Exhibit 10.35
EXECUTION VERSION
MASTER CREDIT FACILITY AGREEMENT
BY AND AMONG
THE PARTIES LISTED ON SCHEDULE I ATTACHED HERETO
AND
RED MORTGAGE CAPITAL, INC.
DATED AS OF
DECEMBER 31, 2008

 

 

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TABLE OF CONTENTS

              Page  
 
       
ARTICLE 1 THE COMMITMENT
    2  
Section 1.01. The Commitment
    2  
Section 1.02. Requests for Advances
    3  
Section 1.03. Maturity Date of Advances; Amortization
    3  
Section 1.04. Interest on Advances
    4  
Section 1.05. Coupon Rates for Variable DMBS Advances
    5  
Section 1.06. Notes
    6  
Section 1.07. Reserved
    6  
Section 1.08. Conversion from Variable Facility Commitment to Fixed Facility
Commitment
    6  
Section 1.09. Limitations on Right to Convert
    7  
Section 1.10. Conditions to Conversion
    7  
Section 1.11. Yield Maintenance
    7  
Section 1.12. Interest Rate Cap
    8  
ARTICLE 2 THE ADVANCES
    8  
Section 2.01. Rate Setting for an Advance
    8  
Section 2.02. DMBS Refinance Confirmation Form for Rollover Variable Advances
    9  
Section 2.03. Breakage and other Costs
    9  
Section 2.04. Advances
    9  
Section 2.05. Determination of Allocable Facility Amount and Valuations
    10  
Section 2.06. Future Advances Made on Increased Values
    10  
ARTICLE 3 COLLATERAL CHANGES
    11  
Section 3.01. Right to Add Collateral
    11  
Section 3.02. Procedure for Adding Collateral
    11  
Section 3.03. Right to Obtain Releases of Collateral
    12  
Section 3.04. Procedure for Obtaining Releases of Collateral
    12  
Section 3.05. Right to Substitutions
    14  
Section 3.06. Procedure for Substitutions
    14  
Section 3.07. Substitution Deposit
    15  
ARTICLE 4 INCREASE OF CREDIT FACILITY
    17  
Section 4.01. Request to Increase Commitment
    17  
Section 4.02. Procedure for Obtaining Increases in Commitment
    17  
Section 4.03. Closing
    17  
ARTICLE 5 TERMINATION OF FACILITIES
    18  
Section 5.01. Right to Complete or Partial Termination of Facilities
    18  
Section 5.02. Procedure for Complete or Partial Termination of Facilities
    18  
Section 5.03. Right to Terminate Credit Facility
    18  
Section 5.04. Procedure for Terminating Credit Facility
    19  

 

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              Page  
 
       
ARTICLE 6 CONDITIONS PRECEDENT TO ALL REQUESTS
    19  
Section 6.01. Conditions Applicable to All Requests
    19  
Section 6.02. Conditions Precedent to Initial Advance
    21  
Section 6.03. Conditions Precedent to Future Advances
    22  
Section 6.04. Conditions Precedent to Addition of an Additional Mortgaged
Property to the Collateral Pool
    23  
Section 6.05. Conditions Precedent to Release of Property from the Collateral
Pool.
    24  
Section 6.06. Conditions Precedent to Substitutions
    25  
Section 6.07. Conditions Precedent to Increase in Commitment
    26  
Section 6.08. Conditions Precedent to Conversion
    27  
Section 6.09. Conditions Precedent to Complete or Partial Termination of
Facilities
    27  
Section 6.10. Conditions Precedent to Termination of Credit Facility
    28  
Section 6.11. Delivery of Opinion Relating to Advance Request, Addition Request,
Substitution Request, Conversion Request or Expansion Request
    28  
Section 6.12. Delivery of Property-Related Documents
    28  
Section 6.13. Additional Collateral
    30  
Section 6.14. Letters of Credit
    30  
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
    32  
Section 7.01. Representations and Warranties of Borrower
    32  
Section 7.02. Representations and Warranties of Lender
    32  
ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR
    32  
Section 8.01. Compliance with Agreements
    32  
Section 8.02. Maintenance of Existence
    33  
Section 8.03. Financial Statements; Accountants’ Reports; Other Information
    33  
Section 8.04. Access to Records; Discussions With Officers and Accountants
    36  
Section 8.05. Certificate of Compliance
    36  
Section 8.06. Maintain Licenses
    37  
Section 8.07. Inform Lender of Material Events
    37  
Section 8.08. Compliance with Applicable Law
    38  
Section 8.09. Alterations to the Mortgaged Properties
    38  
Section 8.10. Loan Document Taxes
    39  
Section 8.11. Further Assurances
    39  
Section 8.12. Transfer of Ownership Interests in Borrower or Guarantor
    39  
Section 8.13. Transfer of Ownership of Mortgaged Property
    40  
Section 8.14. Consent to Prohibited Transfers
    42  
Section 8.15. Date-Down Endorsements
    43  
Section 8.16. Ownership of Mortgaged Properties
    43  
Section 8.17. Compliance with Net Worth Test
    43  
Section 8.18. Compliance with Liquidity Test
    43  
Section 8.19. Change in Property Manager
    43  
Section 8.20. Single Purpose Entity
    43  
Section 8.21. ERISA
    44  
Section 8.22. Consents or Approvals
    44  
Section 8.23. Prepayment of Rents
    44  
Section 8.24. Affiliate Contracts
    44  
Section 8.25. Post Closing Obligation
    44  
Section 8.26. Geographical Diversification Requirements
    45  

 

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              Page  
 
       
ARTICLE 9 NEGATIVE COVENANTS OF BORROWER
    45  
Section 9.01. Other Activities
    45  
Section 9.02. Liens
    45  
Section 9.03. Indebtedness
    45  
Section 9.04. Principal Place of Business
    45  
Section 9.05. Condominiums
    46  
Section 9.06. Restrictions on Distributions
    46  
Section 9.07. No Hedging Arrangements
    46  
Section 9.08. Confidentiality of Certain Information
    46  
ARTICLE 10 FEES
    46  
Section 10.01. Reserved
    46  
Section 10.02. Occupancy Deficiency Origination Fee
    46  
Section 10.03. Origination Fees
    47  
Section 10.04. Due Diligence Fees
    48  
Section 10.05. Legal Fees and Expenses
    49  
Section 10.06. Failure to Close any Request
    49  
ARTICLE 11 EVENTS OF DEFAULT
    49  
Section 11.01. Events of Default
    49  
ARTICLE 12 REMEDIES
    51  
Section 12.01. Remedies; Waivers
    51  
Section 12.02. Waivers; Rescission of Declaration
    52  
Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and
Other Obligations
    52  
Section 12.04. No Remedy Exclusive
    52  
Section 12.05. No Waiver
    53  
Section 12.06. No Notice
    53  
ARTICLE 13 INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES
    53  
Section 13.01. Insurance and Real Estate Taxes
    53  
Section 13.02. Replacement Reserves
    55  
Section 13.03. Completion/Repair Reserves
    55  
ARTICLE 14 LIMITS ON PERSONAL LIABILITY
    55  
Section 14.01. Personal Liability to Borrower
    55  
Section 14.02. Additional Borrowers
    57  
Section 14.03. Borrower Agency Provisions
    58  
Section 14.04. Joint and Several Obligation; Cross-Guaranty
    58  
Section 14.05. Waivers With Respect to Other Borrower Secured Obligation
    59  
Section 14.06. No Impairment
    62  
Section 14.07. Election of Remedies
    63  
Section 14.08. Subordination of Other Obligations
    64  
Section 14.09. Insolvency and Liability of Other Borrower
    64  
Section 14.10. Preferences, Fraudulent Conveyances, Etc
    65  
Section 14.11. Maximum Liability of Each Borrower
    66  
Section 14.12. Liability Cumulative
    66  

 

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              Page  
 
       
ARTICLE 15 MISCELLANEOUS PROVISIONS
    66  
Section 15.01. Counterparts
    66  
Section 15.02. Amendments, Changes and Modifications
    66  
Section 15.03. Payment of Costs, Fees and Expenses
    67  
Section 15.04. Payment Procedure
    67  
Section 15.05. Payments on Business Days
    68  
Section 15.06. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial
    68  
Section 15.07. Severability
    69  
Section 15.08. Notices
    69  
Section 15.09. Further Assurances and Corrective Instruments
    71  
Section 15.10. Term of this Agreement
    72  
Section 15.11. Assignments; Third-Party Rights
    72  
Section 15.12. Headings
    72  
Section 15.13. General Interpretive Principles
    72  
Section 15.14. Interpretation
    73  
Section 15.15. Standards for Decisions, Etc
    73  
Section 15.16. Decisions in Writing
    73  
Section 15.17. Requests
    73  
Section 15.18. Conflicts Between Agreements
    73  
Section 15.19. Timing of Decisions
    74  

 

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EXHIBITS

     
EXHIBIT A
  Schedule of Initial Mortgaged Properties and Initial Valuations
EXHIBIT B
  RESERVED
EXHIBIT C
  RESERVED
EXHIBIT D
  RESERVED
EXHIBIT E
  Confirmation of Guaranty
EXHIBIT F
  Compliance Certificate
EXHIBIT G-1
  Borrower Organizational Certificate
EXHIBIT G-2
  Guarantor Organizational Certificate
EXHIBIT H
  Conversion Request
EXHIBIT I
  Master Credit Facility Agreement Conversion Amendment
EXHIBIT J
  Rate Form
EXHIBIT K
  RESERVED
EXHIBIT L
  Advance Request
EXHIBIT M
  Request (Addition/Release)
EXHIBIT N
  Confirmation of Obligations
EXHIBIT O
  Expansion Request
EXHIBIT P
  Facility Termination Request
EXHIBIT Q
  Amendment to Master Credit Facility Agreement
EXHIBIT R
  Credit Facility Termination Request
EXHIBIT S
  RESERVED
EXHIBIT T
  RESERVED
EXHIBIT U
  Cash Collateral, Security and Custody Agreement
EXHIBIT V
  Letter of Credit
EXHIBIT W-1
  Bank Legal Opinion (Foreign)
EXHIBIT W-2
  Bank Legal Opinion (Domestic)
EXHIBIT X
  Form of Rent Roll
 
   
APPENDIX I
  Definitions
 
   
SCHEDULE I
  List of Borrowers

 

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MASTER CREDIT FACILITY AGREEMENT
THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 31st day of December,
2008, by and among (i) the parties listed on Schedule I attached hereto, each as
a Borrower hereunder; (ii) RED MORTGAGE CAPITAL, INC., an Ohio corporation; and
(iii) EDUCATION REALTY TRUST, INC., a Maryland corporation, and EDUCATION REALTY
OPERATING PARTNERSHIP, LP, a Delaware limited partnership, as guarantor.
RECITALS
A. Borrower owns one (1) or more Rental Properties (unless otherwise defined or
the context clearly indicates otherwise, capitalized terms shall have the
meanings ascribed to such terms in Appendix I of this Agreement) as more
particularly described in Exhibit A to this Agreement.
B. Borrower has requested that Lender establish a $222,411,000 Credit Facility
in favor of Borrower, comprised initially of (a) a $74,550,000 Variable
Facility, of which $49,874,000 will be advanced initially, all or part of which
can be converted to a Fixed Facility in accordance with, and subject to, the
terms and conditions of this Agreement and (b) a $147,861,000 Fixed Facility.
C. To secure the obligations of Borrower under this Agreement and the other Loan
Documents issued in connection with the Credit Facility, Borrower shall create a
Collateral Pool in favor of Lender. The Collateral Pool shall be comprised of
(i) the Rental Properties listed on Exhibit A and (ii) any other collateral
pledged to Lender from time to time by Borrower pursuant to this Agreement or
any other Loan Documents.
D. Each Note and Security Document related to the Mortgaged Properties
comprising the Collateral Pool shall be cross-defaulted (i.e., a default under
any Note, Security Document relating to the Collateral Pool and under this
Agreement, shall constitute a default under each Note, Security Document and
this Agreement related to the Mortgaged Properties comprising the Collateral
Pool) and cross-collateralized (i.e., each Security Instrument related to the
Mortgaged Properties within the Collateral Pool shall secure all of Borrower’s
obligations under this Agreement and the other Loan Documents) and it is the
intent of the parties to this Agreement that, after an Event of Default, Lender
may accelerate any Note without needing to accelerate any other Note and that in
the exercise of its rights and remedies under the Loan Documents, Lender may,
except as provided in this Agreement, exercise and perfect any and all of its
rights in and under the Loan Documents with regard to any Mortgaged Property
without needing to exercise and perfect its rights and remedies with respect to
any other Mortgaged Property and that any such exercise shall be without regard
to the Allocable Facility Amount assigned to such Mortgaged Property and that
Lender may recover an amount equal to the full amount outstanding in respect of
any of the Notes in connection with such exercise and any such amount shall be
applied as determined by Lender pursuant to the terms of this Agreement, the
Notes and the other Loan Documents.

 

 

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E. Subject to the terms, conditions and limitations of this Agreement, Lender
has agreed to establish the Credit Facility.
NOW, THEREFORE, Borrower, Lender, and Guarantor in consideration of the mutual
promises and agreements contained in this Agreement, hereby agree as follows:
ARTICLE 1
THE COMMITMENT
Section 1.01. The Commitment.
Subject to the terms, conditions and limitations of this Agreement:
(a) Variable Facility Commitment.
(i) Subject to the provisions of subsection (a)(ii) below, Lender agrees to make
Variable DMBS Advances and Variable Structured ARM Advances to Borrower from
time to time during the Variable Facility Availability Period in accordance with
the terms and provisions of this Agreement. The aggregate principal balance of
the Variable Advances Outstanding at any time shall not exceed the Variable
Facility Commitment. No Variable DMBS Advances shall be made, or be permitted to
remain Outstanding unless the aggregate of Variable DMBS Advances Outstanding is
at least $25,000,000. The borrowing of a Variable Advance shall permanently
reduce the Variable Facility Commitment by the original principal amount of such
Variable Advance. Borrower may not re-borrow any part of a Variable Advance
which it has previously borrowed and repaid. Except as set forth in Section 2.06
of this Agreement, no Variable Advances shall be made as a result of increases
in the Valuation of any Mortgaged Property. Any portion of the Variable Facility
Commitment that is not advanced on the Initial Closing Date and which Lender
determines may be advanced to Borrower, is available to be advanced to Borrower
within ninety (90) days of the Initial Closing Date.
(ii) Limitation on Variable DMBS Advances. Fannie Mae, in its sole discretion,
shall determine whether a Variable DMBS Advance execution is available to
Borrower in connection with each proposed Variable DMBS Advance. The limitations
set forth in this Section 1.01(a)(ii) do not apply to Rollover Variable
Advances.
(b) Fixed Facility Commitment. Lender agrees to make Fixed Advances to Borrower
from time to time during the Fixed Facility Availability Period. The aggregate
original principal of the Fixed Advances shall not exceed the Fixed Facility
Commitment. The borrowing of a Fixed Advance shall permanently reduce the Fixed
Facility Commitment by the original principal amount of such Fixed Advance.
Borrower may not re-borrow any part of a Fixed Advance which it has previously
borrowed and repaid. Except as set forth in Section 2.06, no Fixed Advances
shall be made as a result of increases in the Valuation of any Mortgaged
Property. Any portion of the Fixed Facility Commitment that is not advanced on
the Initial Closing Date and which Lender determines may be advanced to
Borrower, is available to be advanced to Borrower within ninety (90) days of the
Initial Closing Date.

 

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Section 1.02. Requests for Advances.
Borrower shall request an Advance by giving Lender an Advance Request in
accordance with Section 2.04. The Advance Request shall indicate whether the
Request is for a Fixed Advance, a Variable DMBS Advance, a Variable Structured
ARM Advance or more than one type of Advance.
Section 1.03. Maturity Date of Advances; Amortization.
(a) Variable Advances; Amortization. The maturity date of each Variable Advance
shall be the earlier of (i) the Variable Facility Termination Date, (ii) the
maturity date of the applicable outstanding DMBS (with respect to a Variable
DMBS Advance), or (iii) such other maturity date referenced in any Variable
Facility Note. Subject to the terms of the preceding sentence, the maturity date
of any Variable Advance shall be specified by Borrower for such Variable
Advance, provided that such maturity date shall be no earlier than the date five
(5) years after the Closing Date of such Variable Advance and no later than the
date ten (10) years after the Closing Date of such Variable Advance, provided
that no maturity date shall exceed the Variable Facility Termination Date. Not
less than thirty (30) Business Days prior to the maturity date of the applicable
outstanding DMBS, the relevant Borrower may request that the Variable DMBS
Advance backing the outstanding DMBS be (1) refinanced with a Rollover Variable
Advance through the sale of a new DMBS using the DMBS Refinance Request Form (in
the form attached to the applicable Variable Facility Note) which, shall take
effect on the maturity date of the outstanding DMBS and shall be funded by the
sale of a single DMBS, in an amount sufficient to fund the aggregate outstanding
principal balance of such Variable DMBS Advance or (2) converted to a Fixed
Advance which, shall take effect on the maturity date of the outstanding DMBS.
No Borrower may refinance any Variable DMBS Advance on or after the Variable
Facility Termination Date. The DMBS Issue Date shall be the first day of the
month in which the DMBS is issued, and the maturity date of the DMBS funding
each Variable DMBS Advance shall be specified by Borrower in its Advance
Request, which date shall be three, six or nine full months after the DMBS Issue
Date; provided, however, in connection with a release, an addition or a
substitution of a Mortgaged Property and subject to Borrower’s payment to Lender
of an administrative fee of $2,500, the maturity date of the DMBS funding a
Variable DMBS Advance may be one or two full months after the DMBS Issue Date.
For these purposes, a year shall be deemed to consist of twelve (12) 30-day
months. For example, the date which completes three full months after September
1 shall be December 1; and the date which completes three full months after
January 1 shall be April 1. The initial Variable Advance will require
amortization calculated over the Amortization Period. Any Future Advances that
are Variable Advances may be payable interest only, in Lender’s sole and
absolute discretion.
(b) Fixed Advances; Amortization. The maturity date of any Fixed Advance shall
be specified by Borrower for such Fixed Advance, provided that such maturity
date shall be no earlier than the date five (5) years after the Closing Date of
such Fixed Advance and no later than the date ten (10) years after the Closing
Date of such Fixed Advance, provided that no maturity date shall exceed the
Fifteenth Anniversary. The initial Fixed Advance will require amortization
calculated over the Amortization Period. Any Future Advances that are Fixed
Advances may be payable interest only, in Lender’s sole and absolute discretion.

 

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(c) Prepayment.
(i) Fixed Advances are not prepayable at any time, provided that,
notwithstanding the foregoing, Borrower may prepay all or a portion of any Fixed
Advance pursuant to the yield maintenance provisions of the Fixed Facility Note.
(ii) Subject to the terms and conditions of the Variable Facility Notes, the
Indebtedness extended to Borrowers hereunder through Variable Advances is
prepayable in whole or in part at any time pursuant to the fee maintenance
provisions of the Variable Facility Notes.
Section 1.04. Interest on Advances.
(a) Partial Month Interest. Notwithstanding anything to the contrary in this
Section 1.04, if an Advance is not made on the first day of a calendar month,
and, with respect to a Variable DMBS Advance, the DMBS Issue Date is the first
day of the month following the month in which the Advance is made, Borrower
shall pay interest on the original stated principal amount of the Advance for
the partial month period commencing on the Closing Date for the Advance and
ending on the last day of the calendar month in which the Closing Date occurs.
Borrower shall pay interest for such partial month on any (i) Variable DMBS
Advance at a rate per annum equal to the greater of (1) the Coupon Rate as
determined in accordance with Section 1.05 and (2) a rate determined by Lender,
based on Lender’s cost of funds and approved at least three (3) Business Days
prior to such Advance, in writing, by Borrower, (ii) Variable Structured ARM
Advance at a rate per annum equal to a rate determined by Lender based on
Lender’s cost of funds and approved at least three (3) Business Days prior to
such Advance in writing by Borrower; and (iii) Fixed Advance at a rate, per
annum equal to the greater of (1) the interest rate described in subsection
(d)(i) of this Section 1.04 and (2) a rate determined by Lender, based on
Lender’s cost of funds, and approved at least three (3) Business Days prior to
such Advance, in writing, by Borrower.
(b) Variable DMBS Advances.
(i) Discount. Each Variable DMBS Advance shall be a discount loan. The original
stated principal amount of a Variable DMBS Advance shall be the sum of the Price
and the Discount. The Price and Discount of each Variable DMBS Advance shall be
determined in accordance with the procedures set forth in Section 2.01. The
proceeds of the Variable DMBS Advance made available by Lender to Borrower will
equal the Price. Borrower shall pay to Lender, in advance of Lender making the
initial Variable DMBS Advance requested by Borrower, the entire Discount for the
Variable DMBS Advance. With respect to any subsequent Variable DMBS Advances,
Borrower shall pay to Lender the Discount for the Variable DMBS Advance in
monthly installments. Each monthly installment shall be equal to the product of
(1) a fraction with one as the numerator and the number of months in the term of
the applicable DMBS as the denominator, multiplied by (2) the Discount
calculated on the applicable then Outstanding DMBS (for example, if the DMBS
term is three (3) months and the entire Discount is $100,000, such monthly
installments shall equal one third (1/3) of the entire Discount (i.e. $33,333).
The first installment shall be payable on or prior to the Closing Date of such
Variable DMBS Advance. Subsequent installments shall be payable on the first day
of each calendar month, commencing on the first day of the second full calendar
month following the DMBS Issue Date, to the first day of the month prior to the
maturity date of such DMBS.

 

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(ii) Variable Facility Fee. In addition to paying the Discount and the partial
month interest, if any, Borrower shall pay monthly installments of the Variable
Facility Fee to Lender for each Variable DMBS Advance Outstanding from the
applicable DMBS Issue Date to its maturity date. The Variable Facility Fee shall
be payable in advance, in accordance with the terms of the Variable Facility
Note. The first installment shall be payable on or prior to the Closing Date for
the Variable DMBS Advance and shall apply to the first full calendar month of
the DMBS issued in connection with such Variable DMBS Advance. Subsequent
installments shall be payable on the first day of each calendar month,
commencing on the first day of the second full calendar month of such DMBS, to
its maturity date. Each installment of the Variable Facility Fee shall be in an
amount equal to the product of (1) the Variable Facility Fee, (2) the Variable
DMBS Advance Outstanding, and (3) 1/12.
(c) Variable Structured ARM Advances.
(i) Adjustable Rate. Each Variable Structured ARM Advance shall bear interest at
an Adjustable Rate which Adjustable Rate shall include the Margin. The
Adjustable Rate with respect to each Variable Structured ARM Advance shall
change on each Rate Change Date until such Variable Structured ARM Advance is
repaid in accordance with the applicable Variable Facility Note.
(d) Fixed Advances.
(i) Annual Interest Rate. Each Fixed Advance shall bear interest at a rate, per
annum, equal to the Cash Interest Rate for such Fixed Advance.
(ii) Monthly Payment. In addition to paying the partial month interest, if any,
Borrower shall pay monthly installments of the Cash Interest Rate to Lender for
each Fixed Advance from the first day of the month following the Closing Date
for such Advance, to its maturity date. The Cash Interest Rate shall be payable
in arrears, in accordance with the terms of the Fixed Facility Note.
Installments shall be payable on the first day of each calendar month,
commencing on the first day of the second full calendar month of such Advance,
to its maturity date.
Section 1.05. Coupon Rates for Variable DMBS Advances.
The Coupon Rate applicable to a Variable DMBS Advance shall mean the sum of
(1) an imputed interest rate as determined by Lender pursuant to Section 2.01 of
this Agreement (rounded to three places) payable for the DMBS pursuant to the
DMBS Commitment (“DMBS Imputed Interest Rate”) and (2) the Variable Facility
Fee.

 

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Section 1.06. Notes.
(a) Variable Advances. The obligation of Borrower to repay the Variable Advances
shall be evidenced by the Variable Facility Notes. The Variable Facility Notes
shall be payable to the order of Lender and shall be made in the original
principal amount of each Variable Advance.
(b) Fixed Advances. The obligation of Borrower to repay the Fixed Advances shall
be evidenced by the Fixed Facility Notes. The Fixed Facility Notes shall be
payable to the order of Lender and shall be made in the original principal
amount of each Fixed Advance.
Section 1.07. Reserved.
Section 1.08. Conversion from Variable Facility Commitment to Fixed Facility
Commitment.
Except as provided in Section 1.09, Borrower shall have the right, from time to
time prior to the Variable Facility Termination Date, to convert all or any
portion of the Variable Facility Commitment to the Fixed Facility Commitment,
provided that the maturity date for any such Fixed Advance shall be as required
generally for Fixed Advances pursuant to Section 1.03(b). If any Variable
Advances Outstanding under a Variable Facility Note are converted to a Fixed
Advance, the Fixed Facility Note executed in connection with such Fixed Advance
shall not have a maturity date beyond the maturity date set forth in the
original Variable Facility Note. The Variable Facility Commitment shall be
reduced by, and the Fixed Facility Commitment shall be increased by, the amount
of each conversion.
(a) Request. To convert all or a portion of the Variable Facility Commitment to
the Fixed Facility Commitment, Borrower shall deliver a Conversion Request to
Lender. Each Conversion Request shall designate (i) the amount of the Variable
Facility Commitment to be converted, and (ii) any Variable Advances Outstanding
that will be prepaid on or before the Closing Date for the conversion as
required by Section 1.09(c).
(b) Closing. Subject to Section 1.09 and provided that all conditions contained
in Section 1.10 are satisfied, Lender shall permit the requested conversion to
close at offices designated by Lender on a Closing Date selected by Lender, and,
with respect to a Variable DMBS Advance, occurring on the maturity date of the
applicable outstanding DMBS, within thirty (30) Business Days after Lender’s
receipt of the Conversion Request (or on such other date as Borrower and Lender
may agree). At the closing, Lender and Borrower shall execute and deliver, at
the sole cost and expense of Borrower, in form and substance satisfactory to
Lender, the Conversion Documents. Borrower shall be obligated to pay an interest
rate and fees in connection with a conversion as determined in accordance with
the applicable requirements of the Fannie Mae product line then in effect.
(c) Minimum Remaining Amount of Variable DMBS Advances. After the closing of any
conversion, if any Variable DMBS Advances remain Outstanding, the minimum
aggregate principal amount Outstanding of such remaining Variable DMBS Advances
shall be not less than $25,000,000. If the aggregate principal amount
Outstanding of Variable DMBS Advances is less than $25,000,000, such Variable
DMBS Advances must be repaid or converted to Fixed Advances pursuant to the
terms of this Section and Sections 1.09 and 1.10.

 

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Section 1.09. Limitations on Right to Convert.
Borrower’s right to convert all or any portion of the Variable Facility
Commitment to the Fixed Facility Commitment is subject to the following
limitations:
(a) Reserved.
(b) Minimum Request. Each Conversion Request shall be in the minimum amount of
$3,000,000.
(c) Obligation to Prepay Variable Advances. Borrower shall prepay any difference
by which, after the conversion, the aggregate unpaid principal balance of all
Variable Advances Outstanding will exceed the Variable Facility Commitment.
(d) Failure to Convert. In the event all or a portion of the amount of the
Variable Facility Commitment set forth in the Conversion Request cannot be
converted because the increased Fixed Facility Commitment does not satisfy the
Underwriting Requirements, Borrower shall prepay the amount of the Variable
Facility Commitment that cannot be converted to a Fixed Facility Commitment and
shall pay all prepayment premiums and other fees associated with such
prepayment.
Section 1.10. Conditions to Conversion.
The conversion of all or any portion of the Variable Facility Commitment to the
Fixed Facility Commitment is subject to the satisfaction, on or before the
Closing Date, of (a) the conditions precedent contained in Section 6.08 and
Section 6.11 and (b) all applicable General Conditions contained in
Section 6.01.
Section 1.11. Yield Maintenance.
At such time as Borrower requests the first Fixed Advance, or, if prior in time,
elects to convert all or a portion of the Variable Facility Commitment to a
Fixed Facility Commitment, Borrower shall select yield maintenance with respect
to Fixed Advances. Borrower shall notify Lender of such selection on the Advance
Request for the first Fixed Advance or on the first Conversion Request, as
applicable. The terms and conditions of yield maintenance are contained in the
Fixed Facility Notes. The selection of Borrower as to yield maintenance made at
the time of the first Advance Request for a Fixed Advance or the first
Conversion Request shall apply to all Fixed Advances made pursuant to this
Agreement.

 

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Section 1.12. Interest Rate Cap.
To protect against fluctuations in interest rates during the term, pursuant to
the terms of the Pledge, Interest Rate Cap Agreement, Borrower shall make
arrangements for a LIBOR-based interest rate cap in form and substance
satisfactory to Lender with a counterparty satisfactory to Lender (“Interest
Rate Cap”) to be in place and maintained at all times with respect to the
portion of the Variable Facility Commitment which has been funded and remains
Outstanding. As set forth in the Pledge, Interest Rate Cap Agreement, Borrower
agrees to pledge its right, title and interest in the Interest Rate Cap to
Lender as additional collateral for the Indebtedness.
ARTICLE 2
THE ADVANCES
Section 2.01. Rate Setting for an Advance.
Rates for an Advance shall be set in accordance with the following procedures:
(a) Preliminary, Nonbinding Quote. At Borrower’s request, Lender shall quote an
estimate of the Cash Interest Rate (for a proposed Fixed Advance), or the
Adjustable Rate (for a proposed Variable Structured ARM Advance) or the DMBS
Imputed Interest Rate (for a proposed Variable DMBS Advance). Lender’s quote
shall be based on (i) in the case of a proposed Variable DMBS Advance, a
solicitation of bids from institutional investors selected by Lender in the case
of a DMBS execution or, in the case of a Fixed Advance or a Variable Structured
ARM Advance, the rate quoted by Fannie Mae for a cash execution and (ii) the
proposed terms and amount of the Advance selected by Borrower. The quote shall
not be binding upon Lender.
(b) Rate Setting. Borrower may submit to Lender, by facsimile transmission
before 1:00 p.m. Washington, D.C. time on any Business Day (“Rate Setting
Date”), a completed and executed Rate Form. The Rate Form shall specify the
amount, term, DMBS Issue Date, Variable Facility Fee, any breakage fee deposit
amount, the proposed maximum Coupon Rate (“Maximum Annual Coupon Rate”), the
proposed Maximum Adjustable Rate or Cash Interest Rate, as applicable, and
Closing Date for the Advance.
(c) Rate Confirmation. In the case of a DMBS execution, within one (1) Business
Day after receipt of the Rate Form and upon satisfaction of all of the
conditions to Lender’s obligation to make the Advance, Lender shall solicit bids
from institutional investors selected by Lender based on the information in the
Rate Form and, provided the actual Coupon Rate would be at or below the Maximum
Annual Coupon Rate, shall obtain a commitment (“DMBS Commitment”) for the
purchase of a DMBS having the bid terms described in the related Rate Form. In
the case of a cash execution, within one (1) Business Day after receipt of the
Rate Form, Lender shall obtain a commitment from Fannie Mae (“Fannie Mae
Commitment”) for the purchase of the proposed Advance having the terms described
in the related Rate Form. Lender shall then complete and countersign the Rate
Form thereby confirming the amount, term, and Closing Date for the Advance, in
the case of a Variable DMBS Advance, the DMBS Issue Date, DMBS Delivery Date,
DMBS Imputed Interest Rate, Variable Facility Fee, Coupon Rate, Discount and
Price, in the case of the Variable Structured ARM Advance, the Adjustable Rate,
and in the case of a Fixed Advance, the Cash Interest Rate and shall immediately
deliver by facsimile transmission the Rate Form to Borrower.

 

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Section 2.02. DMBS Refinance Confirmation Form for Rollover Variable Advances.
Not later than four (4) Business Days before the Closing Date for a Rollover
Variable Advance, Borrower shall execute and deliver to Lender a fully executed
DMBS Refinance Confirmation Form (in the form attached to the applicable
Variable Facility Note).
Section 2.03. Breakage and other Costs.
If Lender obtains, and then fails to fulfill, the DMBS Commitment or Fannie Mae
Commitment because the Advance is not made (for a reason other than Lender’s
default), Borrower shall pay all reasonable out-of-pocket costs payable to the
potential investor and other reasonable costs, fees and damages incurred by
Lender in connection with its failure to fulfill the DMBS Commitment or Fannie
Mae Commitment. Lender reserves the right to require Borrower to post a deposit
at the time the DMBS Commitment or Fannie Mae Commitment is obtained. Such
deposit shall be refundable to Borrower upon the delivery of the related DMBS or
the purchase of the Advance for cash by Fannie Mae.
Section 2.04. Advances.
Borrower may deliver an Advance Request to Lender:
(a) If the Advance Request is to obtain the Initial Advance and all conditions
precedent contained in Section 6.02 and Section 6.11 and the General Conditions
contained in Section 6.01 are satisfied on or before the Closing Date for the
Initial Advance, Lender shall make the Initial Advance on the Initial Closing
Date or on such other date as Borrower and Lender may agree.
(b) If the Advance Request is to obtain a Future Advance, such Advance Request
shall be in the minimum amount of $3,000,000, except that any Request for a
Variable DMBS Advance shall be in the minimum amount of $25,000,000. If all
conditions precedent contained in Section 6.03 and Section 6.11 and the General
Conditions contained in Section 6.01 are satisfied, Lender shall make the
requested Future Advance, at a closing to be held at offices designated by
Lender on a Closing Date selected by Lender, which date shall be not more than
three (3) Business Days after Borrower’s receipt from Lender of the confirmed
Rate Form (or on such other date as Borrower and Lender may agree).

 

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Section 2.05. Determination of Allocable Facility Amount and Valuations.
(a) Initial Determinations. On the Initial Closing Date, Lender shall determine
(i) the Allocable Facility Amount and Valuation for each Initial Mortgaged
Property, (ii) the Aggregate Debt Service Coverage Ratio and the Aggregate Loan
to Value Ratio, (iii) the Advance Amount, and (iv) the Commitment amount. The
determinations made as of the Initial Closing Date shall remain unchanged until
the First Anniversary. Changes in Allocable Facility Amount, Valuations, the
Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio
shall be made pursuant to Section 2.05(b).
(b) Monitoring Determinations. Once each Calendar Quarter within twenty
(20) Business Days after Borrower has delivered to Lender the reports required
in Section 8.03, Lender shall determine the Aggregate Debt Service Coverage
Ratio, the Aggregate Loan to Value Ratio, the Valuations and the Allocable
Facility Amounts and whether Borrower is in compliance with the other covenants
set forth in the Loan Documents. With respect to the third Calendar Quarter
during any Loan Year, monitoring determinations shall be calculated based on the
prior twelve (12) month period. After the First Anniversary, on an annual basis,
and if Lender decides that changed market or property conditions warrant, Lender
shall redetermine Allocable Facility Amounts and Valuations. Lender shall also
redetermine Allocable Facility Amounts to take account of any addition or
release of Collateral or other event that invalidates the outstanding
determinations. In determining Valuations, Lender shall use Cap Rates based on
its internal survey and analysis of cap rates for comparable sales in the
vicinity of the Mortgaged Property, with such adjustments as Lender deems
appropriate and without any obligation to use any information provided by
Borrower. If Lender is unable to determine a Cap Rate for a Mortgaged Property,
Lender shall have the right, not more than once annually, to obtain, at
Borrower’s expense, a market study in order to establish a Cap Rate. Lender
shall promptly disclose its determinations to Borrower. Until redetermined, the
outstanding Allocable Facility Amounts and Valuations shall remain in effect.
Notwithstanding anything in this Agreement to the contrary, no change in
Allocable Facility Amounts, Valuations, the Aggregate Loan to Value Ratio or the
Aggregate Debt Service Coverage Ratio shall, unless resulting from the removal
of Collateral from the Collateral Pool, (i) result in a Potential Event of
Default or Event of Default, (ii) require the prepayment of any Advances,
(iii) require the addition of Collateral to the Collateral Pool, or
(iv) preclude the making of a Rollover Variable Advance.
Section 2.06. Future Advances Made on Increased Values.
Borrower may request, and Lender, in its sole discretion, may advance Future
Advances based on decreases in the Aggregate Loan to Value Ratio and increases
in the Aggregate Debt Service Coverage Ratio as determined by Lender in
accordance with this Agreement and based on Lender’s determination that such
Future Advance may be made pursuant to Lender’s Underwriting Requirements for
the Fannie Mae “Supplemental Loan” product line then in effect, and pursuant to
the terms and conditions of the Loan Documents, but only to the extent that such
Future Advance and subsequent reallocation of the Allocable Facility Amounts do
not cause the Geographical Diversification Requirements to be violated. Borrower
shall pay all reasonable costs related to such Future Advance requested under
this Section 2.06 (whether or not such Future Advance is actually made),
including but not limited to Appraisal costs, environmental site assessment
costs, physical needs assessment costs, Lender’s nonrefundable due diligence fee
of $4,000 for each Mortgaged Property in the Collateral Pool at the time plus
out-of-pocket expenses payable at the time a Request for a Future Advance is
made, a reunderwriting fee in the amount equal to the greater of $50,000 or one
percent (1%) of such proposed Future Advance, all legal fees incurred by Lender
and Fannie Mae in connection with such proposed Future Advance and any other
actual out of pocket third party costs incurred in connection with such proposed
Future Advance. In relation to any Future Advance made pursuant to this Section
2.06, Borrower shall be obligated to pay an interest rate and fees, determined
in accordance with the applicable requirements of the Fannie Mae “Supplemental
Loan” product line then in effect. Borrower shall request such Future Advance by
giving Lender an Advance Request in accordance with Section 2.04 and an
Expansion Request, requesting an Expansion in the amount of such Future Advance
in accordance with Section 4.01.

 

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ARTICLE 3
COLLATERAL CHANGES
Section 3.01. Right to Add Collateral.
Subject to the terms and conditions of this Article, Borrower shall have the
right, from time to time during the Fixed Facility Availability Period and the
Variable Facility Availability Period, as applicable, to add Rental Properties
to the Collateral Pool.
Section 3.02. Procedure for Adding Collateral.
The procedure for adding Collateral contained in this Section 3.02 shall apply
to all additions of Collateral.
(a) Request. Subject to the limitations set forth in Section 15.17, Borrower may
deliver to Lender an Addition Request to add one (1) or more Rental Properties
to the Collateral Pool. Each Addition Request shall be accompanied by the
following: (i) the quality and type of property-related information required by
Lender in connection with the Initial Advances made hereunder and any additional
information Lender may reasonably request; and (ii) the payment of all
Additional Collateral Due Diligence Fees and the Additional Collateral Due
Diligence Deposit.
(b) Underwriting. Borrower may add any Additional Mortgaged Property provided
that, after such addition, the proposed Additional Mortgaged Property itself has
a Debt Service Coverage Ratio of not less than 1.30:1.0 with respect to the
amount of the Advance which equals the Allocated Facility Amount which is
allocated to such Additional Mortgaged Property drawn from the Fixed Facility
Commitment and 1.05:1.0 with respect to the amount of the Advance which equals
the Allocated Facility Amount which is allocated to such Additional Mortgaged
Property drawn from the Variable Facility Commitment, and its Loan to Value
Ratio must not exceed seventy-five percent (75%), and, after such addition, the
Collateral Pool must satisfy the Coverage and LTV Tests, provided, that if
either of the tests described above are not met, Lender may permit the
Additional Mortgaged Property to be added to the Collateral Pool. Lender shall
evaluate the proposed Additional Mortgaged Property in accordance with the
Underwriting Requirements and shall make underwriting determinations as to the
Debt Service Coverage

 

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Ratio and the Loan to Value Ratio of the proposed Additional Mortgaged Property
and the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value
Ratio applicable to the Collateral Pool on the basis of the lesser of (i) the
acquisition price of the proposed Additional Mortgaged Property if purchased by
Borrower within twelve (12) months of the related Addition Request, and (ii) a
Valuation made with respect to the proposed Additional Mortgaged Property. In
addition, Lender shall determine whether an exit strategy acceptable to Lender
is available with respect to such Additional Mortgaged Property. Within thirty
(30) Business Days after receipt of (1) the Addition Request and (2) all
reports, certificates and documents required by the Underwriting Requirements,
including a zoning analysis required by Lender in connection with similar loans
anticipated to be sold to Fannie Mae, Lender shall notify Borrower whether it
has determined whether the proposed Additional Mortgaged Property meets the
Underwriting Requirements and the other conditions for addition set forth in
this Agreement. If Lender determines that the proposed Additional Mortgaged
Property meets the Underwriting Requirements and the other conditions set forth
in this Agreement, it shall set forth the Aggregate Debt Service Coverage Ratio,
the Aggregate Loan to Value Ratio, and the Advance Amount that Lender estimates
shall result from the addition of the proposed Additional Mortgaged Property.
Within five (5) Business Days after receipt of Lender’s written consent to the
Addition Request, Borrower shall notify Lender in writing whether it elects to
add the proposed Additional Mortgaged Property to the Collateral Pool. If
Borrower fails to respond within the period of five (5) Business Days, it shall
be conclusively deemed to have elected not to add the proposed Additional
Mortgaged Property to the Collateral Pool.
(c) Closing. If Lender determines that the proposed Additional Mortgaged
Property meets the conditions set forth in this Agreement, Borrower timely
elects to add the proposed Additional Mortgaged Property to a Collateral Pool
and all conditions precedent contained in Section 6.04, Section 6.11 and
Section 6.12 and all General Conditions contained in Section 6.01 are satisfied,
the proposed Additional Mortgaged Property shall be added to the Collateral
Pool, at a closing to be held at offices designated by Lender on a Closing Date
selected by Lender, occurring within thirty (30) Business Days after Lender’s
receipt of Borrower’s election (or on such other date as Borrower and Lender may
agree).
Section 3.03. Right to Obtain Releases of Collateral.
Subject to the terms and conditions of this Article 3 and the limitations set
forth in Section 15.17, Borrower shall have the right from time to time to
obtain a release of Collateral from the Collateral Pool.
Section 3.04. Procedure for Obtaining Releases of Collateral.
(a) Request. To obtain a release of Collateral from the Collateral Pool,
Borrower shall deliver a Release Request to Lender. The Release Request shall
result in a termination of all or any part of the Credit Facility and Borrower
shall lose the borrowing capacity associated with such release and all or a part
of the Variable Facility Commitment and/or Fixed Facility Commitment comprising
such borrowing capacity shall be terminated.

 

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(b) Closing. If all conditions precedent contained in Section 6.05 and all
General Conditions contained in Section 6.01 are satisfied, Lender shall cause
the Release Mortgaged Property to be released, at a closing to be held at
offices designated by Lender on a Closing Date selected by Lender, and occurring
within thirty (30) days after Lender’s receipt of the Release Request (or on
such other date as Borrower and Lender may agree), by executing and delivering,
and causing all applicable parties to execute and deliver, all at the sole cost
and expense of Borrower, the Release Documents. Borrower shall prepare the
Release Documents and submit them to Lender for its review.
(c) Release Price. The “Release Price” for each Release Mortgaged Property means
the greater of (i) one hundred percent (100%) of the Allocable Facility Amount
for the Release Mortgaged Property and (ii) one hundred percent (100%) of the
amount, if any, of Advances Outstanding that are required to be repaid by
Borrower to Lender in connection with the proposed release of the Release
Mortgaged Property from the Collateral Pool so that, immediately after the
release, the Coverage and LTV Tests will be satisfied. In addition to the
Release Price, Borrower shall pay to Lender all associated prepayment premiums
and other amounts due under the Notes being repaid. In connection with a
non-simultaneous substitution of Collateral pursuant to Section 3.06(c)(ii) of
this Agreement, Borrower shall be permitted, in lieu of paying the Release
Price, to post a Letter of Credit issued by a financial institution acceptable
to Lender and having terms and conditions acceptable to Lender, having a face
amount equal to one hundred fifteen percent (115%) of the Allocable Facility
Amount for the Release Mortgaged Property.
(d) Application of Release Price. The Release Price for the Release Mortgaged
Property will be applied first against the Variable Advances Outstanding until
there are no further Variable Advances Outstanding, then against the prepayment
of Fixed Advances Outstanding, so long as the prepayment is permitted under the
applicable Fixed Facility Note. The remainder of the Release Price, if any,
shall be held by Lender (or its appointed collateral agent) as Additional
Collateral, in accordance with a security agreement and other documents in form
and substance acceptable to Lender. Any such Additional Collateral remaining
will be returned to Borrower on the Termination Date. If, on the date Borrower
pays the Release Price, Variable Advances are Outstanding but not then due and
payable, Lender shall hold the Release Price as Additional Collateral, until the
next date on which Variable Advances are due and payable, at which time Lender
shall apply the appropriate portion of the Release Price to such Variable
Advances.
(e) Release of Borrower and Guarantor. Upon the release of a Mortgaged Property,
the Borrower that is the owner of such Release Mortgaged Property and the
Guarantor shall be released of all obligations related to the Release Mortgaged
Property under this Agreement and the other Loan Documents except for any
provisions of this Agreement and the other Loan Documents that are expressly
stated to survive any release or termination.

 

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Section 3.05. Right to Substitutions.
Subject to the terms and conditions of this Article 3 and the limitations sets
forth in Section 15.17, Borrower shall have the right to obtain the release of
the Mortgaged Property securing the Advances made to such Borrower by replacing
such Mortgaged Property with one or more Rental Properties that meet the
requirements of this Agreement (the “Substitute Mortgaged Property”) thereby
effecting a "Substitution” of Collateral.
Section 3.06. Procedure for Substitutions.
(a) Request. Borrower shall deliver to Lender a completed and executed
Substitution Request. Each Substitution Request shall be accompanied by the
following: (i) the information required by the Underwriting Requirements with
respect to the proposed Substitute Mortgaged Property and any additional
information Lender reasonably requests; and (ii) the payment of all Additional
Collateral Due Diligence Fees and the Additional Collateral Due Diligence
Deposit.
(b) Underwriting.
(i) Lender shall evaluate the proposed Substitute Mortgaged Property in
accordance with the Underwriting Requirements.
(ii) A Substitution may be effected if (A) (1) the Substitute Mortgaged Property
has a Valuation equal to or greater than the Valuation of the Release Mortgaged
Property, and (2) the Substitute Mortgaged Property has Net Operating Income (as
determined by Lender in its discretion) equal to or greater than the Net
Operating Income (as determined by Lender in its discretion) of the Release
Mortgaged Property and (3) Lender determines that the Substitute Mortgaged
Property is of similar or better quality and located in a similar or better
market as the Release Mortgaged Property and (B) after the Substitution, the
Collateral Pool meets the Coverage and LTV Tests and the Substitute Mortgaged
Property itself has a Debt Service Coverage Ratio of not less than 1.30:1.0 with
respect to the amount of the Advance which equals the Allocated Facility Amount
which is allocated to such Substitute Mortgaged Property drawn from the Fixed
Facility Commitment and 1.05:1.0 with respect to the amount of the Advance which
equals the Allocated Facility Amount which is allocated to such Substitute
Mortgaged Property drawn from the Variable Facility Commitment and a Loan to
Value Ratio of not more than seventy-five percent (75%). If any of the tests
described in (A) and (B) are not met, Lender may, in its discretion, permit the
substitution to be effected.
(iii) Within thirty (30) Business Days after receipt of (A) the Substitution
Request and (B) all reports, certificates and documents required by the
Underwriting Requirements and this Agreement, including a zoning analysis
required by Lender in connection with similar loans anticipated to be sold to
Fannie Mae, Lender shall notify the applicable Borrower whether the Substitute
Mortgaged Property meets the requirements of this Section 3.06(b) and the
Underwriting Requirements and the other requirements for the Substitution of a
Mortgaged Property as set forth in this Agreement. Within five (5) Business Days
after receipt of Lender’s written notice in response to the Substitution
Request, Borrower shall notify Lender whether it elects to proceed with the
Substitution. If Borrower fails to respond within the period of five (5)
Business Days, it shall be conclusively deemed to have elected not to proceed
with the Substitution.

 

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(c) Closing. If Lender determines that the Substitution Request satisfies the
conditions set forth herein, Borrower timely elects to proceed with the
substitution, and all conditions precedent contained in Section 3.05,
Section 3.06, Section 6.04, Section 6.05, Section 6.06, Section 6.11,
Section 6.12 and all General Conditions contained in Section 6.01 are satisfied,
the proposed Substitute Mortgaged Property shall be added in replacement of the
Mortgaged Property being released, at a closing to be held at offices designated
by Lender on a Closing Date selected by Lender and occurring —
(i) if the substitution of the proposed Substitute Mortgaged Property is to
occur simultaneously with the release of the Release Mortgaged Property, within
sixty (60) days after Lender’s receipt of the applicable Borrower’s election (or
on such other date to which Borrower and Lender may agree); or
(ii) if the substitution of the proposed Substitute Mortgaged Property is to
occur subsequent to the release of the Release Mortgaged Property, within ninety
(90) days after the release of such Release Mortgaged Property (provided such
date may be extended an additional ninety (90) days if Borrower provides
evidence satisfactory to Lender of Borrower’s diligent efforts in finding a
suitable proposed Substitute Mortgaged Property) (the “Property Delivery
Deadline”) in accordance with the terms of this Section 3.06(c).
Section 3.07. Substitution Deposit.
(a) The Deposit. If a Substitution of the proposed Substitute Mortgaged Property
is to occur subsequent to the release of the Release Mortgaged Property pursuant
to Section 3.06(c)(ii), at the Closing Date of the release of the Release
Mortgaged Property, Borrower shall deposit with Lender the “Substitution
Deposit” described in Section 3.07(b) in the form of cash or, in lieu of
depositing cash for the Substitution Deposit, Borrower may post a Letter of
Credit issued by a financial institution acceptable to Lender and having terms
and conditions acceptable to Lender, having a face amount equal to the
Substitution Deposit.
(b) Substitution Deposit Amount. The “Substitution Deposit” for each proposed
substitution shall be an amount equal to the sum of (i) the Release Price, plus
(ii) any and all of the fee maintenance for the DMBS, or the prepayment premium
for a Note funded through a cash execution, calculated as of the end of the
month in which the Property Delivery Deadline occurs, as if the Note (and
applicable DMBS, if applicable) were to be prepaid in such month, plus (iii)
interest on the Note (or Discount, if applicable, and if necessary as estimated
by Lender) through the end of the month in which the Property Delivery Deadline
occurs, if necessary as reasonably estimated by Lender, plus (iv) costs,
expenses and fees of Lender pertaining to the substitution (the “Substitution
Cost Deposit”). If a Substitution of the last remaining asset is taking place,
the cash collateral or Letter of Credit must include, (A) any yield maintenance
that would be due to the extent that the Fixed Advance must be prepaid to effect
a Release at that time, (B) any Discount that would be due for any Variable DMBS
Advance, as applicable, if necessary as reasonably estimated by Lender and
(C) any fee maintenance that would be due to the extent that the Variable
Structured ARM Advance must be prepaid to effect a Release at that time. The
Substitution Cost Deposit shall be used by Lender to cover all reasonable
out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including
any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in
connection with such substitution whether such substitution actually closes. In
the event that the Borrower elects to post a Letter of Credit in lieu of cash
for the Substitution Deposit, Borrower shall also be obligated to make any
regularly scheduled payments of principal and interest due under the applicable
Note during any period between the closing of the Release Mortgaged Property and
the earlier of the closing of the Substitute Mortgaged Property and the date of
prepayment of the Note, or the applicable DMBS.

 

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(c) Failure to Close Substitution. If the substitution of the proposed
Substitute Mortgaged Property does not occur by the Property Delivery Deadline
in accordance with Section 3.06(c)(ii), then such Borrower shall have
irrevocably waived its right to substitute such Release Mortgaged Property with
the proposed Substitute Mortgaged Property, and the release of the Release
Mortgaged Property shall be deemed a prepayment of the Note and the DMBS, if
applicable. The Property Delivery Deadline shall be no later than the date
ninety (90) days (or one hundred eighty (180) days, if applicable) after the
date the Lender’s lien on such Release Mortgaged Property is released. Any DMBS
being prepaid shall be deemed to be prepaid as of the end of the month in which
the Property Delivery Deadline falls, and the Lender, shall follow standard
Fannie Mae procedures for the prepayment of the Note, or any applicable DMBS,
including delivery of the Substitution Deposit (less the Substitution Cost
Deposit) to Fannie Mae in accordance with such procedures. Any portion of the
Substitution Deposit not needed to prepay the Note, or any applicable DMBS, all
interest, and any prepayment fees (including any portion of the Substitution
Cost Deposit not used by Lender to cover all reasonable out-of-pocket costs and
expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal
fees and expenses incurred by Fannie Mae and Lender in connection with such
Substitution) shall be promptly refunded to the applicable Borrower after the
Property Delivery Deadline.
(d) Substitution Deposit Disbursement. At closing of the Substitution, the
Lender shall disburse the Substitution Deposit (less any portion of the
Substitution Cost Deposit used by Lender to cover all reasonable out-of-pocket
costs and expenses incurred by Lender and Fannie Mae, including any
out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in
connection with such substitution) directly to the Borrower at such time as the
conditions set forth in Sections 3.05, 3.06, 6.06, 6.11, 6.12 and all General
Conditions contained in Section 6.01 have been satisfied, which must occur no
later than the Property Delivery Deadline.

 

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ARTICLE 4
INCREASE OF CREDIT FACILITY
Section 4.01. Request to Increase Commitment.
Subject to the terms, conditions and limitations of this Article and this
Agreement, Borrower may request, during the Fixed Facility Availability Period,
to increase the Fixed Facility Commitment, during the Variable Facility
Availability Period, to increase the Variable Facility Commitment, or both (the
“Expansion”). Lender has the right to agree to Borrower’s request in its sole
discretion. Any Expansion is subject to the following limitations:
(a) Maximum Amount of Increase in Commitment. The maximum amount of the
Expansion is $77,589,000 (for a maximum total Commitment of $300,000,000).
(b) Minimum Request. Each Request for an Expansion shall be in the minimum
amount of $3,000,000, except that an Expansion that will result in a Variable
DMBS Advance shall be in a minimum amount of $25,000,000.
(c) Terms and Conditions. The terms and conditions (including pricing)
applicable to any Expansion shall be mutually agreed upon by Lender and Borrower
at the time of the Expansion.
Section 4.02. Procedure for Obtaining Increases in Commitment.
To obtain an Expansion, Borrower shall deliver an Expansion Request to Lender.
Each Expansion Request shall be accompanied by a nonrefundable deposit of
$25,000 and shall include the following:
(a) the total amount of the proposed increase;
(b) a designation of the increase as being part of the Fixed Facility Commitment
and/or the Variable Facility Commitment;
(c) a request that Lender inform Borrower of an indication of the interest rate
and fees that will apply to Advances drawn from such Expansion; and
(d) a request that Lender inform Borrower of Net Worth and Liquidity
requirements that will apply upon the Expansion.
Section 4.03. Closing.
If Lender in its sole discretion agrees to the Expansion Request and if all
conditions precedent contained in Section 6.07 and Section 6.11 and all
applicable General Conditions contained in Section 6.01 are satisfied, Lender
shall permit the Expansion to occur, at a closing to be held at offices
designated by Lender on a Closing Date selected by Lender, and occurring within
fifteen (15) Business Days after Lender’s receipt of the Expansion Request (or
on such other date as Borrower and Lender may agree).

 

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ARTICLE 5
TERMINATION OF FACILITIES
Section 5.01. Right to Complete or Partial Termination of Facilities.
Subject to the terms and conditions of this Article, Borrower shall have the
right from time to time to permanently reduce the Variable Facility Commitment
and/or the Fixed Facility Commitment.
Section 5.02. Procedure for Complete or Partial Termination of Facilities.
(a) Request. To permanently reduce the Variable Facility Commitment or the Fixed
Facility Commitment, Borrower shall deliver a Facility Termination Request to
Lender. A permanent reduction of the Variable Facility Commitment to $0 shall be
referred to as a “Complete Variable Facility Termination.” A permanent reduction
of the Fixed Facility Commitment to $0 shall be referred to as a “Complete Fixed
Facility Termination.” The Facility Termination Request shall include the
following:
(i) The proposed amount of the reduction in the Variable Facility Commitment
and/or Fixed Facility Commitment; and
(ii) Unless there is a Complete Variable Facility Termination or a Complete
Fixed Facility Termination, a designation by Borrower of any Variable Advances
that will be prepaid and/or any Fixed Advances that will be prepaid.
Any release of Collateral, whether or not made in connection with a Facility
Termination Request, must comply with all conditions to a release that are
contained in Section 6.05.
(b) Closing. If all conditions precedent contained in Section 6.09 and all
General Conditions contained in Section 6.01 are satisfied, Lender shall reduce
the Variable Facility Commitment or Fixed Facility Commitment, as the case may
be, to the amount designated by Borrower, at a closing to be held at offices
designated by Lender on a Closing Date selected by Lender, within thirty
(30) Business Days after Lender’s receipt of the Facility Termination Request
(or on such other date as Borrower and Lender may agree), by executing and
delivering the Facility Termination Document evidencing the reduction in the
Facility Commitment.
Section 5.03. Right to Terminate Credit Facility.
Subject to the terms and conditions of this Article, Borrower shall have the
right to terminate this Agreement and the Credit Facility and receive a release
of all of the Collateral.

 

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Section 5.04. Procedure for Terminating Credit Facility.
(a) Request. To terminate this Agreement and the Credit Facility, Borrower shall
deliver a Credit Facility Termination Request to Lender.
(b) Closing. If all conditions precedent contained in Section 6.10 are
satisfied, this Agreement shall terminate, and Lender shall cause all of the
Collateral to be released, at a closing to be held at offices designated by
Lender on a Closing Date selected by Lender, within thirty (30) Business Days
after Lender’s receipt of the Credit Facility Termination Request (or on such
other date as Borrower and Lender may agree), by executing and delivering, and
causing all applicable parties to execute and deliver, all at the sole cost and
expense of Borrower, the Credit Facility Termination Documents.
ARTICLE 6
CONDITIONS PRECEDENT TO ALL REQUESTS
Section 6.01. Conditions Applicable to All Requests.
Borrower’s right to close the transaction requested in a Request shall be
subject to Lender’s determination that all of the following general conditions
precedent (“General Conditions”) have been satisfied, in addition to any other
conditions precedent contained in this Agreement:
(a) Geographical Diversification. For each Request on or after the First
Anniversary, the Geographical Diversification Requirements shall be satisfied.
In the event Borrower decides to wind down the Credit Facility over a period no
longer than six (6) months by releasing all of the Mortgaged Properties then
currently remaining in the Collateral Pool, Borrower shall send a notice in
writing to Lender, which notice shall include a statement that Borrower intends
to wind down the Credit Facility and a timeline for each of the releases (the
“Wind Down Notice”). After receipt of the Wind Down Notice, the Geographical
Diversification Requirements for any Release may be waived in Lender’s
discretion, provided that Borrower satisfies each of the following at the time
of the Release: (x) all other conditions of a Release shall be met and (y) each
Mortgaged Property then currently remaining in the Collateral Pool has a Debt
Service Coverage Ratio of not less than 1.30:1.0 with respect to the amount of
the Advance which equals the Allocated Facility Amount which is allocated to
each such Mortgaged Property and drawn from the Fixed Facility Commitment and
1.05:1.0 with respect to the amount of the Advance which equals the Allocated
Facility Amount which is allocated to each such Mortgaged Property and drawn
from the Variable Facility Commitment and a Loan to Value Ratio of not more than
seventy-five percent (75%). At Borrower’s request, Lender may in its discretion
permit that the Geographical Diversification Requirements be waived in
connection with any Request.
(b) Payment of Expenses. The payment by Borrower of Lender’s and Fannie Mae’s
reasonable third party out-of-pocket fees and expenses payable in accordance
with this Agreement, including, but not limited to, the legal fees and expenses
described in Section 10.05.

 

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(c) No Material Adverse Change. Except in connection with a Credit Facility
Termination Request, there has been no material adverse change in the financial
condition, business or prospects of Borrower or Guarantor or in the physical
condition, operating performance or value of any of the Mortgaged Properties
since the date of the most recent Compliance Certificate (or, with respect to
the conditions precedent to the Initial Advance, from the condition, business or
prospects reflected in the financial statements, reports and other information
obtained by Lender during its review of Borrower and Guarantor and the Initial
Mortgaged Properties).
(d) No Default. Except in connection with a Credit Facility Termination Request,
there shall exist no Event of Default or Potential Event of Default on the
Closing Date for the Request and, after giving effect to the transaction
requested in the Request, no Event of Default or Potential Event of Default
shall have occurred.
(e) No Insolvency. Except in connection with a Credit Facility Termination
Request, receipt by Lender on the Closing Date for the Request of evidence
satisfactory to Lender that neither Borrower nor Guarantor is insolvent (within
the meaning of any applicable federal or state laws relating to bankruptcy or
fraudulent transfers) or will be rendered insolvent by the transactions
contemplated by the Loan Documents, including the making of a Future Advance,
or, after giving effect to such transactions, will be left with an unreasonably
small capital with which to engage in its business or undertakings, or will have
intended to incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature or will have intended to hinder, delay or defraud
any existing or future creditor.
(f) No Untrue Statements. The Loan Documents shall not contain any untrue or
misleading statement of a material fact and shall not fail to state a material
fact necessary to make the information contained therein not misleading.
(g) Representations and Warranties. Except in connection with a Credit Facility
Termination Request, all representations and warranties made by Borrower and
Guarantor in the Loan Documents shall be true and correct in all material
respects on the Closing Date for the Request with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date for the Request.
(h) No Condemnation or Casualty. Except in connection with a Credit Facility
Termination Request or a Release Request or a Substitution Request, there shall
not be pending or threatened any condemnation or other taking, whether direct or
indirect, against the Mortgaged Property and there shall not have occurred any
casualty to any improvements located on the Mortgaged Property, which casualty
would have a Material Adverse Effect.

 

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(i) Delivery of Closing Documents. The receipt by Lender of the following, each
dated as of the Closing Date for the Request, in form and substance satisfactory
to Lender in all respects:
(i) The Loan Documents relating to such Request;
(ii) A Compliance Certificate;
(iii) An Organizational Certificate; and
(iv) Such other documents, instruments, approvals (and, if requested by Lender,
certified duplicates of executed copies thereof) and opinions as Lender may
reasonably request.
(j) Covenants. Except in connection with a Credit Facility Termination Request,
Borrower is in full compliance with each of the covenants contained in Article 8
and Article 9 of this Agreement, without giving effect to any notice and cure
rights of Borrower.
(k) Execution. For any Advance, conversion of an Advance or any refinance of an
Advance, Lender must confirm with Fannie Mae that Fannie Mae is purchasing
Advances of the type requested by Borrower in the marketplace at the time of the
Request and on the Closing Date for the requested Advance, conversion or
refinance. Borrower acknowledges that if Lender does not confirm that Fannie Mae
is purchasing Advances of the type requested by Borrower in the marketplace,
Borrower will not be entitled to any Advance, conversion or refinance under this
Agreement.
Section 6.02. Conditions Precedent to Initial Advance.
The obligation of Lender to make the Initial Advance is subject to the following
conditions precedent:
(a) Receipt by Lender of the fully executed Advance Request;
(b) If the Initial Advance is a Variable Advance, receipt by Lender at least
five (5) days prior to the Initial Closing Date, of the confirmation of an
Interest Rate Cap commitment, in accordance with the Pledge, Interest Rate Cap
Agreement, effective as of the Initial Closing Date;
(c) If the Initial Advance is a Variable Advance, receipt by Lender of Interest
Rate Cap Documents in accordance with the Pledge, Interest Rate Cap Agreement,
effective as of the Initial Closing Date;
(d) Delivery to the Title Company, for filing and/or recording in all applicable
jurisdictions, of all applicable Loan Documents required by Lender, including
duly executed and delivered original copies of the Variable Facility Note or
Fixed Facility Note, as applicable, the Guaranty, the Initial Security
Instruments covering the Initial Mortgaged Properties and UCC-1 Financing
Statements covering the portion of the Collateral comprised of personal
property, and other appropriate instruments, in form and substance satisfactory
to Lender and in form proper for recordation, as may be necessary in the opinion
of Lender to perfect the Liens created by the applicable Security Instruments
and any other Loan Documents creating a Lien in favor of Lender, and the payment
of all taxes, fees and other charges payable in connection with such execution,
delivery, recording and filing;

 

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(e) If the Initial Advance is a Variable DMBS Advance, receipt by Lender of the
first installment of Variable Facility Fee and the entire Discount payable by
Borrower pursuant to Section 1.04; and
(f) Receipt by Lender of the Initial Origination Fee pursuant to
Section 10.03(a), the Initial Due Diligence Deposit pursuant to Section 10.03(a)
and the Initial Due Diligence Fee pursuant to Section 10.04(a).
Section 6.03. Conditions Precedent to Future Advances.
A Future Advance is subject to the satisfaction of the following conditions
precedent:
(a) Except in connection with a Rollover Variable Advance, receipt by Lender of
the fully executed Advance Request;
(b) Except in connection with a Rollover Variable Advance, delivery by Lender to
Borrower of the Rate Form for the Future Advance;
(c) Except in connection with a Rollover Variable Advance, after giving effect
to the requested Future Advance, the Coverage and LTV Tests will be satisfied;
(d) If the Advance is a Fixed Advance, delivery of a Fixed Facility Note, duly
executed by Borrower, in the amount and reflecting all of the terms of the Fixed
Advance;
(e) If the Advance is a Variable DMBS Advance, delivery of the DMBS Refinance
Confirmation Form, duly executed by Borrower and/or (in the case of a Variable
Advance that is not a Rollover Variable Advance) a new Variable Facility Note,
as applicable;
(f) For any Title Insurance Policy not containing a revolving credit or future
advance endorsement, the receipt by Lender of an endorsement to the Title
Insurance Policy, amending the effective date of the Title Insurance Policy to
the applicable Closing Date and showing no additional exceptions to coverage
other than the exceptions shown on the Initial Closing Date and other exceptions
approved by Lender;
(g) If the Advance is a Variable DMBS Advance, the receipt by Lender of the
first installment of Variable Facility Fee for the Variable DMBS Advance and the
entire Discount for the Variable DMBS Advance payable by Borrower pursuant to
Section 1.04;
(h) If the Advance is a Variable Advance (and not a Rollover Variable Advance),
receipt by Lender at least five (5) days prior to the applicable Closing Date,
of the confirmation of an Interest Rate Cap commitment, in accordance with the
Pledge, Interest Rate Cap Agreement, effective as of the Closing Date;
(i) If the Advance is a Variable Advance (and not a Rollover Variable Advance),
receipt by Lender of Interest Rate Cap Documents, in accordance with the Pledge,
Interest Rate Cap Agreement, effective as of the Closing Date;

 

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(j) Except in connection with a Rollover Variable Advance, receipt by Lender of
a Confirmation of Guaranty; and
(k) Receipt by Lender of one or more endorsements as specified by Lender
increasing the amount of any or all Title Insurance Policies in the aggregate
equal to the amount of Future Advances made pursuant to Section 2.06.
Section 6.04. Conditions Precedent to Addition of an Additional Mortgaged
Property to the Collateral Pool.
The addition of an Additional Mortgaged Property to the Collateral Pool on the
applicable Closing Date is subject to the satisfaction of the following
conditions precedent:
(a) The proposed Additional Mortgaged Property itself has a Debt Service
Coverage Ratio of not less than 1.30:1.0 with respect to the amount of the
Advance which equals the Allocated Facility Amount which is allocated to such
Additional Mortgaged Property drawn from the Fixed Facility Commitment and
1.05:1.0 with respect to the amount of the Advance which equals the Allocated
Facility Amount which is allocated to such Additional Mortgaged Property drawn
from the Variable Facility Commitment and a Loan to Value Ratio of not more than
seventy-five percent (75%) and immediately after giving effect to the requested
addition, the Coverage and LTV Tests will be satisfied, provided that if either
of the tests described above are not met, Lender may permit the Additional
Mortgaged Property to be added to the Collateral Pool;
(b) Receipt by Lender of the Additional Collateral Due Diligence Deposit, the
Addition Fee, (provided that no such fee shall be due with respect to an
Additional Mortgaged Property that is added in connection with an Expansion and
the payment of an Expansion Origination Fee) and the Additional Collateral Due
Diligence Fees, or if the Additional Mortgaged Property is being added in
connection with a substitution made pursuant to Section 3.05 of this Agreement,
receipt by Lender of the Substitution Fee and the Additional Collateral Due
Diligence Deposit and the Additional Collateral Due Diligence Fees;
(c) Delivery to the Title Company, with fully executed instructions directing
the Title Company to file and/or record in all applicable jurisdictions, all
applicable Addition Loan Documents required by Lender, including duly executed
and delivered original copies of any Security Instruments and UCC-1 Financing
Statements covering the portion of the Additional Mortgaged Property comprised
of personal property, and other appropriate documents, in form and substance
satisfactory to Lender and in form proper for recordation, as may be necessary
in the opinion of Lender to perfect the Lien created by the applicable
additional Security Instrument, and any other Addition Loan Document creating a
Lien in favor of Lender, and the payment of all taxes, fees and other charges
payable in connection with such execution, delivery, recording and filing;

 

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(d) If required by Lender, amendments to the Notes and the Security Instruments,
reflecting the addition of the Additional Mortgaged Property to the Collateral
Pool and, as to any Note or Security Instrument so amended or if Lender
determines that such endorsement is necessary to maintain the priority of the
Lien created in favor of Lender with respect to the Outstanding Indebtedness or
to maintain the validity of any Title Insurance Policy, the receipt by Lender of
an endorsement to each Title Insurance Policy insuring the Security Instruments,
amending the effective date of each Title Insurance Policy to the Closing Date
and showing no additional exceptions to coverage other than the exceptions shown
on the Initial Closing Date, Permitted Liens and other exceptions approved by
Lender;
(e) If the Title Insurance Policy for the Additional Mortgaged Property contains
a tie-in endorsement, an endorsement to each other Title Insurance Policy
containing a tie-in endorsement, adding a reference to the Additional Mortgaged
Property;
(f) Any proposed Additional Borrower meets and satisfies all of the requirements
and conditions of Section 14.02;
(g) Receipt by Lender on the Closing Date of a Confirmation of Obligations; and
(h) For any Addition on or after the First Anniversary, the Mortgaged Properties
in the Collateral Pool after the Addition shall satisfy the Geographical
Diversification Requirements.
Section 6.05. Conditions Precedent to Release of Property from the Collateral
Pool .
The release of a Mortgaged Property from the Collateral Pool is subject to the
satisfaction of the following conditions precedent on or before the Closing
Date:
(a) Receipt by Lender of the fully executed Release Request;
(b) Immediately after giving effect to the requested release the Coverage and
LTV Tests will be satisfied;
(c) Receipt by Lender of the Release Price;
(d) Receipt by Lender of the Release Fee and all other amounts owing under
Section 3.04(c);
(e) Receipt by Lender on the Closing Date of one (1) or more counterparts of
each Release Document, dated as of the Closing Date, signed by each of the
parties (other than Lender) who is a party to such Release Document;

 

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(f) If required by Lender, amendments to the Notes and the Security Instruments,
reflecting the release of the Release Mortgaged Property from the Collateral
Pool and, as to any Security Instrument or Note so amended or if Lender
determines that such endorsement is necessary to maintain the priority of the
Lien created in favor of Lender with respect to the Outstanding Indebtedness or
to maintain the validity of any Title Insurance Policy, the receipt by Lender of
an endorsement to each Title Insurance Policy insuring the Security Instruments,
amending the effective date of each Title Insurance Policy to the Closing Date
and showing no additional exceptions to coverage other than the exceptions shown
on the Initial Closing Date, Permitted Liens and other exceptions approved by
Lender;
(g) If Lender determines the Release Mortgaged Property to be one (1) phase of a
project, and one (1) or more other phases of the project are Mortgaged
Properties which will remain in the Collateral Pool (“Remaining Mortgaged
Properties”), Lender must determine that the Remaining Mortgaged Properties can
be operated separately from the Release Mortgaged Property and any other phases
of the project which are not Mortgaged Properties and whether any cross use
agreements or easements are necessary. In making this determination, Lender
shall evaluate access, utilities, marketability, community services, ownership
and operation of the Release Properties and any other issues identified by
Lender in connection with similar loans anticipated to be sold to Fannie Mae;
(h) Receipt by Lender of endorsements to the tie-in endorsements of the Title
Insurance Policies, if deemed necessary by Lender, to reflect the release;
(i) Receipt by Lender on the Closing Date of a Confirmation of Obligations; and
(j) For any Release on or after the First Anniversary, the remaining Mortgaged
Properties in the Collateral Pool shall satisfy the Geographical Diversification
Requirements.
Section 6.06. Conditions Precedent to Substitutions.
The obligation of Lender to make a requested Substitution is subject to Lender’s
determination that each of the following conditions precedent has been met:
(a) Receipt by Lender of the fully executed Substitution Request;
(b) Receipt by Lender of the Substitution Deposit to the extent necessary under
Section 3.07;
(c) Receipt by Lender of the Additional Collateral Due Diligence Fees,
Additional Collateral Due Diligence Deposit and Substitution Fee;
(d) Such Substitute Mortgaged Property securing such Advance shall comply with
the provisions of Section 3.06(b) of this Agreement;
(e) Delivery to the Title Company, with fully executed instructions directing
the Title Company to file and/or record in all applicable jurisdictions, all
applicable Loan Documents reasonably required by Lender to be filed or recorded,
including duly executed and delivered original copies of any Security Instrument
and UCC-1 Financing Statements covering the portion of the Substitute Mortgaged
Property comprised of personal property, and other appropriate documents, in
form and substance reasonably satisfactory to Lender and in form proper for
recordation, as may be necessary in the reasonable opinion of Lender to perfect
the Lien created by the applicable additional Security Instrument, and any other
relevant Loan Document creating a Lien in favor of Lender, and the payment of
all taxes, fees and other charges payable in connection with such execution,
delivery, recording and filing;

 

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(f) Receipt by Lender of endorsements to the tie-in endorsements of the Title
Insurance Policies, if deemed necessary by Lender, to reflect the substitution;
(g) Receipt of all documents required for the addition of the Substitute
Mortgaged Property pursuant to the Underwriting Requirements;
(h) Any proposed Additional Borrower meets and satisfies all of the requirements
and conditions of Section 14.02;
(i) Receipt by Lender on the Closing Date of a Confirmation of Obligations;
(j) If required by Lender, amendments to the Notes and the Security Instruments,
reflecting the Substitution and, as to any Security Instrument or Note so
amended or if Lender determines that such endorsement is necessary to maintain
the priority of the Lien created in favor of Lender with respect to the
Outstanding Indebtedness or to maintain the validity of any Title Insurance
Policy, the receipt by Lender of an endorsement to each Title Insurance Policy
insuring the Security Instruments, amending the effective date of each Title
Insurance Policy to the Closing Date and showing no additional exceptions to
coverage other than the exceptions shown on the Initial Closing Date, Permitted
Liens and other exceptions approved by Lender;
(k) For any Substitution on or after the First Anniversary, the Mortgaged
Properties in the Collateral Pool after the Substitution shall satisfy the
Geographical Diversification Requirements.
Section 6.07. Conditions Precedent to Increase in Commitment.
Any Expansion is subject to Lender’s consent in its sole discretion and to the
satisfaction of the following conditions precedent on or before the Closing
Date:
(a) Receipt by Lender of the fully executed Expansion Request;
(b) Receipt by Lender of the Expansion Origination Fee;
(c) Receipt by Lender of an endorsement to each Title Insurance Policy, amending
the effective date of the Title Insurance Policy to the Closing Date, increasing
the limits of liability to the Commitment, as increased under this Article,
showing no additional exceptions to coverage other than the exceptions shown on
the applicable Title Insurance Policy and other exceptions approved by Lender,
together with any reinsurance agreements required by Lender; and
(d) Receipt by Lender of fully executed original copies of all Expansion Loan
Documents, each of which shall be in full force and effect, and in form and
substance satisfactory to Lender in all respects.

 

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Section 6.08. Conditions Precedent to Conversion.
The conversion of all or a portion of the Variable Facility Commitment to the
Fixed Facility Commitment is subject to the satisfaction of the following
conditions precedent on or before the Closing Date:
(a) Receipt by Lender of the fully executed Conversion Request;
(b) After giving effect to the requested conversion, the Coverage and LTV Tests
will be satisfied;
(c) Prepayment by Borrower in full of any Variable Advances Outstanding that
Borrower has designated for payment solely with respect to the conversion;
provided, however, no associated prepayment premiums and other amounts due with
respect to the prepayment of such Variable Advances shall be payable by
Borrower;
(d) If required by Lender, receipt by Lender of an endorsement to each Title
Insurance Policy, amending the effective date of the Title Insurance Policy to
the Closing Date and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions approved by
Lender; and
(e) Receipt by Lender of one (1) or more counterparts of each Conversion
Document, dated as of the Closing Date, signed by each of the parties (other
than Lender) to such Conversion Document.
Section 6.09. Conditions Precedent to Complete or Partial Termination of
Facilities.
The right of Borrower to reduce the Commitment and the obligation of Lender to
execute the Facility Termination Document, are subject to the satisfaction of
the following conditions precedent on or before the Closing Date:
(a) Receipt by Lender of the fully executed Facility Termination Request;
(b) Payment by Borrower in full of all of the Variable Advances Outstanding and
Fixed Advances Outstanding, as the case may be, required to reduce the aggregate
unpaid principal balance of all Variable Advances Outstanding and Fixed Advances
Outstanding, as the case may be, to not greater than the Variable Facility
Commitment and Fixed Facility Commitment, as the case may be, including any
associated prepayment premiums or other amounts due under the Notes (but if
Borrower is not required to prepay all of the Variable Advances Outstanding or
Fixed Advances Outstanding, as the case may be, Borrower shall have the right to
select which of the Variable Advances or Fixed Advances, as the case may be,
shall be repaid); and
(c) Receipt by Lender on the Closing Date of one (1) or more counterparts of the
Facility Termination Document, dated as of the Closing Date, signed by each of
the parties (other than Lender) who is a party to such Facility Termination
Document.

 

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Section 6.10. Conditions Precedent to Termination of Credit Facility.
The right of Borrower to terminate this Agreement and the Credit Facility and to
receive a release of all of the Collateral from the Collateral Pool and Lender’s
obligation to execute and deliver the Credit Facility Termination Documents on
the Closing Date are subject to the following conditions precedent:
(a) Receipt by Lender of the fully executed Credit Facility Termination Request;
and
(b) Payment by Borrower in full of all of the Notes Outstanding on the Closing
Date, including any associated prepayment premiums or other amounts due under
the Notes and all other amounts owing by Borrower to Lender under this
Agreement.
Section 6.11. Delivery of Opinion Relating to Advance Request, Addition Request,
Substitution Request, Conversion Request or Expansion Request.
With respect to the closing of an Advance Request, an Addition Request, a
Substitution Request, a Conversion Request or an Expansion Request, it shall be
a condition precedent that Lender receives favorable opinions of counsel
(including local counsel, as applicable) to Borrower, as to the due organization
and qualification of Borrower, the due authorization, execution, delivery and
enforceability of each Loan Document executed in connection with the Request and
such other matters as Lender may reasonably require, each dated as of the
Closing Date for the Request, in form and substance satisfactory to Lender in
all respects.
Section 6.12. Delivery of Property-Related Documents.
With respect to each of the Initial Mortgaged Properties or an Additional
Mortgaged Property or a Substitute Mortgaged Property, it shall be a condition
precedent that Lender receive from Borrower each of the documents and reports
required by Lender pursuant to the Underwriting Requirements in connection with
the addition of such Mortgaged Property to the Collateral Pool and, each of the
following, each dated as of the applicable Closing Date for the Initial
Mortgaged Property or an Additional Mortgaged Property or a Substitute Mortgaged
Property, as the case may be, if applicable, in form and substance satisfactory
to Lender in all respects:
(a) A commitment for the Title Insurance Policy applicable to the Mortgaged
Property and a pro forma Title Insurance Policy based on the Commitment;
(b) the Insurance Policy (or a certified copy of the Insurance Policy)
applicable to the Mortgaged Property;
(c) The Survey applicable to the Mortgaged Property;

 

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(d) Evidence satisfactory to Lender of compliance of the Mortgaged Property with
Applicable Laws;
(e) A Replacement Reserve Agreement or an amendment thereto, providing for the
establishment of a replacement reserve account, to be pledged to Lender, in
which the owner shall (unless waived by Lender) periodically deposit amounts for
replacements for improvements at the Mortgaged Property and as additional
security for Borrower’s obligations under the Loan Documents;
(f) If required by Lender, a Completion/Repair and Security Agreement or an
amendment thereto, together with required escrows, on the standard form required
by Lender;
(g) An Assignment of Management Agreement or an amendment thereto, on the
standard form required by Lender;
(h) An Assignment of Leases and Rents, if Lender determines one to be necessary
or desirable, provided that the provisions of any such assignment shall be
substantively identical to those in the Security Instrument covering the
Collateral, with such modifications as may be necessitated by applicable state
or local law;
(i) In relation to each Initial Mortgaged Property, a Security Instrument to
effectuate the addition of such Initial Mortgaged Property to the Collateral
Pool, in relation to each Additional Mortgaged Property, a Security Instrument
to effectuate the addition of such Additional Mortgaged Property to the
Collateral Pool, and in relation to each Substitute Mortgaged Property, a
Security Instrument to effectuate the addition of such Substitute Mortgaged
Property to the Collateral Pool and a Note relating to the Mortgaged Properties.
The amount secured by each Security Instrument shall be equal to the Commitment
in effect from time to time;
(j) A Certificate of Borrower Parties;
(k) A Confirmation of Guaranty by each party providing a guaranty to Lender; and
(l) A Contribution Agreement or an amendment thereto.

 

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Section 6.13. Additional Collateral.
If Lender determines that, with respect to the addition, release or substitution
of Mortgaged Properties, the Coverage and LTV Tests are not met when required to
be satisfied by the terms of this Agreement, Borrower shall have the option of
either (A) providing to Lender a Letter of Credit which shall either have a term
equal to the Term of this Agreement or shall have a term of at least 364 days
and provide for a drawing 30 days prior to its date of termination in the event
it is not renewed; (B) depositing cash or Cash Equivalents to the Cash
Collateral Account; (C) adding an Additional Mortgaged Property to the
Collateral Pool in a manner which meets the requirements of Article 3 but which
Additional Mortgaged Property is to be encumbered solely by a Security
Instrument in favor of Lender securing all of the Obligations (any of the above
constituting “Additional Collateral”); or (D) to the extent permitted under the
Loan Documents, prepaying in part or in whole the outstanding principal amount
of Advances designated by Lender, in each case in an amount or, in relation to
an Additional Mortgaged Property, with value equal to that amount which Lender
determines will cause the Coverage and LTV Tests to be satisfied. For purposes
of making such calculation, Lender shall deduct the amount of cash and Cash
Equivalents deposited to the Cash Collateral Account or the amount available
under the Letter of Credit from the outstanding principal balance of all
Advances (the “Assumed Mortgage Principal Amount”) and (i) calculate the
interest component of debt service based on such Assumed Mortgage Principal
Amount and (ii) calculate the principal component of debt service by multiplying
the actual amount of principal times a fraction with a numerator equal to the
Assumed Mortgage Principal Amount and a denominator equal to the actual
outstanding principal amount of all of the Advances. In the event such Borrower
exercises either of the options set forth in clauses (A) or (B) of this
paragraph, Borrower shall execute and deliver a Cash Collateral Agreement.
Lender shall agree at the request of Borrower to exchange one type of Additional
Collateral for another type of Additional Collateral provided such other type of
Additional Collateral is of equivalent value and which meets the requirements of
this Agreement. Notwithstanding any provision hereof to the contrary, except for
any Substitution Deposit delivered in accordance with Section 3.07 (the amount
and application of which shall be determined in accordance with said
Section 3.07), (i) the value of any Additional Collateral delivered pursuant to
this Section 6.13 (other than Substitution Deposits) shall not exceed ten
percent (10%) of the aggregate Valuation of all Mortgaged Properties in the
Collateral Pool, and (ii) in the event the Coverage and LTV Tests (without
regard to the Additional Collateral) are not satisfied within one year after
delivery of the Additional Collateral, Borrower shall be required to prepay the
Advances Outstanding in an amount determined by Lender to cause the Coverage and
LTV Tests to be satisfied, and the Lender may draw on such Additional Collateral
and use the monies to make such prepayment. Any Advances required to be prepaid
pursuant to the preceding sentence shall be selected by the Borrower and, in
addition to the prepayment of the related Notes, Borrower shall pay all
associated prepayment premiums and other amounts due under the Notes being
prepaid.
Section 6.14. Letters of Credit.
(a) Letter of Credit Requirements. If Borrower provides Lender with a Letter of
Credit pursuant to this Agreement, the Letter of Credit shall be in form and
substance satisfactory to Lender and Lender shall be entitled to draw under such
Letter of Credit solely upon presentation of a sight draft to the LOC Bank. Any
Letter of Credit shall be for a term of at least 364 days. Any Letter of Credit
shall be issued by a financial institution satisfactory to Lender and shall have
its long-term debt obligations and its short-term debt obligations rated in
accordance with the requirements of Fannie Mae then in effect.

 

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(b) Draws Under Letter of Credit. Lender shall have the right to draw monies
under the Letter of Credit:
(i) upon the occurrence of (A) an Event of Default; or (B) a Potential Event of
Default of which the Borrower has knowledge has occurred and continued for two
(2) Business Days;
(ii) if 30 days prior to the expiration of the Letter of Credit, the Letter of
Credit has not been extended for a term of at least 364 days or has not been
substituted with a replacement Letter of Credit which satisfies the requirements
of this Agreement; or
(iii) upon the downgrading of the ratings of the long-term or short term debt
obligations of the LOC Bank below the requirements of Fannie Mae then in effect,
provided Borrower does not immediately take action to substitute the Letter of
Credit with a replacement Letter of Credit which satisfies the requirements of
this Agreement and does not deliver such replacement Letter of Credit within
thirty (30) days of such downgrading.
(c) Deposit to Cash Collateral Agreement. If Lender draws under the Letter of
Credit pursuant to Section 6.15(b)(ii) or (iii) above, Lender shall deposit such
draw monies into the Cash Collateral Account, pursuant to the terms of the Cash
Collateral Agreement.
(d) Default Draws. If Lender draws under the Letter of Credit pursuant to
Section 6.15(b)(i) above, Lender shall have the right to use monies drawn under
the Letter of Credit for any of the following purposes:
(i) to pay any amounts required to be paid by Borrower under the Loan Documents
(including, without limitation, any amounts required to be paid to Lender under
this Agreement);
(ii) to (on such Borrower’s behalf, or on its own behalf if Lender becomes the
owner of the Mortgaged Property) prepay any Note;
(iii) to make improvements or repairs to any Mortgaged Property which Lender
determines are necessary to ensure that the Mortgaged Property meets the
requirements set forth in the Loan Documents; or
(iv) to deposit monies into the Cash Collateral Account.
(e) Legal Opinion. Prior to or simultaneous with the delivery of any new Letter
of Credit (but not the extension of any existing Letter of Credit), such
Borrower shall cause the LOC Bank’s counsel to deliver a legal opinion
substantially in the form of Exhibit W-1 or Exhibit W-2, as applicable, and in
any event satisfactory in form and substance to the Lender in the Lender’s
reasonable discretion.

 

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ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Section 7.01. Representations and Warranties of Borrower.
The representations and warranties of Borrower Parties are contained in the
Certificate of Borrower Parties.
Section 7.02. Representations and Warranties of Lender.
Lender hereby represents and warrants to Borrower as follows as of the date
hereof:
(a) Due Organization. Lender is a corporation duly organized, validly existing
and in good standing under the laws of Ohio.
(b) Power and Authority. Lender has the requisite power and authority to execute
and deliver this Agreement and to perform its obligations under this Agreement.
(c) Due Authorization. The execution and delivery by Lender of this Agreement,
and the consummation by it of the transactions contemplated thereby, and the
performance by it of its obligations thereunder, have been duly and validly
authorized by all necessary action and proceedings by it or on its behalf.
ARTICLE 8
AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR
Borrower agrees and covenants with Lender that, at all times during the Term of
this Agreement:
Section 8.01. Compliance with Agreements.
(a) Borrower and Guarantor shall comply with all the terms and conditions of
each Loan Document to which it is a party or by which it is bound; provided,
however, that Borrower’s or Guarantor’s failure to comply with such terms and
conditions shall not be an Event of Default until the expiration of the
applicable notice and cure periods, if any, specified in the applicable Loan
Document.
(b) Borrower shall comply with all the material terms and conditions of any
building permits or any conditions, easements, rights-of-way or covenants of
record, restrictions of record or any recorded or, to the extent Borrower has
knowledge thereof, unrecorded agreement affecting or concerning any Mortgaged
Property including planned development permits, condominium declarations, and
reciprocal easement and regulatory agreements with any Governmental Authority;
provided, however, that Borrower’s failure to comply with such terms and
conditions shall not be an Event of Default until the expiration of the
applicable notice and cure periods, if any, specified in the applicable
document.

 

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Section 8.02. Maintenance of Existence.
(a) Each Borrower Party shall maintain its existence and continue to be
organized under the laws of the state of its organization. Borrower shall
continue to be duly qualified to do business in each jurisdiction in which such
qualification is necessary to the conduct of its business and where the failure
to be so qualified would adversely affect the validity of, the enforceability
of, or the ability to perform, its obligations under this Agreement or any other
Loan Document.
(b) During the Term of this Agreement, REIT Guarantor shall qualify, and be
taxed as, a real estate investment trust under Subchapter M of the Internal
Revenue Code and will not be engaged in any activities which would reasonably be
anticipated to jeopardize such qualification and tax treatment.
Section 8.03. Financial Statements; Accountants’ Reports; Other Information.
(a) Each Borrower Party shall keep and maintain at all times at the address set
forth in Section 15.08 of this Agreement, and upon Lender’s request shall make
available at the Mortgaged Property, complete and accurate books of accounts and
records (including copies of supporting bills and invoices) in sufficient detail
to correctly reflect (i) all of Borrower’s and Guarantor’s financial
transactions and assets, and (ii) the results of the operation of each Mortgaged
Property, and copies of all written contracts, Leases and other instruments
which affect each Mortgaged Property (including all bills, invoices and
contracts for electrical service, gas service, water and sewer service, waste
management service, telephone service and management services, if any). The
books, records, contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.
(b) In addition, each Borrower and Guarantor (with respect to clauses (i), (ii),
(iii), (ix) and (xi) set forth below) shall furnish, or cause to be furnished,
to Lender:
(i) Annual Financial Statements. As soon as available, and in any event within
ninety (90) days after the close of its fiscal year during the Term of this
Agreement, the balance sheet showing all assets and liabilities of Borrower and
REIT Guarantor as of the end of such fiscal year, the statement of income,
expenses, equity and retained earnings of Borrower’s operation and REIT
Guarantor’s operation for such fiscal year, and the statement of changes in
financial position and cash flows of Borrower and REIT Guarantor for such fiscal
year, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year, prepared
in accordance with GAAP consistently applied and accompanied by a certificate of
REIT Guarantor’s independent certified public accountants to the effect that
such financial statements have been reviewed by such accountants, and that such
financial statements fairly present the results of its operations and financial
condition for the periods and dates indicated, with such certification to be
free of exceptions and qualifications as to the scope of the audit as to the
going concern nature of the business and accompanied by a certificate of an
authorized representative of Borrower reasonably acceptable to Lender stating
that such financial statements fairly present the results of its operations and
financial condition for the periods and dates indicated;

 

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(ii) Quarterly Financial Statements. As soon as available, and in any event
within forty five (45) days after each of the first three fiscal quarters of
each fiscal year during the Term of this Agreement, the unaudited balance sheet
showing all assets and liabilities of Borrower as of the end of such fiscal
quarter, the unaudited statement of income, expenses, equity and retained
earnings of Borrower and the unaudited statement of changes in financial
position and cash flows of Borrower for the portion of the fiscal year ended
with the last day of such quarter, and if required by Lender, a statement of
income and expenses of each Mortgaged Property for the prior month, all prepared
in accordance with GAAP and in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in the previous
fiscal year, accompanied by a certificate of an authorized representative of
Borrower reasonably acceptable to Lender stating that such financial statements
have been prepared in accordance with GAAP, consistently applied, and fairly
present the results of its operations and financial condition for the periods
and dates indicated, subject to year end adjustments in accordance with GAAP;
(iii) Quarterly Property Statements. As soon as available, and in any event
within forty five (45) days after each Calendar Quarter, a statement of income
and expenses of each Mortgaged Property prepared in accordance with GAAP and
accompanied by a certificate of an authorized representative of Borrower
reasonably acceptable to Lender to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property for the period indicated;
(iv) Annual Property Statements. On an annual basis within forty five (45) days
after the close of its fiscal year, an annual statement of income and expenses
of each Mortgaged Property accompanied by a certificate of an authorized
representative of Borrower reasonably acceptable to Lender to the effect that
each such statement of income and expenses fairly, accurately and completely
presents the operations of each such Mortgaged Property for the period
indicated;
(v) Monthly Property Statements. Upon Lender’s request, a monthly property
management report for each Mortgaged Property, showing the number of inquiries
made and rental applications received from tenants or prospective tenants and
deposits received from tenants and any other information requested by Lender;
(vi) Updated Rent Rolls. Within 120 days after the end of each fiscal year of
each Borrower, and at any other time upon Lender’s request, a current Rent Roll
for each Mortgaged Property, showing the name of each tenant, and for each
tenant, the space occupied, the lease expiration date, the rent payable for the
current month, the date through which rent has been paid and any other
information requested by Lender and accompanied by a certificate of an
authorized representative of Borrower reasonably acceptable to Lender to the
effect that each such Rent Roll fairly, accurately and completely presents the
information required therein;

 

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(vii) Security Deposit Information. Within 120 days after the end of each fiscal
year of Borrower, and at any other time upon Lender’s request, an accounting of
all security deposits held in connection with any Lease of any part of any
Mortgaged Property, including the name and identification number of the accounts
in which such security deposits are held, the name and address of the financial
institutions in which such security deposits are held and the name and telephone
number of the person to contact at such financial institution, along with any
authority or release necessary for Lender to access information regarding such
accounts;
(viii) Accountants’ Reports; Other Reports. Promptly upon receipt thereof: (1)
copies of any reports or management letters submitted to Borrower by its
independent certified public accountants in connection with the examination of
its financial statements made by such accountants (except for reports otherwise
provided pursuant to subsection (a) above); provided, however, that Borrower
shall only be required to deliver such reports and management letters to the
extent that they relate to Borrower or any Mortgaged Property; and (2) all
schedules, financial statements or other similar reports delivered by Borrower
pursuant to the Loan Documents or requested by Lender with respect to Borrower’s
business affairs or condition (financial or otherwise) or any of the Mortgaged
Properties;
(ix) Ownership Interests. Within 120 days after the end of each fiscal year of
Borrower and REIT Guarantor, and at any other time upon Lender’s request, a
statement that identifies all owners of any interest in Borrower and the
interest held by each, if Borrower is a corporation, all officers and directors
of Borrower, and if Borrower is a limited liability company, all managers who
are not members;
(x) Annual Budgets. Prior to the start of its fiscal year, an annual budget for
each Mortgaged Property for such fiscal year, setting forth an estimate of all
of the costs and expenses, including capital expenses, of maintaining and
operating each Mortgaged Property; and
(xi) Federal Tax Returns. Within thirty (30) days of filing, the Federal tax
return of Borrower and REIT Guarantor.
(c) Each of the statements, schedules and reports required by Section 8.03 shall
be certified to be complete and accurate by an individual having authority to
bind Borrower, and shall be in such form and contain such detail as Lender may
reasonably require. Lender also may require that any statements, schedules or
reports be audited at Borrower’s expense by independent certified public
accountants acceptable to Lender.
(d) If Borrower fails to provide in a timely manner the statements, schedules
and reports required by Section 8.03, Lender shall have the right to have
Borrower’s books and records audited, at Borrower’s expense, by independent
certified public accountants selected by Lender in order to obtain such
statements, schedules and reports, and all related costs and expenses of Lender
shall become immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12 of each Security Instrument.

 

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(e) If an Event of Default has occurred and is continuing, Borrower shall
deliver to Lender upon written demand all books and records relating to the
Mortgaged Property or its operation.
(f) Borrower irrevocably authorizes Lender to obtain a credit report on Borrower
at any time.
(g) If an Event of Default has occurred and Lender has not previously required
Borrower to furnish a quarterly statement of income and expense for the
Mortgaged Property, Lender may require Borrower to furnish such a statement
within forty five (45) days after the end of each fiscal quarter of Borrower
following such Event of Default.
Section 8.04. Access to Records; Discussions With Officers and Accountants.
To the extent permitted by law and in addition to the applicable requirements of
the Security Instruments, Borrower shall permit Lender to:
(a) inspect, make copies and abstracts of, and have reviewed or audited, such of
Borrower’s books and records as may relate to the Obligations or any Mortgaged
Property;
(b) at any time discuss Borrower’s affairs, finances and accounts with
Borrower’s senior management or property managers and independent public
accountants; after an Event of Default, discuss Borrower’s affairs, finances and
account with Guarantor’s officers, partners and employees;
(c) discuss the Mortgaged Properties’ conditions, operations or maintenance with
the managers of such Mortgaged Properties, the officers and employees of
Borrower and/or the Guarantor; and
(d) receive any other information that Lender reasonably deems necessary or
relevant in connection with any Advance, any Loan Document or the Obligations
from the officers and employees of such Borrower or third parties.
Notwithstanding the foregoing, prior to an Event of Default or Potential Event
of Default and in the absence of an emergency, all inspections shall be
conducted at reasonable times during normal business hours upon reasonable
notice to Borrower.
Section 8.05. Certificate of Compliance.
Borrower shall deliver to Lender concurrently with the delivery of the financial
statements and/or reports required by Section 8.03(a) and Section 8.03(b) a
certificate signed by an authorized representative of Borrower reasonably
acceptable to Lender (i) setting forth in reasonable detail the calculations
required to establish whether Borrower and Guarantor were in compliance with the
requirements of Article 8 of this Agreement on the date of such financial
statements, and (ii) stating that, to the best knowledge of such individual
following reasonable inquiry, no Event of Default or Potential Event of Default
has occurred, or if an Event of Default or Potential Event of Default has
occurred, specifying the nature thereof in reasonable detail and the action
Borrower is taking or proposes to take. Any certificate required by this Section
shall run directly to and be for the benefit of Lender and Fannie Mae.

 

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Section 8.06. Maintain Licenses.
Borrower shall procure and maintain in full force and effect all licenses,
Permits, charters and registrations which are material to the conduct of its
business and shall abide by and satisfy all terms and conditions of all such
licenses, Permits, charters and registrations.
Section 8.07. Inform Lender of Material Events.
Borrower shall promptly inform Lender in writing of any of the following (and
shall deliver to Lender copies of any related written communications,
complaints, orders, judgments and other documents relating to the following) of
which Borrower has actual knowledge:
(a) Defaults. The occurrence of any Event of Default or any Potential Event of
Default under this Agreement or any other Loan Document;
(b) Regulatory Proceedings. The commencement of any rulemaking or disciplinary
proceeding or the promulgation of any proposed or final rule which would have,
or may reasonably be expected to have, a Material Adverse Effect; the receipt of
notice from any Governmental Authority having jurisdiction over Borrower that
(i) Borrower is being placed under regulatory supervision, (ii) any license,
Permit, charter, membership or registration material to the conduct of
Borrower’s business or the Mortgaged Properties is to be suspended or revoked or
(iii) Borrower is to cease and desist any practice, procedure or policy employed
by
Borrower in the conduct of its business, and such cessation would have, or may
reasonably be expected to have, a Material Adverse Effect;
(c) Bankruptcy Proceedings. The commencement of any proceedings by or against
Borrower or Guarantor under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official is sought to be appointed for it;
(d) Environmental Claim. The receipt from any Governmental Authority or other
Person of any notice of violation, claim, demand, abatement, order or other
order or direction (conditional or otherwise) for any damage, including personal
injury (including sickness, disease or death), tangible or intangible property
damage, contribution, indemnity, indirect or consequential damages, damage to
the environment, pollution, contamination or other adverse effects on the
environment, removal, cleanup or remedial action or for fines, penalties or
restrictions, resulting from or based upon (i) the existence or occurrence, or
the alleged existence or occurrence, of a Hazardous Substance Activity on any
Mortgaged Property in violation of any law or (ii) the violation, or alleged
violation, of any Hazardous Materials Laws in connection with any Mortgaged
Property or any of the other assets of Borrower;

 

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(e) Material Adverse Effects. The occurrence of any act, omission, change or
event (including the commencement or written threat of any proceedings by or
against Borrower in any Federal, state or local court, or before any
Governmental Authority, or before any arbitrator), that has, or would have, a
Material Adverse Effect, subsequent to the date of the most recent audited
financial statements of Borrower delivered to Lender pursuant to Section 8.03;
(f) Accounting Changes. Any material change in Borrower’s accounting policies or
financial reporting practices;
(g) Legal and Regulatory Status. The occurrence of any act, omission, change or
event, including any Governmental Approval, the result of which is to change or
alter in any way the legal or regulatory status of Borrower; and
(h) Change in Senior Management. Any change in the identity of Senior
Management.
Section 8.08. Compliance with Applicable Law.
Borrower shall comply in all material respects with all Applicable Laws now or
hereafter affecting any Mortgaged Property or any part of any Mortgaged Property
or requiring any alterations, repairs or improvements to any Mortgaged Property.
Borrower shall procure and continuously maintain in full force and effect, and
shall abide by and satisfy all material terms and conditions of all Permits, and
shall comply with all written notices from Governmental Authorities.
Section 8.09. Alterations to the Mortgaged Properties.
Except as otherwise provided in the Loan Documents, Borrower shall have the
right to undertake any alteration, improvement, demolition, removal or
construction (collectively, “Alterations”) to the Mortgaged Property which it
owns without the prior consent of Lender; provided, however, that in any case,
no such Alteration shall be made to any Mortgaged Property without the prior
written consent of Lender if (i) such Alteration could reasonably be expected to
adversely affect the value of such Mortgaged Property or its operation as a
multifamily housing facility in substantially the same manner in which it is
being operated on the date such property became Collateral, (ii) the
construction of such Alteration could reasonably be expected to result in
interference to the occupancy of tenants of such Mortgaged Property such that
tenants in occupancy with respect to five percent (5%) or more of the Leases
would be permitted to terminate their Leases or to abate the payment of all or
any portion of their rent, or (iii) such Alteration will be completed in more
than twelve (12) months from the date of commencement or in the last year of the
Term of this Agreement. Notwithstanding the foregoing, Borrower must obtain
Lender’s prior written consent to construct Alterations with respect to the
Mortgaged Property costing in excess of, with respect to any Mortgaged Property,
the number of bedrooms in such Mortgaged Property multiplied by $2,000, but in
any event, costs in excess of $250,000 and Borrower must give prior written
notice to Lender of its intent to construct Alterations with respect to such
Mortgaged Property costing in excess of $100,000; provided, however, that the
preceding requirements shall not be applicable to Alterations made, conducted or
undertaken by Borrower as part of Borrower’s routine maintenance and repair of
the Mortgaged Properties as required by the Loan Documents.

 

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Section 8.10. Loan Document Taxes.
If any tax, assessment or Imposition (other than a franchise tax or excise tax
imposed on or measured by, the net income or capital (including branch profits
tax) of Lender (or any transferee or assignee thereof, including a participation
holder)) (“Loan Document Taxes”) is levied, assessed or charged by the United
States, or any State in the United States, or any political subdivision or
taxing authority thereof or therein upon any of the Loan Documents or the
obligations secured thereby, the interest of Lender in the Mortgaged Properties,
or Lender by reason of or as holder of the Loan Documents, Borrower shall pay
all such Loan Document Taxes to, for, or on account of Lender (or provide funds
to Lender for such payment, as the case may be) as they become due and payable
and shall promptly furnish proof of such payment to Lender, as applicable. In
the event of passage of any law or regulation permitting, authorizing or
requiring such Loan Document Taxes to be levied, assessed or charged, which law
or regulation in the opinion of counsel to Lender may prohibit Borrower from
paying the Loan Document Taxes to or for Lender, Borrower shall enter into such
further instruments as may be permitted by law to obligate Borrower to pay such
Loan Document Taxes.
Section 8.11. Further Assurances.
Borrower, at the request of Lender, shall execute and deliver and, if necessary,
file or record such statements, documents, agreements, UCC financing and
continuation statements and such other instruments and take such further action
as Lender from time to time may reasonably request as reasonably necessary,
desirable or proper to carry out more effectively the purposes of this Agreement
or any of the other Loan Documents or to subject the Collateral to the lien and
security interests of the Loan Documents or to evidence, perfect or otherwise
implement, to assure the lien and security interests intended by the terms of
the Loan Documents or in order to exercise or enforce its rights under the Loan
Documents. If Lender believes that an “all-asset” collateral description, as
contemplated by Section 9-504(2) of the UCC, is appropriate as to any Collateral
under any Loan Document, the Lender is irrevocably authorized to use such a
collateral description, whether in one or more separate filings or as part of
the collateral description in a filing that particularly describes the
collateral.
Section 8.12. Transfer of Ownership Interests in Borrower or Guarantor.
(a) Prohibition on Transfers. Subject to paragraph (b) of this Section, no
Targeted Entity shall cause or permit a Transfer or a Change of Control.
(b) Permitted Transfers. Notwithstanding the provisions of paragraph (a) of this
Section, the following Transfers by a Targeted Entity, upon thirty (30) days’
prior written notice to Lender, in the case of subclause (ii), (iii) and
(iv) below, are permitted without the consent of Lender (except that with
respect to subclauses (iii) and (iv) below, changes to the Organizational
Documents must be approved by Lender):
(i) The issuance by REIT Guarantor of stock and the subsequent Transfer of such
stock; provided, however, that no Change of Control occurs as the result of such
Transfer.
(ii) A merger with or acquisition of another entity by Guarantor, provided that
(1) such Guarantor is the surviving entity after such merger or acquisition,
(2) no Change of Control occurs, and (3) such merger or acquisition does not
result in an Event of Default, as such terms are defined in this Agreement.

 

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(iii) A Transfer of no greater than 49% of the limited partnership interest or
membership interests in any of the Borrowers to a Person, provided, however,
after such Transfer, (A) there shall be no Change of Control, (B) such Transfer
shall not be to a Prohibited Person, (C) no Borrower shall be in any manner
Controlled by such Person and such Person shall not have consent rights over
decisions and (D) any changes to the Borrower Organizational Documents are
satisfactory to Lender.
(iv) A Transfer of no greater than 49% of the limited partnership interest in
the EROP Guarantor to a Person, provided, however, after such Transfer,
(A) there shall be no Change of Control, (B) such Transfer shall not be to a
Prohibited Person, (C) the EROP Guarantor shall not be in any manner Controlled
by such Person and such Person shall not have consent rights over decisions and
(D) any changes to the EROP Guarantor Organizational Documents are satisfactory
to Lender.
Section 8.13. Transfer of Ownership of Mortgaged Property.
(a) Prohibition on Transfers. Subject to paragraph (b) of this Section, neither
Borrower nor Guarantor shall cause or permit a Transfer of all or any part of a
Mortgaged Property or interest in any Mortgaged Property.
(b) Permitted Transfers. Notwithstanding provision (a) of this Section, the
following Transfers of a Mortgaged Property by Borrower or Guarantor, upon
thirty (30) days prior written notice to Lender, are permitted without the
consent of Lender:
(i) The grant of a leasehold interest in individual dwelling units or commercial
spaces in accordance with the Security Instrument.
(ii) A sale or other disposition of obsolete or worn out personal property which
is contemporaneously replaced by comparable personal property of equal or
greater value which is free and clear of liens, encumbrances and security
interests other than those created by the Loan Documents or Permitted Liens.

 

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(iii) The creation of a mechanic’s or materialmen’s lien or judgment lien
against a Mortgaged Property which is released of record or otherwise remedied
to Lender’s satisfaction within thirty (30) days of the date of creation.
(iv) The grant of an easement if, prior to the granting of the easement,
Borrower causes to be submitted to Lender all information required by Lender to
evaluate the easement, and if Lender consents to such easement based upon
Lender’s determination that the easement will not materially affect the
operation of the Mortgaged Property or Lender’s interest in the Mortgaged
Property and Borrower pays to Lender, on demand, all reasonable third party
out-of-pocket costs and expenses incurred by Lender in connection with reviewing
Borrower’s request. Lender shall not unreasonably withhold its consent to or
withhold its agreement to subordinate the lien of a Security Instrument to
(1) the grant of a utility easement serving a Mortgaged Property to a publicly
operated utility, or (2) the grant of an easement related to expansion or
widening of roadways, provided that any such easement is in form and substance
reasonably acceptable to Lender and does not materially and adversely affect the
access, use or marketability of a Mortgaged Property.
(c) Assumption of Collateral Pool. Notwithstanding paragraph (a) of this
Section, a Transfer of the entire Collateral Pool may be permitted with the
prior written consent of Lender if each of the following requirements is
satisfied:
(i) the transferee (“New Collateral Pool Borrower”) is a Single Purpose entity,
and executes an assumption agreement that is acceptable to Lender pursuant to
which such New Collateral Pool Borrower assumes all obligations of a Borrower
under all the applicable Loan Documents and Borrower and Guarantor are released
from their obligations in a manner satisfactory to Lender;
(ii) the applicable Loan Documents shall be amended and restated as deemed
necessary or appropriate by Lender to meet the then-applicable requirements of
Fannie Mae; provided, however, any waivers granted in connection with the
Initial Advances will not be reinstated unless specifically approved by Lender
and Fannie Mae, and provided further, the interest rates and pricing in
connection with any Outstanding Notes shall remain unchanged, subject to the
terms of the Loan Documents;
(iii) after giving effect to the assumption, the requirements of Section 6.05
and the General Conditions contained in Section 6.01 shall be satisfied;
(iv) New Collateral Pool Borrower shall make such deposits to the reserves or
escrow funds established under the Loan Documents, including replacement
reserves, completion/repair reserves, and all other required escrow and reserve
funds at such times and in such amounts as determined by Lender at the time of
the assumption;
(v) New Collateral Pool Borrower shall propose a guarantor acceptable to Lender,
which guarantor executes and delivers a guaranty acceptable to Lender;
(vi) Lender shall be the servicer of the loan; and
(vii) the requirements of Section 8.14 are satisfied.

 

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Section 8.14. Consent to Prohibited Transfers.
(a) Consent to Prohibited Transfers. Lender may, in its sole and absolute
discretion, consent to a Transfer that would otherwise violate Sections 8.12 and
8.13 if, prior to the Transfer, Borrower or Guarantor, as the case may be, has
satisfied each of the following requirements:
(i) the submission to Lender of all information required by Lender to make the
determination required by this Section;
(ii) the absence of any Event of Default;
(iii) the transferee meets all of the eligibility, credit, management and other
standards (including any standards with respect to previous relationships
between Lender and the transferee and the organization of the transferee)
customarily applied by Lender at the time of the proposed Transfer to the
approval of borrowers or guarantors, as the case may be, in connection with the
origination or purchase of similar mortgages, deeds of trust or deeds to secure
debt on multifamily properties;
(iv) in the case of a Transfer of direct or indirect ownership interests in
Borrower or Guarantor, as the case may be, if transferor or any other person has
obligations under any Loan Documents, the execution by the transferee of one
(1) or more individuals or entities acceptable to Lender and/or Fannie Mae of an
assumption agreement that is acceptable to Lender and that, among other things,
requires the transferee to perform all obligations of transferor or such person
set forth in such Loan Document, and may require that the transferee comply with
any provisions of this Instrument or any other Loan Document which previously
may have been waived by Lender;
(v) if a Variable DMBS Advance is Outstanding, the Transfer shall not cause any
adverse consequences in the taxes or accounting of the trust pursuant to which
the DMBS is issued as determined by Fannie Mae;
(vi) Lender’s receipt of all of the following:
(1) a transfer fee equal to one (1) percent of the Commitment immediately prior
to the transfer.
(2) In addition, Borrower shall be required to reimburse Lender for all of
Lender’s reasonable out-of-pocket costs (including reasonable attorneys’ fees)
incurred in reviewing the Transfer request.

 

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Section 8.15. Date-Down Endorsements.
Before the release or substitution of a Mortgaged Property and at any time and
from time to time that Lender has reason to believe that an additional lien may
encumber a Mortgaged Property, Lender may obtain an endorsement to each Title
Insurance Policy containing a revolving credit endorsement, amending the
effective date of each such Title Insurance Policy to the date of the title
search performed in connection with the endorsement. Borrower shall pay for the
cost and expenses incurred by Lender to the Title Company in obtaining such
endorsement, provided that, for each Title Insurance Policy, it shall not be
liable to pay for more than one (1) such endorsement in any consecutive twelve
(12) month period.
Section 8.16. Ownership of Mortgaged Properties.
Borrower shall be the sole owner of each of the Mortgaged Properties free and
clear of any Liens other than Permitted Liens.
Section 8.17. Compliance with Net Worth Test.
Guarantor and Borrower shall at all times maintain its Net Worth so that it is
not less than $135,000,000.
Section 8.18. Compliance with Liquidity Test.
Guarantor and Borrower shall at all times maintain cash and Cash Equivalents in
an amount not less than an amount that equals six (6) months of Facility Debt
Service based upon the actual Outstanding principal amount of Advances
calculated for the prior six (6) month period.
Section 8.19. Change in Property Manager.
Borrower shall give Lender notice of any change in the identity of the property
manager of each Mortgaged Property, and except with respect to property managers
which are Affiliates of the applicable Borrower, no such change shall be made
without the prior consent of Lender.
Any management agreement must be in form and substance satisfactory to Lender.
Borrower agrees to enter into and cause any property manager to enter into an
assignment and subordination of property management agreement in form and
substance satisfactory to Lender and any other documents or agreements Lender
shall deem necessary in connection with the execution of any property management
agreement.
Section 8.20. Single Purpose Entity.
Borrower and each general partner or managing member of Borrower shall maintain
itself as a Single Purpose entity.

 

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Section 8.21. ERISA.
Borrower shall at all times remain in compliance in all material respects with
all applicable provisions of ERISA, if any, and shall not incur any liability to
the PBGC on a Plan under Title IV of ERISA. Neither the Borrower, nor any member
of the Controlled Group is or ever has been obligated to contribute to any
Multiemployer Plan. The assets of the Borrower do not constitute plan assets
within the meaning of Department of Labor Regulation §2510.3-101 of any employee
benefit plan subject to Title I of ERISA.
Section 8.22. Consents or Approvals.
Borrower shall obtain any required consent or approval of any creditor of
Borrower, any Governmental Authority or any other Person to perform its
obligations under this Agreement and any other Loan Documents.
Section 8.23. Prepayment of Rents.
Subject to the terms of the Security Instruments, Borrower may collect or accept
payment of any Rents for not more than six (6) months prior to the due dates of
such Rents, provided that the aggregate amount of such Rents at any time does
not exceed an amount equal to ten percent (10%) of the aggregate amount of Rents
payable for the entire Collateral Pool during the preceding twelve (12) month
period.
Section 8.24. Affiliate Contracts.
Borrower will cause the parties to the Purchasing Agency Agreement dated as of
October 1, 2007 between Allen & O’Hara, Inc. and Allen & O’Hara Education
Services, Inc., both Affiliates of Borrower, to not amend, restate, modify or
extend such agreement, unless (a) Borrower delivers to Lender a copy of any such
amendment, restatement, modification or extension of such agreement or within
ten (10) days of execution and (b) the terms of the agreement (including the
fee) are consistent with and no worse than the then prevailing market conditions
for a similar arms-length transaction. The fee paid pursuant to the Purchasing
Agency Agreement, will at all times be a market or below market fee.
Section 8.25. Post Closing Obligation.
Borrower acknowledges that EDR Lubbock Limited Partnership is in “Temporary Good
Standing” with the Texas Comptroller of Public Accounts, because, for
administrative reasons, on the Initial Closing Date, the Texas Comptroller of
Public Accounts will only indicate that entities are in “Temporary Good
Standing”. On or prior to February 1, 2009, Borrower shall deliver evidence
reasonably satisfactory to Lender indicating that EDR Lubbock Limited
Partnership has achieved “Good Standing”, “Permanent Good Standing” or a similar
status according to the Texas Comptroller of Public Accounts.

 

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Section 8.26. Geographical Diversification Requirements.
On or prior to the First Anniversary, the Geographical Diversification
Requirements shall be satisfied, unless Lender otherwise consents in its
discretion.
ARTICLE 9
NEGATIVE COVENANTS OF BORROWER
Borrower and Guarantor, as applicable, agree and covenant with Lender that, at
all times during the Term of this Agreement:
Section 9.01. Other Activities.
(a) No Targeted Entity shall amend its Organizational Documents in any material
respect, including without limitation the allocation of decision-making rights
among the members and/or partners, without the prior written consent of Lender;
(b) No Targeted Entity shall dissolve or liquidate in whole or in part;
(c) No Targeted Entity shall, except as otherwise provided in this Agreement,
without the prior written consent of Lender, merge or consolidate with any
Person; or
(d) Borrower shall not use, or permit to be used, any Mortgaged Property for any
uses or purposes other than as a Rental Property and ancillary uses consistent
with Rental Properties.
Section 9.02. Liens.
Borrower shall not create, incur, assume or suffer to exist any Lien on
Borrower’s interest in any Mortgaged Property or any part of any Mortgaged
Property, except the Permitted Liens.
Section 9.03. Indebtedness.
Borrower shall not incur or be obligated at any time with respect to any
Indebtedness (other than Advances) in connection with any of the Mortgaged
Properties. Neither Borrower nor any owner of Borrower shall incur any
“mezzanine debt,” issue any preferred equity or incur any similar Indebtedness
or equity with respect to any Mortgaged Property.
Section 9.04. Principal Place of Business.
Borrower shall not change its principal place of business, state of formation,
legal name or the location of its books and records, each as set forth in the
Certificate of Borrower Parties, without first giving thirty (30) days’ prior
written notice to Lender.

 

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Section 9.05. Condominiums.
Borrower shall not submit any Mortgaged Property to a condominium regime during
the Term of this Agreement.
Section 9.06. Restrictions on Distributions.
Borrower shall not make any distributions of any nature or kind whatsoever to
the owners of its Ownership Interests as such if, at the time of such
distribution, a Potential Event of Default or an Event of Default has occurred
and remains uncured.
Section 9.07. No Hedging Arrangements.
Without the prior written consent of Lender, or unless otherwise required by the
Pledge, Interest Rate Cap Agreement, Borrower will not enter into or guarantee,
provide security for or otherwise undertake any form of contingent obligation
with respect to any Hedging Arrangement.
Section 9.08. Confidentiality of Certain Information.
Borrower Parties shall not disclose any terms, conditions, underwriting
requirements or underwriting procedures of the Credit Facility or any of the
Loan Documents; provided, however, that such confidential information may be
disclosed (A) as required by law or pursuant to generally accepted accounting
procedures, (B) to officers, directors, employees, agents, partners, attorneys,
accountants, engineers and other consultants of Borrower Parties who need to
know such information, provided such Persons are instructed to treat such
information confidentially, (C) to any regulatory authority having jurisdiction
over a Borrower Party, (D) in connection with any filings with the Securities
and Exchange Commission or other Governmental Authorities, or (E) to any other
Person to which such delivery or disclosure may be necessary or appropriate
(1) in compliance with any law, rule, regulation or order applicable to a
Borrower Party, or (2) in response to any subpoena or other legal process or
information investigative demand. Borrower permits Lender to disclose all
financial and other information received from or on behalf of Borrower to Fannie
Mae in connection with the assignment of the Loan.
ARTICLE 10
FEES
Section 10.01. Reserved.
Section 10.02. Occupancy Deficiency Origination Fee.
(a) Borrower shall pay the Occupancy Deficiency Origination Fee in the amount of
$28,125 for all of the Deficient Mortgaged Properties prior to or on the Initial
Closing Date. Borrower shall pay the Occupancy Deficiency Origination Fee in an
amount as calculated by Lender on the Closing Date of any addition of a
Deficient Mortgaged Property.

 

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(b) If on the First Anniversary, Lender determines that any of the Deficient
Mortgaged Properties have failed to achieve economic equivalent occupancy of at
least eighty percent (80%) (taking into account any physical vacancy, bad debts
and rental concessions) for the prior three (3) consecutive months, Lender shall
notify Borrower in writing of the status of the Deficient Mortgaged Properties
and whether Borrower shall have the option to pay the Occupancy Deficiency
Origination Fee (the “Deficiency Notice”). Upon receipt of the Deficiency
Notice, Borrower must: (i) deliver a Release Request to Lender within thirty
(30) days of receipt of the Deficiency Notice, pay the Release Price and the
Release Fee with respect to the non-compliant Deficient Mortgaged Properties
(together with any prepayment premiums and other amounts due) and comply with
the other conditions for a Release and Lender shall release such non-compliant
Deficient Mortgage Properties from the Collateral Pool in accordance with the
terms of this Agreement, (ii) deliver a Substitution Request to Lender within
thirty (30) days of receipt of the Deficiency Notice and cause the Substitution
of the non-compliant Deficient Mortgaged Properties with Substitute Mortgaged
Properties in accordance with the terms of this Agreement or (iii) if Borrower
is given the option pursuant to the Deficiency Notice, pay an additional
Occupancy Deficiency Origination Fee with respect to one or more of the
non-compliant Deficient Mortgaged Properties, for which Lender decides to permit
an Occupancy Deficiency Origination Fee to be paid, within thirty (30) days of
receipt of the Deficiency Notice.
(c) In the event the additional Occupancy Deficiency Origination Fee is paid
pursuant to Section 10.02(b), on the date that is two (2) years from the Initial
Closing Date, if Lender determines that any of the Deficient Mortgaged
Properties have failed to achieve economic equivalent occupancy of at least
eighty percent (80%) (taking into account any physical vacancy, bad debts and
rental concessions) for the prior three (3) consecutive months, Borrower shall
not have the option to pay the Occupancy Deficiency Origination Fee and Lender
shall notify Borrower in writing of the status of the Deficient Mortgaged
Properties (the “Second Deficiency Notice”). Upon receipt of the Second
Deficiency Notice, Borrower must (i) deliver a Release Request to Lender within
thirty (30) days of receipt of the Second Deficiency Notice, pay the Release
Price and the Release Fee with respect to the non-compliant Deficient Mortgaged
Properties (together with any prepayment premiums and other amounts due) and
comply with the other conditions for a Release and Lender shall release such
non-compliant Deficient Mortgage Properties from the Collateral Pool in
accordance with the terms of this Agreement or (ii) deliver a Substitution
Request to Lender within thirty (30) days of receipt of the Second Deficiency
Notice and cause the Substitution of the non-compliant Mortgaged Properties with
Substitute Mortgaged Properties in accordance with the terms of this Agreement.
Section 10.03. Origination Fees.
(a) Initial Origination Fee. Borrower shall pay to Lender on or before the
Initial Closing Date an origination fee (“Initial Origination Fee”) equal to
$790,940 (40 basis points (.40%) multiplied by the Initial Advance).
(b) Expansion Origination Fee. Upon the closing of a Expansion Request under
Article 4, Borrower shall pay to Lender an origination fee (“Expansion
Origination Fee”) equal to the product obtained by multiplying (i) the Expansion
made on the Closing Date for the Expansion Request, by (ii) 40 basis points
(.40%). Borrower shall pay the Expansion Origination Fee on or before the
Closing Date for the Expansion Request.

 

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Section 10.04. Due Diligence Fees.
(a) Initial Due Diligence Fees. Borrower shall pay to Lender non-refundable due
diligence fees (“Initial Due Diligence Fees”) with respect to each Initial
Mortgaged Property in an amount equal to $4,000 per Initial Mortgaged Property.
Borrower shall also deposit with Lender an amount equal to $10,000 for each
Initial Mortgaged Property (“Initial Due Diligence Deposit”) to be used for the
payment of third party costs and out-of-pocket fees and expenses incurred by
Lender. All Initial Due Diligence Fees shall have been paid prior to the Initial
Closing Date and all third party costs and out-of-pocket fees and expenses (not
otherwise covered by the Initial Due Diligence Deposit) incurred by Lender and
Fannie Mae shall be paid by Borrower on the Initial Closing Date (or, if the
proposed Initial Mortgaged Properties do not become part of the Collateral Pool,
on demand). Any portion of the Initial Due Diligence Fee Deposit deposited with
Lender and not actually used by Lender to cover due diligence expenses shall be
refunded to Borrower on the Initial Closing Date.
(b) Additional Due Diligence Fees for Additional Collateral. Borrower shall pay
to Lender non-refundable additional due diligence fees (the “Additional
Collateral Due Diligence Fees”) with respect to each proposed Additional
Mortgaged Property or Substitute Mortgaged Property, as applicable, in an amount
equal to $4,000 per Additional Mortgaged Property or Substitute Mortgaged
Property, as applicable, which represents the estimated cost for due diligence
expenses. Borrower shall also deposit with Lender an amount equal to $10,000 for
each proposed Additional Mortgaged Property or Substitute Mortgaged Property, as
applicable (“Additional Collateral Due Diligence Deposit”) to be used for the
payment of third party costs and out-of-pocket expenses incurred by Lender and
Fannie Mae. All Additional Collateral Due Diligence Fees, third party costs and
out-of-pocket fees and expenses (not otherwise covered by the Additional
Collateral Due Diligence Deposit) incurred by Lender and Fannie Mae shall be
paid by Borrower on the applicable Closing Date (or if the relevant proposed
Additional Mortgaged Property or Substitute Mortgaged Property, as applicable,
does not become part of a Collateral Pool, on demand) for the Additional
Mortgaged Property or Substitute Mortgaged Property, as applicable. Any portion
of the Additional Collateral Due Diligence Deposit deposited with Lender and not
actually used by Lender to cover due diligence expenses shall be refunded to
Borrower on the applicable Closing Date.

 

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Section 10.05. Legal Fees and Expenses.
(a) Initial Legal Fees. Borrower shall pay, or reimburse Lender for, all
out-of-pocket third party legal fees and expenses incurred by Lender and by
Fannie Mae in connection with the preparation, review and negotiation of this
Agreement and any other Loan Documents executed on the date of this Agreement.
(b) Fees and Expenses Associated with Requests. Borrower shall pay, or reimburse
Lender for, all reasonable out-of-pocket third party costs and expenses incurred
by Lender, including the out-of-pocket legal fees and expenses incurred by
Lender in connection with the preparation, review and negotiation of all
documents, instruments and certificates to be executed and delivered in
connection with each Request, the performance by Lender of any of its
obligations with respect to the Request, the satisfaction of all conditions
precedent to Borrower’s rights or Lender’s obligations with respect to the
Request, and all transactions related to any of the foregoing, including the
cost of title insurance premiums and applicable recordation and transfer taxes
and charges and all other reasonable costs and expenses in connection with a
Request. The obligations of Borrower under this subsection shall be absolute and
unconditional, regardless of whether the transaction requested in the Request
actually occurs. Borrower shall pay such costs and expenses to Lender on the
Closing Date for the Request, or, as the case may be, after demand by Lender
when Lender determines that such Request will not close.
Section 10.06. Failure to Close any Request.
If Borrower makes a Request and fails to close on the Request for any reason
other than the default by Lender, then Borrower shall pay to Lender and Fannie
Mae all damages incurred by Lender and Fannie Mae in connection with the failure
to close.
ARTICLE 11
EVENTS OF DEFAULT
Section 11.01. Events of Default.
Each of the following events shall constitute an “Event of Default” under this
Agreement, whatever the reason for such event and whether it shall be voluntary
or involuntary, or within or without the control of Borrower or be effected by
operation of law or pursuant to any judgment or order of any court or any order,
rule or regulation of any Governmental Authority:
(a) the occurrence of a default under any Loan Document beyond the cure period,
if any, set forth therein or an Event of Default under and as defined in any
Loan Document; or
(b) the failure by Borrower to pay when due any amount payable by Borrower,
under any Note, any Security Instrument, this Agreement or any other Loan
Document, including any fees, costs or expenses; or
(c) the failure by Borrower to perform or observe any covenant contained in
Sections 8.02, 8.07, 8.12, 8.13, 8.14, 8.16, 8.17, 8.18, 8.20, 8.23 and
Article 9; or
(d) any warranty, representation or other written statement made by or on behalf
of any Targeted Entity contained in this Agreement, any other Loan Document or
in any instrument furnished in compliance with or in reference to any of the
foregoing, is false or misleading in any material respect on any date when made
or deemed made; or

 

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(e) (i) any Targeted Entity shall (A) commence a voluntary case (or, if
applicable, or joint case) under any Chapter of the Bankruptcy Code (as now or
hereafter in effect) or otherwise, (B) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, debt adjustment, winding up or composition or adjustment of
debts, (C) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws, (D) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of a substantial part of
its property, domestic or foreign, (E) admit in writing its inability to pay, or
generally not be paying, its debts as they become due, (F) make a general
assignment for the benefit of creditors, (G) assert that any Borrower or
Guarantor (solely with respect to the Guaranty), has no liability or obligations
under this Agreement or any other Loan Document to which it is a party; or
(H) take any action for the purpose of effecting any of the foregoing; or
(ii) a case or other proceeding shall be commenced against any Targeted Entity
in any court of competent jurisdiction seeking (A) relief under the Federal
bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
upon or composition or adjustment of debts, or (B) the appointment of a trustee,
receiver, custodian, liquidator or the like of any Targeted Entity or of all or
a substantial part of the property, domestic or foreign, of any Targeted Entity
and any such case or proceeding shall continue undismissed or unstayed for a
period of sixty (60) consecutive calendar days, or any order granting the relief
requested in any such case or proceeding against any Targeted Entity (including
an order for relief under such Federal bankruptcy laws) shall be entered; or
(iii) any Targeted Entity files an involuntary petition against Borrower under
any Chapter of the Bankruptcy Code or under any other bankruptcy, insolvency,
reorganization, arrangement or readjustment of debt, dissolution, liquidation or
similar proceeding relating to Borrower under the laws of any jurisdiction.
(f) both (i) an involuntary petition under any Chapter of the Bankruptcy Code is
filed against Borrower or Borrower directly or indirectly becomes the subject of
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction, or in equity, and (ii) any Targeted Entity has acted in
concert or conspired with such creditors of Borrower (other than Lender) to
cause the filing thereof.
(g) if any provision of this Agreement or any other Loan Document or the lien
and security interest purported to be created hereunder or under any Loan
Document shall at any time for any reason cease to be valid and binding in
accordance with its terms on Borrower or Guarantor, or shall be declared to be
null and void, or the validity or enforceability hereof or thereof or the
validity or priority of the lien and security interest created hereunder or
under any other Loan Document shall be contested by any Targeted Entity seeking
to establish the invalidity or unenforceability hereof or thereof, or Borrower
or Guarantor (only with respect to the Guaranty) shall deny that it has any
further liability or obligation hereunder or thereunder; or

 

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(h) (i) the execution by Borrower of a chattel mortgage or other security
agreement on any materials, fixtures or articles used in the construction or
operation of the improvements located on any Mortgaged Property or on articles
of personal property located therein (other than in connection with any
Permitted Liens), or (ii) if any such materials, fixtures or articles are
purchased pursuant to any conditional sales contract or other security agreement
or otherwise so that the Ownership thereof will not vest unconditionally in
Borrower free from encumbrances, or (iii) if Borrower does not furnish to Lender
upon request the contracts, bills of sale, statements, receipted vouchers and
agreements, or any of them, under which Borrower claim title to such materials,
fixtures, or articles; or
(i) the failure by Borrower to comply with any requirement of any Governmental
Authority within thirty (30) days after written notice of such requirement shall
have been given to Borrower by such Governmental Authority; provided that, if
action is commenced and diligently pursued by Borrower within such thirty
(30) days, then Borrower shall have an additional thirty (30) days to comply
with such requirement; or
(j) a dissolution or liquidation for any reason (whether voluntary or
involuntary) of any Targeted Entity; or
(k) any judgment against Borrower or Guarantor, any attachment or other levy
against any portion of Borrower’s or Guarantor’s assets with respect to a claim
or claims in an amount in excess of $250,000 in the aggregate remains unpaid,
unstayed on appeal undischarged, unbonded, not fully insured or undismissed for
a period of ninety (90) days; or
(l) the failure by Borrower or Guarantor to perform or observe any material
term, covenant, condition or agreement hereunder, other than as contained in
subsections (a) through (k) above, or in any other Loan Document, within thirty
(30) days after receipt of notice from Lender identifying such failure, provided
such period shall be extended for up to thirty (30) additional days if Borrower,
in the discretion of Lender, is diligently pursuing a cure of such default
within thirty (30) days after receipt of notice from Lender.
ARTICLE 12
REMEDIES
Section 12.01. Remedies; Waivers.
Upon the occurrence of an Event of Default, Lender may do any one or more of the
following (without presentment, protest or notice of protest, all of which are
expressly waived by Borrower Party):
(a) by written notice to Borrower, to be effective upon dispatch, terminate the
Commitment and declare the principal of, and interest on, the Advances and all
other sums owing by Borrower to Lender under any of the Loan Documents forthwith
due and payable, whereupon the Commitment will terminate and the principal of,
and interest on, the Advances and all other sums owing by Borrower to Lender
under any of the Loan Documents will become forthwith due and payable.
(b) Lender shall have the right to pursue any other remedies available to it
under any of the Loan Documents.
(c) Lender shall have the right to pursue all remedies available to it at law or
in equity, including obtaining specific performance and injunctive relief.

 

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Section 12.02. Waivers; Rescission of Declaration.
Lender shall have the right, to be exercised in its complete discretion, to
waive any breach hereunder (including the occurrence of an Event of Default), by
a writing setting forth the terms, conditions, and extent of such waiver signed
by Lender and delivered to Borrower. Unless such writing expressly provides to
the contrary, any waiver so granted shall extend only to the specific event or
occurrence which gave rise to the waiver and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.
Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and
Other Obligations.
If Borrower or Guarantor fails to perform the covenants and agreements contained
in this Agreement or any of the other Loan Documents, then Lender at Lender’s
option may make such appearances, disburse such sums and take such action as
Lender deems necessary, in its sole discretion, to protect Lender’s interest,
including (i) disbursement of reasonable attorneys’ fees, (ii) entry upon the
Mortgaged Property to make repairs and replacements, (iii) procurement of
satisfactory insurance as provided in Section 5 of the Security Instrument
encumbering the Mortgaged Property, and (iv) if the Security Instrument is on a
leasehold, exercise of any option to renew or extend the ground lease on behalf
of Borrower and the curing of any default of Borrower in the terms and
conditions of the ground lease. Any amounts disbursed by Lender pursuant to this
Section, with interest thereon, shall become additional indebtedness of Borrower
secured by the Loan Documents. Unless Borrower and Lender agree to other terms
of payment, such amounts shall be immediately due and payable and shall bear
interest from the date of disbursement at the weighted average, as determined by
Lender, of the interest rates in effect from time to time for each Advance
unless collection from Borrower of interest at such rate would be contrary to
Applicable Law, in which event such amounts shall bear interest at the highest
rate which may be collected from Borrower under Applicable Law. Nothing
contained in this Section shall require Lender to incur any expense or take any
action hereunder.
Section 12.04. No Remedy Exclusive.
Unless otherwise expressly provided, no remedy herein conferred upon or reserved
is intended to be exclusive of any other available remedy, but each remedy shall
be cumulative and shall be in addition to other remedies given under the Loan
Documents or existing at law or in equity.

 

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Section 12.05. No Waiver.
No delay or omission to exercise any right or power accruing under any Loan
Document upon the happening of any Event of Default or Potential Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.
Section 12.06. No Notice.
To entitle Lender to exercise any remedy reserved to Lender in this Article, it
shall not be necessary to give any notice, other than such notice as may be
required under the applicable provisions of this Agreement or any of the other
Loan Documents.
ARTICLE 13
INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES
Section 13.01. Insurance and Real Estate Taxes.
(a) Insurance and Tax Escrow; Waiver; Real Estate Tax Letter of Credit. Borrower
shall establish funds for taxes, insurance premiums and certain other charges
for each Mortgaged Property in accordance with Section 7(a) of the Security
Instrument for each Mortgaged Property. Notwithstanding the foregoing, so long
as no Event of Default or Potential Event of Default has occurred, Lender hereby
waives the obligations of Borrower under Section 7(a) of each Security
Instrument with respect to the escrow of premiums for insurance (the “Required
Escrow Payments”). Furthermore, Borrower may satisfy its obligation to establish
a fund for taxes by delivering to Lender: (1) a Real Estate Tax Letter of Credit
that satisfies the requirements set forth in Section 6.14(a) of this Agreement
and (2) a legal opinion pursuant to Section 6.14(e) of this Agreement. During
any period in which the obligation to pay the Required Escrow Payments has been
waived, pursuant to this Section 13.01, each Borrower shall: (i) pay insurance
premiums by or on behalf of Borrower with respect to the insurance policy
meeting the requirements of the Security Instrument for each Mortgaged Property,
(ii) make the deliveries to Lender with respect to insurance policies as
required in Section 19(b) of the Security Instrument for each Mortgaged
Property, and (iii) include all payments of insurance premiums in its monthly
and annual property income and expense data. During any period in which Borrower
has delivered to Lender a Real Estate Tax Letter of Credit pursuant to this
Section 13.01, each Borrower shall: (i) pay taxes by or on behalf of Borrower,
(ii) send Lender invoices and paid receipts, or other documentation satisfactory
to Lender, evidencing payment of such taxes on the date such taxes are due and
payable, and (iii) include all payments of taxes in its monthly and annual
property income and expense data.

 

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(b) Revocation of Waiver. Lender’s waiver of the Required Escrow Payments shall,
at the option of Lender, be revoked upon the occurrence of any of the following
events:
(i) the occurrence of an Event of Default or a Potential Event of Default; or
(ii) any Borrower shall fail to perform its obligations under Section 13.01(a).
(iii) failure by any Borrower to (A) participate in a blanket insurance policy
that complies with Fannie Mae’s insurance requirements and (B) annually furnish
evidence of insurance to Lender in accordance with Section 19(b) of the Security
Instrument for each Mortgaged Property.
(c) Upon Lender’s revocation of its waiver of the Required Escrow Payments,
Borrower’s obligations under Section 7(a) of each of the Security Instruments
shall immediately be reinstated.
(d) Real Estate Tax Letter of Credit.
(i) On the Initial Closing Date, the Real Estate Tax Letter of Credit shall be
in an amount equal to the amount of annual taxes as estimated by Lender. On an
annual basis, Lender shall determine the amount of estimated taxes for the next
tax year and shall send a notice to Borrower at least forty-five (45) days prior
to the expiration of the Real Estate Tax Letter of Credit. Within fifteen
(15) days of Lender’s notice, Borrower shall deliver a replacement Real Estate
Tax Letter of Credit in an amount equal to Lender’s estimate of taxes for such
tax year in accordance with the terms of this Agreement.
(ii) Lender shall have the right to draw monies under the Real Estate Tax Letter
of Credit:

  (1)  
if any Borrower shall fail to perform its obligations under Section 13.01(a); or

  (2)  
upon the occurrence of (A) an Event of Default; or (B) a Potential Event of
Default of which the Borrower has knowledge has occurred and continued for two
(2) Business Days; or

  (3)  
if 30 days prior to the expiration of the Real Estate Tax Letter of Credit, the
Real Estate Tax Letter of Credit has not been extended for a term of at least
364 days or has not been substituted with a replacement Real Estate Tax Letter
of Credit which satisfies the requirements of this Agreement; or

  (4)  
upon the downgrading of the ratings of the long-term or short term debt
obligations of the LOC Bank below the requirements of Fannie Mae then in effect,
provided Borrower does not immediately take action to substitute the Real Estate
Tax Letter of Credit with a replacement Real Estate Tax Letter of Credit which
satisfies the requirements of this Agreement and does not deliver such
replacement Real Estate Tax Letter of Credit within thirty (30) days of such
downgrading.

(iii) If Lender draws under the Real Estate Tax Letter of Credit for any reason
set forth above, Lender shall have the right to use monies drawn under such Real
Estate Tax Letter of Credit for any purpose permitted under this Agreement or
any other Loan Documents.

 

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Section 13.02. Replacement Reserves.
Borrower shall execute a Replacement Reserve Agreement for the Mortgaged
Properties and shall (unless waived by Lender) make all deposits for replacement
reserves in accordance with the terms of the Replacement Reserve Agreement.
Section 13.03. Completion/Repair Reserves.
Borrower shall execute a Completion/Repair and Security Agreement for the
Mortgaged Properties and shall (unless waived by Lender) make all deposits for
reserves in accordance with the terms of the Completion/Repair and Security
Agreement.
ARTICLE 14
LIMITS ON PERSONAL LIABILITY
Section 14.01. Personal Liability to Borrower.
Except as otherwise provided in this Article 14, Borrower shall have no personal
liability under the Loan Documents for the repayment of any Indebtedness or for
the performance of any other Obligations of Borrower under the Loan Documents or
for deficiency judgments for the Indebtedness, and Lender’s only recourse for
the satisfaction of such Indebtedness and the performance of such Obligations
shall be Lender’s exercise of its rights and remedies with respect to the
Mortgaged Properties and any other Collateral held by Lender as security for
such Indebtedness.
(a) Exceptions to Limits on Personal Liability. Borrower shall be personally
liable to Lender for the repayment of a portion of the Advances and other
amounts due under the Loan Documents equal to any loss, expense, cost, liability
or damage suffered by Lender as a result of or in any manner relating to
(i) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument encumbering the Mortgaged Property and the amount of all security
deposits held by Borrower from tenants then in residence; (ii) failure of
Borrower to apply all insurance proceeds, condemnation proceeds or security
deposits from tenants as required by the Security Instrument encumbering the
Mortgaged Property; (iii) failure of such Borrower to comply with its
obligations under the Loan Documents with respect to the delivery of books and
records and financial statements; (iv) fraud or written material
misrepresentation by Borrower or any officer, director, partner, member or
employee of Borrower in connection with the application for or creation of the
Obligations or any request for any action or consent by Lender; or (v) failure
to apply Rents, first, to the payment of reasonable operating expenses and then
to amounts (“Debt Service Amounts”) payable under the Loan Documents (except
that Borrower will not be personally liable (1) to the extent that Borrower
lacks the legal right to direct the disbursement of such sums because of a
bankruptcy, receivership or similar judicial proceeding, or (2) with respect to
Rents of a Mortgaged Property that are distributed in any Calendar Quarter if
Borrower has paid all operating expenses and Debt Service Amounts for that
Calendar Quarter). For purposes of this subsection (a), the term “Rents” shall
have the meaning given to such term in the Security Instrument.

 

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(b) Full Recourse. Borrower shall be personally liable to Lender for the payment
and performance of all Obligations upon the occurrence of any of the following
Events of Default: (i) Borrower’s acquisition of any property or operation of
any business not permitted by Section 33 of any Security Instrument; or (ii) a
Transfer that is an Event of Default under Section 21 of any Security
Instrument; or (iii) any and all indemnification obligations contained in
Section 18 of any Security Instrument; or (iv) a Bankruptcy Event.
As used in this Subsection, the term “Bankruptcy Event” means any one or more of
the following events:

  (A)  
Any Borrower (i) commences a voluntary case (or, if applicable, a joint case)
under any chapter of the Bankruptcy Code or otherwise or consents to or fails to
contest in a timely and appropriate manner any petition filed against it in an
involuntary case under any chapter of the Bankruptcy Code or otherwise,
(ii) institutes (by petition, application, answer, consent or otherwise) any
other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction, (iii) makes a general assignment for the benefit of creditors,
(iv) applies for, consents to or acquiesces in the appointment of any receiver,
liquidator, custodian, sequestrator, trustee or similar officer for it or for
all or any substantial part of the Mortgaged Properties or (v) admits in writing
its inability to pay its debts generally as they mature.

  (B)  
Any Borrower, any Affiliate of Borrower, any Guarantor or any Affiliate of
Guarantor files an involuntary petition against any Borrower under any chapter
of the Bankruptcy Code or under any other bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to Borrower under the laws of any jurisdiction.

  (C)  
Both (1) an involuntary petition under any chapter of the Bankruptcy Code is
filed against any Borrower, or any Borrower directly or indirectly becomes the
subject of any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction, or in equity, and (ii) any Borrower, any Affiliate of
Borrower, any Guarantor or any Affiliate of Guarantor has acted in concert or
conspired with such creditors of Borrower (other than Fannie Mae or Lender) to
cause the filing thereof.

 

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(c) Miscellaneous. To the extent that Borrower has personal liability under this
Section, or Guarantor has liability under the Guaranty, such liability shall be
joint and several and Lender may exercise its rights against Borrower or
Guarantor personally without regard to whether Lender has exercised any rights
against the Mortgaged Property or any other security, or pursued any rights
against any guarantor, or pursued any other rights available to Lender under the
Loan Documents or Applicable Law. For purposes of this Article, the term
“Mortgaged Property” shall not include any funds that (i) have been applied by
Borrower as required or permitted by the Loan Documents prior to the occurrence
of an Event of Default, or (ii) are owned by Borrower or Guarantor and which
Borrower was unable to apply as required or permitted by the Loan Documents
because of a bankruptcy, receivership, or similar judicial proceeding.
Section 14.02. Additional Borrowers.
If the owner of an Additional Mortgaged Property or a Substitute Mortgaged
Property is an Additional Borrower, the owner of such Additional Mortgaged
Property or Substitute Mortgaged Property, as the case may be, must demonstrate
to the satisfaction of Lender that:
(i) the Additional Borrower is a Single-Purpose entity; and
(ii) the Additional Borrower is directly or indirectly wholly-owned by
Guarantor.
In addition, on the Closing Date of the addition of an Additional Mortgaged
Property or a Substitute Mortgaged Property, the owner of such Additional
Mortgaged Property or such Substitute Mortgaged Property, as the case may be, if
such owner is an Additional Borrower, shall become a party to the Contribution
Agreement in a manner satisfactory to Lender, shall deliver a Certificate of
Borrower Parties in form and substance satisfactory to Lender, and execute and
deliver, along with the other Borrowers, Variable Facility Notes and/or Fixed
Facility Notes. Any Additional Borrower of an Additional Mortgaged Property or a
Substitute Mortgaged Property which becomes added to the Collateral Pool shall
be a Borrower for purposes of this Agreement and shall execute and deliver to
Lender an amendment adding such Additional Borrower as a party to this Agreement
and revising the Exhibits hereto, as applicable, to reflect the Additional
Mortgaged Property or Substitute Mortgaged Property and Additional Borrower, in
each case satisfactory to Lender.
Upon the release of a Mortgaged Property, the Borrower that owns such Release
Mortgaged Property shall automatically without further action be released from
its obligations under this Agreement and the other Loan Documents except for any
liabilities or obligations of such Borrower which arose prior to the Closing
Date of such release.

 

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Section 14.03. Borrower Agency Provisions.
(a) In the event an Additional Borrower becomes a party to this Agreement, each
Borrower shall irrevocably designate the Borrower Agent to be its agent and in
such capacity to receive on behalf of the Borrower all proceeds, receive all
notices on behalf of Borrower under this Agreement, make all requests under this
Agreement, and execute, deliver and receive all instruments, certificates,
requests, documents, writings and further assurances now or hereafter required
hereunder, on behalf of such Borrower, and hereby authorizes the Lender to pay
over all loan proceeds hereunder in accordance with the request of the Borrower
Agent. Each Borrower hereby acknowledges that all notices required to be
delivered by Lender to any Borrower shall be delivered to the Borrower Agent and
thereby shall be deemed to have been received by such Borrower.
(b) The handling of this credit facility as a co-borrowing facility with a
Borrower Agent in the manner set forth in this Agreement is solely as an
accommodation to each of Borrower and Guarantor and is at their mutual request.
Lender shall not incur liability to Borrower or Guarantor as a result thereof.
To induce Lender to do so and in consideration thereof, each Borrower hereby
indemnifies the Lender and holds Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or injury asserted
against Lender by any Person arising from or incurred by reason of the Borrower
Agent handling of the financing arrangements of Borrower as provided herein,
reliance by Lender on any request or instruction from Borrower Agent or any
other action taken by the Lender with respect to this Section 14.03 except due
to willful misconduct or gross negligence of the indemnified party.
Section 14.04. Joint and Several Obligation; Cross-Guaranty.
Notwithstanding anything contained in this Agreement or the other Loan Documents
to the contrary (but subject to the provisions of Section 14.01, the last
sentence of this Section 14.04 and the provisions of Section 14.11), each
Borrower shall have joint and several liability for all Obligations.
Notwithstanding the intent of all of the parties to this Agreement that all
Obligations of each Borrower under this Agreement and the other Loan Documents
shall be joint and several Obligations of each Borrower but subject to the
provisions of Section 14.01, each Borrower, on a joint and several basis, hereby
irrevocably guarantees to Lender and its successors and assigns, the full and
prompt payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Obligations owed or hereafter owing to Lender by each other
Borrower. Each Borrower agrees that its guaranty obligation hereunder is an
unconditional guaranty of payment and performance and not merely a guaranty of
collection. The Obligations of each Borrower under this Agreement shall not be
subject to any counterclaim, set-off, recoupment, deduction, cross-claim or
defense based upon any claim any Borrower may have against Lender or any other
Borrower; provided, however, that upon the release of a Mortgaged Property, the
Borrower which owns such Release Mortgaged Property shall automatically without
further action be released from its obligations under this Agreement for the
Obligations, except for any liabilities or obligations of such Borrower which
arose prior to the Closing Date of such release.

 

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Section 14.05. Waivers With Respect to Other Borrower Secured Obligation.
To the extent that a Security Instrument or any other Loan Document executed by
one Borrower secures an Obligation of another Borrower (the “Other Borrower
Secured Obligation”), and/or to the extent that a Borrower has guaranteed the
debt of another Borrower pursuant to Article 14, Borrower who executed such Loan
Document and/or guaranteed such debt (the “Waiving Borrower”) hereby agrees as
follows:
(a) The Waiving Borrower hereby waives any right it may now or hereafter have to
require the beneficiary, assignee or other secured party under such Loan
Document, as a condition to the exercise of any remedy or other right against it
thereunder or under any other Loan Document executed by the Waiving Borrower in
connection with the Other Borrower Secured Obligation: (i) to proceed against
the other Borrower or any other person, or against any other collateral assigned
to Lender by either Borrower or any other person; (ii) to pursue any other right
or remedy in Lender’s power; (iii) to give notice of the time, place or terms of
any public or private sale of real or personal property collateral assigned to
Lender by the other Borrower or any other person (other than the Waiving
Borrower), or otherwise to comply with Section 9615 of the California Commercial
Code (as modified or recodified from time to time) with respect to any such
personal property collateral located in the State of California; or (iv) to make
or give (except as otherwise expressly provided in the Security Documents) any
presentment, demand, protest, notice of dishonor, notice of protest or other
demand or notice of any kind in connection with the Other Borrower Secured
Obligation or any collateral (other than the Collateral described in such
Security Document) for the Other Borrower Secured Obligation.
(b) The Waiving Borrower hereby waives any defense it may now or hereafter have
that relates to: (i) any disability or other defense of the other Borrower or
any other person; (ii) the cessation, from any cause other than full
performance, of the Other Borrower Secured Obligation; (iii) the application of
the proceeds of the Other Borrower Secured Obligation, by the other Borrower or
any other person, for purposes other than the purposes represented to the
Waiving Borrower by the other Borrower or otherwise intended or understood by
the Waiving Borrower or the other Borrower; (iv) any act or omission by Lender
which directly or indirectly results in or contributes to the release of the
other Borrower or any other person or any collateral for any Other Borrower
Secured Obligation; (v) the unenforceability or invalidity of any Security
Document or Loan Document (other than the Security Instrument executed by the
Waiving Borrower that secures the Other Borrower Secured Obligation) or guaranty
with respect to any Other Borrower Secured Obligation, or the lack of perfection
or continuing perfection or lack of priority of any Lien (other than the Lien of
such Security Instrument) which secures any Other Borrower Secured Obligation;
(vi) any failure of Lender to marshal assets in favor of the Waiving Borrower or
any other person; (vii) any modification of any Other Borrower Secured
Obligation, including any renewal, extension, acceleration or increase in
interest rate; (viii) any and all rights and defenses arising out of an election
of remedies by Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Waiving Borrower’s rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise; (ix) any law which provides that the obligation of
a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety’s or
guarantor’s obligation in proportion to the principal obligation; (x) any
failure of Lender to file or enforce a claim in any bankruptcy or other
proceeding with respect to any person;

 

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(xi) the election by Lender, in any bankruptcy proceeding of any person, of the
application or non-application of Section 1111(b)(2) of the Bankruptcy Code;
(xii) any extension of credit or the grant of any lien under Section 364 of the
Bankruptcy Code; (xiii) any use of cash collateral under Section 363 of the
Bankruptcy Code; or (xiv) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any person. The
Waiving Borrower further waives any and all rights and defenses that it may have
because the Other Borrower Secured Obligation is secured by real property; this
means, among other things, that: (A) Lender may collect from the Waiving
Borrower without first foreclosing on any real or personal property collateral
pledged by the other Borrower; (B) if Lender forecloses on any real property
collateral pledged by the other Borrower, then (1) the amount of the Other
Borrower Secured Obligation may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price, and (2) Lender may foreclose on the real property
encumbered by the Security Instrument executed by the Waiving Borrower and
securing the Other Borrower Secured Obligation even if Lender, by foreclosing on
the real property collateral of the Other Borrower, has destroyed any right the
Waiving Borrower may have to collect from the Other Borrower. Subject to the
last sentence of Section 14.04, the foregoing sentence is an unconditional and
irrevocable waiver of any rights and defenses the Waiving Borrower may have
because the Other Borrower Secured Obligation is secured by real property. These
rights and defenses being waived by the Waiving Borrower include, but are not
limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of
the California Code of Civil Procedure. Without limiting the generality of the
foregoing or any other provision hereof, the Waiving Borrower further expressly
waives, except as provided in Section 14.05(g) below, to the extent permitted by
law any and all rights and defenses that might otherwise be available to it
under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or
under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or
any of such sections.
(c) The Waiving Borrower hereby waives any and all benefits and defenses under
California Civil Code Section 2810 and agrees that by doing so the Security
Instrument executed by the Waiving Borrower and securing the Other Borrower
Secured Obligation shall be and remain in full force and effect even if the
other Borrower had no liability at the time of incurring the Other Borrower
Secured Obligation, or thereafter ceases to be liable. The Waiving Borrower
hereby waives any and all benefits and defenses under California Civil Code
Section 2809 and agrees that by doing so the Waiving Borrower’s liability may be
larger in amount and more burdensome than that of the other Borrower. The
Waiving Borrower hereby waives the benefit of all principles or provisions of
law that are or might be in conflict with the terms of any of its waivers, and
agrees that the Waiving Borrower’s waivers shall not be affected by any
circumstances that might otherwise constitute a legal or equitable discharge of
a surety or a guarantor. The Waiving Borrower hereby waives the benefits of any
right of discharge and all other rights under any and all statutes or other laws
relating to guarantors or sureties, to the fullest extent permitted by law,
diligence in collecting the Other Borrower Secured Obligation, presentment,
demand for payment, protest, all notices with respect to the Other Borrower
Secured Obligation that may be required by statute, rule of law or otherwise to
preserve Lender’s rights against the Waiving Borrower hereunder, including
notice of acceptance, notice of any amendment of the Loan Documents evidencing
the Other Borrower Secured Obligation, notice of the occurrence of any default
or Event of Default, notice of intent to accelerate, notice of acceleration,
notice of dishonor, notice of foreclosure, notice of protest, notice of the
incurring by the other Borrower of any obligation or indebtedness and all rights
to require Lender to (i) proceed against the other Borrower, (ii) proceed
against any general partner of the other Borrower, (iii) proceed against or
exhaust any collateral held by Lender to secure the Other Borrower Secured
Obligation, or (iv) if the other Borrower is a partnership, pursue any other
remedy it may have against the other Borrower, or any general partner of the
other Borrower, including any and all benefits under California Civil Code
Sections 2845, 2849 and 2850.

 

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(d) The Waiving Borrower understands that the exercise by Lender of certain
rights and remedies contained in a Security Instrument executed by the Other
Borrower (such as a nonjudicial foreclosure sale) may affect or eliminate the
Waiving Borrower’s right of subrogation against the Other Borrower and that the
Waiving Borrower may therefore incur a partially or totally nonreimburseable
liability. Nevertheless, the Waiving Borrower hereby authorizes and empowers
Lender to exercise, in its sole and absolute discretion, any right or remedy, or
any combination thereof, that may then be available, since it is the intent and
purpose of the Waiving Borrower that its waivers shall be absolute, independent
and unconditional under any and all circumstances.
(e) In accordance with Section 2856 of the California Civil Code, the Waiving
Borrower also waives any right or defense based upon an election of remedies by
Lender, even though such election (e.g., nonjudicial foreclosure with respect to
any collateral held by Lender to secure repayment of the Other Borrower Secured
Obligation) destroys or otherwise impairs the subrogation rights of the Waiving
Borrower to any right to proceed against the other Borrower for reimbursement,
or both, by operation of Section 580d of the California Code of Civil Procedure
or otherwise.
(f) Subject to the last sentence of Section 14.04, in accordance with
Section 2856 of the California Civil Code, the Waiving Borrower waives any and
all other rights and defenses available to the Waiving Borrower by reason of
Sections 2787 through 2855, inclusive, of the California Civil Code, including
any and all rights or defenses the Waiving Borrower may have by reason of
protection afforded to the other Borrower with respect to the Other Borrower
Secured Obligation pursuant to the antideficiency or other laws of the State of
California limiting or discharging the Other Borrower Secured Obligation,
including Sections 580a, 580b, 580d, and 726 of the California Code of Civil
Procedure.
(g) In accordance with Section 2856 of the California Civil Code and pursuant to
any other Applicable Law, the Waiving Borrower agrees to withhold the exercise
of any and all subrogation, contribution and reimbursement rights against
Borrower, against any other person, and against any collateral or security for
the Other Borrower Secured Obligation, including any such rights pursuant to
Sections 2847 and 2848 of the California Civil Code, until the Other Borrower
Secured Obligation has been indefeasibly paid and satisfied in full, all
obligations owed to Lender under the Loan Documents have been fully performed,
and Lender has released, transferred or disposed of all of its right, title and
interest in such collateral or security.

 

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(h) Each Borrower hereby irrevocably and unconditionally agrees that,
notwithstanding Section 14.05(g) hereof, in the event, and to the extent, that
its agreement and waiver set forth in Section 14.05(g) is found by a court of
competent jurisdiction to be void or voidable for any reason and such Borrower
has any subrogation or other rights against any other Borrower, any such claims,
direct or indirect, that such Borrower may have by subrogation rights or other
form of reimbursement, contribution or indemnity, against any other Borrower or
to any security or any such Borrower, shall be, and such rights, claims and
indebtedness are hereby, deferred, postponed and fully subordinated in time and
right of payment to the prior payment, performance and satisfaction in full of
the Obligations. Until payment and performance in full with interest (including
post-petition interest in any case under any chapter of the Bankruptcy Code) of
the Obligations, each Borrower agrees not to accept any payment or satisfaction
of any kind of Indebtedness of any other Borrower in respect of any such
subrogation rights arising by virtue of payments made pursuant to this
Article 14, and hereby assigns such rights or indebtedness to Lender, including
(i) the right to file proofs of claim and to vote thereon in connection with any
case under any chapter of the Bankruptcy Code and (ii) the right to vote on any
plan of reorganization. In the event that any payment on account of any such
subrogation rights shall be received by any Borrower in violation of the
foregoing, such payment shall be held in trust for the benefit of Lender, and
any amount so collected should be turned over to Lender for application to the
Obligations.
(i) At any time without notice to the Waiving Borrower, and without affecting or
prejudicing the right of Lender to proceed against the Collateral described in
any Loan Document executed by the Waiving Borrower and securing the Other
Borrower Secured Obligation, (i) the time for payment of the principal of or
interest on, or the performance of, the Other Borrower Secured Obligation may be
extended or the Other Borrower Secured Obligation may be renewed in whole or in
part; (ii) the time for the other Borrower’s performance of or compliance with
any covenant or agreement contained in the Loan Documents evidencing the Other
Borrower Secured Obligation, whether presently existing or hereinafter entered
into, may be extended or such performance or compliance may be waived; (iii) the
maturity of the Other Borrower Secured Obligation may be accelerated as provided
in the related Note or any other related Loan Document; (iv) the related Note or
any other related Loan Document may be modified or amended by Lender and the
Other Borrower in any respect, including an increase in the principal amount;
and (v) any security for the Other Borrower Secured Obligation may be modified,
exchanged, surrendered or otherwise dealt with or additional security may be
pledged or mortgaged for the Other Borrower Secured Obligation.
(j) It is agreed among each Borrower and Lender that all of the foregoing
waivers are of the essence of the transaction contemplated by this Agreement and
the Loan Documents and that but for the provisions of this Article 14 and such
waivers Lender would decline to enter into this Agreement.
Section 14.06. No Impairment.
Each Borrower agrees that the provisions of this Article 14 are for the benefit
of Lender and their successors, transferees, endorsees and assigns, and nothing
herein contained shall impair, as between any other Borrower and Lender, the
obligations of such other Borrower under the Loan Documents.

 

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Section 14.07. Election of Remedies.
(a) Lender, in its discretion, may (a) bring suit against any one or more
Borrowers, jointly and severally, without any requirement that Lender first
proceed against any other Borrower or any other Person; (b) compromise or settle
with any one or more Borrowers, or any other Person, for such consideration as
Lender may deem proper; (c) release one or more Borrowers, or any other Person,
from liability; and (d) otherwise deal with any Borrower and any other Person,
or any one or more of them, in any manner, or resort to any of the Collateral at
any time held by it for performance of the Obligations or any other source or
means of obtaining payment of the Obligations, and no such action shall impair
the rights of Lender to collect from any Borrower any amount guaranteed by any
Borrower under this Article 14.
(b) Subject to the provisions of Section 14.01 of this Agreement, if, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its rights to enter a deficiency judgment against
any Borrower or any other Person, whether because of any Applicable Law
pertaining to “election of remedies” or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if
such action by Lender shall result in a full or partial loss of any rights of
subrogation that each Borrower might otherwise have had but for such action by
Lender. Subject to the provisions of Section 14.01 of this Agreement, any
election of remedies that results in the denial or impairment of the right of
Lender to seek a deficiency judgment against any Borrower shall not impair any
other Borrower’s obligation to pay the full amount of the Obligations. In the
event Lender shall bid at any foreclosure or trustee’s sale or at any private
sale permitted by law or any of the Loan Documents, Lender may bid all or less
than the amount of the Obligations and the amount of such bid need not be paid
by Lender but shall be credited against the Obligations. The amount of the
successful bid at any such sale, whether Lender or any other party is the
successful bidder, shall be conclusively deemed to be fair market value of the
Collateral and the difference between such bid amount and the remaining balance
of the Obligations shall be conclusively deemed to be amount of the Obligations
guaranteed under this Article 14, notwithstanding that any present or future law
or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which Lender might otherwise be entitled but for such
bidding at any such sale.

 

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Section 14.08. Subordination of Other Obligations.
(a) Each Borrower hereby irrevocably and unconditionally agrees that all amounts
payable from time to time to such Borrower by any other Borrower pursuant to any
agreement, whether secured or unsecured, whether of principal, interest or
otherwise, other than the amounts referred to in this Article 14 (collectively,
the “Subordinated Obligations”), shall be and such rights, claims and
indebtedness are, hereby deferred, postponed and fully subordinated in time and
right of payment to the prior payment, performance and satisfaction in full of
the Obligations; provided, however, that payments may be received by any
Borrower in accordance with, and only in accordance with, the provisions of
Section 14.08(b) hereof.
(b) Until the Obligations under all the Loan Documents have been finally paid in
full or fully performed and all the Loan Documents have been terminated, each
Borrower irrevocably and unconditionally agrees it will not ask, demand, sue
for, take or receive, directly or indirectly, by set-off, redemption, purchase
or in any other manner whatsoever, any payment with respect to, or any security
or guaranty for, the whole or any part of the Subordinated Obligations, and in
issuing documents, instruments or agreements of any kind evidencing the
Subordinated Obligations, each Borrower hereby agrees that it will not receive
any payment of any kind on account of the Subordinated Obligations, so long as
any of the Obligations under all the Loan Documents are outstanding or any of
the terms and conditions of any of the Loan Documents are in effect; provided,
however, that, notwithstanding anything to the contrary contained herein, if no
Potential Event of Default or Event of Default has occurred and is continuing
under any of the Loan Documents, then payments may be received by such Borrower
in respect of the Subordinated Obligations in accordance with the stated terms
thereof. Except as aforesaid, each Borrower agrees not to accept any payment or
satisfaction of any kind of indebtedness of any other Borrower in respect of the
Subordinated Obligations and hereby assigns such rights or indebtedness to
Fannie Mae, including the right to file proofs of claim and to vote thereon in
connection with any case under any chapter of the Bankruptcy Code, including the
right to vote on any plan of reorganization. In the event that any payment on
account of Subordinated Obligations shall be received by any Borrower in
violation of the foregoing, such payment shall be held in trust for the benefit
of Lender, and any amount so collected shall be turned over to Lender upon
demand.
Section 14.09. Insolvency and Liability of Other Borrower.
So long as any of the Obligations are outstanding, if a petition under any
chapter of the Bankruptcy Code is filed by or against any Borrower (the “Subject
Borrower”), each other Borrower (each, an “Other Borrower”) agrees to file all
claims against the Subject Borrower in any bankruptcy or other proceeding in
which the filing of claims is required by law in connection with indebtedness
owed by the Subject Borrower and to assign to Lender all rights thereunder up to
the amount of such indebtedness. In all such cases, the Person or Persons
authorized to pay such claims shall pay to Lender the full amount thereof and
Lender agrees to pay such Other Borrower any amounts received in excess of the
amount necessary to pay the Obligations. Each Other Borrower hereby assigns to
Lender all of such Other Borrower’s rights to all such payments to which

 

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such Other Borrower would otherwise be entitled but not to exceed the full
amount of the Obligations. In the event that, notwithstanding the foregoing, any
such payment shall be received by any Other Borrower before the Obligations
shall have been finally paid in full, such payment shall be held in trust for
the benefit of and shall be paid over to Lender upon demand. Furthermore,
notwithstanding the foregoing, the liability of each Borrower hereunder shall in
no way be affected by:
(a) the release or discharge of any other Borrower in any creditors’,
receivership, bankruptcy or other proceedings; or
(b) the impairment, limitation or modification of the liability of any other
Borrower or the estate of any other Borrower in bankruptcy resulting from the
operation of any present or future provisions of any chapter of the Bankruptcy
Code or other statute or from the decision in any court.
Section 14.10. Preferences, Fraudulent Conveyances, Etc.
If Lender is required to refund, or voluntarily refunds, any payment received
from any Borrower because such payment is or may be avoided, invalidated,
declared fraudulent, set aside or determined to be void or voidable as a
preference, fraudulent conveyance, impermissible setoff or a diversion of trust
funds under the bankruptcy laws or for any similar reason, including without
limitation any judgment, order or decree of any court or administrative body
having jurisdiction over any Borrower or any of its property, or upon or as a
result of the appointment of a receiver, intervenor, custodian or conservator
of, or trustee or similar officer for, any Borrower or any substantial part of
its property, or otherwise, or any statement or compromise of any claim effected
by Lender with any Borrower or any other claimant (a “Rescinded Payment”), then
each other Borrower’s liability to Lender shall continue in full force and
effect, or each other Borrower’s liability to Lender shall be reinstated and
renewed, as the case may be, with the same effect and to the same extent as if
the Rescinded Payment had not been received by Lender, notwithstanding the
cancellation or termination of any of the Loan Documents, and regardless of
whether Lender contested the order requiring the return of such payment. In
addition, each other Borrower shall pay, or reimburse Lender for, all expenses
(including all reasonable attorneys’ fees, court costs and related
disbursements) incurred by Lender in the defense of any claim that a payment
received by Lender in respect of all or any part of the Obligations must be
refunded. The provisions of this Section 14.10 shall survive the termination of
the Loan Documents and any satisfaction and discharge of any Borrower by virtue
of any payment, court order or any federal or state law.

 

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Section 14.11. Maximum Liability of Each Borrower.
Notwithstanding anything contained in this Agreement or any other Loan Document
to the contrary, if the obligations of any Borrower under this Agreement or any
of the other Loan Documents or any Security Instruments granted by any Borrower
are determined to exceed the reasonably equivalent value received by such
Borrower in exchange for such obligations or grant of such Security Instruments
under any Fraudulent Transfer Law (as hereinafter defined), then the liability
of such Borrower shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations under this Agreement or all
the other Loan Documents subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the “Fraudulent
Transfer Laws”), in each case after giving effect to all other liabilities of
such Borrower, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such Borrower
in respect of Indebtedness to any other Borrower or any other Person that is an
Affiliate of the other Borrower to the extent that such Indebtedness would be
discharged in an amount equal to the amount paid by such Borrower in respect of
the Obligations) and after giving effect (as assets) to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, reimbursement, indemnification or contribution of such Borrower
pursuant to Applicable Law or pursuant to the terms of any agreement including
the Contribution Agreement.
Section 14.12. Liability Cumulative.
The liability of each Borrower under this Article 14 is in addition to and shall
be cumulative with all liabilities of such Borrower to Lender under this
Agreement and all the other Loan Documents to which such Borrower is a party or
in respect of any Obligations of any other Borrower.
ARTICLE 15
MISCELLANEOUS PROVISIONS
Section 15.01. Counterparts.
To facilitate execution, this Agreement may be executed in any number of
counterparts. It shall not be necessary that the signatures of, or on behalf of,
each party, or that the signatures of all persons required to bind any party,
appear on each counterpart, but it shall be sufficient that the signature of, or
on behalf of, each party, appear on one (1) or more counterparts. All
counterparts shall collectively constitute a single agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more than
the number of counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto.
Section 15.02. Amendments, Changes and Modifications.
This Agreement may be amended, changed, modified, altered or terminated only by
written instrument or written instruments signed by all of the parties hereto.

 

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Section 15.03. Payment of Costs, Fees and Expenses.
In addition to the payments required by Section 10.05 of this Agreement,
Borrower shall pay, on demand, all reasonable third party out-of-pocket fees,
costs, charges or expenses (including the fees and expenses of attorneys,
accountants and other experts) incurred by Lender in connection with:
(a) Any amendment, consent or waiver to this Agreement or any of the Loan
Documents (whether or not any such amendments, consents or waivers are entered
into).
(b) Defending or participating in any litigation arising from actions by third
parties and brought against or involving Lender with respect to (i) any
Mortgaged Property, (ii) any event, act, condition or circumstance in connection
with any Mortgaged Property or (iii) the relationship between Lender and
Borrower and Guarantor in connection with this Agreement or any of the
transactions contemplated by this Agreement.
(c) The administration or enforcement of, or preservation of rights or remedies
under, this Agreement or any other Loan Documents or in connection with the
foreclosure upon, sale of or other disposition of any Collateral granted
pursuant to the Loan Documents.
(d) Any disclosure documents, including the reasonable fees and expenses of
Lender’s attorneys and accountants.
Borrower shall also pay, on demand, any transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution, delivery, filing, recordation, performance or enforcement of any of
the Loan Documents or the Advances. However, Borrower will not be obligated to
pay any franchise, excise, estate, inheritance, income, excess profits or
similar tax on Lender. Any attorneys’ fees and expenses payable by Borrower
pursuant to this Section shall be recoverable separately from and in addition to
any other amount included in such judgment, and such obligation is intended to
be severable from the other provisions of this Agreement and to survive and not
be merged into any such judgment. Any amounts payable by Borrower pursuant to
this Section, with interest thereon if not paid when due, shall become
additional indebtedness of Borrower secured by the Loan Documents. Such amounts
shall bear interest from the date such amounts are due until paid in full at the
weighted average, as determined by Lender, of the interest rates in effect from
time to time for each Advance unless collection from Borrower of interest at
such rate would be contrary to Applicable Law, in which event such amounts shall
bear interest at the highest rate which may be collected from Borrower under
Applicable Law. The provisions of this Section are cumulative with, and do not
exclude the application and benefit to Lender of, any provision of any other
Loan Document relating to any of the matters covered by this Section.
Section 15.04. Payment Procedure.
All payments to be made to Lender pursuant to this Agreement or any of the Loan
Documents shall be made in lawful currency of the United States of America and
in immediately available funds by wire transfer to an account designated by
Lender before 1:00 p.m. (Eastern Standard Time) on the date when due.

 

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Section 15.05. Payments on Business Days.
In any case in which the date of payment to Lender or the expiration of any time
period hereunder occurs on a day which is not a Business Day, then such payment
or expiration of such time period need not occur on such date but may be made on
the next succeeding Business Day with the same force and effect as if made on
the day of maturity or expiration of such period, except that interest shall
continue to accrue for the period after such date to the next Business Day.
Section 15.06. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.
NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE
OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND
RIGHTS AND OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT AND THE NOTES, GUARANTOR
UNDER THE GUARANTY, AND BORROWER AND GUARANTOR UNDER THE OTHER LOAN DOCUMENTS,
SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN
ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW
APPLICABLE TO CONFLICTS OR CHOICE OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND
SUBSTANTIVE MATTERS RELATING ONLY TO (i) THE CREATION, PERFECTION AND
FORECLOSURE OF LIENS AND SECURITY INTERESTS, AND ENFORCEMENT OF THE RIGHTS AND
REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICH MATTERS SHALL BE GOVERNED BY
THE LAWS OF THE JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED,
(ii) THE PERFECTION, THE EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE
OF SECURITY INTERESTS ON PERSONAL PROPERTY, WHICH MATTERS SHALL BE GOVERNED BY
THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE
UNIFORM COMMERCIAL CODE IN EFFECT FOR THE JURISDICTION IN WHICH THE BORROWERS’
ARE ORGANIZED. BORROWER AND GUARANTOR AGREE THAT ANY CONTROVERSY ARISING UNDER
OR IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY
INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE, EXCEPT AS OTHERWISE PROVIDED
HEREIN, LITIGATED IN THE DISTRICT OF COLUMBIA. THE LOCAL AND FEDERAL COURTS AND
AUTHORITIES WITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL, EXCEPT AS
OTHERWISE PROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY
ARISE UNDER OR IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES
RELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH
THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY
OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS. EACH OF BORROWER AND GUARANTOR IRREVOCABLY CONSENTS TO SERVICE,
JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE
NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY
OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL
RESIDENCE OR OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER
FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST
EITHER OR BOTH OF BORROWER AND GUARANTOR AND AGAINST THE COLLATERAL IN ANY

 

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OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH
ACTION IN ANY OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE
AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE DISTRICT OF COLUMBIA SHALL
GOVERN THE RIGHTS AND OBLIGATIONS OF EACH OF BORROWER AND GUARANTOR AND LENDER
AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY EACH OF BORROWER AND GUARANTOR TO
PERSONAL JURISDICTION WITHIN THE DISTRICT OF COLUMBIA. BORROWER AND GUARANTOR
(I) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING UNDER ANY OF THE LOAN DOCUMENTS TRIABLE BY A JURY AND (II) WAIVE ANY
RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER,
EACH OF BORROWER AND GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT
OF LENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, TO BORROWER AND/OR GUARANTOR THAT LENDER WILL NOT SEEK
TO ENFORCE THE PROVISIONS OF THIS SECTION. THE FOREGOING PROVISIONS WERE
KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER AND GUARANTOR UPON
CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER’S AND
GUARANTOR’S FREE WILL.
Section 15.07. Severability.
In the event any provision of this Agreement or in any other Loan Document shall
be held invalid, illegal or unenforceable in any jurisdiction, such provision
will be severable from the remainder hereof as to such jurisdiction and the
validity, legality and enforceability of the remaining provisions will not in
any way be affected or impaired in any jurisdiction.
Section 15.08. Notices.
(a) Manner of Giving Notice. Each notice, direction, certificate or other
communication hereunder (in this Section referred to collectively as “notices”
and singly as a “notice”) which any party is required or permitted to give to
the other party pursuant to this Agreement shall be in writing and shall be
deemed to have been duly and sufficiently given if:
(i) personally delivered with proof of delivery thereof (any notice so delivered
shall be deemed to have been received at the time so delivered);
(ii) sent by Federal Express (or other similar reputable overnight courier)
designating morning delivery (any notice so delivered shall be deemed to have
been received on the Business Day it is delivered by the courier);
(iii) sent by telecopier or facsimile machine which automatically generates a
transmission report that states the date and time of the transmission, the
length of the document transmitted, and the telephone number of the recipient’s
telecopier or facsimile machine (to be confirmed with a copy thereof sent in
accordance with paragraphs (i) or (ii) above within two Business Days) (any
notice so delivered shall be deemed to have been received (1) on the date of
transmission, if so transmitted before 5:00 p.m. (local time of the recipient)
on a Business Day, or (2) on the next Business Day, if so transmitted on or
after 5:00 p.m. (local time of the recipient) on a Business Day or if
transmitted on a day other than a Business Day);

 

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addressed to the parties as follows:

             
 
  As to Borrower:       Education Realty Operating Partnership, LP
 
          530 Oak Court Drive, Suite 300
 
          Memphis, TN 38117
 
          Attention: Paul Bower and Olan Brevard
 
          Telecopy: (901) 259-2594
 
           
 
  with a copy to:       Bass, Berry & Sims PLC
 
          The Tower at Peabody Place
 
          100 Peabody Place, Suite 900
 
          Memphis, TN 38103
 
          Attention: John A. Stemmler
 
          Telecopy: (901) 543-5999
 
           
 
  As to Lender:       Red Mortgage Capital, Inc.
 
          Two Miranova Place, 12th Floor
 
          Columbus, Ohio 43215
 
          Attention: Servicing Manager
 
          Telecopy: (614) 857-1620
 
           
 
  with a copy to Servicer:       Red Mortgage Capital, Inc.
 
          Two Miranova Place, 12th Floor
 
          Columbus, Ohio 43215
 
          Attention: Director, Loan Servicing and Asset Management
 
          Telecopy: (614) 857-1610
 
           
 
  with a copy to:       Arent Fox LLP
 
          1675 Broadway
 
          New York, New York 10019
 
          Attention: David L. Dubrow, Esq.
 
          Telecopy: (212) 484-3990

 

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  As to Fannie Mae:       Fannie Mae
 
          3900 Wisconsin Avenue, N.W.
 
          Washington, D.C. 20016-2899
 
          Attention: Vice President for Multifamily Asset Management
 
          Telecopy No.: (301) 280-2064
 
           
 
  with a copy to Servicer:       Red Mortgage Capital, Inc.
 
          Two Miranova Place, 12th Floor
 
          Columbus, Ohio 43215
 
          Attention: Director, Loan Servicing and Asset Management
 
          Telecopy: (614) 857-1610
 
           
 
  with a copy to:       Arent Fox LLP
 
          1675 Broadway
 
          New York, NY 10019
 
          Attention: David L. Dubrow, Esq.
 
          Telecopy No.: (212) 484-3990

(b) Change of Notice Address. Any party may, by notice given pursuant to this
Section, change the person or persons and/or address or addresses, or designate
an additional person or persons or an additional address or addresses, for its
notices, but notice of a change of address shall only be effective upon receipt.
Each party agrees that it shall not refuse or reject delivery of any notice
given hereunder, that it shall acknowledge, in writing, receipt of the same upon
request by the other party and that any notice rejected or refused by it shall
be deemed for all purposes of this Agreement to have been received by the
rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. Postal Service, the courier service or facsimile.
Section 15.09. Further Assurances and Corrective Instruments.
(a) Further Assurances. To the extent permitted by law, the parties hereto agree
that they shall, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such supplements hereto and such
further instruments as Lender or Borrower may reasonably request and as may be
required in the opinion of Lender or its counsel to effectuate the intention of
or facilitate the performance of this Agreement or any Loan Document.
(b) Further Documentation. Without limiting the generality of subsection (a), in
the event any further documentation or information is required by Lender to
correct patent mistakes in the Loan Documents, materials relating to the Title
Insurance Policies or the funding of the Advances, Borrower shall provide, or
cause to be provided to Lender, at Borrower’s cost and expense, such
documentation or information. Borrower shall execute and deliver to Lender such
documentation, including but not limited to any amendments, corrections,
deletions or additions to the Notes, the Security Instruments or the other Loan
Documents as is reasonably required by Lender.
(c) Compliance with Investor Requirements. Without limiting the generality of
subsection (a), Borrower shall do anything necessary to comply with the
reasonable requirements of Lender to enable Lender to sell the DMBS backed by an
Advance.

 

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Section 15.10. Term of this Agreement.
This Agreement shall continue in effect until the Termination Date.
Section 15.11. Assignments; Third-Party Rights.
No Borrower shall assign this Agreement, or delegate any of its obligations
hereunder, without the prior written consent of Lender. Lender may assign its
rights and/or obligations under this Agreement separately or together, without
Borrower’s consent, only to Fannie Mae or other entity if such assignment is
made with the intent that such entity will further assign such rights to Fannie
Mae, but may not delegate its obligations under this Agreement unless it first
receives Fannie Mae’s written approval. Lender shall first assign its rights
under this Agreement separately or together, without Borrower’s consent, to
Fannie Mae. Upon assignment to Fannie Mae, Fannie Mae shall be permitted to
further assign its rights under this Agreement separately or together, without
Borrower’s consent.
Section 15.12. Headings.
Article and Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.
Section 15.13. General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined in Appendix I and
elsewhere in this Agreement have the meanings assigned to them in this Agreement
and include the plural as well as the singular, and the use of any gender herein
shall be deemed to include the other genders; (ii) accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP; (iii) references herein to “Articles,” “Sections,” “subsections,”
“paragraphs” and other subdivisions without reference to a document are to
designated Articles, Sections, subsections, paragraphs and other subdivisions of
this Agreement; (iv) a reference to a subsection without further reference to a
Section is a reference to such subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions; (v) a reference to an Exhibit or a Schedule without a
further reference to the document to which the Exhibit or Schedule is attached
is a reference to an Exhibit or Schedule to this Agreement; (vi) the words
“herein,” “hereof,” “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular provision; and (vii) the word
“including” means “including, but not limited to.”

 

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Section 15.14. Interpretation.
The parties hereto acknowledge that each party and their respective counsel have
participated in the drafting and revision of this Agreement and the Loan
Documents. Accordingly, the parties agree that any rule of construction that
disfavors the drafting party shall not apply in the interpretation of this
Agreement and the Loan Documents or any amendment or supplement or exhibit
hereto or thereto.
Section 15.15. Standards for Decisions, Etc.
Unless otherwise provided herein, if Lender’s approval is required for any
matter hereunder, such approval may be granted or withheld in Lender’s sole and
absolute discretion. Unless otherwise provided herein, if Lender’s designation,
determination, selection, estimate, action or decision is required, permitted or
contemplated hereunder, such designation, determination, selection, estimate,
action or decision shall be made in Lender’s sole and absolute discretion.
Section 15.16. Decisions in Writing.
Any approval, designation, determination, selection, action or decision of
Lender or Borrower must be in writing to be effective.
Section 15.17. Requests.
Borrower may submit up to a total of eight (8) Requests per Calendar Year,
subject to the provisions of Section 2.06.
Section 15.18. Conflicts Between Agreements.
Any terms and conditions contained in this Agreement that may also be contained
in another Loan Document are not, to the extent reasonably practicable, to be
construed to be in conflict with each other but rather is construed as
duplicative, confirming, additional, or cumulative provisions. To the extent
that, in the interpretation of this Agreement, any ultimate conflict between the
terms and conditions of this Agreement and those set forth in another Loan
Document is determined to exist, the terms and conditions of this Agreement are
to control.

 

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Section 15.19. Timing of Decisions.
(a) In the event a Variable DMBS Advance is Outstanding and Lender receives a
request from Borrower concerning a subsequent Variable DMBS Advance, Conversion,
Addition, Release, Substitution, Future Advance pursuant to Section 2.06 of this
Agreement and/or Expansion (“Activity”), the rollover date for all Variable DMBS
Advances Outstanding shall be the effective date for the following: (i) all
decisions on the availability of an Activity, (ii) any designation,
determination, selection, estimate, action, or decision made by Lender or Fannie
Mae in connection with any such Activity, including but not limited to one
pertaining to the Geographical Diversification Requirements and (iii) the
Activity itself.
(b) In the event a Variable DMBS Advance is Outstanding, Lender and Fannie Mae
reserves the right to make any decision, designation, determination, selection,
estimate or take any action required of them individually or collectively under
this Agreement, and require any activity resulting from the above, to be
effective on the rollover date for all Variable DMBS Advances Outstanding.
(Signatures appear on following pages)

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

                          BORROWER:    
 
                        EDR TAMPA LIMITED PARTNERSHIP, a Delaware
limited partnership    
 
                        By:   EDR Tampa, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Tampa, Inc., a Delaware corporation, its
manager    
 
                   
 
          By:   /s/ Olan Brevard    
 
                   
 
              Name: Olan Brevard    
 
              Title:   Vice President    

                          EDR STILLWATER LIMITED PARTNERSHIP, a
Delaware limited partnership    
 
                        By:   EDR Stillwater, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Stillwater, Inc., a Delaware corporation,
its manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

 

S-1

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                          EDR WESTERN MICHIGAN LIMITED
PARTNERSHIP, a Delaware limited partnership    
 
                        By:   EDR Western Michigan, LLC, a Delaware limited
liability company, its general partner    
 
                            By:   EDR Western Michigan, Inc., a Delaware
corporation, its manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

                          EDR WABASH LIMITED PARTNERSHIP, a Delaware
limited partnership    
 
                        By:   EDR Wabash, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Wabash, Inc., a Delaware corporation, its
manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

                          EDR COLUMBUS LIMITED PARTNERSHIP, a
Delaware limited partnership    
 
                        By:   EDR Columbus, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Columbus, Inc., a Delaware corporation,
its manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

 

S-2

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                          EDR STATE COLLEGE LIMITED PARTNERSHIP, a
Delaware limited partnership    
 
                        By:   EDR State College, LLC, a Delaware limited
liability
company, its general partner    
 
                            By:   EDR State College, Inc., a Delaware
corporation, its manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

                          EDR COLUMBIA LIMITED PARTNERSHIP, a
Delaware limited partnership    
 
                        By:   EDR Columbia, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Columbia, Inc., a Delaware corporation,
its manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

                          EDR KNOXVILLE LIMITED PARTNERSHIP, a
Delaware limited partnership    
 
                        By:   EDR Knoxville, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Knoxville, Inc., a Delaware corporation,
its manager    
 
                   
 
          By:   /s/ Olan Brevard
 
Name: Olan Brevard    
 
              Title:   Vice President    

 

S-3

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                          EDR LUBBOCK LIMITED PARTNERSHIP,
a Delaware limited partnership    
 
                        By:   EDR Lubbock, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Lubbock, Inc., a Delaware corporation, its
manager    
 
                   
 
          By:   /s/ Olan Brevard
 
   
 
              Name: Olan Brevard
Title:   Vice President    
 
                        EDR TUCSON PHASE II LIMITED PARTNERSHIP,
a Delaware limited partnership    
 
                        By:   EDR Tucson, LLC, a Delaware limited liability
company, its general partner    
 
                            By:   EDR Tucson, Inc., a Delaware corporation, its
manager    
 
                   
 
          By:   /s/ Olan Brevard
 
   
 
              Name: Olan Brevard
Title:   Vice President    
 
                        EDR MURFREESBORO, LLC, a Delaware limited
liability company    
 
                        By:   EDR Manager, LLC, a Delaware limited liability
company, its Manager    
 
                            By:   Education Realty Operating Partnership, LP,
a Delaware limited partnership, its Manager    
 
                   
 
          By:   Education Realty OP GP, Inc., a Delaware
corporation, its General Partner    
 
                   
 
          By:   /s/ Olan Brevard    
 
                   
 
              Name: Olan Brevard
Title:   Vice President    

 

S-4

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                          EDR AUBURN, LLC, a Delaware limited liability
company    
 
                        By:   EDR Manager, LLC, a Delaware limited liability
company, its Manager    
 
                            By:   Education Realty Operating Partnership, LP,
a Delaware limited partnership, its Manager    
 
                   
 
          By:   Education Realty OP GP, Inc., a Delaware
corporation, its General Partner    
 
                   
 
          By:   /s/ Olan Brevard
 
   
 
              Name: Olan Brevard
Title:   Vice President    
 
                        EDR STATESBORO, LLC, a Delaware limited liability
company    
 
                        By:   EDR Manager, LLC, a Delaware limited liability
company, its Manager    
 
                            By:   Education Realty Operating Partnership, LP,
a Delaware limited partnership, its Manager    
 
                   
 
          By:   Education Realty OP GP, Inc., a Delaware
corporation, its General Partner    
 
                   
 
          By:   /s/ Olan Brevard
 
   
 
              Name: Olan Brevard
Title:   Vice President    

[Signatures continue on following page.]

 

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                          GUARANTOR:    
 
                        EDUCATION REALTY OPERATING PARTNERSHIP, LP, a Delaware
limited partnership    
 
                        By:   Education Realty OP GP, Inc.
a Delaware corporation, its general partner    
 
                   
 
      By:   /s/ Olan Brevard
 
   
 
          Name: Olan Brevard
Title:   Vice President    

                  EDUCATION REALTY TRUST, INC., a Maryland corporation    
 
           
 
  By:   /s/ Olan Brevard
 
   
 
      Name: Olan Brevard
Title:   Vice President    

[Signatures continue on following page.]

 

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            LENDER:

RED MORTGAGE CAPITAL, INC., an Ohio corporation
      By:   /s/ R. Barth Kallmerten         Name:   R. Barth Kallmerten       
Title:   Senior Managing Director   

 

S-7

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Schedule 1
List of Borrowers
EDR Wabash Limited Partnership
EDR Stillwater Limited Partnership
EDR Lubbock Limited Partnership
EDR Columbus Limited Partnership
EDR Columbia Limited Partnership
EDR Western Michigan Limited Partnership
EDR Knoxville Limited Partnership
EDR Murfreesboro, LLC
EDR State College Limited Partnership
EDR Tampa Limited Partnership
EDR Tucson Phase II Limited Partnership
EDR Auburn, LLC
EDR Statesboro, LLC

 

Schedule 1-1

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APPENDIX I
DEFINITIONS
For all purposes of the Agreement, the following terms shall have the respective
meanings set forth below:
“Acquiring Person” means a “person” or “group of persons” within the meaning of
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.
“Addition Fee” means, with respect to an Additional Mortgaged Property added to
the Collateral Pool in accordance with Section 3.02, the product of —

  (i)  
40 basis points, multiplied by
    (ii)  
the Allocable Facility Amount of the Additional Mortgaged Property, as
determined by Lender.

“Addition Loan Documents” means the Security Instrument covering an Additional
Mortgaged Property and any other documents, instruments or certificates
reasonably required by Lender in form and substance satisfactory to Lender and
Borrower in connection with the addition of the Additional Mortgaged Property to
the Collateral Pool pursuant to Article 3.
“Addition Request” means a written request, substantially in the form of Exhibit
M to the Agreement, to add Additional Mortgaged Properties to the Collateral
Pool as set forth in Section 3.02(a).
“Additional Borrower” means the owner of an Additional Mortgaged Property or a
Substitute Mortgaged Property, which entity has been approved by Lender and
becomes a Borrower under the Agreement and the applicable Loan Documents and
their permitted successors and assigns.
“Additional Collateral” shall have the meaning given that term in Section 6.13.
“Additional Collateral Due Diligence Deposit” shall have the meaning given that
term in Section 10.04(b).
“Additional Collateral Due Diligence Fees” means the due diligence fees paid by
Borrower to Lender with respect to each Additional Mortgaged Property, as set
forth in Section 10.04(b).
“Additional Mortgaged Property” means each Rental Property owned by Borrower
(either in fee simple or as tenant under a ground lease meeting all of Lender’s
requirements for similar loans anticipated to be sold to Fannie Mae) and added
to the Collateral Pool after the Initial Closing Date pursuant to Article 3.

 

Appendix I-1

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“Adjustable Rate” in connection with a particular Variable Structured ARM
Advance has the meaning given such term in the applicable Variable Facility
Note.
“Advance” means a Variable Advance (including a Rollover Variable Advance)
and/or a Fixed Advance.
“Advance Amount” means the lesser of (a) the amount that would result in an
Aggregate Loan to Value Ratio of 75% or (b) (i) if a Variable Advance, the
amount that would result in an Aggregate Debt Service Coverage Ratio as
permitted under the Coverage and LTV Test for the portion of the Commitment that
will be the Variable Facility Commitment (using a prorated portion of the Net
Operating Income and using the Facility Debt Service for only the Variable
Facility Commitment in making such determination of Aggregate Debt Service
Coverage Ratio), provided that such amount shall not exceed 103% of the amount
that would result using the calculation set forth in (ii) below, and (ii) if a
Fixed Advance, the amount that would result in an Aggregate Debt Service
Coverage Ratio as permitted under the Coverage and LTV Test for the portion of
the Commitment that will be the Fixed Facility Commitment (using a prorated
portion of the Net Operating Income and using the Facility Debt Service for only
the Fixed Facility Commitment in making such determination of Debt Service
Coverage Ratio) or (c) the amount determined by Lender which is based upon an
exit strategy analysis pursuant to the Underwriting Requirements.
“Advance Request” means a written request, substantially in the form of
Exhibit L to the Agreement, for an Advance made pursuant to Section 2.04.
“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the 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 the possession, directly or
indirectly, of the power to direct or cause the direction of the management
(other than property management) and policies of that Person, whether through
the ownership of voting securities, partnership interests or by contract or
otherwise.
“Aggregate Debt Service Coverage Ratio” means, for any specified date, the ratio
(expressed as a percentage) of —
(a) the aggregate of the Net Operating Income for the Mortgaged Properties
to
(b) the Facility Debt Service on the specified date.
“Aggregate Loan to Value Ratio” means, for any specified date, the ratio
(expressed as a percentage) of —
(a) the Advances Outstanding on the specified date,
to
(b) the aggregate of the Valuations most recently obtained prior to the
specified date for all of the Mortgaged Properties.

 

Appendix I-2

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“Agreement” means this Master Credit Facility Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, including all
Recitals and Exhibits to the Agreement, each of which is hereby incorporated
into the Agreement by this reference.
“Allocable Facility Amount” means the portion of the Credit Facility allocated
to a particular Mortgaged Property by Lender in accordance with the Agreement.
“Amortization Period” means a period of thirty (30) years.
“Applicable Law” means (a) all applicable provisions of all constitutions,
statutes, rules, regulations and orders of all governmental bodies, all
Governmental Approvals and all orders, judgments and decrees of all courts and
arbitrators, (b) all zoning, building, environmental and other laws, ordinances,
rules, regulations and restrictions of any Governmental Authority affecting the
ownership, management, use, operation, maintenance or repair of any Mortgaged
Property, including the Americans with Disabilities Act (if applicable), the
Fair Housing Amendment Act of 1988 and Hazardous Materials Laws (as defined in
the Security Instrument), (c) any building permits or any conditions, easements,
rights-of-way, covenants, restrictions of record or any recorded or unrecorded
agreement affecting or concerning any Mortgaged Property including planned
development permits, condominium declarations, and reciprocal easement and
regulatory agreements with any Governmental Authority, (d) all laws, ordinances,
rules and regulations, whether in the form of rent control, rent stabilization
or otherwise, that limit or impose conditions on the amount of rent that may be
collected from the units of any Mortgaged Property, and (e) requirements of
insurance companies or similar organizations, affecting the operation or use of
any Mortgaged Property or the consummation of the transactions to be effected by
the Agreement or any of the other Loan Documents.
“Appraisal” means an appraisal of Rental Property conforming to the requirements
of Lender for similar loans anticipated to be sold to Fannie Mae and accepted by
Lender.
“Appraised Value” means the value set forth in an Appraisal.
“Assignment and Subordination of Management Agreement” means the Master
Assignment and Subordination of Management Agreement required by Lender and
satisfying Lender’s requirements, as the same may be amended, restated, modified
or supplemented from time to time.
“Assignment of Leases and Rents” means an Assignment of Leases and Rents,
required by Lender and satisfying Lender’s requirements, as the same may be
amended, restated, modified or supplemented from time to time.

 

Appendix I-3

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“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”
as now and hereafter in effect, or any successor statute.
“Bankruptcy Event” shall have the meaning set forth in Section 14.01(b).
“Borrower” means individually and collectively, the Initial Borrower and any
Additional Borrower becoming a party to the Agreement and any other Loan
Documents, together with their permitted successors and assigns.
“Borrower Agent” means EROP Guarantor.
“Borrower Parties” means collectively, Borrower and Guarantor.
“Business Day” means a day on which Fannie Mae and Servicer is open for
business.
“Calendar Quarter” means, with respect to any year, any of the following three
month periods: (a) January-February-March; (b) April-May-June;
(c) July-August-September; and (d) October-November-December.
“Calendar Year” means the 12-month period from the first day of January to and
including the last day of December, and each 12-month period thereafter.
“Cap Rate” means, for each Mortgaged Property, a capitalization rate selected by
Lender for use in determining the Valuations, which rate is determined as set
forth in Section 2.05(b).
“Cash Collateral Account” means the cash collateral account established pursuant
to the Cash Collateral Agreement.
“Cash Collateral Agreement” means a cash collateral, security and custody
agreement by and among Fannie Mae, Borrower and a collateral agent for Fannie
Mae in the form attached as Exhibit U to the Agreement, as the same may be
amended, modified or supplemented from time to time.
“Cash Equivalents” means
(a) securities issued or fully guaranteed or insured by the United States
Government or any agency thereof and backed by the full faith and credit of the
United States having maturities of not more than twelve (12) months from the
date of acquisition; and
(b) certificates of deposit, time deposits, demand deposits, eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or bankers’
acceptances, having in each case a term of not more than twelve (12) months,
issued by any commercial bank having membership in the FDIC, or by any U.S.
commercial lender (or any branch or agency of a non-U.S. bank licensed to
conduct business in the U.S.) having combined capital and surplus of not less
than $100,000,000 whose short-term securities are rated at least A-1 by S&P or
P-1 by Moody’s;

 

Appendix I-4

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(c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s
and in either case having a term of not more than twelve (12) months; and
(d) the amount that a borrower has the right to draw under any line of credit,
pursuant to its terms on any specified date.
“Cash Interest Rate” means a rate of interest, per annum, established by Fannie
Mae for cash loans of similar characteristics then offered by Fannie Mae.
“Certificate of Borrower Parties” means that certain Master Certificate of
Borrower Parties executed by the Borrower Parties as of the date hereof, and
which must be executed and delivered by the Borrower Parties to Lender from time
to time in accordance with the terms of this Agreement, the form of which
certificate shall be the same or substantially similar to which the Borrower
Parties execute as of the date hereof.
“Change of Control” means the earliest to occur of: (a) the date on which an
Acquiring Person becomes (by acquisition, consolidation, merger or otherwise),
directly or indirectly, the beneficial owner of more than twenty five percent
(25%) of the total ownership interest of Borrower or Guarantor then outstanding,
or (b) the replacement (other than solely by reason of retirement at age
sixty-five or older, death or disability) of more than fifty percent (50%) (or
such lesser percentage as is required for decision-making by the board of
directors or an equivalent governing body) of the members of the board of
directors (or an equivalent governing body) of Borrower or Guarantor over a
one-year period from the directors who constituted such board of directors at
the beginning of such period and such replacement shall not have been approved
by a vote of at least a majority of the board of directors of Borrower or
Guarantor then still in office who either were members of such board of
directors at the beginning of such one-year period or whose election as members
of the board of directors was previously so approved (it being understood and
agreed that in the case of any entity governed by a trustee, board of managers,
or other similar governing body, the foregoing clause (b) shall apply thereto by
substituting such governing body and the members thereof for the board of
directors and members thereof, respectively) or (c) (i) both Paul O. Bower and
Randall H. Brown are no longer part of the Senior Management of Guarantor or
(ii) both Thomas J. Hickey and Craig L. Cardwell are no longer part of the
Senior Management of Guarantor or (iii) any two of Paul O. Bower, Randall H.
Brown, Thomas J. Hickey and Craig L. Cardwell are no longer part of the Senior
Management of Guarantor.
“Closing Date” means the Initial Closing Date and each date after the Initial
Closing Date on which the funding or other transaction requested in a Request is
required to take place.
“Collateral” means the Mortgaged Properties and other collateral from time to
time or at any time encumbered by the Security Instruments, or any other
property securing Borrower’s obligations under the Loan Documents.

 

Appendix I-5

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“Collateral Pool” means all of the Collateral.
“Commitment” means, at any time, the sum of the Fixed Facility Commitment and
the Variable Facility Commitment.
“Complete Fixed Facility Termination” shall have the meaning set forth in
Section 5.02(a).
“Complete Variable Facility Termination” shall have the meaning set forth in
Section 5.02(a).
“Compliance Certificate” means a certificate of Borrower substantially in the
form of Exhibit F to the Agreement.
“Completion/Repair and Security Agreement” means a Master Completion/Repair and
Security Agreement required by Lender and satisfying Lender’s requirements, as
the same may be amended, restated, modified or supplemented from time to time.
“Confirmation of Guaranty” means a confirmation of the Guaranty executed by
Guarantor in connection with any Request after the Initial Closing,
substantially in the form of Exhibit E to the Agreement.
“Confirmation of Obligations” means a Confirmation of Obligations delivered in
connection with the addition of an Additional Mortgaged Property or a Substitute
Mortgaged Property to the Collateral Pool or a release of a Release Mortgaged
Property from the Collateral Pool, dated as of the Closing Date for each such
addition, signed by Borrower and Guarantor, pursuant to which Borrower and
Guarantor confirm their obligations under the Loan Documents, substantially in
the form of Exhibit N to the Agreement.
“Contribution Agreement” means the Contribution Agreement by and among Initial
Borrower and each Additional Borrower, as the same may be amended, restated,
modified or supplemented from time to time.
“Controlled” (or any variation of such term) of one entity (the “controlled
entity”) by another (the “controlling entity”) means that the controlling entity
has the power and authority, directly or indirectly, to direct or cause the
direction of the management and policies of the controlled entity, by contract
or otherwise.
“Controlled Group” means all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Internal Revenue Code.
“Conversion Amendment” means the Master Credit Facility Agreement Conversion
Amendment, substantially in the form of Exhibit I to the Agreement, reflecting
the conversion of all or any portion of the Variable Facility Commitment to the
Fixed Facility Commitment as set forth in Section 1.08.

 

Appendix I-6

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“Conversion Documents” means the Conversion Amendment, together with an
amendment to each Security Document if required by Lender and other applicable
Loan Documents, in form and substance satisfactory to Lender, reflecting the
change in the Fixed Facility Commitment and the Variable Facility Commitment
pursuant to Section 1.08.
“Conversion Request” means a written request, substantially in the form of
Exhibit H to the Agreement, to convert all or any portion of the Variable
Facility Commitment to the Fixed Facility Commitment pursuant to Section 1.08.
“Coupon Rate” means, with respect to a Variable DMBS Advance, the imputed
interest rate determined by Lender pursuant to Section 1.05.
“Coverage and LTV Tests” mean, each of the following financial tests:
(a) The Aggregate Debt Service Coverage Ratio is not less than (i) 1.30:1.0
during the period of time from the Initial Closing Date to (and including) the
Third Anniversary, 1.35:1.0 during the period of time from the Third Anniversary
to (and including) the Sixth Anniversary and 1.40:1 during the period of time
from the Sixth Anniversary to (and including) the Fifteenth Anniversary with
respect to the amount of the Advances drawn from the Fixed Facility Commitment,
and (ii) 1.05:1.0 during the period of time from the Initial Closing Date to
(and including) the Third Anniversary, 1.10:1.0 during the period of time from
the Third Anniversary to (and including) the Sixth Anniversary, and 1.15:1.0
during the time of time from the Sixth Anniversary to (and including) the
Fifteenth Anniversary with respect to the amount of the Advances drawn from the
Variable Facility Commitment.
(b) The Aggregate Loan to Value Ratio, on any date, does not exceed seventy-five
percent (75%).
“Credit Facility” means the Fixed Facility and the Variable Facility.
“Credit Facility Termination Documents” means the instruments releasing the
Security Instruments as liens on the Mortgaged Properties, UCC-3 Termination
Statements terminating the UCC-1 Financing Statements in favor of Lender, and
such other documents and instruments necessary to evidence the release of the
Collateral from any lien securing the Obligations, and the Notes, all in
connection with the termination of the Agreement and the Credit Facility
pursuant to Article 5.
“Credit Facility Termination Request” means a written request, substantially in
the form of Exhibit R to the Agreement, to terminate the Agreement and the
Credit Facility pursuant to Section 5.04(a).
“Debt Service Amounts” shall have the meaning set forth in Section 14.01(a).

 

Appendix I-7

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“Debt Service Coverage Ratio” means, for any Mortgaged Property, for any
specified date, the ratio (expressed as a percentage) of —
(a) the Net Operating Income for the specified period for the subject Mortgaged
Property, as determined in accordance with this Agreement
to
(b) the Facility Debt Service on the specified date, assuming, for the purpose
of calculating the Facility Debt Service for this definition, that Advances
Outstanding shall be the Allocable Facility Amount for the subject Mortgaged
Property.
“Dedicated Student Housing Property” means a residential property, located in
the United States, containing five or more dwelling units in which not more than
twenty percent (20%) of the net rentable area is or will be rented to
non-residential tenants, and conforming to Fannie Mae’s then current guidelines,
provided that eighty percent (80%) or more of the dwelling units are leased to
undergraduate and/or graduate students.
“Deficient Mortgaged Properties” means the Mortgaged Property known as The
Pointe at Western.
“Discount” means, with respect to any Variable DMBS Advance, an amount equal to
the excess of —

  (i)  
the face amount of the DMBS backed by the Variable DMBS Advance, over
    (ii)  
the Price of the DMBS backed by the Variable DMBS Advance.

“DMBS” means a mortgage-backed security issued by Fannie Mae which is “backed”
by an Advance and has an interest in the Notes and the Collateral Pool securing
the Notes, which interest permits the holder of the DMBS to participate in the
Notes and the Collateral Pool to the extent of such Advance.
“DMBS Commitment” shall have the meaning set forth in Section 2.01(c).
“DMBS Imputed Interest Rate” shall have the meaning set forth in Section 1.05.
“DMBS Issue Date” means the date on which an DMBS is issued by Fannie Mae.
“DMBS Delivery Date” means the date on which an DMBS is delivered by Fannie Mae.
“DUS Guide” means the Fannie Mae Delegated Underwriting and Servicing Guide in
its present form and as amended, modified, supplemented or reissued from time to
time (all references to Parts, Chapters, Sections and other subdivisions of the
DUS Guide shall be deemed references to (i) the Parts, Chapters, Sections and
other subdivisions in effect on the date of the Agreement and (ii) any successor
provisions to such Parts, Chapters, Sections and other subdivisions.

 

Appendix I-8

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder.
“EROP Guarantor” means Education Realty Operating Partnership, LP.
“Event of Default” means any event defined to be an “Event of Default” under
Article 11.
“Expansion” means an increase in the Commitment made in accordance with
Article 4.
“Expansion Loan Documents” means an additional Variable Facility Note or Fixed
Facility Note, as the case may be, increasing the amount of such Note to the
amount of the Commitment, as increased in accordance with Article 4 and
amendments to the Security Instruments, increasing the maximum amount to be
secured by such Security Instruments to the amount of the Commitment.
“Expansion Origination Fee” has the meaning set forth in Section 10.03(b).
“Expansion Request” means a written request, substantially in the form of
Exhibit O to the Agreement, to obtain an Expansion pursuant to Article 4.
“Facility Debt Service” means —
(a) For use in determining the additional borrowing capacity created by the
addition of Additional Mortgaged Properties, the sum of the amount of interest
and principal amortization, during the twelve (12) month period immediately
succeeding the specified date, with respect to the Advances Outstanding on the
specified date and Advances to be obtained as a result of the Addition of
Additional Mortgaged Properties, except that, for these purposes:

  (A)  
each Variable DMBS Advance Outstanding shall be deemed to require level monthly
payments of principal and interest (at an interest rate equal to (A) the
Three-Month LIBOR rate on the specified date plus (B) the Variable Facility Fee
plus (C) up to 300 basis points plus (D) any Monthly Cap Escrow Payment for the
succeeding twelve (12) month period) in an amount necessary to fully amortize
the original principal amount of the Variable Facility Commitment with respect
to a Variable DMBS Advance over the Amortization Period, with such amortization
deemed to commence on the first day of the twelve (12) month period; and

 

Appendix I-9

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  (B)  
each Variable Structured ARM Advance Outstanding shall be deemed to require
level monthly payments of principal and interest (at an interest rate equal to
(A) the One-Month LIBOR or Three-Month LIBOR rate (as applicable) on the
specified date plus (B) the Variable Facility Fee plus (C) the Margin plus
(D) up to 300 basis points plus (E) any Monthly Cap Escrow Payment for the
succeeding twelve (12) month period) in an amount necessary to fully amortize
the original principal amount of the Variable Facility Commitment with respect
to a Variable Structured ARM Advance over the Amortization Period deemed to
commence on the first day of the twelve (12) month period; and
    (C)  
each Fixed Advance Outstanding shall require level monthly payments of principal
and interest (at the Cash Interest Rate for the Fixed Advance) in an amount
necessary to fully amortize the original principal amount of the Fixed Advance
over the Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period; and
    (D)  
each Fixed Advance to be obtained shall be deemed to require level monthly
payments of principal and interest at a rate equal to the estimated Cash
Interest Rate for such Fixed Advance in an amount necessary to fully amortize
the original principal amount of such Fixed Advance over the Amortization
Period, with such amortization deemed to commence on the first day of the twelve
(12) month period.

(b) For use in determining the Aggregate Debt Service Coverage Ratio, for
purposes of determining compliance with the Coverage and LTV Tests, for purposes
of determining Liquidity and for other ongoing monitoring purposes, and for
purposes of determining Release Prices pursuant to Section 3.04(c) as of any
specified date, the sum of:
the amount of interest and principal amortization, during the twelve (12) month
period immediately succeeding the specified date, with respect to the Advances
Outstanding on the specified date, except that, for these purposes:

  (A)  
each Variable DMBS Advance shall be deemed to require level monthly payments of
principal and interest (at the Coupon Rate for such Variable DMBS Advance) in an
amount necessary to fully amortize the original principal amount of the Variable
DMBS Advance over the Amortization Period, with such amortization deemed to
commence on the first day of the twelve (12) month period; and

 

Appendix I-10

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  (B)  
each Variable Structured ARM Advance shall be deemed to require level monthly
payments of principal and interest (at the Adjustable Rate for such Variable
Structured ARM Advance) in an amount necessary to fully amortize the original
principal amount of the Variable Structured ARM Advance over the Amortization
Period, with such amortization deemed to commence on the first day of the twelve
(12) month period; and

  (C)  
each Fixed Advance shall require level monthly payments of principal and
interest (at the Cash Interest Rate for such Fixed Advance) in an amount
necessary to fully amortize the original principal amount of the Fixed Advance
over the Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period.

“Facility Termination Document” means the Amendment of the Master Credit
Facility Agreement, substantially in the form of Exhibit Q to the Agreement,
evidencing the permanent reduction in the Facility Commitment pursuant to
Section 5.02.
“Facility Termination Request” means a written request, substantially in the
form of Exhibit P to the Agreement, for a permanent reduction in the Variable
Facility Commitment or the Fixed Facility Commitment pursuant to Section 5.02.
“Fannie Mae” means the body corporate duly organized under the Federal National
Mortgage Association Charter Act, as amended, 12 U.S.C. §1716 et seq. and duly
organized and existing under the laws of the United States.
“Fees” means Addition Fee, Additional Collateral Due Diligence Fees, Occupancy
Deficiency Origination Fee, Expansion Origination Fee, Initial Due Diligence
Fees, Initial Origination Fee, Release Fee, Substitution Fee, Variable Facility
Fee, LOC Fee and any and all other fees specified in the Agreement.
“Fifteenth Anniversary” means the date that is fifteen (15) years from the
Initial Closing Date.
“First Anniversary” means the date that is one year after the Initial Closing
Date.
“Fixed Advance” means a loan made by Lender to Borrower under the Fixed Facility
Commitment.
“Fixed Facility” means the agreement of Lender to make Fixed Advances to
Borrower pursuant to Section 1.01.
“Fixed Facility Availability Period” means the period beginning on the Initial
Closing Date and ending on the date one (1) year after the Initial Closing Date.

 

Appendix I-11

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“Fixed Facility Commitment” means an aggregate amount of $147,861,000 which
shall be evidenced by the Fixed Facility Notes plus such amount as is added to
or converted to the Fixed Facility Commitment in accordance with Section 1.08
and Article 4 and less such amount by which the Fixed Facility Commitment is
reduced in accordance with Article 5.
“Fixed Facility Note” means a promissory note (together with all schedules,
riders, allonges, addenda, renewals, extensions, amendments and modifications
thereto) which will be issued by Borrower to Lender, concurrently with the
funding of each Fixed Advance, to evidence Borrower’s obligation to repay the
Fixed Advance, and which promissory note will be the same or substantially
similar in form to the promissory note issued by Borrower to Lender in
connection with the Fixed Advance made on the Initial Closing Date.
“Future Advance” means an Advance made after the Initial Closing Date.
“GAAP” means generally accepted accounting principles in the United States in
effect from time to time, consistently applied.
“General Conditions” shall have the meaning set forth in Article 6.
“Geographical Diversification Requirements” shall mean:
(a) no more than 10% of the units in the Collateral Pool shall be located at
Mortgaged Properties dependent on students from colleges or universities with
fewer than 10,000 students; and
(b) no more than 25% of the units in the Collateral Pool shall be located at
Mortgaged Properties dependent on students from colleges or universities with
fewer than 17,000 students; and
(c) no more than 20% of the then Outstanding Advances shall be allocated to
Mortgaged Properties dependent on students from any one college or university;
and
(d) the Mortgaged Properties in the Collateral Pool must be located in at least
five (5) states.
“Governmental Approval” means an authorization, permit, consent, approval,
license, registration or exemption from registration or filing with, or report
to, any Governmental Authority.
“Governmental Authority” means any court, board, agency, commission, office or
authority of any nature whatsoever for any governmental unit (federal, state,
county, district, municipal, city or otherwise) whether now or hereafter in
existence.
“Gross Revenues” means, for any specified period, with respect to any Rental
Property, all income in respect of such Rental Property as reflected on the
certified operating statement for such specified period as adjusted to exclude
unusual income (e.g. temporary or nonrecurring income), income not allowed by
Lender for similar loans anticipated to be sold to Fannie Mae (e.g. interest
income, furniture income, etc.), and the value of any unreflected concessions.

 

Appendix I-12

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“Guarantor” means REIT Guarantor and EROP Guarantor, or a substitute Guarantor
consented to by Lender.
“Guaranty” means that certain Guaranty executed by Guarantor as of the date
hereof, as the same may be amended, restated, modified or supplemented from time
to time.
“Hazardous Substance Activity” means, with respect to any Mortgaged Property,
any storage, holding, existence, release, spill, leaking, pumping, pouring,
injection, escaping, deposit, disposal, dispersal, leaching, migration, use,
treatment, emission, discharge, generation, processing, abatement, removal,
disposition, handling or transportation of any Hazardous Materials (as defined
in the Security Instrument) from, under, into or on such Mortgaged Property in
violation of Hazardous Materials Laws (as defined in the Security Instrument),
including the discharge of any Hazardous Materials emanating from such Mortgaged
Property in violation of Hazardous Materials Laws through the air, soil, surface
water, groundwater or property and also including the abandonment or disposal of
any barrels, containers and other receptacles containing any Hazardous Materials
from or on such Mortgaged Property in violation of Hazardous Materials Laws, in
each case whether sudden or nonsudden, accidental or nonaccidental.
“Hedging Arrangement” means any interest rate swap, interest rate cap or other
arrangement, contractual or otherwise, which has the effect of an interest rate
swap or interest rate cap or which otherwise (directly or indirectly,
derivatively or synthetically) hedges interest rate risk associated with being a
debtor of variable rate debt or any agreement or other arrangement to enter into
any of the above on a future date or after the occurrence of one or more events
in the future.
“Impositions” means, with respect to any Mortgaged Property, all (1) water and
sewer charges which, if not paid, may result in a lien on all or any part of the
Mortgaged Property, (2) premiums for fire and other hazard insurance, rent loss
insurance and such other insurance as Lender may require under any Security
Instrument, (3) Taxes, and (4) amounts for other charges and expenses which
Lender at any time reasonably deems necessary to protect the Mortgaged Property,
to prevent the imposition of liens on the Mortgaged Property, or otherwise to
protect Lender’s interests.

 

Appendix I-13

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“Indebtedness” means, with respect to any Person, as of any specified date,
without duplication, all:
(a) indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than (i) current trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices, and (ii) for construction of improvements to property, if such person
has a non-contingent contract to purchase such property);
(b) other indebtedness of such Person that is evidenced by a note, bond,
debenture or similar instrument;
(c) obligations of such Person under any lease of property, real or personal,
the obligations of the lessee in respect of which are required by GAAP to be
capitalized on a balance sheet of the lessee or to be otherwise disclosed as
such in a note to such balance sheet;
(d) obligations of such Person in respect of acceptances (as defined in
Article 3 of the Uniform Commercial Code of the District of Columbia) issued or
created for the account of such Person;
(e) liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment of
such liabilities; and
(f) as to any Person (“guaranteeing person”), any obligation of (a) the
guaranteeing person or (b) another Person (including any bank under any letter
of credit) to induce the creation of a primary obligation (as defined below)
with respect to which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing, or in
effect guaranteeing, any indebtedness, lease, dividend or other obligation
(“primary obligations”) of any third person (“primary obligor”) in any manner,
whether directly or indirectly, including any obligation of the guaranteeing
person, whether or not contingent, to (1) purchase any such primary obligation
or any property constituting direct or indirect security therefor, (2) advance
or supply funds for the purchase or payment of any such primary obligation or to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (3) purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (4) otherwise assure or hold harmless the
owner of any such primary obligation against loss in respect of the primary
obligation, provided, however, that the term “Contingent Obligation” shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation of any guaranteeing
person shall be deemed to be the lesser of (i) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made and (ii) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Contingent Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Contingent Obligation shall be
such guaranteeing person’s maximum reasonably anticipated liability in respect
thereof as determined by such person in good faith.
“Initial Advance” means the Fixed Advance and/or Variable Advance made on the
Initial Closing Date in the aggregate amount of $197,735,000.

 

Appendix I-14

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“Initial Borrower” means each Borrower under this Agreement as of the Initial
Closing Date.
“Initial Closing Date” means the date of the Agreement.
“Initial Commitment Amount” means $222,411,000.
“Initial Due Diligence Deposit” shall have the meaning set forth in Section
10.04(a).
“Initial Due Diligence Fees” shall have the meaning set forth in Section
10.04(a).
“Initial Mortgaged Properties” means the Dedicated Student Housing Properties
described on Exhibit A to the Agreement and which represent the Dedicated
Student Housing Properties which are made part of the Collateral Pool on the
Initial Closing Date.
“Initial Origination Fee” shall have the meaning set forth in Section 10.03(a).
“Initial Security Instruments” means the Security Instruments covering the
Initial Mortgaged Properties.
“Initial Valuation” means, when used with reference to specified Collateral, the
Valuation initially performed for the Collateral as of the date on which the
Collateral was added to the Collateral Pool. The Initial Valuation for each of
the Initial Mortgaged Properties is as set forth in Exhibit A to the Agreement.
“Interest Rate Cap” shall have the meaning set forth in Section 1.12.
“Interest Rate Cap Documents” means the Pledge, Interest Rate Cap Agreement and
any and all other documents required pursuant thereto or hereto or as Lender
shall require from time to time in connection with Borrower’s obligation to
maintain an Interest Rate Cap for the term of the Variable Facility Commitment.
“Insurance Policy” means, with respect to a Mortgaged Property, the insurance
coverage and insurance certificates evidencing such insurance required to be
maintained pursuant to the Security Instrument encumbering the Mortgaged
Property.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.
Each reference to the Internal Revenue Code shall be deemed to include (a) any
successor internal revenue law and (b) the applicable regulations whether final,
temporary or proposed.
“Lease” means any lease, any sublease or subsublease, license, concession or
other agreement (whether written or oral and whether now or hereafter in effect)
pursuant to which any Person is granted a possessory interest in, or right to
use or occupy all or any portion of any space in any Mortgaged Property, and
every modification, amendment or other agreement relating to such lease,
sublease, subsublease or other agreement entered into in connection with such
lease, sublease, subsublease or other agreement, and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.

 

Appendix I-15

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“Lender” means Red Mortgage Capital, Inc., an Ohio corporation and any
replacement Lender designated by Fannie Mae, and its successors and assigns.
“Letter of Credit” means a letter of credit issued by an LOC Bank satisfactory
to Fannie Mae naming Fannie Mae as beneficiary, in form and substance as
attached hereto as Exhibit V.
“LIBOR” means the London interbank offered rate for one-month, three-month,
six-month, or nine-month (as applicable) U.S. Dollar deposits, as such rate is
reported in the Wall Street Journal. In the event that a rate is not published
for one-month, three-month, six-month, or nine-month (as applicable) LIBOR, then
the nearest equivalent duration London interbank offered rate for U.S. Dollar
deposits shall be selected at Lender’s reasonable discretion. If the publication
of LIBOR is discontinued, Lender shall determine such rate from another
equivalent source selected by Lender in its reasonable discretion.
“Lien” means any mortgage, deed of trust, deed to secure debt, security interest
or other lien or encumbrance (including both consensual and non-consensual liens
and encumbrances).
“Liquidity” means, at any time, the amount of cash and Cash Equivalents owned by
a Person.
“Loan Document Taxes” shall have the meaning set forth in Section 8.10.
“Loan Documents” means the Agreement, the Notes, the Security Documents, the
Guaranty, all documents executed by Borrower or Guarantor pursuant to the
General Conditions set forth in Section 6.01 of the Agreement and any other
documents executed by Borrower or Guarantor from time to time in connection with
the Agreement or the transactions contemplated by the Agreement.
“Loan to Value Ratio” means, for a Mortgaged Property, for any specified date,
the ratio (expressed as a percentage) of —
(a) the Allocable Facility Amount of the subject Mortgaged Property on the
specified date,
to
(b) the Valuation most recently obtained prior to the specified date for the
subject Mortgaged Property.
“LOC Bank” means any financial institution issuing the Letter of Credit and
meeting the requirements set forth in Section 6.15(a).

 

Appendix I-16

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“Margin” means the spread over One-Month LIBOR or Three-Month LIBOR (as
applicable) as determined by Lender.
“Material Adverse Effect” means, with respect to any circumstance, act,
condition or event of whatever nature (including any adverse determination in
any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, or circumstance or circumstances, whether or not
related, a material adverse change in or a materially adverse effect upon any of
(a) the business, operations, property or condition (financial or otherwise) of
Borrower or Guarantor, as applicable, to the extent specifically referred to in
the applicable provision of the applicable Loan Document, (b) the present or
future ability of Borrower to perform the Obligations for which it is liable, or
of Guarantor to perform its obligations under the Guaranty, as the case may be,
to the extent specifically referred to in the applicable provision of the
applicable Loan Document, (c) the validity, priority, perfection or
enforceability of the Agreement or any other Loan Document or the rights or
remedies of Lender under any Loan Document, or (d) the value of, or Lender’s
ability to have recourse against, any Mortgaged Property.
“Maximum Annual Coupon Rate” shall have the meaning set forth in Section
2.01(b).
“Monthly Cap Escrow Payment” shall have the same meaning as the term “Monthly
Deposit” in the Pledge, Interest Rate Cap Agreement.
“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.
“Mortgaged Properties” means, collectively, the Additional Mortgaged Properties,
the Substitute Mortgaged Properties, and the Initial Mortgaged Properties, but
excluding each Release Mortgaged Property from and after the date of its release
from the Collateral Pool.
“Multiemployer Plan” has the meaning set forth in Section 4001(a)(3) of ERISA.
“Multifamily Residential Property” means a residential property, located in the
United States, containing five or more dwelling units in which not more than
twenty percent (20%) of the net rentable area is or will be rented to
non-residential tenants, and conforming to Fannie Mae’s then current guidelines.
“Net Operating Income” means, for any specified period, with respect to any
Mortgaged Property, the aggregate net income during such period equal to Gross
Revenues during such period less the aggregate Operating Expenses during such
period. If a Mortgaged Property is not owned by a Borrower or an Affiliate of a
Borrower for the entire specified period, the Net Operating Income for the
Mortgaged Property for the time within the specified period during which the
Mortgaged Property was owned by a Borrower or an Affiliate of a Borrower shall
be the Mortgaged Property’s pro forma net operating income determined by Lender
in accordance with the underwriting procedures set forth by Lender for similar
loans anticipated to be sold to Fannie Mae.

 

Appendix I-17

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“Net Worth” means, as of any specified date, for any Person, the excess of the
Person’s assets over the Person’s liabilities, determined in accordance with
GAAP on a consolidated basis, provided that all real property shall be valued on
an undepreciated basis.
“Non-Dedicated Student Housing Property” means a residential property, located
in the United States, containing five or more dwelling units in which not more
than twenty percent (20%) of the net rentable area is or will be rented to
non-residential tenants, and conforming to Fannie Mae’s then current guidelines,
provided that more than twenty percent (20%) and less than eighty percent (80%)
of the dwelling units are leased to undergraduate and or graduate students.
“Note” means any Fixed Facility Note and/or any Variable Facility Note.
“Obligations” means the aggregate of the obligations of Borrower and Guarantor
under the Agreement and the other Loan Documents.
“Occupancy Deficiency Origination Fee” means fifty (50) basis points (.5%)
multiplied by the Allocated Facility Amount for the Deficient Mortgaged
Properties on the Initial Closing Date or for such Deficient Mortgaged
Properties as Lender shall determine pursuant to Section 10.02(b).
“One-Month LIBOR” means the London interbank offered rate for One-Month U.S.
Dollar deposits, as such rate is reported in the Wall Street Journal. In the
event that a rate is not published for One-Month LIBOR, then the nearest
equivalent duration London interbank offered rate for U.S. Dollar deposits shall
be selected at Lender’s reasonable discretion. If the publication of One-Month
LIBOR is discontinued, Lender shall determine such rate from another equivalent
source selected by Lender in its reasonable discretion.
“Operating Expenses” means, for any period, with respect to any Mortgaged
Property, all expenses in respect of such Mortgaged Property, as determined by
Lender based on the certified operating statement for such specified period as
adjusted to provide for the following: (i) all appropriate types of expenses,
including a management fee, deposits for the replacement reserves (whether
funded or not), and deposits for completion/repair reserves are included in the
total operating expense figure; (ii) upward adjustments to individual line item
expenses to reflect market norms or actual costs and correct any unusually low
expense items, which could not be replicated by a different owner or manager
(e.g., a market rate management fee will be included regardless of whether or
not a management fee is charged, market rate payroll will be included regardless
of whether shared payroll provides for economies, etc.); and (iii) downward
adjustments to individual line item expenses to reflect unique or aberrant costs
(e.g., non-recurring capital costs, non-operating borrower expenses, etc.).

 

Appendix I-18

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“Organizational Certificate” means, collectively, certificates from Borrower and
Guarantor to Lender, in the form of Exhibits G-1 and G-2 to the Agreement,
certifying as to certain organizational matters with respect to each Borrower
and Guarantor.
“Organizational Documents” means all certificates, instruments and other
documents pursuant to which an organization is organized or operates, including
but not limited to, (i) with respect to a corporation, its articles of
incorporation and bylaws, (ii) with respect to a limited partnership, its
limited partnership certificate and partnership agreement, (iii) with respect to
a general partnership or joint venture, its partnership or joint venture
agreement and (iv) with respect to a limited liability company, its articles of
organization and operating agreement.
“Outstanding” or “outstanding” means, when used in connection with promissory
notes, other debt instruments or Advances, for a specified date, promissory
notes or other debt instruments which have been issued, or Advances which have
been made, to the extent not repaid in full as of the specified date.
“Ownership Interests” means, with respect to any entity, any ownership interests
in the entity and any economic rights (such as a right to distributions, net
cash flow or net income) to which the owner of such ownership interests is
entitled.
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
“Permits” means all permits, or similar licenses or approvals issued and/or
required by an applicable Governmental Authority or any Applicable Law in
connection with the ownership, use, occupancy, leasing, management, operation,
repair, maintenance or rehabilitation of any Mortgaged Property or any
Borrower’s business.
“Permitted Liens” means, with respect to a Mortgaged Property, (i) the
exceptions to title to the Mortgaged Property set forth in the Title Insurance
Policy for the Mortgaged Property which are approved by Lender (ii) residential
Leases for student housing, (iii) the Security Instrument encumbering the
Mortgaged Property, (iv) any other Liens approved by Lender, (v) mechanics liens
provided the same is removed or bonded within thirty (30) days of notice of
filing, and (vi) real estate taxes and water and sewer and other utility charges
that are a lien but not yet due and payable.
“Person” means an individual, an estate, a trust, a corporation, a partnership,
a limited liability company or any other organization or entity (whether
governmental or private).
“Plan” means at any time an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Internal Revenue Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
agreement under which more than one employer makes contributions and to which a
member of the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five (5) plan years made
contributions.

 

Appendix I-19

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“Pledge, Interest Rate Cap Agreement” means that certain Pledge, Interest Rate
Cap Reserve and Security Agreement executed by the Borrowers as of the date
hereof, as the same may be amended, restated, modified or supplemented from time
to time.
“Potential Event of Default” means any event that, with the giving of notice or
the passage of time, or both, would constitute an Event of Default.
“Price” means, with respect to an Advance, the proceeds of the sale of the DMBS
backed by the Advance.
“Prohibited Person” means (i) a Person that is the subject of, whether voluntary
or involuntary, any case, proceeding or other action against such Person under
any existing or future law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors, or (ii) any Person with whom
Lender or Fannie Mae is prohibited from doing business pursuant to any law,
rule, regulation, judicial proceeding or administrative directive, or (iii) any
Person identified on the federal “Excluded Parties List System,” the federal
“Office of Foreign Assets and Control list, the U.S. Department of Housing and
Urban Development’s Limited Denial of Participation, HUD Funding
Disqualifications and Voluntary Abstentions List,” or on the Lender’s and/or
Fannie Mae’s “Multifamily Applicant Experience Check,” each of which may be
amended from time to time and any successor or replacement thereof, or (iv) a
Person that is determined by Fannie Mae or Lender to have an unacceptable level
of outstanding debt to Fannie Mae, or (v) a Person that has caused any
unsatisfactory experience of a material nature with Fannie Mae or Lender, such
as a default, fraud, intentional misrepresentation, litigation, arbitration or
other similar act, or (vi) a Person that is, or whose senior management is, the
subject of any pending criminal indictment or criminal investigation relating to
an alleged felony or has ever been convicted of a felony or held liable for
fraud in a civil or criminal action or (vii) a Person that does not meet the
requirements of Section 57 of the Master Certificate of Borrower Parties.
“Property” means any estate or interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
“Rate Change Date”, in connection with a particular Advance, has the meaning set
forth in the applicable Note.
“Rate Form” means the completed and executed document from Borrower to Lender
pursuant to Section 2.01(b), substantially in the form of Exhibit J to the
Agreement, specifying the terms and conditions of the DMBS to be issued for the
requested Advance.
“Rate Setting Date” shall have the meaning set forth in Section 2.01(b).

 

Appendix I-20

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“Real Estate Tax Letter of Credit” means a letter of credit issued by an LOC
Bank satisfactory to Fannie Mae naming Fannie Mae as beneficiary, in form and
substance as attached hereto as Exhibit V as described in Section 13.01 of this
Agreement.
“REIT Guarantor” shall mean Education Realty Trust, Inc.
“Release Documents” mean instruments releasing the applicable Security
Instrument as a Lien on a Mortgaged Property, and UCC-3 Termination Statements
terminating the UCC-1 Financing Statements, and such other documents and
instruments to evidence the release of such Mortgaged Property from the
Collateral Pool.
“Release Fee” means with respect to any Release effected in accordance with
Section 3.04(c), a fee in the amount of $10,000 per Release Mortgaged Property.
“Release Mortgaged Property” means the Mortgaged Property to be released
pursuant to Article 3.
“Release Price” shall have the meaning set forth in Section 3.04(c).
“Release Request” means a written request, substantially in the form of Exhibit
M to the Agreement, to obtain a release of Collateral from the Collateral Pool
pursuant to Section 3.04(a).
“Remaining Mortgaged Properties” shall have the meaning set forth in Section
6.05(g).
“Rent Roll” means, with respect to any Rental Property, a rent roll prepared and
certified by the owner of the Rental Property, on Fannie Mae Form 4243 or on
another form approved by Lender and containing substantially the same
information as Form 4243 requires, it being acknowledged that the forms attached
hereto as Exhibit X are satisfactory to Lender.
“Rental Property” means a Dedicated Student Housing Property, Non-Dedicated
Student Housing Property and/or a Multifamily Residential Property, as
applicable.
“Replacement Reserve Agreement” means a Master Replacement Reserve and Security
Agreement required by Lender, and satisfying Lender’s requirements, as the same
may be amended, modified or supplemented from time to time.
“Request” means an Advance Request, an Addition Request, an Expansion Request, a
Release Request, a Substitution Request, a Conversion Request, a Credit Facility
Termination Request, or a Facility Termination Request.
“Required Escrow Payments” has the meaning given that term in Section 13.01(a)
of this Agreement.
“Rescinded Payment” has the meaning given that term in Section 14.10 of this
Agreement.

 

Appendix I-21

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“Rollover Variable Advance” means a Variable Advance made solely to refinance an
existing Variable Advance on the maturity date of such outstanding DMBS.
“S&P” shall mean Standard & Poor’s Credit Markets Services, a division of The
McGraw-Hill Companies, Inc., a New York corporation, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.
“Security” means a “security” as set forth in Section 2(1) of the Securities Act
of 1933, as amended.
“Security Documents” means the Security Instruments, the Replacement Reserve
Agreement, the Completion/Repair and Security Agreement and any other documents
executed by Borrower from time to time to secure any of Borrower’s obligations
under the Loan Documents.
“Security Instrument” means, for each Mortgaged Property, a Multifamily
Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of Leases and Rents
and Security Agreement given by a Borrower to or for the benefit of Lender to
secure the obligations of Borrower under the Loan Documents. With respect to
each Mortgaged Property owned by a Borrower, the Security Instrument shall be
substantially in the form published by Fannie Mae for use in the state in which
the Mortgaged Property is located. The amount secured by the Security Instrument
shall be equal to the Commitment in effect from time to time.
“Senior Management” means Paul O. Bower, Randall H. Brown, Thomas J. Hickey and
Craig L. Cardwell or any Person who replaces such individuals.
“Servicer” means a multifamily seller and servicer approved by Fannie Mae, which
initially shall be Red Mortgage Capital, Inc., an Ohio corporation, and any
permitted successor or assign.
“Single-Purpose” means, with respect to a Person that is any form of partnership
or corporation or limited liability company, that such Person at all times since
its formation:

  (i)  
has been a duly formed and existing partnership, corporation or limited
liability company, as the case may be;

  (ii)  
has been duly qualified in each jurisdiction in which such qualification was at
such time necessary for the conduct of its business;

  (iii)  
has complied with the provisions of its organizational documents and the laws of
its jurisdiction of formation in all respects;

  (iv)  
has observed all customary formalities regarding its partnership or corporate
existence, as the case may be;

 

Appendix I-22

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  (v)  
has accurately maintained its financial statements, accounting records and other
partnership or corporate documents separate from those of any other Person;
    (vi)  
has not commingled its assets or funds with those of any other Person;

  (vii)  
has identified itself in all dealings with creditors (other than trade creditors
in the ordinary course of business and creditors for the construction of
improvements to property on which such Person has a non-contingent contract to
purchase such property) under its own name and as a separate and distinct
entity;

  (viii)  
has been adequately capitalized in light of its contemplated business
operations;

  (ix)  
has not assumed, guaranteed or become obligated for the liabilities of any other
Person (except in connection with the Credit Facility or the endorsement of
negotiable instruments in the ordinary course of business) or held out its
credit as being available to satisfy the obligations of any other Person;

  (x)  
has not acquired obligations or securities of any other Person;

  (xi)  
in relation to a Borrower, except for loans made in the ordinary course of
business to Affiliates, has not made loans or advances to any other Person;

  (xii)  
has not entered into and was not a party to any transaction with any Affiliate
of such Person, except in the ordinary course of business and on terms which are
no less favorable to such Person than would be obtained in a comparable
arm’s-length transaction with an unrelated third party;

  (xiii)  
has paid the salaries of its own employees, if any, and maintained a sufficient
number of employees in light of its contemplated business operations;

  (xiv)  
has allocated fairly and reasonably any overhead for shared office space;

  (xv)  
has not engaged in a non-exempt prohibited transaction described in Section 406
of ERISA or Section 4975 of the Internal Revenue Code; and

  (xvi)  
has complied with the requirements of Section 33 of the Security Instrument.

“Sixth Anniversary” means the date that is six (6) years from the Initial
Closing Date.
“Substitution” shall have the meaning set forth in Section 3.05(a).
“Substitution Fee” means with respect to any Substitution effected in accordance
with Section 3.05, a fee which is the sum of the Addition Fee and the Release
Fee.
“Substitution Request” means the written request to add a Substitute Mortgaged
Property to the Collateral Pool pursuant to Section 3.05, Section 3.06 and
Section 3.07.

 

Appendix I-23

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“Survey” means the as-built survey of each Mortgaged Property prepared in
accordance with Lender’s requirements for similar loans that are anticipated to
be sold to Fannie Mae.
“Targeted Entity” means individually and collectively, Borrower and/or any
direct or indirect owner of Borrower, including Guarantor.
“Taxes” means all taxes, assessments, vault rentals and other charges, if any,
general, special or otherwise, including all assessments for schools, public
betterments and general or local improvements, which are levied, assessed or
imposed by any public authority or quasi-public authority, and which, if not
paid, will become a lien, on the Mortgaged Properties.
“Term of this Agreement” shall be determined as provided in Section 15.10.
“Termination Date” means, at any time during which Fixed Advances are
Outstanding, the latest maturity date for any Fixed Advance Outstanding, and, at
any time during which Fixed Advances are not Outstanding, the Variable Facility
Termination Date.
“Third Anniversary” means the date that is three (3) years from the Initial
Closing Date.
“Three-Month LIBOR” means the London interbank offered rate for three-month U.S.
dollar deposits, as such rate is reported in The Wall Street Journal. In the
event that a rate is not published for Three-Month LIBOR, then the nearest
equivalent duration London interbank offered rate for U.S. Dollar deposits shall
be selected at Lender’s reasonable discretion. If the publication of Three-Month
LIBOR is discontinued, Lender shall determine such rate from another equivalent
source selected by Lender in its reasonable discretion.
“Title Company” means First American Title Insurance Company.
“Title Insurance Policies” means the mortgagee’s policies of title insurance
issued by the Title Company from time to time relating to each of the Security
Instruments, conforming to Lender’s requirements for similar loans anticipated
to be sold to Fannie Mae, together with such endorsements, coinsurance,
reinsurance and direct access agreements with respect to such policies as Lender
may, from time to time, consider necessary or appropriate, including variable
credit endorsements, if available, and tie-in endorsements, if available, and
with a limit of liability under the policy (subject to the limitations contained
in sections of the Stipulations and Conditions of the policy relating to a
Determination and Extent of Liability) equal to the Commitment.

 

Appendix I-24

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“Transfer” means
(1) as used with respect to ownership interests in a Targeted Entity (i) a sale,
assignment, pledge, transfer or other disposition of any ownership interest in a
Targeted Entity, or (ii) the issuance or other creation of new ownership
interests in a Targeted Entity or (iii) a merger or consolidation of Targeted
Entity into another entity or of another entity into Targeted Entity, as the
case may be or (iv) the reconstitution of Targeted Entity from one type of
entity to another type of entity, or (v) the amendment, modification or any
other change in the governing instrument or instruments of Targeted Entity which
has the effect of changing the relative powers, rights, privileges, voting
rights or economic interests of the ownership interests in such Targeted Entity.
(2) as used with respect to ownership interests in a Mortgaged Property, (i) a
sale, assignment, lease, pledge, transfer or other disposition (whether
voluntary or by operation of law) of, or the granting or creating of a lien
(other than a Permitted Lien), encumbrance or security interest in, any estate,
rights, title or interest in a Mortgaged Property, or any portion thereof.
Transfer does not include a conveyance of a Mortgaged Property at a judicial or
non-judicial foreclosure sale under any security instrument or the Mortgaged
Property becoming part of a bankruptcy estate by operation of law under the
Bankruptcy Code.
“Underwriting Requirements” means Lender’s overall underwriting requirements for
Dedicated Student Housing Properties in connection with loans anticipated to be
sold to Fannie Mae, pursuant to Fannie Mae’s then current guidelines, including,
without limitation, requirements relating to Appraisals, physical needs
assessments, and environmental site assessments, as such requirements may be
amended, modified, updated, superseded, supplemented or replaced from time to
time.
“Valuation” means, for any specified date, with respect to a Rental Property,
(a) if an Appraisal of the Rental Property was more recently obtained than a Cap
Rate for the Rental Property, the Appraised Value of such Rental Property, or
(b) if a Cap Rate for the Rental Property was more recently obtained than an
Appraisal of the Rental Property, the value derived by dividing —

  (i)  
the Net Operating Income of such Rental Property, by
    (ii)  
the most recent Cap Rate determined by Lender.

Notwithstanding the foregoing, any Valuation for a Rental Property calculated
for a date occurring before the first anniversary of the date on which the
Rental Property becomes a part of the Collateral Pool shall equal the Appraised
Value of such Rental Property, unless Lender determines that changed market or
property conditions warrant that the value be determined as set forth in the
preceding sentence.
“Variable Advance” means any Variable DMBS Advance and any Variable Structured
ARM Advance.
“Variable DMBS Advance” means a loan made by Lender to Borrower under the
Variable Facility Commitment which is a DMBS execution.
“Variable Facility” means the agreement of Lender to make Variable Advances to
Borrower pursuant to Section 1.01.

 

Appendix I-25

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“Variable Facility Availability Period” means the period beginning on the
Initial Closing Date and ending on the date one (1) year after the Initial
Closing Date.
“Variable Facility Commitment” means an aggregate amount of $74,550,000 which
shall be evidenced by the Variable Facility Notes, plus such amount as is added
to the Variable Facility Commitment in accordance with Article 4, less such
amount as is converted from the Variable Facility Commitment to the Fixed
Facility Commitment in accordance with Section 1.08, and less such amount by
which the Variable Facility Commitment is reduced in accordance with Article 5.
“Variable Facility Fee” means for any Variable Advance drawn from any portion of
the Variable Facility Commitment increased pursuant to Article 4 at any time
during the Term of this Agreement, the number of basis points per annum
determined at the time of such Variable Advance by Lender as the Variable
Facility Fee for such Variable Advance.
“Variable Facility Note” means the promissory notes (together with all
schedules, riders, allonges, addenda, renewals, extensions, amendments and
modifications thereto), which have been issued by Borrower to Lender to evidence
Borrower’s obligation to repay Variable Advances, and with respect to a Variable
Structured ARM Advance, the promissory note will be the same or substantially
similar in form to the promissory note issued by Borrower to Lender in
connection with the Variable Structured ARM Advance made on the Initial Closing
Date and with respect to a Variable DMBS Advance, the promissory note will be in
the then current form of promissory note utilized by Fannie Mae for loans with a
DMBS execution.
“Variable Facility Termination Date” means the earlier of (i) the date specified
in a Facility Termination Request, delivered by Borrower pursuant to
Section 5.02 of this Agreement for a Complete Variable Facility Termination or
(ii) December 31, 2023.
“Variable Structured ARM Advance” means a loan made by lender to Borrower under
the Variable Facility Commitment which is a cash execution.
“Wind Down Notice” shall have the meaning set forth in Section 6.01(a).

 

Appendix I-26