EFTA01092870.pdf

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION MERCATA JUSTA, ) 2O1OLO1O797 ) CALENDAR/ROOM W Plaintiff, ) TIME OO:OO v. ) Case No. Brear of Contract DEAN KRETSCHMAR, ) ea '71 ) Jury Demanded - Defendant. ) <i= .15 -0 0 COMPLAINT _— Plaintiff Mercata Justa, L.L.C. ("Plaintiff), by and through its lifiderriged:couAsei, complains of Defendant Dean Kretschmar ("Kretsclunar" or "Defendant") as follows: NATURE OF THIS ACTION 1. This is an action for breach of contract bated on a Loan Agreement (the "Loan Agreement," Ex. A hereto) created on October 22, 2009 in Cook County, Illinois by and between Plaintiff as lender, Mercata Justa Partners, L.L.C. as borrower (the "Borrower"), and Defendant as guarantor, and to enforce certain obligations of Defendant in relation thereto. Pursuant to the Loan Agreement, Plaintiff made a loan of $4,500,000 (the "Term Loan") to Borrower. In connection therewith, Borrower executed, and Defendant in his individual capacity acknowledged, a Term Note in favor of Plaintiff (the "Term Note," Ex. B hereto). Also on October 22, 2009, Defendant executed a Guaranty Agreement (the "Guaranty Agreement," Ex. C hereto) pursuant to which he agreed, as primary obligor, to absolutely, unconditionally, irrevocably and continually guarantee the full, prompt, faithful payment when due of any and all debts, obligations, and liabilities of Borrower to Plaintiff, whether arising under the Loan Agreement, the Term Note, or otherwise. In furtherance of Defendant's obligations under the Loan Agreement and Guaranty, on October 22, 2009 Defendant also entered into a Security Agreement (the "Security Agreement," Ex. D hereto) in favor of Plaintiff pursuant to which DB1/64798376.3 EFTA01092870  Defendant agreed to secure his obligations to Plaintiff with all of his assets. Finally, in partial fulfillment of his obligations under the Security Agreement, Defendant executed a second mortgage (the "Mortgage," Ex. E hereto) (the Guaranty Agreement, Security Agreement, and Mortgage will be collectively referred to as the "Financing Agreements") on his personal residence in favor of Plaintiff Plaintiff brings this action because Borrower has breached its duties under the Loan Agreement and the Security Agreements and Defendant has failed or otherwise refused to honor his obligations under the Financing Agreements. THE PARTIES 2. Plaintiff Mercata Justa, L.L.C. is a Delaware limited liability company. 3. Defendant Dean Kretschmar is an individual and resident of the State of Florida. 4. Borrower Mercata Justa Partners, L.L.C. is a Delaware limited liability company. JURISDICTION AND VENUE 5. This Court has jurisdiction over this matter pursuant to 735 ILCS 5/2-209(a)(1) & (7) in that Defendant transacted business within Illinois and entered into the Financing Agreements in Illinois. Pursuant to the Loan Agreement, Defendant also agreed that any and all disputes regarding the Loan Agreement would be resolved in Cook County, Illinois. 6. Venue is proper pursuant to 735 ILCS 5/2-101 in that the transaction(s), or some part thereof, out of which this cause of action arose, took place or is taking place within this County. DB1/64798376.3 2 EFTA01092871  RELEVANT FACTS Creation of the Financing Agreements 7. On October 22, 2009, Plaintiff, Defendant and Borrower entered into the Loan Agreement wherein Borrower agreed to borrow, and Defendant agreed to serve as Guarantor in respect of, the Term Loan of $4,500,000 being made by Plaintiff. 8. On October 22, 2009, Borrower executed, and Defendant in his individual capacity acknowledged, a Term Note in favor of Plaintiff. 9. On October 22, 2009, Defendant, in his individual capacity, executed a Guaranty Agreement pursuant to which he agreed as primary obligor to absolutely, unconditionally, irrevocably and continually guarantee the full, prompt, faithful payment when due of any and all debts, obligations, and liabilities of Borrower to Plaintiff, whether arising under the Loan Agreement, the Term Note, or otherwise. 10. On October 22, 2009, Defendant entered into the Security Agreement in favor of Plaintiff pursuant to which Defendant agreed to secure his , obligations under the Financing Agreements with all of his assets. 11. Finally, in partial fulfillment of his obligations under the Security Agreement, on October 22, 2009, Defendant executed a second Mortgage on his personal residence in favor of Plaintiff. Terms of the Financing Agreements 12. Pursuant to the Loan Agreement, Plaintiff lent Borrower the Term Loan of $4,500,000. 13. The Term Loan was due to be repaid in March 2010 — the "Term Maturity Date" as defined by the Loan Agreement. See Loan Agreement at pp. 1, 23. DB1/647983763 3 EFTA01092872  14. The Loan Agreement provides that the Borrower "shall pay interest on the unpaid principal amount of the Term Loan at the rate of 20% per annum (the "Applicable Rate"), from the date on which the Term Loan is made until paid in full" and further provides that "[u]pon the occurrence of an `Event of Default' and during the continuance thereof, interest shall accrue on all Liabilities at the per annum rate of five (5) percentage points in excess of the Applicable Rate. Any interest payment, charge, or fee not paid when due shall be added to and become a part of the Liabilities." See Loan Agreement at pp. 1-2. 15. The Loan Agreement provides a list of "Event(s) of Default," (See Loan Agreement at pp. 10-12) and pursuant to Section 7.2, that the occurrence of any Event of Default entitles Plaintiff to "declare the Note and Liabilities to be due and payable, whereupon the Notes and all Liabilities shall become immediately due and payable, all without presentment, demand, protest or notice of any kind." See Loan Agreement at p. 12. 16. Section 7.1(a) of the Loan Agreement provides that it shall constitute an "Event of Default" if the "Borrower or [Defendant] shall fail to perform any of the Liabilities requiring the payment of money when the payment is due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall not be cured within five (5) Business Days of the applicable due date." See Loan Agreement at p. 10. 17. Section 6.2 of the Loan Agreement provides that the "Borrower and the [Defendant] covenant and agree to deliver the documents set forth on Schedule 6.2 to [Plaintiff]... within five days after the Closing Date" of October 22, 2009. Section 6.2 further provides that "ffit. ilure to deliver such documents within that time period shall constitute an Event of Default." See Loan Agreement at p. 10. 18. Section 7.1(e) of the Loan Agreement provides that it shall constitute an Event of DBI/64798376.3 4 EFTA01092873 Default if "[a]ny representation or warrant now or hereafter made by the Borrower or the [Defendant] in or in connection with this Agreement or any of the Financing Agreements... is untrue or incorrect in any material respect when made, or any schedule, certificate, statement, report, financial statement, notice, or other writing furnished at any time by the Borrower or the [Defendant] to the [Plaintiff] is untrue or incorrect in any material respect on the date as of which the facts are stated or certified; or any representation, warranty, schedule, certificate, statement, report, financial statement, notice or other writing furnished at any time by the Borrower to the Lender omits to state or include a material fact necessary to make the statement or the writing not misleading." See Loan Agreement at p. 11. 19. Section 2 of the Guaranty Agreement provides that in an Event of Default under the Loan Agreement, Defendant shall pay and perform all of the obligations guaranteed thereunder, including the full and prompt payment and performance of the obligations of Borrower. See Guaranty Agreement at p. 2. Defendant's Breaches of the Financing Agreements 20. To thte, the Term Note, which was due in March 2010, has not been paid. 21. To date, despite the obligations placed on Defendant by Section 6.2 of the Loan Agreement, Defendant has not delivered to Plaintiff the documents set forth on Schedule 6.2, including but not limited to evidence satisfactory to Plaintiff that Bank of America consented to the grant and recordation of the Mortgage used as security for the Term Loan, despite the fact that the Loan Agreement required said documents to be delivered within five days of closing. 22. Defendant provided Plaintiff with false, material representations concerning his ownership interest in at least two assets put forth as security for the Term Loan, in violation of Section 7.1(e) of the Loan Agreement. DBI/64798376 3 5 EFTA01092874  23. First, Defendant materially represented the value of his personal residence. 24. Second, Defendant represented that he owned a certain account with the Royal Bank of Canada (the "RBC Account") and, separately, that he owned a certain vessel which was likewise to be used as security for the Loan Agreement. 25. Defendant in fact does not have the interest in the vessel as represented nor does he have a personal interest in the RBC account as represented. COUNT I Breach of Contract 26. Plaintiff repeats and incorporates by reference the allegations contained in Paragraphs 1 through 25 above as though fully set forth herein, and further alleges as follows: 27. On October 22, 2009, Plaintiff, Defendant, and Borrower entered into a valid and enforceable contract in Illinois. 28. Plaintiff fully performed its obligations pursuant to the Loan Agreement when it made a Term Loan of $4,500,000 to Borrower on October 22, 2009. 29. Despite Plaintiff's performance, the Loan Agreement is presently in Default. 30. No payments have been made by Borrower or Defendant to Plaintiff in accordance with the terms of the Loan Agreement. 31. Defendants has failed or otherwise refused to honor his obligations under the Loan Agreement or the Financing Agreements. 32. Despite Plaintiff's full performance of its obligations under the Loan Agreement, Defendant breached Section(s) 6.2, 7.1(a), and 7.1(e) of the Loan Agreement, among others, and has refused to honor his obligations under the Financing Agreements. 33. As a direct and proximate cause of Defendant's breaches of the Loan Agreement and the Financing Agreements, Plaintiff has suffered, and is entitled to recover, direct, indirect, DBI/647983763 6 EFTA01092875 consequential and incidental damages, including, but not limited to, the amount of the Term Loan plus interest as provided by the terms of the Loan Agreement. WHEREFORE, Plaintiff respectfully prays that this Court: 1. Award Plaintiff its actual damages sustained as a result of Defendant's breach of the Loan Agreement; 2. Award Plaintiff its costs and expenses, including, but not limited to, its attorneys' fees in bringing and pursuing this action; 3. Award Plaintiff pre-judgment and post judgment interest; and • 4. Award Plaintiff any other and further relief to which it is entitled. Dated: September 21, 2010 Respectfully Submitted, Mercata Justa, L.L.C. By: One of Its Attorneys Kevin B. Dreher (ARDC No. 6277398) Michael F. Derkscn (ARDC No. 6296212) Morgan, Lewis & Bockius LLP 77 West Wacker Drive Chica o Illinois 60601 Firm ID No.: 40417 DB1/64798376.3 7 EFTA01092876  JURY DEMAND COMES NOW the Plaintiff and through its attorneys, hereby respectfully requests trial by jury with respect to all triable issues raised in the above Complaint. Dated: September 21, 2010 Respectfully submitted: Mercata Justa, L.L.C. y: One of Its Attorneys Kevin B. Dreher (ARDC No. 6277398) Michael F. Derksen (ARDC No. 6296212) Morgan, Lewis & Bockius LLP 77 West Wacker Drive • 60601 Firm ID No.: 40417 DB1/6479113763 EFTA01092877  LOAN AGREEMENT This Loan Agreement ("Agreement") is entered into this day of October, 2009, by and among Mercata Justa Partners, L.L.C., a Delaware limited liability company (the "Borrower"), Mercata Justa, L.L.C., a Delaware limited liability company (the "Lender"), and Dean Kretschmar an individual and resident of the State of Florida ("Guarantor"). RECITALS A. Guarantor and Lender are members of the Borrower. 13. The Borrower wishes to obtain a $4,500,000 loan from the Lender, the proceeds of which, together with $500,000 in equity from its members, the Borrower will use to purchase $5,000,000 in Class A membership interests in D3 Capital Club, LLC. Lender is willing to make the loan to Borrower on the terms and conditions described in this Agreement. C. The obligations of Borrower to Lender will be (a) guarantied by Guarantor, and secured by a lien on all assets of Guarantor, now owned or hereafter acquired, and (b) secured by a pledge of Borrower's membership interests in D3 Capital Club, LLC. Capitalized terms used in this Agreement which arc not otherwise defined herein shall have the meanings set forth in Article IX. AGREEMENTS In consideration of the terms and conditions contained in this Agreement and of any Term Loan or extensions of credit made to or for the benefit of the Borrower by the Lender, the parties agree as follows: ARTICLE I THE LOAN 1.1 Loan. Subject to the terms and conditions of this Agreement, the Lender agrees to loan to the Borrower the aggregate principal amount of Four Million Five Hundred Thousand and no/100 dollars ($4,500,000) (the "Term Loan"). The Term Loan is due on the Term Maturity Date. The Term Loan shall be evidenced by a Note in substantially the form of Exhibit A ("Term Note"). Any portion of the Term Loan not borrowed on the Closing Date shall irrevocably expire. 1.2 Use of Proceeds. The Borrower shall use the proceeds of the Term Loan, together with Five Hundred Thousand and no/100 dollars ($500,000) in equity from its members, solely to purchase Class A Membership Interests in D3 Capital Club, LLC, a Delaware limited liability company. 1.3 Interest Rate (a) Term Loan Interest. The Borrower shall pay interest on the unpaid principal amount of the Term Loan at the rate of 20% per annum (the "Applicable Rate"), from the date on which the Term Loan is made until paid in full. 1 DB I/6382003.3 EFTA01092878  (b) Default Interest Rate. Upon the occurrence of an Event of Default and during the continuance thereof, interest shall accrue on all Liabilities at the per annum rate of five (5) percentage points in excess of the Applicable Rate. Any interest payment, charge, or fee not paid when due shall be added to and become a part of the Liabilities. (c) Interest Computation. All interest shall be computed on the basis of a 360 day year, and actual days elapsed. (d) Maximum Interest. Notwithstanding anything to the contrary contained in any Financing Agreement, the interest paid or agreed to be paid under the Term Note and any Financing Agreement shall not exceed the maximum rate of interest permitted by Applicable Law ("maximum rate"). If Lender shall receive interest in an amount that exceeds the maximum rate, the excess interest shall be applied to the principal of the Liabilities or, if it exceeds such unpaid principal, refunded to Borrower. In determining whether the interest contracted for, charged or received by Lender exceeds the maximum rate, Lender may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee or premium rather than interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Liabilities hereunder. 1.4 Making Payments. (a) Repayments from Proceeds. To secure the Liabilities, Borrower has pledged to Lender all of its membership interests in D3, whether now owned or hereafter acquired. All proceeds and distributions received by Borrower from D3 or otherwise arising out of or relating to its membership interests in D3 shall be deposited by Borrower in a Designated Deposit Account (as defined below), and applied and paid as follows: (i) first, to payment of the Liabilities until all Liabilities have been paid in full; (ii) second, to the members of Borrower in accordance with Borrower's Operating Agreement. A "Designated Deposit Account" shall mean a deposit account of Borrower, in which Lender has a first priority perfected security interest, and as to which an account control agreement satisfactory to Lender is in place. (b) Payment at Maturity. Any amount of principal or accrued interest outstanding and unpaid on the Term Loan Maturity Date will be payable to the Lender on the Maturity Date in immediately available funds without any offset or counterclaim and free and clear of (and without deduction for) any present or future taxes. (c) Grossup for Taxes. If Borrower shall be required by Applicable Law to withhold or deduct any Taxes from or in respect of any amount payable under this Agreement or any other Financing Agreement, (a) the amount payable to the Lender shall be increased as necessary so that, after making all required withholding or deductions, the Lender receives an amount equal to the sum it would have received had no such. withholding or deductions been 2 CM31/63832003.3 EFTA01092879  made, (b) Borrower shall make such withholding or deductions, and (c) Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with Applicable Law. Any sums payable to the Lender pursuant to this Section shall be deemed to constitute Obligations. 1.5 Changes in Current Tax Treatment. If the Lender shall at any time after the date of this Agreement determine in good faith that any change in any applicable law, rule, regulation, or guideline or the administration of any such applicable law, rule, or regulation or guideline promulgated by any governmental authority charged with the administration of such applicable law, rule, or regulation or guideline (whether or not having the force of law) shall in any manner subject the Lender or the Term Loan to any tax not otherwise applicable as of the date of this Agreement, or impose or make applicable any disallowance, tax, or other change in the taxation of the interest on the Term Loan (other than a change in the general income tax rate of the Lender), and the Lender determines in good faith that the result of any of the foregoing will be to reduce the net after-tax yield to the Lender on the Term Loan, then the interest rate on the Term Loan, as applicable, shall be increased to the rate that will compensate the Lender for the reduction. The calculation by the Lender of the appropriate rate shall be conclusive, absent manifest error. If the Lender makes a claim for additional interest under this Agreement, the Lender shall provide to the Borrower a certificate setting forth the claim and the basis for such claim. The rate increase shall be effective as of the date of the applicable event, and any additional unpaid interest shall be paid by the Borrower together with the next regularly-scheduled payment of interest following the giving of the notice of the claim by the Lender. ARTICLE II COLLATERAL AND SECURITY 2.1 Security Interest; Guaranty. To secure payment and performance of the Liabilities, (a) the Borrower has granted and pledged to the Lender a security interest in all membership interests of D3 now owned or hereafter acquired by Borrower, pursuant to the Pledge Agreement, and (b) the Guarantor has guarantied the Term Loan and granted Lender a security interest in all of the Borrower's personal property and assets, including pursuant to (i) the Security Agreement, and (ii) the Mortgage. In addition, the Guarantor has guarantied Borrower's obligation to repurchase, at the Lender's option, all of Lender's membership interests in Borrower, pursuant to the Borrower's Operating Agreement and the Guaranty. 2.2 Set-off. The Borrower agrees that (in addition to the Lender's and each holders' rights with respect to proceeds of Collateral), at any time (i) any amount owing by the Borrower under this Agreement or any of the Financing Agreements is then due to the Lender or any such holder, or (ii) any Event of Default exists, the Lender and each such holder may apply to the payment of the Liabilities any and all balances, credits, deposits (including all account balances, whether provisional or final and whether or not collected or available), accounts or monies of the Borrower then or thereafter with the Lender or such holder up to the extent of such Liabilities. 3 DB1/63832003.3 EFTA01092880  ARTICLE III AFFIRMATIVE COVENANTS The Borrower and Guarantor jointly and severally agree and covenant until the indefeasible payment in full of the Liabilities, and the distribution of the Preferred Return to Lender, as follows: 3.1 Information. (a) Financial Information. The Borrower shall provide to the Lender upon request such financial statements, and all data and documentation with respect to its assets and liabilities, as the Lender may reasonably request. Guarantor shall provide to the Lender upon request his personal financial statements, and all data and documentation with respect to the assets and liabilities on such personal financial statements as the Lender may reasonably request. (b) Tax Returns. Within fifteen (15) days after filing, Guarantor and Borrower will provide Lender with true and correct copies of all federal and state tax and information returns of the Guarantor and Borrower filed with federal and state taxing authorities. (c) Default Notices. The Borrower and Guarantor shall notify and fully inform the Lender immediately after the Borrower or Guarantor obtains knowledge of (i) the occurrence of an event or the existence of factual circumstances giving rise to an Event of Default, (ii) an Event of Default under this Agreement, or (iii) any default under any of the other Financing Agreements. (d) Other Information. With reasonable promptness, other business or financial data as the Lender reasonably may request. All financial statements delivered to the Lender pursuant to this Section 3.1 shall be certified by the Borrower and Guarantor as being true, complete, and accurate in all material respects as of the date thereof. The Borrower and the Guarantor authorize the Lender to discuss the financial condition of the Borrower and the Guarantor with the Borrower's and Guarantor's accountants and investment advisors. 3.2 Inspection. The Lender and any authorized representatives designated by the Lender in writing shall have the right, from time to time after the date of this Agreement until the indefeasible payment in full of the Liabilities, to: (a) visit and inspect all properties of the Borrower and Guarantor, and inspect, audit, check, and make copies of and extracts from the Borrower's and Guarantor's books, records, journals, orders, receipts, and any correspondence and other data relating to the Collateral or to any of the Transactions; (b) verify any fact concerning the Collateral as the Lender may consider reasonable under the circumstances; and (c) discuss the affairs, finances, and business of the Borrower with the Borrower's accountant or financial or investment advisor. The Borrower shall pay on demand all reasonable out of pocket expenses incurred by the Lender in exercising its rights under this Section 3.2. 3.3 Claims and Taxes. The Guarantor shall indemnify and hold the Lender, and its officers, directors, employees, attorneys, and agents harmless from and against any and all 4 DB1/63832003.3 EFTA01092881 claims, demands, liabilities, losses, damages, penalties, costs, and expenses (including, without limitation, reasonable attorneys' and consultants' fees) relating to or in any way arising out of the possession, use, operation, or control of any of the Guarantor's assets, except for the indemnified party's gross negligence or intentional misconduct. The Guarantor shall pay or cause to be paid all of its real and personal property taxes, assessments, and charges and all of their franchise, income, unemployment, use, excise, old age benefit, withholding, sales and other taxes, and other governmental charges assessed against the Guarantor, or payable by the Guarantor, at the times and in the manner as to prevent any penalty from accruing or any lien or charge from attaching to its property. 3.4 Insurance. The Guarantor shall maintain, at the Guarantor's expense, public liability and third party property damage insurance policies with respect to the Collateral in amounts and with deductibles as are reasonably acceptable to the Lender, and shall cause the Lender to be named as additional insured on all the policies. The Guarantor shall, at its expense, keep and maintain its real property and personal property assets insured against loss or damage by fire, theft, burglary, pilferage, loss in transit, explosion, spoilage, and all other hazards and risks ordinarily insured against by other owners or users of similar properties in similar businesses in an amount at least equal to the lesser of (a) the outstanding principal balance of the Liabilities, or (b) the full replacement cost of all the property. All the policies of insurance shall be in a form and substance satisfactory to the Lender. The Guarantor shall deliver to the Lender, at closing, certificates of insurance evidencing insurance coverages. The policies of property insurance shall contain endorsements naming the Lender as additional insured and loss payee as its interests may appear, and stating that the policies shall not be terminated or materially changed without at least thirty (30) days prior written notice to the Lender. The Guarantor and the Borrower hereby direct all insurers under the policies of insurance to pay all proceeds of insurance policies naming the Lender or the Borrower as payee to the Lender. All proceeds of property insurance will be used to replace damaged items in like kind so long as no Event of Default shall be existing; provided that whenever an Event of Default shall be existing, the Lender may apply any proceeds of the insurance which may be received by it toward payment of the Liabilities, whether or not due, in such order of application as the Lender may determine. The Borrower and the Guarantor shall notify the Lender of all material insurance claims, and the Lender as an additional insured shall have the right to participate in any settlement negotiations with insurance companies on any material claim settlement, but is not obligated to do so. If the Borrower or the Guarantor, at any time or times after the date of this Agreement, shall fail to obtain or maintain any of the policies of insurance required under the terms of this Agreement or to pay any premium in whole or in part relating to the policies, then the Lender, without waiving or releasing any obligation or Event of Default, may at any time or times after the failure to obtain or maintain the policies, obtain and maintain the policies of insurance and pay the premiums and take any other action with respect to the policies which the Lender deems advisable in its reasonable discretion (but the Lender shall be under no obligation to do so). 3.5 Notices. The Borrower and the Guarantor shall, as soon as possible and in any event within five (5) Business Days after the Borrower or the Guarantor learns of the following, give written notice to the Lender of: (a) any material proceeding (including, without limitation, litigation, investigations, arbitration, or governmental proceedings) being instituted or threatened to be instituted by or against the Borrower, Guarantor or D3, or related to D3 or its assets, in any federal, state, local, or foreign court or before any commission or other regulatory body (federal, 5 DBI/63832003.3 EFTA01092882  state, local, or foreign); (b) any notice that the Borrower's, Guarantor's, or D3's operations are not in full compliance with requirements of applicable federal, state, or local law, including environmental, health, and safety statutes and regulations; (c) the occurrence of a Material Adverse Effect; or (d) any default under the D3 Operating Agreement or otherwise relating to or with respect to D3 or the Pledged Interests. The Borrower and the Guarantor shall promptly forward to Lender copies of all correspondence and documentation received by Borrower or Guarantor from or with respect to D3 or the Pledged Interests. 3.6 Further Assurances. The Borrower and the Guarantor shall take such actions as are necessary or as the Lender may reasonably request from time to time to ensure that the Liabilities under this Agreement and the other Financing Agreements are secured by a first priority security interest (subject to Permitted Liens) in substantially all of the assets of the Borrower and Guarantor, in each case in such manner as the Lender may reasonably determine, including (a) the execution and delivery of joinders, guaranties, security agreements, pledge agreements, mortgages, deeds of trust, financing statements and other documents, and the filing or recording of any of the foregoing, and (b) the delivery of certificated securities and other Collateral with respect to which perfection is obtained by possession (and the Borrower and Guarantor shall use their best efforts and take all actions reasonably required by the Lender to ensure that all equity interests are treated as certificated securities under Article 8 of the UCC). ARTICLE IV NEGATIVE COVENANTS The Borrower and Guarantor jointly and severally covenant and agree until the indefeasible payment in full of the Liabilities, as follows: 4.1 Encumbrances. The Borrower and the Guarantor will not create, incur, assume, or suffer to exist any security interest, mortgage, pledge, lien, or other encumbrance of any nature whatsoever on any of its real or personal property assets, including, without limitation, the Collateral, except for Permitted Liens. 4.2 Indebtedness. Except as listed on the attached Schedule 4.2 the Borrower shall not incur, create, assume, or become or be liable in any manner with respect to, or permit to exist any Indebtedness, except for the Liabilities. 4.3 Investments or Loans. The Borrower shall not make or permit to exist investment! or loans in or to any other Person. The Guarantor shall not make or permit to exist investments or loan in or to any other Person, except: (a) investments in cash and short-term direct obligations of the United States Government; (b) investments in negotiable certificates of deposit issued by any bank acceptable to the Lender, in its reasonable discretion, and payable to the order of the Borrower or Guarantor or to bearer and delivered to the Lender as collateral; (c) investments in commercial paper rated Al or PI; (d) Permitted Investments; (f) existing investments set forth on Schedule 4.3. 6 DBI/63832003.3 EFTA01092883  4.4 Disposal of Property. Except as otherwise permitted under this Agreement, the Borrower and Guarantor shall not sell, lease, transfer, or otherwise dispose of any of the Collateral, except for reinvestments in the ordinary course. 4.5 Amendment of Documents. The Borrower and Guarantor shall not, without the prior written consent of the Lender, exercise or waive any rights under, or permit any amendment or modification to, the D3 Operating Agreement, the Securities Purchase Agreement, or any other agreements with or relating to D3 or the Transactions. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lender that: 5.1 Authority. The execution by the Borrower and Guarantor of this Agreement and of all the Financing Agreements, and the performance of their obligations under this Agreement and under the Financing Agreements: (a) are within the Borrower's and the Guarantor's powers; (b) are duly authorized, executed and delivered; (c) are not in contravention of the terms of any material indenture, agreement, or undertaking to which the Borrower or the Guarantor is a party or by which the Borrower, the Guarantor or any of their property is bound; (d) do not, as of the execution of this Agreement, require any governmental or other consent, registration or approval; and (e) will not, except as contemplated in this Agreement, result in the imposition of any lien, charge, security interest, or encumbrance upon any property of the Borrower or Guarantor under any existing indenture, mortgage, deed of trust, loan or credit agreement, or other material agreement or instrument to which the Borrower or the Guarantor is a party or by which the Borrower, the Guarantor or any of their property may be bound or affected. 5.2 Binding Effect. This Agreement and all of the Financing Agreements are the legal, valid, and binding obligations of the Borrower and the Guarantor and are enforceable against the Borrower and Guarantor in accordance with their terms. 5.3 Financial Data. All financial statements and data regarding the financial condition of the Borrower and the Guarantor previously furnished to the Lender or required to be furnished to the Lender as a condition of the Lender executing this Agreement, are true, complete, and accurate in all material respects, as of the dates set forth therein. All information, reports, and other papers and data furnished to the Lender is true, complete, and accurate in all material respects. 5.4 Collateral. The Borrower and Guarantor each has good, indefeasible, and merchantable title to its real and personal properties and assets (including, without limitation, the Collateral), including but not limited to all assets included on its financial statements, free and clear of all liens, claims, or encumbrances of any kind, except for Permitted Liens. 5.5 Solvency. The Borrower and the Guarantor are solvent, are able to pay debts as they become due, have capital sufficient to carry on its current business and all businesses in which it is about to engage, and now owns property having a value both at fair valuation and at present fair salable value greater than the amount required to pay its debts. The Borrower and the 7 DBI/63832003.3 EFTA01092884 Guarantor will not be rendered insolvent by the execution of this Agreement or of any of the Financing Agreements or by the transactions contemplated under this Agreement or under the Financing Agreements. 5.6 Taxes. The Borrower and Guarantor have filed all federal, state, and local tax reports and returns it is required by any law or regulation to have filed, except for reports not filed pursuant to extensions duly obtained, have either duly paid all taxes, duties, and charges indicated as due on such returns and reports or made adequate provision for the payment of such taxes, duties, and charges, and the assessment of any material amount of additional taxes in excess of those paid and reported is not reasonably expected. The consummation of the Transactions shall not result in the imposition of any tax under 26 USC §5891. 5.7 Litigation and Proceedings. No judgments are outstanding against the Borrower or the Guarantor and no litigation, investigation, contested claim, or governmental proceeding is now pending or, to the Borrower's knowledge, threatened, by or against the Borrower or Guarantor, except judgments and pending or threatened litigation, investigations, contested claims, and governmental proceedings that if resolved in a manner unfavorable to the Borrower would not, in the aggregate, have a Material Adverse Effect. To the Borrower's and Guarantor's knowledge, the Borrower and the Guarantor does not have any contingent liabilities that can reasonably be expected to have, in the aggregate, a Material Adverse Effect. 5.8 Other Agreements. The Borrower and the Guarantor are not in default under any material contract, lease, or commitment to which either is a party or by which either is bound, including but not limited to the first mortgage. 5.9 Compliance with Laws and Regulations. The execution and performance by the Borrower and Guarantor of this Agreement and of the other Transaction Documents, and the consummation of the Transactions, are and will be in compliance with all applicable laws. The Borrower and Guarantor are in compliance with all applicable laws, orders, regulations, and ordinances of all federal, foreign, state, and local governmental authorities relating to their respective business, operations, and assets, except for laws, orders, regulations, and ordinances, the violation of which would not, in the aggregate, have a Material Adverse Effect. 5.10 Consents. Except for consents from the first mortgagee under the mortgage listed on Schedule 5.10, if any, there arc no persons, governmental agencies, or other entities from which the Borrower or Guarantor must obtain consent to the consummation of the transactions described in this Agreement. 5.11 Business Loan. The Term Loan, including interest rate, fees and charges as contemplated hereby, is a business purpose loan within the purview of 815 ILCS 205/4(1)(c), as amended from time to time. 5.12 Absolute Reliance on Representations and Warranties. All representations and warranties contained in this Agreement and any financial statements, instruments, certificates, schedules or other documents delivered in connection herewith, shall survive the execution and delivery of this Agreement, regardless of any investigation made by the Lender, or on the Lender's behalf. 8 DB 1/63832003.3 EFTA01092885  ARTICLE VI CONDITIONS OF ADVANCES; DELIVERIES 6.1 Conditions Precedent to Advance of Term Loan on the Closing Date. Notwithstanding any other provisions contained in this Agreement, as a condition precedent to any obligations of the Lender under this Agreement to make the Term Loan on the Closing Date, all of the following shall have occurred on or before the Closing Date: (a) The Borrower and Guarantor shall have delivered, or caused to be delivered, all of the following documents to the Lender, in form and substance reasonably satisfactory to the Lender: (i) Original fully completed, dated, and executed originals of all of the following documents: (1) This Agreement; (2) The Term Note; (3) Security Agreement; (4) Mortgage; (5) The Pledge Agreement; (6) Account control agreements in form and substance acceptable to the Lender with respect- to each of the deposit and investment accounts of the Guarantor, executed by the Guarantor, the Lender, and the institution at which each such account is maintained and/or the securities intermediary, as applicable; (7) Pledge agreements with respect to the pledge of all investments held by the Guarantor, in substantially the form of the Pledge Agreement, including the consents of all parties whose consent is required for such pledge; (8) Original certificates of title for all vehicles and boats owned by Guarantor, together with endorsements and such other documents as shall be necessary to reflect and perfect the Lender's security interest; (9) The other Financing Agreements, including but not limited to financing statements and other documents to perfect the Lender's security interest in the Collateral; (ii) Certificates from the Borrower's insurance carriers evidencing that all required insurance is in effect, together with the executed form of the Lender's loss payee endorsement and evidencing that the Lender is an additional insured, all as described in Section 33 of this Agreement; 9 DBI/63832003.3 EFTA01092886  (iii) Copies of the securities purchase agreement, subscription agreement, D3 Operating Agreement, and other documents relating to the Borrower's investment and equity interest in D3, and proof satisfactory to the Lender that the proceeds of the Borrower's investment in D3 has been used for the purchase of settlements in accordance with the terms of the Transaction Documents; (iv) Original certificates representing the certificated membership interests in D3, to the extent certificates have been prepared and delivered to members of D3; (v) Evidence that all consents needed in order to consummate the Transactions have been obtained; and (vi) Other documents, agreements and information as the Lender may reasonably request. (b) No material adverse change, as determined by the Lender in its sole discretion, in the financial condition or operations of the Borrower or Guarantor shall have occurred and be continuing. (c) All consents needed in order to consummate the Transactions shall have been obtained. (d) The Lender shall have received, in form and substance satisfactory to the Lender, all certificates, orders, authorities, consents, affidavits, schedules, instruments, security agreements, financing statements, mortgages, and other documents which are provided for under this Agreement, or which the Lender may at any time reasonably request. 6.2 Subsequent Deliveries. The Borrower and the Guarantor covenant and agree to deliver the documents set forth on Schedule 6.2 to Lender, in form and substance acceptable to Lender, within five days after the Closing Date. Failure to deliver such documents within that time period shall constitute an Event of Default. ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES OF THE LENDER 7.1 Event of Default. For purposes of this Agreement, the occurrence of any of the following events shall be a "Event of Default": (a) The Borrower or Guarantor shall fail to perform any of the Liabilities requiring the payment of money when the payment is due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure shall not be cured within five (5) Business Days of the applicable due date. (b) The Borrower or Guarantor shall fail or neglect to perform, keep, or observe any of its covenants, conditions, or agreements contained in Sections 3.2, 14 Article IV or Article VI of this Agreement, or in Section 4.4 and 4.9 of the Security Agreement. 10 DBI/63832003.3 EFTA01092887  (c) The Borrower or Guarantor shall fail or neglect to perform, keep or observe any of its covenants, conditions or agreements contained in Sections 3.1, 3.5, 3.6 of this Agreement, and the breach continues for a period of ten (10) days after notice of the breach has been given by the Lender to the Borrower or the Guarantor, as the case may be. (d) The Borrower or the Guarantor shall fail or neglect to perform, keep, or observe any of its respective covenants, conditions, or agreements contained in this Agreement or in any of the Financing Agreements to which it is a party, other than the covenants, conditions, or agreements as provided in clause (a), (b) or (c) above, and the breach continues for a period of thirty (30) days after notice of the breach has been given by the Lender to the Borrower or the Guarantor. (e) Any representation or warranty now or hereafter made by the Borrower or the Guarantor in or in connection with this Agreement or any of the Financing Agreements, or made by D3 in connection with the Transactions, is untrue or incorrect in any material respect when made, or any schedule, certificate, statement, repor