Exhibit 10.5

LOAN AGREEMENT
between
IMH HOLDINGS 2, LLC, a Delaware limited liability company,
Collectively, AS BORROWER
and
CALMWATER CAPITAL 3, LLC,
a California limited liability company
AS LENDER
Executed as of January 23, 2015

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Exhibit 10.5

LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is dated as of January 23, 2015, by and
between IMH HOLDINGS 2, LLC, a Delaware limited liability company (“Borrower”),
and CALMWATER CAPITAL 3, LLC, a California limited liability company (together
with its successors and assigns, "Lender").
R E C I T A L S
A.    Borrower is the sole member of (i) the owner in fee simple of each land in
Arizona, Texas, California, Minnesota and New Mexico described in Exhibit A
attached hereto and incorporated herein by reference (individually and
collectively, as the context may require, the "Real Property"), which Real
Property is more particularly described in Exhibits A-8, A-14 through A-17,
A-20, A-22, and A-24 through A-28 attached hereto and incorporated herein by
reference and (ii) the holder of the first priority mortgages and notes secured
by the applicable real property described in Exhibits A-11 and A-12 attached
hereto (collectively, the “Asset Loans”), which Loans are evidenced and secured
by the loan documents described Exhibits A-11 and A-12 (collectively, the “Asset
Loan Documents”). The "Improvements" referenced in the Security Instrument
(defined below) are collectively referred to herein as the "Improvements". As
used herein, the term "Property" shall individually and collectively mean, as
the context may require, each Real Property and the Improvements thereon, all
related personal property, and all other "Property" described in each applicable
Security Instrument. The Properties and the Loans are collectively referred to
herein as the “Assets”.
B.    Borrower has applied to Lender for a loan in the amount of up to FOUR
MILLION, THREE HUNDRED EIGHTY-FIVE THOUSAND AND NO/100 DOLLARS ($4,385,000.00)
(the "Loan") for refinancing the Assets and for certain costs related thereto,
and Lender is willing to make the Loan on the terms and conditions hereinafter
set forth. The Loan is evidenced by, among other things, that certain Promissory
Note, dated as of the date hereof made by Borrower in the original principal
amount of $4,385,000.00 and payable to Lender (such Promissory Note, together
with all amendments, modifications and/or supplements thereto are hereinafter
collectively referred to as the "Note"). The terms and provisions of the Note
are hereby incorporated by reference in this Agreement.
C.    Borrower’s obligations under the Loan will be secured by, among other
items, (i) each first priority Deed of Trust, Security Agreement and Financing
Statement and Mortgage, Security Agreement and Financing Statement dated as of
the date hereof, from the applicable Asset Guarantor to the trustee named
therein for the benefit of Lender, or to Lender, as the case may be, encumbering
the Properties, and granting Lender a first priority lien in the Properties
(collectively, the "Real Property Security Instrument") and (ii) the Collateral
Security Agreement dated as of the date hereof from Borrower to Lender and each
assignment of the Asset Loan Documents (collectively, the "Asset Loan Security
Instrument" and together with the Real Property Security Instrument,
collectively, the “Security Instrument”).
NOW, THEREFORE, Borrower and Lender agree as follows:

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ARTICLE 1.
DEFINITIONS
1.1    INCORPORATION OF EXHIBITS AND SCHEDULE. Exhibits A through F and
Schedules 1-4 to this Agreement, attached hereto are incorporated in this
Agreement and expressly made a part hereof by this reference.
1.2    DEFINED TERMS. The following capitalized terms generally used in this
Agreement shall have the meanings defined or referenced below. Certain other
capitalized terms used only in specific sections of this Agreement are defined
in such sections.
"ADA" means the Americans with Disabilities Act, 42 U.S.C. §§ 12101, et. seq. as
now or hereafter amended or modified.
"Affiliate" of any Person means (a) any other Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such Person, (b) any other Person with five
percent (5%) or more of the equity interest of which is held beneficially or of
record by such Person (in each case, directly or indirectly), (c) with respect
to Borrower, any Asset Guarantor or any Guarantor, any partner or member in
Borrower, any Asset Guarantor or any Guarantor (other than partners or members
that obtain an interest in Borrower or Guarantor in violation of the terms of
the Loan Documents), and (d) any Guarantor, any Asset Guarantor or Borrower.
"Affiliate Fees" shall have the meaning ascribed to such term in
Section 3.1.1(z) hereof.
"Agreement" shall have the meaning ascribed to such term in the preamble hereto.
“Apple Valley Property” shall mean the Real Property described on Exhibit A-7
attached hereto and all Improvements and Property relating thereto.
"Applicable Laws" shall have the meaning ascribed to such term in Section 6.18
hereof.
"Approved Budget" shall have the meaning ascribed to such term in Section 10.6
hereof.
"Asset Borrowers" shall have the meaning ascribed to such term in Section 4.1
hereof.
“Asset Guarantor” shall mean, individually, collectively, jointly and severally,
IMH SPECIAL ASSET NT 175-IGH, LLC, an Arizona limited liability company (“IMH
175”), AZ-HAVASU, LLC, an Arizona limited liability company (“AZ Havasu”),
AZ-HAVASU SN 2.08, LLC, an Arizona limited liability company (“AZ 2.08”),
AZ-HAVASU GOLDEN VALLEY, LLC, an Arizona limited liability company (“AZ Golden
Valley”), AZ-HAVASU KINGMAN, LLC, an Arizona limited liability company (“AZ
Kingman”), NM EMERALD, LLC, a New Mexico limited liability company (“NM
Emerald”), IMH SPECIAL ASSET NT 118, LLC, an Arizona limited liability company
(“IMH 118”), IMH SPECIAL ASSET NT 176, LLC, an Arizona limited liability company
(“IMH 176”), IMH SPECIAL ASSET NT 162, LLC, an Arizona limited liability company
(“IMH 162”), IMH SPECIAL ASSET NT 194, LLC, an

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Arizona limited liability company (“IMH 194”), IMH SPECIAL ASSET NT 102, LLC, an
Arizona limited liability company (“IMH 102”), IMH SPECIAL ASSET NT 228, LLC, an
Arizona limited liability company (“IMH 228”), IMH SPECIAL ASSET NT 198, LLC, an
Arizona limited liability company (“IMH 198”), HEBER 20, LLC, an Arizona limited
liability company.”
"Asset Loan" shall have the meaning ascribed to such term in Recital A hereof.
"Asset Loan Documents" shall have the meaning ascribed to such term in Recital A
hereof.
"Assets" shall have the meaning ascribed to such term in Recital A hereof.
“BACA” shall mean that certain Blocked Account Control Agreement more
specifically identified in Exhibit B attached hereto.
"Bankruptcy" means with respect to any Person, if such Person (a) makes an
assignment for the benefit of creditors, (b) files a voluntary petition in
bankruptcy, (c) is adjudged a bankrupt or insolvent, or has entered against
itself an order for relief, in any bankruptcy or insolvency proceeding, (d)
files a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, (e) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against it in
any proceeding of this nature, (f) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Person or of all or any
substantial part of its properties, or (g) if 120 days after the commencement of
any proceeding against the Person seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
statute, law or regulation, if the proceeding has not been dismissed, or if
within 90 days after the appointment, without such Person’s consent or
acquiescence, of a trustee, receiver or liquidator of such Person or of all or
any substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the appointment
is not vacated.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 USC § 101‑1330) as
now or hereafter amended or recodified.
"Borrower" shall have the meaning ascribed to such term in the preamble hereto.
"Business Day" means a day of the week (but not a Saturday, Sunday or public
holiday on which the banking institutions in Los Angeles, California are
authorized or required by law to be closed) on which the offices of Lender are
open to the public for carrying on substantially all of Lender’s business
functions. Unless specifically referenced in this Agreement as a Business Day,
all references to "days" shall be to calendar days.
"Capital Improvement Budget" shall mean the capital budget attached hereto as
part of Exhibit C.

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"Carveout Guaranty" means the Indemnity and Guaranty Agreement dated as of the
date hereof, made by Guarantor in favor of Lender, as modified, amended and/or
supplemented from time to time.
“Cash Collateral Account” shall have the meaning ascribed to such term in
Section 2.4(b) hereof.
“Cash Collateral Agreement” means an agreement by and among Borrower, Lender and
a bank reasonably acceptable to Lender regarding the handling of funds in the
Cash Collateral Account and more specifically identified in Exhibit B attached
hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
“Collateral” means any property, real or personal, tangible or intangible, now
or in the future securing the Loan and/or Borrower’s other obligations to
Lender, including but not limited to the property and interests covered by the
Loan Documents.
"Control" means the possession, directly or indirectly, of the power to cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, family relationship or otherwise.
Controlled and Controlling shall have correlative meanings.
"Default" means an event, omission or condition, that, with the giving of notice
or lapse of time or both, would constitute an Event of Default.
"Effective Date" means the first date Lender disburses any funds into escrow
(and, in all events, interest or amounts funded and deemed funded shall begin to
accrue interest on the date Lender disburses any funds into escrow).
"Environmental Indemnity Agreement" means that certain Hazardous Substances
Indemnity Agreement dated as of the date hereof, executed by Borrower, Asset
Guarantors and Guarantor, collectively, in favor of Lender , as modified,
amended and/or supplemented from time to time.
"Environmental Laws" shall have the meaning ascribed to such term in
Section 7.1(a) hereof.
"Environmental Report" means that certain (i) Phase I Environmental Report dated
December 29, 2014 and prepared by AEI Consultants as Project No. 337753, with
respect to the Property described in Exhibit A-14 for the benefit of Lender, and
(ii) Phase I Environmental Report dated December 29, 2014 and prepared by AEI
Consultants as Project No. 337756, with respect to the Property described in
Exhibit A-8 for the benefit of Lender.
"ERISA" means the Employee Retirement Income Security Act of 1974, and any
regulations issued pursuant thereto, as now or from time to time hereafter in
effect.
"Event of Default" shall have the meaning ascribed to such term in Section 11.1
hereof.

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“Force Majeure” means a delay or delays caused by unusually adverse weather
conditions, earthquake or other acts of God, strikes, lockouts, acts of public
enemy, riots or insurrections or any other unforeseen circumstances or events
beyond the control of Borrower (except financial circumstances or events or
matters which may be resolved by the payment of money).
"GAAP" means generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.
"Governmental Authority" means any federal, state, county or municipal
government, or political subdivision thereof, any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, or any court or administrative tribunal.
"Gross Operating Income" shall have the meaning ascribed to such term in
Section 10.5(a).
"Gross Rents" means an amount equal to the rent payments received from the
Property.
"Guarantor" means IMH Financial Corporation, a Delaware corporation, and with
respect to any other guaranty now or hereafter executed in connection with the
Loan, any other Person (other than an Asset Guarantor) who, or which, in any
manner, is or becomes obligated to Lender thereunder (collectively or jointly
and severally as the context thereof may suggest or require).
"Hazardous Substances" shall have the meaning ascribed to such term in
Section 7.1(a) hereof.
"Improvements" shall have the meaning ascribed to such term in Recital A hereof.
"Leases" means any lease, occupancy agreement, sublease or other agreement
creating possessory rights in all or any portion of any Property.
"Lender" shall have the meaning ascribed to such term in the preamble hereto.
"Lender Expenses" shall have the meaning ascribed to such term in Section 2.3(a)
hereof.
"Loan" shall have the meaning ascribed to such term in Recital B hereof.
"Loan Commitment Fee" shall have the meaning ascribed to such term in the Note.
"Loan Documents" means those documents, as hereafter modified, amended and/or
supplemented from time to time, properly executed and in recordable form, if
necessary, listed in Exhibit B hereof as Loan Documents.
“Loan-to-Value Ratio” means the ratio of (a) the Outstanding Principal Balance
as of the date in question, to (b) the appraised value of the Assets as of such
date, as determined by Lender

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in its sole but good faith discretion whether pursuant to its underwriting
practices or an updated appraisal, which determination shall be conclusive
absent manifest error.
"Lockbox Agreement" means that certain Lockbox and Security Agreement, between
Borrower and Lender of even date herewith.
"Material Agreements" shall mean (i) each Material Lease, (ii) each management,
brokerage or leasing agreement (other than the Property Management Agreement),
and (iii) any cleaning, maintenance, service or other contract or agreement of
any kind (other than the Leases) of a material nature (materiality for purposes
of this definition shall mean any contract with a term longer than one year and
providing for payment of more than Fifty Thousand Dollars ($50,000)), in either
case relating to the ownership, development, leasing, management, use,
operation, maintenance, repair, improvement or restoration of any Property,
whether written or oral.
“Material Lease” shall mean any lease for more than five thousand (5,000)
rentable square feet of space or having gross rent of $1.65 per square foot or
more.
"Maturity Date" shall have the meaning ascribed to such term in the Note.
"Net Sale Proceeds" means, in connection with a partial release pursuant to and
in strict accordance with Section 8.2 below, gross sale proceeds less
arms‑length brokerage fees, reasonable attorney’s fees and closing charges
payable to third parties not affiliated with Borrower and customary closing
expenses and prorations, which in no event shall exceed in the aggregate more
than seven percent (7.0%) of the gross sales price for that portion of the
Property being sold and partially released from the Loan Documents, unless
otherwise consented to by Lender in the exercise of its sole, but good faith
discretion, but without deduction for taxes of any kind (except real property
taxes and documentary transfer taxes) of Borrower (or any Affiliate thereof),
whether actually paid or deducted pursuant to prorations.
“Net Operating Income” shall mean: an amount equal to the Gross Rents and any
other income generated from the Property for the period being measured, minus
the sum of (x) an adjustment for vacancy/collection losses with respect to the
Oasis Property only equal to the greater of (i) five percent (5%), or (ii) a
higher vacancy rate as determined by Lender in its reasonable discretion based
upon the then prevailing vacancy rates in the applicable sub-market for a
similar property at the time of such determination); and (y) the Operating
Expenses (defined below) for the period being measured; and (z) an amount for
management expenses not less than the lesser of (aa) four percent (4%) of the
amount of Gross Rents and any other income generated from the property, reduced
by any adjustment for vacancy/collection losses with respect to the Oasis
Property, or (bb) the actual management expenses of the Property as of the date
of determination.
"Note" shall have the meaning ascribed to such term in Recital B hereof.
"OFAC" shall have the meaning ascribed to such term in Section 6.18 hereof.

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"OFAC Laws and Regulations" shall have the meaning ascribed to such term in
Section 6.18 hereof.
"Operating Agreements" shall mean, collectively, any covenants, restrictions or
agreements of record relating to the construction, operation or use of the
Assets.
"Operating Budget" shall have the meaning ascribed to such term in Section 10.6
hereof.
"Operating Expenses" means for purposes of calculating Net Operating Income all
actual operating expenses and disbursements of every kind, nature or description
actually paid or due and payable (and accrued even if not payable in the case of
real property taxes and insurance premiums) during (or projected by Lender to be
incurred for) the period being measured, including, without limitation, those
for leasing, management, operation, maintenance, repairs, annual taxes, bond
assessments, ground lease payments, insurance, utilities and other annual
expenses (but not tenant retrofit and lease commission costs) actually expended,
on a cash basis. Operating Expenses shall not include any interest or principal
payments on the Loan or any allowance for depreciation nor shall it include
asset management fees or other fees payable under the operating agreement of
Borrower. Operating Expenses shall not include any management expenses to the
extent that such management expenses have already been deducted from Net
Operating Income pursuant to the definition of Net Operating Income contained
herein.
"Outstanding Principal Balance" means the then outstanding principal balance of
the Loan.
"Participant" shall have the meaning ascribed to such term in Section 12.13
hereof.
"Patriot Act" shall have the meaning ascribed to such term in Section 6.18
hereof.
"Payment Date" shall have the meaning ascribed to such term in the Note.
"Permitted Operating Expenses" shall have the meaning ascribed to such term in
Section 10.5(b) hereof.
"Person" means any individual, corporation, partnership, limited liability
company, trust, unincorporated organization or other entity.
"Prescribed Laws" shall have the meaning ascribed to such term in Section 6.18
hereof.
"Property" shall have the meaning ascribed to such term in Recital A hereof.
"Property Management Agreement" means, individually and collectively as the
context may require, a Qualified Replacement Property Management Agreement.
"Property Manager" means the manager under any Property Management Agreement,
and any successor property manager for the Properties as expressly permitted
pursuant to this Agreement.

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"Qualified Replacement Property Management Agreement" shall mean a leasing and
management agreement with a Qualified Replacement Property Manager, which
leasing and management agreement shall be reasonably acceptable to Lender in
form and substance (such approval not to be unreasonably withheld by Lender).
"Qualified Replacement Property Manager" means a reputable and experienced
property management organization/leasing agency possessing experience in
managing and leasing properties similar in size, scope, use and value as the
subject Property, as approved by Lender in its reasonable discretion.
"Real Property" shall have the meaning ascribed to such term in Recital A
hereof.
"Released Property" shall have the meaning ascribed to such term in Section 8.2
hereof.
“REO Loan #1” shall mean the $24,365,000 loan from Lender to REO Loan #1
Borrower.
“REO Loan #1 Assets” shall mean the “Assets” as defined in the REO Loan #1 Loan
Agreement.
“REO Loan #1 Borrower” shall mean AZ-WATERS EDGE, LLC, an Arizona limited
liability company, OASIS INDIAN BEND LLC, a Delaware limited liability company,
HL NEWCO, LLC, a Delaware limited liability company, NT 233 OAK CREEK LOTS, LLC,
an Arizona limited liability company, CA-DALEY, LLC, an Arizona limited
liability company, IMH LR REAL ESTATE, LLC, an Arizona limited liability
company, IMH LR CLUBHOUSE, LLC, an Arizona limited liability company, SOUTHWEST
ACQUISITIONS, LLC, a Delaware limited liability company, IMH SPECIAL ASSET NT
139, LLC, a Delaware limited liability company, BUENA YUMA, LLC, an Arizona
limited liability company, and IMH SPECIAL ASSET NT 140, LLC, an Arizona limited
liability company.
“REO Loan #1 Loan Agreement” shall mean that certain Loan Agreement dated as of
even date herewith by and between Lender and REO Loan #2 Borrower with respect
to REO Loan #1.
“REO Loan #1 Loan Documents” shall mean, individually and collectively, any and
all documents evidencing or securing REO Loan #1, each as modified, amended,
and/or supplemented from time to time in accordance with the terms hereof.
“REO Loan #2 Security Agreement” shall mean the “Security Instrument” as defined
in the REO Loan #2 Loan Agreement.
"Required Work" shall have the meaning ascribed to such term in Section 2.5.
"Reserves" means, collectively, any reserves established under the Loan
Documents.

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“Sardinia Agricultural Lease” shall mean that certain Agricultural Lease
intended to be executed by and between IMH Special Asset NT 176, LLC, as
landlord, and Ag Tech Farms Incorporated, as tenant, a copy of which has been
delivered to Lender.
“Sardinia Tenant” means Ag Tech Farms Incorporated, tenant under the Sardinia
Agricultural Lease.
"Security Instrument" shall have the meaning ascribed to such term in Recital C
hereof.
"Structural Engineering Report" shall have the meaning given to such term in
Section 3.1.1(h) hereof.
"Subdivision Map" shall have the meaning ascribed to such term in Section 9.5
hereof.
"Survey" shall have the meaning ascribed to such term in Section 3.1.1(k)
hereof.
"Tax and Insurance Reserve" shall have the meaning ascribed to such term in
Section 2.4(a) hereof.
"Title Company" means each title insurance company approved by Lender that will
issue the Title Policy for each Property.
"Title Policy" means an ALTA extended coverage lender’s title policy and UCC+
title policy issued by Title Company insuring the lien of the Security
Instruments in the full maximum principal amount of the Loan subject only to
such exceptions approved by Lender and including such endorsements as are
required by Lender.
"Transfer" means the sale, transfer, hypothecation, encumbrance, mortgage,
conveyance, lease, alienation, assignment, pledge, disposition, divestment, or
leasing with option to purchase, or assignment of any Asset or Asset Guarantor,
or any portion thereof or interest therein (whether direct or indirect, legal or
equitable, including the issuance, sale, assignment, pledge, alienation,
conveyance, divestment, transfer, disposition, hypothecation, mortgage or
encumbrance of any direct or indirect ownership interest in Borrower or in any
entity having an ownership interest in Borrower, whether direct or indirect) (or
entering into any agreement or contract to do any of the foregoing that is not
conditioned on compliance with the terms of the Loan Documents), or undertaking,
suffering or causing any of the foregoing to occur voluntarily, involuntarily or
by operation of law.
"UCC Searches" shall have the meaning ascribed to such term in Section 3.1.1(t).
ARTICLE 2.
LOAN
2.1    LOAN. By and subject to the terms of this Agreement, Lender agrees to
lend to Borrower and Borrower agrees to borrow from Lender the Loan in the
principal sum of FOUR MILLION, THREE HUNDRED EIGHTY-FIVE THOUSAND AND NO/100
DOLLARS

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($4,385,000.00), said sum to be evidenced by the Note. The Note shall be
secured, in part by, among other things, the Security Instrument encumbering the
Assets. Amounts disbursed to or on behalf of Borrower pursuant to the Note shall
be used to refinance the Assets and for such other purposes and uses as may be
permitted under this Agreement and the other Loan Documents.
2.2    MATURITY DATE. On the Maturity Date, all sums due and owing under this
Agreement and the other Loan Documents shall be repaid in full. All payments due
to Lender under this Agreement, whether at the Maturity Date or otherwise, shall
be paid in immediately available funds.
2.3    FUNDING OF LOAN. Subject to the terms, provisions and conditions of this
Agreement and the other Loan Documents, including, without limitation,
satisfaction of the conditions precedent set forth in Section 3.1.1 hereof, on
the Effective Date, Borrower agrees to borrow from Lender, and Lender shall
disburse to Borrower from the proceeds of the Loan the sum of FOUR MILLION THREE
HUNDRED EIGHTY-FIVE THOUSAND AND NO/100 DOLLARS ($4,385,000.00) which shall be
used for paying (A) the cost of paying off any existing financing secured by an
encumbrance on the Assets, (B) out‑of‑pocket fees, costs and expenses incurred
by Lender in connection with the Loan transaction, including, without
limitation, all appraisal, title, escrow, engineering, environmental and
attorneys’ fees and expenses (collectively, the "Lender Expenses"), (C) the Loan
Commitment Fee, (D) establishment of the Tax and Insurance Reserve and (E) fees
payable to the broker named in Section 12.27 of this Agreement. Borrower hereby
authorizes Lender to disburse on the Effective Date such Loan proceeds directly
to Lender as are necessary to pay the Lender Expenses and the Loan Commitment
Fee.
2.4    ADDITIONAL RESERVES.
(a)    Tax and Insurance Impounds. Tax and insurance reserves shall be
maintained by a monthly deposit by Borrower of one-twelfth (1/12th) of the
annual real property taxes and assessments for the Properties and one-twelfth
(1/12th) of the annual insurance premiums payable for the Properties, each as
reasonably estimated by Lender (the "Tax and Insurance Reserve").
Notwithstanding the foregoing, on the Effective Date, the Tax and Insurance
Reserve shall be funded in an amount which, when the required monthly payments
are added thereto, will be sufficient to pay such charges when due. Borrower
shall provide to Lender a copy of the applicable invoices at least thirty (30)
days prior to (i) the date such Taxes become delinquent and (ii) the date such
insurance premiums are due. If Lender at any time determines that any amounts
paid into the Tax and Insurance Reserve are insufficient for the payment in full
of such taxes, assessments, levies and/or insurance premiums, Lender shall
notify Borrower of the increased amounts required to pay all amounts due,
whereupon Borrower shall pay (or cause to be paid) to Lender within thirty (30)
days thereafter the additional amount as stated in Lender’s notice.
So long as no Default (other than an Unintentional Non-Monetary Default (as
hereinafter defined) or Event of Default has occurred and is continuing, all
sums in the Tax and Insurance Reserve shall be held by Lender in the Tax and
Insurance Reserve to pay annual real property

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taxes and assessments for the Properties when necessary so that the maximum tax
discount available may be obtained with regard to the Properties and to pay
insurance premiums for the Properties in one installment before the same become
delinquent. Borrower shall be responsible for ensuring the receipt by Lender, at
least thirty (30) days prior to the respective delinquency date for Taxes and
due date for payment of insurance premiums, of all bills, invoices and
statements for all real property taxes and assessments and insurance premiums to
be paid from the Tax and Insurance Reserve, and, so long as no Default (other
than an Unintentional Non-Monetary Default) or Event of Default hereunder or
under any other Loan Document has occurred and is continuing, Lender shall pay
the governmental authority or other party entitled thereto directly, to the
extent funds are available for such purpose in the Tax and Insurance Reserve. In
making any payment from the Tax and Insurance Reserve, Lender shall be entitled
to rely on any bill, statement or estimate procured from any public office or
insurance company or agent without any inquiry into the accuracy of such bill,
statement or estimate and without any inquiry into the accuracy, validity,
enforceability or contestability of any tax, assessment, valuation, sale,
forfeiture, tax lien or title or claim thereof. The Tax and Insurance Reserve
shall not, unless otherwise explicitly required by applicable law, be or be
deemed to be escrow or trust funds, but, at Lender’s option and in Lender’s
discretion, may either be held in a separate account or be commingled by Lender
with the general funds of Lender or Lender’s loan servicer. Interest (if any) on
the funds contained in the Tax and Insurance Reserve shall accrue for the
benefit of and belong to Lender and shall be paid immediately to Lender. No
interest on funds contained in the Tax and Insurance Reserve shall be paid by
Lender to Borrower. The Tax and Insurance Reserve is solely for the protection
of Lender and entails no responsibility on Lender’s part beyond the payment of
taxes, assessments and insurance premiums following receipt of bills, invoices
or statements therefor in accordance with the terms hereof and beyond the
allowing of due credit for the sums actually received. Upon assignment of the
Loan by Lender, any funds in the Tax and Insurance Reserve shall be turned over
to the assignee and any responsibility of Lender, as assignor, with respect
thereto shall terminate. If the total funds in the Tax and Insurance Reserve
shall exceed the amount of payments actually applied by Lender for the purposes
of the Tax and Insurance Reserve, such excess shall, at the option of Lender,
either be credited by Lender on subsequent payments to be made hereunder or
refunded to Borrower. If, however, the Tax and Insurance Reserve shall not
contain sufficient funds to pay the sums required when the same shall become due
(with respect to insurance premiums) or delinquent (with respect to Taxes),
Borrower shall, within ten (10) days after receipt of written notice thereof,
deposit with Lender the full amount of any such deficiency. If Borrower shall
fail to deposit with Lender the full amount of such deficiency as provided
above, such failure shall constitute an Event of Default and, without limiting
Lender’s other rights and remedies by reason thereof, Lender shall have the
option, but not the obligation, to make such deposit and all amounts so
deposited by Lender, together with interest thereon at the Default Interest Rate
from the date deposited by Lender until actually paid by Borrower, shall be
immediately paid by Borrower on demand and shall be secured by the Security
Instrument and by all of the other Loan Documents securing all or any part of
the indebtedness evidenced by the Note. Upon the occurrence and during the
continuance of an Event of Default, Lender may, but shall not be obligated to,
to the extent permitted by law, apply at any time the balance then remaining in
the Tax and Insurance Reserve against the indebtedness secured by the Security
Instrument in whatever order Lender shall subjectively determine. No such
application of the Tax and

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Insurance Reserve shall be deemed to cure any Default or Event of Default
hereunder. Upon full payment of the indebtedness secured by the Loan Documents
in accordance with its terms or at such earlier time as Lender may elect, the
balance of the Tax and Insurance Reserve then in Lender’s possession shall be
paid over to Borrower and no other party shall have any right or claim thereto.
“Unintentional Non-Monetary Default” means an unintentional default hereunder or
under the other Loan Documents for a reason other than Borrower’s failure to pay
when due any sums payable under the Note or any of the other Loan Documents,
which default Borrower has commenced to cure and will cause to be cured within
the cure periods provided under the Loan Documents.
(b)    Cash Collateral Account. If during the Early Prepayment Period (as
defined in the Note) (i) any Asset Guarantor shall sell any Asset to a third
party that is not an Affiliate of Borrower, any Asset Guarantor or Guarantor in
an arms-length transaction, all in accordance with the provisions of Section 8.2
below and such Asset is released from the lien of the Loan Documents, or (ii) if
any payment of principal is received by any Asset Guarantor or Borrower under
any of the Asset Loans, then the Net Sales Proceeds of the sale under clause (i)
immediately above and/or the amounts received under clause (ii) immediately
above, as applicable, shall be deposited into an account to be established by
Borrower (the “Cash Collateral Account”) and governed by the Cash Collateral
Agreement. So long as there is no Default or Event of Default continuing and
Lender has approved (in Lender’s sole and absolute discretion) the New Asset (as
defined below), Borrower shall have the right to apply the funds in the Cash
Collateral Account for making new, first priority mortgage loans (the “New
Asset”); provided, however, that the amount available for disbursement from the
Cash Collateral Account for each New Asset shall not exceed forty percent (40%)
of the amount advanced by Borrower for such New Asset. Lender may approve such
New Asset in Lender’s sole and absolute discretion and thereafter, concurrently
with any disbursement of any amounts from the Cash Collateral Account, the New
Asset must be properly pledged to Lender in the same manner as the existing
Asset Loans, in order for Borrower to receive any such disbursement. Borrower
shall deliver a request for disbursement to Lender, at least twenty-one (21)
days prior to the requested date of funding, together with all information
necessary for Lender to evaluate the New Asset (similar to the conditions set
forth in Section 3.1). Interest (if any) on the funds contained in the Cash
Collateral Account shall accrue for the benefit of Borrower and shall be added
to the Cash Collateral Account for use as provided herein. If there is an Event
of Default, Lender may, but shall not be obligated to, exercise its remedies
under the Cash Collateral Agreement and the other Loan Documents. At any time,
and in its sole discretion, Borrower may elect to apply all or any portion of
the funds held in the Cash Collateral Account as a partial repayment of the
Loan, and once paid, such amounts shall not be re-advanced to Borrower.
Notwithstanding anything to the contrary set forth in this Agreement or the
other Loan Documents, this Section 2.4(b) shall be of no force or effect unless
and until Borrower, Lender and a bank acceptable to Lender in its reasonable
discretion shall have entered into Cash Collateral Agreement in form and
substance reasonably acceptable to Lender.
2.5    REQUIRED WORK. Any improvements required to be performed under this
Agreement or paid for under this Agreement ("Required Work") (including, without
limitation, all work required under Section 9.12 hereof) shall be completed in a
lien-free and good and

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workmanlike manner as soon as practicable and in strict compliance with the term
of the Loan Documents. The Required Work as set forth on Exhibit E shall be
completed by the completion dates set forth therein, provided, however, such
completion dates shall be extended for reasons of Force Majeure and provided
further and notwithstanding anything to the contrary contained herein, with
respect to Borrower seeking entitlements as indicated in such Exhibit E,
Borrower shall have the right, in its sole discretion, to abandon its efforts to
obtain such entitlements, and once abandoned, such entitlements shall not be
deemed Required Work (provided that Borrower shall remain responsible for, and
shall pay, all consultants, contractors and third parties providing services in
connection with such entitlements). Borrower shall provide written notice to
Lender if and when it elects to so abandon any such entitlement efforts. Without
limitation, all Required Work shall comply with all applicable laws, ordinances,
rules and regulations of all Governmental Authorities having jurisdiction over
the applicable Property and applicable insurance requirements, including
applicable building codes, special use permits, environmental regulations, and
requirements of insurance underwriters. If Lender disapproves, in its reasonable
judgment, any portion of the construction or equipping of any Property,
Borrower, within ninety (90) days after such disapproval, shall commence to
correct the condition so disapproved, and thereafter will diligently complete
such correction. Borrower agrees that all materials contracted or purchased for
construction of any Property and all labor hired or contracted for with respect
to any construction and paid for with proceeds of the Loan will be used and
employed solely on such Property and for no other purpose.
ARTICLE 3.
DISBURSEMENT
3.1    CONDITIONS PRECEDENT TO DISBURSEMENTS.
3.1.1    Lender’s obligation to make the initial disbursement under the Loan
Documents shall be subject to satisfaction of following conditions precedent by
not later than the date hereof:
(a)    No Default or Event of Default. There exists no Default or Event of
Default.
(b)    Loan Documents. Lender shall have received all Loan Documents, other
documents, instruments, policies, and forms of evidence or other materials
requested by Lender under the terms of this Agreement or any of the other Loan
Documents.
(c)    Security Instrument. Each Security Instrument is a valid lien upon the
applicable Assets and is prior and superior to all other liens and encumbrances
thereon except those approved by Lender in writing.
(d)    Representations and Warranties True at Closing. The representations and
warranties contained in Article 6 of this Agreement or otherwise made by or on
behalf of Borrower in any of the Loan Documents or in any certificate, written
statement or other writing given in connection with the Loan (including, but not
limited to, all financial and operating

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statements) shall be true and correct in all material respects on and as of the
Effective Date with the same effect as if made at such time.
(e)    Performance. Borrower shall have performed and complied with all
agreements and conditions contained herein required to be performed and complied
with by Borrower prior to or on the Effective Date.
(f)    Reports, Studies and Permits. Lender shall have received and approved in
form and substance reasonably satisfactory to Lender:  (i) a report of the
physical condition of the Properties and the properties subject to the Asset
Loans; (ii) copies of all agreements which were material to completion of the
Improvements; (iii) copies of all building permits and similar permits,
licenses, approvals, zoning and land use approval, development agreements and
other authorizations of governmental agencies, if any, required in connection
with the development of the Properties and the properties subject to the Asset
Loans; and (iv) copies of any initial study, negative declaration, mitigated
negative declaration, environmental impact report, notice of determination or
notice of exemption prepared, adopted, certified or filed by or with any
governmental agency in connection with the Properties and the properties subject
to the Asset Loans.
(g)    Environmental Matters. Lender shall have received the Environmental
Report in form and substance reasonably satisfactory to Lender from an
independent, licensed environmental engineer approved by Lender, certifying to
Lender that each of the Properties and the properties subject to the Asset Loans
is free from any Hazardous Substances, except for such uses which are in
compliance with Environmental Laws. Such report shall be addressed directly to
Lender or, if such report is not addressed to Lender, Borrower shall obtain
reliance letters satisfactory to Lender.
(h)    Structural Engineering Report. If required by Lender, Lender shall have
received and approved from an independent, licensed engineer reasonably
acceptable to Lender, a report (the "Structural Engineering Report") certifying
to Lender that each of the Properties and the properties subject to the Asset
Loans is structurally sound and is in good order and repair, identifying, among
other things, any deferred maintenance for the Properties and the properties
subject to the Asset Loans and the cost thereof, providing a 10-year schedule of
anticipated capital expenditures and the per annum costs thereof, and setting
forth recommendations of remedial repairs, capital improvements and replacements
which should be undertaken.
(i)    Earthquake Report. If required by Lender, Lender shall have received and
approved from an independent, licensed engineer reasonably acceptable to Lender,
a report stating the probable maximum loss to the Properties and the properties
subject to the Asset Loans resulting from seismic events. The report shall
include, but shall not be limited to, a soil analysis, structural analysis, and
soil-structure interaction analysis, proximity to known faults and seismic
history.
(j)    Title Insurance. Each Title Company shall be irrevocably committed to
issue to Lender the Title Policy which shall include extended coverage policies
of title insurance, together with such endorsements as required by Lender, in
the amount of the Loan (or other

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amount approved by Lender) and issued by Title Company, with such reinsurance or
co‑insurance as may be required by Lender, in form and substance satisfactory to
Lender insuring that the applicable Asset Guarantor is the owner of the
Properties, and that each Real Property Security Instrument creating the
insurable interest of Lender under the applicable Title Policy is a valid first
lien on the applicable Property encumbered thereby, in favor of Lender, its
successors and assigns, as the insured, free and clear of all liens,
encumbrances and exceptions to title whatsoever, other than encumbrances
approved in writing by Lender prior to the Effective Date. Further, all existing
lender’s title insurance policies with respect to the Asset Loans shall have
been properly assigned or endorsed over to Lender.
(k)    Survey. For each Asset, if required by Lender, Borrower shall have
furnished to Lender two (2) copies of an acceptable survey by an independent,
registered surveyor reasonably satisfactory to Lender, certified to Lender, its
successors and assigns, and the applicable Title Company as having been made in
accordance with the most recent standards for "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys," jointly established and adopted
by ALTA and ACSM (collectively, the "Survey").
(l)    Insurance. Borrower shall have delivered to Lender the policies of
insurance (or certificates) as required by Article 5 of this Agreement, and
shall have delivered evidence reasonably satisfactory to Lender of the payment
of all premiums payable for the existing period of such policies.
(m)    Consents, Licenses, Permits and Approvals. Borrower shall have furnished
to Lender copies of, or other evidence satisfactory to Lender establishing that
Borrower has obtained, all consents, licenses, permits and approvals from any
and all governmental authorities having jurisdiction over Borrower and/or any
Asset, which are required in connection with the Assets and/or the execution,
delivery and performance by Borrower under, and the validity and enforceability
of, the Loan Documents, and all such consents, licenses, permits and approvals
shall be in full force and effect, and written proof that any and all corporate,
partnership and limited liability company action necessary to enable Borrower to
enter into the financing transactions contemplated by this Agreement shall have
been obtained and/or taken by Borrower (including, without limitation, any
required consents of any partners, members and/or shareholders).
(n)    REAs, CCRs. Lender shall have received copies of any reciprocal easement
agreements, development agreements, covenants, conditions and restrictions or
similar agreements affecting the Assets and each and all of the same shall be
reasonably satisfactory in form and substance to Lender.
(o)    Financial Statements. Lender shall have received originally signed and
dated financial statements, balance sheets, and tax returns from Borrower,
Guarantor and each Asset Guarantor, and any other financial information relating
to the Assets requested by Lender, including, without limitation, income and
expense statements.
(p)    Payment of Fees and Expenses. Borrower shall have paid to Lender, on or
before the Effective Date, the Loan Commitment Fee and the Lender Expenses.

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(q)    Leases and Tenant Estoppels. Borrower shall have provided Lender with
(i) copies of all signed Leases and any amendments and lease guarantees for with
respect to any of the Assets, (ii) omitted; (iii) a current itemized and
certified rent roll for each Asset; and (iv) if required by Lender, a tenant
estoppel certificate and subordination and non-disturbance agreement in form,
substance and scope satisfactory to Lender in its sole discretion (in which,
without limiting the generality of the foregoing, the applicable tenant shall
certify, represent and warrant to Lender that, among other things, each such
Lease is in effect in accordance with its terms, and that there are no existing
defaults under any of the Leases).
(r)    Lien Search Reports. Lender shall have received satisfactory reports of
UCC, federal tax lien, state tax lien, bankruptcy, judgment and pending
litigation searches conducted by a search firm reasonably acceptable to Lender
(collectively, the "UCC Searches"). Such UCC Searches shall have been received
in relation to Borrower, Guarantor, each Asset Guarantor and each Asset.
(s)    No Injunction. No law or regulation shall have been adopted, no order,
judgment or decree of any Governmental Authority shall have been issued, and no
litigation shall be pending or threatened, which in the good faith judgment of
Lender would enjoin, prohibit or restrain, or impose or result in an adverse
effect upon the making or repayment of the Loan or the consummation of the
transactions contemplated by the Loan Documents.
(t)    Material Contracts. Borrower shall have delivered to Lender a copy of all
Material Agreements and Operating Agreements relating to the Assets, including
without limitation, the Property Management Agreement. In addition, if required
by Lender, Borrower shall obtain estoppels and other customary agreements with
any third parties under such Material Agreements and Operating Agreements.
(u)    Site Inspection. Lender shall have performed, or caused to be performed
on its behalf, an on-site due diligence review of the Assets to be acquired with
the Loan satisfactory to Lender in Lender’s sole discretion.
(v)    Subdivision. Lender shall have received evidence satisfactory to Lender
(including title endorsements) that each Real Property comprising the Properties
constitutes a separate lot for real estate tax and assessment purposes.
(w)    No Material Adverse Change. Since the date financial reports were
delivered to Lender, there shall have been no material adverse change in the
financial condition or business of Borrower, any Asset Guarantor or Guarantor
nor any material decline in the condition or market value of the Assets, each as
determined by Lender in its sole discretion.
(x)    Underwriting and Due Diligence. Lender shall have satisfactorily
completed its underwriting and due diligence with respect to the Loan, Borrower,
Asset Guarantors, the partners, joint venturers or members of Borrower, each
Guarantor, each Asset Guarantor and the Assets, including, without limitation,
any title, survey, insurance, tenant estoppel letters, lease abstracts,
environmental reports, structural reports, and financial statements relating to
the Assets, and Lender shall have completed such other real estate and

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legal due diligence investigations as Lender deems necessary, and such review
and investigations shall provide Lender with resulting information which, in
Lender’s sole discretion, is satisfactory to permit Lender to enter into this
Agreement and to make the Loan.
(y)    Budgets. Lender shall have reviewed and approved capital improvement and
operating budgets for the Properties, and Borrower’s proposed sources and uses
of funds for the Loan proceeds, together with a detailed timeline for completion
of the capital improvements or renovations (if any) contemplated for the
Properties.
(z)    Affiliate Fees. Borrower shall have disclosed to Lender, and Lender shall
have approved, all fees, commissions and other amounts (collectively, "Affiliate
Fees") which have been or will be reimbursed or paid to or paid on behalf of
Borrower, any Guarantor, any Asset Guarantor or any Affiliate thereof in
connection with the financing of the Assets. All Affiliate Fees shall be
deducted from the calculation of capitalization costs of the financing
transaction contemplated by this Agreement for determining the maximum principal
amount of the Loan and Borrower’s required equity contribution. Without
limitation on the foregoing, all Affiliate Fees shall be subordinate to the Loan
and shall be terminable by Lender in the event of the occurrence of an Event of
Default;
(aa)    Charter Documents. Lender shall have received from Borrower, each Asset
Guarantor and Guarantor, certified copies of all organizational documents
relating to such Person (other than a natural Person) as Lender may request,
including, but not limited to, all partnership or operating agreements
evidencing the organization, existence and authority of Borrower and such other
corporate, partnership and limited liability company documents with respect to
Borrower and its constituent entities as Lender shall require, including
evidence of authorization and incumbency of all Persons executing the Loan
Documents on behalf of Borrower, good standing certificates, qualifications to
do business in the appropriate jurisdictions, resolutions authorizing the
execution, delivery and performance of the Loan Documents, and incumbency
certificates;
(bb)    Loan File. Lender shall have received copies of the Asset Loan Documents
and each Asset Guarantor’s loan file with respect to the Asset Loan Documents.
(cc)     Additional Matters. Lender shall have received such other permits,
certificates (including certificates of occupancy reflecting the use of the
Properties as of the Effective Date), opinions, documents and instruments
(including without limitation, written proof from the appropriate Governmental
Authority regarding the zoning of the Properties) in form and substance
reasonably acceptable to Lender relating to the Loan as may have been requested
by Lender and all other documents and all legal matters in connection with the
Loan shall be reasonably satisfactory in form and substance to Lender.
(dd)    Loan-to-Value Ratio. The Loan-to-Value Ratio is no more than 40%
ARTICLE 4.
SPECIAL COVENANTS RELATING TO THE COLLATERAL

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4.1    DEFENSE OF TITLE. Borrower shall defend the Collateral, the title and
interest therein of the borrowers under the Asset Loans (such borrowers,
collectively, the “Asset Borrowers”) represented and warranted in the Asset Loan
Documents, and the legality, validity, binding nature, and enforceability of
each lien contained in the Asset Loan Documents and the first priority of the
Asset Loan Documents against all matters, including, without limitation: (a) any
attachment, levy, or other seizure by legal process or otherwise of any or all
Collateral; (b) any lien or encumbrance or claim thereof on any or all
Collateral; (c) except by the applicable Asset Guarantor under the Asset Loan,
any attempt to foreclose, conduct a trustee’s sale, or otherwise realize upon
any or all Collateral under any lien or encumbrance; and (d) any claim
questioning the legality, validity, binding nature, enforceability, or priority
of the Asset Loan Documents. Borrower shall notify Lender promptly in writing of
any of the foregoing and will provide such information with respect thereto as
Lender may from time to time reasonably request.
4.2    FURTHER ASSURANCES. Borrower and/or the applicable Asset Guarantor shall
promptly execute, acknowledge, and deliver such additional agreements,
documents, and instruments and do or cause to be done such other acts as Lender
may reasonably request from time to time to better assure, preserve, protect,
and perfect the interest of Lender in the Collateral and the rights and remedies
of Lender under the Loan Documents.
4.3    ENDORSEMENTS. If reasonably required by Lender from time to time in
connection with the approvals to be granted by Lender pursuant to the Loan
Documents, Borrower shall provide such continuation endorsements, date down
endorsements, survey endorsements and other endorsements to title policy for the
Property, in form and substance reasonably satisfactory to Lender, as Lender
reasonably determines necessary to insure the priority of the Asset Loan
Documents as a valid first lien on the Property. Borrower agrees to furnish to
the applicable title company such surveys and other documents and information as
Lender or such title company may reasonably require for such title company to
issue such endorsements.
4.4    ASSET LOAN DOCUMENTS. Neither Borrower nor any Asset Guarantor shall
amend, modify or supplement any of the Asset Loan Documents without Lender’s
prior written consent. Neither Borrower nor any Asset Guarantor shall waive or
modify any defaults by any Asset Borrower under the Asset Loan Documents or
waive or modify any maturity date extension requirements under the Asset Loan
Documents, each without Lender’s prior written consent. Neither Borrower nor any
Asset Guarantor shall commence any foreclosure or other remedial action without
Lender’s prior written consent and neither Borrower nor any Asset Guarantor
shall consummate any foreclosure or other remedies under any of the Asset Loan
Documents without Lender’s prior written consent. Neither Borrower nor any Asset
Guarantor shall release any collateral securing any portion of any Asset Loan,
except pursuant to Article 8 below. Lender’s prior written consent for an
amendment or modification of any Asset Loan under this Section 4.4. shall not be
unreasonably withheld, conditioned or delayed for an amendment or modification
of any Asset Loan so long as the item for which Lender’s consent is requested
does not materially modify the terms of the Asset Loan or affect Lender’s
security in the Collateral or affect Borrower’s ability to perform its
obligations under the Loan Documents. Notwithstanding

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anything the contrary contained herein or the other Loan Documents, (i) Lender’s
prior written consent shall not be required for amendments, modifications or
supplements to any of the Asset Loan Documents that are solely of a de minimis
and administrative nature, such as, for example, the modification of notice
information, and (ii) Borrower shall provide Lender with prior written notice of
any amendment, modification, supplement, waiver, or commencement or exercise of
any remedial action in connection with any Asset Loan and provide Lender with
copies of documents relating thereto promptly following execution or receipt
thereof.
4.5    NOTIFICATION. Borrower shall promptly disclose to Lender the occurrence
of: (a) any default by Borrower, any Asset Guarantor or any Asset Borrower under
any of the Asset Loan Documents; (b) any action or proceeding which is
instituted by or against Borrower, any Asset Guarantor or any Asset Borrower or
the Property in any Federal or state court or before any Governmental Authority,
federal, state or local, foreign or domestic, or any such actions or proceedings
are threatened against Borrower or any Asset Borrower or the Property; and (c)
the occurrence of any Default or Event of Default.
ARTICLE 5.
INSURANCE
Borrower shall at all times keep the improvements now existing or hereafter
erected on each Property insured against all losses, hazards, casualties,
liabilities and contingencies as Lender shall require and in such amounts and
for such periods as Lender shall require. Borrower shall purchase and maintain
the following policies of insurance with respect to each Property in form and
substance satisfactory to Lender as follows:
5.1    PROPERTY INSURANCE. Property insurance covering loss or damage by fire,
lightning, water, wind and such other perils as are included in a standard
"special causes of loss form" property insurance policy in an amount no less
than one hundred percent (100%) of the replacement cost (including cost of
demolition, increased costs to repair or rebuild each applicable Property to
comply with current building, zoning or land use ordinance or law, and debris
removal) of all real and personal property, including tenant improvements,
eighteen (18) months of gross rental income or business income (or, if coverage
is on an "actual loss sustained" basis, covering a period of restoration not
less than eighteen (18) months) with not less than an additional ninety (90) day
period of extended indemnity coverage, and including such other endorsements as
Lender may reasonably require, insuring against damage to each Property in an
amount acceptable to Lender. The loss valuation clause of the policy shall be
replacement cost value. The deductible under such policy shall not exceed
$25,000. This policy shall contain ordinance or law coverage, including loss to
undamaged parts of the building to the full building damage limit of the policy
and with demolition and increased cost of construction insured to limits in an
amount acceptable to Lender. The policy shall contain a standard mortgagee
insurance clause and a Lender’s Loss Payable Endorsement or clause (ISO form CP
12 18 or equivalent) with Lender named on the policy as both mortgagee and loss
payee.
5.2    BOILER AND MACHINERY INSURANCE. Boiler and machinery (or equipment
breakdown) insurance, in an amount which is no less than twenty percent (20%) of

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the sum of the one hundred percent (100%) replacement cost value of each
Property, or such other amount agreed by Lender, plus an amount equivalent to
the annual Gross Operating Income for each Property, covering the mechanical
breakdown of boilers, air conditioning equipment and other machinery and
equipment in an amount deemed necessary by Lender. The loss valuation clause of
the policy shall be replacement value.
5.3    FLOOD INSURANCE. Flood insurance if the applicable Property lies within
Flood Zones A or V, or if otherwise deemed necessary by Lender, in a form and
with insured limits and deductibles acceptable to Lender.
5.4    EARTHQUAKE INSURANCE. If the applicable Property is in an area prone to
geological phenomena, including, but not limited to, sinkholes, or mine
subsidence, earth movement or earthquake, insurance covering such perils with
insured limits and deductibles acceptable to Lender. This policy shall include
ordinance or law coverage as shown above in Section 5.1. The loss valuation
clause of the policy shall be replacement cost.
5.5    TERRORISM INSURANCE. As required by Lender, Borrower shall provide
evidence of insurance covering loss from acts of terrorism; provided, however,
that this requirement shall only apply to the extent of a legislative extension
of the Terrorism Risk Insurance Act of 2002 (the “TRIA”). If the TRIA is not
extended, then Borrower shall insure loss from acts of terrorism with coverage
commercially available to Borrower at a cost no greater than 75% of the cost to
insure the property without such terrorism coverage.
5.6    LIABILITY INSURANCE. Commercial General Liability insurance with limits
no less than $5,000,000 each occurrence and $5,000,000 in the aggregate for any
policy year with Lender included as an additional insured with the coverage
primary and non-contributory to any other valid and collectible insurance. The
use of a combination of primary and excess liability insurance policies shall be
permitted in order to maintain the required limits of liability insurance. All
liability insurance policies must provide for claims to be insured on an
occurrence basis. All liability policies shall include coverage of premises and
operations, products and completed operations, contractual liability, personal
injury, and acts of terrorism.
5.7    CONSTRUCTION. During any period of construction, reconstruction,
renovation or alteration of any Property at a cost in excess of 10% of the
stated amount of the Note, Borrower shall maintain at Borrower’s sole expense,
with licensed insurers approved by Lender, the following policies of insurance
in form and substance satisfactory to Lender:
(a)    Builder’s Risk Insurance coverage in any amount equal to 100% of the
completed value replacement cost of all improvements to be constructed, written
on a Causes of Loss – Special Form or its equivalent, in a non-reporting
completed value form. The loss valuation clause of the policy shall be
replacement cost value. Coverage shall be extended to insure project soft costs
to include 100% of the cost during the construction term of construction loan
interest, taxes and insurance and shall insure loss of income or rents in an
amount equivalent to the gross income or loss of rents for an indemnity period
of no less than twelve months. Any exclusion for loss or damage to existing
structures shall be removed from the policy. The policy shall contain a basic
perils deductible no greater than $25,000. Coverage

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shall permit for partial occupancy by Borrower and shall insure all construction
materials and supplies on the construction site, stored off-site and while in
transit. The policy shall include coverage of ordinance or law perils as shown
above in Section 5.1 and of equipment breakdown perils as shown above in Section
5.2;
(b)    Borrower shall require of its contractor, and contractor shall purchase
and maintain, (1) general liability insurance with limits of $3,000,000 each
occurrence / $3,000,000 annual aggregate with Lender and Borrower included as
additional insured with the coverage primary and non-contributory to any other
valid and collectible insurance and, (2) worker’s compensation as required by
statute or law and to insure employer’s liability in amount of at least
$1,000,000 per occurrence. Borrower shall require of the sub-contractors, and
sub-contractors shall purchase and maintain, (1) general liability insurance
with limits of $1,000,000 each occurrence / $1,000,000 annual aggregate with
Lender and Borrower included as additional insured with the coverage primary and
non-contributory to any other valid and collectible insurance and, (2) worker’s
compensation as required by statute or law and to insure employer’s liability in
amount of at least $1,000,000 per occurrence.
5.8    GENERAL. All insurance policies contemplated by Section 5.1 hereof shall
name Borrower as the insured. All premiums on insurance policies shall be paid
in full. Borrower shall provide the Lender certified copies of all required
insurance policies, or other evidence which is reasonably acceptable to Lender.
Property insurance certificates shall be issued using the ACORD 28 form. All
insurance policies shall provide that the insurance shall not be cancelable
without thirty (30) days prior written notice to Lender, or ten (10) days prior
written notice if due to non-payment of premium, and Borrower shall provide
Lender with no less than ten (10) days prior written notice of material changes
to the insurance policies. All policies, other than liability insurance
policies, shall not contain any co-insurance clause or such clause shall be
removed by an "agreed amount" endorsement. Lender shall be named under a
Lender’s Loss Payable Endorsement (ISO form CP 12 18 or equivalent) and as
mortgagee with a standard form mortgagee clause applying on all non-liability
insurance policies which Borrower maintains with respect to each Property and
Improvements. Borrower shall provide to Lender evidence, in a form as is
reasonably required by Lender, of any other hazard insurance Lender may
reasonably deem necessary at any time during the Loan. Without limitation on the
foregoing, all policies shall be insured by a licensed insurance company or
companies with a rating of A- VIII or better by A.M. Best Co. and shall contain
deductibles not in excess of five percent (5%) of the policy limits.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
As a material inducement to Lender’s entry into this Agreement, Borrower
represents and warrants to Lender as of the Effective Date (and as of the date
of any additional advances hereunder) and continuing thereafter that:
6.1    AUTHORITY/ENFORCEABILITY. Borrower is in material compliance with all
laws and regulations applicable to its organization, existence and transaction
of business and

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has all necessary rights and powers to own, manage, service and operate (as the
case may be) each Asset as contemplated by the Loan Documents.
6.2    BINDING OBLIGATIONS. Borrower is authorized to execute, deliver and
perform its obligations under the Loan Documents, and such obligations shall be
valid and binding obligations of Borrower.
6.3    FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has delivered to Lender
all formation and organizational documents of Borrower and of the managing
member, or members of Borrower, if any, and of all Asset Guarantors and
Guarantors other than Guarantors which are natural persons, if any, and all such
formation and organizational documents remain in full force and effect and have
not been amended or modified since they were delivered to Lender. Borrower shall
promptly provide Lender with copies of any amendments or modifications of the
formation or organizational documents of Borrower, each Asset Guarantor and any
Guarantor.
6.4    NO VIOLATION. Borrower’s and any Asset Guarantor’s execution, delivery,
and performance under the Loan Documents do not: (a) require any consent or
approval not heretofore obtained under any partnership agreement, operating
agreement, articles of incorporation, bylaws or other document; (b) violate any
Applicable Laws; or (c) conflict with, or constitute a breach or default or
permit the acceleration of obligations under any agreement, contract, lease, or
other document by which the Borrower, any Asset Guarantor or any Asset is bound
or regulated.
6.5    COMPLIANCE WITH LAWS. Borrower and/or the applicable Asset Guarantor has
obtained, and at all times shall have obtained all permits, licenses,
exemptions, and approvals necessary to own, construct, occupy, operate, service
and market (as the case may be) the Assets in accordance with the Approved
Budget (as applicable) and the Loan Documents, and shall maintain compliance
with all Applicable Laws. To Borrower’s knowledge, each Property is a legal
parcel lawfully created in full compliance with all subdivision laws and
ordinances.
6.6    LITIGATION. Except as set forth on Schedule 3 attached hereto, there are
no claims, actions, suits, or proceedings pending, or to Borrower’s knowledge
threatened, against Borrower, any Asset Guarantor or any Guarantor affecting any
Asset.
6.7    FINANCIAL CONDITION. All financial statements and financial information
heretofore and hereafter delivered to Lender by Borrower, including, without
limitation, information relating to the financial condition of Borrower, the
Assets or members of Borrower, Asset Guarantors and Guarantor, fairly and
accurately represent in all material respects the financial condition of the
subject thereof and have been prepared (except as noted therein) in accordance
with GAAP consistently applied. Borrower acknowledges and agrees that Lender may
request and obtain additional information from third parties regarding any of
the above, including, without limitation, credit reports.

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6.8    NO MATERIAL ADVERSE CHANGE. There has been no material adverse change in
the financial condition of Borrower, any Asset Guarantor and/or Guarantor since
the dates of the latest financial statements furnished to Lender and, except as
otherwise disclosed to Lender in writing, Borrower has not entered into any
material transaction which is not disclosed in such financial statements.
6.9    ACCURACY. All material reports, documents, instruments, information and
forms of evidence delivered to Lender concerning the Loan or security for the
Loan or required by the Loan Documents are accurate, correct and sufficiently
complete to give Lender true and accurate knowledge of their subject matter, and
do not contain any misrepresentation or omission.
6.10    TAX LIABILITY. Borrower and each Asset Guarantor has filed all required
federal, state, county and municipal tax returns and has paid all taxes and
assessments owed and payable, and Borrower has no knowledge of any basis for any
additional payment with respect to any such taxes and assessments.
6.11    UTILITIES. Each Property has rights of access to public ways and is
served by water, sewer, sanitary sewer and storm drain facilities adequate to
service such Property for its intended use. All utility services, including,
without limitation, gas, water, sewage, electrical and telephone, necessary for
the development and occupancy of such Property and Improvements are available at
or within the boundaries of such Property, or Borrower has taken all steps
necessary to assure that all such services will be available upon completion of
the Improvements.
6.12    COMPLIANCE. Borrower and/or each applicable Asset Guarantor is in
material compliance with all governmental requirements for the development,
ownership and operation of each Property and construction of the Improvements
and will conform to and comply with all governmental requirements and any
approved plans and specifications relating to any construction.
6.13    AMERICANS WITH DISABILITIES ACT COMPLIANCE. The Improvements are in all
material respects compliant with all of the requirements of the Americans with
Disabilities Act, of July 26, 1990, Pub. L. No. 101-336, 104 Stat. 327,
42 U.S.C. § 12101, et. seq., as amended from time to time. Borrower shall be
responsible for all ADA compliance costs.
6.14    BUSINESS LOAN. The Loan is a business loan transaction in the stated
amount solely for the purpose of carrying on the business of Borrower and none
of the proceeds of the Loan will be used for the personal, family or
agricultural purposes of the Borrower.
6.15    NO CONDEMNATION. There are no pending or, to the best of Borrower’s
knowledge, threatened eminent domain or condemnation proceedings affecting the
Property (or any portion thereof).
6.16    DEFECTS. To the best of Borrower’s knowledge, except as otherwise
disclosed in the Environmental Report, Structural Engineering Report or the
Property Condition Report,

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there are no defects, facts or conditions affecting any Property or any portion
thereof which would make any Property unsuitable for the occupancy, use or sale
thereof. To the best of Borrower’s knowledge, there are no surface or subsurface
soil conditions adversely affecting any Property, including, without limitation,
unstable soil or landfills.
6.17    LEASES. The rent roll attached hereto as Exhibit F hereto is true,
complete and correct and no Property is subject to any Leases or occupancy
agreements other than as described in such Exhibit F (and without limitation,
there are no agreements or documents affecting any of the Leases except as
expressly listed on such Exhibit F). The Leases identified on Exhibit F are in
full force and effect and, to the best of Borrower’s knowledge, there are no
defaults thereunder by either party (except as disclosed in the rent roll). The
copies of the Leases delivered to Lender are true and complete, and there are no
oral agreements with respect thereto. Except as disclosed by the rent roll, no
rent (including security deposits) has been paid more than one (1) month in
advance of its due date. All work to be performed by Borrower under each Lease
has been performed as required and has been accepted by the applicable tenant.
Any payments, free rent, partial rent, rebate of rent or other payments,
credits, allowances or abatements required to be given by Borrower to any tenant
has already been received by such tenant (except as disclosed in the rent roll).
The tenants under the Leases have accepted possession of and are in occupancy of
all of their respective demised premises and have commenced the payment of rent
under the Leases (except as disclosed in the rent roll).
6.18    PATRIOT ACT AND RELATED MATTERS. Borrower, each Asset Guarantor and
Guarantor shall promptly comply with all existing and future federal, state and
local laws, orders, ordinances, governmental rules and regulations or court
orders affecting Borrower, the Assets, or the use thereof, including, without
limitation, Prescribed Laws (collectively, "Applicable Laws"). The term
"Prescribed Laws" shall mean, collectively, (a) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56) (the "Patriot Act"), (b) OFAC Laws and
Regulations (as defined below), (c) the International Emergency Economic Power
Act, 50 U.S.C. §1701 et. seq. and (d) all other legal requirements relating to
money laundering or terrorism. Lender shall have the right to audit Borrower’s
compliance with the Prescribed Laws. Borrower shall from time to time, upon
Lender’s request, provide Lender with evidence reasonably satisfactory to Lender
that each of Borrower and the Assets complies with all Prescribed Laws or is
exempt from compliance with Prescribed Laws. "OFAC Laws and Regulations" means
any lists, laws, rules, sanctions and regulations maintained by the United
States Department of the Treasury’s Office of Foreign Assets Control ("OFAC")
pursuant to any authorizing statute, Executive Order No. 13224 (September 23,
2001) and any related enabling or implementing executive orders or regulation,
including the Trading with the Enemy Act, 50 U.S.C. App. 1-44, as amended from
time to time, the International Emergency Economic Powers Act, 50 U.S.C.
§§ 1701-06, as amended from time to time, the unrepealed provisions of the Iraqi
Sanctions Act, Pub. L. No. 101-513; United Nations Participation Act, 22 U.S.C.
§ 287c, as amended from time to time, the International Security and Development
Cooperation Act, 22 U.S.C. § 2349 aa 9, as amended from time to time, The Cuban
Democracy Act, 22 U.S.C. §§ 6001-10, as amended from time to time, The Cuban
Liberty and Democratic Solidarity Act, 18 U.S.C. §§ 2332d and 2339b, as

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amended from time to time, and The Foreign Narcotics Kingpin Designation Act,
Pub. L. No. 106-120, as amended from time to time.
6.19    NO BANKRUPTCY. No bankruptcy or insolvency proceedings are pending or
contemplated by Borrower or any Asset Guarantor or, to the best knowledge of
Borrower, against Borrower or any Asset Guarantor or by or against any endorser
or cosigner of the Note, or any guarantor or indemnitor under any guaranty or
indemnity agreement executed in connection with the Note or the loan evidenced
thereby and secured hereby.
6.20    NOT FOREIGN PERSON. Neither Borrower nor any Asset Guarantor is a
"foreign person" within the meaning of §1445(f)(3) of the Internal Revenue Code
of 1986, as amended, and the related Treasury Department regulations, including
temporary regulations.
6.21    BORROWER’S PRIOR ACTS. Borrower, since the date of formation:
(a)    Has always been duly formed, validly existing and in good standing under
the laws of the state of its formation;
(b)    Has received no notice of any judgments or liens of any nature against it
except for tax liens not yet delinquent;
(c)    Has always been and is in material compliance with all laws, regulations,
and orders applicable to it, and has, and has always had, all permits necessary
for it to operate;
(d)    Has received no notice of any pending or threatened (in writing)
litigation, and has never been a party to any material lawsuit, arbitration,
summons, or other material legal proceeding except as disclosed in writing to
Lender;
(e)    Has never been, except as disclosed in writing to Lender, and is not
involved in any dispute with any taxing authority, and has paid all taxes due to
any taxing authority before the delinquency thereof;
(f)    Has never owned any property other than its interests in the Asset
Guarantors and has never engaged in any business except the ownership of the
membership interests in the Asset Guarantors;
(g)    Has prepared financial statements that fairly and accurately reflect its
current financial condition;
(h)    Has no material contingent or actual obligations unrelated to the Assets;
and
(i)    Has, since formation, complied in all material respects with the
covenants referred to in Section 9.10.
6.22    ASSET LOANS. Exhibits A-8 through A-28 attached hereto accurately
describe all of the Assets. Borrower has delivered to Lender true, correct and
complete copies of all of the

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Asset Loan Documents and Borrower’s loan file with respect to the Asset Loans to
the extent in Borrower’s possession or control. There are no defaults under any
of the Asset Loans except as set forth in Schedule 2 attached hereto.
6.23    OMITTED.
6.24    ERISA.
(a)    Neither Borrower nor any Asset Guarantor is an entity deemed to hold
"plan assets" within the meaning of 29 C.F.R. § 2510.3-101 of an employee
benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I
of ERISA or any plan (within the meaning of Section 4975 of the Code), and
neither the execution of this Agreement nor the making of the Loan gives rise to
a prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code.
(b)    Neither Borrower nor any Asset Guarantor is (i) an employee benefit plan
(as defined in Section 3(3) of ERISA), (ii) a plan as defined in Section
4975(e)(1) of the Code, which is subject to Section 4975 of the Code, or (iii)
an entity whose underlying assets constitute "plan assets" of any such employee
benefit plan or plan for purposes of Title I of ERISA or Section 4975 of the
Code.
6.25    PROPERTY MANAGEMENT AGREEMENT. Each Property Management Agreement, if
any, shall be subject to the Security Instrument pursuant to the terms of the
Subordination of Management Agreement to be executed by Borrower and the
applicable Property Manager named therein in favor of Lender. Neither the
execution and delivery of the Loan Documents nor any party’s performance
thereunder will adversely affect Borrower’s rights under any Property Management
Agreement.
6.26    CERTIFICATE OF OCCUPANCY; LICENSES. All certifications, permits,
licenses and approvals, including, without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Assets, whether temporary or permanent, have been obtained and
are in full force and effect. Borrower shall keep and maintain, or cause to be
kept and maintained, all certifications, permits, licenses and approvals
necessary for the operation of the Assets.
6.27    MATERIAL AGREEMENTS.
(a)    Borrower has not entered into, and is not bound by, any Material
Agreement which continues in existence, except those previously disclosed in
writing to Lender.
(b)    Each of the Material Agreements is in full force and effect, neither
Borrower nor any Asset Guarantor has received no notice of any monetary or other
defaults by Borrower thereunder and, to the best knowledge of Borrower, there
are no monetary or other defaults thereunder by any other party thereto. None of
Borrower, any Asset Guarantor, Property Manager or any other Person acting on
Borrower’s behalf has given or received any notice of default under any Material
Agreement that remains outstanding or in dispute.

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(c)    Borrower has delivered true, correct and complete copies of the Material
Agreements (including all amendments and supplements thereto) to Lender.
(d)    No Material Agreement has as a party which is an Affiliate of Borrower.

ARTICLE 7.
HAZARDOUS MATERIALS
7.1    SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a)    Borrower hereby represents and warrants to Lender that, as of the date
hereof, to the best of Borrower’s knowledge: (i)  no Property (and for purposes
of this Section 7.1, “Properties” shall include those properties that are
encumbered by the Asset Loan Documents) is in material violation of any local,
state or federal law, rule or regulation pertaining to environmental regulation,
contamination or clean-up (collectively, "Environmental Laws"), including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. §9601 et seq. and 40 CFR §302.1 et seq.), as
amended by the Superfund Amendments and Reauthorization Act of 1986; the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et seq.); the
Federal Water Pollution Control Act (33 U.S.C. §1251 et seq. and 40 CFR § 116.1
et seq.); those relating to Lead Based Paint (as defined below); the Hazardous
Materials Transportation Act (49 U.S.C. §1801 et seq.); the Clean Air Act, 42
U.S.C. §7401 et seq; the Toxic Substances Control Act; 15 U.S.C. §2601 et seq;
the Safe Drinking Water Act) (42 U.S.C. §300f et seq; and the regulations
promulgated pursuant to said laws, all as same may have been or may be amended
relating to or affecting any Property, any portion thereof, whether or not
caused by or within the control of Borrower; (ii) to the best of Borrower’s
knowledge, no hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls, petroleum products, flammable explosives, radioactive
materials, infectious substances or raw materials which include hazardous
constituents), paint containing more than 0.5% leaf by dry weight ("Lead Based
Paint") or any other substances or materials which are included under or
regulated by Environmental Laws, or any mold (collectively, "Hazardous
Substances"), are located on or have been handled, generated, stored, processed
or disposed of on or released or discharged from any Property (including
underground contamination) except for those substances used by Borrower in the
ordinary course of Borrower's business and in compliance with all Environmental
Laws; (iii) no Property is subject to any private or governmental lien or
judicial or administrative notice or action relating to Hazardous Substances;
(iv) to the best of Borrower’s knowledge, there are no existing or closed
underground storage tanks or other underground storage receptacles for Hazardous
Substances on any Property; (v) neither Borrower nor any Asset Guarantor has
received written notice of and, to the best of Borrower’s knowledge, there
exists no investigation, action, proceeding or claim by any agency, authority or
unit of government or by any third party which could result in any liability,
penalty, sanction or judgment under any Environmental Laws with respect to any
condition, use or operation of any Property nor does Borrower know of any basis
for such a claim; and (vi) niether Borrower nor any Asset Guarantor has received
notice of and, to the best of Borrower's knowledge, there has been no claim by
any

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party that any use, operation or condition of any Property has caused any
nuisance or any other liability or adverse condition on any other property nor
does Borrower know of any basis for such a claim.
(b)    Borrower shall keep or cause each Property to be kept free from Hazardous
Substances (except those substances used by Borrower in the ordinary course of
its business and in compliance with all Environmental Laws), shall not install
or use any underground storage tanks, shall expressly prohibit the use,
generation, handling, storage, production, processing and disposal of Hazardous
Substances (except those substances used by Borrower in the ordinary course of
its business and in compliance with all Environmental Laws), and, without
limiting the generality of the foregoing, so long as this Agreement continues in
effect, shall not install in the Improvements or permit to be installed in the
Improvements asbestos or any substance containing asbestos.
(c)    Borrower shall promptly notify Lender if Borrower or any Asset Guarantor
shall become aware of the possible existence of (i) any Hazardous Substances on
any Property (except those substances used by Borrower in the ordinary course of
its business and in compliance with all Environmental Laws), or other potential
environmental problem or liability, with respect to any Property, (ii) any lien,
action or notice affecting any Property or Borrower or any Asset Guarantor
resulting from any violation or alleged violation of the Environmental Laws,
(iii) the institution of any investigation, inquiry or proceeding concerning
Borrower, any Asset Guarantor or any Property pursuant to any Environmental Law
or otherwise relating to Hazardous Substances, or (iv) the discovery of any
occurrence, condition or state of facts which would render any representation or
warranty contained in this Agreement incorrect in any respect if made at the
time of such discovery or (v) that any Property is in violation of any
Environmental Laws. Further, promptly following receipt of the same, Borrower
shall deliver to Lender copies of any and all orders, notices, permits,
applications, reports, and other communications, documents and instruments
pertaining to the actual, alleged or potential presence or existence of any
Hazardous Substances at, on, about, under, within in connection with any
Property. Borrower shall, promptly following written request thereof by Lender,
at Borrower's sole cost and expense, and regardless of the source of
contamination, take all actions as shall be reasonably necessary or advisable
for the clean-up of any and all portions of any Property or other affected
property, including, without limitation, all investigative, monitoring, removal,
containment and remedial actions in accordance with all applicable Environmental
Laws (and in all events in a manner reasonably satisfactory to Lender), and
shall further pay or cause to be paid, at no expense to Lender, all clean-up,
administrative and enforcement costs of applicable governmental agencies which
may be asserted against any Property. In the event Borrower fails to do so,
Lender may, but shall not be obligated to, cause any Property or other affected
property to be freed from any Hazardous Substances or otherwise brought into
conformance with Environmental Laws and any and all costs and expenses incurred
by Lender in connection therewith shall be paid by Borrower within ten (10) days
after written notice from Lender itemizing the amounts thereof incurred to the
date of such notice. In the event Borrower fails to pay such costs and expenses
within ten (10) days after such written notice from Lender, such costs and
expenses, together with interest thereon at the Default Interest Rate from the
date incurred by Lender until actually paid by Borrower, shall be immediately
due and payable by Borrower on demand and shall be secured by this Agreement and
by all of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. In furtherance of the foregoing,

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Borrower hereby grants to Lender and Lender's agents and employees access to
each Property during normal business hours and an irrevocable license to remove
any items reasonably deemed by Lender to be Hazardous Substances and to do all
things Lender shall deem necessary to bring any Property in conformance with
Environmental Laws. Borrower covenants and agrees, at Borrower's sole cost and
expense, to indemnify, defend, protect (at trial and appellate levels, and with
attorneys, consultants and experts reasonably acceptable to Lender), and hold
Lender harmless from and against any and all present and future liens, damages,
losses, liabilities, obligations, settlement payments, penalties, assessments,
citations, directives, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses of any kind or of any nature
whatsoever (including, without limitation, reasonable attorneys', reasonable
consultants' and reasonable experts' fees and disbursements actually incurred in
investigating, defending, settling or prosecuting any claim, litigation or
proceeding) (collectively, "Costs") which may at any time be imposed upon,
incurred by or asserted or awarded against Lender or any Property, and arising
directly or indirectly from or out of: (i) the violation of any Environmental
Laws relating to or affecting any Property, whether or not caused by or within
the control of Borrower; (ii) the actual or alleged presence, release or threat
of release of any Hazardous Substances now or hereafter, on, in, under or
affecting all or any portion of any Property, regardless of whether or not
caused by or within the control of Borrower; (iii) the failure by Borrower to
comply fully with the terms and conditions of this Section 7.1; (iv) the breach
of any representation or warranty contained in this Section 7.1; or (v) the
enforcement of this Section 7.1(c), including, without limitation, the cost of
assessment, containment and/or removal of any and all Hazardous Substances from
all or any portion of any Property, the cost of any actions required to be taken
under this Section 7.1 in response to the presence, release or threat of release
of any Hazardous Substances on, in, under, within or otherwise affecting any
portion of any Property to prevent or minimize such release or threat of release
so that it does not migrate or otherwise cause or threaten danger to present or
future public health, safety, welfare or the environment, and costs incurred to
comply with the Environmental Laws in connection with all or any portion of any
Property. The indemnity set forth in this Section 7.1(c) shall also include,
without limitation, any diminution in the value of the security afforded by any
Property or any future reduction in the sales price of any Property by reason of
any matter set forth in this Section 7.1(c). Notwithstanding anything contained
herein to the contrary, in no event shall Borrower be liable for or be obligated
to indemnify Lender for Costs resulting solely from Lender’s gross negligence or
willful misconduct. Lender's rights under this Section 7.1(c) shall survive
payment in full of the indebtedness secured hereby and shall be in addition to
all other rights of Lender under this Agreement, the Note and the other Loan
Documents.
(d)    Upon Lender's request, at any time and from time to time after the
occurrence of an Event of Default hereunder or at such other time as Lender has
reasonable grounds to believe that Hazardous Substances are or have been
released, stored or disposed of on or around any Property or that any Property
may be in violation of the Environmental Laws, Borrower shall provide, at
Borrower's sole cost and expense, an inspection or audit of any Property
prepared by a hydrogeologist or environmental engineer or other appropriate
consultant reasonably approved by Lender indicating the presence or absence of
Hazardous Substances on any Property or an inspection or audit of the
Improvements prepared by an engineering or consulting firm approved by Lender
indicating the presence or absence of friable asbestos or substances containing
asbestos on any Property, as applicable. If Borrower fails to provide such
inspection or audit within thirty (30) days after such

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request, without waiving any other rights or remedies of Lender by reason of
Borrower's failure to do so, Lender may order the same, and Borrower hereby
grants to Lender and Lender's employees and agents access to each Property
during normal business hours and an irrevocable license to undertake such
inspection or audit. The cost of such inspection or audit shall be paid by
Borrower within five (5) Business Days after written notice from Lender
itemizing the amounts thereof incurred to the date of such notice. In the event
Borrower fails to pay such cost within five (5) Business Days after such written
notice from Lender, such cost, together with interest thereon at the Default
Interest Rate from the date incurred by Lender until actually paid by Borrower,
shall be immediately due and payable to Lender by Borrower on demand and shall
be secured hereby and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.
(e)    Reference is made to the Environmental Indemnity Agreement. The
provisions of this Agreement and the Environmental Indemnity Agreement shall be
read together to maximize the coverage with respect to the subject matter
thereof, as determined by Lender; provided, however, the obligations of the
Indemnitors (as defined in the Environmental Indemnity Agreement) are not
secured by the liens and security interests under this Agreement, as more fully
set forth in the Environmental Indemnity Agreement.
(f)    If, at any time hereafter, Lead-Based Paint is suspected of being present
on any Property, Borrower agrees, at its sole cost and expense and within twenty
(20) days thereafter, to cause a qualified engineer or other expert satisfactory
to Lender to perform an inspection of the Property and prepare a an assessment
report describing the location and condition of the Lead-Based Paint (a
“Lead-Based Paint Report”), which Lead-Based Paint Report shall be in form,
scope and substance, acceptable to Lender. Borrower agrees that if at any time
hereafter it is, determined that any Property contains Lead Based Paint, on or
before thirty (30) days following such determination Borrower shall, at
Borrower’s sole cost and expense, develop and implement, and thereafter
diligently and continuously carry out (or cause to be developed and implemented
and thereafter diligently and continually to be carried out), an operations,
abatement and maintenance plan for the Lead Based Paint on any Property, which
plan shall be prepared by an expert reasonably approved by Lender, and be in
form, scope and substance reasonably acceptable to Lender (together with any
Lead-Based Paint Report, the "O&M Plan") (If an O&M Plan has been prepared prior
to the date hereof, Borrower agrees to diligently and continually carry out (or
cause to be carried out) the provisions thereof.) Compliance with the O&M Plan
shall require or be deemed to require, without limitation, the proper
preparation and maintenance of all records, papers and forms required under the
Environmental Laws.
(g)    Borrower agrees that if at any time hereafter it is, determined that any
Property contains asbestos-containing materials ("ACM's"), on or before thirty
(30) days following such determination Indemnitors shall, at their sole cost and
expense, develop and implement, and thereafter diligently and continuously carry
out (or cause to be developed and implemented and thereafter diligently and
continually to be carried out), an operations and maintenance program (the
"Maintenance Program") designed by an environmental consultant, reasonably
approved by Lender, with respect to the ACM's, consistent with "Guidelines for
Controlling Asbestos-Containing Materials in Buildings" (ISOPIA, 1985) and other
relevant guidelines, and such Maintenance

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Program will hereafter continuously remain in effect until the Loan is repaid in
full. In furtherance of the foregoing, Borrower shall inspect and maintain all
ACM's on a regular basis and ensure that all ACM's shall be maintained in a
condition that prevents exposure of occupants to ACM's at all times. Without
limiting the generality of the preceding sentence, provided a Maintenance
Program is in place, Lender may reasonably require (i) periodic notices or
reports to Lender in form, substance and at such intervals as Lender may
specify, (ii) an amendment to such Maintenance Program to address changing
circumstances, laws or other matters, (iii) at Borrower’s sole cost and expense,
supplemental examination of any Property by consultants specified by Lender (but
not more frequently than once in any calendar year unless an Event of Default
has occurred and is continuing), and (iv) variation of the Maintenance Program
in response to the reports provided by any such consultants.
7.2    LEGAL EFFECT OF SECTION. It is expressly understood that Borrower’s duty
to indemnify Lender hereunder shall survive: (i) any judicial or non-judicial
foreclosure under the Security Instrument, or transfer of any Property in lieu
thereof; (ii) the release and reconveyance or cancellation of the Security
Instrument; and (iii) the satisfaction of all of Borrower’s obligations under
the Loan Documents.
ARTICLE 8.    
RECONVEYANCE
8.1    FULL REPAYMENT AND RECONVEYANCE. Upon indefeasible payment in full of all
sums owing and outstanding under the Loan Documents and full satisfaction of all
other obligations under this Agreement and the other Loan Documents, Lender
shall issue a full release and reconveyance of the Assets from the lien of the
Security Instrument; provided, however, that all of the following conditions
shall be satisfied at the time of, and with respect to, such reconveyance and
remittance: (a) Lender shall have received all escrow, closing and recording
costs, the costs of preparing and delivering such reconveyance and any sums then
due and payable under the Loan Documents; and (b) Lender shall have received a
written release satisfactory to Lender of any set aside letter, letter of credit
or other form of undertaking which Lender has issued to any surety, governmental
agency or any other party in connection with the Loan and/or the Assets.
Lender’s obligation to make further disbursements under the Loan shall terminate
as to any portion of the Loan undisbursed as of the date of issuance of such
full release or reconveyance, and any commitment of Lender to lend any
undisbursed portion of the Loan shall be canceled.
8.2    PARTIAL RELEASE OF PROPERTY. After the Effective Date, Borrower shall
have the right to obtain from Lender a release of each individual Asset (the
"Released Property") from the lien of the Security Instrument securing
Borrower’s obligations under the Loan Documents in connection with the sale of
any of the same to a third party that is not an Affiliate of Borrower, any Asset
Guarantor or any Guarantor with the Borrower in an arms‑length transaction, all
upon satisfaction in full of each and all of the following conditions precedent:
(a)    Borrower shall deliver to Lender a written request (each, a “Release
Notice”) for such partial release not later than thirty (30) days prior to the
day on which

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Borrower desires such partial release to become effective (which notice may be
revoked by Borrower at any time prior to Lender’s recordation of such partial
release);
(b)    [Intentionally Omitted];
(c)    No Default or Event of Default shall have occurred and be continuing
either as of the date on which Borrower shall request such partial release
and/or as of the effective date of such partial release;
(d)    Lender shall have been paid, in immediately available funds, all escrow,
closing and recording costs; the costs of preparing and delivering such partial
release and any other related documents, including without limitation reasonable
attorneys’ fees; the out-of-pocket costs incurred by Lender in verifying that
all conditions precedent to the release of the applicable parcels have been
satisfied; the cost of any title insurance endorsements required by Lender and a
reconveyance fee equal to Five Hundred Dollars ($500.00);
(e)    Except as set forth in Section 2.4(b), the greater of (x) 40% of the Net
Sale Proceeds and (y) the applicable minimum release prices set forth in Exhibit
D attached hereto (the “Release Prices”) for the Released Property shall have
been paid to Lender as a partial repayment of the Loan.
(f)    Borrower, at its sole cost and expense, shall have delivered to Lender
one or more endorsements to the Title Policy insuring that, after giving effect
to such release, (x) the lien created hereby and insured under such title policy
is a first priority lien on the remaining Properties subject only to original
permitted exceptions applicable to the remaining Properties, and (y) the Title
Policy is in full force and effect and unaffected by such release;
(g)    [Intentionally Omitted]; and
(h)    The Assets maintain (on a portfolio basis both before the release of the
Released Property and after giving effect to the release of the Released
Property) a “Loan-to-Value Ratio” of not more than 40%.
Neither the acceptance of any payment or the issuance of any partial release by
Lender shall affect the Borrower’s obligation to pay all amounts owing under
this Agreement or the other Loan Documents or the lien of the Security
Instrument on the remaining Assets.
Lender shall use commercially reasonable efforts to cooperate with Borrower or
any Asset Guarantor, at Borrower’s sole cost and expense, with respect to
complying with any applicable law, rule or regulation having jurisdiction over
any Borrower, Asset Guarantor or any Asset in connection with the sale of any
Asset (including, without limitation, Arizona Department of Real Estate
regulations pertaining to residential, subdivided lot sales), it being
acknowledged and agreed that Lender shall have no obligation whatsoever to incur
any cost or expense or additional liability in connection with such commercially
reasonable cooperation.

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ARTICLE 9.
COVENANTS OF BORROWER
9.1    EXPENSES. Borrower shall pay, whether or not the closing of the Loan
occurs, all of the Lender Expenses and all other out of pocket costs and
expenses incurred by Lender or any of its Affiliates, from time to time,
including documentation and diligence fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses (including UCC and judgment and tax lien
searches and UCC filings and fees for post-closing UCC and judgment and tax lien
searches, if required by Lender), all servicing fees and expenses and attorneys’
fees incurred (a) in any effort to enforce, protect or collect payment of any
obligations hereunder or otherwise secured by the Security Instrument or to
enforce any Loan Document or any related agreement, document or instrument, or
effect collection hereunder or thereunder, (b) in connection with entering into,
negotiating, preparing, reviewing and executing this Agreement and the other
Loan Documents and all related agreements, documents and instruments,
(c) arising in any way out of administration of the Loan including any wire
transfer fees or audit expenses and a servicing fee equal to 0.1% per annum of
the original, maximum principal balance of the Loan payable in arrears on each
Payment Date (the “Servicing Fee”), (d) in connection with instituting,
maintaining, preserving, enforcing and foreclosing on Lender’s security
interests, whether through judicial proceedings or otherwise, (e) in connection
with reviewing Borrower’s compliance with insurance requirements (both prior to
the Effective Date and thereafter during the term of the Loan), (f) in defending
or prosecuting any actions, claims or proceedings arising out of or relating to
Lender’s transactions with Borrower, any Asset Guarantor or any Guarantor,
(g) in seeking, obtaining or receiving any advice with respect to its rights and
obligations under this Agreement, any of the other Loan Documents and all
related agreements, documents and instruments, or (h) in connection with any
modification, restatement, supplement, amendment, waiver or extension of this
Agreement or any other Loan Document or any related agreement, document or
instrument, and all of the same may be charged to Borrower’s account and shall
be part of the obligations secured by the Security Instrument. Borrower
recognizes and agrees that formal written appraisals of the Assets by a licensed
independent appraiser may be required by Lender’s internal procedures and/or
federal regulatory reporting requirements on an annual and/or specialized basis
and that Lender may, at its option, require inspection of the Assets and
Improvements by an independent supervising architect and/or cost engineering
specialist: (i) at least once each month during the course of any capital
improvement project/construction at any Property; (ii) upon completion of any
new or remodeled Improvements; and (iii) at least semi-annually thereafter;
provided, however, that the cost of any such appraisal or inspection performed
in the ordinary course of administration of the Loan during any period that no
Event of Default is continuing shall be paid by Lender from the Servicing Fee,
it being agreed that Borrower shall pay the cost of any such appraisal or
inspection performed in connection with any Event of Default or the exercise by
Lender of its remedies under this Agreement or the other Loan Documents.
9.2    ERISA COMPLIANCE. Borrower shall at all times comply with the provisions
of ERISA with respect to any retirement or other employee benefit plan to which
it is a party as employer, and as soon as possible after Borrower knows, or has
reason to know, that any

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Reportable Event (as defined in ERISA) with respect to any such plan of Borrower
has occurred, it shall furnish to Lender a written statement setting forth
details as to such Reportable Event and the action, if any, which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event furnished to the Pension Benefit Guaranty Corporation.
9.3    LEASING. Borrower shall cause all units on each Property to be leased on
market rates and in all events at not less than prevailing market terms from
time to time, taking into account market standard rental concessions, rent
abatement and free rent. Borrower shall timely perform all obligations that are
required to be performed by the landlord under the Leases. Lender acknowledges
that IMH 176 has delivered to the Sardinia Tenant the Sardinia Agricultural
Lease for execution, and the Sardinia Agricultural Lease, when executed, shall
be deemed approved by Lender.
All Material Leases (and expansions, renewals or material modifications of
Leases, and any cancellation or termination of any such Material Leases) of all
or any part of any Property and Improvements shall be with Tenants approved by
Lender in writing and upon terms approved in writing by Lender in its reasonable
and good faith discretion prior to Borrower’s execution of any such Material
Lease (or expansion, renewal or material modification of a Lease). Lender’s
prior written approval shall not be required for (i) a non-material modification
of a Material Lease, such as, for example, the modification of notice
provisions, or (ii) any expansion, renewal, cancellation, or termination of a
Material Lease for which a tenant has a pre-existing right under a Lease;
provided, however, that Borrower shall provide Lender with prior written notice
(unless such right may be exercised unilaterally by a Tenant, in which case
prior notice need be given, but Borrower shall provide prompt notice thereof) of
such modification, expansion, renewal, cancellation or termination and provide
Lender with copies of any documents relating thereto promptly following
execution thereof.
9.4    APPLICATION OF GROSS OPERATING INCOME. Borrower shall apply or cause to
be applied all Gross Operating Income from the Assets pursuant to the Approved
Budget (as applicable) and otherwise in accordance with the terms of the Loan
Documents.
9.5    SUBDIVISION MAPS. Neither Borrower nor any Asset Guarantor shall have any
right to record any final map, plat, parcel map, lot line adjustment or other
subdivision map of any kind covering any portion of any Property (collectively,
"Subdivision Map"), without Lender’s prior written consent, which approval may
be granted or withheld in Lender’s sole and absolute discretion. Without
limitation on the foregoing, Lender shall also have the right to approve, in its
sole and absolute discretion, any changes to or amendments of the current zoning
for any Property. Notwithstanding anything to the contrary contained in this
Section 9.5, Lender shall not unreasonably withhold, condition or delay its
consent to, and approval of, any modification, amendment or restatement of any
Subdivision Map (including, without limitation, any replatting of the same) or
changes or amendments to the current zoning for the Property, so long as the
same does not change the permitted use of any Asset as provided in Section 9.18
hereof unless the applicable Asset is non-operating, or reduce the zoned density
or permitted floor area ratio of the Property and Improvements as such exist as
of the date hereof.

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9.6    FURTHER ASSURANCES. Upon Lender’s request and at Borrower’s sole cost and
expense, Borrower shall execute, acknowledge and deliver or shall cause to be
executed, acknowledge and delivered, any other instruments and perform any other
reasonable acts necessary, desirable or proper, as determined by Lender, to
carry out the purposes of this Agreement and the other Loan Documents or to
perfect and preserve any liens created by the Loan Documents; provided, however,
that in no event shall the obligations or liabilities of Borrower be increased
thereby.
9.7    ASSIGNMENT. Without the prior written consent of Lender in its sole
discretion, Borrower shall not assign Borrower’s interest under any of the Loan
Documents, or in any monies due or to become due thereunder, and any assignment
without such consent shall be void. In this regard, Borrower acknowledges that
Lender would not make this Loan except in reliance on Borrower’s expertise,
reputation, prior experience in owning and operating commercial real property
and mortgage loans, Lender’s knowledge of Borrower, and Lender’s understanding
that this Agreement is more in the nature of an agreement involving personal
services than a standard loan where Lender would rely on security which already
exists.
9.8    TITLE TO LOAN ASSETS.
(a)    Borrower shall not, and shall cause its Affiliates to not, accept or
record any deed or other instrument of conveyance of any kind with respect to
all or any portion of any property encumbered by the Asset Loan Documents
without the prior written consent of Lender, whether as a result of or in
connection with a foreclosure, by deed in lieu of foreclosure, or otherwise,
which consent shall not be unreasonably withheld, delayed or conditioned. Lender
shall respond to any request by Borrower to exercise any of its remedies under
the Asset Loan Documents for which Lender’s prior written consent is required
within five (5) Business Days following delivery of notice thereof. If Lender
fails to respond to Borrower within such five (5) Business Day period, then
Lender shall be deemed to have granted its consent to Borrower’s request.
(b)    Without limitation of the foregoing, if Borrower or any Affiliate of
Borrower is the successful bidder at a foreclosure sale of any of any property
encumbered by the Asset Loan Documents (whether in connection with a foreclosure
or otherwise), or otherwise acquires title to or an interest in all or any
portion of such property, then concurrently therewith, Borrower shall cause such
property to be subject to the first lien of the Loan Documents in the same
manner that the Properties are subject to the Loan Documents.
9.9    TRANSFERS. By delivery of this Agreement, Borrower acknowledges that the
financial standing and managerial and operational ability of Borrower are
substantial and material considerations to Lender in its agreement to make the
Loan and that any encumbrance or transfer of an interest in any Asset or in
Borrower whether direct or indirect, will materially impair Lender’s security
under the Security Instrument. To induce Lender to make the Loan, Borrower
agrees Borrower shall not effect a Transfer, either directly or indirectly, or
by operation of law, without in each instance first obtaining Lender’s prior
written consent, which consent may be withheld for any reason, or given upon
such terms and conditions as Lender deems necessary or appropriate, all within
Lender’s sole and absolute discretion, to the extent permitted

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by Applicable Law. Upon any Transfer made in violation of this Section 9.9 but
subject to the cure rights contained in Section 11.1(g), without limitation on
Lender’s other rights, Lender shall have the absolute right in its sole
discretion, without demand or notice, to declare all sums, indebtedness and
obligations secured by this Agreement and the other Loan Documents to be
immediately due and payable (including the Yield Maintenance (as defined in the
Note)), except to the extent that and in such particular circumstances where
exercise of such right by Lender is prohibited by law. Any Transfer effected
pursuant to a consent by Lender shall be subject to this Agreement and the other
Loan Documents, and any direct transferee shall, as a condition of the
effectiveness of any such consent and as a covenant of Borrower and such
transferee, and in form and substance prescribed by Lender, assume all
obligations hereunder and agree to be bound by all provisions contained herein.
Such assumption shall not, however, release Borrower or any maker or guarantor
(including any Asset Guarantor or Guarantor) from any liability thereunder.
Notwithstanding anything to the contrary contained herein, the following shall
not constitute a “Transfer” and are hereby expressly acknowledged and permitted
by Lender:
(i)
The transfer of any direct or indirect ownership interests in Guarantor,
including, without limitation, the transfer of any common or preferred stock; or

(ii)
Any tenant lease of Property entered into by Borrower in accordance with the
terms and conditions of this Agreement.

9.10    SINGLE PURPOSE ENTITY. Borrower shall be and remain a single purpose
bankruptcy remote entity and shall at all times comply with the following
covenants:
(a)    The purpose for which Borrower is organized shall be limited to
(i) owning, holding, selling, leasing, transferring, exchanging, operating and
managing Borrower’s interests in the Asset Guarantors, (ii) entering into the
Loan, (iii) refinancing the Loan in connection with a permitted repayment of the
Loan, and (iv) transacting any and all lawful business that is incident,
necessary and appropriate to accomplish the foregoing.
(b)    Borrower has not owned, does not own and will not own any asset or
property other than (i) its interests in the Asset Guarantors and
(ii) incidental personal property necessary for and used in connection with the
ownership or operation of the same.
(c)    Borrower shall not engage in a business other than the ownership,
operation and management of the Asset Guarantors and acquire any other property
without Lender’s prior written consent.
(d)    From and after the Effective Date, Borrower shall not enter into any
contract or agreement with any Affiliate, any Asset Guarantor or any Guarantor,
without Lender’s prior written consent.
(e)    Neither Borrower nor any Asset Guarantor shall incur, create, assume or
guarantee any indebtedness or liabilities, secured or unsecured, direct or
contingent, other than (i) the Loan and REO Loan #1 and incidental costs and
expenses associated therewith,

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(ii) unsecured indebtedness incurred in the ordinary course of business of
owning, operating, and maintaining the Property, that (A) are in such amounts
that are normal and reasonable under the circumstances (but in no event more
than Four Hundred Fifty Thousand Dollars ($450,000) (in the aggregate together
with all trade payables or accrued expenses incurred by Borrower)), (B) are not
evidenced by a note, and (C) are required to be paid within sixty (60) days from
the date they are first incurred by Borrower, and (iii) non-delinquent property
taxes and assessments. No indebtedness other than the Loan may be secured
(subordinate or pari passu) by the Property, and no indebtedness may be secured,
directly or indirectly, by any partnership, membership or other equity interest
in Borrower (comprising the same) without Lender’s consent in Lender’s sole and
absolute discretion.
(f)    Except for the Asset Loans and REO Loan #1, Borrower has not made and
will not make any loans or advances to any Person or entity and shall not
acquire obligations or securities of an Affiliate.
(g)    Borrower is and will remain solvent and Borrower will pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due; provided, however, that in no
event shall any other Person be obligated to make a capital contribution to
Borrower to ensure Borrower’s compliance with the covenant in this Section
9.10(g).
(h)    Borrower has done or caused to be done and will do all things necessary
to observe organizational formalities and preserve its existence, and Borrower
will not amend, modify or otherwise change, in violation of the covenants of
this Section 9.10 or the organizational documents of Borrower, as the case may
be without the written consent of Lender.
(i)     Borrower shall maintain all of its books, records, financial statements
and bank accounts separate from those of its Affiliates. Borrower’s assets will
not be listed as assets on the financial statement of any other Person. Borrower
shall have its own separate financial statement, provided, however, that
Borrower’s assets may be included in a consolidated financial statement of its
parent companies if inclusion on such a consolidated statement is required to
comply with the requirements of GAAP, and provided, further, that such
consolidated financial statement shall contain a footnote to the effect that
Borrower’s assets are owned by Borrower, as the case may be and that they are
being included on the financial statement of its parent solely to comply with
the requirements of GAAP, and provided, further, that such assets shall be
listed on Borrower’s own separate balance sheet. Borrower will file its own tax
returns (unless a disregarded entity for tax purposes) and will not file a
consolidated federal income tax return with any other corporation. Borrower
shall maintain its books, records, resolutions and agreements as official
records.
(j)    Borrower will be, and at all times will hold itself out to the public as,
a legal entity separate and distinct from any other Person, shall correct any
known misunderstanding regarding its status as a separate entity, shall conduct
business in its own name and shall not identify itself or any of its Affiliates
as a division or part of the other.

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(k)    Borrower will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations provided, however, that in no event shall
any other Person be obligated to make a capital contribution to Borrower to
ensure Borrower’s compliance with the covenant in this Section 9.10(k).
(l)    Neither Borrower, nor any constituent party of Borrower has or at any
time sought nor will seek the dissolution, winding up, liquidation,
consolidation or merger, in whole or in part, or the sale of material assets of
Borrower or any Asset Guarantor except as permitted hereunder and/or in
connection with a payoff of the Loan.
(m)     Other than funds held pursuant to the BACA and/or the Cash Collateral
Agreement, Borrower will not commingle the funds and other assets of Borrower
with those of any other Person, and will not participate in a cash management
system with any such Person. The foregoing shall not preclude distributions by
Borrower to its members after payment of principal (if any) and interest then
due under the Note and all other amounts then due and payable under the Loan
Documents, including, without limitation, the payment of operating expenses of
the respective Asset and all amounts payable under this Agreement.
(n)    Other than funds held pursuant to the BACA and/or the Cash Collateral
Agreement, (i) no Borrower will not commingle its assets with those of any other
Person and will hold all of its assets in its own name.
(o)    Other than REO Loan #1, Borrower will not guarantee or become obligated
for the debts of any other Person and has not, does not and will not in the
future hold itself out as being responsible for the debts or obligations of any
other Person.
(p)    Borrower shall not pledge its assets for the benefit of any other Person,
other than with respect to the Loan and REO Loan #1.
(q)    Borrower shall not file or permit any Asset Guarantor to file a petition
for relief under the Bankruptcy Code, or under any other present or future state
of federal law regarding bankruptcy, reorganization or other debtor relief law.
(r)    Borrower shall not partition and shall not permit any partition of the
Property.
9.11    MATERIAL AGREEMENTS.
(a)    Borrower shall or shall cause the applicable Asset Guarantor to (i)
promptly perform and/or observe the covenants, agreements and conditions
required to be performed and observed by it under each Material Agreement and
Operating Agreement to which it is a party, and do all things necessary to
preserve and to keep unimpaired its rights thereunder, (ii) promptly notify
Lender in writing of the giving by Borrower or any Asset Guarantor or receipt by
Borrower or any Asset Guarantor of any notice of any default by any party under
any Material Agreement and Operating Agreement of which it is aware and (iii
promptly enforce the

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performance and observance of all of the covenants, agreements and conditions
required to be performed and/or observed by any other party under each Material
Agreement and Operating Agreement to which Borrower or any Asset Guarantor is a
party in a commercially reasonable manner
(b)    Borrower shall not, and shall not permit the applicable Asset Guarantor
to, without Lender’s prior consent which shall not be unreasonably withheld: (i)
enter into, surrender or terminate any Material Agreement or Operating Agreement
to which it is a party or to which Borrower or any Asset Guarantor or any Asset
is subject (unless, with respect to Material Agreements (other than Leases), the
other party thereto is in material default and the termination of such agreement
would be commercially reasonable), (ii) increase or consent to the increase of
the amount of any charges under any Material Agreement or Operating Agreement to
which it is a party or to which Borrower or any Asset Guarantor or any Asset is
subject, except as provided therein or, with respect to Material Agreements
(other than Leases), on an arm’s-length basis and commercially reasonable terms;
or (iii) otherwise modify, change, supplement, alter or amend, or waive or
release any of its rights and remedies under any Material Agreement or Operating
Agreement to which it is a party or to which Borrower or any Asset Guarantor or
any Asset is subject in any material respect, except, with respect to Material
Agreements (other than Leases), on an arm’s-length basis and commercially
reasonable terms.
9.1    COMPLETION OF REQUIRED CAPITAL IMPROVEMENTS AND TENANT IMPROVEMENTS
COMMENCED BY BORROWER. Borrower shall complete or cause to be completed all
capital improvements required under the Capital Improvement Budget and the
Approved Budget and this Agreement, and any tenant improvements commenced by
Borrower, each on-time and free and clear of any liens. Without limitation on
the foregoing, Borrower shall complete or cause to be completed all capital
improvements it commences which are not required by the Approved Budget and this
Agreement, which Lender subsequently approves in writing as required hereunder.
9.2    ASSET LOAN COVENANTS. Borrower shall use its commercially reasonable
efforts to require each borrower under the Asset Loans to keep and maintain in
full force and effect all restrictive covenants, development agreements,
easements and other agreements with Governmental Authorities and other Persons
that are necessary or desirable for the use, occupancy, and sale of the
applicable property encumbered by the Asset Loan Documents. Borrower shall
require that each borrower under the Asset Loans comply in all material respects
with any such covenants, development agreements, easements and other agreements
and will diligently enforce its rights thereunder. Borrower shall otherwise
enforce or cause to be enforced the terms of the Asset Loan Documents. If
requested to do so at any time by Lender, Borrower shall provide such
continuation endorsements, date down endorsements and other endorsements to the
lender’s title insurance Policy for any property encumbered by the Asset Loan
Documents, in form and substance required by Lender. Borrower shall promptly
disclose to Lender the occurrence of: (a) any default by under any Asset Loan;
(b) any action or proceeding which is instituted by or against Borrower or any
Asset Guarantor or in relation to any Asset in any Federal or state court or
before any Governmental Authority, federal, state or local, foreign or

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domestic, or any such actions or proceedings which are threatened against
Borrower or any Asset Guarantor or any Asset.
9.3    OMITTED.
9.4    PROPERTY MANAGEMENT AGREEMENT. Borrower shall (i) cause the applicable
Property to be operated pursuant to the applicable Property Management
Agreement, if any; (ii) promptly perform and/or observe or cause to be performed
and/or observed in all material respects all of the covenants, agreements and
obligations required to be performed and observed by the applicable Borrower
under the applicable Property Management Agreement, if any, and do all things
necessary to preserve and to keep unimpaired its material rights thereunder;
(iii) promptly notify Lender of any default under or any material adverse change
with respect to any Property Management Agreement, if any; (iv) promptly deliver
to Lender a copy of each financial statement, business plan, capital
expenditures plan, and/or notices of default received by the applicable Borrower
under the applicable Property Management Agreement, if any; and (v) use best
efforts to promptly enforce or cause to be enforced in all material respects the
performance and observance of all of the covenants and agreements required to be
performed and/or observed by the applicable Borrower under the applicable
Property Management Agreement. Without Lender’s prior written consent, which
shall not be unreasonably withheld, Borrower shall not (A) surrender, terminate
or cancel any Property Management Agreement; (B) reduce or consent to the
reduction of the term of any Property Management Agreement; (C) fail to exercise
any option or right to renew or extend the term of any Property Management
Agreement; (D) surrender, terminate, forfeit, or suffer or permit the surrender,
termination or forfeiture of any Property Management Agreement; (E) increase or
consent to the increase of the amount of any charges under any Property
Management Agreement; (F) modify, change, supplement, alter or amend any
Property Management Agreement or waive any of its rights and remedies under any
Property Management Agreement; or (G) grant its consent or approval as may be
requested or required in connection with the terms and provisions of any
Property Management Agreement.
Any Property Management Agreement shall at all times be terminable without
payment of a premium or fee immediately upon an Event of Default and otherwise
upon not less than thirty (30) days’ prior written notice; provided, however,
that without the prior written consent of Lender, Borrower shall not enter into
any new agreement, or modify, amend, supplement, assign, replace or terminate
any existing agreement, in each case, which provides for the management, leasing
and/or operation of the Property or Improvements, provided that Lender shall not
unreasonably withhold its consent for any Qualified Replacement Property
Management Agreement. Any such agreements must expressly provide that they are
subordinate to Lender’s rights and interests under the Loan and the Loan
Documents in all respects. All consultants, property managers and leasing agents
for the Property shall be subject to Lender’s reasonable prior approval (not to
be unreasonably withheld) and, at Lender’s request, Borrower shall cause each
such consultant, property manager or leasing agent to execute and deliver to
Lender a consent and agreement to the foregoing provisions in form and substance
reasonably acceptable to Lender.

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9.5    MAINTENANCE. Borrower shall keep or cause to be kept each Property in
good condition and repair and shall provide security for each Property in at
least the same manner as maintained on the date hereof.
9.6    UTILITIES. Borrower shall pay or cause to be paid when due all charges
that are incurred by Borrower for the benefit of each Property for gas,
telephone, electricity, water, sewer, or other services furnished to each
Property.
9.7    NO CHANGE IN USE. Each Asset shall be used solely as currently used and
Borrower shall not permit any change in use or additional uses on any Asset
without the prior written consent of Lender, which shall not be unreasonably
withheld, conditioned or delayed.
9.8    PATRIOT ACT AND RELATED MATTERS. Borrower, each Asset Guarantor and
Guarantor shall comply with any and all existing and future Applicable Laws,
including, without limitation, all Prescribed Laws.
9.9    OPERATING COVENANTS. Borrower shall cause the Assets to maintain a
“Loan-to-Value Ratio” of not more than 40%.
9.10    INTERIM BEVERAGE MANAGEMENT. Upon written request by Lender, or any
purchaser at a foreclosure sale affiliated with Lender, following foreclosure or
transfer by deed-in-lieu of foreclosure of the Security Instrument, which
request may be made by Lender or such purchaser in its sole and absolute
discretion within thirty (30) days after the date a foreclosure of the Security
Instrument is final or the date a deed-in-lieu of foreclosure is delivered, as
the case may be, if such Property is operating with a liquor license in place,
Borrower shall cooperate with Lender or such purchaser to obtain an interim
liquor license for the Property including, without limitation, signing or
causing the applicable Asset Guarantor to sign Section 5 of any liquor license
application.
9.11    ORGANIZATIONAL DOCUMENTS.
(b)    The organizational documents of Borrower shall provide that the business
and affairs of Borrower shall be (A) managed by or under the direction of a
board of one or more directors designated by Borrower’s sole member (the “Sole
Member”) or (B) a committee of managers designated by Sole Member (a
“Committee”) or (C) by Sole Member, and at all times there shall be at least one
(1) duly appointed Independent Director or Independent Manager.  In addition,
the organizational documents of Borrower shall provide that no Independent
Director or Independent Manager (as applicable) of Borrower may be removed or
replaced without cause and unless Borrower provides Lender with not less than
three (3) Business Days’ prior written notice of (a) any proposed removal of an
Independent Director or Independent Manager (as applicable), together with a
statement as to the reasons for such removal, and (b) the identity of the
proposed replacement Independent Director or Independent Manager, as applicable,
together with a certification that such replacement satisfies the requirements
set forth in the organizational documents for an Independent Director or
Independent Manager (as applicable). Notwithstanding the foregoing, if (i) the
Independent Manager is no longer affiliated with or employed by the Nationally
Recognized Service Company which provided the Independent

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Manager, and such Nationally Recognized Service Company provides a replacement
Independent Manager, or (ii) the Independent Manager dies or voluntarily resigns
and a Nationally Recognized Service Company provides a replacement Independent
Manager, Borrower may appoint such replacement Independent Manager with no prior
notice, identification or certifications to the Lender.
(c)    The organizational documents of Borrower shall also provide an express
acknowledgment that Lender is an intended third-party beneficiary of the
“special purpose” provisions of such organizational documents.
(d)    The organizational documents of Borrower shall provide that the board of
directors, the Committee or Sole Member (as applicable) of Borrower shall not
take any action which, under the terms of any certificate of formation, limited
liability company operating agreement or any voting trust agreement, requires an
unanimous vote of the board of directors (or the Committee as applicable) of
Borrower unless at the time of such action there shall be (A) at least one
(1) member of the board of directors (or the Committee as applicable) who is an
Independent Director or Independent Manager, as applicable (and such Independent
Director or Independent Manager, as applicable, has participated in such vote)
or (B) if there is no board of directors or Committee, then such Independent
Manager shall have participated in such vote.  The organizational documents of
Borrower shall provide that Borrower will not and Borrower agrees that it will
not, without the unanimous written consent of its board of directors, its
Committee or its Sole Member (as applicable), including, or together with, the
Independent Director or Independent Manager (as applicable) (i) file or consent
to the filing of any petition, either voluntary or involuntary, to take
advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, (ii) seek or consent to the appointment of a receiver,
liquidator or any similar official of Borrower or a substantial part of its
business, (iii) take any action that might cause such entity to become
insolvent, (iv) make an assignment for the benefit of creditors, (v) admit in
writing its inability to pay debts generally as they become due, (vi) declare or
effectuate a moratorium on the payment of any obligations, or (vii) take any
action in furtherance of the foregoing.  Borrower shall not take any of the
foregoing actions without the unanimous written consent of its board of
directors, its Committee or its Sole Member, as applicable.
(e)    The organizational documents of Borrower shall provide that, until such
time as the Loan shall be paid and performed in full, upon the occurrence of any
event that causes Sole Member to cease to be a member of Borrower (other than
(i) upon an assignment by Sole Member of all of its limited liability company
interest in Borrower and the admission of the transferee, if permitted pursuant
to the organizational documents of Borrower and the Loan Documents, or (ii) the
resignation of Sole Member and the admission of an additional member of
Borrower, if permitted pursuant to the organizational documents of Borrower and
the Loan Documents), each of the persons acting as an Independent Director or
Independent Manager (as applicable) of Borrower shall, without any action of any
Person and simultaneously with Sole Member ceasing to be a member of Borrower,
automatically be admitted as members of Borrower (in each case, individually, a
“Special Member” and collectively, the “Special Members”) and shall preserve and
continue the existence of Borrower without dissolution.  The

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organizational documents of Borrower shall further provide that until such time
as the Loan shall be paid and performed in full, no Special Member may resign or
transfer its rights as Special Member unless (i) a successor Special Member has
been admitted to Borrower as a Special Member, and (ii) such successor Special
Member has also accepted such appointment (as applicable).
(f)    The organizational documents of Borrower shall provide that, until such
time as the Loan shall be paid and performed in full, except as expressly
permitted pursuant to the terms of this Agreement, (i) Sole Member may not
resign, and (ii) no additional member shall be admitted to Borrower.
(g)    The organizational documents of Borrower shall provide that, until such
time as the Loan shall be paid and performed in full: (i) Borrower shall be
dissolved, and its affairs shall be wound up, only upon the first to occur of
the following: (A) the termination of the legal existence of the last remaining
member of Borrower or the occurrence of any other event which terminates the
continued membership of the last remaining member of Borrower in Borrower unless
the business of Borrower is continued in a manner permitted by its operating
agreement or the Limited Liability Company Act of the state in which the
Borrower is organized (the “Act”), or (B) the entry of a decree of judicial
dissolution under the Act; (ii) upon the occurrence of any event that causes the
last remaining member of Borrower to cease to be a member of Borrower or that
causes Sole Member to cease to be a member of Borrower (other than (A) upon an
assignment by Sole Member of all of its limited liability company interest in
Borrower and the admission of the transferee, if permitted pursuant to the
organizational documents of Borrower and the Loan Documents, or (B) the
resignation of Sole Member and the admission of an additional member of
Borrower, if permitted pursuant to the organizational documents of Borrower and
the Loan Documents), to the fullest extent permitted by law, the personal
representative of such last remaining member shall be authorized to, and shall,
within ninety (90) days after the occurrence of the event that terminated the
continued membership of such member in Borrower, agree in writing (I) to
continue the existence of Borrower, and (II) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of Borrower, effective as of the occurrence of the event that terminated
the continued membership of such member in Borrower; (iii) the bankruptcy of
Sole Member or a Special Member shall not cause such Sole Member or Special
Member, respectively, to cease to be a member of Borrower and upon the
occurrence of such an event, the business of Borrower shall continue without
dissolution; (iv) in the event of the dissolution of Borrower, Borrower shall
conduct only such activities as are necessary to wind up its affairs (including
the sale of the assets of Borrower in an orderly manner), and the assets of
Borrower shall be applied in the manner, and in the order of priority, set forth
in the Act; and (v) to the fullest extent permitted by law, each of Sole Member
and the Special Members shall irrevocably waive any right or power that they
might have to cause Borrower or any of its assets to be partitioned, to cause
the appointment of a receiver for all or any portion of the assets of Borrower,
to compel any sale of all or any portion of the assets of Borrower pursuant to
any applicable law or to file a complaint or to institute any proceeding at law
or in equity to cause the dissolution, liquidation, winding up or termination of
Borrower.

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(h)    Borrower shall conduct its business so that the assumptions made with
respect to Borrower in any insolvency opinion shall be true and correct in all
respects.  In connection with the foregoing, Borrower hereby covenants and
agrees that it will comply with or cause the compliance with, (i) all of the
facts and assumptions (whether regarding Borrower or any other Person) set forth
in any insolvency opinion, (ii) all of the representations, warranties and
covenants on this Schedule I, and (iii) all of the organizational documents of
Borrower.
“Independent Director” or “Independent Manager” shall mean a natural person
selected by Borrower (a) with prior experience as an independent director,
independent manager or independent member, (b) with at least three (3) years of
employment experience, (c) who is provided by a Nationally Recognized Service
Company, (d) who is duly appointed as an Independent Director or Independent
Manager and is not, will not be while serving as Independent Director or
Independent Manager (except pursuant to an express provision in Borrower’s
operating agreement providing for the appointment of such Independent Director
or Independent Manager to become a “special member” upon the last remaining
member of Borrower ceasing to be a member of Borrower) and shall not have been
at any time during the preceding five (5) years, any of the following:

(i)
a stockholder, director (other than as an Independent Director), officer,
employee, partner, attorney or counsel of any Borrower Party or any direct or
indirect parent of Borrower;

(ii)
a customer, supplier or other Person who derives any of its purchases or
revenues from its activities with any Borrower Party;

(iii)
a Person or other entity Controlling or under common Control with any such
stockholder, partner, customer, supplier or other Person described in clause (i)
or clause (ii) above; or

(iv)
a member of the immediate family of any such stockholder, director, officer,
employee, partner, customer, supplier or other Person described in clause (i) or
clause (ii) above.

A natural person who otherwise satisfies the foregoing definition and satisfies
subparagraph (i) by reason of being the Independent Director or Independent
Manager of a “special purpose entity” affiliated with Borrower shall be
qualified to serve as an Independent Director or Independent Manager of
Borrower, provided that the fees that such individual earns from serving as
Independent Director or Independent Manager of Affiliates of Borrower in any
given year constitute in the aggregate less than five percent (5%) of such
individual's annual income for that year.
A natural person who satisfies the foregoing definition other than clause
(ii) shall not be disqualified from serving as an Independent Director or
Independent Manager of Borrower if such individual is an independent director,
independent manager or special manager provided by a Nationally Recognized
Service Company that provides professional independent directors, independent
managers and special managers and also provides other corporate services in the

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ordinary course of its business. Lender accepts and approves of the appointment
of Steven Novack of Lord SPV as the Independent Manager of Borrower.

“Nationally Recognized Service Company” shall mean any of Lord Securities
Corporation, CT Corporation, Corporation Service Company, National Registered
Agents, Inc., Wilmington Trust Company, National Corporate Research, Ltd.,
United Corporate Services, Inc., Independent Member Services LLC or such other
nationally recognized company that provides independent director, independent
manager or independent member services and that is reasonably satisfactory to
Lender, in each case that is not an Affiliate of Borrower and that provides
professional independent directors and other corporate services in the ordinary
course of its business.

ARTICLE 10.
REPORTING COVENANTS
10.1    FINANCIAL INFORMATION.
(a)    Borrower shall deliver to Lender, as soon as available, but in no event
later than ninety (90) days after each calendar year end, and not later than
forty-five (45) days after each calendar quarter end, a current financial
statement for Borrower (including, without limitation, an income and expense
statement, rent roll and balance sheet) certified by an authorized
representative of Borrower. Borrower shall cause Guarantor to deliver to Lender
annual financial statements (including contingent liabilities) of Guarantor,
within ninety (90) days after each calendar year end and quarterly financial
statements not later than forty-five (45) days after each calendar quarter end,
Guarantor’s financial statements shall be certified by an authorized
representative of each Guarantor, as applicable, to be true and correct in all
material aspects and not contain any material omissions. Notwithstanding
anything to the contrary contained herein, following an Event of Default
hereunder or under the other Loan Documents, Lender may require, in Lender’s
sole and absolute discretion, that all financial statements required hereunder
shall be audited by a nationally recognized accounting firm selected by Borrower
and approved by Lender in writing in its reasonable discretion. Lender agrees
that BDO is an acceptable accounting firm for purposes of this Section 10.1 and
that, to the extent separate audited financial statements cannot be prepared,
then audited financial statements required under this Section 10.1 may be
consolidated financial statements; provided, however, that Borrower shall
continue to provide separate unaudited financial statements for Borrower, any
Asset Guarantor or Guarantor if requested by Lender.
(b)     If in addition to the annual financial statements audited financial
information is prepared, Borrower shall deliver to Lender copies of that
information within thirty (30) days of its final preparation. All such financial
information shall include a statement which specifies the accounting methodology
used to prepare the information.
(c)    Borrower shall deliver to Lender concurrently with the delivery to the
Asset Borrower any written notices delivered to the Asset Borrower (including,
without

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limitation, monthly statements. Without limitation, all financial statements
will include a calculation of Net Operating Income, expenses payable and
receivable reports, rent rolls and occupancy statistics and shall be certified
by Borrower. The form and methodology of the financial statements provided to
Lender prior to the Effective Date are acceptable to Lender; however, Borrower
acknowledges that Lender’s approval of the form and methodology of such
statements does not constitute, and shall not be deemed to constitute, approval
of any future financial information or a limitation on the information that may
be requested by Lender in connection with the Loan.
(d)    If any statements, information or reports required hereunder (including
under this Section 10.1, Sections 10.3, 10.4 and 10.5) are not timely delivered,
there shall be an initial fee of $500.00 for the first day late and a subsequent
fee of $250.00 per each day thereafter that such statements, information or
reports are not delivered.
10.2    BOOKS AND RECORDS. Borrower shall maintain complete books of account and
other records for the Assets and for disbursement and use of the proceeds of the
Loan, and the same shall be available for inspection and copying by Lender upon
reasonable prior notice.
10.3    ASSET LOANS. In addition to any other reporting requirements contained
herein, until such time as the Note is paid in full, within thirty (30) days
after the end of each month, Borrower shall provide Lender with payment and loan
servicing reports with respect to each Asset Loan, in form and substance
reasonably satisfactory to Lender.
10.4    LEASING REPORTS. Borrower shall deliver to Lender monthly rent rolls,
leasing schedules and reports, delinquency reports, occupancy statistics, lists
of prospective tenants and property tours, operating statements, together with
(which shall include a list of leasing prospects, proposals and the then-current
negotiation status of the same, in such detail as Lender may require), operating
statements and/or such other leasing information as Lender shall request with
respect to the Properties and Improvements, each in form and substance
reasonably satisfactory to Lender, within thirty (30) days of the end of the
applicable month.
10.5    OPERATING STATEMENTS FOR PROPERTIES AND IMPROVEMENTS. Until such time as
the Note is paid in full, Borrower shall deliver to Lender monthly operating
reports within thirty (30) days after the end of each month, and within thirty
(30) days after the end of each quarter, which show in detail the amounts and
sources of Gross Operating Income received by or on behalf of Borrower and the
amounts and purposes of Permitted Operating Expenses paid by or on behalf of
Borrower with respect to each Property and Improvements for the previous month.
(a)    "Gross Operating Income" for this purpose shall mean the sum of any and
all amounts, payments, fees, rentals, additional rentals, expense reimbursements
(including, without limitation, all reimbursements by tenants, lessees,
licensees and other users of such Property and Improvements), discounts or
credits to Borrower, income, interest and other monies directly or indirectly
received by or on behalf of or credited to Borrower from any person with respect
to Borrower’s ownership, use, development, operation, leasing, franchising,
marketing or licensing of such Property and Improvements. Gross Operating Income
shall be computed on a

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cash basis and shall include for each quarterly statement all amounts actually
received in such quarter whether or not such amounts are attributable to a
charge arising in such quarter.
(b)    "Permitted Operating Expenses" shall mean the following expenses, but
only to the extent provided in the Operating Budget: (i) taxes and assessments
imposed upon such Property and Improvements to the extent that such taxes and
assessments are required to be paid by Borrower and are actually paid or
reserved for by Borrower; (ii) bond assessments; (iii) insurance premiums for
casualty insurance (including, without limitation, earthquake) and liability
insurance carried in connection with such Property and Improvements; (iv)
operating expenses incurred by Borrower for the management, operation, cleaning,
leasing, maintenance and repair of such Property and Improvements (provided,
however, that the property management fees may not exceed the lesser of four
percent (4.0%) of the amount of gross rents and the actual amounts payable under
the Property Management Agreement), but in all events only to the extent
provided in the Approved Budget. Permitted Operating Expenses shall not include
any interest or principal payments on the Loan or any allowance for
depreciation.
10.6    BUDGET. On or before December 1 of each year throughout the term of the
Loan, as the same may be extended, Borrower shall submit to Lender for Lender’s
review and reasonable approval (a) a capital improvement budget for the each
Asset (i.e., non-vacant Properties) which shall not include any payment to
Borrower or any Affiliate unless expressly approved by Lender, in writing, in
its sole discretion and (b) an operating budget (the "Operating Budget") for
each Asset (collectively with the Capital Improvement Budget, the "Approved
Budget"). Borrower shall cause the Assets to be owned and operated in accordance
with the Approved Budget as approved by Lender, and shall make no changes to any
such approved budgets without the prior written consent of Lender which consent
shall not to be unreasonably withheld. The budget for 2015 is attached as
Exhibit C attached hereto and has been approved by Lender.
ARTICLE 11
EVENTS OF DEFAULT AND REMEDIES
11.1    EVENT OF DEFAULT. The occurrence of any one or more of the following
shall constitute an event of default (an "Event of Default") under this
Agreement and the other Loan Documents:
(c)    Monetary. Borrower’s failure to pay when due any sums payable under the
Note or any of the other Loan Documents within five (5) days when due (provided,
however, that there shall be no grace period for amounts due at the Maturity
Date or upon earlier acceleration nor any grace period if a grace period is
already provided hereunder for such payments); provided further, however, that
Borrower’s non-payment of amounts other than those due at the Maturity Date or
upon earlier acceleration of the Loan shall not be an Event of Default to the
extent Lender is holding funds in any Reserves specifically for the payment of
such amount, and Borrower has satisfied all conditions for disbursement of funds
from the applicable Reserve, and Lender fails to apply or disburse such funds in
accordance with the terms of this

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Agreement to the amounts then due and owing for which Borrower has satisfied the
conditions of disbursement from such Reserve; or
(d)    Liens, Attachment; Condemnation. (i) The recording of any claim of lien
against any Asset or the service on Lender of any bonded stop notice relating to
the Loan and the continuance of such claim of lien or bonded stop notice for
forty-five (45) days after the date on which Borrower or any Affiliate becomes
aware of such claim of lien days without discharge, satisfaction or provision
for payment (including a bond, cash deposit or other security reasonably
satisfactory to Lender, so long as the Property nor any interest therein would
not be in any danger of sale, loss or forfeiture) being made by Borrower or such
Affiliate in a manner satisfactory to Lender; or (ii) the condemnation, seizure
or appropriation of, or occurrence of an uninsured casualty with respect to any
material portion of the Assets, provided, however, that such shall not be an
Event of Default if Borrower is otherwise performing its obligations under this
Agreement and (y) in the event of an uninsured casualty with respect to any
material portion of the Assets, Borrower pays to Lender an amount equal to the
shortfall of any insurance proceeds required for the restoration therefor or,
(z) in the event there is a condemnation, seizure or appropriation of any
material portion of the Assets, condemnation proceeds are remitted to Lender, or
Borrower otherwise pays to Lender, an amount equal to the diminution of the
Assets, as reasonably determined by Lender; or (iii) the sequestration or
attachment of, or any levy or execution upon any of the Assets, any other
collateral provided by Borrower or an Affiliate under any of the Loan Documents,
any monies in the Reserves, or any substantial portion of the other assets of
Borrower, which sequestration, attachment, levy or execution is not released,
expunged or dismissed prior to the earlier of forty-five (45) days or the sale
of the assets affected thereby; or
(e)    Representations and Warranties. Any of Borrower’s or an Affiliate’s
representations or warranties contained in the this Agreement or any other Loan
Document was untrue when made (provided that in the event that Borrower did not
know, or have a reasonable basis to know, that such representations or
warranties were untrue, Borrower shall have the right to cure such default
within thirty (30) days after receipt of written notice from Lender of the
inaccuracy of such representation or warranty (except that, if the default is
such that it cannot be cured within said thirty (30) day period, and Borrower
promptly commences the cure of such default within thirty (30) days of the start
of such thirty (30) day period and diligently pursues such cure to completion,
then such thirty (30) day period shall be extended to such period of time as may
be reasonably necessary, but in no event more than a total of ninety (90)
days)); or
(f)    Voluntary Bankruptcy; Insolvency; Dissolution. (i) The filing of a
petition by Borrower for relief under the Bankruptcy Code, or under any other
present or future state or federal law regarding bankruptcy, reorganization or
other debtor relief law; (ii) the filing of any pleading or an answer by
Borrower in any involuntary proceeding under the Bankruptcy Code or other debtor
relief law which admits the jurisdiction of the court or the petition’s material
allegations regarding Borrower’s insolvency; (iii) a general assignment by
Borrower for the benefit of creditors; or (iv) Borrower applying for, or the
appointment of, a receiver, trustee, custodian or liquidator of Borrower or any
of its property; or

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(g)    Involuntary Bankruptcy. The failure of Borrower to effect a full
dismissal of any involuntary petition under the Bankruptcy Code or under any
other debtor relief law that is filed against Borrower or in any way restrains
or limits Borrower or Lender regarding the Loan, the Assets, prior to the
earlier of the entry of any court order granting relief sought in such
involuntary petition, or ninety (90) days after the date of filing of such
involuntary petition; or
(h)    Partners; Corporate Guarantor; Limited Guarantor. The occurrence of any
of the events specified in Section 11.1 (d) or 11.1 (e) as to any Asset
Guarantor or Guarantor; or
(i)    Transfer. Any Transfer occurs without the prior written consent of Lender
in its sole and absolute discretion (except as may be expressly permitted by
Section 9.9 hereof), provided, however, that Borrower shall have the right to
cure any such default arising from Borrower’s failure to comply with the terms
and conditions of this Agreement solely with respect to any tenant lease of the
Property within thirty (30) days after receipt of written notice from Lender
that a tenant lease of the Property failed to comply with the terms and
conditions of this Agreement (except that, if the default is such that it cannot
be cured within said thirty (30) day period, and Borrower promptly commences the
cure of such default within thirty (30) days of the start of such thirty (30)
day period and diligently pursues such cure to completion, then such thirty (30)
day period shall be extended to such period of time as may be reasonably
necessary, but in no event more than a total of ninety (90) days)); or
(j)    Loss of Priority. The failure at any time of any Security Instrument to
be a valid first lien upon the applicable Asset or any portion thereof, other
than as a result of any release or reconveyance of a Security Instrument with
respect to all or any portion of the Assets pursuant to the terms and conditions
of this Agreement; or
(k)    Single Purpose Entity. Borrower shall fail to comply with the provisions
of Section 9.10 (Single Purpose Entity); or
(l)    Adverse Financial Condition. Any material adverse change in the financial
condition of Borrower, any Asset Guarantor or any Guarantor, from the condition
shown on the financial statement(s) submitted to Lender and relied upon by
Lender in making the Loan, which results in Borrower being unable to fulfill the
material obligations of Borrower hereunder and under the Loan Documents; or
(m)    Key Person or Entity. The retirement, death, or incapacity of Lawrence D.
Bain or the withdrawal of Lawrence D. Bain from the operation of Borrower, and
Borrower’s failure to provide a substitute or replacement of such Person
approved in writing by Lender in its sole discretion within sixty (60) days
after the occurrence of any such retirement, death, incapacity or withdrawal,
Lender agrees that Jay Wolf is an acceptable replacement for Lawrence D. Bain.;
or
(n)    Environmental Indemnity Agreement. The occurrence of a default (after all
notice and grace periods provided therein, if any, shall have expired) under the
Environmental Indemnity Agreement; or

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(o)    Guaranties. The occurrence of a default (after all notice and grace
periods provided therein, if any, shall have expired) under the Carveout
Guaranty; or
(p)    Asset Loans. Borrower shall fail to strictly comply with the provisions
of Article 4 (Special Covenant Relating to the Collateral) hereof or Section 9.8
(Title to Loan Assets); or
(q)     Lockbox Agreement. Any default by Borrower under the Lockbox Agreement
which is not cured within thirty (30) days after written notice of such default
given by Lender to Borrower except that, if the default is such that it cannot
be cured within said thirty (30) day period but is reasonably susceptible to
cure within sixty (60) days, and Borrower promptly commences the cure of such
default within thirty (30) days after such written notice and diligently pursues
such cure to completion, then such thirty (30) day period shall be extended to
such period of time as may be reasonably necessary, but in no event more than a
total of sixty (60) days.; or
(r)    Other Payments. Borrower’s failure to timely fund any Reserves as
required hereunder if such failure continues for five (5) Business Days
following Borrower’s receipt of written notice thereof from Lender; or
(s)    Permits; Utilities; Insurance. (i) The neglect, failure or refusal of
Borrower or any Asset Guarantor to keep in full force and effect any material
permit, license, consent or approval required for the operation of any Property
that is not fully reinstated within thirty (30) days after Lender gives Borrower
notice of the lapse of effectiveness of such material permit, license, consent
or approval; (ii) the curtailment in availability to any Property of utilities
or other public services necessary for the full occupancy and utilization of the
Improvements that is not restored to full availability within thirty (30) days
after Lender gives Borrower notice of such curtailment of availability; or (iii)
the failure by Borrower to maintain any insurance required under this Agreement
or any Loan Document provided, however, that with respect to clauses (i) and
(ii) above, such shall not be an Event of Default provided that Borrower is
otherwise performing its obligations under this Agreement and the other Loan
Documents, Borrower commences to reinstate or restore such item within thirty
(30) days of the loss or curtailment thereof, and Borrower reinstates such
material permit, license, consent or approval, or restores such utilities or
other public services within one hundred eighty (180) days following the initial
lapse or curtailment; or
(t)    Material Obligation. Failure of Borrower or any Affiliate to pay when due
or the default beyond any applicable notice and cure period with respect to any
indebtedness or other liability of Borrower or any Asset aggregating in excess
of $100,000.00 ("Material Indebtedness"); the default by Borrower or any
Affiliate in the performance (beyond the applicable grace period with respect
thereto, if any) of any term, provision or condition contained in any agreement
under which any Material Indebtedness was created or is governed; the occurrence
of any other event or condition, the effect of which event or condition is to
cause, or to permit the holder or holders of any Material Indebtedness to cause,
such Material Indebtedness to become due prior to its stated maturity; or any
Material Indebtedness of Borrower or an Affiliate shall be declared to be due
and payable or required to be prepaid or

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repurchased (other than by a regularly scheduled payment) prior to the stated
maturity thereof; provided however, Borrower or such Affiliate shall have the
right to contest in good faith any of the matters set forth in this subparagraph
(r), so long as Borrower or such Affiliate does so diligently, by appropriate
proceedings and without prejudice to Lender and provided that neither the
Property, the Asset nor any interest therein would be in any danger of sale,
loss or forfeiture as a result of such proceeding or contest. In the event
Borrower or any Affiliate shall contest any such claim or demand, Borrower shall
promptly notify Lender of such contest and thereafter shall, upon Lender's
request, promptly provide a bond, cash deposit or other security satisfactory to
Lender to protect Lender's interest and security should the contest be
unsuccessful; or
(u)    Impairment of Security. (i) The validity or effectiveness of any Asset
Loan Security Instrument or its transfer, grant, pledge or assignment by the
Person executing it in favor of Lender is materially impaired as determined by
the non-appealable decision of a court of competent jurisdiction; (ii) it is
determined by the non-appealable decision of a court of competent jurisdiction
that any Asset Loan Security Instrument is not a legal, valid and binding
obligation of such party enforceable in accordance with its terms; (iii) the
security interest or lien purporting to be created by any of the Asset Loan
Security Instruments ceases to be a valid, perfected lien subject to no liens
other than liens not prohibited by this Agreement or any Asset Loan Security
Instrument; or (iv) any Asset Loan Security Instrument is amended, subordinated,
terminated or discharged, or any Person is released from any of its covenants or
obligations except to the extent that Lender expressly consents in writing
thereto; or
(v)    Asset Loan Documents. (i) The validity or effectiveness of any Asset Loan
Document or the transfer, grant, pledge or assignment by the Person executing it
is materially impaired as determined by the non-appealable decision of a court
of competent jurisdiction; (ii) it is determined by the non-appealable decision
of a court of competent jurisdiction that any Asset Loan Document is not a
legal, valid and binding obligation of such party enforceable in accordance with
its terms; (iii) the security interest or lien purporting to be created by any
of the Asset Loan Documents ceases to be a valid, perfected lien; or (iv) any
Asset Loan Document is amended, subordinated, terminated or discharged, or any
Person is released from any of its covenants or obligations except to the extent
that Lender expressly consents in writing thereto; or
(w)    Other Default. The occurrence of an event of default by Borrower or any
Affiliate under any other Loan Document or Borrower’s or an Affiliate’s default
in the performance of any other term, covenant or condition contained in this
Agreement (including, without limitation, Section 9.20 hereof) or any other Loan
Document which is not cured within thirty (30) days after written notice of such
default given by Lender to Borrower except that, if the default is such that it
cannot be cured within said thirty (30) day period but is reasonably susceptible
to cure within ninety (90) days, and Borrower or the applicable Affiliate
promptly commences the cure of such default within thirty (30) days after such
written notice and diligently pursues such cure to completion, then such thirty
(30) day period shall be extended to such period of time as may be reasonably
necessary, but in no event more than a total of ninety (90) days; or

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(x)    REO Loan #1. An Event of Default as defined in the REO Loan #1 Loan
Documents occurs.
11.2    ACCELERATION UPON EVENT OF DEFAULT; REMEDIES. Upon the occurrence and
continuance of any Event of Default specified in this Article 11, Lender may, at
its sole option, declare all sums owing to Lender under the Note, this Agreement
and the other Loan Documents immediately due and payable. Upon such
acceleration, Lender may, in addition to all other remedies permitted under this
Agreement and the other Loan Documents and at law or in equity, apply any sums
in the Reserves to the sums owing under the Loan Documents and any and all
obligations of Lender to fund further disbursements under the Loan shall
terminate.
11.3    DISBURSEMENTS TO THIRD PARTIES. Upon the occurrence and continuance of
an Event of Default occasioned by Borrower’s failure to pay money to a third
party as required by this Agreement, Lender may but shall not be obligated to
make such payment from the Loan proceeds or other funds of Lender. If such
payment is made from proceeds of the Loan, Borrower shall immediately deposit
with Lender, upon written demand, an amount equal to such payment. If such
payment is made from funds of Lender, Borrower shall immediately repay such
funds upon written demand of Lender. In either case, the Event of Default with
respect to which any such payment has been made by Lender shall not be deemed
cured until such deposit or repayment (as the case may be) has been made by
Borrower to Lender.
11.4    LENDER’S COMPLETION OF CONSTRUCTION. Upon the occurrence and continuance
of an Event of Default, Lender may, upon five (5) days prior written notice to
Borrower, and with or without legal process, take possession of the Assets,
remove Borrower and all agents, employees and contractors of Borrower from the
Assets, complete the work of any construction and market and sell or lease the
Assets. For this purpose, Borrower irrevocably appoints Lender as its
attorney‑in‑fact, which agency is coupled with an interest. As attorney‑in-fact,
Lender may, in Borrower’s name, take or omit to take any action Lender may deem
appropriate, including, without limitation, exercising Borrower’s rights under
the Loan Documents and all contracts concerning the Assets.
11.5    REPAYMENT OF FUNDS ADVANCED. Any funds expended by Lender in the
exercise of its rights or remedies under this Agreement and the other Loan
Documents shall be payable to Lender upon written demand, together with interest
at the rate applicable to the principal balance of the Note from the date the
funds were expended.
11.6    RIGHTS CUMULATIVE, NO WAIVER. All Lender’s rights and remedies provided
in this Agreement and the other Loan Documents, together with those granted by
law or at equity, are cumulative and may be exercised by Lender at any time.
Lender’s exercise of any right or remedy shall not constitute a cure of any
Event of Default unless all sums then due and payable to Lender under the Loan
Documents are repaid and Borrower has cured all other Events of Default. No
waiver shall be implied from any failure of Lender to take, or any delay by
Lender in taking, action concerning any Event of Default or failure of condition
under the Loan Documents, or from any previous waiver of any similar or
unrelated Event of Default or failure

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of condition. Any waiver or approval under any of the Loan Documents must be in
writing and shall be limited to its specific terms.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1    INDEMNITY. EXCEPT TO THE EXTENT DUE SOLELY TO LENDER’S WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE, BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND
HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES,
AGENTS, SUCCESSORS AND ASSIGNS FOR, FROM AND AGAINST ANY AND ALL LOSSES,
DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES), WHICH
ANY SUCH PARTY MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE
TO WHICH BORROWER APPLIES THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWER OR ANY
ASSET GUARANTOR TO PERFORM ANY OBLIGATIONS AS AND WHEN REQUIRED BY THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; (C) ANY FAILURE AT ANY TIME OF ANY
OF BORROWER’S OR ANY ASSET GUARANTOR’S REPRESENTATIONS OR WARRANTIES TO BE TRUE
AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, CONSTITUENT PARTNER OR
MEMBER OF BORROWER, ANY ASSET GUARANTOR, ANY CONTRACTOR, SUBCONTRACTOR OR
MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO
ANY OF THE ASSETS. BORROWER SHALL PROMPTLY PAY TO LENDER UPON DEMAND ANY AMOUNTS
OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE
INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE
PRINCIPAL BALANCE OF THE NOTE. BORROWER’S DUTY AND OBLIGATIONS TO DEFEND,
INDEMNIFY AND HOLD HARMLESS SUCH PARTIES SHALL SURVIVE CANCELLATION OF THE NOTE
AND THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE SECURITY
INSTRUMENT.
12.2    FORM OF DOCUMENTS. The form and substance of all documents, instruments,
and forms of evidence to be delivered to Lender under the terms of this
Agreement and any of the other Loan Documents shall be subject to Lender’s
approval and shall not be modified, superseded or terminated in any respect
without Lender’s prior written approval.
12.3    NO THIRD PARTIES BENEFITED. No person other than Lender and Borrower and
their permitted successors and assigns shall have any right of action under any
of the Loan Documents.
12.4    NOTICES. All notices or other communications required or permitted to be
given pursuant to the provisions of this Agreement shall be in writing and shall
be considered as properly given if delivered to the appropriate party at the
address set forth below (subject to change from time to time by written notice
to all other parties to this Agreement). Except when otherwise required by law,
any notice which a party is required or may desire to give the other

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shall be in writing and may be sent by e-mail (provided that a copy is
simultaneously sent by one of the other permitted means of giving notice
hereinafter set forth), by personal delivery or by mail (either (i) by United
States registered or certified mail, return receipt requested, postage prepaid,
or (ii) by Federal Express or similar generally recognized overnight carrier
regularly providing proof of delivery). Any notice so given by e-mail shall be
deemed to have been given as of the date on which the sender of such
communication shall confirm receipt thereof by the appropriate parties. Any
notice so given by mail shall be deemed to have been given as of the date of
delivery established by U.S. Post Office return receipt or the overnight
carrier’s proof of delivery, as the case may be. Any such notice not so given
shall be deemed given upon receipt of the same by the party to whom the notice
is to be given; provided, however, that non-receipt of any communication as the
result of any change of address of which the sending party was not notified or
as the result of a refusal to accept delivery shall be deemed receipt of such
communication. For purposes of notice, the addresses of the parties shall be:
Borrower:     c/o IMH Financial Corporation
7001 N. Scottsdale Road
Scottsdale, Arizona 85253
Attention: Lawrence D. Bain
Email: ldb@imhfc.com

With a copies to:    c/o IMH Financial Corporation
7001 N. Scottsdale Road
Scottsdale, Arizona 85253
Attention: Jonathan Brohard
Email: jbrohard@imhfc.com
and
Polsinelli PC
One East Washington Street, Suite 1200
Phoenix, Arizona 85004
Attention: Margaret Esler
Email: mesler@polsinelli.com
Lender:    Calmwater Capital 3, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, California 90025
Attention: Larry Grantham, Managing Director
Email: larry@karlinre.com
With a copy to:    Safarian, Choi & Bolstad LLP
555 South Flower St., Suite 650
Los Angeles, California 90071

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Attention: Alex Choi
Email: achoi@safarianchoi.com
Any party shall have the right to change its address for notice hereunder to any
other location within the continental United States by the giving of fifteen
(15) days’ notice to the other party in the manner set forth hereinabove.
Borrower shall forward to Lender, without delay, any notices, letters or other
communications delivered with respect to any Asset or to Borrower naming Lender,
"Lender" or any similar designation as addressee, or which is reasonably likely
to affect the ability of Borrower to perform its obligations to Lender under the
Loan Documents.
12.5    ATTORNEY-IN-FACT. Borrower hereby irrevocably appoints and authorizes
Lender, as Borrower’s attorney‑in‑fact, which agency is coupled with an
interest, to execute and/or record in Lender’s or Borrower’s or any Asset
Guarantor’s name any notices, instruments or documents that Lender deems
appropriate to protect Lender’s interest under any of the Loan Documents.
12.6    ACTIONS. Borrower agrees that Lender, in exercising the rights, duties
or liabilities of Lender or Borrower under the Loan Documents, may commence,
appear in or defend any action or proceeding purporting to affect any Assets, or
the Loan Documents and Borrower shall promptly reimburse Lender upon written
demand for all such out-of-pocket expenses so incurred or paid by Lender,
including, without limitation, reasonable attorneys’ fees and expenses and court
costs.
12.7    RIGHT OF CONTEST. Borrower may contest in good faith any claim, demand,
lien, levy or assessment by any person other than Lender which would constitute
an Event of Default if: (a) Borrower pursues the contest diligently, in a manner
which Lender determines is not prejudicial to Lender, and does not impair the
rights of Lender under any of the Loan Documents; and (b) Borrower deposits with
Lender any funds or other forms of assurance which Lender in good faith
reasonably determines from time to time appropriate to protect Lender from the
consequences of the contest being unsuccessful. Borrower’s compliance with this
Section 12.7 shall operate to prevent such claim, demand, levy or assessment
from becoming an Event of Default.
12.8    RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender under
the Loan Documents is, and shall at all times remain, solely that of borrower
and lender, and Lender neither undertakes nor assumes any responsibility or duty
to Borrower or to any third party with respect to the Assets, except as
expressly provided in this Agreement and the other Loan Documents.
12.9    DELAY OUTSIDE LENDER’S CONTROL. Lender shall not be liable in any way to
Borrower or any third party for Lender’s failure to perform or delay in
performing under the Loan Documents (and Lender may suspend or terminate all or
any portion of Lender’s obligations under the Loan Documents) if such failure to
perform or delay in performing results directly or indirectly from, or is based
upon, the action, inaction, or purported action, of any governmental or local
authority, or because of war, rebellion, insurrection, strike, lock‑out,

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boycott or blockade (whether presently in effect, announced or in the sole
judgment of Lender deemed probable), or from any Act of God or other cause or
event beyond Lender’s control.
12.10    ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged
by Lender to enforce or defend any provision of this Agreement, any of the other
Loan Documents or Other Related Documents, or as a consequence of any Event of
Default under the Loan Documents, with or without the filing of any legal action
or proceeding, and including, without limitation, any fees and expenses incurred
in any bankruptcy proceeding of the Borrower or any Asset Guarantor, then
Borrower shall immediately pay to Lender, upon demand, the amount of all
attorneys’ fees and expenses and all costs incurred by Lender in connection
therewith, together with interest thereon from the date of such demand until
paid at the rate of interest applicable to the principal balance of the Note as
specified therein.
12.11    IMMEDIATELY AVAILABLE FUNDS. Unless otherwise expressly provided for in
this Agreement, all amounts payable by Borrower to Lender shall be payable only
in United States currency, immediately available funds.
12.12    LENDER’S CONSENT. Wherever in this Agreement there is a requirement for
Lender’s consent, determination and/or a document to be provided or an action
taken "to the satisfaction of Lender", except as otherwise expressly set forth
herein, it is understood by such phrase that Lender shall exercise its consent,
right or judgment in its sole and absolute discretion.
12.13    LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Borrower
agrees that Lender may elect, at any time, to sell, assign or grant
participations in all or any portion of its rights and obligations under the
Loan Documents, and that any such sale, assignment or participation may be to
one or more financial institutions, private investors, and/or other entities, at
Lender’s sole discretion ("Participant"). Borrower further agrees that Lender
may disseminate to any such actual or potential purchaser(s), assignee(s) or
participant(s) all documents and information (including, without limitation, all
financial information) which has been or is hereafter provided to or known to
Lender with respect to: (a) the Assets and its operation; (b) any party
connected with the Loan (including, without limitation, Borrower, any Person
having any interest, whether direct or indirect, in Borrower, any constituent
partner or member of Borrower, any Asset Guarantor and any Guarantor); and/or
(c) any lending relationship other than the Loan which Lender may have with any
party connected with the Loan. In the event of any such sale, assignment or
participation, Lender and the parties to such transaction shall share in the
rights and obligations of Lender as set forth in the Loan Documents only as and
to the extent they agree among themselves. In connection with any such sale,
assignment or participation, Borrower further agrees that the Loan may be split
into two or more loans with the economic terms materially the same as provided
herein and in the other Loan Documents, the Loan Documents shall be sufficient
evidence of the obligations of Borrower to each purchaser, assignee, or
participant, and upon written request by Lender, Borrower shall enter into such
amendments or modifications to the Loan Documents as may be reasonably required
in order to evidence any such sale, assignment or participation. The indemnity
obligations of Borrower under the Loan Documents shall also apply with respect
to any Participant.

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Without limitation of the foregoing, Borrower acknowledges that Lender may
effectuate one or more Secondary Market Transactions (as defined below).
Borrower shall cooperate in all respects with Lender in effecting any such
Secondary Market Transaction and shall cooperate in all respects to implement
all requirements imposed by any Investment Party or Rating Agency (each as
defined below) involved therein, including, without limitation, amendments to
Borrower’s organizational documents and/or the obligations evidenced by each
Note and this Agreement and secured by the Security Instrument, and
modifications to any Loan Documents, provided however that such shall not
materially increase Borrower’s obligations or liabilities under this Agreement
or the other Loan Documents. Borrower shall provide such information and
documents relating to Borrower, any Asset Guarantor, any Guarantor, the Property
and any tenants as Lender may reasonably request in connection with such
Secondary Market Transaction, including, without limitation, non-consolidation,
Delaware and other customary opinions. Borrower shall make available to Lender
all information concerning its business and operations that Lender may
reasonably request pursuant to the terms of the Loan Documents. Lender shall be
permitted to share all information provided in connection with the Loan with the
Investment Parties, Rating Agencies, investment banking firms, accounting firms,
law firms and other third-party advisory firms involved with the Loan Documents
or the applicable Secondary Market Transaction. It is understood that the
information provided to Lender in connection with the Loan may ultimately be
incorporated into the offering documents for the Secondary Market Transaction
and thus potential Investment Parties may also see some or all of the
information with respect to the Loan, any Asset Guarantor, any Guarantor, the
Assets, Borrower and the holders of direct or indirect interests in Borrower.
Borrower irrevocably waives any and all rights it may have under any Applicable
Laws (including, without limitation, any right of privacy) to prohibit such
disclosure. Lender and all of the aforesaid third-party advisors and
professional firms shall be entitled to rely on the information supplied by, or
on behalf of, Borrower. Except to the extent due solely to Lender’s willful
misconduct or gross negligence, Borrower hereby indemnifies Lender as to any
losses, claims, damages or liabilities that arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the information provided by or on behalf of Borrower or any Affiliate, or arise
out of or are based upon the omission or alleged omission by Borrower to state
therein a material fact required to be stated in such information, or necessary
in order to make the statements in such information, or in light of the
circumstances under which they were made, not misleading. Lender may publicize
the existence of the Loan or Borrower’s obligations under the Loan in connection
with its marketing for a Secondary Market Transaction or otherwise as part of
its business development. As used herein, the following terms shall have the
following meanings: (x) “Secondary Market Transaction” shall be (1) any sale of
the Security Instrument, this Agreement, any Note and other Loan Documents to
one or more investors as a whole loan, (2) a participation of the Loan or
Borrower’s obligations under the Loan to one or more investors, (3) a
securitization of the Loan, (4) any other sale or transfer of the Loan or
Borrower’s obligations under the Loan or any interest therein to one or more
investors; (y) “Rating Agency” shall mean any nationally-recognized statistical
rating organization that has been designated by Lender to provide, or that
provides, a rating on Borrower, the Loan or any securities evidencing an
interest in, inter alia, a trust or other entity which is the holder of any
Note; and (z) “Investment Party” shall mean any actual or potential purchaser,
transferee, assignee, servicer, participant or investor in a Secondary Market
Transaction.

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12.14    RESERVED.
12.15    LENDER’S AGENTS. Lender may designate an agent or independent
contractor to exercise any of Lender’s rights under this Agreement and any of
the other Loan Documents. Any reference to Lender in any of the Loan Documents
shall include Lender’s agents, employees or independent contractors.
12.16    TAX SERVICE. Lender is authorized to secure, at Borrower’s expense, a
tax service contract with a third party vendor which shall provide tax
information on the Assets satisfactory to Lender.
12.17    WAIVER OF RIGHT TO TRIAL BY JURY;JUDICIAL REFERENCE IN THE EVENT OF
JURY TRIAL WAIVER UNENFORCEABILITY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY. THE PARTIES
HERETO HEREBY AGREE THAT THE PROVISIONS CONTAINED HEREIN HAVE BEEN FAIRLY
NEGOTIATED ON AN ARMS-LENGTH BASIS, WITH BOTH SIDES AGREEING TO THE SAME
KNOWINGLY AND BEING AFFORDED THE OPPORTUNITY TO HAVE THEIR RESPECTIVE LEGAL
COUNSEL CONSENT TO THE MATTERS CONTAINED HEREIN. ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY AND THE AGREEMENTS CONTAINED HEREIN REGARDING THE APPLICATION OF
JUDICIAL REFERENCE IN THE EVENT OF THE INVALIDITY OF SUCH JURY TRIAL WAIVER.
12.18    SEVERABILITY. If any provision or obligation under this Agreement and
the other Loan Documents shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that provision shall be
deemed severed from the Loan Documents and the validity, legality and
enforceability of the remaining provisions or obligations shall remain in full
force as though the invalid, illegal, or unenforceable provision had never been
a part of the Loan Documents; provided, however, that if the rate of interest or
any other amount payable under the Note or this Agreement or any other Loan
Document, or the right of collectability therefor, are declared to be or become
invalid, illegal or unenforceable, Lender’s obligations to make advances under
the Loan Documents shall not be enforceable by Borrower.

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12.19    HEIRS, SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
under the terms and conditions of this Agreement, the terms of the Loan
Documents shall bind and inure to the benefit of the heirs, successors and
assigns of the parties.
12.20    TIME. Time is of the essence of each and every term of this Agreement.
12.21    HEADINGS. All article, section or other headings appearing in this
Agreement and any of the other Loan Documents are for convenience of reference
only and shall be disregarded in construing this Agreement and any of the other
Loan Documents.
12.22    GOVERNING LAW. THIS AGREEMENT, AND THE LOAN, AS A WHOLE, WAS NEGOTIATED
IN THE STATE OF ARIZONA, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND, EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 9-301 OR 9-307 OF THE UCC, IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF ARIZONA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA; PROVIDED, HOWEVER, THAT AT ALL TIMES THE
PROVISIONS HEREIN FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT TO THE SECURITY INSTRUMENT SHALL BE GOVERNED
BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE ASSET
IS LOCATED (OR IN THE CASE OF ASSET LOANS, STATE IN WHICH THE UNDERLYING
COLLATERAL IS LOCATED). TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT, AND, EXCEPT AS SET FORTH ABOVE, THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ARIZONA.
12.23    INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect to the
matters contemplated therein and supersede all prior negotiations or agreements,
written or oral. The Loan Documents shall not be modified except by written
instrument executed by all parties. Any reference to the Loan Documents includes
any amendments, renewals or extensions now or hereafter approved by Lender in
writing.
12.24    JOINT AND SEVERAL LIABILITY. Except for the Guarantor, the liability of
all persons and entities obligated in any manner under this Agreement and any of
the Loan Documents shall be joint and several.
12.25    COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be convenient or required. It shall not be
necessary that the

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signature of, or on behalf of, each party, or that the signature of all persons
required to bind any party, appear on each counterpart. All counterparts shall
collectively constitute a single document. It shall not be necessary in making
proof of this Agreement to produce or account for more than a single counterpart
containing the respective signatures of, or on behalf of, each of the parties
hereto. Any signature page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures thereon and
thereafter attached to another counterpart identical thereto except having
attached to it additional signature pages. Facsimile and other electronically
transmitted signatures shall serve as the functional equivalent of manually
executed signatures for all purposes.
12.26    CONFIDENTIALITY AND PUBLICITY.
(a)    Borrower hereby agrees that Lender or any Affiliate of Lender may (i)
disclose a general description of transactions arising under the Loan Documents
for advertising, marketing or other similar purposes, (ii) use Borrower’s, any
Asset Guarantor’s or any Guarantor’s names, logos or other indicia germane to
such parties in connection with such advertising, marketing or other similar
purposes and (iii) disclose any and all information concerning the Loan
Documents, as well as any information regarding the Borrower, any Asset
Guarantor or any Guarantor and their operations, received by Lender in
connection with the Loan Documents required by its lenders or funding or
financing sources
(b)    Borrower agrees, and agrees to cause each of its Affiliates, (i) not to
transmit or disclose provision of any Loan Document to any Person (other than to
Borrower’s advisors and officers on a need-to-know basis) without Lender’s prior
written consent, (ii) to inform all Persons of the confidential nature of the
Loan Documents and to direct them not to disclose the same to any other Person
and to require each of them to be bound by these provisions. Borrower agrees to
submit to Lender and Lender reserves the right to review and approve all
materials that Borrower or any of its Affiliates prepares that contain Lender’s
name or describe or refer to any Loan Document, any of the terms thereof or any
of the transactions contemplated thereby. Borrower shall not, and shall not
permit any of its Affiliates to, use Lender’s name (or the name of any of
Lender’s Affiliates) in connection with any of its business operations,
including without limitation, advertising, marketing or press releases or such
other similar purposes, without Lender’s prior written consent. Nothing
contained in any Loan Document is intended to permit or authorize Borrower or
any of its Affiliates to contract on behalf of Lender.
(c)    Lender agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent required or requested by any
regulatory authority purporting to have jurisdiction over such Person (including
any self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to

60

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

this Agreement or any other Loan Document or the enforcement of rights hereunder
or thereunder, (f) subject to an agreement containing provisions substantially
the same as those of this Section, any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Agreement, (g) with the consent of the Borrower, (h) in connection
with any Secondary Market Transaction, or (i) to the extent such Information (x)
becomes publicly available other than as a result of a breach of this Section or
(y) becomes available to Lender or its Affiliates on a nonconfidential basis
from a source other than the Borrower. For purposes of this Section,
“Information” means all information received from the Borrower, any Asset
Guarantor or any Guarantor relating to the Borrower, any Asset Guarantor or any
Guarantor or any of their respective businesses, other than any such information
that is available to Lender on a nonconfidential basis prior to disclosure by
the Borrower. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.
12.27    BROKERS. Except for Daniel MacDonnell of Cushman &Wakefield, Borrower
hereby represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrower shall indemnify, defend
and hold Lender harmless for, from and against any and all claims, liabilities,
costs and expenses of any kind (including Lender’s attorneys’ fees and expenses)
in any way relating to or arising from a claim by any Person that such Person
acted on behalf of Borrower or Lender in connection with the transactions
contemplated herein, regardless of whether caused in whole or in part by the
negligence or strict liability of Lender. The provisions of this Section 12.27
shall survive the expiration and termination of this Agreement and the payment
of the Loan.
12.28    OFFSETS AND COUNTERCLAIMS. Borrower hereby waives the right to assert a
counterclaim, other than a compulsory counterclaim, in any action or proceeding
brought against it by Lender or its agents, including any servicer of Borrower,
or otherwise offset any obligations to make payments required under the Loan
Documents.
12.29    REMEDIES OF BORROWER. If a claim or adjudication is made that Lender or
any of its agents, including any servicer of Borrower, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan Document,
Lender or any such agent, as the case may be, has an obligation to act
reasonably or promptly, Borrower agrees that neither Lender nor its agents,
including any servicer of Borrower, shall be liable for any monetary damages,
and Borrower’s sole remedy shall be to commence an action seeking injunctive
relief or declaratory judgment. Any action or proceeding to determine whether
Lender has acted reasonably shall be determined by an action seeking declaratory
judgment. Borrower specifically waives any claim against Lender and its agents,
including any servicer of Borrower, with respect to actions taken by Lender or
its agents on Borrower’s behalf, other than any such claim arising from the
gross negligence or willful misconduct of Lender or such agent.
12.30    PRINCIPLES OF CONSTRUCTION

61

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

12.31    INCORPORATION BY REFERENCE. Each of Borrower and Lender acknowledge and
agree that it is obligated and bound by the terms and conditions of each of the
Loan Documents, as applicable, as if the same were fully incorporated herein.
12.32    CROSS DEFAULT; CROSS COLLATERALIZATION.  Borrower acknowledges that
Lender has made the Loan to Borrower and the REO Loan #1 to REO Loan #1 Borrower
upon the security of the collective interest in the Assets and the REO Loan #1
Assets and in reliance upon the aggregate of the Assets and the REO Loan #1
Assets taken together being of greater value as collateral security than the sum
of each of the Assets, individually, and the REO Loan #1 Assets, individually,
taken separately.  Borrower agrees that the Security Instrument, with respect to
the Assets, and the REO Loan #1 Security Instrument with respect to the REO Loan
#1 Assets are and will be cross-collateralized and cross-defaulted with each
other so that (i) an Event of Default under any Loan Document or REO Loan #1
Loan Document shall constitute an Event of Default under all of the Loan
Documents and all of the REO Loan #1 Loan Documents; (ii) each of the Security
Instrument and the REO Loan #1 Security Instrument shall constitute security for
the Loan and REO Loan #1 as a single blanket lien on all of the Assets and the
REO Loan #1 Assets; and (iii) such cross-collateralization shall in no event be
deemed to constitute a fraudulent conveyance.

[SIGNATURE PAGE FOLLOWS]

62

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

Exhibit 10.5

IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the
date appearing on the first page of this Agreement.

LENDER:
CALMWATER CAPITAL 3, LLC, a California limited liability company

By:     
Name:     
Title:     

BORROWER:
,
a _____________ limited liability company
By:     
Name:     
Title:     

[SIGNATURE PAGE TO LOAN AGREEMENT]

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

Exhibit 10.5

EXHIBIT A

DESCRIPTION OF PROPERTY

[See Exhibits A-8, A-11 through A-20, A-22 and A-24 through A-28 attached]

EXHIBIT A

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

EXHIBIT A-8
LEGACY IGH
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-11
POLI-GOLD LLC
LOAN DOCUMENTS

1.    Construction Loan Agreement dated July 17, 2008, between Poli-Gold,
L.L.C., an Arizona limited liability company (“Poli-Gold”) as Borrower, Veronica
Polidori (“Polidori”) individually and as trustee of the and Polidori Family
Trust dated June 3, 1998 (“Polidori Trust”) collectively, as Guarantor and IMH
Secured Loan Fund, LLC, a Delaware limited liability company (“Fund”), as
subsequently modified by Modification of Construction Loan Agreement, dated July
18, 2009, between Poli-Gold as Borrower, Polidori Partnership and Polidori Trust
collectively as Guarantor, and Fund as Lender;
2.    Modification of Construction Loan Agreement dated July 18, 2009, between
Poli-Gold as Borrower, Polidori individually and as trustee of the Polidori
Trust collectively, as Guarantor, and Fund as Lender;
3.    Second Modification of Construction Loan Agreement, dated the date hereof,
by and between Poli-Gold as Borrower, Polidori individually and as trustee of
the Polidori Trust collectively, as Guarantor, and AZ-Havasu, LLC, an Arizona
limited liability company (“AZ-Havasu”), as Lender;
4.    Amended and Restated Environmental Certification and Indemnity Agreement,
dated July 17, 2008, between Poli-Gold as Borrower, Polidori, individually and
as trustee of the Polidori Trust collectively, as Guarantor and Indemnitor, and
Fund as Lender, as subsequently amended by Amendment to Amended and Restated
Environmental Certification and Indemnity Agreement, dated July 18, 2009,
between Poli-Gold as Borrower, Polidori, individually and as trustee of the
Polidori Trust collectively as Guarantor and Indemnitor, and Fund as Lender;
5.    Unconditional Loan Guaranty, dated July 17, 2008, between Polidori,
individually and as trustee of the Polidori Trust collectively, as Guarantor,
Poli-Gold as Borrower, and Fund as Lender;
6.    Promissory Note Secured by Real Property dated July 17, 2008, from
Poli-Gold as Maker to Fund as Payee;
7.    Amended and Restated Promissory Note Secured by Real Property, in the
amount of Four Million and No/100ths Dollars ($4,000,000.00), dated the date
hereof, from Poli-Gold as Maker to AZ-Havasu as Payee;
8.    LLC Resolution for Poli-Gold;

EXHIBIT A

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

9.    Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(Garfield County), dated July 17, 2008, between Poli-Gold as Trustor, Fund as
Beneficiary, and First American Title Insurance Company (“First American”) as
Trustee, recorded July 21, 2008, in Book 433, Page 252, of the Official Records
of Garfield County, Utah (“Garfield Records”);
10.    Modification and Amendment of Deed of Trust (Utah) dated the date herof,
between Poli-Gold as Trustor, AZ-Havasu as Beneficiary and First American as
Trustee;
11.    Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(Mohave County) (the “Mohave Deed of Trust”), dated July 17, 2008, between
Poli-Gold and Polidori Family Limited Partnership, an Arizona limited
partnership (“Polidori Partnership”) collectively, as Trustor, Fund as
Beneficiary, and First American as Trustee, recorded July 21, 2008, in Book
7261, Page 449, in the Official Records of Mohave County, Arizona (“Mohave
Records”), as subsequently modified by Modification of Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Filing (Mohave), dated September 19,
2008, between Poli-Gold and Polidori Partnership collectively, as Trustor, Fund
as Beneficiary, and First American as Trustee, recorded October 6, 2008, in Book
7320, Page 991 in the Mohave Records;
12.    The Partnership Authorization for Polidori Partnership;
13.    Assignment of Note and Deed of Trust dated May 21, 2004, assigning the
Mohave Deed of Trust from Fund as Assignor, to IMH Special Asset NT 238, LLC, an
Arizona limited liability company (n/k/a AZ-Havasu), recorded May 25, 2010, at
Book 450, Page 130, the Garfield Records;
14.    Assignment of Note and Mortgage dated May 21, 2004, assigning the Utah
Deed of Trust from Fund as Assignor, to IMH Special Asset NT 238, LLC, an
Arizona limited liability company (n/k/a AZ-Havasu), recorded May 24, 2010, at
Fee No. 2010031809 in the Mohave Records;
15.    Security Agreement (Pledge), dated July 17, 2008, between Poli-Gold and
Polidori collectively as Grantor, and Fund as Secured Party, as subsequently
amended by Amendment to Security Agreement (Pledge), dated July 18, 2009,
between Polidori and Poli-Gold collectively as Grantor, and Fund as Secured
Party;
16.    UCC-1 Financing Statement filed July 22, 2008, with the Arizona Secretary
of State, at File No. 200815483364, listing Poli-Gold as Debtor and Fund as
Secured Party, which was subsequently assigned to IMH Special Asset NT 238, LLC,
on June 8, 2010, as the Secured Party, which was subsequently amended on August
23, 2010, to change the name of the Secured Party to AZ-Havasu;
17.    Deed of Trust and Assignment of Rents (630 acres and mineral rights),
dated October 13, 2011, between Poli-Gold as Trustor, AZ-Havasu as Beneficiary,
and Chicago Title Insurance Company as Trustee, recorded November 4, 2011, at
Fee No. 2011056348, in the Mohave Records;

EXHIBIT A

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

18.    Amended Deed of Trust and Assignment of Rents (630 acres and mineral
rights), dated the date hereof, between Poli-Gold as Trustor, AZ-Havasu as
Beneficiary, and Chicago Title Insurance Company as Trustee;
19.    UCC-1 Financing Statement (630 acres and mineral rights) naming Poli-Gold
as Debtor, filed December 2, 2011, with the Arizona Secretary of State;
20.    Subordination Agreement dated the date hereof, by Horizon Community Bank,
an Arizona state chartered banking corporation, and AZ Havasu;
21.    Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(R4 Lots), dated the date hereof, between Polidori Partnership as Trustor,
AZ-Havasu, as Beneficiary, and Chicago Title Insurance Company, as Trustee,
recorded of even date herewith in the Mohave Records;
22.    UCC-1 Financing Statement (for R4 lots) listing Polidori Partnership as
the Debtor filed with the Arizona Secretary of State;
23.    Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(Spokane lots), dated the date hereof, between Golden Bluff, as Trustor,
AZ-Havasu as Beneficiary, and Chicago Title Land Trust Company as Trustee,
recorded of even date herewith in the Official Records of Spokane County,
Washington;
24.    LLC Resolution for Golden Bluff;
25.    UCC-1 Financing Statement, listing Golden Bluff as Debtor;
26.    Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(Wilieup Ranch), dated the date hereof, between Grey Falcon Ranch, L.L.C., an
Arizona limited liability company (“Grey Falcon”) as Trustor, AZ-Havasu as
Beneficiary, and Chicago Title Insurance Company as Trustee, recorded of even
date herewith in Mohave Records;
27.    Intercreditor Agreement dated the date hereof, between Grey Falcon as
Borrower, AZ-Havasu as Subordinate Lender, and Engelman Berger, P.C., as Senior
Lender, recorded of even date herewith in the Mohave Records;
28.    LLC Resolution for Grey Falcon;
29.    UCC-1 Financing Statement, listing Grey Falcon as Debtor;
30.    Pledge and Security Agreement (LLC Membership Interest) (With Consent of
Other Members), dated the date hereof, between AZ-Havasu as the Secured Party
and Veronica Polidori as Pledgor for her membership interests in Stoneridge
Development, LLC, an Arizona limited liability company;
31.    Title Policy – First American Title Insurance Company dated July 21,
2008, Policy No. 354866A, with endorsements, for Utah property;

EXHIBIT A

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

32.    Title Policy – Chicago Title Insurance Company dated November 4, 2011,
Policy No. CTM2011009514-L, with endorsements for 630 acres and mineral rights;
33.    Title Policy – Chicago Title Insurance Company dated May 22, 2014, Policy
No. CTM2011009515A, with endorsements for the 3R4 lots;
34.    Title Policy – Chicago Title Insurance Company dated May 29, 2014, Policy
No. 82307-91314354, with endorsements for the Golden Bluff – Spokane, WA lots;
and
35.    Title Policy – Chicago Title Insurance Company dated May 22, 2014, Policy
No. CTM2011009517A, with endorsements for the Grey Falcon property.

LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-12
POLI-GOLD (SUNSHINE NOTE)
LOAN DOCUMENTS
1.    Deed of Trust and Assignment of Rents dated March 12, 2007, between
Sunshine Concrete & Materials, Inc., an Arizona corporation (“Sunshine”) as
Trustor, Veronica Polidori, Trustee of The Polidori Family Trust, UDT dated June
3, 1998 (“Polidori”) as Beneficiary, and Chicago Title Insurance Company as
Trustee, recorded March 12, 2007, at Book 6706, Page 268, in the Official
Records of Mohave County, Arizona (“Mohave Records)**;
2.    Assignment of Beneficial Interest Under Deed of Trust dated November 16,
2010, from Polidori as Assignor to Poli-Gold, L.L.C., an Arizona limited
liability company (“Poli-Gold”) recorded November 16, 2010, in the Mohave County
Records, at Fee No. 2010067433;
3.    Assignment of Deed of Trust and Other Loan Documents dated May 8, 2014,
from Poli-Gold as Assignor to AZ-Havasu SN 2.08, LLC, an Arizona limited
liability company (“AZ-Havasu 2.08”) as Assignee, recorded May 22, 2014, in the
Mohave County Records, at Fee No. 2014022512;
4.    Promissory Note dated March 12, 2007, from Sunshine as Maker to Polidori
as Holder**;
5.    Allonge dated May 8, 2014, from Polidori Family Trust as Assignor to
Poli-Gold**;
6.    Allonge dated May 8, 2014, from Polidori as Assignor to AZ-Havasu 2.08**;
and
7.    Title Policy Chicago Title Insurance Company, dated March 12, 2007, Policy
No. 09-22440-1, with endorsements.

LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-14
POLI-GOLD (GOLDEN VALLEY)
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-15
POLI-GOLD (KINGMAN)
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-16
INTERSTATE DEVELOPMENT (EMERALD BUILDING)
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-17
FLAGSTAFF FAIRWAY ESTATES (WEDGE)
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-20
SARDINIA INVESTMENTS
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-22
LEGENDALE
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-24
COTTONWOOD RETAIL LLC
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-25
TIERRA BUENA
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-26
LEGEND HOLDINGS LLC (CAMP VERDE)
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-27
MINAXI G PATEL (PATEL)
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

EXHIBIT A-28
HEBER 142 LLC
LEGAL DESCRIPTION
Attached.

EXHIBIT A

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

Exhibit 10.5

EXHIBIT B

DOCUMENTS
1.    Loan Documents. The documents listed in this Section 1, and amendments,
modifications and supplements thereto which have received the prior written
consent of Lender, together with any documents executed in the future that are
approved by Lender and that recite that they are "Loan Documents" for purposes
of this Agreement are collectively referred to herein as the Loan Documents.
1.1    This Agreement.
1.2    The Promissory Note dated as of the date hereof, in the maximum principal
amount of $4,385,000, made by Borrower payable to the order of Lender.
1.3    Each Deed of Trust, Security Agreement and Financing Statement and
Mortgage, Security Agreement and Financing Statement dated as of the date
hereof, executed by the applicable Asset Guarantor, as Trustor, to the trustee
named therein (if any), for the benefit of Lender, as Beneficiary.
1.4    Each Uniform Commercial Code – National Financing Statement – Form UCC-1,
showing the applicable Asset Guarantor, as debtor, and Lender, as secured party,
to be filed with the Secretary of State of the State of Arizona, the Secretary
of State of the State of Delaware or the Secretary of State of the State of New
Mexico, as applicable.
1.5    Each Uniform Commercial Code – National Financing Statement – Form UCC-1,
showing the applicable Asset Guarantor, as debtor, and Lender, as secured party,
to be recorded in the Official Records (as defined in each Security Instrument).
1.6    Lockbox and Security Agreement dated as of the date hereof, executed by
Borrower, the Asset Guarantors and Lender.
1.7    Each Subordination of Management Agreement dated as of the date hereof,
executed by Borrower and the Property Manager named therein in favor of Lender.
1.8    Assignment of Leases and Rents dated as of the date hereof, executed by
the applicable Asset Guarantor and Lender.
1.9    Assignment of Warranties and Other Contract Rights dated as of the date
hereof, executed by Borrower, the Asset Guarantors and Lender.
1.10    Collateral Security Agreement dated as of the date hereof, executed by
AZ Havasu, AZ 2.08 in favor of Lender.

EXHIBIT B

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

1.11    Blocked Account Control Agreement dated as of the date hereof, executed
by US Bank, Lender and Borrower.
1.12    Certificate Regarding Borrower Structure dated as of the date hereof,
executed by Borrower.
1.13    Receipt and Closing Certificate dated as of the date hereof, executed by
Borrower.
1.14    Indemnity and Guaranty Agreement dated as of the date hereof, executed
by each Asset Guarantor and Guarantor in favor of Lender.
1.15    Hazardous Substances Indemnity Agreement dated as of the date hereof,
executed by the Borrower, each Asset Guarantor and Guarantor in favor of Lender.
1.16    Uniform Commercial Code – National Financing Statement – Form UCC-1,
showing Borrower, as debtor, and Lender, as secured party, to be filed with the
Secretary of State of the State of Delaware.
1.17    Each Allonge in connection with the Asset Loans executed by the
applicable Asset Guarantor to Lender.
1.18    Each Assignment of Deed of Trust or Assignment of Mortgage in connection
with the Asset Loans executed by the applicable Asset Guarantor to Lender.
1.19     Freedom to Choose Insurance certificates executed by NM Emerald and IMH
162.
1.20    Cash Collateral Agreement executed by Borrower for the benefit of
Lender.
1.21    Custodial Agreement executed by Lender, US Bank and Borrower.
1.22    Undelivered Items Letter Agreement executed by Borrower to Lender.
1.23    Loan Agreement Notice executed by Lender, Guarantor, Borrower and IMH
176.

[Add Others]

SCHEUDLE 1

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

SCHEUDLE 1

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

Exhibit 10.5

EXHIBIT C

Approved Budget

Asset
Budget
 
 
Borrower
None
Legacy IGH
None
Poli-Gold LLC
None
Poli-Gold (Sunshine Note)
None
Poli-Gold (Golden Valley)
None
Poli-Gold (Kingman)
None
Interstate Development (Emerald Building)
None
Flagstaff Fairway Estates (Wedge)
None
Sardinia Investments
None
Legendale
None
Cottonwood Retail LLC
None
Tierra Buena
None
Legend Holdings LLC (Camp Verde)
None
Minaxi G Patel (Pagel)
None
Heber 142 LLC
None

EXHIBIT C

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

Exhibit 10.5

EXHIBIT D
MINIMUM RELEASE PRICES
Asset
Release Price
Poli-Gold LLC

$2,599,500

Poli-Gold (Sunshine Note)

$720,000

Poli-Gold (Golden Valley)

$720,000

Poli-Gold (Kingman)

$120,000

Interstate – NM

$1,308,600

Flagstaff Wedge – Flagstaff

$891,000

Legacy IGH – MN

$720,000

Sardinia – TX

$696,000

Legendale – NM

$644,400

Cottonwood Retail – Casa Grande

$431,400

Teirra Buena – Casa Grande

$388,200

Patel – Prescott Valley

$319,200

Heber – CA

$317,400

Legend Holdings – Camp Verde

$362,787

EXHIBIT D

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

Exhibit 10.5

EXHIBIT E
REQUIRED WORK

Project
City
State
Completion Date
Required Work
Legacy IGH - MN
Inver Grove Heights
MN
12/31/2015
Entitlements for Preliminary Plat Map
Interstate - NM
Albuquerque
NM
12/31/2015
Remediation of Construction Defect
Tierra Buena - Casa Grande
Casa Grande
AZ
12/31/2015
Entitlements for Preliminary Plat Map

 

EXHIBIT E

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

Exhibit 10.5

EXHIBIT F

RENT ROLL AND LIST OF LEASES

1.    That certain Agricultural Lease intended to be executed by and between IMH
Special Asset NT 176, LLC, as landlord, and Ag Tech Farms Incorporated, as
tenant, a copy of which has been delivered to Lender. As of the date of this
Agreement, Ag Tech Farms Incorporated is holding over under its previous lease
which has expired, pending execution of this lease.

SCHEDULE 1
LITIGATION
 
CASE NAME
COURT AND CAUSE NO.
ATTORNEYS REPRESENTING IMH
SUMMARY AND STATUS
NM-Emerald, LLC v. Interstate Development, LLC
Case No. D-202-CV-2013-00359, State of New Mexico, County of Bernalillo, Second
Judicial District Court

Geoffrey D. Rieder
Foster, Reider & Jackson, P.C.
(505) 767-0577

Richard M. Amoroso
Jonathan Brinson
Polsinelli Shughart PC
(602) 650-2000
tfroderman@polsinelli.com
ramoroso@polsinelli.com
jbrinson@polsinelli.com

NM-Emerald, LLC (a subsidiary of IMH Financial Corporation) filed a Complaint on
1/9/13 for negligence in the construction of a 2-story office complex located in
Albuquerque, New Mexico.

12/1/14: No change. 11/17/14: Amended Complaint filed and served. Defendants
have appeared in lawsuit. Written discovery requests being sent to newly added
defendants. Insureds and insurance carriers have been sent settlement demands
for payment for damages to building. Motions to dismiss have been filed and
briefed. IMH seeking default judgments against defendants who failed to answer
the Amended Complaint. Final inspections of property completed. Awaiting expert
reports as to damages.
  
 

SCHEDULE 1

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

Poli-Gold (Default)

 
Christopher H. Bayley
Benjamin W. Reeves
Snell & Wilmer, L.L.P.
(602) 382-6360
cbayley@swlaw.com
breeves@swlaw.com

1/14/15: The Borrower failed to pay off the loan prior to year end and the
Lender has requested that we proceed with the foreclosure; We have circulated
updated foreclosure documents to the Lender to review and discuss with NWRA,
including a disclosure of NWRA’s collateral interest in the loan; The Lender
received an updated survey of the property; The title company remains willing to
insure that the Lender upon foreclosure will take title to all but three
parcels; The Lender is scheduling a time to discuss a few questions it has
regarding the legal description with the title company.

 
Victor and Julia McCleve; Tract M, LLC; and Vincent Goett v. IMH Financial
Corporation, IMH Special Asset NT 101, LLC; IMH Special Asset NT 118, LLC;
IMH Special Asset NT 132, LLC; IMH Special Asset NT 160, LLC
Case No. CV 2012-00757
Coconino County Superior Court, Arizona

William J. Maledon
Osborn Maledon
(602) 640-9000
wmaledon@omlaw.com

Christopher H. Bayley
Benjamin W. Reeves
Snell & Wilmer, L.L.P.
(602) 382-6360
cbayley@swlaw.com
breeves@swlaw.com

Plaintiffs filed a Complaint against IMH on 11/15/12 alleging Breach of Contract
and Wrongful Foreclosure. Defendants filed their Answer on 12/24/12. On 1/25/13
the state court litigation was still stayed pending approval by the Bankruptcy
court. FR 160, LLC bankruptcy now complete. Status conference continued pending
possible settlement.
12/18/14: Work with client on possible settlement of all litigation with related
sale of Tract M for Flagstaff Ranch.
1/14/15: Work with client re revisions to draft settlement agreement.
 

SCHEUDLE 1

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

Exhibit 10.5

SCHEDULE 2
ASSET LOAN DEFAULTS

1.
Loan from IMH SPECIAL ASSET NT 238, LLC to POLI-GOLD, LLC in the amount of Nine
Million Three Hundred Fifty Thousand and no/100ths Dollars ($9,350,000.00), as
subsequently amended and loan amount reduced to Four Million and no/100 ths
Dollars ($4,000,000.00).

2.
Loan from AZ-HAVASU, LLC to SUNSHINE CONCRETE & MATERIALS, INC., in the amount
of Two Million Eighty-Eight Thousand and no/100ths Dollars. ($2,088,000.00).

SCHEDULE 2