Exhibit 10. (a)

CONSTRUCTION LOAN AGREEMENT

BY AND AMONG

SAUL HOLDINGS LIMITED PARTNERSHIP,

a Maryland limited partnership (“Borrower”)

U.S. BANK NATIONAL ASSOCIATION,

a national banking association, as agent (“Agent”)

and

U.S. BANK NATIONAL ASSOCIATION,

a national banking association, as lender,

and any other lenders who are now or

who may hereafter become

parties to this Agreement (collectively, the “Lenders”)

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

TABLE OF CONTENTS

 

I.

  LOAN    10  

1.1        Principal

   10  

1.2        Payment of Interest

   11  

1.3        Prepayment

   11  

1.4        Maturity Date; Extension

   11  

1.5        Calculation of Interest

   12  

1.6        Regulatory Costs

   13  

1.7        Inability to Determine LIBOR

   13  

1.8        Illegality

   13  

1.9        Capital Adequacy

   14  

1.10      Intentionally Omitted

   14  

1.11      Default Rate

   14  

1.12      Late Payment Charge

   14  

1.13      Effective Rate

   15  

1.14      Payments

   15  

1.15      Fees

   15  

1.16      No Waiver by Agent

   15

II.

  CONDITIONS OF BORROWING    15  

2.1        Pre-Closing Requirements

   15  

2.2        Loan Documents

   18  

2.3        Title Insurance

   19  

2.4        Opinion of Borrower’s Attorneys

   19

III.

  ADVANCES OF LOAN PROCEEDS    19  

3.1        General

   19  

3.2        Loan In Balance

   20  

3.3        Inspections

   20  

3.4        Responsibility of Agent and the Lenders

   21  

3.5        Advance Procedures

   21  

3.6        Tenant Improvements

   25  

3.7        Advances During Property Operation

   25

IV.

  REPRESENTATIONS AND WARRANTIES OF BORROWER    26  

4.1        Legal Status of Borrower

   26  

4.2        Title

   26  

4.3        No Breach of Applicable Agreements or Laws

   26

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

  

4.4        No Litigation or Defaults

   26   

4.5        Financial and Other Information

   26   

4.6        No Defaults under Loan Documents or Other Agreements

   27   

4.7        Boundary Lines; Conformance with Governmental Requirements and
Restrictions

   27   

4.8        Loan in Balance

   27   

4.9        Architect’s Certificate

   27   

4.10      Anti-Terrorism Regulations

   27   

4.11      Plans and Specifications

   28

V.

   COVENANTS OF BORROWER    28   

5.1        Completing Construction

   28   

5.2        Changing Costs, Scope or Timing of Work

   29   

5.3        Balancing the Loan

   29   

5.4        Paying Costs of Property and Loan

   30   

5.5        Using Loan Proceeds

   30   

5.6        Keeping of Records

   30   

5.7        Providing Financial Information

   30   

5.8        Providing Operating Budgets and Operating Statements

   31   

5.9        Providing Leasing Information

   31   

5.10      Providing Updated Surveys

   32   

5.11      Providing Evidence of Completion

   32   

5.12      Maintaining Insurance Coverage

   32   

5.13      Complying with Other Documents

   32   

5.14      Financial Covenants

   33   

5.15      Interest Rate Protection Agreement

   33   

5.16      ERISA

   33   

5.17      Claim Against Architect

   34   

5.18      Management Agreements

   35   

5.19      Private Restrictions

   35   

5.20      USA Patriot Act Notice; Compliance

   36   

5.21      Guarantor Articles of Incorporation

   36

VI.

   DEFAULTS    36   

6.1        Events of Default

   36   

6.2        Rights and Remedies

   37   

6.3        Completion of Property by Agent

   38

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

VII.

  MISCELLANEOUS    39  

7.1        Binding Effect; Waivers; Cumulative Rights and Remedies

   39  

7.2        Survival

   39  

7.3        Governing Law; Waiver of Jury Trial

   39  

7.4        Counterparts

   39  

7.5        Notices

   39  

7.6        Agent’s Sign

   39  

7.7        No Third Party Reliance

   39  

7.8        Time of the Essence

   39  

7.9        Entire Agreement; No Oral Modifications

   40  

7.10      Captions

   40  

7.11      Joint and Several Liability

   40  

7.12      Borrower’s Relationship with Agent and the Lenders

   40  

7.13      Right of Set-Off

   40

VIII.

  AGENCY PROVISIONS    40  

8.1        Agency

   40  

8.2        Resignation of Agent; Removal

   41  

8.3        Administration

   42  

8.4        Actions by Agent; Required Consents

   42  

8.5        Payments

   43  

8.6        Management of Acquired Collateral

   45  

8.7        Defaulting Lender

   46  

8.8        Representations, Warranties and Acknowledgments

   47  

8.9        Assignments; Participation

   48  

8.10      Other Business

   50  

8.11      Consents

   50  

8.12      Agent as Lender

   50  

8.13      Notification of Defaults and Events of Default

   50  

8.14      No Reliance by Borrower

   50  

8.15      Reliance

   50  

8.16      Pledge to Federal Reserve Bank

   51  

8.17      Limitation of Liability

   51

 

EXHIBIT A

   ASSIGNMENT AND ASSUMPTION AGREEMENT

EXHIBIT B

   DESCRIPTION OF IMPROVEMENTS

EXHIBIT C

   LEGAL DESCRIPTION OF THE LAND

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

EXHIBIT D    PERMITTED ENCUMBRANCES EXHIBIT E    SWORN CONSTRUCTION COST
STATEMENT EXHIBIT F    TITLE INSURANCE REQUIREMENTS EXHIBIT G    INSURANCE
REQUIREMENTS EXHIBIT H    NOTICES AND WIRE INSTRUCTIONS EXHIBIT I    COMMITMENT
PERCENTAGES EXHIBIT J    FORM OF LIEN WAIVER EXHIBIT K    DRAW REQUEST FORM
EXHIBIT L    [INTENTIONALLY DELETED] EXHIBIT M    PLANS EXHIBIT N    LEASING
GUIDELINES EXHIBIT O    BORROWER COMPLIANCE CERTIFICATE EXHIBIT P    GUARANTOR
COMPLIANCE CERTIFICATE EXHIBIT Q    PRE-LEASING TEST

[SCHEDULES AND EXHIBITS INTENTIONALLY OMITTED]

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

CONSTRUCTION LOAN AGREEMENT

THIS CONSTRUCTION LOAN AGREEMENT (this “Agreement”) is made and entered into as
of the 14th day of May, 2008, by and among (i) SAUL HOLDINGS LIMITED
PARTNERSHIP, a Maryland limited partnership (“Borrower”), (ii) U.S. BANK
NATIONAL ASSOCIATION, a national banking association, as agent (“Agent”), and
(iii) U.S. BANK NATIONAL ASSOCIATION, a national banking association, as lender,
and any other lenders who are now or who may hereafter become parties to this
Agreement (collectively, the “Lenders”).

WITNESSETH THAT, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

DEFINITIONS

For the purposes of this Agreement, the following terms shall have the following
respective meanings, unless the context hereof clearly requires otherwise:

Advance: Any portion of the Loan advanced to or for the benefit of Borrower in
accordance with the terms hereof.

Advance Date: The date on which an Advance requested by Borrower hereunder is to
be made.

Affiliate: Any parent of Borrower, subsidiary of Borrower or entity controlled
by or under common control with Borrower.

Agent: U. S. Bank National Association, its successors and assigns as agent for
the Lenders.

Agreement: This Construction Loan Agreement, including any amendments hereof and
supplements hereto executed by Borrower and Agent.

Architect’s Certificate: That certain Certificate of Architect regarding the
Property from the Project Architect.

Assignee Lender: As defined in Section 8.9(a).

Assignment and Assumption Agreement: An instrument in the form of Exhibit A,
duly completed and executed and delivered.

Bank-Provided Interest Rate Hedge: An Interest Rate Hedge which is provided by
any Lender and which meets the following requirements: such Interest Rate Hedge
(i) is documented in a standard International Swap Dealer Association Agreement,
(ii) provides for the method of calculating the reimbursable amount of the
provider’s credit exposure in a reasonable and customary manner, and (iii) is
entered into for hedging (rather than speculative) purposes. If Borrower elects
to obtain a Bank-Provided Interest Rate Hedge, and provided that Agent confirms
that such Interest Rate Hedge meets the foregoing requirements, the liabilities
of the Borrower to the provider of any Bank-Provided Interest Rate Hedge shall
be a part of Borrower’s obligations hereunder, guaranteed by the Guaranty and
secured by the Deed of Trust and other Loan Documents.

Borrower: Saul Holdings Limited Partnership, a Maryland limited partnership, and
its permitted successors and assigns.

 

1

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

Business Day: Any day, other than a Saturday, a Sunday, or a legal holiday on
which Agent is not open for business.

Closing Date: The date of this Agreement.

Code: The Internal Revenue Code of 1986, as amended, and applicable U.S.
Department of Treasury regulations issued pursuant thereto in temporary or final
form.

Commitment Percentage: With respect to each Lender’s share of all right, title
and interest in the Loan and the Loan Documents, as set forth on Exhibit I
attached hereto, as amended and modified by unilateral action of Agent from time
to time to reflect the sale or assignment of a portion of the Loan.

Committed Amount: One Hundred Fifty-Seven Million Five Hundred Thousand and
00/100ths Dollars ($157,500,000.00).

Completion: All Improvements have achieved Substantial Completion (as defined in
the Construction Contract), free of all mechanics’, labor, materialmen’s and
other similar lien claims; said Substantial Completion has been approved by the
Inspecting Architect; Borrower and Project Architect have delivered a
certification to Agent on AIA Form G704 that the Property has been substantially
completed in accordance with the approved Plans; Borrower has obtained and
delivered to Agent copies of all licenses and permits needed to operate the
Property; Agent has received photographs of the completed Improvements, copies
of all warranties from suppliers covering materials, equipment and appliances
included within the Property and evidence that all insurance required hereby is
in full force and effect; and no Event of Default exists hereunder.

Completion Date: December 24, 2010, provided however that such Completion Date
shall be subject to extension by reason of acts of God (including hurricanes,
tornadoes, cyclones, other severe storms, high winds, lightning, floods or
earthquakes); action or inaction of governmental authorities having jurisdiction
over the Project; strikes; shortages or unavailability of labor or materials;
lockouts or labor difficulty; explosion; sabotage; accident; riot or civil
commotion; act of war, fire or other casualty; legal requirements; and causes
beyond the reasonable control of Borrower; provided, Borrower provides written
notice to Agent immediately upon becoming aware of the occurrence of any of the
foregoing conditions and provided further that the aggregate period of such
delay(s) shall not extend beyond April 26, 2011.

Construction Contract: As defined in Section 2.1(c) hereof.

Consultants: Third party experts retained by Agent to assist it in connection
with closing, advancing, disbursing or administering the Loan.

Contingency Reserve: A reserve of Loan proceeds to pay costs of the Property
which are in excess of the amounts thereof anticipated on the date hereof,
whether as a result of price increases, changes in the Plans or otherwise, the
initial amount of which shall be Seven Million Four Hundred and Five Thousand
and Two Hundred Eighteen and 00/100ths Dollars ($7,405,218.00).

Contractor: Any person, party or entity (other than the Project Architect) which
has a contract or subcontract under which payment may be required for any work
done, material supplied or services furnished in connection with acquiring,
constructing, financing, equipping and/or developing the Property.

 

2

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

Debt Service: An amount equal to (x) the amount of the Loan outstanding at the
time of determination multiplied by (y) the greater of (i) a debt constant
calculated using a rate of interest equal to 2.25% per annum in excess of the
then prevailing T-Note Rate and assuming a thirty (30) year principal
amortization schedule, or (ii) seven percent (7.0%) per annum.

Debt Service Test: The determination by Agent, in its sole discretion exercised
in good faith, that the Property has generated Net Operating Income during the
immediately preceding three (3) months which, when annualized, equals or exceeds
the product of (a) with respect to a proposed reduction in the Interest Rate
payable under the Loan Documents, as contemplated in the definition of “LIBOR
Rate” below, 1.00 times Debt Service (the “Interest Rate Reduction Debt Service
Test”), (b) with respect to the condition set forth in Section 1.4(b) hereof for
the Second Extension Period, as determined as of the first day of such Extension
Period, 1.00 times Debt Service (the “Extension Debt Service Test”), and
(c) with respect to a proposed reduction in the liability of Borrower under the
Loan Documents, as contemplated in Section 8.17 hereof, 1.00 times Debt Service
(the “Recourse Reduction Debt Service Test”).

Deed of Trust: The Combination Credit Line Deed of Trust, Security Agreement and
Fixture Financing Statement of even date herewith covering the Property,
executed by Borrower in favor of Agent for the benefit of the Lenders to secure
the Loan, including any amendments thereof and supplements thereto executed by
Borrower and Agent.

Default Rate: As defined in Section 1.11 hereof.

Defaulting Lender: Any Lender who for any reason shall fail or refuse to abide
by its obligations under the Loan Documents or this Agreement within the time
periods specified for performance of such obligation or, if no time frame is
specified, if such failure or refusal continues for a period of five
(5) Business Days. Agent shall notify Lender of its determination that such
Lender is a Defaulting Lender. Any such Defaulting Lender shall have a period of
five (5) Business Days after Agent’s notice within which to cure such Defaulting
Lender’s failure or refusal to comply with its obligations hereunder and the
under the Loan Documents.

Developer: Saul Holdings Limited Partnership, a Maryland limited partnership.

Development Fee: A sum equal to $8,500,000.00, representing the fee payable by
Borrower to Developer. The Development Fee shall not be a part of any Advance
hereunder.

Draw Request: A written request by Borrower, in the form of Exhibit K hereto, or
such other form as may be reasonably requested by Agent, for an advance of Loan
proceeds under this Agreement.

Employee Benefit Plan: Any employee benefit or other plan establishing benefits
or compensation for employees established or maintained, or to which
contributions have been made, by Borrower.

Environmental Audit: A written environmental review, audit, assessment or report
addressed to Agent, setting forth the results of an investigation of the
Property, including an historical investigation of the uses and ownership of the
Land, contacts with appropriate governmental agencies and any Tests which may be
requested by Agent, prepared by a competent environmental engineer or consultant
who is acceptable to Agent and is licensed, bonded and insured in accordance
with all applicable statutes.

Environmental Laws: Any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and

 

3

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

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.

Equipment: All fixtures, equipment and personal property owned by Borrower and
located or to be located in or on, and used in connection with, the
construction, management, maintenance or operation of the Land and the
Improvements.

Equity Requirement: An aggregate amount of Fifty-Three Million Five Hundred
Thousand and 00/100ths Dollars ($53,500,000.00), consisting of (i) Twenty Nine
Million Seven Hundred Thirty Five Thousand Three Hundred Thirty One and
00/100ths Dollars ($29,735,331.00) which shall be contributed on or prior to the
Closing Date, (ii) the Development Fee, and (iii) Fifteen Million Two Hundred
Sixty Four Thousand Six Hundred Sixty Nine and 00/100th Dollars ($15,264,669.00)
which shall be contributed on a pari passu (50/50) basis with the Loan proceeds
until all such additional Fifteen Million Two Hundred Sixty Four Thousand Six
Hundred Sixty Nine and 00/100th Dollars ($15,264,669.00) has been contributed.
The Equity Requirement shall not be deemed satisfied unless and until confirmed
by Agent in writing, in its sole discretion, upon Borrower’s written request.

ERISA: As defined in Section 5.16.

ERISA Affiliate: Any corporation which is a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the Code) as Borrower
or any trade or business which is under common control (within the meaning of
Section 414(c) of the Code) with Borrower or any organization which is required
to be treated as a single employer with Borrower under Section 414(m) or 414(o)
of the Code.

Event of Default: Any event set forth in Section 6.1.

Extension Debt Service Test: As defined in the definition of Debt Service Test.

Extension Fee: Fifteen hundredths of one percent (0.15%) of the then outstanding
principal balance of the Loan.

Extension Periods: As defined in Section 1.4.

Extension Request: As defined in Section 1.4.

Federal Funds Rate: As of any date of determination, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, “H.15(519)”) for such date opposite the caption “Federal Funds
(Effective)”. If for any relevant date such rate is not yet published in
H.15(519), the rate for such date will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the “Composite 3:30 p.m.
Quotation”) for such date under the caption “Federal Funds Effective Rate”. If
on any relevant date the appropriate rate for such date is not yet published in
either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such date
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that date by
each of three leading brokers of Federal funds transactions in New York City
selected by Agent.

 

4

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

Fee Letter: That certain Fee Letter between Borrower and Agent of even date
herewith.

First Extension Period: As defined in Section 1.4.

GAAP: Generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of any date of determination. Except as may
be expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted, and all accounting determinations hereunder shall be made,
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred, unless Borrower and Agent agree in writing on an adjustment to
said computation or determination to account for such change in GAAP.

General Contractor: Clark Residential, LLC.

Governmental Requirements: All laws, statutes, codes, ordinances, and
governmental rules, regulations and requirements (including, without limitation,
the Proffers) applicable to Borrower and the Property.

Guarantor: Saul Centers, Inc., a Maryland corporation.

Guaranty: That certain Guaranty of even date herewith given by Guarantor in
favor of Agent and the Lenders.

Hazardous Substances: 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.

Improvements: The buildings and improvements that are now or are hereafter
placed or constructed upon the Land, as more particularly described on Exhibit B
attached hereto (including all sitework, utilities, infrastructure, paving,
striping, signage, curb and gutter, landscaping and installation of all “common
area” improvements required under any covenants encumbering the Property,
required by applicable law, or zoning approvals entered into by Borrower).

Initial Advance: The first advance of Loan proceeds.

Inspecting Architect: EMJ Construction Consultants and/or any other independent
architect, engineer or consultant selected by Agent.

Interest Rate Hedge: An interest rate exchange, collar, cap, swap, adjustable
strike cap, adjustable strike corridor or similar agreements entered into by
Borrower to provide protection to, or minimize the impact upon, the Borrower of
increasing floating rates of interest applicable to the Loan.

Interest Rate Reduction Debt Service Test: As defined in the definition of Debt
Service Test.

 

5

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

Interest Reserve: A reserve of Loan proceeds to pay interest on the Loan through
Completion of the Improvements, the initial amount of which shall be Twenty
Million Nine Hundred Forty Eight Thousand Nine Hundred Eighty Nine and 00/100ths
Dollars ($20,948,989.00).

Land: The land legally described on Exhibit C attached hereto and hereby made a
part hereof, together with all additions thereto and substitutions therefor
agreed to by Borrower and Agent.

Law: Any federal, state or local law, statute, rule, regulation, ordinance,
order, decree, directive, requirement, code, notice of violation or rule of
common law, now or hereafter in effect, and in each case as amended, and any
judicial or administrative interpretation thereof by a governmental authority or
otherwise, including any judicial or administrative order, determination,
consent decree or judgment.

Leadership: Leadership Institute, a Virginia non-stock corporation

Leadership Agreements: Collectively, those certain documents by and between
Borrower and Leadership relating to the Project, as may be amended, modified,
supplemented or replaced from time to time, including, without limitation,
(i) that certain Development Agreement dated as of June 7, 2006, as amended by
that certain First Amendment to Development Agreement dated as of September 5,
2007; (ii) that certain Lease dated as of June 7, 2006; and (iii) that certain
Temporary Construction Easement and Crane Swing License Agreement dated as of
June 7, 2006.

Lease: Any lease, sublease or sub-sublease, letting, license, concession or
other agreement (whether written or oral and whether now or hereafter in
effect), pursuant to which any Person is granted a possessory interest in, or
right to use or occupy, all or any portion of any space in the Project, and
every modification, amendment or other agreement relating to such lease,
sublease, sub-sublease or other agreement entered into in connection with such
lease, sublease, sub-sublease or other agreement and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto; provided, however, that such
term shall not include any agreements, instruments or other documents that are
necessary to satisfy the Proffers.

Leasing Guidelines: As set forth on Exhibit N attached hereto and hereby made a
part hereof.

Lenders: Each Lender that is a party to this Agreement and which hereafter
becomes party to this Agreement, collectively, and each of their respective
permitted successors and assigns.

LIBOR: With respect to any requested LIBOR Rate Advance, the one month LIBOR
Rate quoted by Agent from Reuters Screen LIBOR01 or any successor thereto, which
shall be that one-month LIBOR Rate in effect two New York Banking Days prior to
the beginning of each calendar month, adjusted for any reserve requirement and
any subsequent costs arising from a change in government regulation, such rate
to be reset monthly on the first day of each calendar month.

LIBOR Rate: (a) For the period commencing on the date of this Agreement and
continuing thereafter unless and until the effective date of any reduction in
such rate in accordance with clause (b) below, LIBOR Rate shall mean a rate of
interest equal to two and one-half percent (2.5%) per annum plus LIBOR; (b) if,
upon Borrower’s written request, Agent determines, in its sole discretion acting
in good faith, that Completion has occurred, LIBOR Rate shall mean a rate of
interest equal to two and thirty-five hundredths percent (2.35%) per annum plus
LIBOR, and (c) if, upon Borrower’s written request, Agent determines, in its
sole discretion acting in good faith, that the Interest Rate Reduction Debt
Service Test is satisfied, LIBOR Rate shall mean a rate of interest equal to two
and twenty hundredths percent (2.20%) per annum plus LIBOR. In no event shall
the LIBOR Rate ever exceed the maximum lawful rate.

 

6

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

LIBOR Rate Advance: Any portion of the Principal Balance which bears interest at
a LIBOR Rate; provided, however, that any LIBOR Rate Advance must be in the
aggregate principal amount of at least $500,000.00.

Loan: The loan of the proceeds of the Note by the Lenders to Borrower in
advances to be made pursuant to the terms of this Agreement.

Loan Documents: The documents enumerated in Section 2.2 of this Agreement, which
evidence and secure the Loan, including, but not limited to, the Note, the Deed
of Trust, this Agreement, the Assignment of Leases and Rents and the
Indemnification Agreement, and including any amendments thereof and supplements
thereto executed by Borrower and Agent.

Majority Lenders: Lenders holding Notes representing, in the aggregate, not less
than sixty six and sixty seven hundredths percent (66.67%) of the Committed
Amount or, if no such principal amount is then outstanding, Lenders representing
not less than sixty six and sixty seven hundredths percent (66.67%) of the
Commitment Percentages.

Maturity Date: November 14, 2011, as such date may be extended in accordance
with the provisions of Section 1.4 hereof.

Money Markets: One or more wholesale funding markets available to Agent,
including negotiable certificates of deposit, commercial paper, eurodollar
deposits, bank notes, federal funds and others.

Multiemployer Plan: Any plan defined as such in Section 3(37) of ERISA.

Net Operating Income: For any period of determination, net operating income
generated by the Property for such period (i.e., gross operating income
determined in accordance with GAAP, less (x) all operating expenses payable in
the ordinary course of operating the Property, determined in accordance with
GAAP (exclusive of debt service, capital expenditures, leasing costs, tenant
improvement costs, depreciation and amortization) and (y) reserves calculated
for the first year on the basis of (1) for apartments units, $250.00 per unit
per year, or $61,000.00, (2) for office space, $0.25 per rentable square foot
per year, or $42,600.00; and (3) for retail space, $0.25 per rentable square
foot per year, or $10,575, for a total reserve deduction in the first year of
operations of $114,175. After completing the first full year of operations,
reserves shall be escalated at 4% per annum. Borrower shall provide Agent with
all information and materials required by Agent necessary for the determination
of Net Operating Income.

New York Banking Day: Any day (other than a Saturday or Sunday) on which
commercial Lenders are open for business in New York, New York.

Note: Individually or collectively, as the context may require, the Promissory
Notes, of even date herewith, executed and delivered by Borrower to the Lenders
in the aggregate maximum principal amount of One Hundred Fifty-Seven Million
Five Hundred Thousand and 00/l00ths Dollars ($157,500,000.00), to evidence the
Loan, as the same may be amended, modified or replaced from time to time.

Obligations: The obligations of Borrower to Agent and the Lenders described in
the Loan Documents.

Operating Budget: A detailed listing of all anticipated annual income and
expenses from and for managing, maintaining and operating the Property, prepared
by Borrower or its agent and in form and substance acceptable to Agent.

 

7

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

Operating Statement: A current, detailed statement of income and expenses from
and for managing, maintaining and operating the Property, in form and substance
acceptable to Agent, certified as true, correct and complete by the chief
financial officer of Borrower (or officer acting in a similar such capacity),
and expressly showing all variations from the Operating Budget for the period
covered thereby.

Pension Plan: Any employee pension benefit plan within the meaning of
Section 3(2) of ERISA with respect to which Borrower or any ERISA Affiliate at
any relevant time has liability or an obligation to contribute.

Permitted Encumbrances: The liens, charges and encumbrances on title to the
Property listed on Exhibit D hereto, if any, or otherwise approved by the Agent
in writing.

Permitted Transfer: The following transfers, pledges and other changes in the
direct or indirect ownership interests in Borrower and/or Guarantor (which shall
be permitted without payment of any fee to Agent or the Lenders):

(a) transfers of interests, admissions of additional members, limited partners
or shareholders, and other structural changes, in Borrower, Guarantor, or any
owner of a direct or indirect legal or beneficial interest in either of them,
including, but not limited to, their respective partners, members or
shareholders, provided that after giving effect thereto (i) B. Francis Saul II,
B. Francis Saul III, members of their respective families, trusts for the
benefit of any of the same and/or companies or other entities controlled
directly or indirectly by any of the same, continue to (A) own and control,
directly or indirectly, at least ten percent (10%), in the aggregate, of (x) the
limited partnership units of Borrower, and (y) the common stock of Guarantor on
a fully diluted basis, and (B) retain responsibility for the day-to-day
management of the Property; and (ii) Guarantor continues to be the sole managing
general partner of Borrower; and

(b) transfers of the publicly traded stock of Guarantor, provided that after
giving effect thereto, B. Francis Saul II, B. Francis Saul III, members of their
respective families, trusts for the benefit of any of the same and/or companies
or other entities controlled directly or indirectly by any of the same, continue
to (i) own and control, directly or indirectly, at least ten percent (10%), in
the aggregate, of the common stock of Guarantor on a fully diluted basis, and
(ii) retain responsibility for the day-to-day management of the Property.

For purposes of the foregoing, a pledge of any interest shall not constitute a
transfer of such interest unless and until the interest so pledged has been
transferred pursuant to a foreclosure of the lien of such pledge, provided that
any such pledge shall not exceed one hundred percent (100%), in the aggregate,
of the limited partnership interests in Borrower. As necessary, all
representations and warranties of Borrower and Guarantor in the Loan Documents
shall be deemed modified to conform to any such transfers, pledges or other
changes.

Person: Any natural person, corporation, limited liability company, partnership
(general or limited), limited liability partnership, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.

Plan: As defined in Section 5.16.

Plans: The construction documents for the Improvements, including the plans,
drawings and specifications, as approved (or deemed approved) by Agent from time
to time.

 

8

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

Pollutant: Any hazardous or toxic substance, waste or material, or other
pollutant or contaminant (including but not limited to radioactive materials,
gasoline, asbestos, ureaformaldehyde and polychlorinated biphenyls), as those
terms are defined or used in any Environmental Law.

Pre-Leasing Test: As defined on Exhibit Q hereto.

Prime Rate: The rate publicly announced by Agent from time to time as its prime
rate, as and when such rate changes; provided, however, that Agent may lend to
its customers at interest rates that are above or below the Prime Rate.

Prime Rate Advance: Any portion of the Principal Balance which bears interest at
the Prime Rate.

Principal Balance: One Hundred Fifty-Seven Million Five Hundred Thousand and
00/100ths Dollars ($157,500,000.00) or so much thereof as may have been advanced
to or for the benefit of Borrower and remains unpaid from time to time.

Prior Advance: As defined in Section 3.5(d)(2).

Proffers: The approved development conditions of Arlington County special
exception site plan no. 397, and all agreements contemplated thereby, whether or
not existing in separate written form as of the date of this Agreement.

Project: A mixed use development located on two parcels of land straddling the
North and South sides of Clarendon Boulevard between North Garfield and North
Highland Streets comprised of approximately 244 rental apartment units,
approximately 170,400 square feet of office space, approximately 42,300 square
feet of ground floor and retail space and an underground parking garage
containing approximately 600 spaces.

Project Architect: Torti Gallas and Partners, or such other architectural firm
that may be selected by Borrower, subject to the approval of Agent, such
approval not to be unreasonably withheld, conditioned or delayed.

Projected Sources: As defined in Section 5.3.

Property: The Land, the Improvements and the Equipment.

Protective Advances: Any amount advanced or expended by the Agent and/or the
Lenders pursuant to the Loan Documents to preserve or protect the Lenders’
rights with respect to the Loan.

Recourse Reduction Debt Service Test: As defined in the definition of Debt
Service Test.

Regulation D; Regulation U: Regulations D and U, respectively (or any substitute
regulations), of the Board of Governors of the Federal Reserve System (or any
successor thereto), together with all amendments from time to time thereto.

Regulatory Change: Any change, after the date of the initial funding of the
Note, in United States federal, state or foreign laws, regulations or treaties,
or the adoption or making after such date of any interpretations, directives or
requests applying to Agent and/or the Lenders of or under any United States
federal, state or foreign laws or regulations (whether or not having the force
of law) by any court or

 

9

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

governmental or monetary authority charged with the interpretation or
administration thereof, excluding, however, for purposes of LIBOR Rate Advances,
any such change which results in an adjustment of the reserve requirement
specified by Regulation D and the effect of which is reflected in a change in
rate applicable to any such LIBOR Rate Advance.

Reserves: The Interest Reserve, Contingency Reserve and Tenant Improvement
Reserve.

Revolving Credit Agreement: As defined in Section 5.14.

Second Extension Period: As defined in Section 1.4.

Set-Off: A security interest granted by Borrower to Agent and the Lenders, a
lien on and an express contractual right to set off against all depository
account balances, cash and any other property of the Borrower now or hereafter
in the possession of Agent or the Lenders and the right to refuse to allow
withdrawals from any account, subject to the terms of the Loan Documents and
applicable law.

Sworn Construction Cost Statement: An itemized, certified statement of actual
and estimated costs of the Property, in the form of Exhibit E attached hereto or
to be attached hereto within ninety (90) days after the date hereof and hereby
made a part hereof, signed and sworn to by Borrower (as indicated on Exhibit E
hereto), as the same may be amended or supplemented with the approval of Agent
from time to time, Section I of which is referred to as the “Summary Sworn
Construction Cost Statement”.

Tenant Improvements: All finish improvements to the basic building shell of the
Improvements for tenant space within the Improvements, as shown on the schedule
thereof delivered by Borrower to Agent.

Tenant Improvement Reserve: A reserve of Loan proceeds to pay the costs of
Tenant Improvements for retail and office space, the initial amounts of which
shall be $2,750,085.00 and $10,310,760.00, respectively.

Tests: Such soil tests, chemical tests, materials tests and other tests and
analyses as are appropriately required to confirm, with relative certainty, the
absence of Pollutants from the Property.

Title Company: Commonwealth Land Title Insurance Company.

Title Policy: A loan policy of title insurance in favor of Agent for the benefit
of the Lenders issued by the Title Company and complying with the requirements
of Exhibit F attached hereto and hereby made a part hereof.

T-Note Rate: The annualized yield on ten (10) year United States Treasury notes
having a maturity date closest to the Maturity Date, as determined by Agent in
its sole discretion.

I. LOAN

1.1 Principal. Subject to the terms, provisions and conditions of this
Agreement, each Lender severally, but not jointly, agrees to lend to Borrower
pro rata in accordance with its Commitment Percentage, and Borrower agrees to
borrow from the Lenders, the proceeds of the Loan, from time to time, in
accordance with the terms hereof until the Maturity Date, for the purpose of
constructing the Improvements and otherwise developing the Property. All
advances of Loan proceeds shall be evidenced by the Note. Notwithstanding the
expressed principal amount of the Note, Borrower shall not be obligated to repay
more than the unpaid balance of advances made to or for the

 

10

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

benefit of Borrower by Agent and the Lenders pursuant hereto and to the other
Loan Documents, together with interest thereon at the rates specified below,
computed on each Advance from the date it is made by the Lenders. In no event
shall the Lenders be obligated hereunder to lend to Borrower more than Borrower
has qualified to receive under the terms of Article III hereof.

1.2 Payment of Interest. Interest shall accrue on the Principal Balance from and
after the date hereof. All interest payable hereunder shall be computed on the
basis of a 360 day year, but shall be charged for the actual number of days
principal is unpaid. Interest accruing in accordance herewith shall be payable,
as accrued, on the first Business Day of each calendar month, commencing with
the first Business Day of the next calendar month following the calendar month
in which the Initial Advance is made to Borrower, and continuing on the first
Business Day of each and every calendar month thereafter until the Principal
Balance and all accrued interest thereon are paid in full. Agent shall provide a
monthly notice to Borrower setting forth the amount of interest due and the due
date thereof, which notice shall be mailed on or prior to the tenth (10th) day
preceding the first day of each month; provided, however, that Borrower shall be
obligated to pay interest on the Loan when due regardless of the date Borrower
receives such notice. All unpaid, accrued interest shall be paid in full at the
time the Principal Balance is paid in full.

In the event that the interest and/or charges in the nature of interest, if any,
provided for by this Agreement or by any other Loan Document, shall contravene a
legal or statutory limitation applicable to the Loan, if any, Borrower shall pay
only such amounts as would legally be permitted; provided, however, that if the
defense of usury and all similar defenses are unavailable to Borrower, Borrower
shall pay all amounts provided for herein. If, for any reason, amounts in excess
of the amounts permitted in the foregoing sentence shall have been paid,
received, collected or applied hereunder, whether by reason of acceleration or
otherwise, then, and in that event, any such excess amounts shall be applied to
principal, unless principal has been fully paid, in which event such excess
amount shall be refunded to Borrower.

1.3 Prepayment. The Principal Balance and accrued interest thereon may be
prepaid in full or in part at any time, without premium or penalty, after a
minimum of three (3) Business Days’ prior written notice from Borrower to Agent
of the date of prepayment. In the event that Borrower shall fail to provide at
least such three (3) Business Days’ notice when herein required, Agent will
charge, and Borrower shall pay, additional interest on the amount prepaid, at
the LIBOR Rate or at the Default Rate, whichever is then applicable, from the
earlier of the date such notice is given or the date the prepayment is made
through the date three (3) Business Days after the date of such notice or, if no
notice is given, such prepayment. Each prepayment shall be in an amount not less
than the lesser of $100,000.00 or the Principal Balance.

1.4 Maturity Date; Extension. If not sooner paid in accordance with the terms
hereof, the Principal Balance, together with all unpaid interest accrued
thereon, shall be due and payable, in full, on the Maturity Date; provided,
however, the Maturity Date may be extended for two (2) additional periods of
nine (9) months each (individually, the “First Extension Period” and the “Second
Extension Period” and collectively, the “Extension Periods”) upon the written
request (the “Extension Request”) of Borrower given not less than thirty
(30) days nor more than ninety (90) days prior to the Maturity Date then
existing, each such extension being subject to satisfaction of all of the
following conditions:

(a) Payment on or before the first day of each Extension Period of the Extension
Fee;

 

11

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

(b) With respect to the Second Extension Period, the Extension Debt Service Test
shall be satisfied as of the first day of such Extension Period, as determined
by Agent in its sole discretion exercised in good faith (assuming that all
principal and interest payments due hereunder are paid in a timely manner after
receipt by Agent of the Extension Request); provided, however, if the Extension
Debt Service Test is not satisfied, Borrower may elect to satisfy this condition
by paying a principal curtailment in an amount sufficient to reduce the
Principal Balance as of the first day of the Second Extension Period such that
the Extension Debt Service Test shall be satisfied as of such date, as
determined by Agent in its sole discretion exercised in good faith (assuming
that all principal and interest payment due hereunder are paid in a timely
manner after receipt by Agent of the Extension Request);

(c) At the time of each Extension Request and on the first day of each Extension
Period, there shall exist no uncured Event of Default (as hereinafter defined);

(d) Borrower shall deliver to Agent a title bringdown or, in the event Agent
requires that any documentation be recorded in connection with such extension,
an endorsement to the existing title insurance policy held by Agent on behalf of
the Lenders in connection with the Loan, bringing current the effective date of
such coverage setting forth no liens or encumbrances other than Permitted
Encumbrances and stating that the coverage afforded by such title insurance
policy, or the agreements thereunder, shall not be affected because of such
extension;

(e) Completion of the Improvements has been achieved to the satisfaction of
Agent and all certificates of occupancy and use permits shall have been issued
in connection therewith;

(f) Borrower shall deliver to Agent all financial information relating to
Borrower and the Guarantor required hereunder, and such information shall
reflect that no Materially Adverse Effect (as defined in the Deed of Trust),
financial or otherwise, as determined by Agent, in its sole discretion exercised
in good faith, shall have occurred with respect to Borrower;

(g) Borrower shall deliver to Agent on or before the then existing Maturity Date
such documentation as Agent may reasonably require in connection with such
proposed extension, all of which shall be in form and substance acceptable to
Agent;

(h) Borrower shall pay all costs and expenses reasonably incurred by or on
behalf of Agent in connection with such extension, including appraisal fees,
internal or external appraisal review fees, inspection fees, legal fees and such
other professional services which Agent requires; Borrower shall also pay survey
costs and costs of environmental studies and reports if such survey(s) and/or
environmental studies or reports are deemed necessary by Agent pursuant to
Agent’s internal policies or pursuant to applicable laws, rules or regulations;
the payment by Borrower of these costs and expenses shall not be credited, in
any way or to any extent, against any portion of the outstanding balance of the
Loan; and

(i) At the time of each Extension Request and on the first day of each Extension
Period, Agent shall have determined that the Loan is in balance pursuant to
Section 3.2.

Notwithstanding Borrower’s right to extend the Maturity Date of the Loan as set
forth above, Borrower hereby agrees that Agent and the Lenders shall have no
commitment or obligation to extend the Maturity Date unless each of the
foregoing conditions shall have been satisfied.

1.5 Calculation of Interest. From and after the date hereof, and until the date
on which the Note is paid in full, Borrower shall pay interest only on the
outstanding Principal Balance at the

 

12

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

rate per annum equal to the LIBOR Rate, except as otherwise provided in this
Agreement and the Loan Documents.

1.6 Regulatory Costs. Notwithstanding any other provision herein, if any
Regulatory Change shall change the basis of taxation of payments to the Lenders
of the principal of or interest on any LIBOR Rate Advance or any other fees or
amounts payable hereunder (other than taxes imposed on the overall net income of
the Lenders by the jurisdiction in which the Lenders have their principal
offices or by any political subdivision or taxing authority therein), or shall
subject the Lenders to any new or additional charge, fee, withholding or tax of
any kind with respect to the Loan hereunder or change the method of taxation of
the Loan or impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit or loan commitments extended by, the Lenders (except any such reserve
requirement which is reflected in LIBOR) or shall impose on the Lenders or the
London interbank market any other condition affecting this Agreement, the Note
or the LIBOR Rate Advances made by the Lenders, and the result of any of the
foregoing shall be to increase the cost to the Lenders of making or maintaining
any LIBOR Rate Advance or to reduce the amount of any sum received or receivable
by the Lenders hereunder (whether of principal, interest or otherwise) in
respect thereof, by an amount deemed by such Lender to be material, then
Borrower shall pay to Agent for the benefit of such Lender upon demand, such
additional amount or amounts as will compensate such Lender for such additional
costs or reduction, including lost income resulting therefrom as reasonably
determined by such Lender. A statement from such Lender setting forth such
amount or amounts as shall be necessary to so compensate such Lender shall be
delivered to Borrower and shall, in the absence of manifest error, be conclusive
and binding upon Borrower. Borrower shall pay Agent on behalf of such Lender the
amount shown as due on any such statement within ten (10) Business Days after
its receipt of the same. Failure on the part of any Lender to demand
compensation for any increased costs, lost income or reduction in amounts
received or receivable shall not constitute a waiver of such Lender’s rights to
demand compensation for any increased costs or reduction in amounts received or
receivable. The protection under this section shall be available to the Lenders
regardless of any possible contention of the invalidity or inapplicability of
any law, regulation or directive which shall give rise to any demand by the
Lenders.

1.7 Inability to Determine LIBOR. In the event that on any date for determining
the LIBOR Rate, Agent shall determine (which determination shall be conclusive
in the absence of manifest error) that, by reason of circumstances affecting the
London interbank market, adequate and fair means do not exist for ascertaining
the LIBOR Rate, Agent shall promptly give to Borrower notice (confirmed as soon
as practicable in writing) of the nature and effect of such circumstances, and
the Principal Balance shall bear interest at a rate based upon an alternate
index selected by the Agent, reasonably comparable to that of LIBOR, intended to
generate a return substantially the same as that generated by the LIBOR Rate. If
at any time subsequent to Agent’s giving of such notice, Agent determines that
because of a change in circumstances the LIBOR Rate is again available to
Borrower, Agent shall so notify Borrower and shall convert the rate of interest
payable with respect to such portion of the Principal Balance from such
alternative rate to the LIBOR Rate. Nothing in this Section shall affect the
LIBOR Rate then in effect on any LIBOR Rate Advance outstanding at the time of
receipt by Borrower of such notice until the expiration of the LIBOR Rate period
in effect with respect to such LIBOR Rate Advance at such time.

1.8 Illegality. Notwithstanding anything to the contrary herein contained, if
any Regulatory Change shall make it unlawful for Agent and/or the Lenders to
make or maintain any LIBOR Rate Advance or to give effect to its obligations as
contemplated hereby, then, by written notice to Borrower, Agent may:

 

13

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

(a) declare that LIBOR Rate Advances will not thereafter be made hereunder, in
which event Borrower shall be prohibited from requesting LIBOR Rate Advances,
and the Lenders shall not be required to make LIBOR Rate Advances to Borrower,
hereunder unless such declaration is subsequently withdrawn; and

(b) require, but only to the extent and for so long as the Regulatory Change
affects outstanding LIBOR Rate Advances, that all outstanding LIBOR Rate
Advances made by Lenders be converted to Prime Rate Advances as of the effective
date of such notice as is hereinafter provided for (notwithstanding any
provisions of the Note or this Agreement to the contrary), and interest shall
accrue thereon, from and after said date, at the Prime Rate or the Default Rate,
whichever is then applicable. For purposes of this Section, a notice to Borrower
by Agent shall be effective, if lawful, on the date of receipt by Borrower.

1.9 Capital Adequacy. Borrower shall also pay to the applicable Lenders from
time to time on demand such amounts as such Lender may determine to be necessary
to compensate such Lender for any costs which such Lender determines are
attributable to the extension of credit hereunder in respect of any amount of
capital maintained by such Lender or any of its affiliates pursuant to any law,
guideline or regulation of any jurisdiction or any interpretation, directive or
request (whether or not having the force of law) of any court or governmental or
monetary authority enacted, whether proposed on the date of this Agreement or
enacted, promulgated or issued after the date of this Agreement, but only to the
extent that such costs are charged generally by such Lender to similarly
situated borrowers in similar loan transactions; provided, however, that the
applicable Lender(s) shall use good faith efforts to provide Borrower with
notice of such amounts not later than ten (10) Business Days after the date on
which such Lender(s) learn of the same. Without limiting the foregoing, such
compensation shall include an amount equal to any reduction in return on assets
or return on equity to a level below that which the Lenders could have achieved
absent their extension of credit hereunder and but for such law, regulation,
interpretation, directive or request. Each Lender will notify Agent as promptly
as practicable after it determines to demand such compensation.

1.10 [Intentionally Omitted].

1.11 Default Rate. If a default shall occur and continue beyond any applicable
notice, cure or grace period under the Note, this Agreement or any of the other
Loan Documents or the entire Principal Balance, all interest accrued thereon,
and all other amounts payable under the Loan have not been repaid on or before
the Maturity Date, then the entire Principal Balance shall (without notice to or
demand upon Borrower) become due and payable on said date, together with all
unpaid, accrued interest thereon and all other amounts payable under the Loan,
and with interest computed thereon from and after that date at a rate which is
five percent (5%) per annum in excess of the current rate of interest accruing
on the Principal Balance, or at the maximum lawful rate of interest which may be
charged thereon by Agent, if any, whichever is less (hereinafter called “Default
Rate”), until all such amounts are paid in full.

1.12 Late Payment Charge. In the event that any required payment of principal
and/or interest hereunder (other than full payment at maturity) is not made
within five (5) days of the due date thereof, Borrower shall pay to Agent an
additional payment of a late payment charge to compensate for Lenders’ loss of
use of funds and for the expenses of handling the delinquent payment, in an
amount equal to five percent (5.0%) of such delinquent payment. In the event the
maturity of the indebtedness hereunder is accelerated by Agent, this section
shall apply only to payments overdue prior to the time of such acceleration.

 

14

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

1.13 Effective Rate. Borrower, Agent and the Lenders agree that no payment of
interest or other consideration made or agreed to be made by Borrower to Agent
and/or the Lenders pursuant to this Agreement, the Note, the Deed of Trust or
any other instrument referring to or securing the Note shall, at any time, be
deemed to have been computed at an interest rate in excess of the maximum rate
of interest permissible by law, if any. In the event such payments of interest
or other consideration provided for in this Agreement, the Note, the Deed of
Trust or any other instrument referring to or securing the Note shall result in
payment of an effective rate of interest which, for any period of time, is in
excess of the limit of the usury law or any other law applicable to the Loan
evidenced by the Note, all sums in excess of those lawfully collectible as
interest for the period in question shall, without further agreement or notice
between or by any party or parties hereto, be applied to the Principal Balance
immediately upon receipt of such monies by Agent with the same force and effect
as though Borrower had specifically designated, and Agent had agreed to accept,
such extra payments as a principal payment, without premium or penalty. If
principal has been fully paid, any such excess amount shall be refunded to
Borrower. This provision shall control over every other obligation of Borrower,
Agent and the Lenders hereunder and under the Note, the Deed of Trust and any
other instrument which secures the Note.

1.14 Payments. All payments made under the Note shall be applied to any late
payment charge then due, to accrued interest, to the Principal Balance and, if
Agent and the Lenders have advanced any sums under the terms of any instrument
which secures the Note, to repayment of the funds so advanced, even though the
same have become part of the Principal Balance, together with interest thereon
at the Default Rate, in such order as Agent, at its option, may elect. All
payments made under the Loan shall be made in immediately available funds,
without counterclaim or set off and free and clear of, and without any deduction
or withholding for any taxes or other payments.

1.15 Fees. On the date hereof and on or before the dates set forth therein,
Borrower shall pay Agent all fees, costs and expenses referenced in the Fee
Letter. The agency fee set forth in the Fee Letter is for the services to be
performed by Agent in acting as Agent and is fully earned on the date paid. The
agency fee paid to the Agent is solely for its own account and is nonrefundable.

1.16 No Waiver by Agent. Agent shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies, and no waiver
of any kind shall be valid unless in writing and signed by Agent. All rights and
remedies of Agent under the terms of this Agreement, the Note, or any of the
other Loan Documents, and under any statutes or rules of law shall be cumulative
and may be exercised successively or concurrently. Any provision of this
Agreement and the Note which may be unenforceable or invalid under any law shall
be ineffective to the extent of such unenforceability or invalidity without
affecting the enforceability or validity of any other provision hereof.

II. CONDITIONS OF BORROWING

Neither Agent nor the Lenders shall be required to make any advances hereunder
until the pre-closing requirements, conditions and other requirements set forth
below have been completed and fulfilled to the satisfaction of Agent, at
Borrower’s sole cost and expense. It is agreed, however, that Agent and the
Lenders may, in their discretion, make advances prior to completion and
fulfillment of any or all of such pre-closing requirements, conditions and
requirements, without waiving their right to require such completion and
fulfillment before any additional advances are made.

2.1 Pre-Closing Requirements. At least five (5) Business Days prior to the
closing of the Loan, Borrower shall provide to Agent each of the following, in
form and substance acceptable to Agent.

 

15

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

(a) A commitment for the Title Policy or a preliminary title report from the
Title Company, complying with the standard requirements of Agent therefor, a
copy of which has been delivered to Borrower.

(b) Two (2) complete sets of the Plans for the Improvements set forth in Exhibit
M. All mechanical, electrical, structural and other specialized drawings for the
Improvements shall be signed by licensed engineers of the respective disciplines
normally responsible for such drawings. All portions of such Plans prepared by
the Project Architect shall be signed by the Project Architect.

(c) The General Contractor’s construction contract and the guarantee given to
Owner in connection therewith (collectively, the “Construction Contract”) and a
schedule of values of all trades, the Project Architect’s agreement (the
“Architect’s Agreement”), a schedule listing all subcontracts signed to date
relating to the construction of the Improvements on the Property, and such other
contracts, subcontracts and schedules relating to the Property as Agent may
reasonably require to the extent then executed.

(d) Three (3) copies of a current, certified ALTA/ACSM land title survey
prepared in accordance with Agent’s standard requirements therefor, copies of
which have been delivered to Borrower.

(e) Soil reports on the Land, showing that the soil will adequately support the
Improvements.

(f) An Environmental Audit running to the benefit of Agent, satisfactory to
Agent, and all reports, data and other information produced in connection with
the Tests. The Environmental Audit shall also specify whether or not any
environmental assessment, study or statement with respect to the Property is
required by any Governmental Requirement. If such an assessment, study or
statement is so required, Borrower shall provide a copy thereof to Agent.

(g) Copies of insurance policies or certificates of insurance for Borrower and
the General Contractor written by insurers satisfactory to Agent and in amounts
satisfactory to Agent, prepared in accordance with Agent’s standard requirements
therefor, a copy of which has been delivered to Borrower. Agent confirms that
the insurance coverage currently carried by Borrower and General Contractor, as
previously provided to Agent, is currently satisfactory as to the insurer and
all other requirements; provided, however, nothing contained herein shall be
deemed to limit Agent’s right to modify its insurance requirements from time to
time.

(h) Borrower’s estimated schedules for construction of the Improvements and for
disbursement of the Loan proceeds.

(i) Copies of all building permits required for the then current stage of
construction of the Improvements, and a schedule of all other necessary licenses
and permits which must be obtained in order to occupy and operate the Property.

(j) A zoning opinion from Borrower’s counsel in form and substance acceptable to
Agent.

(k) An appraisal of the Property showing an “as stabilized” loan to value ratio
less than or equal to seventy-five percent (75%), addressed to Agent, prepared
by an M.A.I. appraiser acceptable to Agent.

 

16

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

(l) Letters addressed to Agent from the suppliers confirming the availability of
water, storm and sanitary sewer, gas, electric and telephone utilities for the
Improvements, prepared in accordance with Agent’s standard requirements
therefor, copies of which have been delivered to Borrower.

(m) A Certificate of the Project Architect (the “Architect’s Certificate”)
addressed to Agent, prepared in accordance with Agent’s standard requirements
therefor, a copy of which has been delivered to Borrower. Borrower agrees that
it shall not, without the prior written consent of Agent, consent to any release
or settlement of any claims under the Architect’s Certificate or any agreements
pursuant to which the Plans and Specifications were, or are to be, prepared,
including, but not limited to, any architect’s contracts, which consent shall
not be unreasonably conditioned, withheld, or delayed given the overall
interests of constructing the Improvements and otherwise developing the
Property.

(n) UCC chattel lien searches from the Maryland State Department of Assessments
and Taxation (“MSDAT”) in the name of Borrower.

(o) A Certificate of Good Standing for Borrower, currently issued by MSDAT;
copies of Borrower’s Limited Partnership Agreement, Certificate of Limited
Partnership currently certified by MSDAT, Certificate of Fact currently issued
by the Virginia State Corporation Commission, and resolutions of Borrower’s
general partner authorizing the transaction described herein, all currently
certified by Borrower’s general partner; a Certificate of Good Standing for
Guarantor, currently issued by MSDAT; and copies of the Guarantor’s Articles of
Incorporation, currently certified by MSDAT, and Guarantor’s Bylaws, all
currently certified by Guarantor.

(p) A copy of each agreement relating to the management, operation or
maintenance of the Property.

(q) A proposed Operating Budget for the Property.

(r) The most current available annual financial statements for Borrower and
Guarantor on a consolidated basis, as well as financial statements on a
consolidated basis for each of the three (3) full fiscal years of Guarantor
immediately preceding the time period covered by said current financial
statements;

(s) All property tax information regarding the Property requested by Agent;

(t) The Sworn Construction Cost Statement for the Property;

(u) A flood zone certification indicating that the portion of the Property on
which the Improvements are located is not located in a flood plain or any other
flood prone area, as designated by any governmental agency; provided, however,
that if the portion of the Property on which the Improvements are so located,
Borrower shall obtain and deliver to Agent evidence of flood insurance
acceptable to Agent;

(v) A copy of any subdivision plat and site plan for the Property;

(w) One or more standard forms of lease to be used by Borrower in leasing
residential, retail and office space within the Property;

(x) Copies of the Leadership Agreements;

 

17

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

(y) Copies of the Proffers;

(x) Other agreements, documents and exhibits, without limitation, which may be
required, in Agent’s judgment, exercised in good faith, to assure compliance
with the requirements of this Agreement.

In addition to the above, at least five (5) Business Days prior to the initial
advance of Loan Proceeds, Borrower shall provide to Agent evidence satisfactory
to Agent that Borrower has contributed to the Property cash equity in an amount
not less than $29,735,331.00 prior to the date hereof.

2.2 Loan Documents. Except to the extent expressly set forth below in this
Section 2.2, on or before the date of closing of the Loan, Borrower shall
execute and deliver (or cause to be executed and delivered) to Agent the
following documents in form and substance acceptable to Agent and to its
counsel, to evidence and secure the Loan:

(a) The Note.

(b) The Deed of Trust.

(c) This Agreement.

(d) An Assignment of Leases and Rents.

(e) An Indemnification Agreement.

(f) A first security interest in all Equipment and in all of Borrower’s
intangible property relating to the Property, created and evidenced by a
security agreement (which may be incorporated within the Deed of Trust) and by
appropriate Uniform Commercial Code financing statements.

(g) A covenant compliance certificate, in the form attached hereto as Exhibit O.

(h) The Fee Letter.

(i) An assignment of the Plans and of the Project Architect’s agreement pursuant
to which the same were prepared, along with written acknowledgment from the
Project Architect authorizing Agent to rely on and utilize the Plans, without
additional charge, and further confirming to Agent that, if an Event of Default
has occurred, the Project Architect will cooperate with Agent regarding the
completion of construction of the Property.

(j) An assignment of the Construction Contract for the Property and an agreement
from the General Contractor to honor and perform the same for Agent in the event
of an Event of Default under the Loan Documents.

(k) Such other documents as Agent may reasonably require to evidence and secure
the Loan.

Agent may designate which of the Loan Documents are to be placed of record, the
order of recording thereof, and the offices in which the same are to be
recorded. Borrower shall pay all documentary, recording and/or registration
taxes and/or fees, if any, due upon the Loan Documents.

 

18

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

2.3 Title Insurance. Agent shall have received a pro forma copy of the Title
Policy.

2.4 Opinion of Borrower’s Attorneys. Agent shall have received from outside
counsel for Borrower and Guarantor a current written opinion, subject to
customary assumptions and qualifications, in scope, form and substance
acceptable to Agent.

III. ADVANCES OF LOAN PROCEEDS

3.1 General. Subject to the terms and conditions set forth in this Agreement,
each Lender shall, pro rata according to such Lender’s Commitment Percentage of
the Committed Amount, make advances for the benefit of Borrower, not more
frequently than once per month, in such amounts as Borrower may request, in
accordance with the terms of this Agreement. All monies advanced by Agent and
the Lenders (including amounts payable to Agent and the Lenders and advanced by
Agent and the Lenders to themselves pursuant to the terms hereof) shall
constitute loans made to Borrower under this Agreement, evidenced by the Note
and this Agreement and secured by the other Loan Documents, and interest shall
be computed thereon, as prescribed by this Agreement and the Note, from the date
of the Advance, whether or not an Advance made to the Title Company is fully
disbursed by the Title Company or is withheld in full or in part.

Subject to Section 6.2(e), Agent reserves the right, exercisable after the
occurrence of an Event of Default and for so long as such Event of Default
exists, to make advances of amounts which are allocated to any of the designated
items in the Sworn Construction Cost Statement for such other purposes or in
such different proportions as Agent may, in its sole discretion exercised in
good faith, deem necessary or advisable.

No advance shall constitute a waiver of any condition precedent to the
obligation of the Lenders to make any further advance. All conditions precedent
to the obligation of the Lenders to make any advance are imposed hereby solely
for the benefit of Agent and the Lenders, and no other party may require
satisfaction of any such condition precedent or shall be entitled to assume that
Agent and the Lenders will make or refuse to make any advance in the absence of
strict compliance with such condition precedent.

Lenders may advance to themselves, when due after the occurrence of an Event of
Default and for so long as such Event of Default exists, from the proceeds of
the Loan, without further order or request from Borrower, all interest payable
to the Lenders under the terms hereof or of the Note, and shall, at Agent’s
option, advance to Agent all other sums then due under this Agreement or under
any of the other Loan Documents, including but not limited to fees, attorneys’
fees, Inspecting Architect’s fees and all out-of-pocket expenses incurred by
Agent in connection with this Agreement and the other Loan Documents. After the
occurrence of an Event of Default and for so long as such Event of Default
exists, Agent shall also have the right, but not the obligation, to advance and
directly apply the proceeds of the Loan to the satisfaction of any of Borrower’s
other obligations hereunder or under any of the other Loan Documents.

In the event that the total amount of the Loan exceeds the amount needed to
fully pay all cost allocations set forth on the Sworn Construction Cost
Statement approved by Agent, Agent and the Lenders shall not be required to
advance, and Borrower shall not be entitled to receive, the excess. Upon
extension of the Maturity Date as herein provided, Borrower shall not be
entitled to borrow, and Agent and the Lenders shall not be obligated to advance,
additional proceeds of the Loan.

 

19

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

3.2 Loan In Balance. Agent and the Lenders shall not be obligated to make any
advance of Loan proceeds unless and until Borrower has provided Agent with
evidence, acceptable to Agent, that the Loan is in balance: i.e., that all
remaining unpaid costs of the Property for the remaining period until the
Maturity Date, as determined by Agent, in its sole discretion exercised in good
faith, including the Reserves, do not exceed the sum of the amount of the Loan
proceeds not yet advanced by the Lenders, the remaining amount, if any, to be
contributed in respect of the Equity Requirement, and the net operating income
from the Property reasonably projected to be received during such period. The
initial amount of the Reserves has been designated in the Sworn Construction
Cost Statement. The required amount of said Reserves shall decline as costs and
payments for which they are maintained are paid therefrom; provided, however,
that the amount of any such Reserves shall never decline below an amount
sufficient to pay all costs and payments for which it is maintained which then
remain unpaid, as determined by Agent. If the Reserves become depleted, such
depletion shall not limit Borrower’s obligation hereunder to pay all sums which
otherwise would have been payable from such Reserves.

Notwithstanding any provision of this Agreement to the contrary, in the event
that Agent or Borrower determines in good faith that the Loan is not in balance,
it shall notify the other party hereto of such determination, and Borrower
shall, within ten (10) Business Days, deposit with Agent funds equal to said
insufficiency in order to bring the Loan back into balance. Said funds shall be
disbursed by Agent pursuant to and in accordance with the disbursement
procedures set forth in this Agreement prior to any advances by Agent or the
Lenders of additional Loan proceeds.

3.3 Inspections. Agent, the Title Company, the Inspecting Architect, Consultants
and their representatives shall have access to the Property at all reasonable
times and shall have the right to enter the Property and to conduct such
inspections thereof as they shall reasonably deem necessary or desirable for the
protection of the interests of Agent and the Lenders.

Agent may retain the Inspecting Architect, and any other consultants deemed
necessary or desirable by Agent, in its sole discretion exercised in good faith,
at Borrower’s expense, to make periodic inspections of the Property and to
review all change orders relating to the Property. Agent may request the
Inspecting Architect, before any advance of Loan proceeds is made, to inspect
all work and materials for which payment is requested and all other work upon
the Property, review the current Draw Request, approve such work and Draw
Request and/or submit to Agent a progress inspection report. Agent may also
retain such other Consultants as Agent reasonably deems necessary or convenient
to perform such services as may, from time to time, be required by Agent in
connection with the Loan, this Agreement, the other Loan Documents or the
Property.

Neither Borrower nor any third party shall have the right to use or rely upon
the reports of the Inspecting Architect or any other reports generated by Agent
or its Consultants for any purpose whatsoever, whether made prior to or after
commencement of construction. Borrower shall be responsible for making its own
inspections of the Property during the course of construction and shall
determine to its own satisfaction that the work done and materials supplied are
in accordance with applicable contracts with its contractors. By advancing funds
after any inspection of the Property by Agent or the Inspecting Architect, Agent
shall not be deemed to waive any Event of Default, waive any right to require
construction defects to be corrected, or acknowledge that all construction
conforms with the Plans.

Notwithstanding any provision of this Agreement to the contrary, in the event
that Agent should determine in good faith that the actual quality or value of
the work performed or the materials furnished does not correspond with the
quality or value of the work required by the Plans, Agent shall

 

20

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

notify Borrower of its objections thereto, and, as soon as reasonably
practicable, Borrower shall correct the conditions to which Agent objects if
such conditions are not in accordance with the Plans.

3.4 Responsibility of Agent and the Lenders. It is expressly understood and
agreed that neither Agent nor the Lenders assume any liability or responsibility
for the sufficiency of the Loan proceeds to complete the Property, for
protection of the Property, for the satisfactory completion of the Property, for
inspection during construction, for the adequacy or accuracy of the Sworn
Construction Cost Statement, for any representations made by Borrower, or for
any acts on the part of Borrower or its contractors to be performed in the
construction of the Property.

3.5 Advance Procedures.

(a) Borrower shall submit to Agent a copy of the Sworn Construction Cost
Statement for the Property, and shall advise Agent of the names of each
Contractor providing goods or services in connection with the development and
construction of the Improvements. If requested by Agent, Borrower shall also
furnish to Agent a copy of each contract with each of the Contractors. Borrower
shall keep the Agent advised at all times of the names of all Contractors, and
of the type of work, material or services and of the dollar amount covered by
each of their respective contracts with Borrower or with the General Contractor.
It is understood that only Contractors whose names, contract descriptions and,
after a request therefor, contracts have been furnished to Agent shall be
entitled to receive disbursements of Loan proceeds under this Agreement.
Borrower shall also provide or cause to be provided to Agent a date down of the
Title Policy.

(b) Borrower shall either (a) refrain from commencing construction of, and from
accepting delivery of materials for, the Property prior to the recording of the
Deed of Trust, or (b) provide such evidence and/or documents to the Title
Company as shall be sufficient to secure from the Title Company priority
insurance over all possible mechanic’s lien claims, relating to construction of
the Improvements that may have commenced prior to the recording of the Deed of
Trust.

(c) Subject to the provisions of this Section 3.5(c), Borrower may obtain
advances for disbursement to Contractors only to the extent of the amount of the
contract work satisfactorily completed or materials actually incorporated into
the Property by each such Contractor in accordance with his contract, less
retainage determined and held in accordance with the terms of the Construction
Contract. Borrower agrees that all sums requested hereunder for disbursement to
each Contractor shall not exceed that amount; provided, however, Agent will, at
Borrower’s request, make Advances for materials, supplies and equipment
purchased for the Improvements stored on-site, or off-site within the
continental United States, in either case which materials will largely be those
made specifically for inclusion in the Improvements rather than being stock
goods, the aggregate of which Advances shall not at any time exceed $2,500,000,
and otherwise in accordance with the provisions of the balance of this
Section 3.5(c).

Borrower may not obtain advances for disbursement to Contractors for the cost of
materials acquired for the Property and stored on-site but not yet incorporated
therein, unless Agent has received and approved (i) such financing statements
and other documents and evidence as Agent may reasonably require sufficient to
create, perfect and protect a first lien on said materials (including, but not
limited to, lien searches) which such documents and evidence Agent shall
request, to the extent Agent determines them to be necessary, promptly after
receipt of the applicable Draw Request Form, (ii) evidence that upon payment
therefor Borrower has acquired title to the same and that the same are covered
by all risk insurance covering 100% of the total value of said materials, with
Agent, Borrower and the General Contractor as named insureds under the policy;
(iii) such materials are reasonably protected against theft or damage as
determined by the Inspecting Architect; (iv) the Inspecting Architect

 

21

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

has viewed and inspected such materials; and (v) in the opinion of the
Inspecting Architect, the stored materials are physically secured and can be
incorporated into the Improvements within ninety (90) days. Each request for an
advance of Loan proceeds for materials to be stored on-site shall constitute
Borrower’s representation to Agent and Lenders that the conditions set forth in
items (i) through (v) above in this paragraph have been satisfied.

Borrower may not obtain advances for disbursement to Contractors for the cost of
materials acquired for the Property and stored off-site but not yet incorporated
therein, unless Agent has received and approved (i) such security agreements,
financing statements and other documents and evidence as Agent may reasonably
require sufficient to create, perfect and protect a first lien on said materials
including, but not limited to, lien searches which materials Agent shall
request, to the extent Agent determines them to be necessary, promptly after
receipt of the applicable Draw Request Form, (ii) evidence that Borrower has
acquired title to the same and that the same are covered by all risk insurance
covering 100% of the total value of said materials for all periods until
delivery of the same to the Property, with Agent, Borrower and the General
Contractor as named insureds under the policy; (iii) information regarding the
place of storage therefor on the Land, in a secure or bonded warehouse or at
other facilities or locations off the Property reasonably acceptable to Agent
(the Agent agreeing for this purpose that the premises of the supplier or
subcontractor from which the materials are being obtained shall be an acceptable
location); (iv) certification from the supplier or subcontractor that the
materials are stored in a secure manner at a location separate from any
materials not owned by Borrower and are clearly identified as owned by Borrower
and subject to a security interest in favor of Agent on behalf of the Lenders;
and (v) a written statement from the holder of said materials to the effect that
Borrower and/or the General Contractor, or their representatives may freely
inspect said materials at all reasonable times upon reasonable advance notice
(Borrower agreeing that, for this purpose, Agent and the Inspecting Architect
shall be identified to such holder as such a representative). Each request for
an advance of Loan proceeds for materials to be stored off-site shall constitute
Borrower’s representation to Agent and Lenders that the conditions set forth in
items (i) through (v) above in this paragraph have been satisfied.

Borrower covenants to deliver to Agent, within ten (10) days of any such
Advance: (A) for materials owned by Borrower outright, (x) paid bills and
original warehouse receipts or other documents of title which correspond to the
materials so purchased and stored, (y) a statement from the seller of said
materials to the effect that title thereto has passed to Borrower outright, and
that no lien has or will be filed or claimed by the seller in connection
therewith and (z) a certificate of Borrower to the effect that said materials
are owned by Borrower outright, free and clear of all liens other than the lien
held by or on behalf of Lenders and that all of the applicable terms of this
paragraph have been complied with and (B) for materials for which the advance
was paid as a down payment or deposit, (1) paid bills and original warehouse
receipts, as applicable, which correspond to the materials to which a deposit or
down payment was made, (2) a statement from the seller of said materials to the
effect that all payments due and payable with respect to such materials have
been paid, together with lien waivers, if appropriate, in connection therewith,
and (3) a certificate of Borrower to the effect that all of the applicable terms
of this paragraph have been complied with (the representations set forth above
and the statements contained in such certificates shall be deemed to be
“representations and warranties” of Borrower with the same force and effect as
if they had been set forth in Article IV and the accuracy thereof shall be
subject to independent verification by Agent and the Inspecting Architect).

Agent and the Lenders shall not be required to make the final advance for the
payment of the full amount of each Contractor’s contract until Agent is
satisfied that such Contractor’s portion of the work on the Improvements has
been completed in accordance with the approved Plans, and compliance with all
requirements set forth in this Agreement.

 

22

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

(d) Whenever Borrower desires to obtain an advance of Loan proceeds, Borrower
shall submit a signed Draw Request, in the form of Exhibit K hereto or such
other form as Agent may reasonably require, to Agent and to the Inspecting
Architect at least ten (10) Business Days prior to the date on which the
requested advance is to be made (“Advance Date”) and within three (3) Business
Days after receipt thereof, Agent shall provide a complete copy of such Draw
Request (including the supporting detail provided pursuant hereto) to the
Lenders. Borrower shall also simultaneously submit to Agent the following:

(1) A certificate (which may be incorporated in or attached to the Draw Request)
relating to each Contractor who is to receive a disbursement from the advance,
signed by the Project Architect, or by another construction supervisor approved
by Agent (provided that in the case of Contractors engaged directly by Borrower,
such certification shall be made by Borrower), stating that each such Contractor
has satisfactorily completed the work for which disbursement (less any required
retainage) is requested in such Draw Request. Such certificate shall be provided
on AIA Form G702/703.

(2) An unconditional waiver of mechanic’s lien and/or materialman’s lien,
executed by the General Contractor and each direct subcontractor of the General
Contractor to which any portion of the immediately preceding advance (“Prior
Advance”) of Loan proceeds was paid, covering liens for all work done and
materials supplied for which disbursement was made from the Prior Advance, in
the form required by Agent and, if appropriate, the Title Company. Such waivers
shall be submitted in each case, unless the Agent determines that such Advance
does not include payment for any lienable work. Agent hereby approves the form
of lien waiver attached hereto as Exhibit J.

(3) To the extent not yet fully contributed, evidence satisfactory to Agent of
the contribution, since the date of the last Advance, of additional equity in
respect of the Equity Requirement, in an amount not less than the amount of the
Requested Advance.

(4) Such other supporting evidence as may be reasonably requested by the Agent
to establish the cost or value of the Improvements for which disbursement is to
be and has been made.

(e) Prior to the initial disbursement of Loan proceeds, upon Completion of the
Improvements, and prior to the final disbursement for construction costs of the
Improvements, Borrower shall furnish to Agent and the Title Company six
(6) copies of an acceptable survey, showing the exact location of the
Improvements. When the foundation for the Improvements is completed, Borrower
shall furnish to Agent and the Title Company six (6) copies of a wall check
survey in form and substance satisfactory to Agent. Disbursements shall be made
by the Agent only if the Title Company has confirmed in writing its willingness
to insure over any adverse matters shown by such survey (to the extent such
affirmative coverage is acceptable to Agent) or such matters are otherwise
addressed to the satisfaction of Agent.

Agent and/or Borrower shall provide notice to the Title Company when Agent has
determined that a requested Advance is approved, at which time the Title Company
shall date down its examination of title. The Title Company shall (i) give Agent
immediate notice by telephone if any intervening liens are disclosed (other than
those expressly listed in the Title Company’s loan policy of title insurance or
subsequent amendments thereto previously given to Agent), and (ii) on the date
of each Advance, deliver to Agent a written continuation of said loan policy of
title insurance, dated as of the relevant Advance Date, insuring the priority of
the lien of the Deed of Trust in an amount equal to advances made by the Lenders
through such date. If any such intervening liens or other matters, which are not
bonded over by Borrower or otherwise permitted by this Agreement and may, in
Agent’s or the Majority Lenders’ reasonable determination, jeopardize the
Lenders’ security interest in the Property, are

 

23

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

disclosed by said continuation or are in any other manner discovered by the
Title Company or Agent, the Agent may (or shall, upon the written direction of
the Majority Lenders), refrain from making further disbursements until Agent
(following withdrawal of Majority Lenders’ written direction to refrain from
further disbursements, if applicable) notifies the Title Company that such
intervening liens or other matters have been waived by the Agent or the Majority
Lenders, as applicable, or satisfied. Upon demand of Agent, Borrower shall
promptly cause any such liens or other matters to be satisfied of record or
bonded, or shall make other arrangements with respect to the discharge thereof
or other protection with respect thereto satisfactory to Agent.

On each Advance Date, if all the terms and conditions of this Agreement have
been complied with by Borrower, to the satisfaction of Agent, if no default or
Event of Default exists hereunder or under any of the other Loan Documents,
Agent shall advance to Borrower (or, at Borrower’s direction, to the General
Contractor) in a manner satisfactory to the Agent, the principal amount of the
requested advance (less any required retainage, if applicable, and less amounts
payable to and advanced by Agent to itself and the Lenders).

(g) The provisions of this Agreement requiring submission of the Architect’s
Certificate and related documents and the required retainage shall not apply
with respect to Loan proceeds to be disbursed for the items listed below, which
may be disbursed in full upon submission of a Draw Request listing such items
signed by Borrower or Agent and/or the following special documentation, if any,
to Agent or as otherwise provided by this Agreement:

 

ITEM

  

SPECIAL DOCUMENTATION

Agent or Lender charges (interest, fees, etc.)   

None other than notice to Borrower during periods when no Event of Default
remains uncured

Attorneys’ fees (including Agent’s counsel) and Inspecting Architect’s fees   

Copies of Statements providing general description of work for total amount of
each request

Real estate taxes on the Property   

Copies of Bills

Insurance Premiums   

Copies of Statements

Other indirect (non-construction) items   

As reasonably specified by Agent and, if appropriate, the Title Company

Soft costs aggregating less than $10,000 per vendor for any Draw Request   

None

If Borrower directly pays certain costs of construction, the Agent may disburse
Loan proceeds, advanced for payment of such construction costs, directly to
Borrower, as a reimbursement for such payment; provided that all of the other
requirements of this Agreement, including, but not limited to, the presentation
of waivers of lien with respect thereto, are fulfilled.

 

24

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

(h) Agent may take such steps as it may deem appropriate, at its option, to
verify the application of Loan proceeds to work done and material furnished for
the Property, and to vary the disbursement procedures herein set forth, if the
same becomes necessary or desirable, in Agent’s sole discretion exercised in
good faith, to assure the proper application of Loan proceeds and/or to preserve
the first lien status of the Deed of Trust with respect to disbursements made
pursuant hereto, including, but not limited to, making disbursements directly to
subcontractors after the occurrence of an Event of Default and for so long as
such Event of Default exists. However, Agent shall not be obligated to conduct
any such verification or to so vary said procedures.

(i) The Borrower shall keep records showing the names of all Contractors and
other payees to whom disbursements of Loan proceeds are made, the date of each
disbursement, and the amount of each disbursement, which records may be
inspected by Agent.

(j) In the event that the Agent shall determine, in its reasonable judgment,
that proper documentation to support a given disbursement, as required by this
Agreement, has not been furnished, the Agent shall withhold payment of all or
such portion of such disbursement as shall not be so supported by proper
documentation, and shall promptly notify Borrower of the discrepancy in or
omission of such documentation. Such funds shall remain available for
advancement under this Agreement, if the requirements hereof with respect
thereto are later met.

(k) Borrower shall be responsible for making inspections of the Property during
the course of construction, and shall determine to its own satisfaction that the
work done or material supplied by the Contractors to whom disbursements are to
be made out of each advance has been properly done or supplied in accordance
with applicable contracts with such Contractors. The Title Company and the Agent
shall not be required to conduct any inspections of the Property.

(l) It is expressly understood and agreed that neither Agent nor any Lenders
assume any liability or responsibility for the satisfactory completion of the
Improvements, for the adequacy of funds advanced or disbursed pursuant hereto to
complete the Improvements, for inspections during construction, or for any acts
on the part of Borrower or the Contractors to be performed in the construction
of the Improvements.

3.6 Tenant Improvements. Agent will not advance Loan proceeds to pay costs of
Tenant Improvements for any non-residential rentable space within the Property
unless and until, in addition to the other conditions to such advance as
provided in this Agreement, Agent has approved the lease covering said space (to
the extent required by the Loan Documents) and has received from the tenant a
tenant estoppel certificate, in Agent’s form, confirming the existence and terms
of the lease and such other matters as Agent may request (or such other form as
may be specified by the applicable lease if such lease was approved by Agent),
and a budget covering the costs of such Tenant Improvements. If such costs
exceed the amount set forth therefor on the schedule of standard tenant
improvements furnished by Borrower and approved by Agent, Borrower shall pay
said excess, in cash, before Agent will advance Loan proceeds to pay the same.
As soon as practicable following the completion of the Tenant Improvements for
any non-residential space within the Property, Borrower shall deliver to Agent a
tenant estoppel certificate from the applicable tenant, in Agent’s form,
confirming the continued existence of the lease, the absence of any default
thereunder, the completion of such tenant improvements to the tenant’s
satisfaction, the occupancy of the leased space by the tenant and such other
matters as Agent may reasonably require.

3.7 Advances During Property Operation. All income from the Property shall be
used first to pay operating expenses of the Property in accordance with the then
applicable Operating Budget for the Property prepared by Borrower and approved
by Agent and then to pay interest on the Loan, before any

 

25

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

proceeds of the Loan shall be advanced to pay interest on the Loan. If, as and
when the income from the Property is sufficient, in the determination of Agent,
to pay (i) all of the operating expenses of the Property in accordance with such
approved Operating Budget, and (ii) all interest on the Loan as and when such
interest becomes due and payable, then, from and after such event, no further
Advances from the Interest Reserve shall be made or permitted, and any remaining
balance in the Interest Reserve shall not be reallocated and shall be terminated
and the Committed Amount shall be reduced accordingly.

IV. REPRESENTATIONS AND WARRANTIES OF BORROWER

Borrower represents and warrants to Agent and the Lenders that:

4.1 Legal Status of Borrower. Borrower is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Maryland,
duly qualified to transact business under the laws of the Commonwealth of
Virginia, and has all power, authority, permits, consents, authorizations and
licenses necessary to carry on its business, to construct, equip, own and
operate the Property and to execute, deliver and perform this Agreement and the
other Loan Documents; the Guarantor is the sole managing general partner of
Borrower; all resolutions of the general partner of Borrower necessary to
authorize the execution, delivery and performance of this Agreement and of the
other Loan Documents which have been or are to be executed by and on behalf of
Borrower have been duly adopted and are in full force and effect; and this
Agreement and such other Loan Documents have been duly authorized, executed and
delivered by and on behalf of Borrower so as to constitute this Agreement and
such other Loan Documents the valid and binding obligations of Borrower,
enforceable in accordance with their terms, subject only to the effects of
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the rights of creditors generally, principles of equity and
exercise of judicial discretion.

4.2 Title. Borrower is the owner, in fee simple, of the Land, subject to no
lien, charge, mortgage, deed of trust, restriction or encumbrance, except the
Permitted Encumbrances.

4.3 No Breach of Applicable Agreements or Laws. The consummation of the
transactions contemplated hereby and the execution, delivery and/or performance
of this Agreement and the other Loan Documents will not result in any breach of
or constitute a default under any mortgage, deed of trust, lease, bank loan,
credit agreement, or other instrument or violate any Governmental Requirements,
to which Borrower is a party, or by which Borrower may be bound or affected.

4.4 No Litigation or Defaults. As of the date hereof, there are no actions,
suits, proceedings or investigations pending or, to the knowledge of Borrower,
threatened in writing against Borrower or the Property, or involving the
validity or enforceability of the Loan Documents or the priority of the lien
thereof, at law or in equity; in any court or before any federal, state,
municipal or other governmental agency, in an amount greater than or equal to
$500,000, except as previously disclosed to Lender; and Borrower is not in
default with respect to any order of any court or governmental agency having
jurisdiction over Borrower.

4.5 Financial and Other Information. The financial statements of Borrower and
the Guarantor previously or hereafter delivered to Agent fairly and accurately
present, or will fairly and accurately present, the financial condition of
Borrower and the Guarantor, as of the dates of such statements, and neither this
Agreement nor any document, financial statement, financial or credit
information, certificate or statement referred to herein or furnished to Agent
by Borrower or the Guarantor contains, or will contain, any untrue statement of
a material fact or omits, or will omit, a material fact, or is or will be
misleading in any material respect.

 

26

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

4.6 No Defaults under Loan Documents or Other Agreements. There is, and, until
the Lenders have been fully repaid the entire indebtedness evidenced or to be
evidenced by the Note, there will be, no default or Event of Default on the part
of Borrower under the Loan Documents or under any other document, including,
without limitation, the Proffers and the Leadership Agreements, to which
Borrower is a party and which relates to the ownership, occupancy, use,
development, construction or management of the Property. Neither Borrower nor
Guarantor is, nor will be, in default beyond applicable notice, grace or cure
periods under any instrument or agreement under and subject to which any
recourse indebtedness in excess of $100,000.00 in the aggregate or any
nonrecourse indebtedness in excess of $10,000,000.00 in the aggregate for
borrowed money has been issued or is secured.

4.7 Boundary Lines; Conformance with Governmental Requirements and Restrictions.
The exterior lines of the Improvements are, and at all times will be, within the
boundary lines of the Land (except for such encroachments as are otherwise
addressed to the satisfaction of Agent), and Borrower has examined and is
familiar with all applicable covenants, conditions, restrictions and
reservations, and with all applicable Governmental Requirements, including, but
not limited to, building codes and zoning, environmental, hazardous substance,
energy and pollution control laws, ordinances and regulations affecting the
Property, and the Property will in all material respects conform to and comply
with said covenants, conditions, restrictions, reservations and Governmental
Requirements. All Governmental Requirements necessary for the subdivision,
development and construction of the Improvements as contemplated by the Plans
and this Agreement have been obtained, or with respect to construction will be
obtained before the applicable phase of construction commences.

4.8 Loan in Balance. The Loan is in balance, or, if not, Borrower is prepared to
deposit with Agent, immediately upon demand by Agent, sufficient funds to bring
the Loan into balance.

4.9 Architect’s Certificate. To the best of Borrower’s knowledge, the
information set forth in the Architect’s Certificate is true, accurate and
complete.

4.10 Anti-Terrorism Regulations.

(a) General. None of Borrower, Guarantor or any Affiliate is in violation of any
Anti-Terrorism Law or engages in or conspires to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(b) Executive Order No. 13224. None of Borrower, Guarantor or any Affiliate, or
their respective agents acting or benefiting in any capacity in connection with
the Loan or other transactions hereunder, is any of the following (each a
“Blocked Person”):

(1) a Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224;

(2) a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
Executive Order No. 13224;

(3) a Person or entity with which any Bank is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law;

 

27

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

(4) a Person or entity that commits, threatens or conspires to commit or
supports “terrorism” as defined in Executive Order No. 13224;

(5) a Person or entity that is named as a “specially designated national” on the
most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list; or

(6) a Person or entity who is affiliated or associated with a person or entity
listed above.

(c) None of Borrower, Guarantor or any Affiliate, nor any of their agents acting
in any capacity in connection with the Loan, any letters of credit or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to Executive
Order No. 13224.

(d) Neither the Borrower nor any Affiliate, nor any person owning an interest
therein, are a “Special Designated National” or “Blocked Person” as those terms
are defined in the office of Foreign Asset Control Regulations (31 C.F.R. § 500
et. seq.).

4.11 Plans and Specifications. Exhibit M is a true, correct and complete list of
all plans and specifications for the Project as of the date hereof.

THE WARRANTIES AND REPRESENTATIONS IN THIS ARTICLE IV, AND ANY ADDITIONAL
WARRANTIES AND REPRESENTATIONS CONTAINED HEREIN AND IN THE OTHER LOAN DOCUMENTS,
SHALL BE DEEMED TO HAVE BEEN RENEWED AND RESTATED BY BORROWER AT THE TIME OF
EACH REQUEST BY BORROWER FOR AN ADVANCE OF LOAN PROCEEDS.

V. COVENANTS OF BORROWER

While this Agreement is in effect, and until the Lenders have been paid in full
the principal of and interest on all advances made by the Lenders hereunder and
under the other Loan Documents:

5.1 Completing Construction. The parties hereto acknowledge that construction of
the Project has commenced. Borrower shall become a party to no contract for an
amount in excess of $500,000, or more than one contract for any one contractor
for an amount in excess of $1,000,000 in the aggregate, including the General
Contractor’s construction contract, for the performance of any work on the
Property or for the supplying of any labor, materials or services for the
construction of the Improvements and the Tenant Improvements, except upon such
terms and with such parties as shall be approved in writing by Agent. No
approval by Agent of any contract or change order shall make Agent and/or the
Lenders responsible for the adequacy, form or content of such contract or change
order. Borrower shall expeditiously complete the development and construction of
the Improvements in a good and workmanlike manner and in accordance with the
contracts, subcontracts and Plans submitted to and approved by Agent (to the
extent required by this Agreement), and in compliance with all applicable
Governmental Requirements, and any covenants, conditions, restrictions and
reservations applicable thereto, so that Completion of the Improvements occurs
on or before the Completion Date. Borrower shall not permit any approvals issued
pursuant to applicable Governmental Requirements in connection with the
development and construction of the Improvements to expire. Borrower assumes
full responsibility for paying in full for the development and construction of
the Improvements and for the compliance of the Plans and the Property with all

 

28

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

Governmental Requirements and with sound building and engineering practices,
and, notwithstanding any approvals by Agent, neither Agent nor any Lenders shall
have any obligation or responsibility whatsoever for the Plans or any other
matter incident to the Property or the construction of the Improvements.
Borrower shall correct or cause to be corrected (a) any defect in the
Improvements, (b) any departure in the construction of the Improvements from the
Plans or Governmental Requirements, and (c) any encroachment by any part of the
Improvements or any other structure located on the Land on any building line,
easement, property line or restricted area unless such encroachment is either
(i) contemplated by a Permitted Encumbrance or (ii) both minor in nature and
addressed to the satisfaction of Agent. Borrower shall cause all roads necessary
for the utilization of the Property for its intended purposes to be completed
and dedicated (if dedication thereof is required by any governmental authority
or pursuant to any Governmental Requirements), the bearing capacity of the soil
on the Land to be made sufficient to support the Improvements, and sufficient
local utilities to be made available to the Property and installed at costs (if
any) set out in the Sworn Construction Cost Statement, on or before the
Completion Date.

5.2 Changing Costs, Scope or Timing of Work. Borrower shall deliver to Agent
revised sworn statements of estimated costs of the Improvements, showing changes
in or variations from the original Sworn Construction Cost Statement, as soon as
reasonably practicable after such changes are known to Borrower. Borrower shall
deliver to Agent a revised construction schedule, if and when there has been one
or more delays in construction resulting in a net aggregate delay of thirty
(30) days or more.

Borrower shall promptly furnish Agent with two (2) copies of all changes or
modifications in the Plans, contracts or subcontracts for the Property, as
approved by Agent, prior to incorporation of any such change or modification
into the Property, whether or not Agent’s consent to such change or modification
is required hereby; provided that if Agent’s prior consent was not required with
respect to such change, Borrower shall deliver such change at the time of the
next Draw Request. Borrower shall not make or consent to any change or
modification in such Plans, contracts or subcontracts, and no work shall be
performed with respect to any such change or modification, without the prior
written consent of Agent, if such change or modification would in any material
way alter the design or structure of the Improvements or materially change the
rentable area thereof in any way, or increase or decrease the cost of the
Improvements by $500,000.00 or more for any single change or modification, or if
the aggregate amount of all changes and modifications increases the total amount
set forth in the original Sworn Construction Cost Statement by more than
$1,000,000.00; provided, however, that such increases or decreases in costs
shall not include changes in the budget due to construction interest costs).
Agent shall reply within ten (10) Business Days after receipt of (a) the request
for approval of a change order from Borrower and (b) all information reasonably
necessary for Agent and Inspecting Architect to evaluate such proposed change
order. Agent shall promptly notify Borrower if the materials it has received in
connection with any such request for approval are not sufficient to satisfy the
condition set forth in clause (b) of the preceding sentence.

5.3 Balancing the Loan. Borrower shall furnish to Agent, within ten (10) days
after a request therefor by Agent, (a) satisfactory evidence of Borrower’s
projected ability to pay all unpaid costs of completing the Improvements and
operating the Property through the Maturity Date, which projection (“Projected
Sources”) shall include, among other things, the undisbursed Loan proceeds and
net operating income from the Property reasonably projected to be received
during the term of the Loan, and/or (b) except as otherwise set forth in the
definition of the term “Equity Requirement”, cash equal to any difference
between such unpaid costs and Projected Sources, which shall be held and
advanced by Agent pursuant to the terms hereof.

 

29

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

5.4 Paying Costs of Property and Loan. Borrower shall pay and discharge, when
due, all taxes, assessments and other governmental charges upon the Property, as
well as all claims for labor and materials which, if unpaid, might become a lien
or charge upon the Property; provided, however, that Borrower shall have the
right to contest the amount, validity and/or applicability of any of the
foregoing in strict accordance with the terms of the Deed of Trust.

Borrower shall also pay all costs and expenses of Agent (and, during periods
when a default exists, the Lenders) and Borrower in connection with the
Property, the preparation and review of the Loan Documents and the making,
closing, administration and repayment of the Loan, and, reasonable costs
incurred in connection with any transfer of the Loan, including, but not limited
to, the fees of Agent’s attorneys (which, at times when no default exists, shall
be limited to reasonable attorneys’ fees), fees of the Inspecting Architect,
appraisal fees, environmental fees, survey and title search fees, title
insurance costs, disbursement expenses, and all other costs and expenses payable
to third parties incurred by Agent (and, during periods when a default exists,
the Lenders), or Borrower in connection with the Loan. Such costs and expenses
shall be so paid by Borrower whether or not the Loan is fully advanced or
disbursed.

5.5 Using Loan Proceeds. Borrower shall use the Loan proceeds solely to pay, or
to reimburse Borrower for paying, costs and expenses shown on the Sworn
Construction Cost Statement approved by Agent and incurred by Borrower in
connection with the construction of the Improvements on the Land and the
equipping of the Improvements, together with other expenses set forth on the
Sworn Construction Cost Statement approved by Agent and such incidental costs
and expenses relating thereto as may be approved from time to time in writing by
Agent.

No portion of the proceeds of the Loan shall be used, in whole or in part, for
the purpose of purchasing or carrying any “margin stock” as such term is defined
in Regulation U of the Board of Governors of the Federal Reserve System.

5.6 Keeping of Records. Borrower shall set up and maintain accurate and complete
books, accounts and records pertaining to the Property in a manner reasonably
acceptable to Agent and to the Title Company. Upon twenty-four (24) hours prior
notice and during normal business hours, Borrower will permit representatives of
Agent, the Inspecting Architect and the Title Company to have free access to and
to inspect and copy all books, records and contracts of Borrower (other than any
such records relating to prior financing secured by the Property). Any such
inspection by Agent and/or the Inspecting Architect shall be for the sole
benefit and protection of Agent and the Lenders, and Agent shall have no
obligation to disclose the results thereof to Borrower or to any third party
other than the Lenders.

5.7 Providing Financial Information. Borrower shall furnish to Agent such
financial information concerning Borrower and Guarantor, and Borrower’s and
Guarantor’s other assets and investments, as Agent may reasonably request, and
shall furnish to Agent, at Borrower’s sole cost and expense the following:

(a) Fiscal Year. Not later than one hundred ten (110) days after the end of each
fiscal year, a consolidated balance sheet, a consolidated statement of profit
and loss and consolidated statement of cash flows, as of the end of such fiscal
year, for the Borrower and Guarantor, on a consolidated basis certified by
independent accountants satisfactory to Agent as being complete and correct and
fairly presenting the financial condition and results of operations as of the
end of such year and for that fiscal year for Borrower and Guarantor together
with a statement from the chief financial officer for Borrower and the
Guarantor, in the forms attached hereto as Exhibits O and P.

 

30

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

(b) Fiscal Quarter.

(i) Not later than forty five (45) days after the end of each fiscal quarter,
ending March 31, June 30 and September 30, a balance sheet, statement of profit
and loss and statement of cash flows for such fiscal quarter, for the Guarantor
and its consolidated subsidiaries, to be prepared on an accrual basis and
certified as complete and correct by the chief financial officer of such
entities; and

(ii) Not later than forty five (45) days after the end of each fiscal quarter, a
statement from the chief financial officer for the Borrower and the Guarantor,
in the forms attached hereto as Exhibits O and P, together with documentation
showing all calculations necessary to support such statement.

(c) Securities Filings. Copies of all 8Ks, 10Ks and 10Qs filed with the U.S.
Securities and Exchange Commission, the Maryland State Securities Commission,
and any other state regulators regarding the Guarantor, which shall be delivered
to Agent as and when filed or distributed; and

(d) Other. Such other statements or reports as the Lenders may through Agent
reasonably request in form and detail satisfactory to such Lenders.

All such financial statements shall be in reasonable detail, shall be prepared
in general accordance with GAAP (except that assets may be valued based on
market value), or in accordance with another accounting method acceptable to
Agent, and shall be certified as true, correct and complete by Borrower (by its
chief financial officer) or Guarantor. In addition, Borrower shall permit Agent
and each Lender to examine all of Borrower’s and Guarantor’s books and records
pertaining thereto.

5.8 Providing Operating Budgets and Operating Statements. Following Completion,
Borrower shall deliver to Agent prior to the commencement of each fiscal year of
the Property, an Operating Budget for the Property for said fiscal year. In
addition, Borrower shall, by the fifteenth (15th) day of each calendar month,
deliver to Agent an Operating Statement for the Property for the preceding
calendar month, which shall specifically note all variations from the current
Operating Budget. Borrower shall also deliver to Agent an annual Operating
Statement for the Property within one hundred twenty (120) days following the
end of each fiscal year thereof. All such Operating Statements shall be
certified as true, correct and complete by Borrower.

5.9 Providing Leasing Information. As soon as available and in any event within
forty-five (45) days after the close of each fiscal quarter of Borrower,
Borrower shall furnish to Agent a leasing status report on the Property for the
preceding fiscal quarter, which shall specifically include a summary of all
letters of intent and leasing proposals received or issued by Borrower, a rent
roll for Leases then in effect, and such other leasing information reasonably
required by Agent. All such leasing reports shall be certified as true, correct
and complete by Borrower and in the same form as previously provided to Agent.

All Leases entered into after the date hereof (i) which are for greater than
(a) five thousand (5,000) square feet of office space, or (b) three thousand
five hundred (3,500) square feet of retail space, or (ii) that do not materially
conform to Borrower’s standard lease form (whether for residential, office, or
retail) approved by Agent in writing, or (iii) that contain terms or conditions
that deviate from the Leasing Guidelines for such space, shall be upon terms and
with tenants approved in writing by Agent (and by the Majority Lenders with
respect to any Lease for office space in excess of 20,000 square feet or any
Lease for retail space in excess of 5,000 square feet) prior to Borrower’s
execution of any such Lease. Borrower shall seek Agent’s approval of any Lease
requiring such approval

 

31

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

by delivering, via personal delivery or certified mail, a letter requesting such
approval, and such financial information regarding the proposed tenant as Agent
requests. If Agent has not responded to any such request for approval within
seven (7) Business Days after Agent’s receipt of such request together with any
such requested financial information, Borrower shall have the right to send a
written notice (the “Second Request”) to Agent marked, in conspicuous type,
“Clarendon Center: Leasing Materials for Agent Review - SECOND REQUEST”
requesting that Agent respond to such request for approval. If Agent fails to
either deny or approve such request for approval in writing within three
(3) Business Days from Agent’s receipt of such Second Request, Agent and, where
such approval is required, the Majority Lenders, shall be deemed to have
approved such request. As to any Leases not requiring Agent’s approval, Borrower
shall, upon request, deliver financial information regarding such proposed
tenant concurrently with its delivery of the first draft, as provided below. All
Leases shall include estoppel, subordination, attornment and mortgagee
protection provisions satisfactory to Agent. For each proposed Lease requiring
Agent’s consent, Borrower shall provide Agent with a copy of the final draft of
such proposed Lease to be delivered to all parties thereto for execution, marked
to show changes made from the form approved by Agent. Any amendment, supplement
or modification of a Lease entered into solely to memorialize the exercise by a
Tenant of an existing right or option set forth in the applicable Lease shall
not require Agent’s consent.

5.10 Providing Updated Surveys. Upon completion of the foundation, and at such
other times as Agent may deem appropriate in good faith, Borrower shall furnish
to Agent six (6) copies of a certified survey of the Property, certifying that
the Improvements are constructed within the property lines of the Land, do not
encroach upon any easement affecting the Land (other than such encroachments
which have been insured over to Agent’s satisfaction or which have been approved
as permissible by the other parties to such easement) and do comply with all
applicable Governmental Requirements relating to the location of improvements,
along with a letter from the Title Company confirming the acceptability of said
survey.

5.11 Providing Evidence of Completion. Upon Completion of the Improvements, and
prior to the final advance of Loan proceeds to pay for hard costs of
construction of the Property (except for Tenant Improvements), including, but
not limited to, any retainage therefor, and as a condition of the same, Borrower
shall furnish Agent with all items required to evidence Completion, including
unconditional occupancy permits; a final, certified Property “as-built” survey
(six [6] copies); certification from the Borrower and Project Architect on AIA
Form G704 that the Property has been substantially completed in accordance with
the approved Plans; final lien waivers (which may be conditioned on payment)
from the General Contractor, and all subcontractors with respect to the work
performed in connection with the construction and equipping of the Improvements,
provided that final, unconditional lien waivers shall be delivered to Agent as
soon as practicable thereafter; the evidence of insurance required by
Section 5.12 hereof; copies of all warranties covering materials, equipment and
appliances included within the Property; copies of all licenses and permits
required for operation of the Property; and photographs of the completed
Improvements.

5.12 Maintaining Insurance Coverage. Borrower shall, at all times until the
Lenders have been fully repaid all indebtedness evidenced by the Note, maintain,
or cause to be maintained, in effect (and, upon request, shall furnish to Agent
copies of), insurance policies, as required under the terms of Exhibit G
attached hereto, and shall furnish to Agent proof of payment of all premiums for
such insurance.

5.13 Complying with Other Documents. Borrower shall comply with and perform, in
all material respects, all of its agreements and obligations under all contracts
and agreements to which Borrower is a party relating to the ownership,
occupancy, use, leasing, development, construction or

 

32

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

management of the Property (expressly including, without limitation, the
Leadership Agreements and the Proffers), and shall comply with all requests by
Agent which are consistent with the terms thereof.

5.14 Financial Covenants. Borrower shall at all times comply with its covenants
and agreements under Section 5.8 of that certain Revolving Credit Agreement
dated as of December 19, 2007, by and among Borrower, as borrower, Agent, as
agent, and certain other parties thereto, as it may have been and hereafter may
be from time to time modified, amended, restated, supplemented or replaced (the
“Revolving Credit Agreement”), which evidences a $150,000,000 revolving credit
facility, the provisions of which Section 5.8 are hereby incorporated herein by
reference as if fully set forth herein. Borrower acknowledges and agrees that it
shall be an Event of Default hereunder and under the Loan Documents in the event
that Agent declares an “Event of Default” under the Revolving Credit Agreement
for failure to comply with the covenants and obligations set forth in
Section 5.8 of the Revolving Credit Agreement, within the cure periods provided
therein. In the event that such facility is terminated, Borrower shall continue
to be bound by the covenants set forth in Section 5.8 of the Revolving Credit
Agreement in effect thereunder as of the date immediately prior to such
termination, until such time as the obligations of the Borrower hereunder have
been fully and finally satisfied. Borrower shall cause the Guarantor to at all
times comply with its covenants and agreements under Section 19 of the Guaranty.

5.15 Interest Rate Protection Agreement. Borrower may (but shall not be required
to) purchase an Interest Rate Hedge in form and substance acceptable to Agent at
the time of Closing or within ninety (90) days thereafter. Any request
thereafter is subject to Agent’s approval.

5.16 ERISA.

(a) Borrower hereby represents and warrants that none of its assets are, for
purposes of the Employee Retirement Income Security Act of 1974, as amended, and
any applicable regulations or guidance promulgated thereunder (“ERISA”) or
Section 4975 of the Code, considered assets of a Plan. Lender hereby represents
and warrants that the source of funds for the Loan are not the assets of a Plan
or the plan assets of a Plan. For purposes hereof, “Plan” shall mean any “plan”
as defined in Section 3(3) of ERISA that is subject to any provision of Title I
of ERISA and any plan as defined in Section 4975 of the Code that is subject to
any provision of such section.

(b) Borrower hereby covenants and agrees that, for so long as the Loan remains
outstanding:

(i) In addition to the prohibitions set forth in the Loan Documents, and not in
limitation thereof, Borrower shall not assign, sell, pledge, encumber, transfer,
hypothecate or otherwise dispose of its interest or rights in any of the Loan
Documents or in the Property, or attempt to do any of the foregoing or suffer
any of the foregoing, if such proposed action will result in a prohibited
transaction under ERISA or the Code; and

(ii) Borrower shall take and cause to be taken all necessary actions so that at
all times the assets of Borrower shall not be considered for any purpose of
ERISA or Section 4975 of the Code to be assets of a Plan.

(c) Borrower shall indemnify and hold Agent and Lenders free and harmless from
and against all loss, costs (including reasonable attorneys’ fees and expenses),
taxes, damages and expenses Agent or any Lender may suffer by reason of the
investigation, defense and settlement of claims, and in obtaining any prohibited
transaction exemption under ERISA necessary in Agent’s reasonable judgment, by
reason of the inaccuracy of the foregoing representations and warranties of

 

33

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

Borrower or a breach of the foregoing covenants of Borrower of this
Section 5.16. The obligations of Borrower under this subparagraph (c) shall
survive the payment in full of the Loan or other satisfaction thereof.

(d) Lender hereby covenants and agrees that, for so long as the Loan remains
outstanding, it will not (in addition to the prohibitions set forth in the Loan
Documents, and not in limitation thereof), assign, sell, pledge, encumber,
transfer, hypothecate or otherwise dispose of any interest in the Loan to a Plan
or to an entity the assets of which constitute the plan assets of a Plan.

(e) No Pension Plan sponsored, maintained or contributed to by Borrower or any
of its ERISA Affiliates has an accumulated funding deficiency (whether or not
waived) under Section 412 of the Code or Section 302 of ERISA.

(f) Neither Borrower nor any ERISA Affiliate has any unsatisfied liability for
withdrawal liability with respect to any Pension Plan which is a Multiemployer
Plan.

5.17 Claim Against Architect. Borrower hereby covenants and agrees to promptly
notify Agent if Borrower learns that any of the information contained in the
Architect’s Certificate is untrue, inaccurate or incomplete. If such deficiency
requires correction of the Plans and/or the Improvements, Borrower shall
thereupon correct the Plans and/or the Improvements so as to ensure that the
Improvements are or will be constructed in accordance with all Governmental
Requirements. Provided there exists no Event of Default, Borrower shall have the
right to determine the best course of action to address such deficiency,
including whether or not to bring suit against the Architect therefor, provided
that Borrower shall give prior notice thereof to Agent and, to the extent
Agent’s consent is otherwise required under this Agreement, has obtained Agent’s
consent with respect thereto. Upon the occurrence of an Event of Default and for
so long as such Event of Default continues to exist, Agent shall have the right,
with respect to any errors or omissions in the Architect’s Certificate, to
(x) pursue its remedies under the Assignment of the Plans and Related
Agreements, (y) take such action against Architect in Borrower’s name under the
contract with the Project Architect (the “Architect’s Contract”) as may be
appropriate in Agent’s sole discretion or (z) to collect amounts payable by
Architect to Borrower pursuant to any claim made by Borrower under the
Architect’s Contract, which amounts are hereby assigned to Agent as additional
collateral for the Loan, provided that Borrower shall have the right to retain
and apply such amounts as it determines prior to an Event of Default. For the
purpose of carrying out the provisions of this Section, Borrower irrevocably
appoints Agent its attorney-in-fact, with full power of substitution, to execute
and deliver all such documents, to pay and receive such funds, and to take such
action as may be necessary, in the judgment of Agent, to pursue said claims
against Architect which rights shall be exercisable only after the occurrence of
an Event of Default and for so long as such Event of Default exists. This power
of attorney is coupled with an interest and is irrevocable. Agent, however,
shall have no obligation to undertake any of the foregoing.

The parties hereby agree that any amounts payable pursuant to a claim (the
“Claim Payment”) against the Architect or its insurer to Borrower pursuant to
the Architect’s Contract shall, after an Event of Default has occurred and is
continuing under the Loan, be payable directly to Agent from the Architect or
its insurer. Borrower hereby authorizes and directs the Architect to pay or
cause its insurer to pay the Claim Payment to Agent upon written notice from
Agent that an Event of Default has occurred under the Loan Documents, without
the need to obtain further consent of Borrower, without any obligation to
determine whether a default has in fact occurred and regardless of whether Agent
has taken possession of any portion of the Property or assumed Borrower’s rights
and obligations under the Architect’s Contract. Any such payment to Agent shall
constitute payment to Borrower under the Architect’s Contract.

 

34

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

Any amounts collected by Agent under this Section 5.17 shall be deemed
additional collateral for the Loan and may be applied by Agent, during any time
when an Event of Default exists under the Loan, to the secured indebtedness in
such manner and order as Agent may elect.

5.18 Management Agreements. Without the prior written consent of Agent and the
Majority Lenders, which consent shall not be unreasonably withheld or delayed,
Borrower shall not enter into, or amend any material economic term of, any
agreement providing for the management, leasing or operation of the Property or
Improvements. Any other amendment of any such agreement shall require the prior
written consent of Agent, not to be unreasonably withheld or delayed. If
required by Agent, Borrower shall assign, pursuant to an agreement in form and
substance reasonably acceptable to Agent, its interest under any such agreement
to Agent as security for Borrower’s obligations under the Loan Documents, and,
if required by Agent, Borrower shall cause the management party to such
agreement to consent to such assignment and subordinate its interest in the
Property to the Deed of Trust and the Loan.

5.19 Private Restrictions.

(a) Notwithstanding anything to the contrary contained in Section 1.9 of the
Deed of Trust, the following language is hereby added to the end of the first
(1st) sentence of such Section:

; and provided further, however, that with respect to any Private Restrictions
for which the Title Company has issued affirmative coverage as part of the Title
Policy, Grantor’s failure to comply with such Private Restrictions shall not
constitute a breach of, or default under, this Deed of Trust until such time (if
at all) as (i) a court of competent jurisdiction shall have issued a binding
order or judgment (the execution of which has not been stayed pending appeal)
enjoining further non-compliance with such Private Restrictions (an “Order”),
and (ii) Grantor fails to comply with such Private Restrictions in compliance
with the terms of such order or judgment. For so long as Borrower is not in
strict compliance with such Private Restrictions, Borrower shall (w) provide
written notice to Agent within two (2) Business Days of receiving written notice
of the commencement or threatened commencement of any action or proceeding to
enforce such Private Restrictions, (x) at all times from and after the
commencement of any such action or proceeding, diligently pursue a full, final
and favorable resolution of any such action or proceeding, (y) upon Agent’s
written request from time to time, furnish to Agent cash or other security
reasonably satisfactory to Agent for payment of Agent’s anticipated costs and
expenses to be incurred in connection with such action or proceeding, and
(z) keep Agent fully informed of the progress of any such action or proceeding
until the final, non-appealable disposition thereof. In no event shall the
foregoing limit Borrower’s obligation to comply at all times with Governmental
Requirements.

(b) Notwithstanding anything to the contrary contained in Section 1.19 of the
Deed of Trust, the following language is hereby added to the end of the first
(1st) sentence of such Section:

; or (v) Grantor’s failure to comply with any Private Restrictions for which the
Title Company has issued affirmative coverage as part of the Title Policy.

(c) At any time after issuance of an Order (which remains binding), Agent may,
at its option and at Borrower’s expense, prepare or obtain a revised valuation
of the Property based on the then-most recent appraisal of the Property
(assuming completion and stabilization). The value shown in such appraisal shall
be referred to herein as the “Unrestricted Value.” Such revised valuation shall
assume that any specific space within the Property then being used (or
immediately prior to issuance of the Order

 

35

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

was being used) by a restaurant or other user serving alcohol in alleged
violation of the Private Restrictions is, instead, used for general retail
purposes and shall assume a market rental for such general retail use, taking
into account (a) down time, (b) demolition/reconstruction costs (tenant
improvement costs), (c) leasing commissions, (d) marketing costs, (e) management
expenses and overhead, (f) any other applicable expenses. The value thus
determined for the Property shall be referred to herein as the “Restricted
Value.” If Agent reasonably determines that the Loan to Value Ratio (as defined
below) is less than or equal to seventy-five percent (75%), then Borrower shall
amend the Loan Documents to reduce the Committed Amount (but in no event shall
the amount of such reduction in the Committed Amount exceed seventy-five percent
(75%) of the amount by which the Restricted Value is less than the Unrestricted
Value) and, if necessary, pay a principal curtailment on the Loan, within ninety
(90) days after receipt of notice from Agent that such principal curtailment is
required, in an amount sufficient to reduce the Principal Balance to the reduced
Committed Amount. If, after any such amendment, such Order expires, is
terminated or otherwise no longer remains binding (in Agent’s reasonable
determination), then at Borrower’s written request and provided that no Event of
Default then exists, and subject to the other terms and conditions of this
Agreement, the parties hereto shall amend the Loan Documents to increase the
Committed Amount by the amount of the prior curtailment, upon which amendment
such previously curtailed amount shall be available to be re-disbursed to
Borrower in accordance with the terms and conditions of this Agreement. For
purposes of the foregoing, the term “Loan to Value Ratio” shall mean the ratio
obtained by dividing (i) the Committed Amount by (ii) the Restricted Value, as
reasonably determined by Agent in accordance with this subsection (c).

5.20 USA Patriot Act Notice; Compliance. The USA Patriot Act of 2001 (Public Law
107-56) and federal regulations issued with respect thereto require all
financial institutions to obtain, verify and record certain information that
identifies individuals or business entities which open an “account” with such
financial institution. Consequently, Agent (for itself and/or as Agent for all
Lenders hereunder) may from time-to-time request, and Borrower shall provide to
Lender, Borrower’s name, address, tax identification number and/or such other
identification information as shall be necessary for Lender to comply with
federal law. An “account” for this purpose may include, without limitation, a
deposit account, cash management service, a transaction or asset account, a
credit account, a loan or other extension of credit, and/or other financial
services product.

5.21 Guarantor Articles of Incorporation. Guarantor shall not amend its articles
of incorporation without the prior written consent of Agent (except as may be
expressly required by law or regulation).

VI. DEFAULTS

6.1 Events of Default. Any of the following events shall constitute an “Event of
Default” under this Agreement:

(a) Default by Borrower in the payment of any payment of principal and/or
interest required to be paid pursuant to the Note or default in the payment of
any other amounts due under the Loan Documents, which default is not cured
within five (5) days after the due date thereof.

(b) Default by Borrower in the performance or observance of any term, covenant
or condition of this Agreement, the Deed of Trust, the Note or any of the other
Loan Documents, other than a default described in Subsection (a) above, which
default continues for thirty (30) days after Agent has given written notice of
such failure to Borrower. In the event that such default is susceptible of cure
but is not cured within said thirty (30) days, so long as Borrower is diligently
and continuously pursuing such

 

36

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

cure, as evidenced to Agent’s satisfaction, Agent shall permit Borrower an
additional thirty (30) days to effectuate such cure.

(c) Any representation or warranty made by Borrower in this Agreement, in any of
the other Loan Documents, or in any certificate or document furnished under the
terms of this Agreement or in connection with the Loan, shall be untrue or
incomplete in any material respect.

(d) (i) Work on the Improvements shall be substantially abandoned, or shall, by
reason of Borrower’s fault, be delayed or discontinued for a period of fifteen
(15) consecutive days, or construction shall be delayed for any reason
whatsoever, in each instance to the extent that Completion of the Improvements
cannot, in the reasonable judgment of Agent, be accomplished prior to the
Completion Date and (ii) Borrower fails to cure such delay or to establish to
the satisfaction of Agent that Completion of the Improvements can be
accomplished prior to the Completion Date, within thirty (30) days after notice
of such default from Agent.

(e) Borrower shall commit an act of bankruptcy; or shall apply for, consent to
or permit the appointment of a receiver, custodian, trustee or liquidator for it
or any of its property or assets; or shall fail to, or admit in writing its
inability to, pay its debts as they mature; or shall make a general assignment
for the benefit of creditors or shall be adjudicated bankrupt or insolvent; or
shall take other similar action for the benefit or protection of its creditors;
or shall give notice to any governmental body of insolvency or pending
insolvency or suspension of operations; or shall file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors, or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, rearrangement, dissolution, liquidation or
other similar debtor relief law or statute; or shall file an answer admitting
the material allegations of a petition filed against it in any proceeding under
any such law or statute; or shall be dissolved, liquidated, terminated or
merged; or shall effect a plan or other arrangement with creditors; or a
trustee, receiver, liquidator or custodian shall be appointed for it or for any
of its property or assets and shall not be discharged within ninety (90) days
after the date of his appointment; or a petition in involuntary bankruptcy or
similar proceedings is filed against it and is not dismissed within ninety
(90) days after the date of its filing.

(f) Agent determines that the Loan is not in balance and, at Agent’s option,
Borrower (i) fails to deposit with Agent, promptly upon demand, sufficient funds
to permit Agent to pay excess costs of the Property as the same become payable
or (ii) does not pay said excess costs directly and deliver to Agent
unconditional mechanics’ lien waivers therefor (or paid receipts for
non-lienable items), at Agent’s option.

(g) A trustee or receiver is appointed for the Property or any portion thereof,
for Borrower, for any assets, or an involuntary petition in bankruptcy or
insolvency is filed against Borrower and is not discharged within ninety
(90) days after such appointment or filing.

(h) Any assignment of this Agreement or the proceeds of the Loan by Borrower
voluntarily, by operation of law or otherwise, without the unanimous prior
written consent of the Lenders.

6.2 Rights and Remedies. Upon the occurrence of any Event of Default and for so
long as such Event of Default continues to exist, unless such Event of Default
is subsequently waived in writing by Agent, Agent shall be entitled, at the
option of Agent, to exercise any or all of the following rights and remedies,
consecutively or simultaneously, and in any order:

(a) Lenders may make one (1) or more further advances of Loan proceeds, without
liability to make any subsequent advances thereof.

 

37

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

(b) Lenders may suspend their obligation to make advances under this Agreement,
without notice to Borrower.

(c) Lenders may terminate their obligation to make advances under this
Agreement, and Agent may declare the entire unpaid principal balance of the
advances made under this Agreement to be immediately due and payable, together
with accrued and unpaid interest on such advances, without notice to or demand
on Borrower.

(d) Agent may exercise any or all remedies specified herein and in the other
Loan Documents, including (without limiting the generality of the foregoing) the
right to foreclose the Deed of Trust, and/or any other remedies which it may
have therefor at law, in equity or under statute.

(e) Agent may cure the Event of Default on behalf of Borrower, and, in doing so,
may enter upon the Property, and may expend such sums as it may deem desirable
in Agent’s good faith judgment (provided that such amount shall not exceed
$2,000,000 in the aggregate with the prior written consent of the Majority
Lenders), including attorneys’ fees, all of which shall be deemed to be advances
hereunder, even though causing the Loan to exceed the face amount of the Note,
shall bear interest at the Default Rate and shall be payable by Borrower on
demand.

6.3 Completion of Property by Agent. In addition, in case of the occurrence and
during the continuation of an Event of Default caused by, or which results in,
Borrower’s failure, for any reason, to continue with construction of the
Improvements as required by this Agreement, then Agent may (but shall not be
obligated to), in addition to, or in concert with, the other remedies referred
to above, take over and complete construction of the Improvements in accordance
with the Plans, with such changes therein as Agent may, in its discretion
exercised in good faith, deem appropriate, all at the risk, cost and expense of
Borrower. Agent may assume or reject any contracts entered into by Borrower in
connection with the Property, may enter into additional or different contracts
for work, services, labor and materials required, in the judgment of Agent, to
complete the Property, and may pay, compromise and settle all claims in
connection with the Property. All sums, including attorneys’ fees, and charges
or fees for supervision and inspection of the construction and for any other
necessary or desirable purpose in the discretion of Agent expended by Agent
and/or the Lenders in completing or attempting to complete the Improvements
(whether aggregating more, or less, than the face amount of the Note), shall be
deemed advances made by the Lenders to Borrower hereunder, and Borrower shall be
liable to Agent on behalf of the Lenders, on demand, for the repayment of such
sums, together with interest on such sums from the date of their expenditure at
the rates provided herein. Agent may, in its discretion, at any time abandon
work on the Property, after having commenced such work, and may recommence such
work at any time, it being understood that nothing in this Section shall impose
any obligation on Agent or any Lender either to complete or not to complete the
Improvements. For the purpose of carrying out the provisions of this Section,
Borrower irrevocably appoints Agent its attorney-in-fact, with full power of
substitution, to execute and deliver all such documents, to pay and receive such
funds, and to take such action as may be necessary, in the judgment of Agent, to
complete the construction of the Improvements which rights shall be exercisable
only after the occurrence of an Event of Default and for so long as such Event
of Default exists. This power of attorney is coupled with an interest and is
irrevocable. Agent, however, shall have no obligation to undertake any of the
foregoing, and, if Agent does undertake any of the same, neither Agent nor the
Lenders shall have any liability for the adequacy, sufficiency or completion
thereof.

 

38

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

VII. MISCELLANEOUS

7.1 Binding Effect; Waivers; Cumulative Rights and Remedies. The provisions of
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, personal
representatives, legal representatives, successors and assigns; provided,
however, that neither this Agreement nor the proceeds of the Loan may be
assigned by Borrower voluntarily, by operation of law or otherwise, without the
prior written consent of Agent. No delay on the part of Agent in exercising any
right, remedy, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder constitute such a waiver or exhaust the same, all of which
shall be continuing. The rights and remedies of Agent specified in this
Agreement shall be in addition to, and not exclusive of, any other rights and
remedies which Agent would otherwise have at law, in equity or by statute, and
all such rights and remedies, together with Agent’s rights and remedies under
the other Loan Documents, are cumulative and may be exercised individually,
concurrently, successively and in any order.

7.2 Survival. All agreements, representations and warranties made in this
Agreement shall survive the execution of this Agreement, the making of the
advances by the Lenders, and the execution of the other Loan Documents, and
shall continue until Agent on behalf of the Lenders receives payment in full of
all indebtedness of Borrower incurred under this Agreement and under the other
Loan Documents.

7.3 Governing Law; Waiver of Jury Trial. This Agreement, the rights of the
parties hereunder and the interpretation hereof shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Virginia in all
respects. Borrower hereby waives any right to a trial by jury in any action
relating to the Loan and/or the Loan Documents.

7.4 Counterparts. This Agreement may be executed in any number of counterparts,
all of which shall constitute a single agreement.

7.5 Notices. Any notice required or permitted to be given by either party hereto
to the other under the terms of this Agreement, or documents related hereto, may
be given by personal delivery or recognized overnight courier, and shall be
deemed to have been received one business day after the date the same is sent.
Such notice shall be addressed to the party to which the notice is to be given
at the address set forth opposite its name on the signature page below (or, as
applicable, in the Assignment and Assumption Agreement by virtue of which an
Assignee Lender becomes a party to this Agreement), or at any other address
specified in a notice given by such party to the other not less than ten
(10) days prior to the date on which such address change becomes effective for
purposes of this Agreement.

7.6 Agent’s Sign. Agent may, if it so desires, place a sign of reasonable size
on the Land, indicating that Agent and the Lenders are providing financing for
the Property, and/or may otherwise publicize its involvement with the Property,
including, but not limited to, issuing press releases.

7.7 No Third Party Reliance. No third party shall be entitled to rely upon this
Agreement or to have any of the benefits of Agent’s and the Lenders’ interest
hereunder, unless such third party is an express assignee of all or a portion of
the interest of Agent and/or any Lender hereunder.

7.8 Time of the Essence. Time is of the essence hereof with respect to the
dates, terms and conditions of this Agreement.

 

39

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

7.9 Entire Agreement; No Oral Modifications. This Agreement, the other Loan
Documents and the other documents mentioned herein set forth the entire
agreement of the parties with respect to the Loan and supersede all prior
written or oral understandings and agreements with respect thereto. No
modification or waiver of any provision of this Agreement shall be effective
unless set forth in writing and signed by the parties hereto.

7.10 Captions. The headings or captions of the Articles and Sections set forth
herein are for convenience only, are not a part of this Agreement and are not to
be considered in interpreting this Agreement.

7.11 Joint and Several Liability. If Borrower consists of more than one
(1) individual and/or entity, each of said individuals and/or entities shall be
jointly and severally liable for each covenant, agreement, representation and
warranty of Borrower hereunder.

7.12 Borrower’s Relationship with Agent and the Lenders. The relationship
between Borrower, Agent and the Lenders created hereby and by the other Loan
Documents shall be that of a borrower and a lender only, and in no event shall
Agent and/or the Lenders be deemed to be a partner of, or a joint venturer with,
Borrower.

7.13 Right of Set-Off. As additional security for the payment of the
Obligations, Borrower hereby grants to each Lender a security interest in, a
lien on and an express contractual right to Set-Off. The Lenders may, at any
time upon the occurrence and during the continuation of an Event of Default
hereunder or under the other Loan Documents Set-Off against the Obligations
whether or not the Obligations (including future installments) are then due or
have been accelerated, all without any advance or contemporaneous notice or
demand of any kind to Borrower, such notice and demand being expressly waived.

VIII. AGENCY PROVISIONS

8.1 Agency.

(a) Appointment and Authorization. Each Lender hereby appoints and authorizes
Agent to act as sole administrative agent under this Agreement and the other
Loan Documents, authorizes and directs Agent to enter into the Loan Documents
other than this Agreement for the benefit of the Lenders, and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and the Loan Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental thereto.
In furtherance thereof, Lenders hereby ratify the execution and delivery by
Agent of this Agreement, the acceptance by Agent of all of the other Loan
Documents and the terms and conditions of the Loan Documents. The Agent hereby
accepts such appointment as administrative agent. Agent shall exercise all
rights and powers of Agent under this Agreement, including the administration of
the Loan and disbursement of Advances, except as otherwise expressly provided in
this Agreement. The Borrower, without further inquiry or investigation, shall,
and is hereby authorized by the Lenders to, assume that all actions taken by the
Agent hereunder and in connection with or under the Loan Documents are duly
authorized by the Lenders.

Each Lender hereby agrees that, except as set forth in Section 8.4(a) or as
otherwise set forth herein, any action taken by the Majority Lenders in
accordance with the provisions of this Agreement or the other Loan Documents,
and the exercise by the Majority Lenders of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders.

 

40

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

(b) Non-Liability of Agent and Indemnity; Non-Liability for Force Majeure.

(1) Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement or in the other Loan Documents. Agent shall administer
the Loan in accordance with the terms and conditions of this Agreement in the
same manner as it customarily does for similar loans for its own account. The
duties of the Agent shall be mechanical and administrative in nature; the Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement or any Loan Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any Loan Document except as
expressly set forth herein or therein. Neither Agent nor any of its respective
directors, officers, agents or employees shall be liable to any Lender for any
action taken or not taken by them under or in connection with this Agreement or
under any of the other Loan Documents. In this regard, Agent may consult with
independent legal counsel, accountants and other professionals or experts
selected by it, and shall not be liable for any action taken or not taken by it
or them in good faith in accordance with the advice of such legal counsel,
accountants or other professionals or experts. In the absence of gross
negligence or willful misconduct, Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith pursuant to
the terms of this Agreement, and if any such apportionment or distribution is
subsequently determined to have been made in error, the sole recourse of any
person to whom payment was due, but not made, shall be to recover from the
recipients of such payments any payment in excess of the amount to which they
are determined to have been entitled.

(2) In the event the Agent is not reimbursed and indemnified by the Borrower,
within ten (10) Business Days of demand therefor by Agent, each Lender will
reimburse and indemnify the Agent, and its directors, officers, agents and
employees, in proportion to its respective Commitment Percentage of the Loan,
for and against any claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Agent, or its directors, officers, agents, or employees in
performing its duties hereunder or under any Loan Document; provided, however,
that no Lender shall be liable for any of the foregoing to the extent that they
arise from the gross negligence or willful misconduct of the party to be
indemnified. The obligations of the Lenders under this Section 8.1(b)(2) shall
survive the payment in full of all obligations of Borrower and the termination
of this Agreement.

(3) No Lender or Agent shall be liable in any way to Borrower or any third party
for Agent’s or such Lender’s failure to perform or delay in performing under the
Loan Documents (and Agent or any Lender may suspend or terminate all or any
portion of Agent’s or such Lender’s obligations under the Loan Documents) if
such failure to perform or delay in performing results directly or indirectly
from, or is based upon, the action, inaction, or purported action, of any
governmental or local authority, or because of war, rebellion, insurrection,
strike, lock-out, boycott or blockade, or from any act of God or other cause or
event beyond Agent’s or such Lender’s control.

8.2 Resignation of Agent; Removal.

(a) U.S. Bank National Association or any successor agent may resign as Agent at
any time by written notice delivered to the Borrower and the Lenders (if any).
Such resignation shall be effective upon the earlier to occur of thirty
(30) days following such notice or a successor’s acceptance of appointment as
the Agent. In addition, in the event of Agent’s gross negligence or willful
misconduct, Agent may be removed pursuant to the unanimous approval of all
Lenders by giving thirty (30) days prior written notice to Agent and Borrower;
provided, however, for purposes of calculating such unanimous approval in this
context, Agent, in its capacity as a Lender, shall be deemed a Defaulting Lender
and its Commitment Percentage shall therefore be disregarded and excluded for
voting purposes only.

 

41

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

(b) In the case of any of the events described in Section 8.2(a), (A) the
Majority Lenders shall appoint a successor Agent from among the Lenders so long
as such successor meets the requirements described in Sections 8.9(a)(2) and
8.9(a)(3) hereof; provided, however, that the resigning Agent shall be entitled
to appoint a successor agent who, so long as no Event of Default exists
hereunder, has been approved by Borrower, which approval shall not be
unreasonably withheld, conditioned or delayed, and who meets the requirements of
Sections 8.9(a)(2) and 8.9(a)(3) as Agent, if the Majority Lenders have not
appointed a successor within thirty (30) days after the date the resigning Agent
gave notice of resignation; (B) upon a successor’s acceptance of appointment
(and assumption of the Agent’s obligations hereunder arising after the date of
such appointment), the successor will thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the resigning or removed
Agent; (C) upon the effectiveness of any resignation or removal, the resigning
or removed Agent will thereupon be discharged from the duties and obligations of
Agent which thereafter arise under this Agreement; and (D) any resigning Agent
shall have the benefit of any indemnities provided in the Loan Documents and
this Agreement.

8.3 Administration.

(a) Expenses. Each Lender shall reimburse the Agent for its Commitment
Percentage of any expenses with respect to the administration, enforcement or
collection of the Loan which are not reimbursed by the Borrower pursuant to and
within the period required by the Loan Documents, or if not specified in the
Loan Documents, promptly after the date of demand therefor made by the Agent.
The Agent shall have the right, but not the obligation, to incur such
expenditures prior to reimbursement therefor by the Lenders.

(b) Documents; Information; Inspection. Except for the Note executed in favor of
each Lender and for Loan Documents sent for filing or recording (which are not
returned following recording), Agent shall hold and maintain a duplicate set of
all original Loan Documents. The Agent shall promptly deliver to each Lender a
duplicate original of this Agreement and a copy or counterpart execution copy of
each Loan Document (other than any fee letter solely between Agent and
Borrower). The Agent shall promptly forward to each Lender a copy of each
financial statement of Borrower or other financial statement for the Property
received from Borrower. Agent shall promptly forward to such Lender each
financial statement of Borrower and Guarantor received by Agent. The Lenders
may, upon reasonable prior notice and during the Agent’s normal business hours,
inspect and make copies of such books and records of Agent that relate to this
Loan.

8.4 Actions by Agent; Required Consents.

(a) Except as specified below, Agent shall exercise its sole discretion to act
or not to act under the Loan Documents and the appropriate action with respect
thereto. Such discretion may be exercised with respect to the granting of
approvals, consents, and modifications under the Loan Documents and with respect
to the exercise or refraining from exercise of rights under the Loan Documents.

(b) Notwithstanding Section 8.4(a), the following matters shall require the
prior consent of all of the Lenders:

(1) any change (other than as currently contemplated in the Loan Documents) in
the interest rate under the Loan;

 

42

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

(2) any reduction in the amount of any payment of any fees other than fees paid
solely to the Agent;

(3) release of any portion of the Property or other collateral;

(4) release of any guarantor or other obligor under any Loan Document;

(5) any change (other than by operation of the Loan Documents) in the Maturity
Date of the Loan or in the conditions for any extension of the Maturity Date;

(6) any release, termination, modification or amendment of any indemnity
provided in the Loan Documents;

(7) any forgiveness of principal, interest or other amounts payable under the
Loan (other than late fees up to three (3) times per annum) or any extension of
time for payment of principal or interest;

(8) any increase in the Committed Amount or the Loan;

(9) any amendment to this Section 8.4(b);

(10) any amendment to the definitions of Majority Lenders or Commitment
Percentages;

(11) any change in Commitment Percentages (excluding any change as a result of
assignments permitted under Section 8.9)

(c) Notwithstanding Section 8.4(b), the prior consent of the Majority Lenders
shall be required for (1) any proposal from Borrower that Agent approve a
Contractor under a contract with a value in excess of $1,500,000.00 to the
extent such contract will not be bonded and (2) the acceleration of any
indebtedness under the Loan Documents, or the pursuit of remedies against the
Borrower or Guarantor;

(d) In case one or more Events of Default have occurred and shall be continuing,
and whether or not acceleration of the Loan shall have occurred, the Agent
shall, if (a) so requested by the Majority Lenders and (b) the Lenders have
provided to the Agent such additional indemnities and assurances against
expenses and liabilities as the Agent may reasonably request, proceed to enforce
the provisions of this Agreement and the other Loan Documents and exercise all
or any such other legal and equitable and other rights or remedies as it may
have in respect of enforcement of the Lenders’ rights against the Borrower under
this Agreement and the other Loan Documents. The Majority Lenders may direct the
Agent in writing as to the method and the extent of any such enforcement, the
Lenders (including any Lender which is not one of the Majority Lenders so
directing the Agent in writing) hereby agreeing to ratably and severally
indemnify and hold the Agent harmless from all liabilities incurred in respect
of all actions taken or omitted in accordance with such directions, provided
that the Agent need not comply with any such direction to the extent that the
Agent reasonably believes the Agent’s compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction.

8.5 Payments.

 

43

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

(a) Interest Rates and Disbursement Matters. Lenders and Agent specifically
agree to the following operational and administrative procedures as between
themselves:

(1) that the LIBOR Rate (as established from time to time) shall in each
instance be the rate established from time to time by U.S. Bank National
Association.

(2) Agent shall notify each Lender by telephone or facsimile of the LIBOR Rate
two (2) Business Days prior to the date on which the LIBOR Rate shall be
effective. Agent shall notify each Lender by telephone or facsimile of its
Commitment Percentage of a proposed Advance of the Loan and the date of such
disbursement two (2) Business Days prior to such disbursement with respect to
disbursements which are to bear interest at the LIBOR Rate, such notice to be
delivered by facsimile. Each Lender shall deposit by wire transfer of
immediately available funds to Agent’s account as specified on Exhibit H hereto
the amount of such Commitment Percentage no later than 10:00 a.m. (Central time)
on the date of such disbursement.

Unless Agent shall have been notified by any Lender not later than the close of
business (Central time) on the Business Day immediately preceding the date for
funding in respect of any Advance that such Lender does not intend to make
available to Agent such Lender’s Commitment Percentage of such Advance, Agent
may assume that such Lender has made such amount available to Agent. In any case
where a Lender does not for any reason make available to Agent such Lender’s
Commitment Percentage of such Advance, Agent, in its sole discretion, may, but
shall not be obligated to, fund to Borrower such Lender’s Commitment Percentage
of such Advance. If the amount so funded by Agent is not in fact made available
to Agent by the responsible Lender, then such Lender hereby assigns to Agent any
payments received by Agent from Borrower in repayment of such amount, together
with interest thereon at the rate applicable to such Advance.

(3) If any Lender fails to deliver funds to Agent for a disbursement by the time
required by subsection (2) above, such Lender shall pay to Agent interest on
such funds (x) at the Federal Funds Rate, as announced by the Federal Reserve
Bank of New York, for each day (or portion thereof) until such funds are
delivered. Any interest paid pursuant to this section shall be divided among the
Lenders which funded the applicable disbursement.

(4) Agent shall wire transfer to each Lender at such Lender’s account as
designated on Exhibit H hereto its Commitment Percentage of any payments (to the
extent payable pursuant to Section 8.5(b)) within one (1) Business Day of
Agent’s receipt of such payment. Agent shall pay to the Lenders interest
thereon, at the Federal Funds Rate from the Business Day following receipt of
such funds by Agent until such funds are paid in immediately available funds to
the Lender.

(5) Any Lender desiring to make a claim for costs or taxes payable by Borrower
shall deliver a certificate to Agent setting forth the basis and calculation
thereof and the Agent shall forward such certificate to the Borrower. Except as
provided in the Loan Documents, each Lender shall be responsible for any taxes
payable in respect of amounts paid hereunder. All payments made by Agent to
Lenders shall be made without withholding for taxes, charges, or levies, except
as may be required by law. Each Lender shall on demand from Agent provide
completed and signed copies of certificates required to show exemption of such
Lender from United States withholding taxes.

(b) Application of Recoveries. Except to the extent otherwise provided in
Section 8.6 hereof, all payments made and actually received by the Agent in
respect of the Loan (from any person or source) shall be applied in the
following order of priority (based on Commitment Percentages thereof):

 

44

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

(1) to the reimbursement of any costs incurred by the Agent to administer,
enforce, collect or deal with the Loan (including payments made pursuant to
Sections 8.5(a)(2) and (3) hereof (or to reimbursement of the Lenders to the
extent such costs have been paid by the Lenders);

(2) to the repayment of any Protective Advances (to the extent not paid pursuant
to clause (1) above);

(3) to the payment of all interest (including interest calculated at the Default
Rate) due and payable on the Note;

(4) to the payment of fees payable under the Loan Documents; and

(5) to the payment of principal of the Note.

(c) Excess Payments. If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off or otherwise) on
account of its interest in the Loan in excess of its Commitment Percentage in
the Loan, such Lender will make such disposition and arrangements with the other
Lenders with respect to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise, as shall result in each Lender
receiving in respect of the Note held by it its proportionate payment as
contemplated by this Agreement; provided, however, that if all or any portion of
such excess payment is thereafter recovered by the Borrower or other party
entitled thereto through legal action or otherwise, each Lender shall reimburse
the party returning such excess payment in an amount equal to such Lender’s
Commitment Percentage of the excess payment.

(d) Liability for Advances. If in the reasonable opinion of the Agent the
distribution of any amount received by it in such capacity hereunder or under
any of the other Loan Documents might involve it in material liability, it may
refrain from making distribution until its right to make distribution shall have
been adjudicated by a court of competent jurisdiction, provided that the Agent
shall invest any such undistributed amounts in overnight obligations on behalf
of the Lenders and interest thereon shall be paid pro rata to the Lenders in
accordance with their respective Commitment Percentages. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Agent
is to be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.

8.6 Management of Acquired Collateral. If, following any Event of Default, Agent
acquires title to the Property by foreclosure under the Deed of Trust (or by
deed in lieu of such foreclosure) or Agent realizes upon any other collateral
for the Loan, Agent shall hold title to such collateral in its own name as Agent
for the Lenders to the extent of their Commitment Percentages. Each Lender
hereby irrevocably waives any right to seek a partition of any interests in the
Property. Agent shall have the sole and exclusive right to make (or to refrain
from making) all decisions with respect to, and to perform (or refrain from
performing) all actions with respect to, the leasing, encumbering, use,
operation, maintenance, improvement, repair and restoration of the Property (and
any Improvements located thereon) or disposition of any other collateral;
provided, however, that, notwithstanding anything contained in this Agreement to
the contrary, Agent shall not, without the prior written consent of the Majority
Lenders, (a) sell (or lease as a whole) the Property or encumber the Property
with a mortgage, deed of trust or similar instrument securing indebtedness for
borrowed money, or (b) make any single expenditure with respect to the Property
in an amount in excess of $500,000 (exclusive of taxes and assessments,
insurance premiums, utility charges and expenditures required to comply with
applicable laws), or (c) dispose of any other collateral. Subject to the
foregoing, each Lender, pro rata in accordance with its Commitment Percentage,
shall reimburse

 

45

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

Agent, on demand, for all costs and expenses actually incurred by Agent in
connection with the sale, lease, encumbering, use, operation, maintenance,
improvement, repair and restoration of the Property (including all costs and
expenses incurred by Agent to pay taxes and assessments, utility charges,
insurance premiums, common area maintenance charges, leasing commissions, tenant
improvement costs, repair costs and restoration costs). The indemnity provisions
contained in Section 8.1(b) above shall apply equally to actions (and omissions)
by Agent with respect to the Property so acquired by Agent. Each Lender shall
participate pro rata in accordance with their respective Commitment Percentage
in all income, expenses, profits and losses of the Property.

8.7 Defaulting Lender.

(a) Defaults. If for any reason any Lender becomes a Defaulting Lender, then in
addition to the rights and remedies that may be available to the Agent and the
other Lenders at law and in equity, such Defaulting Lender’s right to
participate in the administration of the Loan and the Loan Documents, including,
without limitation, any rights to consent to or direct any action or inaction of
the Agent, shall be suspended during the pendency of such failure or refusal.
Borrower acknowledges and agrees that (a) the obligations of the Lenders under
this Agreement are several, (b) no Lender is or will be obligated to lend
Borrower more than the amount set forth in Exhibit I hereto for such Lender, nor
to fund any part of any advance except upon fulfillment of all applicable
conditions precedent provided herein and in the other Loan Documents, (c) except
to the extent expressly provided in this Agreement, Borrower shall have no
recourse or claim against a non-defaulting Lender nor against Agent (so long as
the same have otherwise complied with their obligations under this Agreement),
for any deficiency or any liability, loss, damage or expense resulting from the
default of a Defaulting Lender, and (d) the Commitment Percentage of the
Committed Amount of any Lender shall not be increased or decreased as a result
of the failure by any other Lender to perform its obligation to make an advance.

(b) Remedies. If for any reason the Defaulting Lender fails to make timely
payment to any other party to this Agreement of any amount required to be paid
to it hereunder, in addition to other rights and remedies which such other party
may have under Section 8.7(a) or otherwise, such other party shall be entitled
(1) to collect interest from the Defaulting Lender for the period from the date
on which the payment was due until the date on which the payment is made for
each day during such period at the Federal Funds Rate, (2) to withhold or set
off, and to apply to the payment of the defaulted amount and any related
interest, any amounts to be paid to the Defaulting Lender under this Agreement,
(3) to bring an action or suit against the Defaulting Lender in a court of
competent jurisdiction to recover the defaulted amount and any related interest,
(4) to arrange for the purchase of the Commitment Percentage of the Defaulting
Lender as provided in Section 8.7(d), and (5) to advance funds on behalf of the
Defaulting Lender as provided in Section 8.7(e).

(c) Indemnity. The Defaulting Lender shall indemnify, defend, and hold Agent and
each of the other Lenders harmless from and against any and all losses, damages,
liabilities, and expense (including attorneys’ fees) which they may actually
sustain or incur by reason of or in consequence of the Defaulting Lender’s
failure or refusal to abide by the terms of this Agreement.

(d) Purchase Right. If a Lender becomes a Defaulting Lender, the other Lenders
who are not Defaulting Lenders shall have the right, but not the obligation, in
their sole discretion, to acquire (pro rata based on the Commitment Percentages
of the Lenders exercising such right) all of such Defaulting Lender’s right,
title, and interest in and to the Loan. The purchase price shall be the
principal and accrued interest allocable to the Defaulting Lender’s Commitment
Percentage of the Loan and shall be paid on the closing day of such purchase. On
the date of closing of such purchase, the Defaulting Lender shall pay the Agent
a processing fee of $3,500. The Defaulting Lender shall retain liability for all
obligations in respect of the Loan and this Agreement arising prior to the date
of transfer (but releasing

 

46

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

Defaulting Lender’s liability for all obligations in respect of the Loan and
this Agreement arising from and after the date of transfer) and shall execute
and deliver such documents as may be reasonably necessary to effect such
transfer.

(e) Default Loans. If a Lender becomes a Defaulting Lender, the other Lenders
may (pro rata based on the Commitment Percentages of the Lenders exercising such
right), but are not obligated to, make advances to the Agent in the aggregate
amount that the Defaulting Lender is obligated to advance under this Agreement.
Such advances shall be treated as loans made to the Defaulting Lender, shall
bear interest at the Default Rate (payable on demand), shall be due and payable
upon demand, and shall be paid prior to any payment being made to the Defaulting
Lender.

(f) Cumulative Remedies and Survival. The exercise of the above remedies shall
not reduce, diminish or liquidate the Defaulting Lender’s obligation for the
sharing of losses and reimbursement of costs, liabilities, and expenses under
the Loan Documents and this Agreement. The obligations of the Defaulting Lender
arising prior to any purchase pursuant to Section 8.7(d) shall survive any such
purchase.

8.8 Representations, Warranties and Acknowledgments.

(a) Authorization, etc. Each Lender represents and warrants, as of the date
hereof, as follows:

(1) Such Lender has all necessary corporate power and authority to own its
interest in the Loan and the Loan Documents, and has all necessary corporate
power and authority to perform its obligations with respect to this Agreement
and the Loan Documents;

(2) The execution and delivery of this Agreement and all other instruments and
documents executed and delivered in connection therewith by such Lender have
been duly authorized by all requisite corporate action of such Lender; and

(3) No approval, authorization, order, license or consent of, or registration of
filing with, any governmental authority or other person is required in
connection with such Lender’s execution and delivery of this Agreement by such
Lender.

(b) Independent Decision. Each Lender agrees that it has, independently and
without reliance upon any other party hereto, or upon the directors, officers,
agents or employees of any other party hereto, but only in reliance upon
information supplied to it by or on behalf of the Borrower and upon such other
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Agreement and the Loan Documents.
Without limiting the foregoing, each Lender acknowledges that it has received
copies of the Loan Documents and financial statements, certificates,
instruments, documents, affidavits, resolutions and agreements as it deems
necessary to make its credit analysis and decisions in respect of the Loan. Each
Lender also agrees that it shall, independently and without reliance upon any
other party hereto, continue to make its own independent credit analyses and
decisions in acting or not acting under the Loan Documents. Except as
specifically provided herein, the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the Closing Date or at any time or times thereafter.

(c) No Reliance. Each Lender hereby acknowledges that, except as specifically
set forth herein, Agent (i) makes no warranty or representation to Lenders for
any statements, warranties or representations (written or otherwise, express or
implied) made in or in connection with the Loan

 

47

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

Documents or for the financial condition of the Borrower or for the title or the
value of any of the collateral for the Loan, and (ii) shall not be responsible
to the Lenders for any recitals, statements, representations or warranties
herein or for the due execution, effectiveness, legality, validity,
enforceability, genuineness, sufficiency, or collectibility of any of the Loan
Documents or any other instrument or document furnished pursuant thereto or in
connection with the Loan or the legality, validity, enforceability, genuineness,
sufficiency, perfection or priority of any rights in all or any portion of the
collateral for the Loan. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Borrower or any holder
of any Note shall have been duly authorized or is true, accurate and complete.
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any of the other Loan Documents or the financial condition of the
Borrower or any of its Affiliates, or the existence or possible existence of any
Event of Default or any default which, with the giving of notice, passage of
time, or both, would become an Event of Default.

8.9 Assignments; Participation.

(a) Permitted Assignments. Any Lender may assign, without Agent or Borrower
approval, to (i) any affiliate of such Lender all or a portion of its respective
Commitment Percentage of the Loan, in such a manner as to create privity of
contract between such affiliate and the Borrower and to make such affiliate a
Lender for all purposes hereunder, or (ii) to any other Lender. Any Lender may
assign to any entity which meets the following conditions (“Assignee Lender”)
all or a portion of its respective Commitment Percentage of the Loan, in such a
manner as to create privity of contract between such person and the Borrower and
to make such person a Lender for all purposes hereunder:

(1) The minimum portion of the total commitment which the assigning Lender may
assign to an Assignee Lender shall be Five Million and 00/100ths Dollars
($5,000,000.00).

(2) An Assignee Lender (or its direct or indirect parent) shall be either (A) a
commercial lender organized under the laws of the United States, or any state
thereof, and having total assets in excess of Ten Billion Dollars
($10,000,000,000) or (B) a U.S. branch of a commercial bank organized under the
laws of any other country which has total assets in excess of Ten Billion
Dollars ($10,000,000,000) or (C) any other U.S. financial institution which has
total assets in excess of Ten Billion Dollars ($10,000,000,000).

(3) The senior unsecured debt of an Assignee Lender (or its direct or indirect
parent) shall have a rating of Baa-2 or higher from Moody’s Investors Service,
Inc. or a comparable rating agency.

(4) Such assignment shall have been approved by Agent and, so long as no Event
of Default exists hereunder or under the other Loan Documents, by Borrower,
which approval shall not be unreasonably withheld, conditioned or delayed.

(5) The Assignee Lender shall have paid to the Agent an administrative fee of
$3,500.00 to process the admission of such Assignee Lender.

(6) The Assignee Lender shall not be Borrower or any of Borrower’s Affiliates.

(b) Assignment and Assumption. The Borrower and Agent may continue to deal
solely and directly with the assigning Lender in connection with the interest so
assigned to an Assignee Lender (or to an affiliate of such Lender) until such
time as (i) written notice of such assignment, together

 

48

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

with payment instructions, addresses and related information with respect to the
Assignee Lender (or such affiliate) shall have been given to the Borrower and
Agent by the assigning Lender and the Assignee Lender (or such affiliate);
(ii) the assigning Lender and the Assignee Lender (or such affiliate) shall have
delivered to the Borrower and Agent an Assignment and Assumption.

Promptly following a request therefor, Borrower will execute and deliver to
Agent an appropriate replacement promissory note or replacement promissory
notes, in each case designated as such, in favor of each assignee (and assignor,
if such assignor is retaining a portion of its Commitment Percentage and
advances) reflecting such assignee’s (and assignor’s) Commitment Percentage
Committed Amount. Promptly following the execution and delivery of such
replacement promissory note(s) the original promissory note or notes evidencing
all or a portion of the Commitment Percentage of the Committed Amount and
advances being assigned shall be canceled and returned to Borrower.

(c) Notice by Agent. Promptly following receipt by Agent of an executed
Assignment and Assumption, Agent shall give notice to the Borrower and to the
Lenders of: (i) the effectiveness of the assignment by the assigning Lender to
the Assignee Lender (or the affiliate of the Lender); and (ii) the revised
percentages and maximum amounts of the Commitment Percentage of the Committed
Amount in effect as a result of such assignment.

(d) Adjustment of Shares. Immediately upon delivery of the Assignment and
Assumption to Agent, this Agreement shall be deemed to be amended to the extent,
but only to the extent, necessary to reflect the addition of the Assignee Lender
(or affiliate of the Lender) and the resulting adjustment of the Commitment
Percentage arising therefrom. The Commitment Percentage of the Committed Amount
assigned to each Assignee Lender (or such affiliate) shall reduce the Commitment
Percentage of the Committed Amount of the assigning Lender by a like amount.

(e) Rights of Assignee. From and after the date upon which Agent notifies the
assigning Lender that it has received an executed Assignment and Assumption:
(1) the Assignee Lender (or the Lender’s affiliate) thereunder shall be a party
to this Agreement and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Assumption, shall have the
rights and obligations of a Lender under this Agreement; and (2) the assigning
Lender shall, to the extent that rights and obligations under this Agreement
have been assigned by it pursuant to such Assignment and Assumption, relinquish
its rights and be released from its obligations under this Agreement.

(f) Assignee’s Agreements. By executing and delivering an Assignment and
Assumption, the Assignee Lender (or the Lender’s affiliate) thereunder confirms
and agrees as follows: (1) other than as provided in such Assignment and
Assumption, the assigning Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
the Note or any other instrument or document furnished pursuant to the Loan;
(2) the assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other parties or the performance or observance by the Borrower of any of its
obligations under the Note and this Agreement; (3) the Assignee Lender (or such
affiliate) has received a copy of this Agreement, together with such other
documents and information as the Assignee Lender (or such affiliate) has deemed
appropriate to make its own credit analysis and decision to enter into the
Assignment and Assumption; (4) the Assignee Lender (or such affiliate) will,
independently and without reliance upon Agent, continue to make its own credit
decisions in taking or not taking action under this Agreement; (5) the Assignee
Lender (or such affiliate) hereby appoints and authorizes Agent to take such
action as administrative

 

49

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

agent on its behalf and to exercise such powers under the Loan Documents and
this Agreement as are delegated to Agent thereunder and hereunder, together with
such powers as are reasonably incidental thereto; and (6) the Assignee Lender
(or such affiliate) agrees that it will perform all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender and
confirms the representations and warranties of the assigning Lender under this
Agreement.

(g) Participations. Any Lender may sell a participation interest in all or any
portion of the Loan without the prior consent of the Agent and the other
Lenders; provided, however, such participants shall have no independent voting
rights. Such selling Lender shall remain responsible for the performance of it
obligations hereunder, and the Borrower and Agent shall continue to deal solely
and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.

8.10 Other Business. The Agent and each Lender may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with Borrower or any affiliate of Borrower as if it were not performing the
duties specified herein, and may accept fees and other considerations from the
Borrower or any such affiliate for services in connection with this Agreement
and otherwise without having to account for the same to the other parties
hereto.

8.11 Consents. If the Agent requests in writing the consent or approval from the
Lenders and any Lender does not respond to such request within ten (10) Business
Days (or such other period as may be provided herein, including, without
limitation, under Section 5.9), such Lender shall be deemed to have given such
consent or approval.

8.12 Agent as Lender. In its individual capacity as a Lender, U.S. Bank shall
have the same obligations and the same rights, powers and privileges in respect
to its Commitment Percentage and the Advances made by it, and as the holder of
any Note as it would have were it not also the Agent.

8.13 Notification of Defaults and Events of Default. Agent and each Lender
hereby agree that, upon learning of the existence of a default or an Event of
Default, it shall (to the extent notice has not previously been provided)
promptly notify the other parties to this Agreement (other than Borrower)
thereof. The Agent hereby agrees that upon receipt of any notice under this
provision it shall promptly notify the other Lenders of the existence of such
default or Event of Default. Agent shall provide to Lenders copies of any notice
of a default or an Event of Default which Agent delivers to Borrower.

8.14 No Reliance by Borrower. The provisions of this Article VIII are for the
benefit of Agent, the Lenders, and other than the portions of Sections 8.9(a)
and 8.9(b) that pertain specifically to Borrower, Borrower shall have no right
to rely on or enforce any of the provisions hereof; provided, however, the
foregoing shall in no way limit Borrower’s obligations under this Article VIII.
In performing its functions and duties under this Agreement, Agent shall act
solely as Agent of the Lenders and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust with or
for Borrower or any other person.

8.15 Reliance. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents, telecopies or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper person, and with respect to all matters
pertaining to this Agreement or any of the other Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountants and other experts selected by it.

 

50

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

8.16 Pledge to Federal Reserve Bank. Anything in this Agreement to the contrary
notwithstanding, without the need to comply with any of the formal or procedural
requirements of this Agreement, including this Section 8.16, any Lender may at
any time and from time to time pledge and assign all or any portion of its
rights under all or any of the Loan Documents to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such Lender from its
obligations thereunder. To facilitate any such pledge or assignment, Agent
shall, at the request of such Lender, enter into a letter agreement with the
Federal Reserve Bank in, or substantially in, the form of the exhibit to
Appendix C to the Federal Reserve Bank of New York Operating Circular No. 10.

8.17 Limitation of Liability.

(a) Borrower shall be fully and personally liable for the payment of the
indebtedness evidenced by or created or arising under the Loan Documents, and
any judgment or decree in any action brought to enforce the obligation of the
Borrower to pay such indebtedness shall be enforceable against the Borrower and
any such judgment or decree shall be subject to execution upon and be a lien
upon the assets of the Borrower; provided, however, that, recourse of Agent on
behalf of the Lenders to the Borrower’s assets other than any property
encumbered by the Deed of Trust and the other Loan Documents (the “Other
Assets”) for the repayment of the Loan shall be limited as follows:

(i) Upon satisfaction of the Pre-Leasing Test, recourse to the Other Assets for
the repayment of outstanding principal under the Note (“Principal”) shall not
exceed One Hundred Eighteen Million One Hundred Twenty-Five Thousand and
00/100ths Dollars ($118,125,000.00).

(ii) Upon Completion of the Improvements, recourse to the Other Assets for the
repayment of Principal shall not exceed Ninety-Four Million Five Hundred
Thousand and 00/100ths Dollars ($94,500,000.00).

(iii) Upon satisfaction of the Recourse Reduction Debt Service Test, recourse to
the Other Assets for the repayment of Principal shall not exceed Sixty-Three
Million and 00/100ths Dollars ($63,000,000.00).

In no event shall the preceding subparagraphs (i)—(iii) be deemed to limit
Borrower’s obligations with respect to accrued interest or any other amounts
other than Principal owing under the Loan Documents or hereunder.

The personal liability of Borrower for the repayment of Principal pursuant to
this Section 8.17(a) shall not be reduced as a result of Agent realizing upon
any collateral furnished to Agent and the Lenders in connection with the Loan
(except that there shall be only one satisfaction of all amounts due to the
Lenders with respect to the Loan).

(b) Notwithstanding Section 8.17(a) above, in no event shall recourse to the
Other Assets be limited with respect to, and Borrower shall at all times remain
fully and personally liable, and shall indemnify and reimburse Agent and the
Lenders for, all actual liabilities, costs, losses, damages, expenses (including
reasonable attorneys’ fees and disbursements, and court costs, if any), and
claims suffered or incurred by Agent and/or the Lenders, to the extent of actual
monetary loss, in connection with the Loan or the Property by reason of or in
connection with any of the following:

(i) any misapplication or misappropriation of (A) rents received by Borrower
from the Property after the occurrence of an Event of Default under the Loan
Documents; (B) insurance proceeds, condemnation proceeds or tenant security
deposits, in each case relating to the Property; or (C) proceeds from any sale
of all or a portion of the Property;

 

51

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

(ii) any fraud or intentional misrepresentation of Borrower, Guarantor or any
affiliated property manager or leasing agent in connection with the Loan, the
Property or any request for any action or consent by Agent;

(iii) any sale, conveyance, mortgage, grant, lien, encumbrance, security
interest, pledge, assignment or transfer of the Property (or any part or portion
thereof) or any ownership interest in Borrower (direct or indirect, legal or
equitable) in violation of Section 1.14 of the Deed of Trust;

(iv) any event or circumstance for which Borrower indemnifies Agent and/or the
Lenders under the Indemnification Agreement;

(v) the failure of Borrower to apply operating revenues generated by the
Property and received by Borrower or any affiliated property manager or leasing
agent to pay any debt service, impounds, operating expenses and emergency
capital expenditures or costs;

(vi) intentional removal or physical destruction of property (without the
concurrent replacement thereof with property of at least equivalent value and
utility) constituting any material portion of the Property, or any other
intentional and material waste of any portion of the Property by Borrower;

(vii) Borrower or Guarantor (i) filing a voluntary petition under the Bankruptcy
Code or any other Federal or state bankruptcy or insolvency law, or (ii) making
an assignment for the benefit of creditors; or

(viii) Borrower (1) filing, or joining in the filing of, an involuntary petition
against Borrower or Guarantor under the Bankruptcy Code or any other Federal or
state bankruptcy or insolvency law, or (2) soliciting or causing to be solicited
petitioning creditors for any involuntary petition against Borrower or
Guarantor, or (3) filing an answer consenting to or otherwise acquiescing in or
joining in any involuntary petition filed against Borrower or Guarantor by any
other Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law, or (4) voting adversely to Agent’s and/or the Lenders’
interest in any proceeding under the Bankruptcy Code or any other state or
Federal bankruptcy or insolvency law which involves Borrower or Guarantor or any
portion of the Property, or (5) consenting to or acquiescing or joining in an
application for the appointment of a custodian, receiver, trustee or examiner
for Borrower or Guarantor or any portion of the Property (unless such action is
at the written request of Agent and/or the Lenders).

(c) Nothing contained in this Section 8.17 shall affect or limit the ability of
Agent on behalf of the Lenders to enforce any of their rights or remedies with
respect to any property encumbered by the Deed of Trust and the other Loan
Documents, nor shall anything contained in this Section 8.17 affect or limit the
rights of Agent and the Lenders to proceed against any person or entity,
including the Borrower or any partner in the Borrower with respect to the
enforcement of any guarantees of payment or guarantees of performance and
completion or other similar rights.

[SIGNATURES ON FOLLOWING PAGES]

 

52

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

[Signature Page to Clarendon Center Construction Loan Agreement]

IN WITNESS WHEREOF, intending to be legally bound, the parties have executed and
delivered this Agreement, under seal, as of the date first written above.

 

BORROWER: SAUL HOLDINGS LIMITED PARTNERSHIP, a Maryland limited partnership By:
  Saul Centers, Inc., a Maryland corporation, its sole general partner

 

  By:  

/s/ B. Francis Saul III

  Name:   B. Francis Saul III   Title:   President

 

Address for notices: Saul Holdings Limited Partnership 7501 Wisconsin Avenue,
Suite 1500 East Bethesda, Maryland 20814 Attention:   B. Francis Saul III and  
  Scott V. Schneider

 

With a copy to: Pillsbury Winthrop Shaw Pittman LLP 2300 N Street, N.W.
Washington, D.C. 20037 Attention:   Christian Buerger, Esq.

 

Q-1

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

[Signature Page to Clarendon Center Construction Loan Agreement]

 

AGENT AND AS A LENDER: U.S. BANK NATIONAL ASSOCIATION By:  

/s/ A. Jeffrey Jacobson

  A. Jeffrey Jacobson   Senior Vice President

 

Address for notices: U.S. Bank National Association 1650 Tysons Boulevard, Suite
250 McLean, Virginia 22102 Attention:   A. Jeffrey Jacobson     Senior Vice
President

 

With a copy to: Bingham McCutchen LLP 2020 K Street, NW Washington, D.C. 20006
Attention:   Barry P. Rosenthal, Esq.

 

Q-2

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

[Signature Page to Clarendon Center Construction Loan Agreement]

 

LENDER: WELLS FARGO BANK, NATIONAL ASSOCIATION By:  

/s/ Mark F. Monahan

  Mark F. Monahan   Vice President

 

Address for notices: Wells Fargo Bank, National Association 1750 H Street, N.W.,
Suite 400 Washington, D.C. 20006 Attention:   Manager, Loan Administration

 

Q-3

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

HSBC REALTY CREDIT CORPORATION (USA), a Delaware corporation By:  

/s/ Elizabeth C. Halling

Name:   Elizabeth C. Halling Title:   Vice President

 

Notice Address: HSBC Realty Credit Corporation (USA) One HSBC Center, 27th Floor
Buffalo, NY 14203 Attention:   Eric Nicotera Fax:   (716) 841-5099 Email:  
eric.nicotera@us.hsbc.com

 

With copies to: HSBC Bank USA, National Association 1130 Connecticut Avenue NW,
Suite 1200 Washington, DC 20036 Attn:   Elizabeth C. Halling Fax:   (202)
496-8758 Email:   elizabeth.c.halling@us.hsbc.com

 

and Goulston & Storrs, P.C. 2001 K Street, N.W., 11th Floor Washington, DC 20006
Attn:   Dennis Moyer, Esq. Fax:   (202) 263-0554 Email:  
dmoyer@goulstonstorrs.com

 

Q-4

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

[Signature Page to Clarendon Center Construction Loan Agreement]

 

LENDER: COMPASS BANK By:  

/s/ S. K. Gorman

Name:   S. K. Gorman

Its:

  Senior Vice President

 

Address for notices: Compass Bank 15 South 20th Street, Suite 1500 Birmingham,
AL 35233 Attn:   Kent Gorman

 

Q-5

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

[Signature Page to Clarendon Center Construction Loan Agreement]

 

LENDER: RAYMOND JAMES BANK, FSB By:  

/s/ William J. Hindman

Name:   William J. Hindman

Its:

  Senior Vice President

 

Address for notices: Raymond James Bank, FSB 710 Carillon Parkway St.
Petersburg, FL 33716 Attention:   Loan Administration/Operations

 

Q-6

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

[SCHEDULES AND EXHIBITS INTENTIONALLY OMITTED]

 

Q-7