Exhibit 10.3

 

 

LOAN AGREEMENT

 

 

dated as of March 19, 2019

 

 

HC GOVERNMENT REALTY HOLDINGS, L.P.,

 

as Borrower,

 

 

THE LENDERS PARTY HERETO

 

 

and

 

 

 

HCM AGENCY, LLC,

 

as Collateral Agent

 

 

 

 

 

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ARTICLE I Definitions

1  

Section 1.1

Definitions

1

 

Section 1.2

Other Definitional Provisions

10

   

ARTICLE II THE LOANS

11      

Section 2.1

Term Loan

11

 

Section 2.2

Evidence of Debt

11

 

Section 2.3

Repayment of Loans

12

 

Section 2.4

Interest

12

 

Section 2.5

Use of Proceeds

13

 

Section 2.6

Obligations Absolute

13

   

ARTICLE III RESERVED

13    

ARTICLE IV Payments

13      

Section 4.1

Method of Payment

14

 

Section 4.2

Voluntary Prepayment

14

 

Section 4.3

Mandatory Prepayment

14

 

Section 4.4

Computation of Interest

15

 

Section 4.5

Sharing of Payments by Lenders

15

       

ARTICLE V Collateral

16      

Section 5.1

Collateral

16

 

Section 5.2

Setoff

17

 

Section 5.3

Guaranty Agreements

17

 

Section 5.4

Deposit Account Control Agreements

17

   

ARTICLE VI Conditions Precedent

17      

Section 6.1

Initial Extension of Credit

17

 

Section 6.2

Post Closing Deliveries

19

   

ARTICLE VII Representations and Warranties

19      

Section 7.1

Existence

19

 

Section 7.2

Financial Statements

19

 

Section 7.3

Requisite Action; No Breach

20

 

Section 7.4

Operation of Business

20

 

Section 7.5

Litigation and Judgments

20

 

Section 7.6

Rights in Properties; Liens

20

 

Section 7.7

Enforceability

20

 

Section 7.8

Approvals

20

 

Section 7.9

Debt

21

 

Section 7.10

Use of Proceeds; Margin Securities

21

 

Section 7.11

ERISA

21

 

Section 7.12

Taxes

21

 

Section 7.13

Disclosure

21

 

Section 7.14

Subsidiaries

21

 

 

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Section 7.15

Compliance with Laws; REIT Status

21

 

Section 7.16

Compliance with Agreements

22

 

Section 7.17

Environmental Matters

22

 

Section 7.18

Solvency

22

 

Section 7.19

Transactions With Affiliates

22

 

Section 7.20

Investment Company Act

22

 

Section 7.21

Sanctions

22

 

Section 7.22

Anti-Corruption

23

   

ARTICLE VIII Affirmative Covenants

23      

Section 8.1

Reporting Requirements

23

 

Section 8.2

Maintenance of Existence; Conduct of Business

25

 

Section 8.3

Maintenance of Properties

25

 

Section 8.4

Taxes and Claims

25

 

Section 8.5

Insurance

26

 

Section 8.6

Inspection

26

 

Section 8.7

Keeping Books and Records

26

 

Section 8.8

Compliance with Laws

26

 

Section 8.9

Compliance with Agreements

26

 

Section 8.10

Further Assurances

26

 

Section 8.11

ERISA

27

 

Section 8.12

Continuity of Operations

27

 

Section 8.13

LNR Property Owners

27

   

ARTICLE IX Negative Covenants

27      

Section 9.1

Debt

27  

Section 9.2

Limitation on Liens

28

 

Section 9.3

Mergers, Acquisitions, Dissolutions and Disposition of Assets

28

 

Section 9.4

Subsidiaries

29

 

Section 9.5

Restricted Payments

29

 

Section 9.6

Investments

29

 

Section 9.7

Compliance with Environmental Laws

30

 

Section 9.8

Accounting

30

 

Section 9.9

Change of Business

30

 

Section 9.10

Transactions With Affiliates

30

 

Section 9.11

Compliance with Government Regulations

30

 

Section 9.12

Management Fees

31

 

Section 9.13

Sanctions

31

 

Section 9.14

Anti-Corruption

31

   

ARTICLE X Financial Covenant

31      

Section 10.1

Fixed Charge Coverage Ratio

31

   

ARTICLE XI DefaulT

31      

Section 11.1

Events of Default

31

 

Section 11.2

Remedies Upon Default

33

 

Section 11.3

Performance by Collateral Agent

34

 

2

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ARTICLE XII Miscellaneous

34      

Section 12.1

Expenses of Agent and Lenders

34

 

Section 12.2

INDEMNIFICATION

34

 

Section 12.3

Limitation of Liability

35

 

Section 12.4

No Waiver; Cumulative Remedies

35

 

Section 12.5

Successors and Assigns

35

 

Section 12.6

Survival

35

 

Section 12.7

Recovery of Payments

36

 

Section 12.8

Amendment

36

 

Section 12.9

Reserved

36

 

Section 12.10

Notices

36

 

Section 12.11

Applicable Law; Venue; Service of Process

37

 

Section 12.12

Counterparts

38

 

Section 12.13

Severability

38

 

Section 12.14

Headings

38

 

Section 12.15

Consent to Participations

38

 

Section 12.16

Sale of Obligations and Information Sharing

39

 

Section 12.17

USA Patriot Act

39

 

Section 12.18

Anti-Terrorism Law

39

 

Section 12.19

Time of the Essence

39

 

Section 12.20

WAIVER OF TRIAL BY JURY

40

 

Section 12.21

ENTIRE AGREEMENT

40

   

ARTICLE XIII COLLATERAL AGENCY PROVISIONS

40      

Section 13.1

Appointment

40

 

Section 13.2

Delegation of Duties

41

 

Section 13.3

Exculpatory Provisions

41

 

Section 13.4

Reliance by Collateral Agent

41

 

Section 13.5

Notices of Default

42

 

Section 13.6

Non‑Reliance on the Collateral Agent and Other Lenders

42

 

Section 13.7

Indemnification

42

 

Section 13.8

The Collateral Agent in Its Individual Capacity

43

 

Section 13.9

Resignation of the Collateral Agent; Successor Collateral Agent

43

 

Section 13.10

Release of Collateral

43

 

Section 13.11

Reimbursement by Lenders

44

 

3

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INDEX OF SCHEDULES AND EXHIBITS

 

Schedules

         

Schedule 1.1

-

List of Existing Indebtedness to be Repaid of Closing

Schedule 7.14

-

Subsidiaries

Schedule 9.1

-

Existing Permitted Indebtedness as of Closing

Schedule 9.12

-

Property Management Agreements

           

Exhibits

         

Exhibit A

-

Compliance Certificate

Exhibit B

-

Form of Not

 

4

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LOAN AGREEMENT

 

This LOAN AGREEMENT, dated as of March 19, 2019 (this “Agreement”), is among HC
GOVERNMENT REALTY HOLDINGS, L.P., a Delaware limited partnership (“Borrower”),
the Lenders party hereto from time to time (collectively, the “Lenders” and each
individually, a “Lender”) and HCM AGENCY, LLC, a Delaware limited liability
company, in its capacity as collateral agent for such Lenders (acting in such
capacity, the “Collateral Agent”).

 

R E C I T A L S:

 

WHEREAS, Borrower has requested that Lenders extend credit to Borrower in the
form of (i) a senior secured term loan in the amount of $10,500,000 to be made
on the date hereof and (ii) incremental senior secured term loans to be made
available to Borrower following the Closing Date in an aggregate amount up to
$10,000,000. Lenders are willing to make such extensions of credit to Borrower
upon the terms and conditions hereinafter set forth, provided that, with respect
to such incremental term loans, the Lenders will have no commitment or
obligation to fund, and if the Lenders in their sole discretion approve such a
term loan, such term loan shall be subject to the terms hereof.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:

 

ARTICLE I

Definitions

 

Section 1.1     Definitions. As used in this Agreement, the following terms have
the following meanings:

 

“Accrual Rate” has the meaning set forth in Section 2.4.

 

“Additional Cash Amount” has the meaning set forth in Section 2.4.

 

“Additional Interest Amount” has the meaning set forth in Section 2.4.

 

“Affiliate” means, with respect to any Person, any other Person which, directly
or indirectly, Controls or is Controlled by or is under common Control with such
Person, including, (a) any Person which beneficially owns or holds ten percent
(10%) or more of any class of voting stock of such Person or ten percent (10%)
or more of the Equity Interests in such Person, (b) any Person of which such
Person beneficially owns or holds ten percent (10%) or more of any class of
voting shares or in which such Person beneficially owns or holds ten percent
(10%) or more of the Equity Interests in such Person, and (c) any officer or
director of such Person. For purposes hereof, “Control” and correlative terms
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management of policies of a Person, whether through
the ability to exercise voting power, by contract, or otherwise.

 

 

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“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the state of New York or North Carolina, are authorized or
required by law to close.

 

“Capital Expenditures” means for the REIT and its Subsidiaries, all expenditures
for assets which, in accordance with GAAP, are required to be capitalized and so
shown on the consolidated balance sheet of Borrower and its Subsidiaries.

 

“Capitalized Lease Obligations” means, for any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations, in
accordance with GAAP, are required to be classified and accounted for as a
capital lease on a balance sheet of any such Person.

 

“Cash Pay Rate” has the meaning set forth in Section 2.4.

 

“Cash Taxes” means for the REIT and its Subsidiaries, on a consolidated basis,
for any period, the sum of all income taxes paid in cash during such period, as
determined in accordance with GAAP.

 

“Change of Control” means the occurrence of any of the following:

 

(a)     The REIT shall cease to be the sole owner of the Limited Partner;

 

(b)     The REIT shall cease to be the sole general partner of the Borrower;

 

(c)     Borrower shall fail to own one hundred percent (100%) of the ownership
interests of any Subsidiary of the Borrower; or

 

(d)     Borrower shall fail to have the right to receive the economic interests
in the revenue from the operation of the LNR Properties in substantially the
same manner set forth in the LNR Property Documents as of the Closing Date.

 

The foregoing notwithstanding, transfers of, or issuances of, Equity Interests
in Borrower or the REIT which do not specifically violate one of the provisions
set forth in (a) through (d) above shall not constitute a Change of Control and
shall be permitted transfers.

 

“Claims” has the meaning set forth in Section 12.2.

 

“Closing Date” means March 19, 2019.

 

“Closing Date Term Loan” shall have the meaning given to such term in Section
2.1(a).

 

“Collateral” has the meaning specified in Section 5.1.

 

“Compliance Certificate” means a certificate in the form of Exhibit A, fully
completed and executed by Borrower.

 

“Credit Parties” means Borrower and each Guarantor.

 

2

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“Debt” means, without duplication, for any Person (a) all indebtedness, whether
or not represented by bonds, debentures, notes, securities or other evidences of
indebtedness, for the repayment of money borrowed, including, with respect to
Borrower, the indebtedness evidenced by the Notes and all other indebtedness of
Borrower to Lenders, (b) indebtedness and obligations arising in connection with
Rate Management Transactions, (c) all indebtedness representing deferred payment
of the purchase price of property or assets (but excluding accrued expenses
incurred in accordance with customary practices in the ordinary course of
business and trade accounts payable in the ordinary course of business that are
not past due by more than one hundred twenty (120) days unless being disputed in
good faith), (d) Capitalized Lease Obligations, (e) all indebtedness under
guaranties (other than any non-recourse carve out guaranties under which
recourse has not yet been triggered), endorsements, assumptions or other
contingent obligations, in respect of, or to purchase or otherwise acquire,
indebtedness of others, (f) all indebtedness secured by a Lien existing on
property owned, subject to such Lien, whether or not the indebtedness secured
thereby shall have been assumed by the owner thereof, and (g) all Disqualified
Equity Interests of such Person; provided, however, that neither deferred
revenue nor taxes, in each case arising in the ordinary course of business,
shall constitute Debt. Debt shall, for purposes of this Agreement, be calculated
on a consolidated basis in accordance with GAAP (unless otherwise indicated).

 

“Default Rate” means the lesser of (a) with respect to the Loans, the sum of the
Accrual Rate plus five percent (5.0%) or (b) the Maximum Rate.

 

“Disqualified Equity Interests” means any Equity Interest that (a) by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable in cash, pursuant to a sinking fund obligation or
otherwise, or is redeemable in cash at the option of the holder thereof, in
whole or in part, on or prior to the date that is ninety-one (91) days following
the Maturity Date (excluding any provisions requiring redemption upon a “change
of control” or similar event which would constitute an Event of Default), (b) is
convertible into or exchangeable (unless at the sole option of the issuer
thereof) for (i) debt securities or other Debt or (ii) any Equity Interest
referred to in clause (a) above, in each case at any time on or prior to the
date that is ninety-one (91) days following the Maturity Date, or (c) contains
any repurchase obligation that may come into effect prior to payment in full of
all Obligations.

 

“Distribution” means (a) any distribution, dividend or any other payment or
distribution (in cash, property or obligations) made by Borrower on account of
its Equity Interests, (b) any redemption, purchase, retirement or other
acquisition by Borrower of any of its Equity Interests, or (c) the establishment
and funding of any fund for any such distribution, dividend, payment or
acquisition.

 

“Dollar” and “$” mean currency of the United States of America which is at the
time of payment legal tender for the payment of public and private debts in the
United States of America.

 

“Domestic Subsidiary” means any Subsidiary of Borrower, whether presently or
hereafter created or existing, that is organized and existing under the laws of
the United States or any state or commonwealth thereof or under the laws of the
District of Columbia; provided that if such Subsidiary does not exist on the
Closing Date, Borrower and such Subsidiary shall satisfy the provisions of
Section 9.4 with respect to such Subsidiary.

 

3

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“Environmental Laws” means any and all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Substance or to health and safety matters.

 

“Equity Interests” means with respect to any Person, the shares, interests,
participations, or other equivalents (however designated) of corporate stock,
membership interests or partnership interests (or any other ownership interests)
of such Person.

 

“Equity Issuance” means any issuance by any Credit Party to any Person of its
Equity Interests, other than (a) any issuance of its Equity Interests pursuant
to the exercise of options or warrants, (b) any issuance of its Equity Interests
pursuant to the conversion of any debt securities to equity or the conversion of
any class of equity securities to any other class of equity securities, (c) any
issuance of options or warrants relating to its Equity Interests, (d) any
issuance by the REIT of its Equity Interests pursuant to any employee stock
ownership plan or dividend or distribution reinvestment program, (e) the
issuance of partnership interests in the Borrower in connection with a
contribution of real property pursuant to any Property Acquisition, and (f) the
issuance of the Equity Interests in the REIT and/or the Borrower to the Lenders
or their Affiliates.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations and published interpretations thereof.

 

“Event of Default” has the meaning specified in Section 11.1.

 

“Excluded Subsidiary” means any SPE (including any LNR Property Owner) which is
a party to SPE Mortgage Debt that contractually restricts the ability of such
SPE to provide a guaranty of the Obligations or the grant of a security interest
of its assets to secure such guaranty or the Obligations.

 

“Excluded Taxes” means any taxes imposed on or measured by net income (however
denominated), franchise taxes, and branch profits taxes or other taxes of a
similar nature.

 

“Existing Indebtedness” means, collectively, the Debt of the REIT and its
Subsidiaries and the LNR Property Owners set forth in Schedule 1.1.

 

“Financial Officer” means the chief executive officer, the chief financial
officer or another officer reasonably acceptable to Required Lenders.

 

“Fixed Charge Coverage Ratio” means, for the REIT and its Subsidiaries, on a
consolidated basis, for any period (a) (i) Net Operating Income for the
applicable period (as determined in accordance with Section 10.1) ended as of
such date, minus (ii) the sum of all operating expenses and other cash charges
incurred by the REIT and its Subsidiaries (other than the SPEs), divided by (b)
the sum of (i) Scheduled Principal Payments Paid for the applicable period (as
determined in accordance with Section 10.1) ended as of such date, plus (ii)
cash Interest Expense for the period (as determined in accordance with Section
10.1) ended as of such date plus (iii) cash Distributions by the Borrower or
REIT for the period ended as of such date (but only to the extent permitted to
be paid under this Agreement), plus (iv) Cash Taxes for the period ended as of
such date, plus (v) Non-Financed Capital Expenditures for the period ended as of
such date. For purpose of this calculation, and all other financial covenants
contained in this Agreement, the LNR Property Owners will be treated as
Subsidiaries of the REIT.

 

4

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“GAAP” means generally accepted accounting principles in the United States of
America consistently applied; provided that if there occurs after the date of
this Agreement any change in GAAP that affects in any respect the calculation of
any covenant contained in this Agreement, Lenders and Borrower shall negotiate
in good faith amendments to the provisions of this Agreement that relate to the
calculation of such covenant with the intent of having the respective positions
of Lenders and Borrower after such change in GAAP conform as nearly as possible
to their respective positions as of the date of this Agreement and, until any
such amendments have been agreed upon by Borrower and Hale, the applicable
covenants shall be calculated as if no such change in GAAP has occurred.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Guarantors” means (i) the Holding Company Guarantors and (ii) each Subsidiary
Guarantor.

 

“Hale” means Hale Partnership Capital Management, LLC, a North Carolina limited
liability company and its Affiliates, and their respective successors and
permitted assigns.

 

“Hazardous Substance” means any substance, product, waste, pollutant, material,
chemical, contaminant, constituent or other material which is or becomes listed,
regulated or addressed under any Environmental Law.

 

“Holding Company Guarantors” means (i) the Limited Partner (ii) the REIT.

 

“Holding Company Guaranty Agreement” means the Guaranty Agreement executed by
the Holding Company Guarantors in favor of the Collateral Agent and Lenders, as
the same may be amended, supplemented or modified.

 

“Holmwood” means Holmwood Capital, LLC, a Delaware limited liability company.

 

“Income Tax Expense” means for the REIT and its Subsidiaries, on a consolidated
basis for any period, all state and federal income tax expenses for such period,
determined in accordance with GAAP.

 

“Incremental Term Loan” shall have the meaning given such term in Section
2.1(b).

 

5

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“Incremental Term Loan Conditions” means the following conditions:

 

(a)      The Lenders shall have approved the funding of such Incremental Term
Loan;

 

(b)      No Event of Default or Unmatured Event of Default has occurred and is
continuing or would arise as a result of funding such Incremental Term Loan; and

 

(c)      The Collateral Agent and Lenders shall have received the following
items, as applicable:

 

(i)       an executed Note with respect to such Incremental Term Loan, if
requested by such Lender;

 

(ii)      a written request from Borrower to advance such Incremental Term Loan,
which shall set forth (A) the requested date of the advance of such Incremental
Term Loan, which shall be a Business Day not less than (5) Business Days
following the date of such notice and (B) the principal amount of the requested
Incremental Term Loan; and

 

(iii)     such other documentation or information may be required by Collateral
Agent or the Lenders in their reasonable discretion.

 

“Intellectual Property Security Agreement” means an Intellectual Property
Security Agreement executed by a Credit Party in favor of Collateral Agent in
form and substance satisfactory to Collateral Agent.

 

“Interest Expense” means for the REIT and its Subsidiaries, on a consolidated
basis, for any period, the sum of all interest expense paid or required by its
terms to be paid during such period, as determined in accordance with GAAP.

 

“Interest Payment Date” shall mean the last Business Day of each calendar month.

 

“Investment” means any direct or indirect investment in any Person, including
capital contributions to any Person, investments in or the acquisition of debt
securities or Equity Interests of any Person, or any loans, advances, guaranties
or other extensions of credit to any Person.

 

“Lien” means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law or otherwise.

 

“Limited Partner” means Holmwood Portfolio Holdings, LLC, a Delaware limited
liability company.

 

“Liquid Investments” means (a) cash on deposit in a financial institution, (b)
readily marketable direct obligations of the United States of America, (c) fully
insured certificates of deposit with maturities of one (1) year or less from the
date of acquisition of any commercial bank operating in the United States having
capital and surplus in excess of $100,000,000.00, (d) commercial paper of a
domestic issuer if at the time of purchase such paper is rated in one of the two
highest rating categories of Standard and Poor’s Corporation or Moody’s
Investors Service, Inc. and (e) other Investments approved by Hale, in its
reasonable discretion.

 

6

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“LNR Properties” shall mean the real property and improvements located at 221 W.
5th Avenue, Lorain, OH, 1809 Latournette Drive, Jonesboro, AR, and 650 NW
Peakcock Blvd., Port St. Lucie, FL.

 

“LNR Property Owners” shall mean GOV Lorain, LLC, GOV Jonesboro, LLC and GOV
PSL, LLC, each a Delaware limited liability company, the single member limited
liability companies that own the fee interests in each of the LNR Properties.

 

“LNR Property Documents” shall mean the Contribution Agreement dated March 31,
2016, between Holmwood and Borrower, as amended by that certain First Amendment
to Contribution Agreement dated June 10, 2016 and as further amended by that
certain Second Amendment to Contribution Agreement dated May 26, 2017, and the
Assignment of Profits Interests effective May 26, 2017 by Holmwood in favor of
Borrower pursuant to which the economic interest in the LNR Properties were
assigned to the Borrower.

 

“Loan” or “Loans” means, collectively, the Closing Date Term Loan and
Incremental Term Loan (or any pro rata advances made by the Lenders to fund the
applicable Loan).

 

“Loan Documents” means this Agreement and all promissory notes, security
agreements, pledge agreements, collateral assignments, mortgages, deeds of
trust, assignments, guaranties, and other instruments, documents and agreements
executed and delivered pursuant to or in connection with this Agreement as such
instruments, documents and agreements may be amended, modified, renewed,
extended or supplemented.

 

“Make Whole Amount” means, with respect to repayments of the Loan made on or
before the eighteen (18) month anniversary of the applicable Settlement Date
(including as a result of an acceleration of the Loan in accordance with the
terms hereof, including Section 11.1(d) or (e)), an amount equal to the interest
payments and fees that would have been due on the Loan being repaid on the date
of repayment or acceleration, as applicable, through and including the eighteen
(18) month anniversary of the applicable Settlement Date had such Loan not been
so repaid or accelerated, assuming that all such interest accrues at the Accrual
Rate and that Borrower would pay all future interest not paid at the Cash Pay
Rate by compounding the PIK Amount to Principal.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, property or condition (financial or otherwise) of the REIT and its
Subsidiaries, taken as a whole, (b) the ability of Borrower to pay the
Obligations or the ability of Borrower to perform its respective obligations
under this Agreement or any of the other Loan Documents or (c) the validity or
enforceability of this Agreement or any of the other Loan Documents, or the
rights or remedies of Collateral Agent or Lenders hereunder or thereunder.

 

“Maturity Date” means March 19, 2022.

 

“Maximum Rate” means the maximum rate of non-usurious interest permitted from
day to day by applicable law.

 

7

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“Monroe Property” means that certain real property and related improvements
located at 1691 Bienville Drive, Monroe, Louisiana which is under contract for
acquisition by the REIT or its Subsidiaries.

 

“Net Operating Income” means for an SPE, for any period, an amount equal to (a)
the aggregate gross revenues from the operations of such SPE during such period
from tenants paying rent minus (b) the sum of all expenses and other charges
incurred in connection with the operation of such SPE’s property during such
period (including accruals for real estate taxes and insurance and property
management fees, but excluding debt service charges, income taxes, depreciation,
amortization and other non-cash expenses), which expenses and accruals shall be
calculated in accordance with GAAP.

 

“Non-Financed Capital Expenditures” means for the REIT and its Subsidiaries, on
a consolidated basis, for any period, Capital Expenditures incurred during such
period in connection with which neither Borrower nor any Subsidiary incurred
Debt.

 

“Notes” means each promissory note issued to a Lender in accordance with Section
2.2.

 

“Obligated Party” means each Guarantor and any other Person who is or becomes a
party to any agreement pursuant to which such Person guarantees or secures
payment and performance of the Obligations or any part thereof.

 

“Obligations” means all advances to, and debts, liabilities, fees, commissions,
obligations, covenants and duties of, Borrower arising under any Loan Document
or otherwise with respect to any Loans, whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest and fees that accrue after
the commencement by or against Borrower or any Affiliate thereof of any
proceeding under any bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditor’s rights naming such Person as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding.

 

“Organizational Documents” means, for any Person, (a) the articles of
incorporation or certificate of formation and bylaws of such Person if such
Person is a corporation, (b) the articles of organization or certificate of
formation and operating agreement or regulations of such Person if such Person
is a limited liability company, (c) the certificate of limited partnership or
certificate of formation and the limited partnership agreement of such Person if
such Person is a limited partnership, or (d) the documents under which such
Person was created and is governed if such person is not a corporation, limited
liability company or limited partnership.

 

“Paid in Full”, “Pay in Full” or “Payment in Full” means, with respect to the
Obligations, the payment in full in cash of all Obligations (other than
contingent indemnification and expense reimbursement obligations to the extent
no claim giving rise thereto has been asserted).

 

“Permitted Distributions” shall have the meaning given to such term in Section
9.5.

 

“Permitted Liens” shall have the meaning given to such term in Section 9.2.

 

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“Person” means any individual, corporation, limited liability company,
partnership, joint venture, company, trust, business trust, association,
Governmental Authority or other entity.

 

“PIK Amount” has the meaning set forth in Section 2.4.

 

“Principal” means the aggregate principal amount of the Loans hereunder,
including any interested that has been paid in kind and capitalized or accrued
to principal.

 

“Property Acquisitions” means the acquisition of (i) federally leased single
tenant properties identified at least thirty (30) days in advance to the Lenders
and consummated on terms and conditions acceptable to the Required Lenders, and
(ii) the Monroe Property on the terms set forth in the applicable purchase
agreements and financing term sheets provided to Hale prior to the Closing Date.

 

“Property Management Agreements” means, collectively, those certain property
management agreements (a) in effect on the Closing Date and set forth on
Schedule 9.12 and (b) entered into by an SPE following the Closing Date with
third party property managers on market terms and otherwise on terms and
conditions reasonably acceptable to Hale.

 

“Rate Management Transaction” means any transaction (including an agreement with
respect thereto) now existing or hereafter entered into by Borrower or any
Subsidiary of Borrower which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.

 

“REIT” means HC Government Realty Trust, Inc., a Maryland corporation.

 

“Required Lenders” means, as of the date of any determination, Lenders holding
more than 50.0% of the sum of the aggregate Loans of all Lenders.

 

“Sanctions” shall have the meaning given to such term in Section 7.21.

 

“Scheduled Principal Payments Paid” means, for the REIT and its Subsidiaries, on
a consolidated basis, for any period, that portion of the Debt of the REIT and
its Subsidiaries which was due to be paid during such period, including, in the
case of Debt consisting of Capitalized Lease Obligations, the amount which was
due to be paid during such period on such Capitalized Lease Obligations. The
term “Scheduled Principal Payments Paid” shall not include any mandatory or
voluntary prepayments of Debt.

 

“Security Agreement” means the Security Agreement, dated as of the Closing Date,
executed by the Credit Parties in favor of Collateral Agent, as the same may be
amended, supplemented or modified (including by any joinder thereto pursuant to
Section 9.4).

 

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“Settlement Date” means, with respect to any advance of the Closing Date Term
Loan or any Incremental Term Loan, the date on which funds are advanced by the
Lenders.

 

“SPE” means (i) a wholly owned Subsidiary of Borrower which is a special purpose
entity which (a) currently exists or (b) which is hereafter formed or acquired
by the Borrower, in each case for the purpose of consummating (previously or in
the future) a Property Acquisition and (ii) the LNR Property Owners.

 

“SPE Mortgage Debt” means Debt of an SPE (a) in existence on the Closing Date
and set forth on Schedule 9.1 and (b) incurred after the Closing Date in
connection with a Property Acquisition or the refinancing of Debt described in
the foregoing clause (a), in each case under clause (b) on terms and conditions
acceptable to the Required Lenders in their sole discretion (provided however,
the parties acknowledge and agree that the terms of the SPE Mortgage Debt for
the Property Acquisitions for the Monroe Property has been approved).

 

“Subsidiary” means, for any Person, a Person of which or in which such Person or
its other Subsidiaries own or control, directly or indirectly, fifty percent
(50%) or more of (a) the combined voting power of all classes having general
voting power under ordinary circumstances to elect a majority of the directors
(if it is a corporation), managers or equivalent body of such Person, (b) the
capital interest or profits interest of such Person, if it is a partnership,
limited liability company, joint venture or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or other
unincorporated association or organization. For the avoidance of doubt, the
Borrower shall constitute a Subsidiary of the REIT, and any Subsidiary of the
Borrower shall also constitute a Subsidiary of the REIT.

 

“Subsidiary Guarantors” means each Domestic Subsidiary existing on the Closing
Date and all future Domestic Subsidiaries who become a guarantor of the
Obligations pursuant to Section 9.4, in each case other than Excluded
Subsidiaries.

 

“Subsidiary Guaranty Agreement” means the Guaranty Agreement executed by certain
of Borrower’s Domestic Subsidiaries in favor of the Collateral Agent and
Lenders, as the same may be amended, supplemented or modified (including by any
joinder thereto pursuant to Section 9.4).

 

“Tax Distribution” means any Distribution made by Borrower in an aggregate
amount which does not exceed the amounts which are sufficient to permit the
partners of Borrower to pay their federal income taxes which arise solely and
directly as a result of their Equity Interests in Borrower.

 

“Three Month Date” means, with respect to any disposition of assets permitted by
Section 9.3(d)(vi), the date which is three (3) months following the date of
such disposition.

 

“Unmatured Event of Default” means the occurrence of an event or the existence
of a condition which, with the giving of notice or the passage of time would
constitute an Event of Default.

 

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Section 1.2     Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words “hereof”, “herein” and “hereunder” and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
Terms used herein that are defined in the Uniform Commercial Code as adopted by
the State of New York, unless otherwise defined herein, shall have the meanings
specified in the Uniform Commercial Code as adopted by the State of New York. In
the event that, at any time, Borrower has no Subsidiaries, all references to the
Subsidiaries of Borrower and the consolidation of certain financial information
shall be deemed to be inapplicable until such time as Borrower has a Subsidiary.
Unless otherwise specified, all references to Subsidiaries herein refer to
Subsidiaries of Borrower. All times of day are eastern time (daylight or
standard, as applicable). Unless otherwise expressly provided herein,
(a) references to agreements (including the Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, extensions, supplements and other modifications thereto, but only
to the extent that such amendments, restatements, extensions, supplements and
other modifications are not prohibited by any Loan Document; and (b) references
to any law shall include all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting such law. When the payment of
any obligation or the performance of any covenant, duty or obligation is stated
to be due or performance required on a day which is not a Business Day, the date
of such payment or performance shall extend to the immediately succeeding
Business Day.

 

ARTICLE II

THE LOANS

 

Section 2.1     Term Loans .

 

(a)     Closing Date Term Loan. Subject to the terms and conditions of this
Agreement, each Lender severally, and not jointly, agrees to make a Loan to
Borrower on the Closing Date in the aggregate principal amount of $10,500,000
(the “Closing Date Term Loan”) and in the respective amounts set forth on Annex
A.

 

(b)     Incremental Term Loans. Subject to the terms and conditions of this
Agreement, if all Incremental Term Loan Conditions have been satisfied, from
time to time after the Closing Date, each Lender severally, and not jointly,
agrees to make term loans available to Borrower in the aggregate principal
amount of up to $10,000,000 (collectively, the “Incremental Term Loan”). This
Section 2.1(b) shall not be construed to create any obligation on the Lenders to
extend or to commit to extend any Incremental Term Loan to Borrower, and any
Incremental Term Loan will only be funded upon the approval of the Lenders,
which such approval may be given or withheld in such Lender’s sole discretion.

 

Section 2.2     Evidence of Debt. The Loans shall be evidenced by one or more
accounts or records maintained by each Lender in the ordinary course of
business. The accounts or records maintained by each Lender shall be conclusive
absent manifest error of the amount of the Loans made by the Lenders to Borrower
and the interest and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of
Borrower hereunder to pay any amount owing with respect to the Obligations. Upon
the reasonable written request of any Lender, Borrower shall execute and deliver
to such Lender a promissory note, which shall evidence such Loans made by such
Lender in addition to such accounts or records. Each such promissory note shall
be substantially in the form of Exhibit B. Each Lender may attach schedules to
its Note and endorse thereon the date, amount and maturity of its Note and
payments with respect thereto.

 

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Section 2.3     Repayment of Loans. Borrower shall repay the unpaid Principal
amount of the Loans on the Maturity Date, together with all accrued and unpaid
interest thereon and any other outstanding Obligations (other than contingent
indemnification or expense reimbursement obligations for which no claim has been
asserted).

 

Section 2.4     Interest.

 

(a)     Interest Payments. The Principal shall accrue interest on the unpaid
balance thereof from the applicable Settlement Date until the Loans have been
Paid in Full at a rate per annum equal to 14.0% (the “Accrual Rate”). From the
applicable Settlement Date and thereafter until the Loans have been Paid in
Full, interest shall be paid currently in cash on a monthly basis in arrears on
each Interest Payment Date at the fixed rate of 12.0% per annum (the “Cash Pay
Rate”). On each Interest Payment Date, the Borrower shall: (A) make an
additional cash payment to the Lenders of interest accruing on the Loans since
the last Interest Payment Date at a rate equal to 2.0% per annum of the
Principal outstanding under the Loans (the “Additional Cash Amount”); (B)
increase the then outstanding Principal of the Loans by an amount (the “PIK
Amount”) equal to the difference between (i) interest accruing at the applicable
Accrual Rate during the preceding month and (ii) interest accruing at the
applicable Cash Pay Rate during the preceding month; or (C) pay a portion of the
Additional Cash Amount to the Lenders and compound to the Principal a portion of
the PIK Amount such that the combined amount of such portion of the Additional
Cash Amount and such portion of the PIK Amount is equal to interest accruing
since the last Interest Payment Date at a rate of 2.0% per annum of the
Principal outstanding under the Loans (collectively, the Additional Cash Amount,
the PIK Amount or any combination thereof, the “Additional Interest Amount”);
provided that, if the Borrower shall make an election to satisfy a portion of
its interest payment obligations under this Section 2.4(a) on an Interest
Payment Date by compounding any of the Additional Interest Amount to Principal,
it shall do so by compounding any such amount of the Additional Interest Amount
to all Lenders on an equal and ratable basis. Accrued and unpaid interest shall
also be due and payable on the date on which any Principal is due, including on
the Maturity Date.

 

(b)     Default Rate; Payment of Default Interest. After the occurrence and
during the continuance of any Event of Default (it being understood and agreed
that, with respect to an Event of Default related to non-compliance with any of
the financial covenants contained herein, the date of occurrence shall be the
applicable test date), the Principal, as well as any overdue Obligations, shall
bear interest at a per annum rate equal to the Default Rate, beginning on the
date of the occurrence of such Event of Default, except to the extent the
Required Lenders have otherwise agreed in writing not to charge such Default
Rate. All such interest shall be paid as an increase to the Cash Pay Rate in a
manner consistent with Section 2.4(a) hereof on a monthly basis (or, at the
option of the Required Lenders, on demand) until the Payment in Full of the
Obligations hereunder or such Event of Default has ceased to be continuing
(whether as a result of a written waiver by the Required Lenders or otherwise).

 

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(c)     Savings Clause. No provision of this Agreement or of any other Loan
Documents shall require the payment or the collection of interest in excess of
the Maximum Rate. If any excess of interest in such respect is hereby provided
for, or shall be adjudicated to be so provided, in this Agreement or any other
Loan Documents or otherwise in connection with this loan transaction, the
provisions of this Section shall govern and prevail and neither Borrower nor the
sureties, guarantors, successors or assigns of Borrower shall be obligated to
pay the excess amount of such interest or any other excess sum paid for the use,
forbearance or detention of sums loaned pursuant hereto. In the event any Lender
ever receives, collects or applies as interest any such sum, such amount which
would be in excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the Principal of the indebtedness
evidenced by the Notes; and, if the principal of the Notes has been paid in
full, any remaining excess shall forthwith be paid to Borrower. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Borrower
and Lenders shall, to the extent permitted by applicable law, (a) characterize
any non-principal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof and (c) amortize,
prorate, allocate and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by the Notes so that interest for the entire term does not exceed the Maximum
Rate.

 

Section 2.5     Use of Proceeds. The proceeds of Loans shall be used to (i)
finance a portion of the consideration payable in connection with Property
Acquisitions, (ii) refinance in full the Existing Indebtedness, (iii) general
working capital requirements of Borrower and for other legitimate corporate
purposes approved by Hale in its reasonable discretion, and (iv) in each case,
to pay fees and expenses incurred in connection therewith or herewith.

 

Section 2.6     Obligations Absolute. The obligations of Borrower under this
Agreement and the other Loan Documents, shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and the other Loan Documents under all circumstances, including
(a) any lack of validity or enforceability of any Loan Document, (b) the
existence of any claim, set-off, counterclaim, defense or other rights which
Borrower, any Obligated Party or any other Person may have at any time against
any Lender or any other Person, whether in connection with this Agreement or any
other Loan Document or any unrelated transaction, (c) any amendment or waiver
of, or any consent to departure from, any Loan Document or (d) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing.

 

ARTICLE III

RESERVED

 

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ARTICLE IV

Payments

 

Section 4.1     Method of Payment. All payments of Principal, interest and other
amounts due from Borrower hereunder shall be made, without any presentment
thereof, directly to each Lender, at such address as a Lender may from time to
time designate in writing to Borrower or, if a bank account(s) with a United
States bank is designated for such Lender in any written notice to Borrower from
such Lender, Borrower will make such payments in immediately available funds to
such bank account, no later than 2:00 p.m. on the date due, marked for attention
as indicated, or in such other manner or to such other account in any United
States bank as such Lender may from time to time direct in writing. All payments
of interest may be paid by auto-debit initiated by a Lender.

 

Section 4.2     Voluntary Prepayment. Borrower shall have the right at any time
and from time to time prior to the Maturity Date, upon notice, to optionally
prepay the Loans and other Obligations in whole or in part (provided, that any
such partial prepayment shall be in a minimum amount of $250,000 or, if less,
the entire outstanding amount of the Loan). In the event of an optional
prepayment made under this Section 4.2, Borrower shall give the Lenders written
notice of such prepayment at least ten (10) days (but not more than sixty (60)
days) prior to the prepayment date, specifying (i) such prepayment date (which
shall be a Business Day), (ii) the Principal amount of the Loans to be prepaid
on such date, (iii) the accrued interest and Make Whole Amount, if any,
applicable to the Loans to be prepaid and (iv) that such prepayment is to be
made pursuant to this Section 4.2. Notwithstanding anything to the contrary
contained herein, all payments of Principal and interest due from Borrower
hereunder shall be made to the Lenders on an equal and ratable basis. All Loans
which have been prepaid may not be reborrowed. Any prepayment of the Loan in
accordance with Section 4.2 shall be accompanied by accrued but unpaid interest
thereon, together with the Make Whole Amount. Any voluntary prepayments shall be
allocated first to the Incremental Term Loans, if any, in inverse order of
funding thereof, and last to the Closing Date Term Loan. Subject to the
preceding sentence, any prepayments shall be allocated ratably to each of the
Lenders in accordance with their pro rata share of the Loans.

 

Section 4.3     Mandatory Prepayment.

 

(a)     If Borrower or any other Credit Party shall consummate an initial public
offering of the Equity Interests in such Person, the Borrower shall repay the
outstanding Loans and other Obligations in full immediately upon consummation of
such initial public offering.

 

(b)     Immediately upon receipt by any Credit Party of the net cash proceeds of
any incurrence of Debt (other than Debt permitted hereunder), the Borrower shall
prepay the Loans as hereafter provided in an aggregate amount equal to the
lesser of (i) the balance of the Obligations and (ii) 100% of such net cash
proceeds (and upon any such prepayment any violation or breach of the terms
hereof with respect to the Debt shall be deemed cured).

 

(c)     Immediately upon receipt by any Credit Party of the net cash proceeds of
any Equity Issuance, the Borrower shall prepay the Loans as hereafter provided
in an aggregate amount equal to the lesser of (i) the balance of the Obligations
and (ii)100% of such net cash proceeds.

 

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(d)     Subject to the rights of any lender under the SPE Mortgage Debt, the
Borrower shall prepay the Loans as hereafter provided in an aggregate amount
equal to the lesser of (i) the balance of the Obligations and (ii)100% of the
net cash proceeds of all voluntary and involuntary dispositions of assets
(including by means of casualty and condemnation events) in excess of $50,000 in
the aggregate during any fiscal year, to the extent such net cash proceeds are
not reinvested in similar property within 90 days of the date of such voluntary
or involuntary disposition. This clause (d) shall not apply to dispositions
involving (a) the sale, lease, license, transfer or other disposition of
inventory in the ordinary course of business; (b) the sale, lease, license,
transfer or other disposition in the ordinary course of business of surplus,
obsolete or worn out property no longer used or useful in the conduct of
business of any Credit Party; (c) any sale, lease, license, transfer or other
disposition of property to any Credit Party; (d) the sale or discount of
accounts in the ordinary course of business and (e) termination of a lease of
real or personal property that is not necessary in the ordinary course of
business and that could not reasonably be expected to result in a Material
Adverse Effect.

 

(e)     Together with any mandatory Principal payment made pursuant to this
Section 4.3, Borrower shall pay accrued interest and the Make Whole Amount on
the Principal amount so prepaid and such payments shall be applied first to all
costs, expenses, indemnities and other amounts then due and payable hereunder,
then to payment of interest at the Default Rate, if any, then to accrued
interest and the Make Whole Amount and thereafter to payment of Principal. The
making of any mandatory prepayment under this Section 4.3 shall not excuse any
action that would otherwise constitute an Event of Default hereunder. Any
mandatory prepayments shall be allocated first to the Incremental Term Loans, if
any, in inverse order of funding thereof, and last to the Closing Date Term
Loan.

 

Section 4.4     Computation of Interest. Interest on the Loans shall be computed
on the basis of a year of 360 days and the actual number of days elapsed. Each
determination by a Lender of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.

 

Section 4.5     Sharing of Payments by Lenders

 

If any Lender shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment in respect of (a) Obligations due and payable to such
Lender hereunder and under the other Loan Documents at such time in excess of
its ratable share (according to the proportion of (i) the amount of such
Obligations due and payable to such Lender at such time to (ii) the aggregate
amount of the Obligations due and payable to all Lenders hereunder and under the
other Loan Documents at such time) of payments on account of the Obligations due
and payable to all Lenders hereunder and under the other Loan Documents at such
time obtained by all the Lenders at such time or (b) Obligations in respect of
any of the Loans owing (but not due and payable) to such Lender hereunder and
under the other Loan Documents at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing (but
not due and payable) to such Lender at such time to (ii) the aggregate amount of
the Obligations owing (but not due and payable) to all Lenders hereunder and
under Borrower at such time) of payment on account of the Obligations owing (but
not due and payable) to all Lenders hereunder and under the other Loan Documents
at such time obtained by all of the Lenders at such time then the Lender
receiving such greater proportion shall (x) notify other the Lenders of such
fact, and (y) purchase (for cash at face value) participations in the Loans of
the other Lenders, or make such other adjustments as shall be equitable, so that
the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of Obligations then due and payable to the
Lenders or owing (but not due and payable) to the Lenders, as the case may be,
provided that:

 

(i)      if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest; and

 

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(ii)     the provisions of this Section shall not be construed to apply to (A)
any payment made by Borrower pursuant to and in accordance with the express
terms of this Agreement or (B) any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans to any
assignee or participant.

 

Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may, following written notice to Borrower of the
existence of such participation, exercise against Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of Borrower in the amount of such participation.

 

ARTICLE V

Collateral

 

Section 5.1     Collateral. To secure full and complete payment and performance
of the Obligations, Borrower shall, and shall cause each of its Domestic
Subsidiaries (other than Excluded Subsidiaries) to, execute and deliver or cause
to be executed and delivered the documents described below covering the property
and collateral described therein and in this Section 5.1 (which, together with
any other property and collateral which may now or hereafter secure the
Obligations or any part thereof, is sometimes herein called the “Collateral”):

 

(a)     Borrower shall, and shall cause each of its Domestic Subsidiaries (other
than Excluded Subsidiaries) to, grant to Collateral Agent, for the benefit of
itself and the Lenders, a security interest in all of its accounts, accounts
receivable, inventory, equipment, machinery, fixtures, chattel paper, documents,
instruments, deposit accounts, investment property, letter of credit rights,
intellectual property, general intangibles and all its other personal property,
whether now owned or hereafter acquired, and all products and proceeds thereof,
pursuant to the Security Agreement, which security interest shall be perfected
to the extent required therein and shall be prior to all other Liens other than
Permitted Liens.

 

(b)     Each Credit Party shall grant to Collateral Agent, for the benefit of
itself and the Lenders, a security interest in all its ownership interests of,
among other Persons, its Subsidiaries, pursuant to the Security Agreement, which
security interest shall be perfected to the extent required therein and shall be
prior to all other Liens.

 

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(c)     In the event Borrower or any other Credit Party acquires any registered
intellectual property at any time after the Closing Date, such Person shall (i)
promptly notify the Collateral Agent and (ii) execute, or cause to be executed,
such documents and instruments as Collateral Agent, in its reasonable
discretion, deems necessary to evidence and perfect its Liens on security
interests in such assets (including, without limitation, Intellectual Property
Security Agreements).

 

(d)     Borrower shall, and shall cause each of its Domestic Subsidiaries (other
than Excluded Subsidiaries) to, execute and cause to be executed such further
documents and instruments as Collateral Agent, in its reasonable discretion,
deems necessary to evidence and perfect its liens and security interests in the
Collateral. Borrower authorizes, directs and permits Collateral Agent to file
Uniform Commercial Code financing statements with respect to the Collateral as
are required under any relevant Uniform Commercial Code, including financing
statements that indicate the Collateral as “all assets” of Borrower or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the Uniform Commercial Code of
the jurisdiction wherein such financing statement or amendment is filed or as
being of an equal or lesser scope or with greater detail.

 

Section 5.2     Setoff. Upon the occurrence and during the continuance of an
Event of Default, each Lender shall have the right to set off and apply against
the Obligations in such a manner as a Lender may determine, at any time and
without notice to Borrower or any Obligated Party but with notice to the other
Lenders and Collateral Agent, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from such Lender to Borrower whether or not the Obligations are then due. The
rights and remedies of Lender hereunder are in addition to other rights and
remedies (including, without limitation, to the rights of setoff) which Lender
may have.

 

Section 5.3     Guaranty Agreements. Each Domestic Subsidiary (other than an
Excluded Subsidiary) shall unconditionally and irrevocably guarantee payment and
performance of the Obligations.

 

Section 5.4     Deposit Account Control Agreements. Borrower shall, and shall
cause each other Credit Party to, deliver to Collateral Agent deposit account
control agreements in form and substance reasonably satisfactory to the
Collateral Agent for each of their deposit accounts; provided that such
requirement shall not apply to deposit accounts with aggregate balances not to
exceed $100,000.

 

ARTICLE VI

Conditions Precedent

 

Section 6.1     Initial Extension of Credit. The obligation of the Lenders to
make the Closing Date Term Loans on the Closing Date is subject to the condition
precedent that prior thereto the Collateral Agent and Lenders shall have
received all of the documents set forth below in form and substance satisfactory
to them.

 

(a)     Notes. A Note executed by Borrower in favor of each Lender so
requesting.

 

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(b)     Security Agreement. A duly executed copy of the Security Agreement.

 

(c)     Guaranty Agreement. The Holding Company Guaranty Agreement, duly
executed by the Holding Company Guarantors.

 

(d)     Certificates. A certificate of a responsible officer of each Credit
Party, attaching certified copies of (i) resolutions of the board of directors
or other governing body of such Credit Party, which authorize the execution,
delivery and performance of the Loan Documents to which it is to be a party,
(ii) the Organizational Documents of such Credit Party, and (iii) the names of
the officers of such Credit Party authorized to sign the Loan Documents.

 

(e)     Governmental Certificates. Certificates issued by the appropriate
government officials of the state of organization of each Credit Party as to the
existence and good standing of such Credit Party.

 

(f)     Financing Statements. Uniform Commercial Code financing statements
showing each Credit Party as debtor and Collateral Agent as the secured party.

 

(g)     Diligence Searches. Uniform Commercial Code, litigation, bankruptcy and
similar lien searches showing all financing statements and other documents or
instruments on file against each Credit Party in their state of formation and
such other locations as deemed reasonably necessary by the Collateral Agent.

 

(h)     Intellectual Property Search. A search on the United States Patent and
Trademark Office and United States Copyright Office database showing all
registrations of or applications filed for intellectual property of the Credit
Parties.

 

(i)     Opinion of Counsel. An opinion or opinions of Kaplan Voekler Cunningham
and Frank, PLC, legal counsel to the Credit Parties, as to the Loan Documents.

 

(j)     Payment of Existing Indebtedness. Evidence that all existing
Indebtedness of the Credit Parties (except those permitted pursuant to Section
9.1) have been paid in full and cancelled (or will be paid from the proceeds of
the Loans) and all Liens related thereto have been terminated or released (or
will be terminated and released upon the payment in full thereof).

 

(k)     Consents. Evidence that all necessary consents to the transactions
contemplated hereby have been obtained, including those required under the SPE
Mortgage Debt.

 

(l)     Property Management Agreements. Duly executed copies of the Property
Management Agreements.

 

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(m)    Attorneys’ Fees and Expenses. Evidence that the costs and expenses
(including reasonable attorneys’ fees) referred to in Section 12.1, to the
extent incurred, have been paid in full by Borrower.

 

(n)     Intellectual Property Security Agreement. An Intellectual Property
Security Agreement executed by the REIT.

 

(o)     Additional Documentation. Such additional approvals, opinions or
documents as the Collateral Agent may reasonably request.

 

Section 6.2     Post Closing Deliveries.

 

(a)    Insurance Certificates. As soon as practical after the Closing Date, but
in any event within sixty (60) days after the Closing Date (or such later date
as the Collateral Agent may agree in its sole discretion), the Borrower shall
deliver to the Collateral Agent the certificates of insurance, and related
endorsements or declarations pages, required by Section 8.5 hereof.

 

To the extent any representation and warranty would not be true or any provision
of any covenant would be breached in this Agreement or any other Loan Document
because the action required by this Section 6.2 was not taken on or prior to
Closing Date, the respective representation and warranty shall be required to be
true and correct in all material respects and the respective covenant complied
with at the time the action is taken (or was required to be taken) in accordance
with this Section 6.2.

 

ARTICLE VII

Representations and Warranties

 

To induce Collateral Agent and Lenders to enter into this Agreement, Borrower,
as of the Closing Date and each Settlement Date, hereby represents and warrants
to Collateral Agent and Lenders that:

 

Section 7.1     Existence. The REIT and each of its Subsidiaries, including
Borrower (a) are duly organized, validly existing and in active standing under
the laws of their respective jurisdictions of organization, (b) have all
requisite power and authority to own their assets and carry on their business as
now being or as proposed to be conducted and (c) are qualified to do business in
all jurisdictions where necessary (except where the failure to be so qualified
could not reasonably be expected to result in a Material Adverse Effect). The
REIT and each of its Subsidiaries has the power and authority to execute,
deliver and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.

 

Section 7.2     Financial Statements. Borrower has delivered to Lenders audited
financial statements of the REIT as at and for the fiscal year ended December
31, 2017, and unaudited financial statements for the fiscal quarter ended
December 31, 2018. Such financial statements, have been prepared in accordance
with GAAP (subject to the absence of footnotes and year-end adjustments in the
case of unaudited financial statements), and fairly and accurately present in
all material respects, on a consolidated basis, the financial condition of the
REIT and its Subsidiaries, as of the respective dates indicated therein and the
results of operations for the respective periods indicated therein. As of the
date of such financial statements, the REIT and its Subsidiaries do not have any
material contingent liabilities, liabilities for taxes, material forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments not reflected in such financial statements.

 

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Section 7.3     Requisite Action; No Breach. The execution, delivery and
performance by Borrower of this Agreement and the other Loan Documents to which
Borrower is or may become a party have been duly authorized by all requisite
action on the part of Borrower and do not and will not violate or conflict with
the Organizational Documents of Borrower or any law, rule or regulation or any
order, writ, injunction or decree of any court, Governmental Authority or
arbitrator, and, except as could not reasonably be expected to have a Material
Adverse Effect, do not and will not conflict with, result in a breach of, or
constitute a default under, or result in the imposition of any Lien (other than
the Liens established under the Loan Documents) upon any of the revenues or
assets of Borrower or any Subsidiary pursuant to the provisions of any
indenture, mortgage, deed of trust, security agreement, franchise, permit,
license or other instrument or agreement by which Borrower or any Subsidiary or
any of their respective properties is bound.

 

Section 7.4     Operation of Business. The REIT and each of its Subsidiaries
possess or have a valid right to use all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, or rights thereto, to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted.

 

Section 7.5     Litigation and Judgments. There is no action, suit,
investigation or proceeding before or by any Governmental Authority pending, or
to the knowledge of Borrower, threatened against or affecting the REIT or any
Subsidiary, that could, if adversely determined, reasonably be expected to have
a Material Adverse Effect. There are no outstanding judgments against the REIT
or any of its Subsidiaries for the payment of money in excess of $50,000.00.

 

Section 7.6     Rights in Properties; Liens. The REIT and each of its
Subsidiaries have good and marketable title to or valid leasehold interests in
their respective properties and assets, real and personal, including the
properties, assets and leasehold interests reflected in the financial statements
described in Section 7.2, and none of the properties, assets or leasehold
interests of the REIT or any of its Subsidiaries is subject to any Lien, except
for the Permitted Liens and any other Liens hereafter approved by the Collateral
Agent.

 

Section 7.7     Enforceability. This Agreement constitutes, and the other Loan
Documents to which Borrower is a party, when delivered, shall constitute the
legal, valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforceability thereof may
be limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditor’s rights.

 

Section 7.8     Approvals. o authorization, approval or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery or performance by Borrower of this
Agreement and the other Loan Documents to which Borrower is or may become a
party or the validity or enforceability thereof, except for the filing and
recording of financing statements and other documents necessary in order to
perfect the Liens created by the Security Agreement entered into in connection
herewith.

 

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Section 7.9      Debt. The REIT and its Subsidiaries have no Debt except Debt
permitted pursuant to Section 9.1 or Debt being satisfied from the proceeds of
the Loans.

 

Section 7.10     Use of Proceeds; Margin Securities. Neither Borrower nor any
Subsidiary of the Borrower is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T, U or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.

 

Section 7.11     ERISA. The REIT and each Subsidiary of the REIT have complied
in all material respects with all applicable minimum funding requirements and
all other applicable requirements of ERISA, and there are no existing conditions
that would give rise to material liability thereunder. No Reportable Event (as
defined in Section 4043 of ERISA) has occurred in connection with any employee
benefit plan that might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer such plan.

 

Section 7.12     Taxes. The REIT and each Subsidiary of the REIT have filed all
tax returns (federal, state and local) required to be filed on or before the
date of this representation (including any future dates on which this
representation is deemed to be made), including all income, franchise,
employment, property and sales taxes, and have paid all of their liabilities for
taxes, assessments, governmental charges and other levies that are due and
payable, other than those not yet delinquent and except any such taxes,
assessments, governmental charges and levies which are being contested in good
faith by appropriate proceedings diligently pursued and for which adequate
reserves in accordance with GAAP have been established.

 

Section 7.13     Disclosure. No event has occurred since the date of the most
recently delivered audited financial statements, and no fact or condition
exists, which has had a Material Adverse Effect or which could reasonably be
expected to have a Material Adverse Effect.

 

Section 7.14     Subsidiaries. The REIT has no Subsidiaries other than those
listed on Schedule 7.14. The REIT owns, directly or indirectly, the amount of
ownership interests of each Subsidiary as set forth on Schedule 7.14.

 

Section 7.15     Compliance with Laws; REIT Status.

 

(a)      Neither the REIT nor any of its Subsidiaries is in violation in any
material respect of any material law, rule, regulation, order, or decree of any
Governmental Authority or arbitrator.

 

(b)      The REIT is qualified as a “real estate investment trust” under
Sections 856-860 of the Internal Revenue Code.

 

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(c)      The REIT is in compliance in all material respects with all provisions
of the Internal Revenue Code applicable to the qualification of the REIT as a
“real estate investment trust”.

 

Section 7.16     Compliance with Agreements. Neither the REIT nor any of its
Subsidiaries is in violation in any material respect of any material document,
agreement, contract or instrument to which it is a party or by which it or its
properties are bound.

 

Section 7.17     Environmental Matters. The REIT and each of its Subsidiaries,
and their respective properties, are in material compliance with all material
applicable Environmental Laws and neither the REIT nor any of its Subsidiaries
is subject to any material liability or obligation for remedial action
thereunder. There is no pending or, to Borrower’s knowledge, threatened
investigation or inquiry by any Governmental Authority with respect to the REIT
or any of its Subsidiaries or any of their respective properties pertaining to
any Hazardous Substance. Except in the ordinary course of business and in
compliance with all Environmental Laws, or as otherwise set forth in any
environmental assessments or related reports (each, an “Environmental Report”)
obtained in connection with a Property Acquisition, to Borrower’s knowledge,
there are no Hazardous Substances located on or under any of the properties of
the REIT or any of its Subsidiaries. Except in the ordinary course of business
and in compliance with all Environmental Laws, or as set forth in any
Environmental Report, to Borrower’s knowledge neither the REIT nor any of its
Subsidiaries has caused or permitted any Hazardous Substance to be disposed of
on or under or released from any of its properties. Borrower and each Subsidiary
(or any applicable tenant at a property) have obtained all material permits,
licenses and authorizations which are required under and by all material
Environmental Laws and necessary for the conduct of their business.

 

Section 7.18     Solvency. As of each Settlement Date and after giving effect to
the transactions contemplated by this Agreement and the other Loan Documents,
including all Loans made or to be made hereunder, no Credit Party is insolvent
on a balance sheet basis such that the sum of such Person’s assets exceeds the
sum of such Person’s liabilities, each Credit Party is able to pay its debts as
they become due, and each Credit Party has sufficient capital to carry on its
business.

 

Section 7.19     Transactions With Affiliates. Neither the REIT nor any of its
Subsidiaries is a party to any transaction, arrangement or contract (including
any lease or other rental agreement) with any of its Affiliates other than as
permitted by Section 9.10 hereof.

 

Section 7.20     Investment Company Act. Neither the REIT nor any of its
Subsidiaries is an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

Section 7.21     Sanctions. Neither the REIT nor any of its Subsidiaries or, to
the knowledge of Borrower, any director, officer, employee, agent, or Affiliate
of Borrower or any of its Subsidiaries is a Person that is, or is owned or
controlled by Persons that are: (a) the subject of any sanctions administered or
enforced by the U.S. Department of the Treasury’s Office of Foreign Assets
Control (“OFAC”), the U.S. Department of State, the United Nations Security
Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions
authority (collectively, “Sanctions”), or (b) located, organized or resident in
a country or territory that is, or whose government is, the subject of
Sanctions.

 

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Section 7.22     Anti-Corruption. Neither the REIT nor any of its Subsidiaries,
nor, to the knowledge of Borrower, any director, officer, employee, agent, or
Affiliate of Borrower or any of its Subsidiaries has (a) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, (b) made any direct or indirect unlawful
payment to any government official or employee from corporate funds, (c)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977 or the Bribery Act 2010 of the United Kingdom or similar
law of the European Union or any European Union Member State or similar law of a
jurisdiction in which Borrower or any Subsidiary conduct their business and to
which they are lawfully subject or (d) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.

 

ARTICLE VIII

Affirmative Covenants

 

Borrower covenants and agrees that, until Payment in Full, Borrower will perform
and observe the covenants set forth below, unless Required Lenders shall
otherwise consent in writing.

 

Section 8.1     Reporting Requirements. Borrower will deliver to each Lender:

 

(a)     Annual Financial Statements. As soon as available, and in any event
within one hundred twenty (120) days after the end of each fiscal year of the
REIT, beginning with the fiscal year ending December 31, 2018, a copy of the
annual audited financial statements of the REIT and its Subsidiaries for such
fiscal year containing, on a consolidated basis, balance sheets, statements of
income, statements of members’ capital and statements of cash flows as at the
end of such fiscal year and for the 12-month period then ended, in each case
setting forth in comparative form the figures for the preceding fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and audited and
certified without qualification by independent certified public accountants of
recognized standing reasonably acceptable to the Hale (and for purposes hereof
Hale has approved Cherry Bekaert, LLP, the current independent certified public
accountants for the REIT).

 

(b)     Quarterly Financial Statements. As soon as available, and in any event
within forty five (45) days after the end of each fiscal quarter of the REIT
(including the last fiscal quarter of each fiscal year of the REIT), a copy of
the unaudited financial statements of the REIT and its Subsidiaries as of the
end of such fiscal quarter and for the portion of the fiscal year then ended,
containing, on a consolidated basis, balance sheets, statements of income,
statements of members’ capital and statements of cash flows in each case setting
forth in comparative form the figures for the corresponding period of the
preceding fiscal year, comparisons to budget, and a management discussion and
analysis, all in reasonable detail and certified by a Financial Officer to have
been prepared in accordance with GAAP and to fairly and accurately present in
all material respects the financial condition and results of operations of the
REIT and its Subsidiaries, on a consolidated basis, at the date and for the
periods indicated therein, subject to changes resulting from normal year-end
audit adjustments and absence of footnote disclosures.

 

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(c)     Monthly Financial Statements. As soon as available, and in any event
within forty five (45) days after the end of each calendar month (other than
months which are also fiscal quarter ends), beginning with the month ending
March 31, 2019, a copy of the unaudited financial statements of the REIT and its
Subsidiaries as of the end of such calendar month and for the portion of the
fiscal year then ended, containing, on a consolidated basis, balance sheets,
statements of income, statements of members’ capital and statements of cash
flows in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable detail and
certified by a Financial Officer to have been prepared in accordance with GAAP
and to fairly and accurately present in all material respects the financial
condition and results of operations of the REIT and its Subsidiaries, on a
consolidated basis, at the date and for the periods indicated therein.

 

(d)     Compliance Certificate. (i) Concurrently with the delivery of the
financial statements required by Section 8.1(b), a Compliance Certificate as of
the last day of such fiscal quarter and (ii) together with the financial
statements delivered pursuant to Section 8.1(a), a Compliance Certificate as of
the last day of the fiscal year covered by such financial statements, in each
case executed by a Financial Officer and containing detailed calculations of the
covenants contained in Sections 9.1 and 9.3(d) and Article X.

 

(e)     Tax Returns. Within ten (10) days following the filing thereof, copies
of each federal income tax return filed by a Credit Party.

 

(f)     Annual Projection Reports. As soon as available, and in any event at
least thirty (30) days prior to the end of each fiscal year of the REIT, a copy
of the annual business plan for the ensuing year, including financial
projections and a Capital Expenditure budget.

 

(g)     Notice of Tax Investigations or Prior Period Unassessed Liabilities. As
soon as possible, and in any event within five (5) Business Days after Borrower
becomes aware thereof, notice of any pending investigations of the REIT or any
Subsidiary of the REIT by any taxing authority or of any pending but unassessed
tax liability incurred during a prior period of the REIT or any of its
Subsidiaries.

 

(h)     Certificate of Insurance. Upon request of Collateral Agent or any
Lender, a certificate or certificates evidencing that the insurance required by
Section 8.5 is in full force and effect and that such policies have been
extended.

 

(i)     Notice of Litigation. Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any Governmental Authority against
Borrower or any Guarantor which could have a Material Adverse Effect.

 

(j)     Notice of Judgments. Within five (5) Business Days of the rendering
thereof, notice of any judgment against Borrower or any Guarantor in an amount
which is greater than $100,000.00.

 

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(k)     Notice of Default. As soon as possible and in any event within five (5)
Business Days after Borrower becomes aware of the occurrence of each Event of
Default and any Unmatured Event of Default that will not, in the Borrower’s
reasonable estimation be resolved prior to becoming an Event of Default, a
written notice setting forth the details of such Event of Default or Unmatured
Event of Default and the action which Borrower has taken and proposes to take
with respect thereto.

 

(l)      Notice of Material Adverse Effect. As soon as possible, and in any
event within five (5) Business Days after Borrower becomes aware thereof, notice
of the occurrence of any event or the existence of any fact or condition which
could have a Material Adverse Effect.

 

(m)     General Information. Promptly after receipt of any such request, such
other information concerning Borrower, any Guarantor or the real property of the
Credit Parties or their Subsidiaries as Collateral Agent or a Lender may from
time to time reasonably request.

 

Section 8.2     Maintenance of Existence; Conduct of Business. Borrower will
preserve and maintain, and will cause each Subsidiary to preserve and maintain,
its corporate existence and all of its material leases, privileges, licenses,
permits, franchises, qualifications and rights that are necessary in the
ordinary conduct of its business; provided that upon the sale of any property
held by any SPE, such SPE may be liquidated and dissolved in the ordinary course
of business.

 

Section 8.3     Maintenance of Properties. Borrower will maintain, and will
cause each Subsidiary of Borrower to maintain, its assets and properties in good
condition and repair, ordinary wear and tear and casualty events excepted.

 

Section 8.4     Taxes and Claims. Borrower will pay or discharge, and will cause
each Subsidiary of Borrower to pay or discharge, at or before maturity or before
becoming delinquent all taxes, levies, assessments and governmental charges
imposed on it or its income or profits or any of its property and all lawful
claims for labor, material and supplies, which, if unpaid, might become a Lien
upon any of its property; provided, however, that neither Borrower nor any such
Subsidiary shall be required to pay or discharge any claim, tax, levy,
assessment or governmental charge (a “Tax or Claim Charge”), which is being
contested in good faith by appropriate proceedings diligently pursued, if (i) no
Lien has been filed of record with respect to such Tax or Claim Charge, (ii) no
Collateral or any portion thereof or interest therein would be in any danger of
sale, forfeiture or loss by reason of the contest for such Tax or Claim Charge,
and (iii) Borrower or such Subsidiary has established adequate reserves against
such Tax or Claim Charge in accordance with GAAP.

 

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Section 8.5     Insurance. Borrower will maintain, and will cause each
Subsidiary of Borrower to maintain, with financially sound and reputable
insurance companies, worker’s compensation insurance, liability insurance and
insurance on its property, assets and business, all at least in such amounts and
against such risks as are usually insured against by Persons engaged in similar
businesses and as are reasonably acceptable to the Collateral Agent; provided
that with respect to any insurance for a property encumbered by SPE Mortgage
Debt, satisfaction of the insurance requirements under such Debt shall
constitute acceptable insurance. Each casualty insurance policy and each
insurance policy covering Collateral shall by endorsement name Collateral Agent
as lender loss payee (or “mortgagee loss payee”, if applicable) and each policy
of liability insurance shall by endorsement or the terms thereof name Collateral
Agent as an additional insured. All such policies shall provide that they will
not be cancelled without thirty (30) days prior written notice to Collateral
Agent or ten (10) days in case of non-payment of a premium. Subject in all
events to the rights of the lenders under the SPE Mortgage Debt, in case of loss
due to casualty, Collateral Agent shall be entitled to receive and retain the
proceeds of the insurance policies in excess of $500,000.00, and to, in
Collateral Agent’s reasonable discretion, either apply the same against the
Obligations or release such proceeds to Borrower; provided if any such insurance
proceeds are necessary for the repair or replacement of any Collateral as long
as there is no Event of Default hereunder, such proceeds shall be released to
Borrower to be used for such repairs or replacements. All proceeds of insurance
policies in an aggregate amount equal to or less than $500,000.00 shall be paid
to Borrower, and such proceeds shall be used to repair and restore the
Collateral in substantially the same condition of such Collateral immediately
prior to such loss. If any loss shall occur at any time when Borrower or any
Subsidiary of Borrower shall be in default as to the performance of this
covenant, Collateral Agent shall, subject to the terms of the SPE Mortgage Debt,
nonetheless be entitled to the benefit of all insurance held by or for such
Person, to the same extent as if it had been made payable to Collateral Agent.

 

Section 8.6     Inspection . At any reasonable time and in reasonable intervals,
Borrower will permit, and will cause each Subsidiary of Borrower to permit,
representatives of the Collateral Agent or Lenders to examine and make copies of
the books and records of, and, subject to the rights of tenants, visit and
inspect the properties or assets of Borrower and any such Subsidiary and to
discuss the business, operations and financial condition of any such Persons
with their respective officers and employees and with their independent
certified public accountants.

 

Section 8.7     Keeping Books and Records. Borrower will maintain, and will
cause each Subsidiary of Borrower to maintain, proper books of record and
account in which full, true and correct entries in conformity with GAAP in all
material respects shall be made of all dealings and transactions in relation to
its business and activities.

 

Section 8.8     Compliance with Laws. Borrower will comply, and will cause each
Subsidiary of Borrower to comply, in all material respects, with all material
applicable laws, rules, regulations and orders of any court, Governmental
Authority or arbitrator.

 

Section 8.9     Compliance with Agreements. Borrower will comply, and will cause
each Subsidiary of Borrower to comply, in all material respects, with all
material agreements, contracts and instruments binding on it or affecting its
properties or business.

 

Section 8.10     Further Assurances. Borrower will execute and deliver, and will
cause each Subsidiary of Borrower to execute and deliver, such further
instruments as may be reasonably requested by the Collateral Agent to carry out
the provisions and purposes of this Agreement and the other Loan Documents and
to preserve and perfect the Liens of Collateral Agent in the Collateral.

 

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Section 8.11     ERISA. Borrower will comply, and will cause each Subsidiary of
Borrower to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.

 

Section 8.12     Continuity of Operations. Borrower will continue to conduct,
and will cause each Subsidiary of Borrower to continue to conduct, its primary
businesses (and any other business reasonably related or complementary thereto)
as conducted or contemplated to be conducted as of the Closing Date.

 

Section 8.13     LNR Property Owners. Borrower will use its reasonable efforts,
under the LNR Property Documents and otherwise, to cause the LNR Property Owners
to comply with the covenants applicable to the Borrower’s Subsidiaries, under
this Article VIII and Article IX below.

 

ARTICLE IX

Negative Covenants

 

Borrower covenants and agrees that, until Payment in Full, Borrower will perform
and observe the covenants set forth below, unless Required Lenders shall
otherwise consent in writing.

 

Section 9.1     Debt. Borrower will not incur, create, assume or permit to
exist, and will not permit any Subsidiary to incur, create, assume or permit to
exist, any Debt, except (a) the Obligations, (b) purchase money Debt and
Capitalized Lease Obligations in an aggregate principal amount which does not
exceed $250,000 outstanding (or, in the case of the SPEs, such amounts as may be
set forth in the applicable SPE Mortgage Debt documents) at any time, (c) Debt
arising from the endorsement of instruments for collection in the ordinary
course of business, (d) Debt owed by (i) one Credit Party to another Credit
Party or (ii) any Subsidiary to Borrower, (e) obligations of any Credit Party
for taxes, assessments or other governmental charges which are not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and, in each case, for which such Credit Party
maintains adequate reserves in accordance with GAAP, (f) the SPE Mortgage Debt,
(g) Debt arising from one or more judgments which do not, in themselves, give
rise to an Event of Default, provided such judgments are satisfied or stayed
within thirty (30) days of their rendering, (h) Debt set forth on Schedule 9.1,
(i) Debt arising under Rate Management Transactions so long as entered into for
bona fide hedging of liabilities of the Borrower and its Subsidiaries and not
for speculative purposes, and (j) unsecured Debt of Borrower or any of its
Subsidiaries to the extent not permitted by any of the foregoing clauses,
provided that the aggregate outstanding principal amount of all such Debt
pursuant to this clause (j) does not exceed $250,000 at any time (or, in the
case of the SPEs, such amounts as may be set forth in the applicable SPE
Mortgage Debt documents).

 

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Section 9.2     Limitation on Liens. Borrower will not incur, create, assume or
permit to exist, and will not permit any Subsidiary to incur, create, assume or
permit to exist, any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except the following (“Permitted Liens”): (a)
Liens in favor of Collateral Agent, (b) purchase money Liens and Liens
evidencing Capitalized Lease Obligations securing Debt permitted by Section
9.1(b), which Liens cover only the assets financed with the Debt permitted by
Section 9.1(b), (c) any current encumbrances existing on any of the properties
of the SPE’s (including, but not limited to any exceptions reflected in any
title insurance policy with respect to any such assets) and any future
encumbrances consisting of easements, zoning restrictions or other restrictions
on the use of real property that do not (individually or in the aggregate)
materially affect the value of the assets encumbered thereby (or such affect was
reflected in any purchase price paid in connection with the acquisition of any
such asset) or materially impair the ability of Borrower or any Subsidiary to
use such assets in its business, and none of which is violated in any material
aspect by existing or proposed structures or land use, (d) Liens for taxes,
assessments or other governmental charges (a “Tax or Government Charge”) which
(i) are not delinquent, or (ii) for which (A) no Lien has been filed of record
with respect to such Tax or Government Charge, (B) no Collateral or any portion
thereof or interest therein would be in any danger of sale, forfeiture or loss
by reason of the contest for such Tax or Government Charge, and (C) Borrower or
such Subsidiary has established adequate reserves against such Tax or Government
Charge in accordance with GAAP, (e) Liens of mechanics, materialmen,
warehousemen, carriers or other similar statutory Liens securing obligations
that are not yet due and are incurred in the ordinary course of business, (f)
Liens (other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of business in connection with workers compensation,
unemployment insurance and other types of social security, (g) leases or
subleases granted in the ordinary course of business to others not interfering
in any material respect with the business of the Borrower or any of its
Subsidiaries and any interest or title of a lessor under any lease not in
violation of this Agreement, (h) Liens arising from precautionary uniform
commercial code financing statements filed under any lease permitted by this
Agreement and with respect to which no grant of security interest has been made,
(i) Liens (including the right of set-off) in favor of a bank or other
depositary institution arising as a matter of law or in the ordinary course of
business encumbering deposits, (j) Investments of cash permitted by Section
9.6(a), (k) Liens solely on cash earnest money deposits made by Borrower and its
Subsidiaries in connection with any letter of intent or purchase agreement in
favor of the seller of any property to be acquired in an Investment permitted
pursuant to Section 9.6 to be applied against the purchase price for such
Investment, solely to the extent such Investment or sale, disposition, transfer
or lease would have been permitted on the date of the creation of such Lien and
(l) other Liens securing other Debt or other obligations permitted herein or
other obligations, provided that all Liens permitted under this clause (l) shall
not exceed $500,000.00 in the aggregate at any time and shall not encumber any
portion of Credit Parties’ accounts, chattel paper, instruments, promissory
notes, inventory, fixtures, furnishings, furniture, machinery, equipment, or
rolling stock.

 

Section 9.3     Mergers, Acquisitions, Dissolutions and Disposition of Assets.
Borrower will not, and will not permit any Subsidiary of Borrower to, become a
party to a merger, consolidation, partnership, joint venture or other business
combination or purchase or otherwise acquire all or a substantial part of the
assets of any Person or any shares or other evidence of beneficial ownership of
any Person, provided Credit Parties may enter into any Property Acquisition,
dissolve or liquidate, amend its Organizational Documents in any manner adverse
to Collateral Agent or Lenders, the payment and/or performance of the
Obligations or the Liens created under the Loan Documents, or sell, lease,
assign, transfer or otherwise dispose of its assets, except, (i) in the ordinary
course of business, dispose of or lease inventory, (ii) in the ordinary course
of business, dispose of any used, obsolete, worn out or surplus property
(including, without limitation, used vehicles) that is, in the reasonable good
faith judgment of such Credit Party, no longer economically or commercially
practicable or necessary to maintain or useful in the conduct of the business of
the Credit Parties, taken as a whole, provided that the aggregate amount of fair
market value of all dispositions pursuant to this Section 9.3(d)(ii) shall not
exceed $100,000.00 during any fiscal year, (iii) transactions among Credit
Parties not resulting in a Change of Control, (iv) any involuntary disposition
constituting a casualty event or condemnation, confiscation, requisition,
seizure or taking, (v) give discounts or compromises for less than the face
value of accounts receivable in order to resolve disputes that occur in the
ordinary course of business, and (vi) other asset dispositions not otherwise
permitted hereunder; provided, however, that in the case of this clause (vi),
all of the following conditions are met: (w) the market value of all assets
disposed of pursuant to this clause (vi) does not exceed $50,000.00 individually
and $100,000.00 in the aggregate during any fiscal year of Borrower with respect
to all such transactions; (x) the consideration received is at least equal to
the fair market value of such assets; (y) not later than the Three Month Date,
the net proceeds of such disposition shall have been either (A) reinvested in
assets used in the business of Credit Parties on which Collateral Agent has a
perfected Lien subject only to Permitted Liens or (B) applied as required by
Section 4.3, as applicable; and (z) no Unmatured Event of Default or Event of
Default shall then exist or result from such disposition.

 

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Section 9.4     Subsidiaries. Borrower will not create or acquire any Subsidiary
of Borrower, unless (a) such new Subsidiary is an SPE, (b) the Borrower has (i)
specifically pledged its Equity Interests in such new Subsidiary to Collateral
Agent, and (ii) delivered to Collateral Agent evidence of its authority to enter
into such pledge and (c) if such Subsidiary is not an Excluded Subsidiary, (i)
such new Subsidiary has executed and delivered to Collateral Agent the
Subsidiary Guaranty Agreement and Security Agreement (or joinders thereto in
form and substance reasonably satisfactory to the Collateral Agent), (ii) such
new Subsidiary has delivered to Collateral Agent a certified copy of its
Organizational Documents and evidence of its authority to enter into the
documents referred to in clause (b)(ii) above, and (iii) to the extent requested
by Collateral Agent, Borrower has delivered a legal opinion in form and
substance reasonably satisfactory to them with respect to such new Subsidiary
and the foregoing documents. Any joinder agreement executed pursuant to this
Section shall constitute a Loan Document.

 

Section 9.5     Restricted Payments. Borrower will not declare or pay any
Distribution except for the following (the “Permitted Distributions”): (a)
Distributions to enable the REIT to distribute the minimum amount of dividends
necessary for the REIT to maintain its status as a “real estate investment
trust” for U.S. federal and state income tax purposes, (b) Distributions that
are payable solely in additional shares of its Equity Interests (or warrants,
options or other rights to acquire additional shares of its Equity Interests but
excluding Disqualified Equity Interests), (c) Distributions by the REIT
necessary for it to avoid the payment of federal or state income or excise taxes
for undistributed income, (d) Tax Distributions and (e) provided that no Event
of Default has occurred and is then continuing or would result from the making
of such Distribution on a pro forma basis, other Distributions by the Borrower
to its partners, or the REIT to its shareholders in accordance with the
Organizational Documents as in effect on the Closing Date or as modified with
the consent of Hale.  

 

Section 9.6     Investments. Borrower will not make, and will not permit any
Subsidiary to make, any Investment in any Person other than:

 

(a)     Liquid Investments;

 

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(b)     Property Acquisitions;

 

(c)     any endorsement of a check or other medium of payment for deposit or
collection, or any similar transaction in the normal course of business;

 

(d)     Investments consisting of loans and advances to employees of the
Borrower in the ordinary course of business not to exceed $10,000.00 in the
aggregate at any time outstanding;

 

(e)     deposits required to be made in the ordinary course of business in an
amount reasonably acceptable to the Collateral Agent made to a landlord in the
ordinary course of business to secure or support obligations of Borrower under a
lease of real property; and

 

(f)     other Investments approved by the Collateral Agent in writing.

 

Section 9.7     Compliance with Environmental Laws. Borrower will not, and will
not permit any Subsidiary of Borrower to, use (or permit any tenant to use) any
of their respective properties or assets for the handling, processing, storage,
transportation or disposal of any Hazardous Substance, except in the ordinary
course of business and in material compliance with all material Environmental
Laws, generate any Hazardous Substance, conduct any activity which is likely to
cause a release or threatened release of any Hazardous Substance, or otherwise
conduct any activity or use any of their respective properties or assets in any
manner that is likely to violate any material Environmental Law.

 

Section 9.8     Accounting. Borrower will not make, and will not permit any
Subsidiary of Borrower to make, any change in accounting treatment or reporting
practices (including any change to its fiscal year from December 31), except as
required by GAAP.

 

Section 9.9     Change of Business. Borrower will not enter into, or permit any
Subsidiary of Borrower to enter into, any type of business which is materially
different from the business in which Borrower or such Subsidiary is engaged or
contemplated to be engaged as of the Closing Date.

 

Section 9.10    Transactions With Affiliates. Borrower will not enter into, or
permit to exist, and will not permit any Subsidiary of Borrower to enter into or
permit to exist, any transaction, arrangement or contract (including any lease
or other rental agreement) with any of its Affiliates which is on terms which
are materially less favorable than are obtainable from any Person who is not an
Affiliate of Borrower or such Subsidiary, other than (a) distributions permitted
by Section 9.5, Investments permitted by clause (f) of Section 9.6, management
fees permitted by Section 9.12, and fees paid pursuant to the Property
Management Agreements, (b) the LNR Property Documents and (c) transactions among
the Credit Parties permitted by this Agreement.

 

Section 9.11    Compliance with Government Regulations. Borrower will not, and
will not permit any Subsidiary of Borrower to, (a) be or become subject at any
time to any law, regulation or list of any governmental agency (including,
without limitation, the U.S. Office of Foreign Asset Control list) that
prohibits or limits any Lender from making any advance or extension of credit to
Borrower or from otherwise conducting business with Borrower, or (b) fail to
provide documentary and other evidence of Borrower’s identity as may be
requested by any Lender at any time to enable such Lender to verify Borrower’s
identity or to comply with any applicable law or regulation, including, without
limitation Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

 

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Section 9.12    Management Fees. Borrower will not pay any management fees to
any Person; provided, however, that Borrower may pay fees to the applicable
managers pursuant to the Property Management Agreements (i) as in effect on the
date hereof or as amended with the consent of Hale or (ii) as hereafter entered
into in connection with a Property Acquisition in accordance with clause (b) of
the definition thereof.

 

Section 9.13    Sanctions. Borrower will not, directly or indirectly, use the
proceeds of the Loans, or lend, contribute or otherwise make available such
proceeds to any Subsidiary, joint venture partner or other Person, (a) to fund
any activities or business of or with any Person, or in any country or
territory, that, at the time of such funding, is, or whose government is, the
subject of Sanctions, or (b) in any other manner that would result in a
violation of Sanctions by any Person (including any Person participating in the
Loans, whether as underwriter, advisor, investor, or otherwise).

 

Section 9.14    Anti-Corruption. No part of the proceeds of the Loans shall be
used, directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977.

 

ARTICLE X

Financial Covenant

 

Borrower covenants and agrees that, until Payment in Full, Borrower will perform
and observe the financial covenants set forth below.

 

Section 10.1     Fixed Charge Coverage Ratio. Borrower covenants and agrees
that, until Payment in Full, the Credit Parties will at all times maintain a
Fixed Charge Coverage Ratio of not less than 1.00 to 1.00. The Fixed Charge
Coverage Ratio will be calculated and tested quarterly as of the last day of
each fiscal quarter of the REIT, commencing with the fiscal quarter ending March
31, 2019, for the period of four quarters ended as of such date (a “rolling or
trailing four quarters” basis).

 

ARTICLE XI

Default

 

Section 11.1     Events of Default. Each of the following shall be deemed an
“Event of Default”:

 

(a)     Borrower shall fail to pay (i) principal of or interest on any Note when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) or (ii) any other Obligations or any part thereof when due, and, with
respect to this clause (ii), such failure shall have continued for a period of
ten (10) Business Days.

 

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(b)     Any representation or warranty made or deemed made by Borrower or any
Obligated Party (or any of their respective officers) in any Loan Document or in
any certificate, report, notice or financial statement furnished at any time in
connection with this Agreement shall be false, misleading or erroneous in any
material respect when made or deemed to have been made.

 

(c)     Borrower or any Obligated Party shall fail to perform, observe or comply
with (i) any covenant, agreement or term contained in Section 8.1, Section 8.2
(with respect to Borrower’s existence), Article IX or Article X of this
Agreement or (ii) any covenant, agreement or term contained in any other Section
of this Agreement or any other Loan Document and, with respect to this clause
(ii), such failure shall have continued for a period of ten (10) Business Days
after the earlier of (y) an officer of any Credit Party obtaining knowledge of
such failure or (z) the Borrower’s receipt of written notice of such failure
from Collateral Agent or a Lender (any such notice to be identified, in full or
in part, as a notice of default (or similar language) and to refer specifically
to this clause); provided, however, in the case of a default that cannot be
cured within such ten (10) Business Day period despite Borrower’s diligent
efforts but is susceptible of being cured within thirty (30) days of the earlier
of (y) an officer of any Credit Party obtaining knowledge of such failure or (z)
the Borrower’s receipt of written notice of such failure from Collateral Agent
or a Lender, then Borrower shall have such additional time as is reasonably
necessary to effect such cure, but in no event in excess of thirty (30) days
from the earlier of (y) an officer of any Credit Party obtaining knowledge of
such failure or (z) the Borrower’s receipt of written notice of such failure
from Collateral Agent or a Lender.

 

(d)     Borrower, any Subsidiary of Borrower, any Obligated Party, or any LNR
Property Owner shall commence a voluntary proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or a substantial part of its property or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it or
shall make a general assignment for the benefit of creditors or shall generally
fail to pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.

 

(e)     An involuntary proceeding shall be commenced against Borrower, any
Subsidiary of Borrower, any Obligated Party, or any LNR Property Owner seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official for it or a substantial part of its property, and such
involuntary proceeding shall remain undismissed and unstayed for a period of
sixty (60) days.

 

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(f)     Subject to the applicable contest rights set forth in Sections 7.12 and
8.4, Borrower, any Subsidiary, any Obligated Party or any LNR Property Owner
shall fail to discharge, within a period of thirty (30) days after the
commencement thereof, any attachment, sequestration or similar proceeding or
proceedings involving an aggregate amount in excess of $250,000.00 against any
of its assets or properties.

 

(g)     Borrower, any Subsidiary of Borrower, any Obligated Party or any LNR
Property Owner shall fail to satisfy and discharge, within a period of thirty
(30) days after the rendering thereof, any judgment or judgments against it for
the payment of money in an aggregate amount in excess of $250,000.00.

 

(h)     Borrower, any Subsidiary of Borrower, any Obligated Party or any LNR
Property Owner shall fail to pay when due any principal of or interest on any
Debt in excess of $100,000.00 (other than the Obligations), or the maturity of
any such Debt shall have been accelerated, or any such Debt shall have been
required to be prepaid prior to the stated maturity thereof other than
satisfaction of the associated SPE Mortgage Debt upon the sale of a property, or
any event shall have occurred that permits (or, with the giving of notice or
lapse of time or both, would permit) any holder or holders of such Debt or any
Person acting on behalf of such holder or holders to accelerate the maturity
thereof or require any such prepayment.

 

(i)     This Agreement or any other Loan Document shall for any reason not be,
or cease to be, in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or challenged by
Borrower or any Obligated Party or any of their respective owners, or Borrower
or any Obligated Party shall deny (other than upon satisfaction of the
Obligations) that it has any further liability or obligation under any of the
Loan Documents, or any Lien or security interest created by the Loan Documents
shall for any reason not be, or cease to be, a valid, perfected security
interest in and Lien upon any of the Collateral purported to be covered thereby
with the priority required by the Loan Documents.

 

(j)     The REIT shall fail to maintain its status as a “real estate investment
trust” in compliance with all applicable provisions under the Internal Revenue
Code relating to such status.

 

(k)     A Change of Control shall have occurred.

 

Section 11.2     Remedies Upon Default. If any Event of Default shall occur and
be continuing, the Required Lenders may do any one or more of the following: (a)
declare the outstanding Principal of, accrued and unpaid interest on the Loans
and other Obligations (including the Make Whole Amount) or any part thereof to
be immediately due and payable, and the same shall thereupon become immediately
due and payable, without notice, demand, presentment, notice of dishonor, notice
of acceleration, notice of intent to accelerate, notice of intent to demand,
protest or other formalities of any kind (other than any such notices
specifically required under the Loan Documents), all of which are hereby
expressly waived by Borrower, (b) direct the Collateral Agent to foreclose or
otherwise enforce any Lien granted to Collateral Agent to secure payment and
performance of the Obligations and (c) exercise any and all rights and remedies
afforded by the laws of the State of New York or any other jurisdiction by any
of the Loan Documents, by equity or otherwise; provided, however, that upon the
occurrence of an Event of Default under Section 11.1(d) or Section 11.1(e), the
outstanding Principal of and accrued and unpaid interest on the Loans and the
other Obligations (including the Make Whole Amount) shall become immediately due
and payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower.

 

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Section 11.3     Performance by Collateral Agent. If Borrower shall fail to
perform any covenant, duty or agreement contained in any of the Loan Documents,
Collateral Agent may perform or attempt to perform such covenant, duty or
agreement on behalf of Borrower. In such event, Borrower shall, at the request
of Collateral Agent, promptly pay any amount expended by Collateral Agent in
such performance or attempted performance to Collateral Agent, together with
interest thereon at the Default Rate from the date of such expenditure until
paid. Notwithstanding the foregoing, it is expressly agreed that Collateral
Agent shall not have any liability or responsibility for the performance of (or
a duty to perform) any obligation of Borrower under this Agreement or any other
Loan Document.

 

ARTICLE XII

Miscellaneous

 

Section 12.1     Expenses of Agent and Lenders. Borrower hereby agrees to pay to
Collateral Agent and each Lender on demand (a) all reasonable and documented out
of pocket costs and expenses incurred by Collateral Agent or such Lender in
connection with the preparation, negotiation and execution of this Agreement and
the other Loan Documents and any and all amendments, modifications, renewals,
extensions and supplements thereof and thereto, including, without limitation,
the reasonable fees and expenses of each Lender’s legal counsel, (b) all
reasonable and documented out of pocket costs and expenses incurred by the
Collateral Agent or such Lender in connection with the enforcement of this
Agreement or any other Loan Document, including, without limitation, the
reasonable fees and expenses of each Lender’s legal counsel and (c) all other
reasonable and documented out of pocket costs and expenses incurred by the
Collateral Agent or Lenders in connection with this Agreement or any other Loan
Document, including, without limitation, all costs, expenses, taxes (other than
the Excluded Taxes), assessments, filing fees and other charges levied by any
Governmental Authority or otherwise payable in respect of this Agreement or any
other Loan Document or, to the extent permitted hereunder, in obtaining any
insurance policy, audit or appraisal in respect of the Collateral.

 

Section 12.2     INDEMNIFICATION. BORROWER HEREBY INDEMNIFIES THE COLLATERAL
AGENT AND EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES)
(COLLECTIVELY, “CLAIMS”) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY
OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY,
PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY
OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY
BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED
IN ANY OF THE LOAN DOCUMENTS, OR (D) THE PRESENCE, RELEASE, THREATENED RELEASE,
DISPOSAL, REMOVAL OR CLEANUP OF ANY HAZARDOUS SUBSTANCE LOCATED ON, ABOUT,
WITHIN OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY
SUBSIDIARY OF BORROWER (IN ALL CASES, WHETHER OR NOT CAUSED OR ARISING, IN WHOLE
OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE
INDEMNIFIED PARTY); PROVIDED, HOWEVER, THAT BORROWER’S INDEMNIFICATION
OBLIGATIONS UNDER THIS SECTION 12.2 SHALL NOT APPLY TO THE EXTENT THAT THE
CLAIMS ARISE AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY
INDEMNIFIED PERSON.

 

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Section 12.3     Limitation of Liability. Neither the Collateral Agent, any
Lender nor any Affiliate, officer, director, employee, attorney or agent of the
Collateral Agent or a Lender shall have any liability with respect to, and
Borrower hereby waives, releases and agrees not to sue any of them upon, any
claim for any special, indirect, incidental, exemplary, punitive or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents.

 

Section 12.4     No Waiver; Cumulative Remedies. No failure on the part of the
Collateral Agent or Lenders to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.

 

Section 12.5     Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of Collateral Agent, Lenders and Borrower and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without prior
written consent of Lenders and Collateral Agent.

 

Section 12.6     Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Collateral Agent or a Lender or any closing shall affect the
representations and warranties or the right of Collateral Agent and Lenders to
rely upon them. Without prejudice to the survival of any other obligation of
Borrower hereunder, the obligations of Borrower under Sections 12.1 and 12.2
shall survive repayment of the Notes.

 

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Section 12.7     Recovery of Payments. Borrower agrees that to the extent
Borrower makes a payment or payments to or for the account of any Lender, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or similar
state or federal law, common law or equitable cause (whether as a result of any
demand, settlement, litigation or otherwise), then, to the extent of such
payment or repayment, (a) the Obligations intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
received, and (b) all Liens created under the Loan Documents (to the extent
discharged) shall be revived and continued in full force and effect as if such
payment had not been received. The agreements and obligations in this Section
shall survive repayment of the Loans.

 

Section 12.8     Amendment. This Agreement may be amended, and Borrower may take
any action herein prohibited, or omit to perform any act herein required to be
performed by them, if Borrower shall obtain the prior written consent of the
Required Lenders to such amendment, action or omission to act; provided,
however, that, (a) without the prior written consent of all of the Lenders or,
in the case of the following clauses (i) and (ii), each Lender adversely
affected thereby, no such agreement shall (i) decrease or forgive the Principal
amount of any Loan, or extend the Maturity Date of any Loan, or decrease the
rate of interest on any Loan, or any fees or other amounts payable hereunder,
(ii) effect any waiver, amendment or modification that by its terms changes the
amount, allocation, payment or pro rata sharing of payment on or among the
Loans, or postpones any date fixed by this Agreement or any other Loan Document
for any payment of Principal or interest, (iii) amend the provisions of this
Section 12.8, the definition of the term “Required Lenders” or of the term
“Loan”, or (iv) release Borrower from their obligations under the applicable
Loan Documents and (b) unless also signed by the Collateral Agent, modify the
duties, rights or obligations of the Collateral Agent.

 

Section 12.9     Reserved.

 

Section 12.10    Notices.  (a) All notices and other communications provided for
in this Agreement and the other Loan Documents shall be in writing and may
(subject to paragraph (b) below) be telecopied (faxed), mailed by certified mail
return receipt requested, or delivered by hand or overnight courier service to
the intended recipient at the addresses specified below or at such other address
as shall be designated by any party listed below in a notice to the other
parties listed below given in accordance with this Section.

 

  If to any Credit Party: HC Government Realty Holdings, L.P.     c/o Hale
Partnership Capital Management     390 S. Liberty Street, Suite 100    
Winston-Salem, NC 27101     Attention: Jacqlyn Piscetelli     Email:
jackie@halepartnership.com         If to Hale or Collateral     Agent: c/o Hale
Partnership Capital Management     2115 E 7th Street, Suite 101     Charlotte,
NC 28204     Attention: Steve Hale     Email: steve@halepartnership.com

 

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    With a copy to:          

c/o Hale Partnership Capital Management

3675 Marine Drive

Greenville, NC 27834

Attention: Brad Garner

Email: brad@halepartnership.com

          With a copy (which shall not constitute notice) to:          

Moore & Van Allen PLLC

100 North Tryon Street, Suite 4700

Charlotte, North Carolina 28202

Attention: Ryan Smith

Email: ryansmith@mvalaw.com

 

Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy (fax), subject to
confirmation of receipt, when personally delivered if by hand or overnight
courier service or, in the case of a mailed notice, when duly deposited in the
mails, in each case given or addressed as aforesaid.

 

(b)     The Collateral Agent, Lenders or Borrower may, in its discretion, agree
to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications. Unless
Collateral Agent or a Lender otherwise prescribes, notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgment from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgment), provided, that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient.

 

(c)     Rejection or other refusal to accept a notice, request or communication,
or the inability to deliver a notice, request or communication because of a
changed address of which no notice was given shall be deemed to be receipt of
the notice, request or communication otherwise sent under the terms of this
Section.

 

Section 12.11  Applicable Law; Venue; Service of Process. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York and the applicable laws of the United States of America. All judicial
proceedings brought against Borrower with respect to this Agreement or any of
the other Loan Documents may be brought in any federal or state court of
competent jurisdiction in the Southern District of New York and in any state
court sitting in New York County, New York, and, by execution and delivery of
this Agreement, Borrower accepts, for itself and in connection with its
properties, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement from which no appeal has been
taken or is available. Borrower agrees that service of process upon it may be
made by certified or registered mail, return receipt requested, at its office
specified in this Agreement. Nothing herein or in any of the other Loan
Documents shall affect the right of the Collateral Agent or Lenders to serve
process in any other manner permitted by law or shall limit the right of the
Collateral Agent or any Lender to bring any action or proceeding against
Borrower or with respect to any of its property in courts in other
jurisdictions. Any action or proceeding by Borrower against the Collateral Agent
or Lenders shall be brought only in a federal court of competent jurisdiction in
the Southern District of New York or in any state court sitting in New York
County, New York.

 

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Section 12.12  Counterparts. This Agreement and the other Loan Documents may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery
of an executed signature page of this Agreement and/or any other Loan Document
by a scanned PDF document attached to an e-mail or facsimile transmission shall
be effective as delivery of a manually executed counterpart hereof.

 

Section 12.13  Severability. Any provision of this Agreement held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.

 

Section 12.14  Headings. The headings, captions and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.

 

Section 12.15  Consent to Participations. Lenders shall have the right at any
time and from time to time to sell or transfer one or more participation
interests in the Loans, the Notes and the indebtedness evidenced thereby to one
or more purchasers (“Participants”), whether related or unrelated to such
Lender. Such Lender may provide to any one or more Participants or potential
Participants any information, financial statements, data or knowledge such
Lender may have about Borrower or about any other matter relating to the
Obligations, and Borrower waives any rights to privacy it may have with respect
to such matters, provided that such Participant or potential Participant shall
agree to treat any such information which is identified as confidential with the
same degree of care to maintain the confidentiality of such information as such
person would accord to its own confidential information.  Borrower further
waives any and all notices of sale of participation interests and notices of
repurchases of participation interests. Borrower agrees that the owners of any
participation interests will be considered as the absolute owners of their
interests in the Obligations and will have all the rights granted under the
participation agreements or other agreements governing the sale of their
participation interests, provided that (a) such Participants shall not have any
direct rights under this Agreement or the Loan Documents and (b) Borrower shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement.

 

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Section 12.16  Sale of Obligations and Information Sharing. Borrower agrees that
Lenders may sell, transfer or assign the Obligations, the Loans, the Notes, this
Agreement and/or the Loan Documents to one or more Persons (“Purchasers”);
provided, that the written consent of the Borrower shall be required for any
such sale, transfer or assignment unless (a) such sale, transfer or assignment
is to a Lender or an Affiliate of a Lender or (b) an Event of Default has
occurred and is continuing (such consent not to be unreasonably withheld or
delayed and shall be deemed given if Borrower fails to respond within ten (10)
Business Days of a request for such consent). Borrower agrees that Lenders may
provide any information or knowledge, including, but not limited to financial
statements of Borrower, any Subsidiary or any Obligated Party, which such Lender
may have about Borrower, any Subsidiary or any Obligated Party or about any
matter relating to this Agreement or the Loan Documents, including, but not
limited to any information regarding the Collateral, to (i) any ratings agencies
in connection with any financing such Lender may obtain, (ii) any financing
source or investor of such Lender who agrees to hold such information
confidential in a manger consistent with the terms of this Section 12.16 or
(iii) any of its subsidiaries or Affiliates or their successors, or to any one
or more Purchasers or potential Purchasers, provided that any such Purchaser or
potential Purchaser shall agree to treat any such information which is
identified as confidential with the same degree of care to maintain the
confidentiality of such information as such person would accord to its own
confidential information. Borrower irrevocably waives any and all rights it may
have under any law, rule or regulation which may prohibit such disclosure,
including, but not limited to, any rights of privacy. A transferring Lender
shall give prior notice to Borrower of any sale, transfer or assignment of the
Obligations, the Loans, the Notes, this Agreement and/or the Loan Documents
pursuant to this Section 12.16.

 

Section 12.17  USA Patriot Act. Each 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”), it 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
such Lender to identify Borrower in accordance with the Act.

 

Section 12.18  Anti-Terrorism Law. None of Borrower, any Subsidiary of Borrower
or any Obligated Party is in material violation of any requirement of any law
relating to terrorism or money laundering (“Anti-Terrorism Laws”), including
Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001
(the “Executive Order”), and the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56.

 

(b)     None of Borrower, any Subsidiary of Borrower or any Obligated Party is
any of the following: (i) a Person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order, (ii) 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, the Executive Order,
(iii) a Person with which Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (iv) a Person that
commits, threatens or conspires to commit or supports “terrorism” as defined in
the Executive Order, or (v) a Person that is named as a “specially designated
national and blocked Person” on the most current list published by OFAC at its
official website or any replacement website or other replacement official
publication of such list.

 

Section 12.19  Time of the Essence. The parties agree that time shall be of the
essence in the performance of all of the terms and conditions of this Agreement
and the Loan Documents.

 

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Section 12.20  WAIVER OF TRIAL BY JURY. BORROWER, COLLATERAL AGENT AND EACH
LENDER HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON
CONTRACT, TORT, OR OTHERWISE) BETWEEN BORROWER, COLLATERAL AGENT AND EACH LENDER
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR ANY RELATIONSHIP BETWEEN BORROWER, COLLATERAL AGENT AND EACH LENDER. THIS
PROVISION IS A MATERIAL INDUCEMENT TO COLLATERAL AGENT AND EACH LENDER TO
PROVIDE THE FINANCING EVIDENCED BY THIS AGREEMENT AND THE LOAN DOCUMENTS.

 

Section 12.21  ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

 

 

ARTICLE XIII

COLLATERAL AGENCY PROVISIONS

 

Section 13.1     Appointment.

 

Each of the Lenders hereby irrevocably designates and appoints HCM Agency, LLC
(and its permitted successors and assigns) as the Collateral Agent of such
Lender (or the Lenders represented by it) under this Agreement and the other
Loan Documents for the term hereof (and HCM Agency, LLC hereby accepts such
appointment) and each such Lender irrevocably authorizes the Collateral Agent to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Collateral Agent by the terms of this Agreement and
the other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or the other Loan Documents, the Collateral Agent shall not have
any duties or responsibilities, except those expressly set forth herein and
therein, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Collateral Agent. Any reference to the
Collateral Agent in this Agreement or the other Loan Documents shall be deemed
to refer to the Collateral Agent solely in its capacity as Collateral Agent and
not in its capacity, if any, as a Lender.

 

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Section 13.2     Delegation of Duties.

 

The Collateral Agent may execute any of its respective duties under this
Agreement or the other Loan Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Collateral Agent shall not be responsible to Lenders for the
negligence or misconduct of any agents or attorneys-in-fact selected by the
Collateral Agent with reasonable care.

 

Section 13.3     Exculpatory Provisions.

 

Neither the Collateral Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (i) liable to
Lenders for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement (except for actions occasioned
by its or such Person’s own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by Borrower or any of its
Subsidiaries or any officer thereof contained in this Agreement, the other Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Collateral Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of Borrower or any of its
Subsidiaries to perform its obligations hereunder or thereunder. The Collateral
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or of any other Loan Document, or to inspect the
properties, books or records of Borrower or any of its Subsidiaries.

 

Section 13.4     Reliance by Collateral Agent.

 

The Collateral Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Credit Parties), independent accountants and other
experts selected by the Collateral Agent. The Collateral Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless the
Collateral Agent shall have actual notice of any transferee. The Collateral
Agent shall be fully justified in failing or refusing to take any action under
this Agreement and the other Loan Documents unless it shall first receive such
advice or concurrence of the Required Lenders (or, when expressly required
hereby, all the Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action except for its own gross negligence or willful misconduct. The
Collateral Agent shall in all cases be fully protected from Lenders in acting,
or in refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Required Lenders (or, when expressly
required hereby, all the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future Lenders.

 

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Section 13.5     Notices of Default.

 

The Collateral Agent shall take such action with respect to an Event of Default
as shall be reasonably directed by the Required Lenders solely with respect to
any Collateral; provided that unless and until the Collateral Agent shall have
received such directions, the Collateral Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable in the best interests of the
Lenders, except to the extent that other provisions of this Agreement or the
other Loan Documents expressly require that any such action be taken or not be
taken only with the consent and authorization or the request of the Lenders or
Required Lenders, as applicable.

 

Section 13.6     Non-Reliance on the Collateral Agent and Other Lenders.

 

Each of the Lenders expressly acknowledges that neither the Collateral Agent nor
any of its respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representations or warranties to it and
that no act by the Collateral Agent hereinafter taken, including any review of
the affairs of Borrower, shall be deemed to constitute any representation or
warranty by the Collateral Agent to any Lender. Each of the Lenders represents
that it has made and will continue to make, independently and without reliance
upon the Collateral Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Credit Parties. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Collateral Agent hereunder or under the other Loan Documents, the Collateral
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Credit Parties which
may come into the possession of the Collateral Agent or any of its respective
officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates.

 

Section 13.7     Indemnification.

 

Each of the Lenders hereby agrees to indemnify the Collateral Agent in its
capacity as such (to the extent not reimbursed by Borrower and without limiting
the obligation of Borrower to do so), ratably according to the respective
amounts of their Loans, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Loans) be imposed on,
incurred by or asserted against the Collateral Agent in any way relating to or
arising out of this Agreement, the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Collateral
Agent under or in connection with any of the foregoing; provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements to the extent they result from the Collateral Agent’s gross
negligence or willful misconduct. The agreements in this Section 13.7 shall
survive the payment of the Loans and all other amounts payable hereunder and the
termination of this Agreement and the other Loan Documents.

 

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Section 13.8     The Collateral Agent in Its Individual Capacity.

 

The Collateral Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Credit Parties as though the Collateral Agent were not a Collateral Agent
hereunder. With respect to any Loan made by it, the Collateral Agent shall have
the same rights and powers under this Agreement and the other Loan Documents as
any Lender and may exercise the same as though it were not a Collateral Agent,
and the term “Lenders” shall include the Collateral Agent in its individual
capacity.

 

Section 13.9     Resignation of the Collateral Agent; Successor Collateral
Agent.

 

The Collateral Agent may resign as Collateral Agent at any time by giving
thirty (30) days advance notice thereof to the Lenders and Borrower and,
thereafter, the retiring Collateral Agent shall be discharged from its duties
and obligations hereunder. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, subject to the approval of Borrower (so
long as no Event of Default has occurred and is continuing; such approval not to
be unreasonably withheld or delayed), to appoint a successor Collateral Agent.
If no successor Collateral Agent shall have been so appointed by the Required
Lenders, been approved (so long as no Event of Default has occurred and is
continuing) by Borrower or have accepted such appointment within fifteen (15)
days after the Collateral Agent’s giving of notice of resignation, then the
Collateral Agent shall use its commercially reasonable efforts to appoint a
successor Collateral Agent reasonably acceptable to Borrower (so long as no
Unmatured Event of Default or Event of Default has occurred and is continuing),
on behalf of the Lenders. Upon the acceptance of any appointment as Collateral
Agent hereunder by a successor Collateral Agent, such successor Collateral Agent
shall thereupon succeed to and become vested with all rights, powers, privileges
and duties of the retiring Collateral Agent. After any retiring Collateral
Agent’s resignation hereunder as Collateral Agent, the provisions of this
Section 13.9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Collateral Agent. If
no successor has accepted appointment as Collateral Agent by the date which is
thirty (30) days following a retiring Collateral Agent’s notice of resignation,
the retiring Collateral Agent’s resignation shall nevertheless thereupon become
effective and the Required Lenders shall perform all of the duties of the
Collateral Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

 

Section 13.10     Release of Collateral. Lenders hereby irrevocably authorize
Collateral Agent, at its option and in its reasonable discretion, to release any
Lien granted to or held by Collateral Agent upon any Collateral (a) upon Payment
in Full; (b) constituting property being sold or disposed of in compliance with
the provisions of this Agreement; or (c) if approved, authorized or ratified in
writing by the Required Lenders. The Collateral Agent shall promptly, upon the
written request of the Borrower, execute and deliver to the Credit Parties such
documents as may be necessary to evidence the release of any Lien granted to or
held by the Collateral Agent upon any Collateral (a) upon Payment in Full, (b)
which constitutes property sold or to be sold or disposed of as part of or in
connection with any disposition permitted in accordance with the terms of this
Agreement, (c) which constitutes property in which a Credit Party owned no
interest at the time the Lien was granted or at any time thereafter or (d) if
approved, authorized or ratified in writing by the Required Lenders, or all the
Lenders, as the case may be.

 

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Section 13.11     Reimbursement by Lenders.

 

To the extent that Borrower for any reason fail to indefeasibly pay any amount
required under Section 12.1 or 12.2 to be paid by it to the Collateral Agent (or
any sub-agent thereof), or any officer, director, employee, attorney or agent
(each a “Related Party”) of any of the foregoing, each Lender severally agrees
to pay to the Collateral Agent (or any such sub-agent) or such Related Party, as
the case may be, such Lender’s applicable percentage thereof (determined as of
the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Collateral Agent (or any such
sub-agent) in its capacity as such, or against any Related Party of any of the
foregoing acting for the Collateral Agent (or any such sub-agent) in connection
with such capacity. For the purposes of this Section 13.11, the “applicable
percentage” of a Lender shall be the percentage of the total aggregate principal
amount of the Loans held by such Lender at such time.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

 

BORROWER:

 

HC GOVERNMENT REALTY HOLDINGS, L.P.

 

 

By: HC Government Realty Trust, Inc., its general

partner

          By: /s/ Robert R. Kaplan Jr.                                     
Name: Robert R. Kaplan Jr.   Title:   President

 

 

 

[Signature Page to Loan Agreement]

 

 

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COLLATERAL AGENT AND LENDERS:

 

HCM AGENCY, LLC,
as Collateral Agent

 

By: /s/ Steven A. Hale II                                 

Name:  Steven A. Hale II
Title: President

 

 

 

THE VANDERBILT UNIVERSITY,

as a Lender

 

By:      Hale Partnership Capital Management, LLC,

            its investment manager

 

By: /s/ Steven A. Hale II                                

Name: Steven A. Hale II

Title: Manager

 

 

HG HOLDINGS, INC.

 

 

By: /s/ Steven A. Hale II                                

Name: Steven A. Hale II

Title: Chief Executive Officer

 

 

TRADE CAPITAL, LLC, as a Lender

 

 

By:      /s/ William G. Garner                          

Name: William G. Garner

Title: Manager

 

 

WILLIAMS FAMILY HEIRS, LLC, as a Lender

 

 

By:      /s/ William G. Garner                          

Name: William G. Garner

Title: Manager

 

 

 

[Signature Page to Loan Agreement]

 

 

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AMICUS INVESTMENTS, LLC, as a Lender

 

By:      /s/ William G. Garner                            

Name: William G. Garner

Title:   Manager

 

 

FDT, LLC, as a Lender

 

By:      /s/ Joshua W. Clark                               

Name: Joshua W. Clark

Title:   Manager

 

 

TAWJE, LLC, as a Lender

 

By:      /s/ Edwin L. Clark, Jr.                            

Name: Edwin L. Clark, Jr.

Title:   Manager

 

 

THE FOURSQUARE FOUNDATION, as a Lender

 

By: /s/ Ron Thigpenn                                       

Name: Ron Thigpenn

Title:   Chief Financial Officer

 

By: /s/ Ralph Devin                                          

Name: Ralph Devin

Title:   Controller

 

 

INTERNATIONAL CHURCH OF THE

FOURSQUARE GOSPEL, as a Lender

 

By: /s/ Ron Thigpenn                                      

Name: Ron Thigpenn

Title:   Chief Financial Officer

 

By: /s/ Ralph Devin                                         

Name: Ralph Devin

Title:   Controller

 

 

 

[Signature Page to Loan Agreement]

 

 

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Annex A

 

 

 

Lender

Closing Date Term Loan

The Vanderbilt University

$5,000,000

HG Holdings, Inc.

$2,000,000

The Foursquare Foundation

$2,125,000

International Church of the Foursquare Gospel

$375,000

Trade Capital, LLC

$250,000

Williams Family Heirs, LLC

$250,000

TAWJE, LLC

$250,000

Amicus Investments, LLC

$125,000

FDT, LLC

$125,000

Total

$10,500,000