Exhibit 10.4

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”), dated as of December 20, 2013, between
GGT SPRING TOWN TX, LLC, a Delaware limited liability company (“Borrower”), and
SYNOVUS BANK, a Georgia state banking corporation (“Lender”).

WHEREAS, Borrower has applied to Lender for a loan to be used for the purposes
hereinafter described, and Lender has agreed to make such loan on the terms and
conditions herein contained.

ARTICLE I

DEFINITIONS

The following terms shall have the meanings set forth below:

Affiliate: With respect to any Person, (a) each Person that controls, is
controlled by or is under common control with such Person, and (b) each Person
that, directly or indirectly, owns or controls, whether beneficially or as a
trustee, guardian or other fiduciary, any of the stock of such Person.

Assignment: The Assignment of Rents and Leases from Borrower to Lender of even
date herewith, as the same may be amended, assigning to Lender all leases and
rents with respect to the Project.

Assignment of Deposit: The Assignment of Deposit Account from Guarantor to
Lender of even date herewith, as the same may be amended.

Cost Budget: The cost budget for the Project, initially in the form of Exhibit B
attached hereto, as the same may be amended from time to time with Lender’s
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed.

Default: The occurrence of any event or condition which would, with the giving
of any required notice, lapse of any applicable grace or cure period, or both,
would constitute an Event of Default.

Distributions: Has the meaning set forth in Section 5.21.

Equity Requirement: A total equity contribution of $13,740,000.00 (or 30% of
total costs pursuant to the Cost Budget, if greater), subject to adjustment as
expressly provided in this Agreement.

Event of Default: Has the meaning given in Article VI hereof.

Force Majeure Event: Strikes, lock-outs, war, civil disturbance, natural
disaster, acts of terrorism or, acts of God, governmental regulation of the sale
of materials and supplies or the transportation thereof, shortages of material
or labor resulting directly from general market shortages, governmental control
or diversion, delays in governmental authorities conducting inspections, issuing
licenses or permits or requiring additional approvals or imposing additional
restrictions not reasonably foreseeable based on laws in existence as of the
date hereof and other causes beyond Borrower’s reasonable control, other than
shortage of funds, which cause a delay in Borrower’s performance of an
obligation related to construction of the Project.

 

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General Construction Contract: The guaranteed maximum price general construction
contract dated December 20, 2013, between Borrower and General Contractor, with
such change orders and amendments permitted thereunder that are either expressly
permitted by this Agreement or approved in writing by Lender.

General Contractor: MCRT Gulf Coast/Southwest Construction LLC, a Delaware
limited liability company, as general contractor for the Project, or any
replacement general contractor selected by Borrower, subject to Lender’s
approval, which approval shall not be unreasonably withheld, conditioned or
delayed.

Guarantor: MCRT West Assurance XIX LLC, a Delaware limited liability company,
and its successors and assigns; provided, however, that in the event that
Guarantor is unable to perform its obligations under the Guaranty or that
Investor exercises its rights under the operating agreement for Borrower,
Investor is hereby approved by the Lender as a substitute Guarantor to act in
place of Guarantor, provided that Investor is at the date of substitution a
similarly (or better) capitalized entity that can comply with the financial
obligations in the Guaranty, complies with the Assignment of Deposit and agrees
in writing to be bound by the terms, conditions, and provisions of the Guaranty,
the Indemnity, and any other Loan Documents to which the Guarantor is, or may be
hereafter become, a party.

Guaranty: The Payment and Performance Guaranty Agreement from Guarantor to
Lender of even date herewith, as the same may be amended, guaranteeing repayment
of the Loan, with interest thereon, and other obligations in connection
therewith, and performance of Borrower’s obligations pursuant to the Loan
Documents, all to the extent set forth therein.

In Balance: The comparison of (a) the cost reasonably estimated by Lender to
complete the Project, including payment of both hard costs and soft costs of the
types set forth in subcategories under the “Construction Related Items” of the
Cost Budget, plus Retainage that has been withheld from prior advances of the
Loan to the extent not included in such costs (but without duplication) to
(b) the remaining unadvanced Loan funds in such subcategories, including
Retainage withheld from prior Loan advances, plus amounts that Borrower has
placed on deposit with Lender pursuant to Section 5.7. For purposes of such
comparison, the unexpended amount budgeted under the subcategories under
“Non-Construction Items and Interest” (unless and until reallocated to another
category, with Lender’s approval to the extent required by this Agreement) and
the anticipated accrual of interest and anticipated operating deficits shall be
excluded from the calculations of both (a) and (b).

Indemnity: The Indemnity Agreement from Borrower and Guarantor to Lender of even
date herewith, as the same may hereafter be amended, with respect to violations
of laws, rules and regulations relating to the environment.

Inspector: The individual or firm from time to time designated by Lender to
serve as such hereunder.

 

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Investor: GGT Spring Town Holdings, LLC, a Delaware limited liability company,
which is directly or indirectly Controlled (as defined in the definition of
Permitted Transfers) by CNL Growth Properties, Inc., a Maryland corporation.

Loan: Loan of up to $32,060,000.00 from Lender to Borrower to be made pursuant
to this Agreement, but not more than 70% of costs pursuant to the approved Cost
Budget.

Loan Documents: This Agreement, the Note, the Mortgage, the Assignment, the
Assignment of Deposit, the Indemnity and the Guaranty, together with all other
documents executed and delivered by Borrower or Guarantor to Lender as security
for the Loan.

Manager: Either a management company affiliated with Mill Creek Residential
Trust LLC, Westwood Residential or Greystar, as the property manager and leasing
agent for the Project (or other property manager approved by Lender, which
approval shall not be unreasonably withheld, conditioned or delayed).

Mill Creek Member: MCRT Spring Town LLC, a Delaware limited liability company.

Mortgage: That certain Deed of Trust, Security Agreement and Fixture Filing of
even date herewith, as the same may hereafter be modified or amended, granting
to Lender a first lien upon the Property and the Project.

Mortgaged Property: Has the meaning set forth in the Mortgage.

Net Cash Flow: Income from the rental of the units of the Project in the
ordinary course of business less expenses of ownership and operation of the
Project and Property, including, without limitation, debt service payments then
due with respect to the Loan, management fees and expenses reimbursable to
Manager and reasonable reserves for future payment obligations of the Borrower
(including, without limitation, reasonable reserves for maintenance and repair,
ad valorem taxes and assessments, insurance premiums and other expenses that may
not be payable on a monthly basis).

Note: That certain Promissory Note of even date herewith evidencing Borrower’s
promise to repay the Loan together with interest, as the same may hereafter be
modified or amended.

Optional Note Rate: Has the meaning set forth in Section 2.6 hereof.

Permitted Exceptions: (i) those matters listed on Schedule B of the mortgagee’s
policy of title insurance delivered to Lender in connection with the closing of
the Loan and such other title exceptions as are approved by Lender in writing,
(ii) real property leases permitted by the Loan Documents and leases of
furnishings for model units, office equipment and facilities for cable
televisions, telephone, internet, security systems and similar systems,
(iii) non-consensual liens or encumbrances that are being contested as permitted
by and in accordance with the Loan Documents, (iv) liens, security interests or
encumbrances created under the Loan Documents, (v) liens for real estate taxes
on the Property and Project not yet due and payable or that are being contested
in accordance with the Loan Documents, (vi) other liens or encumbrances approved
by Lender or expressly permitted under the Loan Documents, and (vii) customary
and usual easements and rights of way with respect to the Property and Project
for water and sewer lines,

 

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telephone and internet lines, electric and gas lines or other utilities or for
other similar purposes related to the construction, operation and occupancy of
the improvements within the Project that are either (A) existing and set forth
in Lender’s policy of title insurance or (B) requested by Borrower and approved
by Lender in connection with the Project, not to be unreasonably withheld.

Permitted Transfers:

(i) any transfers of equity interests in a publicly-traded company, or public
company, or change in control of a publicly-traded company or public company;

(ii) a transfer to an immediate family member (i.e., any child, grandchild,
parent, spouse or sibling) or a transfer by a natural person to a revocable
inter vivos trust having such natural person as a trustor or trustee of such
trust and one or more immediate family members of such natural person as
beneficiaries of such trust or a transfer by devise or descent or by operation
of law upon the death of a natural person;

(iii) any transfer of unit of participation or interest by any pension plan,
pension fund or collective investment fund or trust containing pension funds;

(iv) any transfers of direct or indirect equity interests in Mill Creek
Residential Trust LLC;

(v) any transfer of direct or indirect interests in Investor;

(vi) any transfer of direct or indirect interests in Borrower by and between the
Mill Creek Member and Investor;

(vii) any transfer of direct or indirect interests in Borrower by the Mill Creek
Member and/or Investor to any Affiliate thereof;

(viii) any transfer of any interest in Borrower to a Person approved by Lender,
such approval not to be unreasonably withheld, conditioned or delayed, so long
as the Mill Creek Member, Investor and/or any Affiliate thereof shall continue
to have control of the Borrower following such transfer; and

(ix) transfers of direct and/or indirect equity interests in Borrower, provided
that:

(a) no Event of Default exists;

(b) if such transfer is from a Person that is not a Qualified Equityholder,
except as (1) may be otherwise prohibited by applicable law or (2) a transfer or
transfers of publicly traded stock, and issuances of stock to the public which
is the subject of or is exempt from filing(s) with the U.S. Securities and
Exchange Commission, Borrower shall provide not less than ten (10) days prior
written notice to Lender if such transfer is to a Person other than a Qualified
Equityholder or an Affiliate thereof or two (2) days prior written notice if
such transfer is to a Qualified Equityholder or an Affiliate thereof; and

(c) no such transfer shall result in a Change of Control (as defined below).

 

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For the avoidance of doubt, equity transfers of interests in Borrower among CNL
Affiliates (as defined below) shall be permitted without the consent of Lender
subject to the other terms set forth herein. For purposes of subsection (ix) in
the definition of Permitted Transfers and this Section, the following defined
terms shall have the meanings set forth below:

“CNL Affiliates” means any Person directly or indirectly in Control of or
Controlled by, or under direct or indirect common Control with, CNL.

“Change of Control” means the occurrence of the failure of Borrower to be
Controlled by one or more Qualified Equityholders.

“CNL” means CNL Growth Properties, Inc., a Maryland corporation

“Control” of any entity means the ownership, directly or indirectly, of at least
51% of the equity interests in, and the right to at least 51% of the
distributions from, such entity and the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such
entity, whether through the ability to exercise voting power, by contract or
otherwise (subject, however, to such customary veto and/or voting approval
rights as may be granted to any other direct or indirect equityholders of such
entity) (“Controlled” and “Controlling” each having the meaning correlative
thereto).

“Governmental Authority” means any federal, state, county, regional, local or
municipal government, any bureau, department (including any state department of
health), agency or political subdivision thereof and any Person with
jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including any court).

“Qualified Equityholder” means CNL and successor entities to CNL resulting from
a public offering, sale of publicly-traded shares, “privatization”, merger,
reverse merger or similar event.

Provided that in each case an Affiliate of Mill Creek Residential Trust LLC or
Investor is the managing member of the Borrower, and no sale, conveyance,
transfer or assignment of any interest in the Borrower (whether owned directly
or indirectly) shall constitute a Permitted Transfer if it would result in
neither Mill Creek Residential Trust LLC, Investor or their Affiliates having
direct or indirect control of the Borrower.

Person: A natural person, partnership, limited partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature, or any fiduciary acting in such capacity on behalf of the foregoing.

Plans and Specifications: The Plans and Specifications for the Project, as the
same may be amended from time to time with Lender’s prior written consent or
that are otherwise permitted by this Agreement.

Project: The 396-unit class “A” apartment project to be constructed on the
Property in all material respects in accordance with the Plans and
Specifications.

 

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Property: The real estate located in Harris County, Texas, containing
approximately 19.5 acres, as described in Exhibit A attached hereto and made a
part hereof.

Required Completion Date: Not later than thirty (30) months from the date of
this Agreement, as extended by the number of days of delay due to a Force
Majeure Event.

Retainage: The greater of (a) 10% of each draw for payment of the costs under
the General Construction Contract until the Project is 50% complete, at which
date one-half the Retainage will be released and 5% retainage shall be required
on each draw for payment of costs under the General Construction Contract
thereafter, such that, at substantial completion, prior to release of Retainage,
there is an aggregate Retainage of 5%; however, (i) no retainage will be
withheld for the General Contractor fee, general condition costs, materials
purchased directly by contractors (including General Contractor), soft costs and
the following items: lumber, drywall material, doors, millwork, finish hardware,
windows, floor coverings, cabinetry, granite countertops, appliances, elevators,
electrical fixtures, wood trusses and concrete; and (ii) Lender will agree to
release Retainage for subcontractors whose contracts are fully complete upon
receipt of evidence of completion and their final conditional lien waivers
(conditioned only upon release of the retainage to such subcontractor), with
final unconditional lien waivers delivered within fifteen (15) days of such
contractor’s receipt of Retainage; or (b) the retainage required under the
General Construction Contract. For purposes of clarification, the 10% or 5%
Retainage, as the case may be, shall be calculated without regard to the items
for which no retainage is required under item (i) above and the items under item
(ii) above for which retainage has been released.

Security Documents: The Mortgage and the Assignment.

Single Purpose Entity: A Person which complies with the requirements of
Section 5.14 hereof.

Stored Materials: Those materials which are to be used at a future date in the
construction of the Project and are to meet the requirements of Section 2.1(G)
hereof.

Title Company: Fidelity National Title Agency, Inc.

ARTICLE II

DISBURSEMENT OF THE LOAN

2.1 Disbursement Procedure: Lender agrees on the terms and conditions and
relying on the representations set forth herein to lend to Borrower, and
Borrower agrees to borrow from Lender, an amount not to exceed the Loan amount.
Subject to compliance by Borrower with all of the provisions of this Agreement,
the Loan shall be disbursed in several advances at such times and in such
amounts as Lender shall determine in accordance with the following procedures:

(A) Not less ten (10) days before the date on which Borrower desires an advance
from the Loan, Borrower shall submit to Lender (1) a signed cover letter,
indicating the amount requested to be disbursed, and whether interest on the
Loan is to be paid from the draw, (2) for amounts to be disbursed for costs
pursuant to the General Construction Contract, an AIA G702/703 draw request form
satisfactory to Lender, properly executed, with certification by

 

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Borrower, General Contractor and Borrower’s architect that such draw request is
for payment or reimbursement of actual costs incurred for construction of the
Project, which must also be consistent with the Cost Budget, (3) for amounts to
be disbursed for other costs, an itemization in accordance with the Cost Budget,
and, if specifically requested by Lender, invoices or other satisfactory
evidence of such costs, (4) lien releases from the General Contractor and, if
requested by Lender, from subcontractors receiving proceeds from the current
draw or preceding draws for which such a lien release has not been furnished,
and (5) a date-down endorsement to Lender’s title insurance policy confirming no
intervening liens or change in status of title (excluding Permitted Exceptions)
or lien priority of the Mortgage. The cost breakdown for costs pursuant to the
General Construction Contract shall also show the percentage of completion of
each line item on the Cost Budget, and the accuracy of the cost breakdown shall
be certified by Borrower and by the General Contractor. Borrower appoints Darren
Schackman and Jeb Cox (if more than one, any one may sign) as its agent to make
disbursement requests. Borrower may hereafter by written notice to Lender
appoint one or more other agents or change agents to make disbursement requests,
provided any such notice is not effective until actually received by Lender.

(B) The completed construction and the draw request form and cost itemization
will be reviewed by the Inspector who will confirm to Lender its professional
opinion of the cost of completed construction, percentage of completion and
compliance in all material respects with the Plans and Specifications. The
Borrower will coordinate site inspections with the Inspector in a timely manner
so that (i) all payment applications by the General Contractor, whether or not
to be funded from the Loan, will be submitted to the Inspector, and the
Inspector will have the opportunity to review all work in place that is included
in each such payment application; and (ii) the Inspector will be notified of the
timing of substantial completion of key elements of the Project in order to
allow review of footings, foundations and structural components while visible.
Borrower acknowledges and agrees that all inspections by or on behalf of Lender
shall be solely for the benefit of Lender, and Borrower shall have no rights to
(i) rely on any information, materials or opinions of Inspector with respect to
the Project of any kind, however evidenced or communicated; or (ii) claim any
loss or damage against Lender or Inspector arising from any alleged negligence
(excluding Lender’s gross negligence or willful misconduct) or failure to
perform such inspections, failure to monitor loan disbursements or the progress
or quality of construction, or failure to otherwise properly administer the
construction aspects of the Loan. Nothing herein is intended to release
Inspector for its employees’ actions which directly cause bodily injuries or
death or property damage while on the Property.

(C) The maximum advance will be allowable disbursements from the Cost Budget for
Project costs other than costs pursuant to the General Construction Contract, as
determined by Lender, including any unpaid Loan fees and expenses and interest
accrued on the Loan, plus the actual cost of work and labor done on the Project
pursuant to the General Construction Contract, including General Contractor fees
and Stored Materials that are submitted to and approved by Lender, which
approval shall not be unreasonably withheld, conditioned or delayed, subject to
Borrower’s right to reallocate contingency and cost savings in accordance with
the terms of this Agreement. The advance to be made will be the maximum
allowable advance less: (x) the Retainage and (y) the amounts previously
advanced by Lender. Except as otherwise provided in the definition of
“Retainage” in Article I, the Lender will be obligated to advance Retainage only
after satisfactory completion of all construction work (subject to punch list
items for which a holdback reasonably acceptable to Lender shall have been
established if required by Lender) and

 

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the furnishing to Lender of evidence reasonably satisfactory to Lender that such
completion is free of all mechanics’ and materialmen’s liens and that
appropriate governmental authorities have approved the Project in its entirety
for permanent occupancy. Lender will not be obligated to advance for any
duplication of work, work which does not conform in all material respects to the
Plans and Specifications or work which is unsatisfactory in the opinion of
Inspector because the work does not comply with applicable laws or codes or is
defective in any material respect.

(D) Notwithstanding the foregoing, Lender shall not be required to advance more
than once each month except that Borrower may request one additional monthly
advance with respect to the following items: site work, shell, framing, drywall,
trim, paint, stucco, landscaping, mechanical, electrical and plumbing services
and fire alarms. Lender reserves the right to limit the total amount advanced on
the Loan at any time to an amount which, when deducted from the total amount of
the Loan (leaves the Loan, together with any additional funds then held by
Lender as a result of a deposit by Borrower as described in Section 5.7 hereof),
In Balance, all as determined by Lender in its reasonable discretion from time
to time. Subject to the other conditions of this Agreement, the General
Contractor fee of up to six percent (6%) of total construction hard cost will be
allowed and will be advanced in monthly increments over the construction period
based upon percentage of completion. Subject to the other conditions of this
Agreement, an overhead/development fee of up to three percent (3%) of total
Project cost will be advanced as follows: twenty percent (20%) as of the date
hereof (or upon satisfaction of the Equity Requirement, if later), sixty
percent (60%) in increments over the construction period based upon percentage
of completion and the remaining twenty percent (20%) upon completion and
issuance of final, unconditional certificates of occupancy for the Project.
Except for such advances of the developer fee, General Contractor fee, amounts
due for payment of costs under the General Construction Contract, and line items
for leasing, marketing, management or similar expenses to any Affiliate serving
as Manager or leasing agent, Lender shall not be obligated to make any advances
for fees, overhead or other amounts to Borrower, Guarantor, or any Affiliate of
Borrower or Guarantor.

(E) Borrower will be required to inject into the Project, as cash equity, a sum
in the amount of the Equity Requirement. Lender requires and Borrower agrees
that the balance of the Equity Requirement, to the extent not funded at closing
by Borrower for items set forth on the closing statement, will be advanced by
Borrower for costs pursuant to the Cost Budget and evidence thereof furnished to
Lender prior to any request for advance under the Loan. Borrower will provide
Lender with the same items as set forth in Section 2.1(A)(1) through (4) as
evidence of advances of the funds satisfying the Equity Requirement.

(F) A reallocation among line items of the Cost Budget may be made upon
Borrower’s written request, provided any such reallocation must be approved by
Lender, which approval shall not unreasonably be withheld so long as Borrower
provides evidence satisfactory to Lender of verifiable cost savings in the
category from which budgeted amounts are being reallocated and that the amount
remaining unadvanced in such category is sufficient to complete such category.
Notwithstanding the foregoing, (i) no advances from hard cost categories to soft
cost categories or from interest reserve to other categories shall be permitted
except in Lender’s sole discretion, and except that after the Project is
complete and all costs from the hard cost categories of the Cost Budget are
paid, the unused balance may be transferred to the interest reserve or
contingency categories, and (ii) Lender shall allow Borrower to reallocate funds
from the contingency line item to any other hard cost line item without Lender’s
approval and to

 

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reallocate funds from soft cost categories that have verifiable cost savings (of
which Borrower has provided satisfactory evidence) to hard cost categories, but
Borrower shall contemporaneously notify Lender of any such reallocation and such
reallocation shall be subject to the limitations of Section 5.16.

(G) Lender shall not be obligated to advance for Stored Materials unless the
Stored Materials for which Borrower desires an advance are titled in Borrower
and either (1) stored in a bonded warehouse approved by Lender, which approval
shall not be unreasonably withheld, delayed or conditioned, and available for
inspection by Inspector, or (2) stored at the Property or in a locked and
otherwise secure storage arrangement reasonably acceptable to Lender, available
to Inspector for inspection and insured in an amount reasonably acceptable to
Lender. In no event will Lender be required to make advances to pay for Stored
Materials more than one hundred twenty (120) days prior to the date such Stored
Materials are to be used in the construction of the Project. Borrower shall
provide Lender with a description of and invoices for all Stored Materials.

(H) The Cost Budget includes an interest reserve, which will be advanced by
Lender to pay interest on the Loan as it becomes due, unless Borrower pays
interest when due from other than Loan funds. Interest will be payable by
Borrower to Lender on that portion of the interest reserve actually disbursed by
Lender. The Lender will be obligated to advance interest accrued on the Loan
only to the extent that cash flow from the Project, after payment of expenses of
ownership and operation of the Project and Property, is insufficient to do so.
In the event that, prior to the time when cash flow from the Project is
sufficient to pay interest, the interest reserve is reduced to an amount less
than the estimated amount of interest to accrue until such time, Borrower will,
within twenty (20) days of written notice from Lender to do so, deposit with
Lender such sum as may be necessary to increase the interest reserve to an
amount sufficient to pay the estimated amount of interest to accrue until cash
flow from the Project is anticipated to be adequate to pay interest. So long as
no Default or Event of Default exists, at such time as the Project is completed
in accordance in all material respects with the Plans and Specifications, all
costs thereof have been paid, and the cash flow from the Project is sufficient
to pay all debt service payments and operating expenses, then upon Borrower’s
written request, Lender will advance to the Borrower any unadvanced portion of
the Loan and will release to the Borrower the amount deposited pursuant to the
preceding sentence that has not been used to pay interest.

(I) The Cost Budget includes a contingency reserve, which shall be disbursed by
Lender upon Borrower’s request as provided by and in accordance with
Section 2.1(F) above or as otherwise approved by Lender. Interest will be
payable by Borrower to Lender only on that portion of the contingency reserve
actually disbursed by Lender.

Notwithstanding the foregoing, the provisions of this Section 2.1, Lender may
make one or more advances to Borrower upon written or oral disbursement requests
not complying with the requirements of this Section 2.1, and such advances will,
in the absence of bad faith by Lender, be conclusively deemed to be advances to
Borrower hereunder.

2.2 Advances by Lender. Regardless of whether Borrower has submitted a
requisition therefor, Lender may from time to time upon prior written notice to
Borrower advance amounts which become due for construction and non-construction
expenses for which Borrower is responsible for payment, including but not
limited to interest on the Loan, if

 

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Borrower has not timely paid such expenses. Such advances may be made either
directly to parties to whom such amounts are due, made by depositing the same
into Borrower’s checking account with Lender and debiting such account, or paid
to Lender to reimburse Lender for sums due to it. All such advances and advances
to parties other than Borrower shall be deemed advances to Borrower hereunder
and shall be secured by the Security Documents to the same extent as if they
were made directly to Borrower.

2.3 Representations and Warranties. Each submission by Borrower to Lender of a
requisition for an advance of the Loan shall constitute Borrower’s
representation and warranty to Lender that: (a) all completed construction is
constructed in all material respects in accordance with the Plans and
Specifications, and (b) all construction and nonconstruction costs for the
payment of which Lender has previously advanced funds have in fact been paid.

2.4 Additional Information. If Lender or the Title Company shall so require,
Borrower will submit with its requisitions for advances lien waivers in form
reasonably satisfactory to Lender and the Title Company, showing amounts paid
and amounts due to all Persons furnishing labor or materials in connection with
the completion of the Project. If the title insurance policy insuring the
Mortgage is not written so as to insure any and all disbursements of the Loan up
to the face amount of the Mortgage, or if Lender shall so require, Borrower
shall arrange to have the Title Company deliver to Lender a date-down
endorsement confirming the advance being requisitioned and insuring Lender as to
the priority of such advance under the policy insuring the Mortgage without
additional exceptions.

2.5 Delivery of Funds. Except for any initial advance funded through the Title
Company or its approved attorney or agent, Lender will make advances of the Loan
by depositing the same to Borrower’s account with Lender, which account shall be
used by Borrower only for the purpose of paying the costs and expenses
contemplated by this Agreement. The making of an advance by Lender shall not
constitute Lender’s approval or acceptance of the construction theretofore
completed. Lender’s inspection and approval of the Plans and Specifications, the
construction of the Project, or the workmanship and materials used therein,
shall impose no liability of any kind on Lender, the sole obligation of Lender
as the result of such inspection and approval being to make the advances if, and
to the extent, required by this Agreement.

2.6 Optional Note Rate; Tranches. So long as no Event of Default exists,
Borrower may from time to time select up to four tranches of the outstanding
Loan balance to bear interest at a rate other than the Standard Note Rate (as
defined in the Note). Each such tranche in an amount designated by Borrower in
its written notice to Lender will bear interest at a rate of interest quoted by
Lender (based upon rates obtained by Lender from Thomson Reuters or such other
reliable third-party provider of rate quotes as Lender may from time to time
select) from time to time as the sum of (a) the London Interbank Offered Rate
(the “LIBOR”) for deposits in U.S. Dollars, at approximately 9:00 a.m.
(Birmingham, Alabama time), for a period of 30, 60, 90 or 180 days (each a
“LIBOR Period”), divided by one (1) minus the Reserve Percentage, plus (b) 225
basis points. Each such rate (an “Optional Note Rate”) will initially be
established as of the date specified in Borrower’s written election (which must
be at least two (2) business days in advance) and will expire and be reset at
the end of each LIBOR Period. Similarly, Borrower must give written notice of
its election to Lender at least two (2) business days prior to the date on which
the Optional Note Rate will expire and be reset to either (i) change to a
different

 

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Optional Note Rate based on a different LIBOR Period, (ii) revert to the
Standard Note Rate, or (iii) continue with a new Optional Note Rate with the
same LIBOR Period. If no election is timely made, the Borrower will be deemed to
have elected for such tranche to bear interest as provided in (iii) above at new
Optional Note Rate with the same LIBOR Period as the Optional Note Rate then
expiring. No selection shall be made of a LIBOR Period which extends beyond the
Maturity Date. In the event the use of LIBOR for any reason should become
prohibited or unavailable to Lender, or, if in Lender’s good faith judgment, it
is not possible or practical for Lender to set or determine the LIBOR, or if
LIBOR does not in Lender’s commercially reasonable judgment reflect its cost of
making or maintaining loans, then the Standard Note Rate (as it changes from
time to time pursuant to the Note) shall apply until Lender notifies Borrower
that such condition no longer exists.

2.7 Post-Closing Items. Notwithstanding any provision herein to the contrary,
Lender will be under no obligation to fund any advances of the Loan until
Borrower has complied with the provisions of Schedule 2.7 regarding Post-Closing
Items.

ARTICLE III

CONDITIONS TO THE LOAN

Lender’s obligation to make the Loan or any advance thereof shall be effective
only upon fulfillment of the following conditions:

3.1 Payment of Fees. Payment by Borrower of a commitment fee of one-half percent
(1/2%) of the maximum Loan (which is deemed fully earned upon the date of this
Agreement and non-refundable), and all other actual, out-of-pocket fees and
expenses of Lender required by this Agreement which are then due and payable
within ten (10) business days of receipt of written request by Lender to
Borrower.

3.2 Documents. Execution, delivery and, when appropriate, recording or filing,
of this Agreement, the Note, the other Loan Documents, and all other documents
evidencing or securing the Loan, and all other documents required by this
Agreement, all in form and content satisfactory to Lender and Borrower; the
accuracy of all representations and warranties in all material respects herein
and therein; and the absence of any Default hereunder or thereunder. Lender may
elect in its discretion to refuse to fund all or any part of a requested advance
of the Loan if an Event of Default exists or a monetary Default exists. Lender
may also elect to refuse to fund all or any part of a requested advance of the
Loan if any non-monetary Default exists, which does not yet constitute an Event
of Default due to a stated cure period not having expired, if the Lender in its
discretion, acting in good faith, considers such non-monetary Default to be
material and so notifies Borrower.

3.3 Title Insurance. Issuance of the title insurance policy satisfactory to
Lender and receipt by Lender of an endorsement to the title policy insuring the
priority of such advance and confirming that there has been no change in the
status of the title to the Property, creation of any new encumbrance thereon
(except Permitted Exceptions), or occurrence of any event that could in Lender’s
reasonable opinion impair the priority of the lien of the Mortgage as of the
time of each advance.

 

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3.4 Survey. Delivery of a survey acceptable to Lender and the Title Company,
and, within thirty (30) days after completion of the foundations of all
buildings in the Project, if requested by Lender, delivery of an updated survey
showing the construction of the foundations as within the boundaries of the
Property and in compliance with all applicable setback and other location
requirements required by applicable law, regulation or recorded covenant, and
showing no change in conditions which could materially, adversely affect the
Property or the Project as collateral for the Loan.

3.5 Initial Advance. As a condition of the initial advance from the Loan,
Borrower will provide evidence reasonably satisfactory to Lender that all of the
Equity Requirement has been injected into costs set forth in the Cost Budget.

In the event Lender, at its option, elects to make one or more advances prior to
receipt and approval of all items required by this Article III, such election
shall not obligate Lender to make any subsequent advance.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Lender, knowing that Lender will rely on
such representations and warranties as incentive to make the Loan, that:

4.1 Borrower’s Existence. Borrower is a duly organized and existing Delaware
limited liability company, having full power and authority to consummate the
transactions contemplated by this Agreement. Borrower is owned and managed by
the Persons having the ownership percentages and management rights set forth in
Schedule 4.1. Borrower is a Single Purpose Entity whose sole purpose is to
construct, own, operate and lease the Project, and Borrower has no other
material assets and no other indebtedness for borrowed money, either as a
primary obligor or as a surety or guarantor.

4.2 Violations or Actions Pending. There are no actions, suits, or proceedings
pending or, to the best of Borrower’s knowledge, threatened, which might
materially adversely affect the financial condition of Borrower or which might
materially and adversely affect the Project. Borrower is not in violation of any
agreement the violation of which might reasonably be expected to have a material
adverse effect on Borrower’s business or assets, and Borrower is not in
violation of any order, judgment, or decree of any court, or any statute or
governmental regulation to which Borrower is subject which might reasonably be
expected to have a material adverse effect on Borrower’s business or assets.
Neither the execution and performance of this Agreement and other Loan Documents
by Borrower will result in any breach of any mortgage, deed of trust, lease,
credit or loan agreement or any other material instrument which may bind or
affect Borrower.

4.3 Financial Statements. All financial statements of Borrower heretofore given
and hereafter to be given to Lender are and will be true and complete in all
material respects as of their respective dates and prepared in accordance with
generally accepted accounting principles consistently applied to the extent
required under Section 5.12, and fairly represent the financial condition of
Borrower.

 

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4.4 Compliance with Laws and Regulations. All necessary action has been taken
and all building permits (or will be received prior to funding the initial
advance of the Loan) and other permits have been received (or will be received
prior to funding the advance of the Loan related to such stage of construction)
and all concurrency requirements have been or will be satisfied to allow
construction of the Project in all material respects in accordance with the
Plans and Specifications and use of the Project for its intended purpose under
applicable laws, ordinances, and regulations, including, without limitation,
zoning, subdivision and environmental laws. When completed according to the
Plans and Specifications, the Project will comply with all applicable laws and
regulations, including, without limitation, the Fair Housing Act and the
Americans with Disabilities Act, and applicable regulations thereunder.

4.5 Roads and Utilities. All utility, water and sanitary sewer services
necessary at, and for the construction of the Project and use of the Project
upon completion are or will be available to the Property. All roads necessary
for the use of the Project for its intended purposes have been or will be
completed and are or will be public roads maintained by the state, county or
municipality, or the necessary rights-of-way therefor have been or will be
acquired or dedicated, and all necessary steps have been or will be taken to
insure the completion thereof and acceptance and maintenance by the state,
county or municipality.

4.6 Priority of Mortgage. The Mortgage, when duly executed, delivered, and
recorded, will constitute a first lien against the Property, prior to all other
liens and encumbrances, including those which may hereafter accrue, except for
such matters as shall have been excepted with Lender’s approval on the initial
title insurance policy issued by the Title Company insuring the Mortgage and any
other Permitted Exceptions. Review and approval by Lender of a plat of the
Property to be recorded after Closing and Lender’s subordination of its Mortgage
lien to the plat will not be unreasonably withheld.

4.7 Condemnation. There are no proceedings pending, or, to the best of
Borrower’s knowledge, threatened, to exercise any power of condemnation or
eminent domain with respect to the Property, or any interest therein, or to
enjoin or similarly prevent the construction or use of the Project.

4.8 Accuracy of Documents. All documents furnished to Lender by or on behalf of
Borrower as part of or in support of the Loan application or pursuant to this
Agreement are true, correct, complete and accurately represent in all material
respects the matters to which they pertain.

4.9 Equity. Borrower has, prior to or simultaneously with any advance from the
Loan and in addition to the Loan, paid costs of acquisition of the Property,
related closing costs and other costs set forth in the Cost Budget, and will
satisfy the Equity Requirement prior to the initial draw from the Loan.

4.10 Continuing Effectiveness. All representations and warranties contained
herein shall be deemed continuing and in effect at all times while Borrower
remains indebted to Lender and shall be deemed to be incorporated by reference
as being true and correct to Borrower’s knowledge in all material respects in
each requisition for advance by Borrower unless Borrower specifically notifies
Lender in writing of any change therein. If Borrower notifies Lender of any such
change, Lender shall not be obligated to make any further advance unless (i) the
change does not, in Lender’s opinion, materially and adversely affect the
Property, the Project or the financial condition of Borrower or Guarantor, or
(ii) the change is cured, discharged, insured or bonded off by Borrower in a
manner reasonably satisfactory to Lender.

 

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ARTICLE V

COVENANTS OF BORROWER

Borrower covenants and agrees, from the date of this Agreement and as long as
Borrower remains indebted to Lender:

5.1 Construct Project. To commence the construction of the Project within ninety
(90) days of the date hereof; to cause the Project to be constructed on the
Property and in all material respects in accordance with the Plans and
Specifications, and in compliance with all applicable regulations including
zoning and setback requirements, the Fair Housing Act and Americans with
Disabilities Act, and applicable regulations thereunder, and so as not to
encroach upon or overhang any easement or right-of-way; to cause such
construction to proceed continuously; and to complete construction of the
Project by the Required Completion Date subject to extension for any Force
Majeure Event, time being of the essence. Borrower will promptly notify Lender
of any Force Majeure Event that it anticipates will materially affect the
Required Completion Date.

5.2 Use of Proceeds. To use the proceeds of the Loan solely and exclusively for
the purposes set forth in the Cost Budget and to pay such fees, closing costs,
and other nonconstruction expenses relating to the Loan, the construction of the
Project, or the discharge of Borrower’s obligations under this Agreement as
Lender has approved or may from time to time approve.

5.3 Liens and Encumbrances. To keep the Property and Project and all other
assets of Borrower free from all liens and encumbrances except Permitted
Exceptions; to pay promptly all Persons supplying work or materials for
engineering or architectural services with respect to the Project and any
construction of the Project; and to promptly discharge by bond or otherwise, or
make other arrangements acceptable to Lender with respect to, any mechanic’s,
materialman’s or other lien filed against the Property or Borrower subject to
Borrower’s rights to contest such lien in accordance with the Loan Documents.

5.4 Taxes. To pay promptly when due and before the accrual of penalties thereon
all taxes, including all real and personal property taxes and assessments levied
or assessed against Borrower or the Property, and all required contributions
pursuant to applicable development approvals and to provide Lender with
receipted bills therefor if requested by Lender. Borrower may request advances
from the Loan to pay such taxes, assessments and required contributions to the
extent of the line item therefor in the Cost Budget.

5.5 Insurance. To procure and maintain in effect for the benefit of Borrower and
Lender (a) during the period of construction, builder’s risk coverage in an
amount not less than the full replacement cost of the Project (but not less than
the guaranteed maximum price pursuant to the General Construction Contract),
which shall be provided prior to the earlier of delivery of building materials
for, or construction of vertical portions of the buildings comprising part of
the improvements within the Project; (b) at all times while Borrower is indebted
to Lender, liability

 

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insurance in an amount reasonably acceptable to Lender and customarily provided
for similar properties; (c) upon completion of the Project (or any building
thereof) insurance on the Project (or completed portion thereof) with an ISO
Special Cause of Loss form, or its equivalent, for full replacement cost,
without co-insurance, and business interruption insurance (including loss of
rents) sufficient to provide proceeds to cover the “Actual Loss Sustained”
during restoration of any portion of the Project. Actual Sustained Loss shall
mean projected gross revenues (less non-recurring expenses) for a period not
less than twelve (12) months, as projected by Borrower, subject to the
commercially reasonable approval of Lender, and containing a 90-day extended
period of indemnity endorsement; and (d) if any buildings located on the
Property lie within a “special flood hazard area” as identified by the Federal
Emergency Management Agency (or successor governmental agency or authority
performing such identification functions), flood insurance in an amount
acceptable to Lender up to replacement cost (which in no event shall be less
than the coverage and maximum insurance amount available under the National
Flood Insurance Program); and to name Lender as mortgagee and lender loss payee
in all policies of fire and extended coverage, including business interruption
coverage, and as an additional insured under all liability policies relating to
the Property and the Project. All policies must provide at least thirty (3) days
prior written notice of cancellation to Lender (except in the case of nonpayment
of premium, in which case not less than ten (10) days’ prior written notice). At
least ten (10) days prior to the expiration date of all such policies, Borrower
shall provide Lender certificates evidencing such renewals thereof satisfactory
to Lender; however, in the event Borrower is then negotiating for an extension
or replacement and so notifies Lender, no Default shall occur and no forced
placement of insurance will be imposed by Lender so long as Borrower provides
reasonably satisfactory evidence during the period of such negotiation that all
required coverages remain in effect. Borrower shall deliver to Lender receipts
evidencing the payment of all such insurance policies and renewals. All
providers shall have a long-term senior debt rating of at least “A” by Standard
and Poor’s Rating Service or an AM Best rating of AX (or better), unless
(i) otherwise approved by Lender in its reasonable discretion or (ii) providers
with such ratings are unattainable in the then current insurance market in which
case providers with ratings reasonably attainable in such market may be utilized
during the period that such rated providers are unavailable, provided such
lesser-rated providers will be submitted to Lender for its approval, not to be
unreasonably withheld. Except as otherwise provided in this Agreement, proceeds
of any fire and extended coverage insurance shall be applied toward the repair
or restoration of the Project or to the payment of Borrower’s indebtedness to
Lender, at Lender’s option. At all times Borrower will maintain with Lender
satisfactory evidence of current coverage complying with the terms hereof,
consisting of Acord 28 and Acord 25 forms, or, upon Lender’s request, copies of
policies. If Lender requests a copy of any policy, it will provide reasonable
notice to Borrower and initially only the lead policy of any multi-tiered
insurance coverage will be required unless Lender in its reasonable discretion,
upon review of the lead policy, requests any other policy in order to confirm
that the required coverages are in effect or the terms and conditions of such
coverages. Borrower hereby authorizes Lender to make any claim for, receive
payment for, and execute and endorse any documents, checks or other instruments
in payment for loss, theft, or damage under any such insurance policy subject to
the provisions of the Mortgage.

5.6 Fees. To pay a commitment fee to Lender of one-half percent (1/2%) of the
maximum Loan amount, which fee is due and fully earned upon the date of this
Agreement, and all other customary out-of-pocket loan and inspection fees of
Lender, all fees and charges of the Inspector and all expenses involved in
perfecting the lien status or priority of the Mortgage and

 

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all other out-of-pocket expenses of Lender directly related to the Loan or the
protection and preservation of the Property or Project or the enforcement of any
provision of this Agreement, including, without limitation, recording fees and
taxes, intangibles taxes, documentary stamp taxes, tax, title and lien search
charges, title insurance charges, architect’s, engineers’ and reasonable
attorneys’ fees (including reasonable attorneys’ fees at trial and on any appeal
by either Borrower or Lender), real property taxes and insurance premiums, and
to indemnify against, and hold Lender harmless from, any loss, or liability on
account of any claim by any party arising out of the Loan or Lender’s interest
in or lien upon the Property or the Project, unless such claim results from the
gross negligence or willful misconduct of Lender. WITHOUT LIMITATION, THE
FOREGOING INDEMNITY APPLIES TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY
OR ARISE OUT OF THE NEGLIGENCE OF LENDER BUT NOT TO THE EXTENT THAT THE SUBJECT
OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF LENDER.

5.7 Deficiencies. If Lender reasonably determines that the Loan is not In
Balance, Lender may require that Borrower bring the Loan In Balance within ten
(10) business days of Lender’s written demand by either (i) expending an amount
of Borrower’s funds for items included in the Cost Budget sufficient to bring
the Loan In Balance and provide evidence reasonably satisfactory to Lender of
such expenditures, or (ii) depositing with Lender sufficient funds to bring the
Loan In Balance. Lender shall be under no obligation to make any further
advances until the Loan is In Balance.

5.8 Reports and Notices. To furnish promptly to Lender such information as
Lender may reasonably require concerning costs, progress of construction,
marketing, and such other factors as Lender may reasonably require with respect
to the Project; to notify Lender promptly in writing of any litigation
instituted or overtly threatened in writing against Borrower, any liens filed by
the Internal Revenue Service against Borrower or the Property, any audits of any
Federal or state tax return of Borrower, and the results of any such audit; to
notify Lender promptly in writing of any condemnation or similar proceedings
with respect to all or any part of the Property or Project, or any proceeding
seeking to enjoin the intended use of the Property or construction of the
Project, and of all changes in governmental requirements pertaining to the
Property or the Project, utility availability, anticipated costs of the Project,
and any other matters which could reasonably be expected to materially adversely
affect Borrower’s ability to perform its obligations under this Agreement, as
any such matters become known to Borrower.

5.9 Books and Records. To maintain complete and accurate account books and
records with respect to the Loan, the Property and the construction of the
Project, which books and records shall reflect the consistent application of
accepted accounting methods, and to make such books and records available at
reasonable times for inspection and copying by Lender or its agent, with Lender
paying its own expenses of inspection and copying.

5.10 Access and Promotion. To permit Lender and its agents to have access to and
the right to inspect the Property and the Project during normal business hours
upon reasonable notice to Borrower and to name Lender on any construction
signage at the Property identifying Lender as providing construction financing
for the Project, if requested by Lender and permitted under local sign
ordinances.

 

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5.11 Indebtedness. To duly and promptly pay all Borrower’s indebtedness to
Lender according to the terms of this Agreement and the other Loan Documents, to
duly and promptly pay all other indebtedness of Borrower, and to incur no other
indebtedness in any manner secured in whole or in part by the Property, the
Project or any income to be derived therefrom.

5.12 Future Financial and Operating Statements. To furnish to Lender the
following financial information:

(a) Within ninety (90) days of the end of each calendar year, a balance sheet
and a statement of income and expenses of Borrower, prepared in accordance with
generally accepted accounting principles (or other approved accounting method
acceptable to Lender), consistently applied, which statements shall be certified
by Borrower as true and correct in all material respects.

(b) Within ninety (90) days of the end of each calendar year, a balance sheet of
Guarantor, prepared in accordance with tax basis accounting principles (or other
approved accounting method acceptable to Lender), consistently applied, which
statements shall be certified by Guarantor as true and correct in all material
respects.

(c) Within forty-five (45) days of the end of each calendar quarter, after
commencement of leasing of the Project, a current operating statement and rent
roll for the Project, in form reasonably satisfactory to Lender, certified by
Borrower.

(d) Within ten (10) business days of filing, the current federal income tax
return of Borrower (or its Affiliate with which Borrower’s income is included),
including all schedules.

(e) Within forty-five (45) days of the end of each calendar quarter, any
available quarterly update of the Mill Creek Residential Trust, LLC portfolio
status report.

5.13 Maintain Existence. To maintain its existence and good standing in each
state in which its business or assets makes qualification necessary; not to
permit any change in ownership or management of Borrower, or in other Persons
owning Borrower directly or indirectly, from that set forth in Schedule 4.1
except for Permitted Transfers; not to convey, transfer, or lease any
substantial part of its property, assets, or business to any other Person except
in the normal course of its business; not to engage in any business enterprise
other than ownership and leasing of the Property and construction of the Project
as provided in this Agreement; not to incur any debt for borrowed money, either
as a primary obligor or as a guarantor or surety, except for the Loan; not to
merge or consolidate, or permit any such constituent entity to merge or
consolidate, with or into any other firm or corporation or enter into any
partnership or joint venture with any other Person except with Lender’s prior
written consent; and not to make any loans or advances to any other Person,
except extensions of credit in the normal course of business (including to
Manager or General Contractor in connection with the Project). Notwithstanding
the foregoing, all Permitted Transfers will be allowed without Lender’s consent,
and Investor will have the right to remove and replace the Mill Creek Member as
the operating member of Borrower with either Investor or an operating member
owned and controlled by Investor in accordance with the terms and conditions of
Borrower’s operating agreement, upon prior written notice to Lender.

 

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5.14 Maintain Single Purpose Entity Status. Borrower shall not:

(A) Engage in any business or activity other than the ownership, leasing,
operation and maintenance of the Mortgaged Property and the Project and
activities incidental thereto;

(B) Acquire or own any material assets other than (i) the Mortgaged Property and
(ii) such incidental machinery, equipment, fixtures and other personal property
as may be necessary for the operation of the Mortgaged Property;

(C) Merge into or consolidate with any Person or dissolve, terminate or
liquidate in whole or in part, transfer or otherwise dispose of all or
substantially all of its assets (except as permitted in the Loan Documents) or
change its legal structure (except for Permitted Transfers or as otherwise
permitted under the Loan Documents), without in each case Lender’s consent;

(D) Fail to preserve its existence as a limited liability company validly
existing and in good standing under the laws of the jurisdiction of its
organization or formation, or without the prior written consent of Lender,
amend, modify, terminate or fail to comply with the provisions of its articles
of organization, as same may be further amended or supplemented, if such
amendment, modification, termination or failure to comply would adversely affect
its ability to perform its obligations under any Loan Document;

(E) Own any subsidiary or make any investment in, any Person without the consent
of Lender, except for any investments in investment-grade securities;

(F) Commingle its funds or assets with the assets of any of its members or
Affiliates or with the assets of any other Person or entity, excluding any
distributions or other payments made to its members or Affiliates in accordance
with the Loan Documents;

(G) Incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Loan, trade payables incurred in
the ordinary course of business, guarantees in connection with the construction
of the improvements, obligations for taxes paid when due and any indemnity
required by the Title Company in connection with the Loan, the mortgagee title
policy or endorsements required hereunder or the construction of the Project;

(H) Fail to maintain its records, books of account and bank accounts separate
and apart from those of its members and Affiliates, the Affiliates of any of its
members, and any other Person or entity;

(I) Except for the General Construction Contract, any management agreement with
Manager or the development agreement with the Mill Creek Member, enter into any
contract or agreement with any of its members or Affiliates, or the Affiliates
of any of its members, 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;

(J) Seek its dissolution or winding up in whole, or in part;

 

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(K) Maintain its assets in such a manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any of its
members and Affiliates, the Affiliates of any of its members, or any other
person or entity;

(L) Hold itself out to be responsible for the debts of another person or entity,
except for any guaranties, sureties or bonds provided by Borrower in connection
with the construction of the Project;

(M) Make any loans or advances to any third party, including any of its members
or Affiliates, or the Affiliates of any of its members (except for General
Contractor or any Manager);

(N) Fail to file its own tax returns except to the extent the Borrower is a
member of a consolidated taxpayer group that files such returns and Borrower
reconciles and pays its own tax liabilities directly or by reimbursement to the
group;

(O) Agree to, enter into or consummate any transaction which would render it
unable to confirm that (i) it is not an “employee benefit plan” as defined in
Section 3(32) of ERISA, which is subject to Title I of ERISA, or a “governmental
plan” within the meaning of Section 3(32) of ERISA; (ii) it is not subject to
state statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) less than twenty-five percent (25%) of each of its
outstanding class of equity interests are held by “benefit plan investors”
within the meaning of 29 C.F.R. § 2510.3-101(f)(2), as modified by Section 3(42)
of ERISA;

(P) Fail either to hold itself out to the public as a legal entity separate and
distinct from any other person or entity or to conduct its business solely in
its own name, in order not (i) to mislead others as to the identity with which
such other party is transacting business, or (ii) to suggest that it is
responsible for the debts of any third party (including any of its members or
Affiliates, or any general partner, principal or Affiliate thereof); or

(Q) Make distributions to members such as would result in the failure to
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.

5.15 Changes to Property. To authorize or permit no changes to the Property or
the zoning or subdivision thereof that would be inconsistent with the Project
without the prior written consent of Lender and not consent to the formation of
any district that would impose any additional assessments upon the Property (an
“Assessment District”) without the prior written consent of Lender. Nothing
herein is intended to result in a breach by Borrower if the Assessment District
can be and is imposed upon Borrower and the Property without the necessity of
Borrower’s consent. Lender’s consent shall not be unreasonably withheld,
conditioned or delayed to an Assessment District if any additional costs are
adequately supported by projected operating income from the Project and does not
materially decrease the value of the Project.

5.16 Changes to Plans and Specifications or General Construction Contract. To
authorize or permit no changes to the Plans and Specifications or General
Construction Contract (which shall include any change in the amount of any
guaranteed maximum cost, or any increase due to the floating nature of such
guaranteed maximum amount that would result in the

 

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maximum cost, including the General Contractor fee, exceeding $34,589,731)
without the prior written consent of Lender, which shall not be unreasonably
withheld, conditioned or delayed, and all governmental authorities having
jurisdiction to the extent such approval is required by law or regulation.
Notwithstanding the foregoing, Lender’s approval shall not be required for a
change order so long as the Loan remains In Balance for any change order
(i) involving less than $50,000 in cost, as long as the aggregate value of all
change orders made without Lender’s consent (including the change order under
consideration) has not exceeded $500,000, and the requested change does not
materially alter the scope or quality of the Project, (ii) required by
governmental authorities, or (iii) that does not result in an increase in the
guaranteed maximum amount of the General Construction Contract (including the
General Contractor fee) above $34,589,731. Borrower will promptly provide Lender
a copy of each change order. If the change order would result in the Loan not
being In Balance, Borrower will bring the Loan In Balance as provided in
Section 5.7.

5.17 Comply with Other Loan Documents. To perform all its obligations under the
Note and other Loan Documents.

5.18 List of Contractors, Subcontractors, and Materialmen. To notify Lender
promptly upon Lender’s written request of the names and addresses of all
contractors, subcontractors and materialmen who are employed in connection with
the construction of the Project, and whose names and addresses were not
heretofore supplied to Lender. Lender shall have the right to approve any
subcontractor having any contract or contracts for the Project with an aggregate
cost of $1,000,000 or more; provided that Lender has approved the subcontractors
identified on Schedule 5.18 as of the date hereof. Upon request by the Lender,
the General Contractor must provide a report satisfactory to Lender analyzing
all subcontractors with contracts of $1,000,000 or more, performed by the
McGladrey Firm. Lender shall have no approval rights over subcontractors with
subcontracts of less than $1,000,000.

5.19 Completion. Within one hundred twenty (120) days after completion of the
Project, Borrower will provide Lender with an ALTA/ACSM as-built survey (with
such Table A items as shall be designated by Lender) and photographs of the
completed Project, its architect’s certificate of substantial completion in all
material respects in accordance with the Plans and Specifications, copies of
certificates of occupancy, copies of all licenses, permits and other
authorizations as may be necessary for the intended use, leasing and occupancy
of the Project, a copy of its form tenant lease (which shall thereafter
following Lender’s approval be used for all leases unless any material change to
such form is first submitted to and approved by Lender, which approval shall not
be unreasonably withheld, conditioned or delayed), and a final lien waiver from
the General Contractor and its affidavit that it has fully paid all
subcontractors, laborers and materialmen, and such other lien waivers as Lender
may request.

5.20 Construction Accounts. To establish and maintain the Borrower’s
construction account, being the account from which all amounts under the Cost
Budget are to be paid.

5.21 Dividends, Distributions and Redemptions. Not declare or pay any
distributions to its members or managers, as applicable, or purchase, redeem,
retire, or otherwise acquire for value, any ownership interests in Borrower now
or hereafter outstanding, return any capital to its members or managers, as
applicable, or make any distribution of assets to its members or managers, as
applicable (any of the foregoing, a “Distribution”), unless, at the time

 

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of any Distribution, no Event of Default exists that has not been cured, the
Project has been completed in all material respects in accordance with the Plans
and Specifications and all construction and related costs thereof have been paid
and leasing has commenced, and such Distribution is made solely from Net Cash
Flow that has not previously been distributed.

5.22 Further Assurances. At Lender’s request, to execute and deliver to Lender
all further documents and perform all other acts which Lender reasonably deems
necessary or appropriate to perfect or protect its security for the Loan so long
as such documents and/or acts do not increase Borrower’s obligations or limit
the rights of Borrower under the Loan Documents.

ARTICLE VI

EVENTS OF DEFAULT

The occurrence of any of the events listed in this Article shall constitute an
Event of Default under this Agreement:

6.1 Nonpayment of Indebtedness. Failure of Borrower to make (a) any payment of
interest or principal due pursuant to the Note within ten (10) days following
the date due, or (b) any payment of any other sum due pursuant to the Loan
Documents as and when due and such failure (as to payment of sums other than
principal or interest) is not cured within ten (10) days following written
notice from Lender, all whether the payment is due by acceleration or otherwise
under the terms of the Note, Mortgage, this Agreement, or any other Loan
Documents.

6.2 Assignment or Conveyance. Assignment by Borrower of this Agreement, any
rights hereunder, or any advance to be made hereunder, or the conveyance, lease,
mortgage, or any other alienation or encumbrance of the Property or the Project
or any interest therein (other than Permitted Exceptions or as expressly
authorized herein or in any of the other Loan Documents) without the prior
written consent of Lender.

6.3 Foreclosures or Liens. The institution of a foreclosure action against the
Property or the Project or any part thereof, or the filing of a lien against the
Property or the Project or any part thereof, which is not being contested in
accordance with the Loans Documents or removed of record, bonded off, or
dismissed within thirty (30) days after Borrower is notified in writing by
Lender or otherwise of such filing.

6.4 Misrepresentation. If any written certificate, statement, representation or
warranty heretofore or hereafter furnished by or on behalf of Borrower or
Guarantor pursuant to or in connection with this Agreement, any other Loan
Document (including, without limitation, representations and warranties
contained herein, but subject, in the case of any reaffirmation deemed made as
of each Loan advance, to the provisions of Section 4.10 hereof) or as an
inducement to Lender to extend any credit to Borrower proves to have been false
in any material respect at the time as of which the facts therein set forth were
stated or certified or to have omitted any material fact (including, without
limitation, any substantial contingent or unliquidated liability or claim or any
fact necessary to make such information not materially misleading.

 

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6.5 Failure to Complete Project. Failure by Borrower to complete construction of
the Project, and obtain a certificate of occupancy or other final governmental
approval required for the Project, on or before the Required Completion Date (as
extended as a result of a Force Majeure Event).

6.6 Failure to Insure. Failure or refusal by the Title Company, by reason of any
matter affecting title to the Property or the Project, to insure any Loan
advance as giving rise to a valid first lien, subject only to those exceptions
previously approved by Lender, which failure is not cured within ninety
(90) days following written notice from Lender to Borrower.

6.7 Failure to Perform Obligations. Failure by Borrower to perform, in any
material respect, any term, condition or covenant herein or in any other Loan
Document (other than as specified in Sections 6.1 through 6.6 above), which
failure is not cured within thirty (30) days after written notice thereof from
Lender to Borrower; provided, however, that if such failure is not reasonably
capable of cure within such thirty (30) days but within such period the Borrower
commences a cure and provides written notice thereof to Lender and thereafter
diligently pursues a cure, the period will be extended for so long as Borrower
is diligently pursuing a cure but not longer than ninety (90) days from such
original written notice.

6.8 Voluntary Insolvency Proceeding. The filing by Borrower or Guarantor of a
voluntary petition, or the adjudication of Borrower or Guarantor, or the filing
by Borrower or Guarantor of any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for itself under any present or future federal, state or other
statute, law or regulation relating to bankruptcy, insolvency or other relief
for debtors, or if Borrower or Guarantor should seek or consent to or acquiesce
in the appointment of any trustee, receiver or liquidator for itself or of all
or any substantial part of its property or of any or all of the rents, revenues,
issues, earnings, profits or income thereof, or the mailing of any general
assignment for the benefit of creditors, or the admission in writing by either
Borrower or Guarantor of its inability to pay its debts generally as they become
due.

6.9 Involuntary Insolvency Proceeding. The entry by a court of competent
jurisdiction of an order, judgment, or decree approving a petition filed against
Borrower or Guarantor which petition seeks any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency, or other relief for debtors, which order, judgment or
decree remains unvacated and unstayed for an aggregate of ninety (90) days
(whether or not consecutive) from the date of entry thereof, or the seeking or
consenting to the appointment of any trustee, receiver or liquidator of Borrower
or Guarantor or of all or any substantial part of its properties or of any or
all of the rents, revenues, issues, earnings, profits or income thereof which
appointment shall remain unvacated and unstayed for an aggregate of ninety
(90) days (whether or not consecutive).

6.10 Post-Closing Requirements. Any failure to timely provide the Post-Closing
Items in form and content reasonably satisfactory to Lender.

6.11 Event of Default. Any Event of Default as defined in any other Loan
Documents.

 

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Borrower has requested that Lender send to Investor a copy of any notice of
Default or Event of Default at the address of Investor set forth in this
Agreement. Investor may elect to cure or attempt to cure such Default or Event
of Default within the same period as allowed Borrower pursuant to this
Agreement, but shall not be obligated to do so. Lender will accept performance
by Investor under this Section as if performed by Borrower. Upon the timely cure
in accordance with the terms of this Section, the Loan shall be fully
reinstated.

ARTICLE VII

REMEDIES UPON DEFAULT

Lender may elect in its discretion to refuse to fund all or any part of a
requested advance of the Loan if an Event of Default exists or a monetary
Default exists. Lender may also elect to refuse to fund all or any part of a
requested advance of the Loan if any non-monetary Default exists, which does not
yet constitute an Event of Default due to a stated cure period not having
expired, if the Lender in its discretion, acting in good faith, considers such
non-monetary Default to be material and so notifies Borrower. Upon the
occurrence and during the continuance of any Event of Default, Lender shall also
have the absolute right in its sole discretion to exercise alternatively or
cumulatively any or all of the remedies set forth in this Article.

7.1 Termination. Cancel Lender’s obligations to make further advances pursuant
to this Agreement by written notice to Borrower. Upon the occurrence of any
event in Sections 6.8 or 6.9 such cancellation shall occur automatically without
notice.

7.2 Specific Performance. Institute appropriate proceedings to specifically
enforce performance of the terms and conditions of this Agreement.

7.3 Taking of Possession. To the extent permitted by applicable law, take
immediate possession of the Property and the Project as well as all other
Mortgaged Property as is necessary to fully complete all on-site and off-site
improvements required by the Plans and Specifications and complete the
construction and equipping of the Project and do anything in its sole judgment
to fulfill the obligations of Borrower hereunder, including availing itself of
and procuring performance of existing contracts, amending the same, or entering
into new contracts with the same contractors or others and employment of
watchmen to protect the Property and the Project from injury. Without
restricting the generality of the foregoing and for the purposes aforesaid,
Borrower hereby authorizes Lender to complete construction and equip the
Project, to use unadvanced Loan funds or funds which Borrower may have deposited
with Lender pursuant to this Agreement, or to advance funds in excess of the
Loan amount (and Borrower agrees to reimburse Lender for any expenses of such
completion which exceed undisbursed Loan funds reasonably necessary or
appropriate to complete the Project in substantially the manner contemplated by
the Plans and Specifications) to complete the Project; to pay all taxes and
assessments on the Property or the Project not paid by Borrower when due and to
add the amounts of any such payments to the amount of indebtedness secured by
the Security Documents; to make changes in the Plans and Specifications which
shall be reasonably necessary or appropriate to complete the Project in
substantially the manner contemplated by the Plans and Specifications; to retain
or employ new general contractors, subcontractors, architects, engineers and
inspectors as shall be required for said purposes; to pay, settle, or compromise
all bills and claims, which may be incurred in connection with constructing and
equipping the Project; to purchase any fixtures, equipment, machinery, furniture
or any other personal property

 

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as may be necessary or desirable for the completion of the construction and
equipping of the Project or for the clearance of title; to execute all
applications and certificates in the name of Borrower which may be required; to
prosecute and defend all actions or proceedings in connection with the Property
or the Project, fixtures, equipment, machinery, furniture or any other personal
property; and to do any act which Borrower might do in its own behalf relating
to the Property or the Project. WITHOUT LIMITATION, THE FOREGOING REIMBURSEMENT
OBLIGATION APPLIES TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE
OUT OF THE NEGLIGENCE OF LENDER BUT NOT TO THE EXTENT THAT THE SUBJECT OF THE
INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF LENDER.

7.4 Receivership. After giving such notice to Borrower as may be required by
applicable law, appoint or seek appointment of a receiver, without further
notice and without regard to the solvency of Borrower or the adequacy of the
security, for the purpose of preserving the Property and the Project, preventing
waste to the Project, and to protect all rights accruing to Lender by virtue of
this Agreement and the Mortgage, and expressly to make any and all further
improvements, whether on-site or off-site, as Lender may determine to be
necessary to complete the development and construction of the Project. All
expenses incurred in connection with the appointment of such receiver, or in
protecting, preserving, or improving the Property, shall be charged against
Borrower and shall be secured by the Mortgage and enforced as a lien against the
Property and the Project.

7.5 Acceleration. Accelerate maturity of the Note and any other indebtedness of
Borrower to Lender, and demand payment of the principal sum due thereunder, with
interest, advances, actual, out-of-pocket costs, and reasonable attorneys’ fees,
and enforce collection of such payment by foreclosure of the Mortgage or the
enforcement of any other Loan Documents.

7.6 Other. Exercise any other right, privilege or remedy available to Lender as
may be provided by the Loan Documents or under applicable law.

ARTICLE VIII

MISCELLANEOUS

8.1 Conflicting Provisions. In the event of a conflict between any of the
provisions of the Mortgage, Note, or any other document evidencing or securing
the Loan, and this Agreement, the provisions of this Agreement shall control.

8.2 Exclusiveness. This Agreement, the Note and the other Loan Documents are
made for the sole protection of Borrower and Lender, and their permitted
successors and assigns, and no other Person shall have any right of action
hereunder.

8.3 Notice. All notices provided for herein shall be given personally, by mail
or by overnight courier service, addressed to the appropriate party at the
address hereafter designated for such party, or such other address as the party
who is to receive such notice may designate in writing. Notice by mail shall be
by certified mail, addressed to the party with the proper amount of postage
affixed thereto and shall be deemed received three (3) days after the date sent
in the manner aforesaid. Notice by overnight courier shall be sent prepaid and
shall be deemed received on the business day after the date sent. Actual receipt
of notice shall not be required to effect notice hereunder.

 

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If to Borrower:

GGT Spring Town TX, LLC

c/o Mill Creek Residential Trust LLC

5225 Katy Freeway, Suite 103

Houston, Texas 77007

Attention: Mr. Jeb Cox

with copies to:

GGT Spring Town TX, LLC

c/o Mill Creek Residential Trust, LLC

949 South Coast Drive, Suite 400

Costa Mesa, California 92626

Attention: Mr. Eric Lezak

GGT Spring Town TX, LLC

c/o Mill Creek Residential Trust LLC

200 East Robinson Street

Suite 210

Orlando, Florida 32801

Attention: Mr. Alan Kolar

Michelle R. Brown, Esq.

Jones Day

2727 North Harwood Street

Dallas, Texas 75201

and with a copy to Investor of any notice of Default or Event of Default to:

GGT Spring Town Holdings, LLC

c/o CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Rosemary Q. Mills, Chief Financial Officer

Attention: Scott Hall

GGT Spring Town Holdings, LLC

c/o CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Holly J. Greer, Esq., General Counsel

Lowndes, Drosdick, Doster, Kantor & Reed, P.A.

450 South Orange Avenue, Suite 200

Orlando, Florida 32801

 

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Attention: Joaquin E. Martinez, Esq.

and with a copy to Guarantor of any notice of Default or Event of Default to:

GGT Spring Town TX, LLC

c/o Mill Creek Residential Trust, LLC

949 South Coast Drive, Suite 400

Costa Mesa, California 92626

Attention: Mr. Eric Lezak

MCRT West Assurance XIX LLC

200 East Robinson Street

Suite 210

Orlando, Florida 32801

Attention: Mr. Alan Kolar

If to Lender:

Synovus Bank

800 Shades Creek Parkway, Suite 325

Birmingham, Alabama 35209

Attention: Andy Hudson

With a copy to:

Dwight L. Mixson, Jr.

Burr & Forman LLP

420 North 20th Street

Suite 3400

Birmingham, Alabama 35203

8.4 Governing Law and Jurisdiction. This Agreement, the Note and other Loan
Documents, and the rights and obligations of the parties thereto, shall be
construed and interpreted in accordance with the laws of the State of Texas.
Borrower consents to the jurisdiction of the federal and state courts presiding
in Harris County, Texas in any action to enforce this Agreement or any other
Loan Documents. Nothing herein shall limit the jurisdiction of any other court.

8.5 Modification and Waiver. No provisions of this Agreement shall be amended,
waived or modified except by an instrument in writing signed by the party to be
bound.

8.6 Materiality. All representations and warranties made herein and in the Loan
Documents shall be deemed to have been material and relied on by Lender and
shall survive the execution and delivery of the Note and the Loan Documents and
the disbursements and advances of funds made pursuant to this Agreement.

8.7 Headings. All descriptive headings of articles and sections in this
Agreement are inserted for convenience only, and shall not affect the
construction or interpretation hereof.

 

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8.8 Severability. Inapplicability or unenforceability of any provisions of this
Agreement shall not limit or impair the operation or validity of any other
provision of this Agreement.

8.9 Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be an original, but such
counterparts shall together constitute one and the same instrument.

8.10 Assignability. Neither this Agreement, nor any rights or obligations
hereunder, nor any advance to be made hereunder, is assignable by Borrower.
Borrower will not convey or encumber the Property or Project, or any part
thereof, by mortgage or other lien (other than Permitted Exceptions or as
expressly authorized in this Agreement or any of the other Loan Documents)
without the prior written consent of Lender. The rights of Lender under this
Agreement are assignable in part or wholly in connection with the sale of the
Loan with the prior written consent of Borrower, and any assignee of Lender
shall succeed to and be possessed of the rights of Lender hereunder to the
extent of the assignment made, including the right to make advances to Borrower
or any approved assignee of Borrower in accordance with this Agreement. If Loan
is only sold in part, Lender shall remain as the servicer of the Loan.
Notwithstanding the foregoing, nothing herein shall restrict Lender’s right to
sell the Loan without consent of Borrower in whole or part to any purchaser if
(i) the Loan is fully funded, (ii) an Event of Default has occurred and
continues to exists, or (iii) Lender is required to sell the Loan (or part
thereof) by any regulatory authority having jurisdiction over Lender. No sale of
the Loan shall release Lender from its obligation to fund the Loan in accordance
with and subject to the conditions of the Loan Documents or obligate Borrower
for any increase in obligations or additional expenses.

8.11 No Agency Relationship. Lender is not the agent or representative of
Borrower and this Agreement shall not make Lender liable to materialmen,
contractors, craftsmen, laborers or others for goods delivered to or services
performed by them upon the Property, or for debts or claims accruing to such
parties against Borrower and there is no contractual relationship, either
expressed or implied, between Lender and any materialmen, subcontractors,
craftsmen, laborers, or any other Person supplying any work, labor or materials
for the Project or the Property.

8.12 Waiver. No course of dealing and no delay or omission by Lender in
exercising any right or remedy hereunder or with respect to any indebtedness of
Borrower to Lender shall operate as a waiver thereof or of any other right or
remedy and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. Lender
may remedy any default by Borrower to Lender or any other Person in any manner
without waiving the default remedied and without waiving any other prior or
subsequent default by Borrower in the event that Borrower shall fail to remedy
such default and shall be reimbursed for any and all of its reasonable
out-of-pocket expenses in so remedying such default, together with interest from
the date of written notice for reimbursement from Lender to Borrower until
repaid at a rate equal to the Default Rate, as set forth in the Note. All rights
and remedies of Lender hereunder are cumulative.

 

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8.13 Collateral Assignment. Borrower hereby collaterally assigns to Lender all
Borrower’s right, title, and interest in:

(A) The Plans and Specifications,

(B) Borrower’s books and records relating to the Property or construction of the
Project,

(C) To the extent assignable without the consent of a third party that has not
been obtained, all applications, licenses, permits, water and sewer allocations
or rights, and other rights and commitments now in existence or hereafter made
or issued relating to the Property or the Project or any future refinancing
thereof, and

(D) To the extent assignable without the consent of a third party that has not
been obtained, all contracts now or hereafter made by Borrower relating to the
Property or the construction, equipping, marketing, management, sale or lease of
all or any part of the Property or the Project, including, without limitation,
architectural, engineering and construction contracts.

Borrower agrees that, upon any Event of Default under this Agreement, Lender
shall have the absolute right to exercise its remedies that are or may be
available under the Uniform Commercial Code and to complete or allow others to
complete the Project, and, as to any such property which is also the subject of
a security agreement or financing statement in favor of Lender, that Lender will
not be limited to remedies available under the Uniform Commercial Code, but may
at its option avail itself of the rights granted herein in addition to or in
substitution for its Uniform Commercial Code remedies to the extent available
under applicable law. Such collateral assignment shall not restrict Borrower’s
use thereof to complete the Project.

8.14 Termination of Commitment. Any commitment letter or term sheet shall
terminate upon the execution of this Agreement. Without limiting the foregoing,
to the extent any provision of any commitment letter or term sheet shall
conflict with the terms of this Agreement or other Loan Documents, this
Agreement and the other Loan Documents shall control.

8.15 Participation and/or Syndication. Lender may sell one or more participation
or syndication interests in all or any part of the Loan as determined by Lender
in its discretion to one or more banks or financial institutions upon terms
acceptable to Lender; provided that (a) Lender shall remain solely responsible
to Borrower for the performance of its original obligations under the Loan
Documents, (b) Borrower shall continue to deal solely and directly with Lender
in connection with Lender’s rights and obligations under the Loan Documents, and
(c) such participants shall have no right of set-off. Notwithstanding the
foregoing, nothing herein shall restrict Lender’s right to sell the Loan in
whole or part to any purchaser if (i) the Loan is fully funded, (ii) an Event of
Default has occurred and continues to exists, or (iii) Lender is required to
sell the Loan (or part thereof) by any regulatory authority having jurisdiction
over Lender. No sale of the Loan shall release Lender from its obligation to
fund the Loan in accordance with and subject to the conditions of the Loan
Documents or result in increased obligations or expenses to Borrower.

 

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8.16 Restoration and Repair of Property Damaged or Taken. Lender agrees that,
upon Borrower’s written request, the net proceeds of insurance or condemnation
paid and received by Lender with respect to a casualty or taking of the Property
or Project (after payment of Lender’s actual, out-of-pocket costs and expenses
in obtaining such proceeds) shall be deposited into an account with Lender and
shall be made available to Borrower for repair or restoration of the Project,
provided the following conditions are met:

(a) At the time of such loss or damage and at all times thereafter while Lender
is holding any portion of such proceeds, there shall exist no Event of Default;

(b) The property, buildings, improvements and fixtures so damaged must be
capable of being restored to substantially their pre-existing condition and
utility (with a value equal to or greater than prior to such loss or damage),
not later than the later of the Required Completion Date or two hundred ten
(210) days following the date of the casualty or taking;

(c) Within one hundred twenty (120) days following the date of such loss or
damage and prior to any proceeds being disbursed to Borrower, Borrower shall
have confirmed to Lender if Lender so requests that Borrower intends to restore
the Project and shall have provided to Lender all of the following (to the
extent not waived in writing by Lender):

(i) copies of complete plans and specifications for restoration of the property,
buildings, improvements and fixtures damaged or taken to substantially the same
condition and utility prior to such loss or damage,

(ii) construction contract (which may be substantially similar to the General
Construction Contract), providing for repair or restoration of the improvements
so damaged or taken, with a contractor (which may be the General Contractor) and
on terms reasonably satisfactory to Lender,

(iii) payment and performance bonds with respect to such contract (unless the
contractor is General Contractor), on standard AIA forms, naming Lender as
obligee to the extent required by Lender for a material casualty or
condemnation,

(iv) builder’s risk insurance or property insurance for the full cost of
construction with Lender named under a standard mortgagee loss-payable clause,

(v) such additional funds as in Lender’s reasonable opinion are necessary to
complete the repair and restoration as may be required under Section 8.16(g),
and

(vi) copies of all permits and licenses necessary to commence the work in
accordance with the plans and specifications;

(d) Lender may, at Borrower’s expense, retain an independent inspector to review
plans and specifications and completed construction and to certify all requests
for disbursement;

(e) Borrower shall be pursuing such work to completion;

 

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(f) Each disbursement by Lender of such proceeds and deposits shall be funded in
accordance with and subject to the disbursement procedures and conditions set
forth in this Agreement that apply to disbursement of the Loan; and

(g) If, at any time during the course of such work, amounts held by Lender
should be insufficient, in the reasonable judgment of Lender, to pay for all
remaining costs of the work, Borrower will within ten (10) business days of
written notice from Lender either (i) deposit with Lender the amount of such
estimated deficiency, such funds to be held and disbursed as provided in this
Agreement, or (ii) expend an amount of Borrower’s funds for the estimated
deficiency and provide evidence reasonably satisfactory to Lender of such
expenditures.

In the event Borrower fails to timely make such election or having made such
election fails to timely comply with the terms and conditions set forth herein,
Lender shall be entitled with notice but without consent from Borrower to apply
such proceeds or the balance thereof at Lender’s option either (i) to the full
or partial payment or prepayment of the indebtedness under the Note and other
Loan Documents in such order and manner as Lender may elect or (ii) to the
repair and/or restoration of the property, buildings, improvements or fixtures
damaged or taken.

8.17 Non-Recourse Parties. Notwithstanding anything to the contrary contained in
this Agreement, any other Loan Documents, or otherwise, Lender shall have no
recourse upon or against any property or assets of Mill Creek Residential Trust
LLC, the Mill Creek Member, Investor or any of their past, present or future,
direct or indirect, shareholders, partners, members, managers, principals,
directors, officers, agents, incorporators, affiliates (other than Borrower or
Guarantor) or representatives (collectively, the “Non-Recourse Parties”) or any
of their respective assets for payment or collection of any amount, judgment,
judicial process, arbitral award, fee or cost or for any other obligation or
claim arising out of or based upon this Agreement or the Loan Documents. The
Non-Recourse Parties shall not be subject to levy, lien, execution, attachment
or other enforcement procedure for the satisfaction of any of Lender’s rights or
remedies under or with respect to this Agreement or the Loan Documents, in
equity or otherwise. Lender shall not seek enforcement of any judgment, award,
right or remedy against any asset of any of the Non-Recourse Parties. The
provisions of this Section 8.17 shall survive the termination of the Loan, this
Agreement or the Loan Documents. The provisions of this Section 8.17 are hereby
incorporated into all Loan Documents.

[Remainder of page left intentionally blank]

 

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IN WITNESS WHEREOF, the manager of Borrower has caused this Agreement to be
executed by its duly authorized officer in the capacity of manager and on behalf
of Borrower, and Lender has caused this Agreement to be executed by its duly
authorized officer, as of the date first set forth above.

 

SYNOVUS BANK, a Georgia state banking

corporation

BY:   /s/ Andy Hudson Its   Andy Hudson

[Signatures Continue on Following Page]

 

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BORROWER:

GGT SPRING TOWN TX, LLC,

a Delaware limited liability company

BY:   

MCRT Spring Town LLC,

a Delaware limited liability company,

its operating member

  BY:   /s/ Eric Lezak   Name:   Eric J. Lezak   Its   Managing Director

[End of Signatures]

 

Loan Agreement - Signature Page

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EXHIBITS

A—Legal Description

B—Cost Budget

SCHEDULES

2.7—Post-Closing Items

4.1—Ownership and Management

5.18—Approved Major Subcontractors

 

Loan Agreement - Exhibit List Page

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EXHIBIT A

Legal Description

[Omitted as not necessary to an understanding of the Agreement]

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

EXHIBIT B

Cost Budget

 

Cost Item

   Total  

Construction Hard Costs

   $ 32,671,444.00   

General Contractor (GC) Fee

     1,918,287.00   

Land

     5,096,520.00   

Taxes

     200,000.00   

Legal

     300,000.00   

Closing Costs

     200,000.00   

Financing

     330,218.00   

Municipal Fees

     364,308.00   

Architect

     700,000.00   

Engineering and Surveying

     200,000.00   

Preleasing

     150,000.00   

Marketing

     700,000.00   

Construction Interest

     616,410.00   

Broker Fee

     76,448.00   

Miscellaneous/Other

     25,000.00   

Leaseup Operating Deficit

     528,605.00   

Overhead/Development Fee

     1,333,981.00   

Soft Cost Contingency

     388,780.00      

 

 

 

Total Project Cost

   $ 45,800,000.00      

 

 

 

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SCHEDULE 2.7

Post-Closing Items

[Omitted as not necessary to an understanding of the Agreement]

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SCHEDULE 4.1

Ownership and Management

Ownership

 

GGT Spring Town Holdings, LLC

     95 % 

MCRT Spring Town LLC

     5 % 

Management

 

Managing Member:    GGT Spring Town Holdings, LLC with day-to-day operations
delegated to MCRT Spring Town LLC as Operating Member

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SCHEDULE 5.18

Approved Contractors

[Omitted as not necessary to an understanding of the Agreement]