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Exhibit 10.31
 
Loan Number: 080609
 

 
CREDIT AGREEMENT
 
BY AND BETWEEN

 
ESSEX CAL-WA, L.P., as Borrower
 
 
AND
 
 
NORTHMARQ CAPITAL, INC., as Lender

 
November 17,2008

 
 

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1.
DEFINITIONS
1
 
1.1.
Definitions
1
 
1.2.
Construction
14
 
1.3.
Accounting Principles
15
2.
REVOLVING CREDIT FACILITY
15
 
2.1.
Revolving Credit Commitment
15
 
2.2.
Term
16
 
2.3.
Nature of Lender's Obligations with Respect to the Loan
18
 
2.4.
Fees and Costs
18
 
2.5.
Loan Requests
21
 
2.6.
The Loan
24
 
2.7.
The Note
24
 
2.8.
Use of Proceeds
25
 
2.9.
Additions to the Collateral Pool
25
 
2.10.
Release of Collateral
27
 
2.11.
Payment of the Loan Balance Without Termination
28
 
2.12.
Valuations
28
 
2.13.
Termination
29
 
2.14.
Material Adverse Change to Borrower or a Collateral Pool Property.....
31
 
2.15.
Release of Collateral Followed by a Permanent Loan
32
 
2.16.
Loan Documents
33
3.
INTEREST RATES
33
 
3.1.
Interest Rate
34
 
3.2.
Interest Rate Determinations
34
 
3.3.
Interest Periods
34
 
3.4.
Reference Bills® Rate Unascertainable: Illegality; Increased Costs
37
4.
PAYMENTS
38
 
4.1.
Payments
38
 
4.2.
Payment Dates
38
 
4.3.
Prepayments
38
 
4.4.
Prepayment Fee
40
 
4.5.
Additional Payment Obligations
41
 
4.6.
Additional Compensation in Certain Circumstances
41

 
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4.7.
Non-Recourse
42
5.
CONDITIONS OF LENDING
42
 
5.1.
Initial Borrowing Tranche
43
 
5.2.
Each Subsequent Borrowing Tranche
45
6.
REPRESENTATIONS AND WARRANTIES
45
 
6.1.
Representations and Warranties
45
 
6.2.
Updates
55
 
6.3.
Survival of Representations and Warranties
55
7.
COVENANTS
56
 
7.1.
Covenants
56
 
7.2.
Reporting Requirements
62
 
7.3.
Escrows
63
8.
DEFAULT
63
 
8.1.
Events of Default
63
 
8.2.
Consequences of Event of Default
65
 
8.3.
Notice of Sale
66
9.
MISCELLANEOUS
66
 
9.1.
Cooperation by Borrower; Borrower's Obligations
66
 
9.2.
Successors and Assigns
66
 
9.3.
Modifications, Amendments or Waivers
66
 
9.4.
Forbearance
66
 
9.5.
Remedies Cumulative
67
 
9.6.
Reimbursement and Indemnification of Lender and Servicer by Borrower; Taxes
67
 
9.7.
Holidays
68
 
9.8.
Notices
68
 
9.9.
Severability
69
 
9.10.
Governing Law; Consent to Jurisdiction and Venue
69
 
9.11.
Prior Understanding
70
 
9.12.
Duration; Survival
70
 
9.13.
Disclosure of Information
70
 
9.14.
Exceptions
70
 
9.15.
Relationship of Parties; No Third Parties Benefited
70

 
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9.16.
Authority to File Notices
71
 
9.17.
WAIVER OF TRIAL BY JURY
71
 
9.18.
Interpretation
71
 
9.19.
Brokerage Fee
71
 
9.20.
Advertising
72
 
9.21.
Time of Essence
72
 
9.22.
Counterparts
72
 
9.23.
NOTICE OF FINAL AGREEMENT
72
SCHEDULE 1.1(A) LIST OF COLLATERAL POOL PROPERTIES AND ASSOCIATED INITIAL NET
OPERATING INCOMES AND MARKET VALUES
1
SCHEDULE 1.1(B) LIST OF COLLATERAL POOL PROPERTY DOCUMENTS
1
SCHEDULE 1.1(C) FORM OF FIXED RATE NOTE
1
SCHEDULE 2.2 FORM OF SCHEDULED MATURITY DATE EXTENSION CONFIRMATION
1
SCHEDULE 2.4.6.2 FORM OF NET SPREAD CONFIRMATION
1
SCHEDULE 2.5 FORM OF LOAN REQUEST
1
SCHEDULE 2.5.2 FORM OF COMMITMENT LETTER
1
SCHEDULE 3.2 NET SPREAD TABLE
1
SCHEDULE 3.3.3 RENEWAL REQUEST
1
SCHEDULE 4.4 BASE RATE BORROWING TRANCHE PREPAYMENT FEE
1

 
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CREDIT AGREEMENT
 
THIS CREDIT AGREEMENT ("Agreement") is dated as of November 17, 2008 and is made
by and between ESSEX CAL-WA, L.P., a California limited partnership, having an
address at 925 East Meadow Drive, Palo Alto, CA 94303 ("Borrower") and NORTHMARQ
CAPITAL, INC., a Minnesota corporation, having an address at 3500 American
Boulevard West, Suite 500, Bloomington, MN 55431-4435.
 
RECITALS
 
WHEREAS, Borrower desires to obtain a revolving credit facility from Lender in
an amount up to, but not exceeding ONE HUNDRED FIFTY MILLION and NO/100 Dollars
($150,000,000.00, subject to increase to an amount not to exceed TWO HUNDRED
FIFTY MILLION and NO/100 Dollars ($250,000,000.00) as provided herein;
 
WHEREAS, Borrower has offered to grant Lender a security interest in certain
real property and other assets owned by Borrower as security for Borrower's
repayment of such revolving loan; and
 
WHEREAS, Lender is willing to make the above described loan to Borrower secured
by an interest in such real property and other assets owned by Borrower.
 
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants
and agreements hereinafter set forth and intending to be legally bound hereby,
covenant and agree as follows:
 
1.             DEFINITIONS
 
1.1.          Definitions.
 
In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
 
"Addition Fee" shall have the meaning set forth in Section 2.9.3.
 
"Affiliate" or "Affiliates" shall mean (x) as to Borrower, any Essex Affiliate
(as defined in the Security Instrument) and (y) as to any Person (other than
Borrower), any other Person (i) which directly or indirectly controls, is
controlled by, or is under common control with such Person, (ii) which
beneficially owns or holds five percent (5%) or more of any class of the voting
or other equity interests of such Person, or (iii) five percent (5%) or more of
any class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.

 

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"Agreement" shall mean this Credit Agreement, as the same may be supplemented or
amended from time to time, including all schedules attached hereto.
 
"Authorized Officer" shall mean those individuals, designated by written Notice
to Lender from Borrower, authorized to execute Notices, reports and other
documents on behalf of Borrower required hereunder; provided, further, that the
individuals so designated as the Authorized Officers of Borrower shall be the
sole representatives of Borrower for the purpose of giving or receiving any
Notices permitted or required by this Agreement. Borrower may amend such list of
individuals from time to time by giving written Notice of such amendment to
Lender.
 
"Base Rate" shall mean the Reference Bills® Rate plus the applicable Margin (or
the LIBO Rate, but only as provided for in Sections 3.4.1 and 3.4.2 of this
Agreement, plus the applicable Margin). Interest accruing at the Base Rate shall
be calculated monthly in the manner provided in this Agreement based on the
aggregate principal balance of the Base Rate Borrowing Tranches outstanding
during the applicable Month, and such interest shall be paid in arrears, as
provided herein. The Reference Bills® Rate (or the LIBO Rate, but only as
provided for in Sections 3.4.1 and 3.4.2 of this Agreement), with respect to
each Base Rate Borrowing Tranche shall remain fixed throughout the applicable
Interest Period and shall then be recalculated as of each renewal of such Base
Rate Borrowing Tranche in accordance with Section 3.2.1. The Margin with respect
to each Base Rate Borrowing Tranche shall be determined and redetermined from
time to time in accordance with Section 3.2.1.
 
"Base Rate Borrowing Tranche" shall mean any Borrowing Tranche which accrues
interest at the Base Rate.
 
"Benefit Arrangement" shall mean at any time an "employee benefit plan," within
the meaning of Section 3(3) of ERISA, including without limitation a Pension
Plan or a Multiemployer Plan and which is maintained, sponsored or otherwise
contributed to by any member of the ERISA Group.
 
"Borrower" shall mean the entity(ies) defined as Borrower in the Recitals
together with any Proposed Borrower that joins in this Agreement pursuant to the
terms and conditions of Section 2.9.2.2.
 
"Borrower's knowledge" shall mean the knowledge of any officer or employee of
Borrower and/or any Affiliate, including, but not limited to, any Affiliate
which manages or operates any of the Collateral Pool Properties.
 
"Borrowing Date" shall mean, with respect to any Borrowing Tranche, the date of
borrowing or renewal, as the case may be, which shall be a Business Day or, in
the case of a renewal which would otherwise fall on a day other than a Business
Day, the first Business Day thereafter.
 
"Borrowing Tranche" shall mean each advance at the Base Rate hereunder having a
particular Interest Period outstanding at any one time, and all advances at the
Prime Rate and each advance at a Fixed Rate pursuant to a Fixed Rate Note. Two
(2) or more Borrowing Tranches accruing interest at a Base Rate may be combined
to form a single Borrowing Tranche with the same Interest Period (a) without
Prepayment Fee or other penalty or fee in the event such two (2) or more
Borrowing Tranches mature and are renewed at the same time with the same
Interest Period or (b) in the event two (2) or more Borrowing Tranches mature at
different times, with the applicable Prepayment Fee if one (1) or more Borrowing
Tranches are advanced or prepaid and at the request of the Borrower then
combined with one (1) or more other Borrowing Tranches with the same Interest
Period. For all purposes hereunder, all Prime Rate fundings required hereunder
shall be aggregated and deemed a single Borrowing Tranche.

 
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"Breakage Fee" shall have the meaning set forth in Section 2.5.2.2.
 
"Business Day" shall mean any day other than (i) a Saturday or Sunday or a legal
holiday on which either Lender or Servicer is closed for business, and (ii) in
connection with any Loan Request or Renewal Request for a Base Rate Borrowing
Tranche which will accrue interest in part based on the LIBO Rate, any day in
which business is not carried on in the London interbank market.
 
"Closing Date" shall mean the first date on which both of the following
requirements are met: (i) this Agreement has been fully executed and (ii) all
conditions to closing set forth in Section 5.1 hereof shall have been satisfied.
The closing shall take place on the Closing Date at such time and place as the
parties agree. Lender shall notify Borrower promptly after the Closing Date in
writing setting forth the Closing Date.
 
"Collateral" shall mean the Collateral Pool Properties, and all other property
of Borrower on which first priority liens and security interests have been
granted for the benefit of Lender to secure the Loan and all other obligations
of Borrower under the Collateral Pool Property Documents.
 
"Collateral Agreements" shall mean (i) any agreements between Borrower and
Lender for the purpose of establishing replacement reserves for the Collateral
Pool Properties or a particular Collateral Pool Property, including (a)
agreements establishing a fund to assure the completion of repairs or
improvements specified in any such agreement, or (b) agreements assuring a
reduction of the outstanding principal balance of the Loan if the occupancy
income from a Collateral Pool Property does not increase to a level specified in
such agreement, and (ii) any other agreement or agreements between Borrower and
Lender which provide for the establishment of any other fund, reserve or
account, all of the foregoing to be imposed only pursuant to an express written
agreement between Borrower and Lender entered into (a) at the Closing Date, or
(b) with respect to real estate properties added to the Collateral Pool pursuant
to Section 2.9, at or prior to such addition.
 
"Collateral Pool", "Collateral Pool Property" and "Collateral Pool Properties"
shall mean the multi-family real property or properties, as the case may be, as
set forth in Schedule 1.1(A). together with any multi-family real properties
which have been added to the Collateral Pool and less any real properties which
have been released from the Collateral Pool hereunder. Schedule 1.1(A) shall be
deemed amended each time a Collateral Pool Property is added to the Collateral
Pool or released from the Collateral Pool.
 
"Collateral Pool Property Documents" shall mean the Lender's then current
versions of the Security Instruments, assignments of leases and rents,
guaranties, indemnities, Collateral Agreements, O&M Programs, and any other
documents now or in the future executed (or, in the case of a UCC financing
statement, authorized) by Borrower, any guarantor or any other person or entity
in connection with the Loan or the Collateral, as such documents may be amended
from time to time. The Collateral Pool Property Documents shall include, but not
be limited to, those documents set forth in Schedule 1.1(B).

 
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"Commitment" shall mean ONE HUNDRED AND FIFTY MILLION and NO/100 Dollars
($150,000,000.00) as of the Closing Date, subject to increase as provided in
Section 2.1(b) hereof.
 
"Commitment Letter" shall mean a commitment letter issued by Lender in
connection with locking a Fixed Rate for a Fixed Rate Borrowing Tranche pursuant
to Section 2.5.2 hereof, which commitment letter shall be substantially in the
form of Schedule 2.5.2 hereto.
 
"Deemed Minimum Loan Amount" shall mean an amount equal to twenty-five percent
(25%) of the Commitment.
 
"Dollar", "U.S. Dollars" and the symbol $ shall mean lawful money of the United
States of America.
 
"Early Termination Fee" shall have the meaning set forth in Section
2.13.4 hereof.
 
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended or supplemented from time to time, and any successor statute
of similar import, and the rules and regulations thereunder, as from time to
time in effect.
 
"ERISA Group" shall mean, at any time, Borrower and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control and all other entities which, together with Borrower, are
treated as a single employer under Section 414 of the Internal Revenue Code.
 
"Event of Default" shall mean any of the events described in Section 8.1 or
otherwise referred to herein as an "Event of Default".
 
"Expansion Option Date" shall have the meaning set forth in Section
2.1(b) hereof.
 
"Expiration Date" shall mean the earlier to occur of (i) the Maturity Date, or
(ii) the date specified by Borrower as the Expiration Date under Section 2.13.2.
 
"Facility Debt Service" shall mean, for the purposes of this Agreement, the sum
of (i) the interest due on the Note, including any default interest (with
respect to the Revolving Credit Note, subject to a floor of two percent (2.0%),
for the Reference Bills® Rate or any other index then being used by Lender to
determine the interest rate of the Revolving Credit Note pursuant to this
Agreement) and (ii) with respect to the Revolving Credit Note, an amount equal
to one hundred basis points (0.01) of the then outstanding amount of such
Revolving Credit Note, but exclusive of any voluntary or mandatory principal
prepayments allowed or required hereunder. Facility Debt Service shall be
annualized at the time of Lender's determination based on the interest rates
then accruing under all outstanding Borrowing Tranches, notwithstanding the
duration of any Interest Period or the maturity date of any Fixed Rate Note.
Facility Debt Service shall be recalculated (a) as of each Loan Request, (b) as
of each Renewal Request, or deemed renewal under Section 3.3.3, (c) on or about
September 1st of each calendar year during the term of this Agreement,
commencing on or about September 1, 2009, (d) as of each addition, substitution
or deletion of a property to or from the Collateral Pool, (e) as of each
repayment of any principal portion of the Loan, (f) as of the exercise of the
First Extension Option or the Second Extension Option, as applicable, (g) as of
the Expansion Option Date and (h) upon the occurrence of any Material Adverse
Change.

 
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"Facility Debt Service Coverage Ratio" shall mean, at the time of Lender's
determination, the then prevailing computation of Net Operating Income of the
Collateral Pool Properties divided by the then prevailing computation of
Facility Debt Service.
 
"First Extension Option" shall have the meaning set forth in Section 2.2(b)
hereof.
 
"Fixed Rate" shall mean, with respect to any Fixed Rate Borrowing Tranche, the
sum of (i) the US Treasury Security index (as published in The Wall Street
Journal or other available publications, as determined by Lender) plus (ii) the
applicable Margin.

 
"Fixed Rate Borrowing Tranche" shall mean any Borrowing Tranche evidenced by a
Fixed Rate Note. For all purposes hereunder, each Fixed Rate Note shall evidence
a single Fixed Rate Borrowing Tranche and each Fixed Rate Borrowing Tranche
shall accrue interest at the Fixed Rate set forth in the Fixed Rate Note
evidencing such Borrowing Tranche. If Borrower exercises the First Extension
Option or the Second Extension Option, as applicable, in accordance with Section
2.2 hereof, (i) the Fixed Rate that will be applicable for any Fixed Rate
Borrowing Tranche existing on the applicable Scheduled Maturity Date during such
applicable extension period will be redetermined by Lender based on the then
current market level determined in its sole discretion and communicated to
Borrower (provided, that Lender will communicate an indicative (but not final)
Fixed Rate for such extension period to Borrower at least forty-five (45) days
prior to the applicable Scheduled Maturity Date) and (ii) the Margin that will
be used to determine the Fixed Rate applicable for any Fixed Rate Borrowing
Tranche advanced during such applicable extension period shall be determined by
Lender based on the then current market level determined in its sole discretion
and communicated to Borrower in accordance with Section 2.5.2. Notwithstanding
the foregoing, if Borrower exercises the First Extension Option or the Second
Extension Option, as applicable, in accordance with Section 2.2 hereof, Borrower
may elect at any time during such extension period to convert any Fixed Rate
Borrowing Tranche existing on the applicable Scheduled Maturity Date to a Base
Rate Borrowing Tranche, and the Net Spread applicable for any such Base Rate
Borrowing Tranche(s) during such extension period shall be determined by Lender
in accordance with Section 2.4.6.2.
 
"Fixed Rate Note" shall mean collectively (or individually, as and when the
context shall require) any Freddie Mac Multifamily Note evidencing indebtedness
accruing interest at the fixed interest rate set forth in such Multifamily Note
as calculated pursuant to such Multifamily Note, together with all amendments,
extensions, renewals, replacements, refinancings, refundings or replacements of
any such Multifamily Note, in whole or in part. The form of each Fixed Rate Note
shall be substantially similar to the form attached hereto as Schedule 1.1(C).

 
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"Freddie Mac" shall mean the Federal Home Loan Mortgage Corporation.
 
"GAAP" shall mean generally accepted accounting principles as are in effect from
time to time, subject to the provisions of Section 1.3, and applied on a
consistent basis both as to classification of items and amounts.
 
"Indebtedness" shall mean at any time and from time to time the principal amount
of the Revolving Credit Note and/or any Fixed Rate Note then outstanding,
interest thereon, and any other amounts due under the Revolving Credit Note
and/or any Fixed Rate Note, this Agreement, the Security Instrument(s) or any
other Loan Document, including, without limitation, prepayment premiums,
Prepayment Fees, Unused Facility Fees, Minimum Usage Fees, other fees due
hereunder or thereunder, late charges, default interest, and advances to protect
the security of the Security Instrument under Section 12 of the Security
Instrument.
 
"Initial Market Value" shall mean the Market Value of any Collateral Pool
Property as of the date the same is included in the Collateral Pool pursuant to
the provisions hereof. The Initial Market Value of the Collateral Pool
Properties is shown at Schedule 1.1(A).
 
"Interest Period" shall have the meaning assigned to such term in Section 3.3.
 
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor statute
of similar import, and the rules and regulations thereunder, as from time to
time in effect.
 
"Law" shall mean any applicable law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
 
"Lender" shall mean at any time and from time to time, the entity that is the
holder of the Revolving Credit Note and any Fixed Rate Note, provided that
Lender may in its sole discretion designate Servicer to perform some or all of
Lender's obligations under this Agreement, the Revolving Credit Note, any Fixed
Rate Note and the other Loan Documents. NorthMarq, the initial Lender, intends
to sell the Revolving Credit Note and any Fixed Rate Note to Freddie Mac and
assign all of its interests in this Agreement and the other Loan Documents to
Freddie Mac subsequent to the Closing Date, provided the Collateral Pool
Properties serve as Collateral for the Loan as of the date of said assignment.
 
"LIBO Rate" shall mean, with respect to any Base Rate Borrowing Tranche, the
rate of interest, rounded to the nearest basis point (i.e., one-hundredth of one
percent (.0001)), displayed as of 11:00 a.m. London time on the second Business
Day preceding the first day of the applicable Interest Period on the Bloomberg,
L.P., page "BBAM", as the British Bankers Association ("BBA") LIBO Rate (such
page, or such other page as may replace page BBAM on that service, or at the
option of Lender (i) the applicable page on another credible and generally
recognized service which electronically transmits or displays BBA LIBO Rates for
the applicable Interest Period or (ii) any publication of LIBO Rates available
from BBA for the applicable Interest Period, is referred to as the "Designated
Bloomberg Page") for purposes of calculating effective rates of interest for
loans or obligations for an amount comparable to such Borrowing Tranche and
having a term equal to the Interest Period. If the Designated Bloomberg Page is
not available, but such information is generally still published, the LIBO Rate
for such Interest Period will be the BBA LIBO Rate most recently published for
such Interest Period.

 
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"Lien" shall mean any Security Instrument, pledge, lien, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever,
whether voluntarily or involuntarily given, including any conditional sale or
title retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security and any filed financing statement
or other notice of any of the foregoing (whether or not a lien or other
encumbrance is created or exists at the time of the filing).
 
"Loan" shall mean the sum of all Borrowing Tranches outstanding at any one time.
 
"Loan Document" or "Loan Documents" shall mean any or all of this Agreement, the
Revolving Credit Note, the Fixed Rate Note(s), if any, the Collateral Pool
Property Documents and any other instruments, certificates or documents
delivered or contemplated to be delivered hereunder or thereunder or in
connection herewith or therewith, as the same may be supplemented or amended
from time to time in accordance herewith or therewith.
 
"Loan to Value Ratio" shall mean the product, expressed as a percentage,
determined by dividing the Loan by the aggregate of the then current Market
Values of the Collateral Pool Properties. The Loan to Value Ratio shall be
recalculated based on Lender's then current underwriting policies consistently
applied (a) as of each Loan Request, (b) as of each Renewal Request, or deemed
renewal under Section 3.3.3, (c) on or about September 1st of each calendar year
during the term of this Agreement, commencing on or about September 1, 2009, (d)
as of each addition, substitution or deletion of a property to or from the
Collateral Pool, (e) as of each repayment of any principal portion of the Loan,
(f) as of the exercise of the First Extension Option or the Second Extension
Option, as applicable, (g) as of the Expansion Option Date and (h) upon the
occurrence of any Material Adverse Change.
 
"Loan Request" shall have the meaning given to such term in Section 2.5.
 
"Margin" shall mean (i) with respect to a Base Rate Borrowing Tranche, the sum
of the Net Spread and the Servicing Spread and (ii) with respect to a Fixed Rate
Borrowing Tranche, the sum of the Required Net Yield and the Servicing Spread.
 
"Market Value" shall mean as to each individual Collateral Pool Property, the
Initial Market Value of such property, as such Market Value may be subsequently
increased or decreased in accordance with the terms and conditions of this
Agreement; provided, that, with respect to Collateral Pool Properties acquired
by Borrower (or an Affiliate) within twelve months prior to such property being
added to the Collateral Pool, the Initial Market Value shall not exceed the sum
of (i) the purchase price paid by Borrower (or an Affiliate) for such Collateral
Pool Property, (ii) the acquisition costs (not to exceed three percent (3%) of
the purchase price paid by Borrower (or an Affiliate) paid by Borrower (or an
Affiliate) in connection with the purchase of such Collateral Pool Property and
(iii) any escrows held by or on behalf of Lender on account of capital
expenditures (i.e. replacement reserves or repair escrows) for such Collateral
Pool Property.

 
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"Material Adverse Change" shall mean any set of circumstances or events which,
in Lender's reasonable discretion would have or is then reasonably expected to
have a material adverse effect on (i) the validity or enforceability of this
Agreement or the other Loan Documents taken as a whole, (ii) the ability of
Borrower to duly and punctually pay or perform its Obligations, (iii) the
ability of Lender to enforce its legal remedies pursuant to this Agreement or
the other Loan Documents taken as a whole, including, without limitation, by
realizing upon any Collateral or any guaranty, (iv) the business prospects or
financial condition of Borrower or any guarantor, (v) the financial performance
or Market Value of any Collateral Pool Property, or (vi) the compliance of any
Collateral Pool Property with any Law dealing with the use, ownership or
operating of a Collateral Pool Property, the noncompliance with which could
reasonably be expected to have a material adverse effect on the financial
performance or Market Value of any Collateral Pool Property.
 
"Maturity Date" shall mean, the earlier of (i) the Scheduled Maturity Date and
(ii) the date on which the unpaid principal balance of the Revolving Credit Note
and/or any Fixed Rate Note becomes due and payable by acceleration or otherwise
pursuant to this Agreement or any Loan Document or the exercise by Lender of any
right or remedy under this Agreement or any Loan Document.
 
"Maximum Facility Available" shall mean, at the time of determination, the
maximum amount which Borrower may borrow under this Agreement without violating
the Sublimits set forth in Section 2.5.3.
 
"Maximum Loan to Value Ratio" shall mean sixty-five percent (65%).
 
"Minimum Usage Fee" shall have the meaning set forth in Section 2.4.4.
 
"Month" shall mean the appropriate calendar month.
 
"Monthly Payment Statement" shall have the meaning given to such term in Section
4.2.
 
"Mortgage Review Fee" shall mean a non-refundable fee in the amount of FIVE
THOUSAND and NO/100 Dollars ($5,000.00) per real property.
 
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which Borrower or any member of the ERISA Group is then making or accruing an
obligation to make contributions or, within the preceding five (5) Pension Plan
years, has made or. had an obligation to make such contributions.
 
"Net Operating Income" shall mean an annualized dollar amount, as determined by
Lender in its sole but reasonable discretion in accordance with Lender's then
applicable underwriting standards, which is equal to all income from the
operations of the Collateral Pool Properties that is available for repayment of
debt and return of equity after deducting for economic vacancy and all expenses
(exclusive of debt service on account of the Loan). Net Operating Income shall
be calculated by Lender for each individual Collateral Pool Property as of the
Closing Date and thereafter on or about September 1st, commencing on or about
September 1, 2009, of each calendar year during the term of this Agreement, in
accordance with Lender's then current methodology, consistently applied,
excluding from such calculation expenses from depreciation, amortization,
interest expenses, non-recurring items and capital expenses, but including in
such calculation an assumed capital expense reserve in an amount consistent with
Lender's then current requirements for such capital reserves. In addition, upon
the addition, substitution or release of any real property in the Collateral
Pool pursuant to the provisions hereof, Lender shall redetermine Net Operating
Income for the Collateral Pool in the following manner: (i) in the event of an
addition of a real property to the Collateral Pool, Lender shall add the Net
Operating Income of the real property added to the Collateral Pool to the most
recent determination of Net Operating Income for the existing Collateral Pool;
(ii) in the event of a release of a real property from the Collateral Pool,
Lender shall subtract the Net Operating Income of the real property released
from the Collateral Pool from the most recent determination of Net Operating
Income for the Collateral Pool; of (iii) in the event of a substitution of a
real property in the Collateral Pool, Lender shall (x) add the Net Operating
Income of the real property added to in the Collateral Pool to the most recent
determination of Net Operating Income for the existing Collateral Pool and (y)
subtract the Net Operating Income of the real property released from the
Collateral Pool from the most recent determination of Net Operating Income for
the Collateral Pool.

 
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"Net Spread" shall have the meaning set forth in Section 2.4.6.2 with respect to
any Base Rate Borrowing Tranche hereunder.
 
"NorthMarq" shall mean NorthMarq Capital, Inc., a Minnesota corporation.
 
"Note" shall mean the Revolving Credit Note and the Fixed Rate Note(s), if any,
individually or collectively, as the context may require.
 
"Notice" shall have the meaning given to that term in Section 9.8.
 
"O&M Programs" shall mean a written program of operations and maintenance for a
Collateral Pool Property approved in writing by Lender.
 
"Obligation" shall mean any obligation or liability of Borrower to Lender,
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, under or in
connection with this Agreement, the Revolving Credit Note, any Fixed Rate Note
or any other Loan Document, excluding any Permanent Loan or any other liability
of Borrower to Lender not created under this Agreement, the Revolving Credit
Note, any Fixed Rate Note or the other Loan Documents.
 
"Official Body" shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, bureau,
commission, department or instrumentality of either, or any court, tribunal,
grand jury or arbitrator, in each case whether foreign or domestic.
 
"Payment Date" shall have the meaning given to that term in Section 4.2.
 
"PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.

 
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"Pension Plan" shall mean at any time an employee pension benefit plan which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five (5) years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
 
"Permanent Loan" shall have the meaning assigned to that term in Section 2.15.1.
 
"Permanent Loan Collateral" shall have the meaning assigned to that term in
Section 2.15.1.
 
"Permitted Exceptions" shall mean:
 
(a)           Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
 
(b)           Liens of mechanics, materialmen, warehousemen, carriers, or other
like Liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable;
 
(c)           Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of a real property, none of which (i) materially impairs
the use of such property or the value thereof, (ii) is violated in any material
respect by existing or proposed structures or land use, subject to
"grandfathering" and other permitted non-conforming uses as permitted by Lender
during underwriting, or (iii) impairs Borrower's ability to rebuild, repair or
restore any improvements located on a Collateral Pool Property following a
casualty unless the same has been disclosed to Lender in writing and is subject
to law and ordinances coverage acceptable to Lender in its sole discretion;
 
(d)           Liens, security interests and mortgages in favor of Lender for the
benefit of Lender;
 
(e)           Encumbrances listed as exceptions to Lender's title insurance
policies for the Collateral Pool Properties;
 
(f)           Rights of tenants under residential leases and other retail and
commercial leases permitted under the Loan Documents;
 
(g)           Liens on or leases of personal property; and
 
(h)           Liens or encumbrances otherwise agreed to by Lender in writing
from time to time.
 
"Person" shall mean any individual, corporation, partnership, limited liability
company, association, joint-stock company, trust, unincorporated organization,
joint venture, government or political subdivision or agency thereof, or any
other entity.

 
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"Potential Default" shall mean any event or condition which, with the passage of
time, the giving of notice, or a determination by Lender, or any combination of
the foregoing, would constitute an Event of Default.
 
"Prepayment Fee" shall have the meaning set forth in Section 4.4.
 
"Prime Rate" shall mean the rate of interest per annum established on the first
day of each Month during the term hereof and published in The Wall Street
Journal as the prime rate, or any comparable publication reasonably selected by
Lender in the event The Wall Street Journal no longer publishes the prime rate.
 
"Prime Rate Borrowing Tranche" shall mean all Prime Rate fundings in the
aggregate which accrue interest at the Prime Rate. Notwithstanding anything to
the contrary contained herein, no Prime Rate Borrowing Tranches will be
permitted hereunder except as may be required pursuant to Sections 3.3.2 or
3.4.3.

 
"Prohibited Transaction" shall mean any prohibited transaction as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.
 
"Proposed Borrower" shall mean a Single Asset Entity that is an Affiliate of
Borrower and is the owner of one or more properties which have been proposed to
be included in the Collateral Pool, pursuant to the terms hereof.
 
"Rate Lock" shall have the meaning set forth in Section 2.5.2.1.
 
"Rate Lock Termination Event" shall have the meaning set forth in Section
2.5.2.2.
 
"Reference Bills " shall mean the unsecured general obligations of Freddie Mac
designated by Freddie Mac as "Reference Bills® Securities" and issued by Freddie
Mac at regularly scheduled auctions. In the event Freddie Mac shall at any time
cease to designate any unsecured general obligations of Freddie Mac as
"Reference Bills , Lender shall be permitted to exercise its rights under
Section 3.4.
 
"Reference Bills® Rate" shall mean, with respect to each Base Rate Borrowing
Tranche, the "Money Market Yield" (or any equivalent terms designated by Lender)
applicable to the Reference Bills® (i) having an original maturity most
comparable to the term of the Interest Period for the applicable Borrowing
Tranche and (ii) issued at the most recently conducted regularly scheduled
auction preceding the commencement of the Interest Period for such Borrowing
Tranche, as the same is displayed (a) on the Reference Bill Index Page (i.e.,
the Freddie Mac debt securities web page accessed via the Freddie Mac website at
www.freddiemac.com), or (b) at the option of Lender, in any publication of
Reference Bills® auction results designated by Freddie Mac. Notwithstanding any
of the foregoing to the contrary, in the event Freddie Mac has not conducted a
Reference Bills® auction within the sixty (60) calendar day period prior to the
first day of the Interest Period for any Base Rate Borrowing Tranche requested
under Sections 2.5 or 3^3 hereof, the Reference Bills® Rate shall be deemed to
be unascertainable and Lender shall be permitted to exercise its rights under
Section 3.4.

 
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"Release Fee" shall have the meaning set forth in Section 2.10.
 
"Renewal Date" shall have the meaning given to such term in Section 3.3.3.
 
"Renewal Request" shall have the meaning given to such term in Section 3.3.3.
 
"Reportable Event" shall mean a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Pension Plan or Multiemployer
Plan.
 
"Required Net Yield" shall mean the required net yield used to calculate the
Margin applicable to any Fixed Rate Borrowing Tranche advanced on or after the
Closing Date, as determined by Lender in its sole discretion in accordance with
Section 2.5.2.
 
"Revolving Credit Note" shall mean the Multifamily Note of Borrower, in the face
amount of the Commitment, which evidences the Loan, together with all
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
 
"Revolving Credit Note Re-Pricing Termination Option" shall have the meaning
given to such term in Section 2.13.2.
 
"Scheduled Maturity Date" shall mean December 1, 2013, unless otherwise extended
pursuant to Section 2.2(b) and Section 2.2(c) hereof.
 
"Second Extension Option" shall have the meaning set forth in Section 2.2(c)
hereof.
 
"Security Instrument" shall mean any mortgage, deed of trust, or deed to secure
debt secured by any of the Collateral Pool Property(ies).
 
"Seismic Report Fee" shall mean a non-refundable fee equal to Lender's
reasonable out-of-pocket costs and expenses incurred in obtaining a seismic
report with respect to any real property for which Lender, in its discretion,
deems such report necessary.
 
"Servicer" shall mean NorthMarq, or any subsequent independent contractor
appointed by Lender, at Lender's sole cost and expense, to administer the Loan
and the Loan Documents or otherwise perform certain functions in connection
therewith under the terms of a Servicing Agreement. Pursuant to the terms of any
Servicing Agreement, Lender may designate Servicer to perform some or all of
Lender's obligations under this Agreement, the Revolving Credit Note, any Fixed
Rate Note and the other Loan Documents.
 
"Servicing Agreement" shall mean any agreement between Lender and an independent
contractor pursuant to which Lender appoints said independent contractor as
Servicer under this Agreement, the Revolving Credit Note, any Fixed Rate Note
and the other Loan Documents.
 
"Servicing Spread" shall mean four basis points (0.0004).
 
"Single Asset Entity" shall mean an entity which conforms to the requirements of
Section 33 of the Security Instrument.  Notwithstanding the foregoing, a Single
Asset Entity may own one or more of the Collateral Pool Properties so long as
each Collateral Pool Property is subject to the Liens created pursuant to the
Loan Documents.

 
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"Solvent" shall mean, with respect to any Person on a particular date, that on
such date (i) the fair value of the assets of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (iv) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability of such Person after giving
effect to any rights of contribution, subrogation or indemnification of such
Person.
 
"Streamlined Refinancing Program" shall mean Lender's then current program for
refinancing a performing loan in its loan portfolio.
 
"Sublimits" shall have the meaning assigned to that term in Section 2.5.3.
 
"Treasury Rate" shall mean the yield rate as of the date which is five (5)
Business Days prior to the Expiration Date, on a U.S. Treasury Security with a
term of five (5) years and a maturity date most nearly approximating the
Maturity Date, as reported in The Wall Street Journal, expressed as a decimal
calculated to five (5) digits. In the event no yield is published on the
applicable date for such Treasury Security, Lender, in its reasonable
discretion, shall select the non-callable U.S. Treasury Security maturing in the
same year as the Maturity Date with the lowest yield published in The Wall
Street Journal as of the applicable date. If the publication of such yield rate
in The Wall Street Journal is discontinued for any reason, Lender shall, in its
reasonable discretion, select a security with a comparable rate and term to a
U.S. Treasury Security with a term of five (5) years and a maturity date most
nearly approximating the Maturity Date.
 
"Underwriting Materials" shall mean all materials required by Lender pursuant to
Lender's then current loan underwriting requirements including, without
limitation, a current appraisal acceptable to Lender for the proposed real
property(ies).
 
"Uniform Commercial Code" shall have the meaning assigned to that term in
Section 6.1.13.
 
"Unused Facility Fee" shall have the meaning assigned to that term in Section
2.4.3.
 
"Valuation" shall have the meaning set forth in Section 2.12.

 
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"Window Period" shall mean, with respect to any Fixed Rate Note, the three (3)
consecutive calendar month period prior to the initial Scheduled Maturity Date.
 
1.2.          Construction.
 
Unless the context of this Agreement otherwise clearly requires, the following
rules of construction shall apply to this Agreement and each of the other Loan
Documents.
 
1.2.1.       Number; Inclusion.
 
References to the plural include the singular, the plural, the part and the
whole; "or" has the inclusive meaning represented by the phrase "and/or", and
"including" has the meaning represented by the phrase "including without
limitation";
 
1.2.2.       Determination.
 
References to "determination" of or by Lender shall be deemed to include
good-faith estimates by Lender (in the case of quantitative determinations) and
good-faith beliefs by Lender (in the case of qualitative determinations) and
such determinations shall be conclusive absent manifest error;
 
1.2.3.        Lender's Discretion and Consent; References to Lender's
Requirements.
 
Whenever Lender is granted the right herein to act in its sole discretion or to
grant or withhold consent, such right shall be exercised in good faith, and
whenever a reference is made to "Lender's then current requirements", "Lender's
then current programs" or the like, such reference shall be deemed to mean such
requirements, programs and the like as are then standard in the secondary
multifamily mortgage industry, as such standards are generally reflected in the
then current version of the Freddie Mac Multifamily Seller/Servicer Guide;
 
1.2.4.        Documents Taken as a Whole.
 
The words "hereof," "herein," "hereunder," "hereto" and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document as a whole and not to any particular provision of this Agreement or
such other Loan Document;
 
1.2.5.        Headings.
 
The section and other headings contained in this Agreement or such other Loan
Document and the Table of Contents preceding this Agreement or such other Loan
Document are for reference purposes only and shall not control or affect the
construction of this Agreement or such other Loan Document or the interpretation
thereof in any respect;
 
1.2.6.        Implied References to this Agreement.
 
Article, section, subsection, clause, and schedule references are to this
Agreement unless otherwise specified, and schedules attached hereto are
incorporated herein by this reference;

 
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1.2.7.        Persons.
 
Reference to any Person includes such Person's successors and assigns (but only
if such successors and assigns are permitted by this Agreement or such other
Loan Document, as the case may be), and reference to a Person in a particular
capacity excludes such Person in any other capacity;
 
1.2.8.        Modifications to Documents.
 
Reference to any agreement (including this Agreement and any other Loan Document
together with any schedules and exhibits hereto or thereto), document or
instrument means such agreement, document or instrument as amended, modified,
replaced, substituted for, superseded or restated;
 
1.2.9.        From, To and Through.
 
Relative to the determination of any period of time, "from" means "from and
including", "to" means "to but excluding", and "through" means "through and
including"; and
 
1.2.10.      Conflicts with Other Loan Documents.
 
In the event of any conflict between the terms and provisions of this Agreement
and any other Loan Document, the terms and provisions of this Agreement shall
prevail.
 
1.3.          Accounting Principles.
 
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate) and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP. In the event of any change after the date hereof
in GAAP, and if such change would result in the inability to determine
compliance with any financial covenants set form herein, then the parties hereto
agree to endeavor, in good faith, to agree upon an amendment to this Agreement
that would adjust such financial covenants in a manner that would not affect the
substance thereof, but would allow compliance therewith to be determined in
accordance with Borrower's financial statements at that time.
 
2.             REVOLVING CREDIT FACILITY

 
2.1.          Revolving Credit Commitment.
 
(a) Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, Lender agrees to advance funds
to Borrower at any time or from time to time during the term hereof, provided
that after giving effect to any particular advance the Loan amount outstanding
at any one time shall not exceed the amount which would be permitted to be
outstanding under the Sublimits. Within such limits of time and amount and
subject to the other provisions of this Agreement, Borrower may borrow, repay
and reborrow pursuant to this Section 2.1. All advances under this Agreement,
the Revolving Credit

 
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Note and any Fixed Rate Note constitute a single indebtedness, and all of the
Collateral is security for the Revolving Credit Note, any and all Fixed Rate
Notes then outstanding and for the performance of all of the Obligations.
 
(b)           Prior to the twenty-fourth month anniversary of the Closing Date,
(the "Expansion Option Date") Borrower shall have the one-time right to increase
the Commitment as described below, up to a maximum aggregate amount of TWO
HUNDRED FIFTY MILLION and NO/100 Dollars ($250,000,000.00); provided, that (x)
Borrower shall be in compliance with the Sublimits, (y) Borrower shall be in
good standing under its jurisdiction of formation and, if required by law in the
applicable jurisdiction where a Collateral Pool Property is located, shall be
qualified to do business and in good standing in each jurisdiction where the
Collateral Pool Properties are located and (z) there are no Potential Defaults
or Event of Default(s) that have occurred and are continuing. Borrower shall
exercise such right by (i) delivering to Lender on or prior to the Expansion
Option Date written Notice of its intent to increase the Commitment, which
Notice shall be accompanied by a deposit for all reasonable costs and expenses
that Lender and Servicer may incur in connection with documenting such increase,
including, but not limited to, reasonable attorneys' fees and (ii) by executing
and where appropriate acknowledging (a) amendments to this Agreement, the
Revolving Credit Note and any of the other Loan Documents, in form and substance
reasonably acceptable to Lender, as Lender deems necessary to evidence the
increase in the Commitment, and (b) any other amendments or agreements deemed
necessary by Lender, including, but not limited to, amendments to the title
insurance policy(ies) increasing the amount of coverage provided thereunder. All
amendments referred to in clause (ii)(a) of the preceding sentence shall be
prepared by Lender's counsel and delivered to Borrower within a reasonable time
of Borrower's Notice to Lender under clause (i) of the preceding sentence. Upon
Borrower's compliance with all of the provisions of this Section 2.1(b) and upon
Borrower's payment or reimbursement of all reasonable costs and expenses that
Lender and Servicer incurred in connection with documenting the increase of the
Commitment contemplated hereunder (including, but not limited to, reasonable
attorneys' fees) that exceed any deposit delivered by Borrower above, the
Commitment shall be increased to an aggregate amount of TWO HUNDRED FIFTY
MILLION and NO/100 Dollars ($250,000,000.00). Borrower shall have the right at
any time to request an increase in the Commitment; if such request occurs on or
after the Expansion Option Date or is for amounts in excess of an aggregate
amount of TWO HUNDRED FIFTY MILLION and NO/100 Dollars ($250,000,000.00), any
such request shall be subject to Lender's approval in its sole discretion and
subject to re-pricing and such other conditions as Lender shall require in its
sole discretion.
 
2.2.          Term.
 
(a)           The term of the Loan shall commence on the Closing Date and shall
terminate on the Expiration Date unless otherwise terminated earlier pursuant to
the provisions hereof. The entire Indebtedness shall be due and payable on the
Scheduled Maturity Date without prepayment penalty or fee (other than accrued
and unpaid Minimum Usage Fees or Unused Facility Fees due hereunder).
 
(b)           Provided the following conditions are met and subject to Lender's
approval, in its sole and reasonable discretion, Borrower shall have the option
to extend the Scheduled Maturity Date for an additional period of one (1) year
(the "First Extension Option"):

 
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(i)       Borrower shall provide written Notice to Lender at least sixty (60)
days, but no more than ninety (90) days, prior to the initial Scheduled Maturity
Date, which Notice shall be supplemented by such additional information as
Lender may reasonably require to determine, in its sole and reasonable
discretion, whether the conditions set forth in this Section 2.2(b) have been
satisfied;
 
(ii)      Borrower shall pay all of Lender's and Servicer's costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred in
connection therewith prior to the initial Scheduled Maturity Date;
 
(iii)     Borrower shall provide to Lender all documents in connection therewith
as Lender shall require, in its sole and reasonable discretion (including,
without limitation, any new or amended Notes);
 
(iv)     no Potential Default or Event of Default shall have occurred and be
continuing under this Agreement or any of the Loan Documents; and
 
(v)      Borrower shall be in compliance with the Sublimits.
 
(c)           Provided the following conditions are met and subject to Lender's
approval, in its sole and reasonable discretion, Borrower shall have the option
to extend the Scheduled Maturity Date for an additional period of one (1) year
(the "Second Extension Option"):
 
(i)       Borrower shall have exercised the First Extension Option pursuant to
Section 2.2(b);
 
(ii)      Borrower shall provide written Notice to Lender at least sixty (60)
days, but no more than ninety (90) days, prior to the Scheduled Maturity Date,
which Notice shall be supplemented by such additional information as Lender may
reasonably require to determine, in its sole and reasonable discretion, whether
the conditions set forth in this Section 2.2(c) have been satisfied;
 
(iii)     Borrower shall pay all of Lender's and Servicer's reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees) incurred in
connection therewith prior to the then Scheduled Maturity Date;
 
(iv)     Borrower shall provide to Lender all documents in connection therewith
as Lender shall require, in its sole and reasonable discretion (including,
without limitation, any new or amended Notes);
 
(v)      no Potential Default or Event of Default shall have occurred and be
continuing under this Agreement or any of the Loan Documents; and
 
(vi)     Borrower shall be in compliance with the Sublimits.
 
(d)           Provided that if the First Extension Option is exercised pursuant
to Section 2.2(b) hereof, the Scheduled Maturity Date shall be December 1, 2014,
and (i) the Net Spread applicable for any Base Rate Borrowing Tranche shall be
redetermined by Lender in its sole discretion in accordance with Section
2.4.6.2 hereof and (ii) the Fixed Rate applicable for any Fixed Rate Borrowing
Tranche shall be redetermined by Lender in its sole discretion in accordance
with Section 2.4.6.1. Notwithstanding the foregoing, if Borrower exercises the
First Extension Option, Borrower may elect at any time during such extension
period to convert any Fixed Rate Borrowing Tranche existing on the initial
Scheduled Maturity Date to a Base Rate Borrowing Tranche, and the Net Spread
applicable for any such Base Rate Borrowing Tranche(s) during such extension
period shall be determined by Lender in accordance with Section 2.4.6.2 below.
Lender and Borrower shall evidence the new Scheduled Maturity Date and
applicable Net Spread pursuant to this Section 2.2(d) by executing a Scheduled
Maturity Date extension confirmation substantially in the form attached hereto
as Schedule 2.2.

 
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(e)           Provided that if the Second Extension Option is exercised pursuant
to Section 2.2(c) hereof, the Scheduled Maturity Date shall be December 1, 2015,
and (i) the Net Spread applicable for any Base Rate Borrowing Tranche shall be
redetermined by Lender in its sole discretion in accordance with Section
2.4.6.2 hereof and (ii) the Fixed Rate applicable for any Fixed Rate Borrowing
Tranche shall be redetermined by Lender in its sole discretion in accordance
with Section 2.4.6.1. Notwithstanding the foregoing, if Borrower exercises the
Second Extension Option, Borrower may elect at any time during such extension
period to convert any Fixed Rate Borrowing Tranche existing on the Scheduled
Maturity Date, as extended pursuant to Section 2.2(d) hereof, to a Base Rate
Borrowing Tranche, and the Net Spread applicable for any such Base Rate
Borrowing Tranche(s) during such extension period shall be determined by Lender
in accordance with Section 2.4.6.2 below. Lender and Borrower shall evidence
tihie new Scheduled Maturity Date and applicable Net Spread pursuant to this
Section 2.2(e) by executing a Scheduled Maturity Date extension confirmation
substantially in the form attached hereto as Schedule 2.2.
 
(f)            If Borrower does not exercise the First Extension Option, the
entire Indebtedness shall be payable on the initial Scheduled Maturity Date
without the payment of a prepayment penalty or fee (other than accrued and
unpaid Minimum Usage Fees or Unused Facility Fees due hereunder).
 
(g)           If the Borrower does not exercise the Second Extension Option, the
entire Indebtedness shall be payable on the Scheduled Maturity Date, as extended
pursuant to Section 2.2(d) hereof, without the payment of a prepayment penalty
or fee (other than accrued and unpaid Minimum Usage Fees or Unused Facility Fees
due hereunder).
 
2.3.           Nature of Lender's Obligations with Respect to the Loan.
 
Subject to the provisions of this Agreement, the aggregate amount of the Loan
outstanding hereunder at any time shall never exceed the amount which would be
permitted to be outstanding under the Sublimits. Lender shall have no obligation
to make any additional advance hereunder on or after the Business Day
immediately preceding the Maturity Date. While a Potential Default, Event of
Default or Material Adverse Change exists, Lender may refuse to make any
additional advances to Borrower.
 
2.4.           Fees and Costs.

 
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2.4.1.        Fees Paid Prior to the Closing Date.
 
Lender acknowledges that, in addition to Borrower's obligations under Section
5.1.6, Borrower has paid to Lender, as consideration for Lender's costs in
underwriting the transaction contemplated hereby, (x) a non-refundable
transaction fee in the amount of TWO HUNDRED FIFTY THOUSAND and NO/100 Dollars
($250,000.00) and (y) a Mortgage Review Fee and a Seismic Report Fee, if and as
applicable, for each property described at Schedule 1.1(A) and proposed by
Borrower to be included in the Collateral Pool on the Closing Date.
 
2.4.2.        Costs Due on the Closing Date.
 
2.4.2.1. Transaction Costs. Borrower shall pay on the Closing Date
(simultaneously with the closing of the Loan), as further consideration for
Lender's cost in underwriting the commitment, all reasonable out-of-pocket
costs, expenses and disbursements (including fees and expenses of counsel for
Lender and Servicer), incurred by Lender and Servicer in connection with the
negotiation and execution of this Agreement and other instruments and documents
to be delivered hereunder.
 
2.4.3.        Unused Facility Fee.
 
Accruing from the Closing Date until the Maturity Date, Borrower shall pay to
Lender, as consideration for Lender's commitment hereunder, a nonrefundable
unused facility fee (the "Unused Facility Fee") equal to fifteen basis points
(0.0015) per annum (computed on the basis of a year of 360 days and actual days
elapsed) on the average daily difference between the amount of (i) the
Commitment (reduced by the outstanding principal amounts of all Fixed Rate
Borrowing Tranches) and (ii) the greater of (a) the Deemed Minimum Loan Amount
(reduced by the outstanding principal amounts of all Fixed Rate Borrowing
Tranches) or (b) the outstanding principal amount of the Loan (reduced by the
outstanding principal amounts of all Fixed Rate Borrowing Tranches). Except as
otherwise provided in connection with Borrower's election to terminate this
Agreement prior to the Maturity Date pursuant to Section 2.13.2, in which
instance a liquidated Unused Facility Fee shall be payable in accordance with
the provisions of Section 2.13.2, all Unused Facility Fees shall be payable
monthly in arrears on each Payment Date and shall be set forth on the applicable
Monthly Payment Statement. Unused Facility Fee payments which cover less than
one (1) month shall be prorated based on the actual number of days elapsed. Any
accrued but unpaid Unused Facility Fees shall also be due and payable on the
Expiration Date.
 
2.4.4.        Minimum Usage Fee.
 
The average annual outstanding borrowings under the Note (as reduced by the
outstanding principal amounts of all Fixed Rate Borrowing Tranches) must equal
or exceed the Deemed Minimum Loan Amount (as reduced by the outstanding
principal amounts of all Fixed Rate Borrowing Tranches) in order for the
Borrower to avoid paying any Minimum Usage Fee under this Section 2.4.4. In the
event the average annual outstanding borrowings under the Note (as reduced by
the outstanding principal amounts of all Fixed Rate Borrowing Tranches) does not
equal or exceed the Deemed Minimum Loan Amount (as reduced by the outstanding
principal amounts of all Fixed Rate Borrowing Tranches), Borrower shall pay to
Lender, as further consideration for Lender's commitment hereunder, a
nonrefundable minimum usage fee (the "Minimum Usage Fee") equal to the positive
difference, if any, between (i) the product of (a) the Deemed Minimum Loan
Amount (reduced by the outstanding principal amounts of all Fixed Rate Borrowing
Tranches) times (b) the lowest applicable Net Spread and (ii) the total amount
of interest attributable to the Net Spread collected during the calendar year.
The Minimum Usage Fee shall accrue from the Closing Date to the Expiration Date,
shall be computed for each calendar year, or part thereof, during the term of
this Agreement and shall be payable, if at all, in arrears on the Payment Date
scheduled for January of each year of the term hereof, provided that any Minimum
Usage Fee due in the year in which the Expiration Date falls shall be due and
payable on the Expiration Date. Upon Borrower's election to terminate the Loan
and the parties' obligations under the Loan Documents pursuant to the terms of
Section 2.13.2, Borrower shall pay the liquidated Minimum Usage Fee computed in
accordance with Section 2.13.4. Minimum Usage Fee payments which cover a period
of less than one (1) calendar year shall be prorated based on the actual number
of days elapsed.

 
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2.4.5.        Intentionally omitted.
 
2.4.6.        Margin and Net Spread.
 
2.4.6.1.    Fixed Rate Borrowing Tranches. The Margin that will be used to
determine the Fixed Rate applicable for any Fixed Rate Borrowing Tranche
advanced on or after the Closing Date shall be determined by Lender based on the
then current market level determined in its sole discretion and communicated to
Borrower in accordance with Section 2.5.2. If Borrower exercises the First
Extension Option or the Second Extension Option, as applicable, in accordance
with Section 2.2 hereof, (i) the Fixed Rate that will be applicable for any
Fixed Rate Borrowing Tranche existing on the applicable Scheduled Maturity Date
during such applicable extension period will be redetermined by Lender based on
the then current market level determined in its sole discretion and communicated
to Borrower (provided, that Lender will communicate an indicative (but not
final) Fixed Rate for such extension period to Borrower at least forty-five (45)
days prior to the applicable Scheduled Maturity Date) and (ii) the Margin that
will be used to determine the Fixed Rate applicable for any Fixed Rate Borrowing
Tranche advanced during such applicable extension period shall be determined by
Lender based on the then current market level determined in its sole discretion
and communicated to Borrower in accordance with Section 2.5.2. Notwithstanding
the foregoing, if Borrower exercises the First Extension Option or the Second
Extension Option, as applicable, in accordance with Section 2.2 hereof, Borrower
may elect at any time during such extension period to convert any Fixed Rate
Borrowing Tranche existing on the applicable Scheduled Maturity Date to a Base
Rate Borrowing Tranche, and the Net Spread applicable for any such Base Rate
Borrowing Tranche(s) during such extension period shall be determined by Lender
in accordance with Section 2.4.6.2 below.
 
2.4.6.2.    Base Rate Borrowing Tranches. The net spread (the "Net Spread")
applicable for any Base Rate Borrowing Tranche on or before the third
anniversary of the Closing Date shall be as set forth in Schedule 3.2. On and
after the third anniversary of the Closing Date, the Net Spread applicable for
any Base Rate Borrowing Tranche shall be redetermined by Lender in its sole
discretion and communicated to Borrower in writing at least thirty-five (35)
days prior to the third anniversary of the Closing Date (provided, that Lender
will communicate indicative (but not final) Net Spreads at least forty-five (45)
days prior to the third anniversary of the Closing Date). Lender and Borrower
shall evidence the new applicable Net Spread pursuant to this Section 2.4.6.2 by
executing a Net Spread confirmation substantially in the form attached hereto as
Schedule 2.4.6.2 (provided, that Borrower's failure to deliver thirty (30) days
advance written Notice of its election to exercise the Revolving Credit Note
Re-pricing Termination Option pursuant to Section 2.13.2 shall be deemed to be
Borrower's acceptance of the new applicable Net Spread pursuant to this Section
2.4.6.2). With respect to (i) the First Extension Option, the Net Spread
applicable for any Base Rate Borrowing Tranche during such extension period
shall be determined by Lender in its sole discretion and communicated to
Borrower (provided, that Lender will communicate indicative (but not final) Net
Spreads for such extension period to Borrower at least forty-five (45) days
prior to the initial Scheduled Maturity Date) and (ii) the Second Extension
Option, the Net Spread applicable for any Base Rate Borrowing Tranche during
such extension period then current shall be determined by Lender in its sole
discretion and communicated to Borrower (provided, that Lender will communicate
indicative (but not final) Net Spreads for such extension period to Borrower at
least forty-five (45) days prior to the Scheduled Maturity Date as extended
pursuant to Section 2.2(d)). Lender and Borrower shall evidence the new
applicable Net Spread pursuant to this Section 2.4.6.2, by executing a Scheduled
Maturity Date extension confirmation substantially in the form attached hereto
as Schedule 2.2.

 
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2.5.           Loan Requests.

2.5.1.        Except as otherwise provided herein, Borrower may from time to
time prior to the Maturity Date request Lender to make an advance, consistent
with the Sublimits, by delivering Notice to Servicer (a "Loan Request") in the
form attached hereto as Schedule 2.5. Borrower may at any one time submit one
(1) or more Loan Requests; each Loan Request shall specify the items set forth
on Schedule 2.5. including, but not limited to, (i) the proposed Borrowing Date
(which Borrowing Date shall be in accordance with the requirements of Section
2.6); (ii) the amount of the proposed Borrowing Tranche, which shall not be less
than TEN MILLION and NO/100 Dollars ($10,000,000.00). Notwithstanding anything
to the contrary contained herein, no Prime Rate Borrowing Tranches will be
permitted hereunder except as may be required pursuant to Sections 3.3.2 or
3.4.3.

(a)            In the case of a Loan Request for a Base Rate Borrowing Tranche,
Borrower shall deliver a Loan Request, fully completed, authorized and executed
by Servicer and an Authorized Officer, indicating (a) the Interest Period for
purposes of determining the Reference Bills Rate (or such alternative index as
may be selected by Lender in accordance with the provisions of Section 3.4) and
(b) the Base Rate, including the Reference Bills® Rate (or such alternative
index as may be selected by Lender in accordance with the provisions of Section
3.4) and Margin that comprise such Base Rate.

(b)            In the case of a Loan Request for a Fixed Rate Borrowing Tranche,
Borrower shall deliver a Loan Request indicating the maturity date (which shall
be the initial Scheduled Maturity Date or, if Borrower has elected the First
Extension Option or the Second Extension Option, as applicable, in accordance
with Section 2.2 hereof, the applicable Scheduled Maturity Date during such
applicable extension period) and term (which shall be the remaining term of the
Loan to the initial Scheduled Maturity Date or, if Borrower has elected the
First Extension Option or the Second Extension Option, as applicable, in
accordance with Section 2.2 hereof, to the applicable Scheduled Maturity Date
during such applicable extension period) of the requested Fixed Rate Borrowing
Tranche. Borrower must deliver the Loan Request to Lender, subject to Lender's
review and approval, at least three (3) full Business Days prior to the proposed
Borrowing Date set forth in the Loan Request and must comply with Section 2.5.2
hereof (it being understood that Lender shall be under no obligation to fund
such requested advances until all conditions set forth in this Agreement and the
Loan Documents for such advances are satisfied).

 
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(c)            Notwithstanding the foregoing, any Loan Request made
contemporaneously with a request for the addition of a real property under
Section 2.9 shall be subject to the time requirements set forth in Section 2.9.
Subject to the terms of Section 2.5.2, Borrower may revoke any pending but
unfunded Loan Request provided that Borrower reimburses Lender and Servicer for
any reasonable costs and expenses (including reasonable attorneys' fees)
incurred in connection with such Loan Request.

2.5.2.        Fixed Rate Borrowing Tranche Rate-Lock.

2.5.2.1.     Lender shall determine in its sole discretion the actual Margin
that will be used to determine the Fixed Rate that will be applied to the
requested Fixed Rate Borrowing Tranche. Lender shall communicate its Margin
determination to Servicer and Servicer will communicate the Margin to Borrower
via telephone. If Borrower is satisfied with Lender's Margin determination,
Borrower shall request that Lender deliver to Borrower a Commitment Letter
setting forth the Margin and certain other applicable terms for such requested
Fixed Rate Borrowing Tranche. Borrower shall execute the applicable Commitment
Letter and send a fully completed copy thereof to Lender via facsimile before
4:00 p.m. Washington D.C. local time on the same date as Lender delivers the
applicable Commitment Letter to Borrower (provided Lender has delivered the
applicable Commitment Letter to Borrower by 3:00 p.m. Washington D.C. local
time; if Lender delivers the applicable Commitment Letter after 3:00 p.m.
Washington D.C. local time, then Borrower shall have until 4:00 p.m. Washington
D.C. local time of the following Business Day to send a fully executed and
completed copy thereof to Lender via facsimile). Borrower shall thereafter
deliver a fully executed original of the applicable Commitment Letter to Lender
within one (1) Business Day. If Borrower wishes to lock a Fixed Rate based on
the indicated Margin referenced in the applicable Commitment Letter ("Rate
Lock"), provided Borrower is in compliance with the Sublimits on the date of
such Rate Lock, Borrower may, within five (5) Business Days of the date of the
Commitment Letter, contact via telephone the Servicer between the hours of 10:00
a.m. and 2:00 p.m. Washington, D.C. local time. Lender shall confirm Rate Lock
via telephone and shall deliver to Borrower an updated fully completed Exhibit A
to the Commitment Letter evidencing the Fixed Rate applicable to the requested
Fixed Rate Borrowing Tranche. Borrower shall deliver (i) completed and executed
copies of the Loan Request, Fixed Rate Note and Exhibit A to the Commitment
Letter, authorized and executed by Servicer (in the case of a Loan Request) and
by an Authorized Officer, to Lender via facsimile before 4:00 p.m. Washington
D.C. local time on the same date as Rate Lock (provided Rate Lock has occurred
prior to 3:00 p.m. Washington D.C. local time; if Rate Lock occurs after 3:00
p.m. Washington D.C. local time, then Borrower shall have until 4:00 p.m.
Washington D.C. local time of the following Business Day to send such executed
copies to Lender via facsimile) and (ii) originals of the applicable Loan
Request, Fixed Rate Note and Exhibit A to the Commitment Letter to Lender within
two (2) Business Days of Rate Lock. In the event Borrower for any reason fails
to Rate Lock within five (5) Business Days of the date of the applicable
Commitment Letter, Lender shall have no further obligation to advance any funds
at the Margin referenced in such Commitment Letter.

 
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2.5.2.2.     Borrower acknowledges that Lender will incur certain costs in
connection with a Rate Lock and, if after Rate Lock, Borrower (i) fails to
deliver the relevant fully executed originals of the applicable Commitment
Letter, Exhibit A to the Commitment Letter, Loan Request and Fixed Rate Note to
Lender in accordance with Section 2.5.2.1 or (ii) otherwise revokes the pending
but unfunded Loan Request (each, a "Rate Lock Termination Event"), Lender will
suffer damages for taking a position in the financial markets in reliance on its
expectation that Borrower would deliver the relevant fully executed originals of
the applicable Commitment Letter, Exhibit A to the Commitment Letter, Loan
Request and Fixed Rate Note to Lender in accordance with Section 2.5.2.1 and
accept the advance of the requested Fixed Rate Borrowing Tranche. Borrower shall
be obligated to promptly reimburse Lender for any breakage fee as calculated
pursuant to Schedule 2.5.2 hereof (the "Breakage Fee") if a Rate Lock
Termination Event occurs after Rate Lock. Borrower's obligation to pay any
Breakage Fee hereunder shall be secured by the Collateral Pool and the
Collateral Pool Property Documents. In addition to any Breakage Fees due
hereunder, Borrower shall also reimburse Servicer for any reasonable costs and
expenses (including reasonable attorneys' fees) incurred in connection with any
Rate Lock hereunder.

2.5.2.3.     Upon receipt of fully executed originals of the Commitment Letter,
Exhibit A to the Commitment Letter, the Loan Request and the Fixed Rate Note and
provided Borrower does not revoke the pending but unfunded Loan Request after
Rate Lock, Lender shall, as soon as reasonably practicable after all other
conditions to advance are satisfied under this Agreement and the Loan Documents,
deliver the requested funds to Borrower pursuant to the applicable Loan Request;
provided, that interest under any Fixed Rate Note shall not begin to accrue
until Lender delivers such requested funds to Borrower.

2.5.3.        Sublimits.

Notwithstanding anything to the contrary set forth herein, Borrower may borrow
hereunder only to the extent that after giving effect to such borrowing
(collectively, the "Sublimits"):

2.5.3.1.     the Loan to Value Ratio shall not exceed the Maximum Loan to Value
Ratio;

2.5.3.2.     the Facility Debt Service Coverage Ratio shall not be less than
1.60: 1.00;

2.5.3.3.     the number of Borrowing Tranches outstanding shall not exceed ten
(10); and

2.5.3.4.     the Loan shall not exceed the Commitment.

 
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Notwithstanding the foregoing, in the event either of the Sublimits set forth in
Section 2.5.3.1 or Section 2.5.3.2 above are not satisfied at any time prior to
the Expiration Date, Borrower shall be entitled to renew or consolidate (but not
increase the outstanding principal amount of) such existing outstanding
Borrowing Tranches with an Interest Period of one month, provided that, (i) as
of the date of such renewal or consolidation (a) no Event of Default, Potential
Default or Material Adverse Change, other than Borrower's failure to comply with
Sections 2.5.3.1 or 2.5.3.2, shall then exist, (b) Borrower's failure to comply
with Sections 2.5.3.1 or 2.5.3.2 shall have been for a period of less than
ninety (90) days, and (c) Borrower is otherwise in full compliance with all
other terms and conditions of the Loan Documents and (ii) throughout the period
of Borrower's non-compliance with Sections 2.5.3.1 or 2.5.3.2, Borrower shall
comply with the provisions of Section 4.5. Borrower must assure compliance with
Sections 2.5.3.1 or 2.5.3.2 pursuant to the provisions of Section 4.3.
Notwithstanding the foregoing, if Borrower is unable to cause compliance with
the Sublimits within fifteen (15) Business Days following Lender's determination
of Borrower's non-compliance with the Sublimits, then, for so long as Borrower
fails to comply with the Sublimits, (i) the Net Spread applicable to all Base
Rate Borrowing Tranches then outstanding (and thereafter renewed) shall
automatically increase to one-hundred basis points (0.01) over the highest Net
Spread shown on Schedule 3.2 (as such Net Spreads are adjusted by Lender
pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2), further increased, if at all,
in accordance with Schedule 3.2, as a result of the duration of such Base Rate
Borrowing Tranche(s) and (ii) the interest rate applicable to all Fixed Rate
Borrowing Tranches shall automatically increase by one-hundred basis points
(0.01). In the event that the Facility Debt Service Coverage Ratio shall
continue to be less than required pursuant to Section 2.5.3.2 or the Loan to
Value Ratio shall exceed the ratio permitted in accordance with Section 2.5.3.1
for a period of ninety (90) consecutive days from the date of Borrower's receipt
of Notice of such non-compliance, the same shall constitute an Event of Default.

2.6.           The Loan.

After receipt by Servicer of a Loan Request pursuant to Section 2.5.1, and
subject to the Sublimits of Section 2.5.3 and the provisions of Section 5.2,
Lender, relying on the truth and accuracy of the matters set forth in the Loan
Request (but without any obligation to inquire into the truth and accuracy of
such matters), shall fund the amount requested in such Loan Request to Borrower
in U.S. Dollars and immediately available funds on the Borrowing Date. Provided
all conditions set forth in this Agreement and the other Loan Documents are
satisfied, the Borrowing Date shall be the Business Day set forth in the Loan
Request, provided that such date is at least three (3) but not more than five
(5) Business Days after the date of the Loan Request. Lender shall fund the
amounts requested in any Loan Request by 3:00 p.m. Eastern Time on the Borrowing
Date. Notwithstanding the foregoing, any Loan Request (other than a Loan Request
which is not related to or dependent on the addition of a real property under
Section 2.9) made contemporaneously with a request for the addition of a real
property under Section 2.9 shall be subject to the time requirements set forth
in Section 2.9.

2.7.           The Note.

The obligation of Borrower to repay the aggregate unpaid principal amount of the
Loan, together with interest thereon, shall be evidenced by the Note payable to
the order of Lender.

 
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2.8.           Use of Proceeds.

The proceeds of the Loan may be used by Borrower solely for the purpose of
carrying on a business or commercial enterprise (as set forth in the Borrower's
organizational documents) and not for personal, family, household or
agricultural purposes.

2.9.           Additions to the Collateral Pool.

2.9.1.        Procedure for Proposing a Real Property Addition to the Collateral
Pool.

Borrower or Proposed Borrower, as the case may be, may propose to add one or
more multi-family real properties to the Collateral Pool by delivering to Lender
(i) a written proposal for addition of the proposed real property(ies), (ii) a
Mortgage Review Fee for each proposed real property, (iii) a Seismic Report Fee,
if and as applicable, for each proposed real property, and (iv) the Underwriting
Materials with respect to the proposed real property(ies) and with respect to
Proposed Borrower, if applicable, provided that, no more than one (1) such
proposal shall be submitted to Lender in any one (1) Month. Upon Lender's
receipt of all fees required hereunder and all Underwriting Materials, Lender
shall notify Borrower or Proposed Borrower of the same. The determination of
whether Borrower or Proposed Borrower has provided Lender with all Underwriting
Materials shall be in Lender's discretion. For purposes of this Section 2.9,
Borrower or Proposed Borrower may submit a multi-family real property for
addition to the Collateral Pool, if Borrower or Proposed Borrower has a contract
to purchase such real property, provided that Borrower or Proposed Borrower
consummates the purchase of such real property on or before the date such real
property is proposed to be added to the Collateral Pool. Both the Mortgage
Review Fee and the Seismic Report Fee, if any, shall be deemed earned upon
delivery thereof, whether or not Lender approves or disapproves such real
property for addition hereunder. Borrower shall pay all costs and expenses that
Lender and Servicer incur in connection with any such proposal to add a real
property to the Collateral Pool, including, but not limited to, reasonable
attorneys' fees and any reasonable costs and expenses incurred with respect to
third party reports, whether or not Lender approves or disapproves such real
property for addition hereunder. Borrower or its Affiliate shall be permitted to
engage and pay directly the third-party consultants to be retained for the
required property condition reports and environmental reports, provided that (A)
Lender and Servicer approve in advance and in writing each such consultant and
the scope of each such report, and (B) each such report states that it is made
for the benefit, use and reliance of Lender and Servicer, as well as Borrower
and/or its Affiliate.

2.9.2.        Procedure for Adding a Real Property to the Collateral Pool.

 
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2.9.2.1.     With respect to any fully stabilized multi-family real property
that Borrower or Proposed Borrower, as the case may be, proposes for addition to
the Collateral Pool, Lender shall, within fifty (50) days of the date on which
Lender notifies Borrower or Proposed Borrower that it has received all
Underwriting Materials and all applicable fees, use its best efforts to accept
or reject in writing the proposed real property on the basis of whether such
proposed real property meets Lender's then current requirements for addition to
the Collateral Pool, and in the event that Lender accepts the proposed real
property for addition to the Collateral Pool, Lender shall provide Borrower with
a written approval letter and use its best efforts to add such real property to
the Collateral Pool within twenty (20) days of the date of such acceptance,
subject to Borrower's or Proposed Borrower's timely performance of all
obligations listed under Section 2.9.2.2. Each property must pass Lender's own
assessment of earthquake risk to be included in the Collateral Pool.
Notwithstanding anything contained herein to the contrary, no real property
shall be submitted for addition unless (x) the Collateral Pool Properties (after
taking into consideration the Market Value of the real property submitted for
addition), in the aggregate, have a Loan to Value Ratio as determined by Lender
in its sole discretion no greater than the Maximum Loan to Value Ratio and (y)
such property has a value as determined by Lender in its sole discretion that
exceeds NINE MILLION NINE HUNDRED NINETY-NINE THOUSAND NINE HUNDRED NINETY-NINE
AND NO/100 Dollars ($9,999,999.00). The failure of Lender to respond to
Borrower's or Proposed Borrower's request within such fifty (50) day period
shall be deemed a rejection by Lender of the proposal to add the real property
to the Collateral Pool. If Lender provides the reason(s) for such rejection,
Borrower or Proposed Borrower shall have fifty (50) days to cure or otherwise
resolve to the satisfaction of Lender, the objections of Lender to such proposed
real property (Lender, in its sole discretion, may require that Borrower provide
within such fifty (50) day cure period necessary updates of any or all of the
Underwriting Materials). If Borrower or Proposed Borrower does not satisfy
Lender's objections, then such proposal shall be deemed terminated (unless
Lender, in its sole discretion shall opt to extend such fifty (50) day cure
period) provided that, any such termination shall not prevent Borrower or
Proposed Borrower from subsequently resubmitting a real property (together with
all applicable fees due hereunder and the Underwriting Materials) for addition
to the Collateral Pool, further provided that Borrower may not resubmit the same
real property for addition to the Collateral Pool more often than one (1) time
in any twelve (12) month period. Notwithstanding anything contained in the
foregoing to the contrary, under no circumstances shall the addition of any real
property increase the amount of the Commitment.

2.9.2.2.     If and upon the date of acceptance by Lender of a multi-family real
property submitted for addition to the Collateral Pool (such acceptance to be in
writing, together with Lender's determination of the Initial Market Value of
such real property and the Net Operating Income of such property), whether
following the initial proposal of such real property or after satisfying any
objections of Lender, such real property shall be added to the Collateral Pool,
provided that, prior to such addition (or in the instance of the documents
required under item (iii)(b) below, as soon as practicable after such addition),
Borrower or Proposed Borrower shall (i) pay the Addition Fee pursuant to Section
2.9.3, (ii) pay all costs and expenses that Lender or Servicer incur in
connection with the inclusion of such real property, including, but not limited
to, attorneys' fees, and (iii) submit the following to Lender: (a) all
Collateral Pool Property Documents reasonably requested by Lender, where
appropriate, fully executed and where appropriate duly acknowledged and filed of
record in the appropriate official public records, (b) copies of all filing
receipts and acknowledgements issued by any governmental authority evidencing
any recordation or filing necessary to perfect Lender's Lien on the subject real
property or other evidence reasonably satisfactory to Lender of such recordation
and filing of the applicable Security Instrument, (c) evidence reasonably
satisfactory to Lender that, subject to the Permitted Exceptions, (1) in the
case of personal property, the Lien constitutes a first priority security
interest in favor of Lender and, (2) in the case of real property, the Security
Instrument constitutes a valid and perfected first priority Lien in favor of
Lender (such evidence to be in the form of a title insurance policy acceptable
to Lender in both form and substance), and (d) opinions of counsel reasonably
acceptable to Lender and (iv) in the case of a Proposed Borrower, such Proposed
Borrower shall execute (a) separate allonges to the Revolving Credit Note and
any Fixed Rate Note(s) then outstanding and (b) a joinder agreement, both of
which shall be in form and substance reasonably satisfactory to Lender in its
sole discretion. If Borrower or Proposed Borrower fails to perform any of the
acts, where applicable, or to submit any of the documents and evidence listed
under (i), (ii), (iii) and (iv) above together with any and all updates to the
Underwriting Materials reasonably requested by Lender within fifty (50) days of
the date of Lender's acceptance, Lender may at its option reject the proposed
real property and terminate such proposal. In the event that Borrower or
Proposed Borrower performs all of the acts and submits all of the documents and
evidence listed in (i), (ii), (iii) and (iv) above within fifty (50) days of the
date of Lender's acceptance, the proposed real property shall be added to the
Collateral Pool.

 
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2.9.3.        Addition Fee.

For each property added to the Collateral Pool, Borrower shall pay all of
Lender's or Servicer's costs and expenses in connection with such addition
(including, but not limited to, attorneys' fees) and a fee to Lender, in
addition to any other fees payable to Lender upon such addition, in the amount
of FIFTEEN THOUSAND and NO/100 Dollars ($15,000.00) (the "Addition Fee"). The
Addition Fee shall be due and payable upon consummation of the addition of the
proposed real property to the Collateral Pool.

2.10.         Release of Collateral.

Lender shall, upon thirty (30) days advance written Notice, release the Liens
granted hereunder with respect to a Collateral Pool Property or Properties which
constitute(s) less than all Collateral Pool Properties, provided that (i) prior
to such release Borrower shall pay Lender a non-refundable fee of TEN THOUSAND
and NO/100 Dollars ($10,000.00) (a "Release Fee'") and all costs and expenses
that Lender or Servicer incur in connection with such release, including, but
not limited to, attorneys' fees and all other amounts due to Lender hereunder in
connection with such release, including, without limitation, Prepayment Fees and
accrued and unpaid interest, if applicable, (ii) at the time of the request for
such release, no Event of Default or Potential Default shall exist, (iii) after
giving effect to such release, no Event of Default or Potential Default shall
exist, and (iv) Borrower shall be in compliance with all provisions hereof,
including without limitation, the Sublimits, provided, however, that if such
release would otherwise cause Borrower to be in non-compliance with the
Sublimits set forth in Section 2.5.3, Borrower shall have the opportunity to
cure the same prior to or simultaneously with such release by either (a)
pledging multi-family real property collateral, in form, substance, value and in
a manner all acceptable to Lender, in its sole discretion, in accordance with
Section 2.9 or (b) prepaying so much of the Loan as is necessary to cause
compliance with the Sublimits, each in accordance with the provisions of Section
4.3. Notwithstanding the foregoing, if Borrower is unable to cause compliance
with the Sublimits within fifteen (15) Business Days following Lender's
determination of Borrower's non-compliance with the Sublimits, then, for so long
as Borrower fails to comply with the Sublimits, (i) the Net Spread applicable to
all Base Rate Borrowing Tranches then outstanding (and thereafter renewed) shall
automatically increase to one-hundred basis points (0.01) over the highest Net
Spread shown on Schedule 3.2 (as such Net Spreads are adjusted by Lender
pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2), further increased, if at all,
in accordance with Schedule 3.2, as a result of the duration of such Base Rate
Borrowing Tranche(s) and (ii) the interest rate applicable to all Fixed Rate
Borrowing Tranches shall automatically increase by one-hundred basis points
(0.01). Notwithstanding such thirty (30) day time period to obtain a release,
Lender shall upon five (5) Business Days Notice provide a "payoff letter", if
applicable, stating the amount necessary to obtain a release so as to effectuate
a sale or refinance of the subject Collateral Pool Property. Upon the release of
a Lien on a Collateral Pool Property, if the Borrower that is the owner of such
Collateral Pool Property owns no other Collateral Pool Properties, such Borrower
shall be released from its obligations under the Loan Documents, except as
otherwise expressly provided in the Loan Documents. Notwithstanding the
foregoing, under no circumstances may Borrower receive a release of the Security
Instrument with respect to the last property in the Collateral Pool prior to the
Maturity Date, unless Borrower has elected to terminate this Agreement under
Section 2.13 hereunder. Borrower may revoke a pending request to release a
Collateral Pool Property at any time; provided that Borrower pays all of
Lender's reasonable costs and expenses with respect to such release request,
including, without limitation, reasonable attorneys fees; provided, further,
that Borrower shall not be entitled to reimbursement of the Release Fee paid to
Lender in connection with such request to release a Collateral Pool Property.

 
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2.11.         Payment of the Loan Balance Without Termination.

Prior to the Maturity Date, Borrower shall have the right to repay the entire
Loan (i.e., the Revolving Credit Note and any Fixed Rate Note then outstanding),
subject in each instance to the provisions of Sections 4.3 and 4.4, all without
any release of any Lien, and subsequently reborrow hereunder, provided that
Borrower is at such time, and thereafter remains, in compliance with the
provisions of this Agreement, including, without limitation, the obligation to
be in compliance with the Sublimits and the obligations to pay all fees due and
payable hereunder. Under no circumstances shall Borrower be entitled to any
additional advances or re-advances under (a) any Fixed Rate Note at any time or
(b) the Revolving Credit Note on or after the Maturity Date.

2.12.         Valuations.

2.12.1.      Timing and Procedure of Valuation.

In addition to any other provisions requiring valuations hereunder, Lender shall
perform an annual valuation (the "Valuation") to determine, in its sole but
reasonable discretion in accordance with its then current underwriting policies,
practices and procedures consistently applied, (i) the then Market Value and
(ii) the Net Operating Income of each of the Collateral Pool Properties, which
Valuation shall be performed on or about September 1st of each calendar year
during the term of this Agreement, commencing on or about September 1, 2009. In
connection with such Valuation, Borrower shall deliver to Servicer by no later
than June 1 of each calendar year, a current rent roll (which shall be no more
than thirty (30) days old) and a twelve (12) month operating statement with
respect to each Collateral Pool Property, each certified by an Authorized
Officer. Any operating statement required hereunder shall relate to the
operations of the applicable Collateral Pool Property during the preceding
calendar year. Without limiting the foregoing, each such rent roll and operating
statement shall be in such form and contain such detail as Lender may reasonably
require and Lender may require that any such rent rolls and operating statements
shall be verified by an independent party acceptable to Lender.

 
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2.12.2.      Valuations that Disclose a Decrease in Market Value and/or Net
Operating Income.

If any Valuation discloses that the Market Value and/or Net Operating Income of
the Collateral Pool Properties has decreased below the then current values or
calculations thereof, the Maximum Facility Available may be adjusted, if
necessary, in accordance with the provisions of Section 2.5.3, and in the event
such decrease in Market Value or Net Operating Income shall cause Borrower to be
in non-compliance with the Sublimits set forth in Section 2.5.3, Borrower shall
within the time periods set forth in (i) and (ii) below, cure the same by
bringing the Loan into compliance with the Sublimits, by either (i) within
ninety (90) days of Notice from Lender of such decrease, pledging multi-family
real property collateral in form, substance, value and in a manner all
acceptable to Lender, in its sole discretion, in accordance with Section 2.9 or
(ii) within fifteen (15) days of Notice from Lender of such decrease, prepaying
so much of the Loan as is necessary to cause compliance with the Sublimits, each
in accordance with the provisions of Section 4.3. Notwithstanding the foregoing,
if Borrower is unable to cause compliance with the Sublimits within fifteen (15)
Business Days following Lender's determination of Borrower's non-compliance with
the Sublimits, then, for so long as Borrower fails to comply with the Sublimits,
(i) the Net Spread applicable to all Base Rate Borrowing Tranches then
outstanding (and thereafter renewed) shall automatically increase to one-hundred
basis points (0.01) over the highest Net Spread shown on Schedule 3.2 (as such
Net Spreads are adjusted by Lender pursuant to Sections 2.2(d). 2.2(e) and
2.4.6.2), further increased, if at all, in accordance with Schedule 3.2, as a
result of the duration of such Base Rate Borrowing Tranche(s) and (ii) the
interest rate applicable to all Fixed Rate Borrowing Tranches shall
automatically increase by one-hundred basis points (0.01).

2.12.3.      Valuations that Disclose an Increase in Market Value and/or Net
Operating Income

If any Valuation discloses that the Market Value and/or Net Operating Income of
the Collateral Pool Properties has increased above the then current values
thereof, the Maximum Facility Available may be adjusted, if necessary, in
accordance with the provisions of Section 2.5.3, and Borrower shall be entitled
to borrow and reborrow hereunder, subject to the Sublimits, up to the amount of
the Commitment in accordance with the terms of this Agreement.

2.13.         Termination.

2.13.1.      Rights to Terminate.

Borrower and Lender shall have the rights to terminate this Agreement or to
accelerate the Loan, as applicable, as set forth in this Section 2.13.

 
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2.13.2.      Borrower's Right to Terminate the Agreement. At any time during the
term of the Loan, Borrower shall have the right to terminate this Agreement in
full and the parties' obligations under the Loan Documents, provided that
Borrower (i) delivers to Lender thirty (30) days advance written Notice of its
revocable election to terminate this Agreement specifying the Expiration Date,
(ii) repays all accrued interest on, and principal with respect to, the Loan in
full and (iii) performs all Obligations under this Agreement, the Note and the
other Loan Documents, including, but not limited to, Borrower's obligations to
pay all fees as specified in Section 2.13.4. In addition to the foregoing, upon
receipt of Lender's written Notice pursuant to Section 2.4.6.2 hereof of
Lender's redetermination of the Net Spread applicable to the Revolving Credit
Note from and after the third anniversary of the Closing Date, Borrower shall
have the one-time right (the "Revolving Credit Note Re-pricing Termination
Option") to terminate this Agreement in full and the parties' obligations under
the Loan Documents as of the third anniversary of the Closing Date; provided
that, Borrower must satisfy the conditions set forth in the first sentence of
this Section 2.13.2; provided, further, that if (x) Lender's redetermination of
the Net Spread applicable on and after the third anniversary of the Closing Date
in accordance with Section 2.4.6.2 results in the Net Spread being greater than
the Net Spread applicable on the Closing Date and (y) Borrower elects the
Revolving Credit Note Re-Pricing Termination Option, Borrower shall not be
required to pay the fees set forth in Section 2.13.4 hereof (except for the
Prepayment Fees specified therein). In the event Borrower has complied with the
requirements set forth in this Section 2.13.2. Lender shall release the Liens
granted hereunder on the Expiration Date in accordance with Section 2.10.
Without limiting any other provision contained herein, in the event Borrower
shall revoke any such request to terminate its obligations under this Agreement
in full and the parties' obligations under the Loan Documents, Borrower shall
pay all reasonable costs and expenses incurred by Lender and Servicer in
connection with such revocation, including, without limitation, reasonable
attorneys' fees.

2.13.3.      Lender's Right to Accelerate.

Upon an Event of Default that remains uncured by Borrower beyond the expiration
of any applicable cure period under this Agreement, the Note, or any other of
the Loan Documents, Lender shall have the right to (i) accelerate the Loan and
to (ii) collect the Prepayment Fee and liquidated fees pursuant to Section
2.13.4.

2.13.4.      Fees Due Upon Early Termination and/or Acceleration.

In the event Borrower shall terminate Borrower's obligations under the Loan
Documents pursuant to the provisions of Section 2.13.2, or Lender shall
accelerate the Loan pursuant to the provisions of Section 2.13.3 prior to the
Scheduled Maturity Date, Borrower shall pay (i) a Prepayment Fee with respect to
each outstanding Base Rate Borrowing Tranche calculated in accordance with
Section 4.4, (ii) a Prepayment Fee for each Fixed Rate Note calculated in
accordance with the terms of the applicable Fixed Rate Note, and (iii) an early
termination fee ("Early Termination Fee") equal to the greater of (a) one
percent (1.0%) of the unpaid principal balance of the Revolving Credit Note and
any Fixed Rate Note or (b) the sum of (x) a liquidated Unused Facility Fee equal
to fifteen basis points (15) per annum (computed on the basis of a year of 360
days and actual days elapsed) times the difference between the Commitment (as
the same shall exist as of such date) and the Deemed Minimum Loan Amount, for
each Month which will elapse from the Month in which such termination and/or
acceleration occurs through and including the Scheduled Maturity Date (provided,
that if such termination and/or acceleration of the Loan occurs prior to the
third anniversary of the Closing Date, then such fee shall be calculated through
and including the third anniversary of the Closing Date), such liquidated Unused
Facility Fee to be discounted to net present value at a discount rate equal to
the Treasury Rate, together with all accrued Unused Facility Fees payable as of
the date of such termination, and (y) a liquidated Minimum Usage Fee, to be
calculated as the product of an assumed Base Rate Borrowing Tranche in an amount
equal to the Deemed Minimum Loan Amount times the sum of (a) the lowest Net
Spread shown on Schedule 3.2 (or any replacement schedule of Net Spreads in
accordance with Sections 2.2(d), 2.2(e) or 2.4.6.2) plus (b) the Servicing
Spread, for each Month which will elapse from the Month in which such
termination and/or acceleration occurs through and including the Scheduled
Maturity Date, (provided, that if such termination and/or acceleration of the
Loan occurs prior to the third anniversary of the Closing Date, then such fee
shall be calculated through and including the third anniversary of the Closing
Date) such liquidated Minimum Usage Fee to be discounted to net present value at
a discount rate equal to the Treasury Rate, together with all accrued Minimum
Usage Fees, if any, payable as of the date of such termination and/or
acceleration.

 
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2.14.         Material Adverse Change to Borrower or a Collateral Pool Property.

If (i) Borrower or a Collateral Pool Property experiences a Material Adverse
Change or (ii) a Material Adverse Change occurs with respect to this Agreement
or any of the other Loan Documents taken as a whole, Borrower shall promptly
notify Lender of the same in writing as soon as Borrower has notice thereof. If
Lender shall receive Notice of a Material Adverse Change in accordance with the
preceding sentence, or otherwise becomes aware of a Material Adverse Change,
which Material Adverse Change affects a Collateral Pool Property, Lender may
promptly conduct a Valuation of the affected Collateral Pool Property pursuant
to Section 2.12. Until such time as such Valuation, if requested, shall be
completed, the Collateral Pool Property which experienced the Material Adverse
Change, or which is owned by a Borrower that experienced a Material Adverse
Change, shall be deemed for the purposes of determining whether any new
borrowing request satisfies all of the Sublimits set forth in Section 2.5.3 to
have the Market Value and Net Operating Income reasonably determined and
quantified by Lender upon the information then available to Lender. Lender shall
promptly provide Borrower with written Notice of the results of such Valuation.
If the results of such Valuation disclose that the Market Value of the affected
Collateral Pool Property has decreased, then the Market Value shall thereafter
be deemed to be the amount shown in such Valuation. In the event that such
Valuation hereunder shall cause Borrower to be in non-compliance with the
Sublimits set forth in Section 2.5.3, Borrower shall, within the time periods
set for the in (x) and (y) below, cure the same by bringing the Loan into
compliance with the Sublimits by either (x) within ninety (90) days of the
Notice of such valuation, pledging multi-family real property collateral in
form, substance, value and in a manner all acceptable to Lender, in its sole
discretion, in accordance with Section 2.9 or (y) within fifteen (15) days of
Notice from Lender of such decrease, prepaying so much of the Loan as is
necessary to cause compliance with the Sublimits, each in accordance with the
provisions of Section 4.3. Notwithstanding the foregoing, if Borrower is unable
to cause compliance with the Sublimits within fifteen (15) Business Days
following Lender's determination of Borrower's non-compliance with the
Sublimits, then, for so long as Borrower fails to comply with the Sublimits, (i)
the Net Spread applicable to all Base Rate Borrowing Tranches then outstanding
(and thereafter renewed) shall automatically increase to one-hundred basis
points (0.01) over the highest Net Spread shown on Schedule 3.2 (as such Net
Spreads are adjusted by Lender pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2),
further increased, if at all, in accordance with Schedule 3.2, as a result of
the duration of such Base Rate Borrowing Tranche(s) and (ii) the interest rate
applicable to all Fixed Rate Borrowing Tranches shall automatically increase by
one-hundred basis points (0.01). If Lender shall receive Notice of a Material
Adverse Change from Borrower hereunder, or otherwise becomes aware of a Material
Adverse Change which affects Borrower or the enforceability of this Agreement or
the other Loan Documents taken as a whole, Borrower shall immediately provide
any information or documents reasonably requested by Lender, including, but not
limited to, (a) with respect to a Material Adverse Change which affects
Borrower, financial statements and Borrower's business plan to cure such
Material Adverse Change or (b) with respect to a Material Adverse Change which
affects the enforceability of this Agreement or the other Loan Documents taken
as a whole, replacement documents in form and substance acceptable to Lender in
its discretion, together with a legal opinion regarding the enforceability of
such replacement documents, acceptable to Lender in its discretion.

 
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2.15.         Release of Collateral Followed by a Permanent Loan.

2.15.1.      Permanent Loan.

Borrower may request that Lender cause Servicer to make a permanent loan (the
"Permanent Loan") to be secured by one or more Collateral Pool Properties
designated by Borrower (the "Permanent Loan Collateral") to be simultaneously
released from the Collateral Pool and encumbered in favor of Servicer as
security for Borrower's obligations under the Permanent Loan, which request
shall be made in accordance with the provisions of Section 2.15.2. The Permanent
Loan shall be made in accordance with the terms and conditions of the
Streamlined Refinancing Program. Notwithstanding the foregoing, under no
circumstances may Borrower receive a release of the Security Instrument with
respect to the last property in the Collateral Pool prior to the Maturity Date,
unless Borrower has elected to terminate this Agreement under Section
2.13 hereunder.

2.15.2.      Procedure for Making a Permanent Loan.

Borrower may request that Lender cause Servicer to make a Permanent Loan to
Borrower, which request (i) shall be in writing, which writing shall specify (a)
the Collateral Pool Property(ies) that will constitute the Permanent Loan
Collateral, (b) the original principal amount of the requested Permanent Loan,
which amount shall be greater than or equal to TEN MILLION and No/100 Dollars
($10,000,000.00), (c) the related reduction in the Maximum Facility Available,
(d) whether Borrower has selected Lender's then current early rate lock delivery
option, and (e) any payment or prepayment of a Borrowing Tranche, and (ii) shall
be accompanied by (a) any fees then due and owing under Lender's Streamlined
Refinancing Program for each Collateral Pool Property proposed by Borrower to be
subject to the Permanent Loan, and (b) the Underwriting Materials. Following
receipt of all of the items specified in (i) and (ii) of the previous sentence,
Lender shall use its best efforts to consent to Borrower's request within sixty
(60) days of such Notice, provided that (1) at the time of such request no Event
of Default or Potential Default exists, (2) the Permanent Loan shall be made in
accordance with the terms and conditions of the Streamlined Refinancing Program,
(3) after giving effect to such release no Event of Default or Potential Default
shall exist and Borrower will be in compliance with all provisions hereof,
including the Sublimits set forth in Section 2.5.3, further provided that if any
release occasioned by a Permanent Loan would otherwise cause Borrower to be in
non-compliance with the Sublimits, Borrower shall have the opportunity to cure
the same, prior to or simultaneously with the release and the consummation of
the Permanent Loan (which shall occur pursuant to the Streamlined Refinancing
Program), by either (A) pledging collateral in form, substance, value and in a
manner all acceptable to Lender, in its sole discretion, or (B) prepaying so
much of the Loan as is necessary to cause compliance with the Sublimits, each in
accordance with the provisions of Section 4.3, (4) Borrower shall provide
evidence to Lender of title insurance in form and substance acceptable to Lender
and in the face amount of the Permanent Loan, (5) the proposed Borrower under
the Permanent Loan shall execute and deliver such documents as Lender, in its
discretion, may request in order to evidence the making of the Permanent Loan
and in order to grant Lender a first priority Lien on the real and personal
property constituting the Permanent Loan Collateral subject, in each case, to
any Permitted Exceptions, and (6) Borrower shall pay Lender any fees then due
and owing under Lender's Streamlined Refinancing Program. Thereafter, Lender
shall use commercially reasonable efforts to consummate the Permanent Loan
within ninety (90) days after its consent to Borrower's request thereof.
Notwithstanding the foregoing, if Borrower is unable to cause compliance with
the Sublimits within fifteen (15) Business Days following Lender's determination
of Borrower's non-compliance with the Sublimits, then, for so long as Borrower
fails to comply with the Sublimits, (i) the Net Spread applicable to all Base
Rate Borrowing Tranches then outstanding (and thereafter renewed) shall
automatically increase to one-hundred basis points (0.01) over the highest Net
Spread shown on Schedule 3.2 (as such Net Spreads are adjusted by Lender
pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2), further increased, if at all,
in accordance with Schedule 3.2, as a result of the duration of such Base Rate
Borrowing Tranche(s) and (ii) the interest rate applicable to all Fixed Rate
Borrowing Tranches shall automatically increase by one-hundred basis points
(0.01). Notwithstanding the foregoing, in the event that Borrower selects
Lender's then current early rate lock delivery option, Lender shall use its best
efforts, subject to Borrower's timely compliance with Lender's requests, to lock
the interest rate for the requested Permanent Loan within fifteen (15) Business
Days of Borrower's Notice hereunder. Any Permanent Loan granted pursuant to the
foregoing provisions shall not reduce the Commitment hereunder. Simultaneous
with the closing of the Permanent Loan, Lender shall release the Lien granted
hereunder on the Permanent Loan Collateral. Notwithstanding the foregoing, at
any time prior to the release and consummation of the Permanent Loan, Borrower
may by written Notice revoke its request for a release and a Permanent Loan
pursuant to this Section 2.15; provided, however, that Borrower shall reimburse
Lender and Servicer respectively, for Lender's and Servicer's reasonable costs
and expenses, including breakage costs and reasonable attorneys' fees and any
other fees due under this Agreement, that Lender or Servicer incur in connection
with such proposed release and Permanent Loan financing prior to Borrower's
revocation.

 
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2.16.         Loan Documents.

From time to time, Lender in its sole discretion revises its form Loan Documents
to add, delete or change requirements, conditions and other provisions of its
form documents. The revised form of Loan Documents shall be used in conjunction
with any Fixed Rate Notes executed after the date hereof, or any Properties
added to the Collateral Pool after the date hereof.

3.              INTEREST RATES

 
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3.1.           Interest Rate.

The interest rate on each Borrowing Tranche evidenced by the Revolving Credit
Note shall be the Base Rate or, if required pursuant to Sections 3.3.2 or
3.4.3 hereof, the Prime Rate. Interest rates under this Agreement and each Note
shall be computed on the basis of a year of three hundred sixty (36Q) days and
actual days elapsed.

3.2.           Interest Rate Determinations.

3.2.1.        Prime Rate and Base Rate Determination.

(a)            The initial Prime Rate applicable to any Prime Rate Borrowing
Tranche required under Sections 3.3.2 or 3.4.3 shall equal the Prime Rate as of
the Borrowing Date or Renewal Date, as applicable. The Prime Rate shall
thereafter fluctuate in accordance with any changes to the Prime Rate as
published from time to time during the term of the Prime Rate Borrowing Tranche.

(b)            The Base Rate applicable to any Base Rate Borrowing Tranche
hereunder shall, subject to the provisions set forth below, equal the Base Rate
calculated as of the date of the Loan Request and set forth in the Loan Request.
In the event that the Base Rate, calculated as of the Borrowing Date, is more
than twenty-five basis points (0.0025) higher or lower than the Base Rate set
forth in the Loan Request, the Base Rate applicable to such Loan Request shall
instead be the Base Rate calculated as of the Borrowing Date. Thereafter, (i)
the portion of the Base Rate attributable to the Reference Bills® Rate (or such
alternative index as may be selected by Lender in accordance with the provisions
of Section 3.4) for any Base Rate Borrowing Tranche shall be redetermined as of
each renewal of such Borrowing Tranche pursuant to Section 3.3.3 and (ii) the
Margin for all Base Rate Borrowing Tranches then outstanding shall be
redetermined as of each determination and redetermination of the Net Spread. As
determined and redetermined pursuant to this Agreement, the same Margin shall
apply to all Base Rate Borrowing Tranches then outstanding. The portion of the
Margin attributable to the Net Spread shall be determined based on the Facility
Debt Service Coverage Ratio in accordance with the table set forth in Schedule
3.2. The Facility Debt Service Coverage Ratio and Net Operating Income shall
each be redetermined in accordance with the definitions thereof, as applicable.

3.2.2.        Prime Rate, Base Rate and Margin Quotations.

Borrower may call Servicer on or before the date on which a Loan Request is to
be delivered or prior to the end of an Interest Period, to receive both a
calculation of the resulting Facility Debt Service Coverage Ratio for a proposed
Prime Rate (if required pursuant to Sections 3.3.2 or 3.4.3) or Base Rate
Borrowing Tranche and an indication of the rates then in effect, including the
Margin, but both parties acknowledge that such projection shall not be binding
on Lender or Borrower, nor shall such projection affect the rate of interest
which thereafter is actually in effect when the election is made.

3.3.           Interest Periods.

Upon each Loan Request for a new Base Rate Borrowing Tranche, and upon each
Renewal Request applicable to a Base Rate Borrowing Tranche, Borrower shall
notify Lender of the period (the "Interest Period") (which may only be one-month
(having original durations to maturity of approximately thirty (30) days),
three-month (having original durations to maturity of approximately ninety (90)
days), six-month (having original durations to maturity of approximately one
hundred eighty (180) days) or twelve-month (having original durations to
maturity of approximately three hundred sixty (360) days)) for which the
Reference Bills® Rate or LIBO Rate, as the case may be, shall be determined.

 
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3.3.1.        Interest Period to End on a Business Day.

If the last day of any Interest Period is not a Business Day, the Interest
Period shall be deemed to mature on the Business Day immediately following such
date.

3.3.2.        No Interest Periods Beyond the Expiration Date.

Borrower shall not select or renew an Interest Period for any Base Rate
Borrowing Tranche that would end after the Expiration Date. If at the time of
any such selection or renewal the period of time remaining prior to the
Expiration Date is less than thirty (30) days then such Borrowing Tranche shall
bear interest at the Prime Rate. No Prime Rate Borrowing Tranche may remain
outstanding in excess of thirty (30) days at any one time.

3.3.3.        Renewals.

In the case of a redetermination of an Interest Period at the end of an Interest
Period, for purposes of calculating interest due under the applicable Base Rate
Borrowing Tranche the first day of the new Interest Period shall be the first
Business Day immediately following the last day of the preceding Interest Period
(such date, the "Renewal Date"). For each Base Rate Borrowing Tranche, if no new
Interest Period is specified within two (2) Business Days prior to the last day
of such Interest Period, by delivery to Lender via facsimile of a fully
completed, authorized and executed request therefor (a "Renewal Request") in the
form attached hereto as Schedule 3.3.3, the Borrowing Tranche shall be renewed
for an Interest Period of one month at the Base Rate then applicable to a
Borrowing Tranche disbursed on the applicable Renewal Date having a one-month
Interest Period. Notwithstanding anything contained herein to the contrary, (i)
no Borrowing Tranche may be renewed with a principal amount of less than TEN
MILLION and NO/100 Dollars ($10,000,000.00) and (ii) in the event the Facility
Debt Service Coverage Ratio is less than required in accordance with Section
2.5.3.2 or the Loan to Value Ratio exceeds the ratio required in accordance with
Section 2.5.3.1, Borrower may renew or consolidate (but not increase the
outstanding principal amount of) any Borrowing Tranche(s) with Interest Periods
of one-month then outstanding, all in accordance with the provisions of this
Section 3.3.3, provided that, as of the date of such renewal or consolidation
(a) no Event of Default or Potential Default, other than Borrower's failure to
comply with Section 2.5.3.1 or Section 2.5.3.2, shall then exist, (b) Borrower's
failure to comply with Section 2.5.3.1 or Section 2.5.3.2 shall have been for a
period of less than ninety (90) days, and (c) Borrower is otherwise in full
compliance with all other terms and conditions of the Loan Documents, including
the provisions of Section 4.5. Borrower must assure compliance with Section
2.5.3.1 or Section 2.5.3.2 pursuant to the provisions of Section 4.3.
Notwithstanding the foregoing, if Borrower is unable to cause compliance with
the Sublimits within fifteen (15) Business Days following Lender's determination
of Borrower's non-compliance with the Sublimits, then, for so long as Borrower
fails to comply with the Sublimits, (i) the Net Spread applicable to all Base
Rate Borrowing Tranches then outstanding (and thereafter renewed) shall
automatically increase to one-hundred basis points (0.01) over the highest Net
Spread shown on Schedule 3.2 (as such Net Spreads are adjusted by Lender
pursuant to Sections 2.2(d), 2.2(e) and 2.4.6.2), further increased, if at all,
in accordance with Schedule 3.2, as a result of the duration of such Base Rate
Borrowing Tranche(s) and (ii) the interest rate applicable to all Fixed Rate
Borrowing Tranches shall automatically increase by one-hundred basis points
(0.01).

 
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3.3.4.        Interest After Default.

So long as (i) any payment under this Agreement remains past due for thirty (30)
days or more, or (ii) any other Event of Default has occurred and is continuing,
interest on the Loan shall accrue on the unpaid principal balance from the
earlier of the due date of the first unpaid installment or the occurrence of
such other Event of Default at the default rate set forth in the Note. If the
unpaid principal balance and all accrued interest on the Loan are not paid in
full on the Expiration Date, the unpaid principal balance and all accrued
interest on the Loan shall thereafter bear interest at the default rate set
forth in the Note. Borrower acknowledges that (a) its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the Loan, (b) during the time that any installment is delinquent for
more than thirty (30) days, Lender will incur additional costs and expenses
arising from its loss of the use of the money due and from the adverse impact on
Lender's ability to meet its other obligations and to take advantage of other
investment opportunities, and (c) it is extremely difficult and impractical to
determine those additional costs and expenses. Borrower also acknowledges that,
during the time that any installment is delinquent for more than thirty (30)
days or any other Event of Default has occurred and is continuing, Lender's risk
of nonpayment will be materially increased and Lender is entitled to be
compensated for such increased risk. Borrower agrees that the increase in the
rate of interest set forth in the Note represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Agreement, of the additional costs and expenses Lender will incur by reason of
Borrower's delinquent payment and the additional compensation Lender is entitled
to receive for the increased risks of nonpayment associated with a delinquent
loan.

3.3.5.        Late Charge.

If any amount payable under this Agreement, the Note or any other Loan Document,
other than (i) the outstanding amount of the Revolving Credit Note payable on
the Maturity Date, (ii) the then outstanding amount of any Fixed Rate Note
payable on the Maturity Date, or (iii) the then outstanding amount of the Loan
payable upon acceleration of the Note, is not received by Lender as provided in
the Note, Borrower shall pay to Lender, immediately and without demand by
Lender, a late charge as specified in the Note. Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Loan, and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable specified in the Note represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Agreement, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the default rate specified in the Note.

 
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3.4.           Reference Bills® Rate Unascertainable: Illegality; Increased
Costs.

3.4.1.        Unascertainable.

In the event Freddie Mac shall at any time cease to designate any unsecured
general obligations of Freddie Mac as "Reference Bills®", at its option, Lender
may (i) select from time to time another unsecured general obligation of Freddie
Mac having original maturities, most comparable to the term of the Interest
Period for the applicable Borrowing Tranche, and issued by Freddie Mac at
regularly scheduled auctions within the sixty (60) day period prior to the first
day of such Interest Period, and the term "Reference Bills®" as used herein
shall mean such other unsecured general obligations as selected by Lender; or
(ii) for any one or more Interest Periods, use the applicable LIBO Rate for
purposes of determining the Base Rate for such Interest Period(s). If Freddie
Mac has not conducted an auction of its Reference Bills® or other unsecured
general obligations within sixty (60) days prior to the first day of the
Interest Period for the proposed Borrowing Tranche, the Base Rate shall be
determined as the LIBO Rate plus the Margin for such Interest Period(s).

3.4.2.        Illegality; Increased Costs.

At any time at which (i) the Reference Bills® Rate shall not be available and
the Base Rate shall be determined based on the LIBO Rate in accordance with the
provisions of Section 3.4.1 and (ii) Lender shall have also reasonably
determined that (a) adequate and reasonable means do not exist for ascertaining
the applicable LIBO Rate, (b) a contingency has occurred which materially and
adversely affects the London interbank market, (c) the making, maintenance or
funding of any Borrowing Tranche bearing interest in part at the LIBO Rate has
been made unlawful by Lender's compliance in good faith with any Law or any
interpretation or application thereof by any Official Body or with any request
or directive of any such Official Body (whether or not having the force of Law,
but other than as a result of any misconduct by Lender), (d) the Base Rate (as
determined with reference to the LIBO Rate) will not adequately and fairly
reflect the cost to Lender of the establishment or maintaining of any such
Borrowing Tranche, or (e) after making all reasonable efforts, deposits of the
relevant amount in Dollars for the relevant Interest Period for a Borrowing
Tranche are not available to Lender in the London interbank market, then Lender
shall have the rights specified in Section 3.4.3.

3.4.3.        Lender's Rights.

In the case of the events specified in items (i) and (ii) of Section 3.4.2
above, Lender shall promptly notify Borrower thereof. Upon the date as shall be
specified in such Notice, the obligation of Lender to make advances under any
Borrowing Tranche(s) at the Base Rate shall be suspended until Lender shall have
later notified Borrower of Lender's reasonable determination that the
circumstances set forth in Section 3.4.2 no longer exist. If at any time Lender
notifies Borrower that it has made a determination under Section 3.4.2, then
with respect to any Loan Request previously submitted but not yet funded, and
with respect to any Borrowing Tranche on which an Interest Period shall
thereafter expire, each such new or renewal Borrowing Tranche(s) shall
thereafter bear interest at the Prime Rate (unless, with respect to a pending
Loan Request, Borrower immediately notifies Lender by written Notice of its
election not to borrow such funds, or, in the case of a Renewal Borrowing
Tranche, Borrower instead elects to repay such Borrowing Tranche upon the
expiration of the applicable Interest Period in accordance with the terms of
this Agreement), in each case subject to Section 3.3.2 hereof.

 
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4.              PAYMENTS

4.1.           Payments.

All payments and prepayments to be made in respect of principal, interest,
Unused Facility Fees, Minimum Usage Fees or other fees or amounts due from
Borrower hereunder shall be due and payable on the date when due without
presentment, demand, protest, or notice of any kind, including, but not limited
to, notice of Lender's intent to accelerate Borrower's Obligations under the
Loan and notice of such acceleration, all of which (unless expressly provided in
the Loan Documents) are hereby waived by Borrower, and without set-off,
counterclaim or other deduction of any nature, and an action therefor shall
immediately accrue. Such payments shall be made to Lender in immediately
available funds when due. Lender's Monthly Payment Statement shall, in the
absence of manifest error, be conclusive as to the amount of principal of and
interest on the Loan and other amounts owing under this Agreement, provided that
Borrower may challenge the accuracy of any Monthly Payment Statement within one
(1) year of the date of such Monthly Payment Statement.

4.2.           Payment Dates.

Subject to the provisions of Section 4.3, interest on the Loan shall be payable
in arrears and shall be due, together with all other amounts set forth on the
applicable Monthly Payment Statement, prior to 2:00 Eastern Time on the first
(1st) day of any calendar month during the term hereof (the "Payment Date"), and
shall be paid by wire transfer of immediately available funds to an account
specified by Servicer. Lender shall deliver to Borrower an invoice (the "Monthly
Payment Statement") detailing the interest (and principal, if applicable),
Unused Facility Fees, Minimum Usage Fees and other fees due and payable. Except
in the case of a prepayment under Section 4.3, Lender shall deliver the Monthly
Payment Statement detailing charges due for the current calendar month via fax
at least five (5) Business Days prior to the first day of the succeeding
calendar month. In the instance of a renewal of an Interest Period pursuant to
Section 3.3.3, interest on such renewed Borrowing Tranche shall be due and
payable on the next Payment Date, subject to any adjustments in interest rates,
as if the Interest Period had not expired and then been renewed. Interest on
prepayments under Section 4.3 shall be due on the date such prepayment is due.
Interest on the principal amount of the Loan or other monetary Obligation shall
be due and payable on demand after such principal amount or other monetary
Obligation becomes due and payable (whether on the stated maturity date, upon
acceleration or otherwise).

4.3.           Prepayments.

4.3.1.        Voluntary Prepayments.

Borrower shall have the right, at its option, from time to time to prepay the
Loan in whole or part at any time, but no prepayment may be less than the
outstanding principal balance and accrued interest of the applicable Borrowing
Tranche(s) being prepaid. Whenever Borrower desires to prepay any part of the
Loan, Borrower shall provide a prepayment Notice to Lender by 2:00 Eastern Time
at least two (2) Business Days prior to the date of the proposed prepayment
setting forth the following information:

 
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(x)             the estimated date on which the proposed prepayment is to be
made; and

(y)            a statement indicating the application of the prepayment to a
particular Base Rate Borrowing Tranche(s) or Fixed Rate Borrowing Tranche(s).

All prepayment Notices shall be irrevocable. The principal amount of the
Borrowing Tranche(s) for which a prepayment Notice is given, together with
interest on such principal amount, shall be due and payable by 2:00 Eastern Time
on the date specified in such prepayment Notice as the date on which the
proposed prepayment is to be made. Lender shall, upon receipt of Borrower's
Notice, prepare and deliver to Borrower the same day via facsimile or other
electronic transmittal a statement of interest due with respect to such
prepayment, provided that in the event Borrower's prepayment Notice is not
received by Lender prior to 2:00 Eastern Time, Lender shall not be obligated to
prepare and deliver such statement of interest until the Business Day following
Lender's receipt of such Notice.

4.3.2.        Prepayment Fee Not Applicable (Mandatory Prepayment / Collateral
Addition).

4.3.2.1.     If at the time of the release of a portion of the Collateral
pursuant to Section 2.10, Borrower shall be in violation of any of the Sublimits
set forth in Section 2.5.3, Borrower may cure such violation prior to or
simultaneously with such release by either (i) pledging multi-family real
property collateral in form, substance, value and in a manner all acceptable to
Lender, in its sole discretion, in accordance with Section 2.9 or (ii) prepaying
that portion of the Loan outstanding as is necessary to cause compliance with
such Sublimit without any Prepayment Fee or similar fee or penalty.
Notwithstanding the foregoing, if Borrower is unable to cause compliance with
the Sublimits within fifteen (15) Business Days following Lender's determination
of Borrower's non-compliance with the Sublimits, then, for so long as Borrower
fails to comply with the Sublimits, (i) the Net Spread applicable to all Base
Rate Borrowing Tranches then outstanding (and thereafter renewed) shall
automatically increase to one-hundred basis points (0.01) over the highest Net
Spread shown on Schedule 3.2 (as such Net Spreads are adjusted by Lender
pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2), further increased, if at all,
in accordance with Schedule 3.2, as a result of the duration of such Base Rate
Borrowing Tranche(s) and (ii) the interest rate applicable to all Fixed Rate
Borrowing Tranches shall automatically increase by one-hundred basis points
(0.01). Lender shall deliver to Borrower as soon as practicable, but in any
event not less than two (2) Business Days prior to such release, a statement of
the principal and interest due with respect to any required prepayment.

4.3.2.2.     If at the time of a Valuation pursuant to Section 2.12 or at any
other time, Borrower shall be in violation of any of the Sublimits set forth in
Section 2.5.3, Borrower shall cure such violation, within the time periods set
forth in (a) and (b) below, by either (a) within ninety (90) days of Notice,
pledging multi-family collateral in form, substance, value and in a manner all
acceptable to Lender in its sole discretion, in accordance with Section 2.9 or
(b) within fifteen (15) days of Notice from Lender of such decrease, prepaying
so much of the Loan as is necessary to cause compliance with the Sublimits
(together with the payment of any applicable Prepayment Fee or similar fee or
penalty). If at the time of a Material Adverse Change pursuant to Section 2.14,
Borrower shall cure such violation within the time periods set forth in (i),
(ii) and (iii) below, by either (i) within ninety (90) days of Notice, pledging
multi-family collateral in form, substance, value and in a manner all acceptable
to Lender in its sole discretion, in accordance with Section 2.9, (ii) within
fifteen (15) days of Notice from Lender of such decrease, prepaying so much of
the Loan as is necessary to cause compliance with the Sublimits, or (iii)
provided that Borrower is not in violation of a Sublimit, within ninety (90)
days of Notice, releasing one or more Collateral Pool Properties (together with
the payment of any applicable Prepayment Fee or similar fee or penalty). Lender
shall deliver to Borrower within two (2) Business Days following the notice of
Valuation, Material Adverse Change or other event, as the case may be, a
statement of the principal and interest due with respect to any required
prepayment. Notwithstanding the foregoing, if Borrower is unable to cause
compliance with the Sublimits within fifteen (15) Business Days following
Lender's determination of Borrower's non-compliance with the Sublimits, then,
for so long as Borrower fails to comply with the Sublimits, (i) the Net Spread
applicable to all Base Rate Borrowing Tranches then outstanding (and thereafter
renewed) shall automatically increase to one-hundred basis points (0.01) over
the highest Net Spread shown on Schedule 3.2 (as such Net Spreads are adjusted
by Lender pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2), further increased,
if at all, in accordance with Schedule 3.2, as a result of the duration of such
Base Rate Borrowing Tranche(s) and (ii) the interest rate applicable to all
Fixed Rate Borrowing Tranches shall automatically increase by one-hundred basis
points (0.01).

 
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4.3.2.3.     In the event of a casualty or condemnation affecting any of the
Collateral Pool Properties, any award and/or proceeds payable with respect to
such casualty or condemnation shall be treated in accordance with the provisions
of the applicable Loan Documents, provided that Borrower may elect to terminate
this Agreement in accordance with Section 2.13.

4.3.2.4.     Any mandatory prepayment of the Loan in accordance with the
provisions of this Section 4.3.2 shall be applied, as directed by Borrower, to a
particular Base Rate Borrowing Tranche or Base Rate Borrowing Tranches under the
Revolving Credit Note until the Revolving Credit Note has been repaid in full
and thereafter, to the outstanding principal balances of the Fixed Rate Note(s)
pro rata or, in the absence of any specific direction from Borrower, as selected
by Lender in its sole discretion.

4.4.           Prepayment Fee.

Unless Borrower for any reason (i) repays a Borrowing Tranche permitted
hereunder accruing interest at the Prime Rate, (ii) has elected to prepay in
advance all of the interest, applicable to the particular Borrowing Tranche
being prepaid, which would have otherwise accrued over the applicable Interest
Period, (iii) repays all or a part of a Base Rate Borrowing Tranche upon the
expiration of such Base Rate Borrowing Tranche's Interest Period or (iv) repays
a Fixed Rate Note within the applicable Window Period, any prepayment under
Section 4.3 shall be accompanied by a prepayment fee (the "Prepayment Fee"),
unless otherwise provided herein. The Prepayment Fee for (x) any Base Rate
Borrowing Tranche, shall be determined in accordance with Schedule 4.4 and (y)
any Fixed Rate Borrowing Tranche, shall be determined in accordance with the
applicable Fixed Rate Note. The Prepayment Fee shall not constitute the payment
of interest and therefore shall not be included in the calculation of Facility
Debt Service Coverage Ratio or the determination of Borrower's compliance with
the Sublimits set forth in Section 2.5.3. In addition, upon Lender's exercise of
any right of acceleration under this Agreement, the Note, or any other Loan
Document following an Event of Default, Borrower shall pay to Lender the
Prepayment Fee on all Base Rate Borrowing Tranches and Fixed Rate Borrowing
Tranches outstanding at the time of acceleration in addition to all interest
accrued thereon, and all other sums and fees payable to Lender hereunder, in
lieu of determining the same based on the principal amounts being prepaid under
the Revolving Credit Note as specified in Schedule 4.4.

 
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4.5.           Additional Payment Obligations.

Notwithstanding anything to the contrary set forth herein, if Lender shall
determine that the Facility Debt Service Coverage Ratio is less than required
pursuant to Section 2.5.3.2 or that the Loan to Value Ratio exceeds the ratio
permitted in accordance with Section 2.5.3.1, and such noncompliance shall
continue uncured for fifteen (15) Business Days following Lender's determination
of Borrower's non-compliance with the Sublimits, then, for so long as Borrower
fails to comply with the Sublimits, (i) the Net Spread applicable to all Base
Rate Borrowing Tranches then outstanding (and thereafter renewed) shall
automatically increase to one-hundred basis points (0.01) over the highest Net
Spread shown on Schedule 3.2 (as such Net Spreads are adjusted by Lender
pursuant to Sections 2.2(d). 2.2(e) and 2.4.6.2), further increased, if at all,
in accordance with Schedule 3.2, as a result of the duration of such Base Rate
Borrowing Tranche(s) and (ii) the interest rate applicable to all Fixed Rate
Borrowing Tranches shall automatically increase by one-hundred basis points
(0.01). In the event that the Facility Debt Service Coverage Ratio shall
continue to be less than required pursuant to Section 2.5.3.2 or the Loan to
Value Ratio shall exceed the ratio permitted in accordance with Section
2.5.3.1 for a period of ninety (90) consecutive days after receipt of Notice of
the same, the same shall constitute an Event of Default.

4.6.           Additional Compensation in Certain Circumstances.

4.6.1.        Increased Costs Resulting from Taxes, Etc.

If any change in any Law, guideline or interpretation or application thereof by
any Official Body charged with the interpretation or administration thereof or
compliance with any written request or directive of any Official Body (other
than as a result of any misconduct by Lender) which is applicable to Lender:

4.6.1.1.     subjects Lender to any tax or changes the basis of taxation with
respect to this Agreement, the Note, the Loan or payments by Borrower of any
principal, interest, fees, or other amounts due from Borrower hereunder or under
the Revolving Credit Note or any Fixed Rate Note (except for taxes on the
overall net or gross income of Lender or any franchise taxes);

4.6.1.2.     imposes upon Lender any condition or denies Lender any right, the
result of which is to increase the cost to, reduce the income receivable by, or
impose any expense (including breakage costs) upon Lender with respect to this
Agreement, the Note or the making, maintenance or funding of any Borrowing
Tranche by an amount which Lender in its discretion deems to be material;

 
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then Lender shall from time to time notify Borrower of the amount determined in
good faith (using any averaging and attribution methods employed in good faith)
by Lender to be necessary to compensate Lender for such increase in cost. Such
Notice shall set forth in reasonable detail the basis for such determination.
Such amount shall be due and payable by Borrower to Lender thirty (30) days
after such Notice is given.

4.6.2.        Termination.

Upon the occurrence of any event described in Section 4.6.1, Borrower may elect
to terminate this Agreement and the parties' obligations under the Loan
Documents in accordance with the provisions of Section 2.13, and Borrower's
obligations hereunder shall terminate upon Borrower's repayment in full of the
Loan and the Borrower shall not be obligated to pay the fees set forth in
Section 2.13.4

4.6.3.        Indemnity.

In addition to the compensation required by Section 4.6.1, Borrower shall
jointly and severally indemnify Lender and Servicer against all liabilities,
losses or expenses (excluding opportunity costs but including breakage costs)
which Lender and/or Servicer sustains or incurs as a consequence of any:

4.6.3.1.     attempt by Borrower to revoke (expressly, by later inconsistent
notices or otherwise) in whole or part any Loan Request under Section
2.5 (except as provided in Section 3.4.3), any request to release a Collateral
Pool Property under Section 2.10. or notice relating to prepayments under
Section 4.3, or

4.6.3.2.     default by Borrower in the performance or observance of any
covenant or condition contained in this Agreement or any other Loan Document,
including any failure of Borrower to pay when due (by acceleration or otherwise)
any principal, interest, Prepayment Fee, Unused Facility Fee, Minimum Usage Fee
or any other amount due hereunder.

If Lender sustains or incurs any such loss or expense, it shall from time to
time notify Borrower of the amount determined in good faith by Lender (which
determination may include such assumptions, allocations of costs and expenses
and averaging or attribution methods as Lender shall deem reasonable) to be
necessary to indemnify Lender for such loss or expense. Such Notice shall set
forth in reasonable detail the basis for such determination (which shall be
conclusive absent manifest error). Such amount shall be due and payable by
Borrower to Lender thirty (30) days after such Notice is given.

4.7.           Non-Recourse.

The Loan shall be non-recourse as and to the extent provided in the Loan
Documents.

5.              CONDITIONS OF LENDING

 
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The obligation of Lender to fund the Loan hereunder is subject to the
performance by Borrower of its Obligations to be performed hereunder at or prior
to (i) the funding of indebtedness to any Fixed Rate Borrowing Tranche(s) and
(ii) the funding of any Base Rate or permitted Prime Rate Borrowing Tranche(s),
and to the satisfaction of the following further conditions:

5.1.           Initial Borrowing Tranche.

On the Closing Date:

5.1.1.        Delivery of Loan Documents.

All Loan Documents not previously executed and delivered to Lender shall have
been duly executed and delivered to Lender, together with all appropriate
financing statements.

5.1.2.        Validity of Representations.

The representations and warranties of Borrower contained in Section 6 and in
each of the other Loan Documents shall be true and accurate in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and Borrower shall have performed
and complied with all covenants and conditions hereof and thereof, no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist.

5.1.3.        Officer's Certificate.

There shall be delivered to and for the benefit of Lender a certificate, in form
and substance reasonably acceptable to Lender, dated the Closing Date and signed
by an Authorized Officer, certifying as appropriate as to:

5.1.3.1.     all required actions taken by Borrower in connection with this
Agreement and the other Loan Documents;

5.1.3.2.     the names of the officer or officers authorized to sign this
Agreement and the other Loan Documents and the true signatures of such officer
or officers and specifying the Authorized Officers permitted to act on behalf of
Borrower for purposes of this Agreement and the true signatures of such
Authorized Officers, on which Lender may conclusively rely;

5.1.3.3.     copies of the organizational documents of Borrower including its
certificate of incorporation, by-laws, certificate of limited partnership,
partnership agreement, certificate of formation, and limited liability company
agreement, as applicable, as in effect on the Closing Date certified by the
appropriate state official where such documents are filed in a state office
together with certificates from the appropriate state officials as to the
continued existence and good standing of Borrower in each state where organized
or qualified to do business and bring-down certificates by facsimile dated
within thirty (30) days of the Closing Date, all of which shall be attached to
such officer's certificate; and

 
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5.1.3.4.     the matters described in Section 5.1.8.

5.1.4.        Opinion of Counsel.

There shall be delivered to Lender, written opinions of counsel for Borrower
dated the Closing Date and in form and substance satisfactory to Lender and its
counsel as to matters customary to the transactions contemplated herein, or as
Lender may reasonably request.

5.1.5.        Legal Details.

All legal details and proceedings in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be in form and
substance reasonably satisfactory to Lender and counsel for Lender, and Lender
shall have received all such other counterpart originals or certified or other
copies of such documents and proceedings in connection with such transactions,
in form and substance reasonably satisfactory to Lender and said counsel, as
Lender or said counsel may reasonably request.

5.1.6.        Payment of Fees.

Borrower shall have paid or caused to be paid to Lender and Freddie Mac to the
extent not previously paid all fees accrued through the Closing Date and all of
Lender's and Freddie Mac's reasonable costs and expenses, including, but not
limited to, attorneys' fees, title insurance premiums, surveys, appraisals, all
costs incurred in obtaining environmental, engineering and credit reports, all
third party due diligence costs and other costs and expenses incurred by either
Lender or Freddie Mac in connection with the closing of this Loan.

5.1.7.        Consents.

All material consents required to effectuate the transactions contemplated
hereby shall have been obtained.

5.1.8.        No Material Adverse Change.

Since the date of Borrower's formation, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the ownership or management of Borrower.

5.1.9.        No Violation of Laws.

The making of the Loan shall not contravene any Law applicable to Borrower, its
Affiliates or Lender.

5.1.10.      No Actions or Proceedings.

 
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No action, proceeding, investigation, regulation or legislation shall have been
instituted, or, to Borrower's knowledge threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in
Lender's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.

5.1.11.      Collateral Initially Included in Collateral Pool.

With respect to the Collateral which is part of the Collateral Pool at Closing,
Borrower shall have delivered all Underwriting Materials required hereunder for
inclusion of such Collateral into the Collateral Pool, and Lender shall have
approved the inclusion therein.

5.1.12.      Other Conditions.

Borrower shall have satisfied such other reasonable conditions as required by
Lender or Lender's legal counsel.

5.2.          Each Subsequent Borrowing Tranche.

At the time of funding of any Base Rate Borrowing Tranche or Fixed Rate
Borrowing Tranche (excluding renewals, conversions and continuances of any
outstanding Base Rate Borrowing Tranche(s) or Fixed Rate Borrowing Tranche(s)
which do not increase the outstanding principal amount of the Loan made
hereunder) other than the funds advanced on the Closing Date, and after giving
effect to the proposed extensions of credit: (i) the representations and
warranties of Borrower contained in Section 6 and in the other Loan Documents
shall be true and correct in all material respects on and as of the date of the
funding of any such Base Rate Borrowing Tranche or Fixed Rate Borrowing Tranche
with the same effect as though such representations and warranties had been made
on and as of the date of the funding of any such Base Rate Borrowing Tranche or
Fixed Rate Borrowing Tranche (except representations and warranties that
expressly relate solely to an earlier date or time, which representations and
warranties shall be true and correct in all material respects on and as of the
specific dates or times referred to therein and except such changes as would not
constitute a Material Adverse Change) and Borrower shall have performed and
complied with all covenants and conditions hereof; (ii) no Event of Default or,
to Borrower's knowledge, Potential Default shall have occurred and be continuing
or shall exist; (iii) the funding of any Borrowing Tranche shall not contravene
any Law applicable to Borrower, its Affiliates or Lender; (iv) Borrower shall
have delivered to Lender a duly executed and completed Loan Request or Renewal
Request, as the case may be; and (v) Borrower shall have paid all reasonable
fees and expenses incurred by Lender or Servicer in connection therewith.

6.             REPRESENTATIONS AND WARRANTIES

6.1.          Representations and Warranties.

Borrower represents and warrants to Lender as follows:

 
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6.1.1.        Organization and Qualification.

Borrower is a corporation, partnership, limited liability company, or real
estate investment trust, duly organized, validly existing and in good standing
under the Laws of its jurisdiction of organization or formation, as the case may
be, and Borrower has the lawful power to own or lease the Collateral Pool
Properties and to engage in the business it presently conducts or proposes to
conduct. Borrower is duly licensed or qualified and in good standing in all
jurisdictions where the property owned or leased by it or where the nature of
the business transacted by it or both makes such licensing or qualification
necessary and where the failure to be so qualified would result in a Material
Adverse Change.

6.1.2.        Single Asset Entity.

Borrower is a Single Asset Entity, with a purpose limited to owning, maintaining
and operating only the Collateral Pool Properties.

6.1.3.        Power and Authority.

Borrower has full power to enter into, execute, deliver and carry out this
Agreement and the other Loan Documents to which it is a party, to incur the Loan
contemplated by the Loan Documents and to perform its Obligations under the Loan
Documents to which it is a party, and all such actions have been duly authorized
by all necessary proceedings on its part.

6.1.4.        Validity and Binding Effect.

This Agreement has been duly and validly executed and delivered by Borrower and
each other Loan Document which Borrower is required to execute and deliver on or
after the date hereof will have been duly executed and delivered by Borrower on
the required date of delivery of such Loan Document. This Agreement and each
other Loan Document constitutes, or will constitute, legal, valid and binding
obligations of Borrower on and after its date of delivery thereof, enforceable
against Borrower in accordance with its terms, except to the extent that
enforceability of any of such Loan Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance. There is no offset, defense, counterclaim or right of rescission
with respect to any of the Loan Documents.

6.1.5.        No Conflict.

Neither the execution and delivery of this Agreement or the other Loan Documents
by Borrower nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof by
any of them will conflict with, constitute a default under or result in any
breach or violation of (i) the terms and conditions, as applicable, of the
certificate of incorporation, by-laws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents of Borrower or its Affiliates, (ii)
any Law or any material agreement or instrument or order, writ, judgment,
injunction or decree to which Borrower or any of its Affiliates is a party or is
subject, or by which Borrower or any of its Affiliates is bound, or (iii) result
in the creation or enforcement of any Lien, charge or encumbrance whatsoever
upon any property (now or hereafter acquired) of Borrower (other than Liens
granted under the Loan Documents), nor will they result in or require (except as
specifically contemplated by this Agreement) the creation or imposition of any
lien of any nature upon any of the collateral of Borrower other than the Liens
of the Loan Documents.

 
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6.1.6.        Litigation.

There are no actions, suits, proceedings or investigations pending, or to
Borrower's knowledge threatened, against Borrower or its Affiliates at law or
equity before any Official Body which individually or in the aggregate may
result in any Material Adverse Change. Neither Borrower nor its Affiliates are
in violation of any order, writ, injunction or decree of any Official Body which
may result in any Material Adverse Change.

6.1.7.        Title to Collateral Pool Properties.

Borrower has good and marketable title to all Collateral Pool Properties and to
all other assets which it purports to own or which are reflected as owned on its
books and records, free and clear of all Liens and encumbrances except the
Permitted Exceptions. The Permitted Exceptions do not and will not materially
and adversely affect (i) the ability of Borrower to pay in full all sums due
under the Revolving Credit Note, any Fixed Rate Note or any of its other
Obligations in a timely manner, (ii) the use of any Collateral Pool Property for
the use currently being made thereof, (iii) the operation of any Collateral Pool
Property as currently being operated, or (iv) the value of any Collateral Pool
Property.

6.1.8.        Use of Proceeds.

Borrower intends to use the proceeds of the Loan in accordance with Section 2.8.

6.1.9.        Full Disclosure.

Neither this Agreement nor any other Loan Document, nor any material
certificate, statement, agreement or other documents furnished to Lender in
connection herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to Borrower which materially
adversely affects the business, property, assets, financial condition, results
of operations or prospects of Borrower, or any of its Affiliates which has not
been set forth in this Agreement or in the certificates, statements, agreements,
financial projections or other documents furnished in writing to Lender prior to
or at the date hereof in connection with the transactions contemplated hereby.

6.1.10.      Taxes.

All federal, state, local and other tax returns required to have been filed with
respect to Borrower and its Affiliates have been filed, and payment or adequate
provision has been made for the payment of all taxes, fees, assessments and
other governmental charges which have or may become due pursuant to said returns
or to assessments received, except to the extent that such taxes, fees,
assessments and other charges are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made. There are no agreements or waivers extending the statutory period of
limitations applicable to any federal income tax return of Borrower, or its
Affiliates for any period.

 
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6.1.11.      Consents and Approvals.

Except for the filing of financing statements and the relevant Collateral Pool
Property Documents in the appropriate state and county filing offices, there are
no other filings, consents or approvals necessary for the execution of this
Agreement by Borrower or its performance hereunder or under the Loan Documents,
all of which shall have been obtained or made on or prior to the Closing Date.

6.1.12.      No Event of Default; Compliance with Instruments.

No event has occurred and is continuing and no condition exists or will exist
after giving effect to the borrowings or other extensions of credit to be made
on the Closing Date or thereafter under or pursuant to the Loan Documents, which
constitutes an Event of Default or a Potential Default.

6.1.13.      Security Interests.

The Liens and security interests granted to and for the benefit of Lender
pursuant to the Loan Documents constitute and will continue to constitute first
priority security interests under the Uniform Commercial Code as in effect in
each applicable jurisdiction (the "Uniform Commercial Code") or other Law,
entitled to all the rights, benefits and priorities provided by the Uniform
Commercial Code or such Law, subject to the Permitted Exceptions. Upon the
filing of financing statements relating to said security interests in each
office in which filing is required under the Uniform Commercial Code all such
action as is necessary in Lender's sole opinion to establish such rights of
Lender will have been taken, and there will be, upon execution and delivery of
the Loan Documents, such filings and such taking of possession, no necessity for
any further action in order to preserve, protect and continue such rights,
except the filing of continuation statements with respect to such financing
statements within six (6) months prior to the expiration of such filing of such
financing statements. All filing fees and other expenses in connection with each
such action have been or will be paid by Borrower. All continuations and any
assignments of any such financing statements have been or will be timely filed
or refiled, as appropriate, in the appropriate recording offices. Without
limiting the foregoing representations and warranties, Borrower hereby
authorizes Lender to file financing statements, continuation statements and
financing statement amendments, in such form as Lender may require to perfect or
continue the perfection of such security interests and in all events without
Borrower's signature.

6.1.14.      Mortgage Liens.

The Liens granted to and for the benefit of Lender pursuant to the Collateral
Pool Property Documents constitute a valid first priority Lien under applicable
Law, subject to any Permitted Exceptions. All such action as will be necessary
in Lender's sole opinion to establish such Lien of Lender and its priority as
described in the preceding sentence will be taken at or prior to the time
required for such purpose, and there will be as of the date of execution and
delivery of the Collateral Pool Property Documents no necessity for any further
action in order to protect, preserve and continue such Lien and such priority
(except for the timely filing in the required offices of Uniform Commercial Code
financing statement continuations). All filing fees and other expenses in
connection with each such action have been or will be paid by Borrower.

 
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6.1.15.      Insurance.

All insurance policies and other bonds to which Borrower and its Affiliates are
a party are valid and in full force and effect. No notice has been given, no
claim has been made, and no grounds exist, to cancel or avoid any of such
policies or bonds or to reduce the coverage provided thereby. Such policies and
bonds provide adequate coverage from reputable and financially sound insurers in
amounts sufficient to insure the assets and risks of Borrower and its Affiliates
in accordance with prudent business practice in the industry of Borrower and its
Affiliates. The representations made in this Section 6.1.15 with respect to
Affiliates of the Borrower are given only to the extent that the same could
result in a Material Adverse Change.

6.1.16.      Material Contracts; Burdensome Restrictions.

All material contracts relating to Borrower and those contracts relating to
Affiliates of the Borrower, of which a default thereunder could result in a
Material Adverse Change, taken as a whole, are valid, binding and enforceable
(subject to bankruptcy and creditor's rights laws) upon Borrower and such
Affiliates, as applicable, and, to Borrower's knowledge, each of the other
parties thereto in accordance with their respective terms (except as disclosed
in writing by Borrower to Lender prior to the date hereof). There is no default
under any such contracts by Borrower, or to Borrower's knowledge by any of the
other parties thereto, except for defaults which would not result in a Material
Adverse Change. Neither Borrower nor any of its Affiliates is bound by any
contractual obligation, or subject to any restriction in any organizational
document, or any requirement of Law, which is reasonably expected to result in a
Material Adverse Change.

6.1.17.      Investment Companies; Regulated Entities.

Borrower is not an "investment company" registered or required to be registered
under the Investment Company Act of 1940 or under the "control" of an
"investment company" as such terms are defined in the Investment Company Act of
1940 and shall not become such an "investment company" or under such "control."
Borrower is not subject to any other federal or state statute or regulation
limiting its ability to incur any debt.

6.1.18.      Pension Plans and Benefit Arrangements.

The representations and warranties set forth in this Section 6.1.18 shall only
apply to the extent Borrower is at any time, and from time to time, subject to
the provisions of ERISA.

6.1.18.1.   Borrower and each other member of the ERISA Group are in compliance
in all material respects with any applicable provisions of ERISA with respect to
all Benefit Arrangements, Pension Plans and Multiemployer Plans.  There has been
no Prohibited Transaction with respect to any Benefit Arrangement or any Pension
Plan or, with respect to any Multiemployer Plan, which could result in any
material liability of Borrower or any other member of the ERISA Group. Borrower
and all members of the ERISA Group have made when due any and all payments
required to be made under any agreement relating to a Multiemployer Plan or any
Law pertaining thereto. With respect to each Pension Plan and Multiemployer
Plan, Borrower and each member of the ERISA Group (i) have fulfilled in all
material respects their obligations under the minimum funding standards of
ERISA, (ii) have not incurred any liability to the PBGC, and (iii) have not had
asserted against them any penalty for failure to fulfill the minimum funding
requirements of ERISA.

 
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6.1.18.2.   Each Multiemployer Plan is able to pay benefits thereunder when due.

6.1.18.3.   Neither Borrower nor any other member of the ERISA Group has
instituted or intends to institute proceedings to terminate any Pension Plan.

6.1.18.4.   No event requiring notice to the PBGC under Section 302(f)(4)(A) of
ERISA has occurred or is reasonably expected to occur with respect to any
Pension Plan, and no amendment with respect to which security is required under
Section 307 of ERISA has been made or is reasonably expected to be made to any
Pension Plan.

6.1.18.5.   The aggregate actuarial present value of all benefit liabilities
(whether or not vested) under each Pension Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Pension Plan, does not exceed the aggregate fair
market value of the assets of such Pension Plan.

6.1.18.6.   Neither Borrower nor any other member of the ERISA Group has
incurred or reasonably expects to incur any material withdrawal liability under
ERISA to any Multiemployer Plan. Borrower nor any other member of the ERISA
Group has been notified by any Multiemployer Plan that such Multiemployer Plan
has been terminated within the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.

6.1.18.7.   To the extent that any Benefit Arrangement is insured, Borrower and
all members of the ERISA Group have paid when due all premiums required to be
paid for all periods through and including the Closing Date. To the extent that
any Benefit Arrangement is funded other than with insurance, Borrower and all
other members of the ERISA Group have made when due all contributions required
to be paid for all periods through the Closing Date.

6.1.18.8.   All Pension Plans, Benefit Arrangements and Multiemployer Plans have
been administered in accordance with their terms and any Law.

6.1.19.      Other Indebtedness.

Other than the Loan, Borrower has not incurred any debt other than (i) unsecured
trade debt incurred in the ordinary course of business and (ii) subordinate
intercompany debt.

 
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6.1.20.
Solvency,

 
Borrower is Solvent. After giving effect to the transactions contemplated by the
Loan Documents, including the Loan incurred thereunder and the Liens granted to
and for the benefit of Lender, Borrower will be Solvent. Borrower has not
entered into this Credit Agreement or any Loan Document with the actual intent
to hinder, delay, or defraud any creditor, and Borrower has received reasonably
equivalent value in exchange for its obligations under the Loan Documents.
Borrower does not intend to, and Borrower does not believe that it will, incur
debts and liabilities beyond its ability to pay such debts as they mature
(taking into account the timing and amounts to be payable on or in respect of
obligations of Borrower).

 
 
6.1.21.
Agreements.

 
Borrower is not a party to any agreement or instrument or subject to any
restriction which is likely to result in a Material Adverse Change. Borrower is
not in default in any respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any indenture,
agreement or instrument to which it is a party or by which Borrower or any
Collateral Pool Property is bound which default is likely to result in a
Material Adverse Change.

 
 
6.1.22.
No Bankruptcy Filing.

 
Borrower is not contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency Laws or the liquidation of all or a
major portion of its assets or property of Borrower and Borrower has no
knowledge of any Person contemplating the filing of any such petition against
Borrower.
 
 
6.1.23.
Formation.

 
Borrower was formed in the State of California.
 
 
6.1.24.
Compliance.

 
Borrower, each Collateral Pool Property and the use thereof and operations
thereat by Borrower, comply in all material respects with all applicable Laws.
Borrower is not in default or violation of any order, writ, injunction, decree
or demand of any Official Body, the violation of which is reasonably likely to
result in a Material Adverse Change. All required permits, licenses, and
certificates for the lawful use and operation of the Collateral Pool Properties,
including, but not limited to, certificates of occupancy, apartment licenses, or
the equivalent have been obtained and are in full force and effect.

 
 
6.1.25.
Not a Foreign Person.

 
Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of
the Internal Revenue Code.

 
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6.1.26.
Labor Matters.

 
Borrower is not a party to any collective bargaining agreements.

 
 
6.1.27.
Condemnation.

 
No taking, condemnation or eminent domain proceeding has been commenced or, to
Borrower's knowledge, is contemplated with respect to all or any portion of any
Collateral Pool Property or for the relocation of roadways providing access to
any Collateral Pool Property.

 
 
6.1.28.
Utilities and Public Access.

 
Each Collateral Pool Property has adequate rights of access to public ways and
is served by adequate water, sewer, sanitary sewer and storm drain facilities as
are adequate for full utilization of such Collateral Pool Property for its use
as a multifamily residential property. All public utilities necessary to the
continued use and enjoyment of each Collateral Pool Property as presently used
and enjoyed are located in the public right-of-way abutting the premises or an
easement for same, and all such utilities are connected so as to serve each
Collateral Pool Property either (i) without passing over other property or, (ii)
if such utilities pass over other property, pursuant to valid easements. All
roads necessary for the full utilization of each Collateral Pool Property for
its current purpose have been completed and dedicated to public use and accepted
by all Official Bodies or are the subject of access easements for the benefit of
such Collateral Pool Property.

 
 
6.1.29.
No Joint Assessment; Separate Lots.

 
Borrower has not suffered, permitted or initiated the joint assessment of any
Collateral Pool Property (i) with any other real property constituting a
separate tax lot, and (ii) with any portion of such Collateral Pool Property
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to such Collateral Pool Property as a
single lien, which joint assessment would result in a Material Adverse Change.
Borrower shall not suffer, permit or initiate the joint assessment of any
Collateral Pool Property (i) with any other real property constituting a
separate tax lot, and (ii) with any portion of such Collateral Pool Property
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to such Collateral Pool Property as a
single lien. Each Collateral Pool Property is comprised of one or more parcels,
each of which constitutes a separate tax lot and none of which constitutes a
portion of any other tax lot in any manner which would result in a Material
Adverse Change.
 
 
6.1.30.
Assessments.

 
Except as disclosed in the title insurance policies, there are no pending or, to
the Borrower's knowledge proposed special or other assessments for public
improvements or otherwise affecting any Collateral Pool Property, nor, to
Borrower's knowledge are there any contemplated improvements to any Collateral
Pool Property that may result in such special or other assessments.

 
 
6.1.31.
No Liabilities.

 
Borrower has no liabilities or obligations including, without limitation,
contingent obligations (including, without limitation, liabilities or
obligations in tort, in contract, at law, in equity, pursuant to a statute or
regulation, or otherwise) other than those liabilities and obligations expressly
permitted by this Agreement, including those addressed in Section 7.2.2.
 
 
6.1.32.
No Prior Assignment.

 
As of the Closing Date, (i) Lender shall be assignee of Borrower's interest
under any leases with respect to the Collateral Pool Properties, and (ii) there
are no prior assignments of any such leases or any portion of the rents due and
payable thereunder or to become due and payable thereunder which are presently
outstanding.

 
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6.1.33.
Certificate of Occupancy.

 
Borrower has obtained in its own name (or is the express successor or assignee
of) all permits necessary to use and operate the Collateral Pool Properties for
the uses described in Section 2.8, and all such permits are in full force and
effect. The use being made of each Collateral Pool Property is in conformity in
all respects with the certificate of occupancy and/or permits for such
Collateral Pool Property and any other restrictions, covenants or conditions
affecting such Collateral Pool Property, including without limitation, the
applicable zoning and land use ordinances except as otherwise disclosed in
writing to Lender prior to the Closing Date. Each Collateral Pool Property
contains all equipment necessary to use and operate such Collateral Pool
Property in a manner similar to that as of Lender's final inspection thereof.
Borrower will continue to operate each Collateral Pool Property in substantially
the manner in which it is presently being operated.

 
 
6.1.34.
Intellectual Property.

 
All trademarks, trade names and service marks that Borrower owns or has pending,
or under which Borrower is licensed, are in good standing and uncontested, the
failure of which would result in a Material Adverse Change. Borrower has not
infringed, is not infringing, and has not received notice of infringement with
respect to any asserted trademarks, trade names or service marks of others,
which infringement would result in a Material Adverse Change. To Borrower's
knowledge there is no infringement by others of any trademarks, trade names or
service marks of Borrower.

 
 
6.1.35.
Conduct of Business.

 
Borrower does not conduct its business "also known as", "doing business as" or
under any other name.
 
 
6.1.36.
Intentionally Omitted.

 
 
6.1.37.
No Default.

 
The execution, delivery and performance of the obligations imposed on Borrower,
if any, under this Agreement, the Revolving Credit Note and the other Loan
Documents will not cause Borrower to be in default under the provisions of any
agreement, judgment or order to which Borrower is a party or by which Borrower
is bound. There is no litigation or other claim pending before any court or
administrative or governmental body or overtly threatened by a written
communication against Borrower, any Collateral Pool Property, or any other
property of Borrower which would result in a Material Adverse Change or which is
not covered by insurance.

 
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6.1.38.
Condition of the Collateral Pool Properties.

 
To the extent that any Collateral Pool Property has been damaged by fire, water,
wind, earthquake or other cause of casualty, such Collateral Pool Property has
been fully restored.
 
 
6.1.39.
Non-Residential Leases.

 
Each Collateral Pool Property is a multi-family housing project. Gross income
derived from commercial space, if any, located in any Collateral Pool Property
shall not exceed twenty-five percent (25%) of the total gross income of such
Collateral Pool Property. Neither Borrower, nor any general partner, managing
member or principal thereof, is an Affiliate or otherwise related to the lessee
under any leases for laundry equipment, telecommunications, television or
similar systems on or about any of the Collateral Pool Properties. For the
purposes of this Section, leases of parking to tenants shall not be deemed to be
derived from commercial space.
 
 
6.1.40.
No Low Income Housing Tax Credit.

 
Except as disclosed to Lender in writing, Borrower has not claimed, nor does
Borrower intend to claim, a low income housing tax credit for any of the
Collateral Pool Properties under Section 42 of the Internal Revenue Code of
1986, or any successor Section thereto. Should Borrower later decide to pursue
claiming such a tax credit, Borrower will not proceed without obtaining Lender's
prior written consent to do so, to be granted in Lender's sole discretion.
 
 
6.1.41.
No Restrictions.

 
Except as disclosed to Lender in writing, there are no rent level restrictions
or tenant income restrictions on any Collateral Pool Property.

 
 
6.1.42.
No Adverse Affect on the Loan.

 
Nothing involving the Collateral Pool Properties, Borrower or Borrower's credit
standing may be reasonably expected to (i) cause any payments under this
Agreement, the Revolving Credit Note or any other Loan Documents to become
delinquent or (ii) materially adversely affect the Market Value of any
Collateral Pool Property.

 
 
6.1.43.
Term of Leases.

 
All Leases for residential dwelling units with respect to the Collateral Pool
Properties shall be on forms approved by Lender, shall be for initial terms of
at least six (6) months and not more than two (2) years, and shall not include
options to purchase.

 
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6.1.44.
Authorized Officer.

 
The Authorized Officers of Borrower are those individuals that are identified as
"Authorized Representatives" on that certain Certificate of Authorized
Representative (Freddie Mac Form 988MF 7/08) delivered by Borrower to Lender on
November 4, 2008 (as such list of Authorized Officers may be amended from time
to time by written Notice to Lender).

 
 
6.1.45.
Fraudulent Conveyances.

 
Borrower has not entered into any agreements, transactions or series of
transactions with the intent to hinder, delay, or defraud any creditor, and
Borrower has not entered into any agreements, transactions or series of
transactions other than for valid consideration of reasonably equivalent value
in exchange for its obligations thereunder.
 
 
6.1.46.
Affiliate Transactions.

 
Except as approved in writing by Lender, Borrower has not entered into and is
not a party to any contract, lease or other agreement with any Person directly
or indirectly controlling, controlled by, or under common control with Borrower
for the provision of any service, materials or supplies to any Collateral Pool
Property (including any contract, lease or agreement for the provision of
property management services, cable television services or equipment, gas,
electric or other utilities, security services or equipment, laundry services or
equipment, or telephone services or equipment).

 
 
6.1.47.
No Existing Material Adverse Circumstances.

 
As of the date hereof, there exists no set of circumstances which, had such
circumstances arisen subsequent to the date hereof, would constitute a Material
Adverse Change.
 
 
6.2.
Updates.

 
Borrower shall provide with each Loan Request that will result in an increase in
the Loan, written revisions to any representations or warranties in this
Agreement which have become outdated or incorrect in any material respect. In
addition, should any such updates, corrections or additions relate to a matter
which would be a Material Adverse Change, Borrower shall promptly provide Lender
in writing with such revisions as may be necessary or appropriate, to correct or
update same. Notwithstanding the providing of revised information, a breach of
warranty or representation resulting from the prior inaccuracy or incompleteness
shall not be deemed to have been cured thereby or waived by Lender unless and
until Lender, in its sole and absolute discretion, shall have accepted in
writing such revisions or updates; further provided that no representation or
warranty shall be deemed to have been updated by any such revision unless and
until Lender funds the additional Loan Request.

 
 
6.3.
Survival of Representations and Warranties.

 
Borrower agrees that (i) all of the representations and warranties of Borrower
set forth in this Agreement and in the other Loan Documents delivered on the
Closing Date are made as of the Closing Date (except as expressly otherwise
provided) and (ii) all representations and warranties made by Borrower shall
survive the delivery of the Note and continue (a) for so long as any amount
remains owing to Lender under this Agreement, the Note or any of the other Loan
Documents or (b) until the date on which Lender releases all assets in the
Collateral Pool from any Lien securing the Loan Documents pursuant to the
provisions of Section 2.10 or Section 2.15, whichever is later. All
representations, warranties, covenants and agreements made in this Agreement or
in the other Loan Documents shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.

 
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7.
COVENANTS

 
 
7.1.
Covenants.

 
Borrower covenants and agrees that until the later of (i) payment in full of the
Loan and interest thereon, and satisfaction of all of the other Obligations of
Borrower under the Loan Documents and (ii) the Expiration Date, Borrower shall
comply at all times with the following covenants:
 
 
7.1.1.
Preservation of Existence.

 
Borrower shall, and shall cause each of its Affiliates to, maintain its legal
existence as a corporation, general or limited partnership or limited liability
company and its license or qualification and good standing in each jurisdiction
in which its ownership or lease of property or the nature of its business makes
such license or qualification necessary unless the failure to maintain the same
shall not result in a Material Adverse Change to Borrower or any Collateral Pool
Property.

 
 
7.1.2.
Maintenance of Collateral Pool Properties and Leases.

 
Borrower (i) shall not commit waste or permit impairment or deterioration of the
Collateral Pool Properties, (ii) shall not abandon any Collateral Pool Property,
(iii) shall restore or repair promptly, in a good and workmanlike manner, any
damaged part of any Collateral Pool Property to the equivalent of its original
condition, or such other condition as Lender may reasonably approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such restoration or repair (provided that Lender shall make any
insurance proceeds or condemnation awards received by Lender available to
Borrower for restoration and repair), (iv) shall keep the Collateral Pool
Properties in good repair (normal wear and tear excepted), including the
replacement of any personalty and fixtures located on any Collateral Pool
Property with items of equal or better function and quality, (v) shall provide
for professional management of the Collateral Pool Properties by a residential
rental property manager satisfactory to Lender under a contract approved by
Lender in writing (provided that Lender's approval is not required for a manager
or a management agreement where Borrower or an Affiliate of Borrower is the
manager), (vi) shall not change the use of any Collateral Pool Property as a
multi-family residential property, (vii) shall give Notice to Lender of and,
unless otherwise directed in writing by Lender, shall appear in and defend any
action or proceeding purporting to affect any Collateral Pool Property, Lender's
security or Lender's rights under this Agreement, and (viii) shall make any
reasonable repairs to a Collateral Pool Property which are requested by Lender.
Borrower shall not (and shall not permit any tenant or other person to) remove,
demolish or materially alter any Collateral Pool Property or any part thereof
except in connection with the replacement of tangible personalty.

 
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7.1.3.
Collateral Agreements.

 
Borrower shall deposit with Lender such amounts as may be required by any
Collateral Agreement and shall perform all other obligations of Borrower under
each Collateral Agreement.

 
 
7.1.4.
Inspection Rights.

 
Lender, its agents, representatives, and designees may make or cause to be made
entries upon and inspections of any Collateral Pool Property (including
environmental inspections and tests) during normal business hours, or at any
other reasonable time upon reasonable advance notice, except that no such notice
shall be required in cases of emergency. In the case of environmental
inspections, Lender, its agents, representatives, or designees shall, in
providing notice pursuant to this section, identify any third party inspectors.

 
 
7.1.5.
Single Asset Borrower.

 
Prior to the Expiration Date, Borrower (i) shall not own or acquire any real or
personal property other than the Collateral Pool Properties and personal
property related to the operation and maintenance of the Collateral Pool
Properties, (ii) shall not operate any business other than the ownership,
management and operation of the Collateral Pool Properties, and (iii) shall not
maintain its assets in a way difficult to segregate and identify.

 
 
7.1.6.
Use of Proceeds.

 
Borrower will use the proceeds of the Loan only for lawful purposes in
accordance with Section 2.8 hereof.

 
 
7.1.7.
Further Assurances.

 
Borrower shall, from time to time, at its expense, faithfully preserve and
protect Lender's Lien on and security interest in the Collateral as a continuing
first priority perfected Lien, subject only to Permitted Exceptions, and shall
do such other acts and things as Lender in its sole discretion may deem
necessary or advisable from time to time in order to preserve, perfect and
protect the Liens granted under the Loan Documents and to exercise and enforce
its rights and remedies thereunder with respect to the Collateral, provided that
(i) the terms and conditions of this Agreement and the other Loan Documents are
not changed thereby, (ii) Lender will use its best efforts to minimize costs and
expenses incurred in connection with a request under this subsection, (iii)
Borrower's obligations hereunder or under any other Loan Documents are not
increased or otherwise adversely affected thereby except for incidental costs
and expenses such as recording fees and reasonable attorneys' fees and expenses,
and (iv) Borrower's rights hereunder or under any other Loan Documents are not
decreased or otherwise adversely affected thereby.

 
 
7.1.8.
Collateral Pool Properties.

 
7.1.8.1.     Borrower shall be in compliance with the Sublimits set forth in
Section 2.5.3 at such times as expressly required in this Agreement; and

 
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7.1.8.2.     Borrower shall own at all times the entire fee simple interest in
each Collateral Pool Property.

 
 
7.1.9.
Subsequent Periodic Valuations.

 
Borrower shall cooperate with Lender and its agents and provide such information
in its possession as such parties shall reasonably require to complete a new
Valuation for each Collateral Pool Property.

 
 
7.1.10.
Special ERISA Related Covenants.

 
The covenants set forth in this Section 7.1.10, shall only apply to the extent
Borrower is at any time and from time to time subject to the provisions of
ERISA.
 
7.1.10.1.  Borrower shall at all times be a "real estate operating company"
within the meaning of such term contained in 29 CFR § 2510.3-101(d) or an entity
whose underlying assets are not deemed to be assets of a Pension Plan as defined
in Section 3(3) of ERISA.
 
7.1.10.2.  Borrower shall, and shall cause each other member of the ERISA Group
to, comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Pension Plans and Benefit Arrangements. Without limiting the
generality of the foregoing, Borrower shall cause all of its Pension Plans and
all Pension Plans maintained by any member of the ERISA Group to be funded in
accordance with the minimum funding requirements of ERISA and shall make, and
cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Pension Plans, Benefit Arrangements and Multiemployer
Plans.
 
7.1.10.3.  Borrower and members of the ERISA Group shall not:
 
(i)             fail to satisfy the minimum funding requirements of ERISA and
the Internal Revenue Code with respect to any Pension Plan;
 
(ii)            request a minimum funding waiver from the Internal Revenue
Service with respect to any Pension Plan;
 
(iii)           engage in a Prohibited Transaction with any Pension Plan,
Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with
any other circumstances or set of circumstances resulting in liability under
ERISA, would constitute a Material Adverse Change;
 
(iv)           permit the aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Pension Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Pension Plan, to exceed, as of any actuarial
valuation date, the fair market value of the assets of such Pension Plan;

 
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(v)            fail to make when due any contribution to any Multiemployer Plan
that Borrower or any member of the ERISA Group may be required to make under any
agreement relating to such Multiemployer Plan, or any Law pertaining thereto;
 
(vi)           withdraw (completely or partially) from any Multiemployer Plan or
withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from any
Multiple Employer Pension Plan (as such term is defined in ERISA), where any
such withdrawal is likely to result in a material liability of Borrower or any
member of the ERISA Group;
 
(vii)          terminate, or institute proceedings to terminate, any Pension
Plan, where such termination is likely to result in a material liability to
Borrower or any member of the ERISA Group;
 
(viii)         make any amendment to any Pension Plan with respect to which
security is required under Section 307 of ERISA; or
 
(ix)           fail to give any and all Notices and make all disclosures and
governmental filings required under ERISA or the Internal Revenue Code, where
such failure is likely to result in a Material Adverse Change.
 
 
7.1.11.
Indebtedness.

 
Borrower shall not, at any time create, incur, assume or suffer to exist any
indebtedness, except:
 
7.1.11.1. Indebtednes s under the Loan Documents;

 
7.1.11.2. Trade debt incurred in the ordinary course of business and any
subordinate intercompany debt.
 
 
7.1.12.
Liens.

 
Borrower shall not, at any time create, incur, assume or suffer to exist any
Lien on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree or become liable to do so, except the Permitted
Exceptions. Upon Lender's reasonable request, which request shall not be made
more frequently than annually unless Lender has a reasonable suspicion of a
title defect, Borrower shall promptly perform or cause to be performed, at
Borrower's sole cost and expense, a title search reasonably satisfactory to
Lender, demonstrating compliance with the provisions of this Section 7.1.12.

 
 
7.1.13.
Liquidations, Mergers, Consolidations, Acquisitions.

 
Borrower shall not dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person.

 
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7.1.14.
Dispositions of Assets or Affiliates.

 
Borrower shall not sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, all or substantially all of its
assets, provided that the foregoing shall not be construed to prevent Borrower
from selling, conveying or leasing its assets as permitted pursuant to the terms
of this Agreement or any of the other Loan Documents.

 
 
7.1.15.
Affiliate Trans actions.

 
Borrower shall not acquire or purchase an asset in which any Affiliate has a
direct or indirect ownership interest otherwise than upon terms which are no
less favorable than those terms which would be obtained in an arms length
transaction with a third party.

 
 
7.1.16.
Continuation of or Change in Business.

 
Borrower shall not engage in any business activities except as permitted under
its organizational documents and this Agreement.

 
 
7.1.17.
Changes in Organizational Documents; Name.

 
Borrower and its general partners, managing members, or principals shall not
amend in any respect their respective certificate of incorporation (including
any provisions or resolutions relating to capital stock), by-laws, certificate
of limited partnership, or limited partnership agreement (as applicable) or
other formation agreement or other organizational documents without first
sending Notice to Lender and obtaining the prior written consent of Lender,
which shall be granted or denied in Lender's reasonable discretion within thirty
(30) Business Days of Lender's receipt of the proposed amendment, a brief
explanation of its purpose and effect, and such other documents as Lender may
reasonably request. Borrower shall not amend, revise or otherwise change its
name in any respect, without the prior written consent of Lender, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing,
this Section 7.1.17 shall not apply to (i) Essex Property Trust, Inc. for so
long as it remains a publicly traded entity or to (ii) Essex Portfolio, L.P.
unless such change or amendment would result in a Material Adverse Change.

 
 
7.1.18.
Properties Under Development.

 
Except as disclosed to Lender in writing, no Collateral Pool Property shall be
raw land or property under construction or development with respect to which
property construction or reconstruction will be needed before the property can
be leased to tenants paying rent.

 
 
7.1.19.
Further Documentation.

 
In the event any further documentation or information is reasonably required by
Lender to enable Lender to sell the Loan, Borrower shall provide, or cause to be
provided to Lender, at Borrower's sole cost and expense, such documentation or
information. Borrower shall execute and deliver to Lender such documentation,
including, but not limited to, any amendments, corrections, deletions or
additions to this Agreement, the Note, and the other Loan Documents as is
reasonably required by Lender; provided that Borrower shall not be required to
do anything that has the effect of (i) changing the material economic or other
business terms of this Agreement, the Note, or any other Loan Documents, (ii)
imposing on Borrower greater liability or obligation than that set forth in this
Agreement, the Note or any other Loan Documents, or (iii) decreasing or
otherwise adversely affecting the rights of Borrower under this Agreement or any
other Loan Documents.

 
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7.1.20.
Compliance with Lender Requirements.

 
Borrower shall comply with the requirements of Lender in order to enable Lender
to sell the Loan, provided that Borrower shall not be required to do anything
that has the effect of (i) changing the material economic or other business
terms of this Agreement, the Note, or any other Loan Documents or (ii) imposing
on Borrower greater liability or obligation than that set forth in this
Agreement, the Note or any other Loan Documents.

 
 
7.1.21.
Subordination of Leases.

 
Borrower covenants, if any lease of any Collateral Pool Property is not
subordinate to the Security Instrument securing such Collateral Pool Property,
Borrower shall (i) use a new standard lease form containing subordination
language reasonably acceptable to Lender, for all new leases of such Collateral
Pool Property; and (ii) execute the new form of lease on any renewal of any
existing leases of such Collateral Pool Property.

 
 
7.1.22.
Enforceability of Loan Documents.

 
In the event that any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof (except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting the enforceability of creditors'
rights generally or limiting the right to specific performance) or shall in any
way be terminated (except in accordance with its terms) or become or be declared
ineffective or inoperative or shall in any way be challenged or contested,
resulting in the failure to provide the practical benefit of the respective
Liens, security interests, rights, titles, interests, remedies, powers or
privileges intended to be created thereby, Borrower shall use best efforts to
cure any such defect(s) in such Loan Document(s), provided that if Borrower is
unable to cure any such defect(s) within a reasonable time period, not to exceed
thirty (30) days, and further provided that such defect is likely to result in a
Material Adverse Change, Lender may in its discretion, upon ten (10) days notice
to Borrower, accelerate Borrower's obligations under the Note.

 
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7.1.23.
ERISA Matters.

 
The provisions set forth in this Section 7.1.23, shall only apply to the extent
Borrower is at any time and from time to time subject to the provisions of
ERISA. In the event that any of the following occurs: (i) any Reportable Event,
which Lender determines in good faith constitutes grounds for the termination of
any Pension Plan by the PBGC or the appointment of a trustee to administer or
liquidate any Pension Plan, shall have occurred and be continuing; (ii)
proceedings shall have been instituted or other action taken to terminate any
Pension Plan, or a termination notice shall have been filed with respect to any
Pension Plan; (iii) a trustee shall be appointed to administer or liquidate any
Pension Plan; (iv) the PBGC shall give notice of its intent to institute
proceedings to terminate any Pension Plan or Pension Plans or to appoint a
trustee to administer or liquidate any Pension Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, Lender determines in good faith
that the amount of Borrower's liability is likely to cause a Material Adverse
Change; (v) Borrower or any member of the ERISA Group shall fail to make any
contributions when due to a Pension Plan or a Multiemployer Plan; (vi) Borrower
or any member of the ERISA Group shall make any amendment to a Pension Plan with
respect to which security is required under Section 307 of ERISA; (vii) Borrower
or any member of the ERISA Group shall withdraw completely or partially from a
Multiemployer Plan; or (viii) any applicable Law, rule or regulation is adopted,
changed or interpreted by any governmental authority or agency or court with
respect to or otherwise affecting one or more Pension Plans, Multiemployer Plans
or Benefit Arrangements; and, with respect to any of the events specified in
(v), (vi), (vii) or (viii), Lender determines in good faith that any such
occurrence would be reasonably likely to materially and adversely affect the
total enterprise represented by Borrower and the other members of the ERISA
Group, Borrower shall use best efforts to cure such occurrence(s), provided that
if Borrower is unable to cure any such occurrence(s) within a reasonable time
period, not to exceed thirty (30) days, Lender may in its discretion, upon ten
(10) days Notice to Borrower, accelerate Borrower's obligations under the
Revolving Credit Note.

 
 
7.2.
Reporting Requirements.

 
Borrower covenants and agrees that until the later of (i) payment in full of the
Loan and satisfaction of all of Borrower's other Obligations hereunder and under
the other Loan Documents and (ii) the Expiration Date, Borrower will furnish or
cause to be furnished to Lender:

 
 
7.2.1.
Notice of Default.

 
If to Borrower's knowledge an Event of Default or Potential Default has occurred
with respect to Borrower, a certificate signed by an Authorized Officer of
Borrower setting forth the details of such Event of Default or Potential Default
and the actions that Borrower proposes to take with respect thereto;

 
 
7.2.2.
Notice of Litigation.

 
Promptly after the commencement thereof, Notice of all actions, suits,
proceedings or investigations before or by any Official Body or any other Person
which (a) relate to the Collateral, or (b) involve a claim or series of claims
in excess of ONE HUNDRED THOUSAND and NO/100 Dollars ($100,000.00) and, as to
claims described under sections (a) or (b) above, which (i) are not covered by
Borrower's insurance policies and (ii) if adversely determined would constitute
a Material Adverse Change; and

 
 
7.2.3.
Notice of Material Adverse Change.

 
Borrower shall promptly notify Lender of any Material Adverse Change affecting
Borrower, any Collateral Pool Property, this Agreement or the other Loan
Documents taken as a whole.
 
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7.3.           Escrows.
 
Borrower shall be responsible for the payment of real estate taxes on the
Collateral Pool Properties and fire, hazard and other insurance premiums
(collectively, the "Impositions"). Collection of monthly escrow deposits for the
payment of Impositions relating to real estate taxes will be deferred; provided,
that collections of real estate taxes may subsequently be initiated as set forth
in the Loan Documents. Collection of monthly escrow deposits for the payment of
Impositions relating to fire, hazard and other insurance premiums will be
deferred; provided, that collections of insurance premiums may subsequently be
initiated as set forth in the Loan Documents. Collection of monthly escrow
deposits for required replacements will be deferred under the Replacement
Reserve Agreement; provided, that collections of monthly escrow deposits for
required replacements may subsequently be initiated as set forth in the Loan
Documents.
 
8.
DEFAULT

 
 
8.1.
Events of Default.

 
The occurrence or existence of any one or more of the following events or
conditions (whatever the reason therefor and whether voluntary, involuntary or
effected by operation of Law) shall be an "Event of Default":

 
 
8.1.1.
Payments Under Loan Documents.

 
Borrower shall fail to pay any principal under any Base Rate Borrowing Tranche
or Fixed Rate Borrowing Tranche (including scheduled installments, mandatory
prepayments or the payment due at maturity), or shall fail to pay any interest
on any Loan or any other amount owing hereunder or under any other Loan
Documents after such principal, interest or other amount becomes due in
accordance with the terms hereof or thereof;

 
 
8.1.2.
Breach of Representation or Warranty.

 
Any representation or warranty made at any time by Borrower herein or in any
other Loan Document, or in any certificate, other instrument or statement
furnished pursuant to the provisions hereof or thereof, shall prove to have been
false or misleading in any material respect as of the time it was made or
furnished and the result of such false or misleading representation, warranty,
certificate, other instrument or statement is a Material Adverse Change which is
not cured within thirty (30) days after written Notice thereof from Lender to
Borrower, or within such additional reasonable time as may be necessary, in
Lender's judgment to cure such breach, in the event Borrower commences such cure
within such thirty (30) day period and thereafter diligently pursues such cure,
not to exceed sixty (60) additional days;
 
 
8.1.3.
Breach of Covenant.

 
Borrower shall default in the observance or performance of any covenant,
condition or provision hereof or under any other Loan Document, which default is
not otherwise specified as an "Event of Default" under (i) the provisions of
this Article 8 or (ii) Section 22 of any Security Instrument with respect to the
initial Collateral Pool Properties (or the same sections or any similar sections
of any Security Instrument with respect to any future Collateral Pool
Property(ies)) and is not cured within thirty (30) days after Notice thereof
from Lender to Borrower of such default, provided that, no such Notice or grace
period shall apply in the case of any default which could, in Lender's judgment,
absent immediate exercise by Lender of a right or remedy under this Agreement or
any of the other Loan Documents, result in additional harm to Lender, impairment
of the Note, or any rights of Lender under this Agreement or any security given
under any other Loan Document;

 
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8.1.4.
Event of Default under the Loan Documents.

 
Borrower shall be in default under any provision of the Revolving Credit Note,
or any other Loan Document, including, without limitation, any Security
Instrument, beyond any applicable cure period;
 
8.1.5.        Final Judgments or Orders.

 
Any final judgments or orders for the payment of money in excess of ONE HUNDRED
THOUSAND and NO/100 Dollars ($100,000.00) in the aggregate shall be entered
against Borrower by a court having jurisdiction in the premises, which judgment
is not discharged, vacated, bonded or stayed pending appeal within a period of
thirty (30) days from the date of entry;
 
 
8.1.6.
Notice of Lien or Assessment.

 
A notice of Lien or assessment in excess of ONE MILLION and NO/100 Dollars
($1,000,000.00) which is not a Permitted Exception is filed of record with
respect to all or any part of any of Borrower's assets, or any taxes or debts
owing at any time or times hereafter to the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC, becomes payable and the same is not
paid or otherwise discharged within thirty (30) days after the same becomes
payable, unless the same is being contested in accordance with the Loan
Documents;

 
 
8.1.7.
Insolvency.

 
Borrower ceases to be Solvent or admits in writing its inability to pay its
debts as they mature;

 
 
8.1.8.
Cessation of Business.

 
Borrower ceases to conduct the business of Borrower, or Borrower is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of the business of Borrower, and such injunction, restraint or
other preventive order is not dismissed within ten (10) Business Days after the
entry thereof;

 
 
8.1.9.
Lien Priority.

 
The Liens granted to and for the benefit of Lender do not constitute valid first
priority Liens (subject to Permitted Exceptions) under applicable Laws and such
default shall continue unremedied for a period of thirty (30) Business Days
after Borrower's knowledge of the occurrence thereof or such additional
reasonable time period necessary to cure such default, in the event Borrower
commences such cure within such thirty (30) day period and thereafter diligently
pursues such cure, not to exceed sixty (60) additional days (such cure period to
be applicable only in the event such default can be remedied by corrective
action of Borrower to the satisfaction of Lender as determined by Lender in its
reasonable discretion); or

 
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8.1.10.
Bankruptcy and Other Proceedings.

 
Borrower voluntarily files for bankruptcy protection under the United States
Bankruptcy Code or voluntarily becomes subject to any reorganization,
receivership, insolvency proceeding or other similar proceeding pursuant to any
other federal or state Law affecting debtor and creditor rights, or an
involuntary case is commenced against Borrower by any creditor (other than
Lender) of Borrower pursuant to the United States Bankruptcy Code or other
federal or state Law affecting debtor and creditor rights and is not dismissed
or discharged within sixty (60) days after filing.
 
 
8.1.11.
Material Adverse Change.

 
There shall occur a Material Adverse Change which is not corrected to the
reasonable satisfaction of Lender within thirty (30) days after the occurrence
of such Material Adverse Change, or such additional reasonable time period
necessary to cure such Material Adverse Change, in the event Borrower commences
such cure within such thirty (30) day period and thereafter diligently pursues
such cure, not to exceed thirty (30) additional days (such cure period to be
applicable only in the event such default can be remedied by corrective action
of Borrower to the satisfaction of Lender as determined by Lender in its
reasonable discretion). Notwithstanding the foregoing, if Borrower is otherwise
in compliance with all other provisions of this Agreement dealing with facts or
circumstances which would otherwise be a Material Adverse Change, Borrower shall
be deemed to be diligently pursuing a cure pursuant to this Section 8.1.11 and
the time periods of this Section 8.1.11 shall be extended to a date coterminous
with the cure periods provided in any other section of this Agreement with
regard to remedying such facts or circumstances
 
 
8.2.
Consequences of Event of Default.

 
 
8.2.1.
Remedies Cumulative.

 
Upon an Event of Default under Section 8.1, Lender shall be entitled to all of
the rights and remedies granted to Lender under the Loan Documents and
applicable Law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by Law.
 
 
8.2.2.
Acceleration of Loan.

 
Upon an Event of Default, Lender shall be entitled, without limitation, to (a)
accelerate the Loan, and to (b) collect as liquidated damages (i) a Prepayment
Fee applicable to any outstanding Base Rate Borrowing Tranches and Fixed Rate
Borrowing Tranches and (ii) the Early Termination Fee all in accordance with
Section 2.13.4.

 
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8.3.
Notice of Sale.

 
Any notice required to be given by Lender of a sale, lease, or other disposition
of any Collateral that is personal property or any other intended action by
Lender under the Uniform Commercial Code, if given at least ten (10) days prior
to such proposed action, shall constitute commercially reasonable and fair
notice thereof to Borrower.
 
9.
MISCELLANEOUS

 
 
9.1.
Cooperation by Borrower; Borrower's Obligations.

 
Borrower grants to Lender the right to distribute on a confidential basis
financial and other information concerning Borrower, each indemnitor, other
Person, the Collateral Pool Properties, and other pertinent information with
respect to the Loan to any party purchasing securities issued by Lender.
 
 
9.2.
Successors and Assigns.

 
This Agreement shall be binding upon and shall inure to the benefit of Lender,
Borrower and their respective successors and assigns, except that Borrower may
not assign or transfer any of its respective rights or Obligations hereunder or
any interest herein, except as permitted under this Agreement or the other Loan
Documents.

 
 
9.3.
Modifications, Amendments or Waivers.

 
Lender and Borrower may from time to time enter into written agreements amending
or changing any provision of this Agreement or any other Loan Document or the
rights of Lender or Borrower hereunder or thereunder, or may grant written
waivers or consents to a departure from the due performance of the Obligations
of Borrower hereunder or thereunder. Any such written agreement, waiver or
consent (i) shall be effective to bind Lender and Borrower and (ii) shall be
accompanied at all times by a written joinder agreement executed by the
guarantor under that certain Guaranty dated as of the date hereof in favor of
Lender, consenting and/or agreeing to the same.
 
 
9.4.
Forbearance.

 
Lender may (but shall not be obligated to) agree with Borrower, from time to
time, and without giving notice to, or obtaining the consent of, or having any
effect upon the obligations of, any guarantor or other third party obligor, to
take any of the following actions: extend the time for payment of all or any
part of the Loan; reduce the payments due under this Agreement, the Note, or any
other Loan Document; release anyone liable for the payment of any amounts under
this Agreement, the Note, or any other Loan Document; modify the terms and time
of payment of the Loan; join in any extension or subordination agreement;
release any Collateral Pool Property; take or release other or additional
security; modify the rate of interest or period of amortization of the Note or
change the amount of the monthly installments payable under the Note; and
otherwise modify this Agreement, the Note, or any other Loan Document.
 
Any forbearance by Lender in exercising any right or remedy under the Note, this
Agreement, or any other Loan Document or otherwise afforded by applicable Law,
shall be in writing and shall not be deemed a waiver of or preclude the exercise
of any right or remedy. The acceptance by Lender of payment of all or any part
of the Loan after the due date of such payment, or in an amount which is less
than the required payment, shall not be a waiver of Lender's right to require
prompt payment when due of all other payments on account of the Loan or to
exercise any remedies for any failure to make prompt payment. Enforcement by
Lender of any security for the Loan shall not constitute an election by Lender
of remedies so as to preclude the exercise of any other right available to
Lender to the extent permitted by Law. Lender's receipt of any awards or
proceeds shall not operate to cure or waive any Event of Default.

 
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9.5.
Remedies Cumulative.

 
Each right and remedy provided in this Agreement is distinct from all other
rights or remedies under this Agreement or any other Loan Document or afforded
by applicable Law, and each shall be cumulative and may be exercised
concurrently, independently, or successively, in any order.

 
 
9.6.
Reimbursement and Indemnification of Lender and Servicer by Borrower; Taxes.

 
Borrower agrees unconditionally upon demand to pay or reimburse to Lender and
Servicer and to hold Lender and Servicer harmless against (i) liability for the
payment of all reasonable third party out-of-pocket costs, expenses and
disbursements customary within the commercial mortgage loan servicing industry
(including fees and expenses of counsel for Lender and Servicer, incurred by
Lender and Servicer (a) in connection with the administration and interpretation
of this Agreement, and other instruments and documents to be delivered
hereunder, provided such interpretation is in response to Borrower' request for
same, (b) relating to any amendments, waivers or consents pursuant to the
provisions hereof, (c) in connection with the enforcement of this Agreement or
any other Loan Document, or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (d) in any workout or restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings, or (ii) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Lender or Servicer, in its capacity as such,
in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by Lender or Servicer hereunder or
thereunder, provided that no Borrower shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (A) if the same results from Lender's
negligence or willful misconduct or breach of this Agreement, (B) if the same
results from any action taken with respect to a Collateral Pool Property after
Lender has acquired title to such Collateral Pool Property in a foreclosure
proceeding or deed-in-lieu of foreclosure, (C) if Borrower was not given notice
of the subject claim and the opportunity to participate in the defense thereof,
at its expense (except that Borrower shall remain liable to the extent such
failure to give notice does not result in a loss to Borrower), or (D) if the
same results from a compromise or settlement agreement entered into without the
consent of Borrower, which shall not be unreasonably withheld. Borrower agrees
unconditionally to pay all stamp, document, transfer, mortgage registration,
recording or filing taxes or fees and similar impositions now or hereafter
determined by Lender to be payable in connection with this Agreement or any
other Loan Document, and Borrower agrees unconditionally to hold Lender and
Servicer harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.

 
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9.7.
Holidays.

 
Whenever the funding of a Borrowing Tranche hereunder shall be due on a day
which is not a Business Day such payment shall be due on the next Business Day
and such extension of time shall be included in computing interest and fees,
except that the Loan shall be due on the Business Day preceding the Expiration
Date if the Expiration Date is not a Business Day. Whenever any payment or
action to be made or taken hereunder (other than payment of the Loan) shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day, and such extension of
time shall not be included in computing interest or fees, if any, in connection
with such payment or action.
 
 
9.8.
Notices.

 
All notices, requests, demands, directions and other communications ("Notice")
given to or made upon any party hereto under the provisions of this Agreement
shall be in writing unless otherwise expressly provided hereunder and shall be
delivered or sent by telex, facsimile, certified mail or hand delivery if to
Lender, to Lender at the address and numbers set forth below, and if to Borrower
or Proposed Borrower, to each of them at the addresses and numbers set forth
below, or in accordance with any subsequent unrevoked written direction from any
party to the others. All such Notices shall, except as otherwise expressly
herein provided, be effective (a) in the case of facsimile, when received if
received prior to 5:00 p.m. at the recipient's time on a Business Day, otherwise
at 9:00 a.m. on the next Business Day, (b) in the case of hand-delivered Notice,
when hand-delivered, (c) if given by certified mail, three (3) Business Days
after such communication is deposited in the mail with first-class postage
prepaid, return receipt requested, and (d) if given by any other means
(including by air courier), when delivered. Notwithstanding anything to the
contrary contained in this Agreement, all Notices to Lender required hereunder
or under any Loan Document shall be delivered to Servicer, as agent on behalf of
Lender, unless notified otherwise in writing by Lender.
 
Lender's Notice Address and Numbers:
 
NorthMarq Capital, Inc.
3500 American Boulevard West
Suite 500
Bloomington, MN 55431-4435
Attention: Servicing
Facsimile:  (952)356-0099
 
Borrower's Notice Addresses and Numbers:
 
Essex CAL-WA, L.P.
c/o Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, CA 94303
Attention: MarkMikl
Facsimile: (650) 843-1514

 
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with a copy to:
 
Essex CAL-WA, L.P.
c/o Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, CA 94303
Attention: Jordan E. Ritter
Facsimile: (650) 858-1372
 
and to:
 
Essex CAL-WA, L.P.
c/o Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, CA 94303
Attention: Michael Dance
Facsimile: (650) 858-0139
 
 
9.9.
Severability.

 
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision, and all other
provisions shall remain in full force and effect. This Agreement contains the
entire agreement between the parties as to the rights granted and the
obligations assumed in this Agreement. This Agreement may not be amended or
modified except by a writing signed by the party against whom enforcement is
sought.

 
 
9.10.
Governing Law: Consent to Jurisdiction and Venue.

 
This Agreement, and any Loan Document which does not itself expressly identify
the Law that is to apply to it, shall be governed by the Laws of the
Commonwealth of Virginia. Borrower agrees that any controversy arising under or
in relation to this Agreement or any other Loan Document which does not
expressly identify the Law that is to apply to it, shall be litigated in the
courts located in the Commonwealth of Virginia. The state and federal courts and
authorities with jurisdiction in the Commonwealth of Virginia shall have
non-exclusive jurisdiction over all controversies which shall arise under or in
relation to this Agreement. Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for any such litigation and waives any
other venue to which it might be entitled by virtue of domicile, habitual
residence or otherwise. However, nothing in this Agreement is intended to limit
any right that Lender may have to bring any suit, action or proceeding relating
to matters arising under this Credit Agreement in any court of any other
jurisdiction.

 
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9.11.
Prior Understanding.

 
This Agreement and the other Loan Documents supersede all prior understandings
and agreements, whether written or oral, between the parties hereto and thereto
relating to the transactions provided for herein and therein, including any
prior confidentiality agreements and commitments.

 
 
9.12.
Duration; Survival.

 
All representations and warranties of Borrower contained herein or made in
connection herewith shall survive the funding of the initial advance hereunder
and shall not be waived by the execution and delivery of this Agreement, any
investigation by Lender, the funding of any Borrowing Tranche, or payment in
full of the Loan. All covenants and agreements of Borrower contained herein
shall continue in full force and effect from and after the date hereof so long
as Borrower may borrow hereunder and until the later of (i) the Expiration Date
or (ii) the payment in full of the Obligations. All covenants and agreements of
Borrower contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification, including
those set forth in the Note, shall survive payment in full of the Loan and the
Expiration Date. Notwithstanding any of the foregoing to the contrary, in no
event shall (a) the release of Lender's Lien on any Collateral Pool Property,
(b) the maturity, expiration or early termination of the Revolving Credit Note,
or any Fixed Rate Note or (c) the expiration or early termination of this
Agreement, be deemed to terminate any covenants, agreements, representations or
warranties contained in this Agreement, the Note or any of the other Loan
Documents, to the extent that such covenant, agreement, representation or
warranty, shall, by its terms survive the, release, maturity, expiration or
early termination of this Agreement, the Note or any of the other Loan
Documents.

 
 
9.13.
Disclosure of Information.

 
Lender may furnish information regarding Borrower or the Collateral Pool
Properties to third parties with an existing or prospective interest in the
servicing, enforcement, evaluation, performance, purchase or securitization of
the Loan, including, but not limited to, trustees, master servicers, special
servicers, rating agencies, and organizations maintaining databases on the
underwriting and performance of multifamily mortgage loans. Borrower irrevocably
waives any and all rights it may have under applicable Law to prohibit such
disclosure, including, but not limited to, any right of privacy.
 
 
9.14.
Exceptions.

 
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.

 
 
9.15.
Relationship of Parties; No Third Parties Benefited.

 
The relationship between Lender and Borrower shall be solely that of creditor
and debtor, respectively, and nothing contained in this Agreement shall create
any other relationship between Lender and Borrower. No creditor of any party to
this Agreement and no other person shall be a third party beneficiary of this
Agreement or any other Loan Document. Without limiting the generality of the
preceding sentence, (i) an agreement, if any, including any Servicing Agreement,
between Lender and Servicer for interim advancement of funds shall constitute a
contractual obligation of such Servicer that is independent of the obligation of
Borrower for the payment of the Loan, (ii) Borrower shall not be a third party
beneficiary of any Servicing Agreement, and (iii) no payment by Servicer under
any such agreement will reduce the outstanding principal amount of the Loan or
any interest accrued thereon.

 
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9.16.
Authority to File Notices.

 
Borrower irrevocably appoints Lender as its attorney-in-fact, with full power of
substitution, to file for record, at Borrower's cost and expense and in
Borrower's name, any notices that Lender considers reasonably necessary or
desirable to protect the Collateral.
 
 
9 17.
WAIVER OF TRIAL BY JURY.

 
BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP
BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH
THE BENEFIT OF COMPETENT LEGAL COUNSEL.
 

 
/s/ Mark J. Mikl
 
Name: Mark J. Mikl
Title: Senior Vice President

 
 
9.18.
Interpretation.

 
Whenever the context requires, all words used in the singular will be construed
to have been used in the plural, and vice versa, and each gender will include
any other gender. The captions of the articles, sections and schedules of this
Agreement are for convenience only and do not define or limit any terms or
provisions. In the event of a conflict between the terms of the other Loan
Documents and the terms of this Agreement, the terms of this Agreement shall
control.

 
 
9.19.
Brokerage Fee.

 
Borrower represents to Lender that no broker or other Person is entitled to a
brokerage fee or commission as a result of Borrower's actions or undertakings in
connection with the financing contemplated hereunder and agrees to hold Lender
harmless from all claims for brokerage commissions which may be made as a result
of such actions or undertakings, if any. Lender represents to Borrower that no
broker or Person is entitled to a brokerage fee or commission as a result of
Lender's actions or undertakings in connection with the financing contemplated
hereunder and agrees to hold Borrower harmless from all claims for brokerage
commissions which may be made as a result of such actions or undertakings, if
any.

 
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9.20.
Advertising.

 
Lender may include the name of Borrower, the name and location of any Collateral
Pool Property, the Commitment and the number of apartment units contained in any
Collateral Pool Property on Lender's client list and in any typical
advertisement.
 
 
9.21.
Time of Essence.

 
Time is of the essence with respect to each obligation of Borrower and Lender
hereunder.
 
 
9.22.
Counterparts.

 
This Agreement may be executed by different parties hereto on any number of
separate counterparts, each of which, when so executed and delivered, shall be
an original, and all such counterparts shall together constitute one and the
same instrument.
 
 
9.23.
NOTICE OF FINAL AGREEMENT.

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

 
[Signatures Commence on the Following Page]

 
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
 

 
BORROWER:
             
ESSEX CAL-WA, L.P., a California limited partnership
             
By:
Essex SPE, LLC, a Delaware limited liability company, its general partner
                           
By:
Essex Portfolio, L.P., a California limited partnership, its sole member
                             
By:
Essex Property Trust, Inc., a Maryland corporation, its general partner
                               
By:
/s/ Mark J Mikl
         
Name: Mark J Mikl
         
Title: Senior Vice President
                         
LENDER:
             
NORTHMARQ CAPITAL, INC., a Minnesota corporation
             
By:
     
Name: Paul W. Cairns
   
Title: Senior Vice President

 

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

 
 
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
 

 
BORROWER:
             
ESSEX CAL-WA, L.P., a California limited partnership
             
By:
Essex SPE, LLC, a Delaware limited liability company, its general partner
                           
By:
Essex Portfolio, L.P., a California limited partnership, its sole member
                             
By:
Essex Property Trust, Inc., a Maryland corporation, its general partner
                               
By:
           
Name:
         
Title:
                               
LENDER:
                   
NORTHMARQ CAPITAL, INC., a Minnesota corporatron
                   
By:
/s/ Paul W. Cairns
         
Name: Paul W. Cairns
         
Title: Senior Vice President
           

 

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SCHEDULE 1.1(A)

LIST OF COLLATERAL POOL PROPERTIES
AND ASSOCIATED INITIAL NET OPERATING INCOMES AND MARKET VALUES

Collateral Pool Property
 
Initial Net
Operating Income
   
Initial Market
Value
  1.  
Mira Woods Villas, San Diego, California
  $ 3,392,031     $ 56,534,000   2.  
Forest View, Renton, Washington
  $ 1,602,263     $ 26,704,371   3.  
Castle Creek, New Castle, Washington
  $ 1,820,852     $ 30,347,505   4.  
Bonita Cedars, Bonita, California
  $ 1,198,654     $ 19,977,585   5.  
Windsor Ridge, Sunnyvale, California
  $ 3,004,456     $ 50,247,000   6.  
Mission Hills, Oceanside, California
  $ 2,667,975     $ 44,466,000   7.  
Walnut Heights, Walnut California
  $ 1,682,612     $ 28,045,000   8.  
Bristol Commons Apartments, Sunnyvale, California
  $ 2,470,950     $ 41,182,514  

 
Sch. 1.1(A) - 1

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SCHEDULE 1.1(B)

LIST OF
COLLATERAL POOL PROPERTY DOCUMENTS
 
(a)
Mortgage/Deed of Trust/Deed to Secure Debt

 
(b)
UCC-1 Financing Statements

 
(c)
FIRPTA Certificate

 
(d)
Collateral Agreements (if any)

 
(e)
Documents evidencing O & M Programs (if any)

 
(f)
Title insurance policy acceptable to Lender, in an amount equal to not less than
the Initial Market Value of such Collateral Pool Property, which title insurance
shall include the following endorsements (where and if applicable): (i) a tie-in
endorsement, (ii) a multiple foreclosure endorsement, (iii) a first loss
endorsement, (iv) a last dollar endorsement, (v) a variable rate mortgage
endorsement, and (vi) a revolving credit endorsement.

 
Sch. 1.1(B) - 1

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SCHEDULE 1.1(C)
 
FORM OF FIXED RATE NOTE

 
[See attached]

 
Sch. 1.1(C) - 1

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SCHEDULE 1.1(C)

FORM OF FIXED RATE NOTE
 
Freddie Mac Loan Number: 080609

MULTIFAMILY NOTE
(FOR USE ONLY WITH REVOLVING CREDIT FACILITY)
MULTISTATE - FIXED RATE
(REVISION DATE 2-15-2008; specially modified on 11-09-2008)
 
US $______________________
 
Effective Date: ______________________

 
FOR VALUE RECEIVED, the undersigned (together with such party's or parties'
successors and assigns, "Borrower") jointly and severally (if more than one)
promises to pay to the order of _________ , a _________  , the principal sum of
_________ Dollars (US $ _________ ), with interest on the unpaid principal
balance, as hereinafter provided.
 
 
1.
Defined Terms.

 
 
(a)
As used in this Note:

 
"Base Recourse" means a portion of the Indebtedness equal to zero percent (0%)
of the original principal balance of this Note.

 
"Credit Agreement" means that certain Credit Agreement dated as of November 17,
2008 by and between Borrower and NorthMarq Capital, Inc., together with all
amendments or modifications thereto
 
"Default Rate" means an annual interest rate equal to four (4) percentage points
above the Fixed Interest Rate. However, at no time will the Default Rate exceed
the Maximum Interest Rate.
 
"Fixed Interest Rate" means the annual interest rate of _____________ percent
(         %)•
 
"Installment Due Date" means, for any monthly installment of interest only or
principal and interest, the date on which such monthly installment is due and
payable pursuant to Section 3 of this Note. The "First Installment Due Date"
under this Note is _____________ 1, _____________.[insert the first day of the
second month following the origination date; however, if the loan is originated
on the first day of a month, insert the first day of the first month following
the origination date]

 
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"Lender" means the holder from time to time of this Note.
 
"Loan" means the loan evidenced by this Note.
 
"Maturity Date" has the meaning set forth in the Credit Agreement.
 
"Maximum Interest Rate" means the rate of interest that results in the maximum
amount of interest allowed by applicable law.
 
"Prepayment Premium Period" means the period during which, if a prepayment of
principal occurs, a prepayment premium will be payable by Borrower to Lender.
The Prepayment Premium Period is the period from and including the date of this
Note until but not including the first day of the Window Period.
 
"Related Party" shall mean: (i) any Borrower; (ii) any person or entity that
holds, directly or indirectly, any ownership interest in or right to manage
Borrower, including without limitation, any shareholder, member or partner of
Borrower; (iii) any person or entity in which any ownership interest (direct or
indirect) or right to manage is held by Borrower or any partner, shareholder or
member of, or any other person or entity holding an interest in, Borrower; and
(iv) any other creditor of Borrower that is related by blood, marriage or
adoption to Borrower, or any partner, shareholder or member of, or any other
person or entity holding an interest in, Borrower.
 
"Rent" shall have the meaning set forth in the Security Instrument.
 
"Security Instrument" means, individually and collectively, the multifamily
mortgage(s), deed(s) to secure debt and deed(s) of trust effective as of the
effective date of this Note, and subsequently executed pursuant to the Credit
Agreement, from Borrower to or for the benefit of Lender and securing this Note.
 
"Transfer" shall have the meaning set forth in the Security instrument.
 
"Window Period" means the three (3) consecutive calendar month period prior to
the Scheduled Maturity Date.
 
"Yield Maintenance Period" means the period from and including the date of this
Note until but not including _____________ 1, _____________. [The date is
determined by the number of months in the Yield Maintenance Period as provided
for in the Freddie Mac Commitment/ERL Application, beginning with the first day
of the first calendar month following the date of the Note. For example, if the
date of the Note is June 15, 2004, a 120-month Yield Maintenance Period will end
July 1, 2014.]

 
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(b) Other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Credit Agreement or, if not defined therein,
in the Security Instrument.
 
2.             Address for Payment. All payments due under this Note shall be
payable by wire transfer of immediately available funds to an account specified
by Lender, whose address is NorthMarq Capital, Inc., 3500 American Boulevard
West, Suite 500, Bloomington, MN 55431- 4435, or such other place or account as
may be designated by Notice to Borrower from or on behalf of Lender.
 
 
3.
Payments.

 
(a)            Interest will accrue on the outstanding principal balance of this
Note at the Fixed Interest Rate, subject to the provisions of Section 8 of this
Note.
 
(b)            Interest under this Note shall be computed, payable and allocated
on the basis of an actual/360 interest calculation schedule. Each monthly
payment of principal and interest will first be applied to pay in full interest
due, and the balance of the monthly payment paid by Borrower will be credited to
principal.
 
(c)            The Installment Due Date for the first monthly installment
payment under Section 3(d) of interest only or principal and interest, as
applicable, will be the First Installment Due Date set forth in Section 1(a) of
this Note. Except as provided in Section 10, accrued interest will be payable in
arrears.
 
(d)            Beginning on the First Installment Due Date, and continuing until
and including the monthly installment due on the Maturity Date, accrued interest
only shall be payable by Borrower in consecutive monthly installments due and
payable on the first day of each calendar month. The amount of the monthly
installment of interest only payable pursuant to this Section 3(d) on an
Installment Due Date shall vary, and shall equal $ _____________ [insert the per
diem amount, expressed to the fifth decimal place, derived by multiplying the
original principal balance of the Loan by the Fixed Interest Rate and dividing
the product by 360] multiplied by the number of days in the month prior to the
Installment Due Date.
 
(e)            All remaining Indebtedness, including all principal and interest,
shall be due and payable by Borrower on the Maturity Date. Notwithstanding
anything to the contrary in this Note, the Credit Agreement or any other Loan
Document, the Maturity Date of this Note may not be extended pursuant to
Sections 2.2(b) or 2.2 (c) of the Credit Agreement. If Borrower exercises the
First Extension Option or the Second Extension Option pursuant to Sections
2.2(b)

 
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(f)           All payments under this Note shall be made in immediately
available U.S.
 
funds.
 
(g)           Any regularly scheduled monthly installment of interest only or
principal and interest payable pursuant to this Section 3 that is received by
Lender before the date it is due shall be deemed to have been received on the
due date for the purpose of calculating interest due.
 
(h)           Any accrued interest remaining past due for 30 days or more, at
Lender's discretion, may be added to and become part of the unpaid principal
balance of this Note and any reference to "accrued interest" shall refer to
accrued interest which has not become part of the unpaid principal balance. Any
amount added to principal pursuant to the Loan Documents shall bear interest at
the applicable rate or rates specified in this Note and shall be payable with
such interest upon demand by Lender and absent such demand, as provided in this
Note for the payment of principal and interest.
 
(i)           In accordance with Section 14, interest charged under this Note
cannot exceed the Maximum Interest Rate. If the Fixed Interest Rate at any time
exceeds the Maximum Interest Rate, resulting in the charging of interest
hereunder to be limited to the Maximum interest Rate, then any subsequent
reduction in the Fixed Interest Rate shall not reduce the rate at which interest
under this Note accrues below the Maximum Interest Rate until the total amount
of interest accrued hereunder equals the amount of interest which would have
accrued had the Fixed Interest Rate at all times been in effect.
 
4.           Application of Payments. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, Lender may apply the amount
received to amounts then due and payable in any manner and in any order
determined by Lender, in Lender's discretion. Borrower agrees that neither
Lender's acceptance of a payment from Borrower in an amount that is less than
all amounts then due and payable nor Lender's application of such payment shall
constitute or be deemed to constitute either a waiver of the unpaid amounts or
an accord and satisfaction.
 
5.           Security. The Indebtedness is secured by, among other things, the
Security Instrument and the Credit Agreement, and reference is made to the
Security Instrument and the Credit Agreement for other rights of Lender as to
collateral for the Indebtedness.
 
6.           Acceleration. If an Event of Default has occurred and is
continuing, the entire unpaid principal balance, any accrued interest, any
prepayment premium payable under the Credit Agreement, if any, and all other
amounts payable under this Note, the Credit Agreement and any other Loan
Document, shall at once become due and payable, at the option of Lender, without
any prior notice to Borrower (except if notice is required by applicable law,
then after such notice). Lender may exercise this option to accelerate
regardless of any prior forbearance.
 
For purposes of exercising such option, Lender shall calculate the prepayment
premium, if any, as if prepayment occurred on the date of acceleration. If
prepayment occurs thereafter, Lender shall recalculate the prepayment premium,
if any, as of the actual prepayment date.

 
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7.             Late Charge.
 
(a)           If any monthly installment of interest or principal and interest
or other amount payable under this Note, the Credit Agreement, the Security
Instrument or any other Loan Document, other than the outstanding principal
balance of the Loan payable on the Maturity Date or upon acceleration of the
Note, is not received in full by Lender within ten (10) days after the
installment or other amount is due, counting from and including the date such
installment or other amount is due (unless applicable law requires a longer
period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such
installment or other amount due (unless applicable law requires a lesser amount
be charged, in which event such lesser amount shall be substituted).
 
(b)           Borrower acknowledges that its failure to make timely payments
will cause Lender to incur additional expenses in servicing and processing the
Loan and that it is extremely difficult and impractical to determine those
additional expenses. Borrower agrees that the late charge payable pursuant to
this Section represents a fair and reasonable estimate, taking into account all
circumstances existing on the date of this Note, of the additional expenses
Lender will incur by reason of such late payment. The late charge is payable in
addition to, and not in lieu of, any interest payable at the Default Rate
pursuant to Section 8.

 
8.             Default Rate.
 
(a)           So long as (i) any monthly installment under this Note remains
past due for thirty (30) days or more or (ii) any other Event of Default has
occurred and is continuing, then notwithstanding anything in Section 3 of this
Note to the contrary, interest under this Note shall accrue on the unpaid
principal balance from the Installment Due Date of the first such unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
the Default Rate.
 
(b)           From and after the Maturity Date, the unpaid principal balance
shall continue to bear interest at the Default Rate until and including the date
on which the entire principal balance is paid in full.
 
(c)           Borrower acknowledges that (i) its failure to make timely payments
will cause Lender to incur additional expenses in servicing and processing the
Loan, (ii) during the time that any monthly installment under this Note is
delinquent for thirty (30) days or more, Lender will incur additional costs and
expenses arising from its loss of the use of the money due and from the adverse
impact on Lender's ability to meet its other obligations and to take advantage
of other investment opportunities; and (iii) it is extremely difficult and
impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment under this Note
is delinquent for thirty (30) days or more or any other Event of Default has
occurred and is continuing, Lender's risk of nonpayment of this Note will be
materially increased and Lender is entitled to be compensated for such increased
risk. Borrower agrees that the increase in the rate of interest payable under
this Note to the Default Rate represents a fair and reasonable estimate, taking
into account all circumstances existing on the date of this Note, of the
additional costs and expenses Lender will incur by reason of the Borrower's
delinquent payment and the additional compensation Lender is entitled to receive
for the increased risks of nonpayment associated with a delinquent loan.

 
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9.             Limits on Personal Liability.
 
(a)           Except as otherwise provided in this Section 9, in the Revolving
Credit Note or in any guaranty, Borrower shall have no personal liability under
this Note, the Security Instrument, the Credit Agreement, or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Collateral Pool Property and to any other collateral held by Lender as
security for the Indebtedness. This limitation on Borrower's liability shall not
limit or impair Lender's enforcement of its rights against any guarantor of the
indebtedness or any guarantor of any other obligations of Borrower.
 
(b)           Borrower shall be personally liable to Lender for the amount of
the Base Recourse, plus any other amounts for which Borrower has personal
liability under this Section 9.
 
(c)           In addition to the Base Recourse, Borrower shall be personally
liable to Lender for the repayment of a further portion of the Indebtedness
equal to any loss or damage suffered by Lender as a result of the occurrence of
any of the following events:
 
 
(i)
Borrower fails to pay to Lender upon demand after, but only during the
continuance of, an Event of Default all Rents to which Lender is entitled under
Section 3(a) of the Security Instrument and the amount of all security deposits
collected by Borrower from tenants then in residence. However, Borrower will not
be personally liable for any failure described in this subsection (i) if
Borrower is unable to pay to Lender all Rents and security deposits as required
by the Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.

 
 
(ii)
Borrower fails to apply all insurance proceeds and condemnation proceeds as
required by the Security Instrument. However, Borrower will not be personally
liable for any failure described in this subsection (ii) if Borrower is unable
to apply insurance or condemnation proceeds as required by the Security
Instrument because of a valid order issued in a bankruptcy, receivership, or
similar judicial proceeding.

 
Page 6

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(iii)
Borrower fails to comply with Section 14(g) or (h) of the Security Instrument
relating to the delivery of books and records, statements, schedules and
reports.

 
 
(iv)
Borrower fails to pay when due in accordance with the terms of the Security
Instrument the amount of any item below marked "Deferred"; provided however,
that if no item is marked "Deferred", this Section 9(c)(iv) shall be of no force
or effect.

 
 
[Deferred]
Hazard Insurance premiums or other insurance premiums,

 
 
[Deferred]
Taxes,

 
 
[Deferred]
water and sewer charges (that could become a lien on the Mortgaged Property),

 
 
[Collect]
ground rents, if applicable

 
 
[Deferred]
assessments or other charges (that could become a lien on the Mortgaged
Property)

 
(d)           In addition to the Base Recourse, Borrower shall be personally
liable to Lender for:
 
(i)
the performance of all of Borrower's obligations under Section 18 of the
Security Instrument (relating to environmental matters);

(ii) 
the costs of any audit under Section 14(g) of the Security Instrument; and

 
(iii)
any costs and expenses incurred by Lender in connection with the collection of
any amount for which Borrower is personally liable under this Section 9,
including Attorneys' Fees and Costs and the costs of conducting any independent
audit of Borrower's books and records to determine the amount for which Borrower
has personal liability.

 
(e)           All payments made by Borrower with respect to the Indebtedness and
all amounts received by Lender from the enforcement of its rights under the
Security Instrument and the other Loan Documents shall be applied first to the
portion of the Indebtedness for which Borrower has no personal liability.
 
(f)           Notwithstanding the Base Recourse, Borrower shall become
personally liable to Lender for the repayment of all of the Indebtedness upon
the occurrence of any of the following Events of Default:

 
Page 7

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

 
 
 
(i)
Borrower's ownership of any property or operation of any business not permitted
by Section 33 of the Security Instrument;

 
 
(ii)
a Transfer (including, but not limited to, a lien or encumbrance) that is an
Event of Default under Section 21 of the Security Instrument, other than a
Transfer consisting solely of the involuntary removal or involuntary withdrawal
of a general partner in a limited partnership or a manager in a limited
liability company; or

 
 
(iii)
fraud or written material misrepresentation by Borrower or any officer,
director, partner, member or employee of Borrower in connection with the
application for or creation of the Indebtedness or any request for any action or
consent by Lender.

 
(g)           Notwithstanding the Base Recourse, Borrower shall become
personally liable to Lender for the repayment of all of the Indebtedness upon
the occurrence of any of the following events:
 
 
(i)
any Borrower voluntarily files for bankruptcy protection under the United States
Bankruptcy Code; or

 
 
(ii)
any Borrower voluntarily becomes subject to any reorganization, receivership,
insolvency proceeding, or other similar proceeding pursuant to any other federal
or state law affecting debtor and creditor rights; or

 
 
(iii)
an order of relief is entered against any Borrower pursuant to the United States
Bankruptcy Code or other federal or state law affecting debtor and creditor
rights in any involuntary bankruptcy proceeding initiated or joined in by a
Related Party (provided, that if such Borrower or any Related Party has
solicited creditors to initiate or participate in any proceeding referred to in
this Section 9, regardless of whether any of the creditors solicited actually
initiates or participates in the proceeding, then such proceeding shall be
considered as having been initiated by a Related Party).

 
(h)           To the extent that Borrower has personal liability under this
Section 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Collateral Pool
Property or any other security, or pursued any other rights available to Lender
under this Note, the Credit Agreement, the Security Instrument, any other Loan
Document or applicable law. For purposes of this Section 9, the term "Collateral
Pool Property" shall not include any funds that (1) have been applied by
Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or following the cure, if Lender consents to
such cure, of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar proceeding. To the fullest extent permitted by
applicable law, in any action to enforce Borrower's personal liability under
this Section 9, Borrower waives any right to set off the value of the Collateral
Pool Property against such personal liability.

 
Page 8

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10.           Voluntary and Involuntary Prepayments.
 
(a)           Any receipt by Lender of principal due under this Note prior to
the Maturity Date, other than principal required to be paid in monthly
installments pursuant to Section 3, constitutes a prepayment of principal under
this Note. Without limiting the foregoing, any application by Lender, prior to
the Maturity Date, of any proceeds of collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note
constitutes a prepayment under this Note.
 
(b)           Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on an Installment Due Date so long as Borrower designates
the date for such prepayment in a Notice from Borrower to Lender given at least
30 days prior to the date of such prepayment. If an Installment Due Date (as
defined in Section 1(a)) falls on a day which is not a Business Day, then with
respect to payments made under this Section 10 only, the term "Installment Due
Date" shall mean the Business Day immediately preceding the scheduled
Installment Due Date.
 
(c)           Notwithstanding subsection (b) above, Borrower may voluntarily
prepay all of the unpaid principal balance of this Note on a Business Day other
than an Installment Due Date if Borrower provides Lender with the Notice set
forth in subsection (b) and meets the other requirements set forth in this
subsection. Borrower acknowledges that Lender has agreed that Borrower may
prepay principal on a Business Day other than an Installment Due Date only
because Lender shall deem any prepayment received by Lender on any day other
than an Installment Due Date to have been received on the Installment Due Date
immediately following such prepayment and Borrower shall be responsible for all
interest that would have been due if the prepayment had actually been made on
the Installment Due Date immediately following such prepayment.
 
(d)           Unless otherwise expressly provided in the Loan Documents,
Borrower may not voluntarily prepay less than all of the unpaid principal
balance of this Note. In order to voluntarily prepay all or any part of the
principal of this Note, Borrower must also pay to Lender, together with the
amount of principal being prepaid, (i) all accrued and unpaid interest due under
this Note, plus (ii) all other sums due to Lender at the time of such
prepayment, plus (iii) any prepayment premium calculated pursuant Section
10(e) below.
 
(e)           Except as provided in Section 10(f), a prepayment premium shall be
due and payable by Borrower in connection with any prepayment of principal under
this Note during the Prepayment Premium Period. The prepayment premium shall be
computed as follows:
 
 
(i)
For any prepayment made during the Yield Maintenance Period, the prepayment
premium shall be whichever is the greater of subsections (A) and (B) below:

 
Page 9

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(A)
1.0% of the amount of principal being prepaid; or

 
 
(B)
the product obtained by multiplying:

 
 
(1)
the amount of principal being prepaid or accelerated, by

 
 
(2)
the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment Rate,

by
 
(3)
the Present Value Factor.

 
For purposes of subsection (B), the following definitions shall apply:
 
Monthly Note Rate: one-twelfth (1/12) of the Fixed Interest Rate, expressed as a
decimal calculated to five digits.
 
Prepayment Date: in the case of a voluntary prepayment, the date on which the
prepayment is made; in the case of the application by Lender of collateral or
security to a portion of the principal balance, the date of such application.
 
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate, as of the close
of the trading session which is 5 Business Days before the Prepayment Date, on
the Treasury Security, as reported in The Wall Street Journal, expressed as a
decimal calculated to five digits. In the event that no yield is published on
the applicable date for the Treasury Security, Lender, in its discretion, shall
select the non-callable Treasury Security maturing in the same year as the
Treasury Security with the lowest yield published in The Wall Street Journal as
of the applicable date. If the publication of such yield rates in
The Wall Street Journal is discontinued for any reason, Lender shall select a
security with a comparable rate and term to the Treasury Security. The selection
of an alternate security pursuant to this Section shall be made in Lender's
discretion.
 
Present Value Factor: the factor that discounts to present value the costs
resulting to Lender from the difference in interest rates during the months
remaining in the Yield Maintenance Period, using the Assumed Reinvestment Rate
as the discount rate, with monthly compounding, expressed numerically as
follows:

 
Page 10

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

 

1-(1/1+ARR)
ARR

 
n = the number of months remaining in Yield Maintenance Period; provided,
however, if a prepayment occurs on an Installment Due Date, then the number of
months remaining in the Yield Maintenance Period shall be calculated beginning
with the month in which such prepayment occurs and if such prepayment occurs on
a Business Day other than an Installment Due Date, then the number of months
remaining in the Yield Maintenance Period shall be calculated beginning with the
month immediately following the date of such prepayment.
 
ARR = Assumed Reinvestment Rate

 
 
(ii)
For any prepayment made after the expiration of the Yield Maintenance Period but
during the remainder of the Prepayment Premium Period, the prepayment premium
shall be 1.0% of the amount of principal being prepaid.

 
(f)           No prepayment premium shall be payable with respect to (i) any
prepayment made during the Window Period, (ii) any prepayment occurring as a
result of the application of any insurance proceeds or condemnation award under
the Security Instrument or (iii) as otherwise set forth in the Credit Agreement.
 
(g)           Unless Lender agrees otherwise in writing, a permitted or required
prepayment of less than the unpaid principal balance of this Note shall not
extend or postpone the due date of any subsequent monthly installments or change
the amount of such installments.
 
(h)           Borrower recognizes that any prepayment of any of the unpaid
principal balance of this Note, whether voluntary or involuntary or resulting
from an Event of Default by Borrower, will result in Lender's incurring loss,
including reinvestment loss, additional expense and frustration or impairment of
Lender's ability to meet its commitments to third parties. Borrower agrees to
pay to Lender upon demand damages for the detriment caused by any prepayment,
and agrees that it is extremely difficult and impractical to ascertain the
extent of such damages. Borrower therefore acknowledges and agrees that the
formula for calculating prepayment premiums set forth in Section 10(e) above
represents a reasonable estimate of the damages Lender will incur because of a
prepayment. Borrower further acknowledges that the prepayment premium provisions
of this Note are a material part of the consideration for the Loan, and that the
terms of this Note are in other respects more favorable to Borrower as a result
of the Borrower's voluntary agreement to the prepayment premium provisions.

 
Page 11

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11.           Costs and Expenses. To the fullest extent allowed by applicable
law, Borrower shall pay all expenses and costs, including Attorneys' Fees and
Costs incurred by Lender as a result of any default under this Note or in
connection with efforts to collect any amount due under this Note, or to enforce
the provisions of any of the other Loan Documents, including those incurred in
post-judgment collection efforts and in any bankruptcy proceeding (including any
action for relief from the automatic stay of any bankruptcy proceeding) or
judicial or non-judicial foreclosure proceeding.
 
12.           Forbearance. Any forbearance by Lender in exercising any right or
remedy under this Note, the Credit Agreement, the Security Instrument, or any
other Loan Document or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of that or any other right or remedy. The
acceptance by Lender of any payment after the due date of such payment, or in an
amount which is less than the required payment, shall not be a waiver of
Lender's right to require prompt payment when due of all other payments or to
exercise any right or remedy with respect to any failure to make prompt payment.
Enforcement by Lender of any security for Borrower's obligations under this Note
shall not constitute an election by Lender of remedies so as to preclude the
exercise of any other right or remedy available to Lender.
 
13.           Waivers. Borrower and all endorsers and guarantors of this Note
and all other third party obligors waive presentment, demand, notice of
dishonor, protest, notice of acceleration, notice of intent to demand or
accelerate payment or maturity, presentment for payment, notice of nonpayment,
grace, and diligence in collecting the Indebtedness.
 
14.           Loan Charges. Neither this Note, the Credit Agreement nor any of
the other Loan Documents shall be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate
greater than the Maximum Interest Rate. If any applicable law limiting the
amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge
provided for in the Credit Agreement or any other Loan Document, whether
considered separately or together with other charges provided for in the Credit
Agreement or any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation. The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over each Base Rate Borrowing Tranche and Prime
Rate Borrowing Tranche comprising the Revolving Credit Note, this Note and each
other Fixed Rate Note, if any, over the stated term of such Notes. Unless
otherwise required by applicable law, such allocation and spreading shall be
effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of such Notes.

 
Page 12

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

 
 
15.           Commercial Purpose. Borrower represents that Borrower is incurring
the Indebtedness solely for the purpose of carrying on a business or commercial
enterprise, and not for personal, family, household, or agricultural purposes.
 
16.           Counting of Days. Except where otherwise specifically provided,
any reference in this Note to a period of "days" means calendar days, not
Business Days.
 
17.           Governing Law. This Note shall be governed by the laws of the
Commonwealth of Virginia.
 
18.           Captions. The captions of the Sections of this Note are for
convenience only and shall be disregarded in construing this Note.
 
19.           Notices; Written Modifications.
 
(a)           All Notices, demands and other communications required or
permitted to be given pursuant to this Note shall be given in accordance with
the Credit Agreement.
 
(b)           Any modification or amendment to this Note shall be ineffective
unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, that in the event of a Transfer
under the terms of the Security Instrument that requires Lender's consent, any
or some or all of the Modifications to Multifamily Note set forth in Exhibit A
to this Note may be modified or rendered void by Lender at Lender's option, by
Notice to Borrower and the transferee, as a condition of Lender's consent.
 
20.           Consent to Jurisdiction and Venue. Borrower agrees that any
controversy arising under or in relation to this Note may be litigated in the
courts of the Commonwealth of Virginia. The state and federal courts and
authorities with jurisdiction in the Commonwealth of Virginia shall have
jurisdiction over all controversies that shall arise under or in relation to
this Note. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any such litigation and waives any other venue to which it might
be entitled by virtue of domicile, habitual residence or otherwise. However,
nothing in this Note is intended to limit any right that Lender may have to
bring any suit, action or proceeding relating to matters arising under this Note
in any court of any other jurisdiction.
 
21.           WAIVER OF TRIAL BY JURY.   BORROWER AND LENDER EACH (A) AGREES NOT
TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR
THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF
RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH
ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
 
22.           [Intentionally Omitted].
 
23.           Joinder. In accordance with the provisions set forth in the Credit
Agreement, certain Affiliates of Borrower may become liable under this Note, the
Credit Agreement and the other Loan Documents by executing (a) a separate
Allonge to this Note, (b) a joinder agreement in form satisfactory to Lender,
and (c) any other documents reasonably required by Lender to evidence and/or
secure such Affiliate's obligations hereunder, the Credit Agreement or under the
other Loan Documents, all as set forth in the Credit Agreement.
 
24.           Credit Agreement. In the event that the terms of this Note
directly conflict with the terms of the Credit Agreement, the terms of the
Credit Agreement shall control.
 
[Signatures Commence on the Following Page]

 
Page 13

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

 
 
IN WITNESS WHEREOF, and in consideration of the Lender's agreement to lend
Borrower the principal amount set forth above, Borrower has signed and delivered
this Note under seal or has caused this Note to be signed and delivered under
seal by its duly authorized representative. Borrower intends that this Note
shall be deemed to be signed and delivered as a sealed instrument.

   
BORROWER:
 
   
ESSEX CAL-WA, L.P., a California limited partnership
                 
By:
Essex
     
SPE, LLC, a Delaware limited liability company, its general partner
                   
By:
             
Essex Portfolio, L.P., a California limited partnership, its sole member
                 
By:
             
Essex Property Trust, Inc., a Maryland corporation, its general partner
                                     
By:
             
Name:
Title:
                                             
84-1627047
   
Borrower's Social Security/Employer ID Number

 
Page 14

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EXHIBIT A
 
APPROVED MODIFICATIONS TO NOTE
 
 
None.

 
Page Ex. A-1

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

 
 
SCHEDULE 2.2
 
FORM OF
SCHEDULED MATURITY DATE EXTENSION CONFIRMATION

 
[_______________], 20[______]

 
Essex CAL-WA, L.P.
c/o Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, CA 94303
Attention: [________]

 
Ladies and Gentlemen:
 
Reference is made to that Credit Agreement dated as of November 17, 2008, as
amended (the "Credit Agreement") initially by and between ESSEX CAL-WA, L.P., a
California limited partnership, having an address at 925 East Meadow Drive, Palo
Alto, CA 94303 ("Borrower") and NORTHMARQ CAPITAL, INC., a Minnesota
corporation, having an address at 3500 American Boulevard West, Suite 500,
Bloomington, MN 55431-4435 (together with its successors and assigns, "Lender").
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings.
 
Pursuant to Section [2.2(d)] I [2.2(e)] of the Credit Agreement, the Scheduled
Maturity Date of the Credit Agreement shall be extended to [December 1, 2014] /
[December 1, 2015]. Pursuant to Section 2.4.6.2 of the Credit Agreement, the Net
Spread applicable to any Base Rate Borrowing Tranche during the extension period
related to the [First Extension Option] I [Second Extension Option] shall be as
set for the on Exhibit A hereto.
 
By acknowledging and agreeing to the terms of this letter, Borrower represents
and warrants that all the terms and conditions set forth in Section [2.2(b)] I
[2.2(c)] of the Credit Agreement have been satisfied.
 
 
Sincerely,

 
LENDER:
         
[________________________________],
 
a[_________]
       

 
By:
     
Name:
     
Title:
   

 
 
Sch. 2.4.6.2 - 1

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

 
 
[signatures continue on next page]

 
Sch. 2.4.6.2 - 2

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

 
 
ACKNOWLEDGED AND AGREED BORROWER:
 
ESSEX CAL-WA, L.P., a California limited partnership

By:
     
 
   
Essex SPE, LLC, a Delaware limited liability company, its general partner
         
 
         
 
   
By:
   
 
     
Essex Portfolio, L.P., a California limited partnership, its sole member
         
 
         
 
     
By:
 
 
       
Essex Property Trust, Inc., a Maryland corporation, its general partner
         
 
         
 
       
By:
 
         
Name:
Title:
 

 
 
Sch. 2.4.6.2 - 3

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

 
 
EXHIBIT A TO SCHEDULE 2.2

 
NET SPREAD TABLE APPLICABLE DURING AN EXTENSION PERIOD

 
Facility Debt Service Coverage Ratio
Net Spread*
Margin*
Greater than or equal to [ ___ ]: 1.00 but less than [ ___ ]: 1.00
[_______]
[_______]
Greater than or equal to [ ___ ]: 1.00 but less than [ ___ ]: 1.00
[_______]
[_______]
Greater than or equal to [ ___ ]: 1.00
[_______]
[_______]

 
* The Net Spread and Margin set forth above assumes that the Base Rate Borrowing
Tranches will have a one-month Interest Period. The Net Spread and Margin shall
be increased by [ _____ ] basis points ([ _____ ]) for any Base Rate Borrowing
Tranche having a three-month Interest Period, increased by [ ______ ] basis
points ([ ______ ]) for any Base Rate Borrowing Tranche having a six-month
Interest Period, and increased by [ _______ ] basis points ([ ______ ]) for any
Base Rate Borrowing Tranche having a twelve-month Interest Period.

 
Sch. 2.4.6.2 - 4

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

 

SCHEDULE 2.4.6.2

FORM OF
NET SPREAD CONFIRMATION
 
[__________], 20 [_____]

Essex CAL-WA, L.P.
c/o Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, CA 94303
Attention: [___________]

 
Ladies and Gentlemen:
 
Reference is made to that Credit Agreement dated as of November 17, 2008, as
amended (the "Credit Agreement") initially by and between ESSEX CAL-WA, L.P., a
California limited partnership, having an address at 925 East Meadow Drive, Palo
Alto, CA 94303 ("Borrower") and NORTHMARQ CAPITAL, INC., a Minnesota
corporation, having an address at 3500 American Boulevard West, Suite 500,
Bloomington, MN 55431-4435 (together with its successors and assigns, "Lender").
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings.
 
Pursuant to Section 2.4.6.2 of the Credit Agreement, the Net Spread applicable
to any Base Rate Borrowing Tranche on or after December 1, 2011 until initial
Scheduled Maturity Date shall be as set for the on Exhibit A hereto.

Sincerely,
 

 
LENDER:
       
[_____________________],
 
a [________]
       
By:
   
Name:
   
Title:
 

 
Sch. 2.4.6.2 - 1

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

 
 
  [signatures continued on next page]
 
 
Sch. 2.4.6.2 - 2

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

 
 

ACKNOWLEDGED AND AGREED BORROWER:   ESSEX CAL-WA, L.P., a California limited
partnership                 By:              
Essex SPE, LLC, a Delaware limited liability company, its general partner
                                 
By:
             
Essex Portfolio, L.P., a California limited partnership, its sole member
                                   
By:
             
Essex Property Trust, Inc., a Maryland corporation, its general partner
                       
By:
             
Name:
Title:
 

 
Sch. 2.4.6.2 - 3

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

 
 
EXHIBIT A TO SCHEDULE 2.4.6.2

 
NET SPREAD TABLE APPLICABLE ON AND AFTER [DECEMBER] 1,2011

 
Facility Debt Service Coverage Ratio
Net Spread*
Margin*
Greater than or equal to [ ___ ]: 1.00 but less than [ ___ ]:  1.00
[__________]
[__________]
Greater than or equal to [ ___ ]: 1.00 but less than [ ___ ]: 1.00
[__________]
[__________]
Greater than or equal to [ ___ ]: 1.00
[__________]
[__________]

 
* The Net Spread and Margin set forth above assumes that the Base Rate Borrowing
Tranches will have a one-month Interest Period. The Net Spread and Margin shall
be increased by [ _____ ] basis points ([  _____ ]) for any Base Rate Borrowing
Tranche having a three-month Interest Period, increased by [ _____ ] basis
points ([ _____ ]) for any Base Rate Borrowing Tranche having a six-month
Interest Period, and increased by [ _____ ] basis points ([ _____ ]) for any
Base Rate Borrowing Tranche having a twelve-month Interest Period.

 
Sch. 2.4.6.2 - 4

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

 
 
[BORROWER MAY, SUBJECT TO LENDER'S CONSENT, REVISE THIS FORM OF LOAN REQUEST TO
PROVIDE FOR MULTIPLE BORROWING TRANCHES UNDER A SINGLE LOAN REQUEST FORM]

SCHEDULE 2.5

FORM OF
LOAN REQUEST
 
[____________], 20[____]

 
NorthMarq Capital, Inc.
3500 American Boulevard West
Suite 500
Bloomington, MN 55431-4435
Attention: Servicing
 
Ladies and Gentlemen:
 
Reference is made to that Credit Agreement dated as of November 17, 2008, as
amended (the "Credit Agreement") initially by and between ESSEX CAL-WA, L.P., a
California limited partnership, having an address at 925 East Meadow Drive, Palo
Alto, CA 94303 ("Borrower") and NORTHMARQ CAPITAL, INC., a Minnesota
corporation, having an address at 3500 American Boulevard West, Suite 500,
Bloomington, MN 55431-4435 (together with its successors and assigns, "Lender").
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings.

 
I, [ ____________ ], the [ ___________ ] of Borrower, a [ ___________ ], do
hereby certify on behalf of Borrower as of the date hereof, as follows:

 
Borrower is entitled to and hereby requests Lender to make an advance under the
Credit Agreement in the amount of $[__________] (which must be greater than or
equal to [______________] and NO/100 Dollars ($[_______________]). Funds should
be delivered to Borrower by wire to the following account:
 
Bank Name and Location: [______________________________________________]
ABA Number: [______________________________________________________ ]
Account Name: [_____________________________________________________]
Account Number: [___________________________________________________ ]
Further Credit Instructions: [____________________________________________]
Attention: [_________________________________________________________]
 
1.           The requested date  of the  advance  (the  "Borrowing Date")  is
[________________].
 
2.           The Borrowing Tranche shall bear interest at (check one):
 
Sch. 2.5 - 1

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

 
_____ Base Rate
 
_____Fixed Rate

3.         The Interest Period (if the Base Rate is selected) applicable to the
advance is (check one):
 
_____ one-month
 
_____ three-month*
 
_____ six-month**
 
_____ twelve-month***

 
*subject to a [ ______ ] basis point ([ _________ ]) increase in the Margin
otherwise applicable to such Borrowing Tranche

 
**subject to a [ _________ ] basis point ([ ________]) increase in the Margin
otherwise applicable to such Borrowing Tranche

 
***subject to a [ __________ ] basis point ([ _________ ]) increase in the
Margin otherwise applicable to such Borrowing Tranche

 
4.            Borrower will (check one):
 
 
______
Pay all interest due and payable under the requested Borrowing Tranche in
monthly installments pursuant to the terms of the Credit Agreement.

 
 
______
Prepay all interest for such Borrowing Tranche as of the Borrowing Date.

5.

 
(a)           If applicable, the Base Rate for the Base Rate Borrowing Tranche
requested hereunder shall be [_______] ([_______]%) consisting of a Reference
Bills® Rate/LIBO Rate of [_______] percent ([_______]%) and a Margin of
[_______] ([_______]%).
 
(b)           If applicable, the Fixed Rate for the Fixed Rate Borrowing Tranche
requested hereunder shall be [_______] ([_______]%) consisting of the year US
Treasury Security (as determined by Lender) and a Margin of [_______]
([_______]%).

 
6.           Following the disbursement of the funds comprising the Borrowing
Tranche requested herein, the total number of Borrowing Tranches outstanding
will be [_______] ([_______]), which is not more than ten (10).
 
7.           If applicable (i.e. in the event of a Loan Request for a Base Rate
Borrowing Tranche), the maturity date of the Interest Period of the Borrowing
Tranche requested herein is (choose and complete one of the following):
 
[ _______], 20[_______] (which is the last day of the Interest Period, in the
event that such date is a Business Day)

 
Sch. 2.5 - 2

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

 
 
[_______], 20[ __] (which is the Business Day following the last day of the
Interest Period, in the event that such date is not a Business Day).
 
8.           This request for an advance is made pursuant to and in accordance
with the provisions of the Credit Agreement. The proceeds of such advance are to
be used for a permitted purpose under Section 2.8 of the Credit Agreement.
 
9.           The principal amount outstanding under the Credit Agreement on the
date hereof, prior to any advance in response to this request, is $[_______].
 
10.           To the best of Borrower's knowledge and belief following diligent
inquiry, the advance of the funds requested herein will not cause Borrower to be
in non­compliance with the Sublimits set forth in Section 2.5.3 of the Credit
Agreement.
 
11.           To the best of Borrower's knowledge and belief following diligent
inquiry, the computations set forth in Paragraphs 19 through 22 as certified by
Servicer are accurate.
 
12.           All of the covenants and all of the representations and warranties
contained in the Credit Agreement and the other Loan Documents, and all of the
other terms, covenants and conditions contained in the Loan Documents continue
to be materially true and correct and continue to be complied with on the date
hereof, and will continue to be materially true and correct in accordance with
Section 5.2 of the Credit Agreement.
 
13.           No Potential Default or Event of Default has occurred or is
continuing under the Loan Documents.
 
14.           There has been no Material Adverse Change to any Collateral Pool
Property or Borrower since the date of the last Loan Request that will cause
Borrower to be in violation of the Sublimits after the funding of the Borrowing
Tranche requested herein or will render the Base Rate requested herein
inaccurate.
 
15.           All of the other terms and conditions set forth in the Credit
Agreement and the other Loan Documents pertaining to the Loan have been
satisfied.
 
16.           All items that Borrower is required to furnish to Lender pursuant
to the Credit Agreement accompany this request and are true and complete in all
respects.
 
17.           The undersigned is an Authorized Officer of Borrower.
 
18.           Notice of this Loan Request shall be deemed received by Lender
when (i) sent by facsimile to (703) 714-3002 and (ii) verbally confirmed by
telephone call to either (when called in the following order of priority): (1)
primary contact in Loan Accounting, currently Denise Sanchez, ((703) 714-3239),
(2) secondary contact in Loan Accounting, currently Steve Dillon ((703)
714-2691), and (3) Loan Accounting Manager, currently Wendy McLain ((703)
714-2926) or such other names and numbers as Lender may specify upon prior
written Notice to Borrower.

 
Sch. 2.5 - 3

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

 
 
[The Loan Request continues on the following page]

 
Sch. 2.5 - 4

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

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate this [._____]
day of  [______], [___].
 

 
BORROWER:
 
 
ESSEX CAL-WA, L.P., a California limited partnership
             
By:
Essex SPE, LLC, a Delaware limited liability company, its general partner
               
By:
Essex Portfolio, L.P., a California limited partnership, its sole member
                 
By:
Essex Property Trust, Inc., a Maryland corporation, its general partner
                   
By:
           
Name:
Title:

 
[The Loan Request continues on the following page]

 
Sch. 2.5 - 5

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

 
 
19.     The current Loan to Value Ratio is [ ___________ ] ([ ______ ]%), which
is less than or equal to the Maximum Loan to Value Ratio specified in Section
2.5.3.1 of sixty-five percent (65%), determined as follows:

 
A.
The current Loan balance
$[__________________]
 
     
 
 
 
B.
The current aggregate Market Value of the Collateral Pool
$[__________________]
 
   
 
 
 
 
C.
Item A divided by Item B and then multiplied by 100% equals the Loan to Value
Ratio
[_________________]%
 

 
20.           Following the disbursement of the funds comprising the Borrowing
Tranche requested herein, the Loan to Value Ratio will equal [________]
([_____]%), which is less than or equal to the Maximum Loan to Value Ratio set
forth in Section 2.5.3.1 of sixty-five percent (65%), determined as follows:

 
A.
The Loan balance upon disbursement of the funds comprising the Borrowing
Tranche(s) requested herein
$[__________________]
 
       
 
 
B.
The current aggregate Market Value of the Collateral Pool
$[__________________]
 
       
 
 
C.
Item A divided by Item B and then multiplied by 100% equals the Loan to Value
Ratio
[___________________]%
 

 
21.     The current Facility Debt Service Coverage Ratio is [ _________ ]: 1.00,
which is not less than 1.60: 1.00, determined as follows:
 
 
A.
Net Operating Income of the Collateral Pool Properties determined by Lender
$[__________________]
 
 
   
 
 
 
B.
Facility Debt Service (as defined in the Credit Agreement)
$[__________________]
       
 
 
 
C.
Item A divided by Item B equals the Facility Debt Service Coverage Ratio
[___________________]%
 

 
 
Sch. 2.5 - 6

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

 
 
22.     Following the disbursement of the funds comprising the Borrowing Tranche
requested herein, the Facility Debt Service Coverage Ratio will be [ _____ ]:
1.00, which is
not less than 1.60: 1.00, determined as follows:
 

 
A.
Net Operating Income of the Collateral Pool Properties as determined by Lender
$[_________________ ]
             
B.
Facility Debt Service (as defined in the Credit Agreement)
$[_________________ ]
             
C.
Item A divided by Item B equals the Facility Debt Service Coverage Ratio
[_________________ ]%
 

 
Servicer hereby certifies (i) to the accuracy of each of the mathematical
computations set forth in paragraphs 19 through 22 above (acknowledging that
Servicer has relied, with Lender's consent and without independent verification
thereof, on the Net Operating Income and Market Value(s) prepared by Lender),
and (ii) to the best of its knowledge and belief, that all statements made by
Borrower herein are true and accurate in all material respects.

 
SERVICER:
 
 
NORTHMARQ CAPITAL, INC., a Minnesota corporation
       
By:
     
Name: Paul W. Cairns
Title: Senior Vice President

 
 
Sch. 2.5 - 7

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

 

SCHEDULE 2.5.2

FORM OF COMMITMENT LETTER

LETTER OF RATE LOCK COMMITMENT FORM
FOR FIXED RATE BORROWING TRANCHES
PURSUANT TO REVOLVING CREDIT FACILITIES
(Revised 8-28-2008)

 
(LENDER LETTERHEAD)

 
DATE [ __________]
 
Essex CAL-WA, L.P.
c/o Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, CA 94303
 
Attention: [ ___________]
 
Re: Credit Agreement dated as of November 17, 2008, as amended (the "Credit
Agreement") by and between ESSEX CAL-WA, L.P., a California limited partnership,
having an address at 925 East Meadow Drive, Palo Alto, CA 94303 ("Borrower") and
NORTHMARQ CAPITAL, INC., a Minnesota corporation, having an address at 3500
American Boulevard West, Suite 500, Bloomington, MN 55431-4435 (together with
its successors and assigns, "Lender").
 
Lender Loan Number: [  ________________________________ ]

 
Dear [ _________________ ]:

 
This letter is a commitment ("Commitment") by Lender to advance funds at a Fixed
Rate for the Fixed Rate Borrowing Tranche requested by Borrower pursuant to that
certain Loan Request dated as of [ _____________ ] (the "Requested Borrowing
Tranche"). Upon Borrower's timely acceptance of this Commitment in the manner
provided in Part A below and subject to Borrower's satisfaction of the
conditions precedent set forth in Part B below and in the Credit Agreement, this
Commitment will obligate Lender to advance funds for the Requested Borrowing
Tranche in accordance with the provisions and conditions set forth in this
Commitment and in the Credit Agreement. Capitalized terms used but not defined
in this Commitment will have the meanings assigned to them in the Credit
Agreement.
 
A.
Expiration; Acceptance of the Commitment.

 
 
1.
Expiration.

 
Sch. 2.5.2 - 1

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

 
 
This Commitment will expire at 4:00 p.m. time on [ _____________ ] FIVE BUSINESS
DAYS AFTER THE DATE OF THIS LETTER ("Expiration Date"), at which time, this
Commitment will become null and void.
 
2.            Acceptance.
 
If Borrower desires to accept this Commitment:
 
 
(a)
Borrower must execute one original of this Commitment and cause it to be
received by Lender, via facsimile, before 4:00 p.m. Washington D.C. local time
on the same date as Lender delivers this Commitment to Borrower; and

 
 
(b)
Borrower shall thereafter deliver a fully executed original of this Commitment
to Lender within one (1) Business Day of the date of this Commitment.

 
B.
Interest Rate Lock and Selection of Other Loan Terms.

 
If Borrower accepts this Commitment in the manner provided in Part A above, then
Borrower will have until the Expiration Date ("Rate Lock Period") to lock the
Fixed Rate for the Requested Borrowing Tranche ("Interest Rate Lock").
Notwithstanding anything in this Commitment or the Credit Agreement to the
contrary, the Rate Lock Period will terminate on the Expiration Date. If the
Borrower fails to Interest Rate Lock prior to the Expiration Date, this
Commitment will terminate and become null and void.
 
Lender's Required Net Yield ("RNY") for the Requested Borrowing Tranche will be
[ _______ ] basis points above the yield for the [ __________ ] year US Treasury
Security (as determined by Lender) ("Benchmark US Treasury Security"). The
Servicing Spread for the Requested Borrowing Tranche will be four (4) basis
points. The actual yield of the applicable Benchmark US Treasury Security as
determined by Lender at the time of Interest Rate Lock will be used to determine
the Fixed Rate. Borrower must communicate its Interest Rate Lock to Lender
during the Rate Lock Period by telephoning one of the Servicer contacts
identified in the Credit Agreement between the
hours     of     10:00     a.m.     and     2:00     p.m.     Washington,     DC     time.
 
Notwithstanding anything to the contrary contained in this Commitment Letter,
Borrower will not be permitted to Interest Rate Lock in accordance with this
Commitment Letter and the Credit Agreement if it is not in compliance with the
Sublimits on the Rate Lock Date (as defined below).
 
C.
Fixed Rate Note.

 
When Borrower locks the Fixed Rate as provided in Part B above ("Rate Lock
Date"), the Borrower will be obligated to accept funds advanced by Lender for
the Requested Borrowing Tranche in accordance with the provisions and conditions
set forth in this Commitment and the Credit Agreement by the Delivery Date
specified in Exhibit A
 
 
Sch. 2.5.2 - 2

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

 
 
(Interest Rate Lock and Borrowing Tranche Terms Confirmation Sheet) attached to
this Commitment. On the Rate Lock Date, Lender will deliver to Borrower by
facsimile (fax) or by overnight mail or courier a completed Exhibit A to
evidence the terms of the Rate Lock. Borrower must execute and deliver the
completed Exhibit A to Lender in accordance with Section 2.5.2.1 of the Credit
Agreement. Borrow must also satisfy all the other conditions and delivery
requirements set forth in, and in accordance with, Section 2.5.2 of the Credit
Agreement. Failure by Borrower to satisfy the document delivery requirements in
accordance with Section 2.5.2 of the Credit Agreement will constitute a Rate
Lock Termination Event.
 
D.
Rate Lock Termination Event. In accordance with Section 2.5.2.2 of the Credit
Agreement, if a Rate Lock Termination Event occurs, Borrower shall promptly
reimburse Lender for any Breakage Fee as calculated pursuant to Exhibit
B hereto.

 
E.
Potential Defaults or Events of Default. Lender will not be obligated to advance
funds hereunder if a Potential Default or Event of Default has occurred under
the Credit Agreement or any Loan Document.

 
F.
Exhibits.

 
The following Exhibits are attached to this Commitment and are a part of this
Commitment:
 
 
x
Exhibit A
Interest Rate Lock and Borrowing Tranche Terms Confirmation Sheet

 
x 
          Exhibit B                Breakage Fee Calculation

 
SIGNATURE PAGE AND ACCEPTANCE CONTINUE ON NEXT PAGE

 
Sch. 2.5.2 - 3

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

 
 
Please call the undersigned if you have any questions about this Commitment. We
look forward to your acceptance of this Commitment and consummation of the
Interest Rate Lock.

 
Sincerely,
 
[ ______________ ]

 
AGREED AND ACCEPTED BY BORROWER
 
Lender Loan Number [_________________]
 

Date: [__________________________]

 
BORROWER:
 
ESSEX CAL-WA, L.P., a California limited partnership

By:
Essex SPE, LLC, a Delaware limited liability company, its general partner
 
         
 
 
By:
Essex Portfolio, L.P., a California limited partnership, its sole member
 
   
 
   
 
   
By:
Essex Property Trust, Inc., a Maryland corporation, its general partner
 
         
 
     
By:
 
 
         
 
       
Name:
Title:
 

 
Sch. 2.5.2 - 4

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

 
 
EXHIBIT A
COMMITMENT
 
INTEREST RATE LOCK AND BORROWING TRANCHE TERMS
CONFIRMATION SHEET

 
Lender Loan Number: [ ______________________________ ]

 
Date of Interest Rate Lock: [ ________________________________ ]

 
Fixed Rate Borrowing Tranche amount
$
Annual debt service amount
$
Monthly payment: Interest only per diem pavment**[MUST BE EXPRESSED TO THE FIFTH
DECIMAL]
$
   
Index
[____]-year US Treasury Security
Yield Rate on Index on date of Interest Rate Lock
%
Lender RNY
%
Servicing Spread
0.04%
Term
[______] months [MUST BE THE NUMBER OF MONTHS REMAINING UNTIL THE INITIAL
MATURITY DATE (i.e., December 1, 2011)]
Delivery Date
 

** The per diem amount above is an approximation. The actual calculation of the
monthly interest only payment will be made in accordance with Section 3 of the
Note.
 
AGREED AND ACCEPTED BY BORROWER
 
Lender Loan Number [ _________________________ ]
 
Date: [ _________________________ ]
 
BORROWER:
 
ESSEX CAL-WA, L.P., a California limited partnership

By:
Essex SPE, LLC, a Delaware limited liability company, its general partner
               
By:
Essex Portfolio, L.P., a California limited partnership, its sole member
                 
By:
Essex Property Trust, Inc., a Maryland corporation, its general partner
                   
By:
           
 
Name:
Title:
 

 
Sch. 2.5.2 - 5

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

 
 
EXHIBIT B
COMMITMENT
 
BREAKAGE FEE CALCULATION
 
The Breakage Fee will be the greater of (A) or (B) below:
 
A.
2% of the Rate Locked Fixed Rate Borrowing Tranche Loan Amount; or

 
B.
the product obtained by multiplying:

 
 
1.
the Rate Locked Fixed Rate Borrowing Tranche Loan Amount, by

 
 
2.
the value obtained by subtracting

 
 
(a)
the Monthly Yield Rate at Breakage less 1.125 basis points, from

 
 
(b)
the Monthly Yield Rate at Rate-Lock, by

 
 
3.
the Present Value Factor

 
For purposes of this Exhibit B the following definitions will apply: "Breakage
Date": the date that a Rate Lock Termination Event occurs.
 
"Rate Locked Fixed Rate Borrowing Tranche Loan Amount": the Loan amount of the
Requested Borrowing Tranche as set forth in this Commitment Letter.
 
"Yield Rate at Breakage": the yield rate on the Index (set forth on Exhibit A)
as of the close of the trading session on the Breakage Date, as reported in The
Wall Street Journal, expressed as a decimal calculated to five digits. In the
event that no yield is published on the applicable date for the Index, Lender,
in its discretion, will select the non-callable Treasury Security maturing in
the same year as the Index with the lowest yield published in The Wall Street
Journal as of the applicable date. If the publication of such yield rates in The
Wall Street Journal is discontinued for any reason, Lender will select a
security with a comparable rate and term to the Index. The selection of an
alternate security pursuant to this Exhibit B will be made in Lender's
discretion.
 
"Monthly Yield Rate at Breakage": the Yield Rate at Breakage divided by 12.
 
"Yield Rate at Rate-Lock": the yield rate on the Index at rate lock (as set
forth in this Commitment Letter).

"Monthly Yield Rate at Rate-Lock": the Yield Rate at Rate Lock divided by 12.

"Present Value Factor": the factor that discounts to present value the costs
resulting to Lender from the difference in the Yield Rate at Rate-Lock and the
Yield Rate at Breakage calculated using the following formula:

 
Sch. 2.5.2 - 6

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

 
 
1 - (1 + r)n
(r)
 
 
r =
Monthly Yield Rate at Breakage

 
n =
the number of months remaining until the Scheduled Maturity Date

 
Sch. 2.5.2 - 7

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

 
 
SCHEDULE 3.2
 
NET SPREAD TABLE

 
Facility Debt Service Coverage Ratio
Net Spread Fee*
Margin*
Greater than or equal to 1.60 : 1.00 but less than 1.90 : 1.00
0.0146
0.0150
Greater than or equal to 1.90 : 1.00 but less than 2.20 : 1.00
0.0126
0.0130
Greater than or equal to 2.20 : 1.00
0.0095
0.0099

 
* The Net Spread and Margin set forth above assumes that the Base Rate Borrowing
Tranches will have a one-month Interest Period. The Net Spread and Margin shall
be increased by five basis points (0.0005) for any Base Rate Borrowing Tranche
having a three-month Interest Period, increased by fifteen basis points (0.0015)
for any Base Rate Borrowing Tranche having a six-month Interest Period, and
increased by thirty basis points (0.0030) for any Base Rate Borrowing Tranche
having a twelve-month Interest Period.

 
Sch. 3.2 - 1

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

 
 
[BORROWER MAY, SUBJECT TO LENDER'S CONSENT, REVISE THIS FORM OF RENEWAL REQUEST
TO PROVIDE FOR THE RENEWAL OF MULTIPLE BORROWING TRANCHES UNDER A SINGLE RENEWAL
REQUEST FORM OR TO PROVIDE FOR THE SPLITTING OF A MATURING BORROWING TRANCHE
INTO MULTIPLE BORROWING TRANCHES UNDER A SINGLE RENEWAL REQUEST FORM]
 
SCHEDULE 3.3.3
RENEWAL REQUEST
 
[ _____________ ], 20[ __ ]

 
NorthMarq Capital, Inc.
3500 American Boulevard West
Suite 500
Bloomington , MN 55431-4435
Attention: Servicing
Attention:

 
Ladies and Gentlemen:
 
Reference is made to that Credit Agreement dated as of November 17, 2008, as
amended (the "Credit Agreement") initially by and between ESSEX CAL-WA, L.P., a
California limited partnership, having an address at 925 East Meadow Drive, Palo
Alto, CA 94303 ("Borrower") and NORTHMARQ CAPITAL, INC., a Minnesota
corporation, having an address at 3500 American Boulevard West, Suite 50Q,
Bloomington, MN 55431-4435 (together with its successors and assigns, "Lender").
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings.
 
I,   [ ________________ ],   the  [ ________________ ]   of    Borrower,    a [
________________ ], do hereby certify on behalf of Borrower as of the date
hereof, as follows:
 
________ Borrower hereby requests Lender to renew the Borrowing Tranche in the
amount of $[ __ ], whose then-current Interest Period will mature on [ ______ ],
[ ______ ].
 
Or
______ Borrower, in accordance with the provisions of the Credit Agreement, will
repay $[__________] of the outstanding principal amount of the Borrowing Tranche
originally funded in the amount of/, whose Interest Period will mature on
[______], [________],  prior to such maturity date, and hereby requests Lender
to renew such Borrowing Tranche in the amount of the remaining principal balance
of such Borrowing Tranche, the remaining principal balance being equal to
$[________].
 
[or

 
Sch. 3.3.3 - 1

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

 
 
_____ Borrower hereby requests Lender to combine two (2) or more Borrowing
Tranches pursuant to the provisions of the Credit Agreement into a single
Borrowing Tranche, specifically Borrower hereby requests that Lender combine the
Borrowing Tranche in the amount of $[______________], whose Interest Period will
mature on [____________], [_______] with the Borrowing Tranche in the amount of
$________________, whose Interest Period will mature on
[_____________],[_______] [add descriptions of additional Borrowing Tranches as
necessary.]
 
1.           The Borrowing Tranche shall bear interest at (check one):
 
_______ Prime Rate*
 
_______ Base Rate
 
  *Prime Rate is available only as specified in the Credit Agreement
 
2.           The Interest Period (if the Base Rate is selected) applicable to
the renewed Borrowing Tranche is (check one):
 
_______ one-month
 
_______ three-month*
 
_______ six-month**
 
_______ twelve-month***

 
 *subject to a [ _______ ] basis point ([ _________ ] ) increase in the Margin
otherwise applicable to such Borrowing Tranche
 
  **subject to a [ _____________ ] basis point- ([ ___________ ]) increase in
the Margin otherwise applicable to such Borrowing Tranche
 
  ***subject to a [ _____________ ] basis point ([ _____________ ]) increase in
the Margin
 
  otherwise applicable to such Borrowing Tranche
 
3.          Borrower will (check one):
 
 
______
Pay all interest due and payable under the requested Borrowing Tranche in
monthly installments pursuant to the terms of the Credit Agreement.

 
 
______
Prepay all interest for such Borrowing Tranche as of the Borrowing Date.

 
4.            The principal amount outstanding under the Credit Agreement on the
date hereof, prior to any advance in response to this request, is $[].
 
5.            If applicable, the Base Rate for the Borrowing Tranche renewed
hereunder shall be [_____________] ([____]%) consisting of a Reference Bills®
Rate/LIBO Rate of [ __________ ] percent ([_____]%) and a Margin of [_____]
([____]%).

 
Sch. 3.3.3 - 2

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

 
 
6.           If applicable (i.e., in the event of the renewal a Base Rate
Borrowing Tranche), the maturity date of the Interest Period of the Borrowing
Tranche requested herein is (choose and complete one of the following):

[_____________ ], 20[ ____________ ] (which is the last day of the Interest
Period, in the event that such date is a Business Day)
 
[ _____________ ], 20[ _____________ ] (which is the Business Day following the
last day
of the Interest Period, in the event that such date is not a Business Day).
 
7.           To the best of Borrower's knowledge and belief following diligent
inquiry, the computations set forth in Paragraphs 12 through 14 as certified by
Servicer are accurate.
 
8.           [Check one of the following:]
 
  _______ No Potential Default or Event of Default has occurred or is continuing
under the Loan Documents; or
 
  _______ No Potential Default or Event of Default, other than Borrower's non-
compliance with Section 2.5.3.2 of the Credit Agreement, has occurred or is
continuing under the Loan Documents, Borrower is otherwise in full compliance
with the terms of the Loan Agreement, and will not increase the outstanding
principal balance of the Loan pursuant to this Renewal Request.
 
9.           All of the other terms and conditions set forth in the Credit
Agreement and the other Loan Documents pertaining to the Loan have been
satisfied.
 
10.           The undersigned is an Authorized Officer of Borrower.
 
11.           Notice of this Loan Request shall be deemed received by Lender
when (i) sent by facsimile to (703) 714-3002 and (ii) verbally confirmed by
telephone call to either (when called in the following order of priority): (1)
primary contact in Loan Accounting, currently Denise Sanchez, ((703) 714-3239),
(2) secondary contact in Loan Accounting, currently Steve Dillon ((703)
714-2691), and (3) Loan Accounting Manager, currently Wendy McLain ((703)
714-2926) or such other names and numbers as Lender may specify upon prior
written Notice to Borrower.
 
[The Renewal Request continues on the following page]

 
Sch. 3.3.3 - 3

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

 
 
IN WITNESS WHEREOF, the undersigned has executed this Certificate this [_____]
day of [_____________], [_____].

 
BORROWER:
                 
ESSEX CAL-WA, L.P., a California limited partnership
                 
By:
Essex SPE, LLC, a Delaware limited liability company, its general partner
                   
By:
Essex Portfolio, L.P., a California limited partnership, its sole member
                     
By:
Essex Property Trust, Inc., a Maryland corporation, its general partner
                       
By:
                           
Name:
Title:
 

 
[The Renewal Request continues on the following page]

 
Sch. 3.3.3 - 4

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

 
 
12.           The current Loan to Value Ratio is [_________] ([_____]%), which
is less than or equal to the Maximum Loan to Value Ratio set forth in Section
2.5.3.1 of the Credit Agreement of sixty-five percent (65%), determined as
follows:

 
A.
The current Loan balance
$[___________]
             
B.
The current aggregate Market Value of the Collateral Pool
$[___________]
             
C.
Item A divided by Item B and then multiplied by 100% equals the Loan to Value
Ratio
[___________]%
 

 
13.            The current Facility Debt Service Coverage Ratio is ____________
: 1.00, which (check one):
 
_______ is less than 1.60 : 1.00, or
 
_______ is greater than or equal to 1.60 : 1.00,
 
determined as follows:

 
A.
Net Operating Income of the Collateral Pool Properties determined by Lender
$[____________]
       
 
   
B.
Facility Debt Service (as defined in the Credit Agreement)
$[____________]
       
 
   
C.
Item A divided by Item B equals the Facility Debt Service Coverage Ratio
[_____________]%
 

 
14.              Following the renewal of the Borrowing Tranche for the Interest
Period requested herein, the Facility Debt Service Coverage Ratio will be_____:
1.00, which (check one):
 
_______ is less than 1.60 : 1.00, or
 
_______ is greater than or equal to 1.60 : 1.00, determined as follows:

 
A.
Net Operating Income of the Collateral Pool Properties as determined by Lender
$[____________]
             
B.
Facility Debt Service (as defined in the Credit Agreement)
$[____________]
             
C.
Item A divided by Item B equals the Facility Debt Service Coverage Ratio
[_____________]%
 

 
Sch. 3.3.3 - 5

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Servicer hereby certifies (i) to the accuracy of each of the mathematical
computations set forth in paragraphs 12 through 14 above (acknowledging that
Servicer has relied, with Lender's consent and without independent verification
thereof, on the Net Operating Income and Market Value(s) prepared by Lender),
and (ii) to the best of its knowledge and belief, that all statements made by
Borrower herein are true and accurate in all material respects.
 

 
SERVICER:
       
NORTHMARQ CAPITAL, INC., a Minnesota corporation
             
By:.
     
Name: Paul W. Cairns Title: Senior Vice President

 
 
Sch. 3.3.3 - 6

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SCHEDULE 4.4
 
BASE RATE BORROWING TRANCHE PREPAYMENT FEE
 
1.           Definitions - As used in this Schedule 4.4, the words and terms set
forth below shall have the meanings set forth below. Capitalized terms used in
this Schedule 4.4 and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
 
 
(a)
Interest Period Balance: shall mean the number of days remaining in the Interest
Period for the applicable Borrowing Tranche as of the Prepayment Date.

 
 
(b)
Reference BillsSM Rate: shall mean that portion of the Base Rate for the
applicable Borrowing Tranche attributable to the Reference BillsSM Rate for the
applicable Borrowing Tranche, expressed as a decimal calculated to four (4)
digits.

 
 
(c)
Prepayment Date: shall mean (i) in the case of a prepayment under Section 4.3.1
of the Credit Agreement, the date on which the prepayment is made or (ii) in any
other case in which a Prepayment Fee is payable pursuant to the terms of the
Credit Agreement, the date on which Lender accelerates the unpaid principal
balance of the Revolving Credit Note.

 
 
(d)
Reinvestment Rate: shall mean, as of the date that is five (5) Business Days
prior to the Prepayment Date, the Reference BillsSM Rate for the Reference
BillsSM which matures as close as possible, but not prior to, the maturity date
of the Interest Period for the applicable Borrowing Tranche, expressed as a
decimal calculated to four (4) digits.

 
2.           Determination of the Prepayment Fee - The Prepayment Fee payable
under Section 4.4 of the Credit Agreement applicable to any particular Borrowing
Tranche shall be equal to the greater of the amounts obtained by the formulae
set forth in subparagraphs (a) and (b) below.
 
 
 
(a)
the amount obtained by:

 
(i) 
 dividing:

(A) 
 the Interest Period Balance

 
by
 
(B) 
 three hundred and sixty (360) days

 
(ii) 
 then multiplying the figure obtained in (i) above by one percent (1%); and

 
Sch. 4.4 - 1

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(iii)
then multiplying the figure obtained in (ii) above by the amount of principal
being prepaid; or

 
 
(b)
the amount obtained by

 
 
(i)
multiplying

 
 
(A)
the amount of principal being prepaid

 
by
 
 
(B)
the excess (if a positive number) of the Reference BillsSM Rate over the
Reinvestment Rate;

 
 
(ii)
then dividing the figure obtained in (i) above by three hundred and sixty (360)
days; and

 
 
(iii)
then multiplying the figure obtained in (ii) above by the Interest Period
Balance.

 
Notwithstanding the foregoing, if the Reinvestment Rate is greater than or equal
to the Reference BillsSM Rate the fee calculated under this subparagraph (b)
shall equal zero.
 
If at any time a prepayment occurs of a Borrowing Tranche bearing interest at
the LIBO Rate, for purposes of computing the fee payable under this subparagraph
(b), all references in this Schedule 4.4 to Reference BillsSM Rate shall be
deemed to refer to LIBO Rate, as the context requires.
 
Borrower recognizes that prepayment of any amount due under the Revolving Credit
Note, whether voluntary or involuntary resulting from a default by Borrower,
will result in Lender's incurring loss, including reinvestment loss, additional
expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the- extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth above represents a reasonable estimate of the
damages Lender will incur because of a prepayment. Borrower further acknowledges
that the above prepayment premium provisions are a material part of the
consideration for the Loan, and acknowledges that the terms of the Revolving
Credit Note are in other respects more favorable to Borrower as a result of the
Borrower's voluntary agreement to the prepayment premium provisions.
 
Set forth below, for informational purposes only, is an example of the
computation of the Prepayment Fee, based on a hypothetical (i) principal amount
being prepaid of Five Million and NO/100 Dollars ($5,000,000.00), (ii) Interest
Period Balance of fifteen (15) days, (iii) Reference Bills Rate of 2.75% and
(iv) Reinvestment Rate of 2.25%. Based on such hypothetical amounts:

 
Sch. 4.4 - 2

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(a) 
 the computation set forth in Section 2(a) above is as follows:

 
 
(i)
the Interest Period Balance (15 days) divided by three hundred sixty (360) days
yields an amount equal to approximately .041666;

 
 
(ii)
one percent (1%) of the figure obtained in (i) above (approximately .041666) is
an amount equal to approximately .0004166;

 
 
(iii)
the product of the figure obtained in (ii) above (approximately .0004166) times
the amount of principal being prepaid ($5,000,000.00) is an amount equal to
approximately $2,083.33.

 
(b) 
the computation set forth in Section 2(b) above is as follows:

 
 
(i)
the product of the principal being prepaid ($5,000,000.00) times the excess of
the Reference Bills Rate (2.75%) over the Reinvestment Rate (2.25%) (such excess
.5%) is an amount equal to $25,000.00;

 
 
(ii)
the figure obtained in (i) above ($25,000.00) divided by 360 days is an amount
equal to approximately 69.4444;

 
 
(iii)
the product of the figure obtained in (ii) above (approximately 69.4444) times
the Interest Period Balance (15 days) is an amount equal to approximately
$1,041.67.

 
As the figure obtained under the calculation set forth in (a) ($2,083.33)
exceeds the figure obtained under the calculation set forth in (b) ($1,041.67),
the Prepayment Fee under this example would be equal to the figure obtained in
(a) or $2,083.33.
 
 
 Sch. 4.4 - 3

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