MEZZANINE LOAN AGREEMENT

 

DATED AS OF MAY 7, 2012

 

among

 

OXFORD SUMMIT APARTMENTS II LLC

 

and

 

SUMMIT CROSSING MEZZANINE LENDING, LLC

 

 

 

 

Mezzanine LOAN AGREEMENT

 

THIS MEZZANINE LOAN AGREEMENT (this “Agreement”) is made as of May 7, 2012, by
and among OXFORD SUMMIT APARTMENTS II LLC, a Georgia limited liability company
(“Borrower”), having its principal place of business at c/o One Overton Park,
3625 Cumberland Blvd., Suite 500, Atlanta, Georgia 30339, Attn: W. Daniel Faulk,
Jr., and SUMMIT CROSSING MEZZANINE LENDING, LLC, a Georgia limited liability
company (the “Lender”).

 

RECITALS

 

WHEREAS, Borrower has requested that Lender provide a loan to Borrower; and

 

WHEREAS, Lender is willing to provide such loan to Borrower on the terms and
conditions set forth herein;

 

NOW, THEREFORE, in consideration of the terms and conditions herein, and of any
loans, advances, or extensions of credit now or hereafter made to or for the
benefit of Borrower by Lender, the parties hereto hereby covenant and agree as
follows:

 

§1.          DEFINITIONS AND RULES OF INTERPRETATION.

 

§1.1        Definitions. The following terms shall have the meanings set forth
in this §l or elsewhere in the provisions of this Agreement referred to below:

 

Acknowledgment. The Acknowledgment dated as of even date herewith executed by
Borrower in favor of Lender as the same may be modified, amended or restated.

 

Affiliate. An Affiliate, as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the stock, shares,
voting trust certificates, beneficial interests, partnership interests, member
interests or other interests having voting power for the election of directors
of such Person or otherwise to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise, or (b) the ownership of (i) a general partnership
interest, (ii) a managing member’s interest in a limited liability company or
(iii) a limited partnership interest or preferred stock (or other ownership
interest) representing ten percent (10%) or more of the outstanding limited
partnership interests, preferred stock or other ownership interests of such
Person.

 

Agreement. This Mezzanine Loan Agreement, including the Schedules and Exhibits
hereto.

 

Approved Affiliate Fees. The fees which Borrower intends to pay to certain
affiliates in connection with the development and construction of the Project
which are described on Schedule 1 attached hereto and made a part hereof,
including without limitation, the Construction Fee and the Development Fee.

 

 

 

 

Architect. The Person employed by Borrower pursuant to the Design Professional’s
Contract to prepare the Plans for the Project and to supervise the construction
thereof, which party may not be affiliated with Borrower, any Guarantor or
Assignor. The Architect may not be replaced without Lender’s prior written
consent to be determined in Lender’s reasonable discretion.

 

Assignment of Interests. The Assignment of Interests dated as of even date
herewith from the Assignor to Lender, as the same may be modified, amended or
restated from time to time, pursuant to which Assignor has assigned to Lender a
security interest in the interests of Assignor in Borrower.

 

Assignor. Oxford Summit Development II LLC, a Georgia limited liability company,
its successors and assigns.

 

Assignor Organizational Agreements. Collectively, those certain agreements of
Assignor described in Schedule 6.33 attached hereto.

 

Authorized Officer. As to any Person, the chief financial or chief accounting
officer, treasurer or assistant treasurer of such Person.

 

Balance Sheet Date. On or about March 31, 2012.

 

Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or any
successor statute thereto.

 

Basic Agreements. See §6.24(a).

 

Borrower. As defined in the preamble hereto.

 

Borrower Organizational Agreements. Collectively, those certain agreements of
Borrower described on Schedule 6.33 attached hereto.

 

Borrower’s Minimum Equity Investment. See §9.1.

 

Building. All of the buildings and related structures and improvements now or
hereafter located on the Land.

 

Business Day. Any day, other than Saturday and Sunday, on which banking
institutions in Atlanta, Georgia are open for the transaction of banking
business.

 

Capitalized Lease. As applied to any Person, any lease of any Property (whether
real, personal or mixed) by that Person as lessee or obligor which, in
accordance with generally accepted accounting principles, is required to be
capitalized on the balance sheet of that Person.

 

CERCLA. See §6.18(a).

 

Change of Control. The occurrence of any of the following events: (a) Assignor
fails to directly own, free of any lien, encumbrance or claim, one hundred
percent (100%) of the economic and Voting Interests of Borrower; or (b) Faulk
fails to directly or indirectly manage and control Borrower and Assignor and the
activities of Borrower and Assignor, provided, that the death or incapacity of
Faulk shall not constitute a “Change of Control” unless a competent and
experienced successor shall not be approved by Lender within thirty (30) days of
the occurrence of such event, such approval not to be unreasonably withheld,
conditioned or delayed; or (c) Faulk (or trusts controlled by Faulk) and/or
Denny (or trusts controlled by Denny), fails to directly or indirectly own, free
of any lien, encumbrance or claim, at least fifty-one percent (51%) of the
economic and Voting Interests of Assignor and fails to manage and control the
activities of Assignor, provided, that the death or incapacity of Faulk or Denny
shall not constitute a “Change of Control” unless a competent and experienced
successor shall not be approved by Lender within thirty (30) days of the
occurrence of such event, such approval not to be unreasonably withheld,
conditioned or delayed; or (d) Developer fails to be the developer of the
Project.

 

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Civil Engineer. The Person employed by Borrower pursuant to the Civil Engineer’s
Contract to provide civil engineering services for the Project, which party may
not be affiliated with Borrower or Assignor. The Civil Engineer may not be
replaced without Lender’s prior written consent.

 

Civil Engineer’s Contract. The agreement between Civil Engineer and Borrower
relating to civil engineering for the Project.

 

Closing Date. The first date on which all of the conditions set forth in §10
have been satisfied or waived in writing.

 

Code. The Internal Revenue Code of 1986, as amended and in effect from time to
time, and all regulations and formal guidance thereunder.

 

Collateral. All of the property, rights and interests of Borrower and Assignor
which are or are intended to be subject to the security interests, security
title and liens created by the Security Documents.

 

Collateral Property. The Land and the Project.

 

Completion Date. May 5, 2014.

 

Construction Contract. See §10.1(w).

 

Construction Fee. The fee to be paid to the General Contractor under the
Construction Contract from the $374,271.00 contractor’s fee line item set forth
on the Project Budget, provided, however, that such fee shall be deferred and
not paid to the General Contractor until the earlier of (i) payment in full of
the Loan, or (ii) the acquisition of the Project by Lender pursuant to the
Purchase Option Agreement.

 

Construction Finish Standards. The minimum quality of materials, finishes,
amenities, features and personal property, including floor coverings, wall
coverings, electrical/data/security systems, lighting plans, bathroom fixtures
and countertops, cabinetry and appliances for the Project, which shall be
subject to Lender’s review and approval, not to be unreasonably withheld.

 

Construction Schedule. See §10.1(o).

 

Default. See §12.1.

 

Denny. Richard A. Denny, III.

 

Design Professional’s Contract. The agreement between Architect and Borrower
relating to the preparation of the Plans and the supervision of construction for
the Project.

 

Developer. Oxford Properties, LLC

 

Development Agreement. Any property management, leasing, development services or
other similar agreement respecting the development, marketing, sale, leasing,
management or operation of the Project entered into between Borrower, Assignor,
any Guarantor or their respective Affiliates (as the case may be) and any other
Person, whether presently existing or entered into after the date of this
Agreement, including, without limitation that certain Development Agreement
dated as of May 7, 2012 between Borrower and Developer.

 

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Development Fee. The fee to be paid to Developer under the Development Agreement
from the $739,481.00 development fee line item set forth on the Project Budget,
provided, however, that such fee shall be paid in accordance with the terms of
the Development Agreement.

 

Distribution. With respect to any Person, the declaration or payment of any
cash, cash flow, dividend or distribution on or in respect of any shares of any
class of capital stock, partnership interest, membership interest or other
beneficial interest of such Person other than that portion of dividends or
distributions payable solely in equity securities of such Person; the purchase,
redemption, exchange or other retirement of any shares of any class of capital
stock, partnership interest, membership interest or other beneficial interest of
such Person, directly or indirectly through a Subsidiary of such Person or
otherwise; the return of capital by such Person to its shareholders, partners,
members or other owners as such; or any other distribution on or in respect of
any shares of any class of capital stock, member’s interest or other beneficial
interest of such Person.

 

Dollars or $. Dollars in lawful currency of the United States of America.

 

Drawdown Date. The date on which any Loan is made or is to be made.

 

Embargoed Person. See §6.35 hereof.

 

Employee Benefit Plan. Any employee benefit plan within the meaning of §3(3) of
ERISA maintained or contributed to by Borrower, any Guarantor or any ERISA
Affiliate, other than a Multiemployer Plan.

 

Environmental Laws. See §6.18(a).

 

ERISA. The Employee Retirement Income Security Act of 1974, as amended and in
effect from time to time, and all regulations and formal guidance issued
thereunder.

 

ERISA Affiliate. Any Person which is treated as a single employer with Borrower
or any Guarantor under §414 of the Code or §4001 of ERISA, and any predecessor
entity of any of them.

 

ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension
Plan within the meaning of §4043 of ERISA and the regulations promulgated
thereunder as to which the requirement of notice has not been waived or any
other event with respect to which Borrower or an ERISA Affiliate could have
liability under §4062(e) or §4063 of ERISA.

 

Event of Default. See §12.1.

 

Exit Fee. See §3.5.

 

Faulk. W. Daniel Faulk, Jr., an individual resident of the state of Georgia.

 

General Contractor. The persons or firms employed by Borrower pursuant to the
Construction Contract to be responsible for construction of the Project in
accordance with the Plans. The General Contractor may not be replaced without
Lender’s prior written consent.

 

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generally accepted accounting principles. Principles that are (a) consistent
with the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, as in effect from time to time and (b) consistently
applied with past financial statements of the Person adopting the same
principles; provided that a certified public accountant would, insofar as the
use of such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.

 

Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of
§3(2) of ERISA maintained or contributed to by Borrower, any Guarantor or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.

 

Guarantors. Collectively, W. Daniel Faulk, Jr., an individual resident of the
State of Georgia and Richard A. Denny, III, an individual resident of the State
of Georgia and any other guarantor of the Loan from time to time.

 

Guaranty. Collectively, the Unconditional Guaranty of Completion, the
Unconditional Guaranty of Payment and Performance (Faulk), the Unconditional
Guaranty of Payment and Performance (Denny) and the Guaranty of Recourse
Obligations, each dated of even date herewith made by Guarantors in favor of
Lender, as the same may be modified, amended or restated.

 

Hazardous Substances. See §6.18(b).

 

Indebtedness. All obligations, contingent and otherwise, that in accordance with
generally accepted accounting principles should be classified upon the obligor’s
balance sheet as liabilities, or to which reference should be made by footnotes
thereto, but without any double counting, including in any event and whether or
not so classified: (a) all debt and similar monetary obligations, whether direct
or indirect (including, without limitation, any obligations evidenced by bonds,
debentures, notes or similar debt instruments and all subordinated debt); (b)
all liabilities secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; (c) all
guarantees, endorsements and other contingent obligations whether direct or
indirect in respect of indebtedness of others, including any obligation to
supply funds to or in any manner to invest directly or indirectly in a Person,
to purchase indebtedness, or to assure the owner of indebtedness against loss
through an agreement to purchase goods, supplies or services for the purpose of
enabling the debtor to make payment of the indebtedness held by such owner or
otherwise; and the obligation to reimburse the issuer in respect of any letter
of credit; (d) any obligation as a lessee or obligor under a Capitalized Lease;
(e) all subordinated debt; (g) all indebtedness, obligations or other
liabilities under or with respect to (i) interest rate swap, collar, cup or
similar agreements providing interest rate protection and (ii) foreign currency
exchange agreements; and (f) all obligations, contingent or deferred or
otherwise, of any Person, including, without limitation, any such obligations as
an account party under acceptance, letter of credit or similar facilities
including, without limitation, obligations to reimburse the issuer in respect of
a letter of credit except for contingent obligations (but excluding any
guarantees or similar obligations) that are not material and are incurred in the
ordinary course of business in connection with the acquisition or obtaining
commitments for financing of real estate.

 

Indemnity Agreement. The Indemnity Agreement Regarding Hazardous Materials,
dated as of even date herewith, made by Borrower and Guarantors in favor of
Lender, as the same may be modified, amended or restated, pursuant to which
Borrower and Guarantors have agreed to indemnify Lender with respect to
Hazardous Substances and Environmental Laws, such Indemnity Agreement to be in
form and substance satisfactory to Lender.

 

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Institutional Lender. One or more of the following: (i) a bank, savings and loan
association, investment bank, insurance company, real estate investment trust,
financial services company, including, without limitation, Atlantic Capital,
(ii) a trustee or similar Person in connection with a securitization of a
mortgage loan or a nationally recognized conduit, so long as the trustee or
similar Person is an entity that otherwise would be Institutional Lender, which,
in each case of clauses (i) or (ii) of this definition, is regularly engaged in
the business of making or owning commercial loans (including commercial real
estate loans), and the servicer and special servicer, if any, are approved by
S&P and Moody’s to act as servicers and special servicers of commercial mortgage
loan securitizations rated by such rating agencies, or (v) any other entity
approved in writing by Lender, provided, however, that in no event shall an
Institutional Lender be an affiliate of Borrower, Assignor or any Guarantor.

 

Intercreditor Agreement. An intercreditor agreement in form and substance
satisfactory to Lender in its sole and absolute discretion which provides for
the relative rights and priorities of Lender and Mortgage Lender under the
Mezzanine Loan Documents and the Mortgage Loan Documents, respectively, as
modified, amended, restated and replaced from time to time.

 

Interest Payment Date. The fifth Business Day of each calendar month during the
term of the Loan.

 

Interest Rate. See Section 2.3.

 

Investments. With respect to any Person, all shares of capital stock, evidences
of Indebtedness and other securities or other ownership interests issued by any
other Person, all loans, advances, or extensions of credit to, or contributions
to the capital of, any other Person, all purchases of the securities or other
ownership interests or business or integral part of the business of any other
Person and commitments and options to make such purchases, all interests in real
property, and all other investments; provided, however, that the term
“Investment” shall not include (i) equipment, inventory and other tangible
personal property acquired in the ordinary course of business, or (ii) current
trade and customer accounts receivable for services rendered in the ordinary
course of business and payable in accordance with customary trade terms.

 

Land. That certain Real Property located in Forsyth County, Cumming, Georgia, as
more particularly described on Exhibit “B” hereto.

 

Leases. Leases, license agreements and other occupancy agreements, whether
written or oral, relating to the use or occupation of space at the Collateral
Property.

 

Lender. Summit Crossing Mezzanine Lending, LLC, a Delaware limited liability
company.

 

Lender’s Office. Lender’s office located at c/o Preferred Apartment Communities,
Inc. One Overton Park, 3625 Cumberland Blvd., Suite 400, Atlanta, Georgia 30339,
Attn: Leonard A. Silverstein, Esq., or at such other location as Lender may
designate from time to time by notice to Borrower.

 

Lender’s Special Counsel. McKenna Long & Aldridge LLP or such other counsel as
may be approved by Lender.

 

Lien. See §8.2.

 

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Loan. See §2.1.

 

Loan Documents. This Agreement, the Note, the Security Documents, the Guaranty,
the Acknowledgment and all other documents, instruments or agreements now or
hereafter executed or delivered by or on behalf of Borrower, the Guarantors or
Assignor in connection with the Loan.

 

Material Adverse Effect. Any effect in the business, assets, operations, results
of operations or financial or other condition of the Collateral, the Collateral
Property or of Borrower, any Guarantor or Assignor, which individually or in the
aggregate materially and adversely affects or which could reasonably be expected
to materially and adversely affect (a) the ability of Borrower, Assignor or any
Guarantor to pay or perform its respective obligations under the Loan Documents
in accordance with the terms thereof, (b) the validity or enforceability of any
of the Loan Documents, or (c) the business or condition of Borrower, any
Guarantor or the Project, excluding, however, any asset impairments (other than
with respect to the Collateral and the Collateral Property) that have been
booked prior to the date hereof and which have been disclosed in writing to
Lender).

 

Material Project Change. See §9.2.

 

Maturity Date. May 8, 2017, or such earlier date on which the Loan shall become
due and payable pursuant to the terms hereof.

 

Minor Amendments. See §8.13.

 

Moody’s. Moody’s Investors Service, Inc. and any successor thereto.

 

Mortgage Lender. Atlantic Capital Bank, its successor and assigns, as holder of
the Mortgage Loan.

 

Mortgage Loan. An acquisition, development and construction loan in the
principal amount not to exceed $12,384,000.00 from Mortgage Lender which is
secured by a first mortgage encumbering the Project, as modified and amended
from time to time.

 

Mortgage Loan Documents. The documents, instruments and agreements evidencing,
securing or otherwise relating to the Mortgage Loan, as modified and amended
from time to time. In the event that the Mortgage Loan Documents evidencing the
Mortgage Loan shall terminate or otherwise be of no force or effect and have not
been replaced pursuant to loan documents evidencing an approved Mortgage Loan,
then the obligations of Borrower hereunder to perform any covenants under any of
such Mortgage Loan Documents shall survive notwithstanding such termination.
Upon the request of Lender, Borrower shall enter into such amendments to the
Loan Documents as Lender may reasonably request to incorporate some or all of
the representations, warranties and covenants of the Mortgage Loan Documents
into the Loan Documents.

 

Multiemployer Plan. Any multiemployer plan within the meaning of §3(37) or
§4001(a)(3) of ERISA or §414(f) of the Code maintained or contributed to by
Borrower, any Guarantor or any ERISA Affiliate.

 

Note. See §2.2.

 

Notice. See §19.

 

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Obligations. All indebtedness, obligations and liabilities of Borrower, Assignor
and Guarantors to Lender under this Agreement or any of the other Loan Documents
or in respect of any of the Loan or the Note, or other instruments at any time
evidencing any of the foregoing, whether existing on the date of this Agreement
or arising or incurred hereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise.

 

Organizational Documents. Collectively, the Assignor Organizational Agreements
and the Borrower Organizational Agreements.

 

Outstanding. With respect to the Loan, the aggregate unpaid principal thereof as
of any date of determination.

 

Patriot Act. The Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, as the same may
be amended from time to time, and corresponding provisions of future laws.

 

PBGC. The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any
successor entity or entities having similar responsibilities.

 

Permits. All building permits, certificates of occupancy and other governmental
or quasi-governmental permits, licenses and authorizations, including, without
limitation, all state, county and local occupancy certificates, and other
licenses, in any way applicable to the Collateral Property, or any part thereof
or to the development, construction, ownership, use, occupancy, operation,
maintenance, and leasing of the Collateral Property.

 

Permitted Delay. Any delay in construction caused by strike, lockout, war,
terrorism, act of God, fire or other casualty, unusually adverse weather
conditions, inability to obtain labor or materials or governmental restriction
or other act or thing (except Borrower’s lack of funds) beyond the reasonable
control of Borrower or Contractor which in fact materially interferes with the
ability of Borrower or Contractor to complete the Project, and provided Borrower
has notified Lender (1) within ten (10) days of the onset of any such delay
specifying the event which may result in such delay and (2) within ten (10) days
of the termination of any such delay, and provided further the aggregate
extension periods for Permitted Delays shall in no event exceed the period of
delay permitted under the Mortgage Loan Documents and the Construction Contract.
A delay otherwise constituting a Permitted Delay shall not be a Permitted Delay
unless such delay has been consented to by, or will not affect the obligations
of, the sureties under any bonds.

 

Permitted Equity Transfers. Transfers of direct or indirect interests in
Assignor, provided that such transfers do not result in a Change of Control.

 

Permitted Indebtedness. Indebtedness permitted by §8.1.

 

Permitted Liens. Liens, security interests and other encumbrances permitted by
§8.2.

 

Person. Any individual, corporation, limited liability company, partnership,
trust, unincorporated association, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.

 

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Plans. The final plans and specifications, including all drawings and a
specifications project manual, for the construction of the Project, including
the Construction Finish Standards, prepared by the Architect (and, within the
scope of its contract with Borrower, the Civil Engineer), and approved by
Lender, and upon which all building permits were or will be issued for
construction of the Project. The Construction Finish Standards shall be deemed
part of the Plans. Changes to the Plans made in compliance with Section 9.2 of
this Agreement will also be included in the term “Plans”.

 

Project. The multi-family Class “A” apartment project to be constructed on the
Land pursuant to and in accordance with the Plans and the Project Budget having
not less than 140 units, and all other improvements to be made to the Land, and
all fixtures, machinery, furnishings, equipment, supplies, and all other
property of any kind installed or used at the Land.

 

Project Budget. The Project budget as approved from time to time by Lender
pursuant to Section 2.8 of this Agreement, the initial form of which is attached
hereto as Exhibit “C” to this Agreement, showing all sources of funds to be used
(including Borrower’s Minimum Equity Investment), and all costs and expenses to
be incurred, in connection with the Project during the term of the Loan. The
line items set forth in the Schedule of Values attached as Exhibit “C” to the
Construction Contract shall be considered part of the Project Budget for
purposes of this Agreement and the other Loan Documents and shall be used in
lieu of the “Hard Cost” line item in the Project Budget.

 

Project Change. See §9.2.

 

Project Costs All costs and expenses of any kind which have been or will be
incurred in connection with the Project, including, without limitation, the
acquisition of the Land and the construction, equipping, operation, financing,
marketing, sale, leasing, and maintenance of the Project through the Maturity
Date.

 

Project Documents. Any contract, agreement, warranty, service agreements,
maintenance contracts or other agreement entered into by Borrower, any Assignor,
any Guarantor or any Affiliate of such parties providing for the design,
development, engineering, construction, provisioning, equipping, furnishing,
use, occupancy, repair and service of the Project, including, without
limitation, the Design Professional’s Contract, the Civil Engineer’s Contract,
the Construction Contract, and the Plans, and each exhibit thereto and any
amendments and attachments to any of the foregoing, whether presently existing
or entered into after the date hereof.

 

Purchase Option Agreement. That certain Purchase Option Agreement dated as of
even date herewith by Borrower in favor of Lender, as modified and amended from
time to time, that provides Lender or an affiliate of Lender with an option (but
not any obligation) to acquire the Project commencing on the first day of the
29th month following Closing Date through and including the last day of the 33th
month following the Closing Date subject to the terms set forth therein.

 

Qualified Leases. Executed and delivered written Leases on forms approved by the
Lender or otherwise permitted by the Loan Documents, for space in the Project
with tenants who have commenced the payment of rent and are not in material
default in the payment of rent, which Leases comply with the conditions and
requirements for Leases as set forth in Section 7.22 of this Agreement.

 

Record. The record, including computer records, maintained by Lender with
respect to any Loan referred to in the Note.

 

Release. See §6.18(c)(iii).

 

S&P. Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto

 

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Security Documents. The Assignments of Interests, the Indemnity Agreement and
any further collateral assignment for the benefit of Lender, including, without
limitation, UCC-1 financing statements executed and delivered in connection
therewith.

 

State. A State of the United States of America.

 

Subsidiary. As to any Person means a corporation, association, partnership,
joint venture, limited liability company, trust or other business entity of
which the designated parent shall at any time own directly or indirectly through
a Subsidiary or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding Voting Interests.

 

Survey. An instrument survey of the Collateral Property prepared by a registered
land surveyor which shall show the location of all buildings, structures,
easements and utility lines on such property, shall be sufficient to remove the
standard survey exception from the Title Policy, shall show that all buildings
and structures are within the lot lines of the Collateral Property and shall not
show any encroachments by others (or to the extent any encroachments are shown,
such encroachments shall be acceptable to Lender in its sole discretion), shall
show rights of way, adjoining sites, establish building lines and street lines,
the distance to, and names of the nearest intersecting streets and such other
details as Lender may reasonably require; shall show the zoning district or
districts in which the Collateral Property is located and shall show whether or
not the Collateral Property is located in a flood hazard district as established
by the Federal Emergency Management Agency or any successor agency or is located
in any flood plain, flood hazard or wetland protection district established
under federal, state or local law and shall otherwise be in form and substance
reasonably satisfactory to Lender.

 

Surveyor Certification. A certificate executed by the surveyor who prepared the
Survey, dated as of a recent date and containing such information relating to
the Collateral Property as Lender or the Title Insurance Company may reasonably
require, such certificate to be reasonably satisfactory to Lender in form and
substance.

 

Title Insurance Company. Chicago Title Insurance Company or another title
insurance company or companies reasonably approved by Lender.

 

Title Policy. With respect to the Collateral Property, an ALTA standard form
owner’s title insurance policy (or, if such form is not available, an equivalent
form of or legally promulgated form of owner’s title insurance policy reasonably
acceptable to Lender) issued by a Title Insurance Company in such amount as
Lender may require insuring that Borrower holds marketable fee simple title to
such parcel, subject only to the liens of Mortgage Lender under the Mortgage
Loan Documents and other encumbrances approved by Lender and which shall not
contain standard exceptions for mechanics liens, persons in occupancy (other
than tenants as tenants only under Leases) or matters which would be shown by a
survey, shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to Lender in its sole discretion, and shall
contain such other endorsements and affirmative insurance as Lender reasonably
may require and is available in the State in which the Collateral Property is
located.

 

Voting Interests. Stock or similar ownership interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, (a) to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, partnership,
trust or other business entity involved, or (b) to control, manage, or conduct
the business of the corporation, partnership, association, trust or other
business entity involved.

 

-10-

 

  

§1.2        Rules of Interpretation.

 

(a)          A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.

 

(b)          The singular includes the plural and the plural includes the
singular.

 

(c)          A reference to any law includes any amendment or modification to
such law.

 

(d)          A reference to any Person includes its permitted successors and
permitted assigns.

 

(e)          Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.

 

(f)           The words “include”, “includes” and “including” are not limiting.

 

(g)          The words “approval” and “approved”, as the context so determines,
means an approval in writing given to the party seeking approval after full and
fair disclosure to the party giving approval of all material facts necessary in
order to determine whether approval should be granted.

 

(h)          All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in the State of Georgia, have the meanings assigned to them therein.

 

(i)          Reference to a particular “§", refers to that section of this
Agreement unless otherwise indicated.

 

(j)          The words “herein”, “hereof”, “hereunder” and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.

 

§2.          THE loan.

 

§2.1        Loan Funding. Subject to the terms and conditions set forth in this
Agreement, Lender agrees to lend to Borrower, and Borrower may borrow from
Lender between the Closing Date and June 7, 2012 (the “Additional Advance
Date”), the maximum aggregate principal amount of $6,103,027.00 (the “Loan”),
provided that (i) $5,853,027.00 of the Loan shall be funded by Lender to
Borrower as of the Closing Date, and (ii) so long as there is no existing
Default or Event of Default, $250,000 of the Loan (the “Additional Advance”)
shall be funded to Borrower on the Additional Advance Date, provided, further,
however, that Lender may elect in its sole and absolute discretion to fund the
Additional Advance prior to the Additional Advance Date. Borrower’s request for
the funding of the Loan shall constitute a representation and warranty by
Borrower that all of the conditions set forth in §10 have been satisfied on the
date of such request. Once repaid, sums hereunder may not be reborrowed.

 

§2.2        Note. The Loan shall be evidenced by a promissory note of Borrower
in substantially the form of Exhibit “A” hereto (the “Note”), dated as of the
Closing Date and completed with appropriate insertions. The Note shall be
payable to the order of Lender in the principal face amount of $6,103,027.00,
plus such additional principal from time to time outstanding under the Loan
Documents, plus interest accrued thereon, as set forth below. Borrower
irrevocably authorizes Lender to make or cause to be made, at or about the time
of receipt of any payment of principal thereof, an appropriate notation on
Lender’s Record reflecting the making of such Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Loan set forth on
Lender’s Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to Lender, but the failure to record, or any error in so
recording, any such amount on Lender’s Record shall not limit or otherwise
affect the obligations of Borrower hereunder or under the Note to make payments
of principal of or interest on the Note when due.

 

-11-

 

 

§2.3        Interest on Loan. Commencing on the Drawdown Date until the Maturity
Date or an Event of Default as hereinafter provided, interest shall accrue on
the principal amount of the Loan Outstanding from time to time at the per annum
rate equal to eight percent (8%). The Borrower promises to pay interest in
arrears on the Loan on each Interest Payment Date.

 

§2.4        Intentionally Deleted.

 

§2.5        Intentionally Deleted.

 

§2.6        Use of Proceeds. Borrower will use or cause to be used the proceeds
of the Loan only to pay Project Costs which according to the Project Budget are
to be funded with the Loan.

 

§2.7        Project Costs. Borrower shall hold (or if required by the Mortgage
Lender, the Mortgage Lender shall hold) any proceeds of the Loan that are not
funded at Closing to pay Project Costs in accordance with the Project Budget in
trust to be spent only for the Project Costs in accordance with the Project
Budget (the account in which such Loan proceeds are held is referred to herein
as the Reserve Account). Borrower shall pay all Project Costs as they become due
and owing.

 

§2.8        Project Budget. The Project Budget attached as Exhibit “C” and any
modifications to the Project Budget which are made in compliance with the
provisions of this Agreement shows and will show all of the Project Costs as
presently determined or estimated.

 

§2.9        Modifications to Project Budget. It is expected that the Project
Budget may be modified from time to time as Borrower or Lender determine that
actual or anticipated Project Costs have changed. All references in this
Agreement to the “Project Budget” shall mean the same as modified from time to
time in compliance with this Section and Section 9.2. Borrower will inform
Lender promptly after it determines that any item of Project Costs will exceed
the amount shown for such item on the Project Budget and propose for Lender’s
prior written approval, a reallocation of any of the line items or contingency
line items to cover any such shortfall. Except as expressly permitted in Section
9.2 below, all modifications of the Project Budget must be approved by Lender.

 

§2.10      Disbursements to Borrower from Project Budget. Borrower confirms that
the Project Budget does not and will not in the future contain any line items
which are payable to Borrower, Assignor or any Guarantor or any of their
respective Affiliates other than the Approved Affiliate Fees, provided, however,
that Borrower, Assignor, Guarantor or any of the their respective Affiliates may
receive reimbursement of expenses previously paid or in the future paid to third
parties by such party so long as such expenses are third party Project Costs
that are contemplated as part of individual line items in the Project Budget and
the payment thereof is reflected by an appropriate notation in Borrower’s
records pertaining to the Project Budget.

 

§3.          REPAYMENT OF THE LOAN.

 

§3.1        Stated Maturity. Borrower unconditionally promises to pay on the
Maturity Date, and there shall become absolutely due and payable on the Maturity
Date, all of the Loan outstanding on such date, together with any and all
accrued and unpaid interest and charges thereon.

 

-12-

 

 

§3.2        Mandatory Prepayments.

 

(a)          Borrower agrees that upon the occurrence of any refinance of the
Mortgage Loan, at Lender’s option in its sole and absolute discretion, all of
the Obligations outstanding on such date, together with any and all accrued but
unpaid interest thereon and Exit Fees shall become absolutely due and payable.

 

(b)          If at any time there shall occur, whether voluntarily,
involuntarily or by operation of law, a sale, transfer, assignment, conveyance,
option or other disposition of, or any mortgage, hypothecation, encumbrance,
financing or refinancing of (i) all or any portion of the Collateral Property,
except for Permitted Liens; or (ii) any of the other Collateral, or (iii) any
interest of Assignor in Borrower, all of the Obligations outstanding on such
date, together with any and all accrued but unpaid interest thereon and all
applicable Exit Fees shall become absolutely due and payable.

 

§3.3        Optional Prepayments. Subject to §3.4 and §3.5 below, Borrower shall
have the right to prepay the outstanding amount of the Loan, as a whole but not
in part, at any time.

 

§3.4        Partial Prepayments. Partial prepayments of the Loan shall not be
permitted hereunder without Lender’s prior written consent.

 

§3.5        Exit Fees. Notwithstanding anything contained herein to the
contrary, in the event of (a) a sale of the Project to, or refinancing with, a
third party, or (b) any other repayment of the Loan, Borrower shall pay to
Lender an exit fee equal to the amount required to provide Lender with a
fourteen percent (14%) annual rate of return, based on cumulative,
non-compounded interest, on the $6,103,027.00 Loan amount (after taking into
account previously received interest by Lender); (such fee being referred to
herein as the “Exit Fee”). No such Exit Fee will be required to be paid to
Lender if Lender or a wholly owned direct or indirect subsidiary of the Lender
acquires the Project any time during the term of the Loan.

 

§3.6        Effect of Prepayments. Amounts of the Loan prepaid under §3.2 or
§3.3 prior to the Maturity Date may not be reborrowed. Except as otherwise
expressly provided herein, all payments shall first be applied to accrued but
unpaid interest and then to principal as provided above.

 

§4.          CERTAIN GENERAL PROVISIONS.

 

§4.1        [Intentionally Omitted].

 

§4.2        Lender Fees. To induce Lender to enter into this Agreement and to
extend to Borrower the Loan, Borrower shall pay to Lender on the date hereof, a
loan fee in the amount of $122,060.54, which fee when paid shall be fully earned
and non-refundable under any circumstances.

 

§4.3        Funds for Payments.

 

(a)          All payments of principal, interest, commitment fees, closing fees
and any other amounts due hereunder or under any of the other Loan Documents
shall be made to Lender at a bank designated by Lender by certified check, wire
transfer or other means approved by Lender, not later than 3:00 p.m. (Atlanta
time) on the day when due, in each case in lawful money of the United States in
immediately available funds.

 

-13-

 

 

(b)          All payments by Borrower hereunder and under any of the other Loan
Documents shall be made without setoff or counterclaim and free and clear of and
without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless Borrower is
compelled by law to make such deduction or withholding. If any such obligation
is imposed upon Borrower with respect to any amount payable by it hereunder or
under any of the other Loan Documents, Borrower will pay to Lender on the date
on which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable
Lender to receive the same net amount which Lender would have received on such
due date had no such obligation been imposed upon Borrower. Borrower will
deliver promptly to Lender certificates or other valid vouchers for all taxes or
other charges deducted from or paid with respect to payments made by Borrower
hereunder or under such other Loan Document.

 

§4.4        Computations. All computations of interest on the Loan and of other
fees to the extent applicable shall be based on a 360-day year and paid for the
actual number of days elapsed, including the first date of the applicable period
to but not including the date of repayment. Whenever a payment hereunder or
under any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loan as reflected on the Record of Lender from time to
time shall be considered prima facie evidence of such amount.

 

§4.5        [Intentionally Omitted].

 

§4.6        [Intentionally Omitted].

 

§4.7        [Intentionally Omitted].

 

§4.8        [Intentionally Omitted].

 

§4.9        [Intentionally Omitted].

 

§4.10      Indemnity of Borrower. Borrower agrees to indemnify Lender and to
hold Lender harmless from and against any loss, cost or expense that Lender may
sustain or incur as a consequence of default by Borrower in making the payments
or performing its obligations under §4.11.

 

§4.11      Interest on Overdue Amounts; Late Charge. Following the occurrence
and during the continuance of any Event of Default, and regardless of whether or
not Lender shall have accelerated the maturity of the Loan, the Loan shall bear
interest payable on demand at a rate per annum equal to four percent (4.0%)
above the rate that would otherwise be applicable at such time (the “Default
Rate”) until such amount shall be paid in full (after as well as before
judgment) or if such rate shall exceed the maximum rate permitted by law, then
at the maximum rate permitted by law. In addition, Borrower shall pay a late
charge equal to five percent (5%) of any amount of interest and/or principal
payable on the Loan or any other amounts payable hereunder or under the Loan
Documents, which is not paid by Borrower within ten (10) days of the date when
due (such late charge being applicable only to the amounts not paid within ten
(10) days of the date when due). Borrowers acknowledge that it would be
extremely difficult or impracticable to determine Lenders’ actual damages
resulting from any late payment, Event of Default or prepayment, and the late
charges, Default Rate and prepayment fees described in this Agreement are
reasonable estimates of those damages and do not constitute a penalty.

 

§4.12      Certificate. A certificate setting forth any amounts payable pursuant
to §4.10 or §4.11, and an explanation and calculation of such amounts which are
due, submitted by Lender to Borrower, shall be conclusive in the absence of
manifest error.

 

-14-

 

 

§4.13      Limitation on Interest. Notwithstanding anything in this Agreement or
the other Loan Documents to the contrary, all agreements between Borrower and
Lender, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of acceleration
of the maturity of any of the Obligations or otherwise, shall the interest
contracted for, charged or received by Lender exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Lender in excess of the maximum lawful amount, the
interest payable to Lender shall be reduced to the maximum amount permitted
under applicable law; and if from any circumstance Lender shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance of the Obligations and to the payment of
interest or, if such excessive interest exceeds the unpaid balance of principal
of the Obligations, such excess shall be refunded to Borrower. All interest paid
or agreed to be paid to Lender shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal of the Obligations (including the period of any
renewal or extension thereof) so that the interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law. This section
shall control all agreements between Borrower and Lender.

 

§5.          COLLATERAL SECURITY AND GUARANTY.

 

§5.1        Collateral. The Obligations of Borrower shall be secured by (i) a
perfected first priority lien or security title for the benefit of Lender in the
Collateral, (ii) the Indemnity Agreement, and (iii) such additional collateral
from Borrower, Assignor or other Persons, if any, as Lender from time to time
may accept as security for the Obligations. Certain of the Obligations shall
also be guaranteed pursuant to the terms of the Guaranty.

 

§5.2       Release of Collateral. Upon termination of this Agreement and the
payment in full of all of the Obligations, Lender shall release the Collateral
and shall execute such instruments of release as Borrower and its counsel may
reasonably request.

 

§6.          REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants to Lender as follows.

 

§6.1        Authority, Etc.

 

(a)          Organization; Good Standing. Borrower is a limited liability
company duly organized pursuant to Borrower Organizational Agreements filed with
the Secretary of State of Georgia and is validly existing and in good standing
under the laws of the State of Georgia. Assignor is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Georgia. Each of Borrower, Assignor and the Guarantors (i) has all
requisite power to own its respective properties and interests and conduct its
respective business as now conducted and as presently contemplated, and (ii) is
in good standing in each jurisdiction where a failure to be so qualified in such
jurisdiction could have a Material Adverse Effect on the business, assets or
financial condition of such Person.

 

-15-

 

 

(b)          Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which Borrower, Assignor or Guarantors
is or is to become a party and the transactions contemplated hereby and thereby
(i) are within the authority of such Person, (ii) have been duly authorized by
all necessary proceedings on the part of such Person, (iii) do not and will not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which such Person is subject or any judgment,
order, writ, injunction, license or permit applicable to such Person, (iv) do
not and will not conflict with or constitute a default (whether with the passage
of time or the giving of notice, or both) under any provision of the partnership
agreement or certificate, certificate of formation, operating agreement,
articles of incorporation or other charter documents or bylaws of, or any
mortgage, indenture, agreement, contract or other instrument binding upon, such
Person or any of its properties or to which such Person is subject, and
(v) except as provided in the Loan Documents, do not and will not result in or
require the imposition of any Lien on any of the properties, assets or rights of
such Person.

 

(c)          Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which Borrower, Assignor or Guarantors is a party
are valid and legally binding obligations of such Person enforceable in
accordance with the respective terms and provisions hereof and thereof, except
as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors’ rights and except to the extent that availability of the remedy of
specific performance or injunctive relief or other equitable remedies are
subject to the discretion of the court before which any proceeding therefor may
be brought.

 

§6.2       Approvals. The execution, delivery and performance of this Agreement
and the other Loan Documents to which Borrower, Assignor or Guarantors is or is
to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of or approval of any Person or the
authorization, consent, approval of or any license or permit issued by, or any
filing or registration with, or the giving of any notice to, any court,
department, board, commission or other governmental agency or authority other
than those already obtained (including, without limitation, the consent of
Mortgage Lender under the Intercreditor Agreement) and the filing of the
Security Documents in the appropriate records office with respect thereto.

 

§6.3       Title to Properties; Leases. Borrower and Assignor own all of the
assets reflected in the balance sheets of Borrower and Assignor, respectively,
as of the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business since
that date), subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances, (a) other than Permitted Liens as to Borrower and (b) except as
disclosed on such balance sheets with respect to Assignor. Guarantors own all of
the assets reflected in the balance sheet of Guarantors dated as of the Balance
Sheet Date, subject to no rights of others, including any rights of first
refusal, rights of first offer or other right to acquire, mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances which would result in a default under the Guaranty. Without
limiting the foregoing, Borrower has good and marketable fee simple title to the
Collateral Property, free from all liens or encumbrances of any nature
whatsoever, except for the Permitted Liens. Borrower is the insured under an
owner’s policy of title insurance covering the Collateral Property in an amount
not less than the purchase price of the Collateral Property.

 

§6.4       Financial Statements. Borrower has furnished or caused to be
furnished to Lender: (a) the pro forma balance sheet of Borrower as of the
Balance Sheet Date, certified by an Authorized Officer of Borrower, as fairly
presenting the balance sheet of such Persons for such period, (b) the pro forma
balance sheet of the Guarantors as of the Balance Sheet Date certified by
Guarantor as fairly presenting the balance sheet of such Persons for such
period, and (c) certain other financial information relating to Borrower and the
Collateral Property requested by Lender. Such balance sheets and statements
(other than those described in (c) above) have been prepared in accordance with
generally accepted accounting principles and fairly present the respective
financial conditions of Borrower and Guarantors as of such dates and the results
of the operations of Borrower and Guarantors for such periods. There are no
liabilities, contingent or otherwise, of Borrower or Guarantors involving
material amounts not disclosed in said financial statements and the related
notes thereto.

 

-16-

 

 

§6.5       No Material Changes. Since the Balance Sheet Date, there has occurred
no materially adverse change in the financial condition or assets or business of
Borrower taken as a whole as shown on or reflected in the balance sheet of
Borrower as of the Balance Sheet Date, or its statement of income or cash flows
for the fiscal period then ended, or as shown on or reflected in the balance
sheet of Guarantors or the statement of income or cash flows for the fiscal
period then ended, other than changes in the ordinary course of business that
have not had any Material Adverse Effect either individually or in the aggregate
on the business or financial condition of such Person and changes reflected in
the balance sheet and the statement of income or cash flows of Borrower or the
balance sheets and statements of income or cash flows of Guarantors, or other
financial information submitted to Lender after the Balance Sheet Date.

 

§6.6       Franchises, Patents, Copyrights, Etc. Borrower, Assignor and the
Guarantors possess all franchises, patents, copyrights, trademarks, trade names,
servicemarks, licenses and permits, and rights in respect of the foregoing,
material for the conduct of their business substantially as now conducted, free
and clear of all liens and encumbrances, other than Permitted Liens, and without
conflict with any rights of others, except where a failure to possess such
rights would not have a Material Adverse Effect on the business, assets or
financial condition of such Person.

 

§6.7       Litigation; Judgments. Except as stated on Schedule 6.7, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against or affecting Borrower, Assignor, the Guarantors or the Collateral
Property before any court, tribunal, administrative agency or board, mediator or
arbitrator that, if adversely determined, could, either in any case or in the
aggregate, reasonably be expected to, result in a Material Adverse Effect with
respect to the financial condition or business of such Person. There are no
judgments outstanding against or affecting Borrower, Assignor, the Guarantors or
the Collateral Property.

 

§6.8       No Materially Adverse Contracts, Etc. None of Borrower, Assignor or
the Guarantors is subject to any partnership, charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a Material Adverse Effect on the business, assets
or financial condition of such Person. None of Borrower, Assignor or the
Guarantors is a party to any mortgage, indenture, contract, agreement or other
instrument that has or is expected, in the judgment of the partners, members or
officers of such Person, to have any Material Adverse Effect on the business,
assets or financial condition of any of them.

 

§6.9       Compliance with Other Instruments, Laws, Etc. None of Borrower,
Assignor or the Guarantors is in violation of any provision of its partnership
agreement, charter or other organizational documents, by-laws, or any agreement
or instrument to which it may be subject or by which it or any of its properties
may be bound or any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result in the
imposition of substantial penalties or a Material Adverse Effect on the
financial condition, properties or business of such Person.

 

§6.10     Tax Status. Each of Borrower, Assignor and the Guarantors (a) has made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, as the filing
periods may have been extended, (b) has paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due from such Persons by the taxing authority of
any jurisdiction, and the officers, members or partners of such Person know of
no basis for any such claim. The Land is separately assessed for purposes of
real estate tax assessment and payment. There are no audits pending or to the
knowledge of the Borrower threatened with respect to any tax returns filed by
the Borrower or any Guarantor.

 

-17-

 

 

§6.11     No Event of Default. No Default or Event of Default has occurred and
is continuing.

 

§6.12     Holding Company and Investment Company Acts. None of Borrower,
Assignor or the Guarantors is a “holding company”, or a “subsidiary company” of
a “holding company”, or an “affiliate” of a “holding company”, as such terms are
defined in the Public Utility Holding Company Act of 1935, the Federal Power
Act; nor is any of them an “investment company”, or an “affiliated company” or a
“principal underwriter” of an “investment company”, as such terms are defined in
the Investment Company Act of 1940 or to any federal or state statute or
regulation limiting its ability to incur indebtedness for borrowed money.

 

§6.13     Absence of UCC Financing Statements, Etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage, equipment lease, financing lease, option,
encumbrance or other document filed or recorded with any filing records,
registry, or other public office, that purports to cover, affect or give notice
of any present or possible future lien or encumbrance on, or security interest
or security title in, any property of Borrower.

 

§6.14     Setoff, Etc. The Collateral and the rights of Lender with respect to
the Collateral are not subject to any setoff, claims, withholdings or other
defenses. Borrower and Assignor are the owners of the Collateral free from any
lien, security interest, encumbrance or other claim or demand, except Permitted
Liens.

 

§6.15     Certain Transactions. Except as disclosed in writing to Lender, none
of the members, partners, officers, trustees, directors, or employees of
Borrower, Assignor or the Guarantors is a party to any transaction with Borrower
(other than for services as members, partners, employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any member,
partner, officer, trustee, director or such employee or, to the knowledge of
such Person, any limited liability company, corporation, partnership, trust or
other entity in which any member, partner, officer, trustee, director, or any
such employee has a substantial interest or is a member, officer, director,
trustee or partner, unless such contract, agreement or other arrangement is an
arms length arrangement with terms comparable to those which would be obtained
from an unaffiliated Person or is otherwise approved by Lender.

 

§6.16     Employee Benefit Plans. Borrower, Assignor, Guarantors and each ERISA
Affiliate have fulfilled their respective obligations under the minimum funding
standards of ERISA and the Code with respect to each Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the Code
with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan. None of Borrower, Assignor, Guarantors, or any ERISA Affiliate has
(a) sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan, (b) failed to make any contribution or payment to any Employee
Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, or made any
amendment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension
Plan, which has resulted or could result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Code, or (c) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. Neither the Collateral nor the Collateral
Property constitutes a “plan asset” (within the meaning of ERISA and the Code)
of any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan.

 

-18-

 

 

§6.17     [Intentionally Omitted.]

 

§6.18     Environmental Compliance. Borrower or an affiliate or agent thereof
has taken or caused to be taken all commercially reasonable steps necessary to
investigate the past and present conditions and usage of the Collateral Property
and the operations conducted thereon and, based upon such investigation, makes
the following representations and warranties.

 

(a)          None of Borrower, or any operator of the Collateral Property, or
any portion thereof, or any operations thereon is in violation, or alleged
material violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and Recovery Act (“RCRA”), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986
(“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the environment, including,
without limitation, the environmental statutes, regulations, orders and decrees
of the states in which any of the Collateral Property may be located
(hereinafter “Environmental Laws”), which violation involves the Collateral
Property and would have a material adverse effect on the environment or the
business, assets or financial condition of such Person.

 

(b)          Borrower has not received notice from any third party including,
without limitation, any federal, state or local governmental authority, (i) that
it has been identified by the United States Environmental Protection Agency
(“EPA”) as a potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986);
(ii) that any hazardous waste, as defined by 42 U.S.C. §9601(5), any hazardous
substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as
defined by 42 U.S.C. §9601(33) or any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any Environmental Laws
(“Hazardous Substances”) which it has generated, transported or disposed of have
been found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that Borrower conduct a remedial
investigation, removal or other response action pursuant to any Environmental
Law; or (iii) that it is or shall be a named party to any claim, action, cause
of action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party’s incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances.

 

(c)          With respect to the Collateral Property and except as disclosed in
the environmental reports described on Schedule 6.18 to this Agreement, (i) no
portion of the Collateral Property has been used as a landfill or for dumping or
for the handling, processing, storage or disposal of Hazardous Substances except
in accordance with applicable Environmental Laws, and no underground tank or
other underground storage receptacle for Hazardous Substances is located on any
portion of the Collateral Property; (ii) in the course of any activities
conducted by Borrower, or the operators of any of its properties, no Hazardous
Substances have been generated or are being used on the Collateral Property
except in the ordinary course of business and in accordance with applicable
Environmental Laws; (iii) there has been no past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping (a “Release”) or threatened Release of Hazardous Substances
on, upon, into or from the Collateral Property, which Release would have a
material adverse effect on the value of any of the Collateral Property or
adjacent properties or the environment; (iv) there have been no Releases on,
upon, from or into any real property in the vicinity of the Collateral Property
which, through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the
Collateral Property; and (v) any Hazardous Substances that have been generated
on the Collateral Property have been transported off-site only by carriers
having an identification number issued by the EPA or approved by a state or
local environmental regulatory authority having jurisdiction regarding the
transportation of such substance and treated or disposed of only by treatment or
disposal facilities maintaining valid permits as required under all applicable
Environmental Laws, which transporters and facilities have been and are, to the
best of Borrower’s knowledge, operating in compliance with such permits and
applicable Environmental Laws.

 

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(d)          Neither Borrower nor the Collateral Property is subject to any
applicable Environmental Law requiring the performance of Hazardous Substances
site assessments, or the removal or remediation of Hazardous Substances, or the
giving of notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or statement by virtue of
the transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any transactions contemplated hereby.

 

§6.19     [Intentionally Omitted.]

 

§6.20     [Intentionally Omitted.]

 

§6.21     Regulations U and X. No portion of any Loan was or is to be used for
the purpose of purchasing or carrying any “margin security” or “margin stock” as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224. Borrower is not engaged,
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of “purchasing” or carrying any
“margin security” or “margin stock” as such terms are used in Regulations U and
X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220,
221 and 224.

 

§6.22     [Intentionally Omitted.]

 

§6.23     Loan Documents. All of the representations and warranties made by or
on behalf of Borrower, the Guarantors and Assignor in this Agreement and the
other Loan Documents or any document or instrument delivered to Lender pursuant
to or in connection with any of such Loan Documents are true and correct in all
material respects, and, none of Borrower, the Guarantors or Assignor have failed
to disclose such information as is necessary to make such representations and
warranties not misleading in any material respect.

 

§6.24    Collateral Property. Borrower makes the following representations and
warranties concerning the Collateral Property:

 

(a)          Status of Documents. Each of (a) the Organizational Documents, (b)
the Construction Contract, (c) the Design Professional’s Contract, (d) the Civil
Engineer’s Contract and (e) all other Project Documents is in full force and
effect and free from any default on the part of Borrower which would have a
Material Adverse Effect. Such documents are hereinafter sometimes collectively
called the “Basic Agreements". Borrower has provided Lender with true, correct
and complete copies of the Basic Agreements.

 

(b)          Off-Site Utilities. All water, sewer, electric, gas, telephone and
other utilities necessary for the use and operation of the Collateral Property
are installed to the property lines of the Collateral Property through dedicated
public rights of way or through perpetual private easements approved by Lender
with valid permits and are adequate to service the Project in compliance with
applicable law.

 

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(c)          Access, Etc. The streets abutting the Collateral Property are
dedicated and accepted public roads, to which the Collateral Property has direct
access by trucks and other motor vehicles and by foot, or are perpetual private
ways (with direct access by trucks and other motor vehicles and by foot to
public roads) to which the Collateral Property has direct access approved by
Lender. All private ways providing access to the Collateral Property are zoned
in a manner which will permit access to the Project over such ways by trucks and
other commercial and industrial vehicles. The Collateral Property constitutes a
separate parcel which has been properly subdivided in accordance with all
applicable state and local laws, regulations and ordinances to the extent
required thereby, and neither the execution and delivery of the Security
Documents nor the exercise of any remedies thereunder by Lender shall violate
any such law or regulation relating to the subdivision of real property.

 

(d)          No Required Collateral Property Consents, Permits, Etc. None of
Borrower, the Guarantors or Assignor have received any notice of, and has no
knowledge of, any approvals, consents, or licenses required by applicable laws,
rules, ordinances or regulations or any agreement affecting the Collateral
Property for the maintenance, operation, servicing and use of the Collateral
Property or the Project for its intended use which have not been granted,
effected, or performed and completed (as the case may be), or any fees or
charges therefor which have not been fully paid, or which are no longer in full
force and effect. No such approvals, consents, permits or licenses (including,
without limitation, any railway siding agreements) will terminate, or become
void or voidable or terminable on any foreclosure sale of the Collateral. To the
best knowledge of Borrower and the Guarantors, there are no outstanding notices,
suits, orders, decrees or judgments relating to zoning, building use and
occupancy, fire, health, sanitation or other violations affecting, against, or
with respect to, the Collateral Property or any part thereof.

 

(e)          Insurance. None of Borrower, the Guarantors or Assignor have
received any outstanding notice from any insurer or its agent requiring
performance of any work with respect to the Collateral Property or canceling or
threatening to cancel any policy of insurance, and the Collateral Property
complies with the requirements of all of Borrower’s, the Guarantors’ and the
Assignor’s insurance carriers.

 

(f)          Real Property Taxes; Special Assessments. To Borrower’s actual
knowledge, there are no unpaid or outstanding real estate or other taxes or
assessments on or against the Collateral Property or any part thereof which are
payable by Borrower, the Guarantors or Assignor (except only real estate or
other taxes or assessments, that are not yet due and payable). Borrower has
delivered to Lender true and correct copies of real estate tax bills for the
Collateral Property for the most recent calendar year. No abatement proceedings
are pending with reference to any real estate taxes assessed against the
Collateral Property, other than with respect to taxes which have been paid under
protest and which are being contested in good faith. Except as set forth in the
Title Policy delivered to Lender, to Borrower’s actual knowledge, there are no
betterment assessments or other special assessments presently pending with
respect to any portion of the Collateral Property, and none of Borrower, the
Guarantors or Assignor have received any notice of any such special assessment
being contemplated.

 

(g)          Historic Status. The Collateral Property is not located within any
historic district pursuant to any federal, state or local law or governmental
regulation.

 

(h)          Eminent Domain; Casualty. There are no pending eminent domain
proceedings against the Collateral Property or any part thereof, and, to the
knowledge of Borrower, the Guarantors and Assignor, no such proceedings are
presently threatened or contemplated by any taking authority. Neither the
Collateral Property nor any part thereof is now damaged or injured as a result
of any fire, explosion, accident, flood or other casualty.

 

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(i)           Leases. There are no occupancies, rights, privileges or licenses
in or to the Collateral Property or portion thereof for the Collateral Property
other than Qualified Leases. Except as disclosed in writing to Lender, no
material leasing, brokerage or like commissions, fees or payments are due from
Borrower, the Guarantors or Assignor in respect of any Leases.

 

(j)           Basic Agreements. To the best knowledge of Borrower, there are no
material claims or any bases for material claims in respect of the Collateral
Property or its operation by any party to any Basic Agreement.

 

(k)          Other Material Real Property Agreements: No Options. There are no
material agreements pertaining to the Collateral Property, the Project or the
operation or maintenance of either thereof other than as described in this
Agreement (including the Schedules hereto), the Title Policy, the Basic
Agreements or otherwise disclosed in writing to Lender by Borrower; and no
person or entity has any right or option to acquire the Collateral Property or
the Project or any portion thereof or interest therein.

 

(l)           Construction of the Project. As of the Closing Date, construction
of the Project has not commenced. All construction of the Project will be
consistent with the Plans and the Project Documents and in compliance with all
applicable governmental approvals and all applicable covenants, conditions and
restrictions. The use and occupancy of the Project when completed in accordance
with the Plans and the Project Documents will comply with all applicable
governmental approvals and with all applicable covenants, conditions and
restrictions. The Construction Contract will be sufficient to complete the
Project consistent with the Plans and in compliance with all applicable
governmental approvals and all covenants, conditions and restrictions. The
parking spaces to be located on the Collateral Property are and at all times
will continue to be sufficient to satisfy all parking requirements of all
governmental approvals for the Project.

 

(m)         Project Budget. The Project Budget constitutes all costs and
expenses which will be incurred by Borrower in the acquisition, construction,
development, financing, marketing, leasing and maintenance of the Collateral
Property through the Maturity Date.

 

§6.25    Brokers. None of Borrower, the Guarantors, Assignor, or any of their
respective Subsidiaries has engaged or otherwise dealt with any broker, finder
or similar entity in connection with this Agreement or the Loan contemplated
hereunder.

 

§6.26     Other Debt. None of Borrower, Assignor or the Guarantors is in default
of the payment of any Indebtedness or under any other agreement, mortgage, deed
of trust, security agreement, financing agreement, indenture, lease or other
material agreement to which any of them is a party, which default could result
in a Material Adverse Effect. None of Borrower, Assignor or the Guarantors is a
party to or bound by any agreement, instrument or indenture other than the
Mortgage Loan Documents that may require the subordination in right or time of
payment of any of the Obligations to any other indebtedness or obligation of
such Person. Borrower has provided to Lender copies of all agreements,
mortgages, deeds of trust, financing agreements or other material agreements
binding upon Borrower and the Collateral Property and entered into by Borrower
as of the date of this Agreement with respect to any Indebtedness of such
Person.

 

§6.27     Use of Proceeds. No portion of the proceeds of the Loan shall be used
for personal, family or household purposes.

 

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§6.28     Transaction in Best Interests of Parties; Consideration. The
transaction evidenced by this Agreement and the other Loan Documents is in the
best interests of Borrower, Assignor, and the Guarantors. The direct and
indirect benefits to inure to Borrower, Assignor and the Guarantors pursuant to
this Agreement and the other Loan Documents constitute substantially more than
“reasonably equivalent value” (as such term is used in Section 548 of the
Bankruptcy Code) and “valuable consideration,” “fair value,” and “fair
consideration,” (as such terms are used in any applicable state fraudulent
conveyance law), in exchange for the benefits to be provided by Borrower and the
Guarantors pursuant to this Agreement and the other Loan Documents, and but for
the willingness of the Guarantors to enter into the Guaranty and the willingness
of Assignor to enter into the Assignments of Interests, Borrower would be unable
to obtain the financing contemplated hereunder which financing will enable
Borrower, Assignor and the Guarantors to have available financing to conduct and
expand their business.

 

§6.29     Solvency. As of the Closing Date and after giving affect to the
transactions contemplated by this Agreement and the other Loan Documents,
including Loan made or to be made hereunder, none of Borrower, Assignor or the
Guarantors is insolvent on a balance sheet basis, the sum of such Person’s
assets exceeds the sum of such Person’s liabilities, each such Person is able to
pay its debts as they become due, and each such Person has sufficient capital to
carry on its business.

 

§6.30     No Bankruptcy Filing. None of Borrower, Assignor or the Guarantors is
contemplating either the filing of a petition by it under any state or federal
bankruptcy or insolvency laws or the liquidation of its assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against it or any of such other Persons.

 

§6.31     No Fraudulent Intent. Neither the execution and delivery of this
Agreement or any of the other Loan Documents nor the performance of any actions
required hereunder or thereunder is being undertaken by Borrower, Assignor or
Guarantors with or as a result of any actual intent by any of such Persons to
hinder, delay or defraud any entity to which any of such Persons is now or will
hereafter become indebted.

 

§6.32     Special Purpose Entity; Restrictions.

 

(a)          Borrower is in full and complete compliance with the Borrower
Organizational Agreements.

 

(b)          All duties, obligations and responsibilities required to be
performed by Assignor under the Borrower Organizational Agreements, as of the
date hereof, have been performed in all material respects, and no default or
condition which with the passage of time or the giving of notice, or both, would
constitute a default exists under any of such Borrower Organizational
Agreements; it being acknowledged that for purposes of the foregoing, performed
in all material respects shall include, but shall not be limited to, compliance
with the Borrower Organizational Agreements so as not to affect Borrower’s
status as a separate, single purpose or bankruptcy remote entity.

 

(c)          Except for the Borrower Organizational Documents, the Loan
Documents and the Mortgage Loan Documents, neither Borrower nor Assignor is a
party to or is bound by any indenture, contract or other agreement which
purports to prohibit, restrict, limit, or control (i) the transfer or pledge of
direct or indirect interests in Borrower, (ii) the exercise of Voting Interests
with respect to Borrower, or (iii) the management of Borrower.

 

§6.33     Organizational Documents. Attached hereto as Schedule 6.33 is a true,
accurate and complete list of all of the Organizational Documents. Borrower has
delivered to Lender true, correct and complete copies of the Organizational
Documents, and none of the Organizational Documents has been modified or amended
in any respect except as set forth on Schedule 6.33. Each of the Organizational
Documents has been duly authorized, executed and delivered by the parties
thereto and is in full force and effect.

 

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§6.34     Ownership. Schedule 6.34 sets forth, as of the date hereof, the
ownership structure of Borrower, including Assignor and Guarantors, and the
Persons owning and controlling Borrower, Guarantors and Assignor and the form
and jurisdiction of organization of each of such Persons. No Person owns any
direct legal, equitable or beneficial interest in Borrower or Assignor or has
any right to vote or exercise control over Borrower or its management except as
set forth on such Schedule. The ownership interests in Borrower indicated on
Schedule 6.34 are owned free and clear of all liens, restrictions, claims,
pledges, encumbrances, charges or rights of third parties and rights of set-off
or recoupment whatsoever (other than those in favor of Lender hereunder). No
Person other than the Mortgage Lender and Lender has any option, right of first
refusal, right of first offer or other right to acquire all or any portion of
the Collateral. Borrower does not own any assets other than the Collateral
Property.

 

§6.35     Embargoed Persons. At all times throughout the term of the Loan,
including after giving effect to any Permitted Equity Transfers, (a) none of the
funds or other assets of Borrower, Assignor or Guarantors shall constitute
property of, or be beneficially owned, directly or indirectly, by any Person
subject to trade restrictions under United States law, including, but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et
seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any
Executive Orders or regulations promulgated under any such United States laws,
with the result that the investment in Borrower, Assignor or Guarantors, as
applicable (whether directly or indirectly), is or would be prohibited by law or
the Loan made by Lender is in violation of law (each, an “Embargoed Person”);
(b) no Embargoed Person shall have any interest of any nature whatsoever in
Borrower, Assignor or Guarantors, as applicable, with the result that the
investment in Borrower, Assignor or Guarantors, as applicable (whether directly
or indirectly), is or would be prohibited by law or the Loan is or would be in
violation of law; and (c) none of the funds of Borrower, Assignor or Guarantors,
as applicable, have been or shall be derived from, or are the proceeds of, any
unlawful activity, including money laundering, terrorism or terrorism
activities, with the result that the investment in Borrower, Assignor or
Guarantors, as applicable (whether directly or indirectly), is or would be
prohibited by law or the Loan is or would be in violation of law, or may cause
the assets to be subject to forfeiture or seizure.

 

§6.36     Mortgage Loan Documents.

 

(a)          Borrower has delivered to Lender true, correct and complete copies
of the Mortgage Loan Documents.

 

(b)          As of the date hereof, the Mortgage Loan Documents are in full
force and effect and no event of default, or any event which, with the passage
of time or the giving of notice, or both, would constitute an event of default,
has occurred pursuant to the terms of any of the Mortgage Loan Documents on the
part of Borrower or the other parties thereto.

 

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§7.         AFFIRMATIVE COVENANTS OF BORROWER.

 

Borrower covenants and agrees that, so long as any Loan or Note is outstanding
or Lender has any obligation to make any Loan:

 

§7.1       Punctual Payment. Borrower will duly and punctually pay or cause to
be paid the principal and interest on the Loan and all interest, fees and
premiums provided for in this Agreement, all in accordance with the terms of
this Agreement and the Note as well as all other sums owing pursuant to the Loan
Documents.

 

§7.2       Maintenance of Office. Borrower will maintain its chief executive
office at c/o Oxford Properties, LLC, One Overton Park, 3625 Cumberland Blvd.,
Suite 500, Atlanta, Georgia 30339, Attn: W. Daniel Faulk, Jr. or at such other
place in the United States of America as Borrower shall designate upon prior
written notice to Lender, where notices, presentations and demands to or upon
Borrower in respect of the Loan Documents may be given or made.

 

§7.3       Records and Accounts. Borrower will (a) keep true and accurate
records and books of account in which full, true and correct entries will be
made in accordance with generally accepted accounting principles and (b)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation and amortization of its properties, contingencies and other
reserves. Borrower will not make, without the prior written consent of Lender,
(x) any material changes to the accounting procedures used by Borrower in
preparing the financial statements and other information described in §6.4 or
§7.4, or (y) change its fiscal year.

 

§7.4       Financial Statements, Certificates and Information. Borrower will
deliver or cause to be delivered to Lender:

 

(a)          as soon as practicable, but in any event not later than ninety (90)
days after the end of each fiscal year of Borrower, the unaudited balance sheet
of each of Borrower and the Guarantors at the end of such year, and the related
unaudited statement of income, statement of changes in capital and statement of
cash flows for such year, each setting forth in comparative form the figures for
the previous fiscal year and all such statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, together
with a certification by the principal financial or accounting officer of
Borrower and by the Guarantors, respectively, that the information contained in
such financial statements fairly presents the financial position of Borrower and
the Guarantors, respectively, on the date thereof (subject to year end
adjustments);

 

(b)          as soon as practicable, but in any event not later than thirty (30)
days after the end of each month, (i) copies of the unaudited balance sheet of
Borrower as at the end of such month, and the related unaudited statement of
income for the portion of Borrower’s fiscal year then elapsed, all in reasonable
detail and prepared in accordance with generally accepted accounting principles,
together with a certification by the principal financial or accounting officer
of Borrower that the information contained in such financial statements fairly
presents the financial position of Borrower on the date thereof (subject to year
end adjustments); (ii) an operating statement for the Project for such month and
year to date; (iii) copies of Borrower’s bank statements for the Reserve Account
and a summary describing any payments made from such account during the prior
month; (iv) a current certified rent roll for the Project; and (v) after the
last quarter of each year, a detailed statement of all income and expenses for
the Project for such year;

 

(c)          as soon as practicable, but in any event not later than thirty (30)
days after the end of each of the first three (3) fiscal quarters of Borrower,
copies of the unaudited balance sheets of Borrower as at the end of such
quarter, and the related unaudited statement of income, statement of changes in
capital and statement of cash flows for the portion of Borrower’s fiscal year
then elapsed, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, together with a certification by the principal
financial or accounting officer of Borrower, that the information contained in
such financial statements fairly presents the financial position of Borrower on
the date thereof (subject to year end adjustments);

 

-25-

 

 

(d)          contemporaneously with the delivery of the financial statements
referred to in clause (a) above, a statement of all material contingent
liabilities of Borrower and Guarantors which are not reflected in such financial
statements or referred to in the notes thereto;

 

(e)          copies of all financial statements delivered to Mortgage Lender
contemporaneously with the delivery thereof to Mortgage Lender;

 

(f)          evidence reasonably satisfactory to Lender of the timely payment of
all real estate taxes for the Collateral Property; and

 

(g)          from time to time such other financial data and information as
Lender may reasonably request.

 

§7.5       Notices.

 

(a)          Defaults. Borrower will promptly notify Lender in writing of the
occurrence of any Default or Event of Default. If any Person shall give any
notice or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Agreement or under any note,
evidence of Indebtedness, indenture (including, without limitation, any Mortgage
Loan Documents) or other obligation to which or with respect to which any of
Borrower or Guarantors is a party or obligor, whether as principal or surety,
and such default would permit the holder of such note or obligation or other
evidence of Indebtedness to accelerate the maturity thereof, Borrower shall
forthwith give written notice thereof to Lender, describing the notice or action
and the nature of the claimed default.

 

(b)          Environmental Events. Borrower will promptly give notice to Lender
(i) upon Borrower obtaining knowledge of any potential or known Release, or
threat of Release, of any Hazardous Substances at or from any Collateral
Property of Borrower; (ii) of any violation of any Environmental Law that
Borrower reports in writing or is reportable by Borrower in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency and (iii) upon becoming aware
thereof, of any inquiry, proceeding, investigation, or other action, including a
notice from any agency of potential environmental liability, of any federal,
state or local environmental agency or board, that in either case involves the
Collateral Property and has the potential to result in a Material Adverse Effect
with respect to the assets, liabilities, financial conditions or operations of
Borrower.

 

(c)          Notification of Claims. Borrower will, immediately upon becoming
aware thereof, notify Lender in writing of any setoff, claims (including, with
respect to the Collateral Property of Borrower, environmental claims)
withholdings or other defenses to which any of the Collateral or the Collateral
Property, or the rights of Lender with respect to the Collateral or the
Collateral Property are subject.

 

(d)          Notice of Litigation and Judgments. Borrower will give notice to
Lender in writing within fifteen (15) days of becoming aware of any litigation
or proceedings threatened in writing or any pending litigation and proceedings
affecting any of Borrower, Assignor or the Guarantors or to which any of such
Persons is or is to become a party involving a claim against any of such Persons
in an amount in excess of $10,000.00 and stating the nature and status of such
litigation or proceedings. Borrower will give notice to Lender, in writing, in
form and detail reasonably satisfactory to Lender, within ten days of any
judgment, whether final or otherwise, against Borrower, Assignor or the
Guarantors in an amount in excess of $10,000.00.

 

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(e)          Copies of Mortgage Loan Requests. Borrower shall provide Lender
with copies of all draw requests and all third party reports and reviews of the
Project and its progress and all other back-up documentation related thereto
that are provided to or for Mortgage Lender contemporaneously with the submittal
of such documents and materials to Mortgage Lender. Lender reserves the right to
require Borrower to (i) notify Lender of the date, time and location of all draw
request meetings so that Lender may, at its option, attend such meetings (at
Borrower’s expense), and (ii) require additional back-up documentation for all
amounts requested pursuant to a draw request under the Mortgage Loan.

 

(f)          Notice of Proposed Sales, Encumbrances, Refinance or Transfer of
Property. Borrower will give prompt notice to Lender of any proposed sale,
encumbrance, refinance or transfer by Borrower of all or any portion of the
Collateral Property, except for Permitted Liens not constituting Liens granted
pursuant to the Mortgage Loan.

 

§7.6       Existence; Maintenance of Properties.

 

(a)          Borrower will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence as a Georgia limited
liability company. Borrower will do or cause to be done all things necessary to
preserve and keep in full force all of its rights and franchises.

 

(b)          Borrower (i) will cause all of its properties used or useful in the
conduct of its business to be maintained and kept in good condition, repair and
working order (ordinary wear and tear, casualty and condemnation excepted) and
supplied with all necessary equipment, and (ii) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof
in all cases in which the failure so to do would have a Material Adverse Effect
on the condition of its properties or on the financial condition, assets or
operations of Borrower. So long as the Loan remain outstanding, the Collateral
Property shall be developed and operated in a first-class manner as a
multi-family project.

 

§7.7       Insurance. With respect to the properties and businesses of Borrower,
Borrower will procure and maintain or cause to be procured and maintained
insurance or be a “Named Insured” on the General Contractor’s and Management
Company’s policies, as applicable, with financially sound and reputable insurers
against such casualties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities in similar
geographic areas and in amounts, containing such terms, in such forms and for
such periods as may be reasonable and prudent, including, without limitation,
“all risks” property insurance (including broad form flood, broad form
earthquake coverages) on each Building and the contents therein of Borrower in
an amount not less than one hundred percent (100%) of the full replacement cost
of each such Building and the contents therein, with a replacement cost
endorsement and an agreed amount endorsement, provided, however, that solely
with respect to earthquake insurance, such coverage may be in an amount less
than one hundred percent (100%) of the full replacement cost so long as such
amount is commercially reasonable and in accordance with general practices of
businesses engaged in similar activities in similar geographic areas and as may
be required under the Mortgage Loan Documents as they exists on the date hereof,
provided, however, each commercial general liability or umbrella liability
policy with respect to the Collateral Properties shall name Lender as an
additional insured and shall contain a cross liability/severability endorsement.
Borrower shall promptly furnish to Lender all renewal notices and evidence that
all premiums or portions thereof then due and payable have been paid. At least
15 days prior to the expiration date of all such policies, Borrower shall
deliver to Lender evidence of continued coverage, including a certificate of
insurance, as may be satisfactory to Lender.

 

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§7.8       Taxes. Borrower will pay or cause to be paid real estate taxes, other
taxes, assessments and other governmental charges against the Collateral
Property before the same become delinquent, and will duly pay and discharge, or
cause to be paid and discharged, before the same shall become overdue, all
taxes, assessments and other governmental charges imposed upon Borrower, the
Collateral and Borrower’s other properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its properties; provided that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if Borrower
shall have set aside on its books adequate reserves with respect thereto; and
provided further that Borrower will pay all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of proceedings to foreclose any
lien that may have attached as security therefor.

 

§7.9       Inspection of Properties and Books. Upon reasonable prior notice,
Borrower shall permit Lender, or any representative designated by Lender, (at
Borrower’s expense) to visit and inspect the Collateral Property or any of
Borrower’s offices, to examine the books of account of Borrower (and to make
copies thereof and extracts therefrom) and to discuss the affairs, finances and
accounts of Borrower with, and to be advised as to the same by, Borrower’s
officers, all at such reasonable times and intervals as Lender may reasonably
request. Lender shall use good faith efforts to coordinate such visits and
inspections so as to minimize the interference with and disruption to Borrower’s
activities at the Collateral Property. Borrower will cooperate and will cause
its agents and contractors to cooperate to give Lender and its consultants full
access to the Collateral Property. All inspections by Lender and its consultants
shall be for the sole benefit of Lender for its loan administration purposes
only. Neither Lender nor its consultants assumes any liability to Borrower or
any other Person by reason of Lender’s or its consultant’s inspections. Neither
Borrower nor any other Person may rely on Lender’s inspections for any purpose
(including stage of completion, adequacy or workmanship, compliance with
governmental approvals and covenants, conditions and restrictions, conformance
with the Plans, Project Documents, or other matters related to design,
construction and operation). Lender’s inspection of an item shall not result in
any waiver of Lender’s rights in the event such item does not conform with this
Agreement. Borrower shall keep books and records fairly reflecting all of its
business affairs and transactions.

 

§7.10     Compliance with Laws, Contracts, Licenses, and Permits. Borrower will
comply with (a) all applicable laws and regulations now or hereafter in effect
wherever its business is conducted, including all Environmental Laws, (b) the
provisions of all applicable operating agreements, charter documents and by
laws, (c) all agreements and instruments to which it is a party or by which it
or any of its properties may be bound including the Basic Agreements and any
leases, (d) all applicable decrees, orders, and judgments, and (e) all licenses
and permits required by applicable laws and regulations for the conduct of its
business or the ownership, use or operation of its properties. If at any time
any authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in order
that Borrower may fulfill or be in compliance with any of its obligations
hereunder or under any of the Loan Documents, Borrower will promptly take or
cause to be taken all reasonable steps within the power of Borrower to obtain
such authorization, consent, approval, permit or license and furnish Lender with
evidence thereof.

 

§7.11     Monthly Meetings. Borrower shall coordinate and arrange monthly
project meetings among senior management of Borrower and Lender on dates and
times mutually agreeable to Borrower and Lender to review and discuss financial
reports, marketing status, development status and leasing status for the Project
and comparing actual results to budgeted projections.

 

§7.12     Further Assurances. Borrower will cooperate with Lender and execute
such further instruments and documents as Lender shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Agreement
and the other Loan Documents.

 

§7.13     [Intentionally Omitted.]

 

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§7.14     [Intentionally Omitted.]

 

§7.15     Casualty. In the event of any loss or damage to the Collateral
Property, Borrower shall give prompt written notice to the insurance carrier and
Lender. Borrower shall not settle, adjust or compromise any claim under such
insurance policies without the prior written consent of Lender; provided,
however, that Borrower may make proof of loss, settle, adjust or compromise any
claim under such insurance policies solely to the extent expressly permitted
under the Mortgage Loan Documents so long as no Default or Event of Default has
occurred and is continuing. Any proceeds of such claim which are not (a) applied
to the balance of the loan evidenced by the Mortgage Loan Documents or (b) used
for the restoration and repair of the Collateral Property pursuant to the terms
of the Mortgage Loan Documents, shall be paid to Lender and applied to the
payment of the Obligations whether or not then due, less reasonable
out-of-pocket expenses incurred in connection with the settlement, adjustment or
compromise of such claim. Notwithstanding anything contained in the Loan
Documents to the contrary, Lender hereby agrees that Borrower may use all
insurance proceeds to restore and repair the Collateral Property, provided that
such use is permitted under the terms of the Mortgage Loan Documents subject,
however, to disbursement, oversight, inspection and monitoring requirements and
controls required by the Mortgage Lender so long as the Mortgage Loan is
outstanding and, thereafter, subject to disbursement, oversight, inspection and
monitoring requirements and controls customary for construction loans for
similar type properties in similar geographic areas.

 

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

 

§7.17     Compliance. Borrower shall operate its business in compliance with the
terms and conditions of this Agreement and the other Loan Documents.

 

§7.18     Plan Assets, etc. Borrower will do, or cause to be done, all things
necessary to ensure that Borrower will not be deemed to hold “plan assets”
(within the meaning of ERISA or the Code) at any time. Each owner of a direct or
indirect equity interest in Borrower has certified to Borrower and Lender, and
Borrower shall require each proposed transferee of any direct or indirect equity
interest in Borrower, as a condition precedent to such transfer, to certify to
Borrower and Lender, that the source of funds used or to be used by it to
acquire its interest in Borrower are not assets of any plan subject to Title I
of ERISA or Section 4975 of the Code and are not deemed to be assets of any such
plan under the U.S. Department of Labor’s plan asset regulations. Upon request
by Lender, Borrower shall provide Lender with a copy of each such certification
from each owner of an equity interest in Borrower and will promptly provide
Lender with a copy of each such certification from each proposed transferee.

 

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§7.19     Preservation and Maintenance. Borrower (i) shall not permit or commit
waste, impairment, or deterioration of the Collateral Property or abandon the
Collateral Property, (ii) shall not remove, demolish or structurally alter or
permit or suffer the removal, demolition or alteration of any Building except
with the prior written consent of Lender, which consent shall not be
unreasonably withheld, delayed or conditioned, (iii) shall restore or repair
promptly and in a good and workmanlike manner all or any part of the Collateral
Property in the event of any damage, injury or loss thereto, to the equivalent
of its condition prior to such damage, injury or loss, or such other condition
as Lender may approve in writing, (iv) shall keep the Collateral Property,
including the improvements thereon and any fixtures, equipment, machinery and
personal property, in good order, repair and tenantable condition (subject to
ordinary wear and tear, casualty and condemnation) and shall replace fixtures,
equipment, machinery and personal property on the Collateral Property when
necessary to keep such items in good order, repair, and tenantable condition,
and (v) shall keep all trademarks, tradenames, servicemarks and licenses and
permits necessary for the use and occupancy of the Collateral Property in good
standing and in full force and effect and free and clear of all liens and
encumbrances other than Permitted Liens. Neither Borrower, nor any tenant or
other Person shall remove, demolish or alter any Building now existing or
hereafter erected on the Collateral Property or any other fixtures, equipment,
machinery or personal property in or on the Collateral Property except when
incident to the replacement of fixtures, equipment, machinery or other personal
property with items of like kind and value. Borrower shall comply with the
asbestos operations and maintenance program in effect as of the date hereof (if
any) or adopted hereafter with respect to the Collateral Property, and shall not
discontinue or materially modify such program without Lender’s prior written
consent. In the event that Borrower shall remove any asbestos or
asbestos-containing materials after the date hereof, such removal shall be
performed in accordance with all applicable laws and, upon the request of
Lender, Borrower shall provide evidence of such compliance to Lender.

 

§7.20     [Intentionally Omitted.]

 

§7.21     Borrower to Remain a Single-Purpose Entity. Borrower shall conduct its
business in full compliance with and to not violate the terms and conditions of
Borrower Organizational Agreements in any material respects, shall do all things
necessary to observe limited liability company formalities and to preserve its
existence, and Borrower will not amend, modify or otherwise change the Borrower
Organizational Agreements without the prior written consent of Lender, except as
may be permitted pursuant to §8.13. Borrower shall perform all of its duties,
responsibilities and obligations under the Borrower Organizational Agreements,
it being acknowledged that for purposes of the foregoing, perform in all
material respects shall include, but shall not be limited to, compliance with
the Borrower Organizational Agreements so as not to affect Borrower’s status as
a separate, single purpose or bankruptcy remote entity.

 

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§7.22     Leases.

 

(a)          The Borrower will take, or cause to be taken, all reasonable steps
within the power of Borrower to market and lease the leaseable area of the
Collateral Property in accordance with sound and customary leasing and
management practices for similar properties in similar locations. Any such
leasing activity shall be conducted in accordance with the terms of §7.22(b),
below. The Borrower will (i) employ a form of lease that is reasonably
acceptable to the Lender; (ii) fulfill, perform and observe each and every
material condition and covenant to be performed by it under the Leases; (iii)
promptly notify the Lender of any material litigation or administrative
proceeding commenced by a tenant against the Borrower or by the Borrower against
a tenant; (iv) at the sole cost and expense of the Borrower, enforce the Leases
in accordance with the Borrower’s reasonable business judgment; (v) if requested
by the Lender from time to time, provide the Lender with true and correct copies
of all Leases (including all amendments, modifications and renewals) in effect
with respect to the Project; and (vi) appear in and defend, or settle in the
Borrower’s reasonable business judgment, any action growing out of, or in any
manner connected with, the Leases or any of them.

 

(b)          The Borrower will not: (i) enter into, amend, supplement, or
otherwise modify, terminate or cancel or accept surrender of, or consent to the
assignment or subletting of, or grant any concessions to, or waive the
performance of any obligations of any tenant, lessee or licensee under any now
existing or future Lease any Lease on terms substantially less favorable to
Borrower than those generally found in the marketplace in which the Borrower
competes for business; or (ii) enter into any oral Lease.

 

(c)          The Borrower shall not collect any rents, issues, profits,
revenues, income or other benefits payable under any of the Leases for the
Collateral Property more than one (1) month in advance (provided that the
foregoing shall not prohibit the collection of security deposits). The Borrower
shall not, directly or indirectly, cause or permit to exist, any condition which
would result in the termination or cancellation of, or which would relieve the
performance of any obligations of any tenant under, any Lease for all or any
portion of the Collateral Property to the extent the same would reasonably be
expected to result in a Material Adverse Effect.

 

§7.23     Intentionally Omitted.

 

§7.24     Project Documents. Without the prior written consent of Lender,
Borrower shall not, and shall not cause, suffer or permit Assignor or any other
Person acting on behalf of or as agent for Borrower to, (i) enter into any
Project Document, (ii) record any Project Document, (iii) modify or amend, in
any material respect, any Project Document or the form thereof previously
submitted to Lender, or (iv) cancel, terminate or surrender any Project
Document.

 

§8.        CERTAIN NEGATIVE COVENANTS OF BORROWER.

 

Borrower covenants and agrees that, so long as the Loan is outstanding.

 

§8.1       Restrictions on Indebtedness. Borrower will not create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:

 

(a)          Indebtedness of Borrower to Lender arising under any of the Loan
Documents or to the Mortgage Lender arising under any of the Mortgage Loan
Documents;

 

(b)          current liabilities of Borrower incurred in the ordinary course of
business but not incurred through (i) the borrowing of money, or (ii) the
obtaining of credit except for credit on an open account basis customarily
extended and in fact extended in connection with normal purchases of goods and
services;

 

(c)          Indebtedness in respect of taxes, assessments, governmental charges
or levies and claims for labor, materials and supplies to the extent that
payment therefor shall not at the time be required to be made in accordance with
the provisions of §7.8;

 

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(d)          Indebtedness in respect of judgments or awards that would not
constitute an Event of Default; and

 

(e)          endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business.

 

§8.2       Restrictions on Liens, Etc. Without limiting the terms of §8.1,
Borrower will not (a) create or incur or suffer to be created or incurred or to
exist any lien, encumbrance, mortgage, pledge, negative pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
rents, income or profits therefrom; (b) transfer any of its property or assets
or the income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (e) sell, assign, pledge or otherwise
transfer or encumber any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; or (f) incur or maintain any
obligation to any holder of Indebtedness of Borrower which prohibits the
creation or maintenance of any lien securing the Obligations (collectively
“Liens”); provided that Borrower, without the consent of Lender, may create or
incur or suffer to be created or incurred or to exist:

 

(i)          liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in respect of
obligations not overdue;

 

(ii)         deposits or pledges made in connection with, or to secure payment
of, worker’s compensation, unemployment insurance, old age pensions or other
social security obligations;

 

(iii)        liens in respect of judgments, awards or indebtedness, the
Indebtedness with respect to which is permitted by §8.1(d);

 

(iv)        encumbrances on the Collateral Property consisting of easements,
rights of way, covenants, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto, landlord’s or
lessor’s liens under leases to which Borrower is a party, and other minor
non-monetary liens or encumbrances none of which interferes materially with the
use, marketability or development of the property affected in the ordinary
conduct of the business of Borrower, and which encumbrances, liens or defects do
not individually or in the aggregate have a materially adverse effect on the use
or value of the Collateral Property and do not make title to such property
unmarketable by the conveyancing standards in effect where such property is
located;

 

(v)         Liens in favor of the Mortgage Lender under the Mortgage Loan
Documents.

 

(vi)        Liens in favor of Lender under the Loan Documents.

 

(vii)       Mechanic’s liens being contested in good faith in accordance with
Section 7.8.

 

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§8.3       Restrictions on Investments. Borrower will not make or permit to
exist or to remain outstanding any Investment except Investments by Borrower in:

 

(i)          marketable direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase by Borrower;

 

(ii)         [Intentionally Omitted]

 

(iii)        demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$100,000,000; provided, however, that the aggregate amount at any time so
invested with any single bank having total assets of less than $1,000,000,000
will not exceed $200,000;

 

(iv)        [Intentionally Omitted];

 

(v)         [Intentionally Omitted];

 

(vi)        repurchase agreements having a term not greater than 90 days and
fully secured by securities described in the foregoing subsection (i), (ii) or
(iii) with banks described in the foregoing subsection (iii) or with financial
institutions or other corporations having total assets in excess of
$500,000,000;

 

(vii)       shares of so-called “money market funds” registered with the SEC
under the Investment Company Act of 1940 which maintain a level per-share value,
invest principally in investments described in the foregoing subsections (i)
through (vi) and have total assets in excess of $50,000,000; and

 

(viii)      Investments by Borrower in the Collateral Property.

 

§8.4       Merger, Consolidation. Borrower will not become a party to any
merger, consolidation or other business combination or disposition of all or
substantially all of its assets, or agree to effect any acquisition of
substantially all of the assets of a Person, stock acquisition or other
acquisition which may have a similar effect as any of the foregoing without the
prior written consent of Lender, which consent may be withheld in the sole
discretion of Lender.

 

§8.5       Sale and Leaseback. Borrower will not enter into any arrangement,
directly or indirectly, whereby Borrower shall sell or transfer the Collateral
Property in order that then or thereafter Borrower or any affiliate of Borrower
shall lease back such Collateral Property.

 

§8.6       Compliance with Environmental Laws. Borrower will not and will not
permit any tenants or other occupants of the Collateral Property to do any of
the following: (a) use the Collateral Property or any portion thereof as a
facility for the handling, processing, storage or disposal of Hazardous
Substances, except for small quantities of Hazardous Substances as are
appropriate for an apartment project and used in the ordinary course of business
and in compliance with all applicable Environmental Laws, (b) cause or permit to
be located on the Collateral Property, any underground tank or other underground
storage receptacle for Hazardous Substances except in full compliance with
Environmental Laws, (c) generate any Hazardous Substances on the Collateral
Property except in full compliance with Environmental Laws, (d) conduct any
activity at the Collateral Property or use the Collateral Property in any manner
so as to cause a Release of Hazardous Substances on, upon or into the Collateral
Property or any surrounding properties or any threatened Release of Hazardous
Substances which might give rise to liability under CERCLA or any other
Environmental Law, or (e) directly or indirectly transport or arrange for the
transport of any Hazardous Substances (except in compliance with all
Environmental Laws).

 

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Borrower shall:

 

(i)          in the event of any change in Environmental Laws governing the
assessment, release or removal of Hazardous Substances, which change would lead
a prudent lender to require additional testing to avail itself of any statutory
insurance or limited liability, take all commercially reasonable action
(including, without limitation, the conducting of engineering tests at the sole
expense of Borrower) to confirm that no Hazardous Substances are or were
Released or disposed of on the Collateral Property in violation of any
Environmental Laws; and

 

(ii)         if any Release or disposal of Hazardous Substances shall occur or
shall have occurred on the Collateral Property (including without limitation any
such Release or disposal occurring prior to the acquisition or leasing of the
Collateral Property by Borrower), cause the prompt containment and removal of
such Hazardous Substances and remediation of the Collateral Property in full
compliance with all applicable laws and regulations and to the reasonable
satisfaction of Lender; provided, that Borrower shall be deemed to be in
compliance with Environmental Laws for the purpose of this clause (ii) so long
as it or a responsible third party with sufficient financial resources is taking
reasonable action to remediate or manage any event of noncompliance to the
reasonable satisfaction of Lender and no action shall have been commenced by any
enforcement agency. Lender may engage their own environmental engineer to review
the environmental assessments and Borrower’s compliance with the covenants
contained herein.

 

At any time after an Event of Default shall have occurred and be continuing
hereunder, or, whether or not an Event of Default shall have occurred and be
continuing, at any time that Lender shall have reasonable grounds to believe
that a Release or threatened Release of Hazardous Substances may have occurred
relating to the Collateral Property, or that the Collateral Property is not in
compliance with the Environmental Laws, Lender may at its election obtain such
environmental assessments of the Collateral Property prepared by an
environmental engineer as may be reasonably necessary or advisable for the
purpose of evaluating or confirming (i) whether any Hazardous Substances are
present in the soil or water at or adjacent to the Collateral Property, and
(ii) whether the use and operation of the Collateral Property complies with all
Environmental Laws. Environmental assessments may include detailed visual
inspections of the Collateral Property including, without limitation, any and
all storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
reasonably necessary or appropriate for a complete determination of the
compliance of the Collateral Property and the use and operation thereof with all
applicable Environmental Laws. All such environmental assessments shall be at
the sole cost and expense of Borrower.

 

Lender may, but shall never be obligated to remove or cause the removal of any
Hazardous Substances from the Collateral Property (or if removal is prohibited
by any Environmental Law, take or cause the taking of such other action as is
required by any Environmental Law or otherwise required by Lender) if Borrower
fails to comply with its obligations hereunder with respect thereto (without
limitation of Lender’s right to declare a default under any of the Loan
Documents and to exercise all rights and remedies available by reason thereof);
and Lender and its designees are hereby granted access to the Collateral
Property at any time or times, upon reasonable notice, and a license which is
coupled with an interest and irrevocable, to remove or cause such removal or to
take or cause the taking of any such other action. All costs, including, without
limitation, the costs incurred by Lender in taking the foregoing action,
damages, liabilities, losses, claims, expenses (including attorneys’ fees and
disbursements) which are incurred by Lender, as the result of Borrower’s failure
to comply with the provisions of this §8.6, shall be paid by Borrower to Lender
upon demand by Lender and shall be additional obligations secured by the
Security Documents.

 

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§8.7       Distributions. Borrower will not make any Distributions until all
Obligations of Borrower under the Loan Documents shall have been paid in full.

 

§8.8       Sources of Capital. Borrower shall, at all times maintain or have
committed, identifiable available sources of capital to fund the total cost to
complete the development of the Project on a timely basis in amounts and
pursuant to agreements reasonably acceptable to Lender. Amounts available to be
disbursed for such purposes pursuant to this Agreement or the Mortgage Loan
Documents may be considered as a source of capital for the purposes of this
§8.8.

 

§8.9       Asset Sales. Borrower will not sell, assign, lease or dispose of all
or substantially all of its business or assets (whether now owned or hereafter
acquired), either in a single transaction or series of transactions, or enter
into any agreement to do any of the foregoing. Borrower shall not sell,
transfer, lease or otherwise dispose of all or any portion of any asset
(including, without limitation, any interest in the Collateral Property) other
than for fair market value.

 

§8.10     Additional Restrictions Concerning the Collateral and Collateral
Property. Subject to the terms of §3.2(a) of this Agreement, and except for
Permitted Equity Transfers and Permitted Liens, Borrower will not, without the
prior written consent of Lender in each instance, directly or indirectly:
(i) sell, convey, assign, transfer, contribute, option, mortgage, pledge,
encumber, charge, hypothecate or dispose of the Collateral Property, any
Collateral or any part thereof or interest therein; or any income or profits
therefrom, or any other accounts, contract rights, general intangibles,
instruments, chattel paper or other assets or claims, whether now owned or
hereafter acquired; or (ii) create or suffer to be created or to exist any lien,
encumbrance, security interest, mortgage, pledge, restriction, attachment or
other charge of any kind upon, or any levy, seizure, attachment or foreclosure
of, the Collateral Property, any Collateral or any part thereof or interest
therein, or any income or profit therefrom, or any other accounts, contract
rights, general intangibles, instruments, chattel paper or other assets or
claims, whether now owned or hereafter acquired. For the purposes of this
paragraph, the sale, conveyance, transfer, disposition, alienation,
hypothecation or encumbering of all or any portion of any interest in Borrower
or the creation or addition of a new member, new partner or other owner of any
interest in Borrower shall be deemed to be a transfer of an interest in the
Collateral Property.

 

§8.11     Key Documents. Borrower agrees to deliver immediately to Lender copies
of any notices, certificates, requests, demands or other instruments (including
without limitation any notice of default, acceleration or the exercise or threat
of exercise of any remedies thereunder) furnished or delivered to or by Borrower
or Assignor under or in any way relating to the Mortgage Loan Documents or any
Basic Agreements.

 

§8.12     Additional Covenants with Respect to Indebtedness, Operations,
Fundamental Changes. Borrower represents, warrants and covenants as of the date
hereof and until such time as the Obligations are paid in full that Borrower:

 

(a)          does not own and will not own any asset other than the Collateral
Property;

 

(b)          is not engaged and will not engage in any business other than the
ownership and operation of the Collateral Property;

 

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(c)          does not and will not have any Subsidiaries (whether the same would
constitute an entity that could be consolidated on any of such Person’s
financial statements or a minority interest);

 

(d)          will not enter into any contract or agreement with any partner,
member, shareholder, principal or affiliate of Borrower or any affiliate of any
such partner, member, shareholder, principal or affiliate, except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other than an
affiliate;

 

(e)          has not incurred and will not incur any Indebtedness, other than
Permitted Indebtedness.

 

(f)          has not made and will not make any loans or advances to any third
party;

 

(g)          is and will remain solvent and pay its debts and liabilities
(including, without limitation, employment and overhead expenses) from its own
assets as the same shall become due;

 

(h)          has done or caused to be done and will do all things necessary to
observe limited liability company formalities, and to preserve its existence,
and will not, nor will any member thereof amend, modify or otherwise change its
operating agreement or other organizational documents in a manner which
adversely affects Borrower’s existence as a single purpose entity;

 

(i)          will conduct and operate its business as presently conducted and
operated;

 

(j)          will maintain books and records and bank accounts (if any) separate
from those of its affiliates, including its members;

 

(k)          will be, and at all times will hold itself out to the public as, a
legal entity separate and distinct from any other entity (including any
affiliate thereof, including any partner, member, shareholder or any affiliate
of any partner, member or shareholder of Borrower);

 

(l)          will file its own separate tax returns or if such returns are filed
jointly, such Persons shall be reflected as separate entities thereon;

 

(m)          will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

 

(n)          will not, nor shall any member, partner, shareholder or affiliate,
seek the dissolution or winding up, in whole or in part, of Borrower;

 

(o)          will not enter into any transaction of merger, consolidation or
other business combination, or acquire by purchase or otherwise all or
substantially all of the business or assets of, or any stock or beneficial
ownership of, any entity;

 

(p)          will not commingle the funds and other assets of Borrower with
those of any partner, member, shareholder, any affiliate or any other Person;

 

(q)          has and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other Person;

 

(r)          does not and will not hold itself out to be responsible for the
debts or obligations of any other Person; and

 

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(s)          shall comply with the provisions of the Borrower Organizational
Agreements.

 

§8.13     Modification of Organizational Agreements and other Key Documents.
Except for any modifications of the Assignor Organizational Agreements that may
be necessary to reflect a Permitted Equity Transfer, Borrower shall not, nor
shall Borrower permit any other Person to, modify, amend, cancel, release,
surrender or terminate any of the Organizational Documents, or dissolve,
liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation,
redemption, cancellation, winding-up or expiration of Borrower, Assignor, or any
of the Organizational Documents, or seek or permit the partition of any of the
assets of Borrower or Assignor, without in each instance the prior written
consent of Lender, which consent may be withheld by Lender in its sole and
absolute discretion. Notwithstanding the foregoing, however, (a) Lender shall
not unreasonably withhold its consent to any modification or amendment of
(i) the Organizational Documents which does not affect or have an impact on the
management of Borrower or Assignor, any voting rights, the rights to receive
distributions, any provisions regarding Borrower’s status as a separate,
single-purpose or bankruptcy remote entity, any provisions of the Organizational
Documents concerning actions that Borrower or Assignor is either authorized to
do or that are ultra vires, or otherwise materially affect Borrower or Assignor
or the rights and benefits afforded to Lender pursuant to this Agreement and the
other Loan Documents (such modifications or amendments described in the
foregoing proviso are hereinafter referred to as the “Minor Amendments”).

 

§8.14     Mortgage Loan Documents. Borrower shall not modify, amend, terminate,
extend or seek a consent or waiver under the Mortgage Loan Documents in any
respect without the prior written approval of Lender. Borrower shall not use or
permit the use of any proceeds of the Mortgage Loan for any purpose not included
in the Project Budget. Borrower shall fully and timely comply with all terms and
provisions of the Mortgage Loan Documents and shall at all times during
construction keep the Mortgage Loan “in balance” (including, without limitation,
the payment required under §2.10 of the Construction Loan Agreement evidencing
the Mortgage Loan).

 

§9.         DEVELOPMENT MATTERS.

 

§9.1       Borrower’s Equity. As a condition precedent to Lender’s funding of
the Loan, Borrower shall furnish to Lender evidence establishing to Lender’s
satisfaction that the Assignor, Borrower and/or Guarantors have directly or
indirectly made equity contributions to the Project in the amounts and in the
form reasonably satisfactory to Lender (“Borrower’s Minimum Equity Investment”).
Any contributor of equity shall be subordinate to Lender. No funds loaned to or
borrowed by Borrower or any Borrower Party shall count towards Borrower’s
Minimum Equity Investment.

 

§9.2       Project Changes. Borrower must obtain Lender’s prior written approval
of (v) any proposed increase in the Project Budget, (w) any allocation of
contingency funds or savings to other line items within the Project Budget, (x)
any proposed changes in the work or materials or Plans, (y) any proposed changes
to the Construction Contract, the Design Professional’s Contract or the Civil
Engineer’s Contract, or to any subcontract or to any other construction or
design related contract or (z) any new or additional contract related to the
development, construction or design of the Project (each such instance in (w),
(x), (y) or (z), a “Project Change"), which Project Change would have the effect
of (i) an increase in any line in the Project Budget by more than $50,000.00, or
(ii) changing in a material way the Construction Finish Standards, or (iii)
changing in a material way the overall aesthetic appearance of the Project or
any significant services or amenities to be provided in connection with the
Project, or (iv) diminishing the overall quality, functionality or marketability
of the Project (each case (i) through (iv), a “Material Project Change"). For
each proposed Material Project Change, Borrower will furnish copies of the
proposed Material  Project Change to Lender. For purposes of clauses (w) and (i)
in this Section 9.2, Project Budget shall be deemed to exclude the individual
line items set forth in the Schedule of Values attached as Exhibit “C” to the
Construction Contract and shall instead mean the “Hard Costs” line items set
forth in the Project Budget attached hereto as Exhibit “C”.

 

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§9.3       Development; Completion.

 

(a)          Borrower shall cause (x) development and construction of the
Project to begin by the date that is forty-five (45) days from the date hereof
and (y) development and construction of the Project to be completed to the
reasonable satisfaction of Lender on or before the Completion Date, unless
otherwise approved by Lender in writing. Borrower shall prosecute development
and construction of the Project with good faith and diligence in compliance with
the Construction Schedule. Borrower’s failure to proceed diligently and (subject
to Permitted Delay) make regular progress toward completion of the Project, as
determined by Lender acting reasonably, and/or Borrower’s failure to meet
(subject to Permitted Delay) any of the other deadlines set forth in this
Section 9.3, shall constitute an Event of Default.

 

(b)          All construction will be performed free of defects in a good and
workmanlike manner with materials which are new and of high quality. The Project
will be equipped with furnishings, fixtures and equipment which are new and of
high quality. All construction shall be performed in compliance with the Plans,
all applicable governmental approvals and all requirements of any applicable
covenants, conditions and restrictions and the Project Documents. Borrower will
promptly correct any defects in construction or material deviations from the
Plans. Borrower will not commence any phase of construction or operation until
it has secured all required permits, licenses or other authorizations from the
applicable governmental authorities. All materials and labor purchased and
employed for the Project shall be used solely for the Project and for no other
purpose. No changes will be made to the Plans except in accordance with Section
9.2 hereof, and all such changes shall be in compliance with applicable
governmental approvals. All upgrades shall be performed in compliance with the
applicable standards set forth in this subsection (b).

 

§10.      CLOSING CONDITIONS.

 

§10.1     Conditions to Loan Closing. Prior to and as a condition to the closing
of the Loan, Lender must have received and approved the items (and obtained
evidence of the satisfaction of the items) specified in this Section 10. These
items must be fully executed where applicable, and all submissions which are not
originals must be true and complete copies of these items and if requested by
Lender, must be so certified by Borrower or any Borrower Party, or both such
parties (as the case may be).

 

(a)          Loan Documents. The Loan Documents, including satisfaction by
Borrower of all of the conditions to closing set forth therein, and the Mortgage
Loan Documents.

 

(b)          Title Policy. A copy of the owner’s title insurance policy for the
Project naming Borrower as the insured thereunder and containing a “mezzanine
loan” endorsement in form and substance reasonably satisfactory to Lender.

 

(c)          Survey. The Survey which shall be prepared and be certified in
accordance with the Surveyor Certification.

 

(d)          Insurance. Evidence reasonably satisfactory to Lender that the
appropriate insurance required under Section 7.7 at the time of Closing is in
effect.

 

(e)          Formation, Authority and Good Standing Documents. The following
items:

 

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(i)          Evidence of the due organization or incorporation and good standing
of Borrower, each Assignor and each Guarantor, as certified by the Secretary of
State of such party’s state of organization or incorporation, from the
appropriate authority of such state and any other jurisdiction where the failure
to so qualify would have a Material Adverse Effect.

 

(ii)         True, correct and complete copies of all Organizational Documents.

 

(iii)        Evidence of the due authorization of this transaction by Borrower,
each Assignor and each Guarantor, including, without limitation, corporate,
partnership or limited liability company resolutions specifically authorizing
this transaction and incumbency certificates with original specimen signatures
for the officers signing the Loan Documents.

 

(f)          Opinions of Borrower’s, Assignor’s, and Guarantors’ Counsel. Legal
opinions from Borrower’s, Assignor’s, and each Guarantor’s counsel, whose
identity must be satisfactory to Lender, addressing corporate, partnership and
limited liability company organization, authority and good standing, the
enforceability of the Loan Documents, usury and such other matters which Lender
may request.

 

(g)          UCC Searches. Federal, state and local tax and judgment lien
searches and searches of the appropriate Uniform Commercial Code filing offices
showing no Liens affecting the Collateral, Borrower or the Assignor other than
the Permitted Liens.

 

(h)          Financial Statements. The most current financial statements
available for Borrower and each Guarantor, certified as required in and meeting
the other requirements of Section 6.4.

 

(i)          Appraisal. Lender is in receipt of an acceptable appraisal of the
Collateral Property which reflects both an “As-Is” value for the Collateral
Property and a “To Be Developed” value for the Collateral Property prepared by
an appraiser acceptable to Lender who is a member of the American Institute of
Collateral Property Appraisers and complying with Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("FIRREA”).

 

(j)           Environmental Report. A complete environmental report addressed to
Lender, prepared in such detail as Lender may require by a firm approved by
Lender, together with complete copies of all existing environmental and
hazardous material, studies and reports, obtained by Borrower, which
environmental reports shall be acceptable to Lender.

 

(k)          Soil Report. A reasonably acceptable soil report for the Collateral
Property prepared by a licensed soil engineer, showing the location of all
borings and containing recommendations for the design of foundations, paved
areas, and underground utilities.

 

(l)           Project Budget. The Project Budget and, if Lender requests, a
detailed explanation of the assumptions for any line item or category of costs
within the Project Budget.

 

(m)         Design Contracts. Lender shall have received a copy of the Design
Professional’s Contract with Architect, the Civil Engineer’s Contract with Civil
Engineer, and any other design or engineering contracts Borrower has entered
into.

 

(n)          Plans. One set of the Plans and a detailed listing of the Plans.

 

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(o)          Construction Schedule. A detailed schedule (the “Construction
Schedule”) of construction of the Project and corresponding expenditures showing
anticipated construction progress for each trade and showing completion of the
Project as provided in Section 9.3.

 

(p)          Permits and Governmental Approvals. Evidence that Borrower has
obtained the land disturbance permit and all other governmental approvals
necessary for construction of the Project in accordance with the Plans and the
Project Documents.

 

(q)          Zoning. Evidence confirming that the development and planned use of
the Project is in compliance with all applicable zoning Laws and other
applicable governmental approvals. The zoning endorsement required to be
delivered in connection with the issuance of the Title Policy shall satisfy this
condition unless Lender reasonably requests other information or evidence.

 

(r)           Utilities. Evidence that all sewer, water, electrical, telephone
and any other utility services are available at the Collateral Property in
adequate supply for the Collateral Property at connection costs reflected in the
Project Budget, and that no condition exists which materially adversely affects
Borrower’s right to use such services. This evidence shall include letters from
the applicable utility providers.

 

(s)          Other Contractors. A list of all other contractors or
subcontractors who will be working on the Project, a copy of the standard form
subcontract, and copies of executed subcontracts reasonably requested by Lender.

 

(t)           Project Documents. A list of any other Project Documents showing
the dollar values of such contracts and the work to be done, together with
copies of any such contracts and consents to the collateral assignment of such
Project Documents as Lender may reasonably request.

 

(u)          Tax Bill. A copy of the most recent real estate tax bills for the
Collateral Property.

 

(v)          Development Agreement. A true, correct and complete copy of the
Development Agreement.

 

(w)         Construction Contract. Lender shall have received a construction
contract between Borrower and the General Contractor in form and substance
satisfactory to Lender and which shows total costs consistent with the Project
Budget (such contract, including, without limitation, the general conditions and
any special conditions, the “Construction Contract”). Subject to Section 9.2,
the Construction Contract shall not be amended, restated, modified, replaced or
supplemented without the consent of Lender in its sole discretion.

 

(x)          Borrower’s Equity. Evidence that Borrower has invested in the
Collateral Property or otherwise expended for Project Costs in accordance with
the Project Budget Borrower’s Minimum Equity Investment as required under
Section 9.1.

 

(y)          Mortgage Loan. Evidence that the Mortgage Loan is closing
contemporaneously with the closing of the Loan and evidence that
contemporaneously with the closing of the Loan the Mortgage Lender shall be
advancing to Borrower any amounts needed for Borrower to refinance the existing
loan encumbering the Collateral Property and close the Mortgage Loan (after
taking into account the proceeds of the Loan and Borrower’s Minimum Equity
Investment) pursuant to the Mortgage Loan Documents and Lender and Mortgage
Lender shall have executed an Intercreditor Agreement satisfactory to Lender in
its sole and absolute discretion.

 

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(z)          Compliance with Laws. Evidence that the Collateral Property is in
compliance with all local, state, and federal environmental laws, and that there
are no conditions existing currently or likely to exist throughout the term of
the Loan that require or are likely to require clean-up, removal or other
remedial action pursuant to such environmental laws.

 

(aa)        Litigation. Except as disclosed on Schedule 6.7, there shall be no
pending or threatened litigation known to Borrower against Borrower, Assignor
the Guarantors or the Collateral Property.

 

(bb)       Casualty or Condemnation. No casualty has occurred or condemnation
proceeding has been initiated, which in Lender’s sole and absolute discretion,
could have a Material Adverse Effect.

 

(cc)        Material Adverse Effect. No event or series of events shall have
occurred which has resulted in a Material Adverse Effect.

 

(dd)       Representations True; No Default. Each of the representations and
warranties made by or on behalf of Borrower, Assignor, Guarantors or any of
their respective Subsidiaries contained in this Agreement, the other Loan
Documents or in any document or instrument delivered pursuant to or in
connection with this Agreement shall be true as of the date as of which they
were made and shall also be true at and as of the time of the making of the
Loan, with the same effect as if made at and as of that time (except to the
extent of changes resulting from transactions contemplated or permitted by this
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially adverse,
and except to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.

 

(ee)        No Legal Impediment. There shall be no law or regulations thereunder
or interpretations thereof that in the reasonable opinion of Lender would make
it illegal for Lender to make the Loan.

 

(ff)         Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in substance and in form to Lender, and Lender shall have
received all information and such counterpart originals or certified or other
copies of such documents as Lender may reasonably request.

 

(gg)       Additional Matters. Borrower shall have delivered to Lender such
other or additional documents, instruments, information or items as Lender may
reasonably require.

 

§11.       [INTENTIONALLY OMITTED]

 

§12.       EVENTS OF DEFAULT; ACCELERATION; ETC.

 

§12.1     Events of Default and Acceleration. If any of the following events
(“Events of Default” or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, “Defaults”) shall occur:

 

(a)          Borrower shall fail to pay any principal of the Loan when the same
shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;

 

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(b)          Borrower shall fail to pay any interest on the Loan or any other
fees or sums due hereunder or under any of the other Loan Documents, when the
same shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;

 

(c)          Borrower shall fail to comply with any of its covenants contained
in §3.2 or §§8.1, 8.2, 8.3, 8.4, 8.5, 8.7, 8.8, 8.9, 8.10, 8.13 or 8.14 hereof;

 

(d)          Borrower, Assignor, Guarantors, or any other party shall fail to
perform or cause to be performed any other term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those specified in this
§12.1);

 

(e)          any representation or warranty made by or on behalf of Borrower,
Assignor or Guarantors in this Agreement or any other Loan Document, or in any
report, certificate, financial statement, request for a Loan, or in any other
document or instrument delivered pursuant to or in connection with this
Agreement, any advance of a Loan or any of the other Loan Documents shall prove
to have been false in any material respect upon the date when made or deemed to
have been made or repeated;

 

(f)          Intentionally Omitted;

 

(g)          the occurrence of any “Default” (as defined in the Mortgage Loan
Documents) under the Mortgage Loan Documents;

 

(h)          Borrower, Assignor or any Guarantor (A) shall make an assignment
for the benefit of creditors, or admit in writing its general inability to pay
or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of any such Person of any substantial part of the assets
of any thereof, (B) shall commence any case or other proceeding relating to any
such Person under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or (C) shall take any action to
authorize or in furtherance of any of the foregoing;

 

(i)          a petition or application shall be filed for the appointment of a
trustee or other custodian, liquidator or receiver of Borrower, Assignor or any
Guarantor or any substantial part of the assets of any thereof, or a case or
other proceeding shall be commenced against any such Person under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter
in effect, and such Person shall indicate its approval thereof, consent thereto
or acquiescence therein or such petition, application, case or proceeding shall
not have been dismissed within sixty (60) days following the filing or
commencement thereof;

 

(j)          a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Borrower, Assignor or any
Guarantor bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is entered in respect of any
such Person, in each case of the foregoing in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;

 

(k)          there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 60 days, whether or not consecutive, any uninsured final
judgment against Borrower or Guarantors that, with other outstanding uninsured
final judgments, undischarged, against such Person exceeds (a) in the aggregate
$10,000.00 with respect to Borrower or (b) $10,000.00 with respect to any
Guarantor;

 

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(l)           if any of the Loan Documents or any material provision of any Loan
Documents shall be unenforceable, canceled, terminated, revoked or rescinded
otherwise than in accordance with the terms thereof or with the express prior
written agreement, consent or approval of Lender, or any action at law, suit in
equity or other legal proceeding to make unenforceable, cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of
Borrower, Assignor, any Guarantor or any of their respective holders of Voting
Interests, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the terms
thereof;

 

(m)         any dissolution, termination, partial or complete liquidation,
merger or consolidation of the Borrower, Assignor or any Guarantor or any sale,
transfer or other disposition of the assets of the Borrower or any Guarantor
other than as permitted under the terms of this Agreement or the other Loan
Documents;

 

(n)         any suit or proceeding shall be filed against Borrower, Assignor or
any Guarantor or any of their respective assets which in the good faith business
judgment of Lender after giving consideration to the likelihood of success of
such suit or proceeding and the availability of insurance to cover any judgment
with respect thereto and based on the information available to them, if
adversely determined, would have a materially adverse affect on the ability of
such Person to perform each and every one of their respective material
obligations under and by virtue of the Loan Documents;

 

(o)          Borrower, Assignor or any Guarantor shall be indicted for a federal
crime, a punishment for which could include the forfeiture of any assets of such
Person;

 

(p)         a Change of Control shall occur without the prior written approval
of Lender;

 

(q)          with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and Lender shall have determined in its reasonable
discretion that such event reasonably could be expected to result in liability
of Borrower, Assignor or any Guarantor or to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $100,000.00 and such event in the
circumstances occurring reasonably could constitute grounds for the termination
of such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan;

 

(r)          any Guarantor denies that it has any liability or obligation under
the Guaranty, or shall notify Lender of such Guarantor’s intention to attempt to
cancel or terminate the Guaranty, or shall fail to observe or comply with any
term, covenant, condition or agreement under the Guaranty;

 

(s)          any default or event of default, as defined in any of the other
Loan Documents shall occur and continue to exist beyond any applicable grace or
notice or cure period provided in such other Loan Documents;

 

(t)          any material default by Borrower shall occur under any of the Basic
Agreements, which is not cured within any applicable cure period, or any of the
Basic Agreements are terminated or amended without obtaining the approval of
Lender, if such approval is required by the Loan Documents;

 

(u)          the failure of Borrower to perform its obligations under the
Purchase Option Agreement;

 

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then, and in any such event, Lender may, by notice in writing to Borrower
declare all amounts owing with respect to this Agreement, the Notes and the
other Loan Documents to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by Borrower; provided that
in the event of any Event of Default specified in §12.1(h), §12.1(i) or
§12.1(j), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from any of Lender.

 

§12.1A. Limitation of Cure Periods. Notwithstanding anything contained in §12.1
to the contrary, (i) no Event of Default shall exist hereunder upon the
occurrence of any failure described in §12.1(a) or §12.1(b) in the event that
Borrower cures such default within five (5) days following receipt of written
notice of such default, provided, however, that Borrower shall not be entitled
to receive more than two (2) notices in the aggregate pursuant to this clause
(i) in any period of 365 days ending on the date of any such occurrence of
default, and provided further that no such cure period shall apply to any
payments due upon the maturity of the Note, and (ii) no Event of Default shall
exist hereunder upon the occurrence of any failure described in §12.1(d) or
§12.1(e) in the event that Borrower cures such default with thirty (30) days
following receipt of written notice of such default, provided that the
provisions of this clause (ii) shall not pertain to defaults consisting of a
failure to comply with §3.2 or §8 or to any default excluded from any provision
for cure of defaults contained in any other of the Loan Documents.

 

Notwithstanding anything in this Agreement or any other Loan Document to the
contrary, any reference in this Agreement or any other Loan Document to “the
continuance of a default” or “the continuance of an Event of Default” or any
similar phrase shall not create or be deemed to create any right on the part of
Borrower or any other party to cure any default following the expiration of any
applicable grace or notice and cure period.

 

In the event that Borrower obtains any knowledge that any representation or
warranty made by or on behalf of Borrower, the Guarantors or Assignor of a
Borrower in this Agreement or any of the other Loan Documents to its knowledge
and belief shall be untrue or misleading, Borrower shall promptly notify Lender
in writing of the same and shall, within thirty (30) days after learning such
representation or warranty is untrue or misleading, take such actions as are
required to cause such warranty or representation to be correct.

 

§12.2     [Intentionally Omitted.]

 

§12.3     [Intentionally Omitted.]

 

§12.4     Remedies. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not Lender shall have accelerated the
maturity of the Loan pursuant to §12.1, Lender, may proceed to protect and
enforce its rights and remedies under this Agreement, the Note or any of the
other Loan Documents by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, including to the full extent
permitted by applicable law the obtaining of the ex parte appointment of a
receiver, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right. No remedy herein conferred upon Lender or the holder of the
Note is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law. In the event that all or any portion of the Obligations
is collected by or through an attorney-at-law, Borrower shall pay all costs of
collection including, but not limited to, reasonable attorney’s fees actually
incurred. Notwithstanding anything contained herein or in the other Loan
Documents to the contrary, in the event that Lender acquires all of the
interests of Mortgage Lender under the Mortgage Loan Documents and becomes the
holder of the Mortgage Loan (in such capacity, the “Successor Mortgage Lender”),
Lender agrees that upon Guarantors executing and delivering to Successor
Mortgage Lender a Guaranty of Recourse Obligations and an Unconditional Guaranty
of Completion (in the event that construction of the Project in accordance with
the Plans has not been completed prior to such date) guaranteeing certain
obligations of the Borrower under the Mortgage Loan Documents in favor of
Successor Mortgage Lender and in form and substance materially the same as the
Guaranty executed by Guarantors on the date hereof (with such changes thereto as
Lender may reasonably request to reflect that such documents are provided to
guaranty the Borrower’s obligations with respect to the Mortgage Loan instead of
the Loan), Successor Mortgage Lender shall release the Guarantors from the
Unconditional Guaranty of Payment and Performance in favor of Mortgage Lender
dated as of even date herewith executed by Guarantors in favor of Mortgage
Lender. In no event shall the foregoing be deemed or construed as an agreement
of Lender to release the Guarantors of their respective obligations and
liabilities under the Guaranty.

 

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§12.5     Distribution of Collateral Proceeds. In the event that, following the
occurrence and during the continuance of any Event of Default, any monies are
received in connection with the enforcement of any of the Loan Documents, or
otherwise with respect to the realization upon any of the Collateral, such
monies shall be distributed for application as follows:

 

(a)          First, to the payment of, or (as the case may be) the reimbursement
of, Lender for or in respect of all reasonable costs, expenses, disbursements
and losses which shall have been incurred or sustained by Lender to protect or
preserve the collateral or in connection with the collection of such monies by
Lender, for the exercise, protection or enforcement by Lender of all or any of
the rights, remedies, powers and privileges of Lender under this Agreement or
any of the other Loan Documents in connection with protective advances or in
respect of the Collateral or in support of any provision of adequate indemnity
to Lender against any taxes or liens which by law shall have, or may have,
priority over the rights of Lender to such monies;

 

(b)          Second, to all other Obligations in such order or preference as
Lender shall determine; provided, however, that Lender may in its discretion
make proper allowance to take into account any Obligations not then due and
payable; and

 

(c)          Third, the excess, if any, shall be returned to Borrower or to such
other Persons as are entitled thereto.

 

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§12.6     Default Under Mortgage Loan Documents. Notwithstanding anything herein
to the contrary (including without limitation §12.1(f)), Borrower hereby
expressly agrees that any “Default” (as defined in the Mortgage Loan Documents)
(which shall be deemed to include maturity of the debt evidenced and secured by
any of the Mortgage Loan Documents or any other occurrence which would give any
holder of any of the Mortgage Loan Documents the right to exercise remedies
thereunder) shall constitute and be deemed to be an Event of Default under this
Agreement for which no right to cure shall be available. Without limiting the
foregoing, a “Default” under the Mortgage Loan Documents shall conclusively be
deemed to have occurred upon the declaration, statement or notice from the
applicable mortgagee as to the existence or occurrence of a “Default” under any
of the Mortgage Loan Documents. Upon the occurrence of any default under the
Mortgage Loan Documents, Borrower shall deliver to Lender within five (5)
business days after the first to occur of (x) receipt by Borrower notice of such
default from any mortgagee or (y) the date Borrower obtains actual knowledge of
the occurrence of such default, a detailed description of the actions to be
taken by Borrower to cure such default and the dates by which each such action
shall occur. Such schedule shall be subject to the approval of Lender. Borrower
shall take all such actions as are necessary to cure such default under the
Mortgage Loan Documents by the date approved by Lender, and shall deliver to
Lender not less frequently than weekly thereafter written updates concerning the
status of Borrower’s efforts to cure such default. Lender shall have the right,
but not the obligation, to pay any sums or to take any action which Lender deems
necessary or advisable to cure any default or alleged default under the Mortgage
Loan Documents (whether or not Borrower is undertaking efforts to cure such
default or the same is a “Default” under the Mortgage Loan Documents or a
Default or Event of Default hereunder), and such payment or such action is
hereby authorized by Borrower, and any sum so paid and any expense incurred by
Lender in taking any such action shall be evidenced by this Agreement and
secured by the Security Documents and shall be immediately due and payable by
Borrower to Lender upon Borrower’s receipt of written demand therefor with
interest at the rate for overdue amounts set forth in §4.11 until paid. Lender
shall be authorized to take such actions upon the assertion by any holder of any
of the Mortgage Loan Documents of the existence of such default or “Default”
without any duty to inquire or determine whether such default or “Default”
exist. The consent or waiver by a holder of the Mortgage Loan Documents of any
“Default” under the Mortgage Loan Documents or the cure of such “Default” under
the Mortgage Loan Documents shall not annul the occurrence of an Event of
Default hereunder unless otherwise approved by Lender. Borrower shall permit
Lender to enter upon the Collateral Property for the purpose of curing any
default or alleged default under the Mortgage Loan Documents or hereunder.
Borrower hereby transfers and assigns any excess proceeds arising from any
foreclosure or sale under power pursuant to the Mortgage Loan Documents, and
Borrower hereby authorizes and directs the holder or holders of the Mortgage
Loan Documents to pay such excess proceeds directly to Lender up to the amount
of the Obligations. Notwithstanding the foregoing, Lender agrees that (a) with
respect to any monetary default under the Mortgage Loan Documents (other than a
failure to pay upon maturity of the Mortgage Loan), prior to Lender commencing
any right to cure such monetary default, Lender shall provide Borrower with the
opportunity to cure such monetary default until the earlier to occur of (i) such
time as Borrower’s cure period (if any) expires under the Mortgage Loan
Documents, or (ii) Lender determining in its sole and absolute discretion that
action by Lender is necessary or appropriate to preserve or protect from loss or
impairment the rights available to Lender under the Intercreditor Agreement or
the Mortgage Loan Document, or applicable laws, all of which may be made, given
or undertaken without any notice to or consent of Borrower, (b) with respect to
any non-monetary default under the Mortgage Loan Document, prior to Lender
commencing any right to cure such non-monetary default, Lender shall provide
Borrower with the opportunity to cure such non-monetary default until the
earlier to occur of (x) 30 days following Borrower’s receipt of notice of such
non-monetary default or (y) Lender determining in its sole and absolute
discretion that action by Lender is necessary or appropriate to preserve or
protect from loss or impairment the rights available to Lender under the
Intercreditor Agreement or the Mortgage Loan Document, or applicable laws, all
of which may be made, given or undertaken without any notice to or consent of
Borrower.

 

§12.7     Replacement of Developer.

 

(a)          Upon the occurrence and during the continuance of any Event of
Default, Lender may direct Borrower in writing to, and Borrower shall replace
Oxford Properties, LLC as the developer of the Project, or such portions thereof
as Lender may direct with a developer approved by Lender, subject to any
conditions in the applicable Mortgage Loan Documents to the qualifications and
approval of such developer agent and the form and terms of any new development
management agreement. Borrower hereby irrevocably constitutes and appoints
Lender its true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to do and perform any acts
which are referred to in this §12.7(a), in the name and on behalf of Borrower.
The power vested in such attorney-in-fact is, and shall be deemed to be, coupled
with an interest and irrevocable.

 

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(b)          Upon the written demand of Lender following the occurrence of and
during the continuance of an Event of Default, Borrower shall deliver or cause
to be delivered to Lender or Lender’s designee all books, records, contracts,
files and other correspondence relating to the Collateral Property and other
property and assets of Borrower. In addition, upon the occurrence and during the
continuance of an Event of Default, Borrower shall upon the written demand of
Lender cause all earnest money deposits, tenant security deposits (whether in
the form of cash, letter of credit or otherwise) and other refundable deposits
paid to or held by or on behalf of Borrower in connection with the contracts to
purchase property to be delivered to Lender, subject to the rights of the
Mortgage Lender under the Mortgage Loan Documents.

 

§13.       SETOFF.

 

Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits (general or specific, time or demand, provisional
or final, regardless of currency, maturity, or the branch where such deposits
are held) or other sums credited by or due from Lender to Borrower or Assignor
and any securities or other property of Borrower in the possession of Lender may
be applied to or set off against the payment of Obligations and any and all
other liabilities, direct, or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, of such Person to Lender.

 

§14.       INTENTIONALLY OMITTED.

 

§15.       EXPENSES. Borrower agrees to pay (a) the reasonable costs and
expenses of producing and reproducing this Agreement, the other Loan Documents
and the other agreements and instruments mentioned herein, (b) any taxes
(including any interest and penalties in respect thereto) payable by Lender
(other than taxes based upon Lender’s net income or franchise taxes of Lender),
including any recording, mortgage, documentary or intangibles taxes in
connection with the Security Documents and other Loan Documents, or other taxes
payable on or with respect to the transactions contemplated by this Agreement,
including any taxes payable by Lender after the Closing Date (Borrower hereby
agreeing to indemnify Lender with respect thereto), (c) all title insurance
premiums, appraisal fees, engineer’s fees, engineering and environmental reviews
and the reasonable fees, expenses and disbursements of Lender’s counsel incurred
in connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, and
amendments, modifications, approvals, consents or waivers hereto or hereunder,
(d) the reasonable fees, costs, expenses and disbursements of Lender incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein or the addition or substitution
of other Collateral, (e) all reasonable out of pocket expenses (including
reasonable attorneys’ fees and costs actually incurred, which attorneys may be
employees of Lender and the fees and costs of appraisers, engineers, investment
bankers, surveyors or other experts retained by Lender in connection with any
such enforcement proceedings) incurred by Lender in connection with (i) the
enforcement of or preservation of rights under any of the Loan Documents against
Borrower or the administration thereof after the occurrence of a Default or
Event of Default, (ii) the sale of, collection from or other realization upon
any of the Collateral, (iii) the failure by Borrower or Assignor or any other
person pledging Collateral to perform or observe any provision of the Loan
Documents, and (iv) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to Lender’s relationship with
Borrower, Assignor or the Guarantors, (f) all reasonable fees, expenses and
disbursements of Lender incurred in connection with UCC searches, UCC filings,
title rundowns or title searches, (g) all reasonable costs incurred by Lender in
the future in connection with its inspection of the Collateral Property, and (h)
the reasonable fees, costs, expenses and disbursements of Lender incurred in
connection with the execution and delivery of this Agreement and the other Loan
Documents (without duplication of any of the items listed above), including,
without limitation, the costs incurred by Lender in connection with its
inspection of such Collateral, and the fees and disbursements of Lender’s
counsel. The covenants of this §15 shall survive payment or satisfaction of
payment of amounts owing with respect to the Note.

 

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

 

§17.      SURVIVAL OF COVENANTS, ETC.

 

All covenants, agreements, representations and warranties made herein, in the
Note, in any of the other Loan Documents or in any documents or other papers
delivered by or on behalf of Borrower, Assignor or the Guarantors shall be
deemed to have been relied upon by Lender, notwithstanding any investigation
heretofore or hereafter made by it, and shall survive the making by Lender of
the Loan, as herein contemplated, and shall continue in full force and effect so
long as any amount due under this Agreement or the Note or any of the other Loan
Documents remains outstanding. The indemnification obligations of Borrower
provided herein and the other Loan Documents shall survive the full repayment of
amounts due and the termination of the obligations of Lender hereunder and
thereunder to the extent provided herein and therein. All statements contained
in any certificate or other paper delivered to Lender at any time by or on
behalf of Borrower, Assignor or the Guarantors pursuant hereto or in connection
with the transactions contemplated hereby shall constitute representations and
warranties by such Person hereunder.

 

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§18.       ASSIGNMENT AND PARTICIPATION.

 

§18.1     Assignment. Lender may assign to one or more Persons all or a portion
of its interests, rights and obligations under this Agreement, the Note and the
other Loan Documents. Borrower shall execute such amendments to the Loan
Documents as may be requested by Lender to effect such assignment; provided that
any such amendments shall not increase (i) any monetary obligation of Borrower
under the Loan Documents or (ii) any other obligation of Borrower under the Loan
Documents in any materially adverse respect. Notwithstanding the foregoing, at
the request of Lender, Borrower shall deliver one or more new component notes to
replace the original Note or modify the original Note to reflect multiple
components of the Loan (and such new notes or modified note shall have the same
initial weighted average spread as the original note).

 

§18.2     Participations. Lender may sell participations to one or more Persons
in all or a portion of Lender’s rights and obligations under this Agreement and
the other Loan Documents; provided that (a) any such sale or participation shall
not affect the rights and duties of the selling Lender hereunder to Borrower,
(b) such participation shall not entitle such participant to any rights or
privileges under this Agreement or any Loan Documents, including without
limitation, the right to approve waivers, amendments or modifications other than
rights to approve any additional funding by Lender beyond the Loan amount and
(c) such participant shall have no direct rights against Borrower except the
rights granted to Lender pursuant to §13.

 

§18.3     Pledge by Lender. Lender may at any time pledge or assign all or any
portion of its interest and rights under this Agreement (including all or any
portion of the Note). No such pledge or the enforcement thereof shall release
the pledgor Lender from its obligations hereunder or under any of the other Loan
Documents.

 

§18.4     No Assignment by Borrower. None of Borrower, Assignor or the
Guarantors shall assign or transfer any of their respective rights or
obligations under any of the Loan Documents without the prior written consent of
Lender.

 

§18.5     Disclosure. Borrower agrees that in addition to disclosures made in
accordance with standard banking practices Lender may disclose information
obtained by Lender pursuant to this Agreement to assignees or participants and
potential assignees or participants hereunder.

 

§19.       NOTICES.

 

Each notice, demand, election or request provided for or permitted to be given
pursuant to this Agreement (hereinafter in this §19 referred to as “Notice”) but
specifically excluding to the maximum extent permitted by law any notices of the
institution or commencement of foreclosure proceedings, except for any notice
required under applicable law to be given in another manner, shall be deemed to
have been properly given, served and received (i) if delivered by hand, when
delivered, (ii) if sent by reputable overnight courier when delivered as
evidenced by the signed receipt therefor and (iii) if mailed by United States
certified or registered mail, postage prepaid, return receipt requested, on the
date reflected on the return receipt therefor:

 

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If to Lender, to such party at:

 

Summit Crossing Mezzanine Lending, LLC

c/o Preferred Apartment Communities, Inc.
One Overton Park
3625 Cumberland Blvd., Suite 400
Atlanta, Georgia 30339 

Attn: Leonard A. Silverstein, Esq.

 

With a copy to:

 

McKenna Long & Aldridge LLP
303 Peachtree Street, Suite 5300
Atlanta, Georgia 30308
Attn: Jess A. Pinkerton, Esq.

 

If to Borrower or Guarantors, to such party at:

 

Oxford Summit Apartments II LLC
One Overton Park
3625 Cumberland Blvd., Suite 500
Atlanta, Georgia 30339
Attn: W. Daniel Faulk, Jr.

 

With a copy to:

 

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

 

Each Notice shall be effective upon being personally delivered or upon being
sent by overnight courier or upon being deposited in the United States Mail as
aforesaid. The time period in which a response to such Notice must be given or
any action taken with respect thereto (if any), however, shall commence to run
from the date of receipt if personally delivered or sent by overnight courier,
or if so deposited in the United States Mail, the earlier of three (3) Business
Days following such deposit or the date of receipt as disclosed on the return
receipt. Rejection or other refusal to accept or the inability to deliver
because of changed address for which no notice was given shall be deemed to be
receipt of the Notice sent. By giving at least fifteen (15) days prior Notice
thereof, any party hereto shall have the right from time to time and at any time
during the term of this Agreement to change their respective addresses and each
shall have the right to specify as its address any other address within the
United States of America.

 

§20.       RELATIONSHIP.

 

Lender does not have any fiduciary relationship with or fiduciary duty to
Borrower arising out of or in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereunder or thereunder, and the
relationship between Lender and Borrower is solely that of a lender and
borrower, and nothing contained herein or in any of the other Loan Documents
shall in any manner be construed as making the parties hereto partners, joint
venturers or any other relationship other than lender and borrower.

 

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

 

THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF
GEORGIA AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE
OF LAW). BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
GEORGIA ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON SUCH PERSON BY MAIL AT THE ADDRESS SPECIFIED IN §19. BORROWER HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

 

§22.       HEADINGS.

 

The captions in this Agreement are for convenience of reference only and shall
not define or limit the provisions hereof.

 

§23.      COUNTERPARTS.

 

This Agreement and any amendment hereof may be executed in several counterparts
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.

 

§24.      ENTIRE AGREEMENT, ETC.

 

The Loan Documents and any other documents executed in connection herewith or
therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated, except as provided in §26.

 

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

 

EACH OF BORROWER AND LENDER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS §25.
BORROWER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS §25 WITH ITS
LEGAL COUNSEL AND THAT IT AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND
VOLUNTARY ACT.

 

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§26.       CONSENTS, AMENDMENTS, WAIVERS, ETC.

 

Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other instrument related hereto or mentioned herein may
be amended, and the performance or observance by Borrower of any terms of this
Agreement or such other instrument or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of
Lender. No waiver under the Loan Documents shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of Lender in exercising any
right under the Loan Documents shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon Borrower shall entitle Borrower
to other or further notice or demand in similar or other circumstances.

 

§27.       SEVERABILITY.

 

The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.

 

§28.       NO UNWRITTEN AGREEMENTS.

 

THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

 

§29.       TIME OF THE ESSENCE.

 

Time is of the essence with respect to each and every covenant, agreement and
obligation of Borrower under this Agreement and the other Loan Documents.

 

§30.       RIGHTS OF THIRD PARTIES.

 

(a)          This Agreement and the other Loan Documents are made and entered
into for the sole protection and legal benefit of Borrower, Lender, and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.

 

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(b)          All conditions to the performance of the obligations of Lender
under this Agreement, including the obligation to make Loan, are imposed solely
and exclusively for the benefit of Lender and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms or be entitled to assume that Lender will refuse to make advances of
proceeds of the Loan in the absence of strict compliance with any or all thereof
and no other Person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any and all of which may be freely waived in
whole or in part by Lender at any time if in their sole discretion they deem it
desirable to do so. In particular, Lender makes no representation and assumes no
obligation as to third parties concerning the quality of the construction by
Borrower, Assignor or Guarantors, as applicable, of the Collateral Property or
the absence therefrom of defects.

 

§31.       REPLACEMENT NOTES.

 

Upon receipt of evidence reasonably satisfactory to Borrower of the loss, theft,
destruction or mutilation of the Note, and in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
to Borrower or, in the case of any such mutilation, upon surrender and
cancellation of the Note, Borrower will execute and deliver, in lieu thereof, a
replacement Note, identical in form and substance to the Note and dated as of
the date of the Note and upon such execution and delivery all references in the
Loan Documents to such Note shall be deemed to refer to such replacement Note.

 

§32.       USA PATRIOT ACT NOTICE. Lender hereby notifies Borrower that pursuant
to the requirements of the Patriot Act, it is required to obtain, verify and
record information that identifies Borrower, which information includes the
names and addresses of Borrower and other information that will allow Lender to
identify Borrower in accordance with the Patriot Act.

 

§33.       ATTORNEYS’ FEES. As used in this Agreement and in the other Loan
Documents, “reasonable” attorneys’ fees of Lender’s counsel shall mean the
actual fees of Lender’s counsel billed at the usual hourly rates of such
counsel, rather than a percentage of principal and interest as provided in
O.C.G.A. § 13-1-11(a)(2).

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.

 

 

OXFORD SUMMIT APARTMENTS II LLC, a

Georgia limited liability company

      By: Oxford Summit Development II LLC, a
Georgia limited liability company, its sole
Member and Manager           By: /s/ W. Daniel Faulk, Jr. [Seal]     Name: W.
Daniel Faulk, Jr.       Its: Manager  

 

One Overton Park

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

 

 

 

 

 

SUMMIT CROSSING MEZZANINE LENDING,

LLC, a Georgia limited liability company

      By: Preferred Apartment Advisors, LLC, its Agent           By: /s/ John A.
Williams     Name: John A. Williams     Title: President and Chief Executive
Officer

 

c/o Preferred Apartment Communities, Inc.

One Overton Park
3625 Cumberland Blvd., Suite 400

Atlanta, GA 30339

Attn: Leonard A. Silverstein, Esq.

 

 

 

 

EXHIBIT A

FORM OF NOTE

 

$____________ ____________, 20__

 

FOR VALUE RECEIVED, the undersigned, OXFORD SUMMIT APARTMENTS II LLC, a Georgia
limited liability company, hereby promises to pay to the order of SUMMIT
CROSSING MEZZANINE LENDING, LLC, a Georgia limited liability company in
accordance with the terms of that certain Mezzanine Loan Agreement dated as of
______________, 20__, as from time to time in effect, among the undersigned and
Summit Crossing Mezzanine Lending, LLC, (the “Loan Agreement”) to the extent not
sooner paid, on or before the Maturity Date, the principal sum of
_________________________ AND NO/100 DOLLARS ($_______.00), or such amount as
may be advanced by the payee hereof under the Loan Agreement, together with such
additional principal from time to time outstanding under the Loan Agreement,
with daily interest from the date hereof, computed as provided in the Loan
Agreement, on the principal amount hereof from time to time unpaid, at a rate
per annum on each portion of the principal amount which shall at all times be
equal to the rate of interest applicable to such portion in accordance with the
Loan Agreement, and with interest on overdue principal and, to the extent
permitted by applicable law, on overdue installments of interest and late
charges at the rates provided in the Loan Agreement. Interest shall be payable
on the dates specified in the Loan Agreement, except that all accrued interest
shall be paid at the stated or accelerated maturity hereof or upon the
prepayment in full hereof. Capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Loan Agreement.

 

Payments hereunder shall be made to Summit Crossing Mezzanine Lending, LLC, at
c/o Preferred Apartment Communities Inc. One Overton Park, 3625 Cumberland
Blvd., Suite 400, Atlanta, Georgia 30339, Attn: Leonard A. Silverstein, Esq., as
provided in the Loan Agreement

 

This Note is one of one or more Notes evidencing borrowings under and is
entitled to the benefits and subject to the provisions of the Loan Agreement.
The principal of this Note may be due and payable in whole or in part prior to
the Maturity Date and is subject to mandatory prepayment in the amounts and
under the circumstances set forth in the Loan Agreement, and may be prepaid in
whole or from time to time in part, all as set forth in the Loan Agreement.

 

Notwithstanding anything in this Note to the contrary, all agreements between
the undersigned Borrower and Lender, whether now existing or hereafter arising
and whether written or oral, are hereby limited so that in no contingency,
whether by reason of acceleration of the maturity of any of the Obligations or
otherwise, shall the interest contracted for, charged or received by Lender
exceeds the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to Lender in excess
of the maximum lawful amount, the interest payable to Lender shall be reduced to
the maximum amount permitted under applicable law; and if from any circumstance
Lender shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal balance of the Obligations of
the undersigned Borrower and to the payment of interest or, if such excessive
interest exceeds the unpaid balance of principal of the Obligations of the
undersigned Borrower, such excess shall be refunded to the undersigned Borrower.
All interest paid or agreed to be paid to Lender shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal of the Obligations of the
undersigned Borrower (including the period of any renewal or extension thereof)
so that the interest thereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control all agreements
between the undersigned Borrower and Lender.

 

Exhibit “A” - Page 1

 

 

In case an Event of Default shall occur, the entire principal amount of this
Note plus all accrued and unpaid interest may become or be declared due and
payable in the manner and with the effect provided in said Loan Agreement. In
addition to and not in limitation of the foregoing and the provisions of the
Loan Agreement hereinabove defined, the undersigned further agrees, subject only
to any limitation imposed by applicable law, to pay all expenses, including
reasonable attorneys’ fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.

 

This Note shall be governed by and construed in accordance with the internal
laws of the State of Georgia (without giving effect to the conflict of laws
rules of any jurisdiction).

 

The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Loan Agreement, and assent to extensions
of time of payment or forbearance or other indulgence without notice.

 

IN WITNESS WHEREOF the undersigned has duly executed this Note under seal as of
the day and year first above written.

 

 

OXFORD SUMMIT APARTMENTS II LLC, a

Georgia limited liability company

      By:

Oxford Summit Development II LLC, Its

Managing Member

          By:   [Seal]     Name: W. Daniel Faulk, Jr.       Its: Manager  

 

Exhibit “A” - Page 2

 

  

EXHIBIT B

LEGAL DESCRIPTION

 

ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 557, 596, 597, and
598 of the 2nd District 1st Section of Forsyth County, Georgia and being more
particularly described as follows:

 

Beginning at an Iron Pin Set at the Corner common to Land Lots 555, 556, 597,
and 598, said iron pin being the TRUE POINT OF BEGINNING; thence along the Land
Lot Line common to Land Lots 556 and 597 North 89 degrees 07 minutes 40 seconds
East a distance of 1,047.59 feet to a point located at the Land Lot Corner
common to Land Lots 556, 557, 596, and 597; thence continuing along said Land
Lot Line common to Land Lots 557 and 596 North 87 degrees 59 minutes 59 seconds
East a distance of 9.65 feet to a point; thence leaving said Land Lot Line South
01 degrees 39 minutes 18 seconds East a distance of 154.43 feet to a point on
the northwesterly right of way line of Ronald Reagan Boulevard (100’ R/W);
thence continuing along said right of way line the following courses and
distances; South 82 degrees 45 minutes 12 seconds West a distance of 192.28 feet
to a point; thence 517.32 feet along an arc of a curve to the left, said curve
having a radius of 780.00 feet and a chord bearing and distance of South 63
degrees 45 minutes 12 seconds West 507.89 feet to a point; thence South 44
degrees 45 minutes 12 seconds West a distance of 258.55 feet to a point; thence
North 00 degrees 14 minutes 48 seconds West a distance of 42.43 feet to a point;
thence South 89 degrees 45 minutes 12 seconds West a distance of 20.00 feet to a
point; thence South 00 degrees 14 minutes 48 seconds East, 34.14 feet to a
point; thence South 44 degrees 45 minutes 12 seconds West a distance of 158.48
feet to a point in the centerline of an unnamed creek, said point being referred
to as Point “C”; thence following the centerline of said creek and the
meanderings thereof 685 feet more or less to a point located at the intersection
of the centerline of creek and the Southeasterly Right-of-Way Line of Georgia
Highway 400 ( Variable R/W), said point being referred to as Point “E” ( the
terminus of said traverse line); said traverse line from Point “C” to Point “E”
having the following courses and distances: North 19 degrees 17 minutes 58
seconds West a distance of 339.82 feet to a traverse point, said point being
referred to as Point "D"; thence North 78 degrees 05 minutes 11 seconds West a
distance of 361.64 feet to a point, said point being the termination of said
traverse line and Point "E”); thence leaving the centerline of said creek and
continuing along said right-of-way line the following courses and distances:
North 47 degrees 28 minutes 00 seconds East a distance of 146.63 feet to a
Concrete Monument Found; thence North 41 degrees 20 minutes 04 seconds East a
distance of 243.10 feet to an Iron Pin Found (3/4" Open Top Pipe) at the
intersection of said right-of-way line and the Land lot Line common to Land lots
555 and 598; thence leaving said right-of-way line and along said Land Lot Line
South 88 degrees 43 minutes 26 seconds East a distance of 95.93 feet to an Iron
Pin Set and the TRUE POINT OF BEGINNING.

 

Said tract containing 10.45 acres more or less, and being the same property
shown as "Tract 2-1" on that certain Minor Plat, dated May 1, 2012, prepared by
William H. Kelly, Jr., Georgia Registered Land Surveyor No. 2489, of Planners
and Engineers Collaborative, and recorded on May 3, 2012, at Plat Book 133,
Pages 212-215, Forsyth County, Georgia records.

 

Exhibit “B” - Page 1

 

 

EXHIBIT C
PROJECT BUDGET

 

Exhibit “C” - Page 1

 

 

 

SCHEDULE 6.7

LITIGATION

none

 

Schedule 6.7 – Page 1

 

 

schedule 6.18

 

environmental matters

 

Report of Geotechnical Exploration and Phase I Environmental Site Assessment for
Oxford Summit II, dated March 30, 2012, prepared by United Consulting, Project
No. 2005.1146.04.

 

Schedule 6.18 – Page 1

 

 

SCHEDULE 6.33

 

ORGANIZATIONAL AGREEMENTS

 

Operating Agreement of Oxford Summit Apartments II LLC dated as of May 7, 2012

 

Articles of Organization for Oxford Summit Apartments II LLC dated as of March
22, 2012

 

Certificate for Membership Interest in Oxford Summit Apartments II LLC –
Certificate No. 1— issued in favor of Oxford Summit Development II LLC

 

Operating Agreement of Oxford Summit Development II LLC dated as of May 7, 2012

 

Articles of Organization for Oxford Summit Development II LLC dated as of March
22, 2012

 

Schedule 6.33 – Page 1

 

 

SCHEDULE 6.34

 

OWNERSHIP

 

Oxford Summit Development II LLC owns 100% of the membership interests in Oxford
Summit Apartments II LLC

 

The membership interests in Oxford Summit Development II LLC are owned as
follows:

 

Faulk Family LLC   47.8% Richard Denny   27.2% Jay Williams   10% Bill Hargett 
 7% Greg Kotarba   2.5% Keith Roswell   2.5% Jack Hinrichs   1.5% Ellen Chiang 
 1.5%

 

Schedule 6.34 – Page 1

 

 

§1. DEFINITIONS AND RULES OF INTERPRETATION 1           §1.1 Definitions 1  
§1.2 Rules of Interpretation 11         §2. THE loan 11           §2.1 Loan
Funding 11   §2.2 Note 11   §2.3 Interest on Loan 12   §2.4 Intentionally
Deleted 12   §2.5 Intentionally Deleted 12   §2.6 Use of Proceeds 12   §2.7
Project Costs 12   §2.8 Project Budget 12   §2.9 Modifications to Project Budget
12   §2.10 Disbursements to Borrower from Project Budget 12         §3.
REPAYMENT OF THE LOAN 12           §3.1 Stated Maturity 12   §3.2 Mandatory
Prepayments 13   §3.3 Optional Prepayments 13   §3.4 Partial Prepayments 13  
§3.5 Exit Fees 13   §3.6 Effect of Prepayments 13         §4. CERTAIN GENERAL
PROVISIONS 13           §4.1 [Intentionally Omitted] 13   §4.2 Lender Fees 13  
§4.3 Funds for Payments 13   §4.4 Computations 14   §4.5 [Intentionally Omitted]
14   §4.6 [Intentionally Omitted] 14   §4.7 [Intentionally Omitted] 14   §4.8
[Intentionally Omitted] 14   §4.9 [Intentionally Omitted] 14   §4.10 Indemnity
of Borrower 14   §4.11 Interest on Overdue Amounts; Late Charge 14   §4.12
Certificate 14   §4.13 Limitation on Interest 15         §5. COLLATERAL SECURITY
AND GUARANTY 15           §5.1 Collateral 15   §5.2 Release of Collateral 15    
    §6. REPRESENTATIONS AND WARRANTIES 15           §6.1 Authority, Etc 15  
§6.2 Approvals 16   §6.3 Title to Properties; Leases 16

 

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Table of Contents

(continued)

 

      Page           §6.4 Financial Statements 16   §6.5 No Material Changes 17
  §6.6 Franchises, Patents, Copyrights, Etc 17   §6.7 Litigation; Judgments 17  
§6.8 No Materially Adverse Contracts, Etc 17   §6.9 Compliance with Other
Instruments, Laws, Etc 17   §6.10 Tax Status 17   §6.11 No Event of Default 18  
§6.12 Holding Company and Investment Company Acts 18   §6.13 Absence of UCC
Financing Statements, Etc 18   §6.14 Setoff, Etc 18   §6.15 Certain Transactions
18   §6.16 Employee Benefit Plans 18   §6.17 [Intentionally Omitted.] 19   §6.18
Environmental Compliance 19   §6.19 [Intentionally Omitted.] 20   §6.20
[Intentionally Omitted.] 20   §6.21 Regulations U and X 20   §6.22
[Intentionally Omitted.] 20   §6.23 Loan Documents 20   §6.24 Collateral
Property 20   §6.25 Brokers 22   §6.26 Other Debt 22   §6.27 Use of Proceeds 22
  §6.28 Transaction in Best Interests of Parties; Consideration 23   §6.29
Solvency 23   §6.30 No Bankruptcy Filing 23   §6.31 No Fraudulent Intent 23  
§6.32 Special Purpose Entity; Restrictions 23   §6.33 Organizational Documents
23   §6.34 Ownership 24   §6.35 Embargoed Persons 24   §6.36 Mortgage Loan
Documents 24         §7. AFFIRMATIVE COVENANTS OF BORROWER 25           §7.1
Punctual Payment 25   §7.2 Maintenance of Office 25   §7.3 Records and Accounts
25   §7.4 Financial Statements, Certificates and Information 25   §7.5 Notices
26   §7.6 Existence; Maintenance of Properties 27   §7.7 Insurance 27   §7.8
Taxes 28   §7.9 Inspection of Properties and Books 28   §7.10 Compliance with
Laws, Contracts, Licenses, and Permits 28

 

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Table of Contents

(continued)

 

      Page         §7.11  Monthly Meetings 28 §7.12  Further Assurances 28
§7.13  [Intentionally Omitted.] 28 §7.14  [Intentionally Omitted.] 29 §7.15 
Casualty 29 §7.16  Condemnation 29 §7.17  Compliance 29 §7.18  Plan Assets, etc
29 §7.19  Preservation and Maintenance 30 §7.20  [Intentionally Omitted.] 30
§7.21  Borrower to Remain a Single-Purpose Entity 30 §7.22  Leases 31 §7.23 
Intentionally Omitted 31 §7.24  Project Documents 31         §8. CERTAIN
NEGATIVE COVENANTS OF BORROWER 31           §8.1 Restrictions on Indebtedness 31
  §8.2 Restrictions on Liens, Etc 32   §8.3 Restrictions on Investments 33  
§8.4 Merger, Consolidation 33   §8.5 Sale and Leaseback 33   §8.6 Compliance
with Environmental Laws 33   §8.7 Distributions 35   §8.8 Sources of Capital 35
  §8.9 Asset Sales 35   §8.10 Additional Restrictions Concerning the Collateral
and Collateral Property 35   §8.11 Key Documents 35   §8.12 Additional Covenants
with Respect to Indebtedness, Operations, Fundamental Changes 35   §8.13
Modification of Organizational Agreements and other Key Documents 37   §8.14
Mortgage Loan Documents 37         §9. DEVELOPMENT MATTERS 37         §9.1 
Borrower’s Equity 37 §9.2  Project Changes 37 §9.3  Development; Completion 38  
      §10. CLOSING CONDITIONS 38         §10.1  Conditions to Loan Closing 38  
      §11. [INTENTIONALLY OMITTED] 41         §12. EVENTS OF DEFAULT;
ACCELERATION; ETC 41           §12.1 Events of Default and Acceleration 41  
§12.2 [Intentionally Omitted.] 44   §12.3 [Intentionally Omitted.] 44

 

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Table of Contents

(continued)

 

      Page           §12.4 Remedies 44   §12.5 Distribution of Collateral
Proceeds 45   §12.6 Default Under Mortgage Loan Documents 46   §12.7 Replacement
of Developer 46       §13. SETOFF 47       §14. INTENTIONALLY OMITTED 47      
§15. EXPENSES 47       §16. INDEMNIFICATION 48       §17. SURVIVAL OF COVENANTS,
ETC 48       §18. ASSIGNMENT AND PARTICIPATION 49           §18.1 Assignment 49
  §18.2 Participations 49   §18.3 Pledge by Lender 49   §18.4 No Assignment by
Borrower 49   §18.5 Disclosure 49         §19. NOTICES 49       §20.
RELATIONSHIP 50       §21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE 51
      §22. HEADINGS 51       §23. COUNTERPARTS 51       §24. ENTIRE AGREEMENT,
ETC 51       §25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS 51       §26.
CONSENTS, AMENDMENTS, WAIVERS, ETC 52       §27. SEVERABILITY 52       §28. NO
UNWRITTEN AGREEMENTS 52       §29. TIME OF THE ESSENCE 52       §30. RIGHTS OF
THIRD PARTIES 52       §31. REPLACEMENT NOTES 53       §32. USA PATRIOT ACT
NOTICE 53       §33. ATTORNEYS’ FEES 53

 

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