Exhibit 10.2

 

EXECUTION VERSION

 

TAX PROTECTION AGREEMENT

 

THIS TAX PROTECTION AGREEMENT (this “Agreement”) is made and entered into as of
January 30, 2015 by and among Campus Crest Communities, Inc., a Maryland
corporation (the “REIT”), Campus Crest Communities Operating Partnership, L.P.,
a Delaware limited partnership (the “Partnership”), and the other persons set
forth on Schedule 2.1(i) hereof (each a “Protected Partner,” and collectively
the “Protected Partners”).

 

WHEREAS, pursuant to the Second Amendment to Purchase and Sale Agreement dated
as of November 3, 2014 (the “Contribution Agreement”), interests in various
entities of which the Protected Partners were members or partners and that
directly or indirectly own real property, were acquired by the Partnership or a
subsidiary of the Partnership, with the Protected Partners receiving Class A
common units (“OP Units”) of limited partnership interest in the Partnership,
cash, or a combination of OP Units and cash (the “Transaction”).

 

WHEREAS, it is intended for federal income tax purposes that the Transaction be
treated in accordance with Section 15 of the Contribution Agreement;

 

WHEREAS, in accordance with Section 15 of the Contribution Agreement, the
parties desire to enter into this Agreement regarding certain tax matters
associated with the Transaction; and

 

WHEREAS, the REIT and the Partnership desire to evidence their agreement
regarding amounts that may be payable as a result of certain actions being taken
by the Partnership regarding the disposition of certain of the assets of
Partnership or other contributed assets and certain debt obligations of the
Partnership, its partners and its subsidiaries.

 

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein and in the Contribution
Agreement, the parties hereto hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

To the extent not otherwise defined herein, capitalized terms used in this
Agreement have the following meanings:

 

“Agreement” has the meaning set forth in the Recitals.

 

“Cash Consideration” has the meaning set forth in Section 2.3.

 

“Closing” means the closing of the transactions contemplated by the Contribution
Agreement other than the acquisition by the REIT and/or its affiliates of
additional membership interests in each of Copper Beech Townhome Communities
Twenty Six, LLC, Copper Beech Townhome Communities Twenty Eight, LLC, Copper
Beech Townhome Communities Twenty Nine, LLC and Copper Beech Townhome
Communities IUP Buy SPE Management, LLC.

 

“Closing Date” means the date hereof.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

 

 

 

“Consent” means the prior written consent to do the act or thing for which the
consent is required or solicited, which consent may be executed by a duly
authorized officer or agent of the party granting such consent.

 

“Contribution Agreement” has the meaning set forth in the recitals.

 

“Excess Payment” has the meaning set forth in Section 4.4

 

“General Partner” means Campus Crest Communities GP, LLC, the general partner of
the Partnership.

 

“Guaranteed Amount” means the aggregate amount of each Guaranteed Debt that is
guaranteed at any time by Partner Guarantors.

 

“Guaranteed Debt” means any loans incurred (or assumed) by the Partnership or
any Subsidiary that are guaranteed by Partner Guarantors pursuant to Section 3.3
hereof.

 

“Indirect Owner” in the case of a Protected Partner that is an entity classified
as an “S corporation”, a partnership or disregarded entity for federal income
tax purposes, any person owning an equity interest in such Protected Partner,
and, in the case of any Indirect Owner that is an entity classified as an “S
corporation”, a partnership or disregarded entity for federal income tax
purposes, any person owning an equity interest in such entity.

 

“Initial Per Unit Minimum Liability Amount” means, for a Protected Partner, (1)
from the Closing and until the Second Closing (if the Second Closing occurs),
the quotient of (a) the initial maximum Minimum Liability Amount set forth on
Schedule 3.1(a)(i) applicable to such Protected Partner, divided by (b) the
number of OP Units issued to the Protected Partner on the Closing Date, and (2)
from the Second Closing (if the Second Closing occurs), the quotient of (A) sum
of (I) the Unit-Based Minimum Liability Amount for that Protected Partner,
determined immediately prior to the Second Closing, plus (II) the difference
between the maximum Minimum Liability Amount applicable to such Protected
Partner set forth on Schedule 3.1(a)(ii) applicable to such Protected Partner
minus the initial maximum Minimum Liability Amount set forth on Schedule
3.1(a)(i) applicable to such Protected Partner, divided by (B) the sum of the
number of OP Units held by the Protected Partner immediately prior to the Second
Closing plus the number of OP Units issued to the Protected Partner in the
Second Closing Date.

 

“Minimum Liability Amount” means, for each Protected Partner, initially the
amount set forth on Schedule 3.1(a)(i) hereto next to such Protected Partner’s
name, and following the occurrence of the Second Closing (if the Second Closing
occurs), initially the amount set forth on Schedule 3.1(a)(ii) hereto next to
such Protected Partner’s name, as amended from time to time, but in any case
which may not exceed at any time the Unit-Based Minimum Liability Amount for
such Protected Partner. The initial aggregate maximum Minimum Liability Amount
for all Protected Partners shall be $90,441,089 and, immediately following the
occurrence of the Second Closing (if the Second Closing occurs), the aggregate
maximum Minimum Liability Amount shall be $100,000,000 (subject to the
Unit-Based Minimum Liability Amount-limit described in this definition).

 

“Nonrecourse Liability” has the meaning set forth in Treasury Regulations
Section 1.752-1(a)(2).

 

“OP Units” has the meaning set forth in the Recitals.

 

 

 

 

“Partner Guarantors” means those Protected Partners (or Indirect Owners) who
have guaranteed any portion of the Guaranteed Debt pursuant to Section 3.3. The
Partner Guarantors and each Partner Guarantor’s share of the Guaranteed Amount
will be set forth on Exhibit A to Schedule 3.7 hereto, as may be amended from
time to time.

 

“Partnership” has the meaning set forth in the Recitals.

 

“Partnership Agreement” means the Second Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of February 9, 2012, as amended
through the Closing Date, and as the same may be further amended in accordance
with the terms thereof.

 

“Partnership Interest Consideration” has the meaning set forth in Section 2.3.

 

“Protected Gain” shall mean any gain that would be allocable to and recognized
by a Protected Partner under Section 704(c) of the Code in the event of the sale
of a Protected Property in a fully taxable transaction (and, so, excluding such
Protected Partner’s corresponding share of “book gain,” if any, accruing after
the Closing (for the Protected Properties set forth on Schedule 2.1(ii)(a)) or
accruing after the Second Closing (for the Protected Property set forth on
Schedule 2.1(ii)(b))). The initial maximum amount of Protected Gain with respect
to each Protected Partner shall be determined as if the Partnership sold a
Protected Property in a fully taxable transaction on the Closing Date (for the
Protected Properties set forth on Schedule 2.1(ii)(a)) or the Second Closing
Date (for the Protected Property set forth on Schedule 2.1(ii)(b)) for
consideration equal to the Section 704(c) Value of such Protected Property
immediately following the Closing (for the Protected Properties set forth on
Schedule 2.1(ii)(a)) or following the Second Closing (for the Protected Property
set forth on Schedule 2.1(ii)(b)). For purposes of calculating the amount of
Section 704(c) gain that is allocated to a Protected Partner, any “reverse
Section 704(c) gain” allocated to such Partner pursuant to Treasury Regulations
§ 1.704-3(a)(6) shall not be taken into account unless, as a result of
adjustments to the Gross Asset Value (as defined in the Partnership Agreement)
of any Protected Property pursuant to clause (b) of the definition of Gross
Asset Value as set forth in the Partnership Agreement, all or a portion of the
gain recognized by the Partnership that would have been Section 704(c) gain
without regard to such adjustments becomes or is treated as “reverse Section
704(c) gain” or Section 704(b) gain under Section 704 of the Code, then such
gain shall continue to be treated as Section 704(c) gain.

 

“Protected Partner” means (i) those persons set forth on Schedule 2.1(i) hereto
as a “Protected Partner” and (ii) any person who acquires OP Units from a
Protected Partner in a transaction in which gain or loss is not recognized in
whole or in part and in which such transferee’s adjusted basis, as determined
for federal income tax purposes, is determined in whole or in part by reference
to the adjusted basis of a Protected Partner in such OP Units.

 

“Protected Property” means (i) each of the properties identified as a Protected
Property on Schedule 2.1(ii)(a) hereto and, following the consummation of the
Second Closing, each of the properties identified as a Protected Property on
either Schedule 2.1(ii)(a) or on Schedule 2.1(ii)(b) hereto; (ii) a direct or
indirect interest owned by the Partnership in any Subsidiary that owns an
interest in a Protected Property, if the disposition of such interest would
result in the recognition of Protected Gain with respect to a Protected Partner;
and (iii) any other property that the Partnership directly or indirectly
receives that is in whole or in part a “substituted basis property” as defined
in Section 7701(a)(42) of the Code with respect to a Protected Property or
interest therein. For the avoidance of doubt, if any Protected Property is
transferred to another entity in a transaction in which gain or loss is not
recognized, and if the acquiring entity’s disposition of such Protected Property
would cause the Protected Partners to recognize gain or loss as a result
thereof, such Protected Property (including any interest in such entity acquired
directly or indirectly by the Partnership in connection therewith) shall still
be subject to this Agreement.

 

 

 

 

“Qualified Guarantee” has the meaning set forth in Section 3.3.

 

“Qualified Guarantee Indebtedness” has the meaning set forth in Section 3.3.

 

“REIT” has the meaning set forth in the Recitals.

 

“Second Closing” means the closing of the acquisition by the REIT and/or its
affiliates of additional membership interests in each of Copper Beech Townhome
Communities Twenty Six, LLC, Copper Beech Townhome Communities Twenty Eight,
LLC, Copper Beech Townhome Communities Twenty Nine, LLC and Copper Beech
Townhome Communities IUP Buy SPE Management, LLC.

 

“Second Closing Date” means the date of the Second Closing.

 

“Section 704(c) Value” means the fair market value of a Protected Property as
set forth next to each Protected Property on Schedule 2.1(ii).

 

“Subsidiary” means any entity in which the Partnership owns a direct or indirect
interest.

 

“Successor Partnership” has the meaning set forth in Section 2.2.

 

“Tax Claim” has the meaning set forth in Section 7.1.

 

“Tax Proceeding” has the meaning set forth in Section 7.1.

 

“Tax Protection Period” means:

 

(1) with respect to the obligations of the Partnership set forth in Article 2
hereof

 

(X) with respect to the Protected Properties set forth on Schedule 2.1(ii)(a),
the period commencing on the Closing Date and ending at 12:01 AM on the day
after the earlier of (a) seventh (7th) anniversary of the Second Closing (if the
Second Closing occurs) or (b) March 31, 2022; and

 

(Y) with respect to the Protected Property set forth on Schedule 2.1(ii)(b), the
period commencing on the Second Closing Date and ending at 12:01 AM on the day
after the earlier of (a) seventh (7th) anniversary of the Second Closing (if the
Second Closing occurs) or (b) March 31, 2022; and

 

(2) with respect to the obligations of the Partnership set forth in Article 3
hereof, the period commencing on the Closing Date and ending at 12:01 AM on the
day after the earlier of (a) seventh (7th) anniversary of the Second Closing (if
the Second Closing occurs) or (b) March 31, 2022.

 

“Transaction” has the meaning set forth in the Recitals.

 

“Unit-Based Minimum Liability Amount” means, at any given time for a Protected
Partner, the product of (a) the Initial Per Unit Minimum Liability Amount
applicable to such Protected Partner, multiplied by (b) the number of OP Units
then held by such Protected Partner.

 

 

 

 

ARTICLE 2

 

RESTRICTIONS ON DISPOSITIONS OF PROTECTED PROPERTIES;

REPORTING OF TRANSACTION

 

2.1          General Prohibition on Disposition of Protected Properties. The
REIT and the Partnership agree for the benefit of each Protected Partner, for
the term of the Tax Protection Period, that in the event that the Partnership,
directly or indirectly sells, exchanges, transfers, or otherwise disposes of a
Protected Property or any interest therein (without regard to whether such
disposition is voluntary or involuntary) in a transaction that would cause a
Protected Partner to recognize any Protected Gain, the provisions of Article 4
shall apply and the Partnership shall make the payments to the Protected
Partners provided for in Article 4.

 

Without limiting the foregoing, the term “sale, exchange, transfer or
disposition” by the Partnership shall be deemed to include, and the rights of
the Protected Partners with respect thereto under Article 4 shall extend to:

 

(a)any direct or indirect disposition by a Subsidiary of any Protected Property
or any interest therein;

 

(b)any direct or indirect disposition by the Partnership of any Protected
Property (or any direct or indirect interest therein) that is subject to Section
704(c)(1)(B) of the Code and the Treasury Regulations thereunder; and

 

(c)any distribution by the Partnership to a Protected Partner that is subject to
Section 737 of the Code and the Treasury Regulations thereunder.

 

Without limiting the foregoing, a disposition shall include any transfer,
voluntary or involuntary, by the Partnership or a Subsidiary in a foreclosure
proceeding, pursuant to a deed in lieu of foreclosure, or in a bankruptcy
proceeding.

 

2.2           Exceptions Where No Gain Recognized. Notwithstanding the
restrictions set forth in Section 2.1, the Partnership or a Subsidiary may
dispose of any Protected Property (or an interest therein), and Article 4 shall
not apply thereto, if and to the extent that such disposition qualifies as a
like-kind exchange under Section 1031 of the Code, or an involuntary conversion
under Section 1033 of the Code, or other transaction (including, but not limited
to, a contribution of property to any entity that qualifies for the
non-recognition of gain under Section 721 or Section 351 of the Code, or a
merger or consolidation of the Partnership with or into another entity that
qualifies for taxation as a “partnership” for federal income tax purposes (a
“Successor Partnership”)) that does not result (in the year of such disposition
or in a later year within the Tax Protection Period) in the recognition of
Protected Gain to a Protected Partner. In further clarification thereof in the
case of a Section 1031 like-kind exchange, if such exchange is with a “related
party” within the meaning of Section 1031(f)(3) of the Code, any direct or
indirect disposition by such related party of the Protected Property or any
other transaction prior to the expiration of the two (2)-year period following
such exchange and within the Tax Protection Period that would cause Section
1031(f)(1) of the Code to apply with respect to such Protected Property
(including by reason of the application of Section 1031(f)(4) of the Code) and a
result of which is to cause a Protected Partner to recognize Protected Gain
shall be considered a violation of Section 2.1 by the Partnership.

 

 

 

 

2.3           Mergers. Notwithstanding the foregoing, Section 2.1 shall not
apply to a voluntary, actual disposition by a Protected Partner of OP Units in
connection with a merger or consolidation of the Partnership pursuant to which
(1) the Protected Partner is offered either cash or property treated as cash
pursuant to Section 731 of the Code (“Cash Consideration”) or partnership
interests in a partnership that would be treated as the continuing partnership
under the principles of Section 708 of the Code and the receipt of such
partnership interests would not result in the recognition of gain for federal
income tax purposes by the Protected Partner (“Partnership Interest
Consideration”); (2) the Protected Partner has the ability to elect to receive
solely Partnership Interest Consideration in exchange for his OP Units and the
continuing partnership has agreed in writing to assume the obligations of the
Partnership under this Agreement; (3) no Protected Gain is recognized by the
Partnership as a result of any partner of the Partnership receiving Cash
Consideration; and (4) the Protected Partner elects to receive Cash
Consideration.

 

2.4           Transactions. For federal, state and local income tax purposes,
the Partnership shall report the Transaction in a manner consistent with Section
15 of the Contribution Agreement.

 

ARTICLE 3

 

ALLOCATION OF LIABILITIES;

POST-TAX PROTECTION PERIOD GUARANTEE OPPORTUNITIES

 

3.1           Minimum Liability Allocation. . Immediately following the Closing
and during the entire Tax Protection Period, each Protected Partner will be
allocated Nonrecourse Liabilities by the Partnership at least equal to the
Minimum Liability Amount for such Protected Partner; provided further that the
Partnership shall not, during or with respect to the Tax Protection Period, take
any position contrary or inconsistent to such allocation in any federal or state
income tax returns (including, without limitation, information returns, such as
Schedules K-1, provided to partners in the Partnership and returns of
Subsidiaries of the Partnership) or any dealings involving the Internal Revenue
Service (including, without limitation, any audit, administrative appeal or any
judicial proceeding involving the income tax returns of the Partnership or the
tax treatment of any holder of partnership interests the Partnership). The
Partnership will use the optional method under Treasury Regulation Section
1.752-3(a)(3) to allocate Nonrecourse Liabilities considered secured by any
property acquired by the Partnership pursuant to the Transaction to and for the
benefit of the Protected Partners to the extent that the “built-in gain”
allocable to the Protected Partner under Section 704(c) of the Code with respect
to those properties exceeds the amount of the Nonrecourse Liabilities considered
secured by such property allocated to the Protected Partners under Treasury
Regulation Section 1.752-3(a)(2).

 

 

 

 

3.2           Post-Tax Protection Period Opportunities.

 

(a)           Without limiting any of the other obligations of the Partnership
under this Agreement, from and after the expiration of the Tax Protection
Period, the Partnership shall, upon a request from a Protected Partner, use
commercially reasonable efforts to permit such Protected Partner to enter into
an agreement with the Partnership to bear the economic risk of loss as to a
portion of the Partnership’s recourse indebtedness by undertaking an obligation
to restore a portion of its negative capital account balance upon liquidation of
such Protected Partner’s interest in the Partnership and/or to bear financial
liability under a Guarantee Agreement substantially in the form of Schedule 3.7
hereto for indebtedness that would be considered Qualifying Guarantee
Indebtedness under Section 3.3 hereof, if such Protected Partner shall provide
information from its professional tax advisor satisfactory to the Partnership
showing that, in the absence of such agreement, such Protected Partner likely
would not be allocated from the Partnership sufficient indebtedness under
Section 752 of the Code and the at-risk provisions under Section 465 of the Code
to avoid the recognition of gain (other than gain required to be recognized by
reason of actual cash distributions from the Partnership). The Partnership and
its professional tax advisors shall cooperate in good faith with such Protected
Partner and its professional tax advisors to provide such information regarding
the allocation of the Partnership liabilities and the nature of such liabilities
as is reasonably necessary in order to determine the Protected Partner’s
adjusted tax basis in its OP Units and at-risk amount. If the Partnership
permits a Protected Partner to enter into an agreement under this Section 3.2,
the Partnership shall be under no further obligation with respect thereto, and
the Partnership shall not be required to indemnify such Protected Partner for
any damage incurred, in connection with or as a result of such agreement or the
indebtedness, including without limitation a refinancing or prepayment thereof
or taking any of the other actions required by Article 3 hereof with respect to
Qualified Guarantee Indebtedness.

 

(b)           Notwithstanding the foregoing, if, after the expiration of the Tax
Protection Period, due to a change in tax law after the date hereof, either the
Partnership determines, or a Protected Partner is advised by counsel, that there
is a material risk that such Protected Partner may no longer continue to be
allocated debt as a result of a guarantee entered into pursuant to Section 3.3,
such Protected Partner may request (i) that the Partnership elect to utilize
“transition relief rules” relating to such guarantee to permit and the
Partnership shall elect to utilize such transition rules, provided that (1) the
change in law provides for transition relief rules, and (2) the transition
relief rules do not have a material adverse effect on the Partnership and its
partners (other than the Protected Partner) other than a material adverse effect
resulting solely from the continued allocation pursuant to Section 752 of the
Code and Treasury Regulations thereunder of Partnership liabilities to the
Protected Partner equal to the amount the liabilities guaranteed by the
Protected Partner, or (ii) a modification of such Guarantee Agreement and the
Partnership will use its commercially reasonable efforts to work with the lender
with respect to such Guaranteed Debt to have the Guarantee Agreement amended in
a manner that will permit such Protected Partner to be allocated such Protected
Partner’s Guaranteed Amount with respect to the Guaranteed Debt, or use
commercially reasonable efforts to permit such Protected Partner to enter into
an agreement with the Partnership to bear the economic risk of loss as to a
portion of the Partnership’s recourse indebtedness by undertaking an obligation
to restore a portion of its negative capital account balance upon liquidation of
such Protected Partner’s interest in the Partnership. For the avoidance of
doubt, each Protected Partner hereby acknowledges and agrees that the
Partnership shall not be treated as violating its obligations to use
commercially reasonable efforts as described in Section 3.2 to the extent that,
after such a change of tax law, the allocation of Partnership indebtedness for
tax purposes to the Protected Partner cannot be achieved due to the
unwillingness of such Protected Partner either to provide a guarantee or similar
instrument that complies with the new tax law rules, elect to utilize transition
rules (subject to the limitations above), or enter into an agreement with the
Partnership to bear the economic risk of loss as to a portion of the
Partnership’s recourse indebtedness by undertaking an obligation to restore a
portion of its negative capital account balance upon liquidation of such
Protected Partner’s interest in the Partnership; provided, however, that the
Partnership’s obligations as set forth in the last sentence of Section 3.1 shall
continue to apply, but only to the extent permitted by applicable tax law
(including by virtue of the “transition relief rules” included in the relevant
tax law). Any cost and expenses incurred as a result of such a change in tax law
shall be borne equally by the Partnership, on the one hand, and the relevant
Protected Partner, on the other hand.

 

 

 

 

3.3           Qualified Guarantee Indebtedness and Qualified Guarantee:
Treatment of Qualified Guarantee Indebtedness as Guaranteed Debt.

 

For purposes of this Agreement:

 

“Qualified Guarantee Indebtedness” means indebtedness that satisfies all of the
conditions set forth in this Section 3.3, including (i) the debt to be
guaranteed must be considered indebtedness of the Partnership for purposes of
determining the adjusted tax basis in their partnership interests of the
partners in the Partnership; and (ii) the debt to be guaranteed must be
considered indebtedness of the Partnership for purposes of determining the
adjusted tax basis in their partnership interests of the partners in the
Partnership.

 

A “Qualified Guarantee” means a guarantee by the Partner Guarantors pursuant to
a Guarantee Agreement that satisfies the conditions set forth in Section 3.3(a),
including that the guarantee must cause the Guaranteed Amount to be included in
basis for federal income tax purposes of the Partner Guarantor and considered to
be “at risk” for purposes of Section 465 of the Code.

 

The conditions that must be satisfied at all times with respect to any
Guaranteed Debt offered pursuant to Section 3.2 and the guarantees with respect
thereto are as follows:

 

(a)each such guarantee shall be a “bottom dollar guarantee” such that the lender
with respect to the Guaranteed Debt is required to pursue all other collateral
and security for the Guaranteed Debt (other than any “bottom dollar guarantees”
permitted pursuant to this paragraph (a) and/or Section 3.5 below) prior to
seeking to collect on such a guarantee, and the lender shall have recourse
against the guarantee only if, and solely to the extent that, the total amount
recovered by the lender with respect to the Guaranteed Debt after the lender has
exhausted its remedies as set forth above is less than the aggregate of the
Guaranteed Amounts with respect to such Guaranteed Debt (plus the aggregate
amounts of any other guarantees (x) that are in effect with respect to such
Guaranteed Debt at the time the guarantees pursuant Section 3.2 are entered
into, or (y) that are entered into after the date the guarantees pursuant to
this Article 3 are entered into with respect to such Guaranteed Debt and that
comply with Section 3.5 below, but only to the extent that, in either case, such
guarantees are “bottom dollar guarantees” with respect to the Guaranteed Debt),
and the maximum aggregate liability of each Partner Guarantor for all Guaranteed
Debt shall be limited to the amount actually guaranteed by such Partner
Guarantor;

 

(b)the fair market value of the collateral against which the lender has recourse
pursuant to the Guaranteed Debt, determined as of the time the guarantee is
entered into (an independent appraisal relied upon by the lender in making the
loan shall be conclusive evidence of such fair market value when the guarantee
is being entered into in connection with the closing of such loan), shall not be
less than 150% of the sum of (1) the aggregate of the Guaranteed Amounts with
respect to such Guaranteed Debt, plus (2) the dollar amount of any other
indebtedness that is senior to or pari passu with the Guaranteed Debt and as to
which the lender thereunder has recourse against property that is collateral of
the Guaranteed Debt, plus (3) the aggregate amounts of any other guarantees that
are in effect with respect to such Guaranteed Debt at the time the guarantees
pursuant to Section 3.2 are entered into with respect to such Guaranteed Debt
and that comply with Section 3.3(e) below, but only to the extent that such
guarantees are “bottom dollar guarantees” with respect to the Guaranteed Debt);

 

 

 

 

(c)(i) the executed guarantee must be delivered to the lender, and (ii) (A) the
execution of the guarantee by the Partner Guarantors must be acknowledged by the
lender as an inducement to it to make a new loan, to continue an existing loan
(which continuation is not otherwise required), or to grant a material consent
under an existing loan (which consent is not otherwise required to be granted)
or, alternatively, (B) the guarantee must otherwise be enforceable under the
laws of the state governing the loan and in which the property securing the loan
is located or in which the lender has a significant place of business (with any
bona fide branch or office of the lender through which the loan is made,
negotiated, or administered being deemed a “significant place of business” for
the purposes hereof);

 

(d)as to each Partner Guarantor that is executing a guarantee pursuant to this
Agreement, there must be no other person that would be considered to “bear the
economic risk of loss,” within the meaning of Treasury Regulations Section
1.752-2, or would be considered to be “at risk” for purposes of Section 465(b)
of the Code with respect to that portion of such debt for which such Partner
Guarantor is being made liable for purposes of satisfying the Partnership’s
obligations to such Partner Guarantor under this Article 3;

 

(e)the aggregate Guaranteed Amounts with respect to the Guaranteed Debt will not
exceed 25% of the amount of the Guaranteed Debt outstanding at the time the
guarantee is executed. Except for guarantees already in place at the time a
guarantee opportunity is presented to the Protected Partners, at no time can
there be guarantees with respect to the Guaranteed Debt that are provided by
other persons that are “pari passu” with or at a lower level of risk than the
guarantees provided by the Protected Partners. If there are guarantees already
in place at the time a guarantee opportunity is presented to the Protected
Partners that are “pari passu” with or at a lower level of risk than the
guarantees provided by the Protected Partners, then the amount of Guaranteed
Debt subject to such existing guarantees shall be added to the Guaranteed Amount
for purposes of calculating the 25% limitation set forth in this Section 3.3(e);
and

 

(f)the obligor with respect to the Guaranteed Debt is the Partnership or an
entity which is and will continue to be under the legal control of the
Partnership (which shall include a partnership or limited liability company in
which the Partnership or a wholly-owned Subsidiary of the Partnership is the
sole managing general partner or sole managing member, as applicable) and which
the equity interest of the Partnership in both capital and profits is not less
than 50%.

 

3.4           Covenant With Respect to Guaranteed Debt Collateral. The
Partnership covenants with the Partner Guarantors with respect to the Guaranteed
Debt that it will not pledge the collateral with respect to a Guaranteed Debt to
secure any other indebtedness (unless such other indebtedness is, by its terms,
subordinate in all respects to the Guaranteed Debt for which such collateral is
security) or otherwise voluntarily dispose of or reduce the amount of such
collateral unless either (A) after giving effect thereto the conditions in
Section 3.3(b) would continue to be satisfied with respect to the Guaranteed
Debt, and the Guaranteed Debt otherwise would continue to be Qualified Guarantee
Indebtedness, or (B) the Partnership obtains from the lender with respect to the
original Guaranteed Debt a full and complete release of any Partner Guarantor
unless the Partner Guarantor expressly requests that it not be released.

 

3.5           Limitation on Additional Guarantees With Respect to Debt Secured
by Collateral for Guaranteed Debt. The Partnership shall not offer the
opportunity or make available to any person or entity other than a Protected
Partner (or Indirect Owner) a guarantee of any Guaranteed Debt or other debt
that is secured, directly or indirectly, by any collateral for Guaranteed Debt
unless (i) such debt by its terms is subordinate in all respects to the
Guaranteed Debt or, if such other guarantees are of the Guaranteed Debt itself,
such guarantees by their terms must be paid in full before the lender can have
recourse to the Partner Guarantors (i.e., the first dollar amount of recovery by
the applicable lenders must be applied to the Guaranteed Amount); provided,
however, that the foregoing shall not apply with respect to additional
guarantees of Guaranteed Debt so long as the conditions set forth in Sections
3.3(b) and (e) would be satisfied immediately after the implementation of such
additional guarantee (determined in the case of Section 3.3(b), based upon the
fair market value of the collateral for such Guaranteed Debt at the time the
additional guarantee is entered into and adding the amount of such additional
guarantee(s) to the sum of the amounts guaranteed by Protected Partners under
Section 3.2 plus any other preexisting “bottom dollar guarantee” previously
permitted pursuant to this Section 3.5 or Sections 3.3(a) and (b) above, for
purposes of making the computation provided for in Section 3.3(b)), and (ii)
such other guarantees do not have the effect of reducing the amount of the
Guaranteed Debt that is includible by any Partner Guarantor in its adjusted tax
basis for its OP Units pursuant to Treasury Regulations Section 1.752-2.

 

 

 

 

3.6           [RESERVED]

 

3.7           Presumption as to Schedule 3.7. The form of the Guarantee
Agreement attached hereto as Schedule 3.7 shall be conclusively presumed to
satisfy the conditions set forth in Section 3.3 and to have caused the
Guaranteed Debt to be considered allocable to the Guarantor Partner who enters
into such Guarantee Agreement pursuant to Treasury Regulation § 1.752-2 and
Section 465 of the Code so long as all of the following conditions are met with
respect such Guaranteed Debt:

 

(i)there are no other guarantees in effect with respect to such Guaranteed Debt
(other than the guarantees contemporaneously being entered into by the Partner
Guarantors pursuant to Section 3.2);

 

(ii)the collateral securing such Guaranteed Debt is not, and shall not
thereafter become, collateral for any other indebtedness that is senior to or
pari passu with such Guaranteed Debt;

 

(iii)the lender with respect to such Guaranteed Debt is not the Partnership, any
Subsidiary or other entity in which the Partnership owns a direct or indirect
interest, the REIT, any other partner in the Partnership, or any person related
to any partner in the Partnership as determined for purposes of Treasury
Regulation § 1.752-2 or any person that would be considered a “related party” as
determined for purposes of Section 465 of the Code; and

 

(iv)none of the REIT, nor any other partner in the Partnership, nor any person
related to any partner in the Partnership as determined for purposes of Treasury
Regulation § 1.752-2 shall have provided, or shall thereafter provide,
collateral for, or otherwise shall have entered into, or shall thereafter enter
into, a relationship that would cause such person or entity to be considered to
bear the risk of loss with respect to such Guaranteed Debt, as determined for
purposes of Treasury Regulation § 1.752-2 or that would cause such entity to be
considered “at risk” with respect to such Guaranteed Debt, as determined for
purposes of Section 465 of the Code.

 

ARTICLE 4

 

REMEDIES FOR BREACH

 

4.1           Monetary Damages. In the event that the Partnership or a
Subsidiary breaches its obligations set forth in Article 2 or Article 3 with
respect to a Protected Partner (or Indirect Owner), the Protected Partner’s (and
Indirect Owner’s) sole right shall be to receive from the Partnership, and the
Partnership shall pay to Protected Partner as damages, an amount equal to:

 

 

 

 

(i)          in the case of a violation of Article 3, the aggregate federal,
state and local income taxes (including any applicable federal unearned income
Medicare contribution under Section 1411 of the Code) incurred by the Protected
Partner (or Indirect Owner) as a result of the income or gain allocated to, or
otherwise recognized by, such Protected Partner (or Indirect Owner) by reason of
such breach; and

 

(ii)         in the case of a violation of Article 2, the aggregate federal,
state, and local income taxes (including any applicable federal unearned income
Medicare contribution under Section 1411 of the Code) incurred with respect to
the Protected Gain incurred with respect to the Protected Property that is
allocable to such Protected Partner (or Indirect Owner);

 

plus an additional amount so that, after the payment by such Protected Partner
(or Indirect Owner) of all federal, state and local income taxes on amounts
received pursuant to this Section 4.1 (including any tax liability incurred as a
result of such Protected Partner’s (or Indirect Owner’s) receipt of such
indemnity payment), such Protected Partner (or Indirect Owner) retains an amount
equal to its total federal, state and local income tax liability incurred as a
result of such breach.

 

For purposes of computing the amount of the indemnity payment owed to a
Protected Partner or Indirect Owner, (i) any deduction for state and local
income taxes payable as a result thereof shall be treated as fully deductible
for purposes of computing federal income taxes (taking into account any
limitation or phaseout of itemized deductions applicable to taxpayers in the
highest federal income tax bracket), and (ii) a Protected Partner’s tax
liability shall be computed using the highest federal, state and local marginal
income tax rates that would be applicable to such Protected Partner's taxable
income (taking into account the character of such income or gain) for the year
with respect to which the taxes must be paid, and, except as described in clause
(i), without regard to any deductions, losses or credits that may be available
to such Protected Partner that would reduce or offset its actual taxable income
or actual tax liability if such deductions, losses or credits could be utilized
by the Protected Partner to offset other income, gain or taxes of the Protected
Partner, either in the current year, in earlier years, or in later years. In the
case of a Protected Partner that is a partnership, “S corporation” or a
disregarded entity for federal income tax purposes, the preceding sentence shall
be applied treating each Indirect Owner of such partnership, “S corporation” or
disregarded entity as if it were directly a Protected Partner.

 

 

 

 

4.2           Process for Determining Damages. If the Partnership or a
Subsidiary has breached or violated any of the covenants set forth in Article 2
or Article 3 or a Protected Partner asserts that the Partnership or a Subsidiary
has breached or violated any of the covenants set forth in Article 2 or Article
3 (a “Prohibited Transaction”), the Partnership and the Protected Partner agree
to negotiate in good faith to resolve any disagreements regarding any such
breach or violation and the amount of damages, if any, payable to such Protected
Partner under Section 4.1. If any such disagreement cannot be resolved by the
Partnership and such Protected Partner within (i) 60 days after the receipt of
notice from the Partnership of such breach pursuant to Section 4.3, (ii) 60 days
after the receipt of a notice from the Protected Partner that the Partnership or
a Subsidiary has breached its obligations under this Agreement, which notice
shall set forth the amount of income asserted to be recognized by the Protected
Partner and the payment required to be made to such Protected Partner under
Section 4.1 as a result of the breach, (iii) 10 days following the date that the
Partnership notifies the Protected Partner (and its Indirect Owners) of its
intention to settle, compromise and/or concede any Tax Claim or Proceeding
pursuant to Section 7.2, or (iv) 10 days following any final determination of
any Tax Claim or Proceeding, the Partnership and the Protected Partner shall
jointly retain a nationally recognized “Big Four” independent public accounting
firm (an “Accounting Firm”) to act as an arbitrator to resolve as expeditiously
as possible all points of any such disagreement (including, without limitation,
whether a breach of any of the covenants set forth in Article 2 and Article 3
has occurred and, if so, the amount of damages to which the Protected Partner is
entitled as a result thereof, determined as set forth in Section 4.1). All
determinations made by the Accounting Firm with respect to the resolution of any
breach or violation of any of the covenants set forth in Article 2 and Article 3
and the amount of damages payable to the Protected Partner under Section 4.1
shall, subject to any subsequent Tax Claim or Proceeding, and subject to the
last sentence of this Section 4.2, be final, conclusive and binding on the
Partnership and the Protected Partner. The fees and expenses of any Accounting
Firm incurred in connection with any such determination shall be shared equally
by the Partnership and the Protected Partner; provided, however, that if the
amount determined by the Accounting Firm to be owed by the Partnership to the
Protected Partner is more than 5% higher than the amount proposed by the
Partnership to be owed to such Protected Partner prior to the submission of the
matter to the Accounting Firm, then all of the fees and expenses of any
Accounting Firm incurred in connection with any such determination shall be paid
by the Partnership, and if the amount determined by the Accounting Firm to be
owed by the Partnership to the Protected Partner is less than 95% of the amount
proposed by the Partnership to be owed to the Protected Partner prior to the
submission of the matter to the Accounting Firm then all fees and expenses of
any Accounting Firm incurred in connection with any such determination shall be
paid by the Protected Partner. In the case of any Tax Claim or Proceeding that
is resolved pursuant to a final determination or that is settled, compromised
and/or conceded pursuant to Section 7.2, the amount of taxes due to the Internal
Revenue Service or other taxing authority shall, to the extent that such taxes
relate to matters covered in this Agreement, be presumed to be damages resulting
from a breach of this Agreement, and the amount of any such damages shall be
increased by any interest and penalties required to be paid by the Protected
Partner (or Indirect Owner) with respect to such taxes (other than interest and
penalties resulting from a failure of the Protected Partner (or Indirect Owner)
to timely and properly file any tax return or to timely pay any tax, unless such
failure resulted solely from the Protected Partner (or Indirect Owner) reporting
and paying its taxes in a manner consistent with the Partnership) so that the
amount of the damages under Section 4.1 shall not be less than the amount
required to be paid to the Internal Revenue Service or other taxing authority
that pertains to matters covered in this Agreement.

 

4.3           Required Notices; Time for Payment. In the event that there has
been a breach of Article 2 or Article 3, the Partnership shall provide to the
Protected Partners (or Indirect Owners), notice of the transaction or event
giving rise to such breach, along with a calculation of the amount of income to
be recognized by any Protected Partner (or Indirect Owner), and the amount
required to be paid to such Protected Partner (or Indirect Owner), under Section
4.1 by reason thereof, not later than 30 days following the date that the
Partnership becomes aware that such transaction or event constitutes a breach of
this Agreement.

 

(b)           Notwithstanding anything to the contrary contained herein, the
Partnership may not enter into a Prohibited Transaction unless, at least
fourteen (14) days prior to entering into such transaction, the Partnership will
have provided the Protected Partner with evidence reasonably satisfactory to the
Protected Partner that, following such transaction, and including any proceeds
from such transaction, the Partnership will have the requisite liquidity to make
any necessary indemnification payments required pursuant to this Agreement. The
Protected Partner shall have the right to seek and obtain specific performance
or injunctive relief with respect to this Section 4.3(b).

 

 

 

 

(c)           All payments required to be made under Section 4.1 to any
Protected Partner (or Indirect Owner) shall be made to such Protected Partner
(or Indirect Owner) no less than five (5) days prior to the due date of the
quarterly estimated tax payment for individuals which next follows the date that
the transaction giving rise to the obligation hereunder is consummated; and
provided further that any payment required to be made under Section 4.1 to any
Protected Partner (or Indirect Owner) resulting from a Tax Claim or Proceeding
shall be made on or before the date that the relevant taxes are required to be
paid as a result of any final determination of such Tax Claim or Proceeding or
any settlement, compromise and/or concession of such Tax Claim or Proceeding
pursuant to Section 7.2. In the event of a payment made after the date required
pursuant to this Section 4.3, interest shall accrue on the aggregate amount
required to be paid from such date to the date of actual payment at a rate equal
to the lesser of the (i) the “prime rate” of interest, as published in the Wall
Street Journal (or if no longer published there, as announced by Citibank)
effective as of the date the payment is required to be made plus 10% or (ii)
20%, but not to exceed the maximum amount permitted by law.

 

4.4           Additional Damages for Breaches of Section 3.4. Notwithstanding
any of the foregoing in this Article 4, in the event that the Partnership should
breach any of its covenants set forth in Section 3.4 hereof and a Protected
Partner (or Indirect Owner) is required to make a payment in respect of such
indebtedness that it would not have had to make if such breach had not occurred
(an “Excess Payment”), then, in addition to the damages provided for in the
other Sections of this Article 4, the Partnership shall pay to such Protected
Partner (or Indirect Owner) an amount equal to the sum of (i) the Excess
Payment, and (ii) an amount equal to the aggregate federal, state and local
income taxes required to be paid by the Protected Partner (computed as set forth
in Section 4.1) as a result of any payment required under this Section 4.4. Such
amount shall be paid within fifteen (15) days of the Partnership’s receipt of
notice from the Protected Partner (or Indirect Owner) of the Partnership’s
breach of the covenants set forth in Section 3.4 hereof.

 

ARTICLE 5

 

SECTION 704(C) METHOD AND ALLOCATIONS

 

Notwithstanding any provision of the Partnership Agreement, the Partnership
shall use, and shall cause any other Subsidiary to use, the “traditional method”
under Treasury Regulations Section 1.704-3(b) for purposes of making all
allocations under Section 704(c) of the Code with respect to the Protected
Properties and for all other properties acquired by the Partnership pursuant to
the Contribution Agreement to take into account the book-tax disparities as of
the Closing Date (or, the Second Closing Date, as relevant) and with respect to
any revaluation of such property pursuant to Treasury Regulations Sections
1.704-1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g), or 1.704-3(a)(6) with no “curative
allocations”, “remedial allocations” or adjustments to other items to offset the
effects of the “ceiling rule,” including upon any sale of any such property.

 

ARTICLE 6

 

[RESERVED]

 

ARTICLE 7

 

TAX PROCEEDINGS

 

7.1           Notice of Tax Audits. If any claim, demand, assessment (including
a notice of proposed assessment) or other assertion is made with respect to
taxes against the Protected Partners or the Partnership, the calculation of
which involves a matter covered in this Agreement, that could result in tax
liability to a Protected Partner (“Tax Claim”) or if the REIT or the Partnership
receives any notice from any jurisdiction with respect to any current or future
audit, examination, investigation or other proceeding (“Tax Proceeding”)
involving the Protected Partners or the Partnership or that otherwise could
involve a matter covered in this Agreement and could directly or indirectly
affect the Protected Partners (adversely or otherwise), the REIT or the
Partnership, as applicable, shall promptly notify the Protected Partners of such
Tax Claim or Tax Proceeding.

 

 

 

 

7.2           Control of Tax Proceedings. The REIT, as the sole member in the
general partner of the Partnership, shall have the right to control the defense,
settlement or compromise of any Tax Proceeding or Tax Claim; provided, however,
that the REIT shall not consent to the entry of any judgment or enter into any
settlement with respect to such Tax Claim or Tax Proceeding that could result in
tax liability to a Protected Partner (or Indirect Owner) without the prior
written consent of the affected Protected Partner (unless, and only to the
extent, that any taxes required to be paid by the Protected Partner (or Indirect
Owners) as a result thereof would be required to be reimbursed by the
Partnership and the REIT under Article 4, and the Partnership and the REIT agree
in connection with such settlement or consent to make such required payments);
provided further that the Partnership shall keep Protected Partners duly
informed of the progress thereof to the extent that such Proceeding or Tax Claim
could directly or indirectly affect (adversely or otherwise) the Protected
Partners (or Indirect Owners) and that the Protected Partner shall have the
right to review and comment on any and all submissions made to the Internal
Revenue Service, a court, or other governmental body with respect to such Tax
Claim or Tax Proceeding and that the Partnership will consider such comments in
good faith.

 

7.3           Timing of Tax Returns: Periodic Tax Information. The Partnership
shall cause to be delivered to each Protected Partner, as soon as practicable
each year, the Schedules K-1 that the Partnership is required to deliver to such
Protected Partner with respect to the prior taxable year. In addition, the
Partnership agrees to provide to each Protected Partner, upon request, an
estimate of the taxable income expected to be allocable for a specified taxable
year from the Partnership to such Protected Partner, provided that such
estimates shall not be required to be provided more frequently than once each
calendar quarter.

 

ARTICLE 8

 

AMENDMENT OF THIS AGREEMENT; WAIVER OF CERTAIN PROVISIONS;

 

8.1           Amendment. This Agreement may not be amended, directly or
indirectly (including by reason of a merger between the Partnership and another
entity) except by a written instrument signed by the REIT (and if different, the
general partner of the Partnership) and each of the Protected Partners.

 

8.2           Waiver. Notwithstanding the foregoing, upon written request by the
Partnership, each Protected Partner (or Indirect Owner), in its sole discretion,
may waive the payment of any damages that is otherwise payable to such Protected
Partner (or Indirect Owner) pursuant to Article 4 hereof. Such a waiver shall be
effective only if obtained in writing from the affected Protected Partner (or
Indirect Owner).

 

ARTICLE 9

 

MISCELLANEOUS

 

9.1           Additional Actions and Documents. Each of the parties hereto
hereby agrees to take or cause to be taken such further actions, to execute,
deliver, and file or cause to be executed, delivered and filed such further
documents, and will obtain such consents, as may be necessary or as may be
reasonably requested in order to fully effectuate the purposes, terms and
conditions of this Agreement.

 

 

 

 

9.2           Assignment. No party hereto shall assign its or his rights or
obligations under this Agreement, in whole or in part, except by operation of
law, without the prior written consent of the other parties hereto, and any such
assignment contrary to the terms hereof shall be null and void and of no force
and effect.

 

9.3           Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Protected Partner and their respective
successors and permitted assigns, whether so expressed or not. This Agreement
shall be binding upon the REIT, the Partnership, and any entity that is a direct
or indirect successor, whether by merger, transfer, spin-off or otherwise, to
all or substantially all of the assets of either the REIT or the Partnership (or
any prior successor thereto as set forth in the preceding portion of this
sentence), provided that none of the foregoing shall result in the release of
liability of the REIT and the Partnership hereunder. The REIT and the
Partnership covenant with and for the benefit of the Protected Partner (and
Indirect Owners) not to undertake any transfer of all or substantially all of
the assets of either entity (whether by merger, transfer, spin-off or otherwise)
unless the transferee has acknowledged in writing and agreed in writing to be
bound by this Agreement, provided that the foregoing shall not be deemed to
permit any transaction otherwise prohibited by this Agreement.

 

9.4           Subsidiary Entities. Any entity controlled by the Partnership or
the REIT that holds an interest in the Protected Properties shall be bound by
all of the limitations and restriction to which the Partnership is subject
hereunder as if such entity were originally a signatory to this Agreement in
lieu of the Partnership and the REIT.

 

9.5           Modification: Waiver. No failure or delay on the part of any party
hereto in exercising any power or right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the parties hereunder are cumulative
and not exclusive of any rights or remedies which they would otherwise have. No
modification or waiver of any provision of this Agreement, nor consent to any
departure by any party therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances.

 

9.6           Captions. The Article and Section headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

 

9.7           Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:

 

(i)if to the Partnership, or the REIT, to:

 

c/o Campus Crest Communities, Inc.

2100 Rexford Road, Suite 414

Charlotte, North Carolina 28211

Attention: Chief Financial Officer

Facsimile: (704) 973-0965

 

 

 

 

(ii)if to a Protected Partner, to the address on file with the Partnership.

 

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, or faxed in the manner described above, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, or (with respect to a facsimile) the answerback being deemed
conclusive, but not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.

 

9.8           Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.

 

9.9           Governing Law. The interpretation and construction of this
Agreement, and all matters relating thereto, shall be governed by the laws of
the State of Delaware, without regard to the choice of law provisions thereof.

 

9.10        Consent to Jurisdiction; Enforceability.

 

(i)          This Agreement and the duties and obligations of the parties
hereunder shall be enforceable against any of the parties in the courts of the
State of Delaware. For such purpose, each party hereto hereby irrevocably
submits to the nonexclusive jurisdiction of such courts and agrees that all
claims in respect of this Agreement may be heard and determined in any of such
courts.

 

(ii)         Each party hereto hereby irrevocably agrees that a final judgment
of any of the courts specified above in any action or proceeding relating to
this Agreement shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

9.11         Severability. If any part of any provision of this Agreement shall
be invalid or unenforceable in any respect, such part shall be ineffective to
the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions of
this Agreement.

 

9.12         Costs of Disputes. Except as otherwise expressly set forth in this
Agreement, the nonprevailing party in any dispute arising hereunder shall bear
and pay the costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) incurred by the prevailing party or parties in
connection with resolving such dispute.

 

 

 

 

9.13         Representations and Warranties Regarding Authority.

 

(i)          Representations and Warranties of the REIT and the Partnership.
Each of the REIT and the Partnership has the requisite corporate or other (as
the case may be) power and authority to enter into this Agreement and to perform
its respective obligations hereunder. The execution and delivery of this
Agreement by each of the REIT and the Partnership and the performance of each of
its respective obligations hereunder have been duly authorized by all necessary
trust, partnership, or other (as the case may be) action on the part of each of
the REIT and the Partnership. This Agreement has been duly executed and
delivered by each of the REIT and the Partnership and constitutes a valid and
binding obligation of each of the REIT and the Partnership, enforceable against
each of the REIT and the Partnership in accordance with its terms, except as
such enforcement may be limited by (i) applicable bankruptcy or insolvency laws
(or other laws affecting creditors’ rights generally) or (ii) general principles
of equity. The execution and delivery of this Agreement by each of the REIT and
the Partnership do not, and the performance by each of its respective
obligations hereunder will not, conflict with, or result in any violation of (x)
the Partnership Agreement or (y) any other agreement applicable to the REIT
and/or the Partnership, other than, in the case of clause (y), any such
conflicts or violations that would not materially adversely affect the
performance by the Partnership and the REIT of their obligations hereunder.

 

(ii)         Representations and Warranties of the Protected Partners. Each of
the Protected Partners has the requisite corporate or other (as the case may be)
power and authority to enter into this Agreement and to perform its respective
obligations hereunder. The execution and delivery of this Agreement by each of
the Protected Partners and the performance of each of its respective obligations
hereunder have been duly authorized by all necessary trust, partnership, or
other (as the case may be) action on the part of each of the Protected Partners.
This Agreement has been duly executed and delivered by each of the Protected
Partners and constitutes a valid and binding obligation of each of the Protected
Partners.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, the REIT, the Partnership, and the Protected Partners, have
caused this Agreement to be signed by their respective officers (or general
partners) thereunto duly authorized all as of the date first written above.

 

  CAMPUS CREST COMMUNITIES, INC.         By: /s/ Aaron Halfacre   Name: Aaron
Halfacre   Title: Executive Vice President and Chief Investment Officer        
CAMPUS CREST COMMUNITIES OPERATING PARTNERSHIP, L.P.   By: Campus Crest GP, LLC,
its general partner   By: Campus Crest Communities, Inc., its sole member      
  By: /s/ Aaron Halfacre   Name: Aaron Halfacre   Title: Executive Vice
President and Chief Investment Officer         McWhirter Family Limited
Partnership         By: /s/ John R. McWhirter   Name: John R. McWhirter   Title:
General Partner         By: /s/ Jeanette D. McWhirter   Name: Jeanette D.
McWhirter   Title: General Partner         /s/ John W. McWhiter   John W.
McWhirter       /s/ Jodi McWhiter   Jodi McWhirter       /s/ Thomas D. Simco  
Thomas D. Simco

 

 

 

 

  /s/ Betty Simco   Betty Simco       /s/ Mark McWhiter   Mark McWhirter      
/s/ Deborah McWhiter   Deborah McWhirter       /s/ Andrew J. McWhiter   Andrew
J. McWhirter       /s/ Mary James   Mary James       /s/ Eric Heiser   Eric
Heiser       /s/ Rebeccas Heiser   Rebecca Heiser       /s/ Brian McWhiter  
Brian McWhirter       /s/ Susan McWhiter   Susan McWhirter       Heiser
Properties, LLC         /s/ Robert F. Heiser   Name: Robert F. Heiser   Title:
Authorized Signatory         /s/ Judy Heiser   Name: Judy Heiser   Title:
Authorized Signatory

 

 

 

 

  /s/ Gail McWhiter   Gail McWhirter       /s/ Frederick Brenner   Frederick
Brenner       /s/ Patricia Oldford   Patricia Oldford       /s/ Chris Summers  
Chris Summers       /s/ Maria Summers   Maria Summers       /s/ Thomas Foley  
Thomas Foley

 

 

 

 

Schedule 2.1(i)

 

Protected Partners

 

Name of Protected Partner   McWhirter Family Limited Partnership John W.
McWhirter Jodi McWhirter Thomas & Betty Simco Mark & Deborah McWhirter Andrew J.
McWhirter Mary James Eric & Rebecca Heiser Brian & Susan McWhirter Heiser
Properties Gail McWhirter Frederick Brenner Patricia Oldford Chris & Maria
Summers Thomas Foley

 

 

 

 

Schedule 2.1(ii)

 

First Closing Protected Properties

 

Entity  Property  City  State  Section 704(c) Value
Fair Market Value                 CBTC 3, LLC  IUP P1  Indiana  PA  $13,942,706 
                CBTC 4, LLC  IUP P2  Indiana  PA  $10,009,171                 
CBTC 7, LLC  Radford  Radford  VA  $23,973,448                  CBTC 9, LLC 
Northbrook  State College  PA  $26,696,589                  CBTC 13, LLC  Mt.
Pleasant P1  Mt. Pleasant  MI  $34,097,830                  CBTC 15, LLC 
Bowling Green P1  Bowling Green  OH  $13,633,666                  CBTC 17, LLC 
Bowling Green P2  Bowling Green  OH  $7,507,755                  CBTC 16, LLC 
Grand Valley P1  Allendale  MI  $36,281,964                  CBTC 24, LLC  Grand
Valley P2  Allendale  MI  $17,302,678                  CBTC 20, LLC  Missouri 
Columbia  MO  $39,129,761                  CBTC 21, LLC  Statesboro P1 
Statesboro  GA  $44,723,700                  CBTC 25, LLC  South Carolina P1 
Columbia  SC  $52,956,657                  CBTC 32, LLC  South Carolina P2 
Columbia  SC  $11,108,995                  CBTC 35, LLC  San Marcos P2  San
Marcos  TX  $25,582,568                  CBTC 36, LLC  Statesboro P2 
Statesboro  GA  $14,825,669                  CBTC 38, LLC  Mt. Pleasant P2  Mt.
Pleasant  MI  $14,103,688                        Total     $385,876,845 

 

 

 

 

Schedule 2.1(ii)()

 

Second Closing Protected Properties

 

Entity  Property  City  State  Section 704(c) Value
Fair Market Value                 CBTC 29, LLC  San Marcos P1  San Marcos  TX 
$51,211,123                        Total     $51,211,123 

 

 

 

 

Schedule 3.1(a)

 

Initial Minimum Liability Amount

 

Protected Partner  Minimum Liability Amount  MFLP  $23,799,360  John W.
McWhirter  $3,926,641  Jodi McWhirter  $3,926,656  Thomas & Betty Simco 
$7,898,438  Mark & Deborah McWhirter  $7,564,668  Andrew J. McWhirter 
$3,797,840  Mary James  $3,782,169  Eric & Rebecca Heiser  $7,549,329  Brian &
Susan McWhirter  $7,539,278  Heiser Properties  $7,562,341  Gail McWhirter 
$1,261,816  Frederick Brenner  $5,933,412  Patricia Oldford  $2,908,474  Chris &
Maria Summers  $2,990,667  Thomas Foley   —  TOTAL  $90,441,089 

 

 

 

 

Schedule 3.1(a)(ii)

 

Minimum Liability Amount – Following Occurrence of the Second Closing

 

Protected Partner  Minimum Liability Amount  MFLP  $26,285,821  John W.
McWhirter  $4,337,428  Jodi McWhirter  $4,337,444  Thomas & Betty Simco 
$8,724,381  Mark & Deborah McWhirter  $8,358,307  Andrew J. McWhirter 
$4,196,161  Mary James  $4,178,973  Eric & Rebecca Heiser  $8,341,483  Brian &
Susan McWhirter  $8,330,460  Heiser Properties  $8,355,754  Gail McWhirter 
$1,394,768  Frederick Brenner  $6,574,137  Patricia Oldford  $3,222,194  Chris &
Maria Summers  $3,346,578  Thomas Foley  $16,111  TOTAL  $100,000,000 

 

 

 

 

Schedule 3.7

 

Form of Guarantee

 

 

 

 

GUARANTEE

 

This Guarantee is made and entered into as of the ____ day of ___________ ____,
by the persons listed on Exhibit A annexed hereto (the “Guarantors”) for the
benefit of the Lender set forth on Exhibit B annexed hereto and made a part
hereof (the “Lender”) which term shall include any person or entity who
hereafter holds the Note (as defined below) in accordance with the terms
hereof).

 

RECITALS

 

WHEREAS, the Lender has loaned to the borrower set forth on Exhibit B (the
“Borrower”) the amount set forth opposite such Lender’s name on Exhibit B, which
loan (i) is evidenced by the promissory note described on Exhibit C hereto (the
“Note”), (ii) has a current outstanding balance in the amount set forth on
Exhibit B annexed hereto, and (ii) is secured by a mortgage or deed of trust on
the collateral described on Exhibit D annexed hereto (the “Deed of Trust”), with
the property and other assets securing such Deed of Trust referred to as the
“Collateral”);

 

WHEREAS, the Borrower is either Campus Crest Communities Operating Partnership
L.P., a Delaware limited partnership (the “Partnership”) or a Subsidiary of the
Partnership in which the Partnership owns a [__%] or greater interest in the
Subsidiary;

 

WHEREAS, the Guarantors are limited partners in the Partnership; and

 

WHEREAS, the Guarantors are executing and delivering this Guarantee to guarantee
a portion of the Borrower’s payments with respect to the Note, subject to and
otherwise in accordance with the terms and conditions hereinafter set forth.

 

NOW THEREFORE, in consideration of the foregoing recitals and facts and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, each of the Guarantors hereby agree as follows:

 

1.   Guarantee and Performance of Payment.

 

(a)            The Guarantors hereby irrevocably and unconditionally guarantee
the collection by the Lender of, and hereby agree to pay to the Lender upon
demand (following (1) foreclosure of the Deed of Trust, exercise of the powers
of sale thereunder and/or acceptance by the Lender of a deed to the Collateral
in lieu of foreclosure, and (2) the exhaustion of the exercise of any and all
remedies available to the Lender against the Borrower, including, without
limitation, realizing upon the assets of the Borrower other than the Collateral
against which the Lender may have recourse), an amount equal to the excess, if
any, of the Guaranteed Amount set forth on Exhibit B over the Lender Proceeds
(as hereinafter defined) (which excess is referred to as the “Aggregate
Guarantee Liability”). The amounts payable by each Guarantor in respect of the
guarantee obligations hereunder shall be in the same proportion as the dollar
amounts listed next to such Guarantor’s name on Exhibit A attached hereto bears
to the total Guaranteed Amount set forth on Exhibit A, provided that,
notwithstanding anything to the contrary contained in this Guarantee, each
Guarantor’s aggregate obligation under this Guarantee shall be limited to the
dollar amount set forth on Exhibit A attached hereto next to such Guarantor’s
name. The Guarantors’ obligations as set forth in this paragraph 1(a) are
hereinafter referred to as the “Guaranteed Obligations.”

 

 

 

 

(b)           For the purposes of this Guarantee, the term “Lender Proceeds”
shall mean the aggregate of (i) the Foreclosure Proceeds (as hereinafter
defined) plus (ii) all amounts collected by the Lender from the Borrower (other
than payments of principal, interest or other amounts required to be paid by the
Borrower to Lender under the terms of the Note that are paid by the Borrower to
the Lender at a time when no default has occurred under the Note and is
continuing) or realized by the Lender from the sale of assets of the Borrower
other than the Collateral.

 

(c)           For the purposes of this Guarantee, the term “Foreclosure
Proceeds” shall have the applicable meaning set forth below with respect to the
Collateral:

 

1.             If at least one bona fide third party unrelated to the Lender
(and including, without limitation, any of the Guarantors) bids for such
Collateral at a sale thereof, conducted upon foreclosure of the related Deed of
Trust or exercise of the power of sale thereunder, Foreclosure Proceeds shall
mean the highest amount bid for such Collateral by the party that acquires title
thereto (directly or through a nominee) at or pursuant to such sale. For the
proposes of determining such highest bid, amounts bid for the Collateral by the
Lender shall be taken into account notwithstanding the fact that such bids may
constitute credit bids which offset against the amount due to the Lender under
the Note.

 

2.             If there is no such unrelated third-party at such sale of the
Collateral so that the only bidder at such sale is the Lender or its designee,
the Foreclosure Proceeds shall be deemed to be fair market value (the “Fair
Market Value”) of the Collateral as of the date of the foreclosure sale, as such
Fair Market Value shall be mutually agreed upon by the Lender and the Guarantor
or determined pursuant to subparagraph 1(d).

 

3.             If the Lender receives and accepts a deed to the Collateral in
lieu of foreclosure in partial satisfaction of the Borrower’s obligations under
the Note, the Foreclosure Proceeds shall be deemed to be the Fair Market Value
of such Collateral as of the date of delivery of the deed-in-lieu of
foreclosure, as such Fair Market Value shall be mutually agreed upon by the
Lender and the Guarantor or determined pursuant to subparagraph 1(d).

 

(d)           Fair Market Value of the Collateral (or any item thereof) shall be
the price at which a willing seller not compelled to sell would sell such
Collateral, and a willing buyer not compelled to buy would purchase such
Collateral, free and clear of all mortgages but subject to all leases and
reciprocal easements and operating agreements. If the Lender and the Guarantor
are unable to agree upon the Fair Market Value of any Collateral in accordance
with subparagraphs 1(c) 2. or 3. above, as applicable, within twenty (20) days
after the date of the foreclosure sale or the delivery of the deed-in-lieu of
foreclosure, as applicable, relating to such Collateral, either party may have
the Fair Market Value of such Collateral determined by appraisal by appointing
an appraiser having the qualifications set forth below to determine the same and
by notifying the other party of such appointment within twenty (20) days after
the expiration of such twenty (20) day period. If the other party shall fail to
notify the first party, within twenty (20) days after its receipt of notice of
the appointment by the first party, of the appointment by the other party of an
appraiser having the qualifications set forth below, the appraiser appointed by
the first party shall alone make the determination of such Fair Market Value.
Appraisers appointed by the parties shall be members of the Appraisal Institute
(MAI) and shall have at least ten years’ experience in the valuation of
properties similar to the Collateral being valued in the greater metropolitan
area in which such Collateral is located. If each party shall appoint an
appraiser having the aforesaid qualifications and if such appraisers cannot,
within thirty (30) days after the appointment of the second appraiser, agree
upon the determination hereinabove required, then they shall select a third
appraiser which third appraiser shall have the aforesaid qualifications, and if
they fail so to do within forty (40) days after the appointment of the second
appraiser they shall notify the parties hereto, and either party shall
thereafter have the right, on notice to the other, to apply for the appointment
of a third appraiser to the chapter of the American Arbitration Association or
its successor organization located in the metropolitan area in which the
Collateral is located or to which the Collateral is proximate or if no such
chapter is located in such metropolitan area, in the metropolitan area closest
to the Collateral in which such a chapter is located. Each appraiser shall
render its decision as to the Fair Market Value of the Collateral in question
within thirty (30) days after the appointment of the third appraiser and shall
furnish a copy thereof to the Lender and the Guarantor. The Fair Market Value of
the Collateral shall then be calculated as the average of (i) the Fair Market
Value determined by the third appraiser and (ii) whichever of the Fair Market
Values determined by the first two appraisers is closer to the Fair Market Value
determined by the third appraiser; provided, however, that if the Fair Market
Value determined by the third appraiser is higher or lower than both Fair Market
Values determined by the first two appraisers, such Fair Market Value determined
by the third appraiser shall be disregarded and the Fair Market Value of the
Collateral shall then be calculated as the average of the Fair Market Value
determined by the first two appraisers. The Fair Market Value of a Property, as
so determined, shall be binding and conclusive upon the Lender and the
Guarantors. Guarantors shall bear the cost of its own appraiser and, subject to
subparagraph 1(e), shall bear all reasonable costs of appointing, and the
expenses of, any other appraiser appointed pursuant to this subparagraph (1)(d).

 

 

 

 

(e)           Notwithstanding anything in the preceding subparagraphs of this
paragraph 1, (i) in no event shall the aggregate amount required to be paid
pursuant to this Guarantee by the Guarantors as a group with respect to all
defaults under the Note and the Deed of Trust securing the obligations
thereunder exceed the Guaranteed Amount set forth on Exhibit B hereto, and
(ii) the aggregate obligation of each Guarantor hereunder with respect to the
Guaranteed Obligation shall be limited to the lesser of (I) the product of
(w) the Individual Guarantee Percentage for such Guarantor set forth on
Exhibit A hereto multiplied by (x) the Guaranteed Amount, or (II) the product of
(y) such Guarantor’s Individual Guarantee Percentage multiplied by (z) the
Aggregate Guarantee Liability.

 

(f)            In confirmation of the foregoing, and without limitation, the
Lender must first exhaust all of its rights and remedies against all property of
the Borrower as to which the Lender has (or may have) a right of recourse,
including, without limitation, the institution and prosecution to completion of
appropriate foreclosure proceedings under the Deed of Trust, before exercising
any right or remedy or making any claim, under this Guarantee.

 

(g)           The obligations under this Guarantee shall be personal to each
Guarantor and shall not be affected by any transfer of all or any part of a
Guarantor’s interests in the Partnership; provided, however, that if a Guarantor
has disposed of all of its equity interests in the Partnership, the obligations
of such Guarantor under this Guarantee shall terminate 12 months after the date
of such disposition (the “Termination Date”) provided (i) the Guarantor notifies
the Lender that it is terminating its obligations under this Guarantee as of the
Termination Date and (ii) the fair market value of the Collateral exceeds the
outstanding balance of the Note, including accrued and unpaid interest, as of
the Termination Date. Further, no Guarantor shall have the right to recover from
the Borrower any amounts such Guarantor pays pursuant to this Guarantee (except
and only to the extent that the amount paid to the Lender by such Guarantor
exceeds the amount required to be paid by such Guarantor under the terms of this
Guarantee).

 

(h)           The obligations of any Guarantor who is an individual as a
Guarantor hereunder shall terminate with respect to such Guarantor one week
after the death of such Guarantor if, as a result of the death of such
Guarantor, all property held by the Guarantor on the date of death would have a
basis for federal income tax purposes equal to the fair market value of such
property on such date (unless a later date were to be elected by the executor of
the Guarantor’s estate in accordance with the applicable provisions of the
Internal Revenue Code).

 

 

 

 

2.             Intent to Benefit Lender. This Guarantee is expressly for the
benefit of the Lender. The Guarantors intend that the Lender shall have the
right to enforce the obligations of the Guarantors hereunder separately and
independently of the Borrower, subject to the provisions of paragraph 1 hereof,
without any requirement whatsoever of resort by the Lender to any other party.
The Lender’s rights to enforce the obligations of the Guarantors hereunder are
material elements of this Guarantee. This Guarantee shall not be modified,
amended or terminated (other than as specifically provided herein) without the
written consent of the Lender. The Borrower shall furnish a copy of this
Guarantee to the Lender contemporaneously with its execution.

 

3.             Waivers. Each Guarantor intends to bear the ultimate economic
responsibility for the payment hereof of the Guaranteed Obligations to the
extent set forth in paragraph 1 above. Pursuant to such intent:

 

(a)           Except as expressly set forth in paragraph 1 above, each Guarantor
expressly waives any right (pursuant to any law, rule, arrangement or
relationship) to compel the Lender, or any subsequent holder of the Note or any
beneficiary of the Deed of Trust to sue or enforce payment thereof or pursue any
other remedy in the power of the Borrower, the Lender or any subsequent holder
of the Note or any beneficiary of the Deed of Trust whatsoever, and failure of
the Borrower or the Lender or any subsequent holder of the Note or any
beneficiary of the Deed of Trust to do so shall not exonerate, release or
discharge a Guarantor from its absolute unconditional obligations under this
Guarantee. Each Guarantor hereby binds and obligates itself, and its permitted
successors and assignees, for performance of the Guaranteed Obligations
according to the terms hereof, whether or not the Guaranteed Obligations or any
portion thereof are valid now or hereafter enforceable against the Borrower or
shall have been incurred in compliance with any of the conditions applicable
thereto, subject, however, in all respects to the Guarantee Limit and the other
limitations set forth in paragraph 1.

 

(b)           Each Guarantor expressly waives any right (pursuant to any law,
rule, arrangement, or relationship) to compel any other person (including, but
not limited to, the Borrower, the Partnership, any subsidiary of the Partnership
or the Borrower, or any other partner or affiliate of the Partnership or the
Borrower) to reimburse or indemnify such Guarantor for all or any portion of
amounts paid by such Guarantor pursuant to this Guarantee to the extent such
amounts do not exceed the amounts required to be paid by such Guarantor pursuant
to paragraph 1 hereof (taking into account the limitations set forth therein).

 

(c)           Except as expressly set forth in paragraph 1 above, if and only to
the extent that the Borrower has made similar waivers under the Note or the Deed
of Trust, each Guarantor expressly waives: (i) the defense of the statute of
limitations in any action hereunder or for the collection or performance of the
Note or the Deed of Trust; (ii) any defense that may arise by reason o£ the
incapacity, or lack of authority of the Borrower, the revocation or repudiation
hereof by such Guarantor, the revocation or repudiation of the Note or the Deed
of Trust by the Borrower, the failure of the Lender to file or enforce a claim
against the estate (either in administration, bankruptcy or any other
proceeding) of the Borrower; the unenforceability in whole or in part of the
Note, the Deed of Trust or any other document or instrument related thereto; the
Lender’s election, in any proceeding by or against the Borrower under the
federal Bankruptcy Code, of the application of Section 1111(b)(2) of the federal
Bankruptcy Code; or any borrowing or grant of a security interest under
Section 364 of the federal Bankruptcy Code; (iii) presentment, demand for
payment, protest, notice of discharge, notice of acceptance of this Guarantee or
occurrence of, or any default in connection with, the Note or the Deed of Trust,
and indulgences and notices of any other kind whatsoever, including, without
limitation, notice of the disposition of any collateral for the Note; (iv) any
defense based upon an election of remedies (including, if available, an election
to proceed by non-judicial foreclosure) or other action or omission by the
Lender or any other person or entity which destroys or otherwise impairs any
indemnification, contribution or subrogation rights of such Guarantor or the
right of such Guarantor, if any, to proceed against the Borrower for
reimbursement, or any combination thereof; (v) subject to Paragraph 4 below, any
defense based upon any taking, modification or release of any collateral or
guarantees for the Note, or any failure to create or perfect any security
interest in, or the taking of or failure to take any other action with respect
to any collateral securing payment or performance of the Note; (vi) any rights
or defenses based upon any right to offset or claimed offset by such Guarantor
against any indebtedness or obligation now or hereafter owed to such Guarantor
by the Borrower; or (vii) any rights or defenses based upon any rights or
defenses of the Borrower to the Note or the Deed of Trust (including, without
limitation, the failure or value of consideration, any statute of limitations,
accord and satisfaction, and the insolvency of the Borrower); it being intended,
except as expressly set forth in Paragraph 1 above, that such Guarantor shall
remain liable hereunder, to the extent set forth herein, notwithstanding any
act, omission or thing which might otherwise operate as a legal or equitable
discharge of any of such Guarantor or of the Borrower.

 

 

 

 

4.             Amendment of Note and Deed of Trust. Without in any manner
limiting the generality of the foregoing, the Lender or any subsequent holder of
the Note or beneficiary of the Deed of Trust may, from time to time, without
notice to or consent of the Guarantors, agree to any amendment, waiver,
modification or alteration of the Note or the Deed of Trust relating to the
Borrower and its rights and obligations thereunder (including, without
limitation, renewal, waiver or variation of the maturity of the indebtedness
evidenced by the Note, increase or reduction of the rate of interest payable
under the Note, release, substitution or addition of any Guarantor or endorser
and acceptance or release of any security for the Note), it being understood and
agreed by the Lender, however, that the Guarantor’s obligations hereunder are
subject, in all events, to the limitations set forth in Paragraph 1; provided
that (i) in the event that the Lender consents to the release of any Collateral
securing the Note pursuant to the Deed of Trust, the Guaranteed Amount shall be
reduced by the Fair Market Value of such Collateral on the date of such release
(determined as set forth in Section 1(d)); and (ii) upon any material change to
the Note or the Deed of Trust, including, without limitation, the maturity date
or the interest rate of the Note, or upon any release or substitution of any
Collateral securing the Note, within thirty (30) days of any Guarantor’s receipt
of actual notice of such event, subject to the following sentence, such
Guarantor may elect to terminate such Guarantor’s obligations under this
Guarantee by written notice to the Lender. Such termination shall take effect on
the 31st day following such actual notice, provided that no default under the
Guaranteed Obligation has occurred and is then continuing.

 

5.             Termination of Guarantee. Subject to paragraph 4, this Guarantee
is irrevocable as to any and all of the Guaranteed Obligations.

 

6.             Independent Obligations. Except as expressly set forth in
paragraph 1, the obligations of each Guarantor hereunder are independent of the
obligations of the Borrower, and a separate action (or actions) may be brought
by a Lender against the Guarantors, whether or not actions are brought against
the Borrower. Each Guarantor expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which
such Guarantor may now or hereafter have against the Borrower, or any other
person directly or contingently liable for the payment or performance of the
Note and the Deed of Trust arising from the existence or performance of this
Guarantee (including, but not limited to, the Partnership, Campus Crest
Communities, Inc., or any other partner of the Partnership) (except and only to
the extent that a Guarantor makes a payment to the Lender in excess of the
amount required to be paid under paragraph 1 and the limitations set forth
therein).

 

 

 

 

7.             Understanding With Respect to Waivers. Each Guarantor warrants
and represents that each of the waivers set forth above are made with full
knowledge of their significance and consequences, and that under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any of said waivers are determined to be contrary to any applicable law
or public policy, such waiver shall be effective only to the maximum extent
permitted by law.

 

8.             No Assignment. No Guarantor shall be entitled to assign his or
her rights or obligations under this Guarantee to any other person without the
written consent of the Lender.

 

9.             Entire Agreement. The parties agree that this Guarantee contains
the entire understanding and agreement between them with respect to the subject
matter hereof and cannot be amended, modified or superseded, except by an
agreement in writing signed by the parties.

 

10.           Notices. Any notice given pursuant to this Guarantee shall be in
writing and shall be deemed given when delivered personally, or sent by
registered or certified mail, postage prepaid, as follows:

 

If to the Partnership:

 

Campus Crest Communities Operating Partnership, L.P.

Campus Crest Communities, Inc.

2100 Rexford Road, Suite 414

Charlotte, NC 28211

Attention: Chief Financial Officer

Facsimile: (704) 937-0965

 

or to such other address with respect to which notice is subsequently provided
in the manner set forth above; and

 

If to a Guarantor, to the address set forth on Exhibit A hereto, or to such
other address with respect to which notice is subsequently provided in the
manner set forth above.

 

11.           Applicable Law. This Guarantee shall be governed by, interpreted
under and construed in accordance with the laws of the State of Delaware without
reference to its choice of law provisions.

 

12.           Consent to Jurisdiction: Enforceability

 

(a)            This Guarantee and the duties and obligations of the parties
hereto shall be enforceable against each Guarantor in the courts of the State of
Delaware. For such purpose, each Guarantor hereby irrevocably submits to the
nonexclusive jurisdiction of such courts and agrees that all claims in respect
of this Guarantee may be heard and determined in any of such courts.

 

(b)           Each Guarantor hereby irrevocably agrees that a final judgment of
any of the courts specified above in any action or proceeding relating to this
Guarantee shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.

 

 

 

 

13.           Condition of Borrower. Each Guarantor is fully aware of the
financial condition of the Borrower and is executing and delivering this
Guarantee based solely upon its own independent investigation of all matters
pertinent hereto and is not relying in any manner upon any representation or
statement of the Lender or the Borrower. Each Guarantor represents and warrants
that it is in a position to obtain, and hereby assumes full responsibility for
obtaining, any additional information concerning the Borrower’s financial
conditions and any other matter pertinent hereto as it may desire, and it is not
relying upon or expecting the Lender to furnish to it any information now or
hereafter in the Lender’s possession concerning the same. By executing this
Guarantee, each Guarantor knowingly accepts the full range of risks encompassed
within a contract of this type, which risks it acknowledges.

 

14.           Expenses. Each Guarantor agrees that, promptly after receiving
Lender’s notice therefor, such Guarantor shall reimburse Lender, subject to the
limitation set forth in subparagraph 1(e) and to the extent that such
reimbursement is not made by Borrower, for all reasonable expenses (including,
without limitation, reasonable attorneys fees and disbursements) incurred by
Lender in connection with the collection of the Guaranteed Obligations or any
portion thereof or with the enforcement of this Guarantee.

 

IN WITNESS WHEREOF, the undersigned Guarantors set forth on Exhibit A hereto
have executed this Guarantee as of the date first set forth above.