Exhibit 10.3

 

EXECUTION COPY

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this “Agreement”) is made as of this 28 day of September,
2005 by and between (i) COMSTOCK BELLEMEADE, L.C., a Virginia limited liability
company (“Borrower”) and (ii) BANK OF AMERICA, N.A., a national banking
association (the “Lender”).

 

R E C I T A L S:

 

Pursuant to and subject to the terms of a certain Commitment Letter from Lender
to Borrower dated September 2, 2005 (the “Commitment”) and subject to the terms
sets forth hereinbelow, Lender agrees to make a loan to Borrower, as more
particularly described herein for the purpose of (i) the acquisition of certain
residential buildings containing in the aggregate 316 units (each a “Unit” and
collectively, the “Units”) and the improvement of common area facilities within
the complex and (ii) the renovation and condominium conversion of the Units (the
“Renovation”).  All of the foregoing shall be constructed on real property in
Leesburg, Virginia more particularly described in Exhibit “A” hereto.

 

WHEREAS, Comstock Homebuilding Companies, Inc. has executed and delivered to
Lender a Guaranty (as defined herein); and

 

WHEREAS, Lender and Borrower have agreed to execute this Agreement for the
purpose of describing together with the other Loan Documents (as herein defined)
some of the terms and conditions relating to the disbursement of Loan proceeds,
and to otherwise set forth together with the other Loan Documents (as herein
defined) some of the obligations of Borrower and the Lender.

 

W I T N E S S E T H:

 

For and in consideration of these presents, and in further consideration of the
mutual covenants and agreements herein set forth, and in consideration of the
sum of Ten and no/100 Dollars ($10.00) lawful money of the United States of
America by each of the parties to the other paid, receipt of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
covenant and agree as follows:

 

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ARTICLE I – DEFINITIONS

 

1.1                               Definitions.  Borrower and the Lender agree
that, unless the context otherwise specifies or requires, the following terms
shall have the meanings herein specified, such definitions to be applicable
equally to the singular and the plural forms of such terms and to all genders:

 

(a)                                  Appraised Value - The then current market
value determined pursuant to the most recent appraisal for the Property. All
such appraisals shall be ordered by the Lender, prepared at Borrower’s expense
by a certified appraiser acceptable to the Lender and otherwise satisfactory to
the Lender in all respects. The Lender may order, if required by the Lender’s
internal policies, reappraisals of the Property, at the Lender’s sole discretion
and at Borrower’s expense.

 

(b)                                 Borrower - The entity hereinabove designated
as such.

 

(c)                                  Contract - A fully executed contract of
sale for a Unit that: (i) has been accepted by Borrower and meets the Lender’s
criteria for acceptable contracts; (ii) is not subject to cancellation without
forfeiture of all deposits thereunder (except for cause in accordance with
applicable law and in the event the purchaser fails to obtain the necessary
mortgage loan); (iii) contains no contingencies (including, without limitation,
the sale of the purchaser’s home) except ordinary financing contingencies;
(iv) is accompanied by a cash deposit or deposits in form, content and amount
acceptable to the Lender; and (v) that either (A) provides for a cash sale
(i.e., a sale not contingent upon financing) by a purchaser whose
creditworthiness is satisfactory to the Lender in all respects, or (B) is
accompanied by a pre-qualification letter from a permanent mortgage lender in
form, amount and content satisfactory to the Lender in all respects.  In lieu of
copies of Contracts, the Borrower may elect to submit a “Unit Contract Summary
Report” in form attached hereto as Exhibit “C”.  At Lender’s option, no more
than twice monthly Lender shall verify the accuracy of the information on each
Unit Contract Summary Report through a review of Borrower’s files. 
Notwithstanding the foregoing, the Lender shall retain the right to request
copies of Contracts at any time during the term of the Loan.  At the time any
Unit Contract Summary Report is submitted to the Lender for its approval,
Borrower shall specifically identify to the Lender each Contract wherein the
purchaser is affiliated with or related to Borrower, Guarantor (hereinafter
defined) or any of their respective employees, shareholders, partners, members
or other principals, as applicable “Related Party Contracts”).  The number of
Related Party Contracts shall not exceed ten percent (10%) of the total Units
without Lender’s prior consent.

 

(d)                                 Deed of Trust - Collectively, that certain
Credit Line Deed of Trust and Security Agreement of even date herewith, executed
and delivered by Borrower to secure the Loan, as any of the same may from time
to time be amended, modified, supplemented or spread.

 

(e)                                  Default - Any of the happenings, events,
circumstances or occurrences designated as such in this Agreement.

 

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(f)                                    Environmental Regulations -
“Environmental Regulations” as defined in the Deed of Trust.

 

(g)                                 Guarantor – Comstock Homebuilding
Companies, Inc. and any other party that executes and delivers a Guaranty, and
its or their respective successors, personal representatives and permitted
assigns.

 

(h)                                 Guaranty - That certain (i) Guaranty
Agreement of even date herewith executed and delivered by Guarantor to secure
the Loan and all other indebtedness under the Loan Documents (hereinafter
defined), and (ii) any and all other guaranty agreements executed for the
benefit of the Lender to secure the Loan, as any of the same may from time to
time be amended, modified, replaced or supplemented.

 

(i)                                     Hazardous Materials -  “Hazardous
Materials” as defined in the Deed of Trust.

 

(j)                                     Improvements - Any and all buildings,
structures, improvements, alterations or appurtenances already existing or at
any time hereafter constructed or placed upon the Land, and any replacements
thereof, additions thereto and substitutions therefor, including without
limitation, all equipment, apparatus, machinery and fixtures of any kind or
character forming a part thereof.

 

(k)                                  Indebtedness - All amounts due or to become
due to the Lender pursuant to or on account of the Note (hereinafter defined) or
the Letter of Credit Note (hereinafter defined), this Agreement and each of the
other Loan Documents, including, without limitation, all principal (whether
advanced prior to, upon execution of, or after the date of this Agreement),
interest, late charges, loan fees, extension fees, prepayment fees, amounts
drawn under any letters of credit, any letter of credit fees and all other
payments required to be made by the Borrower pursuant to or on account of the
Note, this Agreement and any of the other Loan Documents, and including any and
all amounts advanced by the Lender for the account of the Borrower pursuant to
the provisions of this Agreement and any of the other Loan Documents, whether or
not such amounts are advanced from the proceeds of the Loan.

 

(l)                                     Jurisdiction of Choice - The
Commonwealth of Virginia, the jurisdiction under whose laws this Agreement shall
be governed, unless otherwise provided herein.

 

(m)                               Land  — Any or all of the real property now
owned or hereafter acquired by the Borrower with Loan proceeds and more
particularly described in the Deed of Trust.

 

(n)                                 Lender - The party hereinabove designated as
such, its successors and assigns.

 

(o)                                 Letter of Credit Note – that certain Letter
of Credit Note of even date herewith in the principal amount of $1,000,000.00
made by the Borrower, payable to the order

 

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of the Lender, as the same may from time to time be amended, modified, replaced
or supplemented.

 

(p)                                 Loan – That certain acquisition and
development loan in the amount of $46,725,000.00, and that certain $1,000,000.00
letter of credit, each made pursuant to this Agreement, to finance the
acquisition and development of certain property, as evidenced by the Note and
the Letter of Credit Note and secured by the Deed of Trust and the other Loan
Documents.

 

(q)                                 Loan Documents - This Agreement, the Note,
the Letter of Credit Note, the Deed of Trust, any Guaranty and any other
instrument or documents executed in connection with the Loan, as any of the same
may from time to time be amended, modified or supplemented.

 

(r)                                    Maturity Date – October        , 2007.

 

(s)                                  Note - That certain Deed of Trust Note of
even date herewith in the original principal amount of $46,725,000.00, or so
much thereof as shall be advanced, made by the Borrower, payable to the order of
the Lender, as the same may from time to time be amended, modified, replaced or
supplemented.

 

(t)                                    Obligations - Any and all of the
covenants, warranties, representations, agreements, promises and other
obligations (other than the Indebtedness) made or owing by the Borrower, the
Guarantors or others to the Lender pursuant to or as otherwise set forth in the
Loan Documents.

 

(u)                                 Progress Inspector - Such person or firm as
the Lender may from time to time appoint or designate to inspect the progress of
the Renovation and conformity of construction with applicable laws, and for such
other purposes as may from time to time seem appropriate to the Lender or as may
be required by the terms of this Agreement.

 

(v)                                 Project – Bellemeade Farms Project
(hereinafter defined).

 

(w)                               Property - The property described as such in
the Deed of Trust, including, but not limited to, the Land and the Improvements.

 

(x)                                   Title Company - Any title company approved
by the Lender that provides mortgagee title insurance covering the lien of the
Deed of Trust in favor of the Lender thereon.

 

(y)                                 Bellemeade Farms Project – acquisition,
renovation and condominium conversion of up to 316 Units in Leesburg, Loudoun
County, Virginia and the improvement of common area facilities within the
complex.

 

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ARTICLE II – CONDITIONS PRECEDENT TO CLOSING

 

In addition to any other conditions stated in this Agreement, the following
conditions must be satisfied prior to Lender having any obligation to advance
funds hereunder:

 

2.1                               Loan Documents.  Receipt by Lender of
appropriately completed and duly executed originals of this Agreement and the
other Loan Documents.  In addition, Borrower shall provide a written opinion of
counsel to the Borrower and the Guarantor as to the authority of the Borrower
and the Guarantor to execute and deliver the Loan Documents, as to the
enforceability and validity of the Loan Documents, and as to such other matters
as the Lender may reasonably require.

 

2.2.                            Organizational Documents.    Borrower shall
supply, with respect to the Borrower and Guarantor: (i) a currently certified
copy of the Articles of Organization or Certificate of Incorporation and all
amendments thereto, as applicable; (ii) evidence satisfactory to Lender and its
counsel that Borrower and Guarantor in good standing in the jurisdiction where
organized and qualified to do business in every jurisdiction in which the nature
of their businesses or their properties makes such qualification necessary;
(iii) resolutions of the Borrower and Guarantor authorizing the due execution
and delivery of the Loan Documents to which it is a party, to the extent
necessary; and (iv) certified true copies of the Operating Agreement or By-laws
and all amendments thereto, as applicable.

 

None of the documents pursuant to which the Borrower or Guarantor is organized
shall be amended or modified in any respect without the prior written consent of
the Lender, which may be given or withheld in the reasonable discretion of the
Lender.

 

2.3                               Insurance.  Borrower shall provide Lender with
a complete and fully paid up policy or policies of casualty and fire insurance
with standard extended coverage in an amount not less than the replacement cost
of the improvements and personalty located on the Property; $2,000,000.00
covering all claims for bodily injury or death and property damage arising out
of a single occurrence and $2,000,000.00 for the aggregate of all occurrences
during any given annual policy period, plus $5,000,000.00 of “umbrella”
coverage; builder’s risk insurance with on a completed value, nonreporting form
with permission to complete and occupy; malicious mischief insurance; business
interruption insurance and insurance against such other hazards as Lender may
require, in amounts, with insurers and under forms of policies containing such
provisions and endorsements as Lender may require.  All policies of insurance
(except employee benefit and public liability insurance which shall name Lender
as an additional insured) shall contain a lender’s loss payable clause and
standard mortgagee clause for the benefit of Lender, and shall provide, in part,
that:  (a) in the event of a loss, all insurance proceeds shall be paid to
Lender and Lender shall be authorized and empowered by Borrower to settle,
adjust or compromise any claims for loss, damage or destruction under such
policies of insurance; (b) any loss covered by such insurance shall be payable
by the insurer in accordance with the terms of such policy notwithstanding any
act or negligence of Borrower, its agents or employees, the named insured or any
owner, tenant or occupant of the Property which might otherwise result in
forfeiture of said insurance; (c) the insurer waives all rights of setoff,
counterclaim or deduction against Borrower; and (d) should title to and
beneficial

 

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ownership of the Property become vested in Lender, the insurance provided by
such policies shall continue for the term thereof for the benefit of Lender. 
All required insurance shall provide that (i) the insurance afforded all parties
named as insureds shall be primary insurance and shall not participate with, nor
be in excess over, any other valid and collectible insurance available to
Lender, (ii) any other insurance obtained by any named insured shall not be
called upon to contribute until the limits of the policies required hereunder
are exhausted, and (iii) the insurance required hereunder cannot be canceled or
materially amended or altered without at least thirty (30) days prior written
notification to Lender.  All insurance required hereunder shall be issued by
companies and in an amounts in each company approved in advance by Lender, in
its sole discretion, and such insurance shall be in the form and on terms
(including but not limited to deductibles, self-insured retentions or similar
provisions) approved in advance by Lender, in its sole discretion.

 

Borrower shall deliver all such policies (or certified copies thereof) to
Lender, together with a one-year’s paid receipt for each such policy.  In
addition, Lender shall be furnished with satisfactory evidence indicating
whether the Property is located within an area that has been identified as a
“special flood hazard area” as that term is used in the Flood Disaster
Protection Act of 1973.  If any insurable improvements on the Property are
located in any area so designated, a flood insurance policy satisfactory to
Lender shall be deposited with Lender prior to the closing on the Loan and shall
be maintained in full force until the Loan is repaid in full.

 

2.4                               Financing Statement.  The financing statement
necessary to perfect Lender’s security interest in the personal property subject
to the Deed of Trust shall be duly filed in all appropriate offices and
jurisdictions, all other financing statements covering any of such personal
property shall be terminated, and filing and recording receipts evidencing such
filings and terminations shall be delivered to Lender, all in form and substance
satisfactory to Lender.

 

2.5                               Real Estate Documents.  Lender shall have
received and approved, in its sole discretion, the following:

 

(a)                                  Appraisal.  An appraisal of the Property,
prepared by an appraiser acceptable to Lender, in form and content acceptable to
Lender, conforming to all regulatory and internal appraisal guidelines
applicable to or established by Lender, in its sole, absolute, nonreviewable
discretion, reflecting an as-finished discounted value for the Property
satisfactory to Lender in its sole, absolute nonreviewable discretion.  Lender
acknowledges that the appraisal received by it is acceptable.

 

(b)                                 Title Insurance. An irrevocable commitment
to issue a full-coverage mortgagee title insurance policy (the “Title Policy”)
on the ALTA 1992 form insuring the first lien of the Deed of Trust to Lender in
a form and issued by a title insurance company or companies acceptable to
Lender, said policy (i) containing only those exceptions to title as shall be
reasonably approved by Lender and Lender’s counsel, and (ii) showing the lien of
the Deed of Trust securing the Loan to be a first lien of record, on the fee
simple estate of Borrower in the Property, together with true and complete
copies of all documents or instruments identified therein as exceptions to
title.  The title policy shall be delivered to Lender promptly after

 

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recordation of the Deed of Trust. Lender shall have the right to designate such
co-insurers or re-insurers as it deems advisable in its sole discretion.  Such
policy or policies shall be endorsable or assignable to Lender’s successors and
assigns, upon request, without cost to Lender. Such policy or policies shall
contain affirmative insurance against filed and unfiled mechanic’s liens in form
acceptable to Lender. Lender shall receive satisfactory evidence that there is
no pending litigation with respect to the Property.

 

(c)                                  Survey.  A current survey (or other
documentation acceptable to Lender) and legal description of the Property
satisfactory to Lender from a registered land surveyor of the Commonwealth of
Virginia, which survey shall show all easements, rights of way and other matters
of record, shall locate all proposed improvements on the Land and shall
generally show a state of facts acceptable to Lender and contain a surveyor’s
certificate satisfactory to the Lender.

 

(d)                                 Environmental Audit.  An environmental audit
of the Property prepared by an environmental consulting firm acceptable to
Lender, in its sole discretion, confirming that the Property is in compliance
with all applicable environmental laws.

 

(e)                                  Budget.  Receipt by Lender of the final
budget for the Project, which shall be attached hereto as Exhibit “B”, and which
shall be reasonably acceptable to Lender.

 

(f)                                    Evidence of Zoning Compliance.   Such
written evidence as the Lender may require to the effect that the Property has
been zoned for purposes consistent with the uses contemplated beyond any
possibility of appeal and to the effect, further, that there are no pending
proceedings, either administrative, legislative or judicial which would in any
manner adversely affect the status of the zoning with respect to such property
or any part thereof.

 

(g)                                 Public Utilities.  Evidence to the effect
that sanitary sewer, water, electric, gas, telephone and other public utilities
are available and adequate to serve the Property for purposes consistent with
the Renovation on the Property.

 

(h)                                 Sale Agreement. A copy of the purchase
contract for the Property, satisfactory to the Lender and Lender’s counsel in
form and substance.

 

(i)                                     No Default.  No event shall have
occurred and be continuing that constitutes a Default (as defined below).

 

(j)                                     Representations.  All representations
and warranties contained in this Agreement shall be true and correct in every
material respect as of the date of the first disbursement under this Agreement
and on the date of any future disbursements hereunder.

 

(k)                                  Satisfactory Documents.  All documents
delivered pursuant to this Agreement must be in form and substance reasonably
satisfactory to Lender and its counsel, and all legal matters incident to this
Agreement must be reasonably satisfactory to Lender’s counsel.

 

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2.6                               Equity Requirement.   At or prior to Closing,
Borrower shall provide Lender evidence that Borrower has contributed
$8,872,548.00 toward the purchase price of the Property (“Equity Contribution”).

 

2.7                               Loan Fee. Upon the closing of the Loan, the
Borrower shall pay Lender a non-refundable loan fee in accordance with the Fee
Letter Agreement of even date hererwith between Borrower and Lender.

 

ARTICLE III - CONDITIONS FOR RENOVATION ADVANCES

 

3.1                               In addition to any other conditions stated in
this Agreement, the following conditions must be satisfied prior to Lender
making any advances under this Agreement for the Renovation.  Borrower shall
obtain and submit to Lender for Lender’s approval, in its reasonable discretion,
the following, as they pertain to the Project:

 

(a)                                  Permits.  Copies of any and all building
and similar permits required in connection with the Renovation, together with
such evidence as the Lender may require to the effect that all fees for such
permits have been paid.  Satisfactory evidence shall be submitted to Lender of
the receipt of all governmental approvals necessary for the Renovation and
condominium conversion of the Units have been obtained.  Lender shall also
receive satisfactory evidence that all applicable safety, ecological and
environmental laws and any other codes or regulations affecting the Renovation
and/or proposed use of the Property have been complied with.

 

(b)                                 General Contractor.  The general contractor
must be approved by Lender in Lender’s sole discretion (the “General
Contractor”). The contract for the Renovation shall be subject to Lender’s
approval, and shall be assigned to Lender, effective on a Default under any of
the Loan Documents.  The General Contractor shall consent to such assignment,
and the General Contractor shall agree, in the event of any such Default, to
continue performance of the contract for Lender, if Lender so requests.  In
addition, the General Contractor shall maintain workers’ compensation and
disability insurance in amounts required by law, and employer’s liability
insurance.

 

(c)                                  List of Subcontractors and Materialmen.  If
required by Lender, a list of the names of all subcontractors and materialmen
intended by the Borrower to perform work or supply materials in connection with
the Renovation, and conformed copies of executed contracts for such work and
materials, in form and substance reasonably satisfactory to Lender.

 

(d)                                 Builder’s Risk Insurance.  Evidence that the
insurance policy referred to in paragraph 2.2 hereof contains builder’s risk
coverage on a completed value, non-reporting form with permission to complete
and occupy.

 

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ARTICLE IV - ADVANCES FOR THE RENOVATION

 

4.1  Loan disbursements for the Renovation shall be governed and conditioned on
the following:

 

(a)                                  The Renovation shall be performed by the
Borrower in strict accordance with all applicable (whether present or future)
laws, ordinances, rules, regulations, requirements and order of any governmental
or regulatory authority having or claiming jurisdiction.  The Renovation shall
be completed in a manner so as not to encroach upon any easement or
right-of-way, or upon the land of others. The Renovation shall be wholly within
all applicable building restriction lines and set-backs or variances made
therefor, however established, and shall be in strict accordance with all
applicable use or other restrictions and the provisions of any prior
declarations, covenants and zoning ordinances and regulations.

 

(b)                                 Borrower shall submit to Lender or the
Progress Inspector, at Lender’s discretion, such information as may be
reasonably requested by Lender or the Progress Inspector to verify the
Renovation costs which are to be incurred in connection with the Renovation. 
Lender shall not be obligated to authorize disbursement of Loan proceeds with
respect to the Renovation for an amount in excess of the Renovation costs to be
incurred in connection therewith as verified by Lender or the Progress Inspector
pursuant to the provisions of the preceding sentence. The funding of each draw
request is subject to an inspection and approval by an authorized officer of the
Lender and the Progress Inspector. Sufficient time shall be required between the
submission of the draw request and the actual advances in order to permit
on-site inspection by an authorized officer of the Lender and the Progress
Inspector.

 

(c)                                  The Loan proceeds will be advanced in
installments as the Renovation progresses in accordance with the terms of this
Agreement to finance the Renovation, but no more often than twice each thirty
(30) days; provided that Lender is satisfied that the undisbursed amount of the
Loan will be sufficient to complete the work, costs estimates, approved change
orders on file with the Lender, and pay or provide for all reasonably
anticipated Renovation costs through the maturity of the Loan and the Lender is
satisfied that the Borrower has paid all costs incurred in connection with the
Renovation prior to the date of the requested advance.  In the event Lender
determines that the undisbursed portion of the Loan is insufficient to complete
the Renovation in such manner as Lender may require, the Borrower shall provide
such funds necessary to complete the Renovation.

 

(d)                                 Each advance shall be conditioned upon
receipt of (i) a written certification, on AIA forms G-702 and G-703 by the
Borrower, that the work which is the basis of the requested advance was
satisfactorily completed and within the cost estimates approved by Lender (or
such adjustments of cost estimates of line items as shall be required and
approved by Lender, provided that sufficient funds to complete the Renovation
will be available under such adjusted estimates), to the satisfaction of Lender,
and (ii) evidence that all then necessary certificates required to be obtained
from any board, agency or department (government or otherwise) have been
obtained.  All documents required to be submitted to Lender as a condition of
each disbursement shall be on standard AIA forms or such other agreed upon draw

 

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mechanism and shall be furnished to Lender at the address designated by Lender
from time to time.

 

(e)                                  Lender shall also require notice of
continuation or an endorsement to the title insurance policy theretofore
delivered, indicating that since the last preceding advance there has been no
change in the status of title and no title exceptions not theretofore approved
by the Lender and bringing the policy to the date of the advance then being made
and increasing the coverage of the policy by an amount equal to the advance then
being made if the policy does not by its terms provide for such an increase.

 

(f)                                    Before making any advance of Loan
proceeds, the Lender may require the Borrower to obtain from the General
Contractor, acknowledgments of payment and releases of liens and rights to claim
liens, if applicable, down to the date of the last preceding advance and
concurrently with the final advance.  All such acknowledgments and releases
shall be in the form and substance satisfactory to the Lender.

 

(g)                                 The Lender shall not be obligated to make
the final advance of Loan proceeds hereunder, unless (i) the Progress Inspector
has certified to the Lender on standard AIA forms that the work is complete;
(ii) the Lender has received evidence satisfactory to it that all work requiring
inspection by governmental or regulatory authorities having or claiming
jurisdiction has been duly inspected and approved by such authorities and by any
rating or inspection organization, bureau, association, or office having or
claiming jurisdiction; and (iii) the Lender has received evidence satisfactory
to it that requisite certificates of occupancy for permanent occupancy have been
validly issued and that completion of the Renovation has occurred free and clear
of all mechanics’ or materialmens’ liens and any bills or claims for labor,
materials and services in connection with the completion of the Renovation.  All
fees and costs of the Progress Inspector incurred by the Lender shall be paid by
the Borrower at its sole expense.

 

(h)                                 The Lender shall not be obligated to make
any advances of Loan proceeds hereunder unless, in the reasonable judgment of
the Lender, all work completed at the time of the application for advance has
been performed in a good and workmanlike manner, and all materials and fixtures
usually furnished and installed at that stage of the Renovation have been
furnished and installed, and no Default which has not been cured has occurred
under any of the documents evidencing, securing or guaranteeing the Loan.

 

(i)                                     Upon Default hereunder, Lender, at its
option, may make any and all advances, or any part thereof, directly to the
contractors or subcontractors against requisitions for payment under the
Renovation contracts or subcontracts, as the case may be; the execution of this
Agreement by Borrower shall and does constitute an irrevocable direction and
authorization to so advance funds.  All payments made pursuant to the foregoing
shall be made within the scope of the respective contracts.

 

(j)                                     Lender, at its option, may make any
advance to itself for the payment of interest or any and all other reasonable
costs incurred by Lender in connection with or pursuant

 

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to the Loan Documents, and the execution of this Agreement by Borrower shall and
does constitute an irrevocable direction and authorization to so advance funds.

 

ARTICLE V — REPRESENTATIONS AND WARRANTIES

 

Borrower hereby represents and warrants to the Lender, as of the date hereof and
at all times hereafter, that:

 

5.1                               Organization, Power, Etc.   (a) Borrower is a
duly organized, validly existing limited liability company, in good standing
under the laws of the jurisdiction of its organization; (b) Guarantor is a duly
organized, validly existing corporation under the laws of the jurisdiction of
its organization (c) each of the Borrower and Guarantor has the power and
authority to own its properties and to carry on its business as now being
conducted; (c) each of the Borrower and Guarantor is duly qualified to do
business in the jurisdiction where the Property is located and in every
jurisdiction in which the nature of its business or its properties makes such
qualification necessary; (d) each of the Borrower and Guarantor is in compliance
with all laws, regulations, ordinances and orders of public authorities
applicable to it; and (e) each of the Borrower and Guarantor has the full power,
authority and legal right to execute, deliver and perform the covenants and
obligations set forth in this Agreement and the other Loan Documents and to
carry out the terms hereof and thereof.

 

5.2                               Validity of Loan Documents.  The execution,
delivery and performance by Borrower of the Note, the Letter of Credit Note and
the other Loan Documents: (a) are within the legal powers of Borrower; (b) have
been duly authorized by all requisite partnership and/or membership action, as
applicable; (c) have received all necessary governmental approvals; (d) will not
violate any provision of law, any order of any court or other agency of
government or any articles of organization, membership and/or operating
agreement, partnership agreement, indenture, agreement or other instrument to
which Borrower is a party or by which it or any of its property is bound, or be
in conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of its property or assets, except
as contemplated by the provisions of the Loan Documents; and (e) when executed
and delivered by Borrower, will constitute the legal, valid and binding
obligations of the Borrower and other obligors named therein, if any, in
accordance with their respective terms.

 

5.3                               Financial Statements.  All financial
statements delivered to the Lender are true and correct in all respects, have
been prepared in accordance with generally accepted accounting practices
consistently applied (other than with respect to individual Guarantors), and
fairly present the financial condition of the Borrower and other parties named
therein as of the dates thereof.  No material adverse change has occurred in the
financial condition reflected therein since the dates thereof and no material
additional liabilities have been incurred since the

 

11

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most recent date thereof other than the borrowing contemplated in the Commitment
and this Agreement.

 

5.4                               Other Information.  All other information,
reports, papers and data given to the Lender with respect to Borrower or others
obligated under the terms of the Loan Documents and the Property are accurate
and correct in all material respects and complete insofar as completeness may be
necessary to give the Lender a true and accurate knowledge of the subject
matter.

 

5.5                               Utilities and Access.  All utility services
and access necessary for the Renovation are available, including, without
limitation, roads, telephone service, water supply, storm and sanitary sewer
facilities, and natural gas or electric facilities.

 

5.6                               Defaults.  There is no Default on the part of
the Borrower under the Note or any of the other Loan Documents and no event has
occurred that may give rise to a Default.

 

ARTICLE VI — AFFIRMATIVE COVENANTS

 

Until the Indebtedness has been paid in full and the Loan has been terminated,
Borrower hereby affirmatively covenants and agrees as follows:

 

6.1                               Financial Statements; Sales and Inventory
Reports.  Borrower shall provide the following with respect to the Guarantor:

 

(a)                                  as soon as available, but in no event later
than ninety (90) days after the close of its fiscal year (but in no event
earlier than the date such financial statements must be submitted to
governmental authorities), financial statements (all of which financial
statements may include, as requested by the Lender, a balance sheet, income
statement, sources and uses of funds for such fiscal and/or calendar year,
projected sources and uses of funds for the coming year, detailed listing and
description of all contingent liabilities, tax returns, written verification of
liquidity and such other supporting schedules and documentation which the Lender
may request).  All such financial statements shall be audited by a certified
public accountant acceptable to the Lender in all respects; and

 

(b)                                 if requested by the Lender, within
forty-five (45) days after the close of its quarterly business period (but in no
event earlier than the date such financial statements must be submitted to
governmental authorities), the financial statements to be filed with applicable
governmental authorities.

 

6.2                               Construction.  After each advance of proceeds
under the Loan, Borrower shall commence to acquire the Land and/or proceed with
the Renovation for which each such advance is designated and will prosecute the
same in good faith with diligence and continuity.

 

6.3                               Approval and Permits.  No work associated with
the Renovation shall be commenced by Borrower unless and until all necessary
approvals by all governmental

 

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authorities having or claiming jurisdiction and by the beneficiary of any
applicable restrictive covenant have been obtained, and unless and until all
required building and other permits have been validly issued and all required
fees and bonds have been paid or posted, as the circumstances may require.

 

6.4                               Free and Clear of Liens.  Except as may be
otherwise specifically permitted under the Loan Documents, Borrower shall not
make any contract or arrangement of any kind which would give rise to a lien on
any portion of the Property.  The Renovation shall be completed by Borrower free
and clear of all mechanics’ and materialmen’s liens.

 

6.5                               Compliance with Laws - Encroachments.  The
Renovation shall be performed in strict accordance with all applicable present
and future laws, ordinances, rules, regulations, requirements and orders of any
governmental or regulatory authority having or claiming jurisdiction.

 

6.6                               Inspections; Cooperation.  Borrower shall
permit the Lender and its duly authorized representatives (including, without
limitation, the Progress Inspector) to enter upon the Property at all reasonable
times and in a reasonable manner to inspect the Improvements and any and all
materials and to examine all detailed plans and shop drawings and similar
materials relating to the Renovation.  Borrower will at all times cooperate and
request its subcontractors and materialmen to cooperate with the Lender and its
duly authorized representatives (including, without limitation, the Progress
Inspector) in connection with or in aid of the performance of the Lender’s
functions under this Loan Agreement.  Borrower shall pay all inspection fees
incurred by the Lender in connection with the Loan; however, so long as no
Default exists, inspections shall be limited to two site inspection visits per
month to be performed by the Progress Inspector at Borrower’s sole cost and
expense.  Inspection fees may be deducted by the Lender from the Borrower’s
applicable Loan disbursement.

 

6.7                               Vouchers and Receipts.  Borrower will furnish
to the Lender, promptly on demand, a computer generated report of job costs and
accounts payable for the Project financed under the Loan, and from and after any
Default under the Loan, (i) any contracts, bills of sale, statements, receipted
vouchers or agreements pursuant to which Borrower has any claim of title to any
materials, fixtures or other articles delivered or to be delivered to the Land
or incorporated or to be incorporated into the Improvements and (ii) a verified
written statement, in such form and detail as the Lender may require, showing
all amounts paid and unpaid for labor and materials and all items of labor and
materials to be furnished for which payment has not been made and the amounts to
be paid therefor.

 

6.8                               Payments for Labor and Materials.  Borrower
will pay when due all bills for materials supplied and for services or labor
performed in connection with the Renovation.

 

6.9                               Correction of Construction Defects.  Borrower
will promptly correct or cause the correction of any structural defects in the
Improvements and any substantial departures or deviations from the Plans and
Specifications.

 

13

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6.10                        Insurance.  Borrower will comply with all insurance
requirements set forth in the Deed of Trust.

 

6.11                        Hazardous Materials.  Borrower will comply with the
provisions of the Deed of Trust regarding Hazardous Materials and all applicable
Environmental Regulations.

 

6.12                        Subcontractors.  Borrower shall immediately disclose
to the Lender upon request the names of all subcontractors with whom Borrower
has contracted or intends to contract for the Renovation or for the furnishing
of labor or materials therefor.

 

6.13                        Equity Contribution.  At or prior to closing,
Borrower shall make the Equity Contribution.

 

6.14                        Condominium Conversion.  The Borrower shall take all
steps necessary to validly and legally convert the Property into a condominium
regime with approximately 316 residential Units. The condominium documents,
including without limitation, the condominium declaration and by-laws, shall be
acceptable to the Lender in its discretion. From time to time, upon the Lender’s
request, the Borrower shall provide Lender with evidence that Borrower has
complied with any applicable requirements of the condominium documents and any
applicable laws. Borrower shall, within 150 days of the closing of the Loan,
provide Lender with all condominium documents, including without limitation, the
public offering statement. Lender recognizes that the Bellemeade Farms Project
will utilize an expandable condominium regime, whereby the condominium will be
established in phases to expand over the Property. Lender shall not unreasonably
withhold its consent to certain cross easements as the condominium regime
expands within the complex.

 

6.15                        Curtailment Schedule.  Borrower agrees to comply
with the following curtailment schedule for advances under the Loan (the
“Mandatory Principal Curtailment Requirement”):

 

 

Due Date

 

$ Amount of Curtailment

 

Remaining Commitment

 

June 30, 2006

 

$

7,400,000

 

$

39,325,000

 

September 30, 2006

 

$

5,550,000

 

$

33,775,000

 

December 31, 2006

 

$

5,550,000

 

$

28,225,000

 

March 31, 2007

 

$

5,550,000

 

$

22,675,000

 

June 30, 2007

 

$

5,550,000

 

$

17,125,000

 

September 30, 2007

 

$

5,550,000

 

$

11,575,000

 

Extension Period

 

 

 

 

 

December 31, 2007

 

$

5,550,000

 

$

6,025,000

 

March 31, 2008

 

$

6,025,000

 

$

0

 

 

14

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ARTICLE VII — NEGATIVE COVENANTS

 

Until the Indebtedness has been paid in full and the Loan has been terminated,
Borrower hereby covenants and agrees as follows:

 

7.1                               Restrictions on Subordinate Financing. 
Throughout the term of the Loan, Borrower shall not place any subordinate
financing on the Property.

 

7.2                               Changes to Plans and Specifications.  Without
the prior written consent of the Lender, Borrower will not permit any
substantial changes in the design concept for the Units.

 

7.3                               Prohibition on Transfer of Assets.  Without
the prior written consent of the Lender, Borrower will not transfer any of its
assets, except for transfers in the ordinary course of business and transfers
for which Borrower receives consideration substantially equivalent to the fair
market value of the transferred asset.

 

7.4                               Assignments.  Without the prior written
consent of Lender, Borrower will not transfer, assign, pledge or hypothecate any
of its rights to advances, or any of its rights or obligations under this
Agreement.  Any assignment made or attempted by Borrower without the prior
written consent of the Lender shall be void.  No consent by the Lender to an
assignment by Borrower shall either (a) release Borrower as the party primarily
obligated and liable under the terms of this Agreement unless Borrower shall be
released specifically by the Lender in writing, or (b) be deemed to be a waiver
of the requirement of prior written consent by the Lender with respect to each
and every further assignment.

 

ARTICLE VIII — DEFAULT

 

Each of the following events shall constitute a “Default” under this Agreement
and each of the other Loan Documents:

 

8.1                               Payment of Indebtedness.  Any failure by the
Borrower to pay when due any and all amounts payable by the Borrower under the
terms of the Note or any of the other Loan Documents, which failure to pay
remains uncured for a period of five (5) calendar days after the date such
payment is due (or five (5) calendar days after notice fromLender in the case of
amounts due that are not regular monthly payments), including, without
limitation, any principal payment, interest payment, letter of credit
reimbursement, loan fee, extension fee, letter of credit fee or late charge, and
including any advances made by the Lender from the proceeds of the Loan or
otherwise and interest thereon at the applicable rate set forth in the Loan
Documents.

 

8.2                               Performance of Obligations.  Any default by
the Borrower or Guarantor in the due observance or performance of any of the
Obligations and such default, if other than in payment of the Indebtedness,
shall remain uncured thirty (30) days after the receipt by Borrower of written
notice from Lender identifying such default.  If Borrower receives such notice,
Borrower shall diligently pursue a cure of such default.

 

15

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8.3                               Other Defaults.  The occurrence of any Default
under the Deed of Trust or the Note or any of the other Loan Documents.

 

8.4                               Representations and Warranties.  Any
determination by the Lender that any representation or warranty contained in any
of the Loan Documents or in any certificate, opinion, financial information or
any other form delivered to the Lender in connection with the Loan, is incorrect
or misleading in any material respect at any time.

 

8.5                               Progress of Construction.  Except for delays
unavoidably occasioned by strikes, lock- outs, war or civil disturbance, natural
disaster or acts of God (a) any delay in the Renovation caused by lack of good
faith or reasonable dispatch, (b) any abandonment of the work or discontinuation
of construction for a period of more than thirty (30) consecutive days, unless
the Lender is notified of Borrower’s abandonment of work or discontinuance of
construction is otherwise approved by the Lender, or (c) any failure to complete
the Renovation on or before the maturity date of the Loan.

 

8.6                               Proceeds Insufficient to Complete.  Any
failure by Borrower to pay or deposit the amount of the deficiency required
pursuant to Section 4.1(c) hereof, if the Lender determines that the amount of
undisbursed Loan proceeds available is less than the amount necessary or
required to complete and pay for the Renovation.

 

8.7                               Mechanic’s Lien.  The establishment of any
mechanics’ or materialmen’s lien against any portion of the Property, unless the
same is insured over by the Title Company, satisfied, or bonded to the
satisfaction of the Lender within thirty (30) days.

 

8.8                               Adverse Action or Insolvency.  (a) the entry
of a final judgment for the payment of money in excess of $50,000.00 against the
Borrower or the Guarantor that is not discharged or bonded within thirty (30)
days after the date of entry, (b) the institution of any proceeding by or
against the Borrower or the Guarantor in bankruptcy, or for a reorganization or
an arrangement with creditors under any insolvency or debtor relief law which is
not dismissed or stayed within thirty (30) days of the date of filing, (c) the
appointment of any receiver, liquidator, assignee, custodian or similar official
for the Borrower or the Guarantor or any portion of the Property, or (d) the
issuance of any writ or order of attachment, levy or garnishment against the
Borrower or the Guarantor which is not discharged to the Lender’s satisfaction
within thirty (30) days after the date of such issuance.

 

8.9                               Financial Condition.  Any reasonable
determination by the Lender that a material adverse change has occurred in the
financial condition of the Borrower or Guarantor, including without limitation,
the failure of Guarantor to meet the financial covenants of set forth in
Section 4 of the Guaranty.

 

8.10                        Hazardous Materials.  Violations of any applicable
Environmental Regulations or requirements of the Deed of Trust pertaining to
Hazardous Materials.

 

16

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8.11                        Death and Dissolution.  The death, legal
incompetence, dissolution, liquidation or termination of Borrower or Guarantor,
or of any general partner of Borrower or Guarantor, subject to the provisions of
the Guaranty Agreement.

 

ARTICLE IX — DEFAULT - REMEDIES

 

9.1                               Remedies on Default.  Upon the happening of
any Default, the Lender shall not be obligated to advance any additional Loan
proceeds, and, in addition to any other rights or remedies available to it under
this Section, the Deed of Trust and other Loan Documents, the Lender may enter
into possession of the Property or any portion thereof, and perform any and all
work and labor necessary to complete the Renovation and to employ watchmen to
protect the Property.

 

All sums expended by the Lender for such purposes shall be deemed to have been
paid to the Borrower or for its benefit and shall constitute part of the
Indebtedness secured by the Deed of Trust.   Borrower hereby constitutes and
appoints the Lender as its true and lawful attorney-in-fact with full power of
substitution to complete the work in the name of Borrower, and hereby empowers
said attorney or attorneys as follows:  (a)  to use any funds of Borrower,
including any escrow balances and any unadvanced Loan proceeds, for the purpose
of completing the Renovation;  (b)  to make such additions and changes and
corrections in the plans and specifications as may be necessary or desirable in
the judgment of the Lender to complete the Renovation;  (c)  to employ such
contractors, subcontractors, agents, architects and inspectors as may be
required for such purpose;  (d)  to pay, settle or compromise all existing bills
and claims which are or may be liens against the Property, or may be necessary
or desirable for the completion of the work or the clearance of title; (e) in
the name of Borrower to execute all applications and certificates that may be
required; (f)  to execute, acknowledge and deliver such documents, instruments
and certificates, and to take such other actions, in the name and on behalf of
Borrower and at the sole cost and expense of Borrower, as the Lender, in its
sole discretion, deems necessary, desirable or appropriate to effectuate the
provisions of this section; and (g)  to do any and every act with respect to the
Renovation that Borrower may do in its own behalf.

 

It is understood and agreed that this power of attorney shall be deemed to be a
power coupled with an interest which cannot be revoked.  Such attorney-in-fact
shall also have power to prosecute and defend all actions or proceedings in
connection with the Renovation and to take such actions and require such
performance as is deemed necessary.

 

The Lender shall also have the right, upon the happening of any Default, to do
any one or more of the following, at its election, but without any obligation to
do so:

 

(a)                                  to declare the Indebtedness immediately due
and payable;

 

(b)                                 to terminate the Loan;

 

(c)                                  to decline to make any further Loan
advances and/or readvances;

 

17

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(d)                                 to reduce any claim to judgment;

 

(e)                                  to exercise any and all rights and remedies
afforded by this Agreement and the other Loan Documents, as well as any and all
legal or equitable rights and remedies afforded under any statute or otherwise;
and

 

(f)                                    to set off and apply against the
Indebtedness any and all deposits, funds or assets at any time held, and any and
all indebtedness at any time owed, by the Lender to or for the credit or account
of Borrower.

 

9.2                              
No Conditions Precedent to Exercise of Remedies.  Neither Borrower nor Guarantor
shall be relieved of any obligation by reason of the failure of the Lender to
comply with any request of Borrower or of any other person to take action to
foreclose on the Deed of Trust or otherwise to enforce any provisions of the
Note, the Letter of Credit Note or the other Loan Documents, or by reason of the
release, regardless of consideration, of all or any part of the Property, or by
reason of any agreement of stipulation between any subsequent owner of any
portion of the Property and the Lender extending the time of payment or
modifying the terms of the Notes or the other Loan Documents without first
having obtained the consent of Borrower or such Guarantor; and in the latter
event, Borrower and each Guarantor shall continue to be liable to make payments
according to the terms of any such extension or modification agreement, unless
expressly released and discharged in writing by the Lender.

 

9.3                               Remedies Cumulative and Concurrent.  No remedy
herein conferred upon or reserved to the Lender is intended to be exclusive of
any other remedies provided for in the Note or in the other Loan Documents, and
each and every such remedy shall be cumulative, and shall be in addition to
every other remedy given hereunder, or under the Note, the Deed of Trust or the
other Loan Documents, or now or hereafter existing at law or in equity or by
statute.  Every right, power and remedy given by the Note and the Loan Documents
to the Lender shall be concurrent and may be pursued separately, successively or
together against the Borrower, Guarantor, or the Property or any part thereof,
or any one or more of them; and every right, power and remedy given by the Note
or the other Loan Documents may be exercised from time to time as often as may
be deemed expedient by the Lender.

 

9.4                               Strict Performance.  No delay or omission of
the Lender in exercising any right, power or remedy accruing upon the happening
of a Default shall impair any such right, power or remedy or shall be construed
to be a waiver of any such Default or any acquiescence therein.  No delay or
omission on the part of the Lender in exercising any option for acceleration of
the maturity of the Indebtedness, or for foreclosure under the Deed of Trust
following any Default as aforesaid, or any other option granted to the Lender
hereunder in any one or more instances, or the acceptance by the Lender of any
partial payment on account of the Indebtedness, shall constitute a waiver of any
such Default and each such option shall remain continuously in full force and
effect.

 

18

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9.5                               Dispute Resolution.

 

(a)                                  Arbitration.  Except to the extent
expressly provided below, any Dispute shall, upon the request of either party,
be determined by binding arbitration in accordance with the Federal Arbitration
Act, Title 9, United States Code (or if not applicable, the applicable state
law), the then-current rules for arbitration of financial services disputes of
the American Arbitration Association, or any successor thereof (“AAA”) and the
“Special Rules” set forth below.  “Dispute” means any controversy, claim or
dispute between or among the parties to this Note, Agreement, or Guaranty,  as
applicable, including any controversy, claim or dispute arising out of or
relating to (a) this Agreement, (b) any other Loan Documents, (c) any related
agreements or instruments, or (d) the transaction contemplated herein or therein
(including any claim based on or arising from an alleged personal injury or
business tort). In the event of any inconsistency, the Special Rules shall
control.  The filing of a court action is not intended to constitute a waiver of
the right of Borrower or Lender, including the suing party, thereafter to
require submittal of the Dispute to arbitration.  Any party to this Agreement
may bring an action, including a summary or expedited proceeding, to compel
arbitration of any Dispute in any court having jurisdiction over such action. 
For the purposes of this Dispute Resolution Section only, the terms “party” and
“parties” shall include any parent corporation, subsidiary or affiliate of
Lender involved in the servicing, management or administration of any obligation
described in or evidenced by this Agreement, together with the officers,
employees, successors and assigns of each of the foregoing.

 

(b)                                 Special Rules.

 

(i)                                     The arbitration shall be conducted in
any U.S. state where real or tangible personal property collateral is located,
or if there is no such collateral, in the City and County where Lender is
located pursuant to its address for notice purposes in this Agreement.

 

(ii)                                  The arbitration shall be administered by
AAA, who will appoint an arbitrator.  If AAA is unwilling or unable to
administer or legally precluded from administering the arbitration, or if AAA is
unwilling or unable to enforce or legally precluded from enforcing any and all
provisions of this Dispute Resolution Section, the any party to this Agreement,
may substitute another arbitration organization that has similar procedures to
AAA and that will observe and enforce any and all provisions of this Dispute
Resolution Section.  All Disputes shall be determined by one arbitrator;
however, if the amount in controversy in a Dispute exceeds Five Million Dollars
($5,000,000), upon the request of any party, the Dispute shall be decided by
three arbitrators (for purposes of this Agreement, referred to collectively as
the “arbitrator”).

 

(iii)                               All arbitration hearings will be commenced
within ninety (90) days of the demand for arbitration and completed within
ninety (90) days from the date of commencement; provided, however, that upon a
showing of good cause, the arbitrator shall be permitted to extend the
commencement of such hearing for up to an additional sixty (60) days.

 

19

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(iv)                              The judgment and the award, if any, of the
arbitrator shall be issued within thirty (30) days of the close of the hearing. 
The arbitrator shall provide a concise written statement setting forth the
reasons for the judgment and for the award, if any.  The arbitration award, if
any, may be submitted to any court having jurisdiction to be confirmed and
enforced, and such confirmation and enforcement shall not be subject to
arbitration.

 

(v)                                 The arbitrator will give effect to statutes
of limitations and any waivers thereof in determining the disposition of any
Dispute and may dismiss one or more claims in the arbitration on the basis that
such claim or claims is or are barred.  For purposes of the application of the
statute of limitations, the service on AAA under applicable AAA rules of a
notice of Dispute is the equivalent of the filing of a lawsuit.

 

(vi)                              Any dispute concerning this arbitration
provision, including any such dispute as to the validity or enforceability of
this provision, or whether a Dispute is arbitrable, shall be determined by the
arbitrator; provided, however, that the arbitrator shall not be permitted to
vary the express provisions of these Special Rules or the Reservations of Rights
in subsection (c) below.

 

(vii)                           The arbitrator shall have the power to award
legal fees and costs pursuant to the terms of this Agreement.

 

(viii)   The arbitration will take place on an individual basis without
reference to, resort to, or consideration of any form of class or class action.

 

(c)                                  Reservations of Rights.  Nothing in this
Agreement shall be deemed to (i) limit the applicability of any otherwise
applicable statutes of limitation and any waivers contained in this Agreement,
or (ii) apply to or limit the right of Lender (A) to exercise self help remedies
such as (but not limited to) setoff, or (B) to foreclose judicially or
nonjudicially against any real or personal property collateral, or to exercise
judicial or nonjudicial power of sale rights, (C) to obtain from a court
provisional or ancillary remedies such as (but not limited to) injunctive
relief, writ of possession, prejudgment attachment, or the appointment of a
receiver, or (D) to pursue rights against a party to this Agreement, in a
third-party proceeding in any action brought against Lender in a state, federal
or international court, tribunal or hearing body (including actions in specialty
courts, such as bankruptcy and patent courts).  Lender may exercise the rights
set forth in clauses (A) through (D), inclusive, before, during or after the
pendency of any arbitration proceeding brought pursuant to this Agreement, as
applicable.  Neither the exercise of self help remedies nor the institution or
maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the Dispute occasioning resort to
such remedies.  No provision in the Loan Documents regarding submission to
jurisdiction and/or venue in any court is intended or shall be construed to be
in derogation of the provisions in any Loan Document for arbitration of any
Dispute.

 

20

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(d)                                 Conflicting Provisions for Dispute
Resolution.  If there is any conflict between the terms, conditions and
provisions of this Section and those of any other provision or agreement for
arbitration or dispute resolution, the terms, conditions and provisions of this
Section shall prevail as to any Dispute arising out of or relating to (i) this
Agreement, (ii) any other Loan Document, (iii) any related agreements or
instruments, or (iv) the transaction contemplated herein or therein (including
any claim based on or arising from an alleged personal injury or business
tort).  In any other situation, if the resolution of a given Dispute is
specifically governed by another provision or agreement for arbitration or
dispute resolution, the other provision or agreement shall prevail with respect
to said Dispute.

 

(e)                                  Jury Trial Waiver in Arbitration.  By
agreeing to this Section, the parties irrevocably and voluntarily waive any
right they may have to a trial by jury in respect of any Dispute.

 

ARTICLE IX — MISCELLANEOUS

 

10.1                        No Warranty by Lender.  By accepting or approving
anything required to be observed, performed or fulfilled by Borrower or
Guarantor pursuant to this Agreement or any other Loan Documents, including,
without limitation, any plans, specifications, certificate, financial
information, survey, receipt, appraisal or insurance policy, the Lender shall
not be deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof. Any such acceptance or approval thereof shall not be or
constitute any warranty or representation with respect thereto by the Lender.

 

10.2                        Liability of Lender.  The Lender shall not be liable
for any act or omission by it pursuant to the provisions of this Agreement in
the absence of fraud or gross negligence.  The Lender shall incur no liability
to Borrower or any other party in connection with the acts or omissions of the
Lender in reliance upon any certificate or other paper believed by the Lender to
be genuine or with respect to any other thing which the Lender may do or refrain
from doing, unless such act or omission amounts to fraud or gross negligence.

 

10.3                        Modification - Waiver.  None of the terms or
provisions of this Agreement may be changed, waived, modified, discharged or
terminated except as provided in the Deed of Trust.

 

10.4                        Third Parties - Benefit.  All conditions set forth
herein with respect to the obligations of the Lender to make Loan advances are
imposed solely and exclusively for the benefit of the Lender, and no other
person shall either have standing to require satisfaction of such condition in
accordance with its terms, be entitled to assume that the Lender will refuse to
make advances in the absence of strict compliance with any or all of such
conditions, or be deemed to be beneficiary of such conditions under any
circumstances, any or all of which may be freely waived in whole or in part by
the Lender at any time in the sole and absolute exercise of its discretion.  The
Lender shall in no event be responsible or liable to any person other than the
Borrower for the disbursement of or failure to disburse any of the proceeds of
the Loan, and

 

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no contractor, subcontractor, laborer or material supplier or other person shall
have any right or claim against the Lender with respect to this Agreement.  The
terms and provisions of this Agreement are for the benefit of the parties hereto
and, except as herein specifically provided, no other person shall have any
right or cause of action on account thereof.

 

10.5                        Captions and Headings.  The captions and headings
contained in this Agreement are included herein for convenience of reference
only and shall not be considered a part hereof.

 

10.6                        Counterparts.  This Agreement may be executed in any
number of counterparts, each of which shall be considered an original for all
purposes; provided, however, that all such counterparts shall together
constitute one and the same instrument.

 

10.7                        Signs; Publicity.  At the request and expense of the
Lender (subject to applicable law and compliance with governmental requirements,
and subject to Borrower’s approval of the design and location of said sign,
which consent shall not be unreasonably withheld), Borrower shall install a sign
or signs at a location or locations on the Property satisfactory to the Lender,
reciting, among other things, that the Lender is financing the Renovation. 
Borrower shall (at the expense of Lender) obtain all permits, licenses and
approvals from the appropriate governmental agency or association that are
necessary for the erection and existence of any such signs.  Borrower expressly
authorizes the Lender to prepare and to furnish to the news media for
publication from time to time news releases with respect to any portion of the
Property detailing the Lender’s involvement with the financing.

 

10.8                        Applicable Law.  This Agreement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the
Jurisdiction of Choice, unless the “choice of law” rules of the Jurisdiction of
Choice can be construed or interpreted to require the laws of another
jurisdiction to govern, in which case the “choice of law” rules of the
Jurisdiction of Choice shall not apply.

 

10.9                        Time of Essence.  Time shall be of the essence of
each and every provision of this Agreement of which time is an element.

 

10.10                 Conflicts.  The terms and conditions of the Note and the
other Loan Documents are incorporated into this Agreement and made a part hereof
as if specifically set forth herein.  In the event any provision of this
Agreement conflicts with the terms of any other Loan Document, the terms of this
Agreement shall prevail.  For purposes of this Section the absence of a
provision from any Loan Documents shall not constitute a conflict.

 

10.11                 Quality of Documents and Other Items.  Each document, item
or other evidence required to be delivered to the Lender in connection with this
Agreement shall be satisfactory in form and substance to the Lender in its sole
discretion.  In addition, all surveys, appraisals, environmental site
assessments, inspections, cost reviews, subcontracts, leases, bonds, insurance
policies and all other documents required or contemplated by this Agreement and
the other Loan Documents shall be satisfactory to the Lender and, if required by
the Lender,

 

22

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Borrower shall provide the Lender and its counsel with copies of any or all of
such documents.  All contractors, subcontractors, sureties, insurers and any
other party responsible for the execution and preparation of the foregoing
documents shall also be satisfactory to the Lender.

 

10.12                 Professional Services.  If requested by Lender, Borrower
shall: (a) not more frequently than annually, cause an inspection and written
appraisal of the Property (or such parts of it as are designated in the Lender’s
request) to be made and provided to Lender by an appraiser approved and engaged
by the Lender in its sole discretion; and (b) cause to be conducted or prepared
any other written report, summary, opinion, inspection, review, survey, audit or
other professional service relating to the Property or any operations in
connection with it (all as designated in Lender’s request) as Lender may
reasonably request, including, without limitation, any accounting,
auctioneering, architectural, consulting, engineering, design, legal,
management, pest control, surveying, title abstracting or other technical,
managerial or professional service relating to the Property or its operations.
The Lender may elect to deliver any such request by facsimile, by mail or by
hand delivery addressed to the Borrower as provided herein or by any other
legally effective method, and it may be given at any time and from time to time.

 

10.13                 Further Assurances.  At the request of the Lender,
Borrower shall take any action or execute any additional document reasonably
required by the Lender to secure the Indebtedness, confirm the lien of the Deed
of Trust or further the intent of any of the Loan Documents.

 

10.14                 Costs and Expenses.  The Borrower shall pay all
out-of-pocket fees, charges and expenses incurred by or on behalf of the Lender
in connection with the Loan and the making, closing and administration of the
Loan, including, without limitation (a) fees and expenses for the examination of
title to the Property; (b) recording and filing fees, recordation taxes and
transfer taxes; (c) Title Company premiums, fees and charges; (d) surveyor
charges; (e) appraisal fees; (f) inspection fees; (g) the fees and expenses of
the Lender’s counsel; (h) all amounts due the Progress Inspector; (i) the
payment, satisfaction, discharge and release of any encumbrance, tax, assessment
or other charge or lien upon any portion of the Property; (j) any syndication or
participation fees, if applicable, and (k) the construction, maintenance and
protection of the Improvements and every portion thereof.  Further, the Lender
may (but shall be under no obligation to do so) advance for the account of
Borrower as part of or in addition to the Loan any amount or amounts as the
Lender may deem necessary or advisable in order to fulfill the obligations of
Borrower hereunder, which amount or amounts may be disbursed by the Lender
directly to a third party in order to protect its interests, and any amount so
applied by the Lender shall constitute a portion of the Indebtedness, even
though the aggregate of the amounts so applied, together with the other advances
under the Note, may exceed the principal amount of the Note.

 

10.15                 Fees and Expenses - Indemnity.  Borrower will hold the
Lender harmless and indemnify the Lender from all claims of brokers and
“finders” arising by reason of the Loan, the execution and delivery of this
Agreement or the making of the Loan.  Borrower shall protect, indemnify and save
harmless the Lender and its directors, officers, agents, and employees, the

 

23

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Deed of Trust trustees, and all independent contractors from and against all
liabilities, obligations, claims, damages, fines, penalties, causes of action,
costs and expenses (including, without limitation, attorneys’ fees and
disbursements), imposed upon or incurred by or asserted against any of them in
connection with the Loan.

 

10.16                 Participation or Sale of the Loan.  The Lender may sell
the Loan or any undivided ownership or participation interest in the Loan and
disclose in confidence such financial and other information with respect to
Borrower, the Loan, Guarantor, and/or the Property, or any portion thereof,
which the Lender may deem necessary in connection with such sale or
participation.  Borrower shall execute, acknowledge and deliver any and all
instruments reasonably requested by the Lender in connection with the
foregoing.  Borrower shall also pay any expenses of each participant in
connection with the enforcement of the Loan Documents.

 

10.17                 Seal.  If any Borrower is a corporation, the designation
“(SEAL)” on this Agreement shall be effective as the affixing of such Borrower’s
corporate seal physically to this Agreement.

 

10.18                 WAIVER OF JURY TRIAL.  WITHOUT INTENDING IN ANY WAY TO
LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY “DISPUTE” (FOR PURPOSES OF THIS
SECTION, AS DEFINED IN THE “DISPUTE RESOLUTION” SECTION) AS SET FORTH IN THIS
AGREEMENT, TO THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION OR IS
DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE
OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY JURY IN
RESPECT OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.”  THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER
AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN
MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE PARTIES ENTERING INTO THE LOAN DOCUMENTS.  BORROWER AND LENDER ARE EACH
HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER OF JURY TRIAL.  BORROWER FURTHER REPRESENTS AND WARRANTS
THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT, AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

24

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10.19                 Electronic Transmission of Data.  Lender and Borrower
agree that certain data related to the Loan (including confidential information,
documents, applications and reports) may be transmitted electronically,
including transmission over the Internet.  This data may be transmitted to,
received from or circulated among agents and representatives of Borrower and/or
Lender and their affiliates and other persons involved with the subject matter
of this Agreement.  Borrower acknowledges and agrees that (a) there are risks
associated with the use of electronic transmission and that Lender does not
control the method of transmittal or service providers, (b) Lender has no
obligation or responsibility whatsoever and assumes no duty or obligation for
the security, receipt or third party interception of any such transmission,
except for Lender’s fraud or gross negligence, and (c) Borrower will release,
hold harmless and indemnify Lender from any claim, damage or loss, including
that arising in whole or part from Lender’s strict liability or sole,
comparative or contributory negligence, but excluding that arising from Lender’s
fraud or gross negligence, which is related to the electronic transmission of
data.

 

10.20                 USA Patriot Act Notice.   Lender hereby notifies Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), Lender is required to
obtain, verify and record information that identifies Borrower, which
information includes the name and address of Borrower and other information that
will allow Lender to identify Borrower in accordance with the Act.

 

 

[SIGNATURES APPEAR ON THE NEXT PAGE]

 

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IN WITNESS WHEREOF, the Borrower and the Lender, intending to be executed and
delivered under seal, have executed and delivered these presents or caused these
presents to be executed and delivered under seal as of the year and day first
above written.

 

 

 

BORROWER:

 

 

 

 

 

 

WITNESS/ATTEST:

 

COMSTOCK BELLEMEADE, L.C.,

 

 

a Virginia limited liability company

 

 

 

 

 

 

By:

/s/ Jubal R. Thompson

 

 

By:

Comstock Homebuilding Companies, Inc.,

 

 

 

Its Manager

 

 

 

 

 

 

By:

/s/ Christopher Clemente

 

 

 

 

Name: Jubal R. Thompson

 

 

Christopher Clemente

Title: General Counsel

 

 

Its Chief Executive Officer

 

 

 

 

 

 

(Seal)

 

Address:

11465 Sunset Hills Road

 

 

 

5 th Floor

 

 

 

Reston, Virginia 20190

 

 

 

 

 

 

WITNESS:

 

LENDER:

 

 

 

 

 

BANK OF AMERICA, N.A.

 

 

 

 

 

 

/s/ Kelly Wyche

 

 

 

By:

/s/ Linda Long

 

 

 

 

Name: Kelly Wyche

 

Linda P. Long

Title:

 

Senior Vice President

 

 

 

 

 

Address:

8300 Greensboro Drive

 

 

 

Suite 300

 

 

 

McLean, Va. 22102-3604

 

26

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EXHIBIT “A”

 

Property Description

 

C-27

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EXHIBIT “B”

 

Budget

 

C-28

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EXHIBIT “C”

 

Unit Contract Summary Report

 

C-1

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