rights of the Employer Affiliates under this Agreement.

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11. Injunctive Relief. Executive acknowledges that Executive’s breach of the covenants contained in Sections 8 through 10 of this Agreement inclusive (collectively “Covenants”) would cause irreparable injury and continuing harm to Employer for which there will be no adequate remedy at law, and agrees that in the event of any such breach, Employer seek temporary, preliminary and permanent injunctive relief to the fullest extent allowed by the California Arbitration Act, without the necessity of proving actual damages or posting any bond or other security.

12. Agreement to Arbitrate.

12.1 Mandatory Arbitration. Any dispute or controversy arising out of or relating to any interpretation, construction, performance, termination or breach of this Agreement, will be settled by final and binding arbitration by a single arbitrator to be held in Los Angeles County, California, in accordance with the American Arbitration Association national rules for resolution of employment disputes then in effect, except as provided herein. The arbitrator selected shall have the authority to grant any party all remedies otherwise available by law, including injunctions, but shall not have the power to grant any remedy that would not be available in a state or federal court. The arbitrator shall have the authority to hear and rule on dispositive motions (such as motions for summary adjudication or summary judgment). The arbitrator shall have the powers granted by California law and the rules of the American Arbitration Association which conducts the arbitration, except as modified or limited herein.

12.2 Principles Governing Arbitration. Notwithstanding anything to the contrary in the rules of the American Arbitration Association, the arbitration shall provide (i) for written discovery and depositions as provided in California Code of Civil Procedure Section 1283.05 and (ii) for a written decision by the arbitrator that includes the essential findings and conclusions upon which the decision is based which shall be issued no later than thirty (30) days after a dispositive motion is heard and/or an arbitration hearing has completed. Except in disputes where Executive asserts a claim otherwise under a state or federal statute prohibiting discrimination in employment (“a Statutory Discrimination Claim”), each side shall split equally the fees and administrative costs charged by the arbitrator and American Arbitration Association. In disputes where Executive asserts a Statutory Discrimination Claim against Employer, Executive shall be required to pay the American Arbitration Association’s filing fee only to the extent such filing fee does not exceed the fee to file a complaint in state or federal court. Employer shall pay the balance of the arbitrator’s fees and administrative costs.

12.3 Rules Governing Arbitration. Executive and Employer shall have the same amount of time to file any claim against any other party as such party would have if such a claim had been filed in state or federal court. In conducting the arbitration, the arbitrator shall follow the rules of evidence of the State of California (including but not limited to all applicable privileges), and the award of the arbitrator must follow California and/or federal law, as applicable.

12.4 Selection of Arbitrator. The arbitrator shall be selected by the mutual agreement of the parties. If the parties cannot agree on an arbitrator, the parties shall alternately strike names from a list provided by the American Arbitration Association until only one name remains.

12.5 Arbitrator Decision. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. The prevailing party in the arbitration, as determined by the arbitrator, shall be entitled to recover his or its reasonable attorneys’ fees and costs, including the costs or fees charged by the arbitrator and the American Arbitration

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Association. In disputes where Executive asserts a Statutory Discrimination Claim, reasonable attorneys’ fees shall be awarded by the arbitrator based on the same standard as such fees would be awarded if the Statutory Discrimination Claim had been asserted in state or federal court. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

13. General Provisions.

13.1 Successors and Assigns. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. The Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) or assignee to all or substantially all of the business and/or assets of the Employer to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession or assignment had taken place. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement without Employer’s written consent.

13.2 Legal Protection Clause. The Employer will defend, indemnify and hold harmless the Executive from and against any claim or legal action taken against Executive as a direct consequence of the discharge of Executive’s duties or obedience to directions of the Employer, in accordance with California Labor Code 2802. Such protection, if applicable, includes the cost of legal defense and judgment, if any, against Executive.

13.3 Nonexclusivity of Rights. Except as expressly provided in this Agreement, Executive is not prevented from continuing or future participation in any Employer benefit, bonus, incentive or other plans, programs, policies or practices provided by Employer subject to the terms and conditions of such plans, programs, or practices.

13.4 Waiver. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

13.5 Attorneys’ Fees. Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party, and the arbitrator awards such attorneys’ fees accordingly.

13.6 Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.

13.7 Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Employer, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

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13.8 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California. Except as and to the extent that Section 12 does not properly apply, each party consents to the jurisdiction and venue of the state or federal courts in Los Angeles County, California, in any action, suit, or proceeding arising out of or relating to this Agreement.

13.9 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing.

13.10 Survival. The following provisions shall survive Executive’s employment with Employer to the extent reasonably necessary to fulfill the parties’ expectations in entering this Agreement: Sections 7 (“Termination of Employment”), 9 (“Confidentiality”), 10 (“Interference with Business Relations”) 11 (“Injunctive Relief”), 12 (“Agreement to Arbitrate”), 13 (“General Provisions”), and 14 (“Entire Agreement”).

14. Entire Agreement. This Agreement, together with the other agreements and documents governing the benefits described in this Agreement, constitute the entire agreement among the parties relating to this subject matter hereof and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of Executive and the Board of Directors of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.


		RICHARD MERUELO

Dated:


		Address: _____________________________

		_____________________________

		MERUELO MADDUX PROPERTIES, INC.

Dated:	By:


		JOHN CHARLES MADDUX

		President and Chief Operating Officer

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		MERUELO MADDUX PROPERTIES, L.P.

		By: Meruelo Maddux Properties, Inc., its sole general partner

Dated:	By:


		John Charles Maddux

		President and Chief Operating Officer

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