EXHIBIT 10.38

MASTER CREDIT FACILITY AGREEMENT

THIS MASTER CREDIT FACILITY AGREEMENT (this “Agreement”) is made as of the 2nd
day of March, 2004 by and among (i) Mid-America Apartments, L.P., a Tennessee
limited partnership, Mid-America Apartment Communities, Inc., a Tennessee
corporation and Mid-America Apartments of Texas, L.P., a Texas limited
partnership (individually and collectively, “Borrower”), and (ii) Prudential
Multifamily Mortgage, Inc., a Delaware corporation (“Lender”).

RECITALS

A.           Borrower owns one or more Multifamily Residential 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 make a $11,720,000 loan in favor
of Borrower.

C.           To secure the obligations of Borrower under this Agreement and the
other Loan Documents issued in connection with the Initial Loan, Borrower shall
create a Collateral Pool in favor of Lender. The Collateral Pool shall be
comprised of (i) second or third priority Security Instruments on the
Multifamily Residential Properties listed on Exhibit A and (ii) any other
Security Documents executed by Borrower pursuant to this Agreement or any other
Loan Documents.

D.           Each Security Document shall be cross-defaulted (i.e., a default
under any Security Document, or under this Agreement, shall constitute a default
under each other Security Document, and this Agreement) and cross-collateralized
(i.e., each Security Instrument 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, 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 the Note in connection with such exercise and
any such amount shall be applied as determined by Lender in its sole and
absolute discretion.

E.            Subject to the terms, conditions and limitations of this
Agreement, Lender has agreed to make the Initial Loan to Borrower.

NOW, THEREFORE, Borrower and Lender, in consideration of the mutual promises and
agreements contained in this Agreement, hereby agree as follows:

 

 

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ARTICLE I

THE LOANS

 

SECTION 1.01 The Loans. Subject to the terms, conditions and limitations of this
Agreement, Lender agrees to make a Loan (“Initial Loan”) to the Borrower in an
amount not exceeding $11,720,000 on the Initial Closing Date. After the Initial
Closing Date, Lender may agree, in its sole discretion from time to time, to
make one or more additional Loans to the Borrower subject to such terms and
conditions as Lender may require in its sole discretion. The Initial Loan and
any such additional Loan (a “Future Loan”) shall be evidenced by the Note.

 

Section 1.02 Loan Periods. The term of each Loan shall be divided into periods
as follows:

 

(a)         Partial Month Period. If the Closing Date of a Loan is not the first
day of a calendar month, the period from the Closing Date to the end of that
calendar month is the “Partial Month Period.” For example, if the Loan is made
on August 16, the end of the Partial Month Period is August 31.

 

(b)          Discount Periods. After the Partial Month Period (if any) or if the
Closing Date of a Loan is the first day of a calendar month, the remainder of
the term of the Loan shall be divided into Discount Periods. A “Discount Period”
shall mean the period beginning on the first day of a calendar month and ending
on the first day of the calendar month three months later. The first Discount
Period after a Partial Month Period shall begin on the first day of the calendar
month after the month in which the Closing Date occurs. Any other Discount
Period shall begin on the last day of the prior Discount Period (which shall be
the first day of a calendar month). The Lender agrees that the Borrower may
request a Discount Period of one or two calendar months duration for a timing
purpose to accommodate the sale of a Multifamily Residential Property financed
by the related Loan or some other similar timing purpose. In no event shall any
Discount Period begin or end after the Termination Date. To continue the example
set out in (a), the beginning of the first Discount Period is September 1 and
the last day of that Discount Period is December 1. The beginning of the next
Discount Period after that is December 1 and the last day of that Discount
Period is March 1 of the following year.

 

Section 1.03 Discount Mortgage Backed Security. Each Loan will be funded during
a Discount Period by the issuance of a discount mortgage backed security
(“DMBS”). The principal amount of the Loan shall be equal to the sum of (i) the
price (“Price”) of the DMBS for the Discount Period and (ii) the discount
(“Discount”) of the DMBS for the Discount Period. The Price is equal to the
proceeds of the sale of the DMBS and the Discount is an amount equal to the
difference between (i) the face amount of the DMBS and (ii) the Price of the
DMBS. The proceeds of the Loan made available by Lender to Borrower on the first
day of the Loan shall equal the Price of the initial DMBS issued for the first
Discount Period. Each DMBS shall be issued for a term of three months. The
issuance date (“MBS Issue Date”) for each DMBS shall be the first day of a
calendar month and the maturity date for each DMBS shall be the first day of the
calendar month after such three month term. For example, the maturity date for a
DMBS issued on December 1 is March 1.

 

 

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SECTION 1.04 Interest, Discount and Fees on Loans.  

 

(a)         Partial Month Period Interest. If the Loan has a Partial Month
Period, Borrower shall pay interest on the principal amount of the Loan for the
Partial Month Period 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 in advance, in writing, by
Borrower, pursuant to the procedures mutually agreed upon by Borrower and
Lender.

 

(b)        Discount. Each Loan shall be treated as a discount loan for each
Discount Period. Borrower shall pay to Lender, in advance of the Discount
Period, the entire Discount for the Loan for the upcoming Discount Period. If,
for a Loan, the amount of the Discount for the DMBS for the following Discount
Period is greater than the Discount for the DMBS for the current Discount
Period, then, not less than two Business Days prior to the end of the current
Discount Period, the Borrower shall pay to Lender the aggregate amount of such
difference. If the amount of the Discount for the new DMBS is less than the
Discount for the outstanding DMBS, the aggregate amount of such difference shall
be credited against the regular monthly payment due on the first day of the
following Discount Period.

 

(c)          Loan Fee. Borrower shall also pay monthly installments of the Loan
Fee to Lender for each Loan for each Discount Period. The Loan Fee shall be
payable in advance, in accordance with the terms of the Note. The first
installment shall be payable on or prior to the Closing Date for the Loan and
shall apply to the first full calendar month of the first Discount Period
beginning with or first occurring after the Closing Date. 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 the first
Discount Period until the Loan is paid in full. Each installment of the Loan Fee
shall be in an amount equal to the product of (1) the Loan Fee, (2) the Price of
the Loan during such Discount Period, and (3) 1/12.

 

SECTION 1.05 Coupon Rates for a Loan. The Coupon Rate for a Loan shall equal the
sum of (1) an interest rate as determined by Lender (rounded to three places)
payable for the DMBS pursuant to the DMBS Commitment (“DMBS Imputed Interest
Rate”)and (2) the Loan Fee.

 

SECTION 1.06 Maturity of Loan. The entire unpaid principal of a Loan will be due
and payable by the Borrower on the first to occur of:

 

(a)          the last day of a Discount Period unless, not less than five
Business Days prior to the maturity date of the outstanding DMBS funding for
that Loan for that Discount Period, the Borrower has requested in writing that
the outstanding DMBS be renewed with a new DMBS by sending the Lender a
completed and executed Rate Form in accordance with Section 1.07;

 

 

(b)

the Termination Date; and

 

 

(c)

the maturity date for a Loan established in the Note.

 

SECTION 1.07 Rate Setting for a Loan for a Discount Period.

 

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(a)          The Borrower may request Lender to renew a DMBS for an additional
Discount Period after the then current Discount Period by sending a completed
and executed Rate Form to Lender not less than five Business Days prior to the
end of the current Discount Period.

 

(b)          If the Borrower has requested that an outstanding DMBS be renewed
with a new DMBS, then not less than four Business Days prior to the end of the
current Discount Period, Lender shall notify Borrower of the Discount on the new
DMBS to be issued on such maturity date by sending Borrower a form confirming
the terms and conditions of the new DMBS (the “Rate Confirmation Form”).
Borrower shall execute and return the Rate Confirmation Form to Lender not later
than three Business Days prior to the end of the current Discount Period. The
Lender’s failure to send the Rate Confirmation Form shall not affect in any way
the obligation of the Borrower to repay the Loan in accordance with this
Agreement, the Note and the other Loan Documents.

 

SECTION 1.08 Breakage and other Costs. If Lender obtains, and then fails to
fulfill, a commitment by an investor to purchase the DMBS for the next Discount
Period (“DMBS Commitment”) because the DMBS is not renewed (for a reason other
than Lender’s default), the 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. The Lender reserves the right to require the Borrower to post a
deposit at the time the DMBS Commitment is obtained. Such deposit shall be
refundable to the Borrower upon the delivery of the related DMBS.

 

ARTICLE II

ALLOCABLE FACILITY AMOUNT AND VALUATIONS

 

SECTION 2.01 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 Mortgaged
Property and (ii) the Aggregate Debt Service Coverage Ratio and the Aggregate
Loan to Value Ratio. The initial determinations made pursuant to this subsection
shall remain in effect until the first anniversary of the Initial Closing Date.

 

(b)          Periodic Determinations. From and after the first anniversary of
the Initial Closing Date, Lender shall make the following determinations:

 

(1)          Once each Calendar Quarter, within 20 Business Days after Borrower
has delivered to Lender the reports required in Section 2.2(4) of the Master
Reimbursement Agreement, Lender shall determine the Aggregate Debt Service
Coverage Ratio and the Aggregate Loan to Value Ratio.

 

(2)          If Lender reasonably decides that changed market or property
conditions warrant, Lender shall determine Allocable Facility Amounts and
Valuations.

 

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(3)          Lender shall also redetermine Allocable Facility Amounts to take
account of any addition, release or substitution of Collateral or other event
which invalidates the outstanding determinations.

 

In determining Valuations, Lender shall use Cap Rates (as such term is defined
in the Master Reimbursement Agreement) 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 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.

 

ARTICLE III

COLLATERAL CHANGES/TERMINATION OF FACILITY

 

SECTION 3.01 Right to Obtain Releases of Collateral. Subject to the terms and
conditions of this Article, Borrower shall have the right to obtain a release of
Collateral from the Collateral Pool as follows:

 

(a)          Request. To obtain a release of Collateral from the Collateral
Pool, Borrower may deliver a Release Request to Lender; provided, however, that
no Mortgaged Property may be released from the Collateral Pool unless it is
simultaneously released from the “Collateral Pool” established under the Master
Reimbursement Agreement, and a Release Request with respect to any Mortgaged
Property shall not be effective unless it is delivered simultaneously and in
conjunction with a “Release Request” with respect to such Mortgaged Property
under the Master Reimbursement Agreement. All Loans Outstanding allocated by
Lender to a particular Mortgaged Property, including any associated premiums and
termination fees, must be paid in full on or prior to the date of redemption of
any Bonds issued to finance such Mortgaged Property.

 

(b)          Closing. If all conditions precedent to the release of the
Mortgaged Property contained in Section 4.04 and all General Conditions
contained in Section 4.01 are satisfied, Lender shall cause the Release Property
to be released, simultaneously with the release of the related Collateral
Release Property under the Master Reimbursement Agreement, 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 Mortgaged Property shall
be the “Release Price” for such Mortgaged Property under the Master
Reimbursement Agreement, and shall be calculated and applied as provided in
Section 6.2 of the Master Reimbursement Agreement.

 

 

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SECTION 3.02 Right to Terminate Agreement. Subject to the terms and conditions
of this Article, Borrower shall have the right to terminate this Agreement and
to repay the Loans as follows.

 

(a)          Request. To terminate this Agreement and to repay the Loans,
Borrower shall deliver a Termination Request to Lender.

 

(b)          Closing. If all conditions precedent contained in Section 4.05 are
satisfied, this Agreement shall terminate, and Lender shall cause all of the
Collateral to be released from the Collateral Pool, at a closing to be held at
offices designated by Lender on a Closing Date selected by Lender, within 30
Business Days after Lender’s receipt of the 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 Termination Documents.

 

ARTICLE IV

CONDITIONS PRECEDENT TO ALL REQUESTS

 

SECTION 4.01 Conditions Applicable to All Requests. The obligation of Lender to
close the transaction requested in a Request shall be subject to the following
general conditions precedent (“General Conditions”) in addition to any other
conditions precedent contained in this Agreement:

 

(a)          Payment of Expenses. The payment by Borrower of Lender’s and Fannie
Mae’s reasonable fees and expenses payable in accordance with this Agreement,
including, but not limited to, the legal fees and expenses contained in Section
7.03.

 

(b)          No Material Adverse Change. There has been no material adverse
change in the financial condition, business or prospects of Borrower 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 Loan, from the condition,
business or prospects reflected in the financial statements, reports and other
information obtained by Lender during its review of Borrower and the Mortgaged
Properties).

 

(c)          No Default. 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.

 

(d)          No Insolvency. Receipt by Lender on the Closing Date for the
Request of evidence satisfactory to Lender that Borrower is not 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, 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

 

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ability to pay such debts as they mature or will have intended to hinder, delay
or defraud any existing or future creditor.

 

(e)          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.

 

(f)           Representations and Warranties. All representations and warranties
made by Borrower 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.

 

(g)          No Condemnation or Casualty. There shall not be pending or
threatened any condemnation or other taking, whether direct or indirect, against
any Mortgaged Property and there shall not have occurred any casualty to any
improvements located on any Mortgaged Property, which casualty would have a
material adverse effect on the continued operations of such Mortgaged Property.

 

(h)          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)

A Compliance Certificate;

 

 

(ii)

An Organizational Certificate; and

 

(iii)         Such other documents, instruments, approvals (and, if requested by
Lender, certified duplicates of executed copies thereof) and opinions as Lender
may reasonably request.

 

(i)           Covenants. Borrower is in full compliance with each of the
covenants contained in Article VI of this Agreement, without giving effect to
any notice and cure rights of Borrower.

 

SECTION 4.02 Conditions Precedent to the Initial Loan. The obligation of Lender
to make the Initial Loan is subject to the following conditions precedent:

 

 

(a)

Receipt by Lender of the fully executed Loan Request;

 

(b)          Fully executed original copies of each Loan Document required
pursuant to Section 4.01 or 4.03 to be executed in connection with the Request,
duly executed and delivered by the parties thereto (other than Lender), each of
which shall be in full force and effect.

 

(c)          Favorable opinions of counsel 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.

 

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(d)          Receipt by Lender at least five (5) days prior to the Initial
Closing Date, of the confirmation of a Hedge commitment;

 

 

(e)

Receipt by Lender of Hedge Documents, effective as of the Initial Closing Date;

 

(f)           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 Note, the Security
Instruments covering the 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;

 

(g)          The receipt by Lender of the first installment of Loan Fee and the
entire Discount payable by Borrower pursuant to Section 1.04(c);

 

(h)          Receipt by Lender of the Origination Fee pursuant to Section 7.01
and the Due Diligence Fee pursuant to Section 7.02; and

 

 

(i)

Receipt by Borrower of the conventional Rate Confirmation Form.

 

SECTION 4.03 Delivery of Property-Related Documents. With respect to each of the
Mortgaged Properties, it shall be a condition precedent that Lender receive each
of the following, each dated as of the Closing Date for the Initial Loan in form
and substance satisfactory to Lender in all respects:

 

(a)          A favorable opinion of local counsel to Borrower or Lender as to
the enforceability of the Security Instrument, and any other Loan Documents,
executed in connection with the Request.

 

(b)          A commitment for the Title Insurance Policy applicable to the
Mortgaged Property and a pro forma Title Insurance Policy based on the Initial
Loan.

 

(c)          The Insurance Policy (or a certified copy of the Insurance Policy)
applicable to the Mortgaged Property.

 

 

(d)

The Survey applicable to the Mortgaged Property.

 

(e)          Evidence satisfactory to Lender of compliance of the Mortgaged
Property with property laws as required by Sections 205 and 206 of Part III of
the DUS Guide.

 

 

(f)

An Appraisal of the Mortgaged Property.

 

 

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(g)          A Replacement Reserve Agreement, 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.

 

(h)          A Completion/Repair and Security Agreement, together with required
escrows, on the standard form required by the DUS Guide.

 

(i)           An Assignment of Management Agreement, on the standard form
required by the DUS Guide.

 

(j)           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.

 

SECTION 4.04 Conditions Precedent to Release of Property from the Collateral
Pool. The obligation of Lender to release a Property from the Collateral Pool by
executing and delivering the Release Documents on the Closing Date, are subject
to the satisfaction of the following conditions precedent on or before the
Closing Date:

 

(a)          Satisfaction of the conditions precedent to the release of the
Property contained in Section 6.3 of the Master Reimbursement Agreement
(including without limitation, receipt by Lender of the Release Price);

 

(b)          Receipt by Lender on the Closing Date of one 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;

 

(c)          If required by Lender, amendments to the Note and the Security
Instruments, reflecting the release of the Release Property from the Collateral
Pool and, as to any Security Instrument so amended, the receipt by Lender of an
endorsement to the Title Insurance Policy insuring the Security Instrument,
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;

 

(d)          If Lender determines the Release Property to be one phase of a
project, and one 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 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 whether the
Remaining Mortgaged Properties comply with the terms of Sections 203 and 208 of
Part III of the DUS Guide;

 

 

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(e)          Receipt by Lender of endorsements to the tie-in endorsements of the
Title Insurance Policies, if deemed necessary by Lender, to reflect the release;
and

 

(f)           Receipt by Lender on the Closing Date of a Confirmation of
Obligations, dated as of the Closing Date, signed by Borrower, pursuant to which
Borrower confirms its obligations under the Loan Documents.

 

SECTION 4.05 Conditions Precedent to Termination of Agreement. The right of
Borrower to terminate this Agreement and repay the Loans and Lender’s obligation
to execute and deliver Release Documents for each of the Mortgaged Properties
(the “Termination Documents”) on the Closing Date are subject to the following
conditions precedent:

 

(a)          Payment by Borrower in full of all of the Loans Outstanding on the
Closing Date, including any associated prepayment premiums or other amounts due
under the Note and all other amounts owing by Borrower to Lender under this
Agreement; and

 

 

(b)

Receipt by Lender of the Termination Fee.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF LENDER

 

SECTION 5.01 Representations and Warranties of Lender. Lender hereby represents
and warrants to Borrower as follows:

(a)          Due Organization. Lender is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

(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 VI

REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER

SECTION 6.01. Representations and Warranties of Borrower. The Borrower hereby
makes for the benefit of Lender, at all times during the Term of this Agreement,
the representations and warranties set forth in this Section 6.01.

(a)          Due Organization and Qualification Each Borrower is a limited
partnership or corporation duly organized, validly existing and in good standing
under the laws of its state of organization and is duly qualified to do
business, and is in good standing, in each state in which it owns a Mortgaged
Property and in each other jurisdiction in which such qualification and/or
standing is necessary to the conduct of its business and where the failure to be
so qualified would

 

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adversely affect the validity of, the enforceability of, or the ability of the
Borrower to perform its obligations under, this Agreement and the other Loan
Documents. Each General Partner is a duly organized and validly existing
corporation duly qualified to do business in and in good standing under the laws
of the State of Tennessee or the State of Delaware, as applicable, and in each
other jurisdiction in which such qualification and/or standing is necessary to
the conduct of its business and where the failure to be so qualified would
adversely affect the validity, the enforceability, or the ability of any
Borrower to perform its obligations under this Agreement and the other Loan
Documents. The Borrower’s principal place of business, principal office and
office where they keep their books and records as to the Collateral is located
at the address set out in Section 14.08.

(b)         Power and Authority Each Borrower has the requisite power and
authority (i) to own its property and to carry on its business as now conducted
and as contemplated to be conducted in connection with the performance of the
Obligations hereunder and under the other Loan Documents and (ii) to execute and
deliver this Agreement and the other Loan Documents and to carry out the
transactions contemplated by this Agreement and the other Loan Documents.

(c)         Due Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents have been duly authorized by all
necessary action and proceedings by or on behalf of the Borrower, and no further
approvals or filings of any kind, including any approval of or filing with any
Governmental Authority, are required by or on behalf of the Borrower as a
condition to the valid execution, delivery and performance by the Borrower of
this Agreement or any of the other Loan Documents, except for such approvals and
filings by or with each Issuer (as defined in the Master Reimbursement
Agreement) in connection with the transactions to be effected by the Loan
Documents which have been obtained or made and which are in full force and
effect as of the date hereof.

(d)        Valid and Binding Obligations. This Agreement and the other Loan
Documents to which the Borrower is a party have been duly authorized, executed
and delivered by the Borrower and constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles affecting the enforcement of creditors’ rights generally or
by equitable principles or by the exercise of discretion by any court.

(e)         Non-contravention; No Liens. Neither the execution and delivery of
this Agreement and the other Loan Documents, nor the fulfillment of or
compliance with the terms and conditions of this Agreement and the other Loan
Documents nor the performance of the Obligations:

(i)         does or will conflict with or result in any breach or violation of
any Applicable Law enacted or issued by any Governmental Authority or other
agency having jurisdiction over the Borrower, any of the Mortgaged Properties or
any other portion of the Collateral or other assets of the Borrower, or any
judgment or order applicable to the Borrower or to which the Borrower, any of
the Mortgaged Properties or other assets of the Borrower are subject;

 

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(ii)        does or will conflict with or result in any material breach or
violation of, or constitute a default under, any of the terms, conditions or
provisions of the Borrower’s Organizational Documents, any indenture, existing
agreement or other instrument to which the Borrower is a party or to which the
Borrower, any of the Mortgaged Properties or any other portion of the Collateral
or other assets of the Borrower are subject;

(iii)       does or will result in or require the creation of any Lien on all or
any portion of the Collateral or any of the Mortgaged Properties, except for the
Permitted Liens; or

(iv)       does or will require the consent or approval of any creditor of the
Borrower, any Governmental Authority or any other Person except such consents or
approvals which have already been obtained.

(f)         Pending Litigation or Other Proceedings. There is no pending or, to
the best knowledge of the Borrower, threatened action, suit, proceeding or
investigation, at law or in equity, before any court, board, body or official of
any Governmental Authority or arbitrator against or affecting any Borrower, any
Mortgaged Property or any other portion of the Collateral or other assets of the
Borrower, which, if decided adversely to the Borrower, would have, or may
reasonably be expected to have, a Material Adverse Effect or would adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes. The Borrower is not in default with respect to any order of
any Governmental Authority.

(g)        Master Reimbursement Agreement. Each of the Borrower’s
representations and warranties related to the Mortgaged Properties contained in
the Master Reimbursement Agreement and the other Borrower Documents is true and
correct as of the date hereof.

(h)        Reliance. The Borrower acknowledges, represents and warrants that it
understands the nature and structure of the transactions contemplated by this
Agreement and the other Loan Documents (including, without limitation, the
cross-collateralization and cross-default of the Obligations), that it is
familiar with the provisions of all of the documents and instruments relating to
such transactions; that it understands the risks inherent in such transactions,
including the risk of loss of all or any of the Mortgaged Properties; and that
it has not relied on Lender for any guidance or expertise in analyzing the
financial or other consequences of the transactions contemplated by this
Agreement or any other Loan Document or otherwise relied on Lender in any manner
in connection with interpreting, entering into or otherwise in connection with
this Agreement, any other Loan Document or any of the matters contemplated
hereby or thereby.

(i)          Compliance with Applicable Laws. The Borrower is in compliance with
Applicable Law, including all Governmental Approvals, if any, except for such
items of noncompliance that, singly or in the aggregate, have not had and are
not reasonably expected to cause, a Material Adverse Effect.

 

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SECTION 6.02 Affirmative Covenants of the Borrower. Each Borrower enters into
the covenants and agreements with Lender set forth in this Section 6.02. Each
Borrower covenants and agrees that continuously during the Term of this
Agreement:

(a)          Compliance with the Loan Documents. The Borrower shall comply with
all the terms and conditions of the Loan Documents to which it is a party or by
which it is bound; provided, however, that the 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
Loan Document and shall use its best efforts to cause the Trustee at all times
to comply with the terms of the Bond Documents to which it is a party.

(b)          Maintenance of Existence. The Borrower shall maintain its existence
and continue to be a limited partnership or corporation, as the case may be,
organized under the laws of the state of its organization. The 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.

(c)          Compliance with Master Reimbursement Agreement. The Borrower shall
comply with each of its covenants with respect to the Mortgaged Properties made
in the Master Reimbursement Agreement.

(e)          Warranty of Title. The Borrower shall warrant and defend (a) the
title to each Mortgaged Property and every part of each Mortgaged Property,
subject only to Permitted Liens, and (b) the validity and priority of the lien
of the applicable Loan Documents, subject only to Permitted Liens, in each case
against the claims of all Persons whatsoever. The Borrower shall reimburse
Lender for any losses, costs, damages or expenses (including reasonable
attorneys’ fees and court costs) incurred by Lender if an interest in any
Mortgaged Property, other than with respect to a Permitted Lien, is claimed by
others.

(f) Defense of Actions. The Borrower shall appear in and defend any action or
proceeding purporting to affect the security for this Agreement or the rights or
powers of Lender hereunder or under the Loan Documents, and shall, pursuant to
Section 14.03 of this Agreement, pay all costs and expenses, including the cost
of evidence of title and reasonable attorneys’ fees, in any such action or
proceeding in which Lender may appear. If the Borrower fails to perform any of
the covenants or agreements contained in this Agreement or any Loan Document, or
if any action or proceeding is commenced that is not diligently defended by the
Borrower which affects in any material respect Lender’s interest in any
Mortgaged Property or any part thereof, including eminent domain, code
enforcement or proceedings of any nature whatsoever under any Applicable Law,
whether now existing or hereafter enacted or amended, then Lender may, but
without obligation to do so and without notice to or demand upon the Borrower
and without releasing the Borrower from any Obligation, make such appearances,
disburse such sums and take such action as Lender deems necessary or appropriate
to protect Lender’s interest, including disbursement of attorney’s fees, entry
upon such Mortgaged Property to make repairs or take other action to protect the
security of said Mortgaged Property, and payment, purchase, contest or
compromise of any encumbrance, charge or lien which in the judgment of Lender
appears to be prior or superior to the Loan Documents. In the event (i) that any
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foreclosed in whole or in part or that any Loan Document is put into the hands
of an attorney for collection, suit, action or foreclosure, or (ii) of the
foreclosure of any mortgage, deed to secure debt, deed of trust or other
security instrument prior to or subsequent to any Security Instrument or any
Loan Document in which proceeding Lender is made a party or (iii) of the
bankruptcy of the Borrower an assignment by the Borrower for the benefit of
their respective creditors, the Borrower shall be chargeable with and agrees to
pay all reasonable costs of collection and defense, including actual attorneys’
fees in connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.

(g)          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)) (“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,
the Borrower shall pay all such 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 Document Taxes to be levied, assessed or charged,
which law or regulation in the opinion of counsel to Lender may prohibit the
Borrower from paying the Document Taxes to or for Lender, the Borrower shall
enter into such further instruments as may be permitted by law to obligate the
Borrower to pay such Document Taxes.

(h)            Further Assurances. The 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 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.

SECTION 6.03 Negative Covenants of the Borrower. The Borrower will not take, or
omit to take, any action that, if taken or omitted would be a violation or
breach of its covenants set forth in the Master Reimbursement Agreement or the
other Borrower Documents.

 

ARTICLE VII

FEES AND EXPENSES

 

 

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SECTION 7.01 Origination Fees. Borrower shall pay to Lender an origination fee
(“Origination Fee”) equal to $87,900.00 (which is equal to the product obtained
by multiplying (i) the Initial Loan ($11,720,000), by (ii) .75%).

SECTION 7.02 Due Diligence Fees.

Borrower shall pay to Lender due diligence fees with respect to the Mortgaged
Properties in an amount not to exceed $16,000 per property.

Borrower has previously paid to Lender a portion of the Due Diligence Fees and
shall pay the remainder of the Due Diligence Fees to Lender on the Initial
Closing Date. Any portion of the Due Diligence Fee paid to Lender not actually
used by Lender to cover reasonable due diligence expenses shall be promptly
refunded to Borrower.

SECTION 7.03 Legal Fees and Expenses.

(a)          Initial Legal Fees. Borrower shall pay, or reimburse Lender for,
all out-of-pocket 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 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 7.04 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.

SECTION 7.05 MBS-Related Costs. Borrower shall pay to Lender, within 30 days of
demand, all reasonable fees and expenses incurred by Lender or Fannie Mae in
connection with the issuance of any DMBS backed by a Loan, including the fees
charged by The Depository Trust Company and State Street Bank or any successor
fiscal agent or custodian.

ARTICLE VIII

EVENTS OF DEFAULT

 

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SECTION 8.01 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

(b)          the failure by Borrower to pay when due any amount payable by
Borrower under the 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 Article VI, provided that such period shall be extended for up to
30 additional days if Borrower, in the discretion of Lender, is diligently
pursuing a cure of such default within 30 days after receipt of notice from
Lender; or

(d)          any warranty, representation or other written statement made by or
on behalf of Borrower 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

(e)          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 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 Borrower seeking to establish the invalidity or
unenforceability hereof or thereof, or Borrower shall deny that it has any
further liability or obligation hereunder or thereunder; or

(f)           (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, 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

(g)          the failure by Borrower to perform or observe any material term,
covenant, condition or agreement hereunder, other than as contained in
subsections (a) through (f) above, or in any other Loan Document, within 30 days
after receipt of written notice from Lender identifying such failure;

(h)          The occurrence of an Event of Default as defined in the Master
Reimbursement Agreement or any of the Reimbursement Security Documents.

 

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ARTICLE IX

REMEDIES

SECTION 9.01 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):

(a)          by written notice to Borrower, to be effective upon dispatch,
declare the principal of, and interest on, the Loans and all other sums owing by
Borrower to Lender under any of the Loan Documents forthwith due and payable,
whereupon the principal of, and interest on, the Loans 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.

SECTION 9.02 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 9.03 Lender’s Right to Protect Collateral and Perform Covenants and
Other Obligations. If Borrower 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 Loan 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.

 

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SECTION 9.04 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.

SECTION 9.05 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 9.06 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 X

RIGHTS OF FANNIE MAE

SECTION 10.01 Special Pool Purchase Contract. Borrower acknowledges that Fannie
Mae is entering into an agreement with Lender (“Special Pool Purchase
Contract”), pursuant to which, inter alia, (i) Lender shall agree to assign all
of its rights under this Agreement to Fannie Mae, (ii) Fannie Mae shall accept
the assignment of the rights, (iii) subject to the terms, limitations and
conditions contained in the Special Pool Purchase Contract, Fannie Mae shall
agree to purchase a 100% participation interest in each Loan issued under this
Agreement by issuing to Lender an DMBS, in the amount and for a term equal to
the Loan purchased and backed by an interest in the Note and the Collateral Pool
securing the Note, (iv) Lender shall agree to assign to Fannie Mae all of
Lender’s interest in the Note and Collateral Pool securing the Note, and (v)
Lender shall agree to service the loans evidenced by the Note.

SECTION 10.02 Assignment of Rights. Borrower acknowledges and consents to the
assignment to Fannie Mae of all of the rights of Lender under this Agreement and
all other Loan Documents, including the right and power to make all decisions on
the part of Lender to be made under this Agreement and the other Loan Documents,
but Fannie Mae, by virtue of this assignment, shall not be obligated to perform
the obligations of Lender under this Agreement or the other Loan Documents.

SECTION 10.03 Replacement of Lender. At the request of Fannie Mae, Borrower and
Lender shall agree to the assumption by another lender designated by Fannie Mae
(which lender shall meet Fannie Mae’s then current standards for lenders for
credit facilities of the type and size of the credit facility evidenced by this
Agreement), of all of the obligations of Lender under this Agreement and the
other Loan Documents, and/or any related servicing obligations, and, at Fannie
Mae’s option, the concurrent release of Lender from its obligations under this
Agreement and the other Loan Documents, and/or any related servicing
obligations, and shall execute all releases, modifications and other documents
which Fannie Mae determines are necessary or desirable to effect such
assumption.

SECTION 10.04 Fannie Mae and Lender Fees and Expenses. Borrower agrees that any
provision providing for the payment of fees, costs or expenses incurred or
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pursuant to this Agreement shall be deemed to provide for Borrower’s payment of
all reasonable fees, costs and expenses incurred or charged by Lender or Fannie
Mae in connection with the matter for which fees, costs or expenses are payable.

SECTION 10.05 Third-Party Beneficiary. Borrower hereby acknowledges and agrees
that Fannie Mae is a third party beneficiary of all of the representations,
warranties and covenants made by Borrower to, and all rights under this
Agreement conferred upon, Lender, and, by virtue of its status as third-party
beneficiary and/or assignee of Lender’s rights under this Agreement, Fannie Mae
shall have the right to enforce all of the provisions of this Agreement against
Borrower.

 

ARTICLE XI

LIMITS ON PERSONAL LIABILITY

 

SECTION 11.01. Recourse Obligations, Termination of Personal Liability, and
Exceptions to Limits on Personal Liability.

(a)                  Full Recourse Except as provided in Section 11.01(b), each
Borrower is and shall remain jointly and severally personally liable to Lender
for the payment and performance of all Obligations throughout the term of this
Agreement.

(b)                 Termination of Personal Liability. The provisions of Section
11.01(a) shall be null and void upon the written notice of Borrower to Lender of
its election to render such provisions null and void, provided that (i)
Borrower’s full recourse liability under the Master Reimbursement Agreement
shall have been terminated upon satisfaction of the terms and conditions of
Section 3.13(2) of the Master Reimbursement Agreement and (ii) the new borrower
required by Section 3.13(2) of the Master Reimbursement Agreement executes and
delivers an assumption agreement satisfactory in form and substance to Lender
assuming all of the obligations of Borrower under this Agreement and the Loan
Documents and delivers to Lender any legal opinions, certificates, recordations
and endorsements to title policies or other documents required by Lender.

(c)                 Exceptions to Limits on Personal Liability. Upon termination
of personal liability of Borrower pursuant to Section 11.01(b), Borrower shall
be personally liable to Lender on a joint and several basis for repayment of
amounts due under this Agreement and the other Loan Documents equal to any loss
or damage suffered by Lender as a result of (1) failure of any Borrower to pay
to Lender upon written demand after an Event of Default all Rents to which
Lender is entitled under Section 3(a) of the applicable Security Instruments
encumbering such Mortgaged Property and the amount of all security deposits
collected by any Borrower from tenants then in residence; (2) failure of any
Borrower to apply all insurance proceeds and condemnation proceeds as required
by each Security Instrument encumbering each Mortgaged Property; (3) failure of
any Borrower to comply in all material respects with the covenant set forth in
Section 2.2(4) of the Master Reimbursement Agreement relating to the delivery of
books and records, statements, schedules and reports; (4) fraud or written
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misrepresentation by any Borrower or any officer, director, partner, member or
employee of any Borrower in connection with the application for or creation of
the Obligations or any request for any action or consent by Lender; (5) failure
to apply the rents, profits, issues, products and income of each Mortgaged
Property received or collected by or on behalf of the Borrower (the “Rents and
Profits”), first, to the payment of reasonable operating expenses and then to
amounts (“Debt Service Amounts”) payable under the Borrower Documents (as
defined in the Master Reimbursement Agreement) and the Loan Documents (except
that any Borrower will not be personally liable (i) to the extent that such
Borrower lacks the legal right to direct the disbursement of such sums because
of a bankruptcy, receivership or similar judicial proceeding or otherwise under
the Loan Documents, or (ii) with respect to Rents and Profits of any Mortgaged
Property that are distributed in any Calendar Quarter if such Borrower has paid
all operating expenses and Debt Service Amounts for that Calendar Quarter); or
(6) failure of the Borrower to pay any and all documentary stamp taxes,
intangible taxes and other taxes, impositions, fees and charges due on or with
respect to the Note, the Obligations, this Agreement and/or any of the other
Loan Documents.

(d)                 Full Recourse After Termination of Personal Liability. Upon
termination of personal liability of each Borrower pursuant to Section 11.01(b),
each Borrower shall become personally liable to Lender for the payment and
performance of all Obligations upon the occurrence of any of the following
Events of Default: (1) any Borrower’s acquisition of any property or operation
of any business not permitted by Section 33 of the Security Instruments; or (2)
a breach of any covenant set forth in Section 2.7 of the Master Reimbursement
Agreement.

(e)                  Permitted Transfer Not Release. No Transfer by the Key
Principal of its Ownership Interests in any Borrower shall release any Borrower
from liability under this Article, this Agreement or any other Loan Document,
unless Lender shall have approved the Transfer and shall have expressly released
the Borrower in connection with the Transfer.

(f)                  Miscellaneous. To the extent that Borrower has personal
liability under this Section, Lender may exercise its rights against Borrower
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 (1) have been applied by Borrower as
required or permitted by the Loan Documents prior to the occurrence of an Event
of Default, or (2) are owned by Borrower and which Borrower was unable to apply
as required or permitted by the Loan Documents because of a bankruptcy,
receivership, or similar judicial proceeding.

 

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ARTICLE XII

INTEREST RATE PROTECTION

SECTION 12.01 Interest Rate Protection.

(a)          The Initial Hedge. To protect against fluctuations in interest
rates, Borrower shall make arrangements for a Hedge to be in place and
maintained at all times with respect to the Loans. The Hedge for the Loans shall
be a Cap (as defined in the Master Reimbursement Agreement) for the Initial
Hedge Period.

(b)          Subsequent Hedges. A Subsequent Hedge shall be required for the
remaining term of the Loans, upon the expiration of the Cap in place for the
Initial Hedge Period. Any Subsequent Hedge shall be for a period beginning not
later than the expiration of the prior Cap and ending on the Termination Date.

SECTION 12.02. Hedge Terms. Each Hedge shall:

(a)          provide for a notional principal amount equal at all times to the
outstanding principal balance of the Loans; if the principal amount of the Loans
Outstanding decreases, Borrower may amend the Hedge or Hedges to provide for a
decrease in the notional amount to an amount equal to the reduced amount of the
principal amount, provided that Lender gives its prior written approval to the
documents reflecting the amendment (which approval shall not be unreasonably
withheld, delayed or conditioned);

 

(b)

be in effect for the entire term of the Loans;

(c)          provide for a notional interest rate not greater than the lowest
interest rate that would result in the ratio of

 

(i)

the aggregate Net Operating Income for the Mortgaged Properties, minus the
portion thereof required to satisfy the Coverage and LTV Tests (as defined in
the Master Reimbursement Agreement (determined for this purpose using only the
scheduled debt service for the Bond loans and the outstanding principal amount
of the Bonds)),

to

 

(ii)

Facility Debt Service

of not less than 1.10 to 1 (the “Hedge Rate”);

(d)          require the counterparty to make interest payments on the notional
principal amount at a rate equal to the amount by which Coupon Rate exceeds the
Hedge Rate;

(e)          require the counterparty to make such interest payments to an
account pledged to Lender pursuant to the Hedge Security Agreement; and

 

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(f)           be evidenced, governed and secured on terms and conditions, and
pursuant to documentation (the “Hedge Documents”), in form and content
acceptable to Fannie Mae, and with a counterparty approved by Fannie Mae.

SECTION 12.03 Hedge Security Agreement; Delivery of Hedge Payments. Pursuant to
a Hedge Security Agreement, Lender shall be granted an enforceable, perfected,
first priority lien on and security interest in each Hedge and payments due
under the Hedge (including scheduled and termination payments) in order to
secure Borrower’s obligations to Lender under this Agreement. With respect to
each Hedge, the Hedge Security Agreement must be delivered by Borrower to Lender
no later than the effective date of the Hedge.

SECTION 12.04 Termination. Borrower shall not terminate, transfer or consent to
any transfer of any existing Hedge without Lender’s prior written consent as
long as Borrower is required to maintain a Hedge pursuant to this Agreement;
provided, however, that if, and at such time as, the term of the Loans
terminates, Borrower shall have the right to terminate the existing Hedge with
respect to the Loans.

SECTION 12.05 Performance Under Hedge Documents. Borrower agrees to comply fully
with, and to otherwise perform when due, its obligations under, all applicable
Hedge Documents and all other agreements evidencing, governing and/or securing
any Hedge arrangement contemplated under this Article XII. Borrower shall not
exercise, without Lender’s prior written consent, and shall exercise, at
Lender’s direction, any rights or remedies under any Hedge Document, including
without limitation the right of termination.

ARTICLE XIII

JOINT AND SEVERAL OBLIGATIONS; CROSS GUARANTY AND OTHER INTERBORROWER MATTERS

SECTION 13.01 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 13.10), 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, 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.

SECTION 13.02 Waivers by Borrower and Other Rights

(a)         The obligations of each Borrower under this Article XIII shall
survive any foreclosure proceeding, any foreclosure sale, any delivery of any
deed in lieu of foreclosure, and any release of record of the Security
Instruments. The obligations of each Borrower under this

 

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Article XIII shall be performed without demand by Lender and shall be
unconditional irrespective of the genuineness, validity, regularity or
enforceability of this Agreement, Note, the Security Instruments, or any other
Borrower Document, and without regard to any other circumstance which might
otherwise constitute a legal or equitable discharge of a surety or a guarantor.
Each Borrower hereby waives the benefit of all principles or provisions of law,
statutory or otherwise, which are or might be in conflict with the terms of this
Article XIII and agrees that its obligations shall not be affected by any
circumstances, whether or not referred to in this Article XIII, which might
otherwise constitute a legal or equitable discharge of a surety or a guarantor.
Each Borrower hereby waives the benefits of any right of discharge under any and
all statutes or other laws relating to guarantors or sureties and any other
rights of sureties and guarantors thereunder. Without limiting the generality of
the foregoing, each Borrower hereby waives, to the fullest extent permitted by
law, diligence in collecting the indebtedness of such Borrower to Lender, any
rights or defenses based upon an offset by any Borrower against any obligation
now or hereafter owed to such Borrower by any other Borrower, presentment,
demand for payment, protest, all notices with respect to this Agreement and the
Note which may be required by statute, rule of law or otherwise to preserve
Lender's rights against such Borrower under this Article XIII, including notice
of acceptance, notice of any amendment of any Borrower Document, notice of the
occurrence of any default, potential Event of Default or Event of Default,
notice of intent to accelerate, notice of acceleration, notice of dishonor,
notice of foreclosure, notice of protest, and notice of the incurring by any
Borrower of any obligation or indebtedness. Each Borrower also waives, to the
fullest extent permitted by law, all rights to require Lender to (a) proceed
against any Borrower or any other guarantor of the Borrower's payment or
performance with respect to the Obligations, (b) proceed against or exhaust any
Collateral held by Lender to secure the repayment of the obligations, or (c)
pursue any other remedy it may now or hereafter have against any Borrower. 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 other
Documents and that but for the provisions of this Article XIII and such waivers
Lender would decline to enter into this Agreement.

 

(b)        At any time or from time to time any number of times, without notice
to any Borrower in its capacity as guarantor and without affecting the liability
of any Borrower, (a) the time for payment of the principal of or interest on the
Note may be extended or the Note may be renewed in whole or in part; (b) the
time any Borrower’s performance of or compliance with any covenant or agreement
contained in this Agreement, the Note, the Security Instruments or any other
Loan Document, whether presently existing or hereinafter entered into, may be
extended or such performance or compliance may be waived; (c) the maturity of
the Note may be accelerated as provided in this Agreement, the Note, the
Security Instruments, or any other Loan Document; (d) the Note, the Security
Instruments, or any other Loan Document may be modified or amended by Lender and
any Borrower in any respect, including an increase in the principal amount; and
(e) and security for the Note may be modified, exchanged, surrendered or
otherwise dealt with or additional security may be pledged or mortgaged for the
Note.

 

SECTION 13.03 No Impairment. Each Borrower agrees that the provisions of this
Article XIII are for the benefit of Lender and its 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 13.04 No Subrogation. No Borrower shall have the right of, and hereby
waives any claim for, subrogation contribution, indemnity or reimbursement
against any other Borrower or any General Partner of any other Borrower by
reason of any payment by such Borrower under this Article XIII, whether such
right or claim arises at law or in equity or under any contract or statute or
otherwise, until the Obligations have been paid in full.

SECTION 13.05 Subordination of Subrogation, Etc Each Borrower hereby irrevocably
and unconditionally agrees that in the event that, notwithstanding Section 13.04
hereof, to the extent its agreement and waiver set forth in Section 13.04 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
by virtue of this Article XIII, 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 pursuant to this Article XIII, 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 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
XIII, and hereby assigns such rights or indebtedness to Lender, including the
right to file proofs of claim and to vote thereon in connection with any case
under the Bankruptcy Code, including 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.

SECTION 13.06 Election of Remedies.

(a)         Lender, in its discretion, may (a) bring suit against any one or
more Borrower, 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 Borrower, or any other Person, for such consideration as
Lender may deem proper; (c) release one or more Borrower, 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 XIII. Nothing contained in this paragraph shall in
any way affect or impair the rights or obligations of any Borrower with respect
to any other Borrower.

 

(b)        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 laws 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 or any rights of subrogation which each Borrower might otherwise
have had but for such action by Lender.

 

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Any election of remedies which 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 Section 13.06, 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 any Lender might otherwise be entitled but for
such bidding at any such sale.

 

SECTION 13.07 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 XIII
(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 13.07(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 or any other event or condition
which would constitute an Event of Default after notice or lapse of time or both
has occurred and is continuing under all the Loan Documents, then payments may
be received by such Borrower in respect of the Subordinated Obligations in
accordance with and provided that such Borrower and each other Borrower make
such payment in full. 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 Lender, including the right to file proofs of claim and to vote
thereon in connection with any case under 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

 

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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 13.08 Insolvency and Liability of Other Borrower. So long as any of the
Obligations are outstanding, if a petition under the Bankruptcy Code is filed by
or against any Borrower, each other Borrower agrees to file all claims against
such Borrower in any bankruptcy or other proceeding in which the filing of
claims is required by law in connection with indebtedness owed by such 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
Borrower any amounts received in excess of the amount necessary to pay the
Obligations. Such Borrower hereby assigns to Lender all of such Borrower’s
rights to all such payments to which such 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
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 the Bankruptcy Code or
other statute or from the decision in any court.

SECTION 13.09 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 13.09 shall survive the termination
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satisfaction and discharge of any Borrower by virtue of any payment, court order
or any federal or state law.

SECTION 13.10 Maximum Liability of Each Borrower. Notwithstanding anything
contained in this Agreement or any of the Loan Documents to the contrary, if the
obligations of any Borrower under this Agreement or any of the other Loan
Documents exceed the limitations imposed under any Fraudulent Transfer Law (as
hereinafter defined), then such 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 13.11 Liability Cumulative. The liability of each Borrower under this
Article XIII 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 XIV

MISCELLANEOUS PROVISIONS

SECTION 14.01 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 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 14.02 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.

SECTION 14.03 Payment of Costs, Fees and Expenses. Borrower shall pay, on
demand, all reasonable 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).

 

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(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 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 fees payable to any rating
agencies, 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 Loans. 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 Loan 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 14.04 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. (Washington, D.C. time) on
the date when due.

SECTION 14.05 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 14.06 Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.
NOTWITHSTANDING ANYTHING IN THE NOTE, THE SECURITY DOCUMENTS OR ANY OF THE OTHER
LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND RIGHTS AND
OBLIGATIONS OF EACH BORROWER

 

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UNDER THE NOTE, AND EACH BORROWER 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 (1) 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, (2) THE PERFECTION, THE
EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON
PERSONAL PROPERTY (OTHER THAN DEPOSIT ACCOUNTS), WHICH MATTERS SHALL BE GOVERNED
BY THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF
THE DISTRICT OF COLUMBIA UNIFORM COMMERCIAL CODE AND (3) THE PERFECTION, THE
EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF DEPOSIT ACCOUNTS,
WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE
DEPOSIT ACCOUNT IS LOCATED. BORROWER AGREES THAT ANY CONTROVERSY ARISING UNDER
OR IN RELATION TO THE NOTE, THE SECURITY DOCUMENTS OR ANY OTHER LOAN DOCUMENT
SHALL BE, EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN DISTRICT OF
COLUMBIA. THE LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN
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 NOTE, THE SECURITY
DOCUMENTS OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH
ANY OF THE LOAN DOCUMENTS. EACH BORROWER IRREVOCABLY CONSENTS TO SERVICE,
JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE NOTE,
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 BORROWER AND
AGAINST THE COLLATERAL IN ANY 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 DISTRICT
OF COLUMBIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER AS
PROVIDED HEREIN OR THE SUBMISSION HEREIN BY BORROWER TO PERSONAL JURISDICTION
WITHIN DISTRICT OF COLUMBIA. EACH BORROWER (I) COVENANTS AND AGREES 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) WAIVES ANY RIGHT TO TRIAL BY JURY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER IS INTENDED
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ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER, EACH BORROWER HEREBY CERTIFIES THAT
NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO EACH BORROWER THAT LENDER
WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION. THE FOREGOING
PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER UPON
CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER’S FREE WILL.

SECTION 14.07 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 14.08 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:

(1)          personally delivered with proof of delivery thereof (any notice so
delivered shall be deemed to have been received at the time so delivered);

(2)          sent by Federal Express (or other similar 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);

(3)          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 (1) or (2) above within two Business
Days) (any notice so delivered shall be deemed to have been received (i) on the
date of transmission, if so transmitted before 5:00 p.m. (local time of the
recipient) on a Business Day, or (ii) 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);

addressed to the parties as follows:

 

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As to Borrower:

c/o Mid-America Apartment Communities, Inc.

6584 Poplar Avenue

Suite 300

Memphis, Tennessee 38138

 

Attention:

Simon R.C. Wadsworth

 

Chief Financial Officer

 

 

Telecopier No.

(901) 682-6667

 

with a copy to:

Bass, Berry & Sims PLC

The Tower at Peabody Place

100 Peabody Place

Suite 900

Memphis, Tennessee 38103-3672

 

 

Attention:

John A. Stemmler, Esq.

 

 

Telecopy No.:

(901) 543-5999

 

As to Lender:

Prudential Multifamily Mortgage, Inc.

C/o Prudential Asset Resources

2200 Ross Avenue, Suite 4900 E

Dallas, Texas 75201

 

Attention:

Asset Management Department

 

Telecopy No.:

(214) 777-4556

 

 

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with a copy to:

Prudential Multifamily Mortgage, Inc.

8401 Greensboro Drive

Suite 200

McLean, Virginia 22102

 

Attention:

Laura Eckhardt

Telecopy No.: (703) 610-1422

 

and

Prudential Multifamily Mortgage, Inc.

Four Embarcadero Center

Suite 2700

San Francisco, California 94111

Attention: Harry N. Mixon, Esq.

 

Telecopy No.:

(415) 956-2197

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) 280-2065

with a copy to:

Arent Fox Kintner Plotkin & Kahn, PLLC

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 14.09 Further Assurances and Corrective Instruments

 

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(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 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 Loans, Borrower
shall provide, or cause to be provided to Lender, at their cost and expense,
such documentation or information. Borrower shall execute and deliver to Lender
such documentation, including any amendments, corrections, deletions or
additions to the Note, 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 a Loan.

SECTION 14.10 Term of this Agreement. This Agreement shall continue in effect
until the later of the Termination Date and the payment of all amounts owing to
Lender hereunder.

SECTION 14.11 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 obligations under
this Agreement separately or together, without Borrower’s consent, only to
Fannie Mae, but may not delegate its obligations under this Agreement unless
required to do so pursuant to Section 10.03.

SECTION 14.12 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 14.13 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 14.14 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 which 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 14.15 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 14.16 Decisions in Writing. Any approval, designation, determination,
selection, action or decision of Lender or Borrower must be in writing to be
effective.

[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]

 

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

 

Borrower

 

MID-AMERICA APARTMENTS, L.P., a Tennessee limited partnership

 

 

By:

Mid-America Apartment Communities, Inc., a Tennessee corporation, its sole
General Partner

 

By: __________________________

Simon R. C. Wadsworth

Executive Vice President

 

MID-AMERICA APARTMENT COMMUNITIES, INC., a Tennessee corporation

 

By: __________________________

Simon R. C. Wadsworth

Executive Vice President

 

MID-AMERICA APARTMENTS OF TEXAS, L.P., a Texas limited partnership

 

 

By:

MAC of Delaware, Inc., a Delaware corporation, its sole General Partner

 

By: __________________________

John A. Good

 

Assistant Secretary

 

 

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Lender

PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware Corporation

By:                                             
                                

 

Name:

Sharon D. Singleton

 

 

Title:

Vice President - Closing Officer

 

 

 

 

 

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APPENDIX I

DEFINITIONS

For all purposes of the Agreement, the following terms shall have the respective
meanings set forth below:

“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” has the meaning given such term in the
Master Reimbursement Agreement.

“Aggregate Loan to Value Ratio” has the meaning given such term in the Master
Reimbursement Agreement.

“Agreement” means the Master Credit Facility Agreement, as it may be amended,
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” has the meaning given to such term in the Master
Reimbursement Agreement.

“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.

 

Appendix I-1

Master Credit Facility Agreement

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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.

“Borrower Documents” has the meaning given such term in the Master Reimbursement
Agreement.

“Business Day” means a day on which Fannie Mae 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.

“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.

“Collateral Pool” means all of the Collateral.

“Compliance Certificate” means a certificate of Borrower substantially in the
form of Exhibit C to the Agreement.

“Confirmation of Obligations” has the meaning given such term in the Master
Reimbursement Agreement.

“Coupon Rate” means, with respect to a Loan, the imputed interest rate
determined by Lender pursuant to Section 1.05.

“Discount” shall have the meaning set forth in Section 1.03.

“Discount Period” shall have the meaning set forth in Section 1.02(b).

“DMBS” shall have the meaning set forth in Section 1.03.

“DMBS Commitment” shall have the meaning set forth in Section 1.08.

“DMBS Imputed Interest Rate” shall have the meaning set forth in Section 1.05.

“DUS Guide” means the Fannie Mae Multifamily Delegated Underwriting and
Servicing (DUS) Guide, as such Guide may be amended from time to time, including
exhibits to the DUS Guide and amendments in the form of Lender Memos, Guide
Updates and Guide Announcements (and, if such Guide is no longer used by Fannie
Mae,

 

Appendix I-2

Master Credit Facility Agreement

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the term “DUS Guide” as used in the Agreement means the Fannie Mae Multifamily
Negotiated Transactions Guide, as such Guide may be amended from time to time,
including amendments in the form of Lender Memos, Guide Updates and Guide
Announcements). All references to specific articles and sections of, and
exhibits to, the DUS Guide shall be deemed references to such articles, sections
and exhibits as they may be amended, modified, updated, superseded, supplemented
or replaced from time to time.

“DUS Underwriting Requirements” means the overall underwriting requirements for
Multifamily Residential Properties as set forth in the DUS Guide.

“Event of Default” means any event defined to be an “Event of Default” under
Article VIII.

“Facility Debt Service” means, as of any specified date, the amount of interest
and principal amortization, during the 12 month period immediately succeeding
the specified date, with respect to the Loans Outstanding on the specified date,
except that, for these purposes each Loan shall be deemed to require level
monthly payments of principal and interest (at the Coupon Rate for the Loan) in
an amount necessary to fully amortize the original principal amount of the Loan
over [30] years, with such amortization deemed to commence on the first day of
the 12 month period.

“Fannie Mae” means the federally-chartered and stockholder-owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act, 12 U.S.C. § 1716 et seq.

“Future Loan” shall have the meaning set forth in Section 1.01.

“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 IV.

“Hedge” means an interest rate cap agreement satisfying the requirements of
Article XII.

“Hedge 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.

“Hedge Documents” has the meaning set forth in Section 12.02.

“Hedge Rate” has the meaning set forth in Section 12.02.

 

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“Hedge Security Agreement” means, with respect to a Hedge, the Interest Rate
Hedge Security, Pledge and Assignment Agreement between Borrower and Lender, for
the benefit of Lender, as such agreement may be amended, modified, supplemented
or restated from time to time.

“Initial Closing Date” means the date of the Agreement.

“Initial Hedge Period” means the period from the Initial Closing Date to five
years thereafter.

“Initial Loan” means the Loan made on the Initial Closing Date in the amount of
$11,720,000.

“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.

“Key Principal” has the meaning given to such term in the Master Reimbursement
Agreement.

“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.

“Lender” shall have the meaning set forth in the first paragraph of the
Agreement, but shall refer to any replacement Lender if the initial Lender is
replaced pursuant to the terms of Section 10.03.

“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).

“Loan” or “Loans” means the Initial Loan and any Future Loan.

“Loan Documents” means this Agreement, the Note, the Security Documents, all
documents executed by Borrower pursuant to the General Conditions set forth in
Article IV of the Agreement and any other documents executed by a Borrower from
time to time in connection with the Agreement or the transactions contemplated
by this Agreement.

“Loan Fee” means 67 basis points per annum (0.67%) for the Loans Outstanding on
or before the fifth anniversary of the Initial Closing Date, and for any Loan
made after the fifth anniversary of the Initial Closing Date, the number of
basis points per

 

Appendix I-4

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annum determined by Lender on or before such fifth anniversary as the Loan Fee
for such Loan.

“Loan Request” means a written request, substantially in the form of Exhibit G
to the Agreement for the Initial Loan.

“Loan Year” means the 12-month period from the first day of the first calendar
month after the Initial Closing Date to and including the last day before the
first anniversary of the Initial Closing Date, and each 12-month period
thereafter.

“Master Reimbursement Agreement” means the Master Reimbursement Agreement dated
as of June 1, 2001, as amended, among the Borrower and Fannie Mae, as the same
may be amended, modified, supplemented or restated from time to time.

“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
the Borrower, (b) the present or future ability of the Borrower to perform the
Obligations for which it is liable, (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.

“MBS Delivery Date” means the date on which an MBS is delivered by Fannie Mae.

“MBS Issue Date” shall have the meaning set forth in Section 1.03.

“Mortgaged Properties” means the Multifamily Residential Properties described on
Exhibit A to the Agreement and which represent the Multifamily Residential
Properties which are made part of the Collateral Pool on the Initial Closing
Date

“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 the requirements of Chapter 2 of Part
III of the DUS Guide (Property Requirements).

“Note” means the promissory note, in the form attached as Exhibit A to the
Agreement, which has been issued by Borrower to Lender to evidence Borrower’s
obligation to repay Loans.

“Obligations” means the aggregate of the obligations of Borrower under the
Agreement and the other Loan Documents.

 

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Master Credit Facility Agreement

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“Organizational Certificate” means a certificate from Borrower to Lender, in the
form of Exhibit D to the Agreement, certifying as to certain organizational
matters with respect to Borrower.

“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” means, when used in connection with promissory notes, other debt
instruments or Loans, for a specified date, promissory notes or other debt
instruments which have been issued, or Loans which have been made, but have not
been 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.

“Partial Month Period” shall have the meaning set forth in Section 1.02(a).

“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) the
Security Instrument encumbering the Mortgaged Property, and (iii) any other
Liens approved by Lender.

“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).

“Potential Event of Default” means any event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default.

“Price” shall have the meaning set forth in Section 1.03.

“Property” means any estate or interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.

“Rate Confirmation Form” means the completed and executed document from Lender
to Borrower pursuant to Section 1.07(b), substantially in the form of Exhibit F
to the Agreement.

“Rate Form” means the completed and executed document from Borrower to Lender
pursuant to Section 1.07(a), substantially in the form of Exhibit E to the
Agreement, specifying the terms and conditions of the DMBS to be issued for the
requested Loan.

 

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“Reimbursement Security Documents” has the meaning given such term in the Master
Reimbursement Agreement.

“Release Documents” means instruments, in the form customarily used by Fannie
Mae for releases in the jurisdiction governing the perfection of the security
interest being released, releasing the applicable Security Instruments as a lien
on the applicable Mortgaged Property, and UCC-3 Termination Statements
terminating the UCC-1 Financing Statements perfecting a lien on the portion of
the applicable Mortgaged Property comprised of personal property and such other
documents and instruments as the Borrower may reasonably request evidencing the
release of the applicable Collateral from any lien securing the Obligations
(including a termination of any restriction on the use of any accounts relating
to the applicable Mortgaged Property) and the release and return to the Borrower
of any and all escrowed amounts relating thereto.

“Release Price” shall have the meaning set forth in Section 3.01(c).

“Release Request” means a written request, substantially in the form of Exhibit
H to the Agreement, to obtain a release of Collateral from the Collateral Pool
pursuant to Section 3.01(a).

“Remaining Mortgaged Properties” shall have the meaning set forth in Section
4.04(d).

“Replacement Reserve Agreement” means a Replacement Reserve and Security
Agreement, reasonably required by Lender, and completed in accordance with the
requirements of the DUS Guide.

“Request” means a Loan Request, a Release Request or a Termination Request.

“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
Agreements 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 separate second or
third priority 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 Loans.

“Surveys” means the as-built surveys of the Mortgaged Properties prepared in
accordance with the requirements of Part III, Section 113 of the DUS Guide, or
otherwise approved by Lender.

 

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“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 14.10.

“Termination Date” means March 1, 2014.

“Termination Documents” has the meaning set forth in Section 4.05

“Termination Fee” means, with respect to a termination of this Agreement
pursuant to Article V, an amount equal to the greater of (a) 1% of the principal
balance of the Loans immediately prior to such termination and (b) the product
obtained by multiplying--

 

(1)

the reduction in the Loans by

 

(2)

67 basis points by

 

(3)

the present value factor calculated using the following formula:

1 - (1 + r)-n

r

[r = Yield Rate

n =        the number of years (counting any partial year as a full year)
remaining between the Closing Date for the reduction in the Loans and the
Termination Date.]

The “Yield Rate” means the rate, determined as of the Initial Closing Date, on
the U.S. Treasury security having a maturity closest to the Termination Date.

 

“Termination Request” means a written request, substantially in the form of
Exhibit I to the Agreement, to terminate the Agreement and repay the Loans
pursuant to Section 3.02.

“Title Company” means Fidelity National Title Insurance Company of NewYork.

“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 the requirements of Part III, Section 111 of the DUS
Guide, 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, whether or not required by the DUS
Guide, including variable credit endorsements, if

 

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available, and tie-in Endorsements, if available, and with a limit of liability
under the policy (subject to the limitations contained in Sections 6(a)(i) and
6(a)(iii) of the Stipulations and Conditions of the policy) equal to the Loans.

“Valuation” has the meaning given such term in the Master Reimbursement
Agreement.

 

Appendix I-9

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TABLE OF CONTENTS

Page

 

 

 

ARTICLE I

2

 

THE LOANS

2

 

THE LOANS

2

 

 

SECTION 1.01 The Loans

2

 

 

Section 1.02 Loan Periods

2

 

 

Section 1.03 Discount Mortgage Backed Security

2

 

 

SECTION 1.04 Interest, Discount and Fees on Loans

3

 

 

SECTION 1.05 Coupon Rates for a Loan

3

 

 

SECTION 5.01 Representations and Warranties of Lender

3

 

 

SECTION 1.07 Rate Setting for a Loan for a Discount Period

4

 

 

SECTION 1.08 Breakage and other Costs

4

 

ARTICLE II

4

 

ARTICLE II

4

 

ALLOCABLE FACILITY AMOUNT AND VALUATIONS

4

 

ALLOCABLE FACILITY AMOUNT AND VALUATIONS

4

 

SECTION 2.01 DETERMINATION OF ALLOCABLE FACILITY AMOUNT AND VALUATIONS

 4

ARTICLE III

 

5

COLLATERAL CHANGES/TERMINATION OF FACILITY

5

 

 

SECTION 3.01 Right to Obtain Releases of Collateral

5

 

 

SECTION 3.02 Right to Terminate Agreement

6

 

ARTICLE V

6

CONDITIONS PRECEDENT TO ALL REQUESTS

6

 

 

SECTION 4.01 Conditions Applicable to All Requests

6

 

 

SECTION 4.02 Conditions Precedent to the Initial Loan

8

 

 

SECTION 4.03 Delivery of Property-Related Documents

8

 

SECTION 4.04 CONDITIONS PRECEDENT TO RELEASE OF PROPERTY FROM THE COLLATERAL
POOL

 9  

SECTION 4.05 CONDITIONS PRECEDENT TO TERMINATION OF AGREEMENT

 10  

ARTICLE V

 

10

REPRESENTATIONS AND WARRANTIES OF LENDER

10

 

 

 

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SECTION 5.01 Representations and Warranties of Lender

10

 

ARTICLE VI

 

11

REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER

11

 

 

SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF BORROWER

11

 

 

SECTION 6.02 Affirmative Covenants of the Borrower

13

 

 

SECTION 6.03 Negative Covenants of the Borrower

15

 

ARTICLE VII

 

15

 

SECTION 7.01 Origination Fees

15

 

 

SECTION 7.02 Due Diligence Fees

15

 

 

SECTION 7.03 Legal Fees and Expenses

15

 

 

SECTION 7.04 Failure to Close any Request

16

 

ARTICLE VIII

 

16

EVENTS OF DEFAULT

16

 

 

SECTION 8.01 Events of Default

16

 

ARTICLE IX

 

17

REMEDIES

17

 

 

SECTION 9.01 Remedies; Waivers

17

 

 

SECTION 9.02 Waivers; Rescission of Declaration

17

 

 

SECTION 9.03 LENDER'S RIGHT TO PROTECT COLLATERAL AND PERFORM COVENANTS AND
OTHER OBLIGATIONS

17

 

 

SECTION 9.04 No Remedy Exclusive

18

 

 

SECTION 9.05 No Waiver

18

 

 

SECTION 9.06 No Notice

18

 

ARTICLE X

 

18

RIGHTS OF FANNIE MAE

18

 

 

SECTION 10.01 Special Pool Purchase Contract

18

 

 

SECTION 10.02 Assignment of Rights

19

 

 

SECTION 10.03 Replacement of Lender

19

 

 

SECTION 10.04 Fannie Mae and Lender Fees and Expenses

19

 

 

SECTION 10.05 Third-Party Beneficiary

19

 

ARTICLE XI

 

19

 

 

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LIMITS ON PERSONAL LIABILITY

19

SECTION 11.01. RECOURSE OBLIGATIONS, TERMINATION OF PERSONAL LIABILITY, AND
EXCEPTIONS TO LIMITS ON PERSONAL LIA

 

19

ARTICLE XII

 

21

INTEREST RATE PROTECTION

21

 

 

SECTION 12.01 Interest Rate Protection

21

 

 

SECTION 12.02. Hedge Terms

21

 

 

SECTION 12.03 HEDGE SECURITY AGREEMENT; DELIVERY OF HEDGE PAYMENTS

22

 

 

SECTION 12.04 Termination

22

 

 

SECTION 12.05 Performance Under Hedge Documents

22

 

ARTICLE XIII

 

23

 

JOINT AND SEVERAL OBLIGATIONS; CROSS GUARANTY AND OTHER INTERBORROWER MATTERS

23

 

 

OBLIGATION; CROSS-GUARANTY 23

 

 

 

SECTION 13.02 Waivers by Borrower and Other Rights

23

 

 

SECTION 13.03 No Impairment

24

 

 

SECTION 13.04 No Subrogation

24

 

 

SECTION 13.05 Subordination of Subrogation, Etc

24

 

 

SECTION 13.06 Election of Remedies

25

 

 

SECTION 13.07 Subordination of Other Obligations

26

 

 

SECTION 13.08 Insolvency and Liability of Other Borrower

26

 

 

SECTION 13.09 Preferences, Fraudulent Conveyances, Etc

27

 

 

SECTION 13.10 Maximum Liability of Each Borrower

27

 

 

SECTION 13.11 Liability Cumulative

28

 

ARTICLE XIV

 

28

MISCELLANEOUS PROVISIONS

28

 

 

SECTION 14.01 Counterparts

28

 

 

SECTION 14.02 Amendments, Changes and Modifications

28

 

 

SECTION 14.03 Payment of Costs, Fees and Expenses

28

 

 

SECTION 14.04 Payment Procedure

29

 

 

 

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SECTION 14.05 Payments on Business Days

29

 

SECTION 14.06 CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

 29  

 

SECTION 14.07 Severability

31

 

SECTION 14.08 Notices

31

 

SECTION 14.09 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS

33

 

SECTION 14.10 Term of this Agreement

33

 

 

SECTION 14.11 Assignments; Third-Party Rights

33

 

 

SECTION 14.12 Headings

34

 

 

SECTION 14.13 General Interpretive Principles

34

 

 

SECTION 14.14 Interpretation

34

 

 

SECTION 14.15 Standards for Decisions, Etc

34

 

 

SECTION 14.16 Decisions in Writing

34

 

 

APPENDIX I

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