MEZZANINE LOAN AGREEMENT
DATED AS OF SEPTEMBER 6, 2012
among
OXFORD CITY PARK DEVELOPMENT LLC
and
CITY PARK MEZZANINE LENDING, LLC

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MEZZANINE LOAN AGREEMENT
THIS MEZZANINE LOAN AGREEMENT (this “Agreement”) is made as of September 6,
2012, by and among OXFORD CITY PARK DEVELOPMENT LLC, a Georgia limited liability
company (“Borrower”), having its principal place of business at c/o One Overton
Park, 3625 Cumberland Blvd., Suite 500, Atlanta, Georgia 30339, Attn: W. Daniel
Faulk, Jr., and CITY PARK MEZZANINE LENDING, LLC, a Delaware limited liability
company (the “Lender”).
RECITALS
WHEREAS, Borrower has requested that Lender provide a loan to Borrower; and
WHEREAS, Lender is willing to provide such loan to Borrower on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the terms and conditions herein, and of any
loans, advances, or extensions of credit now or hereafter made to or for the
benefit of Borrower by Lender, the parties hereto hereby covenant and agree as
follows:
§1.DEFINITIONS AND RULES OF INTERPRETATION.
§1.1    Definitions. The following terms shall have the meanings set forth in
this §l or elsewhere in the provisions of this Agreement referred to below:
Acknowledgment. The Acknowledgment dated as of even date herewith executed by
Borrower in favor of Lender as the same may be modified, amended or restated.
Affiliate. An Affiliate, as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the stock, shares,
voting trust certificates, beneficial interests, partnership interests, member
interests or other interests having voting power for the election of directors
of such Person or otherwise to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise, or (b) the ownership of (i) a general partnership
interest, (ii) a managing member’s interest in a limited liability company or
(iii) a limited partnership interest or preferred stock (or other ownership
interest) representing ten percent (10%) or more of the outstanding limited
partnership interests, preferred stock or other ownership interests of such
Person.
Agreement. This Mezzanine Loan Agreement, including the Schedules and Exhibits
hereto.
Approved Affiliate Fees. The fees which Owner intends to pay to certain
affiliates in connection with the development and construction of the Project
which are described on Schedule 1 attached hereto and made a part hereof,
including without limitation, the Construction Fee and the Development Fee.

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Architect. The Person employed by Owner pursuant to the Design Professional’s
Contract to prepare the Plans for the Project and to supervise the construction
thereof, which party may not be affiliated with Borrower, any Guarantor or
Owner. The Architect may not be replaced without Lender’s prior written consent
to be determined in Lender’s reasonable discretion.
Assignment of Interests. The Assignment of Interests dated as of even date
herewith from the Borrower to Lender, as the same may be modified, amended or
restated from time to time, pursuant to which Borrower has assigned to Lender a
security interest in the interests of Borrower in Owner.
Authorized Officer. As to any Person, the chief financial or chief accounting
officer, treasurer or assistant treasurer of such Person.
Balance Sheet Date. On or about June 30, 2012.
Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or any
successor statute thereto.
Basic Agreements. See §6.24(a).
Borrower. As defined in the preamble hereto.
Borrower Organizational Agreements. Collectively, those certain agreements of
Borrower described on Schedule 6.33 attached hereto.
Borrower’s Minimum Equity Investment. See §9.1.
Building. All of the buildings and related structures and improvements now or
hereafter located on the Land.
Business Day. Any day, other than Saturday and Sunday, on which banking
institutions in Atlanta, Georgia are open for the transaction of banking
business.
Capitalized Lease. As applied to any Person, any lease of any Property (whether
real, personal or mixed) by that Person as lessee or obligor which, in
accordance with generally accepted accounting principles, is required to be
capitalized on the balance sheet of that Person.
CERCLA. See §6.18(a).
Change of Control. The occurrence of any of the following events: (a) Borrower
fails to directly own, free of any lien, encumbrance or claim, one hundred
percent (100%) of the economic and Voting Interests of Owner; or (b) Faulk fails
to directly or indirectly manage and control Borrower and Owner and the
activities of Borrower and Owner, provided, that the death or incapacity of
Faulk shall not constitute a “Change of Control” unless a competent and
experienced successor shall not be approved by Lender within thirty (30) days of
the occurrence of such event, such approval not to be unreasonably withheld,
conditioned or delayed; or (c) Faulk (or trusts controlled by Faulk) and/or
Denny (or trusts controlled by Denny), fails to directly or indirectly own, free
of

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any lien, encumbrance or claim, at least fifty-one percent (51%) of the economic
and Voting Interests of Borrower and fails to manage and control the activities
of Borrower, provided, that the death or incapacity of Faulk or Denny shall not
constitute a “Change of Control” unless a competent and experienced successor
shall not be approved by Lender within thirty (30) days of the occurrence of
such event, such approval not to be unreasonably withheld, conditioned or
delayed; or (d) Developer fails to be the developer of the Project.
Civil Engineer. The Person employed by Owner pursuant to the Civil Engineer’s
Contract to provide civil engineering services for the Project, which party may
not be affiliated with Borrower or Owner. The Civil Engineer may not be replaced
without Lender’s prior written consent.
Civil Engineer’s Contract. The agreement between Civil Engineer and Owner
relating to civil engineering for the Project.
Closing Date. The first date on which all of the conditions set forth in §10
have been satisfied or waived in writing.
Code. The Internal Revenue Code of 1986, as amended and in effect from time to
time, and all regulations and formal guidance thereunder.
Collateral. All of the property, rights and interests of Borrower which are or
are intended to be subject to the security interests, security title and liens
created by the Security Documents.
Collateral Property. The Land and the Project.
Completion Date. July 31, 2014.
Construction Contract. See §10.1(w).
Construction Fee. The fee to be paid to the General Contractor under the
Construction Contract from the $782,415.00 contractor’s fee line item set forth
on the Project Budget, provided, however, that such fee shall be deferred and
not paid to the General Contractor until the earlier of (i) payment in full of
the Loan, or (ii) the acquisition of the Project by Lender pursuant to the
Purchase Option Agreement, unless Lender in its sole and absolute discretion
consents in writing to the earlier payment of such fee.
Construction Finish Standards. The minimum quality of materials, finishes,
amenities, features and personal property, including floor coverings, wall
coverings, electrical/data/security systems, lighting plans, bathroom fixtures
and countertops, cabinetry and appliances for the Project, which shall be
subject to Lender’s review and approval, not to be unreasonably withheld.
Construction Inspector. A firm of professional engineers or architects selected
by the Lender to inspect and/or oversee the construction of the Project.
Construction Schedule. See §10.1(o).

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Contingency Reserve. The amount(s) allocated as contingency reserve(s) in the
Project Budget, to be advanced only in accordance with provisions of §2.6
hereof.
Default. See §12.1.
Denny. Richard A. Denny, III.
Design Professional’s Contract. The agreement between Architect and Owner
relating to the preparation of the Plans and the supervision of construction for
the Project.
Developer. Oxford Properties, LLC
Development Agreement. Any property management, leasing, development services or
other similar agreement respecting the development, marketing, sale, leasing,
management or operation of the Project entered into between Borrower, Owner, any
Guarantor or their respective Affiliates (as the case may be) and any other
Person, whether presently existing or entered into after the date of this
Agreement, including, without limitation that certain Development Agreement
dated as of September 6, 2012 between Owner and Developer.
Development Fee. The fee to be paid to Developer under the Development Agreement
from the $1,135,200.00 development fee line item set forth on the Project
Budget, provided, however, that such fee shall be paid in accordance with the
terms of the Development Agreement.
Disbursement Schedule. The schedule of amounts of Loans anticipated to be
requisitioned by Borrower each month during the term of construction of the
Project (including an itemization of Hard Costs and Soft Costs to included in
such requisition), approved by Lender and attached hereto as Exhibit “D”.
Distribution. With respect to any Person, the declaration or payment of any
cash, cash flow, dividend or distribution on or in respect of any shares of any
class of capital stock, partnership interest, membership interest or other
beneficial interest of such Person other than that portion of dividends or
distributions payable solely in equity securities of such Person; the purchase,
redemption, exchange or other retirement of any shares of any class of capital
stock, partnership interest, membership interest or other beneficial interest of
such Person, directly or indirectly through a Subsidiary of such Person or
otherwise; the return of capital by such Person to its shareholders, partners,
members or other owners as such; or any other distribution on or in respect of
any shares of any class of capital stock, member’s interest or other beneficial
interest of such Person.
Dollars or $. Dollars in lawful currency of the United States of America.
Drawdown Date. The date on which any Loan is made or is to be made.
Embargoed Person. See §6.35 hereof.
Employee Benefit Plan. Any employee benefit plan within the meaning of §3(3) of
ERISA maintained or contributed to by Borrower, Owner, any Guarantor or any
ERISA Affiliate, other than a Multiemployer Plan.

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Environmental Laws. See §6.18(a).
ERISA. The Employee Retirement Income Security Act of 1974, as amended and in
effect from time to time, and all regulations and formal guidance issued
thereunder.
ERISA Affiliate. Any Person which is treated as a single employer with Borrower,
Owner or any Guarantor under §414 of the Code or §4001 of ERISA, and any
predecessor entity of any of them.
ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension
Plan within the meaning of §4043 of ERISA and the regulations promulgated
thereunder as to which the requirement of notice has not been waived or any
other event with respect to which Borrower or an ERISA Affiliate could have
liability under §4062(e) or §4063 of ERISA.
Event of Default. See §12.1.
Exit Fee. See §3.5.
Faulk. W. Daniel Faulk, Jr., an individual resident of the state of Georgia.
General Contractor. The persons or firms employed by Owner pursuant to the
Construction Contract to be responsible for construction of the Project in
accordance with the Plans. The General Contractor may not be replaced without
Lender’s prior written consent.
generally accepted accounting principles. Principles that are (a) consistent
with the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, as in effect from time to time and (b) consistently
applied with past financial statements of the Person adopting the same
principles; provided that a certified public accountant would, insofar as the
use of such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of
§3(2) of ERISA maintained or contributed to by Borrower, Owner any Guarantor or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantors. Collectively, W. Daniel Faulk, Jr., an individual resident of the
State of Georgia and Richard A. Denny, III, an individual resident of the State
of Georgia and any other guarantor of the Loan from time to time.
Guaranty. Collectively, the Unconditional Guaranty of Completion, the
Unconditional Guaranty of Payment and Performance (Faulk), the Unconditional
Guaranty of Payment and Performance (Denny) and the Guaranty of Recourse
Obligations, each dated of even date herewith made by Guarantors in favor of
Lender, as the same may be modified, amended or restated.
Hard Costs. The “hard costs” reflected in the Project Budget.

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Hazardous Substances. See §6.18(b).
Indebtedness. All obligations, contingent and otherwise, that in accordance with
generally accepted accounting principles should be classified upon the obligor’s
balance sheet as liabilities, or to which reference should be made by footnotes
thereto, but without any double counting, including in any event and whether or
not so classified: (a) all debt and similar monetary obligations, whether direct
or indirect (including, without limitation, any obligations evidenced by bonds,
debentures, notes or similar debt instruments and all subordinated debt); (b)
all liabilities secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; (c) all
guarantees, endorsements and other contingent obligations whether direct or
indirect in respect of indebtedness of others, including any obligation to
supply funds to or in any manner to invest directly or indirectly in a Person,
to purchase indebtedness, or to assure the owner of indebtedness against loss
through an agreement to purchase goods, supplies or services for the purpose of
enabling the debtor to make payment of the indebtedness held by such owner or
otherwise; and the obligation to reimburse the issuer in respect of any letter
of credit; (d) any obligation as a lessee or obligor under a Capitalized Lease;
(e) all subordinated debt; (g) all indebtedness, obligations or other
liabilities under or with respect to (i) interest rate swap, collar, cup or
similar agreements providing interest rate protection and (ii) foreign currency
exchange agreements; and (f) all obligations, contingent or deferred or
otherwise, of any Person, including, without limitation, any such obligations as
an account party under acceptance, letter of credit or similar facilities
including, without limitation, obligations to reimburse the issuer in respect of
a letter of credit except for contingent obligations (but excluding any
guarantees or similar obligations) that are not material and are incurred in the
ordinary course of business in connection with the acquisition or obtaining
commitments for financing of real estate.
Indemnity Agreement. The Indemnity Agreement Regarding Hazardous Materials,
dated as of even date herewith, made by Borrower and Guarantors in favor of
Lender, as the same may be modified, amended or restated, pursuant to which
Borrower and Guarantors have agreed to indemnify Lender with respect to
Hazardous Substances and Environmental Laws, such Indemnity Agreement to be in
form and substance satisfactory to Lender.
Institutional Lender. One or more of the following: (i) a bank, savings and loan
association, investment bank, insurance company, real estate investment trust,
financial services company, including, without limitation, Bank of the Ozarks,
(ii) a trustee or similar Person in connection with a securitization of a
mortgage loan or a nationally recognized conduit, so long as the trustee or
similar Person is an entity that otherwise would be Institutional Lender, which,
in each case of clauses (i) or (ii) of this definition, is regularly engaged in
the business of making or owning commercial loans (including commercial real
estate loans), and the servicer and special servicer, if any, are approved by
S&P and Moody’s to act as servicers and special servicers of commercial mortgage
loan securitizations rated by such rating agencies, or (v) any other entity
approved in writing by Lender, provided, however, that in no event shall an
Institutional Lender be an affiliate of Borrower, Owner or any Guarantor.

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Intercreditor Agreement. An intercreditor agreement in form and substance
satisfactory to Lender in its sole and absolute discretion which provides for
the relative rights and priorities of Lender and Mortgage Lender under the
Mezzanine Loan Documents and the Mortgage Loan Documents, respectively, as
modified, amended, restated and replaced from time to time.
Interest Payment Date. The fifth Business Day of each calendar month during the
term of the Loan.
Interest Rate. See Section 2.3.
Investments. With respect to any Person, all shares of capital stock, evidences
of Indebtedness and other securities or other ownership interests issued by any
other Person, all loans, advances, or extensions of credit to, or contributions
to the capital of, any other Person, all purchases of the securities or other
ownership interests or business or integral part of the business of any other
Person and commitments and options to make such purchases, all interests in real
property, and all other investments; provided, however, that the term
“Investment” shall not include (i) equipment, inventory and other tangible
personal property acquired in the ordinary course of business, or (ii) current
trade and customer accounts receivable for services rendered in the ordinary
course of business and payable in accordance with customary trade terms.
Land. That certain Real Property located in Mecklenburg County, Charlotte, North
Carolina, as more particularly described on Exhibit “B” hereto.
Leases. Leases, license agreements and other occupancy agreements, whether
written or oral, relating to the use or occupation of space at the Collateral
Property.
Lender. City Park Mezzanine Lending, LLC, a Delaware limited liability company.
Lender’s Office. Lender’s office located at c/o Preferred Apartment Communities,
Inc. One Overton Park, 3625 Cumberland Blvd., Suite 400, Atlanta, Georgia 30339,
Attn: Leonard A. Silverstein, Esq., or at such other location as Lender may
designate from time to time by notice to Borrower.
Lender’s Special Counsel. McKenna Long & Aldridge LLP or such other counsel as
may be approved by Lender.
Lien. See §8.2.
Loan or Loans. See §2.1.
Loan Documents. This Agreement, the Note, the Security Documents, the Guaranty,
the Acknowledgment and all other documents, instruments or agreements now or
hereafter executed or delivered by or on behalf of Borrower, the Guarantors or
Owner in connection with the Loans.
Loan Request. See §2.4.

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Material Adverse Effect. Any effect in the business, assets, operations, results
of operations or financial or other condition of the Collateral, the Collateral
Property or of Borrower, any Guarantor or Owner, which individually or in the
aggregate materially and adversely affects or which could reasonably be expected
to materially and adversely affect (a) the ability of Borrower, Owner or any
Guarantor to pay or perform its respective obligations under the Loan Documents
in accordance with the terms thereof, (b) the validity or enforceability of any
of the Loan Documents, or (c) the business or condition of Borrower, Owner, any
Guarantor or the Project, excluding, however, any asset impairments (other than
with respect to the Collateral and the Collateral Property) that have been
booked prior to the date hereof and which have been disclosed in writing to
Lender).
Material Project Change. See §9.2.
Maturity Date. September 5, 2017, or such earlier date on which the Loan shall
become due and payable pursuant to the terms hereof.
Minor Amendments. See §8.13.
Moody’s. Moody’s Investors Service, Inc. and any successor thereto.
Mortgage Lender. Bank of the Ozarks, its successor and assigns, as holder of the
Mortgage Loan.
Mortgage Loan. An acquisition, development and construction loan in the
principal amount not to exceed $18,571,300.00 from Mortgage Lender which is
secured by a first mortgage encumbering the Project, as modified and amended
from time to time.
Mortgage Loan Documents. The documents, instruments and agreements evidencing,
securing or otherwise relating to the Mortgage Loan, as modified and amended
from time to time. In the event that the Mortgage Loan Documents evidencing the
Mortgage Loan shall terminate or otherwise be of no force or effect and have not
been replaced pursuant to loan documents evidencing an approved Mortgage Loan,
then the obligations of Borrower hereunder to perform or cause Owner to Perform
any covenants under any of such Mortgage Loan Documents shall survive
notwithstanding such termination. Upon the request of Lender, Borrower shall
enter into such amendments to the Loan Documents as Lender may reasonably
request to incorporate some or all of the representations, warranties and
covenants of the Mortgage Loan Documents into the Loan Documents.
Multiemployer Plan. Any multiemployer plan within the meaning of §3(37) or
§4001(a)(3) of ERISA or §414(f) of the Code maintained or contributed to by
Borrower, Owner, any Guarantor or any ERISA Affiliate.
Note. See §2.2.
Notice. See §19.
Obligations. All indebtedness, obligations and liabilities of Borrower and
Guarantors to Lender under this Agreement or any of the other Loan Documents or
in respect of any of the Loan

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or the Note, or other instruments at any time evidencing any of the foregoing,
whether existing on the date of this Agreement or arising or incurred hereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.
Organizational Documents. Collectively, the Owner Organizational Agreements and
the Borrower Organizational Agreements.
Outstanding. With respect to the Loans, the aggregate unpaid principal thereof
as of any date of determination.
Owner. Oxford City Park Apartments LLC, a Georgia limited liability company, its
successors and assigns.
Owner Organizational Agreements. Collectively, those certain agreements of Owner
described in Schedule 6.33 attached hereto.
Patriot Act. The Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, as the same may
be amended from time to time, and corresponding provisions of future laws.
PBGC. The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any
successor entity or entities having similar responsibilities.
Permits. All building permits, certificates of occupancy and other governmental
or quasi-governmental permits, licenses and authorizations, including, without
limitation, all state, county and local occupancy certificates, and other
licenses, in any way applicable to the Collateral Property, or any part thereof
or to the development, construction, ownership, use, occupancy, operation,
maintenance, and leasing of the Collateral Property.
Permitted Delay. Any delay in construction caused by strike, lockout, war,
terrorism, act of God, fire or other casualty, unusually adverse weather
conditions, inability to obtain labor or materials or governmental restriction
or other act or thing (except Borrower’s or Owner’s lack of funds) beyond the
reasonable control of Borrower, Owner or Contractor which in fact materially
interferes with the ability of Owner or Contractor to complete the Project, and
provided Borrower has notified Lender (1) within ten (10) days of the onset of
any such delay specifying the event which may result in such delay and (2)
within ten (10) days of the termination of any such delay, and provided further
the aggregate extension periods for Permitted Delays shall in no event exceed
the period of delay permitted under the Mortgage Loan Documents and the
Construction Contract. A delay otherwise constituting a Permitted Delay shall
not be a Permitted Delay unless such delay has been consented to by, or will not
affect the obligations of, the sureties under any bonds.
Permitted Equity Transfers. Transfers of direct or indirect interests in
Borrower, provided that such transfers do not result in a Change of Control.
Permitted Indebtedness. Indebtedness permitted by §8.1.

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Permitted Liens. Liens, security interests and other encumbrances permitted by
§8.2.
Person. Any individual, corporation, limited liability company, partnership,
trust, unincorporated association, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.
Plans. The final plans and specifications, including all drawings and a
specifications project manual, for the construction of the Project, including
the Construction Finish Standards, prepared by the Architect (and, within the
scope of its contract with Owner, the Civil Engineer), and approved by Lender,
and upon which all building permits were or will be issued for construction of
the Project. The Construction Finish Standards shall be deemed part of the
Plans. Changes to the Plans made in compliance with Section 9.2 of this
Agreement will also be included in the term “Plans”.
Project. The multi-family Class “A” apartment project to be constructed on the
Land pursuant to and in accordance with the Plans and the Project Budget having
not less than 284 units, and all other improvements to be made to the Land, and
all fixtures, machinery, furnishings, equipment, supplies, and all other
property of any kind installed or used at the Land.
Project Budget. The Project budget as approved from time to time by Lender
pursuant to Section 2.8 of this Agreement, the initial form of which is attached
hereto as Exhibit “C” to this Agreement, showing all sources of funds to be used
(including Borrower’s Minimum Equity Investment), and all costs and expenses to
be incurred, in connection with the Project during the term of the Loan. The
line items set forth in the Schedule of Values attached as Exhibit “C” to the
Construction Contract shall be considered part of the Project Budget for
purposes of this Agreement and the other Loan Documents and shall be used in
lieu of the “Hard Cost” line item in the Project Budget.
Project Change. See §9.2.
Project Costs All costs and expenses of any kind which have been or will be
incurred in connection with the Project, including, without limitation, the
acquisition of the Land and the construction, equipping, operation, financing,
marketing, sale, leasing, and maintenance of the Project through the Maturity
Date.
Project Documents. Any contract, agreement, warranty, service agreements,
maintenance contracts or other agreement entered into by Borrower, Owner, any
Guarantor or any Affiliate of such parties providing for the design,
development, engineering, construction, provisioning, equipping, furnishing,
use, occupancy, repair and service of the Project, including, without
limitation, the Design Professional’s Contract, the Civil Engineer’s Contract,
the Construction Contract, and the Plans, and each exhibit thereto and any
amendments and attachments to any of the foregoing, whether presently existing
or entered into after the date hereof.
Purchase Option Agreement. That certain Purchase Option Agreement dated as of
even date herewith by Owner in favor of Lender, as modified and amended from
time to time, that provides Lender or an affiliate of Lender with an option (but
not any obligation) to acquire the Project

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commencing on the first day of the 39th month following Closing Date through and
including the last day of the 43rd month following the Closing Date subject to
the terms set forth therein.
Qualified Leases. Executed and delivered written Leases on forms approved by the
Lender or otherwise permitted by the Loan Documents, for space in the Project
with tenants who have commenced the payment of rent and are not in material
default in the payment of rent, which Leases comply with the conditions and
requirements for Leases as set forth in Section 7.22 of this Agreement.
Record. The record, including computer records, maintained by Lender with
respect to any Loan referred to in the Note.
Release. See §6.18(c)(iii).
Required Equity Funds. See §2.15.
S&P. Standard & Poor’s Ratings Services, a division of The McGraw‑Hill
Companies, Inc. and any successor thereto
Security Documents. The Assignments of Interests, the Indemnity Agreement and
any further collateral assignment for the benefit of Lender, including, without
limitation, UCC‑1 financing statements executed and delivered in connection
therewith.
Soft Costs. The “soft costs” reflected in the Project Budget.
State. A State of the United States of America.
Subsidiary. As to any Person means a corporation, association, partnership,
joint venture, limited liability company, trust or other business entity of
which the designated parent shall at any time own directly or indirectly through
a Subsidiary or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding Voting Interests.
Survey. An instrument survey of the Collateral Property prepared by a registered
land surveyor which shall show the location of all buildings, structures,
easements and utility lines on such property, shall be sufficient to remove the
standard survey exception from the Title Policy, shall show that all buildings
and structures are within the lot lines of the Collateral Property and shall not
show any encroachments by others (or to the extent any encroachments are shown,
such encroachments shall be acceptable to Lender in its sole discretion), shall
show rights of way, adjoining sites, establish building lines and street lines,
the distance to, and names of the nearest intersecting streets and such other
details as Lender may reasonably require; shall show the zoning district or
districts in which the Collateral Property is located and shall show whether or
not the Collateral Property is located in a flood hazard district as established
by the Federal Emergency Management Agency or any successor agency or is located
in any flood plain, flood hazard or wetland protection district established
under federal, state or local law and shall otherwise be in form and substance
reasonably satisfactory to Lender.

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Surveyor Certification. A certificate executed by the surveyor who prepared the
Survey, dated as of a recent date and containing such information relating to
the Collateral Property as Lender or the Title Insurance Company may reasonably
require, such certificate to be reasonably satisfactory to Lender in form and
substance.
Title Insurance Company. First American Title Insurance Company or another title
insurance company or companies reasonably approved by Lender.
Title Policy. With respect to the Collateral Property, an ALTA standard form
owner’s title insurance policy (or, if such form is not available, an equivalent
form of or legally promulgated form of owner’s title insurance policy reasonably
acceptable to Lender) issued by a Title Insurance Company in such amount as
Lender may require insuring that Owner holds marketable fee simple title to such
parcel, subject only to the liens of Mortgage Lender under the Mortgage Loan
Documents and other encumbrances approved by Lender and which shall not contain
standard exceptions for mechanics liens, persons in occupancy (other than
tenants as tenants only under Leases) or matters which would be shown by a
survey, shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to Lender in its sole discretion, and shall
contain such other endorsements and affirmative insurance as Lender reasonably
may require and is available in the State in which the Collateral Property is
located.
Voting Interests. Stock or similar ownership interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, (a) to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, partnership,
trust or other business entity involved, or (b) to control, manage, or conduct
the business of the corporation, partnership, association, trust or other
business entity involved.
§1.2    Rules of Interpretation.
(a)    A reference to any document or agreement shall include such document or
agreement as amended, modified or supplemented from time to time in accordance
with its terms and the terms of this Agreement.
(b)    The singular includes the plural and the plural includes the singular.
(c)    A reference to any law includes any amendment or modification to such
law.
(d)    A reference to any Person includes its permitted successors and permitted
assigns.
(e)    Accounting terms not otherwise defined herein have the meanings assigned
to them by generally accepted accounting principles applied on a consistent
basis by the accounting entity to which they refer.
(f)    The words “include”, “includes” and “including” are not limiting.
(g)    The words “approval” and “approved”, as the context so determines, means
an approval in writing given to the party seeking approval after full and fair
disclosure to the party

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giving approval of all material facts necessary in order to determine whether
approval should be granted.
(h)    All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in the State of Georgia, have the meanings assigned to them therein.
(i)    Reference to a particular “§”, refers to that section of this Agreement
unless otherwise indicated.
(j)    The words “herein”, “hereof”, “hereunder” and words of like import shall
refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
§2.    THE LOAN.
§2.1    Loan Funding. Subject to the terms and conditions set forth in this
Agreement, Lender agrees to lend to Borrower, and Borrower may borrow from time
to time between the Closing Date and the Maturity Date upon submission by
Borrower to Lender of a Loan Request given in accordance with §2.4, up to a
maximum aggregate principal amount equal to $10,000,000.00 (the “Maximum
Commitment”); provided, that, in all events no Default or Event of Default shall
have occurred and be continuing. Each Loan Request hereunder shall constitute a
representation and warranty by Borrower that all of the conditions set forth in
§10, in the case of the Loan funded at Closing, and §11, in the case of the
Loans funded after Closing, have been satisfied on the date of such request.
Once repaid, sums hereunder may not be reborrowed.
§2.2    Note. The Loans shall be evidenced by a promissory note of Borrower in
substantially the form of Exhibit “A” hereto (the “Note”), dated as of the
Closing Date and completed with appropriate insertions. The Note shall be
payable to the order of Lender in the principal face amount of $10,000,000.00,
plus such additional principal from time to time outstanding under the Loan
Documents, plus interest accrued thereon, as set forth below. Borrower
irrevocably authorizes Lender to make or cause to be made, at or about the time
of the Drawdown Date of any Loan or at or about the time of receipt of any
payment of principal thereof, an appropriate notation on Lender’s Record
reflecting the making of such Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Loans set forth on Lender’s Record shall
be prima facie evidence of the principal amount thereof owing and unpaid to
Lender, but the failure to record, or any error in so recording, any such amount
on Lender’s Record shall not limit or otherwise affect the obligations of
Borrower hereunder or under the Note to make payments of principal of or
interest on the Note when due.
§2.3    Interest on Loans. Commencing on the Drawdown Date thereof until the
Maturity Date or an Event of Default as hereinafter provided, interest shall
accrue on the principal amount of each Loan Outstanding from time to time at the
per annum rate equal to eight percent (8%). The Borrower promises to pay
interest in arrears on the Loan on each Interest Payment Date.
§2.4    Requests for Loans. The Borrower (i) shall notify Lender of a potential
request for a Loan as soon as possible prior to the Borrower’s proposed Drawdown
Date, and (ii) shall give to

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Lender a written request for each Loan requested hereunder in a form reasonably
acceptable to Lender (or telephonic notice confirmed in writing in such form (a
“Loan Request”) no less than three (3) Business Days prior to the proposed
Drawdown Date (provided, however, such three (3) Business Days prior notice
shall not be required with respect to the Loan funded on the Closing Date). Each
such Loan Request shall specify with respect to the requested Loan the proposed
principal amount and Drawdown Date. Each such Loan Request shall also contain
(i) a statement as to the purpose for which such advance shall be or has been
used (which purpose shall be in accordance with the terms of §2.6), (ii) a
certification by Borrower containing an itemized statement of Project Costs
actually incurred and paid by Borrower for which such Loan Request is requested,
(iii) a certification by the Borrower and the Guarantors that the Borrower and
Guarantors are and will be in compliance with all covenants under the Loan
Documents after giving effect to the making of such Loan, and (iv) the items
required pursuant to §11 of this Agreement and such other information, documents
and certificates as Lender may reasonably request, including, without
limitation, lien waivers, invoices and architects and contractors certifications
and such other disbursement, oversight, inspection and monitoring requirements
and controls which are customary for construction loans for similar size
projects and for similar type properties in similar geographic areas. Lender
shall have the right, at Borrower’s sole cost and expense, to retain a
Construction Inspector to conduct such oversight, inspection, and monitoring
requirements and controls. Except as provided in this §2.4, each such Loan
Request shall be irrevocable and binding on the Borrower and shall obligate the
Borrower to accept the Loan requested from the Lender on the proposed Drawdown
Date. The Borrower may without cost or penalty revoke a Loan Request by
delivering notice thereof to Lender no later than three (3) Business Days prior
to the Drawdown Date. Borrower shall submit Loan Requests in accordance with the
Disbursement Schedule and Borrower shall not submit more than one (1) Loan
Request per month.
§2.5    Funds for Loans. Upon receipt of the documents required by §10 and §11
and the satisfaction of the other conditions set forth therein, to the extent
applicable, Lender will make available to the Borrower the aggregate amount of
the Loan set forth in an applicable Loan Request by wire transfer.
§2.6    Use of Proceeds; Amount of Advances. Borrower will use, or cause Owner
to use, the proceeds of the Loans only to pay Project Costs in accordance with
the Project Budget. In no event shall Lender be obligated to advance more than
the Maximum Commitment, or if less, the total Project Costs actually incurred by
the Borrower. In no event shall any Loan for Hard Costs of constructing the
Project exceed an amount equal to the sum of (a) the total value of the labor,
materials, fixtures, machinery and equipment completed, approved and
incorporated into the Project prior to the date of the Loan Request for such
Loan, minus (b) the total amount of any Loans previously made by Lender for such
Hard Costs. With respect to any other Hard Costs and all Soft Costs, in no event
shall any Loan exceed an amount equal to the amount of such Hard Costs and Soft
Costs approved by Lender, incurred by the Borrower prior to the date of the Loan
Request for such Loan, and theretofore paid or to be paid with the proceeds of
such Loan, less the total amount of any Loans previously made by Lender for such
Hard Costs and Soft Costs.
§2.7    Project Costs. Borrower shall pay or cause Owner to pay all Project
Costs as they become due and owing.

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§2.8    Project Budget. The Project Budget attached as Exhibit “C” and any
modifications to the Project Budget which are made in compliance with the
provisions of this Agreement shows and will show, by category and line items,
all of the Project Costs as presently determined or estimated. Except as set
forth in Section 9.2 below, the Lender shall not be required to disburse for any
category or line item more than the amount specified in the Project Budget.
§2.9    Modifications to Project Budget. It is expected that the Project Budget
may be modified from time to time as Borrower, Owner or Lender determine that
actual or anticipated Project Costs have changed. All references in this
Agreement to the “Project Budget” shall mean the same as modified from time to
time in compliance with this Section and Section 9.2. Borrower will inform
Lender promptly after Borrower or Owner determines that any item of Project
Costs will exceed the amount shown for such item on the Project Budget and
propose for Lender’s prior written approval, a reallocation of any of the line
items or contingency line items to cover any such shortfall. Except as expressly
permitted in Section 9.2 below, all modifications of the Project Budget must be
approved by Lender.
§2.10    Disbursements to Borrower or Owner from Project Budget. Borrower
confirms that the Project Budget does not and will not in the future contain any
line items which are payable to Borrower, Owner or any Guarantor or any of their
respective Affiliates other than the Approved Affiliate Fees, provided, however,
that Borrower, Owner, Guarantor or any of the their respective Affiliates may
receive reimbursement of expenses previously paid or in the future paid to third
parties by such party so long as such expenses are third party Project Costs
that are contemplated as part of individual line items in the Project Budget and
the payment thereof is reflected by an appropriate notation in Borrower’s or
Owner’s records pertaining to the Project Budget.
§2.11    Advances Do Not Constitute a Waiver. No Loan made by Lender shall
constitute a waiver of any of the conditions to Lender’s obligation to make
further Loans nor, in the event the Borrower fails to satisfy any such
condition, shall any such Loan have the effect of precluding Lender from
thereafter declaring such failure to satisfy a condition to be an Event of
Default.
§2.12    Quality of Work. No Loan shall be required to be advanced by Lender
unless all work done at the date the Loan Request for such Loan is submitted is
done in a good and workmanlike manner and without defects, as may be confirmed
by the report of the Construction Inspector if requested by Lender.
Notwithstanding the foregoing, if a portion of the work for which payment is
included within a Loan Request has not been performed in a good and workmanlike
manner and without defects as determined by such Construction Inspector or
Lender (“Defective Work”), then the amount to be advanced pursuant to such Loan
Request shall be reduced by the portion thereof attributable to the Defective
Work provided that all other conditions to the making of a Loan have been
satisfied. No Loan shall be required to be advanced by Lender upon a Loan
Request with respect to such Defective Work until such Defective Work has been
corrected and brought into full compliance with the requirements of this
Agreement. No Loan shall be made upon any Loan Request if, upon the date of
submittal thereof, any Defective Work has remained uncorrected for a period of
more than thirty (30) days, unless correction of such Defective Work is under
way and progressing reasonably satisfactorily to Lender and the Construction
Inspector.

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§2.13    Contingency Reserve. The amount allocated as “contingency” or
“contingency reserve” in the Project Budget will only be disbursed upon the
prior approval of Lender, such approval not to be unreasonably conditioned,
withheld or delayed. The disbursement of a portion of such “contingency reserve”
shall in no way prejudice Lender from withholding disbursement of any further
portion of the “contingency reserve”, provided, however, that in the event such
“contingency” line item may have increased from the amount set forth in the
original Project Budget, due to savings reallocated to such “contingency” line
item, then Borrower may receive disbursement from such “contingency” line item
without Lender’s approval (subject, however, to satisfaction of all other
conditions to the making of a Loan set forth in this Agreement), so long as the
amount remaining undisbursed from such “contingency” line item remains greater
than amount of such “contingency” line item as set forth in the original Project
Budget. The disbursement of a portion of such “contingency reserve” shall in no
way prejudice Lender from withholding disbursement of any further portion of the
“contingency reserve”.
§2.14    Insufficiency of Loan Proceeds. The Borrower will deposit funds with
Lender (the “Required Equity Funds”) as follows: If at any time prior to
Mortgage Lender commencing to make advances under the Mortgage Loan (other than
any advance made on the Closing Date), Lender shall in its sole discretion
determine that the remaining undisbursed portion of the Loan, and any
undisbursed portion of the Mortgage Loan, and any other sums previously
deposited by the Borrower with Lender in connection with the Loan, is or will be
insufficient to fully complete and equip the Project (including all tenant
improvements to be completed by the Borrower, with respect to both leased or
unleased space) in accordance with the Plans, to operate and carry the Project
after completion of the Project until payment in full of the Loan by the
Borrower, to pay all other Project Costs, to pay all interest accrued or to
accrue on the Loan during the term of the Loan from and after the date hereof,
and to pay all other sums due or to become due under the Loan Documents and the
Mortgage Loan Documents (or as to any budget category or line item in the
Project Budget, if the undisbursed funds for such category or line item are or
will be insufficient to fully pay for the costs attributed to such budget
category or line item), regardless of how such condition may be caused, the
Borrower will, within seven (7) days after written notice of such determination
from Lender, deposit with Lender such sums of money in cash as Lender may
require, in an amount sufficient to remedy the condition described in such
notice, and sufficient to pay any liens for labor, equipment and materials
alleged to be due and payable at that time in connection with the Project, and,
at Lender’s option, no further Loans shall be made by Lender until the
provisions of this §2.14 have been fully complied with. All such deposited sums
shall stand as additional security for the obligations and shall be disbursed by
Lender in the same manner as Loans under this Agreement before any further Loan
advances of proceeds shall be made. Lender shall have no obligation to pay the
Borrower any interest with respect to such deposited funds. In the event that
Mortgage Lender requires such Required Equity Funds to be deposited with
Mortgage Lender, then such Required Equity Funds shall be deposited with
Mortgage Lender instead of with Lender.
§3.    REPAYMENT OF THE LOAN.
§3.1    Stated Maturity. Borrower unconditionally promises to pay on the
Maturity Date, and there shall become absolutely due and payable on the Maturity
Date, all of the Loan outstanding on such date, together with any and all
accrued and unpaid interest and charges thereon.

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§3.2    Mandatory Prepayments.
(a)    Borrower agrees that upon the occurrence of any refinance of the Mortgage
Loan, at Lender’s option in its sole and absolute discretion, all of the
Obligations outstanding on such date, together with any and all accrued but
unpaid interest thereon and Exit Fees shall become absolutely due and payable.
(b)    If at any time there shall occur, whether voluntarily, involuntarily or
by operation of law, a sale, transfer, assignment, conveyance, option or other
disposition of, or any mortgage, hypothecation, encumbrance, financing or
refinancing of (i) all or any portion of the Collateral Property, except for
Permitted Liens; or (ii) any of the other Collateral, or (iii) any interest of
Borrower in Owner, all of the Obligations outstanding on such date, together
with any and all accrued but unpaid interest thereon and all applicable Exit
Fees shall become absolutely due and payable.
§3.3    Optional Prepayments. Subject to §3.4 and §3.5 below, Borrower shall
have the right to prepay the outstanding amount of the Loan, as a whole but not
in part, at any time.
§3.4    Partial Prepayments. Partial prepayments of the Loan shall not be
permitted hereunder without Lender’s prior written consent.
§3.5    Exit Fees. Notwithstanding anything contained herein to the contrary, in
the event of (a) a sale of the Project to, or refinancing with, a third party,
or (b) any other repayment of the Loan, Borrower shall pay to Lender an exit fee
equal to the amount required to provide Lender with a fourteen percent (14%)
annual rate of return, based on cumulative, non-compounded interest, on the
$10,000,000.00 Loan amount (after taking into account previously received
interest by Lender) (such fee being referred to herein as the “Exit Fee”). No
such Exit Fee will be required to be paid to Lender if Lender or a wholly owned
direct or indirect subsidiary of the Lender acquires the Project any time during
the term of the Loan.
§3.6    Effect of Prepayments. Amounts of the Loan prepaid under §3.2 or §3.3
prior to the Maturity Date may not be reborrowed. Except as otherwise expressly
provided herein, all payments shall first be applied to accrued but unpaid
interest and then to principal as provided above.
§4.    CERTAIN GENERAL PROVISIONS.
§4.1    [Intentionally Omitted].
§4.2    Lender Fees. To induce Lender to enter into this Agreement and to extend
to Borrower the Loan, Borrower shall pay to Lender on each Drawdown Date
(including, without limitation, the Closing Date) a loan fee in the amount of
two percent (2.00%) of the amount advanced by Lender on such Drawdown Date,
which fee when paid shall be fully earned and non-refundable under any
circumstances.
§4.3    Funds for Payments.

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(a)    All payments of principal, interest, commitment fees, closing fees and
any other amounts due hereunder or under any of the other Loan Documents shall
be made to Lender at a bank designated by Lender by certified check, wire
transfer or other means approved by Lender, not later than 3:00 p.m. (Atlanta
time) on the day when due, in each case in lawful money of the United States in
immediately available funds.
(b)    All payments by Borrower hereunder and under any of the other Loan
Documents shall be made without setoff or counterclaim and free and clear of and
without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless Borrower is
compelled by law to make such deduction or withholding. If any such obligation
is imposed upon Borrower with respect to any amount payable by it hereunder or
under any of the other Loan Documents, Borrower will pay to Lender on the date
on which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable
Lender to receive the same net amount which Lender would have received on such
due date had no such obligation been imposed upon Borrower. Borrower will
deliver promptly to Lender certificates or other valid vouchers for all taxes or
other charges deducted from or paid with respect to payments made by Borrower
hereunder or under such other Loan Document.
§4.4    Computations. All computations of interest on the Loan and of other fees
to the extent applicable shall be based on a 360‑day year and paid for the
actual number of days elapsed, including the first date of the applicable period
to but not including the date of repayment. Whenever a payment hereunder or
under any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loan as reflected on the Record of Lender from time to
time shall be considered prima facie evidence of such amount.
§4.5    [Intentionally Omitted].
§4.6    [Intentionally Omitted].
§4.7    [Intentionally Omitted].
§4.8    [Intentionally Omitted].
§4.9    [Intentionally Omitted].
§4.10    Indemnity of Borrower. Borrower agrees to indemnify Lender and to hold
Lender harmless from and against any loss, cost or expense that Lender may
sustain or incur as a consequence of default by Borrower in making the payments
or performing its obligations under §4.11.
§4.11    Interest on Overdue Amounts; Late Charge. Following the occurrence and
during the continuance of any Event of Default, and regardless of whether or not
Lender shall have accelerated the maturity of the Loan, the Loan shall bear
interest payable on demand at a rate per annum equal to four percent (4.0%)
above the rate that would otherwise be applicable at such time

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(the “Default Rate”) until such amount shall be paid in full (after as well as
before judgment) or if such rate shall exceed the maximum rate permitted by law,
then at the maximum rate permitted by law. In addition, Borrower shall pay a
late charge equal to five percent (5%) of any amount of interest and/or
principal payable on the Loan or any other amounts payable hereunder or under
the Loan Documents, which is not paid by Borrower within ten (10) days of the
date when due (such late charge being applicable only to the amounts not paid
within ten (10) days of the date when due). Borrowers acknowledge that it would
be extremely difficult or impracticable to determine Lenders’ actual damages
resulting from any late payment, Event of Default or prepayment, and the late
charges, Default Rate and prepayment fees described in this Agreement are
reasonable estimates of those damages and do not constitute a penalty.
§4.12    Certificate. A certificate setting forth any amounts payable pursuant
to §4.10 or §4.11, and an explanation and calculation of such amounts which are
due, submitted by Lender to Borrower, shall be conclusive in the absence of
manifest error.
§4.13    Limitation on Interest. Notwithstanding anything in this Agreement or
the other Loan Documents to the contrary, all agreements between Borrower and
Lender, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of acceleration
of the maturity of any of the Obligations or otherwise, shall the interest
contracted for, charged or received by Lender exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Lender in excess of the maximum lawful amount, the
interest payable to Lender shall be reduced to the maximum amount permitted
under applicable law; and if from any circumstance Lender shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance of the Obligations and to the payment of
interest or, if such excessive interest exceeds the unpaid balance of principal
of the Obligations, such excess shall be refunded to Borrower. All interest paid
or agreed to be paid to Lender shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal of the Obligations (including the period of any
renewal or extension thereof) so that the interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law. This section
shall control all agreements between Borrower and Lender.
§5.    COLLATERAL SECURITY AND GUARANTY.
§5.1    Collateral. The Obligations of Borrower shall be secured by (i) a
perfected first priority lien or security title for the benefit of Lender in the
Collateral, (ii) the Indemnity Agreement, and (iii) such additional collateral
from Borrower or other Persons, if any, as Lender from time to time may accept
as security for the Obligations. Certain of the Obligations shall also be
guaranteed pursuant to the terms of the Guaranty.
§5.2    Release of Collateral. Upon termination of this Agreement and the
payment in full of all of the Obligations, Lender shall release the Collateral
and shall execute such instruments of release as Borrower and its counsel may
reasonably request.
§6.    REPRESENTATIONS AND WARRANTIES.

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Borrower represents and warrants to Lender as follows.
§6.1    Authority, Etc.
(c)    Organization; Good Standing. Borrower is a limited liability company duly
organized pursuant to Borrower Organizational Agreements filed with the
Secretary of State of Georgia and is validly existing and in good standing under
the laws of the State of Georgia. Owner is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Georgia. Each of Borrower, Owner and the Guarantors (i) has all requisite power
to own its respective properties and interests and conduct its respective
business as now conducted and as presently contemplated, and (ii) is in good
standing in each jurisdiction where a failure to be so qualified in such
jurisdiction could have a Material Adverse Effect on the business, assets or
financial condition of such Person.
(d)    Authorization. The execution, delivery and performance of this Agreement
and the other Loan Documents to which Borrower, Owner or Guarantors is or is to
become a party and the transactions contemplated hereby and thereby (i) are
within the authority of such Person, (ii) have been duly authorized by all
necessary proceedings on the part of such Person, (iii) do not and will not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which such Person is subject or any judgment,
order, writ, injunction, license or permit applicable to such Person, (iv) do
not and will not conflict with or constitute a default (whether with the passage
of time or the giving of notice, or both) under any provision of the partnership
agreement or certificate, certificate of formation, operating agreement,
articles of incorporation or other charter documents or bylaws of, or any
mortgage, indenture, agreement, contract or other instrument binding upon, such
Person or any of its properties or to which such Person is subject, and
(v) except as provided in the Loan Documents, do not and will not result in or
require the imposition of any Lien on any of the properties, assets or rights of
such Person.
(e)    Enforceability. The execution and delivery of this Agreement and the
other Loan Documents to which Borrower, Owner or Guarantors is a party are valid
and legally binding obligations of such Person enforceable in accordance with
the respective terms and provisions hereof and thereof, except as enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors’ rights and
except to the extent that availability of the remedy of specific performance or
injunctive relief or other equitable remedies are subject to the discretion of
the court before which any proceeding therefor may be brought.
§6.2    Approvals. The execution, delivery and performance of this Agreement and
the other Loan Documents to which Borrower, Owner or Guarantors is or is to
become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of or approval of any Person or the
authorization, consent, approval of or any license or permit issued by, or any
filing or registration with, or the giving of any notice to, any court,
department, board, commission or other governmental agency or authority other
than those already obtained (including, without limitation, the consent of
Mortgage Lender under the Intercreditor Agreement) and the filing of the
Security Documents in the appropriate records office with respect thereto.

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§6.3    Title to Properties; Leases. Borrower and Owner own all of the assets
reflected in the balance sheets of Borrower and Owner, respectively, as of the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances,
(a) other than Permitted Liens as to Owner and (b) except as disclosed on such
balance sheets with respect to Borrower. Guarantors own all of the assets
reflected in the balance sheet of Guarantors dated as of the Balance Sheet Date,
subject to no rights of others, including any rights of first refusal, rights of
first offer or other right to acquire, mortgages, leases, conditional sales
agreements, title retention agreements, liens or other encumbrances which would
result in a default under the Guaranty. Without limiting the foregoing, Owner
has good and marketable fee simple title to the Collateral Property, free from
all liens or encumbrances of any nature whatsoever, except for the Permitted
Liens. Owner is the insured under an owner’s policy of title insurance covering
the Collateral Property in an amount not less than the purchase price of the
Collateral Property.
§6.4    Financial Statements. Borrower has furnished or caused to be furnished
to Lender: (a) the pro forma balance sheet of Borrower and Owner as of the
Balance Sheet Date, certified by an Authorized Officer of Borrower, as fairly
presenting the balance sheet of such Persons for such period, (b) the pro forma
balance sheet of the Guarantors as of the Balance Sheet Date certified by
Guarantor as fairly presenting the balance sheet of such Persons for such
period, and (c) certain other financial information relating to Borrower, Owner
and the Collateral Property requested by Lender. Such balance sheets and
statements (other than those described in (c) above) have been prepared in
accordance with generally accepted accounting principles and fairly present the
respective financial conditions of Borrower, Owner and Guarantors as of such
dates and the results of the operations of Borrower, Owner and Guarantors for
such periods. There are no liabilities, contingent or otherwise, of Borrower,
Owner or Guarantors involving material amounts not disclosed in said financial
statements and the related notes thereto.
§6.5    No Material Changes. Since the Balance Sheet Date, there has occurred no
materially adverse change in the financial condition or assets or business of or
Owner Borrower taken as a whole as shown on or reflected in the balance sheets
of Borrower and Owner as of the Balance Sheet Date, or their respective
statement of income or cash flows for the fiscal period then ended, or as shown
on or reflected in the balance sheet of Guarantors or their respective statement
of income or cash flows for the fiscal period then ended, other than changes in
the ordinary course of business that have not had any Material Adverse Effect
either individually or in the aggregate on the business or financial condition
of such Person and changes reflected in the balance sheet and the statement of
income or cash flows of Borrower or Owner or the balance sheets and statements
of income or cash flows of Guarantors, or other financial information submitted
to Lender after the Balance Sheet Date.
§6.6    Franchises, Patents, Copyrights, Etc. Borrower, Owner and the Guarantors
possess all franchises, patents, copyrights, trademarks, trade names,
servicemarks, licenses and permits, and rights in respect of the foregoing,
material for the conduct of their business substantially as now conducted, free
and clear of all liens and encumbrances, other than Permitted Liens, and without

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conflict with any rights of others, except where a failure to possess such
rights would not have a Material Adverse Effect on the business, assets or
financial condition of such Person.
§6.7    Litigation; Judgments. Except as stated on Schedule 6.7, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against or affecting Borrower, Owner, the Guarantors or the Collateral Property
before any court, tribunal, administrative agency or board, mediator or
arbitrator that, if adversely determined, could, either in any case or in the
aggregate, reasonably be expected to, result in a Material Adverse Effect with
respect to the financial condition or business of such Person. There are no
judgments outstanding against or affecting Borrower, Owner, the Guarantors or
the Collateral Property.
§6.8    No Materially Adverse Contracts, Etc. None of Borrower, Owner or the
Guarantors is subject to any partnership, charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a Material Adverse Effect on the business, assets
or financial condition of such Person. None of Borrower, Owner or the Guarantors
is a party to any mortgage, indenture, contract, agreement or other instrument
that has or is expected, in the judgment of the partners, members or officers of
such Person, to have any Material Adverse Effect on the business, assets or
financial condition of any of them.
§6.9    Compliance with Other Instruments, Laws, Etc. None of Borrower, Owner or
the Guarantors is in violation of any provision of its partnership agreement,
charter or other organizational documents, by-laws, or any agreement or
instrument to which it may be subject or by which it or any of its properties
may be bound or any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result in the
imposition of substantial penalties or a Material Adverse Effect on the
financial condition, properties or business of such Person.
§6.10    Tax Status. Each of Borrower, Owner and the Guarantors (a) has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, as the filing
periods may have been extended, (b) has paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due from such Persons by the taxing authority of
any jurisdiction, and the officers, members or partners of such Person know of
no basis for any such claim. The Land is separately assessed for purposes of
real estate tax assessment and payment. There are no audits pending or to the
knowledge of the Borrower threatened with respect to any tax returns filed by
the Borrower, Owner or any Guarantor.
§6.11    No Event of Default. No Default or Event of Default has occurred and is
continuing.
§6.12    Holding Company and Investment Company Acts. None of Borrower, Owner or
the Guarantors is a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company”, as such terms are defined in
the Public Utility Holding Company Act of 1935, the Federal Power Act; nor is
any of them an “investment company”, or an “affiliated

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company” or a “principal underwriter” of an “investment company”, as such terms
are defined in the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
§6.13    Absence of UCC Financing Statements, Etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage, equipment lease, financing lease, option,
encumbrance or other document filed or recorded with any filing records,
registry, or other public office, that purports to cover, affect or give notice
of any present or possible future lien or encumbrance on, or security interest
or security title in, any property of Borrower or Owner.
§6.14    Setoff, Etc. The Collateral and the rights of Lender with respect to
the Collateral are not subject to any setoff, claims, withholdings or other
defenses. Borrower is the owner of the Collateral free from any lien, security
interest, encumbrance or other claim or demand, except Permitted Liens.
§6.15    Certain Transactions. Except as disclosed in writing to Lender, none of
the members, partners, officers, trustees, directors, or employees of Borrower,
Owner or the Guarantors is a party to any transaction with Borrower or Owner
(other than for services as members, partners, employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any member,
partner, officer, trustee, director or such employee or, to the knowledge of
such Person, any limited liability company, corporation, partnership, trust or
other entity in which any member, partner, officer, trustee, director, or any
such employee has a substantial interest or is a member, officer, director,
trustee or partner, unless such contract, agreement or other arrangement is an
arms length arrangement with terms comparable to those which would be obtained
from an unaffiliated Person or is otherwise approved by Lender.
§6.16    Employee Benefit Plans. Borrower, Owner, Guarantors and each ERISA
Affiliate have fulfilled their respective obligations under the minimum funding
standards of ERISA and the Code with respect to each Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the Code
with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan. None of Borrower, Owner, Guarantors, or any ERISA Affiliate has
(a) sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan, (b) failed to make any contribution or payment to any Employee
Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, or made any
amendment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension
Plan, which has resulted or could result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Code, or (c) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. Neither the Collateral nor the Collateral
Property constitutes a “plan asset” (within the meaning of ERISA and the Code)
of any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan.
§6.17    [Intentionally Omitted.]

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§6.18    Environmental Compliance. Borrower, Owner, or an affiliate or agent
thereof has taken or caused to be taken all commercially reasonable steps
necessary to investigate the past and present conditions and usage of the
Collateral Property and the operations conducted thereon and, based upon such
investigation, makes the following representations and warranties.
(a)    None of Borrower, or any operator of the Collateral Property, or any
portion thereof, or any operations thereon is in violation, or alleged material
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”),
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state or local statute, regulation, ordinance, order or
decree relating to health, safety or the environment, including, without
limitation, the environmental statutes, regulations, orders and decrees of the
states in which any of the Collateral Property may be located (hereinafter
“Environmental Laws”), which violation involves the Collateral Property and
would have a material adverse effect on the environment or the business, assets
or financial condition of such Person.
(b)    Neither Borrower nor Owner has received notice from any third party
including, without limitation, any federal, state or local governmental
authority, (i) that it has been identified by the United States Environmental
Protection Agency (“EPA”) as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C.
§9601(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any
pollutant or contaminant as defined by 42 U.S.C. §9601(33) or any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws (“Hazardous Substances”) which it has
generated, transported or disposed of have been found at any site at which a
federal, state or local agency or other third party has conducted or has ordered
that Borrower conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a named party
to any claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party’s incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the release of Hazardous Substances.
(c)    With respect to the Collateral Property and except as disclosed in the
environmental reports described on Schedule 6.18 to this Agreement, (i) no
portion of the Collateral Property has been used as a landfill or for dumping or
for the handling, processing, storage or disposal of Hazardous Substances except
in accordance with applicable Environmental Laws, and no underground tank or
other underground storage receptacle for Hazardous Substances is located on any
portion of the Collateral Property; (ii) in the course of any activities
conducted by Borrower, Owner, or the operators of any of their respective
properties, no Hazardous Substances have been generated or are being used on the
Collateral Property except in the ordinary course of business and in accordance
with applicable Environmental Laws; (iii) there has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping (a “Release”) or threatened Release of
Hazardous Substances on, upon, into

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or from the Collateral Property, which Release would have a material adverse
effect on the value of any of the Collateral Property or adjacent properties or
the environment; (iv) there have been no Releases on, upon, from or into any
real property in the vicinity of the Collateral Property which, through soil or
groundwater contamination, may have come to be located on, and which would have
a material adverse effect on the value of, the Collateral Property; and (v) any
Hazardous Substances that have been generated on the Collateral Property have
been transported off-site only by carriers having an identification number
issued by the EPA or approved by a state or local environmental regulatory
authority having jurisdiction regarding the transportation of such substance and
treated or disposed of only by treatment or disposal facilities maintaining
valid permits as required under all applicable Environmental Laws, which
transporters and facilities have been and are, to the best of Borrower’s
knowledge, operating in compliance with such permits and applicable
Environmental Laws.
(d)    None of Borrower, Owner or the Collateral Property is subject to any
applicable Environmental Law requiring the performance of Hazardous Substances
site assessments, or the removal or remediation of Hazardous Substances, or the
giving of notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or statement by virtue of
the transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any transactions contemplated hereby.
§6.19    [Intentionally Omitted.]
§6.20    [Intentionally Omitted.]
§6.21    Regulations U and X. No portion of any Loan was or is to be used for
the purpose of purchasing or carrying any “margin security” or “margin stock” as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224. Borrower is not engaged,
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of “purchasing” or carrying any
“margin security” or “margin stock” as such terms are used in Regulations U and
X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220,
221 and 224.
§6.22    [Intentionally Omitted.]
§6.23    Loan Documents. All of the representations and warranties made by or on
behalf of Borrower, the Guarantors and Owner in this Agreement and the other
Loan Documents or any document or instrument delivered to Lender pursuant to or
in connection with any of such Loan Documents are true and correct in all
material respects, and, none of Borrower, the Guarantors or Owner have failed to
disclose such information as is necessary to make such representations and
warranties not misleading in any material respect.
§6.24    Collateral Property. Borrower makes the following representations and
warranties concerning the Collateral Property:
(a)    Status of Documents. Each of (a) the Organizational Documents, (b) the
Construction Contract, (c) the Design Professional’s Contract, (d) the Civil
Engineer’s Contract

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and (e) all other Project Documents is in full force and effect and free from
any default on the part of Owner which would have a Material Adverse Effect.
Such documents are hereinafter sometimes collectively called the “Basic
Agreements”. Borrower has provided Lender with true, correct and complete copies
of the Basic Agreements.
(b)    Off-Site Utilities. All water, sewer, electric, gas, telephone and other
utilities necessary for the use and operation of the Collateral Property are
available through dedicated public rights of way or through perpetual private
easements approved by Lender with valid permits and are adequate to service the
Project in compliance with applicable law.
(c)    Access, Etc. The Collateral Property has direct access by trucks and
other motor vehicles and by foot to dedicated and accepted public roads or
through perpetual private easements approved by Lender. All private ways
providing access to the Collateral Property are zoned in a manner which will
permit access to the Project over such ways by trucks and other commercial and
industrial vehicles. The Collateral Property constitutes a separate parcel which
has been properly subdivided in accordance with all applicable state and local
laws, regulations and ordinances to the extent required thereby, and neither the
execution and delivery of the Security Documents nor the exercise of any
remedies thereunder by Lender shall violate any such law or regulation relating
to the subdivision of real property.
(d)    No Required Collateral Property Consents, Permits, Etc. None of Borrower,
the Guarantors or Owner have received any notice of, and has no knowledge of,
any approvals, consents, or licenses required by applicable laws, rules,
ordinances or regulations or any agreement affecting the Collateral Property for
the maintenance, operation, servicing and use of the Collateral Property or the
Project for its intended use which have not been granted, effected, or performed
and completed (as the case may be), or any fees or charges therefor which have
not been fully paid, or which are no longer in full force and effect. No such
approvals, consents, permits or licenses (including, without limitation, any
railway siding agreements) will terminate, or become void or voidable or
terminable on any foreclosure sale of the Collateral. To the best knowledge of
Borrower and the Guarantors, there are no outstanding notices, suits, orders,
decrees or judgments relating to zoning, building use and occupancy, fire,
health, sanitation or other violations affecting, against, or with respect to,
the Collateral Property or any part thereof.
(e)    Insurance. None of Borrower, the Guarantors or Owner have received any
outstanding notice from any insurer or its agent requiring performance of any
work with respect to the Collateral Property or canceling or threatening to
cancel any policy of insurance, and the Collateral Property complies with the
requirements of all of Borrower’s, the Guarantors’ and the Owner’s insurance
carriers.
(f)    Real Property Taxes; Special Assessments. To Borrower’s actual knowledge,
there are no unpaid or outstanding real estate or other taxes or assessments on
or against the Collateral Property or any part thereof which are payable by
Borrower, the Guarantors or Owner (except only real estate or other taxes or
assessments, that are not yet due and payable). Borrower has delivered to Lender
true and correct copies of real estate tax bills for the Collateral Property for
the most recent calendar year. No abatement proceedings are pending with
reference to any real estate taxes assessed against the Collateral Property,
other than with respect to taxes which have been paid under

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protest and which are being contested in good faith. Except as set forth in the
Title Policy delivered to Lender, to Borrower’s actual knowledge, there are no
betterment assessments or other special assessments presently pending with
respect to any portion of the Collateral Property, and none of Borrower, the
Guarantors or Owner have received any notice of any such special assessment
being contemplated.
(g)    Historic Status. The Collateral Property is not located within any
historic district pursuant to any federal, state or local law or governmental
regulation.
(h)    Eminent Domain; Casualty. There are no pending eminent domain proceedings
against the Collateral Property or any part thereof, and, to the knowledge of
Borrower, the Guarantors and Owner, no such proceedings are presently threatened
or contemplated by any taking authority. Neither the Collateral Property nor any
part thereof is now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty.
(i)    Leases. There are no occupancies, rights, privileges or licenses in or to
the Collateral Property or portion thereof for the Collateral Property other
than Qualified Leases. Except as disclosed in writing to Lender, no material
leasing, brokerage or like commissions, fees or payments are due from Borrower,
the Guarantors or Owner in respect of any Leases.
(j)    Basic Agreements. To the best knowledge of Borrower, there are no
material claims or any bases for material claims in respect of the Collateral
Property or its operation by any party to any Basic Agreement.
(k)    Other Material Real Property Agreements: No Options. There are no
material agreements pertaining to the Collateral Property, the Project or the
operation or maintenance of either thereof other than as described in this
Agreement (including the Schedules hereto), the Title Policy, the Basic
Agreements or otherwise disclosed in writing to Lender by Borrower; and no
person or entity has any right or option to acquire the Collateral Property or
the Project or any portion thereof or interest therein.
(l)    Construction of the Project. As of the Closing Date, construction of the
Project has not commenced. All construction of the Project will be consistent
with the Plans and the Project Documents and in compliance with all applicable
governmental approvals and all applicable covenants, conditions and
restrictions. The use and occupancy of the Project when completed in accordance
with the Plans and the Project Documents will comply with all applicable
governmental approvals and with all applicable covenants, conditions and
restrictions. The Construction Contract will be sufficient to complete the
Project consistent with the Plans and in compliance with all applicable
governmental approvals and all covenants, conditions and restrictions. The
parking spaces to be located on the Collateral Property are and at all times
will continue to be sufficient to satisfy all parking requirements of all
governmental approvals for the Project.
(m)    Project Budget. The Project Budget constitutes all costs and expenses
which will be incurred by Borrower and Owner in the acquisition, construction,
development, financing, marketing, leasing and maintenance of the Collateral
Property through the Maturity Date.

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§6.25    Brokers. None of Borrower, the Guarantors, Owner, or any of their
respective Subsidiaries has engaged or otherwise dealt with any broker, finder
or similar entity in connection with this Agreement or the Loan contemplated
hereunder.
§6.26    Other Debt. None of Borrower, Owner or the Guarantors is in default of
the payment of any Indebtedness or under any other agreement, mortgage, deed of
trust, security agreement, financing agreement, indenture, lease or other
material agreement to which any of them is a party, which default could result
in a Material Adverse Effect. None of Borrower, Owner or the Guarantors is a
party to or bound by any agreement, instrument or indenture other than the
Mortgage Loan Documents that may require the subordination in right or time of
payment of any of the Obligations to any other indebtedness or obligation of
such Person. Borrower has provided to Lender copies of all agreements,
mortgages, deeds of trust, financing agreements or other material agreements
binding upon Borrower, Owner or the Collateral Property and entered into by
Borrower or Owner as of the date of this Agreement with respect to any
Indebtedness of such Person.
§6.27    Use of Proceeds. No portion of the proceeds of the Loan shall be used
for personal, family or household purposes.
§6.28    Transaction in Best Interests of Parties; Consideration. The
transaction evidenced by this Agreement and the other Loan Documents is in the
best interests of Borrower, Owner, and the Guarantors. The direct and indirect
benefits to inure to Borrower, Owner and the Guarantors pursuant to this
Agreement and the other Loan Documents constitute substantially more than
“reasonably equivalent value” (as such term is used in Section 548 of the
Bankruptcy Code) and “valuable consideration,” “fair value,” and “fair
consideration,” (as such terms are used in any applicable state fraudulent
conveyance law), in exchange for the benefits to be provided by Borrower, Owner
and the Guarantors pursuant to this Agreement and the other Loan Documents, and
but for the willingness of the Guarantors to enter into the Guaranty and the
willingness of Borrower to enter into the Assignments of Interests, Borrower
would be unable to obtain the financing contemplated hereunder which financing
will enable Borrower, Owner and the Guarantors to have available financing to
conduct and expand their business.
§6.29    Solvency. As of the Closing Date and after giving affect to the
transactions contemplated by this Agreement and the other Loan Documents,
including Loan made or to be made hereunder, none of Borrower, Owner or the
Guarantors is insolvent on a balance sheet basis, the sum of such Person’s
assets exceeds the sum of such Person’s liabilities, each such Person is able to
pay its debts as they become due, and each such Person has sufficient capital to
carry on its business.
§6.30    No Bankruptcy Filing. None of Borrower, Owner or the Guarantors is
contemplating either the filing of a petition by it under any state or federal
bankruptcy or insolvency laws or the liquidation of its assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against it or any of such other Persons.
§6.31    No Fraudulent Intent. Neither the execution and delivery of this
Agreement or any of the other Loan Documents nor the performance of any actions
required hereunder or thereunder is being undertaken by Borrower, Owner or
Guarantors with or as a result of any actual intent by

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any of such Persons to hinder, delay or defraud any entity to which any of such
Persons is now or will hereafter become indebted.
§6.32    Special Purpose Entity; Restrictions.
(a)    Borrower is in full and complete compliance with the Borrower
Organizational Agreements.
(b)    All duties, obligations and responsibilities required to be performed by
the members of Borrower under the Borrower Organizational Agreements, as of the
date hereof, have been performed in all material respects, and no default or
condition which with the passage of time or the giving of notice, or both, would
constitute a default exists under any of such Borrower Organizational
Agreements; it being acknowledged that for purposes of the foregoing, performed
in all material respects shall include, but shall not be limited to, compliance
with the Borrower Organizational Agreements so as not to affect Borrower’s
status as a separate, single purpose or bankruptcy remote entity.
(c)    Owner is in full and complete compliance with the Owner Organizational
Agreements.
(d)    All duties, obligations and responsibilities required to be performed by
Borrower under the Owner Organizational Agreements, as of the date hereof, have
been performed in all material respects, and no default or condition which with
the passage of time or the giving of notice, or both, would constitute a default
exists under any of such Owner Organizational Agreements; it being acknowledged
that for purposes of the foregoing, performed in all material respects shall
include, but shall not be limited to, compliance with the Owner Organizational
Agreements so as not to affect Owner’s status as a separate, single purpose or
bankruptcy remote entity.
(e)    Except for the Owner Organizational Documents, the Loan Documents and the
Mortgage Loan Documents, neither Owner nor Borrower is a party to or is bound by
any indenture, contract or other agreement which purports to prohibit, restrict,
limit, or control (i) the transfer or pledge of direct or indirect interests in
Owner, (ii) the exercise of Voting Interests with respect to Owner, or (iii) the
management of Owner.
§6.33    Organizational Documents. Attached hereto as Schedule 6.33 is a true,
accurate and complete list of all of the Organizational Documents. Borrower has
delivered to Lender true, correct and complete copies of the Organizational
Documents, and none of the Organizational Documents has been modified or amended
in any respect except as set forth on Schedule 6.33. Each of the Organizational
Documents has been duly authorized, executed and delivered by the parties
thereto and is in full force and effect.
§6.34    Ownership. Schedule 6.34 sets forth, as of the date hereof, the
ownership structure of Owner, including Borrower and Guarantors, and the Persons
owning and controlling Borrower, Guarantors and Owner and the form and
jurisdiction of organization of each of such Persons. No Person owns any direct
legal, equitable or beneficial interest in Borrower or Owner or has any right

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to vote or exercise control over Borrower, Owner or their management except as
set forth on such Schedule. The ownership interests in Owner indicated on
Schedule 6.34 are owned free and clear of all liens, restrictions, claims,
pledges, encumbrances, charges or rights of third parties and rights of set‑off
or recoupment whatsoever (other than those in favor of Lender hereunder). No
Person other than the Lender has any option, right of first refusal, right of
first offer or other right to acquire all or any portion of the Collateral or
the Collateral Property. Owner does not own any assets other than the Collateral
Property and Borrower does not own any assets other than its 100% membership in
Owner.
§6.35    Embargoed Persons. At all times throughout the term of the Loan,
including after giving effect to any Permitted Equity Transfers, (a) none of the
funds or other assets of Borrower, Owner or Guarantors shall constitute property
of, or be beneficially owned, directly or indirectly, by any Person subject to
trade restrictions under United States law, including, but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders
or regulations promulgated under any such United States laws, with the result
that the investment in Borrower, Owner or Guarantors, as applicable (whether
directly or indirectly), is or would be prohibited by law or the Loan made by
Lender is in violation of law (each, an “Embargoed Person”); (b) no Embargoed
Person shall have any interest of any nature whatsoever in Borrower, Owner or
Guarantors, as applicable, with the result that the investment in Borrower,
Owner or Guarantors, as applicable (whether directly or indirectly), is or would
be prohibited by law or the Loan is or would be in violation of law; and (c)
none of the funds of Borrower, Owner or Guarantors, as applicable, have been or
shall be derived from, or are the proceeds of, any unlawful activity, including
money laundering, terrorism or terrorism activities, with the result that the
investment in Borrower, Owner or Guarantors, as applicable (whether directly or
indirectly), is or would be prohibited by law or the Loan is or would be in
violation of law, or may cause the assets to be subject to forfeiture or
seizure.
§6.36    Mortgage Loan Documents.
(a)    Borrower has delivered to Lender true, correct and complete copies of the
Mortgage Loan Documents.
(b)    As of the date hereof, the Mortgage Loan Documents are in full force and
effect and no event of default, or any event which, with the passage of time or
the giving of notice, or both, would constitute an event of default, has
occurred pursuant to the terms of any of the Mortgage Loan Documents on the part
of Owner or the other parties thereto.
§6.37    Effect of Loan Request. Each Loan Request submitted to Lender as
provided in §2.4 hereof shall constitute an affirmation that the representations
and warranties contained in this Agreement and in the other Loan Documents
remain true and correct as of the date thereof; and unless Lender is notified to
the contrary, in writing, prior to the Drawdown Date of the requested Loan or
any portion thereof, shall constitute an affirmation that the same remain true
and correct on the Drawdown Date.

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§7.    AFFIRMATIVE COVENANTS OF BORROWER.
Borrower covenants and agrees that, so long as any Loan or Note is outstanding
or Lender has any obligation to make any Loan:
§7.1    Punctual Payment. Borrower will duly and punctually pay or cause to be
paid the principal and interest on the Loan and all interest, fees and premiums
provided for in this Agreement, all in accordance with the terms of this
Agreement and the Note as well as all other sums owing pursuant to the Loan
Documents.
§7.2    Maintenance of Office. Borrower will maintain, and will cause Owner to
maintain, their chief executive offices at c/o Oxford Properties, LLC, One
Overton Park, 3625 Cumberland Blvd., Suite 500, Atlanta, Georgia 30339, Attn: W.
Daniel Faulk, Jr. or at such other place in the United States of America as
Borrower shall designate upon prior written notice to Lender, where notices,
presentations and demands to or upon Borrower in respect of the Loan Documents
may be given or made.
§7.3    Records and Accounts. Borrower will, and will cause Owner to, (a) keep
true and accurate records and books of account in which full, true and correct
entries will be made in accordance with generally accepted accounting principles
and (b) maintain adequate accounts and reserves for all taxes (including income
taxes), depreciation and amortization of its properties, contingencies and other
reserves. Borrower will not make, and will not permit Owner to make, without the
prior written consent of Lender, (x) any material changes to the accounting
procedures used by Borrower or Owner in preparing the financial statements and
other information described in §6.4 or §7.4, or (y) change its fiscal year.
§7.4    Financial Statements, Certificates and Information. Borrower will
deliver or cause to be delivered to Lender:
(a)    as soon as practicable, but in any event not later than ninety (90) days
after the end of each fiscal year of Borrower, the unaudited balance sheet of
each of Borrower, Owner and the Guarantors at the end of such year, and the
related unaudited statement of income, statement of changes in capital and
statement of cash flows for such year, each setting forth in comparative form
the figures for the previous fiscal year and all such statements to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles, together with a certification by the principal financial or
accounting officer of Borrower, Owner and by the Guarantors, respectively, that
the information contained in such financial statements fairly presents the
financial position of Borrower, Owner and the Guarantors, respectively, on the
date thereof (subject to year end adjustments);
(b)    as soon as practicable, but in any event not later than thirty (30) days
after the end of each month, (i) copies of the unaudited balance sheet of
Borrower and Owner as at the end of such month, and the related unaudited
statement of income for the portion of Borrower’s and Owner’s fiscal year then
elapsed, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, together with a certification by the principal
financial or accounting officer of Borrower and Owner that the information
contained in such financial

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statements fairly presents the financial position of Borrower and Owner on the
date thereof (subject to year end adjustments); (ii) an operating statement for
the Project for such month and year to date; (iii) copies of Borrower’s and
Owner’s bank statements for the Reserve Account and a summary describing any
payments made from such account during the prior month; (iv) a current certified
rent roll for the Project; and (v) after the last quarter of each year, a
detailed statement of all income and expenses for the Project for such year;
(c)    as soon as practicable, but in any event not later than thirty (30) days
after the end of each of the first three (3) fiscal quarters of Borrower and
Owner copies of the unaudited balance sheets of Borrower and Owner as at the end
of such quarter, and the related unaudited statement of income, statement of
changes in capital and statement of cash flows for the portion of Borrower’s and
Owner’s fiscal year then elapsed, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, together with a
certification by the principal financial or accounting officer of Borrower and
Owner, that the information contained in such financial statements fairly
presents the financial position of Borrower and Owner on the date thereof
(subject to year end adjustments);
(d)    contemporaneously with the delivery of the financial statements referred
to in clause (a) above, a statement of all material contingent liabilities of
Borrower, Owner and Guarantors which are not reflected in such financial
statements or referred to in the notes thereto;
(e)    copies of all financial statements delivered to Mortgage Lender
contemporaneously with the delivery thereof to Mortgage Lender;
(f)    evidence reasonably satisfactory to Lender of the timely payment of all
real estate taxes for the Collateral Property; and
(g)    from time to time such other financial data and information as Lender may
reasonably request.
§7.5    Notices.
(a)    Defaults. Borrower will promptly notify Lender in writing of the
occurrence of any Default or Event of Default. If any Person shall give any
notice or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Agreement or under any note,
evidence of Indebtedness, indenture (including, without limitation, any Mortgage
Loan Documents) or other obligation to which or with respect to which any of
Borrower, Owner or Guarantors is a party or obligor, whether as principal or
surety, and such default would permit the holder of such note or obligation or
other evidence of Indebtedness to accelerate the maturity thereof, Borrower
shall forthwith give written notice thereof to Lender, describing the notice or
action and the nature of the claimed default.
(b)    Environmental Events. Borrower will promptly give notice to Lender
(i) upon Borrower obtaining knowledge of any potential or known Release, or
threat of Release, of any Hazardous Substances at or from any Collateral
Property of Borrower or Owner; (ii) of any violation of any Environmental Law
that Borrower or Owner reports in writing or is reportable by

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Borrower or Owner in writing (or for which any written report supplemental to
any oral report is made) to any federal, state or local environmental agency and
(iii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or
other action, including a notice from any agency of potential environmental
liability, of any federal, state or local environmental agency or board, that in
either case involves the Collateral Property and has the potential to result in
a Material Adverse Effect with respect to the assets, liabilities, financial
conditions or operations of Borrower or Owner.
(c)    Notification of Claims. Borrower will, immediately upon becoming aware
thereof, notify Lender in writing of any setoff, claims (including, with respect
to the Collateral Property of Borrower or Owner, environmental claims)
withholdings or other defenses to which any of the Collateral or the Collateral
Property, or the rights of Lender with respect to the Collateral or the
Collateral Property are subject.
(d)    Notice of Litigation and Judgments. Borrower will give notice to Lender
in writing within fifteen (15) days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and proceedings
affecting any of Borrower, Owner or the Guarantors or to which any of such
Persons is or is to become a party involving a claim against any of such Persons
in an amount in excess of $10,000.00 and stating the nature and status of such
litigation or proceedings. Borrower will give notice to Lender, in writing, in
form and detail reasonably satisfactory to Lender, within ten days of any
judgment, whether final or otherwise, against Borrower, Owner or the Guarantors
in an amount in excess of $10,000.00.
(e)    Copies of Mortgage Loan Requests. Borrower shall provide Lender with
copies of all draw requests and all third party reports and reviews of the
Project and its progress and all other back-up documentation related thereto
that are provided to or for Mortgage Lender contemporaneously with the submittal
of such documents and materials to Mortgage Lender. Lender reserves the right to
require Borrower to (i) notify Lender of the date, time and location of all draw
request meetings so that Lender may, at its option, attend such meetings (at
Borrower’s expense), and (ii) require additional back-up documentation for all
amounts requested pursuant to a draw request under the Mortgage Loan.
(f)    Notice of Proposed Sales, Encumbrances, Refinance or Transfer of
Property. Borrower will give prompt notice to Lender of any proposed sale,
encumbrance, refinance or transfer by Borrower or Owner of all or any portion of
the Collateral Property, except for Permitted Liens not constituting Liens
granted pursuant to the Mortgage Loan.
§7.6    Existence; Maintenance of Properties.
(a)    Borrower will do or cause to be done all things necessary to preserve and
keep in full force and effect Borrower’s and Owner’s existence as a Georgia
limited liability company. Borrower will do or cause to be done all things
necessary to preserve and keep in full force all of Borrower’s and Owner’s
rights and franchises.
(b)    Borrower (i) will cause all of Borrower’s and Owner’s properties used or
useful in the conduct of Borrower’s and Owner’s business to be maintained and
kept in good condition, repair and working order (ordinary wear and tear,
casualty and condemnation excepted)

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and supplied with all necessary equipment, and (ii) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof
in all cases in which the failure so to do would have a Material Adverse Effect
on the condition of Borrower’s and Owner’s properties or on the financial
condition, assets or operations of Borrower or Owner. So long as the Loan remain
outstanding, the Collateral Property shall be developed and operated in a
first-class manner as a multi-family project.
§7.7    Insurance. With respect to the properties and businesses of Borrower and
Owner, Borrower will procure and maintain or cause to be procured and maintained
insurance or be a “Named Insured” on the General Contractor’s and Management
Company’s policies, as applicable, with financially sound and reputable insurers
against such casualties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities in similar
geographic areas and in amounts, containing such terms, in such forms and for
such periods as may be reasonable and prudent, including, without limitation,
“all risks” property insurance (including broad form flood, broad form
earthquake coverages) on each Building and the contents therein of Borrower and
Owner in an amount not less than one hundred percent (100%) of the full
replacement cost of each such Building and the contents therein, with a
replacement cost endorsement and an agreed amount endorsement, provided,
however, that solely with respect to earthquake insurance, such coverage may be
in an amount less than one hundred percent (100%) of the full replacement cost
so long as such amount is commercially reasonable and in accordance with general
practices of businesses engaged in similar activities in similar geographic
areas and as may be required under the Mortgage Loan Documents as they exists on
the date hereof, provided, however, each commercial general liability or
umbrella liability policy with respect to the Collateral Properties shall name
Lender as an additional insured and shall contain a cross liability/severability
endorsement. Borrower shall promptly furnish to Lender all renewal notices and
evidence that all premiums or portions thereof then due and payable have been
paid. At least 15 days prior to the expiration date of all such policies,
Borrower shall deliver to Lender evidence of continued coverage, including a
certificate of insurance, as may be satisfactory to Lender.
§7.8    Taxes. Borrower will pay or cause to be paid real estate taxes, other
taxes, assessments and other governmental charges against the Collateral
Property before the same become delinquent, and will duly pay and discharge, or
cause to be paid and discharged, before the same shall become overdue, all
taxes, assessments and other governmental charges imposed upon Borrower, Owner,
the Collateral and Borrower’s other properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its properties; provided that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if Borrower
shall have set aside on its books adequate reserves with respect thereto; and
provided further that Borrower will pay or cause to be paid all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor.
§7.9    Inspection of Properties and Books. Upon reasonable prior notice,
Borrower shall permit Lender, or any representative designated by Lender, (at
Borrower’s expense) to visit and inspect the Collateral Property or any of
Borrower’s or Owner’s offices, to examine the books of

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account of Borrower and Owner (and to make copies thereof and extracts
therefrom) and to discuss the affairs, finances and accounts of Borrower and
Owner with, and to be advised as to the same by, Borrower’s or Owner’s officers,
all at such reasonable times and intervals as Lender may reasonably request.
Lender shall use good faith efforts to coordinate such visits and inspections so
as to minimize the interference with and disruption to Borrower’s and Owner’s
activities at the Collateral Property. Borrower will cooperate and will cause
its agents and contractors to cooperate to give Lender and its consultants full
access to the Collateral Property. All inspections by Lender and its consultants
shall be for the sole benefit of Lender for its loan administration purposes
only. Neither Lender nor its consultants assumes any liability to Borrower,
Owner or any other Person by reason of Lender’s or its consultant’s inspections.
Neither Borrower nor any other Person may rely on Lender’s inspections for any
purpose (including stage of completion, adequacy or workmanship, compliance with
governmental approvals and covenants, conditions and restrictions, conformance
with the Plans, Project Documents, or other matters related to design,
construction and operation). Lender’s inspection of an item shall not result in
any waiver of Lender’s rights in the event such item does not conform with this
Agreement. Borrower shall keep, and shall cause Owner to keep, books and records
fairly reflecting all of their business affairs and transactions.
§7.10    Compliance with Laws, Contracts, Licenses, and Permits. Borrower will
comply, and will cause Owner to comply, with (a) all applicable laws and
regulations now or hereafter in effect wherever their business is conducted,
including all Environmental Laws, (b) the provisions of all applicable operating
agreements, charter documents and by laws, (c) all agreements and instruments to
which Borrower or Owner is a party or by which Borrower or Owner or any of
Borrower’s or Owner’s properties may be bound including the Basic Agreements and
any leases, (d) all applicable decrees, orders, and judgments, and (e) all
licenses and permits required by applicable laws and regulations for the conduct
of Owner’s and Borrower’s business or the ownership, use or operation of Owner’s
and Borrower’s properties. If at any time any authorization, consent, approval,
permit or license from any officer, agency or instrumentality of any government
shall become necessary or required in order that Borrower or Owner may fulfill
or be in compliance with any of its obligations hereunder or under any of the
Loan Documents, Borrower will promptly take or cause to be taken all reasonable
steps within the power of Borrower to obtain such authorization, consent,
approval, permit or license and furnish Lender with evidence thereof.
§7.11    Monthly Meetings. Borrower shall coordinate and arrange monthly project
meetings among senior management of Borrower and Owner and Lender on dates and
times mutually agreeable to Borrower and Lender to review and discuss financial
reports, marketing status, development status and leasing status for the Project
and comparing actual results to budgeted projections.
§7.12    Further Assurances. Borrower will cooperate with Lender and execute
such further instruments and documents as Lender shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Agreement
and the other Loan Documents.
§7.13    [Intentionally Omitted.]
§7.14    [Intentionally Omitted.]

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§7.15    Casualty. In the event of any loss or damage to the Collateral
Property, Borrower shall give prompt written notice to the insurance carrier and
Lender. Borrower shall not, and shall not permit Owner to, settle, adjust or
compromise any claim under such insurance policies without the prior written
consent of Lender; provided, however, that Borrower or Owner may make proof of
loss, settle, adjust or compromise any claim under such insurance policies
solely to the extent expressly permitted under the Mortgage Loan Documents so
long as no Default or Event of Default has occurred and is continuing. Any
proceeds of such claim which are not (a) applied to the balance of the loan
evidenced by the Mortgage Loan Documents or (b) used for the restoration and
repair of the Collateral Property pursuant to the terms of the Mortgage Loan
Documents, shall be paid to Lender and applied to the payment of the Obligations
whether or not then due, less reasonable out-of-pocket expenses incurred in
connection with the settlement, adjustment or compromise of such claim.
Notwithstanding anything contained in the Loan Documents to the contrary, Lender
hereby agrees that Borrower and Owner may use all insurance proceeds to restore
and repair the Collateral Property, provided that such use is permitted under
the terms of the Mortgage Loan Documents subject, however, to disbursement,
oversight, inspection and monitoring requirements and controls required by the
Mortgage Lender so long as the Mortgage Loan is outstanding and, thereafter,
subject to disbursement, oversight, inspection and monitoring requirements and
controls customary for construction loans for similar type properties in similar
geographic areas.
§7.16    Condemnation. In the event that all or any portion of the Collateral
Property shall be damaged or taken through condemnation (which term shall
include any damage or taking by any governmental authority, quasi-governmental
authority, any party having the power of condemnation, or any transfer by
private sale in lieu thereof), or any such condemnation shall be threatened,
solely to the extent permitted under the Mortgage Loan Documents, Borrower shall
give prompt written notice to Lender. Borrower shall not, and shall not permit
Owner to, settle or compromise any claim, action or proceeding relating to such
damage or condemnation without the prior written consent of Lender; provided
that Borrower or Owner may make proof of loss and settle or compromise any such
claim, action or proceeding solely to the extent permitted under the Mortgage
Loan Documents so long as no Default or Event of Default has occurred and is
continuing. Any proceeds, award or damages from such damage or condemnation
which are not (a) applied to the balance of the loan evidenced by the applicable
Mortgage Loan Documents, or (b) used for the restoration and repair of the
Collateral Property pursuant to the terms of the Mortgage Loan Documents, such
shall be paid to Lender and applied to the payment of the Obligations whether or
not then due less reasonable out-of-pocket expenses incurred in connection with
the settlement or compromise of such claim, action or proceeding.
Notwithstanding anything contained in the Loan Documents to the contrary, Lender
hereby agrees that Borrower and Owner may use all condemnation proceeds, awards
and damages to restore and repair the Collateral Property, provided that such
use is permitted under the terms of the Mortgage Loan Documents subject,
however, to disbursement, oversight, inspection and monitoring requirements and
controls required by the Mortgage Lender so long as the Mortgage Loan is
outstanding and, thereafter, subject to disbursement, oversight, inspection and
monitoring requirements and controls customary for construction loans for
similar type properties in similar geographic areas.

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§7.17    Compliance. Borrower shall operate, and shall cause Owner to operate,
their respective business in compliance with the terms and conditions of this
Agreement and the other Loan Documents.
§7.18    Plan Assets, etc. Borrower will do, or cause to be done, all things
necessary to ensure that neither Borrower nor Owner will be deemed to hold “plan
assets” (within the meaning of ERISA or the Code) at any time. Each owner of a
direct or indirect equity interest in Owner has certified to Borrower and
Lender, and Borrower shall require each proposed transferee of any direct or
indirect equity interest in Owner, as a condition precedent to such transfer, to
certify to Borrower and Lender, that the source of funds used or to be used by
it to acquire its interest in Owner are not assets of any plan subject to Title
I of ERISA or Section 4975 of the Code and are not deemed to be assets of any
such plan under the U.S. Department of Labor’s plan asset regulations. Upon
request by Lender, Borrower shall provide Lender with a copy of each such
certification from each owner of a direct or indirect equity interest in Owner
and will promptly provide Lender with a copy of each such certification from
each proposed transferee.
§7.19    Preservation and Maintenance. Borrower shall, and shall cause Owner to,
(i)  not permit or commit waste, impairment, or deterioration of the Collateral
Property or abandon the Collateral Property, (ii)  not remove, demolish or
structurally alter or permit or suffer the removal, demolition or alteration of
any Building except with the prior written consent of Lender, which consent
shall not be unreasonably withheld, delayed or conditioned, (iii) restore or
repair promptly and in a good and workmanlike manner all or any part of the
Collateral Property in the event of any damage, injury or loss thereto, to the
equivalent of its condition prior to such damage, injury or loss, or such other
condition as Lender may approve in writing, (iv)  keep the Collateral Property,
including the improvements thereon and any fixtures, equipment, machinery and
personal property, in good order, repair and tenantable condition (subject to
ordinary wear and tear, casualty and condemnation) and shall replace fixtures,
equipment, machinery and personal property on the Collateral Property when
necessary to keep such items in good order, repair, and tenantable condition,
and (v) keep all trademarks, tradenames, servicemarks and licenses and permits
necessary for the use and occupancy of the Collateral Property in good standing
and in full force and effect and free and clear of all liens and encumbrances
other than Permitted Liens. None of Borrower, Owner or any tenant or other
Person shall remove, demolish or alter any Building now existing or hereafter
erected on the Collateral Property or any other fixtures, equipment, machinery
or personal property in or on the Collateral Property except when incident to
the replacement of fixtures, equipment, machinery or other personal property
with items of like kind and value. Borrower shall, and shall cause Owner to,
comply with the asbestos operations and maintenance program in effect as of the
date hereof (if any) or adopted hereafter with respect to the Collateral
Property, and shall, and shall cause Owner to, not discontinue or materially
modify such program without Lender’s prior written consent. In the event that
Borrower or Owner shall remove any asbestos or asbestos-containing materials
after the date hereof, such removal shall be performed in accordance with all
applicable laws and, upon the request of Lender, Borrower shall provide evidence
of such compliance to Lender.
§7.20    [Intentionally Omitted.]

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§7.21    Borrower and Owner to Remain a Single-Purpose Entity. Borrower shall,
and shall cause Owner to, conduct their respective business in full compliance
with and to not violate the terms and conditions of their respective
Organizational Agreements in any material respects, shall do all things
necessary to observe limited liability company formalities and to preserve their
respective existence, and Borrower will not, and will not permit Owner to,
amend, modify or otherwise change their respective Organizational Agreements
without the prior written consent of Lender, except as may be permitted pursuant
to §8.13. Borrower shall, and shall cause Owner to, perform all of their
respective duties, responsibilities and obligations under their respective
Organizational Agreements, it being acknowledged that for purposes of the
foregoing, perform in all material respects shall include, but shall not be
limited to, compliance with their respective Organizational Agreements so as not
to affect Borrower’s and Owner’s status as a separate, single purpose or
bankruptcy remote entity.
§7.22    Leases.
(a)    The Borrower will take, or cause to be taken, all reasonable steps within
the power of Borrower to market and lease the leaseable area of the Collateral
Property in accordance with sound and customary leasing and management practices
for similar properties in similar locations. Any such leasing activity shall be
conducted in accordance with the terms of §7.22(b), below. The Borrower will,
and will cause Owner to, (i) employ a form of lease that is reasonably
acceptable to the Lender; (ii) fulfill, perform and observe each and every
material condition and covenant to be performed by Owner under the Leases; (iii)
promptly notify the Lender of any material litigation or administrative
proceeding commenced by a tenant against the Owner or by the Owner against a
tenant; (iv) at the sole cost and expense of the Borrower and Owner enforce the
Leases in accordance with the Borrower’s and Owner’s reasonable business
judgment; (v) if requested by the Lender from time to time, provide the Lender
with true and correct copies of all Leases (including all amendments,
modifications and renewals) in effect with respect to the Project; and (vi)
appear in and defend, or settle in the Borrower’s and Owner’s reasonable
business judgment, any action growing out of, or in any manner connected with,
the Leases or any of them.
(b)    The Borrower will not, and will not permit Owner to,: (i) enter into,
amend, supplement, or otherwise modify, terminate or cancel or accept surrender
of, or consent to the assignment or subletting of, or grant any concessions to,
or waive the performance of any obligations of any tenant, lessee or licensee
under any now existing or future Lease any Lease on terms substantially less
favorable to Owner than those generally found in the marketplace in which the
Owner competes for business; or (ii) enter into any oral Lease.
(c)    The Borrower shall not, and shall not permit Owner to, collect any rents,
issues, profits, revenues, income or other benefits payable under any of the
Leases for the Collateral Property more than one (1) month in advance (provided
that the foregoing shall not prohibit the collection of security deposits). The
Borrower shall not, and shall not permit Owner to, directly or indirectly, cause
or permit to exist, any condition which would result in the termination or
cancellation of, or which would relieve the performance of any obligations of
any tenant under, any Lease for all or any portion of the Collateral Property to
the extent the same would reasonably be expected to result in a Material Adverse
Effect.

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§7.23    Intentionally Omitted.
§7.24    Project Documents. Without the prior written consent of Lender,
Borrower shall not, and shall not cause, suffer or permit Owner or any other
Person acting on behalf of or as agent for Borrower or Owner to, (i) enter into
any Project Document, (ii) record any Project Document, (iii) modify or amend,
in any material respect, any Project Document or the form thereof previously
submitted to Lender, or (iv) cancel, terminate or surrender any Project
Document.
§8.    CERTAIN NEGATIVE COVENANTS OF BORROWER.
Borrower covenants and agrees that, so long as the Loan is outstanding.
§8.1    Restrictions on Indebtedness. Borrower will not, and will not permit
Owner to, create, incur, assume, guarantee or be or remain liable, contingently
or otherwise, with respect to any Indebtedness other than:
(a)    Indebtedness of Borrower to Lender arising under any of the Loan
Documents and Indebtedness of Owner to the Mortgage Lender arising under any of
the Mortgage Loan Documents;
(b)    current liabilities of Owner incurred in the ordinary course of business
but not incurred through (i) the borrowing of money, or (ii) the obtaining of
credit except for credit on an open account basis customarily extended and in
fact extended in connection with normal purchases of goods and services;
(c)    Indebtedness of Borrower and Owner in respect of taxes, assessments,
governmental charges or levies and claims against Owner for labor, materials and
supplies to the extent that payment therefor shall not at the time be required
to be made in accordance with the provisions of §7.8;
(d)    Indebtedness in respect of judgments or awards that would not constitute
an Event of Default; and
(e)    endorsements for collection, deposit or negotiation and warranties of
products or services, in each case incurred in the ordinary course of business.
§8.2    Restrictions on Liens, Etc. Without limiting the terms of §8.1, Borrower
will not, and will not permit Owner to,(a) create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage, pledge,
negative pledge, charge, restriction or other security interest of any kind upon
any of its property or assets of any character whether now owned or hereafter
acquired, or upon the rents, income or profits therefrom; (b) transfer any of
its property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c) acquire, or
agree or have an option to acquire, any property or assets upon conditional sale
or other title retention or purchase money security agreement, device or
arrangement; (d) suffer to exist for a period of more than thirty (30) days
after the same shall have been incurred any

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Indebtedness or claim or demand against it that if unpaid might by law or upon
bankruptcy or insolvency, or otherwise, be given any priority whatsoever over
its general creditors; (e) sell, assign, pledge or otherwise transfer or
encumber any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; or (f) incur or maintain any obligation
to any holder of Indebtedness of Borrower or Owner which prohibits the creation
or maintenance of any lien securing the Obligations (collectively “Liens”);
provided that Borrower, without the consent of Lender, may, and may permit Owner
to, create or incur or suffer to be created or incurred or to exist:
(i)    liens on properties to secure taxes, assessments and other governmental
charges or claims for labor, material or supplies in respect of obligations not
overdue;
(ii)    deposits or pledges made in connection with, or to secure payment of,
worker’s compensation, unemployment insurance, old age pensions or other social
security obligations;
(iii)    liens in respect of judgments, awards or indebtedness, the Indebtedness
with respect to which is permitted by §8.1(d);
(iv)    encumbrances on the Collateral Property consisting of easements, rights
of way, covenants, zoning restrictions, restrictions on the use of real property
and defects and irregularities in the title thereto, landlord’s or lessor’s
liens under leases to which Owner is a party, and other minor non-monetary liens
or encumbrances none of which interferes materially with the use, marketability
or development of the property affected in the ordinary conduct of the business
of Owner, and which encumbrances, liens or defects do not individually or in the
aggregate have a materially adverse effect on the use or value of the Collateral
Property and do not make title to such property unmarketable by the conveyancing
standards in effect where such property is located;
(v)    Liens in favor of the Mortgage Lender under the Mortgage Loan Documents.
(vi)    Liens in favor of Lender under the Loan Documents.
(vii)    Mechanic’s liens being contested in good faith in accordance with
Section 7.8.
§8.3    Restrictions on Investments. Borrower will not, and will not permit
Owner to, make or permit to exist or to remain outstanding any Investment except
Investments by Borrower or Owner in:
(i)    marketable direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase by Borrower or
Owner;
(ii)    [Intentionally Omitted]

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(iii)    demand deposits, certificates of deposit, bankers acceptances and time
deposits of United States banks having total assets in excess of $100,000,000;
provided, however, that the aggregate amount at any time so invested with any
single bank having total assets of less than $1,000,000,000 will not exceed
$200,000;
(iv)    [Intentionally Omitted];
(v)    [Intentionally Omitted];
(vi)    repurchase agreements having a term not greater than 90 days and fully
secured by securities described in the foregoing subsection (i), (ii) or (iii)
with banks described in the foregoing subsection (iii) or with financial
institutions or other corporations having total assets in excess of
$500,000,000;
(vii)    shares of so‑called “money market funds” registered with the SEC under
the Investment Company Act of 1940 which maintain a level per‑share value,
invest principally in investments described in the foregoing subsections (i)
through (vi) and have total assets in excess of $50,000,000; and
(viii)    Investments by Owner in the Collateral Property.
§8.4    Merger, Consolidation. Neither Borrower nor Owner shall become a party
to any merger, consolidation or other business combination or disposition of all
or substantially all of its assets, or agree to effect any acquisition of
substantially all of the assets of a Person, stock acquisition or other
acquisition which may have a similar effect as any of the foregoing without the
prior written consent of Lender, which consent may be withheld in the sole
discretion of Lender.
§8.5    Sale and Leaseback. Neither Borrower nor Owner shall enter into any
arrangement, directly or indirectly, whereby Borrower or Owner shall sell or
transfer the Collateral Property in order that then or thereafter Borrower,
Owner or any affiliate of Borrower or Owner shall lease back such Collateral
Property.
§8.6    Compliance with Environmental Laws. Borrower will not and will not
permit Owner or any tenants or other occupants of the Collateral Property to do
any of the following: (a) use the Collateral Property or any portion thereof as
a facility for the handling, processing, storage or disposal of Hazardous
Substances, except for small quantities of Hazardous Substances as are
appropriate for an apartment project and used in the ordinary course of business
and in compliance with all applicable Environmental Laws, (b) cause or permit to
be located on the Collateral Property, any underground tank or other underground
storage receptacle for Hazardous Substances except in full compliance with
Environmental Laws, (c) generate any Hazardous Substances on the Collateral
Property except in full compliance with Environmental Laws, (d) conduct any
activity at the Collateral Property or use the Collateral Property in any manner
so as to cause a Release of Hazardous Substances on, upon or into the Collateral
Property or any surrounding properties or any threatened Release of Hazardous
Substances which might give rise to liability under CERCLA or any other
Environmental Law, or (e) directly or indirectly transport or arrange for the
transport of any Hazardous Substances (except in compliance with all
Environmental Laws).

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Borrower shall:
(i)    in the event of any change in Environmental Laws governing the
assessment, release or removal of Hazardous Substances, which change would lead
a prudent lender to require additional testing to avail itself of any statutory
insurance or limited liability, take all commercially reasonable action
(including, without limitation, the conducting of engineering tests at the sole
expense of Borrower) to confirm that no Hazardous Substances are or were
Released or disposed of on the Collateral Property in violation of any
Environmental Laws; and
(ii)    if any Release or disposal of Hazardous Substances shall occur or shall
have occurred on the Collateral Property (including without limitation any such
Release or disposal occurring prior to the acquisition or leasing of the
Collateral Property by Owner), cause the prompt containment and removal of such
Hazardous Substances and remediation of the Collateral Property in full
compliance with all applicable laws and regulations and to the reasonable
satisfaction of Lender; provided, that Borrower shall be deemed to be in
compliance with Environmental Laws for the purpose of this clause (ii) so long
as it or a responsible third party with sufficient financial resources is taking
reasonable action to remediate or manage any event of noncompliance to the
reasonable satisfaction of Lender and no action shall have been commenced by any
enforcement agency. Lender may engage their own environmental engineer to review
the environmental assessments and Borrower’s compliance with the covenants
contained herein.
At any time after an Event of Default shall have occurred and be continuing
hereunder, or, whether or not an Event of Default shall have occurred and be
continuing, at any time that Lender shall have reasonable grounds to believe
that a Release or threatened Release of Hazardous Substances may have occurred
relating to the Collateral Property, or that the Collateral Property is not in
compliance with the Environmental Laws, Lender may at its election obtain such
environmental assessments of the Collateral Property prepared by an
environmental engineer as may be reasonably necessary or advisable for the
purpose of evaluating or confirming (i) whether any Hazardous Substances are
present in the soil or water at or adjacent to the Collateral Property, and
(ii) whether the use and operation of the Collateral Property complies with all
Environmental Laws. Environmental assessments may include detailed visual
inspections of the Collateral Property including, without limitation, any and
all storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
reasonably necessary or appropriate for a complete determination of the
compliance of the Collateral Property and the use and operation thereof with all
applicable Environmental Laws. All such environmental assessments shall be at
the sole cost and expense of Borrower.
Lender may, but shall never be obligated to remove or cause the removal of any
Hazardous Substances from the Collateral Property (or if removal is prohibited
by any Environmental Law, take or cause the taking of such other action as is
required by any Environmental Law or otherwise required by Lender) if Borrower
fails to comply with its obligations hereunder with respect thereto (without
limitation of Lender’s right to declare a default under any of the Loan
Documents and to exercise all rights and remedies available by reason thereof);
and Lender and its designees are hereby

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granted access to the Collateral Property at any time or times, upon reasonable
notice, and a license which is coupled with an interest and irrevocable, to
remove or cause such removal or to take or cause the taking of any such other
action. All costs, including, without limitation, the costs incurred by Lender
in taking the foregoing action, damages, liabilities, losses, claims, expenses
(including attorneys’ fees and disbursements) which are incurred by Lender, as
the result of Borrower’s failure to comply with the provisions of this §8.6,
shall be paid by Borrower to Lender upon demand by Lender and shall be
additional obligations secured by the Security Documents.
§8.7    Distributions. Borrower will not make any Distributions until all
Obligations of Borrower under the Loan Documents shall have been paid in full.
§8.8    Sources of Capital. Borrower shall, at all times maintain or have
committed, identifiable available sources of capital to fund the total cost to
complete the development of the Project on a timely basis in amounts and
pursuant to agreements reasonably acceptable to Lender. Amounts available to be
disbursed for such purposes pursuant to this Agreement or the Mortgage Loan
Documents may be considered as a source of capital for the purposes of this
§8.8.
§8.9    Asset Sales. Borrower will not, and will not permit Owner to, sell,
assign, lease or dispose of all or substantially all of its business or assets
(whether now owned or hereafter acquired), either in a single transaction or
series of transactions, or enter into any agreement to do any of the foregoing.
Borrower shall not, and shall not permit Owner to, sell, transfer, lease or
otherwise dispose of all or any portion of any asset (including, without
limitation, any interest in the Collateral Property) other than for fair market
value.
§8.10    Additional Restrictions Concerning the Collateral and Collateral
Property. Subject to the terms of §3.2(a) of this Agreement, and except for
Permitted Equity Transfers and Permitted Liens, Borrower will not, and will not
permit Owner to, without the prior written consent of Lender in each instance,
directly or indirectly: (i) sell, convey, assign, transfer, contribute, option,
mortgage, pledge, encumber, charge, hypothecate or dispose of the Collateral
Property, any Collateral or any part thereof or interest therein; or any income
or profits therefrom, or any other accounts, contract rights, general
intangibles, instruments, chattel paper or other assets or claims, whether now
owned or hereafter acquired; or (ii) create or suffer to be created or to exist
any lien, encumbrance, security interest, mortgage, pledge, restriction,
attachment or other charge of any kind upon, or any levy, seizure, attachment or
foreclosure of, the Collateral Property, any Collateral or any part thereof or
interest therein, or any income or profit therefrom, or any other accounts,
contract rights, general intangibles, instruments, chattel paper or other assets
or claims, whether now owned or hereafter acquired. For the purposes of this
paragraph, the sale, conveyance, transfer, disposition, alienation,
hypothecation or encumbering of all or any portion of any interest in Owner or
the creation or addition of a new member, new partner or other owner of any
interest in Owner shall be deemed to be a transfer of an interest in the
Collateral Property.
§8.11    Key Documents. Borrower agrees to deliver immediately to Lender copies
of any notices, certificates, requests, demands or other instruments (including
without limitation any notice of default, acceleration or the exercise or threat
of exercise of any remedies thereunder) furnished or delivered to or by Borrower
or Owner under or in any way relating to the Mortgage Loan Documents or any
Basic Agreements.

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§8.12    Additional Covenants with Respect to Indebtedness, Operations,
Fundamental Changes. Borrower represents, warrants and covenants as of the date
hereof and until such time as the Obligations are paid in full that each of
Borrower and Owner:
(a)    does not own and will not own any asset other than the Collateral
Property (as to Owner) and the Collateral (as to Borrower);
(b)    is not engaged and will not engage in any business other than the
ownership and operation of the Collateral Property (as to Owner) and the
Collateral (as to Borrower);
(c)    does not and will not have any Subsidiaries (whether the same would
constitute an entity that could be consolidated on any of such Person’s
financial statements or a minority interest) other than Borrower’s ownership of
Owner;
(d)    will not enter into any contract or agreement with any partner, member,
shareholder, principal or affiliate of Borrower, Owner or any affiliate of any
such partner, member, shareholder, principal or affiliate, except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other than an
affiliate;
(e)    has not incurred and will not incur any Indebtedness, other than
Permitted Indebtedness.
(f)    has not made and will not make any loans or advances to any third party;
(g)    is and will remain solvent and pay its debts and liabilities (including,
without limitation, employment and overhead expenses) from its own assets as the
same shall become due;
(h)    has done or caused to be done and will do all things necessary to observe
limited liability company formalities, and to preserve its existence, and will
not, nor will any member thereof amend, modify or otherwise change its operating
agreement or other organizational documents in a manner which adversely affects
Borrower’s or Owner’s existence as a single purpose entity;
(i)    will conduct and operate its business as presently conducted and
operated;
(j)    will maintain books and records and bank accounts (if any) separate from
those of its affiliates, including its members;
(k)    will be, and at all times will hold itself out to the public as, a legal
entity separate and distinct from any other entity (including any affiliate
thereof, including any partner, member, shareholder or any affiliate of any
partner, member or shareholder of Borrower or Owner);
(l)    will file its own separate tax returns or if such returns are filed
jointly, such Persons shall be reflected as separate entities thereon;

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(m)    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;
(n)    will not, nor shall any member, partner, shareholder or affiliate, seek
the dissolution or winding up, in whole or in part, of Borrower or Owner;
(o)    will not enter into any transaction of merger, consolidation or other
business combination, or acquire by purchase or otherwise all or substantially
all of the business or assets of, or any stock or beneficial ownership of, any
entity;
(p)    will not commingle the funds and other assets of Borrower or Owner with
those of any partner, member, shareholder, any affiliate or any other Person;
(q)    has and will maintain its assets in such a manner that it is not costly
or difficult to segregate, ascertain or identify its individual assets from
those of any affiliate or any other Person;
(r)    does not and will not hold itself out to be responsible for the debts or
obligations of any other Person; and
(s)    shall comply with the provisions of the its Organizational Agreements.
§8.13    Modification of Organizational Agreements and other Key Documents.
Except for any modifications of the Borrower Organizational Agreements that may
be necessary to reflect a Permitted Equity Transfer, Borrower shall not, nor
shall Borrower permit any other Person to, modify, amend, cancel, release,
surrender or terminate any of the Organizational Documents, or dissolve,
liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation,
redemption, cancellation, winding-up or expiration of Borrower, Owner, or any of
the Organizational Documents, or seek or permit the partition of any of the
assets of Borrower or Owner, without in each instance the prior written consent
of Lender, which consent may be withheld by Lender in its sole and absolute
discretion. Notwithstanding the foregoing, however, (a) Lender shall not
unreasonably withhold its consent to any modification or amendment of (i) the
Organizational Documents which does not affect or have an impact on the
management of Borrower or Owner, any voting rights, the rights to receive
distributions, any provisions regarding Borrower’s or Owner’s status as a
separate, single-purpose or bankruptcy remote entity, any provisions of the
Organizational Documents concerning actions that Borrower or Owner is either
authorized to do or that are ultra vires, or otherwise materially affect
Borrower or Owner or the rights and benefits afforded to Lender pursuant to this
Agreement and the other Loan Documents (such modifications or amendments
described in the foregoing proviso are hereinafter referred to as the “Minor
Amendments”).
§8.14    Mortgage Loan Documents. Borrower shall not, and shall not permit Owner
to, modify, amend, terminate, extend or seek a consent or waiver under the
Mortgage Loan Documents in any respect without the prior written approval of
Lender. Borrower shall not, and shall not permit Owner to, use or permit the use
of any proceeds of the Mortgage Loan for any purpose not included in the Project
Budget. Borrower shall, and shall cause Owner to, fully and timely comply with
all terms and provisions of the Mortgage Loan Documents and shall, and shall
cause Owner to, at all

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times during construction keep the Mortgage Loan “in balance” (including,
without limitation, the payment required under §2.10 of the Construction Loan
Agreement evidencing the Mortgage Loan).
§9.    DEVELOPMENT MATTERS.
§9.1    Borrower’s Equity. As a condition precedent to Lender’s funding of the
Loan on the Closing Date, Borrower shall furnish to Lender evidence establishing
to Lender’s satisfaction that the Owner, Borrower and/or Guarantors have
directly or indirectly made equity contributions to the Project in the amount of
at least $844,982.00, which amount may include up to $435,084.00 of the
Development Fee (whether or not such fee is paid, waived or deferred)
(“Borrower’s Minimum Equity Investment”). Any contributor of equity shall be
subordinate to Lender, provided, however, that any such contributor of equity
shall have the right to receive payments with respect to such equity so long as
no Default or Event of Default exists.
§9.2    Project Changes. Borrower must obtain Lender’s prior written approval of
(v) any proposed increase in the Project Budget, (w) any allocation of
contingency funds or savings to other line items within the Project Budget, (x)
any proposed changes in the work or materials or Plans, (y) any proposed changes
to the Construction Contract, the Design Professional’s Contract or the Civil
Engineer’s Contract, or to any subcontract or to any other construction or
design related contract or (z) any new or additional contract related to the
development, construction or design of the Project (each such instance in (v),
(w), (x), (y) or (z), a “Project Change”), which Project Change would have the
effect of (i) an increase in any line in the Project Budget by more than
$50,000.00, or (ii) changing in a material way the Construction Finish
Standards, or (iii) changing in a material way the overall aesthetic appearance
of the Project or any significant services or amenities to be provided in
connection with the Project, or (iv) diminishing the overall quality,
functionality or marketability of the Project (each case (i) through (iv), a
“Material Project Change”). For each proposed Material Project Change, Borrower
will furnish copies of the proposed Material  Project Change to Lender. For
purposes of clauses (w) and (i) in this §9.2, Project Budget shall be deemed to
exclude the individual line items set forth in the Schedule of Values attached
as Exhibit “C” to the Construction Contract and shall instead mean the “Hard
Costs” line items set forth in the Project Budget attached hereto as Exhibit
“C”.
§9.3    Development; Completion.
(g)    Borrower shall cause (x) development and construction of the Project to
begin by the date that is forty-five (45) days from the date hereof, and (y)
development and construction of the Project to be completed to the reasonable
satisfaction of Lender on or before the Completion Date, unless otherwise
approved by Lender in writing. Borrower shall, and shall cause Owner to,
prosecute development and construction of the Project with good faith and
diligence in compliance with the Construction Schedule. Borrower’s or Owner’s
failure to proceed diligently and (subject to Permitted Delay) make regular
progress toward completion of the Project, as determined by Lender acting
reasonably, and/or Borrower’s or Owner’s failure to meet (subject to Permitted
Delay) any of the other deadlines set forth in this Section 9.3, shall
constitute an Event of Default.

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(h)    All construction will be performed free of defects in a good and
workmanlike manner with materials which are new and of high quality. The Project
will be equipped with furnishings, fixtures and equipment which are new and of
high quality. All construction shall be performed in compliance with the Plans,
all applicable governmental approvals and all requirements of any applicable
covenants, conditions and restrictions and the Project Documents. Borrower will,
or will cause Owner to, promptly correct any defects in construction or material
deviations from the Plans. The Borrower agrees that any Loan made by Lender,
whether before or after such defects or departures from the Plans and
Specifications are discovered by, or brought to the attention of, Lender, shall
not constitute a waiver of Lender’s right to require compliance with this
§9.3(b). Borrower will not, and will not permit Owner to, commence any phase of
construction or operation until it has secured all required permits, licenses or
other authorizations from the applicable governmental authorities. All materials
and labor purchased and employed for the Project shall be used solely for the
Project and for no other purpose. No changes will be made to the Plans except in
accordance with Section 9.2 hereof, and all such changes shall be in compliance
with applicable governmental approvals. All upgrades shall be performed in
compliance with the applicable standards set forth in this subsection (b).
§10.    CLOSING CONDITIONS.
§10.1    Conditions to Loan Closing. Prior to and as a condition to the closing
of the Loan, Lender must have received and approved the items (and obtained
evidence of the satisfaction of the items) specified in this Section 10. These
items must be fully executed where applicable, and all submissions which are not
originals must be true and complete copies of these items and if requested by
Lender, must be so certified by Borrower, Owner or Guarantor or both such
parties (as the case may be).
(h)    Loan Documents. The Loan Documents, including satisfaction by Borrower of
all of the conditions to closing set forth therein, and the Mortgage Loan
Documents.
(i)    Title Policy. A copy of the owner’s title insurance policy for the
Project naming Owner as the insured thereunder and containing a “mezzanine loan”
endorsement in form and substance reasonably satisfactory to Lender.
(j)    Survey. The Survey which shall be prepared and be certified in accordance
with the Surveyor Certification.
(k)    Insurance. Evidence reasonably satisfactory to Lender that the
appropriate insurance required under Section 7.7 at the time of Closing is in
effect.
(l)    Formation, Authority and Good Standing Documents. The following items:
(i)    Evidence of the due organization or incorporation and good standing of
Borrower, Owner and each Guarantor, as certified by the Secretary of State of
such party’s state of organization or incorporation, from the appropriate
authority of such state and any other jurisdiction where the failure to so
qualify would have a Material Adverse Effect.

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(ii)    True, correct and complete copies of all Organizational Documents.
(iii)    Evidence of the due authorization of this transaction by Borrower,
Owner and each Guarantor, including, without limitation, corporate, partnership
or limited liability company resolutions specifically authorizing this
transaction and incumbency certificates with original specimen signatures for
the officers signing the Loan Documents.
(m)    Opinions of Borrower’s, Owner’s, and Guarantors’ Counsel. Legal opinions
from Borrower’s, Owner’s, and each Guarantor’s counsel, whose identity must be
satisfactory to Lender, addressing corporate, partnership and limited liability
company organization, authority and good standing, the enforceability of the
Loan Documents, usury and such other matters which Lender may request.
(n)    UCC Searches. Federal, state and local tax and judgment lien searches and
searches of the appropriate Uniform Commercial Code filing offices showing no
Liens affecting the Collateral, Borrower or the Owner other than the Permitted
Liens.
(o)    Financial Statements. The most current financial statements available for
Borrower, Owner and each Guarantor, certified as required in and meeting the
other requirements of Section 6.4.
(p)    Appraisal. Lender is in receipt of an acceptable appraisal of the
Collateral Property which reflects both an “As-Is” value for the Collateral
Property and a “To Be Developed” value for the Collateral Property prepared by
an appraiser acceptable to Lender who is a member of the American Institute of
Collateral Property Appraisers and complying with Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
(“FIRREA”).
(q)    Environmental Report. A complete environmental report addressed to
Lender, prepared in such detail as Lender may require by a firm approved by
Lender, together with complete copies of all existing environmental and
hazardous material, studies and reports, obtained by Borrower or Owner, which
environmental reports shall be acceptable to Lender.
(r)    Soil Report. A reasonably acceptable soil report for the Collateral
Property prepared by a licensed soil engineer, showing the location of all
borings and containing recommendations for the design of foundations, paved
areas, and underground utilities.
(s)    Project Budget. The Project Budget and, if Lender requests, a detailed
explanation of the assumptions for any line item or category of costs within the
Project Budget.
(t)    Design Contracts. Lender shall have received a copy of the Design
Professional’s Contract with Architect, the Civil Engineer’s Contract with Civil
Engineer, and any other design or engineering contracts Owner has entered into.
(u)    Plans. One set of the Plans and a detailed listing of the Plans.

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(v)    Construction Schedule. A detailed schedule (the “Construction Schedule”)
of construction of the Project and corresponding expenditures showing
anticipated construction progress for each trade and showing completion of the
Project as provided in Section 9.3.
(w)    Permits and Governmental Approvals. Evidence that Owner has obtained the
land disturbance permit and all other governmental approvals necessary for
construction of the Project in accordance with the Plans and the Project
Documents.
(x)    Zoning. Evidence confirming that the development and planned use of the
Project is in compliance with all applicable zoning Laws and other applicable
governmental approvals. The zoning endorsement required to be delivered in
connection with the issuance of the Title Policy shall satisfy this condition
unless Lender reasonably requests other information or evidence.
(y)    Utilities. Evidence that all sewer, water, electrical, telephone and any
other utility services are available at the Collateral Property in adequate
supply for the Collateral Property at connection costs reflected in the Project
Budget, and that no condition exists which materially adversely affects Owner’s
right to use such services. This evidence shall include letters from the
applicable utility providers.
(z)    Other Contractors. A list of all other contractors or subcontractors who
will be working on the Project, a copy of the standard form subcontract, and
copies of executed subcontracts reasonably requested by Lender.
(aa)    Project Documents. A list of any other Project Documents showing the
dollar values of such contracts and the work to be done, together with copies of
any such contracts and consents to the collateral assignment of such Project
Documents as Lender may reasonably request.
(bb)    Tax Bill. A copy of the most recent real estate tax bills for the
Collateral Property.
(cc)    Development Agreement. A true, correct and complete copy of the
Development Agreement.
(dd)    Construction Contract. Lender shall have received a construction
contract between Owner and the General Contractor in form and substance
satisfactory to Lender and which shows total costs consistent with the Project
Budget (such contract, including, without limitation, the general conditions and
any special conditions, the “Construction Contract”). Subject to Section 9.2,
the Construction Contract shall not be amended, restated, modified, replaced or
supplemented without the consent of Lender in its sole discretion.
(ee)    Borrower’s Equity. Evidence that Borrower and Owner have invested in the
Collateral Property or otherwise expended for Project Costs in accordance with
the Project Budget Borrower’s Minimum Equity Investment as required under
Section 9.1.

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(ff)    Mortgage Loan. Evidence that the Mortgage Loan is closing
contemporaneously with the closing of the Loan and evidence that
contemporaneously with the closing of the Loan, and Lender and Mortgage Lender
shall have executed an Intercreditor Agreement satisfactory to Lender in its
sole and absolute discretion.
(gg)    Compliance with Laws. Evidence that the Collateral Property is in
compliance with all local, state, and federal environmental laws, and that there
are no conditions existing currently or likely to exist throughout the term of
the Loan that require or are likely to require clean-up, removal or other
remedial action pursuant to such environmental laws.
(hh)    Litigation. Except as disclosed on Schedule 6.7, there shall be no
pending or threatened litigation known to Borrower against Borrower, Owner the
Guarantors or the Collateral Property.
(ii)    Casualty or Condemnation. No casualty has occurred or condemnation
proceeding has been initiated, which in Lender’s sole and absolute discretion,
could have a Material Adverse Effect.
(jj)    Material Adverse Effect. No event or series of events shall have
occurred which has resulted in a Material Adverse Effect.
(kk)    Representations True; No Default. Each of the representations and
warranties made by or on behalf of Borrower, Owner, Guarantors or any of their
respective Subsidiaries contained in this Agreement, the other Loan Documents or
in any document or instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made and shall also
be true at and as of the time of the making of the Loan, with the same effect as
if made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Agreement and the other Loan
Documents and changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and except to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
(ll)    No Legal Impediment. There shall be no law or regulations thereunder or
interpretations thereof that in the reasonable opinion of Lender would make it
illegal for Lender to make the Loan.
(mm)    Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in substance and in form to Lender, and Lender shall have
received all information and such counterpart originals or certified or other
copies of such documents as Lender may reasonably request.
(nn)    Additional Matters. Borrower shall have delivered to Lender such other
or additional documents, instruments, information or items as Lender may
reasonably require.
§11.    CONDITIONS OF SUBSEQUENT ADVANCES.

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The obligation of the Lender to make any Loans after the Closing Date shall be
subject to the satisfaction of the following conditions precedent:
§11.1    Prior Conditions Satisfied. All conditions precedent to the Closing and
the initial advance of the Loan on the Closing Date set forth in §10 above, and
any prior Loan under this §11 shall continue to be satisfied as of the Drawdown
Date of such Loan.
§11.2    Performance; No Default. The Borrower shall have performed and complied
with all terms and conditions herein required to be performed or complied with
by it on or prior to the Drawdown Date of such Loan, and on the Drawdown Date of
such Loan there shall exist no Default or Event of Default.
§11.3    Representations and Warranties. Each of the representations and
warranties made by Borrower, Owner and Guarantors in the Loan Documents or
otherwise made by or on behalf of Borrower, Owner or the Guarantors in
connection therewith after the date thereof shall have been true and correct in
all respects on the date when made and shall also be true and correct in all
material respects on the Drawdown Date of such Loan (except to the extent of
changes resulting from transactions contemplated or permitted by the Loan
Documents and changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and except to the extent that
such representations and warranties relate expressly to an earlier date and no
Default or Event of Default shall have occurred and be continuing).
§11.4    Receipt of Lender. The Lender shall have received:
(a)    Loan Request. A Loan Request complying with the requirements hereof,
including those set forth in §2.4 hereof;
(b)    Updates to Title Policy. An update to the Title Policy indicating no
change in the state of title and containing no survey exceptions not approved by
the Agent;
(c)    Current Survey. Once all foundations have been poured, an updated Survey
disclosing no violation, encroachment or other variance from applicable set
backs or other restrictions unless approved by Lender;
(d)    Approval by Lender and Construction Inspector. Approval of the Loan
Request for such Loan by the Lender, and if requested by Lender by the
Construction Inspector, together with evidence reasonably satisfactory to Lender
in order to verify or confirm, based on on-site observations and submissions by
the applicable contractor, (i) that the construction of the Project to the date
thereof was performed in a good and workmanlike manner and in accordance with
the Plans, (ii) the estimated total cost of construction of the Project, (iii)
the percentage of in place construction of the Project, and (iv) that the
remaining undisbursed portion of the Loan and the Mortgage Loan and Required
Equity Funds allocated for such purpose in the Project Budget is adequate to
complete the construction of the Project; and
(e)    Contracts. Evidence that one hundred percent (100%) of the cost of the
remaining construction work is covered by a firm fixed price or guaranteed
maximum price contract

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or subcontracts, or orders for the supplying of materials, with contractors,
subcontractors, materialmen or suppliers satisfactory to Lender.
§12.    EVENTS OF DEFAULT; ACCELERATION; ETC.
§12.1    Events of Default and Acceleration. If any of the following events
(“Events of Default” or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, “Defaults”) shall occur:
(c)    Borrower shall fail to pay any principal of the Loan when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(d)    Borrower shall fail to pay any interest on the Loan or any other fees or
sums due hereunder or under any of the other Loan Documents, when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(e)    Borrower shall fail to comply with any of its covenants contained in §3.2
or §§8.1, 8.2, 8.3, 8.4, 8.5, 8.7, 8.8, 8.9, 8.10, 8.13 or 8.14 hereof;
(f)    Borrower, Owner, Guarantors, or any other party shall fail to perform or
cause to be performed any other term, covenant or agreement contained herein or
in any of the other Loan Documents (other than those specified in this §12.1);
(g)    any representation or warranty made by or on behalf of Borrower, Owner or
Guarantors in this Agreement or any other Loan Document, or in any report,
certificate, financial statement, request for a Loan, or in any other document
or instrument delivered pursuant to or in connection with this Agreement, any
advance of a Loan or any of the other Loan Documents shall prove to have been
false in any material respect upon the date when made or deemed to have been
made or repeated;
(h)    Intentionally Omitted;
(i)    the occurrence of any “Default” (as defined in the Mortgage Loan
Documents) under the Mortgage Loan Documents;
(j)    Borrower, Owner or any Guarantor (A) shall make an assignment for the
benefit of creditors, or admit in writing its general inability to pay or
generally fail to pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian, liquidator or
receiver of any such Person of any substantial part of the assets of any
thereof, (B) shall commence any case or other proceeding relating to any such
Person under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or (C) shall take any action to
authorize or in furtherance of any of the foregoing;

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(k)    a petition or application shall be filed for the appointment of a trustee
or other custodian, liquidator or receiver of Borrower, Owner or any Guarantor
or any substantial part of the assets of any thereof, or a case or other
proceeding shall be commenced against any such Person under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect, and
such Person shall indicate its approval thereof, consent thereto or acquiescence
therein or such petition, application, case or proceeding shall not have been
dismissed within sixty (60) days following the filing or commencement thereof;
(l)    a decree or order is entered appointing any such trustee, custodian,
liquidator or receiver or adjudicating Borrower, Owner or any Guarantor bankrupt
or insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of any such Person, in each
case of the foregoing in an involuntary case under federal bankruptcy laws as
now or hereafter constituted;
(m)    there shall remain in force, undischarged, unsatisfied and unstayed, for
more than 60 days, whether or not consecutive, any uninsured final judgment
against Borrower, Owner or Guarantors that, with other outstanding uninsured
final judgments, undischarged, against such Person exceeds (a) in the aggregate
$10,000.00 with respect to Borrower or Owner, or (b) $10,000.00 with respect to
any Guarantor;
(n)    if any of the Loan Documents or any material provision of any Loan
Documents shall be unenforceable, canceled, terminated, revoked or rescinded
otherwise than in accordance with the terms thereof or with the express prior
written agreement, consent or approval of Lender, or any action at law, suit in
equity or other legal proceeding to make unenforceable, cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of
Borrower, Owner, any Guarantor or any of their respective holders of Voting
Interests, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the terms
thereof;
(o)    any dissolution, termination, partial or complete liquidation, merger or
consolidation of the Borrower, Owner or any Guarantor or any sale, transfer or
other disposition of the assets of the Borrower, Owner or any Guarantor other
than as permitted under the terms of this Agreement or the other Loan Documents;
(p)    any suit or proceeding shall be filed against Borrower, Owner or any
Guarantor or any of their respective assets which in the good faith business
judgment of Lender after giving consideration to the likelihood of success of
such suit or proceeding and the availability of insurance to cover any judgment
with respect thereto and based on the information available to them, if
adversely determined, would have a materially adverse affect on the ability of
such Person to perform each and every one of their respective material
obligations under and by virtue of the Loan Documents;
(q)    Borrower, Owner or any Guarantor shall be indicted for a federal crime, a
punishment for which could include the forfeiture of any assets of such Person;

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(r)    a Change of Control shall occur without the prior written approval of
Lender;
(s)    with respect to any Guaranteed Pension Plan, an ERISA Reportable Event
shall have occurred and Lender shall have determined in its reasonable
discretion that such event reasonably could be expected to result in liability
of Borrower, Owner or any Guarantor or to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $100,000.00 and such event in the
circumstances occurring reasonably could constitute grounds for the termination
of such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan;
(t)    any Guarantor denies that it has any liability or obligation under the
Guaranty, or shall notify Lender of such Guarantor’s intention to attempt to
cancel or terminate the Guaranty, or shall fail to observe or comply with any
term, covenant, condition or agreement under the Guaranty;
(u)    any default or event of default, as defined in any of the other Loan
Documents shall occur and continue to exist beyond any applicable grace or
notice or cure period provided in such other Loan Documents;
(v)    any material default by Borrower or Owner shall occur under any of the
Basic Agreements, which is not cured within any applicable cure period, or any
of the Basic Agreements are terminated or amended without obtaining the approval
of Lender, if such approval is required by the Loan Documents;
(w)    the failure of Owner to perform its obligations under the Purchase Option
Agreement;
then, and in any such event, Lender may, by notice in writing to Borrower
declare, the Lender’s obligations to make Loans hereunder automatically shall so
terminate and all amounts owing with respect to this Agreement, the Notes and
the other Loan Documents to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by Borrower; provided that
in the event of any Event of Default specified in §12.1(h), §12.1(i) or
§12.1(j), the obligations of Lender to make Loans hereunder to be terminated,
whereupon the same shall terminate and Lender shall be relieved of all
obligations to make Loans to the Borrower, and/or declare all such amounts shall
become immediately due and payable automatically and without any requirement of
notice from any of Lender.
§12.1A.    Limitation of Cure Periods. Notwithstanding anything contained in
§12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the
occurrence of any failure described in §12.1(a) or §12.1(b) in the event that
Borrower cures such default within five (5) days following receipt of written
notice of such default, provided, however, that Borrower shall not be entitled
to receive more than two (2) notices in the aggregate pursuant to this clause
(i) in any period of 365 days ending on the date of any such occurrence of
default, and provided further that no such

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cure period shall apply to any payments due upon the maturity of the Note, and
(ii) no Event of Default shall exist hereunder upon the occurrence of any
failure described in §12.1(d) or §12.1(e) in the event that Borrower cures such
default with thirty (30) days following receipt of written notice of such
default, provided that the provisions of this clause (ii) shall not pertain to
defaults consisting of a failure to comply with §3.2 or §8 or to any default
excluded from any provision for cure of defaults contained in any other of the
Loan Documents.
Notwithstanding anything in this Agreement or any other Loan Document to the
contrary, any reference in this Agreement or any other Loan Document to “the
continuance of a default” or “the continuance of an Event of Default” or any
similar phrase shall not create or be deemed to create any right on the part of
Borrower or any other party to cure any default following the expiration of any
applicable grace or notice and cure period.
In the event that Borrower obtains any knowledge that any representation or
warranty made by or on behalf of Borrower, the Guarantors or Owner in this
Agreement or any of the other Loan Documents to its knowledge and belief shall
be untrue or misleading, Borrower shall promptly notify Lender in writing of the
same and shall, within thirty (30) days after learning such representation or
warranty is untrue or misleading, take such actions as are required to cause
such warranty or representation to be correct.
§12.2    [Intentionally Omitted.]
§12.3    [Intentionally Omitted.]
§12.4    Remedies. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not Lender shall have accelerated the
maturity of the Loan pursuant to §12.1, Lender, may proceed to protect and
enforce its rights and remedies under this Agreement, the Note or any of the
other Loan Documents by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, including to the full extent
permitted by applicable law the obtaining of the ex parte appointment of a
receiver, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right. No remedy herein conferred upon Lender or the holder of the
Note is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law. In the event that all or any portion of the Obligations
is collected by or through an attorney-at-law, Borrower shall pay all costs of
collection including, but not limited to, reasonable attorney’s fees actually
incurred.
§12.5    Distribution of Collateral Proceeds. In the event that, following the
occurrence and during the continuance of any Event of Default, any monies are
received in connection with the enforcement of any of the Loan Documents, or
otherwise with respect to the realization upon any of the Collateral, such
monies shall be distributed for application as follows:

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(a)    First, to the payment of, or (as the case may be) the reimbursement of,
Lender for or in respect of all reasonable costs, expenses, disbursements and
losses which shall have been incurred or sustained by Lender to protect or
preserve the collateral or in connection with the collection of such monies by
Lender, for the exercise, protection or enforcement by Lender of all or any of
the rights, remedies, powers and privileges of Lender under this Agreement or
any of the other Loan Documents in connection with protective advances or in
respect of the Collateral or in support of any provision of adequate indemnity
to Lender against any taxes or liens which by law shall have, or may have,
priority over the rights of Lender to such monies;
(b)    Second, to all other Obligations in such order or preference as Lender
shall determine; provided, however, that Lender may in its discretion make
proper allowance to take into account any Obligations not then due and payable;
and
(c)    Third, the excess, if any, shall be returned to Borrower or to such other
Persons as are entitled thereto.
§12.6    Default Under Mortgage Loan Documents. Notwithstanding anything herein
to the contrary (including without limitation §12.1(f)), Borrower hereby
expressly agrees that any “Default” (as defined in the Mortgage Loan Documents)
(which shall be deemed to include maturity of the debt evidenced and secured by
any of the Mortgage Loan Documents or any other occurrence which would give any
holder of any of the Mortgage Loan Documents the right to exercise remedies
thereunder) shall constitute and be deemed to be an Event of Default under this
Agreement for which no right to cure shall be available. Without limiting the
foregoing, a “Default” under the Mortgage Loan Documents shall conclusively be
deemed to have occurred upon the declaration, statement or notice from the
applicable mortgagee as to the existence or occurrence of a “Default” under any
of the Mortgage Loan Documents. Upon the occurrence of any default under the
Mortgage Loan Documents, Borrower shall deliver to Lender within five (5)
business days after the first to occur of (x) receipt by Borrower or Owner of
notice of such default from any mortgagee or (y) the date Borrower or Owner
obtains actual knowledge of the occurrence of such default, a detailed
description of the actions to be taken by Borrower or Owner to cure such default
and the dates by which each such action shall occur. Such schedule shall be
subject to the approval of Lender. Borrower shall take, or shall cause Owner to
take, all such actions as are necessary to cure such default under the Mortgage
Loan Documents by the date approved by Lender, and shall deliver to Lender not
less frequently than weekly thereafter written updates concerning the status of
Borrower’s and Owner’s efforts to cure such default. Lender shall have the
right, but not the obligation, to pay any sums or to take any action which
Lender deems necessary or advisable to cure any default or alleged default under
the Mortgage Loan Documents (whether or not Borrower or Owner is undertaking
efforts to cure such default or the same is a “Default” under the Mortgage Loan
Documents or a Default or Event of Default hereunder), and such payment or such
action is hereby authorized by Borrower, and any sum so paid and any expense
incurred by Lender in taking any such action shall be evidenced by this
Agreement and secured by the Security Documents and shall be immediately due and
payable by Borrower to Lender upon Borrower’s receipt of written demand therefor
with interest at the rate for overdue amounts set forth in §4.11 until paid.
Lender shall be authorized to take such actions upon the assertion by any holder
of any of the Mortgage Loan Documents of the existence of such default or
“Default” without any duty to inquire or determine

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whether such default or “Default” exist. The consent or waiver by a holder of
the Mortgage Loan Documents of any “Default” under the Mortgage Loan Documents
or the cure of such “Default” under the Mortgage Loan Documents shall not annul
the occurrence of an Event of Default hereunder unless otherwise approved by
Lender. Borrower shall permit, and shall cause Owner to permit, Lender to enter
upon the Collateral Property for the purpose of curing any default or alleged
default under the Mortgage Loan Documents or hereunder. Borrower hereby
transfers and assigns any excess proceeds arising from any foreclosure or sale
under power pursuant to the Mortgage Loan Documents, and Borrower hereby
authorizes and directs, on behalf of itself and Owner, the holder or holders of
the Mortgage Loan Documents to pay such excess proceeds directly to Lender up to
the amount of the Obligations. Notwithstanding the foregoing, Lender agrees that
(a) with respect to any monetary default under the Mortgage Loan Documents
(other than a failure to pay upon maturity of the Mortgage Loan), prior to
Lender commencing any right to cure such monetary default, Lender shall provide
Borrower and Owner with the opportunity to cure such monetary default until the
earlier to occur of (i) such time as Owner’s cure period (if any) expires under
the Mortgage Loan Documents, or (ii) Lender determining in its sole and absolute
discretion that action by Lender is necessary or appropriate to preserve or
protect from loss or impairment the rights available to Lender under the
Intercreditor Agreement or the Mortgage Loan Document, or applicable laws, all
of which may be made, given or undertaken without any notice to or consent of
Borrower, (b) with respect to any non-monetary default under the Mortgage Loan
Document, prior to Lender commencing any right to cure such non-monetary
default, Lender shall provide Borrower with the opportunity to cure such
non-monetary default until the earlier to occur of (x) 30 days following
Borrower’s or Owner’s receipt of notice of such non-monetary default or (y)
Lender determining in its sole and absolute discretion that action by Lender is
necessary or appropriate to preserve or protect from loss or impairment the
rights available to Lender under the Intercreditor Agreement or the Mortgage
Loan Document, or applicable laws, all of which may be made, given or undertaken
without any notice to or consent of Borrower.
§12.7    Replacement of Developer.
(a)    Upon the occurrence and during the continuance of any Event of Default,
Lender may direct Borrower in writing to, and Borrower shall replace, or shall
cause Owner to replace, Oxford Properties, LLC as the developer of the Project,
or such portions thereof as Lender may direct with a developer approved by
Lender, subject to any conditions in the applicable Mortgage Loan Documents to
the qualifications and approval of such developer agent and the form and terms
of any new development management agreement. Borrower hereby irrevocably
constitutes and appoints Lender its true and lawful attorney-in-fact, with full
power of substitution, to execute, acknowledge and deliver any instruments and
to do and perform any acts which are referred to in this §12.7(a), in the name
and on behalf of Borrower. The power vested in such attorney-in-fact is, and
shall be deemed to be, coupled with an interest and irrevocable.
(b)    Upon the written demand of Lender following the occurrence of and during
the continuance of an Event of Default, Borrower shall deliver or cause to be
delivered to Lender or Lender’s designee all books, records, contracts, files
and other correspondence relating to the Collateral Property and other property
and assets of Borrower and Owner. In addition, upon the occurrence and during
the continuance of an Event of Default, Borrower shall upon the written

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demand of Lender cause all earnest money deposits, tenant security deposits
(whether in the form of cash, letter of credit or otherwise) and other
refundable deposits paid to or held by or on behalf of Borrower or Owner in
connection with the contracts to purchase property to be delivered to Lender,
subject to the rights of the Mortgage Lender under the Mortgage Loan Documents.
§13.    SETOFF.
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits (general or specific, time or demand, provisional
or final, regardless of currency, maturity, or the branch where such deposits
are held) or other sums credited by or due from Lender to Borrower or Owner and
any securities or other property of Borrower in the possession of Lender may be
applied to or set off against the payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of such Person to Lender.
§14.    INTENTIONALLY OMITTED.
§15.    EXPENSES. Borrower agrees to pay (a) the reasonable costs and expenses
of producing and reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by Lender (other than taxes
based upon Lender’s net income or franchise taxes of Lender), including any
recording, mortgage, documentary or intangibles taxes in connection with the
Security Documents and other Loan Documents, or other taxes payable on or with
respect to the transactions contemplated by this Agreement, including any taxes
payable by Lender after the Closing Date (Borrower hereby agreeing to indemnify
Lender with respect thereto), (c) all title insurance premiums, appraisal fees,
engineer’s fees, engineering and environmental reviews and the reasonable fees,
expenses and disbursements of Lender’s counsel incurred in connection with the
preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (d) the
reasonable fees, costs, expenses and disbursements of Lender incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein or the addition or substitution
of other Collateral, (e) all reasonable out of pocket expenses (including
reasonable attorneys’ fees and costs actually incurred, which attorneys may be
employees of Lender and the fees and costs of appraisers, engineers, investment
bankers, surveyors or other experts retained by Lender in connection with any
such enforcement proceedings) incurred by Lender in connection with (i) the
enforcement of or preservation of rights under any of the Loan Documents against
Borrower or Owner or the administration thereof after the occurrence of a
Default or Event of Default, (ii) the sale of, collection from or other
realization upon any of the Collateral, (iii) the failure by Borrower or Owner
or any other person pledging Collateral to perform or observe any provision of
the Loan Documents, and (iv) any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to Lender’s relationship with
Borrower, Owner or the Guarantors, (f) all reasonable fees, expenses and
disbursements of Lender incurred in connection with UCC searches, UCC filings,
title rundowns or title searches, (g) all reasonable costs incurred by Lender in
the future in connection with its inspection of the Collateral Property, and (h)
the reasonable fees, costs, expenses and disbursements

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of Lender incurred in connection with the execution and delivery of this
Agreement and the other Loan Documents (without duplication of any of the items
listed above), including, without limitation, the costs incurred by Lender in
connection with its inspection of such Collateral, and the fees and
disbursements of Lender’s counsel. The covenants of this §15 shall survive
payment or satisfaction of payment of amounts owing with respect to the Note.
§16.    INDEMNIFICATION. Borrower agrees to indemnify and hold harmless Lender
and the shareholders, directors, agents, officers, subsidiaries, and affiliates
of Lender and any Person that controls Lender from and against any and all
claims, actions or causes of action and suits whether groundless or otherwise,
and from and against any and all liabilities, losses, settlement payments,
obligations, damages and expenses of every nature and character arising out of
or relating to this Agreement or any of the other Loan Documents or the
transactions contemplated hereby or thereby or which otherwise arise in
connection with the financing including, without limitation, (a) any actual or
proposed use by Borrower of the proceeds of any of the Loan, (b) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of Borrower or Owner, (c) Borrower or Owner entering into or
performing this Agreement or any of the other Loan Documents, (d) any actual or
alleged violation of any law, ordinance, code, order, rule, regulation,
approval, consent, permit or license relating to the Collateral Property, (e) in
the event that Lender or any nominee of Lender shall foreclose or otherwise
obtain title to all or any portion of the Collateral, any obligations, duties or
liabilities of Borrower, Owner or any other Person pledging Collateral, (f) with
respect to Borrower and Owner and their respective properties, the violation of
any Environmental Law, the Release or threatened Release of any Hazardous
Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to claims with respect to wrongful death, personal injury or damage to
property), (g) the exercise by Lender of the rights and remedies set forth in
Article 12, (h) any claims that may be made against Lender or its nominee with
respect to any exclusions or limitations from non-recourse provisions contained
in any of the Mortgage Loan Documents, (i) any cost, claim or liability under
Owner Organizational Agreements or the Mortgage Loan Documents, (j) any cost,
claim, liability, damage or expense in connection with any harm Borrower may be
found to have caused in the role of a broker, in each case including, without
limitation, the reasonable fees and disbursements of counsel actually incurred
in connection with any such investigation, litigation or other proceeding;
provided, however, that neither the Borrower nor the Guarantors shall be
obligated under this §16 to indemnify any Person for liabilities arising from
such Person’s own gross negligence or willful misconduct as determined in a
non-appealable judgment by a court of competent jurisdiction, (k) any condition,
use, operation or occupancy of the Project or (l) any and all claims, actions or
causes of action and suits related to or in connection with the sale of any
interests in the Collateral Property, including, without limitation any claims,
actions or suits regarding violations or alleged violations of any state or
federal securities laws. If, and to the extent that the obligations of Borrower
under this §16 are unenforceable for any reason, Borrower hereby agrees to make
the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. The provisions of this §16 shall
survive the repayment of the Loan and the termination of the obligations of
Lender hereunder and shall continue in full force and effect as to Lender so
long as the possibility of any such claim, action, cause of action or suit
exists under applicable law, rule or regulation. Nothing herein shall require
Borrower to indemnify any such indemnified party from any matter, cost or
expense relating to a Release of Hazardous

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Substances or violation of any Environmental Law first occurring after the
Lender or its nominee acquires title to the Property or the equity interests in
Borrower by the exercise of its foreclosure remedies or by transfer in lieu of
foreclosure.
§17.    SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in the
Note, in any of the other Loan Documents or in any documents or other papers
delivered by or on behalf of Borrower, Owner or the Guarantors shall be deemed
to have been relied upon by Lender, notwithstanding any investigation heretofore
or hereafter made by it, and shall survive the making by Lender of the Loan, as
herein contemplated, and shall continue in full force and effect so long as any
amount due under this Agreement or the Note or any of the other Loan Documents
remains outstanding. The indemnification obligations of Borrower provided herein
and the other Loan Documents shall survive the full repayment of amounts due and
the termination of the obligations of Lender hereunder and thereunder to the
extent provided herein and therein. All statements contained in any certificate
or other paper delivered to Lender at any time by or on behalf of Borrower,
Owner or the Guarantors pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by such
Person hereunder.
§18.    ASSIGNMENT AND PARTICIPATION.
§18.1    Assignment. Lender may assign to one or more Persons all or a portion
of its interests, rights and obligations under this Agreement, the Note and the
other Loan Documents. Borrower shall execute such amendments to the Loan
Documents as may be requested by Lender to effect such assignment; provided that
any such amendments shall not increase (i) any monetary obligation of Borrower
under the Loan Documents or (ii) any other obligation of Borrower under the Loan
Documents in any materially adverse respect. Notwithstanding the foregoing, at
the request of Lender, Borrower shall deliver one or more new component notes to
replace the original Note or modify the original Note to reflect multiple
components of the Loan (and such new notes or modified note shall have the same
initial weighted average spread as the original note).
§18.2    Participations. Lender may sell participations to one or more Persons
in all or a portion of Lender’s rights and obligations under this Agreement and
the other Loan Documents; provided that (a) any such sale or participation shall
not affect the rights and duties of the selling Lender hereunder to Borrower,
(b) such participation shall not entitle such participant to any rights or
privileges under this Agreement or any Loan Documents, including without
limitation, the right to approve waivers, amendments or modifications other than
rights to approve any additional funding by Lender beyond the Loan amount and
(c) such participant shall have no direct rights against Borrower except the
rights granted to Lender pursuant to §13.
§18.3    Pledge by Lender. Lender may at any time pledge or assign all or any
portion of its interest and rights under this Agreement (including all or any
portion of the Note). No such pledge or the enforcement thereof shall release
the pledgor Lender from its obligations hereunder or under any of the other Loan
Documents.

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§18.4    No Assignment by Borrower. None of Borrower, Owner or the Guarantors
shall assign or transfer any of their respective rights or obligations under any
of the Loan Documents without the prior written consent of Lender.
§18.5    Disclosure. Borrower agrees that in addition to disclosures made in
accordance with standard banking practices Lender may disclose information
obtained by Lender pursuant to this Agreement to assignees or participants and
potential assignees or participants hereunder.
§19.    NOTICES.
Each notice, demand, election or request provided for or permitted to be given
pursuant to this Agreement (hereinafter in this §19 referred to as “Notice”) but
specifically excluding to the maximum extent permitted by law any notices of the
institution or commencement of foreclosure proceedings, except for any notice
required under applicable law to be given in another manner, shall be deemed to
have been properly given, served and received (i) if delivered by hand, when
delivered, (ii) if sent by reputable overnight courier when delivered as
evidenced by the signed receipt therefor and (iii) if mailed by United States
certified or registered mail, postage prepaid, return receipt requested, on the
date reflected on the return receipt therefor:
If to Lender, to such party at:
City Park Mezzanine Lending, LLC
c/o Preferred Apartment Communities, Inc.
One Overton Park
3625 Cumberland Blvd., Suite 400
Atlanta, Georgia 30339
Attn: Leonard A. Silverstein, Esq.
With a copy to:
McKenna Long & Aldridge LLP
303 Peachtree Street, Suite 5300
Atlanta, Georgia 30308
Attn: Jess A. Pinkerton, Esq.
If to Borrower or Guarantors, to such party at:
Oxford City Park Development LLC
One Overton Park
3625 Cumberland Blvd., Suite 500
Atlanta, Georgia 30339
Attn: W. Daniel Faulk, Jr.

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With a copy to:
Seyfarth Shaw LLP
1075 Peachtree Street, NE, Suite 2500
Atlanta, Georgia 30309
Attn: Steve Kennedy, Esq.

Each Notice shall be effective upon being personally delivered or upon being
sent by overnight courier or upon being deposited in the United States Mail as
aforesaid. The time period in which a response to such Notice must be given or
any action taken with respect thereto (if any), however, shall commence to run
from the date of receipt if personally delivered or sent by overnight courier,
or if so deposited in the United States Mail, the earlier of three (3) Business
Days following such deposit or the date of receipt as disclosed on the return
receipt. Rejection or other refusal to accept or the inability to deliver
because of changed address for which no notice was given shall be deemed to be
receipt of the Notice sent. By giving at least fifteen (15) days prior Notice
thereof, any party hereto shall have the right from time to time and at any time
during the term of this Agreement to change their respective addresses and each
shall have the right to specify as its address any other address within the
United States of America.
§20.    RELATIONSHIP.
Lender does not have any fiduciary relationship with or fiduciary duty to
Borrower arising out of or in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereunder or thereunder, and the
relationship between Lender and Borrower is solely that of a lender and
borrower, and nothing contained herein or in any of the other Loan Documents
shall in any manner be construed as making the parties hereto partners, joint
venturers or any other relationship other than lender and borrower.
§21.    GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF
GEORGIA AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE
OF LAW). BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
GEORGIA ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON SUCH PERSON BY MAIL AT THE ADDRESS SPECIFIED IN §19. BORROWER HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

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§22.    HEADINGS.
The captions in this Agreement are for convenience of reference only and shall
not define or limit the provisions hereof.
§23.    COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several counterparts
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
§24.    ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith or
therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated, except as provided in §26.
§25.    WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
EACH OF BORROWER AND LENDER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS §25.
BORROWER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS §25 WITH ITS
LEGAL COUNSEL AND THAT IT AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND
VOLUNTARY ACT.
§26.    CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other

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

instrument related hereto or mentioned herein may be amended, and the
performance or observance by Borrower of any terms of this Agreement or such
other instrument or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of Lender. No waiver
under the Loan Documents shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay or
omission on the part of Lender in exercising any right under the Loan Documents
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon Borrower shall entitle Borrower to other or further notice or
demand in similar or other circumstances.
§27.    SEVERABILITY.
The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
§28.    NO UNWRITTEN AGREEMENTS.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
§29.    TIME OF THE ESSENCE.
Time is of the essence with respect to each and every covenant, agreement and
obligation of Borrower under this Agreement and the other Loan Documents.
§30.    RIGHTS OF THIRD PARTIES.
(a)    This Agreement and the other Loan Documents are made and entered into for
the sole protection and legal benefit of Borrower, Lender, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
(b)    All conditions to the performance of the obligations of Lender under this
Agreement, including the obligation to make Loan, are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make advances of proceeds of the
Loan in the absence of strict compliance with any or all thereof and no other
Person shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any and all of which may be freely waived in whole or in part by
Lender at any time if in their sole discretion

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

they deem it desirable to do so. In particular, Lender makes no representation
and assumes no obligation as to third parties concerning the quality of the
construction by Borrower, Owner or Guarantors, as applicable, of the Collateral
Property or the absence therefrom of defects.
§31.    REPLACEMENT NOTES.
Upon receipt of evidence reasonably satisfactory to Borrower of the loss, theft,
destruction or mutilation of the Note, and in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
to Borrower or, in the case of any such mutilation, upon surrender and
cancellation of the Note, Borrower will execute and deliver, in lieu thereof, a
replacement Note, identical in form and substance to the Note and dated as of
the date of the Note and upon such execution and delivery all references in the
Loan Documents to such Note shall be deemed to refer to such replacement Note.
§32.    USA PATRIOT ACT NOTICE. Lender hereby notifies Borrower that pursuant to
the requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies Borrower, which information includes the names and
addresses of Borrower and other information that will allow Lender to identify
Borrower in accordance with the Patriot Act.
§33.    ATTORNEYS’ FEES. As used in this Agreement and in the other Loan
Documents, “reasonable” attorneys’ fees of Lender’s counsel shall mean the
actual fees of Lender’s counsel billed at the usual hourly rates of such
counsel, rather than a percentage of principal and interest as provided in
O.C.G.A. § 13‑1‑11(a)(2).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.
OXFORD CITY PARK DEVELOPMENT LLC, a Georgia limited liability company
By:
/s/ W. Daniel Faulk, Jr.___________
Name: W. Daniel Faulk, Jr.
Its: Manager

One Overton Park
3625 Cumberland Blvd., Suite 500
Atlanta, Georgia 30339
Attn: W. Daniel Faulk, Jr.

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

CITY PARK MEZZANINE LENDING, LLC, a Delaware limited liability company
By:
Preferred Apartment Advisors, LLC, its Agent

By: /s/ John A. Williams _____________
Name: John A. Williams
Title: CEO
c/o Preferred Apartment Communities, Inc.
One Overton Park
3625 Cumberland Blvd., Suite 400
Atlanta, GA 30339
Attn: Leonard A. Silverstein, Esq.

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

EXHIBIT A

FORM OF NOTE
$____________    ____________, 20__
FOR VALUE RECEIVED, the undersigned, OXFORD CITY PARK DEVELOPMENT LLC, a Georgia
limited liability company, hereby promises to pay to the order of CITY PARK
MEZZANINE LENDING, LLC, a Delaware limited liability company in accordance with
the terms of that certain Mezzanine Loan Agreement dated as of September 6,
2012, as from time to time in effect, among the undersigned and City Park
Mezzanine Lending, LLC, (the “Loan Agreement”) to the extent not sooner paid, on
or before the Maturity Date, the principal sum of _________________________ AND
NO/100 DOLLARS ($_______.00), or such amount as may be advanced by the payee
hereof under the Loan Agreement, together with such additional principal from
time to time outstanding under the Loan Agreement, with daily interest from the
date hereof, computed as provided in the Loan Agreement, on the principal amount
hereof from time to time unpaid, at a rate per annum on each portion of the
principal amount which shall at all times be equal to the rate of interest
applicable to such portion in accordance with the Loan Agreement, and with
interest on overdue principal and, to the extent permitted by applicable law, on
overdue installments of interest and late charges at the rates provided in the
Loan Agreement. Interest shall be payable on the dates specified in the Loan
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the prepayment in full hereof. Capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in the Loan Agreement.
Payments hereunder shall be made to City Park Mezzanine Lending, LLC, at c/o
Preferred Apartment Communities Inc. One Overton Park, 3625 Cumberland Blvd.,
Suite 400, Atlanta, Georgia 30339, Attn: Leonard A. Silverstein, Esq., as
provided in the Loan Agreement
This Note is one of one or more Notes evidencing borrowings under and is
entitled to the benefits and subject to the provisions of the Loan Agreement.
The principal of this Note may be due and payable in whole or in part prior to
the Maturity Date and is subject to mandatory prepayment in the amounts and
under the circumstances set forth in the Loan Agreement, and may be prepaid in
whole or from time to time in part, all as set forth in the Loan Agreement.
Notwithstanding anything in this Note to the contrary, all agreements between
the undersigned Borrower and Lender, whether now existing or hereafter arising
and whether written or oral, are hereby limited so that in no contingency,
whether by reason of acceleration of the maturity of any of the Obligations or
otherwise, shall the interest contracted for, charged or received by Lender
exceeds the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to Lender in excess
of the maximum lawful amount, the interest payable to Lender shall be reduced to
the maximum amount permitted under applicable law; and if from any circumstance
Lender shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal balance of the Obligations of
the undersigned Borrower and to the payment of interest or, if such excessive
interest exceeds the unpaid balance

Exhibit “A” - Page 1

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

of principal of the Obligations of the undersigned Borrower, such excess shall
be refunded to the undersigned Borrower. All interest paid or agreed to be paid
to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal of the Obligations of the undersigned Borrower (including the
period of any renewal or extension thereof) so that the interest thereon for
such full period shall not exceed the maximum amount permitted by applicable
law. This paragraph shall control all agreements between the undersigned
Borrower and Lender.
In case an Event of Default shall occur, the entire principal amount of this
Note plus all accrued and unpaid interest may become or be declared due and
payable in the manner and with the effect provided in said Loan Agreement. In
addition to and not in limitation of the foregoing and the provisions of the
Loan Agreement hereinabove defined, the undersigned further agrees, subject only
to any limitation imposed by applicable law, to pay all expenses, including
reasonable attorneys’ fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
This Note shall be governed by and construed in accordance with the internal
laws of the State of Georgia (without giving effect to the conflict of laws
rules of any jurisdiction).
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Loan Agreement, and assent to extensions
of time of payment or forbearance or other indulgence without notice.
IN WITNESS WHEREOF the undersigned has duly executed this Note under seal as of
the day and year first above written.
OXFORD CITY PARK DEVELOPMENT LLC, a Georgia limited liability company
By:___________________________________
Name: W. Daniel Faulk, Jr.
Its: Manager

Exhibit “A” - Page 2

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

EXHIBIT “B”
LEGAL DESCRIPTION

BEING A 10.981 ACRE TRACT IN THE CHARLOTTE, NORTH CAROLINA, A PORTION OF TAX
PARCEL 143-131-08 OWNED BY P&L COLISEUM, L.P. AS RECORDED IN DEED BOOK 20205,
PAGE 242 AND SHOWN ON A PLAT RECORDED IN MAP BOOK 21, PAGE 285 IN THE
MECKLENBURG COUNTY REGISTER OF DEEDS AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT AN IRON PIN SET ALONG THE SOUTHERN MARGIN OF THE PROPOSED
RIGHT-OF-WAY OF ARBOR LOOP, SAID PIN LYING N 65°16'13" W, A DISTANCE OF 224.82
FEET FROM AN EXISTING #5 REBAR FOUND ALONG THE NORTHWESTERN BOUNDARY OF TRACT
3-A, OWNED BY THE CITY OF CHARLOTTE AND SHOWN IN MAP BOOK 39, PAGE 149; THENCE
FROM SAID IRON PIN SET AND WITH A CIRCULAR CURVE TO THE RIGHT HAVING A RADIUS OF
20.00 FEET, AN ARC LENGTH OF 32.00 FEET, A CHORD BEARING OF S 18°48'33" W AND A
CHORD DISTANCE OF 28.69 FEET TO AN IRON PIN SET ALONG THE NORTHWESTERN MARGIN OF
THE PROPOSED RIGHT-OF-WAY OF SPEER BOULEVARD; THENCE ALONG AND WITH SAID
PROPOSED RIGHT-OF-WAY THE FOLLOWING SIX (6) COURSES (1) S 64°38'37" W, A
DISTANCE OF 74.38 FEET TO AN IRON PIN SET; THENCE (2) WITH A CIRCULAR CURVE TO
THE LEFT HAVING A RADIUS OF 1186.50 FEET, AN ARC LENGTH OF 284.04 FEET, A CHORD
BEARING OF S 57°47'09" W AND A CHORD DISTANCE OF 283.36 FEET TO AN IRON PIN SET;
THENCE (3) WITH A CIRCULAR CURVE TO THE RIGHT HAVING A RADIUS OF 224.00 FEET, AN
ARC LENGTH OF 39.79 FEET, A CHORD BEARING OF S 56°00'59" W AND A CHORD DISTANCE
OF 39.74 FEET TO AN IRON PIN SET; THENCE (4) S 61°06'18" W, A DISTANCE OF 53.69
FEET TO AN IRON PIN SET; THENCE (5) WITH A CIRCULAR CURVE TO THE LEFT HAVING A
RADIUS OF 276.00 FEET, AN ARC LENGTH OF 41.09 FEET, A CHORD BEARING OF S
56°50'25" W AND A CHORD DISTANCE OF 41.05 FEET TO AN IRON PIN SET; THENCE (6)
WITH A CIRCULAR CURVE TO THE RIGHT HAVING A RADIUS OF 20.00 FEET, AN ARC LENGTH
OF 27.46 FEET, A CHORD BEARING OF N 88°04'52" W AND A CHORD DISTANCE OF 25.36
FEET TO AN IRON PIN SET ALONG THE SOUTHWESTERN MARGIN OF THE PROPOSED
RIGHT-OF-WAY OF NATIONAL AVENUE; THENCE ALONG AND WITH SAID PROPOSED
RIGHT-OF-WAY WITH A CIRCULAR CURVE TO THE LEFT HAVING A RADIUS OF 1026.83 FEET,
AN ARC LENGTH OF 123.58 FEET, A CHORD BEARING OF N 52°11'08" W, AND A CHORD
DISTANCE OF 123.51 FEET TO AN IRON PIN SET; THENCE CONTINUING WITH SAID PROPOSED
RIGHT-OF-WAY N 55°38'00" W, A DISTANCE OF 681.14 FEET TO AN IRON PIN SET ALONG
THE SOUTHEASTERN MARGIN OF THE PROPOSED RIGHT-OF-WAY OF CITY PARK DRIVE; THENCE
ALONG AND WITH SAID PROPOSED RIGHT-OF-WAY N 34°22'00" E, A DISTANCE OF 514.00
FEET TO AN IRON PIN SET ALONG THE SOUTHWESTERN MARGIN OF THE PROPOSED
RIGHT-OF-WAY OF ARBOR LOOP; THENCE ALONG AND WITH SAID PROPOSED RIGHT-OF-WAY S
55°38'00" E, A DISTANCE OF 906.59 FEET TO AN IRON PIN

Exhibit “B” - Page 1

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

SET; THENCE CONTINUING WITH SAID PROPOSED RIGHT-OF-WAY WITH A CIRCULAR CURVE TO
THE RIGHT HAVING A RADIUS OF 217.50 FEET, AN ARC LENGTH OF 108.60 FEET, A CHORD
BEARING OF S 41°19'46" E AND A CHORD DISTANCE OF 107.47 FEET TO THE POINT OF
BEGINNING, CONTAINING 10.981 ACRES , MORE OR LESS.

TOGETHER WITH THOSE REAL PROPERTY RIGHTS SET FORTH IN THE FOLLOWING DOCUMENTS:

MASTER DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR CITY PARK MADE
BY P & L COLISEUM, L.P., A GEORGIA LIMITED PARTNERSHIP TO BE RECORDED ON OR
ABOUT THE DATE HEREOF IN THE REGISTER OF DEEDS OF MECKLENBURG COUNTY, NORTH
CAROLINA.
    
DEVELOPMENT EASEMENTS AND COVENANTS AGREEMENT MADE BY AND BETWEEN P & L
COLISEUM, L.P., A GEORGIA LIMITED PARTNERSHIP AND OXFORD CITY PARK APARTMENTS
LLC, A GEORGIA LIMITED LIABILITY COMPANY, TO BE RECORDED ON OR ABOUT THE DATE
HEREOF IN THE REGISTER OF DEEDS OF MECKLENBURG COUNTY, NORTH CAROLINA.

Exhibit “B” - Page 2

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

EXHIBIT “C”
PROJECT BUDGET

ATTACHED TO ORIGINAL ON FILE WITH LENDER

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

EXHIBIT “D”
DISBURSEMENT SCHEDULE
City Park
 
 
 
Month
Total

 
Sep-12
(4,794,441
)
 
Oct-12
(750,000
)
 
Nov-12
(1,000,000
)
 
Dec-12
(500,000
)
 
Jan-13
(750,000
)
 
Feb-13
(1,000,000
)
 
Mar-13
(1,000,000
)
 
Apr-13
(205,559
)
 
May-13
0

 
Jun-13
0

 
Jul-13
0

 
Aug-13
0

 
Total
(10,000,000
)
 

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

SCHEDULE 6.7

LITIGATION

NONE

Schedule 6.7 – Page 1

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

SCHEDULE 6.18
ENVIRONMENTAL MATTERS
Phase I Environmental Site Assessment Update dated August 31, 2011, Job No.
OPL-001 by Hart & Hickman PC.

Schedule 6.18 – Page 1

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

SCHEDULE 6.33

ORGANIZATIONAL AGREEMENTS

Operating Agreement of Oxford City Park Apartments LLC dated as of September 6,
2012

Articles of Organization for Oxford City Park Apartments LLC dated as of May 9,
2012

Certificate for Membership Interest in Oxford City Park Apartments LLC –
Certificate No. 1-- issued in favor of Oxford City Park Development LLC

Operating Agreement of Oxford City Park Development LLC dated as of September 6,
2012

Articles of Organization for Oxford City Park Development LLC dated as of May 9,
2012

Schedule 6.33 – Page 1

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

SCHEDULE 6.34

OWNERSHIP
Oxford City Park Development LLC owns 100% of the membership interests in Oxford
City Park Apartments LLC

The membership interests in Oxford City Park Development LLC are owned as
follows:

W. Daniel Faulk, Jr. Family LLC
51%
Richard A. Denny III
29%
William B. Hargett
10%
Greg Kotarba
3%
Keith Rothwell
3%
Jack Hinrichs
2%
Ellen Chiang
2%

-

Schedule 6.34 – Page 1

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TABLE OF CONTENTS
(continued)
Page

§1.
DEFINITIONS AND RULES OF INTERPRETATION    1

§1.1
Definitions    1

§1.2
Rules of Interpretation    12

§2.
THE LOAN    13

§2.1
Loan Funding    13

§2.2
Note    13

§2.3
Interest on Loans    14

§2.4
Requests for Loans    14

§2.5
Funds for Loans    14

§2.6
Use of Proceeds; Amount of Advances    14

§2.7
Project Costs    15

§2.8
Project Budget    15

§2.9
Modifications to Project Budget    15

§2.10
Disbursements to Borrower or Owner from Project Budget    15

§2.11
Advances Do Not Constitute a Waiver    15

§2.12
Quality of Work    15

§2.13
Contingency Reserve    16

§2.14
Insufficiency of Loan Proceeds    16

§3.
REPAYMENT OF THE LOAN    16

§3.1
Stated Maturity    16

§3.2
Mandatory Prepayments    17

§3.3
Optional Prepayments    17

§3.4
Partial Prepayments    17

§3.5
Exit Fees    17

§3.6
Effect of Prepayments    17

§4.
CERTAIN GENERAL PROVISIONS    17

§4.1
[Intentionally Omitted]    17

§4.2
Lender Fees    17

§4.3
Funds for Payments    17

§4.4
Computations    18

§4.5
[Intentionally Omitted]    18

§4.6
[Intentionally Omitted]    18

§4.7
[Intentionally Omitted]    18

§4.8
[Intentionally Omitted]    18

§4.9
[Intentionally Omitted]    18

§4.10
Indemnity of Borrower    18

§4.11
Interest on Overdue Amounts; Late Charge    18

§4.12
Certificate    19

§4.13
Limitation on Interest    19

§5.
COLLATERAL SECURITY AND GUARANTY    19

§5.1
Collateral    19

 
 
 

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

TABLE OF CONTENTS
(continued)
Page

§5.2
Release of Collateral    19

§6.
REPRESENTATIONS AND WARRANTIES    20

§6.1
Authority, Etc    20

§6.2
Approvals    20

§6.3
Title to Properties; Leases    21

§6.4
Financial Statements    21

§6.5
No Material Changes    21

§6.6
Franchises, Patents, Copyrights, Etc    21

§6.7
Litigation; Judgments    22

§6.8
No Materially Adverse Contracts, Etc    22

§6.9
Compliance with Other Instruments, Laws, Etc    22

§6.10
Tax Status    22

§6.11
No Event of Default    22

§6.12
Holding Company and Investment Company Acts    23

§6.13
Absence of UCC Financing Statements, Etc    23

§6.14
Setoff, Etc    23

§6.15
Certain Transactions    23

§6.16
Employee Benefit Plans    23

§6.17
[Intentionally Omitted.]    24

§6.18
Environmental Compliance    24

§6.19
[Intentionally Omitted.]    25

§6.20
[Intentionally Omitted.]    25

§6.21
Regulations U and X    25

§6.22
[Intentionally Omitted.]    25

§6.23
Loan Documents    25

§6.24
Collateral Property    26

§6.25
Brokers    28

§6.26
Other Debt    28

§6.27
Use of Proceeds    28

§6.28
Transaction in Best Interests of Parties; Consideration    28

§6.29
Solvency    28

§6.30
No Bankruptcy Filing    29

§6.31
No Fraudulent Intent    29

§6.32
Special Purpose Entity; Restrictions    29

§6.33
Organizational Documents    29

§6.34
Ownership    30

§6.35
Embargoed Persons    30

§6.36
Mortgage Loan Documents    30

§6.37
Effect of Loan Request    30

§7.
AFFIRMATIVE COVENANTS OF BORROWER    31

§7.1
Punctual Payment    31

§7.2
Maintenance of Office    31

§7.3
Records and Accounts    31

 
 
 

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

TABLE OF CONTENTS
(continued)
Page

§7.4
Financial Statements, Certificates and Information    31

§7.5
Notices    32

§7.6
Existence; Maintenance of Properties    33

§7.7
Insurance    34

§7.8
Taxes    34

§7.9
Inspection of Properties and Books    34

§7.10
Compliance with Laws, Contracts, Licenses, and Permits    35

§7.11
Monthly Meetings    35

§7.12
Further Assurances    35

§7.13
[Intentionally Omitted.]    35

§7.14
[Intentionally Omitted.]    36

§7.15
Casualty    36

§7.16
Condemnation    36

§7.17
Compliance    37

§7.18
Plan Assets, etc    37

§7.19
Preservation and Maintenance    37

§7.20
[Intentionally Omitted.]    37

§7.21
Borrower and Owner to Remain a Single-Purpose Entity    38

§7.22
Leases    38

§7.23
Intentionally Omitted    39

§7.24
Project Documents    39

§8.
CERTAIN NEGATIVE COVENANTS OF BORROWER    39

§8.1
Restrictions on Indebtedness    39

§8.2
Restrictions on Liens, Etc    39

§8.3
Restrictions on Investments    40

§8.4
Merger, Consolidation    41

§8.5
Sale and Leaseback    41

§8.6
Compliance with Environmental Laws    41

§8.7
Distributions    43

§8.8
Sources of Capital    43

§8.9
Asset Sales    43

§8.10
Additional Restrictions Concerning the Collateral and Collateral Property    43

§8.11
Key Documents    43

§8.12
Additional Covenants with Respect to Indebtedness, Operations, Fundamental
Changes    44

§8.13
Modification of Organizational Agreements and other Key Documents    45

§8.14
Mortgage Loan Documents    45

§9.
DEVELOPMENT MATTERS    46

§9.1
Borrower’s Equity    46

§9.2
Project Changes    46

§9.3
Development; Completion    46

§10.
CLOSING CONDITIONS    47

 
 
 

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TABLE OF CONTENTS
(continued)
Page

§10.1
Conditions to Loan Closing    47

§11.
CONDITIONS OF SUBSEQUENT ADVANCES    51

§11.1
Prior Conditions Satisfied    51

§11.2
Performance; No Default    51

§11.3
Representations and Warranties    51

§11.4
Receipt of Lender    51

§12.
EVENTS OF DEFAULT; ACCELERATION; ETC    52

§12.1
Events of Default and Acceleration    52

§12.2
[Intentionally Omitted.]    55

§12.3
[Intentionally Omitted.]    55

§12.4
Remedies    55

§12.5
Distribution of Collateral Proceeds    55

§12.6
Default Under Mortgage Loan Documents    56

§12.7
Replacement of Developer    57

§13.
SETOFF    58

§14.
INTENTIONALLY OMITTED    58

§15.
EXPENSES    58

§16.
INDEMNIFICATION    59

§17.
SURVIVAL OF COVENANTS, ETC    60

§18.
ASSIGNMENT AND PARTICIPATION    60

§18.1
Assignment    60

§18.2
Participations    60

§18.3
Pledge by Lender    60

§18.4
No Assignment by Borrower    61

§18.5
Disclosure    61

§19.
NOTICES    61

§20.
RELATIONSHIP    62

§21.
GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE    62

§22.
HEADINGS    63

§23.
COUNTERPARTS    63

§24.
ENTIRE AGREEMENT, ETC    63

§25.
WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS    63

§26.
CONSENTS, AMENDMENTS, WAIVERS, ETC    63

§27.
SEVERABILITY    64

§28.
NO UNWRITTEN AGREEMENTS    64

§29.
TIME OF THE ESSENCE    64

§30.
RIGHTS OF THIRD PARTIES    64

§31.
REPLACEMENT NOTES    65

§32.
USA PATRIOT ACT NOTICE    65

§33.
ATTORNEYS’ FEES    65